A bank is a financial institution that accepts deposits from individuals and businesses, provides loans, and offers various financial services like currency exchange, wealth management, and payment processing. A bank is institution that deals in money and and provides other money related services. Banks play a very role in the economy by facilitating the flow of money, supporting trade, and enabling investments.

In India, the banking system is well-structured and diverse, consisting of different types of banks regulated primarily by the Reserve Bank of India (RBI). These banks work towards the various financial and developmental needs of individuals, businesses, and the economy. The classification of banks are

CLASSIFICATION OF BANKS

1. Central Bank: The central Bank of India is the India’s mother bank, which controls all other banks and acts as an apex body.

a. Scheduled and Non-Scheduled Banks

• Scheduled Banks: Listed in the Second Schedule of the RBI Act, 1934, they meet specific criteria like a minimum paid-up capital and reserves. These banks are further categorized as:
  • Public Sector Banks (PSBs)
  • Private Sector Banks
  • Foreign Banks
  • Regional Rural Banks (RRBs)
  • Cooperative Banks
• Non-Scheduled Banks: Non – scheduled banks are the banks that are not included in the Second Schedule of RBI Act, of 1934. They have limited operations and serve niche markets and are not subject to RB.I regulation.\

2. Commercial Banks: These can be further classified in to public sector banks, private sector banks and Regional Rural Banks.

a. Public Sector Banks (PSBs): These banks are majorly owned by the Government of India. These banks Provide financial services to all sectors, focusing on rural and priority-sector lending. Examples: State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda, Canara Bank, Indian Bank, Union Bank of India, Bank of India, Bank of Maharashtra.

b. Private Sector Banks: These banks are privately owned, with operations driven by profitability and efficiency. They offer modern banking services and focus on urban and semi-urban customers. Examples: HDFC Bank, ICICI Bank, Axis Bank, IDBI Bank, Yes Bank, Federal Bank, Kotak Mahindra Bank, IndusInd Bank.

c. Foreign Banks: These banks headquarter will be outside India but operating within the country. They usually focus on corporate and high income individuals offering international banking services. Examples: Citibank, HSBC, Standard Chartered Bank, DBS.

d. Regional Rural Banks (RRBs): Established to provide credit and other financial services to rural areas, especially to small farmers, artisans, and agricultural laborers. Jointly owned by the Government of India, the state government, and a sponsor bank. Example: Karnataka Vikas Grameen, bank, Prathama Bank, Baroda Gujarat Gramin Bank Etc.

3. Specialized Banks: These banks includes Small finance banks, development banks, EXIM Bank (Export-Import Bank), facilitate international trade, SIDBI ( Small Industries Development Bank of India) promotes small scale industries, NABARD (National bank for agricultural and rural development bank) supports agriculture and rural development.

a. Small Finance Banks (SFBs): These banks target to underserved and unbanked populations, providing basic banking services and loans to small businesses, farmers, and micro-enterprises. Examples: AU Small Finance Bank, Ujjivan Small Finance Bank.

b. Development Banks: Banks focus on providing long-term capital for infrastructure and industrial projects. Examples: Industrial Development Bank of India (IDBI), National Bank for Agriculture and Rural Development (NABARD),.

4. Cooperative Banks: These banks works on a cooperative model, owned and managed by their members. They focuses on rural and semi-urban areas, catering to small-scale industries, agriculture, and self-employed individuals.

• Types of Cooperative Banks:
  • Urban Cooperative Banks (UCBs)
  • State Cooperative Banks
  • District Cooperative Banks

also read : explain the functions of commercial banks.