Banking

Cash and credit are managed by the banking sector of a nation. Banks are the institutional organisations that accept deposits, extend credit to individuals and businesses, and are crucial to a nation's ability to sustain its economic standing. Most nations maintain rigorous regulation of banks due to their significance to the economy. The Reserve Bank of India (RBI) is the top financial organisation in India and controls the nation's monetary policy.

Bank classification in India

The four categories into which banks are divided are:

• Commercial Banks
• Small Finance Banks
• Payments Banks
• Co-operative Banks

Public sector banks, private sector banks, foreign banks, and regional rural banks are additional categories for commercial banks (RRB). Contrarily, there are two categories for cooperative banks: urban and rural. A payments bank is another relatively recent addition to the system in addition to these.

Commercial Banks

Commercial Banks are subject to regulation under the Banking Regulation Act of 1949, and they operate with a profit-making strategy. They primarily take deposits and lend money to individuals, businesses, and the government. Commercial banks can be categorised as follows:

Public Sector Banks

These are the nationalised banks, which conduct more than 75% of the nation's banking transactions. The government is the largest shareholder in these institutions. SBI is the largest public sector bank in India by volume, and as of April 1, 2017, it had merged with five of its partner banks to place it among the top 50 banks in the world.

There are a total of 12 nationalised banks in the country namely below:

Private Sector Banks

These include banks where private shareholders hold a significant portion of the stock or stake. All of the banking laws and guidelines established by the RBI will also apply to banks in the private sector. The list of Indian private sector banks is provided below.

Foreign Banks

A foreign bank is a private company that has its headquarters outside of India and conducts business there. These banks are required to abide by the laws of both their home country and the nation in where they are doing business. The list of foreign banks with operations in India is provided below. –

Regional Rural Banks

These are also scheduled commercial banks, but their primary goal when they were founded was to help out economically disadvantaged groups in society, such as agricultural labourers, small business owners, and marginal farmers. In different Indian states, they typically operate at the regional level and occasionally have branches in particular cities. Additionally crucial duties performed by RRBs are:

• supplying rural and semi-urban areas with banking and financial services
• Governmental activities like paying MGNREGA workers' wages and distributing pensions are examples.
• Debit cards, credit cards, and locker facilities are examples of para-banking amenities

Small Finance Banks

This country's specialised banking market aims to bring financial inclusion to societal groups that are underserved by other banks. Microindustries, small and marginal farmers, unorganised sector entities, and small business units are the principal clients of small finance institutions. These are supervised by the laws of the RBI Act of 1934 and FEMA, and they are licenced under Section 22 of the Banking Regulation Act of 1949.

Payments Bank

This is a very recent bank model in the Indian banking sector. It can accept a restricted deposit and was conceptualised by the RBI. There is now a Rs. 1 lakh per customer cap on the amount. Additionally, they provide services like debit cards, ATM cards, online banking, and mobile banking.

Co-operative Banks

Cooperative banks are governed by an elected management committee and licenced under the Cooperative Societies Act of 1912. These operate on a no-profit, no-loss basis and mostly support urban self-employed individuals, small businesses, and industries. They mostly fund agriculture-based enterprises in rural areas, such as farming, raising livestock, and hatcheries.

Urban Co-operative Banks

The main cooperative banks found in urban and semi-urban areas are referred to as urban cooperative banks. These banks effectively provided small loans to consumers and companies based around neighbourhoods and workplace communities.

According to the RBI, there were 2,104 Urban Co-operative Banks as of March 31, 2003, of which 56 were scheduled banks. Five states—Andhra Pradesh, Gujarat, Karnataka, Maharashtra, and Tamil Nadu—comprise almost 79% of these.

State Co-operative Banks

A State Cooperative Bank is a union of the State's central cooperative bank, which guards the state's cooperative banking system. Scheduled and Non-Scheduled Banks are another two ways to categorise banks. Every person needs to confirm if their savings or deposit account is held with a Scheduled Bank or a Non-Scheduled Bank. Scheduled Banks are included in the Deposit Insurance and Credit Guarantee Corporation's (DICGC) depositor insurance scheme, which is advantageous for all account holders with savings and fixed/recurring deposit accounts. Bank deposits up to Rs 1 lakh, including fixed, savings, current, and recurring deposits, are protected under the DICGC in the case of bank collapse for each depositor per bank.

Scheduled Banks

The Reserve Bank of India Act, 1934's Second Schedule applies to scheduled banks. The following requirements must be met by the bank in order to be considered a scheduled bank:

• A bank meets the requirements for the schedule bank category if its paid-up capital is Rs. 5 lakh or more.
• A bank must demonstrate to the central bank that its operations do not jeopardise the interests of its depositors.
• Instead of being a sole proprietorship or partnership, a bank should be a corporation.

Non-scheduled Banks

Local area banks that are not included in the Reserve Bank of India's Second Schedule are referred to as non-scheduled banks. The cash reserve requirement must also be maintained by Non-Scheduled Banks, but not with the RBI.