General and Banking Awareness: RBI, Credit Institutions and Rural Finance
What is tested
This section blends banking awareness with general and financial awareness relevant to agriculture. Core areas are the Reserve Bank of India and monetary policy, types of accounts and loans, priority sector lending, rural credit institutions (NABARD, RRBs, cooperative banks), financial inclusion schemes, and current affairs of the last six to eight months.
Concepts to hold firmly
- RBI: established 1935, nationalised 1949; functions include currency issue, banker to government, banker's bank, lender of last resort and custodian of foreign reserves. Monetary policy is set by the six-member Monetary Policy Committee, which targets consumer price inflation at 4% with a ±2% band.
- CRR and SLR: the share of net demand and time liabilities kept as cash with RBI and as approved securities respectively; raising either tightens liquidity. Learn the mechanism rather than memorising a rate that changes at each review.
- Priority sector lending: 40% of adjusted net bank credit overall, with 18% for agriculture and a sub-target for small and marginal farmers.
- Institutions: NABARD (1982) is the apex for rural credit and refinance; SIDBI serves MSMEs; NHB serves housing; RRBs were set up from 1975 under the RRB Act 1976.
- NPA: a loan becomes non-performing when interest or principal is overdue for more than 90 days.
Worked example
A bank's adjusted net bank credit is ₹10,000 crore. Its agriculture target is 18%, i.e. ₹1,800 crore. If it has lent ₹1,500 crore to agriculture, the shortfall is ₹300 crore, which can be parked in RIDF with NABARD to earn the shortfall treatment.
Traps that cost marks
Do not mix up the regulators - RBI for banks, SEBI for securities, IRDAI for insurance, PFRDA for pensions. Kisan Credit Card is a short-term input loan, not an investment loan. Distinguish NABARD from SIDBI. Avoid answering current-affairs items from stale memory; if unsure, skip rather than guess wrongly.