cardinal economic indicators

7/23/2019 Cardinal Economic Indicators 1/132 Cardinal Economic Indicators In India, we say that, our banking system is one of the robust and rugged systems. Do we have to believe that or not that’s later part of discourse? But before that, we need to comprehend some economic vitals to gain an insight into what actually is going around us. For that matter, we don’t need to be an epertise in number crunching rather general knowledge would do a way better. So, what are these cardinal economic indicators? !conomic indicators are statistical tools to understand the economic activity of an entity. "hat entity? !ntity could be any organisation, a firm, an industry of some kind or on a larger contet a country. #hese indicators are handy when one needs to sei$e the economic health of an entity. #hese furnish a basis to do analysis of economic performance and of future performance of an organisation. %o, if a firm is in red or doing slack business then these indicators would show the same i.e. unsatisfactory figures. !conomic indicators include various indices, earnings reports, and economic summaries. %o, what do these economic indicators constitute? #hese are unemployment rate, attrition or &uits rate '&uit rate in (.%. !nglish),  consumer price inde and wholesale price inde 'a measure for inflation), consumer leverage ratio, industrial production, bankruptcies, gross domestic  product'*ominal and +++), broadband internet penetration, stock market prices, money supply changes, Foreign echange reserve 'ne of the most paramount indicators for India). Unemployment Rate:- #he unemployment rate is a measure of the prevalence of unemployment  and it is calculated as a percentage by dividing the number of unemployed individuals  by all individuals currently in the labor force. During periods of recession, an economy usually eperiences a relatively high unemployment rate. In country like (%-, Federal employees /ob security is so great that workers in many agencies are more likely to die of natural causes than get laid off or fired. -ccording to a vetted report, the federal government fired 0.112 of its workers in the budget year 33,445 employees in its 6.3 million workforces. 7esearch shows that the private sector fires about 82 of workers annually for poor performance. -t  present, USA has 5. percent unemployment rate. India has presently .! pc unemployment rate reckoned annually. (nemployment 7ate in India decreased to 9.:0 percent in 6038 from 1.60 percent in 6036 and then to 8.4 percent in 6039. (nemployment 7ate in India averaged ;.86 percent from 3:58 until 6038, reaching an all time high of :.90 percent in

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Cardinal Economic Indicators

In India, we say that, our banking system is one of the robust and rugged systems.Do we have to believe that or not that’s later part of discourse? But before that, weneed to comprehend some economic vitals to gain an insight into what actually isgoing around us. For that matter, we don’t need to be an epertise in number crunching rather general knowledge would do a way better.

So, what are these cardinal economic indicators?

!conomic indicators are statistical tools to understand the economic activity of anentity. "hat entity? !ntity could be any organisation, a firm, an industry of somekind or on a larger contet a country. #hese indicators are handy when one needs tosei$e the economic health of an entity. #hese furnish a basis to do analysis of economic performance and of future performance of an organisation. %o, if a firm

is in red or doing slack business then these indicators would show the same i.e.unsatisfactory figures. !conomic indicators include various indices, earningsreports, and economic summaries. %o, what do these economic indicatorsconstitute?#hese are unemployment rate, attrition or &uits rate '&uit rate in (.%. !nglish), consumer price inde and wholesale price inde 'a measure for inflation),consumer leverage ratio, industrial production, bankruptcies, gross domestic

 product'*ominal and +++), broadband internet penetration, stock market prices,money supply changes, Foreign echange reserve 'ne of the most paramount

indicators for India).

Unemployment Rate:-

#he unemployment rate is a measure of the prevalence of unemployment and itis calculated as a percentage by dividing the number of unemployed individuals

 by all individuals currently in the labor force. During periods of recession, aneconomy usually eperiences a relatively high unemployment rate.

In country like (%-, Federal employees /ob security is so great that workers inmany agencies are more likely to die of natural causes than get laid off or fired.-ccording to a vetted report, the federal government fired 0.112 of its workers in

the budget year 33,445 employees in its 6.3 million workforces. 7esearch showsthat the private sector fires about 82 of workers annually for poor performance. -t

 present, USA has 5. percent unemployment rate.

India has presently .! pc unemployment rate reckoned annually.(nemployment 7ate in India decreased to 9.:0 percent in 6038 from 1.60 percentin 6036 and then to 8.4 percent in 6039. (nemployment 7ate in India averaged;.86 percent from 3:58 until 6038, reaching an all time high of :.90 percent in

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600: and a record low of 9.:0 percent in 6038. (nemployment 7ate in India isreported by the <inistry of =abour and !mployment, India.!veryone knows what is >D+ and >*+ but still let’s get a small walk throughthose two vital indicators."#$: - "ross #omestic $roduct  is calculated either by measuring all incomeearned within a country, or by measuring all ependitures within the country,which should approimately be the same."%$: - "ross %ational $roduct uses >D+, but adds income from foreign sources,less income paid to foreign citi$ens and entities. >*+ can be either higher or lower than >D+, depending on whether or not a country has a positive or negative resultfrom net foreign inflows and outgo. #hough >*+ is still calculated, the (nited%tates shifted to >D+ as its primary economic measure in 3::3, in part becausemost countries in the world use >D+ to measure the si$e and direction of their economies. -s a result, >*+ numbers are less common than >D+ figures.

#hose definitions aforementioned can be learned upon getting by heart and can be blurted out when an interview would ask. But, if we are economically sound thenwe should intent on comprehending the subtle part of >D+ and >*+. *ow, what isthat?>D+ and >*+ are calculated based on very specific time periods. But not all theinformation is available at the same time. #his forces the Bureau of =abor %tatistics'the agency that reports official >D+ in the (%) to rely on estimates, resulting inrevisions after the fact. (nreported income is another flaw, and one that is noteasily remedied. Individuals may underreport income to minimi$e income taliability, which will understate the >D+. #his can be a problem between countriesas well, since underreporting of income is more prevalent in some countries thanin others. %till another problem @ given that >D+ and >*+ is often used tomeasure economic strength from one country to another @ is that reporting tendsto be less reliable in some countries than in others. #his is especially likely in lessdeveloped countries, leading to underestimates of true national economic output.#he lack of comparable reporting from one country to another has given rise to twomethods of computing either "#$ or "%$, nominal and purchasin& power

parity, or $$$.

 *ominal is measuring the si$e of a nation’s economy on the basis of its economy in

local currency, converted to dollars 'typically). #he conversion is based oncurrency echange rates in the currency market.+++ ignores currency echange rates, and measures the economy of countries

 based on the cost of a common basket of goods and services. For eample, housingcosts more in the (% than it does in India, so housing in India will get a boost incompiling >D+ or >*+ on the basis of +++.

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-s a rule, +++ will result in a relatively higher >D+ or >*+ in a country wherecosts are lower. +++ ad/usts for the fact that a house in the (% may cost A600,000,while a similar home in India may be only A10,000. It attempts to even out pricevariations between countries.As an e'ample, under nominal, in ()*5, India+s "#$ (,)!,5)* millions o 

US# or (.)/ trillion and usin& $$$, India+s "#$ is ,5,0)),))),))) 1 or

a2out .! times hi&her.

3erein 2elow are some i&ures pertainin& to economy o India.

4arets 6ast Reerence 7re8uency

urrency 41.98 ctC6031 Daily

%tock <arket 64:88 ctC6031 Daily

>D+ 64:88 ctC6031 early

>D+ 604; (%D Billion ctC6031 early

>D+ >rowth rate ; 2 DecC6039 Euarterly

>*+ 14;8: I*7 Billion DecC6039 early

>D+ +er apita 3648 (%D DecC6039 early

>D+ +er apita+++

1141 (%B DecC6039 early

7orei&n E'chan&e Reser9es:-

Foreign !change 7eserves in India decreased to 89::50 (%D <illion in

%eptember 61 from 816060 (%D <illion in the previous week. Foreign !change7eserves in India averaged 35506;.:1 (%D <illion from 3::5 until 6031,reaching an all time high of 858498 (%D <illion in December of 600: and arecord low of 6:095 (%D <illion in %eptember of 3::5. Foreign !change7eserves in India is reported by the 7eserve Bank of India.Before summing all these up, let’s get back to the &uestion which was mootedearlier in the beginning of this very article. Is our banking system robust andrugged? "ell, answer is perpleing. "e can’t say !%G emphatically or also*G either. 7easons are &uiet apparent, <(D7-, a heappraised scheme, has

 /ust started operating. But this scheme is going to create an insurmountable problem in long run. How? +roviding loans to weaker sections of society withoutany collateral is a giant blunder. !conomically backward people without proper skill set would never use that money to do wonders in their life and at the sametime would flunk to repay the loan to bank. #hat’s a desperate attempt to woo

 people for vote bank but in long run we can’t bank on these schemes as this is

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going create a big hole in bank’s pocket. *+- and all, I think I should leave it tothe wisdom of readers.

Payment Banks : A Step Closer Towards Financial Inclusion

>ood <orning 7eaders,- debate sparked on "ednesday about the 7BI giving =icense to the +aymentBanks. #his might sound new to you, but yes there is a different catageory called+ayment Banks. +ayments bank licence will allow companies to collect deposits'initially up to 7s 3 lakh per individual), offer Internet banking, facilitate moneytransfers and sell insurance and mutual funds. It is new strippeddown type of 

 banks, which are epected to reach customers mainly through their mobile phonesrather than traditional bank branches.

#he ob/ectives of setting up of payments banks will be to further financialinclusion by providing small savings accounts and paymentsCremittance services to

migrant labour workforce, low income households, small businesses, other unorganised sector entities and other users. %uch banks will ensure more moneycomes into the banking system and will help reach out to people in rural areas.<oreover, the payments bank licence will enable the network of 3,19,000 postoffices 'including 3,80,000 rural post offices) to offer banking services to themasses in the country.

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6ist o the companies who &ot the license to run payment 2ans :

• -ditya Birla *uvo =td

• -irtel < ommerce %ervices =td

• holamandalam Distribution %ervices =td

• Department of +osts

• Fino +ay#ech =td

•  *ational %ecurities Depository =td

• 7eliance Industries =td

• Dilip %hantilal %hanghvi

• i/ay %hekhar %harma

• #ech <ahindra =td

• odafone mpesa =td

#he net &uestion that arrives in ones mind is that what is the need of payment bank and JKya baaki banks kam hainJ but there is only one answer to all the&uestions that this step is one of the ma/or step towards Financial Inclusion. #hese

 banks have limited services as compared to the other banks. =ets see what these banks can or cant do L

• They can’t offer loans but can raise deposits of upto Rs. 1 lakh, and pay

interest on these balances just like a savings bank account does.

• They can enable transfers and remittances through a mobile phone.

• They can offer services such as automatic payments of bills, and purchases

in cashless, cheque less transactions through a phone.

• They can issue debit cards and AT cards usable on AT net!orks of all


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• They can transfer money directly to bank accounts at nearly no cost being a

 part of the gate!ay that connects banks.

• They can provide fore" cards to travellers, usable again as a debit or AT

card all over #ndia.

• They can offer fore" services at charges lo!er than banks.

• They can also offer card acceptance mechanisms to third parties such as the

$Apple %ay.’ 

#his is for the first time in the history of Indias banking sector that 7BI is givingout differentiated licences for specific activities. 7BI is epected to come out witha second set of such licences @ for small finance banks @ and the process for

those is in its final stage. #he move is seen as a ma/or step in pushing financialinclusion in the country.

It’s a step to redefine banking in India. #he 7eserve Bank epects payment banksto target India’s migrant labourers, lowincome households and small businesses,

offering savings accounts and remittance services with a low transaction cost. Ithopes payments banks will enable poorer citi$ens who transact only in cash to taketheir first step into formal banking. It could be uneconomical for traditional banksto open branches in every village but the mobile phones coverage is a promisinglowcost platform for &uickly taking basic banking services to every rural citi$en.#he innovation is also epected to accelerate India’s /ourney into a cashlesseconomy.#he most prominent figure among those left out is Kishore Biyani, founder and! of Future >roup. Indeed, Biyani throwing his hat in the ring was out of sync

with the groups moves over the past few years. He had sold his stake in publiclisted financial services firm Future apital 'now apital First) and has also beenlooking to rewind holding in insurance Ms to focus on the core retail business.<>>eorge <uthoot and others, from <uthoot Finance, the largest gold financingcompany in the country, too missed on the list of firms which got nod for payments

 bank licences. #here is a set of firms such as Dhootscontrolled D#H companyideocon d6h =td that was not considered for the licence. #he group had sought to

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enter financial services as a business through its D#H firm, which is now listed on *-%D-E. -mong others, *%! %trategic Investment orporation =td, a part of national bourse *%! and realtor Kalpataru orporation also missed on theopportunity to add a new business line. "hile mobile wallets have been one of thefastest growing segment, 7BI granted approval only to +aytm 'the applicant wasits cofounder i/ay %hekhar %harma). Its peers like igen, <obiKwik, itrusand It$ash lost out on the opportunity to become payments bank, at least for now.India’s domestic remittance market is estimated to be about 7s. 500:00 billionand growing. "ith money transfers made possible through mobile phones, a bigchunk of it, especially that of the migrant labour, could shift to this new platform.+ayment banks can also play a crucial role in implementing the government’sdirect benefit transfer scheme, where subsidies on healthcare, education and gasare paid directly to beneficiaries’ accounts. -lso, this is the first time since bankswere nationali$ed, that private sector business groups have bagged the 7BI’s nod

for banking services.

>old %chemesL - %tep #o %trengthen Banking IndustryDear 7eaders,"e have recently seen our >overnment launching schemes based on +hysical>old. #hses schemes were aimed at reducing the demand of physical gold andluring the customers to introduce the same in the banking systems. #hese schemes

are also important because it is one of its own kind and it has the capability toreach to the one of the >old 7eserves of the country i.e. Households. In India, the

 presence of the >old in the household is huge and this diwali season, >ovt wantsthe consumer to invest gold insted of buying more. =et us discuss the schemes indetail as it may come in upcoming eams.

he three schemes launched 2y "o9t. are:

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;i< "old 4onetisation Scheme ;"4S<

;ii< "old So9erei&n =ond Scheme

;iii< "old Coin and =ullion Scheme

+rime <inister <odi also unveiled the first ever national gold coin minted in Indiawith the national emblem of -shok hakra engraved on it. #he >old <onetisation%cheme is aimed at tapping part of an estimated 60,000 tonnes of idle gold worth7s. 1,90,000 crore in family lockers and temples into the banking system.

#he "old So9erei&n =ond will be issued by the 7eserve Bank of India '7BI) on behalf of the government with an interest rate of (.5>. #he bonds will be soldthrough banks and designated post offices. Describing the schemes as sone pesuhagaG 'icing on the cake), <odi said gold has often been a source of women’sempowerment in the Indian society, and these schemes will underscore that sense

of empowerment.

>old monetisation scheme '><%) is a deposit scheme of banks where you will be paid interest on the weight of gold you give. he minimum deposit is ) &rams

;o 005 ineness<. #o make a deposit under this scheme, you need to first get your gold tested from one of the centres certified by BI%. #hese centres, gold refinersand banks will be in a tripartite agreement. -fter doing an N7F 'rayfluorescence) and a fire assay test, you will be told the result. If you still wish todeposit the gold, the centre will give a purity certificate endorsing the weight and

 purity of gold. ou have to then take the certificate to one of the designated banks.In the meantime, the banker will also get intimation from the centre of your gold

deposit and he will credit your Ogold deposit account’ with the e&uivalent amountof gold. #he test centre will send the gold to a refiner who will keep the gold in hiswarehouse 'unless the banks choose to hold it themselves).

#his deposit scheme will be available for the short term of one to three years,medium term of five to seven years and long term of 3631 years. "hile depositsof all tenures will be run only by banks, for the medium and longterm deposits,

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the terms and conditions and rate of interest will be fied by the entral>overnment. -t the end of the deposit period, your deposit, either in cashCgold'medium and longterm deposits will be redeemed only in cash) will be returned toyou by the bank. If redeemed in cash, the rupee value of the gold deposit at the

 prevailing market price will be paid.

India has surpassed hina as world’s largest gold consuming nation with 146tonnes of buying so far this year,G he added. India’s obsession with gold is rivalledonly by hina, with the metal used widely in wedding gifts, religious donationsand as an investment. +revious attempts at mobilising this gold have beenunsuccessful, but +< <odi is hoping higher interest rates paid will help it tosucceed this time.

Huge gold imports have pushed India’s current account deficit to a record A3:0

 billion in 6038, prompting the government to hike its duty on imports to a record302. Imports fell to an estimated A89 billion in 603931, but <odi is looking tocut that further. Investors will have to disclose their permanent account number,registered with the income ta department, if the value of gold is worth more than7s. 10,000 'A;48.18). %ome people fear it is a way for the government to keep atab on the source. -nother concern is the likely loss of 60802 of the weight of 

 /ewellery as it is melted at certified centres at the cost of the depositor.

Some ey 7eatures:

"old 4oneti@ation Scheme

• K a must, but income is tafree

• "ill be melted, but returned as gold

• Fied deposit, but can break it for a fee

• Interest nominal, but it is on gold weight

"old So9erei&n =ond

• !arns you interest

• <inimal charges

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• Better li&uidity


a) <inister of %tate for ommerce P Industry 'IC), <rs. *irmala %itharaman,launched the #echnology -c&uisition and Development Fund '#-DF) under 

 *ational <anufacturing +olicy which is implemented by Department of Industrial+olicy P +romotion'DI++).

 b) #-DF is a new scheme to facilitate ac&uisition of lean, >reen P !nergy!fficient #echnologies, in form of #echnology C ustomised +roducts C %pecialised%ervices C +atents C Industrial Design available in the market available in India or globally, by <icro, %mall P <edium !nterprises '<%<!s).

#he %cheme is conceptualised to catalyse the manufacturing growth in <%<!sector to contribute to the national focus of <ake in IndiaG.

#he scheme will be implemented through >lobal Innovation and #echnology-lliance '>I#-), a /oint venture company, support to <%<! units is envisaged bythe followingL

I. #irect Support or echnolo&y Ac8uisition

II. In-direct Support or echnolo&y Ac8uisition throu&h $atent $ool

III. echnolo&y E8uipment 4anuacturin& Su2sidies

IB. "reen 4anuacturin& Incenti9e Scheme

7I7:7inancial Inclusion 7und ;7I7<

#he Financial Inclusion Fund 'FIF) and Financial Inclusion #echnology Fund'FI#F) was constituted in the year 600;05 for a period of five years with a corpusof 7s. 100 crore each to be contributed by >overnment of India '>I), 7BI and

 *-B-7D in the ratio of 90L90L60. #he guidelines for these two funds were framed by >I.

In -pril 6036, 7BI decided to fund FIF by transferring the interest differential inecess of 0.12 on 7IDF and %#7 deposits on account of shortfall in prioritysector lending.

Dhat is new?

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#he >I has merged the FIF and FI#F to form a single Financial Inclusion Fund.#he 7eserve Bank of India has finalised the new scope of activities and guidelinesfor utilisation of the new FIF in consultation with >I.#he new FIF will be administered by the reconstituted -dvisory Board constituted

 by >I and will be maintained by *-B-7D.

Important $oints related to 7I7

3) #he overall corpus of the new FIF will be 7s. 6000 crore.6) ontribution to FIF would be from the interest differentialG in ecess of 0.12on 7IDF and %#7 deposits on account of shortfall in priority sector lending 'asnotified by 7BI from time to time) kept with *-B-7D by banks.8) #he Fund shall be in operation for another three years or till such period as may

 be decided by 7BI and >overnment of India in consultation with other stakeholders.

9) #he ob/ectives of the FIF shall be to support developmental and promotionalactivitiesG including creating of FI infrastructure across the country, capacity

 building of stakeholders, creation of awareness to address demand side issues,enhanced investment in >reen Information and ommunication #echnology 'I#)solution, research and transfer of technology, increased technological absorptioncapacity of financial service providersCusers with a view to securing greater financial inclusion.

 *oteL #he fund shall not be utili$ed for normal businessCbanking activities.

Eli&i2le Acti9ities$urposes or 7I7

3) #he fund will help for the setting up and operational cost for running FinancialInclusion P =iteracy enters. #he setting up of such enters are in sync with theob/ective of >oI for setting up Financial =iteracy enters upto the block levelunder the +<MD. #hese centres are important as they will beLa. +roviding financial literacy training to all individualsChouseholds of the area.

 b. +roviding counseling services for opening of bank accounts and for operating banking and other financial products and services.c. +roviding training to Bs about various banking P other financial products and

services and also for training them in use of technological devices so as to ensuresmooth servicing of customers.d. 7edressal of customer grievances by attending to customer complaints, if necessary, by taking up with banks and other institutions.6) %etting up of %tandard Interactive Financial =iteracy Kiosks in >ram+anchayats and any other financial literacy efforts under taken by banks inecluded areas.

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8) %upport to *-B-7D P Banks for running of Business P %kill Developmententers.9) %upport to pilot pro/ects for development of innovative products, processes and

 prototypes for financial inclusion.1) Financial assistance to authorised agencies for conduct of surveys for evaluatingthe progress under financial inclusion.

Eli&i2le Institutions

Financial Institutions, vi$., ommercial Banks, 7egional 7ural Banks, ooperativeBanks and *-B-7D.!ligible institutions with whom banks can work for seeking support from the FIFLQ *>sQ %H>sQ Farmers lubs

Q Functional ooperativesQ I.#. enabled rural outlets of corporate entities.Q "ellfunctioning +anchayatsQ 7ural <ultipurpose kiosks C illage Knowledge entersQ ommon %ervices entres '%s) established by %ervice entre -gencies'%-s) under the *ational e>overnance +lan '*e>+).Q +rimary -gricultural %ocieties '+-s).


a) India is set to launch its own version of a sovereign wealth fund @ the *ationalInvestment and Infrastructure Fund that would focus only on core sector pro/ects,

 by the end of the year.

 b) #he *IIF will have a corpus of 7s 60,000 crore. It was cleared by the abineton Muly 6:.c) *ational Investment and Infrastructure Fund '*IIF) is a fund created by the>overnment of India for enhancing infrastructure financing in the country.d) #he ob/ective of *IIF would be to maimi$e economic impact mainly throughinfrastructure development in commercially viable pro/ects, both greenfield and

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 brownfield, including stalled pro/ects. It could also consider other nationallyimportant pro/ects, for eample, in manufacturing, if commercially viable.

7unctions o %II7

Q Fund raising through suitable instruments including offshore credit enhanced bonds, and attracting anchor investors to participate as partners in *IIFRQ %ervicing of the investors of *IIF.Q onsidering and approving candidate companiesCinstitutionsC pro/ects 'includingstate entities) for investments and periodic monitoring of investments.Q Investing in the corpus created by -sset <anagement ompanies '-<s) for investing in private e&uity.Q +reparing a shelf of infrastructure pro/ects and providing advisory services.

%II7 $urpose?

3. +rovides e&uity C &uasie&uity support to those *on Banking Financialompanies '*BFs)CFinancial Institutions 'FIs) that are engaged mainly ininfrastructure financing. #hese institutions will be able to leverage this e&uitysupport and provide debt to the pro/ects selected.6. Invest in funds engaged mainly in infrastructure sectors and managed by -sset<anagement ompanies '-<s) for e&uity C &uasie&uity funding of listed Cunlisted companies.8. +rovides !&uityC &uasie&uity support C debt to pro/ects, to commercially viable

 pro/ects, both greenfield and brownfield, including stalled pro/ects.

7undin& to %II7

#he initial authori$ed corpus of *IIF would be 7s. 60,000 crore, which may beraised from time to time, as decided by <inistry of Finance. >overnment can

 provide upto 60000 crore per annum into these funds. >overnmentscontributionCshare in the corpus will be 9:2 in each entity set up as an alternateInvestment Fund '-IF) and will neither be increased beyond, nor allowed to fall

 below, 9:2. #he whole of 9:2 would be contributed by >overnment directly. 7estis open for contribution from others. #he contribution of >overnment of India to

 *IIF would enable it to be seen virtually as a sovereign fund and is epected to

attract overseas sovereignC &uasisovereignCmultilateralCbilateral investors to coinvest in it. ashrich entral +ublic %ector !nterprises '+%(s) could contribute tothe Fund, which would be over and above the >overnments 9:2. %imilarly,domestic pension and provident funds and *ational %mall %avings Fund may also

 provide funds to the *IIF. *IIF may utili$e the proceeds of moneti$ed land andother assets of +%(s for infrastructure development. #he *IIF will work out these

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details in consultation with the <inistry of Finance, to match different investors’ preferences.

Current %ews related to %II7:

>overnment has set up a search committee under !conomic -ffairs %ecretary%hakti kanta Das for selection of a ! for the *ational Investment andInfrastructure Fund '*IIF).

Green Bonds : A Few Insights

#ear Crusaders,

"e all are ac&uainted that >reen Bonds are in the news now days. %o here, we are

rendering you the few insights of it. It is a crucial topic from the eam point of view, rest assured you are going to get a few &uestions from this topic in the

upcoming eams. %o go through it meticulously, and keep yourself abreast of it.

limate change affects all of us to some etent. But it is epected to hit developing

countries the hardest. Its potential effects on temperatures, precipitation patterns,

sea levels, and fre&uency of weatherrelated disasters pose risks for agriculture,

food, and water supplies. -t stake are recent gains in the fight against poverty,

hunger and disease, and the lives and livelihoods of people in developing


Few people have heard of Jgreen bondsJ, yet they could be a way of raising the

huge amounts of capital needed to tackle climate change and protect our natural


#hey could be critically important, but they remain shrouded in mystery and there

is a great deal of confusion about their eact form and structure. "hat are they?

-re they a way for the government to borrow money for green pro/ects? -re they a

new savings product for ethical consumers?

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#his lack of clarity is understandable and is a direct result of all the different types

that have been recently proposed. #hey could, in fact, be all of the followingL green

gilts, green retail bonds and green investment bank bonds. But, there are many

more being proposed as well, includingL green infrastructure bonds, Smultilateral

development bank green bonds, green corporate bonds, green sectoral bonds,rainforest bonds and indelinked carbon bonds.

-ll of these different 'and sometimes confusing) classes of green bond have an

important role in helping to raise finance for different parts of our lowcarbon


Dhat are &reen 2onds?

- bond is a debt instrument with which an entity raises money from investors. #he

 bond issuer gets capital while the investors receive fied income in the form of 

interest. "hen the bond matures, the money is repaid.

 A green bond is very similar. The only difference is that the issuer of a green

bond publicly states that capital is being raised to fund ‘green’ projects, whichtypically include those relating to renewable energy, emission reductions and so

on. There is no standard definition of green bonds as of now.

Indian firms like Indian 7enewable !nergy Development -gency =td and >reenko

have in the past issued bonds that have been used for financing renewable energy,

however, without the tag of green bonds.

>reen bonds are issued by multilateral agencies such as the "orld Bank,

corporations, government agencies and municipalities. Institutional investors and

 pension funds also have appetite for such bonds. For instance, investment funds

Black7ock and +I< have specific mandates from their investors to invest only

in bonds which fund green pro/ects. #he issuer provides periodic reports about the


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Reason 2ehind 2ein& in the %ews:

In <arch, the !im Bank of India issued a fiveyear A100 million green bond,which is India’s first dollardenominated green bond. #he issue was subscribed

nearly 8.6 times. #he bank has said it would use the net proceeds to fund eligible

green pro/ects in countries including Bangladesh and %ri =anka. !arlier, in

February, es Bank raised 7s 3,000 crore via a 30year bond, which was

oversubscribed twice.

Importance o it or India:

India has embarked on an ambitious target of building 3;1 gigawatt of renewable

energy capacity by 6066, from /ust over 80 gigawatt now. #his re&uires a massive

A600 billion in funding. #his isn’t easy. -s reports suggest, higher interest rates and

unattractive terms under which debt is available in India raise the cost of renewable

energy by 6986 per cent compared to the (.%. and !urope.

Budget allocations have been insufficient. 7enewable energy is still part of the

larger powerCinfrastructure funding basket in most banks, and with most financinggoing towards coal power pro/ects, there is very little funding left for renewable

energy. urrently, options for raising funds and investing in the renewable energy

storyG in the public markets in India is very limited. #hat’s why green bonds seem

like a good option.

Still, why are &reen 2onds an attracti9e option?

%hantanu Maiswal, analyst at Bloomberg *ew !nergy Finance, says, >reen bonds

typically carry a lower interest rate than the loans offered by the commercial banks.

Hence, when compared to other forms of debt, green bonds offer better returns for 

an independent power producers,G %amuel Moseph, hief >eneral <anager,

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#reasury and -ccounts >roup, !im Bank of India, says as these bonds are meant

for specific investors looking to invest in renewable energy pro/ects, pricing could

 be attractive.

#he bank’s green bond was priced at 39;.10 basis points over (% #reasuries

'whereas, usually, bonds are priced at treasuries plus 310 basis points) at a fied

coupon of 6.;1 per cent per annum.

"reen =onds $erormance "lo2ally:

-ccording to Bloomberg *ew !nergy Finance, a record A85.5 billion in green bonds were issued in 6039, 6.4 times the A31 billion issued in 6038. <ost

issuances of international green bonds have been oversubscribed suggesting a

strong appetite for them especially when done by a strong issuer like a large

corporate or a government agency,G the report says.

In the last two years, studies have shown that around T600bn of lowcarbon

infrastructure investment is re&uired in the (K between now and 6060. !rnst P

oung estimates though that traditional sources of capital U ranging from utilitiesthrough to pro/ect finance and infrastructure funds U can only provide T1050bn

over the net 31 years.

Issuers o these 2onds?

In the period between 600; and 6036, supranational organisations such as the

!uropean Investment Bank and the "orld Bank, as also governments, accountedfor most of the green bond issue. %ince then, corporate interest has risen sharply. In

6039, bonds issued by corporations in the energy and utilities, consumer goods,

and real estate sectors accounted for a third of the market, according to K+<>.

he riss and challen&es?

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>lobally, there have been serious debates about whether the pro/ects targeted by

green bond issuers are green enough. #here have been controversies too. 7euters a

few months back reported how activists were claiming that the proceeds of the

French utility >DF %ue$’s A8.9 billion green bond issue were being used to fund adam pro/ect that hurts the -ma$on rainforest in Bra$il.

From an Indian perspective a challenge o! making investors

su"scri"e could "e the tenor and rating o! green "onds reckons

Bloom"erg#s $aiswal% &The downside is that green "onds in India

have a shorter tenor period o! a"out '( years in India whereas a

typical loan would "e !or minimum ') years% This is less whencompared to many international issuances% BA*+I*G

A,A-.*.SS: F., FACTS AB/0T SA1I*G SC2.3.S /FF.-.4 B5


Dear 7eaders,

In this article we are presenting you some of the important points in Banking P

some recent changes which have been done by 7BI.

A< Some points related to Interest Rates on =an Accounts

3) Interest on %avings -Cc is calculated on daily balance basis.

6) *ow, -ll %cheduled ommercial Banks '!cluding 77Bs) have the discretionto offer differential interest rates based on whether the term deposits are with or 

withoutprematurewithdrawalfacility, sub/ect to the following guidelinesLi. -ll term deposits of individuals 'held singly or /ointly) of 6 31 lakh and belowshould, necessarily, have premature withdrawal facility.

ii. For all term deposits other than 'i) above, banks can offer deposits without theoption of premature withdrawal as well.

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iii. Banks should disclose in advance the schedule of interest rates payable ondeposits i.e. all deposits mobili$ed by banks should be strictly in conformity withthe published schedule.

=< a'ation o Sa9in&s =an Interest rates:

(nlike interest on fied deposits, interest earned on savings bank accounts is notsub/ect to #a Deduction at %ource. However, this does not mean the interestearned on %avings accounts is completely ta free. It is eempt upto 7s. 30,000 ina year, and if the interest you earn from %avings accounts crosses this threshold, it

 becomes sub/ect to ta.

C< Senior Citi@ens Sa9in&s Scheme, ())/:

- %cheme which is giving a higher interest rate to the senior citi$ens, if they make

deposits in the banks.

he salient eatures o the Senior Citi@ens Sa9in&s Scheme, ())/ are &i9en


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A "rie! on )-4 BI73/*T285 3/*.TA-5 P/8IC5 -.1I., o! -BI

Dear 7eaders,

7ecently you all must have read that the 7BI has kept the rates unchanged in its

<onetary +olicy review. %o here we are providing you the details about <onetary

enure o the deposit


5 years, which can 2e e'tended 2y years.

Rate o interest :.8 per cent per annum

In9estment to 2e inmultiples o 

7s. 3000C

4a'imum in9estment


7s. 31 lakh

4inimum eli&i2le a&e

or in9estment

40 years '11 years for those who have retired onsuperannuation or under a voluntary or specialvoluntary scheme). #he retired personnelof Defense %ervices 'ecludingivilian Defense !mployees) will be eligible toinvest irrespective of the age limits sub/ect to thefulfillment of other specified conditions




+ermitted after one year of opening the account butwith penalty.

4odes o holdin& -ccounts can be held both in single and /ointholding modes. Moint holding is allowed only withspouse.

Applica2ility to %RI,

$I and 3U7s

 *on 7esident Indians '*7Is), +ersons of Indianrigin '+I) and Hindu (ndivided Family 'H(F)are not eligible to open an account under the%cheme.

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+olicy and its importance. #his will be a part of Banking -wareness portion.

Dhat is 4onetary $olicy?

<onetary policy is the macroeconomic policy laid down by the central bank of the

country, by 7BI in India. It involves management of money supply and interest

rate and it is used by the government of a country to achieve macroeconomicob/ectives like inflation, consumption, growth and li&uidity.

In India, monetary policy of the 7eserve Bank of India is aimed at managing the

&uantity of money in order to meet the re&uirements of different sectors of the

economy and to increase the pace of economic growth.

#he tools which can be used by 7BI are open market operations, bank rate policy,

reserve system, credit control policy, moral persuasion and through many other

instruments. (sing any of these instruments will lead to changes in the interest

rate, or the money supply in the economy.

rd =i-monthly 4onetary $olicy

7BI kept its policy rates unchanged in its review on 9th -ug 6031. #his means that

it kept the policy repo rate under the li&uidity ad/ustment facility '=-F) unchanged

at ;.61 per cent. #he central bank also kept the cash reserve ratio '77) of

scheduled banks unchanged at 9.0 per cent of net demand and time liability.

4aFor 3i&hli&hts

a) +olicy repo rate under the li&uidity ad/ustment facility '=-F) unchanged at ;.61

 per cent.

 b) ontinue to provide li&uidity under overnight repos at 0.61 per cent of bank

wise *D#= at the =-F repo rate and li&uidity under 39day term repos as well as

longer term repos of up to 0.;1 per cent of *D#= of the banking system through

auctions.c) %=7 remained at 63.12.

d) It retains growth target at ;.4 per cent for 603134.

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#he reason for keeping the policy rate unchanged is 3eadline consumer price

inde' ;C$I< inlation which rose for the second successive month in Mune 6031 to

a ninemonth high on the back of a broad based increase in upside pressures,

 belying consensus epectations. -lso, food inflation rose 40 basis points over the

 preceding month, driven by a spike in prices of vegetables, protein items especially pulses, meat and milk and spices.G !ven, prices on the whole have

 been going up as well. -ll this led to the 7BI keeping the repo rate constant.

 Current Rates as on !th Au& ()*5:

3) +olicy 7epo 7ateL ;.612

6) 7everse 7epo 7ateL 4.612

8) <arginal %tanding Facility 7ateL 5.612

9) Bank 7ateL 5.612

1) 77L 92

4) %=7L 63.12

A88 AB/0T *BFC9S

Dear 7eaders,

ou all must have heard that the 7eserve Bank of India is entrusted with the

responsibility of regulating and supervising the *onBanking Financial

ompanies. %o, let’s discuss about what actually *BF’s are.

A2out the term %=7C:

- *onBanking Financial ompany '*BF) is a company registered under the

ompanies -ct, 3:14 engaged in the business of loans and advances, ac&uisition of 

sharesCstocksCbondsCdebenturesCsecurities issued by >overnment or local authority

or other marketable securities of a like nature, leasing, hirepurchase, insurance

 business, chit fund business.

#ierence 2etween =A% G %=7C:

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 *BFs lend and make investments and hence their activities are akin to that of 

 banksR however there are a few differences as given belowL

i. *BF cannot accept demand depositsR

ii. *BFs do not form part of the payment and settlement system and cannot issueche&ues drawn on itselfR

iii. deposit insurance facility of Deposit Insurance and redit >uarantee

orporation is not available to depositors of *BFs, unlike in case of banks.

#ierent typescate&ories o %=7Cs re&istered with R=I:

 *BFs are categori$ed

a) In terms of the type of liabilities into Deposit and *onDeposit accepting *BFs,

 b) *on deposit taking *BFs by their si$e into systemically important and other 

nondeposit holding companies '*BF*D%I and *BF*D) and

c) By the kind of activity they conduct.

"ithin this broad categori$ation the different types of *BFs are as followsL

i. Asset 7inance Company;A7C< L -n -F is a company which is a financial

institution carrying on as its principal business the financing of physical assets

supporting productiveCeconomic activity, such as automobiles, tractors, lathe

machines, generator sets, earth moving and material handling e&uipments, moving

on own power and general purpose industrial machines.

ii. In9estment Company ;IC<  L I means any company which is a financial

institution carrying on as its principal business the ac&uisition of securities.

iii. 6oan Company ;6C<: = means any company which is a financial institution

carrying on as its principal business the providing of finance whether by making

loans or advances or otherwise for any activity other than its own but does not

include an -sset Finance ompany.

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iv. Inrastructure 7inance Company ;I7C<: IF is a nonbanking finance


a) which deploys at least ;1 per cent of its total assets in infrastructure loans, b) has a minimum *et wned Funds of 7s. 800 crore,

c) has a minimum credit rating of O- Oor e&uivalent d) and a 7-7 of 312.

v. Inrastructure #e2t 7und: *on Banking Financial ompany 'IDF*BF) L

IDF*BF is a company registered as *BF to facilitate the flow of long term

debt into infrastructure pro/ects. IDF*BF raise resources through issue of 7upee

or Dollar denominated bonds of minimum 1 year maturity. nly Infrastructure

Finance ompanies 'IF) can sponsor IDF*BFs.

vi. %on-=anin& 7inancial Company - 4icro 7inance Institution ;%=7C-

47I<: *BF<FI is a nondeposit taking *BF having not less than 512of its

assets in the nature of &ualifying assets which satisfy the following criteriaL

a. loan disbursed by an *BF<FI to a borrower with a rural household annual

income not eceeding 7s. 40,000 or urban and semiurban household income noteceeding 7s. 3,60,000.

 b. tenure of the loan not to be less than 69 months for loan amount in ecess of 7s.

31,000 with prepayment without penaltyR

vii. %on-=anin& 7inancial Company 7actors ;%=7C-7actors<: *BF

Factor is a nondeposit taking *BF engaged in the principal business of 

factoring. #he financial assets in the factoring business should constitute at least ;1

 percent of its total assets and its income derived from factoring business should not

 be less than ;1 percent of its gross income.

Re&ister with R=I:

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- company incorporated under the ompanies -ct, 3:14 and desirous of 

commencing business of nonbanking financial institution as defined under %ection

91 I 'a) of the 7BI -ct, 3:89 should comply with the followingL

i. it should be a company registered under %ection 8 of the companies -ct, 3:19

ii. It should have a minimum net owned fund of 7s 600 lakh.

#eposits in %=7C:

a) +resently, the maimum rate of interest an *BF can offer is 36.12. #he

interest may be paid or compounded at rests not shorter than monthly rests.

 b) #he *BFs are allowed to acceptCrenew public deposits for a minimum period

of 36 months and maimum period of 40 months. #hey cannot accept depositsrepayable on demand.

c) #he deposits with *BFs are not insured.

d) #he repayment of deposits by *BFs is not guaranteed by 7BI.

=rie a2out R%=C

a) 7esiduary *onBanking ompany is a class of *BF which is a company and

has as its principal business the receiving of deposits, under any scheme or 

arrangement or in any other manner and not being Investment, -sset Financing,

=oan ompany.

 b) #hese companies are re&uired to maintain investments as per directions of 7BI,

in addition to li&uid assets.

c) #he amount payable by way of interest, premium, bonus or other advantage, by

whatever name called by a 7*B in respect of deposits received shall not be lessthan the amount calculated at the rate of 12 'to be compounded annually) on the

amount deposited in lump sum or at monthly or longer intervalsR and at the rate of 

8.12 'to be compounded annually) on the amount deposited under daily deposit


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d) Further, a 7*B can accept deposits for a minimum period of 36 months and

maimum period of 59 months from the date of receipt of such deposit. #hey

cannot accept deposits repayable on demand.

Some other re&ulators:

Cate&ory o Companies Re&ulator

hit Funds 7espective %tate >overnments

Insurance companies I7D-

Housing Finance ompanies *HB

enture apital Fund C %!BI

<erchant Banking companies %!BI

%tock broking companies %!BI

 *idhi ompanies <inistry of corporate affairs,

>overnment of India

A Brie! on C0--.*C5 S5ST.3 I* I*4IA

Dear 7eaders,

#oday we are providing you all some important points on our urrency system as

this is one of the important topic within Banking -wareness. "e are epecting

&uestions from this portion. %o, en/oy the post.

$resent #enomination o =an %otes:

-t present, banknotes in India are issued in the denomination of 7e.3, 7s.1 7s.30,

7s.60, 7s.10, 7s.300, 7s.100 and 7s.3000. #hese notes are called banknotes as

they are issued by the 7eserve Bank of India '7eserve Bank).

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#enomination o =an %otes G Coins:

#he 7eserve Bank can also issue banknotes in the denominations of five thousand

rupees and ten thousand rupees, or any other denomination that the entral

>overnment may specify. #here cannot, though, be banknotes in denominations

higher than ten thousand rupees in terms of the current provisions of the 7eserveBank of India of -ct, 3:89. oins can be issued up to the denomination of 


Role o "o9ernment o India in Currency System:

In terms of %ection 61 of 7BI -ct, 3:89 the design of banknotes is re&uired to be

approved by the entral >overnment on the recommendations of the entral Board

of the 7eserve Bank of India. #he responsibility for coinage vests with the>overnment of India on the basis of the oinage -ct, 3:04 as amended from time

to time. #he >overnment of India also attends to the designing and minting of 

coins in various denominations.

3ow much currency to 2e produced?

#he 7eserve Bank decides the volume and value of banknotes ecept 7e. 3 note to

 be printed each year. #he &uantum of banknotes that needs to be printed, broadly

depends on the re&uirement for meeting the demand for banknotes due to inflation,

>D+ growth, replacement of soiled banknotes and reserve stock re&uirements.

Dho decides the coins issue?

#he >overnment of India decides the &uantity of coins to be minted on the basis of 

indents' official order) received from the 7eserve Bank.

3ow does the Reser9e =an estimate the demand or 2annotes?

#he 7eserve Bank estimates the demand for banknotes on the basis of the growth

rate of the economy, the replacement demand and reserve stock re&uirements by

using statistical modelsCtechni&ues.

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Dhat is a currency chest?

#o facilitate the distribution of banknotes and rupee coins, the 7eserve Bank 

has authori$ed select branches of scheduled banks to establish urrency hests.

#hese are actually storehouses where banknotes and rupee coins are stocked on

 behalf of the 7eserve Bank.

Dhat is a small coin depot?

%ome bank branches are also authori$ed to establish %mall oin Depots to stock 

small coins. #he %mall oin Depots also distribute small coins to other bank 

 branches in their area of operation.

Dhat are soiled, mutilated and imperect 2annotes?

'i) Jsoiled noteLJ means a note which, has become dirty due to usage and also

includes a two piece note pasted together wherein both the pieces presented belong

to the same note, and form the entire note.

'ii) <utilated banknote is a banknote, of which a portion is missing or which is

composed of more than two pieces.

'iii) Imperfect banknote means any banknote, which is wholly or partially,

obliterated, shrunk, washed, altered or indecipherable but does not include amutilated banknote.

 Can soiled and mutilated 2annotes 2e e'chan&ed or 9alue?

es. %uch banknotes can be echanged for value.

Clean %ote $olicy:7eserve Bank of India has been continuously making efforts to make good &uality

 banknotes available to the members of public. #o help 7BI and banking system,

the members of public are re&uested to ensure the followingL

a) *ot to staple the banknotes

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 b) *ot to write C put rubber stamp or any other mark on the banknotes

c) %tore the banknotes safely to prevent any damage


3) %eeking to spread awareness among public about fake notes, the 7eserve Bank 

has launched a website eplaining ways to detect counterfeit notes. "ith a tagline

+ehchano +aise Ki Boli, Kyunki +aisa Bolta Hai, the website gives visual presentation with pointers on currency

notes of 30, 60, 10, 300, 100 and 3,000 rupee denominations.

(< 4I%I4U4 RESERBE SHSE4#he 7eserve Bank has the sole right to issue currency notes, ecept one rupee

notes which are issued by the <inistry of Finance. #he 7BI follows a minimum

reserve system in the note issue. Initially, it used to keep 90 per cent of gold

reserves in its total assets. But, since 3:1;, it has to maintain only 7s. 600 crores of 

gold and foreign echange reserves, of which gold reserves should be of the value

of 7s. 331 crores.

) A!ter a gap o! over ;( years -e ' note has "een released in

the country and it "ears the signature o! Finance Secretary -a<iv

3ehrishi% Incidentally the note was released at Shrinath<i temple

in *athdwara -a<asthan on 3arch = "y 3ehrishi% A Brie! on

F/-.IG* .>C2A*G. -.S.-1.S

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 Dear Readers,

Today we are providing you the notes on one of the most important financial

terms !R"#$% "&'(A%$" R")"R*"). This is important as it can be as+ed in the $eneral Awareness section in the upcoming eams.

