STRUCTURE OF

COMMERCIAL BANKING
IN INDIA
 INTRODUCTION
* Commercial banks are very important
segment of the money market .
* They play a very important role in the
economy by mobilizing savings from various
sectors, which is the foundation for the
growth and development of economy .
* With the growth and development of the
economy the commercial banks grow along
 STRUCTURE OF INDIAN
BANKING SYSTEM
• IT CAN BE EASILY CLASSIFIED INTO TWO
CATEGORIES:

• Organized sector Unorganized sector

INDIAN
BANKING
SYSTEM
 RESERVE BANK OF INDIA
• Reserve bank is the central bank of India and
hence, is the leader of the Indian banking
system
• Reserve bank of India came into existence in
1935
• It is making efforts for the improvement of
banking system ever since.
 ORGANISED SECTOR
• Main constituents of the organized sector are
commercial banks .
• These may be scheduled or non scheduled
banks.
• In the present scenario there is only one bank
in the non scheduled banks while all the other
banks come under scheduled category .
• Out of the scheduled banks the public banks
hold an important place
 Public sector banks
• They stared with the setting up of state bank
of India ,in 1955,by taking over IMPERIAL
BANK OF INDIA
• In next 5 years the princely states banks were
made associated with the STATE BANK OF
INDIA. These banks taken together were
known as State Bank of India Group or SBI
GROUP . Thus the group consists of :
• State bank of India
• State bank of Hyderabad
• State bank of Patiala
• State bank of Travancore
• State bank of Bikaner & Jaipur
• State bank of Mysore
• State bank of Saurashtra
• State bank of Indore
 Nationalized bank
• In JULY 1969 , 14 banks with a deposit base of
Rs. 50 crores or more were nationalized
• In 1980 ,six more private sector banks were
nationalized bringing up the total number of
the banks nationalized to 20 . These banks
were :
1. BANK OF BARODA
2. PUNJAB NATIONAL BANK
3. BANK OF INDIA
4. CANARA BANK
5. CENTRAL BANK OF INDIA
6. UNION BANK OF INDIA
7. INDIAN BANK
8. INDIAN BANK OVERSEAS
9. SYNDICATE BANK
10.U C O BANK
11.ALLAHABAD BANK
12.UNITED BANK OF INDIA
13. ORIENTAL BANK OF COMMERCE
14.CORPORATION BANK
15.VIJAYA BANK
16.DENA BANK
17.BANK OF MAHARASHTRA
18.ANDHRA PRADESH
19.PUNJAB & SIND BANK
20.NEW BANK OF INDIA
Later on new bank of India merged with
Punjab National Bank ,in 1993-94
OBJECTIVES OF COMMERCIAL
BANK
• To help achieve balanced regional and
sectoral development of the economy by way
of making the banks to reach out to the small
man and to the small man and to the remote
areas of the country .
• Contribute to the social welfare of the
country by accelerating the process of
economic development
Reasons responsible for the strain in the
banking sector
1. Stress on the quantitative and hurried increase in loans
without proper assessment and the expense of quality of
assets
2. Politically motivated or influenced sanctions of loans ,loan
melas and waiver of loan
3. Indiscriminate expansion of banking activities ignoring the
canons of the banking –that is , safety , productivity and
profitability .
4. Diversificaton of banking operations in the
unconventional areas without giving proper attention
either to systematic development to back up successful
implementations of these new activities or to building up
infrastructure facilities
5. Lack of expertise within the banks to handle this complex
banking scenario and not much effort to improve the
quality of personnel within the banking sector by
equipping to handle the growing challenges effectively
6. Lack of effective management information system and
control leading to blurred accountability at all the levels
7. Pressure on achieving the targets mechanically due to
somewhat political pressure in decision –making in certain
areas , and the interference of the midddlemen in the
field of loans to weaker sections of the society leading to
unethical practices in the banking
8. Growing complacent attitude of the trade unions of both
officers and workmen staff ,which has partially led to the
deterioration of customer services
9. The uniformity in various aspects of the
public sector banking operations led to lack
of competition , excessive recruitment ,
higher operating expenses and lower income
,lack of response to changing needs due to
rigidity and uniformity
 REGIONAL RURAL BANKS
(RRB’S)
• RRB’s were set up on the recommendations of
a working group and beaded by M.
Narsimham in 1975
• OBJECTIVE
To provide credit and other facilities to small
and marginal farmers , agricultural labourers
and artisans
 FEATURES
1. Area of the RRB is limited only to the region ,
comprising of some districts of the state
2. They grant loan only to the rural agriculture
sector and small artisans
3. Lending rate would be lesser than the
commercial banks
4. Intended to eliminate money lenders
5. They are supplement to the effort of co-
operative banks
6. RRB’s are sponsored by commercial banks
Banks in those days mainly focussed upon the agro
sector. Regional rural banks in India penetrated
every corner of the country and extended a helping
hand in the growth process of the country.

