A.

Primary Functions of Banks ↓

The primary functions of a bank are also known as banking functions. They are the main functions of a bank.
These primary functions of banks are explained below

1. Accepting Deposits

The bank collects deposits from the public. These deposits can be of different types, such as :-
a. Saving Deposits
b. Fixed Deposits
c. Current Deposits
d. Recurring Deposits
a. Saving Deposits

This type of deposits encourages saving habit among the public. The rate of interest is low. At present it is about 4% p.a.
Withdrawals of deposits are allowed subject to certain restrictions. This account is suitable to salary and wage earners. This
account can be opened in single name or in joint names.

b. Fixed Deposits

Lump sum amount is deposited at one time for a specific period. Higher rate of interest is paid, which varies with the period
of deposit. Withdrawals are not allowed before the expiry of the period. Those who have surplus funds go for fixed deposit.

c. Current Deposits

This type of account is operated by businessmen. Withdrawals are freely allowed. No interest is paid. In fact, there are
service charges. The account holders can get the benefit of overdraft facility.

d. Recurring Deposits

This type of account is operated by salaried persons and petty traders. A certain sum of money is periodically deposited into
the bank. Withdrawals are permitted only after the expiry of certain period. A higher rate of interest is paid.

2. Granting of Loans and Advances

The bank advances loans to the business community and other members of the public. The rate charged is higher than what it
pays on deposits. The difference in the interest rates (lending rate and the deposit rate) is its profit.
The types of bank loans and advances are :-
a. Overdraft
b. Cash Credits
c. Loans
d. Discounting of Bill of Exchange
a. Overdraft

This type of advances are given to current account holders. No separate account is maintained. All entries are made in the
current account. A certain amount is sanctioned as overdraft which can be withdrawn within a certain period of time say
three months or so. Interest is charged on actual amount withdrawn. An overdraft facility is granted against a collateral
security. It is sanctioned to businessman and firms.

b. Cash Credits

The client is allowed cash credit upto a specific limit fixed in advance. It can be given to current account holders as well as
to others who do not have an account with bank. Separate cash credit account is maintained. Interest is charged on the
amount withdrawn in excess of limit. The cash credit is given against the security of tangible assets and / or guarantees. The
advance is given for a longer period and a larger amount of loan is sanctioned than that of overdraft.

c. Loans

It is normally for short term say a period of one year or medium term say a period of five years. Now-a-days, banks do lend
money for long term. Repayment of money can be in the form of installments spread over a period of time or in a lumpsum
amount. Interest is charged on the actual amount sanctioned, whether withdrawn or not. The rate of interest may be slightly
lower than what is charged on overdrafts and cash credits. Loans are normally secured against tangible assets of the
company.

d. Discounting of Bill of Exchange

The bank can advance money by discounting or by purchasing bills of exchange both domestic and foreign bills. The bank
pays the bill amount to the drawer or the beneficiary of the bill by deducting usual discount charges. On maturity, the bill is
presented to the drawee or acceptor of the bill and the amount is collected.

B. Secondary Functions of Banks ↓

The bank performs a number of secondary functions, also called as non-banking functions.
These important secondary functions of banks are explained below.

1. Agency Functions

The bank acts as an agent of its customers. The bank performs a number of agency functions which includes :-
a. Transfer of Funds
b. Collection of Cheques
c. Periodic Payments
d. Portfolio Management
e. Periodic Collections
f. Other Agency Functions
a. Transfer of Funds

The bank transfer funds from one branch to another or from one place to another.

b. Collection of Cheques

The bank collects the money of the cheques through clearing section of its customers. The bank also collects money of the
bills of exchange.

c. Periodic Payments

On standing instructions of the client, the bank makes periodic payments in respect of electricity bills, rent, etc.

d. Portfolio Management

The banks also undertakes to purchase and sell the shares and debentures on behalf of the clients and accordingly debits or
credits the account. This facility is called portfolio management.

e. Periodic Collections

The bank collects salary, pension, dividend and such other periodic collections on behalf of the client.

f. Other Agency Functions

They act as trustees, executors, advisers and administrators on behalf of its clients. They act as representatives of clients to
deal with other banks and institutions.

