1.

TYPES OF BANKS IN INDIA

Banks can be classified into various types. Given below are the bank types in India:-

 Central Bank
 Cooperative Banks
 Commercial Banks
 Regional Rural Banks (RRB)
 Local Area Banks (LAB)
 Specialized Banks
 Small Finance Banks
 Payments Banks

Central Bank
The Reserve Bank of India is the central bank of our country. Each country has a central bank
that regulates all the other banks in that particular country.

The main function of the central bank is to act as the Government’s Bank and guide and regulate
the other banking institutions in the country. Given below are the functions of the central bank of
a country:

 Guiding other banks

 Issuing currency
 Implementing the monetary policies
 Supervisor of the financial system

Cooperative Banks
These banks are organised under the state government’s act. They give short term loans to the
agriculture sector and other allied activities.

The main goal of Cooperative Banks is to promote social welfare by providing concessional
loans

Commercial Banks
 Organised under the Banking Companies Act, 1956
 They operate on a commercial basis and its main objective is profit.
 They have a unified structure and are owned by the government, state, or any private
entity.
2.TYPES OF ACCOUNTS

Savings Account

These are deposit accounts meant to help consumers save their money. A savings account
can be opened by any individual in India who holds an Aadhaar card and a PAN card,
both of which are mandatory to open a bank account in India. 

Key Features of a Savings Account

Limit. There is no limit to the amount of money that can be saved in a savings account.
The number of transactions may be capped in some cases, depending on your bank. 

Balance. A consumer is expected to maintain a mandatory minimum balance in most

cases to maintain a savings account. 

Current Account

Current accounts are mostly business accounts where money is frequently transferred
between financial accounts. These accounts are best suited for transactions by
corporations and business owners for daily business activities. 

Key Features of a Current Account

Limit. There is no limit to how much money can be put in a current account. Current
accounts also do not have a transaction limit. 

Balance. A current account has a higher minimum balance requirement than savings
accounts. 

Interest. Consumers do not earn any interest on current accounts. 

Salary Account

These accounts are opened by banks upon the request of big corporations and businesses
that pay their employees through banks. Each employee is eligible to maintain a salary
account in which the company they are employed with credits a monthly salary. 

Key Features of a Salary Account

Limit. There is no limit to how much money can be put in a salary account. Each
employee receives salaries based on disbursal from their employees. Independent
transactions can be made by employees to transact between this kind of bank account
with another. 

Balance. A salary account is a zero balance account and employees can withdraw all the
money credited in the account at any point. 

Interest. Employees do not earn any interest on salary accounts. 

NRI Account

These accounts are opened by non-resident Indians who wish to maintain a financial bank
account in India. There are three kinds of NRI accounts that can be opened:

Non-Residential Ordinary Account (NRO)

These accounts hold deposits in Indian rupee denomination. The money deposited is
from proceeds earned in India. 

Key Features of an NRO

Limit. There is no limit to how much money can be put in an NRO account. 

Balance. Any amount of balance can be maintained. 

Interest. The principal and the interest earned on that principal fall under the taxable
category. 

Recurring Deposit (RD) Accounts

These accounts are opened as deposit accounts by consumers who are interested in
earning interest on their money. Commonly known as RDs, these accounts are the easiest
ways to earn an income higher than that offered by savings accounts. 

Key Features of a Recurring Deposit

Limit. The minimum limit to open an RD differs from one bank to another. Consumers
can opt for a minimum limit as low as INR 1,000 per month and open an RD account
with any bank of their choice. 

Balance. RDs are deposit accounts that allow consumers to collect a monthly amount set
at the beginning of the tenure of the account.

Fixed Deposit (FD) Accounts

These accounts are opened to earn interest on  deposits for a fixed period of time until
maturity. Fixed deposits are among the safest financial instruments to save and earn
interest on idle money. 

Key Features of a Fixed Deposit

Limit. There is no limit to how much money can be put in a fixed deposit account. The
higher the money allocation, the more interest is paid at the end of the account’s tenure.

