Indian Banking System
Indian Banking System
Structure of the Indian banking system, scheduled vs non-scheduled banks, commercial and cooperative banks, bank nationalisation, banking reforms, financial inclusion, and modern banking innovations.
Key Dates
Bank of Hindustan established in Calcutta — often cited as first bank in India (but it was a European trading bank, wound up by 1832)
Bank of Calcutta established (became Bank of Bengal in 1809) — first Presidency bank; followed by Bank of Bombay (1840) and Bank of Madras (1843)
Allahabad Bank established — oldest surviving public sector bank at the time (merged with Indian Bank in 2020)
Punjab National Bank established in Lahore — first swadeshi bank; founded by Lala Lajpat Rai and others
Three Presidency banks merged to form Imperial Bank of India — acted as quasi-central bank before RBI's establishment
Reserve Bank of India established (April 1) under RBI Act 1934 — took over central banking functions from Imperial Bank
Banking Regulation Act 1949 enacted — gave RBI supervisory and regulatory powers over commercial banks
Imperial Bank of India nationalised as State Bank of India (SBI) under SBI Act 1955 — to extend banking to rural areas
14 major commercial banks with deposits over Rs 50 crore nationalised (July 19) — social control of banking, rural credit expansion
Regional Rural Banks (RRBs) established under RRB Act 1976 — Prathama Bank in Moradabad, UP was the first RRB (October 2, 1975)
6 more commercial banks with deposits over Rs 200 crore nationalised — total PSBs reached 28
Narasimham Committee-I recommended banking sector reforms — reduced CRR/SLR, entry of new private banks, capital adequacy norms
Jan Dhan Yojana launched (August 28) — world's largest financial inclusion programme; 51+ crore accounts opened
First Small Finance Banks (SFBs) and Payments Banks licensed — differentiated banking for inclusion
Banks Board Bureau (BBB) established; later renamed FSIB (Financial Services Institutions Bureau) in 2022 for PSB leadership appointments
10 PSBs merged into 4 (effective April 1, 2020) — total PSBs reduced from 27 to 12; Lakshmi Vilas Bank merged with DBS India
Structure of Indian Banking — Comprehensive
The Indian banking system has a pyramidal structure with RBI at the apex as regulator and supervisor. Banks are classified as: Scheduled Banks (listed in the Second Schedule of the RBI Act 1934 — must have paid-up capital and reserves of at least Rs 5 lakh and satisfy RBI that its affairs are not conducted in a manner detrimental to the interests of depositors) and Non-Scheduled Banks (not listed — typically small cooperative banks). Scheduled Commercial Banks (SCBs): (1) Public Sector Banks (PSBs) — 12 banks where government holds majority (>51%) stake. SBI is the largest — Rs 63 lakh crore assets, 22,000+ branches. Other major PSBs: Bank of Baroda, Punjab National Bank, Canara Bank, Union Bank of India, Indian Bank, Bank of India, Central Bank, Indian Overseas Bank, UCO Bank, Bank of Maharashtra, Punjab & Sind Bank. (2) Private Sector Banks — 21 banks. Largest: HDFC Bank (post-merger with HDFC Ltd in July 2023 — India's largest bank by market capitalisation at Rs 13+ lakh crore). Others: ICICI Bank, Axis Bank, Kotak Mahindra Bank, IndusInd Bank, YES Bank, Federal Bank, Bandhan Bank, IDFC First Bank, RBL Bank, South Indian Bank, Karur Vysya Bank, etc. (3) Foreign Banks — 46 banks operating in India with about 270 branches. Major ones: Standard Chartered, Citibank (consumer banking exited to Axis Bank), HSBC, Deutsche Bank, Barclays, DBS (Singapore). Foreign banks can operate as branches or wholly-owned subsidiaries (WOS). (4) Regional Rural Banks (RRBs) — 43 banks (after consolidation from 196 in 2005). Shareholding: Centre 50%, State 15%, Sponsor Bank 35%. Focus: Last-mile rural credit. (5) Small Finance Banks (SFBs) — 12 banks. Must lend 75% to priority sector; 50% of loans must be up to Rs 25 lakh. Examples: AU Small Finance Bank (largest), Equitas, Ujjivan, Fincare (merged with AU), Jana, Suryoday, ESAF, North East, Capital, Unity. (6) Payments Banks — 6 operational. Can accept deposits up to Rs 2 lakh, cannot lend. Jio Payments Bank, India Post Payments Bank (IPPB — largest network with 1.5 lakh+ access points through post offices), Paytm Payments Bank (faced RBI restrictions in 2024 for compliance failures), Airtel Payments Bank, NSDL Payments Bank, Fino Payments Bank. Cooperative Banks: Three-tier short-term structure (State Cooperative Banks → District Central Cooperative Banks → Primary Agricultural Credit Societies — PACS, ~97,000 across India). Long-term structure: State Cooperative Agriculture & Rural Development Banks. Urban Cooperative Banks (UCBs) — about 1,500; regulated jointly by RBI (banking operations) and state Registrar of Cooperative Societies (management/governance). UCBs face governance challenges — the PMC Bank collapse (2019, Rs 11,000 crore fraud) exposed vulnerabilities.
