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Understanding The Indian Banking Sector Research Team | Posted On Wednesday, February 20,2019, 06:29 PM

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Understanding The Indian Banking Sector



Banking originated in 18th century in India. General bank of India started in the year 1786 and this was one of the first banks to flourish in India, followed by bank of Hindustan. Currently, the State Bank of India is the oldest existing bank in India.

The British East India Company established bank of Calcutta, bank of Madras and bank of Bombay which was later merged to form the Imperial bank of India in 1925. Imperial bank of India was renamed as State Bank of India, post independence. The reserve bank of India RBI, is the central institution responsible for regulating and controlling all banks in India. RBI is headquartered at the financial capital of India, Mumbai.

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Understanding The Indian Banking Sector

Key Terminologies To Understand The Banking Sector

Below mentioned are the key terminologies to understand the banking sector in India:

  1. National Electronic Funds Transfer: National Electronics Funds Transfer NEFT, is a method by which you can transfer funds between bank accounts. There is a limit on the maximum amount transferrable through NEFT.
  1. Linked account: Accounts linked within the same bank, where funds can be electronically transferred across accounts, to carry out other specified services.
  1. Base rate: Minimum rate that a bank charges to credit worthy customers. Banks cannot lend at a rate lower than this.
  1. Balance transfer: This is an option under which the loan balances or the due amounts can be transferred across lenders.
  1. Cashback: This is an offer in which the bank or merchant pays back a certain portion of the transaction made.

6. Credit history: Track record of an individual’s credit (borrowing and repayment). This includes all the credit related transactions of individuals.

7. Collateral: Borrowers must provide a security in the prescribed form in order to avail certain kinds of loans. If borrower fails to repay, then the bank liquidates the collateral to recover the dues.

8. Documentation fee: This is the amount paid by borrowers for banks to check his / her credit worthiness.

9. Dormant or inactive account: Bank accounts become dormant or inactive, if individuals don’t make any transactions over a certain period of time.

10. Fixed rate: Banks lend at particular rate of interest. If the interest rate is fixed throughout the tenure of the loan, then it is termed as fixed rate.

11. Floating rate: If the lending rate of a bank changes due to various factors, then it is said to be floating interest rate.

12. MICR code: Magnetic ink character recognition MICR, comprises of nine digits mentioned at the bottom of the cheque number. It is a unique code and varies across banks and branches.

13. No – frills account: This is a basic savings account offered by banks to make banking simpler and accessible to customers. Customers with no – frills accounts, enjoy the benefit of not having to maintain minimum balance. Customers can have zero balance.

14. Electronic clearing service: Electronic clearing service ECS, is a service offered by banks to directly debit funds from your bank account, towards investment account and clearing loans through EMI. Under this, customers give standing instructions to banks to direct funds on a regular basis to the specified accounts through NEFT.

15. Processing fee: Banks charge a small portion of the loan amount towards processing the loan application. Processing fee is non refundable, even if the loan application gets rejected.

16. Real time gross settlement: Real time gross settlement RTGS, works on same lines of NEFT, but a minimum of Rs 2 Lakhs must be transferred in RTGS.

17. KYC: Know your customer KYC, are the guidelines laid down by RBI under which all banks collect a valid identity and address proof, along with PAN details without which banking services cannot be offered.

18. Routing number: It is a unique number that identifies your bank or financial institution.

19. APR: Annual percentage rate APR, is the rate of interest you get on the money deposited in a bank account over a financial year.

20. Compound interest: Compound interest is basically the interest on interest. Under this, interest is compounded on a yearly or quarterly or monthly or weekly or daily basis.

21. Returned item fee: This is a fee charged on the person who is trying to deposit a cheque which bounces. Cheque bounce happens when there is insufficient balance in the account.

