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

Research Team

GeneraL Awareness 5
www.mahendras.org

CONTENTS
S.No. Chapter Name Pg. No.

1. INdian Banking Industry 7-18

2. reserve bank of india & mONETARY pOLICY 19-27

3. NPA and BASEL NORMS 28-35

4. INFLATION 36-42

5. National Income 43-48

6. Money Market In India 49-55

7. Capital Market In India 56-66

8. Foreign Trade & foreign Exchange 67-72

9. PUBLIC FINANCE (bUDGET) 73-81

10. Economic Planning In India 82-86

11. Social Welfare Schemes 87-96

12. INSURANCE SECTOR 97-107

13. MISCELLANEOUS 108-130

6 GeneraL Awareness
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INdian Banking Industry

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

GeneraL Awareness 7
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INdian Banking
CHAPTER
1 Industry
Scan the QR code to get video of this chapter.
Historical Background
The first bank of limited liability managed by Indians was
Oudh Commercial Bank founded in 1881. Punjab National
Bank was established in 1894.
Swadeshi movement, which began in 1906, encouraged
the formation of a number of commercial banks. Banking
crisis during 1913 -1917 and failure of 588 banks in various
States during the decade ended 1949 underlined the need for
regulating and controlling commercial banks.
The Banking Companies Act was passed in February1949,
which was subsequently amended to read as Banking
regulation Act, 1949.This Act provided the legal framework
for regulation of the banking system by RBI. The largest bank
- Imperial Bank of India - It was nationalised in 1955 and
rechristened as State Bank of India, followed by formation
of its 8 Associate Banks in1959. On January 1, 1963 State
Bank of Bikaner was merged with State Bank of Jaipur and
a new bank was formed as State Bank of Bikaner & Jaipur.
In 2008 State Bank of Saurashtra was merged with SBI and
State Bank of Indore was merged with SBI in 2010. SBI
merged 5 of its associate banks along with Bhartiya Mahila
Bank with itself from 1 April 2017.
With a view to bring commercial banks into the mainstream
of economic development with definite social obligations and
objectives, the Government issued an ordinance on 19 July
1969 acquiring ownership and control of 14 major banks in
the country. Six more commercial banks were nationalized
from 15 April 1980.
Meaning of Bank
Bank is a lawful organization, which accepts deposits that can
be withdrawn on demand. It also lends money to individuals
and business houses that need it.
Role of Banking
Banks provide funds for business as well as personal needs
of individuals. They play a significant role in the economy
of a nation. Let us know about the role of banking-
##It encourages savings habit among people and thereby
makes funds available for productive use.
##It acts as an intermediary between people having surplus
money and those requiring money for various business
activities.
8 GeneraL Awareness
##It facilitates business transactions through receipts and
payments by cheques instead of currency.
##It provides loans and advances to businessmen for short
term and long-term purposes.
##It also facilitates import export transactions.
##It helps in national development by providing credit to
farmers, small-scale industries and self-employed people
as well as to large business houses which lead to balanced
economic development in the country.
##It helps in raising the standard of living of people in
general by providing loans for purchase of consumer
durable goods, houses, automobiles, etc.
Types of Banks
There are various types of banks which operate in our country
to meet the financial requirements of different categories
of people engaged in agriculture, business, profession, etc.
Banks with a reserve capital of less than 5 lakh rupees qualify
as non-scheduled banks. Unlike scheduled banks, they are not
entitled to borrow from the RBI for normal banking purposes,
except, in emergency or “abnormal circumstances.”
Bank Classification In India
There are two broad categories under which banks are
classified in india- scheduled and non-scheduled banks.
The scheduled banks include commercial banks and
cooperative banks. the commercial banks include regional
rural banks, small finance bank, foreign banks, private sector
banks, and public sector banks. payments bank is a new
introduction to the category.
Cooperative banks include urban and rural banks.
Scheduled banks are the banks which are covered under the
second schedule of the Reserve Bank of India Act, 1934. To
qualify for being a scheduled bank, a minimum of 5 lakh
paid-up capital is required on the bank’s behalf. The RBI
lends loan to these banks at bank rate as and when required.
On the basis of functions, the banking institutions in India
may be divided into the following types:
1. Central Bank (RBI, in India)
2. Commercial Banks

{{ Public Sector Banks
{{ Private Sector Banks
{{ Foreign Banks
3. Development Banks (IFCI, SFCs, SIDBI, NABARD)
4. Co-operative Banks
{{ State Co-operative Banks of public sector banks are: State Bank of India, Corporation
{{ Central Co-operative Banks
{{ Primary Credit Societies
5. Specialized Banks (EXIM Bank)
Central Bank
A bank which is entrusted with the functions of guiding
and regulating the banking system of a country is known
as its Central bank. Such a bank does not deal with the
general public. It acts essentially as Government’s banker,
maintain deposit accounts of all other banks and advances
money to other banks, when needed. The Central Bank
provides guidance to other
banks whenever they face any
problem. It is therefore known
as the banker’s bank. The
Reserve Bank of India is the
central bank of our country.
The Central Bank maintains
record of Government revenue
and expenditure under various
heads. It also advises the
Government on monetary and credit policies and decides
on the interest rates for bank deposits and bank loans.
In addition, foreign exchange rates are also determined
by the central bank. Another important function of
the Central Bank is the issuance of currency notes,
regulating their circulation in the country by different
methods. No other bank than the Central Bank can
issue currency.
Commercial Banks
Commercial banks are regulated and managed under the
Banking Regulation Act, 1949. These are profit making
banks based on their business model. Granting loans to the
government, general public, and corporate and accepting
deposits counts as the primary function.
Commercial Banks are banking institutions that accept
deposits and grant short-term loans, and advances to their
customers. In addition to giving short-term loans, commercial
banks also give medium-term and long-term loan to
business enterprises. Now-a-days some of the commercial
banks are also providing housing loan on a long-term basis
to individuals. There are also many other functions of
commercial banks.
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Types of Commercial banks
Commercial banks are of three types i.e., Public sector banks,
Private sector banks and Foreign banks.
Public Sector Banks:
These are banks where majority stake is held by the
Government of India or Reserve Bank of India. Examples
Bank, Bank of Baroda and Dena Bank, etc.
Private Sector Banks:
In case of private sector banks majority of share capital of
the bank is held by private individuals. These banks are
registered as companies with limited liability. For example:
ICICI Bank, EXIM Bank and Federal Bank etc.
Foreign Banks:
These banks are registered and have their headquarters in
a foreign country but operate their branches in our country.
Some of the foreign banks operating in our country are
Hong Kong and Shanghai Banking Corporation (HSBC),
Citibank, American Express Bank, Standard & Chartered
Bank, Grindlay’s Bank, etc. The number of foreign banks
operating in our country has increased since the financial
sector reforms of 1991. According to a report by RBI there
are 45 foreign banks branches in India as on January 31, 2018.
Development Banks :
Business often requires medium and long-term capital for
purchase of machinery and equipment, for using latest
technology, or for expansion and modernization. Such
financial assistance is provided by Development Banks. They
also undertake other development measures like subscribing
to the shares and debentures issued by companies, in case
of under subscription of the issue by the public. Industrial
Finance Corporation of India (IFCI) and State Finance
Corporations (SFCs) are examples of development banks
in India.
Co-operative Banks :
People who come together to jointly serve their common
interest often form a co-operative society under the Co-
operative Societies Act. When a co-operative society engages
itself in banking business. It is called a Co-operative Bank.
The society has to obtain a licence from the Reserve Bank of
India before starting banking business. Any co-operative bank
as a society has to function under the overall supervision of
the Registrar, Co-operative Societies of the State. As regards
banking business, the society must follow the guidelines set
issued by the Reserve Bank of India.
Types of Co-operative Banks
There are three types of co-operative banks operating in
our country. They are primary credit societies, central co-
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operative banks and state co-operative banks. These banks
are organized at three levels, village or town level, district
level and state level.
State Co-operative Banks:
These are the apex (highest level) co-operative banks in all
the states of the country. They mobilise funds and help in
its proper channelisation among various sectors. The money
reaches the individual borrowers from the state co-operative
banks through the central co-operative banks and the primary
credit societies.
Central Co-operative Banks:
These banks operate at the district level having some of
the primary credit societies belonging to the same district
as their members. These banks provide loans to their
members (i.e., primary credit societies) and function as
a link between the primary credit societies and state co-
operative banks.
Primary Credit Societies:
These are formed at the village or town level with borrower
and non-borrower members residing in one locality. The
operations of each society are restricted to a small area so
that the members know each other and are able to watch over
the activities of all members to prevent frauds.
Specialised Banks :
There are some banks, which
cater to the requirements and
provide overall support for setting
up business in specific areas of
activity. EXIM Bank, SIDBI and
NABARD are examples of such
banks. They engage themselves in
some specific area or activity and
thus, are called specialised banks. Let us know about them.
Export Import Bank of India (EXIM Bank):
EXIM Bank was established in year 1982. If you want to
set up a business for exporting products abroad or importing
products from foreign countries for sale in our country,
EXIM bank can provide you the required support and
assistance. The bank grants loans to exporters and importers
and also provides information about the international
market. It gives guidance about the opportunities for export
or import, the risks involved in it and the competition to
be faced, etc.
Small Industries Development Bank of India (SIDBI):
SIDBI was established on the year 2nd April, 1990. It
provides loan on easy terms to small scale business unites
10 GeneraL Awareness
or industry including the newly established. It also finances
modernisation of small-scale industrial units, use of new
technology and market activities. The aim and focus of
SIDBI is to promote, finance and develop small-scale
industries.
It headquartered at Lucknow and having its offices all over
the country.
SIDBI operates under the Department of Financial Services,
Government of India.
National Bank for Agriculture and Rural Development
(NABARD):
NABARD was established
on the recommendations of
B.Sivaramman Committee, (by
Act 61, 1981 of Parliament) on
12 July 1982 to implement the
National Bank for Agriculture
and Rural Development Act
1981. It replaced the Agricultural
Credit Department (ACD) and
Rural Planning and Credit Cell (RPCC) of Reserve Bank
of India, and Agricultural Refinance and Development
Corporation (ARDC).
##It is one of the premier agencies providing
developmental credit in rural areas. NABARD is
India’s specialised bank for Agriculture and Rural
Development in India.
##NABARD has its head office at Mumbai, India.
##The initial corpus of NABARD was Rs.100 crores.
Consequent to the revision in the composition of share
capital between Government of India and RBI, the
paid up capital as on 31 May 2017, stood at Rs.6,700
crore with Government of India holding Rs.6,700
crore (100% share). The authorized share capital is
Rs.30,000 crore.
##NABARD is also known for its ‘SHG Bank Linkage
Programme’ which encourages India’s banks to lend
to self-help groups (SHGs). Largely because SHGs are
composed mainly of poor women, this has evolved into
an important Indian tool for microfinance. By March
2006, 22 lakh SHGs representing 3.3 core members had
to be linked to credit through this programme.
Functions and Roles of NABARD -
##Credit Functions
##Developmental and Promotional Functions
##Supervisory Functions
##Institutional and Capacity building
##Role in Training

SMALL BANK AND PAYMENT BANK
Payment Banks
What they can do • Offer Internet Banking
• Sell Mutual Funds/ Insurance /Pensions
• Offer Bill Payment Service
• Have ATMs & BCs
• Can function as BC of other Banks
What they can’t do • Offer Credit Cards
• Extend Loans
• Handle Cross Remittances
• Accept NRI Deposits
Eligibility Criterion • Issuer of Pre-Paid Cards, Telecom Companies, • Individuals/ Professionals with equal to or
NBFCs, Banking Companies, Super Market
Chain, Real Estate, Companies, PSUs
• Minimum Capital Rs. 100 Crores
• 75% Capital must be invested in G-Sec.
Other provisions • 25% Deposits in Other Banks
• Min. 26% Investment from Indians
• Compulsory Listing on a recognized stock
exchange as net worth exceeds Rs. 500
Crores
• Maximum Balance Limit in an account is • 25% branches in non-banking rural areas.
Rs. 1 Lakh
• Compulsory to adopt technological and
networking solutions for operations
• Minimum capital requirement - 15%
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Small banks
• Sell forex to customers
• Sell Mutual Funds/ Insurance/ Pensions
• Can convert into a full-fledged bank
• Operate across the country
• Grant Large Loans
• Float subsidiaries
• Can’t sell complicated financial products
more than 10 years of experience, NBFCs,
Micro Organizations and Local Area Banks
• Minimum Capital Rs. 100 Crores
• 75% Lending in PSL
• Compulsory to comply with reserve system
• Individual borrowings are eligible up to 10%
and organizational borrowings are eligible up
to 15% of the total assets
• Will provide BFs facility

