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