Prelims fact sheets
Banking System in India: Structure and Functions — UPSC Fact Sheet
India's banking system is regulated by the Reserve Bank of India under the RBI Act, 1934 and the Banking Regulation Act, 1949.
Pragnya IAS Academy, Hyderabad · Updated 16 October 2026 · 5 min read
Key facts
| Item | Detail |
|---|---|
| Regulator | Reserve Bank of India (est. 1935) |
| Key laws | RBI Act, 1934; Banking Regulation Act, 1949 |
| Scheduled bank | Listed in the Second Schedule of the RBI Act |
| Commercial banks | Public sector, private, foreign, regional rural banks, small finance banks, payments banks |
| Cooperative banks | Urban and rural cooperative banks (dual regulation reduced by 2020 amendment) |
| Payments banks | Can accept deposits (with a cap) but cannot lend |
Why it matters for UPSC
- GS 3 economy: credit flow, financial inclusion, NPAs and banking reforms.
- Recent themes: bank mergers, digital banking units, UPI, deposit insurance (DICGC) and governance of cooperative banks.
Prelims angle
Prelims favours differences between bank types (payments vs small finance banks), RBI tools (CRR, SLR, repo) and deposit insurance limits (₹5 lakh per depositor per bank).
Frequently asked questions
Who regulates banks in India?
The Reserve Bank of India under the RBI Act, 1934 and the Banking Regulation Act, 1949.
Can payments banks give loans?
No. Payments banks can accept limited deposits and offer payments services but cannot lend.