Structure of Organized Indian Banking Industry – Part 2


Commercial Banks

Commercial banks are a significant part of India’s Financial Institution system. These are profit earning institutions which accept deposits from general public, and provide loans to individuals like household, entrepreneurs, businessmen etc. for various purposes.

There are total 93 Commercial banks in India. 27 Public sector banks, out of which 19 are nationalized and 6 are SBI and its associates and rest two are IDBI and Bhartiya Mahila Bank and 21 Private Sector banks.

Commercial banks earn profit in the form of interest; commission etc. the main source of income of a commercial bank is the difference between the lending rates and the deposit rate. Operations of all these banks are regulated by the Reserve Bank of Indi (RBI).

Classification of commercial banks

1.Scheduled Banks

Scheduled banks are those banks which are included in the Second Schedule of RBI Act 1934. These banks carry out normal business of banking like accepting deposits, providing loans and other banking services. All commercial banks (Indian and foreign), regional rural banks and state co-operative banks are scheduled banks.

Catagorisation of Scheduled banks

  • Public Sector Banks – Public sector banks are those banks in which The Government holds the majority of stake. For example- SBI, PNB, Central bank of India, IDBI Bank Etc.
  • Private sector Banks – Private sector banks are those banks in which private individuals hold the majority stake. For Example- ICICI Bank, HDFC Bank, Yes Bank etc.
  • Foreign Banks – Foreign banks are such banks, those have their Head office located outside India. For example – Citi Bank, Standard Chartered bank etc.
  • Regional Rural Banks – The Regional Rural Banks (RRBs), it is a new form of banks. These banks introduced in the middle of 1970s. They originated with the objective of developing rural economy by providing financial services in these remote areas. Each RRB is owned by three entities with their respective shares as following –

Central Government – 50%
State Government – 15%
Sponsor Bank – 35%

Regional Rural Banks are regulated by NABARD (National Bank for Agriculture & Rural Development).

  • Cooperative Banks – These banks are small financial Institutions. The structure of Indian Cooperative banks is one of the largest networks across the world. These banks provide easy credit to small businesses and to the poor segment.

Structure of Cooperative network in India

The network of Cooperative banks can be divided into 2 broad segments as following

  1. Urban Cooperative Banks
  2. Rural Cooperative banks

Urban Cooperative Banks

In Indian Banking system urban cooperative banks are divided into scheduled and non-scheduled. Both categories are further divided into single-state and multi-state. Major Banks are in the category of non-schedule and single-state.

  • Operations of urban cooperative Banks are monitored by RBI.
  • Registration and Management activities are managed by Registrar of Cooperative Societies (RCS).
  • RCS operate in single-state and Central RCS (CRCS) operate in multi-state.

Rural Cooperatives

The structure of rural cooperatives is divided into short-term and long-term. The short-term cooperative banks are three tiered, they operate in different states. These are as following –

  1. State Cooperative Banks – these banks operate at the highest level in the state.
  2. District Central Cooperative Banks – these banks operate at the district levels.
  3. Primary Agricultural Credit Societies – these banks operate at the village or grass-root level.

In the same way long-term structures are divided as following –

  1. State Cooperative Agriculture and Rural Development Banks (SCARDB) – these banks operate at state level.
  2. Primary Cooperative Agriculture and Rural Development Banks (PCARDBS) – these banks operate at district / block level.

The activities of Rural Cooperative Banks are regulated by a shared management – RBI and NBARD. And all management and registration activities are manages by RCS

2. Non-Scheduled Bank

These banks are not included in the Second Schedule of RBI Act 1934.

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