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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 thats 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 dont need to be an expertise in number
crunching rather general knowledge would do a way better.
So, what are these cardinal economic indicators?
Economic indicators are statistical tools to understand the economic activity of an
entity. What entity? Entity could be any organisation, a firm, an industry of some
kind or on a larger context a country. These indicators are handy when one needs to
seize the economic health of an entity. These furnish a basis to do analysis of
economic performance and of future performance of an organisation. So, if a firm
is in red or doing slack business then these indicators would show the same i.e.
unsatisfactory figures. Economic indicators include various indices, earnings
reports, and economic summaries. So, what do these economic indicators
constitute?
These are unemployment rate, attrition or quits rate (quit rate in U.S. English),
consumer price index and wholesale price index (a measure for inflation),
consumer leverage ratio, industrial production, bankruptcies, gross domestic
product(Nominal and PPP), broadband internet penetration, stock market prices,
money supply changes, Foreign exchange reserve (One of the most paramount
indicators for India).
Unemployment Rate:The 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 experiences a relatively high unemployment rate.
In country like USA, Federal employees' job security is so great that workers in
many agencies are more likely to die of natural causes than get laid off or fired.
According to a vetted report, the federal government fired 0.55% of its workers in
the budget year 11,668 employees in its 2.1 million workforces. Research shows
that the private sector fires about 3% of workers annually for poor performance. At
present, USA has 5.3 percent unemployment rate.
India has presently 3.6 pc unemployment rate reckoned annually.
Unemployment Rate in India decreased to 4.90 percent in 2013 from 5.20 percent
in 2012 and then to 3.6 percent in 2014. Unemployment Rate in India averaged
7.32 percent from 1983 until 2013, reaching an all time high of 9.40 percent in

2009 and a record low of 4.90 percent in 2013. Unemployment Rate in India is
reported by the Ministry of Labour and Employment, India.
Everyone knows what is GDP and GNP but still lets get a small walk through
those two vital indicators.
GDP: - Gross Domestic Product is calculated either by measuring all income
earned within a country, or by measuring all expenditures within the country,
which should approximately be the same.
GNP: - Gross National Product uses GDP, but adds income from foreign sources,
less income paid to foreign citizens and entities. GNP can be either higher or lower
than GDP, depending on whether or not a country has a positive or negative result
from net foreign inflows and outgo. Though GNP is still calculated, the United
States shifted to GDP as its primary economic measure in 1991, in part because
most countries in the world use GDP to measure the size and direction of their
economies. As a result, GNP numbers are less common than GDP figures.
Those 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 then
we should intent on comprehending the subtle part of GDP and GNP. Now, what is
that?
GDP and GNP are calculated based on very specific time periods. But not all the
information is available at the same time. This forces the Bureau of Labor Statistics
(the agency that reports official GDP in the US) to rely on estimates, resulting in
revisions after the fact. Unreported income is another flaw, and one that is not
easily remedied. Individuals may under-report income to minimize income tax
liability, which will understate the GDP. This can be a problem between countries
as well, since under-reporting of income is more prevalent in some countries than
in others. Still another problem given that GDP and GNP is often used to
measure economic strength from one country to another is that reporting tends
to be less reliable in some countries than in others. This is especially likely in less
developed countries, leading to under-estimates of true national economic output.
The lack of comparable reporting from one country to another has given rise to two
methods of computing either GDP or GNP, nominal and purchasing power
parity, or PPP.
Nominal is measuring the size of a nations economy on the basis of its economy in
local currency, converted to dollars (typically). The conversion is based on
currency exchange rates in the currency market.
PPP ignores currency exchange rates, and measures the economy of countries
based on the cost of a common basket of goods and services. For example, housing
costs more in the US than it does in India, so housing in India will get a boost in
compiling GDP or GNP on the basis of PPP.

As a rule, PPP will result in a relatively higher GDP or GNP in a country where
costs are lower. PPP adjusts for the fact that a house in the US may cost $200,000,
while a similar home in India may be only $50,000. It attempts to even out price
variations between countries.
As an example, under nominal, in 2015, Indias GDP 2,067,501 millions of
USD or $ 2.04 trillion and using PPP, Indias GDP is $ 7,375,900,000,000 or
about 3.6 times higher.
Herein below are some figures pertaining to economy of India.
Markets
Currency
Stock Market
GDP
GDP
GDP Growth rate
GNP
GDP Per Capita
GDP Per Capita
PPP

Last
65.43
26933
26933
2067 USD Billion
7%
56739 INR Billion
1263 USD
5565 USB

Reference
Oct/2015
Oct/2015
Oct/2015
Oct/2015
Dec/2014
Dec/2014
Dec/2014
Dec/2014

Frequency
Daily
Daily
Yearly
Yearly
Quarterly
Yearly
Yearly
Yearly

Foreign Exchange Reserves:Foreign Exchange Reserves in India decreased to 349980 USD Million in
September 25 from 352020 USD Million in the previous week. Foreign Exchange
Reserves in India averaged 188027.95 USD Million from 1998 until 2015,
reaching an all time high of 383643 USD Million in December of 2009 and a
record low of 29048 USD Million in September of 1998. Foreign Exchange
Reserves in India is reported by the Reserve Bank of India.
Before summing all these up, lets get back to the question which was mooted
earlier in the beginning of this very article. Is our banking system robust and
rugged? Well, answer is perplexing. We cant say YES emphatically or also
NO either. Reasons are quiet apparent, MUDRA, a heap-praised scheme, has
just started operating. But this scheme is going to create an insurmountable
problem in long run. How? Providing loans to weaker sections of society without
any collateral is a giant blunder. Economically backward people without proper
skill set would never use that money to do wonders in their life and at the same
time would flunk to repay the loan to bank. Thats a desperate attempt to woo
people for vote bank but in long run we cant bank on these schemes as this is

going create a big hole in banks pocket. NPA and all, I think I should leave it to
the wisdom of readers.
Payment Banks : A Step Closer Towards Financial Inclusion
Good Morning Readers,
A debate sparked on Wednesday about the RBI giving License to the Payment
Banks. This might sound new to you, but yes there is a different catageory called
Payment Banks. Payments bank licence will allow companies to collect deposits
(initially up to Rs 1 lakh per individual), offer Internet banking, facilitate money
transfers and sell insurance and mutual funds. It is new stripped-down type of
banks, which are expected to reach customers mainly through their mobile phones
rather than traditional bank branches.

The objectives of setting up of payments banks will be to further financial


inclusion by providing small savings accounts and payments/remittance services to
migrant labour workforce, low income households, small businesses, other
unorganised sector entities and other users. Such banks will ensure more money
comes into the banking system and will help reach out to people in rural areas.
Moreover, the payments bank licence will enable the network of 1,54,000 post
offices (including 1,30,000 rural post offices) to offer banking services to the
masses in the country.

List of the companies who got the license to run payment banks :
Aditya Birla Nuvo Ltd
Airtel M Commerce Services Ltd
Cholamandalam Distribution Services Ltd
Department of Posts
Fino PayTech Ltd
National Securities Depository Ltd
Reliance Industries Ltd
Dilip Shantilal Shanghvi
Vijay Shekhar Sharma
Tech Mahindra Ltd
Vodafone m-pesa Ltd
The next question that arrives in ones mind is that what is the need of payment
bank and "Kya baaki banks kam hain" but there is only one answer to all the
questions that this step is one of the major step towards Financial Inclusion. These
banks have limited services as compared to the other banks. Let's see what these
banks can or can't do :
They cant 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 ATM cards usable on ATM networks of all
banks.

They can transfer money directly to bank accounts at nearly no cost being a
part of the gateway that connects banks.
They can provide forex cards to travellers, usable again as a debit or ATM
card all over India.
They can offer forex services at charges lower than banks.
They can also offer card acceptance mechanisms to third parties such as the
Apple Pay.
This is for the first time in the history of India's banking sector that RBI is giving
out differentiated licences for specific activities. RBI is expected to come out with
a second set of such licences for small finance banks and the process for
those is in its final stage. The move is seen as a major step in pushing financial
inclusion in the country.

Its a step to redefine banking in India. The Reserve Bank expects payment banks
to target Indias migrant labourers, low-income households and small businesses,
offering savings accounts and remittance services with a low transaction cost. It
hopes payments banks will enable poorer citizens who transact only in cash to take
their first step into formal banking. It could be uneconomical for traditional banks
to open branches in every village but the mobile phones coverage is a promising
low-cost platform for quickly taking basic banking services to every rural citizen.
The innovation is also expected to accelerate Indias journey into a cashless
economy.
The most prominent figure among those left out is Kishore Biyani, founder and
CEO of Future Group. Indeed, Biyani throwing his hat in the ring was out of sync
with the group's moves over the past few years. He had sold his stake in public
listed financial services firm Future Capital (now Capital First) and has also been
looking to rewind holding in insurance JVs to focus on the core retail business.MG
George Muthoot and others, from Muthoot Finance, the largest gold financing
company in the country, too missed on the list of firms which got nod for payments
bank licences. There is a set of firms such as Dhoots-controlled DTH company
Videocon d2h Ltd that was not considered for the licence. The group had sought to

enter financial services as a business through its DTH firm, which is now listed on
NASDAQ. Among others, NSE Strategic Investment Corporation Ltd, a part of
national bourse NSE and realtor Kalpataru Corporation also missed on the
opportunity to add a new business line. While mobile wallets have been one of the
fastest growing segment, RBI granted approval only to Paytm (the applicant was
its co-founder Vijay Shekhar Sharma). Its peers like Oxigen, MobiKwik, Citrus
and ItzCash lost out on the opportunity to become payments bank, at least for now.
Indias domestic remittance market is estimated to be about Rs. 800-900 billion
and growing. With money transfers made possible through mobile phones, a big
chunk of it, especially that of the migrant labour, could shift to this new platform.
Payment banks can also play a crucial role in implementing the governments
direct benefit transfer scheme, where subsidies on healthcare, education and gas
are paid directly to beneficiaries accounts. Also, this is the first time since banks
were nationalized, that private sector business groups have bagged the RBIs nod
for banking services.

Gold Schemes: A Step To Strengthen Banking Industry


Dear Readers,
We have recently seen our Government launching schemes based on Physical
Gold. Thses schemes were aimed at reducing the demand of physical gold and
luring the customers to introduce the same in the banking systems. These schemes
are also important because it is one of its own kind and it has the capability to
reach to the one of the Gold Reserves of the country i.e. Households. In India, the
presence of the Gold in the household is huge and this diwali season, Govt wants
the consumer to invest gold insted of buying more. Let us discuss the schemes in
detail as it may come in upcoming exams.

The three schemes launched by Govt. are:

(i) Gold Monetisation Scheme (GMS)


(ii) Gold Sovereign Bond Scheme
(iii) Gold Coin and Bullion Scheme
Prime Minister Modi also unveiled the first ever national gold coin minted in India
with the national emblem of Ashok Chakra engraved on it. The Gold Monetisation
Scheme is aimed at tapping part of an estimated 20,000 tonnes of idle gold worth
Rs. 5,40,000 crore in family lockers and temples into the banking system.
The Gold Sovereign Bond will be issued by the Reserve Bank of India (RBI) on
behalf of the government with an interest rate of 2.75%. The bonds will be sold
through banks and designated post offices. Describing the schemes as sone pe
suhaga (icing on the cake), Modi said gold has often been a source of womens
empowerment in the Indian society, and these schemes will underscore that sense
of empowerment.

Gold monetisation scheme (GMS) is a deposit scheme of banks where you will be
paid interest on the weight of gold you give. The minimum deposit is 30 grams
(of 995 fineness). To make a deposit under this scheme, you need to first get your
gold tested from one of the centres certified by BIS. These centres, gold refiners
and banks will be in a tripartite agreement. After doing an XRF (x-ray
fluorescence) and a fire assay test, you will be told the result. If you still wish to
deposit the gold, the centre will give a purity certificate endorsing the weight and
purity of gold. You 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 gold deposit account with the equivalent amount
of gold. The test centre will send the gold to a refiner who will keep the gold in his
warehouse (unless the banks choose to hold it themselves).
This 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 12-15 years. While deposits
of all tenures will be run only by banks, for the medium and long-term deposits,

the terms and conditions and rate of interest will be fixed by the Central
Government. At the end of the deposit period, your deposit, either in cash/gold
(medium and long-term deposits will be redeemed only in cash) will be returned to
you 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 China as worlds largest gold consuming nation with 562
tonnes of buying so far this year, he added. Indias obsession with gold is rivalled
only by China, with the metal used widely in wedding gifts, religious donations
and as an investment. Previous attempts at mobilising this gold have been
unsuccessful, but PM Modi is hoping higher interest rates paid will help it to
succeed this time.
Huge gold imports have pushed Indias current account deficit to a record $190
billion in 2013, prompting the government to hike its duty on imports to a record
10%. Imports fell to an estimated $34 billion in 2014-15, but Modi is looking to
cut that further. Investors will have to disclose their permanent account number,
registered with the income tax department, if the value of gold is worth more than
Rs. 50,000 ($763.53). Some people fear it is a way for the government to keep a
tab on the source. Another concern is the likely loss of 20-30% of the weight of
jewellery as it is melted at certified centres at the cost of the depositor.
Some Key Features:
Gold Monetization Scheme
KYC - a must, but income is tax-free
Will be melted, but returned as gold
Fixed deposit, but can break it for a fee
Interest nominal, but it is on gold weight
Gold Sovereign Bond
Earns you interest
Minimal charges

Better liquidity
TADF
a) Minister of State for Commerce & Industry (I/C), Mrs. Nirmala Sitharaman,
launched the Technology Acquisition and Development Fund (TADF) under
National Manufacturing Policy which is implemented by Department of Industrial
Policy & Promotion(DIPP).
b) TADF is a new scheme to facilitate acquisition of Clean, Green & Energy
Efficient Technologies, in form of Technology / Customised Products / Specialised
Services / Patents / Industrial Design available in the market available in India or
globally, by Micro, Small & Medium Enterprises (MSMEs).
The Scheme is conceptualised to catalyse the manufacturing growth in MSME
sector to contribute to the national focus of Make in India.
The scheme will be implemented through Global Innovation and Technology
Alliance (GITA), a joint venture company, support to MSME units is envisaged by
the following:
I. Direct Support for Technology Acquisition
II. In-direct Support for Technology Acquisition through Patent Pool
III. Technology / Equipment Manufacturing Subsidies
IV. Green Manufacturing Incentive Scheme
FIF:Financial Inclusion Fund (FIF)
The Financial Inclusion Fund (FIF) and Financial Inclusion Technology Fund
(FITF) was constituted in the year 2007-08 for a period of five years with a corpus
of Rs. 500 crore each to be contributed by Government of India (GOI), RBI and
NABARD in the ratio of 40:40:20. The guidelines for these two funds were framed
by GOI.
In April 2012, RBI decided to fund FIF by transferring the interest differential in
excess of 0.5% on RIDF and STCRC deposits on account of shortfall in priority
sector lending.
What is new?

The GOI has merged the FIF and FITF to form a single Financial Inclusion Fund.
The Reserve Bank of India has finalised the new scope of activities and guidelines
for utilisation of the new FIF in consultation with GOI.
The new FIF will be administered by the reconstituted Advisory Board constituted
by GOI and will be maintained by NABARD.
Important Points related to FIF
1) The overall corpus of the new FIF will be Rs. 2000 crore.
2) Contribution to FIF would be from the interest differential in excess of 0.5%
on RIDF and STCRC deposits on account of shortfall in priority sector lending (as
notified by RBI from time to time) kept with NABARD by banks.
3) The Fund shall be in operation for another three years or till such period as may
be decided by RBI and Government of India in consultation with other stake
holders.
4) The objectives of the FIF shall be to support developmental and promotional
activities including creating of FI infrastructure across the country, capacity
building of stakeholders, creation of awareness to address demand side issues,
enhanced investment in Green Information and Communication Technology (ICT)
solution, research and transfer of technology, increased technological absorption
capacity of financial service providers/users with a view to securing greater
financial inclusion.
Note: The fund shall not be utilized for normal business/banking activities.
Eligible Activities/Purposes for FIF
1) The fund will help for the setting up and operational cost for running Financial
Inclusion & Literacy Centers. The setting up of such Centers are in sync with the
objective of GoI for setting up Financial Literacy Centers upto the block level
under the PMJDY. These centres are important as they will be:
a. Providing financial literacy training to all individuals/households of the area.
b. Providing counseling services for opening of bank accounts and for operating
banking and other financial products and services.
c. Providing training to BCs about various banking & other financial products and
services and also for training them in use of technological devices so as to ensure
smooth servicing of customers.
d. Redressal of customer grievances by attending to customer complaints, if
necessary, by taking up with banks and other institutions.
2) Setting up of Standard Interactive Financial Literacy Kiosks in Gram
Panchayats and any other financial literacy efforts under taken by banks in
excluded areas.

3) Support to NABARD & Banks for running of Business & Skill Development
Centers.
4) Support to pilot projects for development of innovative products, processes and
prototypes for financial inclusion.
5) Financial assistance to authorised agencies for conduct of surveys for evaluating
the progress under financial inclusion.
Eligible Institutions
Financial Institutions, viz., Commercial Banks, Regional Rural Banks, Cooperative
Banks and NABARD.
Eligible institutions with whom banks can work for seeking support from the FIF: NGOs
SHGs
Farmer's Clubs Functional Cooperatives
I.T. enabled rural outlets of corporate entities.
Well-functioning Panchayats
Rural Multipurpose kiosks / Village Knowledge Centers
Common Services Centres (CSCs) established by Service Centre Agencies
(SCAs) under the National e-Governance Plan (NeGP).
Primary Agricultural Societies (PACs).

NIIF
a) India is set to launch its own version of a sovereign wealth fund the National
Investment and Infrastructure Fund that would focus only on core sector projects,
by the end of the year.
b) The NIIF will have a corpus of Rs 20,000 crore. It was cleared by the Cabinet
on July 29.
c) National Investment and Infrastructure Fund (NIIF) is a fund created by the
Government of India for enhancing infrastructure financing in the country.
d) The objective of NIIF would be to maximize economic impact mainly through
infrastructure development in commercially viable projects, both greenfield and

brownfield, including stalled projects. It could also consider other nationally


important projects, for example, in manufacturing, if commercially viable.
Functions of NIIF
Fund raising through suitable instruments including off-shore credit enhanced
bonds, and attracting anchor investors to participate as partners in NIIF;
Servicing of the investors of NIIF.
Considering and approving candidate companies/institutions/ projects (including
state entities) for investments and periodic monitoring of investments.
Investing in the corpus created by Asset Management Companies (AMCs) for
investing in private equity.
Preparing a shelf of infrastructure projects and providing advisory services.
NIIF Purpose?
1. Provides equity / quasi-equity support to those Non Banking Financial
Companies (NBFCs)/Financial Institutions (FIs) that are engaged mainly in
infrastructure financing. These institutions will be able to leverage this equity
support and provide debt to the projects selected.
2. Invest in funds engaged mainly in infrastructure sectors and managed by Asset
Management Companies (AMCs) for equity / quasi-equity funding of listed /
unlisted companies.
3. Provides Equity/ quasi-equity support / debt to projects, to commercially viable
projects, both greenfield and brownfield, including stalled projects.
Funding to NIIF
The initial authorized corpus of NIIF would be Rs. 20,000 crore, which may be
raised from time to time, as decided by Ministry of Finance. Government can
provide upto 20000 crore per annum into these funds. Government's
contribution/share in the corpus will be 49% in each entity set up as an alternate
Investment Fund (AIF) and will neither be increased beyond, nor allowed to fall
below, 49%. The whole of 49% would be contributed by Government directly. Rest
is open for contribution from others. The contribution of Government of India to
NIIF would enable it to be seen virtually as a sovereign fund and is expected to
attract overseas sovereign/ quasi-sovereign/multilateral/bilateral investors to coinvest in it. Cash-rich Central Public Sector Enterprises (PSUs) could contribute to
the Fund, which would be over and above the Government's 49%. Similarly,
domestic pension and provident funds and National Small Savings Fund may also
provide funds to the NIIF. NIIF may utilize the proceeds of monetized land and
other assets of PSUs for infrastructure development. The NIIF will work out these

details in consultation with the Ministry of Finance, to match different investors


preferences.
Current News related to NIIF:
Government has set up a search committee under Economic Affairs Secretary
Shakti kanta Das for selection of a CEO for the National Investment and
Infrastructure Fund (NIIF).
Green Bonds : A Few Insights
Dear Crusaders,
We all are acquainted that Green Bonds are in the news now days. So here, we are
rendering you the few insights of it. It is a crucial topic from the exam point of
view, rest assured you are going to get a few questions from this topic in the
upcoming exams. So go through it meticulously, and keep yourself abreast of it.
Climate change affects all of us to some extent. But it is expected to hit developing
countries the hardest. Its potential effects on temperatures, precipitation patterns,
sea levels, and frequency of weather-related disasters pose risks for agriculture,
food, and water supplies. At stake are recent gains in the fight against poverty,
hunger and disease, and the lives and livelihoods of people in developing
countries.

