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UGC NET Commerce Banking and Financial Institutions Syllabus

The Banking and Financial Institutions syllabus for UGC NET Commerce in full: 1 chapter, 9 topics and 24 sub-topics, every one listed below, plus 51 Banking and Financial Institutions flashcards with answers.

1Chapters
9Topics
24Sub-topics
51Flashcards

Banking and Financial Institutions syllabus: 1 chapter, 9 topics

Expand any chapter to see its topics and sub-topics.

  1. Overview of Indian financial system

     9 topics
    • Types of banks
      • Commercial banks
      • Regional Rural Banks (RRBs)
      • Foreign banks
      • Cooperative banks
    • Reserve Bank of India
      • Functions
      • Role and monetary policy management
    • Banking sector reforms in India
      • Basel norms
      • Risk management
      • NPA management
    • Financial markets
      • Money market
      • Capital market
      • Government securities market
    • Financial Institutions
      • Development Finance Institutions (DFIs)
      • Non-Banking Financial Companies (NBFCs)
      • Mutual Funds
      • Pension Funds
    • Financial Regulators in India
    • Financial sector reforms including financial inclusion
    • Digitisation of banking and other financial services
      • Internet banking
      • Mobile banking
      • Digital payments systems
    • Insurance
      • Types of insurance- Life and Non-life insurance
      • Risk classification and management
      • Factors limiting the insurability of risk
      • Re-insurance
      • Regulatory framework of insurance- IRDA and its role

UGC NET Commerce Banking and Financial Institutions flashcards — 51 questions with answers

  1. What are the two broad categories of banks in India based on inclusion in the Reserve Bank of India Act's schedule?

    Scheduled banks (listed in the Second Schedule of the RBI Act, 1934) and non-scheduled banks (not listed). Scheduled banks must have paid-up capital and reserves of at least Rs 5 lakh and satisfy the RBI that their affairs are not conducted against depositors' interests.

  2. Distinguish between commercial banks and cooperative banks.

    Commercial banks are profit-oriented joint-stock institutions regulated under the Banking Regulation Act, 1949, serving the general public. Cooperative banks are member-owned, operate on a no-profit-no-loss cooperative basis, serve agriculture and small borrowers, and are regulated jointly by RBI and state Registrars of Cooperative Societies.

  3. What is a scheduled commercial bank (SCB) and what types does it include?

    An SCB is a bank listed in the Second Schedule of the RBI Act, 1934. It includes public sector banks, private sector banks, foreign banks, regional rural banks (RRBs), and small finance banks.

  4. What are Regional Rural Banks (RRBs) and how is their shareholding distributed?

    RRBs are scheduled commercial banks set up under the RRB Act, 1976 to provide credit to rural and agricultural sectors. Shareholding is: Central Government 50%, sponsor bank 35%, and State Government 15%.

  5. What is the difference between a small finance bank and a payments bank?

    Small finance banks accept deposits and lend (focus on priority sector, small borrowers), with 75% of credit to priority sectors. Payments banks accept deposits up to Rs 2 lakh per customer, offer remittances and payments, but cannot lend or issue credit cards.

  6. What is a Non-Banking Financial Company (NBFC) and how does it differ from a bank?

    An NBFC is a company registered under the Companies Act engaged in financial activities like loans, investments, and leasing. Unlike banks, NBFCs cannot accept demand deposits, are not part of the payment and settlement system, and depositors do not have DICGC insurance cover.

  7. When was the Reserve Bank of India established and when was it nationalised?

    The RBI was established on 1 April 1935 under the RBI Act, 1934, based on recommendations of the Hilton Young Commission. It was nationalised on 1 January 1949.

  8. What are the main functions of the Reserve Bank of India?

    Issuing currency (note-issuing authority), banker to the government, banker's bank and lender of last resort, controller of credit and monetary policy, custodian of foreign exchange reserves, and regulation and supervision of the financial system.

  9. Under which currency note-issue system does the RBI currently operate?

    The Minimum Reserve System (since 1956), under which the RBI must hold a minimum reserve of Rs 200 crore, of which Rs 115 crore is in gold and Rs 85 crore in foreign securities, while issuing any amount of currency.

  10. What is the composition of the Monetary Policy Committee (MPC) of the RBI?

    The MPC has six members: three from the RBI (the Governor as chairperson, the Deputy Governor in charge of monetary policy, and one RBI officer) and three external members appointed by the Central Government. Decisions are by majority; the Governor has a casting vote in a tie.

  11. What is the inflation target set for the RBI under the flexible inflation targeting framework?

    4% Consumer Price Index (CPI) inflation, with a tolerance band of +/- 2% (i.e., 2% to 6%).

  12. Define Cash Reserve Ratio (CRR).

    CRR is the percentage of a bank's net demand and time liabilities (NDTL) that it must maintain as cash reserves with the RBI. No interest is paid on these balances; it is a tool to control liquidity.

