1. What is a Bank?

A bank is a financial institution where you can

deposit money, withdraw funds, and manage your
finances. They provide various services like savings
accounts, checking accounts, loans, mortgages, and
investments. Banks also facilitate electronic
transactions, such as online banking and credit card
services.
They play a crucial role in the economy by ensuring
the flow of money and credit, and by providing a
safe place to store your money.
2. What is Banking?
Banking refers to the business conducted or services offered by a bank. It
involves accepting deposits from the public, making loans, and providing
other financial services. Here are some key aspects of banking:
[Link]: Individuals and businesses can deposit their money in various
types of accounts like savings accounts, checking accounts, and fixed
deposits.
[Link] and Credit: Banks lend money to individuals and businesses for
purposes like buying a home, financing a car, or expanding a business.
This includes personal loans, mortgages, credit cards, and business loans.
[Link] Services: Many banks offer investment products such as
mutual funds, bonds, and stocks. They also provide advisory services to
help customers make informed investment decisions.
[Link] and Transfer Services: Banks facilitate various transactions
like electronic fund transfers, wire transfers, and online payments. They
provide platforms for online banking and mobile banking.
[Link] Services: Banks offer safe deposit boxes for customers to
store valuable items securely.
3. Why do we need Banks?
•Safety and Security: Banks provide a secure place for individuals and
businesses to store their money.
•Facilitating Transactions: Banks make it easier to manage everyday
transactions, such as paying bills, transferring money, and making purchases.
They offer services like online banking, mobile banking, and debit/credit cards
that simplify financial transactions.
•Credit and Loans: Banks provide access to credit and loans, enabling
individuals and businesses to borrow money for various purposes, like buying
a house, starting a business, or financing education.
•Investment Opportunities: Banks offer various investment products and
services, such as savings accounts, fixed deposits, mutual funds, and more.
•Economic Stability: Banks play a crucial role in maintaining financial stability
by efficiently allocating resources and providing liquidity to the economy.
•Financial Intermediation: Banks act as intermediaries between savers and
borrowers.
•Payment Systems: Banks provide payment systems that allow for the smooth
transfer of funds between parties. This includes domestic and international
4. What is a Commercial Bank?

What is a Commercial Bank?

A commercial bank is a type of financial institution
that provides various financial services to individuals,
businesses, and governments.
5. Second Schedule of RBI?
The Second Schedule of the Reserve Bank of India
(RBI) Act, 1934, lists the Scheduled Banks. These
banks are categorized into two main types: Scheduled
Commercial Banks and Scheduled Co-operative Banks.
[Link] Commercial Banks: These include State
Bank of India and its associates, nationalized banks,
private sector banks, foreign banks, and regional rural
banks.
[Link] Co-operative Banks: These consist of
state co-operative banks and urban co-operative
banks.
Being included in the Second Schedule means that
these banks are subject to the regulations and
supervision of the RBI.
6. What is a PSU Bank?
PSU Bank stands for Public Sector Undertaking Bank or Public Sector Bank.
These banks are owned and operated by the government. They form a
significant part of the banking sector in India and play a crucial role in the
country's economy.
Here are some key characteristics of PSU Banks:
[Link] Ownership: A majority stake in these banks (more than 50%)
is held by the government.
[Link] Goals: Apart from profitability, PSU banks often focus on social
objectives like financial inclusion, providing banking services in rural areas,
and supporting government schemes.
[Link]: They are regulated by the Reserve Bank of India (RBI) and are
included in the Second Schedule of the RBI Act, 1934, making them
Scheduled Banks.
[Link]: PSU banks offer a wide range of banking services including
deposits, loans, and credit facilities to individuals, businesses, and
government entities.
7. How many PSU Banks are there in India?
As of 2025, there are 12 active and operational Public
Sector Undertaking (PSU) Banks in India. These banks
continue to play a significant role in the country's
banking sector and economy.
8. Give one point of difference between public sector
banks and private banks?