Few people have heard of "green bonds", yet they could be a way of raising the
huge amounts of capital needed to tackle climate change and protect our natural
world.
They could be critically important, but they remain shrouded in mystery and there
is a great deal of confusion about their exact form and structure. What are they?
Are they a way for the government to borrow money for green projects? Are they a
new savings product for ethical consumers?

This lack of clarity is understandable and is a direct result of all the different types
that have been recently proposed. They could, in fact, be all of the following: green
gilts, green retail bonds and green investment bank bonds. But, there are many
more being proposed as well, including: green infrastructure bonds, *multilateral
development bank green bonds, green corporate bonds, green sectoral bonds,
rainforest bonds and index-linked carbon bonds.
All of these different (and sometimes confusing) classes of green bond have an
important role in helping to raise finance for different parts of our low-carbon
transition.
What are green bonds?
A bond is a debt instrument with which an entity raises money from investors. The
bond issuer gets capital while the investors receive fixed income in the form of
interest. When 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, which
typically 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 Renewable Energy Development Agency Ltd and Greenko
have in the past issued bonds that have been used for financing renewable energy,
however, without the tag of green bonds.
Green bonds are issued by multilateral agencies such as the World Bank,
corporations, government agencies and municipalities. Institutional investors and
pension funds also have appetite for such bonds. For instance, investment funds
BlackRock and PIMCO have specific mandates from their investors to invest only
in bonds which fund green projects. The issuer provides periodic reports about the
project.

Reason behind being in the News:


In March, the Exim Bank of India issued a five-year $500 million green bond,
which is Indias first dollar-denominated green bond. The issue was subscribed
nearly 3.2 times. The bank has said it would use the net proceeds to fund eligible
green projects in countries including Bangladesh and Sri Lanka. Earlier, in
February, Yes Bank raised Rs 1,000 crore via a 10-year bond, which was
oversubscribed twice.
Importance of it for India:
India has embarked on an ambitious target of building 175 gigawatt of renewable
energy capacity by 2022, from just over 30 gigawatt now. This requires a massive
$200 billion in funding. This isnt easy. As reports suggest, higher interest rates and
unattractive terms under which debt is available in India raise the cost of renewable
energy by 24-32 per cent compared to the U.S. and Europe.
Budget allocations have been insufficient. Renewable energy is still part of the
larger power/infrastructure funding basket in most banks, and with most financing
going towards coal power projects, there is very little funding left for renewable
energy. Currently, options for raising funds and investing in the renewable energy
story in the public markets in India is very limited. Thats why green bonds seem
like a good option.

Still, why are green bonds an attractive option?


Shantanu Jaiswal, analyst at Bloomberg New Energy Finance, says, Green 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, Samuel Joseph, Chief General Manager,

Treasury and Accounts Group, Exim Bank of India, says as these bonds are meant
for specific investors looking to invest in renewable energy projects, pricing could
be attractive.
The banks green bond was priced at 147.50 basis points over US Treasuries
(whereas, usually, bonds are priced at treasuries plus 150 basis points) at a fixed
coupon of 2.75 per cent per annum.
Green Bonds Performance Globally:
According to Bloomberg New Energy Finance, a record $38.8 billion in green
bonds were issued in 2014, 2.6 times the $15 billion issued in 2013. Most
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, the report says.
In the last two years, studies have shown that around 200bn of low-carbon
infrastructure investment is required in the UK between now and 2020. Ernst &
Young estimates though that traditional sources of capital ranging from utilities
through to project finance and infrastructure funds can only provide 50-80bn
over the next 15 years.
Issuers of these bonds?
In the period between 2007 and 2012, supranational organisations such as the
European Investment Bank and the World Bank, as also governments, accounted
for most of the green bond issue. Since then, corporate interest has risen sharply. In
2014, bonds issued by corporations in the energy and utilities, consumer goods,
and real estate sectors accounted for a third of the market, according to KPMG.
The risks and challenges?

Globally, there have been serious debates about whether the projects targeted by
green bond issuers are green enough. There have been controversies too. Reuters a
few months back reported how activists were claiming that the proceeds of the
French utility GDF Suezs $3.4 billion green bond issue were being used to fund a
dam project that hurts the Amazon rainforest in Brazil.

From an Indian perspective, a challenge of making investors


subscribe could be the tenor and rating of green bonds, reckons
Bloombergs Jaiswal. The downside is that green bonds in India
have a shorter tenor period of about 10 years in India whereas a
typical loan would be for minimum 13 years. This is less when
compared to many international issuances. BANKING
AWARENESS: FEW FACTS ABOUT SAVING SCHEMES OFFERED BY
BANKS
Dear Readers,
In this article we are presenting you some of the important points in Banking &
some recent changes which have been done by RBI.

A) Some points related to Interest Rates on Bank Accounts


1) Interest on Savings A/c is calculated on daily balance basis.
2) Now, All Scheduled Commercial Banks (Excluding RRBs) have the discretion
to offer differential interest rates based on whether the term deposits are with or
without-premature-withdrawal-facility, subject to the following guidelines:
i. All term deposits of individuals (held singly or jointly) of 15 lakh and below
should, necessarily, have premature withdrawal facility.
ii. For all term deposits other than (i) above, banks can offer deposits without the
option of premature withdrawal as well.

iii. Banks should disclose in advance the schedule of interest rates payable on
deposits i.e. all deposits mobilized by banks should be strictly in conformity with
the published schedule.
B) Taxation of Savings Bank Interest rates:
Unlike interest on fixed deposits, interest earned on savings bank accounts is not
subject to Tax Deduction at Source. However, this does not mean the interest
earned on Savings accounts is completely tax free. It is exempt upto Rs. 10,000 in
a year, and if the interest you earn from Savings accounts crosses this threshold, it
becomes subject to tax.
C) Senior Citizens Savings Scheme, 2004:
A Scheme which is giving a higher interest rate to the senior citizens, if they make
deposits in the banks.
The salient features of the Senior Citizens Savings Scheme, 2004 are given
below:

Tenure of the deposit 5 years, which can be extended by 3 years.


account
Rate of interest
Investment to
multiples of
Maximum
limit

9.3 per cent per annum


be

in Rs. 1000/-

investment Rs. 15 lakh

Minimum eligible age 60 years (55 years for those who have retired on
for investment
superannuation or under a voluntary or special
voluntary scheme). The retired personnel
of Defense Services
(excluding
Civilian Defense Employees) will be eligible to
invest irrespective of the age limits subject to the
fulfillment of other specified conditions
Premature
closure/withdrawal
facility

Permitted after one year of opening the account but


with penalty.

Modes of holding

Accounts can be held both in single and joint


holding modes. Joint holding is allowed only with
spouse.

Applicability to
PIO and HUFs

NRI, Non Resident Indians (NRIs), Persons of Indian


Origin (PIO) and Hindu Undivided Family (HUF)
are not eligible to open an account under the
Scheme.

A brief on 3RD BI-MONTHLY MONETARY POLICY REVIEW of RBI


Dear Readers,
Recently you all must have read that the RBI has kept the rates unchanged in its
Monetary Policy review. So here we are providing you the details about Monetary

Policy and its importance. This will be a part of Banking Awareness portion.
What is Monetary Policy?
Monetary policy is the macroeconomic policy laid down by the central bank of the
country, by RBI in India. It involves management of money supply and interest
rate and it is used by the government of a country to achieve macroeconomic
objectives like inflation, consumption, growth and liquidity.
In India, monetary policy of the Reserve Bank of India is aimed at managing the
quantity of money in order to meet the requirements of different sectors of the
economy and to increase the pace of economic growth.
The tools which can be used by RBI are open market operations, bank rate policy,
reserve system, credit control policy, moral persuasion and through many other
instruments. Using any of these instruments will lead to changes in the interest
rate, or the money supply in the economy.
3rd Bi-monthly Monetary Policy
RBI kept its policy rates unchanged in its review on 4th Aug 2015. This means that
it kept the policy repo rate under the liquidity adjustment facility (LAF) unchanged
at 7.25 per cent. The central bank also kept the cash reserve ratio (CRR) of
scheduled banks unchanged at 4.0 per cent of net demand and time liability.
Major Highlights
a) Policy repo rate under the liquidity adjustment facility (LAF) unchanged at 7.25
per cent.
b) Continue to provide liquidity under overnight repos at 0.25 per cent of bankwise NDTL at the LAF repo rate and liquidity under 14-day term repos as well as
longer term repos of up to 0.75 per cent of NDTL of the banking system through
auctions.
c) SLR remained at 21.5%.
d) It retains growth target at 7.6 per cent for 2015-16.

The reason for keeping the policy rate unchanged is Headline consumer price
index (CPI) inflation which rose for the second successive month in June 2015 to
a nine-month high on the back of a broad based increase in upside pressures,
belying consensus expectations. Also, food inflation rose 60 basis points over the
preceding month, driven by a spike in prices of vegetables, protein items especially pulses, meat and milk - and spices. Even, prices on the whole have
been going up as well. All this led to the RBI keeping the repo rate constant.
Current Rates as on 6th Aug 2015:
1) Policy Repo Rate: 7.25%
2) Reverse Repo Rate: 6.25%
3) Marginal Standing Facility Rate: 8.25%
4) Bank Rate: 8.25%
5) CRR: 4%
6) SLR: 21.5%
ALL ABOUT NBFC'S
Dear Readers,
You all must have heard that the Reserve Bank of India is entrusted with the
responsibility of regulating and supervising the Non-Banking Financial
Companies. So, lets discuss about what actually NBFCs are.
About the term NBFC:
A Non-Banking Financial Company (NBFC) is a company registered under the
Companies Act, 1956 engaged in the business of loans and advances, acquisition of
shares/stocks/bonds/debentures/securities issued by Government or local authority
or other marketable securities of a like nature, leasing, hire-purchase, insurance
business, chit fund business.
Difference between BANK & NBFC:

NBFCs lend and make investments and hence their activities are akin to that of
banks; however there are a few differences as given below:
i. NBFC cannot accept demand deposits;
ii. NBFCs do not form part of the payment and settlement system and cannot issue
cheques drawn on itself;
iii. deposit insurance facility of Deposit Insurance and Credit Guarantee
Corporation is not available to depositors of NBFCs, unlike in case of banks.
Different types/categories of NBFCs registered with RBI:
NBFCs are categorized
a) In terms of the type of liabilities into Deposit and Non-Deposit accepting
NBFCs,
b) Non deposit taking NBFCs by their size into systemically important and other
non-deposit holding companies (NBFC-NDSI and NBFC-ND) and
c) By the kind of activity they conduct.
Within this broad categorization the different types of NBFCs are as follows:
i. Asset Finance Company(AFC) : An AFC is a company which is a financial
institution carrying on as its principal business the financing of physical assets
supporting productive/economic activity, such as automobiles, tractors, lathe
machines, generator sets, earth moving and material handling equipments, moving
on own power and general purpose industrial machines.
ii. Investment Company (IC) : IC means any company which is a financial
institution carrying on as its principal business the acquisition of securities.
iii. Loan Company (LC): LC 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 Asset Finance Company.

iv. Infrastructure Finance Company (IFC): IFC is a non-banking finance


company
a) which deploys at least 75 per cent of its total assets in infrastructure loans,
b) has a minimum Net Owned Funds of Rs. 300 crore,
c) has a minimum credit rating of A or equivalent d) and a CRAR of 15%.

v. Infrastructure Debt Fund: Non- Banking Financial Company (IDF-NBFC) :


IDF-NBFC is a company registered as NBFC to facilitate the flow of long term
debt into infrastructure projects. IDF-NBFC raise resources through issue of Rupee
or Dollar denominated bonds of minimum 5 year maturity. Only Infrastructure
Finance Companies (IFC) can sponsor IDF-NBFCs.
vi. Non-Banking Financial Company - Micro Finance Institution (NBFCMFI): NBFC-MFI is a non-deposit taking NBFC having not less than 85%of its
assets in the nature of qualifying assets which satisfy the following criteria:
a. loan disbursed by an NBFC-MFI to a borrower with a rural household annual
income not exceeding Rs. 60,000 or urban and semi-urban household income not
exceeding Rs. 1,20,000.
b. tenure of the loan not to be less than 24 months for loan amount in excess of Rs.
15,000 with prepayment without penalty;
vii. Non-Banking Financial Company Factors (NBFC-Factors): NBFCFactor is a non-deposit taking NBFC engaged in the principal business of
factoring. The financial assets in the factoring business should constitute at least 75
percent of its total assets and its income derived from factoring business should not
be less than 75 percent of its gross income.
Register with RBI:

A company incorporated under the Companies Act, 1956 and desirous of


commencing business of non-banking financial institution as defined under Section
45 I (a) of the RBI Act, 1934 should comply with the following:
i. it should be a company registered under Section 3 of the companies Act, 1954
ii. It should have a minimum net owned fund of Rs 200 lakh.
Deposits in NBFC:
a) Presently, the maximum rate of interest an NBFC can offer is 12.5%. The
interest may be paid or compounded at rests not shorter than monthly rests.
b) The NBFCs are allowed to accept/renew public deposits for a minimum period
of 12 months and maximum period of 60 months. They cannot accept deposits
repayable on demand.
c) The deposits with NBFCs are not insured.
d) The repayment of deposits by NBFCs is not guaranteed by RBI.

Brief about RNBC


a) Residuary Non-Banking Company is a class of NBFC 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, Asset Financing,
Loan Company.
b) These companies are required to maintain investments as per directions of RBI,
in addition to liquid assets.
c) The amount payable by way of interest, premium, bonus or other advantage, by
whatever name called by a RNBC in respect of deposits received shall not be less
than the amount calculated at the rate of 5% (to be compounded annually) on the
amount deposited in lump sum or at monthly or longer intervals; and at the rate of
3.5% (to be compounded annually) on the amount deposited under daily deposit
scheme.

d) Further, a RNBC can accept deposits for a minimum period of 12 months and
maximum period of 84 months from the date of receipt of such deposit. They
cannot accept deposits repayable on demand.
Some other regulators:
Category of Companies

Regulator

Chit Funds

Respective State Governments

Insurance companies

IRDA

Housing Finance Companies

NHB

Venture Capital Fund /

SEBI

Merchant Banking companies

SEBI

Stock broking companies

SEBI

Nidhi Companies

Ministry
of
corporate
Government of India

affairs,

A Brief on CURRENCY SYSTEM IN INDIA


Dear Readers,
Today we are providing you all some important points on our Currency system as
this is one of the important topic within Banking Awareness. We are expecting
questions from this portion. So, enjoy the post.
Present Denomination of Bank Notes:
At present, banknotes in India are issued in the denomination of Re.1, Rs.5 Rs.10,
Rs.20, Rs.50, Rs.100, Rs.500 and Rs.1000. These notes are called banknotes as
they are issued by the Reserve Bank of India (Reserve Bank).

Denomination of Bank Notes & Coins:


The Reserve Bank can also issue banknotes in the denominations of five thousand
rupees and ten thousand rupees, or any other denomination that the Central
Government may specify. There cannot, though, be banknotes in denominations
higher than ten thousand rupees in terms of the current provisions of the Reserve
Bank of India of Act, 1934. Coins can be issued up to the denomination of
Rs.1000.
Role of Government of India in Currency System:
In terms of Section 25 of RBI Act, 1934 the design of banknotes is required to be
approved by the Central Government on the recommendations of the Central Board
of the Reserve Bank of India. The responsibility for coinage vests with the
Government of India on the basis of the Coinage Act, 1906 as amended from time
to time. The Government of India also attends to the designing and minting of
coins in various denominations.
How much currency to be produced?
The Reserve Bank decides the volume and value of banknotes except Re. 1 note to
be printed each year. The quantum of banknotes that needs to be printed, broadly
depends on the requirement for meeting the demand for banknotes due to inflation,
GDP growth, replacement of soiled banknotes and reserve stock requirements.
Who decides the coins issue?
The Government of India decides the quantity of coins to be minted on the basis of
indents( official order) received from the Reserve Bank.
How does the Reserve Bank estimate the demand for banknotes?
The Reserve Bank estimates the demand for banknotes on the basis of the growth
rate of the economy, the replacement demand and reserve stock requirements by
using statistical models/techniques.

What is a currency chest?


To facilitate the distribution of banknotes and rupee coins, the Reserve Bank
has authorized select branches of scheduled banks to establish Currency Chests.
These are actually storehouses where banknotes and rupee coins are stocked on
behalf of the Reserve Bank.
What is a small coin depot?
Some bank branches are also authorized to establish Small Coin Depots to stock
small coins. The Small Coin Depots also distribute small coins to other bank
branches in their area of operation.
What are soiled, mutilated and imperfect banknotes?
(i) "soiled note:" 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) Mutilated 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 a
mutilated banknote.
Can soiled and mutilated banknotes be exchanged for value?
Yes. Such banknotes can be exchanged for value.
Clean Note Policy:
Reserve Bank of India has been continuously making efforts to make good quality
banknotes available to the members of public. To help RBI and banking system,
the members of public are requested to ensure the following:
a) Not to staple the banknotes

b) Not to write / put rubber stamp or any other mark on the banknotes
c) Store the banknotes safely to prevent any damage
Note:
1) Seeking to spread awareness among public about fake notes, the Reserve Bank
has launched a website explaining ways to detect counterfeit notes. With a tagline
'Pehchano Paise Ki Boli, Kyunki Paisa Bolta Hai', the websitewww.paisaboltahai.rbi.org.in -- gives visual presentation with pointers on currency
notes of 10, 20, 50, 100, 500 and 1,000 rupee denominations.
2) MINIMUM RESERVE SYSTEM
The Reserve Bank has the sole right to issue currency notes, except one rupee
notes which are issued by the Ministry of Finance. The RBI follows a minimum
reserve system in the note issue. Initially, it used to keep 40 per cent of gold
reserves in its total assets. But, since 1957, it has to maintain only Rs. 200 crores of
gold and foreign exchange reserves, of which gold reserves should be of the value
of Rs. 115 crores.

3) After a gap of over 20 years, Re 1 note has been released in


the country and it bears the signature of Finance Secretary Rajiv
Mehrishi. Incidentally, the note was released at Shrinathji temple
in Nathdwara, Rajasthan, on March 6 by Mehrishi. A Brief on
FOREIGN EXCHANGE RESERVES

Dear Readers,
Today we are providing you the notes on one of the most important financial
terms FOREIGN EXCHANGE RESERVES. This is important as it can be asked
in the General Awareness section in the upcoming exams.

As it was in the news that, our country's foreign exchange reserves rose by
$321.7 million to $353.648 billion in the week to July 24 on account of increase
in foreign currency assets. The country's gold reserves remained unchanged at
$19.074 billion. The special drawing rights with the International Monetary
Fund were up by $5.8 million to $4.024 billion in the week under review, while
the country's reserve position with the Fund also rose by $1.8 million to $1.304
billion.

As on July 24, 2015


Components of Forex

Bn.

US$ Mn.

Total Reserves

22,551.8

353,648.1

1.1 Foreign Currency Assets

20,995.3

329,245.4

1.2 Gold

1,216.1

19,074.3

1.3 SDRs

257.1

4,024.2

83.3

1,304.3

1.4 Reserve Position in the IMF


Lets discuss What actually is FOREX?

