Banking Finance Exposure Projects

Submitted To

Savitribai Phule Pune University

In partial fulfilment of the degree of
Bachelor of Business Administration

By
Name:- Srushti Shankar Jagtap
Seat No: 4550
Roll no: 14020

BBA III Semester

Under the guidance of

Dr. Sharmila Kavediya

Research Guide
MES Garware College of Commerce, Karve Road, Pune 411004
(2022-2023)

1
 DECLARATION

I, Srushti Shankar Jagtap, of Second Year BBA hereby declare that the project report
submitted under the subject Banking & Finance Exposure (Subject Code – 306(B)) represents
my own collection of information, original research and work, was carried out by me in MES
Garware College of Commerce, Karve Road, Pune – 04.
I have completed this mandatory project work prescribed by Savitribai Phule Pune
University. I further declare that the foregoing statements made by me in regard to my project
report are correct and complete.

Date –
Place – MES Garware College of Commerce, Karve Road, Pune – 411004.

Ms. Srushti Shankar Jagtap

SY. BBA
MES Garware College of Commerce
Karve Road, Pune – 411004

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 ACKNOWLEDGEMENT

I would like to express gratitude towards our college for the immense support and help
throughout the curriculum, and a special thanks to our research guide Dr. Sharmila Kavediya
madam , for extending help, cooperation and guidance right from the generation till the
finalization of the report. He has been a constant source of encouragement and inspiration in
designing out this study. I am grateful to all respective people who have guided me throughout
the report.
I would also like to thank Dr. Sandeep Rathod Coordinator & Dr N.S.Umarani ,
Principal, GCC, for the immense support and timely help regarding any aspect of the entire
curriculum. My sincere thanks to my friends enabling me to take up various tedious operations
easily.

Name – Srushti Shankar Jagtap

Seat No. - 4550
Class –SYBBA
Date –
Place – MES Garware College of Commerce, Karve Road, Pune – 411004.

3
MES Garware College of Commerce, Pune-04

Bachelor of Business Administration

Certificate
This is to certify that Mr/Ms. Roll

No. _ and Exam Seat No. student of BBA ( SEM-III ) has satisfactory completed research

Project on

for the subject of Banking & Finance exposure as laid down by the Savitribai Phule

Pune University for the academic year 2022-2023.

I further clarify that, the work has been carried out under my guidance.

Dr. Sharmila
Kavediya
External Examiner Internal Examiner

4
 A BANKING AND FINANCE REPORT ON

“ BANK VISIT- STATE BANK OF INDIA”

SUBMITTED BY

( BATCH- 2022-2023 )

5
 INDEX

SR.NO CONTENTS PAGE

NO.
1. TITLE 7
2. OBJECTIVES OF PROJECT 7
3. BRIEF INTRODUCTION OF THE BANK 7-8

4. INFORMATION COLLECTED DURING THE VISIT: 8-14

• BANKING FUNCTIONS
• MEANING OF SBI’S LOGO
• SERVICES PROVIDED

5. CONCLUSION 15

6
• TITLE- BANK VISIT [ STATE BANK OF INDIA, GOKULNAGAR BRANCH ]

• OBJECTIVES OF THE VISIT-

1.To create awareness on access to financial services, availability of various types of services
and their functioning.

2.Also, to understand their rights and responsibilities as customers of financial services.

3.To determine the benefits appointed.

4.To find out what types of accounts they provide for businesses and individuals.

5.To learn about cheques, withdrawing, and depositing limits of individual incorporate banks.

• BRIEF INTRODUCTION OF THE BANK-

The roots of the State Bank of India lie in the 19th century when the Bank of Calcutta (later
renamed as Bank of Bengal) was established on June 2, 1806. The Bank of Bengal was one
of three Presidency banks, the other two being Bank of Bombay and Bank of Madras. These
three Presidency banks were incorporated as joint-stock companies. They have the exclusive
right to issue paper currency until 1861 when the right was taken over by the Government of
India. The three Presidency banks amalgamated on January 27,1921 and were named
Imperial Bank of India. The Imperial Bank of India remained a joint-stock company without
Government participation. All in all, the SBI was formed after the merger of approximately
twenty banks.

According to the State Bank of India Act of 1955, the Reserve Bank of India, acquired a
controlling interest in the Imperial Bank of India and the Imperial Bank of India became the
State Bank of India on July 1, 1955. But the Indian Government acquired the Reserve
Bank of India’s stake in SBI in 2008 to remove any conflict of interest because the RBI is the
country’s banking regulatory authority. In 1959, the government passed the State Bank of
India (Subsidiary Banks) Act thus making the eight banks that had belonged to princely states
subsidiaries of SBI. But now all the subsidiaries have been merged with SBI.SBI maintains
thousands of branches throughout India and offices in dozens of countries throughout the
world. The bank’s headquarters are in Mumbai. SBI provides a range of banking products

7
through its network of branches in India and overseas, including products aimed at non-
resident Indians.
SBI has a very conservative approach to accounting particularly when it comes to declaration
of its assets. SBI enjoys a monopoly of the government business. The Reserve Bank of India
owns about 60% of the bank’s equity. Acts as agent of Reserve Bank of Bank.

