Banking
A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. You can avail many products and services from Personal and Business banking products and services including accounts & deposits, cards, loans, insurance and mutual funds insurance.
In other words, Banking refers to the system of financial institutions, such as banks and credit unions that provide various financial services to individuals, businesses, and governments. Banking services mainly include accepting deposits, lending money, facilitating transactions, and offering various financial products like savings accounts, loans, and credit cards.
Functions of Banks
Banking plays a crucial role in the economy by facilitating the flow of money and enabling economic activities. Banks in India offer a wide range of banking services, such as savings and checking accounts, loans, credit cards, investment services, and electronic banking options like online and mobile banking.
The major functions of banks are:-
Types of Banks in India
The Banking System in India is divided into several types, each serving specific functions and purposes. The table below represents the different types of banks in India and how it is further divided:
Central Bank
The Reserve Bank of India (RBI) serves as the Central Bank of India and is responsible for regulating and controlling the monetary and banking system in the country.
Commercial Banks
These are the most common types of banks and include public sector banks, private sector banks, and foreign banks. They provide various services like savings and current accounts, loans, and investments.
Owned and operated by the government-
State Bank of India (SBI), Punjab National Bank (PNB), and Bank of Baroda (BOB)
These are privately owned and managed banks-
HDFC Bank, ICICI Bank, and Axis Bank
These banks have branches in India and are headquartered in foreign countries i.e.-
Citibank, Standard Chartered, and HSBC.
These banks cater to rural and semi-urban areas and are owned by the government, commercial banks, and state governments.
Cooperative Banks
A Co-operative Bank is registered under the Co-operative Societies Act of 1912 and is run by an elected managing committee. It works on a non-profit, no-loss basis and mainly serves entrepreneurs, small businesses, self-employment, and more in urban areas. In rural areas, it mainly functions to finance agriculture-based activities like farming, livestock, and hatcheries.
There are mainly two types of Co-operative Banks:
State Co-operative Banks: A State Co-operative Bank is a federation of the central Co-operative banks that will act as a custodian of the Co-operative banking structure in the State.
Urban Co-operative Banks: The Urban Co-operative Bank is the primary Co-operative bank located in urban and semi-urban areas. The banks essentially lent to smaller borrowers, and businesses centered around a community, locality, and more.
Payment Banks
The payment banks are a relatively new banking model in the country that has been conceptualized by the RBI. This bank is allowed to accept a restricted deposit. The bank also offers services such as ATM cards, net banking and more.
Small Finance Banks
These banks primarily serve the no serviced area of the population, including small businesses and low-income individuals. This type of bank is licensed under Section 22 of the Banking Regulation Act 1949, and it is governed by the Provisions Act of 1934.
Small Finance Banks in India:-
Frequently Asked Questions (FAQs):-
What do you mean by banking?
Banking services mainly include accepting deposits, lending money, facilitating transactions, and offering various financial products like savings accounts, loans, and credit cards. Banking plays a crucial role in the economy by facilitating the flow of money and enabling economic activities.
What is the basic of banking?
A bank is a type of financial institution that is permitted to accept deposits and provide loans. Financial services such as wealth management, currency exchange, and safe deposit boxes may be offered by banks. Retail banks, commercial or corporate banks, and investment banks are among the several types of banks.
What is KYC in banking?
KYC means "Know Your Customer". It is a process by which banks obtain information about the identity and address of the customers. This process helps to ensure that banks' services are not misused.
What is banking detail?
Banking Details means the specified information required to perform banking transactions. This often comprises the name of the account, the bank where the account is held, the branch information, account type, and number.
What is the full form of RTGS?
'RTGS' stands for Real Time Gross Settlement, which can be explained as a system where there is continuous and real-time settlement of fund-transfers, individually on a transaction-by-transaction basis.
What is the full form of UPI?
UPI full form is Unified Payments Interface. A UPI ID, also known as a Virtual Payment Address (VPA), is a unique identifier used to receive payments directly into your bank account.
What is NEFT & RTGS?
NEFT and RTGS facilitate online fund transfers between bank accounts with varying features. NEFT processes transactions in batches and is available 24x7, including weekends and holidays. RTGS processes transactions individually in real-time and is also available 24x7, including weekends and holidays.
What is IFSC code?
The Indian Financial System Code (IFSC), is a unique 11-digit alphanumeric code that is used for online fund transfer transactions done via NEFT, RTGS and IMPS. The IFSC code can be found on the cheque leaf provided by the bank.
Who is the Father of Banking?
