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GeneraL Awareness 3
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4 GeneraL Awareness
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PREFACE
This gives us immense pleasure, to present you the latest edition of this book. We thank you from the depth
of our hearts, for the love and affection given by you just from the beginning. Dear friends, change is the
law of nature. We must learn to tolerate the blows of time with patience and learn not only to endure, but
also to expect, welcome, and enjoy both the joys as well as the sorrows of life. We must do what we can to
"get success." We have to operate with the information and skills that are necessary for winning.
Today’s era is governed by technology. The technology has increased the pace of changing the world we
see day by day, and so the pattern of examination and criteria of selection has also changed. As we are
aware that interview is a part of the various examinations and the written/objective exams are going to
be tougher than earlier.
Every choice you make including the thoughts you have has consequences. When you start choosing the
right behaviour and thoughts which will take a lot of discipline you'll get the right outcomes.
Be aware of the factors that influence the way you see the world, so that you can deal with them and react
against them. You are your own most important resource for making your life work. Success is a moving
target that must be tracked and continuously pursued.
In this context we have completely updated this book keeping in mind the forthcoming examination pattern.
This edition caters to need of General Awareness that is asked in Preliminary and Mains stages of most
of the Banking and Insurance examinations for various posts. This book is thoroughly based on the latest
pattern in which time limit is given for each section. Every chapter in this book describes the concept with
the help of various examples and at the end gives miscellaneous examples to clear the concepts. Examples
have been solved with standard as well as short methods. At the end of each chapter exercises has been
given to master the topic by solving variety of exam oriented question. So we have now given a complete
focus on concept building and mastering each topic through this book.
We are truly dedicated to provide you the best among the rest. This book is an initiative from our side to
make you perfect in this subject.
We will be highly gratified, if this book will help students in getting selection.
Any suggestions related to the this book shall always be welcomed and we shall endeavor to incorporate
them in our upcoming issues.

Research Team

GeneraL Awareness 5
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CONTENTS
S.No. Chapter Name Pg. No.

1. INdian Banking Industry 7-17

2. rbi & mONETARY pOLICY 18-27

3. NPA and BASEL NORMS 28-35

4. INFLATION 36-42

5. National Income 43-48

6. Money Market In India 49-55

7. Capital Market In India 56-66

8. Foreign Trade & Exchange 68-73

9. PUBLIC FINANCE (bUDGET) 74-82

10. Economic Planning In India 83-87

11. Social Welfare Schemes 88-99

12. INSURANCE SECTOR 100-111

13. MISCELLANEOUS 112-145

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INdian Banking Industry

##Historical Background
##Types of Banks
##Types of Advances
##Bank Deposit Accounts
##National payments corporation of india
##Peer-to-Peer (P2P) Lending
##trade receivables discounting system
##Question and Answer

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INdian Banking
CHAPTER

1 Industry
Scan the QR code to get video of this chapter.

term and long-term purposes.

Historical Background
##It also facilitates import export transactions.
The first bank of limited liability managed by Indians was
Oudh Commercial Bank founded in 1881. Punjab National ##It helps in national development by providing credit to
Bank was established in 1894. farmers, small-scale industries and self-employed people
as well as to large business houses which lead to balanced
Swadeshi movement, which began in 1906, encouraged
the formation of a number of commercial banks. Banking economic development in the country.
crisis during 1913 -1917 and failure of 588 banks in various ##It helps in raising the standard of living of people in
States during the decade ended 1949 underlined the need for general by providing loans for purchase of consumer
regulating and controlling commercial banks. durable goods, houses, automobiles, etc.
The Banking Companies Act was passed in February1949, Types of Banks
which was subsequently amended to read as Banking
regulation Act, 1949.This Act provided the legal framework There are various types of banks which operate in our country
for regulation of the banking system by RBI. The largest to meet the financial requirements of different categories of
bank - Imperial Bank of India - was nationalised in 1955 and people engaged in agriculture, business, profession, etc. On
rechristened as State Bank of India, followed by formation the basis of functions, the banking institutions in India may
of its 8 Associate Banks in1959. On January 1, 1963 State be divided into the following types:
Bank of Bikaner was merged with State Bank of Jaipur and 1. Central Bank (RBI, in India)
a new bank was formed as State Bank of Bikaner & Jaipur.
2. Commercial Banks
In 2008 State Bank of Saurashtra was merged with SBI and
State Bank of Indore was merged with SBI in 2010. SBI {{ Public Sector Banks
merged 5 of its associate banks along with Bhartiya Mahila
Bank. with itself from 1 April 2017 {{ Private Sector Banks

With a view to bring commercial banks into the mainstream {{ Foreign Banks
of economic development with definite social obligations and 3. Development Banks (IFCI, SFCs, SIDBI, NABARD)
objectives, the Government issued an ordinance on 19 July 4. Co-operative Banks
1969 acquiring ownership and control of 14 major banks in
the country. Six more commercial banks were nationalized {{ State Co-operative Banks
from 15 April 1980. {{ Central Co-operative Banks
Meaning of Bank {{ Primary Credit Societies
Bank is a lawful organization, which accepts deposits that can 5. Specialized Banks (EXIM Bank)
be withdrawn on demand. It also lends money to individuals Central Bank
and business houses that need it.
A bank which is entrusted
Role of Banking with the functions of guiding
Banks provide funds for business as well as personal needs and regulating the banking
of individuals. They play a significant role in the economy system of a country is known
of a nation. Let us know about the role of banking- as its Central bank. Such a bank
##It encourages savings habit among people and thereby does not deal with the general
makes funds available for productive use. public. It acts essentially as
Government’s banker, maintain
##It acts as an intermediary between people having surplus deposit accounts of all other
money and those requiring money for various business
banks and advances money to other banks, when needed.
activities.
The Central Bank provides guidance to other banks whenever
##It facilitates business transactions through receipts and they face any problem. It is therefore known as the banker’s
payments by cheques instead of currency. bank. The Reserve Bank of India is the central bank of our
##It provides loans and advances to businessmen for short country. The Central Bank maintains record of Government
8 GeneraL Awareness
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revenue and expenditure under various heads. It also advises (SFCs) are examples of development banks in India.
the Government on monetary and credit policies and decides
on the interest rates for bank deposits and bank loans. In
Co-operative Banks :
addition, foreign exchange rates are also determined by the People who come together to jointly serve their common
central bank. Another important function of the Central Bank interest often form a co-operative society under the Co-
is the issuance of currency notes, regulating their circulation operative Societies Act. When a co-operative society engages
in the country by different methods. No other bank than the itself in banking business it is called a Co-operative Bank.
Central Bank can issue currency. The society has to obtain a licence from the Reserve Bank of
India before starting banking business. Any co-operative bank
Commercial Banks as a society has to function under the overall supervision of
Commercial Banks are banking institutions that accept the Registrar, Co-operative Societies of the State. As regards
deposits and grant short-term loans, and advances to their banking business, the society must follow the guidelines set
customers. In addition to giving short-term loans, commercial issued by the Reserve Bank of India.
banks also give medium-term and long-term loan to Types of Co-operative Banks
business enterprises. Now-a-days some of the commercial
banks are also providing housing loan on a long-term basis There are three types of co-operative banks operating in
to individuals. There are also many other functions of our country. They are primary credit societies, central co-
commercial banks. operative banks and state co-operative banks. These banks
are organized at three levels, village or town level, district
Types of Commercial banks level and state level.
Commercial banks are of three types i.e., Public sector banks, State Co-operative Banks:
Private sector banks and Foreign banks.
These are the apex (highest level) co-operative banks in all
Public Sector Banks: the states of the country. They mobilise funds and help in
These are banks where majority stake is held by the its proper channelisation among various sectors. The money
Government of India or Reserve Bank of India. Examples reaches the individual borrowers from the state co-operative
of public sector banks are: State Bank of India, Corporation banks through the central co-operative banks and the primary
Bank, Bank of Baroda and Dena Bank, etc. credit societies.
Private Sectors Banks: Central Co-operative Banks:
In case of private sector banks majority of share capital of These banks operate at the district level having some of the
the bank is held by private individuals. These banks are primary credit societies belonging to the same district as their
registered as companies with limited liability. For example: members. These banks provide loans to their members (i.e.,
The Jammu and Kashmir Bank Ltd., Bank of Rajasthan primary credit societies) and function as a link between the
Ltd., Development Credit Bank Ltd, Lord Krishna Bank primary credit societies and state co-operative banks.
Ltd., Bharat Overseas Bank Ltd., Global Trust Bank, Vysya Primary Credit Societies:
Bank, etc.
These are formed at the village or town level with borrower
Foreign Banks: and non-borrower members residing in one locality. The
These banks are registered and have their headquarters in operations of each society are restricted to a small area so
a foreign country but operate their branches in our country. that the members know each other and are able to watch over
Some of the foreign banks operating in our country are the activities of all members to prevent frauds.
Hong Kong and Shanghai Banking Corporation (HSBC),
Citibank, American Express Bank, Standard & Chartered
Specialised Banks :
Bank, Grindlay’s Bank, etc. The number of foreign banks There are some banks, which cater to the requirements and
operating in our country has increased since the financial provide overall support for setting up business in specific
sector reforms of 1991. According to a report by RBI there areas of activity. EXIM Bank, SIDBI and NABARD are
are 45 foreign banks branches in India as on January 31, 2018. examples of such banks. They engage themselves in some
specific area or activity and thus, are called specialised banks.
Development Banks : Let us know about them.
Business often requires medium and long-term capital for Export Import Bank of India
purchase of machinery and equipment, for using latest (EXIM Bank):
technology, or for expansion and modernization. Such financial
assistance is provided by Development Banks. They also EXIM Bank was established in
undertake other development measures like subscribing to the year 1982. If you want to set up
shares and debentures issued by companies, in case of under a business for exporting products
subscription of the issue by the public. Industrial Finance abroad or importing products from
Corporation of India (IFCI) and State Finance Corporations foreign countries for sale in our

GeneraL Awareness 9
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country, EXIM bank can provide you the required support and If a person is engaged in
assistance. The bank grants loans to exporters and importers agriculture or other activities
and also provides information about the international market. like handloom weaving,
It gives guidance about the opportunities for export or import, fishing, etc. NABARD can
the risks involved in it and the competition to be faced, etc. provide credit, both short-
Small Industries Development Bank of India (SIDBI): term and long-term, through
regional rural banks. It
provides financial assistance,
especially, to co-operative
credit, in the field of agriculture, small-scale industries,
cottage and village industries handicrafts and allied economic
SIDBI was established on the year 2nd April, 1990. It activities in rural areas.
provides loan on easy terms to small scale business unites
or industry including the newly established. It also finances Functions and Roles of NABARD -
modernisation of small-scale industrial units, use of new ##Credit Functions
technology and market activities. The aim and focus of SIDBI
##Developmental and Promotional Functions
is to promote, finance and develop small-scale industries.
##Supervisory Functions
National Bank for Agriculture and Rural Development
(NABARD): ##Institutional and Capacity building
NABARD was established on 12th July, 1982. It is a central ##Role in Training
or apex institution for financing agricultural and rural sectors.
SMALL BANK AND PAYMENT BANK
Payment Banks Small banks
What they can do • Offer Internet Banking • Sell forex to customers
• Sell Mutual Funds/ Insurance /Pensions • Sell Mutual Funds/ Insurance/ Pensions
• Offer Bill Payment Service • Can convert into a full-fledged bank
• Have ATMs & BCs • Operate across the country
• Can function as BC of other Banks
What they can’t do • Offer Credit Cards • Grant Large Loans
• Extend Loans • Float subsidiaries
• Handle Cross Remittances • Can’t sell complicated financial products
• Accept NRI Deposits
Eligibility Criterion • Issuer of Pre-Paid Cards, Telecom Companies, • Individuals/ Professionals with equal to or
NBFCs, Banking Companies, Super Market more than 10 years of experience, NBFCs,
Chain, Real Estate, Companies, PSUs Micro Organizations and Local Area Banks
• Minimum Capital Rs. 100 Crores • Minimum Capital Rs. 100 Crores
• 75% Capital must be inve G-Sec. • 75% Lending in PSL
Other provisions • 25% Deposits in Other Banks • Compulsory to comply with reserve system
• Min. 26% Investment from Indians • Individual borrowings are eligible up to 10%
• Compulsory Listing on a recognized stock and organizational borrowings are eligible up
exchange as net worth exceeds Rs. 500 to 15% of the total assets
Crores • Will provide BFs facility
• Maximum Balance Limit in an account is • 25% branches in non-banking rural areas.
Rs. 1 Lakh
• Compulsory to adopt technological and
networking solutions for operations
• Minimum capital requirement - 15%

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RBI had received 142 application for payment banks and 71 4. Equitas Holdings P Limited, Chennai
application for small banks. 5. ESAF Microfinance and Investments Private Ltd.,
A preliminary scrutiny of all the applications involving prima Chennai
facie eligibility including the ability to raise the minimum 6. Janalakshmi Financial Services Private Limited,
initial capital and the status of ownership and control by Bengaluru
residents as per the Guidelines was carried out by the RBI
team. The findings of the preliminary scrutiny were presented 7. RGVN (North East) Microfinance Limited, Guwahati
to an External Advisory Committee (EAC) constituted under 8. Suryoday Micro Finance Private Ltd., Navi Mumbai
the Chairmanship of Smt. Usha Thorat, former Deputy 9. Ujjivan Financial Services Private Ltd., Bengaluru
Governor of the RBI. The EAC recommended applications
10. Utkarsh Micro Finance Private Ltd., Varanasi
to be taken up for detailed examination based on prima facie
eligibility vis-à-vis the Guidelines. Functions of Commercial Banks
The detailed scrutiny involved assessment of financial The functions of commercial banks are of two types.
soundness, proposed business plan, fit and proper status (A) Primary functions
based on due diligence reports received from the regulators,
investigative agencies, banks, etc. (B) Secondary functions.
An important factor was proposed reach into unbanked areas Primary functions
and underserved sections of the population. The EAC held The primary functions of a commercial bank includes:
detailed discussions in multiple sittings on the applications ##Accepting deposits; and
based on the information presented to it. The EAC then
submitted its recommendations to the RBI. ##Granting loans and advances.

An Internal Screening Committee (ISC), consisting of Accepting deposits

the Governor and the four Deputy Governors of the RBI The most important activity of a commercial bank is to
thereafter examine the applications. The ISC also deliberate mobilise deposits from the public. People who have surplus
on the rationale of the recommendations made by the EAC. income and savings find it convenient to deposit the amounts
After scrutinising all the applications, the ISC made its with banks. Depending upon the nature of deposits, funds
independent recommendations to the Committee of the deposited with bank also earn interest. Thus, deposits with the
Central Board (CCB) of the RBI. bank grow alongwith the interest earned. If the rate of interest
is higher, public gets motivated to deposit more funds with the
Based on the recommendations the RBI in August 2015 gave bank. There is also safety of funds deposited with the bank.
tentative sanction to the following 11 PAYMENT BANKS-
Grant of loans and advances
1. Aditya Birla Nuvo
The second important function of a commercial bank is to
2. Airtel M Commerce grant loans and advances. Such loans and advances are given
3. Cholman-dalam Distribution to members of the public and to the business community at
a higher rate of interest than allowed by banks on various
4. Department of Posts deposit accounts. The rate of interest charged on loans and
5. Fino Pay Tec advances varies according to the purpose and period of loan
and also the mode of repayment.
6. National Securities Depository Limited
Loans
7. Reliance Industries
A loan is granted for a specific time period. Generally
8. Sun Pharma commercial banks provide short-term loans. But term loans,
9. Paytm i.e., loans for more than a year may also be granted. The
borrower may be given the entire amount in lump sum or in
10. Tech Mahindra instalments. Loans are generally granted against the security
11. Vodafone Mpesa of certain assets. A loan is normally repaid in instalments.
However, it may also be repaid in lump sum.
Note : Out of the above, three companies have withdrawn
namely Cholmandalam Distribution, Sun Pharma and Tech Advances
Mahindra as on 25/05/2016 An advance is a credit facility provided by the bank to its
In September 2015 RBI has issued in principle approval to customers. It differs from loan in the sense that loans may be
10 SMALL FINANCE BANKS as follows. granted for longer period, but advances are normally granted
for a short period of time. Further the purpose of granting
1. Au Financiers (India) Ltd., Jaipur advances is to meet the day-to-day requirements of business.
2. Capital Local Area Bank Ltd., Jalandhar The rate of interest charged on advances varies from bank to
bank. Interest is charged only on the amount withdrawn and
3. Disha Microfin Private Ltd., Ahmedabad not on the sanctioned amount.
GeneraL Awareness 11
stportal.mahendras.org
Types of Advances E-banking (Electronic Banking)
Banks grant short-term financial assistance by way of cash With advancement in information and communication
credit, overdraft and bill discounting. technology, banking services are also made available through
Cash Credit computer. Now, in most of the branches you see computers
being used to record banking transactions. Information about
Cash credit is an arrangement whereby the bank allows the the balance in your deposit account can be known through
borrower to draw amount upto a specified limit. The amount computers. In most banks now a days human or manual teller
is credited to the account of the customer. The customer counter is being replaced by the Automated Teller Machine
can withdraw this amount as and when he requires. Interest (ATM). Banking activity carried on through computers and
is charged on the amount actually withdrawn. Cash Credit other electronic means of communication is called ‘electronic
is granted as per terms and conditions agreed with the banking’ or ‘e-banking’.
customers.
Automated Teller Machine (ATM)
Overdraft
Banks have now installed their own Automated Teller
Overdraft is also a credit facility granted by bank. A Machine (ATM) throughout the country at convenient
customer who has a current account with the bank is locations. By using this, customers can deposit or withdraw
allowed to withdraw more than the amount of credit balance money from their own account any time.
in his account. It is a temporary arrangement. Overdraft
facility with a specified limit may be allowed either on the Debit Card
security of assets, or on personal security, or both.
Discounting of Bills
Banks provide short-term finance by discounting bills, that
is, making payment of the amount before the due date of
the bills after deducting a certain rate of discount. The party
gets the funds without waiting for the date of maturity of
the bills. In case any bill is dishonoured on the due date,
the bank can recover the amount from the customer.
Secondary Functions
In addition to the primary functions of accepting deposits
Banks are now providing Debit Cards to their customers
and lending money, banks perform a number of other
having saving or current account in the banks. The customers
functions, which are called secondary functions. These are
can use this card for purchasing goods and services at
as follows: Issuing letters of credit, travellers cheque, etc.
different places in lieu of cash. The amount paid through
##Undertaking safe custody of valuables, important debit card is automatically debited (deducted) from the
documents and securities by providing safe deposit customers’ account.
vaults or lockers. Credit Card
##Providing customers with facilities of foreign exchange
dealings.
##Transferring money from one account to another; and
from one branch to another branch of the bank through
cheque, pay order and demand draft.
##Standing guarantee on behalf of its customers, for
making payment for purchase of goods, machinery,
vehicles etc.
##Collecting and supplying business information.
##Providing reports on the credit worthiness of customers.
Credit cards are issued by the bank to persons who may or
##Providing consumer finance for individuals by way of may not have an account in the bank. Just like debit cards,
loans on easy terms for purchase of consumer durables credit cards are used to make payments for purchase, so
like televisions, refrigerators, etc. that the individual does not have to carry cash. Banks allow
##Educational loans to students at reasonable rate of certain credit period to the credit cardholder to make payment
interest for higher studies, especially for professional of the credit amount. Interest is charged if a cardholder is not
courses. able to pay back the credit extended to him within a stipulated
period. This interest rate is generally quite high.

12 GeneraL Awareness
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Smart Card can be made either by signing a withdrawal form or by issuing
A smart card is a plastic a cheque or by using ATM card. Normally banks put some
made pocket size card restriction on the number of withdrawals from this account.
that is embedded with an Interest is allowed on the balance of deposit in the account. The
integrated circuit. Smart rate of interest on savings bank account varies from bank to
card are also known as bank and also changes from time to time. A minimum balance
chip cards or integrated has to be maintained in the account as prescribed by the bank.
circuit card (ICC). The Current Deposit Account: Big businessmen, companies and
installed integrated circuit institutions such as schools, colleges, and hospitals have to make
(IC Chip) on a smart card consist of a memory, a processor payment through their bank accounts. Since there are restriction
and communicates to the external world through the on number of withdrawals from savings bank account, that
card surface. It stores data, help in identification and type of account is not suitable for them. They need to have an
authentication, application processing etc. account from which withdrawal can be made any number of
Smart card classified into two sets : times. For this purpose banks open current account for them.
Like savings bank account, this account also requires certain
Memory Card- These smart cards contain only non volatile minimum amount of deposit while opening the account. On this
memory storage components alongwith dedicated security deposit, bank does not pay any interest on the balances. Rather
logic (occasionally). the account holder pays certain amount each year as operational
Micro Processor Cards- These smart cards contain volatile charge. For the convenience of the account holders banks also
memory as well as micro processor components. allow withdrawal of amounts in excess of the balance of deposit.
This facility is known as overdraft facility. It is allowed to some
Net Banking
specific customers and upto a certain limit subject to previous
With the extensive use of computer and Internet, banks have agreement with the bank concerned.
now started transactions over Internet. The customer having
Fixed Deposit Account (also known as Term Deposit
an account in the bank can log into the bank’s website and
Account): Many a time people want to save money for long
access his bank account. He can make payments for bills,
period. If money is deposited in saving bank account, banks
give instructions for money transfers, fixed deposits and
allow a lower rate of interest. Therefore, money is deposited
collection of bills, etc.
in a fixed deposit account to earn an interest at a higher rate.
Phone Banking This type of deposit account allows deposit to be made of
In case of phone banking, a customer of the bank having an an amount for a specified period. This period of deposit may
account can get information of his account, make banking range from 7 days to 10 years or more, during which no
transactions like, fixed deposits, money transfers, demand withdrawal is allowed. However, on request, the depositor
draft, collection and payment of bills, etc. by using telephone. can encash the amount before its maturity. In that case banks
give lower interest than what was agreed upon. The interest on
As more and more people are now using mobile phones, fixed deposit account can be withdrawn at certain intervals of
phone banking is possible through mobile phones. In mobile time. At the end of the period, the deposit may be withdrawn
phone a customer can receive and send messages (SMS) or renewed for a further period. Banks also grant loan on the
from and to the bank in addition to all the functions possible security of fixed deposit receipt.
through phone banking
Recurring Deposit Account: This type of account is suitable for
Bank Deposit Accounts those who can save regularly and expect to earn a fair return on
the deposits over a period of time. While opening the account a
Types of Bank Deposit Accounts
person has to agree to deposit a fixed amount once in a month
On the basis of purpose they serve, bank deposit accounts for a certain period. The total deposit along with the interest
may be classified as follows: therein is payable on maturity. However, the depositor can also
be allowed to close the account before its maturity and get back
##Savings Bank Account
the money along with the interest till that period. The account can
##Current Deposit Account be opened by a person individually, or jointly with another, or by
##Fixed Deposit Account the guardian in the name of a minor. The rate of interest allowed
on the deposits is higher than that on a savings bank deposit.
##Recurring Deposit Account
Flexi Deposit- These deposits are a combination of demand
##Flexi Deposit and fixed deposits for meeting customer’s financial needs
Savings Bank Account : If a person has limited income and in flexible manner. Only one SB account /CA is opened and
wants to save money for future needs, the Saving Bank Account the term deposits issued under the scheme are linked to this
is most suited for his purpose. This type of account can be opened account. Once balance in SB/CA crosses a pre-agreed level,
with a minimum initial deposit that varies from bank to bank. such surpulas amount is automatically transferred to the fix
Money can be deposited any time in this account. Withdrawals deposit account of pre-determined maturity.

GeneraL Awareness 13
stportal.mahendras.org
from others via mobile phones, by using their registered
National Payments Corporation of India
mobile number. This service is available 24x7, including
The National Payments Corporation of India is an umbrella bank holidays. Transfers funds via Virtual Payment Address
organisation for operating retail payments and settlement (VPA) thus eliminating the need to remember beneficiary
systems in India. It was founded in 2008, the NPCI is a account number and IFS Code.
not-for-profit organisation registered under section 8 of
the Companies Act 2013. The organisation is owned by a BHIM:
consortium of major banks, and has been promoted by the Bharat Interface for Money(BHIM) is a mobile app developed
country’s central bank, the Reserve Bank of India. by National Payments Corporation of India (NPCI), based
Presently, there are ten core promoter banks (State Bank of on the Unified Payment Interface (UPI). It was launched by
India, Punjab National Bank, Canara Bank, Bank of Baroda, Narendra Modi, the Prime Minister of India, at a Digi Dhan
and Union Bank of India, Bank of India, ICICI Bank, mela at Talkatora Stadium in New Delhi on 30 December
HDFC Bank, Citibank and HSBC). The Board consists of 2016. It was named after Dr. Bhimrao R. Ambedkar and is
intended to facilitate e-payments directly through banks as
Biswamohan Mahapatra as the Non-Executive Chairman,
part of the 2016 Indian banknote demonetisation and drive
Nominees from Reserve Bank of India and Nominees from
towards cashless transactions.
ten core promoter banks. Dilip Asbe is the current managing
director and chief executive officer of the NPCI. The app supports all Indian banks which use that platform,
which is built over the Immediate Payment Service
SERVICES: infrastructure and allows the user to instantly transfer money
RuPay between bank accounts of any two parties. It can be used on
RuPay is a domestic card scheme of India. The card has all mobile devices.
Magnetic stripe, EMV chip. More than 300 cooperative IMPS:
banks and the Regional Rural Banks (RRBs) in the country Immediate Payment Service (IMPS) fund transfer service
have also issued allows customers to instantly transfer money online or from
Rupay Contactless is a contactless payment technology mobile phones using their registered mobile number 24x7,
feature that allows cardholders to wave their card in including bank holidays. IMPS can be used to receive or
front of contactless payment terminals without the need transfer funds using beneficiary registered mobile number
to physically swipe or insert the card into a point-of-sale and Money Mobile Identifier (MMID) or account number
device. and branch IFSC code. This service is available 24x7 with
immediate confirmation of transaction.
Bharat BillPay
NEFT:
The Bharat bill payment system is a Reserve Bank of India
National Electronic Funds Transfer (NEFT) is a payment
(RBI) conceptualised system driven by the NPCI. It is a
utility that allows customers to transfer funds from their
one-stop ecosystem for payment of all bills providing an
Citibank accounts to their own or any other individual having
interoperable and accessible “Anytime Anywhere” bill
an account with any other bank in the country which is a part
payment service to all customers across India with certainty,
of the NEFT network. NEFT can be done online without
reliability and safety of transactions. visiting your bank branch. There is no minimum or maximum
BHIM Aadhar Pay limit on the amount of funds that can be transferred. It is not
BHIM Aadhar pay is an Aadhar based payments interface restricted to any particular geographical area within India,
which allows real time payments to Merchants using Aadhar given that a bank branch should be NEFT enabled.
number of Customer &authenticating him/her through his/ RTGS:
her bio metrics.---- Real Time Gross Settlement (RTGS) is a funds transfer
National Electronic Toll Collection utility that allows customers to transfer funds to their own
or other bank accounts promptly. The minimum amount
FASTag is a device that employs Radio Frequency
for an RTGS funds transfer in Rs2, 00, 000. Funds transfer
Identification (RFID) technology for making toll payments
via RTGS happens in real time. RTGS is generally used for
directly while the vehicle is in motion. FASTag (RFID Tag) transfer of large amounts.
is affixed on the windscreen of the vehicle and enables
a customer to make the toll payments directly from the M-WALLETS
account which is linked to FASTag. Popular digital payment mode via smartphones; enable easy
UPI: payments to vendors with cash back carrot thrown in Wallets
include SBI Buddy, HDFC PayZapp, ICICI Pocket, Paytm,
Unified Payments Interface (UPI) fund transfer service Mobikwik. In all 40 entities have mobile wallet licences,
allows customers to instantly transfer funds or request funds of which 25 are operational. Interoperability is a challenge.

14 GeneraL Awareness
 stportal.mahendras.org
PLASTIC MONEY for servicing loans
750 million cards in circulation; less than 400 million are (v) Not cross-sell products except for loan-specific insurance
used; 250-300 million debit cards used mainly at ATMs to products.
withdraw cash; 27 million credit cards in use Most merchants (vi) Not permit international flow of funds.
insist on transaction fees between 2% to 20%; annual interest An NBFC-P2P will be expected to:
(on outstanding card dues) between 36% and 40% (i) Undertake due diligence on the participants.
Peer-to-Peer (P2P) Lending (ii) Undertake credit assessment and risk profiling of the
borrowers and disclose the same to their prospective lenders.
P2P lending is a crowd-funding model (largely online) where
(iii) Undertake documentation of loan agreements and other
people looking to invest their money with people who want
related documents.
to borrow can do so. Peer-to-peer lending is a form of crowd-
(iv) Provide assistance in disbursement and repayments of
funding used to raise loans for people who need to borrow,
loan amount.
from people who want to invest.
(v) Render services for recovery of loans originated on the
Regulatory Practices by Major Countries platform.
##Australia Prudential norms
##China
1. The aggregate exposure of a lender to all borrowers at
##France
any point of time, across all P2Ps, shall be subject to a
##Germany cap of Rs 10 lakh.
##New Zealand 2. The aggregate loans taken by a borrower at any point of
##United Kingdom time, across all P2Ps, shall be subject to a cap of Rs 10
##United States of America lakh.
All peer-to-peer lending (P2P) platforms will be regulated 3. The exposure of a single lender to the same borrower,
by the Reserve Bank of India (RBI). across all P2Ps, shall not exceed Rs 50,000.
Fund transfer mechanism 4. The maturity of the loans shall not exceed 36 months.
Fund transfer between participants on the P2P lending
Trade Receivables Discounting System
platform will happen through escrow account mechanisms.
All fund transfers shall be through and from bank accounts, The scheme for setting up and operating the institutional
and cash transactions are strictly prohibited. mechanism for facilitating the financing of trade receivables
of MSMEs from corporate and other buyers, including
Scope of activities of NBFC-P2P
Government Departments and Public Sector Undertakings
Among several other things, an NBFC-P2P can: (PSUs), through multiple financiers will be known as Trade
(i) Act as an intermediary providing an online marketplace Receivables Discounting System (TReDS). The TReDS
or platform to participants involved in P2P lending. will facilitate the discounting of both invoices as well as
(ii) Not raise deposits as defined by or under Section 45I(bb) bills of exchange. Further, as the underlying entities are the
of the Act or the Companies Act, 2013. same (MSMEs and corporate and other buyers, including
(iii) Not lend on its own. Government Departments and PSUs), the TReDS could
(iv) Not hold, on its own balance sheet, funds received from deal with both receivables factoring as well as reverse
lenders for lending, or funds received from borrowers factoring so that higher transaction volumes come into the
system and facilitate better pricing.

How Peer-To-Peer Lending Works*

Commits to a
borrower (2)

Gives cash to the

platform (6)

Borrower Lending Platform

Applies for a Investor receives Lender/Investor
loan (1) (e.g. Lending Club) loan note (9)

(10) (11)

Issues the actual Infroms third-

loan (4) party bank that Purchases the loan note
Loan
borrower is Note (8) using Investor's cash (7)
verified,
Loan Note (5) Investors have
committed (3)

Partner Bank (e.g.

Web Bank)

Initial application and funding Loan note purchasing BI INTELLIGENCE

Loan note transfer GeneraL
Loan repayment Awareness 15

*This is a simplified graphic showing how a loan is processed through a peer-to-peer market place-revenue sources such as fees are not included
stportal.mahendras.org

INDIAN BANKING INDUSTRY

1. Which of the following is true regarding Presidency Banks in India?
(A) Bank of Bengal, Bank of Bombay, Bank of Madras
(B) These banks are also called quasi banks
(C) Imperial Bank of India was setup by merging presidency Banks
(D) These Banks are the first in India
(E) These banks were nationalized on 1st January,1949
(1) A and B are true (2) A, B, C are correct (3) A, B, C, E are correct
(4) All options are correct (5) No option is correct.
2. Before the establishment of the Reserve Bank of India, who had been handed over the charge of exchange control?
(1) Allahabad Bank (2) Imperial Bank of India (3) Punjab National Bank
(4) General Bank of India (5) None of the above
3. Which of the following statements are true about Central Bank of India?
(A) It was started in 1911 (B) It was India’s 1st Swadeshi Bank
(C) Its tagline “Central to you since 1911” (D) Its Head office is in Lucknow
(E) Its 1 Chairman was Sir Pherozesha Mehta
st

(1) A and B are true (2) A, B, C are correct (3) A, B, C, E are correct
(4) All options are correct (5) No option is correct
4. Deposit account which have not been operated more than 10 years are to be classified as:
(1) Inoperative accounts (2) Dormant accounts (3) Unclaimed accounts
(4) Dead accounts (5) None of these
5. When was RBI nationalized?
(1) 1 January 1949 (2) 1 January 1950 (3) 1 January 1951
(4) 1 January 1952 (5) None of these
6. As per the new guidelines issued by RBI minimum required capital to setup a bank by corporate is ;
(1) Rs. 600 cr. (2) Rs. 700 cr. (3) Rs. 400 cr.
(4) Rs. 500 cr. (5) Other than given options
7. When was SBI formed?
(1) 1955 (2) 1956 (3) 1957 (4) 1958 (5) 1959
8. Which of the following public sector banks has the largest number of branches in foreign countries?
(1) Bank of India (2) State Bank of India (3) Punjab National Bank
(4) Corporation Bank (5) None of these
9. The only merger of two public sector banks took place between -
(1) Bank of India and New Bank of India (2) Punjab National Bank and New Bank of India
(3) Allahabad Bank and United Bank of India (4) Punjab National Bank and Bank of Rajasthan
(5) None of these
10. Which of the following banks was inaugurated by Mahatma Gandhi in 1919?
(1) Bank of Maharashtra (2) Bank of Baroda (3) State Bank of Saurashtra
(4) Union Bank of India (5) None of these
11. Which of the following terms is used in banking field?
(1) Input devices (2) Mouse (3) Eraser (4) Bank rate (5) None of these

16 GeneraL Awareness
 stportal.mahendras.org
12. Which of the following is Flexi deposit -
(1) Demand Deposit (2) Time Deposit (3) Demand & Time Deposit
(4) Fixed deposit (5) None of these
13. Liquidity with a banker means:
(1) Cash in hand (2) Cash and bank balances (3) Short term current assets
to convert into cash (4) All the above (5) None of these
14. Which is India’s third largest private bank, which was earlier named as UTI Bank?
(1) ICICI Bank (2) Axis Bank (3) IDBI (4) PNB (5) SBI
15. Which of the following does not provide interest?
(1) Savings Account (2) Current Account (3) Fixed Account
(4) Recurring Account (5) None of these
16. Which of the following is the apex institution which handles refinance for agriculture and rural development in India?
(1) RBI (2) SIDBI (3) NABARD (4) SEBI (5) None of these
17. The interest on Savings account is calculated on -
(1) Daily Basis (2) Daily Product Basis (3) Quarterly
(4) Yearly (5) None of these
18. Benefits of Core banking is
(1) Reliable centralized data recovery (2) Enable warehousing and data mine technology
(3) Integrated customer center services (4) Core infrastructure and used for future expenses
(5) All the above
19. What is minimum paid up capital for setting up a Commercial Bank in India?
(1) Rs. 100 cr (2) Rs. 200 cr (3) Rs. 300 cr (4) Rs. 400 cr (5) Rs. 500 cr
20. Who is the founder of Punjab National Bank?
(1) Lala Lajpat Rai (2) K.V. Kamath (3) M.K. Gandhi
(4) Shikha Sharma (5) None of these
21. Which bank has Tagline “Pure Banking Nothing else”?
(1) PNB (2) SBI (3) Canara Bank (4) SIDBI (5) None of these
22. Which was the first Indian Bank to setup an ATM in India?
(1) SBI (2) BOB (3) ICICI (4) HDFC (5) None of these
23. What do you mean by LPG in Banking?
(1) Liberalization, Privatization, Globalization (2) Liberty, Peace, Grooming
(3) Light, Power, Gross (4) Liberalization, Publication, Globalization
(5) None of these
24. When was IBA established ?
(1) 1945 (2) 1946 (3) 1942 (4) 1943 (5) None of these
25. What is CBS?
(1) Cash Banking Solutions (2) Core Banking Solutions
(3) Convertible Bonds and Solutions (4) Cashless banking Solutions
(5) None of these
ANSWER KEY
1.(2) 2.(2) 3.(3) 4.(5) 5.(1) 6.(5) 7.(1) 8.(2) 9.(2) 10.(4)
11.(4) 12.(3) 13.(1) 14.(2) 15.(2) 16.(3) 17.(2) 18.(1) 19.(5) 20.(1)
21.(2) 22.(3) 23.(1) 24.(2) 25.(2)
GeneraL Awareness 17
stportal.mahendras.org

rbi & mONETARY pOLICY

##Functions of RBI
Monetary Authority
Regulator and supervisor of the financial system
Manager of Foreign Exchange
Issuer of currency
LOLR (Lender of Last Resort)-
Open Market Operations (OMO)
Market Stabilisation Scheme (MSS)
##Measures of Money
##Reserve bank information technology pvt. ltd.
##banking ombudsman scheme
##NBFC ombudsman scheme
##ombudsman scheme for digital transaction
##WORKING GROUPS & COMMITTEES BY RBI
##Question & Answer

18 GeneraL Awareness
 stportal.mahendras.org

rbi & mONETARY

CHAPTER

2 pOLICY
Scan the QR code to get video of this chapter.

The Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of
India Act, 1934.
The Central Office of the Reserve Bank was initially established in Calcutta but was permanently moved to Mumbai in
1937. The Central Office is where the Governor sits and where policies are formulated. Though originally privately owned,
since nationalisation in 1949, the Reserve Bank is fully owned by the Government of India.
Functions of RBI
Monetary Authority
Formulates, implements and monitors the monetary policy.
Objective: maintaining price stability and ensuring adequate flow of credit to productive sectors.

SBI

Regulator and supervisor of the financial system

Manager of Foreign Exchange
Prescribes broad parameters of banking operations
Manages the foreign exchange in accordance with the
within which the country’s banking and financial system
provisions of Foreign Exchange Management Act,
functions.
1999.
Objective: maintain public confidence in the system, protect
Objective: to facilitate external trade and payment and
depositors’ interest and provide cost-effective banking
promote orderly development and maintenance of foreign
services to the public.
exchange market in India.
GeneraL Awareness 19
stportal.mahendras.org
Issuer of currency Market Stabilisation Scheme (MSS)
Issues and exchanges or destroys currency and coins not fit This instrument for monetary management was introduced
for circulation. in 2004. Liquidity of a more enduring nature arising from
Objective: to give the public adequate quantity of supplies large capital flows is absorbed through sale of short-dated
of currency notes and coins and in good quality. government securities and treasury bills. The mobilised cash
is held in a separate government account with the Reserve
Developmental role
Bank.
Performs a wide range of promotional functions to support
Repo/Reverse Repo Rate
national objectives.
These rates under the Liquidity Adjustment Facility (LAF)
Related Functions
determine the corridor for short-term money market interest
Banker to the Government: performs merchant banking rates. In turn, this is expected to trigger movement in other
function for the central and the state governments; also acts segments of the financial market and the real economy.
as their banker.
Bank Rate
Banker to banks: maintains banking accounts of all scheduled
banks. It is the rate at which the Reserve Bank is ready to buy or
rediscount bills of exchange or other commercial papers.
LOLR (Lender of Last Resort)- It also signals the medium-term stance of monetary policy.
Monetary policy Base Rate (BR)
Monetary policy refers to the use of instruments under the
It is the minimum rate of interest that a bank is allowed
control of the central bank to regulate the availability, cost
to charge from its customers. Unless mandated by the
and use of money and credit.
government, RBI rule stipulates that no bank can offer loans
The goal: achieving specific economic objectives, such as at a rate lower than BR to any of its customers. It is effective
low and stable inflation and promoting growth. from 1 July, 2010. However, all existing loans, including
The main objectives of monetary policy in India are: home loans and car loans, will continue to be at the current
rate. Only the new loans taken on or after July 1 and old loans
Maintaining price stability
being renewed after this date will be linked to BR.
Ensuring adequate flow of credit to the productive sectors of
Marginal Cost of Funds based Lending Rate (MCLR)
the economy to support economic growth Financial stability
Direct Instruments ##All rupee loans sanctioned and credit limits from 1
April 2016 will be priced with MCLR which will be the
Cash Reserve Ratio (CRR) internal benchmark
The share of net demand and time liabilities that banks must ##The MCLR will be a tenor linked internal benchmark.
maintain as cash balance with the Reserve Bank.
##Actual lending rates will be determined by adding
Statutory Liquidity Ratio (SLR)
components of spread to the MCLR
The share of net demand and time liabilities that banks must
##Bank will review and publish their MCLR of different
maintain in safe and liquid assets, such as, government
maturities every month on a pre-announced date
securities, cash and gold.
##Banks may specify interest dates on their floating rate
Refinance Facilities
loans. They will have the option to offer loans with reset
Sector-specific refinance facilities (e.g., against lending to dates linked either to the date of sanction of the loan/
export sector) provided to banks. credit limits or to the date of review of MCLR
Indirect Instruments ##The periodicity of reset shall be one year or lower
Liquidity Adjustment Facility (LAF)
##The MCLR prevailing on the day the loan is sanctioned
Consists of daily infusion or absorption of liquidity on a will be applicable till the next reset date, irrespective of
repurchase basis, through repo (liquidity injection) and the changes in the benchmark during the interim period
reverse repo (liquidity absorption) auction operations, using
##Existing loans and credit limits linked to the base rate
government securities as collateral.
may continue till repayment or renewal, as the case may
Open Market Operations (OMO) be. Existing borrowers will also have the option to move
Outright sales/purchases of government securities, in addition to the MCLR linked loan at mutually acceptable terms
to LAF, as a tool to determine the level of liquidity over the ##Banks will continue to review and publish base rate as
medium term. hitherto
20 GeneraL Awareness
 stportal.mahendras.org
MCLR will comprise waiver for default in SLR compliance arising out of use of
##Marginal cost of funds this facility in terms of notification issued under sub section
(2A) of Section 24 of the Banking Regulation Act, 1949.
##Negative carry on account of CRR
Rate of Interest
##Operating costs
The rate of interest on amount availed under this facility will
##Tenor premium be 25 basis points above the LAF repo rate, or as decided by
Marginal cost of funds the Reserve Bank from time to time.
##Marginal cost of funds will comprise of Marginal cost Term Repo under the Liquidity Adjustment
of borrowings and return on net worth Facility-
Negative carry on account of CRR Operational Guidelines
##Negative carry on the mandatory CRR which arises due Term Repo under the Liquidity Adjustment Facility (LAF)
to return on CRR balances being nil for 14 days and 7 days tenors will be introduced for banks
Required CRR*(marginal cost)/(1-CRR) (scheduled commercial banks other than RRBs) in addition
Operating costs to the existing daily LAF (repo and reverse repo) and MSF.

