Chandigarh - Banking Network

Banking Network

When you sit back and think about it, banks are often a huge part of our lives. We deposit our paychecks, take out loans, and set up savings accounts, all at a bank. But what do banks do? What are the different types of banks? Let's start finding some answers to these questions by looking at the different types of banks that make up a banking system.

A banking network is a group or network of institutions that provide financial services for us. These institutions are responsible for operating a payment system, providing loans, taking deposits, and helping with investments.

Functions

Banking Network perform several different functions, depending on the network of institutions. For example, payment and loan functions at commercial banks allow us to deposit funds and use our checking accounts and debit cards to pay our bills or make purchases. They can also help us finance our cars and homes.

By comparison, central banks or systems distribute currency and establish money-related policies. Investment banks or systems conduct trades or deal with capital markets.

A Banking Network, also known as an ATM consortium or ATM network, is a computer network that enables ATM cards issued by a financial institution that is a member of the network to be used to perform ATM transactions through ATMs that belong to another member of the network.

Banking is no new term to anyone be it homemakers, salaried people, businessmen, farmers, students or any other profession. Especially the Indian homes are well connected with banks and banking. The banking industry takes care of the finances of a country which includes credit and cash.Banks are the backbone of the economy in a country and hence strict rules and regulations are imposed on the modus-operandi of banks. The major transactions that happen at banks are granting credits and accepting deposits from various entities.RBI is the apex body that governs and monitors bank across India. It is responsible for regulating the monetary policy in the country.

BANK CLASSIFICATION IN INDIA

There are two broad categories under which banks are classified in India- SCHEDULED AND NON-SCHEDULED BANKS.The scheduled banks include COMMERCIAL BANKS AND COOPERATIVE BANKS. The commercial banks include REGIONAL RURAL BANKS, SMALL FINANCE BANK, FOREIGN BANKS, PRIVATE SECTOR BANKS, and PUBLIC SECTOR BANKS. PAYMENTS BANK is a new introduction to the category.Cooperative banks include URBAN AND RURAL BANKS.

Let us understand the nomenclature better;

SCHEDULED BANKS are the banks which are covered under the second schedule of the Reserve Bank of India Act, 1934. To qualify for being a scheduled bank, a minimum of 5 lakh paid-up capital is required on the bank?s behalf. The RBI lends loan to these banks at bank rate as and when required.COMMERCIAL BANKS are regulated and managed under the Banking Regulation Act, 1949. These are profit making banks based on their business model. Granting loans to the government, general public, and corporate and accepting deposits counts as the primary function.