Bank Nationalisation — Rationale & Impact
First Phase (1969): 14 banks with deposits over Rs 50 crore were nationalised on July 19, 1969, by ordinance under PM Indira Gandhi. The Banking Companies (Acquisition and Transfer of Undertakings) Ordinance 1969 was later challenged in R.C. Cooper vs Union of India (1970) — Supreme Court struck down the ordinance as it violated the right to compensation under Article 31. The government then passed a fresh Act (Banking Companies Act 1970) with adequate compensation provisions. Banks nationalised: Central Bank of India, Bank of Maharashtra, Dena Bank, Punjab National Bank, Syndicate Bank, Canara Bank, Indian Bank, Indian Overseas Bank, Bank of Baroda, Union Bank, Allahabad Bank, United Bank of India, UCO Bank, Bank of India. Rationale: (1) Social control of banking — banks were controlled by industrial houses (Tata, Birla) and served only urban industrial credit needs. (2) Expansion of banking to rural areas — pre-nationalisation, only 8,187 rural bank branches existed; by 1991, rural branches reached 35,134. (3) Priority sector lending — ensuring credit flow to agriculture, small industry, weaker sections. (4) Reducing concentration of economic power in a few industrial families. Second Phase (1980): 6 more banks with deposits over Rs 200 crore were nationalised — Andhra Bank, Corporation Bank, New Bank of India, Oriental Bank of Commerce, Punjab & Sind Bank, Vijaya Bank. New Bank of India was later merged with Punjab National Bank (1993) — the first bank merger. Impact of nationalisation: (1) Branch expansion: Total bank branches grew from 8,262 (1969) to 72,000+ (1991). Rural branches: from 1,833 to 35,134. Population per branch fell from 64,000 to 14,000. (2) Deposit mobilisation: Bank deposits rose from Rs 4,646 crore (1969) to Rs 2,05,000 crore (1991). (3) Credit to priority sectors: Agriculture credit share rose from 2.2% (1967) to 18% of ANBC. (4) Financial inclusion improved dramatically — banking habit spread beyond urban elite. Criticisms: (1) Operational inefficiency — high staff costs, bloated workforce, poor customer service. (2) Political interference in lending decisions — "telephone banking." (3) NPA accumulation — directed lending without commercial judgment. (4) Poor technology adoption compared to private banks.
Types of Modern Banks — SFBs, Payments Banks, Universal Banks
Small Finance Banks (SFBs): Licensed since 2015 based on Nachiket Mor Committee (2013) recommendations for universal financial inclusion. SFBs provide basic banking services (savings, deposits, lending, remittances) to unserved and underserved sections including small farmers, micro/small enterprises, and unorganised sector. Regulatory requirements: 75% of Adjusted Net Bank Credit (ANBC) to priority sector lending (vs 40% for regular commercial banks). 50% of loan portfolio must comprise advances up to Rs 25 lakh. No promoter holding cap initially, but must reduce to 26% within 12 years (with 40% within 5 years). 10 SFBs were licensed in the first round (2015): AU, Capital, Disha (ceased operations), ESAF, Equitas, Fincare (merged with AU in 2024), Jana, North East, Suryoday, Ujjivan, Utkarsh. Unity SFB later (joint venture of Centrum Financial and PMC Bank). SFBs have grown rapidly — total assets of Rs 3.5+ lakh crore (2024). AU SFB is the largest with Rs 1+ lakh crore assets and has been reclassified as a universal bank candidate. Payments Banks: Can accept demand deposits (savings and current accounts) up to Rs 2 lakh per customer. Cannot lend or issue credit cards. Can issue debit cards, offer internet/mobile banking, bill payments, remittances, and act as business correspondents for other banks. Must invest at least 75% of demand deposits in government securities with maturity up to 1 year. Model: Technology-driven, low-cost, paperless banking. India Post Payments Bank (IPPB) has the widest reach through 1.5 lakh+ post offices and 3 lakh postmen/gramin dak sevaks as doorstep bankers. 11 licences were granted; only 6 became operational (Vodafone M-Pesa, Cholamandalam, FINO, Tech Mahindra, Aditya Birla either did not launch or surrendered licences). Paytm Payments Bank faced RBI supervisory action in January 2024 for persistent KYC deficiencies and compliance failures — banned from accepting new deposits/customers (existing services allowed to wind down gradually). Universal Banking: The concept of universal banking (one institution offering commercial banking, investment banking, insurance, and securities services under one roof) was recommended by the Narasimham Committee-II (1998) and Khan Working Group (1998). In India, SBI, HDFC Bank (post-merger), and ICICI Bank effectively function as universal banks through subsidiaries (insurance, mutual funds, securities, investment banking). The distinction between banking and non-banking financial activities is increasingly blurred.
