Banks in India - List of Different Types of Banks in India


SHIKSHAGAINER.BLOGSPOT.COM

Banks are financial institutions that perform deposit and lending functions. There are various types of banks in India and each is responsible to perform different functions.

Banks can be classified into various types. Given below are the bank types in India:-

  • Central Bank
  • Cooperative Banks
  • Commercial Banks
  • Regional Rural Banks (RRB)
  • Local Area Banks (LAB)
  • Specialized Banks
  • Small Finance Banks
  • Payments Banks

Functions of Banks

The major functions of banks are almost the same but the set of people each sector or type deals with may differ. Given below the functions of the banks in India:

  1. Acceptance of deposits from the public
  2. Provide demand withdrawal facility
  3. Lending facility
  4. Transfer of funds
  5. Issue of drafts
  6. Provide customers with locker facilities
  7. Dealing with foreign exchange

Apart from the above-mentioned list, various utility functions also need to be performed by the various banks.

Central Bank

The Reserve Bank of India is the central bank of our country. Each country has a central bank that regulates all the other banks in that particular country.

The main function of the central bank is to act as the Government’s Bank and guide and regulate the other banking institutions in the country. Given below are the functions of the central bank of a country:

  • Guiding other banks
  • Issuing currency
  • Implementing the monetary policies
  • Supervisor of the financial system

In other words, the central bank of the country may also be known as the banker’s bank as it provides assistance to the other banks of the country and manages the financial system of the country, under the supervision of the Government.

Cooperative Banks

These banks are organised under the state government’s act. They give short term loans to the agriculture sector and other allied activities.

The main goal of Cooperative Banks is to promote social welfare by providing concessional loans

They are organised in the 3 tier structure

  • Tier 1 (State Level) – State Cooperative Banks (regulated by RBI, State Govt, NABARD)
    • Funded by RBI, government, NABARD. Money is then distributed to the public
    • Concessional CRR, SLR applies to these banks. (CRR- 3%, SLR- 25%)
    • Owned by the state government and top management is elected by members
  • Tier 2 (District Level) – Central/District Cooperative Banks
  • Tier 3 (Village Level) – Primary Agriculture Cooperative Banks

Commercial Banks

  • Organised under the Banking Companies Act, 1956
  • They operate on a commercial basis and its main objective is profit.
  • They have a unified structure and are owned by the government, state, or any private entity.
  • They tend to all sectors ranging from rural to urban
  • These banks do not charge concessional interest rates unless instructed by the RBI
  • Public deposits are the main source of funds for these banks

The commercial banks can be further divided into three categories:

  1. Public sector Banks – A bank where the majority stakes are owned by the Government or the central bank of the country.
  2. Private sector Banks – A bank where the majority stakes are owned by a private organization or an individual or a group of people
  3. Foreign Banks – The banks with their headquarters in foreign countries and branches in our country, fall under this type of bank