Balance. An FD account holds a lump sum amount as investment.

3.COMMERCIAL BANKS
The term commercial bank refers to a financial institution that accepts deposits,
offers checking account services, makes various loans, and offers basic
financial products like certificates of deposit (CDs) and savings accounts to
individuals and small businesses.

Types of Commercial Banks:

There are three different types of commercial banks.
 Private bank –: It is a type of commercial banks where private individuals and
businesses own a majority of the share capital. All private banks are recorded as
companies with limited liability. Such as  Housing Development Finance Corporation
(HDFC) Bank, Industrial Credit and Investment Corporation of India (ICICI) Bank, Yes
Bank, and more such banks.
 Public bank –: It is a type of bank that is nationalised, and the government holds a
significant stake.  For example, Bank of Baroda, State Bank of India (SBI), Dena Bank,
Corporation Bank, and Punjab National Bank.
Foreign bank –: These banks are established in foreign countries and have branches
in other countries. For instance, American Express Bank, Hong Kong and Shanghai
Banking Corporation (HSBC), Standard & Chartered Bank, Citibank, and more such
banks.

4.NEGOTIABLE INSTRUMENTS
A negotiable instrument is a signed document that promises a sum of
payment to a specified person or the assignee. In other words, it is a
formalized type of IOU: A transferable, signed document that promises to
pay the bearer a sum of money at a future date or on-demand. The payee,
who is the person receiving the payment, must be named or otherwise
indicated on the instrument.
Types of negotiable instruments-
Personal checks

Personal checks are signed and authorized by someone who deposited

money with the bank and specify the amount required to be paid, as
well as the name of the bearer of the check (the recipient).
Traveller’s checks

Traveller’s checks are another type of negotiable instrument intended

to be used as a form of payment by people on vacation in foreign
countries as an alternative to the foreign currency.

Money order

Money orders are like checks in that they promise to pay an amount to
the holder of the order. Issued by financial institutions and
governments, money orders are widely available, but differ from checks
in that there is usually a limit to the amount of the order – typically
$1,000.

Promissory notes

Promissory notes are documents containing a written promise between

parties – one party (the payor) is promising to pay the other party (the
payee) a specified amount of money at a certain date in the future.

5. BANKER AND CUSTOMER RELATIONSHIP

The relationship between a banker and a customer depends on the type of
transaction. In this banker and customer relationship, both parties have
some obligations and rights. The relationship between banker and
customer is not only that of a debtor and creditor. However, they also share
other relationships.
6. NABARD
1.BACKGROUND
National Bank for Agriculture and Rural Development (NABARD) was established on 12 July
1982 by an Act of the Parliament. NABARD, as a Development Bank, is mandated for providing
and regulating credit and other facilities for the promotion and development of agriculture, small
scale industries, cottage and village industries, handicrafts and other rural crafts and other allied
economic activities in rural areas with a view to promoting integrated rural development and
securing prosperity of rural areas.
2. VISION
Development Bank of the Nation for Fostering Rural Prosperity.
3. MISSION
Promote sustainable and equitable agriculture and rural development through participative
financial and non-financial interventions, innovations, technology and institutional development
for securing prosperity.
4. OWNERSHIP
NABARD is wholly owned by Government of India.
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5. ORGANISATIONAL SET UP
NABARD, with its Head office at Mumbai, has NABARD, with its Head office at Mumbai, has
31 Regional Offices located in States and Union Territory, a cell at Srinagar, 04 Training
Establishments in the Northern, Eastern & Southern parts of India and 414 District Development
Managers functioning at district level. NABARD has 2243 professionals supported by 1130 other
staff. (Data pertains to 31 March 2021 - CoB).
6. FUNCTIONS AT A GLANCE
The major functions of NABARD include promotion and development, refinancing, financing,
planning, monitoring and supervision.
Non-credit related:
 Credit Planning and Monitoring, Coordination with various agencies and institutions.
 Assist in policy formulation of GoI, RBI and State Governments on matters related to
agricultural credit and rural development.
 Institutional development and capacity building of Cooperatives and Regional Rural
Banks (RRBs) to strengthen the rural credit delivery system. Statutory inspection of
Regional Rural Banks (RRBs), State Cooperative Banks and District Central Cooperative
Banks (DCCBs), voluntary inspection of State Cooperative Agriculture and Rural
Development Banks (SCARDBs) and their off-site surveillance.
 Promotional and developmental initiatives in the areas of farm, off-farm, micro finance,
financial inclusion, Convergence with Govt sponsored programmes.
 Supporting the financial inclusion efforts of Regional Rural Banks and Cooperative
Banks.