 As it was in the news that, our country-s foreign echange reserves rose by

/01.2 million to /3/.456 billion in the wee+ to 7uly 05 on account of increase

in foreign currency assets. The country-s gold reserves remained unchanged at

18.925 billion. The special drawing rights with the #nternational :onetary

und were up by 3.6 million to 5.905 billion in the wee+ under review, while

the country-s reserve position with the und also rose by 1.6 million to 1./95


 &ets discuss 'hat actually is ()R*+

omponents of Fore

As on uly (/, ()*5

₹ =n. US 4n.

* (

#otal 7eserves 66,113.5 818,495.3

3.3 7orei&n Currency Assets 60,::1.8 86:,691.9

3.6 "old 3,634.3 3:,0;9.8

3.8 S#Rs 61;.3 9,069.6

3.9 Reser9e $osition in the I47 58.8 3,809.8

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 Reserves are maintained by countries for meeting their international payment

obligations ; both short and long terms, including sovereign and commercialdebts, financing of imports, for intervention in the foreign currency mar+ets

during periods of volatility, besides helping to boost the confidence of the mar+et 

in the ability of a country to meet its eternal obligations and to absorb anyunforseen eternal shoc+s, contingencies or unepected capital movements.

 #ndia-s foreign echange reserves comprise foreign currency assets, gold and

special drawing rights allocated to it by the #nternational :onetary und <#:=

in addition to the reserves it has par+ed with the fund. oreign echangereserves are held and managed by the R>#.

The (oreign currency assets are investment mainly in instruments abroad which

have the highest credit rating and which do not pose any credit ris+. These

include sovereign bonds, treasury bills and short?term deposits in top?rated global ban+s besides cash accounts.

 The Special 4rawing -ight ?S4- is an interest7"earing

international reserve asset created "y the I3F in '@=@ to

supplement other reserve assets o! mem"er countries% The S4- is

"ased on a "asket o! international currencies comprising the 0%S%

dollar $apanese yen euro and pound sterling% It is not a currency

nor a claim on the I3F "ut is potentially a claim on !reely usa"le

currencies o! I3F mem"ers% It can "e held and used "y mem"er

countries the I3F and certain designated ocial entities called

prescri"ed holders"ut it cannot "e held !or eDample "y

private entities or individuals% BA*+I*G PAT2,A5 ;('E: S/3.


Dear 7eaders, we are providing you the important financial terms which are

mainly the part of >eneral -wareness in all the upcoming Bank eams. Hope you

like this post as this will make your financial portion strong.

*< ype o assets

he assets portolio o the 2ans is re8uired to 2e classiied as

'3) standard assets'6) substandard assets'8) doubtful assets and'9) loss

assets.%tandard asset is one that does not disclose any problems and which does

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not carry more than normal risk attached to the business .-n asset which has been

classified as *+- for a period not eceeding 36 months is considered as sub

standard asset.Doubtful asset is one which has remained *+- for a period

eceeding 36 months.-n asset which is considered uncollectible and loss has been

identified by the bank or internal or eternal auditors or the 7BI inspection and theloss has not been written off is regarded as loss asset. 

(< Core =anin& Solutions ;C=S<

ore Banking %olutions is a bu$$ word in Indian banking at present, where

 branches of the bank are connected to a central host and the customers of 

connected branches can do banking at any breach with core banking facility.

< $rime 6endin& Rate

#he minimum shortterm interest rate charged by commercial  banks to their most

creditworthy clients. It is a reference interest  rate used by banks for its lending


/< $arties o a Che8ue:

#here are three parties to the che&ue

3Drawer or <aker 

6#he bank 'Drawee) on whom the che&ue is drawn 'i.e. the bank with whom the

account is maintained by the drawer)

8 +ayee U +ayee is the person whose name is mentioned on the che&ue to whomor to whose order the money is directed to be paid.

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5< Special #rawin& Ri&hts ;S#Rs<

It is a reserve asset 'known as O+aper >old’) created within the framework of the

International <onetary Fund in an attempt to increase international li&uidity, and

now forming a part of countries official fore reserves along with gold, reserve

 positions in the I<F and convertible foreign currencies.

!< %e&otiated #ealin& System

#he *egotiated Dealing %ystem '*D%) for electronic dealing and reporting of 

transactions in government securities was introduced in February 6006. It

facilitates the members to submit electronically, bids or applications for primary

issuance of >overnment %ecurities when auctions are conducted. *D% also

 provides an interface to the %ecurities %ettlement %ystem '%%%) of the +ublic Debtffice, 7BI, <umbai thereby facilitating settlement of transactions in >overnment

%ecurities 'both outright and repos) conducted in the secondary market.

< %#S 4 ;rder 4atch<

In -ugust, 6001, 7BI introduced an anonymous screen based order matching

module on *D%, called *D%<. #his is an order driven electronic system, where

the participants can trade anonymously by placing their orders on the system or 

accepting the orders already placed by other participants. *D%< is operated by

the learing orporation of India =td. 'I=) on behalf of the 7BI.

J< Dhat is Asset 4ana&ement Companies?

- company that invests its clients pooled fund into securities that match its

declared financial ob/ectives. -sset management companies provide investors with

more diversification and investing options than they would have by themselves.

<utual funds, hedge funds and pension plans are all run by asset managementcompanies. #hese companies earn income by charging service fees to their clients.

0< KSoiled %ote:K means a note which, has become dirty due to usage and also

includes a two piece note pasted together wherein both the pieces presented belong

to the same note, and form the entire note.

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;ii< 4utilated 2annote is a banknote, of which a portion is missing or which is

composed of more than two pieces.

*)< Imperect 2annote means any banknote, which is wholly or partially,

obliterated, shrunk, washed, altered or indecipherable but does not include a

mutilated banknote.

FI*-*I-= I*=(%I*It is the delivery of financial services at affordable costs to vast sections of disadvantaged and low income groupsFinancial inclusion involves

3) >ive formal banking services to poor people in urban P rural areas.6) +romote habit of moneysavings, insurance, pensioninvestment among poor people.8) Help them get loans at reasonable rates from normal banks. %o they don’t

 become victims in the hands of local moneylender.

Some Important initiati9es or inancial inclusion:

3) =ead banking scheme '=B%).6) *o frills account.8) B%BD-

9) Business orrespondents 'B) system.1) %wabhiman ampaign4) +<MD

6ead =an Scheme

#he =ead Bank %cheme, introduced towards the end of 3:4:, envisages assignmentof lead roles to individual banks 'both in public sector and private sector) for thedistricts allotted to them. - bank having a relatively large network of branches inthe rural areas of a given district and endowed with ade&uate financial and

manpower resources has generally been entrusted with the lead responsibility for that district. -ccordingly, all the districts in the country have been allotted tovarious banks. #he lead bank acts as a leader for coordinating the efforts of allcredit institutions in the allotted districts to increase the flow of credit toagriculture, smallscale industries and other economic activities included in the

 priority sector in the rural and semiurban areas, with the district being the basicunit in terms of geographical area.

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%o 7rill Account

*o Frills account is a basic banking account. %uch account re&uires either nilminimum balance or very low minimum balance. harges applicable to suchaccounts are low. %ervices available to such account is limited. In what can bedescribed as a watershed -nnual +olicy %tatement, the 7BI in 600104 called uponIndian banks to design a Ono frills account’ U a no precondition, low Ominimum

 balance maintenance’ account with simplified K 'Know our ustomer) norms.But -ll the eisting O*ofrills’ accounts opened were converted into B%BD- incompliance with the guidelines issued by 7BI in 6036 .


7BI in 6036 came out with fresh guidelines and asked banks to offer a OBasic%avings Bank Deposit -ccount’ which will offer following minimum common

facilities to all their customers. #hese guidelines includesL'a) #his account shall not have the re&uirement of any minimum balance.'b) #he services available in the account will include deposit and withdrawal of cash at bank branch as well as -#<sR receiptCcredit of money through electronic

 payment channels or by means of depositCcollection of che&ues drawn byentralC%tate >overnment agencies and departmentsR'c ) "hile there will be no limit on the number of deposits that can be made in amonth, account holders will be allowed a maimum of four withdrawals in amonth, including -#< withdrawalsR and'd) Facility of -#< card or -#<cumDebit ard.

=usiness Correspondent

Business correspondents are bank representatives. #hey personally goes to the areaallotted to them and carry out banking.

• #hey help villagers to open bank accounts.

• #hey help villagers in banking transactions. 'deposit money, take money out

of savings account, loans etc.)

• #he Business orrespondent carries a mobile device.

• #he villager gives his thumb impression or electronic signature, and get the


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• Business orrespondents get commission from bank for every new account

opened, every transaction made via them, every loanapplication processedetc.

Recently on 7inancial Inclusion

#he 7eserve Bank of India '7BI) has constituted a committee with the ob/ective of working out a mediumterm 'fiveyear) measurable action plan for financialinclusion. #he terms of reference will include reviewing the eisting policy of financial inclusion, including supportive payment system and customer protectionframework, taking into account the recommendations made by various committeesset up earlier.It will also study the crosscountry eperience in financial inclusion to identify keylearnings, particularly in the area of technologybased delivery models, that could

inform policies and practices. #he committee will also suggest a monitorablemediumterm plan for financial inclusion in terms of its various components like

 payments, deposit, credit, social security transfers, pension and insurance.Deepak <ohanty, 7BI eecutive director, will chair the committee

#+!% F <*!>ood <orning 7eaders,

Keeping in view the upcoming 7BI !am, we are providing you some notes on

Banking -wareness that will help you during preparations. In 7BI -ssistanteamination, the >- section is of 90 marks. #his 90 marks is divided into Banking-wareness and urrent -ffairs. %o you have to be careful as these are &uick marksand you can easily get it in /ust few minutes.

• ommodity <oney ommodity money value is derived from the

commodity out of which it is made. #he commodity itself represents money,and the money is the commodity. For instance, commodities that have been

used a <edium of echange include gold, silver, copper, salt, peppercorns,rice, large stones, etc.

• 7epresentative <oney is money that includes token coins, or any other 

 physical tokens like certificates, that can be reliably echanged for a fiedamountC&uantity of a commodity like gold or silver.

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• Fiat <oney Fiat money, also known as fiat currency is the money whose

value is not derived from any intrinsic value or any guarantee that it can beconverted into valuable commodity 'like gold). Instead, it derives value only

 based n government order 'fiat)

• ommercial Bank <oney ommercial bank money or the demand deposits

are claims against financial institutions which can be used for purchasinggoods and services.

Reser9e 4oney ;4 )<

urrency in circulation V BankersO Odeposits with the 7BI V Other’ deposits withthe 7BI W *et 7BI Ocredit to the >overnment V 7BI credit to the commercialsector V 7BIs claims on banks V 7BIs net is foreign assets V >ovemment’scurrency liabilities to the public 7BIs net nonmonetary liabilities.


urrency with the public V Demand deposits with the banking system V therdeposits with the 7BI


<3 V %avings deposits of ofXce savings banks.


<3V #ime deposits with the banking systemW *et bank credit to the >overnment V Bank credit to the ommercial sector V *etforeign assets of the banking sector V >oveinment’s currency liabilities to the

 public *et nonmonetary liabilities of the banking sector.

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<8 V-ll deposits with post office savings banks 'ecluding *ational %avingsertificates)

Bhartiya 7eserve Bank *ote <udran +rivate =imited 'B7B*<+=)#he 7eserve Bank established B7B*<+= in February 3::1 as a whollyownedsubsidiary to augment the production of bank notes in India and to enable bridgingof the gap between supply and demand for bank notes in the country.

-e7Post: Bitcoins

In the recent days, we are hearing a lot about a new type of currency, JBitcoinJ. It

is basically a Jvirtual currencyJ, which is making &uite hype in market today. #here

are various myths and speculations surrounding this currency. %o, here we are

 presenting to you the brief about JBitcoinsJ. Hope you like the postYYY

Dhat is =itcoin?

Bitcoin is a distributed peertopeer digital currency that can be transferred

instantly and securely

 between any two people in the world. Its like electronic cash that you can use to

 pay friends or merchants.

Dho created 2itcoins?

-ccording to various newspaper article, a 49yearold Mapanese-merican

 physicist %atoshi *akamoto is speculated as the creater of Bitcoin.

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Dhat are 2itcoins?

Bitcoins are the unit of currency of the Bitcoin system. - commonly used

shorthand for this is B#G to refer to a price or amount 'e.g. 300 B#G). #here

are such things as physical bitcoins, but ultimately, a bitcoin is /ust a number 

associated with a Bitcoin -ddress. - physical bitcoin is simply an ob/ect, such as a

coin, with the number carefully embedded inside. %ee also an easy intro to Bitcoin.

3ow can I &et 2itcoins?

#he entire bitcoins currency is generated by algorithms, it is very easy to make

sure that once the 63 million mark is reached there are no more bitcoins to be

issued. Bitcoins, their issue and their maimum circulation have been

 predetermined from the beginning and therein lies its innate value.

ou can obtain Bitcoins by purchasing them from someone else using regular 

currency or by earning them through a system called Bitcoin <ining. Bitcoins are

stored in Bitcoin wallets which also manage addresses from which you can send

and receive payments. *ew and different addresses can be generated for different

transactions and can be done as many times as re&uired.

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3ow does it wor?

-s a new user, you can get started with Bitcoin without understanding the technical

details. nce you have installed a Bitcoin wallet on your computer or mobile

 phone, it will generate your first Bitcoin address and you can create more

whenever you need one. ou can disclose your addresses to your friends so thatthey can pay you or vice versa. In fact, this is pretty similar to how email works,

ecept that Bitcoin addresses should only be used once.

=alances - 2loc chains - #he block chain is a shared public ledger on which the

entire Bitcoin network relies. -ll confirmed transactions are included in the block 

chain. #his way, Bitcoin wallets can calculate their spendable balance and new

transactions can be verified to be spending bitcoins that are actually owned by the

spender. #he integrity and the chronological order of the block chain are enforced

with cryptography.

#ransactions private keys - transaction is a transfer of value between Bitcoin

wallets that gets included in the block chain. Bitcoin wallets keep a secret piece of 

data called a private key or seed, which is used to sign transactions, providing a

mathematical proof that they have come from the owner of the wallet. #he

signature also prevents the transaction from being altered by anybody once it has

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 been issued. -ll transactions are broadcast between users and usually begin to be

confirmed by the network in the following 30 minutes, through a process called


+rocessing mining <ining is a distributed consensus system that is used to

confirm waiting transactions by including them in the block chain. It enforces a

chronological order in the block chain, protects the neutrality of the network, and

allows different computers to agree on the state of the system. #o be confirmed,

transactions must be packed in a block that fits very strict cryptographic rules that

will be verified by the network. #hese rules prevent previous blocks from being

modified because doing so would invalidate all following blocks. <ining also

creates the e&uivalent of a competitive lottery that prevents any individual fromeasily adding new blocks consecutively in the block chain. #his way, no

individuals can control what is included in the block chain or replace parts of the

 block chain to roll back their own spends.

3ow do we do 2usiness? Usin& 2itcoinsL

ou offer to pay me for my services via bitcoins and I accept the same. "hy

 bitcoins? Because bitcoins are anonymous and are not traceable by anyone. #heyare the perfect way for people to do business with each other without revealing

identities. #hey dont leave any digital footprints like credit card records, bank 

transactions, etc.

%o lets say that we agree to a deal and you agree to send me bitcoins in advance

to pay me for my /ob. I set the price at 8 bitcoins for my work. #he current rate is

about 7s 85,000 per bitcoin. %o, you are paying me about 7s 3.31 lakh for this

covert operation.

Dhy are 2itcoins so 9alua2le?

#he absolute brilliance of bitcoins is that only 63 million bitcoins will ever be

made available in the market. '%o far 38 million are in circulation and 5 million

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more will be gradually released into the system by the end of 6390). >iven that the

entire bitcoins currency is generated by algorithms, it is very easy to make sure that

once the 63 million mark is reached there are no more bitcoins to be issued.

#oes =itcoin &uarantee an inlu' o ree money?

%ince Bitcoin is a new technology, what it is and how it works may be initially

unclear. Bitcoin is sometimes presented as being one of three thingsL

-. %ome sort of online getrich&uick scam.

B. - loophole in the market economy, the installation of which guarantees a steady

influ of cash.

. - sure investment that will almost certainly yield a profit.In fact, none of the above is true.

Is =itcoin a M&et-rich-8uicM scheme?

If youve spent much time on the Internet, youve probably seen ads for many getrich&uick schemes. #hese ads usually promise huge profits for small amounts of 

easy work. Bitcoin is in no way similar to these schemes. Bitcoin doesnt promise

windfall profits. #here is no way for the developers to make money from your 

involvement or to take money from you. Bitcoin is an eperimental, virtual

currency that may succeed or may fail.

As an in9estment, is =itcoin a sure thin&?

Bitcoin is a new and interesting electronic currency, the value of which is not

 backed by any single government or organi$ation. =ike other currencies, it is worth

something partly because people are willing to trade it for goods and services. Its

echange rate fluctuates continuously, and sometimes wildly. It lacks wide

acceptance and is vulnerable to manipulation by parties with modest funding.

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-nyone who puts money into Bitcoin should understand the risk they are taking

and consider it a highrisk currency.

3ow are new 2itcoins created? *ew bitcoins are generated by the network through the process of JminingJ. In a

 process that is similar to a continuous raffle draw, mining nodes on the network are

awarded bitcoins each time they find the solution to a certain mathematical

 problem 'and thereby create a new block). reating a block is a proof of work with

a difficulty that varies with the overall strength of the network. #he reward for 

solving a block is automatically ad/usted so that, ideally, every four years of 

operation of the Bitcoin network, half the amount of bitcoins created in the prior 9

years are created.

Blocks are mined every 30 minutes, on average and for the first four years

'630,000 blocks) each block included 10 new bitcoins. -s the amount of 

 processing power directed at mining changes, the difficulty of creating new

 bitcoins changes.

Is =itcoin a $on@i scheme?

In a +on$i %cheme, the founders persuade investors that they’ll profit. Bitcoin does

not make such a guarantee. #here is no central entity, /ust individuals building an


- pon$i scheme is a $ero sum game. !arly adopters can only profit at the epense

of late adopters. Bitcoin has possible winwin outcomes. !arly adopters profit from

the rise in value. =ate adopters, and indeed, society as a whole, benefit from the

usefulness of a stable, fast, inepensive, and widely accepted p6p currency.

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7acts a2out =itcoin

Bitcoin is a real currency that fluctuates in price and which can be echanged to

conduct real business. #he business of transacting bitcoins and earning bitcoins in return is really the

nerve centre of this esoteric currency, and this is what makes it uni&ue.

Bitcoin is a work of not one but many geniuses. %atoshi *akamoto may have

 been the chief blueprint architect whose master design many other super clever 

architects used to build on.

Bitcoins will get harder and harder to earn. Hence they will only keep growing in

value as the years roll by.

Bitcoin is vulnerable despite being proclaimed as a digital currency with a

 permanent trace. But its theft only points to the fact that it is potentially very


Bitcoin is here to stay. It may have its share of troubles, but its acceptability is

growing leaps and bounds.

BA*+I*G PAT2,A5 ;('E: 3/*.5 3A-+.T

#ear Readers,

#oday we are providing you the important brief of <oney <arket, as this is always

asked in the >eneral awareness section in all banking eams.

"e hope that this will help you scoring well in your eams.

K4oney 4aretK refers to the market for shortterm re&uirement and deployment

of funds. <oney market instruments are those instruments, which have a maturity

 period of less than one year.

#he most active part of the money market is the market for overnight call and term

money between banks and institutions and repo transactions. <oney <arket is

regulated by 7BI.

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<oney <arket can be further divided into 8 parts. #hese areL

a) all <oney <arket

 b) #erm <oney <arket

c) *otice <oney <arket

#he market to get funds for 3 day only is called as Call 4oney <arket. #he

market to get funds for 6 days to 39 days is called as %otice 4oney <arket. #he

market to get funds for 31 days to 3 year is called as erm 4oney <arket.

%ome of the <oney <arket instruments areL

*< Commercial $aper

(< Certiicate o #eposit

< -2ills

/< Cash 4ana&ement =ills

Commercial $apers-

a) - + is a short term security '; days to 841 days) issued by a corporate entity

'other than a bank), at a discount to the face value.

 b) ommercial +aper '+) is an unsecured money market instrument issued in the

form of a promissory note.

c) +s normally give a higher return than fied deposits P Ds.

d) + can be issued in denominations of 7s. 1 lakh or multiples thereof. -mount

invested by a single investor should not be less than 7s. 1 lakh 'face value).

e) nly corporates who get an investment grade rating can issue +s, as per 7BI

rules. It is issued at a discount to face value.

f) Bank and FI’s are prohibited from issuance and underwriting of +’s.

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Certiicates o #eposit

a) Ds are negotiable money market instrument issued in demat form or as a

(sance +romissory *otes.

 b) Ds issued by banks should not have the maturity less than seven days and notmore than one year.

c) Financial Institutions are allowed to issue Ds for a period between 3 year and

up to 8 years.

d) Ds are like bank term deposits but unlike traditional time deposits these are

freely negotiable and are often referred to as *egotiable ertificates of Deposit.

e) Ds normally give a higher return than Bank term deposit.

f) -ll scheduled banks 'ecept 77Bs and ooperative banks) are eligible to issueDs.

g) Ds are issued in denominations of 7s. 3 =ac and in the multiples of 7s. 3 =ac


h) DiscountCoupon rate of D is determined by the issuing bankCFI.

i) =oans cannot be granted against Ds and BanksCFIs cannot buy back their own

Ds before maturity

reasury 2ills

a) #reasury Bills are short term 'up to one year) borrowing instruments of the

>overnment of India which enable investors to park their short term surplus funds

while reducing their market risk.

 b) #hey are auctioned by 7eserve Bank of India at regular intervals and issued at a

discount to face value.

c) -ny person in India including Individuals, Firms, ompanies, orporate bodies,#rusts and Institutions can purchase #reasury Bills.

d) #reasury Bills are eligible securities for %=7 purposes.

e) #reasury Bills are available for a minimum amount of 7s. 61,000 and in

multiples of 7s. 61,000 thereafter.

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f) -t present, 7BI issues #Bills for three different maturitiesL :3 days, 356 days

and 849 days.

Cash 4ana&ement =ills ;C4=s<a) >overnment of India, in consultation with the 7eserve Bank of India, has

decided to issue a new shortterm instrument, known as ash <anagement Bills

'<Bs), to meet the temporary mismatches in the cash flow of the >overnment.

 b) #he <Bs have the generic character of #bills but are issued for maturities less

than :3 days.

c) =ike #bills, they are also issued at a discount and redeemed at face value at


d) #he tenure, notified amount and date of issue of the <Bs depends upon the

temporary cash re&uirement of the >overnment.

-.1.-S. 3/-TGAG. 8/A* : A 2elping 2and For Senior Citiens

>ood <orning 7eaders,

#oday we are providing you some small but important concepts of reverse

mortgage loan. #his is one of the important topics. %o below are the details.

