Banking Industry Structure
All banks of India can be simply divided into 3 major groups viz. Central Bank (RBI), Scheduled Banks and Non-scheduled Banks. This implies that every bank other than RBI, is either a scheduled bank or a non-scheduled bank.
However, on the basis of functions, there are five broad categories of Banks in India viz. Central Bank (RBI), Commercial Banks, Development Banks (or Development Finance Institutions), Cooperative Banks and Specialized banks.
Scheduled Versus Non-scheduled banks
A bank is called a scheduled bank in India, if it is listed in the second schedule of the RBI Act, 1934. In order to be included under this schedule of the RBI Act, banks have to fulfill certain statutory conditions such as:
- These banks need to have paid up capital and reserves of at least Rs. 0.5 million (50 Lakh)
- They should satisfy the CRAR norms and other prudential norms of RBI
- They should satisfy the RBI that their business is not being conducted in a manner prejudicial to the interests of its depositors.
In our country all banks are scheduled banks except four Local Area Banks and some Non-scheduled Urban Cooperative Banks. As of February 2015, these four local area banks are:
- Coastal Local Area Bank Ltd – Vijayawada (Andhra Pradesh)
- Capital Local Area Bank Ltd – Phagwara (Punjab)
- Krishna Bhima Samruddhi Local Area Bank Ltd, Mahbubnagar (Andhra Pradesh)
- Subhadra Local Area Bank Ltd., Kolhapur (Maharashtra)
The scheduled banks are further classified into Scheduled Commercial Banks and Scheduled Cooperative Banks. The basic difference between scheduled commercial banks and scheduled cooperative banks is in their holding pattern. Scheduled cooperative banks are cooperative credit institutions that are registered under the Cooperative Societies Act. These banks work according to the cooperative principles of mutual assistance.
Classification up to this point is displayed in the below graphics.
Different types of Scheduled Commercial Banks
The scheduled commercial banks are those banks which are included in the second schedule of RBI Act 1934 and which carry out the normal business of banking such as accepting deposits, giving out loans and other banking services.
Scheduled Commercial Banks can be further divided into four groups: