Adda 247 New Edition BA Vishal Sharma

1 Adda247 | No.
1 APP for Banking & SSC Preparation

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2 Adda247 | No. 1 APP for Banking & SSC Preparation
INDEX
Contents
PREFACE .................................................................................................................................................. 4
1. Banking Awareness for Bank Interview ............................................................................................. 5
Part 1: Banking Awareness (Theory) ....................................................................................................... 5
Topic 1: RESERVE BANK OF INDIA (RBI) & ITS FUNCTIONS ...............................................................5
Topic 2: FUNCTIONS OF RBI ........................................................................................................................7
Topic 3: FISCAL POLICY .............................................................................................................................. 22
Topic 4: SCHEDULED BANK & BANK ACCOUNTS IN INDIA ............................................................. 25
Topic 5: FINANCIAL INCLUSION.............................................................................................................. 28
Topic 6: NPA-NON-PERFORMING ASSET & SARFAESI ACT 2002 ....................................................... 32
Topic 7: HYPOTHECATION, PLEDGE, & MORTGAGE .......................................................................... 35
TOPIC 8: ALL ABOUT THE MARGINAL COST OF FUNDS BASED LENDING RATE (MCLR) ......... 37
Topic 9: IMPORTANT POINTS ON ATM IN INDIA ................................................................................ 39
Topic 10: CODES WHICH ARE USED IN BANKING SECTOR ............................................................... 40
TOPIC 11: BANKING OMBUDSMAN SCHEME 2006 .............................................................................. 41
Topic 12: DEPOSIT INSURANCE AND CREDIT GUARANTEE CORPORATION (DICGC) ............... 43
Topic 13: THE BIGGEST MERGER: SBI MERGER 2017 ............................................................................ 44
Topic 14: THE CHANGE IN THE TAX STRUCTURE IN INDIA: ALL ABOUT THE GST ................... 46
Topic 15: What are the NEGOTIABLE INSTRUMENTS & the ACT 1881? ............................................... 49
Topic 16: THE PRIORITY SECTOR LENDING (PSL) ................................................................................ 56
Topic 17: FINANCIAL MARKETS IN INDIA AND THE INSTRUMENTS ............................................. 62
Topic 18: IMPORTANT MISCELLANEOUS BANKING AWARENESS TOPICS ................................... 69
Topic 19: ACCOUNTS FOR FOREIGN (CURRENCY/PERSON) IN INDIA ............................................ 73
Topic 20: FINANCIAL INSTITUTIONS in INDIA .................................................................................... 76
Topic 21: IMPORTANT FINANCIAL TERMS IMPORTANT FOR SBI INTERVIEW ............................ 79
Topic 22: NBFC’S IN INDIA ......................................................................................................................... 84
Topic 23: DEVELOPMENTS IN THE BANKING SECTOR ....................................................................... 86
Topic 24: ALL ABOUT THE PAN CARD .................................................................................................... 91
Topic 25: ALL ABOUT THE PREPAID INSTRUMENTS ........................................................................... 93
Topic 26: RISK MANAGEMENT IN BANKING SECTOR ....................................................................... 95
Topic 27: A BRIEF ON INDIAN BANKS' ASSOCIATION (IBA) ........................................................... 101
Part 2: Banking Current Affairs-2017 ...................................................................................................104

PREFACE
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Team Adda247

1. Banking Awareness for Bank Interview
Part 1: Banking Awareness (Theory)
Topic 1: RESERVE BANK OF INDIA (RBI) & ITS FUNCTIONS
RBI established on April 1, 1935 under RBI Act 1934

(recommendations of John Hilton Young Commission 1926 –
called Royal Commission on Indian Currency & Finance), is the
central bank of the country & was nationalised w.e.f. Jan
01,1949.
Originally it was a shareholders‟ bank which was taken over by
the Central Govt. under Reserve Bank (Transfer of Public
Ownership) Act 1948 (paid up capital Rs. 5 cr).
RBI‟s central office is in Mumbai.
RBI is not expected to perform the function of accepting
deposits from the general public.
RBI has its headquarters at Mumbai.
Prime lending rate is decided by the individual banks.
RBI decides the following rates namely; Bank rate, repo rate,
reverse repo rate & cash reserve ratio.
The quantitative instruments of RBI are – bank rate policy, cash
reserve ratio & statutory liquidity ratio.
The objective of monetary policy of RBI is to control inflation;
discourage hoarding of commodities & encourage flow of credit
into neglected sector.
When RBI is lender of the last resort, it means that RBI advances
credit against eligible securities.
Government of India decides the quantity of coins to be minted.
The method which is used currently in India to issue currency
note – minimum reserve system. For issuing notes, RBI is
required to hold the minimum reserves of Rs. 200 crore of
which note less than Rs. 115 crore is to be held in gold.

Topic 2: FUNCTIONS OF RBI
Currency System in India
Along with Government of India, RBI is responsible for the

design, production and overall management of the nation‟s
currency, with the goal of ensuring an adequate supply of clean
and genuine notes.
The Government of India is the issuing authority of coins and
supplies coins to the Reserve Bank on demand. The Reserve
Bank puts the coins into circulation on behalf of the Central
Government.
The Department of Currency Management at Central Office,
Mumbai, in cooperation with the Issue Departments of the
Reserve Bank‟s Regional Offices across India oversees currency
management.
The function includes supplying and distributing adequate
quantity of currency throughout the country and ensuring the
quality of banknotes in circulation by continuous supply of
clean notes and timely withdrawal of soiled notes.
Currency chests are extended arms of the Reserve Bank Issue
Departments and are responsible for meeting the currency
requirements of their respective regions.
Tools used in Currency Management

Four printing presses print and supply banknotes. These are at
Dewas in Madhya Pradesh, Nasik in Maharashtra, Mysore in
Karnataka, and Salboni in West Bengal.

The presses in Madhya Pradesh and Maharashtra are owned by
the Security Printing and Minting Corporation of India
(SPMCIL), a wholly owned company of the Government of
India. The presses in Karnataka and West Bengal are owned by
the Bharatiya Reserve Bank Note Mudran Private Limited
(BRBNMPL), a wholly owned subsidiary of the Reserve Bank.
Coins are minted by the Government of India. Reserve Bank is
the agent of the Government for distribution, issue and
handling of coins. Four mints are in operation: Mumbai in
Maharashtra, Noida in Uttar Pradesh, Kolkata, and Hyderabad.
RBI’s Clean Note Policy

Education campaign on preferred way to handle notes: no stapling,
writing, excessive folding etc.
Timely removal of soiled notes: use of currency verification and
processing systems and sorting machines
Exchange facility for torn, mutilated or defective notes: at all
branches of commercial banks.
As per the Indian Coinage Act:

(a) a coin of any denomination not lower than one rupee, for any
sum not exceeding one thousand rupees;
(b) a half-rupee coin, for any sum not exceeding ten rupees;
(c) any other coin, for any sum not exceeding one rupee:
Note: Provided that the coin has not been defaced and has not lost
weight so as to be less than such weight as may be prescribed in its
case.

Denominations of coins and notes in circulation
Coins in circulation: 50 paise, 1, 2, 5 and 10 Rupee
Coins in India
Coins: The Government of India has the sole right to mint
coins. The designing and minting of coins in various
denominations is also the responsibility of the Government of
India. Coins are minted at the four India Government Mints at
Mumbai, Alipore (Kolkata), Saifabad (Hyderabad), Cherlapally
(Hyderabad) and NOIDA (UP).
Denominations: Coins in India are presently being issued in
denominations of one rupee, two rupees, five rupees and ten
rupees.
Note: Coins can be issued up to the denomination of Rs.1000 as per
the Coinage Act, 1906.
Types of Bank Notes in India

Contemporary Currency notes have 15 languages on the panel
which appear on the reverse of the note.
Soiled Notes: Soiled notes are those which have become dirty
and slightly cut. Notes which have numbers on two ends, i.e.
notes in the denomination of Rs.10 and above which are in two
pieces, are also treated as soiled note. The cut in such notes,
should, however, not have passed through the number panels.

Mutilated Notes: Notes which are in pieces and/or of which
the essential portions are missing can also be exchanged.
Essential portions in a currency note are name of issuing
authority, guarantee, promise clause, signature, Ashoka Pillar
emblem/portrait of Mahatma Gandhi, water mark.
Imperfect banknotes: Imperfect banknote means any banknote,
which is wholly or partially, obliterated, shrunk, washed,
altered or indecipherable but does not include a mutilated
banknote.
Notes in circulation: Rs. 5, 10, 20, 50,100, 500 and 2000
Currency Features of Rs.500 & Rs. 2000 Notes
Rs500 Note
The new Rs500 notes in the Mahatma Gandhi (New) Series are
different from the previous series in colour, size, theme, location of
security features and design elements. The size of the new note
is 66mm x 150mm. The colour of the notes is stone grey and the
predominant new theme is Indian heritage site - Red Fort.
Denomination numeral is in Devnagari. Guarantee clause,
Governor's signature, RBI emblem shifted towards right. Ashoka
pillar emblem is on right. 15 languages are written on the reverse
side of Note. For visually impaired, Circle with Rs. 500 in raised
print on the right and Bleed lines on left and right in raised
print. Swachh Bharat logo with slogan is on the reverse side of the
Note.
Rs2000 Note
The Reserve Bank of India has introduced new design banknotes in
the denomination of Rs2000 as part of Mahatma Gandhi (New)
Series. The size of the new note is 66mm x 166mm. The new
denomination has motif of the Mangalyaan on the reverse,
depicting the country's first venture in interplanetary space. The
base colour of the note is magenta. The note has other designs,
geometric patterns aligning with the overall colour scheme, both on
the obverse and the reverse. Denomination numeral is in
Devnagari. For visually impaired, Rectangle with Rs.2,000 in raised
print on right and Seven angular bleed lines in raised print. Swachh
Bharat logo with slogan is on the reverse side of the Note.
RBI Regulating Commercial Banking
The central bank has a critical role to play in ensuring the safety
and soundness of the banking system-and in maintaining financial
stability and public confidence in this system.
Mandate /Goals: Regulation aimed at protecting depositors‟
interests, orderly development and conduct of banking operations
and fostering of the overall health of the banking system and
financial stability.
Perimeter: Commercial banks, All India Financial Institutions,
Credit Information Companies, Regional Rural Banks and Local
Area Banks.
Evolution: Regulatory functions have evolved with the
development of the Indian banking system and adoption of
prudential norms based on international best practices.
Tools of Regulation
The tools used for regulation are statutory, prudential regulation,
other regulatory guidelines and moral suasion through speeches of
Governor, Deputy Governors and periodic meetings, seminars, etc.
Policy Framework
Focal points for providing framework for regulation:
Issuance of „licences‟ for opening of banks
„Authorisations‟ for opening of branches by banks in India,
governing foreign banks entry and expansion and approval of
Indian banks to operate overseas,
policy formulation, review and implementation on Prudential
Norms, Basel – II and III frameworks, validation of quantitative
models on Credit, Market and Operational Risks, Stress testing,
International Financial Reporting Standards (IFRS),
Securitisation, Resolution mechanism, etc.
Monitoring maintenance of SLR and CRR by banks,
approving appointments of chief executive officers (private
sector and foreign banks) and their compensation packages,
overseeing the amalgamation, reconstruction, and liquidation of
banking companies,
policy issues relating to customer service,
Anti-Money Laundering and Combating Financing of Terrorism
and issuing of instructions regarding KYC regulation of
financial institutions

RBI's regulating Co-operative Banking
This includes ensuring credit availability to the productive
sectors of the economy, establishing institutions designed to
build the country's financial infrastructure, expanding access to
affordable financial services and promoting financial education
and literacy.
The rural co-operative credit system in India is primarily
mandated to ensure flow of credit to the agriculture sector. It
comprises short-term and long-term co-operative credit
structures. The short-term co-operative credit structure operates
with a three-tier system - Primary Agricultural Credit Societies
(PACS) at the village level, Central Cooperative Banks (CCBs) at
the district level and State Cooperative Banks (StCBs) at the
State level. PACS are outside the purview of the Banking
Regulation Act, 1949 and hence not regulated by the Reserve
Bank of India. StCBs/DCCBs are registered under the
provisions of State Cooperative Societies Act of the State
concerned and are regulated by the Reserve Bank. Powers have
been delegated to National Bank for Agricultural and Rural
Development (NABARD) under Sec 35 A of the Banking
Regulation Act to conduct inspection of State and Central
Cooperative Banks.
Primary Cooperative Banks (PCBs), also referred to as Urban
Cooperative Banks (UCBs), cater to the financial needs of
customers in urban and semi-urban areas. UCBs are primarily
registered as cooperative societies under the provisions of either
the State Cooperative Societies Act of the State concerned or the
Multi State Cooperative Societies Act, 2002 if the area of
operation of the bank extends beyond the boundaries of one
state. The sector is heterogeneous in character with uneven
geographic spread of the banks. While many of them are unit
banks without any branch network, some of them are large in
size and operate in more than one state.
Reserve Bank regulates the banking functions of
StCBs/DCCBs/UCBs under the provisions of Sections 22 and 23
of the Banking Regulation Act, 1949 (As Applicable to
Cooperative Societies (AACS).
Banker & Debt Manager to the Government
Managing the government's banking transactions is a key RBI

role. Reserve Bank of India has undertaken the traditional
central banking function of managing the government‟s
banking transactions. The Reserve Bank of India Act, 1934
requires the Central Government to entrust the Reserve Bank
with all its money, remittance, exchange and banking
transactions in India and the management of its public debt. The
Government also deposits its cash balances with the Reserve
Bank.
RBI by agreement, act as the banker and debt manager to State
Governments. Currently, the Reserve Bank acts as banker to all
the State Governments in India (including Union Territory of
Puducherry), except Sikkim. For Sikkim, it has limited
agreement for management of its public debt.
As a banker to the Government, RBI receives and pays money
on behalf of the various Government departments. It also
undertakes to float loans and manage them on behalf of the
Governments.
It provides Ways and Means Advances – a short-term interest
bearing advance – to the Governments, to meet temporary
mismatches in their receipts and payments. Besides, like a
portfolio manager, it also arranges for investments of surplus
cash balances of the Governments.
It acts as adviser to Government, whenever called upon to do
so, on monetary and banking related matters.
Under the administrative arrangements, the Central
Government is required to maintain a minimum cash balance
with the Reserve Bank. Currently, this amount is Rs.10 crore on
a daily basis and Rs.100 crore on Fridays, as also at the annual
account closing day of the Centre and the Reserve Bank (end of
March and June).
All the State Governments are required to maintain a minimum
balance with the Reserve Bank, which varies from state to state
depending on the relative size of the state budget and economic
activity. To tide over temporary mismatches in the cash flow of
receipts and payments, the Reserve Bank provides Ways and
Means Advances/Overdraft to the State Governments. The
WMA scheme for the State Governments has provision for
Special Drawing Facility (SDF) and Normal WMA. A State
Government account can be in overdraft for a maximum 14
consecutive working days with a limit of 36 days in a quarter.
Banker to Banks
Banks need their own mechanism to transfer funds and settle

inter-bank transaction-such as borrowing from and lending to
other banks-and customer transactions. RBI fulfills the role of
banker's bank.

Banks are required to maintain a portion of their demand and
time liabilities as cash reserves with the Reserve Bank. For this
purpose, they need to maintain accounts with the Reserve Bank.
In order to facilitate a smooth inter-bank transfer of funds, or to
make payments and to receive funds on their behalf, banks need
a common banker. By providing the facility of opening accounts
for banks, the Reserve Bank becomes this common banker,
known as „Banker to Banks‟ function. The function is performed
through the Deposit Accounts Department (DAD) at the
Reserve Bank‟s Regional offices.
RBI monitors operations of these accounts to ensure that
defaults do not take place. It also facilitates remittance of funds
from a bank‟s surplus account at one location to its deficit
account at another. Such transfers are electronically routed
through a computerised system called e-Kuber.
RBI also introduced the Centralised Funds Management System
(CFMS) to facilitate centralised funds enquiry and transfer of
funds across DADs. This helps banks in their fund management
as they can access information on their balances maintained
across different DADs from a single location.
As Banker to Banks, it provides short-term loans and advances
to select banks, when necessary, to facilitate lending to specific
sectors and for specific purposes. These loans are provided
against promissory notes and other collateral given by the
banks.
As a Banker to Banks, the Reserve Bank also acts as the „lender
of the last resort‟. It can come to the rescue of a bank that is
solvent but faces temporary liquidity problems by supplying it
with much needed liquidity when no one else is willing to
extend credit to that bank. The Reserve Bank extends this
facility to protect the interest of the depositors of the bank and
to prevent possible failure of the bank, which in turn may also
affect other banks and institutions and can have an adverse
impact on financial stability and thus on the economy.
A Brief on Foreign Exchange Management
The comprehensive Foreign Exchange Regulation Act, 1973

empowered the Reserve Bank, and in certain cases the Central
Government, to control and regulate dealings in foreign
exchange payments outside India, export and import of
currency notes and bullion, transfer of securities between
residents and non-residents, acquisition of foreign securities,
and acquisition of immovable property in and outside India,
among other transactions.
Extensive relaxations in the rules governing foreign exchange
were initiated, prompted by the liberalisation measures
introduced since 1991 and the Act was amended as a new
Foreign Exchange Regulation (Amendment) Act 1993. Keeping
in view the changed environment, the Foreign Exchange
Management Act (FEMA) was enacted in 1999 to replace FERA.
FEMA became effective from June 1, 2000.
The Reserve Bank issues licences to banks and other institutions
to act as Authorised Dealers in the foreign exchange market.
The Reserve Bank of India, is the custodian of the country‟s
foreign exchange reserves and is vested with the responsibility
of managing their investment. The legal provisions governing
management of foreign exchange reserves are laid down in the
Reserve Bank of India Act, 1934.The basic parameters of the
Reserve Bank‟s policies for foreign exchange reserves
management are safety, liquidity and returns.

