Banking Awareness
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✨ Login to trackExams love the small words of banking: CASA, NPA, SARFAESI, DICGC and the payment systems NEFT, RTGS, IMPS and UPI. Each carries one definition and one number. Cheque types and the rupee's exchange-rate history complete this block.
Accounts, deposits and lending words
CASA means Current Account plus Savings Account. These deposits pay little or no interest, so banks call them low-cost funds. A high CASA ratio lowers a bank's cost of money.
A demand deposit is withdrawable any time. A time deposit (fixed deposit) runs for a fixed term.
| Term | Meaning |
|---|---|
| Overdraft | Withdraw more than the balance, within a limit |
| Cash credit | Working-capital loan against stock or assets |
| Demand draft | Prepaid instrument, paid by the bank itself |
| Lien | Bank's right to retain a debtor's asset |
For loans against assets: a pledge keeps the goods with the lender. Hypothecation leaves the goods with the borrower. A mortgage covers immovable property.
Payment systems: NEFT, RTGS, IMPS, UPI
| System | Year | Speed | Money range |
|---|---|---|---|
| RTGS | 2004 | Real time, one by one | ₹2 lakh minimum, no maximum |
| NEFT | 2005 | Half-hourly batches | No RBI-set minimum |
| IMPS | 2010 | Instant | Up to ₹5 lakh |
| UPI | 2016 | Instant, mobile app | ₹1 lakh usual cap; ₹5 lakh for hospitals, education, capital markets, insurance |
RTGS and NEFT now run 24x7 (December 2020 and December 2019). RTGS means Real Time Gross Settlement: each payment settles alone and in full.
UPI means Unified Payments Interface. It runs on a virtual payment address (VPA), so bank details stay hidden.
Tip: Match the year to the speed: 2004 big, 2005 batch, 2010 instant, 2016 on the phone.
Bad loans and recovery
A loan becomes an NPA (Non-Performing Asset) when interest or instalment stays unpaid for 90 days. Then it moves: sub-standard (an NPA for 12 months), doubtful, and finally loss.
- SARFAESI Act, 2002: a secured creditor bank can seize and sell pledged property without going to court. It does not cover unsecured loans or agricultural land.
- Debts Recovery Tribunals (RDDBFI Act, 1993) hear bank recovery cases.
- The Insolvency and Bankruptcy Code, 2016 is the modern route for dead companies, run through the NCLT.
Rule: SARFAESI needs security. No security means no seizure without court help.
Deposit insurance: DICGC
The Deposit Insurance and Credit Guarantee Corporation was formed in 1978 by merging the Deposit Insurance Corporation (1962) with a credit guarantee body.
- It insures ₹5 lakh per depositor per bank (raised from ₹1 lakh in 2020), counting principal and interest together.
- It covers licensed banks: commercial banks, RRBs, cooperative banks and small finance banks. NBFCs sit outside.
- The bank pays the premium, not the depositor.
Example: You keep ₹6 lakh in one bank. If it fails, DICGC pays ₹5 lakh; the rest follows liquidation.
Cheques and instruments
A bearer cheque pays whoever holds it. An order cheque pays the named person. A crossed cheque must go through a bank account.
- A cheque is valid for 3 months from its date (the rule since 2012).
- Post-dated: dated ahead; valid from that date. Stale: older than three months. Self: 'self' means the drawer's own account.
Watch: Exams swap bearer and order, or pay a crossed cheque at the counter.
Loan pricing and the rupee
Loan pricing moved in steps: BPLR (2003) to base rate (2010) to MCLR (2016) to repo-linked EBLR (2019). MCLR is the Marginal Cost of funds based Lending Rate.
The rupee's external value was officially fixed (the par value system) till 1991. It was devalued twice in July 1991. LERMS (March 1992) ran a dual rate: 40% of foreign exchange at the official rate, 60% at the market rate. The rates were unified in March 1993.
Question types you will see
Each type: how to recognise it, the method step by step, and one question to try.
Payment systems: match and compare
The question says 'RTGS was introduced in', 'which system settles in batches', or asks for the minimum of a system.
Anchor the years: RTGS 2004, NEFT 2005, IMPS 2010, UPI 2016.
Anchor the money rules: RTGS ₹2 lakh minimum, IMPS ₹5 lakh cap, UPI ₹1 lakh usual.
NEFT runs in batches; RTGS runs payment by payment.
One table answers every comparison.
Which payment system settles each transaction individually and in real time?
Show solutionHide solution
Batch settlement is NEFT.
One-by-one settlement is RTGS.
RTGS (Real Time Gross Settlement)
NPA classification
The question asks after how many days a loan becomes an NPA, or what an NPA older than 12 months is called.
