EXECUTIVE SUMMARY Commercial banks occupy a dominant place in the money market.

They, as a matter of fact, form the largest component in the banking structure of any country. They are the oldest, largest and fastest growing financial institutions in India. They are profit making institutions, dealing in money and credit. Commercial banks play a major role in the growth and development of the country due to the modern organization and functioning, huge funds and wide network all over the country. Thus, they are like a reservoir into which flow the savings, the idle surplus money of households and from which loans are given on interest to businessmen and others who need them for investment or productive uses. Commercial banks are very important source of institutional credit as they are the major depository of peoples savings. They are very important devices for providing short term credit to trade and commerce.

Commercial !anks being repositories of deposits have played significant role in garnering savings of the people particularly after the nationalization. Thus, they have made praiseworthy efforts in pooling the savings. Rationale of the study The "ationale of the study can be considered as follows#$ topics. on the subject. The study is comprehensive. It helps to improve the research and investigation ability. practically Hypothesis: It enables to think logically and It aims at giving a thorough grounding The study includes essential core

The hypothesis being put forth for this study about Commercial banking is that awareness of Commercial banks is &&', but there are still many people who do not know about the Commercial banks and the amenities provided by them. Commercial banks are coming up with new innovative ideas and schemes for increasing their customer base and fulfilling the needs of the general public. Research Methodolo y: The research methodology is data collection through#$ ("I)*"+ ,-."C/, ,/C-01*"+ ,-."C/, !ri"ary Sources: ,urvey by distributing

2uestionnaire to the people taking sample size of &&, Interviews conducted with bankers3 accumulating knowledge and help from friends, professors, etc. Secondary Sources: 4athering data through books, journals, magazines, websites, newspapers, etc.
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 E#pected Contri$ution /6pectations from the study are that it may contribute to the real scenario of commercial banking demand and accordingly the banks can go for new innovative schemes. It will also specify some recommendations and based on that banks can make suitable arrangements in a

!anking,

in

its

crude

form,

is

an

age$old

phenomenon. It was in e6istence even in ancient times, too. It is the business of providing financial services to consumers and businesses. They are the single major source of institutional finance in the country. *ccording to ,ection 7 8c9 of the !anking "egulation *ct, :;: $ <!anking company means any
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company which transacts the business of banking in India=. ,ection 7 8b9 of the act defines banking as accepting for the purpose of lending or investment of deposits of money fro the public repayable on demand or otherwise and withdrawable by che2ue, draft, order or otherwise. !anking services also serve two primary purposes. %irst, by supplying customers with the basic mediums$of$e6change 8cash, checking accounts, and credit cards9, banks play a key role in the way goods and services are purchased. >ithout these familiar methods of payment, goods could only be e6changed by barter 8trading one good for another9, which is e6tremely time$consuming and inefficient. Second, by accepting money deposits from savers and then lending the money to borrowers, banks encourage the flow of money to productive use and investments. This in turn allows the economy to grow. >ithout this flow, savings would sit idle in someones safe or pocket, money would not be available to borrow, people would not be able to
7

purchase cars or houses, and businesses would not be able to build new factories the economy needs to produce more goods and grow. /nabling the flow of money from savers to investors is called financial intermediation, and thus, banking is e6tremely important to a free market economy. &ri in and E'olution of Indian (an)in -pinions differ as to the origin of the work ?!anking?. The word ?!ank? is said to be of 4ermanic origin, cognate with the @rench word ?!an2ue? and the Italian word ?!anca?, both meaning ?bench?. It is surmised that the word would have drawn its meaning from the practice of the Aewish money$changers of Bombardy, a district in 0orth Italy, who in the middle ages used to do their business sitting on a bench in the market place. *gain, the etymological origin of the word gains further relevance from the derivation of the word ?!ankrupt? from the @rench word ?!an2ue route? and the Italian word ?!anca$rotta? meaning ?!roken bench? due
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probably to the then prevalent practice of breaking the bench of the money$changer, when he failed. !anking is different from money$lending but two terms have in practice been taken to convey the same meaning. !anking has two important functions to perform, one of accepting deposits and other of lending monies andDor investment of funds. It follows from the above that the rates of interest allowed on deposits and charged on advances must be known and reasonable. The money$lender advances money out of his own private wealth hardly accepts deposits and usually charges high rates of interest. )ore often, the rates of interest relate to the needs of the borrower. )oney$lending was practiced in all countries including India, much earlier than the recent type of !anking came on scene. Si nificance of (an)s The importance of a bank to modern economy, so as to enable them to develop, can be stated as follows#

