Commercial banks form a prominent part of the country’s Financial Institution System. Commercial Banks are those profit making institutions which accept deposits from general public and gives money (loan) to individuals like household, entrepreneurs, businessmen etc. The prime objective of these banks is to earn profit in the form of interest, commission etc. The operations of all these commercial 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 depositors. Some commercial banks in India are – ICICI Bank, State Bank of India, Axis Bank, and HDFC Bank, Punjab national bank, Central bank of India.
At present, there are 27 Public Sector Banks in India including SBI (plus its 5 associates) and 19 nationalized banks. Further, there are two banks which have been categorized by RBI as “Other Public Sector Banks”. IDBI and Bhartiya Mahila Bank come under this category.
Classification of commercial banks
Functions of Commercial Banks
Primary Functions of Commercial Banks:
Being a short term credit dealer, the commercial banks accept the savings of public in the form of following deposits:
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 of the banks.
Overdraft facility: its permission to a current A/c holder of withdrawal more than to what he has deposited in his/her account.
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.
It is a facility to withdraw a certain amount of money on a given security.
Secondary Functions of Commercial Banks:
Agency functions: Bank pays on the behalf of its customers as an agent and gets fee for agency functions such as:
Credit Creation: It is one of the most important functions of commercial banks. A bank creates credit on the basis of its primary deposits. It further lends the money to common borrowers/ corporate/investors .This landed money is deposited by those people to have excess money and want to earn a fix return on their money. Commercial banks charges more rate of interests from customers (borrowers) as compared to given to the depositors of the money.
List of Commercial Banks in India
SBI & Associates:
Other Public Sector Banks:
Here it can be conclude that network of commercial banks will play a prominent role in the economic development coming years, especially after the introduction of plan of financial inclusion in the whole country.