Banking awareness · Static + current
Top 120 banking terms for IBPS, SBI, RBI Grade B and NABARD
Master the Top 120 Banking Terms covering the most important concepts in Banking and the Indian Financial System. This comprehensive resource includes Money and Banking, Functions of Banks, NPA and its Resolution Mechanisms, Financial Inclusion, Priority Sector Lending (PSL), Types of Loans, Payment Systems in India, Digital Banking, Basel Norms, Banking Regulations, Credit Appraisal, Asset Classification, Banking Products & Services, and other essential banking concepts.
RBI policy corridor and reserve ratios as on July 2026. The MPC meets every two months, so confirm these five figures after each policy statement before your exam.
How to use this page
Read the definition first and try to recall the explanation before you open the card. Tick the box on the left rail once a term is genuinely yours, and the gold meter in the bar above will track you.
Use the search box for a term you half remember, the chapter chips to revise one syllabus area, and the level chips to isolate what you still find hard. When you are short of time, switch on Not yet learnt and drill only the gaps. The flashcard box and the ten question test at the bottom both draw on whatever is currently on screen, so filter first and then test.
Why these 120 terms
Banking awareness rewards precision, not volume. The same eighty or ninety concepts recirculate through IBPS, SBI, RBI Grade B and NABARD papers year after year, and the marks are lost not because a candidate has never seen the term but because the figure attached to it has moved. A study PDF from 2022 will still tell you that a bulk deposit starts at ₹2 crore, that a priority sector education loan is capped at ₹10 lakh, that there are 43 Regional Rural Banks and that you may name one nominee. All four statements are now wrong.
So this list is built the other way round. The 120 entries follow the twelve chapters of a standard static banking syllabus, ordered so that each term rests on the one before it. Demand deposits come before CASA ratio, the ninety day rule comes before SARFAESI, and adjusted net bank credit comes before every priority sector sub-target.
001-010 · 10 terms
Foundations and the history of Indian banking
Where the system came from, how a bank actually earns, and the consolidation that produced today's twelve public sector banks.
Bank and its core function
A bank accepts deposits from the public that are repayable on demand and lends or invests that money to earn a spread.Basic
Section 5(b) of the Banking Regulation Act, 1949 defines banking as accepting deposits of money from the public for lending or investment, repayable on demand or otherwise, and withdrawable by cheque, draft or order. Two features separate a bank from every other lender: it takes public deposits and it creates credit. The Reserve Bank of India (RBI) is the sole regulator of the banking sector. Because deposits can be withdrawn at short notice while loans run for years, every bank carries a maturity mismatch, which is the reason capital and liquidity rules exist at all.
Assets and liabilities of a bank
Loans and investments are a bank's assets because they earn income; deposits are its liabilities because they carry a cost.Basic
This inversion of everyday language catches candidates out. The money you deposit is your asset but the bank's liability, because the bank owes it back to you. Loans the bank gives out are its assets, because they generate interest income. Cash with the RBI, government securities held for the Statutory Liquidity Ratio and fixed assets also sit on the asset side. The Asset Liability Committee (ALCO) exists to keep the maturity and interest rate profile of the two sides in balance.
Net interest margin
Net interest margin is net interest income divided by average interest earning assets, shown as a percentage.Intermediate
If a bank charges 9 percent on loans and pays 4 percent on deposits, the 5 percentage point gap is the raw spread. Net Interest Margin (NIM) refines this by dividing net interest income by average earning assets instead of simply subtracting one rate from another. Large Indian private banks and the State Bank of India usually report NIM above 3 percent, while several public sector banks operate closer to 2.5 percent. A high Current Account Savings Account share pulls the cost of funds down and lifts NIM, which is why banks chase CASA so hard.
Bank of Hindustan and the Presidency Banks
Bank of Hindustan (1770) was India's first bank; the Presidency Banks were Bengal (1806), Bombay (1840) and Madras (1843).Basic
Bank of Hindustan was set up in Calcutta in 1770 and ceased operations in 1832. The Presidency Banks were funded by the presidency governments of the East India Company era and issued their own notes for a time. Bank of Bengal, established in 1806, is the oldest of the three and the direct ancestor of the State Bank of India. Oudh Commercial Bank (1881) was the first limited liability bank managed by Indians, and Punjab National Bank (1895) was the first bank managed entirely with Indian capital.
Imperial Bank of India and State Bank of India
The three Presidency Banks merged into the Imperial Bank of India in 1921, which was nationalised and renamed State Bank of India in 1955.Basic
The Imperial Bank came into existence on 27 January 1921 under the Imperial Bank of India Act, 1920, and carried out limited central banking functions until the RBI began operations on 1 April 1935. On the recommendation of the All India Rural Credit Survey Committee, it was nationalised and renamed State Bank of India on 1 July 1955. SBI absorbed its five remaining associate banks and Bharatiya Mahila Bank on 1 April 2017. Several coaching PDFs still print 1927 for the Imperial Bank, so use 1921 in the exam.
Bank nationalisation of 1969 and 1980
Fourteen major banks were nationalised on 19 July 1969 and six more on 15 April 1980.Basic
The 1969 ordinance covered banks with deposits above ₹50 crore, including Central Bank of India, Bank of India, Punjab National Bank, Bank of Baroda and Canara Bank. The stated aim was to move credit towards agriculture, small industry and exports instead of a handful of business houses. The 1980 round covered six banks with deposits above ₹200 crore, among them Andhra Bank, Corporation Bank, Vijaya Bank and Oriental Bank of Commerce. New Bank of India, nationalised in 1980, was merged into Punjab National Bank in 1993, which is why the count of nationalised banks fell to nineteen well before the recent mergers.
Narasimham Committee reforms
Two committees chaired by M. Narasimham, in 1991 and 1998, set the template for capital adequacy, asset classification and bank consolidation in India.Advanced
The Committee on the Financial System (1991) recommended cutting the Statutory Liquidity Ratio and Cash Reserve Ratio, introducing prudential norms for income recognition and asset classification, and phasing in an 8 percent capital adequacy ratio. It also proposed a four tier banking structure and the creation of Debt Recovery Tribunals. The Committee on Banking Sector Reforms (1998) raised the capital adequacy target to 9 percent, suggested narrow banking for weak banks and recommended mergers among strong banks. Almost every acronym in the bad loan chapter, from IRAC norms to DRTs, traces back to these two reports.
Public sector bank amalgamation of 2020
From 1 April 2020 ten public sector banks were merged into four, taking the count of public sector banks from 27 in 2017 down to 12.Intermediate
Punjab National Bank absorbed Oriental Bank of Commerce and United Bank of India. Canara Bank absorbed Syndicate Bank. Union Bank of India absorbed Andhra Bank and Corporation Bank. Indian Bank absorbed Allahabad Bank. This followed the merger of Dena Bank and Vijaya Bank into Bank of Baroda in 2019 and the absorption of SBI's associates in 2017. The six amalgamating banks were removed from the Second Schedule of the RBI Act, 1934. Learn each anchor bank with its amalgamating banks as a pair, because that is how the question is almost always framed.
One State One RRB
The fourth phase of Regional Rural Bank amalgamation, effective 1 May 2025, cut the number of RRBs from 43 to 28.Intermediate
Regional Rural Banks (RRBs) were created under the RRB Act, 1976 following the Narasimham Working Group of 1975, with Prathama Bank as the first RRB. Shareholding is split between the Central Government at 50 percent, the sponsor bank at 35 percent and the State Government at 15 percent. The One State One RRB policy merged 26 RRBs across eleven states and union territories into single entities, leaving 28 RRBs with more than 22,000 branches spread over roughly 700 districts. About 92 percent of these branches are in rural and semi urban centres, and NABARD remains their refinancing and supervisory anchor.
Banking Laws (Amendment) Act, 2025
A 2025 law allowing up to four nominees per deposit account and raising the substantial interest threshold from ₹5 lakh to ₹2 crore.Advanced
Its provisions were notified in two phases, on 1 August 2025 and 1 November 2025. A depositor may now name up to four nominees, either simultaneously with specified shares for deposits or successively for lockers and articles in safe custody. The definition of substantial interest in Section 5 of the Banking Regulation Act, 1949 moved from ₹5 lakh, a figure untouched since 1968, to ₹2 crore. The maximum tenure of a co-operative bank director rose from eight to ten years, and public sector banks may now transfer unclaimed shares and bond proceeds to the Investor Education and Protection Fund.
011-020 · 10 terms
Banking and its types
The structural vocabulary of the sector, from branch and unit banking through to the differentiated licences the RBI issued in 2015.
Scheduled and non-scheduled banks
A scheduled bank is one listed in the Second Schedule of the RBI Act, 1934 after meeting the prescribed capital and conduct conditions.Intermediate
Section 42(6)(a) of the RBI Act requires paid up capital and reserves of at least ₹5 lakh and that the bank's affairs are not conducted in a way detrimental to depositors. Scheduled status brings access to RBI refinance, membership of the clearing house and the right to borrow under the Liquidity Adjustment Facility. Scheduled commercial banks include public sector banks, private banks, foreign banks, Regional Rural Banks, small finance banks and payments banks, while scheduled co-operative banks form a separate group. When banks merge, the absorbed entities are removed from the Second Schedule by notification.
Branch banking and unit banking
Branch banking operates through many offices under a single bank; unit banking operates from one office serving a small local area.Basic
India follows branch banking, which spreads risk across regions and lets surplus deposits in one state fund credit demand in another. Unit banking, historically common in the United States, keeps decision making close to the customer but concentrates risk in a single local economy. Chain banking, where a group of persons controls three or more separately chartered banks, and group banking through a holding company are the variants that appear in objective papers. Core Banking Solutions have blurred the practical difference by turning every branch into an access point for every account.
Retail banking and wholesale banking
Retail banking serves individuals with small ticket products; wholesale banking serves corporates and institutions with large exposures.Basic
Retail products include savings accounts, home loans, vehicle loans, credit cards and personal loans. The book is granular, so one default barely moves the numbers, but the operating cost per account is high. Wholesale banking covers working capital limits, term loans, cash management and trade finance for companies, where a single account can be large enough to dent the balance sheet if it turns bad. Regulators assign lower risk weights to a well diversified retail portfolio for exactly this reason, which is why banks have tilted towards retail since 2015.
