Banking And Monetary Policy Flashcards
(162 cards)
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3
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What is Central Bank Digital Currency (CBDC) as defined by RBI?
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Legal tender issued by a central bank in digital form, exchangeable 1:1 with fiat currency [source: 680, 681]. It’s a liability of the Reserve Bank, unlike existing digital money in commercial bank accounts [source: 682].
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Is India’s Digital Rupee (CBDC) insured against inflation? Is it fungible?
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No, it is not insured against inflation [source: 685]. Yes, it is fungible, meaning it can be converted into deposits and cash [source: 686].
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What is the status of India’s Retail CBDC pilot as of June 2024?
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The pilot involved 5 million customers and 0.42 million merchants as of June 2024 [source: CBDC retail pilot customers grow to 5 million till June 2024: RBI report
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What is a Syndicated Loan?
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Financing offered by a group (syndicate) of lenders [source: 687, 691], typically used when the loan amount is too large for a single lender or requires specialized expertise [source: 688]. It allows lenders to spread risk [source: 690]. Borrowers can be corporations, large projects, or governments [source: 691].
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What is the minimum Capital Adequacy Ratio (CAR) requirement for Wholly Owned Subsidiaries (WOS) of foreign banks in India?
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WOS must meet Basel III requirements continuously [source: 693] and maintain a minimum CAR of 10% of risk-weighted assets (or as prescribed) from the start of operations [source: 694].
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What are the board composition requirements for a WOS of a foreign bank in India mentioned in the text?
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Mandates may include: not less than 50% directors as resident Indian nationals; not less than 50% non-executive directors; minimum one-third independent directors; directors must meet ‘Fit and Proper’ criteria [source: 696].
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What is the Liquidity Adjustment Facility (LAF)? Who can access it?
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A facility for scheduled commercial banks (excluding RRBs) and Primary Dealers (PDs) to manage overnight liquidity by borrowing from RBI (repo) or parking excess funds with RBI (reverse repo) against G-Sec collateral [source: 697].
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What are the FPI investment limits in G-Secs, SDLs, and Corporate Bonds for 2024-25?
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Limits remain unchanged at 6% (G-Secs), 2% (SDLs/SGSs), and 15% (Corporate Bonds) of the outstanding stock of securities [source: RBI Notifies Revised Investment Limits for the Financial Year 2024-25]. Investments under the Fully Accessible Route (FAR) are reckoned separately.
11
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Has a dedicated debt trading platform been launched on the NSE?
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Yes, the NSE launched a dedicated debt trading platform in May 2023 to allow retail investors to invest in corporate bonds transparently [source: 702].
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Can digital currencies like CBDCs be programmed, for example, with expiration dates?
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Yes, digital currencies can be programmable. China’s exploration with its digital yuan includes the possibility of expiration dates to control money velocity [source: 709, 710, 711].
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What is Sterilisation in macroeconomics? What is a common instrument used?
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Action by a central bank to counter the effects of balance of payments surplus/deficit on the money supply [source: 712]. It neutralizes the monetary impact of foreign exchange operations [source: 714, 715]. A common instrument is Open Market Operations (OMO) involving sale/purchase of securities [source: 713, 718].
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What is the difference between the Primary Market and the Secondary Market in capital markets?
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The Primary Market deals with the issuance of new securities, while the Secondary Market (stock market/exchange) deals with the purchase and sale of existing securities [source: 720, 721].
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What are Government Bonds (G-Secs) and State Development Loans (SDLs)?
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G-Secs are primarily long-term (5-40 years) debt instruments issued by Central and State governments [source: 722, 723]. Government bonds issued by State Governments are specifically called SDLs [source: 724].
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What are Treasury Bills (T-bills)? What is their maturity?
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Short-term debt instruments (maturity < 1 year) issued by the GOI (via RBI) to meet short-term fund requirements [source: 726, 727]. They are Zero Coupon Bonds issued as promissory notes [source: 726, 728]. Maturities are typically 91, 182, or 364 days.
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What is the Call Money Market? What is the Call Rate?
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A market for short-term finance (1-15 days maturity) used for inter-bank transactions, primarily to maintain Cash Reserve Ratio (CRR) [source: 729, 730]. The interest rate paid is the Call Rate, which is highly volatile [source: 731, 732].
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What was the approximate weighted average Call Money rate in India in early April 2025?
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Around 6.15% per annum.
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How might central banks typically respond to high inflation according to the text?
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Central banks often increase interest rates (like the repo rate decided by the MPC) to control inflation by reducing borrowing and cooling the economy [source: 735, 736, 737, 738]. This was a common response post-pandemic [source: 733, 734].
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What is Nominal Effective Exchange Rate (NEER)?
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The value of a domestic currency relative to a weighted average basket of major foreign currencies [source: 739].
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What is Real Effective Exchange Rate (REER)? How does it differ from NEER?
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REER is the NEER adjusted for relative inflation between the home country and the countries in the currency basket [source: 740, 743].
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What is the likely impact of REER appreciation on export competitiveness?
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Appreciation in REER makes domestic currency stronger, increasing the cost of exports and potentially reducing their competitiveness [source: 741].