Ownership: Public sector banks are owned and operated
by the government, with a majority stake (more than
50%) held by the government. Private sector banks, on
the other hand, are owned and operated by private
entities or individuals.
9. What is a Payment Bank?
A Payment Bank is a type of financial institution in India that operates on a
smaller scale compared to traditional banks. They focus primarily on
providing basic banking services to underserved populations, including small
businesses, low-income households, and migrant laborers. Here are some
key features of Payment Banks:
[Link] Services: Payment Banks can accept deposits up to a certain limit
(currently ₹200,000 per customer) and offer savings accounts and current
accounts.
[Link] Services: They facilitate easy and efficient money transfers,
making them ideal for sending remittances both domestically and
internationally.
3. Payment Services: Payment Banks provide payment and remittance
services, including mobile banking, electronic transfers, and payment of
utility bills.
4. No Credit: Unlike traditional banks, Payment Banks are not allowed to
provide loans or credit cards.
5. Interest: They can offer interest on deposits, similar to savings accounts
in traditional banks.
6. Simplified Banking: They aim to provide simple and accessible banking
services to individuals who may not have access to traditional banking
channels.
Some well-known Payment Banks in India include Paytm Payments Bank,
Airtel Payments Bank, and India Post Payments Bank.
10. What is a Small Finance Bank?
A Small Finance Bank (SFB) is a type of bank in India that aims to provide
essential banking services to underserved and unbanked sections of society,
including small businesses, low-income households, and marginal farmers.
[Link] Audience: SFBs focus on serving individuals and small businesses
that typically have limited access to traditional banking services.
[Link] Services: They accept deposits in the form of savings accounts,
fixed deposits, and current accounts, similar to traditional banks.
[Link] Services: SFBs offer loans and credit facilities to their target
audience, including microloans, small business loans, agricultural loans, and
more.
[Link] Inclusion: Their primary goal is to promote financial inclusion by
providing banking services to areas that are underserved by larger
commercial banks.
[Link]: SFBs are regulated by the Reserve Bank of India (RBI).
[Link] Rates: They can offer competitive interest rates on deposits and
loans to attract customers and support their financial needs.
Some well-known Small Finance Banks in India include Ujjivan Small Finance
11. What is merger?
A merger is a corporate strategy where two
companies combine to form a single entity. This can
help businesses grow, expand into new markets,
achieve economies of scale, and improve
competitiveness.
12. Difference between merger and acquisition?
•Merger: In a merger, two companies of roughly equal
size and status come together to form a new entity.
Both companies agree to join forces, and the
combined company often adopts a new name,
identity, and management structure. The goal is
typically to achieve synergy, cost savings, and
market expansion.
•Acquisition: In an acquisition, one company (the
acquirer) purchases another company (the target).
The target company may either be absorbed into the
acquiring company or continue to operate as a
subsidiary. The acquirer gains control over the target
company's assets, operations, and management. The
acquisition may be friendly (mutually agreed upon) or
hostile (resisted by the target company's
management).
13. What are your views on recent mergers of PSU Banks?
The recent mergers of (PSU) Banks in India have been a significant move
aimed at strengthening the banking sector and improving efficiency.
[Link]: The mergers have reduced the number of PSU banks from
27 to 12, creating larger and more robust entities. This consolidation is
expected to improve the banks' financial stability and operational efficiency.
[Link] of Scale: By merging, the banks can achieve economies of
scale, reducing costs and improving profitability.
[Link] Reach: The larger entities can now reach more customers and
offer a wider range of products and services.
[Link] Governance: With fewer banks to oversee, the government and
the Reserve Bank of India (RBI) can focus on better governance and
regulation.
[Link] Impact: While the mergers are generally positive, there have
been some challenges, such as confusion among customers about their
accounts and branches. However, banks have been working to address
these issues through clear communication and support.
Overall, the mergers are seen as a step towards creating a more resilient
14. What are your views on Govt’s plan to privatize PSU Banks?
Improving efficiency, reducing fiscal burden, and fostering a more
competitive banking sector.