Banking Reforms & Key Committees
India's banking sector has been shaped by recommendations of several landmark committees: (1) Narasimham Committee-I (1991) — The watershed moment. Recommendations: Reduce CRR from 15% to 3-5% and SLR from 38.5% to 25% (phased), introduce 8% CRAR (Capital to Risk-Weighted Assets Ratio — later raised to 9% by RBI), establish Debt Recovery Tribunals, allow entry of new private sector banks (3 new banks licensed in 1993-94: ICICI Bank, HDFC Bank, Axis Bank — originally UTI Bank), phase out directed credit, adopt international accounting and disclosure standards, establish asset classification and provisioning norms (4-category classification). Most recommendations were implemented and transformed Indian banking. (2) Narasimham Committee-II (1998): Recommended strengthening capital adequacy to 10% (RBI later mandated 9% + buffers), merging strong banks to create globally competitive institutions, reducing government stake in PSBs below 33% (not implemented), and adopting international best practices in risk management. (3) P.J. Nayak Committee (2014) — "Governance of Board and Directors of Indian Banks": Recommended creating a Bank Investment Company (BIC) to hold government stakes in PSBs (not implemented), professional and independent PSB boards, performance-linked CEO tenures, greater autonomy in operations. The committee noted that PSB governance was the weakest link — government as owner, regulator (RBI), and customer (government deposits/lending) created conflicts. (4) Nachiket Mor Committee (2013) — "Committee on Comprehensive Financial Services for Small Businesses and Low-Income Households": Recommended universal access to bank account by January 2016, Payments Banks and SFBs for underserved segments, investment products accessible through Business Correspondents. Led directly to PMJDY, SFB, and Payments Bank licences. Recent reforms: (1) EASE (Enhanced Access & Service Excellence) framework — 6 editions since 2018. Action Points Index (EAI) measures PSB performance across 6 themes: responsible banking, customer responsiveness, credit off-take, PSU financial parameters, governance, and HR. (2) PSB mergers (2019-20): 10 PSBs merged into 4 anchor banks — OBC + UBI → PNB, Syndicate → Canara, Andhra + Corporation → Union Bank, Allahabad → Indian Bank. Separately: Dena + Vijaya → Bank of Baroda (2019). These mergers created larger, better-capitalised banks with wider reach. (3) FSIB (2022): Replaced Banks Board Bureau. Recommends candidates for MD/CEO, ED, and Chairman positions in PSBs, insurance companies, and financial institutions. Independent body to reduce government interference in appointments.
