Money and Banking
Money and banking for UPSC: functions of money, M0 to M3, the money multiplier, the RBI, India's banking structure, NPAs, capital adequacy and banking reforms.
SyllabusGS III · Indian economy and issues relating to mobilisation of resources; money, banking and the financial system
Banking is the single most-tested area of Prelims Economy. Questions range from the definitions of money supply to the kinds of banks the RBI licenses, and from deposit insurance to bad-loan resolution. Mains asks how the banking system mobilises savings, why bad loans pile up, and how reforms such as recapitalisation, mergers and the Insolvency and Bankruptcy Code changed the picture.
What UPSC asks
- Prelims: M1 and M3, reserve money and the money multiplier, functions of the RBI, scheduled vs non-scheduled banks, payments banks and small finance banks, NPAs, Basel norms, deposit insurance, digital rupee.
- Mains GS III: mobilisation of resources, financial stability, NPAs and the twin balance sheet problem, public sector bank reform, financial inclusion.
Key sub-topics
| Sub-topic | What to master |
|---|---|
| Money | Functions, fiat money, legal tender, currency issue |
| Money supply | M0, M1, M2, M3, M4; money multiplier |
| The RBI | History, functions, legal provisions |
| Banking structure | Commercial, cooperative, RRBs, differentiated banks |
| Banking reforms | Nationalisation, Narasimham Committees, mergers |
| Asset quality | NPAs, SARFAESI, IBC, Basel III, deposit insurance |
Start with Money Supply and the Banking System, then revise with the quick revision sheet and practice questions.