SSC CGL Economics · Money, Banking and Public Finance
Banks, Microfinance and Financial Inclusion
India's development banks and NABARD with their years, the schemes that bring banking to the poor, and microfinance: self-help groups, the Malegam committee and the RBI's rules for microfinance lenders.
Why this matters
Twenty-eight questions in the bank: 16 from the 2023 shifts, ten from the 2024 shifts and two from the 2025 shifts. Microfinance alone gave 16 of them, nearly all in 2023, and the hard ones ask an exact RBI rule, so learn the rules table as written.
Concept 1 of 2: Banks, development institutions and inclusion schemes
Definition
Institutions:
- Institutional credit: commercial banks, cooperatives, regional rural banks. Moneylenders, traders and commission agents are informal.
- Development banks in order: IFCI 1948, ICICI 1955, IDBI 1964.
- Lead Bank Scheme: 1969, one bank in charge of each district.
- NABARD: 1982, the apex body for farm and rural credit.
- India Post Payments Bank: banking at the door through postmen.
- Bandhan Bank is a private bank; Canara, UCO and Indian Overseas Bank are public sector. BFSI is Banking, Financial Services and Insurance.
Schemes:
- PM Jan Dhan Yojana (2014): the National Mission for Financial Inclusion, a basic account for every household.
- Stand-Up India (2016): bank loans for SC, ST and women entrepreneurs.
- PM MUDRA Yojana (2015): collateral-free loans through member lending institutions, up to Rs 10 lakh when the question was set. MUDRA is Micro Units Development and Refinance Agency.
- The Factoring Regulation (Amendment) Bill, 2021 eased working capital for MSMEs.
Practise this conceptself-check · 3 quick reps
The same idea in a real exam question:
Example 1 · Money, Banking and Public Finance · Banks, Microfinance and Financial Inclusion
Jan Dhan is inclusion, not microfinance
Concept 2 of 2: Microfinance and self-help groups
Definition
Basics:
- Microfinance: small loans and other services for low-income people with no access to regular banking.
- The idea came from Muhammad Yunus and the Grameen Bank of Bangladesh (1970s).
- A self-help group has about 10 to 20 members who pool savings; the members decide loans and savings. An SHG is small and informal; an MFI is a larger, formal institution.
- NABARD began the SHG-Bank Linkage Programme in 1992-93, and NGOs train the groups.
Regulation:
- The RBI regulates microfinance institutions.
- The Malegam Committee (set up 2010, after the Andhra Pradesh crisis) proposed the NBFC-MFI category.
- RBI rules of 2022: a microfinance loan is collateral-free, to a household earning up to Rs 3 lakh a year, and not tied to a lien on the borrower's deposit account. An NBFC-MFI must keep at least 75% of total assets in such loans.
- MFIN (Microfinance Institutions Network) is the sector's self-regulatory organisation.
Practise this conceptself-check · 3 quick reps
The same idea in a real exam question:
Example 2 · Money, Banking and Public Finance · Banks, Microfinance and Financial Inclusion
Total assets, not equity
Summary — formulas & gotchas at a glance
A revision cheat-sheet for the formulas and gotchas above. Click any concept name to jump back to its full explanation.
Reference tables (2)
Watch out for (2)
- Jan Dhan is inclusion, not microfinance→ Banks, development institutions and inclusion schemes
- Total assets, not equity→ Microfinance and self-help groups
Test yourself on Money, Banking and Public Finance
20 past SSC CGL questions from this chapter, timed at 12 minutes and marked the way the exam marks it. You see your score and every answer the moment you finish. Free to start.