22. Overdraft fee: Fee charged when current account doesn’t have enough balance to cover a requested payment.

Commercial Banks

A commercial bank is a bank offering services of accepting deposits, loans and other basic banking services. Commercial banks are classified as shown below:

Public Sector Commercial Banks:

These are the banks in which the central government of India has majority stake (51% and more than that). Government of India is responsible for complete regulation and administration of these banks. Below mentioned are the public sector banks in India. The numbers mentioned in the brackets indicate the percentage of government’s stake:

1.Allahabad Bank (60%)

2.Andhra Bank (69%)

3.Bank of Baroda (63.7%)

4.Bank of India (64.4%)

5.IDBI Bank (97.46%)

6.Bank of Maharashtra (81.61%)

7.Canara Bank (64.5%)

8.Central Bank of India (81.5%)

9.Corporation Bank (100%)

10. Indian Bank (81.51%)

11. Indian Overseas Bank (89.90%)

12. Oriental Bank of Commerce (77.23%)

13.Punjab & Sind Bank (79.62%)

14. Punjab National Bank (60%)

15.State Bank of India (59%)

16.Syndicate Bank (66.17%)

17.UCO Bank (84.23%)

18.Union Bank of India (63.44%)

19.United Bank of India (85.91%)

20. Dena Bank

21. Vijaya Bank

Private Sector Commercial Banks:

These are the banks in which a private entity holds majority stake. Complete administration and regulation of these banks are done by a private entity. Below mentioned are the private banks in India:


1. City Union Bank

2. Karur Vysya Bank

3. Catholic Syrian Bank

4. Tamilnad Mercantile Bank

5. Nainital Bank (Wholly owned subsidiary of Bank Of Baroda)

6. Karnataka Bank

7. Lakshmi Vilas Bank

8. Dhanlaxmi Bank

9. South Indian Bank

10. Federal Bank

11. Jammu and Kashmir Bank

12. RBL Bank

13. DCB Bank


14. ICICI Bank


15. Axis Bank


16. HDFC Bank


17. IndusInd Bank


18. Kotak Mahindra Bank


19. Yes Bank


20.IDFC Bank


21.Bandhan Bank


Regional Rural Banks (Rrbs)

Regional Rural Banks, RRBs, also called Gramin banks, are Indian scheduled banks operating at regional levels across India. They are created with the view of serving the rural areas of India with basic banking and financial services. Below mentioned is the list of regional rural banks in India:

