EXECUTIVE SUMMARY

EXECUTIVE SUMMARYCommercial banks occupy a dominant place in the money market. They, as a matter of fact, form the largest component in the banking structure of any country. They are the oldest, largest and fastest growing financial institutions in India. They are profit making institutions, dealing in money and credit. Commercial banks play a major role in the growth and development of the country due to the modern organization and functioning, huge funds and wide network all over the country.Thus, they are like a reservoir into which flow the savings, the idle surplus money of households and from which loans are given on interest to businessmen and others who need them for investment or productive uses.

Commercial banks are very important source of institutional credit as they are the major depository of peoples savings. They are very important devices for providing short term credit to trade and commerce. Commercial Banks being repositories of deposits have played significant role in garnering savings of the people particularly after the nationalization. Thus, they have made praiseworthy efforts in pooling the savings.

Rationale of the study

The Rationale of the study can be considered as follows:-

The study includes essential core topics.

It aims at giving a thorough grounding on the subject.

The study is comprehensive.

It helps to improve the research and investigation ability.

It enables to think logically and practically Hypothesis:

The hypothesis being put forth for this study about Commercial banking is that awareness of Commercial banks is 100%, but there are still many people who do not know about the Commercial banks and the amenities provided by them. Commercial banks are coming up with new innovative ideas and schemes for increasing their customer base and fulfilling the needs of the general public.

Research Methodology:

The research methodology is data collection through:-

PRIMARY SOURCES

SECONDARY SOURCES

Primary Sources: Survey by distributing questionnaire to the people taking sample size of 100, Interviews conducted with bankers; accumulating knowledge and help from friends, professors, etc.

Secondary Sources: Gathering data through books, journals, magazines, websites, newspapers, etc.

Expected ContributionExpectations from the study are that it may contribute to the real scenario of commercial banking demand and accordingly the banks can go for new innovative schemes. It will also specify some recommendations and based on that banks can make suitable arrangements in a

Banking, in its crude form, is an age-old phenomenon. It was in existence even in ancient times, too. It is the business of providing financial services to consumers and businesses. They are the single major source of institutional finance in the country.

According to Section 5 (c) of the Banking Regulation Act, 1949 - Banking company means any company which transacts the business of banking in India. Section 5 (b) of the act defines banking as accepting for the purpose of lending or investment of deposits of money fro the public repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise.

Banking services also serve two primary purposes. First, by supplying customers with the basic mediums-of-exchange (cash, checking accounts, and credit cards), banks play a key role in the way goods and services are purchased. Without these familiar methods of payment, goods could only be exchanged by barter (trading one good for another), which is extremely time-consuming and inefficient. Second, by accepting money deposits from savers and then lending the money to borrowers, banks encourage the flow of money to productive use and investments. This in turn allows the economy to grow. Without this flow, savings would sit idle in someones safe or pocket, money would not be available to borrow, people would not be able to purchase cars or houses, and businesses would not be able to build new factories the economy needs to produce more goods and grow. Enabling the flow of money from savers to investors is called financial intermediation, and thus, banking is extremely important to a free market economy.

Origin and Evolution of Indian Banking

Opinions differ as to the origin of the work "Banking". The word "Bank" is said to be of Germanic origin, cognate with the French word "Banque" and the Italian word "Banca", both meaning "bench". It is surmised that the word would have drawn its meaning from the practice of the Jewish money-changers of Lombardy, a district in North Italy, who in the middle ages used to do their business sitting on a bench in the market place. Again, the etymological origin of the word gains further relevance from the derivation of the word "Bankrupt" from the French word "Banque route" and the Italian word "Banca-rotta" meaning "Broken bench" due probably to the then prevalent practice of breaking the bench of the money-changer, when he failed.

Banking is different from money-lending but two terms have in practice been taken to convey the same meaning. Banking has two important functions to perform, one of accepting deposits and other of lending monies and/or investment of funds. It follows from the above that the rates of interest allowed on deposits and charged on advances must be known and reasonable. The money-lender advances money out of his own private wealth hardly accepts deposits and usually charges high rates of interest. More often, the rates of interest relate to the needs of the borrower. Money-lending was practiced in all countries including India, much earlier than the recent type of Banking came on scene. Significance of Banks The importance of a bank to modern economy, so as to enable them to develop, can be stated as follows:

(i) The banks collect the savings of those people who can save and allocate them to those who need it. These savings would have remained idle due to ignorance of the people and due to the fact that they were in scattered and oddly small quantities. But banks collect them and divide them in the portions as required by the different investors.

