Bank classification under schedule 2 of Banking regulation act 1949

C.6] Bank Classification under Schedule 2 of Banking Regulation Act, 1949

1. Scheduled Banks

• Definition: Banks that are included in the Schedule II of the Banking Regulation Act, 1949.
• Purpose: To regulate and supervise banks that deal with public deposits and have a significant role in the financial system.
• Eligibility Criteria:
  • Minimum paid-up capital and reserves of Rs. 5 lakh.
  • Minimum deposits of Rs. 5 lakh.
• Key Features:
  • Subject to central bank supervision.
  • Required to maintain cash reserve ratio (CRR) and statutory liquidity ratio (SLR).
  • Must submit quarterly returns to RBI.
• Examples:
  • State Bank of India
  • Punjab National Bank
  • HDFC Bank

2. Non-Scheduled Banks

• Definition: Banks not included in the Schedule II of the Banking Regulation Act, 1949.
• Purpose: Typically small or specialized banks that do not accept public deposits.
• Key Features:
  • Not subject to RBI supervision.
  • Not required to maintain CRR or SLR.
  • May not be allowed to accept public deposits.
• Examples:
  • NABARD
  • Export-Import Bank of India (EXIM Bank)
  • Some private sector banks before they were scheduled

3. Commercial Banks

• Definition: Banks that accept deposits and provide various banking services to the public.
• Key Features:
  • Accept demand and time deposits.
  • Provide credit facilities.
  • Engage in payment and settlement services.
• Types:
  • Scheduled Commercial Banks
  • Non-Scheduled Commercial Banks
• Examples:
  • ICICI Bank
  • Axis Bank
  • Yes Bank

4. Wholesale Banks

• Definition: Banks that primarily deal with large corporate clients and institutions.
• Key Features:
  • Focus on bulk transactions and large deposits.
  • Not typically involved in retail banking.
  • Operate in interbank markets and foreign exchange.
• Examples:
  • ICICI Bank (before its transformation)
  • HDFC Bank (before expansion)

5. Payment Banks

• Definition: Banks that provide basic banking services to low-income individuals and small businesses.
• Key Features:
  • Accept small deposits (up to Rs. 1 lakh).
  • Provide mobile banking and digital payment services.
  • Cannot issue credit cards or loans.
• Regulation:
  • Established under RBI guidelines.
  • Operate under Payment Banks Act, 2015.
• Examples:
  • Airtel Payments Bank
  • Paytm Payments Bank

6. Small Financing Banks

• Definition: Banks that focus on micro, small, and medium enterprises (MSMEs) and agriculture.
• Key Features:
  • Minimum capital of Rs. 100 crore.
  • Focus on rural and semi-urban areas.
  • Provide credit facilities to MSMEs and agricultural sector.
• Regulation:
  • Established under RBI guidelines.
  • Operate under Small Finance Banks Act, 2017.
• Examples:
  • Ujjivan Small Finance Bank
  • ESAF Small Finance Bank

7. Development Banks

• Definition: Financial institutions that provide long-term financing for infrastructure, industry, and agriculture.
• Key Features:
  • Focus on developmental objectives.
  • Provide subsidized loans and financial assistance.
  • Operate under RBI supervision.
• Examples:
  • NABARD
  • IDBI Bank
  • EXIM Bank

8. Universal Banks

• Definition: Banks that offer a wide range of financial services including retail, corporate, investment, and insurance.
• Key Features:
  • Operate in multiple financial sectors.
  • Provide cross-selling of financial products.
  • Typically large and diversified in operations.
• Examples:
  • HDFC Bank
  • ICICI Bank
  • SBI

Summary Table: Bank Classification under Schedule II