TYPES OF BANKING IN INDIA
Before knowing the types of banking in India, let’s understand what is Liability and what is Assets.
Liability
Liabilities are items that the bank owes to someone else including deposits and bank borrowing from other institutions. Simply, it includes deposits such as fixed, current/savings deposits (CASA= Current account and saving account).
Assets
The assets are items that the bank owns. It includes mortgages and loans such as personal, housing, education etc.
Types of Banking in India
Here some important banking types are summarized which often are asked in banking exams.
- Branch Banking: When a bank that is connected to one or more other bank branch in an area or outside of it; to its customers is called Branch banking. This bank provides all the usual financial services but is backed and ultimately controlled by a larger financial institution.
- Chain banking: Chain banking is a form of bank governance in which individuals or an entity takes control of, at least, three banks that are independently chartered. It is not like branch banking or group banking because banks within such a system are separately-owned and are not part of the same entity.
- Digital Banking: Here banking done through the digital platform, doing away with all the paperwork like cheque, demand draft etc. It means availability of all banking activities online.
- Green banking: As the name Green refers to sustainable development concerns and creating awareness among people about environmental responsibility.
- Islamic banking: This is based on the principles of not charging interest as they consider money has no intrinsic value therefore, cannot be sold at a profit. It is also called Sharia banking. Such banking is prevalent in some Islamic countries.
- Merchant banking: It is the combination of banking and consultancy service. Consultancy means to provide advice, guidance and service for a fee.
- Mixed Banking: Mixed banking is a banking model where banks undertake both commercial and industrial banking. It is popular banking model in countries like Germany and Japan.
- Narrow banking: These are safe banks and using their deposits to buy governmental bonds. Therefore, no danger or risk of non-performing loans/assets.
- Offshore banking: The deposit of funds by a company or an individual in a bank that is located outside their national residence.
- Para banking: It refers to the activities carried out by the banks apart from its normal day-to-day activities like deposits, withdrawals, giving credit, etc. Para Banking activities includes insurance business, portfolio management services, mutual funds business etc.
- Retail banking: It refers to the dealing of commercial banks with individual customers, both on liability and assets sides of the balance sheet.
- Universal banking: it is a multi-purpose and multi-functional supermarket providing both banking and financial services through a single window. It is a system in which banks provide a wide variety of comprehensive financial services including those tailored to retail, commercial and investment services.
- Unit Banking: Unit banking refers to a bank that is a single, usually small bank that provides financial services to its local community. A unit bank is independent and does not have any connecting bank/ branches in other areas.
- Virtual banking: The Virtual Banking is the provision of accessing the banking and related services online. There is no need to go the bank branch/office. Simply, it provides the banking services through an extensive use of information technology without any requirement for the physical walk-in premises is called as virtual banking.
- Wholesale banking: It refers to banking service between merchant banks and other financial institution. They deal with larger clients such as multinationals and large corporates. This is also called corporate banking.
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