EXECUTIVE SUMMARY

Commercial banks occupy a dominant place in the

money market. They, as a matter of fact, form the largest
component in the banking structure of any country. They
are the oldest, largest and fastest growing financial
institutions in India. They are profit making institutions,
dealing in money and credit. Commercial banks play a
major role in the growth and development of the country
due to the modern organization and functioning, huge
funds and wide network all over the country.
Thus, they are like a reservoir into which flow the
savings, the idle surplus money of households and from
which loans are given on interest to businessmen and
others who need them for investment or productive uses.
Commercial banks are very important source of
institutional credit as they are the major depository of
peoples savings. They are very important devices for
providing short term credit to trade and commerce.
Commercial anks being repositories of deposits have
played significant role in garnering savings of the people
!
particularly after the nationalization. Thus, they have
made praiseworthy efforts in pooling the savings.
Rationale of the study
The "ationale of the study can be considered as follows#$
The study includes essential core topics.
It aims at giving a thorough grounding on
the subject.
The study is comprehensive.
It helps to improve the research and
investigation ability.
It enables to think logically and
practically
Hypothesis:
The hypothesis being put forth for this study about
Commercial banking is that awareness of Commercial
banks is !%%&, but there are still many people who do
not know about the Commercial banks and the amenities
provided by them. Commercial banks are coming up
'
with new innovative ideas and schemes for increasing
their customer base and fulfilling the needs of the general
public.
Research Methodoloy:
The research methodology is data collection through#$
("I)*"+ ,-."C/,
,/C-01*"+ ,-."C/,
!ri"ary Sources: ,urvey by distributing
2uestionnaire to the people taking sample size of !%%,
Interviews conducted with bankers3 accumulating
knowledge and help from friends, professors, etc.
Secondary Sources: 4athering data through books,
journals, magazines, websites, newspapers, etc.
E#pected Contri$ution
/5pectations from the study are that it may contribute to
the real scenario of commercial banking demand and
accordingly the banks can go for new innovative
6
schemes. It will also specify some recommendations and
based on that banks can make suitable arrangements in a
anking, in its crude form, is an age$old phenomenon. It
was in e5istence even in ancient times, too. It is the
business of providing financial services to consumers
and businesses. They are the single major source of
institutional finance in the country.
*ccording to ,ection 7 8c9 of the anking
"egulation *ct, !:;: $ <anking company means any
company which transacts the business of banking in
India=. ,ection 7 8b9 of the act defines banking as
accepting for the purpose of lending or investment of
deposits of money fro the public repayable on demand or
otherwise and withdrawable by che2ue, draft, order or
otherwise.
anking services also serve two primary purposes.
%irst, by supplying customers with the basic mediums$
of$e5change 8cash, checking accounts, and credit cards9,
;
banks play a key role in the way goods and services are
purchased. >ithout these familiar methods of payment,
goods could only be e5changed by barter 8trading one
good for another9, which is e5tremely time$consuming
and inefficient. Second, by accepting money deposits
from savers and then lending the money to borrowers,
banks encourage the flow of money to productive use
and investments. This in turn allows the economy to
grow. >ithout this flow, savings would sit idle in
someones safe or pocket, money would not be available
to borrow, people would not be able to purchase cars or
houses, and businesses would not be able to build new
factories the economy needs to produce more goods and
grow. /nabling the flow of money from savers to
investors is called financial intermediation, and thus,
banking is e5tremely important to a free market
economy.
&riin and E'olution of Indian (an)in

-pinions differ as to the origin of the work
?anking?. The word ?ank? is said to be of 4ermanic
origin, cognate with the @rench word ?an2ue? and the
7
Italian word ?anca?, both meaning ?bench?. It is
surmised that the word would have drawn its meaning
from the practice of the Aewish money$changers of
Bombardy, a district in 0orth Italy, who in the middle
ages used to do their business sitting on a bench in the
market place. *gain, the etymological origin of the word
gains further relevance from the derivation of the word
?ankrupt? from the @rench word ?an2ue route? and
the Italian word ?anca$rotta? meaning ?roken bench?
