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Cheatsheet: Banking in India
1. Reserve Bank of India (RBI)
1.1 Establishment and Governance
| Aspect | Details |
|---|---|
| Establishment Date | April 1, 1935 |
| Nationalization | January 1, 1949 |
| Headquarters | Mumbai |
| Governing Act | Reserve Bank of India Act, 1934 |
| Governor (Current) | Appointed by Government of India for 4-year term |
| Central Board | 1 Governor + 4 Deputy Governors + 10 Directors + 2 Government Officials |
1.2 Key Functions
- Monetary authority: Formulates and implements monetary policy
- Regulator and supervisor of financial system
- Manager of foreign exchange under FEMA, 1999
- Issuer of currency (except ₹1 coin and note issued by Ministry of Finance)
- Banker to Government (Central and State Governments)
- Banker to banks: Maintains accounts of scheduled banks
- Developmental role: Promotes banking habits and financial inclusion
1.3 Monetary Policy Tools
| Tool | Description |
|---|---|
| Repo Rate | Rate at which RBI lends to commercial banks |
| Reverse Repo Rate | Rate at which RBI borrows from commercial banks |
| Cash Reserve Ratio (CRR) | Percentage of deposits banks must maintain with RBI as cash reserves |
| Statutory Liquidity Ratio (SLR) | Percentage of deposits banks must maintain as liquid assets |
| Marginal Standing Facility (MSF) | Emergency lending facility for banks at higher rate than repo |
| Bank Rate | Rate at which RBI lends long-term to banks without collateral |
1.4 Financial Stability Measures
- Prescribes Capital Adequacy Ratio (CAR) - minimum 9% for Indian banks
- Conducts financial sector assessments and stress tests
- Issues guidelines on income recognition, asset classification, and provisioning
- Implements Basel III norms for banking regulation
2. Banking Structure in India
2.1 Classification of Banks
| Type | Description |
|---|---|
| Scheduled Banks | Banks included in Second Schedule of RBI Act, 1934; minimum paid-up capital of ₹5 lakh |
| Non-Scheduled Banks | Banks not included in Second Schedule; do not meet RBI requirements |
| Commercial Banks | Public sector, private sector, foreign banks providing general banking services |
| Cooperative Banks | State, district, and urban cooperative banks operating on cooperative principles |
| Regional Rural Banks (RRBs) | Government-owned banks focusing on rural and agricultural credit |
| Payment Banks | Accept deposits up to ₹2 lakh per customer; cannot lend or issue credit cards |
| Small Finance Banks | Provide financial services to unserved and underserved segments |
2.2 Public Sector Banks
2.2.1 Nationalization History
- First phase: July 19, 1969 - 14 major banks nationalized
- Second phase: April 15, 1980 - 6 more banks nationalized
- State Bank of India nationalized under SBI Act, 1955
2.2.2 Current PSBs (Post Consolidation)
- 12 Public Sector Banks as of 2023
- State Bank of India (largest PSB)
- Punjab National Bank, Bank of Baroda, Canara Bank, Union Bank of India, Indian Bank, Bank of India
- Central Bank of India, Indian Overseas Bank, UCO Bank, Bank of Maharashtra, Punjab & Sind Bank
2.3 Private Sector Banks
- ICICI Bank, HDFC Bank, Axis Bank (large private banks)
- Kotak Mahindra Bank, IndusInd Bank, Yes Bank
- IDFC First Bank, Bandhan Bank, RBL Bank
- Licensed under Banking Regulation Act, 1949
2.4 Regional Rural Banks (RRBs)
| Aspect | Details |
|---|---|
| Establishment | October 2, 1975 under RRB Act, 1976 |
| Purpose | Provide credit to rural areas, especially agriculture and small industries |
| Ownership Pattern | Central Government 50%, State Government 15%, Sponsor Bank 35% |
| Current Number | 43 RRBs (after consolidation) |
| Area of Operation | Limited to specific regions within states |
2.5 Payment Banks
- Established under RBI guidelines 2014
- Maximum deposit: ₹2 lakh per customer
- Cannot issue loans or credit cards
- Examples: Paytm Payment Bank, India Post Payment Bank, Airtel Payment Bank
- Can issue debit cards, ATM cards, and online banking