8i9 The banks collect the savings of those people who can save and allocate them to those who need it. These savings would have remained idle due to ignorance of the people and due to the fact that they were in scattered and oddly small 2uantities. !ut banks collect them and divide them in the portions as re2uired by the different investors. 8ii9 !anks preserve the financial resources of the country F it is e6pected that they allocate them appropriately in the suitable F desirable manner. 8iii9 They make available the means for sending funds from one place to another and do this in cheap, safe and convenient manner. economy and essential for financing the developmental process, is governed by banks. change its currency and credit policy fre2uently, This is done by "!I, by changing the supply of money with the changing needs of the public. *lthough traditionally, the main business of banks is acceptance of deposits and lending, the banks have now spread their wings far and wide into many allied and even unrelated activities. Structure of (an)in Syste"
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*t present, the organized banking system in India can be broadly divided into three categories# i9 ii9 iii9 The Central !ank of the country, the "eserve The Commercial !anks The Cooperative !anks. The "!I is the ape6 monetary and banking authority in the country and has the responsibility to control the banking system in India. !ank of India

Co""ercial $an)s
play a major role in the growth and development of the country. They mobilize savings and make them available to large and small industrial enterprise and traders for working capital re2uirements. *fter :C:, commercial banks are broadly classified into nationalized or public sector banks and private sector banks. The ,!I and its associate banks along with another %& banks are the public sector banks. The private sector banks include Indian scheduled banks which have not been nationalized and branches of foreign banks operating in India. The "egional "ural
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!anks came into e6istence since the middle of :E&s with the specific objective of providing credit and deposits facilities to the small and marginal farmers, agricultural labourers and artisans and small entrepreneurs. (an)in in India !anking in India act as a connected link between the borrowers and lenders of money. The banks main activity should be to do the business of banking which should not be subsidiary to any other business. Thus, a bank should always add the word <!ank= to its name to enable people to know that it is a bank and is dealing in money.

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8@rom small to large, commercial banking have got u covered, as In banking there is no such thing as <one size fits all= 9 I*TR&+UCTI&* T& C&MMERCIA, (A*-S: Commercial banks play a vital role in the economic development of a nation. They are the most important source of institutional credit in the money market as they provide short term loans and advances to its customers. They perform a variety of functions and are the main source of credit which is the main input for trade and business activity. Credit created by commercial banks is a major component of money supply in a modern economy. )odern economies depend on the banking sector for production, e6change and distribution.

* Commercial bank is a type of financial intermediary and a type of bank. Commercial bank has two possible "eanin s: a9 It is the term used for a normal bank to distinguish it from an investment bank. b9 Commercial banking can also refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses, as opposed to normal individual members of the public 8retail banking9. * commercial bank is a profit seeking organization dealing in the other peoples money, in the sense that it accepts deposits of money from the public to keep them in its custody for safety. ,o also, it deals in credit, i.e., it creates credit by making advances out of the funds received as deposits to needy people. It charges higher rate of interests for the loans sanctioned and offers lower rate of interest for the deposits. The difference between the two is the profit earned by the bank. Thus, a commercial

bank functions as a mobiliser of saving in the economy. The most distinctive feature of a commercial bank is that it accepts deposits called demand deposits from the public which are che2uable, i.e., withdrawable by means of che2ue. *cceptance of che2uable deposits alone, however, does not give it a status of bank. Its another essential function is to make use of these deposits for lending to others. Commercial banks ordinarily are simple business or commercial concerns which provide various types of financial services to Hcustomers in return for payments in one form or another, such as interest, discounts, fees, commission, and so on. ,o, we can say that their objective is to make profits. * commercial bank is therefore like a reservoir into which flow the savings, the idle surplus money of households and from which loans are given on interest to businessmen and others who need them for investment or productive uses.

+efinition: /conomists have defined a Commercial !ank in various ways. $ *ccording to (rof. Crowther, <a banker is a dealer in debt, his own and other peoples.= $ *ccording to (rof. sayes, <Commercial !anks are institutions whose debts I usually reffered to as bank deposits I are commonly accepted in final settlement of other peoples deposits.= Thus, all these definitions clearly indicate the essential function of a bank namely dealing in money and credit. %U*CTI&*S &% C&MMERCIA, (A*-S Commercial banks perform several crucial functions to satisy the needs of the various sectors of the economy, which may be classified into two categories# 8I9 (rimary functions, and 8II9 ,econdary functions.

