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Bank Types & Deposits

Banking / Economy Awareness · Banking System & RBI

Useful for: IBPS Banking

Overview

Banks are classified by ownership and licence type, and deposits by how freely they can be withdrawn.

Key points

Scheduled banks are listed in the Second Schedule of the RBI Act, 1934.
Payments banks accept deposits up to ₹2 lakh per customer and cannot lend.
Small finance banks serve small businesses and unbanked sections; 75% of their adjusted net bank credit goes to priority sectors.
Demand deposits: current and savings accounts; time deposits: fixed and recurring deposits.
DICGC insures deposits up to ₹5 lakh per depositor per bank (principal and interest).

Explanation

CASA ratio = current + savings deposits ÷ total deposits; a higher CASA lowers the bank’s cost of funds.
Current accounts generally earn no interest and suit businesses.
Regional Rural Banks focus on rural credit.
Cooperative banks are regulated jointly by the RBI and state registrars.

Step by step

Identify the institution, rule or instrument asked.
Recall its definition, year, limit or function from a table.
Eliminate options from similar institutions or older rules.

Examples

The maximum deposit per customer in a payments bank → ₹2 lakh.
Deposit insurance cover per depositor per bank → ₹5 lakh.
Savings and current accounts are → demand deposits.

Traps and advanced points

Trap: Thinking payments banks can lend.
Trap: Calling FDs demand deposits.
Trap: Using the old ₹1 lakh insurance limit.

Quick revision

Payments bank ₹2 lakh, no lending.
DICGC ₹5 lakh.
CASA = cheap funds.

Practice MCQs

Which banking/finance term is best described as: debt security representing borrowing by issuer?
1. bond
2. operational risk
3. simple interest
4. DICGC
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Answer: (a) bond. Bond prices and yields generally move inversely for a given bond when market yield changes.
Which banking/finance term is best described as: risk of losses from adverse market-price movements?
1. IFSC
2. current account
3. RTGS
4. market risk
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Answer: (d) market risk. Includes interest-rate, FX and equity-price exposures.
Which term-description pair is correctly matched for the concept “EMI”?
1. AML — Equated Monthly Instalment
2. reverse repo / liquidity absorption operations — Equated Monthly Instalment
3. LTV — Equated Monthly Instalment
4. EMI — Equated Monthly Instalment
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Answer: (d) EMI — Equated Monthly Instalment. Periodic loan payment combining principal and interest components.
Which term-description pair is correctly matched for the concept “NPCI”?
1. NPCI — National Payments Corporation of India
2. NPCI — deposit placed for a specified tenure
3. NPCI — risk of losses from adverse market-price movements
4. IFSC — National Payments Corporation of India
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Answer: (a) NPCI — National Payments Corporation of India. Umbrella organisation central to multiple retail payment systems in India.
Which term-description pair is correctly matched for the concept “cheque crossing”?
1. cheque crossing — instruction/restriction affecting how a cheque is paid/collected
2. cheque crossing — bank promise to pay beneficiary on specified default/conditions
3. cheque crossing — statement of revenue and expenses over a period
4. cheque crossing — movement of cash and cash equivalents into/out of an entity
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Answer: (a) cheque crossing — instruction/restriction affecting how a cheque is paid/collected. Crossing generally routes payment through a bank account rather than cash over the counter.
Which term-description pair is correctly matched for the concept “demand deposit”?
1. demand deposit — deposit withdrawable on demand subject to account terms
2. demand deposit — bank capital relative to risk-weighted exposures
3. demand deposit — deposit placed for a specified tenure
4. market risk — deposit withdrawable on demand subject to account terms
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Answer: (a) demand deposit — deposit withdrawable on demand subject to account terms. Demand deposit — deposit withdrawable on demand subject to account terms. Current and savings accounts are common demand-deposit categories.
In banking/finance, what does “demand deposit” refer to most accurately?
1. Loan-to-Value ratio
2. Reserve Bank of India
3. deposit withdrawable on demand subject to account terms
4. Current Account Savings Account
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Answer: (c) deposit withdrawable on demand subject to account terms. The correct answer is “deposit withdrawable on demand subject to account terms”. Current and savings accounts are common demand-deposit categories.
Which term-description pair is correctly matched for the concept “CASA”?
1. CASA — international bank-capital/liquidity/risk standards developed by the Basel Committee
2. demand deposit — Current Account Savings Account
3. CASA — risk that a borrower/counterparty fails to meet obligations
4. CASA — Current Account Savings Account
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Answer: (d) CASA — Current Account Savings Account. CASA — Current Account Savings Account. CASA deposits are a key low-cost deposit base for banks.
Which banking/finance term is best described as: Current Account Savings Account?
1. CASA
2. NEFT
3. demat account
4. capital adequacy
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Answer: (a) CASA. CASA — Current Account Savings Account. CASA deposits are a key low-cost deposit base for banks.
Which banking/finance term is best described as: deposit placed for a specified tenure?
1. IRDAI
2. CASA
3. EMI
4. term deposit
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Answer: (d) term deposit. Term deposit — deposit placed for a specified tenure. Interest and premature-withdrawal rules depend on bank terms.