Commercial Banks in India

Commercial banks form a significant part of the country’s Financial Institution System. Commercial Banks are those profit seeking institutions which accept deposits from general public and advance money to individuals like household, entrepreneurs, businessmen etc. with the prime objective of earning profit in the form of interest, commission etc. The operations of all these banks are regulated by the Reserve Bank of India, which is the central bank and supreme financial authority in India. The main source of income of a commercial bank is the difference between these two rates which they charge to borrowers and pay to depositers. Examples of commercial banks – ICICI Bank, State Bank of India, Axis Bank, and HDFC Bank.

Classification of commercial banks

1. Scheduled banks :- Banks which have been included in the Second Schedule of RBI Act 1934. They are categorized as follows:
   • Public Sector Banks :- are those banks in which majority of stake is held by the government. Eg. SBI, PNB, Syndicate Bank, Union Bank of India etc.
   • Private Sector Banks :- are those banks in which majority of stake is held by private indivisuals. Eg. ICICI Bank, IDBI Bank, HDFC Bank, AXIS Bank etc.
   • Foreign Banks :- are the banks with Head office outside the country in which they are located. Eg. Citi Bank, Standard Chartered Bank, Bank of Tokyo Ltd. etc.
2. Non scheduled commercial banks :- Banks which are not included in the Second Schedule of RBI Act 1934.

Activities of Commercial Banks

Primary Functions of Commercial Banks:

Deposit Acceptance: Being a short term credit dealer, the commercial banks accept the savings of public in the form of following deposits:

• Fixed term deposits
• Current A/c deposits
• Recurring deposits
• Sving A/c deposits
• Tax saving deposits
• Deposits for NRIs

Lending Money: a second major function is to give loans and advances and thereby earn interest on it. This function is the main source of income for the bank. Overdraft facility: Permission to a current A/c holder of withdrawal more than to what he has deposited.

Loans & advances: A kind of secured and unsecured loans against some kind of security. Discounting of bill of exchange: in case a person wants money immediately, he/she can present the B/E to the respective commercial bank and can get it discounted.

Cash credit : Facility to withdraw a certain amount of money on a given security.

Secondary Functions of Commercial Banks:

Agency functions: Bank pays on behalf of its customers as an agent and gets paid fee for agency functions such as:

• Payment of taxes, bills
• Collection of funds through bills, cheques etc.
• Transfer of funds
• Sale-purchaseof shares and debentures
• Collection/Payment of dividend or interest
• Acts as trustee & executor of properties
• Forex Transactions
• General Utility Services: locker facility

Credit Creation: It is one of the most outstanding function of commercial banks. A bank creates credit on the basis of its primary deposits. It further lends the money which people has depositted with the bank also charge interest on this money, which is much higher than what it actually pays to depositer. Thus bank generates money for itself.

Last Updated on January 17th, 2019

List of Commercial Banks in India

SBI & Associates: State Bank of India State Bank of Bikaner & Jaipur State Bank of Hyderabad State Bank of Indore State Bank of Mysore State Bank of Patiala State Bank of Travancore Nationalised Banks: Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank of India Corporation Bank Dena Bank IDBI Bank Ltd. Indian Bank Indian Overseas Bank Oriental Bank of Commerce Punjab & Sind Bank Punjab National Bank Syndicate Bank UCO Bank Union Bank of India United Bank of India Vijaya Bank Foreign Banks: ABN Amro Bank Abu Dhabi Commercial Bank American Express Banking Corporation Antwerp Diamond Bank AB Bank Bank International Indonesia Bank of America Bank of Bahrain & Kuwait Bank of Ceylon Bank of Nova Scotia Bank of Tokyo Mitsubishi UFJ Barclays Bank BNP Paribas Calyon Bank Chinatrust Commercial Bank Citibank DBS Bank Deutsche Bank Hongkong & Shanghai Banking Corporation JP Morgan Chase Bank JSC VTB Bank Krung Thai Bank Mashreq Bank Mizuho Corporate Bank Oman International Bank Shinhan Bank Societe Generale Sonali Bank Standard Chartered Bank State Bank of Mauritius UBS AG

Other Scheduled Commercial Banks: Axis Bank Bank of Rajasthan