Commercial banks are for-profit institutions that accept deposits from the public and provide loans to individuals, businesses, and entrepreneurs. They are regulated by the Reserve Bank of India and their main goal is to generate revenue through interest, fees, and other means. Commercial banks offer services like checking and savings accounts, business and personal loans, and drafts/checks. However, they face limitations like inadequate rural branch coverage, political interference, low-profitability from priority sector lending requirements, and over-lending in some areas which has increased non-performing assets.

1. Commercial Banks
Commercial banks are profit-making institutions that accept deposits from the general public and lend money
(loans) to individuals such as households, entrepreneurs, and businessmen. The primary goal of these banks is to
make money through interest, commissions, and other means. The Reserve Bank of India, India's central bank and
supreme financial authority, regulates the operations of all commercial banks.
•Commercial Banks operate under the Banking Companies Act, 1956.
•Any banking organization that deals with the deposits and loans of businesses are referred to as a commercial bank.
•Commercial banks issue bank checks and drafts and accept term deposits.
•Through installment loans and overdrafts, commercial banks also serve as moneylenders.
•Commercial banks also provide a variety of deposit accounts, including checking, savings, and time deposits.
•These institutions are run for profit and are owned by a group of people.
•A commercial bank's main source of income is the difference between the two rates which it charges borrowers and
pays depositors.

2. Significance of Commercial Banks
•They encourage saving and increase the rate of capital formation.
•They are a source of finance and credit for a country's a trade and industry.
•By establishing branches in backward and remote areas of a country, they promote balanced regional
development.
•Bank credit enables entrepreneurs to innovate and invest in large and small-scale industries, accelerating a
country's economic development process.
•They contribute to the growth of priority sectors such as agriculture, small-scale industry, retail trade, and
export.
•They assist a country's commerce and industry in expanding their field of operation.

3. Limitations of Commercial Banks
•Banks were asked to open branches in rural and underserved areas where basic infrastructure such as roads,
communication, transportation, education, and safe buildings for bank operations do not exist.
•There is a problem with even the security of bank employees in some places.
•Because all public sector banks provide the same service, there has been fierce competition in deposit
mobilization.
•There are several financial institutions that provide financing to the same borrowers, including commercial banks,
cooperative banks, regional rural banks, and state financial corporations.
 Because of these numerous organizations and the lack of coordination among these institutions, duplicate
financing, over-financing, or under-financing has occurred.
•Though commercial banks have made spectacular efforts to meet the financial needs of the agricultural sector and
its allied activities, a more vigorous effort is still required, as commercial banks' total assistance to the agricultural
sector is not even 10% of their needs.
•The number of banks in rural areas is quite inadequate in comparison to the need for banking services, as
evidenced by the fact that only 5% of villages are served by banks.
•Commercial banks have branches in various parts of the country, but they are not evenly distributed.
 Around half of the branches are concentrated in the Southern and Western regions.
 States like Assam, Jammu & Kashmir, Manipur, Nagaland, Orissa, Tripura, Uttar Pradesh, and West
Bengal are underbanked.

4. •Financing of priority sectors, the opening of branches in rural as well as unbanked and backward areas, granting
low-interest loans to weaker sections, increase in salary and establishment costs, and increase in overdue resulted
in a decline in the rate of profitability of most commercial banks in India.
•The banking industry has been subjected to all of the constraints of the public sector as a result of its
nationalization which has resulted in its low efficiency.
 These include managers' bureaucratic attitudes, a lack of initiative, red-tapism, excessive delays, a lack of
commitment, responsibility, and indifference to work, among other things.
•Bank nationalization has resulted in political interference and political pressure at all levels of the banking
system.
•The liberal credit policy, which is necessary to meet the credit needs of the weaker sections, the agricultural
sector, and so on, has resulted in the insecurity of bank funds and, ultimately, depositors' money.
•A loose credit policy has also resulted in a sluggish recovery.
•Many nationalized banks have multiple branches in the same area. As a result, each of them faces unfair and
unnecessary competition in deposit mobilization.