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SSC CGL RBI, Banks & NBFC

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This page covers SSC CGL RBI, Banks & NBFC with complete concept notes, 27 graded practice MCQs, key points and exam-specific tips. Free to study.

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Concept Notes

RBI, Banks & NBFC— Rules & Concept

1.Core Concept

Read this first — the foundation of the topic

RBI, BANKS & NBFC — Complete Study Guide for SSC CGL ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━

CORE CONCEPT — What is RBI? ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━

RBI stands for Reserve Bank of India. It is the CENTRAL BANK of India. Think of it as the 'bank of all banks.' It was established on April 1, 1935 under the RBI Act, 1934. It was nationalised in 1949. Headquarters: Mumbai. The RBI Governor is the head. The current RBI Governor (as of 2024) is Sanjay Malhotra. RBI does NOT deal with the public directly. It controls money supply, inflation, and the banking system of India.

━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ KEY FUNCTIONS OF RBI

━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ 1. Issues currency notes (except 1 rupee coin/note — issued by Ministry of Finance)

2. Acts as banker to the Government of India 3. Controls credit and money supply (Monetary Policy)

4. Regulates all commercial banks and NBFCs 5. Maintains foreign exchange reserves

6. Acts as lender of last resort TRICK: '1 rupee note' — this is a TRAP question. The 1-rupee note has the signature of Finance Secretary, NOT RBI Governor.

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2.Formula Block

Memorise — at least one formula appears in every paper
Repo Rate = Rate at which RBI lends money TO banks (short term)
Reverse Repo Rate = Rate at which RBI BORROWS money FROM banks
CRR (Cash Reserve Ratio) = % of deposits banks MUST keep with RBI (no interest earned)
SLR (Statutory Liquidity Ratio) = % of deposits banks must keep in liquid assets (gold, govt securities)
Bank Rate = Rate for long-term lending by RBI to banks
MSF (Marginal Standing Facility) = Emergency overnight borrowing rate for banks
RBI raises Repo Rate → borrowing becomes costly → money supply falls → inflation DECREASES
RBI lowers Repo Rate → borrowing becomes cheap → money supply rises → inflation INCREASES
CRR = Cash with RBI (C for Central Bank)
SLR = Securities/Liquid assets kept by bank itself (S for Self)
Scheduled Banks = Listed in 2nd Schedule of RBI Act (SBI, PNB, HDFC etc.)
Non-Scheduled Banks = Not listed; operate under stricter rules
Commercial Banks = Accept deposits, give loans (SBI, Axis, ICICI)
Cooperative Banks = Work on cooperative principles (for rural areas)
Regional Rural Banks (RRBs) = Set up under RRB Act 1976; serve rural poor
Small Finance Banks = Serve small borrowers, microfinance
Payments Banks = Can accept deposits up to Rs. 2 lakh; CANNOT give loans (Paytm, Airtel)

Monetary Policy Tools

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These are the weapons RBI uses to control inflation and money supply:

SHORTCUT 1 — Direction Trick:

SHORTCUT 2 — CRR vs SLR Memory Trick:

SHORTCUT 3 — Formula to remember rate hierarchy:

MSF Rate > Repo Rate > Reverse Repo Rate

(MSF is always ABOVE Repo; Reverse Repo is always BELOW Repo)

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TYPES OF BANKS IN INDIA

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NBFC — Non-Banking Financial Company:

An NBFC does financial work (loans, investments) but is NOT a bank. It CANNOT accept demand deposits. Regulated by RBI. Example: Bajaj Finance, Muthoot Finance, HDFC Ltd (before merger).

