The Indian banking system can be broadly classified as follows:
1. The Central Bank
- Reserve Bank of India (RBI): The apex institution that controls and regulates the entire banking system. It is the central bank of the country.
2. Commercial Banks
These banks operate on a commercial basis with the main objective of earning a profit. They are the backbone of the country’s financial system. They are further divided into:
- Public Sector Banks (PSBs):
- What they are: Banks in which the government holds the majority of the shares (more than 50%).
- Role: They play a crucial role in implementing the government’s social and economic objectives.
- Example: Bank of Baroda (BoB), State Bank of India (SBI), Punjab National Bank (PNB). etc
- Private Sector Banks:
- What they are: Banks in which the majority of the shares are held by private individuals or institutions.
- Role: Known for their customer service, technology, and innovation.
- Example: HDFC Bank, ICICI Bank, Axis Bank.
- Foreign Banks:
- What they are: Banks that are incorporated in a foreign country but operate in India through their branches.
- Role: They facilitate international trade and investment.
- Example: Citibank, HSBC, Standard Chartered Bank.
- Regional Rural Banks (RRBs):
- What they are: Specialised banks established to serve the credit needs of rural and agricultural sectors.
- Ownership: Jointly owned by the Central Government, the State Government, and a Sponsor Bank.
- Example: Aryavart Bank, Baroda UP Bank.
3. Cooperative Banks
These banks are registered under the Cooperative Societies Act and are run on a cooperative basis, owned and operated by their members. They are primarily focused on serving rural and agricultural credit needs. The structure is tiered:
- Urban Cooperative Banks: Operate in urban and semi-urban areas.
- Rural Cooperative Banks:
- State Cooperative Banks (at the state level).
- District/Central Cooperative Banks (at the district level).
- Primary Agricultural Credit Societies (PACS) (at the village level).
4. Differentiated Banks (Niche Banks)
These are newer types of banks created by the RBI to serve the specific needs of certain segments of the population and promote financial inclusion.
- Small Finance Banks (SFBs):
- Role: Provide basic banking services like accepting deposits and lending, but with a focus on serving the unserved and underserved sections, including small businesses, small and marginal farmers, and the unorganized sector.
- Example: AU Small Finance Bank, Equitas Small Finance Bank.
- Payments Banks:
- Role: Can accept restricted deposits (currently up to ₹2 lakhs per customer) but cannot issue loans or credit cards. They focus on providing remittance services, mobile banking, and payments.
- Example: Airtel Payments Bank, India Post Payments Bank.
5. Development Banks
These are specialized financial institutions that provide long-term finance for the industrial and agricultural development of the country.
Examples: NABARD (for agriculture and rural development), SIDBI (for small industries), NHB (for housing).