Committee • Nachiket Mor Committee Usha Thorat Committee

11 PAYMENT BANKS- Note : Bharti Airtel launched India’s first live payments
bank named Airtel payment bank in March 2017.Paytm
1. Aditya Birla Nuvo
payment bank, India Post payment bank, Fino Payment
2. Airtel M Commerce bank and Aditya Birla Payment Bank have also launched
3. Cholman-dalam Distribution services. Cholamandalam Distribution Services, Sun
Pharmaceuticals and Tech Mahindra have surrendered their
4. Department of Posts licenses. Aditya Birla have discontinued their services from
5. Fino Pay Tech 26 July 2019.
6. National Securities Depository Limited In September 2015 RBI has issued in principle approval to
10 Small Finance Banks as follows.
7. Reliance Industries
1. Au Financiers (India) Ltd., Jaipur
8. Sun Pharma
2. Capital Local Area Bank Ltd., Jalandhar
9. Paytm
3. Disha Microfin Private Ltd., Ahmedabad
10. Tech Mahindra
4. Equitas Holdings P Limited, Chennai
11. Vodafone Mpesa
GeneraL Awareness 11
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5. ESAF Microfinance and Investments Private Ltd.,
Chennai
6. Janalakshmi Financial Services Private Limited,
Bengaluru
7. RGVN (North East) Microfinance Limited, Guwahati
8. Suryoday Micro Finance Private Ltd., Navi Mumbai
9. Ujjivan Financial Services Private Ltd., Bengaluru
10. Utkarsh Micro Finance Private Ltd., Varanasi
Functions of Commercial Banks
The functions of commercial banks are of two types.
(A) Primary functions
(B) Secondary functions.
Primary functions
The primary functions of a commercial bank includes:
##Accepting deposits; and
##Granting loans and advances.
Accepting deposits
The most important activity of a commercial bank is to
mobilise deposits from the public. People who have surplus
income and savings find it convenient to deposit the amounts
with banks. Depending upon the nature of deposits, funds
deposited with bank also earn interest. Thus, deposits with the
bank grow alongwith the interest earned. If the rate of interest
is higher, public gets motivated to deposit more funds with the
bank. There is also safety of funds deposited with the bank.
Grant of loans and advances
The second important function of a commercial bank is to
grant loans and advances. Such loans and advances are given
to members of the public and to the business community at
a higher rate of interest than allowed by banks on various
deposit accounts. The rate of interest charged on loans and
advances varies according to the purpose and period of loan
and also the mode of repayment.
Loans
A loan is granted for a specific time period. Generally
commercial banks provide short-term loans. But term loans,
i.e., loans for more than a year may also be granted. The
borrower may be given the entire amount in lump sum or in
instalments. Loans are generally granted against the security
of certain assets. A loan is normally repaid in instalments.
However, it may also be repaid in lump sum.
Advances
An advance is a credit facility provided by the bank to its
customers. It differs from loan in the sense that loans may be
granted for longer period, but advances are normally granted
for a short period of time. Further the purpose of granting
12 GeneraL Awareness
advances is to meet the day-to-day requirements of business.
The rate of interest charged on advances varies from bank to
bank. Interest is charged only on the amount withdrawn and
not on the sanctioned amount.
Types of Advances
Banks grant short-term financial assistance by way of cash
credit, overdraft and bill discounting.
Cash Credit
Cash credit is an arrangement whereby the bank allows the
borrower to draw amount upto a specified limit. The amount
is credited to the account of the customer. The customer
can withdraw this amount as and when he requires. Interest
is charged on the amount actually withdrawn. Cash Credit
is granted as per terms and conditions agreed with the
customers.
Overdraft
Overdraft is also a credit facility granted by bank. A customer
who has a current account with the bank is allowed to
withdraw more than the amount of credit balance in his
account. It is a temporary arrangement. Overdraft facility
with a specified limit may be allowed either on the security
of assets, or on personal security, or both.
Discounting of Bills
Banks provide short-term finance by discounting bills, that
is, making payment of the amount before the due date of the
bills after deducting a certain rate of discount. The party gets
the funds without waiting for the date of maturity of the bills.
In case any bill is dishonoured on the due date, the bank can
recover the amount from the customer.
Secondary Functions
In addition to the primary functions of accepting deposits and
lending money, banks perform a number of other functions,
which are called secondary functions. These are as follows:
Issuing letters of credit, travellers cheque, etc.
##Undertaking safe custody of valuables, important
documents and securities by providing safe deposit
vaults or lockers.
##Providing customers with facilities of foreign exchange
dealings.
##Transferring money from one account to another; and
from one branch to another branch of the bank through
cheque, pay order and demand draft.
##Standing guarantee on behalf of its customers, for
making payment for purchase of goods, machinery,
vehicles etc.
##Collecting and supplying business information.
##Providing reports on the credit worthiness of
customers.

##Providing consumer finance for individuals by way of
loans on easy terms for purchase of consumer durables
like televisions, refrigerators, etc.
##Educational loans to students at reasonable rate of
interest for higher studies, especially for professional
courses.
E-banking (Electronic Banking)
With advancement in information and communication
technology, banking services are also made available through
computer. Now, in most of the branches you see computers
being used to record banking transactions. Information about
the balance in your deposit account can be known through
computers. In most banks now a days human or manual teller
counter is being replaced by the Automated Teller Machine
(ATM). Banking activity carried on through computers and
other electronic means of communication is called ‘electronic
banking’ or ‘e-banking’.
Automated Teller Machine (ATM)
Banks have now installed their own Automated Teller
Machine (ATM) throughout the country at convenient
locations. By using this, customers can deposit or withdraw
money from their own account any time.
Debit Card
Banks are now providing Debit Cards to their customers
having saving or current account in the banks. The customers
can use this card for purchasing goods and services at
different places in lieu of cash. The amount paid through
debit card is automatically debited (deducted) from the
customers’ account.
Credit Card
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Credit cards are issued by the bank to persons who may or
may not have an account in the bank. Just like debit cards,
credit cards are used to make payments for purchase, so
that the individual does not have to carry cash. Banks allow
certain credit period to the credit cardholder to make payment
of the credit amount. Interest is charged if a cardholder is not
able to pay back the credit extended to him within a stipulated
period. This interest rate is generally quite high.
Smart Card
A smart card is a plastic
made pocket size card
that is embedded with an
integrated circuit. Smart
card are also known as
chip cards or integrated
circuit card (ICC). The
installed integrated circuit (IC Chip) on a smart card
consist of a memory, a processor and communicates to
the external world through the card surface. It stores
data, help in identification and authentication, application
processing etc.
Smart card classified into two sets :
##Memory Card- These smart cards contain only
non volatile memory storage components alongwith
dedicated security logic (occasionally).
##Micro Processor Cards- These smart cards contain
volatile memory as well as micro processor components.
Net Banking
With the extensive use of computer and Internet, banks have
now started transactions over Internet. The customer having
an account in the bank can log into the bank’s website and
access his bank account. He can make payments for bills,
give instructions for money transfers, fixed deposits and
collection of bills, etc.
Phone Banking
In case of phone banking, a customer of the bank having
an account can get information of his account, make
banking transactions like, fixed deposits, money transfers,
demand draft, collection and payment of bills, etc. by using
telephone.
As more and more people are now using mobile phones,
phone banking is possible through mobile phones. In mobile
phone a customer can receive and send messages (SMS)
from and to the bank in addition to all the functions possible
through phone banking
Bank Deposit Accounts
Types of Bank Deposit Accounts
On the basis of purpose they serve, bank deposit accounts
may be classified as follows:
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##Savings Bank Account Recurring Deposit Account: This type of account is suitable
##Current Deposit Account for those who can save regularly and expect to earn a fair
##Fixed Deposit Account
##Recurring Deposit Account once in a month for a certain period. The total deposit along
##Flexi Deposit
Savings Bank Account : If a person has limited income
and wants to save money for future needs, the Saving Bank
Account is most suited for his purpose. 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 withdrawals 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.
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 restriction 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. For this purpose banks open
current account for them. Like savings bank account, this
account also requires certain minimum amount of deposit
while opening the account. 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. It is allowed to
some specific customers and upto a certain limit subject to
previous agreement with the bank concerned.
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 saving bank account,
banks allow a lower rate of interest. Therefore, money is
deposited in a fixed deposit account to earn an interest at
a higher rate.
This type of deposit account allows deposit to be made of
an amount for a specified period. This period of deposit may
range from 7 days to 10 years or more, during which no
withdrawal is allowed. However, on request, the depositor
can encash the amount before its maturity. In that case banks
give lower interest than what was agreed upon. The interest on
fixed deposit account can be withdrawn at certain intervals of
time. At the end of the period, the deposit may be withdrawn
or renewed for a further period. Banks also grant loan on the
security of fixed deposit receipt.
14 GeneraL Awareness
return on the deposits over a period of time. While opening
the account a person has to agree to deposit a fixed amount
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 account can be opened by a person
individually, or jointly with another, or by the guardian in the
name of a minor. The rate of interest allowed on the deposits
is higher than that on a savings bank deposit.
Flexi Deposit- These deposits are a combination of demand
and fixed deposits for meeting customer’s financial needs
in flexible manner. Only one SB account /CA is opened and
the term deposits issued under the scheme are linked to this
account. Once balance in SB/CA crosses a pre-agreed level,
such surpulas amount is automatically transferred to the fix
deposit account of pre-determined maturity.
National Payments Corporation of India
The National Payments Corporation of India is an umbrella
organisation for operating retail payments and settlement
systems in India. It was founded in 2008, the NPCI is a
not-for-profit organisation registered under section 8 of
the Companies Act 2013. The organisation is owned by a
consortium of major banks, and has been promoted by the
country’s central bank, the Reserve Bank of India.
SERVICES:
RuPay
RuPay is a domestic card scheme of India. The card has
Magnetic stripe, EMV chip. More than 300 cooperative
banks and the Regional Rural Banks (RRBs) in the country
have also issued
Rupay Contactless is a contactless payment technology
feature that allows cardholders to wave their card in front of
contactless payment terminals without the need to physically
swipe or insert the card into a point-of-sale device.
Bharat BillPay
The Bharat bill payment system is a Reserve Bank of India
(RBI) conceptualised system driven by the NPCI. It is a
one-stop ecosystem for payment of all bills providing an
interoperable and accessible “Anytime Anywhere” bill
payment service to all customers across India with certainty,
reliability and safety of transactions.
BHIM Aadhar Pay
BHIM Aadhar pay is an Aadhar based payments interface
which allows real time payments to Merchants using Aadhar
number of Customer & authenticating him/her through his/
her bio metrics.