Universal banking
Universal banking is one institution offering commercial banking, investment banking, insurance and asset management under a single group.Intermediate
The R. H. Khan Committee (1998) recommended that development financial institutions and banks converge into universal banks. The reverse merger of ICICI into ICICI Bank in 2002 and the conversion of IDBI in 2004 were the practical results. In India the model runs mainly through subsidiaries, since a bank cannot itself underwrite insurance. The attraction is cross selling and fee income; the risk is that trouble in one arm spreads to the deposit taking arm, which is precisely what supervisors monitor through consolidated supervision.
Narrow banking
Narrow banking restricts a bank's assets to short term risk free government securities while it continues to hold demand deposits.Advanced
The idea was raised in India by the Tarapore Committee on Capital Account Convertibility as a way of handling banks weighed down by bad loans. If a weak bank invests only in government securities, its asset quality cannot deteriorate further and depositors stay protected while the existing bad loans are worked out. The price is that the bank stops performing credit intermediation, so the economy loses a lender. It sits at the opposite end of the spectrum from universal banking, and the two are frequently paired in one question.
Para banking and bancassurance
Para banking covers the non-banking financial services a bank may offer with RBI permission, such as mutual fund distribution and insurance selling.Intermediate
Typical para banking activities include distributing mutual funds, acting as a depository participant, managing pension funds, leasing, hire purchase and the credit card business. Bancassurance is the subset in which a bank sells the products of a tied insurer for a commission. Under the open architecture arrangement a bank may partner more than one insurer in each category of life, general and health. All of this is fee income, so it improves the cost to income ratio without consuming capital the way lending does.
Shadow banking and NBFCs
Shadow banking is credit intermediation carried on outside the regulated banking system, largely through non-banking financial companies.Advanced
A Non-Banking Financial Company (NBFC) lends and invests but cannot accept demand deposits, cannot issue cheques drawn on itself and is not covered by deposit insurance. NBFCs must register with the RBI and, since October 2022, are supervised under a Scale Based Regulation framework with Base, Middle, Upper and Top layers. The IL&FS default of 2018 showed how a large NBFC funded by short term paper can transmit stress straight into banks and mutual funds. Deposit taking NBFCs and larger non-deposit taking ones are covered by the Reserve Bank Integrated Ombudsman Scheme.
Differentiated banks
Differentiated or niche banks hold a restricted licence that permits only a narrow range of activities, unlike a full service commercial bank.Intermediate
The Nachiket Mor Committee on Comprehensive Financial Services for Small Businesses and Low Income Households (2013) designed the framework. The RBI granted in principle approvals for payments banks and small finance banks in 2015 under Section 22 of the Banking Regulation Act, 1949. Wholesale and Long Term Finance banks were floated in a 2017 discussion paper but were never licensed. The common logic is that a narrow mandate lets the RBI admit entities that could never meet the capital and scope requirements of a universal bank.
Payments banks
Payments banks accept deposits up to ₹2 lakh per customer, cannot lend at all, and require ₹100 crore of paid up capital.Intermediate
The per customer deposit ceiling was raised from ₹1 lakh to ₹2 lakh in April 2021. A payments bank may issue debit cards but not credit cards, and it may not extend any loan. It must invest at least 75 percent of its demand deposit balances in Statutory Liquidity Ratio eligible government securities maturing within a year, and may hold up to 25 percent with other scheduled commercial banks. Airtel, India Post, Fino, Jio and NSDL run payments banks; the licence of Paytm Payments Bank was cancelled, so verify the operating count close to your exam date.
Small finance banks
Small finance banks provide basic banking to underserved segments, need ₹200 crore of capital and must direct 75 percent of credit to priority sectors.Intermediate
At least 50 percent of the loan portfolio must be made up of loans of ₹25 lakh and below, and at least 25 percent of banking outlets must sit in unbanked rural centres. Promoter holding starts at a minimum of 40 percent and is scaled down over time. Existing NBFCs, microfinance institutions and local area banks that are owned and controlled by residents may convert into small finance banks. Those converting from urban co-operative banks may start at ₹100 crore and reach ₹200 crore within five years. Eleven small finance banks were operating in 2026, a figure that shifts with each merger.
021-030 · 10 terms
Types of accounts and nomination
The deposit side of the balance sheet, the rules that govern each product, and the 2025 change that lets you name four nominees.
Demand deposits and time deposits
Demand deposits are repayable whenever the customer asks; time deposits are locked in for an agreed maturity and pay more.Basic
Savings and current accounts are demand deposits. Fixed and recurring deposits are time deposits. The split matters far beyond terminology, because Net Demand and Time Liabilities (NDTL) is the base on which the Cash Reserve Ratio and Statutory Liquidity Ratio are computed. Demand deposits are cheap but volatile, while time deposits are costlier but stable, so the mix drives both liquidity risk and the cost of funds at the same time.
Savings account
A savings account is an interest bearing demand deposit meant for individuals and specified non-trading organisations.Basic
Interest has been calculated on the daily closing balance since 1 April 2010 and must be credited at least quarterly. Rates were deregulated in October 2011, so each bank sets its own; large banks generally pay between 2.5 and 3.5 percent while small finance banks pay considerably more. Section 80TTA allows a deduction of up to ₹10,000 a year on savings interest for individuals below sixty, and Section 80TTB gives senior citizens ₹50,000 covering savings and term deposit interest together. Firms, companies and trading concerns cannot open savings accounts.
Current account
A current account is a non-interest bearing demand deposit designed for businesses that need unlimited transactions.Intermediate
Firms, companies, trusts and associations of persons open current accounts to run day to day business. No interest is paid, banks levy service charges, and overdraft facilities can be attached. The RBI tightened current account opening norms in August 2020 so that a borrower with aggregate exposure of ₹5 crore or more across the banking system maintains current accounts only with lending banks, in proportion to their share of credit. The purpose was to stop borrowers routing sales proceeds away from the banks that funded them.
CASA ratio
CASA ratio is the share of current and savings account balances in a bank's total deposits.Intermediate
Current accounts pay nothing and savings accounts pay very little, so a high Current Account Savings Account (CASA) ratio directly lowers the cost of funds and lifts net interest margin. A ratio above 40 percent is generally treated as healthy for an Indian commercial bank. Public sector banks with large branch networks and salary account relationships tend to score well, while banks that depend on bulk term deposits score poorly. Watch the direction of travel too: a falling CASA ratio in a rising rate cycle signals that depositors are shifting into term deposits.
Fixed deposit
A fixed deposit locks a lump sum for a chosen tenure between seven days and ten years at a contracted rate of interest.Intermediate
Interest is paid at the agreed rate for the agreed period regardless of what happens to market rates, and a loan of up to about 90 percent of the deposit value is usually available. Rates must be set by tenure and not by the amount, except for bulk deposits where differential pricing is permitted. From FY 2025-26 the bank deducts tax at source only once interest in that bank crosses ₹50,000 in a financial year, or ₹1 lakh for senior citizens, and Form 15G or 15H is filed to avoid deduction where total income is below the taxable limit. Note that the Income Tax Act, 2025 replaces these forms with Form 121 from 1 April 2026.
Recurring deposit
A recurring deposit accepts a fixed monthly instalment for an agreed period and pays term deposit rates on the accumulating balance.Basic
It carries most features of a fixed deposit but is designed to build a savings habit rather than to park an existing lump sum. The usual maximum period is 120 months, and interest is compounded quarterly on the accumulated balance. Premature closure attracts a penalty and missed instalments attract a small default charge. Nomination is available, and the same tax deduction thresholds that apply to fixed deposit interest apply here as well.
Bulk deposit
A bulk deposit is a single rupee term deposit of ₹3 crore and above for scheduled commercial banks and small finance banks.Intermediate
The threshold was raised from ₹2 crore to ₹3 crore by an RBI amendment dated 7 June 2024, and for Regional Rural Banks and Local Area Banks it stands at ₹1 crore. Banks may offer a differential rate on bulk deposits based on their asset liability projections, which is the one permitted exception to pricing purely by tenure. Bulk deposits are a costly and flighty source of funds, so a bank that relies heavily on them usually shows a weaker net interest margin. Older study material still quotes ₹2 crore, so use ₹3 crore.
Inactive and dormant account
An account with no customer induced transaction for over twelve months is inactive; after twenty four months it is classified as dormant.Intermediate
Only customer induced transactions count, so interest credited by the bank does not reset the clock. Banks cannot levy a penalty for non-maintenance of minimum balance in an inoperative account, and re-activation must be done free of charge on submission of fresh KYC. The RBI's revised instructions of January 2024 require banks to run annual reviews and contact holders of inoperative accounts and unclaimed deposits. A dormant account cannot be operated through internet banking until it is reactivated at the branch.
Unclaimed deposits and the DEA Fund
Deposits lying unclaimed for ten years or more are transferred to the RBI's Depositor Education and Awareness Fund.Advanced
The Depositor Education and Awareness (DEA) Fund was set up under Section 26A of the Banking Regulation Act, 1949 and the DEA Fund Scheme, 2014. Transfer to the fund does not extinguish the depositor's right; the customer or legal heir can still claim the amount from the bank with interest, and the bank then claims reimbursement from the RBI. The UDGAM portal, launched in August 2023, lets the public search for unclaimed deposits across participating banks in one place. The pool has grown into tens of thousands of crores, which is exactly the problem the four nominee rule is meant to slow down.
Nomination facility
Nomination lets a depositor name up to four persons who can receive the balance on death without a succession certificate.Intermediate
The Banking Companies (Nomination) Rules, 1985 allow banks to pay the nominee without insisting on a succession certificate or verifying the claims of legal heirs. Since the Banking Laws (Amendment) Act, 2025, a depositor may name up to four nominees for deposits, either simultaneously with specified percentage shares or successively, and lockers and articles in safe custody take successive nomination only. A nominee is a trustee for the legal heirs, not the owner of the money, so nomination does not override a will or personal succession law. Forms DA1, DA2 and DA3 handle nomination, cancellation and variation respectively.
