Functional Classification of Banks

Central Bank

A central bank is the most important institution in the banking system of a country
established with the objective of regulating the banking and monetary system of the
country.
It issues notes and currencies within the country and is entrusted with responsibility
of maintaining the price level in the country stable.
It acts as banker to the Government and it directly or indirectly controls the activities
of all other banks.
Example:
o State Bank of Pakistan is Central Bank of our country.

Savings Banks

The basic purpose of these banks is to inculcate the habit of savings in the people.
The savings bank deposits are not repayable upon only the written orders of the depositor but
the depositor or his agent has to appear personally at the saving bank to make withdrawal, and
for this purpose he must present a pass book, a certificate of deposit or some similar documents
to prove his right to receive payment.
It takes deposits from the public and lands the collected funds to traders
Example:

o
o

. Post Office Savings Banks

National Savings Organization

Mortgage Banks

These banks mainly deal in loans for the acquisition or construction of real estate
Mortgage bank advances long term credits against securities of immovable properties
The period of loan usually ranges between 15 to 30 years

Example:

House Building Finance Corporation in Pakistan is a Mortgage Bank.

Agricultural Bank

Such bank provides long and short term finance to agriculturists for their agricultural purposes.
Long term capital is required for acquisition and improvement of land and purchase of heavy
machinery and equipment.
Short period capital is required by the farmers for current expenditure on seed, wages etc.

Example:

Zarai Taraqiati Bank of Pakistan

Exchange Bank

Exchange bank deals mainly in the finance of the foreign trade of the country.
It deals in foreign exchange.
The main function of such bank is to buy and sell foreign currencies, rather titles to foreign
currencies in the form of bills of exchange, drafts, telegraphic transfers etc.
It purchases the bill of exchange which arise in connection with the import and export trade of
the country and they deal in exchange
Example:

o
o

Grindlays Bank Ltd

Standard Chartered Bank Ltd

Cooperative Bank

This type of bank is organized mutually by the persons of similar occupations within
the objectives of providing banking and credit facilities to the members.

Generally in every country. Government patronizes co-operative banks in order to

encourage the cultivators, fisherman, workers in the factories etc.

Example:

o KPK Provincial Co-operative Ltd

Foreign banks

The banks which have their origin and head offices in the foreign country are called foreign
banks
Foreign bank helps people and businesses engage in international trade and finance
Foreign banks are the branches of the banks incorporated abroad.

Example:

o
o
o

The Standard Chartered Bank Ltd

ABN-AMRO Bank
HSBC Bank Middle East Limited Pakistan

References:

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