Did you know that India has six different types of banks? Each type of bank falls into a category based on its purpose. When one thinks about banks, the most common ones come to our mind. However, the majority of the banks that will come to your mind fall under just 1 category i.e. commercial banks. Apart from that, there are 4 more categories under which Indian banks are classified.
If you are in India and want to know more about the different types of banking institutions available, continue reading. In this article, we will be discussing the five most common types of Indian Banks.
Types of Banks in India
Let us know more about the types of banks in India and the specific purpose that they solve for the citizens.
Commercial banks are the most well-known banks that provide services like loans, deposits, investments, and credit cards. These provide lending services to both businesses and individuals for various purposes, including home loans for residential purchase or construction and business loans.
Commercial Banks can be further classified into 4 categories: These 4 types of banks in India are:
Public Sector Banks
Public sector banks provide banking services to individuals, companies, and other entities within the country. The government owns a majority stake in these institutions, which are referred to as public sector banks. These financial institutions serve retail customers by providing personal loans and deposit products like savings accounts or fixed deposits for the long term. Public sector banks are often called PSUs in the Indian banking system.
Example – State Bank of India, Allahabad Bank, Andhra Bank, Bank of Baroda, Central Bank of India, Oriental Bank of Commerce, Punjab National Bank, Punjab & Sind Bank, UCO Bank, Vijaya Bank, IDBI Bank Ltd.
Private Sector Banks
Like public sector banks, private sector banks provide banking services to individual customers and corporate entities. However, these institutions are owned by a group of shareholders with either one or more individuals holding the majority stake in this type of institution.
Example – HDFC Bank, AXIS Bank, ICICI Bank, Kotak Mahindra Bank, IndusInd Bank, Federal Bank.
Moving forward on the types of banks in India, we land on Foreign Banks. These are an international financial entity that has established operations within India. Foreign banks have to get a special permit from the Reserve Bank of India to operate in the country.
Example – Bank of America, Australia and New Zealand Banking Group Ltd, National Australia Bank, Westpac Banking Corporation, Bank of Bahrain & Kuwait, HSBC, CITI Bank, Deutsche Bank, United Overseas Bank Ltd, Standard Chartered Bank.
Regional Rural Banks
These banks operate in the rural areas of India and handle the commercial activities of the region. State Governments own the Regional Rural Banks, and they can be classified as either scheduled or non-scheduled banks. RRBs are joint ventures between the Central government (50%), State government (15%), and Commercial Bank (35%).
Example – Punjab Gramin Bank, Allahabad UP Gramin Bank, Paschim Banga Gramin Bank, Kerala Gramin Bank, Bihar Gramin Bank.
Read more about the top commercial banks in India.
Small Finance Banks
These give out small loans to those who may not have access to other banking facilities. They offer their customers innovative financial products that include credit cards, personal loans, deposits with attractive rates of interest on savings accounts, etc. These types of banks in India are also a recent addition.
Example – AU Small Finance Bank, Equitas Small Finance Bank, Jana Small Finance Bank, Northeast Small Finance Bank, Capital Small Finance Bank, Suryoday Small Finance Bank, Ujjivan Small Finance Bank.
The latest type of banks in India are Payment banks. These provide low-cost banking services through mobile phones by allowing users to transfer funds from one account to another using the internet. Payment banks have become quite popular in India in recent times due to the governments’ initiative of digital India. These banks empower digital payments by giving access to banking via mobile phones and the internet.
Example – Paytm Payments Bank, Airtel Payments Bank, India Post Payments Bank.
These exist mainly in rural areas where there is no other banking facility available. They also offer their members savings accounts with low interest rates as well as agricultural loans. Cooperative banks are directly owned by the government of India, by the state government, or jointly.
Example – Punjab State Cooperative Bank, Adarsh Co-operative Bank Ltd, Nagpur Nagarik Sahakari Bank Ltd, The Bharat Co-op. Bank (Mumbai) Ltd.
There are specialized banks, too, such as housing finance companies or banks that serve a particular purpose. These focus only on mortgages and do not offer general banking services.
Example – Small Industries Development Bank of India (SIDBI), EXIM Bank – EXIM Bank stands for Export and Import Bank. National Bank for Agricultural & Rural Development (NABARD).
More on Types of Banks in India
We have now covered 5 types of banks in India: commercial banks, small finance banks, payment banks, cooperative banks, and specialized banks. All these banks in India are governed by 1 financial institution known as the leading institution for banking in India. It is known as the Reserve Bank of India. This comes under a different category called the central bank.
Another type of bank in India is the central bank, whose function is to control all the banks in the country. This is the Reserve Bank of India which was established in 1935. The main objective of this institution is to regulate the monetary and banking system, issue currency notes and coins, and control credit rates so that there are no inflationary pressures on the Indian economy.
So, we have covered all six types of banks in India. I hope this post gave you the right information along with examples. If you have any comments, please do leave them below.