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What is a Bank?A bank is a financial institution and a financial

intermediary that accepts deposits and channels those

deposits into lending activities, either directly or

through capital markets. A bank connects customers

that have capital deficits to customers with capitalsurpluses

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TYPES OF BANKS CENTRAL

COMMERCIAL

DEVELPOMENT

SPECIALISED BANK

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What are Commercial Banks?A commercial bank (or business bank) is a type

of financial institution and intermediary. It is abank that provides transactional, savings, and moneymarket accounts and that accepts time deposits

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Objective -to help businessmen.

These banks collect money from general public andgive short-term loans to businessmen by way of cash

credits, overdrafts, etc.

services provided:1. collecting cheques,

2. bill of exchange

3. remittance money from one place to another place.

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In India, commercial banks are established under

Companies Act, 1956. In 1969, 14 commercial bankswere nationalised by Government of India. Thepolicies regarding deposits, loans, rate of interest, etc.of these banks are controlled by the Central Bank.

http://kalyan-city.blogspot.com/2010/09/nationalisation-of-banks-in-india.htmlhttp://kalyan-city.blogspot.com/2010/09/nationalisation-of-banks-in-india.html

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Types of Commercial banks: 1.Public sector banks

2.Private sector banks

3.Foreign banks.

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Public Sector Banks These are banks where majority stake is held by

the Government ofIndia or Reserve Bank of India.

Examples of public sector banks are: State Bank ofIndia,Corporation Bank, Bank of Baroda and DenaBank, etc

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Private Sectors Banks In case of private sector banks majority of share

capital of the bank is held by private individuals.These banks are registered as companies with limitedliability.

For example: The Jammu and Kashmir Bank Ltd., Bank

of Rajasthan Ltd.,Development Credit Bank Ltd, LordKrishna Bank Ltd., Bharat Overseas Bank Ltd.,GlobalTrust Bank, Vysya Bank, etc

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Foreign Banks These banks are registered and have their

headquarters in a foreign countrybut operate theirbranches in our country.

Some of the foreign banks operating in our country areHong Kong and Shanghai Banking Corporation (HSBC),Citibank, American Express Bank, Standard & CharteredBank, Grindlays Bank, etc.

The number of foreign banks operating in our country hasincreased since the financial sector reforms of 1991.

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Functions of Commercial Banks

The functions of commercial banks are of two types.

(A) Primary functions

(B) Secondary functions.

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Primary functions

The primary functions of a commercial bank include:

a) Accepting deposits

b) Granting loans and advances

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Types of Advances

a) Cash Credit

Cash credit is an arrangement whereby the bank allowsthe borrower to draw amount upto a specified limit.

The amount is credited to the account of the customer.The customer can withdraw this amount as and whenhe requires.

Interest is charged on the amount actually withdrawn.Cash Credit is granted as per terms and conditionsagreed with the customers.

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b) Overdraft

Overdraft is also a credit facility granted by bank. Acustomer who has a current account with the bank isallowed to withdraw more than the amount of creditbalance in his account.

It is a temporary arrangement. Overdraft facility with aspecified limit may be allowed either on the security ofassets, or on personal security, or both.

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c) Discounting of Bills

Banks provide short-term finance by discounting bills,that is, making payment of the amount before the duedate of the bills after deducting a certain rate ofdiscount.

The party gets the funds without waiting for the dateof maturity of the bills. In case any bill is dishonouredon the due date, the bank can recover the amount fromthe customer.

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SECONDARY FUNCTIONS Issuing letters of credit, travellers cheque, etc.

Undertaking safe custody of valuables, importantdocument and securities by providing safe deposit vaults orlockers.

Providing customers with facilities of foreign exchangedealings.

Transferring money from one account to another; andfrom one branch to another branch of the bank throughcheque, pay order, demand draft.

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SECONDARY FUNCTION CONTD Collecting and supplying business information.

Providing reports on the credit worthiness of customers.

Providing consumer finance for individuals by way of loanson easy terms for purchase of consumer durables liketelevisions, refrigerators, etc.

Educational loans to students at reasonable rate of interestfor higher studies, especially for professional courses.

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Some examples of Commercial Banks in

India

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