Complete Financial Terms, Concepts & Definitions from Roots to Current Day
For RBI Grade B Phase 2 — Paper III (Finance & Management)
| Component | Examples | Role |
|---|---|---|
| Financial Institutions | Banks (SBI, PNB), NBFCs, Insurance Cos, Mutual Funds, Pension Funds | Intermediaries between savers & borrowers |
| Financial Markets | Money Market, Capital Market, Forex Market, Derivatives Market | Platform for buying/selling financial instruments |
| Financial Instruments | Equity, Bonds, T-Bills, Commercial Paper, Certificates of Deposit | Claims on future cash flows |
| Financial Services | Banking, Insurance, Leasing, Factoring, Mutual Funds, VC | Services that facilitate financial transactions |
| Regulators | RBI, SEBI, IRDAI, PFRDA, NABARD, NHB | Supervise and regulate the system |
| Regulator | Full Name | Regulates | Estd. |
|---|---|---|---|
| RBI | Reserve Bank of India | Banks, NBFCs, Payment Systems, Money Market, Forex | 1935 |
| SEBI | Securities & Exchange Board of India | Stock Exchanges, Mutual Funds, FPIs, Credit Rating Agencies | 1992 |
| IRDAI | Insurance Regulatory & Development Authority of India | Insurance companies & intermediaries | 1999 |
| PFRDA | Pension Fund Regulatory & Development Authority | NPS, Pension Funds | 2014 |
| NHB | National Housing Bank | Housing Finance Companies | 1988 |
| NABARD | National Bank for Agriculture & Rural Development | Cooperative Banks, RRBs, Rural Finance | 1982 |
| IBBI | Insolvency & Bankruptcy Board of India | Insolvency resolution process | 2016 |
| Detail | Info |
|---|---|
| Established | April 1, 1935 (under RBI Act, 1934) |
| Nationalised | January 1, 1949 |
| Headquarters | Mumbai (Mint Road) |
| Current Governor | Shri Sanjay Malhotra (since Dec 2025) |
| Deputy Governors | 4 (Max) |
| Regional Offices | 31 (including sub-offices) |
| Subsidiaries | DICGC, ReBIT, IFTAS |
| Instrument | Type | Current Rate | How It Works |
|---|---|---|---|
| Repo Rate | Quantitative | 5.25% | Rate at which RBI lends to banks (overnight) against G-Secs. ↑ Repo = ↑ lending rates = tight money |
| SDF Rate | Quantitative | 5.00% | Rate at which banks park excess funds with RBI (no collateral needed). Floor of LAF corridor |
| MSF Rate | Quantitative | 5.50% | Emergency borrowing rate for banks (can dip into SLR up to 2%). Ceiling of LAF corridor |
| Bank Rate | Quantitative | 5.50% | Rate for long-term lending by RBI to banks. Penal rate for SLR/CRR shortfall |
| Reverse Repo | Quantitative | 3.35% | Fixed rate (legacy). Replaced by SDF as floor since April 2022 |
| CRR | Quantitative | 3.00% | % of NDTL banks MUST keep with RBI as cash. No interest earned. ↑ CRR = less money to lend |
| SLR | Quantitative | 18.00% | % of NDTL banks MUST invest in G-Secs/Gold/Cash. Ensures solvency. ↑ SLR = less free cash |
| OMO | Quantitative | — | Open Market Operations: RBI buys/sells G-Secs to inject/absorb liquidity |
| MSS | Quantitative | — | Market Stabilisation Scheme: T-Bills/Bonds issued to absorb excess liquidity |
| Moral Suasion | Qualitative | — | RBI persuades/advises banks verbally (no legal force) |
| Selective Credit Control | Qualitative | — | Margin requirements, credit rationing for specific sectors |
| Category | Types | Key Details |
|---|---|---|
| Scheduled Commercial Banks (SCBs) | Public Sector Banks (PSBs) | 12 PSBs (after mergers). Govt holds ≥51%. E.g., SBI, PNB, BOB |
| Private Sector Banks | E.g., HDFC Bank, ICICI, Axis, Kotak. Growing rapidly | |
| Foreign Banks | E.g., Citibank, HSBC, Standard Chartered. Operate as branches/WOS | |
