Banking in India

The following summary of Banking in India, based on Ramesh Singh’s Indian Economy, covers the evolution, structure, and regulatory framework of the Indian banking sector.

I. Overview and Structure of Indian Banking

The Indian banking system is broadly divided into Scheduled and Non-Scheduled banks.

Scheduled Banks: Banks included in the Second Schedule of the RBI Act, 1934. They are further classified into:
- Commercial Banks: Includes Public Sector Banks (e.g., SBI, PNB), Private Sector Banks, Foreign Banks, and Regional Rural Banks (RRBs).
- Co-operative Banks: Focus on small-scale clients and rural credit.
Differentiated Banks: Includes Small Finance Banks (targeted at under-served sections) and Payment Banks (providing basic deposit and payment services).

II. Reserve Bank of India (RBI) Functions

The RBI acts as the central bank with several critical roles:

Monetary Authority: Formulates and implements monetary policy to maintain price stability.
Regulator & Supervisor: Prescribes parameters for banking operations.
Manager of Foreign Exchange: Manages the Foreign Exchange Management Act (FEMA), 1999.
Banker to Government & Banks: Maintains accounts for central/state governments and Scheduled Commercial Banks (SCBs).

III. Key Banking Concepts & Reforms

RRBs: Established in 1975 to provide rural credit. Capital is shared by Central Govt (50%), State Govt (15%), and Sponsoring Bank (35%).
NPA Management: Addressing Non-Performing Assets through mechanisms like the Insolvency and Bankruptcy Code (IBC) and proposed Public Sector Asset Rehabilitation Agency (PARA).
Monetary Aggregates: Measures of money supply including M0 (Reserve Money), M1 (Narrow Money), and M3 (Broad Money).

IV. Mnemonics for Fast Learning

Concept	Mnemonic	Explanation
Monetary Aggregates	“M1 adds Mail, M3 adds Time”	M1 is most liquid; M2 adds Post Office (Mail); M3 adds Time Deposits; M4 adds Total Post Office deposits.
M0 (Reserve Money)	“CRO”	Currency in circulation + Reserves of banks + Other deposits with RBI.
Assets vs. Liabilities	“L-A-D”	Loans are Assets; Deposits are Liabilities for a bank.
RBI Money Printing	“GFG”	Prints money against Gold, Foreign securities, and Government securities (Min ₹200cr).

V. 100 Questions & Answers (Sample Selection)

Note: Below are high-yield questions derived from the Banking section of Ramesh Singh.

Q: In which year were RRBs first set up?
A: 1975.
Q: What is the share of the Central Government in RRB capital?
A: 50%.
Q: Which institution is known as the “Banker’s Bank”?
A: Reserve Bank of India.
Q: What does CRR stand for?
A: Cash Reserve Ratio.
Q: Which aggregate is known as “Narrow Money”?
A: M1.
Q: What is the primary objective of Small Finance Banks?
A: Financial inclusion.
Q: Under which act was the RBI established?
A: RBI Act, 1934.
Q: What is the “Twin Balance Sheet” problem?
A: Simultaneous stress on corporate and bank balance sheets.
Q: Which committee recommended the establishment of RRBs?
A: Narasimham Committee (1975).
Q: What is the current repo rate (approximate)?
A: 6.50% (as of 2024; verify current RBI policy).

Would you like me to provide a detailed breakdown of the latest NPA resolution mechanisms or more mnemonics for the various RBI policy rates?

AI can make mistakes, so double-check responses

19 sites

Ramesh Singh Summary: Banking in India- 1 – EduRev1 Dec 2020 — (v) Regulator and Supervisor of Payment and Settlement Systems : It includes functions like introducing and upgrading safe and eff…EduRev
Ramesh Singh Summary: Banking in India- 2 – EduRev11 Aug 2025 — The Regional Rural Banks (RRBs) were first set up on 2 October, 1975 (only 5 in numbers) with the aim to take banking services to …EduRev
Types of Banking in India | DBS Bank14 Aug 2025 — Indian banking types are broadly classified into two types – scheduled and non-scheduled. These banks could be commercial, small f…DBS Bank | India

Show all

more on money

In Ramesh Singh’s

Indian Economy, the “Money” section explores the functions of money, the money market, and the technical measures of money supply (monetary aggregates) used by the Reserve Bank of India (RBI).

I. Functions of Money

Money is defined by its functions rather than its form. Ramesh Singh highlights four primary roles:

Medium of Exchange: Facilitates the buying and selling of goods/services.
Common Measure of Value: Acts as a unit of account to price different items.
Store of Value: Can be saved and retrieved in the future.
Standard for Deferred Payments: Basis for future payments (loans/debts).

II. Monetary Aggregates (Money Supply)

The RBI uses specific categories to measure the amount of money in the economy, ranked from most liquid (e.g., cash) to least liquid (e.g., fixed deposits).

Aggregate	Name	Components
M0	Reserve Money	Currency in Circulation + Bankers’ deposits with RBI + ‘Other’ deposits with RBI.
M1	Narrow Money	Currency with the Public + Demand Deposits (Savings/Current Accts) + ‘Other’ deposits with RBI.
M2	Narrow Money (incl. PO)	M1 + Savings deposits with Post Office savings banks.
M3	Broad Money	M1 + Time/Term Deposits (Fixed/Recurring) with the banking system.
M4	Total Money	M3 + Total deposits with Post Office (excluding National Savings Certificates).

III. The Indian Money Market

The money market deals with short-term funds (maturities up to 364 days).

Organized Sector: Regulated by the RBI; includes Commercial Banks, NBFCs, and Mutual Funds.
Unorganized Sector: Includes indigenous bankers, moneylenders, and chit funds.
Key Instruments: Treasury Bills (T-Bills), Commercial Paper (CP), and Certificates of Deposit (CD).

IV. Mnemonics for Money Concepts

Concept	Mnemonic	Explanation
Functions of Money	“MESS”	Medium of exchange, Exchange value, Store of value, Standard for deferred payments.
Supply Layers	“M1 is Liquid, M2 adds Mail”	M1 is most liquid; M2 adds Post Office (Mail) savings.
M3 Broadening	“M3 adds Time”	M3 is M1 plus Time (Fixed) Deposits.
Money Multiplier	“Multiplier = 3/0”	Formula: M3 ÷ M0. It shows how many times broad money is of reserve money.

V. Additional 10 Q&A on Money

Q: What is “High-Powered Money”?
A: M0 (Reserve Money), as it forms the base for credit creation.
Q: Which measure of money supply is most commonly used for policy?
A: M3 (Broad Money).
Q: Why is M1 called “Narrow Money”?
A: Because it only includes highly liquid assets like cash and demand deposits.
Q: What happens to liquidity as we move from M1 to M4?
A: Liquidity decreases.
Q: Who has the sole right to mint coins in India?
A: The Government of India.
Q: What is the “Velocity of Money”?
A: The average number of times a unit of money changes hands in a given period.
Q: Does M4 include National Savings Certificates (NSC)?
A: No, it is specifically excluded.
Q: What is the main source of Broad Money (M3)?
A: Net bank credit to the government and commercial sectors.
Q: Which committee recommended the current money supply measurement?
A: Y.V. Reddy Working Group (1998).
Q: What is the “Money Multiplier” in India typically?
A: Usually in the range of 5 to 6.

Would you like a similar breakdown of RBI’s Monetary Policy Tools (like Repo, SLR, and CRR) or a summary of Financial Sector Reforms?

11 sites

Money Supply and Monetary Aggregates – GKToday31 Jan 2026 — Money Supply and Monetary Aggregates. Money supply is the total stock of monetary assets available in an economy at a given time. …GKToday
Monetary Aggregates – UnacademyMonetary Aggregates * Note: The Narrow money has another component known as M2 money which includes M1 component and savings depos…Unacademy
Ramesh Singh Summary: Indian Money Market – EduRevMoney Market in India: History and Development. India’s organised money market developed substantially from the mid-1980s. Earlier…EduRev

Show all

RBI monetary Policy tools

In the February 2026 Monetary Policy meeting, the Reserve Bank of India (RBI) opted for stability, maintaining a Neutral stance and keeping the benchmark Repo Rate unchanged at 5.25%. This decision reflects a cautious approach amid global uncertainties and steady domestic growth, with retail inflation projected at a benign 2.1% for FY 2025–26.

I. Quantitative Tools (General Instruments)

These tools regulate the total volume of money and credit in the economy.

Repo Rate (5.25%): The anchor rate at which the RBI lends short-term funds to commercial banks against government securities.
Standing Deposit Facility (SDF) (5.00%): A collateral-free liquidity absorption tool that serves as the floor of the interest rate corridor.
Marginal Standing Facility (MSF) (5.50%): An emergency window for banks to borrow overnight funds at a higher rate than repo.
Bank Rate (5.50%): The long-term lending rate for commercial papers or bills of exchange, currently aligned with the MSF rate.
Cash Reserve Ratio (CRR) (3.00%): The percentage of a bank’s total deposits that must be maintained as cash with the RBI.
Statutory Liquidity Ratio (SLR) (18.00%): The minimum percentage of deposits banks must hold in liquid assets like gold, cash, or government bonds.
Open Market Operations (OMO): The buying and selling of government securities to inject or suck out liquidity from the system.

II. Qualitative Tools (Selective Instruments)

These tools target specific sectors to direct the flow of credit where it is most needed.

Margin Requirements: Adjusting the difference between the loan amount and the value of collateral to control credit to specific sectors.
Moral Suasion: Persuading banks through advisories or meetings to align with the central bank’s policy without administrative compulsion.
Credit Rationing: Fixing a ceiling or limit on the amount of credit available for specific industries.
Selective Credit Control (SCC): Regulating loans against specific risky commodities like food grains or raw cotton.

III. Mnemonics for Monetary Tools

Concept	Mnemonic	Explanation
Liquidity Corridor	“S-R-M”	SDF (Floor) – Repo (Anchor) – MSF (Ceiling)
Quantitative Tools	“R-O-B-C-S”	Repo, OMO, Bank Rate, CRR, SLR
Inflation Strategy	“Hike to Tighten”	To fight Inflation, Hike rates to reduce money supply.
Deflation Strategy	“Cut to Boost”	To fight Recession, Cut rates to increase money supply.

IV. Sample Q&A on Monetary Tools

Q: Who chairs the Monetary Policy Committee (MPC)?
A: The RBI Governor (currently Sanjay Malhotra as of February 2026).
Q: What is the current “Symmetric Corridor” width?
A: 50 basis points (SDF at 5.00% and MSF at 5.50%).
Q: How does a “Neutral” stance differ from “Accommodative”?
A: A neutral stance allows the RBI to move rates in either direction based on data; accommodative implies a readiness to cut rates to boost growth.
Q: Which tool does not require collateral for liquidity absorption?
A: Standing Deposit Facility (SDF).

Would you like to explore Ramesh Singh’s summary on Fiscal Policy or more specific details on the Insolvency and Bankruptcy Code (IBC)?

26 sites

Monetary Policy Tools – Indian Economy Notes – PreppMonetary Policy Tools – Indian Economy Notes. … Monetary Policy Tools are instruments used by the central bank to regulate the t…Prepp
February 2026 RBI Policy: Repo Rate Held at 5.25% – India Infoline7 Feb 2026 — February 2026 RBI Policy: Repo Rate Held at 5.25% * Summary. * The February 2026 RBI Monetary Policy saw the MPC unanimously keep …India Infoline
India Interest Rate – Trading EconomicsTable_content: header: | Calendar | GMT | Reference | Actual | Previous | Consensus | TEForecast | row: | Calendar: 2025-10-01 | G…Trading Economics

Show all

more on qualitative tool with menomenics alogn with 10 question and answer with pnemonics

In Ramesh Singh’s

Indian Economy, Qualitative Tools (also called Selective Tools) are the “scalpels” of the RBI. Unlike Quantitative tools that affect the whole economy, these target specific sectors to prevent speculation or boost priority areas like agriculture.

I. The Qualitative Toolkit (Selective Tools)

Margin Requirements (LTV – Loan to Value): The difference between the market value of collateral and the loan amount.
- Example: If the margin is 20%, you get a ₹80 loan for ₹100 gold. To stop speculation, RBI increases the margin.
Consumer Credit Regulation: Controlling the down payment and EMI installments for goods like cars or TVs.
Rationing of Credit: Setting a “ceiling” or maximum limit on loans for specific sectors to prevent over-lending.
Moral Suasion: A mix of “persuasion and pressure.” The RBI holds meetings with bank CEOs to “strongly suggest” following policy trends without formal penalties.
Direct Action: The “nuclear option.” If a bank repeatedly violates RBI guidelines, the RBI can impose hefty fines or even cancel their license.

II. Mnemonics for Qualitative Tools

Concept	Mnemonic	Explanation
The 5 Tools	“M-C-R-M-D”	Margin, Consumer Credit, Rationing, Moral Suasion, Direct Action.
Margin Rule	“More Margin, Less Money”	Increasing Margin requirements leads to Less loan money in the borrower’s hand.
Moral Suasion	“Talk then Walk”	RBI first Talks (Suasion), then takes Action (Direct Action).

III. 10 Q&A on Qualitative Tools

1. Q: Which tool changes the “Loan-to-Value” ratio for a borrower?

A: Margin Requirements.
Mnemonic: “M-L” (Margin sets the Limit).

2. Q: What is the primary purpose of Qualitative tools?

A: To control the direction of credit (Sector-specific control).
Mnemonic: “Qualitative = Quality/Direction”.

3. Q: If RBI wants to stop a “Real Estate Bubble,” which tool is most specific?

A: Increasing Margin Requirements for housing loans.

4. Q: What is ‘Moral Suasion’ often called in banking circles?

A: “Jawboning” (Using talk to influence).

5. Q: When does RBI use ‘Direct Action’?

A: When a bank refuses to follow RBI directives despite warnings.
Mnemonic: “D for Discipline”.

6. Q: How does ‘Consumer Credit Regulation’ affect inflation?

A: By increasing the required down payment, it reduces the demand for luxury goods.

7. Q: Is ‘Credit Rationing’ a quantitative or qualitative tool?

A: Qualitative (it targets the limit for specific sectors).

8. Q: Who handles ‘Selective Credit Control’ in India?

A: The Reserve Bank of India (RBI).

9. Q: Which tool involves “informal” communication?

A: Moral Suasion.
Mnemonic: “Moral = Mouth” (Talking to banks).

10. Q: Can ‘Direct Action’ include stopping a bank from taking new deposits?

A: Yes, it is a form of administrative penalty.

Would you like to move on to the Priority Sector Lending (PSL) targets or perhaps a summary of NPAs and the IBC framework?

PSL

Priority Sector Lending (PSL) refers to the Reserve Bank of India (RBI)’s mandate for banks to allocate a specific portion of their credit to sectors that are vital for inclusive development but often underserved by formal finance.

Effective April 1, 2025, the RBI issued new “Master Directions” that modernized these targets and categories to reflect current economic priorities.

I. Updated PSL Targets (FY 2025–26)

The targets are calculated as a percentage of Adjusted Net Bank Credit (ANBC) or the Credit Equivalent Amount of Off-Balance Sheet Exposure (CEOBE), whichever is higher.

Bank Category	Overall PSL Target	Key Sub-targets
Domestic Commercial Banks	40%	Agri (18%), Micro (7.5%), Weaker Sections (12%)
Regional Rural Banks (RRBs)	75%	Agri (18%), Micro (7.5%), Weaker Sections (15%)
Small Finance Banks (SFBs)	60% (Revised)	Reduced from 75% to provide more flexibility
Urban Cooperative Banks (UCBs)	60% (Revised)	Lowered from 75% to ease compliance

II. Major Categories and 2025–26 Limits

Agriculture: Includes farm credit, agri-infrastructure (up to ₹100 crore per borrower), and ancillary activities.
MSMEs: Loans to startups up to ₹50 crore.
Housing: Loan limits for individuals are population-linked:
- ≥ 50 lakh population: Up to ₹50 lakh (unit cost max ₹63 lakh).
- 10–50 lakh population: Up to ₹45 lakh (unit cost max ₹57 lakh).
- < 10 lakh population: Up to ₹35 lakh (unit cost max ₹44 lakh).
Education: Individual loan limit increased to ₹25 lakh.
Renewable Energy: Loan limit for power generators raised to ₹35 crore per borrower.
Weaker Sections: Now explicitly includes transgender persons as eligible beneficiaries.

III. Mnemonics for PSL

Concept	Mnemonic	Explanation
Core Targets	“40-75 split”	40% for big banks, 75% for rural/niche banks (RRBs/SFBs used to be 75%; SFBs are now 60%).
Agricultural Split	“18 = 10 + 8”	18% total Agri, including 10% specifically for Small & Marginal Farmers (SMF).
Housing Repair	“15 for Metro, 10 for Rest”	Loans up to ₹15 lakh (Metro) and ₹10 lakh (Other) for repairs.

IV. 10 Q&A on PSL

Q: What happens if a bank fails to meet its PSL target?
A: They must deposit the shortfall into the Rural Infrastructure Development Fund (RIDF) with NABARD or other designated funds.
Q: Are Payment Banks required to meet PSL targets?
A: No, they are not subject to PSL targets.
Q: What is a PSLC?
A: Priority Sector Lending Certificate—a tradable instrument that allows banks with a shortfall to “buy” compliance from banks with a surplus.
Q: What is the landholding limit for a ‘Small Farmer’?
A: More than 1 hectare and up to 2 hectares.
Q: Do loans to NBFCs count as PSL?
A: Yes, for on-lending to specified sectors like Agri or Micro, but capped at 5% of the bank’s total PSL.
Q: What is the 2026 update regarding NCDC?
A: Effective January 19, 2026, bank credit to the National Cooperative Development Corporation (NCDC) for on-lending to cooperatives qualifies as PSL.
Q: Which regions get extra weightage for PSL?
A: Districts with low per capita credit get a 125% weightage; high-credit districts get 90%.
Q: What is the loan limit for renewable energy for individual households?
A: Up to ₹10 lakh per borrower.
Q: Are gold loans considered PSL?
A: Only if the end-use is for an eligible sector like agriculture.
Q: Is there an interest rate cap on PSL loans?
A: The 2025 guidelines removed the interest margin cap on certain PSL-linked securitisation to align with current microfinance regulations.

Would you like a summary of the Narasimham Committee reports on banking reforms or more details on Financial Inclusion schemes?

19 sites

Revised Priority Sector Lending Guidelines – Drishti IAS28 Mar 2025 — Why in News? The Reserve Bank of India (RBI) has issued revised Priority Sector Lending (PSL) guidelines under the Banking Regulat…Drishti IAS
Priority Sector Lending (PSL) – Shankar IAS Parliament8 Dec 2025 — What is Priority Sector Lending (PSL)? * PSL – It is an RBI’s initiative that mandates banks to allocate a specific portion of the…Shankar IAS Parliament
Priority Sector Lending – GKToday1 Feb 2026 — Priority Sector Lending * Priority Sector Lending is an RBI-mandated scheme that requires banks to devote a certain portion of the…GK Today

Show all

NPA

In Ramesh Singh’s

Indian Economy, Non-Performing Assets (NPAs) are defined as “bad loans” where the borrower fails to pay interest or principal for a specified period, typically 90 days.

As of late 2025, the banking sector has shown significant improvement, with the gross NPA ratio of Scheduled Commercial Banks reaching a historic low of 2.15% in September 2025.

I. Asset Classification & SMA Framework

Before a loan becomes an NPA, it is tracked as a Special Mention Account (SMA) to flag early stress.

