Scheduled banks are those listed under the Reserve Bank of India Act, 1934's second schedule. They must have a minimum of Rs 5 lakh in raised funds and paid-up capital. The Reserve Bank of India provides them with low-interest loans and clearing house membership.
These banks must maintain a daily CRR (Cash Reserve Ratio) balance with the central bank at the rates set by it. Scheduled banks include all commercial banks, including nationalized, global, cooperative, and regional rural banks. Non-scheduled foreign banks in India sometimes miss out on these benefits.
Benefits for these banks include:
- Refinancing facility from a central bank.
- Access to cash storage facilities.
- Automatic clearinghouse membership.
Below are characteristics differentiating scheduled banks and non-scheduled banks:
- Listed in the RBI Act's second schedule.
- Meet all RBI standards, with a paid-up capital of Rs. 5 lakh or higher.
- Keep a cash reserve ratio with the RBI.
- Permitted by the RBI to borrow money.
- More financially secure.
- Not listed in the RBI Act's second schedule.
- Do not need to meet specific prerequisites.
- Keep a CRR sum on hand.
- Carry a higher risk.
Functions of Scheduled Banks
- Accept public deposits.
- Provide on-demand withdrawal facility.
- Offer lending facility.
- Enable fund transfer.
- Issue drafts.
- Provide lockers for clients.
- Handle foreign exchange.
Scheduled banks are often chosen for their affordable services and lack of minimum balance requirement. However, customers needing specific features not offered by scheduled banks or wanting more control over their money may prefer non-scheduled banks.