Scheduled Bank – Know Its Types and Functions
Banks play an essential role in a country’s financial ecosystem. These financial institutions assist a country’s economy to flourish and allow retail customers and companies to securely store money and get credit among other services. The modern Indian banking system is divided into scheduled banks and non-scheduled banks.
Read on to know more about the types of scheduled banks, their examples, and how they operate in India.
What is a Scheduled Bank?
The RBI grants a scheduled bank status to a financial institution only if it meets certain criteria in the RBI Act of 1934 and the Banking Regulation Act of 1949. Scheduled banks are those listed in Schedule II of the Reserve Bank of India Act of 1934 and constitute the majority of banks operating under the central bank. As per the rules, the bank’s paid-up capital and raised funds must be at least Rs. 5 lakh.
Scheduled banks are also members of clearing houses. They are responsible for maintaining an average daily cash reserve ratio with the central bank.
The RBI permits scheduled banks to issue loans at bank rates. The RBI has also laid specific management standards in RBI directions for 2015. Some of these standards include the selection of the CEO and other senior management personnel, the preservation of capital adequacy, asset quality, and profitability.
Functions of a Scheduled Bank
The primary functions of scheduled banks are mentioned below.
- Scheduled banks accept deposits from the general public
- These banks make a demand withdrawal facility available
- They provide credit facilities, money transfers, and draft publication
- Scheduled banks make lockers available to customers
- They can also manage foreign exchange
Benefits of Scheduled Bank
All Scheduled Banks listed with the RBI have major advantages over other banks.
- Banks become eligible for preferential debts/loans at the bank rate as per the RBI guidelines
- The banks also become members of the clearing house facility. A clearing house is a financial institution established to facilitate the exchange of payments, securities, or derivatives transaction
- They are able to obtain a central bank refinancing facility
- Currency storage facilities are also available at scheduled banks
Types of Scheduled Banks in India
The list of scheduled banks in India is lengthy due to its many institutions. Scheduled banks include all nationalised, cooperative, multinational, and regional rural banks.
Scheduled banks are further classified as follows:
- State Bank of India and its partners
- Scheduled commercial banks
- Scheduled Commercial Public Sector Banks
- Scheduled Commercial Private Sector Banks
- Old Private Banks
- New Banks in the Private Sector
- Scheduled Foreign Banks in India
Examples of Scheduled Banks
Here is a list of scheduled commercial banks in the public and private sectors:
1. Scheduled Commercial Public Sector Banks in India
The following are some of the examples of scheduled commercial banks in India (public sector):
- State Bank of India
- Bank of Baroda (Including Vijaya Bank and Dena Bank)
- Bank of India
- Bank of Maharashtra
- Canara Bank (including Syndicate Bank)
- The Central Bank of India
- Indian Bank (Including Allahabad Bank)
- Indian Overseas Bank
- Punjab National Bank (including Oriental Bank of Commerce and United Bank of India)
- Punjab & Sind Bank
- Union Bank of India (including Andhra Bank and Corporation Bank)
- UCO Bank
2. Scheduled Private Sector Banks in India
Below mentioned are few examples of scheduled commercial bank in India (private sector):
- Axis Bank Ltd.
- Catholic Syrian Bank Ltd.
- City Union Bank Ltd.
- Development Credit Bank Ltd.
- Dhanlaxmi Bank Ltd.
- Federal Bank Ltd.
- HDFC Bank Ltd.
- ICICI Bank Ltd.
- IndusInd Bank Ltd.
- Kotak Mahindra Bank Ltd.
3. Scheduled Foreign Banks in India
Here is the list of some of the foreign banks with branches in India:
- AB Bank
- Abu Dhabi Commercial Bank
- American Express
- Australia and New Zealand Banking Group
- Barclays Bank Plc
- Bank of America
- Bank of Bahrain and Kuwait
- Bank of Ceylon
- Bank of China
- Bank of Nova Scotia
- BNP Paribas
- Citibank India
- Crédit Agricole
- Corporate and Investment Bank
- Credit Suisse
Number of Scheduled Banks in India
1. Scheduled Public Sector Banks in India
These are the banks in which the government of India owns more than 50% of the stock. As a result, the government is the primary stakeholder in PSBs. As of 2022, there are 12 public sector banks, but there were once 27 banks that have now been merged.