Category	Overdue Period	Asset Status
SMA-0	Up to 30 days	Standard
SMA-1	31 – 60 days	Standard
SMA-2	61 – 90 days	Standard
NPA	> 90 days	Non-Performing

Types of NPAs

Substandard: Remained an NPA for ≤ 12 months.
Doubtful: Remained an NPA for > 12 months.
Loss Assets: Identified as “uncollectible” by the bank, auditor, or RBI inspectors, even if not fully written off.

II. Key Ratios & Formulas

Gross NPA (GNPA): The total value of all defaulted loans before any provisions are made.
Net NPA (NNPA): Reflects the actual financial burden after subtracting provisions from the GNPA.
- Formula: Net NPA = Gross NPA – Provisions
Provision Coverage Ratio (PCR): The percentage of bad loans a bank has covered by setting aside funds from its profits.
- Formula: PCR = (Total Provisions / Gross NPAs) × 100
- Benchmark: A PCR of 70% or more is considered healthy.

III. Resolution Mechanisms

Insolvency and Bankruptcy Code (IBC): Provides a time-bound recovery process (typically 180 days) for insolvent accounts.
SARFAESI Act, 2002: Empowers banks to seize and sell collateral of defaulting borrowers without court intervention.
NARCL (Bad Bank): The National Asset Reconstruction Company Ltd acquires large stressed assets (₹500 crore+) to aggregate and resolve them efficiently.

IV. Mnemonics for NPAs

Concept	Mnemonic	Explanation
Classification	“S-D-L”	Substandard, Doubtful, Loss Assets.
SMA Stages	“3-6-9”	Stress levels at 30 days (SMA-0), 60 days (SMA-1), and 90 days (NPA).
Resolution	“S-I-N”	SARFAESI, IBC, NARCL (The three main ways to clean NPAs).
Agri-NPA	“2-Short, 1-Long”	2 crop seasons for Short duration crops; 1 season for Long duration crops.

V. 10 Q&A on NPAs

Q: What is the “90-day norm”?
A: A loan is classified as an NPA if interest or principal is overdue for 90 days.
Q: What is the Twin Balance Sheet problem?
A: Simultaneous financial stress on the corporate sector (borrowers) and the banking sector (lenders).
Q: Who determines if an asset is a “Loss Asset”?
A: The bank, internal/external auditors, or RBI inspectors.
Q: Can an NPA be reclassified as a “Standard Asset”?
A: Yes, only if the borrower pays the entire arrears of interest and principal.
Q: What is “evergreening” of loans?
A: Giving fresh loans to a borrower to help them pay off interest on an existing bad loan.
Q: What is the primary role of an Asset Reconstruction Company (ARC)?
A: To buy bad loans from banks at a discount and attempt to recover the dues.
Q: Which sector has historically contributed the most to NPAs in India?
A: Public Sector Banks (PSBs), particularly in infrastructure and core sectors.
Q: What are Special Mention Accounts (SMA)?
A: Pre-NPA categories used for early identification of loan stress.
Q: What is the “4R strategy” for NPAs?
A: Recognition, Resolution, Recapitalisation, and Reforms.
Q: Does an NPA classification apply to a single account or the whole borrower?
A: It is borrower-wise; if one account turns NPA, all accounts of that borrower are classified as NPA.

Would you like to explore the Basel III Norms for capital adequacy or the latest Budget 2026 highlights for the banking sector?

AI responses may include mistakes. For financial advice, consult a professional. Learn more

20 sites

Non-Performing Assets (NPA): Definition, Types & Examples31 Jul 2025 — The Reserve Bank of India defines non-performing assets (NPAs) in India as any advance or loan that has been past due for more tha…Jiraaf
Non-Performing Assets: NPA Full Form, Definition, and TypesUnderstanding NPA: Full Form, Meaning, and Its Types. … The term ‘Non-Performing Asset’ (NPA) might sound complex, but it is key…Kotak Bank
Non-Performing Assets (NPA) – Definition, Types & ExamplesNon-Performing Assets (NPA) * NPA expands to non-performing assets (NPA). Reserve Bank of India defines Non Performing Assets in I…Groww

Show all

Public sector Asset Rehabilitation Agency

In Ramesh Singh’s

Indian Economy, the Public Sector Asset Rehabilitation Agency (PARA) is discussed as a proposed “Bad Bank” solution to resolve the Twin Balance Sheet (TBS) problem—where both banks and companies have overleveraged or stressed balance sheets.

While the concept was proposed in the Economic Survey 2016-17, it eventually paved the way for the creation of the NARCL (National Asset Reconstruction Company Ltd) in 2021.

I. Why was PARA proposed?

The agency was envisioned to handle the “Deeply Stressed” assets that private Asset Reconstruction Companies (ARCs) couldn’t manage.

Centralized Resolution: One agency to handle large-ticket NPAs from multiple banks.
Government-led: To provide “political cover” for bank managers making tough decisions on loan hair-cuts.
Incentive Alignment: To prevent the delay in resolution caused by coordination issues between different banks.

II. The “Bad Bank” Structure (NARCL & IDRCL)

India’s current version of PARA is a dual-structure system:

NARCL (The “Bad Bank”): It buys the bad loans from banks (15% cash, 85% Security Receipts).
IDRCL (The “Manager”): The India Debt Resolution Company Ltd manages and sells these assets to recover money.

III. Mnemonics for PARA & Bad Banks

Concept	Mnemonic	Explanation
PARA’s Purpose	“P-A-R-A”	Public Asset Recovery Agency.
Twin Problem	“T-B-S”	Twin Balance Sheet (Stress on Banks + Sector/Corporates).
Modern Dual Structure	“N-I”	NARCL (The Buyer) and IDRCL (The Seller/Manager).
The 4Rs	“R-R-R-R”	Recognition, Resolution, Recapitalisation, Reform.

IV. 10 Q&A on PARA and Bad Banks

Q: Who first proposed the idea of PARA?
A: The Economic Survey 2016-17 (authored by Arvind Subramanian).
Q: What is the main goal of a “Bad Bank”?
A: To clean up bank balance sheets by taking over their NPAs so they can start lending again.
Q: What is a “Haircut” in banking terms?
A: The percentage reduction in the amount to be paid back by the borrower (e.g., accepting ₹70 for a ₹100 debt).
Q: In the NARCL model, what percentage of the deal is paid in cash?
A: 15% (the remaining 85% is in Security Receipts).
Q: Who provides the guarantee for the Security Receipts (SRs) issued by NARCL?
A: The Government of India.
Q: What is the difference between PARA and a Private ARC?
A: PARA is government-backed and handles much larger, more complex infrastructure NPAs.
Q: Does PARA/NARCL focus on retail loans or corporate loans?
A: Corporate loans (typically those above ₹500 crore).
Q: Why is it called a “Bad Bank”?
A: Because it only holds “bad” (non-performing) assets, not “good” (deposits/performing loans).
Q: What is the “Lead Bank” challenge PARA aimed to solve?
A: The difficulty of getting 10-20 different banks to agree on a single resolution plan for one borrower.
Q: Is NARCL a permanent body or a temporary resolution vehicle?
A: It is intended as a resolution vehicle with a finite life to clean up the current legacy of bad loans.

Would you like to dive into the Insolvency and Bankruptcy Code (IBC) or the Basel III Capital Accords next?

SARFAESI ACT

In Ramesh Singh’s

Indian Economy, the SARFAESI Act, 2002 is highlighted as a landmark legislation that shifted the “balance of power” from the borrower to the lender, allowing banks to recover dues without the “slow-motion” of civil courts.

I. Overview: SARFAESI Act, 2002

Full Name: Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act.

Objective: To allow banks and financial institutions to auction residential or commercial properties (collateral) when a borrower defaults.
The Power: Banks can take possession of the security (collateral) without the intervention of a court or tribunal.
Applicability: Applies to secured loans where the security is worth more than ₹1 lakh and the default is more than 20% of the principal and interest.
Exclusion: It does not apply to agricultural land (to protect farmers).

II. The Recovery Process

Notice: Bank issues a 60-day notice to the defaulter.
Possession: If not paid, the bank takes possession of the asset.
Sale: The bank can lease, sell, or appoint a manager to manage the asset.
Appellate: The borrower can appeal to the Debt Recovery Tribunal (DRT) within 45 days.

III. Mnemonics for SARFAESI

Concept	Mnemonic	Explanation
Core Function	“S-A-R”	Seize, Auction, Recover.
Notice Period	“6-Pack”	60 days notice for the borrower to pay up.
Exclusion	“No Farm”	Agricultural land is strictly exempt from SARFAESI.
The Name	“S-R-E”	Securitisation, Reconstruction, Enforcement.

IV. 10 Q&A on SARFAESI Act

Q: Does a bank need a court order to seize property under SARFAESI?
A: No, that is the primary strength of the act.
Q: What is the minimum loan amount for SARFAESI to apply?
A: ₹1 lakh.
Q: Can SARFAESI be used for unsecured loans (like credit cards)?
A: No, it only applies to Secured Assets.
Q: Where can a borrower challenge a bank’s action under this act?
A: At the Debt Recovery Tribunal (DRT).
Q: What percentage of the debt must remain unpaid for the act to be valid?
A: More than 20% of the principal and interest.
Q: Why is agricultural land excluded?
A: To prevent social unrest and protect the livelihoods of farmers.
Q: What is “Securitisation” in this context?
A: Issuing marketable securities (Security Receipts) backed by the pool of stressed assets.
Q: What is the role of an Asset Reconstruction Company (ARC) here?
A: ARCs are established under this act to buy bad loans and manage recovery.
Q: Can a bank take physical possession of a house if the borrower refuses to leave?
A: Yes, they can seek help from the District Magistrate (DM) or Chief Metropolitan Magistrate.
Q: How much time does a borrower have to appeal to the DRT?
A: 45 days from the date the bank took action.

Would you like to see how SARFAESI compares to the Insolvency and Bankruptcy Code (IBC), or shall we move to Basel III Norms?

AI responses may include mistakes. For legal advice, consult a professional. Learn more

Wilfull Defaulter

In Ramesh Singh’s

Indian Economy, a Wilful Defaulter is a borrower who has the financial capacity to repay a loan but chooses not to, or who misuses the funds for purposes other than what was agreed upon.

As of February 2026, the Reserve Bank of India (RBI) has implemented a more stringent and time-bound framework under the Master Direction on Wilful Defaulters (2024), which now requires lenders to classify such borrowers within six months of their account turning into a Non-Performing Asset (NPA).

I. Four Criteria for Wilful Default

According to RBI guidelines, a wilful default is deemed to have occurred if any of the following are noted:

Deliberate Non-repayment: The borrower defaults despite having adequate financial capacity.
Fund Diversion: Using loan money for purposes other than those approved by the lender (e.g., using a business loan to buy personal property).
Siphoning of Funds: Moving funds so they are untraceable or not used for the sanctioned project, detrimental to the entity’s health.
Asset Disposal: Selling or disposing of secured assets (collateral) without the lender’s knowledge or consent.

II. Severe Consequences (The “Commercial Death Knell”)

Being declared a wilful defaulter leads to several “blacklisting” measures:

Credit Embargo: Complete denial of new loans from any bank or NBFC in India.
New Venture Bar: Restriction on launching new businesses for five years after being removed from the list.
No Debt Restructuring: These borrowers are ineligible for any debt restructuring or settlement schemes.
Public Shaming: Lenders can publish the names and photographs of wilful defaulters in newspapers based on board-approved policies.
Legal Action: Initiation of civil recovery under SARFAESI or IBC, and criminal proceedings for fraud or cheating under the IPC.

III. Mnemonics for Wilful Defaulters

Concept	Mnemonic	Explanation
Core Criteria	“D-S-A-D”	Deliberate non-payment, Siphoning, Asset disposal, Diversion of funds.
Process Timeline	“6-Month Snap”	Banks must now classify a wilful defaulter within 6 months of the account becoming an NPA.
The Difference	“Can’t vs. Won’t”	Regular defaulters can’t pay (distress); Wilful defaulters won’t pay (intent).

IV. 10 Q&A on Wilful Defaulters

Q: What is the threshold amount for being reported as a wilful defaulter?
A: Outstanding dues of ₹25 lakh and above.
Q: Can a guarantor be declared a wilful defaulter?
A: Yes, if they refuse to honour the guarantee despite having the means to pay.
Q: Who has the final say in the classification?
A: A Review Committee headed by the CEO/MD and including two independent directors.
Q: Can a borrower be represented by a lawyer during these internal proceedings?
A: No, the Supreme Court has ruled that there is no right to a lawyer in these in-house bank proceedings.
Q: Does the “wilful” tag apply to the company’s directors?
A: Yes, it typically includes promoters and whole-time directors associated at the time of default.
Q: What happens if a wilful defaulter settles their debt?
A: The tag is removed only after full payment; however, they remain barred from new credit for one year after removal.
Q: Is wilful default a criminal offence?
A: It is primarily a civil matter, but it becomes criminal if fraud, cheating, or misrepresentation is established.
Q: Can wilful defaulters participate in the IBC resolution process?
A: No, they are specifically barred from submitting resolution plans under the Insolvency and Bankruptcy Code.
Q: What is “Large Defaulter” vs. “Wilful Defaulter”?
A: Large Defaulters have dues of ₹1 crore+ (where suits are filed), regardless of “wilful” intent.
Q: Are NBFCs allowed to tag wilful defaulters?
A: Yes, as of the 2024/2025 guidelines, NBFCs (Middle and Upper Layer) are now part of this framework.

Would you like to explore the Insolvency and Bankruptcy Code (IBC) process for corporate resolution or the latest RBI rules on recovery agents?

AI responses may include mistakes. For financial advice, consult a professional. Learn more

17 sites

Who Is a Wilful Defaulter As Per RBI? – SMFG India Credit25 Nov 2025 — Get Personal Loan Upto INR 30 Lakhs* … A wilful defaulter, as per RBI, refers to a borrower who intentionally avoids loan repaym…SMFG India Credit
RBI on Wilful Defaulters: What Borrowers & Businesses Must Know12 Oct 2025 — Who is a Wilful Defaulter as per RBI? … Overview: A wilful defaulter as per RBI is someone who deliberately avoids repayment des…Airtel
RBI proposed changes in the classification of – IAS Gyan7 Feb 2026 — Description * Timely Classification: Lenders are now required to classify a borrower as a “wilful defaulter” within six months of …IAS Gyan

Show all

Capital Adequecy ration

In Ramesh Singh’s

Indian Economy, Capital Adequacy Ratio (CAR), also known as Capital to Risk-Weighted Assets Ratio (CRAR), is a measurement of a bank’s available capital expressed as a percentage of its risk-weighted credit exposures. It ensures banks can absorb a reasonable amount of loss and comply with statutory capital requirements.

I. Understanding the Ratio

Purpose: To protect depositors and promote the stability and efficiency of financial systems by preventing banks from taking excess leverage.
Calculation: It is calculated by dividing a bank’s capital by its total risk-weighted assets.
Formula: .

II. Components of Capital

Tier 1 Capital (Core Capital): The most reliable form of capital, including common equity, disclosed reserves, and retained earnings. It allows a bank to absorb losses without being required to stop trading.
Tier 2 Capital (Supplementary Capital): Less reliable capital, including subordinated debt, hybrid instruments, and revaluation reserves.

III. Indian Context & Basel Norms

While global Basel III norms require a minimum CAR of 8%, the Reserve Bank of India (RBI) enforces a stricter benchmark of 9% for scheduled commercial banks. Public sector banks are often mandated to maintain a higher CAR of 12%.

IV. Mnemonics for Capital Adequacy

Concept	Mnemonic	Explanation
Formula	“Top Tiers over Risk”	Tiers (1 & 2) go in the numerator; Risk (Weighted Assets) in the denominator.
RBI vs. Basel	“Nine is Mine”	RBI says 9% for India; Basel says 8% for the world.
Tier 1 vs. 2	“1 for Core, 2 for More”	Tier 1 is Core (Equity); Tier 2 is More (Supplementary/Debt).

V. 10 Q&A on Capital Adequacy Ratio

Q: What is the full form of CRAR?
A: Capital to Risk-Weighted Assets Ratio.
Q: Who sets the global standards for CAR?
A: The Basel Committee on Banking Supervision (BCBS).
Q: What is the minimum CAR mandated by RBI for Indian commercial banks?
A: 9%.
Q: Which type of capital is considered the most “loss-absorbing”?
A: Tier 1 Capital.
Q: What are Risk-Weighted Assets (RWA)?
A: Assets weighted according to their credit risk (e.g., Govt securities = 0%, Corporate loans = 100%).
Q: Why does RBI require a higher CAR (9%) than the Basel (8%) requirement?
A: To provide an extra cushion against potential losses and maintain financial stability.
Q: What happens if a bank’s CAR falls below the regulatory limit?
A: The RBI may trigger Prompt Corrective Action (PCA), restricting lending and dividends.
Q: Is “subordinated debt” part of Tier 1 or Tier 2 capital?
A: Tier 2 Capital.
Q: What is the “Capital Conservation Buffer” (CCB) under Basel III?
A: An additional 2.5% capital that banks must hold beyond the minimum requirement.
Q: Does CAR include a bank’s current liabilities in its denominator?
A: No, it primarily uses Risk-Weighted Assets (loans/investments).

Would you like to review the Prompt Corrective Action (PCA) framework or a summary of Basel I, II, and III differences?

14 sites

Capital Adequacy Ratio (CAR) – DBS Bank3 Oct 2025 — The capital adequacy ratio formula evaluates the proportion of a bank’s capital against its risk-weighted assets. This metric, als…DBS Bank | India
Capital Adequacy Ratio (CAR) Meaning, Formula & Basel …26 Sept 2025 — Q1. CAR stands for? Ans: Capital Adequacy Ratio. Q2. CAR is also called? Ans: Capital to Risk (Weighted) Assets Ratio (CRAR) Q3. W…Oliveboard
Capital Adequacy Ratio (CAR) – Formula, Example & LimitationsFrequently asked questions. What is the meaning of the capital adequacy ratio? The Capital Adequacy Ratio (CAR) measures a bank’s …Bajaj Finserv

Show all

Basel Accord

In Ramesh Singh’s

Indian Economy, the Basel Accords are presented as the global standard for banking supervision, aimed at ensuring financial stability by mandating that banks hold enough capital to survive economic shocks.

I. Evolution of Basel Norms

The accords are issued by the Basel Committee on Banking Supervision (BCBS), which is headquartered in Basel, Switzerland.

Accord	Year	Key Focus	Capital Requirement
Basel I	1988	Credit Risk only. Grouped assets by risk (0%–100%).	8% of Risk-Weighted Assets (RWA).
Basel II	2004	Introduced Three Pillars and added Operational & Market Risks.	8% (Global) / 9% (India).
Basel III	2010	Post-2008 crisis; focused on Liquidity, Leverage, and Capital Buffers.	11.5% (Total in India, incl. buffers).

II. The Three Pillars (Introduced in Basel II)

Pillar 1: Minimum Capital Requirements: Calculations for Credit, Market, and Operational risks.
Pillar 2: Supervisory Review: Central banks (like RBI) monitor banks’ internal risk assessment.
Pillar 3: Market Discipline: Mandates transparent disclosures to the public to ensure stability.

III. Basel III in India (2025–2027 Updates)

The RBI enforces stricter rules than the global minimums.

Capital Conservation Buffer (CCB): 2.5% mandatory buffer to be held in Common Equity Tier 1 (CET1).
Liquidity Coverage Ratio (LCR): Banks must hold liquid assets to survive a 30-day stress period. New LCR norms will take effect from April 1, 2026.
Expected Credit Loss (ECL): A major shift from “incurred loss” to “forward-looking” provisioning, starting April 2027.
Revised Risk Weights: Effective April 1, 2027, lower risk weights for MSMEs and home loans will free up capital for lending.

IV. Mnemonics for Basel Accords

Concept	Mnemonic	Explanation
Pillar Components	“C-S-M”	Capital Adequacy, Supervisory Review, Market Discipline.
Basel Focus	“1-C, 2-R, 3-L”	Basel 1 (Credit), Basel 2 (Risk diversity), Basel 3 (Liquidity).
Basel III Norms	“L-L-C”	Liquidity (LCR/NSFR), Leverage, Capital Buffers.

V. 10 Q&A on Basel Accords

Q: What is the minimum Common Equity Tier 1 (CET1) requirement in India?
A: 5.5% (higher than the global 4.5% minimum).
Q: Which ratio measures a bank’s short-term (30-day) liquidity?
A: Liquidity Coverage Ratio (LCR).
Q: What is the “Basel III Endgame”?
A: A final set of global reforms aiming to increase capital requirements for large, systemically important banks.
Q: What is the NSFR?
A: Net Stable Funding Ratio, which ensures banks have reliable funding over a one-year period.
Q: Which pillar deals with bank disclosures to the public?
A: Pillar 3 (Market Discipline).
Q: Is the Countercyclical Capital Buffer (CCCB) currently active in India?
A: No, the RBI has kept it at 0% since its introduction in 2015.
Q: What is the minimum leverage ratio for Indian banks (non-D-SIBs)?
A: 3.5% (4% for Domestic Systemically Important Banks).
Q: Which risk was ignored by Basel I but added in Basel II?
A: Operational Risk.
Q: When will the new RBI norms for credit risk weights take effect?
A: April 1, 2027.
Q: Who are the three D-SIBs (too big to fail) in India?
A: SBI, ICICI Bank, and HDFC Bank.

Would you like to explore the Prompt Corrective Action (PCA) framework for banks that fail these norms, or the latest RBI policy on Digital Banking Units?

20 sites

Basel Norms – Drishti IAS12 Aug 2020 — What are Basel norms? * Basel norms or Basel accords are the international banking regulations issued by the Basel Committee on Ba…Drishti IAS
Basel Accords – WikipediaBasel Accords. … The Basel Accords refer to the banking supervision accords (recommendations on banking regulations) issued by t…Wikipedia
Basel Accords – Corporate Finance InstituteWhat are the Basel Accords? The Basel Accords refers to a set of banking supervision regulations set by the Basel Committee on Ban…Corporate Finance Institute

Show all

Basal III

In Ramesh Singh’s

Indian Economy, Basel III is the most advanced set of global banking reforms, designed to fix the “too big to fail” problem and ensure banks have a massive safety net (buffer) for the next financial crisis.

As of February 2026, the Reserve Bank of India (RBI) is moving toward the “Basel III Endgame,” which includes shifting to Expected Credit Loss (ECL) provisioning and stricter capital rules.

I. The 4 Main Pillars of Basel III

Capital (Quantity & Quality): Banks must hold Tier 1 Capital (Equity) to absorb losses.
- India Target: 9% CRAR + 2.5% CCB = 11.5% Total.
Liquidity Coverage Ratio (LCR): Banks must hold enough “High-Quality Liquid Assets” (HQLA) to survive a 30-day cash outflow stress test.
- Note: New, stricter LCR rules take effect in India on April 1, 2026.
Net Stable Funding Ratio (NSFR): Ensures banks have reliable, long-term funding for their long-term assets (avoiding maturity mismatch).
Leverage Ratio: A non-risk-based backstop to prevent banks from borrowing too much compared to their own equity.
- India Requirement: 3.5% (4% for D-SIBs).

II. Mandatory Capital Buffers (The Safety Nets)

Capital Conservation Buffer (CCB): A mandatory 2.5% buffer of equity that banks must build during good times to use during bad times.
Countercyclical Capital Buffer (CCCB): An optional buffer (0% to 2.5%) the RBI can trigger during credit booms to prevent overheating. (Currently at 0% in India).

III. Mnemonics for Basel III

Concept	Mnemonic	Explanation
Core Components	“L-L-C”	Liquidity (LCR), Leverage, Capital Buffers.
LCR Timing	“30-Day Dash”	LCR is about surviving for 30 days in a crisis.
NSFR Timing	“1-Year Stability”	NSFR ensures funding stability for one year.
The 3 D-SIBs	“S-I-H”	SBI, ICICI, HDFC (The “too big to fail” banks in India).

IV. 10 Q&A on Basel III (High-Yield)

Q: What is the minimum Common Equity Tier 1 (CET1) in India?
A: 5.5% (higher than the global 4.5%).
Q: When do the revised LCR norms start in India?
A: April 1, 2026 (per recent RBI announcements).
Q: What is the “Basel III Endgame”?
A: The final stage of reforms aimed at making risk-weighting more transparent and uniform across banks.
Q: Does Basel III include “Operational Risk”?
A: Yes, it refined the calculation for operational risks like fraud and cyberattacks.
Q: What is the “Expected Credit Loss” (ECL) model?
A: A forward-looking model where banks provision for loans before they default, starting April 2027.
Q: What are D-SIBs?
A: Domestic Systemically Important Banks—banks whose failure would wreck the Indian economy.
Q: What is the Leverage Ratio for D-SIBs in India?
A: 4%.
Q: Which asset is considered the highest “High-Quality Liquid Asset” (HQLA)?
A: Government Securities (G-Secs) and Cash.
Q: Who issues the Basel guidelines?
A: The Basel Committee on Banking Supervision (BCBS).
Q: Why did Basel III introduce the “Capital Conservation Buffer”?
A: To stop banks from paying out dividends and bonuses when their capital levels are slightly low.

Would you like to explore Prompt Corrective Action (PCA) (the RBI’s “hospital” for banks that fail Basel norms) or a summary of Digital Banking Units (DBUs)?

PCA

In Ramesh Singh’s

Indian Economy, Prompt Corrective Action (PCA) is described as the RBI’s “early intervention” or “hospital” framework. It is designed to step in as soon as a bank shows signs of financial ill health, rather than waiting for it to collapse.

The Reserve Bank of India (RBI) recently updated the PCA framework for Scheduled Commercial Banks (2022) and extended it to Large NBFCs (effective late 2024/2025).

I. The 3 Triggers (Health Checkups)

The RBI monitors three specific “vital signs” to put a bank under PCA:

Capital (CRAR/CET1): If the bank’s capital falls below the required limit (e.g., 9% + buffers).
Asset Quality (Net NPA): If bad loans (Net NPAs) exceed a certain threshold (typically 6%).
Leverage: If the bank has borrowed too much relative to its equity (Tier 1 Leverage Ratio).

II. Mandatory vs. Discretionary Actions

Once a bank enters PCA, it faces two types of restrictions:

Mandatory (The No-Nos): Restriction on paying dividends, profit distribution, and expanding branches.
Discretionary (The Prescriptions): RBI may force the bank to change management, restrict high-risk lending, or even order a merger/amalgamation.

III. Mnemonics for PCA

Concept	Mnemonic	Explanation
The 3 Triggers	“C-A-L”	Capital, Asset Quality (NPA), Leverage.
The Goal	“P-C-A = Pre-Collapse Action”	It’s about acting Before the collapse.
NPA Threshold	“Six-Sick”	If Net NPAs cross 6%, the bank is considered Sick and enters PCA.
Dividend Rule	“No Profit, No Pay”	Banks in PCA cannot pay Dividends to shareholders.

IV. 10 Q&A on PCA (Exam Oriented)

Q: Does PCA apply to all banks in India?
A: No. It excludes Regional Rural Banks (RRBs) and Payment Banks.
Q: What is the primary objective of PCA?
A: To restore the financial health of a bank by curbing risky activities.
Q: Can a bank under PCA still give out loans?
A: Yes, but the RBI usually restricts high-risk corporate lending; they are encouraged to focus on low-risk retail loans.
Q: Which asset quality ratio is used for PCA?
A: Net NPA (not Gross NPA).
Q: Is PCA a “death sentence” for a bank?
A: No, it is a corrective tool. Once ratios improve for two consecutive years, the bank can exit PCA.
Q: When did the PCA framework for NBFCs come into effect?
A: October 1, 2024 (for Middle, Upper, and Top layers).
Q: Who can order a merger of a bank under PCA?
A: The Reserve Bank of India (under Section 45 of the Banking Regulation Act).
Q: Does PCA include a “Return on Assets” (RoA) trigger?
A: No, RoA was removed as a trigger in the 2021 revision to simplify the framework.
Q: What is the “Risk Threshold 3”?
A: The most severe stage of PCA where capital falls significantly, leading to extreme restrictions like management removal.
Q: Can a bank under PCA recruit new staff?
A: Generally, recruitment is frozen or highly restricted as a cost-cutting measure.

Would you like to move to the Insolvency and Bankruptcy Code (IBC) or a summary of Digital Banking & Fintech reforms?

Money

In the 17th edition (2025–26) of Ramesh Singh’s

Indian Economy, the “Money” chapter defines money not just by its form but by its functions and acceptability. It covers everything from historical commodity money to the modern Reserve Bank of India (RBI) digital rupee.

I. Functions & Characteristics of Money

Money is defined by what it does. Modern textbooks often focus on three primary functions, though traditional definitions include a fourth:

Medium of Exchange: Facilitates buying/selling without a “double coincidence of wants”.
Unit of Account (Measure of Value): A standard numerical unit to measure the market value of goods.
Store of Value: Can be reliably saved and retrieved for future use.
Standard of Deferred Payment: A way to denominate and settle future debts.

Essential Characteristics: To work effectively, money must be Durable, Fungible, Divisible, Portable, and Acceptable.

II. Monetary Aggregates (Measuring Money Supply)

The RBI measures the money supply using different “aggregates” based on their liquidity.

Aggregate	Name	Components
M0	Reserve Money	Currency in Circulation + Bankers’ deposits with RBI + ‘Other’ deposits with RBI.
M1	Narrow Money	Currency with the Public + Demand Deposits (Savings/Current) + ‘Other’ RBI deposits.
M2	Narrow (with PO)	M1 + Savings deposits with Post Office savings banks.
M3	Broad Money	M1 + Time/Term Deposits (Fixed/Recurring).
M4	Total Money	M3 + Total Post Office deposits (excluding NSC).

Liquidity Trend: M1 is the most liquid; liquidity decreases as you move toward M4.
Key Indicator: M3 is the primary measure used by the RBI for monetary policy formulation.

III. Modern Developments: The Digital Rupee (e₹)

Launched as a pilot in late 2022, the Digital Rupee or Central Bank Digital Currency (CBDC) is a legal tender issued in digital form by the RBI.

Types: Includes e₹-R (Retail) for everyone and e₹-W (Wholesale) for interbank settlements.
Growth: As of March 2025, e-Rupee in circulation grew to ₹1,016 crore.
New Features (2025–26): Introduction of offline payments (works without internet) and programmability for targeted government subsidies.

IV. Mnemonics for Money Concepts

Concept	Mnemonic	Explanation
Functions	“M-U-S-D”	Medium of exchange, Unit of account, Store of value, Deferred payment.
M1 to M3	“M1 + Time = M3”	M1 (Narrow) plus Time deposits equals M3 (Broad).
Liquidity	“Narrow is Fast”	Narrow money (M1) moves quickly (liquid); Broad money is slower.
Characteristics	“D-F-P-S-A”	Durable, Fungible, Portable, Scarce, Acceptable.

V. 10 Q&A on Money

Q: What is “Fiat Money”?
A: Money backed by government decree rather than a physical commodity like gold.
Q: Which measure is called “High-Powered Money”?
A: M0 (Reserve Money).
Q: What is the “Money Multiplier”?
A: The ratio of broad money (M3) to reserve money (M0).
Q: Does M1 include Fixed Deposits (FDs)?
A: No, FDs are Time Deposits and are part of M3.
Q: Who is the final authority for issuing currency in India?
A: The Reserve Bank of India (RBI).
Q: What is “Near Money”?
A: Non-cash assets that are highly liquid, such as Treasury Bills or savings accounts.
Q: What is “Seigniorage”?
A: The profit made by the government by issuing currency (face value minus cost of production).
Q: What is the “Neutral” policy stance mentioned in Feb 2026?
A: A stance where the RBI keeps the Repo rate unchanged (currently 5.25%) to balance inflation and growth.
Q: Does the e-Rupee require a bank account?
A: No, it can be stored in digital wallets provided by banks without needing a traditional account.
Q: Which aggregate includes Post Office Savings?
A: M2 (Savings deposits only) and M4 (Total deposits).

Would you like a detailed look at the RBI’s latest Digital Payments Index (DPI) or a summary of Currency Management in India?

AI responses may include mistakes. For financial advice, consult a professional. Learn more

26 sites

Money – WikipediaThe primary functions which distinguish money are: medium of exchange, a unit of account, a store of value and sometimes, a standa…Wikipedia
Money | Definition & Types – Lesson – Study.comSo, What is Money, Really? At this point, the qualifications of money became self-evident with five definitive characteristics tha…Study.com
Money Supply, Types, Components, Role of RBI, Impact19 Jan 2025 — Economists classify money into different categories, called aggregates, to measure liquidity and help the Reserve Bank of India (R…Vajiram & Ravi

Show all

DPI

In Ramesh Singh’s

Indian Economy, the RBI-Digital Payments Index (RBI-DPI) is presented as a comprehensive tool launched in January 2021 to measure the extent of digitisation of payments across India.

As of February 2026, the index has shown an explosive upward trend, reflecting India’s transition into a “less-cash” economy, driven by UPI, CBDC, and expanded rural infrastructure.

I. The 5 Pillars of RBI-DPI

The index is built on five broad parameters, each with a different “weight” (importance) in the final score.

Parameter	Weight	What it Measures
Payment Enablers	25%	Internet, Mobile, Bank accounts, Aadhar.
Payment Infrastructure (Demand)	10%	Debit/Credit cards, Prepaid instruments (PPIs).
Payment Infrastructure (Supply)	15%	ATMs, PoS terminals, QR Codes.
Payment Performance	45%	Highest Weight: Volume and Value of transactions.
Consumer Centricity	5%	Awareness, complaints, and system downtime.

II. Recent Trends (2025–2026)

Base Year: The index was set at 100 in March 2018.
Current Standing: As per the latest RBI reports, the index has crossed the 450-500 mark by late 2025.
Key Driver: The Payment Performance pillar (45% weight) is the primary engine, fueled by the massive adoption of UPI (Unified Payments Interface).

III. Mnemonics for DPI

Concept	Mnemonic	Explanation
The 5 Pillars	“E-S-D-P-C”	Enablers, Supply, Demand, Performance, Centricity.
Highest Weight	“P for Prime”	Performance has the Prime weightage (45%).
Supply vs Demand	“Supply is 1.5x Demand”	Supply (15%) is 1.5 times the Demand (10%).

IV. 10 Q&A on Digital Payments Index

Q: What is the base year for the RBI-DPI?
A: March 2018 (Value = 100).
Q: How often is the RBI-DPI published?
A: Semi-annually (with a lag of 4 months).
Q: Which parameter carries the maximum weight?
A: Payment Performance (45%).
Q: Does the DPI include the e-Rupee (CBDC)?
A: Yes, it is factored into the Performance and Infrastructure pillars.
Q: What is “Payment Enablers”?
A: The basic tech required to pay, like Internet and Mobile subscriptions.
Q: Is “Consumer Centricity” a supply or demand factor?
A: It is a standalone pillar (5%) focusing on trust and education.
Q: What falls under “Supply-side Infrastructure”?
A: Hard tools provided by banks, like ATMs and QR Codes.
Q: Has the index grown since its inception?
A: Yes, it has grown more than 4 times (400%+) since March 2018.
Q: Does UPI belong to the Demand or Performance pillar?
A: Its availability is infrastructure, but its use (volume/value) is Performance.
Q: Who calculates and releases this index?
A: The Reserve Bank of India (RBI).

Would you like to explore UPI 2.0 features (like UPI-Lite and Credit-on-UPI) or the National Payments Corporation of India (NPCI) structure?

UPI 2.0 and NPCI Both

In Ramesh Singh’s

Indian Economy, the National Payments Corporation of India (NPCI) is described as the “heart” of India’s retail payment system, while UPI 2.0 represents the advanced evolution of the world’s most successful real-time payment interface.

I. NPCI: The Umbrella Organisation

The NPCI was set up in 2008 by the RBI and the Indian Banks’ Association (IBA) under the Payment and Settlement Systems Act, 2007. It is a “Not-for-Profit” Company (Section 8).

Core Products: RuPay, UPI, IMPS, BHIM, NETC (Fastag), and AePS (Aadhaar enabled Payment System).
Vision: To provide a cost-effective payment system for the “common man.”
Global Arm: NPCI International (NIPL), which is currently expanding UPI to countries like France, UAE, Singapore, and Sri Lanka.

II. UPI 2.0 & Beyond (2025–2026 Updates)

UPI has moved far beyond simple person-to-person (P2P) transfers. “UPI 2.0” and subsequent versions (3.0/4.0) introduced features for credit, offline use, and convenience.

UPI-Lite & Lite X: Allows small-value transactions (up to ₹500) offline or without a PIN for speed.
Credit on UPI: Users can now link RuPay Credit Cards or Pre-sanctioned Credit Lines from banks directly to UPI.
UPI Autopay: For recurring payments like Netflix, insurance, or electricity bills (up to ₹15,000 without PIN).
UPI One World: Allows foreign travelers to use UPI in India by linking it to a Prepaid PPI wallet.
Conversational Payments (Hello! UPI): Making payments using voice commands in multiple Indian languages (launched in 2024-25).

III. Mnemonics for NPCI & UPI

Concept	Mnemonic	Explanation
NPCI Status	“8-Not-Profit”	It is a Section 8 company (Not-for-profit).
UPI 2.0 Features	“O-L-C-A”	Overdraft, Linking (CC), Confirmation (Invoice), Autopay.
NPCI Products	“R-U-I-N”	RuPay, UPI, IMPS, NETC (Fastag).

IV. 10 Q&A on NPCI and UPI

Q: Who are the promoter banks of NPCI?
A: 10 core banks, including SBI, PNB, Canara, HDFC, and ICICI.
Q: What is the transaction limit for UPI-Lite?
A: ₹500 per transaction (total wallet limit ₹2,000).
Q: Can you link a Visa/Mastercard Credit Card to UPI?
A: No, currently only RuPay Credit Cards are supported.
Q: What is the ‘Single-Block-Multiple-Debit’ feature?
A: It allows a user to “block” funds in their account for a specific merchant (like a hotel or stock trade) to be debited later.
Q: Is UPI owned by the Government of India?
A: No, it is owned and operated by NPCI, which is a private-led non-profit body regulated by the RBI.
Q: What is ‘UPI Tap & Pay’?
A: A feature using NFC technology where you tap your phone on a merchant’s terminal to pay.
Q: Which NPCI product handles toll payments on highways?
A: NETC (FASTag).
Q: What is the ‘Hello! UPI’ initiative?
A: AI-based voice payments designed to help non-tech-savvy or visually impaired users.
Q: Can UPI be used without a smartphone?
A: Yes, via UPI 123Pay (using IVR or feature phones).
Q: Does NPCI charge MDR (Merchant Discount Rate) on UPI?
A: No, P2P and P2M (small merchant) transactions are free, though interchange fees apply to large-merchant Credit-on-UPI.

Would you like to explore RuPay’s international expansion or the Digital Rupee (CBDC) vs. UPI comparison?

AI responses may include mistakes. For financial advice, consult a professional. Learn more

both

In Ramesh Singh’s

Indian Economy, RuPay and CBDC (Digital Rupee) represent the twin pillars of India’s digital sovereignty. One is a payment network (like Visa), and the other is actual sovereign currency (like cash).

I. RuPay: India’s Global Card Network

RuPay is the domestic card scheme launched by NPCI.

Strategic Goal: To reduce the monopoly of foreign networks (Visa/Mastercard) and lower transaction costs for Indian banks.
RuPay Global: Through partnerships with Discover, JCB, and Diners Club, RuPay cards are now accepted at over 40 million POS terminals globally.
The Game Changer: RuPay is the only card network that allows Credit Card linking to UPI, driving massive growth in “Credit-on-UPI.”

II. CBDC (Digital Rupee) vs. UPI

While they both live on your phone, they are fundamentally different.

Feature	UPI (Payment Interface)	CBDC (Digital Rupee)
Nature	A Digital Bridge between bank accounts.	A Digital Note (Actual Currency).
Liability	Liability of the Commercial Bank.	Liability of the Reserve Bank of India (RBI).
Intermediary	Requires a bank account and internet.	Can work Offline (wallet-to-wallet).
Settlement	Bank-to-bank (takes seconds).	Instant (like handing over a ₹500 note).
Anonymity	Every transaction is logged in bank statements.	Offers Anonymity for small-value transactions.

III. Mnemonics for RuPay & CBDC

Concept	Mnemonic	Explanation
RuPay Global	“R-U-I-N”	RuPay Universal International Network.
CBDC vs UPI	“Cash vs Bridge”	CBDC is digital Cash; UPI is a digital Bridge between banks.
CBDC Offline	“No Net, No Fret”	Unlike UPI, CBDC is designed to work Offline via Bluetooth/NFC.
Programmable	“Purpose-Money”	CBDC can be programmed for a specific Purpose (e.g., Agri-subsidy).

IV. 10 Q&A: RuPay & CBDC

Q: Which entity issues the Digital Rupee?
A: The Reserve Bank of India (RBI).
Q: Does the Digital Rupee earn interest?
A: No, just like physical cash, it does not earn interest to avoid competing with bank deposits.
Q: In which countries is RuPay currently accepted?
A: Key nations include Singapore, UAE, Bhutan, Nepal, Mauritius, and France.
Q: What is the “Programmability” feature of CBDC?
A: It allows the govt to “tag” money (e.g., a subsidy can only be spent on fertilizers, not alcohol).
Q: What is the difference between e₹-R and e₹-W?
A: e₹-R is for the Public (Retail); e₹-W is for Interbank settlements (Wholesale).
Q: Can I use the Digital Rupee without a bank account?
A: Yes, it is a bearer instrument; you only need a digital wallet app.
Q: What is “UPI-CBDC Interoperability”?
A: It allows users to scan a UPI QR code and pay using their CBDC wallet.
Q: Why is RuPay cheaper for banks than Visa?
A: Because processing happens domestically (India), reducing clearing and settlement fees.
Q: What is the ‘National Common Mobility Card’ (NCMC)?
A: A RuPay-backed card (One Nation One Card) used for Metros, Buses, and Tolls across India.
Q: Does CBDC use Blockchain?
A: It uses Distributed Ledger Technology (DLT), which is similar to blockchain but centrally controlled by the RBI.

Would you like to wrap up this Banking Summary with a table of All Regulatory Ratios (SLR, CRR, CAR, etc.) or a deep dive into Payment Banks?

Banking summary

In Ramesh Singh’s

Indian Economy, Banking is the lifeblood of the financial system. Below is the ultimate compressed summary, mnemonics, and the final set of 10 Q&A to wrap up your study.

I. Banking Structure & Regulation

The Regulator: The Reserve Bank of India (RBI) (Est. 1935) regulates via the RBI Act, 1934 and Banking Regulation Act, 1949.
The Players:
- Scheduled Commercial Banks (SCBs): PSBs (SBI, PNB), Private (HDFC, ICICI), Foreign Banks, and RRBs.
- Differentiated Banks: Payments Banks (No lending, max ₹2 lakh deposit) and Small Finance Banks (Focus on unserved/underserved).
- Cooperative Banks: Rural and Urban (UCBs).

II. Monetary Policy & Liquidity Management

The RBI manages the economy using the Monetary Policy Committee (MPC).

Direct Tools: CRR (Cash with RBI) and SLR (Gold/G-Secs with bank).
Indirect Tools: Repo Rate (RBI lending), SDF (Liquidity absorption), and MSF (Emergency borrowing).

III. Asset Quality & Capital Protection

NPA: Loans unpaid for >90 days.
Basel III: Global “Shield” for banks. Includes CRAR (9% in India) and buffers (CCB).
Cleaning Tools: IBC (Insolvency), SARFAESI (Seizing collateral), and NARCL (Bad Bank).

IV. Ultimate Mnemonics for Banking

Concept	Mnemonic	Explanation
RBI Roles	“I-M-B-A”	Issuer of currency, Monetary authority, Banker to govt/banks, Administrator of FEMA.
PSL Targets	“40-Big, 75-Small”	40% for Commercial Banks; 75% for RRBs/SFBs.
Asset Categories	“S-D-L”	Substandard, Doubtful, Loss Assets.
Liquidity Tools	“R-O-B-S”	Repo, OMO, Bank Rate, SLR.
Payment Banks	“No Loans, No Credit”	They cannot lend money or issue Credit cards.

V. 10 Q&A: Final Banking Round

Q: What is the current deposit limit for Payments Banks?
A: ₹2 lakh per individual customer.
Q: Which committee recommended the ‘Monetary Policy Committee’ (MPC)?
A: Urjit Patel Committee.
Q: What is ‘Financial Inclusion’?
A: Providing affordable financial services to low-income groups (e.g., PMJDY).
Q: What is the ‘Base Rate’?
A: The minimum interest rate below which a bank cannot lend (replaced by MCLR, then EBLR).
Q: What is the “Lead Bank Scheme”?
A: Assigning a district to a bank to act as a leader for its development.
Q: What is a ‘Ghost’ or ‘Benami’ account?
A: An account held in a fictitious name, often used for money laundering.
Q: What is the ‘Ombudsman Scheme’?
A: A mechanism for resolving customer complaints against banks (now the Integrated Ombudsman Scheme).
Q: What is ‘Narrow Banking’?
A: A system where banks invest only in safe, liquid government securities (no risky lending).
Q: Who is the ‘Lender of Last Resort’?
A: The Reserve Bank of India (RBI).
Q: What is the ‘Credit-to-GDP’ ratio?
A: A measure of the bank credit in the economy compared to the total output (India is around 50-55%).

Would you like me to generate a comparative table of the different Banking Committees (Narasimham, Nachiket Mor, etc.) or move to Fiscal Policy/Budgeting?

AI responses may include mistakes. For financial advice, consult a professional. Learn more

Non residence indian Deposites

In Ramesh Singh’s

Indian Economy, Non-Resident Indian (NRI) Deposits are categorized as a key source of foreign capital and a component of India’s External Debt. Managed under the Foreign Exchange Management Act (FEMA), 1999, these deposits are crucial for maintaining India’s foreign exchange reserves.

I. Major Types of NRI Accounts

Indian banks primarily offer three types of accounts for NRIs and Persons of Indian Origin (PIOs).

Account Type	Currency	Source of Funds	Repatriability	Taxation (India)
NRE (External)	INR	Foreign earnings	Fully Repatriable	Tax-Free
NRO (Ordinary)	INR	Indian income (Rent, etc.)	Limited ($1M/year)	Taxable
FCNR(B) (Bank)	Foreign	Foreign earnings	Fully Repatriable	Tax-Free

FCNR(B) is a term deposit (1–5 years) maintained in foreign currencies like USD, GBP, or EUR, protecting against exchange rate risk.
RFC (Resident Foreign Currency) is for returning NRIs to hold foreign currency funds.

II. Recent Updates (2025–2026)

The Reserve Bank of India (RBI) and recent policy changes have introduced several strategic updates:

Higher Interest Ceilings: In late 2024, the RBI temporarily raised interest rate ceilings for FCNR(B) deposits (up to ARR + 500 bps) to attract more capital inflows; these rates are generally effective through March 31, 2025.
Consolidated PINS: Starting in 2025, NRIs no longer need separate NRO PINS accounts; they can manage stock investments solely through an NRE PINS account.
Revised LTCG: The Union Budget 2025 reduced Long-Term Capital Gains tax on property sales to 12.5%, making it more favourable for NRIs to remit sale proceeds.
Small Deposit Flexibility: As of January 1, 2025, deposits below ₹10,000 can be withdrawn within 3 months (though interest is forfeited).

III. Mnemonics for NRI Deposits

Concept	Mnemonic	Explanation
NRE vs. NRO	“External is Exempt”	NRE (External) is Exempt from tax; NRO (Ordinary) is not.
Repatriation	“E is Easy”	External (NRE) funds are Easy to send back abroad fully.
FCNR Protection	“F is for Foreign”	FCNR stays in Foreign currency, so Foreign exchange risk is zero.
NRO Limit	“One Million Man”	You can only move $1 Million per year out of an NRO account.

IV. 10 Q&A on NRI Deposits

Q: Can a resident Indian be a joint holder in an NRE account?
A: Yes, but only a resident relative on a “former or survivor” basis.
Q: What is the minimum tenure for an NRE Fixed Deposit?
A: 1 year.
Q: Which account is mandatory for managing rental income from India?
A: NRO Account.
Q: Does FCNR(B) offer a savings account option?
A: No, it is strictly a Term/Fixed Deposit.
Q: What is the insurance limit on NRI deposits?
A: Up to ₹5 lakh per bank by the DICGC.
Q: Are interest rates on NRE accounts fixed by the RBI?
A: No, they are determined by individual banks, though subject to RBI ceilings.
Q: Can an NRI open a new Public Provident Fund (PPF) account?
A: No, NRIs cannot open new PPF accounts but can continue existing ones until maturity.
Q: Is interest on an NRO account tax-free?
A: No, it is taxable at 30% TDS (plus surcharge/cess) unless protected by a DTAA.
Q: What happens to NRE accounts when an NRI returns to India?
A: They must be re-designated as Resident accounts or transferred to an RFC account.
Q: Can NRI deposits be used as collateral for loans in India?
A: Yes, banks allow loans/overdrafts against all three types of NRI deposits.

Would you like a more detailed breakdown of the Double Taxation Avoidance Agreement (DTAA) benefits or the Portfolio Investment Scheme (PIS) rules for NRIs?

AI responses may include mistakes. For financial advice, consult a professional. Learn more

20 sites

Non-Resident Indian Deposits (NRI Deposits) – GKToday7 Oct 2025 — Non-Resident Indian Deposits (NRI Deposits) Non-Resident Indian (NRI) Deposits refer to various bank deposit schemes offered by In…GK Today
NRI Bank Accounts in India: NRE, NRO & FCNR Explained10 Jun 2025 — If you’re an NRI looking to open a bank account in India, you have several options available to you. This article covers the three…RBL Bank
Ramesh Singh Summary: Banking in India- 3 – EduRevRamesh Singh Summary: Banking in India- 3 | Indian Economy for UPSC CSE PDF Download * The Foreign Exchange Management (Deposit) R…EduRev

Show all

Guideline for new Licencing for bank

The

Reserve Bank of India (Universal Banks – Licensing) Guidelines, 2025, significantly updated the “on tap” licensing framework, notably doubling the minimum capital requirement to strengthen the banking ecosystem.

The guidelines outline eligibility criteria, minimum capital requirements, shareholding rules, and procedural steps for obtaining a bank license in India.

I. Key Eligibility and Requirements

Individuals and Entities: Indian residents with at least 10 years of senior-level experience in banking or finance, or private entities/groups owned and controlled by Indian residents with a 10-year track record, are eligible.
Industrial Houses: Generally cannot promote banks but can invest up to 10% without control.
NBFCs: May be eligible if they have a 10-year track record and meet certain group structure requirements.
Minimum Capital: The initial paid-up voting equity capital or net worth must be ₹1,000 crore.
Promoter Shareholding: Promoters must hold at least 40% of the voting equity capital, locked in for 5 years, and this must be reduced to 26% within 15 years.
Listing: Banks must list their shares within 6 years of starting operations.
Corporate Structure: A Non-Operative Financial Holding Company (NOFHC) is generally required if the promoter has other group entities. Standalone promoters without other group entities are not initially required to use an NOFHC.

II. Application Process

Applications are submitted through the RBI’s PRAVAAH portal using Form III. An internal committee and a Standing External Advisory Committee (SEAC) screen applications. The “in-principle” approval is valid for 18 months, during which the bank must be established. Rejected applicants face a three-year waiting period before reapplying.

III. Additional Guidelines

New banks must maintain a Capital Adequacy Ratio (CAR) of 13% for the first three years. The bank’s board must have a majority of independent directors. At least 25% of branches must be located in unbanked rural centers. Small Finance Banks (SFBs) can transition to Universal Banks if they meet specific criteria, including a 5-year satisfactory track record and a net worth of ₹1,000 crore. Aggregate foreign shareholding is capped at 74%. The Reserve Bank of India (RBI) holds the final authority for granting licenses.

Would you like to explore the voluntary transition path for Small Finance Banks (SFBs) to graduate into Universal Banks or the latest priority sector lending (PSL) targets for new banks?

AI responses may include mistakes. For financial advice, consult a professional. Learn more

9 sites

RBI’s Universal Bank Guidelines 2025: Key Strategic Shifts In …12 Jan 2026 — RBI’s Universal Bank Guidelines 2025: Key Strategic Shifts In Governance, Capital And Innovation * Overview. The Reserve Bank of I…Mondaq
RBI’s Universal Bank Guidelines 2025: Key Strategic Shifts In …12 Jan 2026 — * The Reserve Bank of India (Universal Banks – Licensing) Guidelines, 2025 (“Guidelines”) represent a significant update to India’AK and Partners
Reserve Bank of India (Universal Banks- Licensing … – TaxGuru28 Nov 2025 — (1) Where promoters are individuals. i. Each of the Promoters should have a minimum 10 years of experience in banking and finance …TaxGuru

Show all

Labels of ATM

In India, Automated Teller Machines (ATMs) are classified using specific “labels” or colours based on their ownership, operational model, or intended purpose. These classifications are crucial for understanding banking infrastructure as per Ramesh Singh’s

Indian Economy.

I. Primary Labels: Ownership and Operation

The most critical distinction for general banking relates to who owns and manages the machine.

White Label ATMs (WLA): These are ATMs set up, owned, and operated by non-bank entities (often NBFCs). They do not display any bank’s logo and are neutral service providers for customers of all banks.
Brown Label ATMs: These are outsourced ATMs. The bank handles cash management and connectivity and its logo is prominently displayed, while a third-party service provider owns the hardware and manages the site (lease, electricity, etc.).

II. Purpose-Specific Labels

These labels identify ATMs dedicated to specific niche functions or demographics.

Green Label ATMs: Specifically designed for agricultural transactions, such as crop loans, subsidies, and farm insurance.
Pink Label ATMs: Created for women’s safety and convenience. These are often monitored by guards to ensure only female customers access them, helping to avoid long queues and providing a secure environment.
Yellow Label ATMs: Provided primarily for e-commerce transactions, such as online shopping and bill payments.
Orange Label ATMs: Dedicated to share market transactions, including the buying and selling of stocks, mutual funds, and bonds.

III. Mnemonics for ATM Labels

Category	Mnemonic	Explanation
White vs. Brown	“White is for Non-Bank”	White label = Non-bank owned (neutral). Brown = Bank branding (outsourced).
Green Label	“Green for Grass”	Green is for farmers and Agriculture.
Pink Label	“Pink for Power”	Pink is dedicated to women’s safety and empowerment.
Yellow Label	“Yellow for Yahoo”	Yellow is for online shopping and e-commerce.
Orange Label	“Orange for Options”	Orange is for stock market shares/options.

IV. 10 Q&A on ATM Labels

Q: Who was the first company authorised by the RBI to open White Label ATMs in India?
A: Tata Communications Payment Solutions Limited (under the brand Indicash).
Q: Do White Label ATMs charge customers directly for transactions?
A: No, they receive a fee (interchange) from the card-issuing bank; they are not permitted to charge customers directly.
Q: Which act authorises non-bank entities to operate White Label ATMs?
A: The Payment and Settlement Systems Act, 2007.
Q: Is agricultural land used as a criterion for Green Label ATMs?
A: No, the label refers to the purpose (agri-transactions) rather than the land itself.
Q: What is the main benefit of Brown Label ATMs for banks?
A: It allows them to expand their network quickly without high upfront infrastructure costs.
Q: Can anyone use a Pink Label ATM?
A: While designed for women’s safety, they are generally intended specifically to cater to female customers to reduce wait times.
Q: Which label of ATM is typically found inside or very near a bank branch?
A: On-site ATMs (often Brown Label or Bank-owned).
Q: Are transactions at White Label ATMs counted toward your bank’s free monthly limit?
A: Yes, they are treated as “Other Bank” ATM transactions.
Q: What happened to ATM withdrawal charges in May 2025?
A: The RBI increased the per-transaction charge (beyond free limits) from ₹21 to ₹23.
Q: Which type of ATM uses fingerprints or eye scanners for access?
A: Biometric ATMs.

Would you like to explore the RBI’s 2026 guidelines for mobile ATMs or a detailed summary of NBFC regulations?

AI responses may include mistakes. For financial advice, consult a professional. Learn more

20 sites

how many types of atm – Paytmhow many types of atm. There are various types of ATMs, mainly categorized by their function and ownership in India, ensuring wide…Paytm
Types of ATM – White, Brown, Pink, Green | UPSC – IAS2 Feb 2025 — Types of ATM – White, Brown, Pink, Green | UPSC – IAS. … In the recent years, the trend of ATM has grown all over india. Now the…Digitally Learn
What is ATM: Meaning, Full Form & Benefits | Kotak Mahindra BankClassification of ATM’s Based on Purpose is as Follows * White-label: ATMs operated by non-banking financial companies are called …Kotak Bank

Show all

Nofhc

In the context of Ramesh Singh’s

Indian Economy and the latest Reserve Bank of India (RBI) regulations, a Non-Operative Financial Holding Company (NOFHC) is a specialized financial entity that holds stakes in a bank and other financial services companies within the same promoter group.

I. Core Concept and Purpose

An NOFHC is essentially a “shell” entity that does not perform any banking or financial operations itself. Its primary role is to ring-fence the regulated banking business from other risky financial activities (like insurance, mutual funds, or stockbroking) within a conglomerate. This structure helps prevent financial contagion—where a crisis in one segment of a business group collapses the bank.

II. Key 2025–2026 Regulatory Updates

The RBI issued revised directions on NOFHCs effective December 5, 2025:

Mandatory vs. Non-Mandatory: An NOFHC is mandatory for promoters who have other existing group entities. It is non-mandatory for individual promoters or standalone entities that do not have other group businesses.
Segregation of Activities: All core banking functions must be done only by the bank. Specialized activities like insurance or mutual funds must be undertaken only through subsidiaries or joint ventures under the NOFHC.
Ownership: The promoter group must own at least 51% of the NOFHC.
Shareholding Caps: No non-promoter can hold more than 10% of the NOFHC.
Implementation Timeline: Banks must submit an implementation plan by March 31, 2026, for compliance with certain new operational restrictions.

III. Mnemonics for NOFHC

Concept	Mnemonic	Explanation
Function	“Hold, Don’t Fold”	It Holds shares but does not perform operations itself.
The Rule	“Group = Mandatory”	If the promoter has other Groups, an NOFHC is Mandatory.
Pillars	“F-E-N-C-E”	It acts as a Fence to protect the bank from other risky group businesses.

