Why were six PSBs excluded from Schedule II of RBI act recently?

October 1, 2020

On September 30, 2020, the Reserve Bank of India excluded six public sector banks from the Second Schedule of RBI Act. This was done following their merger with other banks. These six banks are Oriental Bank of Commerce (OBC), Syndicate Bank, United Bank of India, Corporation Bank, Andhra Bank and Allahabad Bank.

Highlights

There were 27 Public Sector Banks in 2017. Their count has now come down to 12 with seven large PSBs and five smaller PSBs. The OBC and United Bank of India were merged into Punjab National Bank. The Syndicate Bank was merged with Canara Bank and Andhra Bank and Corporation Bank were merged into Union Bank of India and Allahabad Bank was merged into Indian Bank.

A bank that is mentioned in the Second Schedule of the RBI Act is called as the Scheduled Commercial Bank.

Scheduled Commercial Bank

Every bank listed in the schedule II of RBI act is a Scheduled Bank. In order to enter the category, a bank should hold a paid-up capital of Rs 5 lakh (minimum). These banks are eligible for loans from RBI at bank rate.

Non-Scheduled Banks

Those banks that are not listed in Schedule II of the RBI act are non-scheduled banks. They are not eligible to receive loans from RBI.

Commercial Bank

A Commercial Bank can be a scheduled or a non-scheduled bank. They operate on profit basis. They extend loans to businesses, public and government.

Co-operative Banks

These banks are registered under Cooperative Societies Act, 1912. On the other hand, the other banks are registered under RBI act. The Cooperative Banks are those banks run by elected managing committee. In Urban areas, these banks cater to small businesses, home buying, educational loans, industries. In rural areas, these banks cater to agriculture-based activities, diaries, livestock, farming, hatcheries.

These banks work on no profit no loss basis.