Indian Banking System

The Indian banking system is a tiered structure with the RBI at the apex. Below it sit Scheduled and Non-Scheduled Banks. Scheduled Banks (listed in the 2nd Schedule of the RBI Act, 1934) include Commercial Banks and Co-operative Banks. Commercial Banks split into Public Sector Banks (PSBs), Private Sector Banks, Foreign Banks, Regional Rural Banks (RRBs) and Small Finance Banks/Payments Banks. To be 'scheduled', a bank needs paid-up capital + reserves of at least Rs 5 lakh and must satisfy RBI that its affairs are not detrimental to depositors. Co-operative banks are split into urban (UCBs) and rural (StCB > DCCB > PACS) layers. After the 2019-20 mergers, there are 12 PSBs. Memory aid: 'RBI commands SCHEDULED soldiers — Commercial & Co-operative'.

Imperial Bank of India (1921) became State Bank of India in 1955 after the Gorewala Committee — SBI is the only bank nationalised under a special SBI Act. The big nationalisation happened on 19 July 1969 when 14 banks (deposits > Rs 50 crore) were nationalised, followed by 6 more on 15 April 1980 (deposits > Rs 200 crore), making 20. The Narasimham Committee I (1991) and II (1998) drove liberalisation, introduced CRAR/Basel norms, asset classification and prudential norms. RBI was nationalised on 1 Jan 1949. Memory hook: '14 in 69, 6 in 80' and 'Narasimham = New-era reforms'.

Bank PO papers rarely ask "what is a universal bank?" in those words. Instead, they hand you four bank names and ask which category each belongs to — and a wrong classification chains into three more wrong answers in the caselet. This worked example builds the fast, decision-tree method that toppers use to classify any Indian bank in under fifteen seconds.

Question: Classify each of the following — Bandhan Bank, AU Small Finance Bank, Paytm Payments Bank, and Bank of Baroda — into the correct category of the Indian banking system.

The categories you must already know

Definition: A Universal Bank (also called a Scheduled Commercial Bank — Public or Private) holds a full banking licence from the RBI and may accept deposits, lend, issue credit cards, undertake foreign-exchange business, sell third-party products and offer almost every financial service permitted to a bank.

Definition: A Small Finance Bank (SFB) is a differentiated bank licensed under RBI's 2014 framework to take deposits and to lend — but with a mandate that at least 75% of its Adjusted Net Bank Credit must go to the priority sector and at least 50% of loans must be below Rs 25 lakh. SFBs focus on the unserved and underserved.

Definition: A Payments Bank is another 2014-framework category that cannot lend and cannot issue credit cards. It may take demand deposits up to a per-customer cap (raised from Rs 1 lakh to Rs 2 lakh in April 2021), issue debit cards, and offer payments and remittance services. It is essentially a settlement-grade deposit institution.

Definition: A Public Sector Bank (PSB) is a Scheduled Commercial Bank in which the Government of India holds the majority stake. After the 2019–2020 mega-mergers, India has 12 PSBs, with SBI and Bank of Baroda among the largest.

Solution

Step 1: Bandhan Bank. Bandhan was the only microfinance institution to receive an "in-principle" universal banking licence in April 2014 (alongside IDFC). It began operations as a full-service bank on 23 August 2015. Despite its microfinance origin, the RBI placed it firmly in the universal-bank category, so it can lend, issue credit cards, do trade finance — anything a private commercial bank can. Classification: Universal Private Sector Bank.

Step 2: AU Small Finance Bank. AU started life in 1996 as an NBFC (AU Financiers India Ltd) lending to small commercial-vehicle buyers. It received an SFB licence in 2017 and converted from NBFC to bank. As an SFB, it must keep most of its loan book in the priority sector and below Rs 25 lakh per loan. Classification: Small Finance Bank.

Step 3: Paytm Payments Bank. The "Payments Bank" in its name is the giveaway. Paytm Payments Bank can take deposits (up to the Rs 2 lakh cap per customer) and run wallets and UPI, but it cannot lend and cannot issue credit cards. It also cannot accept NRI deposits. Classification: Payments Bank.

