QUESTIONS

1. With reference to Kurzarbeit scheme Which of the above statements are correct?
seen recently in news, consider the (a) 1 and 3 only
following statements: (b) 1 and 2 only
1. Payment under Kurzarbeit is calculated on (c) 2 and 3 only
the basis of net loss of earnings.
(d) 1, 2 and 3
2. The policy provides for a short-time work
allowance, called kurzarbeitgeld, which
partially compensates for lost earnings 4. With reference to the Circuit Breakers
during uncertain economic situations. in the stock market, consider the
Which of the above statements is/are correct? following statements:
1 only 1. They are also called a ‘collar’ and are

RE
(a)
triggered to prevent markets from
(b) 2 only crashing.
(c) Both 1 and 2 2. When triggered, these circuit breakers
bring about a coordinated trading halt in
(d) Neither 1 nor 2
all equity and equity derivative markets
nationwide.
2. With reference to the Deen Dayal
Upadhyaya Grameen Kaushalya Yojana
(DDU-GKY), consider the following
O Which of the above statements is/are correct?
(a) 1 only

statements: (b) 2 only

SC
1. It is a placement linked skill development (c) Both 1 and 2
program.
(d) Neither 1 nor 2
2. It is implemented as Public Private
Partnership(PPP) project
5. Consider the following statements
3. It provides for guaranteed placement for all
regarding ‘Additional Tier 1 bonds’:
the trained candidates.
1. These bonds have maturity period of
GS

Which of the above statements is/are correct? 3 years.

(a) 1 and 2 only 2. Individual investors too can hold these
(b) 2 only bonds.

(c) 1 and 3 only 3. The issuing bank cannot call back the bonds
or repay the principal after a specified
(d) 1, 2 and 3 period of time.
Which of the above statements is/are correct?
3. Consider the following statements
(a) 1 and 2 only
regarding ‘Swap Ratios’:
1. It is an exchange ratio which is often used (b) 2 only
in instances of merger and acquisitions. (c) 1 and 3 only
2. To calculate the swap ratio, companies (d) 1, 2 and 3
analyzes only two financial ratios such as
book value, earnings per share.
6. Recently, restrictions on Input Tax
3. The current market prices of the target
company and acquiring company’s stocks
Credit (ITC) was challenged in High
are compared along with their respective Court. In this context, consider the
financial situations. following statements:

3 P2020_CRCA_500/D34
 1. It is the tax that a business pays on a
purchase and that it can use to reduce its
tax liability when it makes a sale
2. No input tax credit will be allowed if
depreciation has been claimed on tax
component of a capital good
3. It can be availed on goods and services for
both business purposes and non-business
(personal) purposes.
Which of the above statements is/are correct?
1. CRAR is arrived at by dividing the capital
of the bank with aggregated risk-weighted
assets for credit risk, market risk, and
operational risk.
2. The lower the CRAR of a bank the better
capitalized it is.
3. CRAR is decided by central banks and bank
regulators to prevent commercial banks
from taking excess leverage and becoming
insolvent in the process.

(a) 1 and 3 only Which of the above statements are correct?

(b) 2 and 3 only (a) 1 and 3 only

(c) 1 only (b) 1 and 2 only

(d) 1 and 2 only (c) 2 and 3 only
(d) 1, 2 and 3

RE
7. Which of the following statements
regarding the differences between 9. Consider the following statements
Payment Aggregators and Payment regarding Agricultural and Processed
Gateways is/are correct? Food Products Export Development
1. Payment Aggregators in India allow the Authority (APEDA):
merchants to deal in a specific payment
1. It has been entrusted with the responsibility
O
option put on the portal, whereas Payment
to monitor import of sugar.
Gateways offer multiple options for
payment, from bank transfers, credit/debit 2. It is established by an act of Parliament.
cards, e-wallet transactions, etc. Which of the above statements is/are correct?
SC
2. Payment Gateways play the role of an
(a) 1 only
intermediary with merchants and customers
who want to pay for any goods or services (b) 2 only
they are purchasing from the site, whereas
(c) Both 1 and 2
Payment Aggregator is more an interface
through which said intermediaries accept (d) Neither 1 nor 2
payments and make settlements.
GS

Select the correct answer using the code given 10. Helicopter money, seen recently in
below: news, refers to:
(a) 1 only
(a) Special types of helicopter hired to drop
(b) 2 only money from air directly to the poor.
(c) Both 1 and 2 (b) A type of highly subsidized loan provided
(d) Neither 1 nor 2 by the banks to the farmers.
(c) Money that is earned through short curt
8. With reference to the Capital to ways like gambling.
Risk-weighted Assets Ratio (CRAR), (d) Printing large sums of money and
consider the following statements: distributing it to the public.

