Top 225 RBI Terms and Concepts for RBI Grade B, NABARD and Banking Exams
Master the 225 most important RBI-related terms and concepts essential for RBI Grade B, NABARD Grade A, and other Banking and Regulatory examinations. Covering monetary policy, banking regulation, financial markets, payment systems, inflation, liquidity management, forex, financial inclusion, digital banking, RBI functions, and key regulatory frameworks, this resource provides concise, exam-oriented explanations to strengthen conceptual clarity and support quick revision.
Policy corridor as on 9 August 2026 (MPC neutral stance). Rates change at each MPC meeting: verify the current figures before your exam.
How to use this list
Read in order: terms are arranged so that a concept comes before the ones that depend on it. Tick the box on each card as you master it and watch the meter fill. Use the flashcard drill and the ten-question test to force recall, and tap a linked term chip to jump straight to a related entry.
1. Indian Financial System: Foundations
Entries 001 to 018- 001
Financial System
The network of financial institutions, financial markets, financial instruments, services, and regulators that facilitates the flow of funds from savers to borrowers. It channels savings from surplus units to deficit units.BasicNo. 001A financial system channels savings from surplus units into productive investment by deficit units. It performs several key functions, including financial intermediation, resource allocation, price discovery, risk management, liquidity provision, and monetary policy transmission. Key Components: Financial Institutions: Banks, NBFCs, insurance companies, mutual funds, etc.; Financial Markets: Money market, capital market, foreign exchange market, etc.; Financial Instruments: Deposits, loans, bonds, shares, derivatives, etc.; Financial Services: Payments, lending, investment, insurance, asset management, etc. and Regulators: RBI, SEBI, IRDAI, PFRDA, etc. Remember: Financial System = Institutions + Markets + Instruments + Services + Regulators, with the core objective of efficient allocation of financial resources.
Related - 002
Financial Intermediation
The process through which financial institutions, such as banks and insurance companies, channel funds from savers (surplus units) to borrowers (deficit units) for productive investment and consumption.IntermediateNo. 002Financial intermediaries act as a bridge between savers and borrowers. They pool funds from multiple depositors and allocate them as loans or investments while managing maturity, liquidity, credit, and default risks. Since intermediaries handle public funds, their activities are subject to regulatory oversight to protect depositors and maintain financial stability. Commercial banks, mutual funds and insurers are the classic examples of Intermidiatary. Financial intermediation improves the efficient allocation of savings, credit availability, liquidity management, and overall economic growth.
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Organised and Unorganised Markets
Organised markets are regulated by RBI, SEBI and IFSCA; unorganised markets are informal lenders operating outside regulation.BasicNo. 003Organised finance includes banks, NBFCs, stock exchanges and government securities markets that follow statutory rules. Unorganised finance covers moneylenders, indigenous bankers and chit funds that are accessible but often opaque and costly. A stated goal of financial inclusion is to migrate borrowers from the unorganised to the organised segment.
Related - 004
Money Market and Capital Market
The money market trades short-term funds up to one year; the capital market trades long-term funds above one year.BasicNo. 004The money market meets working-capital and liquidity needs through instruments like Treasury Bills, commercial paper and call money. The capital market finances fixed investment through equity, debentures and long-dated bonds. RBI is the dominant regulator of the money market while SEBI leads the capital market.
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Primary Market and Secondary Market
The Primary Market is the market where new securities are issued for the first time, while the Secondary Market is where already-issued securities are bought and sold among investors.BasicNo. 005Primary Market: In the primary market, companies, governments, and other eligible issuers raise fresh capital directly from investors by issuing new securities. It deals with new issues such as Initial Public Offerings (IPOs), Follow-on Public Offerings (FPOs), and new bond issues. The price of securities may be determined through a fixed-price mechanism or book-building process. Secondary Market: In the secondary market, investors trade securities that have already been issued. The issuing company does not receive fresh capital from these transactions. Prices are largely determined by the forces of demand and supply, and stock exchanges provide an organized platform for trading. Importance: The secondary market provides liquidity and facilitates price discovery, which increases the attractiveness of securities issued in the primary market. Thus, the primary market contributes to capital formation, while the secondary market provides liquidity and price discovery. Remember: Primary Market = New Securities + Capital Formation | Secondary Market = Existing Securities + Liquidity + Price Discovery.
Related - 006
Financial Instruments
Financial instruments are contractual claims or financial assets that represent a financial value and can be used to transfer funds, manage risk, store value, or earn a return.IntermediateNo. 006Primary or Direct Securities: These represent direct claims on the issuer and include instruments such as equity shares, preference shares, bonds, and debentures. Investors directly hold a financial claim against the issuing entity. Indirect Securities: These provide investors exposure to financial assets through an intermediary or pooled investment vehicle. Examples include mutual fund units and certain insurance products. Derivatives: Derivative instruments derive their value from an underlying asset, security, index, interest rate, currency, or other reference variable. Common examples include futures, forwards, options, and swaps. Importance: Financial instruments provide investors with different combinations of risk, return, liquidity, and maturity, allowing them to choose investments according to their financial objectives and risk appetite. They also facilitate capital formation, risk management, liquidity, and efficient allocation of financial resources. Remember: Financial Instruments = Claims/Contracts used for Investment + Financing + Risk Management + Transfer of Funds.
Related - 007
Primary or Direct Securities
Primary or direct securities are financial securities issued directly by non-financial units or borrowers to investors, creating a direct financial claim between the issuer and the investor. Major examples include equity shares, preference shares, and debentures.IntermediateNo. 007Equity Shares: Equity shares represent ownership in a company and generally provide shareholders with voting rights and a residual claim on profits and assets. Equity shareholders may receive dividends, but the dividend is not fixed. Preference Shares: Preference shares provide shareholders with preferential rights over equity shareholders regarding the payment of dividends and repayment of capital. They generally carry a fixed dividend and ordinarily do not carry voting rights, except in specified circumstances. Debentures: Debentures are debt instruments through which a company borrows funds from investors. They generally carry a fixed or predetermined rate of interest and create a creditor relationship between the investor and the issuing company. Other Equity Variants: Rights shares are offered to existing shareholders, usually in proportion to their existing holdings, while bonus shares are issued free of cost to existing shareholders by capitalising eligible reserves. Remember: Direct Securities = Direct Claim on the Issuer | Equity = Ownership | Preference Shares = Preferential Claim | Debentures = Debt.
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Indirect Securities
Indirect securities are financial claims created when a financial intermediary stands between savers and the ultimate users of funds. Examples include mutual fund units and insurance policies.IntermediateNo. 008Role of Intermediary: In indirect finance, the saver holds a claim against the financial intermediary, rather than directly against the borrower or ultimate user of funds. The intermediary collects funds from multiple savers and deploys them through loans, investments, or other financial assets. Mutual Fund Units: A mutual fund pools money from investors and invests it in a diversified portfolio of securities. The investor holds units representing a claim on the fund's portfolio rather than directly owning each underlying security. Insurance Policies: An insurance policy is primarily a contract between the policyholder and the insurer that provides specified risk coverage in return for premiums. Insurance companies may invest the premiums they collect in various financial assets. Importance: Indirect securities allow savers to access diversified investments and professional financial management, particularly when they lack the time, expertise, or resources to invest directly. Remember: Indirect Securities = Saver → Financial Intermediary → Ultimate User of Funds | Direct Securities = Saver → Issuer/Borrower.
Related - 009
Debentures
Debt instruments issued by a company promising fixed interest and repayment of principal at maturity.BasicNo. 009Debentures are usually unsecured and backed by the issuer's creditworthiness rather than collateral. Holders receive a prespecified interest and rank ahead of shareholders on the assets in liquidation, but they cannot vote. They can be convertible or non-convertible, secured or naked, redeemable or perpetual. Examiners like the point that a debenture holder is a lender, not an owner.
Related - 011
Derivatives
Contracts whose value is derived from an underlying asset such as a stock, bond, commodity or currency.IntermediateNo. 011Derivatives let users hedge price risk, speculate or gain exposure without owning the underlying. The main types are forwards, futures, options and swaps. Forwards and swaps trade over the counter while futures and options trade on regulated exchanges like NSE and BSE. For the exam, note that a farmer selling a wheat futures contract is hedging, not speculating.
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Futures and Forwards
Agreements to buy or sell an asset at a set price on a future date; futures are standardised and exchange-traded.IntermediateNo. 012A forward is a customised over-the-counter contract with counterparty risk, while a futures contract is standardised, exchange-traded and marked to market daily to reduce credit risk. Both lock in a price today for delivery later. Futures suit hedgers who want liquidity and transparency.
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Options
Contracts giving the buyer the right, not the obligation, to buy (call) or sell (put) an asset at a set price.IntermediateNo. 013A call option gives the right to buy and a put option gives the right to sell within a period at a strike price. The buyer pays a premium and can walk away if the trade is unfavourable, capping loss at the premium. Options are used to hedge or speculate on direction.
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Mutual Fund
A pooled vehicle that collects money from many investors and invests it in a diversified portfolio managed by professionals.AdvancedNo. 014A mutual fund issues units whose value is the Net Asset Value, the market value of holdings net of expenses divided by outstanding units. It is set up as a trust with a sponsor, trustees, an asset management company and a custodian, and is regulated by SEBI. Funds are classified by asset class, objective, structure and geography.
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Development Financial Institutions (DFIs)
Institutions that provide long-term finance for infrastructure and industry, such as NaBFID, EXIM Bank and SIDBI.BasicNo. 016DFIs specialise in patient, long-gestation funding that commercial banks find hard to provide. India's newest is the National Bank for Financing Infrastructure and Development, set up to deepen infrastructure lending. Specialised institutions like NABARD, SIDBI and NHB serve agriculture, small industry and housing respectively.
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Regulatory Architecture
India's multi-regulator model: RBI for banking and money, SEBI for capital markets, IRDAI for insurance, PFRDA for pensions.BasicNo. 017Each regulator supervises a defined slice of the financial system to ensure stability and protect consumers. RBI also oversees NBFCs, payment systems and, more recently, HFCs and urban co-operative banks. IFSCA is the unified regulator for the GIFT City international financial services centre. A common prelims item asks which regulator governs which activity.
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Financial Services
Activities that support the financial system, such as asset management, insurance, payment gateways and advisory services.BasicNo. 018Financial services make the system work smoothly by connecting savers, borrowers and markets and by managing risk and information. They span banking, insurance, wealth management, underwriting and payments. Unlike instruments, they are activities rather than tradable claims.
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2. Reserve Bank of India: Origins and Structure
Entries 019 to 029- 019
Reserve Bank of India (RBI)
India's central bank, established on 1 April 1935 under the RBI Act, 1934, and nationalised in 1949.BasicNo. 019The RBI traces its origins to the 1926 Hilton-Young Commission, which recommended a central bank to separate currency and credit control from government. It began as a private shareholders' bank and became wholly state-owned on 1 January 1949. It briefly served as central bank for Burma and Pakistan after independence.
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Hilton-Young Commission
The 1926 Royal Commission on Indian Currency and Finance that recommended creating a central bank for India.IntermediateNo. 020Its proposal to separate control of currency and credit from the government led directly to the RBI Act, 1934 and the Bank's establishment in 1935. The recommendation aimed to augment banking facilities across the country. It is a recurring one-mark fact linking 1926 to the birth of the RBI. Pair it with the RBI Act, 1934 in your revision notes.
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RBI Act, 1934
The statute that constitutes the RBI and defines its core functions of issuing notes and securing monetary stability.IntermediateNo. 021The Act's preamble, as amended by the Finance Act, 2016, makes price stability the primary objective of monetary policy while keeping growth in mind. It also provides the statutory basis for the Monetary Policy Committee under Chapter III-F. RBI's wider powers, however, draw on several other laws too.
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Central Board of Directors
The apex governing body of the RBI, a 21-member board headed by the Governor under Section 8(1) of the RBI Act.IntermediateNo. 022The Central Board comprises the Governor, four Deputy Governors, four directors from the local boards, ten government-nominated directors and two government officials. The central government appoints or nominates its members. It is assisted by committees such as the Committee of the Central Board, the Board for Financial Supervision and the Board for Payment and Settlement Systems.
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Local Boards
Four regional boards of the RBI for the Western, Eastern, Northern and Southern areas, based in Mumbai, Kolkata, New Delhi and Chennai.BasicNo. 023Each Local Board has five members appointed by the central government for a four-year term, capped at two terms or eight years. Their role is advisory, guiding the Central Board on matters referred to them and duties delegated to them. They protect local and regional interests within the RBI's governance. Remember the four cities and the five-member composition.