due probably to the then prevalent practice of breaking
the bench of the money$changer, when he failed.
anking is different from money$lending but two
terms have in practice been taken to convey the same
meaning. anking has two important functions to
perform, one of accepting deposits and other of lending
monies andCor investment of funds. It follows from the
above that the rates of interest allowed on deposits and
charged on advances must be known and reasonable. The
money$lender advances money out of his own private
wealth hardly accepts deposits and usually charges high
rates of interest. )ore often, the rates of interest relate to
the needs of the borrower. )oney$lending was practiced
D
in all countries including India, much earlier than the
recent type of anking came on scene.
Sinificance of (an)s
The importance of a bank to modern economy, so as to
enable them to develop, can be stated as follows#
8i9 The banks collect the savings of those people who can
save and allocate them to those who need it. These
savings would have remained idle due to ignorance of
the people and due to the fact that they were in scattered
and oddly small 2uantities. ut banks collect them and
divide them in the portions as re2uired by the different
investors.
8ii9 anks preserve the financial resources of the country
E it is e5pected that they allocate them appropriately in
the suitable E desirable manner.
8iii9 They make available the means for sending funds
from one place to another and do this in cheap, safe and
convenient manner.
economy and essential for financing the developmental
process, is governed by banks.
F
change its currency and credit policy fre2uently, This is
done by "I, by changing the supply of money with the
changing needs of the public.
*lthough traditionally, the main business of banks
is acceptance of deposits and lending, the banks have
now spread their wings far and wide into many allied and
even unrelated activities.
Structure of (an)in Syste"
*t present, the organized banking system in India can be
broadly divided into three categories#
i9 The Central ank of the country, the "eserve
ank of India
ii9 The Commercial anks
iii9 The Cooperative anks.
The "I is the ape5 monetary and banking
authority in the country and has the responsibility to
control the banking system in India.
Co""ercial $an)s
play a major role in the growth and development of the
country. They mobilize savings and make them available
to large and small industrial enterprise and traders for
working capital re2uirements. *fter !:D:, commercial
G
banks are broadly classified into nationalized or public
sector banks and private sector banks. The ,I and its
associate banks along with another '% banks are the
public sector banks. The private sector banks include
Indian scheduled banks which have not been nationalized
and branches of foreign banks operating in India. The
"egional "ural anks came into e5istence since the
middle of !:F%s with the specific objective of providing
credit and deposits facilities to the small and marginal
farmers, agricultural labourers and artisans and small
entrepreneurs.
(an)in in India
anking in India act as a connected link between the
borrowers and lenders of money. The banks main activity
should be to do the business of banking which should not
be subsidiary to any other business. Thus, a bank should
always add the word <ank= to its name to enable people
to know that it is a bank and is dealing in money.
:
8@rom small to large, commercial banking have got u
covered,
as In banking there is no such thing as <one size fits all= 9
I*TR&+UCTI&* T& C&MMERCIA, (A*-S:
Commercial banks play a vital role in the economic
development of a nation. They are the most important
source of institutional credit in the money market as they
provide short term loans and advances to its customers.
They perform a variety of functions and are the main
source of credit which is the main input for trade and
business activity. Credit created by commercial banks is
a major component of money supply in a modern
economy. )odern economies depend on the banking
sector for production, e5change and distribution.
!%
* Commercial bank is a type of financial
intermediary and a type of bank. Commercial bank has
two possible "eanins:
a9 It is the term used for a normal bank to
distinguish it from an investment bank.
b9 Commercial banking can also refer to a bank or
a division of a bank that mostly deals with deposits and
loans from corporations or large businesses, as opposed
to normal individual members of the public 8retail
banking9.
* commercial bank is a profit seeking organization
dealing in the other peoples money, in the sense that it
accepts deposits of money from the public to keep them
in its custody for safety. ,o also, it deals in credit, i.e., it
creates credit by making advances out of the funds
received as deposits to needy people. It charges higher
rate of interests for the loans sanctioned and offers lower
rate of interest for the deposits. The difference between
the two is the profit earned by the bank. Thus, a
commercial bank functions as a mobiliser of saving in
the economy.
