Practice Questions Indian Economy

Open Market Operations refer to purchase and sale of government securities by RBI in the open market to control money supply. When RBI buys securities it injects liquidity (expansionary). When it sells securities it absorbs liquidity (contractionary). OMO is a quantitative tool under Section 17(8) of RBI Act.

RBI is known as the Bankers Bank because it provides banking services to commercial banks just as commercial banks provide services to public. RBI maintains accounts of banks provides lender of last resort facility and regulates banking operations. It is also the banker to the government.

The Narasimham Committee (Committee on Financial System) submitted its report in 1991 recommending major banking sector reforms. A second Narasimham Committee on Banking Sector Reforms submitted report in 1998. Key recommendations included reduction in CRR/SLR prudential norms and entry of private banks.

The minimum amount for RTGS transaction is Rs 2 lakh. There is no maximum limit for RTGS. For amounts below Rs 2 lakh NEFT or IMPS can be used. RTGS is meant for large and time-critical payments. It operates on real-time basis meaning funds are transferred instantly.

NABARD (National Bank for Agriculture and Rural Development) was established on 12th July 1982 based on recommendations of B. Sivaraman Committee (CRAFICARD). It is the apex institution for agricultural and rural credit. NABARD refinances regional rural banks cooperative banks and other institutions. Its headquarters is in Mumbai.

Imperial Bank of India was nationalized on 1st July 1955 and renamed as State Bank of India (SBI). This was before the major bank nationalization of 1969. Imperial Bank was formed in 1921 by amalgamating three presidency banks – Bank of Calcutta Bank of Bombay and Bank of Madras.

The Insolvency and Bankruptcy Code (IBC) was enacted in 2016 to consolidate and amend laws relating to insolvency resolution of corporate persons partnership firms and individuals. IBBI (Insolvency and Bankruptcy Board of India) is the regulator. IBC provides time-bound resolution process of 330 days.

CRR (Cash Reserve Ratio) is a quantitative or general tool of monetary policy that affects overall credit in the economy. Other quantitative tools include SLR Bank Rate Repo Rate and Open Market Operations. Qualitative tools are selective and include credit rationing margin requirements and moral suasion.

The Priority Sector Lending (PSL) target for domestic commercial banks is 40% of Adjusted Net Bank Credit (ANBC). For foreign banks with 20 or more branches it is 40%. Sub-targets include 18% for agriculture and 7.5% for micro enterprises. Shortfall is deposited with NABARD/SIDBI/NHB.

The Priority Sector Lending (PSL) target for domestic commercial banks is 40% of Adjusted Net Bank Credit (ANBC). For foreign banks with 20 or more branches it is 40%. Sub-targets include 18% for agriculture and 7.5% for micro enterprises. Shortfall is deposited with NABARD/SIDBI/NHB.

The Hilton Young Commission (Royal Commission on Indian Currency and Finance) headed by Sir Edward Hilton Young submitted its report in 1926 recommending the establishment of RBI. Based on this recommendation RBI was established on 1st April 1935. The commission also recommended India to adopt Gold Bullion Standard.

The current SDF rate is 5.0% which is 25 basis points below the repo rate (5.25%). SDF acts as the floor of the Liquidity Adjustment Facility corridor while MSF acts as the ceiling. Banks park excess funds under SDF without any collateral requirement. SDF helps RBI absorb excess liquidity.

As per RBI MPC decision of February 2026 the repo rate is 5.25%. RBI has cut rates by 125 basis points since February 2025 when it cut repo rate for first time in 5 years from 6.50% to 6.25%. Subsequently rates were cut in April June October and December 2025 bringing it to current level.

SLR requires banks to maintain a minimum percentage of NDTL in the form of liquid assets like cash gold and unencumbered government securities. It ensures that banks have sufficient liquid assets. SLR is prescribed under Section 24 of Banking Regulation Act 1949. Current SLR is 18%.