#he scheme of reverse mortgage has been introduced for the benefit of senior 

citi$ens owning a house but having inade&uate income to meet their needs. %ome


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7eatures o re9erse mort&a&e are:a) - homeowner who is above 40 years of age is eligible for reverse mortgage

loan. It allows him to turn the e&uity in his home into one lump sum or periodic

 payments mutually agreed by the borrower and the banker.

 b) * 7!+-<!*# is re&uired as long as the borrower lives, Borrower should

 pay all taes lating to the house and maintain the property as his primary residence.

c) #he amount of loan is based on several factors L borrower’s age, value of the

 property, current interest rates and the specific plan chosen. #he valuation of the

residential property is done at periodic intervals and it shall be clearly specified tothe borrowers upfront. #he banks shall have the option to revise the periodic C lump

sum amount at such fre&uency or intervals based on revaluation of property.

Settlement #he loan shall become due and payable only when the last surviving

 borrower dies or would like to sell the home, or permanently moves out. n death

of the home owner, the legal heirs have the choice of keeping or selling the house.

If they decide to sell the house, the proceeds of the sale would be used to repay the

mortgage, with the remainder going to the heirs.

As per the scheme !ormulated "y *ational 2ousing Bank ?*2B

the maDimum period o! the loan period is 'E years% The residual

li!e o! the property should "e at least ;( years% ,here the

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"orrower lives longer than 'E years periodic payments will not "e

made "y lender% 2owever the "orrower can continue to occupy%

BA*+ 3.I* ACC/0*T +208,A*A 2AI +5A7 T5P.S /F BA*+ AHC

>ood <orning 7eaders,

#oday we are posting the types of accounts in Banks. #here are very fre&uent

&uestions from this part asked in many eams earlier. Must have an overview and

read it with a light mind.

ypes o =an Accounts

- bank account can be a time deposit account or a term deposit account or a no frillaccount ie B%BD- .


a. %avings Bank -ccount

 b. urrent Deposit -ccount

c. Fied Deposit -ccount

d. 7ecurring Deposit -ccount.

e. *oFrill -ccount

a. Sa9in&s =an Account

#his type of account can be opened with a minimum initial deposit that varies from

 bank to bank. <oney can be deposited any time in this account. "ithdrawals can

 be made either by signing a withdrawal form or by issuing a che&ue or by using-#< card. *ormally banks put some restriction on the number of withdrawal from

this account. Interest is allowed on the balance of deposit in the account. #he rate

of interest on savings bank account varies from bank to bank and also changes

from time to time. - minimum balance has to be maintained in the account as

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 prescribed by the bank. Interest rate is paid to the account holders on daily balance


2. Current #eposit AccountBig businessmen, companies and institutions such as schools, colleges, and

hospitals have to make payment through their bank accounts. %ince there are

restrictions on number of withdrawals from savings bank account, that type of 

account is not suitable for them. #hey need to have an account from which

withdrawal can be made any number of times. Banks open current account for 

them. n this deposit bank does not pay any interest on the balances. 7ather the

account holder pays certain amount each year as operational charge. For the

convenience of the account holders banks also allow withdrawal of amounts in

ecess of the balance of deposit. #his facility is known as overdraft facility.

c. 7i'ed #eposit Account ;also nown as erm #eposit Account<

<any a time people want to save money for long period. If money is deposited in

savings bank account, banks allow a lower rate of interest. #herefore, money is

deposited in a fied deposit account to earn interest at a higher rate.

d. Recurrin& #eposit Account

#his type of account is suitable for those who can save regularly and epect to earn

a fair return on the deposits over a period of time. "hile opening the account a

 person has to agree to deposit a fied amount once in a month for a certain period.

#he total deposit along with the interest therein is payable on maturity. However,

the depositor can also be allowed to close the account before its maturity and get

 back the money along with the interest till that period. #he rate of interest allowed

on the deposits is higher than that on a savings bank deposit but lower than the rate

allowed on a fied deposit for the same period.

e. %o 7rill Account, ie =S=#A

#he Basic %avings Bank Deposit -ccount allows you to bank with a $ero minimum

 balance re&uirement. -ll the eisting O*ofrills’ accounts opened by the banks are

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now converted into B%BD- in compliance with the guidelines issued on -ugust

66, 6036 by the 7eserve Bank of India '7BI). B%BD- guidelines are applicable to

all scheduled commercial banks in India, including foreign banks having branches

in IndiaG. *o charge will be levied for nonoperationCactivation of inoperative

OBasic %avings Bank Deposit -ccount’.


a= :inimum age to open a ban+ account is now 19 years.

b= :aimum #nterest rate is given on D Ac.

c= The maimum period of an D is 19 years B for RD is 3 years.

Short notes on Accounts !or *-IHPI/ in India

Dhat are the dierent types o accounts which can 2e maintained 2y an

%RI$I in India?

ypes o accounts which can 2e maintained 2y an %RI $I in India:

A. %on-Resident rdinary Rupee Account ;%R Account<

 *7 accounts may be opened C maintained in the form of current, savings,

recurring or fied deposit accounts. Interest rates offered by banks on *7

deposits cannot be higher than those offered by them on comparable domestic

rupee deposits.

Z -ccount should be denominated in Indian 7upees.

Z +ermissible credits to *7 account are transfers from rupee accounts of nonresident banks, remittances received in permitted currency from outside India

through normal banking channels, permitted currency tendered by account holder 

during his temporary visit to India, legitimate dues in India of the account holder 

like current income like rent, dividend, pension, interest, etc., sale proceeds of 

assets including immovable property ac&uired out of rupeeCforeign currency funds

or by way of legacyC inheritance.

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Z *7IC+I may remit from the balances held in *7 account an amount not

eceeding (%D one million per financial year, sub/ect to payment of applicable


Z #he limit of (%D 3 million per financial year includes sale proceeds of 

immovable properties held by *7IsC+Is.

=. %on-Resident ;E'ternal< Rupee Account ;%RE Account<

3) *7! account may be in the form of savings, current, recurring or fied deposit


6) %uch accounts can be opened only by the nonresident himself and not through

the holder of the power of attorney.

8) -ccount will be maintained in Indian 7upees.

9) -ccrued interest income and balances held in *7! accounts are eempt from

Income ta.

1) -uthorised dealersCauthorised banks may at their discretion allow for a period of 

not more than two weeks, overdrawings in *7! savings bank accounts, up to a

limit of 7s.10,000.

4) =oans up to 7s.300 lakh can be etended against security of funds held in *7!

-ccount either to the depositors or third parties.

. Foreign urrency *on 7esident 'Bank) -ccount U F*7 'B) -ccount

Z F*7 'B) accounts are only in the form of term deposits of 3 to 1 years

Z -ccount can be in any freely convertible currency.

Z =oans up to 7s.300 lakh can be etended against security of funds held in F*7 

'B) deposit either to the depositors or third parties.

Z #he interest rates are stipulated by the Department of Banking perations andDevelopment, 7eserve Bank of India.

4rips o! !oreign currency7Foreign Accounts

Dear 7eaders,

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  Following is the article related to Drips of foreign currency.#his

article was provided by 7ohan -nand one of the regular readers. 

#rips o orei&n currency: nly potion or the ailin& rupee-s rupee continues to plummet, now trailing at 49.96 per (%D, recently the ape

 bank has made some changes in the interest rates of F*7 'B) account. #his step

has been taken to bolster the tardy foreign eport credit inflow. #his is sufficed to

say that India’s rupee strength overtly depends on the amount of foreign currency,

mostly dollar. #he more dollars trickle in, the stronger is the rupee.

Here, this article is presenting you precise but succinct information about types of 

foreign accounts available in India.

<any *7Is are often faced with the situation of maintaining a 7upee account in

India. #o encourage *on 7esident Indians '*7I’s) and +ersons of Indian rigin

'+I’s) staying abroad to invest in India, the >ovt. has allowed these Individuals to

open 8 types of *7I -ccount in IndiaL




3. %RE Account i.e. %on-Resident E'ternal Account is a rupee denominated

account and the amount in this type of account is freely repatriable. #his type of 

 *7I -ccount can either be in the form of %avings, urrent, 7ecurring or Fied


-s this form of *7I -ccount is rupee denominated, the investor will have to

convert Foreign urrency into 7upees and in case he intends to take the funds back 

to his home country, he will again have to convert the 7upees into Foreign

urrency #his form of *7I Bank -ccount is best suited for overseas savings which

have been remitted to India by converting the foreign currency into I*7.

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oint 3oldin&: *7! account can be /ointly held with another *7I but not with

resident Indian. n the other hand *7 account 'discussed below) can be held

with *7I as well as resident Indian 'close relative) as defined under %ection 4 of 

the ompanies -ct 3:14.

6. %R Account i.e. %on-Resident rdinary Account is a rupee denominated

account and can be in the form of savings or current or recurring or fied deposit.

#he income which is deemed to accrue or arise in India can be deposited only this

type of account. !amples of such forms of incomes are 7ent, Dividend and

ommission etc. the interest earned in *7 account and credit balances are

sub/ect to respective income ta bracket and are also sub/ect to applicable wealth

ta '>ovt. has done away with this ta and subsumed it in indirect ta system in

the form service ta.)

%uch incomes cannot be deposited in *7! -ccount. <oreover, the interest earned

on this form of account is also taable as compared to *7! and F*7 -ccount in

which #a on Interest is not levied in India. TD) on the amount accrued in the

 form of #nterest is applicable in %R! account.

'hoose % R" accounts if you@

-%rimary reason !ant to park your overseas earnings remitted to #ndia converted 

to #ndian


[ want to maintain savings in Rupee but +eep them liCuid

[ want to ma+e a joint account with another %R#

[ want Rupee savings to be freely repatriable

'hoose %R! account if you@

-%rimary reason !ant to park #ndia based earnings in Rupees in #ndia/

[ want account to deposit income earned in #ndia such as rent, dividends etc

[ want to open account with resident #ndian <close relative=

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8. 7C%R ;=< stands or 7orei&n Currency %on Resident Account ;=ans< and can

only be opened in Foreign urrency and not in the Indian urrency. It is a form of 

fied deposit on which regular interest is paid. -s Interest 7ates in India 'appro ;

52) are much higher as compared to the interest rates in western countries 'appro

362), many *7I’s invest their surplus funds in fied deposits in India throughthis type of *7I -ccount -nother benefit of this type of *7I Bank -ccount is that

the investor will not have to bear any risk of fluctuations in the foreign currency.

%ay for e.g.L <r. - invests A30 in this form of *7I -ccount and the Interest 7ate is

302 p.a., he would get A 33 at the end of the year irrespective of the 7upeeDollar 

echange rates. -nd therefore in this form of *7I Bank -ccount, he is free from

any foreign echange risk.

#his type of *7I Bank -ccount can be opened for a minimum of 3 year and a

maimum of 1 years. <oreover, the interest earned on this form of %R# >an+ 

 Account is also eempted from ta in #ndia.

%=. #he Foreign urrency *on7esident 'F*7'B)) scheme was introduced with

effect from <ay 31, 3::8 to replace the then prevailing F*7'-) scheme

introduced in 3:;1, where the foreign echange risk was borne by 7BI and

subse&uently by the >ovt. of India. #he F*7 '-) scheme was withdrawn in

-ugust, 3::9 in view of its implications for the central bank’s balance sheet and

&uasifiscal costs to the >overnment.

hamare deposits insured hai kyunki7 4ICGC hai na%%%

#eposit Insurance and Credit "uarantee Corporation is a 3002 subsidiary

of 7eserve Bank of India. It was established on Muly 31, 3:;5 under Deposit

Insurance and redit >uarantee orporation -ct, 3:43 for the purpose of 

 providing insurance of deposits and guaranteeing of credit facilities. It insures all bank deposits, such as saving, fied, current, recurring deposits for up to the limit

of 7s. 300,000 of each deposits in a bank.

=ans which are insured 2y #IC"C:

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ommercial BanksL -ll commercial banks including branches of foreign banks

functioning in India, local area banks and regional rural banks are insured by the


#IC"C insured?

In the event of a bank failure, DI> protects bank deposits that are payable in

India. #he DI> insures all deposits such as savings, fied, current, recurring,

etc. ecept the following types of deposits.

'i) Deposits of foreign >overnmentsR

'ii) Deposits of entralC%tate >overnmentsR

'iii)Interbank depositsR'iv) Deposits of the %tate =and Development Banks with the %tate cooperative


'v) -ny amount due on account of any deposit received outside India

'vi) -ny amount, which has been specifically eempted by the corporation with the

 previous approval of 7eserve Bank of India.

4a'imum deposit amount insured 2y the #IC"C:

!ach depositor in a bank is insured upto a maimum of 7s.3,00,000 '7upees ne

=akh) for both principal and interest amount held by him in the same capacity.

#oes the #IC"C insure Fust the principal on an account or 2oth principal and

accrued interest?

#he DI> insures principal and interest upto a maimum amount of 7s. ne


Are deposits in dierent 2ans separately insured?

es. If you have deposits with more than one bank, deposit insurance coverage

limit is applied separately to the deposits in each bank.

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Can the 2an deduct the amount o dues paya2le 2y the depositor?

es. Banks have the right to set off their dues from the amount of deposits. #he

deposit insurance is available after netting of such dues.

Can any insured 2an withdraw rom the #IC"C co9era&e?

 *o. #he deposit insurance scheme is compulsory and no bank can withdraw from


Inko toh 8/A* dena hi padega kyunki B/SS ?-BI ka nirdesh hai7

P-I/-IT5 S.CT/- 8.*4I*G

Dear readers, today we are providing you the highlights of the one of the most

important topic of >eneral awareness section, i.e. the $riority Sector 6endin&. It

is very relevant for all the upcoming banking eams, IB+%C%BIC77B etc. and also

 being asked in the banking interviews.

3i&hli&hts o $S6

It means provide credit to the needy sectors of the society. #he sectors areL

Q -griculture

Q <icro and %mall !nterprises

Q !ducation

Q Housing

Q !port

Q "eaker %ections

Q %ocial Infrastructure

Q 7enewable !nergy

ar&ets under $S6

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Q A&ricultureL 35 percent of -*B. ut of this 35 percent, a target of 5 percent of 

-*B is for %mall and <arginal Farmers, to be achieved in a phased manner i.e.,

; per cent by <arch 6034 and 5 per cent by <arch 603;.

Q Deaer SectionsL 30 percent of -*B.

Q 4icro EnterprisesL ;.1 percent of -*B has been prescribed for <icro

!nterprises, to be achieved in a phased manner i.e. ; percent by <arch 6034 and

;.1 percent by <arch 603;.

Q 9erall $S6 #arget for Domestic BankCForeign Bank with more than 60

BranchesL 90 percent of -d/usted *et Bank redit.

Q verall +%= #arget for 7orei&n =an with less than () =ranches: 90 percent of 

-d/usted *et Bank redit to be achieved in a phased manner






Cate&ori@ation o 4S4E accordin& to 4S4E AC ())!

4anuacturin& Sector ;"oods<

Enterprises In9estment in plant and machinery

<icro !nterprises Does not eceed twenty five lakh rupees

%mall !nterprises <ore than twenty five lakh rupees but does noteceed five crore rupees

<edium !nterprises<ore than five crore rupees but does not eceed

ten crore rupees

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Ser9ice Sector

Enterprises In9estment in e8uipment

<icro !nterprises Does not eceed ten lakh rupees

%mall !nterprises<ore than ten lakh rupees but does not eceed two crore




<ore than two crore rupees but does not eceed five crore


ther 7acts:

Q Farmers with landholding of up to 3 hectare are considered as <arginal Farmers.

Farmers with a landholding of more than 3 hectare and upto 6 hectares are

considered as %mall Farmers.

Q %cheduled ommercial Banks having any shortfall in lending to priority sector 

shall be allocated amounts for contribution to the 7ural Infrastructure

Development Fund '7IDF) established with *-B-7D.

Q For 7enewable !nergy, bank loans up to a limit of 7s.31 crore to borrowers for  purposes like solar based power generators, etc. For individual households, the

loan limit will be 7s.30 lakh per borrower.

Q For Housing, banks can provide loans to individuals up to 7s. 65 lakh in

metropolitan centres 'with population of ten lakh and above) and loans up to 7s. 60

lakh in other centres for purchaseCconstruction of a dwelling unit per family.

Q !port credit will be allowed up to 86 percent of -*B for Foreign banks with

less than 60 branches in India.

Q For !ducation, banks can provide loans to individuals for educational purposes

including vocational courses upto 7s. 30 lakh for studies in India and 7s. 60 lakh

for studies abroad.

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BA*+I*G mein pehli "aar7 The First Among All Banks

Dear 7eaders,

  - very >ood <orning to all of you and we hope that today morning

will bring a new inspiration for your eam preparation. -nd >od is also helping uswith such a good weather to study hard. "ell /okes apart and on a serious note,

todays notes are based on the first achiever in the Indian Banking %ector. It is not

only important for %BI, IB+% + but also for different Insurance sector eams vi$.

=I, *I=, *I-=, >I, (II, riental Insurance. If it is possible, make a note of

it for future, otherwise you will always find it on Bankers -dda.

3. #he First Bank in India U  =an o 3industan

6. First >overnor of 7BI U 4r. s2orne Smith

8. First Indian governor of 7BI U 4r. C # #eshmuh

9. First Bank to Introduce -#< in India U 3S=C

1. First Bank to introduce saving Bank in India U $residency 2an in *J)

4. First Bank to Introduce he&ue system in India U =en&al =an *J/

;. First Bank to introduce Internet Banking U ICICI =A% 

5. First Bank to introduce <utual Fund U State =an o India

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:. First Bank to introduce redit ard in India U Central =an o India

30. First Foreign Bank in India U Comptoire d+Escompte de $aris o 7rance in


33. First Moint %tock Bank of India U Allaha2ad =an 

36. First Indian bank to open branch outside India in =ondon in 3:94 U =an o


38. First Indian Bank started with Indian capital U $unFa2 %ational =an 

39. First 7egional 7ural Bank name +rathama >rameen Bank was started

 by U Syndicate =an 

31. First (niversal Bank in India U ICICI =an 

34. First bank in India listed in *ew ork %tock !change '*%!) U ICICI =an 

3;. First Bank in India to launch #alking -#<s for differently

able person U Union =an o India


First Bank in India to launch its own +ayment -ggregators U State =an o India.


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3:. ountry’s first all woman bank U =hartiya 4ahila =an 

60. First India bank >ot I% U Canara =an 

-* #I<! <*! provide karta hai -#<’s P "=-’s#ear Readers,

  7irst o all "ood 4ornin& to all o you. oday we are postin&

some 8uestions out o which you can e'pect at least one or two 8uestions inupcomin& 2an e'ams. It is Important or you to understand what to read out

o thousand topics rom 2oo. =ut we will pro9ide you handpiced topics and

will present to you in such a manner that it will stay ore9er in your mind.

N.*. Dhat is an Automated eller 4achine ;A4<?

-ns 3. -utomated #eller <achine is a computeri$ed machine that provides thecustomers of banks the facility of accessing their account for dispensing cash and

to carry out other financial P nonfinancial transactions without the need toactually visit their bank branch.

N.(. Dhat are Dhite 6a2el A4s ;D6As<?

-ns 6. -#<s set up, owned and operated by nonbanks are called "hite =abel-#<s. *onbank -#< operators are authori$ed under +ayment P %ettlement%ystems -ct, 600; by the 7eserve Bank of India.

N.. Dhat has 2een the rationale o allowin& non-2an entities or settin& up

o D6As ?

-ns 8. #he rationale of allowing nonbank entity to set up "hite =abel -#<s has been to increase the geographical spread of -#< for increased C enhancedcustomer service.

N./. Dhat type o cards can 2e used at an A4D6A?

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-ns 9. #he -#<C-#< cum debit cards, credit cards and open prepaid cards 'that permit cash withdrawal) issued by banks can be used at -#<sC"=-s for varioustransactions.

N.5. Dhat are the ser9icesacilities a9aila2le at A4sD6As?

-ns 1. In addition to cash dispensing, -#<sC"=-s may offer many other servicesCfacilities to bank customers. %ome of these services includeL

• -ccount Information

• ash Deposit 'Acceptance o deposits are not permitted at D6As<

• 7egular Bills +ayment 'not permitted at D6As<

• +urchase of 7eload ouchers for <obiles 'not permitted at D6As<

• <iniC%hort %tatement

• +I* change

• 7e&uest for he&ue Book 

N.!. Dhat is $ersonal Identiication %um2er ;$I%<?

-ns 4. +I* is the numeric password which is separately mailed C handed over tothe customer by the bank while issuing the card. <ost banks re&uire the customersto change the +I* on the first use. ustomer should not disclose +I* to anybody,including to bank officials. ustomers should change the +I* at regular intervals.

N.. Can these cards 2e used at any 2annon-2an A4 ;D6A< in the


-ns ;. es. #he cards issued by banks in India may be used at any bank C white

label -#< in the country.

N.J. Is the customer char&ed or A4 transactions?

-ns.5. "ith effect from *ovember 03, 6039, %avings bank account holders can doa minimum o three transactions 'including both financial and nonfinancialtransactions) free of charge in a month at other bank -#<s in case of -#<slocated in si' metro locations, vi$. <umbai, *ew Delhi, hennai, Kolkata,

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Bengaluru and Hyderabad. -t other locations, the savings bank account holderscan transact a minimum o i9e transactions 'including both financial and nonfinancial transactions) free of charge in a month at other bank -#<s.%imilarly, =asic Sa9in&s =an #eposit Account holders will continue to get fivefree transactions. Banks on their own can decide to offer more number of transactions free of cost to their customers. In case of charges to be levied oncustomers, the customer can be charged a maimum of 7s. 60C per transaction'plus service ta, if any) by hisCher bank.

N.0. Dhat steps should a customer tae in case o ailed A4 transaction at

other 2anwhite la2el A4s, when his her account is de2ited?

-ns :. #he customer should lodge a complaint with the card issuin& 2an at the

earliest. #his process is applicable even if the transaction was carried out atanother bank’sCnonbank’s -#<. In case of "=-s, the contact numberCtoll free

numbers are also available for lodging complaints regarding failed transactions attheir -#<s.

N.*). Is there any time limit or the card issuin& 2ans or recreditin& the

customers account or a ailed A4D6A transaction indicated under N. %o.


-ns 30. -s per the 7BI instructions, banks have been mandated to resolvecustomer complaints by recrediting the customer’s account within ; working daysfrom the date of complaint.

N.**. Are the customers eli&i2le or compensation or delays 2eyond

worin& days?

-ns 33. es. !ffective from Muly 3, 6033, banks have to pay compensation of 7s.300C per day for delays in recrediting the amount beyond ; working days fromthe date of receipt of complaint for failed -#< transactions. #he compensation hasto be credited to the account of the customer without any claim being made by thecustomer. If the complaint is not lodged within 80 days of transaction, the customer is not entitled for any compensation for delay in resolving his C her complaint.

N.*(. Dhat is the course o action or the customer i the complaint is notaddressed 2y hisher 2an within the stipulated time not addressed to his


-ns 36. #he customer can take recourse to the Banking mbudsman, if thegrievance is not redressed by the hisCher card issuing bank.

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7BI the B%% of all BanksR=I is the central =an o India and controls the entire money issue, circulationthe entire money issue, circulation and control by its monetary policies and lending

 policies by periodical updates or corrections to discipline the economy.

he central 2an o India, founded in *05, which maintains the monetary policyof its national currency, the rupee, and the nations currency reserves.

