A banking system is a group or network of institutions that provide
financial services. The major types of banking systems include those made
up of commercial, national, and investment banks and credit unions may
also be part of a banking system.
Banking refers to any business entity that accepts and safeguards the finances of other persons and organizations and lends the finances to carry out economic activities such as making profits. Banking is important in the economy since it provides crucial services for both businesses and consumers, such as offering car loans, offering checking accounts, home loans, among other services. Banks also carry out currency exchange, wealth management, safe deposit, and offering loans to gain profits.
Functions of banking systems
The banking system of India consists of the central
bank (Reserve Bank of India - RBI), commercial banks, cooperative
banks and development banks (development finance institutions). These
institutions, which provide a meeting ground for the savers and the
investors, form the core of India’s financial sector.
The banking system plays an important role in promoting economic growth not only by channeling savings into investments but also by improving allocative efficiency of resources. The recent empirical evidence, in fact, suggests that banking system contributes to economic growth more by improving the allocative efficiency of resources than by channeling of resources from savers to investors. An efficient banking system is now regarded as a necessary pre-condition for growth.
Functions of the central bank include:
Banking development in India has been, by and large, a
state-induced activity. The Reserve Bank of India was nationalized in 1949
followed by the nationalization of Imperial Bank of India (now the
State Bank of India - SBI) in 1955. In 1969, 14 major commercial banks
were nationalized and the exercise was repeated when 6 more commercial
banks were nationalized in 1980. Thus, prior to economic reforms initiated
in early 1990s, banking business in India was a near-monopoly of
the Government of India.
In India the banks and banking have been divided in different groups. Each group has their own benefits and limitations in their operations. They have their own dedicated target market. Some are concentrated their work in rural sector while others in both rural as well as urban. Most of them are only catering in cities and major towns.
Public sector Banks functions in India
Scheduled Banks functions in India
These are banks which are listed in the second schedule of
the Reserve Bank of India Act, 1934. These banks are required to maintain certain amounts with RBI and,
in return, they enjoy the facility of financial accommodation and
remittance facilities at concessionary rates from RBI. State Co-operative Banks.
Basic Banks Services
Banks have existed since at least the 14th century. They provide a safe
place for consumers and business owners to stow their cash and a source of
loans for personal purchases and business ventures. In turn, the banks use
the cash that is deposited to make loans and collect interest on them.
Banks offer various ways to stash your cash and various ways to borrow money. Various types of bank accounts exist to attend to the different needs of the consumers. The following are the different types of banking accounts and the purpose they serve.
1. Savings Accounts : Savings accounts pay interest to the depositor. Depending on how long account holders hope to keep their money in the bank, they can open a regular savings account that pays a little interest or a certificate of deposit (CD) that pays a little more interest.
2. Checking Accounts : Checking accounts are deposits used by consumers and businesses to pay their bills and make cash withdrawals. They pay little or no interest and typically come with monthly fees, usage fees, or both. Today's consumers generally have their paychecks and any other regular payments automatically deposited in one of these accounts. These accounts are often linked to debit cards which can be used for purchases or ATM withdrawals. Checking accounts are purposely to hold money in a secure place for a limited duration of time and convenient payment of bills.
3.Money market accounts (MMAs): Has the features of both saving and checking accounts to come up with a single deposit account. The sole purpose of this account is to provide potential investors with a safer platform for investing in highly liquid cash and debt-based assets by using smaller capital. It is a better account for people who hold higher account balances and would wish to earn higher interest out of them.
4.Certificate of deposits (CDs): These are time fixed deposit accounts that hold a person's money for a fixed term. It attracts more interest than all the other accounts if there are no premature withdrawals before the end of the period to avoid penalties. It is important to save financial goals with planned end dates such as six months or five years in exchange for interest from the bank.
5.Financial Banking sector in India : Along with the rest of the economy and perhaps even more than the rest, financial markets in India have witnessed a fundamental transformation in the years since liberalization. The going has not been smooth all along but the overall effects have been largely positive.
Financial Sector in India consists of three main segments
Financial institutions -banks, mutual funds, insurance companies
Financial markets -money market, debt market, capital market, forex market
Financial products -loans, deposits, bonds, equities
Which is the Best Bank in India
The primary function of any public sector bank or private sector bank
is to receive deposits and lend money to needful individuals and
businesses. Banks are considered to be a synonym of trust across the
world. When any individual deposits money in the nationalized banks in
India, it doesn’t matter what the amount is, the individual knows that the
money will be safe in the bank as compared to anywhere else. Top Banks in
India help you in putting your hard-earned money in a place that will also
give you interest on that amount.