!!
The most distinctive feature of a commercial bank
is that it accepts deposits called demand deposits from
the public which are che2uable, i.e., withdrawable by
means of che2ue. *cceptance of che2uable deposits
alone, however, does not give it a status of bank. Its
another essential function is to make use of these
deposits for lending to others.
Commercial banks ordinarily are simple business or
commercial concerns which provide various types of
financial services to Hcustomers in return for payments in
one form or another, such as interest, discounts, fees,
commission, and so on. ,o, we can say that their
objective is to make profits.
* commercial bank is therefore like a reservoir into
which flow the savings, the idle surplus money of
households and from which loans are given on interest to
businessmen and others who need them for investment or
productive uses.
+efinition:
/conomists have defined a Commercial ank in various
ways.
!'
$ *ccording to (rof. Crowther, <a banker is a dealer in
debt, his own and other peoples.=
$ *ccording to (rof. sayes, <Commercial anks are
institutions whose debts I usually reffered to as bank
deposits I are commonly accepted in final settlement of
other peoples deposits.=
Thus, all these definitions clearly indicate the
essential function of a bank namely dealing in money
and credit.
%U*CTI&*S &% C&MMERCIA, (A*-S
Commercial banks perform several crucial functions
to satisy the needs of the various sectors of the economy,
which may be classified into two categories#
8I9 (rimary functions, and
8II9 ,econdary functions.
.I/ !ri"ary $an)in functions of the commercial
banks include#
!. *cceptance of deposits from
the public3
'. Bending of funds3
6. .se of che2ue system3 and
!6
;. "emittance of funds.
01 Acceptance of +eposits fro" the !u$lic
*ccepting deposits is the primary function of a
commercial bank. y receiving deposits from the public,
commercial banks mobilise savings of the household
sector.
anks generally accept deposits in three types of
accounts#
8i9 Current *ccount,
8ii9 ,avings *ccount, and
8iii9 @i5ed 1eposits *ccount.
1eposits in Current Account are withdrawable by
the depositors by che2ues for any amount to the e5tent
of the balance at their credit, at any time without any
prior notice. 1eposits of current accounts are, thus,
known as 1emand deposits. ,uch accounts are
maintained by commercial and industrial firms and
businessmen, and the che2ue system is the most
convenient and very safe mode of payment. 0o interest
is provided for such deposits. In fact bank charge certain
commission for providing the facility.

!;
Sa'in Accounts are maintained for encouraging
savings of households. >ithdrawals from deposits from
savings account are not freely allowed as in the case of
current account. There are some restrictions on the
amount to be withdrawn at a time and also on the number
of withdrawals made during a period. Indian commercial
banks have, however, rela5ed these rules of savings
accounts to a certain e5tent in recent times. anks pay a
rate of interest on the savings account deposits as
prescribed by the central bank. (resently, it is 7 & p.a. *
nominal rate of interest is provided for such deposits.
1eposits in %i#ed Account are time deposits. In the
normal course, deposits cannot be withdrawn before the
e5piry of the specified time period of the deposits. *
premature withdrawal is, however, permitted only at the
cost of forfeiture of the interest payable, at least partly.
-n these deposits commercial banks pay higher rates of
interest, and the rate becomes higher with the increase in
duration. Bonger the time period, higher would be the
rate of interest and vice versa.
y creating such varieties of deposits, banks
motivate savers and depositors in a variety of ways and
encourage savings in the economy. @urther, by keeping
!7
deposits with banks, depositors money is not secure and
remains in safe custody, but it yields interest also.
)oreover, banks demaand deposits are in the form of
li2uid cash, for they serve as money to the business
community and, therefore, is called bank money.
,endin of funds
*nother major function of commercial banks is to
e5tend loans and advances out of the money which
comes to them by way of deposits to businessmen and
entrepreneurs against approved such as gold or silver
bullion, government securities, easily saleable stocks and
shares, and marketable goods.
anks advances to customers may be made in many
ways#
8i9 -verdrafts,
8ii9 Cash Credits,
8iii9 1iscounting Trade ills,
8iv9 )oney$at$call or very short$term advances,
8v9 Term loans,
8vi9 Consumer Credit,
8vii9 )iscellaneous *dvances.
!D
8i9 &'erdraft: * commercial bank grants overdraft
facility to an account holder by which he is allowed to
draw an amount in e5cess of the balance hels in the
account, up to the e5tent of stipulated limit. -verdrafts
are permissible in current account only. ,uppose, a
customer has "s. 7%,%%% in his current account with the
bank. ank grants him overdraft facility up to "s.
!%,%%%. Then, this customer is entitled to issue che2ues
upto "s. D%,%%% on his account. -bviously, overdraft
facility sanctioned up to "s.!%,%%% by the bank in this
case is as good as credit granted by the bank to that
e5tent.
8ii9 Cash credit: ank give credit in cash to business
firms in industry and trade, against pledge or
hypothecation of goods, or personal guarantee given by
the borrowers. It is essentially a drawing account against
credit sanctioned by the bank and is operated like a
current account on which an overdraft is sanctioned. It is
the most popular mode of advance in the Indian banking
system.
!F
8iii9 +iscountin trade $ill: The banks facilitate trade
and commerce by discounting bills of e5change called
trade bills. Traders often draw bill of e5change to meet
their obligations in business transitions. ,uch a trade bill
is payable in cash on maturity, after a stipulated date.
1iscounting of bills by the bank amounts to granting of
credit to the party concerned till the maturity date of the
bill. This method of bank lending is widely adopted for
two reasons# 8a9 such loans are self li2uidatory in
character3 and
8b9 these trade bills are rediscountable
with the central bank.
8iv9 Money at call or 'ery short ter" ad'ances: ank
also grants loans for a very short period, generally not
e5ceeding F days to the borrowers, usually dealers or
brokers in stock e5change markets against collateral
securities like stock or e2uity shares, debentures, etc.,
offered by them. ,uch advances are repayable
immediately at notice hence, they are described as
money at call or call money.
!G
8v9 Ter" ,oans: anks give term loans to traders,
industrialists and now to agriculturists also against some
collateral securities. Term loans are so$called because
their maturity period varies between ! to !% years. Term
loans as such provide intermediate or working capital
funds to the borrowers. ,ometimes, two or more banks
may jointly provide large term loans to the borrower
against a common security. ,uch loans are called
participation loans or consortium finance.
8vi9 Consu"er Credit: anks also grant to households
in a limited amount to buy some durable consumer goods
such as television sets, refrigerators, etc3 or to meet some
personal needs like payment of hospital bills, etc. such
consumer credit is made in a lump sum and is repayable
in installments in a short time. .nder the '%$point
programme, the scope of consumer credit has been
e5tended to caver e5penses on marriage funeral etc3 as
well.
8vi9 Miscellaneous Ad'ances: *mong other forms of
bank advances there are packing credits given to
!:
e5porters for a short duration, e5ports bills purchasedC
discounted, import finance $ advances against import
bills, finance to the self employed, credit to the public
sector, credit to the cooperative sector and above all,
credit to the weaker sections of the community at
concessional rates.
21 Use of che3ue syste":
It is a uni2ue feature and function of banks that they
have introduced the che2ue system for the withdrawl of
deposits.
There are two types of che2ues#
i9 the bearer che2ue and
ii9 the crossed che2ue.
* $earer che3ue is encashable immediately at the bank
by its possessor. ,ince, it is negotiable, it serves as good
as cash on transferability.
'%
*
crossed che3ue, on the other hand, is one that is crossed
by two parallel lines on its face at the left hand corner
and such a che2ue is not immediately encashable. It has
to be deposited only in the payees account. It is not
negotiable.
In modern business transactions, the use of che2ues
to settle debts is found to be much more convenient than
the use of cash. Commercial banks, thus, render an
important service by providing an ine5pensive medium
of e5change such as che2ues. In fact, a che2ue is also
considered as the most developed credit instrument.
