Commercial banks in India: Types and functions

Explore all about commercial banks in India, from their types to function, and find out the banks with the highest deposits

Published: Aug 26, 2024 10:00:23 AM IST
Updated: Aug 26, 2024 05:21:45 PM IST


A commercial bank is a financial institution that performs operations related to deposit and withdrawal of money for the public, provides loans for investment, and carries out other similar activities.  The two main functions of a commercial bank are lending and borrowing. They play a crucial role in the country's financial system by smoothing the flow of funds, offering banking products and services, and contributing to economic growth.

Evolution of commercial banks in India

The evolution of commercial banks in India spans several centuries, reflecting changes in economic policies, banking regulations, and technological advancements. Let's look at the evolution of commercial banks in India:

Pre-independence era (pre-1947):

The origins of modern banking in India can be traced back to the 18th century when European trading companies established banks for conducting financial transactions.

The Bank of Hindustan (1770) and the General Bank of India (1786) were among the earliest banks in the subcontinent.

The State Bank of India (SBI) was established as the Bank of Calcutta in 1806. It later merged with the Bank of Bombay and the Bank of Madras in 1921 to form the Imperial Bank of India, eventually becoming the State Bank of India in 1955.

Post-independence and nationalisation (1947-1969):

After gaining independence in 1947, India witnessed a series of banking reforms to foster economic development.

The Banking Regulation Act of 1949 provided the regulatory framework for banking operations.

In 1969, the Indian government nationalised 14 major banks to achieve social and economic objectives, including increased credit flow to priority sectors like agriculture and small-scale industries.

Liberalisation and technological advancements (1991 onward):

Through the economic liberalisation of 1991, the government initiated financial sector reforms to promote competition and efficiency.

The entry of private and foreign banks introduced a new era of competition and innovation in the banking sector.

Technological advancements revolutionised banking operations, leading to the establishment of online banking services.

Consolidation and regulatory changes (2000s onward):

In the 2000s, there was a trend of mergers and acquisitions in the banking sector, leading to the consolidation of banks for enhanced efficiency and scale.

The Reserve Bank of India (RBI) implemented Basel regulations to strengthen the banking system.

Current landscape (2020s onward):

Digital banking, mobile banking, and fintech collaborations have become prominent features of the commercial banking landscape.

The RBI focuses on maintaining financial stability, promoting financial inclusion, and addressing emerging challenges such as cybersecurity risks.

Types of commercial banks in India 

There are various commercial banks in India, each serving specific functions and catering to distinct segments of the economy. Here are the types of commercial banks in India:

Public sector banks

Public sector banks are government-owned banks where the majority of the ownership lies with the government. Examples include the State Bank of India (SBI), Punjab National Bank (PNB), and Bank of Baroda. These banks play a crucial role in implementing government policies related to financial inclusion and priority sector lending.

Bank Headquarter
State Bank of India Mumbai
Bank of Baroda Vadodara
Punjab National Bank New Delhi
Union Bank of India Mumbai
Indian Overseas Bank Chennai
Canara Bank Bengaluru
Indian Bank Chennai
UCO Bank Kolkata
Bank of India Mumbai
Central Bank of India Mumbai
Bank of Maharashtra Pune
Punjab & Sind Bank New Delhi


Private sector banks

Private individuals or entities own these banks and operate them. They operate on a profit motive and are known for their efficiency and innovation. Examples include ICICI Bank, HDFC Bank, and Axis Bank.

Bank name Headquarter
HDFC Bank Mumbai
ICICI Bank Mumbai
Kotak Mahindra Mumbai
Axis Bank Mumbai
IndusInd Bank Pune
IDBI Bank Mumbai
IDFC First Bank Mumbai
Yes Bank Mumbai
AU Small Finance Bank Jaipur
Bandhan Bank Kolkata
Federal Bank Aluva
RBL Bank Mumbai
Jammu & Kashmir Bank Srinagar
Karur Vysya Bank Karur
City Union Bank Kumbakonam
Karnataka Bank Mangaluru
Tamilnad Mercantile Bank Thoothukudi
CSB Bank Thrissur
South Indian Bank Thrissur
DCB Bank Mumbai
Dhanlaxmi Bank Thrissur
Lakshmi Vilas Bank Chennai

Foreign banks

Foreign banks are headquartered outside India and operate within the country after obtaining the necessary regulatory approvals. Examples include Standard Chartered, Citibank, and HSBC.