Reserves are maintained by countries for meeting their international payment


obligations both short and long terms, including sovereign and commercial
debts, financing of imports, for intervention in the foreign currency markets
during periods of volatility, besides helping to boost the confidence of the market
in the ability of a country to meet its external obligations and to absorb any
unforseen external shocks, contingencies or unexpected capital movements.
India's foreign exchange reserves comprise foreign currency assets, gold and
special drawing rights allocated to it by the International Monetary Fund (IMF)
in addition to the reserves it has parked with the fund. Foreign exchange
reserves are held and managed by the RBI.
The Foreign currency assets are investment mainly in instruments abroad which
have the highest credit rating and which do not pose any credit risk. These
include sovereign bonds, treasury bills and short-term deposits in top-rated
global banks besides cash accounts.
The Special Drawing Right (SDR) is an interest-bearing
international reserve asset created by the IMF in 1969 to
supplement other reserve assets of member countries. The SDR is
based on a basket of international currencies comprising the U.S.
dollar, Japanese yen, euro and pound sterling. It is not a currency,
nor a claim on the IMF, but is potentially a claim on freely usable
currencies of IMF members. It can be held and used by member
countries, the IMF, and certain designated official entities called
"prescribed holders"but it cannot be held, for example, by
private entities or individuals. BANKING PATHWAY 2015: SOME
FINANCIAL TERMS
Dear Readers, we are providing you the important financial terms which are
mainly the part of General Awareness in all the upcoming Bank exams. Hope you
like this post as this will make your financial portion strong.
1) Type of assets
The assets portfolio of the banks is required to be classified as
(1) standard assets(2) sub-standard assets(3) doubtful assets and(4) loss
assets.Standard asset is one that does not disclose any problems and which does

not carry more than normal risk attached to the business .An asset which has been
classified as NPA for a period not exceeding 12 months is considered as substandard asset.Doubtful asset is one which has remained NPA for a period
exceeding 12 months.An asset which is considered uncollectible and loss has been
identified by the bank or internal or external auditors or the RBI inspection and the
loss has not been written off is regarded as loss asset.
2) Core Banking Solutions (CBS)
Core Banking Solutions is a buzz 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.
3) Prime Lending Rate
The minimum short-term interest rate charged by commercial banks to their most
creditworthy clients. It is a reference interest rate used by banks for its lending
purposes.
4) Parties of a Cheque:
There are three parties to the cheque
1-Drawer or Maker
2-The bank (Drawee) - on whom the cheque is drawn (i.e. the bank with whom the
account is maintained by the drawer)
3- Payee Payee is the person whose name is mentioned on the cheque to whom
or to whose order the money is directed to be paid.

5) Special Drawing Rights (SDRs)


It is a reserve asset (known as Paper Gold) created within the framework of the
International Monetary Fund in an attempt to increase international liquidity, and
now forming a part of countries official forex reserves along with gold, reserve
positions in the IMF and convertible foreign currencies.
6) Negotiated Dealing System
The Negotiated Dealing System (NDS) for electronic dealing and reporting of
transactions in government securities was introduced in February 2002. It
facilitates the members to submit electronically, bids or applications for primary
issuance of Government Securities when auctions are conducted. NDS also
provides an interface to the Securities Settlement System (SSS) of the Public Debt
Office, RBI, Mumbai thereby facilitating settlement of transactions in Government
Securities (both outright and repos) conducted in the secondary market.
7) NDS OM (Order Match)
In August, 2005, RBI introduced an anonymous screen based order matching
module on NDS, called NDS-OM. This 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. NDS-OM is operated by
the Clearing Corporation of India Ltd. (CCIL) on behalf of the RBI.
8) What is Asset Management Companies?
A company that invests its clients' pooled fund into securities that match its
declared financial objectives. Asset management companies provide investors with
more diversification and investing options than they would have by themselves.
Mutual funds, hedge funds and pension plans are all run by asset management
companies. These companies earn income by charging service fees to their clients.
9) "Soiled Note:" 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) Mutilated banknote is a banknote, of which a portion is missing or which is


composed of more than two pieces.

10) Imperfect banknote means any banknote, which is wholly or partially,


obliterated, shrunk, washed, altered or indecipherable but does not include a
mutilated banknote.
FINANCIAL INCLUSION
It is the delivery of financial services at affordable costs to vast sections of
disadvantaged and low income groups
Financial inclusion involves
1) Give formal banking services to poor people in urban & rural areas.
2) Promote habit of money-savings, insurance, pension-investment among poorpeople.
3) Help them get loans at reasonable rates from normal banks. So they dont
become victims in the hands of local moneylender.
Some Important initiatives for financial inclusion:
1) Lead banking scheme (LBS).
2) No frills account.
3) BSBDA
4) Business Correspondents (BC) system.
5) Swabhiman Campaign
6) PMJDY
Lead Bank Scheme
The Lead Bank Scheme, introduced towards the end of 1969, envisages assignment
of lead roles to individual banks (both in public sector and private sector) for the
districts allotted to them. A bank having a relatively large network of branches in
the rural areas of a given district and endowed with adequate financial and
manpower resources has generally been entrusted with the lead responsibility for
that district. Accordingly, all the districts in the country have been allotted to
various banks. The lead bank acts as a leader for coordinating the efforts of all
credit institutions in the allotted districts to increase the flow of credit to
agriculture, small-scale industries and other economic activities included in the
priority sector in the rural and semi-urban areas, with the district being the basic
unit in terms of geographical area.

No Frill Account
'No Frills 'account is a basic banking account. Such account requires either nil
minimum balance or very low minimum balance. Charges applicable to such
accounts are low. Services available to such account is limited. In what can be
described as a watershed Annual Policy Statement, the RBI in 2005-06 called upon
Indian banks to design a no frills account a no precondition, low minimum
balance maintenance account with simplified KYC (Know Your Customer) norms.
But All the existing No-frills accounts opened were converted into BSBDA in
compliance with the guidelines issued by RBI in 2012 .
BSBDA
RBI in 2012 came out with fresh guidelines and asked banks to offer a Basic
Savings Bank Deposit Account which will offer following minimum common
facilities to all their customers. These guidelines includes:(a) This account shall not have the requirement of any minimum balance.
(b) The services available in the account will include deposit and withdrawal of
cash at bank branch as well as ATMs; receipt/credit of money through electronic
payment channels or by means of deposit/collection of cheques drawn by
Central/State Government agencies and departments;
(c ) While there will be no limit on the number of deposits that can be made in a
month, account holders will be allowed a maximum of four withdrawals in a
month, including ATM withdrawals; and
(d) Facility of ATM card or ATM-cum-Debit Card.
Business Correspondent
Business correspondents are bank representatives. They personally goes to the area
allotted to them and carry out banking.
They help villagers to open bank accounts.
They help villagers in banking transactions. (deposit money, take money out
of savings account, loans etc.)
The Business Correspondent carries a mobile device.
The villager gives his thumb impression or electronic signature, and get the
money.

Business Correspondents get commission from bank for every new account
opened, every transaction made via them, every loan-application processed
etc.
Recently on Financial Inclusion
The Reserve Bank of India (RBI) has constituted a committee with the objective of
working out a medium-term (five-year) measurable action plan for financial
inclusion. The terms of reference will include reviewing the existing policy of
financial inclusion, including supportive payment system and customer protection
framework, taking into account the recommendations made by various committees
set up earlier.
It will also study the cross-country experience in financial inclusion to identify key
learnings, particularly in the area of technology-based delivery models, that could
inform policies and practices. The committee will also suggest a monitorable
medium-term plan for financial inclusion in terms of its various components like
payments, deposit, credit, social security transfers, pension and insurance.
Deepak Mohanty, RBI executive director, will chair the committee
TYPES OF MONEY
Good Morning Readers,
Keeping in view the upcoming RBI Exam, we are providing you some notes on
Banking Awareness that will help you during preparations. In RBI Assistant
examination, the GA section is of 40 marks. This 40 marks is divided into Banking
Awareness and Current Affairs. So you have to be careful as these are quick marks
and you can easily get it in just few minutes.
Commodity Money - Commodity money value is derived from the
commodity out of which it is made. The commodity itself represents money,
and the money is the commodity. For instance, commodities that have been
used a Medium of exchange include gold, silver, copper, salt, peppercorns,
rice, large stones, etc.
Representative Money - is money that includes token coins, or any other
physical tokens like certificates, that can be reliably exchanged for a fixed
amount/quantity of a commodity like gold or silver.

Fiat Money - 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 be
converted into valuable commodity (like gold). Instead, it derives value only
based On government order (fiat)
Commercial Bank Money - Commercial bank money or the demand deposits
are claims against financial institutions which can be used for purchasing
goods and services.

Reserve Money (M 0)
Currency in circulation + Bankers deposits with the RBI + Other deposits with
the RBI = Net RBI credit to the Government + RBI credit to the commercial
sector + RBI's claims on banks + RBI's net is foreign assets + Govemments
currency liabilities to the public - RBI's net non-monetary liabilities.
M1
Currency with the public + Demand deposits with the banking system + 'Other'
deposits with the RBI
M2
M1 + Savings deposits of ofce savings banks.
M3
M1+ Time deposits with the banking system
= Net bank credit to the Government + Bank credit to the Commercial sector + Net
foreign assets of the banking sector + Goveinments currency liabilities to the
public - Net non-monetary liabilities of the banking sector.

M4
M3 +All deposits with post office savings banks (excluding National Savings
Certificates)
Bhartiya Reserve Bank Note Mudran Private Limited (BRBNMPL)
The Reserve Bank established BRBNMPL in February 1995 as a wholly-owned
subsidiary to augment the production of bank notes in India and to enable bridging
of the gap between supply and demand for bank notes in the country.

Re-Post: Bitcoins
In the recent days, we are hearing a lot about a new type of currency, "Bitcoin". It
is basically a "virtual currency", which is making quite hype in market today. There
are various myths and speculations surrounding this currency. So, here we are
presenting to you the brief about "Bitcoins". Hope you like the post!!!
What is Bitcoin?
Bitcoin is a distributed peer-to-peer digital currency that can be transferred
instantly and securely
between any two people in the world. It's like electronic cash that you can use to
pay friends or merchants.
Who created bitcoins?
According to various newspaper article, a 64-year-old Japanese-American
physicist Satoshi Nakamoto is speculated as the creater of Bitcoin.

What are bitcoins?


Bitcoins are the unit of currency of the Bitcoin system. A commonly used
shorthand for this is BTC to refer to a price or amount (e.g. 100 BTC). There
are such things as physical bitcoins, but ultimately, a bitcoin is just a number
associated with a Bitcoin Address. A physical bitcoin is simply an object, such as a
coin, with the number carefully embedded inside. See also an easy intro to Bitcoin.
How can I get bitcoins?
The entire bitcoins currency is generated by algorithms, it is very easy to make
sure that once the 21 million mark is reached there are no more bitcoins to be
issued. Bitcoins, their issue and their maximum circulation have been
predetermined from the beginning and therein lies its innate value.
You can obtain Bitcoins by purchasing them from someone else using regular
currency or by earning them through a system called Bitcoin Mining. Bitcoins are
stored in Bitcoin wallets which also manage addresses from which you can send
and receive payments. New and different addresses can be generated for different
transactions and can be done as many times as required.

How does it work?


As a new user, you can get started with Bitcoin without understanding the technical
details. Once 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. You can disclose your addresses to your friends so that
they can pay you or vice versa. In fact, this is pretty similar to how email works,
except that Bitcoin addresses should only be used once.
Balances - block chains - The block chain is a shared public ledger on which the
entire Bitcoin network relies. All confirmed transactions are included in the block
chain. This 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. The integrity and the chronological order of the block chain are enforced
with cryptography.

Transactions - private keys - A 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. The
signature also prevents the transaction from being altered by anybody once it has

been issued. All transactions are broadcast between users and usually begin to be
confirmed by the network in the following 10 minutes, through a process called
mining.

Processing - mining - Mining 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. To be confirmed,
transactions must be packed in a block that fits very strict cryptographic rules that
will be verified by the network. These rules prevent previous blocks from being
modified because doing so would invalidate all following blocks. Mining also
creates the equivalent of a competitive lottery that prevents any individual from
easily adding new blocks consecutively in the block chain. This 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.
How do we do business? Using bitcoins!
You offer to pay me for my services via bitcoins and I accept the same. Why
bitcoins? Because bitcoins are anonymous and are not traceable by anyone. They
are the perfect way for people to do business with each other without revealing
identities. They don't leave any digital footprints like credit card records, bank
transactions, etc.
So let's say that we agree to a 'deal' and you agree to send me bitcoins in advance
to pay me for my job. I set the price at 3 bitcoins for my work. The current rate is
about Rs 38,000 per bitcoin. So, you are paying me about Rs 1.15 lakh for this
covert operation.
Why are bitcoins so valuable?
The absolute brilliance of bitcoins is that only 21 million bitcoins will ever be
made available in the market. (So far 13 million are in circulation and 8 million

more will be gradually released into the system by the end of 2140). Given that the
entire bitcoins currency is generated by algorithms, it is very easy to make sure that
once the 21 million mark is reached there are no more bitcoins to be issued.
Does Bitcoin guarantee an influx of free money?
Since 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 things:
A. Some sort of online 'get-rich-quick' scam.
B. A loophole in the market economy, the installation of which guarantees a steady
influx of cash.
C. A sure investment that will almost certainly yield a profit.
In fact, none of the above is true.
Is Bitcoin a 'get-rich-quick' scheme?

If you've spent much time on the Internet, you've probably seen ads for many 'getrich-quick' schemes. These ads usually promise huge profits for small amounts of
easy work. Bitcoin is in no way similar to these schemes. Bitcoin doesn't promise
windfall profits. There is no way for the developers to make money from your
involvement or to take money from you. Bitcoin is an experimental, virtual
currency that may succeed or may fail.

As an investment, is Bitcoin a sure thing?


Bitcoin is a new and interesting electronic currency, the value of which is not
backed by any single government or organization. Like other currencies, it is worth
something partly because people are willing to trade it for goods and services. Its
exchange rate fluctuates continuously, and sometimes wildly. It lacks wide
acceptance and is vulnerable to manipulation by parties with modest funding.

Anyone who puts money into Bitcoin should understand the risk they are taking
and consider it a high-risk currency.
How are new bitcoins created?
New bitcoins are generated by the network through the process of "mining". 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). Creating a block is a proof of work with
a difficulty that varies with the overall strength of the network. The reward for
solving a block is automatically adjusted so that, ideally, every four years of
operation of the Bitcoin network, half the amount of bitcoins created in the prior 4
years are created.
Blocks are mined every 10 minutes, on average and for the first four years
(210,000 blocks) each block included 50 new bitcoins. As the amount of
processing power directed at mining changes, the difficulty of creating new
bitcoins changes.
Is Bitcoin a Ponzi scheme?
In a Ponzi Scheme, the founders persuade investors that theyll profit. Bitcoin does
not make such a guarantee. There is no central entity, just individuals building an
economy.
A ponzi scheme is a zero sum game. Early adopters can only profit at the expense
of late adopters. Bitcoin has possible win-win outcomes. Early adopters profit from
the rise in value. Late adopters, and indeed, society as a whole, benefit from the
usefulness of a stable, fast, inexpensive, and widely accepted p2p currency.

Facts about Bitcoin


- Bitcoin is a real currency that fluctuates in price and which can be exchanged to
conduct real business.
- The business of transacting bitcoins and earning bitcoins in return is really the
nerve centre of this esoteric currency, and this is what makes it unique.
- Bitcoin is a work of not one but many geniuses. Satoshi Nakamoto 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
valuable.
- Bitcoin is here to stay. It may have its share of troubles, but its acceptability is
growing leaps and bounds.

BANKING PATHWAY 2015: MONEY MARKET


Dear Readers,
Today we are providing you the important brief of Money Market, as this is always
asked in the General awareness section in all banking exams.
We hope that this will help you scoring well in your exams.
"Money Market" refers to the market for short-term requirement and deployment
of funds. Money market instruments are those instruments, which have a maturity
period of less than one year.
The most active part of the money market is the market for overnight call and term
money between banks and institutions and repo transactions. Money Market is
regulated by RBI.

Money Market can be further divided into 3 parts. These are:


a)

Call Money Market

b)

Term Money Market

c)

Notice Money Market

The market to get funds for 1 day only is called as Call Money Market. The
market to get funds for 2 days to 14 days is called as Notice Money Market. The
market to get funds for 15 days to 1 year is called as Term Money Market.
Some of the Money Market instruments are:
1) Commercial Paper
2) Certificate of Deposit
3) T-bills
4) Cash Management Bills
Commercial Papersa) A CP is a short term security (7 days to 365 days) issued by a corporate entity
(other than a bank), at a discount to the face value.
b) Commercial Paper (CP) is an unsecured money market instrument issued in the
form of a promissory note.
c) CPs normally give a higher return than fixed deposits & CDs.
d) CP can be issued in denominations of Rs. 5 lakh or multiples thereof. Amount
invested by a single investor should not be less than Rs. 5 lakh (face value).
e) Only corporates who get an investment grade rating can issue CPs, as per RBI
rules. It is issued at a discount to face value.
f) Bank and FIs are prohibited from issuance and underwriting of CPs.

Certificates of Deposit
a) CDs are negotiable money market instrument issued in demat form or as a
Usance Promissory Notes.
b) CDs issued by banks should not have the maturity less than seven days and not
more than one year.
c) Financial Institutions are allowed to issue CDs for a period between 1 year and
up to 3 years.
d) CDs are like bank term deposits but unlike traditional time deposits these are
freely negotiable and are often referred to as Negotiable Certificates of Deposit.
e) CDs normally give a higher return than Bank term deposit.
f) All scheduled banks (except RRBs and Co-operative banks) are eligible to issue
CDs.
g) CDs are issued in denominations of Rs. 1 Lac and in the multiples of Rs. 1 Lac
thereafter.
h) Discount/Coupon rate of CD is determined by the issuing bank/FI.
i) Loans cannot be granted against CDs and Banks/FIs cannot buy back their own
CDs before maturity
Treasury bills
a) Treasury Bills are short term (up to one year) borrowing instruments of the
Government of India which enable investors to park their short term surplus funds
while reducing their market risk.
b) They are auctioned by Reserve Bank of India at regular intervals and issued at a
discount to face value.
c) Any person in India including Individuals, Firms, Companies, Corporate bodies,
Trusts and Institutions can purchase Treasury Bills.
d) Treasury Bills are eligible securities for SLR purposes.
e) Treasury Bills are available for a minimum amount of Rs. 25,000 and in
multiples of Rs. 25,000 thereafter.

f) At present, RBI issues T-Bills for three different maturities: 91 days, 182 days
and 364 days.
Cash Management Bills (CMBs)
a) Government of India, in consultation with the Reserve Bank of India, has
decided to issue a new short-term instrument, known as Cash Management Bills
(CMBs), to meet the temporary mismatches in the cash flow of the Government.
b) The CMBs have the generic character of T-bills but are issued for maturities less
than 91 days.
c) Like T-bills, they are also issued at a discount and redeemed at face value at
maturity.
d) The tenure, notified amount and date of issue of the CMBs depends upon the
temporary cash requirement of the Government.

REVERSE MORTGAGE LOAN : A Helping Hand For Senior Citizens


Good Morning Readers,
Today we are providing you some small but important concepts of reverse
mortgage loan. This is one of the important topics. So below are the details.
The scheme of reverse mortgage has been introduced for the benefit of senior
citizens owning a house but having inadequate income to meet their needs. Some
important

Features of reverse mortgage are:


a) A homeowner who is above 60 years of age is eligible for reverse mortgage
loan. It allows him to turn the equity in his home into one lump sum or periodic
payments mutually agreed by the borrower and the banker.
b) NO REPAYMENT is required as long as the borrower lives, Borrower should
pay all taxes lating to the house and maintain the property as his primary residence.
c) The amount of loan is based on several factors : borrowers age, value of the
property, current interest rates and the specific plan chosen. The valuation of the
residential property is done at periodic intervals and it shall be clearly specified to
the borrowers upfront. The banks shall have the option to revise the periodic / lump
sum amount at such frequency or intervals based on revaluation of property.
Settlement - The loan shall become due and payable only when the last surviving
borrower dies or would like to sell the home, or permanently moves out. On 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 formulated by National Housing Bank (NHB),


the maximum period of the loan period is 15 years. The residual
life of the property should be at least 20 years. Where the

borrower lives longer than 15 years, periodic payments will not be


made by lender. However, the borrower can continue to occupy.
BANK MEIN ACCOUNT KHULWANA HAI KYA?- TYPES OF BANK A/C
Good Morning Readers,
Today we are posting the types of accounts in Banks. There are very frequent
questions from this part asked in many exams earlier. Just have an overview and
read it with a light mind.
Types of Bank Accounts
A bank account can be a time deposit account or a term deposit account or a no frill
account ie BSBDA .
TYPES OF BANK ACCOUNTS
a. Savings Bank Account
b. Current Deposit Account
c. Fixed Deposit Account
d. Recurring Deposit Account.
e. No-Frill Account
a. Savings Bank Account
This type of account can be opened with a minimum initial deposit that varies from
bank to bank. Money can be deposited any time in this account. Withdrawals can
be made either by signing a withdrawal form or by issuing a cheque or by using
ATM card. Normally banks put some restriction on the number of withdrawal from
this account. Interest is allowed on the balance of deposit in the account. The rate
of interest on savings bank account varies from bank to bank and also changes
from time to time. A minimum balance has to be maintained in the account as

prescribed by the bank. Interest rate is paid to the account holders on daily balance
basis.
b. Current Deposit Account
Big businessmen, companies and institutions such as schools, colleges, and
hospitals have to make payment through their bank accounts. Since there are
restrictions on number of withdrawals from savings bank account, that type of
account is not suitable for them. They need to have an account from which
withdrawal can be made any number of times. Banks open current account for
them. On this deposit bank does not pay any interest on the balances. Rather 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
excess of the balance of deposit. This facility is known as overdraft facility.
c. Fixed Deposit Account (also known as Term Deposit Account)
Many 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. Therefore, money is
deposited in a fixed deposit account to earn interest at a higher rate.
d. Recurring Deposit Account
This type of account is suitable for those who can save regularly and expect to earn
a fair return on the deposits over a period of time. While opening the account a
person has to agree to deposit a fixed amount once in a month for a certain period.
The 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. The rate of interest allowed
on the deposits is higher than that on a savings bank deposit but lower than the rate
allowed on a fixed deposit for the same period.
e. No Frill Account, ie BSBDA
The Basic Savings Bank Deposit Account allows you to bank with a zero minimum
balance requirement. All the existing Nofrills accounts opened by the banks are

now converted into BSBDA in compliance with the guidelines issued on August
22, 2012 by the Reserve Bank of India (RBI). BSBDA guidelines are applicable to
all scheduled commercial banks in India, including foreign banks having branches
in India. No charge will be levied for nonoperation/activation of inoperative
Basic Savings Bank Deposit Account.
Notes:
a) Minimum age to open a bank account is now 10 years.
b) Maximum Interest rate is given on FD A/c.
c) The maximum period of an FD is 10 years & for RD is 5 years.