Maidavolu Narasimham (3 June 1927 – 20 April 2021) was an Indian banker who served as the thirteenth governor of the Reserve Bank of India (RBI) from 2 May 1977 to 30 November 1977. For his contributions to the banking and financial sector in India, He is often referred to as the “Father of Banking” reforms in India.
What is a Fixed Deposit (FD)?
You put a lump sum in your bank for a fixed tenure at an agreed rate of interest in Fixed Deposit. At the end of the tenure, you receive the amount you have invested plus compound interest. FDs are also called term deposits.
What is NEFT?
NATIONAL ELECTRONIC FUNDS TRANSFER (NEFT), it is a secured, economical, reliable and efficient system of funds transfer between Banks. At the time of funds transfer, the remitter has to furnish the necessary details i.e. Name & Account No. of the Beneficiary, Name of Bank/Branch and IFSC Code of the Beneficiary Branch.
What is the full form of IFSC?
IFSC stands for Indian Financial System Code. The Reserve Bank of India (RBI) utilizes the IFSC code for electronic money transfers between banks, as it helps them verify the transfer of resources. No National Electronic Funds Transfer (NEFT) transactions can take place without the IFSC code.
What is Net Banking?
Net Banking is an easy, fast, and secure way to access all your banking services online. Many banks have embraced digitalization and now offer online banking, which allows you to complete all your banking transactions from the comfort of your own home.
What is AML in banking?
Anti-money laundering (AML) refers to the activities financial institutions perform to achieve compliance with legal requirements to actively monitor for and report suspicious activities.
What is KYB?
Know Your Business (KYB) is a critical step in the AML compliance process. It is an extension of the Know Your Customer (KYC) process. The main difference is that KYB focuses on the business's owners, shareholders, and suppliers before considering customers or consumers.
What is CRR?
Cash Reserve Ratio (CRR), the commercial banks have to hold a certain minimum amount of deposit as reserves with the central bank. The percentage of cash required to be kept in reserves as against the bank's total deposits, is called the Cash Reserve Ratio.
What is the full form of UTR?
The full form of UTR is Unique Transaction Reference (UTR) number. UTR reference number helps in identifying a RTGS, IMPS or NEFT transaction. UTR numbers are used by every bank operating in India.
What is IMPS and NEFT?
'IMPS' means Immediate Payment Service. It is an electronic fund transfer mechanism of the Indian banking system. It lets you transfer funds to a payee's bank account instantly. This service is available for the customers 24*7. 'NEFT' means National Electronic Funds Transfer (NEFT).
What is the CIF number?
The CIF (Customer Identification File) number is an 11-digit unique number banks use to identify customers and save their data. The full form of CIF is the Customer Information File. It is essential for enabling effective client management and account information access.
What is the full form of MICR?
MICR stands for Magnetic Ink Character Recognition. It is a technology that involves the use of Magnetic Ink and Special Characters to process and verify the legitimacy of cheques. Introduced by the Reserve Bank of India, MICR technology has revolutionized the way banks process cheques and other financial documents.
What is the IBAN code?
IBAN stands for International Bank Account Number, which you can use when making or receiving international payments. Your IBAN doesn't replace your Sort Code & Account Number ─ it's an additional number with extra information to help overseas banks identify your account for payments.
What is SWIFT code?
SWIFT stands for The Society for Worldwide Interbank Financial Telecommunications, which facilitates secure international money and security transfers through a vast messaging network. As a member-owned cooperative, the SWIFT banking system ensures safe financial transactions for its members.
What is Interest Rate?
Interest Rate refers to the amount charged by a lender. When you borrow money from a bank or other lender, interest is the primary method by which the lender earns income. It's the amount you pay back on top of what you borrow and is calculated as a percentage of what you owe.
What is IMPS in a bank?
Immediate Payment Service is a new facility added to Mobile Banking Service. It facilitates funds transfer to an account of the beneficiary with a participating bank, based on beneficiary's Mobile Number & MMID or Account No & IFSC.
What is SLR in banking?
Statutory Liquidity Ratio or SLR is the minimum percentage of deposits that a commercial bank has to maintain in the form of liquid cash, gold or other securities.
Which is faster, NEFT or RTGS?
RTGS processes transactions instantly. This makes it the faster option for high-value, time-sensitive transfers. On the other hand, NEFT operates in batches, with transactions processed in half-hourly intervals.
What is a Customer ID?
A Customer Identification Number (CIN) is a unique identifier assigned to an individual or entity by a financial institution. It serves as a reference code that helps the institution track and manages the customer's information, transactions, and interactions.
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