Types of Banks in India – RBI Grade B » raceinstitute.in

Types of Banks in India – RBI Grade B Phase 2

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Types of Banks in India

Indian Banking Sector – classified into scheduled and Non-Scheduled banks. All banks included in the second schedule to the Reserve Bank of India Act 1934 are scheduled banks. These banks comprises of scheduled commercial banks and scheduled co-operative banks. Scheduled co-operative banks consist of scheduled state co-operative banks and urban co-operative. Scheduled commercial banks are categorized into five different groups according to their nature of operations.

They are:

  • State Bank of India
  • Public Sector Banks
  • Private Sector Banks
  • Foreign Banks
  • Regional Rural Banks

Criteria For All The Above Banks:

Criteria for Scheduled Banks – Reserve Bank of India fixes the criteria as per Section 42 (6) (a) of the RBI Act 1934.

1. Scheduled banks are those banks whose minimum paid up capital and reserve amount to Rs. 25 lakhs.

2. These banks have to submit details of their activities to the RBI every week.

3. These banks are listed in the second schedule of the RBI Act 1934.

Scheduled Banks in India:

There are 3 types of Scheduled banks in India:

1. Public Sector Scheduled Banks (27 PSBs (21 Nationalized and 6 SBI Groups))

2. Private Sector Scheduled Banks

3. Foreign Scheduled Banks

Criteria for Public Sector Banks:

The Private Sector Banks are banks where greater part of the equity are held by the private share-holders and not by the government. Private Sector Banks are classified as old Private Sector Banks and New Private Sector Banks.

Criteria For New Private Sector Banks By RBI:

1. Promoter / promoter groups with diversified ownership, sound credentials and integrity with a successful track record for at least 10 years in their businesses will be eligible to promote banks.

2. The initial minimum paid-up capital will be Rs. 500 crores.

3. The aggregate non-resident share holding from FDI, NRIs and FIIs (Foreign Institutional Investors) shall not exceed 49% for the first five years from the date of licensing of the New Private Sector Banks.

4. The banks shall open at least 25% of its branches in un-banked rural centres (population up to 9999 as per 2001 census).

Criteria for Foreign Banks:

1. RBI has laid down new guidelines (criteria) that will require several –but not all – foreign banks to set up wholly owned subsidiaries.

2. The guidelines set other criteria which will determine which foreign banks (out of 43 in India) will be required to switch over to the subsidiary route.

3. The guidelines state that the foreign banks who have legislation that give a preferential claims to deposits in the home country in a winding-up proceeding would have to set up a wholly owned subsidiary (WOS) .

4. A Banking subsidiary will create a separate legal entity which will have its own capital base, and local Board of Directors.

5. RBI said the minimum paid –up equity capital for a wholly owned subsidiary would be Rs. 500 crore, upfront

… to be continued

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