Difference Between Scheduled Banks and Non-Scheduled Banks

Main Difference

The main difference between Scheduled Banks and Non-Scheduled Banks is that Scheduled Banks include all the commercial banks like nationalized, foreign, development, cooperative and regional rural banks and Non-Scheduled Banks are the banks that do not attach or cling to the norms prescribed by the Reserve Bank or Central Bank.

Scheduled Banks vs. Non-Scheduled Banks

The banks that are enlisted or included in the scheme of the central bank called scheduled bank whereas Non-scheduled banks are those banks which not included in the schedule of the central bank. Scheduled banks are scheduled and under full control of central bank and non-scheduled banks are neither scheduled nor under the direct control of the central bank. Scheduled banks shall have to deposit 18% to the central bank ( 12.5% others and 5.5% cash), and there is no compulsion for non-scheduled banks. Scheduled banks get the privileges of clearing facility and re-discounting of a bill to the central bank whereas non-scheduled banks do not get such facility. The prevailing rates of interest for scheduled banks are comparatively low and non-scheduled banks rate of interest is comparatively high. Scheduled banks play a significant role in the money market whereas non-scheduled banks do not play a significant role.

Comparison chart

Scheduled BanksNon-Scheduled Banks
Scheduled banks are a banking enterprise whose minimum paid-up capital is a specific amount and does not damage the interest of the depositors.Non-scheduled banks are the banks that don’t obey the rules specified by the reserve bank or say the banks that do not come under the category of scheduled banks.
Cash Reserve Ratio
Maintained with reserve bank.Maintained with themselves.
Returns
To be submitted periodically.No such provision of submitting periodic returns.
Second Schedule
Listed in the second schedule.Not-listed in the second schedule.
Borrowing
Scheduled banks are granted to borrow money from reserve bank for regular banking purposes.Non-Scheduled banks are not granted to borrow money from reserve bank for regular banking purposes.
Members of Clearing House
It can become a member of the clearinghouse.It cannot become a member of the clearinghouse.

What are Scheduled Banks?

Scheduled Banks are the banks, which accounted in the second schedule of the reserve bank. Scheduled banks savor certain rights such as Right to receive refinance facility from the vertex bank, Entitled for currency chest facility and Right to become members of clearing house. However, they are required to fulfill certain obligations like maintaining a standard daily balance of CRR (Cash Reserve Ratio) with the reserve bank or central bank at the rates stated by it. Add to that; these banks need to present returns at regular intervals, to the central bank as long as the rules of reserve bank or central bank and banking regulation. To modify as a scheduled bank, the bank should conform to the conditions which are:

  • The total minimum value of paid-up capital and reserve must be a specific
  • The bank requires satisfying the central bank that its concerns are not carried out in a way that causes damage or harm to the interest of the depositors.
  • The bank requires to be a corporation rather than a sole proprietorship or partnership firm.

What are Non-Scheduled Banks?

Non-scheduled bank refers to the banks which not listed in the second schedule of the reserve bank. In better terms, the banks which do not obey or acquiesce with the provisions specified by the central bank, under the meaning of the reserve bank , or as per specific functions, etc. or as per the judgment of the reserve bank, are not able to assist and protect the precipitates or depositor’s interest, are known as non-scheduled banks. Non-scheduled banks are also needed to maintain the cash reserve requirement, not with the reserve banks, but with themselves. These are local area banks.

Types

  • Co-operative banks
  • State co-operative banks
  • Central co-operative banks
  • Primary credit societies

Key Differences

  1. A banking corporation whose paid-up capital is a specific amount and does not harm the interest of the depositors called a Scheduled bank. On the other hand, non-scheduled banks are the banks which are not competent in complying with the provision of the central bank.
  2. Scheduled banks are some others covered in the second schedule of the Reserve Bank, whereas non-scheduled banks are the banks that not covered in the second schedule of the Reserve Bank.
  3. Scheduled banks are authorized to borrow money from the central bank for regular banking purposes. Conversely, non-scheduled banks are not authorized to borrow money from the central bank for usual banking purposes. Nevertheless, under abnormal states, they can request the central bank for accommodation.
  4. Scheduled banks have the freedom to become the member in clearing house, while no such facility is allowed to non-scheduled banks.
  5. Scheduled Banks required to maintain cash reserves with reserve bank, at the rates prescribed by it. On the other hand, Non-Scheduled Bank also requires to keep cash reserves, but with themselves only.
  6. Scheduled banks must present or submit the periodic returns to the Reserve bank. As against, there is no such need of submission of periodic returns to the central bank, in case of non-scheduled banks.

Conclusion

Scheduled banks obtain allowances through the offices of the Central Bank or Reserve Bank and its agents, for free or at facilitating rates. Moreover, borrowing aptitudes or facilities by Central Bank on the submission of the records. Such facilities not granted to the non-scheduled banks.

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