Chamatkar Singh L-2023-A-049-Biv

ROLE , TYPES &
FUNCTION OF
BANKING
BY – CHAMATKAR SINGH [ L-2023-A-049-BIV]
COURSE NO. – ECON . 102
COURSE TITLE – FUNDAMENTALS OF AGRICULTURAL ECONOMICS
SUBMITTED TO –DR. SUNNY KUMAR
CONTENT
• We will study about :
• 1. Role of banking
• 2. Types of banks
• 3. Function of Central banks
• 4. Function of Commercial banks
ROLE OF INDIAN BANKING
• Indian banking has a big role in the growth of the economy of India. Every country’s economy lies in the banking
system. When the bank functions well, only then it benefit in nation-building.
• Below we’ve provided the function of the banking system in India:
• Business Growth
• When it comes to business growth, the Indian banking sector helps a lot. It establishes different branches to develop
strong ties with foreign countries. That helps in the major growth of the economy.
• In addition to this, Indian banks facilitate trade and commerce. It offers payment facilities to various local and
international business houses.
• Financial Stability
• The banking sector provides financial stability to the Indian economy. It also offers safe and secure financial services to
help people. The services include money orders, cash deposits, and cash card services. People can take advantage of
these perks to help their businesses grow.
• Cash Management
• Cash management plays an essential role in the growth of the economy of India. It permits banks to provide money
transfers and quick cash. That’s how they help people with different services.
• Many business houses ask for money from the banks to help their business. It helps banks handle the money transfers
carried out for many industrial units and various business houses. And it makes the whole method smooth.
ROLE OF INDIAN BANKING
• Advancement of Credit
• Every bank provides loans to people to expand their businesses. The Indian banking sector is one of the most active sectors
that provide loans to individuals and institutions.
• The Indian economy has a huge impact on active loans. It is crucial in providing funds to different priority sectors like small-
scale industries, agriculture, trading enterprises, real estate, etc.
• Financial Security
• The Indian banking system provides people with financial security for their funds. It is done by offering loans at competitive
rates, paying reliable remittance services, etc. That’s how people can save their money.
• They also invest in financial tools like government securities, long-term bonds, etc. Thus, it plays an essential role in the
context of financial security.
• Manage Assets
• Banks handle money and precious items such as gold, silver, diamonds, etc. People rely on banks to keep their valuable
items safe and sound. They make loans and accept deposits and payments from their clients. Also provide credit cards,
debit cards, checkbooks, etc. They can count as a reliability factor for their assets.
TYPES OF BANKS
Commercial Banks
• These are the most common types of banks and include public sector banks, private sector banks, and
foreign banks. They provide various services like savings and current accounts, loans, and investments.
• These are the most common types of banks and include public sector banks, private sector banks, and
foreign banks. They provide various services like savings and current accounts, loans, and investments.
• Public Sector Banks: Owned and operated by the government, examples include State Bank of India
(SBI), Punjab National Bank (PNB), and Bank of Baroda (BOB).
• Private Sector Banks: These are privately owned and managed banks, such as HDFC Bank, ICICI Bank,
and Axis Bank.
• Foreign Banks: These banks have branches in India and are headquartered in foreign countries. Some
examples are Citibank, Standard Chartered, and HSBC.
• Regional Rural Banks (RRBs): These banks cater to rural and semi-urban areas and are owned by the
government, commercial banks, and state governments.
COOPERATIVE BANK
A Cooperative Bank is registered under the Co-
operative Societies Act of 1912 and is run by an
elected managing committee. It works on a non-
profit, no-loss basis and mainly serves entrepreneurs,
small businesses, self-employment, and more in
urban areas.
In rural areas, it mainly functions to finance
agriculture-based activities like farming, livestock,
and hatcheries .
types of Co-operative Banks:
A State Co-operative Bank is a federation of the

State Co-operative central Co-operative banks that will act as a
Banks custodian of the Co-operative banking structure in the
State.
The Urban Co-operative Bank is the primary Co-

operative bank located in urban and semi-urban
areas. The banks essentially lent to smaller
Urban Co-operative borrowers, and businesses centred around a
Banks community, locality, and more.
The Reserve Bank of India (RBI) serves as the Central

