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Banking Awareness is an important part of banking and financial-sector exams such as IBPS, SBI, RBI, NABARD and SIDBI. Study banking concepts and terms, the RBI and monetary policy, financial institutions, digital banking and payments, and follow current banking developments — topic by topic, with short exam points for quick revision.
What banks do and the different kinds of banks in India.
A financial institution that accepts deposits from the public and uses them for lending or investment. Section 5(b) of the Banking Regulation Act, 1949 defines "banking" as accepting deposits, repayable on demand or otherwise and withdrawable by cheque, draft or otherwise, for lending or investment.
Exam Point: Accepting deposits and lending are the two primary functions of a bank.
Primary functions: accepting deposits and lending money. Secondary functions: agency services (collecting cheques, paying bills, standing instructions) and utility services (lockers, remittances, bank guarantees, letters of credit).
Indian banks are grouped by ownership and purpose: commercial banks (public, private, foreign), cooperative banks, regional rural banks, small finance banks, payments banks and development banks.
Profit-making banks that serve the general public, businesses and government, regulated by the RBI under the Banking Regulation Act.
Exam Point: Scheduled commercial banks include public sector, private sector and foreign banks, regional rural banks, small finance banks and payments banks.
Banks in which the Government of India holds a majority (more than 50%) stake, such as SBI, Punjab National Bank and Bank of Baroda.
Exam Point: 14 major banks were nationalised in 1969 and 6 more in 1980. SBI was formed in 1955 from the Imperial Bank of India.
Banks majority-owned by private shareholders, such as HDFC Bank, ICICI Bank and Axis Bank.
Exam Point: New private banks were licensed from the 1990s, after the financial sector reforms.
Banks incorporated outside India that operate here through branches or a wholly owned subsidiary (WOS).
Banks owned by their members and run on the "one member, one vote" principle. Urban cooperative banks serve towns; rural cooperatives work in a three-tier structure (state, district and primary societies).
Exam Point: The Banking Regulation (Amendment) Act, 2020 strengthened RBI supervision of cooperative banks.
Banks that provide credit to small farmers, agricultural labourers, artisans and small entrepreneurs in rural areas.
Exam Point: Set up under the Regional Rural Banks Act, 1976. Ownership: Central Government 50%, sponsor bank 35%, State Government 15%.
Banks that take deposits and lend mainly to small businesses, small and marginal farmers and the unorganised sector.
Exam Point: Small finance banks must lend 75% of their adjusted net bank credit (ANBC) to the priority sectors.
Banks that accept small deposits and provide payments and remittance services, but cannot lend or issue credit cards. They can issue debit cards.
Exam Point: Recommended by the Nachiket Mor Committee. The deposit limit per customer is ₹2 lakh (raised from ₹1 lakh in 2021).
Specialised institutions that provide long-term finance for development of a sector, such as NABARD (agriculture and rural), SIDBI (MSMEs), EXIM Bank (foreign trade) and NHB (housing).
Exam Point: IDBI was set up in 1964 as the apex development bank and later became a commercial bank.
Scheduled banks are listed in the Second Schedule of the RBI Act, 1934. They maintain CRR with the RBI and can borrow from it. Banks not in this schedule are non-scheduled.
The RBI is India's central bank. Policy rates change over time — check Current Affairs for the latest figures.
Established on 1 April 1935 under the RBI Act, 1934, on the recommendation of the Hilton Young Commission. Nationalised on 1 January 1949. Headquarters: Mumbai (moved from Kolkata in 1937).
Monetary authority, issuer of currency, banker to the Government, banker's bank and lender of last resort, regulator and supervisor of banks, manager of foreign exchange under FEMA, and regulator of payment systems.
Exam Point: The ₹1 note and coins are issued by the Government of India; the RBI issues all other notes.
The RBI is governed by a Central Board of Directors: the Governor, up to four Deputy Governors and directors nominated by the Central Government. It has four local boards (Mumbai, Kolkata, Chennai and New Delhi).
How the RBI manages interest rates and liquidity to keep prices stable while keeping the objective of growth in mind. India follows flexible inflation targeting: the Government sets a CPI inflation target every five years in consultation with the RBI.
Exam Point: The framework adopted in 2016 set the target at 4% CPI inflation with a band of ±2%.
The rate at which the RBI lends short-term funds to banks against eligible government securities.
Exam Point: A change in the repo rate influences borrowing costs and overall liquidity conditions. A repo rate cut makes loans cheaper.
The rate at which the RBI absorbs funds from banks against government securities.
Exam Point: Since 2022 the Standing Deposit Facility, not the reverse repo, is the floor of the RBI's interest-rate corridor.
The rate at which the RBI lends to banks for longer periods without buying securities (rediscounting).
Exam Point: The bank rate is aligned with the MSF rate and is used mainly for penal rates.
