Banking, Financial Services, and Insurance

(BFSI)
M2- Introduction to Banking

Duration- 90 min

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 What you’ll learn in this Module

1. Indian Banking Structure

2. Types of Banks

3. Role of Banks in India

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 Introduction to Banking

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 Central Bank
(RBI)

Non-scheduled Development
Structure of the Indian Banking System Scheduled Banks
banks Banks

Co-operative
Commercial Banks IFCI
Banks

Public Sector Private Sector Foreign Sector Regional Rural Rural Co-operative Urban Co-
IDBI
Banks Banks Banks Banks banks operative banks

SBI and Associate State Central Co-

EXIM
Banks operative Banks

Other District Central

Nationalized Co-operative SIDBI
Banks Banks

Primary
Other Public
Agricultural NABARD
Sector Banks
Societies

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 Types of Banks in India
• Reserve Bank of India is the central bank of the country and regulates the banking system of India. The structure
of the banking system of India can be broadly divided into 3 categories-

1. Scheduled banks

 These are Banks that are included in the second schedule of the Reserve Bank of India Act, 1934.
 Such banks become eligible for debts/loans on bank rate from the RBI and automatically acquire the
membership of a clearing house.
 Scheduled banks are further divided into commercial and cooperative banks
 e.g. State Bank of India (SBI), Indian Overseas Bank (IOB), Union Bank of India and others

1.i) Commercial Banks

 The institutions that accept deposits from the general public and advance loans with the purpose of earning
profits are known as Commercial Banks. Commercial banks can be broadly divided into 4 categories-

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 Types of Banks in India contd…
a) Public Sector Banks- Majority stake is held by the government. After the recent amalgamation of smaller banks
with larger banks, there are 12 public sector banks in India as of now. e.g. Bank of Baroda, Punjab National Bank.

b) Private Sector Banks are banks where the major stakes in the equity are owned by private stakeholders or
business houses. A few major private sector banks in India are HDFC Bank, Kotak Mahindra Bank, ICICI Bank and
others.

c) Foreign Bank- A bank that has its headquarters outside the country but runs its offices as a private entity at any
other location outside the country. Such banks are under an obligation to operate under the regulations provided
by the central bank of the country as well as the rule prescribed by the parent organization located outside India,
e.g. Citi Bank.

d) Regional Rural Banks (RRBs)- These banks were established under the Regional Rural Banks Ordinance, 1975
with the aim of ensuring sufficient institutional credit for agriculture and other rural sectors. The area of
operation of RRBs is limited to the area notified by the Government. RRBs are owned jointly by the Government
of India, the State Government and Sponsor Banks, e.g. Arunachal Pradesh Rural Bank.

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 Types of Banks in India contd…
1.ii) Cooperative Bank

 It is a financial entity that belongs to its members, who are also the owners as well as the customers of their bank.
 They provide their members with numerous banking and financial services.
 Cooperative banks are the primary supporters of agricultural activities, some small-scale industries and self-
employed workers.
 e.g. Mehsana Urban Co-operative Bank.
 Cooperative banks are further divided into two categories

a) Rural cooperative Banks- They are either short-term or long-term (e.g. Maharashtra state co-operative bank)
 Short-term cooperative banks can be subdivided into State Co-operative Banks, District Central Co-operative Banks,
Primary Agricultural Credit Societies.
 Long-term banks are either State Cooperative Agriculture and Rural Development Banks (SCARDBs) or Primary
Cooperative Agriculture and Rural Development Banks (PCARDBs).

b) Urban Co-operative Banks (UCBs) refer to primary cooperative banks located in urban and semi-urban areas. (e.g. Goa
urban co-operative bank)

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 Types of Banks in India contd…
2. Non-scheduled banks

 These are Banks that are not included in the second section of the Reserve Bank of India Act, 1934.
 They are not eligible to borrow from the RBI for normal banking purposes except for emergencies.
 e.g. Jammu & Kashmir Bank

3. Development banks

 Financial institutions providing long term funds at low and stable interest rates for capital intensive investments for
a long period of time
 e.g. NABARD- National Bank for Agriculture and Rural Development
 Development Banks are of 5 types

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 Types of Banks in India contd…
IFCI (Industrial Finance Corporation of India)- Objective is to provide long and medium term financial offerings to large scale
businesses. It especially offers its services when ordinary bank accommodation does not suit the undertaking or finance
cannot be raised in a profitable manner from the issue of shares

IDBI (Industrial Development Bank of India) is regarded as a public financial institution as per the Companies Act, 1956.

EXIM (Export-Import Bank of India) is a public sector financial institution whose main aim is to finance the Indian exports that
generate foreign exchange for the country. It also extends term loans for foreign trade.

SIDBI (Small Industries Development Bank of India) is owned by 33 govt. of India owned / controlled institutions. It promotes
employment generating industries, particularly in semi-urban areas for creating more employment.
It takes initiative for technical upgradation and modernization of existing units and expands the channels for marketing the
small scale industry products in domestic and international markets.

NABARD (National Bank for Agriculture and Rural Development) is the prime development bank in India. Its main focus is to
uplift rural India by increasing the credit flow for the promotion of the agriculture and non-farm sector. It is considered as the
apex bank of the country which takes care of the cottage, small and village industry and other rural setups.

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 Role of Banks in India- https://bit.ly/3O43L4Q

Img 1- A bank is a financial institution which is

involved in borrowing and lending money

Img 2- Banks keep money safe for

customers and pays an annual interest on
the same
Img 3- Banks lend money to needy
customers for at a certain interest rate

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 Role of Banks in India

Img 4- Banks offer financial advice and related

financial services, such as insurance
Img 5- These loans and business investment are
important for enabling economic growth

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 References
http://www.bfsissc.com/
https://bit.ly/3KtUz7K
https://bit.ly/3O8322H
https://bit.ly/3rcJFeI
https://bit.ly/3KxvF7e
https://bit.ly/3GZfVrq

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