National Electronic Toll Collection
FASTag is a device that employs Radio Frequency
Identification (RFID) technology for making toll payments
directly while the vehicle is in motion. FASTag (RFID Tag)
is affixed on the windscreen of the vehicle and enables a
customer to make the toll payments directly from the account
which is linked to FASTag.
UPI:
Unified Payments Interface (UPI) fund transfer service allows
customers to instantly transfer funds or request funds from
others via mobile phones, by using their registered mobile
number. This service is available 24x7, including bank
holidays. Transfers funds via Virtual Payment Address (VPA)
thus eliminating the need to remember beneficiary account
number and IFS Code.
BHIM:
Bharat Interface for Money(BHIM) is a mobile app developed
by National Payments Corporation of India (NPCI), based
on the Unified Payment Interface (UPI). It was launched by
Narendra Modi, the Prime Minister of India, at a Digi Dhan
mela at Talkatora Stadium in New Delhi on 30 December
2016. It was named after Dr. Bhimrao R. Ambedkar and is
intended to facilitate e-payments directly through banks as
part of the 2016 Indian banknote demonetisation and drive
towards cashless transactions. The app supports all Indian
banks which use that platform, which is built over the
Immediate Payment Service infrastructure and allows the
user to instantly transfer money between bank accounts of
any two parties. It can be used on all mobile devices.
IMPS:
Immediate Payment Service (IMPS) fund transfer service
allows customers to instantly transfer money online or from
mobile phones using their registered mobile number 24x7,
including bank holidays. IMPS can be used to receive or
transfer funds using beneficiary registered mobile number
and Money Mobile Identifier (MMID) or account number
and branch IFSC code. This service is available 24x7 with
immediate confirmation of transaction.
NEFT:
National Electronic Funds Transfer (NEFT) is an electronic
funds transfer system maintained by the Reserve Bank of India
(RBI). Started in November 2005, the setup was established and
maintained by Institute for Development and Research in Banking
Technology (IDRBT). NEFT enables bank customers in India to
transfer funds between any two NEFT-enabled bank accounts on
a one-to-one basis. It is done via electronic messages.
Unlike real-time gross settlement (RTGS), fund transfers
through the NEFT system do not occur in real-time basis.
NEFT settles fund transfers in half-hourly batches with 23
settlements occurring between 00:30 hrs. to 00:00 hrs.
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From December 16, 2019, 48 half-hourly batches occurring
between 00.30 am to 00:00 am everday regardless of a Holiday
or otherwise. There is no limit – either minimum or maximum
– on the amount of funds that could be transferred using NEFT.
RTGS:
Real Time Gross Settlement (RTGS) is a funds transfer
utility that allows customers to transfer funds to their own
or other bank accounts promptly. The minimum amount
for an RTGS funds transfer in Rs2, 00, 000. Funds transfer
via RTGS happens in real time. RTGS is generally used for
transfer of large amounts.
M-WALLETS
Popular digital payment mode via smartphones; enable
easy payments to vendors with cash back carrot thrown in
Wallets include SBI Buddy, HDFC PayZapp, ICICI Pocket,
Paytm, Mobikwik. In all 40 entities have mobile wallet
licences, of which 25 are operational. Interoperability is
a challenge.
PLASTIC MONEY
Plastic money is a term used to represent the hard plastic
cards used in day to day life in place of actual banknotes.
They come in several forms such as debit cards, credit cards,
store cards and pre-paid cash cards.
750 million cards in circulation; less than 400 million are
used; 250-300 million debit cards used mainly at ATMs to
withdraw cash; 27 million credit cards in use.
Peer-to-Peer (P2P) Lending
P2P lending is a crowd-funding model (largely online) where
people looking to invest their money with people who want
to borrow can do so. Peer-to-peer lending is a form of crowd-
funding used to raise loans for people who need to borrow,
from people who want to invest.
Regulatory Practices by Major Countries
� Australia � China
� France � Germany
� New Zealand � United Kingdom
� United States of America
All peer-to-peer lending (P2P) platforms will be regulated
by the Reserve Bank of India (RBI).
Fund transfer mechanism
Fund transfer between participants on the P2P lending
platform will happen through escrow account mechanisms.
All fund transfers shall be through and from bank accounts,
and cash transactions are strictly prohibited.
Scope of activities of NBFC-P2P
Among several other things, an NBFC-P2P can:
(i) Act as an intermediary providing an online marketplace
or platform to participants involved in P2P lending.
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(ii) Not raise deposits as defined by or under Section 45I(bb) 1. The aggregate exposure of a lender to all borrowers at
of the Act or the Companies Act, 2013. any point of time, across all P2Ps, shall be subject to a
(iii) Not lend on its own. cap of Rs 10 lakh.

(iv) Not hold, on its own balance sheet, funds received from 2. The aggregate loans taken by a borrower at any point of
lenders for lending, or funds received from borrowers time, across all P2Ps, shall be subject to a cap of Rs 10
for servicing loans lakh.

(v) Not cross-sell products except for loan-specific insurance 3. The exposure of a single lender to the same borrower,
products. across all P2Ps, shall not exceed Rs 50,000.

(vi) Not permit international flow of funds. 4. The maturity of the loans shall not exceed 36 months.

An NBFC-P2P will be expected to: Trade Receivables Discounting System

(i) Undertake due diligence on the participants.
(ii) Undertake credit assessment and risk profiling of the
borrowers and disclose the same to their prospective
lenders.
(iii) Undertake documentation of loan agreements and other
related documents.
(iv) Provide assistance in disbursement and repayments of
loan amount.
(v) Render services for recovery of loans originated on the
platform.
Prudential norms
The scheme for setting up and operating the institutional
mechanism for facilitating the financing of trade receivables
of MSMEs from corporate and other buyers, including
Government Departments and Public Sector Undertakings
(PSUs), through multiple financiers will be known as Trade
Receivables Discounting System (TReDS). The TReDS
will facilitate the discounting of both invoices as well as
bills of exchange. Further, as the underlying entities are the
same (MSMEs and corporate and other buyers, including
Government Departments and PSUs), the TReDS could deal
with both receivables factoring as well as reverse factoring
so that higher transaction volumes come into the system and
facilitate better pricing.

How Peer-To-Peer Lending Works*

Commits to a
borrower (2)

Gives cash to the

platform (6)

Borrower Applies for a Lending Platform Investor receives Lender/Investor

loan (1) (e.g. Lending Club) loan note (9)

(10) (11)

Issues the actual Infroms third-

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

Partner Bank (e.g.

Web Bank)

Initial application and funding Loan note purchasing BI INTELLIGENCE

Loan note transfer Loan repayment

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

16 GeneraL Awareness
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INDIAN BANKING INDUSTRY
Q.1. Which of the following is true regarding Presidency (5) None of these
Banks in India? Q.5. When was RBI nationalized?
(A) Bank of Bengal, Bank of Bombay, Bank of (1) 1 January 1949 (2) 1 January 1950
Madras
(3) 1 January 1951 (4) 1 January 1952
(B) These banks are also called quasi banks
(5) None of these
(C) Imperial Bank of India was setup by merging
presidency Banks Q.6. As per the new guidelines issued by RBI minimum
required capital to setup a bank by corporate is ;
(D) These Banks are the first in India
(1) Rs. 600 cr. (2) Rs. 700 cr.
(E) These banks were nationalized on 1st January,1949
(3) Rs. 400 cr. (4) Rs. 500 cr.
(1) A and B are true
(5) None of these
(2) A, B, C are correct
Q.7. When was SBI formed?
(3) A, B, C, E are correct
(1) 1955 (2) 1956
(4) All options are correct
(3) 1957 (4) 1958
(5) No option is correct.
(5) 1959
Q.2. Before the establishment of the Reserve Bank of
India, who had been handed over the charge of Q.8. Which of the following public sector banks has the
exchange control? largest number of branches in foreign countries?
(1) Allahabad Bank (1) Bank of India
(2) Imperial Bank of India (2) State Bank of India
(3) Punjab National Bank (3) Punjab National Bank
(4) General Bank of India (4) Corporation Bank
(5) None of the above (5) None of these
Q.3. Which of the following statements are true about Q.9. The only merger of two public sector banks took
Central Bank of India? place between -
(A) It was started in 1911 (1) Bank of India and New Bank of India
(B) It was India’s 1st Swadeshi Bank (2) Punjab National Bank and New Bank of India
(C) Its tagline “Central to you since 1911” (3) Allahabad Bank and United Bank of India
(D) Its Head office is in Lucknow (4) Punjab National Bank and Bank of Rajasthan
(E) Its 1st Chairman was Sir Pherozesha Mehta (5) None of these
(1) A and B are true Q.10. Which of the following banks was inaugurated by
Mahatma Gandhi in 1919?
(2) A, B, C are correct
(1) Bank of Maharashtra
(3) A, B, C, E are correct
(2) Bank of Baroda
(4) All options are correct
(3) State Bank of Saurashtra
(5) No option is correct
(4) Union Bank of India
Q.4. Deposit account which have not been operated more
than 10 years are to be classified as: (5) None of these
(1) Inoperative accounts Q.11. Which of the following terms is used in banking
field?
(2) Dormant accounts
(1) Input devices (2) Mouse
(3) Unclaimed accounts
(3) Eraser (4) Bank rate
(4) Dead accounts
(5) None of these

GeneraL Awareness 17
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Q.12. Which of the following is Flexi deposit - (5) All the above
(1) Demand Deposit Q.19. What is minimum paid up capital for setting up a
(2) Time Deposit Commercial Bank in India?

(3) Demand & Time Deposit (1) Rs. 100 cr (2) Rs. 200 cr

(4) Fixed deposit (3) Rs. 300 cr (4) Rs. 400 cr

(5) None of these (5) Rs. 500 cr

Q.13. Liquidity with a banker means: Q.20. Who is the founder of Punjab National Bank?

(1) Cash in hand (1) Lala Lajpat Rai (2) K.V. Kamath

(2) Cash and bank balances (3) M.K. Gandhi (4) Shikha Sharma

(3) Short term current assets to convert into cash (5) None of these

(4) All the above Q.21. Which bank has Tagline “Pure Banking Nothing
else”?
(5) None of these
(1) PNB (2) SBI
Q.14. Which is India’s third largest private bank, which
was earlier named as UTI Bank? (3) Canara Bank (4) SIDBI

(1) ICICI Bank (2) Axis Bank (5) None of these

(3) IDBI (4) PNB
(5) SBI
Q.15. Which of the following does not provide interest?
(1) Savings Account (2) Current Account
(3) Fixed Account (4) Recurring Account
(5) None of these
Q.16. Which of the following is the apex institution
which handles refinance for agriculture and rural
development in India?
(1) RBI (2) SIDBI
(3) NABARD (4) SEBI
(5) None of these
Q.17. The interest on Saving account is calculated on -
(1) Daily Basis (2) Daily Product Basis
(3) Quarterly (4) Yearly
(5) None of these
Q.18. Benefits of Core banking is
(1) Reliable centralized data recovery
(2) Enable warehousing and data mine technology
(3) Integrated customer center services
(4) Core infrastructure and used for future expenses
Q.22. Which was the first Indian Bank to setup an ATM
in India?
(1) SBI (2) BOB
(3) ICICI (4) HDFC
(5) None of these
Q.23. What do you mean by LPG in Banking?
(1) Liberalization, Privatization, Globalization
(2) Liberty, Peace, Grooming
(3) Light, Power, Gross
(4) Liberalization, Publication, Globalization
(5) None of these
Q.24. When was IBA established ?
(1) 1945 (2) 1946
(3) 1942 (4) 1943
(5) None of these
Q.25. What is CBS?
(1) Cash Banking Solutions
(2) Core Banking Solutions
(3) Convertible Bonds and Solutions
(4) Cashless banking Solutions
(5) None of these

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

18 GeneraL Awareness
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rbi & mONETARY pOLICY

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

GeneraL Awareness 19
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rbi & mONETARY

CHAPTER

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

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

SBI

Regulator and supervisor of the financial system
Main Objective of Monetary policy in India: maintain
public confidence in the system, protect depositors’ interest
and provide cost-effective banking services to the public.
Manager of Foreign Exchange
20 GeneraL Awareness
Manages the foreign exchange in accordance with the
provisions of Foreign Exchange Management Act,
1999.
Objective: to facilitate external trade and payment and
promote orderly development and maintenance of foreign
exchange market in India.

