Bank Account

Banks & Their Importance

Banks perform three core functions — financial intermediation (channelling savings into loans), credit creation (the deposit-lending cycle that creates more credit than physical currency in circulation), and operating the payment systems covered throughout tackl.finance's payments series — making them central to monetary policy transmission and financial inclusion. This guide maps India's bank landscape (Public Sector, Private, Foreign, Regional Rural, Small Finance, Payments Banks, and Co-operative Banks, the latter brought more directly under RBI supervision via the Banking Regulation (Amendment) Act, 2020), all unified by RBI licensing and ₹5 lakh DICGC deposit insurance. We then cover NBFCs — which lend extensively (gold loans, vehicle finance, microfinance, housing finance via HFCs, and P2P platforms) but cannot accept demand deposits, don't carry DICGC protection even where they do offer FDs, and sit outside the direct payment-system rails. We explain RBI's Scale-Based Regulation (SBR) framework, effective October 2022, which places every NBFC into one of four layers (Base, Middle, Upper, Top) with progressively bank-like requirements for larger, more systemically significant NBFCs — a direct response to past episodes of NBFC-sector stress. We close with co-lending, the growing model through which banks and NBFCs jointly fund loans, combining a bank's cost of funds with an NBFC's reach.