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INTRODUCTION

A commercial bank is a type of financial institution that provides services such as


accepting deposits, making business loans, and offering basic investment
products."Commercial bank" can also refer to a bank, or a division of a large bank, which
more specifically deals with deposit and loan services provided to corporations or
large/middle-sized business - as opposed to individual members of the public/small
business - retail banking, or merchant banks.
The general role of commercial banks is to provide financial services to general public
and business, ensuring economic and social stability and sustainable growth of the
economy. In this respect, "credit creation" is the most significant function of commercial
banks. While sanctioning a loan to a customer, they do not provide cash to the borrower.
Instead, they open a deposit account from which the borrower can withdraw. In other
words, while sanctioning a loan, they automatically create deposits, known as a "credit
creation from commercial banks".
In most countries central banks are responsible for the oversight of the commercial
banking system of their respective countries. They will impose a number of conditions on
the banks that they regulate such as keeping bank reserves and to maintain
minimum capital requirements.Commercial banks generally provide a number of services
to its clients, these can be split into core banking services such as deposits and loans and
other services which are related to payment systems and other financial services.
A commercial bank is a financial institution that is authorized by law to receive money
from businesses and individuals and lend money to them. Commercial banks are open to
the public and serve individuals, institutions, and businesses. A commercial bank is
almost certainly the type of bank you think of when you think about a bank because it is
the type of bank that most people regularly use.Banks are regulated by federal and state
laws depending on how they are organized and the services they provide. Commercial
banks are also monitored through the Federal Reserve System.A commercial bank is a
financial institution that provides services, such as accepting deposits, giving business
loans and auto loans, mortgage lending, and basic investment products like savings
accounts and certificates of deposit.
Banking occupies one of the most important positions in the modern economic world. It
is necessary for trade and industry. Hence it is one of the great agencies of commerce.
Although banking in one form or another has been in existence from very early times,
modern banking is of recent origin. It is one of the results of the Industrial Revolution
and the child of economic necessity.

Definition of a Bank
A commercial bank is a profit-seeking business firm, dealing in money and credit. It is a
financial institution dealing in 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 thus,
functions as a mobiliser of saving in the economy. A 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.
The term Bank has been defined in different ways by different economists. A few
definitions are: According to Walter Leaf
A bank is a person or corporation which holds itself out to receive from the public,
deposits payable on demand by cheque. Horace White has defined a bank, as a
manufacture of credit and a machine for facilitating exchange. According to Prof.
Kinley, A bank is an establishment which makes to individuals such advances of money
as may be required and safely made, and to which individuals entrust money when not
required by them for use.
The Banking Companies Act of India defines Bank as A Bank is a financial
institution which accepts money from the public for the purpose of lending or
investment repayable on demand or otherwise withdraw able by cheques, drafts or
order or otherwise.
Thus, we can say that a bank is a financial institution which deals in debts and credits. It
accepts deposits, lends money and also creates money. It bridges the gap between the
savers and borrowers. Banks are not merely traders in money but also in an important
sense manufacturer of money.

History of commercial bank

In December 1988, Commercial Bank opened its first location where a restaurant used to
be. Waiters were replaced with tellers and the kitchen became a bank vault secured with
a 21-ton steel door. Having survived a fire that destroyed a major bank building years
before, this door was chosen as a symbol of security and resilience, and it still stands
today as a reminder of the strong foundation that Commercial Bank was built upon.
As an influential part of the community, Commercial Bank found great success in West
Port. A second location was opened in 1997 in Florissant and like the first location,
secured its vault with a strong, historic door. The banks continued success generated a
desire to extend its exceptional services to a third location.
Opened in 2005, the Chesterfield Valley location followed the lead of the first two, with
a commitment to provide friendly, personalized customer service. Most recently, a fourth
location opened in 2014 at the corner of Mason and Manchester Road expanding our
footprint in the West County area.
Today with the support of our customers, all four locations continue to thrive and grow.
Commercial Bank now looks forward to branching out and developing new relationships
with more local communities in the future.

Commercial Banking
Commercial banking involves a division within a bank that focuses on business accounts
and working with business owners. Some banks may refer to these services under the
term "business is banking instead of commercial banking.
The bank may offer services such as payroll processing, a way to pay your quarterly
taxes, and financial planning services. The financial planning may also include the
management of retirement accounts in addition to financial planning for the business.
Many commercial banking divisions focus on lending money to help businesses stay
afloat.

Advantages
Commercial banking can help a small business by making it easier to manage day-to-day
financial tasks. An established commercial account with a bank will make it easier to
borrow money when you grow your business. Often a business is assigned a
representative who works directly with the company to find the best services and
solutions for the issues the business is facing.
For example, the company may save money by outsourcing payroll processing. Banks
also offer invoicing services, with personalized invoices, and can set up transfers to other
banks which will simplify accounting procedures. Some banks offer retirement account
management for your employees as well as other employee benefits.
This can save you money, and make it easier to manage all of the services you offer
employees. Some banks allow you to make deposits online by scanning checks. Your
bank may offer you discount on your merchant services fees. Commercial banking allows
you to set up direct deposits for your employees as well as for any invoices you need to
pay to others, which will save you time.
Location
Most commercial banks are large companies. You can find these companies all over your
town, state or country. Some commercial banks have businesses in other countries as
well. Some commercial banks are located inside of malls or retail stores. You have the
ability to access your money and account information from almost any location.

Discounts
Commercial banks have the ability to provide customers with low prices. Like wholesale
companies, they buy in bulk and sell at discount. Some discounts they may offer include
free checking, no fees when opening savings or checking accounts and having low
interest rates on real estate loans.
Product Offerings
Compared to credit unions, commercial banks offer more products and services.
Commercial banks offer every banking service that a small banking company would offer
plus CDs, investment accounts, loans, commercial real estate loans, mortgage plans and
the option of having a debit card, credit card or both.
Online Banking
Customers can keep track of their checking and savings accounts, transfer money to
either of their accounts, pay their bills or apply for a loan. Customers can even speak to a
customer service representative or bank specialist through the website. In order to access
any of these services, customers may have to pay a monthly fee.
Electronic Banking
Customers can even keep control of their bank accounts when the commercial bank is
closed. With the use of 24-hour ATMs, customers can withdraw or deposit money, access
account information or transfer their funds. ATMs are conveniently located everywhere
that the banks are located. Plus, you can use your debit card to use a commercial bank
other than where you do your banking.

Disadvantages
Commercial banking or business accounts are often more expensive than traditional bank
accounts. Banks may charge fees for night deposits, for processing a certain number of
checks and for the payroll services. Depending on the size of your business, some of the
services offered may not be needed, and you may still be charged for the services even if
you're not fully using them.
Different banks may offer different services and charge different fees, and it can be
difficult to compare the services. Signing up for a commercial account before your
business is ready for one will cost you and may slow the growth of the business. If you
choose the wrong bank, you may have a difficult time opening a new account and
transferring all of the services to another bank. This can cost you both time and money.

