Classification Of Different Banks

Classification on the Basis of Ownership

Various Banks can be classified on the basis of ownership in the following manner:

(1) Public Sector Banks: Public sector Banks are those which are owned by the government. The government alone controls them. In India,14 banks were nationalized in1960 and 6 in 1990. All these banks are now Public sector Banks. Their main objective is social welfare. After the merger of the new Bank of India in the Punjab National Bank and the addition of IDBI in this category the number of the nationalized banks is now 20. Besides these, the State bank of India and its subsidiaries are also included in this category which is a 6in number. In this manner, a total of 26 banks is working in the Public sector.

(2) Private Sector Banks: The Private sector banks are those banks which are owned and controlled by the Private sector or some individuals. In India, banks like Jammu and Kashmir Bank ltd., etc.are Private sector banks. Control of any individual or body on these banks depends on the number of shares held by that individual or a Private body. Their main objective is to earn Profit.

(3) Cooperative Banks
: The cooperative banks are those which are organized by a group of individuals. The main objective of these banks is to help its members. The State Cooperative Bank, the District Cooperative Bank, and Primary Loan Societies are included in cooperative banks.

 Classification on the Basis of Functions

On the basis of functions various banks can be classified as follows:

(1) Commercial Banks
: These banks accept deposits from the general Public and Provide short-term loans to manufacturers and traders. Besides this, these banks Perform various agency functions for their customers. These banks Pay lesser interests on deposits while charge higher interest on the amount lent. This difference of interest is the main source of their income. In India, there are generally two types of commercial banks which are as follows:

  • Foreign Commercial Banks: Those banks which are based in some foreign country but have a branch in India are called foreign commercial banks. Lloyds Bank, Standard Chartered Bank, Grindlays Bank, Citi Bank, Bank of America etc.are examples of foreign commercial banks. All these banks Provide the facility of foreign exchange also.
  • Indian Commercial Banks: Those banks which are based in India are called the Indian Commercial banks. These are of following two types:
                        (a) Public Sector Banks: These banks are by the government. They are 26 in number. Punjab National Bank, Central Bank of India, Indian Bank, State Bank of India, UCO Bank etc.are the examples of the Public Sector banks. Some authorized branches of these banks Provide the facility of foreign exchange also.

                        (b) Private Sector Banks:
These banks are owned by the Private sector. Jammu and Kashmir Ltd., Punjab Bank Ltd. etc.are examples of Private sector banks. (The detailed description of the functions of commercial banks is given later in this chapter.)
(2)Industrial Development Bank: The industrial development banks are those banks which give medium-term and long - term to loans to industries. These banks help in establishing new industrial units. These banks help in the selling of shares and debentures of companies, also purchase themselves and very often perform the job of underwriting also. They usually Provide loan for Purchasing land, Plant, machinery, etc. In India, these banks can be classified into two categories:   

(i) National level: On the national level, there are four banks which Provide loans for industrial development:
(a) The Industrial Development Bank of India (IDBI)
(b) The Small Industries Development Bank of India (SIDBI)
(c) The Industrial Finance Corporation of India (IFCI)
(d) The Industrial Credit and Investment Corporation (ICICI)

(ii) State Level
: On the State level, there are two banks which Provide loans for industrial development:
(a) State Finance Corporation (SFC)
(B) State Industrial Development Corporation (SIDC)

(3)The Agriculture Bank
: Agriculture banks are those banks which Provide loan Primarily for agriculture works. In agriculture, short-term loans are required for Purchasing seeds, fertilizers, etc. while long-term loans are required for land, tractors etc.the banks which Provide loans to this sector are classified into two categories:

(i) The Cooperative Banks
: These banks Provide short-term loans to the agriculture sector. These banks work as the commercial banks but their structure and ownership pattern is different from that of the commercial banks. Cooperative banks are of three types:
(a)  State Cooperative Banks
(b)  Central Cooperative Banks
(c)  Primary Cooperative Societies

(ii) The Land Development Bank
: The main function of a land development bank is to Provide loans on the security of land. These banks Provide long-term loans. The main objectives of these loans are to Purchase tractors, land improvement, Payment of old debts etc. These banks are of the following two types: (a) The State Land Development Bank, (b) The Primary Land Development Bank.

(4) The Regional Rural Banks: These banks were established in 1975 to enhance the banking facilities in rural areas. In these banks, features of commercial and cooperative banks are found. These banks are sponsored by some commercial banks. Their total capital's 50% is Provided by the Central Government, 35% by the commercial bank concerned and 15% by the state government concerned. The main functions Performed by these banks are to Provide loans to small traders, small farmers and for the development of agriculture activities.

(5) Other Apex Banking Institutions
: In this category, the other main banks of the country are included. These are as follows:

(i) Central Bank: The central bank is the apex bank of the banking structure of a country According to Bill Rogers, ''Three made discoveries have been made till now-fire wheel and Central Bank.'' Central bank Plays an important role in any country's monetary and banking system. The central bank is the most important bank in a country. The main function of this bank is to maintain the economic stability of the country and in reference to underdeveloped countries, its main function is to make Possible the works of economic development. This bank issues currency controls other banks and works as a bank of the government. This bank controls the credit in a country. In India, the Reserve Bank of India, in England, the Bank of England and in America, the Federal Reserve Bank are the central bank. Through the first central bank of the world was established in Sweden in 1668 yet the central banking system was started only after the establishment of the bank of England in 1694.
(ii) The Export-Import Bank of India (EXIM Bank)
: On January 1, 1982, EXIM Bank was established to expand foreign trade. The main objective of this bank was to Provide assistance to traders engaged in import and export. This bank Provides the facility of refinancing to the financial institutions and commercial banks. Besides this, the bank Provides loan facilities for establishing joint undertakings in foreign countries and to export-import machinery and tools.

(iii) The National Housing Bank: In 1998, the National Housing Bank (NHB) was established. The main objective of establishing this bank was to Provide housing loans to the general Public. This bank Provides the facility of refinancing also on housing loans extended by the financial institutions and the commercial banks.

(iv) The Industrial Reconstruction Bank of India
: The main objective of this bank is to rehabilitate the industries. For rehabilitation of industries, the bank takes the management of the sick industrial units in its own hands and Provides them financial assistance.

(v) The National Bank for Agriculture and Rural Development
(NABARD): The main objective of establishing this bank is to develop agriculture and rural areas. The main functions of this bank are as follows:
(a)  To Provide short-term, medium-term and long-term loans for agriculture and its allied activities.
(b)  To extend the refinancing facility to the commercial and the cooperative banks on agriculture loans.  
(c)   To Provide finance for encouraging the export of specific commodities.
(d)   To Perform research work for rural upliftment.                    



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