## Types of Banks in India

Banks in India are broadly classified into the following categories:

Category	Description
Commercial Banks	General-purpose banks accepting deposits and granting loans to the public
Cooperative Banks	Banks organised on cooperative principles; serve specific member communities
Development Banks (Long-Term Lending Institutions)	Provide long-term finance for industry and infrastructure (e.g., NABARD, NHB)
Regional Rural Banks (RRBs)	Serve rural areas; established under RRB Act 1976; jointly owned by Central Govt, State Govt, and sponsor bank
Payment Banks	Limited-service banks; accept deposits and remittances but cannot lend
Small Finance Banks	Serve unserved and underserved segments; can lend and accept deposits

### Major Functions of a Bank

1. Accepting deposits — current, savings, fixed, recurring

2. Granting loans — funded and non-funded credit facilities

Worked example

### Example 1

Classification drill: Paytm Payments Bank can accept deposits but cannot grant a home loan — it is a Payment Bank, not a Commercial Bank.

### Example 2

Classification drill: A bank set up to provide crop loans to farmers in rural Rajasthan, co-owned by State Bank of India, State Government of Rajasthan, and Central Government — this is a Regional Rural Bank (RRB).

⚠️ Common exam mistakes

Confusing Small Finance Banks with Payment Banks — SFBs can both accept deposits AND lend; Payment Banks cannot lend.
Treating Development Banks as commercial banks — Development Banks focus on long-term project finance, not day-to-day banking.
Forgetting RRBs have a tripartite ownership structure (Central Govt 50%, State Govt 15%, Sponsor Bank 35%).

Reference:

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