(ii) Banks preserve the financial resources of the country & it is expected that they allocate them appropriately in the suitable & desirable manner. (iii) They make available the means for sending funds from one place to another and do this in cheap, safe and convenient manner.

economy and essential for financing the developmental process, is governed by banks.

change its currency and credit policy frequently, This is done by RBI, by changing the supply of money with the changing needs of the public.

Although traditionally, the main business of banks is acceptance of deposits and lending, the banks have now spread their wings far and wide into many allied and even unrelated activities.

Structure of Banking System

At present, the organized banking system in India can be broadly divided into three categories:

i) The Central Bank of the country, the Reserve Bank of India

ii) The Commercial Banks

iii) The Cooperative Banks.

The RBI is the apex monetary and banking authority in the country and has the responsibility to control the banking system in India.

Commercial banks play a major role in the growth and development of the country. They mobilize savings and make them available to large and small industrial enterprise and traders for working capital requirements. After 1969, commercial banks are broadly classified into nationalized or public sector banks and private sector banks. The SBI and its associate banks along with another 20 banks are the public sector banks. The private sector banks include Indian scheduled banks which have not been nationalized and branches of foreign banks operating in India. The Regional Rural Banks came into existence since the middle of 1970s with the specific objective of providing credit and deposits facilities to the small and marginal farmers, agricultural labourers and artisans and small entrepreneurs.

Banking in India

Banking in India act as a connected link between the borrowers and lenders of money. The banks main activity should be to do the business of banking which should not be subsidiary to any other business. Thus, a bank should always add the word Bank to its name to enable people to know that it is a bank and is dealing in money.

(From small to large, commercial banking have got u covered,

as In banking there is no such thing as one size fits all )

INTRODUCTION TO COMMERCIAL BANKS:

Commercial banks play a vital role in the economic development of a nation. They are the most important source of institutional credit in the money market as they provide short term loans and advances to its customers. They perform a variety of functions and are the main source of credit which is the main input for trade and business activity. Credit created by commercial banks is a major component of money supply in a modern economy. Modern economies depend on the banking sector for production, exchange and distribution.

A Commercial bank is a type of financial intermediary and a type of bank. Commercial bank has two possible meanings:

a) It is the term used for a normal bank to distinguish it from an investment bank.

b) Commercial banking can also refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses, as opposed to normal individual members of the public (retail banking).

A commercial bank is a profit seeking organization dealing in the other peoples money, in the sense that it accepts deposits of money from the public to keep them in its custody for safety. So also, it deals in credit, i.e., it creates credit by making advances out of the funds received as deposits to needy people. It charges higher rate of interests for the loans sanctioned and offers lower rate of interest for the deposits. The difference between the two is the profit earned by the bank. Thus, a commercial bank functions as a mobiliser of saving in the economy.

The most distinctive feature of a commercial bank is that it accepts deposits called demand deposits from the public which are chequable, i.e., withdrawable by means of cheque. Acceptance of chequable deposits alone, however, does not give it a status of bank. Its another essential function is to make use of these deposits for lending to others.

Commercial banks ordinarily are simple business or commercial concerns which provide various types of financial services to 'customers in return for payments in one form or another, such as interest, discounts, fees, commission, and so on. So, we can say that their objective is to make profits.

A commercial bank is therefore like a reservoir into which flow the savings, the idle surplus money of households and from which loans are given on interest to businessmen and others who need them for investment or productive uses.

Definition:

Economists have defined a Commercial Bank in various ways.

- According to Prof. Crowther, a banker is a dealer in debt, his own and other peoples.

- According to Prof. sayes, Commercial Banks are institutions whose debts usually reffered to as bank deposits are commonly accepted in final settlement of other peoples deposits.

Thus, all these definitions clearly indicate the essential function of a bank namely dealing in money and credit.