Low or no interest rates:


Brick-and-mortar banks are notorious for their lower interest rates on savings accounts,
compared with online banks. In fact, in a recent survey by GOBankingRates, the best
savings accounts were all with online banks: MySavingsDirect, Ally Bank, Barclays,
iGObanking and CIT offered the top five highest interest rates.
Wide range of fees:
When you think of a traditional bank, you might also think of bank fees. Bank of
America, for example, charges a $35 nonsufficient funds fee, whereas Alliant Credit
Union one of the largest credit unions open to the public charges just $25 for an
NSF
fee.
Poor customer service:
A 2015 study by Consumer Reports suggested that one of the major downfalls of big
banks is that they dont understand customers needs or and dont provide personalized
service. According to the survey, the four mega banks Bank of America, Chase,
Citibank and Wells Fargo which hold approximately 40 percent of all U.S. commercial
bank assets, landed in the bottom fifth of the customer satisfaction rankings. Smaller
financial institutions have a smaller demographic, but this seems to help them gain
insight into whos banking with them and what those customers want.

Features of commercial bank

Commercial banks manage deposit accounts, such as checking and savings accounts, for
individuals and businesses. They make loans to the public using the money held on
deposit. Investment banks differ strongly; these institutions facilitate the buying and
selling of stocks, bonds and other investments, as well as helping companies to go public
with initial public offerings (IPO).
According to an article in The Enterprise from February 2009, commercial banks are
highly regulated by a number of federal authorities, including the Federal Deposit
Insurance Corporation (FDIC) and the Federal Reserve. Commercial banks are federally
insured to protect customers' accounts. Investment banks, on the other hand,
are only loosely regulated by the Securities and Exchange Commission (SEC), allowing
them much more leeway in their strategic decision-making.

Risk Tolerance
Investment banks have a higher risk tolerance due to their business model and the relative
weakness of government regulation in the industry. Commercial banks are much less
tolerant of risk. Panic can ensue if families and businesses lose their checking and
savings accounts, so commercial banks have an implied fiduciary duty to act in the best
interest of their clients, not to mention the tight strings attached to commercial banks
amp; #039; FDIC insurance.

History and the Future


According to BU.edu, institutions that mixed commercial and investment banking
activities contributed in part to the great depression of the early 20th century. The GlassSteagall Act, part of the Banking Act of 1933, mandated the complete separation of
commercial and investment banking activities, which seemed to yield stable results until
its repeal in 1999 by the Gramm-Leach-Bliley Act. Since then, large banks have been free
to engage in both types of banking under one roof, which is believed to have been a large
contributing factor to the bust of the internet bubble in 2000 and 2001 and the beginning
of the global recession in 2008. Whether or not Congress will act to separate the two
activities, seemingly so volatile when used in tandem, remains to be seen.

Benefits of Combination
Banks mix commercial and investment activities to realize significant benefits. Acting as
an investment bank, an institution can help a company sell an IPO, then use its
commercial division to extend a generous line of credit to the new corporation. The
generous loan allows the new company to finance rapid growth and boost its stock price.
The bank can then reap the benefits of increased trading revenue and snag more
commissions from future stock offerings.

Considerations

The problem with mixing investment and commercial banking is that institutions have
historically gone too far to prop up weak and undeserving companies, leading to bubbles
and disastrous busts. Mixed-business banks have the ability to create excitement and
hype surrounding particular companies while injecting large sums of capital to prop up
their stock valuations. Without paying attention to the fundamental strength of sectors
and individual companies, however, this behavior is almost guaranteed to end in disaster.
The two most particular elements of a business bank are getting and loaning, i.e.,
acknowledgment of stores and loaning of cash to tasks to gain Interest (benefit). To put it
plainly, banks obtain to loan.
With Commercial Bank's Internet Banking, you have the comfort of doing your managing
an account right from home or anyplace you have Internet access 24 hours a day, 7 days a
week. Exploit these services:
Exchange reserves between your records
Check account equalizations
View and print pictures of your checks
View account explanations
Check credit equalizations and installment history
Make credit installments from your Commercial Bank checking or investment account
Reorder Checks (with no progressions)

Place a stop installment on a check


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Role of commercial bank

1. Mobilizing Saving for Capital Formation:


The commercial banks help in mobilising savings through network of branch banking.
People in developing countries have low incomes but the banks induce them to save by
introducing variety of deposit schemes to suit the needs of individual depositors. They
also mobilise idle savings of the few rich. By mobilising savings, the banks channelise
them into productive investments. Thus they help in the capital formation of a developing
country.
2. Financing Industry:
The commercial banks finance the industrial sector in a number of ways. They provide
short-term, medium-term and long-term loans to industry. In India they provide shortterm loans. Income of the Latin American countries like Guatemala, they advance
medium-term loans for one to three years. But in Korea, the commercial banks also
advance long-term loans to industry.
In India, the commercial banks undertake short-term and medium-term financing of small
scale industries, and also provide hire- purchase finance. Besides, they underwrite the
shares and debentures of large scale industries. Thus they not only provide finance for
industry but also help in developing the capital market which is undeveloped in such
countries.
3. Financing Trade:

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The commercial banks help in financing both internal and external trade. The banks
provide loans to retailers and wholesalers to stock goods in which they deal. They also
help in the movement of goods from one place to another by providing all types of
facilities such as discounting and accepting bills of exchange, providing overdraft
facilities, issuing drafts, etc. Moreover, they finance both exports and imports of
developing countries by providing foreign exchange facilities to importers and exporters
of goods.
4. Financing Agriculture:
The commercial banks help the large agricultural sector in developing countries in a
number of ways. They provide loans to traders in agricultural commodities. They open a
network of branches in rural areas to provide agricultural credit. They provide finance
directly to agriculturists for the marketing of their produce, for the modernization and
mechanization of their farms, for providing irrigation facilities, for developing land, etc.
They also provide financial assistance for animal husbandry, dairy farming, sheep
breeding, poultry farming, pisciculture and horticulture. The small and marginal farmers
and landless agricultural workers, artisans and petty shopkeepers in rural areas are
provided financial assistance through the regional rural banks in India. These regional
rural banks operate under a commercial bank. Thus the commercial banks meet the credit
requirements of all types of rural people.

