Type of Banks

 Public Sector Banks (12)

 Private Sector (21)
 Foreign Banks/ MNCs
 Regional Rural Banks (RRBs)
 Urban Co-operative Banks
 Rural Co-operative Banks
 Small Finance Banks (since 2014)
 Payment Banks (since 2015)
Categorization & Structure
Types of Banks
Scheduled and Non-Scheduled Banks:
 - Refer to those banks which have been included in the
Second Schedule of Reserve Bank of India Act, 1934, after
satisfying all the criteria laid down thereunder. Banks not
under this Schedule are called Non-Scheduled Banks.

Every Scheduled Bank enjoys two principal advantages:

 a) becomes eligible for debts/loans at the bank rate from
the RBI; and,
 b) automatically acquires the membership of clearing
house.
Types of Banks
Commercial Banks :
 - Commercial Banks, also known as Deposit Banks, work for profit
 - They offer a wide range of banking services such as accepting
deposits, providing loans, issuing credit cards, facilitating money
transfers, and offering various financial products.
 - These are regulated by RBI

 Can be divided into six categories currently:

 - Public Sector Banks
 - Private Sector Banks
 - Foreign Banks
 - Regional Rural Banks
 - Small Finance Banks
 - Payment Banks
Types of Banks
Co-operative Banks:
 Co-operative Banks mean association of persons, belonging to
the same local or professional community or sharing a
common interest, unite voluntarily, get registered as a Society
and take a license from RBI for banking.
 Based on principles of mutual trust and mutual help
 Work on a ‘no profit no loss’ basis, ‘one shareholder one vote’.
 Two types – Urban Co-operative Banks and Rural Co-operative
Banks (State, Central or Primary)
 E.g. Abhudaya Co-operative Bank (UCB), Maharashtra State
Co-operative Bank (RCB)
Types of Banks
Public Sector Banks:
 Refer to those banks in which majority of stake i.e. more than
50% is held by a government. Includes SBI and all nationalized
banks. Offer all services of a commercial bank.

Private Sector Banks:

 Banks owned and managed by private shareholders
 Work like a corporate entity
 Not necessarily have any inclination towards priority sector
but bound to follow rules and regulations made by RBI.
 E.g. Axis bank, HDFC Bank, ICICI Bank, IDBI Bank etc.
Types of Banks
Foreign Banks:
 Banks with HO outside but branch offices in India
 Incorporated outside India
 Have to follow regulations of their home country as well as RBI
 Some Foreign banks may have wholly owned subsidiaries in India while
others just liaison office.
 E.g. HSBC Bank, Barclays, SCB etc.

Regional Rural Banks (RRBs):

 A body corporate with share capital subscribed by Central Govt, State Govt
and sponsoring bank in the ratio of 50:15:35.
 Performs functions only within defined local limits, introduced in 1975
 Besides normal commercial banking, do additional priority lending like
loans and advances to small and marginal farmers, labour, small
entrepreneurs/ traders etc.(mix of Co-op + Commercial Bank)
 E.g. Maharashtra Gramin Bank (sponsored by Bank of Maharashtra)
 Vidarbha Konkan Gramin Bank (sponsored by Bank of India)
Types of Banks
 Small Finance Bank:
 Niche banks started in 2014 with aim to provide financial services to
the unserved and unbanked region of the country like farmers,
micro & small enterprises, low income household etc.
 Can work in both urban and rural areas. No area restriction.
 Existing NBFCs, microfinance institutions, local area banks, Urban
Co-operative Bank can apply to become small finance banks.
 Registered as a public limited company and governed by RBI.
 Mandate: 75% of its net credits should be in priority sector lending
and 50% of its loans must in under ₹25 lakh range.
 Minimum net worth prescribed as Rs. 100 crore + increase to Rs.
200 crore within five years from the date of commencement of
business. At net worth of ₹500 crore, listing becomes mandatory.
 12 Small finance banks as on date E.g. Jana Small Finance Bank, AU
Small Finance Bank, Unity Small Finance Bank etc.
Types of Banks
Payment Banks:

