SSC CGL Economics Banking: Notes & Practice Questions

The SSC CGL Economics Banking section covers important concepts related to the Indian banking and financial system. Topics include the history and structure of banking in India, Reserve Bank of India (RBI), State Bank of India (SBI), bank nationalisation, Regional Rural Banks (RRBs), NABARD, cooperative banks and NBFCs.

For revision, PW SSC brings these concepts together in a concise format, while the exercise questions provide practice based on the topics covered. You can use the notes to revise important facts, dates, institutions and banking terms and then attempt the questions to reinforce your understanding. 

What is Indian Banking System?

A bank is a financial institution authorised to accept public deposits and grant credit loans. For competitive exams, studying the banking system in India for SSC CGL helps you master financial structures, credit control tools, and monetary aggregates. These concise notes summarise core institutional milestones and monetary concepts for rapid revision.

Evolution and Historical Phases

Banking in India developed across three distinct eras. The table below outlines the core phases of banking development:

Reserve Bank of India (RBI)

The Reserve Bank of India serves as the central monetary authority of the nation. It was established on April 1, 1935, under the Reserve Bank of India Act, 1934, following the Hilton Young Commission recommendations. The government nationalised the RBI on January 1, 1949.

Key functions of the RBI include:

• Regulating currency issue and managing foreign exchange reserves.

• Formulating and executing national monetary policy.

• Acting as banker to the government and commercial banks.

• Controlling credit flow through quantitative and qualitative tools.

Specialised Banking Institutions

Specialised institutions cater to targeted economic segments. Understanding these forms a key part of banking awareness for SSC CGL.

• Regional Rural Banks (RRBs): Established on October 2, 1975, based on the Narasimham Committee recommendations. The first RRB was Prathama Bank. Equity is shared between the Central Government (50%), State Government (15%), and Sponsor Bank (35%).

• NABARD: Formed on July 12, 1982, on the recommendations of the B. Sivaraman Committee. It serves as the apex body for rural and agricultural finance.

• Cooperative Banks: Member-owned entities registered under the Cooperative Societies Act, providing essential credit to agriculture and small enterprises.

Monetary Aggregates and Money Supply

The RBI classifies the money supply into four distinct monetary measures based on liquidity:

• M0 (Monetary Base): Currency in circulation plus banker deposits with the RBI.

• M1 (Narrow Money): Currency with the public + demand deposits with the banking system + other deposits with the RBI.

• M2: M1 + savings deposits with Post Office savings banks.

• M3 (Broad Money): M1 + time deposits with the banking system.

Credit Regulation Mechanism

The RBI regulates money supply using specific quantitative measures:

1. Cash Reserve Ratio (CRR): The fixed share of net demand and time liabilities that commercial banks must keep as cash reserves with the RBI.

2. Statutory Liquidity Ratio (SLR): The mandatory proportion of deposits banks maintain in safe, liquid assets like government bonds and gold.

3. Repo Rate: The benchmark interest rate at which the central bank lends short-term funds to commercial banks against government collateral.

These tools allow the central bank to manage inflation during economic expansions and inject liquidity during slowdowns.

SSC CGL Economics Banking Practice Questions by PW

After revising the concepts, you can practise questions based on the Indian banking system and related economic concepts. Some practice questions are given below:

1. In which century did the English establish agency houses in major Indian cities, offering loans?

(a) 17th century
(b) 18th century
(c) 19th century
(d) 20th century

2. Which was the first bank based on the European banking system founded in India?

(a) Bank of Calcutta
(b) Bank of Hindustan
(c) Bank of Bombay
(d) Bank of Madras

3. What year did the Bank of Bengal change its name to the Bank of Madras?

(a) 1806
(b) 1809
(c) 1840
(d) 1843

4. Under which phase did the Government of India take control of 14 major private banks?

(a) Phase I: Early Era
(b) Phase II: Nationalisation Period
(c) Phase III: Liberalisation and Banking Sector Reforms
(d) Phase IV: Technological Advancements

5. When was the Reserve Bank of India founded?

(a) 1935
(b) 1947
(c) 1955
(d) 1969

6. What legislation led to the formation of the Reserve Bank of India?

(a) Companies Act of 1936
(b) Reserve Bank of India Act, 1934
(c) Banking Regulation Act, 1949
(d) RBI Act, 1947

7. Which bank emerged from the amalgamation of the Bank of Bengal, Bank of Bombay, and Bank of Madras?

(a) Reserve Bank of India
(b) State Bank of India
(c) Imperial Bank of India
(d) Bank of Hindustan

8. When was the State Bank of India nationalized?

(a) 1955
(b) 1969
(c) 1980
(d) 2008

9. Who recommended the establishment of Regional Rural Banks (RRBs)?

(a) Narsimhan committee
(b) B. Sivaramman Committee
(c) Hilton Young Commission
(d) Royal Commission on Indian Currency and Finance

10. When was NABARD established?

(a) 1921
(b) 1948
(c) 1955
(d) 1982

For complete practice questions and answers on SSC CGL Economics Banking, you can download the PDF given below.

SSC CGL Economics Banking Notes PDF

The PDF contains the detailed SSC CGL Economics Banking notes, including concepts related to the Indian banking system, RBI, SBI, nationalisation of banks, RRBs, NABARD, cooperative banks, NBFCs, Banking Ombudsman, money market instruments, cheques, types of money and money supply.

It also includes 25 exercise questions with answers based on these concepts. You can use the PDF for quick revision and question-based practice.

How to Prepare for SSC CGL Economics Banking?

Banking includes several factual concepts, dates, committees, institutions and functions. A focused revision approach can help you retain these details more effectively.

• Revise institutions separately: Note the establishment year, purpose and major functions of RBI, SBI, RRBs and NABARD.

• Remember important timelines: Revise major dates such as 1935 for RBI's establishment, 1955 for SBI and 1969 and 1980 for bank nationalisation.

• Differentiate banking entities: Keep the features and roles of commercial banks, RRBs, cooperative banks and NBFCs separate.

• Practise factual MCQs: Solve questions based on committees, Acts, establishment years, functions and banking terms.

• Revise money-market terms: Learn the meaning and purpose of T-Bills, Commercial Paper, Certificates of Deposit, Repo and other instruments together.

• Use the notes for quick revision: Revisit the PDF before practising questions to recall definitions, dates and key facts.

SSC CGL Economics Banking includes several factual concepts related to the Indian banking system, financial institutions and the money market. You can use the PW SSC study resources to revise important concepts, dates, committees and functions in one place and practise the accompanying questions to reinforce your preparation. 

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