5. Financing Consumer Activities:


People in underdeveloped countries being poor and having low incomes do not possess
sufficient financial resources to buy durable consumer goods. The commercial banks
advance loans to consumers for the purchase of such items as houses, scooters, fans,
refrigerators, etc. In this way, they also help in raising the standard of living of the people
in developing countries by providing loans for consumptive activities.
6. Financing Employment Generating Activities:
The commercial banks finance employment generating activities in developing countries.
They provide loans for the education of young persons studying in engineering, medical
and other vocational institutes of higher learning. They advance loans to young
entrepreneurs, medical and engineering graduates, and other technically trained persons
in establishing their own business. Such loan facilities are being provided by a number of
commercial banks in India. Thus the banks not only help inhuman capital formation but
also in increasing entrepreneurial activities in developing countries.
7. Help in Monetary Policy:

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The commercial banks help the economic development of a country by faithfully


following the monetary policy of the central bank. In fact, the central bank depends upon
the commercial banks for the success of its policy of monetary management in keeping
with requirements of a developing economy.
Thus the commercial banks contribute much to the growth of a developing economy by
granting loans to agriculture, trade and industry, by helping in physical and human capital
formation and by following the monetary policy of the country.

Types of Banks

Broadly speaking, banks can be classified into commercial banks and central bank.
Commercial banks are those which provide banking services for profit. The central bank
has the function of controlling commercial banks and various other economic activities.
There are many types of commercial banks such as deposit banks, industrial banks,
savings banks, agricultural banks, exchange banks, and miscellaneous banks.
Banks are of various types which are explained as under:
1. Commercial Banks:
Commercial banks are those banks which perform all kinds of banking functions such as
accepting deposits, advancing loans, credit creation, and agency functions. They are also
called joint stock banks because they are organized in the same manner as joint stock
companies.
They usually advance short-term loans to customers. Of late, they have started giving
medium term and long-term loans also. In India 20 major commercial banks have been

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nationalized, whereas in developed countries they are run like joint stock companies in
the private sector. Some of the commercial banks in India are Andhra Bank, Canara
Bank, Indian Bank, Punjab National Bank, etc

2. Exchange Banks:
These banks finance mostly for the foreign trade of a country. Their main function is to
discount, accept and collect foreign bills of exchange. They buy and sell foreign currency
and thus help businessmen in their transactions. They also carry on the ordinary banking
business.
In India, there are some commercial banks which are branches of foreign banks. These
banks facilitate for the conversion of Indian currency into foreign currency to make
payments to foreign exporters. They purchase bills from exporters and sell their proceeds
to importers. They purchase and sell forward exchange too and thus minimise the
difference in exchange rates between different periods, and also protect merchants from
losses arising out of exchange fluctuations by bearing the risk. The industrial and
commercial development of a country depends these days, largely upon the efficiency of
these institutions.
Exchange banks are those banks which deal in foreign exchange and specialise in
financing foreign trade. They are also called foreign exchange banks. In India, these
exchange banks have their head offices located outside India.
The Chartered Bank and the Brindlays Bank have their head officers in England,
whereas the American Express Bank, and Citi Bank have their head offices in the USA.
These banks also render other services such as collecting and supplying information
about the foreign customers, providing remittance facilities etc.
3. Industrial Banks:
Industries require a huge capital for a long period to buy machinery and equipment.
Industrial banks help such industrialists. They provide long term loans to industries.
Besides, they buy shares and debentures of companies, and enable them to have fixed
capital. Sometimes, they even underwrite the debentures and shares of big industrial
concerns. The important functions of industrial banks
1. They accept long term deposits.
2. They meet the credit requirements of industries by extending long term loans.

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3. These banks advise the industrial firms regarding the sale and purchase of shares and
debentures.
The industrial banks play a vital role in accelerating industrial development. In India,
after attainment of independence, several industrial banks were started with large paid up
capital. They are, The Industrial Finance Corporation (I.F.C.), The State Financial
Corporations (S.F.C.), Industrial Credit and Investment Corporation of India (ICICI) and
Industrial Development Bank of India (IDBI) etc.
Industrial banks are those banks which provide medium term and long-term finance to
industries for the purchase of land, machinery etc. They underwrite the debentures and
shares of industries and also subscribe to them. In India, there are a number of financial
institutions which perform the functions of industrial banks such as Industrial
Development Bank of India, Industrial Finance Corporation of India, Industrial Credit
and Investment Corporation of India, etc. Each State in India has its own State Financial
Corporation. These institutions are also known as Development Banks.

4. Agricultural Banks:
Agriculture has its own problems and hence there are separate banks to finance it. These
banks are organized on co-operative lines and therefore do not work on the principle of
maximum profit for the shareholders. These banks meet the credit requirements of the
farmers through term loans, viz., short, medium and long term loans. There are two types
of agricultural banks,
(a) Agricultural Co-operative Banks, and
(b) Land Mortgage Banks. Co-operative Banks are mainly for short periods. For long
periods there are Land Mortgage Banks. Both these types of banks are performing useful
functions in India.
Agricultural banks are those banks which provide credit to farmers for short-term,
medium-term and long-term needs. In India, commercial banks, regional rural banks and
Agricultural Cooperative Banks provide short-term loans to farmers. Land Development
Bank give medium-term and long-term loans to farmers on the mortgage of their land.
The
National Bank for Agriculture and Rural Development (NABARD) provides refinance
facilities to all types of banks which give loans to agriculturists.
5. Cooperative Banks:

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Cooperative banks are those financial institutions which are organized on the
principle of cooperation. They provide short-term and medium-term loans to
their members. In rural areas, there are agricultural cooperative banks which
accept deposits and give loans to agriculturists, rural artisans, etc.
In urban areas, there are also cooperative banks which perform the functions
of ordinary commercial banks but give loans to their members only. There is
a State Cooperative Bank in every state of India with its branches at the
district level known as the Central Cooperative Bank. The Central
Cooperative Bank, in turn, has is branches both in urban and rural
areas.Every State Cooperative bank is an apex bank which provides credit
facilities to the Central Cooperative Banks. It mobilises financial resources
from the richer sections of the urban population by accepting deposits and
creating credit like commercial banks and borrowing from the money
market. It also gets funds from the Reserve Bank of India.

6. Savings Banks:
Savings banks help promote small savings, and mobilise them. They have been very
successful in Japan and Germany. In India, post offices act as savings bank.
7. Central Bank:
The central bank is the apex bank in a country which controls its monetary and banking
structure. It is owned by the government of the country and operates in national interest.
It regulates and issues currency, performs banking and a agency services for the state,
keeps cash reserves of commercial banks, keeps and manages international currency, acts
as the lender of the last resort, acts as a clearing house, and controls of credit. The
Reserve Bank of India is the Central bank in India.
8. Miscellaneous Banks:
There are certain kinds of banks which have arisen in due course to meet the specialised
needs of the people. In England and America, there are investment banks whose object is
to control the distribution of capital into several uses. American Trade Unions have got
labour banks, where the savings of the labourers are pooled together. In London, there is
the London Discount House whose business is to go about the city seeking for bills to

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discount. There are numerous types of different banks in the world, carrying on one or
the other banking business

Functions of commercial bank


A commercial bank is authorized to serve the following functions:
Receive deposits - take money in from individuals and businesses (called depositors)
Disburse payments - make payments upon the direction of its depositors, such as
honoring a check
Collections - a bank will act as your agent to collect funds from another bank payable to
you, such as when someone pays you by check drawn on an account from a different
bank Invest funds in securities for a return

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Safeguard money - banks are considered a safe place to store your wealth Maintain and
service savings and checking accounts of its depositors
Maintain custodial accounts - accounts controlled by one person but for the benefit of
another person, such as a trust account.
Lend money

Functions of Commercial Banks:


Commercial banks perform a variety of functions which can be divided as:
(1) accepting deposits;
(2) advancing loans;
(3) Credit creation;
(4) financing foreign trade;
(5) agency services;
(6) miscellaneous services to customers.