RBI’s Monetary Policy
What is Monetary Policy?

Monetary policy refers to the policy of the central bank with regard
to the use of monetary instruments under its control to achieve the
goals specified in the Act. Reserve Bank of India (RBI) is vested
with the responsibility of conducting monetary policy. This
responsibility is explicitly mandated under the Reserve Bank of
India Act, 1934.
Objective of Monetary Policy

The primary objective is to maintain price stability while
keeping in mind the objective of growth. In May 2016, RBI Act,
1934 was amended to provide a statutory basis for the
implementation of the flexible inflation targeting framework.
The amended RBI Act also provides for the inflation target to be
set by the Government of India, in consultation with the
Reserve Bank, once in every five years. Accordingly, the Central
Government has notified in the Official Gazette 4 per cent
Consumer Price Index (CPI) inflation as the target for the period
from August 5, 2016 to March 31, 2021 with the upper tolerance
limit of 6 per cent and the lower tolerance limit of 2 per cent.
The monetary policy framework aims at setting the policy
(repo) rate based on an assessment of the current and evolving
macroeconomic situation; and modulation of liquidity
conditions to anchor money market rates at or around the repo
rate.
What is MPC?
Section 45ZB of the amended RBI Act, 1934 provides for an
empowered six-member monetary policy committee (MPC) to be
constituted by the Central Government. The Members of the
current MPC are as follows:
1. Governor of RBI – Chairperson, ex officio;
2. Deputy Governor of RBI, in charge of Monetary Policy –
Member, ex officio;
3. One officer of RBI to be nominated by the Central Board –
Member, ex officio;
4. Shri Chetan Ghate, Professor, Indian Statistical Institute (ISI) –
Member;
5. Professor Pami Dua, Director, Delhi School of Economics –
Member; and
6. Dr. Ravindra H. Dholakia, Professor, Indian Institute of
Management, Ahmedabad – Member.
(Members referred to at 4 to 6 above, will hold office for a period of
four years or until further orders, whichever is earlier.)
The MPC determines the policy interest rate required to achieve the
inflation target. RBI's Monetary Policy Department (MPD) assists
the MPC in formulating the monetary policy. Financial Markets
Operations Department (FMOD) operationalises the monetary
policy, mainly through day-to-day liquidity management
operations.
Instruments of Monetary Policy
Repo Rate: The (fixed) interest rate at which the Reserve Bank
provides overnight liquidity to banks against the collateral of
government and other approved securities under the liquidity
adjustment facility (LAF).
Reverse Repo Rate: The (fixed) interest rate – currently 50 bps

below the repo rate – at which the Reserve Bank absorbs liquidity,
on an overnight basis, from banks against the collateral of eligible
government securities under the LAF.
The LAF consists of overnight as well as term repo auctions. The

aim of term repo is to help develop the inter-bank term money
market, which in turn can set market based benchmarks for pricing
of loans and deposits, and hence improve transmission of monetary
policy.
Marginal Standing Facility (MSF): A facility under which

scheduled commercial banks can borrow additional amount of
overnight money from the Reserve Bank by dipping into their
Statutory Liquidity Ratio (SLR) portfolio up to a limit [currently
two per cent of their net demand and time liabilities deposits
(NDTL)] at a penal rate of interest, currently 50 basis points above
the repo rate. This provides a safety valve against unanticipated
liquidity shocks to the banking system.
Bank Rate: It is the rate at which the Reserve Bank is ready to buy
or rediscount bills of exchange or other commercial papers. The
Bank Rate is published under Section 49 of the Reserve Bank of
India Act, 1934. This rate has been aligned to the MSF rate and,
therefore, changes automatically as and when the MSF rate changes
alongside policy repo rate changes.
Cash Reserve Ratio (CRR): The average daily balance that a bank
shall maintain with the Reserve Bank as a share of such per cent of
its NDTL that the Reserve Bank may notify from time to time in the
Gazette of India.

Statutory Liquidity Ratio (SLR): The share of NDTL that banks
shall maintain in safe and liquid assets, such as, unencumbered
government securities, cash and gold. Changes in SLR often
influence the availability of resources in the banking system for
lending to the private sector.
Open Market Operations (OMOs): These include both outright

purchase and sale of government securities for injection and
absorption of durable liquidity, respectively.
Market Stabilisation Scheme (MSS): This instrument for monetary

management was introduced in 2004. Surplus liquidity of a more
enduring nature arising from large capital inflows is absorbed
through sale of short-dated government securities and treasury
bills. The cash so mobilised is held in a separate government
account with the Reserve Bank.
Other Points to look at

Under the amended RBI Act, the monetary policy making is as
under:
a) The MPC is required to meet at least four times in a year.
b) The quorum for the meeting of the MPC is four members.
c) Each member of the MPC has one vote, and in the event of an
equality of votes, the Governor has a second or casting vote.
d) Once in every six months, the Reserve Bank is required to
publish a document called the Monetary Policy Report to explain:
i. the sources of inflation; and
ii. the forecast of inflation for 6-18 months ahead.

Topic 3: FISCAL POLICY
Fiscal policy deals with the government policy concerning changes

in the taxation and expenditure overheads and components, while
Monetary policy, deals with the changes in the factors and
instruments that affect the supply of money in the economy and the
rate of interest. The government of India deals with fiscal policy
(through Annual Budget and other timely interventions), while RBI
is responsible for execution of monetary policy.
Types of Fiscal Policy

Neutral Fiscal Policy: This implies a balanced budget where
(Government spending = Tax revenue).
Contractionary (restrictive) Fiscal policy: This policy involves
raising taxes or cutting government spending, so that (Government
spending < Tax revenue) it cuts up on the aggregate demand (thus,
economic growth) and to reduce the inflationary pressures.
Expansionary Fiscal Policy: It is generally used for giving stimulus
to the economy ,i.e., to speed up the rate of GDP growth or during
a recession when growth in national income is not sufficient
enough to maintain the present standards of living. A tax cut
and/or an increase in government spending would be
implemented to stimulate economic growth and lower
unemployment rates.
Instruments of Fiscal Policy

Reduction of Govt. Expenditure
Increase in Taxation
Imposition of new Taxes
Wage Control
Rationing
Public Debt
Increase in savings
Maintaining Surplus Budget
Other measures of Fiscal Policy

Increase in Imports of Raw materials
Decrease in Exports
Increase in Productivity
Provision of Subsidies
Use of Latest Technology
Rational Industrial Policy
PUBLIC REVENUES
The income of the Government through all sources is called public
income or public revenue. Public revenue refers to income of a
Government from all sources raised, in order to meet public
expenditure. Public revenue consists of taxes, revenue from
administrative activities like fines, fees, income from public
enterprises, gifts and grants. Public Receipts includes public
revenue plus the receipts from public borrowings, the receipts from
sale of public assets & printing & issuing new currency notes. It
includes other sources of public income along with public revenue.
Public Revenue can be classified as Tax Revenue and Non -Tax
Revenue.
PUBLIC EXPENDITURE
Public Expenditure refers to Government Expenditure. It is
incurred by Central and State Governments. The Public
Expenditure is incurred on various activities for the welfare of the
people and also for the economic development.

Capital and Revenue Expenditure:
Capital Expenditure of the Government refers to that expenditure
which results in creation of fixed assets. They are in the form of
investment. They add to the net productive assets of the economy.
Capital Expenditure is also known as development expenditure as
it increases the productive capacity of the economy. It is investment
expenditure and a non-recurring type of expenditure.
Revenue expenditures are current or consumption expenditures

incurred on civil administration, defense forces, public health and,
education, maintenance of Government machinery etc. This type of
"expenditure is of recurrent type which is incurred year after year.
Plan and Non - Plan Expenditure

The plan expenditure is incurred on development activities
outlined in ongoing five year plan. Plan expenditure is incurred on
Transport, rural development, communication, agriculture, energy,
social services,etc. The non - plan expenditure is incurred on those
activities, which are not included in five-year plan.
PUBLIC DEBT
Public debt refers to Government debt. It refers to Government
borrowings from individuals, financial institutions,
organizations and foreign countries. If revenue collected
through taxes and other sources is not adequate to cover
expenditure, the Government may resort to borrowings. Thus
public debt is one of the instruments to cover deficits in budget.

Topic 4: SCHEDULED BANK & BANK ACCOUNTS IN INDIA
a) As per Sec 2 (e) of RBI Act, a scheduled bank means a bank

whose name is included in the 2nd schedule of RBI Act 1934.
b) A scheduled bank should satisfy the conditions which include
paid-up capital&reserves requirement of not less than Rs. 5 lac,
satisfaction of RBI that the affairs will not be conducted by the bank
in a way to jeopardize the interests of the depositor. (Commercial,
Rural&many State Coop Banks are classified as Scheduled Banks).
c) A bank that is not included in the 2nd Schedule of RBI is called
Non-scheduled Bank.
Types of Bank Accounts in India (Deposit Accounts)
Traditionally banks in India have four types of deposit accounts,

namely Saving Banking Accounts, Current Accounts, Recurring
Deposits and, Fixed Deposits.
Saving Account
Saving accounts are opened to encourage the people to save
money and collect their savings. The saving account holder is
allowed to withdraw money from the account as and when
required. The interest on Saving Bank Accounts was fixed by RBI
and it was fixed at 4.00% on daily balance basis. RBI has
deregulated Saving Fund account interest rates and now banks
are free to decide the same within certain conditions imposed by
RBI.
Features of Saving Accounts –
There is no restriction on the number and amount of deposits.
However, in India, mandatory PAN (Permanent Account

Number) details are required to be furnished for doing cash
transactions exceeding र50,000.
Withdrawals are allowed subject to certain restrictions.
A minimum amount has to be kept on saving account to keep it
functioning.
Current Account
Current Accounts are basically meant for businessmen and are
never used for the purpose of investment or savings.
Features of Current Accounts –
The main objective of Current Account holders in opening these
account is to enable them (mostly businessmen) to conduct their
business transactions smoothly.
There are no restrictions on the number of times deposit in cash /
cheque can be made or the amount of such deposits;
Usually banks do not pay any interest on such current accounts.
The current accounts do not have any fixed maturity as these are
on continuous basis accounts.
Cheque book facility is provided and the account holder can
deposit all types of the cheques and drafts in their name or
endorsed in their favour by third parties.
Recurring Deposit Account

Recurring Deposit is a special kind of Term Deposit offered by
banks in India popularly known as RD accounts which help people
with regular incomes to deposit a fixed amount every month into
their Recurring Deposit account and earn interest at the rate
applicable to Fixed Deposits.
Features of RD Accounts –

Recurring Deposit accounts are normally allowed for maturities
ranging from 6 months to 120 months
These accounts can be opened in single or joint names.
Nomination facility is also available.
Rate of Interest offered is similar to that in Fixed Deposits.
Interest is compounded on quarterly basis in recurring deposits.
Fixed Deposit Account (FD)

The account which is opened for a particular fixed period (time) by
depositing particular amount (money) is known as Fixed (Term)
Deposit Account. The term 'fixed deposit' means that the deposit is
fixed and is repayable only after a specific period is over. Under
fixed deposit account, money is deposited for a fixed period say six
months, one year, five years or maximum ten years. The money
deposited in this account can not be withdrawn before the expiry of
period.
Features of FD Accounts –
The main purpose of fixed deposit account is to enable the
individuals to earn a higher rate of interest on their surplus funds
(extra money).
The amount can be deposited only once. For further such
deposits, separate accounts need to be opened.
Fixed Deposit Account may be opened for a minimum period
of 7 days and maximum period of 10 years.
The minimum amount required to open a Fixed Deposit is
Rs.1000.
Withdrawals are not allowed. However, in case of emergency,
banks allow to close the fixed account prior to maturity date. In
such cases, the bank deducts 1% (deduction percentage many
vary) from the interest payable as on that date.

Topic 5: FINANCIAL INCLUSION
Financial inclusion involves

1) Give formal banking services to poor people in urban & rural
areas.
2) Promote habit of money-savings, insurance, pension-investment
among poor-people.
3) Help them get loans at reasonable rates from normal banks. So
they don‟t become victims in the hands of local moneylender.
Some Important initiatives for Financial Inclusion

Lead banking scheme (LBS).
No frills account.
BSBDA
Business Correspondents (BC) system.
Swabhiman Campaign
PMJDY
Lead Bank Scheme

The Lead Bank Scheme, introduced towards the end of 1969,
envisages assignment of lead roles to individual banks (both in
public sector & private sector) for the districts allotted to them.
A bank having a relatively large network of branches in the
rural areas of a given district& endowed with adequate
financial & manpower resources has generally been entrusted
with the lead responsibility for that district. Accordingly, all the
districts in the country have been allotted to various banks.

The lead bank acts as a leader for coordinating the efforts of all
credit institutions in the allotted districts.
No Frill Account
'No Frills 'account is a basic banking account. Such account
requires either nil minimum balance or very low minimum
balance. Charges applicable to such accounts are low.
The RBI in 2005-06 called upon Indian banks to design a „no
frills account‟ – a no precondition, low „minimum balance
maintenance‟ account with simplified KYC (Know Your
Customer) norms.
But all the existing „No-frills‟ accounts opened were converted
into BSBDA in compliance with the guidelines issued by RBI in
2012.
BSBDA
In 2012, RBI introduced BSBDA. Some important points are:
This account shall not have the requirement of any minimum
balance.
The services available in the account will include: deposit &
withdrawal of cash at bank branch as well as ATMs;
receipt/credit of money through electronic payment channels or
by means of deposit/collection of cheques drawn by
Central/State Government agencies & departments;
While there will be no limit on the number of deposits that can
be made in a month, account holders will be allowed a
maximum of four withdrawals in a month, including ATM
withdrawals.
Facility of ATM card or ATM-cum-Debit Card.
Business Correspondent
Business correspondents are bank representatives. They
personally go to the area allotted to them & carry out banking.
They help villagers to open bank accounts, in banking
transactions etc.
Business Correspondents get commission from bank for every
new account opened, every transaction made via them, every
loan-application processed etc.
A Brief on BSBDA-Small Accounts:

In BSBDA, banks are required to provide free of charge
minimum 4 withdrawals, through ATMs
Total credits in such accounts should not exceed 1 lakh rupees
in a year.
Maximum balance in the account should not exceed 50,000 Rs
at any time
The total of debits by way of cash withdrawals and transfers
will not exceed 10,000 rupees in a month
Foreign remittances cannot be credited to Small Accounts
without completing normal KYC formalities
Small accounts are valid for a period of 12 months initially
which may be extended by another 12 months if the person
provides proof of having applied for an Officially Valid
Document.
PMJDY: Scheme and Current Status
Pradhan Mantri Jan-Dhan Yojana (PMJDY) is National Mission for

Financial Inclusion to ensure access to financial services, namely,
Banking/ Savings & Deposit Accounts, Remittance, Credit,
Insurance, Pension in an affordable manner. Account can be
opened in any bank branch or Business Correspondent (Bank Mitr)
outlet. Accounts opened under PMJDY are being opened with Zero
balance. However, if the account-holder wishes to get cheque book,
he/she will have to fulfill minimum balance criteria.
Special Benefits under PMJDY Scheme

Interest on deposit.
Accidental insurance cover of Rs. 1 lac
No minimum balance required.
The scheme provide life cover of Rs. 30,000/- payable on death
of the beneficiary, subject to fulfillment of the eligibility
condition.
Beneficiaries of Government Schemes will get Direct Benefit
Transfer in these accounts.
After satisfactory operation of the account for 6 months, an
overdraft facility will be permitted.
Access to Pension, insurance products.
Overdraft facility upto Rs.5000/- is available in only one
account per household, preferably lady of the household.

