IAS Gyan

Daily News Analysis

Schedule BanK  

11th December, 2021 Economy

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  • Paytm Payments Bank has gained Reserve Bank of India's (RBI) approval to function as a scheduled bank .


  • It can participate in government and companies' request for proposals, primary auctions, fixed-rate and variable rate repos, and reverse repos, along with participation in Marginal Standing Facility.
  • It will also be eligible to be a partner in government-run financial inclusion schemes.


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

  • 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.