Name of the Bank Headquarters
AB Bank Ltd. Dhaka, Bangladesh
Abu Dhabi Commercial Bank Ltd Abu Dhabi, United Arab Emirates
American Express Banking Corporation New York, United States
Australia and New Zealand Banking Group Ltd. Melbourne, Australia
Barclays Bank Plc London, United Kingdom
Bank of America Charlotte, North Carolina, United States
Bank of Bahrain & Kuwait BSC Manama, Bahrain
Bank of Ceylon Colombo, Sri Lanka
Bank of China Beijing, China
Bank of Nova Scotia Toronto, Canada
BNP Paribas Paris, France
Citibank N.A New York, United States
Rabobank Utrecht, Netherlands
Credit Agricole Corporate & Investment Bank Paris, France
Credit Suisse A.G Zürich, Switzerland
CTBC Bank Co. Ltd. Nangang District, Taipei, Taiwan
DBS Bank India Limited Singapore
Deutsche Bank Frankfurt, Germany
Doha Bank Doha, Qatar
Emirates Bank NBD Dubai, United Arab Emirates
First Abu Dhabi Bank Abu Dhabi, United Arab Emirates
FirstRand Bank Ltd Johannesburg, South Africa
HSBC Ltd London, England, UK
Industrial & Commercial Bank of China Ltd. Xicheng District, Beijing, China
Industrial Bank of Korea Jung-gu, Seoul, South Korea
J.P. Morgan Chase Bank N.A. New York, USA
JSC VTB Bank Moscow, Russia
KEB Hana Bank Seoul, South Korea
Kookmin Bank Seoul, South Korea
Krung Thai Bank Public Co. Ltd. Watthana, Bangkok, Thailand
Mashreq Bank PSC Dubai, United Arab Emirates
Mizuho Bank Ltd. Chiyoda City, Tokyo, Japan
MUFG Bank, Ltd. Chiyoda City, Tokyo, Japan
NatWest Markets Plc London, United Kingdom
PT Bank Maybank Indonesia TBK Senayan, Jakarta, Indonesia
Qatar National Bank (Q.P.S.C.) Doha, Qatar
Sberbank Moscow, Russia
SBM Bank (India) Limited Port Louis, Mauritius
Shinhan Bank Jung-gu, Seoul, South Korea
Societe Generale Paris, France
Sonali Bank Ltd. Dhaka, Bangladesh
Standard Chartered Bank London, England, UK‎
Sumitomo Mitsui Banking Corporation Chiyoda City, Tokyo, Japan
United Overseas Bank Ltd Singapore
Westpac Banking Corporation Sydney, Australia
Woori Bank Jung-gu, Seoul, South Korea

Regional rural banks

Regional Rural Banks are a specialised category of banks created to cater to the banking needs of rural and semi-urban areas.