Issuer of currency
Issues and exchanges or destroys currency and coins not fit
for circulation.
Objective: to give the public adequate quantity of supplies
of currency notes and coins and in good quality.
Developmental role
Performs a wide range of promotional functions to support
national objectives.
Related Functions
Banker to the Government: performs merchant banking
function for the central and the state governments; also acts
as their banker.
Banker to banks: maintains banking accounts of all scheduled
banks.
LOLR (Lender of Last Resort)-
Monetary policy
Monetary policy refers to the use of instruments under the
control of the central bank to regulate the availability, cost
and use of money and credit.
The goal: achieving specific economic objectives, such as
low and stable inflation and promoting growth.
The main objectives of monetary policy in India are:
Maintaining price stability
Ensuring adequate flow of credit to the productive sectors
of the economy to support economic growth Financial
stability
Direct Instruments
Cash Reserve Ratio (CRR)
The share of net demand and time liabilities that banks must
maintain as cash balance with the Reserve Bank.
Statutory Liquidity Ratio (SLR)
The share of net demand and time liabilities that banks must
maintain in safe and liquid assets, such as, government
securities, cash and gold.
Refinance Facilities
Sector-specific refinance facilities (e.g., against lending to
export sector) provided to banks.
Indirect Instruments ##The periodicity of reset shall be one year or lower
Liquidity Adjustment Facility (LAF)
Consists of daily infusion or absorption of liquidity on a
repurchase basis, through repo (liquidity injection) and
reverse repo (liquidity absorption) auction operations, using
government securities as collateral.
Open Market Operations (OMO)
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Outright sales/purchases of government securities, in addition
to LAF, as a tool to determine the level of liquidity over the
medium term.
Market Stabilisation 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.
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.
Bank Rate
It is the rate at which the Reserve Bank is ready to buy or
rediscount bills of exchange or other commercial papers.
It also signals the medium-term stance of monetary policy.
Base Rate (BR)
It is the minimum rate of interest that a bank is allowed
to charge from its customers. Unless mandated by the
government, RBI rule stipulates that no bank can offer loans
at a rate lower than BR to any of its customers. It is effective
from 1 July, 2010. However, all existing loans, including
home loans and car loans, will continue to be at the current
rate. Only the new loans taken on or after July 1 and old loans
being renewed after this date will be linked to BR.
Marginal Cost of Funds based Lending Rate (MCLR)
##All rupee loans sanctioned and credit limits from 1
April 2016 will be priced with MCLR which will be the
internal benchmark
##The MCLR will be a tenor linked internal benchmark.
##Actual lending rates will be determined by adding
components of spread to the MCLR
##Bank will review and publish their MCLR of different
maturities every month on a pre-announced date
##Banks may specify interest dates on their floating rate
loans. They will have the option to offer loans with reset
dates linked either to the date of sanction of the loan/
credit limits or to the date of review of MCLR
##The MCLR prevailing on the day the loan is sanctioned
will be applicable till the next reset date, irrespective of
the changes in the benchmark during the interim period
##Existing loans and credit limits linked to the base rate
may continue till repayment or renewal, as the case may
be. Existing borrowers will also have the option to move
to the MCLR linked loan at mutually acceptable terms
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##Banks will continue to review and publish base rate as
hitherto
MCLR will comprise
##Marginal cost of funds
##Negative carry on account of CRR
##Operating costs
##Tenor premium
Marginal cost of funds
##Marginal cost of funds will comprise of Marginal cost
of borrowings and return on net worth
Negative carry on account of CRR
##Negative carry on the mandatory CRR which arises due
to return on CRR balances being nil
Required CRR*(marginal cost)/(1-CRR)
Operating costs
##All operating costs associated with providing the loan
product including cost of raising funds will be included
under this.
Tenor premium
##The cost arise from loan commitments with longer tenor
Bank shall publish the internal benchmark for different
maturities
##Overnight MCLR
##One-month MCLR
##Three month MCLR
##Six month MCLR
##One year MCLR
Marginal Standing Facility (MSF) - Scheme
Definition: Marginal standing facility (MSF) is a window
for banks to borrow from the Reserve Bank of India in
an emergency situation when inter-bank liquidity dries up
completely.
Description: Banks borrow from the central bank by
pledging government securities at a rate higher than the
repo rate under liquidity adjustment facility or LAF in short.
The MSF rate is pegged 100 basis points or a percentage
point above the repo rate. Under MSF, banks can borrow
funds up to one percentage of their net demand and time
liabilities (NDTL).
This facility is effective from May 9, 2011.
Eligibility :
All Scheduled Commercial Banks having Current Account
and SGL Account with Reserve Bank, Mumbai will be
eligible to participate in the MSF Scheme.
22 GeneraL Awareness
Tenor and Amount
Under the facility, the eligible entities can avail overnight,
up to two per cent of their respective Net Demand and Time
Liabilities (NDTL) outstanding at the end of the second
preceding fortnight. But for the intervening holidays, the
MSF facility will be for one day except on Fridays when
the facility will be for three days or more, maturing on the
following working day. In the event, the banks’ SLR holdings
fall below the statutory requirement up to two per cent of their
NDTL, banks will not have the obligation to seek a specific
waiver for default in SLR compliance arising out of use of
this facility in terms of notification issued under sub section
(2A) of Section 24 of the Banking Regulation Act, 1949.
Rate of Interest
The rate of interest on amount availed under this facility will
be 25 basis points above the LAF repo rate, or as decided by
the Reserve Bank from time to time.
Term Repo under the Liquidity Adjustment
Facility-
Operational Guidelines
Term Repo under the Liquidity Adjustment Facility (LAF)
for 14 days and 7 days tenors will be introduced for banks
(scheduled commercial banks other than RRBs) in addition
to the existing daily LAF (repo and reverse repo) and MSF.
Term repo auctions will be conducted on CBS (E-KUBER)
platform through electronic bidding as is done in the case
of OMO auctions.
The total amount of liquidity injected through term repos
would be limited to 0.25 per cent of NDTL of the banking
system.
While the 14 day term repo of tenor would be conducted
every reporting Friday, the 7 day term repo would be
conducted on every non-reporting Friday.
In case the notified amount for the 14-day term repo is not
fully subscribed, a 7-day term repo would be conducted on
the following Friday for the remaining un-subscribed amount.
In case of full subscription in the 14-day term repo, there
will be no 7 day term repo auction on the following Friday.
Banks would be required to place their bids with the term repo
rate that they are willing to pay to RBI for the tenor of the
repo expressed in percentage terms up to two decimal places.
Once the bidding time is over, all the bids would be arranged
in descending order of the term repo rates quoted and the
cut-off rate would be arrived at the rate corresponding to the
notified amount of the auction. Successful bidders would be
those who have placed their bids at or above the cut-off rate.
All bids lower than the cut-off rate would be rejected. RBI
will, however, reserve the right to (i) inject marginally higher
amount than the notified amount due to rounding effects and

(ii) inject less than the notified amount without assigning any
reasons therefor.
No bids would be accepted at or below the prevailing Repo
Rate under LAF.
On the day prior to the auction, RBI will announce the
amount to be auctioned under term repo along with its tenor.
The minimum bid amount for the auction would be Rupees
one crore and multiples thereof. The allotment would be in
multiples of Rupees one crore. Term repo auctions would be
conducted on Fridays between 2.30 PM - 3.00 PM. In case
Friday falls on a holiday, the auction would take place on the
preceding working day at Mumbai.
There will be provision of pro-rata allotment should there be
more than one successful bid at the cut-off rate.
There will be no restriction on the maximum amount of
bidding by individual bidders under term repo.
The reversal of term repo would take place at the ‘start of
day’ on the day of completion of the term.
The eligible collateral for term repo and the applicable
haircuts will remain the same as daily LAF repo and MSF.
All other terms and conditions as applicable to LAF
operations will also be made applicable to term repo. These
conditions will, however, be subject to review on a periodic
basis.
The first such term repo auction was conducted on October
11, 2013 (Friday) for 7 days. The notified amount for the
auction would be communicated to the market on October
10, 2013 (Thursday).
As hitherto, daily LAF for individual banks would be
restricted to a certain percentage of their NDTL outstanding
as on the last Friday of the second preceding fortnight
(currently it is at 0.50 per cent).
Monetary Policy Committee (MPC)
The Reserve Bank of India Act, 1934 (RBI Act) has
been amended by the Finance Act, 2016, to provide for a
statutory and institutionalised framework for a Monetary
Policy Committee, for maintaining price stability, while
keeping in mind the objective of growth. The Monetary
Policy Committee would be entrusted with the task of fixing
the benchmark policy rate (repo rate) required to contain
inflation within the specified target level. A Committee- based
approach for determining the Monetary Policy will add lot
of value and transparency to monetary policy decisions. The
meetings of the Monetary Policy Committee shall be held
at least 4 times a year and it shall publish its decisions after
each such meeting.
As per the provisions of the RBI Act, out of the six Members
of Monetary Policy Committee, three Members will be
from the RBI and the other three Members of MPC will be
appointed by the Central Government. In exercise of the
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powers conferred by section 45ZB of the Reserve Bank of
India Act, 1934, the Central Government has accordingly
constituted, through a Gazette Notification dated 29th Sept
2016, the Monetary Policy Committee of RBI, with the
following composition, namely:-
(a) The Governor of the Bank—Chairperson, ex officio;
(b) Deputy Governor of the Bank, in charge of Monetary
Policy—Member, ex officio;
(c) One officer of the Bank to be nominated by the Central
Board—Member, ex officio;
(d) Shri Chetan Ghate, Professor, Indian Statistical Institute
(ISI) —Member
(e) Professor Pami Dua, Director, Delhi School of
Economics (DSE) — Member
(f) Dr. Ravindra H. Dholakia, Professor, Indian Institute of
Management (IIM),Ahmedabad— Member
The Members of the Monetary Policy Committee appointed
by the Central Government shall hold office for a period of
four years, with immediate effect or until further orders,
whichever is earlier.
Measures of Money
Money is a thing that is usually accepted as payment for
goods and services as well as for the repayment of debts.
Money supply, like money demand, is a stock variable. The
total stock of money in circulation among the public at a
particular point of time is called money supply. RBI publishes
figures for four alternative measures of money supply, viz.
M1, M2, M3 and M4.
They are defined as follows -
M1 = CU + DD+OD (other deposit with RBI)
M2 = M1 + Savings deposits with Post Office savings
banks
M3 = M1 + Net time deposits of commercial banks
M4 = M3 + Total deposits with Post Office savings
organisations (excluding National Savings
Certificates)
where, CU is currency (notes plus coins) held by the public
and DD is net demand deposits held by commercial banks.
The word ‘net’ implies that only deposits of the public held
by the banks are to be included in money supply.
The interbank deposits, which a commercial bank holds in
other commercial banks, are not to be regarded as part of
money supply.
M1 and M2 are known as narrow money. M3 and M4 are
known as broad money.These gradations are in decreasing
order of liquidity. M1 is most liquid and easiest for
transactions whereas M4 is least liquid of all. M3 is the most
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commonly used measure of money supply. It is also known
as aggregate monetary resources.
Bank Note Paper Mill
##SPMCIL is an Indian government-owned corporation
that engages in the production of bank notes, coins, non–
judicial stamps, postage stamps, and other government
related documents for India. Established- 2006
##Bharatiya Reserve Bank Note Mudran Private
Limited is the one of the subsidiaries of Reserve Bank
of India. Prints bank notes (Indian rupees) for Reserve
Bank of India (RBI). Established in- 1995 It has two
presses one in Mysore and Salboni. It contains nine units,
which include four presses, four mints, and a paper mill.
##India Government Mint operates four mints in the
country for the production of coins.
##Mumbai, Maharashtra
##Kolkata, West Bengal
##Hyderabad, Telangana
##Noida, Uttar Pradesh
Under The Coinage Act, 1906, which has been amended and
now known as Coinage Act 2010 the Government of India
responsibility of the production.
Supply to the RBI for distribution RBI places an annual
indent for the purpose production programme of coins.
Coins can be issued up to the denomination of Rs.1000.
Coins in India presently-50 paisa, 1,2,5,10 rupee, Up to 50
paisa coins called ‘small coins’, Coins rupee 1 and above
called- Rupee coins
Marks On Mint
Bombay (Mumbai) Mint
##Bombay (Mumbai) Mint has a diamond under the date
of the coin (year of issue). The Proof coins from this
mint have a mint mark ‘B’ or ‘M’.
Calcutta (Kolkata) Mint
##Calcutta mint has no mark under the date of the coin
(year of issue). Or it has a “c” mark.
Hyderabad Mint
##Hyderabad Mint has a star under the date of the coin
(year of the issue). The other mint marks from Hyderabad
include a split diamond, and a dot in the diamond.
Noida Mint
##Noida mint has a dot under the year of issue (coin date).
CURRENCY OF INDIA (INR) - Notes are printed at four
printing presses.
1. Nashik, Maharashtra
2. Dewas, Madhya Pradesh
24 GeneraL Awareness
3. Mysore, karnataka
4. Salboni , West Bengal
##Govt. of India issue coins and 1 rupee note
##RBI issue 2 rupee and above note
##RBI can issue banknotes in the denomination 5000 and
10000 under RBI Act, 1934.
Reserve Bank Information Technology Pvt
Ltd (ReBIT)
Reserve Bank Information Technology Pvt Ltd (ReBIT) has
been set up in 2016 as a wholly owned subsidiary by the Reserve
Bank of India (RBI). It take cares of the IT requirements,
including the cyber security needs of the Reserve Bank and its
regulated entities. ReBIT will focus on IT and cyber security
(including related research) of the financial sector and assist in
IT systems audit and assessment of the RBI regulated entities;
advise, implement and manage internal or system-wide IT
projects (both the existing & the new) of the Reserve Bank as
mutually decided between the Reserve Bank and ReBIT.
IFTAS
Indian Financial Technology and Allied Services (IFTAS) is
registered under the wholly-owned subsidiary of the Reserve
Bank of India Act, 2013. It provides critical infrastructure
services to the Reserve Bank of India, cooperatives and other
financial institutions.
Banking Ombudsman Scheme
The Banking Ombudsman Scheme is an inexpensive
forum for bank customers, for resolution of complaints
relating to certain services rendered by banks. The Banking
Ombudsman Scheme is introduced under Section 35 A of
the Banking Regulation Act, 1949 by RBI with effect from
1995. Presently the Banking Ombudsman Scheme 2006 (As
amended upto July 1, 2017) is in operation.
The Banking Ombudsman is a senior official appointed
by the Reserve Bank of India. As on date, twenty Banking
Ombudsmen have been appointed with their offices located
mostly in state capitals. All Scheduled Commercial Banks,
Regional Rural Banks and Scheduled Primary Co-operative
Banks are covered under the Scheme.
The amount of compensation is limited to the amount
arising directly out of the act or omission of the bank or
Rs. 20 lakh, whichever is lower. The Banking Ombudsman
may award compensation not exceeding Rs. 1 lakh to the
complainant for mental agony and harassment.
Ombudsman Scheme’ for Non-Banking
Financial Companies (NBFC)
The Reserve Bank of India (RBI) launched ‘Ombudsman
Scheme’ for non-banking financial companies (NBFC)
for redressal of complaints against them. As per the RBI,
this Scheme will offer a speedy and cost-free complaint
redressal mechanism relating to deficiency in the services
by NBFCs covered under the Scheme. The Scheme will be
known as ‘Ombudsman Scheme for Non-Banking Financial
Companies, 2018’.

