General Awareness / Banking Awareness: Institutions and Transmission
General Awareness / Banking Awareness tests the economic and banking environment in which a probationary officer works: RBI and monetary policy, bank types and regulation, financial inclusion, payment systems, NPAs, capital adequacy, government schemes, and current banking/economic news. Karnataka Bank is a private-sector bank established in 1924 and headquartered in Mangaluru; know its broad identity rather than guessing at unaudited figures.
Core rules
- RBI is India’s central bank: it issues currency (except coins and ₹1 notes, which are government-issued), manages monetary policy, regulates banks, and acts as lender of last resort.
- Repo is RBI’s lending to banks against securities; reverse repo absorbs liquidity. CRR is the cash reserve ratio; SLR is the statutory liquidity ratio.
- A higher repo or CRR generally tightens liquidity and raises borrowing costs; open market operation purchases inject liquidity.
- NPA accounts are classified by overdue duration; SARFAESI, the IBC, and recovery tribunals are resolution routes.
- RTGS is high-value real-time gross settlement; NEFT is batch/24x7; UPI is instant retail.
Worked example
If RBI raises the repo rate, banks’ marginal cost of funds tends to rise, so loan and deposit rates may increase, credit growth may slow, and the rupee may be supported by higher returns. That is a chain of likely effects, not a guarantee: transmission depends on deposit competition and liquidity.
Traps that cost marks
Swapping repo and reverse repo; mixing CRR with SLR; confusing bank rate with base rate; using stale governors, rates, or chairpersons; and choosing a scheme’s launch year when the question asks about its purpose.