Explain different types of banks.
Types of Banks :
1. Central Bank : Central Bank plays an important role in country. It provides guidance to other banks. It holds
control and guides over other banks in country. It is known as bankers bank. Reserve Bank of India is central
bank of India. The main function of this bank is to maintain economic stability of the country.
2. Commercial Bank : Commercial Banks accept the deposits from public and provide short-term loans to
traders, manufacturers and businessmen by way of cash credits, overdraft, etc. There are three types of
commercial banks such as public sector banks, private sector banks and foreign banks.
3. Development Bank : Development Bank provides loan to business for the purpose of development of
business. Such loans may be required for purchase of machinery, expanding business activities, research
expenses, etc. Example of Development banks are Industrial Finance Corporation of India (IFCI) State
4. Co-operative Banks : Co-operative banks are financial institution registered under the Co-operative Societies Act.
The main objective of a co-operative bank is to give credit to economically backward people. There are three types
of Co-operative banks such as Primary Credit Societies, at village level; Central Co-operative Bank, at district level;
State Co-operative Banks and Rural Co-operative Banks at state level.
5. Specialised Banks : There are some banks which cater to the requirements of specific sectors and provide
overall support for setting up business in specific areas. Exim Bank, SIDBI and NABARD are examples of such
6. Regional Rural Banks : These banks were established in 1975 to enhance the banking facilities in the rural areas.
In these banks, the features of commercial and co-operative banks are found. These banks are sponsored by
some commercial banks. 50% of their capital 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 agricultural activities.
7. Exchange Banks : Exchange banks are mainly concerned with financing foreign trade. Main functions of
Exchange bank are remitting money from one country to another country, discounting of foreign bills,
helping import and export trade, etc. Bank of Tokyo, Bank of America are the examples of exchange banks
working in India.
8. Indigenous Bankers : In India, Indigenous or native/domestic bankers have been carrying on banking functions
for generations before properly organized commercial and other banks started functioning. They mainly deal in
“hundis” and promissory notes. They charge a very high rate of interest on loan. Hundis are regarded as native
Bills of Exchange.
9. Savings Bank : This bank accepts small savings from public who have fixed income. It creates the saving
habit among people. In India, post office saving bank is one of the saving banks. Commercial bank and Cooperative
Bank also play a role of saving bank.