FUNCTIONS OF COMMERCIAL BANKS

Commercial banks perform several crucial functions to satisy the needs of the various sectors of the economy, which may be classified into two categories:

(I) Primary functions, and

(II) Secondary functions.(I) Primary banking functions of the commercial banks include:

1. Acceptance of deposits from the

public;

2. Lending of funds;

3. Use of cheque system; and

4. Remittance of funds.1. Acceptance of Deposits from the Public

Accepting deposits is the primary function of a commercial bank. By receiving deposits from the public, commercial banks mobilise savings of the household sector.

Banks generally accept deposits in three types of accounts:

(i) Current Account,

(ii) Savings Account, and

(iii) Fixed Deposits Account.

Deposits in Current Account are withdrawable by the depositors by cheques for any amount to the extent of the balance at their credit, at any time without any prior notice. Deposits of current accounts are, thus, known as Demand deposits. Such accounts are maintained by commercial and industrial firms and businessmen, and the cheque system is the most convenient and very safe mode of payment. No interest is provided for such deposits. In fact bank charge certain commission for providing the facility.

Saving Accounts are maintained for encouraging savings of households. Withdrawals from deposits from savings account are not freely allowed as in the case of current account. There are some restrictions on the amount to be withdrawn at a time and also on the number of withdrawals made during a period. Indian commercial banks have, however, relaxed these rules of savings accounts to a certain extent in recent times. Banks pay a rate of interest on the savings account deposits as prescribed by the central bank. Presently, it is 5 % p.a. A nominal rate of interest is provided for such deposits.

Deposits in Fixed Account are time deposits. In the normal course, deposits cannot be withdrawn before the expiry of the specified time period of the deposits. A premature withdrawal is, however, permitted only at the cost of forfeiture of the interest payable, at least partly. On these deposits commercial banks pay higher rates of interest, and the rate becomes higher with the increase in duration. Longer the time period, higher would be the rate of interest and vice versa.

By creating such varieties of deposits, banks motivate savers and depositors in a variety of ways and encourage savings in the economy. Further, by keeping deposits with banks, depositors money is not secure and remains in safe custody, but it yields interest also. Moreover, banks demaand deposits are in the form of liquid cash, for they serve as money to the business community and, therefore, is called bank money.Lending of funds

Another major function of commercial banks is to extend loans and advances out of the money which comes to them by way of deposits to businessmen and entrepreneurs against approved such as gold or silver bullion, government securities, easily saleable stocks and shares, and marketable goods.

Banks advances to customers may be made in many ways:

(i) Overdrafts,

(ii) Cash Credits, (iii) Discounting Trade Bills,(iv) Money-at-call or very short-term advances,

(v) Term loans,(vi) Consumer Credit,

(vii) Miscellaneous Advances.(i) Overdraft: A commercial bank grants overdraft facility to an account holder by which he is allowed to draw an amount in excess of the balance hels in the account, up to the extent of stipulated limit. Overdrafts are permissible in current account only. Suppose, a customer has Rs. 50,000 in his current account with the bank. Bank grants him overdraft facility up to Rs. 10,000. Then, this customer is entitled to issue cheques upto Rs. 60,000 on his account. Obviously, overdraft facility sanctioned up to Rs.10,000 by the bank in this case is as good as credit granted by the bank to that extent.

(ii) Cash credit: Bank give credit in cash to business firms in industry and trade, against pledge or hypothecation of goods, or personal guarantee given by the borrowers. It is essentially a drawing account against credit sanctioned by the bank and is operated like a current account on which an overdraft is sanctioned. It is the most popular mode of advance in the Indian banking system.

(iii) Discounting trade bill: The banks facilitate trade and commerce by discounting bills of exchange called trade bills. Traders often draw bill of exchange to meet their obligations in business transitions. Such a trade bill is payable in cash on maturity, after a stipulated date. Discounting of bills by the bank amounts to granting of credit to the party concerned till the maturity date of the bill. This method of bank lending is widely adopted for two reasons: (a) such loans are self liquidatory in character; and

(b) these trade bills are rediscountable with the central bank.