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What was the trend in India’s REER index (2015-16 base) around Jan 2025 based on search results?
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The REER index showed some fluctuation, standing around 115.2 in Jan 2025, slightly down from the previous month but generally within a range observed over recent years.
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What happens to the difference between NEER and REER when domestic inflation rises?
The difference between NEER and REER increases as domestic inflation rises, since REER accounts for relative inflation [source: 743].
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How does RBI use Open Market Operations (OMO) to manage high inflation?
If inflation is too high, RBI sells Government Securities (G-Secs) through OMO to absorb excess liquidity from the market, reducing money circulation and dampening demand [source: 745, 746].
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How might RBI intervene using forex markets if the rupee depreciates significantly against the dollar?
RBI would likely sell dollars in the market to increase dollar supply relative to the rupee, helping to prevent further depreciation [source: 747].
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What action might RBI take if interest rates in the USA/EU fall significantly compared to India?
RBI might buy dollars (injecting rupees) to counteract potential large inflows of foreign investment seeking higher returns in India, thus keeping the Indian economy competitive and attractive for investment [source: 749, 750].
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What were RBI's recent OMO actions announced in March 2025 in response to liquidity conditions?
RBI announced OMO purchases of G-Secs totalling ₹1 lakh crore (in two tranches) and a USD/INR Buy/Sell Swap auction of $10 billion to inject liquidity into the banking system facing a deficit [source: RBI to infuse additional liquidity via Open Market Operations purchase, $10B forex swap for liquidity crunch - Business Today].
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Which body regulates Credit Rating Agencies (CRAs) in India?
Securities and Exchange Board of India (SEBI) [source: 751], under the SEBI (Credit Rating Agencies) Regulations, 1999 [source: 751].
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What recent amendment was made to SEBI's CRA regulations concerning ESG?
SEBI (Credit Rating Agencies) (Amendment) Regulations, 2023, introduced standards and compliance requirements specifically for ESG (Environmental, Social, Governance) rating providers [source: Blog
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Give two examples of SEBI-registered Credit Rating Agencies mentioned in the text.
ICRA Limited (formerly Investment Information and Credit Rating Agency of India Ltd) [source: 753] and Brickwork Ratings (BWR) [source: 755].
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What was the Banks Board Bureau (BBB)? What body succeeded it?
BBB was an autonomous body (functional from April 2016) set up to recommend appointments for Boards of Directors (Whole-Time Directors, Chairman) in PSBs, Public Sector Insurance Companies & FIs, and improve governance [source: 758, 886]. It was succeeded by the Financial Services Institutions Bureau (FSIB) [source: Fsib - Latest fsib , Information & Updates - BFSI -ET BFSI].
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Who comprised the Banks Board Bureau (BBB) according to the text?
Chairman, three ex-officio members (Secretary-Dept. of Public Enterprises, Secretary-Dept. of Financial Services, RBI Deputy Governor), and three expert members [source: 759]. The RBI Governor was not its chairman [source: 759].
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What is a Convertible Bond?
A fixed-income corporate debt security yielding interest payments, which can be converted into a predetermined number of common stock/equity shares [source: 764]. It's a hybrid security [source: 765].
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What is a key advantage of convertible bonds for investors mentioned in the text? How does it relate to inflation?
It offers potential upside participation (if stock price rises) while protecting principal on the downside [source: 766]. The option to convert provides a degree of indexation against rising consumer prices (inflation) [source: 769].
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What is the primary objective of monetary policy in India as mandated under the RBI Act, 1934?
To maintain price stability while keeping in mind the objective of growth [source: 773]. Price stability is seen as a necessary precondition for sustainable growth [source: 774].
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Which body determines the policy interest rate (like Repo Rate) in India? Which RBI departments assist/operationalize policy?
The Monetary Policy Committee (MPC) determines the policy rate [source: 774]. RBI's Monetary Policy Department (MPD) assists the MPC, and the Financial Markets Operations Department (FMOD) operationalizes it through liquidity management [source: 775, 776].
39
What was the RBI MPC's decision on the Repo Rate in its April 2025 meeting?
The MPC unanimously decided to reduce the policy repo rate by 25 basis points to 6.0% [source: RBI Issues April 2025 Policy Update - PIB]. SDF rate was adjusted to 5.75% and MSF/Bank Rate to 6.25% [source: RBI Issues April 2025 Policy Update - PIB].
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Who appoints the RBI Governor? Can the Central Government give directions to RBI?
The Governor is appointed by the Prime Minister's Office (Central Govt.) on the Finance Minister's recommendation (as per Sec 8(1)(a) of RBI Act) [source: 778]. Yes, the Central Government can give directions to RBI in the public interest after consulting the Governor (Sec 7 of RBI Act) [source: 780].
41
Can the RBI Board override the Governor's powers?
Yes, under Section 58 of the RBI Act, the Board can make regulations giving it power to override the Governor, subject to certain conditions [source: 782, 783].
42
Which entities supervise Urban Cooperative Banks (UCBs)? How did the BR (Amendment) Act, 2020 change RBI's powers?
