BANKING

RESERVE BANK OF INDIA

SCHEDULED BANK
II SCHEDULE NON-SCHEDULED BANK

• SCHEDULED COMMERCIAL BANK • OTHER THAN SCHEDULED BANKS

• SCHEDULED COOPERATIVE BANK
• SPECIAL FINANCIAL INSTITUTION
 SCHEDULED COMMERCIAL BANK

• SCHEDULE II RBI ACT 1934

• COMPANIES ACT 1956/2013

• BANKING REGULATION ACT 1949

• Scheduled Commercial Banks in India are banks that are listed under the Second Schedule of the
Reserve Bank of India Act, 1934, regulated by the Reserve Bank of India (RBI) and are
authorized to carry out banking activities in India
• Scheduled commercial Banks are further divided into 6 types as below -
• Scheduled Public Sector Banks
• Scheduled Private Sector Banks
• Scheduled Small Finance Banks
• Regional Rural Banks
• Foreign Banks
• Payment banks (currently four banks Airtel Payments Bank, Fino Payments Bank, India Post
Payments Bank, Paytm Payments Bank have been granted Scheduled bank status)
 COMMERCIAL BANK

• PUBLIC SECTOR BANKS

SBI
NATIONALISED BANKS
• PRIVATE SECTOR BANKS
• FOREIGN BANKS
• REGIONAL RURAL BANKS
• PAYMENT BANKS
• SMALL FINANCE BANKS
 PUBLIC SECTOR BANKS

• GOI OWNS 51%OF THE EQUITY OR HAS ABILITY TO CONTROL ITS MANAGEMENT AND POLICIES
• SBI 1955
• 5 ASSOCIATE BANKS OF SBI 1959
• 14 NATIONALISED BANKS 1969
• 6 MORE NATIONALISED BANKS IN1980
• CURRENTLY AFTER MERGER 12 PUBLIC SECTOR BANKS (SBI + 11 OTHERS)
• Emergence of public sector banks
• The Central Government entered the banking business with the nationalization of the Imperial Bank of India in
1955. A 60% stake was taken by the Reserve Bank of India and the new bank was named State Bank of India.
The 7 other state banks became subsidiaries of the new bank in 1959 when the State Bank of India (Subsidiary
Banks) Act, 1959 was passed by the Union government.
• The next major government intervention in banking took place on 19 July 1969 when the Indira government
nationalised an additional 14 major banks. The total deposits in the banks nationalised in 1969 amounted to 50
crores. This move increased the presence of nationalised banks in India, with 84% of the total branches coming
under government control. In all, 28 banks were nationalised from 1955–1980
• Presently 12 nationalised banks include Punjab National Bank (PNB), Bank of Baroda (BoB), Bank of India
(BoI), Central Bank of India, Canara Bank, Union Bank of India, Indian Overseas Bank (IOB), Punjab, and Sind
Bank, Indian Bank, UCO Bank, Bank of Maharashtra, and State Bank of India (SBI).
 PRIVATE SECTOR BANK
• BANK IN WHICH PRIVATE SHAREHOLDING IS MORE THAN 50%
• LIBRALISATION, PRIVATISATION AND GLOBALISATION 1991
• LICENSING 1993

• COMMERCIAL BANK COOPERATIVE BANKS SPECIAL FINANCIAL INSTITUTIONS

• The banks which have been setup in the 1990s under the guidelines of the Narasimham
Committee are referred to as new private sector banks
• At present, there are 21 private banks in India, as of 1 March 2023.
• Superior Financial Services
• Designed Innovative Products
• Tapped new markets
• Greater efficiency
• Axis Bank Ltd, Development Credit, Bank Ltd, HDFC Bank Ltd, ICICI Bank Ltd, IndusInd
Bank Ltd, Kotak Mahindra Ltd, Yes Bank Ltd, etc.
 FOREIGN BANKS
• “Foreign banks” are Financial Institutions that serve financial services to
International consumers outside of their own country, obligated to follow the
regulations of the home country as well as the host country

• The list of Foreign Banks in India includes City Bank, Bank of America,
Barclays Bank, DBS Bank, Standard Chartered Bank and more.
 SMALL FINANCE BANK
• The small finance bank will be required to use the words “Small Finance Bank” in its name in
order to differentiate it from other banks.
• The minimum paid-up equity capital for small finance banks shall be ₹200 crore
• Required to maintain a minimum capital adequacy ratio of 15 per cent of its risk weighted assets
(RWA) on a continuous basis
• The promoter's minimum initial contribution to the paid-up equity capital of such small finance
bank shall at least be 40 per cent.
• The promoter's minimum contribution of 40 per cent of paid-up equity capital shall be locked in
for a period of five years from the date of commencement of business of the bank. Further, the
promoter’s stake should be brought down to 30 per cent of the paid-up equity capital of the bank
within a period of 10 years, and to 26 per cent within 12 years from the date of commencement
of business of the bank
• Savings vehicles primarily to unserved and underserved sections of the population

• Supply of credit to small business units; small and marginal farmers; micro and small industries; and other un-organised sector
entities, through high technology-low cost operations.