41 Re"ittance of %unds:
Commercial banks, on account of their network of
branches throughout the country, also provide facilities to
remit funds from one place to another for their customers
by issuing bank drafts, mail transfers or telegraphic
transfers on nominal commission charges. *s compared
'!
to the postal money orders or other instruments, bank
drafts have proved to be a much cheaper mode of
transferring money and has helped the business
community considerably.
8II9 Secondary $an)in functions of the commercial
banks are also known as non$banking functions. They
perform a multitude of other non$banking functions
which may be classified as#
!. *gency ,ervices, and
'. 4eneral .tility ,ervices.
01 Aency Ser'ices
ankers perform certain functions for E on behalf
of their clients, as#
a9 To collect or make payments for bills, che2ues,
promissory notes, interest, dividends, rents3
subscriptions, insurance premia, etc. @or these services,
some charges are usually levied by the banks.
b9 To remit funds on behalf of the clients by drafts or
mail or telegraphic transfers.
''
c9 To act as e5ecutor, trustee and attorney for the
customers will.
d9 ,ometimes, bankers also employ income$ta5
e5porters not only to prepare income$ta5 returns for their
customers but also to help them to get refund of income$
ta5 in appropriate cases.
e9 To work as correspondents, agents or
representatives of their clients.
-ften, bankers obtain passports, travellers tickets,
secure passages for their customers, and receive letters
on their behalf.
21 5eneral Utility Ser'ices
)odern commercial banks usually perform certain
general utility services for their community, such as#
a9 Betters of credit may be given by the banks at the
behest of the importer in favour of the e5porter.
b9 ank drafts and travellers che2ues are issued in order
to provide facilities for transfer of funds from one part of
the country to another.
'6
c9 anks may deal in foreign e5change or finance foreign
trade by accepting or collecting foreign bills of
e5change.
,hares floated by government, public bodies and
corporations may be underwritten by banks3
d9 Certain banks arrange for safe deposit vaults, so that
customers may entrust their securities and valuables to
them for safe custody.
e9 anks also compile statistics and business information
relating to trade, commerce, and industry. ,ome banks
may publish valuable journals or bulletins containing
research on financial, economic and commercial matters.
Co""ercial (an)s !lay an I"portant Role in a
Modern Econo"y
!9 They constitute the very life$blood of modern trade,
commerce E industry, as they provide the necessary
funds for their working capital such as to buy raw
materials, to pay wages, to incur current business
e5penses in marketing of goods, etc
';
'9 These banks encourage peoples savings habit through
their various savings deposit schemes.
69 They also mobilize idle saving resources from
households to business people for productive use.
;9 They transmit money from place to place with
economy and safety.
79 Their agency services are, no doubt, of immense value
to the people at large, as they case their difficulties, save
their time E energy Eprovide them safety E security.
*ATI&*A,ISATI&* &% C&MMERCIA,
(A*-S
y the !:D%s, the Indian banking industry has become
an important tool to facilitate the development of the
Indian economy. >ith effect from Auly !:, !:D:, !;
largest commercial banks were nationalized. * second
dose of nationalization of D more commercial banks
followed in !:G%. The stated reason for the
nationalization was to give the government more control
of credit delivery. >ith the second dose of
nationalization, the 4-I controlled around :!& of the
banking business of India. *fter this, until the !::%s the
'7
nationalized banks grew at a place of around ;&, closer
to the average growth rate of the Indian economy. ,o,
these nationalization of banks was carried out with the
aim of Jremoval of control by a few and to bring about a
more optimal allocation of bank funds. *fter
nationalization, the credit policy of public sector banks
underwent a radical change, with special emphasis being
placed on credit to priority sectors including agriculture,
small scale industry and programmes for poverty
alleviation.
The "ain o$6ecti'es of nationali7ation 8ere as
follo8s:
!. To introduce social banking by directing bank funds
at concessional rates to the weaker sections of societ
for productive purposes.
'. To prevent monopolies in the banking sector caused
due to use of major share of funds by a few private
entrepreneurs.
'D
6. To introduce E promote banking facilities in
backward areas E reduce regional disparities in
branch e5pansion and growth of banking.
;. To e5pand the role of Commercial banking in
agricultural credit.
!ER%&RMA*CE &% C&MMERCIA,
(A*-S I* THE !&ST 9*ATI&*A,I:ATI&*
!ERI&+
01 Achie'e"ents:
.a/ ,ead (an) Sche"e# *fter nationalization, it was
felt that banks should be allotted particular districts
where they would take the lead in studying the need and
scope for banking development. .nder the scheme,
districts were allotted to the ,tate ank 4roup, !;
nationalised banks and 6 private banks. /ach bank was
assigned the status of Jlead bank in a particular district.
The lead bank had to study and understand the socio$
economic condition of the district and undertake surveys
for this purpose. Through the surveys the lead bank
would collect useful information about the credit needs,
'F
development needs and pattern of production and nature
of employment in the district. *fter such informations
were gathered, the lead bank would then plan and
implement development programmes in the area, with
the help of other banks and financial institutions. This
scheme was a uni2ue e5periment and it helped in branch
e5pansion, deposit mobilization and e5pansion of
priority sector lending.
.$/ (ranch E#pansion: *fter nationalization, there was
massive e5pansion of bank branches, especially in the
rural areas. The Bead an k scheme played played a
major role in this. 1uring the first fifteen years after
nationalization, branches e5panded at about ',;%% per
year. Total number of bank branches has increased from
G'D' in !:D: to DF,'G6 in '%%F.
-ver G%& of bank offices are located in backward states
and in semi$urban areas and rural areas. This, to some
e5tent took care of regional imbalance in the spread of
banking.
.c/ +eposit Mo$ili7ation: *s a result of e5pansion of
banking facilities, there was a large increase in deposits.
'G
In !:D:, deposits amounted to !6& of the 41(, by '%%;
this ratio increased 67% times. The increase in rural
deposits as production of total has been from 6& to
!7&. ank deposits now constitute about ;%& of financil
assets held by households.
.d/ (an) ,endin: Traditionally, banks in India had
concentrated in providing working capital to industry and
trade. -nly after nationalization, loans are being given
for agricultural operations. ank credit stood at "s. 6,
6:: crore in !:D:. In the ne5t 6 decades, his increased by
about '%% times. In !:DG, large and medium industries
accounted for about '%% times. In !:DG, large and
medium industries accounted for about D%& of aggregate
bank credit. *griculture accounted for about '&. This
changed drastically after nationalization and bank credit
to priority sector, including agriculture was close to ;%&
of total credit.
.e/ +irected Credit !rora""es: * major objective of
bank nationalization was to make bank credit available
the priority sector, comprising of agriculture, small scale
':
industries, e5ports, transporters and small traders at
concessional rates. This system of directed bank credit
was e5pected to contribute to contribute to economic
growth as well as social justice. ,uccess was achieved in
this direction after nationalization.
21 Shortco"ins#
.a/ Inade3uate (an)in facilities# 1espite
achievements in branch e5pansion, banking facilities
continue to remain inade2uate to meet the needs of the
large population. The national average population per
bank branch is still very high at about !'%%%. This ratio
is higher than the national average in some states like
ihar, -rissa, >est engal and )adhya (radesh.
anking facilities are still not e2uitably distributed
among all states.
6%
.$/ Inade3uate +eposit Mo$ili7ation: anking habits
of people in India are still not very good. * large part of
the population still prefer to carry out transactions in
cash and are not covered by the banking system .
Therefore, there is a large scope for further increasing
deposits and bring in more money in the banking system.
.c/ Inade3uate lendin: /ven though there has been
significant increase in lending to priority sectors, it is
still inade2uate in comparison to the needs of these
sectors. ecause of these small farmers and traders have
to still depend on the unorganized sector for meeting
their credit re2uirements.
.d/ Increased E#penditure: *fter nationalization,
there has been significant increase in e5penditure on
banking operations. This is due to aggressive and
sometimes irrational branch e5pansion. There has been
over$staffing in nationalized banks and some of their
operations in rural areas are simply not economically
feasible.
6!