• INFORMATION COLLECTED DURING THE VISIT-

- Central Banking Functions:

SBI acts as an agent of RBI, where there are no branches of RBI to perform the following
functions-

- Currency Maintenance– Essentially, the RBI is responsible for the maintenance of

currency. But the offices of RBI are only available in big cities. In places where RBI has
no branches, it maintains its currency through the SBI. The currency is withdrawn from
these branches of SBI whenever required by the RBI. In other words, it acts as a Currency
Chest on behalf of the RBI.
- Government’s Bank– The SBI caters to the needs of the central and state governments.
Firstly, it collects money and makes payments on behalf of the government. It also
collects the charges on behalf of the government like tax collection and other payments
besides granting advances and loans to the government.
- Bank bankers by receiving deposits from and give loans to other commercial banks.
Many commercial banks have their accounts with SBI and these banks resort to help to
SBI whenever they face any financial shortage.
- The SBI also acts as a clearinghouse for all commercial banks in places where RBI does
not have its presence.

- General Banking Functions:

Since its inception, the SBI is working to cover all areas, including the rural areas, which
have remained outside the reach of the banking sector for a substantial period so that their
living standard can be uplifted. Besides performing the above-mentioned work, THE SBI just

8
like any other public-sector bank performs the normal banking operations that are mentioned
below:

1. Accepts deposits from the public under current, saving, recurring and fixed deposits.
2. Acts as an administrator, executor and trustee.
3. Issue and circulate letters of credit.
4. Offer remittance facilities like demand draft, telegraphic transfer, etc.
5. Accept, draw, discount, sell and buy bills of exchange and other negotiable instruments.
6. Merchant-Banking facilities.
7. Operates Non-Resident External and foreign currency accounts.
8. Offers community services banking by providing grants to many socially relevant
research projects undertaken by various universities and institutes.
9. Promotes exports through export credit.

- MEANING OF SBI’S LOGO:

At present the logo of SBI is a blue circle with a small cut at the bottom and is said to be
inspired by Kankaria Lake (Ahmedabad) which resembles this on Google Maps. The blue
circle symbolizes unity and completeness while the white one represents the common
man as a vital part of the bank, despite the huge size of the bank. The logo also suggests a
keyhole which is the symbol of safety, security and strength. Some also interpret the
white circle as the bank’s branch and the vertical line stands for the streets and lanes of
any city which leads to the bank’s branch reflecting that wherever one goes, the SBI is
there to serve.

The State Bank of India is the biggest commercial bank in the country with the largest
number of branches and offices in India and abroad. Since its nationalisation in 1955, its
working reveals that it has made tremendous progress in deposits, advances, rural credit,
industrial finance, priority sectors, merchant banking, mutual fund, housing finance,
factoring etc.

- SERVICES PROVIDED ARE:

▪ DEPOSIT ACCOUNT-

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1. Savings Account:
SBI offers various types of savings account with which account holders can earn upto 4% p.a.
interest on their account balance. Account can also link it to MOD account to earn higher
interest. Types of saving accounts are:

a) SBI Insta savings account:

The SBI Insta savings account is an instant savings account, which brings the complete
digital banking ecosystem to your mobile. You can open a savings account in minutes with
the SBI Yono mobile app or from the Yono online portal in minutes. Insta savings account
can be opened easily with OTP-based e-KYC using your Aadhaar card details which are
linked to the mobile number and PAN card details. The overall balance at the end of the day
can go up to Rs. 1,00,000 and the total annual credit transactions can go up to Rs. 2,00,000.
You will need to maintain a minimum balance as defined for a normal savings bank account
(Metro & Urban - Rs. 3000; Semi-Urban - Rs. 2000; Rural - Rs. 1000). However, the
minimum balance fees for the Insta savings account have been eliminated until March 31,
2019. In addition, you must not have an OTP account with another bank or financial
institution. You can only have one Insta savings account and no other accounts at any given
time.

b) SBI Savings Plus Account:

Savings Plus Account is a Savings Bank Account linked where any amount over Rs 25,000
would be transferred to a fixed deposit. The minimum balance of Rs 25,000 should be
maintained. This means that where you get an interest rate of 4% in the SB account you
might end-up getting 6%, which is the current FD interest rate. So, go for this account if you
have a surplus in your savings account every month. Account holders also have the flexibility
to choose the tenure of the deposit.

c) SBI digital savings account:

The SBI digital savings account is an online savings account that can be opened using the
Yono mobile application through the SBI or Yono online portal. The SBI digital savings
account comes with a paperless account opening process. But, you will have to visit the bank
once to complete the account opening process. The Aadhaar card and the PAN card are
required to open this account The State Bank of India digital savings account can be used
individually only. You must visit the branch to convert it to a joint account You will need to

10
maintain a minimum balance as defined for a normal savings bank account (Metro & Urban -
Rs. 3000; Semi-Urban - Rs. 2000; Rural - Rs. 1000). You can convert digital savings account
into a zero balance salary account by asking the bank to fix the salary package To open
Digital savings account with the State Bank of India you need to check the eligibility criteria
are as follows: You must be a resident Indian over 18 years You must have a valid Aadhaar
number (linked to a mobile number registered in his name) and a valid permanent account
number. You will need to have a valid mobile phone number registered with your name and a
valid and active email address.

d) Yuva Savings Bank Account:

This savings bank account is for young adults between 10-30 years of age to give them the
first experience of an independent, restriction free Banking experience. Facilities available
such as ATM- cum-Debit card facility, Mobile Banking, Internet Banking, Cheque books. So,
it is only for those who fall in this particular age group.

e) Premium Savings Account:

Premium Savings Account provides an enriched version of Savings Bank account consisting
of the concessions and add-ons. There should be a minimum amount of Rs 10000/. to be
maintained. The auto sweep will be applicable after retaining Rs 25000/- in the account.

2. Current Account:
SBI offers various types of current accounts with low maintenance charges to satisfy
customer’s needs and expectations. SBI current account can be opened with a minimum
balance of Rs. 10,000.

1. Normal Current Account:

This current account fits entrepreneurs or traders who deal with the small businesses can open
this current account in SBI along with basic facilities at a nominal cost.

a) A number of multi-city cheque leaves – first 50 Multi-city cheque leaves free in a

financial year.
b) Debit card charges – Free ATM/ Debit card for the first year.
c) A number of total NEFT transactions (via Net Banking/ Mobile banking) – Transaction
Amount up to Rs. 10,000 will cost Rs. 1/-.

11
d) Number of total NEFT transactions (At Branch) – Transaction Amount up to Rs. 10,000
will cost Rs. 2.50/- + GST.
e) RTGS transactions (via Net Banking/Mobile banking) – From Rs. 2 Lacs to Rs. 5 Lacs:
Rs 5/- including GST.
f) RTGS transactions (At Branch) – From Rs. 2 Lacs to Rs. 5 Lacs: Rs. 25 including GST.
g) Demand Draft charges – Up to Rs. 5000: Rs. 25/- includes GST.

2. Power Gain Current Account:

This current account fits the Premium Businessmen, Professionals, Traders etc. i.e; those who
look to expand and diversify their operations and handle bulk cash transactions.

a) A number of multi-city cheque leaves – 200 Multi-city cheque leaves free per month.
b) Business Debit card charges – Free Pride Business debit cards for the first year.
c) The number of total NEFT transactions (via Net Banking/Mobile banking) – Transaction
Amount up to Rs. 10,000 will cost Rs. 1/-.
d) Number of total NEFT transactions (At Branch) – Transaction Amount up to Rs. 10,000
will cost Rs. 2.50/- + GST.
e) RTGS transactions (via Net Banking/Mobile banking) – From Rs. 2 Lacs to Rs. 5 Lacs:
Rs 5/- including GST.
f) RTGS transactions (At Branch) – From Rs. 2 Lacs to Rs. 5 Lacs: Rs. 25 including GST.
g) Demand Draft charges – Up to Rs. 5000: Rs. 25/- includes GST.

3. Power Pack Current Account:

This account is more suitable for elite businessmen, top professionals entities, large traders
etc. operating across the country and who deal with large cash transactions and process huge
number of payments & collection transactions.

a) A number of multi-city cheque leaves – 1000 Multi-city cheque leaves free per month.
b) Business Debit card charges – Free Pride Business debit cards with a withdrawal limit of
Rs. 2,00,000 per day.
c) Free payments and collections via RTGS and NEFT transactions.
d) Demand Draft charges – Up to Rs. 5000: Rs. 25/- includes GST.

4. Power Jyoti Current Account:

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This account is opened by the Institutions, Firms, Educational Institute, Government Bodies,
etc. mainly for the purpose of fund collections or fees/ fines at all the Branches of SBI along
with generation of MIS.

a) No cheque book facility.

b) The organizations get access to the MIS in the desired form.
c) It offers with low transaction fees of Rs. 60/- + GST per transaction.

▪ LOAN-

1. Home Loan:
SBI home loans have catered to the need of owning a home of over 30 lakh families in India.
SBI loans come with low processing charges, low-interest rates, and no hidden costs.

2. Personal Loan:
SBI offers 4 types of personal loans for tenure ranging from 1 to 5 years. SBI Personal Loans
cater to the financial needs of any account holder at low-interest rates. Types of personal loan
are:

a) SBI QUICK Personal Loan:

- You can avail a loan amount of up to Rs.20 lakh.
- You can avail this loan even if you do not maintain a bank account with SBI.
- You need to draw a minimum monthly income of Rs.15,000 to avail this loan.

b) SBI Kavach Personal Loan:

You can avail this loan if you or any member of your family is diagnosed with Covid-19 and
you are in need of money for treatment. You will have to provide the report stating that you
or the member of your family has been diagnosed with the condition. Make sure the report is
not older than a month. There is no processing fee charged, no collateral required and no
other fees charged. The maximum loan amount that you charge is up to Rs.20 lakh with a
repayment tenure of 5 years with a moratorium period of 3 months offered. The interest rate
charged is 8.50%.

c) SBI XPress Credit:

- Low processing fees.

13
- Maximum loan amount of up to Rs.20 lakh.
- Lowest interest rate offered is between 10.60% p.a. and 13.10% p.a.

d) SBI Pre-approved Personal Loans:

- The loan will be instantly processed.
- Low processing fee.
- The interest rate will be low and affordable and starts at 9.60%.

Also, loans like Education loan, Two-Wheeler loan, Loan against property, Gold loan, Car
loan and Business loan are available.

▪ INVESTMENT-

1. Fixed Deposit:
SBI offers a wide array of fixed deposit schemes to regular individuals and senior citizens.
SBI FD rates vary from 5.00% to 6.80% for regular individuals and 5.50% to 7.30% for
senior citizens.

2. Recurring Deposit:
SBI offers a recurring deposit with tenure ranging from 12 months to 120 months. Customers
can avail loan/overdraft up to 90% against SBI recurring deposit.

❖ PRODUCTS AND SERVICES OFFERED BY SBI-

1. Balance enquiry
2. 24/7 Customer care
3. Net banking
4. Mobile banking
5. Debit and Credit card
6. SBI Mutual Fund
7. AEPS/ATM Transactions
8. Social security schemes

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• CONCLUSION-
After spending a day in a corporate bank and observing their work environment, we could say
that it’s the best services an individual could gain. A corporate bank has everything that is
needed for an average citizen. It includes the transfer of money, quick cash, loans, deposits,
cheques, etc. The positive attitude of the employees gave enormous confidence to the clients
to deal with the bank again.

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 A BANKING AND FINANCE REPORT ON

“FUNCTIONS OF COMMERCIAL BANKS”

SUBMITTED BY

( BATCH- 2022-2023 )

16
 INDEX

SR.NO CONTENT PAGE NO.

1. OBJECTIVES OF THE PROJECT 18

2. NEED AND IMPORTANCE OF STUDY 18

3. MEANING OF COMMERCIAL BANK 18

4. TYPES OF COMMERCIAL BANKS 19-20

5. FUNCTIONS OF COMMERCIAL BANK 20-27

• PRIMARY FUNCTIONS
• SECONDARY FUNCTIONS

6. CLASSIFICATION OF COMMERCIAL BANKS 27

7. ROLE OF COMMERCIAL BANK IN 27-30

DEVELOPING ECONOMY

8. ANALYSIS 30-31

9. CONCLUSION 31

10. BIBLIOGRAPHY 31-32

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• OBJECTIVES OF THE PROJECT-
- To understand the functions of commercial banks and their working.
- To study what they contribute in developing economy.

• NEED AND IMPORTANCE OF STUDY-

i. To understand that Commercial banks dominate among depository institutions.
ii. To know that banks are important in the money supply process.

• MEANING OF COMMERCIAL BANKS-

The word ‘bank’ is used in the sense of a commercial bank. It is of Germanic origin though
some persons trace its origin to the French word ‘Banqui’ and the Italian word ‘Banca’.
Chamber’s Twentieth Century Dictionary defines a bank as an “institution of the keeping,
lending and exchanging, etc. of money.”

Commercial Bank can be described as a financial institution, that offers basic investment
products like a savings account, current account, etc to the individuals and corporates. Along
with that, it provides a range of financial services to the general public such as accepting
deposits, granting loans and advances to the customers. It is a profit making company, which
pays interest at a low rate to the depositors and charges higher rate of interest to the
borrowers and in this way, the bank earns the profit.

▪ HOW DOES IT WORKS-

Commercial banks offer basic services of banking to the public including individual
customers as well as small and medium-sized businesses. Money is made by banks by
charging for services and fees. The fees depend on the products given such as overdraft fees,
fees for safe deposit boxes, late fees, etc. Various loans also consist of fees other than interest
on loans.