These functions are discussed as follows:


1. Accepting Deposits:
This is the oldest function of a bank and the banker used to charge a commission for
keeping the money in its custody when banking was developing as an institution.
Nowadays a bank accepts three kinds of deposits from its customers. The first is the
savings deposits on which the bank pays small interest to the depositors who are usually
small savers.
The depositors are allowed to draw their money by cheques up to a limited amount
during a week or year. Businessmen keep their deposits in current accounts. They can
withdraw any amount standing to their credit in current deposits by cheques without
notice. The bank does not pay interest on such accounts but instead charges a nominal
sum for services rendered to its customers. Current accounts are known as demand
deposits.
Deposits are also accepted by a bank in fixed or time deposits. Savers who do not need
money for a stipulated period from 6 months to longer periods ranging up to 10 years or

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more are encouraged to keep it in fixed deposit accounts.The bank pays a higher rate of
interest on such deposits. The rate of interest increases with the length of the time period
of the fixed deposit. But there is always the maximum limit of the interest rate which can
be paid. For instance, the interest rate on fixed deposits over five years is 11 per cent in
India.
2. Advancing Loans:
One of primary functions of commercial banks is to advance loans to its customers. A
bank lends a certain percentage of the cash lying in deposits on a higher interest rate than
it pays on such deposits. This is how it earns profits and carries on its business. The bank
advances loans in the following ways:
(a) Cash Credit:
The bank advances loan to businessmen against certain specified securities. The amount
of the loan is credited to the current account of the borrower. In cash of a new customer a
loan account for the sum is opened. The borrower can withdraw money through cheques
according to his requirements buy pays interest on the full amount.

(b) Call Loans:


These are very short-term loans advanced to the bill brokers for not more than fifteen
days. They are advance against first class bill or securities. Such loans can be recalled at a
very short notice. In normal times they can also be renewed.
(c) Overdraft:
A bank often permits a businessman to draw cheques for a sum greater than the balance
lying m his Current account. This is done by providing the overdraft facility up to a
specific amount to the businessman. But he is charged interest only on the amount by
which his current account is actually overdrawn and not by the full amount of the
overdraft sanctioned to him by the banks.
(d) Discounting Bills of Exchange:
If a creditor holding a bill of exchange wants money immediately, the bank provides him
the money by discounting the bill of exchange. It deposits the amount of the bill in the
current account of the bill-holder after deducting its rate of interest for the period of the

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loan which is not more than 90 days. When the bill of exchange matures, the bank gets its
payment from the banker of the debater who accepted the bill.
3. Credit Creation:
Credit creation is one of the most important functions of the commercial banks. Like
other financial institutions, they aim at earning profits. For this purpose, they accept
deposits and advance loans by keeping small cash in reserve for day-to-day transactions.
When a bank advances a loan, it opens and account in the name of the customer and does
not pay him in cash but allows him to draw the money by cheque according to his needs.
By granting a loan, the bank creates credit or deposit.
4. Financing Foreign Trade:
A commercial bank finances foreign trade of its customers by accepting foreign bills of
exchange and collecting them from foreign banks. It also transacts other foreign
exchange business and buys and sells foreign currency.
5. Agency Services:
A bank acts as an agent of its customers in collecting and paying cheques, bills of
exchange, drafts, dividends, etc. It also buys and sells shares, securities, debentures, etc.
for its customers. Further, it pays subscriptions, insurance premium, rent, electric and
water bills, and other similar charges on behalf of its clients. It also acts as a trustee and
executor of the property and will of its customers. Moreover, the bank acts as an income
tax consultant to its clients. For some of these services, the bank charges a normal fee
while it renders others free of charge.
6. Miscellaneous Services:
Besides the above noted services, the commercial bank performs a number of other
services. It acts as the custodian of the valuables of its customers by providing them
lockers where they can keep their jewellery and valuable documents. It issues various
forms of credit instruments, such as cheques, drafts, travellers cheques, etc. which
facilitate transactions.
The bank also issues letter of credit and acts as a referee to its clients. It underwrites
shares and debentures of companies and helps in the collection of funds from the public.
Some commercial banks also publish journal which provide statistical information about
the money market and business trends of the economy.

Primary functions.

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Commercial banks provide loans and advances of various forms, including an overdraft
facility, cash credit, bill discounting, money at call etc. They also give demand and term
loans to all types of clients against proper security. Commercial banks accept various
types of deposits from public especially from its clients, including saving account
deposits, recurring account deposits, and fixed deposits. These deposits are returned
whenever the customer demands it or after a certain time period. In most countries central
banks are responsible for the oversight of the commercial banking system of their
respective countries. They will impose a number of conditions on the banks that they
regulate such as keeping bank reserves and to maintain minimum capital requirements.

Collection of deposits: The primary function of commercial banks is to collect deposits


from the public. Such deposits are of three main types: current, saving and fixed.
A current account:is used to make payments. A customer can deposit and withdraw
money from the current account subject to a minimum required balance. If the customer
overdraws the account, he may be required to pay interest to the bank. Cash credit facility
is allowed in the current account.
Savings account:
is an interest yielding account. Deposits in savings account are used for saving money.
Savings bank account-holder is required to maintain a minimum balance in his account to
avail of cheque facilities.
Fixed or term deposits:
Are used by the customers to save money for a specific period of time, ranging from 7
days to 3 years or more. The rate of interest is related to the period of deposit. For
example, a fixed deposit with a maturity period of 3 years will give a higher rate of return
than a deposit with a maturity period of 1 year. But money cannot be usually withdrawn
before the due date. Some banks also impose penalty if the fixed deposits are withdrawn
before the due date. However, the customer can obtain a loan from the bank against the
fixed deposit receipt.
Loans and advances:

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Commercial banks have to keep a certain portion of their deposits as legal reserves. The
balance is used to make loans and advances to the borrowers. Individuals and firms can
borrow this money and banks make profits by charging interest on these loans.
Commercial banks make various types of loans such as:
Loan to a person or to a firm against some collateral security;Cash credit (loan in
installments against certain security);Overdraft facilities (i.e. allowing the customers to
withdraw more money than what their deposits permit); andLoan by discounting bills of
exchange..

