Banking Basics, Key Concepts You Should Know for SBI CBO 2025

Understanding the fundamental concepts of banking is crucial for cracking the SBI CBO (Circle Based Officer) 2025 exam. This exam tests your knowledge of core banking operations, financial awareness, and the regulatory environment. To clear the SBI CBO 2025 exam, a clear understanding of banking basics is a must. Make sure you revise important concepts like types of banks, banking terms, RBI functions, and recent trends. Let us go through the key banking concepts you should be familiar with.

Key Concepts You Should Know for SBI CBO 2025

Banking refers to the activities of accepting deposits and lending money to individuals and businesses. Banks act as financial intermediaries that help channel funds from savers to borrowers. Apart from lending and borrowing, banks also provide various services like money transfer, digital banking, foreign exchange, and investment facilities.

Types of Banks in India

There are several types of banks that operate under the supervision of the Reserve Bank of India (RBI):

1. Commercial Banks
These include public sector banks like SBI and private sector banks like HDFC. They provide banking services to the public and businesses.

2. Cooperative Banks
These banks are owned and operated by their members. They serve rural and semi-urban areas.

3. Regional Rural Banks (RRBs)
RRBs are sponsored by public sector banks and focus on agricultural and rural development.

4. Small Finance Banks
They provide basic banking services to small businesses, micro industries, and low-income households.

5. Payments Banks
They offer services like deposits and money transfers but cannot give loans or issue credit cards.

Functions of Banks

Banks perform several important functions that support the economy:

• Accepting Deposits: Savings accounts, current accounts, and fixed deposits.
• Providing Loans and Advances: Home loans, personal loans, and business loans.
• Remittance Services: NEFT, RTGS, IMPS, and UPI.
• Digital Banking: Internet banking, mobile banking, and digital wallets.
• Foreign Exchange Services: For travellers and businesses involved in international trade.

Important Banking Terms

1. Repo Rate
It is the rate at which RBI lends money to commercial banks. When the repo rate increases, borrowing becomes expensive.

2. Reverse Repo Rate
It is the rate at which banks park their surplus funds with the RBI. It helps in managing liquidity in the system.

3. CRR (Cash Reserve Ratio)
The percentage of total deposits that banks are required to keep with the RBI in cash form.

4. SLR (Statutory Liquidity Ratio)
The percentage of deposits that banks must maintain in the form of liquid assets like gold or government securities.

5. NPA (Non-Performing Asset)
A loan that has not been repaid for more than 90 days is treated as an NPA.

6. Base Rate and MCLR
These are the minimum interest rates below which a bank cannot lend. MCLR has replaced the base rate system in most banks.

Banking Regulatory Bodies

1. Reserve Bank of India (RBI)
RBI is the central bank of India. It regulates the banking system, manages monetary policy, and ensures financial stability.

2. NABARD
The National Bank for Agriculture and Rural Development promotes rural development and provides credit support to farmers.

3. SEBI
Though not directly related to banking, SEBI regulates the capital market, which banks participate in.

4. IRDAI
Insurance Regulatory and Development Authority of India supervises the insurance sector.

Priority Sector Lending (PSL)

Banks are required by the RBI to lend a certain percentage of their loans to specific sectors like agriculture, micro and small enterprises, education, and housing. This helps in inclusive growth.

Know Your Customer (KYC)

KYC is a process to verify the identity of bank customers. It includes submission of documents like Aadhaar, PAN, and proof of address. It helps prevent money laundering and fraudulent activities.

Latest Trends in Banking

• Digital Banking
  With the rise in internet usage, digital banking services like UPI, mobile apps, and e-wallets have become very common.
• Fintech Integration
  Banks are increasingly collaborating with fintech companies to offer faster and smarter services.
• Cybersecurity
  Banks are investing in security technologies to protect customer data and financial transactions.