The minimum public shareholding requirement for private sector banks is 25% as per SEBI guidelines applicable to all listed companies. For PSBs it is 25% with government holding minimum 51%. RBI has separate guidelines for promoter shareholding which must be brought down to 15% over time for new banks.

The premium for deposit insurance is paid by banks to DICGC not by depositors. Banks pay 12 paise per Rs 100 of assessable deposits. RBI has proposed a risk-based premium model where sounder banks pay less premium. Currently all banks pay the same premium regardless of their financial health.

The sub-target for agriculture under Priority Sector Lending is 18% of ANBC. Within this at least 10% should go to small and marginal farmers. Other sub-targets include 7.5% for micro enterprises 10% for weaker sections and 2% for education. Housing loans up to Rs 35 lakh also qualify as PSL.

Small Finance Banks were introduced based on recommendations of Nachiket Mor Committee on Comprehensive Financial Services for Small Businesses and Low Income Households (2014). The first SFBs started operations in 2016. They focus on unserved and underserved sections including small farmers MSMEs and unorganized sector.

Pradhan Mantri Jan Dhan Yojana was launched on 28th August 2014 by PM Narendra Modi. It is the world’s largest financial inclusion initiative. It provides basic banking accounts with zero balance RuPay debit card and overdraft facility of Rs 10000. Over 53 crore accounts have been opened under PMJDY.

The Hilton Young Commission (Royal Commission on Indian Currency and Finance) headed by Sir Edward Hilton Young submitted its report in 1926 recommending the establishment of RBI. Based on this recommendation RBI was established on 1st April 1935. The commission also recommended India to adopt Gold Bullion Standard.

Open Market Operations refer to purchase and sale of government securities by RBI in the open market to control money supply. When RBI buys securities it injects liquidity (expansionary). When it sells securities it absorbs liquidity (contractionary). OMO is a quantitative tool under Section 17(8) of RBI Act.

Base Rate system was introduced by RBI on 1st July 2010 replacing the BPLR (Benchmark Prime Lending Rate) system. Base Rate is the minimum rate below which banks cannot lend (except for certain categories). It was replaced by MCLR (Marginal Cost of Funds based Lending Rate) in April 2016.

6 banks were nationalized on 15th April 1980. Banks with deposits of Rs 200 crore or more were nationalized. This brought total nationalized banks to 20 (14 in 1969 + 6 in 1980). The objective was to expand banking services to rural areas and priority sectors. SBI was already nationalized in 1955.

The general per transaction limit for UPI is Rs 1 lakh. However for specific use cases like tax payments capital markets and IPO it is Rs 5 lakh. For UPI 123PAY (feature phones) the limit is Rs 5000. RBI increased tax payment limit from Rs 1 lakh to Rs 5 lakh in August 2024.

The maximum overdraft facility available under PMJDY is Rs 10000 (enhanced from Rs 5000). It is available to one account per household preferably to a woman. The account must be operated satisfactorily for 6 months. PMJDY also provides accident insurance of Rs 2 lakh and life cover of Rs 30000.

SIDBI stands for Small Industries Development Bank of India. It was established on 2nd April 1990 under SIDBI Act 1989 as a wholly owned subsidiary of IDBI. It is the principal development financial institution for promotion financing and development of MSMEs. Its headquarters is in Lucknow.

The minimum public shareholding requirement for private sector banks is 25% as per SEBI guidelines applicable to all listed companies. For PSBs it is 25% with government holding minimum 51%. RBI has separate guidelines for promoter shareholding which must be brought down to 15% over time for new banks.

NDTL stands for Net Demand and Time Liabilities. It represents the total deposits of a bank minus inter-bank deposits. Demand liabilities are payable on demand (current and savings accounts). Time liabilities are payable after a fixed period (fixed deposits). CRR and SLR are calculated as percentage of NDTL.

Reverse Repo Rate is the rate at which RBI borrows money from commercial banks. It is always lower than the repo rate. Banks park their excess liquidity with RBI earning interest at reverse repo rate. Higher reverse repo rate incentivizes banks to park funds with RBI reducing liquidity in the system.

