Since the establishment of the first Indian bank – the Bank of Hindostan in 1770, Commercial banks in India have been a cornerstone of our financial system for centuries. This blog will delve into their crucial role within India’s economy by discussing functions and types, as well as contributions towards monetary stability and growth. With over 90 commercial entities operating today, which includes big players like State Bank Of India (the largest commercial banks in India ) and HDFC bank. Understanding this sector is imperative for us to comprehend its influence on daily lives and economic progression – Join our exploration of Commercial banking intricacies, their effects and how they shape the modern-day Indian economy.
What are commercial banks in India?
Commercial banks in India are financial institutions regulated under the Banking Regulation Act of 1949 that provide essential banking services. Their primary function is to accept public deposits and extend loans, primarily for profit-driven purposes. These organizations serve as intermediaries in the financial system by channeling funds from savers (depositors) into borrowers while ensuring secure transactions.
They offer a diverse array of products such as savings accounts, fixed deposits, and personal and business loans, along with payment solutions aimed at addressing individuals’ or businesses’ needs effectively within our economy thereby playing an essential role in overall economic growth by efficiently managing the flow of money from savers to borrowers while maintaining financial stability.
Function of Commercial Bank:
Commercial Banks in India play a vital role within the Indian Banking System, carrying out crucial tasks and operating mainly using these methods.
Deposit Acceptance: Commercial Banks in India assist in collecting funds by providing diverse forms of bank accounts such as those earning interests on your savings (savings accounts), tailored to business dealings via current accounts, or offering long-term saving options through fixed deposits. These account types cater to distinct customer needs while preserving market liquidity.
Lending Operations: Banks use the money they collect from people’s savings to lend out different types of loans, such as personal loans, house mortgages, and business loans. They earn income by charging more on these loaned funds than what they pay depositors due to the difference in interest rates while ensuring that they keep a certain amount as per legal rules.
Intermediary Function: These banks effectively channel public savings into productive investments. They evaluate credit risks, distribute funds, and support key economic sectors like agriculture and small businesses.
Extended Services: Modern commercial banks have expanded beyond traditional functions. They now offer digital payments, forex services, and investment management. Their reach extends to rural and semi-urban regions, promoting financial inclusion nationwide.
Thus, these institutions form a cornerstone of India’s financial infrastructure, fostering economic development while serving both retail and corporate clients.
A Historical Perspective: Evolution of Commercial Banks in India
India’s banking sector has transformed significantly since independence in 1947, starting with the Banking Regulation Act in 1949. A landmark came in 1969 when 14 major banks were nationalized to expand access to rural and underserved areas. Economic reforms in 1991 opened the sector to private and foreign banks, fostering competition and innovation.
Post-2000, banks merged for greater strength and adherence to international norms like Basel guidelines. Today, the sector is digitally driven, focusing on mobile and fintech partnerships to enhance accessibility. The Reserve Bank of India oversees these changes, ensuring security while promoting inclusive banking for all.
Types of Commercial Banks in India
1. Public Sector Banks (PSBs)
Public Sector Banks are majority-owned by the Government of India, focusing on financial inclusion and providing essential banking services across urban and rural areas. Examples include SBI and PNB.
2. Private Sector Banks
Private Sector Banks are owned by private entities, emphasizing profitability and customer service. They include old banks like City Union Bank and new entrants like HDFC Bank and ICICI Bank.
3. Foreign Banks
Foreign Banks operate branches in India but are headquartered abroad. They primarily serve multinational corporations and affluent individuals, offering specialized services. Notable examples include HSBC and Citibank.
4. Regional Rural Banks (RRBs)
Regional Rural Banks aim to provide banking services in rural areas, promoting financial inclusion. Sponsored by commercial banks, they serve specific regions with tailored products. Examples include Prathama Bank.
5. Payment Banks
Payment Banks focus on providing basic banking services like savings accounts and remittances without offering loans or credit cards. Examples include Paytm Payments Bank and Airtel Payments Bank.
