Indian Banking System
Indian Banking System Introduction – In India, the Reserve Bank serves as the central banking institution, overseeing and managing the country’s banking system. It regulates exchange control and banking regulations and implements the government’s monetary policy. The banking system in India operates under the guidelines set by the RBI.
Banks are crucial for the modern economy, serving as its backbone. They play a vital role in gathering deposits and extending credit to different sectors of the economy. A bank is a financial institution that receives deposits, lends money to individuals and businesses, facilitates payments, invests funds in securities, and safeguards money. Banks manage savings and current accounts, offer credit through loans and credit cards, and act as trustees for their clients.
In India, banks provide a variety of services to customers, including savings and checking accounts, loans (personal, business, and mortgages), credit cards, investment services, and electronic banking options like online and mobile banking.
Function of Banks
Here are some key functions of banks:
- Safe Deposits: Banks offer a secure place for individuals and businesses to deposit their money, allowing them to withdraw it when needed.
- Lending Money: Banks lend money to individuals and businesses for purposes like home mortgages, business expansion, or personal loans.
- Transaction Facilitation: Banks enable transactions using various payment methods, such as checks, debit/credit cards, and electronic transfers.
- Foreign Exchange Services: Many banks offer foreign exchange services, allowing customers to buy, sell, or exchange foreign currencies.
- Safe Deposit Boxes: Some banks provide safe deposit boxes for customers to securely store valuable items and documents.
- Investment Products: Banks offer investment products like mutual funds, stocks, and bonds, helping customers grow their wealth.
- Online and Mobile Banking: Banks offer convenient online and mobile banking services, allowing customers to access their accounts, pay bills, and transfer funds easily.
Banking System in India
India has a vast banking network with a system that operates in four tiers:
- Scheduled Commercial Banks: These are banks listed in the second schedule of the Reserve Bank of India Act, 1934. Scheduled banks include private sector banks, foreign banks, and nationalized banks in India.
List of Public Sector Banks
| Sr. No. | Name of the Bank |
| 1 | Bank of Baroda |
| 2 | Bank of India |
| 3 | Bank of Maharashtra |
| 4 | Canara Bank |
| 5 | Central Bank of India |
| 6 | Indian Bank |
| 7 | Indian Overseas Bank |
| 8 | Punjab & Sind Bank |
| 9 | Punjab National Bank |
| 10 | State Bank of India |
| 11 | UCO Bank |
| 12 | Union Bank of India |
- Regional Rural Banks (Gramin Banks): These banks operate in both rural and urban areas, aiming to provide basic banking and financial services. They were established to serve the banking needs of rural communities.There are 43 Regional Rural banks.
List of Regional Rural Banks
| Sr. No. | Name of RRB |
| 1 | Assam Gramin Vikash Bank |
| 2 | Andhra Pradesh Grameena Vikas Bank |
| 3 | Andhra Pragathi Grameena Bank |
| 4 | Arunachal Pradesh Rural Bank |
| 5 | Aryavart Bank |
| 6 | Bangiya Gramin Vikash Bank |
| 7 | Baroda Gujarat Gramin Bank |
| 8 | Baroda Rajasthan Kshetriya Gramin Bank |
| 9 | Baroda UP Bank |
| 10 | Chaitanya Godavari GB |
| 11 | Chhattisgarh Rajya Gramin Bank |
| 12 | Dakshin Bihar Gramin Bank |
| 13 | Ellaquai Dehati Bank |
| 14 | Himachal Pradesh Gramin Bank |
| 15 | J&K Grameen Bank |
| 16 | Jharkhand Rajya Gramin Bank |
| 17 | Karnataka Gramin Bank |
| 18 | Karnataka Vikas Gramin Bank |
| 19 | Kerala Gramin Bank |
| 20 | Madhya Pradesh Gramin Bank |
| 21 | Madhyanchal Gramin Bank |
| 22 | Maharashtra Gramin Bank |
| 23 | Manipur Rural Bank |
| 24 | Meghalaya Rural Bank |
| 25 | Mizoram Rural Bank |
| 26 | Nagaland Rural Bank |
| 27 | Odisha Gramya Bank |
| 28 | Paschim Banga Gramin Bank |
| 29 | Prathama U.P. Gramin Bank |
| 30 | Puduvai Bharathiar Grama Bank |
| 31 | Punjab Gramin Bank |
| 32 | Rajasthan Marudhara Gramin Bank |
| 33 | Saptagiri Grameena Bank |
| 34 | Sarva Haryana Gramin Bank |
| 35 | Saurashtra Gramin Bank |
| 36 | Tamil Nadu Grama Bank |
| 37 | Telangana Grameena Bank |
| 38 | Tripura Gramin Bank |
| 39 | Uttar Bihar Gramin Bank |
| 40 | Utkal Grameen Bank |
| 41 | Uttarbanga Kshetriya Gramin Bank |
| 42 | Vidharbha Konkan Gramin Bank |
| 43 | Uttarakhand Gramin Bank |
- Co-operative Banks: These banks focus on lending to small business groups and providing finance to the agriculture sector. They are present in rural, urban, and semi-urban areas, primarily offering basic banking services.
- Payment Banks and Small Finance Banks: Recently introduced by the RBI, these are modern banks designed to strengthen the distribution of Atal Pension Yojana (APY). India has 6 payment banks and 12 small finance banks, contributing to the outreach of subscribers under APY.
List of Small Finance Banks & Payments Banks
| Small Finance Banks (SFB) | Payments Banks (PB) |
| 1. Au Small Finance Bank Ltd. | 1. Airtel Payments Bank Ltd |
| 2. Capital Small Finance Bank Ltd | 2. India Post Payments Bank Ltd |
| 3. Fincare Small Finance Bank Ltd. | 3. FINO Payments Bank Ltd |
| 4. Equitas Small Finance Bank Ltd | 4. Paytm Payments Bank Ltd |
| 5. ESAF Small Finance Bank Ltd. | 5. Jio Payments Bank Ltd |
| 6. Suryoday Small Finance Bank Ltd. | 6. NSDL Payments Bank Limited |
| 7. Ujjivan Small Finance Bank Ltd. | |
| 8. Utkarsh Small Finance Bank Ltd. | |
| 9. North East Small Finance Bank Ltd | |
| 10. Jana Small Finance Bank Ltd | |
| 11. Shivalik Small Finance Bank Ltd | |
| 12. Unity Small Finance Bank Ltd |
Types of Banking System in India
India has various types of banks that serve different purposes:
- Commercial Banks: These are profit-making institutions that collect deposits from the public and lend money to businesses, traders, farmers, and consumers. They play a crucial role in meeting the working capital needs of trade and industry.
- Development Banks: Specialized financial institutions providing long-term finance to large and medium industries. They also engage in activities promoting capital formation, contributing to industrial and economic development.
- Co-operative Banks: Focused on providing credit to primary agriculture credit societies at lower interest rates.
- Land Development Banks: These banks primarily fund the agricultural sector, offering long-term credit to farmers for land development or acquiring new land.
- Investment Banks: Act as intermediaries when a company issues new equity or debt securities. Investment banks can also invest in these companies through the purchase of equity shares.
- Merchant Banks: Help companies sell new shares in the stock market, raising funds from the general public.
- Foreign Banks: Non-Indian banks that operate in India, following regulations from both their home country and India. Currently, there are 45 foreign banks in operation.
- Central Banks: The Reserve Bank of India (RBI) acts as the central regulatory bank, controlling the entire banking system of the country.
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