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Governor of the RBI
The chief executive and public face of the RBI, appointed by the central government for a term not exceeding five years.IntermediateNo. 024The Governor chairs the Central Board and the Monetary Policy Committee, holding a second or casting vote in the event of a tie in the MPC. Deputy Governors, up to four, assist in charge of specific portfolios. The Governor holds office for terms fixed by government and is eligible for reappointment. The current Governor is Sanjay Malhotra.
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Board for Financial Supervision (BFS)
A committee of the RBI's Central Board that oversees supervision of banks, NBFCs and financial institutions.AdvancedNo. 025The BFS was set up to give focused, integrated supervision over the financial system and to spot instability at both the individual and system level. Alongside the Board for Regulation and Supervision of Payment and Settlement Systems, it strengthens the RBI's oversight role. Its work supports financial stability, a core RBI mandate.
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Departments of the RBI
The RBI operates through around thirty specialised departments, including the FinTech Department created in 2022.BasicNo. 026Departments span monetary policy and research, regulation and risk, supervision and inclusion, financial markets, and operations. The FinTech Department was carved out in January 2022 from the payment systems division to focus on financial technology. This structure lets the RBI manage its expanding mandate.
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Deputy Governors
Up to four senior RBI officials who assist the Governor, each holding charge of specific portfolios.BasicNo. 027Deputy Governors head clusters of departments such as monetary policy, regulation, supervision and currency management, and one of them sits on the Monetary Policy Committee. They are appointed by the central government, usually from among senior RBI executives, career economists or commercial bankers, for terms not exceeding five years, and are eligible for reappointment. The RBI Act permits up to four Deputy Governors at any time. Together with the Governor they form the top executive management of the RBI, distinct from the non-executive directors who sit on the Central Board.
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Preamble of the RBI Act
The statement of the RBI's basic functions: to regulate note issue, keep reserves and secure monetary stability.IntermediateNo. 028As amended by the Finance Act, 2016, the preamble makes maintaining price stability, while keeping growth in mind, the primary objective of monetary policy. It also speaks of operating the currency and credit system to the country's advantage. It frames the RBI's foundational purpose.
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Board for Payment and Settlement Systems (BPSS)
A committee of the RBI's Central Board that regulates and supervises payment and settlement systems.AdvancedNo. 029The BPSS is the highest policy-making body for payment systems within the RBI, functioning as a committee of the Central Board. It frames policies for the authorisation, regulation and supervision of payment systems under the Payment and Settlement Systems Act, 2007, and sets standards for their safety and efficiency. Its operational arm is the Department of Payment and Settlement Systems, which handles day-to-day oversight. It sits alongside the Board for Financial Supervision, so that payments oversight runs parallel to banking supervision in the RBI's governance.
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3. Statutory Framework and Functions of the RBI
Entries 030 to 036- 030
Functions of the RBI
The RBI performs traditional central-banking functions plus developmental and promotional functions suited to a developing economy.BasicNo. 030Traditional functions include note issue, monetary policy, banker to government and banks, and regulation of banks and NBFCs. Developmental functions include financial inclusion, market development and consumer protection. The mix reflects India's status as a developing economy where the central bank also builds institutions.
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Banker to Banks and Lender of Last Resort
The RBI holds banks' reserves, settles interbank transactions and provides emergency credit as lender of last resort.IntermediateNo. 031As banker to banks, the RBI enables efficient fund transfers and interbank settlement, and under Section 18 it can act as lender of last resort to a bank in distress. This support protects depositors and prevents contagion during liquidity stress. It complements the RBI's supervisory role.
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Foreign Exchange Management (FEMA)
The RBI's power over external trade and payments under the Foreign Exchange Management Act, 1999.IntermediateNo. 032FEMA, which came into force on 1 June 2000, replaced the restrictive FERA and classifies transactions as current or capital account. Section 10 lets the RBI authorise persons to deal in foreign exchange and revoke such authorisation for breaches. FEMA underpins schemes like the Liberalised Remittance Scheme. Note that FEMA is a management law, in contrast with the older control-oriented FERA.
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Banking Regulation and Supervision
The RBI's power to license, regulate, inspect and issue directions to banks under the Banking Regulation Act, 1949.AdvancedNo. 033Section 22 of the BR Act gives the RBI power to grant and cancel bank licences, and Section 35A lets it issue binding directions in the public interest. Sections 36AA and 36AB allow it to remove management and appoint additional directors, and the 2017 amendment added powers over stressed-asset resolution. Powers over public sector and co-operative banks are not uniform.
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Payment and Settlement Regulation
The RBI's authority to regulate payment systems under the Payment and Settlement Systems Act, 2007.AdvancedNo. 034Under Section 4 of the PSS Act, no person may operate a payment system without RBI authorisation, and Section 8 lets it revoke that authorisation for non-compliance. This law underpins the RBI's oversight of RTGS, NEFT, UPI and card networks. It made the RBI the designated authority for payment systems.
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Financial Stability
A core RBI mandate to keep the financial system resilient so that shocks do not disrupt credit and growth.AdvancedNo. 035An unstable financial system harms intermediation and slows growth, so the RBI monitors risks at both institution and system level through the Board for Financial Supervision. The lender-of-last-resort facility and experience in managing prices and exchange rates reinforce this role. The RBI publishes a periodic Financial Stability Report. It is one of three RBI mandates alongside price stability and inclusive growth.
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Credit Information Companies (CICs)
Entities that collect and share credit information on borrowers, regulated by the RBI under the CIC Regulation Act, 2005.AdvancedNo. 036Companies like credit bureaus compile repayment histories to help lenders assess creditworthiness, and the RBI issues directions and inspects them. The three pillars of the Act are the credit information companies, credit institutions and specified users. Accurate credit information improves lending decisions and access.
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4. Monetary Policy Framework and the MPC
Entries 037 to 047- 037
Monetary Policy
The RBI's management of money supply, interest rates and liquidity to achieve price stability while supporting growth.BasicNo. 037Monetary policy works by setting the policy repo rate and managing liquidity so that market rates, credit and demand move in the desired direction. Its primary legal objective since 2016 is price stability, keeping growth in mind. The RBI reviews policy roughly every two months through the Monetary Policy Committee.
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Flexible Inflation Targeting (FIT)
India's monetary framework, adopted in 2016, that targets a stated CPI inflation rate while accommodating growth.IntermediateNo. 038FIT replaced the earlier multiple indicator approach after the Urjit Patel Committee of 2014 recommended a single nominal anchor for policy. The framework was formalised by the Monetary Policy Framework Agreement between the RBI and the government in February 2015 and given statutory force by the 2016 amendment to the RBI Act, which also created the Monetary Policy Committee. Flexible means the RBI aims to bring inflation to the 4 per cent target over the medium term but may tolerate short-run deviations within the 2 to 6 per cent band so that it does not choke growth. In effect the framework anchors inflation expectations without forcing a mechanical rate change in response to every temporary price shock.
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Inflation Target
The government-notified CPI inflation goal of 4 per cent with a tolerance band of plus or minus 2 per cent.IntermediateNo. 039The central government, in consultation with the RBI, sets the target once every five years in terms of all-India CPI. The target of 4 per cent within a 2 to 6 per cent band has run since 2016 and was extended for a further five years to 2026. Missing the band for three consecutive quarters counts as a failure that triggers a report to government. The band edges of 2 and 6 per cent are frequently tested.
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Failure to Meet the Target
A defined breach where average inflation stays above or below the band for three consecutive quarters.AdvancedNo. 040Under Section 45ZN of the RBI Act, read with the RBI (Monetary Policy Committee and Monetary Policy Process) Rules 2016, failure is defined as average CPI inflation remaining outside the 2 to 6 per cent band for three consecutive quarters. On such a failure the RBI must send the central government a report stating the reasons for the breach, the remedial actions it proposes, and an estimate of the time within which inflation will return to target. This report is addressed to the government and is not published. The provision made the RBI formally accountable for the inflation outcome for the first time, and it was triggered in 2022 when inflation stayed above 6 per cent for three straight quarters.
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Monetary Policy Committee (MPC)
The six-member statutory body that sets the policy repo rate to achieve the inflation target.IntermediateNo. 041Constituted under Section 45ZB of the amended RBI Act, the MPC has three RBI members and three external members appointed by government for four years. It must meet at least four times a year, and its decisions bind the RBI. Each member has one vote, with the Governor holding a casting vote in a tie. The six-member split of three plus three is a core fact.
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MPC Voting and Minutes
Each MPC member casts one vote; minutes are published on the fourteenth day after the meeting.AdvancedNo. 042In a tie the Governor exercises a second or casting vote, and the resolution is published after every meeting. On the fourteenth day the RBI releases the minutes, giving each member's vote and statement. This transparency is designed to build credibility for policy decisions. The fourteenth-day publication of minutes is a precise, examinable detail.
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Multiple Indicator Approach
The pre-2016 framework where the RBI weighed many quantity and rate variables rather than a single inflation anchor.AdvancedNo. 043Before FIT, the RBI looked at money, credit, output, trade, capital flows and fiscal position alongside rates and the exchange rate. Rising inflation with weak growth, or stagflation, exposed its lack of a clear nominal anchor and prompted the shift to inflation targeting. It left analysts unsure what the RBI was targeting. Contrast it with FIT's single, transparent anchor.
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Monetary Policy Transmission
The process by which a change in the policy repo rate passes through to bank lending and deposit rates and the wider economy.AdvancedNo. 044Transmission runs through several channels. The interest rate channel passes a repo change into bank deposit and lending rates; the credit channel changes the quantity of bank lending; the exchange rate channel works through rate differentials that move the rupee and import prices; and the asset price channel shifts bond and equity valuations. These feed into aggregate demand, output and finally inflation. External benchmarking of retail and MSME loans to the repo rate since 2019 has made the interest rate channel faster and more complete, while sticky deposit rates and surplus or deficit liquidity can still slow it.
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Monetary Policy Stance
The RBI's signalled direction of policy, described as accommodative, neutral or focused on withdrawal of accommodation.IntermediateNo. 045The stance is the RBI's forward guidance on the likely near-term direction of rates, signalled without committing to a specific move. An accommodative stance means the RBI is inclined to cut rates or hold them low to support growth and will not raise them. A neutral stance means it can move either way depending on incoming data, keeping both a cut and a hike on the table. Withdrawal of accommodation means it is draining the surplus liquidity built up earlier and leaning towards higher rates to contain inflation, the stance the RBI ran through much of 2022 and 2023. In the August 2026 policy the MPC held the repo rate at 5.25 per cent with a neutral stance.
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Monetary Policy Report
A document the RBI must publish twice a year explaining the sources of inflation and its forecast for the coming quarters.AdvancedNo. 046Required under the amended RBI Act, the report covers the sources of inflation and the forecast for six to eighteen months ahead. It strengthens the accountability and transparency of the flexible inflation targeting framework. It is released alongside monetary policy.
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Policy Rate Corridor
The band within which the RBI keeps overnight rates, bounded by the SDF floor and the MSF ceiling around the repo rate.AdvancedNo. 047The corridor is presently 25 basis points on each side of the repo rate, giving an SDF of 5.00 per cent and an MSF of 5.50 per cent when the repo is 5.25 per cent. Narrowing the corridor reduces rate volatility and aids transmission. It is the operational scaffold of the LAF.
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5. Monetary Policy Instruments and Liquidity Management
Entries 048 to 070- 048
Quantitative and Qualitative Tools
Quantitative tools like CRR, SLR and the repo rate affect the total volume of credit; qualitative tools direct its allocation.BasicNo. 048Quantitative or general tools include reserve ratios, policy rates and open market operations that change how much credit is available. Qualitative or selective tools include margin requirements, credit rationing, consumer credit regulation and moral suasion that steer credit towards or away from sectors. The RBI uses both to balance growth and inflation.
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Cash Reserve Ratio (CRR)
The share of a bank's net demand and time liabilities that must be kept as cash reserves with the RBI, currently 3.00 per cent.BasicNo. 049Banks earn no interest on CRR balances and cannot lend against them, so raising CRR drains lending capacity and lowering it releases funds. It is a direct lever over money supply. As of 2026 the CRR stands at 3.00 per cent after a cut in December 2025. Remember CRR is held in cash with the RBI, unlike SLR.
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Statutory Liquidity Ratio (SLR)
The share of net demand and time liabilities that a bank must hold in liquid assets like cash, gold or approved securities, currently 18.00 per cent.BasicNo. 050Mandated under Section 24(2A) of the Banking Regulation Act, SLR is kept by the bank with itself, unlike CRR which sits with the RBI. It safeguards solvency, curbs excess credit and channels funds into government securities. As of 2026 the SLR is 18.00 per cent.
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Net Demand and Time Liabilities (NDTL)
The total of a bank's demand and time liabilities to the public, the base on which CRR and SLR are calculated.BasicNo. 051Demand liabilities are payable on demand like current and savings balances, while time liabilities like fixed deposits mature later. Both reserve ratios are computed as a percentage of NDTL. A worked example is a bank with NDTL of ten lakh keeping forty thousand as CRR at 4 per cent. Understanding NDTL is essential to compute reserve requirements.