The Indian banking sector has witnessed wide ranging changes under the influence of the financial sector reforms initiated during the early 1990s. The approach to such reforms in India has been one of gradual and non-disruptive progress through a consultative process. The emphasis has been on deregulation and opening up the banking sector to market forces. The Reserve Bank has been consistently working towards the establishment of an enabling regulatory framework with prompt and effective supervision as well as the development of technological and institutional infrastructure.
Persistent efforts have been made towards adoption of international benchmarks as appropriate to Indian conditions. While certain changes in the legal infrastructure are yet to be effected, the developments so far have brought the Indian financial system closer to global standards.
Private banks are today increasingly displacing nationalized banks from their positions of pre-eminence. Though the nationalized State Bank of India (SBI) remains the largest bank in the country by far, private banks like ICICI Bank, Axis Bank and HDFC Bank have emerged as important players in the retail banking sector. Though spawned by government-backed financial institutions in each case, they are profit-driven professional enterprises.
Apart from this, the bank bank in India also provide various kinds of banking services such as loan facilities, fixed deposit schemes, debit & credit card facilities, etc. Currently, there are a total of 34 nationalized banks in India of which 12 are Indian government banks and the rest 22 are private sector banks. Below is a list of all banks in India.
Best Public Sector (PSU) Banks in India
|List of PSU Banks||Number of Branches||Number of ATMs||Headquarter|
|State Bank of India (SBI)||24000||58559||Mumbai|
|Punjab National Bank (With Merger of Oriental Bank of Commerce and United Bank of India)||11437||8985||New Delhi|
|Bank of Baroda (With Merger of Dena Bank & Vijaya Bank)||8581||10318||Vadodara|
|Canara Bank (With Merger of Syndicate Bank)||10391||12829||Bengaluru|
|Union Bank of India (With Merger of Andhra Bank and Corporation Bank)||9500||13300||Mumbai|
|Bank of India||5825||5000||Mumbai|
|Indian Bank (With Merger of Allahabad Bank)||6000+||6104||Chennai|
|Central Bank of India||2876||4666||Mumbai|
|Indian Overseas Bank||2995||3400||Chennai|
|Bank of Maharashtra||1860||1897||Pune|
|Punjab & Sindh Bank||1045||1554||New Delhi|
Best Private Sector Banks in India
|List of Private Banks||Number of Branches||Number of ATMs||Headquarter|
|Bandhan Bank||1000||485||Kolkata, West Bengal|
|Catholic Syrian Bank||426||290||Thrissur, Kerala|
|City Union Bank||600||1724||Thanjavur, Tamil Nadu|
|DCB Bank||323||4,99||Mumbai, Maharashtra|
|Dhanlaxmi Bank||269||3,46||Thrissur, Kerala|
|Federal Bank||1252||1598||Aluva, Kerala|
|HDFC Bank||4787||13514||Mumbai, Maharashtra|
|ICICI Bank||4882||15159||Mumbai, Maharashtra|
|IDBI Bank||1892||3693||Mumbai, Maharashtra|
|IDFC First Bank||301||216||Mumbai, Maharashtra|
|IndusInd Bank||1004||2662||Mumbai, Maharashtra|
|Jammu & Kashmir Bank||958||1322||Srinagar, Jammu and Kashmir|
|Karnataka Bank||835||1503||Mangaluru, Karnataka|
|Karur Vysya Bank||668||1641||Karur, Tamil Nadu|
|Kotak Mahindra Bank||1369||2429||Mumbai, Maharashtra|
|Lakshmi Vilas Bank||570||1045||Chennai, Tamil Nadu|
|Nainital Bank||135||-||Nainital, Uttarakhand|
|RBL Bank||342||-||Mumbai, Maharashtra|
|South Indian Bank||852||1393||Thrissur, Kerala|
|Tamilnad Mercantile Bank Limited||509||1156||Thoothukudi, Tamil Nadu|
|Yes Bank||1050||1305||Mumbai, Maharashtra|
Frequently Asked Questions
What is the purpose of the banking system?
The purpose of the banking system is to provide an easy way for people to pay for goods and services, save their money, and transfer money between accounts. Banking systems provide credit opportunities, facilitate fund flow into the economy, ensure financial generation for public development and growth, and provide payment options.
What are the different types of banking system?
Banking systems comprises all institution that operates by accepting deposits and lending out finances to gain profit. They include; commercial banks, central banks, credit unions, and investment banks.
How does the banking system work?
Banking systems manage the flow of money between individuals and businesses by accepting deposits and lending out money for investments. Banks earn interest from loans, the cost of managing consumer accounts, and investing for profits.
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