Difference between Scheduled and Non-Scheduled Banks

In this article we are explaining the key differences between the Scheduled Banks and Non-Scheduled Banks.

Definition of Scheduled Banks:

“Banks which have been included in the second scheduled of the RBI Act, 1934”. The banks included in this category should fulfil two conditions;

1. The paid up capital and collected fund of the bank should not be less than Rs. 5 lac.

2. Any activity of the bank will not adversely affect the interests of the depositors.

Examples of Scheduled Banks are: Scheduled Commercial Banks in India are categorised in 5 different groups according to their ownership / nature of operation.

These bank groups are: (i) State Bank of India (ii) Nationalised Banks, (iii) Regional Rural Banks, (iv) Foreign Banks (v) Other Indian Scheduled Commercial Banks (in the private sector).

Every Scheduled Banks enjoys following facilities;

1. Scheduled Banksare eligible for obtaining debts/loans on bank rate from the RBI.

2. Scheduled Banksautomatically acquires the membership of the clearing house.

3. Scheduled Banks get the facility of the rediscount of first class exchange bills from RBI. This facility is provided by the RBI only if the Scheduled Banks deposit average daily cash with the RBI which is decided by the RBI itself and presents the recurring statements under the provision of RBI Act, 1934 and Banking Regulation Act, 1949.

Definition of Non- Scheduled Banks:

The banks which are not included in the list of the scheduled banks are called the Non- Scheduled Banks. At present there are only 3 such banks in the country.

Non- Scheduled Banks have to follow CRR conditions. These banks can have CRR fund with themselves as no compulsion has been made by the RBI to deposit it in the RBI.

Non- Scheduled Banks are also not eligible for having loans from the RBI for day to day activities but under the emergency conditions RBI can grant loan to them.

Example: All local area banks are called the Non-scheduled banks.

Key differences between the Scheduled Banks and Non- Scheduled Banks are;

1. Scheduled banks follow the rules made by the RBI while Non-scheduled banks do not follow the rules made by the RBI.

2. Scheduled banks are eligible for inclusion in the second schedule to the Reserve Bank of India Act, 1934 while Non-scheduled banks are not included in the second schedule.

3Scheduled banks are allowed to borrow money from RBI for regular banking purposes while Non-scheduled banks are not allowed.

4. Scheduled banks can become a member of clearing house while Non-scheduled banks can’t.

5. Scheduled banks and Non-scheduled banks both need to maintain the Cash Reserve Ratio but Scheduled banks have to deposit this amount in the RBI while Non-scheduled banks can deposit this amount with themselves.

So from the above description it became clear that Scheduled banks and Non-Scheduled Banks are different not only in their functioning but also in the regulations made by the RBI. Scheduled banks do care about the interests of the depositors while Non-Scheduled Banks don’t do so because they are bound to follow the guidelines of RBI.