TYPES OF BANKS IN INDIA (Syllabus: GS Paper 3 – Economy)

Context: The last financial year, 2023-24 (FY24), was good for private banks and excellent for public-sector banks (PSBs).

Types of Banks in India:

• Central Bank: RBI serves as the Central Bank of India and is responsible for regulating and controlling the monetary and banking system in the country.
• Commercial Banks: These banks are organized under the Banking Companies Act 1956. The main objective of commercial banks is to make a profit and include public sector banks, private sector banks, and foreign banks. Types:

o Public Banks: Owned and operated by the government, examples include State Bank of India (SBI), Punjab National Bank (PNB), and Bank of Baroda (BOB).

o Private Sector Banks: These are privately owned and managed banks, such as HDFC Bank, ICICI Bank, and Axis Bank. IndusInd was the first pvt. bank in India.

o Foreign Banks: These banks have branches in India and are headquartered in foreign countries. Some examples are Citibank, Standard Chartered, and HSBC.

• Regional Rural Banks (RRBs): These banks cater to rural and semi-urban areas and are owned by the government, commercial banks, and state governments.
• Co-operative Bank is registered under the Co-operative Societies Act of 1912 and is run by an elected managing committee. It works on a non-profit, no-loss basis and mainly serves entrepreneurs, small businesses, self-employment, and more in urban areas.
• Payment banks: They are a relatively new banking model in the country that has been conceptualized by the RBI. This bank is allowed to accept a restricted deposit with restricted functions.
• Small Finance Banks: These banks primarily serve the unserved and underserved sections of the population, including small businesses and low-income individuals.

o This type of bank is licensed under Section 22 of the Banking Regulation Act 1949, and it is governed by the Provisions Act of 1934.