##All operating costs associated with providing the loan Term repo auctions will be conducted on CBS (E-KUBER)
product including cost of raising funds will be included platform through electronic bidding as is done in the case
under this. of OMO auctions.

Tenor premium The total amount of liquidity injected through term repos
would be limited to 0.25 per cent of NDTL of the banking
##The cost arise from loan commitments with longer tenor system.
Bank shall publish the internal benchmark for different While the 14 day term repo of tenor would be conducted
maturities every reporting Friday, the 7 day term repo would be
##Overnight MCLR conducted on every non-reporting Friday.
##One-month MCLR In case the notified amount for the 14-day term repo is not
fully subscribed, a 7-day term repo would be conducted on
##Three month MCLR
the following Friday for the remaining un-subscribed amount.
##Six month MCLR In case of full subscription in the 14-day term repo, there
##One year MCLR will be no 7 day term repo auction on the following Friday.
Marginal Standing Facility - Scheme Banks would be required to place their bids with the term repo
rate that they are willing to pay to RBI for the tenor of the
As announced in the Monetary Policy for the year 2011-12,
repo expressed in percentage terms up to two decimal places.
a new Marginal Standing Facility (MSF) is being introduced
with effect from May 9, 2011. Once the bidding time is over, all the bids would be arranged
in descending order of the term repo rates quoted and the
The Scheme will be operationalized on the lines of the
cut-off rate would be arrived at the rate corresponding to the
existing Liquidity Adjustment Facility - Repo Scheme (LAF
notified amount of the auction. Successful bidders would be
- Repo). The salient features of the Scheme are as under:
those who have placed their bids at or above the cut-off rate.
This facility is effective from May 9, 2011. All bids lower than the cut-off rate would be rejected. RBI
Eligibility : will, however, reserve the right to (i) inject marginally higher
amount than the notified amount due to rounding effects and
All Scheduled Commercial Banks having Current Account (ii) inject less than the notified amount without assigning any
and SGL Account with Reserve Bank, Mumbai will be reasons therefor.
eligible to participate in the MSF Scheme.
No bids would be accepted at or below the prevailing Repo
Tenor and Amount Rate under LAF.
Under the facility, the eligible entities can avail overnight, On the day prior to the auction, RBI will announce the
up to two per cent of their respective Net Demand and Time amount to be auctioned under term repo along with its tenor.
Liabilities (NDTL) outstanding at the end of the second The minimum bid amount for the auction would be Rupees
preceding fortnight. But for the intervening holidays, the one crore and multiples thereof. The allotment would be in
MSF facility will be for one day except on Fridays when multiples of Rupees one crore. Term repo auctions would be
the facility will be for three days or more, maturing on the conducted on Fridays between 2.30 PM - 3.00 PM. In case
following working day. In the event, the banks’ SLR holdings Friday falls on a holiday, the auction would take place on the
fall below the statutory requirement up to two per cent of their preceding working day at Mumbai.
NDTL, banks will not have the obligation to seek a specific
GeneraL Awareness 21
stportal.mahendras.org
There will be provision of pro-rata allotment should there be (f) Dr. Ravindra H. Dholakia, Professor, Indian Institute of
more than one successful bid at the cut-off rate. Management (IIM),Ahmedabad— Member
There will be no restriction on the maximum amount of The Members of the Monetary Policy Committee appointed
bidding by individual bidders under term repo. by the Central Government shall hold office for a period of
The reversal of term repo would take place at the ‘start of four years, with immediate effect or until further orders,
day’ on the day of completion of the term. whichever is earlier.

The eligible collateral for term repo and the applicable Measures of Money
haircuts will remain the same as daily LAF repo and MSF. Money is a thing that is usually accepted as payment for
All other terms and conditions as applicable to LAF goods and services as well as for the repayment of debts.
operations will also be made applicable to term repo. These Money supply, like money demand, is a stock variable. The
conditions will, however, be subject to review on a periodic total stock of money in circulation among the public at a
basis. particular point of time is called money supply. RBI publishes
The first such term repo auction was conducted on October figures for four alternative measures of money supply, viz.
11, 2013 (Friday) for 7 days. The notified amount for the M1, M2, M3 and M4.
auction would be communicated to the market on October They are defined as follows -
10, 2013 (Thursday).
M1 = CU + DD+OD (other deposit with RBI)
As hitherto, daily LAF for individual banks would be
M2 = M1 + Savings deposits with Post Office savings
restricted to a certain percentage of their NDTL outstanding
banks
as on the last Friday of the second preceding fortnight
(currently it is at 0.50 per cent). M3 = M1 + Net time deposits of commercial banks
Monetary Policy Committee (MPC) M4 = M3 + Total deposits with Post Office savings
organisations (excluding National Savings
The Reserve Bank of India Act, 1934 (RBI Act) has
Certificates)
been amended by the Finance Act, 2016, to provide for a
statutory and institutionalised framework for a Monetary where, CU is currency (notes plus coins) held by the public
Policy Committee, for maintaining price stability, while and DD is net demand deposits held by commercial banks.
keeping in mind the objective of growth. The Monetary The word ‘net’ implies that only deposits of the public held
Policy Committee would be entrusted with the task of fixing by the banks are to be included in money supply.
the benchmark policy rate (repo rate) required to contain The interbank deposits, which a commercial bank holds in
inflation within the specified target level. A Committee- based other commercial banks, are not to be regarded as part of
approach for determining the Monetary Policy will add lot money supply.
of value and transparency to monetary policy decisions. The
meetings of the Monetary Policy Committee shall be held M1 and M2 are known as narrow money. M3 and M4 are
at least 4 times a year and it shall publish its decisions after known as broad money.These gradations are in decreasing
each such meeting. order of liquidity. M1 is most liquid and easiest for
transactions whereas M4 is least liquid of all. M3 is the most
As per the provisions of the RBI Act, out of the six Members commonly used measure of money supply. It is also known
of Monetary Policy Committee, three Members will be as aggregate monetary resources.
from the RBI and the other three Members of MPC will be
appointed by the Central Government. In exercise of the Bank Note Paper Mill
powers conferred by section 45ZB of the Reserve Bank of ##SPMCIL is an Indian government-owned corporation
India Act, 1934, the Central Government has accordingly that engages in the production of bank notes, coins, non–
constituted, through a Gazette Notification dated 29th Sept judicial stamps, postage stamps, and other government
2016, the Monetary Policy Committee of RBI, with the related documents for India. Established- 2006
following composition, namely:-
Bharatiya Reserve Bank Note Mudran Private
(a) The Governor of the Bank—Chairperson, ex officio; Limited is the one of the subsidiaries of Reserve Bank
(b) Deputy Governor of the Bank, in charge of Monetary of India. Prints bank notes (Indian rupees) for Reserve
Policy—Member, ex officio; Bank of India (RBI). Established in- 1995 It has two
presses one in Mysore and Salboni. It contains nine units,
(c) One officer of the Bank to be nominated by the Central
which include four presses, four mints, and a paper mill.
Board—Member, ex officio;
India Government Mint operates four mints in the
(d) Shri Chetan Ghate, Professor, Indian Statistical Institute
country for the production of coins.
(ISI) —Member
##Mumbai, Maharashtra
(e) Professor Pami Dua, Director, Delhi School of
Economics (DSE) — Member ##Kolkata, West Bengal
22 GeneraL Awareness
 stportal.mahendras.org
##Hyderabad, Telangana
Banking Ombudsman Scheme
##Noida, Uttar Pradesh
The Banking Ombudsman Scheme is an inexpensive
Under The Coinage Act, 1906, which has been amended and forum for bank customers, for resolution of complaints
now known as Coinage Act 2010 the Government of India relating to certain services rendered by banks. The Banking
responsibility of the production. Ombudsman Scheme is introduced under Section 35 A of
Supply to the RBI for distribution RBI places an annual the Banking Regulation Act, 1949 by RBI with effect from
indent for the purpose production programme of coins. 1995. Presently the Banking Ombudsman Scheme 2006 (As
Coins can be issued up to the denomination of Rs.1000. amended upto July 1, 2017) is in operation.
Coins in India presently-50 paisa, 1,2,5,10 rupee, Up to 50 The Banking Ombudsman is a senior official appointed
paisa coins called ‘small coins’, Coins rupee 1 and above by the Reserve Bank of India. As on date, twenty Banking
called- Rupee coins
Ombudsmen have been appointed with their offices located
Marks On Mint mostly in state capitals. All Scheduled Commercial Banks,
Bombay (Mumbai) Mint Regional Rural Banks and Scheduled Primary Co-operative
Banks are covered under the Scheme.
##Bombay (Mumbai) Mint has a diamond under the date
of the coin (year of issue). The Proof coins from this The amount of compensation is limited to the amount
mint have a mint mark ‘B’ or ‘M’. arising directly out of the act or omission of the bank or
Rs. 20 lakh, whichever is lower. The Banking Ombudsman
Calcutta (Kolkata) Mint
may award compensation not exceeding Rs. 1 lakh to the
##Calcutta mint has no mark under the date of the coin complainant for mental agony and harassment.
(year of issue). Or it has a “c” mark.
Ombudsman Scheme’ for Non-Banking
Hyderabad Mint Financial Companies (NBFC)
##Hyderabad Mint has a star under the date of the coin The Reserve Bank of India (RBI) launched ‘Ombudsman
(year of the issue). The other mint marks from Hyderabad Scheme’ for non-banking financial companies (NBFC)
include a split diamond, and a dot in the diamond. for redressal of complaints against them. As per the RBI,
Noida Mint this Scheme will offer a speedy and cost-free complaint
##Noida mint has a dot under the year of issue (coin date). redressal mechanism relating to deficiency in the services
by NBFCs covered under the Scheme. The Scheme will be
CURRENCY OF INDIA (INR) - Notes are printed at four known as ‘Ombudsman Scheme for Non-Banking Financial
printing presses. Companies, 2018’.
1. Nashik, Maharashtra The Scheme will cover all deposit-taking NBFCs for now
2. Dewas, Madhya Pradesh and based on the result and experience gained, it would
3. Mysore, karnataka extend the scheme to cover those NBFCs who have the asset
size of Rs. 100 crore and above with customer interface.
4. Salboni , West Bengal
The NBFC ombudsmen will function and the complaints
##Govt. of India issue coins and 1 rupee note
of customer as per zone wise. For this NBFC ombudsmen
##RBI issue 2 rupee and above note will discharge their functions from four offices in Chennai,
##RBI can issue banknotes in the denomination 5000 and Mumbai, Kolkata and New Delhi.
10000 under RBI Act, 1934. NBFC Ombudsman will not charge any fee for filing and
Reserve Bank Information Technology Pvt resolving customers’ complaints.
Ltd (ReBIT) If the NBFC does not reply within a period of 30 days (one
Reserve Bank Information Technology Pvt Ltd (ReBIT) month) after receipt of the complaint from complainant or
has been set up in 2016 as a wholly owned subsidiary by the NBFC rejects the complaint, or if the complainant is not
the Reserve Bank of India (RBI). It take cares of the IT happy with the reply given by the NBFC, then the complainant
requirements, including the cyber security needs of the can file the complaint with the NBFC Ombudsman.
Reserve Bank and its regulated entities. ReBIT will focus Ombudsman Scheme for Digital Transactions
on IT and cyber security (including related research) of the
financial sector and assist in IT systems audit and assessment It was announced in the Monetary Policy Statement of
of the RBI regulated entities; advise, implement and manage December 5, 2018, the Reserve Bank of India (RBI)
internal or system-wide IT projects (both the existing & the launched the Ombudsman Scheme for Digital Transactions
new) of the Reserve Bank as mutually decided between the (OSDT) on January 31, 2019 for redressal of complaints
Reserve Bank and ReBIT. against System Participants.

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The Scheme was launched under Section 18 of the Payment
Working Groups And Committees
and Settlement Systems Act, 2007, provides a cost-free
The expert committee to review the Economic Capital
and expeditious complaint redressal mechanism relating
Framework (ECF) - Bimal Jalan
to deficiency in customer services in digital transactions
Task Force on Offshore Rupee Markets - Usha Thorat
conducted through non-bank entities regulated by RBI.
Complaints relating to digital transactions conducted FRBM (Fiscal Responsibility and Budget Management)
Review Committee - N.K. Singh
through banks will continue to be handled under the
Banking Ombudsman Scheme. The offices of Ombudsman High Level Committee (HLC) for implementation of Clause
6 of Assam Accord - M P Bezbarauah
for Digital Transactions will function from the existing
The High Level Task Force on Public Credit Registry for
21 offices of the Banking Ombudsman and will handle
India - Y M Deosthalee
complaints of customers from their respective territorial
The Internal Study Group to Review the Working of the
jurisdiction. Marginal Cost of Funds Based Lending Rate System
The Scheme provides for an Appellate mechanism under - Janak Raj
which the complainant / System Participant has the option The Inter-Regulatory Working Group on FinTech and Digital
to appeal against the decision of the Ombudsman before Banking - Sudarshan Sen
the Appellate Authority. The Working Group to Review of the Guidelines for Hedging
Committees and their main Focus Areas of Commodity Price Risk by Residents in the Overseas
Markets - Chandan Sinha
B.Sivraman Committee Institutional Credit for The Household Finance Committee
Agriculture and Rural
- Tarun Ramadorai
Development
The Internal Working Group on Rationalisation of Branch
Bhagwati Committee Unemployment Authorisation Policy - Lily Vadera
Bhagwati Committee Public Welfare The Working Group on Development of Corporate Bond
Market in India - Harun R Khan
Cook Committee (on Capital Adequacy of Banks The Working Group on Import Data Processing and
behalf of BIS) Monitoring System - AK Pandey
Dave Committee Mutual Funds The Working Group on Interest Rate Options
(Functioning) - P G Apte

Dharia Committee Public Distribution System The Advisory Committee on Ways and Means Advances to
State Governments - Sumit Bose
DR Gadgil Committee Agricultural Finance The Committee on Medium-term Path on Financial Inclusion
- Deepak Mohanty
Gadgil Committee (1961) Lead Bank System
The Committee on Differential Premium System for Banks
Narsimham Committee Financial System in India - Jasbir Singh
RN Malhotra Committee Reforms in Insurance The Working Group on Compilation of Flow of Funds Accounts
for Indian Economy - D K Mohanty
Sector
The High Powered Committee on Urban Co-operative Banks
(UCBs) - R Gandhi

In order to ensure the robustness and credibility of the financial system and to minimise the risks, the Reserve Bank
has designated industry bodies Fixed Income, Money Markets and Derivatives Association of India (FIMMDA) and
Foreign Exchange Dealers Association of India (FEDAI) as the benchmark administrators for the Rupee interest rate
and foreign exchange benchmarks, respectively. The FIMMDA, FEDAI and Indian Banks Association (IBA) have
since jointly floated an independent company for benchmark administration. Benchmark submission activities of
banks and PDs including their governance framework for submission are proposed to be brought under the Reserve
Bank’s on-site and off-site supervision.

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RBI AND MONETARY POLICY

1. RBI is the lender of last resort, what does it mean?
(1) RBI advances necessary credit against eligible securities.
(2) Commercial banks give fund to RBI
(3) RBI advances money to public whenever there is any emergency
(4) All the above
(5) None of these
2. Which of the following statements is incorrect?
(1) RBI is a profit making institution acting in the interest of the Govt.
(2) Every country has only one central bank which is managed by govt. officials.
(3) RBI does not perform any ordinary commercial banking functions.
(4) RBI has adopted of MRS to issue currency.
(5) None of these
3. ————————— Credit policy promotes investment.
(1) Dear (2) Cheap (3) Restricted (4) Green (5) None of these
4. What can RBI do to improve efficiency of the banking system?
(1) It can bring about compulsory amalgamation of weak banks.
(2) It can claim for compulsory liquidation.
(3) It can expedite winding up of proceedings to safeguard the interest of depositors.
(4) All of the above
(5) None of these
5. Which act has given control & supervision power to RBI over commercial banks?
(1) RBI Act, 1934.
(2) Banking regulation Act, 1949.
(3) Both RBI Act, 1934 & Banking Regulation Act, 1949.
(4) Banking regulation Act, 1960.
(5) None of these
6. Central bank promotes commercial banking by ….
(1) Providing cheap rediscounting facilities to commercial banks.
(2) Providing liberalized rediscounting to commercial banks.
(3) Giving subsidies to new banks.
(4) All of the above
(5) None of these
7. Whenever RBI does some open market operation transaction, actually it wishes to which of the followings?
(1) Inflation only (2) Liquidity in economy
(3) Increase borrowing powers of the banks (4) Flow of FDI
(5) None of these
8. Where was the first headquarter of RBI?
(1) New Delhi (2) Mumbai (3) Kolkata (4) Chennai (5) None of these
9. Which of the following is/are the objective(s) of monetary policy?
(A) To anchor inflation expectation.

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(B). To actively manage liquidity
(C). To maintain interest rate regime output & financial stability.
(1) Only (A) (2) All (A), (B), (C) (3) Only B (4) Both A & B (5) None of these
10. Which of the following is/are KEY POLICY rate used by RBI to influence interest rate?
(A) Bank rate & repo rate (B) Reverse repo rate (C) CRR & SLR
(1) Only (A) (2) Only (B) (3) All (4) Only (C) (5) Both (A) & (B)
11. Which of the following rates signals the RBI’s long term outlook on interest rate?
(1) Repo rate (2) Reverse repo rate (3) Bank rate (4) SLR (5) CRR
12. The monetary authority in India, viz RBI is bound to maintain a reserve against the note issued whatever may be
the amount, this system is called as ————————
(1) MRS (2) PRS (3) Maximum fiduciary issue system
(4) Simple deposit system (5) None of these
13. Which of the following is not the function of RBI?
(1) Managing FOREX reserve
(2) Deciding Bank rate, CRR and SLR from time to time
(3) Opening saving account for general public
(4) Prescribing the capital adequacy ratio
(5) Current Management
14. Banks wishing to provide mobile banking services have to obtain permission from which of the following authority:
(1) RBI (2) TRAI (3) IRDAI
(4) No permission needed (5) None of these
15. RBI takes certain steps to curb the menace of inflation. In this context, which among the following will not help
RBI in controlling the inflation in the country?
(1) An increase in the bank rate
(2) An increase in the reverse ratio requirements
(3) A purchase of securities in the open market
(4) Increasing the repo rate
(5) None of these
16. What will be the impact on the cash reserves of commercial banks if RBI conduct a sale of securities?
(1) Increase (2) Decrease (3) Remain constant
(4) Neither Increase or Decrease (5) None of these
17. Under which qualitative tool, RBI fixes maximum limit to loan and advances that can be made above which the
commercial banks cannot exceed?
(1) Rationing of credit (2) Margin requirement (3) Loan-value ratio
(4) Moral suasion (5) None of these
18. To combat rising inflation, RBI has to do which of the following activities?
(1) increases bank rate (2) Sell govt. securities (3) Increase reserve ratio
(4) All of the above (5) None of these
19. If the cash reserve ratio (CRR) is increased by the RBI, its impact on the expansion of credit creation will be
to-
(1) Decreases it (2) Increases it (3) No impact (4) Can’t say (5) None of these
20. What is the maximum number of official directors in RBI’s central board of Directors?
(1) One (2) Two (3) Four (4) Five (5) None of these
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21. Who appoints the governor of RBI?
(1) President of India (2) Prime minister of India (3) Central govt. of India
(4) Vice President of India (5) None of these
22. The RBI reduces or increases different rates and ratios in ‘’basis points’’ one basis point is equal to -
(1) One tenth of a percent (2) One hundredth of a percent
(3) One thousandth of a percent (4) One percent
(5) One hundred percent
23. Under the BSBDA scheme of the RBI, any individual including those from weaker sections of the society, can
open Zero balance account in which of the following banks?
(1) Public sector banks (2) Private sector banks
(3) Foreign banks operating in India (4) All of the above
(5) Only (1) and (2)
24. A major public sector bank raised interest rate on loan by 25 basis points. This means the bank has raised interest
by 25 basis points of
(1) Saving bank interest rate (2) Base Lending rate (3) Repo Rate
(4) Present rate on deposits (5) Discounts rate of interest
25. The LAF (Liquidity adjustment facility) is a facility extended by the RBI to the scheduled commercial banks
excluding—
(1) RRBs (2) Private Banks (3) Nationalized Banks
(4) SBI (5) None of these

Answer Key
1.(1) 2.(1) 3.(2) 4.(4) 5.(3) 6.(1) 7.(2) 8.(3) 9.(2) 10.(5)
11.(3) 12.(1) 13.(3) 14.(2) 15.(3) 16.(2) 17.(1) 18.(4) 19.(1) 20.(4)
21.(3) 22.(2) 23.(4) 24.(2) 25.(1)

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NPA and BASEL NORMS

##NON PERFORMING ASSETS -NPA

##ARC (ASSET RECONSTRUCTION COMPANY)
##DRT (DEBT RECOVERY TRIBUNAL)
##BASEL NORMS
##Prompt Corrective action (PCA)
##Question & Answer

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CHAPTER
NPA and BASEL
3 NORMS
Scan the QR code to get video of this chapter.

SUBSTANDARD ASSETS:-
NON PERFORMING ASSETS -NPA
##Unsecured outstanding balance - 25%
##NPA is defined as a credit facility in respect of which
the interest and/or installment of principal has remained ##Secured outstanding balance - 15%
‘past due’ for a specified period of time. DOUBTFUL ASSETS :-
##An asset, including a leased asset, becomes non- ##Unsecured portion of outstanding balance - 100%,
performing when it ceases to generate income for the Secured outstnading balance
bank.
D1 - 25%
##In accounting, originally Bad & Doubtful Debts.
D2 - 40%
FOR AGRICULTURAL PURPOSE
D3 - 100%
##Interest or installment of principal remains overdue for
two harvest seasons but for a period not exceeding two LOSS ASSETS:-
and a half years in the case of an advance granted for
agricultural purpose ##The entire assets should be written off, if permitted by
RBI then 100% provisoing of outstanding balance.
##Any amount to be received remains overdue for a period
of more than 90 days in respect of other accounts. NPA MANAGEMENT- PREVENTIVE
OUT OF ORDER:- MEASURES
##An account should be treated as out of order if the ##Formation of the credit information bureau(india) limited
outstanding balance remains continuously in excess of (CIBIL)
sanctioned limit /drawing power. ##Release of willful defaulter’s list. RBI also releases a
OVERDUE:- list of borrowers with aggregate outstanding of Rs. 1
crore and above against whom banks have filed suits
##Any amount due to the bank under any credit facility is for recovery of their frauds.
‘overdue’ if it is not paid on due date fixed by the bank.
##Reporting of frauds to RBI.
NET NPA:-
##Special mention accounts (SMA) for early identification
##Net NPAs are those type of NPAs in which the bank has of bad debt.
deducted the provision regarding NPAs. Net NPA shows
##Risk assessment and risk management.
the actual burden of banks.
LOK ADALAT
ASSET CLASSIFICATION
##To settle disputes involving account in “doubtful” and
##Sub-Standard Assets- With effect from 31 March “loss” category.
2005,When a NPA remained due for a period less than
##Outstanding balance of Rs.20 lakhs for compromise
or equal to twelve months.
settlement.
##Doubtful Assets-With effect from 31 March 2005,When
##Proved to be quite effective for speedy justice and
substandard remained due for a period of twelve months.
recovery of small loans.
##Loss Assets- A loss asset is one, where the bank or the ##Progress through this channel is expected to pick up in
internal or external auditors or the RBI inspection has the coming years
identified the loss but the amount has not been written
off wholly SARFAESI ACT-2002
##Securitization and Reconstruction of Financial Assets
PROVISIONING NORMS and Enforcement of Securities Interest Act
STANDARD ASSETS:-
##The Act provides three alternative methods for recovery
##General provision of a minimum of 0.40 percent on of non-performing assets, namely: -
standard assets ##Securitization

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##Asset Reconstruction  and winding up of companies. All proceedings under the
##Enforcement of Security without the intervention of Companies Act, including proceedings relating to Arbitration,
the Court. Compromise, arrangements and reconstruction and winding
##SARFAESI Act is not applicable on up of companies shall be disposed of by the National
Company Law Tribunal.
(i) NPA loans with outstanding less than Rs. 1 lakh
The National Company Law Tribunal is the Adjudicating
(ii) NPA loan accounts where the amount is less than
20% of the principal and interest are not eligible to Authority for Insolvency resolution process of Companies
be dealt with under this Act. and Limited Liability Partnerships under the Insolvency and
Bankruptcy Code, 2016.
(iii) Agriculture Lands
Civil court do not have jurisdiction to entertain any suit
ARC (ASSET RECONSTRUCTION
or proceeding the Tribunal or the Appellate Tribunal is
COMPANY)
empowered to determine.
##A company which is set up with the objective of taking
over Distressed assets (NPA) from banks or financial The NCLT has thirteen benches. Justice M.M. Kumar, a
institutions and to Reconstruct or re-pack these assets retired Chief Justice of the Jammu & Kashmir High Court
to make those assets saleable. has been appointed as President of the NCLT. Decisions of
##To buy out troubled loans from banks and make special the NCLT may be appealed to the National Company Law
efforts at Recovering value from the assets, if necessary Appellate Tribunal (NCLAT). The decisions of NCLAT may
by special legislation, with special powers for recovery. be appealed to the Supreme Court of India.
##Restructuring of weak banks to divest the bad loan portfolio. Insolvency and Bankruptcy Board
##India’s first ARC with an initial equity of Rs.10 crore The Insolvency and Bankruptcy Board of India was
with ICICI bank, IDBI and SBI. established on 1st October, 2016 under the Insolvency
##Incorporated as a public limited company on February and Bankruptcy Code, 2016 (Code). It is a key pillar
11, 2002. of the ecosystem responsible for implementation of the
##FDI limit in ARC - 100% Code that consolidates and amends the laws relating to
reorganization and insolvency resolution of corporate
##Minimum network for ARC - 100 cr.
persons, partnership firms and individuals in a time bound
DRT (DEBT RECOVERY TRIBUNAL) manner for maximization of the value of assets of such
persons, to promote entrepreneurship, availability of credit
and balance the interests of all the stakeholders.
It has regulatory oversight over the Insolvency Professionals,
Insolvency Professional Agencies, Insolvency Professional
##
Entities and Information Utilities. It writes and enforces
##To recover their bad Debt quickly and efficiently. rules for processes, namely, corporate insolvency resolution,
##39 Debt Recovery Tribunal and 5 Debt Recovery corporate liquidation, individual insolvency resolution and
Appellate Tribunal individual bankruptcy under the Code.
##It is the special court established by central government for
Public Credit Registry
the purpose of bank or any financial institutions recovery.
##For being appointed as DRT a person should be qualify Public Credit Registry (PCR), created by the Reserve Bank
to be district judge and for being appointed as DRAT, of India, is a digital registry to capture and store financial
the person should qualify to be a judge of the high court. information of borrowers, both existing and new borrowers.
##In this court only the recovery cases of Rs.10 lakhs and The credit registry will collate the borrowing history of both
above can be filed. individuals and corporate borrowers. Borrowers will have
access to their credit information and seek corrections. It was
National Company Law Tribunal
recommended by the committee headed by Y.M. Deosthalee.
The National Company Law Tribunal (NCLT) is a quasi-
judicial body in India that deals with issues relating to The idea behind creating the public registry is to collate the
Indian companies. The NCLT was established under the financial information of individual and corporate borrowers
Companies Act 2013 and was constituted on 1 June 2016 by under one platform, inclusive of financial delinquencies,
the government of India. It is based on the recommendation pending legal suits, and wilful defaulters. The objective is to
of the justice Eradi committee on law relating to insolvency strengthen the credit culture of the Indian economy.
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##It was the very first attempt to introduce the concept of
CAPITAL ADEQUACY RATIO
minimum standards of capital adequacy. Then the second
accord by the name Basel Accord II was established in
1999 with a final directive in 2003 for implementation
by 2006 as Basel II Norms.
##This has been fully implemented under the guidelines of
the Reserve Bank of India from 1 April, 2009.
Capital adequacy ratio or CAR or CRAR is a ratio of the
FEATURES OF BASEL II NORMS
banks capital funds to risk weighted assets which has to be
maintained to buffer the risk to the bank from its risk assets. Basel II Norms are considered as the reformed & refined
form of Basel I Accord. The Basel II Norms primarily stress
Tier 1 capital = core capital (paid up capital+ preferential
on 3 factors, i.e. Capital Adequacy, Supervisory Review and
share) + profit carry forward+ reserve from sale of assets etc…
Market discipline. The Basel Committee calls these factors
Tier2 capital = subordinated term debt + General loss reserve + as the Three Pillars to manage risks.
adjustment + undisclosed reserve (this is not for Indian Bank).
BASEL III NORMS
BASEL NORMS ##Basel III capital regulation is started from 1st Jan, 2013
& it will be fully implemented by March 31, 2018.The
draft guidelines prescribe minimum capital requirements
and also capital conservation buffer.
##CORE capital (paid up capital + preferential shares
should be 5.5% of risk Weighted Assets........ (1)
##Total tier 1 capital should be 7% of risk weighted
## Assets…...(2)
##The Basel Committee on Banking Supervision provides ##Total capital should be 9% of RWA…. (3)
a forum for regular cooperation on banking supervisory CAPITAL CONSERVATION BUFFER
matters worldwide.
##The CCB in the form of common equity of 2.5% of RWA.
##The Committee’s Secretariat is located at the Bank for
##A minimum capital Adequacy Ratio for bank will be
International Settlements (BIS) in Basel, Switzerland.
11.5% after full application of the capital conservation
Basel is a city of Switzerland
buffer by 31st march 2020.
NEED FOR SUCH NORMS (BASEL-I) ##CCB requirement is proposed to be implemented
##The first accord by the name .Basel Accord I. was between 31st march, 2014 To March 31st, 2020.
established in 1988 and was implemented by 1992.
Domestic Systemically Important Banks (D-SIBs)
SBI, ICICI Bank and HDFC Bank, continue to be identified as Domestic Systemically Important Banks (DSIBs), under the
same bucketing structure as last year. The additional Common Equity Tier 1 (CET1) requirement for D-SIBs has already been
phased-in from April 1, 2016 and will become fully effective from April 1, 2019. The additional CET1 requirement will be in
addition to the capital conservation buffer.
Bucket Banks Additional Common Equity Tier Additional Common Equity Tier 1
1 requirement as a percentage of requirement applicable form April 1,
risk weighted Assets (RWAs) for 2019 (as per phase-in arrangement)
FY 2018-19

5 - 0.75% 0.1%

4 - 0.60% 0.80%

3 State Bank of India 0.45% 0.60%

2 - 0.30% 0.40%

1 ICICI Bank & HDFC Bank 0.15% 0.20%

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The higher capital requirements are applicable from April 1, 2016 in a phased manner and will become fully effective from
April 1, 2019. The additional common equity requirement for different buckets over the four year phase-in period is as under:

Bucket April 1, 2016 April 1, 2017 April 1, 2018 April 1, 2019

5 0.25% 0.50% 0.75% 1.00%

4 0.20% 0.40% 0.60% 0.80%

3 0.15% 0.30% 0.45% 0.60%

2 0.10% 0.20% 0.30% 0.40%

1 0.05% 0.10% 0.15% 0.20%

Prompt Corrective action (PCA)

##PCA applicable on All Scheduled Commercial Banks (Excluding Regional Rural Banks)
##PCA framework was effective from April 1, 2017 based on the financials of the banks for the year ended March 31, 2017.
##The framework would be reviewed after three years.
PCA Framework for Banks
A. Capital, asset quality and profitability continue to be the key areas for monitoring.
B. Indicators to be tracked for Capital, asset quality and profitability would be CRAR/ Common Equity Tier I ratio, Net
NPA ratio and Return on Assets respectively.
C. Leverage would be monitored additionally as part of the PCA framework.
PCA matrix - Areas, indicators and risk thresholds
Indicator Risk Threshold 1 Risk Threshold 2 Risk Threshold 3
Area
Capital CRAR- Minimum upto 250 bps below more than 250 bps -
(Breach of either regulatory prescription Indicator but not exceeding -
CRAR or CET 1 for capital to risk assets <10.25% but 400 bps below In excess of 312.50 bps
ratio to trigger PCA) ratio + applicable capital >=7.75% Indicator <7.75% below Indicator
conservation buffer(CCB) upto 162.50 bps but >=6.25%
current minimum RBI <3.625%
below Indicator
prescription of 10.25% more than 162.50
(9% minimum total capital <6.75% but >=
5.125% bps below but not
plus 1.25%* of CCB as on exceeding 312.50
March 31, 2017) bps below Indicator
And/ Or
Regulatory pre-specified <5.125% but
trigger of Common >=3.625%
Equity Tier 1 (CET 1min)
+ applicable capital
conservation buffer(CCB)
current minimum RBI
prescription of 6.75%
(5.5% plus 1.25%* of CCB
as on March 31, 2017)
Breach of either CRAR or
CET 1 ratio to trigger PCA

Asset Quality Net Non-performing >=6.0% but <9.0% >=9.0% but < >=12.0%
advances (NNPA) ratio 12.0%

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Profitability Return on assets (ROA) Negative ROA for Negative ROA for Negative ROA for four
two consecutive three consecutive consecutive years
years years
Leverage Tier 1 Leverage ratio4 <=4.0% but > = 3.5% < 3.5% (leverage is
(leverage is over over 28.6 times the
25 times the Tier 1 Tier 1 capital)
capital)

*CCB would be 1.875% and 2.5% as on March 31, 2018 and March 31, 2019 respectively.
{{ Breach of ‘Risk Threshold 3’ of CET1 by a bank would identify a bank as a likely candidate for resolution through
tools like amalgamation, reconstruction, winding up, etc.
{{ In the case of a default on the part of a bank in meeting the obligations to its depositors, possible resolution processes
may be resorted to without reference to the PCA matrix.
Mandatory and Discretionary Actions
Specifications Mandatory Actions Discretionary Actions
Risk Threshold 1 Restriction on dividend distribution/ remittance of profits. Special Supervisory Interactions
Promoters/owners/parent in the case of foreign banks to bring Strategy related
in capital Governance related
Capital related
Risk Threshold 2 Restriction on branch expansion : domestic and/or overseas Credit risk related
Higher provisions as part of the coverage regime Market risk related
Risk Threshold 3 Restriction on branch expansion; domestic and/or overseas HR related
Profitability related
Restriction on management compensation and director’s fees,
Operations related
as applicable
Any other
CAMELS RATING
In India RBI inspect all the banks through CAMELS rating.
C – CAPITAL ADEQUACY A – ASSETS QUALITY M – MANAGEMENT
E – EARNING L – LIQUIDITY S – SENSTIVITY TO MARKET RISK
But due to BASEL 3rd Norms CAMELS POLICY is being closed & in place of that INROADS policy is going to be introduced.
INROADS-INDIAN RISK ORIENTED AND DYNAMIC RATING SYSTEM
RISK MATRIX
1. CREDIT RISK 2. MARKET RISK 3. INTREST RATE RISK 4. LIQUIDITY RISK
5. BUSSINESS RISK 6. OPERATIONAL RISK 7. LEGAL RISK 8. FOREX RISK

NOTES

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NON PERFORMING ASSETS AND BASEL NORMS
1. SARFAESI Act not applicable in ———
(1) House property (2) machinery (3) agricultural land (4) KVP (5) None of these
2. When NPA considered in case of long duration crops——
(1) 4 crop season (2) 2 crop season (3) 3 crop season (4) 1crop season (5) None of these
3. In PCR, ‘P’ Stands for ———
(1) Payment (2) Provident (3) Provision (4) None of these (5) All of these
4. NPA implemented under the recommendation of which committee—
(1) Shivraman committee (2) Narshimham committee (3) K P committee
(4) None of these (5) All of these
5. In CCCB , ‘B’ Stands for ———
(1) Bottom (2) Button (3) Butter (4) Buffer (5) None of these
6. SARFAESI Act was passed in the year—————
(1) 2005 (2) 2013 (3) 2002 (4) 2001 (5) 2012
7. When outstanding balance is more than drawing power and the account become out of order is known as ————
(1) hold on account (2) dormant account (3) irregular account
(4) demat account (5) None of these
8. when NPA considered in case of short duration crops————
(1) 1crop season (2) 2crop season (3) 3 crop season (4) 4crop season (5) None of these
9. When RBI started implementation of NPA guidelines ————
(1)1990 (2) 1991 (3)1992 (4) 1995 (5) None of these
10. under asset classification of NPA accounts above one year but upto three year assets due known as ———
(1) substandard asset (2) standard assets (3) doubtful asset
(4) bad debts (5) Loss assets
11. In terms of circular dated 1.07.2013 a provisioning coverage ratio on gross NPA is prescribed by RBI is ———
(1)100% (2) 90% (3) 70% (4) 40% (5) None of these
12. what is the provisioning percentage of standard assets ————
(1) 0.10% (2) 0.20% (3) 0.40% (4) 0.60% (5) None of these
13. If anyone fail to meet its payment obligations to the lender even when it has capacity to honor the obligations is
known as ————
(1) Drawer (2) Drawee (3) Wilful Defaulter (4) Spot Defaulter (5) None of these
14. which committee recommended wilful loan defaulter————
(1) Narsimham committee (2) Shivraman committee (3) S.S.Kohli committee
(4) P.K Nayak committee (5) None of these
15. NPA under D3 category (beyond 3 years), how much provision should be maintained;
(1) 100% provision both on secured and unsecured portion
(2) 40% provision on secured and 100% on unsecured portion
(3) 25% provision on secured and 40% on unsecured portion
(4) 15% provision on secured and 25% on unsecured portion
(5) None of these
16. When bank ensure that bank maintain a buffer of capital that can be used to absorb losses during economic stress
is known as —
(1) Conservation Buffer (2) Surplus (3) Profit
(4) Surcharge (5) None of these
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17. In BCBS , ‘s’ stands for ———
(1) support (2) Stop (3) supervision (4) standard (5) None of these
18. In which year Basel III implementation started ?
(1) 1st April 2010 (2) 1st April 2013 (3) 1st April 2014 (4) 1st April 2015 (5) None of these
19. When RBI supervise Basel implementation bank wise is known as ?
(1) ICAAP (2) SRDP (3) SREP (4) SRAP (5) None of these
20. When BASEL III will be fully implemented ?
(1) March 2017 (2) March 2018 (3) March 2019 (4) March 2020 (5) None of these
21. Which of the following can purchase NPA?
(1) ARC (2) Banks (3) Financial Institutions (4) NBFC (5) All of the above
22. Core capital is also known as ——
(1) Tier I capital (2) Tier II capital (3) Tier III capital (4) Tier IV capital (5) None of these
23. Which committee is related to NPA?
(1) Khanna Committee (2) L K Jha Committee (3) Mahalanobis Committee
(4) C. Rao Committee (5) None of the above
24. What is a method for calculating and controlling exposure to market risk——
(1) value at risk (2) Risk cover (3) stop loss (4) lose cover risk (5) None of these
25. The business activities of a bank that generally do not involve booking assets (loans) and taking deposits are
called———
(1) ALM (2) Bad loan exposure (3) off balance sheet exposure
(4) NPA (5) None of these
26. In ICAAP, assessment process organized by—
(1) RBI (2) Bank itself (3) CIBIL (4) SIDBI (5) None of these
27. Main motive of Basel accord is——
(1) increase Risk weighted assets (2) Decrease portfolio income
(3) increase Risk tolerance level (4) decrease in portfolio income
(5) None of these
28. Which department setup by RBI to collect, store, and disseminate credit data to banks on credit exposures of Rs.
5 crore and above——
(1) CRILC (2) CIBIL (3) CRISIL (4) ICRA (5) None of these
29. Which of the following statement is correct in the context of NPA account?
(1) The interest cannot be debited to the account even if it has been recovered
(2) If interest has been debited during the year but not recovered and account has become NPA at the end of the
year interest can be taken to income
(3) In case of government guaranteed account interest can be taking to income when not recovered
(4) Interest cannot be debited to account and credited to profit and loss account till it is recovered
(5) None of these
30. What is the minimum investment in Security Receipts for ARC which was earlier 5%?
(1) 10% (2) 15% (3) 20% (4) 25% (5) None of these
ANSWER KEY
1.(3) 2.(4) 3.(3) 4.(2) 5.(4) 6.(3) 7.(3) 8.(2) 9.(3) 10.(3)
11.(3) 12.(3) 13.(3) 14.(1) 15.(3) 16.(1) 17.(3) 18.(2) 19.(3) 20.(3)
21.(2) 22.(1) 23.(2) 24.(1) 25.(3) 26.(2) 27.(3) 28.(1) 29.(1) 30.(2)

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INFLATION

##STAGES OF INFLATION
##CAUSES OF INFLATION
##Impact of Inflation and Deflation on Economy
##Measurement of Inflation in India
##CORE INFLATION
##INFLATION RELATED TERMS
##Question & Answer

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CHAPTER

4 INFLATION
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But this cannot go on forever because the limit is set

DEFINITION
by full employment ceiling, after which the prices
Inflation is defined as a sustained increase in the general level start rising and moderate inflation starts assuming the
of prices for goods and services. It is measured as an annual nature of hyper-inflation which, in turn, has disastrous
percentage increase. As inflation rises, every rupee you own consequences on production.
buys a smaller percentage of a good or service.
It distorts the smooth functioning of price mechanism,
The value of a rupee does not stay constant when there hinders capital formation, stimulates speculative
is inflation. The value of a rupee is observed in terms of activities and hoarding, leads to misallocation of
purchasing power, which is the real, tangible goods that productive resources.
money can buy. When inflation goes up, there is a decline in
In short, inflation invites business to seek profits
the purchasing power of money. For example, if the inflation
via manipulation of markets rather than via efficient
rate is 2% annually, then theoretically a Re 1 pack of gum
production.
will cost Rs 1.02 in a year. After inflation, your money can’t
buy the same amount of goods it could beforehand. 2. Effects on Distribution:
STAGES OF INFLATION Inflation has the effect of redistributing income because
prices of all factors do not rise in the same proportion.
##Creeping inflation(0-3%) Entrepreneurs stand to gain more than wage earners
##Trotting inflation (Walking And Running Inflation) or fixed income groups. Speculators, hoarders, black
(3%-10%) marketers and smugglers stand to gain on account of
##Galloping inflation(10%-20%) windfall profits.

##Hyper inflation(20% and above) Changes in the value of money also result in the
redistribution of wealth partly because during inflation
##Note- Percentage values are only approximate. Data may there is no uniform rise in prices and partly because debts
vary. are expressed in terms of money. Inflation is a kind of
CAUSES OF INFLATION hidden tax, steeply regressive in character and in effects.
This redistribution of wealth as a result of inflation puts
Demand Pull inflation (Wage Pull Inflation)- This is the more burden on those groups of the economy which are
typical situation in which demand is more and supply is less least able to bear it.
(commonly referred to as the “demand-pull” occurrence, or
“excess demand inflation”). When wage inflation occurs, the 3. Debtors and Creditors:
prices for the product or service increase, thus leading into Debtors borrow from creditors to pay the latter along
the situation known as demand-pull inflation. An example with the rate of interest at some future date. Changes in
of this would be the dramatic changes in the economy the price level affect them differently at different times.
during war. During inflation when the prices rise (and the real value
Cost-Push Inflation - When an increase of price occurs in of money goes down), the debtors pay back less in real
regard to the product or maintenance of a service or product, terms than what they had borrowed, and thus, to that
the expected increase in price is the resultant effect. For an extent they are gainers. On the other hand, the creditors
example, if a car manufacturer paid more for a vital part of get less in terms of goods and services than what they had
an engine, the labour cost would decrease to counter the lent and stand to lose to that extent. During the period of
new price. deflation, however, when prices fall (and the real value
of money rises), creditors stand to gain and debtors lose.
Impact of Inflation and Deflation on Economy
4. The Entrepreneurs:
1. Effects on Production:
When prices rise, producers, traders speculators and
Keynes felt that as long as there were unemployed entrepreneurs stand to gain on account of windfall profits
resources in the economy a moderate or a mild dose of because prices rise at a faster rate than cost of production,
inflation might be in order; because this would lead to besides, there is time-lag between the two. Moreover, they
waves of optimism inducing businessmen to invest more. gain because the prices of their inventories (stock) go up.

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Again, they generally being borrowers of money for periods of rising prices as their incomes remain fixed.
business purposes, stand to gain. On the other hand, Kemmerer remarked: “The middle class, however, which
falling prices heavily reduce the profits on account of by hard work and thrift has built up a fund of saving to
the fact that wages fail to fall along with the fall in the educate its children and to provide a livelihood for times
prices. Entrepreneurs, therefore, react to it by curtailing of sickness and for old age, finds itself in a desperate
the volume of production and hence employment goes situation in a time of serious inflation.” During deflation,
down generating a full-fledged depression. however, middle class is able to get some relief on
5. Investors: account of falling prices and rising value of money.

Different kinds of investors are affected differently by 9. Government:

inflation and deflation. One can invest in bonds and In a mixed economy, the public sector is affected by
debentures which yield a fixed rate of interest income or fluctuations in price level. As prices rise, the government
one can invest in real estate or equities (shares) whose has to spend more on goods and services including raw
returns (dividends) rise and fall with profits earned by materials for carrying through their project. Estimates
the companies concerned. When prices rise, the returns are revised and taxes are raised. On the other hand, when
on equities go up on account of the rise in profits, while prices fall, the government sector or the public sector
the bonds and debenture-holders gain nothing as their has to incur less costs.
incomes remain fixed. 10. Public Moral:
On the other hand, equity-holders will lose during Inflation results in arbitrary redistribution of wealth
depression on account of a fall in the price level, while favoring businessmen and debtors and hurting
the debenture- and bond-holders gain. To the extent consumers, creditors, petty shopkeepers, small investors
investors are able to diversify their investment, they can and fixed income earners. This lowers the public moral.
protect themselves from the effects of the fluctuation in The ethical standards and the public moral had fallen to
prices. miserably low levels during the period of hyper-inflation
6. Farmers: in Germany.
Farmers gain during inflation. The prices of farm Measurement of Inflation in India
products go up and the cost incurred by them (like
Inflation in India is measured through two major indices
interest and taxes) either remain constant or do not
namely Consumer Price Index (CPI) and Wholesale Price
increase much, at any rate i.e., costs lag behind prices
Index (WPI). The most important index is All India CPI
received by the farmers. In India, during war and post-
by CSO. Labour Bureau prepares three CPIs for specific
war period, farmers were able to pay-off their old debts
occupational groups. WPI is prepared by Office of Economic
on account of high prices of their products because of
Affairs, Ministry of Commerce and Industry.
inflation. Moreover, farmers are generally debtors and
have to pay less in real terms, while the land revenue The WPI, where prices are quoted from wholesalers, is
and taxes etc., do not rise much. Thus, farmers stand to constructed by Office of Economic Affairs, Ministry of
gain during periods of inflation. Commerce and Industries. In the case of CPI (prices quoted
from retailers), there are several indices to measure it: CPI
7. Wage Earners:
for industrial labourers (CPI-IL), agricultural labourers (CPI-
Wage-earners generally suffer during inflation, despite AL) and rural labourers (CPI-RL) besides an all India CPI.
the fact that they obtain a wage rise according to a rise in
In addition, Gross Domestic Product (GDP) deflator and
the cost of living index. However, wages do not rise as
Private Final Consumption Expenditure (PFCE) deflator from
much as the rise in prices of those commodities, which
the National Accounts Statistics (NAS) provide an implicit
the workers consume. Further, there is a lag between a
economy-wide inflation estimate.
rise in the price level and a rise in wages. If the workers
are organized, they may not suffer much during inflation Consumer Price Index
but if they are unorganized like the agricultural labourers, Two Ministries – Ministry of Statistics and Programme
they may suffer more, as they may not find it easy to Implementation (MOSPI) and Ministry of Labour and
get their wages increased. Similarly, in deflation the real Employment (MOLE) are engaged in the construction of
value of the money wages received by them increases different CPIs for different groups/sectors. CPI inflation is
and they may gain a little. also called as retail inflation as the prices are quoted from
8. Middle Class and Salaried Persons: retailers. Following are the various CPIs.
The hardest hit are the persons who receive fixed (a) CPI for all India or CPI combined.
incomes, usually called the middle class. Persons who (b) CPI for Agricultural Labourers (AL)
live on past savings, fixed interest or rent, pensioners,
government employees, teachers etc., suffer during (c) CPI for Rural Labourers (RL); and

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(d) CPI for Industrial Workers (IW) (ii) CPIs by MOLE (Labour Bureau)
(i) CPI by MOSPI (CSO) The Labour Bureau, Ministry of Labour and Employment
The CSO, which comes under MOSPI, is constructing the (MOLE) is preparing different indices for various categories
rural, urban and the combined CPIs. They are published of people. These were CPI for Rural Labourers (CPI-RL), CPI
from 2011 onwards. Of these, the CPI combined is the most for Agricultural Labourers (CPI-AL) and CPI for Industrial
important of all the CPIs as it is relevant for all categories Workers (CPI-IW). There was a CPI for Urban Non-Manual
of people. Employees (CPI-UME), but it was discontinued from April
2010.
In April 2014, the RBI has selected the all India CPI (of CSO)
as the inflation index to target inflation under its new inflation Since these CPIs were for specific categories of workers, it
targeting monetary policy framework. RBI’s decision has lacked the quality of an all India index.
made the CPI as the prime inflation index.
Different price indices in India
Index Agency Base Year
WPI Office of Economic Affairs, Ministry of Commerce and Industries (MOCI) 2011-12
CPI All India, CPI -Urban and Rural CSO, Ministry of Statistics and Programme 2012
Implementation (MOSPI)
CPI-AL Labour Bureau, Ministry of Labour and Employment (MOLE) 1986-87
CPI-RL 1986-87
CPI-IW 2001

On the other hand, the first three indices are for specific
Core Inflation
occupational categories. The CPI compiled and released at
national level by MOLE reflect fluctuations in retail prices Another way to analyse inflation data is by looking at “core
relating to specific segments of population in the country inflation,” which is generally a chosen measure of inflation
like industrial Workers (CPI-IW), agricultural laborers that excludes the more volatile categories like food and
(CPI-AL) and rural labourers (CPI-RL). energy prices. The main argument here is that the central
What is the difference between the various CPIs? bank should effectively be responding to the movements in
permanent component of the price level rather than temporary
Difference between the various CPIs is not just that they
measure price level changes for different sectors or groups. deviations.
In addition to such a sector specific price level measurement; Since core inflation is derived from the headline, it reflects
these indices differ in terms of their geographical coverage, the weaknesses in the primary measure of inflation.
commodities included, weights assigned to the different
commodity groups and the base year on the basis of which In Indian context, the derivation of core inflation by exclusion
price level changes are compared. of food and energy from CPI/WPI discards a substantial
portion of the commodity basket. So the price movement of
The Wholesale Price Index (WPI)
the remaining commodities may not be representative of the
The WPI is published by the Office of Economic Adviser, underlying inflationary trend.
Ministry of Commerce and Industry. It is in use since 1942
and is being published from 1947 regularly. It has a long IIP (Index of Industrial Production)
history for serving as the nationwide inflation indicator till
IIP is and index for India whiich details ot the growth of
the emergence of the combined CPI in 2011. An important
various sector in an economy such as mineral, mining,
feature of the WPI which separate it from the CPI is that
prices are collected from wholesalers. electricty and manufacturing. A high level panel had firmed
up the methodology for the IIP with new base year of 2011-
The new WPI series aimes at capturing the price movement
12. The statistics ministry has proposed the new base year
in a more realistic way in keeping with the times. The basic
for IIP as 2017-2018.
difference between the two series is that the new WPI
index with 2011-12 as the base year has a total of 697 items The new IIP series has total of 809 items occuring in the
including 117 items for primary articles 16 items for fuel and manufactring sector in the item basket (405 item group),
power and 564 items for manufacturing products. The prices where 149 new itmes have been added and 124 items have
tracked are ex-factory price for manufactured productes, been deleted from the 2004-05 series. The earlier series
mandi price for agri commodities and ex-mines prices for had 620 itemes (397 itmes groups) in the manufactring
minerals weights given to each commodity covered in the
sector.
WPI.

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considered an acceptable antidote to high inflation, reflation
Inflation Related Terms
is considered to be an antidote to deflation (which, unlike
Deflation inflation, is considered bad regardless how high it is).
A general decline in prices, often caused by a reduction Recession
in the supply of money or credit. Deflation can be caused When there is a negative growth in the GDP for two
also by a decrease in government, personal or investment consequtive quarters in a financial year, the condition is
spending. The opposite of inflation, deflation has the side known as recession.
effect of increased unemployment since there is a lower
level of demand in the economy, which can lead to an Agflation
economic depression. Central banks attempt to stop severe An increase in the price of food that occurs as a result of
deflation, along with severe inflation, in an attempt to keep increased demand from human consumption and use as an
the excessive drop in prices to a minimum. alternative energy resource. While the competitive nature of
Hyperinflation retail supermarkets allows some of the effects of agflation
to be absorbed, the price increases that agflation causes
Extremely rapid or out of control inflation. There is no precise are largely passed on to the end consumer. The term is
numerical definition to hyperinflation. Hyperinflation is a derived from a combination of the words “agriculture” and
situation where the price increases are so out of control that “inflation”.
the concept of inflation is meaningless.
Inflation, Interest Rate and RBI
Stagflation
If the interest rate is low then loan will be cheap. It gives
A condition of slow economic growth and relatively high more borrowing power in the hands of consumers. With low
unemployment - a time of stagnation - accompanied by a cost loans easily available, the consumers spend more due
rise in prices, or inflation. to which the economy grows and naturally creating more
Disinflation inflation. If the RBI feels that the economy is growing very
A slowing in the rate of price inflation. Disinflation is used fast, and the gap between demand and supply may increase
to describe instances when the inflation rate has reduced to a greater extent, then it will increase the interest rates.
marginally over the short term. It is used to describe periods Increase in interest rate means costly loans. It gives less
of slowing inflation. borrowing power in the hands of consumers. This will lower
the amount of cash entering the economy.
Reflation
It’s the RBI’s responsibility to check and monitor inflation via
Reflation is the act of stimulating the economy by increasing indicators like the Wholesale Price Index (WPI), Consumer
the money supply or by reducing taxes. It is the opposite Price Index (CPI) and the Producer Price Indexes (PPI), to
of disinflation. It can refer to an economic policy whereby take best decision to keep the economy in balance. There must
a government uses fiscal or monetary stimulus in order to be enough economic growth to increase wages and decrease
expand a country’s output. This can possibly be achieved unemployment, but not too much growth that it leads to very
by methods that include reducing tax, changing the money high inflation. The target of inflation rate must be between
supply, or even adjusting interest rates. Just as disinflation is two and three percent per year.

NOTES

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INFLATION
1. What is/are the possible cause of inflation?
(i) Growth in population. (ii) Rise in unemployment. (iii) Increasing Urbanization.
(1) Only option i is correct. (2) Only option ii is correct. (3) Only option iii is correct.
(4) All of these (5) None of these
2. What is/are the possible cause of demand-pull inflation?
(A) An increase in costs of goods and services. (B) A reduction in the interest rates leading to lower EMIs.
(C) An increase in government spending.
(1) Only option A is correct. (2) Only option A & B are correct.
(3) Only option B & C are correct. (4) All of these
(5) None of these
3. Which of the following is one of the effect of Inflation?
(1) Reduction in the purchasing power of money. (2) It reduces the cost of living.
(3) It enhances the standard of living. (4) Reduces the price of products.
(5) None of these
4. The Phillips curve shows the relationship between inflation and ________?
(1) Poverty. (2) Purchasing power. (3) Unemployment
(4) Growth domestic product. (5) None of these
5. Which of the following is a reason for deflation?
(1) Surplus budgeting. (2) Growth in GDP (3) High interest rates.
(4) All the above (5) None of these
6. Which of the following is an effect of deflation?
(1) An increase in the purchasing power of money. (2) A decrease in the price of goods and services.
(3) Decrease in the gross domestic product of a country. (4) All the above
(5) None of these
7. Which of the following measures can be undertaken to control inflation?
(A) Control on public expenditure (B) Control on hoarding and black marketing
(C) Restrictive credit policy.
(1) Options A & B is correct. (2) Options B & C is correct. (3) Options A & C is correct.
(4) Options A, B & C is correct. (5) None of these
8. Which of the following measures can be undertaken to control deflation?
(A) Increase in the government spending. (B) Decreasing interest rates.
(C) Suspending government employees.
(1) Options A & B is correct. (2) Options B & C is correct. (3) Options A & C is correct.
(4) Options A, B & C is correct. (5) None of these
9. Which of the following statement is true about wholesale price index?
(A) It consist of 697 items in total. (B) Manufactured item has maximum weightage
(C) Its base year was revised to 2011-12 from 2004-05.
(1) Options A & B is correct. (2) Options B & C is correct. (3) Options A & C is correct.
(4) Options A, B & C is correct. (5) None of these
10. Which of the following products/articles holds maximum weightage in WPI?
(1) Primary articles. (2) Fuel items. (3) Manufactured items.
(4) Equal weightage (5) None of these
11. Who among the following benefits the most from inflation?
(1) Creditor (2) Debtor (3) Wage employee (4) All of these (5) None of these
12. Compiling and releasing monthly Wholesale Price Indices is done by:
(1) The Office of the Economic Adviser (Ministry of Commerce & Industry).

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(2) Ministry of Statistics and Programme Implementation
(3) Central Statistical Office
(4) All of these
(5) None of these
13. What is the most powerful tool used by the Reserve Bank of India to control inflation?
(1) Increasing policy rates. (2) Decreasing policy rates.
(3) Decreasing government expenditure (4) Increasing the tax structure
(5) None of these
14. A condition in which both inflation and recession exists is known as:
(1) Stagnation (2) Stagflation (3) Walking inflation (4) Deflation (5) None of the above
15. Which one of the following is ‘most vulnerable’ to evil effects of inflation?
(1) A salaried employee (2) An agricultural farmers
(3) A person who have borrowed money from bank. (4) College student.
(5) None of these
16. The process to correct inflation is:
(1) Stagnation (2) Stagflation (3) Deflation (4) Disinflation (5) None of the above
17. Which of the following statement is true regarding Deficit Financing:
(A) Deficit financing is a method of meeting government deficits through the creation of new money.
(B) The deficit is the gap caused by the excess of government expenditure over its receipts.
(C) Deficit financing provides the government resources for the plans.
(D) It has been replaces by ‘Ways and Means Advances’ from April 1997.
(1) All options except D is true (2) All options except (A), (B) & (C) is true
(3) All options except C is true (4) All options except (B) is true
(5) All options are true
18. Which of the following is not the stage of inflation?
(1) Hyper-Inflation (2) Walking Inflation (3) Depression
(4) Creeping Inflation (5) None of these
19. A continuous fall in the GDP for two consecutive quarter is defined as:
(1) Recession (2) Depression (3) Prosperity (4) Recovery (5) None of these
20. A phase in the economy characterized by continuous increase in GDP after an era of negative growth is termed as:
(1) Recession (2) Depression (3) Prosperity (4) Recovery (5) None of these
21. A phase in the economy characterized by continuous fall the in GDP leading to negative growth is termed as:
(1) Recession (2) Depression (3) Prosperity (4) Recovery (5) None of these
22. Which of the following economy has faced hyper-inflation?
(1) Japan (2) Venezuela (3) Germany (4) All of these (5) None of these
23. In order to negate the evil effects of Inflation one must invest in:
(1) Bonds (2) Equity (3) Saving account (4) Current Account (5) None of these
24. Which of the following statement is true:
(1) Inflation is inversely related to decreasing money supply.
(2) Deflation is inversely related to decreasing money supply.
(3) Reflation is related to decreasing in money supply.
(4) Disinflation is related to increasing in money supply.
(5) None of these
ANSWER KEY
1.(4) 2.(3) 3.(1) 4.(3) 5.(3) 6.(4) 7.(4) 8.(1) 9.(4) 10.(3)
11.(2) 12.(1) 13.(1) 14.(2) 15.(2) 16.(4) 17.(5) 18.(3) 19.(1) 20.(4)
21.(2) 22.(4) 23.(2) 24.(2)
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National Income

##SOURCES OF INCOME
##Methods of calculating National Income
##Measures of National Income
##Various Method for calculating National Income
##TYPE OF GOODS
##DEPRECIATION
##HISTORY OF STATISTICAL SYSTEM IN INDIA
##NATIONAL SAMPLE SURVEY ORGANISATION (NSSO)
##Question & Answer

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CHAPTER
National
5 Income
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By adding the money sent by the Indian citizens from abroad

Definition
to the income of the various factors of production, we get the
J.M.Keynes, a famous economist defined national income gross national income.
as follows -
GDP = Rent + Wage + Interest +Profit + Income from abroad
“National Income is the money value of all goods and services
This method will help us to know the contributions made
produced in a country during a year”.
by different agents like landlords, labourers, capitalists and
Sources Of Income organizers to national income.
It is not that countries which are endowed with a bounty of Expenditure Method
natural wealth- minerals or forests or the most fertile lands National income can also be calculated by adding up the
- are naturally the richest countries. In fact the resource rich expenditure incurred for goods and services. Government as
Africa and Latin America have some of the poorest countries well as private individuals spend money for consumption and
in the world, whereas many prosperous countries have production purposes. The sum total of expenditure incurred
scarcely any natural wealth. in a country during a year will be equal to national income.
There was a time when possession of natural resources was GDP = Individual Expenditure + Government Expenditure
the most important consideration but even then the resource
had to be transformed through a production process. The This method will help us to identify the expenditure incurred
economic wealth, or well-being, of a country thus does not by different agents.
necessarily depend on the mere possession of resources; Any one of the above methods can be used for calculating
the point is how these resources are used in generating a national income.
flow of production and how, as a consequence, income and
Production method = Income method = Expenditure
wealth are generated from that process. People combine
method
their energy with natural and manmade environment within
a certain social and technological structure to generate a flow Measures of National Income
of production. Gross Domestic Product (GDP)
Methods of calculating National Income GDP is the total money value of all final goods and services,
Production Method produced with in the geographical boundary of the country
during a financial year.
This method is based on the total production of a country
during a year. First of all production units are classified into SOME MACRO ECONOMIC IDENTITIES
primary, secondary and tertiary sectors then we identify the Gross Domestic Product measures the aggregate production
various units that come under these sectors. We estimate the of final goods and services taking place within the domestic
goods and services produced in each of these sectors. The economy during a year.
sum total of products produced in these three sectors is the
GDP = Value of all services produced within the country
total output of the nation. The next step is to find out the
+ value of all goods produced within the country.
value of these products in terms of money. The money sent
by Indian citizens working abroad is also added to this. Now Gross National Product (GNP)
we get the gross national income. But the whole of it may not accrue to the citizens of the
GDP = Money value of final goods and services + Income country. For example, a citizen of India working in United
from abroad States may be earning her wage and it will be included
in the United States GDP. But legally speaking, she is an
Income Method
Indian. When we try to compensate this, in order to maintain
Factors of production together produce output and income. symmetry, we must deduct the earnings of the foreigners who
The income received by the factors of production during a are working within our domestic economy, or the payments
year can be obtained by adding rent to land, wages to labour, to the factors of production owned by the foreigners. For
interest to capital and profit to organisations. This will be example, the profits earned by the Korean-owned Hyundai
equal to the income of the nation. In other words, total income car factory will have to be subtracted from the GDP of India.
is equal to the reward given to various factors of production. The macroeconomic variable which takes into account
44 GeneraL Awareness
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such additions and subtractions is known as Gross National taxes (Net indirect taxes = Indirect taxes- Subsidies)
Product (GNP). It is,therefore, defined as follows Personal Income (PI) = NI - Undistributed profits - Net
GNP=GDP + Factor income earned by the domestic interest payments made by households - Corporate
factors of production employed in the rest of the world tax + Transfer payments to the households from the
- Factor income earned by the factors of production of government and firms.
the rest of the world employed in the domestic economy. However, even PI is not the income over which the
Various Method for calculating National households have complete say. They have to pay taxes from
Income PI. If we deduct the Personal Tax Payments (for example
income tax), and Non-tax Payments (such as fines) from
PI, we obtain what is known as the Personal Disposable
Income. Thus
Personal Disposable Income (PDI) = PI - Personal tax
payments - Non-tax payments.
Personal Disposable Income is the part of the aggregate
income which belongs to the households. They may decide
to consume a part of it, and save the rest.
Type Of Goods
Final Goods
An item that is meant for final use and will not pass
through any more stages of production or transformations,
for example an article of clothing which is ready to be sold
finally to the consumers for final use. Such a good is called
a final good.
Final goods may be of two types consumption goods and
(+)

capital goods. we can distinguish between Goods like food,

and clothing, and services like recreation that are consumed
when purchased by their ultimate consumers are called
Hence, GNP=GDP + Net factor income from abroad consumption goods or consumer goods. (This also includes
services which are consumed but for convenience we may
We have already noted that a part of the capital gets consumed refer to them as consumer goods.)Then there are other goods
during the year due to wear and tear. This wear and tear is that are of durable character which are used in the production
called depreciation. Naturally, depreciation does not become process. These are tools, implements and machines. While
part of anybody’s income. If we deduct depreciation from they make production of other commodities feasible, they
GNP the measure of aggregate income that we obtain is called themselves don’t get transformed in the production process.
Net National Product (NNP). Thus, They are also final goods yet they are not final goods to be
NNP=GNP - Depreciation ultimately consumed.
It is to be noted that all these variables are evaluated at market Intermediate Goods
prices. Through the expression given above, we get the value All the final goods and services produced in an economy in
of NNP evaluated at market prices. But market price includes a given period of time are either in the form of consumption
indirect taxes. When indirect taxes are imposed on goods goods (both durable and non-durable) or capital goods. As
and services, their prices go up. Indirect taxes accrue to the final goods they do not undergo any further transformation
government. We have to deduct them from NNP evaluated in the economic process. Of the total production taking place
at market prices in order to calculate that part of NNP which in the economy a large number of products don’t end up in
actually accrues to the factors of production. Similarly, there final consumption and are not capital goods either. Such
may be subsidies granted by the government on the prices goods may be used by other producers as material inputs.
of some commodities (in India petrol is heavily taxed by the
government, whereas cooking gas is subsidised). So we need Counting them separately will lead to the error of double
to add subsidies to the NNP evaluated at market prices. The counting. Whereas considering intermediate goods may give
measure that we obtain by doing so is called Net National a better description of total economic activity, counting them
Product at factor cost or National Income. will highly exaggerate the final value of our economic activity.

Thus, NNP at factor cost = Depreciation

National Income (NI ) = NNP at market prices -(Indirect Already existing capital stock suffers wear and tear and
taxes - Subsidies) = NNP at market prices - Net indirect needs maintenance and replacement. A part of the capital
GeneraL Awareness 45
stportal.mahendras.org
goods produced this year goes for replacement of existing
National Sample Survey Organisation (NSSO)
capital goods and is not an addition to the stock of capital
goods already existing and its value needs to be subtracted National Sample Survey (NSS) was set up in 1950 on the
from gross investment for arriving at the measure for net recommendations of National Income Committee, chaired by
investment. This deletion, which is made from the value of late Prof. P. C. Mahalanobis to fill up large gaps in statistical
gross investment in order to accommodate regular wear and data for computation of national income aggregates,
tear of capital,is called depreciation. especially in respect of unorganized / household sector
of the economy. Initially statistical work of NSS except
Net Investment = Gross investment - Depreciation
for fieldwork used to be carried out by Indian Statistical
We can imagine as if the machine is being gradually used up Institute under the guidance of Prof. Mahalanobis, while NSS
in each year’s production process and each year one twentieth Directorate was created and assigned the fieldwork. NSS was
of its original value is getting depreciated. So, instead of reorganized as National Sample Survey Organisation (NSSO)
considering a bulk investment for replacement after twenty in March 1970 on the recommendation of Review Committee
years, we consider an annual depreciation cost every year. Chaired by Sh. B. Sivaraman, when all aspects of NSS work
This is the usual sense in which the term depreciation is was brought under a single organization under Government
used and inherent in its conception is the expected life of a of India. However full integration was not possible until
particular capital good, like twenty years in our example of June, 1972 (on the eve of launching of NSS 27th round). In
the machine. Depreciation is thus an annual allowance for a way, this marked the end of an era in the history of NSS.
wear and tear of a capital good.In other words it is the cost In the new set-up Governing Council (GC) of NSSO with
of the good divided by number of years of its useful life. a non-official Chairman to guide all the activities of NSSO
Notice here that depreciation is an accounting concept. No came in as the apex body of the new organization and NSS
real expenditure may have actually been incurred each year surveys were given a new perspective. In 2006, consequent to
yet depreciation is annually accounted for. formation of National Statistical Commission, GC of NSSO
was dissolved and a Steering Committee of National Sample
History Of Statistical System In India
Survey came in its place. The NSSO is now called as National
The first attempt to calculate national income of India was made Sample Survey organisation. The NSSO functions under
by Dada Bhai Naoroji in 1867-68. The first scientific attempt the overall direction of a Steering Committee with requisite
was made by Prof.V.K.R.V.Rao in 1931-32. The first official independence and autonomy in the matter of collection,
attempt was made by Prof.P.C.Mahalanobis in 1948- 49. The processing and publication of NSS data. In addition to the non
final report was submitted in 1954. Today national income is official Chairman, the Steering Committee is composed of
calculated and published by the Central Statistics office. academicians, data users from Central and State Government
Only after India became independent did the Government of departments and senior officers of the Ministry. The NSSO
India establish a Central Statistical Unit (1949), which was is headed by the Director General and Chief Executive
later (1951) converted into the Central Statistics office (CSO) Officer (DG&CEO), who is also the Member Secretary of
and the Department of Statistics, which constitute presently the Steering Committee.
the National Statistical Organisation (NSO) of the Ministry
of Statistics and Programme Implementation.
CENTRAL Statistics OFFICE (CSO)
The CSO, headed by a Director General, consists of five
Divisions, namely, the National Accounts Division (NAD),
the Economic Statistics Division (ESD), the Social Statistics
Division (SSD), the Training Division and the Coordination
& Publication Division (CAP). The CSO has wing located
in Kolkata known as Industrial Statistics Wing.
The Central Statistical Office is responsible for coordination
of statistical activities in the country, and for evolving
and maintaining statistical standards. Its activities include
National Income Accounting; conduct of Annual Survey of
Industries, Economic Censuses and its follow up surveys,
compilation of Index of Industrial Production, as well
as Consumer Price Indices, Gender Statistics, imparting
training on Official Statistics, Five Year Plan work relating to
Development of Statistics in the States and Union Territories;
dissemination of statistical information, work relating to
trade, energy, construction, and environment statistics,
revision of National Industrial Classification, etc.
46 GeneraL Awareness
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NATIONAL INCOME
1. Which is the most important source for National Income in India?
(1) Agriculture (2) Services (3) Industry (4) Business (5) None of these
2. When the economy grows, what effect it has on the tertiary sector -
(1) Decrease and then increases (2) Increases and then decreases (3) increases
(4) decreases (5) none of these
3. What is National Income –
(1) National product value at market cost (2) Net National Value at Factor cost
(3) Domestic value at market cost (4) Domestic Value at factor cost
(5) None of these
4. Which of the following calculates National Income of India–
(1) Planning Commission (2) Finance Ministry (3) CSO
(4) RBI (5) None of these
5. In 1867-68 who calculated the per capita income at 20 rupees for the first time in India
(1) M.G. Ranade (2) Sir W.Hunter (3) Naoroji (4) R.Dutt (5) None of these
6. Who gave the concept of ‘Drain of Wealth’?
(1) Bal Gangadhar Tilak (2) Naoroji (3) G.K. Gokhale
(4) Govind Sharma (5) None of these
7. Which of the following is not included in National Income?
(1) Tenant’s rent (2) Expenditure on bridges
(3) Winning a Lottery (4) Agent’s Commission for selling a house
(5) None of These
8. With which of the following we divide the National Income to calculate Per Capita Income?
(1) Total population of a country (2) Working Population (3) Total Area of the Country
(4) Total Capital Formation (5) None of These
9. Which of the following is true about India’s National Income?
(1) The % of Agriculture is more than that of services.
(2) The % of Industries is more than that of the Agriculture
(3) The % of services is more than of Industry
(4) The % of services is more than that of the combined % of manufacturing and agriculture
(5) None of these
10. Which of the following is equal to depreciation?
(1) Gross National Product - net national product` (2) Net National Product - GNP
(3) Gross national product - personal income (4) Personal income – Personal taxes
(5) None of these
11. Which of the following is not the method of measurement of national income -
(1) Production Method (2) Income method (3) Investment method
(4) Expenditure method (5) None of these
12. Which of the following fields in India received the largest proportion of gross national product -
(1) in agriculture and related fields (2) Public Administration in defence
(3) service sector (4) manufacturing, construction, electricity and gas
(5) None of these

GeneraL Awareness 47
stportal.mahendras.org
13. What is Nation’s National income -
(1) The Government’s annual revenue (2) The sum value of all products
(3) The surplus production in the commercial sectors (4) Deducting the imports from exports
(5) None of these
14. Which of the following is not included while calculating the National income?
(1) Rent (2) Mixed income (3) Pension (4) Retained earnings (5) None of these
15. What is the type of Indian economy?
(1) Socialist (2) Mixed (3) Gandhian (4) Independent (5) None of these
16. What do you understand by closed economy?
(1) Control of inflation (2) Deficit Financing (3) Only Export
(4) No import No export (5) None of these
17. Which of the following publishes World Investment report?
(1) I.B.R.D (2) I.M.F (3) U.N.D.P (4) W.T.O (5) UNCTAD
18. Human development Index includes which of the following -
(1) US dollars per capita GDP (2) Real GDP per capita at purchasing power
(3) US dollar gross national product (4) US dollars per capita national income
(5) None of these
19. A country’s economic development is dependent on -
(1) Natural Resources (2) Capital Formation (3) market size
(4) All of these (5) None of these
20. Which of the following issues Human Development report?
(1) UNCTAD (2) ASEAN (3) IBRD (4) UNDP (5) None of these
21. Head office of CSO is located in-
(1) Mumbai (2) Kolkata (3) New Delhi (4) Chennai (5) Bengaluru
22. What is the base year of GVA/GDP ?
(1) 2011-12 (2) 2012-13 (3) 2013-14 (4) 2009-10 (5) 2014-15
23. GVA stands for?
(1) Gross Value Added (2) Gross Valid Add (3) Gross Value Addition
(4) Gross Value Admission (5) None of these
24. Which of the following is a feature of Indian Economy?
(1) High income economy (2) Medium income economy
(3) Lower medium income economy (4) Lower income economy
(5) None of these
25. From where did the Gross Happiness start?
(1) Greece (2) Bhutan (3) Bangladesh (4) India (5) None of these

ANSWER KEY
1.(2) 2.(3) 3.(2) 4.(3) 5.(3) 6.(2) 7.(3) 8.(1) 9.(4) 10.(1)
11.(3) 12.(3) 13.(2) 14.(4) 15.(2) 16.(4) 17.(5) 18.(4) 19.(4) 20.(4)
21.(3) 22.(1) 23.(1) 24.(3) 25.(2)

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Money Market In India

##Financial Market
##India money market
##Instruments of Money Market
##Negotiable Instruments
##Question & Answer

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Money Market
CHAPTER

6 In India
Scan the QR code to get video of this chapter.

Financial Market

Securities and
Reserve Bank
Exchange
of India
Board of India

Capital Commodity Money

Market Market Market

T-Bills Term Money

Equity Debt
Commercial Commercial
Papers Bills
Secondary Derivative
Primary Market
Market Market
Certificate of
Call Money
Deposit

 Public  BSE
Issue  Exchange  Corporate
 NSE
 Private Traded Loan
 Regional
Placement  OTC Traded  PSU Bonds
Stock
(domestic/  Customized  G- Sec.
Exchanges
Foreign)

Indian Money Market

Unorganised Sector Organised Sector Co-operative Sector

Money Indigenous Nidhi's Chit

Lenders Bankers Funds

RBI Public Sector Private Sector Development Banks DFHI Ltd.

Banks Banks and Financial
Institutions

SBI Other Nationalised UTI, LIC,IFC, IDBI

Banks

Scheduled Banks Non-Scheduled Banks

Indian Banks Foreign Banks

50 GeneraL Awareness
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There are certain organisation in the financial market which ##Minimum amount of CD should be Rs. 1 lakh i.e., the
deal in money while keeping a synch. These institutions minimum deposit that could be accepted from a single
combined together are called Money Market. subscriber should not be less than Rs. 1 lakh & in
multiples of Rs 1 lakh there after.
Money Market Institutions are
Commercial Papers
Government of India and other sovereign bodies
##Commercial papers [CPs] are negotiable short-term
Banks and Development Financial Institutions
unsecured promissory notes with fixed maturities, issued
PSUs [Public Sector Undertakings by well-rated organizations.
Private sector organizations ##These are generally sold on discount basis. Organizations
The Government /Quasi government owned non-corporate can issue CPs either directly or through banks or
entities. merchant banks [called as dealers]. These instruments
are normally issued in the multiples of five lakh.
Large numbers of instruments that are traded in the money
market are issued by Government of India, State governments ##Minimum Time period – 7 days
and other statutory bodies. Instruments that are issued by the ##Maximum Time Period – 364 days
Development Financial Institutions [DFI] and banks carry
the highest credit ratings amongst non-government issuers Dated Government Securities
mainly due to their connection with the Indian Government. ##These are securities issued by the Government of India
Instruments of Money Market and State Governments.

Call Money ##The date of maturity is specified in the securities

therefore they are known as dated securities.
Call money market is a market for uncollateralized lending
and borrowing of funds. This market is predominantly Zero -Coupon Bonds
overnight and is open for participation only to schedule ##It is issued at a discount to face value. No interest is
commercial banks and the primary dealers. The largest money paid during the period of the bond. But at the time of
market is - Mumbai maturity full payment or bullet payment of the face value
Notice Money would be done.
One financial institution borrow money from another Deep-Discount Bonds:
financial institution for 2 days to 14 days. ##It was first introduced by IDBI in June 1994 followed
Term Money by ICICI. It is similar to zero-coupon bonds with longer
maturity.
One financial institution borrow money from another
financial institution for more than 14 days. Negotiable Instruments
Treasury Bills Definition of Negotiable Instruments
These are the lowest risk category instruments for the short According to section 13 of the Negotiable Instruments Act,
term. RBI issues treasury bills [T-bills] at a prefixed day and 1881, a negotiable instrument means “promissory note, bill
for a fixed amount. There are 3 types of treasury bills. of exchange, or cheque, payable either to order or to bearer”.
##91-day T-bill: maturity is in 91 days, it is auctioned on Types Of Negotiable Instruments
wednesday of every week and day of payment thursday.
According to the Negotiable Instruments Act, 1881 there are
##182-day T-bills: maturity is in 182 days, it is auctioned three types of negotiable instruments i.e., promissory note,
on Wednesday, which is non reporting week and day of bill of exchange and cheque. However many other documents
payment Thursday. are also recognized as negotiable instruments on the basis of
##364-day T-bill: maturity is 364 days, it is auctioned on custom and usage, like hundis, treasury bills, share warrants,
Wednesday which is a reporting week and payment on etc., provided they possess the features of negotiability. In the
thursday. following sections, we shall study about Promissory Notes
Certificates of Deposits (popularly called pronotes), Bills of Exchange (popularly
called bills), Cheques and Hundis (a popular indigenous
##CDs are issued by banks and Financial Institutions (FI).
document prevalent in India), in detail.
##This instrument was first time allowed in India in 1989.
Promissory Note (Section-4 Of N.I. Act 1881)
##A CD is a negotiable promissory note, secure and short Suppose you take a loan of Rupees Five Thousand from your
term, of up to a year, in nature. friend Ramesh. You can make a document stating that you
##The maturity period of CDs issued by banks should not will pay the money to Ramesh or the bearer on demand. Or
be less than 7 days and not more than 364 days, from you can mention in the document that you would like to pay
the date of issue. the amount after three months. This document, once signed
GeneraL Awareness 51
stportal.mahendras.org
by you, duly stamped and handed over to Ramesh, becomes a Crossed cheque: Since open cheque is subject to risk of theft,
negotiable instrument. Now Ramesh can personally present it it is dangerous to issue such cheques. This risk can be avoided
before you for payment or give this document to some other by issuing another types of cheque called ‘Crossed cheque’.
person to collect money on his behalf. He can endorse it in The payment of such cheque is not made over the counter
somebody else’s name who in turn can endorse it further till at the bank. It is only credited to the bank account of the
the final payment is made by you to whosoever presents it payee. A cheque can be crossed by drawing two transverse
before you. This type of a document is called a Promissory parallel lines across the cheque, with or without the writing
Note. ‘Account payee’ or ‘Not Negotiable’.
Bill of Exchange (Section-5 of N.I. ACT 1881) Bearer cheque: A cheque which is payable to any person
Suppose Rajiv has given a loan of Rupees Ten Thousand who presents it for payment at the bank counter is called
to Sameer, which Sameer has to return. Now, Rajiv also ‘Bearer cheque’. A bearer cheque can be transferred by mere
has to give some money to Tarun. In this case, Rajiv can delivery and requires no endorsement.
make a document directing Sameer to make payment up to Order cheque: An order cheque is one which is payable to
Rupees Ten Thousand to Tarun on demand or after expiry a particular person. In such a cheque the word ‘bearer’ may
of a specified period. This document is called a Bill of be cut out or cancelled and the word ‘order’ may be written.
Exchange, which can be transferred to some other person’s The payee can transfer an order cheque to someone else by
name by Tarun. signing his or her name on the back of it.
Section 5 of the Negotiable Instruments Act, 1881 defines a Hundis : A Hundi is a negotiable instrument by usage. It is
bill of exchange as ‘an instrument in writing containing an often in the form of a bill of exchange drawn in any local
unconditional order, signed by the maker, directing a certain language in accordance with the custom of the place. Some
person to pay a certain sum of money only to or to the order times it can also be in the form of a promissory note. A
of a certain person, or to the bearer of the instrument’. hundi is the oldest known instrument used for the purpose
Cheques (Section-6 of N.I. ACT 1881) of transfer of money without its actual physical movement.
The provisions of the Negotiable Instruments Act shall apply
Cheque is a very common form of negotiable instrument. to hundis only when there is no customary rule known to
If you have a savings bank account or current account in a the people.
bank, you can issue a cheque in your own name or in favour
of others, thereby directing the bank to pay the specified Demand Draft
amount to the person named in the cheque. The Demand Draft is a pre-paid Negotiable Instrument,
Therefore, a cheque may be regarded as a bill of exchange; wherein the drawee bank undertakes to make payment in full
the only difference is that the bank is always the drawee in when the instrument is presented by the payee for payment.
case of a cheque. The demand draft is made payable on a specified branch of
a bank at a specified centre. In order to obtain payment, the
The Negotiable Instruments Act, 1881 defines a cheque
beneficiary has to either present the instrument directly to
as a bill of exchange drawn on a specified banker and
the branch concerned or have it collected by his / her bank
not expressed to be payable otherwise than on demand.
through the clearing mechanism.
Actually, a cheque is an order by the account holder of the
bank directing his banker to pay on demand, the specified Banker’s Cheque
amount, to or to the order of the person named therein or Banker’s cheque is another payment instrument which is
to the bearer. used by banks to settle payment obligations on behalf of their
Types of Cheque customers. This instrument is guaranteed by the bank for its
full value and is similar to a demand draft. In practice, these
Open cheque: A cheque is called ‘Open’ when it is possible
instruments are payable at the branch of issue and are used
to get cash over the counter at the bank. The holder of an
for payment within the local clearing jurisdiction.
open cheque can do the following:
Receive its payment over the counter at the bank, Deposit Payment Orders
the cheque in his own account Payment Orders are issued by banks for payments made on
Pass it to some one else by signing on the back of a behalf of the bank. These instruments are signed by a banker
cheque. and carry the guarantee of the bank on the availability of the
funds. These instruments are payable at the branch of issue.

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MONEY MARKET
1. Which of the following is the regulator of money market?
(1) Government of India (2) Reserve Bank of India
(3) Insurance Regulatory Development Authority. (4) Telecom Regulatory Authority of India
(5) None of these
2. What is call money?
(1) It is an overnight loan in the money market.
(2) It is loan of above 1 day to 14 days in the money market.
(3) It is loan of above 14 day to 364 days in the money market.
(4) It is an amount charged on ISD calls.
(5) None of these
3. What is notice money?
(1) It is an overnight loan in the money market.
(2) It is a loan for 2 days to 14 days in the money market.
(3) It is a loan of above 14 days to 364 days in the money market.
(4) It an amount given in order to book a delivery.
(5) None of these
4. What is term money?
(1) It is an overnight loan in the money market
(2) It is a loan of above 1 day to 14 days in the money market.
(3) It is a loan of above 14 days to 364 days in the money market.
(4) It is a loan provided on certain terms and conditions by bank to its customer.
(5) None of these
5. Which of the following is related to Money Market?
(1) Commercial money (2) Treasury bills (3) Cheque
(4) Shares (5) Derivative
6. Which of the following is not related to money market?
(1) Treasury bills (2) Commercial paper (3) Commercial bills
(4) Shares (5) Certificates of deposits
7. Which of the following statement is true about commercial paper?
(A) It is a promissory note (B) It is traded in the money market
(C) It was introduced in 1990. (D) It secure instrument
(1) Option C & D are correct. (2) Option A & B are correct. (3) Option B & C are correct.
(4) Option A, B & C are correct. (5) All options are correct.
8. Which of the following statement is true about certificate of deposit?
(A) It is a secure instrument in comparison to commercial paper.
(B) It is a promissory note
(C) It is traded in the capital market.
(D) It was introduced in 1990.
(1) Option A & B are false (2) Option C & D are false (3) Option B & C are correct.
(4) Option A, C & D are correct. (5) All options are correct.

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9. Which of the following statement is false about Treasury bill?
(A) It is a secure instrument. (B) It is a promissory note
(C) It is issued by the government. (D) It’s is issued for a maximum maturity of 1 year.
(1) Option A & B are false (2) Only Option C is true (3) Option B & D are correct.
(4) Option A, & D are correct. (5) All options are correct except C.
10. Which of the following statement is true about commercial bill?
(A) It is a promissory note (B) It is a bill of exchange
(C) It is a trade bill. (D) It is issued by the Reserve Bank of India
(1) Option A & B are correct. (2) Option A & D are correct. (3) Option B & C are correct.
(4) Option C & D are correct. (5) All options are correct.
11. Which of the following statement is related to dated securities?
(A) It is a secure instrument.
(B) It is issued by RBI on the behalf of government.
(C) It acknowledge the debt by a government.
(D) The date of maturity is mentioned on the certificate
(1) Only Option A & B. (2) Only Option C & D. (3) Only Option B & C.
(4) Only Option A, C & D. (5) All options are related
12. What is the minimum amount at which commercial paper can be issued?
(1) The minimum amount for commercial papers is 5 lacs.
(2) The minimum amount for commercial papers is 5 crores.
(3) The minimum amount for commercial papers is 1 lacs.
(4) The minimum amount for commercial papers is 1 crore
(5) None of these
13. What is the minimum and maximum maturity of certificate of deposit issued by financial institutions except
bank?
(1) Certificate of deposit issued by financial institutions are for 1 year to 3 years.
(2) Certificate of deposit issued by financial institutions are for 7 days to 1 year.
(3) Certificate of deposit issued by financial institutions are for 15 days to 90 days.
(4) Certificate of deposit issued by financial institutions are for 1 years to 10 years.
(5) None of these
14. What is the minimum amount at which certificate of deposit is issued?
(1) The minimum amount for certificate of deposit is 5 lacs.
(2) The minimum amount for certificate of deposit is 5 crores.
(3) The minimum amount for certificate of deposit is 1 lacs.
(4) The minimum amount for certificate of deposit is 1 crore
(5) None of these
15. Which of the following is considered to be more secure instrument?
(1) Cheque (2) Draft (3) Commercial paper
(4) Hundi (5) All of the above
16. What is the maximum validity of a Cheque?
(1) 30 days (2) 60 days (3) 90 days (4) 180 days (5) None of these

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17. Which is not a type of Cheque?
(1) Stale Cheque (2) Mutilated Cheque (3) Account payee Cheque
(4) Crossed Cheque (5) Promissory Cheque
18. Which is a type of crossing in a Cheque?
(1) Negotiable crossing (2) Special crossing (3) level crossing
(4) Precise crossing (5) Named crossing
19. Which of the following Cheque is payable on the counter?
(1) Account payee Cheque (2) Crossed Cheque (3) Bearer Cheque
(4) Special crossing Cheque (5) None of these
20. A Cheque issued whose maturity date is over is termed as?
(1) Dead Cheque (2) Mutilated Cheque (3) Stale Cheque
(4) Blank Cheque (5) None of these
21. Which of the following act defines a Cheque
(1) Reserve Bank of India Act 1934 (2) Negotiable Instrument Act 1881
(3) Banking Regulation Act 1949 (4) Companies Act 2013
(5) Foreign Exchange Management Act 1999
22. Which of the following instrument is defined under negotiable instrument act?
(1) Cheque (2) Promissory note (3) Bill of exchange
(4) Draft (5) All of these
23. Which of the following institution cannot participate in call money market?
(1) Banks (2) NBFC (3) Primary dealers
(4) RBI (5) None of the above
24. Which of the following is related to deep discount bond?
(A) It is a long term zero coupon bond
(B) The rate of interest is mentioned on the certificate
(C) It issued by post office only.
(D) The date of maturity is not defined
(1) Only Option A (2) Only Option C & D (3) Only Option B & C
(4) Only Option A, C & D (5) All options are related
25. Commercial Bill is a type of-
(1) Promissiory Note (2) Cheque (3) Stamp
(4) Bill of Exchange (5) None of the above

ANSWER KEY
1.(2) 2.(1) 3.(2) 4.(3) 5.(2) 6.(4) 7.(4) 8.(2) 9.(5) 10.(3)
11.(5) 12.(1) 13.(1) 14.(3) 15.(2) 16.(3) 17.(5) 18.(2) 19.(3) 20.(3)
21.(2) 22.(5) 23.(2) 24.(1) 25.(4)

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Capital Market In India

##Sources of funds
##TYPE OF PUBLIC ISSUES
##KINDS OF SHARES
##DERIVATIVE
##Commodity Market
##DEMAT ACCOUNT
##NET ASSET VALUE (NAV)
##SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)
##STOCK MARKET/STOCK EXCHANGE
##Question & Answer

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CAPITAL MARKET
CHAPTER

7 IN INDIA
Scan the QR code to get video of this chapter.

Capital market is a market for securities (debt or equity), where business enterprises (companies) and governments can
raise long-term funds. It is defined as a market in which money is provided for periods longer than a year, as the raising
of short-term funds takes place on other markets (e.g., the money market). The capital market includes the stock market
(equity securities) and the bond market (debt).

Capital Market

Primary Secondary
Market Market

Places/
IPO Tools
Space

FPO Equity Shares BSE

Right Issue Pref. Shares NSE

Issue of Pref.
Mutual Funds OTCEI
Shares

Regional
Private Stock
Debentures
Placement
Exchanges

Issue of
Debenture Bonds

NFO

Sources of Funds
Domestic Foreign Other Foreign
Sources Sources Medium
Primary Market

 Issue of
 IPO Shares under
 FPO GDR  FDI
 Right Issue  Issue of
 Issue of Shares under  FII
Bond/ ADR
Debentures  External  NRI
 Issue of Pref. Commercial Remittances
Shares Borrowings

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Type Of Public Issues KINDS OF SHARES

Initial Public Offering [IPO] Equity Shares
When an unlisted company in order to raise the capital, invites Equity shares are also known as common stock or
the purchase applications from the public for its new equity common shares. Equity holders are considered to be the
shares through an offer, the offer is known as Initial Public actual owners of the company and their claim is known as
Offering. Any company can bring IPO only once. residual claim
Follow On Public Offering (FPO) Preference Shares
When a listed company in order to raise the capital, invites Preference shares are those shares which are given preference
the purchase applications from the public for its new equity as regards to payment of dividend and repayment of capital.
shares through an offer, the offer is known as Follow-on Preference shareholders cannot exercise their voting rights on
Public Offer. In other word any company issuing its new all the matters. They can vote only on the matters affecting
shares to the public other than the first time. their own interest.
Right Issue Secondary Market
Here, a listed organization proposes to issue fresh securities
to its existing shareholders as on a record date. The rights are Working of Primary Market
offered in a particular ratio to the number of securities held
prior to the issue. This route is best suited for organizations Issuer of
Securities

Investor
who would like to raise capital without diluting the stake Securities
Flow of Funds
of its existing shareholders. In other word the existing
shareholders are offered right of first denial. These shares
can be sold to others only when existing shareholders don’t
purchase these shares.
Working of Secondary Market
Preferential Issue
This is an issue of either shares or convertible securities by Intermediaries
Securities
listed organizations to a select group of people under Section Investor Investor
(81) of the Companies Act,1956. This issue is neither a Rights Flow of Funds

issue nor Public issue and is a faster way for any organization
to raise capital.

##The secondary market is the financial market where

Secondary Market
previously issued securities and financial instruments
such as stock, bonds, options, and futures are bought
and sold.
Regulated by Regulated by
RBI SEBI ##The term “secondary market” is also used to refer to the
market for any used goods or assets, or an alternative
use for an existing product or asset where the customer
Gilt Edge
Corporate base is the second market.
Securities
Market
Market
Corporate Action
##Declaration of dividends, issue of bonus shares, and
Debenture splitting shares into smaller denominations are called
##A long term security or Debt instrument yielding a fixed corporate actions. They impact the market price of shares
rate of interest issued by a company. as they alter the intrinsic value of the shares.
##A debenture is a medium to long term debt instrument Buyback of Shares
used by large companies to borrow money at a fixed ##Buyback is a method for an organization to invest by
rate of interest. buying shares from other investors in the market. It is
##Types of debenture done by the organization for the purpose of improving
the liquidity in its shares and enhancing the shareholders
1. Convertible Debenture wealth. As per SEBI regulations, the organization is
2. Non-convertible Debenture permitted to buy back its share.
3. Secured Debenture ##STOCK SPLIT- A corporate action in which a company
4. Unsecured Debenture divides its existing shares into multiple shares. Although
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the number of shares outstanding increases by a specific regulations of an exchange, they generally suffer from
multiple, the total value of the shares remains the same counterparty risk
compared to pre-split amounts, because the split did not Futures Contracts- A futures contract is an agreement
add any real value. between two parties to buy or sell an asset at a certain time in
# #BONUS SHARE- A bonus share is a free share of future at a certain price. These are basically exchange traded,
stock given to current shareholders  in a company, standardized contracts. The exchange stands guarantee to
based upon the number of shares that the shareholder all transactions and counterparty risk is largely eliminated.
already owns While the issue of bonus shares Options- It is a bilateral contract in which Option Writer
increases the total number of share issued and owned, (also known as Option Seller) sells the right to buy or sell
it does not change the value of the company. Although the agreed quantity of underlying asset at an agreed price on
the total number of issued shares increases, the ratio a certain future date to the Option Buyer.
of number of shares held by each shareholder remains
constant. Option Writer can’t force the Option Buyer to execute the
contract while Option Buyer can force the Option Writer
What Is A Derivative ? (Option Seller) for the execution of contract. Means the
The term ‘Derivative’ stands for a contract whose price is Option Buyer has liberty to execute or not to execute the
derived from or is dependent upon an underlying asset. The contract. The Option Seller has right to choose between
underlying asset could be a financial asset such as currency, transfer of assets and paying the differential amount to the
stock and market index, an interest bearing security or a Option Buyer at the time of execution of contract.
physical commodity. Today, around the world, derivative If Option Buyer is getting the right to BUY the underlying
contracts are traded on electricity, weather, temperature and asset, the option will be known as Call Option (BBC)
even volatility.
Forward Contracts- These are promises to deliver an asset If Option Buyer is getting the right to SELL the underlying
at a pre- determined date in future at a predetermined price. asset, the option will be known as Put Option (BSP)
Forwards are highly popular on currencies and interest
If the agreement can be executed only on the expiry date,
rates. The contracts are traded over the counter (i.e. outside
then it is known as European Option.
the stock exchanges, directly between the two parties) and
are customized according to the needs of the parties. Since If the agreement can be executed on or before the expiry
these contracts do not fall under the purview of rules and date, then it is known as American Option.

Equity Derivative
Market Market

Market
Segments

Commodity
Market

Swap repayment schedule. In the same manner an American

The meaning of swap is to change one thing with another. company Sam & Co. has borrowed funds from an FI situated
It is a contract in which two parties agree to exchange each in India as per agreed upon repayment schedule similar to
other’s known series of future obligations on a certain rate that of Ankit & Co. Now if Ankit & Co. and Sam & Co. enter
or formula agreed upon by them. into an agreement with each other under which they will be
paying each other’s installment as per agreed upon rate, this
e.g. Ankit & Co. which is an Indian company has borrowed agreement is called as SWAP.
funds from FI situated in America as per agreed upon

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Forwards
Derivative Market
Futures
Call Option
Options
Put Option
SWAPS

Warrants

Commodity Market What Is A Demat Account?

##Securities (shares, Debenture, Bonds etc) are held
electronically in a dematerialized (or ‘Demat’) account
Futures instead of the investor taking physical possession of
certificates.
##The move from physical certificates to electronic book
keeping.
Commodity Over the
Market Counter Advantage of Demat Account-
##No risk due to loss on account of fire, theft or mutilation

Forward ##Bonus/Right shares/split allotted to the investor directly

credit into his demat account.
##Transaction Costs are low
##A single demat account can hold both Equity and Debt
Commodity markets are markets where raw or primary instruments
products are exchanged. These raw commodities are traded
on regulated commodities exchanges, in which they are ##No stamp duty on transfer of securities
bought and sold in standardized contracts. ##From April 2006, it has become mandatory for
This article focuses on the history and current debates any person holding a  demat account  to possess a
regarding global commodity markets. It covers physical permanent account number (PAN).
product (food, metals, electricity) markets but not the ways Mutual Fund
that services, including those of governments, nor investment,
nor debt, can be seen as a commodity. Liberty of Open Ended
Entry & Exit
MCX (Now known as metropolitan Stock Exchange of Close Ended
India Limited) - is the first commodity exchange which
launched the ipo of 700 cr. Debt
Oriented
Mutual Fund
ASBA (Application Supported by Blocked Amount): Investment
Class
Equity

This is a step towards the capital market reforms and Balanced

Actively
transparency. Under this when any investor applies for Management Managed
Style
securities in the new issue market he/ she is not required Passively
Other
to transfer the amount in the issuer’s account with the Managed

application. The amount is blocked in his/ her account

and the issuer company will get the funds only after ##It is an investment vehicle .
the allotment on the basis of number of allotted shares. ##It consists of a pool of funds collected from many
With this investors’ interest is protected by reducing the investors for the purpose of investing.
complication and time lag for refund of excess application
money. ##Investments can be made in securities such as stocks,
bonds, money market instruments and similar assets.

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##Mutual funds are operated by Fund managers, who invest amount each unit holder will get per unit on redemption or
the fund’s capital and attempt to produce income for the winding up of mutual fund. Net Sales given by the difference
fund’s investors. between the total sales and total repurchases of the units of
##A mutual fund’s portfolio is designed according to its a fund.
objectives as specified in its portfolio. Related Terms
Portfolio Management Authorized Capital
It is the practice of soliciting the services of professional It is the maximum amount of share capital fixed in the
and qualified fund managers for the purpose of investment Memorandum of Association of a company as required by
in the capital market. the Company’s act. They are also known as nominal capital.
It involves entrustment of investment activities to fund Issued Capital
managers who for a small premium undertake the task of It is that part of a company’s capital that has been subscribed
preparing and managing an investment portfolio for the and alloted to shareholders. It is a broader concept than paid
investors. This helps ordinary investors in optimizing returns up capital.
and lowering risks on their investment.
Paid Up Capital
Net Asset Value (NAV)
It is that part of the issued capital of a company, paid up by
The investment efficiency of the mutual fund can be measured the shareholders (promoters). It is that part, invested by the
in terms of the NAV values and Net Sales. NAV is the promoters. Therefore, an issued capital may or may not be
indicator of the investment performance and it indicates the a paid up capital.

ASBA (Application Supported By Blocked Amount

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##But trading was concentrated by BSE and it enjoy
Important Terminology & Important Points
monopoly
Arbitrage
##User from out side Bombay found it extremely difficult
A company listed in many stock exchanges & the rate of for trading.
share is different in different stock exchange. Through this
##BSE imposed higher entry barrier
situation customer got profit through trading & this profit is
known as arbitrage. ##So the services of brokers were extremely high.
Hedging Securities And Exchange Board of India
When customer invest money in different assets like share, (SEBI)
debenture, bond….. To control the risk of market. The Securities and Exchange Board of India was established
Bull Market in 1988 & given statutory powers on April 12, 1992 in
A bull market is associated with increasing investor accordance with the provisions of the Securities and
confidence, and increased investing in anticipation of future Exchange Board of India Act, 1992 (Recommendation of
price increases (capital gains). A bullish trend in the stock Narsimhan Committee). BUDGET 2015-16, FMC (Forward
market often begins before the general economy shows clear Market Commission) merged in SEBI.
signs of recovery. Member of SEBI
Bear Market ##CHAIRMAN- Nominated by Govt. of India
A bear market is a general decline in the stock market over a ##Two member from finance ministry
period of time. It is a transition from high investor optimism
##A Deputy governor of RBI
to widespread investor fear and pessimism.
##5 member nominated by GOI.
Blue Chip Stocks
Regional Office
A Blue Chip Stock is the share of a company with Large
Market Capitalization and strong, consistent performance 1- New Delhi
track record irrespective of stages and siuation of economy. 2- Chennai
Major Stock Indexes of Stock Exchanges are made of Blue
Chip Stocks. 3- Kolkata

Margin Trading 4- Ahmedabad

When an investor pays for a part of his/her purchases and Local Offices— 1.Chandigarh 2.Bengaluru 3.Lucknow 4.
remaining part is paid by the broker/banker as a short term Hyderabad 5. Dehradun 6. Kochi 7. Guwahati 8.Jaipur
funding to the investor on which no interest charged if repaid 9.Bhubaneswar 10. Indore 11.Patna 12. Panaji 13.Ranchi
within time, is known as margin trading. This facility is 14. Raipur. 15. Jammu 16. Shimla 17. Shimla
mainly used in intraday trading. Stock Market/Stock Exchange
Kerb Trading This is a place where buying & selling of share completed
Trading after the official time. It is illegal. by common man or financial institution.
##The first Indian company which was listed in NASDAQ Every stock exchange have certain Broker (DALALs) who
is INFOSYS. are registered. Customer can buy or sell securities through
##First Indian company which was listed in DOWJONES- broker.
ICICI listing is important for a company in stock exchange if the
##1929-30 recession started with the downfall of dow jones. company participating in trading system.
##Investment- use of money for the purpose of profit. Any company can be listed in different stock exchange.
##Disinvestment- selling of the share of PSUs by Goi. India’s oldest stock exchange is BSE.
This process started in India from 1991. BSE is also known as DALAL STREET.
Problem of Stock Market Before SEBI Came 3 famous stock exchange of Mumbai are
##Market was extremely restrictive regulation on the 1:- BSE 2:- NSE 3:- OTCEI
issuers enforced by the Controller of capital issues (cci). Bombay Stock Exchange (BSE)
First organized stock exchange was established in 1875 1. BSE & NSE share 80% business of stock exchange.
in Bombay.
2. BSE is the oldest stock exchange of Asia.
##There were 20 regional stock exchange in Bombay in
1992. 3. It was established in 1875.

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4. BSE started an index on the basis of 30 companies & it National Stock Exchange (NSE)
is known as BSE 30 or Sensex.
National Stock Exchange (NSE) was established in the mid
5. Sensex- sensitive index of stock exchange. It is the 1990s as a demutualized electronic exchange.
barometer of indian economy.
Committee related to NSE- M.J.Ferwani Committee .
6. The base year of Sensex is 1978-79.
NSE was established by IDBI,UTI,LIC,GIC,IFCI etc…..
7. Reliance have largest share in BSE 30 companies. Then
Infosys & ICICI. NSE started operation in 1994 with electronic trading.
8. Those companies which are in BSE have more than By march 31st 1999, all the 23 stock exchange in the country
0.5% market capitalization with compare to total market has computerized online screen based trading.
capitalization of BSE.

Energy, Precious Metals, Base Metals,

Indian Commodities Exchange Ltd. ICEX Mumbai
Agricultural Produces
Energy, Precious Metals, Base Metals,
Metro Politan Stock Exchange of India Ltd. MSEI Mumbai
Agricultural Produces
National Commodity and Derivative
NCDEX Mumbai Agricultural Produces
Exchange Ltd.
National Multi-Commodity Exchange of
NMCE Ahmedabad Agricultural Produces
India Ltd.
Ace Derivatives and Commodity Exchange
ACE Mumbai Agricultural Produces
Ltd.
Energy, Precious Metals, Base Metals,
Universal Commodity Exchange Ltd. UCX Mumbai
Agricultural Produces

COUNTRY WISE MAJOR STOCK EXCHANGES

The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally the
leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.
S.No. Country Stock Index
1 Australia CSE Composite Index, S & P / ASX 100

2 Brazil Ibovespa - Bovespa Index

3 Canada S & P / T S X 60, S & P / T S X Composite Index
4 China SSE Composite Index, SZSE Component Index
5 France CAC 40
6 Germany DAX, TecDAX
7 Hong Kong Hang Seng Index
8 India Sensex, Nifty
9 Japan Nikkei 225
10 New Zealand NZX 50 Index
11 Russia RTS Index
12 Singapore FTSE Group Indices
13 South Korea KOSPI
14 Taiwan Taiwan Capitalization Weighted Stock Index (TAIEX)
15 United Kingdom FT 30 Index, FTSE 100 Index
16 United States NYSE Arca Major Market Index, Dow Jones Industrial Average, NASDAQ
Composite

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OTCEI Index
The OTCEI, which was set up in 1992, was the first Index shows how a specified portfolio of share prices is
computerized stock exchange in India. moving to give an indication of the market trends. It is a
basket of securities and the average price movement of the
WHAT HAPPENED AFTER THAT……………..
basket of securities indicates the index movement, whether
1. Equity trade in at NSE commenced in november 1994. upwards or downwards.
2. With in one year of operation,NSE surpassed the BSE Sensex And Nifty
in term of turnover. Sensex is an index based on 30 shares traded on the BSE.
3. BSE was working since 1875, with monopoly now it had The Sensex is the barometers of the Indian markets. The
to face competition with NSE. indices are composite in nature in that they cover a large
segment of industries
4. So in march 1995, bse also adopted similar innovation
to keep up in the race (bolt- BSE online trading system). Nifty is an index based on 50 shares traded on the NSE.
The Nifty is also known as national index for fifty
M-CAP (MARKET CAPITALIZATION):-
company.
Market Capitalization is the aggregate valuation of the
company based on its current share price and the total number Mutual Fund
of outstanding shares. A mutual fund is a professionally managed investment
Companies are divided in to 3 forms on the basis of market fund that pools money from many investors to purchase
capitalization- securities. These investors may be retail or institutional in
nature. Primary structures of mutual funds include open-
1. LARGE CAP :- Large CAP is more then 10 thousand end funds, unit investment trusts, and closed-end funds.
crore. Exchange-traded funds (ETFs) are open-end funds or unit
2. MID CAP:- MCAP is between 2500 cr. To 10000 cr. investment trusts that trade on an exchange. Mutual funds
are also classified by their principal investments as money
3. SMALL CAP:- Small CAP is less than 2500 cr.
market funds, bond or fixed income funds, stock or equity
National Securities Clearing Corporation funds, hybrid funds or other.
Ltd- NSCCL The first company that dealt in mutual funds was the Unit
It is a subsidiary of NSE established in 1995. Everyday Trust of India. It was set up in 1963 as a joint venture of the
trade (sale or buy) done on the NSE, NSCCL becomes the Reserve Bank of India and the Government of India.
country party. Association of Mutual Funds in India
CENTRAL DEPOSITORY SERVICES LIMITED The Association of Mutual Funds in India (AMFI) is
(CDSL) & NATIONAL SECURITIES DEPOSITORIES dedicated to developing the Indian Mutual Fund Industry
LTD.–(NSDL) on professional, healthy and ethical lines and to enhance
CDSL, is the second indian central securities depository and maintain standards in all areas with a view to
based in Mumbai, its main function is the holding securities protecting and promoting the interests of mutual funds
either in certificated or uncertificated (dematerialized) form, and their unit holders. AMFI, the association of SEBI
to enable book entry transfer of securities. registered mutual funds in India of all the registered Asset
In november 1996, National Security Deposit LTD.–NSDL, Management Companies, was incorporated on August 22,
the first depository in india was established. 1995, as anon-profit organisation. As of now, all the 44
For the purpose of that if you buy any share it will Asset Management Companies that are registered with
automatically converted in electronic form & deposited in SEBI, are its members
your demat a/c.

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CAPITAL MARKET
1. NAV calculation of mutual funds means ——
(1) Liquidity (2) Dividend payment (3) Net worth of shares
(4) Capitalization (5) None of these
2. What purchases do not incur any brokerage or stamp duty——
(1) FPO (2) Right issue (3) IPO (4) Debenture (5) None of these
3. Ordinary shares issued to existing shareholders is known as ?
(1) IPO (2) FPO (3) Right issue (4) Bonus share (5) None of these
4. The difference between cost price and sale price of share held by an investor is known as ——
(1) Dividend (2) profit (3) interest (4) capital gain (5) None of these
5. Extra dividend provided to ordinary shareholders who have received their dividend is known as——
(1) Cumulative preference share (2) convertible preference share
(3) participating preference share (4) redeemable preference share
(5) None of these
6. Preference shares that may be repurchased by the issuing company are——
(1) Cumulative preference share (2) convertible preference share
(3) participating preference share (4) redeemable preference share
(5) None of these
7. SEBI act 1992 empowers SEBI with ———— power
(1) Constitutional power (2) non statutory power (3) statutory power
(4) none of these (5) None of these
8. When share are issued at fixed price is known as———
(1) Floor price (2) Public issue (3) Private issue (4) Dividend issue (5) None of these
9. What is a future contract——?
(1) It is a standardized forward contract (2) Is an obligation
(3) May be for financial instruments or commodities (4) All of these
(5) None of these
10. If a person bought ‘option contract’ is ———
(1) An obligation, but not a right (2) Both a right and an obligation
(3) A right, but not an obligation (4) Neither a right nor an obligation
(5) None of these
11. When a person looking for profit by simultaneously entering in to transactions in two or more markets is called——
(1) Position (2) hedging (3) arbitrage (4) All of these (5) None of these
12. When a person buy or sell assets in order to mitigate risk of price fluctuation is called———
(1) Insurance (2) Hedging (3) Arbitrage (4) All of these (5) None of these
13. Long position in two call and put with the same strike price to expiration date is called———
(1) Spread (2) Stock (3) Straps (4) Straddle (5) None of these
14. Derivative is a product whose value is derived from the value of underlying assets is called——
(1) Product (2) Service (3) Factors (4) Bases (5) None of these
15. What is a mechanism mandated by SEBI to determine the exit price of voluntary delisting——
(1) Floor price (2) exit price (3) Exit book building
(4) Reverse book building (5) None of these

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16. Listing a company on the stock market requires that the company————
(1) Be a partnership firm (2) be proprietary firm
(3) a limited liability company (4) all of these
(5) None of these
17. If debt increases then the value of share affects in the following way————
(1) The lower the debt the higher the share value (2) The lower the debt the lower the share value
(3) The higher the debt the higher the share value (4) No Effect
(5) None of these
18. If the growth factor increases when calculating present value will cause the value to ———
(1) Decrease (2) stay the same (3) increase
(4) approx. market price (5) None of these
19. An order to trade in a stock once trigger price is reached is known as ——
(1) an at discretion order (2) an at market order (3) an at passive order
(4) an at stop loss order (5) None of these
20. Which type of company restricts the right to transfer shares and where the public may not be invited to subscribe
for shares on debentures or to deposit money with the company———?
(1) Limited company (2) unlimited Company (3) public company
(4) proprietary Company (5) None of these
21. If the dividends are unpaid any one year they accumulate and paid at some later date to preference shareholder
when company has sufficient profit is known as ——
(1) Convertible preference share (2) equity share
(3) participatory preference share (4) Cumulative preference share
(5) None of these
22. It is mandatory that all listed equity share are settled under compulsory rolling settlement within ——— days
(1) T+2 (2) T+5 (3) T+1 (4) T+7 (5) None of these
23. In ETF “T” stands for———
(1) Transfer (2) Transaction (3) Traded (4) Term (5) None of these
24. Who is the recent chairman of SEBI———?
(1) Shri Ajay Tyagi (2) Shri Hari Ojha (3) K P Singh
(4) Ram Gopal Hari (5) None of these
25. When people buy IPO from stock market they have to block his money in his bank account is called.....
(1) ABBA (2) AMBA (3) ASBA (4) IMPS (5) None of these

ANSWER KEY
1.(2) 2.(3) 3.(4) 4.(4) 5.(3) 6.(4) 7.(3) 8.(2) 9.(4) 10.(3)
11.(3) 12.(2) 13.(3) 14.(4) 15.(4) 16.(3) 17.(4) 18.(3) 19.(4) 20.(4)
21.(4) 22.(1) 23.(3) 24.(1) 25.(3)

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Foreign Trade & Exchange

{{ FEATURES OF FOREIGN TRADE

{{ CURRENT ACCOUNT
{{ CAPITAL ACCOUNT
{{ DIFFERENCE BETWEEN FDI AND FII
{{ INDIA’S FDI POLICY
{{ ROUTES FOR FDI TO ENTER INTO INDIA
{{ NEER AND REER
{{ FERA TO FEMA
{{ Question & Answer

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Foreign Trade &

CHAPTER

8 Exchange
Scan the QR code to get video of this chapter.

BALANCED BALANCE OF PAYMENTS

Foreign Trade
Value of total receipts equals total payments.
Its exports and imports of merchandise from one country
to another countries under contract of sale. No country The Balance of Payment accounting has two types:
in the world produces all the commodities it requires. The Current account
commodities which a country produces is at advantage,
Capital account
because it can export.
Features of Foreign Trade Current Account
Import: if the seller is abroad, and the buyer is in the home ##All transactions relating to goods, services and
country. unrequited transfers constitute current account Flow of
Export: when the seller is in the home country and the items pertaining to specific period of time Visible items
purchaser is abroad. include goods Invisible items include services
Visible trade : which can be seen e.g.. Trade of goods. Capital Account
Invisible trade: which can not be seen e.g. Exchange of services. All transactions indicating changes in stock magnitudes
Balance Of Payments concerning capital receipts and payments constitute capital
It is a systematic record of all the economic transactions account.
between the residents of that countries during a given period. Relates to
OR ##Change in stock of gold
A Balance of Payment account is a statement of double entry
system of record of all economic transactions (involving ##Change in reserve of foreign
foreign payments) between residents of a country and the rest ##Currency including SDR
of the world carried out in specific period of time.
##Financial claims & liabilities.
FAVORABLE BALANCE OF PAYMENTS
Value of total receipts more than total payments. ##Direct investment (FDI),

ADVERSE BALANCE OF PAYMENTS ##Portfolio investments (FII),

Value of total receipts less than total payments. ##External commercial borrowing (ECB) etc

Difference Between Current Account And Capital Account

Current Account Capital Account
##Indicates flow aspect of country’s national ## Indicates changes in stock magnitudes
transactions ## Relates to all transactions constituting debts and
##Relates to goods services and unrequited transfer of ownership
transfers

Convertibility of Rupee
Current Account Convertibility Capital Account Convertibility
• Money classified under current account can • Money classified under capital account cannot be
be easily converted into Dollar, Yen, Pound, easily converted into different currency. RBI has
Rupee etc. strict guidlines.
• We don’t have Full Capital Account Convertibility.

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route for most activities; a small negative list was notified,
Foreign Investment
where either the automatic route was not available or there
Foreign Direct Investment (FDI) were limits on FDI.
It refers to direct investment in the productive capacities of FDI is prohibited under the government route as well as
a country by someone from outside the country. the automatic route in the following sectors, where FDI
is not allowed.
Foreign Institutional Investors (FII)
a) Atomic Energy
These are investments by entities from outside the
country into the financial assets like debts and shares b) Lottery Business
of companies from a different country, in which they c) Gambling and Betting
are incorporated. FIIs are required to register with d) Business of Chit Fund
SEBI (Securities and Exchange Board of India) and any
foreign individual wanting to invest into India has to e) Nidhi Companies
copy through one of these FIIs. Routes For FDI To Enter Into India
Difference Between FDI And FII Automatic Route
##In order to remove the ambiguity that prevails on what In most sectors, FDI is permitted on the automatic route. FDI
is Foreign Direct Investment (FDI) and what is Foreign in such sectors does not require any prior approval and only
Institutional Investment (FII) the Finance Minister in his requires notification of RBI.
budget speech of 2013 clarified as under– Government Approved Route
##“I propose to follow the international practice and lay In respect of sectors/activities which are presently under
down a broad principle that where an investor has a stake automatic route but required Government approval earlier as
of 10% or less in a company, it will be treated as FII and, per the extant policy during the relevant period, concerned
where an investor has a stake of more than 10%, it will administrative Ministry/Department would be the Competent
be treated as FDI. Arvind Mayaram committee will be Authorities for the grant of post-facto approval for foreign
constituted to examine the application of the principle investment. In case of proposals involving total foreign equity
and to work out the details expeditiously. inflow of more than Rs 5000 crore, Competent Authority shall
Participatory Notes (P-Notes) place the same for consideration of Cabinet Committee on
##These are financial instruments used by investors or Economic Affairs (CCEA).
hedge funds that are not registered with the Securities The Foreign investgment promotion board (FIPB) the
and Exchange Board of India to invest in Indian government abolished in April 2017.
securities. Indian-based brokerages buy India-based Foreign Exchange
securities and then issue participatory notes to foreign
investors. Any dividends or capital gains collected from Foreign exchange reserves are an important component of the
the underlying securities go back to the investors. BoP and an essential element in the analysis of an economy’s
external position.
Global Depository Receipts (GDRs)
India’s Balance of Payments and Foreign Trade
These are equity instruments issued in international markets
India’s foreign exchange reserves comprise Foreign Currency
like London, Luxembourg etc. Indian companies use GDRs
Assets (FCAs), gold, Special Drawing Rights (SDRs)
to raise capital from abroad. GDRs are designated in dollars,
and Reserve Tranche Position (RTF) in the International
euros etc.
Monetary Fund (IMF).
American Depository Receipts (ADRSs)
Exchange Rate
These are the equity instruments issued to American retail
Exchange Rate is the rate, at which Indian rupee will be
and institutional investors. They are listed in New York, either
exchanged with other international currencies, say US dollar,
on Nasdaq or New York Stock Exchange.
in the foreign exchange market.
Bharat Depository Receipts (BhDRs)
These are similar to ADR/GDR. They are used by non-Indian
NEER And REER
companies in the Indian stock markets for issuing equity to The Nominal Effective Exchange Rate (NEER) and
Indian investors. Real Effective Exchange Rate (REER) indices are
used as indicators of .external competitiveness of the
India’s FDI Policy
country over a period of time/NEER is the weighted
To encourage FDI inflows, India has continued to be fine- average of bilateral nominal exchange rates of the
tuned and progressively liberalized, allowing FDI in more home currency in terms of foreign currencies, while
and more industries under the automatic route. In the year REER is defined as a weighted average of nominal
2000, government allowed FDI up to 100% on the automatic exchange rates, adjusted for home and foreign country
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relative price differentials. Offshore Banking Units (OBUs)

From Foreign Exchange Regulation To ##As per RBI policy of Nov 12, 2002, within SEZs, the OBUs
would be virtually foreign branches of Indian banks located
Management (FERA To FEMA) in India. The major aspects of the guidelines are:
##High Level Committee on Balance of Payments (BoP)
##Eligibility Criteria : Banks operating in India viz. public
(Chairman: Dr C Rangarajan, 1993), set the broad
sector, private sector and foreign banks authorized to
agenda in this regard.
deal in foreign exchange are eligible to set up OBUs.
##The committee recommended the following
##Capital: Parent bank to provide a minimum of USD 10
##The introduction of a market-determined exchange rate million to its OBU.
regime within limits.
Currency Accounts
##Liberalization of current account transactions leading to
##NOSTRO ACCOUNT (Our Account with you)
current account convertibility.
##A nostro account is a record of funds held by a bank
##Strict regulation of external commercial borrowings,
in another country in the currency of that country (in
especially short-term debt.
foreign currency).
Special Economic Zone (SEZ) ##VOSTRO ACCOUNT (your account with us)
Asia’s first Export Processing Zone (EPZ), was set up in ##A vostro account will be in the local currency of the
Kandla, India in 1965. bank where the money is being held i.e. it is the bank in
The first SEZ policy was announced in April, 2000, which country B’s record of the money kept by the bank from
inter-alia provided for to make SEZ an engine of growth country A with it.
supported by quality infrastructure backed up by attractive ##LORO ACCOUNT (their account with them)
fiscal package.
##A loro account is a record of an account held by a bank
To import stability to the SEZ regime, SEZ Act, 2005, was on behalf of a third party.
enacted and which came into effect from February 10, 2006.
Forex Reserves
As per the provisions of the SEZ Act, 2005, 100% FDI is
allowed in SEZs through the automatic route. These are the reserves with the country (with RBI in India
on behalf of Govt. of India) which are used to finance
Some Important Terms In International imports/make payments to countries abroad in settlement
Banking of transactions. The movement in forex reserves is the net
result of all external transactions.