Short notes on Accounts for NRI/PIO in India


What are the different types of accounts which can be maintained by an
NRI/PIO in India?
Types of accounts which can be maintained by an NRI / PIO in India:
A. Non-Resident Ordinary Rupee Account (NRO Account)
NRO accounts may be opened / maintained in the form of current, savings,
recurring or fixed deposit accounts. Interest rates offered by banks on NRO
deposits cannot be higher than those offered by them on comparable domestic
rupee deposits.
Account should be denominated in Indian Rupees.
Permissible credits to NRO 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 acquired out of rupee/foreign currency funds
or by way of legacy/ inheritance.

NRI/PIO may remit from the balances held in NRO account an amount not
exceeding USD one million per financial year, subject to payment of applicable
taxes.
The limit of USD 1 million per financial year includes sale proceeds of
immovable properties held by NRIs/PIOs.
B. Non-Resident (External) Rupee Account (NRE Account)
1) NRE account may be in the form of savings, current, recurring or fixed deposit
accounts.
2) Such accounts can be opened only by the non-resident himself and not through
the holder of the power of attorney.
3) Account will be maintained in Indian Rupees.
4) Accrued interest income and balances held in NRE accounts are exempt from
Income tax.
5) Authorised dealers/authorised banks may at their discretion allow for a period of
not more than two weeks, overdrawings in NRE savings bank accounts, up to a
limit of Rs.50,000.
6) Loans up to Rs.100 lakh can be extended against security of funds held in NRE
Account either to the depositors or third parties.
C. Foreign Currency Non Resident (Bank) Account FCNR (B) Account
FCNR (B) accounts are only in the form of term deposits of 1 to 5 years
Account can be in any freely convertible currency.
Loans up to Rs.100 lakh can be extended against security of funds held in FCNR
(B) deposit either to the depositors or third parties.
The interest rates are stipulated by the Department of Banking Operations and
Development, Reserve Bank of India.

Drips of foreign currency-Foreign Accounts


Dear Readers,

Following is the article related to Drips of foreign currency.This


article was provided by Rohan Anand one of the regular readers.
Drips of foreign currency: Only potion for the ailing rupee
As rupee continues to plummet, now trailing at 64.42 per USD, recently the apex
bank has made some changes in the interest rates of FCNR (B) account. This step
has been taken to bolster the tardy foreign export credit inflow. This is sufficed to
say that Indias rupee strength overtly depends on the amount of foreign currency,
mostly dollar. The 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.
Many NRIs are often faced with the situation of maintaining a Rupee account in
India. To encourage Non Resident Indians (NRIs) and Persons of Indian Origin
(PIOs) staying abroad to invest in India, the Govt. has allowed these Individuals to
open 3 types of NRI Account in India:NRE
NRO
FCNR(B)
1. NRE Account i.e. Non-Resident External Account is a rupee denominated
account and the amount in this type of account is freely repatriable. This type of
NRI Account can either be in the form of Savings, Current, Recurring or Fixed
Deposit.
As this form of NRI Account is rupee denominated, the investor will have to
convert Foreign Currency into Rupees and in case he intends to take the funds back
to his home country, he will again have to convert the Rupees into Foreign
Currency This form of NRI Bank Account is best suited for overseas savings which
have been remitted to India by converting the foreign currency into INR.

Joint Holding: NRE account can be jointly held with another NRI but not with
resident Indian. On the other hand NRO account (discussed below) can be held
with NRI as well as resident Indian (close relative) as defined under Section 6 of
the Companies Act 1956.
2. NRO Account i.e. Non-Resident Ordinary Account is a rupee denominated
account and can be in the form of savings or current or recurring or fixed deposit.
The income which is deemed to accrue or arise in India can be deposited only this
type of account. Examples of such forms of incomes are Rent, Dividend and
Commission etc. the interest earned in NRO account and credit balances are
subject to respective income tax bracket and are also subject to applicable wealth
tax (Govt. has done away with this tax and subsumed it in indirect tax system in
the form service tax.)
Such incomes cannot be deposited in NRE Account. Moreover, the interest earned
on this form of account is also taxable as compared to NRE and FCNR Account in
which Tax on Interest is not levied in India. TDS on the amount accrued in the
form of Interest is applicable in NRO account.
Choose N RE accounts if you:
(Primary reason) want to park your overseas earnings remitted to India converted
to Indian
Rupees;

want to maintain savings in Rupee but keep them liquid;

want to make a joint account with another NRI;

want Rupee savings to be freely repatriable


Choose NRO account if you:
(Primary reason) want to park India based earnings in Rupees in India;

want account to deposit income earned in India such as rent, dividends etc;

want to open account with resident Indian (close relative)

3. FCNR (B) stands for Foreign Currency Non Resident Account (Banks) and can
only be opened in Foreign Currency and not in the Indian Currency. It is a form of
fixed deposit on which regular interest is paid. As Interest Rates in India (approx 78%) are much higher as compared to the interest rates in western countries (approx
1-2%), many NRIs invest their surplus funds in fixed deposits in India through
this type of NRI Account Another benefit of this type of NRI Bank Account is that
the investor will not have to bear any risk of fluctuations in the foreign currency.
Say for e.g.: Mr. A invests $10 in this form of NRI Account and the Interest Rate is
10% p.a., he would get $ 11 at the end of the year irrespective of the Rupee-Dollar
exchange rates. And therefore in this form of NRI Bank Account, he is free from
any foreign exchange risk.
This type of NRI Bank Account can be opened for a minimum of 1 year and a
maximum of 5 years. Moreover, the interest earned on this form of NRI Bank
Account is also exempted from tax in India.
NB. The Foreign Currency Non-Resident (FCNR(B)) scheme was introduced with
effect from May 15, 1993 to replace the then prevailing FCNR(A) scheme
introduced in 1975, where the foreign exchange risk was borne by RBI and
subsequently by the Govt. of India. The FCNR (A) scheme was withdrawn in
August, 1994 in view of its implications for the central banks balance sheet and
quasi-fiscal costs to the Government.

hamare deposits insured hai kyunki- DICGC hai na...

Deposit Insurance and Credit Guarantee Corporation is a 100% subsidiary


of Reserve Bank of India. It was established on July 15, 1978 under Deposit
Insurance and Credit Guarantee Corporation Act, 1961 for the purpose of
providing insurance of deposits and guaranteeing of credit facilities. It insures all
bank deposits, such as saving, fixed, current, recurring deposits for up to the limit
of Rs. 100,000 of each deposits in a bank.
Banks which are insured by DICGC:

Commercial Banks: All commercial banks including branches of foreign banks


functioning in India, local area banks and regional rural banks are insured by the
DICGC.
DICGC insured?
In the event of a bank failure, DICGC protects bank deposits that are payable in
India. The DICGC insures all deposits such as savings, fixed, current, recurring,
etc. except the following types of deposits.
(i) Deposits of foreign Governments;
(ii) Deposits of Central/State Governments;
(iii)Inter-bank deposits;
(iv) Deposits of the State Land Development Banks with the State co-operative
bank;
(v) Any amount due on account of any deposit received outside India
(vi) Any amount, which has been specifically exempted by the corporation with the
previous approval of Reserve Bank of India.
Maximum deposit amount insured by the DICGC:
Each depositor in a bank is insured upto a maximum of Rs.1,00,000 (Rupees One
Lakh) for both principal and interest amount held by him in the same capacity.
Does the DICGC insure just the principal on an account or both principal and
accrued interest?
The DICGC insures principal and interest upto a maximum amount of Rs. One
lakh.
Are deposits in different banks separately insured?
Yes. If you have deposits with more than one bank, deposit insurance coverage
limit is applied separately to the deposits in each bank.

Can the bank deduct the amount of dues payable by the depositor?
Yes. Banks have the right to set off their dues from the amount of deposits. The
deposit insurance is available after netting of such dues.
Can any insured bank withdraw from the DICGC coverage?
No. The deposit insurance scheme is compulsory and no bank can withdraw from
it.

Inko toh LOAN dena hi padega kyunki BOSS (RBI) ka nirdesh haiPRIORITY SECTOR LENDING
Dear readers, today we are providing you the highlights of the one of the most
important topic of General awareness section, i.e. the Priority Sector Lending. It
is very relevant for all the upcoming banking exams, IBPS/SBI/RRB etc. and also
being asked in the banking interviews.
Highlights of PSL
It means provide credit to the needy sectors of the society. The sectors are:
Agriculture
Micro and Small Enterprises
Education
Housing
Export
Weaker Sections
Social Infrastructure
Renewable Energy
Targets under PSL

Agriculture: 18 percent of ANBC. Out of this 18 percent, a target of 8 percent of


ANBC is for Small and Marginal Farmers, to be achieved in a phased manner i.e.,
7 per cent by March 2016 and 8 per cent by March 2017.
Weaker Sections: 10 percent of ANBC.
Micro Enterprises: 7.5 percent of ANBC has been prescribed for Micro
Enterprises, to be achieved in a phased manner i.e. 7 percent by March 2016 and
7.5 percent by March 2017.
Overall PSL Target for Domestic Bank/Foreign Bank with more than 20
Branches: 40 percent of Adjusted Net Bank Credit.
Overall PSL Target for Foreign Bank with less than 20 Branches: 40 percent of
Adjusted Net Bank Credit to be achieved in a phased manner2015-16
2016-17
2017-18
2018-19
2019-20
Categorization of MSME according to MSME ACT 2006
Manufacturing Sector (Goods)

Enterprises

Investment in plant and machinery

Micro Enterprises

Does not exceed twenty five lakh rupees

Small Enterprises

More than twenty five lakh rupees but does not


exceed five crore rupees

Medium Enterprises

More than five crore rupees but does not exceed


ten crore rupees

Service Sector

Enterprises

Investment in equipment

Micro Enterprises

Does not exceed ten lakh rupees

Small Enterprises

More than ten lakh rupees but does not exceed two crore
rupees

Medium
Enterprises

More than two crore rupees but does not exceed five crore
rupees

Other Facts:
Farmers with landholding of up to 1 hectare are considered as Marginal Farmers.
Farmers with a landholding of more than 1 hectare and upto 2 hectares are
considered as Small Farmers.
Scheduled Commercial Banks having any shortfall in lending to priority sector
shall be allocated amounts for contribution to the Rural Infrastructure
Development Fund (RIDF) established with NABARD.
For Renewable Energy, bank loans up to a limit of Rs.15 crore to borrowers for
purposes like solar based power generators, etc. For individual households, the
loan limit will be Rs.10 lakh per borrower.
For Housing, banks can provide loans to individuals up to Rs. 28 lakh in
metropolitan centres (with population of ten lakh and above) and loans up to Rs. 20
lakh in other centres for purchase/construction of a dwelling unit per family.
Export credit will be allowed up to 32 percent of ANBC for Foreign banks with
less than 20 branches in India.
For Education, banks can provide loans to individuals for educational purposes
including vocational courses upto Rs. 10 lakh for studies in India and Rs. 20 lakh
for studies abroad.

BANKING mein pehli baar- The First Among All Banks


Dear Readers,
A very Good Morning to all of you and we hope that today morning
will bring a new inspiration for your exam preparation. And God is also helping us
with such a good weather to study hard. Well jokes apart and on a serious note,
today's notes are based on the first achiever in the Indian Banking Sector. It is not
only important for SBI, IBPS PO but also for different Insurance sector exams viz.
LIC, NICL, NIACL, GIC, UII, Oriental Insurance. If it is possible, make a note of
it for future, otherwise you will always find it on Bankers Adda.
1. The First Bank in India Bank of Hindustan
2. First Governor of RBI Mr. Osborne Smith
3. First Indian governor of RBI Mr. C D Deshmukh
4. First Bank to Introduce ATM in India HSBC
5. First Bank to introduce saving Bank in India Presidency bank in 1830

6. First Bank to Introduce Cheque system in India Bengal Bank 1784

7. First Bank to introduce Internet Banking ICICI BANK

8. First Bank to introduce Mutual Fund State Bank of India

9. First Bank to introduce Credit Card in India Central Bank of India

10. First Foreign Bank in India Comptoire dEscompte de Paris of France in


1860

11. First Joint Stock Bank of India Allahabad Bank

12. First Indian bank to open branch outside India in London in 1946 Bank of
India

13. First Indian Bank started with Indian capital Punjab National Bank
14. First Regional Rural Bank name Prathama Grameen Bank was started
by Syndicate Bank
15. First Universal Bank in India ICICI Bank
16. First bank in India listed in New York Stock Exchange (NYSE) ICICI Bank
17. First Bank in India to launch Talking ATMs for differently able person Union Bank of India
18.
First Bank in India to launch its own Payment Aggregators State Bank of India.
(SBIePay)

19. Countrys first all woman bank Bhartiya Mahila Bank


20. First India bank Got ISO Canara Bank

ANY TIME MONEY provide karta hai- ATMs & WLAs


Dear Readers,
First of all Good Morning to all of you. Today we are posting
some questions out of which you can expect at least one or two questions in
upcoming bank exams. It is Important for you to understand what to read out
of thousand topics from book. But we will provide you handpicked topics and
will present to you in such a manner that it will stay forever in your mind.
Q.1. What is an Automated Teller Machine (ATM)?
Ans 1. Automated Teller Machine is a computerized machine that provides the
customers of banks the facility of accessing their account for dispensing cash and
to carry out other financial & non-financial transactions without the need to
actually visit their bank branch.
Q.2. What are White Label ATMs (WLAs)?
Ans 2. ATMs set up, owned and operated by non-banks are called White Label
ATMs. Non-bank ATM operators are authorized under Payment & Settlement
Systems Act, 2007 by the Reserve Bank of India.
Q.3. What has been the rationale of allowing non-bank entities for setting up
of WLAs ?
Ans 3. The rationale of allowing non-bank entity to set up White Label ATMs has
been to increase the geographical spread of ATM for increased / enhanced
customer service.
Q.4. What type of cards can be used at an ATM/WLA?

Ans 4. The ATM/ATM cum debit cards, credit cards and open prepaid cards (that
permit cash withdrawal) issued by banks can be used at ATMs/WLAs for various
transactions.
Q.5. What are the services/facilities available at ATMs/WLAs?
Ans 5. In addition to cash dispensing, ATMs/WLAs may offer many other
services/facilities to bank customers. Some of these services include:
Account Information
Cash Deposit (Acceptance of deposits are not permitted at WLAs)
Regular Bills Payment (not permitted at WLAs)
Purchase of Re-load Vouchers for Mobiles (not permitted at WLAs)
Mini/Short Statement
PIN change
Request for Cheque Book

Q.6. What is Personal Identification Number (PIN)?


Ans 6. PIN is the numeric password which is separately mailed / handed over to
the customer by the bank while issuing the card. Most banks require the customers
to change the PIN on the first use. Customer should not disclose PIN to anybody,
including to bank officials. Customers should change the PIN at regular intervals.
Q.7. Can these cards be used at any bank/non-bank ATM (WLA) in the
country?
Ans 7. Yes. The cards issued by banks in India may be used at any bank / white
label ATM in the country.
Q.8. Is the customer charged for ATM transactions?
Ans.8. With effect from November 01, 2014, Savings bank account holders can do
a minimum of three transactions (including both financial and non-financial
transactions) free of charge in a month at other bank ATMs in case of ATMs
located in six metro locations, viz. Mumbai, New Delhi, Chennai, Kolkata,

Bengaluru and Hyderabad. At other locations, the savings bank account holders
can transact a minimum of five transactions (including both financial and nonfinancial transactions) free of charge in a month at other bank ATMs.
Similarly, Basic Savings Bank Deposit Account holders will continue to get five
free 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 on
customers, the customer can be charged a maximum of Rs. 20/- per transaction
(plus service tax, if any) by his/her bank.
Q.9. What steps should a customer take in case of failed ATM transaction at
other bank/white label ATMs, when his / her account is debited?
Ans 9. The customer should lodge a complaint with the card issuing bank at the
earliest. This process is applicable even if the transaction was carried out at
another banks/non-banks ATM. In case of WLAs, the contact number/toll free
numbers are also available for lodging complaints regarding failed transactions at
their ATMs.
Q.10. Is there any time limit for the card issuing banks for recrediting the
customers account for a failed ATM/WLA transaction indicated under Q. No.
9?
Ans 10. As per the RBI instructions, banks have been mandated to resolve
customer complaints by re-crediting the customers account within 7 working days
from the date of complaint.
Q.11. Are the customers eligible for compensation for delays beyond 7
working days?
Ans 11. Yes. Effective from July 1, 2011, banks have to pay compensation of Rs.
100/- per day for delays in re-crediting the amount beyond 7 working days from
the date of receipt of complaint for failed ATM transactions. The compensation has
to be credited to the account of the customer without any claim being made by the
customer. If the complaint is not lodged within 30 days of transaction, the customer
is not entitled for any compensation for delay in resolving his / her complaint.
Q.12. What is the course of action for the customer if the complaint is not
addressed by his/her bank within the stipulated time / not addressed to his
satisfaction?
Ans 12. The customer can take recourse to the Banking Ombudsman, if the
grievance is not redressed by the his/her card issuing bank.

RBI- the BOSS of all Banks


RBI is the central Bank of India and controls the entire money issue, circulation
the entire money issue, circulation and control by its monetary policies and lending
policies by periodical updates or corrections to discipline the economy.
The central bank of India, founded in 1935, which maintains the monetary policy
of its national currency, the rupee, and the nation's currency reserves.
It is also known as the Bank of last resort/Bankers bank/Governments bank.
Establishment:
The reserve bank of India was established on April 1, 1935 in accordance with the
provisions of the Reserve Bank of India Act, 1934. The Central Office of the
Reserve Bank of India was initially established in Calcutta but was permanently
moved to Mumbai in 1937. Though originally privately owned, since
nationalization in 1949, the Reserve Bank is fully owned by the Government of
India.
MAIN FUNCTIONS OF RBI:
1) Monetary Authority: Formulates implements and monitors the monetary
policy.
2) Regulator and supervisor of the financial system: Prescribes broad
parameters of banking operations within which the countrys banking and financial
system functions.
3) Manager of Foreign Exchange: Manages the Foreign Exchange Management
Act, 1999.
4) Issuer of Currency: Issues and exchanges or destroys currency and coins not fit
for circulations.
5) Development role: Performs a wide range of promotional functions to support
national objectives.
6) Bankers to the Government: performs merchant banking function for the
central and the state governments; also acts as their banker.
7) Bankers to banks: maintains banking accounts of all scheduled banks.
Central Board of RBI:

The Reserve Bank's affairs are governed by a central board of directors. The board
is appointed by the Government of India in keeping with the Reserve Bank of India
Act. They are appointed/nominated for a period of four years
Official Directors:
Full-time : Governor and not more than four Deputy Governors
Currently:
Dr. Raghuram Rajan (Governor)
Shri H.R. Khan (Deputy Governor)
Dr. Urjit R. Patel (Deputy Governor)
Shri R. Gandhi (Deputy Governor)
Shri S. S. Mundra (Deputy Governor)
Subsidiaries of RBI:
Fully owned: Deposit Insurance and
India(DICGC),
Bharatiya
Reserve
Limited(BRBNMPL)

Other Important facts related to RBI:

Credit
Bank

Guarantee Corporation of
Note
Mudran
Private

Reserve Bank of India Act passed in 1934.


Reserve Bank of India (RBI) established on 1 April 1935.
Reserve Bank of India (RBI) established on the recommendation of HiltonYoung Commission.
RBI is the sole authority in India to issue Bank notes in India.
Emblem of RBI: Panther and Palm Tree.
Chintaman Dwarkanath Deshmukh (C D Deshmukh) was the governor of
RBI at the Time of nationalization of RBI in 1949.

