In this article, we’re taking a look at the types of banks in India. This will include a breakdown of the key categories, classifications, and differences between them.
Of course, we will also be answering common questions that we receive about the Indian banking system and Indian banks in particular.
This is part of our free series on banking in India, covering topics like opening an NRI bank account, which you can access here.
Feel free to use the table of contents to jump ahead to the sections most relevant to you.
Table of Contents
- Types of Banks in India
- Types of Commercial Banks in India
- Frequently Asked Questions
- Do You Want Help Opening Bank Accounts?
Types of Banks in India
Types of banks in India fall into eight categories, ranging from major international financial institutions to small regional banks. Each of these banks in India plays a key role in the Indian banking system, serving different demographics and financial requirements.
The eight categories, which we discuss in greater detail below, include public sector banks; private sector banks; cooperative banks; regional rural banks (RRBs); foreign banks in India; small finance banks; payment banks; and development banks.
Depending on the category, there may be other subcategories to consider as well. For example, within cooperative banks, there are urban cooperative banks and rural cooperative banks to consider. Similarly, public sector, private sector, and foreign banks all fall into the broader category of commercial banks.
Needless to say, all of the banks that operate in India are regulated by the Reserve Bank of India (RBI), which is the Indian central bank. This includes both private sector banks, foreign banks, and nationalized banks. Likewise, all of the categories above fit into either the scheduled bank’s classification or the non-scheduled bank’s classification, though most non-residents and foreigners will only be considering scheduled banks in India.
Here is a closer look at the different types of banks in India.
Commercial Banks
Commercial banks in India include three main categories of banks, which are public sector banks, private sector banks, and foreign banks. These are the major deposit-taking institutions in the entire country. Below, we will take a closer look at the types of commercial banks.
Cooperative Banks
Cooperative banks operate similarly to commercial banks though typically on a smaller scale. Additionally, instead of being owned by shareholders, they are owned by their members. Members of cooperative banks typically include individuals and small businesses in local communities.
Regional Rural Banks
Regional rural banks in India are specifically organized in order to provide financial services in the most rural parts of the country. This is a distinct type of bank in India that involves a joint venture between the central and state government along with a sponsoring bank.
Specialized Banks
Specialized banks are a broad category of banks that include a number of subcategories of banks with very specific mandates. These subcategories include development banks, agriculture banks, housing companies, and microfinance institutions like small finance banks and payments banks. Here is a look at a few of these subcategories now.
Development Banks
Development banks typically provide long-term financing to specific sectors, including international trade, infrastructure, and more.
Small Finance Banks
Small finance banks in India focus on specific financial services to underserved demographics, typically involving low-income individuals.
Payments Banks
Payments banks in India specifically focus on providing payment and remittance services. In other words, they are not standard financial institutions, and instead focus exclusively on processing payments and taking deposits.
Local Area Banks
Local area banks are a distinct category of banks in India, catering to a specific region or local area. The focus of local area banks in India is to promote financial inclusion.
Central Banks
The only central bank in India is the Reserve Bank of India (RBI). The RBI’s key roles include monetary policy, currency issuance, banking regulation, banking supervision, foreign exchange, and financial stability.
Types of Commercial Banks in India
The three types of commercial banks in India are public sector banks, private sector banks, and foreign banks. We explore each of these in greater detail below.
Public Sector Banks
Public sector banks in India refer to those banks that are government-owned. At present, there are three public sector banks in the country, including the State Bank of India, the Bank of Baroda, and the Punjab National Bank.
Private Sector Banks
Private sector banks are privately owned and operated. These banks include the largest banks in the country, including ICICI Bank, HDFC Bank, and Axis Bank.
Foreign Banks
Foreign banks in India include those foreign financial institutions that have registered local branches or subsidiaries within the country. These banks include major international financial institutions like Citibank, Standard Chartered, and HSBC.
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Frequently Asked Questions
Below are a few of the most common questions we receive from people looking into the types of banks in India. If you have further questions you would like to ask our team, don’t hesitate to get in touch.
What Are the Various Types of Banks in India?
The various types of banks in India include: public sector banks; private sector banks; cooperative banks; regional rural banks (RRBs); foreign banks in India; small finance banks; payment banks; and development banks.
How Many Public Sector Banks Are There in India?
There are 12 public sector banks in India, which include Bank of Baroda, Bank of India, Bank of Maharashtra, Canara Bank, Central Bank of India, Indian Bank, Indian Overseas Bank, Punjab & Sind Bank, Punjab National Bank, State Bank of India, UCO Bank, and Union Bank of India.
What Is the Classification of Banks in India?
There are two distinct classifications of banks in India, which are scheduled Indian banks and non-scheduled Indian banks. Schedule banks include the private sector, public sector, and foreign banks, which offer a significantly wider range of services and benefit from RBI credit, membership in clearinghouses, and more.
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