Money, Banking & Finance

1️⃣ Introduction: Role of Money in the Economy

Money is anything that is universally accepted as a medium of exchange for goods and services. It replaced the barter system, bringing efficiency, stability, and growth to modern economies.

Memory Trick: Money = Measure, Medium, Means.

A. Functions of Money

Type	Function	Explanation
Primary	Medium of Exchange	Used to buy/sell goods & services
	Measure of Value	Common unit for pricing goods
Secondary	Store of Value	Keeps value for future use
	Standard of Deferred Payments	Used in loans, EMIs, contracts
Contingent	Transfer of Value	Transfers money between people/places

Trick: Money’s 4 jobs – Buy, Count, Keep, Pay.

B. Reserve Bank of India (RBI)

Founded	1st April 1935
Nationalized	1949
Headquarters	Mumbai
Current Governor (2025)	Shaktikanta Das
Motto	Developing with Stability

Functions of RBI

Category	Function
Monetary Authority	Controls money supply, inflation, interest rates
Issuer of Currency	Sole authority to issue currency notes (₹2 to ₹2000)
Banker to Banks	Provides loans and maintains CRR/SLR
Banker to Government	Manages public debt, government accounts
Foreign Exchange Manager	Maintains forex reserves, manages rupee stability
Developmental Role	Promotes financial inclusion, digital banking, rural credit

Trick: RBI = Regulate, Borrow, Issue.

Structure of RBI

  RBI (Governor)
        ↓
  Deputy Governors (4)
        ↓
  Departments
        ↓
  Banking Supervision,
  Monetary Policy, 
  Currency Management,
  Financial Inclusion, 
  etc.

C. Commercial Banks and Their Functions

Definition

Commercial Banks are financial institutions that accept deposits, give loans, and provide financial services to individuals and businesses.

Category	Functions
Primary	Accept deposits, provide loans & advances
Secondary	Credit creation, remittance (NEFT, RTGS), agency services
Modern	ATMs, mobile banking, UPI, online transactions

Trick: Bank = Borrow, Advance, Network, Keep Safe.

Types of Commercial Banks

Type	Example	Ownership
Public Sector	SBI, PNB, BoB	Govt-owned
Private Sector	HDFC, ICICI, Axis	Privately owned
Foreign Banks	HSBC, CitiBank	Operate from abroad
Regional Rural Banks (RRBs)	Prathama Bank	Focus on rural areas
Cooperative Banks	Urban & State Cooperatives	Member-owned

D. Types of Bank Accounts

Account Type	Features	Best For
Savings Account	Limited transactions, interest earned	Individuals
Current Account	No interest, unlimited transactions	Businesses
Fixed Deposit (FD)	Fixed term, higher interest	Investors
Recurring Deposit (RD)	Monthly savings	Salaried individuals

Trick: Save – Spend – Secure – Steady.

E. Monetary Policy Tools

Instrument	Full Form / Meaning	Function / Effect
Repo Rate	Rate at which RBI lends to banks	↓ Repo → More lending → Boosts economy
Reverse Repo Rate	Rate at which RBI borrows from banks	↑ Reverse Repo → Banks park more money with RBI
CRR (Cash Reserve Ratio)	% of deposits banks keep with RBI	Controls liquidity
SLR (Statutory Liquidity Ratio)	% of deposits banks keep in gold/securities	Ensures solvency
Bank Rate	Long-term lending rate by RBI	Used for long-term credit control
MSF (Marginal Standing Facility)	Overnight borrowing for emergencies	For short-term liquidity

Trick: RBI’s Tools = Repo, Reverse, Ratio, Reserve.

Current (2025 Estimates)

Term	Rate (Approx)
Repo Rate	6.50%
Reverse Repo Rate	3.35%
CRR	4.5%
SLR	18%

F. Financial Inclusion Initiatives

1️⃣ Pradhan Mantri Jan Dhan Yojana (PMJDY)

Launched: 2014
Aim: Universal access to banking services for every Indian.

Zero-balance account
RuPay debit card
₹2 lakh accident insurance
Over 50 crore accounts opened

Trick: Jan Dhan = Every Jan’s Dhan.

2️⃣ BHIM (Bharat Interface for Money)

Launched: 2016
Objective: Promote digital payments using UPI.
Developed by: NPCI.

Uses UPI for instant transfers
Linked to mobile number
Promotes cashless economy

Trick: BHIM = Bharat’s Handy Instant Money.

