Banks are financial institutions whose debt is widely accepted as money. There are different types of banks seen in a country.Commercial bank occupies an important place in the banking system of a country. These banks carry out a large percentage of the banking businessCommercial bank occupies an important place in the banking system of a country. These banks carry out a large percentage of the banking business. Commercial banks are those banks which accepts deposits from the public and granting loan to the public and create money.
Commercial banks are divided into 4 types:Public Sector Bank(25) , RRB(82) ,Private Bank(21) and Foreign Bank(32). SBI and its associates-6,Old private bank-14,other nationalised bank-19,New private bank-7.
1.Public Sector Bank:
SBI is the first public sector bank of the country,It was established in 1959.SBI subsidiary act was passed by for these 7 banks associated with the SBI.
i.State Bank of Hyderabad.
ii.State Bank of Jaipur and Bikaner.
iii.State Bank of Travancore.
iv.State Bank of Mysore.
v.State Bank of Patiala.
vi.State Bank of Indore.
vii.State Bank of Saurashtra.
SBl Saurashtra merged with the 2008 After that the state Bank of Indore was also merged with 2010.So new the SBI associate is 5.
2.Other nationalised Bank:
In 1959 the Govt. of India nationalised 14 banks, later in 1980.Another 6 banks were nationalised.The total number of nationalised banks was 20. Now bank of india was merged with Punjab National Bank.So the numbers comes down to 10 is known as Rural Bank.
3.Regional Rural Bank(RRB):
On the recommendation on the banking commision 1972 act 2(5) RRB were established there main function is to provide financial help to small and marginal farmer and rural worker inorder to develop the rural economic on March 31,2010 as many as 82 RRB were functioning in the country..
4.Private Sector Bank:
Banks whose ownership based in the private sector are called private sector bank.
(i)Old private sector Bank
(ii)New private sector current Bank
Since 1991 due to the economic reforms RBI are giving acceptance to the establishment of new bank in private sector even non resident Indians (NRI) and foreign country can by shares of private sector bank.New private bank provides high level of customer service at the end of March 2010 out of 21 private bank and 7 are New private bank.
Foreign bank are those bank whose head quarter situated in outside of country or foreign country.In the past these banks are mainly deed the foreign exchange.So these were called the foreign exchange bank.Now the number of foreign banks are 32.
Functions Of Commercial Banks In India:
In the modern world banks perform such a variety of functions,that is not possible to make an all inclusive list of their functions and services.Some basis functions perform by the banks are discussed below.
The primary function or the most important function of a bank is to accept deposit from those who can save but can not profitability utilise these saving themselves to attract savings from all sorts of individuals.
a.Fixed or time deposit
Money deposited for fixed time of period means one,two or five year and can not be withdrawn before the expiry or maturity period.The ROI is higher than the other account.The longer period of fixed deposit possible the higher rate of return.It is also called Time deposit.
These accounts are generally maintain by the traders and business man who have to make a number of payment every day and withdraw also many times.Normally no interest is paid to on these accounts rather the deposited have to pay some charges to the bank for service Purposes.
c.Saving deposit account
The aim of these accounts is to encourage and mobilise small savings of the public.Certain restrictions are imposed on the depositors regarding the number of withdrawals in a given period.Cheque facilities available and the rate of interest is low as compared to fixed deposit.
d.Recurring deposit account
The purpose of these accounts is to encourage the regular savings by a specified amount deposited every month for a specific period say 12,24,36 or 60 months.These amount can not be withdrawn before the maturity except emergency.
e.Home safe account
Home safe accounts is another scheme aiming at promoting the savings habits under this scheme a safe is supplied to the depositors to keep at home and to put his small savings in it.Periodically the safe is taken to the bank where the amount of safe is credited to his account.
2.Advancing Of Loans:
The second important function of a bank is to advance loans to the public.After keeping some cash reserves the banks lend their deposits to the needy borrowers. Before advancing loan banks are satisfied about the creditworthiness of the borrowers.
Types Of advancing Loans:
a.Money at call
Such loans are very short term loans and backed by the bank at very short notice of say one day to 14 days.These loans are generally made to other banks or financial institutions.
b.Cash credit loan
The debtor is allowed to withdraw a certain amount on a given security the debtor withdraws the amount within these limits as per his requirement and also repay it .The interest change by the bank on the accrual withdrawal.
Sometimes the banks gives facility to its current account holder customer.The bank sanction to withdraw more money than lying in his account.It is called overdraft.It available for short-term.Suppose a person has Rs10000 in his current account the banks allow him to issue cheques up to 12 thousand rupees.The two thousand rupees will be called overdraft.
The banks have also started advancing medium term and long term loans.The maturity period is more than one year.The interest is charged on the entire amount of loan and the loan is repaid either on maturity or in installment.
A unique function of the bank is to create credit facility.It is the outcome of the process of advancing loan when a bank grant loan to its customers,It does not lend cash but open an account in the borrower name and credit the amount of loan in his account.whenever a bank grant loan it create an equal amount of bank deposit so it is called credit creation.
4.Promoting cheque system/facility:
Banks also render a very useful medium of exchange in the form of cheque.Banks are also provide facility on cheque system.
Banks also perform certain agency functions on behalf of their customers.
a.Remitance of Fund
Banks help their customers in transferring funds from one place to another place through cheques,drafts etc.
b.collection and payment of credit instruments
Banks collect and pay various credit instruments like cheques,Bills of exchange,promissory note etc.
c.Purchasing and sell of securities
Banks undertake purchasing and selling of various securities like shares,stocks,bonds and debentures etc on behalf of their customers.
d.collection of dividends on shares
Banks also collect dividends,interest on shares and debentures of their customers.Banks issue or collect some interest on their investment and loan.
e.income tax consultancy
Banks may also employ income tax experts to prepare income tax returns for their customers.
f.act like trustee and executer
Banks preserve the wills of their customers and execute them after their death.
6.General utility function:
Banks also provide locker facilities to their customers to keep their valuable and important documents in this locker.
Banks also issue travelers cheques to help their customers to travel without the fear of theft and loss of money.
c.letter of credit
Letters of credit are issued by the bank to their customers satisfying their credit worthiness.Letter credits are very useful in foreign trade.
d.under writing securities
Banks underwrite the securities issued by the Government, private or public bodies because of its full faith on banks the public will not hesitate in buying securities carrying the signature of the bank.
Some banks issue cheques of various denominations like rs11 ,21,31,51,101 etc for the auspicious occasion.
f.foreign exchange business
Banks also deal in the business of foreign currencies.Again they may finance foreign bills of exchange.