 New model of banks, conceptualized by RBI in 2014, which cannot issue

credit.
 Digital wallets and app came to India since 2006. (Mobiwik, Paytm etc.)
Had high public reach, even more than big banks. Allowed to launch
payment banks in 2014. After registering as public limited company under
the Companies Act, 2013 & RBI. To promote financial inclusion.
 Can accept demand deposits (Saving/current) up to 2 lakhs, provide
payment/remittance/internet/ATM services but not credit services as risky.
Even prohibited from establishing NBFC subsidiaries.
 The minimum capital requirement is Rs.100 crore
 Mandatory to have the word ‘payment’ in their name
 6 payment banks active as on date. E.g. Airtel Payments Bank, India Post
Payments Bank, Fino Payments Bank, Jio Payments Bank, Paytm Payments
Bank, NSDL Payments Bank.
Types of Banks
Shadow Banks & NBFCs:

 ‘Shadow banking’ describes those financial intermediaries that participate

in financial services like creating credit, investing etc. but do not come
within the regulatory framework of Central Bank.
 Also called NBFC in India, as registered under Companies Act but not
licensed as bank by RBI. Term analogous to Shadow Bank. These are not
allowed to take demand deposits—from the public.
 Shadow banking institutions arose out of innovation in financial markets,
to fill the gap between customer demand and traditional banking.
 Though not regulated by RBI, but they are important as well as legal too
and generally have their own respective regulator like Association of
Mutual Fund, SEBI, IRDA etc. In spite of some NBFCs being blamed for the
financial crisis of 2007-08, the sector has continued to expand significantly.
 Examples of shadow banks include private equity funds, mortgage lenders,
money market funds, insurance and re-insurance companies, hedge funds
and even large investment banks, like Goldman Sachs or Morgan Stanley.
Types of Banks
Neo Banks:
 A virtual bank that operates exclusively online without physical branches.
 These New-age banks cater to the financial needs of tech-savvy millennials,
Gen Z, which do not want to visit branches and like immediate money
transfers, lending etc.
 Their services may be accessed by clients through their computers or
mobile devices.
 According to Zion Market Research, the neo bank sector was worth$ 18.6
million in 2018 and is expected to grow at a CAGR of 46.5%, generating
about $ 394 billion by 2026.
 There are two main types of Neo-banks: companies that applied for their
own banking license (also called ‘challenger banks’) and companies
partnering with a traditional bank to provide financial services. Currently,
RBI maintaining its stand on the need of physical presence as per its 2014
guidelines leaving Neo banks in India with only option i.e. to partner with
traditional banks.
 Advantage: Lower operating cost, smoother user interface, speed etc.
 The top neo banks in India include Razorpay, Jupiter, Open, Instapay, Niyo,
etc.
Types of Accounts

 Demand Deposits vs Time Deposits

 Savings Account
 Current Account
 (CASA, Current Account Premium Scheme)
 Deposit at Call account

 Fixed Deposits
 Recurring Deposits
Types of Accounts – Non Residents
 Non- Resident Ordinary (NRO) Account
 Non-Resident (External) (NRE) Account
 Foreign Currency Non-Resident (FCNR) Account

 Relevant for NRI/PIO/OCB

 (refer text book, Chapter 2 for more details)
Types of Banking Customers
 Individuals, (major, minor, illiterate person)
 Joint Hindu Family
 Firms
 Trusts
 Companies
 Club & Co operative Societies
 Other Persons (E.g. Local Authorities, autonomous
bodies, Boards and others created by specific legislation)
Reserve Bank Of India.
 Central Bank of India
 Constituted under the RBI Act 1934.
 Started functioning w.e.f. April 1, 1935
 Headquartered at Mumbai (1937) – (P.M. road)
 Current Governor of RBI: Mr. Shaktikanta Das (honored
with the title of 'Governor of the Year' for 2023 by Central
Banking in London recently)
Functions of RBI
 Issuing Notes – all notes bear the signature of current RBI
Governor, kind of promissory note
 Government's Banker – Both Central and State; collecting the
receipts and making payments on behalf; Constitution
provides for establishment of Consolidated Fund, Public
Accounts and Contingency Fund of India; Represent the Indian
Govt at IMF/World Bank etc.
 Bankers’ Bank – each bank has to maintain account, has to
maintain cash reserves as per CRR
 Lender of the last resort – when unable to get from other
sources, lends at interest higher than normal bank rate.
 Supervision of banks – Quantitative & qualitative tools
 Issue banking licenses and branch licenses- After Banking
Regulation Act 1949, RBI autonomous and apex monetary
body
Functions of RBI
 To conduct investigations into complaints, frauds pertaining to
banks – like in case of YES Bank in 2020, banking ombudsman facility
on website
 Checking Inflation and other economic parameters – helps govt
achieve objectives such as industrial growth, inflation control etc. by
managing credit and money supply
 Foreign exchange control- Apex body under FEMA, regulates
through changes in automatic and approval route.
 Maintaining value of the Indian Rupee – India has managed float,
RBI intervenes if required
 Monetary Policy – complements fiscal policy, concerned with
regulating supply of money in the economy.
Tools of monetary control
 Cash Reserve Ratio (CRR)
 Statutory Liquidity Ratio (SLR)
 Repo & Reverse Repo
 Open market Operations (OMO)
 Marginal Standing Facility (MSF) Rate
 Standing Deposit Facility (SDF) Rate
 Selected Credit Control (SCC)
Tools of Monetary Control
Cash Reserve Ratio (CRR)-
 - Minimum percentage of deposits (as specified by RBI) that must be
maintained in cash by every bank
 - Computed as a certain percentage of the net demand and time
liabilities,
 - Aim: ensures that banks do not run out of cash + empowers RBI to
regulate money available for lending
 E.g. If CRR is 4 %, that means banks have to keep 4 rupees with RBI in
cash whenever their deposit increases by 100 rupees.

