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Banking

Banking consists of various activities that can be done through financial institutions that will accept deposits from individuals and other entities. These financial institutions will then utilize this money to offer loans and invest it for a profit.

Banking is known to be important in the economy because it provides services to businesses and consumers, such as offering loans, checking accounts, and various other services.

Need for Banking Systems

The purpose of banking systems is to give security and confidence to the economy. A banking system operates in line with managing the flow of money between people and businesses. 

The functions of a bank are mentioned below:

  • Accepting withdrawals and deposits
  • Providing loans
  • Offering different types of accounts
  • Internet banking features
  • Customer support
  • Credit and debit cards
  • Remittance of funds
  • Bill payments

Bank Classification in India

The table below represents the different types of banks in India and how it is further divided:

1. Central Bank

2. Commercial Banks

a) Private Sector Banks

b) Public Sector Banks

c) Regional Rural Banks

d) Foreign Banks

3. Co-operative Banks

a) State Co-operative Banks

b) Urban Co-operative Banks

4. Payments Banks

5. Scheduled Banks

6. Non-Scheduled Banks

7. Small Finance Banks

1) Central Bank

The central bank of India is known as the Reserve Bank of India. The R.B.I. is a financial institution that is mandated to regulate and oversee all of the other banks in the country.

2) Commercial Banks

Commercial banks are regulated under - the Banking Regulation Act of 1949, and their business model has been constructed to make profits.

The primary function of the commercial bank is to accept deposits and offer loans to the public, businesses, and the government. A commercial bank is further divided into the following:

a) Private Sector Banks

b) Public Sector Banks

c) Regional Rural Banks

d) Foreign Banks

a) Private Sector Banks

Private sector banks are the ones with a major stake or equity being held by private shareholders. All of the banking rules and regulations laid down by the Reserve Bank of India (central bank) are applicable to private sector banks. 

Here is the list of private sector banks in India:

  1. I.C.I.C.I. Bank  
  2. R.B.L. Bank
  3. I.D.F.C. Bank  
  4. South Indian Bank
  5. IDBI Bank
  6. Tamilnad Mercantile Bank
  7. YES Bank
  8. Axis Bank
  9. City Union Bank  
  10. Karnataka Bank
  11. Dhanlaxmi Bank  
  12. Kotak Mahindra Bank
  13. D.C.B. Bank
  14. Karur Vysya Bank
  15. Federal Bank
  16. Lakshmi Vilas Bank
  17. H.D.F.C. Bank  
  18. Nainital Bank 
  19. IndusInd Bank
  20. Bandhan Bank
  21. Jammu and Kashmir Bank

b) Public Sector Banks

A public sector bank is a nationalized bank, and it accounts for more than 75% of the total banking sector in the country. They are banks with a majority of the stakes held by the government.

Here is a list of public sector banks in India:

  1. Bank of Maharashtra
  2. Indian Bank
  3. Bank of Baroda
  4. Canara Bank
  5. State Bank of India
  6. Central Bank of India
  7. Union Bank of India
  8. Indian Overseas Bank
  9. UCO Bank
  10. Punjab & Sind Bank
  11. Bank of India
  12. Punjab National Bank

c) Regional Rural Banks

A regional bank is a scheduled commercial bank, but it is established to provide credit to the weaker section of the society, such as marginal farmers, small businesses, and agricultural labourers. They would typically operate at a regional level in different states of the country and have branches in selected urban areas.

d) Foreign Banks

A foreign bank is a bank with its headquarters in a foreign country but also operates in other parts of the country as a private entity. These banks need to follow the regulations of the home country as well as the country where they operate.

