Particulars:-

1. Introduction
2. Commercial Banking
3. Functions Of commercial banks
4. Types of commercial banks
5. Nationalization of commercial banks
6. Main objectives of nationalization
7. Role of commercial banks in a developing country
8. Top commercial banks in india
9. Opportunities for indian banks
10. Advantages of indian commercial banks
11. Disadvantages of indian commercial banks
12. Conclusion
13. Bibliography

BODY FOR THE TOPICS:-

[Link]-The term commercial bank refers to a financial institution that accepts

deposits, offers checking account services, makes various loans, and offers
basic financial products like certificates of deposit (CDs) and savings accounts
to individuals and small businesses. A commercial bank is where most people
do their banking.

Commercial banks make money by providing and earning interest from loans
such as mortgages, auto loans, business loans, and personal loans. Customer
deposits provide banks with the capital to make these loans.

2. COMMERCIAL BANKING:-

Commercial banks provide basic banking services and products to the general
public, both individual consumers and small to mid-sized businesses. These
services include checking and savings accounts, loans and mortgages, basic
investment services such as CDs, as well as other services such as safe
deposit boxes.

Banks make money from service charges and fees. These fees vary based
on the products, ranging from account fees (monthly maintenance
charges, minimum balance fees, overdraft fees, non-sufficient funds (NSF)
charges), safe deposit box fees, and late fees. Many loan products also
contain fees in addition to interest charges.

[Link] of commercial banking-

Primary Functions 
1. Accepting Deposits – Commercial banks accept deposits from their
customers in the form of saving, fixed, and current deposits. 
 Savings Deposits – Savings deposits allow a customer to credit funds
towards their accounts for up to a certain limit. These deposits are
preferred by individuals with a fixed income, utilised to create savings
over time.
 Fixed Deposits – Fixed deposits come with a predetermined lock-in
period. Fixed deposits are also referred to as time deposits as the funds
are deposited for a specific time frame.
 Current Deposits – Current deposits allow account holders to deposit
and withdraw money whenever necessary. In some cases, current
accounts also offer overdrafts until a pre-specified limit to individuals
and businesses.

2. Providing Loans – One of the main functions of commercial banks is

providing credit to organisations and individuals, and profit from the earned
interest. Usually, banks retain a small reserve for their expenses while offering
the remaining amount to customers as various types of short and long-term
credits.
Commercial banks provide both secured and unsecured loans, categories are-
 Cash Credit – Commercial Banks and its Functions include extending
advances to individuals and organisations against bonds, inventories,
and other types of securities. This facility, commonly known as cash
credit, provides a more substantial sum when compared to other forms
of credits.
 Short-Term Credits – Short-term loans are usually pledged without any
security, offering a smaller loan amount and repayment tenor. These
are also referred to as personal loans.

3. Credit Creation – A unique function of commercial banks is credit creation.

Instead of offering liquid cash, banks create a line of credit and transfer the
loan to a business or commercial body all at once.

Secondary Functions 
The following can be considered as the secondary functions of commercial
banks – 
1. Providing locker Facilities – Commercial banks provide locker facilities to
customers who want to store valuables safely. Locker facilities eliminate the
impending risk of theft or loss, which prevail when kept at home.

2. Dealing in Foreign Exchange – Commercial banks help provide foreign

exchange to individuals and organisations which export or import goods from
overseas. However, only certain banks which have the licence to deal in
foreign exchange are eligible for such transactions. 

3. Exchange of Securities – Another function of commercial banks is to trade

in bonds and securities. Customers can purchase or sell the units from the
financial institution itself, which offers more convenience than alternate
approaches.

4. Discounting Bills of Exchange – The main function of a commercial bank

in today’s date is to discount bills of businesses. Bill discounting is considered
as a profitable investment for banks. Bills create a steady flow of funds, while
not becoming a risky venture during payment as it is considered as a
negotiable instrument. These also do not involve the financial institution in any
litigation. 

5. Bank as an Agent – Commercial Bank and its Function also requires them
to provide finance-related services to customers, fulfilling the role of an agent.
These services usually include – 
 Acting as an administrator, trustee, or executor of a customer-owned
estate.
 Assisting customers with tax returns, tax refunds, and other similar
tasks.
 Serving as a platform to pay premiums, repay loan instalments, etc.
 Offering a platform for electronic transaction of funds, processing of
cheques, drafts, bills, etc.

[Link] OBJECTIVES OF NATIONALIZATION

 [Link] OF COMMERCIAL BANKS IN DEVELOPING COUNTRY:-

There is acute shortage of capital. People lack initiative and

enterprise. Means of transport are undeveloped. Industry is
depressed. The commercial banks help in overcoming these
obstacles and promoting economic development. The role of a
commercial bank in a developing country is discussed as under.

