Banking refers to a system of financial institutions, such as banks and credit unions that provides various financial services to individuals, businesses, and government set up. Banking services mainly include accepting deposits, lending money, facilitating transactions, and offering various financial products like savings accounts, loans, and credit cards. Banking services mainly include accepting deposits, lending money, facilitating transactions, and offering various financial products like savings accounts, loans, and credit cards. Banks play a very important role in boosting the economy by putting the flow of money in the market and therefore helping in economic activities.
Functions of Banks
Banks in India offer numerous amount of banking services like savings and checking accounts, loans (personal, business, and mortgages), credit cards, investment services, and electronic banking options like online and mobile banking.
Some of the major functions of banks are mentioned below –
- Accepting Deposits – Banks provide customers, and businesses a safe option to deposit their money which can be withdrawn according to their will.
- Providing Loans – Banks give or lend money to individuals, and businesses for various purposes, such as home mortgages, business expansion, or personal loans.
- Payments and Settlement – Banks allow transactions to take place through various payment methods, like checks, debit/credit cards, and electronic transfers.
- Currency Exchange – Many banks offer foreign exchange services, allowing customers to buy, sell, or exchange foreign currencies.
- Safekeeping Of Valuables – Some banks offer safe deposit boxes to safely keep valuable things and documents. Their privacy will also be maintained.
- PassBook Updation Service: To reduce the time and number of banking apps, now we have installed we have now integrated FedBook into our all-new FEDMOBILE App, which has several features like digital Federal Bank Passbook, utility bill payment, DTH services, and investments.
Investment Services – Banks also provide banking services to their customers which help them to grow like -investing in mutual funds, stocks, and bonds.
- Internet Banking Services – The Bank offers online and mobile banking services, making it convenient for the customer to pay bills, transfer funds, and be easily able to access their account. It also saves time as the customer does not have to physically visit a bank branch to do above mentioned things
- Locker Service: Safe locker deposit options are given to various banks, and lockers of different sizes are given to customers depending on their needs. Rent of the locker has to be given by the account holder and rent is charged annually.
- Cheque Book Request: To get a new cheque book you can log into the bank website or visit physically a bank branch and request one in person. Cheque book contains the Cheque Number, IFSC code, and account details of the account holder.
Types of Banks in India
The Banking System in India is divided into several types, each serving specific functions and purposes. The table below represents the different types of banks in India and how it is further divided:
|Banking Classification in India|
|Types of Banks||Sub-types|
|Commercial Banks||a) Private Sector Banks
b) Public Sector Banks
c) Regional Rural Banks
d) Foreign Banks
|Co-operative Banks||a) State Co-operative Banks
b) Urban Co-operative Banks
|Small Finance Banks||–|
1) Central Bank
The Reserve Bank of India (RBI) serves as the Central Bank of India and is responsible for regulating and controlling the monetary and banking system in the country.
- Commercial Banks – Commercial banks provide services like savings, loans, investments, and opening of current accounts. Major commercial banks are Public sector banks, Private sector banks, and Foreign banks.
- Public Sector Banks – They are owned, and operated by the government, examples include State Bank of India (SBI), Punjab National Bank (PNB), and Bank of Baroda (BOB).
- Private Sector Banks – These are privately owned and managed banks, such as HDFC Bank, ICICI Bank, and Axis Bank.
- Foreign Banks – These are the banks that have headquarters in India and have branches out of India. Some examples of foreign banks are Citibank, Standard Chartered Bank, and HSBC.
- Regional Rural Banks – These banks cater to rural and semi-urban areas and are owned by the government, commercial banks, and state governments.
- Cooperative Banks – A Co-operative Bank is registered under the Co-operative Societies Act of 1912 and is run by an elected managing committee. It works on a non-profit, no-loss basis and mainly serves entrepreneurs, small businesses, self-employment, and more in urban areas. In rural areas, it mainly functions to finance agriculture-based activities like farming, livestock, and hatcheries. There are mainly two types of Co-operative Banks:
|Types of Cooperative Bank||Description|
|State Co-operative Banks||A State Co-operative Bank is a federation of the central Co-operative banks that will act as a custodian of the Co-operative banking structure in the State.|
|Urban Co-operative Banks||The Urban Co-operative Bank is the primary Co-operative bank located in urban and semi-urban areas. The banks essentially lent to smaller borrowers, and businesses centered around a community, locality, and more|
- Payment Banks – It is the new banking model that has come into existence or conceptualized by RBI. In this banking model bank is allowed to accept restricted amount of money. A maximum amount of INR 1 lakh is allowed to be deposited in the bank. The banks also offer net banking, ATMs, and more.
- Small Finance Banks – These banks focus on an unserved and underserved section of society. Low-income groups of society. This type of bank is licensed under Section 22 of the Banking Regulation Act 1949, and it is governed by the Provisions Act of 1934.
Here are a few examples of Small Finance Banks in India:
- AU Small Finance Bank Ltd.
- Utkarsh Small Finance Bank Ltd.
- Fincare Small Finance Bank Ltd.
- Ujjivan Small Finance Bank Ltd.
- Jana Small Finance Bank Ltd.
- ESAF Small Finance Bank Ltd.
- Suryoday Small Finance Bank Ltd.
- Equitas Small Finance Bank Ltd.
- Capital Small Finance Bank Ltd.
- North East Small Finance Bank Ltd
- Scheduled Banks – These banks are covered under the 2nd Schedule of RBI Act 1934, and they need to have a paid-up capital of INR 5 lakhs or more.
- Non Scheduled Banks – The non-scheduled banks are local area banks that are not listed in the 2nd Schedule of the RBI Act 1934.