2.6 Small Finance Banks
- Established to promote financial inclusion
- Focus on small business units, small and marginal farmers, micro and small industries
- Minimum capital requirement: ₹200 crore
- 75% of lending must be to priority sector
- Examples: AU Small Finance Bank, Ujjivan Small Finance Bank, Equitas Small Finance Bank
3. Banking Regulation and Legislation
3.1 Major Banking Acts
| Act | Key Provisions |
|---|---|
| RBI Act, 1934 | Establishes RBI as central bank; defines its powers and functions |
| Banking Regulation Act, 1949 | Regulates all banking companies in India; licensing, management, operations |
| Nationalization Acts (1970, 1980) | Nationalized major commercial banks |
| DICGC Act, 1961 | Establishes Deposit Insurance and Credit Guarantee Corporation |
| SARFAESI Act, 2002 | Enables banks to recover Non-Performing Assets without court intervention |
| Banking Companies Act, 1970 | Provided for acquisition of major banks |
| IBC, 2016 | Insolvency and Bankruptcy Code for resolution of stressed assets |
3.2 Deposit Insurance
- DICGC provides insurance cover up to ₹5 lakh per depositor per bank
- Covers principal and interest amount across all deposit accounts
- Effective from February 4, 2020 (increased from ₹1 lakh)
- Applies to savings, current, fixed, and recurring deposits
3.3 Priority Sector Lending
| Category | Target |
|---|---|
| Domestic Banks | 40% of Adjusted Net Bank Credit (ANBC) |
| Foreign Banks | 40% of ANBC (branches > 20) or credit equivalent to off-balance sheet exposure |
| Agriculture | 18% of ANBC |
| Micro Enterprises | 7.5% of ANBC |
| Weaker Sections | 12% of ANBC |
3.3.1 Priority Sector Categories
- Agriculture (farm credit, allied activities)
- Micro, Small and Medium Enterprises (MSMEs)
- Export credit
- Education (loans up to ₹10 lakh for studies in India)
- Housing (loans up to ₹35 lakh in metropolitan centers, ₹25 lakh in other centers)
- Social infrastructure (health, water, sanitation)
- Renewable energy (loans up to ₹30 crore)
- Weaker sections (SC/ST, small farmers, artisans)
4. Financial Inclusion and Digital Banking
4.1 Pradhan Mantri Jan Dhan Yojana (PMJDY)
| Aspect | Details |
|---|---|
| Launch Date | August 28, 2014 |
| Objective | Universal access to banking facilities with zero balance accounts |
| Features | RuPay debit card, overdraft facility of ₹10,000, accident insurance cover of ₹2 lakh |
| Life Insurance | ₹30,000 for accounts opened before January 26, 2015 |
4.2 Digital Payment Systems
4.2.1 National Payment Systems
| System | Description |
|---|---|
| NEFT | National Electronic Funds Transfer; 24x7 settlement since December 2019 |
| RTGS | Real Time Gross Settlement; minimum ₹2 lakh; immediate transfer; 24x7 since December 2020 |
| IMPS | Immediate Payment Service; instant 24x7 transfer using mobile, internet, ATM |
| UPI | Unified Payments Interface; instant mobile-based payment; launched August 2016 |
| BHIM | Bharat Interface for Money; UPI-based app launched December 30, 2016 |
| NACH | National Automated Clearing House; bulk transactions, mandates, ECS replacement |
4.2.2 Card Payment Systems
- RuPay: Indigenous card payment network launched 2012 by NPCI
- Debit cards, credit cards, prepaid cards
- Point of Sale (PoS) terminals for merchant transactions
- Contactless cards using NFC technology
4.3 NPCI Initiatives
- National Payments Corporation of India: Umbrella organization for retail payments
- Founded: 2008; promoted by RBI and Indian Banks' Association
- Operates RuPay, UPI, IMPS, NETC (FASTag), AePS, BHIM
- UPI transaction limit: ₹1 lakh per transaction
- FASTag: Electronic toll collection on national highways
4.4 Other Financial Inclusion Schemes
- Pradhan Mantri MUDRA Yojana: Micro-credit to small businesses (Shishu up to ₹50,000, Kishore ₹50,000-₹5 lakh, Tarun ₹5-₹10 lakh)
- Stand Up India: Loans ₹10 lakh to ₹1 crore for SC/ST and women entrepreneurs
- Pradhan Mantri Suraksha Bima Yojana: Accident insurance ₹2 lakh for ₹20 annual premium
- Pradhan Mantri Jeevan Jyoti Bima Yojana: Life insurance ₹2 lakh for ₹436 annual premium
- Atal Pension Yojana: Pension scheme for unorganized sector
5. Banking Products and Services
5.1 Deposit Accounts
| Type | Features |
|---|---|
| Savings Account | Withdrawals allowed; interest paid; minimum balance requirements vary |
| Current Account | Overdraft facility; no interest; unlimited transactions; for businesses |
| Fixed Deposit | Lump sum for fixed period; higher interest; premature withdrawal penalty |
| Recurring Deposit | Monthly deposits for fixed period; fixed interest; builds savings habit |
| NRI Accounts | NRE (repatriable), NRO (non-repatriable), FCNR (foreign currency) |
5.2 Loan Products
5.2.1 Types of Loans
- Home Loan: For purchasing/constructing residential property; tenure up to 30 years
- Personal Loan: Unsecured loan for personal needs; higher interest rates
- Vehicle Loan: For two-wheelers, cars, commercial vehicles
- Education Loan: For higher studies in India and abroad; moratorium period available
- Gold Loan: Against gold jewelry; quick disbursement
- Business Loan: For working capital and business expansion
- Agricultural Loan: Crop loans, farm equipment, land development
5.2.2 Credit Assessment Terms
| Term | Description |
|---|---|
| CIBIL Score | Credit score ranging 300-900; maintained by TransUnion CIBIL |
| EMI | Equated Monthly Installment for loan repayment |
| Collateral | Asset pledged as security for loan |
| Margin Money | Borrower's contribution toward purchase; difference between loan and asset value |
| Loan-to-Value Ratio | Percentage of asset value that can be borrowed |
5.3 Other Banking Services
- Demand Draft (DD): Payment instrument issued by bank; guaranteed payment
- Banker's Cheque/Pay Order: Similar to DD; valid within same city
- Letter of Credit: Payment guarantee for import-export transactions
- Bank Guarantee: Assurance by bank on behalf of customer for contract fulfillment
- Locker Facility: Safe custody of valuables
- Demat Account: For holding securities in electronic form
- Forex Services: Currency exchange, forex cards for international travel
6. Key Banking Terms and Concepts
6.1 Asset Classification
| Category | Definition |
|---|---|
| Standard Asset | Performing asset with no overdue; regular principal and interest payment |
| Sub-Standard Asset | NPA for period up to 12 months |
| Doubtful Asset | NPA for more than 12 months; recovery doubtful |
| Loss Asset | Asset identified as non-recoverable by bank or auditor |
| Non-Performing Asset (NPA) | Loan overdue for 90 days or more; no interest or principal payment |
6.2 Financial Ratios and Metrics
| Ratio | Description |
|---|---|
| Capital Adequacy Ratio (CAR) | Capital as percentage of risk-weighted assets; minimum 9% in India |
| Gross NPA Ratio | Gross NPAs as percentage of total advances |
| Net NPA Ratio | Net NPAs as percentage of net advances after provisions |
| CASA Ratio | Current and Savings Account deposits as percentage of total deposits; higher is better |
| Credit-Deposit Ratio | Loans as percentage of deposits; indicates lending efficiency |
| Return on Assets (ROA) | Net income as percentage of total assets; measures profitability |
| Return on Equity (ROE) | Net income as percentage of shareholder equity |
6.3 Interest Rate Terms
- Base Rate: Minimum lending rate below which bank cannot lend (replaced by MCLR)
- MCLR: Marginal Cost of Funds based Lending Rate; effective April 1, 2016
- External Benchmark Lending Rate (EBLR): Linked to external benchmarks like repo rate; from October 1, 2019
- Spread: Difference between lending rate and cost of funds
- Prime Lending Rate: Rate charged to most creditworthy customers
6.4 Banking Operations Terms
| Term | Definition |
|---|---|
| KYC | Know Your Customer; mandatory customer identification process |
| IFSC Code | 11-character code for electronic fund transfers; identifies bank branch |
