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Types of Bank in India
- Commercial Banks:These banks primarily focus on accepting deposits and providing loans to the public. They include:
- Public Sector Banks:Owned and operated by the government, examples include State Bank of India (SBI), Bank of Baroda, and Punjab National Bank.
- Private Sector Banks:Owned and operated by private entities, examples include HDFC Bank, ICICI Bank, and Axis Bank.
- Foreign Banks:Banks incorporated outside India, with branches operating in India, like Deutsche Bank and Citibank.
- Public Sector Banks:Owned and operated by the government, examples include State Bank of India (SBI), Bank of Baroda, and Punjab National Bank.
- Cooperative Banks:These banks operate on the principle of cooperation and serve specific communities or regions. They include Urban Cooperative Banks and State Cooperative Banks.
- Regional Rural Banks (RRBs):These banks focus on providing banking services to rural areas, supporting agricultural and rural development.
- Small Finance Banks:These banks focus on providing basic banking services to unserved and underserved sections of the population, such as small businesses and micro-enterprises.
- Payments Banks:These banks focus on facilitating payments and remittances, offering services like digital wallets and fund transfers.
- Local Area Banks (LABs):These banks operate within a specific local area and focus on providing financial services to that region.
- Financial Institutions:These institutions provide financial services like lending, investment, and other financial products, including development financial institutions and specialized institutions.
Banks are financial institutions that perform deposit and lending functions. There are various types of banks in India and each is responsible for performing different functions.
In terms of the government exam syllabus, a candidate must know the types of banks and the role of each of them in managing the financial system of a country.
The bank takes deposits at a much lower rate from the public called the deposit rate and lends money at a much higher rate called the lending rate.
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
This is an important topic for the IAS Exam. In this article, aspirants will get information on the banking system in India, its functions, and the type of banks in India.
The types of banks in India, their functions and the list of banks under each section form a very important part of the banking awareness syllabus which is included in most Government exams.
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:
Acceptance of deposits from the public
Provide demand withdrawal facility
Lending facility
Transfer of funds
Issue of drafts
Provide customers with locker facilities
Dealing with foreign exchange
Apart from the above-mentioned list, various utility functions also need to be performed by the various banks.
Aspirants can read about different bank exams in the linked article.
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, the government and NABARD. Money is then distributed to the public
Concessional CRR and SLR apply 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:
Public sector Banks – A bank where the majority stakes are owned by the Government or the central bank of the country.
Private sector Banks – A bank where the majority stakes are owned by a private organization or an individual or a group of people
Foreign Banks – The banks with their headquarters in foreign countries and branches in our country, fall under this type of bank
Given below is the list of commercial banks in our country:
Given below is the list of commercial banks in our country:
| Commercial Banks in India | ||
| Public Sector Banks | Private Sector Banks | Foreign Banks |
| 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 Dena Bank Indian Bank Indian Overseas Bank Oriental Bank of Commerce Punjab National Bank Punjab & Sind Bank Syndicate Bank Union Bank of India United Bank of India UCO Bank Vijaya Bank IDBI Bank Ltd. | 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 Financial Services. | 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 special types of commercial Banks that provide concessional credit to agriculture and rural sectors.
RRBs were established in 1975 and are registered under the Regional Rural Bank Act, 1976.
RRBs are joint ventures between the Central government (50%), State government (15%), and a Commercial Bank (35%).
196 RRBs have been established from 1987 to 2005.
From 2005 onwards government started the merger of RRBs thus reducing the number of RRBs to 82
One RRB cannot open its branches in more than 3 geographically connected districts.
Aspirants can check the list of Regional Rural banks in India in the linked article.
Local Area Banks (LAB)
Introduced in India in the year 1996
These are organized by the private sector
Earning profit is the main objective of Local Area Banks
Local Area Banks are registered under Companies Act, 1956
At present, there are only 4 Local Area Banks all of which are located 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) – Loans for a small-scale industry or business can be taken from SIDBI. Financing small industries with modern technology and equipment 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.
There are various other specialized banks and each possesses a different role in helping develop the country financially.
Small Finance Banks
As the name suggests, this type of bank looks after the micro industries, small farmers, and the unorganized sector of society by providing them with loans and financial assistance. These banks are governed by the central bank of the country.
Given below is the list of the Small Finance Banks in our country:
| AU Small Finance Bank | Equitas Small Finance Bank | Jana Small Finance Bank | Northeast Small Finance Bank |
| Capital Small Finance Bank | Fincare Small Finance Bank | Suryoday Small Finance Bank | Ujjivan Small Finance Bank |
| Esaf Small Finance Bank | Utkarsh Small Finance Bank |
Payments Banks
A newly introduced form of banking, the payments bank has been conceptualized by the Reserve Bank of India. People with an account in the payments bank can only deposit an amount of up to Rs.1,00,000/- and cannot apply for loans or credit cards under this account.
Options for online banking, mobile banking, the issue of ATMs, and debit cards can be done through payments banks. Given below is a list of the few payments banks in our country:
- Airtel Payments Bank
- India Post Payments Bank
- Fino Payments Bank
- Jio Payments Bank
- Paytm Payments Bank
- NSDL Payments Bank