Banks in India

Why Do You Need a Banking System in India? 

A banking system is crucial for India as it plays a vital role in the country's economic growth and financial stability. It serves as the backbone of the economy, ensuring that money flows smoothly and efficiently. The banking system provides various essential services that individuals, businesses, and the government rely on.

People can deposit their earnings and savings, knowing that their funds are protected and accessible when needed. This builds confidence among the public and encourages them to save, which in turn contributes to capital formation and economic development.

Comparison Between

Fixed Deposits, Guaranteed Return Plans & Debt Mutual Fund

Guaranteed Return Plans, Fixed Deposits &
Debt Mutual Fund

Guaranteed Return Plans

Returns Before Tax

7.5% ^(TAX-FREE)

Returns After Tax

7.5%

Guaranteed Returns

Yes

Life Cover

Yes

Tax on Profit

Tax Free*

Risk

No Risk

Still Better than FD’s and Debt Mutual Fund

Fixed Deposits

Returns Before Tax

7% ^(TAXABLE)

Returns After Tax

4.8%

Guaranteed Returns

Yes

Life Cover

No

Tax on Profit

Taxable

Risk

Low Risk

Debt Mutual Fund

Returns Before Tax

8% ^(TAXABLE)

Returns After Tax

5.5%

Guaranteed Returns

No

Life Cover

No

Tax on Profit

Taxable

Risk

High Risk

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*For annual premium upto ₹5 Lacs

Bank Classification in India

1. Central Bank

   The Reserve Bank of India (RBI) is the main financial institution in India and serves as the Central Bank. It plays an important role in formulating and implementing monetary policy, regulating and supervising other banks, issuing and managing India's currency, and maintaining financial stability.

2. Commercial Banks

   Commercial Banks provide a wide range of financial services to individuals, businesses, and governments. These banks accept deposits from the public and offer loans and credit facilities. 

   They are further categorized into:

   • Public Sector Banks

   • Private Sector Banks

   • Foreign Banks

   • Regional Banks

   Public Sector Banks

   Public Sector Banks are financial institutions where the majority of the shares are owned by the government. These banks play a significant role and account to 75% of the total banking sector of India. They have a widespread presence, especially in rural and remote areas, making banking services accessible to a larger portion of the population. 

   Public Sector Banks of India are:

   • State Bank of India

   • Bank of Baroda

   • Punjab & Sind Bank

   • Central Bank of India

   • Bank of India

   • UCO Bank

   • Union Bank of India

   • Indian Overseas Bank

   • Indian Bank

   • Punjab National Bank

   • Canara Bank

   • Bank of Maharashtra

   Private Sector Banks

   Private Sector Banks are owned and operated by private individuals or corporations. Private sector banks are known for their customer-centric approach and efficient service delivery. The rules and regulations of these banks are laid down by the Reserve Bank of India.
   Private Sector Banks of India:

   • Tamilnad Mercantile Bank

   • Axis Bank

   • Jammu and Kashmir Bank

   • D.C.B. Bank

   • Karnataka Bank

   • Federal Bank

   • I.D.F.C. Bank

   • YES Bank

   • Nainital Bank

   • R.B.L. Bank

   • IndusInd Bank

   • H.D.F.C. Bank

   • South Indian Bank

   • IDBI Bank

   • Karur Vysya Bank

   • I.C.I.C.I. Bank

   • City Union Bank

   • Kotak Mahindra Bank

   • Dhanlaxmi Bank

   • Lakshmi Vilas Bank

   • Bandhan Bank 

   and more 

   Foreign Banks 

   Foreign Banks are banks that have their headquarters located outside India but have established a presence within the country. These banks contribute to the diversification of the Indian banking landscape and are supposed to follow the rules and regulations of both the home country and the country they operate in.
   Foreign Banks in India are:

   • Barclays Bank Plc.

   • Bank of Ceylon

   • Industrial Bank of Korea

   • Qatar National Bank (Q.P.S.C.)

   • J.P. Morgan Chase Bank N.A

   • D.B.S. Bank India Limited

   • United Overseas Bank Ltd

   • Credit Suisse A.G.

   • Societe Generale

   • National Australia Bank

   • Shinhan Bank

   • First Abu Dhabi Bank P.J.S.C.

   • Industrial & Commercial Bank of China Ltd.

