Did you know: Types of banks in India | 2020

Do you know the bank in which you are holding in your account falls under which category of banks? No! Then this post is going to help you out thoroughly on the same. From commercial banks to foreign banks in India, this post will let you know about all of these.
The banking industry manages finances in a nation including cash and credit. Banks are the institutional entities that accept deposits and grant credit to the bodies and play a core role in preserving the economic prestige of a nation.
In line with their significance in the economy, banks are kept under robust regulation in most of the nations. Similarly, in India, the Reserve Bank of India (RBI) is the peak banking institution that controls the monetary policy across the nation.

Sorts of Banks in India
Banks are primarily classified into 4 categories:

  • Commercial Banks
  • Small Finance Banks
  • Payments Banks
  • Co-operative Banks

Without delay, let’s take an ample comprehension over all of these.

  1. Commercial Banks

Public sector banks, private sector banks, foreign banks and Regional Rural Banks (RRB) fall under Commercial Banks. On the contrary, urban and rural banks are classified under cooperative banks. Besides these, a quite recent to the structure is payments bank. Let’s plunge into the classification of these banks further.

  • Public Sector Banks

Public Sector Banks are the nationalised banks and hold over 75% of the total banking business in India. The major segment of stakes in these banks is associated with the government.

With regard to volume, the State Bank of India is the largest public sector bank in India and often stated as the best bank in India since its merger with 5 associate banks (as on April 1, 2017), it got a position among the top 50 banks across the globe. There are 20 public sector banks in India at present.

  • Private Sector Banks

Private Sector Banks include those banks whose major stake are associated with private shareholders. All the rules and regulations laid down by the RBI for banking will be applicable to private sector banks too. As on April 1, 2020, there are 22 private sector banks in India.

  • Foreign Banks

As the term states itself, a bank whose headquarter is in a foreign country but functions in India as a private banking body. These banks function with a commitment to follow the rules and regulations of its home country alongside the banking rules and regulations in India. At present, there are 46 foreign banks in India.

  • Regional Rural Banks

Regional Rural Banks (RRBs) are also scheduled commercial banks but they’re built with the core objective of rendering credit to weaker sections of the society such as agricultural labourers, small farmers and small businesses.

They generally function at local levels in different states of India and may have branches in certain urban areas too. Other significant operations carried out by Regional Rural Banks include:

  • Extending banking and financial services to rural and semi-urban areas
  • Government functions such as crediting wages of workers under Mahatma Gandhi National Rural Employment Guarantee Act, 2005 (MGNREGA), pensions allocation, etc.
  • Para-banking facilities such as debit cards, credit cards and locker facilities

As of April 1, 2020, there are 43 Regional Rural Banks in India.

  1. Small Finance Banks

This is a specified banking section in India and is focused to render financial inclusion to segments of the society that are not catered by other banks. The prime customers of small finance banks in India include micro industries, small farmers, unorganized sector bodies and small business entities.

Small finance banks are licensed u/s 22 of the Banking Regulation Act, 1949 and are regulated by the provisions of RBI Act, 1934 and FEMA.

  1. Payments Bank

This is comparatively a novel model of the bank in the Indian Banking sector. It was visualized by the Reserve Bank of India (RBI) and is granted to accept a restricted deposit.

Customer can save up to Rs. 1 Lakh in these banks. Payment banks also extend services such as ATM cards, net-banking, mobile-banking, etc. At present, there are 6 operational payment banks in India.

  1. Co-operative Banks

These banks are registered under the Cooperative Societies Act, 1912 and they are run by an elected managing committee. Co-operative banks function on no-profit no-loss ground and principally cater businesspeople, small enterprises, industries and self-employment in urban areas. In rural areas, these banks largely finance agriculture-based activities such as farming, livestock and hatcheries.

Co-operative banks in India are classified into 2 categories:

  • Urban Co-operative Banks
  • State Co-operative Banks
  • Urban Co-operative Banks

These banks refer to the primary cooperative banks situated in urban and semi-urban areas. These banks particularly lend to small borrowers and businesses hover around communities, localities, etc.

In accordance with the report of RBI as on December 24, 2019, there are 1,544 Urban Co-operative Banks in India.

  • State Co-operative Banks

State Cooperative Banks are federation of the central cooperative bank which operates as custodian of the cooperative banking structure in the State.

Banks can also be classified based on Scheduled and Non-Scheduled Banks. It is vital for every bank account holder to check if they are possessing their savings or deposit account with a Scheduled Bank or Non-Scheduled Bank.

Scheduled Banks are also coated under the depositor insurance program of Deposit Insurance and Credit Guarantee Corporation (DICGC), which is advantageous for all the account holders possessing a savings and fixed/recurring deposit account.

Under DICGC, the bank deposits of up to Rs 1 lakh, including fixed, savings, current and recurring deposits, per depositor per bank in case of bank failure are insured.

  • Scheduled Banks

Scheduled banks are coated under the second schedule of the RBI Act, 1934. To get authorized as a scheduled bank, the bank should adapt to the following conditions:

  • A bank that possesses a paid-up capital of Rs. 5 Lakh and above get authorization for the schedule bank category.
  • A bank needs to gratify the central bank that its affairs are not performed in a way that harms the depositors.
  • A bank should be an establishment instead of a sole-proprietorship or partnership firm.
  • Non-Scheduled Banks

These banks refer to the local area banks which are not listed in the Second Schedule of Reserve Bank of India. Non-Scheduled Banks also need to preserve the cash reserve requirement, not with the Reserve Bank of India but with themselves.


Every bank that exist fall under any of the above categories. If you were unknown about the type of your bank then we strongly hope that this post would have helped you assess which bank category your bank falls under.

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