1st women Deputy Governor of RBI -K.J.Udeshi.


RBI is not expected to perform the function of accepting deposits from the
general public
The first Governor of the Reserve Bank of India from 01.04.1935 to
30.06.1937 was Sir Osborne Smith
RBI decides the following rates namely; Bank rate, repo rate, reverse repo
rate and cash reserve ratio.
Banking Awareness: Inflation and RBI
To understand RBI monetary policy we have to understand why RBI has to do
all this mehnat, RBI has a biggest villain standing against him called as
INFLATION.
INFLATIONInflation is the biggest parasite in the Indian economy. In the condition of inflation
there is flow of extra money in the economy creating excess 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 excess in
demand and this creates a rise in price of the products resulting in inflation.
Inflation has the following adverse effects on the economy:

Here is story of Mr. Bechara (common man)


Inflation and Purchasing ProductsPurchasing Power-The value of a currency expressed in terms of the amount of
goods or services that one unit of money can buy. Purchasing power is important

because, all else being equal, inflation decreases the amount of goods or services
you'd be able to purchase. Mr.Bechara is fetching a salary of Rs.20K monthly, he
was doing his best to keep up to the expectations his over sized wife and extra
demanding kids, Now in inflation his salary is the same but his 20K will now
cannot complete the demands of his family, because that 20K has become
equivalent to say, 18K and now they can have less resources in the same prices,
This will result in the debt conditions , lesser purchase of goods and services(due
to higher prices) and will directly hurt the economy.

Inflation and DebtPrice inflation is a debtor's best friend and a creditor's worst enemy. Lets see how,
our Mr. Bechara gave Rs. 10K to a debtor in 2006 for a period of three years, after
two years inflation occurred, now the value of that 10k becomes equivalent to 8k
(loss in the value of Rs), The effect of inflation on debtors is positive because
debtors can pay their debts with money that is less valuable.
Other negative impacts-

Black-marketing- Expecting 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 Mr. Bechara has to pay more than
hefty amount for the daily ka aaloo ,pyazz..
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.
Different stages of InflationCreeping Inflation:
Creeping or mild inflation is when prices rise 3% a year or less.
Walking Inflation:
This type of strong, or pernicious, inflation is between 3-10% a year. It is harmful
to the economy because it heats up economic growth too fast.
Galloping Inflation:
When inflation rises to ten percent or greater, it wreaks absolute havoc on the
economy. Money loses value so fast that business and employee income can't keep
up with costs and prices. Foreign investors avoid the country.
Hyperinflation:
Hyperinflation is when the prices skyrocket, the currency becomes a piece of trash,
Zimbabwe experienced a similar conditions in previous years.
Calculation of Inflation-

In India inflation is calculated by the help of CPI(Consumer Price


Index),previously it was calculated by WPI(Wholesale Price Index), CPI as a scale
was adopted by RBI ,due the recommendations of Urijit Patel committee.
Nitty-Gritty of FDs
Hello

Readers,

Here we are presenting to you all a brief about Fixed Deposits, which was
shared
by
Rohan
Anand.
Don't
forget
to
thank
him!!!
FDs (Fixed Deposits): A comprehensible approach towards defining the nittygritty of a popular investing instrument.
Fixed 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.
Fixed deposit, in fact, gives you a fixed interest either annually or on a cumulative
basis. What's important to note is that this interest income is taxed on accrual basis.
This means irrespective of when you receive it, you will have to pay tax at the end
of the financial year. Even if it is not taxable, you still have to show it in your I-T
returns.
There is no doubt that bank fixed 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?
Lets try to answer this question,
Most FDs only give you about 8.50 % interest before tax and around 7 % after tax.
This means, you are effectively losing money every year you invest your money in
a FD.
In correlation with equity mutual funds, long term returns from which are tax free,
FD interest is taxable at your current tax slab. The higher your income, the lower
your FD return will be.

Now, another question ensued from these above answers. If FDs are pricey enough
taking a long term perspective then where one should invest. Mutual Funds might
be the answer. But lets stick to the subject on which we are discussing.
Another aspect of the FD which is subtle is TDS. TDS or Tax Deducted at Source
is the Income Tax departments way of automating tax collection, to an extent. The
tax on interest from any FD is paid partially via TDS deducted by the bank and the
rest is paid as Self-Assessment Tax by the individual.
Banks deduct TDS on interest only if the interest amount for an F.D is greater than
Rs.10, 000 per year. The rate of TDS deducted by banks is 10% on interest income,
provided your PAN number is available with the bank. If the bank doesnt have
your PAN in its records, TDS is deducted at 20% on interest income.
If your total income is below the minimum tax slab (10%), the TDS on FD interest
that is deducted by banks can be recovered by claiming a refund for the TDS
amount at the time of tax filing.
Alternately, You can submit the Form 15G to the bank declaring that since your
taxable income for the year will be below the minimum tax slab, the bank
shouldnt deduct TDS on your FD Interest.
Senior Citizens are also exempt from paying TDS on FD interest as a special
concession by the IT department. They need to submit Form 15H to ensure they
arent charged TDS on their F.Ds.
On the whole, one of the major benefits of FD is its liquidity. For any immediate
requirement, it can be broken and the money is credited you're your account within
a short span of time. With higher interest rates it is surely a good investment
opportunity. Senior citizens, who generally get higher interest rates, will benefit if
they fall in a lower tax slab. In a nutshell, one should invest in FDs, if one finds
difficulty in comprehending the most elusive and volatile stock market.

Important Banking Terms


Hello Readers,
On the account of upcoming SBI PO Exam, here we are providing you all the
Important Banking Terms. Hope you all like the post!!!
Accrued interest: Interest due from issue date or from the last coupon payment
date to the settlement date. Accrued interest on bonds must be added to their
purchase price.
Arbitrage: Buying a financial instrument in one market in order to sell the same
instrument at a higher price in another market.
Ask Price: The lowest price at which a dealer is willing to sell a given security.
Asset-Backed Securities (ABS): A type of security that is backed by a pool of
bank loans, leases, and other assets. Most ABS are backed by auto loans and credit
cards these issues are very similar to mortgage-backed securities.
At-the-money: The exercise price of a derivative that is closest to the market price
of the underlying instrument.
Basis Point: One hundredth of 1%. A measure normally used in the statement of
interest rate e.g., a change from 5.75% to 5.81% is a change of 6 basis points.
Bear Markets: Unfavorable markets associated with falling prices and investor
pessimism.
Bid-ask Spread: The difference between a dealers bid and ask price.
Bid Price: The highest price offered by a dealer to purchase a given security.
Blue Chips: Blue chips are unsurpassed in quality and have a long and stable
record of earnings and dividends. They are issued by large and well-established
firms that have impeccable financial credentials.
Bond: Publicly traded long-term debt securities, issued by corporations and
governments, whereby the issuer agrees to pay a fixed amount of interest over a
specified period of time and to repay a fixed amount of principal at maturity.

Book Value: The amount of stockholders equity in a firm equals the amount of the
firms assets minus the firms liabilities and preferred stock
Broker: Individuals licensed by stock exchanges to enable investors to buy and
sell securities.
Brokerage Fee: The commission charged by a broker.
Bull Markets: Favorable markets associated with rising prices and investor
optimism.
Call Option: The right to buy the underlying securities at a specified exercise
price on or before a specified expiration date.
Callable Bonds: Bonds that give the issuer the right to redeem the bonds before
their stated maturity.
Capital Gain: The amount by which the proceeds from the sale of a capital asset
exceed its original purchase price.
Capital Markets: The market in which long-term securities such as stocks and
bonds are bought and sold.
Certificate of Deposits (CDs): Savings instrument in which funds must remain on
deposit for a specified period, and premature withdrawals incur interest penalties.
Closed-end (Mutual) Fund: A fund with a fixed number of shares issued, and all
trading is done between investors in the open market. The share prices are
determined by market prices instead of their net asset value.
Collateral: A specific asset pledged against possible default on a bond. Mortgage
bonds are backed by claims on property. Collateral trusts bonds are backed by
claims on other securities. Equipment obligation bonds are backed by claims on
equipment.
Commercial Paper: Short-term and unsecured promissory notes issued by
corporations with very high credit standings.

Common Stock: Equity investment representing ownership in a corporation; each


share represents a fractional ownership interest in the firm.
Compound Interest: Interest paid not only on the initial deposit but also on any
interest accumulated from one period to the next.
Contract Note: A note which must accompany every security transaction which
contains information such as the dealers name (whether he is acting as principal or
agent) and the date of contract.
Controlling Shareholder: Any person who is, or group of persons who together
are, entitled to exercise or control the exercise of a certain amount of shares in a
company at a level (which differs by jurisdiction) that triggers a mandatory general
offer, 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 majority of the board of directors
of the issuer.
Convertible Bond: A bond with an option, allowing the bondholder to exchange
the bond for a specified number of shares of common stock in the firm. A
conversion price is the specified value of the shares for which the bond may be
exchanged. The conversion premium is the excess of the bonds value over the
conversion price.
Corporate Bond: Long-term debt issued by private corporations.
Coupon: The feature on a bond that defines the amount of annual interest income.
Coupon Frequency: The number of coupon payments per year.
Coupon Rate: The annual rate of interest on the bonds face value that a bonds
issuer promises to pay the bondholder. It is the bonds interest payment per dollar
of par value.
Covered Warrants: Derivative call warrants on shares which have been separately
deposited by the issuer so that they are available for delivery upon exercise.
Credit Rating: An assessment of the likelihood of an individual or business being
able to meet its financial obligations. Credit ratings are provided by credit agencies
or rating agencies to verify the financial strength of the issuer for investors.

Currency Board: A monetary system in which the monetary base is fully backed
by foreign reserves. Any changes in the size of the monetary base has to be fully
matched by corresponding changes in the foreign reserves.
Current Yield: A return measure that indicates the amount of current income a
bond provides relative to its market price. It is shown as: Coupon Rate divided by
Price multiplied by 100%.
Custody of Securities: Registration of securities in the name of the person to
whom a bank is accountable, or in the name of the banks nominee; plus deposition
of securities in a designated account with the banks bankers or with any other
institution providing custodial services.
Default Risk: The possibility that a bond issuer will default ie, fail to repay
principal and interest in a timely manner.
Derivative Call (Put) Warrants: Warrants issued by a third party which grant the
holder the right to buy (sell) the shares of a listed company at a specified price.
Derivative Instrument: Financial instrument whose value depends on the value of
another asset.
Discount Bond: A bond selling below par, as interest in-lieu to the bondholders.
Diversification: The inclusion of a number of different investment vehicles in a
portfolio in order to increase returns or be exposed to less risk.
Duration: A measure of bond price volatility, it captures both price and
reinvestment risks to indicate how a bond will react to different interest rate
environments.
Earnings: The total profits of a company after taxation and interest.
Earnings per Share (EPS): The amount of annual earnings available to common
stockholders as stated on a per share basis.
Earnings Yield: The ratio of earnings to price (E/P). The reciprocal is price
earnings ratio (P/E).
Equity: Ownership of the company in the form of shares of common stock.

Equity Call Warrants: Warrants issued by a company which give the holder the
right to acquire new shares in that company at a specified price and for a specified
period of time.
Ex-dividend (XD): A security which no longer carries the right to the most
recently declared dividend or the period of time between the announcement of the
dividend and the payment (usually two days before the record date). For
transactions during the ex-dividend period, the seller will receive the dividend, not
the buyer. Ex-dividend status is usually indicated in newspapers with an (x) next to
the stocks or unit trusts name.
Face Value/ Nominal Value: The value of a financial instrument as stated on the
instrument. Interest is calculated on face/nominal value.
Fixed-income Securities: Investment vehicles that offer a fixed periodic return.
Fixed Rate Bonds: Bonds bearing fixed interest payments until maturity date.
Floating Rate Bonds: Bonds bearing interest payments that are tied to current
interest rates.
Fundamental Analysis: Research to predict stock value that focuses on such
determinants as earnings and dividends prospects, expectations for future interest
rates and risk evaluation of the firm.
Future Value: The amount to which a current deposit will grow over a period of
time when it is placed in an account paying compound interest.
Future Value of an Annuity: The amount to which a stream of equal cash flows
that occur in equal intervals will grow over a period of time when it is placed in an
account paying compound interest.
Futures Contract: A commitment to deliver a certain amount of some specified
item at some specified date in the future.
Hedge: A combination of two or more securities into a single investment position
for the purpose of reducing or eliminating risk.
Income: The amount of money an individual receives in a particular time period.

Index Fund: A mutual fund that holds shares in proportion to their representation
in a market index, such as the S&P 500.
Initial Public Offering (IPO): An event where a company sells its shares to the
public for the first time. The company can be referred to as an IPO for a period of
time after the event.
Inside Information: Non-public knowledge about a company possessed by its
officers, major owners, or other individuals with privileged access to information.
Insider Trading: The illegal use of non-public information about a company to
make profitable securities transactions
Intrinsic Value: The difference of the exercise price over the market price of the
underlying asset.
Investment: A vehicle for funds expected to increase its value and/or generate
positive returns.
Investment Adviser: A person who carries on a business which provides
investment advice with respect to securities and is registered with the relevant
regulator as an investment adviser.
IPO price: The price of share set before being traded on the stock exchange. Once
the company has gone Initial Public Offering, the stock price is determined by
supply and demand.
Junk Bond: High-risk securities that have received low ratings (i.e. Standard &
Poors BBB rating or below; or Moodys BBB rating or below) and as such,
produce high yields, so long as they do not go into default.
Leverage Ratio: Financial ratios that measure the amount of debt being used to
support operations and the ability of the firm to service its debt.
Libor: The London Interbank Offered Rate (or LIBOR) is a daily reference rate
based on the interest rates at which banks offer to lend unsecured funds to other
banks in the London wholesale money market (or interbank market). The LIBOR
rate is published daily by the British Bankers Association and will be slightly

higher than the London Interbank Bid Rate (LIBID), the rate at which banks are
prepared to accept deposits.
Limit Order: An order to buy (sell) securities which specifies the highest (lowest)
price at which the order is to be transacted.
Limited Company: The passive investors in a partnership, who supply most of the
capital and have liability limited to the amount of their capital contributions.
Liquidity: The ability to convert an investment into cash quickly and with little or
no loss in value.
Listing: Quotation of the Initial Public Offering companys shares on the stock
exchange for public trading.
Listing Date: The date on which Initial Public Offering stocks are first traded on
the stock exchange by the public
Margin Call: A notice to a client that it must provide money to satisfy a minimum
margin requirement set by an Exchange or by a bank / broking firm.
Market Capitalization: The product of the number of the companys outstanding
ordinary shares and the market price of each share.
Market Maker: A dealer who maintains an inventory in one or more stocks and
undertakes to make continuous two-sided quotes.
Market Order: An order to buy or an order to sell securities which is to be
executed at the prevailing market price.
Money Market: Market in which short-term securities are bought and sold.
Mutual Fund: A company that invests in and professionally manages a diversified
portfolio of securities and sells shares of the portfolio to investors.
Net Asset Value: The underlying value of a share of stock in a particular mutual
fund; also used with preferred stock.
Offer for Sale: An offer to the public by, or on behalf of, the holders of securities
already in issue.

Offer for Subscription: The offer of new securities to the public by the issuer or
by someone on behalf of the issuer.
Open-end (Mutual) Fund: There is no limit to the number of shares the fund can
issue. The fund issues new shares of stock and fills the purchase order with those
new shares. Investors buy their shares from, and sell them back to, the mutual fund
itself. The share prices are determined by their net asset value.
Open Offer: An offer to current holders of securities to subscribe for securities
whether or not in proportion to their existing holdings.
Option: A 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.
Oversubscribed: When an Initial Public Offering has more applications than
actual shares available. Investors will often apply for more shares than required in
anticipation of only receiving a fraction of the requested number. Investors and
underwriters will often look to see if an IPO is oversubscribed as an indication of
the publics perception of the business potential of the IPO company.
Par Bond: A bond selling at par (i.e. at its face value).
Par Value: The face value of a security.
Perpetual Bonds: Bonds which have no maturity date.
Placing: Obtaining subscriptions for, or the sale of, primary market, where the new
securities of issuing companies are initially sold.
Portfolio: A collection of investment vehicles assembled to meet one or more
investment goals.
Preference Shares: A corporate security that pays a fixed dividend each period. It
is senior to ordinary shares but junior to bonds in its claims on corporate income
and assets in case of bankruptcy.
Premium (Warrants): The difference of the market price of a warrant over its
intrinsic value.

Premium Bond: Bond selling above par.


Present Value: The amount to which a future deposit will discount back to present
when it is depreciated in an account paying compound interest.
Present Value of an Annuity: The amount to which a stream of equal cash flows
that occur in equal intervals will discount back to present when it is depreciated in
an account paying compound interest.
Price/Earnings Ratio (P/E): The measure to determine how the market is pricing
the companys common stock. The price/earnings (P/E) ratio relates the companys
earnings per share (EPS) to the market price of its stock.
Privatization: The sale of government-owned equity in nationalized industry or
other commercial enterprises to private investors.
Prospectus: A detailed report published by the Initial Public Offering company,
which includes all terms and conditions, application procedures, IPO prices etc, for
the IPO
Put Option: The right to sell the underlying securities at a specified exercise price
on of before a specified expiration date.
Rate of Return: A percentage showing the amount of investment gain or loss
against the initial investment.
Real Interest Rate: The net interest rate over the inflation rate. The growth rate of
purchasing power derived from an investment.
Redemption Value: The value of a bond when redeemed.
Reinvestment Value: The rate at which an investor assumes interest payments
made on a bond which can be reinvested over the life of that security.
Relative Strength Index (RSI): A stocks price that changes over a period of time
relative to that of a market index such as the Standard & Poors 500, usually
measured on a scale from 1 to 100, 1 being the worst and 100 being the best.
Repurchase Agreement: An arrangement in which a security is sold and later
bought back at an agreed price and time.

Resistance Level: A price at which sellers consistently outnumber buyers,


preventing further price rises.
Return: Amount of investment gain or loss.
Rights Issue: An offer by way of rights to current holders of securities that allows
them to subscribe for securities in proportion to their existing holdings.
Risk-Averse, Risk-Neutral, Risk-Taking:
Risk-averse describes an investor who requires greater return in exchange
for greater risk.
Risk-neutral describes an investor who does not require greater return in
exchange for greater risk.
Risk-taking describes an investor who will accept a lower return in exchange
for greater risk.
Senior Bond: A bond that has priority over other bonds in claiming assets and
dividends.
Short Hedge: A transaction that protects the value of an asset held by taking a
short position in a futures contract.
Settlement: Conclusion of a securities transaction when a customer pays a
broker/dealer for securities purchased or delivered, securities sold, and receives
from the broker the proceeds of a sale.
Short Position: Investors sell securities in the hope that they will decrease in value
and can be bought at a later date for profit.
Short Selling: The sale of borrowed securities, their eventual repurchase by the
short seller at a lower price and their return to the lender.
Speculation: The process of buying investment vehicles in which the future value
and level of expected earnings are highly uncertain.

Stock Splits: Wholesale changes in the number of shares. For example, a two for
one split doubles the number of shares but does not change the share capital.
Subordinated Bond: An issue that ranks after secured debt, debenture, and other
bonds, and after some general creditors in its claim on assets and earnings. Owners
of this kind of bond stand last in line among creditors, but before equity holders,
when an issuer fails financially.
Substantial Shareholder: A person acquires an interest in relevant share capital
equal to, or exceeding, 10% of the share capital.
Support Level: A price at which buyers consistently outnumber sellers, preventing
further price falls.
Technical Analysis: A method of evaluating securities by relying on the
assumption that market data, such as charts of price, volume, and open interest, can
help predict future (usually short-term) market trends. Contrasted with
fundamental 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.)
Time Horizon: The duration of time an investment is intended for.
Trading Rules: Stipulation of parameters for opening and intra-day quotations,
permissible spreads according to the prices of securities available for trading and
board lot sizes for each security.
Trust Deed: A formal document that creates a trust. It states the purpose and terms
of the name of the trustees and beneficiaries.
Underlying Security: The security subject to being purchased or sold upon
exercise of the option contract.
Valuation: Process by which an investor determines the worth of a security using
risk and return concept.
Warrant: An option for a longer period of time giving the buyer the right to buy a
number of shares of common stock in company at a specified price for a specified
period of time.

Window Dressing: Financial adjustments made solely for the purpose of


accounting presentation, normally at the time of auditing of company accounts.
Yield (Internal rate of Return): The compound annual rate of return earned by an
investment
Yield to Maturity: The rate of return yield by a bond held to maturity when both
compound interest payments and the investors capital gain or loss on the security
are taken into account.
Zero Coupon Bond: A bond with no coupon that is sold at a deep discount from
par value.