Banks earn money by giving out loans and for that purpose they use funds from customer
deposits. They charge higher interest rates on loans they give out and comparatively less rate

18
of interest on the amount they get as deposits from their customers. For e.g., a bank may
provide a 0.30 per cent rate of interest on savings account to its customers but charges a 4.8
per cent rate of interest annually for home loans.

Generally, commercial banks are situated in buildings where their customers come for using
ATM machines and other banker window facilities. As internet technology has risen in recent
years, most banks allow customers to do most services online. People can now make money
transfers, deposits or make payments for bills online.

• TYPES OF COMMERCIAL BANKS-

Commercial banks are classified into two categories i.e. scheduled commercial banks and
non-scheduled commercial banks. Further, scheduled commercial banks are further classified
into three types:

1) Private Bank: When the private individuals own more than 51% of the share capital, then
that banking company is a private one. However, these banks are publicly listed
companies in a recognized exchange. Private banking offers clients a variety of perks,
privileges, and personalized service, which has become an increasingly prized commodity
in an automated, digitized banking world. However, there are advantages to both the
private bank clients as well as the banks themselves.
For example- Axis Bank, Induslnd Bank, Kotak Mahindra Bank.

2) Public Bank: A public bank is a bank that is owned by the government rather than private
shareholders. When the Government holds more than 51% of the share capital of a
publicly listed banking company, then that bank is called as Public sector bank.
For example- Bank of Maharashtra, State Bank Of India, Central Bank of India.

3) Foreign Bank: Banks set up in foreign countries, and operate their branches in the home
country are called as foreign banks.
For example- Barclays Bank plc, Deutsche Bank, Bank Of America.

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 Non-scheduled commercial banks refer to the banks which are not covered in the Reserve
Bank of India’s second schedule. The paid-up capital of such banks is not more than Rs. 5
lakhs.

• FUNCTIONS OF COMMERCIAL BANKS-

1. PRIMARY FUNCTIONS-

A. Accepting Deposits:
Commercial banks accepts all types of deposits from the public. Deposits accepted by the
banks are safe and in return banks offers them interest.
❖ Types of deposits-
a) Demand deposits- Demand deposits are the deposits which are withdrawable on demand.
It includes saving account deposits and recurring account deposits.
• Saving account deposits- Features:
1. These accounts are opened by a large number of people who wish to save a small portion
of their income.
2. It is suitable for salaried class, middle income group, small traders and other small savers.
3. The minimum amount required to open the account is very small and minimum balance to
be kept in the account is also small .
4. The rate of interest payable on this account is between 3% to 4%.
5. Amount can be withdrawn by the depositors without prior notice to the bank, but there are
restrictions on number of withdrawals.
6. The main aim of this deposit is to encourage the habit of saving among small savers and
salaried people.

• Advantages of saving deposit account to the banks:

1. Small savings can be mobilized in the form of bank deposits.
2. It gives liquidity to the bank.
3. Operating cost are low.
4. Interest paid is low.
• Advantages of saving account to the customer-
1. Personal cheques can be collected through this account.

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 2. Customers can withdrawn money through ATM, cash deposit machines tec.
3. Marginal interest between 3% to 4% can be earned by the depositors.
• Current account deposits- Features:
1. Mostly current accounts are maintained by the business entities.
2. There are no restrictions on the number of transactions .
3. There is no upper limit for number of deposits.
4. Current account can be operated by cheques and deposits can be made by filling pay in
slips similar to saving account.
5. Customers can withdraw excess money even if account is not having sufficient balance.
6. Bank donot pay any interest to the depositor on the credit balance on the account.
7. Temporary loan facility is availed on the current account ( overdraft facility).Bank
charges minimum interest on the amount of overdraft utilized.

• Advantages of current account-

1. It is suitable for various types of customers like businessmen, commercial, industrial and
other organizations.
2. Even if current account holder is not earning interest, but they can enjoy the power of
unlimited transactions.
3. Enteries in the current account is considered as evidence for payments to third parties and
receipt from others.
4. Overdraft facility is getting to the current account holders.

b) Time deposits- Time deposits are the deposits which are repayable after certain period of
time. It includes fixed account deposits and recurring account deposits.
• Features-
1. Fixed deposits are accepted for fixed period which is specified at the time of making
deposits.
2. Fixed deposits can be accepted from 7 days to 10 years.
3. The rate of interest on fixed deposits are higher than current account and saving account.
4. Interest rates on fixed deposits are paid by the banks is between 7%to 8%.
5. Fixed deposits are repayable only after for which they are deposited.
6. In the event premature withdrawal ,interest will be paid only for the period for which the
deposits has remained. In addition to that, banks will charge penalty.

