Decoding the different types of banking in India
The Indian banking sector is rather dynamic. Banks encourage people to save money with them and mobilise that money to invest in above-average investments. Banks also use these funds to finance various kinds of loans, thereby managing the cash flow for their massive clientele. In this article, we break down the different types of banking in India and the function of the banks.
Common types of banks prevalent in India include the following:
The banking sector is divided into scheduled and non-scheduled banks.
Commercial banks can be scheduled or non-scheduled and are regulated under the Banking Regulation Act, 1949. These banks accept deposits and grant loans to the general public, businesses, and even the Government. Commercial types of banking systems are:
Licensed under section 22 of the Banking Regulation Act, 1949, these types of banking systems cater to sections of societies not usually served by large banks. They serve micro and cottage industries and small business units.
RBI restricts these banks to offer deposit facilities only, with a deposit limit of INR 1 Lakh per customer. You can avail of debit cards and e-banking facilities.
These banks are registered under the Cooperative Societies Act, 1912, and function on a no-profit no-loss basis. They offer banking services to entrepreneurs, small businesses, and industries.
Scheduled or non-scheduled are the primary types of banking in India, while commercial banks can be both. Commercial banks accept deposits and offer loans and other banking products. Conversely, payment banks strictly offer deposit facilities. Small finance and regional rural banks cater to the banking needs of small enterprises or marginalised farmers and labourers.
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*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.