2. Scheduled Private Sector Banks in India
These are the banks in which private entities have the most stake. There are 21 private sector banks in total. All private sector banks provide their consumers with various banking and financial services.
Private sector banks are classified into two types:
- Private Sector Banks from the Past (these banks came into existence before 1968)
- New Banks in the Private Sector (these banks were incorporated after 1968)
3. Scheduled Foreign Banks in India
In India, there are 45 foreign banks. Foreign banks are international banks that must abide by the rules and regulations of both their home and host countries. They have several loan limits based on the capital of their partner banks.
What are Non-Scheduled Banks?
Non-scheduled banks are those which are not regulated by the regulations of the RBI. They are not mentioned in the second schedule of the RBI Act of 1934. They must also meet the cash reserve requirement with their funds, not with the RBI. They are generally smaller in size, cover a limited range and have additional financial restraints as well.
Also Read
The Differences Between a Scheduled Bank and Non-Scheduled Bank
Below are some of the critical differences between scheduled bank and non-scheduled banks:
| BASIS FOR COMPARISON | SCHEDULED BANKS | NON-SCHEDULED BANKS |
| Meaning | A scheduled bank means a banking company with a minimum paid-up capital of Rs. 5 lakh that does not jeopardise depositors’ interests | Non-scheduled banks do not follow the Reserve Bank of India’s rules or do not fall under the category of scheduled banks |
| Second Schedule | The second schedule includes these banks | The second schedule does not include them |
| Cash Reserve Ratio | Maintained with RBI. | Maintained with themselves. |
| Borrowing | Scheduled banks can borrow funds from the RBI for routine banking functions | Non-scheduled banks are not permitted to borrow funds from the RBI for routine banking purposes |
| Returns | Submitted regularly | There is no such requirement to submit periodic returns |
| Members of clearing house | It can become a member of the clearing house | It cannot become a member of the clearing house |
Final word
There are now many banks offering various services and catering to residents’ financial requirements as per the rules set by the RBI. The Reserve Bank of India, or RBI, sets the rules and regulations for India’s scheduled banks. These are licensed financial institutions that accept deposits and grants various loans, credit and debit cards, and other financial services.
FAQs
Ans. Scheduled banks are those designated in Schedule II of the Reserve Bank of India Act of 1934. To qualify as a scheduled bank, the bank’s paid-up capital and raised funds must be at least Rs. 5 lakh. These banks are eligible for low-interest RBI loans.
Ans. To qualify as a scheduled bank, the bank’s paid-up capital and collected funds must be greater than Rs. 5 lakh. Scheduled banks are eligible for Reserve Bank of India loans at bank rates and are granted membership in clearinghouses.
Ans. The following are the advantages of being a scheduled bank under the Reserve Bank of India Act, 1934:
• It becomes eligible for debts/loans at the RBI’s bank rate.
• The clearinghouse membership is automatically acquired.
• The RBI is offering a discount on first-class exchange bills.
Ans. Scheduled banks are those mentioned in the Reserve Bank of India Act, 1934’s second schedule. To qualify as a scheduled bank, the bank’s paid-up capital and raised funds must be at least Rs. 5 lakh. Scheduled banks are eligible for low-interest Reserve Bank of India loans and membership in clearinghouses.
Ans. Scheduled banks are permitted to conduct standard banking operations such as receiving deposits, making loans, and providing other financial services. A scheduled bank can apply for bank rate loans from the RBI. They are also eligible to join clearing homes.
Disclaimer
This article is solely for educational purposes. Navi doesn't take any responsibility for the information or claims made in the blog.
