Banking System Structure
The banking system in India is a well-organized network that manages money, provides credit, and maintains financial stability. At the very top sits the Reserve Bank of India (RBI), which was established under the RBI Act of 1934. The RBI is the central bank and acts as the regulator for all other banks. It controls the flow of money and ensures that prices stay stable by managing inflation. Banks in India are broadly classified into Scheduled and Non-Scheduled banks.
Concepts (3)
The FSIB is a government body that recommends candidates for the position of directors and chairpersons in Public Sector Banks and insurance companies. It replaced the Banks Board Bureau (BBB) in 2022.
The FSIB is a government body that recommends candidates for the position of directors and chairpersons in Public Sector Banks and insurance companies. It replaced the Banks Board Bureau (BBB) in 2022. While it makes recommendations, the final decision on appointments is taken by the Appointments Committee of the Cabinet. It also helps banks develop plans to raise capital and improve their internal strategies.
Scheduled banks are those included in the Second Schedule of the RBI Act, 1934. They are eligible for loans from the RBI at the bank rate and are considered more stable. Non-scheduled banks are not in this list and have more restrictions.
Scheduled banks are those included in the Second Schedule of the RBI Act, 1934. They are eligible for loans from the RBI at the bank rate and are considered more stable. Non-scheduled banks are not in this list and have more restrictions. Most banks you see daily, like SBI or HDFC, are Scheduled Banks. They must maintain a Cash Reserve Ratio (CRR) with the RBI to ensure they have enough cash to pay back depositors.
RRBs were created to bridge the gap in rural credit. They combine the local feel of cooperatives with the professional management of commercial banks. Each RRB is 'sponsored' by a larger bank. For example, Prathama Bank was the first RRB.
RRBs were created to bridge the gap in rural credit. They combine the local feel of cooperatives with the professional management of commercial banks. Each RRB is 'sponsored' by a larger bank. For example, Prathama Bank was the first RRB. Their ownership is divided: 50% Central Govt, 15% State Govt, and 35% Sponsor Bank. They focus on lending to small farmers and rural artisans.
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