EXECUTIVE SUMMARY
EXECUTIVE SUMMARYCommercial 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 Banks 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 Rationale of the study can be considered as follows:-
The study includes essential core topics.
It aims at giving a thorough grounding on the subject.
The study is comprehensive.
It helps to improve the research and investigation ability.
It enables to think logically and practically Hypothesis:
The hypothesis being put forth for this study about Commercial
banking is that awareness of Commercial banks is 100%, 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 Methodology:
The research methodology is data collection through:-
PRIMARY SOURCES
SECONDARY SOURCES
Primary Sources: Survey by distributing questionnaire to the
people taking sample size of 100, Interviews conducted with
bankers; accumulating knowledge and help from friends, professors,
etc.
Secondary Sources: Gathering data through books, journals,
magazines, websites, newspapers, etc.
Expected ContributionExpectations 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
Banking, in its crude form, is an age-old phenomenon. It was in
existence 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.
According to Section 5 (c) of the Banking Regulation Act, 1949 -
Banking company means any company which transacts the business of
banking in India. Section 5 (b) 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 cheque, draft, order or otherwise.
Banking services also serve two primary purposes. First, by
supplying customers with the basic mediums-of-exchange (cash,
checking accounts, and credit cards), banks play a key role in the
way goods and services are purchased. Without these familiar
methods of payment, goods could only be exchanged by barter
(trading one good for another), which is extremely 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. Without this flow, savings would sit idle in
someones safe or pocket, money would not be available to borrow,
people would not be able to purchase cars or houses, and businesses
would not be able to build new factories the economy needs to
produce more goods and grow. Enabling the flow of money from savers
to investors is called financial intermediation, and thus, banking
is extremely important to a free market economy.
Origin and Evolution of Indian Banking
Opinions differ as to the origin of the work "Banking". The word
"Bank" is said to be of Germanic origin, cognate with the French
word "Banque" and the Italian word "Banca", both meaning "bench".
It is surmised that the word would have drawn its meaning from the
practice of the Jewish money-changers of Lombardy, a district in
North Italy, who in the middle ages used to do their business
sitting on a bench in the market place. Again, the etymological
origin of the word gains further relevance from the derivation of
the word "Bankrupt" from the French word "Banque route" and the
Italian word "Banca-rotta" meaning "Broken bench" due probably to
the then prevalent practice of breaking the bench of the
money-changer, when he failed.
Banking is different from money-lending but two terms have in
practice been taken to convey the same meaning. Banking has two
important functions to perform, one of accepting deposits and other
of lending monies and/or 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. More often, the rates of
interest relate to the needs of the borrower. Money-lending was
practiced in all countries including India, much earlier than the
recent type of Banking came on scene. Significance of Banks The
importance of a bank to modern economy, so as to enable them to
develop, can be stated as follows:
(i) 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 quantities. But banks
collect them and divide them in the portions as required by the
different investors.
(ii) Banks preserve the financial resources of the country &
it is expected that they allocate them appropriately in the
suitable & desirable manner. (iii) 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 frequently, This is done
by RBI, by changing the supply of money with the changing needs of
the public.
Although 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 Banking System
At present, the organized banking system in India can be broadly
divided into three categories:
i) The Central Bank of the country, the Reserve Bank of
India
ii) The Commercial Banks
iii) The Cooperative Banks.
The RBI is the apex monetary and banking authority in the
country and has the responsibility to control the banking system in
India.
Commercial banks 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 requirements. After 1969, commercial banks are broadly
classified into nationalized or public sector banks and private
sector banks. The SBI and its associate banks along with another 20
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 Regional Rural
Banks came into existence since the middle of 1970s with the
specific objective of providing credit and deposits facilities to
the small and marginal farmers, agricultural labourers and artisans
and small entrepreneurs.
Banking in India
Banking 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 Bank to its name
to enable people to know that it is a bank and is dealing in
money.
(From small to large, commercial banking have got u covered,
as In banking there is no such thing as one size fits all )
INTRODUCTION TO COMMERCIAL BANKS:
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. Modern economies
depend on the banking sector for production, exchange and
distribution.
A Commercial bank is a type of financial intermediary and a type
of bank. Commercial bank has two possible meanings:
a) It is the term used for a normal bank to distinguish it from
an investment bank.
b) 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 (retail banking).
A 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. So
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
chequable, i.e., withdrawable by means of cheque. Acceptance of
chequable 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
'customers in return for payments in one form or another, such as
interest, discounts, fees, commission, and so on. So, we can say
that their objective is to make profits.
