Different Types Banks India – Know All types of Banks In India

Different Types Banks India – Know All types of Banks In India

 

Broadly speaking, banks can be classified into commercial banks and central bank. Commercial banks are those which provide banking services for profit. The central bank has the function of controlling commercial banks and various other economic activities. There are many types of commercial banks such as deposit banks, industrial banks, savings banks, agricultural banks, exchange banks, and miscellaneous banks.

Download Free Study Material

Different Types Banks India – Know All types of Banks In India

Different Types Banks India – Know All types of Banks In India

Deposit Banks

  • The most important type of deposit banks is the commercial banks.
  • They have connection with the commercial class of people.
  • These banks accept deposits from the public and lend them to needy parties.
  • Since their deposits are for short period only, these banks extend loans only for a short period.
  • Ordinarily these banks lend money for a period between 3 to 6 months.
  • They do not like to lend money for long periods or to invest their funds in any way in long term securities.

Industrial Banks

Different Types Banks India – Know All types of Banks In India

Industries require a huge capital for a long period to buy machinery and equipment. Industrial banks help such industrialists. They provide long term loans to industries. Besides, they buy shares and debentures of companies, and enable them to have fixed capital. Sometimes, they even underwrite the debentures and shares of big industrial concerns.

To Download This File Click On The Download- Download Now 

The important functions of industrial banks are:

  1. They accept long term deposits.
  2. They meet the credit requirements of industries by extending long term loans.
  3. These banks advise the industrial firms regarding the sale and purchase of shares and debentures.

The industrial banks play a vital role in accelerating industrial development. In India, after attainment of independence, several industrial banks were started with large paid up capital.

Here are the Some Of Industrial Banks 

  • The Industrial Finance Corporation (I.F.C.)
  • The State Financial Corporations (S.F.C.)
  • Industrial Credit and Investment Corporation of India (ICICI)
  • Industrial Development Bank of India (IDBI) etc.

Savings Banks

Different Types Banks India – Know All types of Banks In India

  • These banks were specially established to encourage thrift among small savers and therefore, they were willing to accept small sums as deposits.
  • They encourage savings of the poor and middle class people. In India we do not have such special institutions, but post offices perform such functions.
  • After nationalisation most of the nationalised banks accept the saving deposits.

Agricultural Banks

Agriculture has its own problems and hence there are separate banks to finance it. These banks are organised on co-operative lines and therefore do not work on the principle of maximum profit for the shareholders. These banks meet the credit requirements of the farmers through term loans, viz., short, medium and long term loans.

There are two types of agricultural banks

  • Agricultural Co-operative Banks, and
  • Land Mortgage Banks. Co-operative Banks are mainly for short periods. For long periods there are Land Mortgage Banks. Both these types of banks are performing useful functions in India.

Exchange Banks

  • These banks finance mostly for the foreign trade of a country.
  • Their main function is to discount, accept and collect foreign bills of exchange.
  • They buy and sell foreign currency and thus help businessmen in their transactions.
  • They also carry on the ordinary banking business.
  • In India, there are some commercial banks which are branches of foreign banks.
  • These banks facilitate for the conversion of Indian currency into foreign currency to make payments to foreign exporters.
  • They purchase bills from exporters and sell their proceeds to importers.
  • They purchase and sell “forward exchange” too and thus minimise the difference in exchange rates between different periods, and also protect merchants from losses arising out of exchange fluctuations by bearing the risk.
  • The industrial and commercial development of a country depends these days, largely upon the efficiency of these institutions.

Scheduled Banks

  • By definition, any bank which is listed in the 2nd schedule of the Reserve Bank of India Act, 1934 is considered a scheduled bank. The list includes the State Bank of India and its subsidiaries (like State Bank of Travancore), all nationalised banks (Bank of Baroda, Bank of India etc), regional rural banks (RRBs), foreign banks (HSBC Holdings Plc, Citibank NA) and some co-operative banks.
  • These also include private sector banks, both classified as old (Karur Vysya Bank) and new (HDFC Bank Ltd).
  • To qualify as a scheduled bank, the paid up capital and collected funds of the bank must not be less than Rs5 lakh. Scheduled banks are eligible for loans from the Reserve Bank of India at bank rate, and are given membership to clearing houses.

Non-scheduled Banks

  • Non-scheduled banks by definition are those which are not listed in the 2nd schedule of the RBI act, 1934. Banks with a reserve capital of less than 5 lakh rupees qualify as non-scheduled banks.
  • Unlike scheduled banks, they are not entitled to borrow from the RBI for normal banking purposes, except, in emergency or “abnormal circumstances.” Jammu & Kashmir Bank is an example of a non-scheduled commercial bank.

Co-operative Banks

  • Co-operative banks operate in both urban and non-urban areas. All banks registered under the Cooperative Societies Act, 1912 are considered co-operative banks. These are banks run by an elected managing committee with provisions of members’ rights and a set of “communally developed and approved bylaws and amendments
  • In the urban centers, they mainly finance entrepreneurs, small businesses, industries, self-employment and cater to home buying and educational loans. Likewise, co-operative banks in the rural areas primarily cater to agricultural-based activities, which include farming, livestocks, dairies and hatcheries etc. They also extend loans to small scale units, cottage industries, and self-employment activities like artisanship.
  • Unlike commercial banks, who are driven by profit, co-operative banks work on a “no profit, no loss” basis.
  • These are regulated by the Reserve Bank of India under the Banking Regulation Act, 1949 and Banking Laws (Application to Co-operative Societies) Act, 1965.

Regional Rural Banks

  • Regional Rural Banks or RRBs, simply put, serve the rural areas and agricultural sectors with basic banking and adequate financial services.
  • They were set up in 1975, based on the recommendations of a committee.
  • Based in Moradabad, Prathama Bank, established on 2 October 1975, is the first RRB to open in India.
  • It was sponsored by Syndicate Bank. The RRBs are owned by the central government (50%), the state government (15%) and the sponsor bank (35%).
  • Several commercial banks have sponsored RRBs.
  • Prominent examples include the Maharashtra Gramin Bank (sponsored by the Bank of Maharashtra) and the Himachal Gramin Bank (sponsored by Punjab National Bank).
  • RRBs were set up to eliminate other unorganized financial institutions like money lenders and supplement the efforts of co-operative banks.