2. General Utility Functions

The bank also performs general utility functions, such as :-

a. Issue of Drafts, Letter of Credits, etc.
b. Locker Facility
c. Underwriting of Shares
d. Dealing in Foreign Exchange
e. Project Reports
f. Social Welfare Programmes
g. Other Utility Functions
a. Issue of Drafts and Letter of Credits

Banks issue drafts for transferring money from one place to another. It also issues letter of credit, especially in case of,
import trade. It also issues travellers' cheques.

b. Locker Facility

The bank provides a locker facility for the safe custody of valuable documents, gold ornaments and other valuables.

c. Underwriting of Shares

The bank underwrites shares and debentures through its merchant banking division.

d. Dealing in Foreign Exchange

The commercial banks are allowed by RBI to deal in foreign exchange.

e. Project Reports

The bank may also undertake to prepare project reports on behalf of its clients.

f. Social Welfare Programmes

It undertakes social welfare programmes, such as adult literacy programmes, public welfare campaigns, etc.

g. Other Utility Functions

It acts as a referee to financial standing of customers. It collects creditworthiness information about clients of its customers.
It provides market information to its customers, etc. It provides travellers' cheque facility.
https://kalyan-city.blogspot.com/2011/04/functions-of-banks-important-banking.html

Role and importance of bank

1. Bank Saves Your Money Continuously.
Without money no one will respect you. Money also helps you in need. So, saving
money is necessary for you. Bank do this work very faithfully. You can keep
money on bank for savings without any fear. If you want to save money on bank
continuously, you have to open a bank account. In this deposit account you can
save money.

2. Bank Supplies Necessary Money for Different Types of Business and

Institutions.
Different types of manufacturer company, business institutions are starting their
business by taking loan from bank. Bank supplies necessary money for different
types of business and institutions for increasing the development of a country. If
you want to start a business you also can loan from bank. And bank will loan you
with low rate of interest.
3. Bank Saves Money with High Security.
Do you feel insecurity about your savings money? Bank gives proper security for
savings money, parts, several types of wealth, and your faith for their commitment.
Actually, hackers accessed its computer network and stole names and street
addresses of millions of its clients. This is intrusion. Thus they stole more money.
Some banks are give you much security in this case. You have to trust to bank by
thinking the good history of bank.

4. Bank Transfers the Money of Customer from one Place to another.

There are lot of system of transferring money like transfer money between your
accounts, send money to another person, transfer to another bank or bank to bank
transfer, recurring transfer and last technology money transferring system is mobile
banking or mobile to mobile transfer money. Actually, estimating the easiest and
safest system to transfer money can be tough. I think online and mobile apps
banking is the best. Because online banking has different types easiest ways like
PayPal, square cash, google wallet, transfer-wise, ACH transfer, wire transfer(if
available).

5. Bank Create Medium of Exchange.

Money is a special type of asset in an economy that people generally use to
purchase goods and services from other people or businesses. A medium of
exchange is like something that buyers will exchange with a dealer when they
actually need to purchase goods or services from the dealer. While many other
things could be used like a medium of exchange in an economy of any country,
money is not only common but also a useful medium of exchange in our society.

6. Online Banking Facilities.

Have your Bank at your finger-tips, even when you are in the movement with
Online Banking giving you the access to your account at all times. If you have an
account, you are eligible to apply for this facility. Online banking facilities giving
by lot of financial institutions have many looks and many potential in general, but
also have a few that are application specific.

7. By Adopting Different Strategy Bank Create Loan Deposit from Financial

Transitions.
Do you know that banks create deposits in the process of lending. Actually, the
conventional description of the banking states that deposits normally create loans.
The other description is that the opposite that is loans create deposits. In the real
factor liabilities create assets, whereas in the monetary sector, assets create
liabilities. The reserve requirement of central bank normally affects the banks’
deposit inter mediation and checks bank leverage system.

8. Mobile Banking has Made Easy of Activities of Banking.

Mobile banking offers many advantages to the customers such as best security,
easy access, easy withdraw or send and helpful application for smart phone for
easy banking. Actually, the biggest benefit of mobile banking is that you can
control with more security of your money. We don't have always internet
connection to our but we have always mobile network. Mobile banking is simply
need mobile network. So, mobile banking has easy access, good security, no fees,
banking activities done quickly and it has easy access system to go to your
account.

9. Bank Gives Different Types of Necessaries Consultancy to Business and

Industry Organization.
Advice for starting a business or different types of business news is given by bank
to the customers or business and industry institutions. The bank is inspiring to
them for taking the risk for starting a business. Bank gives to take risk, find
address, rent a building and after all kinds of information.