**********

P2020_CRCA_500/D34 4
 ANSWER HINTS
Answer Key
Q. 1 (c) Q. 3 (a) Q. 5
Q. 2 (a) Q. 4 (c) Q. 6
1. Correct Option: (c)
Explanation:
 Both statements are correct
Supplementary notes:
Kurzarbeit scheme
 Kurzarbeit is German for “short-work”. The
policy provides for a short-time work
O Yojana (DDU-GKY)
allowance, called kurzarbeitgeld, which
partially compensates for lost earnings
during uncertain economic situations.
SC
 The policy was rolled out during the 2008
economic crisis while its origins date back as
far as the early 20th century, before and after
World War I.
 The scheme aims to address workers who are
impacted by loss of income due to shortened
work hours during such times.
GS
 They can apply for short-term work benefits
under the scheme, with the government
stepping in to pay employees a part of their
lost income.
 This helps the companies retain their
employees instead of laying them off, and
allows the latter to sustain themselves for a
period of up to 12 months.
 Quantum of payment:Payment under
Kurzarbeit is calculated on the basis of net
loss of earnings. As per Germany’s Federal
Agency for Work, short-time employees
generally receive about 60 per cent of the flat-
rate net wage, In case there is at least one child
in the house of the short-time worker, he/she
receives 67 per cent of the flat-rate net wage.
 In News: Germany’s Kurzarbeit scheme, for
payment of staff hit by lost work hours.
P2020_CRCA_500/D34
(b) Q. 7 (b) Q. 9 (c)
(d) Q. 8 (a) Q. 10 (d)
2. Correct Option: (a)
Explanation:
RE
 Statement 3 is incorrect: It provides for
guaranteed placement for at least 75% trained
candidates.
Supplementary notes:
Deen Dayal Upadhyaya Grameen Kaushalya
 It is a placement linked skill development
program which allows skilling in a PPP mode
and assured placements in regular jobs in an
organization not owned by the skilled person.
 DDU-GKY is being undertaken as PPP
Project all over the country through Project
Implementing Agencies (PIAs) registered with
the Ministry of Rural Development.
 Further, Guidelines of the scheme mandate
State Governments to take up skill training
projects with Corporate Social Responsibility
funding.
 Beneficiary Eligibility:
 Rural Youth:15 - 35 Yrs
 SC/ST/Women/PVTG/PWD: upto 45 Yrs
Features:
 Enable Poor and Marginalized to Access
Benefits:Demand led skill training at no cost
to the rural poor
 Inclusive Program Design:Mandatory
coverage of socially disadvantaged groups
(SC/ST 50%; Minority 15%; Women 33%)
 Shifting Emphasis from Training to Career
Progression:Pioneers in providing incentives
for job retention, career progression and
foreign placements
6
  Greater Support for Placed Candidates:Post-
placement support, migration support and
alumni network
 Proactive Approach to Build Placement
Partnerships:Guaranteed Placement for at
least 75% trained candidates
 Enhancing the Capacity of Implementation
Partners:Nurturing new training service
providers and developing their skills
 Regional Focus: Greater emphasis on projects
for poor rural youth in Jammu and Kashmir
(HIMAYAT), the North-East region and 27 Left-
Wing Extremist (LWE) districts (ROSHINI)
 Standards-led Delivery:All program activities
are subject to Standard Operating Procedures
that are not open to interpretation by local
inspectors. All inspections are supported
by geo-tagged, time stamped videos/
photographs
 In News: The National Institute of Rural
Development and Panchayati Raj (NIRDPR)
will soon undertake real-time assessment of
government’s flagship youth employment
scheme the Deen Dayal Upadhyaya Grameen O
Kaushlya Yojana (DDU-GKY).
3. Correct Option: (a)
SC
Explanation:
 Statement 2 is incorrect: To calculate the
swap ratio, companies analyze financial ratios
such as book value, earnings per share, profits
after tax, and dividends paid, as well as other
factors, such as the reasons for the merger or
acquisition.
GS
Supplementary notes:
Swap Ratio
 It is the ratio at which an acquiring company
will offer its own shares in exchange for the
target company’s shares during a merger or
acquisition.
 To calculate the swap ratio, companies analyze
financial ratios such as book value, earnings
per share, profits after tax, and dividends paid,
as well as other factors, such as the reasons for
the merger or acquisition.
 The current market prices of the target and
acquiring company’s stock are compared along
with their respective financial situations.
 A ratio is when configured which states the rate
at which the target company’s shareholders
will receive acquiring company shares of stock
for every one share of target company stock
they currently hold.
7 P2020_CRCA_500/D34
 In News:Eight state-owned banks have
announced swap ratios for the proposed
mergers.
4. Correct Option: (c)
Explanation:
 Both statements are correct
Supplementary notes:
Circuit Breakers in Stock Market
 They are also called a ‘collar’ and are
triggered to prevent markets from crashing,
which happens when market participants start
to panic induced by fears that their stocks are
overvalued and decide to sell their stocks.
RE
 They temporarily halt trading if prices rapidly
move outside of pre-determined bounds.
 The system of circuit breakers has been revised
several times based on feedback from past
crises.
 In June 2001, the Securities and Exchange
Board of India (SEBI) implemented index-
based market-wide circuit breakers.
 This system applies at three stages of the index
movement, at 10, 15 and 20 per cent.
 10% trigger limit: If this limit is breached
before 1 pm, trade is halted for 45 minutes.
If the same is breached between 1 pm to
2.30 pm, trade is halted for 15 minutes.
After 2.30 pm, there is no halt in trading.
 15% trigger limit: If this limit is breached
before 1 pm, trade is halted for 1 hour 45
minutes. If the same is breached between
1 pm to 2.30 pm, trade is halted for 45
minutes. After 2.30 pm, trade is halted for
the remainder of the day.
 20% trigger limit: If this limit is breached
any time during trading hours, trading is
halted for the remainder of the day.
 When triggered, these circuit breakers
bring about a coordinated trading
halt in all equity and equity derivative
markets nationwide.
 Duration of halt: Trade could be halted for 15
minutes up to the whole day.
 In News: Recently a circuit breaker was
triggered in the Indian stock markets for
the first time since 2009 as indexes plunged
more than 10 percent, halted trading for 45
minutes.
 IAS 2021