It is also known as the =an o last resort=aner+s 2an"o9ernment+s 2an.


#he reserve bank of India was established on -pril 3, 3:81 in accordance with the provisions of the 7eserve Bank of India -ct, 3:89. #he entral ffice of the

7eserve Bank of India was initially established in alcutta but was permanentlymoved to <umbai in 3:8;. #hough originally privately owned, sincenationali$ation in 3:9:, the 7eserve Bank is fully owned by the >overnment of India.

 :A#% E%'T#!%) ! R>#@

3) 4onetary Authority: Formulates implements and monitors the monetary policy.6) Re&ulator and super9isor o the inancial system: +rescribes broad

 parameters of banking operations within which the country’s banking and financialsystem functions.8) 4ana&er o 7orei&n E'chan&e: <anages the Foreign !change <anagement-ct, 3:::.9) Issuer o Currency: Issues and echanges or destroys currency and coins not fitfor circulations.1) #e9elopment role:  +erforms a wide range of promotional functions to supportnational ob/ectives.4) =aners to the "o9ernment: performs merchant banking function for the

central and the state governmentsR also acts as their banker.;) =aners to 2ans: maintains banking accounts of all scheduled banks.

'entral >oard of R>#@

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#he 7eserve Banks affairs are governed by a central board of directors. #he boardis appointed by the >overnment of India in keeping with the 7eserve Bank of India-ct. #hey are appointedCnominated for a period of four years

!fficial Directors@

7ull-time : >overnor and not more than four Deputy >overnorsCurrently:

• Dr. 7aghuram 7a/an '>overnor)

• %hri H.7. Khan 'Deputy >overnor)

• Dr. (r/it 7. +atel 'Deputy >overnor)

• %hri 7. >andhi 'Deputy >overnor)

• %hri %. %. <undra 'Deputy >overnor)

  )ubsidiaries of R>#@

7ully owned: Deposit Insurance and redit >uarantee orporation of India'DI>), Bharatiya 7eserve Bank *ote <udran +rivate=imited'B7B*<+=)[!ther #mportant facts related to R>#@

• 7eserve Bank of India -ct passed in 3:89.

• 7eserve Bank of India '7BI) established on 3 -pril 3:81.

• 7eserve Bank of India '7BI) established on the recommendation of Hilton

oung ommission.

• 7BI is the sole authority in India to issue Bank notes in India.

• !mblem of 7BIL +anther and +alm #ree.

• hintaman Dwarkanath Deshmukh ' D Deshmukh) was the governor of

7BI at the #ime of nationali$ation of 7BI in 3:9:.

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• 3st women Deputy >overnor of 7BI K.M.(deshi.

• 7BI is not epected to perform the function of accepting deposits from the

general public

• #he first >overnor of the 7eserve Bank of India from 03.09.3:81 to

80.04.3:8; was %ir sborne %mith

• 7BI decides the following rates namelyR Bank rate, repo rate, reverse repo

rate and cash reserve ratio.

Banking Awareness: Ination and -BI

To understand R># monetary policy we have to understand why R># has to do

all this mehnat, R># has a biggest villain standing against him called as #%FAT#!%.


Inflation is the biggest parasite in the Indian economy. In the condition of inflation

there is flow of etra money in the economy creating ecess of demand in the

market for the products as compared to supply in midst of all this maara maari the

 producers grab this opportunity with both arms and if possible with legs too 'too

greedy these fellows), they mark higher prices for the goods that are ecess in

demand and this creates a rise in price of the products resulting in inflation.

Inflation has the following adverse effects on the economyL

3ere is story o 4r. =echara ;common man<

Inlation and $urchasin& $roducts-

+urchasing +ower#he value of a currency epressed in terms of the amount of 

goods or services that one unit of money can buy. +urchasing power is important

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 because, all else being e&ual, inflation decreases the amount of goods or services

youd be able to purchase. <r.Bechara is fetching a salary of 7s.60K monthly, he

was doing his best to keep up to the epectations his over si$ed wife and etra

demanding kids, *ow in inflation his salary is the same but his 60K will now

cannot complete the demands of his family, because that 60K has becomee&uivalent to say, 35K and now they can have less resources in the same prices,

#his will result in the debt conditions , lesser purchase of goods and services'due

to higher prices) and will directly hurt the economy.

Inlation and #e2t-

+rice inflation is a debtors best friend and a creditors worst enemy. =et’s see how,

our <r. Bechara gave 7s. 30K to a debtor in 6004 for a period of three years, after 

two years inflation occurred, now the value of that 30k becomes e&uivalent to 5k 

'loss in the value of 7s), #he effect of inflation on debtors is positive because

debtors can pay their debts with money that is less valuable.

ther ne&ati9e impacts-

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=lac-maretin& !pecting inflation many mafias start to collect the onions and

kerosene in their backyards for releasing these when the inflation strikes, hence

they will make big bucks in no time and our <r. Bechara has to pay more than

hefty amount for the daily ka aaloo ,pya$$..

Unemployment Inflation comes along with a gift package of unemployment,

companies with limited resources will start to fire people on the name of cost

cutting and also the new recruitments will not happen resulting in not so aache din

for aspirants.

#ierent sta&es o Inlation-

Creepin& Inlation:

reeping or mild inflation is when prices rise 82 a year or less.

Dalin& Inlation:

#his type of strong, or pernicious, inflation is between 8302 a year. It is harmful

to the economy because it heats up economic growth too fast.

"allopin& Inlation:

"hen inflation rises to ten percent or greater, it wreaks absolute havoc on the

economy. <oney loses value so fast that business and employee income cant keep

up with costs and prices. Foreign investors avoid the country.


Hyperinflation is when the prices skyrocket, the currency becomes a piece of trash,

\imbabwe eperienced a similar conditions in previous years.

Calculation o Inlation-

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In India inflation is calculated by the help of +I'onsumer +rice

Inde),previously it was calculated by "+I'"holesale +rice Inde), +I as a scale

was adopted by 7BI ,due the recommendations of (ri/it +atel committee.

*itty7Gritty o! F4s

 (ello Readers,

 (ere we are presenting to you all a brief about ied Deposits, which was

shared by Rohan Anand. Don-t forget to than+ himGGG

7#s ;7i'ed #eposits<: - comprehensible approach towards defining the nitty

gritty of a popular investing instrument.

Fied deposit 'FD) is a financial instrument where a sum of money given to a bank, financial institution or company whereby the receiving entity pays interest at

a specified percentage for the time duration of the deposit.

Fied deposit, in fact, gives you a fied interest either annually or on a cumulative

 basis. "hats important to note is that this interest income is taed on accrual basis.

#his means irrespective of when you receive it, you will have to pay ta at the end

of the financial year. !ven if it is not taable, you still have to show it in your I#


#here is no doubt that bank fied deposits 'FDs) are considered safe in that you

will most likely get your money back. But did you know that bank FDs can

negatively affect your savings over the long term?

=et’s try to answer this &uestion,

<ost FDs only give you about 5.10 2 interest before ta and around ; 2 after ta.

#his means, you are effectively losing money every year you invest your money ina FD.

In correlation with e&uity mutual funds, long term returns from which are ta free,

FD interest is taable at your current ta slab. #he higher your income, the lower 

your FD return will be.

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 *ow, another &uestion ensued from these above answers. If FDs are pricey enough

taking a long term perspective then where one should invest. <utual Funds might

 be the answer. But let’s stick to the sub/ect on which we are discussing.

-nother aspect of the FD which is subtle is #D%. #D% or #a Deducted at %ource

is the Income #a department’s way of automating ta collection, to an etent. #he

ta on interest from any FD is paid partially via #D% deducted by the bank and the

rest is paid as %elf-ssessment #a by the individual.

Banks deduct #D% on interest only if the interest amount for an F.D is greater than

7s.30, 000 per year. #he rate of #D% deducted by banks is 302 on interest income,

 provided your +-* number is available with the bank. If the bank doesn’t have

your +-* in its records, #D% is deducted at 602 on interest income.

If your total income is below the minimum ta slab '302), the #D% on FD interest

that is deducted by banks can be recovered by claiming a refund for the #D%

amount at the time of ta filing.

-lternately, ou can submit the Form 31>G to the bank declaring that since your 

taable income for the year will be below the minimum ta slab, the bank 

shouldn’t deduct #D% on your FD Interest.

%enior iti$ens are also eempt from paying #D% on FD interest as a special

concession by the I# department. #hey need to submit Form 31H to ensure they

aren’t charged #D% on their F.Ds.

n the whole, one of the ma/or benefits of FD is its li&uidity. For any immediate

re&uirement, it can be broken and the money is credited youre your account within

a short span of time. "ith higher interest rates it is surely a good investment

opportunity. %enior citi$ens, who generally get higher interest rates, will benefit if 

they fall in a lower ta slab. In a nutshell, one should invest in FDs, if one finds

difficulty in comprehending the most elusive and volatile stock market.

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Important Banking #erms3ello Readers,

n the account o upcomin& S=I $ E'am, here we are pro9idin& you all the

Important =anin& erms. 3ope you all lie the postLLL

Accrued interest: Interest due from issue date or from the last coupon paymentdate to the settlement date. -ccrued interest on bonds must be added to their 

 purchase price.

Ar2itra&e: Buying a financial instrument in one market in order to sell the sameinstrument at a higher price in another market.

As $rice: #he lowest price at which a dealer is willing to sell a given security.

Asset-=aced Securities ;A=S<: - type of security that is backed by a pool of  bank loans, leases, and other assets. <ost -B% are backed by auto loans and creditcards U these issues are very similar to mortgagebacked securities.

At-the-money: #he eercise price of a derivative that is closest to the market priceof the underlying instrument.

=asis $oint: ne hundredth of 32. - measure normally used in the statement of interest rate e.g., a change from 1.;12 to 1.532 is a change of 4 basis points.

=ear 4arets: (nfavorable markets associated with falling prices and investor  pessimism.

=id-as Spread: #he difference between a dealer’s bid and ask price.

=id $rice: #he highest price offered by a dealer to purchase a given security.

=lue Chips: Blue chips are unsurpassed in &uality and have a long and stablerecord of earnings and dividends. #hey are issued by large and wellestablishedfirms that have impeccable financial credentials.

=ond: +ublicly traded longterm debt securities, issued by corporations andgovernments, whereby the issuer agrees to pay a fied amount of interest over aspecified period of time and to repay a fied amount of principal at maturity.

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=oo Balue: #he amount of stockholders’ e&uity in a firm e&uals the amount of thefirm’s assets minus the firm’s liabilities and preferred stock 

=roer: Individuals licensed by stock echanges to enable investors to buy andsell securities.

=roera&e 7ee: #he commission charged by a broker.

=ull 4arets: Favorable markets associated with rising prices and investor optimism.

Call ption: #he right to buy the underlying securities at a specified eercise price on or before a specified epiration date.

Calla2le =onds: Bonds that give the issuer the right to redeem the bonds beforetheir stated maturity.

Capital "ain: #he amount by which the proceeds from the sale of a capital asseteceed its original purchase price.

Capital 4arets: #he market in which longterm securities such as stocks and bonds are bought and sold.

Certiicate o #eposits ;C#s<: %avings instrument in which funds must remain ondeposit for a specified period, and premature withdrawals incur interest penalties.

Closed-end ;4utual< 7und: - fund with a fied number of shares issued, and alltrading is done between investors in the open market. #he share prices aredetermined by market prices instead of their net asset value.

Collateral: - specific asset pledged against possible default on a bond. <ortgage bonds are backed by claims on property. ollateral trusts bonds are backed by

claims on other securities. !&uipment obligation bonds are backed by claims one&uipment.

Commercial $aper: %hortterm and unsecured promissory notes issued bycorporations with very high credit standings.

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Common Stoc: !&uity investment representing ownership in a corporationR eachshare represents a fractional ownership interest in the firm.

Compound Interest: Interest paid not only on the initial deposit but also on anyinterest accumulated from one period to the net.

Contract %ote: - note which must accompany every security transaction whichcontains information such as the dealer’s name 'whether he is acting as principal or agent) and the date of contract.

Controllin& Shareholder: -ny person who is, or group of persons who together are, entitled to eercise or control the eercise of a certain amount of shares in acompany at a level 'which differs by /urisdiction) that triggers a mandatory generaloffer, or more of the voting power at general meetings of the issuer, or who is or 

are in a position to control the composition of a ma/ority of the board of directorsof the issuer.

Con9erti2le =ond: - bond with an option, allowing the bondholder to echangethe bond for a specified number of shares of common stock in the firm. -conversion price is the specified value of the shares for which the bond may beechanged. #he conversion premium is the ecess of the bond’s value over theconversion price.

Corporate =ond: =ongterm debt issued by private corporations.

Coupon: #he feature on a bond that defines the amount of annual interest income.

Coupon 7re8uency: #he number of coupon payments per year.

Coupon Rate: #he annual rate of interest on the bond’s face value that a bond’sissuer promises to pay the bondholder. It is the bond’s interest payment per dollar of par value.

Co9ered Darrants: Derivative call warrants on shares which have been separatelydeposited by the issuer so that they are available for delivery upon eercise.

Credit Ratin&: -n assessment of the likelihood of an individual or business beingable to meet its financial obligations. redit ratings are provided by credit agenciesor rating agencies to verify the financial strength of the issuer for investors.

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Currency =oard: - monetary system in which the monetary base is fully backed by foreign reserves. -ny changes in the si$e of the monetary base has to be fullymatched by corresponding changes in the foreign reserves.

Current Hield: - return measure that indicates the amount of current income a bond provides relative to its market price. It is shown asL oupon 7ate divided by+rice multiplied by 3002.

Custody o Securities: 7egistration of securities in the name of the person towhom a bank is accountable, or in the name of the bank’s nomineeR plus depositionof securities in a designated account with the bank’s bankers or with any other institution providing custodial services.

#eault Ris:  #he possibility that a bond issuer will default ie, fail to repay

 principal and interest in a timely manner.

#eri9ati9e Call ;$ut< Darrants: "arrants issued by a third party which grant theholder the right to buy 'sell) the shares of a listed company at a specified price.

#eri9ati9e Instrument: Financial instrument whose value depends on the value of another asset.

#iscount =ond: - bond selling below par, as interest inlieu to the bondholders.

#i9ersiication: #he inclusion of a number of different investment vehicles in a portfolio in order to increase returns or be eposed to less risk.

#uration: - measure of bond price volatility, it captures both price andreinvestment risks to indicate how a bond will react to different interest rateenvironments.

Earnin&s: #he total profits of a company after taation and interest.

Earnin&s per Share ;E$S<: #he amount of annual earnings available to commonstockholders as stated on a per share basis.

Earnin&s Hield:  #he ratio of earnings to price '!C+). #he reciprocal is priceearnings ratio '+C!).

E8uity: wnership of the company in the form of shares of common stock.

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E8uity Call Darrants: "arrants issued by a company which give the holder theright to ac&uire new shares in that company at a specified price and for a specified

 period of time.

E'-di9idend ;O#<: - security which no longer carries the right to the mostrecently declared dividend or the period of time between the announcement of thedividend and the payment 'usually two days before the record date). For transactions during the edividend period, the seller will receive the dividend, notthe buyer. !dividend status is usually indicated in newspapers with an ') net tothe stock’s or unit trust’s name.

7ace Balue %ominal Balue: #he value of a financial instrument as stated on theinstrument. Interest is calculated on faceCnominal value.

7i'ed-income Securities: Investment vehicles that offer a fied periodic return.

7i'ed Rate =onds: Bonds bearing fied interest payments until maturity date.

7loatin& Rate =onds: Bonds bearing interest payments that are tied to currentinterest rates.

7undamental Analysis: 7esearch to predict stock value that focuses on suchdeterminants as earnings and dividends prospects, epectations for future interestrates and risk evaluation of the firm.

7uture Balue: #he amount to which a current deposit will grow over a period of time when it is placed in an account paying compound interest.

7uture Balue o an Annuity: #he amount to which a stream of e&ual cash flowsthat occur in e&ual intervals will grow over a period of time when it is placed in anaccount paying compound interest.

7utures Contract: - commitment to deliver a certain amount of some specifieditem at some specified date in the future.

3ed&e: - combination of two or more securities into a single investment positionfor the purpose of reducing or eliminating risk.

Income: #he amount of money an individual receives in a particular time period.

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Inde' 7und: - mutual fund that holds shares in proportion to their representationin a market inde, such as the %P+ 100.

Initial $u2lic erin& ;I$<: -n event where a company sells its shares to the public for the first time. #he company can be referred to as an I+ for a period of time after the event.

Inside Inormation: *onpublic knowledge about a company possessed by itsofficers, ma/or owners, or other individuals with privileged access to information.

Insider radin&: #he illegal use of nonpublic information about a company tomake profitable securities transactions

Intrinsic Balue: #he difference of the eercise price over the market price of theunderlying asset.

In9estment: - vehicle for funds epected to increase its value andCor generate positive returns.

In9estment Ad9iser: - person who carries on a business which providesinvestment advice with respect to securities and is registered with the relevantregulator as an investment adviser.

I$ price: #he price of share set before being traded on the stock echange. ncethe company has gone Initial +ublic ffering, the stock price is determined bysupply and demand.

un =ond: Highrisk securities that have received low ratings 'i.e. %tandard P+oor’s BBB rating or belowR or <oody’s BBB rating or below) and as such,

 produce high yields, so long as they do not go into default.

6e9era&e Ratio: Financial ratios that measure the amount of debt being used to

support operations and the ability of the firm to service its debt.

6i2or: #he =ondon Interbank ffered 7ate 'or =IB7) is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other  banks in the =ondon wholesale money market 'or interbank market). #he =IB7 rate is published daily by the British Banker’s -ssociation and will be slightly

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higher than the =ondon Interbank Bid 7ate '=IBID), the rate at which banks are prepared to accept deposits.

6imit rder: -n order to buy 'sell) securities which specifies the highest 'lowest) price at which the order is to be transacted.

6imited Company: #he passive investors in a partnership, who supply most of thecapital and have liability limited to the amount of their capital contributions.

6i8uidity: #he ability to convert an investment into cash &uickly and with little or no loss in value.

6istin&: Euotation of the Initial +ublic ffering company’s shares on the stock echange for public trading.

6istin& #ate: #he date on which Initial +ublic ffering stocks are first traded onthe stock echange by the public

4ar&in Call: - notice to a client that it must provide money to satisfy a minimummargin re&uirement set by an !change or by a bank C broking firm.

4aret Capitali@ation: #he product of the number of the company’s outstandingordinary shares and the market price of each share.

4aret 4aer: - dealer who maintains an inventory in one or more stocks andundertakes to make continuous twosided &uotes.

4aret rder: -n order to buy or an order to sell securities which is to beeecuted at the prevailing market price.

4oney 4aret: <arket in which shortterm securities are bought and sold.

4utual 7und: - company that invests in and professionally manages a diversified

 portfolio of securities and sells shares of the portfolio to investors.

%et Asset Balue: #he underlying value of a share of stock in a particular mutualfundR also used with preferred stock.

er or Sale: -n offer to the public by, or on behalf of, the holders of securitiesalready in issue.

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er or Su2scription: #he offer of new securities to the public by the issuer or  by someone on behalf of the issuer.

pen-end ;4utual< 7und: #here is no limit to the number of shares the fund canissue. #he fund issues new shares of stock and fills the purchase order with thosenew shares. Investors buy their shares from, and sell them back to, the mutual funditself. #he share prices are determined by their net asset value.

pen er: -n offer to current holders of securities to subscribe for securitieswhether or not in proportion to their eisting holdings.

ption: - security that gives the holder the right to buy or sell a certain amount of an underlying financial asset at a specified price for a specified period of time.

9ersu2scri2ed: "hen an Initial +ublic ffering has more applications thanactual shares available. Investors will often apply for more shares than re&uired inanticipation of only receiving a fraction of the re&uested number. Investors andunderwriters will often look to see if an I+ is oversubscribed as an indication of the public’s perception of the business potential of the I+ company.

$ar =ond: - bond selling at par 'i.e. at its face value).

$ar Balue: #he face value of a security.

$erpetual =onds: Bonds which have no maturity date.

$lacin&: btaining subscriptions for, or the sale of, primary market, where the newsecurities of issuing companies are initially sold.

$ortolio: - collection of investment vehicles assembled to meet one or moreinvestment goals.

$reerence Shares: - corporate security that pays a fied dividend each period. Itis senior to ordinary shares but /unior to bonds in its claims on corporate incomeand assets in case of bankruptcy.

$remium ;Darrants<: #he difference of the market price of a warrant over itsintrinsic value.

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$remium =ond: Bond selling above par.

$resent Balue: #he amount to which a future deposit will discount back to presentwhen it is depreciated in an account paying compound interest.

$resent Balue o an Annuity: #he amount to which a stream of e&ual cash flowsthat occur in e&ual intervals will discount back to present when it is depreciated inan account paying compound interest.

$riceEarnin&s Ratio ;$E<: #he measure to determine how the market is pricingthe company’s common stock. #he priceCearnings '+C!) ratio relates the company’searnings per share '!+%) to the market price of its stock.

$ri9ati@ation: #he sale of governmentowned e&uity in nationali$ed industry or 

other commercial enterprises to private investors.

$rospectus: - detailed report published by the Initial +ublic ffering company,which includes all terms and conditions, application procedures, I+ prices etc, for the I+

$ut ption: #he right to sell the underlying securities at a specified eercise priceon of before a specified epiration date.

Rate o Return: - percentage showing the amount of investment gain or lossagainst the initial investment.

Real Interest Rate: #he net interest rate over the inflation rate. #he growth rate of  purchasing power derived from an investment.

Redemption Balue: #he value of a bond when redeemed.

Rein9estment Balue: #he rate at which an investor assumes interest paymentsmade on a bond which can be reinvested over the life of that security.

Relati9e Stren&th Inde' ;RSI<: - stock’s price that changes over a period of timerelative to that of a market inde such as the %tandard P +oor’s 100, usuallymeasured on a scale from 3 to 300, 3 being the worst and 300 being the best.

Repurchase A&reement: -n arrangement in which a security is sold and later  bought back at an agreed price and time.

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Resistance 6e9el: - price at which sellers consistently outnumber buyers, preventing further price rises.

Return: -mount of investment gain or loss.

Ri&hts Issue: -n offer by way of rights to current holders of securities that allowsthem to subscribe for securities in proportion to their eisting holdings.

Ris-A9erse, Ris-%eutral, Ris-ain&:

• 7iskaverse describes an investor who re&uires greater return in echange

for greater risk.

• 7iskneutral describes an investor who does not re&uire greater return in

echange for greater risk.

• 7isktaking describes an investor who will accept a lower return in echange

for greater risk.

Senior =ond: - bond that has priority over other bonds in claiming assets anddividends.

Short 3ed&e: - transaction that protects the value of an asset held by taking ashort position in a futures contract.

Settlement: onclusion of a securities transaction when a customer pays a brokerCdealer for securities purchased or delivered, securities sold, and receivesfrom the broker the proceeds of a sale.

Short $osition: Investors sell securities in the hope that they will decrease in value

and can be bought at a later date for profit.

