Scheduled Commercial Banks (SCBs) form the core of the Indian banking system. They play a crucial role in mobilising savings, providing credit, supporting economic growth, and implementing monetary policy.
Scheduled Banks in India
Scheduled Banks in India are those banks that are included in the Second Schedule of the Reserve Bank of India Act, 1934. These banks are regulated by the Reserve Bank of India (RBI). A bank is included in this schedule only if it satisfies the conditions laid down under Section 42(6)(a) of the RBI Act. Banks that are not included in this schedule are known as Non-Scheduled Banks. Scheduled banks are considered financially stable and reliable because they operate under strict RBI regulations and supervision.
Scheduled banks enjoy important facilities from the RBI. They are eligible to receive loans and advances from the RBI at the official bank rate whenever required. They also automatically become members of the clearing house system, which helps in smooth and faster settlement of inter-bank transactions such as cheque clearing and fund transfers.
Types of Scheduled Banks in India
Scheduled Banks in India are mainly divided into two categories:
| Main Categories of Scheduled Banks | Types |
|---|---|
| Scheduled Commercial Banks | Public Sector Banks, Private Sector Banks, Small Finance Banks, Regional Rural Banks (RRBs), Foreign Banks, Payments Banks |
| Scheduled Co-operative Banks | State Co-operative Banks, Urban Co-operative Banks |
Scheduled Commercial Banks
Scheduled Commercial Banks are the most important part of the Indian banking system. These banks provide services such as deposits, loans, internet banking, mobile banking, and investment services. They are further divided into different categories:
- Scheduled Public Sector Banks – These banks are mainly owned by the Government of India. Example: State Bank of India.
- Scheduled Private Sector Banks – These banks are owned by private individuals or institutions. Examples include HDFC Bank and ICICI Bank.
- Scheduled Small Finance Banks – These banks mainly provide banking services to farmers, small businesses, and low-income groups.
- Scheduled Regional Rural Banks (RRBs) – These banks focus on providing banking and credit facilities in rural areas.
- Foreign Banks – These are banks headquartered outside India but operating branches within India.
- Scheduled Payments Banks – These banks accept small deposits and provide payment and digital banking services but cannot provide large loans.
Scheduled Co-operative Banks
Scheduled Co-operative Banks operate on co-operative principles and mainly serve local communities. These banks are divided into two categories:
- Scheduled State Co-operative Banks – These banks operate at the state level and mainly support agricultural and rural credit.
- Scheduled Urban Co-operative Banks – These banks operate in urban and semi-urban areas and provide banking services to local people and businesses.
Importance of Scheduled Banks
Scheduled Banks form the backbone of India’s organized banking system. They help in mobilizing savings, providing loans, supporting businesses and industries, promoting rural development, and improving financial inclusion. Through their large branch networks and digital banking services, scheduled banks play a major role in India’s economic growth and financial stability.
Growth of Scheduled Commercial Banks in India (2005–2013)
| Indicators | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 |
|---|---|---|---|---|---|---|---|---|---|
| Number of Commercial Banks | 284 | 218 | 178 | 169 | 166 | 163 | 163 | 169 | 151 |
| Number of Branches | 70,373 | 72,072 | 74,653 | 78,787 | 82,897 | 88,203 | 94,019 | 102,377 | 109,811 |
| Population per Bank (in thousands) | 16 | 16 | 15 | 15 | 15 | 14 | 13 | 13 | 12 |
| Aggregate Deposits | ₹17,002 billion | ₹21,090 billion | ₹26,119 billion | ₹31,969 billion | ₹38,341 billion | ₹44,928 billion | ₹52,078 billion | ₹59,091 billion | ₹67,504.54 billion |
| Bank Credit | ₹11,004 billion | ₹15,071 billion | ₹19,312 billion | ₹23,619 billion | ₹27,755 billion | ₹32,448 billion | ₹39,421 billion | ₹46,119 billion | ₹52,605 billion |
| Deposit as % of GNP | 62% | 64% | 69% | 73% | 77% | 78% | 78% | 78% | 79% |
| Per Capita Deposit | ₹16,281 | ₹19,130 | ₹23,382 | ₹28,610 | ₹33,919 | ₹39,107 | ₹45,505 | ₹50,183 | ₹56,380 |
| Per Capita Credit | ₹10,752 | ₹13,869 | ₹17,541 | ₹21,218 | ₹24,617 | ₹28,431 | ₹34,187 | ₹38,874 | ₹44,028 |
| Credit-Deposit Ratio | 63% | 70% | 74% | 75% | 74% | 74% | 76% | 79% | 79% |
Analysis of Banking Growth
The table shows the strong growth of scheduled commercial banks in India between 2005 and 2013. During this period, the number of commercial banks declined from 284 to 151 because of mergers, restructuring, and consolidation in the banking sector. However, the number of bank branches increased significantly from 70,373 in 2005 to 109,811 in 2013, showing a major expansion of banking services across the country.