SBI has 30 Regional Rural Banks in India known as

RRBs. The rural banks of SBI is spread in 13 states
extending from Kashmir to Karnataka and Himachal
Pradesh to North East. The total number of SBIs
Regional Rural Banks in India branches is 2349
(16%). Till date in rural banking in India, there are
14,475 rural banks in the country of which 2126
(91%) are located in remote rural areas. 
 Apart from SBI, there are many other banks which function for the
• development of the rural areas in India. These banks are listed below:
Andhra PradeshBiharAndhra Pradesh Grameena Vikas Bank
• Andhra Pragathi Grameena Bank
• Deccan Grameena Bank
• Chaitanya Godavari Grameena Bank
• Saptagiri Grameena Bank
• ChhattisgarhChhattisgarh Gramin Bank
• Surguja Kshetriya Gramin Bank
• Durg-Rajnandgaon Gramin Bank
• Satpura Kshetriya Gramin Bank
• Madhya Bharath Gramin Bank
• Chambal-Gwalior Kshetriya Gramin Bank
• Rewa-Sidhi Gramin Bank
• Sharda Gramin Bank
• GujaratDena Gujarat Gramin Bank
• Baroda Gujarat Gramin Bank
• Saurashtra Gramin Bank
• HaryanaHarayana Gramin Bank
• Gurgaon Gramin Bank
• Jammu & KashmirJammu Rural Bank
• Ellaquai Dehati Bank
• Kamraz Rural Bank
• AssamAssam Gramin Vikash Bank
• Langpi Dehangi Rural Bank
• JharkhandJharkhand Gramin Bank
• Vananchal Gramin Bank
• Madhya PradeshNarmada Malwa Gramin Bank
• Satpura Kshetriya Gramin Bank
• Madhya Bharath Gramin Bank
• Rewa-Sidhi Gramin Bank
• Sharda Gramin Bank
• Ratlam- Mandsaur Kshetriya Gramin Bank
• Vidisha Bhopal Kshetriya Gramin Bank
• Mahakaushal Kshetriya Gramin Bank
• Jhabua Dhar Kshetriya Gramin Bank
• Chambal-Gwalior Kshetriya Gramin Bank
• Madhya Bihar Gramin Bank
• Bihar Kshetriya Gramin Bank
• Uttar Bihar Kshetriya Gramin Bank
• Kosi Kshetriya Gramin Bank
• Samastipur Kshetriya Gramin Bank
• Himachal PradeshHimachal Gramin Bank
• Parvatiya Gramin Bank
• PunjabPunjab Gramin Bank
• Faridkot-Bhatinda Kshetriya Gramin Bank
• Malwa Gramin Bank
• KeralaNarmada Malwa Gramin Bank
• North Malabar Gramin Bank
• Tamil NaduPandyan Grama Bank
• Pallavan Grama Bank
• MaharashtraMarathwada Gramin Bank
• Aurangabad -Jalna Gramin Bank
• Wainganga Kshetriya Gramin Bank
• Vidharbha Kshetriya Gramin Bank
• Solapur Gramin Bank
• Thane Gramin Bank
• Ratnagiri-Sindhudurg Gramin Bank
•
KarnatakaKarnataka Vikas Grameena Bank
• Pragathi Gramin Bank
• Cauvery Kalpatharu Grameena Bank
• Krishna Grameena Bank
• Chikmagalur-Kodagu Grameena Bank
• Visveshvaraya Gramin Bank
• RajasthanBaroda Rajasthan Gramin Bank
• Marwar Ganganagar Bikaner Gramin Bank
• Rajasthan Gramin Bank
• Jaipur Thar Gramin Bank
• Hodoti Kshetriya Gramin Bank
• Mewar Anchalik Gramin Bank
• OrissaKalinga Gramya Bank
• Utkal Gramya Bank
• Baitarani Gramya Bank
• Neelachal Gramya Bank
• Rushikulya Gramya Bank
• Uttar PradeshPurvanchal Gramin Bank
• Kashi Gomti Samyut Gramin Bank
• Uttar Pradesh Gramin Bank
• Shreyas Gramin Bank
• Lucknow Kshetriya Gramin Bank
• Ballia Kshetriya Gramin Bank
• Triveni Kshetriya Gramin Bank
• Aryavart Gramin Bank
• Kisan Gramin Bank
• Kshetriya Kisan Gramin Bank
• Etawah Kshetriya Gramin Bank
• Rani Laxmi Bai Kshetriya Gramin Bank
• Baroda Western Uttar Pradesh Gramin Bank
• Devipatan Kshetriya Gramin Bank
• Prathama Bank
• Baroda Eastern Uttar Pradesh Gramin Bank
• ManipurManipur Rural Bank
• MizoramMizoram Rural Bank
• UttaranchalUttaranchal Gramin Bank
• Nainital Almora Kshetriya Gramin Bank