[Link] and Autonomy: Privatization can lead to better management
and operational efficiency as private sector banks often have more
autonomy and flexibility in decision-making compared to government-run
banks.
[Link] Fiscal Burden: By selling stakes in PSU banks, the government
can raise funds, which can be used to reduce fiscal deficits and invest in
other critical sectors.
[Link] Discipline: Private ownership can introduce market discipline,
encouraging better governance and risk management practices.
[Link] Service: Privatized banks may offer improved customer service
and innovative products to stay competitive in the market.
[Link] Concerns: There are concerns about job security and changes
in employee benefits. The government has assured that the interests of
workers will be protected, including salaries, pensions, and other benefits.
Overall, it is essential to manage the transition carefully to ensure that it
15. What is RBI?
The Reserve Bank of India (RBI) is the central bank of India and plays a critical
role in the country's financial system.
[Link]: on April 1, 1935, under the RBI Act, 1934.
[Link]: It regulates and supervises the financial system, including banks
and non-banking financial institutions, to ensure stability and public
confidence.
[Link] Policy: The RBI formulates and implements monetary policy to
manage inflation, control money supply, and ensure economic stability.
[Link] Issuance: It has the exclusive authority to issue and manage the
currency in India.
[Link] Exchange Management: The RBI manages the country's foreign
exchange reserves and oversees the Foreign Exchange Management Act
(FEMA).
[Link] Role: It plays a developmental role by promoting financial
inclusion, supporting rural banking, and encouraging innovation in financial
services.
[Link]: It regulates and oversees the functioning of banks, ensuring
16. What are the main functions of RBI?
Monetary Authority
Regulation and Supervision
Issuer of Currency
Foreign Exchange Management
Developmental Role
Banker to the Government
Banker to Banks
Payment and Settlement Systems
17. Who is the Governor of RBI?
The current Governor of the Reserve Bank
of India (RBI) is Sanjay Malhotra. He took
office on December 11, 2024. Prior to this
role, he served as the Revenue Secretary in
the Ministry of Finance and has a long
career in public service, including roles in
finance, taxation, and financial services.
18. Who are the Deputy Governors of RBI?
Reserve Bank of India (RBI) has four Deputy Governors:
[Link] Swaminathan J - Serving since June 26, 2023.
[Link] T. Rabi Sankar - Serving since May 3, 2021, with an
extended term from May 3, 2024.
[Link] M. Rajeshwar Rao - Serving since October 9, 2020, with
an extended term from October 9, 2024.
[Link]. M.D. Patra - Serving since January 15, 2020, with an
extended term from January 15, 2025.
19. What is CRR? What is the current CRR?
CRR stands for Cash Reserve Ratio. It is the percentage of a
bank's total deposits that must be maintained as a reserve with
the Reserve Bank of India (RBI). Banks cannot use this reserve
amount for lending or any other purpose. The primary purpose
of CRR is to ensure liquidity and control money supply in the
economy.
As of December 6, 2024, the current CRR is 4.00%.
20. What is SLR? Current SLR requirement?
SLR stands for Statutory Liquidity Ratio. It is the minimum
percentage of a bank's total deposits that must be maintained
in the form of liquid assets such as cash, gold, or government-
approved securities. Unlike the Cash Reserve Ratio (CRR), which
is maintained with the RBI, SLR is maintained by the banks
themselves.
As of December 16, 2024, the current SLR requirement is
18.00%.
21. Why does RBI enforce CRR and SLR?
CRR (Cash Reserve Ratio)
[Link] Management: By requiring banks to maintain a
certain percentage of their deposits as reserves with the RBI,
CRR ensures that banks have sufficient liquidity to meet
depositor demands and other financial obligations.
[Link] Control: CRR helps the RBI control the money supply
in the economy. By adjusting the CRR, the RBI can influence the
amount of money banks can lend, thereby affecting overall
economic activity.
