Types of Banks in India

With an increase in the range of financial activities in the Indian banking sector, there are different of banks that cater to specific requirements of the customers. Today, we have banks catering to customers through personalized services and banks that offer specific services. Typically, banks can be classified on the basis of their activities. Examples of these activities include investment, retail or business.

Main Types of Banks in India

The extent of ownership determines the type of banks that you see in India. Decades ago, nationalized banks dominated the banking sector in India. In 1969, the major nationalization of banks was spearheaded by none other than Prime Minister Indira Gandhi. The purpose was to spread awareness to rural areas and make cheap finance options available to the poor and needy farmers. That year, 14 major commercial banks were nationalized.

Today, the banking scenario has changed considerably. The following are the main types of banks in India:

Privately Owned: These banks operate on a purely profit basis. Also called central banks and new generation banks, these are controlled by the state governments of their respective countries. While they are known to offer quick, easy and convenient options for customers, they are not considered as reliable and committed to growing the wealth of their customers as nationalized banks.

Publicly Owned: These banks are operated and controlled by the government. These banks actively maintain a huge number of operations that constitute the country’s liquidity in the banking sector. They are considered safe, reliable and committed to the customers and the process established by the Reserve Bank of India. 

These banks handle a number of tasks pertaining to the banking sector. Publicly owned banks also determine the interest rates that other banks in the country offer.

Other Categories of Banks

The following categories include larger banks that have broader and multiple divisions:

Retail banks: These banks deal with consumers and small business owners directly. The major products offered by them include savings and current accounts, credit cards, and loans, such as mortgages. These also cater to high net worth clients offering them wealth management services.

These can be further divided into

• Offshore banks: Most of these are private banks that operate in spheres of reduced taxes.
• Community banks: These banks operate on a local basis and serve people and markets that have usually been devoid of banking services.
• Postal savings banks: These banks operate in collaboration with the nation’s national postal systems.
• Building societies: Typically owned by their clients, these banks offer a broad range of retail banking services.
• Ethical banks: These banks only acknowledge investments that are socially and environmentally useful.
• Business banks: These banks serve medium scale businesses and organizations.
• Corporate banks: These banks typically deal with major business entities.
• Investment banks: These banks help clients in mergers and acquisitions and other services related to financial markets. Some investment banks conduct underwriting services only. Some investment banks are merchant banks that perform traditional banking activities related to trade-finance.

All types of banks function well based on the extent of trust they are able to communicate with their customers. Their customers, in turn, recommend them to others and avail more services offered by these banks, expecting complete safety of their dealings.