COMMERCIAL BANKING IN INDIA

STRUCTURE OF COMMERCIAL BANKING IN INDIA:

Commercial banking system in India comprises of the scheduled and nonscheduled commercial banks. The scheduled banks are further classified as public sector and private sector banks. Public sector banks consists of State Bank of India, and its seven subsidiaries banks, 14 major commercial banks were nationalized on July 19, 1969 and 6 commercial banks were nationalized on Arial 15^th, 1980 and Regional Rural Banks.

Public sector banks are further classified into four forms of banks namely:

State bank of India

Associated banks of State Bank of India

Nationalized Banks

Regional Rural Banks

Banks in Private Sector includes:

Foreign Banks

Other registered banks

The nationalized and tight control over the major banks was aimed in reducing the banks concentration over the major banks was aimed in reducing the banks concentration of economic power and their influence on industrial and business monopolies, and in increasing the flow of credit to small business. It was intended that these measures would achieve a wide spread of bank credit of priority sector and make banks more effective instruments for economic progress.

Regional Rural Banks were setup in 1975 to provide credit to the weaker section of the rural population, particularly to small and marginal farmers, agricultural workers, village artisans etc.

In short the significant changes in banking mainly aimed at increasing the role of banks as catalyst agents of development to reduce the rural disparities in banking.

OBJECTIVES OF COMMERCIAL BANKS OF INDIA:

The landscape of the Indian banking system has changed considerably since the state took over 14 major commercial banks in 1975. The nationalized banks now serve as an instrument of national policy of growth with social justice and not as agency of business houses.

Since nationalization, commercial banks especially public sector banks framed certain objectives for the development of banking sector. The prominent objectives are as under:

Development and growth of priority sectors like small scale industries, cottage industries, steel and other industries.

Bank emphasized the need to reduce cost and improve operational efficiency in banks.

Wider territorial and regional spread of branch network.

Faster mobilization of savings through banks deposits.

Deployment of bank credit in favour of neglected sector of the economy like agriculture.

Development of Capital market.

To create five million jobs and to reduce the poverty by 20 percent.

To pass the securities and reconstruction of financial assets and enforcement of securities bill, by parliament.

To recover the dues from their borrowers, in helping the bank to prune its NPA’s.

To open the branches in rural areas and un-banked centers.

The large scale expansion programme through effective control mechanisms. The mechanisms include regulation of credit deposit ratio at State level and branch level. As this ratio is regarded as an indicator of the banks performance.

Reduce the costs and improve operational efficiency in banks.

ROLE OF COMMERCIAL BANKS:

According to banking regulation act 1949, banking means, “accepting ,for the purpose of lending or investment of deposits of money , from the public, repayable on demand or otherwise and no company can carry on the business of banking unless it uses as part of its name at least one of such words as bank, bankers and banking”. Thus in India, accepting and lending or investment of deposits have been assumed as two major functions of commercial banks.

The commercial banks have been making vigorous and sustained efforts in discharging their social responsibilities in other sector as well. The social responsibility of banking sector mainly includes:

To provide equal opportunities for development of people abilities and potentialities.

Mobilization of family savings by inculcating sound banking habits in the individuals.

Assisting the continuous development of industry and other service with a social purpose.

Assisting weaker sections of the population to be self –sufficient and achieve a certain standard of life.

The banks also take the responsibility to offer courteous customers services with a free purpose.

The bank also plays an important role in assisting the state in the process of socio-economy development.

The role played by the banks in the customer services is tremendous. Now, the motto promoted by banks is “Customers satisfaction”. Service is the end product of a banks work and its success depends on the range and quality of services it can offer to its clientele, big as well as small. The teller system, night safe service, insured saving bank account, preparation of income tax return etc. are some of the prominent service provided by the banks to its customers.

The Commercial Bank plays a leading role in the lending. Focused attention was given to rural lending and weaker section by identifying the poorest among the poor with appropriate subsidy linked government programmes.

Of the leading role played by Commercial Banks there has been a tremendous decline in the operations of money lenders in rural areas.

PRESENT STATE OF COMMERCIAL BANKS:

Banking has traditionally remained a protect industry in many emerging economies. Regulated and lending rates and restrictions on computation enable comfortable spreads. “Banking sector is dominated by Scheduled Commercial Banks. As at end of March 2002, there were 296 Commercial Banks Operating in India. This included 27 public sector banks, 31 private; 42 foreign and 196 Regional Rural Banks.