Money supply, the RBI, monetary policy, banks and inflation on one page. For explanations, go back to the [chapter](/economy/money-banking/).

{{< callout type="tip" title="How to use this sheet" >}}
Scan it top to bottom in the week before Prelims. **Bold** entries are the facts examiners return to most often. Rates and inflation figures are dated: update them after each MPC meeting and monthly data release.
{{< /callout >}}

## Money Supply

| Measure | Components |
|---------|-----------|
| **M0** (reserve / high-powered money) | Currency in circulation + bankers' deposits with RBI + other deposits with RBI |
| **M1** (narrow money) | Currency with public + **demand deposits** + other deposits with RBI |
| M2 | M1 + post office savings bank deposits |
| **M3** (broad money) | M1 + **net time deposits** with banks |
| M4 | M3 + total post office deposits (excluding NSC) |
| Liquidity order | M1 > M2 > M3 > M4 |
| Money multiplier | M3 / M0; simple case 1/r |

## RBI Timeline and Facts

| Fact | Detail |
|------|--------|
| Hilton Young Commission | **1926** |
| RBI Act | **1934** |
| Operations began | **1 April 1935**, Calcutta |
| Moved to Bombay | 1937 |
| **Nationalised** | **1 January 1949** |
| First Governor / first Indian Governor | Osborne Smith / **C.D. Deshmukh** |
| **Governor (as of 2026)** | **Sanjay Malhotra**, 26th, since 11 December 2024 |
| Sole right to issue notes | Section 22, RBI Act; ₹1 note and coins by Government |
| Minimum Reserve System | 1957: ₹200 crore (₹115 crore gold) |
| Digital rupee pilots | Wholesale 1 Nov 2022; retail 1 Dec 2022 |

## Monetary Policy Framework

| Item | Detail |
|------|--------|
| Urjit Patel Committee | 2014 |
| Framework Agreement | February 2015 |
| Statutory basis | Finance Act 2016; Sec 45ZA (target), **45ZB (MPC)** |
| **Target** | **4% CPI ± 2%**, set by the **Government** in consultation with RBI; current period **1 April 2026 – 31 March 2031** (notified 25 March 2026) |
| Failure | Outside the band for **3 consecutive quarters** → report to Government (first in 2022) |
| **MPC** | **6** members (3 RBI + 3 external); quorum **4**; Governor's **casting vote**; external term 4 years, no reappointment; meets at least 4 times a year |

## Policy Rates (as of the August 2026 review)

| Rate | Level |
|------|-------|
| **Repo** | **5.25%** (cut on 5 Dec 2025; held Feb, Apr, Jun, Aug 2026) |
| SDF (floor) | 5.00% |
| MSF (ceiling) | 5.50% |
| Bank Rate | 5.50% |
| **CRR** | **3%** (cut from 4% in four steps, Sep–Nov 2025) |
| **SLR** | **18%** |
| Stance | Neutral |

## Banking

| Fact | Detail |
|------|--------|
| Banking Regulation Act | 1949 |
| SBI | **1 July 1955** (Imperial Bank; AIRCS / Gorwala) |
| **Nationalisation** | **19 July 1969: 14 banks** (₹50 crore); **15 April 1980: 6 banks** (₹200 crore) |
| Lead Bank Scheme | 1969 |
| **RRBs** | Began **2 Oct 1975**; RRB Act 1976; **Centre 50 : Sponsor 35 : State 15**; **28** after 1 May 2025 |
| **NABARD** | **12 July 1982**; CRAFICARD (Sivaraman); supervises RRBs and rural cooperatives |
| Narasimham Committees | **1991** (I), **1998** (II) |
| New private banks | From 1993 |
| **PSBs** | **12** since 1 April 2020 (as of 2026) |
| Small finance and payments banks | Nachiket Mor Committee (2013); licences 2015 |
| **Payments bank** | Deposits up to **₹2 lakh**; **no loans, no credit cards** |
| **NPA** | Overdue **> 90 days** |
| Recovery | DRT 1993; SARFAESI 2002; **IBC 2016**; NARCL 2021 |
| Capital (Basel III, India) | CRAR 9% + conservation buffer 2.5% |
| PSL | 40% of ANBC (agriculture 18%); RRB and SFB 75% |
| DICGC | **₹5 lakh** since 4 Feb 2020 |
| PMJDY | 28 August 2014 |
| **Chhattisgarh Gramin Bank** | State's single RRB; sponsor **SBI**; HQ Atal Nagar–Nava Raipur; renamed from Chhattisgarh Rajya Gramin Bank (notified January 2026) |