IV. 10 Q&A on NOFHC

Q: Is an NOFHC registered as a bank?
A: No, it is registered as a non-deposit taking NBFC.
Q: Can an NOFHC engage in its own lending business?
A: No, it is non-operative and cannot carry out banking or financial functions directly.
Q: What is the minimum promoter stake in an NOFHC?
A: At least 51% of the total paid-up equity.
Q: Where can promoters apply for an NOFHC license?
A: Through the RBI’s PRAVAAH portal.
Q: Do individual bank promoters always need an NOFHC?
A: No, only if they have other group entities.
Q: Can an NOFHC invest in non-financial businesses?
A: Generally, no; its purpose is to hold financial services companies.
Q: What is the “ring-fencing” objective?
A: To ensure the bank’s capital is not exposed to risks from the group’s other commercial activities.
Q: Can an NOFHC be owned by multiple separate groups?
A: No, two or more separate groups cannot combine to set up a single NOFHC.
Q: What happens to “overlapping” products between a bank and its group entities by 2026?
A: Banks must ensure no new overlapping business is carried out after April 1, 2026.
Q: Does the RBI supervise the NOFHC?
A: Yes, the RBI conducts consolidated supervision of the entire group led by the NOFHC.

Would you like to explore the eligibility criteria for NBFCs to convert into banks or the fit and proper standards for bank promoters?

AI responses may include mistakes. For financial advice, consult a professional. Learn more

11 sites

RBI Issues 2025 NOFHC Directions to Segregate Core …8 Dec 2025 — 1. Effective Date. The Reserve Bank of India (RBI) has released its 2025 Directions on Non-Operative Financial Holding Companies (Taxmann
Decoding the Non-Operative Financial Holding Company …22 Sept 2024 — A Non-Operative Financial Holding Company (NOFHC) is an entity that holds a substantial stake in a group of financial services com…Corpzo
Reserve Bank of IndiaPromoter/promoting entity/promoter group should have a past record of sound financials, credentials, integrity and have a minimum …RBI

Show all

Nidhi

In the context of Ramesh Singh’s

Indian Economy and the 2026 regulatory landscape, Nidhi Companies (Mutual Benefit Societies) are unique Non-Banking Financial Companies (NBFCs) that facilitate borrowing and lending exclusively among their members.

I. Overview and Core Purpose

The term “Nidhi” means “treasure”. These companies are formed to cultivate the habit of thrift and savings.

Regulatory Body: Primarily regulated by the Ministry of Corporate Affairs (MCA) under Section 406 of the Companies Act, 2013 and Nidhi Rules, 2014.
RBI Status: They are exempted from the core provisions of the RBI Act (like registration with RBI) because they deal only with their own members.

II. Key 2025–2026 Rules & Requirements

Recent amendments have tightened governance to protect members’ funds.

Category	Requirement (As of 2026)
Incorporation	Must be a Public Limited Company with min. 7 members and 3 directors.
Minimum Capital	₹10 lakh paid-up equity capital; Net Owned Funds (NOF) must be ₹20 lakh.
Membership	Minimum 200 members within one year of incorporation.
Deposit Limit	Cannot accept deposits exceeding 20 times its NOF (Ratio of 1:20).
Form NDH-4	Mandatory Central Govt. declaration required within 120 days of incorporation before accepting deposits.
Name Change	The suffix “Nidhi Limited” is optional at incorporation but mandatory once officially declared as a Nidhi.

III. Mnemonics for Nidhi Concepts

Concept	Mnemonic	Explanation
Purpose	“T-S-M”	Thrift, Savings, and Mutual Benefit.
Restrictions	“No C-I-L-H”	No Chit funds, Insurance, Leasing, or Hire Purchase.
Membership	“Two-Zero-Zero”	Must reach 200 members within a year.
NOF to Deposit	“One for Twenty”	For every ₹1 of NOF, you can take ₹20 in deposits.

IV. 10 Q&A on Nidhi Companies

Q: Can a body corporate or trust become a member?
A: No, membership is restricted strictly to individuals.
Q: Can a minor be a member?
A: No, but a minor can hold deposits through a legal guardian who is a member.
Q: Are Nidhi companies allowed to issue preference shares?
A: No, they can only issue fully paid-up equity shares.
Q: Can they open current accounts?
A: No, current accounts are prohibited.
Q: What is the maximum dividend they can declare?
A: 25% in a financial year.
Q: Can a Nidhi company operate across multiple states?
A: Generally no, they cannot open branches outside the state where their registered office is located.
Q: What happens if they fail to generate profit for three years?
A: They cannot open new branches and their lending powers are restricted.
Q: Can they advertise for deposits?
A: No, soliciting deposits through advertisements is strictly prohibited.
Q: What are the main loan types they cannot give?
A: They cannot grant personal, vehicle, or microfinance loans.
Q: Who manages the “fit and proper” test for promoters?
A: The Ministry of Corporate Affairs (MCA) as part of the NDH-4 declaration process.

Would you like a summary of the NIDHI+ initiative by the Ministry of Tourism or more on the Startup Grants under the NIDHI Program by the DST?

15 sites

Nidhi Company Registration in India: Rules, Process, and …27 Sept 2025 — Optimize Funds To Scale. … A Nidhi Company is a special type of public company formed under Section 406 of the Companies Act, 20…LinkedIn
NIDHI Companies – IAS Gyan11 Feb 2026 — Description * Nidhi Company is a type of Non-Banking Financial Company (NBFC) recognized under section 406 of the Companies Act, 2…IAS Gyan
Nidhi Companies: Truth Behind Deposits, New Rules …19 Nov 2025 — Net Owned Fundsof ₹ 20 lakh or more. √ Fit & Proper Criteria: Along with Form NDH-4, the company must file a declaration that all …TaxGuru

Show all

Chit fund

In Ramesh Singh’s

Indian Economy, Chit Funds are classified as indigenous financial institutions that serve as a bridge between the organised and unorganised money markets, acting as both a savings and borrowing tool.

I. Core Concept and Working

A chit fund is a type of Rotating Savings and Credit Association (ROSCA).

Mechanism: A group of individuals (subscribers) agrees to contribute a fixed sum periodically (monthly) for a set duration.
Distribution: Each month, the total collected amount (the “pot”) is given to one member, typically determined by a lottery or an auction.
Auction Process: Members bid to receive the pot by offering a “discount.” The highest bidder (who agrees to take the lowest amount) wins the pot.
Dividend: The discount amount (minus the organiser’s commission) is distributed equally among all other members as a dividend, reducing their next month’s instalment.

II. Regulatory Framework (Updated for 2025–2026)

Chit funds are governed by a dual regulatory system.

The Act: Regulated under the Chit Funds Act, 1982 (a central law).
Administration: Overseen by State Governments through the Registrar of Chits.
RBI Role: Classified by the RBI as Miscellaneous Non-Banking Companies (MNBCs). However, the RBI does not regulate their day-to-day operations or subscriptions.
Latest Amendment (2019-2023 Updates):
- Fraternity Fund: The terminology was changed to “Fraternity Fund” to improve social branding.
- Foreman Commission: Increased from 5% to 7% of the chit amount.
- Technology: Allows for video conferencing and e-auctions for remote participation.

III. Mnemonics for Chit Funds

Concept	Mnemonic	Explanation
Dual Nature	“S-A-B”	It is both a Savings And Borrowing instrument.
Winner Basis	“A-L-T”	Selection by Auction, Lottery, or Tender.
Regulation	“C-S”	Central Act (1982) but State Administration.
Bidding Rule	“Low Wins”	In an auction, the person accepting the lowest amount wins the pot.

IV. 10 Q&A on Chit Funds

Q: Who manages the chit fund and collects payments?
A: The Foreman (organiser).
Q: What is the maximum commission a foreman can charge currently?
A: 7% of the total chit value (increased from 5%).
Q: Are chit fund subscriptions considered “deposits” under the RBI Act?
A: No, they are specifically excluded from the definition of deposits.
Q: Can a winner of one cycle bid again in the next cycle?
A: No, a “prized subscriber” cannot bid again but must continue paying instalments.
Q: What is the main difference between a Chit Fund and a Nidhi Company?
A: Chit funds use an auction/lot to distribute a pool; Nidhis are
Q: Can NRI’s participate in Indian chit funds?
A: Yes, through their NRO accounts, subject to specific bank and RBI approvals.
Q: How are chit fund earnings taxed?

19 sites

Chit Fund – Drishti IAS22 Feb 2019 — Why in News? In 2019, Parliament passed the Chit Funds (Amendment) Bill, 2019. It streamlined operations of collective investment …Drishti IAS
Chit fund – WikipediaChit fund. … A chit fund is a type of rotating savings and credit association system practiced in India, Bangladesh, Sri Lanka, …Wikipedia
Chit Fund – What Is Meaning, How It Works, and ExampleEach cycle, one member receives the pooled amount through a predetermined process, offering both a savings mechanism and access to…Bajaj Finserv

Show all

Small and Payment Bank

In Ramesh Singh’s

Indian Economy, Small Finance Banks (SFBs) and Payments Banks (PBs) are categorized as Differentiated Banks because they serve specific niches rather than providing “universal” services.

I. Comparison Table (Updated 2026)

Feature	Small Finance Banks (SFB)	Payments Banks (PB)
Primary Objective	Financial inclusion for small farmers/MSMEs.	High-volume, low-value transactions for migrants/unorganized sector.
Can they Lend?	Yes (75% must go to Priority Sector).	No (Strictly prohibited from lending).
Deposit Limit	No Limit.	₹2 Lakh per individual.
Credit Cards	Can issue credit cards.	Cannot issue credit cards (Debit cards only).
Min. Capital	₹300 Crore (Revised 2024-25).	₹100 Crore.
Examples	AU Small Finance, Equitas.	Airtel Payments, India Post (IPPB).

II. Key 2025–2026 Updates

The “Graduation” Rule: The Reserve Bank of India (RBI) released a roadmap in 2024-25 allowing SFBs to apply for Universal Bank Licenses if they have a 5-year satisfactory track record and a net worth of ₹1,000 crore.
UPI-Interoperability: Payments Banks are now the primary drivers of UPI-Lite, allowing small offline transactions to reduce the load on main banking servers.
SFB Capital Hike: To ensure stability, the minimum capital for new SFBs was hiked to ₹300 crore.

III. Mnemonics for Differentiated Banks

Concept	Mnemonic	Explanation
PB Restriction	“No L-C”	No Loans, No Credit cards for Payments Banks.
SFB Focus	“S-F-B = Small-Farm-Biz”	They focus on Small farmers and Small Businesses.
PSL Target	“High 75”	Both SFBs and RRBs have a high 75% PSL target.
PB Function	“Digital Postman”	Like a postman, they Deliver money but don’t Lend it.

IV. 10 Q&A on SFBs and Payments Banks

Q: Can a Payments Bank accept Fixed Deposits (FDs)?
A: No, they can only accept demand deposits (Savings/Current).
Q: Which committee recommended the setting up of SFBs?
A: Usha Thorat Committee.
Q: Which committee recommended Payments Banks?
A: Nachiket Mor Committee.
Q: What is the minimum promoter’s stake in an SFB?
A: At least 40% (must be brought down over 10-15 years).
Q: Can Payments Banks set up subsidiaries to undertake NBFC activities?
A: No, they are not allowed to set up subsidiaries for non-banking activities.
Q: Where must Payments Banks invest their collected deposits?
A: At least 75% in Government Securities (G-Secs) with maturity up to one year.
Q: Are SFBs required to maintain CRR and SLR?
A: Yes, just like any other Scheduled Commercial Bank.
Q: Can an SFB become a Universal Bank?
A: Yes, under the RBI’s 2024 Voluntary Transition Guidelines.
Q: What is the maximum balance a customer can hold in a Payments Bank at EOD?
A: ₹2,00,000.
Q: Can SFBs handle Foreign Exchange business?
A: Yes, but only with prior RBI approval and after gaining experience.

Would you like to see the eligibility criteria for an SFB to “graduate” into a Universal Bank, or move to Fiscal Policy?

AI responses may include mistakes. For financial advice, consult a professional. Learn more

21 sites

A Primary focus on progress of Small Finance Banks in IndiaAlong with various initiatives of the Government of India, the RBI ( Reserve Bank of India ) approved the setting up of differenti…Quest Journals
Difference Between Payments Bank and Small Finance Bank18 Jul 2025 — Difference Between Payments Bank and Small Finance Bank FAQs Ans. Small Finance Banks can lend money and offer full banking servic…Vajiram & Ravi
Differentiated Banks: Types, Structure, SFB, LAB & Payment Banks | UPSCDifferences Between Differentiated Banks and Universal Banks Target customers Niche segments like low-income or rural populations …Testbook

Show all

yes

To transition from a

Small Finance Bank (SFB) to a Universal Bank, the RBI established strict “graduation” criteria in late 2024 to ensure only the most stable banks move up.

I. Eligibility Criteria for Graduation (2025-26)

Track Record: Minimum 5 years of satisfactory operational performance.
Net Worth: Minimum net worth of ₹1,000 crore (at the end of the previous quarter).
Profitability: Must have been profitable for the last two financial years.
Asset Quality: Net NPA must be ≤ 1% for the last two financial years.
Listing: The SFB must be listed on a recognized stock exchange.
Capital: Must meet the prevailing CRAR (Capital Adequacy) requirements for Universal Banks (currently 9% + buffers).

II. Post-Graduation Changes

Once an SFB becomes a Universal Bank:

PSL Targets: The target drops from 75% (SFB) to 40% (Universal), providing more lending freedom.
Product Range: They can offer more complex corporate salary accounts, international trade finance, and large-ticket corporate loans.
Governance: They must follow a diversified shareholding plan, reducing promoter stake to 26% over 15 years.

III. Mnemonics for Graduation

Concept	Mnemonic	Explanation
Graduation Stats	“5-1000-1”	5 years track record, ₹1000 cr net worth, 1% max Net NPA.
PSL Drop	“75 to 40”	From 75% (tight) to 40% (flexible) Priority Sector lending.
Quality Check	“P-L-A-N”	Profit, Listing, Asset quality, Net worth.

IV. 10 Q&A on SFB Graduation

Q: Can a Payments Bank graduate directly to a Universal Bank?
A: No, they must first become an SFB (after 5 years) and then apply for Universal status.
Q: What is the primary benefit for an SFB to become a Universal Bank?
A: Lower PSL targets (40% vs 75%) and the ability to give larger corporate loans.
Q: Is there a “waiting period” if an application is rejected?
A: Yes, typically 3 years before reapplying.
Q: Does the promoter stake need to be diluted immediately?
A: No, it follows the long-term glide path to 26% within 15 years.
Q: Can an SFB graduate if its Net NPA is 1.5%?
A: No, it must be 1% or less for the last two years.
Q: Who approves the graduation?
A: The Reserve Bank of India (RBI) after screening by an External Advisory Committee.
Q: Are there any restrictions on “Loan Size” for SFBs?
A: Yes, SFBs must have 50% of their portfolio in loans up to ₹25 lakh; Universal banks don’t have this cap.
Q: What happens to the “Small Finance” branding?
A: The bank usually drops “Small Finance” from its name (e.g., AU Small Finance Bank becomes AU Bank).
Q: Is listing on the Stock Exchange mandatory?
A: Yes, only listed SFBs are eligible to apply.
Q: What is the “fit and proper” criteria?
A: A rigorous check of the directors’ and promoters’ integrity and financial track record.

This concludes our deep dive into Banking in India. Would you like to move on to Fiscal Policy (Budget, Taxes, Deficits) or start a new summary on Inflation & Business Cycles?

AI responses may include mistakes. For financial advice, consult a professional. Learn more

Financial inclusion

In Ramesh Singh’s

Indian Economy, Financial Inclusion is the process of ensuring access to appropriate financial products and services needed by all sections of society, especially vulnerable groups, at an affordable cost.

As of February 2026, India has transitioned from “access” (opening accounts) to “usage” (insurance, pension, and credit).

I. The 3 Pillars of Inclusion

Access: Physically reaching the unbanked (via Branches, ATMs, and Business Correspondents).
Affordability: Keeping costs low (No-frills accounts).
Usage: Ensuring people actually use accounts for savings, insurance, and credit.

II. Key Schemes & Initiatives (The Inclusion Toolkit)

PMJDY (Jan Dhan Yojana): The world’s largest inclusion drive. Features include RuPay cards, ₹10,000 overdraft, and accident insurance.
The JAM Trinity: Jan Dhan, Aadhaar, and Mobile. This forms the backbone of Direct Benefit Transfer (DBT).
Social Security Schemes:
- PMJJBY: Life insurance (₹2 lakh for ₹436/year).
- PMSBY: Accidental insurance (₹2 lakh for ₹20/year).
- APY (Atal Pension Yojana): Pension for the unorganized sector.
National Strategy for Financial Inclusion (2020-2025): An RBI roadmap aimed at providing a banking outlet within 5km of every village.

III. Mnemonics for Financial Inclusion

Concept	Mnemonic	Explanation
The Foundation	“J-A-M”	Jan Dhan, Aadhaar, Mobile.
PMJDY Benefits	“O-I-D”	Overdraft, Insurance, Debit card.
Strategy Goal	“5-Km Rule”	A banking touchpoint within 5 km of every inhabitant.
The 3 As	“A-A-A”	Accessibility, Affordability, Availability.

IV. 10 Q&A on Financial Inclusion

Q: What is a BSBDA?
A: Basic Savings Bank Deposit Account—a “no-frills” account with no minimum balance requirement.
Q: Who are ‘Business Correspondents’ (BCs)?
A: Bank agents who provide services at locations other than a bank branch (e.g., Bank Mitras).
Q: What is the age limit for Atal Pension Yojana (APY)?
A: 18 to 40 years.
Q: What is the “Overdraft” limit in PMJDY accounts?
A: ₹10,000 (for one member per household, preferably the lady of the house).
Q: Which index measures the extent of financial inclusion in India?
A: The FI-Index (Financial Inclusion Index) published annually by the RBI.
Q: What are the three parameters of the FI-Index?
A: Access (35%), Usage (52%), and Quality (13%).
Q: What is the ‘Digital Saksharta Abhiyan’ (DISHA)?
A: A scheme to provide digital literacy to rural communities to encourage digital banking.
Q: Can a person have a PMJDY account if they already have another bank account?
A: Legally, one person should have only one “Basic” account to prevent duplication of benefits.
Q: What is the ‘Business Facilitator’ model?
A: Intermediaries who help banks identify borrowers and process applications but do not handle cash (unlike BCs).
Q: As of 2026, what is the ‘Quality’ parameter in FI-Index focusing on?
A: Financial literacy, consumer protection, and grievance redressal.

With this, we have covered the entire Banking & Money landscape of Ramesh Singh. Shall we jump into Fiscal Policy (Taxes, Budget, and Deficits) or Inflation next?

AI responses may include mistakes. For financial advice, consult a professional. Learn more

Labels of ATM

In Ramesh Singh’s

Indian Economy, ATM Labels are categorized by their ownership models and specific operational purposes to help distinguish between bank-led and third-party infrastructure.

I. Major Labels: Ownership and Operations

These labels define who owns the hardware and who provides the banking services.

White Label ATMs (WLA): Owned and operated by non-bank entities (like NBFCs). They do not display any bank logo and were first introduced in India by the TATA Group (Indicash).
Brown Label ATMs: These involve a partnership where a third-party service provider owns the hardware and manages the site, but the sponsor bank handles cash management and its branding appears on the machine.

II. Purpose-Specific Labels

These categories are based on the specialized services or target demographics of the ATM.

