BANKING SERVICES

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 BANKING SERVICES

Meaning of  Bank

The word "bank" has several facets and gradations of meaning that come into play depending on how it is used. Detailed explanation, pertaining to its different uses, is as follows:

Bank as a Financial Institution: The most obvious use of the term "bank" refers to a financial institution holding a license to receive deposits, make loans, and perform other financial activities. Banks are an integral part of the economy, as they protect money and offer accounts for saving and checking, extend credit, and transfer funds. Banks may be divided into various classes, including commercial banks, investment banks, central banks, and retail banks. Banks generate revenue through charging an interest rate on loans, gathering fees, and investing.

Banking Services


Types of Banks in India






India's banking system is quite diverse and comprises various types of banks, each offering different types of functions and catering to the needs of various sections of the economy. The following are the main types of banks in India:


1. Commercial Banks

Commercial banks comprise the core or backbone of any country's banking system. As profit-making institutions, commercial banks in India provide a wide variety of financial services to the people, various firms, and even the government. These are further categorized into:


  •  Public Sector Banks: These are the banks where the government of India has a majority stake, like State Bank of India (SBI), Punjab National Bank (PNB), and Bank of Baroda. In the financial inclusion efforts of the government, public sector banks play a very critical role, and in general, they are involved with governmental schemes.


  • The private sector banks comprise HDFC Bank, ICICI Bank, and Axis Bank, which are the banks in which most of the shares have been held by private shareholders. The banks are characterized by the superiority of their customer services, immense technology-driven products, and competitive financial products.


  • Foreign Banks: These are the banks whose head offices are outside India but operate in India through branches. Examples include Citibank, HSBC, Standard Chartered Bank, and so on. In general, the foreign banks in India serve the multinational corporations and high-net-worth individuals by providing specialized financial services.


  • Regional Rural Banks (RRBs): Constituted with the aim of providing basic banking facilities, RRBs are owned jointly by the Government of India, the concerned State Government, and Sponsor Banks, and mainly disburse credit to the agriculture sector, small businesses, and other rural economic undertakings. Some examples of RRBs are Andhra Pragathi Grameen Bank and Prathama UP Gramin Bank


2. Cooperative Banks

Cooperative banks are banks owned and managed by the members who use their services; they are established under cooperative societies' acts and basically operate on the principles of mutual assistance. They extend loans mainly to the credit requirements so formed by the agricultural sector, small-scale industries, and self-employed workers. Cooperative banks in India can be divided into:


  • Urban Cooperative Banks: This category consists of banks operating in urban and semi-urban areas. They serve the needs of individual persons, small-scale business entrepreneurs, and industries. They offer almost all the services that are offered by a commercial bank, in every respect, including savings and currents accounts, loans, and other similar financial services.


  • State Cooperative Banks: A class of top-flight banks operating in the states, these banks provide the district cooperative banks with their needed finances. They, therefore, act as go-between agencies to both the Reserve Bank of India and the district cooperative banks.


  • District Cooperative Banks: These operate hand in hand at the district level and are supposed to serve well in the agricultural sector, like giving credit and financial services directed towards the same, for example, the farmers' and farmers' co-operatives of the same, and other rural-based enterprises.


3. Specialized Banks

These are banks set to serve in a particular given sector of the economy. They are, in turn, modeled in a manner that's supposed to serve the requirements of that sector best. Some of them include:


  • Small Finance Banks (SFBs): These are mainly established banks that provide financial services to the unserved and underserved sections of the population, including small businesses, marginal farmers, and micro-industries. Basic operations of small finance banks include offering sheet products like savings and current accounts, dispensing loans, and remittances. Examples are AU Small Finance Bank and Ujjain Small Finance Bank.


  • Payments Banks: These banks have been designed to proliferate the concept of financial inclusion through the provision of general banking services, such as savings accounts, remittance services, and making and receiving payments. They are not allowed to lend money or issue credit cards. They majorly operate through digital means. An example is Paytm Payments Bank.


  • Development Banks: These are the banks or financial institutions that provide very long-term capital requirements to its clientele - mainly in agricultural and industrial sectors and also in infrastructure development. The development banks "develop" and "grow" specific industries by providing funds help or extend advice regarding the financial and other matters involved. The examples are that of the National Bank for Agriculture and Rural Development (NABARD) and the Export-Import Bank of India (Exim Bank).


4. Central Bank

The Reserve Bank of India (RBI) is the central bank of India, responsible for regulating the country’s monetary policy, issuing currency, managing foreign exchange, and overseeing the entire banking system. The RBI also acts as a banker to the government and other banks and plays a critical role in maintaining financial stability.


5. Non-Banking Financial Companies (NBFCs)

Even though they are not technically banks, NBFCs undertake financial institution activities that are more or less banking in nature without a banking license. They offer loans, asset financing, leasing, and other financial services, very often targeting segments that the traditional banks neglect. Examples include Bajaj Finance, Shriram Transport Finance, and Muthoot Finance.


6. Regional Development Banks

These are the banks that finance specific regions or sectors. The purpose of existence is to enable regional development through long-term loans and financial assistance for infrastructure projects, industrial development, and any other initiatives at the regional level.

The different types of banks in India have different purposes, none like the others, but they contribute to different sections of the society in their cardinal way for the betterment and progress of the country's economy.

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