10. Bank Creates Employment Opportunities for You.

Bank has lot of activities and it is done by lot of people. For running a bank
smoothly a bank need skilled banker. Actually, a banker is the people of a country.
So, bank needs people and country people need job. That's how bank creates job
opportunity for people.

A demand deposit account (DDA) consists of funds held in a bank account from which deposited funds
can be withdrawn at any time

Structure of Indian banking system

https://www.youtube.com/watch?v=NfCV_rYdUcw
https://www.jagranjosh.com/general-knowledge/difference-between-scheduled-and-nonscheduled-
banks-1525429852-1

 RBI
The Reserve Bank of India (RBI) is India's central bank, which controls the issue and supply of
the Indian rupee. RBI is the regulator of the entire Banking in India. RBI plays an important part in the
Development Strategy of the Government of India.
RBI regulates commercial banks and non-banking finance companies working in India. It serves as the
leader of the banking system and the money market. It regulates money supply and credit in the country.
The RBI carries out India's monetary policy and exercises supervision and control over banks and non-
banking finance companies in India. RBI was set up in 1935 under the Reserve Bank of India Act,1934.
 It commenced its operations on 1 April 1935 in accordance with the Reserve Bank of India Act, 1934.
Following India's independence on 15 August 1947, the RBI was nationalised on 1 January 1949.

The central bank is an independent apex monetary authority which regulates banks and provides important
financial services like storing of foreign exchange reserves, control of inflation, monetary policy report.

The central board of directors is the main committee of the central bank. The Government of India
appoints the directors for a four-year term. The board consists of a governor, and not more than four
deputy governors; four directors to represent the regional boards;[43] two – usually the Economic Affairs
Secretary and the Financial Services Secretary – from the Ministry of Finance and ten other directors from
various fields. The Reserve Bank – under Raghuram Rajan's governorship – wanted to create a post of a
chief operating officer (COO), in the rank of deputy governor and wanted to re-allocate work between the
five of them (four deputy governor and COO).[44][45]
The bank is headed by the governor, currently Shaktikanta Das.[2] There are three deputy governors B. P.
Kanungo,[46] Mahesh Kumar Jain, and Michael Patra
The RBI has four regional representations: North in New Delhi, South in Chennai, East in Kolkata and
West in Mumbai.

 Schedule Banks
 Scheduled Banks in India constitute those banks which have been included in
the Second Schedule of Reserve Bank of India(RBI) Act, 1934. RBI in turn
includes only those banks in this schedule which satisfy the criteria laid
down vide section 42 (6) (a) of the Act.

The banks included in this schedule list should fulfil two conditions.
1. The paid capital and collected funds of bank should not be less than Rs. 5
lac.
2.Any activity of the bank will not adversely affect the interests of
depositors.
 Every Scheduled bank enjoys the following facilitiess.
1. Such bank becomes eligible for debts/loans on bank rate from the RBI
2. Such bank automatically acquire the membership of clearing house.
 The following are the Scheduled Banks in India (Public Sector):

State Bank of India
State Bank of Bikaner and Jaipur
State Bank of Hyderabad
State Bank of Indore
State Bank of Mysore
State Bank of Saurashtra
State Bank of Travancore
Andhra Bank
Allahabad Bank
Bank of Baroda
Bank of India
Bank of Maharashtra
Canara Bank
Central Bank of India
Corporation Bank
Dena Bank
Indian Overseas Bank
Indian Bank
Oriental Bank of Commerce
Punjab National Bank
 Punjab and Sind Bank
Syndicate Bank
Union Bank of India
United Bank of India
UCO Bank
Vijaya Bank
 The following are the Scheduled Banks in India (Private Sector):

ING Vysya Bank Ltd
Axis Bank Ltd
Indusind Bank Ltd
ICICI Bank Ltd
South Indian Bank
HDFC Bank Ltd
Centurion Bank Ltd
Bank of Punjab Ltd
IDBI Bank Ltd
 The following are the Scheduled Foreign Banks in India:

American Express Bank Ltd.
ANZ Gridlays Bank Plc.
Bank of America NT & SA
Bank of Tokyo Ltd.
Banquc Nationale de Paris
Barclays Bank Plc
Citi Bank N.C.
Deutsche Bank A.G.
Hongkong and Shanghai Banking Corporation
Standard Chartered Bank.
The Chase Manhattan Bank Ltd.
Dresdner Bank AG.