UCBs were initially supervised by the Registrar of Cooperative Societies [source: 784]. RBI got powers for banking regulation/supervision via the BR Act, 1949 [source: 784]. The 2020 amendment gave RBI overriding powers, though the Registrar's powers also continue [source: 785, 786].
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What methods can UCBs use to raise capital as per the 2022 RBI notification?
Issuance of equity shares, preference shares, and debt instruments [source: 787].
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What is Black Money? What is the main concern for the government regarding it?
Money hidden from tax authorities [source: 792], originating from illegal activity or legal but unreported activity [source: 793]. The main concern is the loss of revenue to the State Exchequer due to tax evasion [source: 794].
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What recent change was made via Budget 2024 regarding penalties under the Black Money Act?
The Rs 10 lakh penalty for failing to report foreign assets (other than immovable property) in ITR is proposed to be removed if the aggregate value doesn't exceed Rs 20 lakh, effective Oct 1, 2024 [source: Budget 2024: Not reporting these foreign assets in ITR wont attract the Rs 10 lakh penalty under Black Money Act - The Economic Times].
46
What is the Money Multiplier?
It shows how reserve money (high-powered money/monetary base) creates broader money supply (M3) through credit creation by banks [source: 798, 898]. It indicates the maximum amount of money the banking system generates per unit of reserve [source: 898].
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How do banking habits and Cash Reserve Ratio (CRR) affect the money multiplier?
Increased banking habits among people increase the multiplier [source: 800, 805]. An increase in CRR reduces the money multiplier, as banks have less money to lend [source: 802]. They are inversely proportional [source: 801].
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What is the 'RBI Retail Direct scheme'?
Launched in 2021 [source: 806], it allows retail investors to buy and sell government securities (G-Secs) online in both primary and secondary markets [source: 807, 808], by opening a Retail Direct Gilt (RDG) account with RBI [source: 809, 810].
51
How many registrations/accounts were reported on the RBI Retail Direct platform by Aug 2024?
The platform had attracted 2,32,902 registrations resulting in 1,62,036 new accounts by August 12, 2024 [source: Unlock Government Bonds with RBI Retail Direct Platform - Grip Invest].
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What is the Negotiated Dealing System - Order Matching (NDS-OM)?
A screen-based electronic anonymous order matching system owned by RBI for secondary market trading in Government securities [source: 811].
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What was the approximate trading volume on NDS-OM on April 11, 2025?
Approximately ₹79,427 Crore across 6289 trades [source: Trading Summary - ccil - The Clearing Corporation of India Limited].
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What is Central Depository Services (India) Limited (CDSL)?
One of India's leading securities depositories [source: 812], initially promoted by BSE Ltd [source: 813].
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In what capacity does the RBI act as a 'lender of last resort'?
As a Banker to Banks, RBI provides short-term loans/advances to solvent banks facing temporary liquidity problems when no other source is willing to lend [source: 815, 816, 817, 818]. (Note: It acts as Banker to Government when lending to finance deficits [source: 819]).
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Define M1, M2, and M3 money supply measures based on the text.
M1 (narrow money): Coins/notes in circulation + other easily convertible money equivalents [source: 823]. M2: M1 + short-term time deposits in banks + certain money market funds [source: 824]. M3: M2 + long-term time deposits [source: 825]. (Note: M0 is base/reserve money [source: 799, 822]).
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What is the Interest Coverage Ratio (ICR)? How is it calculated?
A financial ratio determining how well a company can pay interest on outstanding debts [source: 826]. Used by lenders/investors to assess risk [source: 827]. Calculated as: ICR = EBIT (Earnings Before Interest and Taxes) / Interest Expense [source: 828].
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What does a lower ICR indicate? What does a higher ICR indicate?
A lower ICR indicates higher debt burden and possibility of bankruptcy; the company is more vulnerable [source: 829, 830]. A higher ICR indicates stronger financial health and better capability to meet interest obligations [source: 831].
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What is the Minimum Support Price (MSP)? What are its major objectives?
A price fixed by the Government of India for certain agricultural products to insure producers against sharp price falls [source: 832, 833]. Objectives: Support farmers from distress sales, procure food grains for public distribution [source: 834], ensure availability to weaker sections at affordable prices [source: 836], market intervention [source: 838].
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How does the government use MSP and procurement?
Government agencies purchase quantities offered by farmers at MSP if market prices fall below it [source: 835]. This procurement builds buffer stocks used for PDS and market intervention (selling when prices are high, buying when low) [source: 836, 838, 839].
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When is the MSP for Kharif Crops for 2024-25 applicable?
Applicable from September 1, 2024 [source: Minimum Support Price - Agriculture - Vikaspedia].
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What is Commercial Paper (CP)? What is its maturity range?
A short-term (maturity up to 1 year), unsecured money market debt instrument issued by companies/FIs, usually as a promissory note in dematerialized form [source: 844, 845, 846]. Minimum maturity is 7 days, maximum is 1 year [source: 847].
63
What was a key trend in the Indian Commercial Paper market in 2024/early 2025?
CP issuance saw fluctuations and some decline due to increased RBI scrutiny on NBFCs and a preference shift towards long-term debt by some corporations [source: Commercial Paper - C4S Courses].
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What is a Certificate of Deposit (CD)? Who can issue them?