The Scheme will cover all deposit-taking NBFCs for now
and based on the result and experience gained, it would
extend the scheme to cover those NBFCs who have the asset
size of Rs. 100 crore and above with customer interface.
The NBFC ombudsmen will function and the complaints
of customer as per zone wise. For this NBFC ombudsmen
will discharge their functions from four offices in Chennai,
Mumbai, Kolkata and New Delhi.
NBFC Ombudsman will not charge any fee for filing and
resolving customers’ complaints.
If the NBFC does not reply within a period of 30 days (one
month) after receipt of the complaint from complainant or
the NBFC rejects the complaint, or if the complainant is not
happy with the reply given by the NBFC, then the complainant
can file the complaint with the NBFC Ombudsman.
Ombudsman Scheme for Digital Transactions
It was announced in the Monetary Policy Statement of December
5, 2018, the Reserve Bank of India (RBI) launched the
Ombudsman Scheme for Digital Transactions (OSDT) on January
31, 2019 for redressal of complaints against System Participants.
The Scheme was launched under Section 18 of the Payment
and Settlement Systems Act, 2007, provides a cost-free
and expeditious complaint redressal mechanism relating to
deficiency in customer services in digital transactions conducted
through non-bank entities regulated by RBI. Complaints relating
to digital transactions conducted through banks will continue
to be handled under the Banking Ombudsman Scheme. The
offices of Ombudsman for Digital Transactions will function
from the existing 21 offices of the Banking Ombudsman and will
handle complaints of customers from their respective territorial
jurisdiction. The Scheme provides for an Appellate mechanism
under which the complainant / System Participant has the option
to appeal against the decision of the Ombudsman before the
Appellate Authority.
Committees and their main Focus Areas
B.Sivraman Committee Institutional Credit for
Agriculture and Rural
Development
Bhagwati Committee Unemployment
Bhagwati Committee Public Welfare
Cook Committee (on behalf Capital Adequacy of Banks
of BIS)
Dave Committee Mutual Funds (Functioning)
In order to ensure the robustness and credibility of the financial system and to minimise the risks, the Reserve Bank has
designated industry bodies Fixed Income, Money Markets and Derivatives Association of India (FIMMDA) and Foreign
Exchange Dealers Association of India (FEDAI) as the benchmark administrators for the Rupee interest rate and foreign
exchange benchmarks, respectively. The FIMMDA, FEDAI and Indian Banks Association (IBA) have since jointly floated
an independent company for benchmark administration. Benchmark submission activities of banks and PDs including their
governance framework for submission are proposed to be brought under the Reserve Bank’s on-site and off-site supervision.
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Dharia Committee Public Distribution System
DR Gadgil Committee Agricultural Finance
Gadgil Committee (1961) Lead Bank System
Narsimham Committee Financial System
RN Malhotra Committee Reforms in Insurance Sector
Working Groups And Committees
The expert committee to review the Economic Capital
Framework (ECF) - Bimal Jalan
Task Force on Offshore Rupee Markets - Usha Thorat
FRBM (Fiscal Responsibility and Budget Management)
Review Committee - N.K. Singh
High Level Committee (HLC) for implementation of Clause
6 of Assam Accord - M P Bezbarauah
The High Level Task Force on Public Credit Registry for
India - Y M Deosthalee
The Internal Study Group to Review the Working of the
Marginal Cost of Funds Based Lending Rate System
- Janak Raj
The Inter-Regulatory Working Group on FinTech and Digital
Banking - Sudarshan Sen
The Working Group to Review of the Guidelines for Hedging
of Commodity Price Risk by Residents in the Overseas
Markets - Chandan Sinha
The Household Finance Committee
- Tarun Ramadorai
The Internal Working Group on Rationalisation of Branch
Authorisation Policy - Lily Vadera
The Working Group on Development of Corporate Bond
Market in India - Harun R Khan
The Working Group on Import Data Processing and
Monitoring System - AK Pandey
The Working Group on Interest Rate Options
- P G Apte
The Advisory Committee on Ways and Means Advances to
State Governments - Sumit Bose
The Committee on Medium-term Path on Financial Inclusion
- Deepak Mohanty
The Committee on Differential Premium System for Banks
in India - Jasbir Singh
The Working Group on Compilation of Flow of Funds Accounts
for Indian Economy - D K Mohanty
The High Powered Committee on Urban Co-operative Banks
(UCBs) - R Gandhi

GeneraL Awareness 25
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RBI AND MONETARY POLICY
Q.1. RBI is the lender of last resort, what does it mean?
(1) RBI advances necessary credit against eligible
securities.
(2) Commercial banks give fund to RBI
(3) RBI advances money to public whenever there
is any emergency
(4) All the above
(5) None of these
Q.2. Which of the following statements is incorrect?
(1) RBI is a profit making institution acting in the
interest of the Govt.
(2) Every country has only one central bank which
is managed by govt. officials.
(3) RBI does not perform any ordinary commercial
banking functions.
(4) RBI has adopted of MRS to issue currency.
(5) None of these
Q.3. —————— Credit policy promotes investment.
(1) Dear (2) Cheap
(3) Restricted (4) Green
(5) None of these
Q.4. What can RBI do to improve efficiency of the
banking system?
(1) It can bring about compulsory amalgamation of
weak banks.
(2) It can claim for compulsory liquidation.
(3) It can expedite winding up of proceedings to
safeguard the interest of depositors.
(4) All of the above
(5) None of these
Q.5. Which act has given control & supervision power
to RBI over commercial banks?
(1) RBI Act, 1934.
(2) Banking regulation Act, 1949.
(3) Both RBI Act, 1934 & Banking Regulation Act,
1949.
(4) Banking regulation Act, 1960.
(5) None of these
Q.6. Central bank promotes commercial banking by -
(1) Providing cheap rediscounting facilities to
commercial banks.
(2) Providing liberalized rediscounting to commercial
banks.
(3) Giving subsidies to new banks.
(4) All of the above
(5) None of these
26 GeneraL Awareness
Q.7. Whenever RBI does some open market operation
transaction, actually it wishes to which of the
followings?
(1) Inflation only
(2) Liquidity in economy
(3) Increase borrowing powers of the banks
(4) Flow of FDI
(5) None of these
Q.8. Where was the first headquarter of RBI?
(1) New Delhi (2) Mumbai
(3) Kolkata (4) Chennai
(5) None of these
Q.9. Which of the following is/are the objective(s) of
monetary policy?
(A) To anchor inflation expectation.
(B) To actively manage liquidity
(C) To maintain interest rate regime output &
financial stability.
(1) Only (A) (2) All (A), (B), (C)
(3) Only B (4) Both A & B
(5) None of these
Q.10. Which of the following is/are KEY POLICY rate
used by RBI to influence interest rate?
(A) Bank rate & repo rate
(B) Reverse repo rate
(C) CRR & SLR
(1) Only (A) (2) Only (B)
(3) All (4) Only (C)
(5) Both (A) & (B)
Q.11. Which of the following rates signals the RBI’s long
term outlook on interest rate?
(1) Repo rate (2) Reverse repo rate
(3) Bank rate (4) SLR
(5) CRR
Q.12. The monetary authority in India, viz RBI is bound to
maintain a reserve against the note issued whatever
may be the amount, this system is called as ———
(1) MRS
(2) PRS
(3) Maximum fiduciary issue system
(4) Simple deposit system
(5) None of these
Q.13. Which of the following is not the function of RBI?
(1) Managing FOREX reserve
(2) Deciding Bank rate, CRR and SLR from time to time
(3) Opening saving account for general public

(4) Prescribing the capital adequacy ratio
(5) Current Management
Q.14. Banks wishing to provide mobile banking services
have to obtain permission from which of the following
authority:
(1) RBI (2) TRAI
(3) IRDAI (4) No permission needed
(5) None of these
Q.15. RBI takes certain steps to curb the menace of
inflation. In this context, which among the following
will not help RBI in controlling the inflation in the
country?
(1) An increase in the bank rate
(2) An increase in the reverse ratio requirements
(3) A purchase of securities in the open market
(4) Increasing the repo rate
(5) None of these
Q.16. What will be the impact on the cash reserves of
commercial banks if RBI conduct a sale of securities?
(1) Increase
(2) Decrease
(3) Remain constant
(4) Neither Increase or Decrease
(5) None of these
Q.17. Under which qualitative tool, RBI fixes maximum
limit to loan and advances that can be made above
which the commercial banks cannot exceed?
(1) Rationing of credit (2) Margin requirement
(3) Loan-value ratio (4) Moral suasion
(5) None of these
Q.18. To combat rising inflation, RBI has to do which of
the following activities?
(1) increases bank rate (2) Sell govt. securities
(3) Increase reserve ratio (4) All of the above
(5) None of these
Q.19. If the cash reserve ratio (CRR) is increased by the
RBI, its impact on the expansion of credit creation
will be to-
(1) Decreases it (2) Increases it
(3) No impact (4) Can’t say
(5) None of these
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Q.20. What is the maximum number of official directors
in RBI’s central board of Directors?
(1) One (2) Two
(3) Four (4) Five
(5) None of these
Q.21. Who appoints the governor of RBI?
(1) President of India
(2) Prime minister of India
(3) Central govt. of India
(4) Vice President of India
(5) None of these
Q.22. The RBI reduces or increases different rates and
ratios in ‘’basis points’’ one basis point is equal to -
(1) One tenth of a percent
(2) One hundredth of a percent
(3) One thousandth of a percent
(4) One percent
(5) One hundred percent
Q.23. Under the BSBDA scheme of the RBI, any individual
including those from weaker sections of the society,
can open Zero balance account in which of the
following banks?
(1) Public sector banks
(2) Private sector banks
(3) Foreign banks operating in India
(4) All of the above
(5) Only (1) and (2)
Q.24. A major public sector bank raised interest rate on
loan by 25 basis points. This means the bank has
raised interest by 25 basis points of
(1) Saving bank interest rate
(2) Base Lending rate
(3) Repo Rate
(4) Present rate on deposits
(5) Discounts rate of interest
Q.25. The LAF (Liquidity adjustment facility) is a facility
extended by the RBI to the scheduled commercial
banks excluding—
(1) RRBs (2) Private Banks
(3) Nationalized Banks (4) SBI
(5) None of these

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

GeneraL Awareness 27
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NPA and BASEL NORMS

