BANK AND TYPES OF

BANKS
DEFINITION OF A BANK
The Banking Companies Act of India defines a
bank a “A Bank is a financial institution which
accepts money from the public for the purpose of
lending or investment repayable on demand or
otherwise withdrawable by cheques, drafts or order
or otherwise.
CLASSIFICATION OF BANKS
Banks can be classified on the basis of functions, ownership,
domicile and registration.
I. CLASSIFICATION ON THE BASIS OF
FUNCTIONS
 Commercial Banks:
They are those banks which carry on commercial
banking operations such as acceptance of deposits from the
public repayable on demand or after a short period, and grant
short term credit mainly to trade, commerce and industry with
a wide network of branches spread throughout the coutry.
 Industrial Banks:
Industrial banks is an institution established to
provide long term financial requirements of industries.
IDBI,ICICI, State Financial Corporations(SFC’s) are
examples of industrial banks.
 Agricultural Banks:
they are those banks which are intended to
provide agricultural credit. In India, agricultural credit is
provided by co operative institutions. The primary
cooperative banks are meant to provide short term credit
and land development banks are meant to provide long
term credit.
Exchange Banks:
They are those banks that deal in foreign exchange and
specialize in financing foreign trade. The main function of
Exchange Banks is to facilitate conversion of one currency into
another. In India, almost all commercial banks have its own
foreign exchange divisions.
Saving Banks:
Saving Banks are those banks which promote saving
habits among the public and mobilize the scattered savings of
the society into a common reservoir.
Central Banks:
Central Bank is the top most banking institution which
controls, regulates, and supervises the monetary and credit
system of a country. The Central Bank of the country has the
power to control all the banking institutions in the country and
is usually the basic source of the nation’s bank credit. It has the
monopoly of issuing notes. RBI is the Central bank of India.
World Bank:
World bank also known as International Bank for
Reconstruction and Development, is a bank established for the
purpose of providing long term loans for reconstructing the
economies damaged by second world war and developing the
under developed economies. The member countries will get
financial assistance from World Bank.
II. CLASSIFICATION ON THE BASIS OF
OWNERSHIP
 Public Sector Banks:
Public sector banks are those banks which are owned
and controlled by the government. SBI, Union Bank are some
examples.
 Private Sector Banks:
Private Sector Banks are those banks which are owned and
controlled by private individuals or corporations and not by the
government.
 Co-operative Banks:
Cooperative banks are those banks which are owned and
operated by co operative societies. In India, cooperative banks
are established for meeting financial needs in rural areas .
III. CLASSIFICATION ON THE BASIS OF
DOMICILE
Domestic Banks:
Domestic banks are those banks that are registered
within the country. As far as India is concerned, any bank
registered in India as a banking company is a domestic bank.
Foreign Banks:
Foreign Banks are those banks that are registered in a
foreign country and have their head office in a foreign country.
As far as India is concerned, any banks registered outside India
and have a branch in India is a foreign bank. Citi bank is an
example of Foreign Bank.
CLASSIFICATION ON THE BASIS OF
REGISTRATION
Scheduled and Non Scheduled Banks:
Scheduled banks are those banks whose name appears in
the 2nd schedule to Reserve bank of India Act 1934. Non
Scheduled banks are those which are not included in the 2 nd
schedule of the Reserve Bank of India Act 1934.
Licensed and Non Licensed Banks:
Licensed banks are those banks which have been given a
license from the RBI for carrying on banking business in India.
Under the Banking Regulation Act 1949, every banking company
must obtain a license from the RBI for doing banking business in
India. Non Licensed banks are those which do not have a license
from the RBI.