General Awareness with special reference to Banking Industry
What the section tests
General Awareness with special reference to Banking Industry tests the RBI, monetary policy, banking structure, payment systems, financial inclusion, and basic financial markets. Nainital Bank-specific facts can appear because it is a scheduled commercial bank and a subsidiary of Bank of Baroda, headquartered in Nainital, Uttarakhand.
Core rules
- Repo is the rate at which RBI lends short-term funds to banks against government securities; reverse repo absorbs liquidity. CRR is cash held with RBI and earns no interest; SLR is held in approved securities and gold.
- Priority sector lending target is 40% of adjusted net bank credit for domestic commercial banks; weaker sections are a sub-target.
- RTGS is for high-value, real-time gross settlement with a minimum of ₹2 lakh; NEFT is a deferred net settlement batch system; IMPS and UPI run 24×7. UPI is operated by NPCI.
- DICGC insures deposits up to ₹5 lakh per depositor per bank.
Worked example
If RBI raises the repo rate, banks' marginal cost of funds rises. Transmission usually pushes lending rates up, which can cool credit demand and inflation. Deposit rates may also reprice upward with a lag. The reasoning chain is: policy rate up, cost of funds up, lending and deposit rates up, credit growth moderates.
Traps
Confusing CRR with SLR; describing reverse repo as a lending rate; mixing NEFT with RTGS settlement; and using stale figures for policy rates or GDP. Learn the mechanism first, then attach the latest number only if the question expects it.