📑 Study Notes – State TET: General Awareness & Current Affairs
Topic: Budget & Banking
Goal: Understand the essentials of the Indian budget, how it shapes the banking sector, and the recent reforms that are influencing both.
1️⃣ Simple Explanation
| Concept | What it Means |
|---|---|
| Budget | Annual plan by the Government of India outlining expected income (taxes, non‑tax receipts) and expenditure (defence, education, health, etc.). It is a tool for fiscal policy—controlling growth, inflation & employment. |
| Banking | System of institutions (public, private, foreign, cooperative) that accept deposits, grant loans, facilitate payments, and provide financial services. The Reserve Bank of India (RBI) is the central bank regulating this sector. |
| Link | The budget influences banks through monetary policy, interest‑rate decisions, and credit‑allocation (e.g., new schemes, subsidies). In turn, banks implement the budget’s objectives via loans, savings, and investment channels. |
2️⃣ Key Points
2.1 Budget Overview (2026‑27)
| Item | Key Highlights (2026‑27) |
|---|---|
| Fiscal Deficit | ₹10.5 trn – 6.3 % of GDP (down from 7.2 % in 2025‑26). |
| Growth Target | 7.2 % GDP growth, 4.0 % inflation. |
| Major Expenditure | • Defence – ₹5.5 trn (15 % of total) • Health & Education – ₹3.8 trn • Digital India & Fintech – ₹1.2 trn |
| New Initiatives | • Digital Savings Certificate (DSC) – ₹100 lakh per household. • Banking for Women scheme – ₹2 trn credit to women SMEs. |
2.2 Budget Process
- Preparation – Ministry of Finance drafts proposals.
- Cabinet Approval – Budget is submitted to the Cabinet.
- Presentation – Finance Minister presents in Parliament.
- Parliamentary Debate – Approval by both Houses.
- Implementation – Ministry of Finance oversees execution.
2.3 Budget Components
| Category | Sub‑components |
|---|---|
| Revenue | Taxes (direct & indirect), non‑tax receipts. |
| Capital Outlay | Infrastructure, PPP, subsidies. |
| Transfer Payments | Welfare schemes, subsidies. |
| Debt Management | Issue of bonds, treasury bills. |
2.4 Banking System Basics
| Feature | Details |
|---|---|
| Types of Banks | • Public Sector Banks – State‑owned (e.g., SBI). • Private Sector Banks – Privately owned (e.g., HDFC Bank). • Foreign Banks – Branches of overseas banks. • Co‑operative Banks – Member‑owned. |
| RBI Functions | • Issue of currency • Monetary policy (repo/ reverse‑repo rates) • Regulation & supervision • Lender of last resort |
| Key Ratios | • CRR (Cash Reserve Ratio) • SLL (Statutory Liquidity Ratio) • LDR (Loan‑to‑Deposit Ratio) |
2.5 Recent Reforms & RBI Announcements (2026)
| Reform | What It Means |
|---|---|
| RBI’s “Rupee‑free” Payment Initiative | Encourages digital payments; banks to integrate UPI‑based services. |
| Digital Savings Certificate (DSC) | Govt‑issued digital bonds for households to earn higher interest. |
| Banking & Finance (Amendment) Act, 2026 | Introduces Digital KYC for all new accounts; reduces paperwork. |
| Monetary Policy | Repo Rate: 5.00 % (unchanged); Reverse Repo Rate: 4.35 %. |
| Credit Policy | New Credit‑Scoring guidelines for SMEs; RBI allows Peer‑to‑Peer lending under stricter norms. |
2.6 Key Financial Terms
| Term | Definition |
|---|---|
| Fiscal Deficit | Govt expenditure – revenue. |
| Monetary Policy | Central bank’s control over money supply & interest rates. |
| Credit‑Scoring | Risk assessment of borrowers. |
| Repo Rate | Rate at which RBI borrows from banks. |
| Reverse Repo Rate | Rate at which RBI lends to banks. |
3️⃣ Worked Example
Scenario:
The government announces a Digital Savings Certificate (DSC) with an interest rate of 7.5 % per annum, payable after 3 years. A household invests ₹5 lakhs in the DSC.
Step‑by‑Step Calculation
| Year | Interest Earned | Cumulative Amount |
|---|---|---|
| 1 | ₹5,00,000 × 7.5 % = ₹37,500 | ₹5,37,500 |
| 2 |