[Link] Stability: Maintaining reserves with the RBI reduces
the risk of bank failures by ensuring that banks have a safety
buffer to handle unexpected withdrawals or financial crises.
SLR (Statutory Liquidity Ratio)
[Link] Liquidity: SLR ensures that banks maintain a portion
of their deposits in liquid assets like cash, gold, or government
securities, which can be easily converted to cash in times of
need.
[Link] Investment in Government Securities: By requiring
banks to invest a part of their deposits in government-approved
securities, SLR helps fund government projects and initiatives,
contributing to economic development.
[Link] Credit Growth: SLR helps the RBI regulate the
amount of credit banks can extend to the public. By adjusting
the SLR, the RBI can influence lending and borrowing activities
in the economy.
[Link] Management: Maintaining a portion of deposits in low-risk
liquid assets helps banks manage their risk exposure and
ensures the safety and soundness of the banking system.
22. What is Repo Rate?
The Repo Rate (short for Repurchase Rate) is the interest rate at which the
Reserve Bank of India (RBI) lends short-term funds to commercial banks.
When banks need to borrow money from the RBI, they provide government
securities as collateral and agree to repurchase them at a predetermined
rate. The repo rate is a crucial tool used by the RBI to control inflation,
manage liquidity, and regulate the money supply in the economy.
•Monetary Policy: The repo rate is a key component of the RBI's monetary
policy. By increasing or decreasing the repo rate, the RBI can influence
borrowing costs, consumer spending, and overall economic activity.
•Inflation Control: When inflation is high, the RBI may increase the repo rate
to make borrowing more expensive, thereby reducing the money supply and
curbing inflation. Conversely, when the economy needs a boost, the RBI may
lower the repo rate to encourage borrowing and spending.
•Liquidity Management: By adjusting the repo rate, the RBI can manage the
liquidity in the banking system, ensuring that banks have adequate funds to
meet their lending and operational needs.
As of December 6, 2024, the current repo rate is 6.50%.
23. What is Reverse Repo Rate?
The Reverse Repo Rate is the interest rate at which the Reserve Bank of India
(RBI) borrows money from commercial banks. In other words, it is the rate at
which banks can park their excess funds with the RBI for a short period. The
reverse repo rate is a crucial tool used by the RBI to manage liquidity in the
banking system and control inflation.
•Liquidity Management: When the RBI wants to absorb excess liquidity from
the banking system, it increases the reverse repo rate. This encourages banks
to deposit their excess funds with the RBI, thereby reducing the money supply
in the economy.
•Monetary Policy: The reverse repo rate is often used in conjunction with the
repo rate to influence short-term interest rates and overall monetary
conditions. Changes in the reverse repo rate can affect the availability of
credit and the cost of borrowing.
•Inflation Control: By increasing the reverse repo rate, the RBI can curb
inflation by reducing the money supply. Lowering the reverse repo rate can
stimulate economic activity by increasing liquidity in the banking system.
As of December 6, 2024, the current reverse repo rate is 3.35%.
24. What is the current repo rate and reverse repo rate?
As of the latest update on December 6, 2024, the current
repo rate in India is 6.50% and the reverse repo rate is
3.35%.
25. What is Bank Rate?
Bank Rate is the interest rate at which a country's central bank (such as the
Reserve Bank of India) lends money to domestic commercial banks. Unlike
the repo rate, which is used for short-term borrowing, the bank rate is
typically used for long-term loans. Here are some key points about the bank
rate:
[Link] Policy Tool: The bank rate is an important tool of monetary policy
used by the central bank to control money supply, inflation, and overall
economic activity.
[Link] Rates: Changes in the bank rate can influence the interest rates
that commercial banks charge their customers for loans and offer on deposits.
[Link] Stability: By adjusting the bank rate, the central bank can ensure
financial stability and maintain adequate liquidity in the banking system.
[Link]-Term Impact: Since the bank rate affects long-term lending, changes in
this rate can have significant implications for investment and economic
growth.