| MICR Code | 9-digit code for cheque processing using Magnetic Ink Character Recognition |
| SWIFT Code | Code for international wire transfers; Society for Worldwide Interbank Financial Telecommunication |
| Nominee | Person designated to receive account proceeds in case of account holder's death |
| Hypothecation | Charge against movable asset without possession transfer |
| Mortgage | Charge against immovable property as loan security |
| Lien | Bank's right to retain assets until debt is paid |
7. Recent Banking Reforms and Initiatives
7.1 Bank Consolidation
- Merger of State Bank associates with SBI (April 1, 2017): 5 associate banks and Bharatiya Mahila Bank merged
- First phase consolidation (April 1, 2019): Vijaya Bank and Dena Bank merged with Bank of Baroda
- Second phase consolidation (April 1, 2020): 10 PSBs merged into 4 banks
- Result: Number of PSBs reduced from 27 (2017) to 12 (2023)
7.2 Banking Reforms
7.2.1 Narasimham Committee Recommendations
- First Committee (1991): Reduced SLR and CRR, introduced CAR norms, established asset classification
- Second Committee (1998): Stronger banking system, mergers, NPA reduction
7.2.2 Recent Policy Measures
- Introduction of payment banks and small finance banks (2015)
- Implementation of Basel III norms
- Prompt Corrective Action (PCA) framework for weak banks
- Insolvency and Bankruptcy Code, 2016 for faster NPA resolution
- Bank Board Bureau (BBB) for appointments and governance
- Account Aggregator framework for financial data sharing (2021)
7.3 Technology Initiatives
- Core Banking Solutions (CBS): Centralized banking operations across branches
- Mobile Banking: Banking services through mobile applications
- Internet Banking: Online banking through web portals
- Digital KYC: Aadhaar-based e-KYC for instant account opening
- Blockchain and AI: Being explored for fraud detection and efficiency
- YONO (SBI): Integrated digital banking platform
7.4 Financial Sector Bodies
| Organization | Role |
|---|---|
| SEBI | Securities and Exchange Board of India; regulates securities market; established 1992 |
| IRDAI | Insurance Regulatory and Development Authority; regulates insurance; established 1999 |
| PFRDA | Pension Fund Regulatory and Development Authority; regulates pension sector; established 2003 |
| NABARD | National Bank for Agriculture and Rural Development; apex institution for rural credit; established 1982 |
| SIDBI | Small Industries Development Bank of India; promotes MSMEs; established 1990 |
| NHB | National Housing Bank; regulates housing finance; established 1988 |
| EXIM Bank | Export-Import Bank of India; finances foreign trade; established 1982 |
8. Banking Ombudsman and Customer Protection
8.1 Banking Ombudsman Scheme
| Aspect | Details |
|---|---|
| Introduction | 1995; revised in 2006 and 2017 |
| Purpose | Redressal of customer complaints against banks |
| Appointment | Appointed by RBI |
| Jurisdiction | Complaints up to ₹20 lakh (increased from ₹10 lakh in 2017) |
| Time Limit | Complaint within 1 year from date of reply or 1 year and 30 days if no reply |
| Process | Free of cost; decision within 30 days |
8.2 Complaint Categories
- Non-payment or delay in payment of cheques, drafts
- Non-adherence to RBI guidelines on interest rates
- Delays in clearing or collection of cheques
- Non-issuance or delay in issuance of drafts, pay orders
- Failure to issue or delay in issuing ATM/debit cards
- Unauthorized electronic fund transfers
- Loan application issues and delays
- Credit card disputes
8.3 Customer Rights
- Right to Fair Treatment: Non-discriminatory access to banking services
- Right to Transparency: Clear information on products, services, terms
- Right to Suitability: Products suited to needs; proper disclosure
- Right to Privacy: Confidentiality of customer information
- Right to Grievance Redressal: Access to complaint mechanisms
8.4 Customer Service Standards
- Cheque collection: Local within 24 hours, outstation within 7-10 days
- Locker rent: Paid annually; access during banking hours
