Understanding Types of Banks in Indonesia Based on Function, Operation, and Ownership

Kapanlagi.com - Almost everyone is familiar with banks, right? Banks themselves are financial intermediary institutions that are generally established with the authority to accept deposits, lend money, and issue promissory notes or banknotes. Some banks also provide a number of service products, including transfers, bill payments, loans, and others. In addition, banks generally have the goal of helping economic growth, improving public welfare, and equalizing national development.

Basically, banks have several general functions that you need to know, such as collecting funds from deposits from banks, funds from the public, and other financial institutions. Banks also serve as distributors of funds from the general public in the form of credit cards, securities, and fixed asset ownership. In addition, banks also have the function of monitoring money traffic such as money transfers, credit cards, and so on.

Well, although they have the same general function, it turns out that each bank works differently. There are several types of banks and their functions that you need to know. Instead of being curious, let's directly look at the complete review below.

1. Types of Banks Based on their Functions

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The first type of bank is distinguished based on its function such as central bank, commercial bank, and people's credit banks. For a more complete understanding, let's take a look at the following review.

-Central Bank

The Central Bank is a private institution or agency responsible for monetary or financial policies in a country. The main task of the central bank is to maintain currency stability or prices in a country. In Indonesia, the role of the central bank is carried out by Bank Indonesia. Later, the bank will control the inflation rate in a country, so the economy of a country will depend on the central bank. It is also important to note that every country in the world has its own central bank, and there is only one in each country.

The central bank has the authority to create and implement monetary policies to control the amount of money circulating in society. In addition, the central bank also has the task of regulating and maintaining the smoothness of both cash and non-cash payment systems. The central bank itself has a great responsibility in regulating and supervising banking from the risks and costs of systemic crises.

- Commercial Bank

The next type of bank based on its function is a commercial bank. Basically, commercial banks provide services in payment transactions. This business entity also has the right to collect money from the public. Well, the collected money will be managed by the bank in the form of deposits and will be rotated back into debt to those in need of funding. Commercial banks can provide these services to the community within their operational area.

- People's Credit Banks (BPR)

People's Credit Banks (BPR) are types of banks that only accept time deposits, savings, and the like. Usually, BPRs are found in small towns close to the community in need. The tasks of BPR itself are to provide credit, provide Shariah principle funds, place funds in the form of certificates, and collect funds from the public.

2. Types of Banks Based on their Operations

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The second type of bank is differentiated based on its operations, such as conventional banks and Islamic banks. To provide a more complete understanding, let's take a look at the following explanation.

Conventional Banks

Conventional banks are types of banks that provide general financial services regulated by the banking industry. The activities of conventional banks include collecting and distributing funds to the public in the form of credit. Conventional banks determine interest rates based on the Bank Indonesia interest rates. This type of bank is commonly used by the Indonesian community.

Islamic Banks

On the other hand, Islamic banks are types of banks that apply Sharia principles. Regulations regarding Islamic banks are governed by Law Number 21 of 2008 concerning Sharia Banking. These banks are not allowed to operate using gharar, maysir, riba, zalim, and haram objects.

3. Types of Banks Based on Ownership

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The second type of bank is distinguished based on ownership such as government banks, national private banks, and foreign banks. To make it more complete, let's take a look at the following review.

- Government Banks

Government banks are one type of bank whose shares are owned by the state. Examples of government banks in Indonesia are Mandiri, BTN, BRI, and BNI 46. Each region, each government also has its own banks such as Bank Jateng, Bank Jabar, and others.

- National Private Banks

National private banks are one type of bank whose shares are owned by Indonesian entrepreneurs. Examples of national private banks are Bank Muamalat, Bank Permata, BCA, etc.

- Foreign Banking

As the name suggests, this type of bank is owned by foreigners who open branches in all countries. This bank can be a government bank or a private bank. Some examples of foreign-owned banks include Citibank, HSBC, and others.

Those are a series of types of banks along with their functions that you need to know. Hopefully, it will increase your knowledge and understanding of the types of banks in Indonesia.

(kpl/dtm)