Banks are financial institutions that deal in money and credit. They accept deposits from the general public and extend loans for various purposes such as consumption and investment. They offer a rate of interest on the deposits (borrowing rate) and charge a rate of interest on the amount they lend (lending rate).
The following are the different types of banks:
i. Commercial banks - These banks are governed by the Indian Banking Regulation Act of 1949. They provide credit to the general public. Commercial banks are of three types:
a. Public sector banks - These are the banks in which the majority of the stake is held by the Government of India or Reserve Bank of India. State Bank of India and Bank of Baroda are the examples of public sector banks.
b. Private sector banks - These are the banks in which the majority of the stake is held by private parties. Bank of Rajasthan and ING Vyasa Bank are the examples of public sector banks.
c. Foreign sector banks - These banks are registered in foreign countries. Their headquarters are also located in foreign countries. HSBC and American Express are examples of foreign sector banks.
ii. Co-operative banks - These banks are governed by the provisions of the State Co-operative Societies Act. They provide cheap credit to their members only. They are of three types:
a. Primary credit banks - These are formed by the members of one locality such as a village or town. The borrowers and depositors all belong to the same society.
b. District central co-operative banks - These banks have their operations at the district level and they act as a link between primary credit societies and state co-operative societies.
c. State co-operative banks - These banks have their operations in a state. They mobilise savings from the depositors and channelise them to various sectors.
iii. Specialised banks - These banks provide credit to industrial units and export-import units. They are classified into three types:
• Export-Import Bank of India (EXIM Bank) - The bank provides funds for setting up an export or import business.Small Industries Development
• Bank of India (SIDBI) - It was set up to provide direct and indirect financial assistance under different schemes. It caters to the credit and finance requirements of small-scale enterprises.
• National Bank for Agricultural and Rural Development (NABARD) - It was established in 1982 with the main objective of promoting rural development and integrating efforts in this direction.
iv. Central bank - This is the apex financial institution that regulates and controls the activities of all banks and financial institutions in the country. The Reserve Bank of India (RBI) is the central bank of India.
v. Development banks - These banks provide financial assistance to business houses so that they can finance their capital requirements, expansion and modernisation. State Financial Corporation’s (SFCs) and Industrial Financial Corporation of India (IFCI) are examples of development banks.
vi. Regional rural banks - These banks were established in 1975 to extend banking facilities to the rural areas. The main objective of these banks is to provide credit to small traders, farmers, etc.
vii. Exchange banks - These banks remit money from one country to another, discount foreign bills, finance export and import of goods, etc. Bank of Tokyo and Bank of America are examples of exchange banks.
viii. Indigenous bankers - These are domestic bankers that carry out banking activities in the country. These banks mainly deal in "Hundis" and promissory notes. Also, the rate of interest charged by the banks is very high.
ix. Savings bank - These banks accept small deposits from the public having a fixed income. The main objective of these banks is to encourage the habit of saving in people.