A fixed-income instrument governed by RBI, issued in dematerialized form by All-India Financial Institutions or Scheduled Commercial Banks [source: 848, 849]. Issued at a discount to face value [source: 849].
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Who are the participants in the Call Money Market?
RBI, banks, primary dealers, etc. [source: 852].
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What are Zero Coupon Bonds?
Bonds issued at a discount and redeemed at par value [source: 853]. No periodic interest payments are made before maturity [source: 854]. T-bills are an example [source: 726].
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What constitutes Non-Financial Debt?
Debt excluding that of Financial Institutions (institutions borrowing primarily to re-lend) [source: 855, 856]. Examples from text: Housing loans by households, amounts outstanding on credit cards, treasury bills [source: 857].
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What is Expansionary Monetary Policy?
When a central bank uses its tools to stimulate the economy by increasing money supply, lowering interest rates, and increasing demand [source: 858, 859].
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How does cutting Statutory Liquidity Ratio (SLR) act as an expansionary measure?
Reducing SLR means banks need to hold less in specified liquid assets (like G-Secs), freeing up more funds for lending, thus increasing liquidity/credit creation [source: 862].
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How does decreasing the Marginal Standing Facility (MSF) Rate potentially act as an expansionary measure?
MSF is a penal rate at which banks borrow overnight from RBI [source: 863]. While increasing the MSF rate discourages borrowing (contractionary) [source: 865], decreasing it would make emergency borrowing cheaper, potentially supporting liquidity (though less direct than repo rate cuts).
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How does cutting the Bank Rate act as an expansionary measure?
Bank Rate is a rate for longer-term RBI lending [source: 866]. Cutting it makes long-term funds cheaper for banks, potentially leading to lower lending rates and increased money supply [source: 1029, 1030, 1031]. (Though LAF repo rate is currently more significant [source: 868]).
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How does cutting the Repo Rate act as an expansionary measure?
Reducing the repo rate makes borrowing from RBI cheaper for commercial banks, enabling them to offer loans at lower rates, thus boosting borrowing and money supply [source: 869, 870, 871].
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Describe the three-tier structure of the short-term rural co-operative credit system in India.
Primary Agricultural Credit Societies (PACS) at the village level; Central Cooperative Banks (CCBs) at the district level; State Cooperative Banks (StCBs) at the State level [source: 873].
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What are some main functions of District Central Cooperative Banks (DCCBs)?
To meet the credit requirements of member societies (like PACS), act as a balancing centre for PACS (channeling surplus funds to deficit ones), and undertake non-credit activities [source: 874].
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What is the Service Area Approach (SAA)? Under which scheme was it implemented?
Launched by RBI in 1989 to promote orderly development of rural areas [source: 875]. Implemented under the Lead Bank Scheme [source: 875]. (The Lead Bank Scheme aims to coordinate banks and development agencies to increase credit flow to priority sectors and promote rural/semi-urban development [source: 876, 877]).
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Are deposits considered a financial asset for a commercial bank?
No, deposits are a liability owed by the bank to the depositor [source: 878]. Assets include cash, loans, investments, etc. [source: 878].
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According to the text, what factors can decrease the likelihood of a currency crisis in India?
Foreign currency earnings from the IT sector and remittances from Indians abroad [source: 879, 880]. These contribute to strengthening the rupee [source: 881]. Increasing government expenditure is stated to have no effect [source: 882].
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What were India's estimated remittances received in 2024? What was its global share?
India received an estimated $129 billion in remittances in 2024, securing the highest global share at 14.3% [source: India Secures 14.3% of Global Remittances: World Bank
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What were India's projected IT export earnings for FY 2024-25?
Likely to reach $210 billion, representing about 18% of the total global IT outsourcing spending [source: India's IT exports to hit $210 billion by FY25; captures 18% of global IT outsourcing spend].
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What are Participatory Notes (P-Notes)?
Instruments used by overseas investors to invest in Indian stock markets without registering directly with SEBI [source: 884]. They are issued by registered Foreign Institutional Investors (FIIs) [source: 884, 885].
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What recent change did SEBI make regarding P-Notes?
SEBI barred Foreign Portfolio Investors (FPIs) from issuing P-Notes that have derivatives as the underlying assets [source: Sebi tightens participatory notes rules for foreign funds].
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What was the purpose of the Banks Board Bureau (BBB)? Which committee recommended its formation?
To recommend appointments/selection for Boards of Directors in PSBs, Public Sector Insurance Companies & FIs, and recommend measures to improve their corporate governance [source: 886]. It was a step towards governance reforms recommended by the P.J. Nayak Committee [source: 887]. (BBB was later succeeded by FSIB).
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How can issuing Rupee-denominated Masala Bonds help support the rupee's value?
It reduces the demand for dollars needed for loan repayment (as the debt is in rupees), thus supporting the rupee [source: 889].
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How can easing conditions for External Commercial Borrowings (ECBs) help support the rupee?
Easing ECB conditions can help attract more loans denominated in foreign currencies, increasing the inflow of foreign currency and strengthening the rupee [source: 890].
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What is the likely impact of an Expansionary Monetary Policy on the Indian Rupee's value according to the text?
It can either have no influence or potentially cause a further slide (depreciation) in the rupee's value [source: 891, 892].
88
What is RBI's directive regarding the Storage of Payment System Data?
Payment system data (end-to-end transaction details, payment/settlement info) must be stored on systems located exclusively within India [source: 893, 894]. System providers need a System Audit Report (SAR) from CERT-IN empanelled auditors [source: 897]. The text states systems should not be owned/operated by PSEs [source: 896], check latest norms.
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What is the Merchant Discount Rate (MDR)?
The total charges/taxes involved in a digital payment, charged to the merchant [source: 903]. It includes bank charges and processing fees paid to banks or payment aggregators [source: 904, 905].
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What recent government measure relates to MDR for UPI transactions?
A ₹1,500 crore incentive scheme for FY 2024-25 promotes low-value BHIM-UPI transactions, aiming for zero MDR on UPI, especially for small merchants receiving up to ₹2,000 [source: Cashless India: ₹1,500 crore incentive scheme for low-value BHIM-UPI transactions].
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What is the National Financial Switch (NFS)? Who operates it?
The largest network of shared ATMs in India, facilitating interoperable transactions like cash withdrawal, fund transfers, etc. [source: 906]. Operated by the National Payments Corporation of India (NPCI) since 2009 [source: 906, 907].
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What was the approximate volume of financial transactions on the NFS network in February 2025?
Approximately 267.5 million transactions [source: India NPCI: Retail Payments: Volume: Financial: National Financial Switch (NFS) - CEIC].
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What is Legal Tender?
Anything recognized by law as a means to settle a public or private debt or financial obligation [source: 909]. Creditors are legally obligated to accept it for debt repayment [source: 910]. National currency is typically legal tender [source: 910].
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Describe the composition of India's Monetary Policy Committee (MPC). How are decisions made?
Six members: Three internal (RBI Governor as Chair, Deputy Governor in charge of monetary policy, one RBI official nominated by the central board) and three external members appointed for a four-year term [source: 914, 916, 917, 918, 919]. Each member has one vote; the Governor has a casting vote in case of a tie [source: 920].
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What were Local Area Banks (LABs)? What was their objective?
Banks conceived in 1996 guidelines to provide efficient financial intermediation in limited areas (primarily rural/semi-urban) with a low-cost structure [source: 921, 922]. Required minimum capital of ₹5 crore and operation in three contiguous districts [source: 923]. (Note: Search result listed RRBs, not current LAB status).
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What are the objectives of setting up Small Finance Banks (SFBs) in India?
To facilitate financial inclusion by supplying credit to small business units, small/marginal farmers, micro/small industries, and other unorganized sector entities, using high technology-low cost operations [source: 924, 925].
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Is encouraging young entrepreneurs in rural areas an explicit objective of SFBs according to the text?
No, the text explicitly states this is not mentioned as a purpose [source: 926]. The focus is on financial inclusion for underserved sectors [source: 924].
100
What was the asset quality trend for SFBs in India heading into FY2025?
After improving in FY2024, asset quality (GNPA ratio) deteriorated slightly by Sep 2024 (to 2.8%), driven by microfinance loan slippages. Further deterioration was expected in FY2025 [source: Small finance banks' growth to slow down to 18-20 % in FY2025: ICRA - The Times of India].
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What is Unified Payments Interface (UPI)?
A single platform merging various banking services/features [source: 927]. Allows real-time bank-to-bank payments using mobile number or VPA (UPI ID) [source: 929]. Smartphones can act as virtual debit cards [source: 930]. QR codes can eliminate the need for digital wallets [source: 932].
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What is the 'Scheme for Sustainable Structuring of Stressed Assets (S4A)'?
An optional RBI framework for resolving large stressed accounts [source: 933]. It involves determining the sustainable debt level for a borrower and bifurcating outstanding debt into sustainable debt and equity/quasi-equity instruments [source: 934]. Aims to help rework financial structures of entities facing genuine difficulties [source: 935].
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What is the National Payments Corporation of India (NPCI)?
An umbrella organisation for operating retail payments and settlement systems in India [source: 936], initiated by RBI and IBA under the Payment and Settlement Systems Act, 2007 [source: 908, 936].
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What is RuPay?
India's domestic card payment network, a product of NPCI [source: 937]. It has wide acceptance at ATMs, POS devices, and e-commerce sites in India and is considered highly secure [source: 937].
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What is the approximate share of RuPay in total card spending in India, and how much involves credit via UPI (as of early 2025)?
About 16% of card spending occurs on RuPay. Approximately half of this RuPay spending (i.e., 8% of total card spending) happens via RuPay credit on UPI [source: 16% of card spends happen on RuPay, half of it on credit via UPI: NPCI - Business Standard].
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What is a Payments Bank? What restrictions do they face?
A bank operating on a smaller scale without involving credit risk [source: 939]. Can accept deposits (up to ₹1 lakh limit mentioned), offer remittance services, mobile payments, ATM/debit cards, net banking, etc. [source: 941]. Restrictions: Cannot advance loans or issue credit cards [source: 940, 943, 944].
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Who is eligible to be a promoter of a Payments Bank in India?
Mobile telephone companies and supermarket chains (owned and controlled by residents) are eligible promoters [source: 942].
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What is Core Banking Solution (CBS)?
A network of a bank's branches enabling customers to operate their accounts from any networked branch, regardless of where the account was opened [source: 946].
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What is the Marginal Cost of Funds based Lending Rate (MCLR)?
The benchmark lending rate introduced by RBI for banks to lend to new borrowers [source: 949]. Aims to improve transparency in interest rate determination and ensure fair rates for borrowers and banks [source: 950, 951].
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What were the approximate 1-Year MCLR rates for some banks around April 2025?
Based on Bank of India data, the 1-Year MCLR effective April 1, 2025, was 9.05% [source: MCLR 2025 - BOI - Bank of India]. Rates vary across banks and tenors.
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What is the likely impact of RBI reducing the Statutory Liquidity Ratio (SLR)?
Banks have to maintain a lower percentage of deposits as liquid assets [source: 952, 953], increasing funds available for lending [source: 953]. This may lead commercial banks to cut their lending rates to encourage borrowing [source: 955].
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What is the purpose of the Basel III Accord?
Developed by the Basel Committee on Banking Supervision post-2008 crisis [source: 956], it provides internationally agreed measures to strengthen bank regulation, supervision, and risk management [source: 957, 958]. Aims to coordinate banking regulations globally and strengthen the international banking system [source: 960].
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What is the implementation status of Basel III capital regulations in India?
Basel III capital regulations were implemented from April 2013 and fully implemented by October 2021 [source: Basel III Endgame
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Differentiate between Monetary Policy and Fiscal Policy instruments mentioned.
Monetary Policy instruments (used by RBI/Central Bank) include Bank Rate, OMOs, Repos, SLR, CRR [source: 962]. Fiscal Policy instruments (used by Government) include government spending, tax policies, public debt, and public revenue [source: 963].
115
How does RBI use the Repo Rate to control inflation?
RBI can increase the Repo Rate, making borrowing from RBI more expensive for banks [source: 965]. This reduces the money supply available for banks to lend, leading to lower demand and potentially falling prices [source: 966, 967].
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What is Pradhan Mantri Jan Dhan Yojana (PMJDY)? Is a minimum balance required?
A national mission for financial inclusion launched in Aug 2014 [source: 968], ensuring access to banking/savings accounts, remittance, credit, insurance, pension [source: 969]. No minimum balance is required in PMJDY accounts [source: 971].
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How many PMJDY accounts were opened as of January 15, 2025? What percentage are held by women?
Over 54.58 crore accounts opened, with 55.7% (30.37 crore) held by women [source: Over 54.5 Crore Jan Dhan Accounts Opened till Jan 15 - Current Affairs - Adda247].
118
What is the Marginal Standing Facility (MSF) Rate?
The rate at which banks borrow overnight funds from RBI against approved government securities [source: 972, 973]. It's a window for banks to manage emergency cash flow needs [source: 974]. Typically set above the Repo Rate [source: 864].
119
What are Net Demand and Time Liabilities (NDTL)?
Refers to the liabilities of a bank [source: 972, 975]. Demand Liabilities are payable on demand (current accounts, demand portion of savings accounts, DDs, etc.) [source: 975]. Time Liabilities are payable otherwise (fixed deposits, recurring deposits, time portion of savings accounts, etc.) [source: 976]. Used in calculating reserve requirements like CRR/SLR.
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122
What is the likely effect of decreasing interest rates in an economy according to the text?
It will likely increase investment expenditure [source: 987]. People may deposit less and borrow more, increasing the money supply [source: 988].
123
What areas of commercial bank regulation fall under RBI's purview as per the text?
Liquidity of assets (via CRR, SLR) [source: 991], Branch expansion/shifting/closing (under Banking Regulation Act, Sec 23) [source: 992], Merger of banks (voluntary amalgamation approval under BR Act, Sec 44-A) [source: 993], and initiating Winding up of banks unable to meet commitments [source: 993].
124
What is the RBI's stance on forcing mergers among Urban Cooperative Banks (UCBs) according to recent reports?
RBI will not force mergers among UCBs; it is not their policy, according to RBI board member Satish Marathe [source: RBI will not force mergers of urban co-operative banks: RBI board member]. This contrasts with earlier expert committee suggestions for regulatory nudges or mandatory resolution for weak UCBs [source: RBI will not force mergers of urban co-operative banks: RBI board member].
125
What does an increase in the Bank Rate by the central bank signify?
It signifies the central bank is following a Tight Monetary Policy [source: 997]. Higher bank rates translate to higher lending rates by commercial banks, curbing liquidity [source: 995, 996]. Tight policy aims to slow down overheated economic growth or fast-rising inflation [source: 998, 999].
126
What are Open Market Operations (OMO)?
The sale and purchase of government securities and treasury bills by RBI (or the central bank) [source: 1000].
127
What is the objective of OMO? How does RBI use it to increase/decrease money supply?
To regulate the money supply in the economy [source: 1001]. RBI purchases G-Secs to increase money supply (inject liquidity) and sells G-Secs to decrease money supply (absorb liquidity) [source: 1002, 1013, 1016].
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What is Priority Sector Lending (PSL)?
Lending to sectors considered important by GoI/RBI for basic needs development, which are given priority over other sectors [source: 1003]. Banks are mandated to provide adequate and timely credit to encourage their growth [source: 1004].
129
What is the overall PSL target for banks mentioned? Name some key sectors included.
Banks must extend at least 40% of their Adjusted Net Bank Credit (ANBC) to priority sectors [source: 1005]. Sectors include Agriculture, MSME, Export Credit, Education, Housing, Social Infrastructure, Renewable Energy, and Weaker Sections [source: 1004, RBI issues revised priority sector lending norms effective April 1 - Mint].
130
In its role as 'Bankers' Bank', what functions does RBI perform for commercial banks?
RBI holds deposits of other banks [source: 1007] and provides credit to them in times of need [source: 1007]. It performs functions similar to what commercial banks do for their customers [source: 1008]. RBI also advises banks on various matters like risk management [source: 1010, 1011].
131
Which actions mentioned lead to an increase in money supply?
Purchase of government securities from the public by the Central Bank [source: 1013]. Borrowing by the government from the Central Bank [source: 1015].
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Which actions mentioned do not directly increase money supply?
Deposit of currency in commercial banks by the public (transfer within the system) [source: 1014]. Sale of government securities to the public by the Central Bank (absorbs money) [source: 1016].
133
What is Microfinance?
Financial services (credit, savings, micro-insurance, remittances, fund transfers) provided to low-income/unemployed sections who have difficulty accessing formal financial services [source: 1017, 1018]. It's a tool for financial inclusion [source: 1019].
134
What is the growth outlook for the Microfinance (NBFC-MFI) sector in India for FY2025 according to ICRA?
Growth is predicted to slow sharply to 0-5% in FY2025 (down from 29% in FY2024), hampered by concerns over asset quality, particularly in the microfinance loan segment [source: MFI sector set to shrink in FY25: ICRA - Times of India].
135
What are Teaser Loans? What is RBI's stance mentioned in the text?
Loans offering low initial interest rates that increase later [source: 1020]. Considered an aspect of subprime lending [source: 1021]. RBI has shown caution/disapproval and increased standard asset provisioning requirements for them, but hasn't explicitly banned them according to the text [source: 1022, 1023].
136
What are RBI's current guidelines or stance on teaser loans based on search results?
RBI norms requiring higher provisioning (e.g., 2% standard asset provisioning mentioned in older reports) have discouraged banks like SBI and Canara Bank from offering such schemes [source: Most banks, housing finance companies say no to teaser loans - Moneylife].
137
Which institutions are the main disbursers of institutional agricultural credit in India? What is their approximate share?
Commercial banks (~60%), Cooperative banks (~30%), and Regional Rural Banks (RRBs) [source: 1026, 1027].
138
What is the effect of reducing the Bank Rate on market liquidity?
Reducing the bank rate makes RBI's long-term loans cheaper for banks, encouraging them to borrow more, leading to infusion of funds/liquidity into the banks and ultimately the market [source: 1029, 1030, 1031].
139
How does the purpose of SLR differ from LAF?
SLR is a minimum reserve requirement (percentage of deposits) maintained in liquid assets (cash, gold, G-Secs) primarily ensuring solvency and enabling government borrowing [source: 1032, 1033]. LAF is a monetary policy tool allowing banks to manage overnight liquidity by borrowing (repo) or lending (reverse repo) to RBI [source: 1035].
140
What is a Non-Banking Financial Company (NBFC)?
A company registered under the Companies Act engaged in financial activities like loans, advances, acquisition of securities, leasing, hire-purchase, insurance, chit business, etc., but whose principal business is not agriculture, industry, trading of goods (other than securities), or real estate construction/sale [source: 1036].
141
What are key differences between NBFCs and Banks mentioned?
NBFCs cannot accept demand deposits; do not form part of the payment and settlement system (cannot issue cheques drawn on themselves); depositors are not covered by DICGC insurance [source: 1037, 1038].
142
What is the Scale Based Regulation (SBR) framework for NBFCs introduced by RBI?
Introduced in Oct 2021, it classifies NBFCs into four layers (Base, Middle, Upper, Top) based on asset size and scoring, applying differential regulations [source: RBI releases list of NBFCs in the Upper Layer (NBFC-UL) for 2024-25, RBI releases Upper Layer NBFCs list for 2024-25: LIC Housing, Bajaj Finance, and more among 15 firms - Upstox]. NBFCs in the Upper Layer face enhanced regulations [source: RBI releases Upper Layer NBFCs list for 2024-25: LIC Housing, Bajaj Finance, and more among 15 firms - Upstox].
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How does the RBI use the Cash Reserve Ratio (CRR) to control inflation or inject funds?
To control high inflation, RBI increases CRR, reducing funds available with banks for lending [source: 1044]. To inject funds, RBI lowers CRR, helping banks provide more loans and boosting economic growth [source: 1046].
145
What are some key features of a Limited Liability Partnership (LLP) in India?