26. What is RLLR?
RLLR stands for Repo Linked Lending Rate. It is a lending rate that is directly
linked to the Reserve Bank of India's (RBI) repo rate. The repo rate is the rate
at which commercial banks borrow money from the RBI.
Here's how it works:
•RLLR = Repo Rate + Spread
•The spread is an additional percentage added by banks to cover operational
costs and profit margins.
•When the RBI changes the repo rate, the RLLR adjusts accordingly, making
loan interest rates more dynamic and transparent.
This system ensures that changes in the repo rate are quickly reflected in
loan interest rates, benefiting borrowers when the repo rate is cut.
MCLR (Marginal Cost of Funds-based Lending Rate):
•Definition: The minimum interest rate that a bank can lend at. It is
determined based on the bank's marginal cost of funds.
•Purpose: To ensure that the lending rates are more sensitive to the changes
in the cost of funds for banks.
Base Rate:
•Definition: The minimum rate set by the Reserve Bank of India (RBI) below
which banks are not allowed to lend.
•Purpose: To provide transparency in the credit market and ensure that
borrowers are not exploited by banks.
PLR (Prime Lending Rate):
•Definition: The interest rate at which banks lend to their most creditworthy
customers.
•Purpose: Used as a benchmark for various loan products offered by banks.
Re. 1 Note:
•Signatory: The Re. 1 note is signed by the Finance Secretary of India.
•Purpose: To authenticate and authorize the issuance of the currency note.
Monetary Policy
Definition:
The process by which the RBI controls the supply of money, often targeting
an inflation rate or interest rate to ensure economic stability and growth.
Tools:
CRR (Cash Reserve Ratio)
SLR (Statutory Liquidity Ratio)
Repo Rate
Reverse Repo Rate
Open Market Operations (OMOs)
MSF (Marginal Standing Facility)
Bank Rate
LAF (Liquidity Adjustment Facility)
Monetary policy aims to manage inflation, control the money supply, and
achieve sustainable economic growth. The RBI uses various tools to achieve
these goals, adjusting them as necessary to respond to changing economic
conditions.
Monetary Policy Committee (MPC):
•Definition: The Monetary Policy Committee is a committee formed by the
Reserve Bank of India (RBI) to decide on monetary policy, including setting
the repo rate.
•Purpose: To bring transparency and accountability in formulating India's
monetary policy.
MSF (Marginal Standing Facility):
•Definition: A facility through which banks can borrow overnight funds from
the RBI at a higher rate than the repo rate.
•Purpose: To provide emergency funding to banks in times of severe liquidity
shortages.
LAF (Liquidity Adjustment Facility):
•Definition: A facility used by the RBI to manage the day-to-day liquidity in the
banking system through repo and reverse repo operations.
•Purpose: To stabilize short-term interest rates and maintain liquidity in the
system.
•Deposit:
•Definition: Money placed into a bank account by a customer.
•Purpose: To provide a safe place to keep money and earn interest.
Demand Deposit:
•Definition: Withdrawable on demand, such as savings accounts and current
accounts.
•Purpose: Provide liquidity and easy access to funds.
Time / Term Deposit:
•Definition: Money deposited for a fixed term, such as fixed deposits (FD) and
recurring deposits (RD).
•Purpose: Earn a higher interest rate over a specified period.
Fixed Deposit:
•Definition: A type of term deposit where money is deposited for a fixed term
at a predetermined interest rate.
•Purpose: Provides a higher rate of interest compared to savings accounts.
Recurring Deposit:
•Definition: A type of term deposit where customers deposit a fixed amount
regularly over a specified period.
•Purpose: Helps in accumulating savings systematically.
Bank Account:
•Definition: An arrangement where the bank holds funds on behalf of a
customer.
•Purpose: To manage, save, and access money for various financial
transactions.
Saving Account:
•Definition: An account for individuals to save money while earning interest on
the deposited funds.
