COMMERCIAL BANKS

Among the banking institution in the

organized sector, the commercial banks are
the oldest institution having a wide
network of branches commanding utmost
public confidence and having the lion’s
share in the commercial banking
operations.
 Structure of commercial banks

Public sector Private sector

banks banks

SBI Nationalized RRBS

banks Foreign
Indian banks
banks
• Functions of commercial banks:
 accepts deposits of various kinds such as
current deposits, time deposits, saving deposits.
 advance loans to traders, producers and
other generally for short periods.
 collects cheques,bills etc on behalf of their
customers.
 they provide general utility services such
as accepting bills of exchange, issuing traveler's
cheques and letters of credit, accepting valuables
for safe custody,etc
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• Now it is also providing loan for agriculture and
economic Development. They finance co-
operative societies to enable them to expand
their production credit to the farmers.
• Since 1975,the SBI and nationalized banks are
sponsoring regional rural banks to expand cheap
credit to small farmers, rural artisan and other.
• Kisan credit card scheme was introduced in
1998-99to facilitate the flow of timely and
adequate short term credit to the farmers.
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• Commercial banks extend financial assistance
to the exporter on priority basis and relatively
liberalized terms.
• It also extends general utility services like
safety locker facility, transfer of funds, ATM
facility, credit card facility, gift cheque,
accepting bills and providing advice on
financial matters to its customers.
 Balance sheet of a bank
• Liabilities
• 1.Share capital
• 2.Reserve fund
3.Deposits(demand,time,saving)
• 4.Borrowing from other banks
• 5.Acceptance and endorsements
• 6.Other liabilities.
• Assets
• 1.Cash
a. Cash in hand
b.Cash with the central bank
c.Cash with others banks
2.Money at call and short notice
3.Bills purchased or discounted
4.Investments
5.Loans and advances
6.Accetances and endorsement
7.Building and other fixed assets
• Liabilities of the bank:
• 1.share capital: Bank initially raises its funds by
issuing share Capital. It is the contributions made by
the shareholders. It is the actually paid up share
capital which constitute the liability of the bank.
• 2.Reserve funds: It is the amount accumulated
over the years out of undistributed
Profits.Normally,all the profits of the bank are not
distributed among the shasreholders.some part is
retained undistributed for meeting
contingencies .This is reserved fund.
• Deposits: Deposits from the public constitute
the major portion of the banks working Capital.
Deposits are the liabilities of a bank towards the
depositors.
• Borrowing from banks: sometimes the
bank borrows loans from reserve bank of
india,other banks and other institutions.
• Acceptances: The bank also creates liabilities
by accepting and endorsing the bills of exchange
on behalf of its customers
• Assets of the bank:
• Cash(cash in hand, cash with the central
bank, cash with other banks)
• Money at call at short notice
• Bills purchased and discounted
• Investments
• Loans and advances
• Acceptance and endorsements
• Building and other fixed assets.
 Investment policy of banks:
• Liquidity

• Solvency

• Profitability