The term ‘bank’ is derived from the greek word ‘banque’
that refers to some kind of banking. Casa De San Giorgio was the first bank to
be established in 1148.The first public bank was the Bank of Venice,
established in 1157.In simple words, bank refers to institution that deals in
money and money related matters. They accept deposits from the public and gives
loans to those who need it. They also perform various other functions such as
credit creation, agency job and general service.
Types of bank: Banks may be classified on
various basis as under:-
1.
On the basis of ownership:
(i) public sector banks, e.g. State Bank of India
(ii) private sector banks, e.g. Vijaya
Bank
(iii) co-operative banks, e.g. State
co-operative bank.
2.
On the basis of law:
(i) scheduled banks- these banks
must have a paid up capital of least Rs.5 lacs.
(ii) non-scheduled
banks- these banks are not mentioned in the Second Schedule of Reserve Bank
and may have a paid up capital of less than Rs.5 lacs. There are only 3 such
banks in India at present.
3.
On the basis of their functions:
(i) commercial banks: these are the most important constituents
of banking system. E.g. SBI, Canara
Bank, PNB etc, etc.
(ii) foreign banks: such banks are
incorporated in a foreign country and set up their branches in India. E.g.Bank
of America, Chartered Bank, Hong Kong Bank etc.
(iii) industrial banks: they offer long
term and medium term loans to the industries and also work for their
development. E.g.IDBI,IFC,SFCs etc.
(iv)
agricultural banks : such banks give credit to agricultural sector of
the economy.e.g.NABARD
(v) saving banks: their principal function is to collect
small savings across the country and put them to productive use. In India, a
dept. Of Post Offices functions as savings banks.
(vi) indigenous
banks : These banks found their origins in India.
(vii) central banks: it is the apex bank
of the banking system of the country. RBI, Bank of England, Federal Reserve
System are central banks of India, England and USA respectively.
Commercial banks, may , again be classified as follows
on the basis of their organisation:-
a)
Unit Banking: In this banking
system, a particular bank functions in a limited area. Such banks are of small
size and generally has no branch. They deposit money in some big bank called
correspondent bank. The control and ownership of these banks is generally in
the hands of local individuals. This banking system is popular in USA.
b)
Branch Banking: Branch banking is a
system in which:-
(i) a bank renders its banking services at
two or more places
(ii) head office has the overall control over
the working of various branches
(iii) branches can be opened in the same town,
state or the country in which the concerned head office is located or at
different places
(iv)overall control of all the branches is
done by one central authority, viz.Board of Directors.
c)
Chain Banking: This system of
banking became popular in USA in 1920. In this system every bank in the banking
chain has its own identity as well as independent board of management. However,
it is possible that one individual is the member of various management boards.
d)
Group Banking: Group banking is that
banking system in which two or more banks operate under the control of a holding company. In
the words of Goldfield and
Chandler,”Group Banking refers to the system in which a corporation or a
holding company operates two or more banks simultaneously. These banks are
known as subsidiaries of the
corporation or the holding company. These banks may be unit banks or branch
banks.”
e)
Correspondent Banking: Correspondent
banking is an arrangement that exists
among banks throughout the country based on the practice of smaller banks
carrying deposits with larger banks in exchange for the performance of various
services.
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