Banking refers to the system of financial institutions, such as banks and credit unions, that provide various financial services to individuals, businesses, and governments. Banking services mainly include accepting deposits, lending money, facilitating transactions, and offering various financial products like savings accounts, loans, and credit cards.
Banking plays a crucial role in the economy by facilitating the flow of money and enabling economic activities.
Functions of Banks
Banks in India offer a wide range of banking services, such as savings and checking accounts, loans (personal, business, and mortgages), credit cards, investment services, and electronic banking options like online and mobile banking.
Some of the major functions of banks are mentioned below:
- Accepting Deposits: Banks provide a safe place for individuals and businesses to deposit their money, which can be withdrawn when needed.
- Providing Loans: Banks lend money to individuals and businesses for various purposes, such as home mortgages, business expansion, or personal loans.
- Payments and Settlements: Banks enable transactions through various payment methods, like checks, debit/credit cards, and electronic transfers.
- Currency Exchange: Many banks offer foreign exchange services, allowing customers to buy, sell, or exchange foreign currencies.
- Safekeeping of Valuables: Some banks offer safe deposit boxes for customers to securely store valuable items and documents.
- Investment Services: Banks also provide investment products like mutual funds, stocks, and bonds, helping customers grow their wealth.
- Internet Banking Services: Banks offer online and mobile banking services, making it convenient for customers to access their accounts, pay bills, and transfer funds.
Types of Banks in India
The Banking System in India is divided into several types, each serving specific functions and purposes. The table below represents the different types of banks in India and how it is further divided:
Banking Classification in India | |
Types of Banks | Sub-types |
Central Bank | - |
Commercial Banks | a) Private Sector Banks b) Public Sector Banks c) Regional Rural Banks d) Foreign Banks |
Co-operative Banks | a) State Co-operative Banks b) Urban Co-operative Banks |
Payment Banks | - |
Small Finance Banks | - |
Scheduled Banks | - |
Non-scheduled Banks | - |
1) Central Bank
The Reserve Bank of India (RBI) serves as the Central Bank of India and is responsible for regulating and controlling the monetary and banking system in the country.
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2) Commercial Banks
These are the most common types of banks and include public sector banks, private sector banks, and foreign banks. They provide various services like savings and current accounts, loans, and investments.
These are the most common types of banks and include public sector banks, private sector banks, and foreign banks. They provide various services like savings and current accounts, loans, and investments.
- Public Sector Banks: Owned and operated by the government, examples include State Bank of India (SBI), Punjab National Bank (PNB), and Bank of Baroda (BOB).
- Private Sector Banks: These are privately owned and managed banks, such as HDFC Bank, ICICI Bank, and Axis Bank.
- Foreign Banks: These banks have branches in India and are headquartered in foreign countries. Some examples are Citibank, Standard Chartered, and HSBC.
- Regional Rural Banks (RRBs): These banks cater to rural and semi-urban areas and are owned by the government, commercial banks, and state governments.
The table below shows a few examples of Commercial Banks in India.
Commercial Banks in India | |||
Public Sector Banks | Private Sector Banks | Foreign Banks | |
Here is a list of public sector banks in India:
| Here is the list of private sector banks in India:
| Here is a list of foreign banks that operate in India:
| |
3) Cooperative Banks
A Co-operative Bank 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 mainly serves entrepreneurs, small businesses, self-employment, and more in urban areas.
In rural areas, it mainly functions to finance agriculture-based activities like farming, livestock, and hatcheries. There are mainly two types of Co-operative Banks:
Types of Cooperative Bank | Description |
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. |
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) Payment Banks
The payment banks are a relatively new banking model in the country that has been conceptualised 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) Small Finance Banks
These banks primarily serve the unserved and underserved sections of the population, including small businesses and low-income individuals.
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.
Here are a few examples of Small Finance Banks in India:
- AU Small Finance Bank Ltd.
- Utkarsh Small Finance Bank Ltd.
- Fincare Small Finance Bank Ltd.
- Ujjivan Small Finance Bank Ltd.