| Small Finance Banks (SFBs) | 11 SFBs. Must lend 75% to priority sector. Min ₹25 lakh capital | |
| Payments Banks | Airtel, Paytm, India Post, Fino, Jio | Max deposit ₹2 lakh. No lending. Payment services only |
| Regional Rural Banks (RRBs) | 43 RRBs | Shareholding: GoI 50%, State 15%, Sponsor Bank 35%. Rural lending |
| Cooperative Banks | Urban Cooperative Banks (UCBs) | Regulated by RBI + State Registrar. Serve urban/semi-urban areas |
| Rural Cooperatives | PACS → DCCBs → StCBs (3-tier). Regulated by NABARD + State |
| Term | Full Form | Meaning |
|---|---|---|
| NDTL | Net Demand & Time Liabilities | Total deposits (demand + time) minus inter-bank deposits. Base for CRR/SLR calculation |
| CASA | Current Account Savings Account | Low-cost deposits for banks. Higher CASA ratio = lower cost of funds = higher profitability |
| NPA | Non-Performing Asset | Loan where interest/principal overdue for >90 days |
| GNPA | Gross NPA | Total NPAs before provisioning |
| NNPA | Net NPA | GNPA minus provisions. True measure of asset quality |
| PSL | Priority Sector Lending | 40% of ANBC must go to agriculture, MSME, education, housing, weaker sections |
| MCLR | Marginal Cost of Funds Based Lending Rate | Internal benchmark for bank lending rates (since Apr 2016) |
| EBLR | External Benchmark Linked Lending Rate | Linked to Repo Rate / T-Bill / FBIL rate. Mandatory for new retail loans since Oct 2019 |
| Base Rate | — | Minimum rate below which banks cannot lend (pre-MCLR system) |
| DICGC | Deposit Insurance & Credit Guarantee Corp. | Insures deposits up to ₹5 lakh per depositor per bank |
| PCA | Prompt Corrective Action | RBI framework to restrict weak banks (triggered by NPA/CRAR/ROA thresholds) |
| CRAR / CAR | Capital to Risk-weighted Assets Ratio | Minimum 9% for Indian banks (Basel III). Measures bank solvency |
| Institution | Full Name | Estd. | Function |
|---|---|---|---|
| NABARD | National Bank for Agriculture & Rural Development | 1982 | Apex body for rural credit; refinances cooperative banks & RRBs; promotes SHGs, FPOs; regulates rural cooperative banks |
| SIDBI | Small Industries Development Bank of India | 1990 | Apex body for MSME sector; provides direct & indirect finance; Fund of Funds for startups |
| EXIM Bank | Export-Import Bank of India | 1982 | Finances, facilitates & promotes India's international trade; Lines of Credit to foreign govts |
| NHB | National Housing Bank | 1988 | Apex body for housing finance; regulates HFCs; promotes affordable housing |
| NaBFID | National Bank for Financing Infrastructure & Development | 2021 | Development Finance Institution (DFI) for long-term infrastructure financing |
| ECGC | Export Credit Guarantee Corporation | 1957 | Provides credit risk insurance to exporters |
| MUDRA | Micro Units Development & Refinance Agency | 2015 | Refinances micro-enterprise loans: Shishu (up to ₹50K), Kishor (₹50K–5L), Tarun (₹5L–10L) |
| Stance | Meaning | Signal |
|---|---|---|
| Accommodative | Ready to cut rates or keep rates low | Growth priority; rates may go down, not up |
| Neutral | Flexibility in either direction | Can raise or cut rates based on data |
| Hawkish / Tightening | Ready to raise rates | Inflation priority; rates may go up |
| Current (Feb 2026) | Neutral | MPC keeping options open; cumulative 125 bps cut done |
| Instrument | Issuer | Maturity | Key Feature |
|---|---|---|---|
| Treasury Bills (T-Bills) | Government of India | 91 / 182 / 364 days | Zero coupon; issued at discount; risk-free; benchmark |
| Commercial Paper (CP) | Corporates | 7 days – 1 year | Unsecured promissory note; min ₹5 lakh; high credit rating needed |
