A bank is a crucial part of any nation. It plays a significant role in maintaining the financial stability of the countries. Banks offer a variety of services to help the customers and to manage their finances better. They promote capital formation and influence economic activities through the interest rate.
In India, the structure of the banking industry is formed over several years. Reserve Bank of India is the Central bank and it aims to regulate financial institutions to ensure economic stability and growth in India. Going through the article, we have provided detailed information on the structure of the Indian banking system and its related topics.
Structure of Banking Industry
Indian Banks are mainly divided into commercial banks and Co-operative banks. Commercial banks comprise :Schedule Commercial Banks and non-scheduled commercial banks. SCBs are further divided into private,public ,foreign banks and Regional Rural Banks .Co-operative banks which include urban and rural Co-operative banks.
They are financial institutions which are regulated banking regulations act 1949. Commercial banks are performing to ‘make profit’. The commercial banks are classified in to again, public sector bank, private sector bank , foreign bank, regional rural bank.
Public sector banks
The name indicates its ownership. More than 50 percent stakes of these banks are held by the Ministry of Finance of the Government of India or State Ministries of Finance of different State Governments. Government regulates its financial guidelines. These are also known as nationalized banks. Currently in India we have 12 nationalized banks.
|Bank of Baroda||Mumbai|
|Bank of India||Mumbai|
|Bank of Maharashtra||Pune|
|Central Bank of India||Mumbai|
|Indian Overseas Bank||Chennai|
|Punjab National Bank||New Delhi|
|Punjab & Sind Bank||New Delhi|
|Union Bank of India||New Delhi|
|State Bank of India||New Delhi|
Private sector banks are licensed under Reserve bank of India act 1949 and ownership of these banks are in private hands such as institutions, corporates etc. catholic Syrian Bank, City Union Bank, Dhanlaxmi Bank, Federal Bank, Jammu and Kashmir Bank are some of the private sector banks that existed in the bank privatization era. AXIS BANK, ICICI BANK, HDFC BANK, YES BANK were incorporated after 1993.
Foreign banks are incorporated in foreign countries and operating in India through branches. Currently 45 foreign banks are operating in India. Standard Chartered Bank from United Kingdom have 100 branches in India is highest in number. CITI bank (usa), HSBC bank (HONG Kong), Bank of Ceylon (Sri Lanka) are examples of foreign banks.
Regional Rural Bank
Regional Rural Banks were set up by the state government and sponsored commercial banks with the objective of rural economy. RRB provides banking service and credit to farmers, small traders, and entrepreneurs in the rural area.
Established in under the provisions of the Regional Rural Banks Act. Currently 43 RRBs in India. SBI sponsoring 14 of them. Industrial development bank of India, NABARD are providing financial assistance to RRBs.
Example: Kerala Gramin Bank. Karnataka Vikas Grameena Bank, Meghalaya Rural Bank.
Cooperative banks are an important part of the organized Indian banking sector. It plays a vital role in rural banking.
Cooperative banks are a group of societies registered under cooperative societies They are divided into two categories – urban and rural.
Urban Co-operative Banks are scheduled and non-scheduled banks. Rural cooperative credit institutions are long term and short-term institutions. Short term cooperative credit institutions are in three structures. State co-operative bank, District co-operative bank and Primary agricultural credit societies. Long term institutions are two tier. They are Agriculture and rural development banks, primary cooperative agriculture and rural development banks. Banking regulation act 1949 and banking laws (cooperative societies) act 1955 are the acts which RBI regulates cooperative banks.
Scheduled bank and non-scheduled bank
Scheduled banks are listed in the second schedule of the reserve bank of India act 1934. The nationalized banks and private banks, foreign banks, regional rural banks are under this category. A scheduled bank must have a paid-up capital of less than five lakhs.
Non-scheduled banks are just opposite to scheduled banks. It is not listed in the second schedule of the Reserve bank of India act 1934. Paid Up capital is less than five lakhs.