Key Concepts & Self-Assessment15 Key Facts
Review key Indian Banking Sector: Scheduled Commercial Banks, RRBs & Basel Norms exam facts and rate your mastery to track revision.
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#1
Scheduled Commercial Banks (SCBs) are financial institutions included in the Second Schedule of the Reserve Bank of India Act, 1934.
#2
Under the RBI Act 1934, scheduled bank status requires paid-up capital and reserves of at least ₹5 lakh and conducting operations without prejudicing depositor interests.
#3
The Banking Regulation Act, 1949 regulates bank licensing under Section 22 and mandates maintenance of the Statutory Liquidity Ratio (SLR) under Section 24.
#4
The Government of India nationalized 14 major commercial banks on July 19, 1969, having deposit bases exceeding ₹50 crore each.
#5
A second phase of nationalization occurred on April 15, 1980, bringing six additional commercial banks with deposit bases over ₹200 crore under public ownership.
#6
The Narasimham Committee I (1991) recommended reducing high statutory reserve ratios (CRR and SLR), deregulating interest rates, and establishing transparent asset classification.
#7
The Narasimham Committee II (1998) advocated bank consolidation, introducing tighter capital adequacy ratios and establishing asset reconstruction companies.
#8
Regional Rural Banks (RRBs) were established under the Regional Rural Banks Act, 1976 following recommendations of the Narasimham Working Group of 1975.
#9
The shareholding structure of RRBs is apportioned as 50% by the Central Government, 15% by the State Government, and 35% by the Sponsor Bank.
#10
Under Priority Sector Lending (PSL) guidelines, domestic commercial banks must allocate 40% of Adjusted Net Bank Credit (ANBC) to mandated sectors like agriculture.
#11
Non-Performing Assets (NPAs) are advances where interest or principal installments remain overdue for more than 90 days in commercial lending.
#12
Basel III guidelines issued by the Basel Committee on Banking Supervision require Indian commercial banks to maintain a minimum CRAR of 9%.
#13
Under Basel III in India, a Capital Conservation Buffer (CCB) of 2.5% common equity tier-1 raises total regulatory capital requirements to 11.5%.
#14
The Insolvency and Bankruptcy Code (IBC), 2016 established a time-bound corporate insolvency resolution process overseen by the National Company Law Tribunal.
#15
The National Asset Reconstruction Company Limited (NARCL) serves as India's bad bank to acquire and resolve stressed commercial bank assets.
Subject Specialist Commentary
Analytical perspective & practical exam advice from the Master10 academic board
India's organized banking sector is anchored by Scheduled Commercial Banks, institutions listed in the Second Schedule of the Reserve Bank of India Act, 1934. The system expanded rapidly through the historic nationalization waves of 1969 and 1980 to advance financial inclusion. However, structural modern banking reforms were spearheaded by the landmark Narasimham Committees in 1991 and 1998, which phased out excessive reserve requirements, introduced transparent bad-loan norms, and paved the way for modern prudential regulation.
Economics questions in UPSC Prelims and banking exams heavily test committee recommendations and statutory ratios. A classic test trap involves the shareholding of Regional Rural Banks: remember it is split 50:35:15 among the Central Government, Sponsor Bank, and State Government respectively. Under RBI's Basel III guidelines, Indian banks must maintain a minimum capital-to-risk-weighted-assets ratio (CRAR) of 9 percent plus a 2.5 percent conservation buffer. Keep in mind that loans become non-performing after ninety overdue days.
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