031-040 · 10 terms
KYC, ATM services and their types
Customer identification from the Officially Valid Document up to video KYC, and the full colour coded ATM family that examiners love.
Know Your Customer
Know Your Customer is the process of verifying a customer's identity and address before an account is opened and periodically thereafter.Basic
The RBI issues KYC directions under Section 35A of the Banking Regulation Act, 1949 read with the Prevention of Money Laundering Act, 2002 and the rules made under it. The purpose is to stop banks being used, knowingly or otherwise, for money laundering and terror financing. KYC has four elements: a customer acceptance policy, customer identification procedures, monitoring of transactions and risk management. Every bank must also report suspicious transactions and cash transactions above ₹10 lakh to the Financial Intelligence Unit India.
Officially Valid Document
An Officially Valid Document is one of six listed documents accepted as proof of identity and address for KYC.Intermediate
The six are the passport, driving licence, proof of possession of Aadhaar, Voter Identity Card, job card issued by NREGA signed by a State Government officer, and a letter from the National Population Register containing name and address. The Permanent Account Number is required separately for tax purposes but is not itself an Officially Valid Document (OVD) under the Master Direction. Where the OVD does not carry the current address, a deemed OVD such as a utility bill not older than two months may be submitted, with the correct OVD to follow within three months.
Risk categorisation and periodic KYC updation
Customers are classified as low, medium or high risk, and KYC is refreshed every ten, eight and two years respectively.Intermediate
Risk categorisation is based on the customer's identity, social and financial status, nature of business and pattern of transactions, and the category itself must be kept confidential from the customer. Periodic updation follows the schedule of ten years for low risk, eight years for medium risk and two years for high risk customers. If there is no change in KYC information, a self declaration from the customer through any channel, including email, registered mobile or ATM, is enough. Failure to complete periodic updation can lead to the account being restricted rather than closed outright.
Video based Customer Identification Process
V-CIP is an alternative to physical KYC in which an official of the bank verifies the customer through a live consent based video interaction.Advanced
The RBI permitted the Video based Customer Identification Process (V-CIP) in January 2020 and widened its scope in 2021 to cover periodic updation, proprietorship accounts and authorised signatories. The session must be live and unbroken, the software must capture geo-tagging to confirm the customer is in India, and liveness checks must rule out a recorded video. Verification uses Aadhaar based e-KYC or offline verification, or the PAN in digital form, and every session is recorded with an audit trail. It is the reason a savings account can now be opened end to end from a phone.
Central KYC Records Registry
CKYCR is a central repository that stores KYC records of customers across banking, insurance, securities and pension in a single number.Advanced
The Central KYC Records Registry (CKYCR) is managed by CERSAI and was set up under the Prevention of Money Laundering Rules. Once a customer's records are uploaded, a fourteen digit KYC Identifier is generated, and any other regulated entity can download the record with the customer's consent instead of collecting documents afresh. It removes duplicate KYC across the financial system and shortens onboarding sharply. Do not confuse CKYCR with CERSAI's other role, which is registering security interests to prevent multiple loans against the same property.
ATM and failed transaction compensation
A bank must reverse a failed ATM debit within five days of the transaction date or pay ₹100 for each day of delay.Intermediate
Under the RBI's harmonised Turn Around Time framework of September 2019, an account debited without cash being dispensed must be reversed within T+5 days, failing which compensation of ₹100 per day is credited automatically without the customer having to ask. The customer should still lodge the complaint within thirty days of the transaction for the fastest resolution. Since 1 January 2022 banks may charge up to ₹21 per transaction beyond the free limit, which is five free transactions a month at own bank ATMs and three or five at other bank ATMs depending on the city. Older notes quote a seven day resolution window, which is no longer correct.
Onsite and offsite ATM
An onsite ATM is located within bank premises; an offsite ATM stands away from any branch of that bank.Basic
The distinction matters for branch authorisation policy, since offsite ATMs let a bank extend reach without opening a branch. India's first ATM was installed by HSBC in Mumbai in 1987. Cash Recycler Machines that accept and dispense notes are counted separately from ATMs in RBI statistics. Micro ATMs, which are handheld devices used by Business Correspondents with Aadhaar authentication, are a different category again and are central to last mile financial inclusion.
White label ATM
A white label ATM is owned and operated by a non-bank entity under its own brand, with cash supplied by a sponsor bank.Intermediate
The RBI permitted non-bank entities registered under the Companies Act to set up White Label ATMs (WLAs) in 2012, with a minimum net worth of ₹100 crore. Tata Communications Payment Solutions launched the first one, Indicash, in 2013. The operator owns the machine and the branding, while the sponsor bank handles cash management and settlement, and the customer's own bank charges the interchange. India One is another well known WLA brand. The policy aim was to push ATM coverage into Tier 3 to Tier 6 centres where banks found branch based ATMs uneconomic.
Brown label ATM
A brown label ATM has hardware and lease owned by a service provider, while a sponsor bank supplies cash, connectivity and its own brand.Intermediate
The easy way to remember the difference is the signage. A brown label ATM displays the bank's logo even though a vendor owns the machine, whereas a white label ATM displays the non-bank operator's own brand. Brown label arrangements let banks expand their ATM footprint without capital expenditure, converting a fixed cost into a per transaction fee. Both models sit under the RBI's ATM authorisation framework and both settle through the National Financial Switch operated by NPCI.
Colour coded and biometric ATMs
Green, orange, yellow and pink label ATMs denote agricultural, share market, e-commerce and women only machines respectively.Basic
Green label ATMs are meant for agricultural transactions, orange label for share transactions, yellow label for e-commerce payments and pink label for women, usually with a guard to manage queues. Biometric ATMs authenticate through a fingerprint or iris scan instead of a PIN, which suits customers who are not comfortable with numeric passwords and underpins Aadhaar enabled cash withdrawal in villages. These labels are convention rather than a formal RBI classification, but they appear regularly in preliminary papers, so learn the colour to purpose mapping by rote.
041-049 · 9 terms
Types of money and money supply
Fiat money, the four RBI money supply aggregates, and the descriptive labels that turn up in one mark questions.
Fiat money and legal tender
Fiat money has no intrinsic value and circulates because the government declares it legal tender.Intermediate
Indian currency notes other than the one rupee note are issued by the RBI under Section 22 of the RBI Act, 1934. The one rupee note and all coins are issued by the Government of India, though the RBI puts them into circulation. Coins are legal tender up to specified limits, while notes are unlimited legal tender. The RBI follows the Minimum Reserve System since 1957, holding assets of at least ₹200 crore of which ₹115 crore must be in gold, which means note issue is not backed rupee for rupee by anything.
Reserve money (M0)
Reserve money is currency in circulation plus bankers' deposits with the RBI plus other deposits with the RBI.Intermediate
Reserve money, also called high powered money or the monetary base, is the RBI's direct liability and the raw material from which the banking system creates broad money. Every rupee of reserve money supports several rupees of deposits through the credit creation process. Open market operations, changes in the Cash Reserve Ratio and foreign exchange intervention all work by altering reserve money or the multiplier applied to it. M0 is published weekly and is the aggregate to watch when the RBI is managing durable liquidity.
Narrow money and broad money
M1 is currency with the public plus demand deposits plus other deposits with the RBI; M3 adds time deposits with the banking system.Intermediate
The RBI publishes four aggregates. M1, narrow money, is the most liquid. M2 adds savings deposits with post offices. M3, broad money, is M1 plus time deposits with the banking system and is the headline aggregate used for policy analysis. M4 adds all post office deposits other than National Savings Certificates. The examinable ranking is M1 less than M2 less than M3 less than M4, and the standard trap is asking which aggregate includes post office savings deposits, which is M2.
Money multiplier
The money multiplier is broad money divided by reserve money, showing how many rupees of M3 each rupee of M0 supports.Advanced
When a bank receives ₹100 of deposits and the Cash Reserve Ratio is 4 percent, it can lend ₹96, which returns to the system as a fresh deposit and is lent again, and so on. The theoretical multiplier is the reciprocal of the reserve ratio, but the actual multiplier is lower because the public holds cash and banks keep excess reserves. India's money multiplier has typically run between five and six in recent years. A CRR cut, such as the reduction to 3 percent in 2025, raises the multiplier and therefore the credit creating capacity of the system.
Dear money and cheap money
Dear money is credit available only at high interest rates; cheap money is credit available at low rates.Intermediate
A dear money policy follows a tight monetary stance, where the RBI raises the repo rate or reserve ratios to squeeze demand and cool inflation. Borrowing becomes expensive, so companies defer capital expenditure and households postpone purchases. A cheap money policy does the reverse and is used when growth needs support, as after the 2020 shock when the repo rate fell to 4 percent. The terms describe the cost of credit in the economy, not any particular instrument.
Hot money
Hot money is short term capital that moves rapidly between markets chasing interest rate or exchange rate gains.Intermediate
It typically arrives as foreign portfolio investment in equities and debt rather than as foreign direct investment, and it can leave as fast as it came. Large hot money outflows depress the rupee, drain foreign exchange reserves and force the RBI to intervene, which is why India retains capital account controls on debt inflows. The contrast with foreign direct investment, which is long term, control oriented and hard to reverse, is a standing comparison question. Certificates of deposit and short dated government paper are typical hot money instruments.
Hard currency and soft currency
A hard currency is globally traded and holds value reliably; a soft currency is volatile and not widely accepted outside its home country.Basic
The US dollar, euro, Japanese yen, pound sterling and Swiss franc are the standard hard currencies, and the first five of these plus the Chinese renminbi make up the Special Drawing Rights basket of the International Monetary Fund. A hard currency is backed by a large stable economy, deep financial markets and low inflation, so exporters and central banks are willing to hold it. Soft currencies belong to economies with high inflation or political instability and usually trade at a discount in forward markets.