Here is a list of foreign banks that operate in India:

  1. Australia and New Zealand Banking Group Ltd.
  2. National Australia Bank
  3. Westpac Banking Corporation
  4. Bank of Bahrain & Kuwait BSC
  5. AB Bank Ltd.
  6. Credit Agricole Corporate & Investment Bank
  7. Societe Generale
  8. Deutsche Bank
  9. HSBC Bank
  10. PT Bank Maybank Indonesia TBK
  11. Mizuho Bank Ltd.
  12. Sumitomo Mitsui Banking Corporation
  13. M.U.F.G. Bank, Ltd.
  14. Coöperatieve Rabobank U.A.
  15. Sonali Bank Ltd.
  16. Bank of Nova Scotia
  17. Industrial & Commercial Bank of China Ltd.
  18. BNP Paribas
  19. Doha Bank Q.P.S.C.
  20. Qatar National Bank (Q.P.S.C.)
  21. JSC VTB Bank
  22. Sberbank
  23. United Overseas Bank Ltd
  24. FirstRand Bank Ltd
  25. Shinhan Bank
  26. Woori Bank
  27. Barclays Bank Plc.
  28. Standard Chartered Bank
  29. The Royal Bank of Scotland plc
  30. American Express Banking Corporation
  31. Bank of America
  32. Citibank
  33. J.P. Morgan Chase Bank N.A
  34. Kookmin Bank
  35. S.B.M. Bank (India) Limited
  36. K.E.B. Hana Bank
  37. Industrial Bank of Korea
  38. Bank of Ceylon
  39. D.B.S. Bank India Limited
  40. Credit Suisse A.G.
  41. C.T.B.C. Bank Co., Ltd.
  42. Krung Thai Bank Public Co. Ltd.
  43. Abu Dhabi Commercial Bank Ltd.
  44. Mashreq Bank P.S.C.
  45. First Abu Dhabi Bank P.J.S.C.
  46. Emirates Bank NBD

3) Co-operative Banks

A Co-operative Bank is one that is registered under the Co-operative Societies Act of 1912 and is run by an elected managing committee. It works on a non-profit no-loss basis, and it will mainly serve entrepreneurs, small businesses, self-employment, and more in urban areas.

In the rural areas, they will mainly function to finance agriculture-based activities like farming, livestock, and hatcheries. There are mainly these types of Co-operative Banks:

a) State Co-operative Banks

b) Urban Co-operative Banks

a) State Co-operative Banks

A State Co-operative Bank is a federation of the central Co-operative banks that will act as a custodian of the Co-operative banking structure in the State.

b) Urban Co-operative Banks

The Urban Co-operative Bank is the primary Co-operative bank located in urban and semi-urban areas. The banks essentially lent to smaller borrowers and businesses centred around a community, locality, and more. 

4) Payments Banks

The payments banks are a relatively new banking model in the country that has been conceptualized by the RBI. This bank is allowed to accept a restricted deposit. This amount is limited to Rs. 1 lakh for a customer.

The bank also offers services such as ATM cards, net banking and more.

5) Scheduled Banks

These banks are covered under the 2nd Schedule of RBI Act 1934, and they need to have a paid-up capital of Rs. 5 lakh or more. 

6) Non-Scheduled Banks

The non-scheduled banks are local area banks that are not listed in the 2nd Schedule of the RBI Act 1934.

7) Small Finance Banks

It Is a niche small finance bank in India with the objective of providing financial inclusion to sections of society that have not been served by other banks. The core customers of this bank are inclusive micro industries, unorganized sector entities, marginal farmers, and more.

This type of bank is licensed under Section 22 of the Banking Regulation Act 1949 and it is governed by the Provisions Act of 1934.

  1. AU Small Finance Bank Ltd.
  2. Utkarsh Small Finance Bank Ltd.
  3. Fincare Small Finance Bank Ltd.
  4. Ujjivan Small Finance Bank Ltd.
  5. Jana Small Finance Bank Ltd.
  6. ESAF Small Finance Bank Ltd.
  7. Suryoday Small Finance Bank Ltd.
  8. Equitas Small Finance Bank Ltd.
  9. Capital Small Finance Bank Ltd.
  10. North East Small Finance Bank Ltd.

Banking - FAQs

What is the meaning of banking?

Banking is the function of financial institutions that hold deposits and offer loans.

How many public sector banks does India have?

India has 12 nationalized banks.

What kinds of accounts does a bank offer?

Banks offer different types of accounts, and they are:

  • Checking accounts
  • Savings accounts
  • Taxable brokerage accounts
  • Certificate of deposit
  • Money market accounts, and more

Do small finance banks provide debit cards?

Yes, small finance banks also provide debit cards, internet banking, and more.

Are non-scheduled banks entitled to borrow from the central bank?

Non-scheduled banks can only borrow from the RBI when there is an emergency.

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