• Promoter ‘fit and proper’ status of the applicants on the basis of their past record of sound credentials and integrity; financial
soundness and successful track record of professional experience or of running their businesses, etc. for at least a period of five
years.

• After the small finance bank reaches the net worth of ₹500 crore listing will be mandatory within three years of reaching that net
worth.

• However, small finance banks having net worth of below ₹500 crore could also get their shares listed voluntarily, subject to
fulfillment of the requirements of the capital markets regulator.

• Au Financiers India Ltd. , Ujjivan Financial Services Pvt Ltd.

 PAYMENT BANKS
• The minimum capital requirement is Rs.100 crore
• For the first five years, the stake of the promoter should remain at least 40%.
• These banks can accept a restricted deposit, which is currently limited to ₹200,000 per customer
• Cannot issue credit, loans and credit cards
• Both current account and savings accounts can be operated by such banks.
• Payments banks can issue ATM cards or debit cards and provide online or mobile banking.
• The bank can accept utility bills.
• It cannot form subsidiaries to undertake non-banking activities
• The following is the list of active payments banks:[20]

• Airtel Payments Bank

• India Post Payments Bank
• Fino Payments Bank
• Jio Payments Bank
• Paytm Payments Bank
 REGIONAL RURAL BANK
• OPERATES IN A PARTICULAL AREA OR REGION TO PROVIDE SERVICES VILLEGERS AND FARMERS
• RESTRICTED TO APARTICULAR AREA ONLY
• N NARSIMHAM COMMITTEE RECOMMENDATION
• RRB FIRST ESTABLISHED IN 1975
• RRB ACT 1976
• REGULATORS

RBI (GUIDELINES
NABARD (INSPECTION)

• SHAREHOLDING

50% CENTRAL GOVERNMENT

15% STATE GOVERNMENT
35% SPONSORED BANK
 FUNCTIONS OF RRB
• TO OPERATE AT THE REIONAL LEVEL IN VARIOUS STATE ACROSS THE COUNTRY
• TO CATER THE NEED OF RURAL PEOPLE IN THE BACKWARD REGION
• PRIORITY SECTOR LENDING
• RBI NOT OPERATES IN GOA AND SIKKIM
• IT’S MAIN OBJECTIVE IS TO
PROVIDE CREDIT AND OTHER BANKING FACILITIES TO THE SMALL, MARGINAL FARMERS,
AGRICULTRAL LABOURERS, SMALL ARTISANS.
• The scheduled banks came into existence in 1975 when 6 regional rural banks (RRBs) came into
existence under the Regional Rural Banks Ordinance, 1975.
• Currently there are a total of 56 Regional Rural Banks in India.
• Development of agriculture, trade, commerce industry, and other productive activities in rural
areas
• Provide credit and other facilities to the small and marginal farmers, agricultural labourers and
small entrepreneurs
• Each RRB is sponsored by a public sector bank
• These banks are under the ownership of Ministry of Finance, Government of India, Sponsered
Bank and concerned State Government in the ratio of 50:35:15 respectively.
• Chaitanya Godavari Grameena Bank, Guntur, Andhra Pradesh Deccan Grameena Bank,
Rangareddy, Andhra Pradesh Dena Gujarat Gramin Bank, Gandhinagar, Gujarat ,Haryana
Gramin Bank, Rohtak, Haryana etc
 NON-PERFORMING ASSETS
•A non-performing asset (NPA) is a loan or an advance where -:
•interest and/ or installment of principal remain overdue for a period of more than 90 days in respect of a term
loan;
•the bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted.
•the account remains ‘out of order’ in respect of an Overdraft/Cash Credit (OD/ CC);

OUT OF ORDER
 the outstanding balance remains continuously in excess of the sanctioned limit/drawing power or
 In cases where the outstanding balance in the principal operating account is less than the sanctioned
limit/drawing power, but there are no credits continuously for 90 days as on the date of Balance Sheet ; or
 credits are there but are not enough to cover the interest debited during the same period, these accounts
should be treated as ‘out of order’.

Overdue: Any amount due to the bank under any credit facility is ‘overdue’ if
• it is not paid on the due date fixed by the bank
 PRUDENTIAL NORMS ON INCOME RECOGNITION,ASSET
CLASSIFICATION AND PROVISIONING PERTAINING TO ADVANCES

• Categories of Non-Performing Assets: Provision required

• Substandard Assets (NPA 12 MONTHS OR LESS) 15%
• Doubtful Assets:(SUBSTANDARD FOR 12 MONTHS) (Secured + Unsecured)
• Sub-categories:
• Doubtful up to 1 Year (D1) 25% + 100%
• Doubtful 1 to 3 Years (D2) 40% + 100%
• Doubtful more than 3 Years (D3) 100% + 100%

• Loss Assets: 100%

Would be one, where loss has been identified by the
bank or internal or external auditors or the RBI
inspection but the amount has not been written off wholly.