The Banking system of a country is an important pillar holding up the financial system of the country’s

economy. The major role of banks in a financial system is the mobilization of deposits and disbursement
of credit to various sectors of the economy. The existing, elaborate banking structure of India has
evolved over several decades

Reserve Bank of India is the central bank of the country and regulates the banking system of India. The
structure of the banking system of India can be broadly divided into

The institutions that accept deposits from the general public and advance loans with the purpose of
earning profits are known as Commercial Banks.

Commercial banks can be broadly divided into public sector, private sector, foreign banks and RRBs.

Public Sector Bank :-

In Public Sector Banks the majority stake is held by the government. After the recent amalgamation of
smaller banks with larger banks, there are 12 public sector banks in India as of now. An example of
Public Sector Bank is State Bank of India.Public Sector Banks.

Public sector banks are the ones in which the government owns the majority of the shares. For instance,
the SBI is one of the public sector banks whose 58.60% shares are held by the government.Such banks
are further divided into nationalized banks and state banks and its associates.In nationalized banks, the
central government supervises and regulates the functioning of the banking institution.However, the
central government keeps minimizing the shares in PSU banks as and when it sells shares.This is done to
minimize the government shareholding in such banks.Bank of Baroda, Indian Overseas Bank, Canara
Bank, Central Bank of India, etc. are the public sector banks in India.

Private Sector Bank :-

Private Sector Banks are banks where the major stakes in the equity are owned by private stakeholders
or business houses. A few major private sector banks in India are HDFC Bank, Kotak Mahindra Bank, ICICI
Bank etc.

Private Sector Banks

These are the banks in which the majority of the equity is held by private entities, corporations,
institutions, or individuals, apart from the government. These banks are controlled and managed by
private promoters.

Since 1969, banking in India has been dominated by the public sector banks, at the time when all the
major banks were nationalized by the Indian government.

After liberalization in the 1990s, banks like HDFC, ICICI, etc. got permission and now are the new-age
private sector banks.
In the total banking sector of India, public sector banks consist of 72.9% share, while the rest is covered
by private entities. There are 22 private sector banks.

IndusInd Bank, Axis Bank, ICICI Bank, HDFC Bank, etc. are the private sector bank

Foreign Bank :-

A Foreign Bank is a bank that has its headquarters outside the country but runs its offices as a private
entity at any other location outside the country. Such banks are under an obligation to operate under
the regulations provided by the central bank of the country as well as the rule prescribed by the parent
organization located outside India. An example of Foreign Bank in India is Citi Bank.A foreign bank is
compelled to follow the guidelines of both the home as well as host countries.

Most banks generally open a foreign branch to cater to the additional needs and requirements of their
multinational corporate clients.Foreign banks tend to be more effective in countries with high taxes and
nations where it is easy for international firms to enter the market.The foreign bank works via financial
bodies and they operate on several levels. In reality, banks transform into a smaller number of financial
firms known as ‘dealers’ who are directly associated in large amounts of foreign exchange trading.There
are a total of 46 foreign banks operating in India. These include HSBC Bank, Barclays Bank, Citi Bank,
Deutsche Bank, etc.

Regional rural banks :-

Regional Rural Banks were established under the Regional Rural Banks Ordinance, 1975 with the aim of
ensuring sufficient institutional credit for agriculture and other rural sectors. The area of operation of
RRBs is limited to the area notified by the Government. RRBs are owned jointly by the Government of
India, the State Government and Sponsor Banks. An example of RRB in India is Arunachal Pradesh Rural
Bank.

RRBs were established in 1975 as per the Narasimham Committee recommendations under the RRB Act
1976.The prime objective of the RRBs is to bridge the credit gaps and promote financial inclusion for the
rural population.RRBs are supposed to operate within a limited area for which they are established.The
Regional Rural Banks are regulated and supervised by the NABARD. These banks are licensed by the RBI
under the Reserve Bank of India Act 1934. The RRBs are owned by 3 entities with their respective shares
as below: Central Government 50% Sponsor Banks 35% State Government 15%Currently there are a
total of 56 RRBs operating in the country. The first RRB was Prathama Grameen Bank.In order to become
eligible to open a new branch, an RRB should satisfy the following: No default in the SLR and/ or CRR
management in the last two years .Operational profits to be made Improvements in net worth Net NPA
(Non Performing Assets) ratio should not exceed 8%

Cooperative Banks

A Cooperative Bank is a financial entity that belongs to its members, who are also the owners as well as
the customers of their bank. They provide their members with numerous banking and financial services.
Cooperative banks are the primary supporters of agricultural activities, some small-scale industries and
self-employed workers. An example of a Cooperative Bank in India is Mehsana Urban Co-operative
Bank.Cooperatives have all along been playing a very vital role in the development of the rural
economy.A cooperative bank is a financial organization that belongs to its members, who are also the
owners and its customers.Such banks provide their members with varied banking and financial
services.Cooperative banks are the primary helpers of agricultural activities, self-employed workers, and
small scale industries.Cooperative banks are the ones in which individuals come together to form a
credit cooperative society at the ground level.The individuals in the society can be an association of
borrowers and non-borrowers residing in a particular area and interested in the business affairs of each
other.Cooperative banks are further classified into rural and urban.

At the ground level, individuals come together to form a Credit Co-operative Society. The individuals in
the society include an association of borrowers and non-borrowers residing in a particular locality and
taking interest in the business affairs of one another. As membership is practically open to all
inhabitants of a locality, people of different status are brought together into the common organization.
All the societies in an area come together to form a Central Co-operative Banks.Cooperative banks are
further divided into two categories - urban and rural.

Rural cooperative Banks are either short-term or long-term.Short-term cooperative banks can be
subdivided into State Co-operative Banks, District Central Co-operative Banks, Primary Agricultural
Credit Societies.Long-term banks are either State Cooperative Agriculture and Rural Development Banks
(SCARDBs) or Primary Cooperative Agriculture and Rural Development Banks (PCARDBs).Urban Co-
operative Banks (UCBs) refer to primary cooperative banks located in urban and semi-urban areas.

Development Banks

Financial institutions that provide long-term credit in order to support capital-intensive investments
spread over a long period and yielding low rates of return with considerable social benefits are known as
Development Banks. The major development banks in India are; Industrial Finance Corporation of India
(IFCI Ltd), 1948, Industrial Development Bank of India' (IDBI) 1964, Export-Import Banks of India (EXIM)
1982, Small Industries Development Bank Of India (SIDBI) 1989, National Bank for Agriculture and Rural
Development (NABARD) 1982.Development Banks

Development banks are the ones that provide long-term credit to support capital-intensive investments
widespread for a long period and yielding low rates of returns. Such banks are also known to consider
social benefits of the small and medium enterprises.

The banking system of India has the capability to influence the development of the economy. Besides, it
is also instrumental in the development of both rural and suburban regions as they provide capital for
small businesses and help them further.IFCI (Industrial Finance Corporation of India), IDBI (Industrial
Development Bank of India), EXIM (Export-Import Banks of India), and NABARD (National Bank for
Agriculture and Rural Development) are some of the major development banks in India.

The banking system of a country has the capability to heavily influence the development of a country’s
economy. It is also instrumental in the development of rural and suburban regions of a country as it
provides capital for small businesses and helps them to grow their business. The organized financial
system comprises Commercial Banks, Regional Rural Banks (RRBs), Urban Co-operative Banks (UCBs),
Primary Agricultural Credit Societies (PACS) etc. caters to the financial service requirement of the
people. The initiatives taken by the Reserve Bank and the Government of India in order to promote
financial inclusion have considerably improved the access to the formal financial institutions. Thus, the
banking system of a country is very significant not only for economic growth but also for promoting
economic equality