Banks are financial organizations that perform lending as well as deposit activities. There are various kinds of banks in India, and each one has a certain function. As these banks are crucial to the management of a nation’s financial system, applicants preparing for government exams must be familiar with these sorts of banks and their functions.It’s crucial to know what each kind of bank performs, particularly if you’re preparing for an exam like the IAS Exam. This aids in educating you about the functions of various banks and the Indian banking system. It’s a major component of the banking knowledge required for government exams.
There are two primary divisions in the Indian banking system: scheduled and non-scheduled banks. The main participants are scheduled banks, which are designated under the Reserve Bank of India Act and are governed by more stringent laws. This guarantees their financial stability. These consist of international banks operating branches in India, as well as private and public sector banks. Scheduled banks provide more services, such as loans, deposits, and payment processing.
In contrast, non-scheduled banks operate outside this list and have fewer regulations. They typically cater to niche areas or serve specific communities, like cooperative banks. While they may offer loans, they cannot accept deposits from the public. This limited scope makes them less prominent in the overall financial landscape.
The Reserve Bank of India’s Second Schedule lists scheduled banks, which are the foundation of the country’s financial system. They offer a wide range of financial services and are subject to strict rules to maintain stability. This comprises foreign banks with worldwide experience, private sector banks like HDFC, renowned for innovation, and public sector banks like State Bank of India, respected for their wide reach.
Scheduled banks are essential to the economy because they take deposits from people and companies and use them for loans, investments, and payment services. Their widespread presence in India’s rural and urban areas plays a crucial role in promoting financial inclusion and economic prosperity.
Every nation has a central bank that is in charge of all the other banks there. The Reserve Bank of India is the name of our nation’s central bank. The central bank’s primary responsibilities include acting as the nation’s government bank and directing and supervising the other banks. The following are some of a central bank’s duties:
To put it simply, the nation’s central bank functions as a banker for the other banks. It looks out for them and runs the financial system, all under government supervision.
These banks operate under state government regulations and specialize in providing short-term loans to the agriculture sector and related activities. Their primary objective is to foster social welfare by offering concessional loans. They are structured into three tiers:
In India, non-scheduled banks function independently of the primary banking network. They are subject to fewer regulations and are often smaller than scheduled banks because they are not included in the Reserve Bank of India’s Second Schedule. These banks frequently concentrate on particular industries or target demographics. State cooperative banks, for instance, support their communities by lending money, but they are not allowed to accept public deposits. Non-scheduled banks are riskier and have less of an impact on India’s financial system than scheduled banks because they are subject to fewer regulations.
Commercial banks operate under the Banking Companies Act of 1956 and follow a profit-first strategy. They are owned by the government, state organizations, or private citizens and have a single organizational structure. Unless instructed by the RBI, these banks, which serve a range of industries in both rural and urban areas, often don’t give concessional interest rates. Public deposits are the main source of funding for them.
Commercial banks are further categorized into three types:
Below is a 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 BankCity 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 |
Some banks are designed to serve specific purposes, known as specialized banks. These include:
There are several other specialized banks, each playing a distinct role in the financial development of the country.
This category of banks, as implied by its name, caters to micro-industries, small farmers, and the unorganized sector of society by offering them loans and financial aid. These banks are regulated 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 |
Capital Small Finance Bank | Fincare Small Finance Bank |
Esaf Small Finance Bank | Utkarsh Small Finance Bank |
Jana Small Finance Bank | Northeast Small Finance Bank |
Suryoday Small Finance Bank | Ujjivan Small Finance Bank |
In India, payment banks are a relatively new kind of bank that was formed with the express goal of addressing financial inclusion for the underbanked and unbanked populations. These banks were established in 2015 and support small enterprises and individuals, especially those residing in underserved and rural areas. The maximum deposit amount for someone with a payments bank account is Rs. 1,00,000; they are not eligible to apply for credit cards or loans. In addition to services like ATMs and debit cards, payment banks also provide internet and mobile banking. Here are a few payment banks that are active in our nation:
Banks act as the backbone of any economy, playing a crucial role in the flow of money and facilitating financial activities. Their functions can be broadly categorized into two main types: primary functions and secondary functions.
Primary Functions:
Secondary Functions:
In addition to their primary functions, banks offer a wide range of secondary services that benefit both individuals and businesses. These include:
By performing these functions, banks contribute significantly to the smooth functioning of an economy. They ensure the safety and availability of money, promote investment and economic growth, and provide a variety of financial services that cater to the needs of individuals and businesses.
List of Top 10 Banks in India
Housing Development Finance Corporation Ltd. ( HDFC Bank Ltd)
State Bank Of India (SBI)
ICICI Bank.
Axis Bank.
Kotak Mahindra Bank.
IndusInd Bank.
Yes Bank.
Punjab National Bank.
Commercial banks are of three types i.e., Public sector banks, Private sector banks and Foreign banks.
The functions of commercial banks are of two types – Primary functions and Secondary functions. The primary functions of a commercial bank are accepting deposits and granting loans & advances.If the rate of interest is higher, the public is motivated to deposit more funds with the bank. The second important function of a commercial bank is to grant loans and advances. Such loans and advances are given to members of the public and to the business community at a higher rate of interest than allowed by banks on various deposit accounts. The secondary functions of banks are issuing letters of credit, cheques, demand draft, transferring money from one account to another, providing locker facilities etc.
Repo rate is the rate at which the RBI lends to commercial banks by purchasing securities while bank rate is the lending rate at which commercial banks can borrow from the RBI without providing any security.
The three main types of transactions include checks, withdrawals and deposits.
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