Types of Banks in India and their functions

Reserve Bank of India:

RBI is the Central Bank of India, which acts as a banker to the government

It is also called as “Bankers bank”, because all banks will have accounts with RBI. It provides funds to all banks hence it is called as BANKERS BANK

RBI was established by an act of Parliament in 1934

It has four zonal offices at Mumbai, Kolkata, Chennai and Delhi and 19 regional offices

Current Governor: Dr. Raghuram Rajan

Deputy Governors: H R Khan, Dr Urjit Patel, R Gandhi and S S Mundra

Head office: Mumbai

Functions:

 Issues currency notes

Acts as bankers bank

Maintain foreign exchange reserves

Maintains CRR and SLR

Its affairs are regulated by 21-member central board of directors: Governor (Dr. Raghuram Rajan), 4 deputy Governors, 2 Finance Ministry representatives, 10 Government-nominates directors,4 directors to represent local boards

Policy Rates, Reserve Ratios, Lending and Deposit Rates 

Bank Rate: 9:00%

Repo Rate: 8:00%

Reverse Repo Rate: 7:00%

Cash Reserve Ratio (CRR): 4%

Statutory Liquidity Ratio (CRR): 22.00%

Base Rate: 10.00%-10.25%

Savings Deposit Rate: 4%

Term Deposit Rate: 8.00%-9.5%

Currency notes other than one rupee notes are issued by RBI

The initial share capital for RBI was Rs. 5 Crores

Scheduled Commercial Banks:

Scheduled Commercial banks are: 

State Bank of India and its associates (State bank of India has got 7 subsidiaries they are State bank of Hyderabad, State bank of Mysore, State bank of Travancore, State bank of Indore, State bank of Sourashtra, State bank of Bikaneer, State bank of Jaipur), 

Nationalized Banks,

Private Sector Banks, 

Regional Rural Banks, 

Urban Cooperative Banks, 

State Cooperative Banks

Public Sector Banks: State Bank of India and associate banks + 20 nationalized banks are called public sector banks

Nationalized Banks:

Nationalized banks are the banks which are owned and run by government of India

There are total of 20 nationalized banks

In 1969, 14 banks were nationalized

In 1980, 6 banks were nationalized

Nationalized banks are Allahabad bank, Andhra bank, Bank of Baroda, Bank of India, Bhartiya Mahila bank, Canara bank, Central Bank of India, Corporation bank, Dena bank, IDBI bank, Indian bank, Indian Overseas bank, Oriental Bank of Commerce, Punjab National bank, Punjab & Sind bank, Syndicate bank, UCO bank, Union bank of India, United bank of India, Vijaya bank

Private Banks:

Private Banks are the banks which are owned and run by individuals

Private banks are split into two groups by financial regulators in India they are

Old Private sector banks: The banks which were not nationalized at the time of bank nationalization that took place during 1969 and 1980 are known as old private sector banks.

New Private Sector Banks: Banks which came in operation after 1991, with the introduction of economic and financial sectors reforms are called “new private-sector banks”

These banks were formed as per RBI guidelines 1993

These banks should have a minimum net worth of Rs.200 Crores

The promoters holding should be a minimum of 25% of the paid-up capital

Within 3 years of the starting of the operations, the bank should offer shares to public and their net worth must increased to 300 Crores.

New private-sector banks in India are Axis Bank, Bank of Punjab, Centurian Bank, Development Credit Bank, SBI Bank, ICICI Bank, IndusInd Bank, Kotak Mahindra Bank, Yes Bank, Times Bank (Merged with HDFC Bank Ltd.), Global Trust Bank (Merged with Oriental Bank of Commerce), Balaji Corporation Bank Limited

Foreign Banks:

Banks which are foreign originated are called foreign banks

Regional Rural Banks (RRB’S)

Regional rural banks were established on 26^th September, 1975

RRB’S comes under scheduled commercial banks

Main aim of RRBs is financial resources for rural/semi-urban areas and providing loans to small and marginal farmers, agricultural labourers and rural artisans.

RRB works under supervision of NABARD (National Bank for Agricultural and Rural Development)

Functions of RRBs:

Providing banking facilities to rural and semi-urban areas

Carrying out government operations like disbursement of wages of MGNREGA workers, distribution of pensions etc. 

Providing Para-Banking facilities like locker facilities and credit cards

Share Capital in RRB’s: Central Government: 50%

                                           Sponsored bank: 35%

                                           State government: 15%

Co-operative Banks:

The main purpose of co-operative banks is to co-operate small scale industries, and to provide small loans

Industrial Banks:

The main purpose of Industrial banks is provide big loans to large scale industries,

Some of the Industrial banks are IDBI bank, Industrial bank of India etc.