The population served by each bank branch also improved. In 2005, one bank branch served around 16,000 people, while by 2013 this number declined to 12,000, indicating better banking access and financial inclusion. Aggregate deposits increased sharply from ₹17,002 billion in 2005 to ₹67,504.54 billion in 2013, reflecting higher public savings and growing confidence in the banking system.
Similarly, bank credit expanded rapidly from ₹11,004 billion to ₹52,605 billion during the same period. This rise shows increased lending activities for businesses, industries, agriculture, and retail customers. Deposits as a percentage of Gross National Product (GNP) also increased from 62% to 79%, highlighting the growing importance of banks in the Indian economy.
Per capita deposits and per capita credit saw continuous growth, which indicates higher income levels, better banking penetration, and increased financial activity among the population. The credit-deposit ratio improved from 63% in 2005 to 79% in 2013, showing that banks were lending a larger share of their deposits to support economic growth. Overall, the data reflects the rapid expansion, modernization, and strengthening of the Indian banking sector during this period.
Functions of Scheduled Commercial Banks in India
Scheduled Commercial Banks are banks included in the Second Schedule of the Reserve Bank of India Act, 1934, and regulated by the Reserve Bank of India. These banks play an important role in the Indian economy by accepting deposits, providing loans, supporting trade and industry, and promoting economic development.
Main Functions of Scheduled Commercial Banks
| Function | Description |
|---|---|
| Accepting Deposits | Banks accept money from the public in the form of savings accounts, current accounts, fixed deposits, and recurring deposits. |
| Providing Loans and Advances | Banks provide loans to individuals, businesses, farmers, industries, and traders for various purposes such as housing, education, business expansion, and agriculture. |
| Credit Creation | Scheduled commercial banks create credit by lending a part of the deposits received from customers, which increases money circulation in the economy. |
| Facilitating Trade and Commerce | Banks support trade by providing services like letters of credit, bank guarantees, overdrafts, and bill discounting facilities. |
| Payment and Remittance Services | Banks help in transferring money from one place to another through cheques, demand drafts, NEFT, RTGS, IMPS, UPI, and mobile banking services. |
| Agency Functions | Banks act as agents for customers by collecting cheques, paying bills, collecting dividends, and handling insurance or tax payments. |
| Investment Services | Banks provide investment-related services such as mutual funds, insurance products, demat accounts, and wealth management services. |
| Foreign Exchange Services | Banks deal in foreign exchange transactions and help in import-export payments and international trade. |
| Locker Facilities | Banks provide safe deposit lockers to customers for storing valuables and important documents securely. |
| Promoting Savings | Banks encourage people to save money through various deposit schemes and interest-bearing accounts. |
| Financial Inclusion | Banks provide banking services in rural and unbanked areas through branches, ATMs, mobile banking, and government schemes. |
| Supporting Government Policies | Banks help the government implement financial schemes, subsidy transfers, pension payments, and welfare programs. |
Scheduled Commercial Banks are the backbone of the Indian financial system. Their primary function is to accept deposits from the public and provide loans to different sectors of the economy. By collecting savings from people and lending them to businesses and individuals, banks help in capital formation and economic growth. These banks also create credit, which increases the supply of money and supports industrial and commercial activities.
Apart from lending and deposit functions, scheduled commercial banks provide several modern banking services such as internet banking, mobile banking, ATM services, debit and credit cards, and digital payment systems. They also support international trade through foreign exchange services and letters of credit. Banks play a major role in implementing government financial inclusion programs such as the Pradhan Mantri Jan Dhan Yojana and help in direct benefit transfers, pension payments, and subsidy distribution.
Through their widespread branch network and digital banking infrastructure, scheduled commercial banks contribute significantly to employment generation, rural development, industrial growth, and overall economic development of India.