Minimum Alternative Tax - An Insight


A Definition -

Direct tax in lay terms is a tax on income that you have


to pay, it cannot be shifted to others. Some of its forms include income tax, wealth
tax, etc. Direct taxes are directly levied on individuals, corporations and
organisations and collected by way of income tax returns to be filed each year.
An indirect tax is collected by an intermediary (such as a retail store) from the
person who bears the ultimate economic burden of the tax (such as the customer).
Indirect taxes include sales tax, service tax, value-added tax, commodity
transaction tax and securities transaction tax among others.
One such indirect tax is the minimum alternate tax (MAT). Going forward, we will
explain what MAT is, the reasons for its introduction, and who is liable to pay the
tax.

Normally, a company is liable to pay tax on the income computed in accordance


with the provisions of the Income-Tax Act, but the profit and loss account of the
company is prepared as per provisions of the Companies Act.
In the past, a large number of companies showed book profits on their profit and
loss account and at the same time distributed huge dividends. However, these
companies didnt pay any tax to the government as they reported either nil or
negative income under provisions of the Income-Tax Act.
These companies were showing book profits and declaring dividends to their
shareholders but were not paying any tax. These companies are popularly known
as zero tax companies.
The Indian Income-Tax Act allows a large number of exemptions from total
income. Besides exemptions, there are several deductions permitted from the gross
total income. Further, depreciation allowable under the Income-Tax Act, is not the
same as required under the Companies Act. The latter provides a lower rate viz-aviz the I-T Act which computes a higher rate of depreciation.
The result of such exemptions, deductions, and other incentives under the IncomeTax Act in the form of liberal rates of depreciation is the emergence of zero tax
companies, which in spite of having high book profit are able to reduce their
taxable income to nil.
Government's take on MAT
Government formed panel to resolve tax dispute with foreign investors.
Finance Minister Arun Jaitley announced that a high-level committee will
look into the controversial issue of payment of Minimum Alternate Tax
(MAT) by FIIs.
The Committee is requested to give its recommendation of the specific
issues of MAT on FIIs expeditiously.
Government also declared that minimum alternate tax (MAT) would not be
applicable on foreign companies earning from capital gains on securities,
royalty, fee on technical services and interest, providing a huge breather to
foreign investors.

Mergers of Banks - Soon to be a reality


While India claims to have escaped the global financial crisis, PSBs are in a mess
today because they were big lenders to many mega-scamsters of the UPA regime
and shaky infrastructure projects (telecom, coal, power, realty and SEZ).
The finance ministry is looking at the possibility of merging at least five
state-run banks - from Andhra Bank, Bank of Maharashtra, Dena Bank,
Punjab & Sind Bank, Vijaya Bank, and United Bank of India - with larger
PSUs after their performance and bad asset levels improve.
The move has been recommended by the Working Group on Consolidation
and Restructuring of PSBs (public sector banks).
Officials said smaller banks would be merged with larger banks, which
needed a presence in regions where the smaller banks were strong.

GYAN SANGAM
P.J.Nayak committee - RBI had appointed a committee under former Axis
Bank chairman PJ Nayak for improving governance in the sector. The panel
had recommended the government give up its control over these banks and
reduce stake in these to less than 51 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.

US and European countries have long been demanding greater access to the
Indian financial market in return for concessions in the services sector.
Loss-making PSU banks have been similarly merged with the profitable
ones to create larger entities.To nudge the banks, the government has already
decided that only profitable banks with a good performance record will be
recapitalised.
A provision of Rs 9,555 crore has been made this fiscal for the
recapitalisation of PSU banks, including the National Bank for Agriculture
and Rural Development, the Export-Import Bank of India, India
Infrastructure Finance Company and Small Industries Development Bank of
India.
Last year, a provision of Rs 11,200 crore had been made for recapitalisation,
but a mere Rs 6,990 crore was infused into banks, including the SBI, Bank
of Baroda, Punjab National Bank, Canara Bank and Syndicate Bank.
For reading more of Basel - III - CLICK HERE
Case of SBI
SBI has five associate banks, namely State Bank of Bikaner and Jaipur, State
Bank of Hyderabad, State Bank of Patiala, State Bank of Travancore,
besides State Bank of Mysore
SBI is waiting for all associate banks to turn in better results in the next
financial year. So, we would like them to stabilise and come out at a
particular level.
The government has in the past toyed with the idea of merging the associates
of the State Bank of India with it or creating an "SBI-2" by merging some of
these associates. Some associates such as the State Bank of Indore were
merged with the SBI in the past.
The smaller unlisted subsidiaries are almost 100 per cent owned by the SBI
and merging them should not pose any major problem as their functioning is
similar to that of the parent.

The move, officials said, will create a larger SBI, giving the country's largest
bank much more financial muscle.

The drive to create larger Indian banks stems from the need to comply with
new Basel norms that would kick off by 2019 and create large entities
capable of taking on competition from foreign banks with the opening up of
the domestic financial sector.
Banks will need to raise almost Rs 4.5 lakh crore in Tier-1 capital, including
Rs 2.4 lakh crore in equity capital, by March 2019 under the Basel III norms.
Officials said at present the focus would be on assessing the loan portfolios
of small banks to help them exit businesses where they were not strong or
were unprofitable. Subsequently, these banks would be asked to concentrate
on particular segments.
Earlier, the government had merged the State Bank of Hyderabad with the
State Bank of India. There was also a move to merge some of the other SBI
subsidiaries with the State Bank of Patiala seen to be next in the queue.
Disadvantages of the mergers The merger and consolidation of large PSBs, if it ever happens, will further reduce
the number of banks in the country and kill competition. This is bad for the
consumer, because banks will operate even more like a cartel in that situation. We
also need to mobilise public opinion on the circumstances in which having big
banks, capable of funding large infrastructure projects, is in Indias interest.

The big learning from the global financial crisis is that banks that are too big to
fail are bailed out by the exchequer and the entire country pays the price.

MUDRA Bank - Funding the Unfunded


Micro Units Development and Refinance Agency (MUDRA) Bank Dedicated
Regulator and Refinancer
The Micro Units Development Refinance Agency (MUDRA) Bank is set to be
launched on April 8th 2015 by our Honourable Prime Minister Shri Narendra Modi
ji.
The Bank will start with a corpus of Rs 20,000 crore which would be allocated to
the Bank from the money available from shortfalls of priority sector lending.
Further amount of Rs 3000 crores will be allocated from Budget as a Credit
Guarantee Corpus.
Key Responsibilities of MUDRA Bank
- Laying down policy guidelines for micro/small enterprise financing business
- Registration and Regulation of MFI entities
- Accreditation/rating of MFI entities
- Laying down responsible financing practices to prevent over indebtedness,
ensuring client protection principles and methods of recovery
- Development of standardized covenants governing last mile lending to
micro/small enterprises
- Promoting right technology solutions for the last mile
- Formulating and running a credit guarantee scheme for providing guarantees to
the loans which are being extended to micro-enterprises

- Creating a good architecture of last mile credit delivery to micro businesses under
the scheme of Pradhan Mantri Mudra Yojana
Benefits of Launching MUDRA Bank
- Uniformity in regulations and best practices for the SHG Bank linkage
programme, NBFC-MFIs, and trusts/societies/not for profit NBFCs/Section 25
companies engaging in MFI activities as MUDRA Bank would be the sole
regulator for all players in the MFI sector.
- Increased liquidity and access to low cost funding support to MFIs
- Increased access to low cost funding for MFIs could lead to a reduction in the
cost of funds for MFIs.

India Economic Reform


The economy of India is one of the fastest growing economies in the world. Since
its independence in the year 1947, a number of economic policies have been taken
which have led to the gradual economic development of the country. On a broader
scale, India economic reform has been a blend of both social democratic and
liberalization policies.

Economic reforms during the post independence period


The post independence period of India was marked by economic policies which
tried to make the country self sufficient. Under the economic reform, stress was
given more to development of defense, infrastructure and agricultural sectors.
Government companies were set up and investment was done more on the public
sector. This was made to make the base of the country stronger. To strengthen the
infrastructure, new roads, rail lines, bridges, dams and lots more were constructed.
During the Five Years Plans initiated in the 1950s, the economic reforms of India
somewhat followed the democratic socialist principle with more emphasis on the

growth of the public and rural sector. Most of the policies were meant towards the
increase of exports compared to imports, central planning, business regulation and
also intervention of the state in the finance and labor markets. In the mid 50's huge
scale nationalization was done to industries like mining, telecommunications,
electricity and so on.
Economic Reforms during 1960s and 1980s
During the mid 1960's effort was made to make India self sufficient and also
increase the production and export of the food grains. To make the plan a success,
huge scale agricultural development was undertaken. The government initiated the
Green Revolution movement and stressed on better agricultural yield through the
use of fertilizers, improved seed and lots more. New irrigation projects were
undertaken and the rural banks were also set up to provide financial support to the
farmers.
The first step towards liberalization of the economy was taken up by Rajiv Gandhi.
After he became the Prime Minister, 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 Reforms during 1990s to the present times
Due to the fall of the Soviet Union and the problems in balance of payment
accounts, the country faced economic crisis and the IMF asked for the bailout loan.
To get out of the situation, the then Finance Minister, Manmohan Singh initiated
the economic liberation reform in the year 1991. This is considered to be one of the
milestones in India economic reform as it changed the market and financial
scenario of the country. Under the liberalization program, foreign direct investment
was encouraged, public monopolies were stopped, and service and tertiary sectors
were developed.
Since the initiation of the liberalization plan in the 1990s, 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 Gross Domestic Product.
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. Nevertheless, to

cope with the present situation, the Indian government has taken a number of
decisions like strengthening the banking and tertiary sectors, increasing the
quantity of exports and lots more.

Credit Rating Agencies of India & World


Important Credit Rating Agencies
Leading Credit Rating Agency in India
Indian credit rating industry mainly comprises of CRISIL, ICRA, CARE,
ONICRA, FITCH (India Ratings & Research) & SMERA.
CRISIL - Credit Rating Information Services of India Limited Headquarter Mumbai
ICRA - Investment information and credit rating agency - Headquarter Gurgaon, India
CARE - Credit Analysis and Research - Headquarters Mumbai
ONICRA - Headquarter - Gurgaon, India
SMERA - Headquarters Mumbai
Fitch (India Ratings & Research) - Headquarters Mumbai
Note: CRISIL is the largest credit rating agency in India, with a market share of
greater than 60%.
Leading Credit Rating Agency in World
Standard & Poor's (S&P) Headquarter New York, US
Moody's Headquarter - New York, US
Fitch - Headquarter - New York, US

Regulators in India
Regulator
Reserve
Bank of
India (RBI)
Securities
and
Exchange
Board of
India
(SEBI)

Sectors

Chairman

Financial system
Raghuram
and monetary
Rajan
policy, Money
Market
Security & Capital U.K. Sinha
Market, stock
broking &
Merchant
Banking, Nidhis,
Chit Fund
Companies
Insurance industry T. S. Vijayan

Insurance
Regulatory
and
Developmen
t Authority
(IRDA)
Telecom
Telecommunicatio
Regulatory
n Industry
Authority of
India
(TRAI)
Forward
Commodity
Markets
Market
Commission
Pension
Pension sector
Fund
Regulatory
and
Developmen
t Authority
(PFRDA)

Headquarte
r
Mumbai

Mumbai

Hyderabad

Rahul
Khullar

New Delhi

Ramesh
Abhishek

Mumbai

Hemant
Contractor

New Delhi

Insurance Sector
Dear all, in view of upcoming insurance exams, were are presenting you a brief
write-up
on
insurance
sector
and
companies
in
this
sector.

In India, insurance has a deep-rooted history. It finds mention in the writings of


Manu ( Manusmrithi), Yagnavalkya (Dharmasastra) and Kautilya ( Arthasastra ).
The writings talk in terms of pooling of resources that could be re-distributed in
times of calamities such as fire, floods, epidemics and famine. This was probably a
pre-cursor to modern day insurance. Ancient Indian history has preserved the
earliest 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,
England in particular.
Brief history of insurance sector
The insurance sector in India has completed all the facets of competition - from
being an open competitive market to being nationalized and then getting back to
the form of a liberalized market once again. The history of the insurance sector in
India reveals that it has witnessed complete dynamism for the past two centuries
approximately.With the establishment of the Oriental Life Insurance Company in
Kolkata, the business of Indian life insurance started in the year 1818.
Important milestones in the Indian life insurance business
1912: The Indian Life Assurance Companies Act came into force for regulating the
life insurance business.
1928: The Indian Insurance Companies Act was enacted for enabling the
government to collect statistical information on both life and non-life insurance
businesses.
1938: The earlier legislation consolidated the Insurance Act with the aim of
safeguarding the interests of the insuring public.
1956: 245 Indian and foreign insurers and provident societies were taken over by
the central government and they got nationalized. LIC was formed by an Act of
Parliament, viz. LIC Act, 1956. It started off with a capital of Rs. 5 crore and that
too from the Government of India. The history of general insurance business in
India can be traced back to Triton Insurance Company Ltd. (the first general
insurance company) which was formed in the year 1850 in Kolkata by the British.
Important milestones in the Indian general insurance business

1907: The Indian Mercantile Insurance Ltd. was set up which was the first
company of its type to transact all general insurance business.
1957: General Insurance Council, an arm of the Insurance Association of India,
framed a code of conduct for guaranteeing fair conduct and sound business
patterns.
1968: The Insurance Act improved for regulating investments and set minimal
solvency levels and the Tariff Advisory Committee was set up.
1972: The General Insurance Business (Nationalization) Act, 1972 nationalized the
general insurance business in India. It was with effect from 1st January 1973.
107 insurers integrated and grouped into four companies viz. the National
Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental
Insurance Company Ltd. and the United India Insurance Company Ltd. GIC was
incorporated as a company.
Insurance Repository in India
The Insurance Repository in India is a database of insurance policies. It allows
policy holders to make revisions to a policy with speed and accuracy. It launched
on 16 September 2013. It is the world's first of its kind. India's Insurance
Regulatory and Development Authority has issued licenses to five entities to act as
Insurance Repositories:
Central Insurance Repository Limited (CIRL)
SHCIL Projects Limited
Karvy Insurance repository Limited
NSDL Database Management Limited
CAMS Repository Services Limited

E-Insurance Account
E-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 insurance
repository, it`s a one point of contact for all of the insurance contracts, if any
change is needed in any of the personal information then instead of going to an
each insurer and submitting the request separately to each one of them, here
through an e-insurance account, the policy holder can submit a request to an

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.
What type of an Insurance Policies can be kept in an E Insurance Account:
1.All of the below mention policies can be kept in an electronic form provided
these have been issued by the companies registered with Insurance Regulatory
Development Authority(IRDA)
2.All the Life insurance policies including individual or group.
3. All the general insurance policies including individual or group.
4. Any other form of an insurance policy approved by an IRDA.
Public Sector Insurance Companies
Life Insurance Corporation of India
General Insurance Corporation of India
National Insurance Co. Ltd.
Oriental Insurance Co. Ltd.
New India Assurance Co. Ltd.
United India Insurance Co. Ltd.
Life Insurance Corporation of India
Headoffice- Mumbai
Chairman - Shri S. K. Roy
The Parliament of India enacted the Life Insurance Corporation Act on the 19th of
June 1956, and the Life Insurance Corporation of Indian was established on 1st
September, 1956, with the objective of spreading life insurance much more widely
and in particular to the rural areas with a view to reach all insurable persons in the
country, providing them adequate financial cover at a reasonable cost
General Insurance Corporation
Headoffice - Mumbai
Chairman - A K Roy
General Insurance Corporation of India (GIC Re) was approved as Indian
Reinsurer on 3rd November,2000. As an Indian reinsurer GIC has been giving
reinsurance support to four public sector & other private general insurance
companies.

The New India Assurance Co. Ltd.


Headoffice- Mumbai
Chairman - G.Srinivasan
It is the "largest general insurance company of India on the basis of gross premium
collection inclusive of foreign operations". It was founded by Sir Dorabji Tata in
1919, and was nationalised in 1973.
National Insurance Company Limited (NICL)
Headoffice- Kolkata
Chairman - Shri A.V. Girija Kumar
It is a state owned general insurance company in India. The company was
established in 1906 and nationalised in 1972. It's portofolio consists of a multitude
of general insurance policies, offered to a wide arena of clients encompassing
different sectors of the economy.[3] Apart from being leading insurance provider in
India, NICL also serves Nepal.
United India Insurance Company Limited
Headoffice - Chennai
Chairman - Milind Kharat
under Department of Financial Services, Ministry of Finance (India), is a public
sector General Insurance Company of India and one of the top General Insurers in
Asia. With the net worth of Rs 5407 crores and profit of Rs 528 crores, the
company has collected gross premium of Rs 9709 crores as of in the financial year
2013-14. The company has more than seven decades of experience in Non-life
Insurance business and was formed to its present form by the merger of 22
companies, consequent to the nationalisation of General Insurance companies in
India.
Oriental Insurance Company Ltd
Headoffice - New Delhi
Chairman - Dr. A.K.Saxena
It was established on September 12, 1947 in the then Bombay. It was a completely
owned subsidiary of Oriental Government Security Life Assurance Company Ltd.

It was created with the mandate of executing its parent bodys general insurance
operations.
Facts about Public sector banks
List of Public Sector Banks , Head offices, Year of establishment and
Slogans :

S.No

Bank Name

Head Office

Year of
establishment

Slogan

Allahabad
Bank

Kolkata

1865

A tradition of trust

Andhra Bank

Hyderabad

20 Nov. 1923

Much more to do.


With YOU in focus

Bank of
Baroda

Baroda

20 July 1908

Indias International
Bank

Bank of India

Mumbai

7 Sept. 1906

Relationships
beyond Banking

Bank of
Maharashtra

Pune

16 sept. 1935

One Family
Bank

Canara Bank

Bangalore

1910

Its easy to change


for those who you
love, Together we
Can

Central Bank
of India

Mumbai

21 Dec. 1911

Build A Better Life


Around Us, Central
to you since 1911

Corporation
Bank

Mangalore

12 March 1906

Prosperity for all

Dena Bank

Mumbai

26 May 1938

Trusted Family Bank

One

10

Indian Bank

11

Chennai

5 March 1907

Taking
Banking
Technology
to
Common Man, Your
Tech-friendly bank

Indian
Chennai
Overseas Bank

10 Feb. 1937

Good people to grow


with

12

Oriental Bank
of Commerce

19 Feb. 1943

Where
individual
committed

13

Punjab
New Delhi
National Bank

1895

The Name you can


Bank Upon

14

Punjab & Sind New Delhi


Bank

24th June 1908

Where series is a
way of life

15

Syndicate
Bank

1925

Your Faithful And


Friendly Financial
Partner

16

Union Bank of Mumbai


India

1919

Good people to bank


with

17

United Bank
of India

Kolkata

1950

The
Bank
that
begins with U

18

UCO Bank

Kolkata

1943

Honors Your Trust

19

Vijaya Bank

Bangalore

1931

A friend You can


Bank Upon

20

IDBI Bank Ltd Mumbai

1964

Banking for all;


Aao Schein Bada

21

Bharatiya
Mahila Bank

19th Nov. 2013

Empowering
women,

Gurgaon , Haryana

Manipal, karnataka

New Delhi

every
is

Empowering India
State Bank Group

State Bank of
India

Mumbai

1st July 1956

State Bank of
Bikaner &
Jaipur

Rajasthan

1963

State Bank of
Patiala

Punjab

1917

Blending Modernity
with Tradition

State Bank of
Hyderabad

Hyderabad

1941

You can always bank


on us

State Bank of
Mysore

Bangalore

1913

Working for a better


tomorrow

State Bank of
Travancore

Thiruvananthapuram

1945

A Long Tradition of
Trust

The Nation banks on


us; Pure Banking
Nothing Else; With
you all the way

Important Facts about Indian Currency


Hello Readers,
Let's know everything about Indian Currency. Hope you all like the post..
The Indian rupee symbol ' ' (officially adopted in 2010) is derived from
the Devanagari consonant "" (ra) and the Latin letter "R". The first series of coins
with the rupee symbol was launched on 8 July 2011. Currency paper is composed
of cotton and cotton rag.
RBI issues all the bank notes except Rupees 1 Notes. These notes are issued by
Ministry of Finance. Recently RBI launched a website PaisaBoltaHai to raise
awareness of counterfeit or fake currency among users of the Indian Rupees and
also the citizen of India.
The main security features of current banknotes are:
Watermark White side panel of notes has Mahatma Gandhi watermark.