NOTES

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FOREIGN TRADE
1. For any country, in which of the following categories can we define ‘Balance of Payment’?
(1) Favorable Balance of Payment. (2) Adverse Balance of Payment.
(3) Balanced Balance of Payment. (4) Any one of the above term can be used
(5) None of these
2. An economy that do not export or import from other country, is said to be..
(1) Open economy (2) Closed economy (3) Mixed economy
(4) Socialist economy (5) capitalist economy
3. If import increase then the current account deficit of country is likely to?
(1) Will remain constant. (2) Is likely to Increase (3) Is likely to decrease
(4) all of the above (5) None of the above
4. Which of the following is included in Export-Import of a country?
(1) Visible items (2) Invisible items (3) Only a (4) both a & b (5) None of the above
5. Which of the following is not included in invisible item in balance of payments:
(1) Tour and travels paid by tourist (2) Foreign remittance (3) Hotel charges
(4) Food grains (5) None of these
6. Which of the following organization/institution will provide fund for the deficit in balance of payments of a country?
(1) International Monetary Fund (2) World Trade Organization
(3) Bank for International Settlement (4) Group of 7 Developed Nations
(5) None of these
7. Which one of the following, clearly defines the meaning of the balance of payments of a country?
(1) Balance in consolidated fund of the country. (2) Balance with International Monetary Fund
(3) Balance in World Bank. (4) Public debt of that country.
(5) Record of foreign trade of the country.
8. What is the effect of an increase in demand for exports on the foreign currency reserve of a country?
(1) It will be Positive for the foreign currency reserve of that country.
(2) It will be Negative for the foreign currency reserve of that country.
(3) It will be Neutral for the foreign currency reserve of that country.
(4) all of these
(5) None of these
9. Which of the following is included in the Balance of payments of a country:
(1) Current account (2) Capital account (3) Revenue accounts (4) Saving account (5) Both 1 & 2
10. What will be effect of an increase in the debt of a country on current account deficit?
(1) It shall be effected positively. (2) It shall be effected negatively
(3) It shall be effected neutrally (4) all of these
(5) None of these
11. If the value of rupee declines rapidly with comparison to dollar, then the price of Indian goods will?
(1) Indian goods will grew cheaper for foreigners to import our product.
(2) Indian goods will grew costlier for foreigners to export their product.
(3) Indian goods would remain at the same price
(4) all the above
(5) None of these
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12. In which of the following account is borrowings from the World Bank be recorded in the balance of payments?
(1) Capital account. (2) Visible Goods. (3) Current account. (4) Revenue account. (5) Saving account.
13. In which of the following is, the visible items recorded for a country?
(1) Capital account. (2) The balance of trade (3) Foreign Exchange
(4) Reserve Bank of India (5) None of these
14. Which of the following is the full form of IMF.
(1) International Monetary Finance (2) Internet Monetary Fund
(3) International Monetary Fund (4) International Monetary Function committee
(5) None of these
15. Which of the following is the full form of FDI?
(1) Foreign direct investment (2) Foreign development investment
(3) Fixed deposit interest (4) 2 and 3
(5) None of these
16. If balance of payments of country is in deficit, then:
(1) current account will be in deficit (2) export shall increase
(3) The country can borrow from abroad (4) 1 and 3 both.
(5) None of these
17. Foreign exchange reserves of a country will increase, if?
(1) Increase taxes by the government. (2) Export increases but import remain unchanged
(3) Import increases but export remain unchanged (4) 1 and 2 both.
(5) None of these
18. All type of borrowings from outside the country is mentioned in...
(1) Trade account (2) capital account (3) current account
(4) Monetary account (5) None of these
19. IMF gives loans:
(1) To fill gap in balance of payments (2) To fill gap in government budget
(3) To decrease poverty (4) To increase opportunities
(5) all of the above
20. A bank account held in foreign country by a domestic bank denominated in the currency of that country is called:
(1) Loro account (2) Nostro account
(3) Vostro account (4) Foreign currency convertible account
(5) Non-resident ordinary account

ANSWER KEY
1.(4) 2.(2) 3.(2) 4.(4) 5.(4) 6.(1) 7.(5) 8.(1) 9.(5) 10.(2)
11.(1) 12.(1) 13.(2) 14.(3) 15.(1) 16.(4) 17.(2) 18.(2) 19.(1) 20.(2)

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PUBLIC FINANCE

{{ HISTORICAL BACKGROUND
{{ CONCEPTS OF BUDGET
{{ TAXES ON INCOME AND EXPENDITURE
{{ Public Debt
{{ FRBM Act
{{ VAT & GST
{{ Question & Answer

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CHAPTER

9 PUBLIC FINANCE
Scan the QR code to get video of this chapter.

Historical Background
‘Budget System’ was introduced in Shanmukham Chetty on November
India on 7th April, 1860. Sir James 26, 1947.
Wilson the first Indian Finance In 1950-51 budget, the then Finance
Member delivered the budget Minister John Mathai announced the
speech expounding the Indian creation of the Planning Commission.
financial policy as an integral whole
for the first time. C. D. Deshmukh was the first Indian
Governor of RBI to have presented
The financial year for the Union and the State Governments the Interim Budget for the year
in India is from April to March. Each financial year is, 1951-52.
therefore, spread over two calendar years. The period of
financial year as from April to March was introduced in Morarji Desai was the only Finance Minister to have had
India from 1867. Prior to that, the financial year in India the opportunity to present two budgets on his birthday - in
used to commence on 1st May and ended on 30th April 1964 and 1968. After Desai’s resignation, Indira Gandhi,
(L.K. Jha Committee’s Report of the Committee On Change the then Prime Minister of India, took over the Ministry of
in Financial Year). Finance to become the only woman to hold the post of the
finance minister.
Although the Indian Constitution does not mention the
term ‘Budget’, it provides that the President shall in respect The 1965-66 budget contained the first disclosure scheme
of every financial year cause to be laid before both the for black money. Since 1980, budget papers are printed in
Houses of Parliament, the House of People (Lok Sabha) North Block. A week before the budget is presented, the
and the Council of States (Rajya Sabha), a statement of the employees of the press stay in the ministry and have no means
estimated receipts and expenditure of the Government for of communicating with the outside world.
that year. This statement known as the ‘Annual Financial Pranab Mukherjee, the first Rajya Sabha member to hold the
Statement’ is the main fiscal or budgetary document of the Finance portfolio, presented the annual budgets for 1982-83,
Government. 1983-84 and 1984-85.
Budget has been described in Article-112 of the Indian Rajiv Gandhi presented the budget for 1987-89 after V. P.
Constitution as Annual Financial Statement. Singh quit his government and in the process became only
Article-110 Describes Money Bill the third Prime Minister to present a budget after his mother
and grandfather.
Railway Budget was separated from
General Budget in the year 1924 on Three interim budgets were presented in the 1990s while
the recommendations of Acworth Yashwant Sinha presented the interim budget.
Committee. However it is again Budgets for 1991-92 and 1998-99 Manmohan Singh
merged with the Union Budget on presented the 1996-97 interim Budget.
the recommendation of NITI Aayog
P Chidambaram rewrote India‘s Exim Policy in one non-
Members B. Debroy and K. Desai on
stop eight-hour sitting in July 1991, when he became the
21 Sep. 2016.
Commerce Minister.
Budget was presented each year on the last working day of
R Venkataraman and Pranab Mukherjee were the Finance
February by the Finance Minister of India in Parliament. But
Ministers who later became the President of India.
now budget is presented on 1st working day of February. The
budget has to be passed by the House before it can come into Service Tax was introduced in 1994-95 on services like
effect on April 1, the start of India’s financial year. telephone services, stock brokers, health clubs, beauty
parlours, dry cleaning services etc. to correct the disparity in
Former Finance Minister Morarji Desai presented the budget
taxation between goods and services, has become a buoyant
ten times, the most by any finance minister.
source of revenue in recent years.
The first Union budget of independent India was presented After elections in 1996, a non-Congress ministry assumed
by R. K. office. Hence the final budget for 1996-97 was presented
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by P. Chidambaram, who then belonged to Tamil Maanila and the amount withdrawn is returned to the fund from the
Congress. consolidated fund.
Following a constitutional crisis when the I. K. Gujral Public Account Fund
Ministry was on its way out, a special session of Parliament
This fund is to account for flows for those transactions where
was convened just to pass Chidambaram’s 1997-98 budget.
the government is merely acting as a banker, for instance,
This budget was passed without a debate.
provident funds, small savings and so on. These funds do not
Until the year 2000, the Union Budget was announced at 5 belong to the government. They have to be paid back at some
pm on the last working day of the month of February. This time to their rightful owners. Because of this nature of the
practice was inherited from the Colonial Era, when the British fund, expenditures from it are not required to be approved
Parliament would pass the budget in the noon followed by by Parliament.
India in the evening of the day.
Supplementary, Additional Or Excess Grants
It was Yashwant Sinha, the then Finance Minister of India in
If the amount authorized through appropriations for
the NDA government (led by BJP) of Atal Bihari Vajpayee,
a particular service is found to be insufficient for the
who changed the ritual by announcing the 2001 Union Budget
purposes of that year or when a need has arisen during
at 11 am. It also showed, how the previous governments
the current financial year for supplementary or additional
had continued the processes from pre-independence period,
expenditure upon some new service not contemplated
without giving it any thought.
in the annual financial statement for that year, a
Jaswant Singh was Finance Minister for 13 days. supplementary demands for grants proposal shall be made
Both Yaswant Sinha and Manmohan Singh have presented before Parliament. However, if any money has been spent
five Union Budgets in a row. on any service during a financial year in excess of the
In an election year, Budget may be presented twice - first to amount granted for that service and for that year, demand
secure vote on account for a few months and later in full. for such excess, as the case may be is to be laid before both
the Houses of Parliament for authorizing (subject to the
The Budget is presented in Parliament on a date fixed by report of the Public Accounts Committee) the expenditure
the President. incurred in excess.
Concepts of Budget The House of the People shall have power relating to : -
On the budget day, the Finance Minister tables 14 documents. (a) Vote on Account- to make any grant in advance in respect
Of these, the main and most important document is the of the estimated expenditure for apart of any financial
Annual Financial Statement. year pending the completion of the parliamentary
Annual Financial Statement procedure.
Article 112 of the constitution requires the government to (b) Vote of Credit- to make a grant for meeting an
present to the Parliament a statement of estimated receipts unexpected demand upon the resources of India when on
and expenditure in respect of every financial year, April 1 to account of the magnitude or the indefinite character of
March 31. This statement is the annual financial statement. the service the demand cannot be stated with the details
The annual financial statement is usually a white 10-page ordinarily given in an annual financial statement;
document. It is divided into three parts, Consolidated Fund, (c) Exceptional Grant- to make provision for an exceptional
Contingency Fund and Public Account Fund. For each of grant that does not form part of the current service of any
these funds, the government has to present a statement of financial year.
receipts and expenditure.
Revenue Receipt/ Expenditure
Consolidated Fund
All receipts and expenditure that in general do not entail sale
This is the most important of all the government funds. All or creation of assets are included under the revenue account.
revenues raised by the government, money borrowed and On the receipts side, taxes would be the most important
receipts from loans given by the government flow into the revenue receipt. On the expenditure side, anything that
consolidated fund of India. All government expenditure is does not result in creation of assets is treated as revenue
made from this fund, except for exceptional items met from expenditure. Salaries, subsidies and interest payments are
the Contingency Fund or the Public Account. Importantly, no good examples of revenue expenditure.
money can be withdrawn from this fund without Parliament’s
approval. Capital Receipt/ Expenditure
Contingency Fund All receipts and expenditure that liquidate or create an asset,
would in general be under capital account. For instance, if
As the name suggests, any urgent or unforeseen expenditure the government sells shares (disinvests) in public sector
is met from this fund. The Rs 500-crore fund is at the companies, like it did in the case of Maruti, it is in effect
disposal of the President. Any expenditure incurred from selling an asset. The receipts from the sale would go under
this fund requires a subsequent approval from Parliament
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capital account. On the other hand, if the government gives Union Excise Duty:
someone a loan from which it expects to receive interest, Duties imposed on goods manufactured in the country by
that expenditure would go under the capital account. In the Central Government, but those goods are exempted from
respect of all the funds the government has to prepare a union excise duties, on which State Government imposes
Revenue Budget (detailing revenue receipts and revenue excise duty for example Sugar, Cotton, Textile, Tobacco,
expenditure) and a Capital Budget (capital receipts and Motor Spirit, Match Box and Cement etc.
capital expenditure). Contingency Fund is clearly not that
important. Public Account is important in that it gives a view GST (GOODS AND SERVICE TAX):
of select savings and how they are being used, but not that
relevant from a budget perspective. The consolidated fund
is the key to the budget.
Revenue Of Central Government
Receipt estimates on revenue account are divided into two
parts i.e. tax revenue and non tax revenue.
Tax revenue is divided into three parts: A single common “Goods and Services Tax” was pioneered
(a) Tax on income and expenditure by Prime Minister Atal Bihari Vajpayee. Vajpayee set up a
committee headed by the Finance Minister of West Bengal,
(b) Tax on assets and capital transaction; and Asim Dasgupta to design a GST model.
(c) Tax on goods and services Goods and Services Tax is an indirect tax (or consumption
Non-Tax Revenue is divided into two parts tax) imposed in India on the supply of goods and services.
(a) Fiscal and other services GST is imposed at every step in the production process, but
is meant to be refunded to all parties in the various stages
(b) Interest receipts, dividends and profits
of production other than the final consumer. The GST was
Taxes On Income And Expenditure launched at midnight on 1 July 2017 by the President of
India.
Taxes on income are of two kinds i.e. Personal Income Tax
and Corporation Tax i.e. tax on profits of companies. Goods and services tax are divided into five tax slabs for
collection of tax - 0%, 5%, 12%, 18% and 28%. However,
Income Tax
Petroleum products, alcoholic drinks, electricity, are not
Central government imposes personal income tax on taxed under GST. The tax came into effect from July 1,
individual’s income and revenue received from this is 2017 through the implementation of One Hundred and
distributed between the Centre and the States. Income tax First Amendment of the Constitution of India by the Indian
is not imposed on all individuals but on those who are government. The tax replaced existing multiple flowing taxes
prosperous. Its basis is ‘Ability to Pay ‘ principle. levied by the central and state governments.
Corporation Tax GST Council
Corporation tax is tax on income of companies. This tax is GST Council is the governing body of GST having 33
imposed by Central Government on the profits of small and members. It is chaired by the Union Finance Minister. GST
big companies. Council is an apex member committee to modify, reconcile or
Securities Transaction Tax (STT) to procure any law or act or regulation based on the context
Sale of any asset (shares, property etc-) results in loss or of goods and services tax in India.
profit. Depending on the time the asset is held, such profits Goods and Services Tax Network (GSTN)
and losses are categorised as long term or short term capital The GSTN software is developed by Infosys Technologies
gain/loss. In the year 2004-05 budget, the government and the Information Technology network that provides the
abolished long-term capital gains tax on shares (tax on profits computing resources is maintained by the NIC. “Goods and
made on sale of shares held for more than a year) and replaced Services Tax” Network (GSTN) is a non-profit organisation
it with STT. It is a kind of turnover tax where the investor has formed for creating a sophisticated network, accessible
to pay a small tax on the total consideration paid/received to stakeholders, government and taxpayers to access
in a share transaction. In budget 2018-19, again 10% LTCG information from a single source (portal).
(long term capital gain) tax introduced.
Direct Tax
Custom Duty
Traditionally, these are taxes where the burden of tax falls on
Taxes imposed on imports. While revenue is an important the person on whom it is levied. These are largely taxes on
consideration, custom duties may also be levied to protect income or wealth. Income tax (on corporates and individuals),
the domestic industry or sector (agriculture, for one), in FBT, STT and BCTT are direct taxes.
retaliation against measures by other countries etc.

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GST

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Indirect Tax component of the non-scheme expenditure is relatively small
In the case of indirect taxes the incidence of tax is usually with the largest allocation going to defence.
not on the person who pays the tax. These are largely taxes
on expenditure and include customs, excise and GST.
Types of Deficit
Revenue Deficit
Indirect taxes are considered regressive, the burden on the
rich and the poor is alike. That is why governments strive Revenue Expenditure – Revenue Income
to raise a higher proportion of taxes through direct taxes. Budgetary Deficit
Moving on, we come to the next important receipt item in
Total Expenditure – Total Income
the revenue account, non-tax revenue.
Fiscal Deficit
Non-Tax Revenue
Budgetary Deficit + Borrowing & Other Liabilities
The most important receipts under this head are interest
payments (received on loans given by the government to Primary Deficit
states, railways and others) and dividends and profits received Fiscal Deficit – Interest Payment
from public sector companies.
It is important to note that the entire defence expenditure is non-
Various services provided by the government - general
scheme expenditure. We will now take up the various deficits
services such as police and defence, social and community
and the components of scheme and non-scheme expenditure.
services such as medical services and economic services
such as power and railways - also yield revenue for the FRBM Act:
government. Though Railways are a separate department, Enacted in 2003, the Fiscal Responsibility and Budget
all its receipts and expenditures are routed through the Management Act requires the elimination of revenue deficit
consolidated fund. by 2008-09. This means that from 2008-09, the government
Public Debt will have to meet all its revenue expenditure from its
revenue receipts. Any borrowing would then only be to meet
In normal accounting, debt is a stock, to be measured at a
capital expenditure - repayment of loans, lending and fresh
point of time, while borrowing and repayment during a year
investment. The Act also mandates a 3% limit on the fiscal
are flows, to be measured over a period of time. In Budget
deficit after 2008-09. This is a reasonable limit that allows
parlance, however, you’ll find public debt receipts and
significant leverage to the government to build capacities in
public debt disbursals. These are respectively borrowings
the economy without compromising fiscal stability.
and repayments during the year. The difference between the
two is the net accretion to the public debt. It is important to note that since the entire Budget is at current
market prices, the deficits are also calculated with reference
Public debt can be split into two heads, internal debt (money
to GDP at current market prices.
borrowed within the country) and external debt (funds
borrowed from non-Indian sources). Value-Added Tax (VAT) And GST:
The internal debt comprises of Treasury Bills, Market VAT helps avoid cascading of taxes (tax being levied upon a
Stabilisation Scheme, Ways and Means Advance, and price that includes one or more elements of tax) as a product
securities against small savings. passes through different stages of production/value addition.
The tax is based on the difference between the value of the
Scheme Expenditure
output and the value of the inputs used to produce it. The aim
This is essentially the Budget support to the central plan and is to tax a firm only for the value added by it to the inputs it
the central assistance to state and Union territory plans. Like is using for manufacturing its output and not the entire input
all Budget heads, this is also split into revenue and capital cost. VAT brings in transparency to commodity taxation: right
components. now, only the final tax paid by the consumer is apparent to
Non-Scheme Expenditure them, while with value added tax generalised to goods and
services tax (GST) that subsumes both central and state
This is largely the revenue expenditure of the government.
level taxation, the entire element of tax borne by a good (or
The biggest item of expenditure are interest payments,
a service) would be represented by the GST paid on it.
subsidies, salaries, defence and pension. The capital

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PUBLIC FINANCE (BUDGET)

1. What is budget?
(1) It is a monthly financial statement of estimated receipts and expenditures of the Government of India in a
financial year.
(2) It is an annual financial statement of estimated expenditures of the Government of India in respect of each
financial year.
(3) It is quarterly financial statement of estimated receipts of the Government of India in respect of each financial
year.
(4) It is an annual financial statement of estimated receipts and expenditures of the Government of India in respect
of each financial year.
(5) None of these
2. Which of the following is true regarding a budget?
(A) Budget is a legal document. (B) It is passed by the legislature
(C) It is approved by the President.
(1) Only option A is correct. (2) Only option A & B are correct.
(3) Only option B & C are correct. (4) All of these
(5) None of these
3. What were the different types of budget presented in India?
(A) The Union Budget is presented to the Parliament in two parts.
(B) Railway Budget consists of the detail of Indian Railway.
(C) General Budget consists the financial detail of Indian Government.
(1) Only option A, B & C is correct. (2) Only option A & B are correct.
(3) Only option B & C are correct. (4) Only option A & C are correct.
(5) None of these
4. Which of the following is true regarding the nature and objective of budget?
(A) Government Budget is designed for optimal allocation of scarce resources.
(B) The main objective of Government financial management is to determine how adequately the financial and
resource management responsibilities have been discharged
(C) The broad objectives of the Government to be broken down into detailed work plans.
(1) Only option B & C is correct. (2) Only option A & B are correct.
(3) Only option A, B & C are correct. (4) Only option A & C are correct.
(5) None of these
5. Which of the following is true regarding budget preparation in India?
(A) Budget preparation in India is a calculative process between the Ministry of Finance and the spending Ministries.
(B) Top down approach with the Ministry of Finance issuing guidelines or communicating instructions to spending
Ministries.
(C) A bottom-up approach, wherein the spending Ministries plan and present requests for budget allocation.
(1) Only option B & C is correct. (2) Only option A, B & C are correct.
(3) Only option A & B are correct. (4) Only option A & C are correct.
(5) None of these
6. What are the components of a budget?
(1) Annual Financial Statement. (2) Finance Bill. (3) Appropriation Bill.
(4) Demands for Grants. (5) All of the above

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7. When is a budget presented in the Lok Sabha?
(A) It is presented in accordance with article 204(1) of rules of procedure and conduct of business.
(B) The budget is presented in the Lok Sabha on the day as fixed by the president of India
(C) Now it is presented at 11 am on the first working day of February.
(1) Option A, B & C is correct. (2) Only option B & C are correct.
(3) Only option A & B are correct. (4) Only option A & C are correct.
(5) None of these
8. Which of the following is related to budget?
(1) Plan expenditure (2) Decided expenditure (3) Undecided expenditure
(4) Option 1 & 2 are true (5) Options 2 & 3 is true
9. Which of the following is included to scheme expenditure?
(1) Central plans. (2) Centrally sponsored state plans. (3) Only option 2 is true
(4) Only option 1 is true (5) Both 1 and 2 is true
10. Which of the following is included to non-scheme expenditure?
(1) Interest payments. (2) Subsidies.
(3) wage and salary payments to government employees (4) All of these
(5) None of these
11. Borrowing is included in which of the following account?
(1) Current account (2) Saving account (3) Capital account.
(4) Social account (5) None of these
12. Article 112 of the Constitution of India is related to:
(1) Budget (Annual Financial Statement) (2) Financial Emergency.
(3) National Emergency. (4) State budget.
(5) None of these
13. Article 110 of the Constitution of India is related to:
(1) Budget (2) Financial Bill (3) Money Bill (4) State budget (5) None of these
14. Article 117 of the Constitution of India is related to:
(1) Budget (2) Financial Bill (3) Money Bill (4) State budget (5) None of these
15. Which of the following is a type of budget?
(1) Deficit budget (2) Surplus Budget (3) Balanced budget (4) Interim Budget (5) All of these
16. Which of the following fund is related to article 266(i)?
(1) Contingency Fund (2) Consolidated Fund (3) Public Account Fund
(4) All of these (5) None of these
17. Which of the following fund is related to article 266(ii)?
(1) Contingency Fund (2) Consolidated Fund (3) Public Account Fund
(4) All of these (5) None of these
18. Which of the following fund is related to article 267?
(1) Contingency Fund (2) Consolidated Fund (3) Public Account Fund
(4) All of these (5) None of these
19. What is the amount allocated for Contingency Fund?
(1) Rs. 50 crores. (2) Rs. 500 crores. (3) Rs. 5,000 crores.
(4) Rs. 50,000 crores. (5) None of these
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20. Revenue Deficit is defined as:
(1) Total Revenue Expenditure - Total Revenue Receipt (2) Revenue receipt plus Revenue expenditure
(3) Revenue receipt minus Capital expenditure (4) Capital receipt minus Revenue expenditure
(5) None of these
21. Fiscal Deficit is defined as:
(1) Total Capital receipt minus Revenue expenditure (2) Total Borrowing minus Total expenditure
(3) Total Revenue receipt plus Revenue expenditure (4) Total Receipt minus Total expenditure
(5) Total (non-borrowed) Receipt minus Total expenditure
22. Primary Deficit is defined as:
(1) Fiscal Deficit – interest payments (2) Fiscal Deficit + interest payments
(3) Fiscal Deficit – Revenue Expenditure (4) Fiscal Deficit – Capital Expenditure
(5) None of these
23. Which of the following Deficit indicates lack of resources to accomplish a decided target for coming year:
(1) Revenue Deficit (2) Capital Deficit (3) Primary Deficit (4) Fiscal Deficit (5) None of these
24. Non-scheme revenue expenditure includes:
(A) Interest payments, subsidies (mainly on food and fertilizers).
(B) Wage and salary payments to government employees, grants to States and Union Territories governments.
(C) Payment for Pensions, police, economic services in various sectors, other general services such as tax collection,
social services, and grants to foreign governments.
(1) Only option A & C is correct. (2) Only option B & C are correct.
(3) Only option A, B & C are correct. (4) All are correct.
(5) None of these
25. Non-scheme capital expenditure mainly includes:
(a) Defence expenditure
(b) Loans to public enterprises and loans to States.
(c) Loans to Union Territories and foreign governments.
(1) Only option a & c are correct (2) Only option b & c are correct
(3) Only option a & b are correct (4) All are correct
(5) None of these

ANSWER KEY
1.(4) 2.(4) 3.(1) 4.(3) 5.(2) 6.(5) 7.(1) 8.(1) 9.(5) 10.(4)
11.(3) 12.(1) 13.(3) 14.(2) 15.(5) 16.(2) 17.(3) 18.(1) 19.(2) 20.(1)
21.(5) 22.(1) 23.(4) 24.(3) 25.(4)

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Economic Planning in India

{{ HISTORY OF PLANNING IN INDIA

{{ PLANNING COMMISSION
{{ NATIONAL DEVELOPMENT COUNCIL
{{ NITI AAYOG (Main Points)
{{ Question & Answer

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CHAPTER
Economic
10 Planning in India
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a. Make an assessment of the material, capital and human

History of Planning In India
resources of the country, including technical personnel,
First attempt to initiate and investigate the possibilities of augmenting such of
economic planning these resources as are found to be deficient in relation
in India was made by to the nation’s requirement;
Sir M. Visvesvarayya,
b. Formulate a Plan for the most effective and balanced
a noted engineer and
utilisation of country’s resources;
politician, in 1934
through his book, c. On a determination of priorities, define the stages in
‘Planned Economy for which the Plan should be carried out and propose the
India’. allocation of resources for the due completion of each
stage;
In 1938, ‘National
Planning Commission’ was set - up under the chairmanship d. Indicate the factors which are tending to retard economic
of JL Nehru by the Indian National Congress. Its development, and determine the conditions which, in
recommendations could not be implemented because of the view of the current social and political situation, should
beginning of the Second World War and changes in the Indian be established for the successful execution of the Plan;
political situation. e. Determine the nature of the machinery which will be
In 1944, ‘Bombay necessary for securing the successful implementation
Plan’ was presented by of each stage of the Plan in all its aspects;
8 leading industrialists f. Appraise from time to time the progress achieved in the
of Bombay. execution of each stage of the Plan and recommend the
In 1944, ‘Gandhian adjustments of policy and measures that such appraisal
Plan’ was given by may show to be necessary; and
Shrimannarayan. g. Make such interim or ancillary recommendations as
In 1945, ‘People’s appear to it to be appropriate either for facilitating
Plan’ was given by the discharge of the duties assigned to it, or on a
M N Roy. In 1950, consideration of prevailing economic conditions, current
‘Sarvodaya Plan’ was policies, measures and development programmes or on
given by J P Narayan. A few points of this plan were accepted an examination of such specific problems as may be
by the Government. referred to it for advice by Central or State Governments.
Planning Commission National Development Council
The Planning Commission was set - up on March 15, 1950 All the plans made by the Planning Commission have to
under the chairmanship of JL Nehru, by a resolution of Union be approved by National Development Council first. It was
Cabinet. It is an extra - constitutional, non - statutory and constituted to build co-operation between the States and the
advisory body. It consists of Prime Minister as the ex - officio Planning Commission for economic planning. It is an extra
Chairman, one Deputy - Chairman appointed by the PM - constitutional and extra - legal body. It was set - up on
and some full time members. The tenure of its members and August 6, 1952, by a proposal of the Government. The PM is
deputy chairman is not fixed. There is no definite definition of the ex - officio chairman of NDC. Other members are Union
its members also. They are appointed by the Government on Cabinet Ministers, Chief Ministers and Finance Ministers of
its own discretion. The number of members can also change all States, Lt. Governors of Union Territories and Governors
according to the wishes of the Government. of Centrally - ruled States.
Functions State Planning Board
The 1950 resolution setting up the Planning Commission Apex planning body at State level is generally a State
outlined its functions as to: Planning Body comprising the Chief Minister as Chairman,

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Finance and Planning Ministers of that State and some The government intends to reduce poverty by 10 per cent
technical experts. District Planning Committee is also there during the 12th Five-Year Plan. Ahluwalia said, We aim
comprising both official and non - official members. to reduce poverty estimates by 2 per cent annually on a
12th Five Year Plan sustainable basis during the Plan period.

12th Five Year Plan of the Government of India (2012–17) According to the Tendulkar methodology, the percentage of
is under drafting which aims at one direction will help doing population below the poverty line was 29.8 per cent at the
so the growth rate at 9.56%. end of 2009-10. This number includes 33.8 per cent in the
rural areas. He also said that the rate of decline in poverty
With the deteriorating global situation, the Deputy Chairman doubled during the 11th Plan. The commission had said,
of the Planning Commission Montek Singh Ahluwalia has while using the Tendulkar poverty line, the rate of reduction
said that achieving an average growth rate of 9 per cent in in the five years between 2004–05 and 2009–10, was about
the next five years is not possible. The final growth target has 1.5 percentage points each year, which was twice that when
been set at 9% by the endorsement of plan at the National compared to the period between 1993-95 to 2004-05.
Development Council (NDC) meeting held in New Delhi.
After 12th Five Year Plan: NITI Aayog to replace 5 years plan
It is not possible to think of an average of 9 per cent (in with 15 years vision document. it is come into effect 2017-18.
12th Plan). I think somewhere between 8 and 8.5 per cent Seven years national development Agenda (It will be lay down
is feasible”, Ahluwalia said on the sidelines of a conference the scheme, programmes and strategies to achive the long term
of State Planning Boards and departments. The approached vision), from 1 April 2017-3 years action plan (strategic paper)
paper for the 12th Plan, approved last year, talked about an
annual average growth rate of 9 per cent. Niti Aayog (Main Points)
When I say feasible...that will require major effort. If you Niti Aayog - National Institution for Transforming India
don’t do that, there is no God given right to grow at 8 per Chairperson - Prime Minister
cent. I think given that the world economy deteriorated very
Vice Chairperson- Dr. Rajiv Kumar (Economist)
sharply over the last year...the growth rate in the first year of
the 12th Plan (2012-13) is 6.5 to 7 per cent. CEO :- Planning Commission Secretary Mr. Amitabh kant
- have been appointed as CEO of the NITI Aayog.
He also indicated that soon he would share his views with
other members of the Commission to choose a final number Full Time Member - Mr. Bibek Debroy (Economist),
(economic growth target) to put before the country’s NDC Mr. V.K. Saraswat (Former DRDO Chief), Ramesh chand
for its approval. (Agricultural Expert), Dr. V.K. Paul (Professor and Public
health Expert)
Though the 12th Plan has taken off, it is yet to be formally
approved. The Planning Commission has set a deadline of EX Officio Member - Mr. Rajnath Singh, Mr. Arun Jaitely,
September for taking the approval of the NDC. The council Mr. Piyush Goyal, Mr. Radha Mohan Singh.
is expected to meet after July subject to the convenience of Special Invitees - Mr. Nitin Gadkari, Prakash Javadekar, Mr.
the Prime Minister. Thawar Chand Gehlot.

NITI Aayog has replaced the Previous Planning Commission of India.

Parameter NITI Aayog Planning Commission
Financial Clout To be an advisory body, or a think tank. The Enjoy the powers to allocate funds to ministries and
powers to allocate funds might be vested State Governments.
in the Finance Ministry.
Full Time The number of full-time members could be The last commission had 8 full time members.
Members fewer than Planning Commssion.
State’s Role State Governments are expected to play a State’s role was limited to the National Development
more significant role than they did in the Council and annual interaction during Plan Meetings.
Planning Commission.
Member Secretary To be known as the CEO and to be Secretaries or Member Secretaries were appointed
appointed by the Prime Minister. through the usual process.
Part-Time To have a number of part time members, Planning Commission had no provision for Part-Time
Members depending on the need from time to time. Members.

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PLANNING AND NITI Aayog
1. What does N stand for in “NITI Aayog”?
(1) Nominal (2) National (3) Numerical (4) Numbered (5) Numismatic
2. Who is the CEO of NITI Aayog?
(1) Sindhushree Khullar (2) Montek Ahluwalia (3) C.B. Krishnamurthy
(4) Amitabh Kant (5) Sushma Swaraj
3. Which of the following is a special invitee in the NITI Aayog?
(1) Suresh Prabhu (2) Rajnath Singh (3) Kiran Rijiju (4) Nitin Gadkari (5) None of these
4. What is the intial capital of SETU under NITI Aayog?
(1) 500 Crore (2) 1000 Crore (3) 1500 Crore (4) 2000 Crore (5) 2500 Crore
5. What does S stand for in SETU?
(1) Solar (2) Seminal (3) Silicon (4) Sole (5) Self
6. Who was the 1st Chairman of Planning Commission?
(1) Rajendra Prasad (2) S. Radhakrishnan (3) B.R. Ambedkar
(4) Mahatma Gandhi (5) J.L. Nehru
7. What is the Maximum limit of Part-time members in the erstwhile Planning Commission?
(1) 0 (2) 1 (3) 2 (4) 3 (5) 4
8. After which Former Prime Minister “AIM” scheme under NITI Aayog? has been setup?
(1) C.M. Annadurai (2) K. Kamraj (3) A.B. Vajpayee
(4) L.K. Advani (5) None of these
9. The Economic Planning concept in India is taken from?
(1) U.K. (2) U.S.A (3) Spain (4) Russia (5) Italy
10. What was the Basis of First Five Year Plan?
(1) Harold -Domar Model (2) P.C. Mahalanobis Model (3) Both of the Above
(4) All of the Above (5) None of these
11. Which Plan is also known as Gadgil Yojna?
(1) 1st Five year plan (2) 2nd Five year plan (3) 3rd Five year plan
(4) 4th Five year plan (5) 5th Five year plan
12. When was the National Development Council constituted?
(1) 2 August, 1952 (2) 6 August, 1952 (3) 8 August, 1952 (4) 12 August, 1952 (5) 22 August,1952
13. Who appoints the Vice-Chairman of NITI Aayog?
(1) Prime Minister (2) President of India
(3) Chief Justice of the Supreme Court (4) Attorney General
(5) None of these
14. What is the composition of Ex-officio members in the NITI Aayog?
(1) 2 (2) 4 (3) 6 (4) 8 (5) 10
15. Who was nominated to the full time membership of NITI Aayog?
(1) Bibek Shastri (2) Varun Agarwal (3) Arun Shourie (4) Ramesh Chand (5) None of these
16. When the Government did announced the formation of NITI Aayog?
(1) 1st Jan,2014 (2) 1st Jan,2015 (3) 1st Jan,2016 (4) 1st April,2015 (5) 1st March,2015

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17. Who was replaced as the CEO of the NITI Aayog?
(1) Montek Ahluwalia (2) D.R. Gadgil (3) Sindhushree Khullar
(4) Arundhati Bhattacharya (5) D. Subbarao
18. What was the maximum strength of Full time members in the Planning Commission?
(1) 8 (2) 9 (3) 10 (4) 11 (5) 12
19. What is the full form of AIM?
(1) Atal Invitation Mission (2) Atal Invention Mission
(3) Atal Introspection Mission (4) Atal Innovation Mission
(5) None of these
20. Grand Innovation Challenge is associated with which scheme/mission?
(1) AIM (2) SETU (3) AMRUT (4) JNNURM (5) None of these
21. What is the full form of NIDHI under Atal Innovation Mission?
(1) National Invite for Developing and Harnessing Innovations
(2) National Initiative for Development and Harnessing Innovations
(3) National Initiative for Developing and Harnessing Innovations
(4) National Invite for Development and Harnessing Innovations
(5) None of these
22. Which was the last Five year plan?
(1) 10th (2) 11th (3) 12th (4) 8th (5) None of these
23. What is the composition of Part-time members in NITI Aayog?
(1) 0 (2) 1 (3) 2 (4) 3 (5) 4
24. NITI Aayog will have which of the following bodies comprising of Chief Ministers of States and Lt. Governors
of Union Territories?
(1) Governing committee (2) Governing Panel
(3) Governing select committee (4) Governing Council
(5) None of these
25. Which of the following statements is/are correct about NITI Aayog?
(A) A serving IES officer can become a part time member of Niti Aayog
(B) A union minister can become a full time members of NITI Aayog
(1) Only 1 (2) Only 2 (3) Both (4) Not Applicable (5) None of these

ANSWER KEY
1.(2) 2.(4) 3.(4) 4.(2) 5.(5) 6.(5) 7.(1) 8.(3) 9.(5) 10.(1)
11.(3) 12.(2) 13.(1) 14.(2) 15.(4) 16.(2) 17.(3) 18.(1) 19.(4) 20.(1)
21.(2) 22.(3) 23.(3) 24.(4) 25.(5)

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Social Welfare Schemes

{{ Pradhan Mantri Jan-Dhan Yojana

{{ Beti Bachao, Beti Padhao Yojana
{{ Sukanya Samriddhi Yojana
{{ SWACHh BHARAT ABHIYAN
{{ MAKE IN INDIA PROJECT
{{ PRADHAN MANTRI KRISHI SINCHAYEE YOJANA
{{ Pharma Jan Samadhan scheme
{{ Upgrading the Skills and Training in Traditional
Arts/Crafts for Development (USTTAD) Scheme
{{ Deendayal Upadhyaya Gram Jyoti Yojana
{{ Shyama Prasad Mukherjee Rurban mission
{{ Pradhan Mantri Khanij Kshetra Kalyan Yojana
{{ Mission Indradhanush
{{ Pradhan Mantri Vaya Vandana Yojana
{{ Ayushman Bharat Yojana
{{ Stand-Up India Scheme
{{ Pradhan Mantri Fasal Bima Yojana
{{ ATAL PENSION YOJANA
{{ GOBAR-Dhan Yojana
{{ Mission Solar Charkha
{{ Pradhan Mantri Annadata Aay SanraksHan Abhiyan
{{ Pradhan Mantri Kisan Samman Nidhi
{{ Pradhan Mantri Shram Yogi Mandhan
{{ Question & Answer

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Social Welfare
CHAPTER

11 Schemes
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##Easy Transfer of money across India

Pradhan Mantri Jan-Dhan Yojana
(PMJDY-28 August 2014) ##Beneficiaries of Government Schemes will get Direct
Benefit Transfer in these accounts.
Pradhan Mantri Jan-Dhan Yojana (PMJDY) is National Mission
for Financial Inclusion to ensure access to financial services, ##After satisfactory operation of the account for 6 months,
namely, Banking/ Savings & Deposit Accounts, Remittance, an overdraft facility will be permitted
Credit, Insurance, Pension in an affordable manner. ##Access to Pension, insurance products.
Account can be opened in any bank branch or Business ##Accidental Insurance Cover, RuPay Debit Card must be
Correspondent (Bank Mitra) outlet. PMJDY accounts are used at least once in 90 days.
being opened with Zero balance. However, if the account-
##Overdraft facility upto Rs.10000/- is available in only
holder wishes to get cheque book, he/she will have to fulfill
one account per household, preferably lady of the
minimum balance criteria.
household.
Objective
##Age limit 18 to 65 years.
The objective of “Pradhan Mantri Jan-Dhan Yojana
(PMJDY)” is ensuring access to various financial services Beti Bachao, Beti Padhao Yojana
like availability of basic savings bank account, access to need (22 January 2015)
based credit, remittances facility, insurance and pension to
Government has introduced a new scheme called Beti Bachao,
the excluded sections i.e. weaker sections & low income
Beti Padhao, which will help in generating awareness and
groups. This deep penetration at affordable cost is possible
improving the efficiency of delivery of welfare services
only with effective use of technology.
meant for women with an initial corpus of Rs 100 crore. The
PMJDY is a National Mission on Financial Inclusion government would focus on campaigns to sensitize people
encompassing an integrated approach to bring about of this country towards the concerns of the girl child and
comprehensive financial inclusion of all the households in women. The process of sensitization must begin early and
the country. The plan envisages universal access to banking therefore the school curriculum must have a separate chapter
facilities with at least one basic banking account for every on gender mainstreaming.
household, financial literacy, access to credit, insurance
and pension facility. In addition, the beneficiaries would Sukanya SamridDhi Yojana
get RuPay Debit card having inbuilt accident insurance (22 January 2015)
cover of Rs. 2 lakh. The plan also envisages channeling all This small-deposit scheme is subpart of Beti Bachao
Government benefits (from Centre / State / Local Body) to the campaign.
beneficiaries accounts and pushing the Direct Benefit Transfer
Features
(DBT) scheme of the Union Government. The technological
issues like poor connectivity, on-line transactions will be ##(Minor) bank account for girl child below the age of 10.
addressed. Mobile transactions through telecom operators and ##She can withdraw 50% of the money after reaching age
their established centres as Cash Out Points are also planned of 18 e.g. for higher education. 18 years deadline will
to be used for Financial Inclusion under the Scheme. Also an also help preventing child-marriages. (Although scheme
effort is being made to reach out to the youth of this country is silent- on whether account money will be forfeited if
to participate in this Mission Mode Programme. child marriage done.)
Special Benefits under PMJDY Scheme ##For initial account opening, minimum deposit Rs.250
required.
##Interest on deposit.
##Later, any amount in multiple of 100 can be deposited,
##Accidental insurance cover of Rs.2.00 lac
but not exceeding Rs. 1.5 lakh per year. No income tax
##No minimum balance required. will be applicable on this.
##Life insurance cover of Rs.30,000/- ##Account can be opened via post office or commercial
##Rs. 2000 OD without any conditions. banks, Account will remain operative until she reaches
21 age.
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stportal.mahendras.org
PMKSY is central scheme that aims at providing irrigation
Swach Bharat Abhiyan-2 Oct. 2014
facilities to every village in the country by converging
ongoing irrigation schemes implemented by various
ministries.
Salient features
Ensure access to some means of protective irrigation to all
agricultural farms in the country in order to produce ‘per drop
more crop’ to bring desired rural prosperity.
Flexibility and autonomy:to states in the process of planning
and executing irrigation projects in order to ensure water to
every farm.
The concept of Swachh Bharat is to pave access for every Irrigation plans: ensure that state and district irrigation plans
person to sanitation facilities including toilets, solid and are prepared on the basis of sources of availability of water
liquid waste disposal systems, village cleanliness and safe and agro-climatic conditions in that region.
and adequate drinking water supply. We have to achieve this Promoting extension activities: related to ‘on farm water
by 2019 as a befitting tribute to Father of the Nation Mahatma management and crop alignment’ for farmers as well as grass
Gandhi on his 150th Birth Anniversary. root level field functionaries.
Make In India Project Agencies involved: nodal agency for implementation of
PMKSY projects will be state agriculture department.
Inter-ministerial National Steering Committee (NSC) will
periodically review these projects.
Budgetary allocation: PMKSY - Harkhet Kopani -
Country’s 96 irrigation - deprived districts Budget allocation
is rupees 2600 cr.
Funding Pattern: Centre- States will be 75: 25 per cent.
In case of north-eastern region and hilly states it will be
90:10.
With the objective of making the country a manufacturing
hub for domestic and foreign companies,  Prime Minister Pharma Jan Samadhan Scheme
Narendra Modi on Thursday launched the NDA Government’s (12 March 2015)
“Make in India” campaign rolling out a red carpet to attract
Union Government has launched Pharma Jan Samadhan
industrialists to make India a global manufacturing hub, to
scheme, for redressal of grievances of consumers related to
help create jobs and boost economic growth.
drug pricing and availability of medicines.
Adding that the FDI is also a responsibility for the people of
India, he said, foreign direct investment (FDI) has a different It was launched by Union Chemicals and Fertilizers Minister
meaning for him, and not just how the world looks at it only Ananth Kumar in New Delhi.
as an opportunity. For him, FDI means “first develop India”. The scheme is a web-enabled system created by National
Pradhan Mantri Krishi Sinchayee Yojana Pharmaceutical Pricing Authority (NPPA).
(1 July 2015) It seeks to serve as a robust E-governance tool for protection
of interests of consumers through effective implementation
of the price of drugs.
The scheme will provide consumers with an online facility
to redress their complaints related to over-pricing of
medicines, non-availability of medicines and refusal of
supply for sale of any medicine without good and sufficient
reason.
After receiving the complaint, NPPA will initiate action on
any complaint within 48 hrs.
The scheme also seeks to create awareness among the people
Union Cabinet meeting chaired by Narendra Modi approved and act as a deterrent against black-marketing, spurious
Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) or PM’s medicines and inflated cost of drugs by creating phama-
Agriculture Irrigation Scheme. literacy initiative.
90 GeneraL Awareness
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It will be comprehensive plan documents detailing out the
Upgrading The Skills And Training In
strategy for the cluster development.
Traditional Arts/Crafts For Development
(USTAAD) Scheme (14 May 2015) Pradhan Mantri Khanij Kshetra
Union Government formally launched Upgrading the Skills
Kalyan Yojana (PMKKKY-17
and Training in Traditional Arts/Crafts for Development September 2015)
(USTTAD) Scheme. Union Government has launched the Pradhan Mantri Khanij
It was launched by Union Minister of Minority Affairs Dr. Kshetra Kalyan Yojana (PMKKKY) for the welfare of people
Najma Heptullah in Varanasi, Uttar Pradesh in order to affected by mining related operations.
improve degrading conditions of world famous Banaras Saree About Pradhan Mantri Khanij Kshetra Kalyan Yojana
weavers who belong to minority communities. (PMKKKY)
Facts about USTAAD Scheme: Aim: Mitigate the adverse impacts due to mining operation
on the health and environment.
The Scheme aims at upgrading Skills and Training of
minority communities by preservation of traditional ancestral It also seeks to ensure long-term sustainable livelihoods for
Arts and Crafts. the affected people in mining areas.
It also envisages boosting the skill of craftsmen, weavers Objective: To implement various welfare and developmental
and artisans who are already engaged in the traditional projects in mining affected areas by complementing the
ancestral work. existing ongoing schemes of State and Central Government;
To mitigate and minimize the adverse impacts during and
Under the scheme, assistance will be provided to traditional
after mining on the health, environment and socio-economics
artisans to sell their products in order to make them more
of people in mining districts.
compatible with modern markets.
To ensure long-term sustainable livelihoods to people in areas
It is fully funded by Union Government and Union Ministry affected by mining.
of Minority Affairs is nodal agency in implementing it.
DMF spending: 60 per cent of the DMFs will be spent on
Shyama Prasad Mukherjee Rurban Mission high priority areas including health care, education, drinking
(SPMRM-16 September 2015) water supply, sanitation and skill development of the affected
people.
The Union Cabinet has approved Shyama Prasad Mukherjee
Rurban mission for its ambitious bid to spur social, economic Rest of the funds will be spent on infrastructure developmental
and infrastructure development in rural areas. projects such as making roads, railways, bridges, waterways
projects, irrigation and alternative energy sources.
Salient features:
Aim: SPMRM through development of rurban growth Mission Indradhanush
clusters aims at catalyzing overall regional growth. Union Ministry of Health and Family Welfare has launched
Twin objectives: It seeks to achieve of strengthening rural the Mission Indradhanush to achieve full immunisation of
areas and de burdening the urban areas. children below two years.
Mission Indradhanush depicts 7 colours of the rainbow
Thus it seeks for balanced regional development and growth
which aims to cover all those children by 2020 who are either
of the country by simultaneously benefiting the rural as well
unvaccinated or are partially vaccinated against 7 vaccine
as urban areas of the country.
preventable diseases
The State Governments would identify the clusters which
These 7 diseases are :
have latent potential for growth in accordance with the
Framework for Implementation. • Diphtheria
This framework will be prepared by the Union Ministry of • Whooping cough
Rural Development. • Tetanus
The clusters will be geographically contiguous Gram • Polio
Panchayats with different population and follow administrative • Tuberculosis
convergence units of Gram Panchayats.
• Measles
Plain and coastal areas must have population of about 25000 to
• Hepatitis B
50000, desert areas, hilly or tribal areas must have 5000 to 15000.
WHO, UNICEF, Rotary International and others are donor
There would be a separate approach for selection of clusters
partners for Mission Indradhanush.
in Tribal and Non-Tribal Districts.
The mission was launched in December 2014 on the occasion
States government will prepare Integrated Cluster Action of National Good Governance Day (Dec. 25)
Plans for Rurban Clusters.
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It would seek to increase their familiarity with factoring
UDAY scheme (November 2015)
services, e-market places and registration with online
Union Cabinet chaired by Prime Minister Narendra Modi platforms as well as sessions on best practices and problem
has given its nod Ujwal DISCOM Assurance Yojna (UDAY) solving.
for financial restructuring of debt of power distribution
companies. It would provide women and SC/ST entrepreneurs bank loans
repayable up to 7 years.
The Scheme aims for financial turnaround and revival of
It would be between 10 lakh to 1 crore rupees for greenfield
Power Distribution companies (DISCOMs).
enterprises in the non-farm sector.
Allows power DISCOMs in selected states to convert their
The overall intent is to leverage the institutional credit
debt into state bonds as well as roll out number of measures
structure to reach out to this under-served population.
to improve efficiency at power plants.
For this margin money of the composite loan will be up to
Seeks to ensure that struggling DISCOMs can shake off years
25%.
of losses and start on a path to profitability.
It is expected that this scheme would benefit atleast 2.5
Assures the rise of vibrant and efficient DISCOMs: through
lakh borrowers and expected date of reaching the target of
four initiatives
approvals is 36 months from the launch of the Scheme.
(i) Improve operational efficiencies of DISCOMs
Pradhan Mantri Fasal Bima Yojana
(ii) Reduce of cost of power
(18 February 2016)
(iii) Reduce interest cost of DISCOMs
The Union Cabinet has approved Pradhan Mantri Fasal Bima
(iv) Enforce financial discipline on DISCOMs through Yojana, a new crop insurance scheme to boost farming sector
alignment with State finances. in the country.
Debt Burden: Shifts 75 per cent of power DISCOMs debt It is farmers’ welfare scheme that aims to reduce the premium
burden to states’ balance sheets. burden on farmers and ensure early settlement of crop
This step would result in interest cost savings to the tune of assurance claim for the full insured sum.
3-5 per cent. Highlights of Scheme Uniform premium: Farmers will
State Power Bonds or loans: Selected states would be able pay uniform premium of 2 per cent for all Kharif crops and
to sell the balance 25 per cent as state-backed power bonds 1.5 percent for all Rabi crops.
or loans which will carry interest rates of G-Sec plus 50 In case of annual horticultural and commercial crops, farmers
basis points. will pay 5 per cent premium.
Improve operational efficiency: by implementing steps like These premium rates are very low.
(i) swapping of coal linkages Government will pay balance premium to provide full insured
(ii) monitoring aggregate technical and commercial (AT&C) amount to the farmers against crop loss on account of natural
losses calamities.
(iii) Focus on smart metering and feeder separation in states. Government subsidy: There will be no upper limit
subsidy given by Government even if balance premium is
So far 21 out of the 29 states have opted for this scheme,Andhra
90 percent.
Pradesh has become the 1st state to opt for this scheme
Capping the Premium: The provision of capping the
Stand-Up India Scheme (5 April 2016) premium rate has been removed and farmers will get claim
The Union Cabinet has approved the Stand Up India Scheme against full sum insured without any reduction.
to promote entrepreneurship among Scheduled Caste/
It was removed as it resulted in low claims being paid to
Scheduled Tribes (SC/ST) and Women entrepreneurs.
farmers and was mainly done to limit Government outgo on
Features of Stand Up India Scheme the premium subsidy.
It will refinance window through Small Industries Use of technology: Government will encourage use of
Development Bank of India (SIDBI) with an initial amount technology especially Smart phones and remote sensing to
10,000 crore rupees.
a great extent.
Under it, a credit guarantee mechanism would be created
through the National Credit Guarantee Trustee Company In order to reduce the delays in claim payment to farmers,
(NCGTC). smart phones will be used to capture and upload data of
crop cutting.
It will be the operating agency for the loan.
It will provide handholding support to the borrowers at both To reduce the number of crop cutting experiments remote
pre loan stage and during operations stage. sensing will be used.

92 GeneraL Awareness
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##The Life Insurance Corporation of India (LIC) would be
Heritage City Development and
the implementing body of the scheme during the current
Augmentation Yojana (HRIDAY-21 January financial year.
2015) scheme ##The scheme aims to provide social security to elderly
Union government has launched a Heritage City Development persons aged 60 years during their old age.
and Augmentation Yojana (HRIDAY) scheme to preserve and ##Under the scheme, an assured pension with guaranteed
rejuvenate the rich cultural heritage of the country. rate of return of 8% per annum would be provided for a
Union governments ambitious Rs 500 crore HRIDAY project period of ten years. Besides, the nominee would have an
was launched by Urban Development Minister Venkaiah option for pension on a monthly / quarterly / halfyearly
Naidu in New Delhi. and annual basis.
In the initial phase, 12 heritage cities have been identified Cabinet approves Rs. 2,351.38 crore ‘Pradhan
which will be rejuvenated and developed under HRIDAY. Mantri Gramin Digital Saksharta Abhiyan’
The 12 cities are: Amritsar, Varanasi, Gaya, Puri, Ajmer, for digital literacy
Mathura, Dwarka, Badami, Velankanni, Kanchipuram, The Union Cabinet chaired by the Prime Minister Shri
Warangal and Amaravati. Narendra Modi approved the ‘Pradhan Mantri Gramin
Salient features: Digital Saksharta Abhiyan’ (PMGDISHA) on February 8,
2017 to make 6 crore rural households digitally literate by
It aims to bring urban planning, economic growth and
March 2019.
heritage conservation together for heritage cities.
##The outlay for PMGDISHA is Rs.2,351.38 crore.The
It also seeks beautification in an inclusive and integrated
project will be carried out in a phased manner. In the
manner with focus on cleanliness, livelihoods, skills, safety,
FY 2016-17, 25 lakh candidates will be trained under
security, accessibility and faster service delivery of heritage
the programme. Further 275 lakh in the FY 2017-18 and
cities.
300 lakh in the FY 2018-19 would be trained.
Heritage management plan (HMP) will be prepared for the ##The programme would be implemented under the overall
identified cities which will outline heritage resources and supervision of Ministry of Electronics and IT in active
develop policies to guide their conservation, restoration, collaboration with States/UTs through their designated
future use and development. State Implementing Agencies, District e-Governance
It will seek to improve last-mile connectivity heritage sites Society (DeGS), etc.
by documentation, conservation of areas, providing more ##To ensure that the programme covers overall geographical
facilities for women, senior citizens and differently abled area, each of the 250,000 Gram Panchayats have been
citizens. directed to register an average of 200-300 candidates.
HRIDAY will be dovetailed with the Tourism Ministry’s ##The scheme will enable the rural people to operate
Pilgrimage Rejuvenation and Spiritual Augmentation Drive computers and other digital devices like tablets, smart
(PRASAD) scheme which has an outlay of Rs 100 crore. phones, send and receive emails, browse internet, access
Atal Pension Yojna Government Services, undertaking cashless transactions,
##Atal Pension Yojna will replace the NPS Swavlamban etc.
Yojna. Government to launch Rs 6000-crore
##The Scheme was Launched on 1st June . ‘SAMPADA’ scheme for food processing
##All Subscribers below the age of 40 will be Eligible Union Food Processing Minister Harsimrat Kaur Badal has
for A minimum pension of 1000/- and a maximum of announced that her ministry will soon approach the Cabinet
5000/- . for the approval for an umbrella programme ‘Scheme for
##The Govt. will contribute 50% of a subscriber’s Agro-Marine Produce Processing and Development of
contribution or 1000/- per annum whichever is less to Agro-Processing Clusters (SAMPADA).’
each eligible account for 5 Years. About SAMPADA:
##It will be a Simple product Open to all bank account holders Financial Outlay: Rs. 6000 crore
who are NOT members of any social security scheme .
To be implemented by: FY 2019-20
Union Cabinet Approves to Launch Varishtha Proposed Schemes to improve food supply chain:
Pension Bima Yojana 2017 1. Creation/ Expansion of Food Processing and
As a part of government’s commitment for financial Preservation Capacities’
inclusion and social security the Union Cabinet has given 2. New Agro-Processing Clusters’
its post-facto approval to launch Varishtha Pension Bima
3. Backward and Forward Linkages’
Yojana 2017 (VPBY 2017) on January 24, 2017.

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Initiative to create Food Processing Infrastructure: On July 21, 2017, Finance Minister Arun Jaitley formally
Ms. Harsimrat Kaur also mentioned that in order to ensure launched Pradhan Mantri Vaya Vandana Yojana (PMVVY),
seamless transfer of food products from production a pension scheme exclusively for senior citizens (60 years
place to consumption centre, Govt. will provide up to and above) with 8% fixed rate of interest on their savings.
Rs 10 crore of subsidy grant or 35% subsidy (whichever More Details about Pradhan Mantri Vaya Vandana
is lower) for creating infrastructure at food clusters, Yojana (PMVVY):
agriculture hubs, food labs and cold chains across the Life Insurance Corporation (LIC) of India which has been
country. given the sole privilege to operate this scheme started
Arun Jaitley launches Pradhan Mantri Vaya Vandana Yojana offering the scheme from May 4, 2017. The scheme will
pension scheme with 8 pct fixed rate. remain open till May 3, 2018.

Scheme Name Start Date Benefits Annual Contribution Eligibility Who will run
the scheme

Pradhan Mantri June 01, Personal GST Tax

Rs. 12 P.A. + Service All persons with Aadhar Banks/
Suraksha Bima 2015 Accident Cover linked bank account Insurance firms
Yojna

Atal Pension Yojana June 01, Pension Rs. 48 P.M. for a monthly Persons who don’t pay PFRDA
2015 pension of Rs. 1000 Income Tax, existing
members of NPS
Rs. 248 P.M. for a monthly Swavalamban
pension of Rs. 5000

Pradhan Mantri June 01, Life Insurance GST Tax All persons with Aadhar
Rs. 330 P.A. + Service Banks/
Jeevan Jyoti Bima 2015 Cover linked bank account Insurance firms
Yojana

Unorganised Sector -- Provident No fixed contribution Informal/ Unorganised EPFO

Workers’ Social Fund/ Pension Sector workers
Security Fund and Insurance

##It can be purchased offline as well as online through Har Ghar Yojana –‘Saubhagya’, to carry out electrification
Life Insurance Corporation (LIC) of India.Pension is of all households in India.
payable at the end of each period, during the policy term
Saubhagya:
of 10 years, as per the frequency of monthly, quarterly,
half-yearly, yearly as chosen by the pensioner at the i. The total budget for this project is Rs.16,320 crore. Gross
time of purchase. Budgetary Support (GBS) provided is Rs.12,320 crore.
##PMVVY provides an assured return of 8% per annum ii. The budget allocated for the rural households is
payable monthly for 10 years. Rs.14,025 crore. For which, GBS is Rs.10,587.50 crore.
##Loan up to 75% of purchase price shall be allowed after iii. Budget allocated for urban households is Rs.2,295
3 policy years to meet the liquidity needs. crore. For which, GBS is Rs.1,732.50 crore.
##The scheme also allows for premature exit for the iv. All the States and Union Territories should complete
treatment of any critical or terminal illness of self or household electrification by 31st December 2018.
spouse. On such premature exit, 98% of the purchase
v. The beneficiaries for free electricity connection would
price will be refunded.
be identified using Socio Economic and Caste Census
##On death of the pensioner during the policy term of 10 (SECC) 2011 data.
years, the purchase price shall be paid to the beneficiary.
The aim of this Scheme is:
Prime Minister launches Pradhan Mantri • Environmental upgradation by eliminating
Sahaj Bijli Har Ghar Yojana ‘Saubhagya’ Kerosene usage for lighting
On 25th September 2017, Prime Minister Mr.Narendra • Improvement of education, health services and
Modi launched a new scheme, Pradhan Mantri Sahaj Bijli communication

94 GeneraL Awareness
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• Increasing economic activities and jobs STRIVE is a central sector scheme having financial outlay
Rs 2200 crore out of which half the amount will be in the
• Improvement of quality of life particularly for women
form of loan assistance from World Bank.
vi. Cabinet approves implementation of the scheme “Dairy
##Under STRIVE scheme, emphasis will be laid on
Processing & Infrastructure Development Fund”
incentivizing Industrial Training Institutes (ITIs) to
vii. On September 12,2017, Cabinet Committee on improve overall performance including apprenticeship
Economic Affairs(CCEA) approved a “Dairy Processing by involving Small and Medium Enterprises (SMEs),
& Infrastructure Development Fund” (DIDF) with an business associations and industry clusters.
outlay of Rs10,881 crore during the period from 2017-
##A robust mechanism for delivering quality skill development
18 to 2028-29.This fund will give new impetus to the
training will be developed. This will be done by strengthening
dairy industry and to people relying on it.The project
institutions such as State Skill Development Missions
will be implemented by National Dairy Development
(SSDMs), National Skill Development Corporation (NSDC),
Board (NDDB) and National Dairy Development
Sector Skill Councils (SSCs), ITIs and National Skill
Cooperation (NCDC).
Development Agency (NSDA) etc.
viii. The objective of the fund : –
##National Skills Qualification Framework (NSQF)
i) Building an efficient milk procurement system by including National Quality Assurance Framework
setting up of cold storage infrastructure. (NQAF) across central and state government schemes
will be universalised in order to ensure standardization
ii) Installation of electronic milk adulteration testing
in skill delivery, content and training output.
equipment.
iii) Creation/modernization/expansion of processing Cabinet introduces ‘Pradhan Mantri Mahila
infrastructure and manufacturing Shakti Kendra’
ix. faculties for Value Added Products for the Milk Unions/ On November 22, 2017, Cabinet Committee on Economic
Milk Producer Companies. Affairs (CCEA) gave approval for the expansion of schemes
of the Ministry of Women and Child Development (WCD)
SANKALP & STRIVE Schemes to boost Skill under the umbrella scheme “Mission for Protection and
India Mission Empowerment for Women”.
In a bid to provide a boost to ‘Skill India Mission’, on October ##The expansion has been approved for a period from 2017-
11, 2017, Union Cabinet approved two new skill development 18 to 2019- 20 with financial outlay of 3636.85 crore.
schemes named Skills Acquisition and Knowledge Central Share will be approximately Rs.3084.96 crore.
Awareness for Livelihood Promotion (SANKALP) and Skill
##Government is planning to establish One Stop Centres
Strengthening for Industrial Value Enhancement (STRIVE).
(OSCs) to provide comprehensive support to women
Both these schemes are result oriented programmes focusing
affected by violence and deployment of Mahila Police
on vocational education and training.
Volunteers (MPVs) to create public-police interface.
Salient Features of Skills Acquisition and Knowledge
##Pan-India expansion of Beti Bachao Beti Padhao yojana
Awareness for Livelihood Promotion (SANKALP) Scheme:
to cover all 650 districts has been approved by CCEA.
SANKALP is a centrally sponsored scheme having financial
##Besides, a new scheme called ‘Pradhan Mantri Mahila
outlay Rs 4,455 crore out of which 3300 crore will be in the
Shakti Kendra’ (PMSSK)’, which will empower rural
form of a loan from World Bank.
women through community participation, has also been
##Under this scheme, over 50 Trainers and Assessors approved.
academies with self-sustainable models will be set up
Salient Features of ‘Pradhan Mantri Mahila Shakti Kendra’:
in priority sectors.
PMSSK will be geared towards empowering rural women
##The scheme also has provision to set up additional
through community participation with an aim to create an
academies to plug sectoral and geographical gaps.
environment in which they realize their full potential.
##Underprivileged and marginalised sections of the
##Under Union Budget 2017-18, corpus of Rs 500 crore
society including women, Scheduled Castes (SCs),
was announced for setting up Mahila Shakti Kendras in
Schedule Tribes (STs) and Persons with Disabilities
14 lakh Anganwadi Centres at village level.
(PWD) will be provided skill training opportunities
under SANKALP. ##Most important will be the block level initiatives,
under which community engagement through Student
Salient Features of Skill Strengthening for Industrial
Volunteers is envisioned in 115 most backward
Value Enhancement (STRIVE) Scheme:
districts.

GeneraL Awareness 95
stportal.mahendras.org
##More than 3 lakh student volunteers from local colleges Ayushman Bharat consists of two major elements.
will strive to generate awareness about various important
government schemes/ programmes as well as social National Health Protection Scheme
issues. • Ayushman Bharat-National Health Protection Scheme,
Portal for Affordable Credit & Interest which will cover over 10 crore (one hundred million)
Subvention Access poor and vulnerable families providing coverage up to 5
lakh rupees per family per year for secondary and tertiary
##A centralized electronic platform for processing
care hospitalization.
interest subvention on bank loans to beneficiaries
under Deendayal Antyodaya Yojana – National Urban Wellness centres
Livelihoods Mission (DAY-NULM) named “PAiSA – • Under this 1.5 lakh centres will be setup to provide com-
Portal for Affordable Credit and Interest Subvention prehensive health care, including for non-communicable
Access”, was launched on 26 February 2018. The web diseases and maternal and child health services, apart
platform has been designed and developed by Allahabad from free essential drugs and diagnostic services.
Bank which is the Nodal bank.
GOBAR-Dhan Yojana
##All 35 states / UTs & all scheduled commercial banks,
##The Galvanizing Organic Bio-Agro Resources Dhan
RRBs and Cooperative Banks are expected to be on (GOBAR-DHAN) scheme was first announced by
board the PAiSA portal the year end. Finance Minister Arun Jaitley during his budget speech
on February 1. The scheme would focus on managing
Pradhan Mantri Vaya Vandana Yojana and converting cattle dung and solid waste in farms to
(PMVVY) compost, biogas and bio-CNG.
##This is a pension plan for senior citizens who are 60
Mission Solar Charkha
years and above. Under this scheme senior citizens will
get a guaranteed return of 8% for 10 years. This plan ##The Solar Charkha Mission is a Ministry of Micro Small
is exempted from Goods and services tax.The scheme & Medium Enterprises (MSME) initiative launched
will be available for one year from date of launch. It was during June 2018. The Khadi and Village Industries
launch on 4th May 2017. Commission (KVIC) would implement the programme.
Government of India has accorded approval to set up 50
##The scheme provides an assured return of 8% per
such clusters with a budget of Rs. 550 Crore for 2018-19
annum for 10 years. The differential return, i.e. the
and 2019-20. The scheme is envisaged to generate direct
difference between return generated by LIC and the
employment nearly to one lakh persons in the approved
assured return of 8% per annum would be borne by
Fifty (50) clusters.
Government of India as subsidy on an annual basis.
Pension is payable at the end of each period during Scheme Objectives
the policy tenure of 10 years as per the frequency of The objectives of the Scheme are as follows:
monthly/quarterly/ half-yearly/yearly as chosen by the
subscriber at the time of purchase. Minimum purchase ##To ensure inclusive growth by generation of employment,
price under the scheme is Rs.1,50,000/- for a minimum especially for women and youth, and sustainable
pension of Rs. 1,000/- per month and the maximum development through solar charkha clusters in rural
purchase price is Rs.7,50,000/- for a maximum pension areas.
of Rs.5,000/- per month. The scheme is exempted ##To boost rural economy and help in arresting migration
from Goods and Services Tax. The scheme is open for from rural to urban areas.
subscription till 3rd May 2018.
##To leverage low-cost, innovative technologies and
Ayushman Bharat Yojana processes for sustenance
##Ayushman Bharat Yojana or Pradhan Mantri Jan Arogya ##The target is to cover 50 solar clusters across the country,
Yojana (PMJAY) or National Health Protection Scheme whereby approx. 1, 00,000 artisans/beneficiaries are to
or ModiCare is a centrally sponsored scheme launched be covered under the various scheme components.
on 23 September 2018, under the Ayushman Bharat
Mission. Pradhan Mantri Annadata Aay SanraksHan
##It is an umbrella of two major health initiatives namely,
Abhiyan (PM-AASHA)
Health and Wellness centres and National Health ##The Scheme is aimed at ensuring remunerative prices to
Protection Scheme (NHPS). the farmers for their produce as announced in the Union

96 GeneraL Awareness
 stportal.mahendras.org
Budget for 2018. Government has already increased the Nidhi Yojana. The scheme was presented in the interim
MSP of kharif crops by following the principle of 1.5 budget 2019 in the national assembly on the 1st February
times the cost of production. 2019. All small and marginal farmers with land will
receive financial assistance of Rs. 6,000 every year
Components of PM-AASHA:
under the scheme.
The Scheme is comprised of:
##A small and marginal landholder farmer is primarily
##Price Support Scheme (PSS), a family comprising of a husband, wife and minor
##Price Deficiency Payment Scheme (PDPS) children. The family possess a cultivable land up to 2
hectares as per land records of the concerned State and
##Pilot of Private Procurement & Stockist Scheme (PPPS). Union Territory. The existing land-ownership system
Expenditure: is used for the identification of the beneficiaries for the
calculation of benefits.
The Cabinet has decided to give additional government
guarantee of Rs.16, 550 crore making it Rs. 45,550 crore Pradhan Mantri Shram Yogi Mandhan
in total.
##Pradhan Mantri Shram Yogi Mandhan is a 2019 scheme
Pradhan Mantri Kisan Samman Nidhi introduced by Government of India for poor labourers
(PM-KISAN) in the unorganised sector from minimum 18years of age
to maximum 40 years. Under the scheme, a monthly
##On 24 February 2019, PM Narendra Modi launched pension of Rs. 3,000 per month is provided to workers
Pradhan Mantri Kisan Samman Nidhi ( PM-KISAN) in the unorganised sector over 60 years of age. However,
scheme in Uttar Pradesh’s Gorakhpur by transferring to benefit from the scheme, workers have to contribute
the first instalment of Rs. 2,000 each to over one crore Rs. 55 monthly (for age 18) and it varies according to
farmers. It is cash transfer scheme. age. Maximum contribution for a year cannot exceed
##The Finance Minister has announced a Farmer Income Rs. 2400 (Rs.200 per month).
Support Scheme called Pradhan Mantri Kisan Samman

NOTES

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SOCIAL WELFARE SCHEMES
1. Which one of the following is PMJDY related to?
(1) Female education (2) Literacy (3) Bank
(4) Financial inclusion (5) All the above
2. What is the amount for life insurance cover in PMJDY?
(1) 1.00 lac rupees (2) 5000 rupees (3) 30,000 rupees (4) 2.00 lacs rupee (5) None of these
3. What is the amount for accidental insurance cover in PMJDY?
(1) 1.00 lac rupees (2) 5000 rupees (3) 30,000 rupees (4) 2.00 lacs rupee (5) None of these
4. What is the amount under overdraft facility in PMJDY?
(1) 1.00 lac rupees (2) 10,000 rupees (3) 3,000 rupees (4) 50,000 rupees (5) None of these
5. Under PMJDY to claim the benefits of accidental insurance policy, the RuPay Debit Card must be used at least
once in how many days?
(1) in 90 days (2) in 30 days (3) in 60 days (4) in 65 days (5) None of these
6. PM MUDRA yojna has classified micro units under following the categories?
(1) Shishu (2) Kishore (3) Tarun (4) All of the above (5) None of the above
7. Which of the following category will be given loan upto 50,000 under PM MUDRA yojna?
(1) Shishu (2) Kishore (3) Tarun (4) All of the above (5) None of these
8. Which of the following category will be given loan between 50,000 and upto 5 lacs under PM MUDRA yojna?
(1) Shishu (2) Kishore (3) Tarun (4) All of the above (5) None of these
9. Which of the following categories will be given loan between 5 lacs and upto 10 lacs under PM MUDRA yojna?
(1) Shishu (2) Kishore (3) Tarun (4) All of the above (5) None of these
10. In which of the following schemes we receive sixty percent of the loan offered under PM MUDRA yojna?
(1) Shishu (2) Kishore (3) Tarun (4) All of the above (5) None of these
11. Which of the given statements is true regarding ‘Make in India’?
(A) The program was launched by PM Modi in September 2014
(B) It is to transform India into a global design and manufacturing hub
(C) ‘Make in India’ is just an inspiring slogan.
(D) Department of Industry Policy and Promotion works on this program.
(1) All options are false (2) Only option (A), (B) & (C) are true
(3) Only option (A), (B) & (D) are true (4) Only (C) is true
(5) All statements are true
12. MUDRA bank will be....
(1) Commercial Bank (2) Regulating Agency (3) Refinance Agency
(4) Credit Rating Agency (5) None of these
13. The objective of Beti Bachao Beti Padhao yojna is?
(A) Prevention of gender biased selective elimination
(B) Ensuring survival & protection of the girl child
(C) Ensuring education and participation of the girl child
(1) Only (A) (2) Both (A) & (B) (3) Both (B) & (C) (4) All (A), (B) and (C) (5) None
14. Beti Bachao Beti Padhao yojna was launched on?
(1) 21 January 2014 (2) 21 January 2015 (3) 22 January 2014
(4) 22 January 2015 (5) None of these

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15. Sukanya Samridhi account was launched on?
(1) 21 January 2014 (2) 21 January 2015 (3) 22 January 2015
(4) 22 January 2014 (5) none of these
16. The minimum investment limit in one financial year under Sukanya Samridhi account is?
(1) Rs. 250 (2) Rs. 5000 (3) Rs. 100 (4) Rs. 10000 (5) Rs. 500
17. The maximum investment limit in one financial year under Sukanya Samridhi account is?
(1) Rs. 12000 (2) Rs. 1.5 lacs (3) Rs. 1 lac (4) Rs. 10000 (5) Rs. 100
18. The amount in Sukanya Samridhi account can be deposited until the completion of ..........years from date of opening
the account.
(1) 18 years (2) 21 years (3) 12 years (4) 10 years (5) 14 years
19. The maximum age eligibility for PMJJBY is?
(1) 100 years (2) 40 years (3) 50 years (4) 60 years (5) 70 years
20. What is the amount as premium in PMJJBY?
(1) Rs. 12 (2) Rs. 33 (3) Rs. 330 (4) Rs. 70 (5) Rs. 100
21. What is the amount provided as an insurance cover under the PMJJB Yojna?
(1) Rs. 1 lac (2) Rs. 2 lacs (3) Rs. 3 lacs (4) Rs. 4 lacs (5) Rs. 5 lacs
22. The maximum age eligibility for PMSBY is?
(1) 100 years (2) 40 years (3) 50 years (4) 60 years (5) 70 years
23. What is the amount as premium in PMSBY?
(1) Rs. 12 (2) Rs. 33 (3) Rs. 330 (4) Rs. 70 (5) Rs. 100
24. What is the amount provided as insurance cover under PMSBY?
(1) Rs. 1 lac (2) Rs. 2 lacs (3) Rs. 3 lacs (4) Rs. 4 lacs (5) Rs. 5 lacs
25. Swachh Bharat Abhiyan
(A) It was started on 02 October 2014.
(B) It is started to celebrate the 150th anniversary of Indira Gandhi
(C) It is a cleanliness drive targeting to clean India by 2019.
(1) Option (B) is true (2) Only (C) is true (3) Only (C) is true
(4) Both (A) & (C) are true (5) All are true

ANSWER KEY
1.(4) 2.(3) 3.(4) 4.(2) 5.(1) 6.(4) 7.(1) 8.(2) 9.(3) 10.(1)
11.(5) 12.(3) 13.(4) 14.(4) 15.(3) 16.(1) 17.(2) 18.(5) 19.(3) 20.(3)
21.(2) 22.(5) 23.(1) 24.(2) 25.(4)

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INSURANCE SECTOR

{{ WHAT IS INSURANCE
{{ BRIEF HISTORY OF INSURANCE
{{ PURPOSE AND NEED OF INSURANCE
{{ THE BUSINESS OF INSURANCE
{{ WHAT IS PREMIUM
{{ LAW AND REGULATIONS
{{ LIFE INSURANCE CORPORATION ACT, 1956
{{ INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY
ACT 1999
{{ Essentials of IRDA Act
{{ CONSUMER PROTECTION ACT 1986 (COPA)
{{ Insurance OMBUDSMAN
{{ General Insurance
{{ Important Abbreviation Related to Insurance
{{ Question & Answer

100 GeneraL Awareness

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CHAPTER
INSURANCE
12 SECTOR
Scan the QR code to get video of this chapter.

jettisoning) The Greeks had started benevolent societies in the

What Is Insurance
late 7th century AD, to take care of the funeral and families
The business of insurance is related to the protection of the of members who died. The friendly societies of England were
economic values of assets. Every asset has a value. The asset similarly constituted. The Great Fire of London in 1666, in
would have been created through the efforts of the owner. The which more than 13000 houses were lost, gave a boost to
asset is valuable to the owner, because he expects to get some insurance and the first fire insurance company, called the
benefits from it. It is a benefit because it meets some of his Fire Office, was started in 1680.
needs. The benefit may be an income or in some other form.
In the case of a factory or a cow, the product generated by it The origins of insurance business as in vogue at present, is
is sold and income is generated. In the case of a motor car, traced to the Lloyd’s Coffee House in London. Traders, who
it provides comfort and convenience in transportation. There used to gather in the Lloyd’s coffee house in London, agreed
is no direct income. Both are assets and provide benefits. to share the losses to their goods while being carried by ships.
The losses used to occur because of pirates who robbed on
Every asset is expected to last for a certain period of time the high seas or because of bad weather spoiling the goods
during which it will provide the benefits. After that, the or sinking the ship. In India, insurance began in 1818 with
benefit may not be available. There is a life-time for a life insurance being transacted by an English company, the
machine in a factory or a cow or a motor car. None of them Oriental Life Insurance Co. Ltd.. The first Indian insurance
will last for ever. The owner is aware of this and he can so company was the Bombay Mutual Assurance Society Ltd,
manage his affairs that by the end of that period or life-time, formed in 1870 in Mumbai. This was followed by the Bharat
a substitute is made available. Thus, he makes sure that the Insurance Co. in 1896 in Delhi, the Empire of India in 1897
benefit is not lost. However, the asset may get lost earlier. in Mumbai, the United India in Chennai,the National Indian
An accident or some other unfortunate event may destroy and the Hindusthan Cooperative in Kolkata.
it or make it incapable of giving the benefits. An epidemic
may kill the cow suddenly. In that case, the owner and those Later, were established the Cooperative Assurance in Lahore,
enjoying the benefits therefrom, would be deprived of the the Bombay Life (originally called the Swadeshi Life), the
benefits. The planned substitute would not have been ready. Indian Mercantile, the New India and the Jupiter in Mumbai
There is an adverse or unpleasant situation. Insurance is a and the Lakshmi in New Delhi. These were all Indian
mechanism that helps to reduce the effects of such adverse companies started as a result of the swadeshi movement in
situations. It promises to pay to the owner or beneficiary of the early 1900s. By the year 1956, when the life insurance
the asset, a certain sum if the loss occurs. business was nationalised and the Life Insurance Corporation
of India (LIC) was formed on 1st September 1956, there were
Types of Insurance 170 companies and 75 provident fund societies transacting
1. Life Insurance life insurance business in India. After the amendments to the
2. Non Life Insurance (General Insurance) relevant laws in 1999, the L.I.C. did not have the exclusive
privilege of doing life insurance business in India.
Brief History of Insurance
As on March 2019 there were 24 life insurers, 34 non life
Insurance has been known to exist in some form or other insurers as on 25/3/2019 and 2 Re-insurer.
since 3000 BC. The Chinese traders, traveling treacherous
river rapids would distribute their goods among several Purpose And Need of Insurance
vessels, so that the loss from any one vessel being lost, Assets are insured, because they are likely to be destroyed or
would be partial and shared, and not total. The Babylonian made nonfunctional before the expected life time, through
traders would agree to pay additional sums to lenders, as the accidental occurrences. Such possible occurrences are called
price for writing off the loans, in case of the shipment being perils. Fire, floods, breakdowns, lightning, earthquakes, etc,
stolen. The inhabitants of Rhodes adopted the principle of are perils. If such perils can cause damage to the asset, we say
‘general average’, whereby, if goods are shipped together, the that the asset is exposed to that risk. Perils are the events. Risks
owners would bear the losses in proportion, if loss occurs, are the consequential losses or damages. The risk to a owner
due to jettisoning during distress. (Captains of ships caught of a building, because of the peril of an earthquake, may be
in storms, would throw away some of the cargo to reduce a few lakhs or a few crores of rupees, depending on the cost
the weight and restore balance. Such throwing away is called of the building, the contents in it and the extent of damage.

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Insurance does not protect the asset. It does not prevent its ##Early death
loss due to the peril. The peril cannot be avoided through ##Living too long
insurance. The risk can sometimes be avoided, through better
##Disabilities
safety and damage control measures. Insurance only tries
to reduce the impact of the risk on the owner of the asset ##Sickness
and those who depend on that asset. They are the ones who ##Unemployment
benefit from the asset and therefore, would lose, when the Insurance of Intangibles
asset is damaged. Insurance only compensates for the losses
The concept of insurance has been extended beyond the
and that too, not fully.
coverage of tangible assets. Exporters run the risk of losses,
Only economic consequences can be insured. If the loss is not if the importers in the other country default in payments or
financial, insurance may not be possible. Examples of non- in collecting the goods. They will also suffer heavily due
economic losses are love and affection of parents, leadership to sudden changes in currency exchange rates, economic
of managers, sentimental attachments to family heirlooms, policies or political disturbances in the other country.
innovative and creative abilities, etc. These are dynamic risks and are insured. Doctors and other
How Insurance Works professionals run the risk of being charged with negligence
People facing common risks come together and make their and subsequent liability for damages. The amounts in question
small contributions to a common fund. The contribution to can be fairly large, beyond the capacity of individuals to bear.
be made by each person is determined on the assumption These are insured. Thus, insurance is extended to intangibles.
that while it may not be possible to tell beforehand, which In some countries, the voice of a singer or the legs of a
person will suffer, it is possible to tell, on the basis of past dancer may be insured. These are assets which produce the
experiences, how many persons, on an average, may suffer income and provide living to the owners. The object insured
losses. is intangible, but it is linked to a financial loss, and therefore
becomes insurable. Indian non-life insurers are perhaps,
Human Asset
considering the feasibility to insure such risks.
A human being is an income generating asset. One’s
income generating ability depends on one’s skills, (manual,
The Business of Insurance
professional, problem solving, entrepreneurial, etc). These In India, insurance business is classified primarily as life and
are the assets. The value of the asset can be measured by non-life or general. Life insurance includes all risks related
considering the income that is generated by the person to the lives of human beings and general insurance covers
concerned. The concept of Human Life Values, provides the rest. General insurance has three classifications viz., Fire
scientific ways to determine the asset value of the human life (dealing with all fire related risks), Marine (dealing with all
and therefore, the amount of life insurance required.. These transport related risks and ships) and Miscellaneous (dealing
techniques, like other techniques related to selling, will have with all others like liability, fidelity, motor, crop, engineering,
to be learnt on the job. construction, I aviation, personal accident, etc). Personal
accident and sickness insurance, which are related to human
These assets also can be lost through unexpectedly early
beings, is classified as ‘non-life’ in India, but is classified as
death or through sickness and disabilities caused by accidents.
‘life’ in many other countries. What is ‘non-life’ in India is
Accidents may or may not happen. Death will happen, but
termed as ‘Property and Casualty’ in some other countries.
the timing is uncertain. If it happens around the time of one’s
retirement, when it could be expected that the income will In India, the IRDA has, in 2005, issued Regulations enabling
normally cease, the person concerned could have made some micro-insurance (broadly meaning insurance for small Sums
other arrangements to meet the continuing needs. But if it Assured, like 5 to 50 thousands) to be done by both life and
happens much earlier when the alternate arrangements are general insurers on the basis of mutual tie-ups. A policy
not in place, there can be losses to the person and dependents. may be issued by a life insurer covering both life and non-
Those dependent on the income are helped to overcome their life risks, but premium on account of the non-life business
difficulties, by insurance. will be passed on to a general insurer and the claim amount
collected from the latter.
A person, who may have made arrangements for his needs
after his retirement, also would need insurance. This is The premium for insurance is based on expectations of the
because the arrangements would have been made on the basis losses. These expectations are based on studies of occurrences
of some expectations like, likely to live for another 15 years, in the past and the use of statistical principles. There is, in
or that children will be able to look after the aged parents. statistics, a “law of large numbers”. When you toss a coin,
If any of these expectations do not become true, the original the chance, or probability, of a head or tail coming up is
arrangement would become inadequate and there could be half. If the coin is tossed 10 times, one cannot be sure that
difficulties. Living too long can be as much a problem as the head will come up 5 times. If the coin is tossed 1 million
dying too young. Both are risks, which need to be safeguarded times, the number of heads will be closer to half a million
against. Insurance takes care. Thus, the risks in the case of a proportionately than in the case of 10. The variation will be
human being are related to less as a percentage.
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Reinsurance: Reinsurance is a contract between the Childrens Plans
insurance company (insurer) and a third party (re-insurer), Insurance can be taken on the lives of children, who are
wherein the latter will protect the former by paying losses minors. The proposal will have to be made by a parent or a
sustained by it under the original contract of insurance. guardian.
Re-insurers from London, as well as other parts of Europe,
Group Insurance
see significant potential in the re-insurance market in India.
Top four global reinsurers, Lloyds, Swiss Re, Munich Re and Group insurance is a plan of insurance, which provides cover
Berkshire Hathaway amongst those eyeing India. In India to a large number of individuals under a single policy called
the general insurance corporation of India is the national the “Master Policy”. The individuals covered under the
reinsurer. master policy are not parties to the contract. The contract will
Bancassurance : Bancassurance is distribution of insurance be between the insurer and a body that represents the group
product through a bank’s network. Under this channel of of individuals covered. This body may be the employer, who
distribution and selling of insurance product bank acts as is interested in obtaining benefits for his employees through
insurance agent and considering the volume of business insurance. The body may be an association of individuals
insurance companies used to associate their employees with through whom the collective interests of the individuals are
the branches for support and assistance. safeguarded, like a trade or professional association. A bank
or financier can make arrangements through a group policy
What is Premium to protect his interests against defaults occurring because of
In a contract of insurance, the insurer promises to pay to the death of the debtors.
the policyholder a specified sum of money, in the event of a First Premium Receipt (FPR)
specified happening. The policyholder has to pay a specified
amount to the insurer, in consideration of this promise. The underwriter’s decision on the proposal may be to accept
‘Premium’ is the name given to this consideration that the at OR or otherwise. If it is accepted at OR, the policy can
policyholder has to pay in order to secure the benefits offered be commenced immediately, provided the full premium had
by the insurance contract. It can be looked upon as the price been paid along with the proposal. The FPR will be issued. If
of the insurance policy. It may be a one-time payment. That is the acceptance is not at OR, the proposer has to agree to the
not common. Often, it has to be paid regularly over a period modified terms and pay the balance premium if any, before
of time. A default in premium can endanger the continuance the FPR can be issued. The IRDA regulations require that
of the policy. If that happens, the policy will be treated as the decision on the proposal should be made by the insurer
‘lapsed’ and the expected benefits may not be available. The within 15 days.
consequences of default are specified in the policy conditions. Law And Regulations
The calculation of premium is a complex technical process,
involving actuarial and statistical principles. Only trained Insurance Act, 1938
professionals, called actuaries, do it. Tables of premium rates The Insurance Act 1938, which came into effect from 1st
for each plan of insurance are made available by insurance July 1939, and was amended in 1950 and later in 1999, is
companies for the use of agents, who are required to quote the the principal enactment relating to the business of insurance
premium for a particular policy being offered to a prospect. in India. The Act contains provisions regarding licensing of
With Profit And Without Profit Policies agents and their remunerations, prohibition of rebates, and
protection of policyholder’s interests. It also has provisions
Without profit’ or ‘Non-participating’ policies are not entitled placing limits on the expenses of insurers, use of funds
to bonuses, which are declared after actuarial valuations. and patterns of investments, maintaining solvency levels,
‘With profit’ or ‘Participating’ policies pay a slightly higher and constitution of Insurance Associations and Insurance
premium for the right to participate in the progress of the Councils and the Tariff Advisory Committee for general
insurer. ‘With profit’ policies are popular because the bonuses insurance.
are expected to be more than the extra premium paid. ‘With
Profit’ policies, where the premium is payable for a limited Till the constitution of the IRDA by the IRDA Act in
period, will continue to participate even after the premiums 1999, the Controller of Insurance was responsible for the
have ceased. administration of the Insurance Act. Since 1999, the IRDA
has replaced the Controller of Insurance. The Insurance Act
Joint Life Policies
vests the IRDA with powers to Register insurance companies
Two or more lives can be covered under one policy. Such and also cancel their registrations.
policies usually cover married couples or partners. The SA
##Monitor and certify the soundness of the terms of life
(Sum Assured) is paid on the death of any of the insured
insurance business.
persons during the term or at the end of the term. Some plans
also provide payment of SA on the death of one life and the ##Make regulations relating to the conduct of the business
policy is continued to cover the second life till maturity, of insurance.
without payment of further premium. ##Inspect documents of insurers.
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##Appoint additional directors. Duties, Powers and Functions of IRDA
##Issue directions. Section 14 of IRDA Act, 1999 laysdown the duties,powers
##Take over the management of an insurer and appoint and functions of IRDA..(1) Subject to the provisions of
administrators. this Act and any other law for the time being in force, the
##Adjudicate on disputes between insurers and Authority shall have the duty to regulate, promote and ensure
intermediaries or between intermediaries. orderly growth of the insurance business and re-insurance
business.
##Decide on disputes relating to settlement of claims of
amounts not .exceeding Rs. 2000. (2) Without prejudice to the generality of the provisions
contained in sub-section (1), the powers and functions
Life Insurance Corporation Act, 1956 of the Authority shall include, -
This Act was the basis for the establishment of the L.I.C. as (a) Issue to the applicant a certificate of registration,
a body corporate consisting of not more than 16 members renew, modify, withdraw, suspend or cancel such
appointed by the Central Government, one of them being registration;
Chairman. The Corporation’s duty was to carry on life (b) Protection of the interests of the policy holders in
insurance business to the best advantage of the community. matters concerning assigning of policy, nomination
Section 30 gave the L.I.C exclusive privilege to transact life by policy holders, insurable interest, settlement of
insurance business in India. This exclusive privilege ceased as insurance claim, surrender value of policy and other
a result of the amendments made in 1999. These amendments terms and conditions of contracts of insurance;
were made in pursuance of the Government’s policy of
economic reforms. 16 insurance companies were registered (c) Specifying requisite qualifications, code of conduct
and had commenced life insurance business till 31.8.2007. and practical training for intermediary or insurance
intermediaries and agents;
Insurance Regulatory And Development
(d) Specifying the code of conduct for surveyors and
Authority Act 1999 loss assessors;
This Act, passed in December 1999, provided for the
establishment of the IRDA to protect the interests of holders (e) Promoting efficiency in the conduct of insurance
of insurance policies, to regulate, promote and ensure orderly business;
growth of the insurance industry and for matters connected (f) Promoting and regulating professional organisations
therewith or incidental thereto. It also sought to amend the connected with the insurance and re-insurance
Insurance Act, 1938, the Life Insurance Corporation Act, business;
1956 and the General Insurance Business (Nationalization) (g) Levying fees and other charges for carrying out the
Act, 1972. purposes of this Act;
The IRDA is a corporate body. It is advised by an Insurance
(h) Calling for information from, undertaking inspection
Advisory Committee consisting of not more than 25
of, conducting enquiries and investigations including
members to represent the interests of commerce, industry,
audit of the insurers, intermediaries, insurance
transport, agriculture, consumer forums, surveyors, agents,
intermediaries and other organisations connected
intermediaries, organisations engaged in safety and loss
with the insurance business;
prevention, research bodies and employees’ associations in
the insurance sector. It replaces the ‘Controller of Insurance’ (i) Control and regulation of the rates, advantages, terms
to administer the provisions of the Insurance Act. That and conditions that may be offered by insurers in
includes registrations, licensing, and laying down regulations respect of general insurance business not so controlled
for the proper conduct of the business and the protection of and regulated by the Tariff Advisory Committee under
the interests of policyholders. section 64U of the Insurance Act, 1938 (4 of 1938);
(j) Specifying the form and manner in which books
Essentials of IRDA Act
of account shall be maintained and statement of
Composition of Authority under IRDA Act, 1999 accounts shall be rendered by insurers and other
As per the section 4 of IRDA Act’ 1999, Insurance Regulatory insurance intermediaries;
and Development Authority (IRDA, which was constituted (k) R egulating investment of funds by insurance
by an act of parliament) specify the composition of Authority companies;
The Authority is a ten member team consisting of (l) Regulating maintenance of margin of solvency;
(a) One Chairman; (m) Adjudication of disputes between insurers and
(b) Five whole-time members intermediaries or insurance intermediaries;
(c) Four part-time members. (all appointed by the (n) Supervising the functioning of the Tariff Advisory
Government of India) Committee;
104 GeneraL Awareness
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(o) Specifying the percentage of premium income of The Ombudsman is expected to make a recommendation
the insurer to finance schemes for promoting and within one month from the date of receipt of complaint. If
regulating professional organisations referred to in the complainant accepts this recommendation, the insurer
clause (f); has to comply within 15 days and inform the Ombudsman
(p) Specifying the percentage of life insurance business accordingly. If the complainant does not accept the
and general insurance business to be undertaken by Ombudsman’s recommendation, the Ombudsman shall
the insurer in the rural or social sector; and pass an award in writing, stating the amount awarded
which shall not be in excess of what is necessary to
(q) Exercising such other powers as may be prescribed. cover the loss suffered by the complainant as a direct
consequence of the insured peril or for an amount not
Consumer Protection Act 1986 (COPA)
exceeding Rs. 20,00,000, whichever is lower. The award
Under this Act, a consumer, as an individual or along with has to be passed within 3 months. The complainant has to
other individuals, or through a consumer organisation, can intimate his acceptance of the award within one month by
approach the various forums prescribed under the Act for a letter of acceptance to the insurer and the insurer has,
redress, in case he is not satisfied with the goods or service to comply within 15 days and inform the Ombudsman. If
provided. He has to allege a defect in the goods or service. A the Complainant does not intimate acceptance, the award
defect or deficiency is a fault, imperfection, shortcoming or cannot be implemented.
inadequacy in the quality, nature or manner of performance,
General Insurance
which is required to be maintained by or under any law or
in pursuance of a contract or undertaking in relation to that Products
service. 1. Fire Insurance : Fire Insurance is desgined to provide
In order to attend to complaints under this Act, consumer financial protection for property against loss or damage by
dispute redressal forums are established in each district Fire and others specified perils.
and for each State. The forum at the district level will hear 2. Marine Insurance : Marine insurance, comprises (a) cargo
complaints up to the value of Rs.20,00,000 and the forum insurance and (b) hull insurance. Cargo insurance provides
at the State level will hear complaints up to the value of Rs. insurance cover in respect of loss of or damage to goods
1,00,00,000. The National Commission will attend formatters during transit by rail, road, sea or air. Thus cargo insurance
beyond the jurisdiction of the State forums and also appeals concerns the following:
“against the decisions of a State forum.
##Export and import shipments- by ocean-going vessels of
Insurance OMBUDSMAN all types, coastal shipments by steamers, sailing vessels,
mechanized boats, etc., shipments by inland vessels or
The Governing body of the Insurance Council is authorized country craft, and consignments by rail, road, or air and
by law to appoint Ombudsmen for the insurance industry. articles sent by post.
The function of the Ombudsman is to resolve complaints in
respect of disputes between policyholders and insurers in ##Hull insurance, on the other hand, concerns the insurance
cost effective, efficient and impartial manner. of ships (hull, machinery, etc.)

The complaints to the Ombudsman may relate to (a) partial or 3. Motor Insurance : The insurance of motor vehicles
total repudiation of claims (b) any dispute regarding premium against damage is not made compulsory, but the insurance
paid or payable in terms of the policy (c) any dispute on the of third party liability arising out of the use of motor vehicles
legal construction of the policy relating to claims (d) delay in in public places is made compulsory. No motor vehicle can
settlement of claims (e) non-issue of any insurance document ply in a public place without such insurance.
to customers after receipt of premium. 4. Personal Accident Insurance : The policy provides that,
if the insured shall sustain any bodily injury resulting solely
The Ombudsman acts as counsel and mediator in matters
and directly from accident caused by external violent and
within its terms of reference. It is not a judicial authority. It
visible means, then the company shall pay to the insured or
has no right to summon witnesses. It has to make its decision
his legal personal representative(s), as the case may be, the
on the basis of documents submitted to it. The complainant
sum or sums set forth, in the policy.
and the insurer are allowed to make personal submissions.
But lawyers are not permitted to argue the case. 5. Health Insurance : This insurance provides for
reembersment of hospitalization/domicilary hospital
Complaints to the Ombudsman lie only when the insurer
expenses for illness/disease suffered are accidental injury
had rejected the complaint or no reply was received
sustained during the policy period.
within one month of the complaint or the reply was not
satisfactory. A complaint can be made within one year after 6. Liability Insurance : The purpose of liability insurance
the insurer had rejected the representation. The subject is to provide indemnity in respect of damages payable
matter should not be already before any court or consumer under law for personal injury to third parties or damage
forum or arbitration. to their property. This legal liability may arise under

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common law on the basis of negligence or under statutory 10. House Holder Insurance : This is a package
law (e.g. Public Liability Insurance Act or Workman’s insurance scheme designed to meet the requirements of a
Compensation Act) on ‘no-fault’ basis, that is even when householder by combining under a single policy a number of
there is no negligence. contingencies which are otherwise covered under separate
Another class of legal liability insurance relates to employer’s policies.
legal liability towards his employees for death or bodily 11. Shopkeeper’s Insurance : The policy is designed
and the policy is known as employer’s liability insurance or for small shopkeepers. The policy is comprised of 10
workman’s compensation insurance. sections.
7. Engineering Insurance : This policy is designed Section 1. Loss or damage to (A) building / (B) contents
to protect the interests of contractors and principals (excluding money and valuables) whilst contained in insured
in respect of civil engineering projects, like buildings, premises by specified perils.
bridges, tunnels, etc. The policy provides an “All Risk” Section 2. Loss of or damage to contents (excluding money
cover. Every risk is covered which is not specifically and valuables) whilst contained in the premises by burglary
excluded. This means that almost any sudden and and housebreaking. (No theft risk is covered)
unforeseen loss or damage occuring during the period
of insurance to the property insured on the construction Section 3.
site is indemnified. a) Loss of money in transit due to accident/ misfortune.
8. Rural Insurance : Rural policies comprise the insurances b) Loss of or damage to money / valuables by Burglary
of various livestock e.g., cattle, sheep, goat, etc. sub-animals / housebreading whilst contained in a burglar proof
e.g., silkworm and honeybee, plantation and horticultural safe.
crops e.g. rubber, grapes, etc. property e.g. agricultural
c) Loss of money whilst lying in cashier’s till and or
pumpsets, etc. person e.g. gramin accident.
counter in insured’s premises by Burglary, house-
9. Burglary Insurance : breaking or following assault/violence on insured or his
1. The policy is available to commercial establishments, employees.
factories, godowns, shops etc. Property in any form, Section 4. Loss of or damage to pedal cycle (s) and legal
including cash, in the business premises can be covered. liability to third parties.
The risks covered are : Section 5. Loss of or damage to fixed plate glass in the
a) Theft of property after actual forcible and violent entry insured premises.
into the premises or theft following actual, forcible Section 6. Loss of or damage to Neon Sign/glow sign.
and violent - exit from the premises.
Section 7. Loss of or damage to Personal Baggage of
b) Damage to insured property or premises by burglars insured or baggage in connection with trade, any where
Cash cover operates only when the cash is secured in a safe in India.
and is granted only if the safe is burglar proof and is of an Section 8. Personal Accident cover for insured/his employees
approved make and design. as per PA. practice.
The cover is granted subject to the following two clauses :- Section 9. Direct pecuniary loss suffered by the insured due
(i) The loss of cash abstracted from the safe following to fraud or dishonesty committed by any salaried employees.
the use of the key to the said safe or any duplicate Section 10.
thereof belonging to the insured is not covered
a) Legal liability to a third party.
unless such key has been obtained by violence or
threats of violence. This is generally known as “key b) Liability to employees under the W.C. Act/common
clause” law.
(ii) A complete list of the amounts of cash in safe 12. Misc. Insurance : Such as bankers blanket policy,
should be kept secure in some place other than jewllers block policy, horse insurance etc.
the safe. Difference between life insurance and general insurance
Some important exclusions under the policy are : 1. General insurance works on the principle of indemnity
a) theft by persons lawfully on the premises (larceny but in life insurance it is only the principle of financial
or ordinary theft is not covered). security
b) loss insurable under fire or plate glass policy. 2. In life Insurance Insurers insured the life of the human
being and in general insurance insurers insured other than
2. The policy can be extended to cover riot, strikes and
human life. But there is few exception such as health
terrorism risks at extra premium.
insurance, which is provided by both.

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Important Abbreviation Related to Insurance

IRDA Insurance Regulatory and development Authority.
LIC Life Insurance Corporation of India
ULIP Unit Linked Insurance Plans
COPA Consumer Protection Act
GIC General Insurance Corporation of India
NAV Net Asset Value
SSS Salary Savings Scheme
SA Sum Assured
FPR First Premium Receipt
IDV Insured’s declared Value
CC Cubic Capacity
TPA Third Party Administrator
NCB No Claim Bonus
NSDL National Securities Depository Limited
CDSL Central Depository Services Limited

Insurance Companies Operating In India Life Insurers

Public Sector Private Sector
1. Life Insurance Corporation of India 1. Bajaj Allianz Life Insurance Company Limited .
2. Aditya Birla Sun Life Insurance Co. Ltd
3. HDFC Standard Life Insurance Co. Ltd
4. ICICI Prudential Life Insurance Co. Ltd
5. Exide Life Insurance Company Limited
6. Max Life Insurance Co. Ltd
7. PNB Metlife India Insurance Co. Ltd.
8. Kotak Mahindra Life Insurance Limited
9. SBI Life Insurance Co. Ltd
10. Tata AIA Life Insurance Company Limited
11. Reliance Nippon Life Insurance Company Limited.
12. Aviva Life Insurance Company India Limited
13. Sahara India Life Insurance Co, Ltd.
14. Shriram Life Insurance Co, Ltd.
15. Bharti AXA Life Insurance Company Ltd.
16. IDBI Federal Life Insurance Company Ltd.,
17. Future Generali India Life Insurance Company Ltd.
18. Canara HSBC Oriental Bank of Commerce Life Insurance
19. AEGON Life Insurance Company Limited.
20. DHFL Pramerica Life Insurance Co. Ltd.
21. Star Union Dai-ichi Life Insurance Co. Ltd.,
22. India First Life Insurance Company Limited
23. Edelweiss Tokio Life Insurance Co. Ltd.
As on 26/ March/ 2019

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Non-Life Insurers
Public Sector Private Sector
1. IFFCO Tokio General Insurance Co. Ltd. 1. Bajaj Allianz General Insurance Co. Ltd.
2. National Insurance Co. Ltd. 2. ICICI Lombard General Insurance Co. Ltd.
3. The New India Assurance Co. Ltd. 3. Reliance General Insurance Co. Ltd.
4. The Oriental Insurance Co. Ltd. 4. Royal Sundaram General Insurance Co. Limited
5. United India Insurance Co. Ltd. 5. Tata AIG General Insurance Co. Ltd.
6. Export Credit Guarantee Corporation of India Ltd. 6. Cholamandalam MS General Insurance Co. Ltd.
7. Agriculture Insurance Co. of India Ltd. 7. HDFC ERGO General Insurance Co. Ltd.
8. Universal Sompo General Insurance Co. Ltd. 8. Star Health and Allied Insurance Company Ltd.
9. SBI General Insurance Company Ltd. 9. Apollo Munich Health Insurance Company Ltd.
10. Future General India Insurance Company Ltd.
11. Shriram General Insurance Company Ltd.
12. Bharti AXA General Insurance Company Ltd.
13. Raheja QBE General Insurance Company Ltd.
14. Max Bupa Health Insurance Company Limited
15. Religare Health Insurance Company Limited
16. Magma HDI General Insurance Company Ltd.
17. Liberty Videocon General Insurance Co. Ltd.
18. Cigna TTK Health Insurance Company Limited.
19. Kotak Mahindra General Insurance Co. Ltd.
20. Adiya Birla Healt Insurance Co. Ltd.
21. DHFL General Insurance Ltd.
22. Acko General Insurance Ltd.
As on 26/03/2019 23. Go Digit General Insurance Ltd.
24. Edelweiss General Insurance Co. Ltd.
25. Reliance Health Insurance
Re- Insurer
1. General Insurance Corporation of India As on 18/01/2019
2. ITI Re-Insurance Limited
Companies With Foreign Partners
Indian Partner Foreign Partner Country
Religare AEGON USA
Dabur Invest Corp. AVIVA Group UK
Bajaj Finserv Ltd. Allianz SE Germany
Bharti Enterprises AXA Group France
Aditya Birla Group Sun Life Financial Canada
Canara Bank & Oriental Bank HSBC Insurance UK
Deewan Housing Finance Corporation Prudential Intl. Holdings Ltd. USA
Future Group & Industrial Inv. Trust Ltd. Generali Group Italy
HDFC Ltd . Standard Life UK
ICICI Bank Prudential UK
Bank of India & Union Bank Dai-Chi Life Japan
TATA Group AIG USA
HDFC Ltd. Ergo International AG Germany
IFFCO Tokio Marine and Nichido Fire Group Japan
Max India Ltd. Bupa UK
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INSURANCE
1. Which of the following types of companies/ organisations issue ULIP?
(1) Insurance companies (2) Banks (3) NABARD
(4) RBI (5) All of these
2. If an insurance policy holder is not satisfied with the award of the insurance ombudsman, he / she can approach
to__?
(1) Courts of law
(2) Consumer forums
(3) Either 1 or 2
(4) The award of insurance ombudsman can not be challenged
(5) Govt
3. Which one of the following is the example of Insurance depositories?
(1) Central Insurance Repository Limited (CIRL)
(2) Karvy Insurance repository Limited
(3) NSDL Database Management Limited
(4) All of these
(5) None of these
4. Which of the following is correct full form of IGMS with reference to insurance sector?
(1) Integrated Grievance Management System
(2) Internal Grievance Management System
(3) Important Grievance Management System
(4) Integral Grievance Management System
(5) Insurance Grievance Management System
5. Which Insurance policy gives holder the benefits of both Insurance and Investment?
(1) Term Insurance Policies (2) Money-back Policies
(3) Unit-linked Investment Policies (4) Pension Policies
(5) Reinsurance Policies
6. Which of the following cannot be ensured?
(1) Property (both movable and immovable) (2) Result of any competition
(3) liability towards others (4) dishonesty
(5) cash
7. Select the correct statement from the following:
(A) Premium is the fixed amount of sum paid over the period by the insured to the insurance company to take
insurance policy and to complete the contract of insurance.
(B) Underwriting is the consideration of material fact to asses the risk and to take the decision whether to accept
the risk for insurance contract and if so at what rate of premium.
(C) Reinsurance is an arrangement by which insurance companies spread their risk with other underwriters or
reinsurance companies called Reinsurance.
(D) Deductible is the amount, which the insured has to bear in all cases and this amount is first, deducted from
the total assessed payable claims amount before determining insurance company’s liability.
(1) A, B & C (2) A, B & D (3) A, C & D (4) B, C & D (5) All are correct
8. FPR stands for:
(1) Final Proposal Report (2) First Proposal Report (3) First Premium Receipt
(4) Final Premium Receipt (5) None of the above

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9. Who is responsible to bear the cost of Medical Checkups when the person for whom the policy have been applied?
(1) Insurance Company
(2) the person for whom the policy have been applied
(3) Proposer
(4) The Sales Officer
(5) any of the above
10. Select the correct statement in respect to Marine Insurance:
(A) It coveres the goods in transit from one place to another through Sea
(B) It coveres the goods in transit from one place to another through Rail & Road
(C) It coveres the goods in transit from one place to another through Air
(D) It does not covere the goods in transit from one place to another through a any possible
combination of Sea, Rail, Road and Air.
(1) A, B & C (2) A, B & D (3) A, C & D (4) B, C & D (5) All are correct
11. Which ofthe following works as Re-Insurer in India?
(1) National Insurance Co. Ltd.
(2) The Oriental Insurance Co. Ltd.
(3) General Insurance Corporation of India
(4) Export Credit Guarantee Corporation of India Ltd.
(5) The New India Assurance Co. Ltd.
12. IRDAI was incorporated as a statutory body on -
(1) 06 January 2000 (2) 01 April 1999 (3) 19 April 1999
(4) 01 April 2000 (5) 19 April 2000
13. Insurance works on the principal of Indemnity it means:
(1) Under this insurance contract both the parties should have faith over each other. As a client it is the duty of
the insured to disclose all the facts to the insurance company. Any fraud or misrepresentation of facts can
result into cancellation of the contract.
(2) That an insured may not be compensated by the insurance company in an amount exceeding the insured’s
economic loss.
(3) Under this principle of insurance, the insured must have interest in the subject matter of the insurance.
Absence of interest makes the contract null and void.
(4) It enables the insured to claim the amount from the third party responsible for the loss. It allows the insurer
to pursue legal methods to recover the amount of loss.
(5) None of the above
14. Which of the following is covered under General Insurance:
(1) Term Plans (2) ULIPs (3) Mediclaim Policies
(4) 2 and 3 both (5) None of the above
15. Slect the wrong satetement from the following:
(1) Insurance follow the ‘Law of Large Numbers’
(2) Principal of ‘Probability’ is required to followed.
(3) The Principal of Subrogation is applicable to Life Insurance only.
(4) General Isurance has wider scope and penetration in India as compared to Life Insurance.
(5) Actuarial science is used to decide the rate of premium for both Life and Non- Life insurance.
16. The concept of indemnity is based on the key principle that policyholders should be prevented from.
(1) Making false insurance claims. (2) Insuring existing losses.

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(3) Paying excessively for insurance cover. (4) Profiting from insurance
(5) None of these
17. Which among the following is a non-traditional life insurance product?
(1) Endowment insurance (2) General insurance
(3) Whole life insurance (4) Term assurance
(5) None of these
18. Under what circumstances would the policyholder need to appoint an appointee?
(1) Policyholder is a Politician. (2) Insured is minor (3) Nominee is a minor
(4) Policyholder is in Army. (5) None of these
19. IRDAI stands for __________.
(1) Issuance Regulatory & Development Authority of India.
(2) International Regulatory & Development Authority of India.
(3) Indian Regulatory & Development Authority of India.
(4) Income Regulatory & Development Authority of India.
(5) Insurance Regulatory & Development Authority of India.
20. Which of the below party is not eligible to enter into a life insurance contract?
(1) Business owner. (2) House wife (3) Government employee
(4) Private employee (5) Minor

ANSWER KEY
1.(1) 2.(3) 3.(4) 4.(1) 5.(3) 6.(2) 7.(5) 8.(3) 9.(3) 10.(1)
11.(3) 12.(5) 13.(2) 14.(3) 15.(3) 16.(4) 17.(2) 18.(3) 19.(5) 20.(5)

NOTES

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MISCELLANEOUS

{{ LIST OF ABBREVIATIONS
{{ Countries with Capital and Currency of Asia
{{ Countries with Capital and Currency f Europe
{{ Countries with Capital and Currency of Africa
{{ Countries with Capital and Currency of North
America
{{ Countries with Capital and Currency of South
America
{{ Countries with Capital and Currency of Oceania
{{ Important National and International Days and
Dates
{{ International Organizations 
{{ International organization and member country
{{ List of Sports Terms
{{ List of Cups And Trophies
{{ BOOKS AND AUTHORS
{{ State/Union Territory capital
{{ Missile
{{ CENSUS 2011
{{ MAJOR CLASSICAL DANCE FORMS OF INDIA
{{ IMPORTANT FINANCIAL ORGANIZATIONS IN INDIA & THEIR
HEADQUARTERS
{{ Question & Answer

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CHAPTER
MISCELLANEOUS
13 Scan the QR code to get video of this chapter.

List Of Abbreviations
AD Authorized Dealer DBS Department of Banking Supervision,
ADB Asian Development Bank RBI
ADR American Depository Receipt DCCB District Central Cooperative Bank
AFS Available For Sale DCM Department of Currency Management,
RBI
ASSOCHAM Associated Chambers of Commerce and
Industry of India DD Demand Draft
ATM Asynchronous Transfer Mode DEIO Department of External Investments and
Operations
ATM Automated Teller Machine
DICGC Deposit Insurance and Credit Guarantee
BIS Bank for International Settlements Corporation of India
BOI Bank of India DRI Differential Rate of Interest Scheme
BoP Balance of Payments DVP Delivery versus Payment
BCBS Basel Committee on Banking Supervision ECB External Commercial Borrowing
CAD Capital Account Deficit ECB European Central Bank
CAG Comptroller and Auditor General of ECGC Export Credit and Guarantee Corporation
India
ECS Electronic Clearing Scheme
CBS Consolidated Banking Statistics, Core
Banking Solution EEFC Exchange Earners Foreign Currency
CC Cash Credit EPF Employees Provident Fund
CD Certificate of Deposit EXIM Export- Import Bank of India
CD Ratio Credit Deposit Ratio FCCB Foreign Currency Convertible Bond
CII Confederation of Indian Industry FCNR(B) Foreign Currency Non-resident (Banks)
CO Capital Outlay FCNRA Foreign Currency Non-resident Account
CP Commercial Paper FCNRD Foreign Currency Non-Repatriable
Deposit
CPI Consumer Price Index
FDI Foreign Direct Investment
CPI-IW Consumer Price Index for Industrial
Workers FEMA Foreign Exchange Management Act
CR Capital Receipts FICCI Federation of Indian Chambers of
Commerce and Industry
CRAR Capital to Risk (Weighted) Asset Ratio
FII Foreign Institutional Investor
CRR Cash Reserve Ratio
FIMMDA Fixed Income Money Market and
CSIR Council of Scientific and Industrial Derivatives Association of India
Research
FISIM Financial Intermediation Services
CSO Central Statistics Office Indirectly Measured
CVC Central Vigilance Commission FPI Foreign Portfolio Investment
DAP Development Action Plan FRBM Fiscal Responsibility and Budget
DBOD Department of Banking Operations and Management Act, 2003
Development FRN Floating Rate Note

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GDP Gross Domestic Product NRI Non-Resident Indian

GDR Global Depository Receipt NSC National Statistical Commission
GIC General Insurance Corporation NSC National Saving Certificate
G-Sec Government Securities NSSF National Social Scurity Fund
HDFC Housing Development Finance Corporation OD Over Draft
HFT Held For Trading OECD Organization for Economic Cooperation
HTM Held to Maturity and Development
HUDCO Housing & Urban Development Corporation OECO Organization for Economic-operation
IBRD International Bank for Reconstruction OLTAS Online Tax Accounting System
and Development OMO Open Market Operations
IBS International Banking Statistics PACS Primary Agriculture Credit Societies
IDBI Industrial Development Bank of India PD Primary Deficit
ICICI Industrial Credit and Investment PDAI Primary Dealers Association of India
Corporation of India PDs Primary Dealers
IFC International Finance Corporation PDS Public Distribution System
IIBI Industrial Investment Bank of India PIO Persons of Indian Origin
IIP Index of Industrial Production PNB Punjab National bank
IIP/InIP International Investment Position PSE Public Sector Enterprise
IMF International Monetary Fund PUC Paid Up Capital
IRBI Industrial Reconstruction Bank of India PUC Pro University Courses
ISO I n t e r n a t i o n a l O rg a n i z a t i o n f o r RBI Reserve Bank of India
Standardization
REER Real Effective Exchange Rate
KVIC Khadi & Village Industries Commission
RIDF Rural Infrastructure Development Fund
LAF Liquidity Adjustment Facility
RNBC Residuary Non-Banking Company
LAMPS Large-sized Adivasi Multipurpose
Societies RWA Risk Weighted Asset

LERMS Liberalised Exchange Rate Management SCARDB State Cooperative Agriculture and Rural
System Development Bank

LIC Life Insurance Corporation of India SCB State Cooperative Bank

MIGA Multilateral Investment Guarantee Agency SCB Scheduled Commercial Bank

MSS Market Stabilisation Scheme SCB Standard Chartered Bank

NABARD National Bank for Agriculture and Rural SDR Special Drawing Rights
Development SEBI Securities and Exchange Board of India
NASSCOM National Association of Software and SGL Subsidiary General Ledger
Services Companies SGSY Swarnajayanti Gram Swarojgar Yojana
NBFC Non Banking Financial Company SHGs Self-Help Groups
NEER Nominal Effective Exchange Rate SIDBI Small Industries Development Bank
NGO Non-Governmental Organization of India
NHB National Housing Bank SJSRY Swarna Jayanti Shahari Rojgar Yojana
NPV Net Present Value SSI Small-Scale Industries
NR(E)RA Non-Resident (External) Rupee Account UCB Urban Cooperative Bank
NR(NR)RA Non-Resident (Non-Repatriable) Rupee UTI Unit Trust of India
Account VC Venture Capital
NRE Non-Resident External WPI Wholesale Price Index
NRG Non-Resident Government YTM Yield to Maturity

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Countries with Capital and Currency of Asia

Country Capital Currency
Afghanistan Kabul Afghani
Bahrain Manama Bahraini Dinar
Bangladesh Dhaka Taka
Bhutan Thimpu Ngulturm
Brunei Bandar Seri Begawan Brunei Dollar
Cambodia Phnom Panh Rile
China Beijing Yuan
Cyprus Nicosia Cyprus Pounnd
India New Delhi Indian Rupee
Indonesia Djakarta Rupiah
Iran Tehran Rial
Iraq Baghdad Iraqi Dinar
Israel Jerusalem Shekel
Japan Tokyo Yen
Jordan Amman Lordan Dinar
Kazakhstan Akmola Tenge
Korea (North) Pyongyang Won (KPW)
Korea (South) Seoul Won (KRW)
Kuwait Kuwait City Kuwait Dinar
Kyrgystan Bishkek Som (KGS)
Laos Vientiane Kip
Lebanon Beirut Lebnanesse Pound
Malaysia Kuala Lumpur Malaysian Ringgit
Maldives Male Rufiyaa
Mongolia Ulan-Bator Tugrik
Myanmar Yangoon Kyat
Nepal Kathamandu Nepalese Rupee
Oman Muscat Omani Rial
Pakistan Islamabad Pakistani Rupee
Philippines Manila Piso
Qatar Doha Qatari Riyal
Saudi Arabia Riyadh Riyal (SAR)
Singapore Singapore Singapore Dollar
Sri Lanka Colombo Sri Lanka Rupee
Syria Damascus Syrian Pound
Taiwan Taipei New Taiwan Dollar
Tajikistan Dushambe Tajik Rouble
Thailand Bangkok Baht
Turkemenistan Ashkabad Manat (TMM)
Turkey Ankara Turkish Lira
United Arab Emirates Abu Dhabi Dirham
Uzbekistan Tashkent Som (UKS)
Vietnam Hanoi Dong
Yemen Sana Riya (YER)

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Countries with Capital and Currency of EUROPE

Country Capital Currency
Albania Tirana Lek
Andorra Andorra-la-vella Euro
Armenia Yerevan Dram
Austria Vienna Schilling
Belarus Minsk Belarusian Ruble
Belgium Brussels Belgian Franc
Bosnia-Herzegovina Sarajevo Konvertibilna Marka
Bulgaria Sofia Bulgarian Lev
Croatia Zagreb Kuna
Czech Prague Czech Koruna
Denmark Copenhagen Danish Krone
Estonia Tallinn Kroon
Finland Helsinki Marakka
France Paris Franc, Euro
Georgia Tbilisi Lari
Germany Berlin Euro
Greece Athens Drachma
Hungary Budapest Forint
Iceland Reykavik Krona
Ireland Dublin Euro
Italy Rome Euro
Kosovo Pristina Euro
Latvia Riga Lats
Leichtenstein Vaduz Swiss Franc
Lithuania Vilnius Litas
Luxemburg Luxemburg Luxemburg France
Macedonia Skopje Dinar
Malta Valletta Maltese Lira
Moldova Chisinau Leu
Monaco Monaco French Franc
Montenegro Podgorica Euro
Netherlands The Hague Guilder
Norway Oslo Norwegian Krone
Poland Warsaw Zloty
Portugal Lisbon Escudo
Republic Prague Koruna
Romania Bucharest Lei
Russia Moscow Rouble
San Marino San Marino Italian Lira
Slovakia Bratislava Slovak Koruna
Slovania Ljubljana Tolar
Spain Madrid Peseta
Sweden Stockholm Krona (SEK)
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Switzerland Berne Swiss Franc

Ukraine Kiev Karbovanets
United Kingdom London Pound Sterling
Vatican City State Vatican City Italian Lira
Yugoslavia Belgrade New Dinar

Countries with Capital and Currency of AFRICA

Country Capital Currency
Algeria Algiers Algerian Dinar
Angola Luanda Kwanza
Benin Porto Novo Franc (CFA)
Bostwana Gaborone Pula
Burkina Faso Ouagadougou Franc (CFA)
Burundi Bujumbura Burundi Franc
Cameroon Yaounde Franc (CFA)
Cape Verde Praia Cape Verde Escudo
Central African Republic Bangui Franc (CFA)
Chad N’D’ Jamena Franc (CFA)
Comoros Moron Comorian Franc
Congo Brazzaville Franc (CFA)
Djibouti Djibouti Djibouti Franc
Egypt Cairo Egyptian Pound
Equatorial Guinea Malabo Franc (CFA)
Eritrea Asmara Nakfa
Gabon Libereville Franc (CFA)
Ghana Accra Cedi
Guinea Conakry Guinean Franc
Guinea Bissau Bissau West Afrocam CFA Franc
Ivory Coast Yamoussoukro Franc (CFA)
Kenya Nairobi Kenya Shilling
Lesotho Maseru Rand
Liberia Monrovia Dollar
Libya Tripoli Libyan Dinar
Madagascar Antananrivo Malagasy Ariary
Malawi Lilongwe Kwacha
Mali Bamako Franc (CFA)
Mauritania Nouakchott Ouguiya
Mauritius Port Louis Mauritius Rupee
Morocco Rabat Dirham
Mozambique Maputo Metical
Namibia Windhock Rand
Niger Niamey Franc
Nigeria Abuja Naira
Rwanda Kigali Franc
Senegal Dakar Franc
Seychelles Victoria Rupee

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Sierra Leone Freetown Leone

Somalia Mogadishu Shilling
South Africa Cape Town/Pretoria/Bloemfontin Rand
Sudan Khartoum Pound
Swaziland Mbabane Lilangeni
Tanzania Dodoma Shilling
The Gambia Banjul Dalasi
Togo Lome Franc
Tunisia Tunis Dinar
Uganda Kampala Shilling
Zambia Lusaka Kwatcha
Zimbabwe Harare Zimbabwe Dollar

Countries with Capital and Currency of NORTH AMERICA

Country Capital Currency
Antigua and Barbuda St. Johns Dollar
Bahamas Nassau Dollar
Barbados Bridgetown Dollar
Belize Belmopan Dollar
Canada Ottawa Canadian Dollar
Costa Rica San Jose Colon
Cuba Havana Peso
Dominica Roseau Sterling
El Salvador San Salvador Colon
Grenada St. George Dollar
Guatemala Guatemala City Quetzal
Haiti Port-au-Prince Gourde
Honduras Tegucigalpa Lempira
Jamaica Kingston Dollar
Mexico Mexico City Peso
Nicaragua Managua Cordoba
Panama Panama City Balboa
St. Kitts and Nevis Basseterre Dollar
Trinidad and Tobago Port-of-Spain Dollar
United States of America Washington D.C. Dollar

Countries with Capital and Currency of SOUTH AMERICA

Country Capital Currency
Argentina Buenos Aires Austral (Pesu)
Bolivia La Paz Boliviano
Brazil Brasilia Real
Chile Santiago Peso
Colombia Bogotá Peso
Ecuador Quito U.S. Dollar
French Guyana Koenne Euro
Guyana Georgetown Dollar
Paraguay Asuncion Guarani

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Peru Lima Nuevosol

Surinam Paramaribo Guilder
Uruguay Montevideo Peso
Venezuela Caracas Bolivar

Countries with Capital and Currency of OCEANIA

Country Capital Currency
Australia Canberra Australian Dollar
Fiji Suva Fiji Dollar
Nauru Nauru Dollar
New Zealand Willington New Zealand Dollar
Papua New Guinea Port Moresby Kina
Solomon Island Honiara Dollar
Tonga Nukualofa Panga
Important National and International Days and Dates
January 23 World Meteorology Day
4 Louis Braille Day 23 Ram Manohar Lohia Birth Anniversary
9 NRI Day 23 Bhagat Singh, Raajguru, Sukhdev Balidan
12 National Youth Day (Swami Vivekanand Divas
Jayanti) 24 World T.B. Day
15 Army Day 26 National Day - Bangladesh/ Independence
23 Netaji Subhash Chandra Bose Jayanti Day - Bangladesh
24 National Girl Child Day 27 World Theatre Day
25 National Voters’ Day/ Tourism Day - India APRIL
26 Republic Day/ International Customs and 2 World Autism Awareness Day
Excise Day 5 National Maritime Day
28 Data Protection Day 6 International Day of Sports for Peace and
February Development
2 World Water-lands Day 7 World Health Day/ Special Protection Group
4 World Cancer Day Foundation Day
20 World Social Justice Day 10 World Homeopathy Day (Birth Anniversary
21 International Mother Tongue Day of Samuel Hanimen)
24 Central Excise Duty Day 12 International Day of Human Space Flight
28 National Science Day 14 Ambedkar Jayanti
March 15 World Art Day
3 World Wild Life Day 16 World Voice Day
4 National Security Day/ Week 17 World Hemophilia Day
8 International Women’s Day 18 World Heritage Day
14 International Kidney Day 22 Earth Day
10 CISF Foundation Day 23 World Book and Copyright Day
15 International Consumer Rights Day 24 Human Unity Day/ Panchayat Divas
20 World Sparrow Day/ International Happiness 26 World Intellectual Property Day
Day 28 World Day on Safety and Security at
21 World Forestry Day/ World Poetry Day Workplace
22 World Water Day 29 International Dance Day

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MAY 14 Hindi Divas

1 International Labour Day (May Day) 15 Engineers’ Day
3 World Press Freedom Day 16 International Day for the Preservation of the
4 World Firefighters’ Day Ozone Layer
8 World Red Cross Day 21 International Day of Peace
8 World Thalassemia Day 25 Antyodaya Divas
12 International Nurse Day 27 World Tourism Day
15 International Family Day OCTOBER
17 World Telecommunication Day 1 International Day of Old Persons
18 International Museum Day 2 Gandhi Jayanti/ Shastri Jayanti/ International
Day of Non-Violence
21 Anti-Terrorism Day/ World Day for Cultural
4 World Animal Day
Diversity for Dialogue and Development
5 World Teachers’ Day
22 International Day for Biological Diversity
8 Indian Air Force Day
24 Commonwealth Day
9 World Post Day
31 World Anti-Tobacco Day
11 International Day of Girl Child
jUNE
14 World Standards Day
1 World Milk Day
15 World Students’ Day
5 World Environment Day
16 World Food Day
6 International Olympic Association
Establishment Day 17 International Day for Eradication of Poverty
8 World Ocean Day 20 World Statistics Day (at every 5 years)
12 World Day Against Child Labour 24 United Nations Day
20 World Refugee Day 31 World Thrift Day/ World Saving Day
21 International Yoga Day 31 National Unity Day
23 United Nations Public Service Day NOVEMBER
10 World Science Day for Peace and Development
29 National Statistics Day
11 National Education Day
jULY
14 World Diabetes Day/ Children’s Day
1 Doctors’ Day
16 International Day for Tolerance
4 Independence Day: United States of America
17 International Students’ Day/ National
11 World Population Day
Journalism Day
15 World Youth Skill Day
19 National Integration Day/ World Toilet Day
18 Nelson Mandela International Day
20 Universal Children’s Day
23 National Broadcasting Day
21 World Television Day
26 Kargil Memorial Day/ Kargil Victory Day
25 World Non-Veg Prevention Day/ International
AUGUST Day for the Elimination of
6 Hiroshima Day 26 World Environment Protection Day/
7 National Handloom Day Constitution Day (India)
9 Nagasaki Day DECEMBER
9 Quit India Day 1 World AIDS Day
12 World Youth Day 2 National Pollution Control Day
15 Independence Day 2 International Day for Abolition of Slavery
19 World Humanitarian Day 3 The International Day of Persons with
29 National Sports Day Disabilities/ Bhopal Gas Tragedy Day
SEPTEMBER 5 International Volunteer Day
7 International Civil Aviation Day
5 Teachers’ Day
7 Armed Forces Flag Day
8 International Literacy Day
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8 SAARC Charter Day 18 International Migrants Day

9 International Anti-Corruption Day 20 International Human Solidarity Day
10 World Human Rights Day 23 Kisan Divas: Choudhary Charan Singh
11 International Mountain Day Jayanti
14 National Energy Conservation Day 25 Good Governance Day

International Organizations 
International Organizations Abbreviation Year of Headquarter
Establishment
United Nations Organisation UNO 1945 New York
International Monetary Fund IMF 1945 Washington DC
International Finance Corporation IFC 1956 Washington DC
International Development Association IDA 1960 Washington DC
World Trade Organisation WTO 1995 Geneva
United Nationas Educational Scientific and Cultural UNESCO 1945 Paris
Organisation
International; Labour Organisation ILO/OIT 1919 Geneva
Food and Agriculture Organisation FAO 1945 Rome
World Health Organisation WHO 1948 Geneva
International Civil Aviation Organisation ICAO 1944 Montreal
International Atomic Energy Agency IAEA 1957 Vienna
International Fund for Agricultural Development IFAD 1977 Rome
Universal Postal Union UPU 1874 Bern
United Nations Children’s Fund UNICEF 1946 New York
United Nations Industrial Development Organisation UNIDO 1966 Vienna
United Nations Population Fund UNFPA 1969 New York
United Nations Development Programme UNDP 1966 New York
United Nations High Commissioner for Refugees UNHCR 1950 Geneva
International Telecommunication Union ITU 1865 Geneva
World Meteorological Organisation WMO 1950 Geneva
World Intellectual Property organisation WIPO 1967 Geneva
World Tourism Organisation UNWTO/OMT 1964 Madrid
Organisation for Prohibition of Chemical Weapons OPCW 1997 The Hage
International Trade Center ITC 1964 Geneva
World Food Program WFP 1961 Rome
United Nations Office on Drug and Crime ODCCP 1997 Vienna
United Nations Institute for Training and Research UNITAR 1963 Geneva
United Nations University UNU 1973 Tokyo
United Nations Human Settlement Programme UNCHS 1975 Nairobi
United Nations Development Fund for Women UNIFEM 1976 New York

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International organization and member country

Organization Number of Member country
country
ASEAN Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar,
10+1
Philippines, Singapore, Thailand, Vietnam. Papua New Guinea(observer)
NAFTA 3 Canada, Mexico, and the United States
APEC United States, Australia, Brunei Darussalam, Canada, Chile, China, Hong
Kong, China, Indonesia, Japan, Malaysia, Mexico, New Zealand, Papua
21
New Guinea, Peru, Philippines, Russia, Singapore, Republic of Korea,
Chinese Taipei, Thailand and Vietnam.
EUROPEAN UNION Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic,
Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland,
28
Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland,
Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the UK.
MERCOSUR Argentina, Brazil, Paraguay, Uruguay and Venezuela. (Members)
5+6+2 Bolivia, Chile, Peru, Colombia, Ecuador, Surinam (Associates) New
Zealand, Mexico (observer)
OPEC Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi
14
Arabia, United Arab Emirates , Venezuela and Indonesia.
SAARC Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and
8
Sri Lanka.
G-15 Algeria ,Argentina ,Brazil, Chile, Egypt, India Indonesia, Islamic Republic
17 of Iran, Jamaica, Kenya, Malaysia, Mexico, Nigeria, Senegal, Sri Lanka
Bolivarian Republic of Venezuela, Zimbabwe
OECD Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark,
Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland,
34 Israel, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New
Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain,
Sweden, Switzerland, Turkey, the United Kingdom, and the United States. 
ASEM European Countries 29 + Asean countries 17 + Japan, South Korea,
53
Australia, New Zealand, Rusia, Mangolia, Kazakhstan.
ACU (Asian Clearing Bangladesh, Bhutan, India, Maldives, Myanmar, Nepal, Pakistan, Sri
9
Union) Lanka and Iran
UNO 193 192 – Montenegro, 193- South Sudan
SAFTA 7 India, Pakistan, Nepal, Sri Lanka, Bangladesh, Bhutan and the Maldives
WTO 164 163-Liberia, 164- Afghanistan
BIMSTEC 7 India, Bangladesh, Myanmar, Sri Lanka, Thailand, Bhutan and Nepal.
G-7 The United States, United Kingdom, France, Canada, Italy, Japan and
7
Germany.
G-20 Argentina, Australia, Brazil, Canada, China, France, Germany, India,
20+EU Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia,
South Africa, Turkey, United Kingdom, United States, European Union.
SHANGHAI 6 China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, and Uzbekistan.
BENELUX 3 Belgium, the Netherlands, and Luxembourg.
European Economic 28 All member countries of European Union Community
IBSA 3 India, Brazil, and South Africa

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Commonwealth Country which has The Queen as Sovereign, while ‘monarchy’ Indicates
53
a Commonwealth country
NATO Belgium, Canada, Denmark, France, Iceland, Italy, Luxembourg,
Neatherlands, Norway, Portugal, United Kingdom, United States, Greece,
28
Turkey, Germany, Spain, Czech Republic, Hungary, Poland, Bulgaria,
Estonia, Latvia, Lithuania, Romania, Slovakia, Slovenia, Albania, Croatia.
ARAB LEAGUE Algeria, Bahrain, the Comoros Islands, Djibouti, Egypt, Iraq, Jordan,
Kuwait, Lebanon, Libya, Morocco, Mauritania, Oman, Palestine, Qatar,
22
Saudi Arabia, Somalia, Sudan, Syria, Tunisia, the United Arab Emirates,
and Yemen.
ARAB PETROLEUM Algeria, Bahrain, Egypt, Iraq, Kuwait, Libya, Qatar, Saudi Arabia, Syria,
11
United Arab Emirates and Tunisia.

