What is Bank? Explain different types of Banks.

Answer: A bank is a financial institution which accepts deposits from the public and lends money. Types: central bank, commercial banks, co-operative banks, development banks, specialised banks (exchange, EXIM, NABARD, SIDBI etc.), small finance banks and payment banks, and regional rural banks.

Meaning: A bank is a financial institution that accepts deposits of money from the public, repayable on demand or otherwise and withdrawable by cheque, draft or other means, for the purpose of lending or investment (Banking Regulation Act, 1949).

Types of banks:

1. Central bank: The apex bank of the country which controls the monetary and banking system. In India it is the Reserve Bank of India (1935). It issues currency, is banker to the government and to banks, and controls credit.
2. Commercial banks: Banks that accept deposits from the public and give loans to trade, industry and individuals for profit. They may be public sector (e.g. SBI), private sector (e.g. HDFC Bank) or foreign banks.
3. Co-operative banks: Banks organised on co-operative principles to provide credit to farmers, small traders and artisans. Their structure: State co-operative bank at the top, District central co-operative banks in the middle and Primary credit co-operative societies at the village level; urban co-operative banks serve towns.
4. Development banks: Banks that provide medium and long term finance for industrial and economic development, e.g. IDBI, IFCI, SIDBI.
5. Specialised banks: Banks that serve a particular sector: exchange banks deal in foreign exchange; EXIM Bank finances foreign trade; NABARD finances agriculture and rural development.
6. Regional rural banks: Set up to provide credit and banking facilities to small farmers, labourers and artisans in rural areas.
7. Small finance banks and payment banks: Small finance banks serve small businesses and unorganised sectors; payment banks accept small deposits and provide payment and remittance services but cannot give loans.

Banks thus mobilise savings and channel them into productive uses, helping trade, industry and the economy.