.e/ ,o8 ,e'el of Efficiency: (ublic sector banks have
suffered from lack of proper supervision and control.
1ue to high degree of political interference and lack of
competition, these banks have become highly
insufficient. There work culture was poor compared to
private sector banks. Kowever, this scenario has now
changed with these banks becoming more profit oriented
and autonomous.
Thus, nationalization of Commercial banks was
done with the objective of social and economic
development. ut this resulted in several problems and
desortions in the banking system. Till !::%s public sector
banks operated with low profitability and efficiency. In
early !::%s, the government implemented the
0arsimham Committee "ecommendations in order to
bring about much needed reforms in the banking sector.
,ince then, the sector has been performing with higher
profitability and efficiency.
6'
TY!ES &% C&MMERCIA, (A*-S:
,cheduled banks
0on$ ,cheduled anks
$ Scheduled (an)s:
* scheduled bank is one which is registered in the
second schedule of the "eserve ank of India. The
66
following conditions must be fulfilled by a bank for
inclusion in the schedule#
i9 The banker concerned must be in business of
banking in India3
ii9 It is either a company defined in ,ection 6 of the
Indian Companies *ct, !:7D, or corporation or a
company incorporated by or under any law in force in
any place outside India or an institution notified by the
central government in this behalf3
iii9 It must have paid$up capital and reserves of an
aggregate role of e5changeable value of not less than
rupees five lakhs3
iv9 It must satisfy the "eserve ank of India that
its affairs are not conducted in a manner detrimental to
the interests of its depositors.
,cheduled banks come under the purview of the various
credit control measures of th "eserve ank of India.
They are re2uired to maintain a certain minimum balance
in their accounts with the "I, and do certain things
prescribed by law. The ,cheduled banks are entitled to
6;
bprrowings and rediscounting facilities from the "I.
These are similar to the member banks of the ..,.*.
$ *on9 Scheduled (an)s:
anks, which are not included in the ,econd ,chedule of
the "I, are known as non$scheduled banks. They may
be classified into ; groups#
a9 anks with paid$up capital and reserves in e5cess
of "s. 7 lakhs3
b9 anks with paid$up capital and reserves ranging
between "s. 7%,%%% and one lakh of rupees3
c9 anks with paid$up capital and reserves ranging
between one lakh of rupees and 7 lakhs3
d9 anks with paid$up capital and reserves below
"s. 7%,%%%.
0on$ ,cheduled banks are not entitled to all those
facilities that the scheduled banks avail of from the
"eserve ank of India. ,ince the enactment of the
anking "egulation *ct in !:;:, non$scheduled banks
have also come under the ambit of the "I control. It has
67
become obligatory on the part of these banks to carry a
portion of their deposits with the "I or in the vault with
the bank itself, and prepare their annual accounts and
balance sheets in accordance with the re2uirements
stipulated in ,ection ': of the anking Companies *ct.
,cheduled anks may be classified into two groups#
Indian ,cheduled anks and @oreign ,cheduled anks.
The Indian ,cheduled anks are those which have their
registered officers in India and are registered in the
second schedule if the "I. *s against this, foreign
scheduled banks comprise those commercial banks
which are registered in the said schedule but have their
registered offices outside India. These banks have played
a prominent role in Indias foreign trade3 in fact, they had
complete sway in this sphere until the ,econd >orld
>ar. ,ince then, a number of leading Indian scheduled
banks entered the field of foreign trade and have in the
course of time achieved an important position in this
field.
Indian scheduled banks may be distinguished in two
broad sectors#
6D
a9 (ublic sector commercial banking comprising the
,tate ank of Indian and its subsidiaries and the twenty
nationalized banks3
b9 (rivate sector commercial banking comprising all
the other Indian scheduled banks that do not fall in the
above group.
C&*C,USI&*:
@riends, as we know, over five decades the
Commercial banks in India achieved astounding success
by enormously spreading banking services in far$flung
and unbanked areas of the country through their massive
branch network are garnering burgeoning amount of
savings which represent half of the 41( of the country.
* major portion of these resources had been deployed to
meet the needs of priority sectors which are critical to the
economy.