•Purpose: To encourage savings and provide easy access to funds.
Current Account:
•Definition: An account primarily for businesses and professionals to manage
their daily transactions.
•Purpose: To facilitate frequent and large transactions without any limits.
Fixed Deposit Account:
•Definition: An account where money is deposited for a fixed term at a
predetermined interest rate.
•Purpose: To earn higher interest rates compared to savings accounts.
Recurring Deposit Account:
•Definition: An account where customers deposit a fixed amount regularly
over a specified period.
•Purpose: To help individuals accumulate savings systematically with regular
deposits.
Pradhan Mantri Jan Dhan Yojna (PMJDY)
•Definition: A national mission for financial inclusion launched by the Indian
government.
•Purpose: To ensure access to financial services like banking, savings and
deposit accounts, remittance, credit, insurance, and pension.
•Benefits: Provides a platform for direct benefit transfer, financial literacy, and
access to government schemes and subsidies.
Documents Required to Open a Bank Account
•Proof of Identity: Examples include Aadhar Card, Passport, Voter ID, PAN
Card.
•Proof of Address: Examples include Utility Bills, Rental Agreement, Passport.
•Recent Photograph: A passport-sized photo for identification.
This process is known as KYC (Know Your Customer), which is mandatory to
verify the identity and address of the customer.
KYC (Know Your Customer)
•Definition: A process to verify the identity and address of customers.
•Purpose: To prevent identity theft, money laundering, and financial fraud.
Risks Faced by Banks
[Link] Risk: The risk of borrowers defaulting on their loans.
[Link] Risk: The risk of losses due to market fluctuations in interest rates,
currency exchange rates, and stock prices.
[Link] Risk: The risk of loss due to failed internal processes, systems,
or external events.
How Banks Help to Improve Society
•Financial Inclusion: By providing banking services to the underserved and
unbanked population.
•Economic Growth: By providing loans and credit to individuals and
businesses, fostering entrepreneurship and development.
•Employment: By creating job opportunities and facilitating financial stability
for individuals.
Biggest Challenges Faced by a Bank
[Link] Compliance: Banks must adhere to numerous regulations and
laws, which can be complex and costly.
[Link] Threats: Protecting customer data from cyber-attacks is a
constant challenge.
[Link] Fluctuations: Banks must navigate economic downturns and
changes in interest rates.
[Link] Advancements: Keeping up with new technologies and digital
banking trends.
[Link] Expectations: Meeting the evolving needs and expectations of
customers.
Negotiable Instruments
Negotiable instruments are financial documents that guarantee the payment
of a specific amount of money, either on demand or at a future date.
Examples include:
•Cheques
•Promissory Notes
•Bills of Exchange
•Demand Drafts
Cheque
A cheque is a negotiable instrument instructing a bank to pay a specific
amount of money from a person's account to another party.
Cheque Truncation System (CTS)
CTS is a system where an electronic image of the cheque is transmitted to the
drawee branch along with the relevant information for processing, eliminating
the need to physically transfer the cheque.
Demand Draft
A demand draft is a pre-paid negotiable instrument issued by a bank,
directing another bank or its own branch to pay a certain sum to a specified
party.
Difference Between Cheque and Demand Draft
•Cheque: Requires the drawer's account to be debited upon payment.
•Demand Draft: Pre-paid, so no account is debited at the time of issuance.
Overdraft
An overdraft occurs when a bank allows a customer to withdraw more money
than they have in their account, up to a certain limit, resulting in a negative
balance.
IFSC Code
The IFSC (Indian Financial System Code) is an 11-digit alphanumeric code
used to identify bank branches for electronic transactions like NEFT, RTGS,
and IMPS.
SWIFT Code
A SWIFT code is an international bank code used for international wire
transfers, consisting of 8 to 11 characters.
Plastic Currency
Plastic currency refers to currency notes made from plastic materials instead
of traditional paper, offering enhanced durability and security features.