##NON PERFORMING ASSETS -NPA

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

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

NON PERFORMING ASSETS -NPA PROVISIONING NORMS

##NPA is defined as a credit facility in respect of which STANDARD ASSETS:-
the interest and/or installment of principal has remained ##General provision of a minimum of 0.40 percent on
‘past due’ for a specified period of time. standard assets
##An asset, including a leased asset, becomes non- SUBSTANDARD ASSETS:-
performing when it ceases to generate income for the
bank. ##Unsecured outstanding balance - 25%

##In accounting, originally Bad & Doubtful Debts. ##Secured outstanding balance - 15%

FOR AGRICULTURAL PURPOSE D1 - 25%

##Interest or installment of principal remains overdue for D2 - 40%

two harvest seasons but for a period not exceeding two
D3 - 100%
and a half years in the case of an advance granted for
agricultural purpose
DOUBTFUL ASSETS :-
##Any amount to be received remains overdue for a period
##Unsecured portion of outstanding balance - 100%,
of more than 90 days in respect of other accounts.
Secured outstnading balance
OUT OF ORDER:-
LOSS ASSETS:-
##An account should be treated as out of order if the
##The entire assets should be written off, if permitted by
outstanding balance remains continuously in excess of
RBI then 100% provisoing of outstanding balance.
sanctioned limit /drawing power.
OVERDUE:- NPA MANAGEMENT- PREVENTIVE
MEASURES
# #Any amount due to the bank under any credit facility
is ‘overdue’ if it is not paid on due date fixed by ##Formation of the credit information bureau(india) limited
the bank. (CIBIL)
NET NPA:- ##Release of willful defaulter’s list. RBI also releases a
list of borrowers with aggregate outstanding of Rs. 1
##Net NPAs are those type of NPAs in which the bank has crore and above against whom banks have filed suits
deducted the provision regarding NPAs. Net NPA shows for recovery of their frauds.
the actual burden of banks.
##Reporting of frauds to RBI.
ASSET CLASSIFICATION ##Special mention accounts (SMA) for early identification
##Sub-Standard Assets- With effect from 31 March of bad debt.
2005,When a NPA remained due for a period less than ##Risk assessment and risk management.
or equal to twelve months.
LOK ADALAT
##Doubtful Assets-With effect from 31 March 2005,When
##To settle disputes involving account in “doubtful” and
substandard remained due for a period of twelve
“loss” category.
months.
##Outstanding balance of Rs.20 lakhs for compromise
##Loss Assets- A loss asset is one, where the bank or the settlement.
internal or external auditors or the RBI inspection has
identified the loss but the amount has not been written ##Proved to be quite effective for speedy justice and
off wholly recovery of small loans.

GeneraL Awareness 29
www.mahendras.org
##Progress through this channel is expected to pick up in
the coming years
SARFAESI ACT-2002
##Securitization and Reconstruction of Financial Assets
and Enforcement of Securities Interest Act
##The Act provides three alternative methods for recovery
of non-performing assets, namely: -
##Securitization
##Asset Reconstruction 
##Enforcement of Security without the intervention of
the Court.
##SARFAESI Act is not applicable on
(i) NPA loans with outstanding less than Rs. 1 lakh
(ii) NPA loan accounts where the amount is less than
20% of the principal and interest are not eligible to
be dealt with under this Act.
(iii) Agriculture Lands
ARC (ASSET RECONSTRUCTION
COMPANY)
##A company which is set up with the objective of taking
over Distressed assets (NPA) from banks or financial
institutions and to Reconstruct or re-pack these assets
to make those assets saleable.
##To buy out troubled loans from banks and make special
efforts at Recovering value from the assets, if necessary
by special legislation, with special powers for recovery.
##Restructuring of weak banks to divest the bad loan portfolio.
##India’s first ARC with an initial equity of Rs.10 crore
with ICICI bank, IDBI and SBI.
##Incorporated as a public limited company on February
11, 2002.
##FDI limit in ARC - 100%
##Minimum network for ARC - 100 cr.
DRT (DEBT RECOVERY TRIBUNAL)
##To recover their bad Debt quickly and efficiently.
##39 Debt Recovery Tribunal and 5 Debt Recovery
Appellate Tribunal
##It is the special court established by central government
for the purpose of bank or any financial institutions
recovery.
30 GeneraL Awareness
##For being appointed as DRT a person should be qualify
to be district judge and for being appointed as DRAT,
the person should qualify to be a judge of the high court.
##In this court only the recovery cases of Rs.10 lakhs and
above can be filed.
National Company Law Tribunal
The National Company Law Tribunal (NCLT) is a quasi-judicial
body in India that deals with issues relating to Indian companies.
The NCLT was established under the Companies Act 2013 and
was constituted on 1 June 2016 by the government of India. It
is based on the recommendation of the justice Eradi committee
on law relating to insolvency and winding up of companies. All
proceedings under the Companies Act, including proceedings
relating to Arbitration, Compromise, arrangements and
reconstruction and winding up of companies shall be disposed
of by the National Company Law Tribunal.
The National Company Law Tribunal is the Adjudicating
Authority for Insolvency resolution process of Companies
and Limited Liability Partnerships under the Insolvency and
Bankruptcy Code, 2016.
Civil court do not have jurisdiction to entertain any suit
or proceeding the Tribunal or the Appellate Tribunal is
empowered to determine.
The NCLT has thirteen benches. Justice M.M. Kumar, a
retired Chief Justice of the Jammu & Kashmir High Court
has been appointed as President of the NCLT. Decisions of
the NCLT may be appealed to the National Company Law
Appellate Tribunal (NCLAT). The decisions of NCLAT may
be appealed to the Supreme Court of India.
Insolvency and Bankruptcy Board
The Insolvency and Bankruptcy Board of India was
established on 1st October, 2016 under the Insolvency
and Bankruptcy Code, 2016 (Code). It is a key pillar
of the ecosystem responsible for implementation of the
Code that consolidates and amends the laws relating to
reorganization and insolvency resolution of corporate
persons, partnership firms and individuals in a time bound
manner for maximization of the value of assets of such
persons, to promote entrepreneurship, availability of credit
and balance the interests of all the stakeholders.
It has regulatory oversight over the Insolvency Professionals,
Insolvency Professional Agencies, Insolvency Professional
Entities and Information Utilities. It writes and enforces
rules for processes, namely, corporate insolvency resolution,
corporate liquidation, individual insolvency resolution and
individual bankruptcy under the Code.

Public Credit Registry
Public Credit Registry (PCR), created by the Reserve Bank
of India, is a digital registry to capture and store financial
information of borrowers, both existing and new borrowers.
The credit registry will collate the borrowing history of
both individuals and corporate borrowers. Borrowers will
have access to their credit information and seek corrections.
It was recommended by the committee headed by Y.M.
Deosthalee.
The idea behind creating the public registry is to collate
the financial information of individual and corporate
borrowers under one platform, inclusive of financial
delinquencies, pending legal suits, and wilful defaulters.
The objective is to strengthen the credit culture of the
Indian economy.
CAPITAL ADEQUACY RATIO
Capital adequacy ratio or CAR or CRAR is a ratio of the
banks capital funds to risk weighted assets which has to
be maintained to buffer the risk to the bank from its risk
assets.
Tier 1 capital = core capital (paid up capital+ preferential
share) + profit carry forward+ reserve from sale of assets etc…
Tier2 capital = subordinated term debt + General loss reserve +
adjustment + undisclosed reserve (this is not for Indian Bank).
BASEL NORMS
Domestic Systemically Important Banks (D-SIBs)
SBI, ICICI Bank and HDFC Bank, continue to be identified as Domestic Systemically Important Banks (DSIBs), under the
same bucketing structure as last year. The additional Common Equity Tier 1 (CET1) requirement for D-SIBs has already been
phased-in from April 1, 2016 and will become fully effective from April 1, 2019. The additional CET1 requirement will be in
addition to the capital conservation buffer.
GeneraL Awareness
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##The Basel Committee on Banking Supervision provides
a forum for regular cooperation on banking supervisory
matters worldwide.
##The Committee’s Secretariat is located at the Bank for
International Settlements (BIS) in Basel, Switzerland.
Basel is a city of Switzerland
NEED FOR SUCH NORMS (BASEL-I)
##The first accord by the name .Basel Accord I. was
established in 1988 and was implemented by 1992.
##It was the very first attempt to introduce the concept of
minimum standards of capital adequacy. Then the second
accord by the name Basel Accord II was established in
1999 with a final directive in 2003 for implementation
by 2006 as Basel II Norms.
##This has been fully implemented under the guidelines of
the Reserve Bank of India from 1 April, 2009.
FEATURES OF BASEL II NORMS
Basel II Norms are considered as the reformed & refined
form of Basel I Accord. The Basel II Norms primarily stress
on 3 factors, i.e. Capital Adequacy, Supervisory Review and
Market discipline. The Basel Committee calls these factors
as the Three Pillars to manage risks.
BASEL III NORMS
##Basel III capital regulation is started from 1st Jan, 2013
& it will be fully implemented by March 31, 2020.The
draft guidelines prescribe minimum capital requirements
and also capital conservation buffer.
##CORE capital (paid up capital + preferential shares
should be 5.5% of risk Weighted Assets........ (1)
##Total tier 1 capital should be 7% of risk weighted
Assets…...(2)
##Total capital should be 9% of RWA…. (3)
CAPITAL CONSERVATION BUFFER (CCB)
##The CCB in the form of common equity of 2.5% of
RWA.
##A minimum capital Adequacy Ratio for bank will be
11.5% after full application of the capital conservation
buffer by 31st march 2020.
##CCB requirement is proposed to be implemented
between 31st march, 2014 To March 31st, 2020.
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Bucket Banks Additional Common Equity Tier Additional Common Equity Tier 1
1 requirement as a percentage of requirement applicable form April 1,
risk weighted Assets (RWAs) for 2019 (as per phase-in arrangement)
FY 2018-19
5 - 0.75% 0.1%
4 - 0.60% 0.80%
3 State Bank of India 0.45% 0.60%
2 - 0.30% 0.40%
1 ICICI Bank & HDFC Bank 0.15% 0.20%
The higher capital requirements are applicable from April 1, 2016 in a phased manner and will become fully effective from
April 1, 2019. The additional common equity requirement for different buckets over the four year phase-in period is as under:
Bucket April 1, 2016 April 1, 2017 April 1, 2018 April 1, 2019
5 0.25% 0.50% 0.75% 1.00%
4 0.20% 0.40% 0.60% 0.80%
3 0.15% 0.30% 0.45% 0.60%
2 0.10% 0.20% 0.30% 0.40%
1 0.05% 0.10% 0.15% 0.20%
Prompt Corrective action (PCA)
##PCA applicable on All Scheduled Commercial Banks (Excluding Regional Rural Banks)
##PCA framework was effective from April 1, 2017 based on the financials of the banks for the year ended March 31, 2017.
##The framework would be reviewed after three years.
PCA Framework for Banks
A. Capital, asset quality and profitability continue to be the key areas for monitoring.
B. Indicators to be tracked for Capital, asset quality and profitability would be CRAR/ Common Equity Tier I ratio, Net
NPA ratio and Return on Assets respectively.
C. Leverage would be monitored additionally as part of the PCA framework.
PCA matrix - Areas, indicators and risk thresholds
Indicator Risk Threshold 1 Risk Threshold 2 Risk Threshold 3
Area
Capital CRAR- Minimum regulatory prescription upto 250 bps more than 250 bps -
(Breach of for capital to risk assets ratio + applicable below Indicator but not exceeding -
either CRAR capital conservation buffer(CCB) current <10.25% but 400 bps below
minimum RBI prescription of 10.25% (9% Indicator <7.75% In excess of
or CET 1 ratio >=7.75% 312.50 bps below
to trigger minimum total capital plus 1.25%* of CCB but >=6.25%
as on March 31, 2017) upto 162.50 bps Indicator
PCA) below Indicator
And/ Or <3.625%
<6.75% but >= more than 162.50
Regulatory pre-specified trigger of Common 5.125% bps below but
Equity Tier 1 (CET 1min) + applicable not exceeding
capital conservation buffer(CCB) current 312.50 bps below
minimum RBI prescription of 6.75% (5.5% Indicator
plus 1.25%* of CCB as on March 31, 2017)
Breach of either CRAR or CET 1 ratio to <5.125% but
trigger PCA >=3.625%
Asset Quality Net Non-performing advances (NNPA) ratio >=6.0% but <9.0% >=9.0% but < 12.0% >=12.0%

