Banking Basics: Types of Banks, Accounts, Cheques and Payment Systems for SSC
Rahul Kumar
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Banking is a regular part of SSC general awareness, finance and economics papers. The questions test basic ideas: the role of the RBI, types of banks, types of accounts, cheques and digital payment systems. This note explains each of them in simple language with tables, practice questions and FAQs.
Structure of the Indian Banking System
| Type | Details |
|---|---|
| Central bank | Reserve Bank of India (RBI): established on 1 April 1935, nationalised in 1949, headquartered in Mumbai. It issues currency (except one-rupee notes, which the Government issues), controls credit and acts as banker to the Government. |
| Commercial banks | Accept deposits and give loans. They are public sector banks (such as SBI), private sector banks, foreign banks and Regional Rural Banks. |
| Regional Rural Banks (RRBs) | Set up from 1975 under the RRB Act 1976 to give credit to rural areas. |
| Cooperative banks | Owned by members; serve farmers and small borrowers (short-term and long-term structure). |
| Small finance banks | Serve small borrowers and small businesses. |
| Payments banks | Accept small deposits and offer payment services, but do not give loans. |
| Development banks | NABARD (1982, agriculture and rural), SIDBI (1990, small industries), EXIM Bank (1982, foreign trade) |
- The State Bank of India was formed in 1955 by taking over the Imperial Bank of India.
- 14 major banks were nationalised in 1969 and 6 more in 1980.
- The Banking Regulation Act, 1949 governs the banks in India.
Types of Deposit Accounts
| Account | Features |
|---|---|
| Savings account | For individuals; pays interest; limited withdrawals; no business use |
| Current account | For businesses and traders; no interest; unlimited transactions; overdraft is usually available |
| Fixed deposit (FD) | A fixed sum for a fixed period at a fixed rate; premature withdrawal usually carries a penalty |
| Recurring deposit (RD) | A fixed monthly instalment for a fixed term; builds a lump sum |
| Basic savings (Jan Dhan) account | Zero-balance account for financial inclusion |
Cheques
| Term | Meaning |
|---|---|
| Drawer | The person who writes (issues) the cheque |
| Drawee | The bank on which the cheque is drawn |
| Payee | The person to whom the money is to be paid |
| Bearer cheque | Payable to the person who holds it |
| Order cheque | Payable to a named person or to his order |
| Crossed cheque | Two parallel lines on the face; payable only through a bank account, not in cash |
| Stale cheque | Presented after its validity of 3 months from the date of issue |
| Post-dated cheque | Carries a future date; cannot be paid before that date |
| Dishonoured cheque | Returned unpaid, for example for insufficient funds |
Cheques are governed by the Negotiable Instruments Act, 1881.
Digital Payment Systems
| System | Key points |
|---|---|
| NEFT | National Electronic Funds Transfer; settles in batches; available round the clock |
| RTGS | Real Time Gross Settlement; for large-value transfers (minimum ₹2 lakh); real-time settlement |
| IMPS | Immediate Payment Service; instant, 24 × 7 transfers |
| UPI | Unified Payments Interface of NPCI; instant mobile payments using a virtual payment address, launched in 2016 |
| Debit card | Money is deducted directly from the account |
| Credit card | A line of credit to be paid back later with interest if not repaid on time |
| ATM | Automated Teller Machine for cash withdrawal and other services |
The National Payments Corporation of India (NPCI), set up in 2008, runs RuPay, UPI and IMPS.
Other Important Terms
- KYC (Know Your Customer): verifying the identity and address of a customer when opening an account.
- NPA (Non-Performing Asset): a loan whose interest or principal remains unpaid for 90 days.
- DICGC: insures bank deposits up to ₹5 lakh per depositor per bank.
- Overdraft: allows withdrawal of more than the balance, up to a limit.
- Repo rate: the rate at which the RBI lends short-term money to banks; reverse repo is the rate at which it borrows from banks.
- CRR and SLR: the share of deposits that banks must keep with the RBI (cash) and in liquid assets (such as gold and government securities).
- Basel norms: international standards on bank capital (Basel I, II and III).
- The values of repo rate, CRR and SLR change from time to time; check a recent source before the exam.
Quick Tips
- Learn the year of each institution: RBI 1935, SBI 1955, RRB 1975, NABARD 1982.
- Remember RTGS is for large values (minimum ₹2 lakh).
- A cheque is valid for 3 months.
- Rates change often; check the latest values for the current-affairs part.
Quick Revision Points
- RBI was set up on 1 April 1935 and nationalised in 1949.
- 14 banks were nationalised in 1969 and 6 in 1980.
- Current account has no interest; savings account does.
- NPA means unpaid for 90 days.
- DICGC insures deposits up to ₹5 lakh.
Practice Questions With Answers
- When was the RBI established?
Answer: 1 April 1935 - In which year were 14 major banks nationalised?
Answer: 1969 - Which account pays no interest, savings or current?
Answer: Current account - What is the validity period of a cheque?
Answer: 3 months - Which payment system is for large-value transfers?
Answer: RTGS - What is the full form of NPA?
Answer: Non-Performing Asset - Who runs UPI?
Answer: NPCI - Up to how much does DICGC insure a deposit?
Answer: ₹5 lakh per depositor per bank - The person who writes a cheque is called?
Answer: Drawer - Which bank was formed in 1955 by taking over the Imperial Bank?
Answer: State Bank of India
How to Practise This Chapter
Practise 10 questions every day and write the steps on paper. Then attempt timed sets from our practice papers and the previous year papers page. See all topics on the Banking Basics notes page.
Frequently Asked Questions
What is the role of the RBI?
It issues currency, regulates banks, controls credit and inflation and acts as the banker to the Government.
What are commercial banks?
Banks that accept deposits and give loans to individuals and businesses.
What is a payments bank?
A bank that accepts small deposits and offers payment services but cannot give loans.
What is the difference between a savings and a current account?
A savings account is for individuals and pays interest; a current account is for businesses and usually pays no interest.
What is a crossed cheque?
A cheque with two parallel lines, which can be paid only into a bank account.
What is a stale cheque?
A cheque presented after 3 months of its date.
What is the difference between NEFT and RTGS?
NEFT settles in batches for any amount; RTGS settles in real time for large amounts (minimum ₹2 lakh).
What is UPI?
A mobile-based instant payment system by NPCI.
What is an NPA?
A loan on which the borrower has not paid interest or principal for 90 days.
What does DICGC do?
It insures bank deposits up to ₹5 lakh.
What is KYC?
The process of verifying a customer’s identity and address.
Is banking asked in SSC exams?
Yes, basic banking terms and institutions are asked in general awareness and in the economics sections.
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Rahul Kumar
SSC Exam Expert & Content Editor
Rahul is a senior SSC exam strategist with 8+ years of experience helping aspirants crack CGL, CHSL and MTS exams. He writes in-depth notification breakdowns, exam pattern guides and preparation strategies.