Difference Between Scheduled and Non-Scheduled Banks in India
In India, banks are classified into Scheduled Banks and Non-Scheduled Banks based on their inclusion in the Second Schedule of the Reserve Bank of India (RBI) Act, 1934. Understanding the difference helps depositors, businesses, and policymakers make informed financial decisions and ensures clarity on banking operations, risk, and regulations.
What are Scheduled Banks?
- Scheduled banks are banks listed under the Second Schedule of the RBI Act, 1934.
- They must fulfill the following criteria:
- Paid-up capital and reserves of at least ₹5 lakh
- Satisfy RBI that their operations are sound and capable of performing banking functions
- Examples: SBI, HDFC Bank, ICICI Bank, Axis Bank, Punjab National Bank
Features of Scheduled Banks:
- Eligible for RBI loans and financial accommodation
- Must maintain Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR)
- Subject to RBI regulations and supervision
- Can participate in interbank transactions and clearinghouse operations
What are Non-Scheduled Banks?
- Non-Scheduled Banks are banks not included in the Second Schedule of RBI Act, 1934.
- Usually smaller banks or banks with limited capital or reach.
- Examples: Some urban cooperative banks, small rural banks, and local banks.
Features of Non-Scheduled Banks:
- Cannot borrow funds from RBI except under specific circumstances
- Limited scope for interbank transactions
- Less regulated and smaller in scale compared to scheduled banks
- Focused on local or specialized banking services
Key Differences Between Scheduled and Non-Scheduled Banks
Feature | Scheduled Banks | Non-Scheduled Banks |
RBI Inclusion | Listed in Second Schedule of RBI Act | Not listed in Second Schedule |
Capital Requirement | Minimum paid-up capital and reserves of ₹5 lakh | No minimum requirement specified |
RBI Support | Eligible for loans and financial accommodation | Cannot borrow from RBI except under specific provisions |
Regulation | Fully regulated by RBI | Limited regulation by RBI |
Size and Reach | Large, nationwide presence | Smaller, often local or regional |
Interbank Transactions | Can participate in clearinghouse and interbank markets | Limited participation in interbank operations |
Examples | SBI, HDFC Bank, ICICI Bank | Certain cooperative and rural banks |
Advantages of Scheduled Banks
- Access to RBI support in times of financial stress
- High credibility and trust among depositors and investors
- Wider range of services including corporate banking, international banking, and digital services
- Ability to participate in interbank markets
Limitations of Non-Scheduled Banks
- Limited financial support from RBI
- Restricted operations in interbank transactions and nationwide reach
- Less exposure to modern banking technologies
- Often focused on local or niche customer segments
FAQs on Scheduled and Non-Scheduled Banks
- What is the main difference between scheduled and non-scheduled banks?
The main difference lies in RBI recognition, capital requirements, regulatory compliance, and access to RBI facilities.
- Can a non-scheduled bank become a scheduled bank?
Yes, if it meets the RBI criteria of capital, reserves, and operational soundness, it can be included in the Second Schedule.
- Are scheduled banks safer than non-scheduled banks?
Generally, yes, because scheduled banks are fully regulated by RBI and eligible for RBI financial support.
- How many scheduled banks are there in India?
As of 2025, there are over 50 scheduled commercial banks, including public, private, foreign, and regional banks.
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