Name of the Regional Rural Bank Sponsor Bank State
Andhra Pragathi Grameena Bank Canara Bank Andhra Pradesh
Chaitanya Godavari Grameena Bank Union Bank of India Andhra Pradesh
Saptagiri Grameena Bank Indian Bank Andhra Pradesh
Arunachal Pradesh Rural Bank State Bank of India Arunachal Pradesh
Assam Gramin Vikash Bank Punjab National Bank Assam
Dakshin Bihar Gramin Bank Punjab National Bank Bihar
Uttar Bihar Gramin Bank Central Bank of India Bihar
Chhattisgarh Rajya Gramin Bank State Bank of India Chhattisgarh
Baroda Gujarat Gramin Bank Bank of Baroda Gujarat
Saurashtra Gramin Bank State Bank of India Gujarat
Sarva Haryana Gramin Bank Punjab National Bank Haryana
Himachal Pradesh Gramin Bank Punjab National Bank Himachal Pradesh
Ellaquai Dehati Bank State Bank of India Jammu & Kashmir
J&K Grameen Bank J&K Bank Ltd. Jammu & Kashmir
Jharkhand Rajya Gramin Bank State Bank of India Jharkhand
Karnataka Gramin Bank Canara Bank Karnataka
Karnataka Vikas Grameena Bank Canara Bank Karnataka
Kerala Gramin Bank Canara Bank Kerala
Madhya Pradesh Gramin Bank Bank of India Madhya Pradesh
Madhyanchal Gramin Bank State Bank of India Madhya Pradesh
Maharashtra Gramin Bank Bank of Maharashtra Maharashtra
Vidharbha Konkan Gramin Bank Bank of India Maharashtra
Manipur Rural Bank Punjab National Bank Manipur
Meghalaya Rural Bank State Bank of India Meghalaya
Mizoram Rural Bank State Bank of India Mizoram
Nagaland Rural Bank State Bank of India Nagaland
Odisha Gramya Bank Indian Overseas Bank Odisha
Utkal Grameen Bank State Bank of India Odisha
Puduvai Bharthiar Grama Bank Indian Bank Puducherry
Punjab Gramin Bank Punjab National Bank Punjab
Baroda Rajasthan Kshetriya Gramin Bank Bank of Baroda Rajasthan
Rajasthan Marudhara Gramin Bank State Bank of India Rajasthan
Tamil Nadu Grama Bank Indian Bank Tamil Nadu
Andhra Pradesh Grameena Vikas Bank State Bank of India Telangana
Telangana Grameena Bank State Bank of India Telangana
Tripura Gramin Bank Punjab National Bank Tripura
Aryavart Bank Bank of India Uttar Pradesh
Baroda UP Bank Bank of Baroda Uttar Pradesh
Prathama UP Gramin Bank Punjab National Bank Uttar Pradesh
Uttarakhand Gramin Bank State Bank of India Uttarakhand
Bangiya Gramin Vikash Bank Punjab National Bank West Bengal
Paschim Banga Gramin Bank UCO Bank West Bengal
Uttar Banga Kshetriya Gramin Bank Central Bank of India West Bengal

Cooperative banks

Cooperative banks operate on cooperative principles, primarily focusing on meeting their members' credit and banking needs. They can be classified into Urban Cooperative Banks (UCBs) and Rural Cooperative Banks (RCBs). These banks play a vital role in supporting local economic activities.

Name of the Bank Address
The Andaman and Nicobar State Co-operative Bank Ltd. Andaman and Nicobar Isls.
The Andhra Pradesh State Co-operative Bank Ltd. Andhra Pradesh
The Arunachal Pradesh State co-operative Apex Bank Ltd. Arunachal Pradesh
The Assam Co-operative Apex Bank Ltd. Assam
The Bihar State Co-operative Bank Ltd Bihar
The Chandigarh State Co-operative Bank Ltd. Chandigarh
The Chhattisgarh Rajya Sahakari Bank Maryadit Chhattisgarh
The Delhi State Co-operative Bank Ltd. Delhi
The Goa State Co-operative Bank Ltd Goa
Gujarat State Co-operative Bank Ltd. Gujarat
The Haryana State Co-operative Apex Bank Ltd. Chandigarh
The Himachal Pradesh State Co-operative Bank Ltd. Himachal Pradesh
The Jammu and Kashmir State Co-operative Bank Ltd. Jammu & Kashmir
Jharkhand State Co-operative Bank Ltd. Jharkhand
The Karnataka State Co-operative Apex Bank Ltd. Karnataka
The Kerala State Co-operative Bank Ltd. Kerala
The Madhya Pradesh Rajya Sahakari Bank Maryadit Madhya Pradesh
The Maharashtra State Co-operative Bank Ltd. Maharashtra
The Manipur State Co-operative Bank Ltd. Manipur
The Meghalaya Co-operative Apex Bank Ltd Meghalaya
The Mizoram Cooperative Apex Bank Ltd. Mizoram
The Nagaland State Co-operative Bank Ltd. Nagaland
The Odisha State Co-operative Bank Ltd. Odisha
The Puducherry State Co-operative Bank Ltd. Puducherry
The Punjab State Co-operative Bank Ltd. Punjab
The Rajasthan State Co-operative Bank Ltd. Rajasthan
The Sikkim State Co-operative Bank Ltd. Sikkim
The Tamil Nadu State Apex Co-operative Bank Ltd. Tamil Nadu
The Telangana State Cooperative Apex Bank Ltd. Telangana
Tripura State Co-operative Bank Ltd. Tripura
The Uttar Pradesh Co-operative Bank Ltd. Uttar Pradesh
The Uttarakhand State Co-operative Bank Ltd. Uttarakhand
The West Bengal State Co-operative Bank Ltd West Bengal
The Daman and Diu State Co-operative Bank Ltd.* Daman and Diu