1. Mobilising Saving for Capital Formation:

The commercial banks help in mobilising savings through network
of branch banking. People in developing countries have low
incomes but the banks induce them to save by introducing variety of
deposit schemes to suit the needs of individual depositors. They also
mobilise idle savings of the few rich. By mobilising savings, the
banks channelise them into productive investments. Thus they help
in the capital formation of a developing country.

2. Financing Industry:
The commercial banks finance the industrial sector in a number of
ways. They provide short-term, medium-term and long-term loans
to industry. In India they provide short-term loans. Income of the
Latin American countries like Guatemala, they advance medium-
term loans for one to three years. But in Korea, the commercial
banks also advance long-term loans to industry.

ADVERTISEMENTS:
In India, the commercial banks undertake short-term and medium-
term financing of small scale industries, and also provide hire-
purchase finance. Besides, they underwrite the shares and
debentures of large scale industries. Thus they not only provide
finance for industry but also help in developing the capital market
which is undeveloped in such countries.

3. Financing Trade:
The commercial banks help in financing both internal and external
trade. The banks provide loans to retailers and wholesalers to stock
goods in which they deal. They also help in the movement of goods
from one place to another by providing all types of facilities such as
discounting and accepting bills of exchange, providing overdraft
facilities, issuing drafts, etc. Moreover, they finance both exports
and imports of developing countries by providing foreign exchange
facilities to importers and exporters of goods.

4. Financing Agriculture:
The commercial banks help the large agricultural sector in
developing countries in a number of ways. They provide loans to
traders in agricultural commodities. They open a network of
branches in rural areas to provide agricultural credit. They provide
finance directly to agriculturists for the marketing of their produce,
for the modernisation and mechanisation of their farms, for
providing irrigation facilities, for developing land, etc.

They also provide financial assistance for animal husbandry, dairy

farming, sheep breeding, poultry farming, pisciculture and
horticulture. The small and marginal farmers and landless
agricultural workers, artisans and petty shopkeepers in rural areas
are provided financial assistance through the regional rural banks in
India. These regional rural banks operate under a commercial bank.
Thus the commercial banks meet the credit requirements of all
types of rural people.

5. Financing Consumer Activities:

ADVERTISEMENTS:

People in underdeveloped countries being poor and having low

incomes do not possess sufficient financial resources to buy durable
consumer goods. The commercial banks advance loans to
consumers for the purchase of such items as houses, scooters, fans,
refrigerators, etc. In this way, they also help in raising the standard
of living of the people in developing countries by providing loans for
consumptive activities.

6. Financing Employment Generating Activities:

The commercial banks finance employment generating activities in
developing countries. They provide loans for the education of young
person’s studying in engineering, medical and other vocational
institutes of higher learning. They advance loans to young
entrepreneurs, medical and engineering graduates, and other
technically trained persons in establishing their own business. Such
loan facilities are being provided by a number of commercial banks
in India. Thus the banks not only help inhuman capital formation
but also in increasing entrepreneurial activities in developing
countries.

7. Help in Monetary Policy:

The commercial banks help the economic development of a country
by faithfully following the monetary policy of the central bank. In
fact, the central bank depends upon the commercial banks for the
success of its policy of monetary management in keeping with
requirements of a developing economy.

Thus the commercial banks contribute much to the growth of a

developing economy by granting loans to agriculture, trade and
industry, by helping in physical and human capital formation and
by following the monetary policy of the country.

[Link] COMMERCIAL BANKS IN INDIA:-

State Bank of India (SBI)

SBI is India’s largest public sector bank and is ranked 232 nd on the Fortune
Global 500 list of the world’s biggest corporations. The bank is also the
country’s biggest lender. It recently joined the list of top 50 banks globally
in terms of asset distribution, following its merger with other associate
banks:  

 State Bank of Travancore (SBT)

 State Bank of Patiala (SEP)
 State Bank of Mysore (SBM)
 State Bank of Hyderabad (SBH)
 State Bank of Bikaner and Jaipur (SBBJ)

As of May 2021, the total combined network of the abovementioned

associate banks is 22,000 branches in India, in addition to 233 offices in 32
countries and 301 correspondents in 72 countries, and a workforce of
249,448 employees. The combined net profit of these banks was Rs.
224,054 crores as of May 2021.
HDFC Bank

Founded in 1994, HDFC Bank is headquartered in Mumbai, Maharashtra.

HDFC is India’s largest private sector bank in terms of assets and market
capitalization. It employs around 120,000 staff and operates a distribution
network of 5,416 branches and 13,640 ATMs across 2,803 cities.