Short Sellin&: #he sale of borrowed securities, their eventual repurchase by theshort seller at a lower price and their return to the lender.

Speculation: #he process of buying investment vehicles in which the future valueand level of epected earnings are highly uncertain.

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Stoc Splits: "holesale changes in the number of shares. For eample, a two for one split doubles the number of shares but does not change the share capital.

Su2ordinated =ond: -n issue that ranks after secured debt, debenture, and other  bonds, and after some general creditors in its claim on assets and earnings. wnersof this kind of bond stand last in line among creditors, but before e&uity holders,when an issuer fails financially.

Su2stantial Shareholder: - person ac&uires an interest in relevant share capitale&ual to, or eceeding, 302 of the share capital.

Support 6e9el: - price at which buyers consistently outnumber sellers, preventingfurther price falls.

echnical Analysis: - method of evaluating securities by relying on theassumption that market data, such as charts of price, volume, and open interest, canhelp predict future 'usually shortterm) market trends. ontrasted withfundamental analysis which involves the study of financial accounts and other information about the company. 'It is an attempt to predict movements in security

 prices from their trading volume history.)

ime 3ori@on: #he duration of time an investment is intended for.

radin& Rules: %tipulation of parameters for opening and intraday &uotations, permissible spreads according to the prices of securities available for trading and board lot si$es for each security.

rust #eed: - formal document that creates a trust. It states the purpose and termsof the name of the trustees and beneficiaries.

Underlyin& Security: #he security sub/ect to being purchased or sold uponeercise of the option contract.

Baluation: +rocess by which an investor determines the worth of a security usingrisk and return concept.

Darrant: -n option for a longer period of time giving the buyer the right to buy anumber of shares of common stock in company at a specified price for a specified

 period of time.

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Dindow #ressin&: Financial ad/ustments made solely for the purpose of accounting presentation, normally at the time of auditing of company accounts.

Hield ;Internal rate o Return<: #he compound annual rate of return earned by aninvestment

ield to <aturityL #he rate of return yield by a bond held to maturity when bothcompound interest payments and the investor’s capital gain or loss on the securityare taken into account.

Pero Coupon =ond: - bond with no coupon that is sold at a deep discount from par value.

<inimum -lternative #a -n InsightA #einition -

Direct ta in lay terms is a ta on income that you haveto pay, it cannot be shifted to others. %ome of its forms include income ta, wealthta, etc. Direct taes are directly levied on individuals, corporations andorganisations and collected by way of income ta returns to be filed each year.

-n indirect ta is collected by an intermediary 'such as a retail store) from the person who bears the ultimate economic burden of the ta 'such as the customer).Indirect taes include sales ta, service ta, valueadded ta, commodity

transaction ta and securities transaction ta among others.

ne such indirect ta is the minimum alternate ta '<-#). >oing forward, we willeplain what <-# is, the reasons for its introduction, and who is liable to pay theta.

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 *ormally, a company is liable to pay ta on the income computed in accordancewith the provisions of the Income#a -ct, but the profit and loss account of thecompany is prepared as per provisions of the ompanies -ct.

In the past, a large number of companies showed book profits on their profit andloss account and at the same time distributed huge dividends. However, thesecompanies didn’t pay any ta to the government as they reported either nil or negative income under provisions of the Income#a -ct.

#hese companies were showing book profits and declaring dividends to their shareholders but were not paying any ta. #hese companies are popularly knownas O$ero ta’ companies.

#he Indian Income#a -ct allows a large number of eemptions from total

income. Besides eemptions, there are several deductions permitted from the grosstotal income. Further, depreciation allowable under the Income#a -ct, is not thesame as re&uired under the ompanies -ct. #he latter provides a lower rate vi$avi$ the I# -ct which computes a higher rate of depreciation.

#he result of such eemptions, deductions, and other incentives under the Income#a -ct in the form of liberal rates of depreciation is the emergence of $ero tacompanies, which in spite of having high book profit are able to reduce their taable income to nil.

"o9ernmentMs tae on 4A

• >overnment formed panel to resolve ta dispute with foreign investors.

• Finance <inister -run Maitley announced that a highlevel committee will

look into the controversial issue of payment of <inimum -lternate #a'<-#) by FIIs.

• #he ommittee is re&uested to give its recommendation of the specificissues of <-# on FIIs epeditiously.

• >overnment also declared that minimum alternate ta '<-#) would not be

applicable on foreign companies’ earning from capital gains on securities,royalty, fee on technical services and interest, providing a huge breather toforeign investors.

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<ergers of Banks %oon to be a reality"hile India claims to have escaped the global financial crisis, +%Bs are in a messtoday because they were big lenders to many megascamsters of the (+- regimeand shaky infrastructure pro/ects 'telecom, coal, power, realty and %!\).

• #he finance ministry is looking at the possibility of merging at least five

staterun banks from -ndhra Bank, Bank of <aharashtra, Dena Bank,+un/ab P %ind Bank, i/aya Bank, and (nited Bank of India with larger +%(s after their performance and bad asset levels improve.

• #he move has been recommended by the "orking >roup on onsolidation

and 7estructuring of +%Bs 'public sector banks).

• fficials said smaller banks would be merged with larger banks, which

needed a presence in regions where the smaller banks were strong.

"HA% SA%"A4

• $..%aya committee  7BI had appointed a committee under former -is

Bank chairman +M *ayak for improving governance in the sector. #he panelhad recommended the government give up its control over these banks and

reduce stake in these to less than 13 per cent.

• Besides Basel, domestic banks need to merge or organically grow into larger 

entities in the long term before the financial market is opened up to foreign banks.

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• (% and !uropean countries have long been demanding greater access to the

Indian financial market in return for concessions in the services sector.

• =ossmaking +%( banks have been similarly merged with the profitable

ones to create larger entities.#o nudge the banks, the government has alreadydecided that only profitable banks with a good performance record will berecapitalised.

• - provision of 7s :,111 crore has been made this fiscal for the

recapitalisation of +%( banks, including the *ational Bank for -gricultureand 7ural Development, the !portImport Bank of India, IndiaInfrastructure Finance ompany and %mall Industries Development Bank of India.

• =ast year, a provision of 7s 33,600 crore had been made for recapitalisation, but a mere 7s 4,::0 crore was infused into banks, including the %BI, Bank of Baroda, +un/ab *ational Bank, anara Bank and %yndicate Bank.

• 7or readin& more o =asel - III - C6IC 3ERE

 Case o S=I  

• %BI has five associate banks, namely %tate Bank of Bikaner and Maipur, %tate

Bank of Hyderabad, %tate Bank of +atiala, %tate Bank of #ravancore, besides %tate Bank of <ysore

• %BI is waiting for all associate banks to turn in better results in the net

financial year. %o, we would like them to stabilise and come out at a particular level.

• #he government has in the past toyed with the idea of merging the associates

of the %tate Bank of India with it or creating an J%BI6J by merging some of these associates. %ome associates such as the %tate Bank of Indore weremerged with the %BI in the past.

• #he smaller unlisted subsidiaries are almost 300 per cent owned by the %BI

and merging them should not pose any ma/or problem as their functioning issimilar to that of the parent.

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• #he move, officials said, will create a larger %BI, giving the countrys largest

 bank much more financial muscle.

• #he drive to create larger Indian banks stems from the need to comply withnew Basel norms that would kick off by 603: and create large entitiescapable of taking on competition from foreign banks with the opening up of the domestic financial sector.

• Banks will need to raise almost 7s 9.1 lakh crore in #ier3 capital, including

7s 6.9 lakh crore in e&uity capital, by <arch 603: under the Basel III norms.

• fficials said at present the focus would be on assessing the loan portfolios

of small banks to help them eit businesses where they were not strong or were unprofitable. %ubse&uently, these banks would be asked to concentrateon particular segments.

• !arlier, the government had merged the %tate Bank of Hyderabad with the

%tate Bank of India. #here was also a move to merge some of the other %BIsubsidiaries with the %tate Bank of +atiala seen to be net in the &ueue.

#isad9anta&es o the mer&ers -

#he merger and consolidation of large +%Bs, if it ever happens, will further reducethe number of banks in the country and kill competition. #his is bad for theconsumer, because banks will operate even more like a cartel in that situation. "ealso need to mobilise public opinion on the circumstances in which having big

 banks, capable of funding large infrastructure pro/ects, is in India’s interest.

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#he big learning from the global financial crisis is that Obanks that are too big tofail’ are bailed out by the eche&uer and the entire country pays the price.

304-A Bank 7 Funding the 0n!unded

4icro Units #e9elopment and Reinance A&ency ;4U#RA< =an #edicated

Re&ulator and Reinancer

#he <icro (nits Development 7efinance -gency '<(D7-) Bank is set to be

launched on -pril 5th 6031 by our Honourable +rime <inister %hri *arendra <odi


#he Bank will start with a corpus of 7s 60,000 crore which would be allocated to

the Bank from the money available from shortfalls of priority sector lending.

Further amount of 7s 8000 crores will be allocated from Budget as a redit

>uarantee orpus.

ey Responsi2ilities o 4U#RA =an 

=aying down policy guidelines for microCsmall enterprise financing business

7egistration and 7egulation of <FI entities

-ccreditationCrating of <FI entities

=aying down responsible financing practices to prevent over indebtedness,

ensuring client protection principles and methods of recovery

Development of standardi$ed covenants governing last mile lending to

microCsmall enterprises

+romoting right technology solutions for the last mile Formulating and running a credit guarantee scheme for providing guarantees to

the loans which are being etended to microenterprises

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reating a good architecture of last mile credit delivery to micro businesses under 

the scheme of $radhan 4antri 4udra HoFana

=eneits o 6aunchin& 4U#RA =an (niformity in regulations and best practices for the %H> Bank linkage

 programme, *BF<FIs, and trustsCsocietiesCnot for profit *BFsC%ection 61

companies engaging in <FI activities as <(D7- Bank would be the sole

regulator for all players in the <FI sector.

Increased li&uidity and access to low cost funding support to <FIs

Increased access to low cost funding for <FIs could lead to a reduction in the

cost of funds for <FIs.

India .conomic -e!orm

#he economy of India is one of the fastest growing economies in the world. %ince

its independence in the year 3:9;, a number of economic policies have been taken

which have led to the gradual economic development of the country. n a broader 

scale, India economic reform has been a blend of both social democratic and

liberali$ation policies.

Economic reorms durin& the post independence period

#he post independence period of India was marked by economic policies which

tried to make the country self sufficient. (nder the economic reform, stress was

given more to development of defense, infrastructure and agricultural sectors.>overnment companies were set up and investment was done more on the public

sector. #his was made to make the base of the country stronger. #o strengthen the

infrastructure, new roads, rail lines, bridges, dams and lots more were constructed.

During the Five ears +lans initiated in the 3:10s, the economic reforms of India

somewhat followed the democratic socialist principle with more emphasis on the

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growth of the public and rural sector. <ost of the policies were meant towards the

increase of eports compared to imports, central planning, business regulation and

also intervention of the state in the finance and labor markets. In the mid 10s huge

scale nationali$ation was done to industries like mining, telecommunications,

electricity and so on.Economic Reorms durin& *0!)s and *0J)s

During the mid 3:40s effort was made to make India self sufficient and also

increase the production and eport of the food grains. #o make the plan a success,

huge scale agricultural development was undertaken. #he government initiated the

O>reen 7evolution’ movement and stressed on better agricultural yield through the

use of fertili$ers, improved seed and lots more. *ew irrigation pro/ects were

undertaken and the rural banks were also set up to provide financial support to the


#he first step towards liberali$ation of the economy was taken up by 7a/iv >andhi.

-fter he became the +rime <inister, a number of restrictions on various sectors

were eased, control on pricing was removed, and stress was given on increased

growth rate and so on.

Economic Reorms durin& *00)s to the present times

Due to the fall of the %oviet (nion and the problems in balance of paymentaccounts, the country faced economic crisis and the I<F asked for the bailout loan.

#o get out of the situation, the then Finance <inister, <anmohan %ingh initiated

the economic liberation reform in the year 3::3. #his is considered to be one of the

milestones in India economic reform as it changed the market and financial

scenario of the country. (nder the liberali$ation program, foreign direct investment

was encouraged, public monopolies were stopped, and service and tertiary sectors

were developed.

%ince the initiation of the liberali$ation plan in the 3::0s, the economic reforms

have put emphasis on the open market economic policies. Foreign investments

have come in various sectors and there has been a good growth in the standard of 

living, per capital income and >ross Domestic +roduct.

Due to the global meltdown, the economy of India suffered as well. However,

unlike other countries, India sustained the shock as an important part of its

financial and banking sector is still under government regulation. *evertheless, to

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cope with the present situation, the Indian government has taken a number of 

decisions like strengthening the banking and tertiary sectors, increasing the

&uantity of eports and lots more.

redit 7ating -gencies of India P "orld

Important Credit Ratin& A&encies

6eadin& Credit Ratin& A&ency in India  

Indian credit rating industry mainly comprises of 7I%I=, I7-, -7!,*I7-, FI#H 'India 7atings P 7esearch) P %<!7-.

• CRISI6 - redit 7ating Information %ervices of India =imited

Head&uarter U <umbai

• ICRA - Investment information and credit rating agency Head&uarter

>urgaon, India

• CARE - redit -nalysis and 7esearch Head&uarters U <umbai

• %ICRA - Head&uarter >urgaon, India

•S4ERA - Head&uarters U <umbai

• 7itch ;India Ratin&s G Research<  Head&uarters U <umbai

 %ote@ 'R#)#F is the largest credit rating agency in #ndia, with a mar+et share of greater than 49H.

6eadin& Credit Ratin& A&ency in Dorld  

• %tandard P +oors '%P+) U Head&uarter U *ew ork, (%

• <oodys U Head&uarter *ew ork, (%

• Fitch Head&uarter *ew ork, (%

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Re&ulators in India

Re&ulator Sectors Chairman 3ead8uarte


Reser9e=an o 

India ;R=I<

Financial systemand monetary policy, <oney


7aghuram7a/an <umbai




=oard o 



%ecurity P apital<arket, stock  broking P

<erchantBanking, *idhis,

hit Fund


(.K. %inha <umbai





t Authority


Insurance industry #. %. i/ayan Hyderabad



Authority o India


#elecommunication Industry


 *ew Delhi












t Authority


+ension sector Hemantontractor 

 *ew Delhi

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Insurance %ector Dear all, in view of upcoming insurance eams, were are presenting you a brief writeup on insurance sector and companies in this sector.

In India, insurance has a deeprooted history. It finds mention in the writings of <anu ' <anusmrithi), agnavalkya 'Dharmasastra) and Kautilya ' -rthasastra ).#he writings talk in terms of pooling of resources that could be redistributed intimes of calamities such as fire, floods, epidemics and famine. #his was probably a

 precursor to modern day insurance. -ncient Indian history has preserved theearliest traces of insurance in the form of marine trade loans and carriers’ contracts.Insurance in India has evolved over time heavily drawing from other countries,!ngland in particular.

 =rie history o insurance sector 

#he insurance sector in India has completed all the facets of competition from being an open competitive market to being nationali$ed and then getting back tothe form of a liberali$ed market once again. #he history of the insurance sector inIndia reveals that it has witnessed complete dynamism for the past two centuriesapproimately."ith the establishment of the riental =ife Insurance ompany inKolkata, the business of Indian life insurance started in the year 3535.

Important milestones in the Indian lie insurance 2usiness*0*(: #he Indian =ife -ssurance ompanies -ct came into force for regulating thelife insurance business.*0(J: #he Indian Insurance ompanies -ct was enacted for enabling thegovernment to collect statistical information on both life and nonlife insurance

 businesses.*0JL #he earlier legislation consolidated the Insurance -ct with the aim of safeguarding the interests of the insuring public.*05!: 691 Indian and foreign insurers and provident societies were taken over by

the central government and they got nationali$ed. =I was formed by an -ct of +arliament, vi$. =I -ct, 3:14. It started off with a capital of 7s. 1 crore and thattoo from the >overnment of India. #he history of general insurance business inIndia can be traced back to #riton Insurance ompany =td. 'the first generalinsurance company) which was formed in the year 3510 in Kolkata by the British.

Important milestones in the Indian &eneral insurance 2usiness

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*0): #he Indian <ercantile Insurance =td. was set up which was the firstcompany of its type to transact all general insurance business.*05: >eneral Insurance ouncil, an arm of the Insurance -ssociation of India,framed a code of conduct for guaranteeing fair conduct and sound business

 patterns.*0!J: #he Insurance -ct improved for regulating investments and set minimalsolvency levels and the #ariff -dvisory ommittee was set up.*0(: #he >eneral Insurance Business '*ationali$ation) -ct, 3:;6 nationali$ed thegeneral insurance business in India. It was with effect from 3st Manuary 3:;8.30; insurers integrated and grouped into four companies vi$. the *ationalInsurance ompany =td., the *ew India -ssurance ompany =td., the rientalInsurance ompany =td. and the (nited India Insurance ompany =td. >I wasincorporated as a company.

Insurance Repository in India#he Insurance 7epository in India is a database of insurance policies. It allows

 policy holders to make revisions to a policy with speed and accuracy. It launchedon 34 %eptember 6038. It is the worlds first of its kind. Indias Insurance7egulatory and Development -uthority has issued licenses to five entities to act asInsurance 7epositoriesL

• entral Insurance 7epository =imited 'I7=)

• %HI= +ro/ects =imited

• Karvy Insurance repository =imited

•  *%D= Database <anagement =imited

• -<% 7epository %ervices =imited

E-Insurance Account!Insurance account is the facility available to the policy holder to keep all of their insurance policies in a demat form by opening an account with an insurancerepository, it]s a one point of contact for all of the insurance contracts, if anychange is needed in any of the personal information then instead of going to aneach insurer and submitting the re&uest separately to each one of them, herethrough an einsurance account, the policy holder can submit a re&uest to an

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insurance repository for that change and it will be applicable for all the policies the policyholder posses.It works in a similar manner like we keep our securitiesshares, mutual funds in an electronic form.

Dhat type o an Insurance $olicies can 2e ept in an E Insurance Account:

3.-ll of the below mention policies can be kept in an electronic form providedthese have been issued by the companies registered with Insurance 7egulatoryDevelopment -uthority'I7D-)6.-ll the =ife insurance policies including individual or group.8. -ll the general insurance policies including individual or group.9. -ny other form of an insurance policy approved by an I7D-.

$u2lic Sector Insurance Companies

=ife Insurance orporation of India>eneral Insurance orporation of India

 *ational Insurance o. =td.riental Insurance o. =td.

 *ew India -ssurance o. =td.(nited India Insurance o. =td.

6ie Insurance Corporation o India

3eadoice- 4um2ai

Chairman - Shri S. . Roy #he +arliament of India enacted the =ife Insurance orporation -ct on the 3:th of Mune 3:14, and the =ife Insurance orporation of Indian was established on 3st%eptember, 3:14, with the ob/ective of spreading life insurance much more widelyand in particular to the rural areas with a view to reach all insurable persons in thecountry, providing them ade&uate financial cover at a reasonable cost

"eneral Insurance Corporation

3eadoice - 4um2ai

Chairman - A Roy

>eneral Insurance orporation of India '>I 7e) was approved as OIndian7einsurer’ on 8rd *ovember,6000. -s an Indian reinsurer >I has been givingreinsurance support to four public sector P other private general insurancecompanies.

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he %ew India Assurance Co. 6td.

3eadoice- 4um2ai

Chairman - ".Srini9asan

It is the Jlargest general insurance company of India on the basis of gross premiumcollection inclusive of foreign operationsJ. It was founded by %ir Dorab/i #ata in3:3:, and was nationalised in 3:;8.

%ational Insurance Company 6imited ;%IC6<

3eadoice- olata

Chairman - Shri A.B. "iriFa umar

It is a state owned general insurance company in India. #he company wasestablished in 3:04 and nationalised in 3:;6. Its portofolio consists of a multitudeof general insurance policies, offered to a wide arena of clients encompassingdifferent sectors of the economy.^8_ -part from being leading insurance provider inIndia, *I= also serves *epal.

United India Insurance Company 6imited

3eadoice - Chennai

Chairman - 4ilind harat

under Department of Financial %ervices, <inistry of Finance 'India), is a publicsector >eneral Insurance ompany of India and one of the top >eneral Insurers in-sia. "ith the net worth of 7s 190; crores and profit of 7s 165 crores, thecompany has collected gross premium of 7s :;0: crores as of in the financial year 603839. #he company has more than seven decades of eperience in *onlifeInsurance business and was formed to its present form by the merger of 66companies, conse&uent to the nationalisation of >eneral Insurance companies inIndia.

riental Insurance Company 6td

Headoffice *ew Delhihairman Dr. -.K.%aena It was established on %eptember 36, 3:9; in the then Bombay. It was a completelyowned subsidiary of riental >overnment %ecurity =ife -ssurance ompany =td.

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It was created with the mandate of eecuting its parent body’s general insuranceoperations.

Facts a"out Pu"lic sector "anks

6ist o $u2lic Sector =ans , 3ead oices, Hear o esta2lishment and

Slo&ans :

S.%o =an %ame 3ead ice Hear o  



3 -llahabadBank 

Kolkata 3541 - tradition of trust

6 -ndhra Bank Hyderabad 60 *ov. 3:68 <uch more to do.

"ith ( in focus

8 Bank of


Baroda 60 Muly 3:05 India’s International


9 Bank of India <umbai ; %ept. 3:04 7elationships

 beyond Banking1 Bank of


+une 34 sept. 3:81 ne Family ne


4 anara Bank Bangalore 3:30 It’s easy to change

for those who you

love, #ogether we


; entral Bank

of India

<umbai 63 Dec. 3:33 Build - Better =ife

-round (s, entralto you since 3:33

5 orporation


<angalore 36 <arch 3:04 +rosperity for all

: Dena Bank <umbai 64 <ay 3:85 #rusted Family Bank  

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30 Indian Bank hennai 1 <arch 3:0; #aking Banking

#echnology to

ommon <an, our 

#echfriendly bank 

33 Indian

verseas Bank 

hennai 30 Feb. 3:8; >ood people to grow


36 riental Bank

of ommerce

>urgaon , Haryana 3: Feb. 3:98 "here every

individual is


38 +un/ab

 *ational Bank 

 *ew Delhi 35:1 #he *ame you can

Bank (pon

39 +un/ab P %indBank 

 *ew Delhi 69th

  Mune 3:05 "here series is away of life

31 %yndicate


<anipal, karnataka 3:61 our Faithful -nd

Friendly Financial


34 (nion Bank of  


<umbai 3:3: >ood people to bank


3; (nited Bank

of India

Kolkata 3:10 #he Bank that

 begins with (G

35 ( Bank Kolkata 3:98 Honors our #rust

3: i/aya Bank Bangalore 3:83 - friend ou can

Bank (pon

60 IDBI Bank =td <umbai 3:49 Banking for allR

-ao %chein BadaG

63 Bharatiya

<ahila Bank 

 *ew Delhi 3:th  *ov. 6038 !mpowering


 !mpowering India

State =an "roup

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3 %tate Bank of


<umbai 3st Muly 3:14 #he *ation banks on

usR +ure Banking

 *othing !lseR "ith

you all the way

6 %tate Bank of

Bikaner P


7a/asthan 3:48

8 %tate Bank of


+un/ab 3:3; Blending <odernity

with #radition

9 %tate Bank of


Hyderabad 3:93 ou can always bank  

on us

1 %tate Bank of<ysore

Bangalore 3:38 "orking for a better  tomorrow

4 %tate Bank of


#hiruvananthapuram 3:91 - =ong #radition of  


Important Facts a"out Indian Currency

 (ello Readers, Fet-s +now everything about #ndian 'urrency. (ope you all li+e the post..

