Quick Answer: Core Banking Terms at a Glance
Quick Answer: For IBPS PO Prelims 2026 revision, remember these one-liners: Repo rate is the rate at which the RBI lends short-term funds to banks against government securities. CRR is the percentage of deposits banks must keep as cash with the RBI. SLR is the share of deposits banks hold themselves in cash, gold and approved securities. An NPA is a loan whose interest or principal stays overdue for more than 90 days.
- Quick Answer: Core Banking Terms at a Glance
- Repo Rate and Reverse Repo Rate
- Cash Reserve Ratio (CRR)
- Statutory Liquidity Ratio (SLR)
- Bank Rate and Marginal Standing Facility (MSF)
- Non-Performing Assets (NPA)
- Priority Sector Lending (PSL)
- Base Rate, MCLR and EBLR
- Inflation and Money Supply Terms
- Comparison Table: Repo vs CRR vs SLR vs NPA
- Memory Tricks for Prelims Revision
- Practice MCQs on Banking Awareness
- Frequently Asked Questions
- Q: What is the repo rate in simple words?
- Q: What happens when RBI increases CRR?
- Q: Is SLR kept with RBI?
- Q: When is an asset classified as an NPA?
- Q: How is this revision sheet different from the MPC explainer?
- Related reading
Repo Rate and Reverse Repo Rate
The repo rate is the policy rate of India — the rate at which the Reserve Bank of India lends short-term money to commercial banks against collateral of government securities under the Liquidity Adjustment Facility (LAF). When the RBI raises the repo rate, borrowing from the RBI becomes costlier; banks pass this on to customers, so loan rates (and EMIs) rise, credit offtake slows and inflation cools. A repo cut works the opposite way, making home, car and personal loans cheaper.
The reverse repo rate historically was the rate at which the RBI borrowed from banks, absorbing excess liquidity. Since the introduction of the SDF (Standing Deposit Facility) in April 2022, the fixed reverse repo has become largely dormant, and the SDF rate (repo minus 25 basis points) is the floor of the LAF corridor, while the MSF rate (repo plus 25 bps) is the ceiling. The repo rate is decided by the six-member Monetary Policy Committee (MPC) under the RBI Act, 1934. Verify the current repo rate at the RBI website before your exam, as policy rates change with bi-monthly MPC meetings.
Cash Reserve Ratio (CRR)
CRR is the percentage of a bank’s Net Demand and Time Liabilities (NDTL) that must be maintained as cash balances with the RBI. Key exam points:
- CRR earns no interest for banks.
- It is kept with the RBI — unlike SLR.
- Raising CRR sucks money out of the system, reducing banks’ lendable funds and tightening money supply; cutting CRR injects liquidity.
- CRR is prescribed under Section 42 of the RBI Act, 1934, and adjusted by the RBI (changes within the range set under the Act).
Statutory Liquidity Ratio (SLR)
SLR is the percentage of NDTL that banks must maintain themselves in liquid assets — cash, gold, and approved securities (mainly government bonds). It is prescribed under Section 24 of the Banking Regulation Act, 1949. Because SLR funds are locked into government securities, a higher SLR reduces the funds available for credit creation; a lower SLR frees resources for lending. Unlike CRR, SLR holdings can earn returns (interest on G-Secs), and they are maintained by the bank itself, not deposited with the RBI.
Bank Rate and Marginal Standing Facility (MSF)
This pair is a classic exam trap. The Bank Rate is the rate at which the RBI lends (or rediscounts bills) without collateral — a penalty rate, traditionally kept 100–200 bps above repo, and it directly feeds into penalties and some long-term lending pricing. The MSF allows banks to borrow overnight from the RBI by dipping into their SLR portfolio (up to 2% of NDTL) — the emergency window when interbank liquidity dries up. The MSF rate is repo + 25 bps.
Difference between repo rate and bank rate: repo is short-term, collateralised lending under LAF; bank rate is uncollateralised and applies to longer-term/penal purposes. Both move in tandem with the policy rate.
Non-Performing Assets (NPA)
A loan becomes an NPA when interest and/or principal remains overdue for more than 90 days (for a term loan), or when the account remains out of order (overdraft/cash credit) or crop season remains overdue (agriculture). Classification:
- Gross NPA: total overdue loans before any provisioning.
- Net NPA: Gross NPA minus provisions made — the actual loss-bearing exposure.
- Sub-standard: NPA for up to 12 months; Doubtful: beyond 12 months; Loss asset: identified as irrecoverable.
Banks set aside provisions against NPAs as per RBI’s Income Recognition and Asset Classification (IRAC) norms, which directly hit their profit and loss accounts.
Priority Sector Lending (PSL)
The RBI mandates that scheduled commercial banks lend a fixed share of ANBC (Adjusted Net Bank Credit) to the priority sector — agriculture (18%), MSME, education, housing, social infrastructure, renewable energy and weaker sections. For domestic banks the overall target is 40% of ANBC. The rationale: left to the market, credit flows disproportionately to established corporates; PSL targets ensure inclusive credit delivery to farm and small-business borrowers. Verify current sub-targets in the RBI Master Directions on Priority Sector Lending.