The bank is also present in Bahrain, Hong Kong, and Dubai. The company’s
financials as of March 2016 are below:

Net income: INR 318.3 billion (3/2021)

Total assets: INR 18.0 trillion (3/2021)

Kotak Mahindra Bank

Kotak Mahindra Bank is considered one of the upcoming commercial banks

in India and is the fifth-biggest private-sector bank in the country according
to market capitalization. It was founded by Uday Kotak in 1985.

The bank operates a network of 1,600 branches across 689 locations and
2,519 ATMs in the country and employs 71,000 staff. It completed a Rs
15,000 crore (US$2.3 billion) merger with ING Vyasa Bank in 2015. 

Net income: INR 99.9 billion (3/2021)

Total assets: INR 4.79 trillion (3/2021)

 
[Link] FOR INDIAN BANKS

Commercial banks in India are broadly classified into three categories:

1. Public Sector Banks: The term “public sector banks” refers to a situation

where the majority equity stake in the banks is held by the government.
The Indian Government keeps default holdings of a minimum
51% shareholding, but management control is only with the Central
Government, thereby classifying them as Public Sector Banks.
 Public sector banks include the State Bank of India and its Associates,
Nationalized Banks (including Industrial Development Bank of India Ltd
(IDBI) since December 2004), and Regional Rural Banks.

2. Private Sector Banks: They are the banks in which individuals and

corporations are the majority shareholders. In India, banks were
nationalized in two phases, in 1969 and 1980. In 1993, the Reserve Bank of
India (RBI), the regulating body for all the country’s banking organizations,
allowed many new commercial banks in India to start operations. Some of
the major commercial banks in India that were given licenses are ICICI
Bank, HDFC Bank, Axis Bank, Yes Bank, and Kotak Mahindra Bank.

Private sector banks are recognized as the banks for the new generation,
providing innovative products, better IT support systems, and competitive
pricing for their products. As of the end of March 2017, there are 21 private
sector banks in India. Besides these, four local area banks are also
categorized as private banks.

3. Foreign Banks: They are the final category of banks that serve as an

important segment of the commercial banking sector. They are
headquartered outside India and they operate from their wholly-owned
subsidiaries or branches in the country. The foreign banks include Royal
Bank of Scotland, Bank of America, Barclays Banks, Deutsche Bank, etc.

[Link] OF INDIAN COMMERCIAL BANKS:-

Advantages of Commercial Banks

Following are the important advantages of financial assistance provided by
commercial banks:

1. The deposited amount with the banks is used for the overall development of the
country through the financial assistance provided by the banks.
2. Socialism was established in the country with the help of the banks and
their nationalization.
3. Banks help the unorganized and weaker sections. As a result, the loan requirements
of small and marginal farmers, artisans, small entrepreneurs, and weaker sections have
started getting fulfilled.
4. The commercial banks have provided financial assistance to the unemployed
persons in starting their venture.
5. By the establishment of regional banks in the rural areas, farmers are coming out of
the grip of moneylenders and rural indebtedness has started declining.
6. The commercial banks are encouraging the development of small and cottage
industrial also and loan facilities are being provided to the entrepreneurs.
7. The economic position of the common man has been rapidly improving due to the
significant role of commercial banks in the process of national development. As a result,
their living standard is going high.
8. The entrepreneurs can obtain the loan on easy terms, without many formalities.
9. Banks maintain the secrecy of all information about their customers.
10. The bank is a real friend at the time of need because the bank helps the
entrepreneurs during the crisis through overdraft facilities and credit facilities.

[Link] OF INDIAN COMMERCIAL BANKS:-

The entrepreneurs and institutions may have the following disadvantages also, from
the commercial banks:

1. The efficiency of the banks is fast reducing.

2. Customer services are also fast deteriorating. As a result, the customers are
getting dissatisfaction also
3. The branch managers have become weak and helpless due to fast expansion
and the majority of local staff. All these adversely affect management and control
4. The profit earning capacity of banks is also reducing due to the decline in their
efficiency.
5. The significant share of loans provided by the banks is utilized only by the
organized sectors of the economy, even today.
6. No change has taken place in the organizational structure of the banks, even
after their fast expansion and new challenges to them.
7. Good progress has not been achieved in the sphere of recovery of loans by
the banks. As a result, the efficient circulation of funds does not become possible.
8. The cases of fraud and embezzlement of bank funds by the bank officers and
staff are also alarmingly increasing.
9. The deposits of the bank have not increased in the proposition of expansion
of branches of the banks. Hence, significant assistance is not being provided to the
entrepreneurs.
10. The political influence in providing loans, especially the concessional loans
have adversely affected the recovery of bank loans.

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