IMPS stands for Immediate Payment Service. It was launched by NPCI in November 2010. It enables instant 24×7 interbank electronic fund transfer through mobile phones internet banking and ATMs. The per transaction limit for IMPS is Rs 5 lakh. IMPS uses MMID (Mobile Money Identifier) for transactions.

The Reserve Bank of India was nationalized on 1st January 1949 under the RBI (Transfer to Public Ownership) Act 1948. Before nationalization RBI was a shareholders’ bank. After nationalization it became fully owned by the Government of India. RBI was established in 1935 as a private shareholders’ bank.

The Reserve Bank of India was established on 1st April 1935 based on the recommendations of the Hilton Young Commission (Royal Commission on Indian Currency and Finance 1926). It was nationalized on 1st January 1949. RBI completed 90 years in April 2025. Its first Governor was Sir Osborne Smith.

Repo rate is the rate at which RBI lends short-term funds to commercial banks against government securities. Repo stands for Repurchase Agreement. Banks sell securities to RBI with an agreement to repurchase them. A lower repo rate reduces banks’ borrowing cost enabling them to lend at lower rates to customers.

RTGS stands for Real Time Gross Settlement. It is a funds transfer system where transfer happens on real-time and gross basis (transaction by transaction). RTGS is meant for large value transactions with minimum amount of Rs 2 lakh. It operates 24x7x365 since December 2020. There is no maximum limit.

Current Account (Demand Deposit) allows unlimited withdrawals through cheques or otherwise. It is meant for businessmen traders and companies who need frequent transactions. No interest is paid on current account balance. Savings accounts have restrictions on number of withdrawals per month.

IMPS stands for Immediate Payment Service. It was launched by NPCI in November 2010. It enables instant 24×7 interbank electronic fund transfer through mobile phones internet banking and ATMs. The per transaction limit for IMPS is Rs 5 lakh. IMPS uses MMID (Mobile Money Identifier) for transactions.

Bank Rate is the rate at which RBI provides long-term funds to commercial banks without any collateral. It is different from repo rate which involves collateral. Bank Rate is published under Section 49 of RBI Act 1934. Currently Bank Rate is aligned with MSF rate at 5.50%. It is used as penal rate for shortfall in CRR/SLR.

RBI acts as banker to both the Central Government and State Governments. Under Section 20 of RBI Act 1934 RBI is obligated to transact government business. It manages public debt issues new loans on behalf of government and maintains government accounts. RBI also provides Ways and Means Advances to governments.

MCLR stands for Marginal Cost of funds based Lending Rate. It was introduced by RBI on 1st April 2016 replacing the Base Rate system. MCLR is linked to marginal cost of funds making loan rates more responsive to policy rate changes. Banks reset MCLR monthly. External benchmark linked loans are now preferred.

Imperial Bank of India was nationalized on 1st July 1955 and renamed as State Bank of India (SBI). This was before the major bank nationalization of 1969. Imperial Bank was formed in 1921 by amalgamating three presidency banks – Bank of Calcutta Bank of Bombay and Bank of Madras.

The Gross NPA ratio of Scheduled Commercial Banks dropped to a 12-year low of 2.6% as per Economic Survey 2024-25. This is due to IBC resolution write-offs and improved credit discipline. Net NPA is even lower at about 0.6%. The banking sector health has improved significantly over past few years.

Bank Rate is the rate at which RBI provides long-term funds to commercial banks without any collateral. It is different from repo rate which involves collateral. Bank Rate is published under Section 49 of RBI Act 1934. Currently Bank Rate is aligned with MSF rate at 5.50%. It is used as penal rate for shortfall in CRR/SLR.

RTGS stands for Real Time Gross Settlement. It is a funds transfer system where transfer happens on real-time and gross basis (transaction by transaction). RTGS is meant for large value transactions with minimum amount of Rs 2 lakh. It operates 24x7x365 since December 2020. There is no maximum limit.

