Bank & Its Classification

BANK & ITS CLASSIFICATION
INTRODUCTION
BANK
A bank is a financial institution which deals with deposits and advances and other related services. It receives money from those who want to save in the form of deposits and lends to those who need it.
DEFINITONS OF BANK
According to Crowther: the banks business is to take the debts of other people to offer his own in exchange and thereby create money.
Oxford Dictionary defines a bank as: "an establishment for custody of money, which it pays out on customer's order."
FEATURES/ CHARACTERISTICS OF BANK
Deals with Money Bank is a financial institution which deals with other peoples money i.e. money given by depositors. Individual / Firm / Company A bank may be a person, firm or a company. A banking company means a company which is in the business of banking.
Acceptance of Deposits
A bank accepts money from the people in the form of deposits which are usually repayable on demand or after the expiry of a fixed period. It gives safety to the deposits of its customers. It also acts as a custodian of funds of its customers.
Advancing Loans A bank lends out money in the form of loans to those who require it for different purposes. Payment and Withdrawal
A bank provides easy payment and withdrawal facility to its customers in the form of cheques and drafts, It also brings bank money in circulation. This money is in the form of cheques, drafts, etc.
Agency and Utility Services A bank provides various banking facilities to its customers. They include general utility services and agency services.
Profit and Service Orientation A bank is a profit seeking institution having service oriented approach.
Connecting Link
A bank acts as a connecting link between borrowers and lenders of money. Banks collect money from those who have surplus money and gives the same to those who are in need of it.
TYPES OF BANKS
BANK & ITS TYPES
On the basis of Law
On the basis of Ownership
On the basis of Domicile
On the basis of functions
On the basis of Organisational Structure
On the basis of Law

Scheduled banks: Scheduled Banks are those banks which have been included in the Second Schedule of RBI Act, 1934. RBI in turn includes only those banks in this schedule which satisfy the criteria laid down vide section 42 (6) (a) of the Act. CONDITIONS: The banking concern must be carrying business in India. It can be a public sector bank, a private sector bank, a foreign bank or a co-operative society. It must have a paid up capital and reserves of Rs. 5 Lakhs. It must ensure RBI that its operations are not detrimental to the interest of depositors. That it must be corporation or co-operative society and not a single owner or partnership firm.
Non Scheduled Banks: the banks which are not included in the second schedule of RBI Act 1934 are called Non Scheduled Banks. They do not fulfil the conditions laid down in the act for induction in the second schedule
On the basis of ownership

Public Sector Banks: Public Sector Banks (PSBs) are banks where a majority stake (i.e. more than 50%) is held by government. The shares of these banks are listed on stock exchanges. There are a total of 23 PSBs in India. For example: Allahabad bank, Bank of Baroda, Bank of India, Punjab National Bank, Oriental Bank of Commerce.
Private Sector Banks: All those banks where greater part of stake or equity is held by the private shareholders and not by government are called "private-sector banks.
For examples:
ICICI Bank, HDFC Bank, Kotak Mahindra Bank, Yes Bank, Axis Bank.
On the basis of Domicile

Domestic Banks: The domestic bank is that bank which works domestically, that is, the bank which works under its geographical boundaries. Banks which are incorporated and registered in India i.e. their head offices are in India. Foreign Banks: A type of foreign bank that is obligated to follow the regulations of both the home and host countries. Banks which are incorporated in foreign countries. Their management and control is in the hands of the country of their origin but the branches are in India.
On the basis of functions

Commercial Banks: Commercial banks are established with an objective to help businessmen. These banks collect money from general public and give short-term loans to businessmen by way of cash credits, overdrafts, etc. Commercial banks provide various services like collecting cheques, bill of exchange, remittance money from one place to another. Exchange Banks: Hong Kong Bank, Bank of Tokyo, Bank of America are the examples of Foreign Exchange Banks working in India. These banks are mainly concerned with the financing of foreign trade.
Indigenous Banks: Indigenous banks means Money Lenders and Sahukars. They collect deposits from general public and grant loans to the needy persons out of their own funds as well as from deposits. These indigenous banks are popular in villages and small towns. They perform combined functions of trading and banking activities. Certain well-known indian communities like Marwaries and Multanis even today run specialised indigenous banks. Industrial Banks / Development Banks: Industrial / Development banks collect cash by issuing shares & debentures and providing long-term loans to industries. The main objective of these banks is to provide long-term loans for expansion and modernisation of industries. In India such banks are established on a large scale after independence. They are: Industrial Finance Corporation of India (IFCI), Industrial Credit and Investment Corporation of India (ICICI)
Land Mortgage / Land Development Banks: Land Mortgage or Land Development banks are also known as Agricultural Banks because these are formed to finance agricultural sector. They also help in land development. In India, Government has come forward to assist these banks. The Government gives guarantee to the debentures issued by such banks.
Saving Banks: Saving banks are established to create saving habit among the people. These banks are helpful for salaried people and low income groups. The deposits collected from customers are invested in bonds, securities, etc. At present most of the commercial banks carry the functions of savings banks.
On the basis of structure

Unit Banking: As from the name it is clear that it is just one single unit or office. These banks are also known as country banks because they operate only in one city. Branch Banking: A big bank with branches is preferred system of banking, now a days, because of globalisation when trade has extended so much, branch banking is the need of the hour. These types of bank operate on large scale and have their nodes in various cities.

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BANK & ITS CLASSIFICATION

FEATURES/ CHARACTERISTICS OF BANK

BANK & ITS TYPES

On the basis of Law

On the basis of Ownership

On the basis of Domicile

On the basis of functions

On the basis of Organisational Structure

On the basis of Law

On the basis of ownership

On the basis of Domicile

On the basis of functions

On the basis of structure

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