Banking Operations and Products
What the exam tests here
Day-to-day branch mechanics: deposit and loan products, KYC, cheque rules, payment systems and priority-sector targets. Questions are usually applied - a figure, a rule, a short calculation.
Core rules and concepts
- Deposits: savings (interest on daily balance, currently regulated minimum rates), current (no interest, meant for businesses), fixed (term, penalty for premature withdrawal), recurring. CASA ratio = current + savings deposits ÷ total deposits and is a low-cost-fund indicator.
- Loans: fund-based (cash credit, overdraft, term loan) versus non-fund-based (letter of credit, bank guarantee). Secured versus unsecured.
- Priority Sector Lending: 40% of Adjusted Net Bank Credit for domestic commercial banks; within it 18% agriculture (with 10% for small and marginal farmers), 7.5% micro enterprises, 12% weaker sections. Shortfall is parked in RIDF with NABARD.
- KYC: Customer Due Diligence, beneficial-ownership identification, periodic updation - low risk 10 years, medium 8 years, high 2 years.
- Cheques: a stale cheque is one presented more than 3 months after its date; crossing, endorsement and CTS clearing apply. NEFT has no minimum or maximum and runs 24x7; RTGS minimum is ₹2 lakh and runs 24x7.
Worked example
A bank's ANBC is ₹5,000 crore. Agriculture target = 18% = ₹900 crore. Actual agriculture lending is ₹810 crore. Shortfall = ₹90 crore, which must be deposited with NABARD in the RIDF. Reasoning: compute the target on ANBC, compare against actual, and route the gap to RIDF.
Traps that cost marks
- Writing a maximum limit for RTGS (there is none).
- Saying current accounts earn interest.
- Using six months for cheque validity instead of three.
- Forgetting that a joint account holder can be nominated against.