Scheduled Banks in India: Functions, Benefits, and Future Perspectives

Scheduled banks in India are specifically recognized by the Reserve Bank of India and offer a secure and regulated financial environment. With numerous institutions in the Indian banking industry, scheduled banks provide stability and consumer protection. Whether you are an experienced investor or new to banking, these banks are a reliable choice for your financial needs in India. 

What are Indian Scheduled Banks?

The RBI has specific criteria outlined in the RBI Act of 1934 and the Banking Regulation Act of 1949 that determine which financial institutions are granted scheduled bank status. These scheduled banks are listed in Schedule II of the Reserve Bank of India Act of 1934 and represent the majority of banks under the central bank’s jurisdiction. Meeting the requirement of having paid-up capital and raised funds of at least 5 lakh rupees is a key factor for obtaining this status.

As clearing house members, Scheduled banks should maintain an average daily cash reserve ratio with the central bank. This ensures the stability and liquidity of the banking system while allowing scheduled banks to meet their financial obligations and operate effectively within the established regulatory framework.

Scheduled banks in India are allowed by the Reserve Bank of India to provide loans at bank rates. In addition, the RBI has set forth management standards in its directions for 2015. These standards cover various aspects such as appointing the CEO and other senior management staff, ensuring sufficient capital adequacy, maintaining asset quality and focusing on profitability. 

Types of Scheduled Banks in India in 2024

Scheduled banks are commercial banks regulated by the RBI and included in the Second Schedule of the Reserve Bank of India Act, 1934. They are classified into the following categories - 

• Scheduled Commercial Public Sector Banks
• SBI and its associates
• Scheduled Commercial Private Sector Banks
• Old Private Banks 
• New Private Sector Banks
• Scheduled Foreign Banks 

List of Scheduled Banks as Per RBI in India in 2024

According to the latest list released by the Reserve Bank of India (RBI), here is the list of scheduled banks operating in India in 2024 - 

What Functions Do Scheduled Banks in India Perform?

Here are all the key functions that scheduled banks in India perform - 

• Accepting deposits from the public
• Introducing a demand withdrawal lending facility
• Funds transfer and issuance of drafts
• Providing customers with locker facilities is essential for ensuring their convenience and security
• After the Government of India allowed their establishment, private banks dealing with foreign exchange were set up in India in the 1990s. Previously, the public sector banks were the main players in this field 

What are the Benefits of Banking with a Scheduled Bank?

In the modern world, selecting the best bank is essential for efficient financial management. Among the numerous banking options available, scheduled banks are recognized for their security and dependability. Their distinct advantage makes them an appealing choice for safeguarding and managing your funds. 

• Stability of Scheduled Banks

Scheduled banks in India are subject to strict regulations from the Reserve Bank of India, the country’s central bank. These regulations ensure that these banks maintain a strong financial position by setting minimum capital requirements. As a result, customers can have confidence in the safety of their deposit

• Access to Exclusive Credit Facilities

Scheduled banks offer a significant advantage of being eligible to borrow funds from the RBI at preferential rates. This allows them to provide customers with a wider range of loan products at competitive interest rates. Whether it is a business loan, a home loan or a personal loan, scheduled banks are likely to offer attractive options to you achieve your financial goals. 

• The Power of Clearing House Membership

Scheduled banks hold an esteemed membership in clearing houses, a crucial network that enables the seamless and efficient settlement of interbank transactions. This membership guarantees swifter clearance times for your cheques and electronic fund transfers, effectively saving you precious time and eliminating any frustration you may have

• A Full Spectrum of Banking Services

Scheduled banks provide more than just deposit protection. They provide a wide range of banking services, including debit and credit cards, internet banking and mobile banking. This convenient approach makes it easier to handle your finances, as you can perform transactions and access account details through multiple platforms

• Trustworthy and Reliable Banking

Scheduled banks in India have a strong and trusted history in the banking system, maintaining transparency and trust through their compliance with RBI regulations. Customers can have faith in their dealings with these banks, as they prioritize ethics and customer satisfaction

Essential Banking Services Offered by Indian Scheduled Banks

Scheduled banks offer a diverse array of services to cater to the financial needs of their customers. These include deposit accounts, credit facilities, payment services, foreign exchange services, investment services, safe deposit boxes and various other financial products. This wide range of offerings makes scheduled banks a one-stop destination for various financial requirements. 

