COMMERCIAL

BANK AND ITS

TYPES
PRESENTED BY – ISHA. S. KAKIRDE
 WHAT ARE COMMERCIAL BANKS?

■ It is a financial institution which performs the

functions of accepting deposits from the public and
lending loans and offers allied services to the account
holder and the public at large
WHAT ARE THE FUNCTIONS OF A COMMERCIAL BANKS?

FUNCTIONS OF COMMERCIAL
BANK

Primary Functions Secondary Functions

Overdraft Facility
Accepting Deposits Advancing of
Loans
Discounting bill of
exchange

Agency Functions

General Utility Function

FUNCTIONS OF COMMERCIAL
BANK
■ (a) Primary Functions: (i) Accepting Deposits:
Implies that commercial banks are mainly dependent on public deposits.
■ There are two types of deposits, which are discussed as follows:
(1) Demand Deposits:
■ Refer to kind of deposits that can be easily withdrawn by individuals without any
prior notice to the bank. In other words, the owners of these deposits are allowed to
withdraw money anytime by simply writing a check. These deposits are the part of
money supply as they are used as a means for the payment of goods and services as
well as debts. Receiving these deposits is the main function of commercial banks.
(2) Time Deposits
■ Refer to deposits that are for certain period of time. Banks pay higher interest on
rime deposits. These deposits can be withdrawn only after a specific time period is
completed by providing a written notice to the bank.
FUNCTIONS OF COMMERCIAL
BANK
■ (ii) Advancing Loans:
Refers to one of the important functions of commercial banks. The
public deposits are used by commercial banks for the purpose of
granting loans to individuals and businesses. Commercial banks grant
loans in the form of overdraft, cash credit, and discounting bills of
exchange.

(b) Secondary Functions:

■ Refer to crucial functions of commercial banks. The secondary
functions can be classified under three heads, namely, agency
functions, general utility functions, and other functions.
■ These functions are explained as follows:
(1) Agency Functions:
■ Implies that commercial banks act as agents of customers by
performing various functions, which are as follows:
(i) Collecting Checks:
■ Refer to one of the important functions of commercial banks. The banks collect
checks and bills of exchange on the behalf of their customers through clearing
house facilities provided by the central bank.
(ii) Collecting Income:
■ Constitute another major function of commercial banks. Commercial banks
collect dividends, pension, salaries, rents, and interests on investments on
behalf of their customers. A credit voucher is sent to customers for information
when any income is collected by the bank
(iii) Paying Expenses:
■ Implies that commercial banks make the payments of various obligations of
customers, such as telephone bills, insurance premium, school fees, and rents.
Similar to credit voucher, a debit voucher is sent to customers for information
when expenses are paid by the bank.
(2) General Utility Function
(i) Provides Locker Facilities :
■ Implies that commercial banks provides locker facilities to its customers
for safe keeping of jewellery, shares, debentures, and other valuable
items. This minimizes the risk of loss due to theft at home
(ii) Issuing Traveller’s Checks :
■ Implies that banks issue traveller’s checks to individuals for travelling
outside the country. Traveller’s checks are the safe and easy way to
protect money while travelling
(iii) Dealing in Foreign Exchange :
■ Implies that commercial banks help in providing foreign exchange to
businessmen dealing with imports and exports. However commercials
banks need to take permission of the central bank for dealing in foreign
exchange
 WHAT ARE THE TYPES OF
COMMERCIAL BANKS?
SCHEDULED BANKS
■ PUBLIC SECTOR BANK
■ PRIVATE SECTOR BANK
■ FOREIGN BANKS
■ The banks which are not included in the list of the scheduled banks are called the
Non- Scheduled Banks. At present there are only 3 such banks in the country.
 PUBLIC SECTOR BANKS
■ Public Sector Banks:  These can be further classified into
Nationalized Banks and Non Nationalized banks. These are the
banks which are owned and controlled by the government. In
these the majority of stake is held by the government. Their main
aim is to provide service to the public. These include State Bank of
India and its associates, Dena bank, Punjab National Bank,
Canara bank, etc.

■ For public banks, majority equity lies in the hands of the government.

Nationalized banks provide financial services to mass customers at
affordable rates.
FUNCTIONS OF PUBLIC SECTOR
BANK
 PRIVATE SECTOR BANK

■ Private Sector Banks: These are the banks which are owned and
controlled by the private individuals. So their main aim is to earn
profit like any other businessman does. These include ICICI Bank,
HDFC Bank, Axis Bank, Yes Bank, etc

■ The majority stake is owned by private shareholders (individuals or

corporates). They accept deposits and distribute loans to individual
customers, small businesses, and medium-sized businesses.
FUNCTIONS OF PRIVATE SECTOR
BANKS
 FOREIGN BANKS

■ Foreign Banks: These are the banks which are owned and controlled by
the foreign companies. They have their headquarters in other countries and
open their branches in India. Examples are Federal Bank, Citi Bank, HSBC
Ltd.

■ As the name suggests, these financial institutions operate in foreign

countries but have head offices in the parent country. The bank’s
foreign branches take deposits, extend loans, engage in securities
trading, and facilitate foreign exchange functions
FUNCTIONS OF FOREIGN BANKS
CONCLUSION
THANK YOU
PRESENTED BY- ISHA.S.KAKIRDE.