The RBI announced on Wednesday that India Post Payments Bank (IPPB) has been included in the Second Schedule to the Reserve Bank of India Act, 1934, and thus made a scheduled bank (see RBI's notification below). Scheduled banks are those the meet certain conditions set by the RBI and enjoy certain privileges over non-scheduled banks, such as the ability to borrow money from the RBI for banking, and to become a member of a clearing house. The inclusion of IPPB in the Second Schedule means that it will be able to borrow money from the central bank even though, as a payments bank, it can't lend money or issue credit cards to its customers. This could skew the playing field as its competitors, such as Airtel Payments Bank and Paytm Payments Bank don't enjoy the same privileges. Conditions for and benefits of being a scheduled bank Section 42 of The Reserve Bank of India Act, 1934 says that for a bank to be included in the Second Schedule, it must have a paid-up capital and reserve of an aggregate value of not less than Rs 5 lakh; and satisfy the RBI that its affairs are not being conducted in a manner detrimental to the interests of its depositors. Scheduled banks enjoy the following benefits: Eligible for obtaining debts/loans on bank rate from the RBI Automatically acquires membership of a clearing house Rediscount of first class exchange bills from the RBI RBI stopped issuing licences 'on-tap' last month, closing the door on Mobikwik and others…
