Difference Between Scheduled And Non-Scheduled Banks

Scheduled Vs Non-scheduled Banks: The banking sector has been the most crucial financial asset of a country. It provides various services such as credit, debit, loans, investments, and plenty of others. Banks have been rising continuously with little or no impact of the recession as they quickly adapt according to the latest demands.

Every one of us uses banking services to manage our assets and even get funds for our needs with high reliability. There are two major banks, Scheduled and Non-Scheduled banks. Their main difference lies in their ownership and control. Scheduled banks are listed under the Reserve Bank of India Act 1934. Also, they follow norms and guidelines decided under the Reserve Bank of India Act. However, Non-scheduled banks are not bound to follow these norms and guidelines.

Scheduled vs Non-Scheduled Banks

The two major classifications of the Banking system are Scheduled banks and Non-scheduled banks. Scheduled banks are included under the second schedule of the Reserve Bank of India Act of 1934. However, Non-scheduled banks are not covered under the Act of 1934.

There are 12 scheduled public sector and 22 private sector banks in India. Non-scheduled banks adhere to the RBI guidelines. However, they are not bound by clause 42 rules. This article lets us know some of the major differences between scheduled and non-scheduled banks.

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What is a Scheduled Bank?

The banks that do follow the provisions specified under the Reserve Bank of India and meet the standards specified under clause 42 of the Reserve Bank of India Act, 1934, are Scheduled Banks.

Scheduled banks are listed under the second schedule of the Reserve Bank of India (RBI) Act, 1934. They need to raise funds of at least Rs 5 Lakh. They borrow money from the Scheduled banks at the bank rate. Some major classifications of scheduled banks are Nationalized banks, regional rural banks, foreign banks, state banks of India, scheduled commercial banks, cooperative banks, etc.

Key Features of Scheduled Bank

They are managed by the Reserve Bank of India, the central bank of India. Hence, they are listed under the second schedule of the Reserve Bank of India Act, 1934.
They meet certain criteria specified by the Central Bank RBI to be included in the second schedule of the RBI Act 1934.
They are eligible for various banking facilities from the RBI whenever they need them. They can also get loans from RBI at bank rates.
They gain the trust of the common citizens of the country as they are under the RBI, which is the central financial organisation of the country.

What is a Non-Scheduled Bank?

The banks that do not follow the provisions specified under the Reserve Bank of India and do not meet the standards specified under clause 42 of the Reserve Bank of India Act, 1934, are Non-Scheduled Banks.

The Non-Scheduled banks reserve funds of value less than 5 lakh rupees and are omitted from the second scheduled list of the Reserve Bank of India Act, 1934. This is because they do not meet the criteria set by the RBI under clause 42. However, they adhere to the RBI rules set for every banking organization in India.

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Key Features of Scheduled Bank

They are not included in the second scheduled list of the Reserve Bank of India Act, of 1934. Hence, they often do not have access to certain privileges provided to the scheduled banks in India, such as clearinghouse membership, refinancing facilities, loan privileges at a lower interest rate, etc.
They generally have a fund capital of less than Rs 5 lakhs. They can only borrow loans from the RBI in emergency situations, not for normal banking work.
They maintain their cash reserve ratio themselves without any support from the Reserve Bank of India.

Scheduled Vs Non-Scheduled Banks: Key Differences

Some major differences between Scheduled and Non-scheduled banks in India are mentioned in the table below.

Scheduled Vs Non-Scheduled Banks
Scheduled Banks	Non-Scheduled Banks
The scheduled banks meet the standards specified under clause 42 of the Reserve Bank of India Act, 1934.	They do not meet the standards specified under clause 42 of the Reserve Bank of India.
They are listed under the second schedule of the Reserve Bank of India, Act 1934	They are not listed under the second schedule of the Reserve Bank of India, Act 1934
They are subjected to strict regulations under the RBI.	They are subjected to very few regulations imposed by the RBI.
They have clearinghouse membership facilities. They maintain an average cash reserve ratio with the Central Bank RBI.	They are not the member of the clearing house.
They are strictly regulated and governed by the RBI.	They are not governed by the RBI.
They offer high returns on investment and must maintain a high CRR. Their CRR is maintained with the Reserve Bank of India.	They offer private services such as offering loans and other services to individuals and businesses.
Their overall capital reserve is at least 5 lakhs or more.	Their overall capital reserve can be less than 5 lakhs or more. However, unlike scheduled banks, they do not have any constraints to keep it at least 5 lakhs.
They can easily get loans for various banking operations from RBI that too under bank interest rate.	They can get loans only during an emergency situation at a comparatively higher interest rate.
Their deposits are generally insured under the Deposit Insurance and Credit Guarantee Corporation (DICGC).	Their deposits are not generally insured.
They are considered to be more reliable and trustworthy among citizens.	Trust levels are slightly lower with non-scheduled banks as they cover lower regulations specified by RBI.

