Meaning & Types of Banks.
Banks are regarded as the nerve centre of the trade, industry and commerce of a country. They provide finance to all the sectors and as such are regarded as the backbone of the business units. The word “Bank” has been derived from the German word “Bank” and the Italian word “Banco”. These word denotes a joint stock fund. The word banking denotes a certain kind of trading operation in money. The trading operation in money and of exchange of money, the lending of money, transmitting of money and depositing of money. The banking system of the country is governed by an Act called the banking regulation Act, 1949. Banks are regarded as a type of institutions who debts (usually called as bank deposits) are commonly accepted in the final settlement of other people. According to Crowther, “A banker is a dealer in debts, his own and of others”. According to Horace White, “A bank is a manufacturer of credit and a machine for facilitating exchanges.” In brief we may conclude that a bank is a financial institution who deals in money and credit.
The followings are some of the board kinds of banks in our country:
I. Commercial Banks: Commercial banks refer to a type of bank which provide financial assistance to the trader of a country. They provide short-term financial assistance for the business. They accept deposit from the investors and extend loans in the form of loan, cash credit, overdraft and discounting of bills. There are two types of commercial banks found in India. These are scheduled and non-scheduled banks. The banks which have a paid-up capital of Rs. 5 Lakhs regarded as scheduled banks. The banks which have a paid-up capital of less than 5 Lakhs are called non-scheduled banks.
II. Industrial Banks: Industrial units cannot function with the help of short-term financial assistance. They need long-term loans. It necessitates the growth of industrial banks in India whose primary objective is to extend long-term loans to industrial sectors. In addition to providing of long-term financial assistance, they guide industrial units on technical and managerial problems. The Industrial Development Bank of India and the Industrial Finance Corporation of India are the pioneers in the industrial banking system of the country.
III. Agricultural Banks: Agricultural banks are a type of banks which provide short-term as well as long-term finance to the agricultural sector. co-operative banks are a type of agricultural banks which provide short-term financial assistance to the people engaged in agriculture. Long-term agricultural loans are given by the Land Mortgage Banks. The National Bank for agriculture and Rural Development (NABARD) was established in 1982 to promote integrated rural development and to provide all sorts of credit to agriculture.
IV. Exchange Banks: Exchange banks denote a type of commercial banks which finance foreign trade in the country. besides financing foreign trade, they provide the following services for the development of foreign trade: (a) They facilitate foreign remittances. (b) They discount foreign bills of exchanges. (c) They help in buying and selling of gold and silver.
V. Indigenous Banks: Before establishment of commercial banks, private money lenders and country bankers played an important role as an important sources of finance. These establishments were known as Indigenous Bankers. They used to charge a high rate of interest and exploited the people who took financial assistance. These banks have lost their monopoly with the development of commercial banks in India. Now-a-days even though a large number of commercial banks act in the banking system, the indigenous bankers have played a significant role becuase some people depend on indigenous bankers for financial assistance.
VI. Post Office Savings Bank: Post offices extend banking facilities by post office savings bank. Post offices accept deposits from the people but do not grant loans like other commercial banks. They usually accept deposits in the form of savings deposit. They usually pay a high rate of interest as compared to other commercial banks.
VII. Regional Rural Banks: Regional Rural Banks are a type of bank who provide credit and other facilities to small farmers, agricultural labourers, small entrepreneurs and artisans of the rural areas. These banks accept deposits and give loans. They pay 1/2 percent more interest on fixed deposits as compared to commercial banks. These banks are established with an authorized capital of Rs. 1 Crore and issued capital of Rs. 2 Lakhs.
VIII. EXIM Bank: The Export Import Bank of India was established in 1982.