Overview

Scheduled Commercial Banks (SCBs) are banks listed in the Second Schedule of the Reserve Bank of India Act, 1934. These banks are authorised to carry out commercial banking activities and are eligible to avail facilities from the central bank, including refinancing and liquidity support.

SCBs form the core of India’s banking system, playing a critical role in credit creation, monetary transmission, financial inclusion, and economic growth.

Legal Basis

A bank is classified as a Scheduled Commercial Bank when it:

• Is included in the Second Schedule of the RBI Act, 1934
• Has a minimum paid-up capital and reserves as prescribed by RBI
• Conducts its affairs in a manner that does not harm the interests of depositors

These banks are regulated by the Reserve Bank of India

Key Features

• Eligible for RBI refinancing and liquidity facilities
• Must maintain Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR)
• Subject to RBI supervision, inspection, and prudential norms
• Can participate in monetary policy operations
• Accept deposits and provide loans to households, businesses, and government

Classification of Scheduled Commercial Banks

Public Sector Banks

These banks are majority-owned by the Government of India.

• State Bank of India (SBI) and its associates
• Nationalised Banks (such as Punjab National Bank, Bank of Baroda, Canara Bank)

They play a major role in priority sector lending, financial inclusion, and government schemes.

Private Sector Banks

These banks are owned and managed by private shareholders.

• Old Private Sector Banks: Federal Bank, South Indian Bank, Karur Vysya Bank
• New Private Sector Banks: HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank

They are known for technological adoption, efficiency, and customer-centric services.

Foreign Banks

Foreign banks operating in India with branches or wholly-owned subsidiaries are also SCBs.

• Examples include HSBC, Citi Bank, Standard Chartered
• They mainly focus on corporate banking, trade finance, and high-net-worth clients

Regional Rural Banks (RRBs)

RRBs are also included under Scheduled Commercial Banks.

• Jointly owned by the Central Government, State Government, and Sponsor Banks
• Focus on rural credit, agriculture, MSMEs, and financial inclusion

Functions of Scheduled Commercial Banks

• Accept deposits (savings, current, fixed, recurring)
• Provide credit to agriculture, industry, services, and households
• Facilitate payments and settlements
• Support priority sector lending
• Implement government welfare and subsidy schemes
• Act as key channels for monetary policy transmission

Importance in the Indian Economy

Scheduled Commercial Banks are central to India’s financial architecture.

• Mobilise savings and convert them into productive investments
• Support economic growth by financing infrastructure, industry, and MSMEs
• Enable financial inclusion through Jan Dhan accounts, DBT, and digital banking
• Act as transmission channels for RBI’s repo rate and liquidity measures

Difference from Non-Scheduled Banks

• Scheduled Banks: Listed in the RBI Act, eligible for RBI facilities, larger and more regulated
• Non-Scheduled Banks: Not listed in the Second Schedule, limited operations, and fewer privileges