6F
Kowever, it is crucial for the commercial banking
industry to meet the increasingly comple5 savings and
financing needs of the economy by offering a wider and
fle5ible range of financial products tailored for all types
of customers. In recent years, it is being felt widely that
the commercial banking system has not actually grown
as sound E vibrant as it needed to be. ,trong capital
positions and balance sheets places the Commercial
banks in a better position to deal with and absorb the
economic shocks. These anks need to face competition
without diluting the operating standards.
In banking, there is no such thing as ?one size fits
all.? ut todayHs commercial banks are more diverse
than ever. +ouHll find a tremendous range of opportunities
in commercial banking, starting at the branch level
because commercial bankers, now are highly
e5perienced in working with businesses to develop the
right financial package to meet your uni2ue business
needs. The face of Commercial banking is changing
rapidly. Competition is going to be tough anks should
avail of the e5isting and upcoming opportunities as well
as address the above$discussed issues if they have to
succeed, not just survive, in the changing environment.
Thus, Commercial anks occupy a dominant place
in the money market, they are like a reservoir into which
6G
flow the savings, the idle surplus, money of households
and from which loans are given on interest to
businessmen E others who need them for investment or
productive uses.
REC&MME*+ATI&*S
anking in India has made a remarkable progress in its
growth and e5pansion, as well as business with social
perspective in the fulfillment of national objectives.
Indian Commercial banking has developed, but, its
perfection is yet to be seen. There still remains many
tasks to be fulfilled.
!. ,till there are villages left without banking facilities,
so many more rural banks branches need to be
opened.
'. Luality of Commercial banking facilities should be
improved to the atmost satisfaction of the customer.
6. -perational costs of Commercial banks should be
reduced to the minimum profitability and working
results must be ma5imized.
;. anking staff should be ade2uately trained.
7. )ore lending should be made in favour of priority
sectors.
6:
D. )alpractices, fraud, corruption and red$tapism must
be done away with.
F. )ore attention should be paid to the development of
e5ports.
G. 0ationalised banks should give more technical
assistance to the small industrialists.
:. Interest rates on deposits should be enhanced
reasonably up to !'$!6 & so that savers get their
legitimate returns.
!%. The high level of overdues of banks have become a
matter of concern. ,o, banks should make all possible
efforts to reduce their overdues. This all re2uires that
no loans should be given without proper identification
and address of the deserving rural poor.
Thus, in order that the association of banks with industry
is more fruitful and rewarding, many innovations have to
be planned and introduced systematically and greater
degree of managerial competence will have to be
developed in Commercial banking sector.
%UTURE !R&S!ECTS &% C&MMERCIA,
(A*-I*5:
;%
Indian banking has developed. ut, its perfection is yet
to be seen. There still remain many tasks to be fulfilled.
Kistorically, profitability from lending activities has been
cyclic and dependent on the needs and strengths of loan
customers. In recent history, investors have demanded a
more stable revenue stream and banks have therefore
placed more emphasis on transaction fees, primarily loan
fees but also including service charges on array of
deposit activities and ancillary services 8international
banking, foreign e5change, insurance, investments, wire
transfers, etc9. Kowever, lending activities still provides
and in future; too will provide bulk of a Commercial
bankHs income.
*s part of the financial services industry, commercial
banking are worldwide attempting to compete better by
improving core operations and differentiating the
customer e5perience. The banking sector has been
consolidating3 it is worth noting that far more people are
employed in the Commercial banking sector than any
other part of the financial services industry. Aobs in
banking can be e5citing and offer e5cellent opportunities
to learn about business, interact with people and build up
a clientele. In future, if we are well$prepared and
;!
enthusiastic about entering the field, we are likely to find
a wide variety of opportunities open to us.
Thus, we can predict the future of Commercial bank, to
be spreaded world wide. They will be providing an
unprecedented level of service to a wide range of
business clients, from small business, through to multi$
national corporate clients. In future, Commercial ank
will come up with more innovative and e5perienced
depth knowledge of specific sectors, to meet all of our
banking re2uirements.
(I(,I&5RA!HY
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