.I/

!ri"ary $an)in functions of the commercial . *cceptance of deposits from

banks include# the public3

%. Bending of funds3 5. .se of che2ue system3 and ;. "emittance of funds. 01 Acceptance of +eposits fro" the !u$lic *ccepting deposits is the primary function of a

commercial bank. !y receiving deposits from the public, commercial banks mobilise savings of the household sector. !anks generally accept deposits in three types of accounts# 8i9 8ii9 8iii9 Current *ccount, ,avings *ccount, and @i6ed 1eposits *ccount.

1eposits in Current Account are withdrawable by the depositors by che2ues for any amount to the e6tent of the balance at their credit, at any time without any prior notice. 1eposits of current accounts
7

are, thus, known as 1emand deposits. ,uch accounts are maintained by commercial and industrial firms and businessmen, and the che2ue system is the most convenient and very safe mode of payment. 0o interest is provided for such deposits. In fact bank charge certain commission for providing the facility. Sa'in Accounts are maintained for encouraging savings of households. >ithdrawals from deposits from savings account are not freely allowed as in the case of current account. There are some restrictions on the amount to be withdrawn at a time and also on the number of withdrawals made during a period. Indian commercial banks have, however, rela6ed these rules of savings accounts to a certain e6tent in recent times. !anks pay a rate of interest on the savings account deposits as prescribed by the central bank. (resently, it is 7 ' p.a. * nominal rate of interest is provided for such deposits. 1eposits in %i#ed Account are time deposits. In the normal course, deposits cannot be withdrawn before the e6piry of the specified time period of the deposits. * premature withdrawal is, however,
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permitted only at the cost of forfeiture of the interest payable, at least partly. -n these deposits commercial banks pay higher rates of interest, and the rate becomes higher with the increase in duration. Bonger the time period, higher would be the rate of interest and vice versa. !y creating such varieties of deposits, banks motivate savers and depositors in a variety of ways and encourage savings in the economy. @urther, by keeping deposits with banks, depositors money is not secure and remains in safe custody, but it yields interest also. )oreover, banks demaand deposits are in the form of li2uid cash, for they serve as money to the business community and, therefore, is called bank money. ,endin of funds *nother major function of commercial banks is to e6tend loans and advances out of the money which comes to them by way of deposits to businessmen and entrepreneurs against approved such as gold or silver
E

bullion, government securities, easily saleable stocks and shares, and marketable goods. !anks advances to customers may be made in many ways# 8i9 -verdrafts, 8ii9 Cash Credits, 8iii9 1iscounting Trade !ills, 8iv9 )oney$at$call or very short$term advances, 8v9 Term loans, 8vi9 Consumer Credit, 8vii9 )iscellaneous *dvances. 8i9 &'erdraft: * commercial bank grants overdraft facility to an account holder by which he is allowed to draw an amount in e6cess of the balance hels in the account, up to the e6tent of stipulated limit. -verdrafts are permissible in current account only. ,uppose, a customer has "s. 7&,&&& in his current account with the bank. !ank grants him overdraft facility up to "s. &,&&&. Then, this customer is entitled to issue che2ues upto "s. C&,&&& on his
G

account. -bviously, overdraft facility sanctioned up to "s. &,&&& by the bank in this case is as good as credit granted by the bank to that e6tent. 8ii9 Cash credit: !ank give credit in cash to business firms in industry and trade, against pledge or hypothecation of goods, or personal guarantee given by the borrowers. It is essentially a drawing account against credit sanctioned by the bank and is operated like a current account on which an overdraft is sanctioned. It is the most popular mode of advance in the Indian banking system. 8iii9 +iscountin trade $ill: The banks facilitate

trade and commerce by discounting bills of e6change called trade bills. Traders often draw bill of e6change to meet their obligations in business transitions. ,uch a trade bill is payable in cash on maturity, after a stipulated date. 1iscounting of bills by the bank amounts to granting of credit to the party concerned till the maturity date of the bill. This method of bank
:

lending is widely adopted for two reasons# loans are self li2uidatory in character3 and

8a9 such

8b9 these trade bills are rediscountable with the central bank. 8iv9 Money at call or 'ery short ter" ad'ances: !ank also grants loans for a very short period, generally not e6ceeding E days to the borrowers, usually dealers or brokers in stock e6change markets against collateral securities like stock or e2uity shares, debentures, etc., offered by them. ,uch advances are repayable immediately at notice hence, they are described as money at call or call money. 8v9 Ter" ,oans: !anks give term loans to traders, industrialists and now to agriculturists also against some collateral securities. Term loans are so$called because their maturity period varies between to & years. Term loans as such provide intermediate or working capital funds to the borrowers. ,ometimes, two or more banks may jointly provide large term
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loans to the borrower against a common security. ,uch loans are consortium finance. 8vi9 Consu"er Credit: !anks also grant to households in a limited amount to buy some durable consumer goods such as television sets, refrigerators, etc3 or to meet some personal needs like payment of hospital bills, etc. such consumer credit is made in a lump sum and is repayable in installments in a short time. .nder the %&$point programme, the scope of consumer credit has been e6tended to caver e6penses on marriage funeral etc3 as well. 8vi9 Miscellaneous Ad'ances: *mong other forms of bank advances there are packing credits given to e6porters for a short duration, e6ports bills purchasedD discounted, import finance $ advances against import bills, finance to the self employed, credit to the public sector, credit to the cooperative sector and above all, credit to the weaker sections of the community at concessional rates.
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called participation loans or

21

Use of che3ue syste": It is a uni2ue feature and function of banks that

they have introduced the che2ue system for the withdrawl of deposits. There are two types of che2ues# i9 ii9 the bearer che2ue and the crossed che2ue.

* $earer che3ue is encashable immediately at the bank by its possessor. ,ince, it is negotiable, it serves as good as cash on transferability.

* crossed che3ue, on the other hand, is one that is

%%

crossed by two parallel lines on its face at the left hand corner and such a che2ue is not immediately encashable. It has to be deposited only in the payees account. It is not negotiable. In modern business transactions, the use of che2ues to settle debts is found to be much more convenient than the use of cash. Commercial banks, thus, render an important service by providing an ine6pensive medium of e6change such as che2ues. In fact, a che2ue is also considered as the most developed credit instrument. 41 Re"ittance of %unds: Commercial banks, on account of their network of branches throughout the country, also provide facilities to remit funds from one place to another for their customers by issuing bank drafts, mail transfers or telegraphic transfers on nominal commission charges. *s compared to the postal money orders or other instruments, bank drafts have proved to be a

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much cheaper mode of transferring money and has helped the business community considerably. 8II9 Secondary $an)in functions of the

commercial banks are also known as non$banking functions. They perform a multitude of other non$ banking functions which may be classified as# . *gency ,ervices, and %. 4eneral .tility ,ervices. 01 A ency Ser'ices !ankers perform certain functions for F on behalf of their clients, as# a9 To collect or make payments for bills, che2ues, promissory notes, interest, dividends, rents3 subscriptions, insurance premia, etc. @or these services, some charges are usually levied by the banks. b9 To remit funds on behalf of the clients by drafts or mail or telegraphic transfers.

%;

c9 To act as e6ecutor, trustee and attorney for the customers will. d9 ,ometimes, bankers also employ income$ta6 e6porters not only to prepare income$ta6 returns for their customers but also to help them to get refund of income$ta6 in appropriate cases. e9 To work as correspondents, agents or representatives of their clients. -ften, bankers obtain passports, travellers tickets, secure passages for their customers, and receive letters on their behalf. 21 5eneral Utility Ser'ices )odern commercial banks usually perform certain general utility services for their community, such as# a9 Betters of credit may be given by the banks at the behest of the importer in favour of the e6porter. b9 !ank drafts and travellers che2ues are issued in order to provide facilities for transfer of funds from one part of the country to another.

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c9 !anks may deal in foreign e6change or finance foreign trade by accepting or collecting foreign bills of e6change. ,hares floated by government, public bodies and corporations may be underwritten by banks3 d9 Certain banks arrange for safe deposit vaults, so that customers may entrust their securities and valuables to them for safe custody. e9 !anks also compile statistics and business information relating to trade, commerce, and industry. ,ome banks may publish valuable journals or bulletins containing research on financial, economic and commercial matters. Co""ercial (an)s !lay an I"portant Role in a Modern Econo"y 9 They constitute the very life$blood of modern trade, commerce F industry, as they provide the necessary funds for their working capital such as to