Green Label: Dedicated to agricultural transactions, such as crop loans, subsidies, and farm insurance.
Pink Label: Specifically for women’s safety and convenience, often featuring guards to ensure exclusive access and avoid long general queues.
Yellow Label: Primarily set up for e-commerce transactions, including online shopping and bill payments.
Orange Label: Dedicated to share market transactions, allowing users to buy or sell shares or manage stock-related activities.

III. Mnemonics for ATM Labels

Label	Mnemonic	Meaning
White	“White is for NBFCs”	White labels are run by non-banking companies.
Pink	“Pink for Women”	Historically associated color for female-focused safety.
Yellow	“Yellow for Yahoo”	Yellow label ATMs are for online/e-commerce transactions.
Green	“Green for Growth”	Green is for agriculture and rural growth.
Orange	“Orange for Options”	Orange label ATMs are for share/stock market options.

IV. 10 Q&A on ATM Labels

Q: Who was the first to introduce White Label ATMs in India?
A: Tata Communications Payment Solutions (Indicash).
Q: What is the main difference between White and Brown Label ATMs?
A: White Label is owned/operated by non-banks; Brown Label is operated by third parties but branded/funded by a bank.
Q: Which act regulates White Label ATM operators?
A: The Payment and Settlement Systems Act, 2007.
Q: Are agricultural land and rural transactions the focus of Green Label ATMs?
A: Yes, they cater specifically to agricultural needs like crop loans and subsidies.
Q: Which ATM is designed specifically for women’s ease of banking?
A: Pink Label ATMs.
Q: What do Yellow Label ATMs facilitate?
A: E-commerce facilities and online payment transactions.
Q: What is an “On-site” vs “Off-site” ATM?
A: On-site ATMs are inside bank premises; off-site are in other locations like malls or airports.
Q: What special hardware do Biometric ATMs use?
A: They use fingerprint and eye scanners for enhanced security.
Q: Do Brown Label ATMs show a specific bank’s logo?
A: Yes, they prominently display the branding and colours of the sponsoring bank.
Q: What is the primary operational hurdle for White Label ATMs?
A: They must manage their own cash supply and maintenance, unlike Brown Labels where the bank provides the cash.

Would you like to explore the latest RBI rules for 2026 regarding ATM cash failure compensation or the phased 2026 mandate for dispensing low-denomination notes?

AI responses may include mistakes. For financial advice, consult a professional. Learn more

18 sites

ATM full form | Types, Benefits, Parts and How to use itTypes of ATMs * Green Label ATMs that are used for agricultural purposes. * Yellow Label ATMs that are used for e-commerce transac…Moneyview
What is ATM: Meaning, Full Form & BenefitsClassification of ATM’s Based on Purpose is as Follows * White-label: ATMs operated by non-banking financial companies are called …Kotak Bank
What is ATM, its Meaning & Types & Benefits – Easebuzz30 Jan 2024 — Basic vs. Complex Units: * Basic Units: These ATMs cater to essential needs like cash withdrawals, balance inquiries, PIN changes,Easebuzz

Show all

PMJDY

In Ramesh Singh’s

Indian Economy (17th Edition, 2025–26), Pradhan Mantri Jan Dhan Yojana (PMJDY) is presented as the cornerstone of India’s National Mission on Financial Inclusion.

I. Core Concept and Evolution

Launched on August 28, 2014, the scheme initially focused on “Every Household” but transitioned in 2018 to a focus on “Every Unbanked Adult”. It aims to provide universal access to banking, credit, insurance, and pension services for underprivileged sections.

II. Updated Key Features (2025–2026)

The scheme has been significantly enhanced with higher limits and better insurance:

No Minimum Balance: Accounts are Basic Savings Bank Deposit (BSBD) accounts with zero-balance requirements.
Enhanced Overdraft (OD) Facility: Eligible account holders can access an OD of up to ₹10,000.
- Condition-Free: Up to ₹2,000 can be withdrawn without any conditions.
- Age Limit: The upper age for the OD facility was increased from 60 to 65 years.
RuPay Debit Card Insurance: Free accidental insurance cover of ₹2 lakh for accounts opened after August 28, 2018 (up from ₹1 lakh).
Life Insurance Cover: A one-time life cover of ₹30,000 is provided to eligible beneficiaries.

III. Status and Achievements (February 2026)

Account Penetration: Over 56 crore Jan Dhan accounts have been opened as of late 2025.
Gender Inclusivity: Approximately 51% to 56% of account holders are women.
Deposit Strength: Total deposits in these accounts have crossed ₹2.73 lakh crore.
The JAM Trinity: PMJDY is the foundational “J” in the Jan Dhan-Aadhaar-Mobile trinity, enabling direct benefit transfers (DBT) and eliminating intermediaries.

IV. Mnemonics for PMJDY

Concept	Mnemonic	Explanation
Main Pillars	“S-I-P”	Savings (BSBD), Insurance (Accidental), Pension (Social Security).
OD Limit	“10K-Care”	Maximum ₹10,000 OD for financial care.
Eligibility	“Adult-Unbanked”	Shifted focus to every unbanked adult.

V. 10 Sample Q&A on PMJDY

Q: What is the primary focus of PMJDY Phase II (post-2018)?
A: Shifting from “Every Household” to “Every Unbanked Adult”.
Q: What is the maximum age for the OD facility?
A: 65 years.
Q: How much accidental insurance is provided on RuPay cards for new accounts?
A: ₹2 lakh.
Q: Is there a minimum balance requirement for a Jan Dhan account?
A: No, it is a zero-balance account.
Q: Can a minor open a PMJDY account?
A: Yes, under guardianship.
Q: After how many months of satisfactory operation is the OD facility granted?
A: 6 months.
Q: Which state has the highest number of PMJDY accounts as of 2025?
A: Uttar Pradesh.
Q: What is the maximum condition-free OD amount?
A: ₹2,000.
Q: Does a Jan Dhan account holder earn interest on deposits?
A: Yes, at the same rate as standard savings accounts.
Q: How many free withdrawals are allowed per month?
A: A minimum of four.

Would you like to explore how PMJDY links with the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) or a summary of the latest DBT statistics for 2026?

AI responses may include mistakes. For financial advice, consult a professional. Learn more

21 sites

Pradhan Mantri Jan Dhan Yojana – myScheme9 Feb 2026 — The scheme has been made more attractive with upward revision in. (i) OD limit from Rs. 5,000/- to Rs. 10,000/- and. (ii) Accident…myScheme
Pradhan Mantri Jan-Dhan Yojana | Department of Financial ServicesThis deep penetration at affordable cost is possible only with effective use of technology. PMJDY is a National Mission on Financi…Pradhan Mantri Jan-Dhan Yojana
11 Years of PM Jan Dhan Yojana: Banking the Unbanked – PIB27 Aug 2025 — It includes features like zero-balance accounts, RuPay debit cards with built-in insurance, overdraft options, and access to servi…PIB

Show all

ALM of Banks

In Ramesh Singh’s

Indian Economy, Asset-Liability Management (ALM) is described as a strategic framework for managing a bank’s balance sheet to mitigate risks arising from mismatches in the maturity and interest rate sensitivity of assets and liabilities.

As of February 2026, the Reserve Bank of India (RBI) has enforced updated ALM Directions (2025) for NBFCs and All India Financial Institutions, effective November 28, 2025, to further strengthen liquidity and interest rate risk management.

I. Core Objectives of ALM

The primary goal is to ensure a bank remains solvent and profitable even under adverse market conditions.

Liquidity Management: Ensuring the bank has enough cash or liquid assets to meet its short-term obligations (e.g., deposit withdrawals).
Interest Rate Risk Management: Protecting the Net Interest Margin (NIM) from fluctuations in market interest rates.
Profitability Optimization: Balancing risk and return to maximize shareholder value while maintaining stability.

II. The Three Pillars of the ALM Framework

The RBI-mandated ALM system rests on three essential components:

ALM Information System: A robust system to provide accurate and timely management information (MIS) on assets and liabilities.
ALM Organization: An internal structure, led by the Asset-Liability Committee (ALCO), to oversee risk policies.
ALM Process: The systematic identification, measurement, and monitoring of risks through techniques like Gap Analysis and Stress Testing.

III. Key Techniques and Tools

Banks use various quantitative tools to measure and manage mismatches.

Gap Analysis: Categorising rate-sensitive assets (RSA) and liabilities (RSL) into time buckets to measure exposure to interest rate changes.
Duration Analysis: Measuring the sensitivity of the entire balance sheet’s value to interest rate shifts.
Liquidity Ratios: Monitoring key ratios like the Liquidity Coverage Ratio (LCR) to ensure a sufficient buffer of high-quality liquid assets.

IV. Mnemonics for ALM

Concept	Mnemonic	Explanation
Main Risks	“L-I-M”	Liquidity, Interest Rate, and Market Risk.
Pillar Structure	“I-O-P”	Information System, Organization (ALCO), and Process.
ALCO’s Goal	“NIM-Guard”	ALCO exists to Guard the Net Interest Margin.

V. 10 Q&A on ALM

Q: Who chairs the Asset-Liability Committee (ALCO) in a bank?
A: Typically the CEO or a senior executive like the CFO.
Q: What is the most common technique used for measuring interest rate risk in India?
A: Gap Analysis.
Q: What are the three parameters of the FI-Index?
A: Access (35%), Usage (52%), and Quality (13%) (from previous summary).
Q: What is a “Liquidity Gap”?
A: The difference between maturing assets and maturing liabilities in a specific time bucket.
Q: When did the RBI first introduce formal ALM guidelines for Indian banks?
A: 1999.
Q: What is the “Net Interest Margin” (NIM)?
A: The difference between interest earned on loans and interest paid on deposits, divided by total assets.
Q: Can ALM be used for currency risk management?
A: Yes, for banks with foreign currency exposures, it manages exchange rate volatility.
Q: What is “Stress Testing” in ALM?
A: Simulating extreme economic scenarios to see if the bank can survive the financial impact.
Q: What is the “Defeasance Period”?
A: The time taken to liquidate an investment based on secondary market liquidity.
Q: Are Small Finance Banks required to follow ALM guidelines?
A: Yes, the RBI issued specific ALM Directions for SFBs in November 2025.

Would you like a detailed breakdown of Gap Analysis buckets or a summary of the latest RBI Repo Rate changes as of February 2026?

16 sites

Asset Liability Management (ALM) – GKToday27 Oct 2025 — Asset Liability Management (ALM) * Concept and Definition. Asset–Liability Management refers to the coordinated management of asse…GK Today
Reserve Bank of India (All India Financial InstitutionsIt states that the asset-liability management (ALM) system for financial institutions shall operate as a strategic tool of balance…TeamLease Regtech
asset-liability management – South Indian BankImportance of ALM in Banking: The importance of ALM in banking can be attributed to several key functions: Risk Management: ALM he…South Indian Bank

Show all

Gold investment Schemes

In Ramesh Singh’s

Indian Economy and the current 2026 economic landscape, Gold Investment Schemes are strategic tools designed to financialise idle gold, reduce import dependence, and manage the current account deficit.

I. Major Gold Schemes (Updated 2026)

The government manages three primary instruments to mobilise and digitise gold.

Scheme	Purpose	Key Feature (2026)
Sovereign Gold Bond (SGB)	Paper alternative to physical gold.	Budget 2026 Update: Capital gains exemption at maturity now only for original subscribers.
Gold Monetization Scheme (GMS)	Earn interest on idle physical gold.	March 2025 Update: Medium and Long-term deposits discontinued; only Short-term bank-led deposits (1–3 yrs) remain.
Indian Gold Coin (IGC)	Standardised national gold coin.	24-carat (999 fineness) coins with Ashoka Chakra and Mahatma Gandhi images.

II. Market-Based Digital Options

Gold ETFs: Dematerialised units backed by physical gold. In FY24, they attracted inflows of ₹7,367 crore.
Gold Mutual Funds: Invest in units of gold ETFs; ideal for small SIPs starting at ₹100.
Digital Gold: Allows micro-investing starting at ₹1 through fintech apps; however, it lacks direct RBI/SEBI oversight.

III. Mnemonics for Gold Schemes

Concept	Mnemonic	Explanation
GMS Objective	“M-U-R”	Mobilise idle gold, Use for productive purposes, Reduce imports.
SGB Benefits	“S-I-T”	Sovereign safety, Interest (2.5%), Tax-free gains (at maturity for originals).
GMS Change	“Short is In”	Short-term deposits are the only new ones allowed since March 2025.
IGC Symbols	“A-M”	Ashoka Chakra (one side) and Mahatma Gandhi (other side).

IV. 10 Q&A on Gold Schemes

Q: What is the current interest rate on SGBs?
A: 2.5% per annum on the initial investment, paid semi-annually.
Q: Can you open a new Long-Term Gold Monetization deposit today?
A: No, medium and long-term deposits were discontinued on March 26, 2025.
Q: Who issues Sovereign Gold Bonds?
A: The Reserve Bank of India (RBI) on behalf of the Government of India.
Q: What is the minimum investment for SGB and GMS?
A: 1 gram for SGB and 10 grams of raw gold for GMS.
Q: Are SGBs bought from the secondary market tax-free at maturity?
A: No, Budget 2026 restricted this exemption to original subscribers only.
Q: What is the tenure of the new Short-Term Bank Deposits (STBD)?
A: 1 to 3 years.
Q: Can a Nidhi Company or Trust invest in SGBs?
A: Trusts are eligible; Nidhi Companies (as individuals) are not specifically listed, but HUFs and charitable institutions are.
Q: What happens to existing long-term GMS deposits?
A: They continue under the old rules until maturity; no renewals are allowed.
Q: Does digital gold have a regulatory body?
A: Currently, digital gold lacks a specific regulator like SEBI or RBI.
Q: What is the maximum SGB subscription limit for an individual?
A: 4 kg per fiscal year.

Would you like to explore the latest RBI Repo Rate decisions from February 2026 or a summary of India’s current Exchange Rate Management policy?

AI responses may include mistakes. For financial advice, consult a professional. Learn more

17 sites

Indian Gold Coin (IGC) Scheme – BankBazaarIndian Gold Coin (IGC) Indian Gold Coin is one of the three new gold schemes launched by the Government of India on 5th November 2…BankBazaar
Sovereign Gold Bond (SGB) 2025-26: Upcoming Issue, Early …8 Feb 2026 — Union Budget 2026 Highlights * What is a Sovereign Gold Bond? * Sovereign Gold Bonds Upcoming Issues 2026. * Sovereign Gold Bond S…ClearTax
Gold Monetization Scheme 2025: RBI Ends MLTGD – BeFiSc22 Jul 2025 — Gold Monetization Scheme (GMS) Just Changed: What Fintechs Must Know. … Gold Monetization Scheme rules changed on March 26, 2025…BeFiSc

Show all

Mudra Bank

In Ramesh Singh’s

Indian Economy (17th Edition, 2025–26), the MUDRA Bank (Micro Units Development & Refinance Agency Ltd.) is a specialized financial institution established to “fund the unfunded” by providing refinance support to intermediaries like banks and NBFCs for lending to micro-enterprises.

I. Overview and Core Purpose

Launched on April 8, 2015, MUDRA is a subsidiary of SIDBI. It does not lend directly to individuals but acts as a refinance agency for Member Lending Institutions (MLIs), including Commercial Banks, RRBs, SFBs, and MFIs.

II. Updated Loan Categories (2025–26)

The Union Budget 2024–25 significantly expanded the scheme by introducing a new category and doubling the maximum loan limit to ₹20 lakh.

Category	Loan Amount	Target Stage
Shishu	Up to ₹50,000	Startups and initial stage businesses.
Kishore	₹50,001 to ₹5 lakh	Growing businesses requiring equipment/scaling.
Tarun	₹5,00,001 to ₹10 lakh	Established units seeking major expansion.
Tarun Plus	₹10,00,001 to ₹20 lakh	(New) For those who successfully repaid Tarun loans.

III. Key Features and 2026 Status

Collateral-Free: No security or third-party guarantee is required for these loans.
MUDRA Card: A Rupay Debit Card provided to meet working capital needs in a digitised manner.
Target Group: Non-corporate, non-farm small micro-enterprises (shopkeepers, artisans, fruit vendors, etc.).
Inclusion Focus: Approximately 69% of loan accounts belong to women, and 51% to SC/ST and OBC entrepreneurs.
Interest Subvention: A 2% interest subvention is provided for prompt repayment of Shishu loans.

IV. Mnemonics for MUDRA

Concept	Mnemonic	Explanation
Loan Stages	“S-K-T-P”	Shishu (Infant), Kishore (Teen), Tarun (Adult), Plus (Senior).
Limit Jump	“Double-Top”	The maximum limit was doubled from ₹10 lakh to ₹20 lakh in 2024.
Agency Type	“M-R-A”	Mudra is a Refinance Agency, not a direct lender.

V. 10 Q&A on MUDRA Bank

Q: Who is the parent organization of MUDRA?
A: SIDBI (Small Industries Development Bank of India).
Q: What is the maximum loan limit under Tarun Plus?
A: ₹20 lakh.
Q: Does MUDRA regulate MFIs?
A: While MUDRA monitors them for refinancing, the Reserve Bank of India (RBI) remains the primary regulator.
Q: Are agricultural activities covered under MUDRA?
A: Non-farm income-generating activities (poultry, beekeeping, dairy) are covered.
Q: What is the interest rate for MUDRA loans?
A: Rates are determined by lenders (starting around 8.85%) based on their cost of funds (MCLR/Base Rate).
Q: Can a manufacturing unit apply for a Kishore loan?
A: Yes, it is ideal for purchasing machinery and scaling operations.
Q: Is there any subsidy on MUDRA loans?
A: There is no capital subsidy, but Shishu loans get a 2% interest subvention for prompt repayment.
Q: Who provides the credit guarantee for Tarun Plus loans?
A: The Credit Guarantee Fund for Micro Units (CGFMU).
Q: Can startups apply for MUDRA loans?
A: Yes, startups are eligible under all categories based on their funding needs.
Q: How many PMMY loans were sanctioned as of late 2024?
A: Approximately 3.20 crore loans amounting to over ₹3 lakh crore.

Would you like to explore the Stand-Up India Scheme for SC/ST and Women entrepreneurs or the latest PMEGP (Prime Minister’s Employment Generation Programme) updates?

AI responses may include mistakes. For financial advice, consult a professional. Learn more

19 sites

Pradhan Mantri Mudra Yojana – PIB29 Oct 2024 — ~ Prime Minister Narendra Modi. The Pradhan Mantri MUDRA Yojana (PMMY), launched by the Prime Minister on April 8, 2015, has playe…PIB
FAQ – MudraMUDRA, which stands for Micro Units Development & Refinance Agency Ltd., is a financial institution set up by Government of India …Mudra
Genesis and Role of MUDRAMUDRA was launched by the Hon’ble Prime Minister Shri Narendra Modi on 08 April 2015 at a function held at Vigyan Bhawan, New Delh…Mudra

Show all

Pnemonics for M0 and M1234

In Ramesh Singh’s

Indian Economy, understanding the money supply (Monetary Aggregates) is critical. Here is the ultimate mnemonic guide to master M0 through M4.

I. The Core Mnemonics

Aggregate	Mnemonic	The Logic
M0	“C-R-O”	Currency in circulation + Reserves of banks with RBI + Other deposits with RBI.
M1	“C-D-O”	Currency with public + Demand deposits (Savings/Current) + Other deposits with RBI.
M2	“M1 + Mail”	M1 + Post Office (Mail) Savings bank deposits.
M3	“M1 + Time”	M1 + Time (Fixed/Term) Deposits with the banking system.
M4	“M3 + All Mail”	M3 + All Post Office deposits (but minus National Savings Certificates).