Currency notes and the ₹2000 withdrawal
The ₹2000 note was withdrawn from circulation on 19 May 2023 under the Clean Note Policy but remains legal tender.Intermediate
This was a withdrawal, not a demonetisation, which is why the note never lost legal tender status. Of the ₹3.56 lakh crore in circulation on 19 May 2023, about 98.47 percent had returned by 30 April 2026, leaving roughly ₹5,451 crore outstanding. Exchange and deposit continue at nineteen RBI Issue Offices and through India Post. Notes are printed at four presses, two of Security Printing and Minting Corporation of India at Nashik and Dewas, and two of Bharatiya Reserve Bank Note Mudran Private Limited at Mysuru and Salboni.
Central Bank Digital Currency
The digital rupee is sovereign currency issued by the RBI in electronic form, a direct liability of the central bank.Advanced
The RBI launched the wholesale Central Bank Digital Currency (CBDC) pilot on 1 November 2022 for settlement of secondary market government securities transactions, and the retail pilot on 1 December 2022 in a closed user group. The retail e-Rupee is issued in the same denominations as notes and coins, is distributed through banks, and offers cash like anonymity for small values. Unlike a bank deposit it carries no credit risk, and unlike UPI it is money itself rather than a way of moving money between deposit accounts. It earns no interest, which is deliberate, so that it does not drain bank deposits.
050-059 · 10 terms
Negotiable instruments and cheques
The 1881 Act and the paper it governs, ending with the continuous clearing reform that came into full effect in January 2026.
Negotiable Instruments Act, 1881
The Act governs three instruments: the promissory note, the bill of exchange and the cheque.Basic
A negotiable instrument is a written document transferable by delivery in the case of a bearer instrument, or by endorsement and delivery in the case of an order instrument. The transferee who takes it in good faith and for value becomes a holder in due course and gets a better title than the transferor had. Section 138 makes dishonour of a cheque for insufficiency of funds a criminal offence punishable with up to two years imprisonment or twice the cheque amount, or both. A demand draft is not defined in the Act and is treated as a bill of exchange by its nature.
Promissory note
A promissory note is an unconditional written promise by the maker to pay a certain sum to a specified person or to their order.Basic
It has two parties, the maker who is the debtor, and the payee who is the creditor. It must be in writing, so a verbal promise never qualifies, and it must be signed by the maker and stamped. A promissory note cannot be made payable to bearer under Section 31 of the RBI Act, since only the RBI may issue bearer promissory notes, which is what a currency note actually is. Banks take a Demand Promissory Note from borrowers as a standard loan document.
Bill of exchange
A bill of exchange is an unconditional written order by the drawer directing the drawee to pay a certain sum to the payee.Intermediate
It has three parties: the drawer who gives the order, the drawee who is directed to pay, and the payee who receives. Unlike a promissory note, a bill is an order rather than a promise, and it requires acceptance by the drawee before it binds them. Bills are the backbone of trade credit, and a seller who does not want to wait until maturity can discount the bill with a bank, which is the practice behind the Trade Receivables Discounting System platform for MSME receivables. Usance bills carry a tenor while demand bills are payable at sight.
Cheque and its three parties
A cheque is a bill of exchange drawn on a specified banker and payable on demand, involving a drawer, a drawee bank and a payee.Basic
The drawer is the account holder who signs it, the drawee is always the bank on which it is drawn, and the payee is the person entitled to receive payment. If it is a self cheque the drawer and payee are the same person. A cheque is valid for three months from the date written on it, reduced from six months with effect from 1 April 2012. An electronic image of a truncated cheque and a cheque in electronic form were brought within the definition by the 2002 amendment to the Act.
Types of cheques
Order, bearer, blank, stale, post-dated, ante-dated, mutilated, open and crossed are the standard descriptive categories of cheque.Basic
An order cheque is payable to a named person or their order, while a bearer cheque is payable to whoever presents it. A blank cheque carries only the signature. A stale cheque is one presented more than three months after its date. A post-dated cheque carries a later date and cannot be paid before it, while an ante-dated cheque carries an earlier date and stays valid for three months from that date. A mutilated cheque is torn and needs confirmation from the drawer, and an open cheque is simply one that has not been crossed.
Crossing of a cheque
Crossing means drawing two parallel transverse lines on the face of a cheque so that it can only be paid into a bank account.Advanced
General crossing is two parallel transverse lines with or without the words and company. Special crossing adds the name of a particular banker, and then payment can be made only to that banker or its agent. Restrictive crossing carries the words account payee, which directs the collecting bank to credit only the payee's account and effectively stops further negotiation. Not negotiable crossing does not stop transfer but strips the transferee of the protection of a holder in due course, so a defect in title travels with the instrument.
Endorsement
Endorsement is the signature of the holder on the back of an instrument for the purpose of transferring it to another person.Advanced
A blank endorsement carries only the signature and turns an order instrument into one payable to bearer. A full or special endorsement names the person to whom payment is to be made. A restrictive endorsement stops further negotiation, for example by writing pay to Ramesh only. A partial endorsement transferring only part of the amount is invalid, and a sans recourse endorsement lets the endorser escape liability if the instrument is dishonoured.
MICR code
The MICR code is a nine digit number printed at the bottom of a cheque that identifies the city, bank and branch.Intermediate
Magnetic Ink Character Recognition (MICR) uses magnetic ink so that machines can read the code even if the cheque is stained or overwritten. The first three digits are the city code, matching the first three digits of the postal index number, the next three identify the bank, and the last three identify the branch. Compare this with the Indian Financial System Code (IFSC), which is eleven characters and is used for electronic transfers rather than paper clearing. Both codes appear on the same cheque leaf, so read the question carefully.
Demand draft
A demand draft is an instrument drawn by one bank on another bank or its own branch, ordering payment of a stated sum to a named payee.Intermediate
The key difference from a cheque is certainty of payment, because the amount has already been collected by the issuing bank, so the drawer cannot stop it and there is no risk of insufficient funds. The drawer of a draft is a bank rather than an individual customer, and a draft can never be made payable to bearer. It is not defined in the Negotiable Instruments Act, 1881 but is treated as a bill of exchange. Since 15 September 2018, drafts of ₹20,000 and above must carry the name of the purchaser on the face of the instrument.
Cheque Truncation System and continuous clearing
CTS clears cheques from images instead of physical paper, and since 2025-26 does so continuously with settlement on realisation.Advanced
Truncation means stopping the physical movement of the cheque and sending an electronic image with the MICR data to the paying bank instead. Under an RBI circular dated 13 August 2025, the Cheque Truncation System (CTS) moved from batch processing to continuous clearing in two phases. Phase 1 from 4 October 2025 gave a single presentation session from 10 am to 4 pm with credit to the customer the same day. Phase 2 from 3 January 2026 requires the drawee bank to confirm or reject within three clear hours, after which the cheque is deemed approved and settled. Older material saying cheques take two working days is now outdated.
060-069 · 10 terms
Loans, advances and types of lending
Security, facility structure and pricing, tracing the lending rate story from BPLR through MCLR to the external benchmark regime.
Loans and advances
A loan is a lump sum disbursed against an agreed repayment schedule; an advance is a credit facility for short term working needs.Basic
Loans are usually term products such as home, vehicle, education and corporate loans, repaid through equated instalments over a fixed period. Advances include overdraft, cash credit and bill discounting, where the borrower draws as needed within a sanctioned limit. Interest on a loan runs on the full disbursed amount, whereas on an advance it runs only on the amount actually used. This is why a business with lumpy cash flows prefers a cash credit limit to a term loan of the same size.
Secured and unsecured loan
A secured loan is backed by an asset the lender can sell on default; an unsecured loan rests only on the borrower's creditworthiness.Basic
Home loans and vehicle loans are secured, which is why they carry lower rates and longer tenures. Personal loans and most credit card outstandings are unsecured, so they are priced far higher to compensate for the loss the bank takes if the borrower defaults. An unsecured loan is sometimes called a clean loan or a signature loan. Under the SARFAESI Act, 2002 a lender can enforce security without going to court, an option that simply does not exist for unsecured exposure, which is the practical reason security matters.
Pledge, hypothecation and mortgage
Pledge transfers possession of movable goods, hypothecation keeps possession with the borrower, and mortgage creates a charge on immovable property.Advanced
In a pledge, such as a gold loan, the bank physically holds the asset, so recovery is straightforward. In hypothecation, such as a vehicle loan or a cash credit against stock, the borrower keeps and uses the asset while the bank holds a charge, which is why cash credit needs regular stock statements. A mortgage covers immovable property and comes in several forms, of which equitable mortgage by deposit of title deeds is the most common in Indian banking because it avoids heavy stamp duty. Bailment underlies pledge, with the borrower as bailor and the bank as bailee.
Overdraft and cash credit
Both let a borrower draw up to a sanctioned limit and pay interest only on the amount used; cash credit is secured by pledged or hypothecated stock.Intermediate
The distinction lies in the nature of the security. A cash credit account is backed by pledge or hypothecation of goods, produce or receivables and is granted to businesses against a drawing power computed from stock statements. An overdraft may be clean or secured by other assets and is typically allowed on a current account. If a limit of ₹30 lakh is sanctioned and only ₹15 lakh is drawn, interest runs on ₹15 lakh alone. Both are running accounts, and both turn into non-performing assets when the account remains out of order for ninety days.
Term loan and working capital loan
A term loan funds fixed assets over a defined repayment period; a working capital loan funds the operating cycle and revolves.Intermediate
Term loans are classified as short term up to one year, medium term up to five years and long term beyond that, and they are repaid from the cash flows the asset generates. Working capital finance covers inventory, receivables and other current assets, and is usually structured as cash credit or a working capital demand loan. Revolving credit lets the borrower draw, repay and draw again within the limit against a commitment fee. Matching the tenure of the facility to the tenure of the asset is the single most basic rule of credit appraisal.
EMI, amortisation and moratorium
An EMI is a fixed monthly payment covering interest and principal; amortisation spreads it over the tenure; a moratorium is a repayment holiday.Basic
In an Equated Monthly Instalment (EMI) the total outgo stays constant but the split shifts, with interest dominating early instalments and principal dominating later ones. The table showing this split is the amortisation schedule. A moratorium is the period during which no repayment is required, common in education loans where repayment starts after the course plus a grace period. Interest usually continues to accrue during a moratorium, which is why the outstanding at the end can be higher than the amount borrowed.
