2.3. Another way of classification of banks

Another better way of categorizing the Indian banks is scheduled and non-scheduled banks. All commercial, RRBs and state cooperative banks are classified like this.

Scheduled banks are those banks which are mentioned in the second schedule of the RBI Act, 1934. These banks have to meet certain minimum criteria such as

♤ a minimum paid up capital and reserves of total aggregate value not less than Rs.5 lacs.

♤ These banks have to also satisfy the RBI that their functions would be carried out in the interests of their depositors.

The facilities enjoyed by scheduled banks are:

♤ They are eligible for obtaining debt/loans on bank rate from RBI

♤ They get automatic membership of clearing house

♤ They can avail the facility of rediscount of first class exchange bills from RBI

Any bank which fulfilled these conditions and got listed in the second schedule, on violating these principles will be descheduled.

Non-scheduled banks - on the other hand are those that have not been included in the second schedule of the RBI Act. As of today there are only three non-scheduled banks in the country. These banks also have to follow the conditions regarding CRR but can keep it with itself. These banks are not eligible for loan from RBI, but become eligible under emergency conditions.