Topic 6: NPA-NON-PERFORMING ASSET & SARFAESI ACT 2002
It means once the borrower has failed to make interest or principal
payments for 90 days, the loan is a non-performing asset.
NPA in case of Agriculture Loans

Farm Credit within Agriculture loans: A loan will be treated as an
NPA if installment of the principal or interest remains unpaid
beyond the due date for
(a) two crop seasons in case of short duration crops (maturing
within one year) &
(b) one crop season for long duration crops (maturing after one
year).
This would also be applicable, mutatis mutandis, to agricultural
term loans. In other agriculture loans, the 90 days norm would be
applicable.
SARFAESI Act & Rules

SARFAESI Act (The Securitization & Reconstruction of Financial
Assets & Enforcement of Security Interest Act, 2002) was enacted to
regulate securitization & reconstruction of financial assets &
enforcement of security interest created in respect of Financial
Assets to enable realization of such assets.
The SARFAESI Act provides for the manner for enforcement of
security interests by a secured creditor without the intervention of a
court or tribunal. If any borrower fails to discharge his liability in
repayment of any secured debt within 60 days of notice from the
date of notice by the secured creditor, the secured creditor is
conferred with powers under the SARFAESI Act to
a) Takes possession of the secured assets of the borrower, including
transfer by way of lease, assignment or sale, for realizing the
secured assets
b) Takeover of the management of the business of the borrower
including the right to transferby way of lease, assignment or sale
for realizing the secured assets,
c) Appoint any person to manage the secured assets possession of
which is taken by thesecured creditor, and
d) Require any person, who has acquired any of the secured assets
from the borrower and from whom money is due to the
borrower, to pay the secured creditor so much of the money as if
sufficient to pay the secured debt.
Assets Portfolio of the Banks according to NPA

(1) standard assets (2) sub-standard assets
(3) doubtful assets (4) loss assets.
Standard asset is one that does not disclose any problems &
which does not carry more than normal risk attached to the
business.
An asset which has been classified as NPA for a period not
exceeding 12 months is considered as sub-standard asset.
Doubtful asset is one which has remained NPA for a period
exceeding 12 months.
An asset which is considered uncollectible & loss has been
identified by the bank or internal or external auditors or the RBI
inspection & the loss has not been written off is regarded as loss
asset.
SARFAESI 2002, Requirement of Net Owned Fund (NOF) for

Asset Reconstruction Companies
No Asset Reconstruction Company (hereinafter referred to as “the
ARC”) shall commence or carry on the business of securitisation or
asset reconstruction without having Net Owned Fund (hereinafter

referred to as NOF) of not less than Rupees two crore or such other
higher amount as the Reserve Bank specify. It has been decided to
fix the minimum NOF requirement for ARCs at ₹ 100 crores.
All the ARCs which are already registered with Reserve Bank of
India and not having the revised minimum NOF shall achieve a
minimum NOF of ₹ 100 crore latest by March 31, 2019.
A Brief on REVERSE MORTGAGE LOAN

The scheme of reverse mortgage has been introduced for the benefit
of senior citizens owning a house but having inadequate income to
meet their needs. Some important features of reverse mortgage are:
a) A homeowner who is above 60 years of age is eligible for reverse
mortgage loan. It allows him to turn the equity in his home into
one lump sum or periodic payments mutually agreed by the
borrower&the banker.
b) NO REPAYMENT is required as long as the borrower lives,
Borrower should pay all taxes relating to the house&maintain the
property as his primary residence.
c) The amount of loan is based on several factors:
 Borrower‟s age,
 Value of the property
 Current interest rates &
 The specific plan chosen.
As per the scheme formulated by National Housing Bank (NHB),

the maximum period of the loan period is 15 years. The residual
life of the property should be at least 20 years. Where the borrower
lives longer than 15 years, periodic payments will not be made by
lender. However, the borrower can continue to occupy.

Topic 7: HYPOTHECATION, PLEDGE, & MORTGAGE
What is pledge?
U/s 172 of Indian Contracts Act, pledge is bailment (delivery) of
goods as security for payment of a loan. Only goods (movable
assets excluding actionable claims (Sec 2(7) of Sales of Goods Act)
can be pledged.
What is the difference between Pledge and Hypothecation?
Hypothecation Pledge
Defined SARFAESI Act 2002 Indian Contract Act 1872
in (Sec 2 n) (section 172)
Definition Charge on movable Bailment of goods as
property in favour of security for payment of a
secured creditor debt or performance of
without delivery of promise
possession
Parties: Hypothecator Pledger / pawner
-Borrower Hypothecate Pledger / pawnee
-Bank
Nature of Movable assets such as Goods
securities stocks, machinery,
vehicles
Possession Borrower (in trust for Possession with bank till
bank). Bank cannot repayment of the loan. Bank
take possession has to preserve the goods
without consent of the carefully & return the same,

borrower. On taking if loan is repaid.
possession bank gets
rights of pledge & can
sell the assets without
intervention.
What is Mortgage?
As per section 58 of Transfer of Property Act 1882, mortgage is
transfer of interest in specific immovable property for the purpose
of securing the payment of money advanced or to be advanced by
way of loan, an existing or future debt or the performance of an
engagement which may give rise to pecuniary liability.

TOPIC 8: ALL ABOUT THE MARGINAL COST OF FUNDS
BASED LENDING RATE (MCLR)
Marginal Cost of funds based Lending rate was introduced by

RBI that replaced the 'base Rate.' From 1st April 2016, the RBI
made it compulsory for all banks to make marginal Cost of
funds based lending rates.
It refers to the minimum interest rate of a bank below which it
cannot lend, except in some cases allowed by the RBI. It is an
internal benchmark or reference rate for the bank.
MCLR actually describes the method by which the minimum
interest rate for loans is determined by a bank - on the basis of
marginal cost or the additional or incremental cost of arranging
one more rupee to the prospective borrower.
RBI decided to shift from base rate to MCLR because the rates
based on marginal cost of funds are more sensitive to changes in
the policy rates. This is very essential for the effective
implementation of monetary policy.
MCLR aimed at:

Improve the transmission of policy rates into the lending rates
of banks.
Bring transparency in the methodology followed by banks for
determining interest rates on advances.
Ensure availability of bank credit at interest rates which are fair
to borrowers as well as banks.
Enable banks to become more competitive and enhance their
long run value and contribution to economic growth.
MCLR is composed of 4 factors:

1) Tenor Premium
2) Negative carry in maintaining CRR
3) Marginal Cost of Funds
4) Operational Costs of bank
How is MCLR Calculated?
1) Tenor Premium: This simply implies that the length of loan is

directly proportional to the amount of premium to be paid. For one
residual tenor, this will remain the same.
2) Negative carry in maintaining CRR with RBI: CRR means the
cash reserve ratio or the amount of cash that is reserved by the
banks. This amount cannot be used by the banks for its daily
purposes. This amount is submitted to the RBI as a token of safety.
The CRR is inversely proportional to the amount of money with the
bank to be used for lending and investment purposes. The only
reason for CRR is to regulate liquidity and ensure safety in the
banking system.
3) Marginal Costs of Funds: It consists of three sub-headings:
(i) Interest charged by the bank to its customers on deposits.
(ii) Rate of interest that RBI charges to banks for borrowings
(iii) Net worth rate of return 92% weightage is provided to (i) + (ii)
and 8% is provided to (iii.)
4) Bank's Operating Cost: It includes the daily utility actions of the
bank. It is evident that MCLR is largely dependent on the marginal
cost of funds. It is also dependent on the repo rate and a variation
in this rate should also bring a change in MCLR.

Topic 9: IMPORTANT POINTS ON ATM IN INDIA
What is an Automated Teller Machine (ATM)?

Ans. Automated Teller Machine is a computerized machine that
provides the customers of banks the facility of accessing their
account for dispensing cash&to carry out other financial & non-
financial transactions without the need to actually visit their bank
branch.
What is White Label ATMs (WLAs)?

Ans. ATMs set up, owned&operated by non-banks are called White
Label ATMs. Non-bank ATM operators are authorized under
Payment & Settlement Systems Act, 2007 by the Reserve Bank of
India.
Is there any time limit for the card issuing banks for recrediting
the customers account for a failed ATM/WLA transaction?
Ans. As per the RBI instructions, banks have been mandated to
resolve customer complaints by re-crediting the customer‟s account
within 7 working days from the date of complaint.
Are the customers eligible for compensation for delays beyond 7

working days?
Ans. Yes. Effective from July 1, 2011, banks have to pay
compensation of Rs. 100/- per day for delays in re-crediting the
amount beyond 7 working days from the date of receipt of
complaint for failed ATM transactions. The compensation has to be
credited to the account of the customer without any claim being
made by the customer. If the complaint is not lodged within 30
days of transaction, the customer is not entitled for any
compensation for delay in resolving his / her complaint.
Topic 10: CODES WHICH ARE USED IN BANKING SECTOR
IFSC (Indian Financial System Code)

Indian Financial System Code is an alpha-numeric code that
uniquely identifies a bank-branch participating in the NEFT
system.
This is an 11-digit code with the first 4 alpha characters
representing the bank, The 5th character is 0 (zero).and the last 6
characters representing the bank branch.
IFSC is used by the NEFT system to identify the originating /
destination banks / branches and also to route the messages
appropriately to the concerned banks / branches.
For ex: SBIN0015986:
i. First 4-character SBIN – refers to State Bank of India.
ii. 0 is a control number.
iii. last six characters (015986) represents the SBI branch Jail Road,
Hari Nagar New Delhi.
MICR (Magnetic Ink Character Recognition)

MICR stands for Magnetic Ink Character Recognition. MICR
Code is a 9-numeric digit code which uniquely identifies a bank
branch participating in the ECS Credit scheme.
MICR code consists of 9 digits e.g 400229128
i. First 3 digits represent the city (400)
ii. Next 3 digits represent the bank (229)
iii. Last 3 digits represent the branch (128)
Note: The MICR Code allotted to a bank branch is printed on the
MICR band of cheque leaves issued by bank branches.

TOPIC 11: BANKING OMBUDSMAN SCHEME 2006
The Banking Ombudsman Scheme enables an expeditious and

inexpensive forum to bank customers for resolution of complaints
relating to certain services rendered by banks. The Banking
Ombudsman is a senior official appointed by the Reserve Bank of
India to redress customer complaints against deficiency in certain
banking services. All Scheduled Commercial Banks, Regional Rural
Banks and Scheduled Primary Co-operative Banks are covered
under the Scheme.
Other Important Points:

 The Banking Ombudsman does not charge any fee for filing and
resolving customers‟ complaints.
 The amount, if any, to be paid by the bank to the complainant by
way of compensation for any loss suffered by the complainant is
limited to the amount arising directly out of the act or omission
of the bank or Rs 10 lakhs, whichever is lower.
 The Banking Ombudsman may award compensation not
exceeding Rs 1 lakh to the complainant only in the case of
complaints relating to credit card operations for mental agony
and harassment.
 If a complaint is not settled by an agreement within a period of
one month, the Banking Ombudsman proceeds further to pass
an award. Before passing an award, the Banking Ombudsman
provides reasonable opportunity to the complainant and the
bank, to present their case.

 If one is not satisfied with the decision passed by the Banking
Ombudsman, one can approach the appellate authority against
the Banking Ombudsmen‟s decision. Appellate Authority is
vested with a Deputy Governor of the RBI.
 If one is aggrieved by the decision, one may, within 30 days of
the date of receipt of the award, appeal against the award before
the appellate authority.

Topic 12: DEPOSIT INSURANCE AND CREDIT GUARANTEE
CORPORATION (DICGC)
Which banks are insured by the DICGC?

Commercial Banks: All commercial banks including branches of
foreign banks functioning in India, local area banks & regional
rural banks are insured by the DICGC.
What does the DICGC insure?

In the event of a bank failure, DICGC protects bank deposits that
are payable in India. The DICGC insures all deposits such as
savings, fixed, current, recurring, etc. except the following types of
deposits.
(i) Deposits of foreign Governments;
(ii) Deposits of Central/State Governments;
(iii) Inter-bank deposits;
(iv) Deposits of the State Land Development Banks with the State
co-operative bank;
(v) Any amount due on account of any deposit received outside
India
(vi) Any amount, which has been specifically exempted by the
corporation with the previous approval of Reserve Bank of India.
What is the maximum deposit amount insured by the DICGC?

Each depositor in a bank is insured upto a maximum of Rs.1,00,000
(Rupees One Lakh) for both principal & interest amount held by
him in the same capacity.
Does the DICGC insure just the principal on an account or both

principal & accrued interest?

The DICGC insures principal & interestupto a maximum amount of
Rs. One lakh.
Topic 13: THE BIGGEST MERGER: SBI MERGER 2017
Merger of Associates of SBI and Bhartiya Mahila Bank (BMB) on

01st April 2017 with State Bank of India (SBI) was a historic move
in the history of India. SBI is not only the largest Public lender of
India but also the most reliable and Employment providing
organization of the country. Here is all the relevant information
that you must know before appearing the interview.
1. 1st April was the record date in India as the merger of State
Bank of India took place (SBI) with five of its associate banks
and Bhartiya Mahila Bank. The five associate banks are State
Bank of Bikaner and Jaipur (SBBJ), State Bank of Mysore (SBM),
State Bank of Travancore (SBT), State Bank of Hyderabad (SBH)
and State Bank of Patiala (SBP).
2. SBI has rebranded its corporate website as "bank.sbi" from the
earlier sbi.co.in.
3. The background to the SBI signboard has been changed from
white to “inky blue” and SBI will be written in a new font
called Effra.
4. The designing and rebranding of SBI logo has been done by a
company called Design Stack.
5. The SBI logo symbolizes its role of a custodian that will keep
customers‟ money safe.
6. With the merger, State Bank of India has entered the league of
'Top 50 Global Banks' with a balance sheet size of Rs. 41

trillion. SBI was earlier placed at 54th rank globally but after the
merging it moved to 44th position making it in the top 50
leading banks globally.
7. The last time such a rebranding exercise was undertaken in
1971, after the government nationalized banks under former
Prime Minister's Indira Gandhi regime.
8. Post-merger, SBI‟s market share will increase to nearly 22 per
cent from 17 per cent.
9. After the merger the tagline of SBI has remained same
i.e. "Banker to every Indian".
10. The total customer base of the bank reaches 37 crore with a
branch network of around 24,000 and nearly 59,000 ATMs
across the country. The merged entity now has a deposit base of
more than Rs 26 lakh-crore and advances level of Rs 18.50 lakh
crore.

Topic 14: THE CHANGE IN THE TAX STRUCTURE IN INDIA:
ALL ABOUT THE GST
GST is one indirect tax for the whole nation, which will make India
one unified common market. GST is a single tax on the supply of
goods and services, right from the manufacturer to the consumer.
Credits of input taxes paid at each stage will be available in the
subsequent stage of value addition, which makes GST essentially a
tax only on value addition at each stage. The final consumer will
thus bear only the GST charged by the last dealer in the supply
chain, with set-off benefits at all the previous stages.
It will be a national sales tax that will be levied on either

consumption of goods or use of services. It will replace 16 current
levies -seven central taxes like excise duty and service tax and nine
state taxes like VAT and entertainment tax, this will lead to one
market with one tax rate. France was the first country to implement
the GST in 1954.
GST Council finalises the tax rates on Goods & Services under
the 4-slab structure
GST Council finalised tax rates on goods and services under the
four-slab structure with essential items of daily use being kept in
the lowest bracket of 5 percent. The Council was headed by
Finance Minister Arun Jaitley and comprising representatives of
all states in the meeting that was held in J&K. GST will be
applicable from 1st July 2017.
Tax Rates finalised under GST

According to GST slabs, seven per cent of the items fall under the
exempt list while 14 per cent have been put in the lowest tax
bracket of 5 per cent. Another 17 per cent items are in 12 per cent
tax bracket, 43 per cent in 18 per cent tax slab and only 19 per
cent of goods fall in the top tax bracket of 28 per cent.
No GST Slab
Foodgrains, milk and other articles of daily use have been
exempted from taxation under the GST regime.The items are:
foodgrains, gur, milk, eggs, curd, lassi, unpacked paneer, natural
honey, fresh vegetables, fruits, atta, besan, maida, vegetable oil,
Prasad, common salt, contraceptive, bread, bindi, vermillion,
stamp, judicial documents, printed books, bangles and handloom
products.
5 PER CENT GST SLAB

The items that are used daily but are not considered articles of basic
necessity are taxed at 5 per cent under the GST regime. The items
are: sugar, tea, coffee, edible oil, coal, skimmed milk powder, milk
food for babies, condensed milk, packed paneer, newsprint,
umbrella, PDS kerosene, LPG, broom, fish fillet, cream, frozen
vegetables, spices, pizza bread, juice, sabudana, coal, medicines,
stent and lifeboat.
12 PER CENT SLAB

The items that are not essential but used by a large number of
households and people will attract 12 per cent GST. The items are
butter, ghee, mobile phones, cashew, almonds, sausages, fruit
juices, packed coconut water, agarbatti, frozen meat products,
animal fat, mixtures, ayurvedic medicines, tooth powder, colour
books and sewing machine.
18 PER CENT SLAB

The articles are considered to be used by middle-class people will
attract 18 per cent GST from July 1. The items are: hair oil, soap,
toothpaste, capital goods, industrial intermediaries, pasta, corn
flakes, jams, soups, ice-cream, toilet paper, facial tissues, iron and
steel, fountain pen, mineral water, camera, speaker, icecream,
envelops and instant food items.
28 PER CENT SLAB

Such items, which are considered as luxury goods or health
hazards will attract 28 per cent GST. The articles are consumer
durables, cars, cement, chewing gum, custard powder, pan masala,
perfume, shampoo, make-up items, fireworks, motorcycles, paint,
deodorant, shaving cream, hair dye, washing machine, vending
machines, vacuum cleaner, hair clippers and dishwasher.