| Certificate of Deposit (CD) | Banks / FIs | 7 days – 1 year (banks); 1–3 yrs (FIs) | Negotiable term deposit; issued at discount |
| Call Money | Banks | 1 day (overnight) | Inter-bank lending; no collateral; rate = call rate |
| Notice Money | Banks | 2–14 days | Short-term inter-bank borrowing |
| Term Money | Banks | 15 days – 1 year | Inter-bank term lending |
| Repo / Reverse Repo | RBI / Banks | Overnight / Term | Collateralized lending using G-Secs |
| CBLO → TREPS | Banks, MFs, Insurance | Overnight | Triparty Repo on G-Secs; replaced CBLO in 2018 |
| Segment | Type | Examples |
|---|---|---|
| Primary Market | New issue of securities | IPO, FPO, Rights Issue, Private Placement, QIP, OFS |
| Secondary Market | Trading of existing securities | BSE (1875), NSE (1992) — Sensex, Nifty 50 |
| Equity Market | Shares / Stocks | Common Stock, Preference Shares, ADR, GDR |
| Bond / Debt Market | Fixed income instruments | G-Secs, SDL, Corporate Bonds, Municipal Bonds, PSU Bonds |
| Type | Definition | Exchange Traded? | Obligation | Example |
|---|---|---|---|---|
| Forward | Custom contract to buy/sell asset at future date at agreed price | ❌ OTC (Over-the-counter) | Both parties obligated | Farmer agrees to sell wheat at ₹2000/quintal after 3 months |
| Future | Standardised forward contract traded on exchange | ✅ Exchange (NSE, MCX) | Both parties obligated | Nifty Futures, Gold Futures |
| Option | Right (not obligation) to buy/sell asset at strike price | ✅ Exchange (mostly) | Buyer has right; Seller has obligation | Call Option (right to buy); Put Option (right to sell) |
| Swap | Agreement to exchange cash flows between two parties | ❌ OTC | Both parties obligated | Interest Rate Swap (fixed ↔ floating); Currency Swap |
| Term | Definition |
|---|---|
| ANBC | Adjusted Net Bank Credit — used to compute Priority Sector Lending targets |
| ARC | Asset Reconstruction Company — buys NPAs from banks at discount & tries to recover |
| Basel III | Global banking regulation for capital adequacy, stress testing & liquidity (BIS) |
| CAR/CRAR | Capital Adequacy Ratio = (Tier 1 + Tier 2 Capital) / Risk Weighted Assets. Min 9% in India |
| CBDC | Central Bank Digital Currency — Digital Rupee (e₹) launched by RBI in 2022 |
| CET1 | Common Equity Tier 1 — highest quality capital (equity + retained earnings). Min 5.5% |
| Core Banking | Centralised system allowing customers to access bank from any branch (CBS) |
| CRILC | Central Repository of Information on Large Credits — RBI database of large borrowers |
| DRT | Debt Recovery Tribunal — adjudicates NPA recovery cases (under RDDBFI Act, 1993) |
| ECB | External Commercial Borrowings — loans raised by Indian entities from foreign sources |
| FCNR | Foreign Currency Non-Resident Account — term deposit in foreign currency by NRIs |
| FPI | Foreign Portfolio Investor — invests in Indian securities market (registered with SEBI) |
| G-Sec | Government Security — debt instrument issued by GoI/State Govts. Safest Indian investment |
| IBC | Insolvency & Bankruptcy Code, 2016 — unified framework for resolution/liquidation |
| KYC | Know Your Customer — identity verification process mandated by RBI for all bank accounts |
| LAF | Liquidity Adjustment Facility — RBI's tool to inject/absorb liquidity via repo/reverse repo |
| LCR | Liquidity Coverage Ratio — Min 100%. Bank must hold HQLA to cover 30-day net outflows |
| NBFC | Non-Banking Financial Company — registered under RBI; lends but can't accept demand deposits |
| NEFT | National Electronic Funds Transfer — 24x7 real-time settlement (since Dec 2019) |
