COMMERCIAL BANKS

Brief History of Banks in India

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In the first half of the 19th century, the East India company established 3 banks The Bank of Bengal in 1809 The Bank of Bombay in 1840 and The Bank of Madras in 1843.
The Bank of Bengal,

These 3 banks were also known as Presidency Banks

which later became the State Bank of India.

All the three presidency banks were amalgamated on 27th. Jan. 1921 and the Imperial Bank of India was established

COMMERCIAL BANKS
In India, only those bank are called Commercial Banks which have been established in accordance with Indian Companies Act 1913.
Bank of Hindustan was the First commercial bank in India.

Meaning
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.

While commercial banks offer services to individuals, they are primarily concerned with receiving deposits and lending to businesses.

A bank is.
A commercial establishment Aiming at profits By accepting deposits from public Which are repayable on demand Through cheques, drafts etc. Which are used for lending or investment

Kinds of Commercial Banks

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Scheduled Banks:
According to Reserve Bank of India Act 1934, a scheduled bank is that bank which has been included in the second scheduled of the Reserve Bank To be include in the schedule, a bank must satisfy the following three condition: 1. It must have a paid up capital and reserves of an aggregate value of at least Rs. 5 lakhs. 2. It must satisfy the RBI that its affairs are not conducted in a manner detrimental to the interest of its depositors. 3. It must be a corporation and not a partnership or a single owner firm.

Non-Scheduled Banks: Banks whose name do not figure in the second Schedule of the Reserve Bank of India Act are non-scheduled banks.

Functions
1. Primary function: Accepting deposits Granting loans Loans and advances

Modes of short term financial assistance

Cash credit Bank overdraft Discounting of bills

2. Agency function: Collection & payment of credit on behalf of customers Collection of dividend, interest & rent on behalf of customers. Purchase & sale of securities Acting as trustee Acting as agents

3. General utility services: Issuing letter of credit & traveler's cheques. Safe-keeping of valuables in safe-deposit locker. Undertaking foreign exchange business. Merchant banker services.

STRUCTURE OF COMMERCIAL BANKS

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SCHEDULED BANKS

NON-SCHEDULED BANKS

PUBLIC SECTOR BANKS

PRIVATE SECTOR BANKS

STATE BANK OF INDIA & ITS SUBSIDIARIES

REGIONAL RURAL BANKS

PRIVATE BANKS

FOREIGN BANKS

NATIONALISED BANKS

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STATE BANK OF INDIA & ITS SUBSIDIARIES On the recommendation of All India Rural Credit Survey Committee, Imperial Bank was nationalized to become State Bank of India on July1, 1955. SBI was established under State Bank of India Act, 1955

Nationalised Bank

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The term public sector banks by itself connotes a situation where the major/full stake in the banks are held by the government. Nationalised banks have been permitted to offer their equity shares to the public to the extent of 49% of their capital. Ex: Indian overseas bank, Canara bank, Bank of India.

Regional Rural Banks

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Regional Rural Banks were set up on the recommendation of a working group M. Narasimham in 1975. The main objective is to extend loan & other facilities to the small and marginal farmers, agricultural labourers and artisans. These are governed by Regional Rural Bank

Act, 1976.

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Private Banks
By private sector banks we mean those banks where equity is held by private share holders, that is to say there is no government holding of the equity shares. Ex: ICICI Bank, HDFC Bank, Yes Bank etc.

Investment policy
Allocation of funds such that main objectives of liquidity, solvency & profitability are achieved. Obligations towards owners, workers, depositors- all are kept in mind while framing investment policy.

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Funds of a bank may be deployed for:

Investment in government and corporate securities. Extending loans and advances to the customers in form of cash credits, overdraft, term loans, bills purchased and discounted. Purchase of fixed assets. Keeping cash in hand and with RBI etc.

Principles of investment policy

1. Liquidity: Capacity of bank to make cash available on demand. Proportion of assets maintained as liquid assets depend on: Ownership of demand deposits Cash reserve Banking habits Seasonal needs

2. Solvency: Capacity to meets its liabilities in long run. 3. Profitability:

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E- Banking
Making banking products and services available to wholesale and retail customers, through an electronic distribution channel is called ebanking Devices have been Telephone, personal computers including ATM.

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Level of Services
Level-I : the basic level service is the bank website, which disseminates information on different product and services. This is generally, combined with e-mail to receive and answer queries.

Level-II: In this type of e-banking customers are allowed to submit their instruction or application or queries on their bank balances or status of certain transaction etc. Level-III: In this banking services are offered through Fully Transactional Web sites. This permits customers to operate their account through internet.
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E-Trading
Refers to electronic settlement of trading of securities. In simple words, it refers to purchase and sale of securities in electronic form. SEBI has made compulsory trading of shares of all the companies listed in Stock Exchange, in Demat form with effect from 2nd Jan., 2002.