GS MAINS
ADVANCE
RE
GS Paper 1, 2, 3, 4 + Essay + Mains Test Series
A Solution for 1250 Marks
O
Online Live Interactive Classes
SC

BATCH STARTS
16 AUGUST 5 Months Course to cover Key concepts
GS

6:00 PM to 8:30 PM of GS Mains paper 1, 2, 3 & 4

Fee ` 42,000 + GST Complete coverage of contemporary
issues of last two years

Detailed Answer Writing session on

each subject

Mains Test Series including 25 Tests

Off. 1B, 2nd Floor, Pusa Road (10 Sectional + 3 Contemporary Issues
Karol Bagh, New Delhi-110005,
(Adjacent to Karol Bagh Metro Gate No. 8)
+ 8 Full Mock + 4 Essay Mock )
+91 8448496262
Essay Classes + Essay Practice
info@iasscore.in
Workbook
/iasscore

8
Study Material of Contemporary Issues
www.iasscore.in
P2020_CRCA_500/D34
5. Correct Option: (b)
Explanation:
 Statement 1 and 3 are incorrect: These
bonds are perpetual and carry no maturity
date. Instead, they carry call options that allow
banks to redeem them after five or 10 years
Supplementary notes:
Additional Tier 1 bonds
 They are a type of unsecured, perpetual bonds
that banks issue to shore up their core capital
base to meet the Basel-III norms.
 These have higher rates than tier II bonds.
 These bonds have no maturity date.
 The issuing bank has the option to call back
the bonds or repay the principal after a
specified period of time.
 The attraction for investors is higher yield than
secured bonds issued by the same entity.
 Individual investors too can hold these
bonds, but mostly high net worth individuals
(HNIs) opt for such higher risk, higher yield