Key Difference — NBFC vs Bank:

Banks can accept demand deposits + are part of payment/settlement system + have deposit insurance (DICGC covers up to Rs. 5 lakh)

NBFCs cannot accept demand deposits + not part of payment system + no DICGC cover

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3.Exam Patterns

What examiners ask — read before attempting PYQs

— What Gets Asked? ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ → Who issues 1-rupee note? (Trap: Finance Ministry, NOT RBI) → What is current Repo Rate / CRR / SLR? → What does NBFC stand for? Can it accept deposits? → Which bank was established first in India? → RBI established year, HQ, and nationalisation year → Payments Bank deposit limit = Rs. 2 lakh → DICGC insurance limit = Rs. 5 lakh per depositor per bank ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━

4.Worked Example

Solve this step-by-step before moving on
1
Step 1

CRR means banks must keep MORE cash with RBI.

2
Step 2

If they keep more with RBI, they have LESS money to lend to public.

3
Step 3

Therefore, money supply in economy DECREASES.

4
Step 4

This is used to CONTROL inflation (tight monetary policy). Answer: Money available for lending DECREASES → inflation is controlled. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ WORKED EXAMPLE 2 ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Question: A bank has total deposits of Rs. 1000 crore. CRR = 4%, SLR = 18%. How much must be kept as CRR and SLR?

1
Step 1

CRR = 4% of 1000 = Rs. 40 crore (kept with RBI, earns NO interest)

2
Step 2

SLR = 18% of 1000 = Rs. 180 crore (kept as liquid assets by bank itself)

3
Step 3

Total locked = 40 + 180 = Rs. 220 crore

4
Step 4

Money available for lending = 1000 - 220 = Rs. 780 crore Answer: CRR = Rs. 40 crore | SLR = Rs. 180 crore | Lendable = Rs. 780 crore ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ NUMBER 1 COMMON TRAP — DO NOT FALL FOR THIS ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Students think RBI issues ALL currency. WRONG. The 1-rupee coin and 1-rupee note are issued by the Ministry of Finance (Government of India), signed by Finance Secretary. All other notes (Rs. 2 and above) are issued by RBI and signed by RBI Governor. This is asked in EVERY exam cycle.

Key Points to Remember

  • RBI was established on April 1, 1935 under the RBI Act, 1934 and nationalised in 1949.
  • RBI Headquarters is in Mumbai; it is India's Central Bank and regulator of all banks and NBFCs.
  • SHORTCUT: 1-rupee note = Finance Ministry (Finance Secretary signs); all other notes = RBI (Governor signs).
  • FORMULA: Repo Rate > Reverse Repo Rate always; MSF Rate > Repo Rate always.
  • CRR = % of deposits kept as CASH with RBI (earns zero interest); SLR = % kept as liquid assets by bank itself.
  • SHORTCUT: RBI raises Repo Rate → money supply falls → inflation decreases (and vice versa).
  • Payments Banks can accept deposits up to Rs. 2 lakh but CANNOT give loans — key exam distinction.
  • DICGC (Deposit Insurance) covers up to Rs. 5 lakh per depositor per bank.
  • NBFC cannot accept demand deposits and is NOT part of the payment/settlement system unlike regular banks.
  • SHORTCUT: RRBs were set up under RRB Act 1976 to serve rural areas; they are scheduled commercial banks.

Exam-Specific Tips

  • RBI was established on April 1, 1935 under the Reserve Bank of India Act, 1934.
  • RBI was nationalised in 1949; its headquarters is in Mumbai (Fort area).
  • The 1-rupee note is issued by the Ministry of Finance and signed by the Finance Secretary — NOT the RBI Governor.
  • DICGC (Deposit Insurance and Credit Guarantee Corporation) provides insurance cover of Rs. 5 lakh per depositor per bank.
  • Payments Banks can accept deposits up to a maximum of Rs. 2 lakh per customer but cannot issue loans or credit cards.
  • Regional Rural Banks (RRBs) were established under the RRB Act, 1976 to provide credit to rural and agricultural sectors.
  • MSF (Marginal Standing Facility) allows banks to borrow overnight funds from RBI at a rate higher than Repo Rate, against government securities.
  • The first bank established in India was Bank of Hindustan in 1770; the oldest public sector bank still operating is Bank of Baroda (1908), while SBI traces its origin to Bank of Calcutta (1806).
Practice MCQs

RBI, Banks & NBFC — Practice Questions

27graded MCQs · easy to hard · full solution & trap analysis · showing 20 of 27

All MCQs →
Practice 1easy

What is the primary difference between a Bank and a Non-Banking Financial Company (NBFC)?