A 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.
Definition:
Economists have defined a Commercial Bank in various ways.
- According to Prof. Crowther, a banker is a dealer in debt, his
own and other peoples.
- According to Prof. sayes, Commercial Banks are institutions
whose debts usually reffered to as bank deposits 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.
FUNCTIONS OF COMMERCIAL BANKS
Commercial banks perform several crucial functions to satisy the
needs of the various sectors of the economy, which may be
classified into two categories:
(I) Primary functions, and
(II) Secondary functions.(I) Primary banking functions of the
commercial banks include:
1. Acceptance of deposits from the
public;
2. Lending of funds;
3. Use of cheque system; and
4. Remittance of funds.1. Acceptance of Deposits from the
Public
Accepting deposits is the primary function of a commercial bank.
By receiving deposits from the public, commercial banks mobilise
savings of the household sector.
Banks generally accept deposits in three types of accounts:
(i) Current Account,
(ii) Savings Account, and
(iii) Fixed Deposits Account.
Deposits in Current Account are withdrawable by the depositors
by cheques for any amount to the extent of the balance at their
credit, at any time without any prior notice. Deposits of current
accounts are, thus, known as Demand deposits. Such accounts are
maintained by commercial and industrial firms and businessmen, and
the cheque system is the most convenient and very safe mode of
payment. No interest is provided for such deposits. In fact bank
charge certain commission for providing the facility.
Saving Accounts are maintained for encouraging savings of
households. Withdrawals 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, relaxed these rules of savings accounts to a
certain extent in recent times. Banks pay a rate of interest on the
savings account deposits as prescribed by the central bank.
Presently, it is 5 % p.a. A nominal rate of interest is provided
for such deposits.
Deposits in Fixed Account are time deposits. In the normal
course, deposits cannot be withdrawn before the expiry of the
specified time period of the deposits. A premature withdrawal is,
however, permitted only at the cost of forfeiture of the interest
payable, at least partly. On these deposits commercial banks pay
higher rates of interest, and the rate becomes higher with the
increase in duration. Longer the time period, higher would be the
rate of interest and vice versa.
By creating such varieties of deposits, banks motivate savers
and depositors in a variety of ways and encourage savings in the
economy. Further, by keeping deposits with banks, depositors money
is not secure and remains in safe custody, but it yields interest
also. Moreover, banks demaand deposits are in the form of liquid
cash, for they serve as money to the business community and,
therefore, is called bank money.Lending of funds
Another major function of commercial banks is to extend 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 bullion, government securities, easily saleable
stocks and shares, and marketable goods.
Banks advances to customers may be made in many ways:
(i) Overdrafts,
(ii) Cash Credits, (iii) Discounting Trade Bills,(iv)
Money-at-call or very short-term advances,
(v) Term loans,(vi) Consumer Credit,
(vii) Miscellaneous Advances.(i) Overdraft: A commercial bank
grants overdraft facility to an account holder by which he is
allowed to draw an amount in excess of the balance hels in the
account, up to the extent of stipulated limit. Overdrafts are
permissible in current account only. Suppose, a customer has Rs.
50,000 in his current account with the bank. Bank grants him
overdraft facility up to Rs. 10,000. Then, this customer is
entitled to issue cheques upto Rs. 60,000 on his account.
Obviously, overdraft facility sanctioned up to Rs.10,000 by the
bank in this case is as good as credit granted by the bank to that
extent.
(ii) Cash credit: Bank 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.
(iii) Discounting trade bill: The banks facilitate trade and
commerce by discounting bills of exchange called trade bills.
Traders often draw bill of exchange to meet their obligations in
business transitions. Such a trade bill is payable in cash on
maturity, after a stipulated date. Discounting 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: (a) such loans are self liquidatory in
character; and
(b) these trade bills are rediscountable with the central
bank.
(iv) Money at call or very short term advances: Bank also grants
loans for a very short period, generally not exceeding 7 days to
the borrowers, usually dealers or brokers in stock exchange markets
against collateral securities like stock or equity shares,
debentures, etc., offered by them. Such advances are repayable
immediately at notice hence, they are described as money at call or
call money.