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Repo Rate
The rate at which the RBI lends short-term funds to banks against government securities, currently 5.25 per cent.BasicNo. 052Repo, short for repurchase, is a collateralised loan where banks sell securities to the RBI and agree to buy them back. A higher repo rate raises banks' cost of funds and lending rates, cooling demand and inflation. The MPC held the repo rate at 5.25 per cent in August 2026. It is the single most important policy rate and the anchor of the corridor.
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Reverse Repo Rate
The rate at which banks park surplus funds with the RBI against government securities; the fixed rate is retained at 3.35 per cent.IntermediateNo. 053Under a reverse repo the RBI absorbs liquidity by borrowing from banks and paying them interest. Since April 2022 the fixed reverse repo has been retained in the toolkit but the Standing Deposit Facility acts as the effective corridor floor. Banks prefer parking with the RBI when market risk is high. Note that the reverse repo rate is now less operationally central than the SDF.
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Liquidity Adjustment Facility (LAF)
The RBI's framework of repo and reverse repo operations that inject or absorb overnight and short-term liquidity.AdvancedNo. 054Introduced in 2000 on the Narasimham Committee's recommendation, the LAF lets banks manage day-to-day liquidity mismatches through repos with the RBI as counterparty. The corridor runs from the MSF ceiling to the SDF floor, with the repo rate in the middle. Banks needing funds beyond the LAF limit turn to the MSF.
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Marginal Standing Facility (MSF)
An emergency window letting banks borrow overnight from the RBI above the LAF limit, at the repo rate plus a spread.IntermediateNo. 055The MSF rate is set slightly above the repo rate, currently 5.50 per cent, and forms the ceiling of the liquidity corridor. Banks can borrow up to 2 per cent of their NDTL by pledging securities, even from the SLR quota, repaying the next working day. It is a safety valve for acute liquidity stress. The MSF equals repo plus a spread is a key relationship.
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Standing Deposit Facility (SDF)
A window, live since April 2022, that lets the RBI absorb liquidity from banks overnight without giving collateral.IntermediateNo. 056The SDF rate is set 25 basis points below the repo rate, currently 5.00 per cent, and it replaced the fixed reverse repo as the floor of the corridor. Because it needs no securities, it frees the RBI from collateral limits when draining liquidity. It also serves as a financial stability tool. Remember the SDF is uncollateralised and sits at repo minus 25 basis points.
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Bank Rate
The rate at which the RBI rediscounts bills of exchange or other commercial paper, aligned to the MSF rate at 5.50 per cent.IntermediateNo. 057Published under Section 49 of the RBI Act, the Bank Rate now moves automatically with the MSF rate as the repo rate changes. Penal rates on shortfalls in CRR and SLR are linked to the Bank Rate. It is a longer-term signalling rate rather than an active liquidity tool today.
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LAF Corridor and WACR
The interest-rate corridor bounded by the MSF ceiling and the SDF floor, within which the weighted average call rate moves.AdvancedNo. 058The MSF and SDF rates set the outer bounds while the repo rate sits at the centre. The RBI manages liquidity so that the weighted average call money rate, its operating target, stays close to the repo rate. A tight corridor improves transmission.
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Weighted Average Call Money Rate (WACR)
The average interest rate on overnight interbank borrowing, weighted by volume, used as the RBI's operating target.AdvancedNo. 059The RBI conducts liquidity operations to keep the WACR aligned with the repo rate, which is how policy signals reach the wider rate structure. Deviations of the WACR from the repo rate indicate liquidity surplus or deficit. Anchoring the WACR is central to transmission. Remember it is the operating target, not a policy rate set by the MPC.
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Open Market Operations (OMOs)
Outright purchases and sales of government securities by the RBI to inject or absorb durable liquidity.AdvancedNo. 060When the RBI buys securities it injects money and when it sells it withdraws money from the system. OMOs influence the term structure of rates and stabilise the government securities market. Unlike LAF, they affect durable rather than temporary liquidity.
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Market Stabilisation Scheme (MSS)
A liquidity tool where the RBI issues special government securities to absorb durable surplus liquidity, called sterilisation.AdvancedNo. 061Introduced in 2004 to mop up liquidity created when the RBI bought foreign currency, MSS lets it drain money without changing policy rates. The securities issued are Market Stabilisation Bonds, and the mopping-up process is called sterilisation. It was notably used after the 2016 demonetisation. Contrast MSS, used only to absorb, with OMOs, which both inject and absorb.
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Sterilisation
The RBI's process of neutralising the liquidity impact of its foreign exchange operations by selling government bonds.AdvancedNo. 062When the RBI buys dollars to check rupee appreciation, it releases rupees that can stoke inflation, so it sells bonds to withdraw the excess. This offsetting action keeps domestic money supply stable. The MSS was created partly to give the RBI a stock of securities for sterilisation.
Related - 063
Operation Twist
A simultaneous purchase of long-term and sale of short-term government securities to lower long-term yields.AdvancedNo. 063Adopted by the RBI from December 2019, Operation Twist buys long-dated bonds to raise their prices and cut long yields, while selling short-dated bonds. Cheaper long-term borrowing is meant to spur investment and spending. The name echoes a 1961 US policy under President Kennedy.
Related - 064
Long-Term Repo Operations (LTRO)
A tool where the RBI lends to banks for one to three years at the repo rate against government securities.AdvancedNo. 064LTRO and its targeted version TLTRO improve transmission by giving banks assured longer-term funds at the repo rate, lowering their cost of funds without changing policy rates. Operations run on the E-Kuber platform at a predetermined rate. The concept was first used by the European Central Bank during its debt crisis.
Related - 065
Variable Rate Repo (VRR) and VRRR
Auction-based repo and reverse repo where the rate is set by the market rather than fixed by the RBI.IntermediateNo. 065In a VRR auction the RBI injects liquidity for a chosen tenor, while a VRRR auction absorbs it, with banks bidding for rates. The VRRR, introduced in December 2021, lets the RBI drain surplus liquidity flexibly. Rates float because they track the reverse repo over the operation's life.
Related - 066
Moral Suasion
A qualitative tool where the RBI persuades banks to follow its guidance without formal legal compulsion.IntermediateNo. 066Through advice, guidelines and informal pressure the RBI nudges banks to, for example, curb speculative credit during inflation. It relies on the RBI's authority rather than binding directions. It is one of several selective credit controls alongside credit rationing, margin requirements and regulation of consumer credit.
Related - 067
Margin Requirement
A qualitative tool where the RBI sets the portion of a loan's value that the borrower must fund, steering credit by sector.IntermediateNo. 067Margin is the part of an asset's value the bank does not finance, so a higher margin tightens credit and a lower margin eases it. By cutting margins for priority sectors like agriculture, the RBI can channel more credit there. It is a selective control rather than a system-wide lever.
Related - 068
Selective Credit Control
Qualitative tools that regulate the flow of credit to specific uses, favouring essential over non-essential purposes.IntermediateNo. 068Selective controls discriminate between uses of credit, for example encouraging export credit while restraining speculative lending. They act on both borrowers and lenders and include margin requirements, credit rationing and consumer credit regulation. They complement quantitative tools that affect overall credit.
Related - 069
Credit Rationing
A qualitative tool where the RBI fixes ceilings on the credit that banks may extend to particular sectors.IntermediateNo. 069By capping the amount available for each bank or sector, the RBI limits credit exposure to unwanted or speculative areas and can also control bill rediscounting. It steers credit without changing its overall price. It is a selective, not a general, control.
Related - 070
Regulation of Consumer Credit
A qualitative tool controlling instalment and hire-purchase credit by fixing down payments, instalments and loan duration.IntermediateNo. 070By adjusting the terms of consumer credit the RBI can moderate demand for durable goods and check inflation. Tighter terms reduce borrowing while looser terms encourage it. It targets consumption credit specifically.
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6. Money Market and Government Securities
Entries 071 to 086- 071
Money Market Instruments
Short-term debt instruments with maturity up to one year used to manage liquidity, such as T-Bills, CDs, CPs and call money.BasicNo. 071The money market lets participants smooth short-term surpluses and shortfalls and gives the RBI a point of intervention for liquidity. Major instruments include call money, Treasury Bills, Cash Management Bills, commercial paper and certificates of deposit. The main players are the RBI and commercial banks.
Related - 072
Call Money
Interbank borrowing and lending for very short periods, from overnight up to fourteen days.BasicNo. 072Call money helps banks manage day-to-day liquidity, with the rate, called the call money rate, changing almost hourly with demand and supply. The overnight segment is the call market and the up-to-fourteen-days segment is the notice market. The RBI keeps the call rate close to the repo rate through liquidity operations.
Related - 073
Treasury Bills (T-Bills)
Short-term government securities issued by the RBI on behalf of the central government, in 91, 182 and 364-day tenors.BasicNo. 073T-Bills are zero-coupon instruments issued at a discount and redeemed at face value, so a bill bought at 95 is repaid at 100. Being government-backed they are risk-free and highly liquid, and banks can use them for SLR and as repo collateral. Only the central government issues them, not the states. The three tenors of 91, 182 and 364 days are a staple fact.
Related - 074
Cash Management Bills (CMBs)
Very short-term government securities of less than 91 days issued by the RBI to bridge temporary cash flow mismatches.IntermediateNo. 074Like T-Bills, CMBs are issued at a discount through RBI auctions and can be held by banks for SLR. Their sub-91-day maturity distinguishes them and suits short, sudden funding gaps of the central government. They were introduced to give the government a flexible short-term instrument.
Related - 075
Certificate of Deposit (CD)
A short-term negotiable instrument issued at a discount by scheduled commercial banks and select institutions to raise funds.IntermediateNo. 075CDs are issued in multiples of one lakh with a minimum of one lakh, for maturities usually above seven days and below one year. Cooperative banks and regional rural banks cannot issue them, and banks cannot lend against them. They let banks raise bulk short-term funds.
Related - 076
Commercial Paper (CP)
An unsecured short-term promissory note issued by large corporates, primary dealers and financial institutions.IntermediateNo. 076CP is placed privately in multiples of five lakh with a minimum of five lakh, for maturities from seven days up to one year, to fund short-term needs like inventory and payroll. Being unsecured, only well-rated issuers can access it cheaply. It broadens funding beyond bank credit.
Related - 077
Government Securities (G-Secs)
Tradable debt instruments issued by the central or state government, comprising short-term T-Bills and longer-term dated securities.BasicNo. 077G-Secs carry no credit risk in the domestic context and range from 91-day T-Bills to dated bonds maturing up to forty years. Banks hold them for SLR and as repo collateral, and the RBI manages their issuance as public debt manager. State government issues are called State Development Loans.
Related - 078
State Development Loans (SDLs)
Dated market borrowings raised by state governments through RBI auctions to fund their fiscal needs.IntermediateNo. 078SDLs are the state counterpart of central dated securities and are eligible for SLR and as collateral. The RBI manages their auctions, usually held on Tuesdays under indicative calendars. They carry a small yield premium over central G-Secs.
Related - 079
G-Sec Yield and Price
Bond prices and yields move inversely, so when interest rates fall bond prices rise and holders can book capital gains.AdvancedNo. 079A fixed-coupon bond becomes more valuable when market rates fall, raising its price and lowering its yield, and the reverse when rates rise. This inverse relationship drives capital gains and losses for G-Sec investors. The G-Sec yield curve, extending up to forty years, is a benchmark for pricing across the economy.
Related - 080
NDS-OM and Primary Dealers
NDS-OM is the RBI's electronic order-matching platform for G-Sec secondary trading, supported by primary dealers.AdvancedNo. 080The Negotiated Dealing System Order Matching platform gives anonymous, screen-based trading in government securities, and the Retail Direct portal lets individuals access it. Standalone Primary Dealers underwrite and make markets in G-Secs, participating in primary auctions. Together they deepen the government securities market.
Related - 081
Bill Rediscounting
The RBI's purchase or rediscounting of eligible bills of exchange from banks to provide them liquidity.IntermediateNo. 081Under the Bank Rate mechanism the RBI stands ready to rediscount bills and commercial paper, injecting funds into the banking system. This channel historically linked the Bank Rate to short-term credit conditions. It is a traditional central-banking function tied to note issue and liquidity.
Related - 082
Coupon Rate
The fixed annual interest a bond pays on its face value, expressed as a percentage.BasicNo. 082A bond with a face value of 100 and a coupon of 7 per cent pays 7 rupees a year until maturity. The coupon is fixed at issue, while the bond's yield changes as its market price moves. Government dated securities carry stated coupons.
