Banking Awareness PDF for All Bank Exams

Banking Awareness PDF for All Bank Exams

Topic 1: Reserve Bank of India & its Functions • Bankers’ bank: It keeps a part of deposits of commercial
banks (as CRR) & acts as lender of last resort by providing
The Reserve Bank of India (RBI) is India's central banking financial assistance to banks. It provides export credit
institution, which controls the monetary policy of the Indian refinance, Liquidity Adjustment Facility & MSF.
rupee. • Controller of Banks: An controller of banks by including the
➢ The Reserve Bank of India was established on April 1, 1935 in banks in 2nd Schedule of the Act. It issues directions, carries
accordance with the provisions of the Reserve Bank of India Act, inspection (on-site as well as off-site) & exercises
1934 (recommendations of Hilton Young Commission). management control.
➢ The Central Office of the Reserve Bank was initially • Controller of credit: RBI can fix interest rates (including
established in Calcutta but was permanently moved to Mumbai Bank Rate) & exercise selective credit controls. Various tools
in 1937. The Central Office is where the Governor sits and where such as change in cash reserve ratio, stipulation of margin on
policies are formulated. securities, directed credit guidelines etc. are used for this
➢ Though originally privately owned, since nationalisation in purpose. It also carries sale & purchase of securities which
1949, the Reserve Bank is fully owned by the Government of are known as open market operations.
India. RBI was nationalised on 1 January 1949. • Maintenance of external value: RBI is responsible also for
➢ The RBI has four zonal offices at Chennai, Delhi, Kolkata and maintaining external value of Indian currency as well as the
Mumbai. internal value. Foreign exchange reserves are held by RBI &
it has a wide power to regulate foreign exchange
List of Members: transactions under Foreign Exchange Management Act.

➢ The general superintendence and direction of the RBI is Important Facts of RBI
entrusted with the 21-member central board of directors:
• RBI is not expected to perform the function of accepting
➢ The governor; 4 Deputy Governors; 2 Finance Ministry
deposits from the general public.
representatives (usually the Economic Affairs Secretary and the
• Prime lending rate is decided by the individual banks.
Financial Services Secretary); 10 government-nominated
• RBI decides the following rates namely; Bank rate, repo rate,
directors to represent important elements of India's economy;
reverse repo rate & cash reserve ratio.
and 4 directors to represent local boards headquartered at
Mumbai, Kolkata, Chennai and New Delhi. • The quantitative instruments of RBI are – bank rate policy,
cash reserve ratio & statutory liquidity ratio.
➢ Each of these local boards consists of 5 members who
• The objective of monetary policy is to control inflation;
represent regional interests, the interests of co-operative and
discourage hoarding of commodities & encourage flow of
indigenous banks.
credit into neglected sector.
• When RBI is lender of the last resort, it means that RBI
Subsidiaries of RBI Fully owned:
advances credit against eligible securities.
• Deposit Insurance and Credit Guarantee Corporation of
India (DICGC), • GOI decides the quantity of coins to be minted.
• Bharatiya Reserve Bank Note Mudran Private Limited • The method which is used currently in India to issue currency
note – minimum reserve system. For issuing notes, RBI is
(BRBNMPL),
required to hold the minimum reserves of Rs. 200 crores of
• Reserve Bank Information Technology Private Limited
which note less than Rs. 115 crores is to be held in gold.
(ReBIT),
• Indian Financial Technology and Allied Services (IFTAS),
Reserve Bank Innovation Hub (RBIH).

Functions of RBI
• Issuance of currency: RBI is the authority in India to issue
currency notes (called bank notes) under signatures of
Governor. (One rupee note called currency note is issued by
the Central Govt. & signed by Finance Secretary). The stock
of currency is distributed with the help of currency chests
spread all over the country.
• Banker to Govt.: RBI transacts govt. business & manages
public debt. SBI or any other bank is appointed Agent where
RBI does not have office. It provides Ways & Means
advances to Govt.
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Topic 2: Policy Rates decided by the RBI b) The Act is not applicable to primary agricultural credit
societies, cooperative land mortgage banks & non-
Current Policy rates as on 1 September 2021 agricultural primary credit societies.
• Policy Repo Rate: 6.50%
• Reverse Repo Rate: 6.25% SCHEDULED BANK
• Marginal Standing Facility Rate: 6.75%
• Bank Rate: 6.75% a) As per Sec 2 (e) of RBI Act, a scheduled bank means a bank
• Fixed Reverse Repo Rate: 3.35% who is included in 2nd schedule of RBI Act 1934.
• CRR: 4.50% b) A scheduled bank should satisfy the conditions which include
• SLR: 18.00% paid-up capital & reserves requirement of not less than Rs. 5
• Base Rate: 8.95% - 10.10% lac, satisfaction of RBI that the affairs will not be conducted
• MCLR (Overnight): 7.95% - 8.50% by the bank in a way to jeopardize the interests of the
depositor. (Commercial, Rural & many State Coop Banks are
• Savings Deposit Rate: 2.70% - 3.00%
classified as Scheduled Banks).
• Term Deposit Rate > 1 Year: 6.00% - 7.25%
c) A bank that is not included in the 2nd Schedule of RBI is called
• Repo Rate: Repo rate is the rate of interest which is levied Non-scheduled Bank.
on Short-Term loans taken by commercial banks from RBI.
Whenever the banks have any shortage of funds they can Total No. of Banks as per RBI Website
borrow it from RBI. • Total PSBs: 12
• Reverse Repo Rate: This is exact opposite of Repo rate. • Total Private Sector Banks: 21
Reverse repo rate is the rate at which commercial banks • Payments Banks: 6 & Small Finance Banks: 11
charge on their surplus funds with RBI. RBI uses this tool • Regional Rural Banks: 43
when it feels there is too much money floating in the • Foreign Banks: 45
banking system.
• State Co-operative Banks: 34 (According to RBI website)
• SLR Rate: Statutory Liquidity Ratio is the amount a
• Small finance Bank: 12
commercial bank needs to maintain in the form of cash, or
• List of Payment Bank: 6
gold or Govt. approved securities (Bonds) before providing
credit to its customers. It is determined as the %age of total • List of Financial Institutions in India: 4
Net Demand & Time Liabilities (NDTL). • List of foreign banks having banking presence in India
• Bank Rate: It is defined in Sec 49 of RBI Act 1934 as the
‘standard rate at which RBI is prepared to buy or rediscount Topic 4: What are the different types of accounts
bills of exchange or other commercial papers eligible for that can be opened in a Bank?
purchase under this act’.
There are mainly three types of deposits accounts in banks.
• Cash Reserve Ratio: CRR refers to the ratio of bank’s cash
reserve balances with RBI with reference to the bank’s net They are
demand & time liabilities to ensure the liquidity & solvency ➢ Demand Deposits
of the scheduled banks. ➢ Time Deposits
• MSF: It was introduced w.e.f. May 09, 2011, by RBI.
➢ Non- Resident Deposits
Eligibility: Scheduled Commercial Banks having Current
Account & SGL Account with RBI. Amount: 1% of NDTL DEMAND DEPOSITS
A Brief on LAF (Liquidity Adjustment Facility) 1. Savings Accounts
• It was introduced by RBI during June, 2000 in phases, to • A savings account allows you to accumulate interest on
ensure smooth transition & keeping pace with technological funds you’ve saved for future needs. Interest rates can
upgradation. be compounded on a daily basis.
• Tenor: Reverse Repo auctions (for absorption of liquidity) & • Savings accounts vary by monthly service fees, interest
Repo auctions (for injection of liquidity) are conducted on a rates, method used to calculate interest, and minimum
daily basis (except Saturdays). opening deposit.
• Cap: 0.25% of NDTL w.e.f. 01.04.14. • In these type of accounts, we have salary or student
account etc.
Topic 3: Banking Regulation Act 1949|Schedule
Banks| Other Types of Banks 2. Current Accounts
• Current Accounts are basically meant for businessmen
a) Passed as the Banking Companies Act 1949 (came into force and are never used for investment or savings.
wef 16.3.49 & changed to Banking Regulation Act 1949 w.e.f. • These deposits are the most liquid deposits and there
01.03.66, it was made applicable to J & K in 1956 (and now are no limits for number of transactions or the amount
applicable throughout India). of transactions in a day.
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• Most of the current account are opened in the names of ➢ Small accounts are valid for a period of 12 months
firm / company accounts. initially which may be extended by another 12 months if
• No interest paid by banks on these accounts. On the the person provides proof of having applied for an
other hand, banks charges certain service charges, on Officially Valid Document.
such accounts. ➢ Small Accounts can only be opened at CBS linked
• In this type of account do not contain any fixed maturity branches of banks or at such branches where it is
as these are on continuous basis accounts. Overdraft possible to manually monitor the fulfilments of the
facility is available in this account. conditions