Base Rate, MCLR and EBLR
Loan pricing has evolved through three regimes:
- Base Rate (2010): banks’ internal minimum lending rate.
- MCLR (April 2016): Marginal Cost of Funds based Lending Rate — replaced the base rate for faster transmission, computed from marginal cost of funds, negative CRR carry and tenure premium.
- EBLR (October 2019): External Benchmark Lending Rate — new floating-rate retail and MSME loans must be linked to an external benchmark, most commonly the repo rate. This is why an MPC repo cut now reflects in EMIs within a quarter (reset at least once in three months).
Inflation and Money Supply Terms
CPI (Consumer Price Index, base 2012=100) is India’s headline inflation measure for monetary policy — the 4% target with a ±2% tolerance band under the flexible inflation targeting framework. WPI (Wholesale Price Index) tracks wholesale prices and is published by the Office of the Economic Adviser, DPIIT. Money supply measures: M0 (currency in circulation + bankers’ deposits with RBI), M1 (M0 + demand deposits), M3 (broad money = M1 + time deposits) and M2/M4 including post-office deposits. The control chain: raise repo/CRR/SLR → costlier credit and lower money multiplier → lower money supply → cooled inflation.
Comparison Table: Repo vs CRR vs SLR vs NPA
| Term | Definition | Decided/Maintained by | Economic Impact |
|---|---|---|---|
| Repo Rate | Rate at which RBI lends short-term to banks against G-Secs | RBI’s Monetary Policy Committee | Raises/lowers cost of borrowing; affects EMIs and inflation |
| CRR | % of NDTL kept as cash with RBI | RBI (no interest) | Tightens or loosens lendable funds and money supply |
| SLR | % of NDTL in cash, gold, approved securities with the bank | RBI (Sec. 24, BR Act 1949) | Limits credit creation; funds government borrowing |
| NPA | Loan overdue beyond 90 days | Classification per RBI’s IRAC norms | Reduces bank profitability; higher provisions; credit risk indicator |
Memory Tricks for Prelims Revision
- “Repo = Repossess”: RBI lends only against security — repo is collateralised; Bank Rate is not.
- “CRR = Cash with RBI”: C for Cash, R for RBI; SLR = “Self-Kept Liquid Reserves” — kept by the bank itself.
- “90-90 rule”: 90 days overdue = NPA; 90 days of runway — remember “3 months, then non-performing.”
- Gross minus Provisions = Net: same formula as gross weight minus packing = net weight.
- Corridor memory — “S-D-M”: SDF (floor, repo −25) → Repo → MSF (ceiling, repo +25).
Practice MCQs on Banking Awareness
- Under which section of the Banking Regulation Act, 1949 is SLR prescribed?
A) Section 24 ✔ B) Section 42 C) Section 17 D) Section 22 - At what MSF rate do banks borrow overnight, if the repo rate is 6.50%?
A) 6.25% B) 6.75% ✔ C) 7.50% D) 6.50% - A term loan is classified as an NPA when it remains overdue for more than:
A) 30 days B) 60 days C) 90 days ✔ D) 180 days - Which of the following earns no interest for banks?
A) SLR securities B) CRR balances ✔ C) Excess SLR investments D) MSF borrowing - Net NPA equals:
A) Gross NPA + provisions B) Gross NPA − provisions ✔ C) Gross advances − Gross NPA D) Sub-standard + doubtful assets
Sources for verification: rbi.org.in (policy rates, PSL Master Directions, IRAC norms) and pib.gov.in for MPC decisions.
Frequently Asked Questions
Q: What is the repo rate in simple words?
The rate at which the RBI lends short-term funds to commercial banks against government securities. Raising it makes borrowing costlier, slows credit growth and cools inflation.
Q: What happens when RBI increases CRR?
Banks must park more of their deposits as cash with the RBI, which reduces lendable funds, contracts the money supply and tightens liquidity in the economy.
Q: Is SLR kept with RBI?
No — SLR is maintained by banks themselves in liquid assets like cash, gold and approved securities. Only CRR is kept with the RBI.
Q: When is an asset classified as an NPA?
When interest or principal remains overdue for more than 90 days for a term loan (or the account is out of order for overdraft/cash credit facilities).
Q: How is this revision sheet different from the MPC explainer?
This is a static glossary of banking terms for revision; the MPC explainer covers the committee’s composition, functioning and latest policy decisions.
Related reading
- Percentage Shortcuts: Fraction Equivalents and Base-Change Tricks for SSC & Bank Exams
- IBPS PO Prelims Mock Test (September 21, 2026): 100 Questions with Answers – Day 12
Quick revision
- CRR earns no interest for banks.
- It is kept with the RBI — unlike SLR.
- Raising CRR sucks money out of the system, reducing banks’ lendable funds and tightening money supply; cutting CRR injects liquidity.
- CRR is prescribed under Section 42 of the RBI Act, 1934, and adjusted by the RBI (changes within the range set under the Act).
- Gross NPA: total overdue loans before any provisioning.
- Net NPA: Gross NPA minus provisions made — the actual loss-bearing exposure.
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