Topic 15: What are the NEGOTIABLE INSTRUMENTS & the
ACT 1881?
In India the Negotiable Instruments Act was passed during 1881

which came into force wef. March 01, 1882.
Cheque
A cheque is (a) a bill of exchange (b) drawn on a specified bank&(c)
not expressed to be payable otherwise than on demand. It includes
electronic image of a truncated cheque & also an electronic cheque.
AMOUNT OF A CHEQUE
Where amount of a cheque differs in words & figures, as per
Section 18, amount written in words should be paid irrespective of
the fact, which amount is less or more.
Types of Cheque
1. Bearer Cheque or open Cheque
When the words "or bearer" appearing on the face of the cheque are
not cancelled, the cheque is called a bearer cheque. The bearer
cheque is payable to the person specified therein or to any other
else who presents it to the bank for payment.
2. Order Cheque
When the word "bearer" appearing on the face of a cheque is
cancelled & when in its place the word "or order" is written on the
face of the cheque, the cheque is called an order cheque. Such a
cheque is payable to the person specified therein as the payee, or to
any one else to whom it is endorsed (transferred).

3. Crossed Cheque
Crossing of cheque means drawing two parallel lines on the face of
the cheque with or without additional words like "& CO." or
"Account Payee" or "Not Negotiable". A crossed cheque cannot be
encashed at the cash counter of a bank but it can only be credited to
the payee's account.
4. Ante-Dated Cheque
If a cheque bears a date earlier than the date on which it is
presented to the bank, it is called as "ante-dated cheque". Such a
cheque is valid upto 3 months from the date of the cheque.
5. Post-Dated Cheque
If a cheque bears a date which is yet to come (future date) then it is
known as post-dated cheque. A post-dated cheque cannot be
honoured earlier than the date on the cheque.
6. Stale Cheque
If a cheque is presented for payment after 3 months from the date
of the cheque it is called stale cheque. A stale cheque is not
honoured by the bank.
7. A self-cheque
A self-cheque is written by the account holder as pay self to receive
the money in the physical form from the branch where he holds his
account.
8. “A truncated cheque” means a cheque which is truncated during

the course of clearing cycle, either by the clearing house or by the
bank whether paying or receiving payment, immediately on
generation of an electronic image for transmission, substituting
the further physical movement of the cheque in writing. The
expression “clearing house” means the clearing house managed by
the RBI or a clearing house recognised as such by the RBI.‟
Parties of a Cheque
There are three parties to the cheque
 Drawer or Maker
 The bank - on whom the cheque is drawn (i.e. the bank with
whom the account is maintained by the drawer)
 Payee – Payee is the person whose name is mentioned on the
cheque to whom or to whose order the money is directed to be
paid.
Endorsement & its Types

As per Section 15, endorsing means signing on the face or backside
of an instrument (or even on a paper called Allonge or stamped
paper), for the purpose of negotiating (transferring to next person)
a negotiable instrument.
Endorsement in full
If an endorser signs his name & adds a direction to pay the amount
mentioned in the instrument to, or to order of, a specified person,
the endorsement is said to be in full. Blank endorsements can be
converted into full.
Restrictive endorsement

Where an endorsement prohibits & restricts further
negotiability of the instrument, it is called restricted
endorsement.
The words „Pay to Ashish only‟ or „Pay to Ashish for my use‟ or
„Pay to Ashish for account of B‟, are the cases of restrictive
endorsement.
Crossing of a Cheque
Crossing of a cheque means two parallel transverse lines on the
face with or without words, such as „& Co‟, „not-negotiable‟,
„payee‟s account only‟ etc. The words without lines will not
constitute crossing. Such instruments should not be paid as
drawer‟s mandate is not clear.
Crossing is applicable in case of cheques & demand draft only
& does not cover bill of exchange or promissory note.
TYPES OF CROSSING
General crossing (sec 123)
General crossing is where a cheque bears across its face two parallel
transverse lines (with or without words such as “& co” or any
abbreviation. (Words not important, lines are).
Special crossing (sec 124)

Where a cheque bears across its face, name of bank, either with or
without the words not-negotiable (lines are not important, the
addition of name of the bank is important), that addition shall be
deemed as special crossing & the cheque shall be considered to be
crossed specially to that banker.

Special Crossing in favour more than one bank: As per Section
127, if a cheque is crossed specially to more than one bank (unless
one bank is acting as collecting agent to another), the payment shall
be refused. A cheque crossed to two or more branches of the same
bank is considered to be crossed to one bank only.
Not negotiable crossing
As per Section 130, a person taking a cheque crossed generally or
specially bearing the words „not negotiable‟ shall not have not be
capable of giving a better title to the cheque than that, which the
person from whom he took it, had. If Ramesh obtains a cheque
without consideration, his title is defective. When he endorses this
cheque, the endorsee shall not be able to get a better title, even if he
paid the value.
Demand Drafts
Demand draft is defined as per Section 85 (a) of NI Act 1881 as an
order to pay money drawn by one office of a bank upon another
office of the same bank for a sum of money payable to order on
demand.
Important features of a demand draft are:
 It is payable to order on demand (85-A NI Act).
 It cannot be issued as payable to bearer (Sec. 31 RBI Act).
 If a bank fails to honour a bank draft, it renders itself liable for
damages. Similarly, mission of signatures or wrong signatures
can also make the bank liable.
 By prior arrangement, the paying bank could be a different
bank also.
Cheque Truncation System

Truncation is the process of stopping the flow of the physical
cheque issued by a drawer at some point by the presenting
bank en-route to the paying bank branch. In its place an
electronic image of the cheque is transmitted to the paying
branch through the clearing house, along with relevant
information like data on the MICR band, date of presentation,
presenting bank, etc. This effectively eliminates the associated
cost of movement of the physical cheques, reduces the time
required for their collection and brings elegance to the entire
activity of cheque processing.
Cheque Truncation speeds up the process of collection of
cheques resulting in better service to customers, reduces the
scope of loss of instruments in transit, lowers the cost of
collection of cheques, and removes reconciliation-related and
logistics-related problems, thus benefitting the system as a
whole.
Reserve Bank of India has therefore decided to focus on
improving the efficiency of the cheque clearing cycle. Offering
Cheque Truncation System (CTS) is a step in this direction.
The New Approach to CTS implementation?

The new approach is the grid-based approach. Under this
approach the entire cheque volume in the country which was
earlier cleared through 66 MICR Cheque Processing locations
is consolidated into the three grids in New Delhi, Chennai and
Mumbai.
Each grid provides processing and clearing services to all the
banks under its respective jurisdiction. Banks, branches and
customers based at small / remote locations falling under the
jurisdiction of a grid would be benefitted, irrespective of

whether there exists at present a formal arrangement for
cheque clearing or otherwise.
Grid-based CTS, is a superior system as it encompasses a
larger geographical area and the chances of paying bank not
having presence in the grid location is seldom. Under grid-
based Cheque Truncation System clearing, all cheques drawn
on bank branches falling within in the grid jurisdiction are
treated and cleared as local cheques.
The benefits from CTS could be summarized as follows –

• Shorter clearing cycle
• Superior verification and reconciliation process
• No geographical restrictions as to jurisdiction
• Operational efficiency for banks and customers alike
• Reduction in operational risk and risks associated with paper
clearing
• No collection charges for collection of cheque drawn on a bank
located within the grid.
• It will also result in reduction in the cheque processing fee,
reduction in operational overhead, elimination of clearing
differences and reconciliation issues etc.

Topic 16: THE PRIORITY SECTOR LENDING (PSL)
It means provide credit to the needy sectors of the society. The

sectors are:
Agriculture
Micro & Small Enterprises
Education
Housing
Export
Weaker Sections
Social Infrastructure
Renewable Energy
Targets under PSL

Agriculture: 18 % of ANBC (Adjusted Net Bank Credit).
Out of this 18 %, a target of 8 % of ANBC is for Small &
Marginal Farmers, to be achieved in a phased manner i.e., 7 %
by March 2016&8 % by March 2017.
Weaker Sections: 10 % of ANBC.
Micro Enterprises: 7.5 % of ANBC has been prescribed for
Micro Enterprises, to be achieved in a phased manner i.e. 7 % by
March 2016&7.5 % by March 2017.
Overall PSL Target for Domestic Bank/Foreign Bank with more
than 20 Branches: 40 % of Adjusted Net Bank Credit.
Overall PSL Target for Foreign Bank with less than 20
Branches: 40 % of Adjusted Net Bank Credit to be achieved in a
phased manner:
2017-18 36
2018-19 38
2019-20 40

Categorization of MSME according to MSME ACT 2006
Manufacturing Sector (Goods)
Enterprises Investment in plant & machinery

Micro Enterprises Does not exceed twenty-five lakh
rupees
Small Enterprises More than twenty-five lakh rupees
but does not exceed five crore
rupees
Medium Enterprises More than five crore rupees but
does not exceed ten crore rupees
Service Sector
Enterprises Investment in equipment
Micro Enterprises Does not exceed ten lakh rupees
Small Enterprises More than ten lakh rupees but does
not exceed two crore rupees
Medium Enterprises More than two crore rupees but
does not exceed five crore rupees
Other Targets under PSL

Farmers with landholding of up to 1 hectare are considered as
Marginal Farmers. Farmers with a landholding of more than 1
hectare & upto 2 hectares are considered as Small Farmers.
Scheduled Commercial Banks having any shortfall in lending to
priority sector shall be allocated amounts for contribution to the
Rural Infrastructure Development Fund (RIDF) established with
NABARD.

For Renewable Energy, bank loans up to a limit of Rs.15 crore to
borrowers for purposes like solar based power generators, etc.
For individual households, the loan limit will be Rs.10 lakh per
borrower.
For Housing, banks can provide loans to individuals up to Rs. 28
lakh in metropolitan centres (with population of ten lakh&
above) &loans up to Rs. 20 lakh in other centres for
purchase/construction of a dwelling unit per family.
Export credit will be allowed up to 32 % of ANBC for Foreign
banks with less than 20 branches in India.
For Education, banks can provide loans to individuals for
educational purposes including vocational courses uptoRs. 10
lakh for studies in India & Rs. 20 lakh for studies abroad.
Limits under Social Infrastructure Bank loans up to a limit of ₹5
crore per borrower for building social infrastructure for activities
namely schools, health care facilities, drinking water facilities &
sanitation facilities in Tier II to Tier VI centres.
Monitoring of Priority Sector Lending targets

To ensure continuous flow of credit to priority sector, there will be
more frequent monitoring of priority sector lending compliance of
banks on „quarterly‟ basis instead of annual basis as of now.
Non-achievement of Priority Sector targets

Scheduled Commercial Banks having any shortfall in lending
to priority sector shall be allocated amounts for contribution to
the Rural Infrastructure Development Fund (RIDF) established
with NABARD & other Funds with NABARD/NHB/SIDBI, as
decided by the Reserve Bank from time to time.
The interest rates on banks‟ contribution to RIDF or any other
Funds, tenure of deposits, etc. shall be fixed by Reserve Bank
of India from time to time.
RBI revises priority sector lending norms for RRBs

Seeing the growing significance of RRBs in pursuit of financial
inclusion agenda, it has been decided to revise the priority sector
guidelines for RRBs.
Some of the salient features of the guidelines are as following:
Targets: 75 % of total outstanding to the sectors eligible for
classification as priority sector lending.
Categories of the Priority Sector: Medium Enterprises, Social
Infrastructure & Renewable Energy will form part of the Priority
Sector, in addition to the existing categories, with a cap of 15 %
of total outstanding.
Agriculture: 18% % of total outstanding should be advanced to
activities mentioned under Agriculture.
Small & Marginal Farmers: A target of 8 % of total outstanding
has been prescribed for Small & Marginal Farmers within
Agriculture.
Micro Enterprises: A target of 7.5 % of total outstanding has
been prescribed for Micro Enterprises.
Weaker Sectors: A target of 15 % of total outstanding has been
prescribed for Weaker Sections.
Monitoring: Priority Sector Lending will be monitored on a
quarterly as well as annual basis.
Note: The revised guidelines will be operational with effect from
January 1, 2016.

Priority Sector Lending Certificates - Scheme
The purpose of PSLCs is to enable banks to achieve the priority
sector lending target and sub-targets by purchase of these
instruments in the event of shortfall and at the same time
incentivize the surplus banks; thereby enhancing lending to the
categories under priority sector.
The PSLCs will be traded through the CBS portal (e-Kuber) of
RBI.
Scheduled Commercial Banks (SCBs), Regional Rural Banks
(RRBs), Local Area Banks (LABs), Small Finance Banks (when
they become operational) and Urban Co-operative Banks who
have originated PSL eligible category loans subject to such
regulations as may be issued by the Bank are eligible for the
PSLC.
All PSLCs will be valid till March 31st and will expire on April
1st.
The PSLCs would have a standard lot size of ₹ 25 lakh and
multiples thereof.
What are the Types of PSLCs?

There would be four kinds of PSLCs :–
i) PSLC Agriculture: Counting for achievement towards the total
agriculture lending target.
ii) PSLC SF/MF: Counting for achievement towards the sub-target
for lending to Small and Marginal Farmers.
iii) PSLC Micro Enterprises: Counting for achievement towards the
sub target for lending to Micro Enterprises.
iv) PSLC General: Counting for achievement towards the overall
priority sector target.
Note: 'Export Credit' can form a part of underlying assets against
the PSLC - General. However, any bank issuing PSLC-General
against 'Export Credit' shall ensure that the underlying 'Export
Credit' portfolio is also eligible for priority sector classification by
domestic banks.

Topic 17: FINANCIAL MARKETS IN INDIA AND THE
INSTRUMENTS
Money Market
It is a market for short-term debt securities, such as commercial
paper, repos, negotiable certificates of deposit, & Treasury Bills
with a maturity of one year or less.
Capital Market
It is the market for long term funds. It refers to all the facilities &
institutional arrangements for borrowing & lending medium &
long term funds.
Money Market VS Capital Market
Money Market Capital Market

Market for short term Market for long term financial
financial assets assets
Maturity period less than one Maturity period beyond one
year year
Deals over the counter Deals at stock exchange
No. of players limited No. of players unlimited
Regulated by RBI Regulated by SEBI
Major money market Instruments

Certificate of Deposit (CD)
Commercial Paper (CP)
Inter Bank Participation Certificates
Inter Bank term Money
Treasury Bills
Bill Rediscounting
Call/Notice Money
Terms relating to Money Market
Call Money Money lent or borrowed for one day

Notice Money lent or borrowed for a period of 2-14 days.
Money
Term Money lent or borrowed for 15 daysto 1 year.
Money
Yield to Expected rate of return on an existing security
maturity purchased for the market.
Coupon Specified interest rate on a fixed maturity security
Rate fixed at the time of issue.
CALL/NOTICE MONEY MARKET OPERATIONS

Under call money market, funds are transacted on overnight
basis & under notice money market, for 2 days to 14 days.
Participants include banks (excluding RRBs) &Primary Dealers
(PDs), both as borrowers & lenders. Non-bank institutions are
not permitted in the call/notice money market with effect from
August 6, 2005.
Calculation of interest payable is based on FIMMDA‟s (Fixed
Income Money Market & Derivatives Association of India)
Handbook of Market Practices.
INSTRUMENT OF GOVT. BORROWING

To meet the temporary receipt & expenditure mismatch, govt.
obtains over draft from RBI under Ways & Means Advances. For

short term liquidity, it issues cash management bills, treasury bills
of 91 days, 182 days&364 days maturity. For long term funds, it
uses dated securities in the form of bonds/long term loans.
Treasury Bills
These are the instruments (in the form of promissory notes) of
short term borrowing by the Central govt., first issued in India
in 1917.
Investors: Treasury bills can be purchased by any one
(including individuals) except State govt.
Denomination: Minimum amount of face value Rs. 25000 & in
multiples thereof. There is no specific amount/limit on the
extent to which these can be issue or purchased.
Maturity: 91 days, 182 days&364 days.
Rate of interest: Treasury bills are zero coupon securities. They
are issued at a discount& redeemed at face value at maturity.
The return to the investors is the difference between the
maturity value or the face value (that is Rs. 100)&the issue price.
Cash Management Bills (CMB)

CMB introduced on 11.08.11, is a short-term security to be sold
by Govt. of India to raise temporary money for cash
management needs.
The tenure is less than 91 days but the notified amount & date
of issue depends upon the temporary cash requirement of the
Govt.
It is issued at discount to the face value through auctions, as in
the case of the Treasury Bills.

