Banking Laws & Services Notes
Subject Overview
Banking Laws & Services is the Banking & Insurance elective on the legal and regulatory side of banking — the laws that govern how banks actually operate. You'll cover the origin and structure of Indian banking, the regulatory and compliance framework (RBI Act 1934, Banking Regulation Act 1949), NPA and securitisation rules (SARFAESI Act) and the Basel framework, and close with banker-customer relationships and banking services like cheque payment/
Subject at a glance
4
Units
34
Topics
6
Credits
4
Infographics
Unit-wise Syllabus
4 units — open any unit for detailed topic-wise notes, diagrams and important exam questions
- Origin and evolution of Indian banking
- types of banks — commercial
- small finance
- payments
- cooperative
- public sector
- private sector
- foreign banks and RRBs
- role of RBI as regulator
- changing functions of commercial banks
Public sector
Government-owned majority, e.g. SBI
Private sector
Privately owned
Foreign banks
Branches of overseas banks
Small finance and payments banks
Inclusion-focused
Cooperative and regional rural banks
Local and rural credit
Study guide
This unit traces Indian banking from its origin and evolution through the types of banks (commercial, small finance, payments, cooperative, public and private sector, foreign and RRBs), the role of the RBI as regulator and the changing functions of commercial banks. Know the difference between the types of bank with an example of each.
- Reserve Bank of India Act 1934 — incorporation
- central banking functions
- provisions for non-banking institutions
- penalties
- credit control techniques
- Banking Regulation Act 1949 — definitions
- business of banking companies
- winding up
Governs
The RBI itself
Banking companies
Covers
RBI's functions and powers
Licensing, management, winding up of banks
Purpose
Central banking and monetary control
Safe and sound banking
Study guide
You study the Reserve Bank of India Act 1934 (incorporation, central banking functions, provisions for non-banking institutions, penalties, credit control) and the Banking Regulation Act 1949 (definitions, business of banking companies, winding up). Learn the key sections and powers of the RBI.
- NPA categories and provisioning norms
- SARFAESI Act
- Bank for International Settlements and Basel Accords
- banker-customer relationship types
- lien
- set-off and appropriation
- Negotiable Instruments Act obligations
- Loss assets
Identified as uncollectible
- Doubtful assets
NPA for over 12 months
- Sub-standard assets
NPA for up to 12 months
- Standard assets
Performing loans
Study guide
You study NPA categories and provisioning norms, the SARFAESI Act, the Bank for International Settlements and Basel Accords, banker-customer relationship types, lien, set-off and appropriation and obligations under the Negotiable Instruments Act. Learn the classification of NPAs with their provisioning percentages.
- Payment and collection of cheques
- duties of paying and collecting bankers
- legal protections under the Negotiable Instruments Act
- security creation — pledge
- hypothecation
- mortgage
- assignment
- fund-based and non-fund-based services
- financial inclusion
Pledge
Movable goods
With the lender
Hypothecation
Movable goods, e.g. vehicles
With the borrower
Mortgage
Immovable property
With the borrower; lender holds rights
Study guide
This unit covers payment and collection of cheques, duties of paying and collecting bankers, protections under the Negotiable Instruments Act, creation of security (pledge, hypothecation, mortgage, assignment), fund-based and non-fund-based services and financial inclusion. Be able to distinguish pledge, hypothecation and mortgage.
Why Banking Laws & Services Matters
Banking law knowledge is essential for roles in banks, NBFCs and compliance, and it is a major part of banking recruitment exams and JAIIB/CAIIB certifications.
How to Prepare for Banking Laws & Services
- Learn the main provisions of the RBI Act and Banking Regulation Act in short notes.
- Prepare a table of pledge, hypothecation and mortgage.
- Learn the NPA categories and provisioning norms.
Banking Laws & Services: Frequently Asked Questions
What is the SARFAESI Act?
The SARFAESI Act allows banks and financial institutions to recover non-performing assets by enforcing security interest without going to court, subject to its conditions.
What is the difference between pledge and hypothecation?
In a pledge the lender takes possession of the goods as security, while in hypothecation the borrower keeps possession but the lender has a charge over the goods.