The share of a bank's net demand and time liabilities (NDTL) that it must keep as cash with the RBI. Banks earn no interest on it.
Exam Point: CRR is maintained under Section 42 of the RBI Act. A higher CRR reduces the money banks can lend.
The share of NDTL a bank must keep in liquid assets such as cash, gold and approved government securities. It is held by the bank itself.
Exam Point: SLR is maintained under Section 24 of the Banking Regulation Act.
The RBI buys or sells government securities in the market to adjust liquidity.
Exam Point: Buying securities injects liquidity; selling securities absorbs it.
An overnight window through which banks borrow from the RBI in an emergency by dipping into their SLR securities up to a limit, at a rate above the repo rate.
Exam Point: Introduced in 2011. The MSF rate is the ceiling of the interest-rate corridor.
A facility through which the RBI absorbs surplus funds from banks without giving securities in return.
Exam Point: Introduced in April 2022. The SDF rate is the floor of the interest-rate corridor.
A six-member committee that decides the policy repo rate: three RBI members (the Governor as chairperson, the Deputy Governor in charge of monetary policy and one RBI officer) and three external members appointed by the Government.
Exam Point: Constituted under Section 45ZB of the RBI Act. The Governor has a casting vote; the MPC meets at least four times a year.
Frequently asked banking terms in short. Repo, reverse repo and bank rate are explained in the RBI section above.
A loan on which interest or principal has remained overdue for more than 90 days.
Exam Point: NPAs are classified as sub-standard, doubtful and loss assets.
Current Account and Savings Account deposits.
Exam Point: A higher CASA ratio means a lower cost of funds for the bank.
Capital to Risk-weighted Assets Ratio — a bank's capital as a share of its risk-weighted assets.
Exam Point: Under the RBI's Basel III rules the minimum CRAR is 9%, plus a capital conservation buffer.
International banking standards set by the Basel Committee on Banking Supervision (at the BIS, Basel, Switzerland): Basel I (1988), Basel II (2004) and Basel III (2010).
Exam Point: Basel II introduced three pillars: minimum capital, supervisory review and market discipline.
Verifying a customer's identity and address before opening an account or providing services.
Exam Point: KYC is required under the PMLA and RBI directions.
Rules and checks that stop illegal money from entering the financial system.
Exam Point: Banks report suspicious and cash transactions to FIU-IND (Financial Intelligence Unit – India).
Indian Financial System Code — an 11-character code that identifies a bank branch for NEFT, RTGS and IMPS.
Exam Point: First 4 characters: bank; 5th: 0; last 6: branch.
Magnetic Ink Character Recognition — a 9-digit code printed on cheques to speed up clearing.
Exam Point: Digits: 3 for the city, 3 for the bank, 3 for the branch.
Cheque clearing using an electronic image of the cheque, so the physical cheque does not travel between banks.
Equated Monthly Instalment — a fixed monthly payment that repays a loan's interest and principal.
Marginal Cost of Funds based Lending Rate — the internal benchmark lending rate introduced from 1 April 2016, replacing the base rate.
Exam Point: Since October 2019 new floating-rate retail and MSME loans are linked to an external benchmark such as the repo rate.
The difference between interest earned and interest paid, as a share of the bank's earning assets.
Exam Point: NIM measures how profitable a bank's lending is.
A Basel III rule that banks must hold enough high-quality liquid assets to cover 30 days of net cash outflows under stress.
Domestic Systemically Important Bank — a bank so large that its failure would hurt the economy ("too big to fail"). D-SIBs must hold extra capital.
Exam Point: The RBI's D-SIB list includes SBI, ICICI Bank and HDFC Bank.
RBI rules that require banks to lend a share of credit to sectors such as agriculture, MSMEs, export credit, education, housing, social infrastructure and renewable energy.
Exam Point: The target for domestic scheduled commercial banks is 40% of ANBC; for RRBs and small finance banks it is 75%.
Giving everyone, especially low-income groups, access to affordable banking, credit, insurance and pensions.
Exam Point: The RBI publishes a Financial Inclusion Index (FI-Index).
The return earned on an investment such as a bond, expressed as a percentage.
Exam Point: Bond prices and yields move in opposite directions.
How easily an asset can be turned into cash; in banking, the funds available in the system.
Exam Point: The RBI manages system liquidity with repo, SDF, MSF and open market operations.
For a one-page summary of key facts and rates, see the Banking quick reference and the list of Indian banks.
The main deposit, loan and payment products offered by banks.
A deposit account for individuals to keep savings and earn interest.
An account for businesses with frequent transactions. Usually no interest is paid.
A lump sum deposited for a fixed period at a fixed interest rate. Early withdrawal usually attracts a penalty.
A fixed amount deposited every month for a fixed period, earning interest like an FD.