90 days unpaid makes an NPA.
Twelve months as an NPA makes it doubtful.
Loss is the final stage.
The ladder has fixed rungs.
A sub-standard asset becomes doubtful after how long?
Show solutionHide solution
It becomes sub-standard first, as an NPA.
Doubtful status follows after 12 months.
After 12 months as a sub-standard asset
SARFAESI and recovery routes
The question asks under which Act a bank can seize secured property without a court, or tests the DRT route.
SARFAESI 2002: secured creditors act without court.
It skips unsecured loans and agricultural land.
DRTs (1993 Act) and the IBC 2016 are the other routes.
Act, year and scope travel as one bundle.
Under the SARFAESI Act, 2002, banks can enforce security on which loans?
Show solutionHide solution
The Act needs collateral.
Agricultural land is excluded.
Secured loans (loans backed by collateral)
DICGC insurance facts
The question asks how much DICGC insures, who pays the premium, or which banks are covered.
Cover: ₹5 lakh per depositor per bank, principal plus interest.
Raised from ₹1 lakh in 2020.
The bank pays the premium; NBFCs are not covered.
Three numbers and one payer make the whole question.
Who pays the deposit-insurance premium to DICGC?
Show solutionHide solution
The depositor pays nothing.
The insured bank bears the cost.
The insured bank
Cheque types and validity
The question says 'a crossed cheque is payable', 'a cheque is valid for', or swaps bearer with order.
Bearer pays the holder; order pays the named person.
Crossed cheques must go through a bank account.
Validity: 3 months from the date of issue.
Each word on the cheque points to one payer.
A crossed cheque must be paid how?
Show solutionHide solution
Two parallel lines cross its face.
Cash over the counter is barred.
Only by credit to a bank account
Banking jargon and exchange-rate history
The question expands CASA, matches lien, pledge, hypothecation and mortgage, or asks about LERMS and the 1991 devaluation.
CASA = current account + savings account, the cheapest funds.
Pledge: goods with lender. Hypothecation: goods with borrower. Mortgage: immovable property.
Par value till 1991, devaluation July 1991, LERMS March 1992, unified March 1993.
These are one-line recall items.
The LERMS of 1992 was a system of what?
Show solutionHide solution
It came after the 1991 devaluation.
It split foreign exchange conversions in two.
A dual exchange rate (40% official, 60% market)
Shortcuts that save time
RTGS 2004, big and real-time (₹2 lakh minimum). NEFT 2005, batches. IMPS 2010, instant, ₹5 lakh cap. UPI 2016, on the phone, ₹1 lakh usual cap.
Which system has a minimum of ₹2 lakh?
Show solutionHide solution
Only one system has a floor.
RTGS starts at ₹2 lakh.
RTGS
90 days late means NPA. Twelve months more means doubtful. The final stage is loss.
After how many days is a loan called an NPA?
Show solutionHide solution
Interest or instalment stays unpaid.
The cut-off is 90 days.
90 days
Mistakes to avoid
Where most students lose marks on this subtopic.
Wrong: Saying DICGC covers the whole deposit. Right: The cover is ₹5 lakh per depositor per bank, principal plus interest together.
Wrong: Mixing RTGS with NEFT. Right: RTGS settles each payment alone and in real time; NEFT settles in batches.
Wrong: Saying SARFAESI works for unsecured loans. Right: SARFAESI needs a secured loan; unsecured loans need the court route.
Wrong: Paying the DICGC premium as a depositor. Right: The bank pays the premium, not the depositor.
Wrong: Treating a post-dated cheque as invalid. Right: A post-dated cheque is valid, but only from its own date.
Wrong: Saying MCLR is older than the base rate. Right: The order is BPLR (2003), base rate (2010), MCLR (2016).
Quick revision
Read this the night before the exam.
CASA = current + savings deposits; the bank's cheapest money.
RTGS 2004 (min ₹2 lakh), NEFT 2005 (batches), IMPS 2010 (₹5 lakh), UPI 2016 (₹1 lakh usual).
Both RTGS and NEFT run 24x7 (Dec 2020 and Dec 2019).
NPA at 90 days: sub-standard, then doubtful after 12 months, then loss.
SARFAESI 2002: seize secured assets without court; DRT 1993; IBC 2016.
DICGC: ₹5 lakh per depositor per bank; the bank pays the premium.
BPLR 2003, base rate 2010, MCLR 2016, repo-linked 2019. LERMS 1992, unified 1993.
Practice: 12 questions
Sets of 10, mixed across the question types above. Every answer has a step-by-step explanation.
Topic test · 12 questions
Suggested time 5 min · wrong answers go to your mistake notebook automatically.