If someone asks you how many banks do you know, you’d surely be able to name around five of the popular ones. But chances are you wouldn’t know how they are different from each other apart from the names. While there are many ways to classify banks, we will focus on the classification based on ownership and point of origin.
Types of Banks
The banks with more than 50% ownership by the government are called public sector banks or nationalised banks. E.g., State Bank of India (SBI), Bank of Baroda and Bank of India.
The banks where individuals or private companies have more than 50% ownership are called private sector banks. Though private sector banks have to adhere to the RBI guidelines and directives, they can have their own financial goals and corporate structures. Examples of private sector banks are HDFC Bank, ICICI Bank, and Axis Bank.
The banks that have originated in a foreign country and have their operations in India are called foreign banks. Foreign banks are also private banks, by definition. Examples of foreign banks in India are Hongkong and Shanghai Banking Corporation (HSBC), Bank of America and Barclays Bank.
Like housing societies, the co-operative bank registered as co-operative societies undertakes banking business to benefit its members (customers), who are also owners. While they can operate throughout the country, they play a vital role in providing banking facilities to rural and semi-urban India. Examples of co-operative banks are Saraswat Cooperative Bank, Cosmos Cooperative Bank and Bharat Cooperative Bank.
Apart from these types, the RBI issues the Differentiated Bank Licence to banks that provide marginalised financial services. The most notable types of such banks are payments banks and small finance banks.
Payments bank majorly provides prices or remittance services and doesn’t offer loans. In a payments bank, customers can hold money only up to Rs. 1 lakh per person in the account. Examples of payment banks are Airtel Payments Bank, Paytm Payments Bank, and India Post Payments Bank.
Unlike payments banks, small finance banks can accept money in accounts and also provide loans. But most of the loans would be lower than Rs. 25 lakhs and for purposes that traditional banks don’t generally cater to. Examples of small finance banks are Ujjivan Small Finance Bank, Equitas Small Finance Bank and AU Small Finance Bank.
THINK ABOUT IT!
Can you list all the banks you know and classify them as per the categories you just learned?