Commercial banks obtain the bulk of their funding mainly through which of the following sources?

Introduction / Context:
Understanding how commercial banks are funded is fundamental to banking and finance. This question asks which source provides the main funding base for commercial banks. For exam candidates, correctly identifying the dominant source is important because it relates to how banks create credit, manage liquidity, and price their loans and deposits.

Given Data / Assumptions:

• The question is about commercial banks, not central banks or non bank financial companies.
• Several potential funding sources are listed: customer deposits, service fees, stock holder capital, and government funding.
• We are interested in the primary or main source of funds used in bank operations.
• Other sources may exist but are smaller compared to the main source.

Concept / Approach:
Commercial banks primarily fund their lending and investment activities through customer deposits. These deposits include savings accounts, current accounts, and term or fixed deposits from individuals, businesses, and institutions. While banks also earn fee based income from services and hold capital contributed by shareholders, these are much smaller in size compared to total deposits. Regular government funding is not a normal or primary source of finance for commercial banks except in special rescue situations. Therefore, the correct answer is the option that names customer deposits as the main funding source.

Step-by-Step Solution:
Step 1: Recall that when individuals and businesses deposit money in bank accounts, the bank shows these amounts as liabilities because it owes this money to depositors.Step 2: Recognise that banks use a large portion of these deposits to make loans and investments, which are their main earning assets.Step 3: Compare the total value of deposits with fee income, shareholder capital, and occasional government funds. Deposits make up the largest part of a commercial banks balance sheet.Step 4: Look at the options and identify that option A clearly refers to customer deposits including current, savings, and term deposits.Step 5: Select option A as the correct answer, because it matches both theory and the structure of real bank balance sheets.

Verification / Alternative check:
A quick verification is to look at any published balance sheet of a commercial bank. The liabilities side shows large amounts under deposits from customers, which dwarf the equity capital and other liabilities. Fees from services appear in the income statement, not as a major funding source. Government support appears only occasionally and usually as a special item when a bank is in trouble. This clearly confirms that deposits are the main source of funds for commercial banks.

Why Other Options Are Wrong:
Option B mentions service fees, which are an important part of non interest income but are not a primary funding base. Option C suggests that banks are funded only by stock holder capital, but in reality capital provides a safety margin and supports risk taking; it is much smaller than the deposit base. Option D suggests regular government funding, which is not the case except in rare bailouts. Thus, these options do not reflect how commercial banks are normally financed.

Common Pitfalls:
Some learners confuse funding sources with income sources and think that service fees are a main source of money. Others may focus on shareholder capital because it is highlighted as Tier 1 capital in regulatory discussions. To avoid confusion, remember that deposits are liabilities that provide the raw material for banking business, while capital and fees play different roles. Always connect the idea of funding with the size and composition of the balance sheet.

Final Answer:
Commercial banks are funded mainly through customer deposits such as current, savings, and term deposits.