The banking system is the backbone of India's financial sector. It is led by the RBI at the top, with many types of banks below it serving different needs. Knowing the structure of banks and the history of nationalisation is important for banking and general studies exams.
Structure of Indian Banking
- At the top is the RBI, the central bank and regulator.
- Scheduled banks are listed in the second schedule of the RBI Act; others are non-scheduled.
- Scheduled banks include commercial banks and cooperative banks.
- Commercial banks include public sector banks, private banks, foreign banks and Regional Rural Banks (RRBs).
Nationalisation of Banks
- The State Bank of India (SBI) was formed in 1955 from the Imperial Bank.
- 14 major banks were nationalised on 19 July 1969 under PM Indira Gandhi.
- Another 6 banks were nationalised in 1980.
- Regional Rural Banks were set up in 1975 to serve rural areas.
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Types of Bank Accounts
- Savings account - for individuals to save and earn interest.
- Current account - for businesses; many transactions, usually no interest.
- Fixed (term) deposit - money kept for a fixed period at higher interest.
- Recurring deposit - a fixed amount saved every month.
Modern Banking Features
- Payment banks and small finance banks were introduced to boost financial inclusion.
- Many public banks were merged in recent years to make them stronger.
- Digital services include NEFT, RTGS, IMPS and UPI.
Quick Revision Points
- The RBI is the regulator of the banking system.
- SBI formed in 1955.
- 14 banks nationalised in 1969; 6 more in 1980.
- RRBs set up in 1975.
- Account types: savings, current, fixed, recurring.
- Newer banks: payment banks and small finance banks.
- Digital transfers: NEFT, RTGS, IMPS, UPI.