RBSE Sec Voc Banking, Financial Services and Insurance cheat sheet

RBI was constituted on 1 April 1935 under the Reserve Bank of India Act 1934 and was nationalised on 1 January 1949; it is the monetary authority, banker to the government and lender of last resort.

A bank must hold a licence under Section 22 of the Banking Regulation Act 1949, and is 'scheduled' only when listed in the Second Schedule of the RBI Act 1934 (paid-up capital plus reserves of at least Rs 5 lakh and satisfactory conduct of business).

Institutional map: commercial banks (public sector, private, foreign, small finance banks, payments banks), cooperative banks (urban and rural) and regional rural banks. Payments banks may accept deposits up to Rs 2 lakh per customer but cannot lend or issue credit cards.

Development finance institutions: NABARD (1982, agriculture and rural), SIDBI (1990, MSME), NHB (1988, housing), EXIM Bank (1982, foreign trade); NABARD also supervises rural cooperative banks and RRBs.

Regulators: RBI (banks, NBFCs, payment systems, PPIs), SEBI (securities and mutual funds), IRDAI (insurance), PFRDA (pensions); the Financial Stability and Development Council, chaired by the Union Finance Minister, coordinates them.

Monetary policy is set by the six-member Monetary Policy Committee chaired by the RBI Governor, who has the casting vote; the flexible inflation target is 4% CPI with a tolerance band of +/- 2%.

Money market instruments (up to one year) include treasury bills of 91, 182 and 364 days, commercial paper, certificates of deposit, call money and repo; the capital market covers equity, corporate bonds and derivatives.

Financial inclusion architecture: Pradhan Mantri Jan Dhan Yojana (2014), business correspondent model, RuPay cards, Direct Benefit Transfer through Aadhaar seeding, and differentiated licences for small finance and payments banks.

Deposit families: savings (interest-bearing, restrictions on withdrawals), current (no interest, for businesses), fixed and recurring deposits, and NRI variants - NRE (rupee, repatriable), NRO (rupee, non-repatriable), FCNR(B) (foreign-currency term deposit).

CASA ratio = (current account + savings account deposits) / total deposits. CASA is the cheapest funding source, so a rising CASA ratio generally widens net interest margin.

Joint account operating modes: 'either or survivor', 'former or survivor', 'anyone or survivor' and 'jointly'; nomination is made under Section 45ZA of the Banking Regulation Act 1949 and the nominee acts as a trustee for legal heirs, not as owner.

Capital adequacy: CRAR = (Tier 1 + Tier 2 capital) / risk-weighted assets; Indian banks must keep a minimum of 9% plus a capital conservation buffer of 2.5%, with Basel III liquidity and leverage ratios alongside.

Priority sector lending target is 40% of adjusted net bank credit, with sub-targets including agriculture 18%, small and marginal farmers 10%, micro enterprises 7.5% and weaker sections 12%.

Working capital products: cash credit (limit against hypothecation of stock and book debts, interest on utilisation), overdraft (on a current account), bill discounting and letter of credit; term loans fund capital expenditure and carry a repayment schedule.

Core Banking Solution centralises customer accounts on a single server, enabling anywhere banking, straight-through processing, centralised reconciliation and real-time MIS; branch becomes a service point rather than a book-keeping unit.

Cheque rules: CTS-2010 standard stationary with prescribed field placement, validity of three months from the date of the instrument, and Section 138 of the Negotiable Instruments Act 1881 for dishonour of a cheque issued for a legally enforceable debt.

NPCI operates UPI, IMPS, NACH, RuPay, AePS, FASTag/NETC, Bharat BillPay and UPI 123Pay; NACH handles bulk credit and debit (salary, subsidy, EMI) and AePS enables Aadhaar-based banking at micro ATMs.

NEFT is a deferred net settlement system available 24x7 since December 2019 with no minimum or maximum amount; RTGS is gross, real-time and final, with a minimum of Rs 2 lakh and no upper limit, available 24x7 since December 2020.

UPI needs a virtual payment address; the standard cap is Rs 1 lakh per transaction, with higher caps for notified categories such as Rs 5 lakh for tax payments and for IPO/RBI Retail Direct applications.