Secondary functions
Agency Services:
The customersmay give standing instruction to the banks to accept or make payments on
their behalf. The relationship between the banker and customer is that of Principal and
Agent. The following agency services are provided by the bankers:
Payment of rent, insurance premium, telephone bills, installments on hire purchase, etc.
The payments are obviously made from the customers account. The banks may also
collect such receipts on behalf of the customer.
The bank collects cheques, drafts, and bills on behalf of the customer.The banks can
exchange domestic currency for foreign currencies as per the regulations.The banks can
act as trustees / executors to their customers. For example, banks can execute the will
after the death of their clients, if so instructed by the latter.
General Utility Services: The commercial banks also provide various general utility
services to their customers. Some of these services are discussed below:
Safeguarding money and valuables:
People feel safe and secured by depositing their money and valuables in the safe custody
of commercial banks. Many banks look after valuable documents like house deeds and
property, and jewellery items.
Transferring money:
Money can be transferred from one place to another. In the same way, banks collect
funds of their customers from other banks and credit the same in the customers account.
Merchant banking:

21

Many commercial banks provide merchant banking services to the investors and the
firms. The merchant banking activity covers project advisory services and loan
syndication, corporate advisory services such as advice on mergers and acquisitions,
equity valuation, disinvestment, identification of joint venture partners and so on.
Automatic Teller Machines (ATM):
The ATMs are machines for quick withdrawal of cash. In the last 10 years, most banks
have introduced ATM facilities in metropolitan and semi-urban areas. The account
holders as well as credit card holders can withdraw cash from ATMs.
Travelers cheque:
A travelers cheque is a printed cheque of a specific denomination. The cheque may be
purchased by a person from the bank after making the necessary payments. The customer
may carry the travelers cheque while travelling. The travelers cheques are accepted in
banks, hotels and other establishments.

Credit Cards:
Credit cards are another important means of making payments. The Visa and Master
Cards are operated by the commercial banks. A person can use a credit card to withdraw
cash from ATMs as well as make payments to trade establishments.In developing
countries like India commercial banks perform certain promotional (developmental)
activities.
For example, nationalized banks in India provide credit to the top priority sectors of the
economy such as agriculture, and small-scale and cottage industries. In this way
commercial banks help to promote the socio-economic development of the country.

Other functions
Along with core products and services, commercial banks perform several secondary
functions. The secondary functions of commercial banks can be divided into agency
functions and utility functions.
Agency functions include:
To collect and clear cheques, dividends and interest warrant.
To make payments of rent, insurance premium, etc.

22

To deal in foreign exchange transactions.


To purchase and sell securities.
To act as trustee, attorney, correspondent and executor.
To accept tax proceeds and tax returns.
Utility functions include:
To provide safety locker facility to customers.
To provide money transfer facility.
To issue travellers cheque.
To act as referees. To accept various bills for payment: phone bills, gas bills, water bills,
etc.
To provide merchant banking facility.
To provide various cards: credit cards, debit cards, smart cards, etc.

Liabilities Management
The important source of fund for commercial bank is liabilities management. They have
to manage it very carefully to minimize risk and achieve goal. The various items included
in the liabilities of commercial banks are equity, reserves, borrowings, deposits, new
account, money market liabilities, deposit account, wholesale and retail certificate of
deposits, negotiable instructs, brokered deposits, interest paying liabilities, short term
loan, bills payable and other outstanding expenses.
Repurchase agreement
This represents the temporary borrowing in money market, mainly from excess required
reserves loaned to it by other banks or the bank has borrowed fund collateralize by some
of its own securities from other bank or a large corporate customer.
Mortgage loans
Long term loans taken generally for constructing building and building under
construction serves as collateral are mortgage loans. The principal source of long term
borrowing include real estate mortgage and this type of loan may have maturity upto
thirty years.

23

Capital funds
It refers to the long term funds contributed to a bank primarily by its owners. It represents
the owner's equity interest in the bank. Tier 1 capital is known as core or primary capital
and a tier 2 capital is known as supplementary capital. Under this fund includes common
stocks, suppliers, retained earnings and undivided profit.
Uses of Fund in commercial Bank
Whatever the funds raised by commercial banks should be properly channelized into
investment earning asset because without such earnings bank cannot survive in the long
run to compute in the challenging financial market. The uses of funds are as follows:
Assets Management
It is to be considered that whatever liabilities undertaken from various sources become
useless these liabilities are converted into earning assets. The various items included in
assets of commercial banks are cash in hand, cash at bank, investment, loans, leases,
bank's earnings assets vault cash, leases, deposits at central bank, cash items in process of
collecting, fixed assets and other current assets.

Evolution of Commercial Banks in India

The commercial banking industry in India started in 1786 with the establishment of the
Bank of Bengal in Calcutta. The Indian Government at the time established three
Presidency banks, viz., the Bank of Bengal (established in 1809), the Bank of Bombay
(established in 1840) and the Bank of Madras (established in 1843). In 1921, the three
Presidency banks were amalgamated to form the Imperial Bank of India, which took up
the role of a commercial bank, a bankers bank and a banker to the Government.

24

The Imperial Bank of India was established with mainly European shareholders. It was
only with the establishment of Reserve Bank of India (RBI) as the central bank of the
country in 1935, that the quasi-central banking role of the Imperial Bank of India came to
an end. In 1860, the concept of limited liability was introduced in Indian banking,
resulting in the establishment of joint-stock banks. In 1865, the Allahabad Bank was
established with purely Indian shareholders. Punjab National Bank came into being in
1895.
Between 1906 and 1913, other banks like Bank of India, Central Bank of India, Bank of
Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. After
independence, the Government of India started taking steps to encourage the spread of
banking in India. In order to serve the economy in general .
The rural sector in particular, the All India Rural Credit Survey Committee recommended
the creation of a state-partnered and state-sponsored bank taking over the Imperial Bank
of India and integrating with it, the former state-owned and state-associate banks.
Accordingly, State Bank of India (SBI) was constituted in 1955. Subsequently in 1959,
the State Bank of India (subsidiary bank) Act was passed, enabling the SBI to take over
eight former state-associate banks as its subsidiaries.
The commercial banking industry in India started in 1786 with the establishment of the
Bank of Bengal in Calcutta. The Indian Government at the time established three
Presidency banks, viz., the Bank of Bengal (established in 1809), the Bank of Bombay
(established in 1840) and the Bank of Madras (established in 1843). In 1921, the three
Presidency banks were amalgamated to form the Imperial Bank of India, which took up
the role of a commercial bank, a bankers bank and a banker to the Government.
The Imperial Bank of India was established with mainly European shareholders. It was
only with the establishment of Reserve Bank of India (RBI) as the central bank of the
country in 1935, that the quasi-central banking role of the Imperial Bank of India came to
an end. In 1860, the concept of limited liability was introduced in Indian banking,
resulting in the establishment of joint-stock banks. In 1865, the Allahabad Bank was
established with purely Indian shareholders. Punjab National Bank came into being in
1895.
Between 1906 and 1913, other banks like Bank of India, Central Bank of India, Bank
of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. After
independence, the Government of India started taking steps to encourage the spread of
banking in India.
In order to serve the economy in general and the rural sector in particular, the All India
Rural Credit Survey Committee recommended the creation of a state-partnered and statesponsored bank taking over the Imperial Bank of India and integrating with it, the former