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buy raw materials, to pay wages, to incur current business e6penses in marketing of goods, etc %9 These banks encourage peoples savings habit through their various savings deposit schemes. 59 They also mobilize idle saving resources from households to business people for productive use. ;9 They transmit money from place to place with economy and safety. 79 Their agency services are, no doubt, of immense value to the people at large, as they case their difficulties, save their time F energy Fprovide them safety F security. *ATI&*A,ISATI&* (A*-S !y the become Auly :, :C&s, the Indian banking industry has an :C:, important tool to facilitate the &% C&MMERCIA,

development of the Indian economy. >ith effect from ; largest commercial banks were nationalized. * second dose of nationalization of C more commercial banks followed in :G&. The stated
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reason for the nationalization was to give the government more control of credit delivery. >ith the second dose of nationalization, the 4-I controlled around : ' of the banking business of India. *fter this, until the ::&s the nationalized banks grew at a place of around ;', closer to the average growth rate of the Indian economy. ,o, these nationalization of banks was carried out with the aim of Jremoval of control by a few and to bring about a more optimal allocation of bank funds. *fter nationalization, the credit policy of public sector banks underwent a radical change, with special emphasis being placed on credit to priority sectors including agriculture, small scale industry and programmes for poverty alleviation. The "ain o$6ecti'es of nationali7ation 8ere as follo8s:

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. To introduce social banking by directing bank funds at concessional rates to the weaker sections of societ for productive purposes. %. To prevent monopolies in the banking sector caused due to use of major share of funds by a in few private entrepreneurs. 5. To introduce F promote banking facilities backward areas F reduce branch e6pansion and growth of banking. ;. To e6pand the role of Commercial banking in agricultural credit. !ER%&RMA*CE &% C&MMERCIA, (A*-S I* THE !&ST 9*ATI&*A,I:ATI&* !ERI&+ regional disparities in

01 Achie'e"ents: .a/ ,ead (an) Sche"e# *fter nationalization, it was felt that banks should be allotted particular districts where they would take the lead in studying the need and scope for banking development. .nder the
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scheme, districts were allotted to the ,tate !ank 4roup, ; nationalised banks and 5 private banks. /ach bank was assigned the status of Jlead bank in a particular district. The lead bank had to study and understand the socio$economic condition of the district and undertake surveys for this purpose. Through the surveys the lead bank would collect useful information about the credit needs, development needs and pattern of production and nature of employment in the district. *fter such informations were gathered, the lead bank would then plan and implement development programmes in the area, with the help of other banks and financial institutions. This scheme was a uni2ue e6periment and it helped in branch e6pansion, deposit mobilization and e6pansion of priority sector lending. .$/ (ranch E#pansion: *fter nationalization, there was massive e6pansion of bank branches, especially in the rural areas. The Bead !an k scheme played played a major role in this. 1uring the first fifteen
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years after nationalization, branches e6panded at about %,;&& per year. Total number of bank branches has increased from G%C% in :C: to CE,%G5 in %&&E. -ver G&' of bank offices are located in backward states and in semi$urban areas and rural areas. This, to some e6tent took care of regional imbalance in the spread of banking. .c/ +eposit Mo$ili7ation: *s a result of e6pansion of banking facilities, there was a large increase in deposits. In :C:, deposits amounted to 5' of the 41(, by %&&; this ratio increased 57& times. The increase in rural deposits as production of total has been from 5' to 7'. !ank deposits now constitute about ;&' of financil assets held by households. .d/ (an) ,endin : Traditionally, banks in India had concentrated in providing working capital to industry and trade. -nly after nationalization, loans are being given for agricultural operations. !ank credit stood at "s. 5, 5:: crore in :C:. In the ne6t 5 decades, his increased by about %&& times. In :CG, large and
5

medium industries accounted for about %&& times. In :CG, large and medium industries accounted for about C&' of aggregate bank credit. *griculture accounted for about %'. This changed drastically after nationalization and bank credit to priority sector, including agriculture was close to ;&' of total credit. .e/ +irected Credit !ro ra""es: * major objective of bank nationalization was to make bank credit available agriculture, the priority sector, comprising of small scale industries, e6ports,

transporters and small traders at concessional rates. This system of directed bank credit was e6pected to contribute to contribute to economic growth as well as social justice. ,uccess was achieved in this direction after nationalization.

