Details of Scheduled Banks

Details of Scheduled Banks

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Scheduled banks are an integral component of a country's financial system, serving as crucial intermediaries between savers and borrowers. They play a pivotal role in fostering economic growth by mobilizing funds and channeling them toward productive investments. Scheduled banks derive their name from being included in the Second Schedule of the Reserve Bank of India Act, 1934.

The features of scheduled banks include inclusion in the Second Schedule, essential banking functions, and clearing house membership. This Second Schedule list specifies the banks eligible to receive various benefits, such as access to central bank facilities and participation in government borrowing programs. Scheduled banks are authorized to provide a wide range of banking services, including accepting deposits, granting loans, offering various credit facilities, and facilitating domestic and international fund transfers. Scheduled banks are typically members of the clearinghouse, enabling them to participate in the clearing and settlement of interbank transactions, cheques, and other financial instruments.

Scheduled banks have to be registered with the central bank after fulfilling certain criteria. The registration process usually involves eligibility assessment, capital requirement, regulatory compliance, fit and proper test, and final approval. The central bank assesses the financial institution's eligibility based on various factors. The institution must meet the minimum capital requirement set by the central bank. The applicant must demonstrate compliance with all relevant banking regulations and legal requirements, including anti-money laundering and customer protection rules. The central bank evaluates the fitness and propriety of the institution's directors and key management personnel to ensure they possess the integrity to run a bank. Upon meeting all the stipulated conditions, the central bank grants scheduled bank status to the applicant.

There are differences between scheduled and non-scheduled banks concerning regulation and benefits. Scheduled banks are subject to strict regulation and oversight by the central bank to ensure financial stability and protect the interests of depositors and borrowers. Non-scheduled banks are not subject to the same level of regulatory scrutiny as scheduled banks. They may still be regulated, but the requirements and oversight are usually less stringent. Scheduled banks enjoy various benefits, such as access to central bank facilities, participation in government borrowing programs, and clearance and settlement services through the clearinghouse. Non-scheduled banks may not have access to certain central bank facilities and may not be members of the clearinghouse, limiting their scope of banking operations.