Financial Structure
The Indian financial system comprises the following
institutions:
1. Commercial banks
a. Public sector
b. Private sector
c. Foreign banks
d. Cooperative institutions
(i) Urban cooperative banks
(ii) State cooperative banks
(iii) Central cooperative banks
2. Financial institutions
a. All-India financial institutions (AIFIs)
b. State financial corporations (SFCs)
c. State industrial development corporations
(SIDCs)
3. Nonbanking financial companies (NBFCs)
4. Capital market intermediaries
About 92 percent of the country’s banking segment
is under State control while the balance comprises
private sector and foreign banks. The public sector
commercial banks are divided into three categories.
State bank group (eight banks): This consists of
the State Bank of India (SBI) and Associate Banks
of SBI. The Reserve Bank of India (RBI) owns the
majority share of SBI and some Associate Banks of
SBI. SBI has 13 head offices governed each by a
board of directors under the supervision of a central
board. The boards of directors and their committees
hold monthly meetings while the executive commit-
tee of each central board meets every week.
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Nationalized banks (19 banks): In 1969, the Gov-
ernment arranged the nationalization of 14 sched-
uled commercial banks in order to expand the branch
network, followed by six more in 1980. A merger
reduced the number from 20 to 19. Nationalized banks
are wholly owned by the Government, although some
of them have made public issues. In contrast to the
state bank group, nationalized banks are centrally gov-
erned, i.e., by their respective head offices. Thus, there
is only one board for each nationalized bank and meet-
ings are less frequent (generally, once a month).
The state bank group and nationalized banks are
together referred to as the public sector banks
(PSBs). Tables 1 and 2 provide details of public is-
sues and post-issue shareholdings of these PSBs.
Regional Rural Banks (RRBs): In 1975, the
state bank group and nationalized banks were re-
quired to sponsor and set up RRBs in partnership
with individual states to provide low-cost financing
and credit facilities to the rural masses.