25

state-owned and state-associate banks. Accordingly, State Bank of India (SBI) was
constituted in 1955. Subsequently in 1959, the State Bank of India (subsidiary bank) Act
was passed, enabling the SBI to take over eight former state-associate banks as its
subsidiaries.
One important feature of the reforms of the 1990s was that the entry of new private sector
banks was permitted. Following this decision, new banks such as ICICI Bank, HDFC
Bank, IDBI Bank and UTI Bank were set up. Commercial banks in India have
traditionally focused on meeting the short-term financial needs of industry, trade and
agriculture.
However, given the increasing sophistication and diversification of the Indian economy,
the range of services extended by commercial banks has increased significantly, leading
to an overlap with the functions performed by other financial institutions. Further, the
share of long-term financing (in total bank financing) to meet capital goods and projectfinancing needs of industry has also increased over the years

Investment banking vs commercial banking


The banking sector is split into two fundamental divisions: investment banking and
commercial banking. Institutions that mix the two activities have come under scrutiny
lately, accused of being major contributors to the global economic meltdown of 2008.
Debate rages as to whether the two distinct banking activities should be carried out under
a single roof, or whether they should be forever separate. Knowing the difference
between commercial banks and investment banks can shed some light on this issue.
The Risk of Commercial Banks
Commercial banks are among the major financial intermediaries in the marketplace. As a
result of this role, commercial banks are exposed to the risks that affect both the
securities markets and the economic conditions that affect consumers. To understand the
risks associated with commercial banks, it is helpful to consider some key areas that
affect banking operations.
Interest Rate Risk
Interest rate risk is one of the more prevalent risks for commercial banks. Generally,
commercial banks are proficient at mitigating interest rate risk in their investment
portfolios. However, interest rates are outside the domain of commercial bank operations.
Instead, the Federal Reserve, the central bank of the U.S., exercises considerable

26

influence over interest rates. As a result, commercial banks try to hedge their loans
against any changes in the general interest rate level in the economy. For example, if a
bank makes a business loan and charges the borrower 5 percent interest with a current
interest rate level at 2 percent, the bank will make a profit of 3 percent if the rate remains
at 2 percent throughout the life of the loan. However, if the general level of interest rates
increases from 2 to 3 percent, the bank's profit will decline to 2 percent.
Default Risk
Commercial banks generally make most of their money on loans. Although banks screen
borrowers and analyze their financial position and ability to pay, commercial banks are
still susceptible to borrower default. When borrowers are unable to pay, they default on a
loan, causing the bank to lose money. Although a general analysis of a bank's loan
portfolio will indicate a small margin of default, widespread borrower default may
jeopardize the solvency of a commercial bank.

Regulation
Commercial banks are also subject to regulation. Depending on the type of bank,
specialization and state in which they operate commercial banks work within a
framework of legal regulation. When regulations change, the bank's operational
framework changes, which may impact its ability to generate profits from loans. For
example, the Federal Reserve may increase the amount of required reserves, forcing
commercial banks to withhold more money to cover customer withdrawals. This
decreases the amount of bank capital available to lend, which may reduce bank profits.
Opportunity Cost
Although loans are a significant part of commercial bank operations, banks may quit
lending for fear of widespread default. If a bank's financial analysis expects diminished
economic activity, a commercial bank may expect diminished capacity of borrower
repayment. With a higher default rate, a bank may prefer to invest only a portion of its
capital to make money from a few successful loans rather than risk more money with the
potential for default.
Deposits
Commercial banks rely partly on attracting deposits from customers to fund banking
investments and loans. To do so, many commercial banks offer traditional banking

27

services, including certificates of deposit and checking, savings and money market
accounts. In addition, banks may increase the interest rate payments on these accounts to
make them more attractive to depositors. Without a consistent flow of deposit funds,
commercial banks would be unable to operate at an optimal level.

Sources of commercial bank


Deposits
The major source of funds for commercial banks is saving. Deposits are gathered in local
markets and typical have lower interest rate. They are relatively stable. Deposits can be
classified as demand deposit (current deposits), etc. In case of demand deposits, the
sources of funds are simply checking account that do not pay interest and permit
unlimited check writing.
Saving deposits are interest bearing sources of fund left with the banks for a period of
weeks, month, or years with no minimum required maturity. Money market deposits
account can pay whatever interest rate the offering bank feel is competitive and have

28

limited check writing privileges attached. No minimum denomination or maturing is


required by law. A time deposit is simply a deposit account that pays interest for fixed
term and the fund cannot be withdrawn before maturity.
Bank rate
Bank rate, also referred to as the discount rate in American English,[1] is the rate of
interest which a central bank charges on the loans and advances to a commercial bank.
The bank rate is known by a number of different terms depending on the country and has
changed over time in some countries as the mechanism used to manage the rate have
changed. Whenever a bank has a shortage of funds, they can typically borrow from the
central bank based on the monetary policy of the country.
The borrowing is commonly done via repos, where the repo rate is the rate at which the
central bank lends short-term money to the banks against securities. A reduction in the
repo rate will help banks to get money at a cheaper rate. When the repo rate increases,
borrowing from the central bank becomes more expensive. It is more applicable when
there is a liquidity crunch in the market.

