BFSI¶
The BFSI sector, which stands for the Banking, Financial Services, and Insurance sector, is a crucial component of the Indian economy, encompassing all facets of banking, insurance, and non-banking financial institutions (NBFCs). Additionally, the BFSI industry includes financial service providers like broking firms and asset management companies. India offers a conducive environment for the BFSI sector to thrive, thanks to a combination of factors such as government policies, public and private sector participation, robust regulations, and technological advancements.
Here is an overview of the BFSI sector's structure in India:
Structure of BFSI in India:¶
1) Central Bank¶
- Definition: The central bank is the apex regulatory authority responsible for overseeing the national banking industry within a country.
- Function: It manages the circulation of currency, controlling inflation by adjusting currency flow. Additionally, it exclusively holds the authority to print a nation's paper currency.
- Example: In India, the Reserve Bank of India (RBI) serves as the designated central bank.
2) Scheduled Commercial Banks¶
- Classification: These banks are further categorized into three types:
- Public Sector Banks (PSB): Banks where the government owns a majority stake (more than 50%) and whose shares are publicly listed. There were 12 active PSBs as of April 1, 2020.
- Private Sector Banks: Banks where private shareholders control the majority stake.
- Foreign Banks: Banks headquartered in one country but operate in another, following the regulations of both their home and host countries.
- Examples: State Bank of India, Bank of Baroda, HDFC Bank, ICICI Bank, Citibank, Standard Chartered Bank, etc.
3) Regional Rural Banks (RRB)¶
- Ownership: These banks are owned by the Ministry of Finance, Government of India.
- Function: RRBs primarily serve rural areas with basic banking and financial services, although they may have urban branches.
- Example: Karnataka Vikas Gramina Bank.
4) Cooperative Banks¶
- Objective: Cooperative banks aim to promote social welfare, with schemes targeting underprivileged or financially underserved sections of society.
- Types: Cooperative banks are further divided into various types, including State Co-operative Banks (SCBs), Primary Credit Societies (PCS), District Central Co-operative Banks (DCCB), and Urban Co-operative Banks (UCB).
5) Specialized Banks¶
- Scope: Specialized banks limit their banking services to specific industries. These include:
- Export-Import Bank of India (EXIM Bank): Assists the export and import sectors.
- Small Industries Development Bank of India (SIDBI): Provides loans to small-scale industries.
- National Bank of Agriculture and Rural Development (NABARD): Offers financial support to the agricultural sector.
6) Development Banks¶
- Purpose: Development banks, also known as development finance institutions, focus on providing capital assistance for economic development projects. They prioritize social development over profit.
- Examples: Industrial Finance Corporation of India (IFCI), State Finance Corporations (SFC), etc.
7) Small Finance Banks (SFB)¶
- Target: SFBs aim to serve sections of society often overlooked by other banks, such as micro industries, unorganized sectors, small or marginal farmers, etc.
8) Payments Bank¶
- Function: Payments banks accept restricted deposits from customers (up to INR 2 lakh) but do not issue loans or credit cards. They offer services like debit/ATM cards, current/savings accounts, and mobile banking.
- Examples: Airtel Payments Bank, Jio Payments Bank, Paytm Payments Bank, etc.
The BFSI sector in India operates under the influence of various interdependent factors, including government policies, public and private participation, robust regulatory measures, and technological advancements. This combination has led the BFSI sector to register strong growth in recent years, making it a vital contributor to India's economy.
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