Commercial banks are banks that take money from people and businesses and give it back as loans or credit. They are businesses that aim to make money for the people who own shares in them.
Commercial banks can also be called retail banks or universal banks because they offer many different services to regular customers. These services include helping with payments, investments, and exchanging foreign money. Some of these services have been digitalized like Bandhan Bank mobile banking can take care of most of these actions without human intervention. They also do important things like taking deposits from people and giving out loans. Commercial banks are controlled by the main bank of a country and must follow certain rules to make sure the banking system is safe and strong.
The main/primary function of commercial bank are:
Deposits
Taking money from customers and keeping it in a bank account. Commercial banks take money from people and businesses, like checking accounts, savings accounts, and time deposits like certificates of deposit (CDs).
Loans
Giving money to people so they can buy things or pay for things they need.Banks give money to people and businesses for different reasons, like buying a house, starting a business, or supporting a project.
Granting Checks
Banks give customers a book of checks that they can use to pay for things. Clearing checks means when banks process the payment from a check and make sure the money is transferred from the check-writer’s account to the recipient’s account.
Keeping track of financial transactions
Banks keep track of their customers’ accounts, like their transaction history, how much money they have, and how much interest they have earned.
Offering a service to keep assets safe.
Banks have special boxes called lockers that they offer to can keep our valuable and important papers secure for us.
Apart from these the commercial bank of today have certain secondary functions too like:
Selling insurance products
Banks now offer insurance products like life insurance and property insurance, to match what customers want.
Giving out credit and debit cards
Credit and debit cards are very common in banking nowadays, but they were not always there. In the old days, banks mostly gave out checks and traveller’s checks as a way to pay for things.
Helping with payments
With the introduction of electronic payments, banks have improved their payment services to include online bill payment, mobile banking, and sending money to others.
Foreign Exchange
Commercial banks have always provided services to exchange different currencies. However, with more people trading and traveling internationally, there is now a greater need for these services.
Managing investments.
It involves making decisions and taking actions to make sure that the investments are well taken care of and grow in value. This may include buying or selling different types of assets, like stocks or bonds, and monitoring their performance. The goal of managing investments is to maximize the return on investment and achieve financial goals.
Advisory Services:
Banks now provide more help to customers with their money, such as planning for retirement, giving advice on investments, and assisting with managing debt.
The top 5 commercial banks in India are:
- HDFC Bank Ltd
- State Bank of India (SBI)
- ICICI Bank Ltd
- Kotak Mahindra Bank Ltd
- Axis Bank Ltd
Except for SBI, all the other banks are privately owned. This means that private banks are more favoured for corporate banking because they focus on the needs of the customers and provide personalized care to each customer. However, public banks are also making changes to keep up with the competition.
Private Banks are highly focused on customer service and care. It makes them more preferable to their customers. Federal Bank customer care number is one such example, where they provide itemized solution for their customers over a call.
Private banks and public banks are very different in who owns them, how they are run, and what they do. Private banks are owned by regular people or businesses, while public banks are owned by the government. Private banks can make their own plans for money and offer services that are focused on what the customer needs.
Ownership:
Public banks have majority of their shares with the government whereas the Private banks are owned by the customers of the banks.
Number of Banks:
There are 21 private banks and 12 government owned banks.
Reach:
The customer base is high for public banks due to their vast distribution, compare to private bank’s customer base.
Job security:
the public banks have very high job security and even provide for pension after retirement. Job security in private banks completely depends on your job performance but they do not provide pension to employees post-retirement.
Share in Banking Industry:
Public banks occupy 72.9% of the banking industry, and Private banks own 19.8%
Foreign Direct Investment:
Public banks allow 20% where as private banks allow 70% of Foreign Direct Investment.
Trust:
Public banks are more trustworthy as they are backed by the government. Private banks are less trustworthy compared to Private banks.
The 21 Private banks in India as of 2023 are:
| Axis Bank |
| Bandhan Bank |
| CSB Bank |
| City Union |
| DCB Bank |
| Dhanlaxmi Bank |
| Federal Bank |
| HDFC Bank |
| ICICI Bank |
| IDBI Bank |
| IDFC FIRST Bank |
| IndusInd Bank |
| J&K Bank |
| Karnataka Bank |
| Karur Vysya Bank |
| Kotak Mahindra Bank |
| Nainital Bank |
| RBL Bank |
| South Indian Bank |
| Tamilnad Mercantile Bank |
| YES Bank |
The 12 Public sector banks owned by the government are:
- Punjab National Bank (PNB)
- Bank of Baroda (BoB)
- Bank of India (BoI)
- Central Bank of India
- Canara Bank
- Union Bank of India
- Indian Overseas Bank (IOB)
- Punjab and Sind Bank
- Indian Bank
- UCO Bank
- Bank of Maharashtra
- State Bank of India (SBI)
The banking industry in India has reacted positively and supportively to the changes being made in the financial sector. New private banks entering the market and causing competition for public sector banks. The changes made in the financial sector have made India’s financial system more similar to the system used globally. Private sector banks and public sector banks are both important parts of the Indian economy. Private banks offer specialized services to their customers and are owned by individuals or groups of people. On the other hand, public banks reach wider markets and serve a larger number of people.