A deposit repayable whenever the customer asks, such as savings and current deposits.
A deposit repayable only after a fixed period, such as FDs and RDs. Also called a time deposit.
Money lent by a bank and repaid with interest, usually in instalments. Loans can be secured (against collateral) or unsecured.
A facility to withdraw more than the account balance up to an agreed limit. Interest is charged only on the amount used.
A short-term working-capital loan to businesses against stock or receivables. Interest is charged on the amount used.
A card to buy now and pay later up to a credit limit. No interest is charged if the bill is paid in full by the due date.
A card linked to a bank account; the amount is deducted from the account immediately.
A bank's promise to pay a beneficiary if its customer fails to meet an obligation.
A bank's undertaking to pay a seller on presentation of specified documents. Widely used in import and export trade.
India's payment systems are run by the RBI (NEFT, RTGS) and NPCI (UPI, IMPS, RuPay and others).
An NPCI system launched in 2016 for instant, 24x7 transfers using a UPI ID or mobile number from any bank account.
An NPCI system launched in 2010 for instant, 24x7 interbank transfers through mobile, internet banking and ATMs.
An RBI system that settles transfers in half-hourly batches.
Exam Point: NEFT has been available 24x7 since December 2019. The RBI sets no minimum or maximum amount.
An RBI system that settles large-value transfers individually and in real time.
Exam Point: Minimum amount ₹2 lakh. Available 24x7 since December 2020.
An NPCI system for basic banking (cash withdrawal, deposit, balance enquiry) at micro-ATMs using Aadhaar number and fingerprint.
An NPCI platform for paying bills — electricity, water, gas, telephone and more — through one interoperable system.
Exam Point: BBPS is now branded "Bharat Connect".
India's own card payment network, launched by NPCI in 2012.
Banking services through the bank's website: transfers, payments, deposits and statements.
Banking services through a bank's mobile app or SMS.
Prepaid payment instruments (PPIs) that store money for payments, regulated by the RBI under the Payment and Settlement Systems Act, 2007.
An RFID tag fixed on a vehicle's windscreen for automatic toll payment under NPCI's National Electronic Toll Collection (NETC) programme.
Paying a merchant by scanning a QR code (for example a UPI QR) with a payment app.
India's Central Bank Digital Currency (CBDC), issued by the RBI as a digital form of legal tender.
Exam Point: Pilots began in 2022: wholesale (e₹-W) in November and retail (e₹-R) in December.
| Feature | UPI | IMPS | NEFT | RTGS |
|---|---|---|---|---|
| Operated by | NPCI | NPCI | RBI | RBI |
| Settlement | Instant to the customer | Instant to the customer | Half-hourly batches | Real time, one by one |
| Availability | 24x7 | 24x7 | 24x7 (since Dec 2019) | 24x7 (since Dec 2020) |
| Amount | Small to medium; limits set by NPCI and banks | Small to medium; limits set by NPCI and banks | No minimum or maximum set by RBI | Minimum ₹2 lakh; for large values |
| Identifier | UPI ID / mobile number | Mobile number, or account number + IFSC | Account number + IFSC | Account number + IFSC |
Exam Point: RTGS settles each transaction individually in real time and is meant for large values; NEFT settles in batches; UPI and IMPS give instant transfers to customers.
Who does what in India's financial system.
India's central bank and the regulator of banks, NBFCs and payment systems.
Exam Point: Headquarters: Mumbai.
National Bank for Agriculture and Rural Development — the apex development bank for agriculture and rural development. It refinances RRBs and cooperative banks.
Exam Point: Set up on 12 July 1982 on the recommendation of the CRAFICARD (B. Sivaraman) Committee. Headquarters: Mumbai.
Small Industries Development Bank of India — the principal institution for financing and developing MSMEs.
Exam Point: Set up in 1990. Headquarters: Lucknow.
Export-Import Bank of India — finances and promotes India's foreign trade.
Exam Point: Started operations in 1982. Headquarters: Mumbai.
National Housing Bank — supervises housing finance companies and refinances housing loans.
Exam Point: Set up in 1988. Headquarters: New Delhi. Regulation of housing finance companies moved to the RBI in 2019.
Securities and Exchange Board of India — regulator of the securities (stock) markets.
Exam Point: Statutory body under the SEBI Act, 1992. Headquarters: Mumbai.
Insurance Regulatory and Development Authority of India — regulator of the insurance sector.
Exam Point: Set up under the IRDA Act, 1999. Headquarters: Hyderabad.
Pension Fund Regulatory and Development Authority — regulates the National Pension System (NPS) and Atal Pension Yojana.
Exam Point: Statutory under the PFRDA Act, 2013. Headquarters: New Delhi.
