There are different types of banks in every country. Each type performs mainly certain functions. Banks have been classified on the basis of their functions.There are several definitions for the term “Bank”. some of them are
Prof. R.S.Sayers explained that “Bank is an institution whose whole debts are widely accepted in settlement of other people’s debt to each other”.
According to the Indian Banking Regulation Act defined banking as the ‘Accepting the deposits of money from the public which are repayable on demand for the purpose of lending or investment of the money acquired from the public in the form of deposits’.
DIFFERENT TYPES OF BANKS
Commercial banks are the banks that accept money in the form of deposits from the public and give loans and advances to its customers by charging interest. They mobilize small savings and promote the growth of trade and commerce. Generally, commercial banks lend money for a short period only. They only provide working capital to the organizations. But in recent times commercial banks are providing long-term capital also to the organizations.
There are several types of deposits which are accepted by the commercial banks like
⦿ Savings Deposits
⦿ Current Deposits
⦿ Fixed Deposits
⦿ Seasonal Deposits
⦿ Recurring Deposits, etc
The Commercial banks give different types of loans and advances to the businessmen like
⦿ Cash Credits
⦿ Discounting Bills
Co-operative Banks are the banks that usually provide short term, medium term, long term credit to agricultural purposes. Co-operative Banks also provides loans to small-scale artisans. Co-operative Banks usually provide credit facilities to farmers, small-scale industries, etc at a cheaper rate of interest. Co-operative Banks are mainly situated in rural areas and can also be seen in urban areas.
Every country has its own Central Bank. The Central bank aims at non-profit functioning. It regulates the monetary and credit system of the country. Central Bank acts as controller, supervisor, and regulator of the activities of commercial banks and other financial institutions in the country. The Central bank is considered as the apex institution of the country’s money market.
Functions of Central Bank
⦿ Note issue
⦿ Credit control
⦿ It acts as a banker to the banks
⦿ It acts as a banker to the government
⦿ It maintains the foreign exchange reserves of the country
⦿ It maintains the Gold reserves of the country
Industrial banks are also called as Investment Banks. Industrial banks provide long-term loans to the industries. Industries require long-term capital for buying machinery, construction of buildings, expansion of operations, etc. These capital required by industries is provided by industrial banks for industrialists to grow their businesses. Industrial banks accept long-term deposits from the public. They secure capital by issuing shares and debentures.
Agricultural Banks are the banks which provide agricultural credit to the farmers. The Agricultural Development Banks provide medium term and long term credit. Some examples of Agricultural Banks in India are Agricultural Finance Corporation, Agricultural Refinance and Development Corporation, National Bank for Agricultural and Rural Development (NABARD).Agricultural Banks are established by the government to promote agricultural credit in the country.
Savings Banks mainly concentrates on the mobilization of savings of the people. In India Post offices run by Postal department act as savings banks. Since Commercial banks are providing these facilities of savings banks to the public, the need for separate savings bank is fading.
Foreign Exchange Banks
Foreign Exchange Banks are the banks which provide finance for foreign trade.These banks accept deposits from the public. Foreign Exchange Banks are specialized banks in providing credit for the foreign trade. These banks usually have their branches in foreign countries for uninterrupted functioning of their services.But in recent times commercial banks are also financing foreign trade.
Exchange Banks are the banks which operate by financing the imports and exports of the country. These banks are mainly concerned with providing foreign exchange to their customers and help to promote international trade. They also offer to discount of foreign bills of exchange to their customers.
Private Bankers are the individuals who do banking business individually or as a partnership. It is purely an unorganized sector.Most of the private bankers do not receive or accept any deposits from the public, they do banking business with their own capital. They lend money to the people for high-interest rates.
There are chit funds in India. They provide finance to trade and commerce. However, they cannot be called as banks in the regular sense. The Chit fund business is very large in a country like India. it is also an unorganized sector in India.
Thus banks are classified on the basis of their functions in which they are specialized. But it must be noted that Commercial Banks are now providing services of agricultural banks, they are providing loans for industries as industrial banks, they are even expanding their services into foreign exchange replacing the foreign exchange banks. Therefore the commercial banks are raising their capabilities for attracting a large number of customers.