  13. Define Statutory Liquidity Ratio (SLR).

    SLR is the minimum percentage of net demand and time liabilities (NDTL) that a bank must maintain in the form of liquid assets such as cash, gold, or approved government securities, held with itself (not the RBI).

  14. What is the repo rate and the reverse repo rate?

    The repo rate is the rate at which the RBI lends short-term funds to commercial banks against government securities. The reverse repo rate is the rate at which the RBI borrows from banks, absorbing liquidity from the system.

  15. What is the Marginal Standing Facility (MSF)?

    MSF is a window through which scheduled commercial banks can borrow overnight funds from the RBI against approved securities (including dipping into SLR) at a rate higher than the repo rate, used in emergency liquidity situations.

  16. What is the Liquidity Adjustment Facility (LAF)?

    LAF is a monetary policy tool that allows banks to manage day-to-day liquidity mismatches by borrowing from the RBI through repo or parking funds through reverse repo, against eligible securities.

  17. What is Open Market Operations (OMO)?

    OMO refers to the buying and selling of government securities by the RBI in the open market to regulate money supply: selling securities absorbs liquidity, while buying securities injects liquidity.

  18. What is the Bank Rate?

    The Bank Rate is the rate at which the RBI lends long-term funds to commercial banks without collateral of securities. It is a signaling tool; the MSF rate is aligned with the Bank Rate.

  19. Which committee's recommendations launched the first generation of banking sector reforms in India in 1991?

    The Narasimham Committee I (1991) recommended the first phase of banking sector reforms, including reduction of CRR and SLR, deregulation of interest rates, prudential norms, and entry of private banks.

  20. What did the Narasimham Committee II (1998) primarily recommend?

    It recommended strengthening the banking system through capital adequacy enhancement, asset classification and provisioning norms, mergers of strong banks, reduction of Non-Performing Assets (NPAs), and greater autonomy for banks.

Show the other 31 Banking and Financial Institutions flashcards

  1. What are prudential norms in banking?

    Prudential norms are RBI regulations on income recognition, asset classification, and provisioning, along with capital adequacy requirements, designed to ensure banks reflect their true financial health and maintain stability.

  2. What is a Non-Performing Asset (NPA)?

    An NPA is a loan or advance on which interest or principal installment remains overdue for more than 90 days. NPAs are classified as substandard, doubtful, or loss assets.

  3. What is the Capital to Risk-weighted Assets Ratio (CRAR) requirement under Basel III in India?

    Indian banks must maintain a minimum total CRAR of 9% (against the Basel III global minimum of 8%), plus a Capital Conservation Buffer of 2.5%, taking the effective requirement to 11.5%.

  4. What is the SARFAESI Act, 2002?

    The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act allows banks and financial institutions to recover NPAs by taking possession of and selling the secured assets of defaulters without court intervention.

  5. What is the Insolvency and Bankruptcy Code (IBC), 2016?

    The IBC is a unified law for time-bound resolution of insolvency of corporates, partnerships, and individuals (within 180 days, extendable to 330 days), administered through the National Company Law Tribunal and adjudicated by the IBBI.

  6. What is the difference between the money market and the capital market?

    The money market deals in short-term funds (maturity up to one year) such as treasury bills, commercial paper, and call money. The capital market deals in long-term funds (over one year) such as shares, bonds, and debentures.

  7. What instruments are traded in the money market?

    Treasury bills (T-bills), commercial paper (CP), certificates of deposit (CD), call money, notice money, term money, commercial bills, and repurchase agreements (repos).

  8. What is the difference between the primary market and the secondary market?

    The primary market is where new securities are issued for the first time to raise capital (e.g., IPOs). The secondary market is where existing/already-issued securities are traded among investors (e.g., stock exchanges).

  9. What is a Treasury Bill (T-Bill)?

    A T-Bill is a short-term debt instrument issued by the Government of India through the RBI at a discount to face value, with maturities of 91, 182, or 364 days, and redeemed at par; it carries no interest coupon.

  10. What is Commercial Paper (CP)?

    CP is an unsecured, short-term promissory note issued by creditworthy corporates, primary dealers, and financial institutions to raise short-term funds, issued at a discount to face value with maturity from 7 days up to one year.

  11. What is a Certificate of Deposit (CD)?

    A CD is a negotiable, unsecured money market instrument issued by banks and select financial institutions against deposits, in dematerialised form, for short-term maturities (7 days to 1 year for banks).

  12. What is the difference between development financial institutions (DFIs) and investment institutions?

    DFIs (e.g., IFCI, IDBI, NABARD, SIDBI, EXIM Bank) provide long-term finance for industrial and infrastructure development. Investment institutions (e.g., LIC, UTI, GIC, mutual funds) mobilise public savings and invest in securities.

  13. What is NABARD and what is its primary role?

    The National Bank for Agriculture and Rural Development, established in 1982, is the apex development bank for refinancing and regulating institutions providing agricultural and rural credit, including RRBs and cooperative banks.

