The post contains the structure and functions of banking from prescribed Debt Recovery Agent Syllabus 2024.


IIBF is the administering authority of DRA Exams every year. Indian Institute of Banking and Finance conducts the Debt Recovery Agent Exams almost every month & this time, the dates have been announced for the October, November & December 2023.

And this time, Learning Sessions have the good news for you! It’s amazing if I can say so! DRA candidates now can get the coaching for their upcoming exams in 2022 & onwards from Learning Sessions expert faculty & that too, this time around, for free! Yes! The online lectures are getting conducted on daily basis & you can contact us for more details.

Amazing, Right?

Well… now that you know about the DRA Classes 2024, lets move on to our current topic i.e. STRUCTURE AND FUNCTION OF BANKING


Like we already know that among the functions of banks are primarily the acceptance of deposits and the provision of credits and loans to bank customers. All banks around the world generally cater to their customers by accepting their funds in the form of deposits and lending them funds as loans. 

In addition, there are other functions that the bank performs within the scope of its nature of service and organizational structure.


Knowing the various functions of banks in India is very important not only for the exam but also for practical purposes. As DRAs has to deal with bank & corporate clients, its not unuseful to understand the knit-bits about the types, roles and structure of banks. And Debt Recovery Agent candidates are expected to know about each of them as well as how banks perform different functions.


To understand in detail the functions of banks in India, we must first go through the basics of banking i.e. the meaning, structure, roles and types of banks in India.



Banks are financial institutions authorized to accept deposits and grant loans. Other functions of banks may include: 

Financial services such as 

  • wealth management, 
  • safety deposit boxes and 
  • Foreign exchange.


There are several types of banks that are designed to perform all of the above functions. The most common types of banks are: 

  1. retail banks, 
  2. corporate banks and 
  3. investment banks.


In most countries, these banks are regulated by either the national government or the central bank. In India, all banks and financial institutions are regulated by the Reserve Bank of India (RBI).



The main functions of banks in India include the following:


  • Accepting deposits: Banks accept deposits from their customers, who can withdraw their funds at will. Customers can deposit money and leave their funds with the bank in any type of bank account – savings account, current account or fixed deposit account.

The savings bank also pays its customers interest on deposits. Such banks are very popular with small savers. A current account is an ongoing account that can be serviced several times during the working day. Whereas a fixed deposit account is responsible for holding deposits for a fixed period of time and such accounts pay a higher rate of interest.

  • Issuing Notes/Drafts: The bank is also responsible for issuing banknotes and creating other cheap means of exchange in the form of drafts or cheques. RBI is responsible for issuing notes and coins in India.

Banks create and facilitate the transfer of credit instruments such as notes, bank drafts, letters of credit, checks and the like. These tools are very useful for saving the use of metal money and make the transfer of funds cheap and convenient.

    • Lending credits and loans: The bank lends funds to needy people at a certain interest rate. Banks provide loans mainly to farmers, industrialists and businessmen who intend to invest in their businesses for their own profit and to contribute to the economic development of the country.
    • Credit deposits: A bank can create deposits by providing loans to its customers. In such cases, the borrower is credited with an amount that can be withdrawn if needed. Customers usually deposit money borrowed from a bank at the same bank either when the bank insists or to take advantage of the benefits of a current deposit account. Such deposits are also known as credit deposits.
  • Exchange services 
  • Enforcement of checks drawn on other banks
  • Acceptance and enforcement of bills of exchange
  • Foreign exchange trading to help settle foreign debts
  • Exchange administrator
  • Helping RBI in keeping issue of notes safe and sound etc.


Now, to the Structure of Indian Banking:

Indian banking structure is generally divided into: 

  • Scheduled Banks and 
  • Non-Scheduled Banks. 

Scheduled banks are further divided into:

  • cooperative banks and 
  • commercial banks

While under commercial banks we have: 

  • public sector banks, 
  • regional rural banks (RRBs) and 
  • foreign banks. 


Let us get into the details:

What are Scheduled banks?

They are described in the Reserve Bank of India Act as banks listed in the Second Schedule of the RBI Act, 1934. All RRBs, Indian and foreign commercial banks and cooperative banks are considered scheduled banks.