Dated Securities
These are long term securities & carry a fixed or floating
coupon (interest rate) paid on the face value, payable at fixed
time periods (half-yearly).
The tenor of dated securities can be up to 40 years.
Public Debt Office of RBI acts as the registry/depository of
Govt. securities & deals with the issue, interest payment &
repayment of principal at maturity.
Ways & Means Advances (WMAS)

WMAs were introduced as per an agreement between RBI &
Govt. WMAs are temporary overdrafts by RBI to govt. (Central
& State) under Section 17(5) of RBI Act. WMSs replaced the
earlier ad hoc T-Bills system.
Objective: WMAs bridge the time interval of mismatch
between govt. expenditure & receipts.
These are not a source of finance.
Duration: 10 consecutive working days for Central Govt.&14
days for State Govt.
Certificate Of Deposit
This scheme was introduced in July 1989, to enable the banking
system to mobilize bulk deposits from the market, which they can
attract at competitive rates of interest.
Who can issue Scheduled commercial banks (except RRBs) & All
India Financial Institutions within their
„Umbrella limit‟.
CRR/SLR Applicable on the issue price in case of banks

Investors Individuals (other than minor), corporations,
companies, trusts, funds, associations etc.
Maturity Min: 7 days Max: 12 Months (in case of FIs
minimum 1 year & maximum 3 years).
Amount Min: Rs. 1 lac, beyond which in multiple of Rs.
1 lac
Int. Rate Market related. Fixed or floating
Loan Against collateral of CD not permitted
Nature Usance Promissory note. Can be issued in
Dematerialisation form only wef. June 30, 2002
Commercial Paper
CP introduced during 1990, is a short term money market
instrument issued as an unsecured usance promissory note &
privately placed.
Who can issue Commercial paper (CP): Companies, primary
dealers (PDs)&all-India financial institutions (FIs).
Maturity: Min 7 days & max upto one year
Amount: Min Rs. 5 lakh or multiples thereof.
A company is eligible to issue CP if:
(a) Its tangible net worth, as per latest audited balance sheet, is not
less than Rs. 4 crore.
(b) Sanctioned working capital limit by bank/s or all-India financial
institution/s;
(c) The borrower accounts are classified as a Standard Asset by
financing bank/s/ institution/s &
(d) Minimum credit rating from SEBI approved credit rating
agency (CRA) is A3. Rating should not be due for review.

What is Merchant Banking
Merchant banking stands for providing various services relation to
capital market & financing the corporate sector. The Merchant
Bankers provide consultancy to the corporate sector on the issues
like finance, capital structure & investment, mergers, takeover &
amalgamations, establishing coordination between the government
& the corporate sector.
Capital Markets in India

It refers to all the facilities & institutional arrangements for
borrowing & lending medium & long-term funds.
It is segregated into (i) gilt edged market & (ii) the industrial
securities market.
The gilt-edged market refers to the market for govt. & semi-
govt. securities which are traded in the market in stable value &
are sought after by banks & other institutions.
The industrial securities market refers to the market for shares
& debentures of old as well as new companies. This market is
further divided as primary market & secondary market.
a) The primary market refers to the setup which helps the
industry to raise funds by issuing different types of securities,
which are issued directly to the investors, both individual &
institutions.
b) The secondary market refers to the network for subsequent sale
& purchase of securities, after these are issued.
A Brief on Indian Depository Receipts (IDR)

IDR is an instrument in the form of a Depository Receipt created by
the Indian depository in India against the underlying equity shares
of the issuing company. In an IDR, foreign companies would issue
shares, to an Indian companies would issue shares, to an Indian
Depository which would in turn issue depository receipts to
investors in India.
Mutual Fund Terms

Asset Management Company: A company formed & registered
under the Companies Act 1956&approved as such by the SEBI to
manage the funds of a mutual fund. Under an agreement (with
the trustees of the Mutual Fund), an AMC undertakes to
formulated mutual funds schemes, distribute income as per
agreement.
Balanced fund: This fund invests in bonds & blue-chip stocks to
conserve capital. It pays reasonable income capital appreciation.
Close-ended scheme: A scheme where funds are raised for a
fixed period. The scheme is wound up after that period & funds
are returned with capital appreciation to unit holders. Normally,
a close-ended scheme is listed on a stock exchange.
Fixed income funds: A mutual fund which primarily invests in
fixed income securities like bonds & debentures. The objective is
to provide monthly or yearly income to investors.
Net asset value: The price of value of one share of a fund. It is
calculated by summing the quoted values of all the securities
held by the fund, adding in cash & any accrued income &
subtracting liabilities & dividing the result by the number of
shares outstanding. Fund companies compute the NAV once a
day based on closing market prices.
Open ended scheme: A scheme is the one which continuously
offers its units & buys them back from investors.

Topic 18: IMPORTANT MISCELLANEOUS BANKING
AWARENESS TOPICS
NATIONALISATION OF BANKS
Nationalisation of Imperial Bank of India & its conversion into
State Bank of India in July 1955.
Conversion of 8 major State-associated banks into subsidiary
banks of SBI in 1959.
Nationalisation of 14 Indian scheduled banks in July 1969.
Nationalisation of 6 more banks in April 1980 & New Bank of
India merged into PNB.
FOREIGN EXCHANGE RESERVES

India's foreign exchange reserves comprise foreign currency
assets, gold & special drawing rights allocated to it by the
International Monetary Fund (IMF) in addition to the reserves it
has parked with the fund.
Foreign exchange reserves are held & managed by the RBI.
The Foreign currency assets are investment mainly in
instruments abroad which have the highest credit rating & which
do not pose any credit risk. These include sovereign bonds,
treasury bills & short-term deposits in top-rated global banks
besides cash accounts.
TRANSFER SYSTEM IN BANKING SECTOR

Real Time Gross Settlement (RTGS)
RTGS implemented w.e.f. 26.03.2004 (revised on 19.10.13), is a
centralized payment system operated by RBI. In RTGS inter-bank
payment instructions are processed & settled, on gross basis in a
real-time environment.
It uses Indian Financial Network (INFINET)&SFMS platforms.
RTGS is regulated by RTGS System Regulations, 2013.
National Electronic Funds Transfer (NEFT)

RBI operationalised NEFT System in Nov 2005. It facilitates
transfer of funds from any bank branch to any other bank branch.
Amount: There is no lower/upper value limit.
Bank account: NEFT is an account to account transfer system.
The remitter&beneficiary should have a bank account.
Introduction of additional settlement batches in NEFT System

Reserve Bank of India announced the introduction of additional
settlements in the NEFT system to enhance the efficiency and add
to customer convenience. The additional 11 settlements at half-hour
intervals will be introduced with effect from July 10, 2017 at 8.30
am, 9.30 am, 10.30 am ……… 5.30 pm and 6.30 pm, taking the total
number of half hourly settlement batches during the day to 23. The
starting batch at 8.00 am and closing batch at 7.00 pm shall remain
the same as hitherto.
Centralized Funds Management Systems (CFMS)

CFMS was operated & maintained by RBI to enable operations on
current accounts maintained at various offices of the RBI, through
standard message formats in a secure manner.

Nepal Remittance Scheme
It is a cross-border one-way remittance facility scheme, for
remittance from India to Nepal.
Amount: Up to Indian Rs. 50,000 from NEFT branches.
Beneficiary will receive funds in Nepalese rupees.
CORE BANKING SOLUTIONS

Core Banking Solutions (CBS) or Centralised Banking Solutions is
the process which is completed in a centralized environment i.e.
under which the information related to the customer‟s account (i.e.
financial dealings, profession, income, etc.) is stored in the Central
Server of the bank (that is available to all networked branches)
instead of the branch server.
RATING OF BANKS IN INDIA

RBI‟s 1995 working group headed by Sh. S. Padmanabhan
suggested method for rating.
Rating criteria: RBI rates the banks on a 5-point scale of A to E,
widely on the lines of international CAMELS rating model for
domestic banks & CALCS model for foreign banks.
CAMELS Rating for Domestic Banks

C: Capital adequacy ratio
A: Asset quality
M: Management Effectiveness
E: Earning (i.e. profitability)
L: Liquidity (asset-liability management)

S: System & controls
Rating parameters for foreign banks

C: Capital adequacy ratio
A: Asset quality
L: Liquidity
C: Compliance
S: System & controls

Topic 19: ACCOUNTS FOR FOREIGN (CURRENCY/PERSON)
IN INDIA
NRO A/c (Foreign Tourist)

1) Foreign tourists during their short visit to India can open a Non-
Resident (Ordinary) Rupee (NRO) account (Current / Savings)
with any Authorised Dealer bank dealing in foreign exchange. Such
account can be opened up to a maximum period of 6 months.
2) Tourists can freely make local payments through the NRO
account. All payments to residents exceeding INR 50,000 can be
made only by means of cheques / pay orders / demand drafts.
EEFC A/c
1) Exchange Earners' Foreign Currency Account (EEFC) is an
account maintained in foreign currency with an Authorised Dealer
i.e. a bank dealing in foreign exchange.
2) It is a facility provided to the foreign exchange earners, including
exporters, to credit 100 % of their foreign exchange earnings to the
account, so that the account holders do not have to convert foreign
exchange into Rupees & vice versa, thereby minimizing the
transaction costs.
3) All categories of foreign exchange earners, such as individuals,
companies, etc. who are resident in India, may open EEFC
accounts.
4) An EEFC account can be held only in the form of a current
account. No interest is payable on EEFC accounts.
ACCOUNTS FOR NRI/PIO
Non-Resident Ordinary Rupee Account (NRO Account)

NRO accounts may be opened / maintained in the form of
current, savings, recurring or fixed deposit accounts. Interest
rates offered by banks on NRO deposits cannot be higher than
those offered by them on comparable domestic rupee deposits.
Account should be denominated in Indian Rupees.
NRI/PIO may remit from the balances held in NRO account an
amount not exceeding USD one million per financial year, subject
to payment of applicable taxes.
The limit of USD 1 million per financial year includes sale
proceeds of immovable properties held by NRIs/PIOs.
Non-Resident (External) Rupee Account (NRE Account)

NRE account may be in the form of savings, current, recurring or
fixed deposit accounts.
Account will be maintained in Indian Rupees.
Accrued interest income & balances held in NRE accounts are
exempt from Income tax.
Authorised dealers/authorised banks may at their discretion
allow for a period of not more than two weeks, overdrawings in
NRE savings bank accounts, up to a limit of Rs.50,000.
Loans up to Rs.100 lakh can be extended against security of
funds held in NRE Account either to the depositors or third
parties.
Foreign Currency Non-Resident (Bank) Account – FCNR (B)

Account
FCNR (B) accounts are only in the form of term deposits of 1 to 5
years
Account can be in any freely convertible currency.

Loans up to Rs.100 lakh can be extended against security of
funds held in FCNR (B) deposit either to the depositors or third
parties.
The interest rates are stipulated by the Department of Banking
Operations & Development, Reserve Bank of India.

Topic 20: FINANCIAL INSTITUTIONS in INDIA
National Bank for Agriculture & Rural Development

Established on 12th July 1982 on the recommendation of
CRAFICARD committee (also called as Sivaraman Comittee)
For Agricultural finance, NABARD is the apex organization.
Chairman: Dr. Harsha Kumar Bhanwala
Head Quarters: Mumbai
Rural Infrastructure Development Fund (RIDF) is operated by
NABARD, instead in April 1995.
NABARD is the "Micro-Finance Regulatory Authority"
Small Industries Development Bank of India (SIDBI)

Small Industries Development Bank of India (SIDBI in short) was
established in the year 1990 (Date: 2nd April 1990) under the
Small Industries Development Bank of India Act 1989 as a
subsidiary of Industrial Development Bank of India.
Chairman- Dr. KshatrapatiShivaji
Head Quarters: Lucknow
Securities & Exchange Board of India (SEBI)

It is the regulator for the securities market in India. SEBI was
initially established as a non-statutory body in April 1988, to
regulate the working of stock exchange. Later it was given a
statutory status on April 1992 via SEBI Act, 1992with the
following objectives.
Chairman- Ajay Tyagi
REGIONAL RURAL BANK (RRB)
Regional Rural Bank Were Set Up by An Ordinance In 1975,
Later Replaced By Rrbs Act, 1976 As Pre Banking Commission
Recommendation In 1975.
Father Of RRB is M.Swaminathan.
The Govt. Of India had appointed a working group on rural
banks under the chairmanship of Mr. M. Narasimham in 1975.
First RRBs were set up on 2nd oct.
Share Holder Contribution In %: Government Of India 50%
Sponsor Bank 35% State Government 15% Total 100%.
EXIM BANK
The Export-Import (EXIM) Bank of India is the principal financial
institution in India for coordinating the working of institutions
engaged in financing export & import trade.
It is a statutory corporation wholly owned by the Government of
India.
It was established on January 1, 1982 for the purpose of
financing, facilitating & promoting foreign trade of India.
Chairman- Yaduvendra Mathur
NATIONAL HOUSING BANK (NHB):

The National Housing Bank (NHB), the apex institution of
housing finance in India, was set up as wholly owned subsidiary
of the Reserve Bank of India.
The bank started its operations from July 1988.
NHB is a subsidiary bank of Reserve Bank of India.
National Housing Bank was established under section 6 of
National Housing Bank Act (1987).
The headquarters of NHB is in New Delhi.
Chairman: Shri Sriram Kalyanaraman
ECGC
Export Credit Guarantee Corporation of India. This organisation
provides risk as well as insurance cover to the Indian exporters.
Chairman- Geetha Muralidhar

Topic 21: IMPORTANT FINANCIAL TERMS IMPORTANT FOR
SBI INTERVIEW
Asset-Liability Management
ALM implemented in India wef 1.4.1999 is a comprehensive &
dynamic framework for measuring, monitoring & managing the
market risk of a bank. It is the management of structure of balance
sheet (liabilities & assets) to maximize net earning from interest
within overall risk-preference (present & future) of the bank.
Cross Selling
Cross-selling stands for offering to the existing & new customers,
some additional banking products, with a view to expand banking
business, reduce the per customer cost of operations & provide
more satisfaction & value to the customer.
Liquidity Adjustment Facility

Liquidity Adjustment Facility (LAF) was introduced by RBI
during June, 2000 in phases, to ensure smooth transition &
keeping pace with technological upgradation.
Tenor: Reverse Repo auctions (for absorption of liquidity) &
Repo auctions (for injection of liquidity) are conducted on a daily
basis (except Saturdays).
Cap: 0.25% of NDTL w.e.f. 01.04.14.
Marginal Standing Facility (MSF)

MSF was introduced w.e.f. May 09, 2011, by RBI.
Eligibility: Scheduled Commercial Banks having Current
Account & SGL Account with RBI.

Tenor & Amount: It can be availed up to 2% of NDTL at the end
of 2nd preceding fortnight. It is for one day.
Clearing Corporation of India

Clearing Corporation of India Limited (CCIL) was incorporated on
30th of April, 2001, as the country‟s first clearing house for the Govt.
securities, forex & other related market segments. It commenced
operations from Feb 15, 2002. It provides a system for efficient
clearing of money, government securities & foreign exchange
market transactions.
Collateralised Borrowing & Lending Obligation (CBLO)

CBLO, an RBI approved money market instrument, is developed
by CCIL for the benefit of the entities phased out from interbank
call money market or given restricted participation in terms of
ceiling on call borrowing & lending transactions & who do not
have access to the call money market.
It is a discounted instrument available in electronic book entry
form for the maturity period ranging from 7 days to 90 Days (can
be up to one year as per RBI guidelines).
Asset Securitisation
Securitisation of assets is an additional channel for recycling of
funds by business entities including banks.
Securitisation is process through which the future receivables
(say rent, installment of a term loan due in future) of an
organization (say bank), are converted into debt instruments
(such as bonds with a fixed rate of return) & then sold.

Banking Codes & Standards Board of India
Banking Codes & Standards Board of India (BCSBI) was set up
on the lines of a similar set up in UK to oversee the Fair Practice
Code evolved by the Bankers.
Members: The Board was set up as a Society, under the Societies
Registration Act, 1860. Commercial banks, RRBs & Urban Coop
Banks are its members. RBI was funding the entire cost of
operations of the Board for the initial 5 years.
A Governing council of the BCSBI looks after its financial affairs
& managerial policies.
The tenure of the Council is 5 years & the appointment of the
Council after 5 years would be with the concurrence of the RBI.
Kisan Vikas Patra

KPV are regulated by KVP Rules 2014, Scheme is available
through Post Offices & those banks that are authorized to operate
PPF scheme.
Denomination: Rs.1000, Rs.5000, Rs.10000 & Rs.50000
Types of certificates: Category Single, Joint A-Type & Joint B-
Type (E/S).
Maturity period: 113 Month
Rate of Interest: 7.6%.
Rate of interest: Rs.1000 becomes double during the maturity
period.
1. Nomination facility, 2. Pledge for loan facility& 3. pre-mature
payment after 2 years & 6 months subject to certain conditions, is
eligible.
Mudra Bank

MUDRA, which stands for Micro Units Development &
Refinance Agency Ltd, is a financial institution being set up by
Government of India for development & refinancing micro units‟
enterprises.
Under the aegis of Pradhan Mantri MUDRA Yojana (PMMY),
MUDRA has already created its initial products/ schemes. The
interventions have been named „Shishu‟, „Kishor‟ & „Tarun‟ to
signify the stage of growth/ development & funding needs of the
beneficiary micro unit / entrepreneur & also to provide a
reference point for the next phase of graduation / growth to look
forward to. The financial limit for these schemes is:
a) Shishu: covering loans up to 50,000/-
b) Kishor: covering loans above 50,000/- & up to 5 lakh
c) Tarun: covering loans above 5 lakh to 10 lakh
National Institute of Bank Management (NIBM)

It was established in 1969 by RBI, in consultation with the
Government of India, as an autonomous apex institution for
research, training, education&consultancy in bank management.
Its mandate is to play a proactive role of “think-tank” of the
banking system. The Governor of RBI is the Chairman of the
Governing Board. National Institute of Bank Management (NIBM)
is situated at Pune, Maharashtra.
Know Your Customer Guidelines

KYC means “Know Your Customer”. It is a process by which banks
obtain information about the identity and address of the customers.
This process helps to ensure that banks‟ services are not misused.
The KYC procedure is to be completed by the banks while opening

accounts. Banks are also required to periodically update their
customers‟ KYC details.
The Government of India has notified six documents as „Officially
Valid Documents‟ (OVDs) for the purpose of producing proof of
identity. These six documents are Passport, Driving Licence,
Voters‟ Identity Card, PAN Card, Aadhaar Card issued by UIDAI
and NREGA Job Card.
What are Small Accounts?

