Banking In India

List of Different types of Banks in India

By October 27, 2022 No Comments

Banks are financial institutions that handle lending and deposit activities. In India, there are many different kinds of banks, and each is accountable for carrying out certain tasks. The public can deposit money with the bank at a considerably lower rate known as the deposit rate, and the bank can lend money at a much higher rate known as the lending rate. IPB one of the best banking training institute in india will let you know more about different types of banks in india.
There are several different sorts of banks. The different types of banks in India are listed below: –

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

Tasks of Banks

The main tasks performed by banks are essentially the same, however the population that each sector or type deals with may be different. Following are the duties performed by Indian banks:

  • Deposits from the public are accepted
  • Provide a facility for demand withdrawal.
  • Lending facility
  • Funds Transfer
  • Issuance of draughts
  • The provision of lockers for clients
  • Handling foreign exchange

The various banks must additionally carry out a number of utility tasks in addition to the ones on the list above.

Central Bank

Every nation has a central bank that oversees all of the other banks in that nation.
The central bank’s primary duties include serving as the government’s bank and directing and supervising all other banking institutions in the nation. The duties of a nation’s central bank are listed below:

  • Guiding other banks
  • Issuing currency
  • Putting the monetary policies into action
  • The financial system’s supervisor

In other words, because it supports the nation’s other banks and oversees the nation’s financial system while working under the direction of the government, the central bank of the nation may also be referred to as the banker’s bank.

Regional Rural Banks (RRB)

Regional Rural Banks (RRB) are a unique class of commercial banks that offer agribusiness and rural businesses subsidised lending.

  • The Regional Rural Bank Act of 1976 governs the registration of RRBs, which were formed in 1975.
  • RRBs are joint ventures between a Commercial Bank (35%), a State government (15%), and the Central government (50%).
  • 196 RRBs were founded between 1987 and 2005.
  • The government began merging RRBs in 2005, bringing the total number of RRBs down to 82.
  • More than three districts that are geographically connected cannot have branches of the same RRB.

Local Area Banks (LAB)

  • First established in India in 1996.
  • The private sector is in charge of organising these
  • The primary goal of Local Area Banks is to make a profit.
  • Local Area Banks are licenced under the 1956 Companies Act.

There are now only 4 local banks, all of which are in South India.

Specialized Banks

Certain banks are introduced for specific purposes only. Such banks are called specialized banks. These include:

Small Industries Development Bank of India (SIDBI) – Loan for a small scale industry or business can be taken from SIDBI. Financing small industries with modern technology and equipments is done with the help of this bank

EXIM Bank – EXIM Bank stands for Export and Import Bank. To get loans or other financial assistance with exporting or importing goods by foreign countries can be done through this type of bank

National Bank for Agricultural & Rural Development (NABARD) – To get any kind of financial assistance for rural, handicraft, village, and agricultural development, people can turn to NABARD.

Cooperative Banks

The state government’s act governs the organization of these banks. The agricultural industry and other related businesses receive short-term loans from them.
Cooperative banks’ primary objective is to advance social welfare by offering low-interest loans.

They are set up in a three-tiered 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

  • Organized under the Banking Companies Act, 1956
  • Their primary goal is to make money, and they function on a commercial basis.
  • They are held by the federal, state, or any private body and have a uniform structure.
  • They typically work in both rural and urban areas.
  • Unless the RBI instructs them otherwise, these banks don’t charge discounted interest rates.
  • The primary source of funding for these institutions is public deposits.

Three additional categories can be used to further divide the commercial banks:

  • Public sector banks – A bank that is primarily owned by the government or the nation’s central bank.
  • Private sector banks: Those banks that are majorly owned by a private company, person, or group of persons.
  • Foreign Banks – The banks with their headquarters in foreign countries and branches in our country, fall under this type of bank