Daily JAIIB Quiz 05 Nov 2026

A financial system links savers and borrowers through financial institutions and markets, using financial instruments and supporting services. Regulators and payment/settlement arrangements help the system function safely and efficiently. It is broader than banks alone because it also includes insurance, securities markets, pension arrangements and other intermediaries.

Before independence and in the early post-independence period, the financial system was less developed and institutionalised than it later became. Banking access was limited, organised financial institutions and markets were less extensive, and development finance institutions had not yet expanded in the later post-independence form. The period after 1951 saw a stronger role for planned development and public institutions.

The 1991 Narasimham Committee advocated financial-sector reforms, including strengthening prudential norms, improving efficiency and competition, reducing excessive directed controls, and improving bank profitability and asset quality. Recommendations helped shape later reforms such as income recognition, asset classification and provisioning norms, capital adequacy requirements, and greater operational autonomy.

A scheduled bank is one included in the Second Schedule to the Reserve Bank of India Act, 1934, subject to the Act‘s eligibility requirements. ‘Scheduled‘ is a statutory classification; it is not simply another name for a government-owned bank. Scheduled banks include eligible commercial and cooperative banks.

RRBs were established to provide banking and credit facilities, especially to small and marginal farmers, agricultural labourers, artisans and small entrepreneurs in rural areas. They combine a regional and rural focus with a formal banking structure. They are not exclusively agricultural development departments and may provide a range of banking services.

Payments banks can provide specified deposit, payment and remittance services within the applicable regulatory framework, but they are not permitted to undertake lending activities from their own balance sheets as ordinary banks do. They must comply with applicable deposit limits, investment requirements and other RBI directions. A payments bank may distribute certain third-party financial products subject to rules.

Small Finance Banks are intended to further financial inclusion by providing savings facilities and credit to small business units, small and marginal farmers, micro and small industries and other underserved groups. Unlike payments banks, Small Finance Banks can undertake lending, subject to RBI licensing conditions and prudential requirements.

Cooperative banks are organised on cooperative principles, including member ownership and democratic governance, subject to the applicable laws and regulatory framework. Their structure includes urban and rural cooperative institutions. Banking regulation involves the RBI, while aspects of registration and management may also involve Central or State cooperative authorities depending on the institution and law applicable.

The Reserve Bank of India was established under the RBI Act, 1934, and began operations on 1 April 1935. The Act provides the statutory framework for the RBI‘s constitution and functions, including monetary and currency-related responsibilities. The Banking Regulation Act, 1949 is a separate major law governing banking companies and specified banking matters.

The Banking Regulation Act, 1949 provides a framework for the regulation of banking companies in India, including matters such as licensing, business restrictions, management, inspection and other supervisory requirements. Its provisions have been extended or applied to cooperative banks through amendments and related legal provisions. It does not establish the RBI; that is under the RBI Act, 1934.

CRR is the proportion of a bank‘s net demand and time liabilities that must be maintained as cash balance with the Reserve Bank of India, as prescribed by the RBI. It is a monetary-policy and liquidity-management tool. It differs from the Statutory Liquidity Ratio (SLR), which requires banks to maintain eligible liquid assets in the prescribed form.

The National Bank for Agriculture and Rural Development (NABARD) is the apex development financial institution focused on agriculture and rural development. Its roles include refinancing eligible rural credit institutions, supporting rural infrastructure and promoting institutional development. SIDBI focuses on MSME development, while EXIM Bank focuses on export-import finance.

SIDBI‘s core mandate is the promotion, financing and development of the micro, small and medium enterprise (MSME) sector. It supports the sector through direct and indirect finance and development initiatives. NABARD focuses on agriculture and rural development, while EXIM Bank supports India‘s international trade.

The Self-Help Group (SHG)–Bank Linkage Programme connects groups that mobilise members‘ savings and practise collective financial discipline with formal banking services and credit. It has been an important channel for improving access to finance, particularly for low-income rural households and women. It is not a scheme limited to financing large companies.

NBFCs provide a range of financial services, including lending and asset finance, under the regulatory framework applicable to their category. They are not identical to banks: an NBFC cannot accept demand deposits like a bank, and NBFC deposits are not covered by DICGC deposit insurance. The precise activities permitted depend on registration, classification and applicable regulations.

The SBR framework categorises NBFCs into layers based on factors such as size, activity and perceived risk, with regulatory requirements calibrated to the layer. The framework is intended to apply proportionate and stronger oversight where systemic importance or risk warrants it. It is not a classification based solely on whether an NBFC is profitable.

The Insurance Regulatory and Development Authority of India (IRDAI) is the statutory regulator responsible for regulating and promoting the orderly growth of the insurance and reinsurance industries. RBI regulates banks and many NBFCs, SEBI regulates securities markets, and PFRDA regulates the pension sector within its mandate.

SEBI regulates India‘s securities market, including securities exchanges, market intermediaries and investor protection matters under the applicable securities laws. RBI is the central bank and banking regulator, IRDAI regulates insurance, and PFRDA regulates pension funds and the pension sector within its statutory remit.

NaBFID was established as a specialised development financial institution to support long-term infrastructure financing in India. Its role includes addressing gaps in infrastructure finance and helping mobilise investment for infrastructure projects. It is not the monetary-policy authority or the regulator of stock exchanges.

EASE stands for Enhanced Access and Service Excellence. The reform agenda has focused on improving public sector bank performance, customer service, responsible banking, technology-enabled processes and operational efficiency. It is a reform programme, not a statutory financial regulator or a deposit insurance scheme.