Introduction to Banking & insurance, Features of Bank, Types of Bank

Introduction to Banking & insurance

1. Introduction to Banking

2. Introduction Banks are essential institutions in the financial system that play a crucial role in the economy. They offer a wide range of services to individuals, businesses, and governments, helping to manage money, facilitate transactions, and support economic growth. A bank is a financial institution that accepts deposits from the public, provides loans, and offers other financial services. Banks act as intermediaries between depositors who want to save money and borrowers who need funds for various purposes.

3. Functions of the Bank Accept Deposits: Banks offer savings accounts, checking accounts, and fixed deposits where customers can safely store their money. Provide Loans: Banks lend money to individuals and businesses for purposes like buying a home, starting a business, or financing large projects. Facilitate Transactions: Banks enable payments through various methods such as checks, electronic transfers, and debit/credit cards. Offer Investment Services: Banks provide financial products like mutual funds, bonds, and stock brokerage services to help customers grow their wealth. Wealth Management: They offer financial planning and advisory services for managing and growing assets.

4. Need of Banks 1. Safekeeping and Management of Money: Deposits and Savings. Risk Mitigation. 2. Facilitating Transactions and Payments: Payment Processing. Credit & Debit cards

5. Need of Banks 3.Capital Allocation and Financing: Lending and Credit Support for Entrepreneurship 4. Economic Intermediation: Matching Savers and Borrowers. Maturity Transformation.

6. Functions of Banks

7. Functions of Bank Primary Function- Accepting Deposits - Savings Deposit Fixed Deposit Current Deposits Recurring Deposits NRI Account

8. Functions of Bank Primary Function- 2. Granting Advances - Lien - Term Loans Pledge - Cash Credit - Mortgage - Overdraft Hypothecation - Bill Discounting Assignment

9. Pledge Hypothecation Mortgage Assignment Type of Asset Movable Property Movable Property Immovable property Documents Possession with Lender Borrower Borrower Lender Example Gold Car, Bike Land, Home Insurance Policy Borrower Pledger Hypothecator Mortgager Assignor Bank Pledgee Hypothecatee Mortgagee Assignee In case of Default Bank can sell assets Bank takes the possession and then auctions the property Bank seizes the property Bank claim the money

10. Functions of Bank Secondary Function- Agencies Functions 2. Utility Functions Transfer of funds - Drafts Merchant Banking - Lockers Portfolio Management - underwriting Leasing - Social welfare Programmes Mutual Funds - ATM Services Factoring Housing Finance

11. Classification of Banks in India Banks, forming part of the Banking System in India, can be divided into two categories

12. Scheduled Bank Scheduled Banks under the Banking System in India refer to those financial institutions that are listed in the 2nd Schedule of the Reserve Bank of India Act, 1934 . This inclusion signifies that they meet specific criteria set by the RBI and are subject to its stricter regulations. A bank to be listed in the schedule has to satisfy the following 2 conditions: It should have paid-up capital and reserves of not less than 5 lacs, and It should satisfy the RBI that their affairs are not being conducted in a manner detrimental to the interest of their depositors. If any Scheduled Bank violates these conditions, it gets de-listed from the schedule.

13. Benefits to scheduled Banks Stability and Security Scheduled banks are regulated by the Reserve Bank of India (RBI), which imposes strict capital requirements and operational guidelines. This ensures a higher level of financial stability compared to non-scheduled banks, providing customers with confidence in the safety of their deposits. Access to Credit Facilities These banks are eligible to borrow from the RBI at preferential rates, allowing them to offer competitive interest rates on loans. This access to cheaper funds enables scheduled banks to provide a variety of loan products, including personal, home, and business loans, making them an attractive option for borrowers. Clearing House Membership Scheduled banks automatically gain membership in clearing houses, facilitating efficient interbank transactions. This membership results in quicker cheque clearances and electronic fund transfers, enhancing customer convenience and reducing transaction times. S

14. Benefits to scheduled Banks Comprehensive Banking Services Scheduled banks offer a full spectrum of banking services, including savings and current accounts, credit and debit cards, internet and mobile banking, and various investment products. This comprehensive service offering allows customers to manage their finances effectively from a single institutionAccess to Credit Facilities Trust and Reliability Due to their compliance with RBI regulations and a history of ethical banking practices, scheduled banks enjoy a reputation for reliability. Customers can trust that their transactions and financial dealings are conducted with transparency and integrity Additional Benefits -Financial Accommodation -Guidance from RBI - Prestige

15. Non- Scheduled Bank Non-scheduled banks by definition are those which are not listed in the 2nd schedule of the RBI act, 1934. Banks with a reserve capital of less than 5 lakh rupees qualify as non-scheduled banks. Unlike scheduled banks, they are not entitled to borrow from the RBI for normal banking purposes, except, in an emergency or abnormal circumstances. Bangalore City Co-operative Bank Ltd. Bangalore, Baroda City Co-op. Bank Limited are a few examples.