21
• Advantages to the customer-
1. Customers will receive higher rate of interest as compare to saving account and recurring
account.
2. Customers are entitled to receive loan against fixed deposits.
3. It is useful in post retirement years.
4. It increases savings habits among people

B. Advancing Loans: Next important function performed by the commercial bank is

lending money to the individuals and companies. The banks make loans to the customers
in the form of term loans, cash credit, overdraft and discounting of bills of exchange.

The bank advances loans in the following ways:

(a) Cash Credit: The bank advances loan to businessmen against certain specified
securities. The amount of the loan is credited to the current account of the borrower. In
cash of a new customer a loan account for the sum is opened. The borrower can
withdraw money through cheques according to his requirements buy pays interest on the
full amount.
• Advantages of cash credit-

The cash credit is one of the most important instruments of short-term financing but it has
some limitations.

a. Involves very less time in the approval of credit.

b. Involves flexibility as the cash credit can be extended for more time to fulfil the need of
the customers.

c. Helps in fulfilling the current liabilities of the organization

d. Charges interest only on the amount withdrawn by the customer. The interest on cash
credit is charged only on the amount of cash withdrawn from the bank, not on the total
amount of credit sanctioned.

• Disadvantages of cash credit-

a. Requires more security for the approval of cash.

22
b. Imposes very high rate of interest.

c. Depends on the consent of the bank to extend the credit amount and the time limit.

(b) Overdraft: A bank often permits a businessman to draw cheques for a sum greater than
the balance lying in his current account. This is done by providing the overdraft facility
up to a specific amount to the businessman. But he is charged interest only on the amount
by which his current account is actually overdrawn and not by the full amount of the
overdraft sanctioned to him by the banks.

(c) Purchasing and discounting of bills-

1. Discounting of bill is a process of settling the bill of exchange by the bank at a value less
than the face value before maturity date.
2. According to Sec. 126 of Negotiable Instruments, “a bill of exchange is an unconditional
order in writing addressed by one person to another, signed by the person giving it,
requiring the person to whom it is addressed to pay on demand or at fixed or determinable
future time a sum certain in money to order or to bearer.”
3. The facility of discounting of bill is used by the organizations to meet their immediate
need of cash for settling down current liabilities.
4. It is one of the ways in which banks provide funds for working capital required by
commerce and industry.
5. Bills arise, when goods are bought on credit and payment is to be made at a later date.
6. Discounting of bills of exchange is the most important form in which bankers give
accommodation without any collateral security.
7. Bills of exchange is to be paid within a period of 90 days.

A bill of exchange is a document acknowledging an amount of money owed in consideration

of goods received. It is a paper signed by the debtor and the creditor for a fixed amount
payable on a fixed date.It is short term investment on which the bank gets a return in the form
of the discount.

Example: suppose A buys goods from B, h may not pay B immediately instead give B a bill
of exchange stating the amount of money owed and the time when A will settle the debt.

23
Now, B is in need of money immediately, so he will present this bill to the bank for
discounting. The bank will deduct its commission and pay B the present value of the bill.
When the bill matures after the specified period, the bank will get payment from A.

- Conditions laid down by the bank for discounting of bill are as follows:

a. Must be intended to specific purpose

b. Must be enclosed with the signature of the two persons (company, bank or reputed person)

c. Must be less than the face value

d. Must be produced before the maturity period.

2. SECONDARY FUNCTIONS-

A. Agency Services: These functions are performed by the banks after getting instructions
from their customers.
1. Payment and collection of a cheque- on behalf of the customer bank makes the cheque
payments of insurance premium, rent, telephone bill, subscription of newspapers,
magazines etc. and collects the cheques for receipt of salary, pension , dividend etc. These
services are a source of income for the banks in the form of commissions.
2. Bills and promissory notes- Bills and promissory notes on behalf of customers is an
indispensable service rendered by a modern bank to his customer.While collecting the
customer’s cheques , a banker acts either as a holder for value or as an agent of the
customer.
3. Execution of standing instructions- A customer may make standing instructions with his
banker for making payments on his behalf to various persons, institutions against his
account or to collect money or transfer of money. The banker acts as an agent of
customers in buying and selling stocks.
4. Acting as a trustee executor- Bank may act as a trustee for executions of wills if the
depositors so desires. While acting as a trustee or executor or attorney , banks see that the
interest of their clients are properly protected.
5. Purchase and sale of securities- Banks perform the function of selling or buying shares,
debentures or any other types of securities for the depositors of the bank.

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6. Act as a representative – The bank can perform the function of a representative for
income tax payments, customs clearance, security passport etc.

B. General Utility Services:

1. Safe custody- A bank under checks the safe custody of valuables against theft and fire
such as negotiable instructments, securities, jewellery and other important documents of
its clients.
2. Safe deposit vaults- Lockers are kept which can be hired by the customers for keeping
their valuable documents.
3. Remittance of funds- Banks transfers the funds from one place to another place or from
one person to another person without involving risk.
4. Pension payments- The pension bill is made payable to the banker and the cheque in
respect of pension is issued in the name of the banker.
5. Acting as a dealer in foreign exchange markets- Exchange of foreign currency is done by
commercial banks and banks charge some commission on the exchanging currency.

