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CLASSIFICATION OF BANKS Types of Banks • On the basis of ownership • On the basis of domicile • On the basis of Function Types of Bank on the basis of Ownership • The banks are classified on the basis of ownership into two categories. • 1. Public sector banks • 2. Private sector banks Types of Bank on the basis of Ownership • 1. Public sector banks: • The banks owned and controlled by the Government are called Public sector bank. e.g Pashtany Bank, • 2. Private sector banks: • The banks owned by corporations are called private sector banks. e.g Habib Bank, Bank Alfalah etc Classification of banks on the basis of domicile • The banks are divided on the basis of domicile into two categories. • 1. Domestic banks • 2. Foreign banks Classification of banks on the basis of domicile • 1. Domestic banks. • The banks registered and incorporated within the country are called domestic banks. e.g. Kabul Bank, Azizi Bank etc • 2. Foreign Banks • The banks which have their origin and head offices in the foreign countries are called foreign banks. e.g. National Bank, Standard Charted Bank etc Classification of Banks on the basis of Function 1. Central Bank: 2. Commercial Banks: 3. Exchange Banks: 4. Saving Banks: 5. Agriculture Banks: 6. Industrial Banks: 7. Co-operative Bank 8. Mortgage Bank 9. Investment Bank 10. Merchant Bank 11. Consortium Bank 12. Export-Import Bank 13. School Bank 14. Labour Bank Classification of Banks on the basis of Function 1. Central Bank: • Central Bank is the bank of banks. Every civilized country now has its own central bank. • The primary function of the central bank is to regulate the flow of money and credit in order to promote efficiency, stability and growth in the country. • “Da Afghanistan Bank” is the central bank of Afghanistan. In Pakistan “State Bank of Pakistan” is the central bank (in England it is “Bank of England” and in America it is “The Federal Reserve System”). • Functions of central bank are; • Sole right of note issue • Banker, agent and advisor to the government • Banker to commercial banks • Controller of credit • Clearing agent • Lender of last resort • Custodian of foreign exchange reserves • Development Role • Other Functions Classification of Banks on the basis of Function 2.Commercial Banks: • Commercial banks are those banks which are engaged in performing the routine duties of banking business. • They collect surplus money and make loans and advances in the form of overdrafts, cash credit and discounting bills of exchange. • They also provide special financial services and agency services. • Commercial banks in short are considered the life blood of the economic society. • In Afghanistan Kabul Bank, Azizi bank, Habib Bank etc are commercial Banks. • Functions of commercial banks are; • Basic Functions • Secondary Functions List of Commercial Banks in Afghanistan • The Afghanistan Bank has licensed 15 commercial Banks which are members of Afghanistan banks association, the following is the list, • Afghanistan International bank (AIB) • Azizi Bank • Arian Bank • Alfalah Bank Limited • Bank-E-Millie Afghan • BRAC Afghanistan Bank • Development Bank of Afghanistan List of Commercial Banks in Afghanistan • Export Promotion Bank • Habib Bank of Pakistan • Kabul Bank • National Bank of Pakistan • Pashtany Bank • Punjab National Bank of India • Standard Chartered Bank • The First Micro Finance Bank Classification of Banks on the basis of 3.Function Banks: Exchange • Exchange banks are mainly deal with international trade. These banks takes the responsibility of settlement of foreign exchange and arrange the foreign businesses. • In Afghanistan commercial banks have been allowed to do the business of Exchange Bank. • American Express bank, Rupali bank, bank of oman are some examples of exchange banks. • There functions are; • Currency exchange • Providing information for international business • Providing finance for international business • Bank drafts and Bill of exchange • Letter of credit Classification of Banks on the basis of Function 4. Saving Banks: • Saving banks are those banks which collect and keep the small savings of the public. They are called thrift promoting institutions. • The Saving banks invest the funds in the safest government securities and offer reasonable rate of profit on saving accounts. • Students, government employees and household women are usually opening such accounts. • A prior notice to bank is necessary for withdrawal of huge amount (More than Afs 15000) • National Saving bank in England and Post office saving bank in Pakistan are examples of saving banks. • There Functions are; • Accepting deposits of people for saving • Investing the money of people in safe means of investment Classification of Banks on the basis of Function 5. Agriculture Banks: • The bank is responsible for the development of agriculture sector of the country. • Agriculture banks are set up to provide financial assistance to the agriculturists and agro-based industries. • Agricultural Development bank of Pakistan, Agricultural Mortgage Corporation in England and Federal Land Bank of USA • There functions are; • Providing long term advances for buying tractors etc • Short term loan for purchasing seeds and fertilizers • Introducing modern techniques in farming • Making awareness in farmers by seminars • Medium term loans for construction of tube wells Classification of Banks on the basis of Function Banks: 6. Industrial • The Industrial banks provide medium and long term credit to the industries. The growth of industries depends on these banks. • Industrial development bank of Pakistan and Industrial bank of Japan are working as industrial banks. • In Afghanistan mostly commercial banks provide financial assistance to the industries. • There functions are; • Granting loans to set up new companies • Long term loans for machinery and construction of building • Loans for modernization and replacement of business units • Short term loan for purchase of raw material and payment of daily expenses.
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