In contrast the reverse repo rate is the rate at which banks can park surplus funds with
reserve bank. This is mostly done when there is surplus liquidity in the market as a high
reverse repo rate will make it attractive to banks to park surplus funds with the central
bank.
Bank rate in India is determined by Reserve Bank of India (RBI). It is the rate at which
RBI gives loan to commercial banks without keeping any collateral. The RBI also
provides short term loans to its clients (keeping collateral) which is called the repo rate.
RBI revises this rate periodically. However, there is no predetermined schedule. The repo
rates are changed re-actively depending on the economy. Like other countries, repo rates
affect the money flow into the nation's economy and affect the inflation and commercial
banks' lending or interest rate.[5] The Indian bank rate is 7 %, which is same as the rate
for Marginal Standing Facility (MSF)

Credit Creation by Commercial Banks


A central bank is the primary source of money supply in an economy through circulation
of currency. It ensures the availability of currency for meeting the transaction needs of an

29

economy and facilitating various economic activities, such as production, distribution,


and consumption.
However, for this purpose, the central bank needs to depend upon the reserves of
commercial banks. These reserves of commercial banks are the secondary source of
money supply in an economy. The most important function of a commercial bank is the
creation of credit.
Therefore, money supplied by commercial banks is called credit money. Commercial
banks create credit by advancing loans and purchasing securities. They lend money to
individuals and businesses out of deposits accepted from the public. However,
commercial banks cannot use the entire amount of public deposits for lending purposes.
They are required to keep a certain amount as reserve with the central bank for serving
the cash requirements of depositors. After keeping the required amount of reserves,
commercial banks can lend the remaining portion of public deposits.
According to Benhams, a bank may receive interest simply by permitting customers to
overdraw their accounts or by purchasing securities and paying for them with its own
cheques, thus increasing the total bank deposits.

The limitations of credit creation process (as shown in Figure-3) are explained as
follows:
(a) Amount of Cash:
Affects the creation of credit by commercial banks. Higher the cash of commercial banks
in the form of public deposits, more will be the credit creation. However, the amount of
cash to be held by commercial banks is controlled by the central bank.
The central bank may expand or contract cash in commercial banks by purchasing or
selling government securities. Moreover, the credit creation capacity depends on the rate
of increase or decrease in CRR by the central bank.
(b) CRR:
Refers to reserve ratio of cash that need to be kept with the central bank by commercial
banks. The main purpose of keeping this reserve is to fulfill the transactions needs of
depositors and to ensure safety and liquidity of commercial banks. In case the ratio falls,
the credit creation would be more and vice versa.
(c) Leakages:

30

Imply the outflow of cash. The credit creation process may suffer from leakages of cash.

The different types of leakages are discussed as follows:


(i) Excess Reserves:
Takes place generally when the economy is moving towards recession. In such a case,
banks may decide to maintain reserves instead of utilizing funds for lending. Therefore,
in such situations, credit created by commercial banks would be small as a large amount
of cash is resented.
(ii) Currency Drains:
Imply that the public does not deposit all the cash with it. The customers may hold the
cash with them which affects the credit creation by banks. Thus, the capacity of banks to
create credit reduces.
(d) Availability of Borrowers:
Affects the credit creation by banks. The credit is created by lending money in form of
loans to the borrowers. There will be no credit creation if there are no borrowers.
(e) Availability of Securities:
Refers to securities against which banks grant loan. Thus, availability of securities is
necessary for granting loan otherwise credit creation will not occur. According to
Crowther, the bank does not create money out of thin air; it transmutes other forms of
wealth into money.
(f) Business Conditions:
Imply that credit creation is influenced by cyclical nature of an economy. For example,
credit creation would be small when the economy enters into the depression phase. This
is because in depression phase, businessmen do not prefer to invest in new projects. In
the other hand, in prosperity phase, businessmen approach banks for loans, which lead to
credit creation. In spite of its limitations, we can conclude that credit creation by
commercial banks is a significant source for generating income.
The essential conditions for creation of credit are as follows:
a. Accepting the fresh deposits from public
b. Willingness of banks to lend money

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c. Willingness of borrowers to borrow

Major Problems Faced by Indias Nationalized Banks


The following points highlight the nine major problems faced by Indias
nationalized banks.
1. Losses in Rural Branches:
Most of the rural branches are running at a loss because of high overheads and prevalence
of the barter system in most parts of rural India.
2. Large Over-Dues:
The small branches of commercial banks are now faced with a new problema large
amount of overdue advances to farmers. The decision of the former National Front Government to waive all loans to farmers up to the value of Rs. 10,000 crores has added to
the plight of such banks.
3. Non-Performing Assets:
The commercial banks at present do not have any machinery to ensure that their loans
and advances are, in fact, going into productive use in the larger public interest. Due to a
high proportion of non-performing assets or outstanding due to banks from borrowers
they are incurring huge losses. Most of them are also unable to maintain capital adequacy
ratio.
4. Advance to Priority Sector:
As far as advances to the priority sectors are concerned, the progress has been slow. This
is partly attributable to the fact that the bank officials from top to bottom could not accept
nationalization gracefully, viz., and diversion of a certain portion of resources to the top
priority and hitherto neglected sectors. This is also attributable to the poor and unsatisfactory loan recovery rates from the agricultural and small sectors.
5. Competition from Non-Banking Financial Institution:
As far as deposit mobilization is concerned, commercial banks have been facing stiff
challenges from non-banking financial intermediaries such as mutual funds, housing
finance corporations, leasing and investment companies. All these institutions compete
closely with commercial banks in attracting public deposits and offer higher rates of
interest than are paid by commercial banks.
6. Competition with Foreign Banks:

32

Foreign banks and the smaller private sector banks have registered higher increase in
deposits. One reason seems to be that non-nationalised banks offer betters customer
service. This creates the impression that a diversion of deposits from the nationalised
banks to other banks has probably taken place.
7. Gap between Promise and Performance:
One major weakness of the nationalised banking system in India is its failure to sustain
the desired credit pattern and fill in credit gaps in different sectors. Even though there has
been a reorientation of bank objectives, the bank staff has remained virtually static and
the bank procedures and practices have continued to remain old and outmoded.
The post-nationalization period has seen a widening gap between promise and
performance. The main reason seems to be the failure of the bank staff to appreciate the
new work philosophy and new social objectives.
8. Bureaucratization:
Another problem faced by the commercial banks is bureaucratization of the banking
system. This is indeed the result of nationalization. The smooth functioning of banks has
been hampered by red-tapism, long delays, lack of initiative and failure to take quick
decisions.
9. Political Pressures:
The smooth working of nationalized banks has also been hampered by growing political
pressures from the Centre and the States. Nationalized banks often face lots of difficulties
due to various political pressures. Such pressures are created in the selection of personnel
and grant of loans to particular parties without considering their creditworthiness.

