Difference Between Scheduled and Non Scheduled Banks
By BYJU'S Exam Prep
Updated on: November 14th, 2023
A major difference between Scheduled and Non Scheduled Banks is created by defining the scope of their financial powers and jurisdiction. In India, the Reserve Bank of India (RBI) is the apex banking body regulating different banks’ functioning and issuing licenses. The Scheduled Banks have to convince RBI that their operations don’t compromise or endanger the interests of depositors.
Difference Between Scheduled and Non Scheduled Banks PDF
However, due to financial instability, Non Scheduled Banks are assumed incapable of safeguarding depositors’ monetary interests. This article underlines the most relevant difference between Scheduled and Non Scheduled Banks along with their meanings and types.
Table of content
Difference Between Scheduled and Non Scheduled Banks in India
Both bank types need to thrive to propel India’s economic growth. The basic Difference Between Scheduled and Non Scheduled Banks lies in their definition. Apart from this, the major differences are discussed below.
Scheduled Bank vs Non Scheduled Bank
|
Scheduled and Non Scheduled Banks |
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|
Parameters |
Scheduled Banks |
Non-Scheduled Banks |
|
Loan from RBI |
Entitled to loans at lower interest rates along with clearing house membership |
Only in emergencies or under abnormal conditions |
|
Cash Reserve Ratio (CRR) |
Must maintain an average balance of daily CRR with RBI at stipulated rates |
Only within itself |
|
Bank Types |
Nationalized, Regional, Rural, Cooperative and other commercial banks |
11 Non-Scheduled State Cooperative Banks; 1500 Non-Scheduled Urban Co-operative Banks; 4 local area banks |
|
Refinancing facility |
Can raise debt from RBI |
Denied |
|
Currency storage facility |
Access Granted |
Denied |
Scheduled and Non Scheduled Banks
Scheduled Bank needs to be a corporation rather than a sole proprietorship or a partnership firm. The Non Scheduled Banks are not obligated to maintain the average daily balance of Cash Reserve Ratio (CRR) with the central bank at specified rates.
What is Scheduled Bank?
Scheduled Banks are listed under Clause 42 in the Second Schedule of the RBI Act of 1934. For a bank to qualify as a Scheduled Bank, it must have a total minimum value of paid-up capital and a reserve of INR 5 lacs.
The basic characteristics of Scheduled Banks are:
- Access to currency chest facility
- Right to become members of clearing house
- Can receive refinance facility from RBI
Types of Scheduled Banks in India
Scheduled Banks in India are divided into five types:
- Regional Rural Banks
- Foreign Banks
- Development Banks
- Private sector Banks
- Nationalized Banks
Payment banks, such as Airtel Payments Bank, Fino Payments Bank, India Post Payments Bank, and Paytm Payments Bank, have recently been granted Scheduled bank status.
>> Scheduled Banks in India List
Many scheduled banks operate across India. The most famous bank with the highest business volume is the State Bank of India. Other banks include subsidiaries, an entire array of nationalized banks such as the Bank of India, RRBs (Regional Rural Banks), specified co-operative banks, and some international banks like Citibank, HSBC Holdings, etc.
The list also features banks from the private sector, like HDFC Bank, Karur Vysya Bank, etc.
What is Non Scheduled Bank?
Non Scheduled Banks in India are not listed under the Schedule II of the Reserve Bank of India Act, 1934. They can maintain the CRR by themselves. The characteristics of Non-Scheduled Banks are:
- Have to exhibit compliance to specific guidelines stipulated by RBI
- Reserve capital can be lesser than INR 5 Lakhs
- Interbank financial transactions and the cheque-clearing facility is not available
Non Scheduled Banks in India
As described by RBI, there are 11 Non Scheduled State Cooperative Banks and 1500 Non-Scheduled Urban Co-operative Banks. Non-scheduled banks are few, including the following:
- Baroda City Co-operative Bank
- Bangalore City Co-operative Bank
- Phagwara’s Capital Local Area Bank Ltd
- Kolhapur’s Subhadra Local Area Bank Ltd
- Mahbubnagar’s Krishna Bhima Samruddhi Local Area Bank, etc.
>> Non Scheduled Banks in India List
Conclusion:
Key Difference Between Scheduled and Non Scheduled Banks
The key Difference Between Scheduled and Non Scheduled Banks is that Scheduled bank is authorized to loan at lower interest rates along with clearing house membership, while Non Scheduled Bank is authorized to loan only during a crisis or under bizarre circumstances.