Base Rate and BPLR
BPLR (2003) and Base Rate (2010) were internal benchmarks below which a bank could not lend, each replaced because transmission was poor.Advanced
The Benchmark Prime Lending Rate allowed lending below BPLR to favoured borrowers, so pricing became opaque and comparison impossible. A working group under Deepak Mohanty reported in October 2009, and the Base Rate system took effect on 1 July 2010 as the floor below which no bank could lend. Base Rate was built from the cost of funds, operating expenses, the negative carry on the Cash Reserve Ratio and a profit margin, but not the repo rate, so repo cuts were not passed on. Permitted exceptions to the floor include loans under the Differential Rate of Interest scheme, loans to a bank's own staff and loans against a customer's own deposits.
Marginal Cost of Funds based Lending Rate
MCLR, effective 1 April 2016, prices loans off the marginal rather than the average cost of funds and must be reviewed monthly.Advanced
The Marginal Cost of Funds based Lending Rate (MCLR) has four components: marginal cost of funds, negative carry on the Cash Reserve Ratio, operating costs and tenor premium. Marginal cost of funds itself is weighted 92 percent to the marginal cost of borrowings and 8 percent to return on net worth. Banks publish MCLR for several tenors, from overnight to one year, and every floating rate loan carries a reset date. Because MCLR still moves with a bank's own funding costs rather than with the policy rate, transmission remained slow, which is what pushed the RBI to the external benchmark in 2019.
External Benchmark Lending Rate
Since 1 October 2019 all new floating rate retail and MSE loans must be linked to an external benchmark such as the repo rate.Advanced
The Internal Study Group chaired by Janak Raj concluded that internal benchmarks like Base Rate and MCLR had failed to transmit policy changes. Banks may choose the RBI policy repo rate, the 91 day or 182 day Treasury bill yield, or any other benchmark published by Financial Benchmarks India Private Limited. The rate must be reset at least once every three months, so a repo change reaches the borrower quickly. With the repo rate at 5.25 percent in 2026, a Repo Linked Lending Rate of repo plus a spread of two to three percentage points is the typical home loan structure.
Fund based and non-fund based facilities
Fund based facilities involve actual outflow of money; non-fund based ones such as guarantees and letters of credit create a contingent liability.Advanced
Fund based credit covers term loans, overdrafts, cash credit and bill discounting, and shows up directly on the balance sheet. Non-fund based facilities include the bank guarantee, where the bank pays the beneficiary if the customer fails to perform, and the letter of credit, where the bank pays the seller once shipping documents are presented. No money leaves the bank unless the underlying obligation is invoked, so these earn commission rather than interest. They appear as off balance sheet exposures and are converted into a Credit Equivalent Amount using credit conversion factors for capital adequacy and priority sector computation.
070-079 · 10 terms
Non-performing assets and resolution
The ninety day rule, the classification ladder, and the recovery machinery from SARFAESI through to the Insolvency and Bankruptcy Code.
Non-performing asset
An advance becomes a non-performing asset when interest or principal stays overdue for more than ninety days.Basic
For a term loan the trigger is ninety days of overdue interest or instalment. A cash credit or overdraft becomes a Non-Performing Asset (NPA) when the account remains out of order for ninety days, meaning the outstanding stays above the sanctioned limit or there are no credits sufficient to cover interest. For short duration crops the trigger is two crop seasons and for long duration crops one crop season. The rules come from the Income Recognition and Asset Classification norms introduced after the Narasimham Committee of 1991, under which interest on an NPA cannot be booked as income unless actually received.
Special Mention Account
A Special Mention Account is a standard account showing early signs of stress, classified SMA-0, SMA-1 or SMA-2 by days overdue.Advanced
SMA-0 covers principal or interest overdue up to thirty days along with other signs of incipient stress. SMA-1 covers thirty one to sixty days overdue and SMA-2 covers sixty one to ninety days. Beyond ninety days the account becomes an NPA. For revolving facilities the sub-categories are defined by how long the account has been out of order. Since 2021 the RBI requires day end classification, so an account overdue on any given day is flagged that day rather than at month end, and lenders must report exposures above ₹5 crore to the Central Repository of Information on Large Credits.
Substandard, doubtful and loss assets
An NPA is substandard for up to twelve months, doubtful thereafter, and a loss asset once the loss has been identified but not written off.Intermediate
A substandard asset is one that has remained an NPA for twelve months or less, where the current net worth of the borrower is not enough to ensure full recovery. It becomes doubtful once it has stayed substandard for twelve months, and doubtful assets are further split into up to one year, one to three years and above three years for provisioning. A loss asset is one where loss has been identified by the bank, its auditors or an RBI inspection but the amount has not yet been written off, and it attracts 100 percent provision. Standard assets are not NPAs but still attract a small provision.
Provisioning and Provisioning Coverage Ratio
Provisioning is the amount set aside against expected loan losses; PCR is total provisions held as a percentage of gross NPAs.Advanced
Provisioning rises with the age and severity of the NPA, from a small standard asset provision through 15 percent on secured substandard advances up to 100 percent on loss assets and on the unsecured portion of doubtful advances above three years. The Provisioning Coverage Ratio (PCR) measures how much of the bad loan book is already absorbed, and the RBI has indicated 70 percent as a desirable floor. A high PCR means future losses are already recognised, so profits are cleaner. Provisions are charged to the profit and loss account, which is why a spike in slippages hits earnings immediately.
Gross NPA and net NPA
Gross NPA is total bad loans as a share of gross advances; net NPA deducts provisions already held against them.Advanced
Gross NPA shows the size of the problem while net NPA shows what remains unabsorbed and therefore still capable of hurting capital. A bank with 4 percent gross NPA and 1 percent net NPA is far healthier than one with the same gross figure and 3 percent net, because the first has already provided for most of it. Indian scheduled commercial banks brought gross NPAs down sharply from the peak of about 11.2 percent in March 2018 to multi-decade lows in recent years. Slippage ratio, which measures fresh additions to NPAs during a period, is the forward looking companion metric.
Wilful defaulter
A wilful defaulter is a borrower who could repay but chose not to, or diverted or siphoned off the borrowed funds.Advanced
The four grounds are default despite capacity to pay, failure to use the funds for the purpose sanctioned, siphoning off funds, and disposing of securities without the lender's knowledge. Under the RBI's Master Direction of 2024, an account with outstanding of ₹25 lakh and above must be examined for wilful default and the decision taken by an Identification Committee with a hearing given to the borrower. A wilful defaulter is barred from further institutional finance and from floating new ventures for five years, and the name is reported to credit information companies. Non-cooperative borrowers form a separate and less severe category.
SARFAESI Act, 2002 and asset reconstruction companies
SARFAESI lets a secured creditor enforce security and sell the asset without court intervention once the account is an NPA.Advanced
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act applies to secured loans with outstanding of ₹1 lakh and above, and the lender must first issue a sixty day notice under Section 13(2). If the borrower does not pay, the lender can take possession, manage or sell the asset under Section 13(4). The borrower may appeal to the Debt Recovery Tribunal within forty five days. Asset Reconstruction Companies registered with the RBI buy bad loans from banks against cash and security receipts, with ARCIL being the first such company in India. The Act does not cover agricultural land.
Debt Recovery Tribunal
DRTs are specialised tribunals that hear bank recovery suits where the amount due is ₹20 lakh or more.Advanced
They were established under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, following the Narasimham Committee, and the pecuniary threshold was raised from ₹10 lakh to ₹20 lakh in 2018. The Act contemplates disposal within six months, though actual timelines run much longer. Appeals go to the Debt Recovery Appellate Tribunal, and a borrower appealing must ordinarily deposit 50 percent of the amount, which the Appellate Tribunal may reduce to 25 percent. A borrower aggrieved by SARFAESI action also comes to the DRT, so the two channels intersect.
Insolvency and Bankruptcy Code, 2016
The IBC consolidates insolvency law into a single creditor driven process with a strict resolution timeline.Advanced
The Corporate Insolvency Resolution Process must be completed within 180 days, extendable by 90 days, with an outer limit of 330 days including litigation. The default threshold for initiating a case against a corporate debtor was raised from ₹1 lakh to ₹1 crore in March 2020. Once the National Company Law Tribunal admits the case, a moratorium takes effect, the board is suspended and an insolvency professional runs the company under a Committee of Creditors, which must approve a resolution plan with 66 percent of voting share. If no plan is approved, liquidation follows under the waterfall in Section 53, where insolvency costs and secured creditors rank ahead of government dues.
Prudential Framework for Resolution of Stressed Assets
The RBI's circular of 7 June 2019 replaced all earlier restructuring schemes with a single framework built on inter-creditor agreements.Advanced
The Supreme Court struck down the RBI's 12 February 2018 circular in the Dharani Sugars case, and the June 2019 framework was the response. Lenders must recognise default on day one and, for accounts above ₹2,000 crore, decide on a resolution plan within a thirty day review period followed by 180 days, failing which additional provisions of 20 and 35 percent apply. Any plan requires agreement from 75 percent of lenders by value and 60 percent by number under an inter-creditor agreement. This framework superseded the older Corporate Debt Restructuring, Strategic Debt Restructuring, Sustainable Structuring of Stressed Assets and Joint Lenders Forum mechanisms, all of which older PDFs still list as current.
080-089 · 10 terms
Priority sector lending
The 40 percent obligation and every sub-target under it, updated for the Master Directions that took effect on 1 April 2025.
Priority sector lending
Priority sector lending requires banks to route 40 percent of adjusted net bank credit to sectors that would otherwise be underserved.Basic
The concept originated in 1972 and the 40 percent target was set on the recommendation of the K. S. Krishnaswamy Committee, to be reached by 1985. The eight categories are agriculture, micro small and medium enterprises, export credit, education, housing, social infrastructure, renewable energy and others. The current rules are the Reserve Bank of India (Priority Sector Lending, Targets and Classification) Directions, 2025, issued on 24 March 2025 and effective from 1 April 2025, which replaced the 2020 directions. A shortfall must be parked in the Rural Infrastructure Development Fund with NABARD or similar funds, which earn well below market returns.