How Does the Future Look for Scheduled Banks in India?

Scheduled banks play a crucial role in the Indian economy but they are now facing significant challenges that are reshaping the banking landscape.

1. The Rise of Digital Banking: Digital banking is undeniably transforming the banking sector, with scheduled banks now offering strong online and mobile banking platforms. A significant number of transactions at leading banks like the State Bank of India already occur through digital channels, a trend that is expected to keep growing
2. Government Initiatives: The government is making efforts to promote digital payments and financial inclusion with initiatives such as the Unified Payments Interface (UPI) and Bharat Bill Payment System (BPSS) contributing to a cashless ecosystem. This is in line with the digital wave that India is currently witnessing
3. Privatization and Consolidation: The potential for increased privatization of public sector banks is a significant shift in the banking sector. With the recent budget proposal to privatize two banks, there is a strong indication towards creating a more competitive landscape. This, along with consolidation among existing players, has the potential to result in fewer but stronger banks
4. Collaboration is Key: Collaboration with fintech companies is crucial for scheduled banks to innovate and adapt to the future. By leveraging advances in artificial intelligence, machine learning and data analytics, banks can revolutionize areas such as customer service, fraud detection and risk management. This partnership between traditional banks and fintech first will drive positive change in the industry 
5. The Human Touch Endures: Traditionally, banks have focused on providing personalized services and building strong customer relationships. As digitalization becomes increasingly important, banks must find ways to incorporate technology without losing the human touch. This balance is crucial for maintaining customer satisfaction and loyalty while also improving operational efficiency
6. Navigating the Unknown: The future is indeed uncertain, especially when it comes to cybersecurity threats and the constantly changing regulatory landscape. Scheduled banks need to be ready to face these challenges head-on to ensure the security and stability of their operations. They must stay vigilant and adapt to the evolving environment to protect themselves and their customers

Frequently Asked Questions (FAQs)

Q: What are scheduled banks in India?

A: Scheduled banks in India are commercial banks that are carefully assessed by the Reserve Bank of India (RBI) before being included in the prestigious second schedule. To be eligible, these banks must meet the RBI’s criteria on capital adequacy, profitability and adherence to banking regulations. 

Q: How do I choose the right scheduled bank in India?

A: Choose the right bank based on your financial needs and goals. Consider the following factors:

• Types of accounts offered
• Interest rates
• Charges
• Branch network and online banking
• Customer service reputation

Q: How safe are my funds in a scheduled bank in India?

A: Scheduled banks in India provide a high level of security for your deposit, with the RBI ensuring deposit insurance coverage up to a specific limit per account holder in case of bank failure. Moreover, they implement strong security measures to protect your financial information and transactions. 

Q: What are the differences between scheduled and non-scheduled banks?

A: The main difference between scheduled and non-scheduled banks is the level of regulation and oversight. Scheduled banks are closely monitored by the RBI, following strict financial guidelines and maintaining capital adequacy, while non-scheduled banks operate with less stringent regulations, posing higher risks for depositing funds. Scheduled banks also offer a wider range of financial products and services compared to non-scheduled banks.

Q: Can I open an account online with a scheduled bank in India?

A: Yes, several banks in India provide the option for online account opening. This usually entails submitting digital versions of KYC documents and undergoing electronic identity verification. However, the specific prerequisites and eligibility criteria can differ among banks. 

Q: What are some of the challenges faced by the scheduled banks in India?

A: Indian scheduled banks face numerous challenges due to the dynamic financial landscape such as:

• High Non-Performing Assets (NPAs)
• Cybersecurity Threats
• Financial Inclusion

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• Top 10 Small Finance Banks (SFBs) in India 2024
• Top 10 Regional Rural Banks (RRBs) in India 2024
• Top 10 P2P Lending Companies in India 2024
• Top 10 Foreign Banks in India 2024

Author: Abhik Das