Practice 2easy

Which of the following is NOT a function of the Reserve Bank of India (RBI)?

Practice 3easy

The Reserve Bank of India (RBI) was established in which year?

Practice 4easy

Which of the following best describes the Repo Rate set by the RBI?

Practice 5easy

What is the Cash Reserve Ratio (CRR) that commercial banks must maintain with the RBI as of 2024?

Practice 6easy

Which of the following is the primary function of the Reserve Bank of India (RBI) in the Indian banking system?

Practice 7easy

Under which ministry is the MUDRA (Micro Units Development and Refinance Agency) scheme operated?

Practice 8easy

The Pradhan Mantri MUDRA Yojana was launched to provide collateral-free loans to which sector?

Practice 9medium

The Cash Reserve Ratio (CRR) is the percentage of deposits that commercial banks must maintain with the Reserve Bank of India. Which of the following best describes the impact of an increase in CRR?

Practice 10medium

The Pradhan Mantri Jan Dhan Yojana (PMJDY) was launched with the primary aim of achieving financial inclusion. In which year was PMJDY launched?

Practice 11medium

The Repo Rate is the rate at which the RBI lends money to commercial banks. Which of the following correctly describes the relationship between Repo Rate and lending by commercial banks?

Practice 12medium

The Pradhan Mantri Jan Dhan Yojana (PMJDY) was launched in which year, and which ministry oversees it?

Practice 13medium

As per RBI guidelines, the Cash Reserve Ratio (CRR) is the percentage of deposits that commercial banks must maintain with the RBI. Which of the following best describes the impact of an increase in CRR?

Practice 14medium

Which of the following is a key difference between a Scheduled Commercial Bank (SCB) and a Non-Banking Financial Company (NBFC)?

Practice 15medium

Which of the following best describes the primary function of the Statutory Liquidity Ratio (SLR) as mandated by the Reserve Bank of India?

Practice 16medium

Which of the following is the primary objective of the Pradhan Mantri Mudra Yojana (PMMY)?

Practice 17medium

The Pradhan Mantri MUDRA Yojana was launched to provide collateral-free loans to micro and small enterprises. In which year was it launched?

Practice 18medium

Which of the following statements about the Statutory Liquidity Ratio (SLR) is correct?

Practice 19hard

As per RBI's monetary policy framework (2024), which of the following best describes the relationship between the Repo Rate and Reverse Repo Rate?

Practice 20hard

Under the RBI Act, 1934, which section empowers the Reserve Bank of India to act as the 'Lender of Last Resort' by providing emergency liquidity support to scheduled commercial banks?

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60-Second Revision — RBI, Banks & NBFC

  • Remember: RBI established 1935, nationalised 1949, HQ Mumbai — these three facts appear in direct MCQs every year.
  • Trap: 1-rupee note is issued by Finance Ministry (Finance Secretary signs), NOT RBI. All other notes = RBI Governor signs.
  • Formula: MSF Rate > Repo Rate > Reverse Repo Rate — rate hierarchy never changes.
  • Formula: CRR = cash kept WITH RBI (no interest); SLR = liquid assets kept BY the bank itself.
  • Remember: NBFC cannot accept DEMAND deposits and has NO DICGC deposit insurance cover unlike banks.
  • Remember: Payments Bank deposit limit = Rs. 2 lakh; DICGC insurance limit = Rs. 5 lakh per depositor per bank.
  • Trick: RBI raises Repo/CRR/SLR → money supply falls → inflation controlled; RBI lowers these → money supply rises → growth boosted.
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