Types of Banks In India

types of banks

In today’s time, we cannot think about a country without a banking industry in it. We all know the functions of a bank for individuals and the country. Banks handle the finance of the country including cash and credit. For a common person, the bank is that place where he can have a saving account and save his savings in that or get a loan if required. Although all the banks deal in finance but they all are not the same.  Banks are of several types based on their services.

We all know about the functions and services that banks provide us but most of us are not aware of the different types of banks what are the main types of banks. In this article, you will get detailed information about the types of banks.

Types of Banks

Although it’s not mandated that every country follow the same banking structure but as most of the countries has the same sort of banking needs so they have the same types of banks.  In India, all the banking activities are being regulated by the Reserve Bank of India. But even if all the banks have the same regulating body but still they all are not the same. The classification of Indian banks has been done as a scheduled bank and non-scheduled banks.  The scheduled banks further classified into commercial and cooperative banks and they further get classified into different types of banks.

Read this article further to know about the different types of banks.

 Commercial Bank   

Commercial banks are basically profit-making institutions. These types of banks are regulated under the Banking Regulation Act, 1949. Accepting deposit and grant loans to the public and the government for making the profit is the focal point of commercial banks. Earlier the commercial banks used to lend money for short terms only but now because on the neck to neck competition in this market and due to the business needs of its customers, the commercial bank also started lending money for a comparatively long tenure.

Commercial banks offer following deposit services to their customers; Savings Deposits, Current Deposits, Fixed Deposits, Seasonal Deposits, and Recurring Deposits, etc. To earn a profit in form of interest, the bank offers following money lending services to public and business houses; Cash Credits, Overdrafts, Loans and Discounting Bills. In India, we can further divide Commercial banks into Public Sector Banks and Private sector banks. Banks like State Bank of India, Banks of Baroda etc are from the domain of public banks and banks like HDFC and ICICI etc are from the private domain.

Foreign Banks

Under this category those banks are included that work in India but have their headquarters in a foreign country. These types of banks work in India as a private entity. Foreign banks have to follow the rules of their home countries and those countries’ from where the banks are operating their operations. Banks like Standard Chartered Bank, Citi Bank, and HSBC are the leading foreign banks in India.  

Co-operative Banks

Co-operative banks provide short term, medium term, and long-term credit for agriculture services. Co-operative banks also give the loans to small scale industry on comparatively low-interest rates. Unlike commercial banks, the Co-operative banks work on no profit no loss business module. These banks are in function in both rural and urban areas. In rural areas, Co-operative banks provide loan mainly to farmers for agricultural work and in urban areas the loan is provided by the Co-operative banks are for the entrepreneurs and small scale industrialist.

Small Finance Banks  

Small finance banks provide their services to that segment of society which could not reach to the commercial banks. Small finance banks provide loans to micro-industry, marginal farmers, small business units and unorganized sector entities. Small finance banks get their license under Section 22 of the Banking Regulation Act, 1949.     

Agriculture Banks

To help the farmers and their agriculture work the agriculture banks provide credit services to the farmer. The interest rates are very low in agriculture banks and the tenure of loan can be medium to long. Banks like Agricultural Refinance and Development Corporation and National Bank for Agricultural and Rural Development (NABARD) are the example of agriculture banks.

Merchant Banks

Merchant banks help the companies to sell their new shares in the market to the public. Merchant banks help the big industries to raise the funds to lend to industry. This money lending process differs completely from the loan services. In this process, the bank doesn’t give a loan to the party but circulate money from those who want to lend it to the interested firms.  Many commercial banks also work like merchant banks in India.

Land Development Banks

The land development banks usually offer long-term loan to the farmers for permanent improvements on the land. Loan development banks give the loan on the first mortgage and sometimes even on the second mortgage of land or agricultural property. Many times Co-operative banks perform the functions of land development of banks in India but every state has one branch of a central land development bank.

Payment Banks  

Payment bank is a new banking concept in India. As per the RBI’s guideline, the payment banks cannot offer the fixed deposit and recurring deposit facilities to its customers but they

can offer small savings accounts, payments, and remittance services to its customers. Paytm is one of the payment banks in India.

Central Bank

With all the above type of banks, India also has a central bank that handles these different banks in India. the name of that central bank if Reserve Bank of India (RBI).


So here are the different types of banks that offer their services in India. banks have an important role in the economy’s growth in any country. Not only the business houses and farmers need the banking services but people with high, average or minimum income also require the banking services hence the banks have become an indispensable part of our daily life so it is a must to know about them.

If you have any question related to the banks and its working, then drop it in the comment box below. We will be happy to help you. 

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