Payment banks

Payment banks are a relatively recent addition to the Indian banking sector. They provide a limited set of banking services, primarily focused on payments and remittances. They cannot issue loans or credit cards but can accept deposits and facilitate transactions. Examples include Airtel Payments Bank and Paytm Payments Bank.

Small finance banks

Small finance Banks cater to the banking needs of underserved and unserved sections of the population, including small businesses and low-income individuals. Examples include Equitas Small Finance Bank and Ujjivan Small Finance Bank.

Name of the Bank
Bank Type
ESAF Small Finance Bank Small Finance Bank
Fino Payments Bank Payments Bank
Equitas Small Finance Bank Small Finance Bank
India Post Payment Bank Payments Banks
Suryoday Small Finance Bank Ltd. Small Finance Bank
Ujjivan Small Finance Bank Small Finance Bank
AU Small Finance Bank Small Finance Bank
Jana Small Finance Bank Small Finance Bank
Airtel Payments Bank Payments Banks
NSDL Payments Bank Payments Banks
Paytm Payments Bank Payments Banks
Fincare Small Finance Bank Small Finance Bank
Jio Payments Bank Payments Banks

Investment norms and asset structure of commercial banks


Commercial banks in India adhere to specific investment norms and maintain a well-defined asset structure to ensure financial stability and regulatory compliance. These norms are established by the Reserve Bank of India (RBI), the country's central banking authority.

Commercial banks in India allocate a significant portion of their funds to government securities, meeting statutory liquidity requirements. Additionally, they invest in a diverse portfolio of assets, including loans and advances to various sectors such as agriculture, industry, and services.

Prudent risk management practices guide their asset structure to maintain a balance between profitability and risk mitigation.

Functions of commercial banks in India

Functions of commercial banks in India are varied and range from accepting deposits to promoting financial inclusion. These aid in the country's economic development. The primary functions of commercial banks are:

  • Accepting deposits: Commercial banks provide a safe and secure place for the public to deposit their money. They offer various types of deposit accounts, including savings accounts, current accounts, and fixed deposits.
  • Providing loans and advances: Commercial banks extend loans and advances to individuals, businesses, and industries.
  • Credit creation: Commercial banks create credit. When they lend money, they create new money in the form of bank deposits, contributing to the overall money supply in the economy.
  • Electronic funds transfer: Commercial banks enable electronic funds transfer through channels such as online banking, mobile banking, and electronic payment systems. This facilitates quick and secure money transfers between accounts.
  • Providing overdraft facilities: Commercial banks offer overdraft facilities to account holders, allowing them to withdraw more money than is available in their accounts up to a certain limit.
  • Investment in securities: Commercial banks invest in a variety of securities, including government bonds, corporate bonds, and other marketable securities.
  • Foreign exchange services: Banks in India engage in foreign exchange operations, facilitating international trade and providing services such as currency exchange and outward remittances.
  • Financial inclusion: Commercial banks help in financial inclusion by extending banking services to underserved and rural areas.