General Awareness: Banking, Financial and Housing-Finance Awareness
What the section tests
The General Awareness section of the LIC HFL Assistant/Associate exam focuses on banking, financial and housing-finance awareness rather than general trivia. Expect questions on RBI functions and monetary-policy tools, types of banks and deposits, NPAs and recovery laws, housing finance concepts, mortgage terms, financial inclusion and payment systems.
Core rules and concepts
- RBI monetary tools include repo rate, reverse repo rate, marginal standing facility, cash reserve ratio and statutory liquidity ratio. Repo is the rate at which RBI lends short-term funds to banks; reverse repo absorbs liquidity.
- CRR is the share of net demand and time liabilities kept as cash with RBI; SLR is held in approved securities and cash.
- SARFAESI Act allows secured creditors to enforce security without court intervention in specified cases; the Insolvency and Bankruptcy Code provides a time-bound insolvency resolution process.
- NHB is the apex housing-finance institution. Regulation of housing finance companies was transferred to RBI in 2019.
- Loan-to-value, or LTV, is the loan amount divided by the property value. A higher LTV means a smaller down payment and greater lender risk.
Worked example
A property is valued at Rs 40 lakh. The lender permits an LTV of 80%. What is the maximum loan and the minimum down payment? Reasoning: maximum loan = 80% of Rs 40 lakh = Rs 32 lakh. Down payment = Rs 40 lakh - Rs 32 lakh = Rs 8 lakh. The LTV is 32/40 = 0.80, or 80%.
Traps that cost marks
Do not interchange repo and reverse repo. Do not confuse CRR with SLR. Do not call NHB the banking regulator; RBI is the banking regulator. In LTV questions, calculate the loan on the property value, not on the borrower's income.
Key points
- Repo is RBI lending to banks; reverse repo absorbs liquidity.
- CRR is cash with RBI; SLR is held in approved securities.
- SARFAESI helps secured creditors enforce security.
- NHB is the apex housing-finance institution; HFC regulation moved to RBI in 2019.
- LTV = loan amount / property value.