Commercial banks are categorised into three types.
1. Public Sector Banks: Public sector banks refer to a type of financial institution that is state-owned by the corresponding Government. A significant part of the share of such organisations is held by the Government. In India, the Reserve Bank of India, which acts as the central bank, creates operating guidelines for the public sector banks.
2. Private Sector Banks: Private sector banks are financial institutions registered as companies with limited liabilities. The major part of the share capital of such companies is owned by individuals or private businesses.
3. Foreign Banks: Foreign banks are financial institutions that are operating overseas within a foreign nation. Post the financial reform of India (in 1991), there was a marked increase in the number of foreign banks on Indian soil. They are essential for the economic development of a nation.