Types of Banks part 2

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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:

Types of Bank

Types of Bank

Types of Bank

Central Bank

The Reserve Bank of India is the central bank of our country. A Bank which is entrusted with the functions of guiding and regulating the banking system of a country is known as its Central bank. Such a bank does not deal with the general public. No other Bank than the Central Bank can issue currency.

It acts essentially as Government’s banker; maintain deposit accounts of all other banks and advances money to other banks, when needed. whenever they face any problem. It is therefore. The Central Bank maintains records of Government revenue and expenditure under various heads. It also advises the Government on monetary and credit policies and decides 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 Bank is the issuance of currency notes, regulating their circulation in the country by different methods.

Commercial Banks

Commercial Banks are banking institutions that accept deposits and grant short erm loans and advances to their customers. Commercial banks also give medium-term and long-term loan to business enterprises. Now-a-days some of the commercial Banks are also providing housing loan on a long-term basis to individuals.

Types of Commercial Banks

Public Sector Banks

In Public sector banks 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, Punjab National Bank, Canara Bank, Bank of India and Oriental Bank of Commerce, etc.

Private Sectors Banks

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., ICICI Bank Ltd., Development Credit Bank Ltd, Lord Krishna Bank Ltd., Bharat Overseas Bank Ltd., Global Trust Bank, ING Vysya Bank, etc.

Foreign Banks

These Banks are registered and have their headquarters in a foreign country but operate their branches in our country. For example, Hong Kong and Shanghai Banking Corporation (HSBC), Citibank, American Express Bank, Standard & Chartered Bank, Grind lay’s Bank, etc. The number of foreign banks operating in our country has increased since the financial sector reforms of 1991.

Development Banks

Business often requires medium and long-term capital for purchase of machinery and equipment, for using latest technology, or for expansion and modernization. Such financial assistance is provided by Development Banks. They also undertake other development measures like Public Sector Banks comprise 19 nationalized banks and State Bank of India and its 7 associate Banks subscribing to the shares and debentures issued by companies, in case of under subscription of the issue by the public. Industrial Finance Corporation of India (IFCI) and State Financial Corporations (SFCs) are examples of development banks in India.

Co-Operative Banks

A co-operative Bank is a financial entity which belongs to its members, who are at the same time the owners and the customers of their bank. Co-operative banks are often formed by persons belonging to the same local or professional community or sharing a common interest. Co-operative banks generally provide a wide range of banking and financial services to their members. People who come together to jointly serve their common interest often form a cooperative 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 banking business.

Types of Co-Operative Banks

There are three types of co-operative banks operating in our country. They are primary credit societies, central co-operative banks and state co-operative banks. These banks are organized at three levels, village or town level, district level and state level.

Primary Credit Societies

Primary credit societies 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.

Central Co-Operative Banks

Central co-operative banks operate at the district level having some of the primary credit societies belonging to the same district as their members. These banks provide loans to their members (i.e., primary credit societies) and function as a link between the primary credit societies and state co-operative banks.

State Co-Operative Banks

These are the apex (highest level) cooperative banks in all the states of the country. They mobilise funds and help in its proper channelization among various sectors. The money reaches the individual borrowers from the state co-operative banks through the central co-operative banks and the primary credit societies.

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