The government of India has nationalized 14 major banks on July 19, 1969 which had deposits of more than Rs 50 Crore and Six more Banks were nationalized on April 15, 1980 which had deposits of Rs. 200 Crore. After nationalization, government had acquired full ownership over these banks. These banks are now controlled and owned by government of India. Name of Banks which were nationalized in 1969 are as follows: - Punjab National Bank Canara Bank Dena Bank Bank of Baroda United Bank of India Bank of Maharashtra Syndicate Bank Union Bank Central Bank United Commercial Bank Bank of India Indian Overseas Bank Indian Bank Allahabad Bank Name of Banks which were nationalized in 1980 are as follows:- Oriental Bank of Commerce Corporation Bank Andhra Bank Punjab & Sindh Bank Vijaya Bank New Bank of India After the merger of New Bank of India with Punjab National Bank in 1993, now the number of nationalized banks has been reduced to 19. =Objectives of Nationalization of Banks were as follows:- To raise public confidence in banking system To mobilize savings from the rural and urban areas in terms of bank deposits. To Expand banking facilities in rural and sub-urban areas. To give more credit to the priority sectors, like agriculture, small industries and traders. To ensure enough development funds for the planned growth of the country. To decentralize economic power. It is a step to break the control of big industrialists upon the banking system. It reduces regional inequalities and helps the poor. = What is Commercial Bank? – Functions of Commercial Banks Commercial Banks refer to both scheduled and non- scheduled commercial banks which are regulated under Banking Regulation Act, 1949. Bank Offices comprise of branches doing banking business (i.e. accepting deposit and/or offering credit to their customers) and administrative offices. 1. Scheduled Commercial Banks Scheduled Commercial Banks are as follows : State Bank of India and its Associates (Public Sector Bank) Nationalised Banks (Public Sector Banks) Foreign Banks Regional Rural Banks Other Scheduled Commercial Banks (Private Sector Banks) 2. Non-Scheduled Commercial Banks Functions of the Commercial Banks Primary Functions of Commercial Banks Secondary Functions of Commercial Banks 1. Agency Functions 2. General Utility Functions Primary Functions of Commercial Banks The primary functions of the commercial banks include the following: 1. Accepting Deposits The bank collects deposits from the public. These deposits can be of different types, such as :- Saving Deposits Current Deposits Fixed Deposits Recurring Deposits: Recurring Deposits are a kind of Term Deposits offered by banks in India in which you have to deposit a fixed amount every month into their Recurring Deposit account and earn interest at the rate applicable to Fixed Deposits. It is similar to making FDs of a certain amount in monthly installments, for example Rs 2,000 every month. 2. Granting of Loans and Advances The bank advances loans to the business community and other members of the public. The rate charged is higher than what it pays on deposits. The types of bank loans and advances are as follows :- Loans Overdraft: Overdraft facility is a credit given to an individual against his or her assets as collateral with banks. As collateral, you can offer you house, insurance policies, bank fixed deposits, shares and bonds, etc to banks. However, interest rates charged and overdraft sanctioned by banks vary on each of the collateral. Cash Credits: This account is the primary method in which Banks lend money against the security of commodities and debt. It runs like a current account except that the money that can be withdrawn from this account is not restricted to the amount deposited in the account. Instead, the account holder is permitted to withdraw a certain sum called “limit” or “credit facility” in excess of the amount deposited in the account. Discounting of bill of exchange: A bill of exchange is an order by the creditor (usually the exporter) to the debtor (the buyer) to pay a debt at a certain date. If the drawer of the bill does not want to wait till the due date of the bill and is in need of money, he may sell his bill to a bank at a certain rate of discount. The bill will be endorsed by the drawer with a signed and dated order to pay the bank. The bank will become the holder and the owner of the bill. After getting the bill, the bank will pay cash to the drawer equal to the face value less interest or discount at an agreed rate for the number of days it has to run. This process is known as discounting of a bill of exchange. Secondary Functions of Commercial Banks The bank performs a number of secondary functions, also called as non-banking functions. These functions are as follows: 1. Agency Functions The bank acts as an agent of its customers. The bank performs a number of agency functions which includes:- Collection of Cheques , Interest etc on behalf of their customer, Purchase and sale of securities, Trustee and executer, Purchase and sale of foreign exchange, letter of references etc. Transfer of Funds Periodic Payments & Collections Portfolio Management Periodic Collections Representation of clients to deal with other banks and institutions. 2. General Utility Functions The bank also performs general utility functions and these are as follows:- Underwriting of Shares Locker Facility Dealing in Foreign Exchange Issue of Drafts, Letter of Credits, etc. Social Welfare Programmes etc Issuing of gift cheques, Merchant banking services etc
Posted on: Thu, 18 Dec 2014 06:39:01 +0000