Banking and Types of Banks

Download PDF of This Page (Size: 286K)

Types of Banks

(a) Commercial Bank: Accept deposits from the public and grant short-term loans and advances to their customers. Also started giving medium-term and long-term loans to trade and industry.

(b) Co-operative Bank: Co-operative society engages itself in banking business is called a Co-operative Bank. Rate of interest charged is usually low. There are three types of co-operative banks operating in India.

  • Primary Credit Societies

  • Central Co-operative Banks

  • State Co-operative Banks

(c) Development Bank: Provide medium and long-term loans to industry. Assist the promotion, expansion and modernisation. They also provide technical advice and assistance, if needed.

Example: Industrial Finance Corporation of India (IFCI), State Financial Corporation’s (SFCs)

(d) Specialised Bank: There are some banks which engage themselves in some specific area or activity and are thus, called specialised banks.

Example: EXIM Bank, SIDBI, NABARD

(e) Central Bank: Entrusted with the responsibility of guiding and regulating the banking system. Apex bank and highest financial authority.

Functions of Commercial Bank

(A) Primary Functions

Accepting deposits:

  • Accept deposits from the public.

  • Public assured safety of funds deposited with bank

  • Provide different types of deposit accounts with different rates of interest like:

  • Fixed Deposit Account

  • Recurring Deposit account

  • Current Account

  • Savings Bank Account etc

Lending money:

  • Lending money to the public as well as to the business houses.

  • Takes form of loans

  • Advances to the customers at the prescribed rates of interest.

  • Loans granted for a specific period.

  • Loans and advances are generally granted against the security of certain assets

  • Provide medium term and long term loan.

(B) Secondary Functions

  • Agency services: Provided by commercial banks as agents of their customers. These include:

  • General utility services: Rendered by commercial banks not only to the customers but also to the general public. These include: