Structure of Indian Banking System

The banking system in India is broadly divided into Scheduled and Non-Scheduled Banks.

A. Scheduled Banks

• Included in the Second Schedule of the RBI Act, 1934.
• Maintain CRR (Cash Reserve Ratio) with RBI.
• Eligible for loans and clearing house facilities.

Types of Scheduled Banks:

1. Commercial Banks

   • Public Sector Banks: Majority owned by Government of India. (Examples: SBI, PNB, Bank of Baroda)
   • Private Sector Banks: Majority owned by private individuals/institutions. (Examples: HDFC, ICICI, Axis Bank)
   • Foreign Banks: Incorporated outside India but operate in India. (Examples: Citibank, HSBC, Standard Chartered)
   • Regional Rural Banks (RRBs): Established in 1975 under the RRB Act, sponsored by public sector banks to promote rural credit.

2. Co-operative Banks

   • Work on principles of co-operation and mutual help.
   • Categories:
     • State Co-operative Banks (SCBs) – apex institutions at state level.
     • District Central Co-operative Banks (DCCBs) – operate at district level.
     • Primary Agricultural Credit Societies (PACS) – operate at village level.
   • Provide credit mainly for agriculture and rural development.

3. Specialised Banks

   • Small Finance Banks (SFBs): Provide credit to small businesses, farmers, unorganised sector (e.g., AU Small Finance Bank, Equitas).
   • Payments Banks: Can accept deposits up to ₹2 lakh per customer but cannot lend (e.g., Paytm Payments Bank, India Post Payments Bank).

B. Non-Scheduled Banks

• Not included in the Second Schedule of RBI Act.
• Smaller in size and operations.
• Cannot borrow from RBI for routine operations.
• Example: Local Area Banks.