32 GeneraL Awareness
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Profitability Return on assets (ROA) Negative ROA for Negative ROA for Negative ROA for
two consecutive three consecutive four consecutive
years years years
Leverage Tier 1 Leverage ratio4 <=4.0% but > = < 3.5% (leverage is
3.5% over 28.6 times the
(leverage is over Tier 1 capital)
25 times the Tier
1 capital)
*CCB would be 1.875% and 2.5% as on March 31, 2018 and March 31, 2019 respectively.
{{ Breach of ‘Risk Threshold 3’ of CET1 by a bank would identify a bank as a likely candidate for resolution through
tools like amalgamation, reconstruction, winding up, etc.
{{ In the case of a default on the part of a bank in meeting the obligations to its depositors, possible resolution processes
may be resorted to without reference to the PCA matrix.
Mandatory and Discretionary Actions
Specifications Mandatory Actions Discretionary Actions
Risk Threshold 1 Restriction on dividend distribution/ remittance of profits. Special Supervisory Interactions
Promoters/owners/parent in the case of foreign banks to bring Strategy related
in capital Governance related
Capital related
Risk Threshold 2 Restriction on branch expansion : domestic and/or overseas Credit risk related
Higher provisions as part of the coverage regime Market risk related
Risk Threshold 3 Restriction on branch expansion; domestic and/or overseas HR related
Profitability related
Restriction on management compensation and director’s fees,
Operations related
as applicable
Any other
CAMELS RATING
In India RBI inspect all the banks through CAMELS rating.
C – CAPITAL ADEQUACY A – ASSETS QUALITY M – MANAGEMENT
E – EARNING L – LIQUIDITY S – SENSTIVITY TO MARKET RISK
But due to BASEL 3 Norms CAMELS POLICY is being closed & in place of that INROADS policy is going to be
rd

introduced.
INROADS-INDIAN RISK ORIENTED AND DYNAMIC RATING SYSTEM
RISK MATRIX
1. CREDIT RISK 2. MARKET RISK 3. INTREST RATE RISK 4. LIQUIDITY RISK
5. BUSSINESS RISK 6. OPERATIONAL RISK 7. LEGAL RISK 8. FOREX RISK

GeneraL Awareness 33
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NON PERFORMING ASSETS AND BASEL NORMS

Q.1. SARFAESI Act not applicable in ——— one year but upto three year assets due known as
(1) House property (2) Machinery ———
(3) Agricultural land (4) KVP (1) substandard asset (2) standard assets
(5) None of these (3) doubtful asset (4) bad debts
Q.2. When NPA considered in case of long duration (5) loss assets
crops—— Q.11. In terms of circular dated 1.07.2013 a provisioning
(1) 4 crop season (2) 2 crop season coverage ratio on gross NPA is prescribed by RBI
(3) 3 crop season (4) 1 crop season is ———
(5) None of these (1) 100% (2) 90%
Q.3. In PCR, ‘P’ Stands for ——— (3) 70% (4) 40%
(1) Payment (2) Provident (5) None of these
(3) Provision (4) None of these Q.12. What is the provisioning percentage of standard
assets ————
(5) All of these
(1) 0.10% (2) 0.20%
Q.4. NPA implemented under the recommendation of
which committee— (3) 0.40% (4) 0.60%
(1) Shivraman committee (5) None of these
(2) Narshimham committee Q.13. If anyone fail to meet its payment obligations to
the lender even when it has capacity to honor the
(3) K P committee
obligations is known as ————
(4) None of these
(1) Drawer (2) Drawee
(5) All of these
(3) Wilful Defaulter (4) Spot Defaulter
Q.5. In CCCB , ‘B’ Stands for ———
(5) None of these
(1) Bottom (2) Button
Q.14. Which committee recommended wilful loan
(3) Butter (4) Buffer defaulter————
(5) None of these (1) Narsimham committee
Q.6. SARFAESI Act was passed in the year————— (2) Shivraman committee
(1) 2005 (2) 2013 (3) S.S.Kohli committee
(3) 2002 (4) 2001 (4) P.K Nayak committee
(5) 2012 (5) None of these
Q.7. When outstanding balance is more than drawing Q.15. NPA under D3 category (beyond 3 years), how much
power and the account become out of order is known provision should be maintained;
as ————
(1) 100% provision both on secured and unsecured
(1) hold on account (2) dormant account portion
(3) irregular account (4) demat account (2) 40% provision on secured and 100% on
(5) None of these unsecured portion
Q.8. When NPA considered in case of short duration (3) 25% provision on secured and 40% on unsecured
crops———— portion
(1) 1 crop season (2) 2 crop season (4) 15% provision on secured and 25% on unsecured
(3) 3 crop season (4) 4 crop season portion
(5) None of these (5) None of these
Q.9. When RBI started implementation of NPA guidelines Q.16. When bank ensure that bank maintain a buffer of
———— capital that can be used to absorb losses during
(1) 1990 (2) 1991 economic stress is known as —
(3)1992 (4) 1995 (1) Conservation Buffer
(5) None of these (2) Surplus
Q.10. Under asset classification of NPA accounts above (3) Profit

34 GeneraL Awareness
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(4) Surcharge Q.25. The business activities of a bank that generally do not
(5) None of these involve booking assets (loans) and taking deposits
Q.17. In BCBS , ‘s’ stands for ——— are called———
(1) Support (2) Stop (1) ALM
(3) Supervision (4) Standard (2) Bad loan exposure
(5) None of these (3) off balance sheet exposure
Q.18. In which year Basel III implementation started ? (4) NPA
(1) 1st April 2010 (2) 1st April 2013 (5) None of these
(3) 1st April 2014 (4) 1st April 2015 Q.26. In ICAAP, assessment process organized by—
(5) None of these (1) RBI (2) Bank itself
Q.19. When RBI supervise Basel implementation bank (3) CIBIL (4) SIDBI
wise is known as ? (5) None of these
(1) ICAAP (2) SRDP Q.27. Main motive of Basel accord is——
(3) SREP (4) SRAP (1) Increase Risk weighted assets
(5) None of these (2) Decrease portfolio income
Q.20. When BASEL III was fully implemented in - (3) Increase Risk tolerance level
(1) March 2017 (2) March 2018 (4) Decrease in portfolio income
(3) March 2019 (4) March 2020 (5) None of these
(5) None of these Q.28. Which department setup by RBI to collect, store, and
Q.21. Which of the following can purchase NPA? disseminate credit data to banks on credit exposures
of Rs. 5 crore and above——
(1) ARC
(1) CRILC (2) CIBIL
(2) Banks
(3) CRISIL (4) ICRA
(3) Financial Institutions
(5) None of these
(4) NBFC
Q.29. Which of the following statement is correct in the
(5) All of the above
context of NPA account?
Q.22. Core capital is also known as ——
(1) The interest cannot be debited to the account
(1) Tier I capital (2) Tier II capital even if it has been recovered
(3) Tier III capital (4) Tier IV capital (2) If interest has been debited during the year but
(5) None of these not recovered and account has become NPA at the
Q.23. Which committee is related to NPA? end of the year interest can be taken to income
(1) Khanna Committee (3) In case of government guaranteed account
(2) L K Jha Committee interest can be taking to income when not recovered
(3) Mahalanobis Committee (4) Interest cannot be debited to account and credited
to profit and loss account till it is recovered
(4) C. Rao Committee
(5) None of these
(5) None of the above
Q.30. What is the minimum investment in Security
Q.24. What is a method for calculating and controlling
Receipts for ARC which was earlier 5%?
exposure to market risk——
(1) 10% (2) 15%
(1) Value at risk (2) Risk cover
(3) 20% (4) 25%
(3) Stop loss (4) Lose cover risk
(5) None of these
(5) None of these

ANSWER KEY
1.(3) 2.(4) 3.(3) 4.(2) 5.(4) 6.(3) 7.(3) 8.(2) 9.(3) 10.(3)
11.(3) 12.(3) 13.(3) 14.(1) 15.(3) 16.(1) 17.(3) 18.(2) 19.(3) 20.(3)
21.(2) 22.(1) 23.(2) 24.(1) 25.(3) 26.(2) 27.(3) 28.(1) 29.(1) 30.(2)

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INFLATION

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

36 GeneraL Awareness

CHAPTER
4 INFLATION
Scan the QR code to get video of this chapter.
DEFINITION
Inflation is defined as a sustained increase in the general level
of prices for goods and services. It is measured as an annual
percentage increase. As inflation rises, every rupee you own
buys a smaller percentage of a good or service.
The value of a rupee does not stay constant when there
is inflation. The value of a rupee is observed in terms of
purchasing power, which is the real, tangible goods that
money can buy. When inflation goes up, there is a decline in
the purchasing power of money. For example, if the inflation
rate is 2% annually, then theoretically a Re 1 pack of gum
will cost Rs 1.02 in a year. After inflation, your money can’t
buy the same amount of goods it could beforehand.
STAGES OF INFLATION
##Creeping inflation(0-3%)
##Trotting inflation (Walking And Running Inflation)
(3%-10%)
##Galloping inflation(10%-20%)
##Hyper inflation(20% and above)
##Note- Percentage values are only approximate. Data may
vary. Changes in the value of money also result in the
CAUSES OF INFLATION
Demand Pull inflation (Wage Pull Inflation)- This is the
typical situation in which demand is more and supply is less
(commonly referred to as the “demand-pull” occurrence, or
“excess demand inflation”). When wage inflation occurs, the
prices for the product or service increase, thus leading into the
situation known as demand-pull inflation. An example of this
would be the dramatic changes in the economy during war.
Cost-Push Inflation - When an increase of price occurs in
regard to the product or maintenance of a service or product,
the expected increase in price is the resultant effect. For an
example, if a car manufacturer paid more for a vital part of
an engine, the labour cost would decrease to counter the
new price.
Impact of Inflation and Deflation on Economy
1. Effects on Production:
Keynes felt that as long as there were unemployed
resources in the economy a moderate or a mild dose of
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inflation might be in order; because this would lead to
waves of optimism inducing businessmen to invest more.
But this cannot go on forever because the limit is set
by full employment ceiling, after which the prices
start rising and moderate inflation starts assuming the
nature of hyper-inflation which, in turn, has disastrous
consequences on production.
It distorts the smooth functioning of price mechanism,
hinders capital formation, stimulates speculative
activities and hoarding, leads to misallocation of
productive resources.
In short, inflation invites business to seek profits
via manipulation of markets rather than via efficient
production.
2. Effects on Distribution:
Inflation has the effect of redistributing income because
prices of all factors do not rise in the same proportion.
Entrepreneurs stand to gain more than wage earners
or fixed income groups. Speculators, hoarders, black
marketers and smugglers stand to gain on account of
windfall profits.
redistribution of wealth partly because during inflation
there is no uniform rise in prices and partly because debts
are expressed in terms of money. Inflation is a kind of
hidden tax, steeply regressive in character and in effects.
This redistribution of wealth as a result of inflation puts
more burden on those groups of the economy which are
least able to bear it.
3. Effects on Debtors and Creditors:
Debtors borrow from creditors to pay the latter along
with the rate of interest at some future date. Changes in
the price level affect them differently at different times.
During inflation when the prices rise (and the real value
of money goes down), the debtors pay back less in real
terms than what they had borrowed, and thus, to that
extent they are gainers. On the other hand, the creditors
get less in terms of goods and services than what they
had lent and stand to lose to that extent. During the
period of deflation, however, when prices fall (and the
real value of money rises), creditors stand to gain and
debtors lose.
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4. Effects on the Entrepreneurs:
When prices rise, producers, traders speculators and
entrepreneurs stand to gain on account of windfall profits
because prices rise at a faster rate than cost of production,
besides, there is time-lag between the two. Moreover,
they gain because the prices of their inventories (stock)
go up.
Again, they generally being borrowers of money for
business purposes, stand to gain. On the other hand,
falling prices heavily reduce the profits on account of
the fact that wages fail to fall along with the fall in the
prices. Entrepreneurs, therefore, react to it by curtailing
the volume of production and hence employment goes
down generating a full-fledged depression.
5. Effects on Investors:
Different kinds of investors are affected differently by
inflation and deflation. One can invest in bonds and
debentures which yield a fixed rate of interest income or
one can invest in real estate or equities (shares) whose
returns (dividends) rise and fall with profits earned by
the companies concerned. When prices rise, the returns
on equities go up on account of the rise in profits, while
the bonds and debenture-holders gain nothing as their
incomes remain fixed.
On the other hand, equity-holders will lose during
depression on account of a fall in the price level, while
the debenture- and bond-holders gain. To the extent
investors are able to diversify their investment, they can
protect themselves from the effects of the fluctuation in
prices.
6. Effects on Farmers:
Farmers gain during inflation. The prices of farm
products go up and the cost incurred by them (like
interest and taxes) either remain constant or do not
increase much, at any rate i.e., costs lag behind prices
received by the farmers. In India, during war and post-
war period, farmers were able to pay-off their old debts
on account of high prices of their products because of
inflation. Moreover, farmers are generally debtors and
have to pay less in real terms, while the land revenue
and taxes etc., do not rise much. Thus, farmers stand to
gain during periods of inflation.
7. Effects on Wage Earners:
Wage-earners generally suffer during inflation, despite
the fact that they obtain a wage rise according to a rise in for industrial labourers (CPI-IL), agricultural labourers (CPI-
the cost of living index. However, wages do not rise as
much as the rise in prices of those commodities, which
the workers consume. Further, there is a lag between a
rise in the price level and a rise in wages. If the workers
are organized, they may not suffer much during inflation
but if they are unorganized like the agricultural labourers,
38 GeneraL Awareness
they may suffer more, as they may not find it easy to
get their wages increased. Similarly, in deflation the real
value of the money wages received by them increases
and they may gain a little.
8. Effects on Middle Class and Salaried Persons:
The hardest hit are the persons who receive fixed
incomes, usually called the middle class. Persons who
live on past savings, fixed interest or rent, pensioners,
government employees, teachers etc., suffer during
periods of rising prices as their incomes remain fixed.
Kemmerer remarked: “The middle class, however, which
by hard work and thrift has built up a fund of saving to
educate its children and to provide a livelihood for times
of sickness and for old age, finds itself in a desperate
situation in a time of serious inflation.” During deflation,
however, middle class is able to get some relief on
account of falling prices and rising value of money.
9. Effects on Government:
In a mixed economy, the public sector is affected by
fluctuations in price level. As prices rise, the government
has to spend more on goods and services including raw
materials for carrying through their project. Estimates
are revised and taxes are raised. On the other hand, when
prices fall, the government sector or the public sector
has to incur less costs.
10. Effects on Public Moral:
Inflation results in arbitrary redistribution of wealth
favoring businessmen and debtors and hurting
consumers, creditors, petty shopkeepers, small investors
and fixed income earners. This lowers the public moral.
The ethical standards and the public moral had fallen to
miserably low levels during the period of hyper-inflation
in Germany.
Measurement of Inflation in India
Inflation in India is measured through two major indices
namely Consumer Price Index (CPI) and Wholesale Price
Index (WPI). The most important index is All India CPI
by CSO. Labour Bureau prepares three CPIs for specific
occupational groups. WPI is prepared by Office of Economic
Affairs, Ministry of Commerce and Industry.
The WPI, where prices are quoted from wholesalers, is
constructed by Office of Economic Affairs, Ministry of
Commerce and Industries. In the case of CPI (prices quoted
from retailers), there are several indices to measure it: CPI
AL) and rural labourers (CPI-RL) besides an all India CPI.
In addition, Gross Domestic Product (GDP) deflator and
Private Final Consumption Expenditure (PFCE) deflator from
the National Accounts Statistics (NAS) provide an implicit
economy-wide inflation estimate.

