A bank is a financial institution that performs deposit and lending functions. Indian banks perform a variety of functions and each has its own responsibilities. Candidates for government exams must be familiar with the types of banks in India and their roles in managing a nation’s financial system.
In most government exams, the banking awareness syllabus covers the types of banks in India, their functions, and the list of banks under each section. Also, as far as banking system is concerned, they get ranks on the basis of Ease 2.0 Banking Reforms Index.
Types of Banks
Our country’s central bank is the Reserve Bank of India. It is the central bank of each country that regulates all the other banks in that country. As the government’s bank, the central bank guides and regulates other banking institutions in the country.
Under the state government’s act, these banks are organized. In addition to lending to the agriculture sector, they also provide short-term loans to other allied industries. Cooperative banks provide concessional loans as a way to promote social welfare schemes.
- Under the 1956 Banking Companies Act, the company is incorporated
- Profit is their main objective, and they operate on a commercial basis.
- Governments, states, or private companies own them and have unified structures.
- From rural to urban, they work in all sectors
Regional Rural Banks (RRB)
- A special type of commercial bank that provides concessional credit to agriculture and rural areas.
- In 1976, the Regional Rural Bank Act was passed, which authorized the establishment of RRBs.
- The RRB is a joint venture between the Central government (50%), state governments (15%), and commercial banks (35%).
Small Finance Banks
These banks provide loans and financial assistance to micro industries, small farmers, and unorganized sectors of society as their name suggests. In each country, the central bank oversees these banks.
Payment banks are a newly introduced form of banking that have been conceptualized by the Reserve Bank of India. An account in the payments bank is limited to deposits of Rs.1,000/- and cannot be used for loans or credit cards. Payment banks are able to offer options for online banking, mobile banking, ATMs, and debit cards.
Ease 2.0 Banking Reforms Index
For public sector banks, EASE (Enhanced Access and Service Excellence) aims to improve banking services. As a joint effort between the PSBs and the government, the Ease 2.0 Banking Reforms Index was introduced in 2018.
Through the Association of Indian Banks, Boston Consulting Group was commissioned to write the agenda. Using more than 120 metrics, the Ease 2.0 Banking Reforms Index measures the performance of banks.
In order to identify banks’ strengths and areas for improvement, the index uses a transparent scoring system. By encouraging healthy competition among public sector banks, it aims to drive change.
According to the report, banks improved their performance in terms of non-performance assets. EASE 2.0 banking reforms index is built on the base of EASE, and the report on the results will be published in 2020.
As part of the second edition of the EASE program, the Banking Reforms Index 2.0 measures the progress and implementation of reforms in the banking sector.
A focus on liquidity in public sector banks had been proposed by the government in its Ease 2.0 Banking Reforms Index.
In an effort to strengthen systems and processes, make the reform journey irreversible and achieve the intended outcomes, Ease 2.0 Banking Reforms Index included new action points across 6 themes.