Services Provided to Customers by Modern commercial Banks

1. Advancing of Loans
Banks are profit oriented business organizations. So they have to advance loan to public
and generate interest from them as profit.
After keeping certain cash reserves, banks provide short-term, medium-term and longterm loans to needy borrowers.
2. Overdraft

33

Sometimes, the bank provides overdraft facilities to its customers though which they are
allowed to withdraw more than their deposits. Interest is charged from the customers on
the overdrawn amount.
3. Discounting of Bills of Exchange
This is another popular type of lending by the modern banks. Through this method, a
holder of a bill of exchange can get it discounted by the bank, in a bill of exchange, the
debtor accepts the bill drawn upon him by the creditor (i.e., holder of the bill) and agrees
to pay the amount mentioned on maturity.
After making some marginal deductions (in the form of commission), the bank pays the
value of the bill to the holder. When the bill of exchange matures, the bank gets its
payment from the party, which had accepted the bill.
4. Cheque Payment
Banks provide cheque pads to the account holders. Account holders can draw cheque
upon bank to pay money. Banks pay for cheques of customers after formal verification
and official procedures..
5. Collection and Payment Of Credit Instruments
In modern business, different types of credit instruments such as bill of exchange,
promissory notes, cheques etc. are used. Banks deal with such instruments. Modern banks
collect and pay different types of credit instruments as the representative of the
customers.
6. Foreign Currency Exchange
Banks deal with foreign currencies. As the requirement of customers, banks exchange
foreign currencies with local currencies, which is essential to settle down the dues in the
international trade.
7. Consultancy
Modern commercial banks are large organizations. They can expand their function to
consultancy business. In this function, banks hire financial, legal and market experts who
provide advices to customers in regarding investment, industry, trade, income, tax etc.
8. Bank Guarantee
Customers are provided the facility of bank guarantee by modern commercial banks.
When customers have to deposit certain fund in governmental offices or courts for

34

specific purpose, bank can present itself as the guarantee for the customer, instead of
depositing fund by customers.
9. Remittance of Funds
Banks help their customers in transferring funds from one place to another through
cheques, drafts, etc.
10. Credit cards
Credit card are cards that allow their holders to make purchases of goods and services in
exchange for the credit cards provider immediately paying for the goods or service, and
the card holder promising to pay back the amount of the purchase to the card provider
over a period of time, and with interest.
11. ATMs Services
ATMs replace human bank tellers in performing basic banking functions such as deposits,
withdrawals, account inquires. Key advantages of ATMs include:
24 hour availability
Elimination of labor cost
Convenience of location
12. Debit cards
Debit cards are used to electronically withdraw funds directly from the cardholders
accounts. Most debit cards require a Personal Identification Number (PIN) to be used to
verify the transaction.
13. Home banking
Home banking is the process of completing financial transaction from ones own home as
opposed to utilizing a branch of a bank. It includes actions such as making account
inquiries, transferring money, paying bills, applying for loans, directing deposits.
14. Online banking
Online banking is a service offered by banks that allows account holders to access their
account data via the internet. Online banking is also known as Internet banking or
Web banking.
Online banking through traditional banks enable customers to perform all routine
transactions, such as account transfers, balance inquiries, bill payments, and stop-

35

payment requests, and some even offer online loan and credit card applications. Account
information can be accessed anytime, day or night, and can be done from anywhere.
15. Mobile Banking
Mobile banking (also known as M-Banking) is a term used for performing balance
checks, account transactions, payments, credit applications and other banking
transactions through a mobile device such as a mobile phone or Personal Digital Assistant
(PDA)

16. Accepting Deposit


Accepting deposit from savers or account holders is the primary function of bank. Banks
accept deposit from those who can save money, but cannot utilize in profitable sectors.
People prefer to deposit their savings in a bank because by doing so, they earn interest.
17. Priority banking
Priority banking can include a number of various services, but some of the popular ones
include free checking, online bill pay, financial consultation and information.
18. Private banking
Personalized financial and banking services that are traditionally offered to a banks rich,
high net worth individuals (HNWIs). For wealth management purposes, HNWIs have
accrued far more wealth than the average person, and therefore have the means to access
a larger variety of conventional and alternative investments. Private Banks aim to match
such individuals with the most appropriate options.

List of Commercial Banks in India


SBI & Associates:
State Bank of India

36

State Bank of Bikaner & Jaipur


State Bank of Hyderabad
State Bank of Indore
State Bank of Mysore
State Bank of Patiala
State Bank of Travancore
Nationalised Banks:
Allahabad Bank
Andhra Bank
Bank of Baroda
Bank of India
Bank of Maharashtra
Canara Bank
Central Bank of India
Corporation Bank
Dena Bank
IDBI Bank Ltd.
Indian Bank
Indian Overseas Bank
Oriental Bank of Commerce
Punjab & Sind Bank
Punjab National Bank
Syndicate Bank
UCO Bank

37

Union Bank of India


United Bank of India
Vijaya Bank
Foreign Banks:
ABN Amro Bank
Abu Dhabi Commercial Bank
American Express Banking Corporation
Antwerp Diamond Bank
AB Bank
Bank International Indonesia
Bank of America
Bank of Bahrain & Kuwait
Bank of Ceylon
Bank of Nova Scotia
Bank of Tokyo Mitsubishi UFJ
Barclays Bank
BNP Paribas
Calyon Bank
China trust Commercial Bank
Citibank
DBS Bank
Deutsche Bank
Hong Kong& Shanghai Banking Corporation
JP Morgan Chase Bank

38

JSC VTB Bank


Krung Thai Bank
Mashreq Bank
Mizuho Corporate Bank
Oman International Bank
Shinhan Bank
Society Generale
Sonali Bank
Standard Chartered Bank
State Bank of Mauritius

CONCLUSION

In this research, we have empirically verified and discussed the relationship of


commercial bank credit and industrial growth in Nigeria from 1980-2009.The aim of the
study was to ascertain the impact of commercial bank credit on industrial growth in
Nigeria economy. Generally, it is observed that crude oil production commercial bank
credit to industrial sector production commercial bank credit to industrial sector has had a
positive relationship and a significant impact on the industrial growth in Nigeria. This can

39

be proved by the 67% R2 value, the T-statistics observed value and their co-efficient
value.
Consequently, base on the results obtained and interpreted in chapter four above, the null
hypothesis which states that there is no positive significant relationship between
commercial banks and industrial growth in Nigeria where rejected.
Thus, from the foregoing we can conclude that the commercial bank credit in Nigeria,
despite its reform in financial sector, effect positively on the industrial growth in Nigeria
from 1980-2009.
The commercial bank credit ratio / provision should be diversified to productive
investment sectors that will yield even the capital and also interest in the economy and
back to the bank. This will enhance the investors and banks good relationship.
The government should encourage more private company participation in some industry.
So that better equipped industries can be eg refineries built and the cost of their product
will reduce, this will enable competitive environment in the economy.
Security should be boosted in commercial and all kind of banks, industries and economy
as whole, this will help reduce the loss of life, properties, even from illegal export of
crude oil product of the high sea where crude oil products and other industrial products
are being smuggled.
There is the urgent need for Nigeria to diversify there credit facilities, the rate of interest,
and other industrial market especially the oil market. High priority should be given to
non oil productive sector; instead of concentrating on oil sector alone.Government should
give immediate attention to the indigenous industrial to enable then to compete with the
other countries industry.

Biblography

www.investopedia.in
Agarwal B.P publication of Delhi.

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