#he Indian rupee symbol 'officially adopted in 6030) is derived from

the #e9ana&ari consonant J र J 'ra) and the =atin letter J7J. #he first series of coinswith the rupee symbol was launched on 5 Muly 6033. urrency paper is composedof cotton and cotton rag.

7BI issues all the bank notes ecept 7upees 3 *otes. #hese notes are issued by<inistry of Finance. 7ecently 7BI launched a website $aisa‐=olta‐3ai to raise

awareness of counterfeit or fake currency among users of the Indian 7upees andalso the citi$en of India.

The main security features of current ban+notes are@

• Iatermar+  ‐ "hite side panel of notes has <ahatma >andhi watermark.

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•  )ecurity thread  ‐ -ll notes have a silver or green security band with

inscriptions 'visible when held against light) of Bharat in Hindi and J7BIJ in!nglish.

 Fatent  image ‐

 n notes of denominations of 7s.60 and upwards, a vertical band on the right side of the <ahatma >andhi’s portrait contains a latentimage showing the respective denominational value numerally 'visible onlywhen the note is held hori$ontally at eye level).

•  :icro lettering  ‐  *umeral denominational value is visible under magnifying

glass between security thread and latent image.

•  #ntaglio ‐ n notes with denominations of I*71 and upwards the portrait of

<ahatma >andhi, the 7eserve Bank seal, guarantee and promise clause,

-shoka +illar !mblem on the left and the 7BI >overnors signature are printed in intaglio 'raised print).

•  #dentification mar+  ‐ n the left of the watermark window, different shapes

are printed for various denominations I*760L vertical rectangle, I*710Ls&uare, I*7300L triangle, I*7100L circle, I*73,000L diamond). #his alsohelps the visually impaired to identify the denomination.

• luorescence ‐  *umber panels glow under ultraviolet light.

• !ptically variable in+  ‐ *otes of 7s.100 and 7s.3,000 denominations have

their numerals printed in optically variable ink. #he number appears greenwhen the note is held flat, but changes to blue when viewed at an angle.

•  )ee‐through register  ‐ Floral designs printed on the front and the back of

the note coincide and perfectly overlap each other when viewed againstlight.

•  "ERion constellation ‐ - pattern of symbols found on the banknote helps

software detect the presence of a banknote in a digital image, preventing itsreproduction with devices such as colour photocopiers.

  Different Jinds of %otes@

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• $enuine %otes0 %uch notes must have a water mark of -soka +illar, security

thread and serial number along with alphabet. #hey have distinctive colours.

•  )oiled notes@ #he currency note which has become dirty due to its use or

may be in 6 pieces. *o portion of such note should be missing. #hese notesare accepted for echange without any restrictions by the banks.

•  :utilated notes0 %uch currency notes that are composed of various pieces or 

they are cut note of which some portion is missing. #hese notes areechanged only by the currency chest branches of banks.

•  )ingledouble numbered notes0 *otes up to 7s.1 are single numbered while

the notes above 7s.1 are double numbered notes.

 R>#’) 'lean %ote Kolicy

7BI had announced Olean *ote +olicy’ in Manuary, 3:::.For withdrawing soiled notes from circulation and pumping fresh notes intocirculation, the 7BI introduced various changes in the system and proceduresrelated to currency management which include mechani$ation of the currencyverification and processing as also shredding and bri&uetting for destruction of soiled and mutilated notes.

 Rules and #nstructions #ssued by R>#@

•  *ot to staple bank notes.

• #o #ender soiled notes to the 7eserve Bank in unstapled condition.

• #o use bands instead of staple pins.

• #o issue only clean notes to members of public.

• #o open select currency chest branches on %undays to provide echangefacility to members of public all over the county.

• #o provide unrestricted facility for echange of soiled and mutilated notes to

members of public.

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• Banks should sort notes into reJissuables and nonJ issuables, and issue only

clean notes to public.

• %oiled notes in unstapled condition may be tendered at 7BI in inward

remittances through urrency hests.

• Banks should stop writing of any kind on watermark window of bank notes.

'oins of 03 Kaise and >elow L Iithdrawal 

>ovt, of India has decided to withdraw the coins of 61 paise and below fromcirculation from Mune 80, 6033. oins of 61 paise and below are not accepted for echange at the bank branches from Muly 3, 6033 onward.

Iithdrawal of Kre‐0993 %otes@7eserve Bank of India decided to withdraw from circulation all banknotes issued

 prior to 6001 as they have fewer security features as compared to banknotes printed after 6001.#he withdrawal eercise is in conformity with the standard international practice of not having multiple series of notes in circulation at the same time.#he 7BI has already been withdrawing these banknotes in a routine manner through banks.It is estimated that the volume of such banknotes 'preJ6001) in circulation is not

significant enough to impact the general public in a large way and the members of  public may echange the preJ6001 series banknotes at bank branches at their convenience.#he deadline for echanging preJ6001 currency notes of various denominations,including 7s.100 and 7s.3,000, has been etended by another si months till Mune80, 6031.

Fiscal System in India

- countrys fiscal system is the complete structure of government revenue andependitures and the framework within which its agencies collect and disburse

those funds. #his system is governed by a nations economic policy, which comes

from decisions made by the governing body.

Fiscal policy is the means by which a government ad/usts its spending levels and

ta rates to monitor and influence a nations economy. It is the sister strategy to

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monetary policy through which a central bank influences a nations money supply.

#hese two policies are used in various combinations to direct a countrys economic


here are parts o the iscal policy

3. +ublic 7evenue.

6. +ublic ependiture.

8. +ublic debt.

Re9enues: are the source o income reali@ed 2y the &o9ernment and are

di9ided into:

*. Re9enue receipts :  which consists of revenue from regular sources

like #aation revenuesL eg., receipts from corporate ta, income ta, ecise ta,

!cise duty, custom duty, service ta etc.*on ta revenueL which include interest

on loans, dividends from +ublic sector units, Fees and stamp duties.

(. Capital receipts:  "hich refer to those inflows to government that are not in the

nature of regular income, But are repayments C recoveries, or proceeds from sale of 

assets. ther receipts like Disinvestment 'selling some shares of a +%() comes

under this head. Borrowings are simply the deficit which can be covered by taking

loans from market.

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E'penditure: are the e'penses incured 2y &o9t and are di9ided into :

 *on plan ependitureL #hese are on going ependiture not covered under the 1

year plans. *onplan revenue ependiture is accounted for by interest payments,subsidies 'mainly on food and fertilisers), wage and salary payments to

government employees, grants to %tates and (nion #erritories governments,

 pensions, police, economic services in various sectors, other general services such

as ta collection, social services, and grants to foreign governments. *onplan

capital ependiture mainly includes defence, loans to public enterprises, loans to

%tates, (nion #erritories and foreign governments.

+lan ependitureL India has adopted economic planning as a strategy for economicdevelopment. For stepping up the rate of economic development fiveyear plans

have been formulated. %o far ten fiveyear plans have been completed. #he

ependiture incurred on the items relating to five year plans is termed as plan

ependiture. %uch ependiture is incurred by the entral >overnment.

- provision is made for such ependiture in the budget of the entral >overnment.

-ssistance given by the entral >overnment to the %tate >overnments and (nion

#erritories for plan purposes also forms part of the plan ependiture. +lanependiture is subdivided into 7evenue !penditure and apital !penditure.#his

ependiture involves funding for programmes and pro/ects covered by the 1 year 

 plans as decided by the various ministerial bodies.

Under the a2o9e heads there are two components:

Re9enue e'penditure  It is payments incurred for day to day running of 

government departments and various services offered to citi$ens. #his alsocomprises of spending towards subsidies, interest payments. #his spurs

consumption in economy.

Capital e'penditure: #his ependiture spurs asset creation, resulting in increased

investment with spending diverted towards cost associated with ac&uisition of 

assets that may include investments in shares, infrastructure as well as loans and

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advances given out by government.

ther Important erms:

$u2lic de2t: #he money borrowed by the government is eventually a burden on

the people of India, and is, therefore, called public debt. It is split into two headsLinternal debt 'money borrowed within the country) and eternal debt 'funds

 borrowed from nonIndian sources).

(sually the government spends more than what it earns through various sources.

#his shortfall, which is met with borrowed funds, is called fiscal deficit.

#echnically, it is the ecess of government ependiture over nonborrowed

receipts @ revenue receipts plus loan repayments received by the govt plus

miscellaneous capital receipts. Fiscal deficit for F38 is estimated at I*7.1.49

lakh crore, revenues of I*7 :.35 lakh crores less ependiture of I*7 39.56 lakhcrores.

Fiscal deficit is measured as a percentage of >D+, hence I*7 1.49 lakh crore C

>D+ of I*7 300.;9 lakh crores work out to estimated fiscal deficit of 1.42 of 


Re9enue #eicit: It is the ecess of revenue ependiture over revenue receipts. -ll

ependiture on revenue account should ideally be met from receipts on revenue

accountR the revenue deficit should be $ero. In such a situation, the government borrowing will not be for consumption but for creation of assets.

Eecti9e re9enue deicitL #his is an even tighter number than the revenue deficit.

It is revenue deficit less grants for creation of capital assets.

$rimary deicitL It is the fiscal deficit less interest payments made by the

government on its earlier borrowings.

#eicit and "#$L -part from the numbers in rupees, the budget document also

mentions deficit as a percentage of >D+. #his is because in absolute terms, the

fiscal deficit may be large, but if it is small compared to the si$e of the economy,

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then its not such a bad thing, especially if it is being used to create production



ypes o iscal policy

Fiscal policy has an effect on each of these categories. #here are two types of fiscal

 policyL !pansionary and ontractionary.

E'pansionary 7iscal $olicy

"hen an economy is in a recession, epansionary fiscal policy is in order.

#ypically this type of fiscal policy results in increased government spending andCor lower taes. - recession results in a recessionary gap U meaning that aggregate

demand 'ie, >D+) is at a level lower than it would be in a full employment

situation. In order to close this gap, a government will typically increase their 

spending which will directly increase the aggregate demand curve 'since

government spending creates demand for goods and services). -t the same time,

the government may choose to cut taes, which will indirectly affect the aggregate

demand curve by allowing for consumers to have more money at their disposal to

consume and invest. #he actions of this epansionary fiscal policy would result in

a shift of the aggregate demand curve to the right, which would result closing therecessionary gap and helping an economy grow.

Contractionary 7iscal $olicy

ontractionary fiscal policy is essentially the opposite of epansionary fiscal

 policy. "hen an economy is in a state where growth is at a rate that is getting out

of control 'causing inflation and asset bubbles), contractionary fiscal policy can beused to rein it in to a more sustainable level. If an economy is growing too fast or 

for eample, if unemployment is too low, an inflationary gap will form. In order to

eliminate this inflationary gap a government may reduce government spending and

increase taes. - decrease in spending by the government will directly decrease

aggregate demand curve by reducing government demand for goods and services.

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Increases in ta levels will also slow growth, as consumers will have less money to

consume and invest, thereby indirectly reducing the aggregate demand curve.

Conclusion n 7iscal $olicy

#he ob/ectives of fiscal policy such as economic development, price stability,

social /ustice, etc. can be achieved only if the tools of policy like +ublic

!penditure, #aation, Borrowing and deficit financing are effectively

used.#hough there are gaps in Indias fiscal policy, there is also an urgent need for 

making Indias fiscal policy a rationalised and growth oriented one. #he success of 

fiscal policy depends upon taking timely measures and their effective

administration during implementation.

Financial Inclusion and Business orrespondents"ith the ob/ective of ensuring greater financial inclusion and increasing theoutreach of the banking sector, 7BI decided in public interest to enable banks touse the services of *>’s C %H>s and <icro Finance Institutions '<FIs) asintermediaries in providing financial and banking services through the use of Business Facilitator and orrespondent.

=usiness Correspondent

(nder the Business orrespondent <odel, *>sC <FIs set up under %ocietiesC#rust -cts, %ocieties registered under <utually -ided ooperative %ocieties -ctsor the ooperative %ocieties -cts of %tates, In engaging such intermediaries as

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Business orrespondents, banks should ensure that they are well established,en/oying good reputation and having the confidence of the local people. Banksmay give wide publicity in the locality about the intermediary engaged by them asBusiness orrespondent and take measures to avoid being misrepresented.

Roles o a =usiness Correspondent   

• Business correspondents are bank representatives.

• #hey help villagers to open bank accounts.

• #hey help villagers in banking transactions. 'deposit money, take money out

of savings account, loans etc.)

• #he Business orrespondent carries a mobile device.

• #he villager gives his thumb impression or electronic signature, and get the


• Business orrespondents get commission from bank for every new account

opened, every transection made via them, every loanapplication processedetc.

he arran&ements with the =usiness Correspondents shall speciy: 

• %uitable limits on cash holding by intermediaries as also limits on individual

customer payments and receipts.

• #he re&uirement that the transactions are accounted for and reflected in the

 banks books by end of day or net working day.

• -ll agreementsC contracts with the customer shall clearly specify that the

 bank is responsible to the customer for acts of omission and commission of

the Business FacilitatorC orrespondent.

Redressal o "rie9ances in re&ard to ser9ices rendered 2y =usiness

7acilitators Correspondents 

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• Banks should constitute >rievance 7edressal <achinery within the bank for

redressing complaints about services rendered by Business orrespondentsand Facilitators and give wide publicity about it through electronic and printmedia.

• #he name and contact number of designated >rievance 7edressal fficer of

the bank should be made known and widely publici$ed. #he designatedofficer should ensure that genuine grievances of customers are redressed


• #he grievance redressal procedure of the bank and the time frame fied for

responding to the complaints should be placed on the banks website.

• If a complainant does not get satisfactory response from the bank within 40

days from the date of his lodging the compliant, he will have the option toapproach the ffice of the Banking mbudsman concerned for redressal ofhis grievanceCs.

- &uick glance on Balance %heet#einition: - balance sheet is a document which summari$es a company’s assets,liabilities andstockholders e&uity at a point of time. #o put it in simple terms, a balance sheet islike a snap shot of a horse race, shows the financial position of a company at a particular point oftime.

Components o a 2alance sheet:

• -ssets

• =iabilities

• 7atios used


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*. Current Assets: #hese are assets that may be converted into cash, sold orconsumed within ayear or less. urrent -ssets include cash, marketable securities, -ccount and notesreceivables, inventories etc.

(. 7i'ed Assets: Fied assets are those tangible physical facilities owned by anenterprise, whichare permanentCdurable in nature. Fied assets are not turned over, meaning they arenotconverted into cash. For eampleL =and and building, machinery, tools, e&uipmentsetc.

. Intan&i2le Assets: #hese assets do not eist in physical form but are notional possessions

owned by an enterprise. #hese assets generally don’t have real money value but areimportant for a company. For eampleL patents, goodwill, trademark etc.


*.Current lia2ilities : #hose obligations of a company which are payable ondemand or within a

 period of less than 3 year from the date of the balance sheet.

(.erm 6ia2ilities: - term liability is a debt which matures after a period of 36months from thedate of the balance sheet

.%et Dorth: #he net worth of a company is the owner’s stake in the business. Itis a liability of a company towards its promoters. It is therefore an important item on the balancesheet onwhich a lending banker can rely.

/.Speciic Reser9es and $ro9isions: %pecific 7eserves and +rovisions are createdfor the

 payment of taes, dividends and other contingencies.


Ratios Showin& 6i8uidity:

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• Current Ratio - 7atio of current assets to current liabilities.

• Nuic Ratio - It is an inde of the solvency of an enterprise. Basically &uick 

ratio is the ratio of 'urrent assetsinventories) and current liabilities.

Ratio showin& 7inancial Sta2ility:

#e2t-E8uity Ratio - #his ratio indicates the relative proportion of shareholderse&uity and debt usedto finance a companys assets.

7atios %howing +rofitabilityLa. 7eturn on investment ratio #his ratio measures the operating efficiency of acompanywithout regards to financial structure.

 b. 7eturn on !&uity 7atio It is the ratio of net income of a business during a period to itsstockholders e&uity during that period.

%tatutory =i&uidity 7atio is the amount a commercial banks needs to maintain inthe form of cash, or gold, or govt. approved securities 'Bonds) before providingcredit to its customers. %=7 rate is determined and maintained by 7BI in order tocontrol the epansion of the bank credit.

The ma"imum limit of &R is 234

Current S6R is ((> o %#6

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Dhat is a =asis point ?

It is the increase in interest rates in percentage terms. For instance, if the interestrate increases by 10 basis points 'bsp), then it means that interest rate has beenincrease by 0.102. ne percentage point is broken down into 300 basis points.#herefore, an increase from 62 to 82 is an increase of one percentage point or 

300 basis points.

%#6 - is the sum of all the demand 'current account and savings account sum in bank ) and time 'fied deposits or recurring deposits etc. which are to be paid onmaturation), these are assets for us but a liability'debt) for the banks.

3ere is an e'ample to show the eect o CRR and S6R.

=et say our =ena Bank had 300 7s as *D#= they can give this much amount of loan to the needy hence 7s 300 will flow in the market'can cause inflation), so <r.Bond '7a/an of 7BI) said keep 92 '77) with us and 662 as %=7 in the form of govt securities and gold 'which can’t be given as loans) so =ena bank is left withonly ;92 ^300 '66 V 9)_ of the *D#= resulting in lesser money to be given asloans and eventually resulting in a check on inflation.

he main o2Fecti9es for maintaining the %=7 ratio are the followingL

i. to control the epansion of bank credit. By changing the level of %=7, the7eserve Bank of India can increase or decrease bank credit epansion.

ii. to ensure the solvency of commercial banks.

iii. to compel the commercial banks to invest in government securities likegovernment bonds.

4ain use o S6R:

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%=7 is used to control inflation and propel growth. #hrough %=7 rate the moneysupply in the system can be controlled effectively.

Dhat is the dierence 2etween S6R and CRR?

"hat %=7 does is it restricts the banks leverage in pumping more money into theeconomy. n the other hand, 77, or cash reserve ratio, is the portion of depositsthat the banks have to maintain with the 7BI. Higher the ratio, the lower is theamount that banks will be able to use for lending and investment.#he other difference is that to meet %=7, banks can use cash, gold or approvedsecurities where as with 77 it has to be only cash. 77 is maintained in cashform with 7BI, where as %=7 is maintained in li&uid form with banks themselves.

Dhat does a reduction in S6R mean?

- cut in %=7 means that the home, car and commercial loan rates will go down.

Banks will have more money with them."ith the reduction of %=7, the 7BI is shrinking the market for governmentsecurities and simultaneously enlarging availability of credit to the private sector."ith that, the cost of funds to the government will increase and the rate charged by

 banks to the private sector decreases.

Banking Awareness: BIS K Basel *orms

#he Bank for International %ettlements 'BI%) established on 3; <ay 3:80,is the

worlds oldest international financial organisation. #he BI% has 40 member central

 banks, representing countries from around the world that together make up about

:12 of world >D+.#he head office is in Basel,%wit$erland and there are two

representative officesL in the Hong Kong %pecial -dministrative 7egion of the

+eoples, 7epublic of hina and in <eico ity.

#he mission of the BI% is to serve central banks of different of nations in their 

 pursuit of monetary and financial stability, to foster international cooperation inthose areas and to act as a bank for central banks.#he Basel ommittee is the

 primary global standard setter for the prudential regulation of banks and provides a

forum for cooperation on banking supervisory matters.

*/-3S ISS0.4 B5 BIS

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 5asel # 

In 3:55,#he Basel ommittee on Banking %upervision 'BB%) introduced capital

measurement system called Basel capital accord,also called as Basel 3. It focused

almost entirely on credit risk. It defined capital and structure of risk weights for  banks. #he minimum capital re&uirement was fied at 52 of risk weighted assets

'7"-). 7"- means assets with different risk profiles. For eample, an asset

 backed by collateral would carry lesser risks as compared to personal loans, which

have no collateral. India adopted Basel 3 guidelines in 3:::.#he Basel I -ccord,

issued in 3:55, has succeeded in raising the total level of e&uity capital in the

system.=ike many regulations, it also pushed unintended conse&uencesR because it

does not differentiate risks very well, it perversely encouraged risk seeking. It also

 promoted the loan securiti$ation that led to the unwinding in the subprime market.

 5asel ## 

In Mune 3:::, the ommittee issued a proposal for a new capital ade&uacy

framework to replace the 3:55 -ccord. #his led to the release of the 7evised

apital Framework in Mune 6009. >enerally known as Basel IIG, the revised‟

framework comprised three pillars, namely minimum capital, supervisor review

and market


<inimum capital is the technical, &uantitative heart of the accord.Banks must holdcapital against 52 of their assets, after ad/usting their assets for risk.%upervisor 

review is the process whereby national regulators ensure their home country banks

are following the rules. If minimum capital is the rule book, the second pillar is the

referee system.<arket discipline is based on enhanced disclosure of risk. #his may

 be an important pillar due to the compleity of Basel. (nder Basel II, banks may

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use their own internal models 'and gain lower capital re&uirements) but the price of 

this is transparency.

 5asel ### 

!ven before =ehman Brothers collapsed in %eptember 6005, the need for 

a fundamental strengthening of the Basel II framework had become apparent.#he banking sector had entered the financial crisis with too much leverage and

inade&uate li&uidity buffers.7esponding to these risk factors, the Basel ommittee

issued +rinciples for sound li&uidity risk management and supervision in the same

month that =ehman Brothers failed. In Muly 600:, the ommittee issued a further 

 package of documents to strengthen the Basel II capital framework, notably with

regard to the treatment of certain comple securitisation positions, off balance

sheet vehicles and trading book eposures. In %eptember 6030, the >roup of 

>overnors and Heads of %upervision announced higher global minimum capital

standards for commercial banks. #his followed an agreement reached in Muly

regarding the overall design of the capital and li&uidity reform package, now

referred to asBasel IIIG.

I*DI- -*D B-%!= *7<%L

• +resently indian banking system folllows basel II norms.

• #he 7eserve Bank of India has etended the timeline for full implementationof the Basel III capital regulations by a year to march 83,603:.<arch 83,603:.

• -round 30 public sector banks '+%Bs) will get a total capital infusion of 7s

36,13; crore from the government before this financial year ends.

• >overnment of India is scaling disinvesting their holdings in +%Bs to 16 per 


%hort *otes on B%..YYHello 7eaders,Here we are providing %hort *otes on ore Banking %olutions one of the hottopic asked in the Interviews. Hope you like the postYYY

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#he term 7! means entrali$ed nline 7ealtime !change.

Dhat is C=S?

B% refers to the software applications for recording transactions, storing customer information, calculating interest and completing the process of passing entries in asingle database.

