Banking & Financial Awareness Notes

Topics Covered

1. Reserve Bank of India 2. Monetary Policy 3. Types of Banks 4. Banking Terms 5. NPA & SARFAESI 6. Financial Regulators 7. Govt Banking Schemes 8. International Institutions

Reserve Bank of India (RBI)

Key Facts

• Established: 1 April 1935 (RBI Act 1934) • Nationalised: 1 January 1949
• HQ: Mumbai (Central Office); first HQ was Kolkata
• Governor: Appointed by Central Government; tenure 3 years (extendable)
• Current Governor: Sanjay Malhotra (Dec 2024–)

Functions of RBI

Monetary Authority: Controls money supply and credit through monetary policy.
Regulator of Banks: Issues banking licences, sets CRR/SLR norms, conducts audits.
Currency Issuer: Issues currency notes (all denominations except Re 1; Re 1 issued by Ministry of Finance).
Government’s Banker: Manages govt accounts, issues Govt Securities (G-Secs).
Custodian of Forex: Manages India’s foreign exchange reserves.
Lender of Last Resort: Provides emergency funds to commercial banks.

Monetary Policy & Rates

Rate	Definition	Current (approx)
Repo Rate	Rate at which RBI lends to commercial banks (overnight)	6.50%
Reverse Repo Rate	Rate at which RBI borrows from commercial banks	3.35%
CRR	Cash Reserve Ratio — % of NDTL banks must keep with RBI as cash	4%
SLR	Statutory Liquidity Ratio — % of NDTL banks must keep in liquid assets	18%
Bank Rate	Rate for long-term lending to commercial banks by RBI	6.75%
MSF	Marginal Standing Facility — emergency overnight borrowing from RBI	6.75%

Exam Tip

CRR increase → less money available with banks → credit contracts → inflation control. Repo rate increase → borrowing becomes costlier → reduces demand → controls inflation. Remember: RBI raises rates to FIGHT inflation; lowers rates to BOOST economy.

Types of Banks in India

Type	Examples	Key Feature
Public Sector Banks	SBI, PNB, Bank of Baroda	Govt holds >51% stake
Private Sector Banks	HDFC, ICICI, Axis, Kotak	Majority private ownership
Regional Rural Banks (RRB)	Gramin Banks	50% Centre + 15% State + 35% Sponsor bank
Cooperative Banks	NABARD supervised	Mutual benefit, agricultural credit
Payments Banks	Paytm, Airtel, India Post	Max Rs 2 lakh deposit; no loans
Small Finance Banks	AU, Equitas, ESAF	Focus on unserved/underserved
Foreign Banks	Citi, HSBC, Standard Chartered	Operate as branches in India

Important Banking Terms

Term	Full Form / Meaning
NDTL	Net Demand and Time Liabilities — base for CRR/SLR calculation
NEFT	National Electronic Funds Transfer — any amount, settles in batches
RTGS	Real Time Gross Settlement — min Rs 2 lakh, instant settlement
IMPS	Immediate Payment Service — 24x7, up to Rs 5 lakh
UPI	Unified Payments Interface — NPCI platform, mobile-based
KYC	Know Your Customer — mandatory verification for bank accounts
CIBIL	Credit Information Bureau India Limited — credit score provider
PLR	Prime Lending Rate — minimum rate at which banks lend
MCLR	Marginal Cost of Funds-based Lending Rate — replaced base rate

NPA & Banking Regulation

NPA Classification

Non-Performing Asset: Loan overdue for more than 90 days becomes NPA.
• Sub-standard: NPA for less than or equal to 12 months.
• Doubtful: Sub-standard for more than 12 months.
• Loss Asset: Considered uncollectable; identified by bank/auditor/RBI.

SARFAESI Act 2002

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act. Allows banks to recover NPAs without court intervention by: (1) Asset reconstruction, (2) Securitisation, (3) Enforcement of security interest.

Financial Regulators

Regulator	Full Form	Regulates
RBI	Reserve Bank of India	Banks, NBFCs, payment systems
SEBI	Securities & Exchange Board of India	Capital markets, mutual funds, brokers
IRDAI	Insurance Regulatory & Development Authority of India	Life & General insurance companies
PFRDA	Pension Fund Regulatory & Development Authority	Pension sector, NPS
NABARD	National Bank for Agriculture & Rural Development	Rural credit, cooperative banks, RRBs
NHB	National Housing Bank	Housing Finance Companies
SIDBI	Small Industries Dev. Bank of India	MSME financing

Important Government Banking Schemes

Scheme	Purpose	Key Feature
Jan Dhan Yojana (PMJDY)	Financial inclusion	Zero balance a/c, overdraft Rs 10,000, RuPay card
Mudra Yojana (PMMY)	Micro enterprise loans	Shishu (<Rs 50K), Kishore (<Rs 5L), Tarun (<Rs 10L)
Stand-Up India	SC/ST/Women entrepreneurs	Rs 10L to Rs 1Cr greenfield enterprise loan
PM SVANidhi	Street vendors	Rs 10K → 20K → 50K collateral-free loans
PMEGP	Employment generation	Khadi Board; manufacturing & service enterprises