composition of the Indian Banking System:
The organized banking system in India can be broadly
divided into three categories viz., the central bank of the country known as
the Reserve Bank of India, the commercial banks and the co-operative banks.
Another and more common classification of banks in India is between scheduled
and non-scheduled banks. The Reserve Bank of India is the supreme monetary and
banking authority in the country and has the responsibility to control the banking
system in the country. It keeps the cash reserves of all scheduled banks and
hence is known as the “Reserve Bank”.
The Indian banking system consists of 26 public sector
banks, 20 private sector banks, 43 foreign banks, 56 regional rural banks,
1,589 urban cooperative banks and 93,550 rural cooperative banks, in addition
to cooperative credit institutions
As on September 2016, the outstanding credit to NBFCs
stood at US$ 55.27 billion, growing at 25 per cent on year-on-year basis. Bank
credit to non-banking finance companies (NBFCs) has touched the highest in
Indian banks are increasingly focusing on adopting
integrated approach to risk management. Banks have already embraced the
international banking supervision accord of Basel II. According to RBI,
majority of the banks already meet capital requirements of Basel III, which has
a deadline of March 31, 2019. Most of the banks have put in place the framework
for asset-liability match, credit and derivatives risk management.
Deposits under Pradhan Mantri Jan Dhan Yojana (PMJDY)
are growing. As on November 09, 2016, US$ 6,971.68 million were deposited,
while 255.1 million accounts were opened.
Rising incomes are expected to enhance the need for
banking services in rural areas and therefore drive the growth of the sector;
programmes like MNREGA have helped in increasing rural income aided by the
recent Jan Dhan Yojana. The Reserve Bank of India (RBI) has relaxed its branch
licensing policy, thereby allowing banks (which meet certain financial parameters)
to set-up new branches in tier-2 to tier-6 centers, without prior approval from
RBI. It has emphasised the need to focus on spreading the reach of banking
services to the un-banked population of India.
Scheduled and Non-scheduled Bank
Under the reserve Bank of India Act, 1934, banks were
classified as scheduled banks and non-scheduled banks.
The scheduled banks are
those which are entered in the Seconds Schedule of RBI Act, 1934. Such banks
are those which have a paid-up capital and reserves of an aggregate value of
not less than Rs. 5 lakhs and which satisfy RBI that their affairs are carried
out in the interests of their depositors. All commercial banks- Indian and
foreign, regional rural banks and state co-operative banks-are scheduled banks.