The „Small Accounts‟ have certain limitations such as:
balance in such accounts at any point of time should not exceed
Rs.50,000
total credits in one year should not exceed Rs.1,00,000
total withdrawal and transfers in a month should not exceed
Rs.10,000
Foreign remittances cannot be credited to such accounts.
Such accounts remain operational initially for a period of twelve
months and thereafter, for a further period of twelve months if
the holder of such an account provides evidence to the bank of
having applied for any of the officially valid documents within
twelve months of the opening of such account.

Topic 22: NBFC’S IN INDIA
A Non-Banking Financial Company (NBFC) is a company

registered under the Companies Act, 1956 engaged in the business
of loans & advances, acquisition of shares/ stocks/ bonds/
debentures/ securities issued by Government or local authority or
other marketable securities of a like nature, leasing, hire-purchase,
insurance business, chit fund business.
Difference between BANK & NBFC:
NBFCs lend & make investments & hence their activities are akin to
that of banks; however there are a few differences as given below:
i. NBFC cannot accept demand deposits;
ii. NBFCs do not form part of the payment & settlement system &
cannot issue cheques drawn on itself;
iii. Deposit insurance facility of Deposit Insurance & Credit
Guarantee Corporation is not available to depositors of NBFCs,
unlike in case of banks.
Register with RBI:
A company incorporated under the Companies Act, 1956&desirous
of commencing business of non-banking financial institution as
defined under Section 45 I(a) of the RBI Act, 1934 should comply
with the following:
a) It should be a company registered under Section 3 of the
companies Act, 1954
b) It should have a minimum net owned fund of Rs 200 lakh.
Deposits in NBFC:

a) Presently, the maximum rate of interest an NBFC can offer is
12.5%. The interest may be paid or compounded at rests not
shorter than monthly rests.
b) The NBFCs are allowed to accept / renew public deposits for a
minimum period of 12 months & maximum period of 60
months. They cannot accept deposits repayable on demand.
c) The deposits with NBFCs are not insured.
d) The repayment of deposits by NBFCs is not guaranteed by RBI.

Topic 23: DEVELOPMENTS IN THE BANKING SECTOR
A Brief on NPCI
National Payments Corporation of India (NPCI) is an umbrella
organization for all retail payments system in India. NPCI was
incorporated in December 2008 & the Certificate of Commencement
of Business was issued in April 2009. The authorized capital was
pegged at Rs 300 crore & paid up capital was Rs 100 crore. The
Board constitutes of Shri Balachandran M as the Chairman, & Shri
A. P. Hota, Managing Director & Chief Executive Officer, NPCI.
A Brief on BHIM
Bharat Interface for Money is an app that lets you make simple,
easy & quick payment transactions using Unified Payments
Interface (UPI). This can be done using just Mobile number or
Virtual Payment Address (VPA). Currently it is available in 12
languages.
A Virtual Payment Address (VPA) is a unique identifier which
you can use to send & receive money on UPI.
Amount of money that can be sent using BHIM is uptoRs 10,000
per transaction & a maximum of Rs 20,000 per day for one bank
account.
A Brief on UPI- 2016

Unified Payments Interface is an instant payment system
developed by NPCI. UPI is built over the IMPS infrastructure &
allows you to instantly transfer money between any two parties'
bank accounts.
UPI-PIN is a 4-6 digit pass code you create/set during first time
registration with this App.
At present, the upper limit per UPI transaction is Rs. 1 Lakh.
Immediate Payment Service (IMPS)
It was launched in 2010. IMPS offers an instant, 24X7, interbank
electronic fund transfer service through mobile phones.
Overview of *99# Service

*99# service launched by NPCI, which works on Unstructured
Supplementary Service Data (USSD) channel. This service was
launched in 2014. Banking customers can avail the service by
dialing *99#, a “Common number across all Telecom Service
Providers (TSPs)” on their mobile phone & transact through an
interactive menu displayed on the mobile screen.
Overview of *99*99# Service

*99*99# is a USSD (Unstructured Supplementary Service Data)
based value added service from NPCI that facilitates the customers
to check the status of his/her Aadhaar number seeding/linking in
the bank account. The service works across all GSM service
providers & brings together the diverse ecosystem partners such as
Banks & TSPs (Telecom Service Providers).
MMID
MMID stands for Mobile Money Identifier. MMID is a 7-digit code
issued by the bank to their customers for availing IMPS.
A Brief on QSAM
*99*99# service, is alternatively known as QSAM (Query Service on
Aadhaar Mapper). Using this service, a person can check the
Aadhaar seeding/linking status in his/her bank account.
A Brief on NACH
NPCI implemented “National Automated Clearing House
(NACH)” for Banks, Financial Institutions, Corporates &
Government, is a web based solution to facilitate interbank, high
volume, electronic transactions which are repetitive & periodic in
nature. NACH System can be used for making bulk transactions
towards distribution of subsidies, dividends, interest, salary,
pension etc. for bulk transactions towards collection of payments
pertaining to telephone, electricity, water, loans, investments in
mutual funds, insurance premium etc.
NACH‟s Aadhaar Payment Bridge (APB) System, developed by
NPCI has been helping the Government & Government Agencies in
making the Direct Benefit Transfer scheme a success.
BBPS
Bharat Bill Payment System (BBPS) will function as a tiered
structure for operating the bill payment system in the country
under a single brand image. National Payments Corporation of
India (NPCI) will function as the authorized Bharat Bill Payment
Central Unit (BBPCU), which will be responsible for setting
business standards, rules & procedures for technical & business
requirements for all the participants. Payments may be made
through the BBPS using cash, transfer cheques, & electronic modes.
A Brief on Specified Bank Notes (Cessation of Liabilities) Act

2017
Government of India notified the Specified Banknotes (Cessation of
liabilities) Act 2017.The SBNs cease to be the liabilities of the
Reserve Bank under Section 34 of the RBI Act & cease to have the
guarantee of the Central Government.
In terms of Section 5 of the Act, with effect from December 31, 2016
no person shall knowingly or voluntarily hold, transfer or receive
any specified banknotes. After the expiry of grace period, holding
of not more than 10 notes in total, irrespective of denomination or
not more than 25 notes for the purpose of study/ research/
numismatics is permitted. In terms of Section 7, contravention of
Section 5 shall be punishable with fine which may extend upto
10,000 INR or five times the face value of the SBNs involved in the
contravention, whichever is higher. The limit of exchange for NRIs
will be Rs. 25000/-.
Rupee Denominated Bonds

Any corporate (entity registered as a company under the
Companies Act, 1956/ 2013) or body corporate (entity specially
created out of a specific act of the Parliament) & Indian banks are
eligible to issue Rupee denominated bonds overseas. Real Estate
Investment Trusts (REITs) & Infrastructure Investment Trusts
(InvITs) coming under the regulatory jurisdiction of the Securities
& Exchange Board of India (SEBI) are also eligible. The minimum
maturity period for such bonds will be 3 years.
Small Finance Banks

The objective is to further financial inclusion by (a) provision of
savings vehicles, (b) supply of credit to small business units;
small & marginal farmers; micro & small industries; & other
unorganised sector entities, through high technology-low cost
operations.
It shall primarily undertake basic banking activities of
acceptance of deposits & lending to unserved & underserved
sections including small business units, small & marginal
farmers, micro & small industries & unorganised sector entities.
The minimum paid-up equity capital is Rs. 100 crores.

The promoter's minimum initial contribution to the paid-up
equity capital of such small finance bank shall at least be 40
%&gradually brought down to 26 % within 12 years from the
date of commencement of business of the bank.
Payments Banks
The objective is to further financial inclusion by providing (i)
small savings accounts(ii) payments/remittance services to
migrant labour workforce, low income households, small
businesses, other unorganised sector entities&other users.
Scope of activities: Acceptance of demand deposits. Payments
bank will initially be restricted to holding a maximum balance
of Rs. 100,000 per individual customer.
The payments banks cannot undertake lending activities. Apart
from amounts maintained as Cash Reserve Ratio (CRR) on its
outside demand&time liabilities, it will be required to invest
minimum 75 % of its "demand deposit balances" in SLR
eligible. The minimum paid-up equity capital shall be Rs. 100
crore.
The promoter's minimum initial contribution to the paid-up equity
capital of such payments bank shall at least be 40 % for the first five
years from the commencement of its business.

Topic 24: ALL ABOUT THE PAN CARD
What is PAN?
Permanent Account Number or PAN is a means of identifying
various taxpayers in the country. The PAN system of identification
is a computer-based system that assigns unique identification
number to every Indian tax paying entity. It is a 10-character
alphanumeric number uniquely allotted to the PAN Cardholder.
Uses of PAN Card
IT Returns Filing: All individuals and entities who are eligible for
Income tax are expected to file their IT returns. A PAN card is
necessary for filing of IT returns.
Opening a bank account: A PAN card is required in order to open

a new bank account, whether it is a savings or a current account.
Buying or selling a motor vehicle: If you wish to buy or sell a
motor vehicle worth more than Rs. 5, 00, 000, you have to provide
the PAN Card details.
Purchase of jewellery: If you are looking at buying any sort of

jewellery that is valued at over Rs. 5, 00, 000, you will have to
provide PAN card details at the time of purchase.
Making investments: If you are considering investing in securities,

you would have to furnish your PAN details for any transactions
amounting to above Rs. 50, 000. This extends to equities, mutual
funds, bonds as well as debentures.

Property: Buying, selling or renting property in India now requires
PAN card proof.
Fixed Deposits: If you plan on investing your money in a Fixed

Deposit (FD) amounting to above Rs. 50, 000 in a bank, you will
have to provide your PAN details. This is done as the bank will
deduct TDS (Tax Deductible at Source) on the FD interest amount.
Cash Deposits: If you are making a cash deposit that amounts to

over Rs. 50, 000 at a time, you will have to submit PAN details as
well.
Insurance Payments: As per the Income Tax Department

directives, PAN card details have to be furnished when making an
insurance payment exceeding Rs. 50, 000 a year.

Topic 25: ALL ABOUT THE PREPAID INSTRUMENTS
PPIs are payment instruments that facilitate purchase of goods

and services, including financial services, remittance facilities etc.
against the value stored on such instruments.
PPIs that can be issued in the country are classified under three
categories viz. (i) Closed system prepaid payment instruments
(ii) Semi-closed system prepaid payment instruments and (iii)
Open system prepaid payment instruments.
Classification of PPI’s
Closed System Prepaid Payment Instruments: These are PPIs
issued by an entity, including individuals, proprietorship firms,
partnership firms etc., for facilitating the purchase of goods and
services from that entity only. These instruments do not permit
cash withdrawal or redemption. As these instruments cannot be
used for payments and settlement for third party services, the issue
and operation of such instruments are not classified as payment
systems requiring approval / authorisation by the Reserve Bank of
India.
Semi-Closed System Prepaid Payment Instruments: These are

PPIs which can be used for purchase of goods and services,
including financial services, remittance facilities etc. at a group of
clearly identified merchant locations/ establishments which have a
specific contract with the issuer (or contract through a payment
aggregator / payment gateway) to accept the PPIs as payment
instruments. These instruments do not permit cash withdrawal,
irrespective of whether they are issued by bank or non-bank PPI
Issuers. Semi-closed PPIs issued by banks and non-banks would
have same features, unless otherwise specified.
Open System Prepaid Payment Instruments: These are PPIs which
shall be only issued by banks, can be used for purchase of goods
and services, including financial services, remittance facilities etc. at
any merchant locations. Banks issuing such PPIs shall also facilitate
cash withdrawal at ATMs / BCs.
Validity of PPI’s
All prepaid payment instruments issued in the country shall have a
minimum validity period of one year from the date of
activation/issuance to the holder.
Limits under PPI

According to the RBI‟s new draft norms for PPIs, amount in a PPI
should not exceed Rs 1 lakh at any point of time if the customer
provides full KYC and Rs. 20,000 if the customer provides
minimum KYC details to the PPI issuing entity. Further, only
banks will be permitted to issue open system PPIs after full KYC
in addition to semi closed PPIs.
The draft also said that the maximum value of any prepaid
payment instrument, where specific limits have not been
prescribed, should not exceed Rs 50,000.
Cash loading to PPIs should be limited to Rs. 50,000 per month
subject to the overall limit of the PPI.
RBI norms further said maximum value in prepaid gift
instrument should not exceed Rs 20,000 and in case of PPI for
Mass Transit Systems it should not be more than Rs 3,000 at any
time. PPIs could be loaded/reloaded by cash, by debit to a bank
account, by credit and debit cards, and other PPIs.

Topic 26: RISK MANAGEMENT IN BANKING SECTOR
Maintaining a trade-off between risk and return is the business of

risk management. Risk management in the banking sector is a key
issue linked to financial system stability.
What is a Risk?
A risk can be defined as an unplanned event with financial
consequences resulting in loss or reduced earnings. Two most
important developments in the banking sector because of which
banks have to emphasise on risk management:
Deregulation: It has given banks more autonomy in areas like

lending, investment, interest rate structure etc. As a result of these
developments, banks are required to manage their own business
themselves and at the same time maintain liquidity and
profitability.
Technological innovation: Technological innovations have

provided a platform to the banks for creating an environment for
efficient customer services as also for designing new products. This
has also increased the diversity and complexity of risks, which
need to be managed professionally so that the opportunities
provided by the technology are not negated.
Major Risks in Banking Sector
Liquidity Risk: Liquidity risk is the risk of a bank not being able to
have enough cash to carry out its day-to-day operations.

Interest Rate Risk: The risk of an adverse impact on Net Interest
Income (NII) due to variations of interest rate may be called Interest
Rate Risk. It is the exposure of a Bank‟s financial condition to
adverse movements in interest rates.
Market Risk: Basel Committee on Banking Supervision defines

market risk as the risk of losses in on- or off-balance sheet positions
that arise from movement in market prices. Market risk is the most
prominent for banks present in investment banking.
Credit or Default Risk: It usually occurs because of inadequate

income or business failure. Credit risk signifies a decline in the
credit assets‟ values before default that arises from the deterioration
in a portfolio or an individual‟s credit quality.
Operational Risk: Basel Committee on Banking Supervision

defines operational risk “as the risk of loss resulting from
inadequate or failed internal processes, people & systems or from
external events. Operational risk, the risk in all banking
transactions.
Other Risks
Strategic Risk: Strategic Risk is the risk arising from adverse
business decisions, improper implementation of decisions or lack of
responsiveness to industry changes.
Reputation Risk: Reputation Risk is the risk arising from negative

public opinion. This risk may expose the institution to litigation,
financial loss or decline in customer base.
Role of RBI in Risk Managements in the Banks
RBI has been using CAMELS rating to evaluate the financial

soundness of the Banks. CAMELS Model consists of six
components namely Capital Adequacy, Asset Quality,
Management, Earnings Quality, Liquidity and Sensitivity to Market
risk.
After the evolution of the BIS prudential norms in 1988, the RBI
took a series of measures to realign its supervisory and regulatory
standards and bring it at par with international best practices.
Finally, it was in the year 1999 that RBI recognised the need of an
appropriate risk management and issued guidelines to banks
regarding assets liability management, management of credit,
market and operational risks. The entire supervisory mechanism
has been realigned since 1994 under the directions of a newly
constituted Board for Financial Supervision (BFS), which functions
under the aegis of the RBI, to suit the demanding needs of a strong
and stable financial system.
A process of rating of banks on the basis of CAMELS in respect of

Indian banks and CACS (Capital, Asset Quality, Compliance and
Systems & Control) in respect of foreign banks has been put in
place from 1999.
Basel Norms
Basel is a city in Switzerland. It is the headquarters of Bureau of
International Settlement (BIS), which fosters co-operation among

central banks with a common goal of financial stability and
common standards of banking regulations.
Basel guidelines refer to broad supervisory standards formulated
by this group of central banks - called the Basel Committee on
Banking Supervision (BCBS). The purpose of the accord is to ensure
that financial institutions have enough capital on account to meet
obligations and absorb unexpected losses.
Basel I: The Basel Capital Accord

In 1988, BCBS introduced capital measurement system called Basel
capital accord, also called as Basel 1. It focused almost entirely on
credit risk. It defined capital and structure of risk weights for
banks. The minimum capital requirement was fixed at 8% of risk
weighted assets (RWA). RWA means assets with different risk
profiles.
Basel II: The New Capital Framework

