Hello friends how are you? I hope you are doing well. For solving multiple choice questions we need to focus on the theory also. As mentioned in the last post, today we will study about TYPE OF BANKS. Without further due, let’s begin.
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TYPE OF BANKS
There are various types of banks which operate in our country to meet the financial requirements of different categories of people engaged in agriculture, business, profession, etc. On the basis of functions, the banking institutions in India may be divided into the following types
- CENTRAL BANK (RBI, in India)
- Commercial Banks
(a) Public sector banks
(b) Private sector banks
(c) Foreign banks
- Development Banks (IFCI, SFC’s, SIDBI, NABARD)
- Co-operative Banks
(a) State Co-operative Banks
(b) Central Co-operative Banks
(c) Primary Credit Societies
- Specialised banks (EXIM Bank)
A bank which is entrusted with the functions of guiding and regulating the banking system of a country is known as it’s Central Bank. Such a bank does not deal with general public. It acts essentially as Government’s banker, maintain deposit accounts for all other banks and advances money to other banks, when needed. The Central Bank also provides guidance to other banks whenever they face any problem. It is therefore known as banker’s bank. The Reserve Bank of India is the central bank of our country. The Central Banks maintains record of Government revenue and expenditure under various heads. It also advises the Government on monetary and credit policies and decided on the interest rates for bank deposits and bank loans. In addition, foreign exchange rates are also determined by the Central bank. Another important function of the Central Banks is the issuance of currency notes, regulating their circulation in the country by different methods. No other bank than the Central Bank can issue currency.
A commercial bank is an institution that provides services such as accepting deposits, providing business loans, and offering basic investment products. The main function of a commercial bank is to accept deposit from the public for the purpose of lending money to the borrowers. Commercial bank can also refer to a bank, or a division of a large bank, which more specifically deals with deposit and loan services provided to corporations or large/middle-sized business – as opposed to individual members of the public/small business.
TYPE OF COMMERCIAL BANKS
PUBLIC SECTOR BANKS
These are banks where majority stake is held by the Government Of India or Reserve Bank of India. Examples of public sector banks are: State Bank Of India, Corporation Bank, Bank of Baroda and Dena Bank, etc.
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PRIVATE SECTOR BANKS
In case of private sector banks majority of share capital of the bank is held by private individuals. These banks are registered as companies with limited liability. For example: The Jammu and Kashmir Bank Ltd.., Bank of Rajasthan, Development Credit Bank Ltd., Lord Krishna Bank, etc.
These banks are registered and have their headquarters in a foreign country but operate their branches in our country. Some of the foreign banks operating in our country are: HONG KONG and Shanghai Banking Corporation (HSBC), Citibank, American Express, Standard & Chartered Bank, Grindlay’s Bank etc. The number of foreign banks operating in our country has increased since financial sector reforms of 1991. According to a report by RBI there are 45 foreign banks branches in India as on January 31, 2018.
Business often requires medium and long-term capital for purchase of machinery and equipment, for using latest technology, or for expansion and modernisation. Such financial assistance is provided by Development Banks. They also undertake other development measures like subscribing to the shares and debentures issued by companies, in case of under subscription of the issue by public. Industrial Finance Corporation of India (IFCI) and STATE FINANCE CORPORATIONS (SFCs) are examples of development banks in India.
People who come together to jointly serve their common interest often form a co-operative society under the CO-OPERATIVE SOCIETIES ACT. When a co-operative society engages itself in banking business it is called a CO-Operative Bank.
The society has to obtain a license from the RESERVE BANK OF INDIA before starting baking business. Any co-operative bank as a society has to function under the overall supervision of the REGISTRAR, Co-operative Societies of the State. As regards banking business, the society must follow the guidelines set issued by the RESERVE BANK OF INDIA.
TYPES OF CO-OPERATIVE BANKS
STATE CO-OPERATIVE BANK
These are the apex (highest level) co-operative banks in all the states of the country. They mobilise funds and help in it’s proper channelisation among various sector. The money reaches the individual borrowers from the state co-operative banks through the central co-operative banks and the primary credit societies.
CENTRAL CO-OPERATIVE BANKS
These banks operate at the district level having some of the primary credit societies belonging to the same district as the members. These banks provide loans to their members and function as a link between the primary credit societies and state co-operative banks.
PRIMARY CREDIT SOCIETIES
These are formed at the village or town level with borrower and non-borrower members residing in one locality. The operations of each society are restricted to a small area so that the members know each other and are able to watch over the activities of all members to prevent frauds.
There are some banks, which cater to the requirements and provide overall support for setting up business in specific areas of activity. EXIM Bank, SIDBI and NABARD are examples of such banks. They engage themselves in some specific area or activity and thus, are called specialised banks.
So, that’s it for today friends. I hope you will go through the whole article to understand better about type of banks. In the next post, we will study about the FUNCTIONS OF COMMERCIAL Banks.
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