(v) Term Loans: Banks 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 1 to 10 years. Term loans as such provide intermediate or
working capital funds to the borrowers. Sometimes, two or more
banks may jointly provide large term loans to the borrower against
a common security. Such loans are called participation loans or
consortium finance.(vi) Consumer Credit: Banks also grant to
households in a limited amount to buy some durable consumer goods
such as television sets, refrigerators, etc; 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. Under the 20-point programme, the scope of consumer
credit has been extended to caver expenses on marriage funeral etc;
as well.
(vi) Miscellaneous Advances: Among other forms of bank advances
there are packing credits given to exporters for a short duration,
exports bills purchased/ 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.
2. Use of cheque system:
It is a unique feature and function of banks that they have
introduced the cheque system for the withdrawl of deposits.
There are two types of cheques:
i) the bearer cheque and
ii) the crossed cheque.
A bearer cheque is encashable immediately at the bank by its
possessor. Since, it is negotiable, it serves as good as cash on
transferability.
A crossed cheque, on the other hand, is one that is crossed by
two parallel lines on its face at the left hand corner and such a
cheque 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 cheques 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
inexpensive medium of exchange such as cheques. In fact, a cheque
is also considered as the most developed credit instrument.
3. Remittance of Funds:
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. As compared to the postal money orders or other
instruments, bank drafts have proved to be a much cheaper mode of
transferring money and has helped the business community
considerably. (II) Secondary banking 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:
1. Agency Services, and
2. General Utility Services.1. Agency Services
Bankers perform certain functions for & on behalf of their
clients, as:
a) To collect or make payments for bills, cheques, promissory
notes, interest, dividends, rents; subscriptions, insurance premia,
etc. For these services, some charges are usually levied by the
banks.
b) To remit funds on behalf of the clients by drafts or mail or
telegraphic transfers.
c) To act as executor, trustee and attorney for the customers
will.
d) Sometimes, bankers also employ income-tax exporters not only
to prepare income-tax returns for their customers but also to help
them to get refund of income-tax in appropriate cases.
e) To work as correspondents, agents or representatives of their
clients.
Often, bankers obtain passports, travellers tickets, secure
passages for their customers, and receive letters on their
behalf.
2.General Utility Services
Modern commercial banks usually perform certain general utility
services for their community, such as:
a) Letters of credit may be given by the banks at the behest of
the importer in favour of the exporter.
b) Bank drafts and travellers cheques are issued in order to
provide facilities for transfer of funds from one part of the
country to another.
c) Banks may deal in foreign exchange or finance foreign trade
by accepting or collecting foreign bills of exchange.
Shares floated by government, public bodies and corporations may
be underwritten by banks;
d) Certain banks arrange for safe deposit vaults, so that
customers may entrust their securities and valuables to them for
safe custody.
e) Banks also compile statistics and business information
relating to trade, commerce, and industry. Some banks may publish
valuable journals or bulletins containing research on financial,
economic and commercial matters. Commercial Banks Play an Important
Role in a Modern Economy
1) They constitute the very life-blood of modern trade, commerce
& industry, as they provide the necessary funds for their
working capital such as to buy raw materials, to pay wages, to
incur current business expenses in marketing of goods, etc
2) These banks encourage peoples savings habit through their
various savings deposit schemes.
3) They also mobilize idle saving resources from households to
business people for productive use.
4) They transmit money from place to place with economy and
safety.
5) Their agency services are, no doubt, of immense value to the
people at large, as they case their difficulties, save their time
& energy &provide them safety & security.
NATIONALISATION OF COMMERCIAL BANKS
By the 1960s, the Indian banking industry has become an
important tool to facilitate the development of the Indian economy.
With effect from July 19, 1969, 14 largest commercial banks were
nationalized. A second dose of nationalization of 6 more commercial
banks followed in 1980. The stated reason for the nationalization
was to give the government more control of credit delivery. With
the second dose of nationalization, the GOI controlled around 91%
of the banking business of India. After this, until the 1990s the
nationalized banks grew at a place of around 4%, closer to the
average growth rate of the Indian economy. So, these
nationalization of banks was carried out with the aim of removal of
control by a few and to bring about a more optimal allocation of
bank funds. After 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 main objectives of nationalization were as follows:
1. To introduce social banking by directing bank funds at
concessional rates to the weaker sections of societ for productive
purposes.
2. To prevent monopolies in the banking sector caused due to use
of major share of funds by a few private entrepreneurs.
3. To introduce & promote banking facilities in backward
areas & reduce regional disparities in branch expansion and
growth of banking.
