Ever wondered why there are so many bank options in India when they can keep only one type of bank with different sectors? From household names you’ve seen on every corner to innovative mobile-first banks, the Indian banking system offers a wide range of institutions. But with this variety comes a challenge which is choosing the right bank for your needs. This blog will be your key to unlocking the in-demand services and smooth functioning with various banks in India. We’ll look at the central bank’s role, dive into the world of commercial banks (public, private, and foreign), and explain the cooperative banking model. We’ll even touch on specialized banks catering to specific requirements.
| Commercial Banks in India are mainly categorized into Public sector banks and private sector banks adding to total of 91 commercial operating banks of which 12 are nationalised banks in the country. |
List of Different Types of Banks in India
In India’s dynamic financial ecosystem, a variety of bank types cater to diverse needs. Let’s break down the main categories:
- Central Bank
- Commercial Banks / PSUs
- Co-operative Banks
- Payment Bank
- Small Bank / Private bank
- Scheduled Bank
- Non-scheduled Bank
Key Highlights on Each Bank
India boasts a diverse banking landscape, catering to various financial needs. Let’s look at the deeper & different aspects of the banks in India.
1. Central Bank
- The Reserve Bank of India (RBI) is the central bank, acting as the supreme authority for all banking institutions in India.
- Regulates all banks and financial institutions, ensuring their smooth functioning and adherence to regulations.
- Manages the country’s monetary policy, influencing interest rates and credit availability.
- Controls the issuance and circulation of Indian Rupee currency.
- Acts as the banker’s bank, providing liquidity and financial support to other banks.
Also Read: Top 10 Banks in India
2. Commercial Banks
These are the most common banks, offering a wide range of financial services to individuals and businesses.
Types:-
Public Sector Banks (PSBs)
- They are owned by the government.
- Their focus is on social welfare alongside profitability.
- They have an extensive branch network, offering accessibility, especially in rural areas. Known for their focus on financial inclusion and government schemes.
Also Read: Top 10 Government Banks
Private Sector Banks
- They are owned by private entities.
- Their focus is on innovation and profitability.
- They offer a wider range of products and services, often focusing on specific market segments and catering to tech-savvy customers. Pioneering digital banking solutions.
Also Read: Everything you need to know about Public Vs Private sector banks
Foreign Banks
- They are established by foreign countries.
- Their focus is on international trade finance or catering to niche markets within India.
- Their main strength is in global reach and expertise, offering specialized services in international trade and finance.
Also Read: Top 10 Foreign Banks in India
3. Cooperative Banks
These are democratic institutions owned by their members, typically focusing on serving local communities.
Types:-
- Urban Cooperative Banks (UCBs): They operate in urban and semi-urban areas, catering to the needs of businesses and individuals within their locality.
- Rural Cooperative Banks (RCBs): They play a crucial role in rural development, offering financial services to farmers and agricultural businesses.
4. Payment Banks
Their function is to promote financial inclusion, these banks offer limited banking services with a strong focus on mobile banking.
- Their focus is to provide basic banking services like deposits, money transfers, bill payments, and limited cash withdrawals.
- They make financial transactions more accessible, especially in rural areas, by leveraging mobile technology.
Also Read: Bharat Bill Pay
| A payments bank is like any other bank, but operating on a smaller scale without involving any credit risk. In simple words, it can carry out most banking operations but can’t advance loans or issue credit cards. |
5. Small Finance Banks (SFBs)
Their function is to bridge the gap in financial services, Small finance bank (SFBs) cater to underserved and underbanked segments of the population.
- Their focus is to provide financial services like loans, microfinance, and deposit accounts to small businesses, entrepreneurs, and individuals who might not have access to traditional banks.
- They offer tailored financial solutions and simplified processes, promoting financial inclusion at the ground level.
6. Scheduled Banks vs Non-Scheduled Banks
Scheduled banks are closely supervised by the RBI, adhering to strict financial guidelines and maintaining capital adequacy. In contrast, Non-scheduled banks operate under less stringent regulations, which presents higher risks for depositors.
Scheduled Banks:
- These banks are included in the Second Schedule of the Reserve Bank of India Act, 1934.
- They are meant to be financially sound and adhere to RBI regulations.
- All commercial banks (PSBs, private sector, and foreign) are scheduled banks.
Non-Scheduled Banks:
- These banks are not included in the Second Schedule of the RBI Act.
- They may be smaller cooperative banks or local area banks with limited operations.
- Their operations are not directly regulated by the RBI, but they may still be subject to certain regulations from other bodies.
