Commercial banks form a significant part of the country’s Financial Institution System. Commercial Banks are those profit seeking institutions which accept deposits from general public and advance money to individuals like household, entrepreneurs, businessmen etc. with the prime objective of earning profit in the form of interest, commission etc. The operations of all these banks are regulated by the Reserve Bank of India, which is the central bank and supreme financial authority in India. The main source of income of a commercial bank is the difference between these two rates which they charge to borrowers and pay to depositers. Examples of commercial banks – ICICI Bank, State Bank of India, Axis Bank, and HDFC Bank.
Classification of commercial banks
- Scheduled banks : Banks which have been included in the Second Schedule of RBI Act 1934. They are categorized as follows:
- Public Sector Banks : are those banks in which majority of stake is held by the government. Eg. SBI, PNB, Syndicate Bank, Union Bank of India etc.
- Private Sector Banks : are those banks in which majority of stake is held by private indivisuals. Eg. ICICI Bank, IDBI Bank, HDFC Bank, AXIS Bank etc.
- Foreign Banks : are the banks with Head office outside the country in which they are located. Eg. Citi Bank, Standard Chartered Bank, Bank of Tokyo Ltd. etc.
- Non scheduled commercial banks : Banks which are not included in the Second Schedule of RBI Act 1934.