Types of Banks

The Different Types of Banks: Which Is Right for Your Needs?

There are many different types of banks, all of which have different target customers and perform different functions. But what exactly are the differences?

What Is a Bank?

It may seem simple, but it’s a question people don’t ask enough. Banks play a huge role in our lives, so it’s important to fully understand what they are. At a high level, banks are financial institutions that are certified to receive deposits of money and provide loans that allow people to borrow money. However, many banks offer other services as well, including financial advising and currency exchange services.

The kinds of institutions that exist in the finance industry run the gamut from central banks to insurance companies and brokerage firms. A financial institution is any public- or privately-owned organization that collects, invests and distributes funds. Banks bridge the gap between individuals who want to save their money in a secure place and those who need to borrow money.

Some banks only serve a specific set of people, while many others serve the general public. Other types of banks, such as a central bank, serve as regulatory bodies for national governments.

Types of Banking:-

1. Branch Banking:
  • Banking done via branches is called as Branch Banking.
  • The branches are set up under Section 23 of the Banking Regulations Act, 1949.
  • High Risk Division
  • Example:- SBI has lots of branches and banking is done via branches.
2. Unit Banking:
  • When a single bank with a single branch or few branches does banking is called Unit Banking.
  • Example: – Capital Local Area Bank, Catholic Syrian bank is an example of Unit Banking.
3. Mixed Banking:
  • When a bank does commercial and investment banking together called as mixed banking.
  • Example: – Bank provides savings account, mutual funds, and loans to industries.
  • Download Free Banking Handbook
4. Chain Banking
  • When a group owns three or more than three independent banks that have individual existence is called as Chain Banking.
  • Example: – SBI and its associates were an example of Chain Banking.
5. Retail Banking
  • If a bank offers a savings account, personal loans, debit cards, credit cards to an individual called Retail Banking.
  • It is consumer oriented.
  • Example:- SBI providing home loans.
6. Wholesale Banking

Banking has done with high net worth individuals or mid-sized companies by offering services like Mutual Funds, Mergers and Acquisitions, Investments such banking is called Wholesale Banking.


  • Merger: – When two banks combine to become one bank known as merger.
  • Acquisition: – When one bank takes control of the other Centurion bank was acquired by HDFC.
  • Amalgamation: – When two or more than two companies or banks combine to become one known as Amalgamation.

Presidency banks were amalgamated into Imperial Bank.

7. Relationship Banking
  • When a bank deliberately focuses on the needs and welfare of the customers this type of banking is known as Relationship Banking.
  • Example: – If a bank offers a credit card along with your opening account.
8. Correspondent Banking

When a domestic bank offers financial services to its customer in foreign countries, where it does not have any physical presence.

9. Universal Banking

Banking in which big banks perform banking functions like providing loans,
providing insurance, providing mutual funds, providing deposits under a single

10. Social Banking

  • When banks focus on the welfare of the public that banking is known as Social Banking.
  • Example:- Bank offers BSBDA, no KYC Account, focus on Financial Inclusion.

11. Virtual Banking

  • Online banking is known as virtual Banking.
  • Example:- Internet Banking, Banking through Paytm, Banking through Mobikwik
12. Narrow Banking
  • It is the opposite of Universal Banking.
  • Narrow Banking means Narrow in the sense of engagement of funds and not inactivity. So, simply, Narrow Banking involves mobilizing a large part of the deposits in Risk Free assets such as Government Securities.
  • Example: – Bank invests in government securities.
13. Islamic Banking

Banking which follows Sharia Law & its rules and which focuses on no interests but sharing profits.

14. Shadow Banking
  • Banking done by non-banking companies called Shadow Banking.
  • Example: – Muthoot Finance.