16. Basis of Difference Scheduled Bank Non- Scheduled Bank Meaning A banking company under the Banking System in India which is listed in the second schedule of the RBI Act 1934 A banking company under the Banking System in India that is not mentioned in the second schedule of the RBI Act 1934. Criteria  Should have a paid-up capital of `5 lakhs or more. – Have to ensure that its affairs are not conducted in a manner detrimental to the interest of its depositors. NO fixed criteria as such Regulatory Requirements  Have to keep  CRR deposits with the Reserve Bank of India. – Required to file their  returns on a periodic basis. – Have to maintain  CRR deposits with themselves. –  No  requirements of  filing returns  as such.

17. Basis of Difference Scheduled Bank Non- Scheduled Bank Rights Available  Authorized to borrow funds from the RBI. – Can apply to join the clearinghouse. – Can avail of the facility of rediscount of first-class exchange bills from RBI. – Usually, not authorized to borrow funds from the RBI. However, they can borrow from the RBI under emergency conditions. – Not eligible for membership in the clearinghouse. – Facility of rediscounting exchange bills from RBI is not available for them. Risk They are financially stable and are unlikely to hurt the rights of the depositors. These banks are riskier to do business. Examples Most of the banks under the Banking System in India are Scheduled Banks. For example, Commercial Banks, Private, and Public Sector Banks. Only a few types of banks under the Banking System in India are Non-Scheduled Banks. For example, Local Area Banks (LABs), and some Urban Cooperative Banks (UCBs).

18. Classification of Banks

19. Central Bank-Reserve Bank of India (RBI) The Reserve Bank of India, the apex institution is the central bank in India which controls, regulates and supervises the monetary and credit systems of the country. The preamble of the RBI Act, 1934, describes its basic functions as 'to regulate' the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage. The RBI thus not only performs its traditional monetary functions, but also a number of regulatory promotional and developmental functions.

20. Functions of Reserve Bank of India (RBI) 1. Monetary Policy Objective: To control inflation, manage liquidity, and stabilize the currency. Tools : Uses instruments such as the repo rate, reverse repo rate, cash reserve ratio (CRR), and statutory liquidity ratio (SLR) to influence the economy. Policy Framework: Implements monetary policy through the Monetary Policy Committee (MPC), which meets regularly to set policy rates.

21. 2. Regulation and Supervision Licensing: Issues licenses to new banks and regulates existing ones, including commercial banks, cooperative banks, and specialized institutions. Standards and Guidelines: Sets prudential norms and guidelines related to capital adequacy, asset classification, provisioning requirements, and management practices. Inspection: Conducts regular inspections and audits of banks and financial institutions to ensure compliance with regulations and financial health.

22. 3.Financial Stability Systemic Risk Management: Monitors and addresses risks that could affect the stability of the financial system. Crisis Management: Intervenes in times of financial distress or crisis to restore stability and confidence in the banking system. Resolution Framework: Oversees the resolution of distressed banks and financial institutions to minimize systemic impact 4. Currency Management Issue of Currency: Regulates and manages the issuance of currency notes and coins, ensuring an adequate supply of clean and genuine currency. Design and Security: Designs currency notes with security features to prevent counterfeiting.

23. 5.Bankers' Bank Bankers' Reserve: Acts as the banker to the government and other banks, managing their reserves and facilitating inter-bank transactions. Clearing and Settlement: Oversees the clearing and settlement systems for inter-bank transactions to ensure efficiency and reliability. 6. Developmental Functions Financial Inclusion: Promotes financial inclusion by supporting initiatives like expanding banking access to underserved areas, promoting digital banking, and encouraging the use of financial products. Infrastructure Development: Supports the development of financial infrastructure, such as payment systems, electronic banking systems, and financial literacy programs.