Step 4: Bank of Baroda. BoB has been a nationalised bank since 1969 (the first big wave of nationalisation under Indira Gandhi). The Government of India remains the majority shareholder. In 2019, Vijaya Bank and Dena Bank merged into BoB, making it one of the country's largest PSBs. Classification: Public Sector Bank.

Conclusion: Bandhan is universal private; AU is SFB; Paytm is a Payments Bank; Bank of Baroda is PSB. The trick that makes this easy is that the bank's full legal name almost always carries the category.

The 15-second decision tree

When a bank name appears in an MCQ, ask three questions in order.

1. Does the name carry the words "Small Finance" or "Payments"? If yes, it is an SFB or a Payments Bank respectively — and you are done. If it says "Payments Bank," remember the cannot-lend rule.
2. Is the Government of India a majority shareholder? Names like SBI, PNB, Canara, BoB, Union, Indian, Bank of India, Bank of Maharashtra, Central, IOB, UCO, Punjab & Sind are PSBs. Everything else with a clean "Bank" suffix is private universal.
3. Is the bank cooperative or regional? Co-operative banks, RRBs, Local Area Banks have their own categories — usually obvious from the name (e.g. "Saraswat Co-op Bank," "Aryavart Bank" is an RRB).

Why it matters: At least one Bank Awareness question every IBPS/SBI exam tests bank classification, and the same idea reappears in interview rounds when the panel asks "what kind of bank is your sponsor bank?" RBI Grade B and NABARD also weave the categories into directed-lending and priority-sector questions.

Real-world example: In January 2024, the RBI restricted Paytm Payments Bank from accepting fresh deposits and credits in its accounts and wallets after persistent supervisory concerns. The case made headlines, but more importantly it reminded every aspirant why Payments Banks exist as a distinct category — they take only short-term, capped deposits and cannot create credit, so disciplinary action is contained. A similar problem in a universal bank would ripple far wider.

Common misconception: Students often think Payments Banks "lend a little." They do not lend at all — the RBI prohibits Payments Banks from undertaking lending activities or issuing credit cards. Any retail credit you see on a fintech platform with "Payments Bank" branding is actually routed through a partner NBFC or universal bank. Similarly, Small Finance Banks are sometimes confused with NBFCs; an SFB is a full deposit-taking bank under the Banking Regulation Act, while an NBFC cannot accept demand deposits.

:::compare

:::keypoints

• The bank's full legal name almost always reveals its category.
• "Small Finance" in the name → SFB → can lend but must serve priority sector heavily.
• "Payments Bank" in the name → cannot lend, cannot issue credit cards.
• Per-customer deposit cap in a Payments Bank is Rs 2 lakh (raised in April 2021).
• Bandhan (2015) and IDFC First (2015) are the universal banks born from the 2014 in-principle licences.
• Bank of Baroda is a Public Sector Bank; the Government of India is its majority shareholder.
• After the 2019–2020 mergers, India has 12 Public Sector Banks.
• SFBs and Payments Banks are "differentiated banks" — a 2014 RBI innovation to deepen financial inclusion.
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:::memory
"P Payments — Produces no loans." If the name carries "Payments Bank," cross out lending and credit cards immediately. For SFBs, remember "Small loans for small lives" — most of the book is below Rs 25 lakh.
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:::recap

• Bandhan = Universal Private Sector Bank (from 2015).
• AU = Small Finance Bank (from 2017, ex-NBFC).
• Paytm Payments Bank = Payments Bank (no lending).
• Bank of Baroda = Public Sector Bank (post-2019 merger with Vijaya and Dena).
• Read the name first, apply the cannot-lend rule second, default to "private universal" last.
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RBI (est. 1 April 1935) is the central bank performing: (1) Banker to Government, (2) Banker's Bank & lender of last resort, (3) Sole currency authority — issues notes of Rs 2 and above (Re 1 note and coins are issued by the Government/Ministry of Finance but circulated by RBI), (4) Custodian of forex reserves, (5) Controller of credit/monetary policy, (6) Regulator & supervisor of banks. Currency is issued under the Minimum Reserve System (since 1957): RBI must hold a minimum of Rs 200 crore in gold + foreign securities, of which gold is at least Rs 115 crore. Memory aid: 'RBI is the Banker, Issuer, Custodian, Controller, Regulator' = BICCR.

Every time the RBI Governor announces "we are cutting the repo rate by 25 basis points," EMIs on home loans across India eventually nudge downwards, your fixed deposit interest dips a little, and the stock market jumps. That single sentence is a monetary policy tool at work. For IBPS PO Banking Awareness, you need to recognise every tool in the RBI's box and know exactly which lever controls what.

Definition: Monetary policy is the set of decisions taken by the central bank (RBI in India) to control the supply of money and the cost of credit, with the goal of price stability and growth.

Definition: A quantitative (general) tool affects the overall volume of money and credit in the economy and applies uniformly to all banks.

Definition: A qualitative (selective) tool affects the direction or quality of credit — who gets it, for what purpose — without changing the overall money supply much.

The quantitative tools — the bulk levers

Quantitative tools work on every commercial bank simultaneously, changing the total quantum of liquidity in the system. There are six you must memorise.

Repo rate. The interest rate at which the RBI lends short-term funds to commercial banks against the collateral of government securities. A cut in the repo rate makes borrowing cheaper for banks, who in turn lend cheaper to customers — this is expansionary monetary policy. A hike does the opposite to fight inflation.

Reverse repo rate. The rate at which the RBI borrows from commercial banks — that is, the rate banks earn when they park surplus funds with the RBI. A higher reverse repo encourages banks to keep cash with the RBI rather than lend, draining liquidity. It is the mirror image of the repo rate.

Cash Reserve Ratio (CRR). The percentage of a bank's Net Demand and Time Liabilities (NDTL) that must be kept as cash with the RBI. CRR cash earns no interest for the bank, so raising CRR squeezes a bank's lendable resources directly. CRR is set under the RBI Act.

Statutory Liquidity Ratio (SLR). The percentage of NDTL that a bank must hold as liquid assets — cash, gold, or RBI-approved government securities — within the bank itself. SLR is governed by the Banking Regulation Act. Note the key difference: CRR cash sits with the RBI, SLR assets sit with the bank.

Marginal Standing Facility (MSF). An overnight emergency window where banks can borrow from the RBI at a rate slightly above the repo rate. It is the last-resort tap when interbank liquidity dries up.

Bank Rate. The long-term rate at which the RBI lends to commercial banks without collateral, used to set penalty rates on CRR/SLR shortfalls. In current practice, the Bank Rate is aligned with the MSF rate.

The repo rate and reverse repo together define the Liquidity Adjustment Facility (LAF) corridor. The policy corridor today is: Reverse Repo (floor) < Repo < MSF/Bank Rate (ceiling).

The qualitative tools — the directed levers

When the RBI wants to steer credit toward or away from a specific sector — say, discouraging speculative lending against gold while encouraging credit to priority sectors — it uses selective (qualitative) tools that do not change overall money supply.

• Margin requirements: the gap between the value of a security pledged and the loan given against it. Higher margin = borrower must bring more own funds = less credit flows.
• Moral suasion: informal persuasion — the Governor calling up bank CEOs to "go slow on consumer durables" or "lend more to MSMEs."
• Consumer credit regulation: rules on EMIs, down payments and tenures for retail loans.
• Direct action: penalties on banks that violate RBI directives — fines, restrictions on opening branches.
• Rationing of credit: explicit ceilings on how much credit a bank may extend to a particular sector or borrower group.

The Monetary Policy Committee (MPC)

Since 2016, monetary policy decisions are taken not by the Governor alone but by the Monetary Policy Committee — a six-member body. Three members are from the RBI (Governor, Deputy Governor in charge of monetary policy, and one RBI-nominated officer), and three are external members nominated by the Central Government. The RBI Governor chairs the MPC and has a casting vote in case of a tie.

The MPC meets at least four times a year and is mandated to keep Consumer Price Index (CPI) inflation at 4%, with a tolerance band of ±2% (i.e., between 2% and 6%). This is called the flexible inflation targeting framework, introduced by the RBI Act amendment of 2016.

Why it matters: Banking Awareness questions on the RBI monetary policy toolkit are among the most reliable scoring areas in IBPS PO. Direct one-mark recall questions appear on each rate's full form, current values, and on the composition and inflation target of the MPC. Many questions also test the quantitative vs qualitative classification.

Real-world example: During the 2020 COVID-19 lockdown the RBI used almost every quantitative tool at once: it cut the repo rate from 5.15% to 4.00%, slashed CRR by 100 basis points to release roughly ₹1.37 lakh crore into the banking system, and announced Targeted Long-Term Repo Operations (TLTROs) to push credit into specific sectors. That was monetary policy on overdrive — expansionary, system-wide, and partly selective.

Common misconception: Many candidates think CRR and SLR are similar because both are ratios on NDTL. They differ on three things: (i) where the asset is held — CRR with RBI, SLR with the bank itself; (ii) what counts — CRR is cash only, SLR can be cash, gold or approved securities; (iii) interest — CRR cash earns nothing, SLR securities earn the interest of the underlying instrument.

:::compare

:::keypoints

• Quantitative tools change how much credit; qualitative tools change what credit is used for.
• Repo cut = expansionary; Repo hike = contractionary.
• CRR is held with the RBI in cash and earns no interest; SLR is held with the bank in liquid assets.
• MSF rate sits above the repo rate; Reverse Repo sits below.
• Bank Rate = MSF rate in current Indian practice.
• MPC has 6 members — 3 RBI + 3 government-nominated; Governor chairs with a casting vote.
• CPI inflation target: 4% ± 2%, i.e. tolerance band of 2–6%.
• CRR and SLR are computed as % of NDTL (Net Demand and Time Liabilities).
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:::memory
"Repo lends, Reverse takes; CRR rests with RBI, SLR rests at home." For the policy corridor floor-to-ceiling: Reverse Repo → Repo → MSF (RRM, rising). For MPC numbers: "6 members, 4 ± 2%" — six seats, four percent target, two percent band.
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:::recap

• Quantitative tools (Repo, Reverse Repo, CRR, SLR, MSF, Bank Rate) move the bulk of liquidity in the system.
• Qualitative tools (margins, moral suasion, credit rationing, direct action) steer credit toward chosen sectors.
• CRR (with RBI, cash, no interest) and SLR (with bank, liquid assets) are not the same — never mix them up.
• The MPC, six members and CPI 4% ± 2%, is the institutional engine of modern Indian monetary policy.
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Q: To control rising inflation, what should RBI do to repo rate, CRR and SLR? Fast logic: Inflation = too much money chasing goods, so RBI must SUCK liquidity OUT (contractionary). Therefore INCREASE repo (loans costlier), INCREASE CRR (more cash locked with RBI), INCREASE SLR (more funds parked in G-secs). All three move UP to fight inflation. Reverse for recession/slowdown (cut all to inject money). Quick rule: 'Inflation = rates UP, Slowdown = rates DOWN.' Also: if repo is 6.50% and MSF is 6.75%, the corridor width is 0.25% above repo, and reverse repo/SDF sits below repo as the floor.

Deposit accounts: (1) Savings — for individuals, interest-bearing, withdrawal limits; (2) Current — for businesses, no interest, overdraft allowed, unlimited transactions; (3) Fixed/Term Deposit — lump sum locked for a tenure, highest interest; (4) Recurring — fixed monthly instalments. Special accounts: NRE (repatriable, in INR), NRO (non-repatriable income in India), FCNR (foreign currency term deposit). CASA = Current Account + Savings Account; a high CASA ratio means cheaper funds for the bank. Negotiable Instruments Act, 1881 covers Promissory Notes, Bills of Exchange and Cheques. A cheque is valid for 3 months from the date of issue. Memory aid: 'Current = Company, Savings = Self'.