(iv) Money at call or very short term advances: Bank also grants loans for a very short period, generally not exceeding 7 days to the borrowers, usually dealers or brokers in stock exchange markets against collateral securities like stock or equity shares, debentures, etc., offered by them. Such advances are repayable immediately at notice hence, they are described as money at call or call money.

(v) Term Loans: Banks give term loans to traders, industrialists and now to agriculturists also against some collateral securities. Term loans are so-called because their maturity period varies between 1 to 10 years. Term loans as such provide intermediate or working capital funds to the borrowers. Sometimes, two or more banks may jointly provide large term loans to the borrower against a common security. Such loans are called participation loans or consortium finance.(vi) Consumer Credit: Banks also grant to households in a limited amount to buy some durable consumer goods such as television sets, refrigerators, etc; or to meet some personal needs like payment of hospital bills, etc. such consumer credit is made in a lump sum and is repayable in installments in a short time. Under the 20-point programme, the scope of consumer credit has been extended to caver expenses on marriage funeral etc; as well.

(vi) Miscellaneous Advances: Among other forms of bank advances there are packing credits given to exporters for a short duration, exports bills purchased/ discounted, import finance - advances against import bills, finance to the self employed, credit to the public sector, credit to the cooperative sector and above all, credit to the weaker sections of the community at concessional rates.

2. Use of cheque system:

It is a unique feature and function of banks that they have introduced the cheque system for the withdrawl of deposits.

There are two types of cheques:

i) the bearer cheque and

ii) the crossed cheque.

A bearer cheque is encashable immediately at the bank by its possessor. Since, it is negotiable, it serves as good as cash on transferability.

A crossed cheque, on the other hand, is one that is crossed by two parallel lines on its face at the left hand corner and such a cheque is not immediately encashable. It has to be deposited only in the payees account. It is not negotiable.

In modern business transactions, the use of cheques to settle debts is found to be much more convenient than the use of cash. Commercial banks, thus, render an important service by providing an inexpensive medium of exchange such as cheques. In fact, a cheque is also considered as the most developed credit instrument.

3. Remittance of Funds:

Commercial banks, on account of their network of branches throughout the country, also provide facilities to remit funds from one place to another for their customers by issuing bank drafts, mail transfers or telegraphic transfers on nominal commission charges. As compared to the postal money orders or other instruments, bank drafts have proved to be a much cheaper mode of transferring money and has helped the business community considerably. (II) Secondary banking functions of the commercial banks are also known as non-banking functions. They perform a multitude of other non-banking functions which may be classified as:

1. Agency Services, and

2. General Utility Services.1. Agency Services

Bankers perform certain functions for & on behalf of their clients, as:

a) To collect or make payments for bills, cheques, promissory notes, interest, dividends, rents; subscriptions, insurance premia, etc. For these services, some charges are usually levied by the banks.

b) To remit funds on behalf of the clients by drafts or mail or telegraphic transfers.

c) To act as executor, trustee and attorney for the customers will.

d) Sometimes, bankers also employ income-tax exporters not only to prepare income-tax returns for their customers but also to help them to get refund of income-tax in appropriate cases.

e) To work as correspondents, agents or representatives of their clients.

Often, bankers obtain passports, travellers tickets, secure passages for their customers, and receive letters on their behalf.

2.General Utility Services

Modern commercial banks usually perform certain general utility services for their community, such as:

a) Letters of credit may be given by the banks at the behest of the importer in favour of the exporter.

b) Bank drafts and travellers cheques are issued in order to provide facilities for transfer of funds from one part of the country to another.

c) Banks may deal in foreign exchange or finance foreign trade by accepting or collecting foreign bills of exchange.

Shares floated by government, public bodies and corporations may be underwritten by banks;

d) Certain banks arrange for safe deposit vaults, so that customers may entrust their securities and valuables to them for safe custody.

e) Banks also compile statistics and business information relating to trade, commerce, and industry. Some banks may publish valuable journals or bulletins containing research on financial, economic and commercial matters. Commercial Banks Play an Important Role in a Modern Economy

1) They constitute the very life-blood of modern trade, commerce & industry, as they provide the necessary funds for their working capital such as to buy raw materials, to pay wages, to incur current business expenses in marketing of goods, etc

2) These banks encourage peoples savings habit through their various savings deposit schemes.