24. 7. Consumer Protection Grievance Redressal: Provides mechanisms for addressing customer grievances against banks and financial institutions. Regulations: Enforces rules to protect consumers’ interests, such as guidelines on fair practices, transparency, and disclosure. 8. Foreign Exchange Management Regulation: Regulates and manages the foreign exchange market and oversees the foreign exchange reserves of the country. Policy Implementation :Implements policies related to foreign exchange management under the Foreign Exchange Management Act (FEMA).

25. 9. Government Advisor Economic Advisor: Advises the government on monetary and financial matters, including fiscal policy and economic strategy. Debt Management: Manages the issuance of government securities and helps in the management of public debt. 10. Research and Data Collection Economic Research: Conducts research and publishes data on various aspects of the economy, financial markets, and banking sector trends. Statistics: Provides statistical information and analysis to guide policy decisions and inform the public..

26. COMMERCIAL BANKS The banks which perform all kinds of banking business and generally finance trade and commerce are called commercial banks. Since their deposits are for a short period, these banks normally advance short term loans to the businessmen and traders and avoid medium-term and long- term lending. However, recently the commercial banks have also extended their areas of operations to medium-term and long-term finance. Examples, Canara Bank, Indian Overseas Bank etc.

27. Categories of Commercial Banks 1) Axis Bank. (2) ICICI Bank. (3) Kotak Mahindra Bank. (4) Tamilnad Mercantile Bank Ltd. (5) IDBI Bank Ltd. etc. Private Sector (1) Canara Bank (2) Indian Bank (3) Bank of Maharashtra (4) State Bank of India (5) Bank of India etc. Public Sector (1) Bank of America (2) Bank of China (3) DBS Bank India Ltd. (4) AB Bank PLC. (5) Standard Chartered Bank. Foreign Bank

28. Development Banks Development banking was conceived as an instrument for achievement of national economic objectives. The main elements of development planning strategy were: (a) Government intervention to promote economic growth. (b) High protection to domestic industry. (c) Promotion of fixed capital assets through different subsidies. (d) Lack of competition as the focus was on planning.

29. Agricultural Banks Agriculture too requires long-term and short-term capital. Fixed or long-term capital is required to buy land and to effectively bring permanent improvements. Short-term capital is necessary to bu y seeds and to meet transplantation expenses . Co-operative banks supply short-term needs of agriculturalists. Land development banks grant long-term loans. Loans are given for the purchase of land, tractors, other equipments, land improvement, etc. NABARD is a central institution for financing agricultural and rural sectors. It was set up by the Central Government and RBI in July, 1982. It provides loans to the agriculture sector on medium and long-term basis. It charges different rates of interest for different purposes. However, the interest rates for the agriculture loans are generally lower than other rates of interest.

30. Exchange Banks Exchange banks finance foreign trade. They specialize in foreign exchange business. They do have branches in important parts of the world. They collect credit information regarding importers and exporters. They accept and discount foreign bills. They issue letters of credit. Ex. EXIM Bank.

31. Investment Banks Investment banks are financial institutions that help companies or government to raise capital (money), and advise them on other financial decisions. Main functions at investment banks: Investment banking is all about meeting client's objectives. Advise companies about the most efficient ways to raise money. Create securities that meet both clients and investors objectives. Serve as a liaison between companies who want to raise money and investors that want to invest money. Serve as an advisor in merger and acquisition (M&A transactions.) Market makers (facilitate trading) for vast array of securities sales & trading. Provide research on companies they cover for clients-research.

32. Co-operative Banks Cooperative Banks refer to those financial institutions under the Banking System in India that operate on the principles of cooperation and mutual benefit for their members. They belong to their members who are both the owners and customers of the bank. Thus, it can be said that the customers are the owners of these banks. Cooperative Banks are named so because these have the cooperation of stakeholders as the motive.

33. 2.On the Basis of Ownership

34. Public Sector Banks Public sector commercial banking, comprising the State Bank of India and its subsidiaries and the twenty nationalized banks. Nationalisation of banks happened in three phases in the years 1959, 1969 and 1980. This led to the dominance of public sector banks as nearly 90 per cent of the banking activity in the country was brought into the public sector. Most people generally rely on nationalized banks backed by the government

35. The Imperial Bank of India (IBI) was one of the oldest and the largest commercial banks in India, and was subsequently renamed and nationalized as the State Bank of India in 1955 . Initially, as per its royal charter, it acted as the central bank for India prior to the formation of the Reserve Bank of India (RBI) in 1935.

