(Sample Material) IAS PRE GS Online Coaching : Economic & Social Development - Banking System in India

Subject: Economic & Social Development
Topic: Banking System in India

Ques. 1 : Write a short notes on Commercial Bank.

Ans. A commercial bank is a type of financial intermediary. It is a financial intermediary because it mediates between the savers and borrowers. It does so by accepting deposits from the public and lending money to businesses and consumers. Its primary liabilities are deposits and primary assets are Ioan and bonds.

“Commercial bank” has to be distinguished from another type called “investment bank”. Investment banks, assist companies in raising funds in the capital markets (both equity and debt), as well as in providing strategic advisory services for mergers, acquisitions and other types of financial transactions. It is also called merchant bank.

The commercial banking system in, India consists of public sector banks; private sector banks and cooperative banks.

Currently, India has 88 scheduled commercial banks (SCBs) - 26 public sector banks (that is with the Government of India holding majority stake) that include SBI and its associates and the IDBI Bank, 31 private banks and 38 foreign banks. Public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.

Public Sector Banks

They are owned by the Government- either totally or as a majority stake holder.

• State Bank of India and its five associate banks called the State Bank group
• 19 nationalised banks
• Regional Rural Banks mainly sponsored by Public Sector Banks

Private Sector Banks include domestic and foreign banks

Co-operative Banks are another class of banks and are not considered as commercial banks as they have social objectives and profit is not the motive. Reserve Bank of India lays down the norms for banking operations and has the final supervising power.