  14. What is SIDBI?

    The Small Industries Development Bank of India, established in 1990, is the principal financial institution for promotion, financing, and development of the micro, small, and medium enterprise (MSME) sector.

  15. What is the role of EXIM Bank of India?

    The Export-Import Bank of India, established in 1982, is the apex institution for financing, facilitating, and promoting India's foreign trade through export credit and lines of credit.

  16. Who regulates the securities market in India and under which Act?

    The Securities and Exchange Board of India (SEBI), established statutorily in 1992 under the SEBI Act, 1992, regulates the securities (capital) market and protects investor interests.

  17. Which body regulates the insurance sector in India?

    The Insurance Regulatory and Development Authority of India (IRDAI), established under the IRDA Act, 1999, regulates and develops the insurance industry.

  18. Which authority regulates the pension sector in India?

    The Pension Fund Regulatory and Development Authority (PFRDA), established statutorily under the PFRDA Act, 2013, regulates the National Pension System (NPS) and pension funds.

  19. What does the Financial Stability and Development Council (FSDC) do?

    The FSDC, set up in 2010 and chaired by the Union Finance Minister, is an apex body that strengthens and institutionalises the mechanism for maintaining financial stability, financial sector development, and inter-regulatory coordination.

  20. Which four main financial regulators oversee India's financial system and their domains?

    RBI (banking and monetary policy), SEBI (securities market), IRDAI (insurance), and PFRDA (pensions). RBI also regulates NBFCs and payment systems.

  21. What is financial inclusion?

    Financial inclusion is the process of ensuring access to appropriate financial products and services (banking, credit, insurance, payments) at affordable cost to all sections of society, especially the weaker and low-income groups.

  22. What is the Pradhan Mantri Jan Dhan Yojana (PMJDY)?

    PMJDY, launched in 2014, is the national mission for financial inclusion providing universal access to basic no-frills savings bank accounts, RuPay debit cards, accident and life insurance cover, and overdraft facilities.

  23. What is a Basic Savings Bank Deposit Account (BSBDA)?

    A BSBDA is a no-frills account offered with zero minimum balance, free RuPay debit card, and basic banking facilities, designed to promote financial inclusion among the unbanked.

  24. What is the role of Business Correspondents (BCs) in financial inclusion?

    Business Correspondents are retail agents engaged by banks to provide banking services (account opening, deposits, withdrawals, remittances) at locations other than bank branches, extending banking reach to remote and unbanked areas.

  25. What is Priority Sector Lending (PSL)?

    PSL is a mandate requiring banks to allocate a portion of credit (40% of Adjusted Net Bank Credit for domestic commercial banks) to specified sectors such as agriculture, MSMEs, education, housing, and weaker sections.

  26. What is the Unified Payments Interface (UPI)?

    UPI is a real-time, instant payment system developed by the National Payments Corporation of India (NPCI) that enables inter-bank fund transfers via mobile devices using a Virtual Payment Address (VPA), without sharing bank details.

  27. Differentiate between RTGS and NEFT.

    RTGS (Real Time Gross Settlement) settles transactions individually and in real time, used for high-value transfers (minimum Rs 2 lakh). NEFT (National Electronic Funds Transfer) settles on a net basis in batches with no minimum or maximum limit. Both now operate 24x7.

  28. What is the difference between life insurance and general insurance?

    Life insurance covers the risk of death or survival of a person and is long-term, treated as a contract of both protection and investment. General (non-life) insurance covers risks to property, health, and liabilities (fire, marine, motor, health) and is typically annual contracts of indemnity.

  29. What is the principle of utmost good faith (uberrimae fidei) in insurance?

    It is a fundamental insurance principle requiring both the insurer and the insured to disclose all material facts honestly and completely; concealment or misrepresentation can render the contract void.

  30. What is the principle of indemnity in insurance?

    The principle of indemnity ensures the insured is compensated only for the actual loss suffered, restoring them to the same financial position as before the loss, so they cannot profit from insurance. It applies to general insurance, not life insurance.

  31. What is reinsurance?

    Reinsurance is the practice whereby an insurer transfers a part of its risk portfolio to another insurer (the reinsurer) to reduce its exposure to large claims and spread risk. The General Insurance Corporation (GIC Re) is India's national reinsurer.

UGC NET Commerce Banking and Financial Institutions FAQ

What is in the UGC NET Commerce Banking and Financial Institutions syllabus?

UGC NET Commerce Banking and Financial Institutions is split into 1 chapter: Overview of Indian financial system. Together they contain 9 topics and 24 sub-topics.

How many chapters are in UGC NET Commerce Banking and Financial Institutions?

1 chapter, containing 9 topics and 24 sub-topics.

Are there flashcards for UGC NET Commerce Banking and Financial Institutions?

Yes — a 51-card Banking and Financial Institutions deck, printed in full in the flashcards section of this page and available in the Examius app with spaced repetition. The free plan covers one exam of your choice, including its flashcards; Examius Pro, a one-time purchase, unlocks every other exam and deck.