List of commercial banks in India
State Bank of India ( Largest commercial bank in India )
| Attribute | Value |
| Headquarters | Mumbai, Maharashtra |
| Government Shareholding | 57.49% |
| Total Assets | ₹6,733,778 crore (US$810 billion) |
Nationalized (Public Sector) Banks
| Bank Name | Headquarters | Government Shareholding | Total Assets |
| Bank of Baroda | Vadodara, Gujarat | 63.97% | ₹1,654,779 crore (US$200 billion) |
| Bank of India | Mumbai, Maharashtra | 81.41% | ₹815,555.61 crore (US$98 billion) |
| Bank of Maharashtra | Pune, Maharashtra | 90.97% | ₹184,082 crore (US$22 billion) |
| Canara Bank | Bengaluru, Karnataka | 62.93% | ₹1,535,017 crore (US$180 billion) |
| Central Bank of India | Mumbai, Maharashtra | 93.08% | ₹369,214.99 crore (US$44 billion) |
| Indian Bank | Chennai, Tamil Nadu | 79.86% | ₹710,500.73 crore (US$85 billion) |
| Indian Overseas Bank | Chennai, Tamil Nadu | 96.38% | ₹274,000.35 crore (US$33 billion) |
| Punjab National Bank | Dwarka, NCT of Delhi | 73.15% | ₹1,561,835.01 crore (US$190 billion) |
| Union Bank of India | Mumbai, Maharashtra | 83.49% | ₹1,391,957.62 crore (US$170 billion) |
| Punjab & Sind Bank | New Delhi, NCT of Delhi | 97.07% | ₹121,067.55 crore (US$15 billion) |
| UCO Bank | Kolkata, West Bengal | 95.39% | ₹253,336.1092 crore (US$30 billion) |
Regular Private Sector Banks
| Bank Name | Headquarters | Total Assets |
| Axis Bank Ltd. | Mumbai, Maharashtra | ₹1,518,238 crore (US$180 billion) |
| Bandhan Bank Ltd. | Kolkata, West Bengal | ₹305,400 crore (US$37 billion) |
| CSB Bank Limited | Thrissur, Kerala | ₹23,337 crore (US$2.8 billion) |
| City Union Bank Ltd. | Kumbakonam, Tamil Nadu | ₹53,311 crore (US$6.4 billion) |
| DCB Bank Ltd. | Mumbai, Maharashtra | ₹39,602 crore (US$4.7 billion) |
| Dhanlaxmi Bank Ltd. | Thrissur, Kerala | ₹13,096 crore (US$1.6 billion) |
| Federal Bank Ltd. | Kochi, Kerala | ₹204,966 crore (US$25 billion) |
| HDFC Bank Ltd. | Mumbai, Maharashtra | ₹4,030,194 crore (US$480 billion) |
| ICICI Bank Ltd. | Mumbai, Maharashtra | ₹2,364,063 crore (US$280 billion) |
| IndusInd Bank Ltd. | Mumbai, Maharashtra | ₹515,094 crore (US$62 billion) |
| IDFC FIRST Bank Limited | Mumbai, Maharashtra | ₹163,071 crore (US$20 billion) |
| Jammu & Kashmir Bank Ltd. | Srinagar, Jammu and Kashmir | ₹82,018 crore (US$9.8 billion) |
| Karnataka Bank Ltd. | Mangaluru, Karnataka | ₹85,580 crore (US$10 billion) |
| Karur Vysya Bank Ltd. | Karur, Tamil Nadu | ₹74,623 crore (US$8.9 billion) |
| Kotak Mahindra Bank Ltd. | Mumbai, Maharashtra | ₹767,667 crore (US$92 billion) |
| Nainital Bank Ltd. | Nainital, Uttarakhand | ₹8,438 crore (US$1.0 billion) |
| RBL Bank Ltd. | Mumbai, Maharashtra | ₹138,403 crore (US$17 billion) |
| South Indian Bank Ltd. | Thrissur, Kerala | ₹94,149 crore (US$11 billion) |
| Tamilnad Mercantile Bank Ltd. | Thoothukkudi, Tamil Nadu | ₹42,758 crore (US$5.1 billion) |
| YES Bank Ltd. | Mumbai, Maharashtra | ₹405,492.99 crore (US$49 billion) |
| IDBI Bank Limited | Mumbai, Maharashtra | ₹298,652 crore (US$36 billion) |
Local Area Banks (LABs)
| Bank Name | Headquarters |
| Coastal Local Area Bank Ltd. | Vijayawada, Andhra Pradesh |
| Krishna Bhima Samruddhi LAB Ltd. | Mahabubnagar, Telangana |
Small Finance Banks (SFBs)
| Bank Name | Headquarters |
| Au Small Finance Bank Ltd. | Jaipur, Rajasthan |
| Capital Small Finance Bank Ltd. | Jalandhar, Punjab |