An asset becomes a Non-Performing Asset (NPA) when interest/principal is overdue for more than 90 days. Classification: Standard (performing) > Sub-standard (NPA up to 12 months) > Doubtful (NPA beyond 12 months) > Loss asset (uncollectible). Provisioning rises as quality falls. Recovery tools: SARFAESI Act, 2002 lets banks seize and sell secured assets WITHOUT court intervention (threshold: secured creditor holding 75% by value can act; minimum loan Rs 1 lakh and outstanding > 20% of principal+interest). DRTs (Debt Recovery Tribunals) under the RDDBFI Act, 1993 handle claims above Rs 20 lakh. The IBC, 2016 provides time-bound (330-day) resolution. Lok Adalats handle smaller dues. Memory: '90 days = NPA; SARFAESI = Seize without court'.

Q: A loan account's interest has been overdue since 1 January. As on 1 December the same year, classify it. Method: Count overdue days. Jan-Dec is ~11 months (>90 days), so it crossed into NPA after ~31 March. From NPA date, if it remains NPA up to 12 months it is 'Sub-standard'. Since only ~8 months have passed since it became an NPA (April to Dec), it is still SUB-STANDARD (not yet doubtful, which needs 12 months as NPA). Trick ladder: 0-90 days overdue = Standard; NPA 0-12 months = Sub-standard; NPA >12 months = Doubtful; unrecoverable = Loss.

Financial inclusion brings affordable banking to the unbanked. PMJDY (2014) is the flagship — zero-balance accounts, RuPay debit card, Rs 2 lakh accident insurance, overdraft up to Rs 10,000. Social-security schemes: PMJJBY (life cover Rs 2 lakh, age 18-50, premium ~Rs 436/yr), PMSBY (accident cover Rs 2 lakh, age 18-70, premium ~Rs 20/yr), APY (pension for unorganised sector, age 18-40). Priority Sector Lending (PSL): banks must lend 40% of ANBC to priority sectors — agriculture (18%, with 10% to small/marginal farmers), MSME, education, housing, weaker sections (12%). Memory aid: 'Jan Dhan opens the door; Jeevan(life)/Suraksha(accident)/Pension protect inside'.

India's banking and financial system is layered like a pyramid. Sitting at the top of each specialised function is an apex or development financial institution that channels credit and policy support into a sector that commercial banks alone could not reach. For IBPS PO Banking Awareness, knowing each apex institution's year of formation, mandate, and current regulator is non-negotiable — it shows up almost every cycle.

Definition: A Development Financial Institution (DFI) is a specialised bank or agency that provides long-term, often concessional, finance to specific sectors — agriculture, MSME, exports, housing — where commercial banks find lending risky or unprofitable.

Definition: An apex institution is the top-level regulator, refinancer, or coordinator for a sector. It does not usually lend directly to customers; it lends to or supervises the institutions that do.

The big four DFIs — NABARD, SIDBI, EXIM Bank, NHB

NABARD — National Bank for Agriculture and Rural Development (1982)

NABARD is the apex DFI for agriculture and rural development. It was set up in July 1982 on the recommendation of the Sivaraman (CRAFICARD) Committee. Its core functions include:

• Refinancing Regional Rural Banks (RRBs), State Co-operative Banks, and Land Development Banks for agricultural credit.
• Supervising RRBs and co-operative banks on behalf of RBI.
• Running the Rural Infrastructure Development Fund (RIDF) to bankroll irrigation, rural roads, and storage projects.
• Implementing schemes like the Self-Help Group (SHG) Bank Linkage Programme, the world's largest microfinance programme.

Memory cue: NABARD = farm.

SIDBI — Small Industries Development Bank of India (1990)

SIDBI is the apex DFI for MSME (Micro, Small and Medium Enterprises) financing. Set up under the SIDBI Act, 1989, and it began operations on 2 April 1990. Originally carved out of IDBI, SIDBI now:

• Refinances banks and SFCs that lend to MSMEs.
• Operates the Stand-Up India portal, MUDRA refinancing window, and the Fund of Funds for Startups.
• Runs MSME credit-rating, equity, and venture-debt programmes.

Memory cue: SIDBI = small industry.

EXIM Bank — Export-Import Bank of India (1982)

EXIM Bank is the apex institution for financing and promoting India's foreign trade, set up on 1 January 1982 under the EXIM Bank Act, 1981. It:

• Provides buyer's credit, suppliers' credit, and lines of credit to overseas governments (an important Indian foreign-policy tool in Africa and South Asia).
• Funds Indian exporters through pre-shipment and post-shipment credit.
• Runs the NIRVIK (Niryat Rin Vikas Yojana) facility alongside ECGC for export credit insurance.

Memory cue: EXIM = export.

NHB — National Housing Bank (1988)

NHB is the apex DFI for housing finance. It was set up on 9 July 1988 under the National Housing Bank Act, 1987, as a wholly owned subsidiary of RBI. A major change came in March 2019, when the Government of India bought out RBI's stake and NHB became a fully Government-owned entity. NHB:

• Refinances Housing Finance Companies (HFCs).
• Supervises and regulates HFCs (regulatory powers transferred to RBI in August 2019 for many functions, but day-to-day supervision still involves NHB).
• Runs the Pradhan Mantri Awas Yojana (Urban) Credit Linked Subsidy Scheme plumbing.

Memory cue: NHB = house.

The three financial-sector regulators

In parallel with the DFIs, three regulators police the rest of the financial system. They are different from DFIs — they do not provide refinance; they make rules and supervise.

• IRDAI (Insurance Regulatory and Development Authority of India) — set up in 1999 as IRDA, renamed IRDAI in 2014. Regulates insurance companies, intermediaries, and policyholder protection. Headquartered in Hyderabad.
• SEBI (Securities and Exchange Board of India) — statutory body since 1992 under the SEBI Act. Regulates securities markets, stock exchanges, mutual funds, FPIs, and investor protection. Headquartered in Mumbai.
• PFRDA (Pension Fund Regulatory and Development Authority) — statutory body since 2014 under the PFRDA Act, 2013. Regulates pensions, especially the National Pension System (NPS) and Atal Pension Yojana (APY).

A common one-liner trap: which body regulates LIC's investments in equity? Two regulators apply — IRDAI on the insurance side, SEBI on the equity-investment side.

Deposit insurance — the DICGC story

Definition: DICGC (Deposit Insurance and Credit Guarantee Corporation) is a wholly owned subsidiary of RBI, established in 1978. It insures the deposits of every depositor in every commercial bank, RRB, and co-operative bank, with a uniform cap.

In February 2020, the cap was raised from Rs 1 lakh to Rs 5 lakh per depositor per bank — the first revision since 1993. This means that if a bank fails, every depositor receives up to Rs 5 lakh covering principal + interest combined. The cover is per depositor per bank (not per account) — so opening many accounts in the same bank does not multiply your protection, but spreading deposits across banks does.

The Deposit Insurance and Credit Guarantee Corporation (Amendment) Act, 2021 further mandated that depositors get interim payment within 90 days of a moratorium being imposed on a bank — a direct policy response to the PMC Bank crisis.

Why it matters: Banking Awareness sets in IBPS PO and Clerk consistently ask about DICGC's cap, the year of revision, and its parent body. A 5-lakh question is almost expected every prelims.

BSBDA — the no-frills account, renamed

Definition: A Basic Savings Bank Deposit Account (BSBDA) is a savings account designed for financial inclusion. It carries no minimum balance requirement and offers a basic set of free services (a few withdrawals per month, a passbook, an ATM card).

BSBDA replaced the old "no-frills" account in August 2012 on RBI's directive. The aim was uniform standards across banks for inclusion accounts. Importantly, Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts, launched in 2014, are essentially BSBDAs with overdraft and accidental insurance riders.

Real-world example: As of 2024, more than 50 crore PMJDY accounts have been opened in India, with cumulative balances over Rs 2 lakh crore — and almost all are BSBDA-class accounts. This is direct exam-relevant data: the question "Which type of account is a PMJDY account?" answers itself.