3) They also mobilize idle saving resources from households to business people for productive use.

4) They transmit money from place to place with economy and safety.

5) Their agency services are, no doubt, of immense value to the people at large, as they case their difficulties, save their time & energy &provide them safety & security. NATIONALISATION OF COMMERCIAL BANKS

By the 1960s, the Indian banking industry has become an important tool to facilitate the development of the Indian economy. With effect from July 19, 1969, 14 largest commercial banks were nationalized. A second dose of nationalization of 6 more commercial banks followed in 1980. The stated reason for the nationalization was to give the government more control of credit delivery. With the second dose of nationalization, the GOI controlled around 91% of the banking business of India. After this, until the 1990s the nationalized banks grew at a place of around 4%, closer to the average growth rate of the Indian economy. So, these nationalization of banks was carried out with the aim of removal of control by a few and to bring about a more optimal allocation of bank funds. After nationalization, the credit policy of public sector banks underwent a radical change, with special emphasis being placed on credit to priority sectors including agriculture, small scale industry and programmes for poverty alleviation.

The main objectives of nationalization were as follows:

1. To introduce social banking by directing bank funds at concessional rates to the weaker sections of societ for productive purposes.

2. To prevent monopolies in the banking sector caused due to use of major share of funds by a few private entrepreneurs.

3. To introduce & promote banking facilities in backward areas & reduce regional disparities in branch expansion and growth of banking.

4. To expand the role of Commercial banking in agricultural credit. PERFORMANCE OF COMMERCIAL BANKS IN THE POST -NATIONALIZATION PERIOD

1. Achievements:(a) Lead Bank Scheme: After nationalization, it was felt that banks should be allotted particular districts where they would take the lead in studying the need and scope for banking development. Under the scheme, districts were allotted to the State Bank Group, 14 nationalised banks and 3 private banks. Each bank was assigned the status of lead bank in a particular district. The lead bank had to study and understand the socio-economic condition of the district and undertake surveys for this purpose. Through the surveys the lead bank would collect useful information about the credit needs, development needs and pattern of production and nature of employment in the district. After such informations were gathered, the lead bank would then plan and implement development programmes in the area, with the help of other banks and financial institutions. This scheme was a unique experiment and it helped in branch expansion, deposit mobilization and expansion of priority sector lending.(b) Branch Expansion: After nationalization, there was massive expansion of bank branches, especially in the rural areas. The Lead Ban k scheme played played a major role in this. During the first fifteen years after nationalization, branches expanded at about 2,400 per year. Total number of bank branches has increased from 8262 in 1969 to 67,283 in 2007.

Over 80% of bank offices are located in backward states and in semi-urban areas and rural areas. This, to some extent took care of regional imbalance in the spread of banking.

(c) Deposit Mobilization: As a result of expansion of banking facilities, there was a large increase in deposits. In 1969, deposits amounted to 13% of the GDP, by 2004 this ratio increased 350 times. The increase in rural deposits as production of total has been from 3% to 15%. Bank deposits now constitute about 40% of financil assets held by households.

(d)Bank Lending: Traditionally, banks in India had concentrated in providing working capital to industry and trade. Only after nationalization, loans are being given for agricultural operations. Bank credit stood at Rs. 3, 399 crore in 1969. In the next 3 decades, his increased by about 200 times. In 1968, large and medium industries accounted for about 200 times. In 1968, large and medium industries accounted for about 60% of aggregate bank credit. Agriculture accounted for about 2%. This changed drastically after nationalization and bank credit to priority sector, including agriculture was close to 40% of total credit.

(e) Directed Credit Programmes: A major objective of bank nationalization was to make bank credit available the priority sector, comprising of agriculture, small scale industries, exports, transporters and small traders at concessional rates. This system of directed bank credit was expected to contribute to contribute to economic growth as well as social justice. Success was achieved in this direction after nationalization.

