Types of Banks

Overview

In this tutorial, we will learn about different types of Banks. A bank is a financial institution that accepts deposits from the public and creates credit by lending money. Its primary functions include providing a safe place for individuals and businesses to deposit their money and facilitating the transfer of funds and services.

Types of Banks

Banks can be categorized into various types based on their functions, ownership, and the financial products and services they offer to their customers.

• Saving Bank
• Commercial Bank
• Central Bank
• Industrial Bank
• Consumer Bank
• Co-operative Bank
• Agricultural Bank
• Exchange Bank

Saving Bank

Saving banks are established to promote saving habits and homeownership among customers. They offer savings accounts, mortgages, and other retail banking services. These banks are helpful for government and private salaried employees. The deposits collected from customers are invested in bonds, securities, etc.

Commercial Bank

Commercial banks are established to serve businesses, corporations, and large institutions. These banks collect money from the general public and give short-term business loans to businessmen through cash credits, overdrafts, etc. Commercial banks provide a wide range of financial services like collecting cheques, treasury services, bill of exchange, investment banking, and remittance money from one place to another.

Central Bank

Central banks are typically government-controlled institutions responsible for monetary policy, paper currency, foreign exchange control, and overall financial stability.

Central banks are non-profit making institutions. Central banks are the bankers of the other banks. They manage a country’s money supply, set interest rates, and often act as a lender of last resort.

Examples

• U.S -> Federal Reserve
• U.K -> Bank of England
• India -> Reserve Bank of India

Industrial Bank

Industrial banks collect cash by issuing shares & debentures and providing long-term loans to industries. The main objective of the industrial banks is to provide long-term loans for the expansion and modernization of industries.

Consumers Bank

Consumer or retail banks are usually found only in advanced countries like the U.S., Germany, etc. Their main objective is to provide essential banking services to individuals and small businesses. Services include loans and basic investment products—for example, purchasing televisions, cars, and home furniture. Consumers can repay the loans in easy installments.

Co-operative Bank

Co-operative banks are owned and operated by their customers, who are
also their members. These banks give affordable credit facilities to small farmers, small-scale industries, salaried employees, etc. They are available in rural as well as in urban areas.

Agricultural Bank

Agricultural or Land Mortgage Banks are formed to finance the farm sector and help develop land. These banks play a crucial role in the development of agriculture by offering a range of financial products and services tailored to the specific needs of farmers, agribusinesses, and rural communities. The primary focus of agricultural banks is to facilitate the farm sector’s growth and productivity by addressing farmers’ unique challenges and requirements.

Exchange Banks

Exchange banks are financial institutions that primarily deal with foreign exchange and international trade. Their primary function is facilitating currency exchange and providing services related to cross-border transactions.

The functions of Exchange Banks are as follows:

• Currency exchange: buying and selling foreign currencies.
  buying and selling Gold and Silver
• International Trade Services: Facilitate international trade,
  cross border transactions like remitting money from one country
  to another country, helping in the import and export trade.