According to the RBI, “Commercial Banks refer to both scheduled and non-scheduled commercial banks which are regulated under Banking Regulation Act, 1949.” Commercial banks operate on a ‘for-profit’ basis.
They primarily engage in the acceptance of deposit and extend loans to the general public, businesses and the government.
By definition, any bank which is listed in the 2nd schedule of the Reserve Bank of India Act, 1934 is considered a scheduled bank.
The list includes the State Bank of India and its subsidiaries (like State Bank of Travancore), all nationalized banks (Bank of Baroda, Bank of India, etc), regional rural banks (RRBs), foreign banks (HSBC Holdings Plc, Citibank NA) and some cooperative banks. These also include private sector banks, both classified as old (Karur Vysya Bank) and new (HDFC Bank Ltd).
To qualify as a scheduled bank, the paid-up capital and collected funds of the bank must not be less than Rs. 5 lakh.
Scheduled banks are eligible for loans from the Reserve Bank of India at bank rate, and are given membership to clearinghouses.
Non-Scheduled banks by definition are those which are not listed in the 2nd schedule of the RBI act, 1934.
Banks with a reserve capital of less than 5 lakh rupees qualify as non-scheduled banks.
Unlike scheduled banks, they are not entitled to borrow from the RBI for normal banking purposes, except, in emergency or “abnormal circumstances.”
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