Types of Banks

There are several types of the banks worldwide. Some important types of the Banks world-wide are as follows:

Central Banks

Central Banks, also known as Reserve Banks or Monetary Authorities are generally the top banking institution of a country with responsibilities such as managing currency, foreign exchange, money supply, interest rates etc. of that country. They are generally government owned bodies.

Some examples of Central Banks are as follows:

  • Australia – Reserve Bank of Australia
  • Bangladesh – Bangladesh Bank
  • Bhutan – Royal Monetary Authority of Bhutan
  • Canada – Bank of Canada (Banque du Canada)
  • China – People’s Bank of China
  • France – Bank of France (Banque de France)
  • Germany – Deutsche Bundesbank
  • United Kingdom – Bank of England
  • Hong Kong – Hong Kong Monetary Authority
  • Japan – Bank of Japan
  • Pakistan – State Bank of Pakistan
  • Sri Lanka – Central Bank of Sri Lanka
  • United States – Federal Reserve System

Apart from that, we note that European Central Bank (ECB) works as the central bank for the euro and administers monetary policy of the Eurozone, which consists of 19 EU member states.

Commercial Banks

The term commercial banks are used for the banks whose main business is normally lending and deposits from public as well as corporation. This term differenced them from investment banks whose main function was investment (capital market). In India, commercial banks are of two type viz. scheduled commercial banks and non-scheduled commercial banks.

Investment Banks / Merchant Banks

The term investment bank is used for those banks whose main business is underwriting (guarantee the sale of) the stock and bond issues and their trade, investment management, and consultancy to corporate regarding share market activities. Similarly, Merchant Banks are those banks which provide capital to the firms in the form of shares and engage in underwriting of stocks etc. Thus, the modern definition of Merchant banks is same as that of investment banks.

Universal Banks

This term is used for banks which are engaged in several kinds of banking activities apart from their core banking business. The additional kinds of businesses may include insurance, trade finance, housing and vehicle finance and so on.

Land development banks

This term is used for the banks which provide long term loans to promote use of land, agriculture etc.

Cooperative Banks

These are generally not-for-profit banks owned by the depositors.

Postal Banks

These banks offer banking services apart from their core business of postal services.

International Financial Institutions (IFIs)

These are those banks that are established by more than one country and provide international finance. They are in important pillar of Global Financial System and sometimes work as important bridge between developed and developing countries in matters of development finance.

  • Currently, world’s largest International Financial Institution is European Investment Bank.

The IFIs can be multilateral, regional or bilateral. Example of multilateral IFIs include World Bank, African Development Bank, Asian Infrastructure Investment Bank (AIIB); examples of regional IFIs include Asian Development Bank and examples of bilateral IFIs include French Development Agency.

All banks of India can be simply divided into 3 major groups viz. Central Bank (RBI), Scheduled Banks and Non-scheduled Banks. So, every bank other than RBI is either a scheduled bank or a non-scheduled bank.However, on the basis of functions, there are five broad categories of Banks in India viz. Central Bank (RBI), Commercial Banks, Development Banks (or Development Finance Institutions), Cooperative Banks and Specialized banks.

Scheduled Versus Non-scheduled banks

A bank is called a scheduled bank in India, if it is listed in the second schedule of the RBI Act, 1934. In order to be included under this schedule of the RBI Act, banks have to fulfill certain statutory conditions such as:

  • These banks need to have paid up capital and reserves of at least Rs. 0.5 million (50 Lakh)
  • They should satisfy the CRAR norms and other prudential norms of RBI
  • They should satisfy the RBI that their business is not being conducted in a manner prejudicial to the interests of its depositors.

In our country all banks are scheduled banks except four Local Area Banks and some Non-scheduled Urban Cooperative Banks. As of February 2015, these four local area banks are:

  • Coastal Local Area Bank Ltd – Vijayawada (Andhra Pradesh)
  • Capital Local Area Bank Ltd – Phagwara (Punjab)
  • Krishna Bhima Samruddhi Local Area Bank Ltd, Mahbubnagar (Andhra Pradesh)
  • Subhadra Local Area Bank Ltd., Kolhapur (Maharashtra)

The scheduled banks are further classified into Scheduled Commercial Banks and Scheduled Cooperative Banks. The basic difference between scheduled commercial banks and scheduled cooperative banks is in their holding pattern. Scheduled cooperative banks are cooperative credit institutions that are registered under the Cooperative Societies Act. These banks work according to the cooperative principles of mutual assistance. Classification up to this point is displayed in the below graphics.

https://www.gktoday.in/wp-content/uploads/2018/11/types-of-banks-india.png
Different types of Scheduled Commercial Banks

The scheduled commercial banks are those banks which are included in the second schedule of RBI Act 1934 and which carry out the normal business of banking such as accepting deposits, giving out loans and other banking services.

Scheduled Commercial Banks can be further divided into four groups:

  • Public Sector Banks: This includes:
    • SBI & Associates
    • Nationalized Banks
    • Other Public Sector Banks
  • Private Banks
  • Foreign Banks
  • Regional Rural Banks

Types of Banks in India

All banks of India can be simply divided into 3 major groups viz. Central Bank (RBI), Scheduled Banks and Non-scheduled Banks. So, every bank other than RBI is either a scheduled bank or a non-scheduled bank.However, on the basis of functions, there are five broad categories of Banks in India viz. Central Bank (RBI), Commercial Banks, Development Banks (or Development Finance Institutions), Cooperative Banks and Specialized banks.

Scheduled Versus Non-scheduled banks

A bank is called a scheduled bank in India, if it is listed in the second schedule of the RBI Act, 1934. In order to be included under this schedule of the RBI Act, banks have to fulfill certain statutory conditions such as:

  • These banks need to have paid up capital and reserves of at least Rs. 0.5 million (50 Lakh)
  • They should satisfy the CRAR norms and other prudential norms of RBI
  • They should satisfy the RBI that their business is not being conducted in a manner prejudicial to the interests of its depositors.

In our country all banks are scheduled banks except four Local Area Banks and some Non-scheduled Urban Cooperative Banks. As of February 2015, these four local area banks are:

  • Coastal Local Area Bank Ltd – Vijayawada (Andhra Pradesh)
  • Capital Local Area Bank Ltd – Phagwara (Punjab)
  • Krishna Bhima Samruddhi Local Area Bank Ltd, Mahbubnagar (Andhra Pradesh)
  • Subhadra Local Area Bank Ltd., Kolhapur (Maharashtra)

The scheduled banks are further classified into Scheduled Commercial Banks and Scheduled Cooperative Banks. The basic difference between scheduled commercial banks and scheduled cooperative banks is in their holding pattern. Scheduled cooperative banks are cooperative credit institutions that are registered under the Cooperative Societies Act. These banks work according to the cooperative principles of mutual assistance. Classification up to this point is displayed in the below graphics.

Scheduled Commercial Banks

The scheduled commercial banks are those banks which are included in the second schedule of RBI Act 1934 and which carry out the normal business of banking such as accepting deposits, giving out loans and other banking services. Scheduled Commercial Banks can be further divided into four groups viz. Public Sector Banks; Private Banks; Foreign Banks and Regional Rural Banks.

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