Adjusted Net Bank Credit
ANBC is the base on which priority sector targets are computed, and the target applies to ANBC or off balance sheet exposure, whichever is higher.Advanced
Adjusted Net Bank Credit (ANBC) starts from bank credit in India, adds bills rediscounted with the RBI and other approved institutions back, and makes specified adjustments for investments in non-SLR bonds held to maturity and for permitted deductions. The comparison is with the Credit Equivalent of Off-Balance Sheet Exposures (CEOBSE), and the higher of the two becomes the base. Using the higher figure prevents a bank from shrinking its priority sector obligation by shifting business into guarantees and letters of credit. Compliance is assessed on the average of quarterly outstandings rather than only at year end.
Agriculture and the small and marginal farmers sub-target
Agriculture carries an 18 percent target within the 40 percent, with 10 percent reserved for small and marginal farmers.Intermediate
Agriculture is split into farm credit, agriculture infrastructure and ancillary activities. A marginal farmer holds up to one hectare, roughly 2.5 acres, and a small farmer holds between one and two hectares, roughly 2.5 to 5 acres. The small and marginal farmers sub-target rose along a glide path to 10 percent of ANBC from FY 2023-24. Landless labourers, tenant farmers, oral lessees and share croppers are treated as small and marginal farmers, and so are Self Help Groups and Joint Liability Groups of such farmers up to specified limits.
MSME classification and the micro enterprises sub-target
Micro enterprises carry a 7.5 percent sub-target, and MSME limits were revised upward with effect from 1 April 2025.Intermediate
Under notification S.O. 1364(E) of 21 March 2025, a micro enterprise has investment up to ₹2.5 crore and turnover up to ₹10 crore, a small enterprise up to ₹25 crore and ₹100 crore, and a medium enterprise up to ₹125 crore and ₹500 crore. Both criteria must be satisfied together, and exports are excluded from turnover. All bank loans to micro, small and medium enterprises qualify as priority sector without any ceiling, and the 7.5 percent sub-target applies to micro enterprises alone. Older material quoting ₹1 crore, ₹10 crore and ₹50 crore for investment is out of date.
Weaker sections
Lending to weaker sections carries a 12 percent target of ANBC and covers small farmers, artisans, SHGs and specified disadvantaged groups.Intermediate
The weaker sections target moved along a glide path to 12 percent of ANBC from FY 2023-24. Covered borrowers include small and marginal farmers, artisans and village industries with credit limits up to ₹1 lakh, beneficiaries of the Differential Rate of Interest scheme, Scheduled Castes and Scheduled Tribes, self help groups, persons with disabilities, minority communities and distressed persons taking loans to repay non-institutional debt. The 2025 Directions widened the list further and removed the cap on loans by urban co-operative banks to individual women beneficiaries. The Differential Rate of Interest scheme itself lends at 4 percent to the poorest borrowers.
Education and housing under PSL
Education loans up to ₹25 lakh per individual and housing loans up to ₹50 lakh in the largest cities qualify as priority sector.Intermediate
The 2025 Directions raised the education ceiling to ₹25 lakh per individual, including vocational courses, and the loan stays classified as priority sector until repayment. Housing is now graded by population: up to ₹50 lakh in centres with population of 50 lakh and above with the dwelling unit costing no more than ₹63 lakh, up to ₹45 lakh in centres of 10 lakh to 50 lakh with a ₹57 lakh cost cap, and up to ₹35 lakh elsewhere. Loans to a bank's own employees are excluded. Older material quoting ₹10 lakh for education and ₹35 lakh as the metropolitan housing ceiling is superseded.
Renewable energy and social infrastructure
Renewable energy loans up to ₹35 crore per borrower and social infrastructure loans up to ₹8 crore per borrower qualify as priority sector.Advanced
Renewable energy covers solar generation, biomass, wind mills, micro hydel and non-conventional street lighting and village electrification, with a separate limit of ₹10 lakh per household. Social infrastructure covers schools, drinking water and sanitation facilities and health care in Tier 2 to Tier 6 centres, with health infrastructure carrying its own per borrower limit. Both ceilings were raised by the 2025 Directions, from ₹30 crore and ₹5 crore respectively. Start-ups are eligible for bank finance up to ₹50 crore under the others category.
PSL targets for RRBs, SFBs and UCBs
Regional rural banks and small finance banks must lend 75 percent of ANBC to priority sectors, while urban co-operative banks must lend 60 percent.Advanced
The 2025 Directions apply to all commercial banks including RRBs, small finance banks, local area banks and primary urban co-operative banks other than salary earners banks. The overall target for urban co-operative banks was cut from 75 percent to 60 percent of ANBC or CEOBSE, whichever is higher. Foreign banks with fewer than twenty branches must lend 40 percent, of which up to 32 percent may be export credit. The 2025 framework also introduced a weight based adjustment so that districts with low per capita priority sector credit attract a higher weight, correcting regional skew.
Priority sector lending certificates
PSLCs let a bank with surplus priority sector lending sell the compliance credit to a bank facing a shortfall, without transferring the loan.Advanced
Priority Sector Lending Certificates (PSLCs) were recommended by the Raghuram Rajan led Committee on Financial Sector Reforms and launched by the RBI in April 2016. There are four types: PSLC Agriculture, PSLC Small and Marginal Farmers, PSLC Micro Enterprises and PSLC General. Trading takes place on the RBI's e-Kuber platform in multiples of ₹25 lakh, and all certificates expire on 31 March irrespective of when they were bought. Only the compliance moves; the underlying loan, its credit risk and its interest stay with the originating bank.
Kisan Credit Card
The Kisan Credit Card gives farmers a revolving short term credit limit for cultivation and allied expenses.Intermediate
The scheme was introduced in 1998 on the recommendation of the R. V. Gupta Committee and is issued by commercial banks, RRBs, small finance banks and co-operatives. The collateral free limit rose from ₹1.6 lakh to ₹2 lakh per borrower with effect from 1 January 2025. Under the Modified Interest Subvention Scheme the covered loan limit was raised from ₹3 lakh to ₹5 lakh in the Union Budget 2025-26, with interest effectively at 7 percent and a further 3 percent prompt repayment incentive bringing it to 4 percent. Coverage has been extended to animal husbandry and fisheries.
090-099 · 10 terms
NRI accounts and RBI norms
Who counts as an NRI, the three deposit accounts they may hold, and the FEMA rules that govern repatriation.
Non-Resident Indian, PIO and OCI
An NRI is an Indian citizen resident outside India for employment, business or an uncertain stay, judged by days spent in India.Intermediate
Under the Foreign Exchange Management Act, 1999 a person is resident in India if they stayed here for more than 182 days in the preceding financial year and intend to remain. A Person of Indian Origin (PIO) holds a foreign passport but has Indian ancestry, and the PIO card scheme was merged into the Overseas Citizen of India (OCI) card in 2015. For banking, NRIs and PIOs get the same deposit facilities. The income tax definition of residence differs from the FEMA definition, which is a favourite trap in descriptive papers.
Non-Resident Ordinary account
An NRO account holds income earned in India such as rent, dividends and pension, and is fully taxable in India.Intermediate
When a resident becomes an NRI, the existing savings account is redesignated as a Non-Resident Ordinary (NRO) account. It is maintained in rupees, may be a savings, current, recurring or fixed deposit, and can be held jointly with a resident Indian. Interest is subject to tax deduction at source in India. Repatriation from an NRO account is capped at USD 1 million per financial year, net of applicable taxes, on production of a certificate from a chartered accountant. This one million dollar cap is the standard distinguishing point against the NRE account.
Non-Resident External account
An NRE account is a rupee account funded from foreign earnings, with interest exempt from Indian income tax and full repatriability.Intermediate
Only money earned abroad may be credited to a Non-Resident External (NRE) account, which is the mirror image of the NRO account. It may be opened jointly with another NRI, or with a resident close relative on a former or survivor basis. The minimum tenure of an NRE term deposit is one year. Interest is exempt from income tax, wealth tax and gift tax in India, and both principal and interest are freely repatriable. The account holder carries the exchange rate risk, because the balance sits in rupees.
FCNR(B) account
An FCNR(B) account is a term deposit held in permitted foreign currency, so the depositor carries no rupee exchange risk.Intermediate
The Foreign Currency Non-Resident (Bank) account can only be a term deposit, with a minimum tenure of one year and a maximum of five years. It may be held in any freely convertible currency permitted by the RBI, commonly the US dollar, pound sterling, euro, yen, Australian dollar and Canadian dollar. Interest is exempt from Indian income tax and the deposit is fully repatriable. Since the London Interbank Offered Rate was fully discontinued in 2023, banks reference the Alternative Reference Rate for the relevant currency, such as SOFR for the US dollar, when pricing these deposits.
SNRR account
A Special Non-Resident Rupee account lets a person resident outside India settle bona fide rupee transactions with an Indian counterparty.Advanced
The Special Non-Resident Rupee (SNRR) account is non-interest bearing and is opened with an authorised dealer bank for specified purposes such as external commercial borrowings, trade credit, trade invoicing in rupees and business related transactions outside the International Financial Services Centre. The RBI has progressively liberalised the tenure restriction to support rupee invoicing of international trade. It differs from an NRO or NRE account in that the holder need not be of Indian origin at all. Balances are repatriable, subject to payment of applicable taxes.
Nostro, vostro and loro accounts
A nostro account is our account with you abroad; a vostro account is your account with us in India; a loro account is a third party's account.Advanced
A nostro account is one an Indian bank keeps with a foreign bank in that country's currency, for example State Bank of India holding US dollars with a bank in New York. A vostro account is one a foreign bank keeps with an Indian bank in rupees. Since July 2022 the RBI has permitted Special Rupee Vostro Accounts so that international trade can be invoiced and settled in Indian rupees, a mechanism used with several partner countries. A loro account is how a bank refers to an account maintained by a third bank, and it appears mainly in objective questions.
