Types of Banks 1 Types of Banks n

Types of Banks 1

Types of Banks n n n Central bank Development Bank Investment Bank Cooperative Credit Bank Regional Rural Bank Non Banking Financial Companies 2

Central Bank The money market that acts as the central monetary authority of the country , serving as the government bank as well as the bankers’ bank is known as a central bank of the country. Functions- The main functions of central bank of a country are functions of note issue, bankers to government, bankers bank etc. 3

The RBI as the central bank of the country is the centre of the Indian financial and monetary system. It has been guiding, monitoring, and regulating, controlling, and promoting destiny of the IFS. It is quite young compared with such central banks as the Bank of England, Risks bank of Sweden, and the Federal Reserve Board of the U. S. 4

Functions n n n As the central banking authority of India, the reserve Bank of India performs the following traditional functions of the central bank: It provides currency and operates the clearing system for the government and banks. It formulates and implements monetary and credit policies. It functions as the government’s and banker’s bank It supervises the operations of credit institutions. It regulates foreign exchange transactions. It moderates the fluctuations in the exchange value of the rupee. 5

n n In addition to the traditional functions of the central banking authority, the Reserve bank of India performs several functions aimed at developing the Indian financial system: It seeks to integrate the unorganized financial sector with the organized financial sector. It encourages the extension of the commercial banking system in the rural areas. It influences the allocation of credit. It promotes the development of new institutions. 6

Development Banks n n A development bank may be defined as a financial institution concerned with providing all types of financial assistance to business units in the form of loans, underwriting, investment and guarantee operations and promotional activitieseconomic development in general and industrial development in particular A development bank is basically a term lending institution. It is a multipurpose financial institution with a broad development outlook. 7

n The concept of development banks in a post independence phenomenon in India. With the end of II World War there was an urgent need for speed industrial development in India. The usual agencies that provided finance for large industries were inadequate. So the govt. of India came forward to set-up a series of financial institution to provide funds to industries. The industrial finance corporation of India, the first development bank was established in 1948. Subsequently many other institutions were set-up. Ex. IDBI, IFCI, SIDBI etc. 8

Factors for growth of Development Banks n n n n Fostering industrial growth Long term assistant Balanced development Promotional services Infrastructure building Economic policies Entrepreneur Development Socio economic objectives 9

Investment Banks Meaning: - Financial intermediaries that acquire the savings of people and direct these funds into the business enterprises seeking capital for the acquisition of plant and equipment and for holding inventories are called ‘investment banks’. Features: -Long term financing, Security, merchandiser, Security middlemen, Insurer, Underwriter Functions: - Capital formation, Underwriting, Purchase of securities, Selling of securities, Advisory services, Acting as dealer. 10

Cooperative Banking Sector n These banks play a vital role in mobilizing savings and stimulating agricultural investment. Co-operativecredit institutions account for the second largest proportion of 44. 6% of total institutional credit of Rs. 3854000 corer to agricultural and allied activities in the rural sector in 1998 to 99. 11

Types of Co-operative Banking sector n n The co-operative sector is very much useful for rural people. The co-operative banking sector is divided into the following categories. State co-operative Banks Central co-operative banks Primary Agriculture Credit Societies 12

Non Banking Finance companies n According to RBI it means a financial institutions which is a company and a non banking institution and which has as its principal business the receiving of deposits under any schemes or arrangement or in any other manner or lending in any manner. 13

Merchant Banks Meaning: - Institution that render wide range of services such as the management of customer’s securities, portfolio management, counseling, insurance, etc are called ‘Merchant Banks’. Functions: Sponsoring issues, Loan syndication, Servicing of issues, Portfolio, management, Arranging fixed deposits, Helps in merger& acquisition 14

Commercial Banks n Commercial banks comprising public sector banks, foreign banks, and private sector banks represent the most important financial intermediary in the Indian financial system. 15

n n The changes in banking structure and control have resulted due to Wider geographical spread and deeper penetration of rural areas, Higher mobilization of deposits, Reallocation of bank credit to priority activities, and Lower operational autonomy for a bank management. 16

n The largest commercial Banks in India, (SBI), was set up in 1955 when the Imperial Bank was nationalized and merged with some banks of the princely states. In 1969, in one fell swoop, the fourteen largest privately – owned commercial banks were nationalized. Subsequently, several other privately – owned commercial banks were nationalized. As a result of these actions, public sector commercial banks, dominate the commercial banking scene in the country. 17

Functions of commercial banks n n n Saving mobilization Special loans Bills discount Credit creation Agencies function General utility function 18

Public Sector Banks n n n State Bank of India and its associate banks called the State Bank Group 20 nationalized banks Regional rural banks mainly sponsored by public sector banks 19

Private Sector Banks n n n Old generation private banks New generation private banks Foreign banks operating in India Scheduled co-operative banks Non-scheduled banks 20

Indigenous banks n n n Indigenous bankers are those individuals or private firm who receives deposits and lend money or deals with funds. Feature Funding source Professional bodies Urban center Socialized financing Mode of lending Personalized Saving 21

Regional rural Bank n They are oriented towards meeting the needs of the weaker section of the rural population consisting of small and marginal farmers, agricultural laborer, small entrepreneurs. These banks were set up after the nationalization of banks in 1969. 22

n REGIONAL RURAL BANKS ACT, 1976 ACT NO. 21 OF 1976 [9 th February, 1976. ] An Act to provide for the incorporation, regulation and winding up of Regional Rural Banks with a view to developing the rural economy by providing, for the purpose of development of agriculture, trade, commerce, industry and other productive activities in the rural areas, credit and other facilities, particularly to the small and marginal farmers, agricultural laborers, artisans and small entrepreneurs, and for matters connected therewith and incidental thereto. 23