Related - 083
Yield to Maturity (YTM)
The total return an investor earns if a bond is held to maturity, accounting for price, coupons and time.AdvancedNo. 083YTM is the single discount rate that equates a bond's present value of future cash flows with its market price. It moves inversely with price, so a fall in price raises the yield. It is the standard measure for comparing bonds.
Related - 084
G-Sec Auctions
The RBI's method of selling government securities through competitive and non-competitive bidding.AdvancedNo. 084Institutional investors bid competitively on price or yield, while retail and small investors use the non-competitive segment to buy at the cut-off without bidding. Auctions can be uniform-price or multiple-price. They ensure transparent, market-based pricing of government debt.
Related - 085
Sovereign Green Bonds (SGrBs)
Government securities whose proceeds are earmarked to finance environmentally sustainable projects.IntermediateNo. 085The RBI issues Sovereign Green Bonds on behalf of the government to fund green infrastructure like renewable energy and clean transport. They help mobilise finance for climate goals and deepen the green debt market. They are part of the government's market borrowing.
Related - 086
STRIPS in G-Secs
Separately traded registered interest and principal securities created by splitting a bond into its cash flows.AdvancedNo. 086STRIPS let each coupon and the principal of a government bond trade as separate zero-coupon instruments. They give investors precise cash-flow matching and deepen the bond market. The RBI facilitates stripping and reconstitution of eligible securities.
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7. RBI as Banker to Government
Entries 087 to 096- 087
Banker to Government
The RBI's role, under Sections 20 and 21 of the RBI Act, to manage the banking and public debt of the central and state governments.IntermediateNo. 087Under Section 20 the RBI has an obligation and under Section 21 the right to transact the central government's banking, while state governments are served by agreement under Section 21A. Duties include maintaining accounts, receipts and payments, managing borrowing and providing Ways and Means Advances. It also manages the public debt of the Union.
Related - 088
Public Debt Management
The RBI's function of raising and managing government borrowing under the Government Securities Act, 2006.AdvancedNo. 088The GS Act, 2006 consolidated the law on government securities and their management by the RBI, replacing the older Public Debt Act, 1944. The RBI conducts G-Sec auctions, maintains records and can determine title to a security in case of doubt. Section 18 of the GS Act shields such orders from being questioned in court.
Related - 089
Ways and Means Advances (WMA)
Temporary loans from the RBI to central and state governments to bridge mismatches between receipts and expenditure.IntermediateNo. 089Introduced under Section 17(5) of the RBI Act, WMA replaced the old ad-hoc Treasury Bills and is not a source of finance but a bridge for timing gaps. Normal WMA carries the repo rate, and repayment beyond ninety days is treated as an overdraft charged at repo plus 2 per cent. It is available to both the centre and the states.
Related - 090
Agency Banks
Commercial banks appointed by the RBI to carry out government banking business such as tax collection and pension payments on its behalf.IntermediateNo. 090The RBI does not have branches everywhere, so under Section 45 of the RBI Act it appoints scheduled commercial banks as its agents to handle government receipts and payments. These agency banks collect direct and indirect taxes, pay pensions and handle small savings, and earn an agency commission called turnover commission from the RBI. Both public sector and eligible private banks now undertake this business. The arrangement lets the government transact across the country while the RBI retains overall control of its accounts.
Related - 091
Market Borrowing Programme
The government's annual plan to raise money from the market by issuing dated securities and Treasury Bills, managed by the RBI.AdvancedNo. 091As public debt manager the RBI plans and conducts the government's borrowing through an indicative issuance calendar released each half year. It calibrates the amount, tenor and timing of auctions to fund the fiscal deficit at reasonable cost while keeping the market orderly. The gross and net borrowing figures are set in the Union Budget each February. Smooth conduct of this programme is central to the RBI's debt management and to G-Sec yields across the economy.
Related - 092
Consolidated Sinking Fund (CSF)
A reserve fund maintained by state governments with the RBI to redeem their market borrowings in an orderly way.AdvancedNo. 092States contribute a small percentage of their outstanding liabilities to the CSF each year, and the corpus is invested in central government securities managed by the RBI. When market loans fall due, the fund cushions repayment so that redemption does not strain a single year's budget. It is a buffer that improves the credibility of state borrowing. States can also borrow against the fund's investments through a special drawing facility from the RBI.
Related - 093
Guarantee Redemption Fund (GRF)
A fund states maintain with the RBI to meet guarantees that are invoked when a state-backed borrower defaults.AdvancedNo. 093State governments often guarantee the borrowings of their public enterprises, and if such a borrower fails to pay, the guarantee is invoked and the state must step in. The GRF sets aside money in advance for this contingent liability, reducing the shock to the budget. Like the sinking fund, its corpus is invested in government securities with the RBI. It is part of prudent state debt management alongside the Consolidated Sinking Fund.
Related - 094
State Government Overdraft Scheme
RBI rules limiting how long and how far a state may run an overdraft after exhausting its Ways and Means Advances.IntermediateNo. 094When a state's temporary cash shortfall exceeds its normal and special Ways and Means Advances, it goes into overdraft with the RBI, charged at the repo rate plus a spread. A state cannot remain in overdraft beyond a set number of consecutive working days, and the RBI can stop payments if the limit is breached. These curbs force states to manage cash discipline rather than rely on the central bank. The scheme sits within the RBI's role as banker to the states under Section 21A.
Related - 095
E-Kuber Platform
The RBI's core banking solution that runs government transactions, securities auctions and settlement in real time.IntermediateNo. 095E-Kuber is the RBI's own core banking system through which government receipts and payments, G-Sec and Treasury Bill auctions, and liquidity operations are processed electronically. It gives the government a single consolidated view of its cash position and settles auctions and schemes such as Sovereign Gold Bonds. It also connects agency banks to the government's accounts. The platform makes government banking and public debt management faster and more transparent.
Related - 096
Minimum Cash Balance of Government
The minimum balance central and state governments must keep with the RBI, below which a cash shortfall triggers Ways and Means Advances.BasicNo. 096Because the RBI is banker to the government, the government keeps its cash balances with the RBI rather than with commercial banks. It must maintain an agreed minimum balance, and when receipts fall short of payments the balance dips, drawing on Ways and Means Advances and then overdraft. Managing this balance day to day is part of the RBI's cash and debt management. Surplus government cash may in turn be auctioned back into the market by the RBI.
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8. Consumer Education and Protection
Entries 097 to 104- 097
Consumer Education and Protection
The RBI's function of protecting bank and NBFC customers, run through the Consumer Education and Protection Department.IntermediateNo. 097The department frames policy on consumer protection and oversees the RBI Ombudsman offices and consumer education cells. The grievance machinery culminates in the Integrated Ombudsman Scheme, which offers a single window for complaints. This function reflects the RBI's growing focus on fair conduct.
Related - 098
Integrated Ombudsman Scheme (RB-IOS)
A single-window RBI grievance redress scheme; the 2026 version allows compensation up to 30 lakh rupees for consequential loss.IntermediateNo. 098RB-IOS 2026, effective 1 July 2026, replaced the 2021 scheme and follows a One Nation One Ombudsman, jurisdiction-neutral approach across banks, eligible NBFCs, payment participants and credit information companies. It removes any ceiling on the disputed amount and lets the ombudsman award up to 30 lakh rupees for consequential loss plus up to 3 lakh rupees for harassment. A complaint may be filed after 30 days of no or unsatisfactory response from the regulated entity.
Related - 099
Internal Ombudsman (IO)
A senior independent official inside a bank or large NBFC who reviews complaints the institution proposes to reject before the customer is told.IntermediateNo. 099Under the RBI's Internal Ombudsman Directions, every complaint that a bank or eligible NBFC intends to reject or only partly redress must first go to its Internal Ombudsman for a fresh look. The IO functions at the apex of the institution's grievance machinery and reports administratively to the chief executive but works independently of business lines. This filters weak rejections before a customer needs to approach the RBI Ombudsman. It strengthens redress at source and reduces the load on the external scheme.
Related - 100
Complaint Management System (CMS)
The RBI's online portal where customers can lodge complaints against banks, NBFCs and payment operators and track their status.IntermediateNo. 100CMS is a single web and app based gateway that routes a complaint to the right Ombudsman office and lets the customer follow it through to closure. It also generates data that the RBI uses to spot recurring problems and to publish complaint trends. Customers can escalate to the Ombudsman through the same system if the institution's reply is unsatisfactory. It operationalises the One Nation One Ombudsman idea for the public.
Related - 101
Charter of Customer Rights
An RBI-endorsed statement of five basic rights every bank customer enjoys, adopted into each bank's board-approved policy.IntermediateNo. 101The charter sets out the right to fair treatment, transparency and honest dealing, suitability of products sold, privacy of customer information, and grievance redress and compensation. Banks are expected to translate these rights into their own board-approved customer rights policy and fair practices. It shifts the relationship from caveat emptor towards a duty of fair conduct on the bank. The five rights are a compact framework for consumer protection questions.
Related - 102
Fair Practices Code
A code of conduct the RBI requires lenders to follow in dealing with borrowers, covering disclosure, fair recovery and non-discrimination.BasicNo. 102The Fair Practices Code obliges banks and NBFCs to disclose all terms including interest and fees upfront, give reasons for loan rejection, provide notice before changing terms, and recover dues without harassment. It applies across banks, NBFCs and microfinance lenders, with tighter conduct rules for microfinance borrowers. It is enforced through the RBI's supervisory and grievance machinery. The code is the baseline of fair dealing that examiners tie to responsible lending.
Related - 103
Banking Codes and Standards Board of India (BCSBI)
A former independent body that set voluntary codes of fair banking conduct, wound down in 2021 as the codes moved into RBI regulation.AdvancedNo. 103Set up in 2006 on the Tarapore Committee's recommendation, the BCSBI framed the Code of Bank's Commitment to Customers and monitored banks' adherence to it. Because compliance was voluntary and overlapped with the RBI's own conduct rules, the RBI disbanded the board in 2021 and absorbed customer protection into its regulatory framework and the Integrated Ombudsman Scheme. Its legacy is the idea of published service standards a customer can hold a bank to. It appears in questions on the evolution of consumer protection in Indian banking.
Related - 104
Appellate Authority under RB-IOS
The Executive Director of the RBI in charge of consumer protection, to whom a party may appeal against an Ombudsman's decision.AdvancedNo. 104If a complainant is dissatisfied with an Ombudsman's award or the rejection of a complaint, or if the regulated entity is aggrieved, an appeal lies to the Appellate Authority, who is the RBI Executive Director overseeing the scheme. The appeal must usually be filed within thirty days of receiving the decision. The authority can uphold, set aside or remand the case, giving a second layer of independent review. This appeal stage completes the two-tier redress design of RB-IOS.
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9. Issuer of Currency and Currency Management
Entries 105 to 117- 105
Issue of Currency
The RBI's sole right, under Section 22 of the RBI Act, to issue bank notes in India through its Issue Department.BasicNo. 105Note issue is a core function kept separate from banking operations in a distinct Issue Department. The RBI recommends note denominations to the government, and every note is legal tender until the government declares otherwise. Exchange of soiled or mutilated notes is treated as a matter of grace, not right.
Related - 106
Legal Tender
Currency that must be accepted in settlement of a debt; RBI notes are legal tender unless the government withdraws that status.IntermediateNo. 106Bank notes issued by the RBI carry legal tender status at any place in India and are exempt from stamp duty. On the recommendation of the Central Board, government may declare any series of a denomination to be no longer legal tender. Coins are legal tender up to prescribed limits under the Coinage Act.
Related - 107
Currency Management
The RBI's function of ensuring an adequate supply of clean and genuine bank notes and coins in the economy.IntermediateNo. 107Along with the government, the RBI designs, prints and distributes currency and withdraws soiled or counterfeit notes under its Clean Note Policy. Coins are minted by the government while notes are issued by the RBI. This function draws statutory power from Section 22 of the RBI Act.
Related - 108
Note Denominations
Bank notes the RBI may issue, ranging from two rupees up to two thousand rupees, in denominations approved by government.IntermediateNo. 108The RBI recommends denominations to the central government, which approves the design, form and material of notes on the Central Board's advice. The set of denominations has changed over time with the introduction and withdrawal of notes. Every note remains legal tender until withdrawn.
Related - 109
Minimum Reserve System
The rule since 1957 under which the RBI backs note issue with a minimum reserve of gold and foreign securities of Rs 200 crore.AdvancedNo. 109India moved from a proportional reserve system to the minimum reserve system in 1957, requiring the RBI to hold reserves of at least 200 crore rupees, of which not less than 115 crore is in gold. Beyond this floor the RBI can issue currency according to the needs of the economy rather than in fixed proportion to reserves. This gives the central bank flexibility to expand the money supply as output grows. The figures of 200 crore total and 115 crore in gold are the classic facts of Indian note issue.
Related - 110
Clean Note Policy
The RBI's policy of putting good quality notes into circulation and promptly withdrawing soiled and mutilated ones.BasicNo. 110Under the Clean Note Policy the RBI and banks are expected to sort notes, remove unfit ones from circulation and issue fresh or reissuable notes to the public. Banks are told not to staple note packets and to exchange soiled notes freely at branches. The aim is durable, hygienic and easily verifiable currency that is harder to counterfeit. It is a continuing operational commitment within currency management.
Related - 111
Currency Chests
Secured storage points, mostly at commercial bank branches, that hold the RBI's stock of notes and coins for distribution.IntermediateNo. 111Currency chests are branches authorised to stock notes and coins on behalf of the RBI so that banks across the country can be supplied quickly. Deposits into and withdrawals from a chest change the issuing bank's balances with the RBI. They form the backbone of currency distribution, especially in areas far from the RBI's own offices. Their network lets the RBI manage the supply of fit notes nationwide.
Related - 112
Soiled and Mutilated Notes
Notes that are dirty, worn or damaged, which the public can exchange at bank branches under the RBI Note Refund Rules.BasicNo. 112A soiled note has become dirty or limp with use, while a mutilated note is torn or missing a portion, and both can be exchanged for value under the Note Refund Rules. The refund on a mutilated note depends on the area of the single largest undivided piece presented. Banks must accept and adjudicate these exchanges as a customer service, not a favour. The rules ensure that ordinary wear does not cost the holder the value of the note.
Related - 113
Security Features of Bank Notes
Design elements such as the watermark, security thread and intaglio printing that let the public and machines verify a genuine note.IntermediateNo. 113Indian notes in the Mahatma Gandhi series carry features like the portrait watermark, a windowed security thread that changes colour, latent images, micro-lettering and raised intaglio printing for the visually impaired. These make counterfeiting difficult and give the public simple checks to spot a fake. The RBI periodically upgrades features and runs awareness campaigns on how to verify a note. Knowing the main features is useful for both currency management and anti-counterfeiting questions.
Related - 114
Counterfeit Notes (FICN)
Fake Indian currency notes, whose detection and reporting the RBI regulates to protect the integrity of the currency.AdvancedNo. 114When a bank detects a fake note it must impound it, issue an acknowledgement and report it, and larger detections are referred to the police, since circulating counterfeit currency is a criminal offence. The RBI and the government track fake currency through mechanisms that involve the security agencies given its links to organised crime. Security feature upgrades and the digital rupee are part of the longer-term response. Fake note detection is a standard part of the RBI's currency management responsibility.
Related - 115
Coinage and the Coinage Act, 2011
Coins are minted and issued by the central government under the Coinage Act, 2011, while the RBI distributes them.IntermediateNo. 115Unlike notes, coins are the responsibility of the government, which decides denominations and designs and mints them at the government mints, with the RBI acting as the distribution channel. The Coinage Act, 2011 consolidated earlier laws and sets the limits up to which coins are legal tender for payment. Coins therefore sit outside the RBI's note issue function even though the RBI puts them into circulation. This division between government coins and RBI notes is a frequent distinction in exams.
Related - 116
Currency Printing Presses
The four presses that print Indian bank notes, run by the government and by a wholly owned RBI subsidiary.AdvancedNo. 116Notes are printed at four presses: two owned by the government through Security Printing and Minting Corporation of India at Nashik and Dewas, and two owned by the RBI through Bharatiya Reserve Bank Note Mudran Private Limited at Mysuru and Salboni. Paper and ink are partly imported, and indigenisation of these inputs is a policy goal. The RBI indents the quantity of notes from these presses based on demand and soiled note replacement. The ownership split between government and RBI presses is a precise, examinable detail.
Related - 117
Currency in Circulation
The total value of notes and coins in the economy, including cash held by the public and in bank tills.IntermediateNo. 117Currency in circulation is a component of reserve money and reflects the public's demand for cash, which rises with income, festivals and uncertainty. It differs from notes in circulation, which excludes coins, and from currency with the public, which excludes cash held by banks. The RBI tracks it closely because a sharp rise drains bank deposits and liquidity. The measure links currency management to the wider monetary aggregates.
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10. Banking Structure and Prudential Regulation
Entries 118 to 145- 118
Scheduled Commercial Banks (SCBs)
Banks listed in the Second Schedule of the RBI Act, 1934, that meet prescribed capital and compliance norms.BasicNo. 118SCBs include public sector banks, private banks, foreign banks, regional rural banks and small finance banks, and enjoy access to RBI refinance and the clearing system. Scheduling requires a minimum paid-up capital and reserves and that the bank's affairs are not run against depositor interest. Being scheduled brings both privileges and supervisory obligations.
Related - 119
Types of Banks in India
India's banking system spans commercial banks, co-operative banks, regional rural banks, small finance banks and payment banks.BasicNo. 119Commercial banks are governed mainly by the Banking Regulation Act, while public sector banks, RRBs and co-operative banks are set up under their own statutes. Differentiated banks like small finance and payment banks serve niche inclusion goals. The RBI's powers over each category are not uniform.
Related - 120
Small Finance Banks (SFBs)
Differentiated banks that provide basic banking and credit to small borrowers, with a high priority sector obligation.IntermediateNo. 120SFBs accept deposits and lend, focusing on unserved segments like small businesses, marginal farmers and micro enterprises. They carry a priority sector target of 75 per cent of adjusted net bank credit, higher than universal banks. They were licensed to deepen financial inclusion.
Related - 121
Payment Banks
Differentiated banks that accept small deposits and offer payments and remittances but cannot lend or issue credit cards.IntermediateNo. 121Payment banks can take demand deposits up to a per-customer limit, offer debit cards and payment services, and must invest heavily in government securities. They cannot undertake lending, which sets them apart from small finance banks. Their goal is to widen access to payments and savings.
Related - 122
Urban Co-operative Banks (UCBs)
Co-operative banks in urban and semi-urban areas, regulated jointly by the RBI and the registrar of co-operative societies.IntermediateNo. 122UCBs serve local communities and small borrowers and face dual regulation, with the RBI overseeing banking functions and the registrar overseeing management. Since 2020 the RBI's supervisory powers over them have been strengthened. Their revised priority sector target is 60 per cent of adjusted net bank credit.
Related - 123
Capital to Risk-Weighted Assets Ratio (CRAR)
A prudential ratio requiring banks to hold capital against their risk-weighted assets to absorb losses.AdvancedNo. 123Under Basel norms, CRAR ensures that a bank's capital is proportionate to the riskiness of its assets, protecting depositors and stability. Riskier exposures attract higher risk weights and therefore more capital. The RBI prescribes minimum CRAR for banks and NBFCs.
Related - 124
Basel Norms
International bank capital and liquidity standards issued by the Basel Committee, implemented in India by the RBI.AdvancedNo. 124Basel III, adopted after the 2008 crisis, tightened capital quality and added buffers, a leverage ratio and liquidity standards like the Liquidity Coverage Ratio. The RBI phases these in for Indian banks with domestic add-ons. They aim to make banks more resilient to shocks.
Related - 125
Tier 1 and Tier 2 Capital
Tier 1 is a bank's core, loss-absorbing capital like equity and reserves; Tier 2 is supplementary capital like subordinated debt.AdvancedNo. 125Tier 1, especially Common Equity Tier 1, absorbs losses while the bank is a going concern, making it the highest quality capital. Tier 2 provides an additional cushion in liquidation. Regulators set minimum ratios for each tier within overall CRAR.
Related - 126
Non-Performing Asset (NPA)
A loan or advance where interest or principal is overdue for more than ninety days.BasicNo. 126Once a loan crosses the ninety-day overdue mark it is classified as non-performing and the bank must set aside provisions against it. NPAs are further graded into sub-standard, doubtful and loss assets by age and recoverability. High NPAs erode profitability and capital. The ninety-day rule is one of the most frequently tested facts in banking.
Related - 127
Asset Classification
The grading of bank loans into standard, sub-standard, doubtful and loss categories based on repayment and recovery prospects.IntermediateNo. 127A standard asset performs normally, a sub-standard asset has been an NPA for up to twelve months, a doubtful asset has remained so longer, and a loss asset is largely unrecoverable. Each category attracts a higher provision. The classification drives how much capital a bank must hold against a loan.
Related - 128
Provisioning Norms
RBI rules requiring banks to set aside funds against loans based on their asset classification and expected loss.IntermediateNo. 128Provisions rise as an asset moves from standard to loss, cushioning the bank against defaults. India is moving from the incurred-loss approach towards an expected credit loss framework that provisions for anticipated future losses. Adequate provisioning protects depositors and stability.
Related - 129
Expected Credit Loss (ECL) Framework
A forward-looking provisioning approach where banks estimate and provide for losses expected over a loan's life.AdvancedNo. 129Unlike the incurred-loss model that provisions only after default, ECL requires banks to build provisions upfront based on the probability of default and loss given default. The RBI has proposed moving Indian banks to an ECL framework in a phased, calibrated manner. It aligns Indian provisioning with global accounting standards.
Related - 130
SARFAESI Act, 2002
A law letting secured lenders enforce security and recover dues from defaulters without court intervention.AdvancedNo. 130The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act allows banks to take possession of and sell pledged assets of defaulting borrowers. It also enables asset reconstruction companies to acquire and resolve bad loans. It speeds up recovery outside lengthy court processes.
Related - 131
Insolvency and Bankruptcy Code (IBC)
The 2016 code providing a time-bound process to resolve corporate insolvency and recover creditor dues.AdvancedNo. 131The IBC created a single framework for resolving stressed firms through the National Company Law Tribunal, with a target resolution timeline of 180 days extendable to 330 days. It shifted control to a resolution professional and prioritised creditors. It complements SARFAESI in tackling bad loans.
Related - 132
Prompt Corrective Action (PCA)
An RBI framework that places weak banks under restrictions when capital, asset quality or leverage breach thresholds.IntermediateNo. 132When a bank crosses risk thresholds on CRAR, net NPAs or leverage, the RBI imposes curbs on lending, dividends and expansion to restore health. The aim is early intervention before a bank fails. A parallel framework now applies to large NBFCs.
Related - 133
Risk Management in Banks
The identification and mitigation of credit, market, operational and liquidity risks that banks face.AdvancedNo. 133Credit risk is default risk, market risk arises from price and rate movements, operational risk from failed processes, and liquidity risk from funding mismatches. Banks use tools like capital buffers, provisioning, hedging and asset-liability management. Sound risk management underpins prudential regulation.
Related - 134
Corporate Governance in Banks
The framework of board oversight, controls and disclosure that ensures banks are run prudently and transparently.AdvancedNo. 134RBI norms cover fit-and-proper criteria for directors, tenure of chief executives, board committees and separation of ownership from management. Good governance reduces the risk of fraud and reckless lending. The RBI can appoint additional directors or supersede boards under the Banking Regulation Act.
Related - 135
Basis Point (bps)
One hundredth of one per cent, the standard unit for expressing changes in interest rates and yields.IntermediateNo. 135A change of 25 basis points equals 0.25 percentage points, so a repo cut from 5.50 to 5.25 per cent is a 25-basis-point cut. Using basis points avoids ambiguity between percent and percentage points. Policy rate and spread changes are almost always quoted in bps.
Related - 136
Know Your Customer (KYC)
Mandatory customer identification and verification norms that banks and regulated entities must follow before onboarding.BasicNo. 136KYC is the customer identification and verification process that banks, NBFCs and other regulated entities must complete under the RBI Master Direction on KYC, which operationalises the Prevention of Money Laundering Act, 2002. Customer Due Diligence requires collecting proof of identity and address through officially valid documents such as Aadhaar, PAN, passport or voter card, and identifying the beneficial owner in the case of non-individual accounts. Customers are placed in low, medium or high risk categories, and periodic re-KYC then falls due every ten, eight or two years respectively. Remote onboarding is permitted through the Video-based Customer Identification Process, and verified records can be filed once with the Central KYC Records Registry for reuse across institutions. The framework is the banking system's first line of defence against money laundering and the financing of terrorism.
Related - 137
Liquidity Coverage Ratio (LCR)
A Basel III requirement that banks hold enough high-quality liquid assets to survive a 30-day stress outflow.AdvancedNo. 137LCR ensures a bank can meet net cash outflows for thirty days under stress using assets like government securities that can be sold quickly. It guards against short-term liquidity crises. It is complemented by the longer-horizon Net Stable Funding Ratio.
Related - 138
Net Stable Funding Ratio (NSFR)
A Basel III standard requiring banks to fund their activities with sufficiently stable sources over a one-year horizon.AdvancedNo. 138NSFR limits over-reliance on short-term wholesale funding by matching the stability of funding to the liquidity of assets over a year. It complements the short-term LCR. Together they strengthen bank liquidity resilience.
Related - 139
CASA Ratio
The share of a bank's deposits held in low-cost current and savings accounts, which lowers its cost of funds.IntermediateNo. 139Current and savings deposits pay little or no interest, so a higher CASA ratio reduces a bank's average funding cost and boosts margins. It is a key indicator of a bank's deposit franchise. Banks compete for CASA to lend more profitably.
Related - 140
External Benchmark Lending Rate (EBLR)
A system linking bank loan rates to an external benchmark like the repo rate to speed up transmission.AdvancedNo. 140Since 2019 banks price many retail and MSME loans off an external benchmark, usually the repo rate, so policy changes pass through quickly to borrowers. It replaced internal benchmarks like the MCLR that transmitted slowly. It sharpened monetary policy transmission.
Related - 141
Marginal Cost of Funds Based Lending Rate (MCLR)
An internal benchmark introduced in 2016 for pricing bank loans based on the marginal cost of funds.AdvancedNo. 141MCLR improved on the earlier base rate but still transmitted policy changes slowly because it reflected banks' own funding costs. It has largely given way to the external benchmark system for new retail loans. It remains relevant for some legacy and corporate loans.
Related - 142
Asset Reconstruction Company (ARC)
A company that buys bad loans from banks at a discount and works to recover or resolve them.IntermediateNo. 142ARCs are registered with the RBI under the SARFAESI Act and acquire non-performing assets, issuing security receipts to the selling banks. They specialise in resolution, freeing banks to focus on fresh lending. They are part of the machinery for cleaning up bank balance sheets.
Related - 143
Customer Due Diligence (CDD)
The core of KYC: identifying a customer, verifying that identity from reliable documents, and understanding the purpose of the account.IntermediateNo. 143CDD requires a regulated entity to establish and verify the identity and address of a customer, identify the beneficial owner behind a non-individual account, and understand the nature of the intended relationship. Enhanced due diligence applies to higher risk customers such as politically exposed persons, while simplified measures apply to low risk ones. Ongoing due diligence monitors transactions for consistency with the customer's profile. CDD is the operational heart of the KYC and anti-money-laundering framework.
Related - 144
Video-based Customer Identification Process (V-CIP)
An RBI-permitted method of completing KYC remotely through a secure, live video interaction with the customer.IntermediateNo. 144V-CIP lets a bank or NBFC official verify a customer's identity face to face over an encrypted video call, capturing a live photograph and validating the identity document and PAN in real time. It uses liveness checks and geotagging to prevent fraud and must be conducted from the institution's own domain. It made fully digital account opening possible without a branch visit. V-CIP is central to low-cost, paperless onboarding and financial inclusion.
Related - 145
Central KYC Records Registry (CKYCR)
A central repository, managed by CERSAI, that stores a customer's verified KYC records for reuse across financial institutions.AdvancedNo. 145Once a customer completes KYC, the verified record is uploaded to the CKYCR and given a unique KYC Identifier, which other regulated entities can use to fetch the record instead of repeating the process. It is operated by the Central Registry of Securitisation Asset Reconstruction and Security Interest of India across banking, securities, insurance and pensions. This cuts duplication and speeds up onboarding while keeping records current. CKYCR is the shared backbone that makes portable, interoperable KYC possible.
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11. Non-Banking Financial Companies (NBFCs)
Entries 146 to 162- 146
Non-Banking Financial Company (NBFC)
A company engaged mainly in financial activity like lending or investment but which cannot accept demand deposits.BasicNo. 146An NBFC is registered under the Companies Act and does financial business as its principal activity, but it is not a bank. It cannot accept demand deposits, is not part of the payment and settlement system, and its depositors get no DICGC insurance. It must register with the RBI under Section 45-IA. The three differences from banks are a favourite comparison question.
Related - 147
Principal Business Criteria (50-50 Test)
A test where a company is an NBFC if financial assets exceed 50 per cent of total assets and financial income exceeds 50 per cent of gross income.IntermediateNo. 147Both conditions must be met for a company to be treated as an NBFC and require RBI registration. The test, defined in a 1999 RBI press release, ensures that only companies predominantly in finance are regulated by the RBI. Companies mainly in agriculture, industry, trade or property fall outside it.
Related - 148
Net Owned Fund (NOF)
The minimum owned capital an NBFC must hold, set at 10 crore rupees for most NBFCs since October 2022.IntermediateNo. 148NOF is the entry-level capital required to register and operate as an NBFC, distinct from the risk-based CRAR. The general requirement rose to 10 crore rupees with effect from 1 October 2022, and existing NBFCs have until 31 March 2027 to comply through a glide path. Specialised NBFCs have their own thresholds.
Related - 149
Scale-Based Regulation (SBR)
The RBI's framework that regulates NBFCs across four layers by size, activity and risk: Base, Middle, Upper and Top.AdvancedNo. 149Effective from October 2022 and consolidated in the 2025 Directions, SBR scales regulation to the systemic footprint of an NBFC. The Base Layer holds smaller non-deposit NBFCs below one thousand crore in assets plus P2P and account aggregator platforms, while the Middle and Upper Layers face progressively tighter rules. The Top Layer is currently empty.
Related - 150
NBFC Base, Middle and Upper Layers
The Base Layer covers smaller NBFCs, the Middle Layer covers larger and deposit-taking NBFCs, and the Upper Layer covers systemically significant ones.AdvancedNo. 150Non-deposit NBFCs below one thousand crore in assets sit in the Base Layer, while all deposit-taking NBFCs and larger ones plus HFCs and CICs sit in the Middle Layer. From July 2026 the Upper Layer is identified by an asset size of one lakh crore rupees and above, and such NBFCs face bank-like norms and mandatory listing. The Top Layer remains vacant.
Related - 151
Deposit-Taking and Non-Deposit NBFCs
Only NBFCs holding a specific deposit licence and an investment-grade rating may accept public deposits, up to 1.5 times their NOF.IntermediateNo. 151Deposit-taking NBFCs need a minimum rating of BBB minus, can offer interest up to 12.5 per cent, and accept deposits of 12 to 60 months, but never repayable on demand. Since 1997 the RBI has issued no new deposit-taking licences as a matter of policy. Non-deposit NBFCs can borrow but cannot take public deposits.
Related - 152
Specialised NBFC Categories
Activity-based NBFC types including IFC, IDF, MFI, Factor, MGC, SPD, CIC, AA, P2P and NOFHC, each with its own norms.IntermediateNo. 152Categories are defined by principal activity, such as infrastructure finance, microfinance, factoring or account aggregation. Their NOF requirements differ: an Infrastructure Finance Company needs 300 crore, a Mortgage Guarantee Company 100 crore, a Housing Finance Company 20 crore, and account aggregator or peer-to-peer platforms just 2 crore rupees. This activity classification sits alongside the layer classification.
Related - 153
NBFC-Microfinance Institution (NBFC-MFI)
A non-deposit NBFC with at least 75 per cent of assets as collateral-free microfinance loans to low-income households.AdvancedNo. 153Under the 2025 Directions a microfinance loan is a collateral-free loan to a household with annual income up to 3,00,000 rupees, and it cannot be linked to a lien on the borrower's deposit. Lenders must give a loan card, cap penalties to the overdue amount and charge no prepayment penalty. The unified income ceiling replaced the earlier lower rural and urban limits.
Related - 154
Systemically Important Core Investment Company (CIC)
An NBFC holding at least 90 per cent of net assets in group company investments, with asset size of 100 crore and public funds.AdvancedNo. 154A CIC mainly invests in shares, debt and loans of its group companies rather than trading them, and holds at least 60 per cent of net assets in group equity. It must have an asset size of 100 crore rupees or more and access public funds to require registration. It cannot carry on other financial activity beyond specified exceptions.
Related - 155
Account Aggregator (NBFC-AA)
An NBFC that, with consent, retrieves and shares a customer's financial data across institutions but cannot hold the data.IntermediateNo. 155The account aggregator acts as a consent-based pipe, collecting information from financial information providers and presenting it to users, without owning or reusing the data. It has a low NOF requirement of 2 crore rupees and enables data-driven lending and advice. It underpins India's open finance ecosystem.
Related - 156
Peer-to-Peer Lending (NBFC-P2P)
An NBFC operating an online platform that matches individual lenders with borrowers for a fee.IntermediateNo. 156An NBFC-P2P acts only as an intermediary facilitating loans, not as a lender itself, and carries a 2 crore rupee NOF requirement. The RBI caps exposures to protect participants and requires disclosures. It broadens credit access outside traditional channels.
Related - 157
Unregistered Type I NBFC
An NBFC exempted from registration since April 2026 because it takes no public funds, has no customer interface and holds assets below 1,000 crore.AdvancedNo. 157Introduced by the 2026 amendment to the SBR Directions, this exemption recognises that companies investing only their own funds pose little systemic or customer risk. Such firms must seek registration as a Type II NBFC before taking public funds or dealing with customers, and eligible existing NBFCs may deregister within six months. Loans from directors or shareholders count as public funds.
Related - 158
NBFC-Factor
A non-deposit NBFC engaged mainly in factoring, with at least half its assets and income from the factoring business.IntermediateNo. 158Factoring is the purchase of a firm's receivables at a discount so the seller gets cash upfront and the factor collects later. An NBFC-Factor must derive at least 50 per cent of assets and income from factoring, and larger investment and credit NBFCs can also factor with registration under the Factoring Regulation Act, 2011. It aids working-capital finance for MSMEs.
Related - 159
Shadow Banking
Credit intermediation by non-bank entities like NBFCs that perform bank-like functions with lighter regulation.IntermediateNo. 159NBFCs are sometimes called shadow banks because they lend and invest like banks but face different rules and cannot take demand deposits. The term signals both their role in credit and the systemic risk they can pose, which scale-based regulation addresses. It is not a pejorative in exam usage but a descriptive label.
Related - 160
Housing Finance Company (HFC)
An NBFC whose principal business is housing finance, regulated by the RBI with a net owned fund of 20 crore rupees.IntermediateNo. 160An HFC must hold at least 60 per cent of assets in housing finance, of which a large share is to individuals, and it sits in the Middle Layer of scale-based regulation. Regulation of HFCs moved from the National Housing Bank to the RBI. They channel long-term credit to home buyers.
Related - 161
Infrastructure Finance Company (IFC)
An NBFC that deploys at least 75 per cent of its total assets in infrastructure loans, with a net owned fund of 300 crore rupees.IntermediateNo. 161An IFC specialises in long-term funding for infrastructure and must meet a minimum credit rating and capital adequacy. Its high NOF requirement reflects the scale of its lending. Only IFCs may sponsor Infrastructure Debt Funds.
Related - 162
Non-Operative Financial Holding Company (NOFHC)
A non-deposit NBFC through which a promoter holds a bank and other financial services companies in its group.AdvancedNo. 162The NOFHC structure ring-fences a new bank from other group financial businesses, holding their shares to the extent regulation permits. It was designed to enable promoter groups to set up banks with clear separation. It sits within the RBI's licensing framework.
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12. Priority Sector, Financial Inclusion and Rural Credit
Entries 163 to 179- 163
Priority Sector Lending (PSL)
RBI-mandated lending to under-served sectors, set at 40 per cent of adjusted net bank credit for domestic commercial banks.BasicNo. 163The eight priority categories are agriculture, MSME, export credit, education, housing, social infrastructure, renewable energy and others. Domestic commercial banks and large foreign banks must lend 40 per cent of adjusted net bank credit or the credit equivalent of off-balance-sheet exposure, whichever is higher, to these sectors. Regional rural and small finance banks face a 75 per cent target and urban co-operative banks 60 per cent.
Related - 164
PSL Sub-Targets
Within the 40 per cent PSL target, sub-targets require 18 per cent to agriculture, 7.5 per cent to micro enterprises and 12 per cent to weaker sections.IntermediateNo. 164These sub-targets ensure credit reaches the most vulnerable within the priority sector, with a further glide-path sub-target for small and marginal farmers. The weaker sections category was expanded under the 2025 Master Directions and now includes transgenders. Shortfalls must be parked in funds with NABARD, SIDBI, MUDRA or NHB.
Related - 165
Adjusted Net Bank Credit (ANBC)
The base for computing PSL targets, being net bank credit adjusted for specified deductions and additions.IntermediateNo. 165ANBC starts from bank credit in India, adjusts for bills rediscounted, certain investments and net PSL certificate positions, and is compared with the credit equivalent of off-balance-sheet exposure, whichever is higher. PSL achievement is measured against ANBC each quarter. The concept ensures a consistent lending base.
Related - 166
Priority Sector Lending Certificates (PSLCs)
Tradable certificates that let a bank with surplus priority sector lending sell the achievement to a bank facing a shortfall.AdvancedNo. 166PSLCs are traded anonymously on the RBI's e-Kuber platform, with the buyer paying a premium, and they expire on 31 March each year regardless of when bought. The seller records a reduction and the buyer an increase in ANBC. There is no transfer of the underlying loan, only the PSL credit.
Related - 167
Lead Bank Scheme (LBS)
A scheme assigning each district to a lead bank responsible for coordinating credit and development in that district.IntermediateNo. 167Launched in 1969, the LBS makes a designated lead bank the coordinator for banking development, credit planning and financial inclusion in its district. District and state level committees monitor progress under the scheme. It links banks with government development programmes at the grassroots.
Related - 168
Kisan Credit Card (KCC)
A scheme giving farmers flexible, timely credit for cultivation and allied activities through a simple card-based limit.IntermediateNo. 168The KCC provides a revolving credit limit for crop production, post-harvest and consumption needs, and has been extended to animal husbandry and fisheries. Loans up to a threshold are collateral-free, and interest subvention lowers the effective cost for prompt repayment. It replaced cumbersome seasonal loan paperwork.
Related - 169
MSME Definition
Micro, small and medium enterprises are classified by combined investment in plant and machinery and annual turnover.IntermediateNo. 169Under the revised composite criteria, micro units have the smallest investment and turnover, small units larger, and medium units the largest within the ceiling, with the same limits for manufacturing and services. MSME credit qualifies for priority sector treatment. Timely credit to MSMEs is a policy priority for jobs and growth.
Related - 170
Rural Infrastructure Development Fund (RIDF)
A fund with NABARD where banks deposit their priority sector shortfalls, used to finance rural infrastructure.AdvancedNo. 170When a bank misses its PSL target, it must contribute to RIDF or similar funds with NABARD, SIDBI, MUDRA or NHB at rates set by the RBI. The money finances rural roads, irrigation and other infrastructure. This ensures that credit still reaches priority sectors even when a bank falls short.
Related - 171
NABARD
The National Bank for Agriculture and Rural Development, the apex development bank for agriculture and the rural economy.BasicNo. 171NABARD refinances rural lending by banks and co-operatives, administers funds like RIDF and supports rural infrastructure and financial inclusion. It is a specialised financial institution rather than a commercial bank. It plays a central role in channelling priority sector shortfalls into rural development.
Related - 172
Financial Inclusion
Ensuring affordable access to banking, credit, insurance and pensions for all, especially weaker and low-income groups.BasicNo. 172Financial inclusion brings unbanked people into the formal system through initiatives like Jan Dhan accounts, business correspondents and differentiated banks. It is one of the RBI's core mandates alongside price and financial stability. Progress is tracked by the Financial Inclusion Index.
Related - 173
Business Correspondents
Agents who deliver basic banking services on behalf of banks in areas without branches.IntermediateNo. 173Business correspondents open accounts, accept deposits, disburse small loans and enable cash withdrawals using handheld devices, extending banking to remote villages. They are a low-cost channel for financial inclusion. The model relies on Aadhaar-based authentication and micro-ATMs.
Related - 174
Financial Inclusion Index (FI-Index)
An RBI index, on a scale of 0 to 100, measuring the depth of financial inclusion across access, usage and quality.IntermediateNo. 174Launched in 2021, the FI-Index weights access at 35 per cent, usage at 45 per cent and quality at 20 per cent, drawing on many indicators across banking, insurance, pensions and postal services. It has no base year, so it reflects cumulative progress. A value of 0 means full exclusion and 100 full inclusion.
Related - 175
Lending to MSMEs and Startups
RBI norms treat bank credit to MSMEs and eligible startups as priority sector to ease their access to finance.IntermediateNo. 175Loans to micro and small enterprises count towards the priority sector, and loans up to a threshold to startups in eligible activities also qualify. Collateral-free credit is supported by guarantee schemes for small borrowers. This channels institutional credit to job-creating firms.
Related - 176
Pradhan Mantri Jan Dhan Yojana (PMJDY)
A national mission for financial inclusion that provides basic bank accounts with no minimum balance requirement.BasicNo. 176PMJDY opened bank accounts for the unbanked, bundling debit cards, overdraft facilities and accident insurance to bring people into the formal system. Overdrafts on Jan Dhan accounts count under the weaker sections category of priority sector. It has driven a large rise in account ownership.
Related - 177
Self Help Group (SHG)
A small group of individuals who pool savings and access bank credit collectively for livelihood needs.IntermediateNo. 177Under the SHG-bank linkage programme, groups save together and borrow jointly, with peer accountability keeping repayment high. Banks lend to SHGs as part of priority sector and financial inclusion efforts. The model empowers rural women in particular.
Related - 178
Interest Subvention
A government subsidy that lowers the effective interest rate on loans such as short-term crop credit.IntermediateNo. 178Under interest subvention the government bears part of the interest so that farmers repaying on time pay a concessional effective rate on Kisan Credit Card loans. It makes formal credit cheaper than informal moneylenders. It is a fiscal support layered on bank lending.
Related - 179
Co-Lending Model (CLM)
An arrangement where a bank and an NBFC jointly fund a priority sector loan, sharing risk and reward.AdvancedNo. 179Under CLM the NBFC originates and services the loan while the bank funds its share, expanding priority sector credit to under-served borrowers. The bank's share must remain without recourse to the NBFC. A bilateral master agreement governs the terms.
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13. Payment and Settlement Systems
Entries 180 to 198- 180
Real Time Gross Settlement (RTGS)
A system for large-value fund transfers settled individually and in real time on a gross basis.BasicNo. 180RTGS settles each transaction one by one as it is received, without netting, making it ideal for high-value and time-critical payments. It is available round the clock every day of the year. There is a minimum transaction value, distinguishing it from retail systems.
Related - 181
National Electronic Funds Transfer (NEFT)
A retail electronic transfer system that settles transactions in batches on a net basis, available at all times.BasicNo. 181NEFT handles retail payments with no minimum or maximum limit set by the RBI, settling on a deferred net basis in half-hourly batches around the clock. It is used for salaries, bills and person-to-person transfers. It complements RTGS for smaller amounts.
Related - 182
Immediate Payment Service (IMPS)
A round-the-clock interbank retail transfer service providing instant, mobile-friendly payments.IntermediateNo. 182Operated by the National Payments Corporation of India, IMPS offers instant fund transfer any time using mobile numbers, account details or other identifiers. It bridged the gap before UPI by enabling real-time retail transfers. It remains a fallback rail underneath many payment apps.
Related - 183
Unified Payments Interface (UPI)
A mobile platform that links multiple bank accounts and enables instant transfers using a virtual payment address.BasicNo. 183Built by NPCI, UPI lets users pay person-to-person or to merchants by scanning a QR code or using a UPI ID, without sharing bank details. It has become India's dominant retail payment rail with billions of monthly transactions. Innovations include UPI123Pay for feature phones and credit on UPI.
Related - 184
National Payments Corporation of India (NPCI)
The umbrella organisation for retail payments in India that operates UPI, IMPS, RuPay, AePS and other systems.IntermediateNo. 184NPCI was set up by banks under the guidance of the RBI and the Indian Banks Association to build and run retail payment infrastructure. It operates the rails behind everyday digital payments. Its not-for-profit structure keeps costs low and access wide.
Related - 185
Aadhaar Enabled Payment System (AePS)
A system letting customers make basic banking transactions using Aadhaar number and biometric authentication.IntermediateNo. 185AePS enables cash withdrawal, deposit, balance enquiry and transfers at business correspondent points using a fingerprint or iris scan linked to Aadhaar. It is a key tool for financial inclusion in areas without branches or smartphones. It relies on the Aadhaar authentication backbone.
Related - 186
Prepaid Payment Instruments (PPIs)
Instruments like mobile wallets and prepaid cards that store value in advance for buying goods and services.IntermediateNo. 186PPIs are issued by banks and authorised non-banks and can be closed, semi-closed or open depending on where they can be used, with KYC-based limits on balances. Full-KYC wallets are now interoperable with UPI. They must follow RBI norms on safety and grievance redress.
Related - 187
Central Bank Digital Currency (CBDC)
The digital rupee, legal tender issued by the RBI in electronic token form, being a liability on its balance sheet.AdvancedNo. 187CBDC or the e-rupee carries the trust and finality of central bank money and is issued in the same denominations as cash, distributed through banks as token service providers. It supports offline use, lower cash-handling costs and financial inclusion, and the RBI has made it non-interest-bearing to limit bank disintermediation. Pilots run in wholesale and retail segments.
Related - 188
Card Tokenisation
Replacing card details with a unique token so that merchants store the token, not the actual card number.IntermediateNo. 188Tokenisation protects card data by ensuring that a merchant or app never stores the real 16-digit number, reducing fraud from data breaches. The RBI mandated tokenisation for saved cards to strengthen security. The token is specific to a device and merchant.
Related - 189
Trade Receivables Discounting System (TReDS)
An electronic platform where MSMEs get their trade receivables financed by discounting invoices to financiers.AdvancedNo. 189On TReDS an MSME supplier uploads an invoice accepted by a large buyer, and financiers bid to discount it, giving the supplier early cash. It eases the working-capital squeeze from delayed payments to small firms. Multiple financiers competing lowers the discount rate.
Related - 190
Cheque Truncation System (CTS)
A system that clears cheques using electronic images instead of moving physical cheques between banks.IntermediateNo. 190CTS speeds up cheque clearing by capturing and transmitting an image and key data, removing the need to physically present the paper cheque. It reduces clearing time and fraud, and operates on a grid basis across the country. It has largely replaced older manual clearing.
Related - 191
White Label ATM (WLA)
An ATM set up and operated by a non-bank entity authorised by the RBI, serving customers of all banks.IntermediateNo. 191WLAs are owned by non-bank companies rather than banks, and they extend cash access especially in semi-urban and rural areas. Customers of any bank can use them, with the sponsor bank providing cash management. They were introduced to widen ATM coverage.
Related - 192
Payments Infrastructure Development Fund (PIDF)
An RBI fund that subsidises deployment of payment acceptance devices in smaller towns and rural areas.IntermediateNo. 192The PIDF incentivises banks and non-banks to install physical and digital acceptance infrastructure like point-of-sale terminals, QR codes and soundboxes in tier-three to tier-six centres. North Eastern states and the union territories of Jammu, Kashmir and Ladakh get higher subsidies. It aims to add lakhs of acceptance touchpoints each year.
Related - 193
Digital Payments Index (DPI)
An RBI composite index that tracks the spread and deepening of digital payments across the country.IntermediateNo. 193The DPI combines five parameters, with payment performance weighted most heavily at 45 per cent, and uses March 2018 as the base period set at 100. It is published semi-annually to show growth in digitisation. A rising DPI signals wider and deeper digital payments.
Related - 194
RuPay
India's domestic card payment network operated by NPCI, offering debit, credit and prepaid cards.BasicNo. 194RuPay lowers costs by keeping card transaction processing within India and works across ATMs, point-of-sale terminals and online. RuPay credit cards can now be linked to UPI for payments. It reduces dependence on international card networks.
Related - 195
Bharat Bill Payment System (BBPS)
An interoperable platform for paying recurring bills like electricity, water, gas and telecom in one place.IntermediateNo. 195BBPS, operated under NPCI, lets customers pay bills across many billers through any participating app or agent, with instant confirmation. It standardises and simplifies bill payments nationwide. It widens digital payment adoption for everyday needs.
Related - 196
National Automated Clearing House (NACH)
A centralised system for bulk, repetitive electronic payments like salaries, subsidies, dividends and EMI collections.IntermediateNo. 196NACH, run by NPCI, handles high-volume credit pushes such as direct benefit transfers and debit pulls such as loan instalments through mandates. It replaced older electronic clearing services with a faster, standardised platform. It underpins government subsidy delivery.
Related - 197
Digital Rupee: Retail and Wholesale
The RBI's CBDC pilots run in two segments: retail e-rupee for the public and wholesale for interbank settlement.IntermediateNo. 197The retail segment lets people hold and spend the digital rupee through wallets for person-to-person and merchant payments, while the wholesale segment settles interbank and securities transactions. Retail CBDC supports offline use and inclusion. Both are pilots that inform full rollout.
Related - 198
e-RUPI
A prepaid, purpose-specific digital voucher delivered by SMS or QR code that can be redeemed without a bank account or app.BasicNo. 198e-RUPI is a person-and-purpose-specific voucher, so funds can be used only for the intended service such as a vaccination or a scholarship. It needs no card, app or internet at the user's end, aiding leak-proof benefit delivery. It was built on the UPI infrastructure.
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14. RBI Initiatives and Deposit Safety
Entries 199 to 212- 199
Deposit Insurance (DICGC)
Insurance by the DICGC covering each depositor up to 5 lakh rupees for principal and interest if a bank fails.BasicNo. 199The Deposit Insurance and Credit Guarantee Corporation, a wholly owned RBI subsidiary, insures deposits in commercial, co-operative, local area and regional rural banks. The cover of 5 lakh rupees, raised from 1 lakh in 2020, applies per depositor per bank and is funded by premiums paid by banks. A proposal to raise it further is under government consideration but not yet notified.
Related - 200
Depositor Education and Awareness Fund (DEA Fund)
A fund holding balances in accounts unclaimed or inoperative for ten years or more, used for depositor education.IntermediateNo. 200Set up under Section 26A of the Banking Regulation Act, the DEA Fund receives balances of deposits left unclaimed for ten years, including accrued interest. Depositors or their heirs can still reclaim the money at any time by applying to the bank. The fund's income supports depositor awareness.
Related - 201
UDGAM Portal
An RBI online portal that lets people search for their unclaimed bank deposits across multiple banks in one place.IntermediateNo. 201UDGAM, standing for Unclaimed Deposits Gateway to Access Information, was launched in 2023 to help depositors trace money transferred to the DEA Fund. Unclaimed bank deposits across the country ran to tens of thousands of crore rupees. The portal centralises search across participating banks.
Related - 202
Retail Direct Scheme
An RBI scheme letting individual investors open a gilt account to buy and sell government securities directly online.IntermediateNo. 202Through a Retail Direct Gilt account, retail investors can buy G-Secs in primary auctions and trade them on NDS-OM without intermediaries and at zero cost. It covers Treasury Bills, dated securities, State Development Loans and Sovereign Gold Bonds. A mobile app now makes access easier.
Related - 203
Sovereign Gold Bond (SGB)
A government security denominated in grams of gold, issued by the RBI as a substitute for holding physical gold.IntermediateNo. 203Investors pay the issue price in cash and are redeemed in cash based on the gold price, earning a fixed 2.5 per cent annual interest paid semi-annually. SGBs have an eight-year tenor with exit allowed after the fifth year, and capital gains on redemption are exempt for individuals. They avoid the storage and purity risks of physical gold.
Related - 204
Regulatory Sandbox
A safe testing space where the RBI lets firms trial innovative financial products on real users under relaxed rules.AdvancedNo. 204The sandbox, framed in 2019, lets banks and fintechs test products live on a limited set of users for a limited time while the RBI monitors risks. It runs in thematic cohorts covering retail payments, cross-border payments, MSME lending and fraud prevention. It fosters learning by doing on all sides.
Related - 205
Inter-operable Regulatory Sandbox (IoRS)
A sandbox mechanism for testing innovations that cut across the domains of multiple financial regulators.AdvancedNo. 205Because some products span banking, securities, insurance and pensions, the IoRS coordinates RBI, SEBI, IRDAI, PFRDA and IFSCA so a hybrid product has a single testing window. It is steered under the inter-regulatory Financial Stability and Development Council mechanism. It avoids firms shuttling between regulators.
Related - 206
PRAVAAH Portal
A secure RBI web platform where individuals and entities apply online for its regulatory approvals and licences.IntermediateNo. 206Launched in 2024, PRAVAAH lets applicants submit and track applications for approvals across the RBI's departments through a single portal, with defined decision timelines. It was launched alongside the Retail Direct mobile app and a FinTech Repository. It digitises and speeds up the approval process.
Related - 207
Utkarsh 2.0
The RBI's medium-term strategy framework for 2023 to 2025, setting its vision, values and milestones.BasicNo. 207Utkarsh 2.0 builds on the first framework Utkarsh 2022 and retains six vision statements covering excellence, trust, relevance, governance, infrastructure and human resources. It gives the RBI a structured roadmap for institutional improvement. It reflects a shift to formal strategic planning.
Related - 208
HaRBInger Hackathon
The RBI's global hackathon inviting innovators to build technology solutions for financial sector problems.BasicNo. 208HaRBInger runs on themes such as smarter digital payments, inclusive digital services, zero financial frauds and being Divyang friendly. Winners receive cash prizes and support for prototype development. It signals the RBI's openness to external innovation.
Related - 209
ANTARDRISHTI Dashboard
An RBI financial inclusion dashboard that captures parameters to assess and monitor the progress of inclusion.BasicNo. 209ANTARDRISHTI helps gauge the extent of financial exclusion at a granular level so that under-served areas can be targeted. It is presently intended for internal RBI use to guide a multi-stakeholder approach. It complements the Financial Inclusion Index.
Related - 210
Market Intelligence and Sachet Portal
RBI mechanisms, including the Sachet portal, to detect and act against unauthorised deposit acceptance and Ponzi schemes.IntermediateNo. 210The Sachet portal lets the public report entities collecting deposits illegally, and State Level Coordination Committees bring regulators and enforcement agencies together to act quickly. The Banning of Unregulated Deposit Schemes Act, 2019 backs this with strong powers. It protects savers from fraudulent schemes.
Related - 211
Financial Literacy Week
An annual RBI campaign that spreads awareness on financial products, safe banking and consumer rights.IntermediateNo. 211Held each year on a chosen theme, Financial Literacy Week uses banks, financial literacy centres and media to educate the public. It supports financial inclusion by helping people use formal finance wisely and avoid frauds. It complements the RBI Kehta Hai awareness drive.
Related - 212
RBI Kehta Hai
A public awareness initiative of the RBI that warns people about frauds and educates them on safe financial practices.BasicNo. 212Through advertisements and outreach, RBI Kehta Hai cautions the public against unauthorised deposit schemes and unsafe practices. It reinforces consumer protection by building awareness. It works alongside the Sachet portal for reporting frauds.
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15. External Sector, Forex and Global Linkages
Entries 213 to 225- 213
Liberalised Remittance Scheme (LRS)
A FEMA scheme letting resident individuals remit up to 2,50,000 US dollars a financial year for permitted purposes.IntermediateNo. 213Introduced in 2004 and progressively liberalised, LRS covers current and capital account purposes such as education, travel, medical treatment, gifts and overseas investment. It is available to resident individuals including minors, but not to corporates, partnerships, HUFs or trusts. Remittances above 10 lakh rupees a year attract tax collected at source.
Related - 214
FCNR(B) Deposits
Foreign Currency Non-Resident (Bank) term deposits held by NRIs in foreign currency, free of exchange-rate risk to the depositor.AdvancedNo. 214FCNR(B) deposits let non-resident Indians keep fixed deposits denominated in permitted foreign currencies, so the depositor bears no rupee depreciation risk. They help the country attract stable foreign currency inflows. The RBI occasionally adjusts interest ceilings to influence such inflows.
Related - 215
External Commercial Borrowings (ECBs)
Loans raised by eligible Indian entities from foreign lenders, subject to RBI limits on amount, maturity and cost.AdvancedNo. 215ECBs let Indian firms borrow abroad, often at lower cost, within a framework governing eligible borrowers, recognised lenders, minimum maturity and an all-in-cost ceiling. They supplement domestic funding for investment. The RBI calibrates ECB norms to manage external debt and capital flows.
Related - 216
Special Rupee Vostro Account (SRVA)
An account arrangement letting foreign banks settle international trade in Indian rupees rather than a foreign currency.AdvancedNo. 216Under the SRVA mechanism a correspondent foreign bank holds a rupee account with an Indian bank so that cross-border trade can be invoiced and settled in rupees. It promotes internationalisation of the rupee and reduces dependence on hard currencies. It is especially useful with partner countries facing currency shortages.
Related - 217
Foreign Exchange Reserves
The RBI's holdings of foreign currency assets, gold, SDRs and the reserve position in the IMF, used to manage external stability.IntermediateNo. 217Reserves let the RBI intervene in the forex market to smooth rupee volatility and cover import and external debt needs. They comprise foreign currency assets, gold, Special Drawing Rights and the IMF reserve tranche. Adequate reserves cushion the economy against capital-flow shocks.
Related - 218
Special Drawing Rights (SDR)
An international reserve asset created by the IMF, whose value is based on a basket of major currencies.AdvancedNo. 218SDRs supplement member countries' official reserves and can be exchanged for freely usable currencies among IMF members. The basket includes the US dollar, euro, Chinese yuan, Japanese yen and pound sterling. India holds SDRs as part of its foreign exchange reserves.
Related - 219
Current and Capital Account
Under FEMA, current account transactions cover trade and income flows while capital account transactions change assets or liabilities.IntermediateNo. 219Current account covers imports, exports, remittances and interest, and is largely convertible, while the capital account covers investment and borrowing and is managed. India follows full current account convertibility but calibrated capital account convertibility. This distinction shapes what remittances are freely allowed.
Related - 220
FLAIR Reporting
An online RBI system for reporting foreign liabilities and assets by Indian companies receiving foreign investment.AdvancedNo. 220The Foreign Liabilities and Assets Information Reporting system collects annual data on foreign direct investment, overseas investment and related positions from Indian firms. This informs the balance of payments and external sector statistics. Filing is a compliance requirement under FEMA.
Related - 221
GIFT City and IFSCA
GIFT City is India's international financial services centre in Gujarat, regulated by the unified authority IFSCA.IntermediateNo. 221The Gujarat International Finance Tec-City hosts offshore banking, insurance and capital market activity, and the International Financial Services Centres Authority is its single unified regulator. It aims to onshore financial business that Indian entities earlier did abroad. It links India to global financial markets.
Related - 222
Currency Internationalisation
Efforts to increase the use of the Indian rupee in cross-border trade, investment and reserves.AdvancedNo. 222Internationalisation is advanced through mechanisms like rupee trade settlement via Special Rupee Vostro Accounts and rupee-denominated bonds. Wider use reduces exchange-rate risk for Indian traders and dependence on the dollar. It is a gradual, calibrated policy tied to capital account liberalisation.
Related - 223
NRE and NRO Accounts
Rupee accounts for non-resident Indians: NRE for foreign earnings freely repatriable, NRO for income earned in India.IntermediateNo. 223A Non-Resident External account holds income earned abroad, is fully repatriable and its interest is tax-free in India, while a Non-Resident Ordinary account holds Indian income with limited repatriation and taxable interest. Both let NRIs manage rupee funds under FEMA. The choice depends on the source of funds.
Related - 224
FDI and FPI
Foreign Direct Investment is long-term ownership in a business; Foreign Portfolio Investment is financial investment in securities.IntermediateNo. 224FDI brings lasting control and management interest and is relatively stable, while FPI in stocks and bonds is more liquid and can reverse quickly. Both are capital account flows governed by FEMA and sectoral caps. Volatile FPI can pressure the rupee and reserves.
Related - 225
Rupee Convertibility
The freedom to convert rupees into foreign currency; India allows full current account and calibrated capital account convertibility.AdvancedNo. 225Current account transactions like trade and remittances are freely convertible, while capital account transactions such as investment and borrowing face limits managed by the RBI. Gradual capital account liberalisation is tied to macroeconomic stability. The LRS is one channel of partial capital convertibility for individuals.
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Flashcard drill
The definition shows first. Name the term, then reveal. Cards are drawn from whatever is visible after your filters.
Ten-question self test
Instant marking with a one-line explanation. Answers reflect figures verified for 9 August 2026.
Score: 0 / 10
Q1. Which committee's recommendation led to the establishment of the Reserve Bank of India?
The 1926 Hilton-Young Commission recommended a central bank, leading to the RBI Act, 1934.
Q2. What is the policy repo rate set by the MPC as of the August 2026 policy?
The MPC held the repo rate at 5.25% with a neutral stance in August 2026.
Q3. The Standing Deposit Facility (SDF) rate is set at what level relative to the repo rate?
The SDF is fixed 25 basis points below the repo rate, currently 5.00%.
Q4. What is the current Cash Reserve Ratio (CRR)?
CRR stands at 3.00% after the December 2025 cut.
Q5. Under flexible inflation targeting, the CPI inflation target and band are:
The target is 4% with a tolerance band of plus or minus 2 per cent.
Q6. The minimum Net Owned Fund for most NBFCs, effective October 2022, is:
Most NBFCs need NOF of Rs 10 crore, with a glide path to 31 March 2027 for existing NBFCs.
Q7. Under the 2025 Directions, a microfinance loan is given to a household with annual income up to:
A microfinance loan is a collateral-free loan to a household with annual income up to Rs 3,00,000.
Q8. The priority sector lending target for domestic commercial banks is:
Domestic commercial banks must lend 40% of ANBC to the priority sector; RRBs and SFBs face 75%.
Q9. Deposit insurance under the DICGC covers each depositor per bank up to:
DICGC cover is Rs 5 lakh per depositor per bank, raised from Rs 1 lakh in 2020.
Q10. Under the Liberalised Remittance Scheme, a resident individual may remit per financial year up to:
LRS allows resident individuals to remit up to USD 2,50,000 per financial year.