National Payments Corporation of India — the umbrella body for retail payments, promoted by the RBI and the Indian Banks' Association. It runs UPI, IMPS, RuPay, NACH, AePS, NETC (FASTag) and Bharat Connect.
Exam Point: Set up in 2008 as a not-for-profit company. Headquarters: Mumbai.
Deposit Insurance and Credit Guarantee Corporation — a wholly owned RBI subsidiary that insures bank deposits.
Exam Point: The cover was raised to ₹5 lakh per depositor per bank in 2020.
International Financial Services Centres Authority — the unified regulator for International Financial Services Centres such as GIFT City.
Exam Point: Set up in 2020 under the IFSCA Act, 2019. Headquarters: GIFT City, Gandhinagar.
The main laws asked in banking exams, in brief. This is exam revision, not legal advice.
The main law regulating banking companies in India: licensing, management, capital, SLR and RBI powers of inspection.
Exam Point: SLR is under Section 24. The Act was amended in 2020 to bring cooperative banks under closer RBI supervision.
The law that created the RBI and sets out its powers and functions.
Exam Point: CRR is under Section 42; the MPC under Section 45ZB; scheduled banks are listed in its Second Schedule.
Governs promissory notes, bills of exchange and cheques.
Exam Point: Section 138 makes dishonour of a cheque for insufficient funds an offence.
Lets banks enforce security (for example, take possession of and sell assets) to recover bad loans without going to court, and provides for asset reconstruction companies (ARCs).
A time-bound process to resolve insolvency of companies and individuals.
Exam Point: The NCLT is the adjudicating authority for companies; the IBBI is the regulator.
Prevents money laundering and allows confiscation of property derived from it. Banks must follow KYC and report transactions to FIU-IND.
Exam Point: The Enforcement Directorate investigates offences under the PMLA.
The Foreign Exchange Management Act manages foreign exchange and cross-border transactions.
Exam Point: FEMA replaced FERA, 1973 and treats violations as civil, not criminal, offences.
Customers first complain to their bank. If the complaint is not resolved within 30 days, or the reply is unsatisfactory, they can approach the RBI Ombudsman.
Exam Point: The RBI Integrated Ombudsman Scheme, 2021 follows "One Nation, One Ombudsman" and is free of cost.
Banking-related schemes that are frequently asked. For other schemes see Government Schemes.
The National Mission for Financial Inclusion, launched on 28 August 2014. It offers basic savings accounts with zero minimum balance, a RuPay debit card with accident insurance and an overdraft facility.
Launched in April 2015 to provide loans to non-corporate, non-farm micro and small enterprises through banks and other lenders.
Exam Point: Loan categories: Shishu, Kishore, Tarun and Tarun Plus.
Launched in April 2016. Bank loans between ₹10 lakh and ₹1 crore for at least one SC/ST borrower and one woman borrower per bank branch to set up a new (greenfield) enterprise.
A pension scheme launched in 2015, mainly for workers in the unorganised sector, administered by the PFRDA.
Exam Point: It gives a guaranteed monthly pension of ₹1,000 to ₹5,000 from age 60; joining age is 18 to 40.
Launched in June 2020 to give collateral-free working-capital loans to street vendors.
Pradhan Mantri Jeevan Jyoti Bima Yojana — one-year renewable life insurance of ₹2 lakh for death due to any cause, for ages 18 to 50.
Pradhan Mantri Suraksha Bima Yojana — one-year renewable accident insurance: ₹2 lakh for accidental death or full disability and ₹1 lakh for partial disability, for ages 18 to 70.
Launched on 1 January 2013 to transfer subsidies and benefits directly into beneficiaries' bank accounts.
Jan Dhan accounts, Aadhaar and Mobile numbers linked together — the backbone of DBT and financial inclusion.
More schemes across sectors: Government Schemes.
Committees whose recommendations shaped Indian banking.
On the financial system: lower CRR and SLR, deregulation of interest rates, entry of new private banks, and tribunals and asset reconstruction for recovering bad loans.
On banking sector reforms: stronger capital adequacy, tighter NPA norms and mergers of strong banks.
On the monetary policy framework.
Exam Point: Recommended CPI inflation as the nominal anchor with a 4% ±2% target and a Monetary Policy Committee.
On comprehensive financial services for small businesses and low-income households.
Exam Point: Recommended payments banks.
On the governance of bank boards.
Exam Point: Led to the Banks Board Bureau.
On the RBI's Economic Capital Framework — how much of its reserves the RBI should keep and how much surplus it should transfer to the Government.
Banking exams also ask about recent developments: RBI monetary policy decisions and current policy rates, new regulations, bank mergers, appointments, payment-system changes, schemes and important reports. These change month to month, so they are covered in Current Affairs rather than on this page.
How the subject appears in the main banking exams. The number of questions and marks is set in each year's notification, so always check the official exam pattern.
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