2.Shortcomings:(a) Inadequate Banking facilities: Despite achievements in branch expansion, banking facilities continue to remain inadequate to meet the needs of the large population. The national average population per bank branch is still very high at about 12000. This ratio is higher than the national average in some states like Bihar, Orissa, West Bengal and Madhya Pradesh. Banking facilities are still not equitably distributed among all states.(b) Inadequate Deposit Mobilization: Banking habits of people in India are still not very good. A large part of the population still prefer to carry out transactions in cash and are not covered by the banking system . Therefore, there is a large scope for further increasing deposits and bring in more money in the banking system.(c) Inadequate lending: Even though there has been significant increase in lending to priority sectors, it is still inadequate in comparison to the needs of these sectors. Because of these small farmers and traders have to still depend on the unorganized sector for meeting their credit requirements.(d) Increased Expenditure: After nationalization, there has been significant increase in expenditure on banking operations. This is due to aggressive and sometimes irrational branch expansion. There has been over-staffing in nationalized banks and some of their operations in rural areas are simply not economically feasible.(e) Low Level of Efficiency: Public sector banks have suffered from lack of proper supervision and control. Due to high degree of political interference and lack of competition, these banks have become highly insufficient. There work culture was poor compared to private sector banks. However, this scenario has now changed with these banks becoming more profit oriented and autonomous.

Thus, nationalization of Commercial banks was done with the objective of social and economic development. But this resulted in several problems and desortions in the banking system. Till 1990s public sector banks operated with low profitability and efficiency. In early 1990s, the government implemented the Narsimham Committee Recommendations in order to bring about much needed reforms in the banking sector. Since then, the sector has been performing with higher profitability and efficiency.

TYPES OF COMMERCIAL BANKS:

Scheduled banks

Non- Scheduled Banks

- Scheduled Banks:

A scheduled bank is one which is registered in the second schedule of the Reserve Bank of India. The following conditions must be fulfilled by a bank for inclusion in the schedule:

i)The banker concerned must be in business of banking in India;

ii)It is either a company defined in Section 3 of the Indian Companies Act, 1956, or corporation or a company incorporated by or under any law in force in any place outside India or an institution notified by the central government in this behalf;

iii)It must have paid-up capital and reserves of an aggregate role of exchangeable value of not less than rupees five lakhs;

iv) It must satisfy the Reserve Bank of India that its affairs are not conducted in a manner detrimental to the interests of its depositors.

Scheduled banks come under the purview of the various credit control measures of th Reserve Bank of India. They are required to maintain a certain minimum balance in their accounts with the RBI, and do certain things prescribed by law. The Scheduled banks are entitled to bprrowings and rediscounting facilities from the RBI. These are similar to the member banks of the U.S.A.- Non- Scheduled Banks:

Banks, which are not included in the Second Schedule of the RBI, are known as non-scheduled banks. They may be classified into 4 groups:

a) Banks with paid-up capital and reserves in excess of Rs. 5 lakhs;

b) Banks with paid-up capital and reserves ranging between Rs. 50,000 and one lakh of rupees;

c) Banks with paid-up capital and reserves ranging between one lakh of rupees and 5 lakhs;

d) Banks with paid-up capital and reserves below Rs. 50,000.

Non- Scheduled banks are not entitled to all those facilities that the scheduled banks avail of from the Reserve Bank of India. Since the enactment of the Banking Regulation Act in 1949, non-scheduled banks have also come under the ambit of the RBI control. It has become obligatory on the part of these banks to carry a portion of their deposits with the RBI or in the vault with the bank itself, and prepare their annual accounts and balance sheets in accordance with the requirements stipulated in Section 29 of the Banking Companies Act.

Scheduled Banks may be classified into two groups: Indian Scheduled Banks and Foreign Scheduled Banks. The Indian Scheduled Banks are those which have their registered officers in India and are registered in the second schedule if the RBI. As against this, foreign scheduled banks comprise those commercial banks which are registered in the said schedule but have their registered offices outside India. These banks have played a prominent role in Indias foreign trade; in fact, they had complete sway in this sphere until the Second World War. Since then, a number of leading Indian scheduled banks entered the field of foreign trade and have in the course of time achieved an important position in this field.

Indian scheduled banks may be distinguished in two broad sectors:

a) Public sector commercial banking comprising the State Bank of Indian and its subsidiaries and the twenty nationalized banks;

b) Private sector commercial banking comprising all the other Indian scheduled banks that do not fall in the above group.

