Commercial Banks in India: Types and Importance

A Commercial Bank is an institution that handles people’s money operations like deposits and withdrawals. It gives loans for investments and other related activities. The main jobs are lending and borrowing money. They help a country by making it easy to move funds, provide banking services, and support the economy.

Evolution of commercial banks in India

Commercial banks in India have evolved over many years, showing how economic rules changed along with bank laws and new technology inventions. Now let’s explore this journey for Indian commercial banks.

Pre-independence era (pre-1947):

Modern banking started in India during the 18th century when European companies opened up their own banks for business purposes. Two early examples are The Bank of Hindustan from 1770 and the General Bank of India, which was established later on in 1786 – both pioneers within this field at that time in our subcontinent.

The State Bank of India (SBI) started as the “Bank of Calcutta” back in 1806. During that time it united with other banks: ‘The Bank of Bombay’ and ‘Bank of Madras’, becoming the Imperial Bank of India by 1921. Finally, SBI emerged from this institution in 1955.

Post-independence and nationalization (1947-1969):

After becoming independent in 1947, India saw a chain of banking reforms aimed at boosting its economy’s growth. In the year 1949, The Banking Regulation Act was passed that set rules for bank operations.

To achieve specific social and economic goals like giving more credit to key areas such as agriculture and small industries in 1969, India nationalized 14 major banks by the government to promote these objectives effectively.

Liberalization and technological advancements (1991 onward):

With economic liberalization in 1991, the government brought reforms that encouraged healthy competition and efficiency among financial institutions.

The arrival of private as well as foreign banks marked a new era where banking was revamped with innovation at its core. Technological advancements also changed how we operate in the world of finance leading to online services taking over traditional methods for better ease.

Consolidation and regulatory changes (2000s onwards):

In the year 2000s, there was a popular trend among banks where they merged or took over other institutions in order to improve their effectiveness by growing bigger as one entity.

The Reserve Bank Of India (RBI), introduced specific rules named Basel Regulations with the purpose of making our country’s banking system more robust and strong from within.

Current landscape (2020s onward):

Digital banks, mobile services for transactions, and partnerships between tech companies in the finance industry are now a common feature across the business world’s monetary sphere.

While focusing on keeping things stable from a macroeconomic perspective along with fostering equal access to banking resources through initiatives of financial inclusion;

Reserve Bank Of India (RBI) also keeps an eye out for emerging threats like potential cybersecurity risks that could compromise customers’ data or accounts and ensures countermeasures are in place.

Types of commercial banks in India

There are various types of commercial banks in India, each one offering specific services and catering to unique aspects of the nation’s economy. These are the types of commercial banks in India:

Public sector banks

Public sector banks, like the State Bank of India or Punjab National Bank for example, are mostly owned by the government which makes them an important part of carrying out official plans on money matters such as making sure everyone can access banking services easily (financial inclusion) and giving special attention to certain areas that need more financial help.

Bank	Headquarter
State Bank of India	Mumbai
Bank of Baroda	Vadodara
Punjab National Bank	New Delhi
Union Bank of India	Mumbai
Indian Overseas Bank	Chennai
Canara Bank	Bengaluru
Indian Bank	Chennai
UCO Bank	Kolkata
Bank of India	Mumbai
Central Bank of India	Mumbai
Bank of Maharashtra	Pune
Punjab & Sind Bank	New Delhi

Private sector banks

Private banks are owned by individual parties or entities who manage these financial establishments with an emphasis on profits while maintaining a reputation for being efficient as well as innovative within their industry – examples like ICICI Bank, HDFC Bank, and AXIS Bank come to mind.

Bank name	Headquarter
HDFC Bank	Mumbai
ICICI Bank	Mumbai
Kotak Mahindra	Mumbai
Axis Bank	Mumbai
IndusInd Bank	Pune
IDBI Bank	Mumbai
IDFC First Bank	Mumbai
Yes Bank	Mumbai
AU Small Finance Bank	Jaipur
Bandhan Bank	Kolkata
Federal Bank	Aluva
RBL Bank	Mumbai
Jammu & Kashmir Bank	Srinagar
Karur Vysya Bank	Karur
City Union Bank	Kumbakonam
Karnataka Bank	Mangaluru
Tamilnad Mercantile Bank	Thoothukudi
CSB Bank	Thrissur
South Indian Bank	Thrissur
DCB Bank	Mumbai
Dhanlaxmi Bank	Thrissur
Lakshmi Vilas Bank	Chennai

Regional rural banks

Regional Rural Banks serve rural and semi-urban areas, offering tailored financial solutions and community-focused services to boost local economies.