- SMS/Email alerts: For all transactions above specified limits
- Pension payment: On first working day of month
- ATM cash availability: 99.5% uptime mandated
- Compensation for failed ATM transactions: ₹100 per day after 5 days
9. Important Banking Committees and Reports
9.1 Major Committees
| Committee | Focus Area |
|---|---|
| Narasimham Committee I (1991) | Financial sector reforms; CAR, NPA norms, SLR/CRR reduction |
| Narasimham Committee II (1998) | Banking sector reforms; strengthening banks, mergers |
| Nayak Committee (2014) | Bank governance reforms; appointment of board members |
| P.J. Nayak Committee (2014) | Governance in bank boards; autonomy and accountability |
| Urjit Patel Committee (2014) | Monetary policy framework; inflation targeting |
| Rangarajan Committee | Various including financial inclusion and priority sector |
| Damodaran Committee (2011) | Customer service in banks |
| Thorat Committee | Financial inclusion and regional banks |
9.2 Basel Norms
9.2.1 Basel Accords
- Basel I (1988): Minimum CAR of 8%; focus on credit risk
- Basel II (2004): Three pillars - minimum capital, supervisory review, market discipline
- Basel III (post-2008 crisis): Implemented in India from April 2013; higher capital requirements, leverage ratio
9.2.2 Basel III Key Requirements
| Component | Requirement |
|---|---|
| Common Equity Tier 1 (CET1) | Minimum 5.5% of risk-weighted assets |
| Tier 1 Capital | Minimum 7% of risk-weighted assets |
| Total Capital | Minimum 9% of risk-weighted assets (11.5% with conservation buffer) |
| Capital Conservation Buffer | 2.5% of risk-weighted assets |
| Leverage Ratio | Minimum 4.5% for Indian banks |
10. Quick Facts and Numbers
10.1 Key Statistics
- Number of PSBs: 12 (after consolidation)
- Largest bank by branches: State Bank of India (over 22,000 branches)
- Deposit insurance: ₹5 lakh per depositor per bank
- PMJDY accounts opened: Over 48 crore accounts
- Regional Rural Banks: 43
- Payment Banks: 6 operational
- Small Finance Banks: 10 operational
10.2 Important Dates
| Event | Date |
|---|---|
| RBI established | April 1, 1935 |
| RBI nationalized | January 1, 1949 |
| SBI Act | 1955 |
| First bank nationalization | July 19, 1969 (14 banks) |
| Second bank nationalization | April 15, 1980 (6 banks) |
| First RRB established | October 2, 1975 |
| NABARD established | July 12, 1982 |
| PMJDY launched | August 28, 2014 |
| UPI launched | August 2016 |
| Demonetization | November 8, 2016 |
10.3 Current Rates (Reference Values)
- Repo Rate: Set by RBI Monetary Policy Committee; reviewed bi-monthly
- Reverse Repo Rate: 25 basis points below repo rate
- CRR: 4.5% (varies based on RBI policy)
- SLR: 18% (varies based on RBI policy)
- Savings account interest: 2.7%-4% (varies by bank)
- Bank rate: Aligned with MSF rate
10.4 Abbreviations
- ANBC: Adjusted Net Bank Credit
- ARC: Asset Reconstruction Company
- ATM: Automated Teller Machine
- CAR: Capital Adequacy Ratio
- CBS: Core Banking Solutions
- CRR: Cash Reserve Ratio
- DICGC: Deposit Insurance and Credit Guarantee Corporation
- FCNR: Foreign Currency Non-Resident
- FEMA: Foreign Exchange Management Act
- IBA: Indian Banks' Association
- IFSC: Indian Financial System Code
- LAF: Liquidity Adjustment Facility
- MCLR: Marginal Cost of Funds based Lending Rate
- MICR: Magnetic Ink Character Recognition
- MSME: Micro, Small and Medium Enterprises
- MSF: Marginal Standing Facility
- NACH: National Automated Clearing House
- NEFT: National Electronic Funds Transfer
- NPA: Non-Performing Asset
- NPCI: National Payments Corporation of India
- NRE: Non-Resident External
- NRO: Non-Resident Ordinary
- PSL: Priority Sector Lending
- PSU: Public Sector Undertaking
- RRB: Regional Rural Bank
- RTGS: Real Time Gross Settlement
- SARFAESI: Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest
- SLR: Statutory Liquidity Ratio
- UPI: Unified Payments Interface
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