Repatriation and the USD 1 million scheme
An NRI may remit up to USD 1 million per financial year from NRO balances and from sale proceeds of assets in India.Advanced
The limit applies to the aggregate of NRO balances, sale proceeds of immovable property, and assets acquired by way of inheritance or legacy. Documentation includes Form 15CA filed by the remitter and Form 15CB certified by a chartered accountant confirming that taxes have been paid. NRE and FCNR(B) balances are outside this cap because they are fully repatriable by definition. Current income such as rent, dividend and pension is also freely repatriable and is not counted against the one million dollar ceiling.
Liberalised Remittance Scheme
LRS allows a resident individual to remit up to USD 250,000 per financial year for permitted current and capital account transactions.Intermediate
The Liberalised Remittance Scheme (LRS) was introduced in 2004 with a limit of USD 25,000 and now stands at USD 250,000 per person per financial year, including minors, with the guardian countersigning. Permitted uses include overseas education, travel, medical treatment, gifts, maintenance of relatives, purchase of property abroad and investment in foreign shares. It cannot be used for margin trading, lottery, or remittances to countries identified as non-cooperative by the Financial Action Task Force. Remittances above the threshold attract tax collected at source, with education and medical remittances treated more favourably.
DTAA and the Tax Residency Certificate
A Double Taxation Avoidance Agreement stops the same income being taxed in both countries, and a TRC is the proof needed to claim its benefit.Advanced
India has Double Taxation Avoidance Agreements (DTAAs) with more than ninety countries, and relief works either through exemption in one country or through a credit for tax paid in the other. Without a DTAA claim, interest on an NRO deposit attracts tax deduction at source at 30 percent plus surcharge and cess; with a valid claim the treaty rate, often between 10 and 15 percent, applies. To claim the benefit the NRI submits a Tax Residency Certificate (TRC) from the country of residence, along with Form 10F and a no permanent establishment declaration, to the bank each year.
Foreign Exchange Management Act, 1999
FEMA is the civil law governing foreign exchange transactions in India, replacing the criminal law framework of FERA.Intermediate
The Foreign Exchange Management Act (FEMA) came into force on 1 June 2000, replacing the Foreign Exchange Regulation Act, 1973 whose violations were criminal offences with the burden of proof on the accused. Under FEMA, contraventions are civil and are compounded with a monetary penalty. Current account transactions are generally free unless specifically restricted, while capital account transactions are permitted only to the extent the RBI or the Central Government allows. Enforcement rests with the Directorate of Enforcement, and authorised dealer banks are the front line of compliance.
100-109 · 10 terms
Payment systems in India
NPCI and its product family, the three fund transfer rails, and the codes that route money between banks.
National Payments Corporation of India
NPCI is the umbrella organisation for retail payments in India, set up in 2008 as a not-for-profit company by the RBI and IBA.Intermediate
The National Payments Corporation of India (NPCI) was incorporated in December 2008 under Section 25 of the Companies Act, 1956 with the RBI and the Indian Banks Association behind it, and it began operations in 2009. Its products include the National Financial Switch for ATM interoperability, RuPay, the Immediate Payment Service, the Unified Payments Interface, BHIM, the Aadhaar Enabled Payment System, the National Automated Clearing House, the Bharat Bill Payment System, FASTag and the Cheque Truncation System. NPCI International Payments Limited was set up in 2020 to take UPI and RuPay abroad. Regulation of all of this flows from the Payment and Settlement Systems Act, 2007.
Real Time Gross Settlement
RTGS settles large value transfers one by one in real time, with a minimum of ₹2 lakh and no upper limit.Basic
Gross settlement means each instruction is settled individually rather than netted against others, and real time means settlement happens as the instruction is processed, which makes the transfer final and irrevocable. Real Time Gross Settlement (RTGS) has been available round the clock on all days since 14 December 2020, making India one of the few countries with a 24x7 large value system. It is operated by the RBI itself, unlike the NPCI operated retail systems. The RBI has removed processing charges levied on banks, and banks may not charge inward RTGS beneficiaries.
National Electronic Funds Transfer
NEFT transfers funds in half hourly batches with no minimum or maximum amount, and runs 24x7 on all days.Basic
National Electronic Funds Transfer (NEFT) works on deferred net settlement, so instructions are collected and settled in batches rather than one by one. It has run in 48 half hourly batches round the clock since 16 December 2019, and the RBI removed charges on NEFT and RTGS for savings account holders from January 2020. There is no minimum or maximum amount for NEFT, though banks route transfers of ₹2 lakh and above through RTGS where speed matters. Both NEFT and RTGS require the beneficiary's account number and IFSC.
Immediate Payment Service
IMPS is NPCI's instant interbank transfer service available round the clock, with a per transaction limit of ₹5 lakh.Intermediate
The Immediate Payment Service (IMPS) was launched in November 2010 and was the first Indian rail to offer instant 24x7 interbank transfer, well before NEFT and RTGS went round the clock. The per transaction limit was raised from ₹2 lakh to ₹5 lakh in 2021, though individual banks may set lower caps. Transfers can be made using the account number and IFSC, or using the Mobile Money Identifier and mobile number, where the MMID is a seven digit code. UPI is built on top of the IMPS infrastructure, which is why UPI settles instantly.
Unified Payments Interface
UPI lets a customer link several bank accounts to one mobile application and transfer money instantly using a virtual payment address.Basic
The Unified Payments Interface (UPI) was launched by NPCI in April 2016 and runs on the IMPS infrastructure. A Virtual Payment Address hides the account number, so no bank details are exchanged. The standard person to person limit is ₹1 lakh a day with most banks allowing about twenty transactions daily. From 15 September 2025 NPCI raised person to merchant limits in specified categories such as insurance, capital markets, travel, collections and the Government e-Marketplace to ₹5 lakh per transaction and ₹10 lakh a day. UPI Lite handles small offline payments and UPI 123Pay serves feature phones through the *99# channel.
Indian Financial System Code
The IFSC is an eleven character alphanumeric code that identifies a specific bank branch in the NEFT and RTGS network.Basic
The first four characters are alphabetic and represent the bank, the fifth is always zero and is kept as a control character for future use, and the last six identify the branch and may be alphanumeric. IFSC is mandatory for NEFT, RTGS and IMPS transfers made using the account number route. Do not confuse it with the nine digit MICR code, which is used for cheque clearing, or with the SWIFT code, which is used for cross border transfers. When banks merge, IFSC codes of the amalgamated branches are reissued under the anchor bank's prefix.
SWIFT code
The SWIFT code is an eight or eleven character Bank Identifier Code used to route international financial messages.Advanced
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is a Belgium based messaging network; it moves instructions, not money, and the money itself moves through correspondent nostro and vostro accounts. The code is built as four characters for the bank, two for the country, two for the location and an optional three for the branch, so an eight character code refers to the head office. The Punjab National Bank fraud of 2018 turned on SWIFT messages issued without matching entries in the core banking system, after which the RBI mandated integration of SWIFT with core banking. Structured Financial Messaging Solution is the domestic equivalent.
Debit cards, credit cards and prepaid instruments
A debit card draws on your own balance, a credit card draws on a sanctioned limit, and a prepaid instrument holds value loaded in advance.Intermediate
A credit card is a debt instrument with an interest free period and interest charged only on the amount utilised, and it requires eligibility screening on the basis of credit score and income. A debit card needs no eligibility check because it can only spend what is already in the account. Prepaid Payment Instruments (PPIs) are wallets, cards or vouchers, split into small PPIs and full KYC PPIs, with full KYC PPIs allowing a balance of up to ₹2 lakh and interoperability through UPI. Card tokenisation, mandatory since October 2022, replaces the actual card number with a token so merchants no longer store card data.
NACH, ECS and e-mandate
NACH is NPCI's bulk clearing platform for recurring debits and credits, and it has replaced the older Electronic Clearing Service.Intermediate
National Automated Clearing House (NACH) handles high volume repetitive transactions such as salary, pension, dividend and subsidy credits, and utility bill, loan instalment and insurance premium debits. It runs on a mandate authorising the bank to debit the account, and since 1 August 2021 NACH has been available on all days of the year. The Aadhaar Payment Bridge System within NACH is the rail that carries Direct Benefit Transfer to crore of beneficiaries. A standing instruction is the equivalent given directly to one's own bank, while e-mandate and UPI AutoPay handle digital recurring authorisations.
Aadhaar Enabled Payment System
AePS lets a customer withdraw cash, deposit money and check balance at a micro ATM using only an Aadhaar number and a fingerprint.Intermediate
The Aadhaar Enabled Payment System (AePS) needs no card, PIN, cheque or signature, which makes it the workhorse of last mile banking through Business Correspondents. The customer supplies the bank name, Aadhaar number and biometric, and the transaction is authenticated against the Unique Identification Authority of India database. It supports cash withdrawal, cash deposit, balance enquiry, mini statement and Aadhaar to Aadhaar fund transfer. The Bharat Bill Payment System is the parallel NPCI platform for standardised bill collection, and both sit under the Payment and Settlement Systems Act, 2007.
110-120 · 11 terms
Financial inclusion and the banking ombudsman
The institutions and grievance machinery that carry banking to the last mile, ending with the integrated ombudsman scheme.
Financial inclusion
Financial inclusion is ensuring that every household has affordable access to banking, credit, insurance, pension and payment services.Basic
The Rangarajan Committee on Financial Inclusion (2008) framed the definition India uses. The RBI tracks progress through a composite Financial Inclusion Index built on access, usage and quality, published annually for the year ending March. The main instruments have been the no-frills account of 2005, later renamed the Basic Savings Bank Deposit Account, the Business Correspondent model of 2006, Pradhan Mantri Jan Dhan Yojana from 2014 and the JAM trinity of Jan Dhan, Aadhaar and mobile. Access is now near universal, so the policy focus has shifted from opening accounts to their active use.