7. SIDBI

The SIDBI (Small Industries Development Bank of India) is a wholly-owned

subsidiary of IDBI (Industrial Development Bank of India), established
under the special Act of the Parliament 1988 which became operative from
April 2, 1990.

SIDBI was made responsible for administering Small Industries

Development Fund and National Equity Fund that were administered by
IDBI before. SIDBI is the Primary Financial Institution for promoting,
developing and financing MSME

FUNCTIONS-
  Small Industries Development Bank of India refinances loans
that are extended by the PLIs to the small-scale industrial units
and also offers resources assistance to them.

 It discounts and rediscounts bills.

 It also helps in expanding marketing channels for the products

of SSI (Small Scale Industries) sector both in the domestic as
well as international markets.

 It offers services like factoring, leasing etc. to the industrial

concerns in the small-scale sector.

8. REGIONAL RURAL BANKS

Regional Rural Banks (RRBs) in India are the scheduled commercial banks that
conduct banking activities for the rural areas at the state level. As the name
suggests, the Regional Rural Banks cater to the needs of the rural and
underprivileged people at the regional level across different states in the country.

1. The Regional Rural Banks or the RRB government-based banks operate

at the regional level in various states across the country.

2. The RRBs are entrusted to cater to the needs of the rural people in the
backward regions and bring Financial Inclusion at the primary level.

3. The main objective of the RRBs is to provide credit and other banking
facilities to the small, marginal farmers, agricultural laborers, small
artisans, etc. in the rural areas for boosting the rural economy.

4. At present, there are 43 RRBs in the country and each of them is

sponsored by the government of India in collaboration with the state
government and sponsor bank.

9. KYC
KYC means Know Your Customer and sometimes Know Your Client.
KYC or KYC check is the mandatory process of identifying and verifying
the client's identity when opening an account and periodically over time.
In other words, banks must make sure that their clients are genuinely who
they claim to be.
Banks may refuse to open an account or halt a business relationship if the
client fails to meet minimum KYC requirements. 

KYC procedures defined by banks involve all the necessary actions to

ensure their customers are real, assess, and monitor risks.
These client-onboarding processes help prevent and identify money
laundering, terrorism financing, and other illegal corruption schemes.
KYC process includes ID card verification, face verification, document
verification such as utility bills as proof of address, and biometric
verification.
Banks must comply with KYC regulations and anti-money laundering
regulations to limit fraud. KYC compliance responsibility rests with the
banks. 

10. SCHEDULED AND NON-SCHEDULED BANKS

Scheduled Bank

Scheduled banks are banks that are listed in the 2nd schedule of the Reserve
Bank of India Act, 1934. The bank's paid-up capital and raised funds must be
at least Rs5 lakh to qualify as a scheduled bank. Scheduled banks are liable for
low-interest loans from the Reserve Bank of India and membership in
clearinghouses.

They must, however, meet certain requirements, such as maintaining an

average daily CRR (Cash Reserve Ratio) balance with the central bank at
the rates set by it. The RBI allows Scheduled Banks to raise debts and loans
at bank rates.
All commercial banks, including nationalized, international, cooperative,
and regional rural banks, fall under scheduled banks.