Two-factor authentication is mandatory for domestic card-not-present transactions; card-on-file tokenisation replaced stored card numbers from 1 October 2022, and contactless taps up to Rs 5,000 do not need a PIN.

Prepaid Payment Instruments: closed (single merchant), semi-closed small (limit Rs 10,000, no cash-out) and semi-closed full-KYC (limit Rs 2 lakh), and open PPIs issued by banks that permit cash withdrawal.

RBI Digital Lending Guidelines 2022: disbursal and repayment must flow directly between the borrower's bank account and the regulated entity, no first-loss default guarantee from lending service providers, a Key Fact Statement, and a cooling-off period to exit the loan.

Account Aggregator is an NBFC-AA that shares financial data only with explicit consent; the consent artefact records purpose, data types, frequency and duration, and can be revoked.

Video-based KYC (V-CIP) is permitted for account-based relationships, with live location and IP capture, face matching against an officially valid document, and retention of the recording.

CBDC pilots: e-rupee wholesale (CBDC-W) for interbank settlement and retail (CBDC-R) as a token-based digital currency liability of the RBI.

NBFCs register with RBI under Section 45-IA of the RBI Act 1934; they may lend and invest but cannot accept demand deposits or issue cheques drawn on themselves, and must maintain the prescribed minimum net owned funds.

Scale Based Regulation (October 2021) layers NBFCs as Base (NOF below Rs 1,000 crore), Middle (Rs 1,000–5,000 crore), Upper (above Rs 5,000 crore) and Top, with rules tightening at each layer.

Common NBFC categories: NBFC-ICC (infrastructure and general lending), NBFC-MFI, NBFC-Factor, NBFC-P2P, NBFC-AA and Core Investment Companies; housing finance companies moved to RBI regulation in 2019.

Mutual fund structure under SEBI (Mutual Funds) Regulations 1996: sponsor promotes the fund and contributes at least 40% of the AMC's net worth, a trustee (at least two-thirds independent) oversees, and the AMC runs the schemes.

NAV = (Total assets - Liabilities) / Units outstanding, computed daily; scheme AUM = NAV x units outstanding, while the expense ratio reduces the NAV that investors actually earn.

SEBI caps total expense ratio by scheme type and by the first Rs 500 crore slab - roughly 2.25% for equity schemes and 2.00% for debt schemes - and direct plans must exclude distributor commission, so their TER is lower than regular plans.

ELSS schemes carry a three-year lock-in and qualify for Section 80C deduction up to Rs 1.5 lakh; SIP invests a fixed sum periodically, STP shifts money between schemes, SWP withdraws a fixed sum periodically.

Capital market plumbing: primary market issues (IPO, FPO) use ASBA, with UPI payment allowed for retail applications up to Rs 5 lakh; secondary trades settle on T+1, securities are held in demat form with NSDL or CDSL, and SEBI regulates exchanges and intermediaries.

Credit rating agencies registered with SEBI (CRISIL, ICRA, CARE, India Ratings, Acuite, Brickwork) assign ratings that feed into bond pricing, bank capital and mutual fund investment rules.

Core principles: insurable interest, utmost good faith, indemnity, contribution, subrogation, proximate cause and loss minimisation. Life insurance is a benefit contract, not a contract of indemnity; general insurance is indemnity-based.

Life product types: term (pure risk, no maturity value), whole life, endowment, money-back, ULIP (minimum lock-in five years, with charges and mortality caps) and annuity/pension plans.

Governance: the Insurance Act 1938, IRDAI Act 1999 and IRDAI as regulator since 2000; life insurance was nationalised in 1956 and private participation reopened in 2000.

Policyholder timelines: free-look period of 30 days from receipt of the policy document, grace period of 15 days for monthly mode and 30 days for other modes, and revival window of five years from the due date of the first unpaid premium.

Nomination is made under Section 39 and assignment under Section 38 of the Insurance Act 1938; most life policies exclude death by suicide in the first 12 months from inception or revival.

