1) Commercial Bank -
A bank is a Financial institution engaged in Banking Business. Bank is a Financial Intermediatory. It deals in money and credit. It deals with other peoples money. Bank collects savings of some people and gives the money those who are in need of it. Thus a bank is a reservoir of money. Commercial Banks are the most common and important type of banking institutions. Commercial banks are profit-making organizations that accepts deposits and use these funds to make loans. Commercial banks receives deposits in the form of fixed deposit, saving bank account and current account. Commercial Banks grant Loans generally for short periods, in the form of cash credit, overdraft and ordinary loans. Commercial Banks are playing the important role in the modern economic organization.
2) Classification of Commercial Banks -
Commercial Banks may be classified into following categories -
(i) Scheduled Commercial Banks and Non-Scheduled Commercial Banks
(ii) Licensed Commercial Bank and Non-Licensed Commercial Bank
(iii) Public Sector Banks and Private Sector Banks
(iv) Indian Banks and Foreign Banks
(i) Scheduled Commercial Banks and Non-Scheduled Commercial Banks:
Scheduled Commercial Banks -
Scheduled Commercial Banks are the banks which have been included in the Second Scheduled of the Reserve Bank of India Act, 1934 (R.B.I). According to Section 42(6) of Reserve Bank of India Act 1934, the Banks dealing with banking business in India and full\fing the terms and conditions provided in the said Act would be included second Scheduled of Reserve Bank of India Act, 1934.
Scheduled Commercial banks may remit the funds by draft, etc. through the offices of the Reserve Bank and its agencies free of cost or concessional rates. The Reserve Ban deals with sale and purchase of Promissory Notes and Bill of Exchange etc. through scheduled Bank only. Reserve Bank deals with the sale and purchase of foreign currency through Scheduled Banks only. R.B.I grants loan on security to the Scheduled Banks only up to a period of 90 days. Reserve Bank of India may borrow money from Scheduled Banks only for a maximum period of 1 Month.
Non- Scheduled Commercial Banks-
Non-Scheduled Commercial banks are the Banks which have not been included in Second Scheduled of the Reserve Bank of India Act, 1934 due to non-fulfillment of requirements mentioned under Section 42(6) of the said Act.
(ii) Licensed Commercial Banks and Non-Licensed Commercial Banks:
According to Section 22(1) of the Banking Regulation Act, 1949 No one Banking Company can Start or deal with banking Business without Prior permission of Reserve Bank of India.
Licensed Commercial Banks-
Reserve Bank issues the Licence to the Bank. It may impose suitable and appropriate conditions at the time issuing the License. If concerning bank fulfills such conditions, The Reserve Bank issues the license to the bank. The bank which is granted a license by Reserve Bank of India is called Licensed Commercial Bank.
Non- Licensed Commercial Banks -
Under Section 22 of the Banking Regulation Act 1949, The Banks which do not obtain the License from Reserve Bank of India are called Non-Licensed Commercial Banks.
(iii) Public Sector Banks and Private Sector Banks :
Commercial Banks may also Classified into Public Sector Banks and Private Sector Banks -
Public Sector Banks -
Public Sector Banks have an important place in Economic Condition of the country. These are Banks where majority stake is held by the Govt. of India or Reserve Bank of India. In 2012 the Largest Public Sector Bank was the State Bank of India. This consist of 14 banks which are nationalized in the year 1969 and six banks which are nationalized in 1980.
Private Sector Banks -
Private Sector Banks are banks that the majority of share capital is held by Private Individuals. In private Sector, Small Scheduled Commercial Banks and newly established Banks with a network of 8,965 branches are operating. To encourage Competitive efficiency, the setting up new private Bank is now encouraged.
(iv) Indian Banks and Foreign Banks:
The Commercial banks may be further classified in Indian Banks and Foreign Banks -
Indian Banks have their registered offices in India, on the other hand, foreign Banks are registered and have their headquarters in foreign Country but operates their branches in India. Apart from the financing of foreign trade, these banks have performed all functions of Commercial Banks and they have an advantage over Indian banks because of their vast resources and superior management. Till September 2010 there were 34 foreign banks in India.
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