Security thread All notes have a silver or green security band with
inscriptions (visible when held against light) of Bharat in Hindi and "RBI" in
English.
Latent image On notes of denominations of Rs.20 and upwards, a vertical
band on the right side of the Mahatma Gandhis portrait contains a latent
image showing the respective denominational value numerally (visible only
when the note is held horizontally at eye level).
Micro lettering Numeral denominational value is visible under magnifying
glass between security thread and latent image.
Intaglio On notes with denominations of INR5 and upwards the portrait of
Mahatma Gandhi, the Reserve Bank seal, guarantee and promise clause,
Ashoka Pillar Emblem on the left and the RBI Governor's signature are
printed in intaglio (raised print).
Identification mark On the left of the watermark window, different shapes
are printed for various denominations INR20: vertical rectangle, INR50:
square, INR100: triangle, INR500: circle, INR1,000: diamond). This also
helps the visually impaired to identify the denomination.
Fluorescence Number panels glow under ultraviolet light.
Optically variable ink Notes of Rs.500 and Rs.1,000 denominations have
their numerals printed in optically variable ink. The number appears green
when the note is held flat, but changes to blue when viewed at an angle.
Seethrough register Floral designs printed on the front and the back of
the note coincide and perfectly overlap each other when viewed against
light.
EURion constellation A pattern of symbols found on the banknote helps
software detect the presence of a banknote in a digital image, preventing its
reproduction with devices such as colour photocopiers.
Different Kinds of Notes:

Genuine Notes: Such notes must have a water mark of Asoka Pillar, security
thread and serial number along with alphabet. They have distinctive colours.
Soiled notes: The currency note which has become dirty due to its use or
may be in 2 pieces. No portion of such note should be missing. These notes
are accepted for exchange without any restrictions by the banks.
Mutilated notes: Such currency notes that are composed of various pieces or
they are cut note of which some portion is missing. These notes are
exchanged only by the currency chest branches of banks.
Single/double numbered notes: Notes up to Rs.5 are single numbered while
the notes above Rs.5 are double numbered notes.
RBIS Clean Note Policy
RBI had announced Clean Note Policy in January, 1999.
For withdrawing soiled notes from circulation and pumping fresh notes into
circulation, the RBI introduced various changes in the system and procedures
related to currency management which include mechanization of the currency
verification and processing as also shredding and briquetting for destruction of
soiled and mutilated notes.
Rules and Instructions Issued by RBI:
Not to staple bank notes.
To Tender soiled notes to the Reserve Bank in unstapled condition.
To use bands instead of staple pins.
To issue only clean notes to members of public.
To open select currency chest branches on Sundays to provide exchange
facility to members of public all over the county.
To provide unrestricted facility for exchange of soiled and mutilated notes to
members of public.

Banks should sort notes into reissuables and non issuables, and issue only
clean notes to public.
Soiled notes in unstapled condition may be tendered at RBI in inward
remittances through Currency Chests.
Banks should stop writing of any kind on watermark window of bank notes.
Coins of 25 Paise and Below Withdrawal
Govt, of India has decided to withdraw the coins of 25 paise and below from
circulation from June 30, 2011. Coins of 25 paise and below are not accepted for
exchange at the bank branches from July 1, 2011 onward.
Withdrawal of Pre2005 Notes:
Reserve Bank of India decided to withdraw from circulation all banknotes issued
prior to 2005 as they have fewer security features as compared to banknotes
printed after 2005.
The withdrawal exercise is in conformity with the standard international practice of
not having multiple series of notes in circulation at the same time.
The RBI has already been withdrawing these banknotes in a routine manner
through banks.
It is estimated that the volume of such banknotes (pre2005) in circulation is not
significant enough to impact the general public in a large way and the members of
public may exchange the pre2005 series banknotes at bank branches at their
convenience.
The deadline for exchanging pre2005 currency notes of various denominations,
including Rs.500 and Rs.1,000, has been extended by another six months till June
30, 2015.
Fiscal System in India
A country's fiscal system is the complete structure of government revenue and
expenditures and the framework within which its agencies collect and disburse
those funds. This system is governed by a nation's economic policy, which comes
from decisions made by the governing body.
Fiscal policy is the means by which a government adjusts its spending levels and
tax rates to monitor and influence a nation's economy. It is the sister strategy to

monetary policy through which a central bank influences a nation's money supply.
These two policies are used in various combinations to direct a country's economic
goals.

There are 3 parts of the fiscal policy


1. Public Revenue.
2. Public expenditure.
3. Public debt.
Revenues: are the source of income realized by the government and are
divided into:

1. Revenue receipts : which consists of revenue from regular sources


like Taxation revenues: eg., receipts from corporate tax, income tax, excise tax,
Excise duty, custom duty, service tax etc.Non tax revenue: which include interest
on loans, dividends from Public sector units, Fees and stamp duties.
2. Capital receipts: Which refer to those inflows to government that are not in the
nature of regular income, But are repayments / recoveries, or proceeds from sale of
assets. Other receipts like Disinvestment (selling some shares of a PSU) comes
under this head. Borrowings are simply the deficit which can be covered by taking
loans from market.

Expenditure: are the expenses incured by govt and are divided into :
Non plan expenditure: These are on going expenditure not covered under the 5 year plans. Non-plan revenue expenditure is accounted for by interest payments,
subsidies (mainly on food and fertilisers), wage and salary payments to
government employees, grants to States and Union Territories governments,
pensions, police, economic services in various sectors, other general services such
as tax collection, social services, and grants to foreign governments. Non-plan
capital expenditure mainly includes defence, loans to public enterprises, loans to
States, Union Territories and foreign governments.
Plan expenditure: India has adopted economic planning as a strategy for economic
development. For stepping up the rate of economic development five-year plans
have been formulated. So far ten five-year plans have been completed. The
expenditure incurred on the items relating to five year plans is termed as plan
expenditure. Such expenditure is incurred by the Central Government.
A provision is made for such expenditure in the budget of the Central Government.
Assistance given by the Central Government to the State Governments and Union
Territories for plan purposes also forms part of the plan expenditure. Plan
expenditure is subdivided into Revenue Expenditure and Capital Expenditure.This
expenditure involves funding for programmes and projects covered by the 5 - year
plans as decided by the various ministerial bodies.
Under

the

above

heads

there

are

two

components:

Revenue expenditure - It is payments incurred for day - to - day running of


government departments and various services offered to citizens. This also
comprises of spending towards subsidies, interest payments. This spurs
consumption in economy.
Capital expenditure: This expenditure spurs asset creation, resulting in increased
investment with spending diverted towards cost associated with acquisition of
assets that may include investments in shares, infrastructure as well as loans and

advances

given

out

by

government.

Other Important Terms:


Public debt: The 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 heads:
internal debt (money borrowed within the country) and external debt (funds
borrowed from non-Indian sources).
Usually the government spends more than what it earns through various sources.
This shortfall, which is met with borrowed funds, is called fiscal deficit.
Technically, it is the excess of government expenditure over 'non-borrowed
receipts' revenue receipts plus loan repayments received by the govt plus
miscellaneous capital receipts. Fiscal deficit for FY13 is estimated at INR.5.64
lakh crore, revenues of INR 9.18 lakh crores less expenditure of INR 14.82 lakh
crores.
Fiscal deficit is measured as a percentage of GDP, hence INR 5.64 lakh crore /
GDP of INR 100.74 lakh crores work out to estimated fiscal deficit of 5.6% of
GDP.
Revenue Deficit: It is the excess of revenue expenditure over revenue receipts. All
expenditure on revenue account should ideally be met from receipts on revenue
account; the revenue deficit should be zero. In such a situation, the government
borrowing will not be for consumption but for creation of assets.
Effective revenue deficit: This is an even tighter number than the revenue deficit.
It is revenue deficit less grants for creation of capital assets.
Primary deficit: It is the fiscal deficit less interest payments made by the
government on its earlier borrowings.
Deficit and GDP: Apart from the numbers in rupees, the budget document also
mentions deficit as a percentage of GDP. This is because in absolute terms, the
fiscal deficit may be large, but if it is small compared to the size of the economy,

then it's not such a bad thing, especially if it is being used to create production
capacities.

Types of fiscal policy


Fiscal policy has an effect on each of these categories. There are two types of fiscal
policy: Expansionary and Contractionary.
Expansionary Fiscal Policy
When an economy is in a recession, expansionary fiscal policy is in order.
Typically this type of fiscal policy results in increased government spending and/or
lower taxes. A recession results in a recessionary gap meaning that aggregate
demand (ie, GDP) 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). At the same time,
the government may choose to cut taxes, which will indirectly affect the aggregate
demand curve by allowing for consumers to have more money at their disposal to
consume and invest. The actions of this expansionary fiscal policy would result in
a shift of the aggregate demand curve to the right, which would result closing the
recessionary gap and helping an economy grow.
Contractionary Fiscal Policy
Contractionary fiscal policy is essentially the opposite of expansionary fiscal
policy. When 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 be
used to rein it in to a more sustainable level. If an economy is growing too fast or
for example, 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 taxes. A decrease in spending by the government will directly decrease
aggregate demand curve by reducing government demand for goods and services.

Increases in tax levels will also slow growth, as consumers will have less money to
consume and invest, thereby indirectly reducing the aggregate demand curve.
Conclusion On Fiscal Policy
The objectives of fiscal policy such as economic development, price stability,
social justice, etc. can be achieved only if the tools of policy like Public
Expenditure, Taxation, Borrowing and deficit financing are effectively
used.Though there are gaps in India's fiscal policy, there is also an urgent need for
making India's fiscal policy a rationalised and growth oriented one. The success of
fiscal policy depends upon taking timely measures and their effective
administration during implementation.

Financial Inclusion and Business Correspondents


With the objective of ensuring greater financial inclusion and increasing the
outreach of the banking sector, RBI decided in public interest to enable banks to
use the services of NGOs / SHGs and Micro Finance Institutions (MFIs) as
intermediaries in providing financial and banking services through the use of
Business Facilitator and Correspondent.

Business Correspondent
Under the 'Business Correspondent' Model, NGOs/ MFIs set up under Societies/
Trust Acts, Societies registered under Mutually Aided Cooperative Societies Acts
or the Cooperative Societies Acts of States, In engaging such intermediaries as

Business Correspondents, banks should ensure that they are well established,
enjoying good reputation and having the confidence of the local people. Banks
may give wide publicity in the locality about the intermediary engaged by them as
Business Correspondent and take measures to avoid being misrepresented.
Roles of a Business Correspondent
Business correspondents are bank representatives.
They help villagers to open bank accounts.
They help villagers in banking transactions. (deposit money, take money out
of savings account, loans etc.)
The Business Correspondent carries a mobile device.
The villager gives his thumb impression or electronic signature, and get the
money.
Business Correspondents get commission from bank for every new account
opened, every transection made via them, every loan-application processed
etc.
The arrangements with the Business Correspondents shall specify:
Suitable limits on cash holding by intermediaries as also limits on individual
customer payments and receipts.
The requirement that the transactions are accounted for and reflected in the
bank's books by end of day or next working day.
All agreements/ contracts with the customer shall clearly specify that the
bank is responsible to the customer for acts of omission and commission of
the Business Facilitator/ Correspondent.
Redressal of Grievances in regard to services rendered by Business
Facilitators/ Correspondents

Banks should constitute Grievance Redressal Machinery within the bank for
redressing complaints about services rendered by Business Correspondents
and Facilitators and give wide publicity about it through electronic and print
media.
The name and contact number of designated Grievance Redressal Officer of
the bank should be made known and widely publicized. The designated
officer should ensure that genuine grievances of customers are redressed
promptly.
The grievance redressal procedure of the bank and the time frame fixed for
responding to the complaints should be placed on the bank's website.
If a complainant does not get satisfactory response from the bank within 60
days from the date of his lodging the compliant, he will have the option to
approach the Office of the Banking Ombudsman concerned for redressal of
his grievance/s.

A quick glance on Balance Sheet


Definition: A balance sheet is a document which summarizes a companys assets,
liabilities and
stockholders equity at a point of time. To put it in simple terms, a balance sheet is
like a snap shot of
a horse race, shows the financial position of a company at a particular point of
time.
Components of a balance sheet:
Assets
Liabilities
Ratios used

Assets:

1. Current Assets: These are assets that may be converted into cash, sold or
consumed within a
year or less. Current Assets include cash, marketable securities, Account and notes
receivables, inventories etc.
2. Fixed Assets: Fixed assets are those tangible physical facilities owned by an
enterprise, which
are permanent/durable in nature. Fixed assets are not turned over, meaning they are
not
converted into cash. For example: Land and building, machinery, tools, equipments
etc.
3. Intangible Assets: These assets do not exist in physical form but are notional
possessions
owned by an enterprise. These assets generally dont have real money value but are
important for a company. For example: patents, goodwill, trade-mark etc.
Liabilities:
1.Current liabilities : Those obligations of a company which are payable on
demand or within a
period of less than 1 year from the date of the balance sheet.
2.Term Liabilities: A term liability is a debt which matures after a period of 12
months from the
date of the balance sheet
3.Net Worth: The net worth of a company is the owners stake in the business. It
is a liability of
a company towards its promoters. It is therefore an important item on the balance
sheet on
which a lending banker can rely.
4.Specific Reserves and Provisions: Specific Reserves and Provisions are created
for the
payment of taxes, dividends and other contingencies.
Ratios:
Ratios Showing Liquidity:

Current Ratio - Ratio of current assets to current liabilities.


Quick Ratio - It is an index of the solvency of an enterprise. Basically quick
ratio is the ratio of (Current assets-inventories) and current liabilities.
Ratio showing Financial Stability:
Debt-Equity Ratio - This ratio indicates the relative proportion of shareholders'
equity and debt used
to finance a company's assets.

Ratios Showing Profitability:


a.
Return on investment ratio- This ratio measures the operating efficiency of a
company
without regards to financial structure.
b.
Return on Equity Ratio- It is the ratio of net income of a business during a
period to its
stockholders' equity during that period.

Statutory Liquidity Ratio is the amount a commercial banks needs to maintain in


the form of cash, or gold, or govt. approved securities (Bonds) before providing
credit to its customers. SLR rate is determined and maintained by RBI in order to
control the expansion of the bank credit.
The maximum limit of SLR is 40%
Current SLR is 22% of NDTL

What is a Basis point ?


It is the increase in interest rates in percentage terms. For instance, if the interest
rate increases by 50 basis points (bsp), then it means that interest rate has been
increase by 0.50%. One percentage point is broken down into 100 basis points.
Therefore, an increase from 2% to 3% is an increase of one percentage point or
100 basis points.
NDTL - is the sum of all the demand (current account and savings account sum in
bank ) and time (fixed deposits or recurring deposits etc. which are to be paid on
maturation), these are assets for us but a liability(debt) for the banks.
Here is an example to show the effect of CRR and SLR.
Let say our Lena Bank had 100 Rs as NDTL they can give this much amount of
loan to the needy hence Rs 100 will flow in the market(can cause inflation), so Mr.
Bond (Rajan of RBI) said keep 4% (CRR) with us and 22% as SLR in the form of
govt securities and gold (which cant be given as loans) so Lena bank is left with
only 74% [100 - (22 + 4)] of the NDTL resulting in lesser money to be given as
loans and eventually resulting in a check on inflation.
The main objectives for maintaining the SLR ratio are the following:
i. to control the expansion of bank credit. By changing the level of SLR, the
Reserve Bank of India can increase or decrease bank credit expansion.
ii. to ensure the solvency of commercial banks.
iii. to compel the commercial banks to invest in government securities like
government bonds.
Main use of SLR:

SLR is used to control inflation and propel growth. Through SLR rate the money
supply in the system can be controlled effectively.
What is the difference between SLR and CRR?
What SLR does is it restricts the bank's leverage in pumping more money into the
economy. On the other hand, CRR, or cash reserve ratio, is the portion of deposits
that the banks have to maintain with the RBI. Higher the ratio, the lower is the
amount that banks will be able to use for lending and investment.
The other difference is that to meet SLR, banks can use cash, gold or approved
securities where as with CRR it has to be only cash. CRR is maintained in cash
form with RBI, where as SLR is maintained in liquid form with banks themselves.
What does a reduction in SLR mean?
A cut in SLR means that the home, car and commercial loan rates will go down.
Banks will have more money with them.
With the reduction of SLR, the RBI is shrinking the market for government
securities and simultaneously enlarging availability of credit to the private sector.
With that, the cost of funds to the government will increase and the rate charged by
banks to the private sector decreases.

Banking Awareness: BIS & Basel Norms


The Bank for International Settlements (BIS) established on 17 May 1930,is the
world's oldest international financial organisation. The BIS has 60 member central
banks, representing countries from around the world that together make up about
95% of world GDP.The head office is in Basel,Switzerland and there are two
representative offices: in the Hong Kong Special Administrative Region of the
People's,
Republic
of
China
and
in Mexico
City.
The mission of the BIS is to serve central banks of different of nations in their
pursuit of monetary and financial stability, to foster international cooperation in
those areas and to act as a bank for central banks.The Basel Committee is the
primary global standard setter for the prudential regulation of banks and provides a
forum for cooperation on banking supervisory matters.
NORMS ISSUED BY BIS

Basel I
In 1988,The Basel Committee on Banking Supervision (BCBS) introduced capital
measurement system called Basel capital accord,also called as Basel 1. It focused
almost entirely on credit risk. It defined capital and structure of risk weights for
banks. The minimum capital requirement was fixed at 8% of risk weighted assets
(RWA). RWA means assets with different risk profiles. For example, an asset
backed by collateral would carry lesser risks as compared to personal loans, which
have no collateral. India adopted Basel 1 guidelines in 1999.The Basel I Accord,
issued in 1988, has succeeded in raising the total level of equity capital in the
system.Like many regulations, it also pushed unintended consequences; because it
does not differentiate risks very well, it perversely encouraged risk seeking. It also
promoted the loan securitization that led to the unwinding in the subprime market.
Basel II
In June 1999, the Committee issued a proposal for a new capital adequacy
framework to replace the 1988 Accord. This led to the release of the Revised
Capital Framework in June 2004. Generally known asBasel II, the revised
framework comprised three pillars, namely minimum capital, supervisor review
and market
discipline.

Minimum capital is the technical, quantitative heart of the accord.Banks must hold
capital against 8% of their assets, after adjusting their assets for risk.Supervisor
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.Market discipline is based on enhanced disclosure of risk. This may
be an important pillar due to the complexity of Basel. Under Basel II, banks may

use their own internal models (and gain lower capital requirements) but the price of
this is transparency.
Basel III
Even before Lehman Brothers collapsed in September 2008, the need for
a fundamental strengthening of the Basel II framework had become apparent.The
banking sector had entered the financial crisis with too much leverage and
inadequate liquidity buffers.Responding to these risk factors, the Basel Committee
issued Principles for sound liquidity risk management and supervision in the same
month that Lehman Brothers failed. In July 2009, the Committee issued a further
package of documents to strengthen the Basel II capital framework, notably with
regard to the treatment of certain complex securitisation positions, off balance
sheet vehicles and trading book exposures. In September 2010, the Group of
Governors and Heads of Supervision announced higher global minimum capital
standards for commercial banks. This followed an agreement reached in July
regarding the overall design of the capital and liquidity reform package, now
referred to asBasel III.
INDIA AND BASEL NORMS:

Presently indian banking system folllows basel II norms.


The Reserve Bank of India has extended the timeline for full implementation
of the Basel III capital regulations by a year to march 31,2019.March 31,
2019.
Around 10 public sector banks (PSBs) will get a total capital infusion of Rs
12,517 crore from the government before this financial year ends.
Government of India is scaling disinvesting their holdings in PSBs to 52 per
cent.

Short Notes on CBS..!!


Hello Readers,
Here we are providing Short Notes on Core Banking Solutions - one of the hot
topic asked in the Interviews. Hope you like the post!!!

The term CORE means - Centralized Online Real-time Exchange.


What is CBS?
CBS refers to the software applications for recording transactions, storing customer
information, calculating interest and completing the process of passing entries in a
single database.
What CBS does?
CBS enables accessing of complete customer account details centrally. It makes it
possible for a bank customer to access his bank account through whichever
channel he prefers like internet banking, mobile banking, ATM etc.
CBS in India
This initiative was taken by the banks on the basis of First Rangarajan Committee
report on bank computerisation submitted in the year 1984.
The committee was constituted under the chairmanship of Dr. C. Rangarajan (Then
deputy governor of RBI).
Old generation banks initially were hesitant about this but with the advent of new
generation private sector banks in India during 1994-1996, the real era of bank
marketing started and these banks started to offer any-where and any-time banking
facilities to its customers.
Syndicate Bank was the first among the Public Sector Banks to implement Core
Banking.
First CBS branch of Syndicate bank was Jayanagar Branch in Bangalore.
Benefits of CBS
A. Benefits for the customers
Through CBS a bank customer can avail banking facilities (transactions)
24x7.
It is time saving, convenient and efficient.