How these institutions plug into the bigger picture

Imagine a small farmer in Maharashtra who wants a tractor loan. She walks into a Regional Rural Bank branch. The RRB lends her the money. But the RRB itself sourced the funds at concessional rates from NABARD's refinance line. When the same farmer also runs a small dal-mill on the side, the mill's machinery is financed by a local commercial bank using SIDBI's MSME refinance. If she ships dal abroad to UAE-based buyers, the exporter on whose behalf the consignment moves uses EXIM Bank's pre-shipment credit. And if her son buys a home in Pune through an HFC, the HFC sources part of its capital from NHB.

Every step is connected to an apex institution. That layered architecture is exactly what IBPS PO sets ask you to reproduce.

A worked classification problem

Question: Match the institution with its primary mandate.

(i) NABARD — (a) Insurance regulation
(ii) SIDBI — (b) Foreign trade finance
(iii) IRDAI — (c) Agriculture and rural credit refinance
(iv) EXIM Bank — (d) MSME refinance

Solution:
Step 1: NABARD → agriculture and rural credit refinance, so (i) → (c).
Step 2: SIDBI → MSME refinance, so (ii) → (d).
Step 3: IRDAI → insurance regulator, so (iii) → (a).
Step 4: EXIM Bank → foreign trade finance, so (iv) → (b).
Conclusion: (i)-c, (ii)-d, (iii)-a, (iv)-b.

Common misconceptions, cleared

Common misconception: "NABARD regulates RRBs." NABARD supervises RRBs on RBI's behalf, but the regulatory power vests with RBI under the RRB Act. Distinguishing supervision (NABARD) from regulation (RBI) is a favourite trap.

Common misconception: "DICGC insures up to Rs 5 lakh per account." It is Rs 5 lakh per depositor per bank, summed across all accounts in that bank, principal plus interest.

Common misconception: "NHB still belongs to RBI." Not since March 2019. NHB is now fully owned by the Government of India.

:::compare

:::keypoints

• NABARD (1982) is the apex for agriculture and rural credit; refinances RRBs and co-operatives.
• SIDBI (1990) is the apex for MSME finance.
• EXIM Bank (1982) finances and promotes India's foreign trade.
• NHB (1988) is the apex for housing finance; ownership moved from RBI to GoI in 2019.
• IRDAI, SEBI, and PFRDA regulate insurance, securities, and pensions respectively.
• DICGC (RBI subsidiary) insures deposits up to Rs 5 lakh per depositor per bank (raised from Rs 1 lakh in February 2020).
• BSBDA replaced the no-frills account in 2012; PMJDY accounts are BSBDAs with extra benefits.
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:::memory
"NABARD-farm, SIDBI-small industry, EXIM-export, NHB-house" — chant the four DFIs in this order with their one-word mandates. They were founded in 1982, 1990, 1982, 1988 — only SIDBI is in the 90s; the rest are 80s.
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:::recap

• The four big DFIs (NABARD, SIDBI, EXIM, NHB) each anchor one sector.
• IRDAI, SEBI, PFRDA are regulators, not DFIs.
• DICGC's Rs 5 lakh deposit cover is per depositor per bank.
• BSBDAs are the inclusion-grade accounts that house PMJDY balances.
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Q: A commercial bank has Adjusted Net Bank Credit (ANBC) of Rs 50,000 crore. What is its overall priority-sector target, and the agriculture sub-target? Method: Overall PSL = 40% of ANBC = 0.40 x 50,000 = Rs 20,000 crore. Agriculture sub-target = 18% of ANBC = 0.18 x 50,000 = Rs 9,000 crore. Weaker-sections target = 12% of ANBC = Rs 6,000 crore. Speed tip: convert percentages directly — 40% is 'two-fifths', 18% is roughly 'one-fifth minus a bit'. Always apply the percentage on ANBC (or Credit Equivalent of Off-Balance-Sheet Exposure, whichever is higher), not on total deposits.