4. To expand the role of Commercial banking in agricultural
credit. PERFORMANCE OF COMMERCIAL BANKS IN THE POST
-NATIONALIZATION PERIOD
1. Achievements:(a) Lead Bank Scheme: After 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. Under the scheme, districts were allotted to the State
Bank Group, 14 nationalised banks and 3 private banks. Each bank
was assigned the status of lead 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. After 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 unique experiment and it helped in
branch expansion, deposit mobilization and expansion of priority
sector lending.(b) Branch Expansion: After nationalization, there
was massive expansion of bank branches, especially in the rural
areas. The Lead Ban k scheme played played a major role in this.
During the first fifteen years after nationalization, branches
expanded at about 2,400 per year. Total number of bank branches has
increased from 8262 in 1969 to 67,283 in 2007.
Over 80% of bank offices are located in backward states and in
semi-urban areas and rural areas. This, to some extent took care of
regional imbalance in the spread of banking.
(c) Deposit Mobilization: As a result of expansion of banking
facilities, there was a large increase in deposits. In 1969,
deposits amounted to 13% of the GDP, by 2004 this ratio increased
350 times. The increase in rural deposits as production of total
has been from 3% to 15%. Bank deposits now constitute about 40% of
financil assets held by households.
(d)Bank Lending: Traditionally, banks in India had concentrated
in providing working capital to industry and trade. Only after
nationalization, loans are being given for agricultural operations.
Bank credit stood at Rs. 3, 399 crore in 1969. In the next 3
decades, his increased by about 200 times. In 1968, large and
medium industries accounted for about 200 times. In 1968, large and
medium industries accounted for about 60% of aggregate bank credit.
Agriculture accounted for about 2%. This changed drastically after
nationalization and bank credit to priority sector, including
agriculture was close to 40% of total credit.
(e) Directed Credit Programmes: A major objective of bank
nationalization was to make bank credit available the priority
sector, comprising of agriculture, small scale industries, exports,
transporters and small traders at concessional rates. This system
of directed bank credit was expected to contribute to contribute to
economic growth as well as social justice. Success was achieved in
this direction after nationalization.
2.Shortcomings:(a) Inadequate Banking facilities: Despite
achievements in branch expansion, banking facilities continue to
remain inadequate to meet the needs of the large population. The
national average population per bank branch is still very high at
about 12000. This ratio is higher than the national average in some
states like Bihar, Orissa, West Bengal and Madhya Pradesh. Banking
facilities are still not equitably distributed among all states.(b)
Inadequate Deposit Mobilization: Banking habits of people in India
are still not very good. A 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.(c) Inadequate lending: Even though there has been
significant increase in lending to priority sectors, it is still
inadequate in comparison to the needs of these sectors. Because of
these small farmers and traders have to still depend on the
unorganized sector for meeting their credit requirements.(d)
Increased Expenditure: After nationalization, there has been
significant increase in expenditure on banking operations. This is
due to aggressive and sometimes irrational branch expansion. There
has been over-staffing in nationalized banks and some of their
operations in rural areas are simply not economically feasible.(e)
Low Level of Efficiency: Public sector banks have suffered from
lack of proper supervision and control. Due 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. However, this 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. But this resulted in
several problems and desortions in the banking system. Till 1990s
public sector banks operated with low profitability and efficiency.
In early 1990s, the government implemented the Narsimham Committee
Recommendations in order to bring about much needed reforms in the
banking sector. Since then, the sector has been performing with
higher profitability and efficiency.
TYPES OF COMMERCIAL BANKS:
Scheduled banks
Non- Scheduled Banks
- Scheduled Banks:
A scheduled bank is one which is registered in the second
schedule of the Reserve Bank of India. The following conditions
must be fulfilled by a bank for inclusion in the schedule:
i)The banker concerned must be in business of banking in
India;
ii)It is either a company defined in Section 3 of the Indian
Companies Act, 1956, or corporation or a company incorporated by or
under any law in force in any place outside India or an institution
notified by the central government in this behalf;
iii)It must have paid-up capital and reserves of an aggregate
role of exchangeable value of not less than rupees five lakhs;
iv) It must satisfy the Reserve Bank of India that its affairs
are not conducted in a manner detrimental to the interests of its
depositors.
Scheduled banks come under the purview of the various credit
control measures of th Reserve Bank of India. They are required to
maintain a certain minimum balance in their accounts with the RBI,
and do certain things prescribed by law. The Scheduled banks are
entitled to bprrowings and rediscounting facilities from the RBI.
