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Understanding Commercial Banks

Commercial banks are financial institutions that accept deposits, provide business loans, and offer savings and checking accounts. They primarily focus on receiving deposits and lending to businesses. Common types of commercial banks include public sector banks, private sector banks, and foreign banks. Commercial banks perform key functions like processing payments, issuing bank drafts, accepting term deposits, lending via loans, and providing letters of credit. Major commercial banks in India include public sector banks like State Bank of India as well as private and foreign banks.

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183 views5 pages

Understanding Commercial Banks

Commercial banks are financial institutions that accept deposits, provide business loans, and offer savings and checking accounts. They primarily focus on receiving deposits and lending to businesses. Common types of commercial banks include public sector banks, private sector banks, and foreign banks. Commercial banks perform key functions like processing payments, issuing bank drafts, accepting term deposits, lending via loans, and providing letters of credit. Major commercial banks in India include public sector banks like State Bank of India as well as private and foreign banks.

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Pradnyesh Ganu
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© Attribution Non-Commercial (BY-NC)
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 A commercial bank (or business bank) is a type of financial institution and intermediary.

It is a
bank that provides transactional, savings, and money market accounts and that accepts time
deposits.
 An institution which accepts deposits, makes business loans, and offers related services. Commercial banks also allow for
a variety of deposit accounts, such as checking, savings, and time deposit.
 commercial banks offer services to individuals, they are primarily concerned with receiving deposits and lending to
businesses.
 2) Commercial Banks
 Commercial banks are of three types
 (i) Public Sector Banks
 (ii) Private Sectors Banks
 (iii) Foreign Banks

The role of commercial banks


Commercial banks engage in the following activities:

 processing of payments by way of telegraphic transfer, EFTPOS, internet banking, or


other means
 issuing bank drafts and bank cheques
 accepting money on term deposit
 lending money by overdraft, installment loan, or other means
 providing documentary and standby letter of credit, guarantees, performance bonds,
securities underwriting commitments and other forms of off balance sheet exposures
 safekeeping of documents and other items in safe deposit boxes
 sale, distribution or brokerage, with or without advice, of insurance, unit trusts and
similar financial products as a “financial supermarket”
 cash management and treasury services
 merchant banking and private equity financing
 traditionally, large commercial banks also underwrite bonds, and make markets in
currency, interest rates, and credit-related securities, but today large commercial banks
usually have an investment bank arm that is involved in the mentioned activities.

Commercial Banks in India are broadly categorized into Scheduled Commercial Banks and Unscheduled Commercial Banks.

Activities of Commercial Banks

The modern Commercial Banks in India cater to the financial needs of different sectors. The main functions of the commercial banks comprise:

 transfer of funds

 acceptance of deposits

 offering those deposits as loans for the establishment of industries

 purchase of houses, equipments, capital investment purposes etc.

 The banks are allowed to act as trustees. On account of the knowledge of the financial market of India the financial companies are attracted
towards them to act as trustees to take the responsibility of the security for the financial instrument like a debenture.
 The Indian Government presently hires the commercial banks for various purposes like tax collection and refunds, payment of pensions etc.

 Commercial banks offer a wide range of corporate financial services that


address the specific needs of private enterprise. They provide deposit, loan
and trading facilities but will not service investment activities in financial
markets.

 Commercial banks can be described as a type of financial intermediary. In the US,


the term is used to refer to any banking organization or division that deals with the
deposits and loans of business organizations.

 The term commercial bank is used to differentiate these banks from investment
banks, which are primarily engaged in the financial markets. Commercial banks are
also differentiated from retail banks that cater to individual clients only. In non
English-speaking countries the term commercial bank is used interchangeably with
the term trading bank.

 Commercial banks play a number of roles in the financial stability and cash flow of a
countries private sector. They process payments through a variety of means
including telegraphic transfer, internet banking and electronic funds transfers.
Commercial banks issue bank checks and drafts, as well as accept money on term
deposits.

 Commercial banks also act as moneylenders, by way of installment loans and


overdrafts. Loan options include secured loans, unsecured loans, and mortgage
loans. A secured loan is one where the borrower provides a certain property or
asset as collateral against the loan. The main condition of these loans is that if the
loan remains unpaid, the bank has the right to use the property in any way they like
to realize the outstanding amount. Unsecured loans have no collateral and therefore
command higher interest rates. There are a variety of unsecured loans available
today and these include credit cars, credit facilities such as a lines of credit,
corporate bonds, and bank overdrafts.
 Mortgage loans that are provided by commercial banks are similar to secured loans
but are used specifically to buy real estate property for commercial purposes. In
most of these cases, the banks hold a lien on the title to the particular property
purchased with the loan. If the borrower is unable to pay the loan back, the bank
leverages this item against the loan to generate funds or recover the principal.

 Commercial banks provide a number of import financial and trading documents


such as letters of credit, performance bonds, standby letters of credit, security
underwriting commitments and various other types of balance sheet guarantees.
They also take responsibility for safeguarding such documents and other valuables
by providing safe deposit boxes.

 Currency exchange functions and the provision of unit trusts and commercial
insurance are typically provided by the relevant departments in larger commercial
banks.

List of Commercial Banks in India

SBI & Associates:

 State Bank of India


 State Bank of Bikaner & Jaipur
 State Bank of Hyderabad
 State Bank of Indore
 State Bank of Mysore
 State Bank of Patiala
 State Bank of Travancore

Nationalised Banks:

 Allahabad Bank
 Andhra Bank
 Bank of Baroda
 Bank of India
 Bank of Maharashtra
 Canara Bank
 Central Bank of India
 Corporation Bank
 Dena Bank
 IDBI Bank Ltd.
 Indian Bank
 Indian Overseas Bank
 Oriental Bank of Commerce
 Punjab & Sind Bank
 Punjab National Bank
 Syndicate Bank
 UCO Bank
 Union Bank of India
 United Bank of India
 Vijaya Bank

Foreign Banks:

 ABN Amro Bank


 Abu Dhabi Commercial Bank
 American Express Banking Corporation
 Antwerp Diamond Bank
 AB Bank
 Bank International Indonesia
 Bank of America
 Bank of Bahrain & Kuwait
 Bank of Ceylon
 Bank of Nova Scotia
 Bank of Tokyo Mitsubishi UFJ
 Barclays Bank
 BNP Paribas
 Calyon Bank
 Chinatrust Commercial Bank
 Citibank
 DBS Bank
 Deutsche Bank
 Hongkong & Shanghai Banking Corporation
 JP Morgan Chase Bank
 JSC VTB Bank
 Krung Thai Bank
 Mashreq Bank
 Mizuho Corporate Bank
 Oman International Bank
 Shinhan Bank
 Societe Generale
 Sonali Bank
 Standard Chartered Bank
 State Bank of Mauritius
 UBS AG

Other Scheduled Commercial Banks:

 Axis Bank
 Bank of Rajasthan
 Catholic Syrian Bank
 City Union Bank
 Development Credit Bank
 Dhanalakshmi Bank
 Federal Bank
 HDFC Bank
 ICICI Bank
 IndusInd Bank
 ING Vysya Bank
 Jammu & Kashmir Bank
 Karnataka Bank
 Karur Vysya Bank
 Kotak Mahindra Bank
 Lakshmi Vilas Bank
 Nainital Bank
 Ratnakar Bank
 SBI Commercial & International Bank
 South Indian Bank
 Tamilnad Mercantile Bank
 Yes Bank

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