Scheduled banks must have:

Minimum paid-up capital and reserves > or = Rs. 25,00,000.00.


What are Unscheduled banks?

These banks are, obviously, not governed by the 2nd Schedule of the RBI Act, 1934 and hence are not bound by the RBI guidelines. Although, they are required to maintain: 

Cash Reserve Ratio (CRR) (not with RBI but with themselves)

Non-scheduled banks must have: 

Minimum paid-up capital and reserves > or = Rs. 5,00,000.00.


What are Commercial Banks?

A commercial bank is the one that primarily accepts deposits and lends loans to their customers. They are financial entities providing facilities to individuals, organizations & businesses in the form of current, term and savings accounts. They also provide loans to businesses.

They can be either: 

  • scheduled or 
  • non-scheduled banks.


What are Public Sector Banks?

The government owns the majority of the shares of these banks. The ownership of the government is generally > 50%. For instance, the government share of the State Bank of India (SBI) is 58.60%.

These banks are further classified into: 

  • Nationalized Banks and 
  • State Bank and its Associates.


What are Private Sector Banks?

These bank’s most equity is held by private entities, corporations, institutions or individuals along with the government. Banking in India has been dominated by public sector banks since 1969, when all major banks were nationalized by the Government of India.

After liberalization in the 1990s, banks like HDFC & ICICI, etc. became private sector banks of the new age.


What are Foreign banks?

These banks are forced to follow the guidelines of both home and host countries. Such banks tend to be more efficient in countries with high taxes and in countries where it is easy for international firms to enter the market.


What are Regional Rural Banks (RRBs)?

These banks were established in 1975 on the recommendation of “The Narasimham Committee” under the RRB Act, 1976. These banks are regulated and supervised by NABARDs (National Bank for Agriculture and Rural Development).

RRB is owned by 3 entities: 

  • Central Government (50%), 
  • State Government (15%) and 
  • Sponsor Banks (35%)


What are Cooperative banks?

Cooperative banks play a very important role in the development of the country’s rural economy. The rural cooperative credit sector, which accounted for more than 50% of loans disbursed a few years ago, now has < 20% of shares.



Now, there are other, in addition to the above types of banks, banks that have been introduced to cater to the specific needs of customers. These banks are called specialized banks. They are as follows:


SIDBI (Small Industries Development Bank of India):

SIBDI provides loans for small scale industries or businesses. Customers who need to finance their small businesses with modern technology and equipment turn to SIBDI for financial assistance.


EXIM Bank (Export and Import Bank):

EXIM Bank is responsible for financing the export and/or import of goods from abroad. It is regulated under the Export-Import Bank of India Act 1981 as an export credit provider, mirroring the global export credit agencies.


NABARD (National Bank for Agriculture and Rural Development):

NABARD provides all kinds of financial assistance for the development of rural, village, agriculture, handicrafts etc. Therefore, it is considered as the apex regulatory body for the overall regulation of RRBs and cooperative banks in India. NABARD is under the purview of the Ministry of Finance.


Small finance banks:

This is another important type of bank that performs functions to help micro industries, marginal farmers and small artisans. Small finance banks provide loans and financial assistance to needy individuals from the unorganized sector of society. These banks are regulated by RBI. 

Some of the small finance banks currently operating in the India are: 

  • AU Small Finance Bank, 
  • Suryoday Small Finance Bank, 
  • Capital Small Finance Bank, 
  • Northeast Small Finance Bank and 
  • Jana Small Finance Bank.


Payment banks:

Payment banks are a newly introduced form of banking conceptualized by the RBI. These banks require a deposit of up to Rs. 1,00,000.00 and do not allow customers to apply for credit cards or loans.

Payments banks provide services of: 

  • online banking, 
  • debit cards, 
  • mobile banking etc. 

The leading payment banks in India are: 

  • Airtel Payments Bank, 
  • NSDL Payments Bank, 
  • Jio Payments Bank, and so on.


That’s all in Functions of Banks study notes for DRA Exams. We hope that the above Debt Recovery Agent study material will be useful for you! For more such study resources, get our:

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