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Banking Structure in India

Reserve Bank of India

In India, Banking is a need of every person whether you want

  • Financial services
  • Financial Intermediary
  • Payment Services
  • Ancillary Services

Banks are always there to easily rely on… Talking about the Banking structure in India, it has somewhat different faces from other countries.

Let’s see how Banking structure classified:

Banking structure Click on image for full size

The Detailed study

Reserve Bank of India:

The foremost name is RBI, since its establishment in 1935 under the RBI Act 1934 acts like a statuary body made by Government of India (GOI). RBI is holding apex position having control of monetary policies of India. In my last blog we have discussed how Imperial Bank of India dissolved and RBI Act 1934 laid down by Royal Commission or Hilton Young Commission. In 1935, RBI had it’s headquarter in Kolkata (West Bengal) but was shifted to Mumbai after two years of its establishment. Sir Chintaman D.Deshmukh was the first Indian Governor of RBI and presently Dr. Raghuram Rajan is serving the position. In India, RBI has 22 offices in different states and Union Territories.

Commercial Banks:

Commercial Banks are the banks that offer their services to general public and organizations. In these Banks, individual can deposits money, apply for business loans as well as can relish various investment schemes.

Main Functions:

  • These banks accept saving account deposits, recurring account deposits, and fixed deposits from general public lodged under some specified time period.
  • These banks also grant term and deposit loans to various organizations, agriculture and rural development sector.
  • They also offer various advantageous facilities like over drafting, money at call, bill discounting, cash credit etc.

Commercial Banks are Scheduled Banks that are included in Scheduled II (Second) of Reserve Bank, 1934. The conditions for to be scheduled are First- Banks should have capital and collective funds more than Rs. 5 lakh and Second- No process of Banks can harm the interest of deposits. Such banks only run to make profit out of their services.

Under Commercial bank, Public Banks, Private Banks, Foreign banks and Regional rural banks comprised of:

Private Banks:

These banks are owned by either a person or limited members that offers their effective wealth management services to high net worth proprietors. Individuals who have usually more property and wealth as compare to lay man are largely in search for right investment schemes as to ensure their financial safety and security.

Some of well-known private banks are Axis Bank, HDFC, ICICI, IndusInd Bank, Kotak Mahindra, Yes Bank etc.

Public Banks:

In India, Public banks are government owned available 27 in number. RBI after nationalization changed the name of imperial Bank of India to State Bank of India holds about RBI’s 60% of stake. Furthermore, SBI has its seven Associates, 19 Nationalized Banks and 1 IDBI (Other Public Sector-Indian Bank) equal to 27 Public Banks in India. Almost 91% of total banking sector contains commercial banks and SBI is the prevalent name to maintain the top position.

Regional Banks:

These are state sponsored banks aim to develop the rural economy providing credits and encouraging helpful facilities in agriculture sector. Almost every state owned these banks except Goa and Sikkim. RRB with 25 lakh capital can be established from which 50% share contributed by the central Government, 15% by the state government and left 35% of sponsoring public.NABARD (National Bank of Agriculture and Rural Development) is holding the apex position in sectors of the agricultural and rural developments.

Foreign Banks:

To make cross border relations firm and reduce the barriers, various foreign companies have reached across the world to establish their branches in other counties. Similarly in India, foreign banks like Standard Charted, HSBC, CITI bank etc are working well with their head quarters in Abroad.

Co-operative Banks:

Co-operative banks can be well-defined with its name as these institutions only works on Cooperative principle. Such institutions engaged in Normal banking by accepting deposits from individuals and repay at their wish or when required. Co-operative banks usually do banking in agriculture and rural sector and works on “No profits No loss” unlike commercial banks.

Urban Co-operative Banks (UCBs), State Co-operative Bank (SCBs) and Central Co-operative Bank (CCBs) operate in Semi Urban, Urban and metropolitan areas respectively. These banks perform all the functions of banking like accepting deposits, mobilizing, supplying and providing facilities.

Loan Details:

  1. Agriculture Credit Society provides both Short term and medium term loans.
  2. Land Development Bank (LDB’s) provides long term loans.
  3. State Co-operative Bank (SCBs) and Central Co-operative Bank (CCBs) provide short term and Term loans.

Sources of their funds are:

  1. Central and State government.
  2. The Reserve bank of India NABARD
  3. Other co-operative Institutes
  4. Ownership Funds
  5. Deposits and Debenture issued.

Specialized Banks:

Specialized banks are financial institution that intended to provide a long term credits to the industrial and agriculture sectors for development purpose. The institutions which are come under this category are:


  • EXIM
  • For import and export business, person can take long term loan from EXIM. These banks provide assistance and support to direct you. Bank also guides you about the risks, possibilities and scenario of International market. Established in 1982 under the Export-Import Bank of India Act 1981 and it’s headquarter is in Mumbai.

  • SIDBI
  • For setting up small scale business or unit, you apply for easy term loans from SIDBI. SIDBI also guide you about the new technology, modernization and market activities. Established in 1990 through an act of parliament and it’s headquarter is in Lucknow.

  • NABARD
  • NABARD is holding apex position in Agriculture and Rural development sectors. The main objective of NABARD is to elevate the rural sector by increasing the valuable credit facilities in these two sectors. Established in 1982 by a specialized act of parliament and it’s headquarter is in Mumbai.

  • IDBI
  • IDBI is subsidiary of RBI that provides large resources to meet the growing demand of loans in Industrial sector. In 1976 the ownership of IDBI was shifted to Government of India (GOI) and it is established as principal financial institute for development of Industrial sector. Established in 1964 under act of parliament and it’s headquarter is in Mumbai.

State level institutions are like SIDC’s, SFC’s etc as well as investment institutions like LIC, GIC and UTI.

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