Scheduled Bank - Definition, What is Scheduled Bank, Advantages of Scheduled Bank, and Latest News - ClearTax (2024)

Meaning of Scheduled Bank

• The banks in the Indian banking system are sub categorized as Scheduled Banks, Non-Schedule Banks, Private Banks and Public Banks. Scheduled banks are those banks that are listed under Schedule II of the Reserve Bank of India Act, 1934.
• The bank's paid-up capital and raised funds must be at least Rs. 5 lakh to qualify as a scheduled bank. These banks are liable for low interest loans from the RBI.
• They also have membership in clearing houses.
• They also have numerous obligations to fulfil such as maintaining an average daily Cash Reserve Ratio with the central bank.

Types of Scheduled Banks in India

• The banks listed in Schedule II are further classified as –
• Scheduled Commercial Public Sector Banks
• SBI and its associates
• Scheduled Commercial Private Sector Banks
• Old Private Banks
• New Private Sector Banks
• Scheduled Foreign Banks in India

Main functions of these banks

Given below is a list of the most important functions of these Scheduled Banks - - Acceptance of deposits from the public- Provide demand withdrawal facility- Lending facility- Transfer of funds- Issue of drafts- Provide customers with locker facilities- Dealing with foreign exchange

Differences Between a Scheduled Bank and Non-Scheduled Bank

Scheduled Bank

• They are listed in the second schedule of the RBI Act.
• These have a paid up capital of Rs. 5 lakhs or more and comply with all the requirements of the RBI.
• They maintain a cash reserve ratio with RBI.
• They are authorized to borrow funds from the Reserve Bank of India.
• They are comparatively more financially stable.

Non-Scheduled Bank

• They are not listed in the second schedule of the RBI Act.
• There is no such condition that needs to be fulfilled for it to be considered a non-scheduled bank.
• They maintain the CRR amount with themselves.
• They are not allowed to.
• These banks are riskier.