In India there are following types of banks:

  1. Reserve Bank of India (RBI), which is the central bank of our country
  2. Commercial Banks
  3. Cooperative Banks
  4. Development Banks

1. Reserve Bank of India (RBI)

RBI is the head of the banking system in India. This means that all other banks such as, commercial or cooperative or development banks, follow the rules and regulations made by RBI. Its head quarter is in Mumbai.

RBI’s main function is to issue currency notes. You can see the signature of the governor of RBI on these currency notes. The note, bearing the signature of the Governor of RBI is approved by the government so that it can be used for buying and selling goods and services.

Another function of RBI is that it acts as banker to the government. In India, both central and state governments take loan from RBI and deposit their money with RBI.

2. Commercial Banks

There are some commercial banks which are under the public sector. For example, State Bank of India (SBI), Punjab National Bank (PNB), Bank of India (BOI), Indian Bank, Canara Bank, and Bank of Baroda (BOB).

There are other commercial banks which are under private sector such as ICICI Bank, Yes Bank, and HDFC Bank. These banks are privately run.

The aim of a commercial bank is to earn profit by charging rate of interest on loans and fees for various services such as issuing draft, transferring money, etc.

3. Cooperative Bank

In India, there are many banks which are run by cooperative societies and are governed by the laws of the state in which they are operating. Such banks are of two types: agricultural (or rural) and non-agricultural (or urban).

In rural areas cooperative banks provide credit for farming, cattle, fishery. etc. In urban areas the cooperative banks provide credit for self employment activities, small scale industry, purchase of durable goods such as television, refrigerator, etc. and personal finance.

Examples of cooperative banks are state cooperative banks, primary agricultural credit societies, urban cooperative banks, land development banks, and district central cooperative banks. These banks may bear different names in different states and areas.

4. Development Banks

To achieve economic development for the country, investment in industries and infrastructure is required. To make such thing possible there are development banks in India.

These banks provide credit for a long period to private business companies and public sector units who want to establish industries and create infrastructure. Some example of development banks are Industrial Development Bank of India, and Industrial Financial Corporation of India and State Finance Corporations.