Back to Main Page

Web Notes

Types of Banks.

Static GK (Master) Banking Awareness

Types of Banks.

Bank

A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets.

In India all BANKS must act under banking regulating act 1949

Types of Banks in India ;-

Central Bank

Our country's central bank is the Reserve Bank of India. Each country has a central bank that oversees all of the country's other financial institutions.
The central bank's principal role is to serve as the government's bank and to oversee and regulate the country's other banking institutions. The functions of a country's central bank are listed below:

· assisting other financial institutions

· Issuing money and enforcing monetary policies

· The financial system's supervisor

In other words, the country's central bank is also known as the banker's bank because it assists other banks in the country and runs the country's financial system under the supervision of the Government.

Cooperative Banks

· These banks are governed by a law enacted by the state government. They provide short-term loans to agriculture and related industries.

· Cooperative banks' principal purpose is to enhance social welfare by providing low-interest loans.

· They are arranged in a three-tiered system.

· State Cooperative Banks, Tier 1 (State Level) (regulated by RBI, State Govt, NABARD)

· The RBI, the government, and the National Bank for Agriculture and Rural Development (NABARD) all contribute to the project's funding. After then, the money is allocated to the general population.

· These banks are subject to CRR and SLR concessions. (SLR: 25%, CRR: 3%)

· The state owns the company, and the senior management is chosen by the members.

· Central/District Cooperative Banks, Tier 2 (District Level)

· Tier 3 (Village Level) – Agriculture (Primary) Cooperative Banks

Commercial Banks

· The Banking Companies Act of 1956 established the company.

· They function on a commercial basis, with profit as their primary goal.

· They are owned by the government, state, or any private company and have a unified structure.

· They look after all sectors, from rural to urban.

· Unless the RBI directs otherwise, these banks do not charge concessional interest rates.

· These banks' primary source of funds is public deposits.

· Commercial banks are further classified into three types:

Public sector banks are those in which the government or the country's central bank owns the majority of the stock.

Examples

State Bank of India

Allahabad Bank
Andhra Bank
Bank of Baroda
Bank of India
Bank of Maharashtra
Canara Bank
Central Bank of India
Corporation Bank

· Banks in the private sector are those in which a private entity, an individual, or a group of people owns the majority of the stock.

Examples

Catholic Syrian Bank
City Union Bank
Dhanlaxmi Bank
Federal Bank
Jammu and Kashmir Bank
Karnataka Bank
Karur Vysya Bank
Lakshmi Vilas Bank
Nainital Bank
Ratnakar Bank
South Indian Bank
Tamilnad Mercantile Bank
Axis Bank
Development Credit Bank (DCB Bank Ltd)
HDFC Bank
ICICI Bank
IndusInd Bank
Kotak Mahindra Bank
Yes Bank
IDFC
Bandhan Bank of Bandhan

· Foreign Banks – This category includes banks with headquarters in other nations and branches in the United States.

Examples

Australia and New Zealand Banking Group Ltd.
National Australia Bank
Westpac Banking Corporation
Bank of Bahrain & Kuwait BSC
AB Bank Ltd.
HSBC
CITI Bank
Deutsche Bank
DBS Bank Ltd.
United Overseas Bank Ltd
J.P. Morgan Chase Bank
Standard Chartered Bank
There are over 40 Foreign Banks in India

Regional Rural Banks (RRB)

· These are unique types of commercial banks that lend to agriculture and the rural economy at a reduced rate.

· RRBs were founded in 1975 and are governed by the 1976 Regional Rural Bank Act.

· RRBs are 50/50 joint ventures between the federal government and state governments (15%), as well as a commercial bank (35 percent ).

· Between 1987 and 2005, 196 RRBs were established.

· From 2005 forward, the government began merging RRBs, bringing the total number of RRBs to 82.

· A single RRB cannot open branches in more than three districts that are geographically connected.

