Types of Banks in India

Commercial banks operate for profit and serve the general public. By ownership:

• Public sector banks: the government holds a majority stake. The State Bank of India and the nationalised banks fall here.
• Private sector banks: privately owned and licensed by the RBI; most are listed.
• Foreign banks: incorporated abroad, operating in India through branches or a wholly-owned subsidiary, regulated by the RBI here.

All are governed by the Banking Regulation Act, 1949, and most are scheduled banks.

Regional Rural Banks (RRBs) were set up under the RRB Act, 1976 to take banking to rural and semi-urban areas and lend to small and marginal farmers, agricultural labourers, artisans and small entrepreneurs.

Each RRB is jointly owned in fixed proportions by the central government, a sponsor bank (a commercial bank), and the state government. They combine the local reach of a cooperative with the discipline of a commercial bank, and are regulated by the RBI and supervised by NABARD.

Cooperative banks are owned by their members on a one-member-one-vote basis and were created to provide affordable credit to people the commercial system underserved.

• Urban Cooperative Banks (UCBs): serve towns and cities.
• Rural cooperative credit institutions: organised in tiers - State Cooperative Banks at the top, District Central Cooperative Banks in the middle, and Primary Agricultural Credit Societies at the village level.

Regulation is shared: the RBI supervises banking functions, while the Registrar of Cooperative Societies (state or central) handles registration and management. Their depositors are covered by deposit insurance.

The RBI licenses two kinds of differentiated (niche) bank:

• Small Finance Banks (SFBs): full-service banks aimed at the unserved and underserved - small businesses, small and marginal farmers, the micro and unorganised sector. They take deposits and lend, and a large share of their loans must go to priority sectors and be in small-ticket sizes.
• Payments Banks: may accept deposits (subject to a per-customer ceiling set by the RBI), offer payments and remittance services, issue debit cards and distribute simple financial products - but cannot lend and cannot issue credit cards. They invest their deposits mainly in government securities and balances with other banks.

Both are scheduled banks once notified and are covered by deposit insurance.

• Scheduled bank: listed in the Second Schedule to the RBI Act, 1934; can borrow from the RBI and join the clearing house, must keep the CRR and file returns.
• Commercial banks: public sector (government majority), private, foreign; all under the Banking Regulation Act, 1949.
• RRBs: under the RRB Act, 1976; owned by the central government, a sponsor bank and the state government; rural focus.
• Cooperative banks: member-owned; UCBs in cities, and a three-tier rural structure (StCB, DCCB, PACS); regulation shared between the RBI and the Registrar of Cooperative Societies.
• Small finance banks: full banking for the underserved, priority-sector heavy. Payments banks: deposits and payments only, no lending, deposit ceiling per customer.
• All these can be scheduled and are covered by deposit insurance.

Answer in one line each.

1. A bank listed in the Second Schedule of the RBI Act is called a what?
2. Banks in which the government holds a majority stake are known as what?
3. Which banks focus on rural and agricultural credit and are sponsored by a larger bank?
4. Which full-service bank type must direct most of its lending to priority sectors and small-ticket loans?
5. Which bank type can take limited deposits and offer payments services but cannot lend?
6. Member-owned banks run on co-operative principles are called what?
7. What kind of bank is the RBI itself?
8. Who regulates foreign banks operating in India?