C. Distribution of third party products:

1. Bancaasurance-Bancaasurance means the selling of life insurance and other insurance
products and services by banking institutions. These companies offer their life insurance
and saving products to individual customers of banks. Banks earn additional revenue by
selling insurance products and insurance companies expand their customer bases without
increasing their sales force or paying agent and broker commissions.
2. Mutual funds- Mutual funds invest their pool of funds in a number of securities to
diversify the risk. Since Banks have the largest reach and customer base, MFs seek the
help of banks to sell their units. Banks are happy to help as it brings them commission
income and also helps to satisfy the investment requirements of their customers.
3. Issuance of credit card and debit card- The process of issuing creditor debit card to the
customer is called issuance of credit card and debit card.In case of credit card, the
issuing bank extends a line credit to consumers and is responsible for providing the
financial backing for the transactions made with the card.In case of debit card, bank
charges annual fees for the maintenance of debit card.The bank is also in charge of the
consumer’s financial information and accounting data. To maintain this information with
the bank, customer need to pay card maintenance charges, renewable charges etc.

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D. Non fund based credit facilities:
1. Letter of credit- The customer of a bank have sometimes to borrow from other financial
institutions. Sometimes they may require some credit facility from the government or the
party to which they are supplying goods. In all such cases , the bank issues letters of
credit in favour of its customer which is a guarantee of the credit worthiness of the party.
That means ,if the buyer is not able to make payment, the bank covers the full or the
remaining amount on behalf of the buyer. A letter of credit is issued against a pledge of
securities or cash.it has importance in the international trade. In international trade letter
of credit make a reliable payment mechanism.
2. Bank guarantee of deferred payment-This type of gurantee is required where a buyer
wants to buy the capital goods from the seller but cannot pay the whole amount
immediately after the delivery of the goods.So to avoid default in the future , the seller
can request the importer to obtain a guarantee that the payments in instalments will be
made. This guarantee of the bank assuring the exporter of the timely instalments of
payments is called Deferred Payment guarantee. Deferred Payment guarantee is issued by
the bank at request of customer when he purchases goods or machineries from a creditor
on the terms of payments after a specified time in lump sum or in instalments. The
creditor requires such deferred payment terms to guaranteed by the bankers of the
principal debtor.

E. Government business-

Banks earn a fees while working as an agent of the central bank for collecting revenues as
well as disbursing the payments under various schemes.

1. Collecting GST- Banks collects all the taxes such as income tax, custom duty, property
tax and GST.The amount collected are remitted to RBI with whom the government
accounts are kept.
2. Stamp duty- Banks and other authorized agents use a franking machine to affix the
documents. The government authorized banks to collect stamp duty.
3. Excise payment- the central board of Excise and customs has made it mandatory for
payment of tax /duty electronically through intr=ernet banking for central excise and

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 service tax assesses paying Rs 50 laks or more duty or tax in the preceding financial year,
or those who had already paid Rs 50 lakhs or more in the current financial year.
4. Government bonds-By selling and servicing these bonds, banks earn commission and the
goodwill of customers.
5. Underwriting loans of Government- Banks perform the functions of underwriting loans
raised by Governments, public bodies or trading corporations. Sometimes banks manage
the issue of loans on behalf of the government and municipal authorities.

• CLASSIFICATION OF COMMERCIAL BANKS-

Indian joint stock banks or commercial banks are classified on statutory and ownership basis.
On the statutory basis, they are further classified into scheduled banks and non-scheduled
banks. A scheduled bank is one which has been included in the second schedule of the
Reserve Bank of India Act, 1934.

To be a scheduled bank, it must be financially and economically sound and satisfy the
following three conditions:

(i) it must have a paid-up capital and reserves of an aggregate value of not less than Rs5
lakhs;
(ii) its affairs are not being or likely to be conducted in a manner detrimental to the
interests of its depositors;
(iii) it must be a joint stock company and not a sole trader or partnership firm.

Besides, it is required to keep a certain percentage of its cash reserves with the RBI and
submit periodical returns to the latter under the Banking Regulation Act, 1949. In return, the
scheduled bank receives concessional remittance and borrowing facilities from the RBI or its
agents.

On the other hand, a non-scheduled bank is that which has not been included in the second
schedule of the RBI Act, 1934. But is subject to the statutory cash reserve requirements
which it is required to keep with itself and not with the RBI. It is not entitled to concessional
remittance and borrowing facilities from the RBI.

