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Thursday, July 4, 2013

Knowledge Bytes- Indian Banking System- III

I hope you enjoyed reading first part of my article on Indian Banking System (Part I, Part II). Here is the final installment on Banking System overview.

What are Co-Operative Banks?
A co-operative bank is a financial entity which belongs to its members, who are at the same time the owners and the customers of their bank. Co-operative banks are often created by persons belonging to the same local or professional community or sharing a common interest. Co-operative banks generally provide their members with a wide range of banking and financial services (loans, deposits, banking accounts, etc).
They provide limited banking products and are specialists in agriculture-related products.
Cooperative banks are the primary financiers of agricultural activities, some small-scale industries and self-employed workers.
Co-operative banks function on the basis of "no-profit no-loss".

The Anyonya Co-operative Bank in India is the first cooperative bank in Asia.
Anyonya Co-operative Bank Limited (ACBL) is the first co-operative bank in India located in the city of Vadodara in Gujarat.

How Bank gets Money?
Banks make money by lending your money out at interest and by charging you for services provided. Banks keep on lending money.
The other big revenue items generated by banks are the fees they charge. Bank charge for every service, whether it is for an electronic transaction, or permitting a transfer through the Internet banking system.
When banks get profits they invest in other companies and in return they will get money.
Cooperative Banks in India are registered under the Co-operative Societies Act.
Cooperative Banks are governed by the Banking Regulations Act 1949 and Banking Laws Act, 1965.
The Co Operative bank is regulated by the RBI.
Cooperative banks are an important constituent of the Indian financial system. They are the primary financiers of agricultural activities, some small-scale industries and self-employed workers.

What are Public Sector Banks?
These are banks where majority stake is held by the Government of India.
Examples of public sector banks are: SBI, Bank of India, Canara Bank, etc.
What are Private Sector Banks?
These are banks majority of share capital of the bank is held by private individuals. These banks are registered as companies with limited liability.
Examples of private sector banks are: ICICI Bank, Axis bank, HDFC, etc.

What are Foreign Banks?
These banks are registered and have their headquarters in a foreign country but operate their branches in our country.
Examples of foreign banks in India are: HSBC, Citibank, Standard Chartered Bank, etc.

What are Regional Rural Banks?
Regional Rural Banks were established under the provisions of an Ordinance promulgated on the 26th September 1975 and the RRB Act, 1976 with an objective to ensure sufficient institutional credit for agriculture and other rural sectors. The area of operation of RRBs is limited to the area as notified by GoI covering one or more districts in the State.
RRBs are jointly owned by GoI, the concerned State Government and Sponsor Banks (27 scheduled commercial banks and one State Cooperative Bank); the issued capital of a RRB is shared by the owners in the proportion of 50%, 15% and 35% respectively.
Prathama bank is the first Regional Rural Bank in India located in the city Moradabad in Uttar Pradesh.


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