Definition of Scheduled banks
- According to the RBI act, 1934, a scheduled Bank is one which is
- Included in the second schedule of the RBI Act
- Has a paid-up capital of not less than 5 lakhs.
- Satisfies that its affairs are not being conducted in a manner which is detrimental to the interests of the depositors.
- It includes different categories such as Scheduled commercial Banks, Public Sector Banks, Cooperative Banks, Regional Rural Banks etc.
Note: The RBI has stipulated the minimum capital requirement of Rs 500 crores for the issuance of new banking licenses. Further, to be eligible to get a Banking license, an entity should have successful track record of running its business for at least 10 years. These requirements are in addition to the requirements mentioned in the RBI Act, 1934.
Categories of Scheduled banks
- Categorized into the five groups based on their ownership and their nature of operations.
- Public Sector Banks: Majority stake is held by the Government of India.
- Private Sector Banks: Majority of share capital of the bank is held by private individuals.
- Foreign Banks: Banks, registered and headquartered in a foreign country, and operate their branches in India. Eg: HSBC, Citibank, Standard Chartered Bank.
- Regional Rural Banks: Established under RRB Act, 1976 to ensure institutional credit for agriculture and other rural sectors.
- The area of operation of RRBs is limited to the area as notified by GoI covering one or more districts in the State.
- Jointly owned by Central government (50%), the respective state government (15%) and sponsor bank (35%).
- Follow CRR and SLR norms as mandated by RBI.
- Priority sector lending (PSL) norms:75% of the loans to the priority sectors.
- Cooperative Banks: Financial institutions are owned and run by their customers. Operate on the principle of one person one vote.
- Note: Recently, RBI has given the status of Scheduled Bank to Paytm and Airtel payment Banks.
Difference between Scheduled & Non-Scheduled banks
| Criteria | Scheduled Banks | Non-Scheduled Banks |
| Listed under RBI Act, 1934? | Yes. Under II Schedule | No. |
| Borrowing from RBI allowed | Yes. | Usually not allowed. May be allowed under exceptional circumstances. |
| Requirement of CRR | Yes. Must Compulsorily maintain with the RBI. | Yes. May Maintain with themselves or with the RBI. |
| Requirement of SLR | Yes. | Yes. |
| Examples | Commercial BanksScheduled Urban Cooperative BanksRRBsScheduled Payment banks such as Paytm, IPPB, Fino etc.Scheduled Small Finance banks such as Ujjivan | Local Area BanksNon-Scheduled Urban Cooperative Banks, State Cooperative Banks and District Cooperative BanksNon-Scheduled Small Finance Banks and Payment Banks |