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21 Shortco"in s# .a/ Inade3uate (an)in facilities# 1espite

achievements in branch e6pansion, banking facilities continue to remain inade2uate to meet the needs of the large population. The national average population per bank branch is still very high at about %&&&. This ratio is higher than the national average in some states like !ihar, -rissa, >est !engal and )adhya (radesh. !anking facilities are still not e2uitably distributed among all states. .$/ Inade3uate +eposit Mo$ili7ation: !anking habits of people in India are still not very good. * large part of the population still prefer to carry out transactions in cash and are not covered by the banking system . Therefore, there is a large scope for further increasing deposits and bring in more money in the banking system.

55

.c/ Inade3uate lendin : /ven though there has been significant increase in lending to priority sectors, it is still inade2uate in comparison to the needs of these sectors. !ecause of these small farmers and traders have to still depend on the unorganized sector for meeting their credit re2uirements. .d/ Increased E#penditure: *fter nationalization, there has been significant increase in e6penditure on banking operations. This is due to aggressive and sometimes irrational branch e6pansion. There has been over$staffing in nationalized banks and some of their operations in rural areas are simply not economically feasible. .e/ ,o8 ,e'el of Efficiency: (ublic sector banks have suffered from lack of proper supervision and control. 1ue to high degree of political interference and lack of competition, these banks have become highly insufficient. There work culture was poor compared to private sector banks. Kowever, this
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scenario has now changed with these banks becoming more profit oriented and autonomous. Thus, nationalization of Commercial banks was done with the objective of social and economic development. !ut this resulted in several problems and desortions in the banking system. Till and efficiency. In early implemented the ::&s public sector banks operated with low profitability ::&s, the government Committee 0arsimham

"ecommendations in order to bring about much needed reforms in the banking sector. ,ince then, the sector has been performing with higher profitability and efficiency.

57

TY!ES &% C&MMERCIA, (A*-S: ,cheduled banks 0on$ ,cheduled !anks

$ Scheduled (an)s: * scheduled bank is one which is registered in the second schedule of the "eserve !ank of India. The following conditions must be fulfilled by a bank for inclusion in the schedule# i9 The banker concerned must be in business of banking in India3
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ii9

It is either a company defined in ,ection 5 of the :7C, or corporation or a

Indian Companies *ct,

company incorporated by or under any law in force in any place outside India or an institution notified by the central government in this behalf3 iii9 It must have paid$up capital and reserves of an aggregate role of e6changeable value of not less than rupees five lakhs3 iv9 It must satisfy the "eserve !ank of India that its affairs are not conducted in a manner detrimental to the interests of its depositors. ,cheduled banks come under the purview of the various credit control measures of th "eserve !ank of India. They are re2uired to maintain a certain minimum balance in their accounts with the "!I, and do certain things prescribed by law. The ,cheduled banks are entitled to bprrowings and rediscounting facilities from the "!I. These are similar to the member banks of the ..,.*.

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$ *on9 Scheduled (an)s: !anks, which are not included in the ,econd ,chedule of the "!I, are known as non$scheduled banks. They may be classified into ; groups# a9 b9 c9 d9 !anks with paid$up capital and reserves in !anks with paid$up capital and reserves !anks with paid$up capital and reserves !anks with paid$up capital and reserves below e6cess of "s. 7 lakhs3 ranging between "s. 7&,&&& and one lakh of rupees3 ranging between one lakh of rupees and 7 lakhs3 "s. 7&,&&&. 0on$ ,cheduled banks are not entitled to all those facilities that the scheduled banks avail of from the "eserve !ank of India. ,ince the enactment of the !anking "egulation *ct in :;:, non$scheduled banks have also come under the ambit of the "!I control. It has become obligatory on the part of these banks to carry a portion of their deposits with the "!I
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or in the vault with the bank itself, and prepare their annual accounts and balance sheets in accordance with the re2uirements stipulated in ,ection %: of the !anking Companies *ct. ,cheduled !anks may be classified into two groups# Indian ,cheduled !anks and @oreign ,cheduled !anks. The Indian ,cheduled !anks are those which have their registered officers in India and are registered in the second schedule if the "!I. *s against this, foreign scheduled banks comprise those commercial banks which are registered in the said schedule but have their registered offices outside India. These banks have played a prominent role in Indias foreign trade3 in fact, they had complete sway in this sphere until the ,econd >orld >ar. ,ince then, a number of leading Indian scheduled banks entered the field of foreign trade and have in the course of time achieved an important position in this field.

