Graduate Level intermediate Banking RBI SEBI NABARD Indian Economy
Indian Economy: Banking, RBI, and Financial Institutions
RBI, scheduled banks, NABARD, SEBI, monetary policy, and financial inclusion schemes — complete PSC banking notes.
Published: 20 Apr 2026
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Banking and financial institutions are tested heavily in PSC exams — expect 4-8 questions per paper on RBI, banks, monetary policy, and government schemes.
Reserve Bank of India (RBI)
| Fact | Detail |
|---|---|
| Established | 1 April 1935 (based on Hilton Young Commission, 1926) |
| Nationalised | 1 January 1949 |
| Headquarters | Mumbai (Shahid Bhagat Singh Road) |
| Current Governor | Sanjay Malhotra (as of April 2025) |
| First Governor | Sir Osborne Smith (British era) |
| First Indian Governor | C.D. Deshmukh |
| Act | Reserve Bank of India Act, 1934 |
| Regulates | Banks, NBFCs, payment systems, forex |
Functions of RBI
- Monetary Authority — formulates monetary policy (Repo Rate, CRR, SLR)
- Issuer of Currency — sole authority to issue banknotes (except Re 1 note — issued by Ministry of Finance, signed by Finance Secretary)
- Banker to Government — manages government accounts, public debt
- Banker’s Bank — lender of last resort to commercial banks
- Forex Manager — manages foreign exchange reserves
- Regulator of Banks — licensing, supervision, inspection
- Developmental Role — priority sector lending, financial inclusion
RBI Monetary Policy Tools
| Tool | Current Rate (approx.) | Purpose |
|---|---|---|
| Repo Rate | 6.00% (Apr 2025) | Rate at which RBI lends to banks (key policy rate) |
| Reverse Repo Rate | 3.35% | Rate at which RBI borrows from banks |
| CRR (Cash Reserve Ratio) | 4.00% | % of deposits banks must keep with RBI as cash |
| SLR (Statutory Liquidity Ratio) | 18.00% | % of deposits banks must hold in gold/govt securities |
| Bank Rate | 6.25% | Rate for long-term lending to banks |
| MSF (Marginal Standing Facility) | 6.25% | Emergency overnight borrowing (Repo + 0.25%) |
Key: Repo rate increase = costlier loans = less money supply = controls inflation.
Monetary Policy Committee (MPC)
- Established under amended RBI Act (2016)
- 6 members: 3 from RBI (Governor as chairman, Deputy Governor, 1 RBI officer) + 3 external (appointed by Government)
- Target: CPI inflation at 4% (with ±2% band: 2%-6%)
- Meets at least 4 times a year
Bank Nationalisation
| Phase | Year | Banks Nationalised | PM |
|---|---|---|---|
| First | 19 July 1969 | 14 banks (with deposits > ₹50 crore) | Indira Gandhi |
| Second | 15 April 1980 | 6 banks (with deposits > ₹200 crore) | Indira Gandhi |
14 banks of 1969: Allahabad Bank, Bank of Baroda, Bank of India, Bank of Maharashtra, Canara Bank, Central Bank of India, Dena Bank, Indian Bank, Indian Overseas Bank, Punjab National Bank, Syndicate Bank, UCO Bank, Union Bank of India, United Bank of India.
Imperial Bank of India → nationalized as State Bank of India in 1955 (not part of 1969/1980).
Important Financial Institutions
| Institution | Est. | HQ | Function |
|---|---|---|---|
| NABARD | 1982 | Mumbai | Apex bank for rural/agriculture credit (Sivaraman Committee) |
| SEBI | 1988 (statutory 1992) | Mumbai | Regulates stock markets, protects investors |
| SIDBI | 1990 | Lucknow | Small industries development |
| EXIM Bank | 1982 | Mumbai | Export-import financing |
| NHB (National Housing Bank) | 1988 | Delhi | Housing finance regulation |
| IRDA (IRDAI) | 1999 | Hyderabad | Insurance regulation |
| PFRDA | 2003 | Delhi | Pension fund regulation (NPS) |
| MUDRA | 2015 | — | Micro Units Development & Refinance Agency |
Types of Banks in India
| Type | Examples | Key Feature |
|---|---|---|
| Public Sector Banks | SBI, PNB, BOB, Canara Bank | Government owns >50% |
| Private Sector Banks | HDFC Bank, ICICI, Axis, Kotak | Private ownership |
| Small Finance Banks | AU, Ujjivan, Equitas | Minimum 75% to priority sector |
| Payments Banks | Paytm, Airtel, India Post | Max deposit ₹2 lakh; no loans |
| Regional Rural Banks (RRBs) | Established 1975 (Narasimham Committee) | Rural credit |
| Cooperative Banks | State/District level | State govt + RBI regulated |
| Foreign Banks | Citibank, HSBC, Standard Chartered | Operate under RBI licence |
Scheduled Banks: Listed in the 2nd Schedule of RBI Act. Must have paid-up capital ≥ ₹5 lakh and satisfy RBI about their affairs.