Statutory Liquidity Ratio (SLR) –

 - Minimum percentage of deposits that a commercial bank has to
maintain in the form of liquid cash, gold or other approved securities
 - If fails to maintain, liable to pay penalty
 - Aim: to ensure solvency of banks, compel to invest in government
securities and fuel growth, increase and decrease bank credit
Tools of monetary control
Repo & Reverse Repo
 - Repurchasing Option is the rate at which the RBI lends short-
term money to the banks against securities; both parties
required to sign an agreement with repurchase date and price
 -Reverse repo is the rate of interest that is provided by the RBI
while borrowing money from the commercial banks or on
surplus parked by them.
 - Aim: rate is changed to make it more expensive or cheap for
the banks to borrow money, influence their lending rate,
regulating credit in economy
 - E.g. The current reverse repo rate in India (July 2023) is 3.35%
and repo rate is 6.5%.
Tools of monetary control
Open market Operations (OMO)

 -Open Market Operations refers to buying and selling of treasury bills,

bonds and dated security issued by the Government by RBI in the open
market.
 - G-Secs carry practically no risk of default and, hence, are practically
risk-free.
 - When RBI buys a Government bond in the open market, it pays for it
by giving a cheque. This increases the money supply. On the other
hand, selling leads to reduction in the money supply and thus
reduction in flow of credit.
Tools of monetary control
Marginal Standing Facility (MSF) Rate –
 The Marginal Standing Facility Rate is the rate at which banks can
borrow overnight funds from the RBI against the collateral of
government securities. It is higher than the repo rate and provides a
safety valve for banks to meet any unforeseen liquidity requirements.
 - E.g. The current MSFR in India (July 2023) is 6.65%

Standing Deposit Facility (SDF) Rate –

 The Standing Deposit Facility Rate is the interest rate offered by the
RBI to banks on their overnight deposits with the Central Bank. This
facility allows banks to earn interest on their surplus funds held with
the RBI.
 - E.g. The current SDFR in India (July 2023) is 3.75 %
Tools of monetary control
 Selected Credit Control (SCC) –
 refers to discriminatory policy of a Central Bank relating to
select sectors of the economy.
 Flow of credit to priority sectors may be encouraged with a
view to stimulate production in these sectors (called
positive application of SCC). Similarly, the Central bank may
decide to restrict the availability of credit to certain non-
priority or speculative sectors (called negative application
of SCC).
 E.g. during periods of inflation, availability of credit for
middlemen storing food grains is discouraged.
 Reference: https://currentaffairs.adda247.com/an-
overview-of-rbis-different-rate-offerings-understanding-
the-tools-of-monetary-policy/
Reference
 http://www.allbankingsolutions.com/Top-
Topics/dep1.shtml

 (For various types of bank accounts, NRI definition)

 Text Book : Essentials of Banking & Insurance. Dr Sunil

Kumar. JSR Publishing. 2020
 (Type of Customers, Deposits accounts and Type of
Banks– Chapter 2 & 4)
Reference
 https://en.wikipedia.org/wiki/List_of_banks_in_India
 (Latest list of various types of Banks)

 https://www.youtube.com/watch?v=salYRtheyv4&featur
e=youtu.be (Small finance & payment banks)
THANK YOU !!