MSF rate is typically 25 basis points (0.25%) higher than the repo rate. Under MSF banks can borrow overnight funds from RBI against their excess SLR holdings up to a certain limit. MSF was introduced in May 2011. Current MSF rate is 5.50% while repo rate is 5.25%. MSF acts as ceiling of policy corridor.

NEFT stands for National Electronic Funds Transfer. It is an electronic fund transfer system maintained by RBI that enables bank-to-bank transfers. NEFT operates in half-hourly batches and is available 24x7x365 since December 2019. There is no minimum or maximum limit for NEFT transactions.

The maximum overdraft facility available under PMJDY is Rs 10000 (enhanced from Rs 5000). It is available to one account per household preferably to a woman. The account must be operated satisfactorily for 6 months. PMJDY also provides accident insurance of Rs 2 lakh and life cover of Rs 30000.

RBI is known as the Bankers Bank because it provides banking services to commercial banks just as commercial banks provide services to public. RBI maintains accounts of banks provides lender of last resort facility and regulates banking operations. It is also the banker to the government.

CRR is the percentage of Net Demand and Time Liabilities (NDTL) that banks must maintain as cash balance with RBI. It is a quantitative tool of monetary policy. Banks do not earn any interest on CRR. Current CRR is 3% of NDTL. CRR is prescribed under Section 42 of RBI Act 1934.

The current SLR is 18% of NDTL. Banks must maintain this in liquid assets including cash gold and approved securities. SLR was progressively reduced from 25% in 1990 to current 18%. It was last revised in April 2020 from 18.25% to 18%. SLR helps control credit expansion and ensures solvency.

The headquarters of RBI is located at Mumbai (formerly Bombay). RBI was originally headquartered in Kolkata (Calcutta) but was permanently moved to Mumbai in 1937. RBI has four regional offices in Mumbai Delhi Kolkata and Chennai. The RBI Central Office is at Shahid Bhagat Singh Marg Mumbai.

The MPC is required to meet at least 4 times in a year as per RBI Act. However in practice it meets 6 times a year (bi-monthly). The quorum for MPC meeting is 4 members. Decisions are taken by majority vote. In case of tie the RBI Governor has a casting vote.

The current CRR is 3% of NDTL. RBI reduced CRR by 100 basis points in June 2025 from 4% to 3% in a staggered manner. This released approximately Rs 2.5 lakh crore of bank funds into the financial system. CRR was last at 3% level in 2020 during COVID pandemic.

As per RBI guidelines a loan becomes Non-Performing Asset when principal or interest remains unpaid for more than 90 days (for term loans). For agricultural loans the period is 2 crop seasons. NPAs are classified as substandard doubtful and loss assets based on age. GNPA of banks was at 12-year low of 2.6% in FY24.

The Monetary Policy Committee consists of 6 members – 3 from RBI (Governor as Chairperson Deputy Governor in charge of monetary policy and one RBI officer) and 3 external members nominated by the Central Government. MPC was constituted under Section 45ZB of RBI Act 1934 (amended in 2016). MPC decides the policy repo rate.

NEFT stands for National Electronic Funds Transfer. It is an electronic fund transfer system maintained by RBI that enables bank-to-bank transfers. NEFT operates in half-hourly batches and is available 24x7x365 since December 2019. There is no minimum or maximum limit for NEFT transactions.

MCLR stands for Marginal Cost of funds based Lending Rate. It was introduced by RBI on 1st April 2016 replacing the Base Rate system. MCLR is linked to marginal cost of funds making loan rates more responsive to policy rate changes. Banks reset MCLR monthly. External benchmark linked loans are now preferred.

The Monetary Policy Committee consists of 6 members – 3 from RBI (Governor as Chairperson Deputy Governor in charge of monetary policy and one RBI officer) and 3 external members nominated by the Central Government. MPC was constituted under Section 45ZB of RBI Act 1934 (amended in 2016). MPC decides the policy repo rate.

Currently there are 12 Public Sector Banks in India after the mega merger in April 2020 which consolidated 10 PSBs into 4. The 12 PSBs are: SBI Punjab National Bank Bank of Baroda Canara Bank Union Bank Indian Bank Indian Overseas Bank Central Bank UCO Bank Bank of Maharashtra Punjab and Sind Bank and Bank of India.

6 banks were nationalized on 15th April 1980. Banks with deposits of Rs 200 crore or more were nationalized. This brought total nationalized banks to 20 (14 in 1969 + 6 in 1980). The objective was to expand banking services to rural areas and priority sectors. SBI was already nationalized in 1955.

Current Account (Demand Deposit) allows unlimited withdrawals through cheques or otherwise. It is meant for businessmen traders and companies who need frequent transactions. No interest is paid on current account balance. Savings accounts have restrictions on number of withdrawals per month.

DICGC provides deposit insurance cover of Rs 5 lakh per depositor per bank. This was enhanced from Rs 1 lakh to Rs 5 lakh in February 2020. DICGC is a wholly owned subsidiary of RBI established in 1978. It insures all types of deposits including savings fixed recurring and current account deposits.

The Narasimham Committee (Committee on Financial System) submitted its report in 1991 recommending major banking sector reforms. A second Narasimham Committee on Banking Sector Reforms submitted report in 1998. Key recommendations included reduction in CRR/SLR prudential norms and entry of private banks.

The general per transaction limit for UPI is Rs 1 lakh. However for specific use cases like tax payments capital markets and IPO it is Rs 5 lakh. For UPI 123PAY (feature phones) the limit is Rs 5000. RBI increased tax payment limit from Rs 1 lakh to Rs 5 lakh in August 2024.

The current CRR is 3% of NDTL. RBI reduced CRR by 100 basis points in June 2025 from 4% to 3% in a staggered manner. This released approximately Rs 2.5 lakh crore of bank funds into the financial system. CRR was last at 3% level in 2020 during COVID pandemic.

Repo rate is the rate at which RBI lends short-term funds to commercial banks against government securities. Repo stands for Repurchase Agreement. Banks sell securities to RBI with an agreement to repurchase them. A lower repo rate reduces banks’ borrowing cost enabling them to lend at lower rates to customers.

NDTL stands for Net Demand and Time Liabilities. It represents the total deposits of a bank minus inter-bank deposits. Demand liabilities are payable on demand (current and savings accounts). Time liabilities are payable after a fixed period (fixed deposits). CRR and SLR are calculated as percentage of NDTL.

CRR is the percentage of Net Demand and Time Liabilities (NDTL) that banks must maintain as cash balance with RBI. It is a quantitative tool of monetary policy. Banks do not earn any interest on CRR. Current CRR is 3% of NDTL. CRR is prescribed under Section 42 of RBI Act 1934.

RBI acts as banker to both the Central Government and State Governments. Under Section 20 of RBI Act 1934 RBI is obligated to transact government business. It manages public debt issues new loans on behalf of government and maintains government accounts. RBI also provides Ways and Means Advances to governments.

As per RBI MPC decision of February 2026 the repo rate is 5.25%. RBI has cut rates by 125 basis points since February 2025 when it cut repo rate for first time in 5 years from 6.50% to 6.25%. Subsequently rates were cut in April June October and December 2025 bringing it to current level.

14 major commercial banks were nationalized on 19th July 1969 by the government of Indira Gandhi through Banking Companies (Acquisition and Transfer of Undertakings) Ordinance. Banks with deposits of Rs 50 crore or more were nationalized. Another 6 banks were nationalized in 1980 making total 20 nationalized banks.

The minimum amount for RTGS transaction is Rs 2 lakh. There is no maximum limit for RTGS. For amounts below Rs 2 lakh NEFT or IMPS can be used. RTGS is meant for large and time-critical payments. It operates on real-time basis meaning funds are transferred instantly.

The premium for deposit insurance is paid by banks to DICGC not by depositors. Banks pay 12 paise per Rs 100 of assessable deposits. RBI has proposed a risk-based premium model where sounder banks pay less premium. Currently all banks pay the same premium regardless of their financial health.

