I85PREP
⌘ K
JAIIB IE&IFS study materials
JAIIB IE&IFS study resources

JAIIB IE&IFS: Indian Financial System: Institutions, Markets and Regulation

JAIIB IE&IFS · Work through your exam, one topic at a time.

All guide sections

Indian Financial System: Institutions, Markets and Regulation

Indian Financial System

This section covers the Indian Financial System domain of JAIIB IE&IFS. The exam tests the architecture of institutions, markets, instruments, regulators and inclusion mechanisms, and whether you can match each instrument or entity to its rule.

Core rules and concepts

  • RBI regulates monetary policy, banks, NBFCs, payment systems and forex; SEBI regulates securities markets; IRDAI regulates insurance; PFRDA regulates pensions. The FSDC supports inter-regulatory coordination.
  • Scheduled commercial banks, small finance banks, payments banks, cooperative banks and RRBs form the banking structure. NBFCs cannot accept demand deposits, are not part of the payment and settlement system as banks are, and their deposits are not insured by DICGC.
  • Money market instruments include T-bills, commercial paper, certificates of deposit, call/notice money and repo. T-bills are government issuances; CP is issued by corporates; CDs by banks. Capital markets cover equity, debt and derivatives.
  • Priority sector lending is 40% of adjusted net bank credit (ANBC); agriculture is 18%, weaker sections 12% and micro enterprises 7.5%. DICGC insures deposits up to Rs 5 lakh per depositor per bank.

Worked example

A bank has ANBC of Rs 10,000 crore. Its agriculture target is 18% of Rs 10,000 crore = Rs 1,800 crore. If actual agriculture lending is Rs 1,500 crore, the shortfall is Rs 300 crore. If total PSL is Rs 3,800 crore, the overall PSL achievement is 38%, a 2 percentage point shortfall against the 40% target. The reasoning is to apply each target to ANBC, not to total assets or deposits.

Traps that cost marks

  • A banking licence and scheduled status are different; scheduled banks are included in the Second Schedule of the RBI Act.
  • Do not treat NBFCs as banks: they cannot accept demand deposits and do not have DICGC cover.
  • T-bills are not corporate paper; commercial paper is.
  • SEBI does not regulate commercial banks; RBI does.
  • Deposit insurance is per depositor per bank, not per branch or per account.