Central Banks Bank of India and is responsible for regulating and
controlling the monetary and banking system in the
country.
CONTD…
Payment Banks
• The payment banks are a relatively new banking model in the country that has been
conceptualised by the RBI. This bank is allowed to accept a restricted deposit. This amount is
limited to Rs. 1 lakh for a customer. The bank also offers services such as ATM cards, net banking
and more.
Small Finance Banks
• These banks primarily serve the unserved and underserved sections of the population, including
small businesses and low-income individuals.
• This type of bank is licensed under Section 22 of the Banking Regulation Act 1949, and it is
governed by the Provisions Act of 1934.
For Example - AU Small Finance Bank Ltd. & Utkarsh Small Finance Bank Ltd.
FUNCTION OF CENTRAL BANK
• Controller of Credit- The Reserve bank of India controls the credit created by commercial banks. The credit flow in
the country is regulated by means of two methods; quantitative method and qualitative method. RBI applies tight
monetary policies when it observes that there is enough supply of money which may cause an inflationary situation.
It squeezes the money supply to keep inflation in check.
• Lender of the Last Resort- The RBI grants accommodation to commercial banks, financial institutions, bill brokers,
etc. in the form of collateral advances or re-discounts. This step is taken in times of stress so that the financial
structure of the country is saved from collapsing. This lending is done on the basis of government securities, treasury
bills, government bonds, etc.
• Custodian of Commercial Banks- As per law, commercial banks need to keep a reserve that is equal to a certain
percentage of the NDTL (net demand and time liabilities). These reserves help commercial banks clear cheques by
transferring funds from one bank to another.
• Regulator of Currency- The main function of the central bank is to print currency notes and RBI has the sole right
in the country for this operation. RBI prints money of all denominations apart from 1 rupee note. It is the ministry of
finance that issues 1 rupee note.
FUNCTION OF COMMERCIAL BANK
• (a) Primary functions

• Accepts deposit : The bank takes deposits in the form of saving, current, and fixed deposits. The
surplus balances collected from the firm and individuals are lent to the temporary requirements of
the commercial transactions.
• Provides loan and advances : Another critical function of this bank is to offer loans and
advances to the entrepreneurs and business people, and collect interest. For every bank, it is the
primary source of making profits. In this process, a bank retains a small number of deposits as a
reserve and offers (lends) the remaining amount to the borrowers in demand loans, overdraft, cash
credit, short-run loans, and more such banks.
• Credit cash: When a customer is provided with credit or loan, they are not provided with liquid
cash. First, a bank account is opened for the customer and then the money is transferred to the
account. This process allows the bank to create money.
FUNCTION OF COMMERCIAL BANKS
• (b) Secondary functions

• Discounting bills of exchange: It is a written agreement acknowledging the amount of money to be
paid against the goods purchased at a given point of time in the future. The amount can also be cleared
before the quoted time through a discounting method of a commercial bank.
• Overdraft facility: It is an advance given to a customer by keeping the current account to overdraw up
to the given limit.
• Purchasing and selling of the securities: The bank offers you with the facility of selling and buying
the securities.
• Locker facilities: A bank provides locker facilities to the customers to keep their valuables or documents
safely. The banks charge a minimum of an annual fee for this service.
• Paying and gathering the credit : It uses different instruments like a promissory note, cheques, and
bill of exchange.
CONCLUSION
• We learnt about :
• 1. Role of banking
• 2. Types of banks
• 3. Function of Central banks
• 4. Function of Commercial banks
BIBLIOGRAPHY
• https://groww.in/banking
• https://www.vedantu.com/commerce/functions-of-central-bank
• https://byjus.com/commerce/functions-of-commercial-banks/

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ROLE , TYPES &

A State Co-operative Bank is a federation of the

The Urban Co-operative Bank is the primary Co-

The Reserve Bank of India (RBI) serves as the Central

• (a) Primary functions

• (b) Secondary functions

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