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Indian scheduled banks may be distinguished in two broad sectors# a9 (ublic sector commercial banking comprising the ,tate !ank of Indian and its subsidiaries and the twenty nationalized banks3 b9 (rivate sector commercial banking comprising all the other Indian scheduled banks that do not fall in the above group.

C&*C,USI&*: @riends, as we know, over five decades the Commercial banks in India achieved astounding success by enormously spreading banking services in far$flung and unbanked areas of the country through their massive branch network are garnering burgeoning amount of savings which represent half of
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the 41( of the country. * major portion of these resources had been deployed to meet the needs of priority sectors which are critical to the economy. Kowever, it is crucial for the commercial banking industry to meet the increasingly comple6 savings and financing needs of the economy by offering a wider and fle6ible range of financial products tailored for all types of customers. In recent years, it is being felt widely that the commercial banking system has not actually grown as sound F vibrant as it needed to be. ,trong capital positions and balance sheets places the Commercial banks in a better position to deal with and absorb the economic shocks. These !anks need to face competition without diluting the operating standards. In banking, there is no such thing as ?one size fits all.? !ut todayHs commercial banks are more diverse than ever. +ouHll find a tremendous range of opportunities in commercial banking, starting at the branch level because commercial bankers, now are highly e6perienced in working with businesses to develop the right financial package to meet your uni2ue business needs. The face of Commercial banking is changing rapidly. Competition is going to
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be tough !anks should avail of the e6isting and upcoming opportunities as well as address the above$ discussed issues if they have to succeed, not just survive, in the changing environment. Thus, Commercial !anks occupy a dominant place in the money market, they are like a reservoir into which flow the savings, the idle surplus, money of households and from which loans are given on interest to businessmen F others who need them for investment or productive uses. REC&MME*+ATI&*S

!anking in India has made a remarkable progress in its growth and e6pansion, as well as business with social perspective in the fulfillment of national objectives. Indian Commercial banking has developed, but, its perfection is yet to be seen. There still remains many tasks to be fulfilled. . ,till there are villages left without banking facilities, so many more rural banks branches need to be opened.

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%. Luality of Commercial banking facilities should be improved to the atmost satisfaction of the customer. 5. -perational costs of Commercial banks should be reduced to the minimum profitability and working results must be ma6imized. ;. !anking staff should be ade2uately trained. 7. )ore lending should be made in favour of priority sectors. C. )alpractices, fraud, corruption and red$tapism must be done away with. E. )ore attention should be paid to the development of e6ports. G. 0ationalised banks should give more technical assistance to the small industrialists. :. Interest rates on deposits should be enhanced reasonably up to %$ 5 ' so that savers get their legitimate returns. &. The high level of overdues of banks have become a matter of concern. ,o, banks should make all possible efforts to reduce their overdues. This all re2uires that no loans should be given without proper identification and address of the deserving rural poor.
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Thus, in order that the association of banks with industry is more fruitful and rewarding, many innovations have to be planned and introduced systematically and greater degree of managerial competence will have to be developed in Commercial banking sector. %UTURE !R&S!ECTS &% C&MMERCIA, (A*-I*5:

Indian banking has developed. !ut, its perfection is yet to be seen. There still remain many tasks to be fulfilled. Kistorically, profitability from lending activities has been cyclic and dependent on the needs and strengths of loan customers. In recent history, investors have demanded a more stable revenue stream and banks have therefore placed more emphasis on transaction fees, primarily loan fees but also including service charges on array of deposit activities and ancillary services 8international banking, foreign e6change, insurance, investments, wire transfers, etc9. Kowever, lending activities still

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provides and in future; too will provide bulk of a Commercial bankHs income. *s part of the financial services industry, commercial banking are worldwide attempting to compete better by improving core operations and differentiating the customer e6perience. The banking sector has been consolidating3 it is worth noting that far more people are employed in the Commercial banking sector than any other part of the financial services industry. Aobs in banking can be e6citing and offer e6cellent opportunities to learn about business, interact with people and build up a clientele. In future, if we are well$prepared and enthusiastic about entering the field, we are likely to find a wide variety of opportunities open to us. Thus, we can predict the future of Commercial bank, to be spreaded world wide. They will be providing an unprecedented level of service to a wide range of business clients, from small business, through to multi$national corporate clients. In future, Commercial !ank will come up with more innovative

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and e6perienced depth knowledge of specific sectors, to meet all of our banking re2uirements.

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