Different Types of Banks

A bank is a financial institution that receives money and advance loans.  There are different types of banks, all providing different types of facilities. Some of the most common banks are listed below.

1. Central bank.

2. Commercial bank.

3. Industrial bank.

4. Agriculture bank.

5. Saving bank.

6. Exchange bank.

1. Central Bank

It is a national bank that establishes monetary and fiscal policy of a particular country. It is responsible for price and economic stability of the country. It offers services to the state such as issuing and managing country’s currency; regulates the flow of money, managing public debts, managing exchange and gold reserves. It also offers services to scheduled commercial banks such as acting as ‘lender of the last resort’ in financial crisis, rediscounting their bill of exchange, clearing their cheques and regulating their activities.  Every country has its own central bank. State Bank of Pakistan is the central bank of Pakistan. Federal Reserve System is the central bank of the USA.

 2. Commercial Bank

It is a bank engaged in performing the routine duties of banking business. The primary function of commercial bank is to receive deposits and advances loans to organizations and individuals. They receive deposits in the form of current or saving account. They provide loans in the form of overdraft, cash credit and discounting bill of exchange. They also make payment against cheques, issue letter of credit (L/C), transfer money and provide ATM service. UBL is the example of commercial bank.

3. Industrial Bank

Industrial bank plays a vital role in the development of industries in a country. It provides short term and long term loans in local and foreign currencies to industrialists for new industrial units. It also offers finance for expansion, modernization, improvement or replacement of existing units.  Industrial bank provides technical, financial and management assistance to its clients in planning and execution of industrial projects. In Pakistan, Industrial Development Bank of Pakistan (IDBP) was established in 1961 to meet industrial requirements. 

4. Agriculture Bank

Agriculture bank plays a crucial role in the development of agriculture sector. It provides credit to farmers and landlords for purchase of manure, seeds, and tractors. It also provides technical assistance to farmers and introducing new techniques in farming. Agriculture Development Bank of Pakistan (ADBP) was established for meeting the financial requirement of agriculture. This bank also known as Zarai Taraqiati Bank Limited (ZTBL).

5. Saving Bank

Saving bank is a financial institution whose main objective is to receive small deposits and pay interest on these deposits. It is a bank that promotes thrift. Saving centers perform the business of saving banks in Pakistan.   Now commercial banks also perform the functions of saving banks.

6. Exchange Bank

It is a bank that deals in foreign exchange and concerned with financing foreign trade. It remittances money from one country to another. It buys and sells foreign exchange at open market rates. Commercial banks also perform the functions of exchange bank.