In June 2004, Basel II guidelines were published by BCBS, which
were considered to be the refined and reformed versions of Basel I
accord. The guidelines were based on three parameters, which the
committee calls it as pillars. - Capital Adequacy Requirements:
Banks should maintain a minimum capital adequacy requirement
of 8% of risk assets - Supervisory Review: According to this, banks
were needed to develop and use better risk management
techniques in monitoring and managing all the three types of risks
that a bank faces, viz. credit, market and operational risks - Market
Discipline: This need increased disclosure requirements. Banks
need to mandatorily disclose their CAR, risk exposure, etc to the
central bank. Basel II norms in India and overseas are yet to be fully
implemented.
Basel III Norms
a) The Basel Committee is the primary global standard-setter for
the prudential regulation of banks & provides a forum for
cooperation on banking supervisory matters. Its mandate is to
strengthen the regulation, supervision & practices of banks
worldwide with the purpose of enhancing financial stability.
Stefan Ingves, Governor of Sveriges Riksbank (SWEDEN), is
the Chairman of the Basel Committee.
b) Basel III or Basel 3 released in December, 2010 is the third in the
series of Basel Accords. These accords deal with risk
management aspects for the banking sector.
c) According to Basel Committee on Banking Supervision "Basel
III is a comprehensive set of reform measures, developed by the
Basel Committee on Banking Supervision, to strengthen the
regulation, supervision & risk management of the banking
sector".
(d) Basel 3 measures aim to:
 Improve the banking sector's ability to absorb shocks arising
from financial & economic stress, whatever the source
 Improve risk management & governance
 Strengthen banks' transparency & disclosures.
Three Pillars of Basel 3

 Pillar 1: Minimum Regulatory Capital Requirements based on
Risk Weighted Assets (RWAs):
Maintaining capital calculated through credit, market & operational

risk areas (mainly that capital which can absorb risk.)
 Pillar 2: Supervisory Review Process:

Regulating tools & frameworks for dealing with peripheral risks
that bank face.
 Pillar 3: Market Discipline:
Increasing the disclosures that banks must provide to increase the

transparency of banks
Important Facts related to BASEL 3

 Minimum Ratio of Total Capital To RWAs--10.50%
 Minimum Ratio of Common Equity to RWAs--4.50% to 7.00%
 Tier I capital to RWAs--6.00%
 Core Tier I capital to RWAs--5.00%
 Capital Conservation Buffers to RWAs--2.50%
 Leverage Ratio--3.00%
 Countercyclical Buffer--0% to 2.50%

Topic 27: A BRIEF ON INDIAN BANKS' ASSOCIATION (IBA)
Indian Banks' Association (IBA) set up in 1946 with 22 members to

discuss issues of common interests. Over the years, IBA emerged as
the Voice of Indian Banking Industry. IBA adopts a consultative
approach to give its views on any issue pertaining to banking
sector. The banks voice their views and reach a consensus for the
common good of the industry, while maintaining the competitive
spirit. The policy of IBA is well received by all the stakeholders in
the industry. To work proactively for the growth of a healthy,
professional and forward looking banking and financial services
industry, in a manner consistent with public good.
Effort of IBA
1. Promote sound and progressive banking principles and
practices.
2. Assist and provide common services to members.
3. Co-ordinate and co-operate on procedural, legal, technical,
administration, professional matters.
4. Collate, classify and circulate statistical and other information.
5. Pool expertise towards common objectives of reduction in costs,
increase efficiency, productivity and improve systems, procedures
and banking practices.
6. Build Image of banking industry through publicity and public
relations.
Managing Committee-
Managing Committee of the Association is its governing body,
headed by the Chairman. It consists of 31 members, including Chief
Executives, representing Public Sector, Private Sector, Foreign

Banks, Co-operative Banks and Associate Banks of State Bank of
India. Members are elected in the Annual General Meeting and
retire by rotation. Day to day administration of IBA is handled by a
Chief Executive assisted by other officials.
Focus & Priorities of IBA

IBA has wide range of consultations with:
1. The Government of India on policy related issues
2. Industry unions on wage negotiations and improving industrial
relations
3. Members to encourage inter-bank co-operation and co-ordination
4. Foreign counterparts to widen the horizon and perspectives
5. Other trade bodies for better co-ordination
6. Its constituents and stakeholders for new initiatives
7. The Reserve Bank of India on regulatory issues
Note: Rajeev Rishi is present Chairman of IBA and its

headquarter is in Mumbai.

Part 2: Banking Current Affairs-2017
Yes Bank partners with TerraPay for faster international

remittance
Private sector lender Yes Bank has partnered with mobile payments
switch TerraPay to enable real-time money transfer to bank
accounts in India. Powered by TerraPay‟s global clearing and
settlement service, the partnership will make it faster and
convenient for consumers to send money to any bank account.
IDBI Bank only PSB to get ‘high’ rating for code compliance
According to the Code Compliance Rating of banks done by the
Banking Codes and Standards Board of India (BCSBI) 2017, only
one (IDBI Bank) out of 26 public sector banks and eight out of 17
private sector banks got „high‟ rating for their adherence to code
compliance.
The eight private sector banks that got „high‟ rating are- Axis Bank,
DCB Bank, HDFC Bank, ICICI Bank, IndusInd Bank, Kotak
Mahindra Bank, RBL Bank and YES Bank. The three foreign banks
are Citibank, HSBC and Standard Chartered Bank, that were
surveyed got „high‟ ranking.
Note: The code compliance rating are based on five parameters viz.
information dissemination, transparency, grievance redressal,
customer-centricity, and customer feedback.
RBI Issues New Rs500 banknotes with inset letter ‘A’

In continuation of issuing of Rs500 denomination banknotes in
Mahatma Gandhi (new) series from time to time which are
currently legal tender, a new batch of banknotes with inset letter
“A” in both the number panels, bearing the signature of Dr. Urjit R.

Patel Governor, Reserve Bank of India; with the year of printing
'2017‟ on the reverse, are being issued.
Indian Overseas Bank launches retail mart in

Thiruvananthapuram
Indian Overseas Bank (IOB), the Lead Bank for
Thiruvananthapuram district, has launched the Retail Mart, a retail
lending concept, in Kerala's capital city. The exclusive facility that
handles retail products has started functioning at the main branch.
SBI cuts interest rate on home loans above Rs 75 lakh by 10 bps

State Bank of India, country‟s largest lender cut the interest rate on
home loans above Rs 75 lakh by 10 basis points (bps) to 8.60
percent. For salaried women borrowers, the loans will be offered at
8.55 percent. According to SBI, the new rates will be effective from
June 15. The home loan rates offered are lowest in the industry.
RBI conducted the financial literacy week

To emphasize the importance of financial literacy, Reserve Bank of
India observed June 5-9, 2017 as Financial Literacy Week across the
country. The Week will focus on four broad themes, viz. Know
Your Customer (KYC), Exercising Credit Discipline, Grievance
Redress and Going Digital.
Vijaya Bank set to develop 100 digital villages

Vijaya Bank is going to develop as many as 100 digital villages in
various States of the country as part of its initiative to promote
digital banking among the rural population.
RBI initiates ‘prompt corrective action’ for Dena Bank

Reserve Bank of India has initiated prompt corrective action (PCA)
for Dena Bank in view of high net non-performing assets and
negative return on assets. Previously, central bank had initiated
PCA for IDBI Bank & UCO Bank in view of high NNPAs and
negative ROA. Prompt Corrective Action is the action which will
not have any material impact on the performance of the bank infact
it will contribute to improve the internal controls of the bank and
improvement in its activities.
SBI, World Bank finance Rs. 400-cr solar projects

State Bank of India and the World Bank announced that they had
financed 100 MW of rooftop solar projects worth Rs400 crore in
India. SBI has availed of a loan of $625 million from the World
Bank for on-lending to viable Grid-Connected Rooftop Solar PV
(GRPV) projects undertaken by developers, aggregators and end-
users, for installation of rooftop solar systems.
New pink-green one rupee notes to be in circulation soon

Reserve Bank of India will soon put into circulation currency notes
in one rupee denomination. New one rupee notes with
predominantly pink-green on obverse and reverse in combination
with other colours will be soon put into circulation.The notes
bearing the rupee symbol have been printed by the Government of
India. The note will bear signature of Shaktikanta Das, Secretary in
the Ministry of Finance.
Karnataka Bank pact with HDFC Asset Management

Karnataka Bank Ltd has entered into a distribution agreement to
sell the mutual fund products of HDFC Capital Asset Management
Ltd (HDFCAML) during exchanged the memorandum of
understanding in Mangaluru, Karnataka.
Bank of Baroda, IFFCO roll out co-branded debit card for farmers
Bank of Baroda (BOB) and IFFCO rolled out their first set of co-
branded debit cards for farmers as part of a novel initiative to push
digitalisation and cashless economy. The co-branded debit cards,
with inbuilt overdraft of Rs. 2,500 in special savings bank account,
could be used for purchase of various agri products at IFFCO sale
counters.
Federal Bank launches new trading platform

Federal Bank, in association with Geojit, has launched a new
trading platform called “Selfie” for customers. Designed and
managed by Geojit, the trading platform will give its users absolute
control over their investments with timely research inputs to make
sound investment decisions. The features of the Selfie Trading
Platform are a uniform experience across multiple platforms and
devices and an advanced charting platform that enables users to
trade directly from charts, among others.
HDFC Life launches AI-based insurance email bot 'SPOK'

HDFC Life announced the launch of an artificial intelligence-based
application 'SPOK' that can automatically read, understand,
categorise, prioritise and respond to customer emails sent to the
private insurer. 'SPOK', an insurance email bot, can read customer
queries within milliseconds and respond to them. The deployment
of SPOK will improve customer experience, while providing the
support staff with the bandwidth to focus on customer satisfaction.
Axis Bank to issue biodegradable prepaid gift cards

Axis Bank Ltd has announced biodegradable prepaid gift cards on
the occasion of World Environment Day. With this, the bank has
become the first to introduce biodegradable cards in the country.
Japan's SoftBank Invests Rs 9,000 Crore in Paytm

Softbank has made its biggest investment in an Indian digital
enterprise by sealing a funding round of Rs 9,000 crore ($1.4 billion)
in mobile payments provider Paytm. The Japanese internet &
telecom conglomerate will now own about a fifth of Paytm.This is
Softbank's largest investment in a single company in India.
Paytm get final nod to launch Payment Bank

Paytm has received the final nod from the Reserve Bank of India &
is set to launch Paytm Payments Bank on May 23, 2017. Paytm is
the third company from the 11 other applicants to launch payments
bank after Airtel & IndiaPost.
RBI puts restriction on Uco Bank's business

RBI put restriction on Kolkata based PSU UCO Bank‟s lending &
branch expansion plans as the state-run lender made net losses for
the two successive fiscal amid severe stress on asset quality. It has
initiated 'Prompt Corrective Action' (PCA) framework on UCO
bank.
SBI revises service charges & to charge ATM withdrawals at Rs.

25
SBI announced revision in service charges with effect from June 1,
2017. All cash withdrawals through ATM will now be charged at

Rs. 25 per transaction which will be applicable only to customers of
its mobile wallet State Bank Buddy.
Changes done by SBI are as follows-
1. All Normal Saving Bank accounts will continue to get eight free
ATM transactions (5 SBI ATMs + 3 other bank ATMs) in Metros
& 10 free transactions in Non-Metro (SBI ATM + 5 Other Bank
ATMs) free apart from the bank transaction.
2. Anyone making upto Rs 1 lakh transfer on IMPS will be charged
with Rs 5 per transaction plus service tax.
3. Between Rs 1 lakh – Rs 2 lakh & Rs 2 lakh – Rs 5 lakh, service
charges are at Rs 15 & Rs 25 each plus service tax.
4. On ATMs, cash withdrawal from the savings account will be
charged with Rs 10 per transaction plus service tax.
Dena Bank classifies Videocon loan as ‘bad’

Dena Bank has become the first lender to classify Videocon
Industries as a bad loan. With the default on payments, Dena Bank
has declared Videocon Industries account as non-performing asset
(NPA) in the fourth quarter ended March 2017.
The promulgation of the Banking Regulation (Amendment)

Ordinance, 2017
The promulgation of the Banking Regulation (Amendment)
Ordinance, 2017 inserting two new Sections (viz. 35AA & 35AB)
after Section 35A of the Banking Regulation Act, 1949 enables the
Union Government to authorize the RBI to direct banking
companies to resolve specific stressed assets by initiating
insolvency resolution process, where required. RBI has also been
empowered to issue other directions for resolution, & appoint or

approve for appointment, authorities or committees to advise
banking companies for stressed asset resolution.
Yes Bank ties up with Paisabazaar.com

Yes Bank announced the alliance with Paisabazaar.com under
which the bank will offer conditionally approved loans to the
latter‟s existing customers. Under this, the bank will help
Paisabazaar.com through its advanced analytics & data mining
capabilities to offer customers of the financial marketplace with
customized & conditionally approved offers across retail lending
products.
SBI, CREDAI ink MoU for concessional loan for housing projects
SBI & real estate developers‟ body CREDAI (Confederation of Real
Estate Developers' Associations of India) signed memorandum of
understanding (MoU) to jointly conduct various initiatives towards
development of the realty sector. The MoU will be in force for a
period of 3 years.
AU Financiers converts to small finance bank

AU Financiers India, a non-banking finance company (NBFC), has
converted itself into a small finance bank by the name AU Small
Finance Bank.
RBI signs MoU with the Bank of Guyana

RBI signed a Memorandum of Understanding (MoU) on
“Supervisory Cooperation & Exchange of Supervisory
Information” with Bank of Guyana. The MoU was signed by Dr.
Gobind N. Ganga, Governor of Bank of Guyana & Dr. Urjit R. Patel,
Governor of Reserve Bank of India.
RBI caps bank exposure to REITs, InvITs at 10%

RBI permitted banks to invest up to 10% of the unit capital of a Real
Estate Investment Trust (REITs) or Infrastructure Investment Trusts
(InvITs). The banks‟ exposure to REITs/InvITs will be within the
overall ceiling of 20% of the net worth permitted for direct
investments in shares, convertible bonds/ debentures, units of
equity-oriented mutual funds & Venture Capital Funds (VCFs).
RBI signed MoU with the Royal Monetary Authority of Bhutan

RBI signed a Memorandum of Understanding (MoU) on
“Supervisory Cooperation & Exchange of Supervisory
Information” with the Royal Monetary Authority of Bhutan.
RBI opened the Office of the Banking Ombudsman at

Chhattisgarh & Jammu & Kashmir
Reserve Bank of India has set up two new Offices of the Banking
Ombudsman for the State of Jammu & Kashmir (in Jammu) &
Chhattisgarh (in Raipur).
ICICI Bank data centre becomes country's first IGBC Platinum

rated project
ICICI Bank Data Centre in Hyderabad has achieved the distinction
of becoming the country's first Platinum rated project under IGBC
(Indian Green Building Council) Green Data Centre Rating System.
PNB launches three new products on foundation day

On the occasion of its Foundation Day, Punjab National Bank
(PNB) has launched three new products for its customers. The three
new products are automated electronic toll collection to facilitate
hassle-free toll payment/ collection, a credit card mobile App & a
scheme for financing a grid connected Roof Solar Power Project.
YES BANK awarded Golden Peacock Award 2017

India‟s fifth largest private sector Bank, the YES BANK has won the
prestigious „Golden Peacock Innovative Product/Service Award
2017‟ (in Financial sector Banking). It received the prize for its
innovative mobile technology product, SIMsePAY at the Dubai
Global Convention 2017.
RBI issues new framework for bad loans

Reserve Bank of India (RBI) has issued a new set of enabling
provisions titled 'Revised Prompt Corrective Action (PCA)
framework' to resolve the problem of banks mounting non-
performing assets (NPAs), or bad loans. Under the revised
framework, if a bank crosses the third level of risk threshold (where
a bank‟s common equity tier I capital falls below the threshold of
3.625 per cent by 3.125 per cent, or more) it will either be
amalgamated or merged, or taken over by another entity.
Bank Boards Bureau evolves 'GRAF' for PSBs

Bank Boards Bureau (BBB) has evolved a Governance, Reward and
Accountability Framework (GRAF) for public sector banks to
ensure that they have the ability to compete successfully with
private sector banks, small finance and payments banks, foreign
banks and non-banking finance companies. The framework is
guided by the latest global benchmarking on governance practices
provided by the Basel Committee on Banking Supervisions
guidelines on corporate governance principles for banks released in
July 2015.
Bank accounts to be blocked if not self-certified by April 30, 2017

As part of Foreign Account Tax Compliance Act (FATCA)
compliance, CBDT has asked the banks/financial institutions to
link their accounts with Aadhaar number and self-certification
from customers by April 30, 2017, to avoid closure of accounts.
ESAF Small Finance Bank launches social deposit scheme

ESAF Small Finance Bank has launched a social deposit scheme
called 'Hrudaya Deposit scheme' in Thrissur, Kerala. The deposit
scheme stands for a social cause through which ESAF Bank
provides the customers an opportunity to be a part in social welfare
projects, which none of the other banks has given so far, stated by
K. Paul Thomas, Managing Director and CEO of ESAF Small
Finance Bank. An individual or a legal entity can join the Hrudaya
Deposit Scheme with a minimum deposit amount of Rs 15 lakh and
for a minimum period of two years.
RBI allows banks to invest in REITs & InvITs