Financial Inclusion — Jan Dhan & JAM Trinity
Pradhan Mantri Jan Dhan Yojana (PMJDY) launched on August 28, 2014, is the world's largest financial inclusion programme. Features: Zero-balance savings bank account, indigenous RuPay debit card (linked to the National Financial Switch for interoperability), Rs 1 lakh accident insurance cover through RuPay card, Rs 30,000 life insurance (for accounts opened between August 15, 2014 and January 26, 2015, under PMJJBY), overdraft facility of Rs 10,000 (for eligible accounts with satisfactory operation for 6 months). Progress: Over 53 crore Jan Dhan accounts opened (2024). Total deposits: Rs 2.3+ lakh crore. 67% accounts in rural/semi-urban areas. 56% accounts held by women. Zero-balance accounts reduced from 76% (2014) to 13% (2024) — indicating active usage. 34 crore RuPay debit cards issued. The JAM Trinity (Jan Dhan + Aadhaar + Mobile) is the backbone of India's Direct Benefit Transfer (DBT) architecture. DBT eliminates intermediaries in subsidy distribution — subsidies/benefits transferred directly to beneficiary bank accounts (seeded with Aadhaar number) via electronic transfer. Over Rs 34 lakh crore transferred through DBT since inception. Government claims savings of Rs 3.48 lakh crore through DBT by eliminating ghost beneficiaries and leakage. Major DBT programmes: LPG subsidy (PAHAL — originally Direct Benefit Transfer of LPG), MGNREGA wages, PM-KISAN payments, scholarship disbursements, COVID relief payments, pension payments. Business Correspondents (BCs): Banks deploy BCs as last-mile agents in areas without bank branches. Over 17 lakh BC outlets across India (including CSCs — Common Service Centres). BCs use Aadhaar-enabled Payment System (AEPS) for biometric-authenticated transactions. Micro-ATMs: Handheld devices used by BCs for cash deposit/withdrawal using Aadhaar authentication. Financial Literacy: RBI's Centre for Financial Literacy (CFL) programme — 1,526 CFLs established in 715 districts. Challenges: Despite near-universal account ownership, financial literacy remains low, many accounts are dormant, insurance and pension uptake under PMJDY is limited, and rural digital infrastructure (connectivity, electricity) remains patchy.
Priority Sector Lending (PSL) Framework
Priority Sector Lending is a regulatory mandate requiring banks to direct a specified percentage of credit to sectors considered vital for economic development and social welfare. Current PSL targets (RBI revised guidelines, 2020): Overall PSL: 40% of Adjusted Net Bank Credit (ANBC) or Credit Equivalent of Off-Balance Sheet Exposures (CEOBE), whichever is higher — for all domestic SCBs and foreign banks with 20+ branches. Foreign banks with less than 20 branches: 40% (of which up to 32% can be in export credit). Agriculture: 18% of ANBC. Within agriculture: 10% target for Small and Marginal Farmers (SMF), and 8% balance to be achieved by all banks. Micro, Small and Medium Enterprises (MSMEs): 7.5% of ANBC. Advances to Weaker Sections: 12% of ANBC (includes SCs/STs, women, differently abled, self-help groups, distressed farmers, Kisan Credit Cards). Housing: Not specified as separate sub-target but loans up to Rs 35 lakh in metros and Rs 25 lakh elsewhere qualify. Education: Loans up to Rs 20 lakh qualify. Export credit: Available as PSL for foreign banks only. Social infrastructure: Loans to schools, healthcare, drinking water, sanitation facilities up to Rs 5 crore. Renewable energy: Loans for solar, biomass, wind, and micro-hydel up to Rs 30 crore per borrower. Others: Overdrafts up to Rs 5,000 in PMJDY accounts, loans to SHGs/JLGs. Shortfall consequences: Banks failing to meet PSL targets must deposit the shortfall amount in Rural Infrastructure Development Fund (RIDF) maintained by NABARD (for domestic banks) or funds maintained by NABARD/NHB/SIDBI/MUDRA (for foreign banks). RIDF deposits earn below-market interest rates (currently bank rate minus 2%), creating a penalty incentive. PSL Trading Certificates (PSLCs): Since April 2016, banks can buy/sell PSLCs on the RBI platform to meet PSL targets without actual lending. A bank with excess PSL (e.g., a rural cooperative bank) can sell PSLCs to a bank with shortfall (e.g., a foreign bank) — the underlying loan stays with the seller, only the "priority" tag is transferred. This created a market-based mechanism for PSL compliance, improving efficiency. PSLC trading volume: Rs 16+ lakh crore (FY24). Four categories: PSLC-Agriculture, PSLC-Small/Marginal Farmer, PSLC-Micro Enterprise, PSLC-General.