• ROLE OF COMMERCIAL BANKS IN DEVELOPING ECONOMY-

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Besides performing the usual commercial banking functions, banks in developing countries
play an effective role in their economic development. The majority of people in such
countries are poor, unemployed and engaged in traditional agriculture.There is acute shortage
of capital. People lack initiative and enterprise. Means of transport are undeveloped. Industry
is depressed. The commercial banks help in overcoming these obstacles and promoting
economic development. The role of a commercial bank in a developing country is discussed
as under:

1. Mobilising Saving for Capital Formation: The commercial banks help in

mobilising savings through network of branch banking. People in developing countries
have low incomes but the banks induce them to save by introducing variety of deposit
schemes to suit the needs of individual depositors. They also mobilise idle savings of the
few rich. By mobilising savings, the banks channelize them into productive investments.
Thus they help in the capital formation of a developing country.

2. Financing Industry: The commercial banks finance the industrial sector in a number of
ways. They provide short-term, medium-term and long-term loans to industry. In India
they provide short-term loans, the commercial banks undertake short-term and medium-
term financing of small scale industries, and also provide hire-purchase finance. Besides,
they underwrite the shares and debentures of large scale industries. Thus they not only
provide finance for industry but also help in developing the capital market which is
undeveloped in such countries.

3. Financing Trade:

The commercial banks help in financing both internal and external trade. The banks provide
loans to retailers and wholesalers to stock goods in which they deal. They also help in the
movement of goods from one place to another by providing all types of facilities such as
discounting and accepting bills of exchange, providing overdraft facilities, issuing drafts, etc.

Moreover, they finance both exports and imports of developing countries by providing
foreign exchange facilities to importers and exporters of goods.

4. Financing Agriculture:

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The commercial banks help the large agricultural sector in developing countries in a number
of ways. They provide loans to traders in agricultural commodities. They open a network of
branches in rural areas to provide agricultural credit.

They provide finance directly to agriculturists for the marketing of their produce, for the
modernisation and mechanisation of their farms, for providing irrigation facilities, for
developing land, etc. They also provide financial assistance for animal husbandry, dairy
farming, sheep breeding, poultry farming, pisciculture and horticulture.

The small and marginal farmers and landless agricultural workers, artisans and petty
shopkeepers in rural areas are provided financial assistance through the regional rural banks
in India. These regional rural banks operate under a commercial bank. Thus the commercial
banks meet the credit requirements of all types of rural people.

5. Financing Consumer Activities:

People in underdeveloped countries being poor and having low incomes do not possess
sufficient financial resources to buy durable consumer goods. The commercial banks advance
loans to consumers for the purchase of such items as houses, scooters, fans, refrigerators, etc.
In this way, they also help in raising the standard of living of the people in developing
countries by providing loans for consumptive activities.

6. Financing Employment Generating Activities:

The commercial banks finance employment generating activities in developing countries.

They provide loans for the education of young persons studying in engineering, medical and
other vocational institutes of higher learning. Such loan facilities are being provided by a
number of commercial banks in India. Thus the banks not only help inhuman capital
formation but also in increasing entrepreneurial activities in developing countries.

7. Help in Monetary Policy:

The commercial banks help the economic development of a country by faithfully following
the monetary policy of the central bank. In fact, the central bank depends upon the

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commercial banks for the success of its policy of monetary management in keeping with
requirements of a developing economy.

Thus the commercial banks contribute much to the growth of a developing economy by
granting loans to agriculture, trade and industry, by helping in physical and human capital
formation and by following the monetary policy of the country.

• ANALYSIS-

1. Does a commercial bank play a major role in growth and development of the country?

Analysis: From the above graph we can analyze that 92% of the people think that a
Commercial Bank does play a major role in economic development whereas there are still
8% of them who don’t feel that way.

2. How do you find despositing in a Commercial Bank?

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Analysis: From the above graph we can analyze that 75% of the people find it convenient for
despositing in a Commercial Bank, whereas 25% of the people find it difficult for depositing.

3. In which areas of a Commercial Bank you need improvement?

Analysis: from the above graph we can analyze that 51% of the people want reasonable
interest rates. And about 22% of the people want new,effective and efficicent schemes to be
introduced by the banks. And about 27% of the people want convenient and effective services
to be provided by commercial bank.

• CONCLUSION-

Commercial banking in India is a one-of-a-kind system found nowhere else in the

world.Customers' deposits, the issuance of certificates of deposit, and reserves from retained
profits are the primary sources of funds for a commercial bank. However, deposits are the
most important source of funds for commercial banks. They are the lifeline of commercial
banks because they are the primary source of bank funds and account for roughly 90% of
bank liabilities.

• BIBLIOGRAPHY-

Websites:

- www.google.com
- www.slideshare.net

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- www.economisdiscussion.net

Books:

- Commercial Banking Management- By Reed Edward

- Banking- By Parker J

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