Basic Savings Bank Deposit Account
A BSBDA is a zero balance savings account with a free debit card and at least four free withdrawals a month.Basic
The no-frills account was introduced in November 2005 and all such accounts were converted into Basic Savings Bank Deposit Accounts (BSBDAs) in August 2012. There is no minimum balance requirement, deposits are unlimited in number, and the bank must allow at least four withdrawals a month at branches and ATMs free of charge. From 1 July 2019 the RBI required banks to give an ATM cum debit card free of issuance and annual charges, and cheque books beyond the free entitlement may be charged. A customer may hold only one BSBDA in one bank, and cannot hold any other savings account in the same bank alongside it.
Small account
A small account is opened for a customer who cannot furnish an Officially Valid Document, with strict caps on balance and turnover.Intermediate
Aggregate credits in a small account cannot exceed ₹1 lakh in a year, aggregate withdrawals and transfers cannot exceed ₹10,000 in a month, and the balance at any point cannot exceed ₹50,000. It is opened on the basis of a self attested photograph and signature or thumb impression in the presence of a bank official. It stays valid for twelve months, extendable by another twelve months if the customer shows proof of having applied for an Officially Valid Document. Foreign remittances cannot be credited to a small account.
Pradhan Mantri Jan Dhan Yojana
PMJDY is the national mission for financial inclusion launched on 28 August 2014, offering a zero balance account with insurance and overdraft.Basic
The account is a Basic Savings Bank Deposit Account with a free RuPay debit card carrying accident insurance of ₹2 lakh for accounts opened from 28 August 2018 and ₹1 lakh for earlier accounts. An overdraft of up to ₹10,000 is available to one member per household after six months of satisfactory operation, preferably the woman of the household, and the eligible age band is 18 to 65 years. The original focus on every household shifted to every unbanked adult in August 2018. More than 56 crore accounts have been opened, with women holding roughly half of them, and the scheme is the delivery rail for Direct Benefit Transfer.
Business Correspondent
A Business Correspondent is a retail agent engaged by a bank to deliver banking services at locations away from a branch.Intermediate
The model was permitted by the RBI in January 2006, initially through non-governmental organisations and later widened to individuals, kirana shop owners, retired teachers and corporate entities including telecom companies. Business Correspondents open accounts, accept small deposits, disburse small credit and handle remittances, usually through a micro ATM using the Aadhaar Enabled Payment System. The bank remains fully liable for the acts of its agent, and there is no distance criterion for BC operations. Business Facilitators, by contrast, only support the bank in sourcing and follow up and cannot handle cash.
Lead Bank Scheme
Under the Lead Bank Scheme each district is assigned to one bank that coordinates credit planning for that district.Intermediate
The scheme was introduced in December 1969 after the National Credit Council study group under D. R. Gadgil recommended an area approach, and the Bankers Committee under F. K. F. Nariman gave it its present shape and name. The lead bank prepares the District Credit Plan, convenes the District Consultative Committee and the District Level Review Committee, and identifies unbanked centres for branch expansion. At the state level the State Level Bankers Committee performs the coordinating role. The High Level Committee under Usha Thorat reviewed the scheme in 2009 and recommended that it continue with a sharper focus on financial inclusion.
NABARD
NABARD is the apex development bank for agriculture and rural development, established on 12 July 1982.Intermediate
The National Bank for Agriculture and Rural Development (NABARD) was set up under an Act of Parliament following the recommendations of the CRAFICARD committee chaired by B. Sivaraman. It refinances co-operative banks, Regional Rural Banks and other institutions, supervises RRBs and co-operative banks, and administers the Rural Infrastructure Development Fund into which priority sector shortfalls are deposited. It launched the Self Help Group Bank Linkage Programme in 1992, now the world's largest microfinance programme. NABARD is wholly owned by the Government of India after the RBI transferred its residual stake in 2018.
Co-operative banks
Co-operative banks are member owned institutions split into urban co-operative banks and a three tier rural co-operative structure.Advanced
Rural co-operatives on the short term side run in three tiers: State Co-operative Banks at the apex, District Central Co-operative Banks at the district level and Primary Agricultural Credit Societies at the village level. Long term credit comes through State and Primary Co-operative Agriculture and Rural Development Banks. Urban Co-operative Banks (UCBs) may be scheduled or non-scheduled and are graded into four tiers by deposit size under the RBI's 2022 framework. Since the Banking Regulation (Amendment) Act, 2020 the RBI has full supervisory powers over co-operative banks, while registration stays with the Registrar of Co-operative Societies.
Deposit Insurance and Credit Guarantee Corporation
DICGC insures bank deposits up to ₹5 lakh per depositor per bank, covering both principal and interest.Intermediate
The Deposit Insurance and Credit Guarantee Corporation (DICGC) is a wholly owned subsidiary of the RBI, formed in 1978 by merging the Deposit Insurance Corporation with the Credit Guarantee Corporation of India. Cover was raised from ₹1 lakh to ₹5 lakh with effect from 4 February 2020, and the premium is paid by the bank, not the depositor. All commercial banks, RRBs, local area banks, small finance banks, payments banks, foreign bank branches in India and co-operative banks are covered; primary co-operative societies are not. Section 18A, inserted in 2021, requires interim payment to depositors within ninety days when a bank is placed under restrictions. A proposal to raise the ₹5 lakh limit has been under consideration, so verify before your exam.
Reserve Bank Integrated Ombudsman Scheme, 2021
RB-IOS merges the three earlier ombudsman schemes into one jurisdiction-free grievance channel built on deficiency in service.Intermediate
Launched on 12 November 2021 on a One Nation One Ombudsman approach, it covers banks, NBFCs, payment system participants and credit information companies. Complaints go to a Centralised Receipt and Processing Centre at Chandigarh, and the toll free number is 14448. A customer must first complain to the bank and may approach the Ombudsman if there is no reply within thirty days or the reply is unsatisfactory, within one year of that reply. There is no limit on the disputed amount, but compensation for consequential loss is capped at ₹20 lakh plus up to ₹1 lakh for time lost, expenses and mental anguish. Appeals lie with the Executive Director in charge at the RBI within thirty days.
Internal Ombudsman
An Internal Ombudsman is a senior official inside the regulated entity who must review every complaint the entity proposes to reject.Advanced
The RBI made the appointment mandatory for banks with ten or more branches, and the Internal Ombudsman Direction, 2023 extended and harmonised the framework across banks, NBFCs, credit information companies and non-bank payment system participants. The Internal Ombudsman is not a bank employee at the time of appointment, reports administratively to the Managing Director and functionally to the board's customer service committee, and cannot handle complaints on their own. Filtering rejections internally is meant to reduce the load on the RBI Ombudsman and improve the quality of first level redress. Customers do not approach the Internal Ombudsman directly.
How to revise this list
Do not read all 120 entries in one sitting. Take two chapters a day, tick what you have genuinely learnt, and come back on day three to the same two chapters using the flashcard drill alone. Recall is what builds retention; rereading only builds familiarity, which feels like knowledge and disappears in the exam hall.
Separate the two kinds of content deliberately. Definitions, Acts, committee names and years are static and will not change before your exam, so learn them once and revise them rarely. Rates, ceilings, targets and institution counts move, so keep a single page of numbers and refresh it after every monetary policy statement and every Union Budget. The five figures in the strip at the top of this page are the ones most likely to be stale by the time you sit the paper.
Frequently asked questions
What is the RBI policy corridor as of July 2026?
The repo rate is 5.25 percent, the Standing Deposit Facility rate is 5.00 percent and the Marginal Standing Facility and Bank Rate are 5.50 percent. The Cash Reserve Ratio is 3.00 percent and the Statutory Liquidity Ratio is 18.00 percent. The Monetary Policy Committee last cut the repo rate in December 2025 and has held it since. Rates change every two months, so verify the corridor after each policy statement.
How many banking terms do I actually need for IBPS, SBI or RBI Grade B?
For preliminary and mains objective papers, a working command of about 120 to 150 static terms covers almost everything asked, because the same definitions recycle across years. What separates candidates is not the size of the list but whether the figures attached to each term are current. RBI Grade B Phase 2 and interviews go further and expect you to explain the mechanism and the policy reasoning, which is why every entry here carries an explanation rather than only a definition.
What changed in priority sector lending in 2025?
The Reserve Bank of India (Priority Sector Lending, Targets and Classification) Directions, 2025 took effect on 1 April 2025 and replaced the 2020 framework. The education ceiling rose to ₹25 lakh, housing limits were regraded to ₹50 lakh, ₹45 lakh and ₹35 lakh by centre population, renewable energy went to ₹35 crore and social infrastructure to ₹8 crore. The overall target for urban co-operative banks was cut from 75 percent to 60 percent of ANBC, and a weight based adjustment was introduced to correct regional skew in credit flow.
Can I still name only one nominee for my bank account?
You may name one, but you are no longer restricted to one. The Banking Laws (Amendment) Act, 2025 permits up to four nominees, notified in phases on 1 August 2025 and 1 November 2025. For deposits you may nominate simultaneously with a specified share for each nominee; for lockers and articles in safe custody the nomination is successive, so the second nominee steps in only if the first is not available. Remember that a nominee receives the money as a trustee for the legal heirs and does not become the owner.
Is the ₹2000 note still valid money?
Yes. The ₹2000 note was withdrawn from circulation on 19 May 2023 under the Clean Note Policy, but it was never demonetised and continues to be legal tender. About 98.47 percent of the notes had returned by 30 April 2026, leaving roughly ₹5,451 crore outstanding. Exchange and deposit continue at nineteen RBI Issue Offices and by post. Examiners like this distinction between withdrawal and demonetisation, so state it explicitly in a descriptive answer.
How is the new cheque clearing system different from the old CTS?
The old Cheque Truncation System processed cheques in fixed batches and credit could take up to two working days. Under the RBI circular of 13 August 2025, clearing moved to a continuous model with settlement on realisation. Phase 1 from 4 October 2025 introduced a single presentation session from 10 am to 4 pm with same day credit. Phase 2 from 3 January 2026 requires the drawee bank to confirm or reject within three clear hours, failing which the cheque is deemed approved. Any study material saying cheques take two days is now wrong.