Deposit Insurance & Bank Resolution
Deposit insurance in India is provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC), a wholly-owned subsidiary of RBI established in 1962 under the DICGC Act 1961. Coverage: Rs 5 lakh per depositor per bank (raised from Rs 1 lakh in February 2020, after the PMC Bank crisis exposed the inadequacy of the earlier limit). Coverage includes: savings, current, fixed, and recurring deposits. Does not cover: government deposits, inter-bank deposits, deposits of state/central cooperative banks from state cooperative banks, deposits of foreign governments, deposits received outside India. Premium: Paid by insured banks to DICGC at 12 paise per Rs 100 of deposits per annum (raised from 10 paise in 2020). DICGC's corpus: approximately Rs 2 lakh crore (2024). Number of insured banks: about 2,000+ (including SCBs, RRBs, cooperative banks). Coverage statistics: DICGC covers about 98% of total deposit accounts (by number) but only about 43% of total deposit amount (because large deposits exceed Rs 5 lakh limit). Interim payments: DICGC Amendment Act 2021 (August 2021) mandated interim payment of Rs 5 lakh to depositors within 90 days of a bank being placed under restrictions (All-Inclusive Directions). This was a response to the PMC Bank depositor crisis where people couldn't access their money for months. Implementation: In the cases of Laxmi Vilas Bank (merged with DBS India, 2020), PMC Bank, and cooperative banks under restrictions, DICGC has facilitated payouts. Financial Resolution and Deposit Insurance (FRDI) Bill 2017: Proposed to establish a Resolution Corporation to handle failing financial firms. Withdrawn in 2018 after public outcry over the controversial "bail-in" clause (which would have allowed conversion of deposits into equity to rescue a failing bank — similar to Cyprus 2013). The bail-in concept remains contentious in India where bank deposits are considered sacrosanct. India currently lacks a comprehensive resolution framework for financial institutions — it's a gap that needs to be addressed through legislation separate from IBC.
Technology in Banking — UPI, CBS, Digital Lending
Indian banking has undergone a technological revolution, particularly since 2010. Core Banking Solution (CBS): Implementation of CBS by all PSBs (completed by 2012-13) was a game-changer — enabled anywhere banking (any branch, any time). Before CBS, accounts were branch-specific, and inter-branch transactions took days. Payment systems: UPI (Unified Payments Interface, 2016) — 13+ billion transactions/month (2024), revolutionised person-to-person and person-to-merchant payments. NEFT (National Electronic Fund Transfer) — batch-based, now 24/7 since December 2019. RTGS (Real Time Gross Settlement) — for large values above Rs 2 lakh, 24/7 since December 2020. IMPS (Immediate Payment Service) — 24/7 real-time interbank transfers. NACH (National Automated Clearing House) — for recurring bulk payments (EMIs, SIPs, salary, pensions). Cheque Truncation System (CTS) — image-based cheque clearing, eliminated physical movement of cheques. Digital lending: RBI's Digital Lending Guidelines (September 2022) regulated the fintech-NBFC lending model. Key provisions: All loans must be disbursed and repaid directly into/from borrower's bank account (no pass-through via lending app). Lending Service Provider (LSP) must disclose it is acting on behalf of the regulated entity (RE — bank/NBFC). Digital Lending Apps (DLAs) must disclose all charges upfront (Annual Percentage Rate). No automatic increase in credit limits without consent. Collection of data by apps limited to what is necessary. First Loss Default Guarantee (FLDG): RBI capped FLDG at 5% of the loan portfolio generated — fintech companies often provided credit guarantees to banks/NBFCs for portfolios originated through their platforms. Capping FLDG at 5% ensures that the primary credit risk stays with the regulated entity. Account Aggregator (AA) framework: RBI-regulated consent layer allowing users to share financial data securely between Financial Information Providers (FIPs — banks, insurance, mutual funds, tax authorities) and Financial Information Users (FIUs — lenders). 8 licensed AAs operational. AAs enable "consent-based credit" — customers with thin credit files can share UPI transaction history, insurance data, or tax returns with lenders for credit assessment, expanding credit access beyond traditional CIBIL score-based underwriting.
