Indian Banking System – @GKDUNIYA

Indian Banking System(GKDUNIYA.IN)

Indian Banking System : The banking system of a country country’s economy is an holding the financial system of the important pillar. The major role of banks in a financial system is to mobilize deposits and disburse credit to various sectors of the economy. India’s current, elaborate banking structure has evolved over several decades.

Types of Indian Banking System

• Structure of Indian Banking System

• Commercial Bank

• Cooperative bank

• development bank

1. Structure of Indian Banking System:– Reserve Bank of India is the of the country central bank and controls the banking system of India. The structure of India’s banking system can be broadly divided into scheduled banks, non-scheduled banks and development banks.

Reserve Bank of India Act, 1934 Banks included in the Second Schedule of the are considered as Scheduled Banks.

Following facilities of scheduled bank

Such bank becomes eligible for loan/loan from RBI at bank rate
All banks which are not covered in the second section of the Reserve Bank of India Act, 1934 are non-scheduled banks. They are not eligible to borrow from RBI for general banking purposes except in emergency.

Scheduled banks are divided into commercial and co-operative banks.

2. Commercial Banks :- The institutions which accept deposits from general public and take advance loans with the aim of earning profit are known as commercial banks.

Commercial banks can be broadly divided into Public Sector, Private Sector, Foreign Banks and RRBs.

The government holds the majority stake in public sector banks. After the recent amalgamation of small banks with big banks, there are 12 public sector banks in India so far. An example of a public sector bank is the State Bank of India.

Private sector banks are banks where the major stake in the equity is owned by private stakeholders or business houses. Some of the major private sector banks in India are HDFC Bank, Kotak Mahindra Bank, ICICI Bank etc.

A foreign bank is a bank that has its headquarters outside the country but runs its offices as a private entity at some other location outside the country. Such banks are bound to operate under the rules provided by the central bank of the country as well as those laid down by the parent organization located outside India. An example of a foreign bank in India is Citibank.

Regional Rural Banks were established under the Regional Rural Banks Ordinance, 1975 with the objective of ensuring adequate institutional credit for agriculture and other rural sectors. The area of ​​operation of RRB is limited to the area notified by the Government. RRBs are jointly owned by the Government of India, State Governments and Sponsor Banks. An example of RRB in India is Arunachal Pradesh Gramin Bank.

3. Co-operative Bank :- – Co operative bank is a financial entity which is related to its members, who are the owners as well as customers of their bank. They provide many banking and financial services to their members. Co-operative banks are the primary supporter of agricultural activities, some small scale industries and self-employed workers. An example of a cooperative bank in India is the Mehsana Urban Co-operative Bank.

At the grassroots level, individuals come together to form a credit cooperative. Society includes an association of borrowers and non-borrowers living in a particular locality and taking interest in each other’s business affairs. Since membership is practically open to all residents of a locality, people of different statuses are brought together in a common organization. All the societies in an area come together to form a central co-operative bank.

Co-operative banks are divided into two categories – urban and rural.

• Rural cooperative banks are either short term or long term.

• Short-term cooperative banks can be divided into state cooperative banks, district central cooperative banks, and primary agricultural credit societies.

• Long term banks are either State Co-operative Agriculture and Rural Development Banks (SCARDB) or Primary Co-operative Agriculture and Rural Development Banks (PCARDBs).

• Urban co-operative banks refer to primary co-operative banks located in urban and semi-urban areas.

4. Development Banks :– Financial institutions that provide long-term loans to support capital-intensive investments spread over a long period and low rates of return with considerable social benefits are known as development banks. The major development banks in India are; Industrial Finance Corporation of India (IFCI Limited), 1948, Industrial Development Bank of India’ (IDBI) 1964, Export-Import Bank of India (EXIM) 1982, Small Industries Development Bank of India (SIDBI) 1989, National Bank for Agriculture and Rural Development ( NABARD) 1982.

The banking system of a country has the potential to heavily influence the growth of the economy of a country. It also plays an important role in the development of rural and suburban areas of the country as it provides capital for small businesses and helps them to grow their business. Organized financial system includes commercial banks, regional rural banks (RRBs), urban co-operative banks (UCBs), primary agricultural credit societies (PACS) etc., which cater to the financial service needs of the people. Initiatives taken by the Reserve Bank and the Government of India to promote financial inclusion have significantly improved access to formal financial institutions. Thus, the banking system of a country is very important not only for economic development but also for promoting economic equality.

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