CONCLUSION:

Friends, as we know, over five decades the Commercial banks in India achieved astounding success by enormously spreading banking services in far-flung and unbanked areas of the country through their massive branch network are garnering burgeoning amount of savings which represent half of the GDP of the country. A major portion of these resources had been deployed to meet the needs of priority sectors which are critical to the economy.

However, it is crucial for the commercial banking industry to meet the increasingly complex savings and financing needs of the economy by offering a wider and flexible range of financial products tailored for all types of customers. In recent years, it is being felt widely that the commercial banking system has not actually grown as sound & vibrant as it needed to be. Strong capital positions and balance sheets places the Commercial banks in a better position to deal with and absorb the economic shocks. These Banks need to face competition without diluting the operating standards.

In banking, there is no such thing as "one size fits all." But today's commercial banks are more diverse than ever. You'll find a tremendous range of opportunities in commercial banking, starting at the branch level because commercial bankers, now are highly experienced in working with businesses to develop the right financial package to meet your unique business needs. The face of Commercial banking is changing rapidly. Competition is going to be tough Banks should avail of the existing and upcoming opportunities as well as address the above-discussed issues if they have to succeed, not just survive, in the changing environment.

Thus, Commercial Banks occupy a dominant place in the money market, they are like a reservoir into which flow the savings, the idle surplus, money of households and from which loans are given on interest to businessmen & others who need them for investment or productive uses.

RECOMMENDATIONS

Banking in India has made a remarkable progress in its growth and expansion, as well as business with social perspective in the fulfillment of national objectives. Indian Commercial banking has developed, but, its perfection is yet to be seen. There still remains many tasks to be fulfilled.

1.Still there are villages left without banking facilities, so many more rural banks branches need to be opened.

2. Quality of Commercial banking facilities should be improved to the atmost satisfaction of the customer.

3. Operational costs of Commercial banks should be reduced to the minimum profitability and working results must be maximized.

4.Banking staff should be adequately trained.

5.More lending should be made in favour of priority sectors.

6.Malpractices, fraud, corruption and red-tapism must be done away with.

7.More attention should be paid to the development of exports.

8.Nationalised banks should give more technical assistance to the small industrialists.

9.Interest rates on deposits should be enhanced reasonably up to 12-13 % so that savers get their legitimate returns.

10.The high level of overdues of banks have become a matter of concern. So, banks should make all possible efforts to reduce their overdues. This all requires that no loans should be given without proper identification and address of the deserving rural poor.

Thus, in order that the association of banks with industry is more fruitful and rewarding, many innovations have to be planned and introduced systematically and greater degree of managerial competence will have to be developed in Commercial banking sector.

FUTURE PROSPECTS OF COMMERCIAL BANKING:

Indian banking has developed. But, its perfection is yet to be seen. There still remain many tasks to be fulfilled. Historically, profitability from lending activities has been cyclic and dependent on the needs and strengths of loan customers. In recent history, investors have demanded a more stable revenue stream and banks have therefore placed more emphasis on transaction fees, primarily loan fees but also including service charges on array of deposit activities and ancillary services (international banking, foreign exchange, insurance, investments, wire transfers, etc). However, lending activities still provides and in future, too will provide bulk of a Commercial bank's income.

As part of the financial services industry, commercial banking are worldwide attempting to compete better by improving core operations and differentiating the customer experience. The banking sector has been consolidating; it is worth noting that far more people are employed in the Commercial banking sector than any other part of the financial services industry. Jobs in banking can be exciting and offer excellent opportunities to learn about business, interact with people and build up a clientele. In future, if we are well-prepared and enthusiastic about entering the field, we are likely to find a wide variety of opportunities open to us.Thus, we can predict the future of Commercial bank, to be spreaded world wide. They will be providing an unprecedented level of service to a wide range of business clients, from small business, through to multi-national corporate clients. In future, Commercial Bank will come up with more innovative and experienced depth knowledge of specific sectors, to meet all of our banking requirements. BIBLIOGRAPHY

Websites

www.google.comwww.rbibulletin.com

www. icici.com www. britannica.comBooks Commercial Banking Management By Reed Edward Banking, Theory and Practice By Reddy P N

Banking by Parker JMagazines

PROFESSIONAL BANKERS (The ICFAI University, June 2007)

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