| NRE Account | Non-Resident External Account — foreign earnings deposited in INR; fully repatriable; tax-free interest |
| NRO Account | Non-Resident Ordinary Account — Indian income of NRIs in INR; limited repatriation; taxable |
| NSFR | Net Stable Funding Ratio — ensures long-term funding stability. Min 100% (Basel III) |
| OCA | One-Time Restructuring of Loans — permitted by RBI during crises (e.g., COVID) |
| PCR | Provision Coverage Ratio = Provisions / Gross NPAs × 100. Higher = safer |
| RTGS | Real Time Gross Settlement — large-value (min ₹2 lakh) instant fund transfer; 24x7 |
| SARFAESI | Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 — lets banks seize collateral without court |
| SDL | State Development Loans — bonds issued by State Governments |
| SWIFT | Society for Worldwide Interbank Financial Telecommunication — secure global messaging for banks |
| UPI | Unified Payments Interface — real-time mobile payment system by NPCI. India's most used payment method |
| WACR | Weighted Average Call Rate — operating target of monetary policy. Tracks near repo rate |
| Write-off | Bank removes bad loan from books (still pursues recovery). Cleans balance sheet, not forgiveness |
| Yield Curve | Graph plotting interest rates vs bond maturity. Normal = upward slope. Inverted = recession signal |
| Type | Cause | Example |
|---|---|---|
| Demand-Pull | Too much money chasing too few goods → excess demand | Govt stimulus leading to higher spending |
| Cost-Push | Rising input costs → producers pass on to consumers | Oil price shock → higher transport & production costs |
| Built-in / Wage-Price Spiral | Workers demand higher wages → firms raise prices → cycle repeats | Unionised sector wage negotiations |
| Structural | Supply-side bottlenecks (infrastructure, regulation) | Food inflation due to poor storage in India |
| Index | Full Name | Base Year | Published By | Items | Key Use |
|---|---|---|---|---|---|
| CPI | Consumer Price Index | 2024=100 (new series from Jan 2026) | MOSPI (NSO) | 299 items in 8 groups | RBI's target for monetary policy (4%±2%) |
| WPI | Wholesale Price Index | 2011-12=100 | DPIIT (Commerce Ministry) | 697 items | Measures producer-level inflation; used for deflator |
| Group | Weight |
|---|---|
| Food & Beverages | ~45.86% |
| Housing | ~10.07% |
| Fuel & Light | ~6.84% |
| Clothing & Footwear | ~6.53% |
| Miscellaneous (Health, Education, Transport) | ~28.32% |
| Core Inflation | CPI minus Food & Fuel — shows underlying price pressure |
| Type | Measures |
|---|---|
| Monetary Policy | ↑ Repo Rate, ↑ CRR, Sell G-Secs (OMO), ↑ SLR → Tighten money supply |
| Fiscal Policy | ↓ Govt spending, ↑ Taxes, ↓ Subsidies → Reduce demand |
| Supply-side | Import duty cuts, release buffer stocks, improve logistics, ban hoarding |
| Administrative | Stock limits on essential commodities, price caps, APMC reforms |
| Term | Formula / Definition |
|---|---|
| Revenue Deficit | Revenue Expenditure − Revenue Receipts (Govt spending more than earning on regular items) |
| Fiscal Deficit | Total Expenditure − Total Receipts (excl. borrowings) = Total Borrowing Requirement of Govt |
| Primary Deficit | Fiscal Deficit − Interest Payments (shows borrowing need excluding past debt servicing) |
| Revenue Receipts | Tax Revenue + Non-Tax Revenue (don't create liability) |
| Capital Receipts | Borrowings + Disinvestment + Loan Recoveries (create liability or reduce assets) |
| Revenue Expenditure | Salaries, Subsidies, Interest payments, Pensions (don't create assets) |
| Capital Expenditure | Roads, Bridges, Defence equipment (create assets or reduce liabilities) |