In the evolution of this strategic industry spanning over two centuries, immense
developments have been made in terms of the regulations governing it, the ownership
structure, products and services offered and the technology deployed. The entire evolution
can be classified into four distinct phases.

1. Phase I- Pre-Nationalisation Phase (prior to 1955)

2. Phase II- Era of Nationalisation and Consolidation (1955-1990)
3. Phase III- Introduction of Indian Financial & Banking Sector Reforms and Partial
Liberalisation (1990-2004)
4. Phase IV- Period of Increased Liberalisation (2004 onwards)
Organisational Structure
https://en.wikipedia.org/wiki/List_of_banks_in_India
1. Reserve Bank of India:
Reserve Bank of India is the Central Bank of our country. It was established on 1st April 1935
accordance with the provisions of the Reserve Bank of India Act, 1934. It holds the apex
position in the banking structure. RBI performs various developmental and promotional
functions.
It has given wide powers to supervise and control the banking structure. It occupies the
pivotal position in the monetary and banking structure of the country. In many countries
central bank is known by different names.

For example, Federal Reserve Bank of U.S.A, Bank of England in U.K. and Reserve Bank of
India in India. Central bank is known as a banker’s bank. They have the authority to
formulate and implement monetary and credit policies. It is owned by the government of a
country and has the monopoly power of issuing notes.

2. Commercial Banks:
Commercial bank is an institution that accepts deposit, makes business loans and offer related
services to various like accepting deposits and lending loans and advances to general
customers and business man.

These institutions run to make profit. They cater to the financial requirements of industries
and various sectors like agriculture, rural development, etc. it is a profit making institution
owned by government or private of both.

Commercial bank includes public sector, private sector, foreign banks and regional
rural banks:
3. Public Sector Banks:
The term “public sector banks” refers to a situation where the majority
equity stake in the banks is held by the government. The Indian
Government keeps default holdings of a minimum 51% shareholding, but
management control is only with the Central Government, thereby
classifying them as Public Sector Banks.

 Public Sector Banks (PSBs) are a major type of bank in India, where a majority stake (i.e.
more than 50%) is held by the government.
 In April 2019, Vijaya Bank and Dena Bank were merged with Bank of Baroda.[1]
 On 30 August 2019, Union Finance Minister Nirmala Sitaraman announced merger of six
public sector banks (PSBs) with four better performing anchor banks in order to streamline
their operation and size, two banks were amalgamated to strengthen national presence and
four were amalgamated to strengthen regional focuses. Subsequently, the number of public
sector bank has been reduced to 12 from 27.[2][3] This new amalgamation came effective from
1 April 2020.[4]
Public Sector Banks (PSBs) are a major type of bank in India, where a majority stake (i.e. more
than 50%) is held by the government. The shares of these banks are listed on stock exchanges.
There are a total of 12 Public Sector Banks alongside 1 state-owned Payments Bank in India.
The Central Government entered the banking business with the nationalization of the Imperial
Bank of India in 1955. A 60% stake was taken by the Reserve Bank of India and the new bank
was named State Bank of India. The seven other state banks became subsidiaries of the new
bank in 1959 when the State Bank of India (Subsidiary Banks) Act, 1959 was passed under
the Nehru government.[1]
The next major government intervention in banking took place on 19 July 1969 when the Indira
Gandhi government nationalised an additional 14 major banks. The total deposits in the banks
nationalised in 1969 amounted to 50 crores. This move increased the presence of nationalised
banks in India, with 84% of the total branches coming under government control
Public Sector Banks (Government Shareholding %, as of 30th june, 2020)

1. State Bank of India (57.64%)

2. Punjab National Bank (85.59%)
3. Bank of Baroda (71.60%)
4. Canara Bank (78.55%)
5. Union Bank of India (89.07%)
6. Punjab & Sind Bank (83.06%)
7. Indian Bank (88.06%)
8. Bank of Maharashtra (92.49%)
9. Bank of India (89.10%)
10. Central Bank of India (78.55%)
11. Indian Overseas Bank (95.84%)
12. UCO Bank (94.44%)
Payments Bank (PB)

 India Post Payments Bank (IPPB) (100%)

