Overview of Banks in India

In India, modern banking originated in the late eighteen century. The Bank of Calcutta, founded in 1806 and currently known as the State Bank Of India, is the country’s oldest profit-oriented bank. At present, there are 34 banks in India, 12 public sector banks and 22 private sector banks. In India, the system of banking is categorised into several groups. Each group has its benefits and limitations in its operations. The banks of India are financial institutions that deal with deposits and loans. 

Structure of Banking in India

The banks in India mainly consist of the primer, Reserve Bank of India, commercial banks, cooperative banks, and developmental banks. All these institutes are a meeting ground for investors and regular people, and they form the core of the financial sector of the country. By mobilising resources and better allocation, banks play an essential role in developing an underdeveloped country. 

Public Sector Banks in India 

The public sector consists of state banks and nationalised banks. There are 27 banks under the public sector. Public sector banks have a significant number of branches that are situated in the metro, urban and rural areas across the country. The PSB accounts for about 75% of deposits and also contributes to 70% of the total advances of all the commercial banks in the country. The public sector banks of India have all the modern banking techniques. The deposits in PSB are mainly asset-based. 

Scheduled Banks 

The scheduled banks in India come under the second schedule of the Reserve Bank of India Act 1934. The scheduled banks in India can receive low-interest loans from RBI, and they are the only banks liable for that. To avail all the financial services that are provided by the RBI, the scheduled banks have to maintain a certain amount with the Reserve Bank. Commercial banks and cooperative banks have also come under this category of banks.

Commercial Banks 

The Banking Companies Act of 1956 established companies. Commercial banks function on a commercial basis. Their main goal is to make a profit. The majority of stakes in any commercial banks are owned by the central or state government or any private corporation. The banks in the commercial sector have a unified structure. They mainly run on public deposits, and their interest rate doesn’t change unless stated by the Reserve Bank of India. 

Central Bank 

Known as the central bank of the country, the Reserve Bank Of India is the highest authority bank. Each country has a central bank that looks into all the other financial institutions. The primary role of the central bank is to serve as the government’s bank and regulate the country’s other banking institutes, direct them, and lay down all the rules. Assisting other financial institutions, issuing them money and monetary policies, and supervising them are some of the critical features of the central bank. 

Cooperative Banks 

These banks in India are governed by the law which the state government enacts. Banks that come under the cooperative sector provide short-term loans to agriculture and its related industries.  These banks provide low-interest loans, which help in enhancing social welfare. The funding of cooperative banks is promoted by the Reserve bank of India, the government of India and the National Bank for Agriculture and Rural Development.  

Objectives of Banks in India

• They are established as institutions for maximising profits and conducting overall economic activities. 
• Collect savings or idle money from the public at a lower interest rate and lend the money at a higher rate of interest. 
• Creating propensity for savings among the people. 
• Motivating people to invest in bringing solvency. 
• Building up capital through savings. 
• To maintain stability, the banks control the money market. 
• Banks issue notes and currency from central banks.
• As a central bank, it is vital to maintain and control rates.
• The role of banks is to assist the government in trade and business and other socio-economic development.

Conclusion 

The Indian banking sector has seen various changes under the varied financial reforms initiated during the 1990s. The approach toward such reforms in India has been gradual and has seen non-disruptive progress via the consultative process. During the time an economic shift was taking place in the country, the main factor of the liberalisation policy was also to open the banking sector to new market forces. The 1990 policy of globalisation and privatisation brought in a flow of the open market and new opportunities. The system of banks in India that we see and hail now is due to the then government’s reforms.