Credit Card:
•Definition: A card issued by a financial institution that allows the cardholder
to borrow funds up to a certain limit to make purchases or withdraw cash.
•Purpose: To provide a line of credit that can be used for various transactions.
Interest is charged on the borrowed amount if not repaid within a specific
period.
Debit Card:
•Definition: A card linked to the cardholder's bank account that allows for
direct withdrawals or payments from the available balance.
•Purpose: To provide access to the cardholder's funds for purchases or
withdrawals without borrowing money.
CVV (Card Verification Value):
•Definition: A security code, typically a three-digit number found on the back
of credit and debit cards.
•Purpose: To enhance security for online and over-the-phone transactions by
verifying that the card is in the physical possession of the user.
RuPay:
•Definition: An Indian domestic card payment network launched by the
National Payments Corporation of India (NPCI).
•Purpose: To promote and facilitate electronic payment and settlement in
India.
Differences between Credit Card and Debit Card:
•Credit Card:
• Borrowing funds up to a limit.
• Interest is charged on the borrowed amount if not repaid in time.
• Useful for building credit history.
•Debit Card:
• Directly linked to the bank account.
• No interest charges as it uses the cardholder's own funds.
• Useful for managing expenses within available funds.
Digital Payment:
•Definition: A method of payment that is made through digital or electronic
means, without the use of physical cash.
•Examples: NEFT, RTGS, IMPS, UPI, mobile wallets.
NEFT (National Electronic Funds Transfer):
•Definition: A nationwide payment system that enables one-to-one funds
transfer from one bank account to another.
•Minimum Limit: No minimum limit.
•Maximum Limit: No maximum limit set by the RBI, but individual banks may
have their own limits.
RTGS (Real-Time Gross Settlement):
•Definition: A continuous (real-time) settlement system where funds transfer
takes place individually on an order-by-order basis.
•Minimum Limit: ₹2,00,000.
•Maximum Limit: No maximum limit set by the RBI, but individual banks may
have their own limits.
IMPS (Immediate Payment Service)
IMPS is an instant payment system developed by the National Payments
Corporation of India (NPCI) that allows 24/7/365 interbank electronic fund
transfer.
NACH (National Automated Clearing House)
NACH is an electronic payment system used for bulk transactions like salaries,
pensions, and bill payments. It facilitates the processing of large volumes of
transactions in a batch mode.
UPI (Unified Payments Interface)
UPI is a real-time payment system developed by NPCI that enables instant
money transfers between bank accounts via a mobile platform. It allows users
to make payments directly from their bank accounts using a UPI-enabled app.
BHIM (Bharat Interface for Money)
BHIM is a mobile app developed by NPCI that uses UPI to facilitate digital
payments. It allows users to make quick and secure payments using their
mobile phones.
NPCI (National Payments Corporation of India)
NPCI is an umbrella organization for operating retail payments and settlement
systems in India. It is responsible for creating and managing various payment
systems like UPI, IMPS, and NACH.
ATM (Automated Teller Machine)
An ATM is an electronic banking outlet that allows customers to complete
basic transactions without the need for a branch representative or teller. It
enables cash withdrawals, deposits, fund transfers, and balance inquiries.
Teller
A teller is a bank employee who assists customers with various banking
transactions, such as deposits, withdrawals, and account inquiries, typically at
a bank branch.
White Label ATM
A White Label ATM is an ATM that is not owned by any particular bank but is
operated by a third-party service provider. These ATMs are usually located in
non-bank premises like retail stores, malls, and airports.
PIN (Personal Identification Number)
The full form of PIN is Personal Identification Number. It is a numeric password
used to authenticate the identity of a user accessing a system, such as an
ATM or a mobile banking app.
CBDC (Central Bank Digital Currency)
CBDC is a digital form of central bank money that is different from traditional
paper currency and coins. Unlike paper currency and coins, CBDCs are digital
and can be used for transactions without the need for physical exchange.
They are issued and regulated by a country's central bank.
