Presented by: (Group-11) Shivam.

Shubham B.Karishma.

Akshit.Gangam.

Class: ( F.Y) B.Com ‘B’Topic: Commercial Bank

Submitted To: Tushti ma’am

Business Environment-II

Commercial banks in India…

“Bank is an institute which collects money from those who are saving it out of their income and lend this money out to those who require it.”

Commercial banks are like other financial institutions which are in the business of lending and borrowing of money or credit.

Definition of Banking…

Functions of Commercial Bank…

Demand or current account deposit. Fixed deposits or time deposits Saving bank deposit.

1. Accepting deposits…

• By allowing an over draft facility cheques are honoured even if deposits is less facility for businessmen only interest on overdraft amount

• Loans by creating a deposits. Banks give loans to people by charging interest

• Bank asks for securitySimply opens an account in name of needy

person and issues a cheque book to transactLoans granted mostly for business

2. Advancing loans…

If a seller sells some goods to a buyer who does not pay in cash. But the seller draws a bill of exchange which is signed by buyer.

There is maturity or payment period, say one month.

Now the seller can give this exchange bill to a bank which will give him cash against it.

Bank charges interest on it till one month.

3. Discounting bills of exchange…

Collection of bills, cheques. Collection of dividends, interest, premium.

Purchase and sale of shares and debentures.

Payment of insurance premiums.

Acts as trustee when nominated.

4. Agency services…

Traveller’s cheques, bank draft Safe vaults for valuables Supplying trade information Economic surveys Projects report preparation

5. General services…

Role and Importance of Commercial banks:

1. Accelerating the rate of capital formation.

2. Provision of Finance and Credit.

3. Developing Entrepreneurship.

4. Promoting balanced regional development.

5. Help to consumers.

Commercial banks encourage the habit of thrift and mobilise the savings of people.

These savings are effectively allocated among the ultimate users of funds, i.e., investors for productive investment.

So, savings of people result in capital formation which forms the basis of economic development.

1. Accelerating the Rate of Capital Formation:

Commercial banks are a very important source of finance and credit for trade and industry.

The activities of commercial banks are not only confined to domestic trade and commerce, but extend to foreign trade also.

2. Provision of Finance and Credit:

Banks promote entrepreneurship by underwriting the shares of new and existing companies and granting assistance in promoting new ventures or financing promotional activities.

Banks finance sick (loss-making) industries for making them viable units.

3. Developing Entrepreneurship:

Commercial banks provide credit facilities to rural people by opening branches in the backward areas.

The funds collected in developed regions may be channelised for investments in the under developed regions of the country.

In this way, they bring about more balanced regional development.

4. Promoting Balanced Regional Development:

Commercial banks advance credit for purchase of durable consumer items like Vehicles, T.V., refrigerator etc., which are out of reach for some consumers due to their limited paying capacity.

In this way, banks help in creating demand for such consumer goods.

5. Help to Consumers:

The commercial banks can be broadly classified under two heads:

Structure of commercial banks…

Commercial banks

Scheduled commercial banks

Private sector

banks

Public sector

banks

Foreign sector

banks

Non-Scheduled commercial banks

Scheduled banks refer to those banks which have been included in the Second Scheduled of Reserve Bank of India Act, 1934.

In India, scheduled commercial banks are of three types:

• Private sector banks.• Public sector banks.• Foreign sector banks.

Scheduled banks:

These banks are owned and controlled by the government.

The main objective of these banks is to provide service to the society, not to make profits.

State Bank of India, Bank of India, Punjab National Bank, Canada Bank and Corporation Bank are some examples of public sector banks.

Public Sector Banks…

These banks are owned and controlled by private businessmen.

Their main objective is to earn profits.ICICI Bank, HDFC Bank, IDBI Bank

is some examples of private sector banks.

Private Sector Banks…

These banks are owned and controlled by foreign promoters.

Their number has grown rapidly since 1991, when the process of economic liberalization had started in India.

Bank of America, American Express Bank, Standard Chartered Bank are examples of foreign banks.

Foreign Banks…

Non-scheduled banks refer to those banks which are not included in the Second Schedule of Reserve Bank of India Act,1934.

Non-scheduled banks:

Thank you…