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Commercial Banks:

The modern commercial banking (CB) originated in India during the 19 th and
the early 20th centuries mainly due to the development of foreign trade and the
emergence of the organized Commercial and industrial sector.
The foreign banks were the first banks to be established in india, and were
known as exchange banks. After world war I the domestic enterprises also
developed which led to the development of Indian banks.
Thus, by the late 1950s the Indian banks began to dominate the field of
banking.
CB Structure:
The CB structure in India is classified into:
Scheduled commercial banks
Non-Scheduled commercial banks

As a result of the recent birth of new private sector banks, the


existing domestic banking system is reclassified as follows:
Public sector banks: they are, SBI & its Associates and
Nationalised Banks.
Private Sector Banks: they are: old Indian private sector banks,
New Indian Private sector banks, Foreign banks.
Scheduled Banks in India constitute those banks which have
been included in the Second schedule of RBI Act 1934.
Non-Scheduled Banks means a banking company as defined in
Clause of Section 5 of the Banking Regulation Act 1949 which
is not a scheduled bank.

The Indian commercial banking system, as seen today, is briefly described


below:
RBI
Pub Sector Banks (157)
SBI (1): SBI Associates (7): Nationalised Banks (19): RRBs (130)
Private Sector Banks (62)
Indian Pvt Banks (33):

Foreign Banks (29)


Old Indian Pvt Banks (20):
New Indian Pvt Banks (9):
Non-Scheduled Banks (4)

Role of Commercial Banks in Industrial Finance:


The CBs too have become an important source of finance. At present about 40% of
the total loans and advances granted by the CBs go to industry.
The SSI has been recognized as a very important productive sector of the economy
deserving special support from the banking institutions. Therefore, various
concessions and facilities have been available to this sector from the banks. The
following are the important facilities granted to SSIs.
The SSI is included in the priority sector for bank finance.
It has been directed that they should not insist on margins and guarantees from
borrowers in this sector and no viable scheme should be turned down merely for
want of margin or collateral security.
It has been given concessional rates of interest for term loans as well as for working
capital.
The repayment periods are not fixed on an adhoc basis but are related to the
surplus generating capacity of the unit.
As a financing institution, a development bank provides finance to industries in
various ways. Equity participations, provision of medium and long term loans,
subscription to bonds or debentures issued by them and guaranteeing of loans raised
from foreign or domestic sources are the usual forms in which they provide finance.
CBs provide various kinds of technical and managerial assistance, undertake
economic and technical research, conduct survey work etc.,