General Awareness: Banking and Housing Finance
General Awareness (Banking and Housing Finance)
This section tests current awareness of the financial system, with a deliberate tilt toward housing finance. Expect questions on RBI monetary policy, banking terminology, NHB and HFCs, mortgage markets, government housing schemes and recent regulatory changes.
Core rules and institutions
- RBI sets the repo rate, reverse repo/SDF, MSF, bank rate, CRR and SLR. Repo is the collateralised lending rate; reverse repo/SDF absorbs liquidity.
- NHB, set up under the National Housing Bank Act, 1987, is the apex housing finance institution. It refinances eligible institutions, promotes housing finance and regulates HFCs; it does not run retail banking.
- HFCs lend for housing and related purposes. Deposit-taking HFCs need specific authorisation; non-deposit HFCs raise funds through borrowings, bonds and securitisation.
- PMAY (Urban and Gramin) supports affordable housing; credit-linked subsidy and interest subsidy are common exam areas.
- NHB RESIDEX tracks residential property price movements.
Worked example
If RBI cuts the repo rate by 25 basis points, a floating-rate home loan benchmarked to an external benchmark may reset lower at the next reset date. A fixed-rate loan already disbursed does not automatically change. The correct chain is: policy rate cut → benchmark falls → floating loan rate may fall → EMI or tenure adjusts.
Traps
- Swapping repo and reverse repo directions.
- Assuming NHB accepts retail deposits like a bank.
- Mixing PMAY-Urban with PMAY-Gramin.
- Treating every rate cut as an immediate benefit for all borrowers.