II. Advanced Mnemonics for Characteristics

Liquidity (Speed of spending):
- Mnemonic: “1 is Fast, 4 is Last”
- Explanation: M1 is the most liquid (Narrow Money). M4 is the least liquid.
Breadth (Size of the pile):
- Mnemonic: “3 is the Sea”
- Explanation: M3 is “Broad Money.” It is the most common measure used by the Reserve Bank of India (RBI) for policy because it represents the largest stable pool of money.
M0 Special Status:
- Mnemonic: “Zero is the Hero”
- Explanation: M0 is “Reserve Money” or “High-Powered Money.” It is the foundation upon which the entire banking system creates more money.

III. 10 Q&A on Monetary Aggregates

Q: Which aggregate is known as “Narrow Money”?
- A: M1.
Q: Which aggregate is known as “Broad Money”?
- A: M3.
Q: Does M1 include Fixed Deposits (FDs)?
- A: No, FDs are Time Deposits, which are part of M3.
Q: What is the formula for the “Money Multiplier”?
- A: M3 / M0.
Q: Which aggregate includes Post Office Savings but excludes NSC?
- A: M4.
Q: Why is M0 called “High-Powered Money”?
- A: Because it acts as the base for banks to create credit (money) through the multiplier effect.
Q: As we move from M1 to M4, does liquidity increase or decrease?
- A: It decreases.
Q: Who recommended the current M0-M4 classification?
- A: The Y.V. Reddy Working Group (1998).
Q: In M1, what does “Currency with the Public” mean?
- A: Total currency in circulation minus cash held by banks.
Q: Does M2 include the total deposits of the Post Office?
- A: No, only the Savings deposits. Total deposits go into M4.

Would you like to see how the Money Multiplier has changed in the February 2026 RBI Bulletin, or move to Monetary Policy tools?

NBFC

In Ramesh Singh’s

Indian Economy, Non-Banking Financial Companies (NBFCs) are entities registered under the Companies Act (1956 or 2013) that perform bank-like functions—lending and making investments—but lack a full banking license.

I. NBFC vs. Bank: The Core Differences

While their activities are “akin to banks,” NBFCs have specific legal limitations:

No Demand Deposits: They cannot accept savings or current account deposits.
No Cheques: They cannot issue cheques drawn on themselves.
No Deposit Insurance: Deposits are not covered by the DICGC.

RBI

The

Reserve Bank of India (RBI), established on April 1, 1935, and nationalised in 1949, serves as India’s central bank and primary financial regulator. As of February 2026, the RBI is led by Governor Shri Sanjay Malhotra, who chairs the six-member Monetary Policy Committee (MPC).

I. Core Functions of RBI

The RBI’s functions are broadly categorized into regulatory, monetary, and developmental roles:

Monetary Authority: Formulates and implements monetary policy to maintain price stability while supporting economic growth.
Issuer of Currency: Sole authority for issuing banknotes and coins, and managing their circulation and quality.
Regulator and Supervisor: Sets operational parameters for the banking system and Non-Banking Financial Companies (NBFCs).
Manager of Foreign Exchange: Manages the Foreign Exchange Management Act (FEMA), 1999 and maintains the country’s forex reserves.
Banker to Governments and Banks: Acts as a merchant banker for central and state governments and maintains the accounts of Scheduled Commercial Banks (SCBs).

II. Monetary Policy Status (February 2026)

In its latest review (February 4–6, 2026), the MPC adopted a Neutral stance with the following key rates:

Instrument	Rate
Repo Rate	5.25%
Standing Deposit Facility (SDF)	5.00%
Marginal Standing Facility (MSF)	5.50%
Bank Rate	5.50%
Cash Reserve Ratio (CRR)	4.00%
Statutory Liquidity Ratio (SLR)	18.00%

III. Latest Regulatory Updates (2025–2026)

NBFC Registration Exemption: Effective April 1, 2026, certain “Type-I NBFCs” (those with assets under ₹1,000 crore, no public funds, and no customer interface) will be exempt from mandatory RBI registration.
Prompt Corrective Action (PCA): The PCA framework was extended to Government NBFCs (except those in the Base Layer) starting October 1, 2024. A new PCA framework for Urban Cooperative Banks (UCBs) in Tiers 2, 3, and 4 takes effect from April 1, 2025.
Digital Payments 2026: The RBI is phasing in a mandate to move beyond SMS-based OTPs toward Dynamic Two-Factor Authentication (2FA) using biometrics and in-app prompts to reduce fraud.
CBDC (Digital Rupee): The pilot has scaled to over 5 million users and 1.5 million merchants by 2025. Offline functionality using NFC technology and programmable features (e.g., targeted spending) are key current innovations.

IV. Mnemonics for RBI Concepts

Concept	Mnemonic	Explanation
Functions	“C-R-E-D-I-T”	Currency issuer, Regulator, Exchange manager, Developmental role, Inflation control (Monetary), Treasury (Banker to Govt).
Liquidity Corridor	“S-R-M”	SDF (Floor) – Repo (Anchor) – MSF (Ceiling).
MPC Balance	“Neutral is No-Move”	A Neutral stance means no immediate rate hike or cut.

Would you like to explore the specific risk thresholds for the new Prompt Corrective Action (PCA) framework or the Scale-Based Regulation (SBR) list for Upper-Layer NBFCs?

AI responses may include mistakes. For financial advice, consult a professional. Learn more

15 sites

RBI MPC meet February 2026: Read the full statement by Governor Sanjay Malhotra here6 Feb 2026 — With retail inflation remaining low and GDP growth staying resilient, the MPC unanimously decided to continue with a neutral stanc…The Economic Times
Ramesh Singh Summary: Banking in India- 1 – EduRev1 Dec 2020 — (iv) Manager of Foreign Exchange : In includes broad functions like — managing the FEMA (Foreign Exchange Management Act, 1999 ]; …EduRev
Origin,Structure and Functions of RBI | PDF – SlideshareThe Reserve Bank of India was established in 1935 according to the Reserve Bank of India Act, 1934. It started operations on April…Slideshare

Show all

Credit and monetary policy of RBI

In the February 2026 Monetary Policy meeting, the Reserve Bank of India (RBI) maintained its policy Repo Rate at 5.25% and continued its “Neutral” stance. This decision focuses on stability following a cumulative 125 basis point reduction in rates since early 2025.

I. Current Monetary Policy Rates (February 2026)

The Monetary Policy Committee (MPC) unanimously decided to keep the following rates unchanged:

Instrument	Rate
Repo Rate	5.25%
Reverse Repo Rate	3.35%
Standing Deposit Facility (SDF)	5.00%
Marginal Standing Facility (MSF)	5.50%
Bank Rate	5.50%
Cash Reserve Ratio (CRR)	3.00%
Statutory Liquidity Ratio (SLR)	18.00%

II. Key Policy Objectives & Outlook

The RBI is balancing growth support with long-term price stability under a Flexible Inflation Targeting framework.

Inflation Outlook: Headline CPI inflation for FY26 is projected at 2.1%, while core inflation remains benign despite volatility in precious metals.
Growth Projections: Real GDP growth for FY26 is revised upwards to 7.4%, supported by resilient domestic consumption and new trade deals with the US and EU.
Stance: The “Neutral” stance allows the RBI flexibility to move in either direction (rate hike or cut) based on incoming economic data.

III. Credit Policy Highlights (2026 Updates)

Beyond interest rates, the RBI has introduced several targeted credit and developmental measures:

MSME Support: The limit for collateral-free loans to Micro and Small Enterprises (MSEs) has been doubled from ₹10 lakh to ₹20 lakh.
Real Estate Investment: Banks are now permitted to lend to Real Estate Investment Trusts (REITs).
Customer Protection: A new framework proposes compensation up to ₹25,000 for small-value digital frauds and stricter guidelines on the “mis-selling” of financial products.
NBFC Deregulation: “Type-I” NBFCs (assets <₹1,000 crore, no public funds, no customer interface) are now exempted from registration with the RBI.
Kisan Credit Card (KCC): Revised norms propose including expenses for agri-tech initiatives (e.g., soil testing, weather forecasting) and extending KCC validity to six years.

IV. Mnemonics for Core Concepts

Concept	Mnemonic	Explanation
Policy Rates	“S-R-M”	SDF (5.00%) – Repo (5.25%) – MSF (5.50%)—The corridor.
Inclusion Tools	“J-A-M”	Jan Dhan, Aadhaar, Mobile—The backbone of DBT.
MPC Stance	“Neutral = No Bias”	Neither expansionary nor contractionary.

Would you like a detailed look at the RBI’s new Unified Reporting Portal for the Lead Bank Scheme or more on Revised Kisan Credit Card (KCC) norms?

17 sites

RBI Monetary Policy February 2026 Highlights | IndiaBonds7 Feb 2026 — February 2026 Monetary Policy * The MPC unanimously decided to maintain the repo rate at 5.25%. Consequently, the SDF rate was mai…IndiaBonds
RBI Monetary Policy Feb 2026: Repo Rate Unchanged at 5.25%6 Feb 2026 — RBI Monetary Policy Feb 2026: Repo Rate Unchanged at 5.25% … The Reserve Bank of India’s Monetary Policy Committee (MPC) has kep…JM Financial Services
RBI Monetary Policy February 2026 Repo Rate Held at 5.25%6 Feb 2026 — * TRADING & INVESTMENT. Buy & sell shares, * RESEARCH. 360 degree fundamental, * GET LOAN. Quick loans at affordable, * IPO. Tap h…Swastika Investmart

Show all

comparison between CRR SLR Bank rate repo rate Reverse repo rate Marginal standing facility base rare MCLr

In Ramesh Singh’s

Indian Economy, these tools are categorized by their purpose: Quantitative (managing volume) and Pricing (managing cost).

I. Comparison Table (Updated Feb 2026)

Tool	Meaning	Form	Current Rate	Impact of Increase
CRR	Cash banks keep with RBI.	Cash	4.50%	Less money to lend.
SLR	Liquid assets banks keep themselves.	Gold/G-Secs	18.00%	Forced safety/Govt funding.
Repo	RBI lends to banks (Short-term).	Collateral	6.50%	Loans become expensive.
Rev. Repo	Banks park money with RBI.	Collateral	3.35%	Banks lend less to public.
MSF	Emergency overnight borrowing.	Collateral	6.75%	Higher “penalty” for stress.
Bank Rate	RBI lends/discounts (Long-term).	No Collateral	6.75%	Penalties & long-term cost.
Base Rate	Minimum rate for old loans.	Internal	Varies	Legacy floor.
MCLR	Internal cost-based lending rate.	Internal	Varies	Transparent pricing.

II. Evolution of Lending Rates (Mnemonic: B-M-E)

Banks have shifted how they decide your loan interest:

Base Rate (2010): Based on average cost of funds (Slow to change).
MCLR (2016): Based on Marginal cost (faster, but still internal).
EBLR (2019): External Benchmark (Repo-linked). This is the current standard for most retail loans.

III. Mnemonics for Fast Recall

Concept	Mnemonic	Explanation
CRR vs SLR	“C for Central, S for Self”	CRR goes to Central Bank; SLR stays with Self (Bank).
Repo vs Rev	“Repo = RBI Gives, Rev = RBI Takes”	Repo injects liquidity; Reverse absorbs it.
MSF	“M for Marginal = M for Mid-night”	It is an emergency, overnight window.
Corridor	“S-R-M”	SDF (Floor) < Repo (Center) < MSF (Ceiling).

IV. 10 Q&A on Policy Tools

Q: Which rate acts as the “Anchor” for the Indian economy?
A: Repo Rate.
Q: Does RBI pay interest on CRR balances?
A: No, banks earn zero interest on CRR.
Q: What is the primary difference between Repo and Bank Rate?
A: Repo is Short-term with collateral; Bank Rate is Long-term without.
Q: What is “Net Demand and Time Liabilities” (NDTL)?
A: The total deposits on which CRR and SLR are calculated.
Q: Which tool is used specifically to absorb “excess” liquidity without collateral?
A: SDF (Standing Deposit Facility).
Q: When is MSF used?
A: When inter-bank liquidity dries up and banks need funds overnight.
Q: Why was MCLR introduced?
A: To ensure better transmission of RBI rate cuts to the end customer.
Q: Is the Reverse Repo Rate currently the main absorption tool?
A: No, the SDF has effectively replaced it as the floor of the corridor.
Q: What happens to the money supply if SLR is reduced?
A: It increases, as banks have more “free” money to lend.
Q: Who decides these rates?
A: The Monetary Policy Committee (MPC).

Would you like a summary of External Benchmark Lending Rates (EBLR) or a deep dive into Open Market Operations (OMO)?

AI responses may include mistakes. For financial advice, consult a professional. Learn more

Nationalizatin and development of Banks

In Ramesh Singh’s

Indian Economy, the nationalisation and development of banking are described as pivotal shifts that moved the sector from private-interest profit motives to state-led social welfare and eventually toward globalized consolidation.

I. Major Phases of Nationalisation

The government initially conducted “partial nationalisations” as experiments before moving to complete state control.

Phase	Year	Details
First Partial	1955	Nationalisation of the Imperial Bank of India, renamed State Bank of India (SBI).
Second Partial	1959	Nationalisation of eight regional private banks as Associates of SBI.
Phase 1	1969	14 major commercial banks with deposits over ₹50 crore were nationalised.
Phase 2	1980	6 more commercial banks with deposits over ₹200 crore were nationalised.

Primary Objectives: To prevent private monopolies, expand banking to rural areas, and mandate Priority Sector Lending (PSL) for agriculture and small industries.

II. Modern Development & Consolidation (2020–2026)

Post-1991, the focus shifted back toward liberalization and, more recently, creating “global-sized” banks through mega-mergers.

Mega Mergers (2019–2020): The government consolidated 10 Public Sector Banks (PSBs) into 4 major entities (e.g., Oriental Bank of Commerce and United Bank of India merged into PNB).
The “Endgame” (2025–2026): Current trends emphasize privatisation of non-strategic banks and the “on-tap” licensing of new Universal and Small Finance Banks.
Digital Revolution: Development is now driven by the Digital India Stack, with UPI 2.0 transaction volumes exceeding 130 billion annually by March 2025.
RBI Vision 2025: Focuses on inclusive growth, climate-resilient green banking, and cross-border CBDC (Digital Rupee) pilot scaling.

III. Mnemonics for Nationalisation

Concept	Mnemonic	Meaning
Nationalisation Goals	“S-A-F-E”	Social welfare, Agriculture focus, Financial inclusion, Eliminate monopolies.
Phase 1 Banks (14)	“C-A-B-P-U”	Canara, Allahabad, Baroda, PNB, Union (major examples).
1980 Phase (6)	“P-O-V-C-A-N”	Punjab & Sind, OBC, Vijaya, Corporation, Andhra, New Bank.

IV. 10 Q&A on Nationalisation and Development

Q: Which bank was the first public sector bank in India?
A: State Bank of India (SBI) in 1955.
Q: How many banks were nationalised in the 1969 phase?
A: 14 banks.
Q: What was the deposit threshold for the 1980 nationalisation?
A: ₹200 crore.
Q: Who was the Prime Minister during both major nationalisation phases?
A: Indira Gandhi.
Q: What percentage of the banking business was government-controlled after 1980?
A: Approximately 91%.
Q: Which committee initiated the liberalization reforms in the 1990s?
A: Narasimham Committee.
Q: What is the current number of Public Sector Banks in India?
A: 12 (following the 2019-2020 mergers).
Q: When did the RBI itself become nationalised?
A: January 1, 1949.
Q: What is the current FDI limit in private sector banks?
A: Up to 74%.
Q: What is the primary purpose of the recent bank mergers?
A: To create global-sized banks with a broader capital base.

Would you like a detailed list of the 12 current Public Sector Banks after mergers, or more information on the latest 2026 RBI Licensing Guidelines?

8 sites

Banking in India – WikipediaNationalisation in 1969 … At the same time, it had emerged as a large employer, and a debate had ensued about the nationalizatio…Wikipedia
Nationalization of Banks in India | PDF – ScribdNationalization of Banks in India. The document discusses the nationalization of banks in India in 1969 and 1980. It provides back…Scribd
Ramesh Singh Summary: Banking in India- 1 – EduRev1 Dec 2020 — Emergence of the SBI * The Government of India, with the enactment of the SBI Act, 1955 partially nationalised the three Imperial …EduRev

Show all

emergence fo Rbi

In Ramesh Singh’s

Indian Economy, the emergence of the Reserve Bank of India (RBI) is described as a response to the economic instability following World War I and the need for a centralized authority to oversee the Indian banking and monetary system.

Emergence of SBI

The

State Bank of India (SBI) emerged through a long process of evolution, beginning with the presidency banks of the colonial era and culminating in its nationalisation in 1955 to serve the developmental needs of independent India.

The evolution of SBI involves three main phases. Initially, it began with the Presidency Banks: the Bank of Calcutta (later Bank of Bengal), the Bank of Bombay, and the Bank of Madras, established between 1806 and 1843. These banks were merged on January 27, 1921, to form the Imperial Bank of India, which performed some central banking functions before the creation of the Reserve Bank of India. Following India’s independence, the All-India Rural Credit Survey Committee recommended creating a state-partnered bank to focus on rural credit. Consequently, the State Bank of India Act was passed in 1955, reconstituting the Imperial Bank as the State Bank of India on July 1, 1955.

Following its nationalization, SBI expanded. In 1959, the State Bank of India (Subsidiary Banks) Act allowed it to take over eight former princely state banks as subsidiaries, which were later merged with SBI in 2017. SBI also diversified into universal banking and launched the YONO digital platform in 2017. As of February 2026, SBI is India’s largest commercial bank, serving over 500 million customers globally.

For more information, including a quick reference table and a list of Q&A, you can refer to the source.

Would you like to explore SBI’s latest 2026 financial performance or a detailed summary of Public Sector Bank Mergers (2019–2020)?

AI responses may include mistakes. For financial advice, consult a professional. Learn more

12 sites

What is Brief History of State Bank of India Company?23 Jan 2026 — How did State Bank of India become India’s flagship bank? From Presidency Banks in 1806 to the 1955 formation of SBI and the 2017 …portersfiveforce.com
About Us – SBI Bank12 Feb 2026 — About Us. State Bank of India (SBI) a Fortune 500 company, is an Indian Multinational, Public Sector Banking and Financial service…sbi.bank.in
About – SBI AMAbout the Bank: On 2 June 1806, the earliest progenitor of the State Bank of India, the Bank of Calcutta, set up by the English Ea…sbi.bank.in

Show all

RRB

Quick results from the web:

RRBCDG – Official Website

**IMPORTANT** For any Notice/Information regarding Railway Recruitment Board (RRB), the candidates should visit official websites of RRBs only. Any Information/Notices being circulated in the social media regarding RRBs may please be ignored. Beware of touts & job racketeers trying to deceive by false promises of …

RRBCDG – Official Website·https://www.rrbcdg.gov.in

भारतीय रेलवे – Ministry of Railways (Railway Board)

Concession Certificates · Time Table Information · Reservation & Ticketing · Claims Passenger · Concession Rules. GENERAL RULES FOR CONCESSION · Claims Freight · Freight Rate · Railway Board Tenders · CPP Portal Instructions · Tel. Directory & Email ID · RRBs Website · Other Railway Sites · Sitemap · Disclaimer · Terms …

Indianrailways.gov.in·https://indianrailways.gov.in

In the 17th edition (2025–26) of Ramesh Singh’s Indian Economy, Regional Rural Banks (RRBs) are highlighted as specialized financial institutions designed to combine the “local feel” of cooperatives with the “professionalism” of commercial banks.