Local Area Banks (LAB)

· In India, it was first introduced in 1996.

· The private sector organizes these.

· Local Area Banks' primary goal is to make a profit.

· Local Area Banks are governed by the 1956 Companies Act.

· There are now just four Local Area Banks in existence, all of which are located in South India.

Specialized Banks

· Certain banks exist just to serve a certain purpose. Specialized banks are the name for several types of financial institutions. These are some of them:

· SIDBI (Small Industries Development Bank of India) - SIDBI can provide a loan for a small-scale enterprise or business. With the support of this bank, small businesses can get current technology and equipment.

· Export and Import Bank (EXIM Bank) - EXIM Bank stands for Export and Import Bank. This type of bank can provide loans or other financial help to foreign countries that are exporting or importing goods.

· NABARD (National Bank for Agricultural and Rural Development) – People can resort to NABARD for any type of financial support for rural, handicraft, village, and agricultural development.

· Other specialist banks exist, each with a unique function to play in the financial development of the country.

Small Finance Banks

This sort of bank, as the name implies, provides loans and financial help to micro industries, small farmers, and the unorganized sector of society. The country's central bank oversees these institutions.

Payments Banks

The Reserve Bank of India conceptualized the payments bank, a newly developed form of banking. People who have a payment bank account can only deposit up to Rs.1,00,000/- and cannot apply for loans or credit cards through this account.
Payment banks provide services such as internet banking, mobile banking, ATM card issuance, and debit card issuance. The following is a list of our country's few payment banks:

· Airtel Payments Bank

· India Post Payments Bank

· Fino Payments Bank

· Jio Payments Bank

· Paytm Payments Bank

· NSDL Payments Bank

SBI

The full form of SBI is State Bank of India. SBI is a public sector financial institution and a multinational corporation. The bank holds 23 per cent of the market share in the banking sector in terms of asset base, and 25 per cent in deposit and loan divisions, enabling it to be India’s largest statutory banking and finance organization.

Indian government holds SBI and that’s SBI’s biggest shareholder with approximately 62 per cent holding or equity funds in SBI. It has over 24000 branch offices in India and about 200 offices in over 30 countries worldwide. Since about 31 March 2017, its assets were estimated at over USD 500 billion. The Indian banking sector had more than 20 per cent share of the market.

History of SBI

The bank was established in the year 1806 as Calcutta ‘s bank to provide the Indians with essential banking services.
In 1809, after the granting of the royal charter, the bank was designated as Bank of Bengal.
The Bank of Bombay was established in 1840, and the Bank of Madras was established in 1843.
Such three banks combined were recognized as presidency banks.
Private subscribers & provincial governments operated a single Presidential bank.
Such banks were given preferential rights to issue currency through the nation that was then controlled over by India’s government in the 1861 period.
The three banks came together in 1921, eventually combined. It was later named as the Imperial bank of India.
When time passed and as the banking industry progressed, India’s Imperial Bank turned itself into the country’s largest corporate company
The Indian government and the Indian reserve bank assumed joint control of the Imperial Bank of India for 1955.
With the regulations of the Subsidiary Bank Act, those enterprises subsequently became bank subsidiaries which were governed by the princely states.
In 2007-08, India’s government bought the entire shares of India’s State Bank from RBI to reduce conflicts of interest.
The RBI which was later merged with the job of a central bank, picked over the function of supervising and controlling banking.

Operations of SBI

It delivers a wide array of banking products and services.
It allows deposits from the public and depositors from institutions.
It provides loans to companies SBI thinks are worthy of funding loans.
It sells and buys gold, besides.
It is taking on the role of representative for India ‘s cooperative bank and RBI.
It attracts and sells foreign exchange payments.
It takes on the part of state property administrator & board member.
It is not allowed to buy the immovable property but may only buy buildings for official commercial purposes.
It has no power to have the bills rediscounted. Two good signatures will make up the bills.