Scheduled Vs Non-Scheduled Banks: Numbers in India

Some of the major classifications of Scheduled banks are public sector banks, private sector banks, payments banks, regional rural banks, etc. Let us know their numbers in India.

Scheduled Vs Non-Scheduled Banks
Name	Number
Scheduled Public sector banks	12
Scheduled Private sector banks	22
Scheduled Small Finance banks	12
Scheduled Regional Rural Banks	43
Scheduled Payments Bank	4
Scheduled Foreign banks	45

What are Commercial Banks?

Commercial banks are institutions that provide various banking services such as loans, credits, checks, savings, current balance accounts, and other facilities. They provide loans to individuals and businesses and are a major influence on our country’s economy. There are three major classifications of Commercial banks in India.

1. Public Sector Banks

These banks are government sector banks where the Indian government is the major stakeholder. They provide various banking facilities to every citizen of India irrespective of their financial status, background and place. Some of the major public sector banks in India are the State Bank of India, Punjab National Bank, etc.

2. Private Sector Banks

The major stakes in private banks are held by individuals or co-partners. They provide various banking facilities to individuals and businesses for their growth at reasonable interest rates. In India, there are more than 21 private-sector banks. Some major private sector banks are Axis Bank, ICICI Bank, HDFC Bank, etc.

3. Foreign Banks

These banks are functional in India and provide various banking and financial services. However, their headquarters are located outside India. In India, there are 40+ foreign banks functional at present. Some of the foreign banks are Abu Dhabi Commercial Bank Ltd., American Express Banking Cooperation, J.P. Morgan Chase Bank, etc.

4. Regional Rural Banks

These banks provide their services mainly to the rural sector of society, which is poor and lacks various basic facilities. In India, some of the rural societies include farmers, labourers, small businesses, etc. There are 43 regional rural banks in India currently operating and providing banking services in remote areas.

What are Cooperative Societies?

Cooperative societies are institutions generally founded by the that come together on the basis of a common social, cultural and economic goal. There are huge communities of cooperative societies in major sectors such as banking, agriculture, housing, transportation, etc.

They provide various services, such as loans, deposits, and credit facilities and are present both in urban and rural areas. They are licensed by RBI and are also regulated by them. The two major classifications of cooperative Societies are Urban Cooperative Banks (UCBs) and Rural Cooperative Banks (RCBs).

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Scheduled Vs Non-Scheduled Banks: Benefits of Scheduled Bank

Some major benefits of Scheduled banks over non-scheduled banks are mentioned below.

Banks get loans for different services at bank rates from the RBI.
They are members of a clearinghouse and are in charge of exchanging payments, securities and transactions.
They are more trusted by citizens as they follow major RBI guidelines and work under them.
They also provide currency storage facilities.

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Scheduled Vs Non-Scheduled Banks FAQs

What are scheduled banks?

The banks that do follow the provisions specified under the Reserve Bank of India and meet the standards specified under clause 42 of the Reserve Bank of India Act, 1934 are Scheduled Banks.

What are Non-Scheduled Banks?

These banks do not follow the provisions specified under the Reserve Bank of India and do not meet the standards specified under clause 42 of the Reserve Bank of India Act, 1934.

What is the major difference between Scheduled and Non-scheduled banks?

The scheduled banks are listed under the second schedule of the Reserve Bank of India Act, 1934. However, non-scheduled banks are not. They are also not maintained by RBI and do not comply with major parameters of Clause 42.