Non-Scheduled Banks Non-scheduled banks, by definition, are those that

do not adhere to the RBI's regulations. They are not mentioned in the
Second Schedule of the RBI Act, 1934, and are therefore deemed incapable
of serving and protecting depositors' interests. Non-scheduled banks must
also meet the cash reserve requirement, but not with reserve banks, but
with themselves. They are generally smaller in size and have a range of
influence that is somewhat narrow. They are risky to do business with due
to their financial limitations.

11.ORGANIZED FINANCIAL SYSTEM AND NON-ORGANIZED FINANCIAL

SYSTEM

Organized sector of the money Unorganized sector of the money

market market

The organized sector includes: The unorganized sector includes:

i. Reserve Bank of India (RBI) i. Money lenders
ii. Commercial banks ii. Indigenous bankers
iii. Co-operative banks iii. Unregulated non-bank financial
iv. Development of financial
institutions
 v. Discount and Finance House of
India
This sector comes under the purview of This sector does not come under the
RBI. control of RBI.
The interest rates are low and borrowers The interest rates are very high and
are not exploited. borrowers are exploited.
It mainly operates in urban, semi-urban, It mainly operates in rural areas or
and certain rural areas. remote regions where the organized
sector is not developed.

12. TYPES OF INSURANCE

1. Health Insurance

In recent years, health insurance has become more confusing than ever.
Nevertheless, it’s essential. A major medical event could cause severe
financial hardships.

Life Insurance

There are a wide variety of life insurance policies. The most basic — and
least expensive— is term life insurance, which pays a specific amount if you
die within the time frame of the policy.

Disability Insurance

Most major corporations offer some form of disability insurance to their

employees, but many smaller businesses do not. This type of coverage is
intended to replace your salary if you were to become temporarily or
permanently disabled.
Long-Term Care Insurance

This insurance helps cover costs in the event you need to be in nursing care,
either on a short- or a long-term basis. You should also consider whether
you have assets outside the policy that could pay for your care. If not,
strong coverage may be more necessary for your family. 

Homeowners And Renters Insurance

Homeowners insurance pays for partial damage or the complete

destruction of your home. Often, it also covers the damaged contents of
your home, as well as the funds necessary to rent accommodations while
your home is being repaired. 

Liability Insurance 

Liability insurance is often attached to your homeowners policy, and it

covers accidents that may happen at your home. For example, if a house
guest slipped on your stairs, you might be responsible for their medical
expenses if you were found liable for the accident. Liability coverage would
mitigate those costs. 

Automobile Insurance 

If you own a car, you are already intimately familiar with automobile
insurance. That’s because it’s one of the most important kinds of coverage
you can have.

13. RBI

 The Reserve Bank of India (RBI) is the central bank of India,

  The RBI was originally set up as a private entity in 1935, but it was
nationalized in 1949.
 The main purpose of the RBI is to conduct consolidated supervision of the
financial sector in India, which is made up of commercial banks, financial
institutions, and non-banking finance firms.

The RBI acts as a regulator and supervisor of the overall financial system.

This injects public confidence into the national financial system, protects
interest rates, and provides positive banking alternatives to the public.
Finally, the RBI acts as the issuer of national currency.

14. MONETORY POLICY

Monetary policy is a set of tools that a nation's central bank has available to
promote sustainable economic growth by controlling the overall supply of money
that is available to the nation's banks, its consumers, and its businesses.

The goal is to keep the economy humming along at a rate that is neither too hot nor
too cold. The central bank may force up interest rates on borrowing in order to
discourage spending or force down interest rates to inspire more borrowing and
spending.

Expansionary Monetary Policy

If a country is facing high unemployment due to a slowdown or a recession, the

monetary authority can opt for an expansionary policy aimed at increasing economic
growth and expanding economic activity.

Contractionary Monetary Policy

A contractionary monetary policy increases interest rates in order to slow the growth
of the money supply and bring down inflation.