Banking Reforms — Key Committees
| Committee | Year | Recommendation |
|---|---|---|
| Narasimham Committee I | 1991 | Banking sector reforms, reduce CRR/SLR, NPA management |
| Narasimham Committee II | 1998 | Capital adequacy, merger of weak banks |
| Khan Committee | 1997 | Harmonising role of RBI and SEBI |
| Raghuram Rajan Committee | 2008 | Financial sector reforms |
| P.J. Nayak Committee | 2014 | Governance of bank boards |
Stock Exchanges
| Exchange | Est. | Location | Index |
|---|---|---|---|
| BSE (Bombay Stock Exchange) | 1875 | Mumbai | Sensex (30 stocks) |
| NSE (National Stock Exchange) | 1992 | Mumbai | Nifty 50 (50 stocks) |
BSE is the oldest stock exchange in Asia.
Government Financial Inclusion Schemes
| Scheme | Year | Key Feature |
|---|---|---|
| Jan Dhan Yojana (PMJDY) | 2014 | Zero-balance bank accounts; RuPay debit card; ₹2 lakh accident insurance |
| Mudra Yojana (PMMY) | 2015 | Loans to micro enterprises: Shishu (≤₹50K), Kishore (₹50K-5L), Tarun (₹5L-10L) |
| Atal Pension Yojana | 2015 | Pension for unorganized sector; ₹1,000-5,000/month guaranteed |
| Sukanya Samriddhi Yojana | 2015 | Girl child savings; ~8% interest; tax-free |
| Stand-Up India | 2016 | Loans ₹10L-1Cr to SC/ST/women entrepreneurs |
| PM Jeevan Jyoti Bima | 2015 | Life insurance ₹2 lakh; premium ₹436/year |
| PM Suraksha Bima | 2015 | Accident insurance ₹2 lakh; premium ₹20/year |
| PM Vishwakarma | 2023 | Artisans and craftspeople support |
| Digital India | 2015 | UPI, Aadhaar-linked payments, digital literacy |
Fiscal Policy Terms
| Term | Meaning |
|---|---|
| Fiscal Deficit | Total expenditure - Total receipts (excluding borrowings) |
| Revenue Deficit | Revenue expenditure - Revenue receipts |
| Primary Deficit | Fiscal deficit - Interest payments |
| Budget Deficit | Total expenditure - Total receipts |
| GDP | Gross Domestic Product — total value of goods & services within borders |
| GNP | GDP + Net factor income from abroad |
| NNP | GNP - Depreciation (= National Income at market price) |
| Per Capita Income | National Income / Population |
| Inflation | Sustained rise in general price level |
| Deflation | Sustained fall in general price level |
| Stagflation | Inflation + unemployment + stagnant growth |
Tax Structure
| Tax Type | Examples | Collected By |
|---|---|---|
| Direct Tax | Income Tax, Corporate Tax, Capital Gains Tax | Central |
| Indirect Tax | GST (replaced VAT, Excise, Service Tax in 2017) | Centre + State |
| GST Council | Chairman: Union FM; members: state FMs | Article 279A |
| GST Rates | 0%, 5%, 12%, 18%, 28% | Slab-based |
101st Constitutional Amendment (2016) introduced GST. Implemented 1 July 2017.
Five-Year Plans to NITI Aayog
- Planning Commission: 1950–2014 (chaired by PM)
- First Five-Year Plan: 1951–56 (based on Harrod-Domar model; focused on agriculture)
- NITI Aayog: Replaced Planning Commission on 1 January 2015
- Chairman: Prime Minister
- Vice Chairman: Appointed by PM
- Full form: National Institution for Transforming India
Quick-Fire Recall
- RBI established? 1 April 1935
- First Indian RBI Governor? C.D. Deshmukh
- Re 1 note signed by? Secretary, Ministry of Finance
- All other notes signed by? RBI Governor
- NABARD established? 1982
- Oldest stock exchange in Asia? BSE (1875)
- GST implemented? 1 July 2017
- Jan Dhan insurance cover? ₹2 lakh accident
- MPC inflation target? 4% (±2%)
- NITI Aayog replaced? Planning Commission (2015)
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