Governed by LLP Act, 2008 [source: 1047]; liability of partners is limited [source: 1047]; minimum 2 partners, no maximum limit [source: 1048]; no minimum board meeting requirement [source: 1049]; no minimum share capital requirement [source: 1050]; Digital Signature Certificate and Director Identification Number (DIN) needed for partners [source: 1051].
146
What recent changes related to LLPs were introduced by the Finance (No. 2) Act, 2024 (effective Apr 2025)?
Permissible limits for partner remuneration doubled [source: Key Income Tax Changes for Partnership Firms & LLPs from April 1, 2025 - IndiaFilings]. Section 194T introduced, mandating 10% TDS on total payments (like remuneration) to a partner if it exceeds ₹20,000 in a financial year [source: Key Income Tax Changes for Partnership Firms & LLPs from April 1, 2025 - IndiaFilings].
147
Is an award passed by the Banking Ombudsman final and binding?
No [source: 1052]. It becomes binding only if the complainant accepts it in writing within 15 days (or extended period) as full settlement [source: 1053]. If not accepted, the award lapses [source: 1054].
148
What was the trend in complaints received under the RBI's Integrated Ombudsman Scheme in 2024?
Complaints saw a significant surge of 32.81%, reaching 9.34 lakh in 2024 [source: 32.81% Surge in Complaints to RBI Ombudsman - Current Affairs - Adda247]. Common causes included service delays, transaction errors, and poor grievance redressal [source: 32.81% Surge in Complaints to RBI Ombudsman - Current Affairs - Adda247].
149
When were 14 major commercial banks nationalized in India? What was an impact mentioned?
July 19, 1969 [source: 1055]. The move increased the reach of banking in rural areas [source: 1055]. Post-nationalization, public sector banks held a dominant share of deposits and branches [source: 1056].
150
When were Regional Rural Banks (RRBs) established in India and why?
Established in 1975 (under an Ordinance followed by RRB Act, 1976) [source: 1057] to develop the rural economy and create a supplementary channel to Cooperative Credit Structure for rural/agricultural credit [source: 1057].
151
How was the financial performance of RRBs in India during FY 2023-24?
RRBs posted their highest ever consolidated net profit (₹7,571 crore) and had an all-time high consolidated capital adequacy ratio (14.2%). Asset quality (GNPA at 6.1%) was the lowest in 10 years [source: 'One state-one RRB' to be effective from May 1 as FinMin].
152
What was the Village Adoption Scheme mentioned in the text?
Introduced by banks in the 1960s to enhance visibility and encourage agri-lending cost-effectively [source: 1058]. SBI later revived it under CSR as "SBI Ka Apna Gaon" [source: 1059].
153
What is the latest status of Village Adoption Schemes by banks?
RBI announced a '75 Digital Village Adoption Programme' in March 2023 aiming to make selected villages Digital Payment Enabled, involving Payment System Operators (PSOs) [source: PayG Contributes to Har Payment Digital - 75 Village Adoption Scheme].
154
What is the purpose of the Banking Regulation Act, 1949?
Controls & regulates all banking activities of banks in India; gives RBI power to license banks [source: 1060, 1061]. Came into force March 16, 1949 [source: 1060].
155
What change did the General Insurance Business (Nationalisation) Amendment Bill, 2021 aim to bring?
Passed in Aug 2021, it aimed to allow greater private participation in public sector general insurers by removing the requirement for the Centre to hold at least 51% equity [source: General Insurance Amendment Bill: What it is about, and why the uproar over it].
156
When was the State Bank of India (SBI) incorporated?
July 1, 1955 [source: 1063], following the nationalization of the Imperial Bank of India with RBI taking a 60% stake [source: 1063].
157
When was India's First Five-Year Plan presented?
Presented before Parliament on July 9, 1951 [source: 1065].
158
What was the purpose of the Basel II Accord?
Issued by the Basel Committee on Banking Supervision (published June 2004), it aimed to create an international standard for banking regulators regarding bank capital adequacy to guard against financial and operational risks [source: 1066, 1067].
159
How does Basel III differ from Basel II?
While Basel II focused mainly on capital amount and risk management, Basel III (developed post-2008 crisis) added new rules on liquidity, leverage, and systemic risk factors [source: Basel III: What It Is, Capital Requirements, and Implementation - Investopedia]. India fully implemented Basel III capital regulations by Oct 2021 [source: Basel III Endgame
160
What are the main components of the Internal Debt of the Central Government mentioned?
Largely consists of market borrowings (Dated Securities, Treasury Bills), securities issued to NSSF, securities issued to international financial institutions, special securities (e.g., against postal insurance), etc. [source: 1068].
161
What is the estimated total internal and external debt & other liabilities of the Government of India for end FY 2025-26?
Estimated at ₹196.78 lakh crore, with internal debt & other liabilities comprising approx. ₹190.14 lakh crore [source: 1. DEBT POSITION OF THE GOVERNMENT OF INDIA The outstanding internal and external debt and other liabilities of the Government o - India Budget].
162
What are Treasury Bills (T-bills)?
Short-term debt instruments (91, 182, 364 days tenure) issued by GoI [source: 1069]. They are zero-coupon securities [source: 1069].