| Equitas Small Finance Bank Ltd. | Chennai, Tamil Nadu |
| ESAF Small Finance Bank Ltd. | Thrissur, Kerala |
| Suryoday Small Finance Bank Ltd. | Navi Mumbai, Maharashtra |
| Ujjivan Small Finance Bank Ltd. | Bengaluru, Karnataka |
| Utkarsh Small Finance Bank Ltd. | Varanasi, Uttar Pradesh |
| North East Small Finance Bank Ltd. | Guwahati, Assam |
| Jana Small Finance Bank Ltd. | Bengaluru, Karnataka |
| Shivalik Small Finance Bank Ltd. | New Delhi, Delhi |
| Unity Small Finance Bank Ltd. | New Delhi, Delhi |
Payments Banks (PBs)
| Bank Name | Headquarters |
| Airtel Payments Bank Ltd. | New Delhi, Delhi |
| India Post Payments Bank Ltd. | New Delhi, Delhi |
| FINO Payments Bank Ltd. | Navi Mumbai, Maharashtra |
| Paytm Payments Bank Ltd. | Noida, Uttar Pradesh |
| Jio Payments Bank Ltd. | Mumbai, Maharashtra |
| NSDL Payments Bank Limited | Mumbai, Maharashtra |
Rural banks
| Bank Name | Established | Headquarters | Branches | Sponsor Bank |
| Andhra Pradesh Grameena Vikas Bank | 2006 | Warangal, Telangana | 755 | State Bank of India |
| Andhra Pragathi Grameena Bank | 2006 | Kadapa, Andhra Pradesh | 552 | Canara Bank |
| Chaitanya Godavari Gramin Bank | 2006 | Guntur, Andhra Pradesh | 219 | Union Bank of India |
| Saptagiri Gramin Bank | 2006 | Chittoor, Andhra Pradesh | 220 | Indian Bank |
| Arunachal Pradesh Rural Bank | 1983 | Itanagar, Arunachal Pradesh | 30 | State Bank of India |
| Assam Gramin Vikash Bank | 2006 | Guwahati, Assam | 474 | Punjab National Bank |
| Dakshin Bihar Gramin Bank | 2019 | Patna, Bihar | 1078 | Punjab National Bank |
| Uttar Bihar Gramin Bank | 2008 | Muzaffarpur, Bihar | 1032 | Central Bank of India |
| Chhattisgarh Rajya Gramin Bank | 2013 | Raipur, Chhattisgarh | 625 | State Bank of India |
| Baroda Gujarat Gramin Bank | 2019 | Vadodara, Gujarat | 489 | Bank of Baroda |
| Saurashtra Gramin Bank | 1978 | Rajkot, Gujarat | 259 | State Bank of India |
| Sarva Haryana Gramin Bank | 2013 | Rohtak, Haryana | 542 | Punjab National Bank |
| Himachal Pradesh Gramin Bank | 2013 | Mandi, Himachal Pradesh | 265 | Punjab National Bank |
| Ellaquai Dehati Bank | 1979 | Srinagar, Jammu and Kashmir | 116 | State Bank of India |
| Jammu and Kashmir Grameen Bank | 2009 | Jammu, Jammu and Kashmir | 217 | Jammu & Kashmir Bank |
| Jharkhand Rajya Gramin Bank | 2019 | Ranchi, Jharkhand | 443 | State Bank of India |
| Karnataka Gramin Bank | 2019 | Ballari, Karnataka | 1142 | Canara Bank |
| Karnataka Vikas Grameena Bank | 2005 | Dharwad, Karnataka | 633 | Canara Bank |
| Kerala Gramin Bank | 2013 | Malappuram, Kerala | 634 | Canara Bank |
| Madhya Pradesh Gramin Bank | 2019 | Indore, Madhya Pradesh | 866 | Bank of India |
Conclusion
India’s commercial banks, tracing back their origins to the 18th century underwent a significant transformation in 1969 when it nationalized major institutions for rural expansion leading eventually to multifaceted banking systems featuring PSU Banks like SBI, Private entities like HDFC and ICICI with specialized niche segments.
21st-century tech innovations, especially mobile and digital platforms reinvigorated this industry via accessibility enhancement and efficiency boosts. Fintech partnerships further enrich the robust financial network making a vital pillar for India’s economic growth along with promoting widespread Financial Inclusion.
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