Types of Banks
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Types of Banks
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Central bank
Development Bank
Investment Bank
Cooperative Credit Bank
Regional Rural Bank
Non Banking Financial Companies
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Central Bank
The money market that acts as the central
monetary authority of the country ,
serving as the government bank as well
as the bankers’ bank is known as a central
bank of the country.
Functions- The main functions of central
bank of a country are functions of note
issue, bankers to government, bankers
bank etc.
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The RBI as the central bank of the country
is the centre of the Indian financial and
monetary system. It has been guiding,
monitoring, and regulating, controlling,
and promoting destiny of the IFS. It is
quite young compared with such central
banks as the Bank of England, Risks bank
of Sweden, and the Federal Reserve
Board of the U.S.
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Functions
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As the central banking authority of India, the
reserve Bank of India performs the following
traditional functions of the central bank:
It provides currency and operates the clearing
system for the government and banks.
It formulates and implements monetary and credit
policies.
It functions as the government’s and banker’s bank
It supervises the operations of credit institutions.
It regulates foreign exchange transactions.
It moderates the fluctuations in the exchange value
of the rupee.
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In addition to the traditional functions of the
central banking authority, the Reserve bank of
India performs several functions aimed at
developing the Indian financial system:
It seeks to integrate the unorganized financial
sector with the organized financial sector.
It encourages the extension of the commercial
banking system in the rural areas.
It influences the allocation of credit.
It promotes the development of new
institutions.
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Development Banks
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A development bank may be defined as a
financial institution concerned with
providing all types of financial assistance
to business units in the form of loans,
underwriting, investment and guarantee
operations and promotional activitieseconomic development in general and
industrial development in particular
A development bank is basically a term
lending institution. It is a multipurpose
financial institution
with a broad
development outlook.
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The concept of development banks in a
post independence phenomenon in India.
With the end of II World War there was an
urgent
need
for
speed
industrial
development in India. The usual agencies
that provided finance for large industries
were inadequate. So the govt. of India
came forward to set-up a series of financial
institution to provide funds to industries.
The industrial finance corporation of India,
the
first
development
bank
was
established in 1948. Subsequently many
other institutions were set-up. Ex. IDBI,
IFCI, SIDBI etc.
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Factors for growth of
Development Banks
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Fostering industrial growth
Long term assistant
Balanced development
Promotional services
Infrastructure building
Economic policies
Entrepreneur Development
Socio economic objectives
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Investment Banks
Meaning:- Financial intermediaries that
acquire the savings of people and direct
these funds into the business enterprises
seeking capital for the acquisition of plant
and equipment and for holding inventories
are called ‘investment banks’.
Features:-Long term financing, Security,
merchandiser, Security middlemen, Insurer,
Underwriter
Functions:- Capital formation, Underwriting,
Purchase of securities, Selling of securities,
Advisory services, Acting as dealer.
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Cooperative Banking Sector
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These banks play a vital role in mobilizing
savings and stimulating agricultural
investment.Co-operativecredit institutions
account for the second largest proportion
of 44.6% of total institutional credit of
Rs.3854000 corer to agricultural and allied
activities in the rural sector in 1998 to 99.
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Types of Co-operative Banking sector
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The co-operative sector is very much
useful for rural people. The co-operative
banking sector is divided into the
following categories.
State co-operative Banks
Central co-operative banks
Primary Agriculture Credit Societies
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Non Banking Finance companies
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According to RBI it means a financial
institutions which is a company and a non
banking institution and which has as its
principal business the receiving of deposits
under any schemes or arrangement or in any
other manner or lending in any manner.
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Merchant Banks
Meaning:- Institution that render wide range of
services such as the management of
customer’s
securities,
portfolio
management, counseling, insurance, etc are
called ‘Merchant Banks’.
Functions:Sponsoring
issues,
Loan
syndication, Servicing of issues, Portfolio,
management, Arranging fixed deposits,
Helps in merger& acquisition
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Commercial Banks
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Commercial banks comprising public
sector banks, foreign banks, and private
sector banks represent the most
important financial intermediary in the
Indian financial system.
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The changes in banking structure and
control have resulted due to
Wider geographical spread and deeper
penetration of rural areas,
Higher mobilization of deposits,
Reallocation of bank credit to priority
activities, and
Lower operational autonomy for a bank
management.
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The largest commercial Banks in India,
(SBI), was set up in 1955 when the
Imperial Bank was nationalized and
merged with some banks of the princely
states. In 1969, in one fell swoop, the
fourteen largest privately – owned
commercial banks were nationalized.
Subsequently, several other privately –
owned
commercial
banks
were
nationalized. As a result of these actions,
public
sector
commercial
banks,
dominate the commercial banking scene
in the country.
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Functions of commercial
banks
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Saving mobilization
Special loans
Bills discount
Credit creation
Agencies function
General utility function
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Public Sector Banks
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State Bank of India and its associate banks
called the State Bank Group
20 nationalized banks
Regional rural banks mainly sponsored by
public sector banks
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Private Sector Banks
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Old generation private banks
New generation private banks
Foreign banks operating in India
Scheduled co-operative banks
Non-scheduled banks
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Indigenous banks
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Indigenous bankers are those individuals
or private firm who receives deposits and
lend money or deals with funds.
Feature
Funding source
Professional bodies
Urban center
Socialized financing
Mode of lending
Personalized Saving
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Regional rural Bank
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They are oriented towards meeting the
needs of the weaker section of the rural
population consisting of small and
marginal farmers,
agricultural laborer,
small entrepreneurs. These banks were
set up after the nationalization of banks in
1969.
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REGIONAL RURAL BANKS ACT, 1976 ACT
NO. 21 OF 1976 [9th February, 1976.] An
Act to provide for the incorporation,
regulation and winding up of Regional
Rural Banks with a view to developing the
rural economy by providing, for the
purpose of development of agriculture,
trade, commerce, industry and other
productive activities in the rural areas,
credit and other facilities, particularly to
the
small
and
marginal
farmers,
agricultural laborers, artisans and small
entrepreneurs, and for matters connected
therewith and incidental thereto.
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