## Inflation

| Fact | Detail |
|------|--------|
| **CPI (Combined)** | **NSO, MoSPI**; **base 2024** (released 12 Feb 2026); 358 items; food and beverages **36.75%**; 12 online markets |
| **WPI** | **Office of the Economic Adviser, DPIIT**; **base 2022-23** (from 15 June 2026); **no services**; PPI in parallel for 5 years |
| CPI-IW | Labour Bureau; base 2016; used for DA |
| GDP deflator | Nominal ÷ real × 100; broadest |
| **CPI inflation** | **4.82% (August 2026)**; 4.45% (July 2026) |
| **WPI inflation** | **9.92% (August 2026)**; fuel and power 22.93% |
| Core inflation | Excludes food and fuel |
| Stagflation | Inflation + stagnation |

## Don't Confuse

| This | vs | That |
|------|----|------|
| Repo: RBI **lends** | vs | SDF: RBI **absorbs**, no collateral |
| CRR: cash with RBI, Sec 42 RBI Act | vs | SLR: liquid assets with bank, Sec 24 BR Act |
| Target set by **Government** | vs | Repo set by **MPC** |
| M1 narrow | vs | M3 broad |
| Payments bank: no lending | vs | Small finance bank: lends |
| Deflation: prices fall | vs | Disinflation: inflation rate falls |
| CPI: NSO, services included | vs | WPI: Office of the Economic Adviser, no services |
| 1969: 14 banks | vs | 1980: 6 banks |

{{< callout type="warning" title="Favourite MCQ traps" >}}
- The **MPC does not set CRR or SLR**. It sets the repo rate and stance.
- The **SDF**, not the reverse repo, has been the corridor floor since April 2022.
- **RRBs** are supervised by **NABARD**, and the sponsor holds **35%**, not 15%.
- The RBI was **set up in 1935** and **nationalised in 1949**. These are two different events.
- The new **CPI food weight is lower** (36.75%), not higher.
{{< /callout >}}

---
Source: https://cgpscnotes.in/economy/money-banking/quick-revision/

Economy Money, Banking and Inflation

Money, Banking and Inflation — Quick Revision

One-page CGPSC quick revision for Money, Banking and Inflation: money supply, RBI, MPC, policy rates (2026), banks, NPAs, CPI and WPI in tables.

4 min read Updated Oct 2026 #quick revision#cgpsc#money

Money supply, the RBI, monetary policy, banks and inflation on one page. For explanations, go back to the chapter.

How to use this sheet

Scan it top to bottom in the week before Prelims. Bold entries are the facts examiners return to most often. Rates and inflation figures are dated: update them after each MPC meeting and monthly data release.

Money Supply

Measure	Components
M0 (reserve / high-powered money)	Currency in circulation + bankers’ deposits with RBI + other deposits with RBI
M1 (narrow money)	Currency with public + demand deposits + other deposits with RBI
M2	M1 + post office savings bank deposits
M3 (broad money)	M1 + net time deposits with banks
M4	M3 + total post office deposits (excluding NSC)
Liquidity order	M1 > M2 > M3 > M4
Money multiplier	M3 / M0; simple case 1/r

RBI Timeline and Facts

Fact	Detail
Hilton Young Commission	1926
RBI Act	1934
Operations began	1 April 1935, Calcutta
Moved to Bombay	1937
Nationalised	1 January 1949
First Governor / first Indian Governor	Osborne Smith / C.D. Deshmukh
Governor (as of 2026)	Sanjay Malhotra, 26th, since 11 December 2024
Sole right to issue notes	Section 22, RBI Act; ₹1 note and coins by Government
Minimum Reserve System	1957: ₹200 crore (₹115 crore gold)
Digital rupee pilots	Wholesale 1 Nov 2022; retail 1 Dec 2022

Monetary Policy Framework

Item	Detail
Urjit Patel Committee	2014
Framework Agreement	February 2015
Statutory basis	Finance Act 2016; Sec 45ZA (target), 45ZB (MPC)
Target	4% CPI ± 2%, set by the Government in consultation with RBI; current period 1 April 2026 – 31 March 2031 (notified 25 March 2026)
Failure	Outside the band for 3 consecutive quarters → report to Government (first in 2022)
MPC	6 members (3 RBI + 3 external); quorum 4; Governor’s casting vote; external term 4 years, no reappointment; meets at least 4 times a year

Policy Rates (as of the August 2026 review)

Rate	Level
Repo	5.25% (cut on 5 Dec 2025; held Feb, Apr, Jun, Aug 2026)
SDF (floor)	5.00%
MSF (ceiling)	5.50%
Bank Rate	5.50%
CRR	3% (cut from 4% in four steps, Sep–Nov 2025)
SLR	18%
Stance	Neutral

Banking

Fact	Detail
Banking Regulation Act	1949
SBI	1 July 1955 (Imperial Bank; AIRCS / Gorwala)
Nationalisation	19 July 1969: 14 banks (₹50 crore); 15 April 1980: 6 banks (₹200 crore)
Lead Bank Scheme	1969
RRBs	Began 2 Oct 1975; RRB Act 1976; Centre 50 : Sponsor 35 : State 15; 28 after 1 May 2025
NABARD	12 July 1982; CRAFICARD (Sivaraman); supervises RRBs and rural cooperatives
Narasimham Committees	1991 (I), 1998 (II)
New private banks	From 1993
PSBs	12 since 1 April 2020 (as of 2026)
Small finance and payments banks	Nachiket Mor Committee (2013); licences 2015
Payments bank	Deposits up to ₹2 lakh; no loans, no credit cards
NPA	Overdue > 90 days
Recovery	DRT 1993; SARFAESI 2002; IBC 2016; NARCL 2021
Capital (Basel III, India)	CRAR 9% + conservation buffer 2.5%
PSL	40% of ANBC (agriculture 18%); RRB and SFB 75%
DICGC	₹5 lakh since 4 Feb 2020
PMJDY	28 August 2014
Chhattisgarh Gramin Bank	State’s single RRB; sponsor SBI; HQ Atal Nagar–Nava Raipur; renamed from Chhattisgarh Rajya Gramin Bank (notified January 2026)

Inflation

Fact	Detail
CPI (Combined)	NSO, MoSPI; base 2024 (released 12 Feb 2026); 358 items; food and beverages 36.75%; 12 online markets
WPI	Office of the Economic Adviser, DPIIT; base 2022-23 (from 15 June 2026); no services; PPI in parallel for 5 years
CPI-IW	Labour Bureau; base 2016; used for DA
GDP deflator	Nominal ÷ real × 100; broadest
CPI inflation	4.82% (August 2026); 4.45% (July 2026)
WPI inflation	9.92% (August 2026); fuel and power 22.93%
Core inflation	Excludes food and fuel
Stagflation	Inflation + stagnation

Don’t Confuse

This	vs	That
Repo: RBI lends	vs	SDF: RBI absorbs, no collateral
CRR: cash with RBI, Sec 42 RBI Act	vs	SLR: liquid assets with bank, Sec 24 BR Act
Target set by Government	vs	Repo set by MPC
M1 narrow	vs	M3 broad
Payments bank: no lending	vs	Small finance bank: lends
Deflation: prices fall	vs	Disinflation: inflation rate falls
CPI: NSO, services included	vs	WPI: Office of the Economic Adviser, no services
1969: 14 banks	vs	1980: 6 banks

Favourite MCQ traps

The MPC does not set CRR or SLR. It sets the repo rate and stance.
The SDF, not the reverse repo, has been the corridor floor since April 2022.
RRBs are supervised by NABARD, and the sponsor holds 35%, not 15%.
The RBI was set up in 1935 and nationalised in 1949. These are two different events.
The new CPI food weight is lower (36.75%), not higher.

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