The commercial banks in India play a major role in the development of the country itself. These banks are primarily concerned with providing loans and accepting deposits. Several other facilities are also provided by the commercial banks in India. At the same time, the commercial banks in India have the opportunity to develop manifold in the future because the economy of India is developing at a good pace and thus the financial institutions of the country are bound to develop with this growth.
The name commercial banking may suggest a number of things, but the term is used to differentiate the other forms of banking from this particular form.
The commercial banks in India generate funds for the purpose of financing their various financial requirements through a definite process. The commercial banks in India accept deposits from different sources like businesses and individuals. A wide range of financial products have been developed by these banks to encourage the savings habit of the clients. There are savings deposits, term deposits and many more to attract the investors. These deposits are recycled in the economy through the loans and other credit products.
The commercial banks in India are regulated by the Reserve Bank of India (RBI). These banks function according to the parameters set by the regulating body. They are also bound to keep a certain amount in the Reserve Bank. This is known as the CRR or the Cash Reserve Ratio. The lending capacity of the commercial banks in India are also related to this Cash Reserve Ratio because whenever it is raised by the Reserve Bank of India, the loan providing capacity of commercial banks decreases. On the other hand, the Reserve Bank of India also decides on the amount of asset that the commercial banks in India can keep in their direct possession.
Again, the Reserve Bank of India determines the interest rates that the commercial banks can impose on the loan products. At the same time, these rates are also related to the interest rates that the commercial banks offer for the deposits.
For further details on various commercial banks in India, please refer to the following links:
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