Classification of Banks

Classification and types of Banks in India

Commercial Banks

  • Universal Commercial banks
    1. Public
    2. Private
    3. Foreign
  • Differential Commercial banks
    1. RRB
    2. Local area banks
    3. Small Finance banks
    4. Payment banks
    5. Wholesale Bank

Cooperative Banks

  • Urban
  • State
  • Central
  • PACS
Classification and types of Banks in India

Non-Banking Financial Institution

  • Development Bank or All India Financial Institution
    1. EXIM
    2. NABARD
    3. NHB
    4. SIDBI
  • PD – Public Depository
  • NBFC – Non Banking Financial Companies
cooperative bank rural bank

Differential Commercial Banks

Regional Rural Bank (RRB) – 1976

  • RRBs were set up on the recommendations of the Narshimham committee
  • It also known as Gramin bank
  • RRBs are operating at regional level in different States of India.
  • They have been created with a view to providing banking facilities to rural and semi-urban areas
  • RRBs may have branches set up for urban operations also
  • Carrying out government operations like disbursement of wages of MGNREGA workers, distribution of pensions etc.
  • Providing Para-Banking facilities like locker facilities, debit and credit cards.
    • Central Government – 50%
    • State Government – 15%
    • Sponsor Banks – 35%
  • Priority Sector Lending75%
  • Area is restricted within the state or some districts
  • Can’t use MSF facility of RBI
  • Other things are same as universal banks
cooperative bank rural bank

Local Area Banks

  • It was introduced in Aug 1996 pursuant to the announcement of the then Finance Minister.
  • It was expected to bridge the gaps in credit availability and strengthen the institutional credit framework in the rural and semi-urban areas.
  • Min start-up capital of a LAB was fixed at Rs.5 crore
  • Maximum operational area of 3 districts
  • PSL – 40%
  • Need to maintain CRR and SLR
cooperative bank rural bank
Classification and types of Banks in India

Small Finance Bank

  • Set up on the recommendations of Nachiket More Committee 2014
  • Individuals/professions with 10 years of experience in finance, Non-Banking Financial Companies (NBFCs), micro finance companies, local area banks are eligible
  • Can be converted into a full-fledged bank after 5 years as per performance
  • CSR and SLR applicable
  • Small Finance Bank can access repo market
  • Can open branch, ATM
  • Can sell ATM, Mutual Fund, Pension, Insurance etc.
  • 25% branches in rural area
  • Can lend money
  • PSL – 40% + 35%(in their preference sector from Priority sector)
  • CRAR – 15%
cooperative bank rural bank

Payment Bank

  • Set up in 2015 on the recommendations of Nachiket More Committee 2014
  • Must be Public ltd. with Rs.100 Cr. Capital
  • Has to maintains min 75% of deposits in Government bond and maximum 25% deposits with other scheduled commercial banks.
  • CSR and SLR applicable
  • Payment Bank can access repo market
  • Can open branch, ATM
  • It can offer ATM card, Mutual Fund, Pension, Insurance etc.
  • 25% access point must be in rural area
  • Max Rs.1 lac per year per person
  • Can not accept time deposit or fixed deposit
  • CRAR – 15%
  • No lending activity
  • No NRI deposit
  • Ex – Paytm – One97 Communications (Vijay Shekhar Sharma), India Post Payment Bank
cooperative bank rural bank

India Post Payment Bank

  • It is a Government of India owned payments bank
  • Operating under the Department of Posts, Ministry of Communication
  • It aims to utilize all of India’s 155,015 post offices as access points and 300,000 postal service workers to provide door to door banking services
  • It started on 30 January 2017 at Raipur and Ranchi
  • The bank offers savings and current accounts up to a balance of Rs 1 Lac.
Payment Banks
Small Finance Banks
Who can be
Prepaid card issuers, telecom companies, NBFCs, business correspondents, supermarket chains, corporates, realty sector co-ops & PSUs
Individuals/professionals with 10 years’ experience in finance, NBFCS. microfinance, local area banks
Must Do
Have a minimum capital of Rs 100cr
Maintain 75% of deposits in govt bonds
Maintain 25% of deposits in other banks
Have at least 26% investment by Indians
Get listed if net worth crosses Rs 500cr
Have 25% of branches in unbanked areas
Be fully networked and technology driven
Have Rs.1 lac cap for deposits in one a/c
Have a minimum capital of Rs 100cr
Extend 75% of loans to priority sector
Have 25% of branches in un banked areas
Maintain reserve requirements
Cap loans to individuals and groups at 10% and 15% of net worth
Have a business correspondent network
Can Do
Offer internet banking
Sale mutual funds, insurance, pensions
Offer bill payment service for customers
Have ATMs and business correspondents (BC)
Can function as BC of another bank
Sale forex to customers
Sale mutual funds, insurance, pensions
Can convert into a full-fledged bank
Expand across the country
Can’t Do
Offer credit cards
Extend loans
Handle cross-border remittances
Accept NRI Deposits
Extend large loans
Float subsidiaries
Cannot deal in sophisticated financial products

Wholesale Bank

  • Wholesale banking is the provision of services by banks to larger customers or organizations
  • Customers can be mortgage brokers, large corporate clients, mid-sized companies, real estate developers and investors, international trade finance businesses, institutional customers etc.
  • Nachiket More Committee recommended it
  • It didn’t started yet
  • Liabilities – Current Account, Term Deposit (>10 Cr.), Bonds, Bank borrowing
  • Assets – Infra project lending, medium corporate lending,
  • Can sell PSL certificate to banks
  • Min paid up Capital Rs.1000 Cr.

Custodian Bank

  • Nachiket More Committee recommended it
  • RBI didn’t give any guideline still
  • Keep client information about yield AGM etc.
  • Safekeeping of securities, derivatives, MF etc
  • Execute deals for client
Classification and types of Banks in India

Co-operative Banks

  • Co-operative Bank involves autonomous association of persons united voluntarily to meet their common economic, social and cultural needs
  • It is a jointly owned and democratically controlled enterprise.
  • Since 1966 it comes under the regulation of RBI
  • Function on “no profit, no loss” basis.
  • Co-operative bank performs all the main banking functions of deposit mobilization, supply of credit and provision of remittance facilities.
  • It provide loans to its members only
  • Voting power is 1 vote to 1 member
  • CRR and SLR applicable on it
  • Can’t access Repo market
  • PSL is not applicable
  • Anyonya Co-operative Bank Limited, 1st co-operative bank in India, Vadodara in Gujarat
Classification and types of cooperative rural commercial Banks in India