Andhra Pradesh

·         Andhra Pradesh Grameena Vikas Bank

·         Andhra Pragathi Grameena Bank

·         Chaitanya Godavari Grameena Bank

·         Saptagiri Grameena Bank

Arunachal Pradesh

·         Arunachal Pradesh Rural Bank


·         Assam Gramin Vikash Bank

·         Langpi Dehangi Rural Bank


·         Dakskin Bihar Gramin Bank

·         Uttar Bihar Gramin Bank


·         Chhattisgarh Rajya Gramin Bank


·         Baroda Gujarat Gramin Bank

·         Dena Gujarat Gramin Bank

·         Saurashtra Gramin Bank


·         Sarva Haryana Gramin Bank

Himachal Pradesh

·         Himachal Pradesh Gramin Bank

Jammu and Kashmir

·         Ellaquai Dehati Bank

·         J&K Grameen Bank


·         Jharkhand Gramin Bank

·         Vananchal Gramin Bank


·         Kaveri Grameena Bank

·         Karnataka Vikas Grameena Bank

·         Pragathi Krishna Gramin Bank


·         Kerala Gramin Bank

Madhya Pradesh

·         Madhyanchal Gramin Bank

·         Narmada Jhabua Gramin Bank

·         Central Madhya Pradesh Gramin Bank


·         Vidharbha Konkan Gramin Bank

·         Maharashtra Gramin Bank


·         Manipur Rural Bank


·         Meghalaya Rural Bank


·         Mizoram Rural Bank


·         Nagaland Rural Bank


·         Utkal Grameen bank

·         Odisha Gramya Bank


·         Puduvai Bharathiar Grama Bank


·         Punjab Gramin Bank


·         Baroda Rajasthan Kshetriya Gramin Bank

·         Rajasthan Marudhara Gramin Bank

Tamil Nadu

·         Pallavan Grama Bank

·         Pandyan Grama Bank


·         Telangana Grameena Bank


·         Tripura Gramin Bank

Uttar Pradesh

·         Allahabad UP Gramin Bank

·         Gramin Bank of Aryavart

·         Baroda UP Gramin Bank

·         Kashi Gomti Samyut Gramin Bank

·         Prathama Bank

·         Purvanchal Bank

·         Sarva UP Gramin Bank


·         Uttarakhand Gramin Bank

West Bengal

·         Bangiya Gramin Vikas Bank

·         Paschim Banga Gramin Bank

·         Uttarbanga Kshetriya Gramin Bank

Foreign Banks

These are the banks that are based in foreign countries and offer banking services in India. These banks must follow the obligations of both home country and India. Below mentioned is the list of foreign banks operating in India:

Australian banks

·         Australia and New Zealand Banking Group

·         National Australia Bank

·         Westpac Banking Corporation

Bahraini banks

·         Bank of Bahrain and Kuwait

Bangladeshi banks

·         AB Bank

·         Sonali Bank

Belgian banks

·         Antwerp Diamond Bank

Canadian banks

·         Bank of Nova Scotia

Chinese banks

·         Industrial & Commercial Bank of China

·         Bank of China

Emirati banks

·         Abu Dhabi Commercial Bank

·         Emirates NBD

·         First Abu Dhabi Bank

·         Mashreq Bank

French banks

·         BNP Paribas

·         Credit Agricole

·         Societe Generale

German banks

·         Deutsche Bank

Indonesian banks

·         Bank Internasional Indonesia

Iranian banks

·         Pasargad Bank

Japanese banks

·         Mizuho Corporate Bank

·         Sumitomo Mitsui Banking

·         Bank of Tokyo-Mitsubishi

Mauritian banks

·         State Bank of Mauritius

Dutch banks

·         Rabobank

Qatari banks

·         Qatar National Bank

Russian banks

·         Sberbank

·         VTB

Singaporean banks

·         DBS Bank

·         United Overseas Bank

South African banks

·         FirstRand Bank

South Korean banks

·         Shinhan Bank

·         Woori Bank

Sri Lankan banks

·         Bank of Ceylon

Swiss banks

·         Credit Suisse

·         UBS AG

Taiwanese banks

·         Chinatrust Commercial Bank

Thai banks

·         Krung Thai Bank

UK banks

·         HSBC (as HSBC Bank India)

·         Barclays Bank

·         Standard Chartered Bank

US banks

·         American Express

·         Bank of America

·         Citibank

·         J.P. Morgan Chase Bank

·         Goldman Sachs

Payments Banks: Payments banks is a new model of banks, formulated by the Reserve Bank of India (RBI). These banks accept a restricted deposit of up to Rs 1 Lakh per account per customer. Payments banks cannot offer loans and credit cards. Current account and savings accounts can be opened and operated in these banks. Below mentioned is the list of payments banks in India:

1.Aditya Birla Payments Bank

2.Airtel Payments Bank

3.India Post Payments Bank

4.Fino Payments Bank

5.Jio Payments Bank

6.Paytm Payments Bank

7.NSDL Payments Bank

Small Finance Banks

Small finance bank is a niche bank in India. Banks with a small finance bank license offer very basic banking services vis-à-vis deposits and lending. The main intention of these banks is to provide financial inclusion to sections of the economy, not being served by other banks. Below mentioned is the list of small finance banks in India:

Ujjivan Small Finance Bank

Jana Small Finance Bank

Equitas Small Finance Bank

AU Small Finance Bank

Capital Small Finance Bank

Fincare Small Finance Bank

ESAF Small Finance Bank

North East Small Finance Bank

Suryoday Small Finance Bank

Utkarsh Small Finance Bank

Post-Office Savings Banks (Posb)

The post office savings bank is a bank, offering deposit schemes which provide a fixed rate of interest on annual basis. It is a useful scheme for those individuals who wish to earn a fixed annual rate of interest by investing a small portion of money.

Wholesale And Long-Term Finance Banks (Wltfb)

In April 2017, RBI proposed a new type of differentiated banks called wholesale and long-term finance (WLTF) banks. The WLTF banks would fund long term high value projects, which work on similar lines to the Development Finance Institutions.

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