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Context:

• Paytm Payments Bank has gained Reserve Bank of India's (RBI) approval to function as a scheduled bank .

Details

• It can participate in government and companies' request for proposals, primary auctions, fixed-rate and variable rate repos, and reverse repos, along with participation in Marginal Standing Facility.
• It will also be eligible to be a partner in government-run financial inclusion schemes.

Meaning of Scheduled Bank

• The banks in the Indian banking system are sub categorized as Scheduled Banks, Non-Schedule Banks, Private Banks and Public Banks. Scheduled banks are those banks that are listed under Schedule II of the Reserve Bank of India Act, 1934.
• The bank's paid-up capital and raised funds must be at least Rs. 5 lakh to qualify as a scheduled bank. These banks are liable for low interest loans from the RBI.
• They also have membership in clearing houses.
• They also have numerous obligations to fulfil such as maintaining an average daily Cash Reserve Ratio with the central bank.

Types of Scheduled Banks in India

• The banks listed in Schedule II are further classified as –
• Scheduled Commercial Public Sector Banks
• SBI and its associates
• Scheduled Commercial Private Sector Banks
• Old Private Banks
• New Private Sector Banks
• Scheduled Foreign Banks in India

Main functions of these banks

• Acceptance of deposits from the public
• Provide demand withdrawal facility
• Lending facility
• Transfer of funds
• Issue of drafts
• Provide customers with locker facilities
• Dealing with foreign exchange

Differences Between a Scheduled Bank and Non-Scheduled Bank

Scheduled Bank

• They are listed in the second schedule of the RBI Act.
• These have a paid up capital of Rs. 5 lakhs or more and comply with all the requirements of the RBI.
• They maintain a cash reserve ratio with RBI.
• They are authorized to borrow funds from the Reserve Bank of India.
• They are comparatively more financially stable.

Non-Scheduled Bank

• They are not listed in the second schedule of the RBI Act.
• There is no such condition that needs to be fulfilled for it to be considered a non-scheduled bank.
• They maintain the CRR amount with themselves.
• They are not allowed to.
• These banks are riskier.

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