• NagalandNagaland Rural Bank
• TripuraTripura Gramin Bank
• West BengalBangiya Gramin Vikash Bank
• Paschim Banga Gramin Bank
• Uttar Banga Kshetriya Gramin Bank
• MeghalayaKa Bank Nogkyndong Ri Khasi- Jaintia
• Arunachal PradeshArunachal Pradesh Rural Bank
PRIVATE SECTOR BANKS
• On recommendations of the NARSIMHAM
COMMITTEE (which focused on the ways to
improve the structure , organization ,
functions, and procedures of financial sector
at large) RESERVE BANK OF INDIA , in 1993 ,
announced guidelines for the entry of new
commercial banks .
• As a result following banks started their
operations:
• Indus In Bank Ltd
• The UTI Bank Ltd.
• HDFC Bank Ltd.
• The ICICI Bank Ltd.
• Global Trust Bank Ltd.
• Centurion Bank Ltd.
• The Times Bank Ltd.
• IDBI Bank Ltd.
• The Development Co-operative Bank Ltd.
• The bank Of Punjab Ltd.
• Private banking in India was practiced since the
begining of banking system in India. The first
private bank in India to be set up in Private Sector
Banks in India was IndusInd Bank. It is one of the
fastest growing Bank Private Sector Banks in India.
IDBI ranks the tength largest development bank in
the world as Private Banks in India and has
promoted a world class institutions in India.
The first Private Bank in India to receive an in
principle approval from the Reserve Bank of India was
Housing Development Finance Corporation Limited,
to set up a bank in the private sector banks in India as
part of the RBI's liberalisation of the Indian 
Banking Industry. It was incorporated in August 1994
as HDFC Bank Limited with registered office in
Mumbai and commenced operations as
Scheduled Commercial Bank in January 1995.
• ING Vysya, yet another Private Bank of India
was incorporated in the year 1930. Bangalore
has a pride of place for having the first branch
inception in the year 1934. With successive
years of patronage and constantly setting new
standards in banking, ING Vysya Bank has
many credits to its account. 
 FEATURES OF PRIVATE
BANKS
• Introduce superior levels of technology and
customer satisfaction
• They are strategic in thinking and operations
• They target specific products and customer
groups rather than the entire financial sector
• Most of them are targeting midsized corporate
• They are specialized in certain segments like
investment , banking , trade finance and foreign
exchange services
CO-OPERATIVE BANKS
• It consists of those banks which represent those
group of societies registered under the acts of
the states relating to the cooperative societies
• IN 1949 a system of agricultural co-operative
credit was brought into being
• Under this scheme , the short –term credit has
been organized with the federal lined agricultural
primary societies as the base , the district as the
federal organization at the intermediate level ,
and the state co-operative banks as the apex
institution .
• The Co operative banks in India started functioning almost 100
years ago. The Cooperative bank is an important constituent of
the Indian Financial System, judging by the role assigned to co
operative, the expectations the co operative is supposed to
fulfil, their number, and the number of offices the cooperative
bank operate. Though the co operative movement originated in
the West, but the importance of such banks have assumed in
India is rarely paralleled anywhere else in the world

Co operative Banks in India are registered under the Co-

operative Societies Act. The cooperative bank is also regulated
by the RBI. They are governed by the Banking Regulations Act
1949 and Banking Laws (Co-operative Societies) Act, 1965. 

Cooperative banks in India finance rural areas under:Farming

• Cattle
• Milk
•
Co operative Banks in India are registered under the
Co-operative Societies Act. The cooperative bank is
also regulated by the RBI. They are governed by
the Banking Regulations Act 1949 and Banking Laws
(Co-operative Societies) Act, 1965. 

Cooperative banks in India finance rural areas

under:Farming
• Cattle
• Milk
• Hatchery
• Personal finance
•
Cooperative banks in India finance urban areas
under:Self-employment
• Industries
• Small scale units
• Home finance
• Consumer finance
• Personal finance
•
Some facts about Cooperative banks in
IndiaSome cooperative banks in India are more
forward than many of the state and private
sector banks.
• According to National Federation of Urban Co-
operative Banks & Credit Societies Ltd
(NAFCUB) the total deposits & lendings of
Cooperative Banks in India is much more than
Old Private Sector Banks & also the New Private
Sector Banks.

• This exponential growth of Co operative Banks

in India is attributed mainly to their much
better local reach, personal interaction with
customers, their ability to catch the nerve of
the local clientele.
1. STATE CO-OPERATIVE BANK
• RBI is not in a condition to deal directly with
primary credit societies or central co-operative
banks because of their large number
• It provides funds to these societies through state
co-operative societies
• The district or central co-operative cannot
directly deal with each other
• The major part of the share capital is provided by
member societies , the rest is generally
contribution from the state
• The main source of their deposits is again the
member societies and central co-operative
banks
• As much as 98%of the advance of co-
operative societies are to these societies
• Of the total advances approximately 75%are
short term and 25%are medium term
advances
• Almost two – third of the advances of the
state co-operative banks is for agricultural
purposes
2. Central (district) co-
operative banks
• The main function of central co-operative
bank is to provide credit to the member
primary co-operative credit societies
• They make give loan to individuals also
 3. PRIMARY CREDIT SOCIETIES
• They have direct root with they people they
intend to serve
• In rural areas they mainly serve cultivators
• In urban areas they mainly serve the
artisans,etc
• The success of co-operative movement
depend upon them
• Share value being naminal is the main source
of the funds
• The lending is only to the members of the
society and every one can be a member
• A large amount of 40% of the total also
perform non-credit functions
• The interest rates are very low
• These societies provide cheapest possible
credit to the members
 Land development banks
• They provide long term loan, for a period of
upto 20 years
• Also known as LAND MORTGAGE BANKS
• First of it’s kind was established in punjab in
1920 at JHANG
• However effective organisation started in
1929
• These banks are registered with limited
liability
 STRUCTURE
• They have a two tier system
• The apex body in the state is the state land development
bank
• At public contact level there are central land mortgage
banks or primary land development banks or braches of
central land development bank
• The organisation of these banks are differs from state to
state
• At the national level ,state land development banks have
formed an association named “ALL-INDIA LAND
DEVELOPMENT BANKS UNION”
 RESOURCE AND ADVANCES
• Land development banks raise their fund from
share capital , deposits and issues of the
bonds
• The RESERVE BANK OF INDIA has contributed
greatly to the resources of the land
development banks by extending term credit
to state government for contributing to share
capital of land development banks and by
subscribing to ordinary and rural debentures
• Ordinary debentures are fully guaranteed the
state government
• The RBI contributes 20% of each debenture
series or the shortfall in the public
subscription , whichever is lower
 INDIGENOUS
BANKERS
• These are individuals and partnership firms
performing the banking function
• They also act as FINANCIAL INTERMIDIARIES
• They are much larger than the commercial banks
• According to the INDIAN CENTRAL BANKING
ENQUIRY COMMITTEE (1931),
• “an indigenous banker is any individual or
private firm receiving deposits and dealing in
hundies or lending money”
• They provide finance for productive purposes
directly to trade and industries , and indirectly
, through money lenders and traders to
agriculturists w it whom they find it difficult to
establish direct relations
• They keep in touch with the traders and small
industrialists and finance marketing on a
sizable scale
 MONEY LENDERS
• Money lenders may be rural or urban ,
professional or non professional
• They include large farmers , merchants ,
traders, arcadias, goldsmiths , village
shopkeepers , sardars of laborers ,etc
• The methods and areas of operations differ
from money lender to money lender
 MAIN CHARACTERISTICS OF
MONEY LENDERS
1. Their funds are their own
2. Their clients are mainly the weaker sections
of the society
3. Their loans are highly exploitative. They
charge very high rates of interest
4. Their operations are entirely unregulated
5. The credit is prompt and flexible
 FOREIGN BANKS
• They are here since British days. Some of them are as under
1. American Express Bank Ltd.
2. ANZ Grid lays Bank Plc.
3. Bank of America NT & SA
4. Bank of Tokyo Ltd.
5. Banquc Nationale de Paris
6. Barclays Ban Deutsche Bank A.G.
7. Hongkong and Shanghai Banking Corporation
8. Citi Bank N.C.
9. Standard Chartered Bank.
10.The Chase Manhattan Bank Ltd.
11.Dresdner Bank AG k Plc
• Such new banks are :
• Barclays bank
• Bank of ceylon
• Bank indonesia international
• State commercial bank of Mauritius
• Development bank of Singapore
• Overseas Chinese bank corporation
• China trust commercial bank
• Krug Thai banking public company ltd
• Cho hung bank
• Fuji bank
• Toronto dominion bank