Commercial Banks in India- Know Everything Here

What Is a Commercial Bank?

A commercial bank is a financial institution that accepts deposits, offers checking account services, makes loans, and provides basic financial products including certificates of deposit (CDs) and savings accounts to individuals and small businesses. Most people conduct their banking through a commercial bank.

Mortgages, auto loans, business loans, and personal loans are a few types of products that commercial banks provide and earn interest on. These products are funded by customer deposits.

Functions of commercial Banks

Primary Functions: 

Accepts deposit: Deposits are accepted in the form of savings, current, and fixed accounts. The surplus balances collected from the firm and the individual are loaned to the business for temporary purposes.

Provides loans and advances: The bank also lends and advances money to entrepreneurs and business people and collects interest from them. These are the bank’s primary sources of profits. Banks use this process to retain only a small number of deposits as reserves and to offer (lend) the rest as demand loans, overdrafts, cash credit, short-term loans, and other types of loans.

Credit cash: A customer who receives credit or a loan does not receive liquid cash. To transfer money to a customer’s account, a bank account must be opened first. This process allows the bank to create money.

Secondary functions 

Discounting bills of exchange: A bill of exchange acknowledges the payment amount against goods purchased at an upcoming date. You can also clear the amount before the quoted time through a discounting method offered by a commercial bank.

Overdraft facility: It allows a customer to overdraw their current account up to the set limit.

 Purchasing and selling of the securities: Your bank provides you with the option of purchasing and selling securities.

Locker facilities: Banks provide lockers for their customers to store valuables or documents. The banks charge a minimum of an annual fee for this service.

Paying and gathering the credit: It utilizes instruments such as promissory notes, checks, and bills of exchange.

How many Commercial Banks are There in India?

In India, commercial banks are classified into three categories:

Public Sector Banks- The rights of these banks are under the Government or the country’s central bank.

Private Sector Banks- Private sector banks denominating shareholders is either a private entity, individual, or group of individuals.

Foreign Banks- These banks are headquartered outside India and are operating in India as well by setting up their branches.

Biggest Commercial Bank in India

SBI is currently the largest commercial bank in India. SBI is a public sector bank and has its headquarters in Mumbai, Maharashtra.

 List of Top-15 Commercial Banks in India

1. SBI (State Bank of India)
2. HDFC Bank
3. ICICI Bank
4. Axis Bank
5. PNB (Punjab National Bank)
6. Kotak Mahindra Bank
7. Canara Bank
8. IndusInd Bank
9. Bank of Baroda
10. IDBI Bank (Industrial Development Bank of India)
11. Yes Bank
12. Union Bank of India Bank
13. Bank Of Maharashtra
14. Indian Overseas Bank
15. Bank Of India

Questions related to Commercial Banks asked in Exam:

Question1. Current account deposits are

a) Non-repayable

b) Non-repayable on demand

c) Repayable on demand

d) None of these

Question 2. Which is the first commercial bank incorporated by the Indians in 1881?

a) Imperial Bank Of India

b) Awadh Commercial Bank

c) Reserve Bank Of India

d) State Bank Of India

Question 3. How many types of commercial bank are there?

a) 5

b) 2

c) 4

d) 3