3️⃣ UPI (Unified Payments Interface)

Introduced: 2016
Function: Real-time interbank money transfer through mobile apps.
Examples: PhonePe, Google Pay, Paytm, BHIM, etc.
Advantage: 24x7 instant transfer, no service charge.

Fact: India accounts for ~60% of global digital transactions (2025).

Trick: UPI = Unified People’s Interface.

G. PYQs (Delhi Police, SSC & State Exams)

1

Which of the following is NOT a function of money?

A) Medium of Exchange B) Store of Value C) Standard of Living D) Measure of Value

PYQ No.1

Show Answer

C) Standard of Living

2

The RBI was nationalized in —

A) 1935 B) 1949 C) 1956 D) 1991

PYQ No.2

Show Answer

B) 1949

3

Which of the following instruments is used by RBI to control credit?

A) CRR B) GDP C) CPI D) MSP

PYQ No.3

Show Answer

A) CRR

4

Repo rate means —

A) Rate at which RBI borrows from banks B) Rate at which banks borrow from RBI C) Rate at which public deposits with RBI D) Rate of foreign exchange

PYQ No.4

Show Answer

B) Rate at which banks borrow from RBI

5

The central bank of India is —

A) SBI B) NABARD C) RBI D) NITI Aayog

PYQ No.5

Show Answer

C) RBI

6

Which of the following is a digital payment interface developed by NPCI?

A) BHIM B) PMJDY C) PM-KISAN D) Atal Pension Yojana

PYQ No.6

Show Answer

A) BHIM

7

“Jan Dhan Yojana” relates to —

A) Crop insurance B) Financial inclusion C) Industrial subsidies D) Women empowerment

PYQ No.7

Show Answer

B) Financial inclusion

8

CRR is maintained by banks —

A) With RBI B) With NABARD C) With Finance Ministry D) With Commercial Banks

PYQ No.8

Show Answer

A) With RBI

9

Which organization regulates India’s monetary policy?

A) Ministry of Finance B) RBI C) SEBI D) NITI Aayog

PYQ No.9

Show Answer

B) RBI

10

The full form of UPI is —

A) Unified Payment Interface B) Unified Personal Investment C) Universal Payment Information D) Unified Public Interface

PYQ No.10

Show Answer

A) Unified Payment Interface

H. Quick Summary Tables

RBI Monetary Instruments

Term	Meaning	Effect on Economy
Repo Rate	RBI → lends to banks	↓ = More lending
Reverse Repo	RBI ← borrows from banks	↑ = Less lending
CRR	Cash reserve with RBI	↑ = Less liquidity
SLR	Gold/securities reserve	Maintains stability

Financial Schemes Summary

Scheme	Launched	Main Goal
PMJDY	2014	Bank accounts for all
BHIM	2016	Promote digital UPI payments
UPI	2016	Instant bank-to-bank transfer
RuPay	2012	Domestic card payment network

Final Concept Recap

Money performs 4 main functions → Exchange, Value, Store, Payment
RBI = Regulator, Banker, Issuer
Repo ↓ → More loans | Reverse Repo ↑ → Less liquidity
Financial inclusion = PMJDY, BHIM, UPI
Digital India = world’s largest real-time payment ecosystem

One-Line Memory: Money runs the market; Banks move the money; RBI manages both.

1️⃣ Introduction: Role of Money in the Economy

A. Functions of Money

B. Reserve Bank of India (RBI)

Functions of RBI

Structure of RBI

C. Commercial Banks and Their Functions

Definition

Types of Commercial Banks

D. Types of Bank Accounts

E. Monetary Policy Tools

Current (2025 Estimates)

F. Financial Inclusion Initiatives

1️⃣ Pradhan Mantri Jan Dhan Yojana (PMJDY)

2️⃣ BHIM (Bharat Interface for Money)

3️⃣ UPI (Unified Payments Interface)

G. PYQs (Delhi Police, SSC & State Exams)

Which of the following is NOT a function of money?

The RBI was nationalized in —

Which of the following instruments is used by RBI to control credit?

Repo rate means —

The central bank of India is —

Which of the following is a digital payment interface developed by NPCI?

“Jan Dhan Yojana” relates to —

CRR is maintained by banks —

Which organization regulates India’s monetary policy?

The full form of UPI is —

H. Quick Summary Tables

RBI Monetary Instruments

Financial Schemes Summary

Final Concept Recap

Master Indian Money, Banking & Finance for Your Exam!