   • M.U.F.G. Bank, Ltd.

   • Credit Agricole Corporate & Investment Bank

   • Kookmin Bank

   • Deutsche Bank

   • HSBC Bank

   • Abu Dhabi Commercial Bank Ltd.

   • Sonali Bank Ltd.

   • BNP Paribas

   • Standard Chartered Bank

   • Emirates Bank NBD

   • Sberbank

   • Coöperatieve Rabobank U.A.

   and more

   Regional Banks

   Regional Rural Banks (RRBs) are specific banks that concentrate on helping people who live in rural and partly urban areas such as small farmers, marginal farmers and labourers. They make sure that people in places have access to banking services and can manage their money. Public Sector Banks support RRBs, and they work together with the government to promote farming and rural growth.

   Regional Banks in India:

   • Andhra Pradesh Grameena Vikas Bank (sponsored by State Bank of India)

   • Assam Gramin Vikash Bank (sponsored by United Bank of India)

   • Bihar Gramin Bank (sponsored by Punjab National Bank)

   • Chhattisgarh Rajya Gramin Bank (sponsored by State Bank of India)

   • Goa Gramin Bank (sponsored by Indian Bank)

   • Gujarat Gramin Bank (sponsored by State Bank of India)

   • Haryana Gramin Bank (sponsored by Punjab National Bank)

   • Himachal Pradesh Gramin Bank (sponsored by State Bank of India)

   • Jammu & Kashmir Grameen Bank (sponsored by Jammu & Kashmir Bank)

   • Jharkhand Rajya Gramin Bank (sponsored by State Bank of India)

   

3. Co-operative Banks

   Co-operative banks are banks that are registered under the Co-operative Societies Act, 1912. They have a unique structure as they are owned and operated by members of an elected committee, who are individuals with a common interest. These banks focus on providing financial services to people on the basis of no loss, no profit model.

   In urban areas their main focus of people are entrepreneurs, small businesses and self-employed people. In rural areas their main focus is to provide financial help to agriculture based activities.  

   They are categorized into:

   • Urban Co-operative Banks

   •  Rural/State Co-operative Banks

   Urban Co-operative Banks

   Urban Co-operative Banks are the lifeline of urban and semi-urban regions in India. As primary co-operative banks, they focus on serving smaller businesses and individuals within local communities. These banks understand the unique financial needs of their areas and provide tailored solutions to meet them. 

   State Co-operative Banks

   State Co-operative Banks are crucial components of India's co-operative banking system. They function as umbrella organizations, overseeing the activities of central co-operative banks within a specific state. By providing guidance, support, and coordination, State Co-operative Banks ensure the effective functioning of co-operative banking at the state level.

4. Payments Banks

   Payments banks are a relatively new addition to India's banking sector and are a concept by the RBI. These banks focus on providing essential financial services such as savings accounts, remittance services, and mobile payments to individuals and small businesses. Payment Banks are permitted to receive a limited deposit, marked at Rs. 1 lakh per customer.

5. Small Finance Banks

   Small Finance Banks are specialized banks that focus on providing financial services to the unbanked sections of the society, including small and marginal farmers, micro and small industries, and other low-income groups. These banks offer basic banking services, promote financial inclusion, and contribute to economic growth at the grassroots level.

   This category of bank is authorized under Section 22 of the Banking Regulation Act, 1949 and is subjected to the regulations of the Provisions Act, 1934.

   Small Finance Banks in India: 

   • Fincare Small Finance Bank Ltd.

   • Utkarsh Small Finance Bank Ltd.

   • North East Small Finance Bank Ltd.

   • Jana Small Finance Bank Ltd.

   • Suryoday Small Finance Bank Ltd.

   • Capital Small Finance Bank Ltd.

   • Equitas Small Finance Bank Ltd.

   • ESAF Small Finance Bank Ltd.

   • Ujjivan Small Finance Bank Ltd.

   • AU Small Finance Bank Ltd.

   

6. Scheduled Banks

   Scheduled banks in India are those banks that are included in the 2nd Schedule of the Reserve Bank of India Act, 1934. These banks fulfill certain criteria and adhere to specific regulations. 

7. Non-Scheduled Banks

   Non-scheduled banks in India are those that are not included in the 2nd Schedule of the RBI Act, 1934. These banks are smaller in scale and may not meet the criteria set for scheduled banks.

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