Health insurance: pre-existing disease waiting periods are capped at 36 months, the moratorium after which no claim can be contested for non-disclosure is 60 continuous months, and portability must be honoured without fresh waiting periods for covered conditions.

General insurance claims: a licensed surveyor is required for claims above Rs 50,000 under Section 64UM of the Insurance Act 1938; motor third-party liability insurance is compulsory under the Motor Vehicles Act 1988.

Claims decision rule: immediate intimation, registration and document checklist, surveyor assessment for general insurance, and repudiation only on defined grounds such as non-disclosure, exclusion or fraud, with written reasons and a grievance route.

Statute map: RBI Act 1934, Banking Regulation Act 1949 (Section 35A gives RBI directions powers), FEMA 1999 for foreign exchange, PMLA 2002 administered through FIU-IND, SEBI Act 1992, IRDAI Act 1999 and PFRDA Act 2013.

KYC has three legs: Customer Due Diligence (identify, verify, understand purpose, monitor), Enhanced Due Diligence for high-risk customers and PEPs, and ongoing monitoring linked to the customer's risk category.

Beneficial ownership thresholds under the PML rules: 25% of shares or voting rights for companies, 15% of capital or profits for partnership firms, and 15% of property or interest for trusts and unincorporated bodies.

Periodic KYC updation cycle: high-risk customers every 2 years, medium-risk every 8 years, low-risk every 10 years; small accounts are capped at Rs 1 lakh aggregate credits a year and Rs 10,000 balance and monthly withdrawal.

Reporting to FIU-IND: Cash Transaction Report for cash above Rs 10 lakh in a month (Rs 50 lakh aggregate in a current account), Suspicious Transaction Report with no monetary threshold, and cross-border wire transfers above Rs 5 lakh.

Deposit insurance: DICGC covers up to Rs 5 lakh per depositor per bank, covering principal plus interest, for commercial and cooperative banks.

Grievance framework: complaint first to the regulated entity, which has 30 days to respond; thereafter the RBI Integrated Ombudsman Scheme 2021 applies, with the complaint filed within one year of the cause of action.

Enforcement and recovery tools: SARFAESI Act 2002 for secured asset enforcement, DRT for debt recovery, IBC 2016 for insolvency, and RBI's fraud framework with Red Flagged Accounts and CRILC reporting for large exposures.

Penal charges (2024 rules) must be disclosed in the Key Fact Statement, cannot be capitalised or compounded, and are distinct from penal interest on the loan amount.

Fair Practices Code duties: transparent Most Important Terms and Conditions, no unsolicited issuance of cards or loans, reason in writing for loan rejection, and no interference with the customer's right to choose a product.

Key Fact Statement for retail and MSME loans must show the all-inclusive annual percentage rate, fees, penal charges and grievance redressal, and is given before the loan agreement is signed.

Grievance ladder: branch or relationship manager, then nodal officer, then the Internal Ombudsman (mandatory for banks with more than 10 branches), then RBI Ombudsman; SEBI complaints run through SCORES and the ODR portal.

Sales-ethics decision rules: risk-profile the customer and match product suitability, disclose commissions and all charges, never promise guaranteed returns on market-linked products, and treat the free-look period as the customer's safety net.

MSME classification from 1 April 2025: micro (investment up to Rs 2.5 crore and turnover up to Rs 10 crore), small (up to Rs 25 crore and Rs 100 crore), medium (up to Rs 125 crore and Rs 500 crore).

Pradhan Mantri MUDRA Yojana slabs: Shishu up to Rs 50,000, Kishore Rs 50,001 to Rs 5 lakh, Tarun Rs 5–10 lakh and Tarun Plus Rs 10–20 lakh, all collateral-free.

Stand-Up India gives Rs 10 lakh to Rs 1 crore to at least one SC/ST and one woman entrepreneur per branch; CGTMSE provides guarantee cover for collateral-free MSME loans, and TReDS discounts MSME receivables.

An entrepreneurship plan for BFSI must show licence and capital requirements (for example, an NBFC needs RBI registration and minimum net owned funds), unit economics, customer acquisition cost, cash-flow and break-even projections, and a compliance and risk plan.