These are similar to the member banks of the U.S.A.- Non- Scheduled
Banks:
Banks, which are not included in the Second Schedule of the RBI,
are known as non-scheduled banks. They may be classified into 4
groups:
a) Banks with paid-up capital and reserves in excess of Rs. 5
lakhs;
b) Banks with paid-up capital and reserves ranging between Rs.
50,000 and one lakh of rupees;
c) Banks with paid-up capital and reserves ranging between one
lakh of rupees and 5 lakhs;
d) Banks with paid-up capital and reserves below Rs. 50,000.
Non- Scheduled banks are not entitled to all those facilities
that the scheduled banks avail of from the Reserve Bank of India.
Since the enactment of the Banking Regulation Act in 1949,
non-scheduled banks have also come under the ambit of the RBI
control. It has become obligatory on the part of these banks to
carry a portion of their deposits with the RBI or in the vault with
the bank itself, and prepare their annual accounts and balance
sheets in accordance with the requirements stipulated in Section 29
of the Banking Companies Act.
Scheduled Banks may be classified into two groups: Indian
Scheduled Banks and Foreign Scheduled Banks. The Indian Scheduled
Banks are those which have their registered officers in India and
are registered in the second schedule if the RBI. As 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 trade; in fact, they had complete sway in this sphere until
the Second World War. Since 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.
Indian scheduled banks may be distinguished in two broad
sectors:
a) Public sector commercial banking comprising the State Bank of
Indian and its subsidiaries and the twenty nationalized banks;
b) Private sector commercial banking comprising all the other
Indian scheduled banks that do not fall in the above group.
CONCLUSION:
Friends, 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 the GDP of the country. A major
portion of these resources had been deployed to meet the needs of
priority sectors which are critical to the economy.
However, it is crucial for the commercial banking industry to
meet the increasingly complex savings and financing needs of the
economy by offering a wider and flexible 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 & vibrant as it needed to be. Strong
capital positions and balance sheets places the Commercial banks in
a better position to deal with and absorb the economic shocks.
These Banks need to face competition without diluting the operating
standards.
In banking, there is no such thing as "one size fits all." But
today's commercial banks are more diverse than ever. You'll find a
tremendous range of opportunities in commercial banking, starting
at the branch level because commercial bankers, now are highly
experienced in working with businesses to develop the right
financial package to meet your unique business needs. The face of
Commercial banking is changing rapidly. Competition is going to be
tough Banks should avail of the existing 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 Banks 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 & others who need them for investment
or productive uses.
RECOMMENDATIONS
Banking in India has made a remarkable progress in its growth
and expansion, 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.
1.Still there are villages left without banking facilities, so
many more rural banks branches need to be opened.
2. Quality of Commercial banking facilities should be improved
to the atmost satisfaction of the customer.
3. Operational costs of Commercial banks should be reduced to
the minimum profitability and working results must be
maximized.
4.Banking staff should be adequately trained.
5.More lending should be made in favour of priority sectors.
6.Malpractices, fraud, corruption and red-tapism must be done
away with.
7.More attention should be paid to the development of
exports.
8.Nationalised banks should give more technical assistance to
the small industrialists.
9.Interest rates on deposits should be enhanced reasonably up to
12-13 % so that savers get their legitimate returns.
10.The high level of overdues of banks have become a matter of
concern. So, banks should make all possible efforts to reduce their
overdues. This all requires that no loans should be given without
proper identification and address of the deserving rural poor.
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.
FUTURE PROSPECTS OF COMMERCIAL BANKING:
Indian banking has developed. But, its perfection is yet to be
seen. There still remain many tasks to be fulfilled. Historically,
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 (international banking, foreign
exchange, insurance, investments, wire transfers, etc). However,
lending activities still provides and in future, too will provide
bulk of a Commercial bank's income.
As part of the financial services industry, commercial banking
are worldwide attempting to compete better by improving core
operations and differentiating the customer experience. The banking
sector has been consolidating; it is worth noting that far more
people are employed in the Commercial banking sector than any other
part of the financial services industry. Jobs in banking can be
exciting and offer excellent 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 Bank will
come up with more innovative and experienced depth knowledge of
specific sectors, to meet all of our banking requirements.
BIBLIOGRAPHY
Websites
www.google.comwww.rbibulletin.com
www. icici.com www. britannica.comBooks Commercial Banking
Management By Reed Edward Banking, Theory and Practice By Reddy P
N
Banking by Parker JMagazines
PROFESSIONAL BANKERS (The ICFAI University, June 2007)
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