SIDBI stands for Small Industries Development Bank of India. It was established on 2nd April 1990 under SIDBI Act 1989 as a wholly owned subsidiary of IDBI. It is the principal development financial institution for promotion financing and development of MSMEs. Its headquarters is in Lucknow.

14 major commercial banks were nationalized on 19th July 1969 by the government of Indira Gandhi through Banking Companies (Acquisition and Transfer of Undertakings) Ordinance. Banks with deposits of Rs 50 crore or more were nationalized. Another 6 banks were nationalized in 1980 making total 20 nationalized banks.

C.D. Deshmukh was the first Indian Governor of RBI serving from 1943 to 1949. Sir Osborne Smith was the first Governor of RBI (1935-37) but he was British. C.D. Deshmukh later became the Finance Minister of India (1950-56). The current RBI Governor is Sanjay Malhotra who took charge in December 2024.

The Reserve Bank of India was established on 1st April 1935 based on the recommendations of the Hilton Young Commission (Royal Commission on Indian Currency and Finance 1926). It was nationalized on 1st January 1949. RBI completed 90 years in April 2025. Its first Governor was Sir Osborne Smith.

Standing Deposit Facility (SDF) was introduced by RBI in April 2022. Under SDF banks can park their excess liquidity with RBI without giving any collateral. SDF rate is 25 basis points below repo rate and replaced the fixed reverse repo rate as floor of LAF corridor. Current SDF rate is 5.0%.

The inflation target for RBI is 4% with a tolerance band of +/- 2% (i.e. 2% to 6%). This flexible inflation targeting framework was adopted in 2016 through amendment to RBI Act. The target is set by Government in consultation with RBI and is reviewed every 5 years. CPI inflation is the anchor.

The inflation target for RBI is 4% with a tolerance band of +/- 2% (i.e. 2% to 6%). This flexible inflation targeting framework was adopted in 2016 through amendment to RBI Act. The target is set by Government in consultation with RBI and is reviewed every 5 years. CPI inflation is the anchor.

Reverse Repo Rate is the rate at which RBI borrows money from commercial banks. It is always lower than the repo rate. Banks park their excess liquidity with RBI earning interest at reverse repo rate. Higher reverse repo rate incentivizes banks to park funds with RBI reducing liquidity in the system.

The Reserve Bank of India was nationalized on 1st January 1949 under the RBI (Transfer to Public Ownership) Act 1948. Before nationalization RBI was a shareholders’ bank. After nationalization it became fully owned by the Government of India. RBI was established in 1935 as a private shareholders’ bank.

Small Finance Banks were introduced based on recommendations of Nachiket Mor Committee on Comprehensive Financial Services for Small Businesses and Low Income Households (2014). The first SFBs started operations in 2016. They focus on unserved and underserved sections including small farmers MSMEs and unorganized sector.

C.D. Deshmukh was the first Indian Governor of RBI serving from 1943 to 1949. Sir Osborne Smith was the first Governor of RBI (1935-37) but he was British. C.D. Deshmukh later became the Finance Minister of India (1950-56). The current RBI Governor is Sanjay Malhotra who took charge in December 2024.

The current SDF rate is 5.0% which is 25 basis points below the repo rate (5.25%). SDF acts as the floor of the Liquidity Adjustment Facility corridor while MSF acts as the ceiling. Banks park excess funds under SDF without any collateral requirement. SDF helps RBI absorb excess liquidity.

The headquarters of RBI is located at Mumbai (formerly Bombay). RBI was originally headquartered in Kolkata (Calcutta) but was permanently moved to Mumbai in 1937. RBI has four regional offices in Mumbai Delhi Kolkata and Chennai. The RBI Central Office is at Shahid Bhagat Singh Marg Mumbai.

Base Rate system was introduced by RBI on 1st July 2010 replacing the BPLR (Benchmark Prime Lending Rate) system. Base Rate is the minimum rate below which banks cannot lend (except for certain categories). It was replaced by MCLR (Marginal Cost of Funds based Lending Rate) in April 2016.