Reserve Bank of India has allowed banks to invest in Real Estate
Investment Trust (REITs) and Infrastructure Investment Trusts
(InvITs), a move that will help revive the cash-starved
infrastructure sector. Banks are allowed to invest in equity-linked
mutual funds, venture capital funds (VCFs) and equities to the
extent of 20% of their Net Owned Fund (NOF).
HDFC Bank UPI on Chillr app

HDFC Bank announced its Unified Payments Interface (UPI) will
also be available on Chillr, a multi-bank mobile payments app. UPI
is an instant payment system developed by the National Payments
Corporation of India (NPCI) to enable faster money transfer
between any two parties‟ bank accounts.
RBL Bank opens IFSC Banking Unit in GIFT City

Ratnakar Bank limited (RBL) Bank announced the opening of its
Indian Financial System Code (IFSC) Banking Unit (IBU) at Gujarat
International Finance Tec-City (GIFT City).
NEFT transfers to be faster as RBI cuts clearance time

Reserve Bank of India (RBI) has decided to slash clearance time for
National Electronic Funds Transfer (NEFT) in an attempt to
enhance the efficiency of the electronic payment system and add to
customer convenience. The NEFT settlement cycle will be reduced
from hourly batches to half hourly batches.The newly appointed
Deputy Governor B P Kanungo stated that 11 additional settlement
batches will be introduced at 8.30 am onwards, taking the total
number of half hourly settlement batches during the day to 23.
IDBI Bank cuts deposit rates by up to 75 bps

IDBI Bank has reduced interest rates, ranging from 50 to 75 basis
points, on retail term deposits (RTD) with effect from April 5, 2017.
The highest interest rate that the bank now offers is 6.40% (earlier
6.90%) on deposits of one-two years maturity.
Aditya Birla Group gets RBI licence to start payments bank

Aditya Birla Idea Payments Bank Ltd becomes the seventh entity to
receive a final licence from the Reserve Bank of India (RBI) to set up
a payments bank.
ICICI, Axis Bank sell Rs 1800 crore Ballarpur loans to Edelweiss

ICICI Bank and Axis Bank sold Rs.1,800 crore of loans to paper
maker Ballarpur Industries Ltd to Edelweiss Asset Reconstruction
Company. It‟s also the first time that loans have been sold to an
asset reconstruction firm. Axis Bank sold loans of Rs.1,200 crore
and ICICI Bank sold loans of Rs.600 crore.
SBI cuts lending rates by 0.15%

Ahead of the Reserve Bank of India's monetary policy this week,
the country's largest bank, State Bank of India has reduced its
benchmark lending rate by 0.15%. Base rate or the minimum
lending rate of the bank has been reduced from 9.25% to 9.1%.
NDB invests $1.5 billion in 7 projects in 2 years of operation

The BRICS-backed New Development Bank (NDB) has invested in
seven projects totaling $1.5 billion in about two years of its
operation. Seven projects have been done so far which aggregate
around $1.5 billion. Six of them are in the renewable energy sector
and one in transport financing.
Post merger, SBI begins operations as unified entity

The State Bank of India, the country's largest lender has started
functioning as unified entity from 01st April 2017 post merger of its
five associate banks, besides Bharatiya Mahila Bank. The five
associate banks merged with the SBI are State Bank of Bikaner &
Jaipur (SBBJ), State Bank of Hyderabad (SBH), State Bank of
Mysore (SBM), State Bank of Patiala (SBP) and State Bank of
Travancore (SBT). With the merger, the SBI joins the league of top
50 banks globally in terms of assets. The total customer base of the
bank reaches 37 crore with a branch network of around 24,000 and
nearly 59,000 ATMs across the country. The merged entity now has

a deposit base of more than Rs 26 lakh-crore and advances level of
Rs 18.50 lakh crore.
Kotak Mahindra Bank launches 8-11 app to double customer base

Kotak Mahindra Bank has launched the '811 banking app' which is
part of the lender's vision to double customer base in 18 months.
Customers will be able to open an account on the 811 banking app
with zero balance. Only Aadhaar and PAN card would be required
to open 811 account which would provide access to over 100
features on mobile. The account offers up to 6 percent interest rate
on savings deposits.
SBI launches 'Unnati' credit card

SBI Card launched a unique credit card „SBI Card Unnati‟ targeted
at all SBI customers, including Jan Dhan account-holders across the
country. Any SBI customer with a balance of at least Rs 25,000 in
his/her savings account with the bank would be eligible for the
Unnati credit card without the need for any credit score or credit
history.
Karnataka Bank, SBI Card launch co-branded credit card

Karnataka Bank and SBI Card have launched co-branded credit
cards for the customers of Karnataka Bank. Through this alliance,
they will launch two variants of the co-branded credit card named
„Karnataka Bank Platinum SBI Card‟ and „Karnataka Bank
SimplySAVE SBI Card‟.
Syndicate Bank opens 40 ‘Ananya’ branches

Syndicate Bank digitally inaugurated 40 „Ananya‟ transformed
branches. Project Ananya is a two-year large-scale transformation
project undertaken by the bank to provide customers with „best in
class‟ services while improving and modernizing the whole bank.
The aim is to enhance customer experience, improve sales focus,
and improve digital transactions through a dedicated digit zone.
The bank also launched its first MSME hub in Bengaluru.
KVB bags ‘best small bank’ award

Karur Vysya Bank (KVB) has been adjudged the „Best Small Bank
for 2016‟. This is the eighth award won by KVB in the current fiscal.
Vijaya Bank inks MoU with Piaggio Vehicles

Vijaya Bank entered into an MoU with Piaggio Vehicles for
providing financial support for the purchase of vehicles under
Small Road Transport Operators (SRTO) scheme in Bengaluru.
ICICI Bank partners with Truecaller

ICICI Bank announced a partnership with mobile app firm
Truecaller for a new UPI-based mobile payment service.The new
feature called as Truecaller Pay, and it will allow users of the app to
instantly create a UPI ID, send money to any UPI ID or a mobile
number registered with the BHIM app.
AP tops in Aadhaar seeding of Jan Dhan accounts

The list of state with highest seeded Aadhaar numbers was topped
by Andhra Pradesh which had linked 87.73 per cent of its Jan-Dhan
accounts with Aadhaar numbers followed by Tripura at 87.08 per
cent and Telangana 83.56 percent.
Karnataka Bank’s launched platinum card

Karnataka Bank has launched the „MoneyPlant RuPay International
Platinum Debit Card‟ to provide more privileges to its premium
and HNI (high net worth individual) customers. The card has a
withdrawal limit of Rs75,000 and purchases limit ofRs2 lakh a day
at point-of-sales terminals and e-commerce sites.
Repco ties up with NHB

Repco Home Finance Ltd (RHFL) has signed an agreement with
National Housing Bank (NHB) for implementation of a credit-
linked subsidy scheme for the middle-income group. The scheme
will be implemented for one year with effect from January 1, 2017,
in all statutory towns. The scheme divides middle-income group
into two categories with annual household income up to Rs12 lakh
and Rs 18 lakh. The subsidy will be available for the two brackets
for a loan amount of Rs 9 lakh and Rs 12 lakh at the rate of 4 per
cent and 3 per cent per annum, respectively, for a tenure of 20
years. The maximum subsidy amount for an individual beneficiary
is Rs 2.35 lakh.
South Indian Bank introduces Aadhar-based payment app

To promote cashless digital transactions, South Indian Bank (SIB)
has introduced Aadhar-based payment in its Unified Payment
Interface (UPI) mobile application- 'SIB M-Pay'.
Cabinet approves proposal for Amendments to the NABARD

Act, 1981
Union Cabinet chaired by the Prime Minister Shri Narendra Modi
has approved the following proposals:
(a) Amendments to National Bank for Agriculture and Rural
Development (NABARD) Act, 1981, include provisions that enable
Central Government to increase the authorized capital of NABARD
from Rs. 5,000 crore to Rs. 30,000 crore and to increase it beyond
Rs. 30,000 crore in consultation with RBI.
(b) Transfer of 0.4 percent equity of RBI in NABARD amounting to
Rs. 20 crores to the Government of India.
NABARD launches water conservation campaign in Karnataka

NABARD (National Bank for Agriculture and Rural Development)
will help Karnataka with low-cost technologies for water
conservation and efficient use of water in the drought-affected
districts. The main focus of the save water programme would be to
create awareness and to cover maximum number of villages in the
districts.
RBI proposes to fix upper limit in PPIs at Rs 1 Lakh

RBI proposed to fix the upper limit for Pre-paid Payment
Instruments (PPIs) at Rs 1 lakh in view of growing usage of PPIs for
a purchase of goods and services. As per the draft, the amount in a
PPI should not exceed Rs 1 lakh at any point of time if the customer
provides full KYC and Rs 20,000 if the customer provides
minimum KYC details to the PPI issuing entity.
Russia’s VTB bank to shut India office

Russian bank VTB has decided to close its only office in New Delhi,
India to cut costs but will continue to work in India.
ICICI Bank launches new app for rural customers

ICICI Bank, India‟s largest private sector bank by consolidated
assets has announced the launch of a mobile banking app 'Mera
iMobile' for rural customers. This app will allow them to access
banking services as well as information on agri-services.
UCO Bank, Future Generali tie up

Private insurer Future Generali India Insurance Company (FGII)
has entered into a corporate agency tie-up for its products with
public lender UCO Bank.
HDFC Bank to offer online loans against securities

HDFC Bank launched an instant digital Loan Against Securities
(LAS) facility in collaboration with the National Securities
Depository Ltd.(NSDL). Demat customers can calculate their
eligibility for overdraft limit against shares, and open a current
account instantly.
State Bank of India signs MoU with CREDAI

State Bank of India and real estate developers‟ body Confederation
of Real Estate Developers' Associations of India (CREDAI) have
signed a memorandum of understanding (MoU) to jointly conduct
various initiatives towards development of the realty sector. The
MoU will be in force for a period of 3 years.
Bandhan Bank, Avenues India tie up

Bandhan Bank, has signed an agreement with Avenues India Pvt
Ltd, a payment solution provider to provide merchants with
seamless access to point-of-sales (POS) and payment gateway
products.
Kerala gets first private bank: ESAF Small Finance Bank

Chief Minister Pinarayi Vijayan launched ESAF (Evangelical Social
Action Forum) Small Finance Bank, Kerala‟s first private sector
bank since the country‟s Independence, in Thrissur, Kerala. R
Prabha, former Chairman, Kerala Grameen Bank, is the Chairman
of ESAF Small Finance Bank.

Finance Minister finalized capital infusion for 10 PSU banks
The Finance Ministry has chalked out a turnaround-linked Rs
8,586-crore capital infusion plan for 10 PSBs. The Top five capital
gaining banks are IDBI Bank (Rs 1,900 crore), Bank of India (Rs
1,500 crore), UCO Bank ( Rs 1,150 crore), Andhra Bank and Indian
Overseas Bank with Rs (1,100 crore) each.
All about Gujarat International Financial Tech City (GIFT City)
A gong resonates in Gandhinagar, Gujarat. Only, this isn't a

metallic one, but PM Narendra Modi's digital gong, a vision to
make India Digital & independent in terms Financial Power.
Keeping the vision in Mind BSE's first international exchange 'India
International Exchange (INX)' has been opened early in this year at
the country's first International Financial Services Centre (IFSC) at
the Gujarat International Finance-Tec (GIFT) City. With this, India
has found a new place on the global financial map.
Here are few important things you must know about GIFT City:
 It is India's first International Financial Services Centre (IF) which
is a fully integrated city with a walk to work culture, it has the
next-in-class infrastructure, connectivity, people, technology &

legal framework – emerging as a platform for businesses across
the world.
 The International Exchange (INX) will provide a platform for
domestic companies to raise capital in foreign currency through
bonds.
 IFSC houses several International Banking Units (IBUs) of banks
that have already conducted business worth $1.5 billion
 It will operate 22 hours a day to allow international investors &
non-resident Indians to trade from anywhere across the globe.
 It is one of the world‟s most advanced technology platforms with
a turn-around time of four microseconds.
 The concept of IFSC is simple but powerful. It aims to provide
on-shore talent with an offshore technological & regulatory
framework.
 This is to enable Indian firms to compete on an equal footing
with offshore financial centers.
Leadership of GIFT City-

Mr. Sudhir Mankad is the Chairman of GIFT City
Mr. Ajay Pandey Managing Director & Group CEO of GIFT City
Recent activities at GIFT City-

 IFSC at GIFT City entered into an agreement with Gujarat
National Law University (GNLU) to collaborate on efforts for
Skill Development in the field of International Financial Services
& Regulations.
 Belgium has become the first country to open an honorary
consulate office in Gujarat International Finance Tec-City (GIFT
City).

 General Insurance Corporation of India (GIC Re) has become the
first re-insurer to open an office at India‟s first International
Financial Services Centre (IFSC) at Gujarat International Finance
Tec-City (GIFT City).
 Ratnakar Bank limited (RBL) Bank announced the opening of its
Indian Financial System Code (IFSC) Banking Unit (IBU) at
Gujarat International Finance Tec-City (GIFT City).
All about the Bharat QR: The QR Code Based Payment System
In the bid to promote digital economy in the country, Government

of India has launched a new payment method using QR codes
named Bharat QR. It is launched after various new payment
methods like UPI payment and BHIM App for smartphones.
It is launched to boost digital transactions, that will make use of QR

codes system for payments across merchant outlets. It is the world's
first interoperable payment system.
Important facts related to Bharat QR

The National Payments Corporation of India (NPCI),
Mastercard, and Visa has developed it.
BharatQR code would require merchants to only display one
QR code instead of multiple ones.
It will ensure that people do not suffer from card loss or card
expiry problem.
It was devised after the Reserve Bank of India's (RBI) direction
in September last year, in order to make payments seamless for
buyers as they just have to "scan to pay" for transactions
instead of swiping their credit/debit cards.
What is QR code?
The QR code or Quick Response code is a two-dimensional
machine-readable code, which is made up of black and white
squares and is used for storing URLs or other information. These
can easily be read by the camera of a smartphone.
Bharat QR Aim & Use

Bharat QR code aims at standardising the QR code payment
method through the country. For this, payment networks like
MasterCard, American Express, National Payment Corporation of
India (NPCI) and Visa have collaborated to promote wider
acceptance of the Bharat QR payment method.
However, after the introduction of Bharat QR code, a consumer can

simply open his or her banking app or BHIM app, scan the
merchant's QR code, enter the payable amount and enter the four
digit code to authenticate the transaction. The amount will be
directly transferred to the merchant‟s bank account once the
transaction is complete. In short, this will provide customers with
an easy scan and pay option irrespective of their card type. The
method would eliminate the need of PoS machines on a merchant
outlet. This will help merchants in avoiding investments in PoS
machines and the transaction fees charged by the banks for
transactions through the PoS systems.

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1 Adda247 | No.

1 APP for Banking & SSC Preparation

Part 2: Banking Current Affairs-2017 ...................................................................................................104

3 Adda247 | No. 1 APP for Banking & SSC Preparation

4 Adda247 | No. 1 APP for Banking & SSC Preparation

Part 1: Banking Awareness (Theory)

Topic 1: RESERVE BANK OF INDIA (RBI) & ITS FUNCTIONS

RBI established on April 1, 1935 under RBI Act 1934

6 Adda247 | No. 1 APP for Banking & SSC Preparation

Currency System in India

Along with Government of India, RBI is responsible for the

Tools used in Currency Management

7 Adda247 | No. 1 APP for Banking & SSC Preparation

RBI’s Clean Note Policy

As per the Indian Coinage Act:

8 Adda247 | No. 1 APP for Banking & SSC Preparation

Types of Bank Notes in India

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Currency Features of Rs.500 & Rs. 2000 Notes

RBI Regulating Commercial Banking

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Banker & Debt Manager to the Government

Managing the government's banking transactions is a key RBI

Banks need their own mechanism to transfer funds and settle

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A Brief on Foreign Exchange Management

The comprehensive Foreign Exchange Regulation Act, 1973

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What is Monetary Policy?

Objective of Monetary Policy

Instruments of Monetary Policy

Reverse Repo Rate: The (fixed) interest rate – currently 50 bps

The LAF consists of overnight as well as term repo auctions. The

Marginal Standing Facility (MSF): A facility under which

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Open Market Operations (OMOs): These include both outright

Market Stabilisation Scheme (MSS): This instrument for monetary

Other Points to look at

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Fiscal policy deals with the government policy concerning changes

Types of Fiscal Policy

Instruments of Fiscal Policy

Other measures of Fiscal Policy

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Revenue expenditures are current or consumption expenditures

Plan and Non - Plan Expenditure

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a) As per Sec 2 (e) of RBI Act, a scheduled bank means a bank

Types of Bank Accounts in India (Deposit Accounts)

Traditionally banks in India have four types of deposit accounts,

25 Adda247 | No. 1 APP for Banking & SSC Preparation

Recurring Deposit Account

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Fixed Deposit Account (FD)

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Financial inclusion involves

Some Important initiatives for Financial Inclusion

Lead Bank Scheme

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A Brief on BSBDA-Small Accounts:

PMJDY: Scheme and Current Status

Pradhan Mantri Jan-Dhan Yojana (PMJDY) is National Mission for

Special Benefits under PMJDY Scheme