Differential Banks and Regional Rural Banks

Differential Banks

• Regional Rural Banks (RRBs) were established in 1976 under the RRB Act, based on the recommendations of M.Narasimham's Committee on Financial Inclusion.
• RRBs are subject to CRR and SLR norms, but RBI can prescribe separate norms.
• Loan interest rates of RRBs cannot be more than the prevailing lending rates of Cooperative Banks in the area.
• RRBs are restricted to a few districts, e.g., Uttar Bihar Gramin Bank (Sponsor bank - Central Bank of India).

Local Area Banks

• Local Area Banks were established in 1996 based on the Budget announcement by Finance Minister Manmohan Singh.
• They are not set up by the Union or State governments or by any special Act or Parliament, but by private entities applying to RBI under the Banking Regulation Act.
• They can open branches in a maximum of three districts, with one urban center per district.
• The remaining branches need to be opened in rural areas of that district.

Small Finance Banks

• Small Finance Banks were established in 2015, with a minimum capital requirement of ₹100 crore.
• Examples include Capital Small Finance Bank (Punjab), Ujjivan (Karnataka), and Utkarsh (UP).
• They can open branches anywhere, with a preference for North East and Central India clusters where Universal Banks' penetration is poor.

Payment Banks

• Payment Banks were established in 2015, with a minimum capital requirement of ₹100 crore.
• Examples include Airtel, India Post, FINO, Paytm, Jio, and NSDL.
• They cannot accept time deposits, but can link accounts to enable automatic transfer of excess balance to a Savings Bank account.

Post Office Savings Bank (PoSB)

• PoSB was established under the Government Savings Bank Act 1873.
• It accepts demand deposits, savings accounts, and time deposits.
• It can keep more than ₹2 lakh balance.
• E-banking and online bill payment services are available.

India Post Payments Bank (IPPB)

• IPPB was established in 2016 as a public limited company under the Companies Act 2013.
• It accepts only savings accounts and current accounts.
• It cannot accept time deposits, but can link accounts to enable automatic transfer of excess balance to a PoSB account.
• UPI, BHIM, NEFT, IMPS, and BBPS services are available.

Development Finance Institutions (DFIs)

• DFIs provide medium to long-term loans to industries, including support services like arranging foreign currency, underwriting, technical/management consultancy, and bank guarantees.
• They do not accept deposits from ordinary people.
• Examples include Industrial Finance Corporation of India (IFCI), National Small Industries Corporation (NSIC), ICICI, Industrial Development Bank of India (IDBI), and India Infrastructure Finance Company Ltd (IIFCL).

Non-Banking Financial Institutions (NBFCs)

• NBFCs include Infrastructure Finance Companies, Asset Reconstruction Companies, Factoring Companies, Gold Loan Companies, and Housing Finance Companies.
• Examples of NBFCs include Tata Capital, Reliance Capital, Infrastructure Leasing & Financial Services Limited (IL&FS), and others.
• NBFCs are classified into different categories based on their functions and services.

Quiz on types of banks, including Regional Rural Banks, Local Area Banks, and Small Finance Banks, and their differences. Also covering chronology and characteristics of these banks.