4. Private Sector Banks:  

The private-sector banks in India represent part of the Indian banking sector that is made
up of both private and public sector banks. The "private-sector banks" are banks where
greater parts of stake or equity are held by the private shareholders and not by governent.
The private-sector banks in India represent part of the Indian banking sector that is made up
of both private and public sector banks. The "private-sector banks" are banks where greater
parts of stake or equity are held by the private shareholders and not by government. Banking
in India has been dominated by public sector banks since the 1969 when all major banks were
nationalised by the Indian government. However since liberalisation in government banking
policy in 1990s, old and new private sector banks have re-emerged. They have grown faster
and bigger over the two decades since liberalisation using the latest technology, providing
contemporary innovations and monetary tools and techniques. The private sector banks are
split into two groups by financial regulators in India, old and new. The old private sector
banks existed prior to the nationalisation in 1969 and kept their independence because they
were either too small or specialist to be included in nationalisation. The new private sector
banks are those that have gained their banking license since the liberalisation in the 1990s
Image source:google

List of Private Sector Banks is:

Banks Established
1. Axis Bank (earlier UTI Bank)  1993(as
UTI Bank)
2. Bank of Punjab (actually an old generation  
private bank since it was not founded under
post-1993 new bank licensing regime)
3. Centurion Bank Ltd. (Merged in Bank of
Punjab in late 2005 to become Centurion Bank
 1994
of Punjab, acquired by HDFC Bank Ltd. in
2008)
4. Development Credit Bank (Converted from
 1995
Co-operative Bank, now DCB Bank Ltd.)
5. ICICI Bank (previously ICICI and then both
merged;total merger SCICI+ICICI+ICICI Bank  1996
Ltd)
6. IndusInd Bank  1994
7. Kotak Mahindra Bank  2003
8. Yes Bank  2005
9. Balaji Corporation Bank Limited  2010
10. HDFC bank  1994
11. Bandhan bank  2015
 12. IDFC Bank  2015
What is the Intake of Government in the Public Sector Banks of India?
5. Foreign Banks:
A foreign bank with the obligation of following the regulations of both its home and its host
countries. Loan limits for these banks are based on the capital of the parent bank, thus
allowing foreign banks to provide more loans than other subsidiary banks.

Foreign banks are those banks, which have their head offices abroad. CITI bank, HSBC,
Standard Chartered etc. are the examples of foreign bank in India. Currently India has 36
foreign banks.

6. Regional Rural Bank (RRB):

The government of India set up Regional Rural Banks (RRBs) on October 2, 1975. The banks
provide credit to the weaker sections of the rural areas, particularly the small and marginal
farmers, agricultural labourers, and small entrepreneurs. There are 82 RRBs in the country.
NABARD holds the apex position in the agricultural and rural development. List of some
RRBs is given below:

7. Co-operative Bank:
Co-operative bank was set up by passing a co-operative act in 1904. They are organised and
managed on the principal of co-operation and mutual help. The main objective of co-
operative bank is to provide rural credit.

The cooperative banks in India play an important role even today in rural co-operative
financing. The enactment of Co-operative Credit Societies Act, 1904, however, gave the real
impetus to the movement. The Cooperative Credit Societies Act, 1904 was amended in 1912,
with a view to broad basing it to enable organisation of non-credit societies.

Name of some co-operative banks India are:

1. Andhra Pradesh State Co-operative Bank Ltd
2. The Bihar State Co- operative Bank Ltd.
3. Chhatisgarh Rajya Sahakari Bank Maryadit
4. The Gujarat State Co-operative Bank Ltd.
5. Haryana Rajya Sahakari Bank Ltd.
Three tier structures exist in the cooperative banking:
i. State cooperative bank at the apex level.
ii. Central cooperative banks at the district level.
iii. Primary cooperative banks and the base or local level.
Scheduled and Non-Scheduled Banks:
The scheduled banks are those which are enshrined in the second schedule of the RBI Act,
1934. These banks have a paid-up capital and reserves of an aggregate value of not less than
Rs. 5 lakhs, they have to satisfy the RBI that their affairs are carried out in the interest of their
depositors.
All commercial banks (Indian and foreign), regional rural banks, and state cooperative banks
are scheduled banks. Non- scheduled banks are those which are not included in the second
schedule of the RBI Act, 1934. At present these are only three such banks in the country.