Standing Deposit Facility (SDF) was introduced by RBI in April 2022. Under SDF banks can park their excess liquidity with RBI without giving any collateral. SDF rate is 25 basis points below repo rate and replaced the fixed reverse repo rate as floor of LAF corridor. Current SDF rate is 5.0%.

The Insolvency and Bankruptcy Code (IBC) was enacted in 2016 to consolidate and amend laws relating to insolvency resolution of corporate persons partnership firms and individuals. IBBI (Insolvency and Bankruptcy Board of India) is the regulator. IBC provides time-bound resolution process of 330 days.

Pradhan Mantri Jan Dhan Yojana was launched on 28th August 2014 by PM Narendra Modi. It is the world’s largest financial inclusion initiative. It provides basic banking accounts with zero balance RuPay debit card and overdraft facility of Rs 10000. Over 53 crore accounts have been opened under PMJDY.

The sub-target for agriculture under Priority Sector Lending is 18% of ANBC. Within this at least 10% should go to small and marginal farmers. Other sub-targets include 7.5% for micro enterprises 10% for weaker sections and 2% for education. Housing loans up to Rs 35 lakh also qualify as PSL.

DICGC provides deposit insurance cover of Rs 5 lakh per depositor per bank. This was enhanced from Rs 1 lakh to Rs 5 lakh in February 2020. DICGC is a wholly owned subsidiary of RBI established in 1978. It insures all types of deposits including savings fixed recurring and current account deposits.

The MPC is required to meet at least 4 times in a year as per RBI Act. However in practice it meets 6 times a year (bi-monthly). The quorum for MPC meeting is 4 members. Decisions are taken by majority vote. In case of tie the RBI Governor has a casting vote.

CRR (Cash Reserve Ratio) is a quantitative or general tool of monetary policy that affects overall credit in the economy. Other quantitative tools include SLR Bank Rate Repo Rate and Open Market Operations. Qualitative tools are selective and include credit rationing margin requirements and moral suasion.

The Gross NPA ratio of Scheduled Commercial Banks dropped to a 12-year low of 2.6% as per Economic Survey 2024-25. This is due to IBC resolution write-offs and improved credit discipline. Net NPA is even lower at about 0.6%. The banking sector health has improved significantly over past few years.

Currently there are 12 Public Sector Banks in India after the mega merger in April 2020 which consolidated 10 PSBs into 4. The 12 PSBs are: SBI Punjab National Bank Bank of Baroda Canara Bank Union Bank Indian Bank Indian Overseas Bank Central Bank UCO Bank Bank of Maharashtra Punjab and Sind Bank and Bank of India.

The current SLR is 18% of NDTL. Banks must maintain this in liquid assets including cash gold and approved securities. SLR was progressively reduced from 25% in 1990 to current 18%. It was last revised in April 2020 from 18.25% to 18%. SLR helps control credit expansion and ensures solvency.

SLR requires banks to maintain a minimum percentage of NDTL in the form of liquid assets like cash gold and unencumbered government securities. It ensures that banks have sufficient liquid assets. SLR is prescribed under Section 24 of Banking Regulation Act 1949. Current SLR is 18%.

MSF rate is typically 25 basis points (0.25%) higher than the repo rate. Under MSF banks can borrow overnight funds from RBI against their excess SLR holdings up to a certain limit. MSF was introduced in May 2011. Current MSF rate is 5.50% while repo rate is 5.25%. MSF acts as ceiling of policy corridor.

NABARD (National Bank for Agriculture and Rural Development) was established on 12th July 1982 based on recommendations of B. Sivaraman Committee (CRAFICARD). It is the apex institution for agricultural and rural credit. NABARD refinances regional rural banks cooperative banks and other institutions. Its headquarters is in Mumbai.

As per RBI guidelines a loan becomes Non-Performing Asset when principal or interest remains unpaid for more than 90 days (for term loans). For agricultural loans the period is 2 crop seasons. NPAs are classified as substandard doubtful and loss assets based on age. GNPA of banks was at 12-year low of 2.6% in FY24.