Banking in India

Banks are classified into classified into four categories –

• Commercial Banks
• Small Finance Banks
• Payments Banks
• Co-operative Banks

Commercial Banks can be further classified into public sector banks, private sector banks, foreign banks and Regional Rural Banks (RRB). On the other hand, cooperative banks are classified into urban and rural. Apart from these, a fairly new addition to the structure is a payments bank.

Commercial Banks are regulated under the Banking Regulation Act, 1949 and their business model is designed to make profit. Their primary function is to accept deposits and grant loans to the general public, corporate and government. Commercial banks can be divided into-

These are the nationalised banks and account for more than 75 per cent of the total banking business in the country. Majority of stakes in these banks are held by the government. In terms of volume, SBI is the largest public sector bank in India and after its merger with its 5 associate banks (as on 1^st April 2017) it has got a position among the top 50 banks of the world.

There are a total of 12 nationalised banks in the country namely below:

These include banks in which major stake or equity is held by private shareholders. All the banking rules and regulations laid down by the RBI will be applicable on private sector banks as well. Given below is the list of private-sector banks in India-

A foreign bank is one that has its headquarters in a foreign country but operates in India as a private entity. These banks are under the obligation to follow the regulations of its home country as well as the country in which they are operating. Given below is the list of foreign banks operating in India –

These are also scheduled commercial banks but they are established with the main objective of providing credit to weaker sections of the society like agricultural labourers, marginal farmers and small enterprises. They usually operate at regional levels in different states of India and may have branches in selected urban areas as well. Other important functions carried out by RRBs include-

• Providing banking and financial services to rural and semi-urban areas
• Government operations like disbursement of wages of MGNREGA workers, distribution of pensions, etc.
• Para-Banking facilities like debit cards, credit cards and locker facilities

This is a niche banking segment in the country and is aimed to provide financial inclusion to sections of the society that are not served by other banks. The main customers of small finance banks include micro industries, small and marginal farmers, unorganized sector entities and small business units. These are licensed under Section 22 of the Banking Regulation Act, 1949 and are governed by the provisions of RBI Act, 1934 and FEMA.

This is a relatively new model of bank in the Indian Banking industry. It was conceptualised by the RBI and is allowed to accept a restricted deposit. The amount is currently limited to Rs. 1 Lakh per customer. They also offer services like ATM cards, debit cards, net-banking and mobile-banking.

Co-operative banks are registered under the Cooperative Societies Act, 1912 and they are run by an elected managing committee. These work on no-profit no-loss basis and mainly serve entrepreneurs, small businesses, industries and self-employment in urban areas. In rural areas, they mainly finance agriculture-based activities like farming, livestock and hatcheries.

Urban Co-operative Banks refer to the primary cooperative banks located in urban and semi-urban areas. These banks essentially lent to small borrowers and businesses centered around communities, localities work place groups.

According to the RBI, on 31st March, 2003 there were 2,104 Urban Co-operative Banks of which 56 were scheduled banks. About 79% of these are located in five states, – Andhra Pradesh, Gujarat, Karnataka, Maharashtra and Tamil Nadu.

A State Cooperative Bank is a federation of the central cooperative bank which acts as custodian of the cooperative banking structure in the State.