Various Types of Banks
There are various types of banks which operate in our country to meet the financial requirements of different categories of people engaged in agriculture, business, profession etc. The banking institution may be divided into following types:
A) Based on the Structure or Organizational Setup: Banks can be of five types based on the structure or organizational setup, viz., unit bank, branch bank, group bank, chain bank and correspondent bank.
1) Unit Bank: Unit Bank is a type of bank under which the banking operations are carried by a single branch with a single office and they limit their operations to a limited area. Normally, unit banks may not have any branch or it may have one or two branches. This unit banking system has its origin in United State of America (USA) and each unit bank has its own shareholders and board of management.
2) Branch Bank: Branch Bank is a type of banking system under which the banking operations are carried with the help of branch network and the branches are controlled by the Head Office of the bank through their zonal or regional offices. Each branch of a bank will be managed by a responsible person called branch manager who will be assisted by the officers, clerks and sub-staff. In England and India, this type of branch banking system is in practice. In India, State Bank of India (SBI) is the biggest public sector bank with a very wide network of 16000 branches.
3) Group Bank: Group Bank is a system of banking under which there will be holding company controlling the subsidiary companies which carry out banking business. In some cases, both the holding and subsidiary companies may carry out banking business. An example in India is SBI which has many subsidiary banks such as State Bank of Mysore, State Bank of Indore, State Bank of Hyderabad, State Bank of Bikaner and Jaipur, State Bank of Patiala and State Bank of Travancore. These subsidiaries carry out banking and other operations such as leasing, merchant banking and so on.
4) Chain Bank: Chain Bank is a system under which different banks come under a common control through common shareholders or by the inter-locking of directors. An example in India is KarurVysya Bank and Lakshmi Vilas Bank having their head offices located in the same place, viz., Karur and sharing common directors by which they may have common management policy.
5) Correspondent Bank: Correspondent Bank is a bank which link two banks of different stature or size. Many Indian banks act as correspondent banks for many foreign banks.
6) Pure Banking: Under pure Banking, the commercial banks give only short-term loans to industry, trade and commerce. They specialize in short term finance only. This type of banking is popular in U.K.
7) Mixed Banking: Mixed banking is that system of banking under which the commercial banks perform the dual function of commercial banking and investment banking, i.e., it combines deposit and lending activity with investment banking. Commercial banks usually offer both short-term as well as medium term loans. The German banking system is the best example of mixed Banking.
8) Regional banking: In order to provide adequate and timely credits to small borrowers in rural and semi-urban areas, Central Government set up Regional Banks, known as Regional Rural Banks all over India jointly with State Governments and some Commercial Banks. As they are permitted to operate in particular region, it may help develop the regional economy.
B) Based on the Ownership: Banks can be of four types based on the ownership. They are public sector banks, private sector banks, foreign banks and cooperative banks.
1) Public Sector Banks: Public Sector Banks are those banks in which majority stake (i.e., more than 50% of the shares) is held by the government of the country. The words such as “The” or “Ltd” will not be found in their names because the ownership of these banks are with the government and the liability is unlimited in nature. Some examples of public sector banks in India include Andhra Bank, Canara Bank, Union Bank of India, Allahabad Bank, Punjab National Bank, Corporation Bank, Indian Bank and so on.
2) Private Sector Banks: Private Sector Banks are those banks which are owned by group of private shareholders. They elect board of directors which manages the affairs of the banks. Some examples of private banks in India include The Lakshmi Vilas Bank Ltd., The Karur Vysya Bank Ltd., The City Union Bank Ltd., HDFC Bank, Axis Bank and son.
3) Foreign Banks: Foreign Banks are those banks which belong to foreign countries and have their incorporated head office in foreign countries and branch offices in other countries. The share capital of the foreign banks will be fully contributed by the foreign investors. Some examples of foreign banks in Indian include ABM Amro bank, Standard Chartered Bank, JP Morgan Chase Bank and so on.
4) Cooperative Banks: Cooperative Banks are those banks which are run by following cooperative principles of service motive. Their main motive is not profit making but to help the weaker sections of the society. Some examples of cooperative banks in India include Central Cooperative Banks, State Cooperative Banks.
C) Based on the Functions: Banks can be of various types based on the functions they perform. They include savings banks, commercial banks, industrial banks, agricultural development banks, land mortgage/development banks, cooperative banks, exchange banks, indigenous banks, consumer banks, central banks.
a) Central Bank: Central Bank is known as guardian bank which bank working in the country. Now a days, in every country there is one central bank and is controlled by the govt. The central Bank manages and control the whole monetary system and also prepares monetary policy and other policies of the govt.
b) Commercial Bank: The commercial bank generally extent short terms loans to the business man and traders. They collect deposits from the public and advance loans to the businessman and producer commercial banks are normally owned by share holders. In India most of the joint stock banks are commercial banks.
c) Co-operative Bank: Co-operatives banks are those banks which established in co-operative sectors. Co-operative banks offer short term and medium term loans to the agricultural sector. Farmers get various kinds of loan for purchasing various agriculture inputs from co-operative banks.
d) Foreign exchange Banks: These are special types of banks which specialize in financing foreign trade. Their main is to make international payments through the purchase and sale of exchange bills.
e) Industrial banks: Industrial banks are those banks which advance long term loans to industries. For the development of industries various types of industrial banks are established. In India, various institution like Industrial and finance co-operation of India (IFCI), Industrial development bank of India, can be termed as Industrial Banks.
f) Savings Banks: Savings banks are those banks which offer opportunities for saving to the small savers and also try to develop saving habits among the people.
g) Development Banks: Development banks are specialized financial institutions which provide medium and long term finance to private entrepreneurs and help in economic development of the country.
h) Agricultural/Land Development Banks: Agricultural/Land Development Banks are those banks which are known as Land Mortgage or Agricultural Banks as they provide finance to agricultural sector. They provide long term loan for agriculture for the purposes of purchase of new land, purchase of heavy agricultural machinery such as tractor, repayment of old debt, conservation of soil and reclamation of loans.
i) Investment Banks: Investment Banks are those banks which are specialized in provide medium and long term financial assistance to business and industry. They are also known as Industrial Banks as they are mainly concerned with industrial finance.
j) Export - Import Bank: These banks have been established for the purpose of financing foreign trade. They concentrate their working on medium and long-term financing. The Export-Import Bank of India (EXIM Bank) was established on January 1, 1982 as a statutory corporation wholly owned by the central government.
k) Indigenous Bankers: That unorganised unit which provides productive, unproductive, long term, medium term and short term loan at the higher interest rate are known as indigenous bankers. These banks can be found everywhere in cities, towns, mandis and villages.
l) Rural Banking: A set of financial institution engaged in financing of rural sector is termed as ‘Rural Banking’. The polices of financing of these banks have been designed in such a way so that these institution can play catalyst role in the process of rural development.