What happens to your deposits if a bank fails?
If a bank fails, your deposits are protected up to a certain limit by the Deposit
Insurance and Credit Guarantee Corporation (DICGC). This means that even if
the bank goes bankrupt, you will get back your money up to the insured
amount.
Full form of DICGC
The full form of DICGC is Deposit Insurance and Credit Guarantee Corporation.
What if you lose money due to online fraud?
If you lose money due to online fraud, you should report the incident to your
bank immediately. The bank will investigate the matter and, if it's proven to
be a fraud, they may refund your money. Additionally, you can file a
complaint with the Banking Ombudsman if the bank does not resolve the
issue satisfactorily.
What do you mean by Banking Ombudsman?
A Banking Ombudsman is an official appointed by the Reserve Bank of India
(RBI) to resolve customer complaints against banks. The Banking
Ombudsman Scheme provides a mechanism for resolving disputes between
customers and banks in a cost-effective and speedy manner.
What is a loan?
A loan is a sum of money borrowed from a bank or financial institution that is
expected to be paid back with interest over a specified period.
What is the difference between loan and advances?
A loan is a financial arrangement where the bank lends money to a borrower
with an agreement to repay it with interest. An advance, on the other hand, is
a short-term loan provided by the bank to meet immediate financial needs,
often without a formal repayment schedule.
What is micro credit?
Micro credit refers to small loans provided to individuals, typically those who
are low-income or do not have access to traditional banking services. These
loans are designed to help them start or expand small businesses.
What is the difference between Pledge, Hypothecation and Mortgage?
•Pledge: This involves giving possession of an asset to the lender as security
for a loan.
•Hypothecation: This involves pledging an asset as security without giving up
possession. The borrower retains possession but the lender has a right to the
asset if the loan is not repaid.
•Mortgage: This involves transferring ownership of an asset to the lender as
security for a loan, but the ownership is transferred back to the borrower once
the loan is repaid.
What is EMI?
EMI stands for Equated Monthly Installment. It is a fixed payment amount
made by a borrower to a lender at a specified date each calendar month.
Each EMI consists of both principal and interest components.
What is NPA?
NPA stands for Non-Performing Asset. It refers to a loan or advance for which
the principal or interest payment has been overdue for a period of 90 days or
more.
How would you recover a loan?
Loan recovery involves several steps:
[Link]: The lender contacts the borrower to remind them of
overdue payments.
[Link]: The lender may negotiate a revised repayment plan.
[Link] Action: If the borrower still does not repay, the lender may take legal
action to recover the loan.
[Link] Seizure: If the loan is secured, the lender may seize the collateral
to recover the outstanding amount.
How can Banks get out of NPAs?
Banks can manage Non-Performing Assets (NPAs) through various strategies:
[Link] Loans: Renegotiating the terms of the loan to make it easier
for the borrower to repay.
[Link] Reconstruction: Selling the NPAs to Asset Reconstruction Companies
(ARCs).
[Link] Action: Taking legal action against defaulters to recover dues.
[Link] of Collateral: Selling the collateral pledged against the loan.
[Link]-Offs: Writing off the loan as a loss, which helps clean up the bank's
balance sheet.
Act formed to deal with NPA
The SARFAESI Act (Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act) was enacted in 2002 to help banks and
financial institutions recover their NPAs efficiently.
What is SARFAESI Act?
The SARFAESI Act allows banks and financial institutions to enforce their
security interest without the intervention of courts. This means they can take
possession of the collateral and sell it to recover dues from defaulting
borrowers.
Who is a willful defaulter?
A willful defaulter is a borrower who has deliberately avoided repaying the
loan despite having the capacity to do so. This can include diverting funds for
purposes other than the intended use of the loan.
What is “writing off loan”?
Writing off a loan means that the bank acknowledges that the loan is unlikely
to be recovered and removes it from its balance sheet as a loss. This does not
mean the bank forgives the loan; it still attempts to recover the dues through
other means.