3. No Frill Accounts: 4. Current Account Savings Account (CASA) :

• Banks were advised in November 2005 to make • CASA deposit is the amount of money that gets
available a basic banking 'no-frills' account either with deposited in the current and savings accounts of bank
'nil' or very low minimum balance as well as charges that customers. It is the cheapest and major source of funds
would make such accounts accessible to vast sections of for banks. The savings accounts portion pays more
population. interest compared to current accounts.
• No frill account is a type of bank account, with low / Zero • A CASA operates like a normal bank account in which
balance requirement with extra-features removed. • funds may be utilized at any time. Because of this
RBI came up with this No-frill concept, because poor flexibility, a CASA has a lower interest rate than a term
people cannot open regular bank accounting having deposit because the bank does not have a guarantee
requirements like Rs.5000/- minimum balance etc. that all the funds are available to lend for a specific
period of time.
Basic Savings Bank Deposit Account (BSBDA) : • These deposits can move out of banks’ books anytime,
• According to the RBI guidelines August 2012, Basic leading to assetliability mismatches. While in case of
Savings Bank Deposit (BSBD) account has been created term deposits, banks are almost certain that the
under the Financial Inclusion, which has a zero
depositor may not withdraw money before the maturity
minimum balance requirement, can be opened by
of the deposit and may also renew the deposit on
people who do not want to be bothered with
maturity.
maintaining any minimum balance.
• A BSBD account does not require customers to maintain
CASA Ratio:
any monthly average balance. KYC Norms is applicable
• The CASA ratio shows how much deposit in a bank has
to these accounts.
in the form of current and saving account deposits in the
• Since BSBD is a type of savings account, the eligibility
total deposit.
of a customer to open this account and interest rates
• A higher CASA ratio means higher portion of the
offered by it are the same as savings bank accounts.
deposits of the bank has come from current and savings
• The customer cannot have any other savings bank
deposit, which is generally a cheaper source of fund.
account, if he/she has a basic savings bank deposit
Hence, higher the CASA ratio better the net interest
account in a bank. An individual is eligible to have only
margin, which means better operating efficiency of the
one 'Basic Savings Bank Deposit Account' in one bank.
bank.
• If the customer already has a savings bank account, the
• Net interest margin is difference between total interest
same will have to be closed within 30 days of opening a
income and expenditure and is shown as a percentage
Basic Savings Bank Deposit or BSBD account. There is
of average earning assets.
no charge on activation of inoperative BSBD accounts
and no-account closure charges.
TIME DEPOSITS
Conditions:
➢ Total credits in such accounts should not exceed one
1. Recurring Deposits Account:
lakh rupees in a year.
• These are popularly known as RD accounts and are
➢ Maximum balance in the account should not exceed special kind of Term Deposits and are suitable for
fifty thousand rupees at any time. people who do not have lump sum amount of savings
➢ The total of debits by way of cash withdrawals and but are ready to save a small amount every month.
transfers will not exceed ten thousand rupees in a • Normally, such deposits earn interest on the amount
month. already deposited (through monthly installments) at
➢ Foreign remittances cannot be credited to Small the same rates as are applicable for Fixed Deposits /
Accounts without completing normal KYC formalities. Term Deposits.
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• These are best if you wish to create a fund for your Escrow Accounts
child's education or marriage of your daughter or buy a • This is a temporary account as it operates until the
car without loans or save for the future. completion of a transaction process, which is
• The RD interest rates paid by banks in India are usually implemented after all the conditions between the buyer
the same as payable on Fixed Deposits, except when and the seller are settled.
specific rates on FDs are paid for particular number of • An escrow account is a temporary pass through account
days. held by a third party during the process of a transaction
• Recurring Deposit accounts are normally allowed for between two parties.
maturities ranging from 6 months to 120 months (10 • An escrow account is an arrangement for safeguarding
Yrs). the seller against its buyer from the payment risk for the
• These accounts can be opened in single or joint names. goods or services sold by the former to the latter.
Nomination facility is also available. • Escrow Accounts are legally permitted in India and for
that you should be either an Advocate or a C.A. or a
2. Fixed Deposits Accounts: person of a high repute or a banker or a person on both
• All Banks in India (including SBI, PNB, ICICI Bank, Yes the parties to the dispute or the transactions are ready
Bank etc.) offer fixed deposits schemes with a wide to keep the money in Escrow with that person.
range of tenures for periods from 7 days to 10 years. • For this, no certificate from any person, authority or RBI
• These are also popularly known as FD accounts. is required. RBI has also permitted Banks (Authorised
However, in some other countries these are known as Dealer Category I) to open escrow accounts on behalf of
"Term Deposits" or "Bond". Non-Resident corporates for acquisition / transfer of
• The term "fixed" in Fixed Deposits (FD) denotes the shares/ convertible shares of an Indian company.
period of maturity or tenor. Therefore, the depositors
are supposed to continue such Fixed Deposits for the Gilt Accounts
length of time for which the depositor decides to keep • Accounts maintained by investors with the Primary
the money with the bank. dealers for holding their Government securities and
• In case of urgent need, depositor can close the account Treasury bills in the demat form are known as Gilt
prematurely by paying penalty. Penalty and Interest accounts.
rate varies from different banks. • A "Gilt Account" means an account opened and
maintained for holding Government securities, by an
NON- RESIDENT DEPOSIT ACCOUNTS entity or a person including ‘a person resident outside
This type of account only applicable for Non- Resident India’ with a "Custodian" permitted by the Reserve Bank
Indians. They are of India to open and maintain Constituent Subsidiary
a) NRO (Non-Resident Ordinary Rupees) Account General Ledger Account with the Public Debt Office of
b) NRE (Non-Resident External Rupees) Account the Reserve Bank of India.
c) FCNR (Foreign Currency Non-Resident) Account • However, in case of a ‘Person resident outside India, the
activities in the operations/maintenance of Gilt Account
Other Accounts Nostro Accounts:
shall be governed by the Foreign Exchange
• Nostro accounts are generally held in a foreign country
Management Act, 2000 and the regulations framed.
(with a foreign bank), by a domestic bank (from our
perspective, our bank). Inactive Accounts:
• It obviates that account is maintained in that foreign • If you have a current or a savings bank account and have
currency. For example, SBI account with HSBC in U.K. not done any transactions or debit through it for more
than 12 months, then it will be classified as an inactive
Vostro Accounts
account.
• Vostro accounts are generally held by a foreign bank in
our country (with a domestic bank). It generally Dormant Account
maintained in Indian Rupee (if we consider India) • And if you don’t do any transactions or debit from a
• For example, HSBC account is held with SBI in India. bank account for 24 months, then it will be classified as
dormant.
Loro Accounts • As per Reserve Bank of India (RBI) guidelines, an
• Loro accounts are generally held by a third party bank, account becomes dormant if a customer does not
other than the account maintaining bank or with whom initiate transactions such as withdrawal of cash at a
account is maintained. branch or Automated Teller Machine (ATM), payment
• For example, BOI wants to transact with HSBC, but by cheque, transfer of funds through Internet banking,
doesn't have any account, while SBI maintains an phone banking or ATMs. Note: Both debit and credit
account with HSBC in U.K. Then BOI could use SBI transactions are considered for re-classifying accounts
account. In this case, for SBI this account is known as as inactive/dormant. However, these transactions have
Nostro account and for BOI it is known as Loro Account. to be initiated by you or some third party.
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Individual Retirement Accounts (IRAs) : Miscellaneous Terms related to the Deposits
• IRAs, or individual retirement accounts, allow you to
save independently for your retirement. • Demand liabilities: Current deposits, Demand liabilities
• These plans are useful if your employer doesn’t offer portion of saving deposits, margins held against LC/LG,
retirement benefits or you want to save more than your Balances in overdue FD, cash certificate & RD, Outstanding
employer-sponsored plan allows. TTs, MTs & DDs, Unclaimed deposits, Credit balance in CC
• These accounts come in two types: the traditional IRA a/c & Deposits held as security for loan payable on demand.
and Roth IRA. • Time liabilities: FDs, cash certificate, cumulative & RDs,
• The Roth IRA is popular because the funds can be time liabilities portion of saving bank deposits, staff security
withdrawn tax-free in many situations. Others prefer deposits, margins against LC not payable on demand,
traditional IRAs because these contributions are tax- deposit held as securities for advances & India Dev Bonds.
deductible.
Topic 5: Negotiable Instrument Act & Cheques
• Both accounts have contribution limits and other
requirements you may need to discuss with your tax • In India the Negotiable Instruments Act was passed during
advisor before choosing your account. 1881 which came into force wef March 01, 1882.
Demat Account (Dematerialized Account) : An Act to define and Law relating to negotiable instruments
• In India's banking terminology, the term DEMAT which are Promissory Notes, Bills of Exchange and cheques (as
Account refers to a deposit made at an Indian financial per section 13). Various other paper instruments like a Banker's
institution that can be used for investing in shares of cheque, Payment order, Payable 'At Par' cheques
stocks and other financial assets. (Interest/Dividend warrants, refund orders, gift cheques etc.),
• DEMAT is short for "Dematerialized" and such accounts are also used to cater to the specific payment needs. The
require that an investor open an account with an statutory basis for these instruments was provided by the
investment broker linked to a savings or other funded Negotiable Instruments Act, 1881 (NI Act).
account.
• Securities are held electronically in a DEMAT Account, Bank Holidays are declared by Central/State Governments/
thereby eliminating the need for physical paper Union Territory under the Negotiable Instruments (NI) Act, 1881.
certificates. This feature helps prevent problems such Some of the important sections of the Act:
as: loss, forgery or theft of the certificates and makes ➢ Section 4 - Promissory note
the process of buying and selling securities much more ➢ Section 5 - Bill of exchange
efficient. ➢ Section 6 – Cheque
Exchange Earners' Foreign Currency Account (EEFC) : ➢ Section 15 – Endorsement
• Exchange Earners' Foreign Currency Account (EEFC) is
Promissory Note
an account maintained in foreign currency with an
A "promissory note" is an instrument in writing (not being a bank-
Authorised Dealer Category - I bank i.e. a bank
note or a currency-note) containing an unconditional
authorized to deal in foreign exchange.
undertaking, signed by the maker, to pay a certain sum of money
• It is a facility provided to the foreign exchange earners,
only to, or to the order of, a certain person, or to the bearer of
including exporters, to credit 100 per cent of their
the instrument. Bank notes are frequently referred to as
foreign exchange earnings to the account, so that the
promissory notes, a promissory note made by a bank and
account holders do not have to convert foreign
payable to bearer on demand.
exchange into Rupees and vice versa, thereby
minimizing the transaction costs. A promissory note is a written agreement to pay a specific
• All categories of foreign exchange earners, such as amount to specific party at a future date or on demand.
individuals, companies, etc., who are resident in India, Conditions:
may open EEFC accounts. ➢ It must be in writing.
• An EEFC account can be held only in the form of a ➢ It must contain an unconditional promise to pay.
current account. No interest is payable on EEFC
➢ It should be signed by the maker.
accounts
➢ The payment should be made to a certain person.
• SEZ Units cannot open EEFC Accounts. However, a unit
located in a Special Economic Zone can open a Foreign ➢ The certainty of the amount payable should be there.
Currency Account with an Authorised Dealer in India. ➢ It should be stamped.

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Bill of exchange What are the Types of Cheque?
A Bill of Exchange is an instrument in writing containing an
1. Bearer Cheque or open Cheque: When the words "or bearer"
unconditional order, signed by the maker, directing a certain
appearing on the face of the cheque are not cancelled, the
person to pay a certain sum of money only to, or to the order of, cheque is called a bearer cheque. The bearer cheque is
a certain person or to the bearer of the instrument. payable to the person specified therein or to any other else
The bill of exchange is defined as written order for payment who presents it to the bank for payment.
issued by the creditor to his debtor. 2. Order Cheque: When the word "bearer" appearing on the
face of a cheque is cancelled & when in its place the word "or
Conditions:
order" is written on the face of the cheque, the cheque is
➢ Bills of exchange must be in writing.
called an order cheque. Such a cheque is payable to the
➢ Bills of exchange are not a request to pay and an order to pay. person specified therein as the payee, or to any one else to
➢ The order must be signed by the drawer, i.e. the maker. whom it is endorsed (transferred).
➢ The order must be for the payment of money only. 3. Crossed Cheque: Crossing of cheque means drawing two
parallel lines on the face of the cheque with or without
Cheque and its Different Types additional words like " & CO." or "Account Payee" or "Not
Negotiable". A crossed cheque cannot be encashed at the
Cheque is an instrument in writing containing an unconditional cash counter of a bank but it can only be credited to the
order, addressed to a banker, sign by the person who has payee's account.
deposited money with the banker, requiring him to pay on 4. Ante-Dated Cheque: If a cheque bears a date earlier than the
demand a certain sum of money only to or to the order of certain date on which it is presented to the bank, it is called as "ante-
person or to the bearer of instrument. dated cheque". Such a cheque is valid upto 3 months from the
A cheque is a document that orders a bank to pay a specific date of the cheque.
amount of money from a person's account to the person in 5. Post-Dated Cheque: If a cheque bears a date which is yet to
come (future date) then it is known as post-dated cheque. It
whose name the cheque has been issued.
cannot be honoured earlier than the date on the cheque.
6. Stale Cheque: If a cheque is presented for payment after 3
Parts of a Cheque
months from the date of the cheque it is called stale cheque.
The four main items on a cheque are:-
A stale cheque is not honoured by the bank.
• Drawer, the person or entity who makes the cheque (The 7. A self-cheque: It is written by the account holder as pay self to
person who issue the cheque or hold the account with bank). receive the money in the physical form from the branch
• Payee, the recipient of the money (A person whose name is where he holds his account.
mentioned in the cheque or to whom the drawee makes 8. “A truncated cheque” means a cheque which is truncated
payment. If drawer has drawn the cheque in favour of self, during the course of a clearing cycle, either by the clearing
then drawer is payee) house or by the bank whether paying or receiving payment,
• Drawee, the bank or other financial institution where the immediately on generation of an electronic image for
cheque can be presented for payment. (The Person who is transmission. The expression “clearing house” means the
directed to make the payment against cheque) clearing house managed by the RBI or a clearing house
• Amount, the currency amount recognised as such by the RBI.’

History of Cheques in India

• The Cheque was introduced in India by the Bank of
Hindustan. In 1881, the Negotiable Instruments Act was
enacted in India. The NI Act provided a legal framework for
non-cash paper payment instruments in India.
• In 1938, the Calcutta Clearing Banks’ Association, which was
the largest bankers’ association at that time, adopted
clearing house.
• Until 1 April 2012, cheques in India were valid for a period of
six months from the date of their issue, before the Reserve
Bank of India issued a notification reducing their validity to
three months from the date of issue.

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The Parties of a Cheque • It is payable to order on demand (85-A NI Act). It cannot be
issued as payable to bearer (Sec. 31 RBI Act).
There are three parties to the cheque
• If a bank fails to honour a bank draft, it renders itself liable
• Drawer or Maker for damages. Similarly, omission of signatures or wrong
• The bank - on whom the cheque is drawn (i.e. the bank with signatures can also make the bank liable.
whom the account is maintained by the drawer) • By prior arrangement, the paying bank could be a different
• Payee – Payee is the person whose name is mentioned on bank also.
the chequeto whom or to whose order the money is directed
to be paid. Topic 6: Financial Inclusion & the initiatives
• ENDORSEMENT: As per Section 15, endorsing means
launched to achieve it
signing on the face or backside of an instrument (or even on
a paper called Allonge or stamped paper), for the purpose of Financial inclusion involves
negotiating (transferring to next person) a negotiable 1) Give formal banking services to poor people in urban & rural
instrument. areas.
2) Promote habit of money-savings, insurance, pension-
A Brief on Crossing of a Cheque investment among poor-people.
• Crossing of a cheque means two parallel transverse lines on 3) Help them get loans at reasonable rates from normal banks.
the face with or without words, such as ‘& Co’, ‘not- So. they don’t become victims in the hands of local
negotiable’, ‘payee’s account only’ etc. The words without moneylender.
lines will not constitute crossing. Such instruments should
not be paid as drawer’s mandate is not clear. No Frill Account
• Crossing is applicable in case of cheques & demand draft • 'No Frills 'account is a basic banking account. Such account
only & does not cover BOE or promissory note. requires either nil minimum balance or very low minimum
balance. Charges applicable to such accounts are low.
• The RBI in 2005-06 called upon Indian banks to design a ‘no
What are the Types of Crossing?
frills account’ – a no precondition, low ‘minimum balance
• General crossing (sec 123): General crossing is where a maintenance’ account with simplified KYC (Know Your
cheque bears across its face two parallel transverse lines Customer) norms.
(with or without words such as “& co” or any abbreviation. • But all the existing ‘No-frills’ accounts opened were
(Words not important, lines are). converted into BSBDA in compliance with the guidelines
• Special crossing (sec 124): Where a cheque bears across its issued by RBI in 2012.
face, name of bank, either with or without the words not-
negotiable (lines are not important, the addition of name of What is BSBDA (Basic Savings & Bank Deposit A/c)?
the bank is important), that addition shall be deemed as In 2012, RBI introduced BSBDA. Some important points are:
special crossing & the cheque be considered to be crossed • This account shall not have the requirement of any minimum
specially to banker. balance.
• Special Crossing in favour more than one bank: As per • The services available in the account will include: deposit &
Section 127, if a cheque is crossed specially to more than one withdrawal of cash at bank branch as well as ATMs;
bank (unless one bank is acting as collecting agent to receipt/credit of money through electronic payment
another), the payment shall be refused. A cheque crossed to channels or by means of deposit/collection of cheques
two or more branches of the same bank is considered to be drawn by Central/State Govt. agencies & departments;
crossed to one bank only. • While there will be no limit on the number of deposits that
• Not negotiable crossing: As per Section 130, a person can be made in a month, account holders will be allowed a
taking a cheque crossed generally or specially bearing the maximum of four withdrawals in a month, including ATM
words ‘not negotiable’ shall not have not be capable of withdrawals.
giving a better title to the cheque than that, which ther p • Facility of ATM card or ATM-cum-Debit Card.
erson from whom he took it, had.

Demand Drafts Business Correspondent

• The business correspondent is nothing but a bank-in-person,
• Demand draft is defined as per Section 85 (a) of NI Act 1881 who is authorised to collect small ticket deposits and extend
as an order to pay money drawn by one office of a bank upon small credit on behalf of the banks. A BC also does the
another office of the same bank for a sum of money payable following activities: Recovering the principal interest of small
to order on demand. value deposits.
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• The RBI has allowed banks to appoint entities and individuals Small Finance Banks:
as agents for providing basic banking services in remote areas • Total Priority Sector: 75% of ANBC.
where they can’t practically start a branch. These agents are • Agriculture: 18% of ANBC or Off-Balance Sheet Exposure,
called Business Correspondents. whichever is higher.
• Business Correspondents are hence instrumental in • Micro Enterprises: 7.5% of ANBC or Off-Balance Sheet
facilitating financial inclusion in the country. • Exposure, whichever is higher.
• As per the RBI guidelines the products provided by BCs are: • Advances to Weaker Sections: 12% of ANBC or Off-Balance
Small Savings Accounts, Fixed Deposit and Recurring Deposit Sheet Exposure, whichever is higher.
with low minimum deposits, Remittance to any BC customer,
Micro Credit and General Insurance. Categorization of MSME according to MSME ACT 2006
• The BC model allows banks to provide door-step delivery of
➢ The government has given a new turnover based
services especially ‘cash in – cash out’ transactions at a classification of MSMEs. As per this new classification, the
location much closer to the rural population, thus addressing MSMEs are categorized in term of business turnover. This is
the last-mile problem. in place of the previous classification based on investment
made in plant & machineries if they are operating in the
Topic 7: All about the Priority Sector Lending manufacturing sector & investment in equipment for service
Norms (Updated) sector companies. As per the new classification, the same
turnover based criteria applied for all type of MSMEs
It means provide credit to the needy sectors of the society. The including those operating in the services sector.
sectors are: ➢ It was the Micro, Small & Medium Enterprises Development
• Agriculture • Micro & Small Enterprises (MSMED) Act which was notified in 2006 that defined the
• Education • Housing three tier of micro, small & medium enterprises & set
• Export • Weaker Sections investment limits.
• Social Infrastructure • Renewable Energy
Table: Classification of MSMEs

Targets under PSL Classification Micro Small Medium

Manufacturing Investment Investment Investment
Domestic and Foreign Banks (with 20 branches and above):
Enterprises & in Plant & in Plant & in Plant &
• Total Priority Sector: 40% of Adjusted Net Bank
Enterprises Machinery Machinery Machinery
Credit or Off-Balance Sheet Exposure, whichever is higher. rendering or or or
• Agriculture: 18% of ANBC or Off-Balance Sheet Exposure, Services Equipment: Equipment: Equipment:
whichever is higher. Not more Not more Not more
• Micro Enterprises: 7.5% of ANBC or Off-Balance Sheet than Rs.1 than Rs.10 than Rs.50
Exposure, whichever is higher. crore & crore & crore &
• Advances to Weaker Sections: 12% of ANBC or Off-Balance Annual Annual Annual
Sheet Exposure, whichever is higher. Turnover ; Turnover ; Turnover ;
not more not more not more
Foreign Banks (with less than 20 branches): than Rs. 5 than Rs. 50 than Rs.
• Total Priority Sector: 40% of Adjusted Net Bank Credit or Off- crore crore 250 crore
Balance Sheet Exposure, with specific allocations.
Other Targets under PSL
• Agriculture, Micro Enterprises, Advances to Weaker Sections:
• Farmers with landholding of up to 1 hectare are considered
Not applicable.
as Marginal Farmers. Farmers with a landholding of more
than 1 hectare & upto 2 hectares are considered as Small
Regional Rural Banks: Farmers.
• Total Priority Sector: 75% of ANBC, with specific • SCB having any shortfall in lending to priority sector shall be
considerations. allocated amounts for contribution to Rural Infrastructure
• Agriculture: 18% of ANBC or Off-Balance Sheet Exposure, Development Fund with NABARD.
whichever is higher. • Export credit will be allowed up to 32% of ANBC for Foreign
• Micro Enterprises: 7.5% of ANBC or Off-Balance Sheet banks with less than 20 branches in India.
Exposure, whichever is higher. • For Education, banks can provide loans to individuals for
• Advances to Weaker Sections: 15% of ANBC or Off-Balance educational purposes including vocational courses uptoRs.
Sheet Exposure, whichever is higher. 10 lakh for studies in India & Rs. 20 lakh for studies abroad.

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Non-achievement of Priority Sector targets Terms relating to Money Market
• Scheduled Commercial Banks having any shortfall in lending
to priority sector shall be allocated amounts for contribution Call Money Money lent or borrowed for one day
to RIDF established with NABARD & other Funds with Notice Money Money lent or borrowed for a period of 2-
NABARD/NHB/SIDBI, as decided by the Reserve Bank from 14 days.
time to time. Term Money Money lent or borrowed for 15 days to 1
• The interest rates on banks’ contribution to RIDF or any year.
other Funds, tenure of deposits, etc. shall be fixed by Yield to Expected rate of return on an existing
Reserve Bank of India from time to time. maturity security purchased for the market.
Coupon Rate Specified interest rate on a fixed
RBI revises priority sector lending norms for RRBs maturity security fixed at the time of
issue.
Salient features of the guidelines:-
• Targets: 75% of total outstanding to the sectors eligible for CALL/NOTICE MONEY MARKET OPERATIONS
classification as priority sector lending.
• Under call money market, funds are transacted on overnight
• Categories of the Priority Sector: Medium Enterprises,
basis & under notice money market, for 2 days to 14 days.
Social Infrastructure & Renewable Energy will form part of
the Priority Sector, in addition to the existing categories, • Participants include banks (excluding RRBs) & Primary
with a cap of 15% of total outstanding. Dealers (PDs), both as borrowers & lenders. Non-bank
• Agriculture: 18% of total outstanding should be advanced institutions are not permitted in the call/notice money
to activities mentioned under Agriculture. market with effect from August 6, 2005.
• Small & Marginal Farmers: A target of 8% of total • Calculation of interest payable is based on FIMMDA’s (Fixed
outstanding has been prescribed for Small & Marginal Income Money Market & Derivatives Association of India)
Farmers within Agriculture. Handbook of Market Practices.
• Micro Enterprises: A target of 7.5 % of total outstanding has
been prescribed for Micro Enterprises. INSTRUMENT OF GOVT. BORROWING
• Weaker Sectors: A target of 15 % of total outstanding has • To meet the temporary receipt & expenditure mismatch,
been prescribed for Weaker Sections. govt. obtains over draft from RBI under Ways & Means
• Monitoring: Priority Sector Lending will be monitored on a Advances. For short term liquidity, it issues cash
quarterly as well as annual basis. management bills, treasury bills of 91 days, 182 days & 364
days maturity. For long term funds, it uses dated securities
Topic 8: Financial Market| Important Points on in the form of bonds/long term loans.
Money Market, Capital Market & their Instruments
MONEY MARKET
TREASURY BILLS

It is a market for short-term debt securities, such as commercial • These are the instruments (in the form of promissory notes)
paper, repos, negotiable certificates of deposit, & Treasury of short term borrowing by the Central govt., first issued in
Bills with a maturity of one year or less. India in 1917.
• TBs can be purchased by any one (including individuals)
CAPITAL MARKETS IN INDIA except State govt.
• Minimum amount of face value Rs. 25000 & in multiples
It is the market for long term funds. It refers to all the facilities thereof.
& institutional arrangements for borrowing & lending medium • Maturity: 91 days, 182 days & 364 days.
& long term funds. • Treasury bills are zero coupon securities. They are issued
Money Market Capital Market at a discount & redeemed at face value at maturity.
Regulated by RBI Regulated by SEBI
Cash Management Bills (CMB)
Major money market Instruments
• CMB introduced on 11.08.11, is a short-term security to be
• Certificate of Deposit (CD) sold by Govt. of India to raise temporary money for cash
• Commercial Paper (CP) management needs.
• Inter Bank Participation Certificates • The tenure is less than 91 days but the notified amount &
• Inter Bank term Money date of issue depends upon the temporary cash
• Treasury Bills requirement of the Govt.
• Bill Rediscounting • It is issued at discount to the face value through auctions,
• Call/Notice Money as in the case of the Treasury Bills.

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DATED SECURITIES (b) Sanctioned working capital limit by bank/s or all-India
financial institution/s;
• These are long term securities & carry a fixed or floating (c) The borrower accounts are classified as a Standard Asset by
coupon (interest rate) paid on the face value, payable at financing bank/s/ institution/s & ‘
fixed time periods (half-yearly). (d) Minimum credit rating from SEBI approved credit rating
• The tenor of dated securities can be up to 40 years. agency (CRA) is A3.
• Public Debt Office of RBI acts as the registry/depository of iv. Maturity: Min 15 days & max upto one year
Govt. securities & deals with the issue, interest payment & v. Amount: Min Rs. 5 lakh or multiples thereof.
repaymentof principal at maturity.
Collateralised Borrowing & Lending Obligation (CBLO)
WAYS & MEANS ADVANCES (WMAs)
• CBLO, an RBI approved money market instrument, is
• WMAs were introduced as per an agreement between RBI & developed by CCIL for the benefit of the entities phased out
Govt. from interbank call money market or given restricted
• WMAs are temporary overdrafts by RBI to govt. (Central & participation in terms of ceiling on call borrowing & lending
State) under Section 17(5) of RBI Act. WMSs replaced the transactions & who do not have access to the call money
earlier ad hoc T-Bills system. market.
• WMAs bridge the time interval of mismatch between govt. • It is a discounted instrument available in electronic book
expenditure & receipts. entry form for the maturity period ranging from 7 days to 90
• Duration: 10 consecutive working days for Central Govt. & Days (can be up to one year as per RBI guidelines).
14 days for State Govt.
CAPITAL MARKETS IN INDIA
OTHER MONEY MARKET INSTRUMENTS
a) It refers to all the facilities & institutional arrangements for
borrowing & lendingmedium & long-term funds.
CERTIFICATE OF DEPOSIT
b) It is segregated into (i) gilt edged market & (ii) the industrial
This scheme was introduced in July 1989, to enable the banking securities market.
system to mobilize bulk deposits from the market, which they c) The gilt edged marketrefers to the market for govt. & semi-
can attract at competitive rates of interest. govt. securities which are traded in the market in stable value
& are sought after by banks & other institutions.
Who can Scheduled commercial banks (except RRBs) & d) The industrial securities market refers to the market for
issue All India Financial Institutions within their shares & debentures of old as well as new companies. This
‘Umbrella limit’. market is further divided as primary market & secondary
CRR/SLR Applicable on the issue price in case of banks market.
Investors Individuals (other than minor), corporations, • The primary market refers to the setup which helps the
companies, trusts, funds, associations etc. industry to raise funds by issuing different types of
Maturity Min: 7 days, Max : 12 Months (in case of FIs securities, which are issued directly to the investors, both
minimum 1 year & maximum 3 years). individual & institutions.
Amount Min: Rs. 1 lac, beyond which in multiple of Rs. 1 • The secondary market refers to the network for subsequent
lac sale & purchase of securities, after these are issued.
Int. Rate Market related. Fixed or floating
Loan Against collateral of CD not permitted
Nature Usance Promissory note. Can be issued in
Dematerialisation form only wef June 30, 2002

COMMERCIAL PAPER
i. CP introduced during 1990, is a short term money market
instrument issued as an unsecured usance promissory note
& privately placed.
ii. Who can issue Commercial paper (CP): Companies, primary
dealers (PDs) & all-India financial institutions (FIs).
iii. A company is eligible to issue CP if:
(a) Its tangible net worth, as per latest audited balance sheet, is
not less than Rs. 4 crore.

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INDIAN DEPOSITORY RECEIPTS (IDRs) • The SARFAESI Act is an Indian law which allows banks and
other financial institution to auction residential or
IDR is an instrument in the form of a Depository Receipt created
commercial properties to recover loans. It gives powers of
by the Indian depository in India against the underlying equity
“Seize and Desist” to banks.
shares of the issuing company. In an IDR, foreign companies
• Banks can give a notice in writing to the defaulting borrower
would issue shares, to an Indian companies would issue shares,
to an Indian Depository which would in turn issue depository requiring it to discharge its liabilities within 60 days. If the
receipts to investors in India. borrower fails to comply with the notice, then banks are
allowed to take possession of the collateral property and sell
it without the permission of a court under this act.
Topic 9: All about the DICGC (Deposit Insurance &
• This law allowed the creation of Asset Reconstruction
Credit Guarantee Corporation of India) Companies (ARC) and allowed banks to sell their non-
1. Which banks are insured by the DICGC? performing assets to ARCs. The first asset reconstruction
All commercial banks including branches of foreign banks company (ARC) of India, ARCIL, was set up under this act.
functioning in India, local area banks & regional rural banks
are insured by the DICGC. Conditions:
2. What does the DICGC insure?
It insures all deposits such as savings, fixed, current, recurring, ➢ SARFAESI is effective only for secured loans where bank can
etc. except the following types of deposits. enforce the underlying security eg. Hypothecation, pledge and
(i) Deposits of foreign Govt.s; mortgages. This law does not apply to unsecured loans, loans
(ii) Deposits of Central/State Govt.s; below Rs.100,000 or where remaining debt is below 20% of the
(iii) Inter-bank deposits; original principal.
(iv) Deposits of the State Land Development Banks with the ➢ The Debt has been classified under Non-Performing Assets by
State co-operative bank; the banks.
(v) Any amount due on account of any deposit received outside
➢ This act is not applicable to an Agricultural land.
India
(vi) Any amount, which has been specifically exempted by the
The assets portfolio of the banks is required to be classified as
corporation with the previous approval of Reserve Bank of
(1) Standard assets (2) sub-standard assets
India.
(3) Doubtful assets (4) loss assets.
3. What is the maximum deposit amount insured by the
DICGC?
The DICGC insures principal and interest upto a maximum • Standard asset is one that does not disclose any problems &
amount of Rs. 5 lakhs. which does not carry more than normal risk attached to the
4. HQ: Mumbai | Chairman, DICGC | Dr. M.D. Patra business.
• An asset which has been classified as NPA for a period not
Topic 10: NPAs & SARFAESI Act exceeding 12 months is considered as sub-standard asset.
• Doubtful asset is one which has remained NPA for a period
It means once the borrower has failed to make interest or exceeding 12 months.
principal payments for 90 days, the loan is considered to be a • An asset which is considered uncollectible & loss has been
non-performing asset. identified by the bank or internal or external auditors or the
RBI inspection & the loss has not been written off is regarded
Criteria for classification of loan as NPA as loss asset.
Farm Credit within Agriculture loans: A loan will be treated as What is pledge: U/s 172 of Indian Contracts Act, pledge is
an NPA if installment of the principal or interest remains unpaid bailment (delivery) of goods as security for payment of a loan.
beyond the due date for (a) two crop seasons in case of short Only goods (movable assets excluding actionable claims (Sec
duration crops (maturing within one year) & (b) one crop season 2(7) of Sales of Goods Act) can be pledged.
for long duration crops (maturing after one year). This would also
be applicable, mutatis mutandis, to agricultural term loans. In Topic 11: A Brief on ATMs in India
other agriculture loans, the 90 days norm would be applicable.
1. What is an Automated Teller Machine (ATM)?
A. Automated Teller Machine is a computerized machine that
SARFAESI Act & Rules
provides the customers of banks the facility of accessing their
• SARFAESI Act (The Securitization & Reconstruction of account for dispensing cash & to carry out other financial &
Financial Assets & Enforcement of Security Interest Act, non-financial transactions without the need to actually visit
2002) their bank branch.

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2. What is White Label ATMs (WLAs)? • Soiled note: means a note which, has become dirty due to
A. ATMs set up, owned & operated by non-banks are called usage & also includes a two piece note pasted together
White Label ATMs. Non-bank ATM operators are authorized wherein both the pieces presented belong to the same note,
under Payment & Settlement Systems Act, 2007 by the & form the entire note.
Reserve Bank of India.
3. Is there any time limit for the card issuing banks for Pre-2005 series Banknotes
recrediting the customer’s account for a failed ATM/WLA The banknotes issued before 2005 MG series are called pre-2005
transaction? series banknotes, which do not have the year of printing on the
A. As per the RBI instructions, banks have been mandated to reverse side. On Jan 23, 2014, RBI decided to withdraw, from
resolve customer complaints by re-crediting the customer’s circulation, these notes as they have fewer security features.
account within 5 working days from the date of complaint. 1. These notes shall continue to be legal tender. The notes are
4. Are the customers eligible for compensation for delays only being withdrawn from circulation.
beyond 5 working days? 2. These notes can be exchanged at select bank branch till
A. Yes. Effective from July 1, 2011, banks have to pay 30.06.16.
compensation of Rs. 100/- per day for delays in re-crediting Currency Quick Facts
the amount beyond 5 working days from the date of receipt Den. Letter Colour Motif Dimension
of complaint for failed ATM transactions. Chocolate Sun Temple, 63 mm
10 -
Brown Konark x120 mm
Topic 12: Currency System in India Greenish 63 mm
20 - Ellora Caves
• Money as a means of payment consists of coins, paper yellow x150 mm
money & withdrawable bank deposits. Fluoresce Hampi 66 mm
50 -
• Legal tender: As per provisions of coinage Act 1906, bank nt Blue with Chariot x140 mm
notes, currency notes & coins (Rs. 1 & above) are legal tender Bright 66 mm
200 H Sanchi Stupa
for unlimited amount. The subsidiary coins (below Re 1) are Yellow ×150 mm
legal tenders for sum not exceeding Re 1. Issue of 1, 2 & 3 Stone 66mm
500 - Red Fort
paise coins discontinued wef Sep 16, 1981. Grey x150mm
• Currency chests are operated by RBI so that they can
Topic 13: A close look at the Prompt Corrective
provide good quality currency notes to the public. However,
RBI has appointed commercial banks to open & monitor Action (PCA)
currency chests on behalf of RBI. The cash kept in currency What is PCA as per RBI? All Misconceptions Cleared
chests is considered to be kept in RBI.
• The bank branches are also authorised to establish Small • RBI clarified that the PCA framework is not intended to
Coin Depots to stock small coins. The Small Coin Depots constrain normal operations of the banks for the general
also distribute small coins to other bank branches in their public.
area of operation. • Under RBI's supervisory framework, it uses various
measures/tools to maintain sound financial health of banks.
What are soiled, mutilated & imperfect banknotes? PCA framework is one of such supervisory tools.
• It involves monitoring of certain performance indicators of
• Government note: means any note issued by Central
the banks as an early warning exercise & is initiated once
Government or supplied by the Central Government to the
such thresholds as relating to capital, asset quality etc. are
Bank & issued by the Bank, provided the liability for the
breached.
payment of the value in respect of such note has devolved
• Its objective is to facilitate the banks to take corrective
on & been taken over by the Bank.
measures including those prescribed by the Reserve Bank, in
• Imperfect Note: means any note, which is wholly or
a timely manner, in order to restore their financial health.
partially, obliterated, shrunk, washed, altered or
• It provides an opportunity to the Reserve Bank to pay
indecipherable but does not include a mutilated note.
focussed attention on such banks by engaging with the
• Mutilated note: means a note of which a portion is missing
management more closely in those areas.
or which is composed of more than two pieces.
• The PCA framework is, thus, intended to encourage banks
• Mismatched note: means a mutilated note which has been
to eschew certain riskier activities & focus on conserving
formed by joining a half note of any one note to a half note
capital so that their balance sheets can become stronger.
of another note.
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Salient Features of revised PCA Framework for Banks Immediate Payment Service (IMPS): It was launched in 2010.
IMPS offers an instant, 24X7, interbank electronic fund transfer
A. Capital, asset quality & profitability continue to be the key
service through mobile phones.
areas for monitoring in the revised framework.
B. Indicators to be tracked for Capital, asset quality & Overview of *99# Service: *99# service launched by NPCI,
profitability would be: which works on Unstructured Supplementary Service Data
a) CRAR/ Common Equity Tier I ratio: CET ratio – the (USSD) channel. This service was launched in 2014. Banking
percentage of core equity capital, net of regulatory customers can avail the service by dialing *99#, a “Common
adjustments, to total risk weighted assets as defined in number across all Telecom Service Providers (TSPs)” on their
RBI Basel III guidelines mobile phone & transact through an interactive menu displayed
b) Net NPA ratio: NNPA ratio – the percentage of net NPAs on the mobile screen.
to net advances
Overview of *99*99# Service: *99*99# is a USSD
c) Return on Assets: ROA – the percentage of profit after tax
(Unstructured Supplementary Service Data) based value added
to average total assets
service from NPCI that facilitates the customers to check the
C. Leverage would be monitored additionally as part of the PCA
status of his/her Aadhaar number seeding/linking in the bank
framework.
D. Breach of any risk threshold (as detailed under) would result account. The service works across all GSM service providers &
in invocation of PCA. brings together the diverse ecosystem partners such as Banks &
E. The PCA framework would apply without exception to all TSPs (Telecom Service Providers).
banks operating in India including small banks & foreign MMID: MMID stands for Mobile Money Identifier. MMID is a 7-
banks operating through branches or subsidiaries based on digit code issued by the bank to their customers for availing
breach of risk thresholds of identified indicators. IMPS.
F. A bank will be placed under PCA framework based on the
audited Annual Financial Results & the Supervisory A Brief on QSAM: *99*99# service, is alternatively known as
Assessment made by RBI. QSAM (Query Service on Aadhaar Mapper). Using this service, a
person can check the Aadhaar seeding/linking status in his/her
Topic 14: All about the Products of NPCI bank account.
• National Payments Corporation of India (NPCI) is an A Brief on NACH
umbrella organization for all retail payments system in India. • NPCI implemented “National Automated Clearing House
It was incorporated in December 2008 & the Certificate of (NACH)” for Banks, Financial Institutions, Corporates &
Commencement of Business was issued in April 2009. Govt., is a web based solution to facilitate interbank, high
• The authorized capital was pegged at Rs 300 crore & paid up volume, electronic transactions which are repetitive &
capital was Rs 100 crore. periodic in nature.
• Biswamohan Mahapatra| Non-Executive Chairman & Dilip • NACH System can be used for making bulk transactions
Asbe- MD & CEO towards distribution of subsidies, dividends, interest, salary,
pension etc. for bulk transactions towards collection of
A Brief on BHIM
payments pertaining to telephone, electricity, water, loans,
• Bharat Interface for Money is an app that lets you make
investments in mutual funds, insurance premium etc.
simple, easy & quick payment transactions using Unified
Payments Interface (UPI). This can be done using just Mobile • NACH’s Aadhaar Payment Bridge (APB) System, developed
number or Virtual Payment Address (VPA). Currently it is by NPCI has been helping the Govt. & Govt. Agencies in
available in 13 languages. making the Direct Benefit Transfer scheme a success.
• Virtual Payment Address (VPA) is a unique identifier which BBPS: Bharat Bill Payment System (BBPS) will function as a
you can use to send & receive money on UPI. tiered structure for operating the bill payment system in the
• With BHIM, you can' t pay more than Rs. 1 Lakh in a country under a single brand image. NPCI will function as the
transaction. authorized Bharat Bill Payment Central Unit (BBPCU), which will
• Daily limit for BHIM app transaction is Rs. 100000 per day. be responsible for setting business standards, rules & procedures
A Brief on UPI- 2016 for technical & business requirements for all the participants.
• Unified Payments Interface is an instant payment system
developed by NPCI. UPI is built over the IMPS infrastructure Topic 15: Small Finance Banks & its Headquarters
& allows you to instantly transfer money between any two • The objective is to further financial inclusion by (a) provision
parties' bank accounts. of savings vehicles, (b) supply of credit to small business
• UPI-PIN is a 4-6 digit pass code you create/set during first units; small & marginal farmers; micro & small industries; &
time registration with this App. other unorganised sector entities, through high technology-
• The upper limit per UPI transaction is Rs. 1 Lakh. low cost operations.
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• It shall primarily undertake basic banking activities of Topic 17: What are the Risks in Banking Sector?
acceptance of deposits & lending to unserved & underserved
sections including small business units, small & marginal • Credit risk: It usually occurs because of inadequate income
farmers, micro & small industries & unorganised sector or business failure. Credit risk signifies a decline in the credit
entities. The minimum paid-up equity capital is Rs. 200 assets’ values before default that arises from the
crores. deterioration in a portfolio or an individual’s credit quality.
• The promoter's minimum initial contribution to the paid-up • Market risk: Basel Committee on Banking Supervision
equity capital of such small finance bank shall at least be 40 defines market risk as the risk of losses in on- or off-balance
% & gradually brought down to 26 % within 12 years from sheet positions that arise from movement in market prices.
the date of commencement of business of the bank. Market risk is the most prominent for banks present in
investment banking.
Headquarters of the Small Finance Banks • Operational risk: Basel Committee on Banking Supervision
defines operational risk “as the risk of loss resulting from
• Au Finance Small Finace Bank Ltd., Jaipur
inadequate or failed internal processes, people & systems or
• Capital Small Finace Bank Ltd., Jalandhar from external events. Operational risk, the risk in all banking
• Fincare Small Finace Bank Ltd., Bengaluru transactions
• Equitas Small Finace Bank, Chennai
• Liquidity risk: Liquidity risk is the risk of a bank not being
• ESAF Small Finace Bank Ltd., Registered Office- Chennai, able to have enough cash to carry out its day-to-day
Corporate Office- Thrissur (Kerala)
operations.
• Jana Small Finace Bank Limited, Bengaluru
• Reputational risk—when banks lose the public’s trust: It is
• North East Small Finace Bank, Guwahati
the risk of damage to a bank’s image & public standing that
• Suryoday Small Finace Bank Ltd., Navi Mumbai
occurs due to some dubious actions taken by the bank.
• Ujjivan Small Finace Bank Ltd., Bengaluru
• Business Risk: Business risk is the risk arising from a bank’s
• Utkarsh Small Finace Bank Ltd., Varanasi
long-term business strategy. It deals with a bank not being
• Shivalik Small Finance Bank Limited, New Delhi
able to keep up with changing competition dynamics, losing
• Unity Small Finance Bank Limited, New Delhi
market share over time, & being closed or acquired.
Topic 16: Payments Banks & its Headquarters Topic 18: What are the BASEL-3 Norms & a brief
• The objective is to further financial inclusion by providing (i) on the 3 Pillars of Basel?
small savings accounts (ii) payments/remittance services to
migrant labour workforce, low income households, small The Bank for International Settlements (BIS) is an international
businesses, other unorganised sector entities & other users. financial institution owned by central banks which fosters
• Scope of activities: Acceptance of demand deposits. It will international monetary and financial cooperation and serves as a
initially be restricted to holding a maximum balance of Rs. bank for central banks.
100,000 per individual customer. The BIS was established in 1930 by an intergovernmental
• It cannot undertake lending activities. Apart from amounts agreement between Germany, Belgium, France, the United
maintained as CRR on its outside demand & time liabilities, Kingdom, Italy, Japan, the United States and Switzerland.
it will be required to invest minimum 75% of its "demand The BIS is owned by 60 central banks, representing countries
deposit balances" in SLR eligible. The minimum paid-up from around the world that together account for about 95% of
equity capital shall be Rs. 100 crore. world GDP.
• The promoter's minimum initial contribution to the paid-up The BIS carries out its work through its meetings, programmes
equity capital of such payments bank shall at least be 40 % and through the Basel Process, hosting international groups
for the first five years from the commencement of its pursuing global financial stability and facilitating their
business. interaction.
It also provides banking services, but only to central banks and
Headquarters of the Payment Banks other international organizations. It is based in Basel,
Switzerland, with representative offices in Hong Kong and
• India Post Payment Bank – New Delhi Mexico City.
• Airtel Payment Bank Limited- Registered Office- New Delhi,
Corporate Office- Gurugram, Haryana Basel Committee on Banking Supervision (BCBS)
• Paytm Payment Bank Limited- Noida, UP • The Basel Committee on Banking Supervision is an
• Jio Payment Bank – Mumbai international committee formed to develop standards for
• Fino Payment Bank Limited- Navi Mumbai banking regulation; it is made up of central bankers from 27
• NSDL Payment Bank Limited- Mumbai countries and the European Union.
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• The present Chairman of the Committee is Stefan Ingves, Also, the quantity and quality of capital under Basel II were
Governor of the central bank of Sweden (Sveriges deemed insufficient to contain any further risk. Basel III norms
Riksbank). Niel Esho is the current Secretary General of the aim at making most banking activities such as their trading book
Basel Committee. The Committee's Secretariat is located at activities more capital-intensive. The guidelines aim to promote
the Bank for International Settlements (BIS) in Basel, a more resilient banking system by focusing on four vital banking
Switzerland. However, the BIS and the Basel Committee parameters viz. capital, leverage, funding and liquidity.
remain two distinct entities. Presently Indian banking system follows Basel II norms. The
Goals Reserve Bank of India has extended the timeline for full
• BCBS does not issue binding regulation; rather, it functions as implementation of the Basel III capital regulations by a year to
an informal forum in which policy solutions and standards are March 31, 2019.
developed.
• The Basel Committee formulates broad supervisory Three Pillars of Basel 3
standards and guidelines and recommends statements of
best practice in banking supervision in the expectation that • Pillar 1: Minimum Regulatory Capital Requirements
member authorities and other nations' authorities will take based on Risk Weighted Assets (RWAs): Maintaining
steps to implement them through their own national capital calculated through credit, market & operational risk
systems. areas (mainly that capital which can absorb risk.)
• It mainly focuses on risks to banks and the financial system • Pillar 2: Supervisory Review Process: Regulating tools &
are called Basel accord. frameworks for dealing with peripheral risks that bank face.
• India has accepted Basel accords for the banking system. • Pillar 3: Market Discipline: Increasing the disclosures that
Basel Accord has given us three Basel Norms which are banks must provide to increase the transparency of banks
Basel I, II and III.
Basel I: Important Facts related to BASEL 3
In 1988, BCBS introduced capital measurement system called
Basel capital accord, also called as Basel 1. It focused almost • Minimum Ratio of Total Capital To RWAs--10.50%
entirely on credit risk. It defined capital and structure of risk • Minimum Ratio of Common Equity to RWAs--4.50% to
weights for banks. The minimum capital requirement was fixed 7.00%
at 8% of Risk Weighted Assets (RWA). RWA means assets with • Tier I capital to RWAs--6.00%
different risk profiles. For example, an asset backed by collateral • Core Tier I capital to RWAs--5.00%
would carry lesser risks as compared to personal loans, which • Capital Conservation Buffers to RWAs--2.50%
have no collateral. India adopted Basel 1 guidelines in 1999. • Leverage Ratio--3.00%
Basel II: • Countercyclical Buffer--0% to 2.50%
In June 2004, Basel II guidelines were published by BCBS, which
were considered to be the refined and reformed versions of Basel Topic 19: Most Important Miscellaneous Banking
I accord. The guidelines were based on three parameters, which Terms
the committee calls it as pillars. They are ➢ Capital Adequacy
Requirements: Banks should maintain a minimum capital • ACU: Asian Clearing Union (ACU) was established with its
adequacy requirement of 8% of risk assets. ➢ Supervisory head-quarters at Tehran, Iran, on December 9, 1974.
Review: According to this, banks were needed to develop and • Moral Suasion: Moral Suasion is just as a request by the RBI
use better risk management techniques in monitoring and to the commercial banks to take so & so action & measures
managing all the three types of risks that a bank faces, viz. credit, in so & so trend of economy. RBI may request commercial
market and operational risks. ➢ Market Discipline: This need banks not to give loans for unproductive purpose which does
increased disclosure requirements. Banks need to mandatorily not add to economic growth but increases inflation.
disclose their CAR, risk exposure, etc to the central bank. Basel II • Bouncing of a cheque: Where an account does not have
norms in India and overseas are yet to be fully implemented. sufficient balance to honour the cheque issued by the
customer, the cheque is returned by the bank with the
Basel III:
In 2010, Basel III guidelines were released. These guidelines were reason "funds insufficient" or "Exceeds arrangement". This is
introduced in response to the financial crisis of 2008. A need was known as 'Bouncing of a cheque'.
felt to further strengthen the system as banks in the developed • Demat Account: The term "demat", in India, refers to a
economies were under-capitalized, over-leveraged and had a dematerialised account for individual Indian citizens to trade
greater reliance on short-term funding. in listed stocks or debentures.

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• Capital Adequacy Ratio (CAR): Capital adequacy ratio A Brief on Nationalization of Banks
measures the amount of a bank’s capital expressed as a
%age of its credit exposure. Globally, the capital adequacy • Nationalisation of Imperial Bank of India & its conversion
ratio has been developed to ensure banks can absorb a into State Bank of India in July 1955.
reasonable level of losses before becoming insolvent. Indian • Conversion of 8 major State-associated banks into
banks are expected to maintain a minimum capital subsidiary banks of SBI in 1959.
adequacy ratio of 9 % (Rs 9 as capital for every Rs 100 in loan • Nationalisation of 14 Indian scheduled banks in July 1969.
or asset) • Nationalisation of 6 more banks in April 1980 & New Bank of
• Balance of Trade: The value of a country’s exports minus the India merged into Punjab National Bank.
value of its imports. Unless specified as the balance of
merchandise trade, it normally incorporates trade in Topic 20: How the amount can be transferred from
services, including earnings (interest, dividends, etc.) on
one Bank A/c to the other?
financial assets.
• Balance of Payments: A list of all of a country’s Real Time Gross Settlement (RTGS)
international transactions for a given time period, usually
The acronym ‘RTGS’ stands for Real Time Gross Settlement,
one year.
which can be defined as the continuous (real-time) settlement of
• NOSTRO Account: A Nostro account is maintained by an
funds transfers individually on an order by order basis (without
Indian Bank in the foreign countries.
netting).
• VOSTRO Account: Vostro account is maintained by a
foreign bank in India with their corresponding bank.
• BCBS: Basel Committee on Banking Supervision is an Processing or Service Charges for RTGS Transactions
institution created by the Central Bank governors of the Parameters RTGS
Group of Ten nations. Minimum Transfer Value Rs. 2 lakh
• What is STRIPS: Separate Trading for Registered Interest & Payment Option Online and Offline
Principal Securities. Maximum Transfer Value No limit
• The CORE word in CBS stands for Centralized Online
Transfer Time Immediate
Realtime Exchange.
Service Time Available 24×7
• Cross Selling: Cross-selling stands for offering to the
Inward Transaction Charges No charges
existing & new customers, some additional banking
Details Required Account No. and IFSC Code
products, with a view to expand banking business, reduce
the per customer cost of operations & provide more Beneficiary Registration Yes
satisfaction & value to the customer.
National Electronic Funds Transfer (NEFT)
Important Terms related to Mutual Funds • National Electronic Funds Transfer (NEFT) is a nation-wide
payment system facilitating one-to-one funds transfer. NEFT
• Asset Management Company: A company formed & is an electronic fund transfer system that operates on a
registered under the Companies Act 1956 & approved as Deferred Net Settlement (DNS) basis which settles
such by the SEBI to manage the funds of a mutual fund. transactions in batches.
Under an agreement (with the trustees of the Mutual Fund), • Under this transfer, individuals, firms and corporates can
an AMC undertakes to formulated mutual funds schemes, electronically transfer funds from any bank branch to any
distribute income as per agreement.
individual, firm or corporate having an account with any other
• Close-ended scheme: A scheme where funds are raised for
bank branch in the country participating in the transfer.
a fixed period. The scheme is wound up after that period &
However, NEFT has no limit - either minimum or maximum -
funds are returned with capital appreciation to unit holders.
on the amount of funds transferred.
Normally, a close-ended scheme is listed on a stock
• In case of Individuals who do not have a bank, account can
exchange.
also deposit cash using NEFT. However, such cash
• Net asset value: The price of value of one share of a fund. It
remittances are restricted to a maximum of Rs. 50,000 per
is calculated by summing the quoted values of all the
securities held by the fund, adding in cash & any accrued transaction.
income & subtracting liabilities & dividing the result by the • The NEFT system also facilitates one-way cross-border
number of shares outstanding. transfer of funds from India to Nepal and it is known as the
• Open ended scheme: A scheme is the one which Indo-Nepal Remittance Facility Scheme. However, the
continuously offers its units & buys them back from remittances are restricted to a maximum of Rs. 50,000 per
investors. transaction in this type of scheme.

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Processing or Service Charges for NEFT Transactions b) EEFC A/c
• Exchange Earners' Foreign Currency Account (EEFC) is an
Parameters NEFT
a/c maintained in foreign currency with Authorised Dealer.
Minimum Transfer Value Rs. 1
• It is a facility provided to foreign exchange earners, including
Payment Option Online and Offline
exporters, to credit 100% of their foreign exchange earnings
Maximum Transfer Value No limit to the a/c, so that the account holders do not have to convert
Transfer Time Up to 30 minutes foreign exchange into Rupees, thereby minimizing the
Service Time Available 24×7 transaction costs.
Inward Transaction Charges No charges • All categories of foreign exchange earners, such as
Details Required Account No. and IFSC Code individuals, companies, etc. who are resident in India, may
Beneficiary Registration Yes open EEFC accounts.
• It can be held only in the form of a current account. No
Immediate Payment Service (IMPS) interest is payable on EEFC accounts.
IMPS is an innovative real time inter-bank electronic funds
ACCOUNTS FOR NRI/PIO: Non-Resident Ordinary
transfer system in India. Banks are allowed to set their own
Rupee Account (NRO Account)
limit for IMPS.
• IMPS offers an inter-bank electronic fund transfer • NRO accounts may be opened / maintained in the form of
service through mobile phones. Unlike NEFT and RTGS, current, savings, recurring or fixed deposit accounts.
the service is available 24/7 throughout the year • Interest rates offered by banks on NRO deposits cannot be
including bank holidays. higher than those offered by them on comparable domestic
rupee deposits.
• This service is offered by National Payments
• Account should be denominated in Indian Rupees.
Corporation of India (NPCI) that empowers customers
• NRI/PIO may remit from the balances held in NRO account
to transfer money instantly through banks and RBI
an amount not exceeding USD one million per financial year,
authorized Prepaid Payment Instrument Issuers (PPI) subject to payment of applicable taxes.
across India. • The limit of USD 1 million per financial year includes sale
• QSAM (Query Service on Aadhaar Mapper) – This proceeds of immovable properties held by NRIs/PIOs.
service helps user in knowing their Aadhaar Seeding
status with their bank account. Non-Resident (External) Rupee Account (NRE Account)
• Both banked as well as un-banked customer can avail
• NRE account may be in the form of savings, current,
IMPS. However, unbanked customer can initiate IMPS recurring or fixed deposit accounts.
transaction using the services of Pre-Paid Payments • Account will be maintained in Indian Rupees.
instrument issuer (PPI). • Accrued interest income & balances held in NRE accounts
are exempt from Income tax.
Processing or Service Charges for IMPS Transactions • Authorised dealers/authorised banks at their discretion
• The maximum transfer limit of funds through IMPS is Rs. 5 allow for a period not more than two weeks, overdrawings in
lakh. However, it may vary from bank to bank. while the NRE savings bank accounts, up to a limit of Rs. 50,000.
minimum limit usually is Rs. 1. However, the limit may vary • Loans up to Rs.100 lakh can be extended against security of
from bank to bank. funds held in NRE Account either to the depositors or third
• IMPS charges are largely subject to the amount which is parties.
being transferred along with the bank’s policies. However,
the regular IMPS charges range from Rs. 2.50 to Rs. 25 for
amounts of Rs. 10,000 to Rs. 5 lakh.

Topic 21: What are the types of Accounts that can

be opened by Foreign (Person) in India?
a) NRO A/c (Foreign Tourist)
• Foreign tourists during their short visit to India can open a
Non-Resident (Ordinary) Rupee (NRO) account (Current /
Savings) with any Authorised Dealer bank dealing in foreign
exchange.
• Can be opened up to a maximum period of 6 months.
• All payments to residents exceeding INR 50,000 can be
made only by means of cheques / pay orders / DDs.

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Foreign Currency Non-Resident (Bank) Account – FCNR 6) If one is not satisfied with the decision passed by the BO, one
(B) Account can approach the appellate authority who is the Deputy
Governor of the RBI.
• FCNR (B) accounts are only in the form of term deposits of 1
to 5 years Topic 24: NBFC OMBUDSMAN SCHEME
• Account can be in any freely convertible currency.
• Loans up to Rs.100 lakh can be extended against security of • RBI introduced an Ombudsman Scheme for customers of
funds held in FCNR (B) deposit either to the depositors or Non-Banking Financial Companies (NBFCs).
third parties. • The Scheme is an expeditious & cost free apex level
• The interest rates are stipulated by the Department of mechanism for resolution of complaints of customers of
Banking Operations & Development, RBI. NBFCs, relating to certain services rendered by NBFCs.
• It is being introduced under Section 45 L of RBI Act, 1934,
Topic 22: A Brief on CAMELS rating for Domestic with effect from February 23, 2018.
Banks? • The NBFC Ombudsman is a senior official appointed by RBI
to redress customer complaints against NBFCs for
• RBI’s 1995 working group headed by Sh. S. Padmanabhan deficiency in certain services covered under the grounds of
suggested method for rating. complaint specified under Clause 8 of the Scheme.
• RBI rates the banks on a 5 point scale of A to E, widely on the • As on date, four NBFC Ombudsman have been appointed
lines of international CAMELS rating model for domestic with their offices located at Chennai, Kolkata, New Delhi &
banks & CALCS model for foreign banks. Mumbai.
• The compensation amount, if any, which can be awarded by
CAMELS Rating for Domestic Banks
NBFC Ombudsman, for any loss suffered by complainant, is
C Capital adequacy ratio limited to the amount arising directly out of the act or
A Asset quality omission of the NBFC or rupees one million, whichever is
M Management Effectiveness lower.
E Earning (i.e. profitability) • Note: NBFC Ombudsman may award compensation not
L Liquidity (asset-liability management) exceeding rupees 0.1 million to the complainant for causing
S System & controls mental agony & harassment.
• Appellate Authority is vested with a Deputy Governor-in-
Rating parameters for foreign banks Charge of the department of the RBI implementing the
C Capital adequacy ratio Scheme.
A Asset quality Topic 25: What is Base Rate, MCLR & Other rates
L Liquidity
of Lending?
C Compliance
S System & controls Base Rate
• RBI decided that banks should switch over to Base Rate
Topic 23: BANKING OMBUDSMAN SCHEME 2006 system w.e.f. 1.7.2010.
• Banks may determine their actual lending rates w.r.t. Base
The Scheme enables a bank customer for filing of complaints Rate.
relating to certain services rendered by banks. • No loan can be sanctioned below base rate.
1) The Banking Ombudsman is a senior official appointed by the • Exempted accounts: The following loans could be priced
Reserve Bank of India to redress customer complaints against without reference to Base Rate: (a) DRI loans (b) loans to
deficiency in certain banking services. banks’ own employees (c) loans to banks’ depositors against
2) All Scheduled Commercial Banks, Regional Rural Banks & their own deposits.
Scheduled Primary Co-operative Banks are covered under the
Scheme. Marginal Cost Based Lending Rate
3) The Banking Ombudsman does not charge any fee for filing • RBI introduced MCLR w.e.f. 1.4.2016 to determine Base
& resolving customers’ complaints. Rate by banks to improve the efficiency of monetary policy
4) The maximum compensation which a BO can help a transmission.
complainant to get is Rs. 20 lakhs. • All rupee loans sanctioned & credit limits renewed w.e.f.
5) If a complaint is not settled by an agreement within a period 01.04.16 to be priced w.r.t. MCLR. It will be internal
of one month, the BO proceeds further to pass an award. benchmark.
Before passing an award, the BO provides reasonable
• The MCLR comprises of (a) Marginal cost of funds; (b)
opportunity to the complainant & the bank, to present their
Negative carry on account of CRR; (c) operating costs; (d)
case.
Tenor premium.
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• Marginal Cost of funds (MCF): It has 2 components (a) Topic 28: What is NBFC & how it differs from
Marginal cost of borrowings (b) return on networth. Banks?
• By using MCF, it will be calculated as: Required CRR ×
(marginal cost) / (1-CRR) • Non-Banking Financial Company (NBFC) is a company
registered under the Companies Act, 1956 engaged in the
business of loans & advances, acquisition of
Topic 26: What is Reverse Mortgage Loan?
shares/stocks/bonds/debentures/securities issued by Govt.
• The scheme of reverse mortgage has been introduced for or local authority or other marketable securities of a like
the benefit of senior citizens owning a house but having nature, leasing, hire-purchase, insurance business, chit fund
inadequate income to meet their needs. Some important business.
• NBFCs lend & make investments & hence their activities are
features of reverse mortgage are:
akin to that of banks; however there are a few differences as
• A homeowner who is above 60 years of age is eligible for
given below:
reverse mortgage loan. It allows him to turn the equity in his a) NBFC cannot accept demand deposits;
home into one lump sum or periodic payments mutually b) NBFCs do not form part of the payment & settlement
agreed by the borrower & the banker. system & cannot issue cheques drawn on itself;
• NO REPAYMENT is required as long as the borrower lives, c) Deposit insurance facility of Deposit Insurance & Credit
Borrower should pay all taxes relating to the house & Guarantee Corporation is not available to depositors of
maintain the property as his primary residence. NBFCs, unlike in case of banks.
• The amount of loan is based on several factors: Borrower’s Types of NBFC
age, Value of the property, Current interest rates & The I. Asset Finance Company (AFC) : An AFC is a company which is
specific plan chosen. a financial institution carrying on as its principal business the
• As per the scheme formulated by National Housing Bank financing of physical assets supporting productive/economic
(NHB), the maximum period of the loan period is 15 years. activity, such as automobiles, tractors, lathe machines,
The residual life of the property should be at least 20 years. generator sets, earth moving and material handling
Where the borrower lives longer than 15 years, periodic equipment’s, moving on own power and general purpose
payments will not be made by lender. However, the industrial machines. Principal business for this purpose is defined
borrower can continue to occupy. as aggregate of financing real/physical assets supporting
economic activity and income arising therefrom is not less than
Topic 27: What is Mortgages & Pledge? 60% of its total assets and total income respectively.

Mortgages: It is used for creating charge against immovable II. Investment Company (IC) : IC means any company which a
financial institution is carrying on as its principal business the
property which includes land, buildings or anything that is
acquisition of securities.
attached to the earth or permanently fastened to anything
attached to the earth (However, it does not include growing III. Loan Company (LC) : LC means any company which a
crops or grass as they can be easily detached from the earth). It financial institution is carrying on as its principal business the
is defined in Section 58 of the Transfer of Property Act 1882. providing of finance whether by making loans or advances or
otherwise for any activity other than its own but does not include
Example: When mortgage is created is when someone takes a an Asset Finance Company.
Housing Loan / Home Loan. In this case house is mortgaged in
IV. Infrastructure Finance Company (IFC) : IFC is a non-banking
favour of the bank / financer but remains in possession of the finance company a) which deploys at least 75 per cent of its total
borrower, which he uses for himself or even may give on rent. assets in infrastructure loans, b) has a minimum Net Owned
Pledge: Funds of Rs. 300 crore, c) has a minimum credit rating of ‘A ‘or
It is used when the lender (pledge) takes actual possession of equivalent d) and a CRAR of 15%.
assets (i.e. certificates, goods). Such securities or goods are Deposits in NBFC:
movable securities. In this case the pledgee retains the • Presently, the maximum rate of interest an NBFC can offer
possession of the goods until the pledgor (i.e. borrower) repays is 12.5%. The interest may be paid or compounded at rests
the entire debt amount. not shorter than monthly rests.
In case there is default by the borrower, the pledgee has a right • NBFCs are allowed to accept / renew public deposits for a
to sell the goods in his possession and adjust its proceeds minimum period of 12 months & maximum period of 60
towards the amount due (i.e. principal and interest amount). months. They cannot accept deposits repayable on demand.
• The deposits with NBFCs are not insured.
Example: Gold /Jewellery Loans, Advance against goods/stock, • The repayment of deposits by NBFCs is not guaranteed by
Advances against National Saving Certificates etc RBI.

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V. Systemically Important Core Investment Company (CIC- • Commercial Bank Money - Commercial bank money or the
ND-SI) : CIC-ND-SI is an NBFC carrying on the business of demand deposits are claims against financial institutions
acquisition of shares and securities which satisfies the following which can be used for purchasing goods & services.
conditions: - • Reserve Money (M 0)
➢ It holds not less than 90% of its Total Assets in the form of Currency in circulation + Bankers‘ ‘deposits with the RBI + ‘Other’
investment in equity shares, preference shares, debt or deposits with the RBI = Net RBI ‘credit to the Govt. + RBI credit
loans in group companies; to the commercial sector + RBI's claims on banks + RBI's net is
➢ Its asset size is Rs.100 crore or above and foreign assets + Govemment’s currency liabilities to the public -
➢ It accepts public fund RBI's net non-monetary liabilities.
VI. Infrastructure Debt Fund: Non- Banking Financial Company M1=Currency with the public + Demand deposits with the
(IDF-NBFC) : IDF-NBFC is a company registered as NBFC to banking system + 'Other' deposits with the RBI
facilitate the flow of long term debt into infrastructure projects. M2=M1 + Savings deposits of office savings banks.
IDF-NBFC raise resources through issue of Rupee or Dollar M3=M1+ Time deposits with the banking system
denominated bonds of minimum 5-year maturity. Only
= Net bank credit to the Govt.
Infrastructure Finance Companies (IFC) can sponsor IDF-NBFCs.
M4=M3 +All deposits with post office savings banks (excluding
VII. Non-Banking Financial Company - Micro Finance National Savings Certificates)
Institution (NBFC-MFI) : NBFC-MFI is a non-deposit taking NBFC
having not less than 85% of its assets in the nature of qualifying • Bhartiya Reserve Bank Note Mudran Private Limited
assets which satisfy the following criteria: (BRBNMPL): RBI established BRBNMPL in February 1995 as
➢ loan disbursed by an NBFC-MFI to a borrower with a rural a wholly-owned subsidiary to augment the production of
household annual income not exceeding Rs.1,00,000 or bank notes in India & to enable bridging of the gap between
urban and semi-urban household income not exceeding supply & demand for bank notes in the country.
Rs.1,60,000;
➢ loan amount does not exceed Rs. 50,000 in the first cycle and Topic 30: What are the Different types of Banking?
Rs.1,00,000 in subsequent cycles;
• Para banking- When Bank provides banking services except
➢ total indebtedness of the borrower does not exceed
the general banking facility.
Rs.1,00,000;
• Narrow Banking- When banks invest its money in Govt.
➢ tenure of the loan not to be less than 24 months for loan
securities instead investing in market to avoid risk.
amount in excess of Rs.15,000 with prepayment without
penalty; • Offshore Banking- Bank which accept currency of all
countries.
➢ loan to be extended without collateral;
• Green banking- Promoting environmental-friendly
➢ aggregate amount of loans, given for income generation, is
not less than 50 per cent of the total loans given by the MFIs; practices & reducing your carbon footprint from your
banking activities.
➢ loan is repayable on weekly, fortnightly or monthly
instalments at the choice of the borrower • Retail Banking- Retail banking refers to the division of a
bank that deals directly with retail customers.
Topic 29: What are the types of Money? • Wholesale banking-Wholesale banking is the provision of
services by banks to organisations such as Mortgage
• Commodity Money - Commodity money value is derived Brokers, large corporate clients, mid-sized companies, sreal
from the commodity out of which it is made. The commodity estate developers & investors, international trade finance
itself represents money, & the money is the commodity. businesses etc.
• Representative Money - is money that includes token coins, • Universal Banking: R H Khan committee & recommended
or any other physical tokens like certificates, that can be the concept of Universal Banking. It means allowing Fls &
reliably exchanged for a fixed amount/quantity of a
banks to undertake all types of banking or development
commodity like gold or silver.
financing activity, subject to compliance of statutory & other
• Fiat Money - Fiat money, also known as fiat currency is the
requirements of RBI, Govt. & related legal Acts.
money whose value is not derived from any intrinsic value or
• Islamic Banking: An Islamic bank is a deposit-taking
any guarantee that it can be converted into valuable
banking institution whose scope of activities excluding
commodity (like gold). Instead, it derives value only based
On Govt. order (fiat) borrowing & lending on the basis of interest.

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Topic 31: What are the important codes that are 19. CRISIL: Credit Rating & Investment Services India Limited
used in Banking? 20. CIBIL: Credit Information Bureau Of India Limited
21. NAV: Net Asset Value
IFSC (Indian Financial System Code) 22. ICRA: Indian Credit Rating Agency
• Indian Financial System Code is an alpha-numeric code that 23. CARE: Credit Analysis & Research Limited
uniquely identifies a bank-branch participating in the NEFT 24. WMAs: Ways & Means Advances
system. 25. ALM: Asset Liability Management
• This is an 11 digit code with the first 4 alpha characters 26. INFINET Indian Financial Network
representing the bank, The 5th character is 0 (zero) & the last 27. OLTAS - On-line Tax Accounting System (OLTAS) for Direct
6 characters representing the bank branch. Taxes
28. TIN - Tax Information Network (TIN)
MICR – Magnetic ink character Recognition
29. CDR- Corporate Debt Restructuring
• MICR is 9-digit numeric code that uniquely identifies a bank
30. CAD- Capital Account Deficit
branch participating in electronic clearing scheme.
31. REITs: Real Estate Investment Trusts
• Used to identify the location of a bank branch.
32. InvITs: Infrastructure Investment Trusts
• City (3) Bank (3) Branch (3)
33. ALM- Asset Liability Management
• It is allotted to a bank branch is printed on the MICR band of 34. ASBA: Application Supported by Blocked Amount
cheques. MICR used for electronic credit system. 35. PIN: Personal Identification Number
SWIFT Code: Society for Worldwide Interbank financial tele- 36. DTAA – Double Taxation Avoidance Agreement
communication 37. EFSF – European Financial Stability Facility
• India was 74th Nation to join SWIFT Network. 38. FINO- Financial Inclusion Network Operation
• SWIFT Code is a standard format of bank Identifier code. 39. FIPB – Foreign Investment Promotion board
• This code is used particularly in International transfer of 40. FSLRC– Financial Sector Legislative Reforms Commission
money between banks. 41. CRAR: Capital to Risk-weighted Assets Ratio
• A majority of FOREX related message are sent to 42. LCR: Liquidity Coverage Ratio
correspondent banks abroad through SWIFT. 43. TARC - Tax Administration Reform Commission
• SWIFT Code consist 8 or 11 character when code is 8 digit, it 44. FRBMA: Fiscal Responsibility & Budget Management Act
is referred to primary office. 45. AMFI- Association of Mutual Fund in India.
1. Bank code: 4 Digit 46. TIEA – Tax Information exchange Agreement
2. Country code: 2 Digit 47. GAAR - General anti avoidance rule
3. Location code: 2 Digit 48. GSLV - Geo-Synchronous Launch Vehicle
4. Branch code (optional): 3 Digit 49. PPP – Public Private Partnership & Purchasing Power parity
50. PSLV – Polar Satellite Launch vehicle
51. ASSOCHAM-Associated Chambers of Commerce &
Topic 32: Important Banking Abbreviations
Industry of India.
1. PSBs: Public Sector Banks 52. BCSBI-Banking Codes & Standards Board of India.
2. SNBCs: Schedule Non- Commercial Banks 53. BIS-Bank for International Settlements.
3. SENSEX: Sensitive Index of Stock Exchange 54. CDS-Credit Default Swap.
4. KYC: Know Your Customer 55. CEPA-Comprehensive Economic Partnership Management.
5. RTGS: Real Time Gross Settlement 56. FIMMDA-Fixed Income Money MARKETS & Derivatives
6. EFT: Electronic Fund Transfer Association.
7. LIBOR: London Interbank Offered Rate 57. FPI-Foreign Portfolio Investment.
8. MIBOR: Mumbai Interbank Offered Rate 58. IBRD-International Bank for Reconstruction &
9. MIBID: Mumbai Interbank Bid Rate Development.
10. FIIs: Foreign Institutional Investments 59. UIDAI-Unique Identification Development Authority of
11. BIRD: Bankers Institute of Rural Development India.
12. BPLR: Benchmark Prime Lending Rate 60. PMGSY- Pradhan Mantri Gram Sadak Yojana
13. SWOT: Strength, Weaknesses, Opportunities & Threats 61. PMEGP- PM's Employment Generation Programme
14. FERA: Foreign Exchange Regulatory Act 62. NRDWP- National Rural Drinking Water Programme
15. FEMA: Foreign Exchange Management Act 63. PMKK- Pradhan Mantri Kaushal Kendras
16. CASA: Current & Saving Account 64. SANKALP- Skill Acquisition & Knowledge Awareness for
17. NDTL: Net Demand & Time Liabilities Livelihood Promotion programme
18. NASDAQ: National Association For Securities Dealers 65. STRIVE- Skill Strengthening for Industrial Value
Automated Quotations Enhancement
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66. NTA- National Testing Agency Small Industries Development Bank of India (SIDBI)
67. ICDS- Integrated Child Development Services
68. TIES- Trade Infrastructure for Export Scheme • Small Industries Development Bank of India (SIDBI in short)
69. FIPB- Foreign Investment Promotion Board was established in the year 1990 (Date: 2nd April 1990)
70. CERT-Fin- Computer Emergency Response Team for our under the Small Industries Development Bank of India Act
Financial Sector 1989 as a subsidiary of Industrial Development Bank of India.
71. IRFC- Indian Railway Finance Corporation Limited • Chairman & MD: Sivasubramanian Ramann | Head
72. FFO- Further Fund Offering Quarters: Lucknow.
• Chairman & Managing Director: Sivasubramanian Ramann
Topic 33: The HQ of NATIONALIZED/PSBs BANKS
Securities & Exchange Board of India (SEBI)
• Allahabad Bank-Kolkata
• It is the regulator for the securities market in India. SEBI was
• Bank of India -Mumbai
initially established as a non statutory body in April 1988, to
• Bank of Maharashtra -Pune
regulate the working of stock exchange. Later it was given a
• Canara Bank -Bangalore
statutory status on April 1992 via SEBI Act, 1992.
• Central Bank of India -Mumbai
• Chairman- Madhabi Puri Buch | Head Quarters: Mumbai
• Corporation Bank -Mangalore
• Indian Bank- Chennai REGIONAL RURAL BANK (RRB):
• Indian Overseas Bank- Chennai
• Oriental Bank of Commerce- Gurugram • Regional rural bank were set up by an ordinance in 1975,
• Punjab National Bank- New Delhi later replaced by RRB Act, 1976 as pre banking commission
• Punjab & Sind Bank- New Delhi recommendation in 1975.
• State Bank of India- Mumbai • Father of RRBs is M.Swaminathan.
• Syndicate Bank- Manipal (Karnataka) • The Govt. Of India Had Appointed A Working Group On
• UCO Bank- Kolkata Rural Banks Under The Chairmanship Of Mr. M.
Narasimham In 1975. First RRB were Set up On 2nd Oct.
• Union Bank of India- Mumbai
• Share Holder Contribution: Govt. Of India 50% Sponsor
• United Bank of India- Kolkata
Bank 35% State Govt. 15%.
• Andhra Bank- Hyderabad
• Bank of Baroda- Vadodra EXIM BANK:
Topic 34: Financial Regulations | Institutions | • Export-Import (EXIM) Bank of India is the principal financial
Organizations institution in India for coordinating the working of
institutions engaged in financing export & import trade.
Chit Funds Respective State Govt.s • It is a statutory corporation wholly owned by the Govt. of
Insurance companies IRDA India.
Housing Finance Companies NHB • It was established on January 1, 1982 for the purpose of
Venture Capital Fund / SEBI financing, facilitating & promoting foreign trade of India.
Merchant Banking companies SEBI • MD- Harsha Bangari |Headquarters : Mumbai
Stock broking companies SEBI
Nidhi Companies Ministry of corporate
affairs, Govt. of
India

National Bank for Agriculture & Rural Development

• Established on 12th July 1982 on the recommendation of
CRAFICARD committee (also called as SivaramanComittee)
• For Agricultural finance, It is the apex organization.
• Chairman: Mr. Shaji K V | Head Quarters: Mumbai
• Rural Infrastructure Development Fund (RIDF) is operated
by NABARD, instead in April 1995.
• NABARD is the "Micro-Finance Regulatory Authority"

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NATIONAL HOUSING BANK(NHB) Topic 36: List of Mergers in the Indian Banking
• It is the apex institution of housing finance in India, was set Industry
up as wholly owned subsidiary of RBI. The Bank which The Bank which got Year of
• The bank started its operations from July 1988. acquired Merged Merger
• NHB is a subsidiary bank of Reserve Bank of India. Union Bank of Andhra Bank & 2020
• National Housing Bank was established under section 6 of India Corporation Bank
National Housing Bank Act (1987). Canara Bank Syndicate Bank 2020
• HQ: of NHB is in New Delhi| CMD: Shri Sarada Kumar Punjab National Oriental Bank of 2020
Hota, Managing Director Bank Commerce & United
Bank of India
ECGC Indian Bank Allahabad Bank 2020
Bank of Baroda Dena Bank & Vijaya 2019
• Export Credit Guarantee Corporation of India. This Bank
organisation provides risk as well as insurance cover to the State Bank of 5 SBI’s Associate Banks 2017
Indian exporters.| Shri. M Senthilnathan, Chairman cum India & Bharatiya Mahila
Managing Director, ECGC Ltd. | Head Quarters : Mumbai Bank
Kotak Mahindra ING Vysya Bank 2016
Indian Banks' Association (IBA) Bank
ICICI Bank Bank of Rajasthan 2010
• Indian Banks' Association (IBA) set up in 1946 with 22
State Bank of State Bank of Indore 2009
members to discuss issues of common interests. Over the
India
years, IBA emerged as the Voice of Indian Banking Industry.
State Bank of State Bank of 2008
IBA adopts a consultative approach to give its views on any India Saurashtra
issue pertaining to banking sector.
HDFC Bank Centurion Bank of 2008
• Chairman, IBA | Shri AK Goel (Union Bank of India) | HQ: Punjab
Mumbai. Centurion Bank of Lord Krishna Bank 2007
Punjab
Topic 35: Financial Inclusion Schemes in India Indian Overseas Bharat Overseas Bank 2007
Bank
The Government of India has been introducing several exclusive
IDBI Bank United Western Bank 2006
schemes for the purpose of financial inclusion. These schemes
Ltd.
intend to provide social security to the less fortunate sections of
Federal Bank Ganesh Bank of 2006
the society. After a lot of planning and research by several
Kurundwad
financial experts and policymakers, the government launched
Centurion Bank Bank of Punjab (BoP) 2005
schemes keeping financial inclusion in mind. These schemes
IDBI Bank Limited IDBI Limited 2005
have been launched over different years. Let us take a list of the
Oriental Bank of Global Trust Bank 2004
financial inclusion schemes in the country:
Commerce (GTB)
• Pradhan Mantri Jan Dhan Yojana (PMJDY) Bank of Baroda Benares State Bank 2002
• Atal Pension Yojana (APY) ICICI Bank Limited ICICI Limited 2002
• Pradhan Mantri Vaya Vandana Yojana (PMVVY) ICICI Bank Bank of Madura 2001
• Stand Up India Scheme HDFC Bank Times Bank 2000
• Pradhan Mantri Mudra Yojana (PMMY) Union Bank of Sikkim Bank 1999
• Pradhan Mantri Suraksha Bima Yojana (PMSBY) India
• Sukanya Samriddhi Yojana State Bank of Kashinath State Bank 1995
• Jeevan Suraksha Bandhan Yojana India
• Credit Enhancement Guarantee Scheme (CEGS) for Bank of India Bank of Karad 1994
Scheduled Castes (SCs) Punjab National Bank New Bank of 1993
Venture Capital Fund for Scheduled Castes under the Social India
Sector Initiatives State bank of Bank of Cochin 1985
Varishtha Pension Bima Yojana (VPBY) India
hf

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Topic 38: A Brief on Printing & Minting of • 2 currency note printing presses owned by GOI & 2 are
Currencies in India owned by RBI, through the Bharatiya Reserve Bank Note
Mudran Ltd. (BRBNML). GOI presses are at Nasik (Western
• In India, RBI is engaged in printing of all notes & production India) & Dewas (Central India). RBI presses are at Mysore
of coins is handled by Government under The Coinage Act, (Southern India) & Salboni (Eastern India).
1906. • Coins are minted in four mints owned by GOI which are
• RBI determines what volume of currency is required at a located at Mumbai, Hyderabad, Calcutta & NOIDA.
particular time.
• The production of bank notes, coins, non-judicial stamps, Topic 39: What is the Mudra Scheme?
postage stamps & other govt. documents is managed by a) MUDRA stands for Micro Units Development & Refinance
Security Printing & Minting Corporation of India Limited Agency Ltd.
(SPMCIL). It was established in 2006. b) Financial institution set up by GOI for development &
refinancing micro units enterprises.
A brief on the Printing Presses c) The purpose is to provide funding to the non-corporate small
a) The first printing press of India Currency Note Press (CNP) business sector through various Last Mile Financial
was established in 1928 for printing bank notes in India. This Institutions like Banks, NBFCs & MFIs.
press is located in Nashik, Maharashtra. d) It be responsible for refinancing all Last Mile Financiers such
b) Bank Note Press (BNP) has two branches located in Mysore, as Non-Banking Finance Companies, Societies, Trusts,
Karnataka & Dewas, Madhya Pradesh. Currently both CNP & Section 8 Companies, Co-operative Societies, Small Banks,
BNP print Indian currency. Scheduled Commercial Banks & Regional Rural Banks.
c) Currency is also printed by RBI which has two printing presses e) Under the aegis of Pradhan Mantri MUDRA Yojana (PMMY),
& owned by Bhartiya Reserve Bank Note Mudran Limited. MUDRA has already created its initial products / schemes.
These are located in Mysore, Karnataka & Salboni, West The financial limit for these schemes are:
Bengal. • Shishu: covering loans upto Rs. 50,000/-
d) Indian security Press is located in Nashik & Security Printing • Kishor: covering loans above Rs. 50,000/- & upto 5
Press is located in Hyderabad. lakhs
e) Currency denomination is printed in 15 Languages. • Tarun: covering loans above Rs. 5 lakhs to 10 lakhs
f) “1 rupee” denomination printed under the control of f) Pradhan Mantri Mudra Yojana is a GoI scheme, which enables
Government of India. a small borrower to borrow from banks, MFIs, NBFCs for
g) Plastic Currency issued first by Australia loans upto 10 lakhs for non-farm income generating
h) Currency paper is imported from Dubai. activities. Generally, loans upto 10 lakhs issued by banks
under Micro Small Enterprises is given without collaterals.
A brief on the Minting of Coins g) Aditya Kanthy, MD & CEO, MUDRA.

a) Security Printing & Minting Corporation of India Limited

Topic 40: Important Financial, Economics &
(SPMCIL) comprises four mint:
❖ India Government Mint, Mumbai Budget Terms
❖ India Government Mint, Kolkata • Fiscal Responsibility & Budget Management Act: The Act
❖ India Government Mont, Hyderabad is an attempt to make the Government adhere to a phased
❖ India Government Mint, Noida plan to reduce fiscal deficit, which denotes an excess of
b) The main objectives of these mints is to produce coins, expenditure over revenue.
medals & awards, as per the requirements of India. • Securities Transaction Tax: It is a tax on all transactions
c) Mumbai mint is known for producing standardized weights & done over the stock exchanges involving securities such as
measures. shares, derivatives, & equity-linked mutual funds.
d) Noida is known as the first mint in the country to produce • Capital Gains Tax: It is a tax on the gains that ensue when
stainless steel coins. an asset is sold for a price higher than what it was bought for.
• Current Account Deficit: It is a trade measure that shows
Points to Remember the value of a country’s imports of goods & services to be
• Special kind of paper is required for the printing of bank higher than the value of its exports.
notes & non-judicial stamps. This paper is produced in • Bear market: A period during which the majority of
special Security Paper Mill which was established in 1968 at securities prices in a particular market (such as the stock
Hoshangabad, Madhya Pradesh. market) drop substantially.

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• Bull market: A period during which the majority of securities • The Government, therefore, first implemented the exercise
prices in a particular market (such as the stock market) rise of nationalisation of the Imperial Bank of India with the
substantially. objective of “extension of banking facilities on a large scale,
• Primary Deficit: The primary deficit is the fiscal deficit more particularly in the rural & semi-urban areas, & for
minus interest payments. It tells how much of the diverse other public purposes”. The Imperial Bank of India
Government's borrowings are going towards meeting was converted into the State Bank of India in 1955 with the
expenses other than interest payments. enactment of the State Bank of India Act, 1955.
• Fiscal policy: It is the government actions with respect to Topic 42: Important Financial Abbreviations Part 2
aggregate levels of revenue & spending. Fiscal policy is
implemented though the budget & is the primary means by • ADRs - American Depository Receipts
which the government can influence the economy. • CAGR - Compounded Annual Growth Rate
• Fiscal Deficit: When the government's non-borrowed • CDSL - Central Depositary Services (India) Limited
receipts fall short of its entire expenditure, it has to borrow • ECS - Electronic Clearing Scheme
money form the public to meet the shortfall. The excess of • GETFs - Gold Exchange Traded Funds
total expenditure over total non-borrowed receipts is called • IFCI - Industrial Financial Corporation of India
the fiscal deficit. • IPO - Initial Public Offering
• Revenue Deficit: The difference between revenue • NSC - National Savings Certificate
expenditure & revenue receipt is known as revenue deficit. It • OTCEI - Over the Counter Exchange of India Limited
shows the shortfall of government's current receipts over • NISM: National Institute of Securities Market
current expenditure. • SIP: Systematic Investment Plan
• Capital Budget: It consists of capital receipts & payments. It • SWP: Systematic Withdrawal Plan
includes investments in shares, loans & advances granted by • AAY: Antyodaya Anna Yojana
the central Government to State Governments, • CAA&A: Controller of Aid Accounts & Audit
Government companies, corporations & other parties. • CFPI: Consumer Food Price Index
• CIRP: Corporate Insolvency Resolution Process
Topic 41: History of Banking Sector in India • CLSS: Credit Linked Subsidy Scheme
• DARE: Department of Agricultural Research & Education
• The first ‘Presidency bank’ was the Bank of Bengal • DGCI&S: Directorate General of Commercial Intelligence &
established in Calcutta on June 2, 1806 with a capital of Rs.50 Statistics
lakh. The bank was given powers to issue notes in 1823. • DGFT: Directorate General of Foreign Trade
• Bank of Bombay was the second Presidency bank set up in • DIPAM: Department of Investment & public Asset
1840 with a capital of Rs.52 lakh, & the Bank of Madras the Management
third Presidency bank established in July 1843 with a capital • DIPP: Department of Industrial Policy & Promotion
of Rs.30 lakh. • DISCOMS: Distribution Companies
• With the collapse of the Bank of Bombay, the New Bank of • EBRD: European Bank for Reconstruction & Development
Bombay was established in January 1868. • EFTA: European Free Trade Association
• The first Indian owned bank was the Allahabad Bank set up • EIB: European Investment Bank
in Allahabad in 1865, the second, Punjab National Bank was • e-NAM: Electronic National Agriculture Market
set up in 1895 in Lahore, & the third, Bank of India was set up • EPCG: Export Promotion on Capital Goods
in 1906 in Mumbai. All these banks were founded under • GCC: Gulf Cooperation Council
private ownership. • IBC: Insolvency & Bankruptcy Code
• Swadeshi Movement of 1906 provided a great impetus to • LFPR: Labour Force Participation Rate
joint stock banks of Indian ownership & many more Indian • M0: Reserve Money
commercial banks such as Central Bank of India, Bank of • M3: Broad money
Baroda, Canara Bank, Indian Bank, & Bank of Mysore were • MDGs: Millennium Development Goals
established between 1906 & 1913. • NAREDCO: National Real Estate Development Council
• The presidency banks were amalgamated into a single bank, • NCLT: National Company Law Tribunal
the Imperial Bank of India, in 1921. It also functioned as a • NICRA: National Innovations on Climate Resilient
central bank prior to the establishment RBI. The Imperial Agriculture
Bank of India performed three set of functions, viz., • PMAY: Pradhan Mantri Awas Yojana
commercial banking, central banking & the banker to the • PMFBY: Pradhan Mantri Fasal Bima Yojana
government. • PMKSY: Pradhan Mantri Krishi Sinchayee Yojana
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• POL: Petroleum Oil & Lubricants • Liquid Assets: Liquid assets consists of: cash, balances with
• RMSA: Rashtriya Madhyamik Shiksha Abhiyan RBI, balances in current accounts with banks, money at call
• SSA: Sarva Shiksha Abhiyaan & short notice, inter-bank placements due within 30 days &
• SUUTI: Specified Undertaking for Unit Trust of India securities under "held for trading" & "available for sale"
• UDAY: Ujjwal Discom Assurance Yojna categories excluding securities that do not have ready
• UDISE: Unified District Information System for Education market.
• ALCO: Asset-Liability Management Committee (ALCO) is a
Topic 43: Miscellaneous Banking Terms strategic decision making body, formulating & overseeing
the function of asset liability management (ALM) of a bank.
• Net Interest Margin: Net interest margin is the net interest • Consortium Financing: It occurs for transactions that might
income divided by average interest earning assets. not take place with a single lender. Several banks agree to
• Bulk Deposits: a) It means single Rupee term deposits of jointly supervise a single borrower with a common appraisal,
Rupees one crore & above for Scheduled Commercial Banks documentation & follow-up & own equal shares in the
other than RRBs. b) For RRBs, it is the Single Rupee term transaction.
deposits of Rupees fifteen lakhs & above. A Brief on Insolvency & Bankruptcy Board of India
• LIBOR: It is the average weighted interest rate on inter-bank a) It was established on 1st October, 2016 under the
loans provided by banks, that participate in the London Insolvency & Bankruptcy Code, 2016 (Code).
interbank market & offer funds in different currencies for b) It is a key pillar of the ecosystem responsible for
different time periods (from 1 day to 1 year). implementation of the Code that consolidates &
• DRI Loans DRI scheme provides bank loan at a concessional amends the laws relating to reorganization & insolvency
rate of interest of 4% per annum for productive / self resolution of corporate persons, partnership firms &
employment ventures. SC/ST, minorities & physically individuals in a time bound manner for maximization of
handicapped persons are targeted under this scheme to the value of assets of such persons, to promote
boost financial inclusion. entrepreneurship, availability of credit & balance the
• Amortization: It is the reduction of an amount at regular interests of all the stakeholders.
intervals over a certain time period. It mainly refers to the c) It is a unique regulator: regulates a profession as well as
reduction of debt by regular payment of loan installments processes.
during the life of a loan. It also describes the accounting d) It has regulatory oversight over the Insolvency
process of writing off an intangible asset. Professionals, Insolvency Professional Agencies,
• Derivative: A derivative instrument derives its value from an Insolvency Professional Entities & Information Utilities.
underlying product. There are basically three derivatives • Moratorium Period: Moratorium period or EMI holiday
a) Forward Contract- A forward contract is an agreement period refers to a particular duration in the loan tenure when
between two parties to buy or sell an agreed amount of the borrower is not required to pay EMIs. This holiday period
a commodity or financial instrument at an agreed price, is mostly available for salaried individuals. Although the
borrower is not required to pay EMIs, the loan amount would
for delivery on an agreed future date. Future Contract-
still continue to incur interest during this period.
Is a standardized exchange tradable forward contract
executed at an exchange.
b) Options- An option is a contract which grants the buyer
the right, but not the obligation, to buy (call option) or
sell (put option) an asset, commodity, currency or
financial instrument at an agreed rate (exercise price) on
or before an agreed date (expiry or settlement date).
The buyer pays the seller an amount called the premium
in exchange for this right. This premium is the price of
the option.
c) Swaps- Is an agreement to exchange future cash flow at
pre-specified Intervals. Typically one cash flow is based
on a variable price & other on affixed one.
• CASA Deposit: Deposit in bank in current & Savings
account.

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