36. Private Sector Banks Public Sector Banks have acquired a place of prominence since nationalization. These continue to be the major lenders in the economy due to their large size and network. Public sector commercial banking, comprising the State Bank of India and its subsidiaries and the twenty nationalized banks. Nationalisation of banks happened in three phases in the years 1959, 1969 and 1980. This led to the dominance of public sector banks as nearly 90 per cent of the banking activity in the country was brought into the public sector.

37. Guidelines of the RBI for the entry of private sector banks as follows:

38. Co-operative Banks Cooperative Banks refer to those financial institutions under the Banking System in India that operate on the principles of cooperation and mutual benefit for their members. They belong to their members who are both the owners and customers of the bank. Thus, it can be said that the  customers are the owners  of these banks. Cooperative Banks are named so because these have the cooperation of stakeholders as the motive. They operate on the principle of “one person, one vote” in decision making in decision-making and are managed on the basis of cooperation, self-help, and no profit no loss.

39. Co-operative Banks Examples of CO-operative Banks- 1. Maharashtra State Co-op. Bank Ltd. 2. Deccan Merchnats Co. op. Bank Ltd. 3. The Bombay Mercantile Co-op. Bank Ltd. 4. Saraswat Co-op. Bank Ltd.

40. Features of Co-operative Banks i) Cooperative banks are supported and sponsored by government. In India, these banks are government subsidized financial agencies. (ii) They function on the basis of 'no profit, no loss'. These banks organized and managed on the basis of co-operation, mutual help and self-help. (iii) Most of the co-operative banks are unscheduled banks but some of them are scheduled banks. (iv) Cooperative banks perform all the main functions of commercial banks. (v) They are financial intermediaries only, because a significant amount of their borrowings is from the RBI, NABARD and Central and State Government.

41. Co-operative Banks On the basis of lending period, it is divided into state level, district level and primary agricultural co-operative societies or village level . Further, the co-operative banking structure in India is divided into five main categories: (i) Primary Urban Co-operative Banks. (ii) Primary Agricultural Credit Societies. (iii) District Central Co-operative Banks. (iv) State Co-operative Banks. (v) Land Development Banks.

42. 3. On the Basis of Dominance

43. Domestic Banks Domestic banks are registered and incorporated within the country. Indian banks operate nationally through a colossal network of branches. Since, they have a large and varied clientele with a diverse spectrum of needs, the Indian banks specialize in different geographical regions urban and rural, different sectors industry both large and small, agriculture, trade, housing, exports, etc. However, all of them are in the organized sector and come under the purview of the RBI Act and Banking Regulations Act.

44. Foriegn Banks The foreign banks are incorporated in foreign country but operating in India. Most foreign banks have a very strong parent bank commitment superior technology and provide a very high level of customer services. This has resulted in very strong performance of these banks both in the retail sector as well as the corporate sector. In order to operate in India, the foreign banks have to obtain a license from the RBI. The main business of foreign banks is the financing of India's foreign trade which they can handle most efficiently with their vast resources. Recently, they have made substantial inroads in internal trade including deposits, advances, discounting of bills, mutual funds, ATMs and credit cards.

45. 4. New Addition

46. Payement Banks The RBI granted 11 businesses "in principle" permission to start payment banks based on the recommendations of the Nachiket More Committee. Paytm payment bank, India Post Payment bank, Airtel payment bank, are the few examples of payment bank in India. This banks are like any other bank but operating on a smaller or restricted scale without involving any credit risk which means it can carryout all banking operations but cannot advance loans or issues credit cards. In this system, customer can do all transaction using mobile phone. This bank can take deposit upto ₹2,00,000 and accept demand deposit in the form of savings and current accounts.

47. Payement Banks Currently, following Payment Banks are functioning in India: (a) Airtel Payment Bank Ltd. (b) India Post Payment Bank Ltd. (c) FINO Payment Bank Ltd. (d) Paytm Payment Bank Ltd. (e) Jio Payment Bank Ltd. (f) NSDL Payment Bank Ltd.

48. Small Finance Banks Small Finance Bank is a type of specialized bank created by RBI to strengthen the Indian economy. This bank mainly provide financial services to the unserved and unbanked region of their country. These institutions are being set up as public limited company under companies Act, 2013. The minimum capital requirement for setting up a small finance bank is 100 crore. It provides banking services to underserved sections such as marginal farmers, micro and small enterprises, and other small businesses.

