Commercial banks are profit making organizations that accept deposits and use these funds to make loans. They are playing the most important role in modern economic organisation. It performs an important economic organization. They perform an important economic function by mobilising the savings of the community and channelise the savings to productive purposes. "The tiny streams of capital flowing into the bank vaults become rives and these in turn fall into ocean of National Finance to drive the wheels of industry and to float the vessels of commerce."

There are mainly two types of commercial banking institutions in India such as public sector banks and private sector banks. The commercial banking group consists of 27 Public sector banks, 29 private sector banks, 36 Foreign Banks operating in India, 196 Regional Rural Banks and 4 Local Area Banks.

Functions of Commercial Banks

Commercial banks perform a variety of functions. All functions of commercial banks may be broadly classified into two -primary functions and secondary functions.

  1. Primary Functions
    • Accepting deposits
    • Lending Money
    • Investment of funds
    • Credit Creation
  2. Secondary Functions
    • Agency Services
    • General Utility Services
    • Modern Functions of a Commercial Bank

Read also: Role of Commercial Banks in the Economic Development