Name of the Regional Rural Bank	Sponsor Bank	State
Andhra Pragathi Grameena Bank	Canara Bank	Andhra Pradesh
Chaitanya Godavari Grameena Bank	Union Bank of India	Andhra Pradesh
Saptagiri Grameena Bank	Indian Bank	Andhra Pradesh
Arunachal Pradesh Rural Bank	State Bank of India	Arunachal Pradesh
Assam Gramin Vikash Bank	Punjab National Bank	Assam
Dakshin Bihar Gramin Bank	Punjab National Bank	Bihar
Uttar Bihar Gramin Bank	Central Bank of India	Bihar
Chhattisgarh Rajya Gramin Bank	State Bank of India	Chhattisgarh
Baroda Gujarat Gramin Bank	Bank of Baroda	Gujarat
Saurashtra Gramin Bank	State Bank of India	Gujarat
Sarva Haryana Gramin Bank	Punjab National Bank	Haryana
Himachal Pradesh Gramin Bank	Punjab National Bank	Himachal Pradesh
Ellaquai Dehati Bank	State Bank of India	Jammu & Kashmir
J&K Grameen Bank	J&K Bank Ltd.	Jammu & Kashmir
Jharkhand Rajya Gramin Bank	State Bank of India	Jharkhand
Karnataka Gramin Bank	Canara Bank	Karnataka
Karnataka Vikas Grameena Bank	Canara Bank	Karnataka
Kerala Gramin Bank	Canara Bank	Kerala
Madhya Pradesh Gramin Bank	Bank of India	Madhya Pradesh
Madhyanchal Gramin Bank	State Bank of India	Madhya Pradesh
Maharashtra Gramin Bank	Bank of Maharashtra	Maharashtra
Vidharbha Konkan Gramin Bank	Bank of India	Maharashtra
Manipur Rural Bank	Punjab National Bank	Manipur
Meghalaya Rural Bank	State Bank of India	Meghalaya
Mizoram Rural Bank	State Bank of India	Mizoram
Nagaland Rural Bank	State Bank of India	Nagaland
Odisha Gramya Bank	Indian Overseas Bank	Odisha
Utkal Grameen Bank	State Bank of India	Odisha
Puduvai Bharthiar Grama Bank	Indian Bank	Puducherry
Punjab Gramin Bank	Punjab National Bank	Punjab
Baroda Rajasthan Kshetriya Gramin Bank	Bank of Baroda	Rajasthan
Rajasthan Marudhara Gramin Bank	State Bank of India	Rajasthan
Tamil Nadu Grama Bank	Indian Bank	Tamil Nadu
Andhra Pradesh Grameena Vikas Bank	State Bank of India	Telangana
Telangana Grameena Bank	State Bank of India	Telangana
Tripura Gramin Bank	Punjab National Bank	Tripura
Aryavart Bank	Bank of India	Uttar Pradesh
Baroda UP Bank	Bank of Baroda	Uttar Pradesh
Prathama UP Gramin Bank	Punjab National Bank	Uttar Pradesh
Uttarakhand Gramin Bank	State Bank of India	Uttarakhand
Bangiya Gramin Vikash Bank	Punjab National Bank	West Bengal
Paschim Banga Gramin Bank	UCO Bank	West Bengal
Uttar Banga Kshetriya Gramin Bank	Central Bank of India	West Bengal

Foreign banks

Foreign banks, located overseas, run operations in India with proper legal permissions. Some examples are Standard Chartered, CitiBank, and HSBC.

Bank name	Headquarter
HDFC Bank	Mumbai
ICICI Bank	Mumbai
Kotak Mahindra	Mumbai
Axis Bank	Mumbai
IndusInd Bank	Pune
IDBI Bank	Mumbai
IDFC First Bank	Mumbai
Yes Bank	Mumbai
AU Small Finance Bank	Jaipur
Bandhan Bank	Kolkata
Federal Bank	Aluva
RBL Bank	Mumbai
Jammu & Kashmir Bank	Srinagar
Karur Vysya Bank	Karur
City Union Bank	Kumbakonam
Karnataka Bank	Mangaluru
Tamilnad Mercantile Bank	Thoothukudi
CSB Bank	Thrissur
South Indian Bank	Thrissur
DCB Bank	Mumbai
Dhanlaxmi Bank	Thrissur
Lakshmi Vilas Bank	Chennai

Cooperative banks

Cooperative banks work with member-focused principles, mainly providing them with credit and banking services. They are divided into two types: Urban cooperatives (UCB) for cities and Rural Cooperatives (RCB) for villages. These institutions greatly help boost local economies by supporting nearby businesses.

Name of the Bank	Address
The Andaman and Nicobar State Co-operative Bank Ltd.	Andaman and Nicobar Isls.
The Andhra Pradesh State Co-operative Bank Ltd.	Andhra Pradesh
The Arunachal Pradesh State co-operative Apex Bank Ltd.	Arunachal Pradesh
The Assam Co-operative Apex Bank Ltd.	Assam
The Bihar State Co-operative Bank Ltd	Bihar
The Chandigarh State Co-operative Bank Ltd.	Chandigarh
The Chhattisgarh Rajya Sahakari Bank Maryadit	Chhattisgarh
The Delhi State Co-operative Bank Ltd.	Delhi
The Goa State Co-operative Bank Ltd	Goa
Gujarat State Co-operative Bank Ltd.	Gujarat
The Haryana State Co-operative Apex Bank Ltd.	Chandigarh
The Himachal Pradesh State Co-operative Bank Ltd.	Himachal Pradesh
The Jammu and Kashmir State Co-operative Bank Ltd.	Jammu & Kashmir
Jharkhand State Co-operative Bank Ltd.	Jharkhand
The Karnataka State Co-operative Apex Bank Ltd.	Karnataka
The Kerala State Co-operative Bank Ltd.	Kerala
The Madhya Pradesh Rajya Sahakari Bank Maryadit	Madhya Pradesh
The Maharashtra State Co-operative Bank Ltd.	Maharashtra
The Manipur State Co-operative Bank Ltd.	Manipur
The Meghalaya Co-operative Apex Bank Ltd	Meghalaya
The Mizoram Cooperative Apex Bank Ltd.	Mizoram
The Nagaland State Co-operative Bank Ltd.	Nagaland
The Odisha State Co-operative Bank Ltd.	Odisha
The Puducherry State Co-operative Bank Ltd.	Puducherry
The Punjab State Co-operative Bank Ltd.	Punjab
The Rajasthan State Co-operative Bank Ltd.	Rajasthan
The Sikkim State Co-operative Bank Ltd.	Sikkim
The Tamil Nadu State Apex Co-operative Bank Ltd.	Tamil Nadu
The Telangana State Cooperative Apex Bank Ltd.	Telangana
Tripura State Co-operative Bank Ltd.	Tripura
The Uttar Pradesh Co-operative Bank Ltd.	Uttar Pradesh
The Uttarakhand State Co-operative Bank Ltd.	Uttarakhand
The West Bengal State Co-operative Bank Ltd	West Bengal
The Daman and Diu State Co-operative Bank Ltd.*	Daman and Diu

Payment banks

Payment banks are new in the Indian financial world. Mainly dealing with money transfers and payments, they offer a limited range of services compared to regular banks – no loans or credit cards but they can accept deposits and manage transactions for you. Examples include Airtel Payment Bank & Paytm Payment Bank.

Small finance banks

Small finance banks provide financial services to underprivileged groups who aren’t well served by traditional institutions, such as small companies or low-income individuals. Some examples are Equitas SFB and Ujjivan SFB. These organizations focus on developing investment norms and assets tailored specifically for their target audience.

Name of the Bank	Bank Type
ESAF Small Finance Bank	Small Finance Bank
Fino Payments Bank	Payments Bank
Equitas Small Finance Bank	Small Finance Bank
India Post Payment Bank	Payments Banks
Suryoday Small Finance Bank Ltd.	Small Finance Bank
Ujjivan Small Finance Bank	Small Finance Bank
AU Small Finance Bank	Small Finance Bank
Jana Small Finance Bank	Small Finance Bank
Airtel Payments Bank	Payments Banks
NSDL Payments Bank	Payments Banks
Paytm Payments Bank	Payments Banks
Fincare Small Finance Bank	Small Finance Bank
Jio Payments Bank	Payments Banks

Investment norms and asset structure of commercial banks

In India, commercial banks follow certain investment rules set by the Reserve Bank of India (RBI). These guidelines help ensure financial stability while also following regulatory requirements. One way they do this is through investing in government securities for statutory liquidity needs. 

They further diversify their assets with loans and advances to sectors like agriculture, industry, and services. Risk management plays a key role in balancing profitability against risk reduction within the banks’ asset structure.

Functions of commercial banks in India

Commercial Banks in India serve many purposes, from taking people’s cash as deposits to encouraging financial accessibility for all citizens. This helps boost our nation’s growth overall. The main duties that commercial banks perform include:  

Accepting deposits:  Commercial banks offer a secure environment where people can keep their money. They provide different types of deposit options like savings accounts, current accounts, and fixed deposits.

Providing loans and advances: Commercial banks give loans and advances to individuals, businesses, and industries.

Credit creation: When commercial banks lend funds they create new credit – transforming those amounts into bank deposits which adds money to the overall economy’s circulation.

Electronic funds transfer: Commercial banks let you move cash quickly and securely through methods like online banking or mobile apps. Banks provide these services for easy transfers between different bank accounts.

Providing overdraft facilities: Commercial banks also offer overdraft facilities, which let account holders borrow more money than they have in their account – up to a certain limit set by the bank.

Investment in securities: Commercial banks allocate funds into diverse financial products like federal debt instruments (bonds), corporate-issued debts as well as tradable assets that cater to different investors’ portfolios.

Foreign exchange services: Commercial Banks in India participate actively on global fronts by managing overseas transactions like those related to foreign currencies or goods & services trading internationally; they also engage in activities including forex exchanges, and international transfers thereby supporting diverse business requirements seamlessly across borders. 

Financial Inclusion:  Commercial banks contribute towards expanding the reach of essential monetary facilities into unserved or far-flung regions, thereby promoting broader accessibility across all sections of society including those residing outside urban hubs.