List of Sports Terms

## Athletics—Relay, Photo finish, Track, Lane, Hurdles, Shot-put, Discuss Throw, Hammer Throw, Triple Jump, High
Jump, Cross Country, etc.
## Badminton—Shuttle cock, Service court, Fore hand, Back Hand, Smash, Hit, Drop, Net, Love, Double fault, etc.
## Baseball—Pinching, Home run, Base runner, Throw, Perfect game, Strike, Put out, etc.
## Basketball—Free throw, Technical foul, Common foul, Under head, Over head, etc.
## Bridge—Master point, Perfect deals, Gland slam, Dummy, Trump, etc.
## Billiards & Snooker—Pull, Cue, Hit, Object ball, Break shot, Scoring, Cushion billiards, etc.
## Boxing—Knock out, Round, Ring Stoppage, Punch, Upper-cut, Kidney punch, Timing, Foot work, etc.
## Chess—E. L. O. rating, international master, Grand master, Gambit, Kings Indian Defence, etc.
## Cycling—Sprint, Time trial, Point race, Trackrace, etc.
## Cricket—Toss, Run, Wicket, Pitch, Stump, Bails, Crease, Pavalion, Gloves, Wicket Keeper, Over, Maiden over,
Followon, Rubber, Ashes, Catch, Bowled, Stump out, Run out, L. B. W; Hit Wicket, Not out, No ball, Wide ball, Dead
ball, Over Throw, Bye, Leg by, Cover drive, Late cut, Hook, Glance, Stroke, Shot, Pull, Sixer, Followthrough, Turn,
Googley, Spin, Yorker, Bouncer, Hattrick, Round the wicket, Over the wicket, Seamer, Boundry line, Slip, Square leg,
Runner, Cover, Gully, Long on, Silly point, Midwicket, Mid on, Forward short leg, Deep/mid-wicket, etc.
## Horseriding—Three day Event, Show jumping, Dresses, Faults, etc.
## Football—Goal, Kick, Head, Penalty kick, Dribble, Off side, Hattrick, Foul, Left out, Right out, Stopper, Defender,
Move, Sideback, Pass, Baseline, Rebound, Comer bick, etc.
## Gymnastics—Parellel bar, Horizontal bar, Floor exercise, Uneven bar, Push up, Sit up. etc.
## Judo—Cocoa, Blue, white, Green belt, etc.
## Hockey—Bully Sudden death, Short corner, Hattrick, Goal, Penalty Corner, Penalty stroke, Pushin, Cut, Dribble,
Scoop, Centre forward, Half back, Astroturf, Left in, Left out, Off-side, Tie breaker, Carried, Stick, Striking circle,
Under cutting, etc.
## Swimming—Freestyle, Breast stroke, Back stroke, Butterfly, Lane, Pool, Crawl, etc.
## Polo—Polo-Bunker, Chukker, Mallet, etc.
## Tennis—Service, Grandslam, Advantage, Deuce, Game Point, Break point, Smash, Shot, Grass Court, Break, Drop
shot, Netplay, Baseline, etc.
## Shooting—Rapidfire Pistol, Standard rifle, Air rifle, Free pistol, Range, Bull’s eye, etc.
## Table Tennis—Volley, Late service, Half volley, Back hand, Drive spin, Chop, etc.
## Weight Lifting—Snatch, Jerk, etc.

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## Volleyball—Deuce, Spikers, Booster, Smash, Sidearm, Panetration, etc.
## Wrestling—Free style, Hal Nelson, Point, Heave, etc.
List of Cups And Trophies
Sport: Hockey :
Aga khan Cup ,Begam Rasul Torphy (woman’s), Maharaja Ranjit Singh Gold Cup, Lady Ratan Tata Trophy
(woman’s), Gurunanak Championship (woman’s) Dhyanchand Trophy, Nehru Trophy, Sindhia Gold cup, Murugappa
Gold Cup, Wellington Cup etc,
Sport: Football :
Begum Hazarat Mahal Cup, BILT Cup, Bordoloi Trophy Colombo Cup, Confederation cup, DCM Trophy, Durand
Cup, Rovers Cup, B.C. Raj Trophy (National Championship), FIFA world Cup, Jules Rimet Trophy, Kalinga
Cup, Santosh Trophy (National Championship), IFA Shield, Scissor Cup, Subroto Mukherjee Cup, Sir Ashutosh
Mukherjee Trophy, Todd Memorial Trophy, Vittal Trophy, etc,
Sport: Cricket :
Anthony D, Mellow Trophy, Ashes, Asia Cup, Benson and Hedges Cup, Bose Trophy, Champions Trophy, Charminar
Challenger Cup, C.K Naidu Trophy, Cooch – Behar Trophy, Deodhar Trophy, Duldeep Trophy, Gavaskar –Border
Trophy, G.D. Birla Trophy, Gillette Cup, Ghulam Ahmad Trophy, Hamkumat Rai Trophy, ICC World Cup, Irani
Trophy Interface Cup, Jawaharlal Nehru Cup, Lomboard World Challenge Cup, Mc Dowells Challenge Cup,
Merchant Cup, Moin –ud –Dowla Cup, Net West Trophy, Prudential Cup(World Cup), Rani Jhansi Trophy, Ranji
Trophy, Rohinton Barcia Trophy, Rothmans Cup, Sahara Cup, Sharjah Cup, Sheesh Mahal Trophy, Sheffield Shield,
Singer Cup, Sir Frank Worrel Trophy, Texaco Cup, Titan Cup, Vijay Hazare Trophy, Vijay Merchant Trophy, Vizzy
Trophy, Wisden Trophy, Wills Trophy, World Series Cup.
Sport: Table Tennis :
Berna Bellack cup( Men), Cobillion Cup (women), Jai Laxmi cup(women),Rajkumari Challenge Cup (women
junior), Ramanuja Trophy (men Junior), Travancore Cup (women), Swathling Cup (men) etc.
Sport: Badminton :
Aggrawal Cup, Amrit Diwan Cup, Asia Cup, Australasia Cup, Chaddha Cup, European Cup, Harilela Cup, Ibrahim
Rahimatillah Challenger Cup, Konica Cup, Sophia Cup, Kitiakara Cup, Thomas Cup Tunku Abdulrahman Cup,
Uber Cup, Yonex Cup etc.
Sport: Basketball :
Basalat Jha Trophy, B.C. Gupta Trophy, Federation Cup, S.M. Arjun Raja Trophy, Todd memorial Trophy, William
jones Cup, Bangalore Bules Challenge Cup, Nehru Cup, Federation Cup etc.
Sport: Bridge :
Basalat Jha Trophy, Holkar Trophy, Ruia Gold Cup, Singhania Trophy. etc
Sport: Polo :
Ezra Cup, Gold Cup, King’s Cup, Prithi Pal Singh Cup, Radha Mohan Cup, Winchester Cup etc.
Sport: Athletics :
Charminar Trophy, Federation Cup etc.
Sport: Air Racing :
Jawaharlal Challenge Trophy, King’s Cup, Schneider Cup etc.
Sport: Billiards :
Arthur Walker Trophy, Thomas Cup etc.

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Sport: Boxing :
Aspy Adjahia Trophy, Federations Cup,Val Baker Trophy etc.
Sport: Golf
Canada Cup, Eisenhower Trophy, Muthiah Gold Cup, Nomura Trophy, President ‘s Trophy, Prince of wales Cup,
Ryder Cup, Solheim Cup, Topolino Trophy, Walker Cup, World Cup etc.
Sport: Chess
Naidu Trophy, Khaitan Torphy , Lin Are City Trophy, World Cup etc.
Sport: Horse Racing
Beresford Cup, Blue Riband Cup, Derby, Grand National Cup etc.
Sport: Netball
Anantrao Pawar Trophy etc.
Sport: Rugby Football
Bledisloe Cup, Calcutta Cup, Webb Ellis Trophy, etc.
Sport: Shooting
North Wales Cup, Welsh Grand Prix etc.
Sport: Volleyball
Centennial Cup, Federation Cup, and Indira Pradhan Trophy, Shivanthi Gold Cup, etc.
Sport: Yatch Racing
America Cup etc.

NOTES

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BOOKS AND AUTHORS

A Better India: A Better World NR Narayana Murthy
Dare to Do: For the New Generation Kiran Bedi
Kashmir: The Unwritten History Christopher Snedden
Walking with Lions : Tales from a Diplomatic Past K Natwar Singh
The Oath of the Vayuputras Amish Tripathi
The Great Gatsby F Scott Fitzgerald
Go Set a Watchman Harper Lee
Getting India Back on Track Ratan Tata
One Life is Not Enough Natwar Singh
Not Just an Accountant: The diary of the nation’s conscience keeper Vinod Rai (Former CAG)
Who Moved my Interest Rate D. Subba Rao
Rebooting India - Realizing a Billion Aspirations Nandan Nilekani and Viral Shah
Lone Fox Dancing Ruskin Bond
Atalji ne kaha Brijendra Rehi
Moving On, Moving Forward Venkaiah Naidu
The Last Girl: My story of captivity and fight against the Islamic
Nadia Murad
State
I Do What I Do Dr. Raghuram Rajan
The Third Pillar Dr. Raghuram Rajan

AUTHOR: SHRI. A.P.J. ABDUL KALAM

India 2020: A Vision for the New Millennium Wings of Fire: An Autobiography
Ignited Minds: Unleashing the Power within India The Luminous Sparks
Mission India Inspiring Thoughts
You are born to Blossom: Take My Journey
Indomitable Spirit
Beyond

Envisioning an Empowered Nation Turning Points: A Journey through Challenges

My Journey: Transforming Dreams into Actions A Manifesto for Change: A Sequel to India 2020

Advantage India: From Challenge to

Transcendence: My Spiritual Experiences with Pramukh Swamiji
Opportunity

AUTHOR: ARUNDHATI ROY

The God of Small Things Broken Republic
The End of Imagination Walking with the Comrades
The Algebra of Infinite Justice Capitalism: A Ghost Story

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AUTHOR: R.K NARAYAN

The Guide The Dark Room
Swami & Friends Waiting for the mahatma
The vender of sweets Malgudi days
Under the Banyan tree & other stories My dateless dairy

AUTHOR: JHUMPA LAHIRI

The Namesake The Lowland

AUTHOR: SALMAN RUSHDIE

Midnight’s Children Fury
Shame Shalimar the Clown
The Satanic Verses The Enchantress of Florence

AUTHOR: V.S.NAIPAUL
A House for Mr. Biswas In a Free State
A Bend in the River Half a Life
Magic Seeds

NOTES

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State/Union Territory capital
  State Capital

1 Andhra Pradesh Hyderabad

2 Arunachal Pradesh Itanagar

3 Assam Dispur

4 Bihar Patna

5 Goa Panaji

6 Chhattisgarh Raipur

7 Gujarat Gandhinagar

8 Haryana Chandigarh

9 Himachal Pradesh Shimla 

10 Jammu and Kashmir Jammu (Winter)/Srinagar (Summer)

11 Jharkhand Ranchi

12 Karnataka Bengaluru

13 Kerala Thiruvananthapuram

14 Madhya Pradesh Bhopal

15 Maharashtra Mumbai

16 Manipur Imphal

17 Meghalaya Shillong

18 Mizoram Aizawl

19 Nagaland Kohima

20 Odisha Bhubaneswar

21 Punjab Chandigarh

22 Rajasthan Jaipur

23 Sikkim Gangtok

24 Tamil Nadu Chennai

25 Telangana Hyderabad

26 Tripura Agartala

27 Uttar Pradesh Lucknow

28 Uttarakhand Dehradun

29 West Bengal Kolkata

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Union Territory Capital

1 Andaman and Nicobar Islands Port Blair

2 Chandigarh Chandigarh

3 Dadra and Nagar Haveli Silvassa

4 Daman and Diu Daman

5 Delhi New Delhi

6 Lakshadweep Kavaratti

7 Puducherry Puducherry

Missile
Missile Range
Agni I Surface to Surface 1250 Km
Agni II Surface to Surface 3000 Km
Agni III Surface to Surface 5000 Km
Agni IV Surface to Surface 4000 Km
Agni V Surface to Surface 8000 Km
Agni VI Surface to Surface 12000 Km
Akash Surface to air 30 Km
Astra Air to Air 80 Km
Barak 1 Ship to air, Ship to surface 12 Km
Barak 8 Ship to air, Ship to surface 90 Km
Brahmos Land, Naval, Air 300 Km
Dhanush Sea to Sea/Surface 350 Km
K4 Under water to surface 3500 Km
Nag Surface to surface, Air to surface 4 Km

Nirbhay Land, Naval, Air 1000 Km

Prahaar Surface to surface 150 Km
Prithvi I Surface to Surface 150 Km
Prithvi II Surface to Surface 350 Km
Prithvi III Surface to Surface 600 Km
Sagarika (K15) Under water to surface 700 Km
Shaurya Surface to Surface 700-1900 Km
Trishul Surface to air 9 Km

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Census 2011
CENSUS 2011 is the 15 in an unbroken series since 1872
th

It is the 7th Census of Independent India

Tag line of Census 2011 – Our Census Our Future

India’s Population is Approx. 17.5 % of World Population

India is the Second Most Populous Country in the World

Every 6th Person in the World is an Indian.

India has more than 50% of its population below the age of 25 & More than 65% below the age of 35.
Facts Related To Districts
Thane (Maharashtra) is the most populated district of India with 1.10 Crore Population.

Dibang Valley (Arunachal Pradesh) is the least populated district with 7,950 Population.

Mahe district (Puducherry) has highest Sex Ratio of 1176 females per 1000 males.

Daman district has lowest sex ratio of 553 females per 1000 males.

Serchhipp district (Mizoram) has highest literacy rate of 98.76%.

Alirajpur (Madhya Pradesh) is the least literate district with 37.20% only.

North East Delhi has the highest density with 37,346 person per Sq. Km.

Dibang Valley (Arunachal Pradesh) has the least density of 1 person per Sq. Km.
Facts Related To Cities
Mumbai is the most populated city in India with 1.24 Crore Population.

Kapurthala (Punjab) is the lease populated city with 99,000 Population.

Kozhikode (Kerala) has the highest Sex Ratio of 1093 female per 1000 males.

Bhiwandi (Maharashtra) has lowest Sex Ratio of 709 female per 1000 males.
Aizawl (Mizoram) has highest literacy rate city with 98.40%.
Sambhal (Uttar Pradesh) is the least literacy city with 48.20%.

Maharashtra is having 18 cities with more than 5 lakh population

POPULATION 2011 PERCENTAGE DECADAL CHANGE

TOTAL RURAL URBAN TOTAL RURAL URBAN

83, 34, 63,448 37, 71, 06,125

1,21,05,69,573 17.7% 12.3% 31.8%
(69%) (31%)

TOTAL MALE FEMALE

1,21,05,69,573 62,31,21,843 58,74,47,730

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India Urban Population (%) Rural Population (%)

  31.20% 68.80%

Highest Population – State Uttar Pradesh (19.98 Crore)

Lowest Population – State Sikkim (6.10 Lakhs)
Highest Population – UT New Delhi (1.67 Crore)
Lowest Population – UT Lakshadweep (64 Thousand)
Highest Urban Population- State Maharashtra (5.08 Crore)
Lowest Urban Population - State Sikkim (1.53 Lakh)
Highest Rural Population – State Uttar Pradesh ( 15.53 Crore)
Lowest Rural Population – State Sikkim (4.5 Lakhs)

Density Of Population [Per Sq. Km]

Density Of Population – India 382

Highest Density – State Bihar (1106)

Lowest Density – State Arunachal Pradesh (17)
Highest Density – UT New Delhi (11,320)

Lowest Density – UT A & N Islands (46)

Sex Ratio [No. Of Female Per 1000 Males]
Sex Ratio – India 943

Highest Sex Ratio – State Kerala (1084)

Lowest Sex Ratio – State Haryana (879)

Highest Sex Ratio – UT Puducherry (1037)

Lowest Sex Ratio – UT Daman & Diu (618)

Child Population (0-6 Years)

Child Population (0-6 Years) – India 16.44 Crore (15.9% of Total Population)

Highest Child Population – State Uttar Pradesh (3.07 Crore)

Lowest Child Population – State Sikkim (64 Thousand)

Highest Child Population – UT Delhi (20 Lakhs)
Lowest Child Population – UT Lakshadweep (7 Thousand)
Child Sex Ratio - India 919

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Scheduled Caste Population

INDIA SC POPULATION DECADAL CHANGE % OF SC

  20,13,78,086 20.80% 16.60%

Highest SC Population – State Uttar Pradesh (4.13 Crore)

Lowest SC Population – State Mizoram (1280)

SCHEDULED TRIBE POPULATION

DECADAL
INDIA ST POPULATION % OF ST
CHANGE
  10,42,81,034 23.70% 8.60%

Highest ST Population – State Madhya Pradesh (1.53 Crore)

Lowest ST Population – State Goa (1.5 Lakhs)

Literates & Literacy Rate (Age 7 Years & Above)

LITERACY RATE %

INDIA TOTAL LITERATES TOTAL RURAL URBAN

  76,34,98,517 74.04% 68.90% 85.00%

Literacy Rate %
INDIA TOTAL MALE FEMALE
  74.04 82.10 65.50
Kerala (94%)
Highest Literacy Rate – State
Bihar (63.80%)
Lowest Literacy Rate –State

Highest Literacy Rate – UT Lakshadweep (92%)

Lowest Literacy Rate – UT D & N Haveli (78%)

Religious Demographics
RELIGION % OF TOTAL POPULATION

Hindus 78.35%

Muslims 14.20%
Christians 2.30%
Sikhs 1.90%

Buddhists 0.80%
Jains 0.40%

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Linguistic Demographics

LANGUAGE % OF TOTAL POPULATION

Hindi 41.03%

Bengali 8.11%

Telugu 7.19%

Marathi 6.99%
Tamil 5.91%

Number of States/UT 35

Number of Districts 640

Number of Statutory Towns 4041

Number of Villages 6,40,930

Major Classical Dance Forms of India

S.NO. CLASSICAL DANCE FORM STATE OF ORIGIN

1 Bharatanatyam Tamil Nadu
2 Chhau Odisha, West Bengal, Jharkhand
3 Gaudiya Nritya West Bengal
4 Kathak Uttar Pradesh [North India]
5 Kathakali Kerala
6 Kuchipudi Andhra Pradesh
7 Manipuri Manipur
8 Mohiniyattam Kerala
9 Odissi Odisha
10 Sattriya Assam
11 Ghoomar Rajasthan
12 Thang Ta Manipur

Major Folk Dance Forms Of India

S.NO. FOLK DANCE FORM STATE OF ORIGIN

1 Bhangra Punjab

2 Charkula Uttar Pradesh

3 Dhandiya Raas Gujarat

4 Garba Gujarat

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5 Bihu Assam

6 Giddha Punjab

7 Thirayattam Kerala

8 Tutsa Naga Arunachal Pradesh

9 Yakshagana Karnataka

10 Jhumar Punjab

11 Rasiya Uttar Pradesh

12 Gombhira West Bengal

13 Raibenshe West Bengal

14 Dhali Tamil Nadu

15 Kummi Kerala

16 Kikkli Punjab

17 Cheraw Mizoram

18 Bagurumba Asom

19 Panthi Chhattisgarh

20 Dhimsa Odisha

List Of Famous Classical Dancers

S.NO. NAME OF THE DANCER DANCE FORM

1 Mallika Sarabhai Kuchipudi & Bharatanatyam

2 Pt. Birju Maharaj Kathak

3 Rukmini Devi Arundale Bharatanatyam

4 Shovana Narayan Kathak

5 Sonal Mansingh Bharatanatyam, Kuchipudi & Chhau

6 Yamini Krishnamurthy Kuchipudi & Bharatanatyam

7 Raja Reddy & Radha Reddy Kuchipudi

8 Shambhu Maharaj Kathak

9 Sitara Devi Kathak

10 Kalamandalam Ramankutty Nair Kathakali

11 Kalamandalam Gopi Kathakali

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12 Madavoor Vasudevan Nair Kathakali

13 Kelucharan Mahapatra Odissi

14 T Chinnammu Amma Mohiniyattam

15 Kalamandalam Sugandhi Mohiniyattam

16 Indira P Bora Sattriya

17 Maniram Datta Moktar Sattriya

FOREIGN DIRECT INVESTMENT

Foreign Direct Investment Is Prohibited In Following Sectors

Lottery Business Gambling and Betting

Chit funds Nidhi company

Trading in Transferable Development Rights Real Estate Business or Construction of Farm Houses

Manufacturing of cigars, of tobacco or of Activities/sectors not open to private sector investment e.g. Atomic
tobacco substitutes energy, Railway operations

Sector FDI Limit Entry Route

Agriculture & Animal Husbandry
a) Floriculture, Horticulture, and Cultivation
of Vegetables & Mushrooms under controlled
conditions
b) Development and Production of seeds and 100% Automatic
planting material
c)Animal Husbandry (including breeding of dogs),
Pisciculture, Aquaculture, Apiculture.
d) Services related to agro and allied sectors
Plantation Sector
(i) Tea sector including tea plantations
(ii) Coffee plantations
(iii) Rubber plantations 100% Automatic
(iv) Cardamom plantations
(v) Palm oil tree plantations
(vi) Olive oil tree plantations
Mining and Exploration of metal and non-metal ores 100% Automatic
Coal & Lignite 100% Automatic
Mining and mineral separation of titanium bearing 100% Automatic
minerals and ores, its value addition and integrated
activities

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Exploration activities of oil and natural gas fields, infrastructure

related to marketing of petroleum products and natural gas, 100% Automatic
marketing of natural gas and petroleum products, petroleum
product pipelines, natural gas/pipelines
Petroleum refining by the Public Sector Undertakings (PSU) 100% Automatic
Defence 100% Automatic up to 49% Government
route beyond 49% wherever it is
likely to result in access to modern
technology or for other reasons to
be recorded
Teleports 100% Automatic
Direct to Home (DTH)
Cable Networks
Mobile TV
Headend-in-the Sky Broadcasting Service(HITS)
Cable Networks
(i) Terrestrial Broadcasting FM(FM Radio) 49% Government
(ii) Up-linking of ‘News & Current Affairs’ TV
Channels
Up-linking of Non-‘News & Current Affairs’ TV 100% Automatic
Channels/ Down-linking of TV Channels
(i) Publishing of newspaper and periodicals dealing 26% Government
with news and current affairs
(ii) Publication of Indian editions of foreign
magazines dealing with news and current affairs
(i) Publishing/printing of scientific and technical 100% Government
magazines/specialty journals/ periodicals
(ii) Publication of facsimile edition of foreign
newspapers
Civil Aviation 100% Automatic
Airports
(a) Greenfield projects
(b) Existing projects
Air Transport Services 100% Automatic up to 49% (Automatic
(i) Scheduled Air Transport Service/ up to 100% for

Domestic Scheduled Passenger Airline NRIs) Government route beyond

49%
(ii) Regional Air Transport Service

Air Transport Services 100% Automatic

(i) Non-Scheduled Air Transport Services
(ii) Helicopter services/seaplane services
requiring DGCA approval
Civil Aviation - Ground Handling Services 100% Automatic
Civil Aviation -Maintenance and Repair organizations

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Construction Development: Townships, Housing, Built-up 100% Automatic

Infrastructure
Industrial Parks -new and existing 100% Automatic
Satellites- establishment and operation 100% Government
Private Security Agencies 74% Automatic up to 49% Government
route beyond 49% and up to 74%
Telecom Services 100% Automatic up
to 49%
Government
route beyond
49%
Trading Cash & Carry Wholesale Trading/Wholesale Trading 100% Automatic
(including sourcing from MSEs)
E-commerce activitie 100% Automatic
Single Brand product retail trading 100% Automatic up to 49%
Government route
beyond 49%
Multi Brand Retail Trading 51% Government
Duty Free Shops 100% Automatic
Railway Infrastructure 100% Automatic
Asset Reconstruction Companies 100% Automatic
Banking- Private Sector 74% Automatic up to 49% Government
route beyond 49% and up to 74%.
Banking- Public Sector 20% Government
Credit Information Companies 100% Automatic
Infrastructure Company in the Securities Market 49% Automatic
Insurance 49% Automatic
Pension Sector 49% Automatic
Power Exchanges 49% Automatic
White Label ATM Operations 100% Automatic
Pharmaceuticals - Greenfield 100% Automatic
Pharmaceuticals - Brownfield 100% Automatic up to 74%
Government route beyond 74%

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List Of Major Indian Cities On Rivers

S.NO. NAME OF THE CITY STATE NAME OF RIVER
1 Varanasi Uttar Pradesh Ganga
2 Kanpur Uttar Pradesh Ganga
3 Mirzapur Uttar Pradesh Ganga
4 Haridwar Uttarakhand Ganga
5 Patna Bihar Ganga
6 Bhagalpur Bihar Ganga
7 Hajipur Bihar Ganga
8 Agra Uttar Pradesh Yamuna
9 New Delhi Delhi Yamuna
10 Mathura Uttar Pradesh Yamuna
11 Nashik Maharashtra Godavari
12 Nanded Maharashtra Godavari
13 Rajahmundry Andhra Pradesh Godavari
14 Lucknow Uttar Pradesh Gomti
15 Dibrugarh Assam Brahmaputra
16 Guwahati Assam Brahmaputra
17 Vijayawada Andhra Pradesh Krishna
18 Sangli Maharashtra Krishna
19 Cuttack Odisha Mahanadi
20 Sambalpur Odisha Mahanadi
21 Kolkata West Bengal Hugli
22 Hyderabad Telangana Musi
23 Bengaluru Karnataka Vrishabhavathi
24 Pune Maharashtra Mula, Mutha
25 Ahmedabad Gujarat Sabarmati
26 Vadodara Gujarat Vishwamitri
27 Ayodhya Uttar Pradesh Saryu
28 Gorakhpur Uttar Pradesh Rapti
29 Ujjain Madhya Pradesh Shipra
30 Jabalpur Madhya Pradesh Narmada
31 Surat Gujarat Tapi
32 Erode Tamil Nadu Kaveri
33 Coimbatore Tamil Nadu Noyyal
34 Madurai Tamil Nadu Vaigai

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Important Financial Organizations In India & Their Headquarters

HEADQUAR-
NAME OF THE ORGANIZATION ESTD.
TERS

Reserve Bank of India RBI 1935 Mumbai

Securities & Exchange Board of India SEBI 1988 Mumbai

State Bank of India SBI 1955 Mumbai

Life Insurance Corporation of India LIC 1956 Mumbai

General Insurance Corporation of India (GIC Re) GIC Re 1972 Mumbai

National Bank for Agriculture & Rural Development NABARD 1982 Mumbai

Export Import Bank of India EXIM 1982 Mumbai

Export Credit Guarantee Corporation ECGC 1957 Mumbai

Deposit Insurance & Credit Guarantee Corporation DICGC 1978 Mumbai

The New India Assurance Company Limited NIACL 1919 Mumbai

National Payments Corporation of India NPCI 2008 Mumbai

Banking Codes & Standards Board of India BCSBI 2006 Mumbai

Credit Information Bureau of (India) Limited CIBIL 2000 Mumbai

Credit Rating Information Services of India Limited CRISIL 1987 Mumbai

Bombay Stock Exchange BSE 1875 Mumbai

National Stock Exchange NSE 1992 Mumbai

Metropolitan Stock Exchange (MCX Stock Exchange) MSE 2008 Mumbai

Multi Commodity Exchange MCX 2003 Mumbai

National Securities Depository Limited NSDL 1996 Mumbai

Central Depository Services Limited CDSL 1998 Mumbai

Asset Reconstruction Company (India) Limited ARCIL 2002 Mumbai

Indian Railway Finance Corporation IRFC 1987 Mumbai

Credit Analysis & Research Limited CARE 1993 Mumbai

SME Rating Agency of India SMERA 2005 Mumbai

Unit Trust of India UTI 1964 Mumbai

Industrial Development Bank of India IDBI 1964 Mumbai

Industrial Credit Investment Corporation of India ICICI 1955 Mumbai

Pension Fund Regulatory & Development Authority PFRDA 2003 New Delhi

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National Housing Bank NHB 1988 New Delhi

MUDRA
Micro Units Development & Refinance Agency Bank 2015 New Delhi
Bank
Agriculture Insurance Company AIC 2002 New Delhi

Employees Provident Fund Organization EPFO 1952 New Delhi

Employee State Insurance Corporation ESIC 1952 New Delhi

The Oriental Insurance Company Limited OICL 1947 New Delhi

Power Finance Corporation PFC 1986 New Delhi

Industrial Financial Corporation of India IFCI 1948 New Delhi

Investment Information & Credit Rating Agency ICRA 1991 New Delhi

Security Printing & Minting Corporation of India SPMCIL 2006 New Delhi

United India Insurance Company Limited UIIC 1938 Chennai

Infrastructure Development Finance Company IDFC 1997 Chennai

Insurance Regulatory & Development Authority of India IRDAI 2000 Hyderabad

National Insurance Company Limited NICL 1906 Kolkata

Small Industries Development Bank of India SIDBI 1990 Lucknow

Bharatiya Reserve Bank Note Mudran Pvt. Limited BRBNMPL 1995 Bengaluru

Public Sector Banks In India

Name Of The Bank Estd. Headquarters Tagline / Slogan

State Bank Group

The banker to every Indian

Pure banking, nothing else
State Bank of India 1955 Mumbai With you – all the way
A bank of the common man
The nation banks on us

Nationalised Banks
1ST PHASE

Bank of India 1906 Mumbai Relationship beyond Banking

Central Bank of India 1911 Mumbai “Central” to you since 1911

Union Bank of India 1919 Mumbai Good people to bank with

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Bank of Maharashtra 1935 Pune Ek parivar, Ek bank

Canara Bank 1906 Bengaluru Together we can

Syndicate Bank 1925 Manipal Faithful & friendly

Punjab National Bank 1894 New Delhi The name you can Bank upon!

Indian Overseas Bank 1937 Chennai Good people to grow with

Indian Bank 1907 Chennai Your own bank

Allahabad Bank 1865 Kolkata A tradition of trust

UCO Bank 1943 Kolkata Honours your trust

United Bank of India 1950 Kolkata The bank that begins with “U”

Bank of Baroda 1908 Vadodara India’s international bank

2Nd Phase
Corporation Bank 1906 Mangalore A premier public sector bank

Punjab & Sind Bank 1908 New Delhi Where service is a way of life

Andhra Bank 1923 Hyderabad Where India banks

Oriental Bank of Commerce 1943 New Delhi Where every individual is committed
* Dena Bank and Vijaya Bank has been merged in Bank of Baroda.
Private Sector Banks In India
Name of The Bank Estd. Headquarters Tagline / Slogan

Old Private Sector Banks

City Union Bank 1904 Kumbakonam Trust & excellence since 1904

Lakshmi Vilas Bank 1926 Chennai The changing face of prosperity

Karur Vysya Bank 1916 Karur Smart way to bank

Tamilnad Mercantile Bank 1921 Tuticorin Be a step ahead of life

Catholic Syrian Bank 1920 Trissur Support all the way

South Indian Bank 1929 Trissur Experience next generation banking

Dhanlakshmi Bank 1927 Trissur Tann. Mann. Dhan.

Federal Bank 1945 Kochi Your perfect banking partner

Karnataka Bank 1924 Mangalore Your family bank across India

Jammu & Kashmir Bank 1938 Srinagar Serving to empower

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Nainital Bank 1922 Nainital -

RBL Bank Ltd 1943 Kolhapur Apno ka bank

New Private Sector Banks

Axis Bank (UTI Bank) 1994 Mumbai Badhti ka nam zindagi

ICICI Bank 1994 Mumbai Hum hain naa! / Khayaal aapka

We understand your world /

HDFC Bank 1994 Mumbai
Bank aapki mutthi mein

Kotak Mahindra Bank 1985 Mumbai Let’s make money simple

IndusInd Bank 1994 Mumbai We make you feel richer

Yes Bank 2004 Mumbai Experience our expertise

DCB Bank 1930 Mumbai We value you

Bandhan Bank 2015 Kolkata Aapka bhala, Sabki bhalai

IDFC Bank 2015 Mumbai The bank of now

IDBI 1964 Mumbai Bank Aisa Dost Jaisa/Banking For All

Top Foreign Banks In India

Name Of The Foreign Bank Country Tagline

Citi Bank USA The citi never sleeps

BNP Paribas France The Bank for the changing world

HSBC Bank UK The world’s local bank

Standard Chartered Bank UK Your right partner

DBS Bank Singapore Living, breathing Asia

Barclays Bank UK Fluent in finance

Deutsche Bank Germany A passion to perform

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Institutions Established By Financial Regulators

Name of The Institution Estd By. Location

National Institute of Bank Management NIBM RBI Pune

Institute for Development & Research in Banking Technology IDRBT RBI Hyderabad

Indira Gandhi Institute of Development Research IGIDR RBI Mumbai

Centre for Advanced Financial Research and Learning CAFRAL RBI Mumbai

National Institute of Securities Market NISM SEBI Mumbai

National Insurance Academy NIA IRDAI Pune

State Festival
Andhra Pradesh Ugadi
Arunachal Pradesh Losar festival
Assam Bihu
Bihar Chhath Puja
Chattisgarh Maghi Purnima
Goa shigmo mel
Gujarat Navaratra (Dandiya Dance)
Haryana Gugga Naumi
Himachal Pradesh Gochi Festival
Jammu and Kashmir Bahu Mela
Jharkhand Karam Festival
Karnataka Mysore Dasara
Kerala Onam
Madhya Pradesh Lokrang festival
Maharashtra Ganesh Chaturthi
Manipur Yaoshang
Meghalaya Khasis
Mizoram Chapchar Kut
Nagaland Sekrenyi
Odisha Dola Yatra
Punjab Bandi Chhor Divas
Rajasthan Gangaur
Sikkim Losar
Tamil Nadu Pongal
Telangana Bathukamma
Tripura Kharchi Puja
Uttar Pradesh Ram Navmi
Uttarakhand Purna Kumbh Mela
West Bengal Durga Puja

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MISCELLANEOUS
1. What is the full form of IFSC?
(1) Indian Financial System Code (2) Italian Financial System Code
(3) Indian Fundamental System Code (4) Indian Finance System Code
(5) None of these
2. How many digits are contained in IFSC?
(1) 9 (2) 10 (3) 11 (4) 12 (5) None of these
3. What does the first four characters in IFSC represents?
(1) Branch code (2) Bank code (3) Central code (4) PIN code (5) None of these
4. What is the full form of MICR?
(1) Magnetic Ink Character Reader. (2) Magnet Ink Character Recognition.
(3) Magnetic Ink Characteristic Recognition. (4) Magnetic Ink Character Recognition.
(5) None of these
5. How many digits are contained in MICR?
(1) 9 (2) 10 (3) 11 (4) 12 (5) None of these
6. What does the last three characters in MICR represents?
(1) Branch code (2) Bank code (3) Central code (4) City code (5) None of these
7. KYC is used a counter measure for:
(1) Financial inclusion. (2) Money laundering. (3) Literacy.
(4) Digitalisation. (5) None of these
8. The full form of KYC is :
(1) Know Your Consumer. (2) Know Your Caller. (3) Know Your Customer.
(4) Know Your Company. (5) None of these
9. KYC was introduced by:
(1) RBI introduced KYC guidelines for all banks in the year 2000.
(2) RBI introduced KYC guidelines for all banks in the year 2002.
(3) IBA introduced KYC guidelines for all banks in the year 2002.
(4) RBI introduced KYC guidelines for all banks in the year 2012.
(5) None of these
10. KYC day is celebrated on?
(1) Last working day of August every year. (2) First working day of April every year.
(3) First working day of August every year. (4) First working day of May every year.
(5) None of these
11. The full form of NEFT is?
(1) National Electronic Funds Transfer. (2) National Electronic Fund Transfer.
(3) National Electronics Fund Transfer. (4) National Electronic Fund Transfers.
(5) None of these
12. Which of the following is true about NEFT:
(A) There is no minimum limit that could be transferred using NEFT.
(B) There is no maximum limit that could be transferred using NEFT.
(C) Remittances can be sent to Nepal only, under the Indo-Nepal Remittance Facility Scheme
(D) NEFT can be used to transfer funds from / to NRE and NRO accounts.
(1) Option A is correct. (2) Option B is correct. (3) Option C is correct.
(4) All of these (5) None of these
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13. Which of the following statement is true about KCC?
(1) The full form of KCC is Kisan Credit Card
(2) KCC scheme was introduced in the year 1998.
(3) The objective of KCC is to fulfil the credit needs of farmers during cropping season through banking system.
(1) Option A is correct. (2) Option B is correct. (3) Option C is correct.
(4) All of the given options are False (5) All of the given options are true
14. Which of the following statement is true about BSBDA?
(A) Its full form is Basic Saving Bank Deposit Account.
(B) The BSBDA scheme is launched by RBI.
(C) It is for any individual, including poor or those from weaker section of the society.
(D) It is applicable to all scheduled commercial banks in India
(1) Option A, B & C is correct. (2) Option B, C & D is correct.
(3) Option C is correct. (4) All of the given options are False
(5) All of the given options are true
15. As per guidelines issued on 22 august 2012 by RBI, all the existing No-frill accounts opened by the banks are now
converted into?
(1) BSDBA (2) BBSDA (3) BSBDA (4) BDSBA (5) None of these
16. What is the Banking Ombudsman Scheme?
(1) It is a forum to bankers for resolution of complaints relating to certain services rendered customers.
(2) It is a forum to bank customers for resolution of complaints relating to certain services rendered by banks.
(3) It is a forum to passengers for resolution of complaints relating to certain services rendered by railways.
(4) It is a forum to public for resolution of complaints relating to certain services rendered by politicians.
(5) None of these
17. Which of the following statement is true about Banking Ombudsman Scheme?
(A) It came into effect from 1996.
(B) It was introduced under Section 35 A of the Banking Regulation Act, 1949 by RBI
(C) It is a senior official appointed by the bank itself.
(1) Option A is correct. (2) Option B is correct. (3) Option C is correct.
(4) All of the given options are False (5) All of the given options are true
18. NACH – National Automated Clearing House is managed by
(1) RBI (2) SBI (3) Union Bank (4) NPCI (5) None of these
19. One rupee notes bear the signatures of :
(1) Finance Minister (2) RBI Governor (3) Secretary, Ministry of Finance
(4) Deputy Governor of RBI (5) None of these
20. What is the full form of USSD in digital banking?
(1) Unstructured Supplementary Service Data
(2) Union-structured Supplementary Service Data
(3) Unstructured Supply Service Data
(4) Unstructured Supplementary Supply Data
(5) None of these

ANSWER KEY
1.(1) 2.(3) 3.(2) 4.(4) 5.(1) 6.(1) 7.(2) 8.(3) 9.(2) 10.(3)
11.(1) 12.(4) 13.(5) 14.(5) 15.(3) 16.(2) 17.(2) 18.(4) 19.(4) 20.(4)

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