Banking Laws, Basel, Capital & Risk

Level: Intermediate
Preparation priority: Very High
For: IBPS PO/CSA, IBPS RRB Officer and Office Assistant, SBI PO/Clerk, Specialist Officer, and banking interviews.
Recommended foundations: Modules 03 (RBI), 06 (credit), 07 (NPAs), 12 (customer protection).

Central idea: The banking system is built on trust, but trust alone cannot absorb a loan loss, a liquidity run or a breakdown of controls. Law decides what banks may do; regulation and supervision require them to act prudently; capital absorbs unexpected losses; and risk management helps prevent damage before it becomes a crisis. This module connects those four layers.

Learning outcomes

You will learn to:

1. separate the objectives of the RBI Act from the Banking Regulation Act;
2. recognise major powers relating to currency, banking licence, inspection and binding directions;
3. distinguish an Act, rule, RBI direction, master circular, notification and supervisory action;
4. locate the correct law for cheque dishonour, bank deposits, money laundering, payment systems, debt recovery, insolvency and foreign exchange;
5. distinguish bank regulatory capital from deposits, cash reserves, provisions and accounting profit;
6. calculate CRAR using capital and risk-weighted assets;
7. interpret CET1, AT1, Tier 1 and Tier 2 capital;
8. explain risk weights, capital buffers, leverage ratio, LCR and NSFR at exam level;
9. compare Basel I, II and III and the three Basel II pillars;
10. understand the role of BCBS and why Basel standards require domestic implementation;
11. identify credit, market, operational, liquidity, interest-rate and concentration risk;
12. interpret the basic logic of stress tests, ICAAP, ALM, internal controls and supervision;
13. explain Prompt Corrective Action and the difference between early restriction and bank closure;
14. avoid over-generalising capital/PCA rules across RRBs, SFBs, payments banks, UCBs and NBFCs; and
15. answer worked questions and MCQs without mistaking transient regulatory values for timeless definitions.