Banking Awareness
Banking Structure in India
Shikha Adya
August 4, 2015

In India, Banking is a need of every person whether you want 

  • Financial services
  • Financial Intermediary
  • Payment Services
  • Ancillary Services

Banks are always there to easily rely on… Talking about the Banking structure in India, it has somewhat different faces from other countries. Let’s see how the Banking structure classified

Reserve Bank of India:

The foremost name is RBI, since its establishment in 1935 under the RBI Act 1934 acts like a statuary body made by the Government of India (GOI). RBI is holding an apex position having control of the monetary policies of India. In my last blog we have discussed how the Imperial Bank of India dissolved and RBI Act 1934 laid down by the Royal Commission or Hilton Young Commission. In 1935, RBI had it’s headquartered in Kolkata (West Bengal) but was shifted to Mumbai after two years of its establishment. Sir Chintaman D.Deshmukh was the first Indian Governor of RBI and presently Dr. Raghuram Rajan is serving the position. In India, RBI has 22 offices in different states and Union Territories.

Commercial Banks:

Commercial Banks are the banks that offer their services to the general public and organizations. In these Banks, individuals can deposits money, apply for business loans as well as can relish various investment schemes. 

Main Functions:

  • These banks accept saving account deposits, recurring account deposits, and fixed deposits from the general public lodged under some specified time period.
  • These banks also grant term and deposit loans to various organizations, agriculture, and rural development sector.
  • They also offer various advantageous facilities like over-drafting, money at call, bill discounting, cash credit, etc.

Commercial Banks are Scheduled Banks that are included in Scheduled II (Second) of Reserve Bank, 1934. The conditions to be scheduled are First- Banks should have the capital and collective funds more than Rs. 5 lakh and Second- No process of Banks can harm the interest of deposits. Such banks only run to make a profit out of their services. Under Commercial bank, Public Banks, Private Banks, Foreign Banks, and Regional rural banks comprised of:

Private Banks:

These banks are owned by either a person or limited members that offer their effective wealth management services to high net worth proprietors. Individuals who have usually more property and wealth as compare to the layman are largely in search of the right investment schemes to ensure their financial safety and security. Some of the well-known private banks are Axis Bank, HDFC, ICICI, IndusInd Bank, Kotak Mahindra, Yes Bank, etc. 

Public Banks:

In India, Public banks are government-owned available 27 in number. RBI after nationalization changed the name of Imperial Bank of India to State Bank of India holds about RBI’s 60% of the stake. Furthermore, SBI has its seven Associates, 19 Nationalized Banks, and 1 IDBI (Other Public Sector-Indian Bank) equal to 27 Public Banks in India. Almost 91% of the total banking sector contains commercial banks and SBI is the prevalent name to maintain the top position. 

Regional Banks:

These are state-sponsored banks aim to develop the rural economy providing credits and encouraging helpful facilities in the agriculture sector. Almost every state-owned these banks except Goa and Sikkim. RRB with 25 lakh capital can be established from which 50% share contributed by the central government, 15% by the state government, and left 35% of the sponsoring public.NABARD (National Bank of Agriculture and Rural Development) is holding the apex position in sectors of the agricultural and rural developments. 

Foreign Banks:

To make cross border relations firm and reduce the barriers, various foreign companies have reached across the world to establish their branches in other counties. Similarly in India, foreign banks like Standard Charted, HSBC, CITI bank, etc are working well with their headquarters in Abroad.

Co-operative Banks:

Co-operative banks can be well-defined with its name as these institutions only work on the Cooperative principle. Such institutions engaged in Normal banking by accepting deposits from individuals and repay at their wish or when required. Co-operative banks usually do banking in agriculture and rural sector and work on “No profits No loss”, unlike commercial banks. Urban Co-operative Banks (UCBs), State Co-operative Bank (SCBs), and Central Co-operative Bank (CCBs) operate in Semi-Urban, Urban and metropolitan areas respectively. These banks perform all the functions of banking like accepting deposits, mobilizing, supplying, and providing facilities.

Loan Details:

  1. Agriculture Credit Society provides both Short term and medium term loans.
  2. Land Development Bank (LDB’s) provides long term loans.
  3. State Co-operative Bank (SCBs) and Central Co-operative Bank (CCBs) provide short term and Term loans.

Sources Of Their Funds Are:

  1. Central and State government.
  2. The Reserve bank of India NABARD
  3. Other co-operative Institutes
  4. Ownership Funds
  5. Deposits and Debenture issued.

Specialized Banks:

Specialized banks are financial institutions that intended to provide long term credits to the industrial and agriculture sectors for development purposes. The institutions which are come under this category are: 

  • EXIM

For import and export business, a person can take a long term loan from EXIM. These banks provide assistance and support to direct you. Bank also guides you about the risks, possibilities, and scenarios of the International market. Established in 1982 under the Export-Import Bank of India Act 1981 and it’s headquartered is in Mumbai. 


For setting up a small scale business or unit, you apply for easy term loans from SIDBI. SIDBI also guides you about the new technology, modernization, and market activities. Established in 1990 through an act of parliament and it’s headquartered is in Lucknow. 


NABARD is holding an apex position in the Agriculture and Rural development sectors. The main objective of NABARD is to elevate the rural sector by increasing the valuable credit facilities in these two sectors. Established in 1982 by a specialized act of parliament and it’s headquartered is in Mumbai. 

  • IDBI

IDBI is a subsidiary of RBI that provides large resources to meet the growing demand for loans in the Industrial sector. In 1976 the ownership of IDBI was shifted to the Government of India (GOI) and it is established as the principal financial institute for the development of the Industrial sector. Established in 1964 under an act of parliament and it’s headquartered is in Mumbai. State-level institutions are like SIDC’s, SFC’s, etc as well as investment institutions like LIC, GIC, and UTI.