Cooperative Banking & Urban Cooperative Banks
Cooperative banks form the grassroots layer of India's banking system, particularly vital for rural credit and agriculture. Structure: Short-term cooperative credit: Three-tier — State Cooperative Banks (StCBs, 34) → District Central Cooperative Banks (DCCBs, 351) → Primary Agricultural Credit Societies (PACS, ~97,000). PACS directly interface with farmers — they disburse crop loans, collect deposits, and distribute inputs (seeds, fertilisers). Long-term cooperative credit: State Cooperative Agriculture & Rural Development Banks (SCARDBs) → Primary Cooperative Agriculture & Rural Development Banks. Focus on long-term investment credit for land development, irrigation, farm mechanisation. Total cooperative bank credit: approximately Rs 10 lakh crore (2024). Cooperative banks account for about 7% of total banking assets but serve about 25% of rural credit needs. PACS reforms: Model PACS bye-laws published by government (2023) envision PACS as multi-service centres — not just credit cooperatives but also handling input supply, marketing, storage, and even CSC (Common Service Centre) activities. Government approved Rs 2,516 crore for computerisation of 63,000 PACS and integration with NABARD and district cooperative banks. Urban Cooperative Banks (UCBs): About 1,500 UCBs operating mostly in Maharashtra, Gujarat, Karnataka, and Andhra Pradesh. Total deposits: approximately Rs 5.5 lakh crore. UCBs have historically suffered from weak governance — dominated by local politicians, poor internal audit, weak risk management, and regulatory gaps. Major UCB failures: PMC Bank (Punjab & Maharashtra Co-operative Bank, 2019): Rs 11,000 crore fraud by promoter (HDIL's Wadhawan family). 73% of total loans given to a single borrower group. RBI imposed withdrawal limits — depositors couldn't access their money. Eventually resolved through merger with Unity Small Finance Bank. The PMC crisis triggered: (1) DICGC coverage increase from Rs 1 lakh to Rs 5 lakh. (2) Banking Regulation (Amendment) Act 2020 bringing UCBs under direct RBI supervisory control (earlier, dual regulation by RBI and Registrar of Cooperatives created regulatory gaps). (3) RBI now has power to supersede UCB boards, order mergers, and approve/reject CEO appointments. NAFSCOB (National Federation of State Cooperative Banks) and state federations coordinate the cooperative banking system. Multi-state cooperative banks are governed by the Multi-State Cooperative Societies Act 2002 and regulated by RBI.
Banking Regulation & Supervision Framework
RBI's regulatory framework for banking operates through multiple layers: (1) Licensing: Under Section 22 of the Banking Regulation Act 1949, no bank can commence banking business without a licence from RBI. "On-tap" licensing for Universal Banks (since 2016) and SFBs (since 2019) replaced the periodic licensing rounds. Applicants must meet fit-and-proper criteria, minimum capital, and business plan viability. (2) Prudential regulations: Capital adequacy (Basel III norms — minimum 9% CRAR + 2.5% Capital Conservation Buffer = 11.5% total, with additional buffers for systemically important banks — D-SIBs identified annually; SBI is the only D-SIB with additional 0.8% buffer). Asset classification and provisioning norms. Income recognition — income on NPAs not booked on accrual basis. Exposure norms — single borrower limit 20% of capital funds, group borrower limit 25%. Large Exposure Framework: Total exposure to a counterparty capped at 25% of Tier-1 capital. (3) Statutory requirements: Cash Reserve Ratio (CRR) — percentage of deposits banks must maintain with RBI (currently 4% after temporary reduction during COVID). Does not earn interest. Statutory Liquidity Ratio (SLR) — percentage of deposits banks must invest in government securities (currently 18%). Earns interest. CRR and SLR are monetary policy and liquidity management tools. (4) Supervisory framework: RBI conducts on-site inspections (Annual Financial Inspection — AFI, for banks; Risk-Based Supervision — RBS, for larger banks) and off-site surveillance (returns submitted by banks). Integrated Compliance Management and Tracking System (ICMTS): Digitised compliance monitoring. Prompt Corrective Action (PCA) framework triggers for weak banks. (5) Resolution tools: RBI can issue directions under Section 35A of BR Act (binding on bank management). Section 45 allows RBI to apply to government for moratorium on a banking company. Banking Regulation Act amendments (2020) gave RBI power to initiate resolution/merger of weak banks without moratorium. (6) Consumer protection: Integrated Ombudsman Scheme 2021 (IOS) — replaced three separate ombudsman schemes (banking, NBFC, digital transactions) with one unified scheme. Complaints can be filed at CMS (Complaint Management System) portal. RBI resolved about 5 lakh complaints in FY24. (7) Anti-money laundering: KYC (Know Your Customer) norms under PML (Prevention of Money Laundering) Act 2002. Customer Due Diligence (CDD), Enhanced Due Diligence (EDD) for high-risk customers. Financial Intelligence Unit (FIU-IND) under Ministry of Finance receives Suspicious Transaction Reports (STRs) and Cash Transaction Reports (CTRs, for cash transactions above Rs 10 lakh).
Relevant Exams
Banking system is the core topic for all banking exams. IBPS and SBI exams test bank types, nationalisation dates, PSL targets and sub-targets, committee recommendations, digital banking innovations, and Jan Dhan Yojana details. UPSC tests the broader reform landscape, financial inclusion architecture (JAM Trinity), cooperative banking challenges, and the role of different bank types. SSC exams ask factual questions on first banks, mergers, the number of PSBs/private banks, SFB/Payments Bank features. DICGC coverage, PCA framework, and digital lending regulations are important for current affairs.