Types of banks

Banks are classified in many ways. On the basis of ownership structure, we classify the commercial banks in Nepal into private sector banks, public sector banks , and joint-venture banks. Kumari bank ltd., Siddhartha bank ltd., and machhapuchhre bank ltd. are examples of private sector banks as they are owned by private investors. Nepal bank ltd., Rastriya Banijya bank ltd., and agricultural development bank ltd. Are the public sector banks because they are owned (majority) by the government. Similarly, Nabil bank limited, standard chartered bank Nepal ltd. And Nepal SBI Bank Ltd., etc Are examples of joint venture banks because they are jointly owned by Nepalese investors and foreign financial institutions.

Classifying banks by the markets they served is another way of classification of banks. Some banks serve the markets through out the world. Such banks are known as international banks or global banks or money-center banks. Citi bank, and JP Morgan chase bank based in the U.S.A. are well-known examples of global bank. But some banks serve only the domestic market. Such banks are known as domestic banks. In Nepalese context, all banks in operation are domestic banks.

Some banks provides wide ranges of financial services while other provides limited product lines. Former types of banks are known as full-service banks and latter ones are known as limited-purpose banks. In Nepal, all banks in operation provides wide range of financial serves. So we can call them as full-service banks. Limited-purpose banks concentrates their services primarily on one line of business. For examples, agricultural development bank used to provide its services only to agricultural sector before the financial liberalization in Nepal. It was established as limited purpose bank. But after financial liberalization it started serving as full-service bank. MBNA American bank is the examples of limited-purpose bank. UK-based LIoyds banking group acquired this bank in December 2016 from bank of America for euro 1.9 billion. It was the world’s largest independent credit card issuer specializing in ‘affinity credit card scheme’.

Bankers are also classified as wholesale banks and retail or consumer banks on the basis of the volume of deals. Wholesale banks focus their services only on the large and medium-size businesses. They make corporate loans, interbank loans and sovereign loans. Sovereign loans are the loan provided to the government. Consumer banks are those banks that provide financial services to individuals, small and medium-size business firms. Such banks offer wide ranges of financial services. Some retail banks outsource their services from specialized vendors such as insurance companies, mutual funds, information technology companies, etc. and offer to consumers and small business firms.

Development of information and communication technology has brought about the revolution in the banking industry. Intensive use of internet is one of the innovations in the banking industry. Some banks operate exclusively or predominantly on internet. Such banks are called internet banks. Some internet banks have branches, and automated teller machines. It is called online banking also. In the USA, internet banks can have state or national charters, but in Nepal we do not have separate financial institutions called internet bank. Almost all banks conducts limited internet banking services such as ATM,  checking the balance through internet and online bill payments. In addition, banks have any-branch-banking-services (ABBS) through the internet service.

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