Schedule bank :
Schedule bank refers to those banking institutions whose names are included in the second schedule of the Central Bank of India Act 1934.
Under Section 42(6) of the Reserve Bank of India Act, a banking company included in this scheduled list must fulfil the following conditions –
- The paid up capital and reserve of the bank should not be less than 5 lakhs.
- The bank must satisfy the Central Bank that it’s affairs are not conducted in a manner detrimental to the interest of the depositors.
- The bank must be a corporation or cooperate society and not a partnership or single own firm.
Types Of Scheduled Bank :
- Scheduled commercial bank – Indian as well as foreign banks.
- Schedule state cooperative bank’s
A. Scheduled Commercial Bank :
A commercial bank is a financial institution that grants loans, accepts deposits and offers basic financial products like savings account and certificate of deposits to individuals and businesses.
The commercial bank’s funds come from money deposited by the bank customers in saving account, checking accounts, money market accounts and certificates of deposits.
Types Of Schedule Commercial Bank:
- Public sector banks
- Private Sector banks
- Foreign Banks
- Regional Rural banks
Public Sector Banks :
Public sector banks are those Banks in which the government has majority shareholding more than 51 percent. Public sector banks are owned and controlled by the government either directly or indirectly through the central banks. These banks are also known as National Bank.
Private Sector Banks :
Private sector banks are those Banks in which the government has majority shareholding less than 51 percent. Private sector banks are those Banks which are owned by private individuals or business corporation.
Functions of Private Sector Banks :
- These banks have bought in state of the art technology in the banking sector.
- These banks provides a healthy competition in the banking system and contributed to the efficiency public sector banks.
- These banks have helped in introducing a high degree of professional management and marketing concepts into banking.
- These banks especially the foreign banks have promoted foreign investments in India and helped in organizing joint ventures .
Foreign Banks :
These banks are foreign in origin. These banks are incorporated outside of the country under the law of the home country but have a place of business In other country . Foreign Banks have their presence from the British period in our country . Initially they were allowed to operate only through branches but now they are allowed to set up subsidiaries in India. Some Example of Foreign Banks : Standard Chartered Banks, Hongkong Shanghai Banking Corporation, American Express Banking corporation, Bank of Tokyo, Citi Bank.
Functions of Foreign Banks:
- Bringing together foreign institutional investors and Indian companie.
- Helping foreign companies and Indian companies to enter into joint ventures.
- Raising finance for power generation, telecommunications and mining projects in India.
- Managing data and information systems by using latest technology.
Regional Rural Banks :
In order to provide efficient banking services in rural areas ,Regional rural banks were setup on 1975 under sponsorship of the commercial bank’s. The regional rural banks are governed by the Regional Rural banks act 1976.
Functions of Regional Rural Banks :
- This bank mobilize financial resources from rural /semi urban areas and grant loans and advances.
- The area of operation of Regional Rural banks is limited to the area as notified by the Reserve Bank of India covering one or more district in a state.
- The issued capital of a Regional Rural banks is shared by the owner in the different proportion ranging from 15 to 20 percent.
B. Scheduled State Cooperative Bank’s :
Cooperative bank’s are small sized bank’s organised in small cooperative sector which have the ability to operate both urban and non urban areas. Cooperative bank’s are registered under the cooperative societies Act. The cooperative bank’s is regulated by the Reserve Bank of India. It is also governed by the Banking regulation act 1949 and Banking laws act 1965.
Types of Schedule Cooperative Bank’s:
- State Cooperative bank’s
- Primary credit society
- Central cooperative bank’s
State Cooperative Bank’s :
These are the apex cooperative banks in all the states of the country. Cooperative bank’s mobilise funds and help in the proper channnelisation among various sectors. The money reaches the individual borrowers from the state cooperative bank’s through the central cooperative bank’s and primary credit society. Cooperative bank’s in India finance rural areas under : Farming, Cattle, milk and personal finance including others.
Primary Credit Society :
These societies are formed as the village level or town level with the borrower or non borrower members residing in one locality. The operation of each society are restricted to a small area so that the members know each other and are able to watch over the activities of all members to prevent frauds.
Central Cooperative Bank’s :
These banks operate at district level. It may have a primary credit societies belonging to the same district as their members.
Functions of Central cooperative banks:
- These banks provides loans to their members .
- It functions as provide link between primary credit society and state cooperative bank’s.
Benefits of Scheduled Bank :
- Get financial assistance from Reserve Bank of India when ever required.
- Borrow money from RBI at Repo rate.
- Automatically alarm the clearing house membership.
- People trust these banks.
Privileges Of Scheduled Banks :
- Scheduled Banks are covered by the deposit insurance and credit guarantee scheme.
- Scheduled Banks are eligible for obtaining loans at Bank rate from the Reserve Bank of India.
- Such banks automatically acquires the membership of the clearing house and avail of clearing house facilities.
- Such banks get the facility of rediscounting of bills from the reserve bank.
- Scheduled Banks are also entitled to receive refinance facility from appropriate institutions.
- An account with scheduled bank carries for the account holders, a greater assurance of safety and also prestige value.
The affairs of the scheduled Banks are closely watched and largely controlled by the Reserve Bank. The scheduled Banks operate under strict supervision of the Reserve Bank and are required to follow the guidelines issued by the Reserve Bank from time to time. These banks are required to present recurring financial statements and other informations to the Reserve Bank. Moreover these banks are also required to maintain certain minimum statutory cash reserve with the Reserve Bank.