What is meant by Bank and Explain the Different types of Banks

We all keep hearing about the word “bank” in our day-to-day life because this is the place where the income of our family members is deposited into the bank accounts and sometimes we go to banks for some other purposes like Borrowing Money, Debit cards, Bank Statements, Business Services, Home Buying etc. and many other.

So these are the basic thing which we do in our day-to-day life with banks, now let’s talk about this topic in detail. let’s start…

What is Bank?

Basically, A bank is a financial institution that deals with money-related activities. It gives the guarantee to the public for securing their money on the behalf of a ‘license’ which is approved by the central bank. In India, “The RBI”(Reserve Bank Of India) is the only central bank that has the power to control all the Indian banks, and the power to control these banks is given by the Government of India.

Banks play a very important role in economic growth as well as in our lives this is because if I talk about in terms of our daily lives, the banks help us by providing some financial services like they provide a variety of accounts to open: Saving accounts, Current Accounts, Salary Accounts, Fixed Deposit Account, etc. where we can store our cash safely, and provide a facility of depositing and withdrawing cash anytime from our accounts and also provide loans related services: Home Loans, Car Loans, Credit cards, etc and many other. but from all of these services, the most important service of a bank is that they provide us the security to our money by providing a storage/account.

If I talk about in terms of economic growth, banks collect surplus savings from the public to store their money securely and invest all these money to the businesses who needs money to grow their businesses, If these businesses can grow, it means that jobs will also be created. As we know, how employment helps to make our country’s growth. And, also banks creates a demand of money in public by granting loans, credit cards likes services etc, where these thing are important for any country’s economy growth.

Types of banks

  • Central Banks
  • Commercial Banks
  • Investment Banks
  • Co-operative Banks
  • Specialised Banks
  • Industrial Banks
  • Agricultural Banks
  • Indigenous Banks
  • Exchange banks

Central Banks

Central bank is also known as national or federal bank. These banks are responsible for controlling our country’s money, provides financial serives, creates monetary policies etc and it has the power to regulate commercial banks.

Examples: RBI (Reserve Bank Of India) is the central bank of our country (India).

Commercial Banks

Commercial banks are those banks where we mostly go for the purpose like depositing money, withdrawing money, opening new accounts, etc, and for doing many other things we go to banks in daily life. These banks are known as “Commercial Banks”

Examples: In india- SBI, Kotak, ICICI, HDFC, PNB, Union Bank, Indian Bank etc. like these there are many others banks are a example of commercial banks.

Investment Banks

Investment banks are those banks who helps corporates or companies to raise funds for their ventures. These banks usually works for large companies, Government, Institutional investors and for high networth individuals. Instead of raising funds, they also provide financial advice to their clients for making their profitable business/investment.

Examples: Central Bank of India, Axis Bank Ltd, ICICI Securities Ltd, HDFC Bank Ltd, JP Morgan India Private Ltd etc. these are investment banks of our india.

Co-operative banks

It is a associations of member where all the member of this banks group are being a member and customer at a same time. Suppose there is a two member: member A & member B, from these two member member b need a money of Rs 70,000 and unfortunately member a has the money to give, so the member a gives money to member b on the behlaf of loan where member b must have to return his money with interest at a given time. In these banks all member are co-operate with each other to fulfilling his/her help. Especially it play a very important in a rural areas.

Examples: Apna Sahakari Bank Ltd, Abhyudaya Co-op. Bank Ltd, Punjab & Maharashtra Co-op. Bank Ltd, The Urban Co-op. Bank Ltd, Sharad Sahakari Bank Ltd etc. so these are the example of co-operative bank of india.

Specialised Banks

Specialised bank are those banks which is created for the specialised purpose or we can say for the specific purpose such as development purpose(development banks), agriculture purpose(agricultural banks), Industrial purpose (industrial bank)etc. these banks are known as “Specialised Bank”.

There are three types:

  1. Export Import Bank of India (EXIM Bank)
  2. Small Industries Development Bank of India (SIDBI)
  3. National Bank for Agricultural and Rural Development (NABARD)

Industrial Banks

Industrial bank are those banks where it is established for the purpose of providing long term loans to the industries for modernization as well as for oue economy growth. These banks provides loans in exchanges of shares or debentures.

Example: Industrial Development Bank of India, Industrial Credit and Investment Corporation of India (ICICI), Industrial Finance Corporation (IFC), State Financial Corporations (SFCs) etc.

Agricultural Banks

Agricultural bank are those banks where they helps farmers to providing short, mid and long term loan in the exchanges of interest. These banks are known as “Agricultural Banks”. well, this bank is a part of co-operative society where they helps others by providing the loans at alow rate in a rural areas.

Example: National Bank for Agriculture and Rural Development (NABARD), HDFC Bank Agricultural Loans, Allahabad Bank Agricultural Loans, Bank of Baroda Agricultural Loans etc.

Indegenous Banks

Indegenous Banks are also known as “Swadeshi Bank”. These banks are work as a money lenders where they accept prcious things like jwellery, car, property etc. and provide loans on behalf of gmentioned things.

Example: Gujarati shroffs, Multani shroffs, Chettiars of the South, Marwari Kayas of Assam etc.

Exchange Banks

Exchange banks are those banks who are mainly concerned with “Financing Foriegn Trade”. These banks helps people by exchanging their currency to another country currency where they want go. These type of bank are known as “Exchnage Banks”.

Example: Bank of tokyo, Bank of America, Hong kong bank etc.


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