Scheduled Banks Features

Scheduled Banks Features

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Scheduled banks, regulated by the central bank, play a crucial role in a country's financial system by facilitating economic activities and promoting savings and investment. The classification of scheduled banks is based on their eligibility for inclusion in the Second Schedule of the Reserve Bank of India (RBI) Act, 1934. In India, scheduled banks are those that meet certain criteria, including maintaining prescribed cash reserve ratio (CRR) and statutory liquidity ratio (SLR) requirements. They are also subject to regulatory oversight by the RBI.

The RBI sets forth various guidelines and regulations for scheduled banks to ensure their smooth functioning, financial stability, and adherence to ethical practices. RBI guidelines for scheduled banks encompass diverse aspects such as capital adequacy norms, asset classification and provisioning standards, corporate governance, customer protection, anti-money laundering measures, and risk management practices. The RBI conducts regular inspections to monitor compliance and take corrective actions when necessary, fostering the overall health of the banking sector.

The functions of scheduled banks include deposit acceptance, lending and credit extension, payment services, and investment services. One of the primary functions of scheduled banks is to accept deposits from individuals, businesses, and other entities. These deposits can be in the form of savings accounts, current accounts, fixed deposits, etc. Scheduled banks provide loans and credit facilities to borrowers. They can be personal loans, home loans, working capital loans, etc. Scheduled banks facilitate domestic and international payment services, including cheque clearing, electronic fund transfers, etc., which are essential for facilitating trade and commerce. Scheduled banks offer investment products such as mutual funds, government securities, and bonds, allowing customers to grow their wealth and manage risk.

The difference between nationalised and scheduled banks can be in the form of ownership, management, and objectives. Nationalized banks are owned and operated by the government. Scheduled banks can be privately owned, public sector banks, or foreign banks operating within the country. Nationalized banks are managed by a board of directors appointed by the government. The government plays a significant role in decision-making and policy implementation. While scheduled banks have their boards of directors, the government's involvement is minimal compared to nationalized banks. They have greater autonomy in decision-making. Nationalized banks often prioritize social welfare and financial inclusion. Scheduled banks primarily focus on commercial activities, aiming to maximize profits for their shareholders while complying with regulatory guidelines.