- Jana Small Finance Bank Ltd.
- ESAF Small Finance Bank Ltd.
- Suryoday Small Finance Bank Ltd.
- Equitas Small Finance Bank Ltd.
- Capital Small Finance Bank Ltd.
- North East Small Finance Bank Ltd.
6) 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 lahks or more.
7) Non-Scheduled Banks
The non-scheduled banks are local area banks that are not listed in the 2nd Schedule of the RBI Act 1934.
Types of Bank Accounts in India
Banks offer several types of bank accounts to cater to different financial needs. These bank accounts vary from one another based on the purpose, transaction frequency and location.
Given below are the common types of bank accounts in India:
- Savings Account: This is a basic account for individuals to save money. It offers interest on deposits and allows limited withdrawals.
- Current Account: This type of account is mainly used by businesses. It has zero or very low interest rates but offers more transaction features, making it suitable for frequent transactions.
- Fixed Deposit Account: In this account, you deposit a lump sum for a fixed tenure at a higher interest rate compared to savings accounts. Funds are locked in until maturity.
- Recurring Deposit Account: It is a savings plan where you deposit a fixed amount every month, and at the end of a specified period, you receive the principal and interest.
- NRI (Non-Resident Indian) Account: These are for Indians living abroad. NRE (Non-Resident External), NRO (Non-Resident Ordinary) and FCNR (Foreign Currency Non-Residential) accounts are major types of NRI accounts.
- Senior Citizen Savings Account: Created for senior citizens, these accounts offer higher interest rates and additional benefits.
- Salary Account: This account is used by an employer to credit the salary of an employee every month. It does not have any minimum balance requirement.
- Demat Account: This account is created primarily for holding and trading in securities electronically, such as stocks and bonds.
- Joint Account: It is shared by two or more individuals, often used for family or business purposes.
- Minor Account: Opened on behalf of minors by parents or guardians. The minor gains control upon reaching a certain age.
- Corporate Account: Used by companies and corporations for their banking needs, including payroll and transactions.
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I'm an enthusiast with a deep understanding of the banking sector. My knowledge extends to the various functions of banks, types of banks in India, and the diverse range of banking services they offer. To support my expertise, I can provide detailed insights into the concepts covered in the article you shared.
Functions of Banks:
- Accepting Deposits
- Providing Loans
- Payments and Settlements
- Currency Exchange
- Safekeeping of Valuables
- Investment Services
- Internet Banking Services
Types of Banks in India:
- Central Bank (Reserve Bank of India - RBI)
- Commercial Banks
- Public Sector Banks
- Private Sector Banks
- Foreign Banks
- Regional Rural Banks (RRBs)
- Cooperative Banks
- State Co-operative Banks
- Urban Co-operative Banks
- Payment Banks
- Small Finance Banks
- Scheduled Banks
- Non-Scheduled Banks
Examples of Commercial Banks in India:
- Public Sector Banks (e.g., State Bank of India, Punjab National Bank)
- Private Sector Banks (e.g., HDFC Bank, ICICI Bank)
- Foreign Banks (e.g., Citibank, Standard Chartered)
Cooperative Banks:
- State Co-operative Banks
- Urban Co-operative Banks
Payment Banks:
- Conceptualized by RBI, limited deposit acceptance (up to Rs. 1 lakh)
Small Finance Banks:
- Serve unserved and underserved sections of the population
Scheduled Banks:
- Covered under the 2nd Schedule of RBI Act 1934 with a paid-up capital of Rs. 5 lakhs or more
Non-Scheduled Banks:
- Local area banks not listed in the 2nd Schedule of the RBI Act 1934
Types of Bank Accounts in India:
- Savings Account
- Current Account
- Fixed Deposit Account
- Recurring Deposit Account
- NRI Accounts (NRE, NRO, FCNR)
- Senior Citizen Savings Account
- Salary Account
- Demat Account
- Joint Account
- Minor Account
- Corporate Account
Feel free to ask for more specific details or any clarifications you may need.