investments.
O
Given the higher risk, the rating for these
bonds is one to four notches lower than the
SC
secured bond series of the same bank. For
example, while SBI’s tier II bonds are rated
AAA by Crisil, its tier I long-term bonds are
rated AA+.
 In News: The Association of Mutual Funds in
India (AMFI)has written to the Reserve Bank
of India (RBI) and the Securities and Exchange
Board of India (SEBI) to allow fund houses a
GS
temporary write down of additional tier 1
bonds of Yes Bankto avoid a huge hit on the
net asset value of schemes that hold such
bonds.
6. Correct Option: (d)
Explanation:
 Statement 3 is incorrect: It can be availed
only on Goods and Services for business
purposes. If they are used for non-business
(personal) purposes, or for making exempt
supplies ITC cannot be claimed
Supplementary notes:
Input Tax Credit (ITC)
 ITC is the tax that a business pays on a
purchase and that it can use to reduce its tax
liability when it makes a sale. In other words,
9 P2020_CRCA_500/D34
businesses can reduce their tax liability by
claiming credit to the extent of GST paid on
purchases.
 Goods and Services Tax (GST) is an integrated
tax system where every purchase by a business
should be matched with a sale by another
business. This makes flow of credit across an
entire supply chain a seamless process.
How does ITC work?
 When a trader sells a good to consumers
he collects GST based on the HSN of the
good sold and the place of destination. Let
us assume that the MRP of the good is INR
1000 and the rate of applicable GST is 18%.
The consumer will therefore, pay a total of INR
1180 for the good which includes a GST of INR
180. Without ITC, the trader will have to pay
INR 180 to the government. With input tax
RE
credit or ITC, the trader can reduce the total
tax that it will have to pay the government.
Who can claim Input Tax Credit?
 ITC can be claimed by a person registered
under GST only if he fulfills all the conditions
as prescribed.
 The dealer should be in possession of tax
invoice
 The said goods/services have been
received
 Returns have been filed.
 The tax charged has been paid to the
government by the supplier.
 When goods are received in installments
ITC can be claimed only when the last lot
is received.
 No ITC will be allowed if depreciation
has been claimed on tax component of
a capital good
 A person registered under composition
scheme in GST cannot claim ITC.
What can be claimed as ITC?
 ITC can be claimed only for business purposes.
ITC will not be available for goods or services
exclusively used for: Personal use; Exempt
supplies; Supplies for which ITC is specifically
not available
Reversal of Input Tax Credit
 ITC can be availed only on goods and services
for business purposes. If they are used for non-
business (personal) purposes, or for making
exempt supplies ITC cannot be claimed. Apart
from these, in the following situations ITC will
be reversed:
  Non-payment of invoices in 180 days–
ITC will be reversed for invoices which were
not paid within 180 days of issue.
 Credit note issued to ISD by seller– This
is for ISD. If a credit note was issued by the
seller to the HO then the ITC subsequently
reduced will be reversed.
 Inputs partly for business purpose and
partly for exempted supplies or for
personal use – This is for businesses which
use inputs for both business and non-
business (personal) purpose. ITC used in
the portion of input goods/services used
for the personal purpose must be reversed
proportionately.
 Capital goods partly for business and
partly for exempted supplies or for
personal use – This is similar to above
except that it concerns capital goods.
 ITC reversed is less than required-
This is calculated after the annual return
is furnished. If total ITC on inputs of
exempted/non-business purpose is more
than the ITC actually reversed during the
year then the difference amount will be
added to output liability. Interest will be
applicable.
O owned by Payment aggregators(financial
 In News: Restrictions on input tax credit
challenged in High Court.
SC
7. Correct Option: (b)
Explanation:
 Statement 1 is incorrect: Payment Gateways
in India allow the merchants to deal in a
specific payment option put on the portal,
whereas Payment aggregators offer multiple
GS
options for payment, from bank transfers,
credit/debit cards, e-wallet transactions, and
recently UPI.
Supplementary notes:
Difference between Payment Gateways &
Payment Aggregators
 Payment Aggregator is the inclusion of all these
payment gateways. Payment aggregators are
service providers through which e-commerce
merchants process payments. They allow
merchants to accept bank transfers without
setting up a merchant account that is
associated with a bank.
 A Payment Gateway is an e-commerce
software application, software that allows
online transactions to take place. It is a pass-
through mechanism through which cards,
net banking and e-wallet payments are done.
Payment gateways offer a means to accept
online payments.
P2020_CRCA_500/D34
 Both payment gateways and payment
aggregators are inclusive. A payment
aggregator need not act as a payment
gateway, but a payment gateway will need an
aggregator.
 Options: Payment Gateways in India allow
the merchants to deal in a specific payment
option put on the portal, whereas Payment
aggregators offer multiple options for
payment, from bank transfers, credit/debit
cards, e-wallet transactions, and recently UPI.
 Small Businesses: Payment gateways use
payment aggregators to be able to cater to
small businesses. This is due to the fact that
small businesses generally find the transaction
fees provided by payment gateways too high
and complex.
 Intermediary & Interface: Payment Gateways
RE
play the role of an intermediary with merchants
and customers who want to pay for any goods
or services they are purchasing from the site.
A payment aggregator is more an interface
through which said intermediaries accept
payments and make settlements.
 Ownership: Payment gateways in India are
service providers) who act as a processing unit
for implementing online payments. Payment
gateways are merchants and vendors who
cannot
 License: Payment gateways require RBI
authorization before they set up a business.
But a payment aggregator requires a payment
aggregator license and obtains necessary
certification from the Payment Card Industry
(Data Security Standard/ PCI DSS).
In news: RBI releases new guidelines for