49. Small Finance Banks In India, currently 11 banks are functioning under the category of Small Finance Banks. Few banks are: (a) Ujjivan Small Finance Bank Ltd. (b) Unity Small Finance Bank Ltd. (c) AU Small Finance Bank Ltd. (d) Capital Small Finance Bank Ltd. (e) Suryoday Small Finance Bank Ltd.

50. NABARD The National Bank for Agriculture and Rural Development (NABARD) is a significant development bank in India, focusing on the agricultural and rural sectors. Established on July 12, 1982, by a special Act of Parliament, NABARD was created to promote sustainable and equitable agriculture and rural development.

51. 1. Objectives Agricultural and Rural Development : To provide and regulate credit for the promotion of agriculture, small-scale industries, cottage and village industries, handicrafts, and other rural crafts. Support Rural Infrastructure : To support the development of rural infrastructure and promote rural non-farm sector development. Financial Inclusion : To ensure the availability of financial services to the rural population and promote inclusive growth.

52. 2. Functions Credit Provision : Refinancing loans extended by various financial institutions for agriculture, rural development, small-scale industries, and other allied economic activities in rural areas. Developmental Activities : Formulating policies and guidelines for rural financial institutions and supporting them through capacity-building initiatives. Supervision : Supervising Regional Rural Banks (RRBs) and Cooperative Banks to ensure their financial health and compliance with regulations. Innovative Schemes : Implementing innovative schemes and projects aimed at improving the efficiency and productivity of the agricultural sector and enhancing rural livelihoods.

53. 3. Key Initiatives and Programs Kisan Credit Card (KCC) : Facilitating timely credit to farmers for their agricultural needs. Rural Infrastructure Development Fund (RIDF) : Funding rural infrastructure projects such as roads, bridges, and irrigation systems. Watershed Development : Promoting sustainable water management practices through watershed development programs. Self-Help Group (SHG) Bank Linkage Program : Promoting financial inclusion by linking self-help groups with banks for access to credit and financial services. Tribal Development Fund : Supporting the economic development of tribal populations through various initiatives. Microfinance : Promoting microfinance institutions to provide credit to the unbanked rural population.

54. EXIM Bank The Export-Import Bank of India (EXIM Bank) is a key financial institution in India, established to facilitate and promote the country's international trade. Here are the key aspects of EXIM Bank: 1. Objectives Promote Exports and Imports : To enhance India's exports and imports by providing financial assistance and support. Facilitate International Trade : To facilitate India's international trade by offering various financial products and services. Support Indian Enterprises : To support Indian enterprises in their globalization efforts by providing financial and advisory services.

55. Key Initiatives and Programs Export Credit : Providing pre-shipment and post-shipment credit to exporters to meet their working capital requirements. Overseas Investment Finance : Supporting Indian companies in their overseas investments and acquisitions through financial assistance. Buyer’s Credit : Offering credit facilities to overseas buyers of Indian goods and services to enhance their purchasing power. Export Marketing Services : Assisting Indian companies in identifying and exploring new export markets through market research and promotional activities. Project Exports : Facilitating the export of engineering goods and services, construction projects, and turnkey projects by providing financial and advisory support.

56. Advisory and Support Services Market Research : Conducting market research and feasibility studies to help Indian companies identify export opportunities and market entry strategies. Trade Information : Providing information on international trade trends, regulations, and market conditions. Capacity Building : Offering training and capacity-building programs for exporters and trade professionals.

57. International Collaborations Partnerships with International Financial Institutions : Collaborating with international financial institutions such as the World Bank, Asian Development Bank (ADB), and International Finance Corporation (IFC) to support trade and investment projects. Export Credit Agencies (ECAs) : Partnering with other ECAs to share risks and promote international trade. Multilateral Agreements : Engaging in multilateral agreements to facilitate trade finance and risk mitigation.

58. Conclusion EXIM Bank plays a crucial role in promoting India's international trade, supporting exporters and importers, and facilitating the globalization of Indian enterprises. Through its various financial products, advisory services, and international collaborations, EXIM Bank contributes significantly to the growth and diversification of India's trade portfolio.

