GA Topper Series: Types of Banking Services

Types of banking services

  • Bank branch means that where banks can either open new branches or move the location of existing branches, which is defined under the provisions of section 23 of the Banking Regulation Act 1949, banks can either open new branches or move the location of existing branches.
  • Bank chain refers to the type of bank when a group of people come together to own and control three or more independent chartered banks. Each of these banks could maintain its independent existence despite common control and ownership. Chain banks have been assigned specific functions so that there is no loss of profits or overlapping of interests. For example, Karur vyasa banking
  • Correspondent bank refers to a financial institution that provides services to another, usually in another country. It acts as an intermediary or agent, facilitating electronic transfers, carrying out business transactions, accepting deposits and collecting documents on behalf of another bank. For example: Vostro and Nostro accounts.
  • Banking unit is a limited mode of banking where banks only operate from a single branch (or a few branches in the same area) taking care of the local community. The system of banking units was born in the United States.
  • Group bank refers to a system in which a group of banks operate under a single holding company; the control that a company can have over 2 financial institutions. These groups of banks must follow the rules and regulations of the company. They must operate within the boundaries of the business. For example, State Bank of India in India.
  • Retail banking: does the bank provides financial services to individual consumers rather than businesses. Retail banking is a way for individuals to manage their money, access credit and deposit their money securely. It is also known as consumer banking or personal banking.
  • Wholesale banking : Involves banking services for high net worth clients such as corporates, commercial banks, medium-sized businesses, etc. . It provides ease of access to a client’s complete financial portfolio who can easily browse through it and make allocations, transfers, etc. appropriate.
  • Relationship banking: is a banking system in which banks make deliberate efforts to understand the needs of customers and offer them products accordingly. It helps banks collect critical information about borrowers, which helps them determine the creditworthiness of those customers.
  • Social bank will aim at mass well-being, will introduce diets that will adapt to the evolution of society. It also endeavors to make various banking services and products affordable to the society especially the weaker section (large segment in India) by introducing various technological breakthroughs and reducing the overhead. This is also called sustainable banking.
  • Shadow bank is a term used to describe banking-like activities (primarily lending) that take place outside the traditional banking sector. It is now commonly referred to internationally as non-banking financial intermediation or market finance. Shadow bank loans have a function similar to traditional bank loans.
  • Digital bank is a generic term that includes all banking activities carried out by technological means. Online banking, which is part of digital banking, refers to day-to-day banking practices carried out through internet-enabled devices. The functions of digital banking are extensive, while online banking is reserved for more ordinary activities. Digital banking poses relatively more security issues than online banking. Digital Banking offers a more personalized experience to meet your financial needs.
  • Islamic bank/Sharia bank : Islamic banking is banking or banking activity that conforms to the principles of Sharia and its practical application through the development of Islamic economics.
  • Narrow banking services : Tight banks are safe banks. By not lending and using their deposits to buy government bonds, they bear virtually no credit risk. There is no risk of non-performing loans and frequent injections of equity that must be funded by taxpayers. For the Reserve Bank of India (RBI) too, supervision is getting easier. There is no need for deposit insurance.

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