payment aggregators.
8. Correct Option: (a)
Explanation:
 Statement 2 is incorrect: The higher the
CRAR of a bank the better capitalized it is
Supplementary notes:
Capital to Risk (Weighted) Assets Ratio
(CRAR)
 Capital to Risk (Weighted) Assets Ratio
(CRAR), also known as Capital adequacy
Ratio, is the ratio of a bank’s capital to its
risk.
 The Capital to risk-weighted assets ratio is
arrived at by dividing the capital of the bank
with aggregated risk-weighted assets for
credit risk, market risk, and operational risk.
10
  The higher the CRAR of a bank the better
capitalized it is.
 CRAR is decided by central banks and bank
regulators to prevent commercial banks
from taking excess leverage and becoming
insolvent in the process.
 The Basel III norms stipulated a capital to
risk-weighted assets of 8%.
 In India, scheduled commercial banks are
required to maintain a CAR of 9% while
Indian public sector banks are emphasized
to maintain a CAR of 12% as per RBI
norms.
 In this system, the funded and non-funded
items and other off-balance sheet exposures
are assigned weights according to the risk
perception and banks are required to maintain
unimpaired minimum capital funds to the
prescribed ratio on the risk-weighted assets.
 The notional amount of each asset is multiplied
by the risk weight assigned to the asset to
arrive at the risk-weighted asset number.
 In News: The Cabinet Committee on Economic
Affairs has given its approval for continuation
of the process of recapitalization of Regional
Rural Banks (RRBs) by providing minimum
O 
regulatory capital to RRBs for another year
beyond 2019-20,that is, up to 2020-21. This is
for those RRBs which are unable to maintain
minimum Capital to Risk weighted Assets Ratio
SC
(CRAR) of 9%, as per the regulatory norms
prescribed by the Reserve Bank of India.
9. Correct Option: (c)
Explanation:
 Both statements are correct
GS
Supplementary notes:
Agricultural and Processed Food Products
Export Development Authority
 It is an authority established under an act
of Parliament and under the administrative
control of the Ministry of Commerce and
Industry, Government of India.
 It has been mandated with the responsibility
of export promotion and development of the
scheduled products viz. fruits, vegetables,
meat products, dairy products, alcoholic and
non-alcoholic beverages etc.
 APEDA has also been entrusted with the
responsibility to monitor import of sugar.
**********
P2020_CRCA_500/D34
Small Farmers Agribusiness Consortium
 It is an autonomous society promoted by
the Ministry of Agriculture, Cooperation
and Farmers’ Welfare.
 It is a pioneer in organising small and marginal
farmers as Farmers Interest Groups, Farmers
Producers Organisation (FPOs) and Farmers
Producers Company for endowing them with
bargaining power and economies of scale.
 It provides a platform for increased accessibility
and cheaper availability of agricultural
inputs to small and marginal farmers and in
establishing forward and backward linkages in
supply chain management.
 In News:Agricultural and Processed Food
Products Export Development Authority
(APEDA)has signed anMoU with the Small
Farmers Agribusiness Consortium (SFAC) to
RE
have a better sync with their activities for the
benefit of farmers.
10. Correct option: (d)
Explanation:
Helicopter money is a proposed unconventional
monetary policy, sometimes suggested as an
alternative to quantitative easing (QE) when
the economy is in a liquidity trap (when interest
rates near zero and the economy remains in
recession).
 Although the original idea of helicopter money
describes central banks making payments
directly to individuals, economists have used
the term ‘helicopter money’ to refer to a wide
range of different policy ideas, including the
‘permanent’ monetization of budget deficits –
with the additional element of attempting to
shock beliefs about future inflation or nominal
GDP growth, in order to change expectations.
 A second set of policies, closer to the original
description of helicopter money, and more
innovative in the context of monetary history,
involves the central bank making direct
transfers to the private sector financed with
base money, without the direct involvement
of fiscal authorities.This has also been called
a citizens’ dividend or a distribution of future
seigniorage.
 Amid rising concerns over economic crisis
that has been triggered by the COVID-19
lockdown; Helicopter Money is one concept
that is being considered by authorities’ world
over.
12