JAIIB Paper 2 – Principles & Practices of Banking

Unit 1: General Banking Operations – Key Topics & Study Guide

Unit 1 of JAIIB Paper 2 – Principles & Practices of Banking covers the fundamental operations of banking, including deposit and loan products, negotiable instruments, risk management, and customer service. Understanding these operations is essential for banking professionals to efficiently manage financial transactions and customer relations.

Below is a detailed breakdown of the most important topics, frequently asked concepts, and expert study tips for Unit 1 – General Banking Operations.

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1. Introduction to Banking & Financial Services

This section covers the basic concepts of banking operations. Key topics include:

Definition & Functions of Banks – Accepting deposits, granting loans, fund transfers, financial advisory services

Types of Banks – Commercial banks, cooperative banks, foreign banks, specialized banks

Role of Banks in Economic Growth – Financial inclusion, capital formation, rural development

Banking Regulations in India – RBI Act, Banking Regulation Act, SEBI guidelines for financial services

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2. Types of Bank Deposits & Their Features

Banks accept various types of deposits, each with different features and benefits. Key types include:

Demand Deposits:

Savings Account – Features, benefits, interest calculation, restrictions

Current Account – Features, overdraft facility, eligibility

Time Deposits:

Fixed Deposits (FDs) – Tenure, premature withdrawal, tax benefits

Recurring Deposits (RDs) – Systematic savings, interest calculation

Specialized Deposits:

NRI Deposits (NRE, NRO, FCNR Accounts) – Features, benefits, taxation

Senior Citizen & Tax-Saver FDs – Higher interest rates, tax exemptions

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3. Banking Loans & Advances

Lending is a crucial function of banks. Key areas include:

Types of Loans & Advances:

Retail Loans – Home loans, car loans, education loans, personal loans

Corporate Loans – Term loans, working capital loans, overdrafts

Priority Sector Lending (PSL) – RBI-mandated sectors, agriculture, MSME financing

Microfinance & Small Business Loans – MUDRA loans, SHG-bank linkage program

Loan Processing & Credit Appraisal:

Eligibility Criteria & Documentation

Creditworthiness Assessment – CIBIL score, income verification

Loan Disbursement & Repayment Methods

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4. Negotiable Instruments & Their Importance

Negotiable instruments facilitate banking transactions. Important topics include:

Definition & Features of Negotiable Instruments – Transferability, endorsement, payment guarantee

Types of Negotiable Instruments:

Cheques – Bearer, order, crossed, post-dated, stale cheques

Demand Drafts (DDs) & Banker’s Cheques – Differences, advantages

Bills of Exchange & Promissory Notes – Characteristics, usage in trade finance

Dishonor of Cheques & Legal Provisions – Section 138 of the Negotiable Instruments Act

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5. Banking Risk Management & Fraud Prevention

Banks must effectively manage risks to ensure financial stability. Key areas include:

Types of Risks in Banking:

Credit Risk – Loan defaults, provisioning norms

Operational Risk – Internal fraud, process failures

Market Risk – Interest rate fluctuations, forex risk

Liquidity Risk – Mismatch in asset-liability management

Risk Mitigation Strategies:

KYC & Anti-Money Laundering (AML) Compliance – Role of PMLA, FATF guidelines

Cybersecurity & Digital Fraud Prevention – RBI guidelines, phishing, data protection

Internal & External Audits – Importance in risk assessment

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6. Customer Service & Relationship Management in Banking

Customer service is key to banking success. Important topics include:

Customer Rights & Banking Ombudsman Scheme – Consumer protection laws, grievance redressal

Know Your Customer (KYC) & Due Diligence – Documents required, periodic updates

Fair Banking Practices & Ethics – Transparency, confidentiality, conflict resolution

Customer Relationship Management (CRM) in Banking – Role in cross-selling, retention strategies

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7. Digital Banking & Technological Innovations

The rise of digital banking has transformed banking operations. Key areas include:

Core Banking Systems (CBS) – Benefits, integration with digital platforms

Electronic Payment Systems – NEFT, RTGS, IMPS, UPI, AEPS

Mobile & Internet Banking – Features, security concerns, regulatory guidelines

FinTech & AI in Banking – Chatbots, robo-advisors, blockchain applications

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8. Banking Regulations & Compliance

Regulatory compliance ensures the stability of banking operations. Important topics include:

Reserve Bank of India (RBI) Guidelines – Monetary policy, credit regulations, banking supervision

Banking Regulation Act, 1949 – Key provisions, licensing, compliance requirements

SARFAESI Act, 2002 – Recovery of bad loans, role in NPA resolution

Prevention of Money Laundering Act (PMLA), 2002 – AML norms, suspicious transaction reporting

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Expert Tips to Crack JAIIB Paper 2 Unit 1

Focus on High-Weightage Topics – Deposits, loans, negotiable instruments, risk management

Use IIBF Study Material – The official IIBF books provide the best explanations

Practice MCQs & Mock Tests – Attempt previous year’s questions to improve speed and accuracy

Stay Updated on Banking Reforms & Digital Trends – Follow RBI circulars and fintech developments

Revise Key Banking Terms & Regulations – Prepare short notes for last-minute revision

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Conclusion

Unit 1 of JAIIB Paper 2 – Principles & Practices of Banking covers fundamental banking operations, deposits, loans, negotiable instruments, risk management, and customer service. By focusing on the frequently asked topics mentioned above, candidates can strengthen their banking knowledge and improve their chances of clearing the JAIIB exam on the first attempt.

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