Types of Trees

Q. 3. Explain various types of banks?

Ans: Following are the various types of banks:

1) Saving Bank: The bank which promotes the habit of saving among the people is called saving bank. It collects small and scattered savings of the society and invests the same in shares and debentures of the company. It pays interest to depositors out of income received from the investment. In India Post office performs the function of savings bank also.

2) Commercial Bank: The bank which operates on commercial principles is called commercial bank. It is registered (established) under Banking Regulation Act, 1949. It collects money from public at lower rate of interest and provides loans and advances to needy people at higher rate of interest. Commercial bank provides short term and medium term loans to trade, commerce and industry. The difference between interest paid and interest received is the profit of the bank. It is profit oriented. In addition to primary functions, it performs secondary functions also. Canara Bank, Dena Bank. Bank of India, 881, etc. are the examples of commercial bank.

3) Industrial Bank: The bank which promotes industrialization in the country is called industrial bank. The main objective of this bank is to promote trade and commerce of a country. Industrial bank provides finance for formation, expansion and modernization of industries. It purchases shares and debentures issued by companies. Sometimes it acts as an underwriter. Industrial Development Bank of India (IDBD, Indian Finance Corporation (IFC). Industrial Credit and Investment Corporation of India limited (ICICI) etc. are the examples of Industrial banks.

4) Agriculture Banks/Land Development Bank: Agricultural banks provide short term as well as long term loans to agricultural sector. These banks are also called Land Development banks because they provide loans for the development of agricultural land, construction of well, purchase of fertilizers, purchasing costly equipment’s, etc. The main objective of this bank is to develop agricultural sector in the country.

5) Co-operative Bank: The bank which operates on the principle of co-operation is called Co-operative bank. It is registered under Co-operative Societies Act, 4960. It is, service oriented. The primary purpose of co-operative banks is to help the co-operative movement in the country. They provide short term loans to members, farmers, artisans. salaried employees, small businessmen, etc. The financial sources of these banks consist of share capital received from members and deposits received from the depositors.

There are three types of Cooperative banks.

i) Primary Co-operative Banks at village level.

ii) Central (lo-operative Banks at district level.

iii) State co-operative Banks at state level.

6) Rural Banks: Banks which are established 1n rural areas to meet financial needs of rural sector are called rural banks. A rural bank provides financial facilities to small farmers and manufacturers in the rural areas. Rapid development of rural areas is possible through Rural banks. Recently the NABARD (National Bank for Agricultural and Rural Development has-been established as an apex rural bank.

7) Exchange Bank: The bank which deals in foreign currencies is called Exchange bank. It purchases and sells foreign currencies. It provides finance to foreign trade. Standard Chartered Bank, Grindlays bank, American Express, etc. are the examples of exchange bank. Government of India has now established separate Export-Import bank (EXIM BANK) to help exporters and importers. It issues a letter of credit, provides information about credit worthiness of importers, discounts foreign bills, provides pre-shipment finance etc.

8) Central Banks: The bank which controls all other banks and financial institutions in the country is called Central bank. Reserve Bank of India, Bank of England are the examples of Central Bank. Central bank is the bank of banks. It is owned and managed by Central Government. Every country has one central bank. It operates under the control of Ministry of Finance. Central Bank performs the following functions.

i) To issue currency notes in the country.

ii) To perform the functions of clearing house.

iii) To act as a banker to the government.

iv) To act as a banker to commercial bank.

v) To act as lender of the last resort.