Dhat C=S does?

B% enables accessing of complete customer account details centrally. It makes it possible for a bank customer to access his bank account through whicheverchannel he prefers like internet banking, mobile banking, -#< etc.

C=S in India#his initiative was taken by the banks on the basis of OFirst 7angara/an ommitteereport’ on bank computerisation submitted in the year 3:59.

#he committee was constituted under the chairmanship of Dr. . 7angara/an '#hendeputy governor of 7BI).

ld generation banks initially were hesitant about this but with the advent of newgeneration private sector banks in India during 3::93::4, the real era of bankmarketing started and these banks started to offer anywhere and anytime bankingfacilities to its customers.

%yndicate Bank was the first among the +ublic %ector Banks to implement oreBanking.First B% branch of %yndicate bank was Mayanagar Branch in Bangalore.

=eneits o C=S

-. Benefits for the customers

• #hrough B% a bank customer can avail banking facilities 'transactions)


• It is time saving, convenient and efficient.

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B. Benefits for the banks

• #his paradigm shift in banking has revolutionised the speed, efficiency and

reach of the delivery systems. It gives greater customer satisfaction which isessential for every bank in this day an age.

• %ince it offers alternate channels than brick and mortar banking, it is a viable

alternative to opening new branches, therefore reduces a bank’s operationalcosts.

• -lternative for etended working hours.

• 7educes long &ueues in bank cash counters.

Banking -warenessL Bretton "oods #winsBretton woods twins mean the organisations i.e.#he International <onetary Fund'I<F) set up along with the "orld Bank after the %econd "orld "ar to assist in thereconstruction of warravaged countries. =eaders felt that financial stability was

 best achieved when countries worked in an environment of interdependence.

#he two organisations were agreed to be set up at a conference in Bretton "oods inthe (%. Hence,they are known as the Bretton "oods twins.#he Bretton "oods

onference, formally known as the (nited *ations <onetary and Financialonference,was the gathering of ;80 delegates from all 99 -llied nations at the<ount "ashington Hotel, situated in Bretton "oods, *ew Hampshire, (nited%tates, to regulate the international monetary and financial order after theconclusion of "orld "ar II.#he conference was held from the 3st to 66nd of Muly,3:99. -greements were eecuted that later established the International Bank for 7econstruction and Development 'IB7D, which is part of todays '"orld Bank >roup) and the International <onetary Fund 'I<F)

I%ER%AI%A6 4%EARH 7U%#

I<F was supposed to oversee and monitor the economic

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 performance of 355 member countries and warn them of any developing economiccrisis.If any crisis does develop and a country approaches I<F for help, theorganisation chalks out a recovery plan, which includes imposition of conditionsfor keeping the economies on a particular path.

#he organi$ations ob/ectives stated in the -rticles of -greement areL

•  promote international economic cooperation,

• international trade,

• employment,

• echangerate stability including by making financial resources available to

member countries to meet balanceofpayments needs.

Dhen did India tae the I47 2ailout paca&e?

#he Indian government, faced with a balance of payments crisis in 3::3, took aloan and agreed to the reforms process. #he liberalisation in the economy was

 partly a concomitant of that need.

#he I<F report is part of its mandate under -rticle I of its constitution. #he fundholds consultations with finance ministries and central banks of each member countries annually for its spring meeting in "ashington.

#he decision of the I<F to intervene in any country is based on the governing boards decision. #he voting rights are determined historically by the economicstrength of the countries. India, because of its rapidly growing economic clout, hasdemanded a redrawing of the voting rights, but that did not happen at the recent%ingapore meeting.Instead, the fund gave ad hoc voting right increase to hina,%outh Korea, #urkey and <eico. It has promised a longterm revision in another 

two years.

DR6# =A% "RU$

 "orld Bank group provides loans to developing countries for capital programs.#he "orld Bank is a component of the "orld Bank >roup, and a member of the(nited *ations Development >roup.

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#he "orld Banks official goal is the reduction of poverty. -ccording to its -rticlesof -greement, all its decisions must be guided by a commitment to the promotionof foreign investment and international trade and to the facilitation of capitalinvestment.

#he "orld Bank should not be confused with the (nited *ations "orld Bank >roup, a member of the (nited *ations !conomic and %ocialouncil and a family of five international organi$ations that make leveraged loansto poor countriesL

• International Bank for 7econstruction and Development 'IB7D)

• International Development -ssociation 'ID-)

• International Finance orporation 'IF)

• <ultilateral Investment >uarantee -gency '<I>-)

• International entre for %ettlement of Investment Disputes 'I%ID)

International =an or Reconstruction and #e9elopment

IB7D is an international financial institution which offers loans to middleincomedeveloping countries. #he IB7D is the first of five member institutions whichcompose the "orld Bank >roup and is head&uartered in "ashington, D.., (nited%tates. It was established in 3:99 with the mission of financing the reconstructionof !uropean nations devastated by "orld "ar II.Following the reconstruction of !urope, the Banks mandate epanded to advancing worldwide economic

development and eradicating poverty. #he IB7D provides commercialgrade or concessional financingto sovereign states to fund pro/ects that seek to improvetransportation and infrastructure, education, domestic policy, environmentalconsciousness, energy investments, healthcare, access to food and potable water,and access to improved sanitation.

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he International #e9elopment Association ;I#A<

 #he ID- is an international financial institution which offers concessional loansand grants to the worlds poorest developing countries.#he ID- is a member of the"orld Bank >roup and is head&uartered in "ashington, D.., (nited %tates. It wasestablished in 3:40 to complement the eisting International Bank for 7econstruction and Development by lending to developing countries which suffer from the lowest gross national income, from troubled creditworthiness, or from thelowest per capita income.

International 7inance Corporation ;I7C<

#he IF was established in 3:14 to support the growth of the private sector in thedeveloping world. #he IF’s stated mission is to promote sustainable privatesector investment in developing countries, helping to reduce poverty and improve

 people’s lives.GIF provides loans and e&uity financing,advice, and technical

services to the private sector. #he IF also plays a catalytic role, by mobili$ingadditional capital through loan syndication and by lessening the political risk for investors, enabling their participation in a given pro/ect.

he International Centre or Settlement o In9estment #isputes ;ICSI#<

#he I%ID is considered to be the leading international arbitration institutiondevoted to resolving disputes between %tates and foreign investors, also known asBI# arbitrations.Based in "ashington, D.. '(.%.-.) and operating under the"orld Bank, I%ID was established in 3:41 by the onvention on the %ettlementof Investment Disputes between %tates and *ationals of ther %tates 'known as theI%ID onvention or "ashington onvention).

he 4ultilateral In9estment "uarantee A&ency ;4I"A<

#he <I>- is an international financial institution which offers political risk insurance and credit enhancement guarantees. %uch guarantees help investors

 protect foreign direct investments against political and noncommercial risks indeveloping countries.<I>- is a member of the "orld Bank >roup and ishead&uartered in "ashington, D.., (nited %tates. It was established in 3:55 as

an investment insurance facility to encourage confident investment in developingcountries.

Dorld =an "roup Strate&y to 3elp India Achie9e Its Bision

#he "orld Bank >roup’s new ountry +artnership %trategy will guide its supportto India from 6038 through 603;. #he strategy aims to help the country lay thefoundations for achieving its longerterm vision of faster, more inclusive growth.G

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- key feature of the new strategy is the significant shift in support toward lowincome and special category states, where many of India’s poor and disadvantagedlive.#he new strategy proposes a lending program of A8 billion to A1 billion eachyear over the net five years. %ity percent of the financing will go to stategovernmentbacked pro/ects. Half of this, or 802 of total lending, will go to lowincome or special category states, up from 352 of lending under the previousstrategy.

Banking Awareness: The Indian Financial System

 The term Lnance in our simple understanding it is perceived as

eMuivalent to 93oney9%Finance eDactly is not money But it is the

source o! providing !unds !or a particular activity%The word

system in the term Lnancial system implies a set o! compleD

and closely connected or interlined institutions agents practices

markets transactions claims and lia"ilities in the economy% The

Lnancial system is concerned a"out money credit and Lnance7

the three terms are intimately related yet are somewhat diNerent

!rom each other%

Components Constituents o Indian 7inancial system:

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 oney arket #nstruments

#he money market can be defined as a market for shortterm money and financial

assets that are near substitutes for money.#he term shortterm means generally a

 period upto one year and near substitutes to money is used to denote any financialasset which can be &uickly converted into money with minimum transaction cost.

%ome of the important money market instruments are briefly discussed belowL

*. Call %otice-4oney 4aret

allC*otice money is the money borrowed or lent on demand for a very short period. "hen money is borrowed or lent for a day, it is known as all 'vernight)

<oney. Intervening holidays andCor %unday are ecluded for this purpose. #hus

money, borrowed on a day and repaid on the net working day, 'irrespective of the

number of intervening holidays) is Jall <oneyJ. "hen money

 is borrowed or lent for more than a day and up to 39 days, it is J*otice <oneyJ.

 *o collateral security is re&uired to cover these transactions.

(. Inter-=an erm 4oney

Interbank market for deposits of maturity beyond 39 days is referred to as the term

money market. #he entry restrictions are the same as those for allC*otice <oney

ecept that, as per eisting regulations, the specified entities are not allowed to

lend beyond 39 days.

. reasury =ills.

#reasury Bills are short term 'up to one year) borrowing instruments of the uniongovernment. It is an I( of the >overnment. It is a promise by the >overnment to

 pay a stated sum after epiry of the stated period from the date of issue':3C356C849

days i.e. less than one year). #hey are issued at a discount to the face value, and on

maturity the face value is paid to the holder. #he rate of discount and the

corresponding issue price are determined at each auction.

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/. Certiicate o #eposits

ertificates of Deposit 'Ds) is a negotiable money market instrument and issued

in dematerialised form or as a (sance +romissory *ote, for funds deposited at a bank or other eligible financial institution for a specified time period.

5. Commercial $aper

+ is a note in evidence of the debt obligation of the issuer. n issuing commercial

 paper the debt obligation is transformed into an instrument. + is thus an

unsecured promissory note privately placed with investors at a discount rate to face

value determined by market forces.

Capital 4aret Instruments

#he capital market generally consists of the following long term period i.e., more

than one year period, financial instrumentsR In the e&uity segment !&uity shares,

 preference shares, convertible preference shares, nonconvertible preference shares

etc and in the debt segment debentures, $ero coupon bonds, deep discount bonds


3y2rid Instruments

Hybrid instruments have both the features of e&uity and debenture. #his kind of 

instruments is called as hybrid instruments.!amples are convertible debentures,

warrants etc.


Financial market is a market where financial instruments are echanged or traded

and helps in determining the prices of the assets that are traded in and is also called

the price discovery process.


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7ore' 4aret - #he Fore market deals with the multicurrency re&uirements,

which are met by the echange of currencies. Depending on the echange rate that

is applicable, the transfer of funds takes place in this market. #his is one of the

most developed and integrated market across the globe

4%EH 4ARE:

#he money market is a market for shortterm funds, which deals in financial assets


 period of maturity is upto one year. It should be noted that money market does not

deal in

cash or money as such but simply provides a market for credit instruments such as

 bills of 

echange, promissory notes, commercial paper, treasury bills, etc.


apital <arket may be defined as a market dealing in medium and longterm

funds. It is an institutional arrangement for borrowing medium and longtermfunds and which provides facilities for marketing and trading of securities. %o it

constitutes all longterm borrowings from banks and financial institutions,

 borrowings from foreign markets and raising of capital by issue various securities

such as shares debentures, bonds, etc.#he market where securities are traded

known as %ecurities market. It consists of two different segments namely primary

and secondary market #he primary market deals with new or fresh issue of 

securities and is, therefore, also known as new issue marketRwhereas the secondary

market provides a place for purchase and sale of eisting securities and is often

termed as stock market or stock echange.


redit market is a place where banks, FIs and *BFs purvey short, medium and

longterm loans to corporate and individuals.

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Banking -warenessL <onetary +olicy of India<onetary policy is the process by which monetary authority of a country i.e. 7BIcontrols the supply of money in the economy by its control over interest rates in

order to maintain price stability and achieve high economic growth. In India, thecentral monetary authority is the 7eserve Bank of India '7BI) is so designed as tomaintain the price stability in the economy.


Euantitative measures to control amount of credit.Eualitative measures to control the allocation to different sections of economy.


• =A% RAE: #he bank rate also known as the discount rate, is the rate of

interest charged by the 7BI for providing funds or loans to the Bankingsystem in india. It also signals the mediumterm stance of monetary policy.

•  $E% 4ARE $ERI%S;4<: #he buying and selling of

government securities in the open market in order to epand or contract theamount of money in the banking system. +urchases in/ect money into the

 banking system and stimulate growth while sales of securities do theopposite.

• 6INUI#IH A#UC4E% 7ACI6IH;6A7<L =i&uidity -d/ustment

Facility is the primary instrument of 7eserve Bank of India for modulatingli&uidity and transmitting interest rate signals to the market. (nder thescheme, repo auctions 'for absorption of li&uidity) and reverse repo auctions'for in/ection of li&uidity) are conducted on a daily basis 'ecept %aturdays).It is sameday transactions, with interest rates decided on a cutoff basis andderived from auctions on uniform price basis.

• RE$REBERSE RE$ RAE: #hese rates under the =i&uidity

-d/ustment Facility '=-F) determine the corridor for shortterm moneymarket interest rates. In turn, this is epected to trigger movement in othersegments of the financial market and the real economy.

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• 4ARE SA=6ISAI% SC3E4E ;4SS<: #his instrument for

monetary management was introduced in 6009. =i&uidity of a moreenduring nature arising from large capital flows is absorbed through sale ofshortdated government securities and treasury bills. #he mobilised cash is

held in a separate government account with the 7eserve Bank.


• CRE#I CEI6I%": In this operation 7BI issues prior information or

direction that loans to the commercial banks will be given up to a certainlimit. In this case commercial bank will be tight in advancing loans to the

 public. #hey will allocate loans to limited sectors. Few eample of ceiling

are agriculture sector advances, priority sector lending.

• 4RA6 SUASI%: <oral %uasions are suggestion and guidelines by the

7BI to the commercial banks to take so and so action and measures in soand so trend of the economy. 7BI may re&uest commercial banks not to giveloans for unproductive purpose which does not add to economic growth butincreases inflation in the economy.

• CRE#I AU3RIPAI% SC3E4E: redit -uthori$ation %cheme

was introduced in *ovember, 3:41 when + Bhattacharya was thechairman of 7BI. (nder this instrument of credit regulation 7BI as per theguideline authori$es the banks to advance loans to desired sectors

-ll about a B-*K -7D- =an Card is typically a plastic card issued by a bank to its clients that

 performs one or more of a number of services that relate to giving the client accessto funds, either from the clients own bank account, or through a credit account.

ards can be classified on the basis of their issuance,usage and payment by the card holder. #here are three types of cards

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• Debit ards

• redit ards

+repaid ards

 Debit cards

Debit cards are issued by banks and are linked to a bank account.#he debit cards are used to withdraw cash from an -#<, purchase of goods andservices at +oint of %ale '+%)C!commerce 'online purchase) both domesticallyand internationally 'provided it is enabled for international use). However, it can beused only for domestic fund transfer from one person to another.

'redit 'ardsredit cards are issued by banks C other entities approved by 7BI. #he credit limitssanctioned to a card holder is in the form of a revolving line of credit 'similar to aloan sanctioned by the issuer) and may or may not be linked to a bank account.#he credit cards are used for purchase of goods and services at +oint of %ale '+%)and !commerce 'online purchase)C through Interactive oice 7esponse'I7)C7ecurring transactionsC <ail rder #elephone rder '<#). #hese cardscan be used domestically and internationally 'provided it is enabled for international use). #he credit cards can be used to withdraw cash from an -#< and

for transferring funds to bank accounts, debit cards, credit cards and prepaid cardswithin the country.

 Krepaid 'ards

+repaid cards are issued by the banks C nonbanks against the value paid in advance by the cardholder and stored in such cards which can be issued as smart cards or chip cards, magnetic stripe cards, internet accounts, internet wallets, mobileaccounts, mobile wallets, paper vouchers, etc.#he usage of prepaid cards depends on who has issued these cards. #he prepaidcards issued by the banks can be used to withdraw cash from an -#<, purchase of 

goods and services at +oint of %ale '+%)C!commerce 'online purchase) and for domestic fund transfer from one person to another. %uch prepaid cards are knownas open system prepaid cards. However, the prepaid cards issued by authorisednonbank entities can be used only for purchase of goods and services at +oint of %ale '+%)C!commerce 'online purchase) and for domestic fund transfer from one

 person to another. %uch prepaid cards are known as semiclosed system prepaidcards. #hese cards can be used only domestically.

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#he maimum value that can be stored in any prepaid card 'issued by banks andauthorised nonbank entities) at any point of time is 7s 3,00,000C

#he following types of semi closed prepaid payment instruments can be issued bycarrying out ustomer Due Diligence as detailed by the banks and authorised non

 bank entitiesL

• (p to 7s.30,000C by accepting minimum details of the customer provided

the amount outstanding at any point of time does not eceed 7s 30,000C andthe total value of reloads during any given month also does not eceed 7s30,000C. #hese can be issued only in electronic form.

• from 7s.30,003C to 7s.10,000C by accepting any Oofficially valid document’

defined under 7ule 6'd) of the +<= 7ules 6001, as amended from time to

time. %uch ++Is can be issued only in electronic form and should be nonreloadable in natureR

• up to 7s.10,000C with full K and can be reloadable in nature. #he

 balance in the ++I should not eceed 7s.10,000C at any point of time.

 )omething more to a >an+ 'ard.....

• Iho decides the limits on cash withdrawal or purchase of goods and

services through use of a cardM

#he limits on cash withdrawal at -#<s and for purchase of goods and services aredecided by the issuer bank. However, in case of cash withdrawal at other bank’s-#<, there is a limit of 7s 30,000C per transaction. ash withdrawal at +% hasalso been enabled by certain banks wherein, a maimum of 7s.3000C can bewithdrawn daily by using debit cards.

 #s the customer charged by hisher ban+ when he uses his debit card atother ban+s AT: for withdrawing cashM

#he savings bank account customer will not be charged by hisCher bank up to fivetransactions 'inclusive of both financial and nonfinancial transactions) in a monthif heCshe uses an -#< of another bank. However, within this overall limit of fivefree transactions, for transactions done at -#< of another bank located in the si

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metro centres, vi$. <umbai, *ew Delhi, hennai, Kolkata, Bengaluru andHyderabad, the free transaction limit is set to three transactions per month.

• Ihere should the customer lodge a complaint in the event of a failed AT: 

transaction <account debited but cash not dispensed at the AT:=M

#he customer has to approach hisCher bank 'bank that issued the card) to lodge acomplaint in the event of a failed -#< transaction.

• Ihat is the time limit for resolution of the complaint pertaining to failed

 AT: transactionM

#he time limit, for resolution of customer complaints by the issuing banks, iswithin ; working days from the date of receipt of customer complaint. Hence the

 bank is supposed to recredit the customer’s account within ; working days. For failure to recredit the customer’s account within ; working days of receipt of thecomplaint from the customer, the bank is liable to pay 7s 300 per day ascompensation to the customer.

• Ihat is the option for a card holder if his complaint is not redressed bythe issuerM

If a complainant does not get satisfactory response from hisCher bank within amaimum period of thirty '80) days from the date of his lodging the complaint,heCshe will have the option to approach the ffice of the Banking mbudsman 'inappropriate /urisdiction) for redressal of his grievance.

•  (ow are the transactions carried out through cards protected against

 fraudulent usageM

For carrying out any transactions at an -#<, the card holder has to key in the +I*which is known only to himCher for debitCcredit and prepaid cards. However, for 

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carrying out transactions at +% too, the card holder has to keyin the +I* which isknown only to the card holder if a debit card is used. In the case of credit cardusage at +% the re&uirement of +I* depends on the banks policy on security andrisk mitigation. In the case of ecommerce transactions, additional factor of authentication is applicable ecept in case of international websites.

• Ihat are the liabilities of a ban+ in case of fraudulent use of a card by

unauthorised personM

In case of card not present transactions 7BI has mandated providing additionalfactor of authentication 'if the issuer bank and ecommerce merchant bank is inIndia). Hence, if a transaction has taken place without the additional factor of 

authentication and the customer has complained that the transaction is not effected by herChim, then the issuer bank shall reimburse the loss to the customer withoutdemur.

•  #s there anyway a customer can come to +now Cuic+ly whether a

 fraudulent transaction has ta+en place using hisher cardM

7BI has been taking various steps to ensure that card payment environment is safe

and secure. 7BI has mandated banks to send online alerts for all card transactionsso that a card holder is aware of transactions taking place on his C her card.

• Ihat is the mandate for ban+s for issuing :agnetic stripe cards or 'hip?

based cardsM

7BI has mandated that banks may issue new debit and credit cards only for 

domestic usage unless international use is specifically sought by the customer.%uch cards enabling international usage will have to be essentially !< hip and+in enabled. #he banks have also been instructed to convert all eisting <agstripecards to !< hip card for all customers who have used their cardsinternationally at least once 'forCthrough e commerceC-#<C+%).

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Banking Awareness: A summary on *.FT -TGS K I3PS

%ational Electronic 7und ranser ;%E7<

• 4eanin& It is way in which you can transfer fund from any bank account

to any other bank account holder in India. *!F# is based on batch processing system.

• 4inimum amount   7s. 3

• 4a'imum amount   #here is no upper ceiling for transferring money

through *!F#, but generally 7#>% is used for transfer of 7s 6,00,000 or


• ime limit #he transactions are processed in hourly batches. #here are

twelve settlements from 5 -.<. to ; +.<. on the weekdays '<onday UFriday) and si settlements from 5 -.<. to 3 +.<. on %aturday. #hemaimum time consumed is 6 hours from the submitting of the transactionin a batch.

• A9aila2ility U *!F# is not available on the bank holidays, 7BI holiday and


%ote - 7or transerrin& unds to %epal, the limit is o Rs. 5), ))).

Real ime "ross Settlement ;R"S<

• 4eanin&   It is way in which you can transfer fund from any bank account

to any other bank account holder in India in real time.

• 4inimum amount 7s 6,00,000

• 4a'imum amount  *o limit

• ime limit   #he transactions are processed on order basis i.e. 7eal time.

#he 7#>% service is available from 5 -.< to 5 +.<. on the weekdays'<onday U Friday) and from 5 -.<. to 8L80 +.<. on %aturday. #he transfer

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is instant but the bank is allowed to take up to 6 hours for crediting theamount to the depositor account.

• A9aila2ility   7#>% is not available on the bank holidays, 7BI holiday and


Inter 4o2ile $ayment Ser9ice ;I4$S<

• 4eanin& It is way in which you can transfer fund from any bank account

to any other bank account holder in India anytime.

• 4inimum amount U 7s 3

• 4a'imum amount U Banks are allowed to set their own limit for I<+%.

• ime limit U It is real time. #he depositor account is credited in less than 3

minute from the submission of transaction.

• A9aila2ility U I<+% can be done 69N; even on bank holidays, 7BI holidayand %unday