Types of Bank Accounts in India
India offers a diverse range of bank accounts, catering to various financial needs and goals. Here’s a comprehensive guide to equip you for navigating this landscape:
Savings Account:
They offer easy access to your money through withdrawals, transfers, and debit cards. While interest rates are typically lower, it’s perfect for everyday transactions and saving for short-term goals.
Also Read: Saving Schemes
Current Account:
Ideal for businesses and individuals with frequent transactions, current accounts offer easy access to funds but minimal or no interest on deposits. They often come with higher transaction limits compared to savings accounts.
Fixed Deposit (FD) Account:
Lock in your money for a predetermined period (1 year, 5 years, etc.) and earn a higher interest rate compared to a savings account. Early withdrawals may incur penalties, making fixed deposit (FDs) suitable for long-term goals where immediate access isn’t necessary.
Recurring Deposit (RD) Account:
Cultivate a disciplined saving habit by depositing a fixed amount periodically (e.g., monthly) into a Recurring Deposit (RD). This helps you save consistently and may offer slightly higher interest rates than regular savings accounts.
Salary Account:
Often offered by your employer in collaboration with a bank, your salary gets deposited directly into this account. You might enjoy benefits like waived minimum balance charges, free debit cards, or loan discounts.
Demat Account:
Essential for buying and selling stocks, mutual funds, and other investments, a Demat account holds your shares and securities electronically. It’s often linked to your savings account for seamless transactions.
Senior Citizen Savings Scheme (SCSS):
A government-backed scheme, the Senior Citizen Savings Scheme, offering attractive interest rates for senior citizens (over 60 years old).
Prime Minister Jan Dhan Yojana (PMJDY):
A government initiative promoting financial inclusion by providing basic banking facilities like savings accounts with RuPay debit cards.
Sukanya Samriddhi Account:
This government scheme, Sukanya Samriddhi, encourages girl child education by offering high interest rates and tax benefits on deposits made for a girl child.
Minor’s Account:
A savings account opened in the name of a minor, typically managed by a parent or guardian.
Factors to Choose the Right Bank Account
Consider your financial goals, transaction frequency, and desired features when selecting a bank account. Look for factors like interest rates, minimum balance requirements, transaction fees, and online banking options. With this knowledge, you’re well-equipped to choose the perfect bank account and embark on your financial journey in India!
To Wrap Up
Understanding the different types of banks, their functions, and their target clientele is crucial for making informed financial decisions. As the banking sector continues to evolve, consumers need to stay informed about the latest developments and choose the banking services that best suit their requirements. India’s banking sector is diverse and offers a wide range of financial services to cater to the needs of individuals and businesses. From traditional commercial banks to specialized institutions like cooperative banks and regional rural banks, the Indian banking landscape provides ample options for customers to choose from.
Download Personal Loan App
Get a loan instantly! Best Personal Loan App for your needs!!
Looking for an instant loan? Buddy Loan helps you get an instant loan from the best-verified lenders. Download the Buddy Loan App from the Play Store or App Store and apply for a loan now!
Apply for Loan on BUDDYLOAN App
Interest rates starts @11.99% p.a. onwards
Frequently Asked Questions
Q. How many types of banks are there in India?
A. India has several types of banks, including commercial banks, cooperative banks, regional rural banks, small finance banks, and local area banks.
Q. How do commercial banks differ from cooperative banks?
A. Commercial banks focus on profit maximization and offer a wide range of services, while cooperative banks are member-owned, prioritizing community welfare and financial inclusion.
Q. What services do public sector banks offer?
A. Public sector banks provide services such as savings and current accounts, loans, credit cards, insurance, and government schemes.
Q. What is the role of private sector banks in India?
A. Private sector banks play a crucial role in economic growth by offering innovative financial products, enhancing competition, and improving customer service.
Q. How do foreign banks operate in India?
A. Foreign banks in India operate through branches or subsidiaries, providing various banking services while adhering to regulations set by the Reserve Bank of India (RBI).
Q. What is the significance of regional rural banks?
A. Regional rural banks enhance financial inclusion by providing credit and banking services to rural and agricultural sectors, supporting local economic development.
Q. What are small finance banks?
A. Small finance banks focus on providing financial inclusion to underserved segments, offering savings accounts, loans, and other banking services.
Q. How do local area banks differ from other types of banks?
A. Local area banks operate in a specific region and focus on meeting the financial needs of local communities, unlike larger banks with a nationwide presence.
Q. What is the role of NABARD in the Indian banking sector?
A. The National Bank for Agriculture and Rural Development (NABARD) plays a key role in financing rural development, supporting agricultural projects, and strengthening rural banking institutions.