| FRBM Act | Fiscal Responsibility & Budget Management Act, 2003 — mandates fiscal discipline |
| Parameter | FY26 RE | FY27 BE |
|---|---|---|
| Total Expenditure | ₹49.65 lakh Cr | ₹53.47 lakh Cr (+7.7%) |
| Capital Expenditure | ₹10.96 lakh Cr | ₹12.22 lakh Cr (+11.5%) |
| Revenue Expenditure | ₹38.69 lakh Cr | ₹41.25 lakh Cr |
| Fiscal Deficit | 4.4% of GDP | 4.3% of GDP |
| Revenue Deficit | 1.5% of GDP | 1.5% of GDP |
| Gross Tax Revenue | — | ₹44.04 lakh Cr |
| Net Tax Revenue | ₹26.7 lakh Cr | ₹28.67 lakh Cr |
| Gross Borrowing | — | ₹17.20 lakh Cr |
| Debt-to-GDP | 56.1% | 55.6% (target: 50±1% by 2030-31) |
| Statement | Shows | Period |
|---|---|---|
| Balance Sheet | What the company OWNS (Assets) vs OWES (Liabilities) + Owner's Equity | Snapshot at a point in time |
| Profit & Loss (Income Statement) | Revenue − Expenses = Net Profit/Loss | Over a period (quarter/year) |
| Cash Flow Statement | Actual cash inflows & outflows from Operating, Investing, Financing activities | Over a period |
| Activity | Includes | Healthy Sign |
|---|---|---|
| Operating (CFO) | Cash from core business (sales, expenses, taxes) | Positive = business generating cash |
| Investing (CFI) | Capex, asset purchases/sales, investments | Negative = company investing in growth |
| Financing (CFF) | Debt raised/repaid, equity issued, dividends paid | Depends on stage of company |
| Category | Ratio | Formula | Meaning |
|---|---|---|---|
| Profitability | ROE | Net Profit / Shareholders' Equity × 100 | Return generated on owners' investment |
| ROA | Net Profit / Total Assets × 100 | How efficiently assets generate profit | |
| Net Profit Margin | Net Profit / Revenue × 100 | % of revenue that becomes profit | |
| Liquidity | Current Ratio | Current Assets / Current Liabilities | Ability to pay short-term obligations. Ideal: >2 |
| Quick Ratio | (Current Assets − Inventory) / Current Liabilities | Stricter liquidity test. Ideal: >1 | |
| Cash Ratio | Cash / Current Liabilities | Most conservative liquidity measure | |
| Leverage | Debt-to-Equity | Total Debt / Shareholders' Equity | How much debt vs equity. Lower = safer |
| Interest Coverage | EBIT / Interest Expense | Ability to pay interest. Higher = better | |
| Efficiency | Inventory Turnover | COGS / Average Inventory | How fast inventory is sold. Higher = better |
| Debtor Days | (Receivables / Revenue) × 365 | Days to collect payment from customers | |
| Creditor Days | (Payables / COGS) × 365 | Days to pay suppliers | |
| Banking-Specific | NIM | (Interest Income − Interest Expense) / Avg Earning Assets | Net Interest Margin — bank's core profitability |
| CAR/CRAR | (Tier 1 + Tier 2 Capital) / Risk-Weighted Assets | Capital Adequacy Ratio. Min 9% in India |
| Scheme | Year | Key Feature |
|---|---|---|
| PM Jan Dhan Yojana (PMJDY) | 2014 | Zero-balance bank account for every unbanked adult; RuPay Debit Card; ₹2 lakh accident insurance; overdraft up to ₹10,000 |
| PM Jeevan Jyoti Bima (PMJJBY) | 2015 | Life insurance of ₹2 lakh; premium ₹436/year; age 18–50 |
| PM Suraksha Bima (PMSBY) | 2015 | Accident insurance ₹2 lakh; premium ₹20/year; age 18–70 |
| Atal Pension Yojana (APY) | 2015 | Guaranteed pension ₹1000–5000/month after 60; for unorganised sector |
| PM MUDRA Yojana | 2015 | Collateral-free loans to micro enterprises: Shishu (≤₹50K), Kishor (₹50K–5L), Tarun (₹5L–10L) |
| Stand-Up India | 2016 | ₹10L–1Cr loans for SC/ST/Women entrepreneurs; at least 1 per bank branch |
| Kisan Credit Card (KCC) | 1998 | Credit facility for farmers for crops, post-harvest, allied activities; interest subvention @2% |