59. National Housing Bank The National Housing Bank (NHB) is a pivotal financial institution in India dedicated to promoting housing finance and ensuring an efficient and stable housing finance system. 1. Establishment and Objectives Establishment : NHB was established on July 9, 1988, under the National Housing Bank Act, 1987. It operates as a wholly owned subsidiary of the Reserve Bank of India (RBI). Objectives : The primary objective is to promote housing finance institutions both at local and regional levels and provide financial and other support to such institutions. NHB aims to enhance credit availability and affordability for housing, particularly for the lower and middle-income segments.

60. 2. Functions Promotion and Development : NHB promotes housing finance institutions and works to develop the housing finance market in India. Refinance Support : Provides refinance facilities to housing finance institutions (HFIs) such as banks, housing finance companies (HFCs), cooperative banks, and regional rural banks (RRBs). Direct Finance : Offers direct financial assistance to public agencies and housing developers for specific housing projects. Regulation and Supervision : Regulates and supervises housing finance companies to ensure their soundness and protect the interests of borrowers and depositors. Policy Advocacy : Advises the government on housing finance policies and helps in the formulation and implementation of housing finance schemes.

61. Key Initiatives and Programs Urban Housing Schemes : Implements and supports various government housing schemes aimed at promoting affordable housing in urban areas, such as the Pradhan Mantri Awas Yojana (PMAY). Rural Housing : Promotes housing finance in rural areas through initiatives like the Rural Housing Fund (RHF) and the Golden Jubilee Rural Housing Finance Scheme. Subsidy Programs : Administers interest subsidy schemes for home loans, such as the Credit Linked Subsidy Scheme (CLSS) under PMAY. Capacity Building : Provides training and capacity-building programs for housing finance institutions to improve their efficiency and reach.

62. Regional Rural Bank Regional Rural Banks (RRBs) are a unique banking sector in India established to provide credit and other financial services to rural areas, particularly to the agricultural sector and small enterprises.

63. 1. Establishment and Objectives Establishment : RRBs were established under the RRB Act of 1976, following the recommendations of the Narasimham Working Group (1975). The first RRB, Prathama Bank, was set up on October 2, 1975. Objectives : To provide banking and credit services to the rural population, especially small and marginal farmers, agricultural laborers, artisans, and small entrepreneurs. To promote financial inclusion by extending banking services to underserved and unbanked rural areas. To support rural development and contribute to the rural economy.

64. 2. Regulation and Supervision NABARD : The National Bank for Agriculture and Rural Development (NABARD) is the principal regulator and supervisor of RRBs, providing them with guidelines, refinance support, and capacity-building assistance. RBI : The Reserve Bank of India (RBI) also regulates RRBs, setting norms and standards for their operations, capital adequacy, asset classification, and provisioning.

65. Challenges Profitability : Many RRBs face challenges in maintaining profitability due to high operational costs and the focus on small, low-margin rural loans. Technological Upgradation : Need for technological upgradation and digital transformation to improve efficiency and service delivery. Regulatory Compliance : Ensuring compliance with regulatory requirements and maintaining financial health amid diverse and challenging rural markets.

66. Case Study IMPACT OF PUBLIC SECTOR BANKS ON FINANCIAL INCLUSION: Scenario : The Indian government, through its public sector banks, initiated a financial inclusion drive known as the Pradhan Mantri Jan Dhan Yojana (PMJDY) in 2014. This scheme aimed to provide universal access to banking facilities, focusing on opening zero-balance savings accounts for the unbanked population. Implementation : Public Sector Banks (PSBs) played a crucial role in implementing this scheme. They leveraged their extensive branch network and reach in rural and semi-urban areas to open millions of accounts. The use of technology, such as mobile banking and Aadhaar-enabled payment systems, further facilitated this process.

67. Outcomes : Increased Financial Inclusion: As of 2023, over 46 crore (460 million) PMJDY accounts have been opened, with a significant portion in rural areas.Direct Benefit Transfer (DBT): These accounts enabled the government to transfer subsidies and benefits directly to the beneficiaries, reducing leakages and improving efficiency. Financial Literacy: The initiative also included efforts to enhance financial literacy among the rural population, helping them understand and utilize banking services better.

68. Conclusion: The classification of banks in India is a reflection of the diverse needs and functions they serve in the economy. Public sector banks, with their government backing and extensive reach, have played a pivotal role in financial inclusion initiatives like PMJDY. This classification not only helps in the organized functioning of the banking sector but also ensures that different economic sectors are adequately served. The case of PMJDY underscores the impact that targeted initiatives through specific bank categories can have on the broader economic and social fabric of the country.