Types of Banks in India

July 19 is celebrated as bank nationalisation day. Let us see how banks were nationalised in India. To plan a systematic monetary flow, the government of India, after independence, planned upon nationalisation of Indian commercial banks, which belonged to private sectors. There are now many types of banking systems in India. Some types of banking systems in India are managed solely by the government , while some are managed by private sectors.

Following are some other reasons why nationalisation of Indian banks was necessary:

• Social Welfare
• Monopoly dominance
• Lending
• Distribution
• Population

Social Welfare

For the economic development of weaker sectors of the society, such as agricultural and rural industries, at Sectra, it was necessary to nationalise the banks. 

Monopoly Dominance 

If it wasn’t for nationalisation of Indian banks, the imbalance caused by dominating private sectors couldn’t be managed in the banking system.

Lending

For managing the money flow in the economy, which involved crediting, depositing, withdrawing, and lending, nationalisation was important. 

Distribution 

To ensure, if not equal, but required and mandatory monitory distribution to all classes of the subcontinent, nationalisation was needed. 

Population 

With the increasing population after independence, for smooth monetary functioning in the society, banking habits naturally became essential, but it wasn’t possible without nationalisation. RBI was the first bank that was nationalised in 1949. Economically dominating banks with networks that were extensive needed to be nationalised, and hence 14 major banks were nationalised on July 19, 1969. With the second phase, 6 other commercial banks were nationalised in 1980 April. 

Types of Banks

Banking was always in practice in India. Banking can be dated back to ancient India as long as 700 BCE ago. Back then, there were different types of banks, and currently, there are different types of banks in India too.

Following are the types of banks in India:

• Scheduled banks
• Non-scheduled banks
• Specialised banks

Scheduled Banks 

Scheduled banks specifically relate to those banks which are included in the list of the second schedule of the 1934 RBI act. With the incorporation in the RBI act, there were a few advantages too, which scheduled banks enjoy today. Scheduled banks are only allowed to borrow money from the RBI, but they are also supposed to periodically submit the returns. Schedule bankers can also become members of the clearing house. Scheduled banks are also supposed to submit a weekly report to RBI regarding all the monetary exchange processes within the week.

Following is the for the classification of scheduled banks:

Commercial 

It has four types as follows:

• Public sector
• Private sector
• Foreign sector
• Regional Rural banks

The ownership of all sectors differs as the Public sector is mainly managed by the Indian government; meanwhile the private sector belongs to private holders with more percentage of ownership. Foreign sectors belong to foreign entities, and RRBs involve Central banks, State banks, and sponsoring banks. 

Co-operative 

• Primary credit societies 
• Central cooperative banks
• State cooperative banks

Primary credit societies refer to small institutions in villages/rural areas. Central cooperative banks refer to district-level banks, and state cooperative banks refer to the state level. All of these can reach out to RBI for a legal banking licence. These are some of the scheduled banks: Bank of Baroda, Axis Bank, State bank of India, etc. 

Non-Scheduled Banks

Non-scheduled banks refer to those banks which are not included in the second schedule of the 1934 RBI act. Non-scheduled banks are not only allowed to borrow money from the RBI. Non-scheduled bankers do not enjoy any privileges such as being a member of the clearing house. Non-scheduled banks include local banks, and it is riskier to manage these types of banks. Examples of Non scheduled banks: Subhadra local area bank, Krishna Bhima Samruddhi Local Area Bank, etc. 

Specialised Banks

Few banks are introduced only for special purposes such as development, investment, etc., and are known collectively as specialised banks. Following are some of the names of Specialised banks: SIDBI, EXIM, NABARD, etc. 

Conclusion

Banks are entities ensuring a smooth monetary flow in society. The main purpose of banks is to keep a person’s money safe from anything and everything. Banks are important as nowadays it is almost not possible to move on in life without a bank account. The bank account is a necessity when buying houses, getting student loans, sending and receiving money, etc. Every citizen must participate in this social contribution and should have a bank account.