Usually, the interest rates charged by the banks are much higher than the interest rates provided by the banks to its customer for savings. They earn profit by charging such a higher interest rate on the loan amount.
Banks in India can be categorized into two main types, which are scheduled banks and non-scheduled banks.
- Scheduled banks: The banks which are included under the second schedule of Reserve Bank of India Act, 1934 is known as schedule bank. The minimum reserve amount for this type of bank is 25 Lakhs.
Scheduled banks can be further categorized into two types, i.e., commercial banks and cooperative banks.
- Commercial banks: These types of banks are included under the Banking Regulation Act 1949. The primary objective of commercial banks is maximizing profit by providing the loan.
Commercial banks can be further categorized into four types, i.e., public sector banks, private banks, regional rural banks, and foreign banks
- Public Bank: The banks in which the majority of the share (Which is more than 50% share) is own by the government is known as a public bank. The State bank of India is an example of a public bank of India.
- Private bank: The banks in which the majority of the share is owned by the private organizations are known as private banks. HDFC, ICICI, Axis bank are examples of private banks in India.
Again, Indian private banks can be divided into two types which are old private banks (private banks established before 1993) and new private banks (Banks established after 1993).
- Foreign banks: The banks whose headquarters are established in foreign countries are known as foreign banks. American Express, HSBC are the example of two popular foreign banks of India.
- Regional rural banks: These are the types of banks that are generally operated at the regional level. The main purpose of these types of banks is to provide banking facilities in the rural areas of India. 50% share of this type of bank is held by central banks, 15% by the state government, and 35% by the sponsored bank.
- Co-operative banks: These banks are registered under the Cooperative Society Act, 1965. The primary objective of this type of bank is to offer credit facilities to the poor/scheduled/backward people in society.
It can be further classified into two types, i.e., district central cooperative bank and state cooperative banks.
- Non-scheduled banks: The banks which are not registered under the second schedule of Reserve Bank of India Act, 1934 is known as a non-scheduled bank. These banks are not regulated by RBI. Coastal Local Area Bank Ltd – Vijayawada (Andhra Pradesh), Capital Local Area Bank Ltd – Phagwara (Punjab), Krishna Bhima Samruddhi Local Area Bank Ltd, Mahbubnagar, and Subhadra Local Area Bank Ltd., Kolhapur are the example of non-scheduled banks.
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