B. Benefits for the banks


This paradigm shift in banking has revolutionised the speed, efficiency and
reach of the delivery systems. It gives greater customer satisfaction which is
essential for every bank in this day an age.
Since it offers alternate channels than brick and mortar banking, it is a viable
alternative to opening new branches, therefore reduces a banks operational
costs.
Alternative for extended working hours.
Reduces long queues in bank cash counters.
Banking Awareness: Bretton Woods Twins
Bretton woods twins mean the organisations i.e.The International Monetary Fund
(IMF) set up along with the World Bank after the Second World War to assist in the
reconstruction of war-ravaged countries. Leaders felt that financial stability was
best achieved when countries worked in an environment of interdependence.
The two organisations were agreed to be set up at a conference in Bretton Woods in
the US. Hence,they are known as the Bretton Woods twins.The Bretton Woods
Conference, formally known as the United Nations Monetary and Financial
Conference,was the gathering of 730 delegates from all 44 Allied nations at the
Mount Washington Hotel, situated in Bretton Woods, New Hampshire, United
States, to regulate the international monetary and financial order after the
conclusion of World War II.The conference was held from the 1st to 22nd of July,
1944. Agreements were executed that later established the International Bank for
Reconstruction and Development (IBRD, which is part of today's (World Bank
Group) and the International Monetary Fund (IMF)
INTERNATIONAL

MONETARY

FUND

IMF was supposed to oversee and monitor the economic

performance of 188 member countries and warn them of any developing economic
crisis.If any crisis does develop and a country approaches IMF for help, the
organisation chalks out a recovery plan, which includes imposition of conditions
for
keeping
the
economies
on
a
particular
path.
The organization's objectives stated in the Articles of Agreement are:
promote international economic cooperation,
international trade,
employment,
exchange-rate stability including by making financial resources available to
member countries to meet balance-of-payments needs.

When
did
India
take
the
IMF
bailout
package?
The Indian government, faced with a balance of payments crisis in 1991, took a
loan and agreed to the reforms process. The liberalisation in the economy was
partly
a
concomitant
of
that
need.
The IMF report is part of its mandate under Article IV of its constitution. The fund
holds consultations with finance ministries and central banks of each member
countries
annually
for
its
spring
meeting
in
Washington.
The decision of the IMF to intervene in any country is based on the governing
board's decision. The voting rights are determined historically by the economic
strength of the countries. India, because of its rapidly growing economic clout, has
demanded a re-drawing of the voting rights, but that did not happen at the recent
Singapore meeting.Instead, the fund gave ad hoc voting right increase to China,
South Korea, Turkey and Mexico. It has promised a long-term revision in another
two
years.
WORLD

BANK

GROUP

World Bank group provides loans to developing countries for capital programs.
The World Bank is a component of the World Bank Group, and a member of the
United
Nations
Development
Group.

The World Bank's official goal is the reduction of poverty. According to its Articles
of Agreement, all its decisions must be guided by a commitment to the promotion
of foreign investment and international trade and to the facilitation of capital
investment.

The World Bank should not be confused with the United


Nations World Bank Group, a member of the United Nations Economic and Social
Council and a family of five international organizations that make leveraged loans
to poor countries:
International Bank for Reconstruction and Development (IBRD)
International Development Association (IDA)
International Finance Corporation (IFC)
Multilateral Investment Guarantee Agency (MIGA)
International Centre for Settlement of Investment Disputes (ICSID)
International
Bank
for
Reconstruction
and
Development
IBRD is an international financial institution which offers loans to middle-income
developing countries. The IBRD is the first of five member institutions which
compose the World Bank Group and is headquartered in Washington, D.C., United
States. It was established in 1944 with the mission of financing the reconstruction
of European nations devastated by World War II.Following the reconstruction of
Europe, the Bank's mandate expanded to advancing worldwide economic
development and eradicating poverty. The IBRD provides commercial-grade or
concessional financingto sovereign states to fund projects that seek to improve
transportation and infrastructure, education, domestic policy, environmental
consciousness, energy investments, healthcare, access to food and potable water,
and
access
to
improved
sanitation.

The
International
Development
Association
(IDA)
The IDA is an international financial institution which offers concessional loans
and grants to the world's poorest developing countries.The IDA is a member of the
World Bank Group and is headquartered in Washington, D.C., United States. It was
established in 1960 to complement the existing International Bank for
Reconstruction and Development by lending to developing countries which suffer
from the lowest gross national income, from troubled creditworthiness, or from the
lowest
per
capita
income.
International
Finance
Corporation
(IFC)
The IFC was established in 1956 to support the growth of the private sector in the
developing world. The IFCs stated mission is to promote sustainable private
sector investment in developing countries, helping to reduce poverty and improve
peoples lives.IFC provides loans and equity financing,advice, and technical
services to the private sector. The IFC also plays a catalytic role, by mobilizing
additional capital through loan syndication and by lessening the political risk for
investors,
enabling
their
participation
in
a
given
project.
The International Centre for Settlement of Investment Disputes (ICSID)
The ICSID is considered to be the leading international arbitration institution
devoted to resolving disputes between States and foreign investors, also known as
BIT arbitrations.Based in Washington, D.C. (U.S.A.) and operating under the
World Bank, ICSID was established in 1965 by the Convention on the Settlement
of Investment Disputes between States and Nationals of Other States (known as the
ICSID
Convention
or
Washington
Convention).
The
Multilateral
Investment
Guarantee
Agency
(MIGA)
The MIGA is an international financial institution which offers political risk
insurance and credit enhancement guarantees. Such guarantees help investors
protect foreign direct investments against political and non-commercial risks in
developing countries.MIGA is a member of the World Bank Group and is
headquartered in Washington, D.C., United States. It was established in 1988 as
an investment insurance facility to encourage confident investment in developing
countries.
World Bank Group Strategy to Help India Achieve Its Vision
The World Bank Groups new Country Partnership Strategy will guide its support
to India from 2013 through 2017. The strategy aims to help the country lay the
foundations for achieving its longer-term vision of faster, more inclusive growth.

A key feature of the new strategy is the significant shift in support toward lowincome and special category states, where many of Indias poor and disadvantaged
live.The new strategy proposes a lending program of $3 billion to $5 billion each
year over the next five years. Sixty percent of the financing will go to state
government-backed projects. Half of this, or 30% of total lending, will go to lowincome or special category states, up from 18% of lending under the previous
strategy.

Banking Awareness: The Indian Financial System


The term "finance" in our simple understanding it is perceived as
equivalent to 'Money'.Finance exactly is not money, But it is the
source of providing funds for a particular activity.The word
"system", in the term "financial system", implies a set of complex
and closely connected or interlined institutions, agents, practices,
markets, transactions, claims, and liabilities in the economy. The
financial system is concerned about money, credit and financethe three terms are intimately related yet are somewhat different
from each other.
Components/ Constituents of Indian Financial system:

FINANCIAL INSTRUMENTS
Money Market Instruments
The money market can be defined as a market for short-term money and financial
assets that are near substitutes for money.The term short-term means generally a
period upto one year and near substitutes to money is used to denote any financial
asset which can be quickly converted into money with minimum transaction cost.
Some of the important money market instruments are briefly discussed below:
1. Call /Notice-Money Market
Call/Notice money is the money borrowed or lent on demand for a very short
period. When money is borrowed or lent for a day, it is known as Call (Overnight)
Money. Intervening holidays and/or Sunday are excluded for this purpose. Thus
money, borrowed on a day and repaid on the next working day, (irrespective of the
number of intervening holidays) is "Call Money". When money
is borrowed or lent for more than a day and up to 14 days, it is "Notice Money".
No collateral security is required to cover these transactions.
2. Inter-Bank Term Money
Inter-bank market for deposits of maturity beyond 14 days is referred to as the term
money market. The entry restrictions are the same as those for Call/Notice Money
except that, as per existing regulations, the specified entities are not allowed to
lend beyond 14 days.
3. Treasury Bills.
Treasury Bills are short term (up to one year) borrowing instruments of the union
government. It is an IOU of the Government. It is a promise by the Government to
pay a stated sum after expiry of the stated period from the date of issue(91/182/364
days i.e. less than one year). They are issued at a discount to the face value, and on
maturity the face value is paid to the holder. The rate of discount and the
corresponding issue price are determined at each auction.

4. Certificate of Deposits
Certificates of Deposit (CDs) is a negotiable money market instrument and issued
in dematerialised form or as a Usance Promissory Note, for funds deposited at a
bank or other eligible financial institution for a specified time period.
5. Commercial Paper
CP is a note in evidence of the debt obligation of the issuer. On issuing commercial
paper the debt obligation is transformed into an instrument. CP is thus an
unsecured promissory note privately placed with investors at a discount rate to face
value determined by market forces.
Capital Market Instruments
The capital market generally consists of the following long term period i.e., more
than one year period, financial instruments; In the equity segment Equity shares,
preference shares, convertible preference shares, non-convertible preference shares
etc and in the debt segment debentures, zero coupon bonds, deep discount bonds
etc.
Hybrid Instruments
Hybrid instruments have both the features of equity and debenture. This kind of
instruments is called as hybrid instruments.Examples are convertible debentures,
warrants etc.
FINANCIAL MARKETS
Financial market is a market where financial instruments are exchanged or traded
and helps in determining the prices of the assets that are traded in and is also called
the price discovery process.
TYPES OF FINANCIAL MARKETS

Forex Market - The Forex market deals with the multicurrency requirements,
which are met by the exchange of currencies. Depending on the exchange rate that
is applicable, the transfer of funds takes place in this market. This is one of the
most developed and integrated market across the globe
MONEY MARKET:
The money market is a market for short-term funds, which deals in financial assets
whose
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
exchange, promissory notes, commercial paper, treasury bills, etc.
CAPITAL MARKET
Capital Market may be defined as a market dealing in medium and long-term
funds. It is an institutional arrangement for borrowing medium and long-term
funds and which provides facilities for marketing and trading of securities. So it
constitutes all long-term borrowings from banks and financial institutions,
borrowings from foreign markets and raising of capital by issue various securities
such as shares debentures, bonds, etc.The market where securities are traded
known as Securities market. It consists of two different segments namely primary
and secondary market The primary market deals with new or fresh issue of
securities and is, therefore, also known as new issue market;whereas the secondary
market provides a place for purchase and sale of existing securities and is often
termed as stock market or stock exchange.
CREDIT MARKET
Credit market is a place where banks, FIs and NBFCs purvey short, medium and
long-term loans to corporate and individuals.

Banking Awareness: Monetary Policy of India


Monetary policy is the process by which monetary authority of a country i.e. RBI
controls 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, the
central monetary authority is the Reserve Bank of India (RBI) is so designed as to
maintain the price stability in the economy.
MEASURES OF MONETARY POLICY:
Quantitative measures to control amount of credit.
Qualitative measures to control the allocation to different sections of economy.
TOOLS OF QUANTITATIVE MEASURES :
BANK RATE: The bank rate also known as the discount rate, is the rate of
interest charged by the RBI for providing funds or loans to the Banking
system in india. It also signals the medium-term stance of monetary policy.

OPEN MARKET OPERTIONS(OMO): The buying and selling of


government securities in the open market in order to expand or contract the
amount of money in the banking system. Purchases inject money into the
banking system and stimulate growth while sales of securities do the
opposite.

LIQUIDITY ADJUCTMENT FACILITY(LAF): Liquidity Adjustment


Facility is the primary instrument of Reserve Bank of India for modulating
liquidity and transmitting interest rate signals to the market. Under the
scheme, repo auctions (for absorption of liquidity) and reverse repo auctions
(for injection of liquidity) are conducted on a daily basis (except Saturdays).
It is same-day transactions, with interest rates decided on a cut-off basis and
derived from auctions on uniform price basis.
REPO/REVERSE REPO RATE: These rates under the Liquidity
Adjustment Facility (LAF) determine the corridor for short-term money
market interest rates. In turn, this is expected to trigger movement in other
segments of the financial market and the real economy.

MARKET STABLISATION SCHEME (MSS): This instrument for


monetary management was introduced in 2004. Liquidity of a more
enduring nature arising from large capital flows is absorbed through sale of
short-dated government securities and treasury bills. The mobilised cash is
held in a separate government account with the Reserve Bank.

TOOLS OF QUALITATIVE MEASURES:


CREDIT CEILING: In this operation RBI issues prior information or
direction that loans to the commercial banks will be given up to a certain
limit. In this case commercial bank will be tight in advancing loans to the
public. They will allocate loans to limited sectors. Few example of ceiling
are agriculture sector advances, priority sector lending.
MORAL SUASION: Moral Suasions are suggestion and guidelines by the
RBI to the commercial banks to take so and so action and measures in so
and so trend of the economy. RBI may request commercial banks not to give
loans for unproductive purpose which does not add to economic growth but
increases inflation in the economy.
CREDIT AUTHORIZATION SCHEME: Credit Authorization Scheme
was introduced in November, 1965 when P C Bhattacharya was the
chairman of RBI. Under this instrument of credit regulation RBI as per the
guideline authorizes the banks to advance loans to desired sectors
All about a BANK CARD
A Bank 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 access
to funds, either from the client's own bank account, or through a credit account.

Cards can be classified on the basis of their issuance,


usage and payment by the card holder. There are three types of cards

Debit Cards
Credit Cards
Prepaid Cards
Debit cards
Debit cards are issued by banks and are linked to a bank account.
The debit cards are used to withdraw cash from an ATM, purchase of goods and
services at Point of Sale (POS)/E-commerce (online purchase) both domestically
and internationally (provided it is enabled for international use). However, it can be
used only for domestic fund transfer from one person to another.
Credit Cards
Credit cards are issued by banks / other entities approved by RBI. The credit limits
sanctioned to a card holder is in the form of a revolving line of credit (similar to a
loan sanctioned by the issuer) and may or may not be linked to a bank account.
The credit cards are used for purchase of goods and services at Point of Sale (POS)
and E-commerce (online purchase)/ through Interactive Voice Response
(IVR)/Recurring transactions/ Mail Order Telephone Order (MOTO). These cards
can be used domestically and internationally (provided it is enabled for
international use). The credit cards can be used to withdraw cash from an ATM and
for transferring funds to bank accounts, debit cards, credit cards and prepaid cards
within the country.
Prepaid Cards
Prepaid cards are issued by the banks / non-banks 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, mobile
accounts, mobile wallets, paper vouchers, etc.
The usage of prepaid cards depends on who has issued these cards. The prepaid
cards issued by the banks can be used to withdraw cash from an ATM, purchase of
goods and services at Point of Sale (POS)/E-commerce (online purchase) and for
domestic fund transfer from one person to another. Such prepaid cards are known
as open system prepaid cards. However, the prepaid cards issued by authorised
non-bank entities can be used only for purchase of goods and services at Point of
Sale (POS)/E-commerce (online purchase) and for domestic fund transfer from one
person to another. Such prepaid cards are known as semi-closed system prepaid
cards. These cards can be used only domestically.

The maximum value that can be stored in any prepaid card (issued by banks and
authorised non-bank entities) at any point of time is Rs 1,00,000/The following types of semi closed pre-paid payment instruments can be issued by
carrying out Customer Due Diligence as detailed by the banks and authorised nonbank entities:
Up to Rs.10,000/- by accepting minimum details of the customer provided
the amount outstanding at any point of time does not exceed Rs 10,000/- and
the total value of reloads during any given month also does not exceed Rs
10,000/-. These can be issued only in electronic form.
from Rs.10,001/- to Rs.50,000/- by accepting any officially valid document
defined under Rule 2(d) of the PML Rules 2005, as amended from time to
time. Such PPIs can be issued only in electronic form and should be nonreloadable in nature;
up to Rs.50,000/- with full KYC and can be reloadable in nature. The
balance in the PPI should not exceed Rs.50,000/- at any point of time.
Something more to a Bank Card.....
Who decides the limits on cash withdrawal or purchase of goods and
services through use of a card?
The limits on cash withdrawal at ATMs and for purchase of goods and services are
decided by the issuer bank. However, in case of cash withdrawal at other banks
ATM, there is a limit of Rs 10,000/- per transaction. Cash withdrawal at POS has
also been enabled by certain banks wherein, a maximum of Rs.1000/- can be
withdrawn daily by using debit cards.
Is the customer charged by his/her bank when he uses his debit card at
other banks ATM for withdrawing cash?
The savings bank account customer will not be charged by his/her bank up to five
transactions (inclusive of both financial and non-financial transactions) in a month
if he/she uses an ATM of another bank. However, within this overall limit of five
free transactions, for transactions done at ATM of another bank located in the six

metro centres, viz. Mumbai, New Delhi, Chennai, Kolkata, Bengaluru and
Hyderabad, the free transaction limit is set to three transactions per month.
Where should the customer lodge a complaint in the event of a failed ATM
transaction (account debited but cash not dispensed at the ATM)?
The customer has to approach his/her bank (bank that issued the card) to lodge a
complaint in the event of a failed ATM transaction.
What is the time limit for resolution of the complaint pertaining to failed
ATM transaction?
The time limit, for resolution of customer complaints by the issuing banks, is
within 7 working days from the date of receipt of customer complaint. Hence the
bank is supposed to re-credit the customers account within 7 working days. For
failure to re-credit the customers account within 7 working days of receipt of the
complaint from the customer, the bank is liable to pay Rs 100 per day as
compensation to the customer.
What is the option for a card holder if his complaint is not redressed by
the issuer?
If a complainant does not get satisfactory response from his/her bank within a
maximum period of thirty (30) days from the date of his lodging the complaint,
he/she will have the option to approach the Office of the Banking Ombudsman (in
appropriate jurisdiction) for redressal of his grievance.
How are the transactions carried out through cards protected against
fraudulent usage?
For carrying out any transactions at an ATM, the card holder has to key in the PIN
which is known only to him/her for debit/credit and prepaid cards. However, for

carrying out transactions at POS too, the card holder has to key-in the PIN which is
known only to the card holder if a debit card is used. In the case of credit card
usage at POS the requirement of PIN depends on the banks policy on security and
risk mitigation. In the case of e-commerce transactions, additional factor of
authentication is applicable except in case of international websites.
What are the liabilities of a bank in case of fraudulent use of a card by
unauthorised person?
In case of card not present transactions RBI has mandated providing additional
factor of authentication (if the issuer bank and e-commerce merchant bank is in
India). 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 her/him, then the issuer bank shall reimburse the loss to the customer without
demur.
Is there anyway a customer can come to know quickly whether a
fraudulent transaction has taken place using his/her card?
RBI has been taking various steps to ensure that card payment environment is safe
and secure. RBI has mandated banks to send online alerts for all card transactions
so that a card holder is aware of transactions taking place on his / her card.
What is the mandate for banks for issuing Magnetic stripe cards or Chipbased cards?
RBI has mandated that banks may issue new debit and credit cards only for
domestic usage unless international use is specifically sought by the customer.
Such cards enabling international usage will have to be essentially EMV Chip and
Pin enabled. The banks have also been instructed to convert all existing Mag-stripe
cards to EMV Chip card for all customers who have used their cards
internationally at least once (for/through e- commerce/ATM/POS).

Banking Awareness: A summary on NEFT, RTGS & IMPS


National Electronic Fund Transfer (NEFT)
Meaning It is way in which you can transfer fund from any bank account
to any other bank account holder in India. NEFT is based on batch
processing system.
Minimum amount Rs. 1
Maximum amount There is no upper ceiling for transferring money
through NEFT, but generally RTGS is used for transfer of Rs 2,00,000 or
above
Time limit The transactions are processed in hourly batches. There are
twelve settlements from 8 A.M. to 7 P.M. on the weekdays (Monday
Friday) and six settlements from 8 A.M. to 1 P.M. on Saturday. The
maximum time consumed is 2 hours from the submitting of the transaction
in a batch.
Availability NEFT is not available on the bank holidays, RBI holiday and
Sunday.
Note - For transferring funds to Nepal, the limit is of Rs. 50, 000.
Real Time Gross Settlement (RTGS)
Meaning It is way in which you can transfer fund from any bank account
to any other bank account holder in India in real time.
Minimum amount Rs 2,00,000
Maximum amount No limit
Time limit The transactions are processed on order basis i.e. Real time.
The RTGS service is available from 8 A.M to 8 P.M. on the weekdays
(Monday Friday) and from 8 A.M. to 3:30 P.M. on Saturday. The transfer

is instant but the bank is allowed to take up to 2 hours for crediting the
amount to the depositor account.
Availability RTGS is not available on the bank holidays, RBI holiday and
Sunday.

Inter Mobile Payment Service (IMPS)


Meaning It is way in which you can transfer fund from any bank account
to any other bank account holder in India anytime.
Minimum amount Rs 1
Maximum amount Banks are allowed to set their own limit for IMPS.
Time limit It is real time. The depositor account is credited in less than 1
minute from the submission of transaction.

Availability IMPS can be done 24X7 even on bank holidays, RBI holiday
and Sunday