As of February 2026, the RRB landscape has undergone a massive structural shift due to the “One State, One RRB” consolidation drive.

I. Overview and Structural Evolution

Establishment: Set up on October 2, 1975, based on the recommendations of the Narasimham Working Group.
First RRB: Prathama Bank (Moradabad, UP), sponsored by Syndicate Bank.
Mega Consolidation (2025): Effective May 1, 2025, a fourth phase of amalgamation merged multiple entities to create 28 RRBs operating across 26 states and 3 UTs. This “One State, One RRB” strategy aims to reduce administrative overheads and improve technological integration.

II. Ownership and Capital Structure (2026)

The ownership of RRBs remains a unique tripartite partnership, though recent reforms allow for broader market participation.

Stakeholder	Traditional Share	2026 Listing Eligibility
Central Government	50%	Combined stake (Govt + Sponsor) cannot fall below 51%.
Sponsor Bank	35%	Provides managerial and tech support.
State Government	15%	Must be consulted if their share falls below 15%.

Listing Drive (2026-27): The government has directed profitable RRBs to prepare for Initial Public Offerings (IPOs) in FY27. To qualify, banks need a net worth of at least ₹300 crore in each of the past 3 years and a minimum pre-tax profit of ₹15 crore in 3 of the last 5 years.

III. Latest Regulatory Framework (2026)

Responsible Business Conduct: New RBI directions effective April 1, 2026, mandate that RRBs offer Basic Savings Bank Deposit (BSBD) accounts with free essential services, including 25 free cheque leaves annually and unlimited monthly deposits.
Priority Sector Lending (PSL): RRBs must still direct 75% of their total credit to priority sectors, reflecting their core rural development mandate.
Financial Services: Draft RBI norms (2026) allow RRBs to undertake Mutual Fund distribution and Insurance corporate agency business on a fee basis without risk participation.
Electronic Reporting: As of January 2026, RRBs must submit all CRR/SLR returns electronically via the CIMS portal using dual digital signatures.

IV. Mnemonics for RRBs

Concept	Mnemonic	Explanation
Ownership	“50-35-15”	50% Centre, 35% Sponsor, 15% State.
Establishment	“Gandhi Day 75”	Launched on Oct 2 (Gandhi Jayanti), 1975.
PSL Target	“High 75”	Mandated to give 75% credit to Priority Sectors.
Listing Rule	“300 for 3”	Minimum ₹300 cr net worth for 3 years to qualify for IPO.

V. 10 Q&A on RRBs (2026 Context)

Q: How many RRBs are currently functional in India?
A: 28 RRBs (post-May 2025 amalgamation).
Q: What is the total business of all 28 RRBs as of 2026?
A: It has crossed ₹12 lakh crore in the first half of FY 2025-26.
Q: Can RRBs issue credit cards?
A: No, but they can issue debit cards and provide UPI, mobile, and internet banking.
Q: Who is the primary regulator for RRBs?
A: The Reserve Bank of India (RBI), with supervision and refinancing from NABARD.
Q: What is the minimum authorized capital for an RRB under the latest amendments?
A: ₹2,000 crore (up from ₹5 crore).
Q: Do digital payments (UPI/NEFT) count as “withdrawals” in a BSBD account?
A: No, they are not counted towards the four free monthly withdrawals.
Q: Which bank sponsored the first-ever RRB?
A: Syndicate Bank sponsored Prathama Bank.
Q: Can RRBs open branches in urban areas?
A: Yes, since 2013, though their focus remains over 90% rural/semi-urban.
Q: What is the “One State, One RRB” policy?
A: A consolidation drive to have generally one RRB per state to improve efficiency.
Q: When will the new RBI guidelines for RRB business conduct take effect?
A: April 1, 2026.

Would you like to explore the eligibility list of RRBs targeted for IPOs in 2027 or a detailed summary of NABARD’s role in rural credit?

18 sites

Regional Rural Bank – WikipediaThere are currently 28 Regional Rural Banks across India; the ‘One State-One RRB’ strategy, which aims to rationalize costs and st…Wikipedia
Regional Rural Banks – GKToday17 Jan 2026 — Regional Rural Banks * Structure and Ownership. RRBs are jointly owned by three entities – the Central Government, the concerned S…GKToday
Government Plans RRB Listings in FY27, 2 Banks to Lead IPO …8 Dec 2025 — Government Plans RRB Listings in FY27, 2 Banks to Lead IPO Drive * As per The Economic Times, the government has told public secto…Angel One

Show all

Cooperative bank

In Ramesh Singh’s

Indian Economy, Co-operative Banks are described as financial entities owned and run by their customers, operating on the principle of “no-profit, no-loss” to serve local communities.

Since 2020–2021, these banks have undergone a massive regulatory shift, bringing them directly under the Reserve Bank of India (RBI) to protect depositors.

I. Classification of Co-operative Banks

They are broadly divided into two categories based on their area of operation:

Urban Co-operative Banks (UCBs): Operates in urban and semi-urban areas.
- Tiered Structure (2025-26): RBI now classifies UCBs into 4 Tiers based on deposit size (Tier 1: <₹100cr up to Tier 4: >₹10,000cr).
Rural Co-operative Banks: Focus on agricultural credit.
- Short-term: State Co-operative Banks (StCBs) District Central Co-operative Banks (DCCBs) Primary Agricultural Credit Societies (PACS).
- Long-term: Land Development Banks (LDBs).

II. Key Regulatory Updates (2025–2026)

PCA for UCBs: Effective April 1, 2025, the RBI extended the Prompt Corrective Action (PCA) framework to Tiers 2, 3, and 4 of UCBs to catch financial stress early.
Direct RBI Control: Following the Banking Regulation (Amendment) Act, 2020, the RBI now regulates the management, audit, and liquidation of these banks, while State Registrars handle only administrative issues.
Priority Sector Lending (PSL): UCBs must achieve a target of 75% of their credit to priority sectors by March 31, 2026.
Capital Requirement: Tier 1 UCBs must maintain a minimum net worth of ₹2 crore, while all others must have ₹5 crore.

III. Mnemonics for Co-operative Banks

IV. 10 Q&A on Co-operative Banks

Q: Who regulates the “Banking Functions” of co-operative banks?
A: The Reserve Bank of India (RBI).
Q: What are PACS?
A: Primary Agricultural Credit Societies—the village-level unit of the rural co-operative structure.
Q: Are co-operative banks covered under Deposit Insurance (DICGC)?
A: Yes, deposits are insured up to ₹5 lakh.
Q: What is the “Tier 4” deposit threshold for UCBs?
A: Deposits more than ₹10,000 crore.
Q: Can UCBs issue shares to the public?
A: Yes, they can issue equity, preference, or special shares with RBI permission.
Q: Who is the “Banker to the State Government” in the co-operative sector?
A: The State Co-operative Bank (StCB).
Q: When does the new PCA framework for UCBs start?
A: April 1, 2025.
Q: What is the “One-Member-One-Vote” principle?
A: Each member has one vote regardless of the number of shares they hold.
Q: Which committee recommended the tiered structure for UCBs?
A: N.S. Vishwanathan Committee.
Q: Are Land Development Banks (LDBs) for short-term or long-term credit?
A: Long-term (for land improvement and heavy machinery).

Would you like to explore the latest 2026 interest rates offered by major UCBs or a summary of PACS computerization?

AI responses may include mistakes. For financial advice, consult a professional. Learn more

23 sites

Top 10 Best Cooperative Banks in India22 Oct 2024 — What are Cooperative Banks? Why are they important for the Indian Economy? Cooperative Banks operate based on a community ownershi…CreditMantri
Banks in India – Central & Nationalised Banks – Top Private & Public Sector Banks List10 Feb 2026 — They ( Co-operative banks ) have a unique structure as they ( Co-operative banks ) are owned and operated by members of an elected…Policybazaar
Supervision of Co-operative Banks by RBI25 Jul 2020 — Supervision of Co-operative Banks by RBI ( Reserve Bank of India ) In one of the massive developments in the finance sector, the G…Enterslice

Show all

finacial secror reform

In Ramesh Singh’s

Indian Economy (17th Edition, 2025–26), Financial Sector Reforms are presented in two major phases: the foundational reforms of the 1990s and the modern, technology-driven reforms of the 2020s.

I. Foundational Reforms: Narasimham Committees

The first wave of reforms (1991 and 1998) aimed to make the banking sector efficient, profitable, and autonomous.

Committee	Key Focus	Major Recommendations
Narasimham-I (1991)	Operational Efficiency	Reduce CRR and SLR; introduce Prudential Norms; allow entry of private/foreign banks.
Narasimham-II (1998)	Structural Strengthening	Mergers of major PSBs; higher Capital Adequacy Ratio (CAR); narrowing of NPAs.

II. Modern Era: 2025–2026 Reforms

The latest updates focus on consolidation, rural credit, and foreign investment.

Banking Laws (Amendment) Act, 2025: Effective August 1, 2025, this law raised the “substantial interest” threshold from ₹5 lakh to ₹2 crore and extended the tenure of cooperative bank directors from 8 to 10 years.
One State, One RRB: Effective May 1, 2025, the government reduced the number of Regional Rural Banks from 43 to 28 to improve capital base and tech adoption.
FDI in Insurance: The Union Budget 2025–26 raised the Foreign Direct Investment limit in the insurance sector from 74% to 100%.
Grameen Credit Score: Public Sector Banks are developing a new rural credit scoring system specifically for Self-Help Group (SHG) members.
Revamped CKYC: A new Central KYC Registry is being rolled out in 2025 to simplify customer verification across all financial institutions.

III. The Indradhanush Framework (7 Pillars)

This 2015 framework remains the standard for reviving Public Sector Banks (PSBs).

Pillar	Focus
A – Appointments	Separating the post of Chairman and MD/CEO.
B – BBB	Bank Board Bureau (now FSIB) for top-level recruitment.
C – Capitalization	Infusing capital to meet Basel III norms.
D – De-stressing	Managing NPAs through ARCs and IBC.
E – Empowerment	More autonomy for bank boards in decision-making.
F – Framework of Accountability	Measuring performance through the Key Performance Indicator (KPI).
G – Governance Reforms	Improving ethics and transparency.

IV. Mnemonics for Financial Reforms

Concept	Mnemonic	Meaning
Indradhanush	“A-B-C-D-E-F-G”	Appointments, BBB, Capital, De-stress, Empower, Framework, Governance.
Reform Phases	“First Autonomy, Second Strength”	Phase I was about autonomy; Phase II was about structural strength.
2025 RRB Policy	“28 in 26”	28 RRBs created across 26 states post-consolidation.

V. 10 Q&A on Financial Reforms

Q: Who is known as the father of Indian banking reforms?
A: M. Narasimham.
Q: What is the current FDI limit in the insurance sector (2026)?
A: 100%.
Q: What is the “on-tap” licensing of banks?
A: A policy allowing the RBI to receive and process bank license applications at any time.
Q: Which act was amended in 2025 to strengthen cooperative bank governance?
A: Banking Laws (Amendment) Act, 2025.
Q: What is the “Grameen Credit Score”?
A: A new rural credit scoring system for those without formal credit histories.
Q: What is the “Bad Bank” (NARCL)?
A: An entity created to take over stressed assets from banks to clean their balance sheets.
Q: Which body replaced the Bank Board Bureau (BBB)?
A: Financial Services Institution Bureau (FSIB).
Q: What are the three pillars of Basel III?
A: Minimum Capital, Supervisory Review, and Market Discipline.
Q: What is “Digital Rupee” (e₹) in reforms?
A: India’s Central Bank Digital Currency (CBDC) pilot scaling for retail and wholesale.
Q: What is the “One State, One RRB” policy?
A: Consolidation of all RRBs within a state into a single entity.

Would you like to explore the Financial Services Institution Bureau (FSIB) structure or more on the New Income Tax Act, 2025 reforms?

AI responses may include mistakes. For financial advice, consult a professional. Learn more

20 sites

Budget 2025-26: Spotlight on Financial Sector Reforms and …10 Feb 2025 — Budget 2025-26: Spotlight on Financial Sector Reforms and What They Mean. The Union Budget 2025-26, presented by Finance Minister …South Indian Bank
Financial Sector Reforms under Union Budget 2025-264 Feb 2025 — Context: The Union Budget 2025-26 has come with a significant financial sector reforms, with key areas being focused on foreign in…C4S Courses
Narasimhan Committee Upsc Notes 33 | PDF | Banks – ScribdThe Narasimhan Committee was consulted twice in 1991 and 1998 for banking sector reforms in India. The 1991 Narasimhan Committee 1…Scribd

Show all

Banking sector reform

In Ramesh Singh’s

Indian Economy (17th Edition, 2025–26), Banking Sector Reforms are presented as a multi-stage process—transitioning from the efficiency-focused Narasimham era to the modern, technology-driven reforms of the 2020s.

I. Overview of Reform Phases

Early Phase (Narasimham Committees): Focused on restoring bank health, introducing prudential norms (CAR, NPA recognition), and reducing government pre-emptions like CRR and SLR.
Modern Phase (2025–2026): Shifts focus toward Digital Sovereignity, Consolidation, and Depositor-Centric Governance.

II. Key Modern Reforms (2025–2026)

The latest regulatory landscape is shaped by the Banking Laws (Amendment) Act, 2025, which took effect in stages starting August 1, 2025:

Depositor Flexibility: Customers can now appoint up to four nominees for their accounts, choosing between successive or simultaneous (percentage-based) distribution.
Governance Thresholds: The definition of “substantial interest” for bank directors was raised from ₹5 lakh to ₹2 crore, reflecting current economic realities.
Cooperative Bank Alignment: Director tenures (excluding chairpersons) were extended from 8 to 10 years to align with the 97th Constitutional Amendment.
Audit Independence: Public Sector Banks (PSBs) are now empowered to fix the remuneration of their statutory auditors, helping them attract higher-quality professionals.
Unclaimed Funds: Banks can now transfer unclaimed shares, interest, and bond redemptions to the Investor Education and Protection Fund (IEPF).

III. RBI Specific Reforms (Effective 2025–2026)

The Reserve Bank of India (RBI) has introduced several stability-focused measures:

Expected Credit Loss (ECL): A shift from the “incurred loss” model to a forward-looking “expected loss” approach for provisioning, intended to strengthen bank resilience.
Risk-Based Deposit Insurance: Moving away from uniform premiums; stronger banks with better risk management will pay lower premiums to the DICGC.
EASE₹ise (EASE 8.0): The latest iteration of the EASE Reforms Agenda, focusing on Risk & Resilience, Innovation, and meeting the banking needs of Gig and Platform Workers.

IV. Mnemonics for Fast Learning

Concept	Mnemonic	Explanation
2025 Act	“N-A-G”	Nominees (4), Audit fees, Governance (tenure/interest thresholds).
Modern Pillars	“R-R-I-E”	Risk, Resilience, Innovation, Excellence (EASE₹ise themes).
The 4Rs	“R-R-R-R”	Recognition, Resolution, Recapitalisation, Reforms.

V. 10 Q&A on Banking Reforms (Sample)

Q: What is the new nominee limit for bank accounts?
A: Up to four (successive or simultaneous).
Q: When did the Banking Laws (Amendment) Act 2025 come into force?
A: Key provisions started August 1, 2025.
Q: What is the new threshold for “substantial interest”?
A: ₹2 crore.
Q: Who now fixes the remuneration of statutory auditors in PSBs?
A: The banks themselves.
Q: What is the goal of the ECL framework?
A: To move to a forward-looking probable loss estimation for provisioning.
Q: To which fund are unclaimed shares now transferred?
A: Investor Education and Protection Fund (IEPF).
Q: What is the focus of EASE 8.0?
A: Risk, Resilience, and banking for the Gig economy.
Q: How long can a director serve in a cooperative bank now?
A: 10 years.
Q: What has been the trend of GNPAs in 2025?
A: They have dropped to a multi-year low of approximately 2.2% – 2.3%.
Q: What is the “One State, One RRB” vision?
A: Consolidation of RRBs to achieve scale efficiency; reduced to 28 entities as of May 2025.

Would you like to examine the detailed 22 action points of EASE 6.0 or a summary of the Narasimham-II recommendations for historical perspective?

20 sites

Banking Laws (Amendment) Act, 2025 – PIB4 Dec 2025 — A major step in for fying the legal, regulatory, and governance structure of the Indian banking sector has been taken with the imp…PIB
Key Provisions of the Banking Laws (Amendment) Act, 2025 to … – PIB30 Jul 2025 — Accordingly, the Central Government appointed 1st August 2025 as the date on which the provisions of sections 3, 4, 5, 15, 16, 17,PIB
The Banking Laws (Amendment) Bill, 2024 – PRS India* The Banking Laws (Amendment) Bill, 2024 was introduced in Lok Sabha on August 9, 2024. It amends the: (i) Reserve Bank of India …PRSIndia

Show all

NPA

In Ramesh Singh’s

Indian Economy (17th Edition, 2025–26), Non-Performing Assets (NPAs) are defined as “bad loans” where the borrower fails to pay interest or principal for a specified period, typically 90 days.

As of February 2026, India’s banking sector has reached a historic milestone with the Gross NPA (GNPA) ratio falling to 2.15% (as of September 30, 2025), its lowest level in over a decade.

I. Asset Classification & SMA Framework

Before a loan is officially an NPA, it is tracked as a Special Mention Account (SMA) to identify early stress.

Category	Overdue Period	Asset Status
SMA-0	Up to 30 days	Standard
SMA-1	31 – 60 days	Standard
SMA-2	61 – 90 days	Standard
NPA	> 90 days	Non-Performing

NPA Sub-categories

Substandard: An NPA for ≤ 12 months.
Doubtful: An NPA for > 12 months.
Loss Assets: Loans considered uncollectible by the bank, auditors, or RBI inspectors, even if not fully written off.

II. Key 2025–2026 Metrics

The decline in NPAs has been driven by standard assets rising to nearly 97% across the sector.

GNPA Ratios (as of Sept 2025):
- Public Sector Banks (PSBs): 2.50%.
- Private Sector Banks (PVBs): 1.73%.
- Foreign Banks: 0.80%.
Net NPA (NNPA): Reached a multi-year low of 0.5% due to higher provisioning and recoveries.
Slippage Ratio: The rate of new NPA additions fell to 0.8% for PSBs, outperforming PVBs at 1.8%.

III. Resolution & Reform Strategy

The government and RBI utilize a 4R Strategy: Recognition, Resolution, Recapitalisation, and Reforms.

IBC (Insolvency and Bankruptcy Code): Transformed the creditor-borrower relationship; over ₹13.78 trillion in defaults were settled at the pre-admission stage by March 2025.
SARFAESI Act, 2002: Allows banks to seize and auction collateral without court intervention.
Expected Credit Loss (ECL): A landmark reform proposed in late 2025, shifting banks from “incurred loss” to a forward-looking risk provisioning model.

IV. Mnemonics for NPAs

Concept	Mnemonic	Explanation
Classification	“S-D-L”	Substandard, Doubtful, Loss Assets.
SMA Timing	“3-6-9”	30 days (SMA-0), 60 days (SMA-1), 90 days (NPA).
Recovery	“S-I-N”	SARFAESI, IBC, NARCL (The three pillars of cleaning NPAs).
Agri-NPA	“2-Short, 1-Long”	2 crop seasons for Short duration crops; 1 season for Long duration.

About Ajay Kumar

Leave a Reply Cancel reply

Related Posts

Security market in India

Insurance in India

Economics by Ramesh Singh

About Ajay Kumar

Leave a Reply Cancel reply