No need to confuse yourself, yes, these commercial banks in India are the ones that you use on a regular basis, you know, the regular banks that exist in India. These are the banks where you can deposit your money, withdraw cash, take loans, and use other banking services. If we go by the definition of commercial banks at large, well, it’ll go something like this: Commercial banks are the ones that are there to offer banking services to the general public and companies/businesses. It’s as simple as that!
And since we’re talking about commercial banks in India, do you even know that the first ever commercial bank right here in the country was Bank of Hindustan, which was established way back in 1770? That’s just a fact you should know because we’re talking about these important parts of the Indian banking system. And yes, it is true that these banks’ main aim is to offer banking services to the general public and businesses and make profits in return, which is understandable if you think about it for a sec. Alright, enough of the introduction stuff, let’s just get to some little more interesting things about commercial banks in India, like how they function, how they are structured, what the different types are, and things like that. So, here we go then.
How Did These Banks Even Start?
As we already told you, the first ever commercial bank was started way back in 1770, and the name of that bank was Bank of Hindustan. That was the first ever; just know that. Then, later on, we got to see some Presidency Banks such as the Bank of Bengal, Bank of Bombay, and Bank of Madras, which all got merged into the Imperial Bank of India way back in 1921. And if you don’t know yet, it is actually the history of the State Bank Of India, which later came into existence back in 1955.
But in the scene of banking right here in India, we saw something interesting, like from 1969 to 1980, the Indian government of India went after some private banks and nationalized them. Why? Well, back then, the government wanted to make sure that right here in India, everyone had access to banking services, especially in the rural parts of the country. Though it wasn’t until the 1990s when India opened up its economy that we got to see some new private sector banks enter the banking scene, and if you don’t know, we’re talking about banks like HDFC and ICICI, which currently are the two largest banks in the country.
Structure of Commercial Banks
Well, if you look at the commercial banks at large, you’ll mainly see just two different types based on whether they’re officially listed by the Reserve Bank of India or not. Here:
- Scheduled Commercial Banks: Well, the banks that are listed under the second schedule of the RBI Act 1934, are considered the typical scheduled commercial banks, which are the most common ones in the country. What’s special about these, though? Oh, well, that would be the fact that these banks get benefits like being able to borrow from RBI and join RBI’s clearing system.
- Non-Scheduled Commercial Banks: And of course, quite the opposite of the first type of banks, there are the ones that aren’t listed in the schedule of RBI, and these are the ones we call Non-Scheduled Commercial Banks. Also, as you can tell already, they are smaller and don’t get the same benefits. Though, keep one thing in mind that right now, there aren’t really any major non-scheduled banks in India, that’s how it is.
Types of Commercial Banks in India
Let’s now talk about the different types of commercial banks in India that can be seen in the Indian banking scene as of 2025. Shall we?
- Public Sector Banks: Of course, when we’re talking about banks, we must mention the public sector banks, which are the government owned ones and to be honest, some of them are too-big-to-fail at this point. Which ones? Oh, those would be banks like SBI, PNB, and Bank Of Baroda, which have literally millions of customers right here in the country and are mainly responsible for spreading the banking sector to literally every part of the country.
- Private Sector Banks: If you search about which are the largest banks in India as of 2025, you’ll see that in the top 5, there are 4 private sector banks, and HDFC and ICICI are the two largest banks of India at the moment.
- Foreign Banks: It is not just the Indian banks that are doing super well in the banking scene of the country; nah, there are some international banks as well that made their entry a few decades ago and are now doing amazing. Though, these banks are mainly in metro cities and focus more on corporate clients and high-net-worth individuals. For those who don’t know, we’re talking about big international names like Citi, HSBC, and Deutsche Bank here.
- Regional Rural Banks (RRBs): See, banking surely is growing super fast in India, but still, there are some rural parts where basic banking services are inaccessible. And that’s why there are RRBs, which are set up by the central government, the state government, and another public bank together.
What Do These Banks Actually Do? Aka Commercial Bank Functions
You see, it is not just about providing you the basic banking services and keeping your money safe, these commercial banks are now involved in a bunch of different things. So, let’s see what the common functions of these commercial banks are right here in India. Here:
Talking about common functions, what if we talk about their main job which is to access deposits and give loans to regular people? Like, you (as a customer to the bank) can go in, open a bank account with them, and deposit your money. When someone else needs a loan, the bank gives out that money to that person and, in return, they charge them interest, and you also get a part of that interest, too.
Other than just that, they also create credit, you know, which means they lend more than they keep, using most of the deposits people put in.
What else? Well, there are many more services that they offer, like lockers, foreign currency exchange, paying your bills, offering demat accounts, investment advice, and whatnot.