| SHG-Bank Linkage | 1992 | Self-Help Groups linked to banks via NABARD; largest microfinance programme globally |
| Direct Benefit Transfer (DBT) | 2013 | Subsidies/benefits transferred directly to Jan Dhan accounts via Aadhaar; eliminates middlemen |
| JAM Trinity | — | Jan Dhan + Aadhaar + Mobile — backbone of financial inclusion in India |
| Ayushman Bharat (PM-JAY) | 2018 | Health insurance ₹5 lakh/family/year for bottom 40% families; extended to all 70+ citizens |
| System | Operator | Feature |
|---|---|---|
| UPI | NPCI | Real-time mobile payments via VPA; 24x7; inter-bank; India's #1 payment system. Now available in 8+ countries |
| RTGS | RBI | Real Time Gross Settlement; min ₹2 lakh; 24x7 since Dec 2020; for large-value transactions |
| NEFT | RBI | National Electronic Funds Transfer; 24x7 since Dec 2019; no minimum amount; batch processing |
| IMPS | NPCI | Immediate Payment Service; 24x7; up to ₹5 lakh; real-time |
| NACH | NPCI | National Automated Clearing House; bulk payments (salaries, dividends, EMIs) |
| BBPS | NPCI | Bharat Bill Payment System; one-stop bill payment for utilities, insurance, etc. |
| FASTag | NPCI/NHAI | RFID-based electronic toll collection; mandatory on all 4-wheelers |
| e₹ (Digital Rupee / CBDC) | RBI | Central Bank Digital Currency; pilot launched Dec 2022; Wholesale (e₹-W) + Retail (e₹-R) |
| e-RUPI | NPCI | Prepaid digital voucher; cashless, contactless; person & purpose specific; no bank account needed |
| RuPay | NPCI | India's domestic card payment network; alternative to Visa/Mastercard; lower MDR |
| AEPS | NPCI | Aadhaar Enabled Payment System; biometric-based banking at micro-ATMs |
| Risk | Definition | Management Tool |
|---|---|---|
| Credit Risk | Borrower fails to repay loan/interest | Credit scoring, collateral, provisioning, diversification |
| Market Risk | Losses from changes in market prices (interest rates, equity, forex) | VaR, hedging with derivatives, duration management |
| Liquidity Risk | Inability to meet short-term obligations | LCR, NSFR, diversified funding, contingency plans |
| Operational Risk | Losses from failed internal processes, people, systems, or external events | Internal controls, BCP, cyber security, audit |
| Interest Rate Risk | Mismatch between rate-sensitive assets & liabilities | ALM (Asset-Liability Management), gap analysis |
| Systemic Risk | Failure of one institution triggers cascading failures across system | D-SIBs regulation, resolution frameworks |
| Framework | Year | Focus | Key Feature |
|---|---|---|---|
| Basel I | 1988 | Credit Risk only | Min CAR = 8%. Simple risk-weight approach |
| Basel II | 2004 | 3 Pillars | Pillar 1: Min Capital | Pillar 2: Supervisory Review | Pillar 3: Market Discipline |
| Basel III | 2010 (post-GFC) | Quality of Capital + Liquidity | Higher CET1, Capital Conservation Buffer, Countercyclical Buffer, LCR, NSFR, Leverage Ratio |
| Component | Minimum Requirement |
|---|---|
| CET1 (Common Equity Tier 1) | 5.5% of RWA |
| Additional Tier 1 | 1.5% |
| Total Tier 1 | 7.0% |
| Tier 2 | 2.0% |
| Minimum CAR | 9.0% (India) vs 8% (global) |
| Capital Conservation Buffer (CCB) | 2.5% |
| Effective Total with CCB | 11.5% |
| D-SIB Surcharge (for SBI etc.) | +0.2% to +0.8% |
| Ratio | Formula | Minimum | Purpose |
|---|---|---|---|
| LCR | HQLA / Total Net Cash Outflows (30 days) | 100% | Survive 30-day liquidity stress |
| NSFR | Available Stable Funding / Required Stable Funding | 100% | Long-term funding stability (1 year horizon) |
| Leverage Ratio | Tier 1 Capital / Total Exposure | 3.5% (India) | Cap on excessive leverage regardless of risk weights |