Consumer Price Index
Two Ministries – Ministry of Statistics and Programme
Implementation (MOSPI) and Ministry of Labour and
Employment (MOLE) are engaged in the construction of
different CPIs for different groups/sectors. CPI inflation is
also called as retail inflation as the prices are quoted from
retailers. Following are the various CPIs.
(a) CPI for all India or CPI combined.
(b) CPI for Agricultural Labourers (AL)
(c) CPI for Rural Labourers (RL); and
(d) CPI for Industrial Workers (IW)
(i) CPI by MOSPI (CSO)
The CSO, which comes under MOSPI, is constructing the
rural, urban and the combined CPIs. They are published
from 2011 onwards. Of these, the CPI combined is the most
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important of all the CPIs as it is relevant for all categories
of people.
In April 2014, the RBI has selected the all India CPI (of CSO)
as the inflation index to target inflation under its new inflation
targeting monetary policy framework. RBI’s decision has
made the CPI as the prime inflation index.
(ii) CPIs by MOLE (Labour Bureau)
The Labour Bureau, Ministry of Labour and Employment
(MOLE) is preparing different indices for various categories
of people. These were CPI for Rural Labourers (CPI-RL), CPI
for Agricultural Labourers (CPI-AL) and CPI for Industrial
Workers (CPI-IW). There was a CPI for Urban Non-Manual
Employees (CPI-UME), but it was discontinued from April
2010.
Since these CPIs were for specific categories of workers, it
lacked the quality of an all India index.

Different price indices in India

Index Agency Base Year
WPI Office of Economic Affairs, Ministry of Commerce and Industries (MOCI) 2011-12
CPI All India, CPI -Urban and Rural CSO, Ministry of Statistics and Programme 2012
Implementation (MOSPI)
CPI-AL Labour Bureau, Ministry of Labour and Employment (MOLE) 1986-87
CPI-RL 1986-87
CPI-IW 2001
On the other hand, the first three indices are for specific difference between the two series is that the new WPI
occupational categories. The CPI compiled and released at index with 2011-12 as the base year has a total of 697 items
national level by MOLE reflect fluctuations in retail prices including 117 items for primary articles 16 items for fuel and
relating to specific segments of population in the country power and 564 items for manufacturing products. The prices
like industrial Workers (CPI-IW), agricultural laborers tracked are ex-factory price for manufactured productes,
(CPI-AL) and rural labourers (CPI-RL). mandi price for agri commodities and ex-mines prices for
What is the difference between the various CPIs? minerals weights given to each commodity covered in the
WPI.
Difference between the various CPIs is not just that they
measure price level changes for different sectors or groups. Core Inflation
In addition to such a sector specific price level measurement; Another way to analyse inflation data is by looking at “core
these indices differ in terms of their geographical coverage, inflation,” which is generally a chosen measure of inflation
commodities included, weights assigned to the different that excludes the more volatile categories like food and
commodity groups and the base year on the basis of which
energy prices. The main argument here is that the central
price level changes are compared.
bank should effectively be responding to the movements in
The Wholesale Price Index (WPI) permanent component of the price level rather than temporary
The WPI is published by the Office of Economic Adviser, deviations.
Ministry of Commerce and Industry. It is in use since 1942 Since core inflation is derived from the headline, it reflects
and is being published from 1947 regularly. It has a long the weaknesses in the primary measure of inflation.
history for serving as the nationwide inflation indicator till
the emergence of the combined CPI in 2011. An important In Indian context, the derivation of core inflation by exclusion
feature of the WPI which separate it from the CPI is that of food and energy from CPI/WPI discards a substantial
prices are collected from wholesalers. portion of the commodity basket. So the price movement of
The new WPI series aimes at capturing the price movement the remaining commodities may not be representative of the
in a more realistic way in keeping with the times. The basic underlying inflationary trend.
GeneraL Awareness 39
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IIP (Index of Industrial Production)
IIP is and index for India whiich details ot the growth of
various sector in an economy such as mineral, mining,
electricty and manufacturing. A high level panel had firmed
up the methodology for the IIP with new base year of 2011-
12. The statistics ministry has proposed the new base year
for IIP as 2017-2018.
The new IIP series has total of 809 items occuring in the
manufactring sector in the item basket (405 item group),
where 149 new itmes have been added and 124 items have
been deleted from the 2004-05 series. The earlier series had
620 itemes (397 itmes groups) in the manufactring sector.
Inflation Related Terms
Deflation
A general decline in prices, often caused by a reduction
in the supply of money or credit. Deflation can be caused
also by a decrease in government, personal or investment
spending. The opposite of inflation, deflation has the side
effect of increased unemployment since there is a lower
level of demand in the economy, which can lead to an
economic depression. Central banks attempt to stop severe
deflation, along with severe inflation, in an attempt to keep
the excessive drop in prices to a minimum.
Hyperinflation
Extremely rapid or out of control inflation. There is no precise
numerical definition to hyperinflation. Hyperinflation is a
situation where the price increases are so out of control that
the concept of inflation is meaningless.
Stagflation
A condition of slow economic growth and relatively high
unemployment - a time of stagnation - accompanied by a
rise in prices, or inflation.
Disinflation
A slowing in the rate of price inflation. Disinflation is used
to describe instances when the inflation rate has reduced
marginally over the short term. It is used to describe periods
of slowing inflation.
Reflation
Reflation is the act of stimulating the economy by
increasing the money supply or by reducing taxes. It is the
40 GeneraL Awareness
opposite of disinflation. It can refer to an economic policy
whereby a government uses fiscal or monetary stimulus in
order to expand a country’s output. This can possibly be
achieved by methods that include reducing tax, changing
the money supply, or even adjusting interest rates. Just
as disinflation is considered an acceptable antidote to
high inflation, reflation is considered to be an antidote
to deflation (which, unlike inflation, is considered bad
regardless how high it is).
Recession
When there is a negative growth in the GDP for two
consequtive quarters in a financial year, the condition is
known as recession.
Agflation
An increase in the price of food that occurs as a result of
increased demand from human consumption and use as an
alternative energy resource. While the competitive nature of
retail supermarkets allows some of the effects of agflation
to be absorbed, the price increases that agflation causes
are largely passed on to the end consumer. The term is
derived from a combination of the words “agriculture” and
“inflation”.
Inflation, Interest Rate and RBI
If the interest rate is low then loan will be cheap. It gives
more borrowing power in the hands of consumers. With
low cost loans easily available, the consumers spend
more due to which the economy grows and naturally
creating more inflation. If the RBI feels that the economy
is growing very fast, and the gap between demand and
supply may increase to a greater extent, then it will
increase the interest rates. Increase in interest rate means
costly loans. It gives less borrowing power in the hands of
consumers. This will lower the amount of cash entering
the economy.
It’s the RBI’s responsibility to check and monitor inflation via
indicators like the Wholesale Price Index (WPI), Consumer
Price Index (CPI) and the Producer Price Indexes (PPI), to
take best decision to keep the economy in balance. There must
be enough economic growth to increase wages and decrease
unemployment, but not too much growth that it leads to very
high inflation. The target of inflation rate must be between
two and three percent per year.

INFLATION
Q.1. What is/are the possible cause of inflation?
(i) Growth in population.
(ii) Rise in unemployment.
(iii) Increasing Urbanization.
(1) Only option i is correct.
(2) Only option ii is correct.
(3) Only option iii is correct.
(4) All of these
(5) None of these
Q.2. What is/are the possible cause of demand-pull
inflation?
(A) An increase in costs of goods and services.
(B) A reduction in the interest rates leading to lower
EMIs.
(C) An increase in government spending.
(1) Only option A is correct.
(2) Only option A & B are correct.
(3) Only option B & C are correct.
(4) All of these
(5) None of these
Q.3. Which of the following is one of the effect of
Inflation?
(1) Reduction in the purchasing power of money.
(2) It reduces the cost of living.
(3) It enhances the standard of living.
(4) Reduces the price of products.
(5) None of these
Q.4. The Phillips curve shows the relationship between
inflation and ________.
(1) Poverty
(2) Purchasing power
(3) Unemployment
(4) Growth domestic product
(5) None of these
Q.5. Which of the following is a reason for deflation?
(1) Surplus budgeting (2) Growth in GDP
(3) High interest rates (4) All the above
(5) None of these
Q.6. Which of the following is an effect of deflation?
(1) An increase in the purchasing power of money
(2) A decrease in the price of goods and services
(3) Decrease in the gross domestic product of a
country
(4) All the above
(5) None of these
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Q.7. Which of the following measures can be undertaken
to control inflation?
(A) Control on public expenditure
(B) Control on hoarding and black marketing
(C) Restrictive credit policy
(1) Options A & B is correct
(2) Options B & C is correct
(3) Options A & C is correct
(4) Options A, B & C is correct
(5) None of these
Q.8. Which of the following measures can be undertaken
to control deflation?
(A) Increase in the government spending
(B) Decreasing interest rates
(C) Suspending government employees
(1) Options A & B is correct
(2) Options B & C is correct
(3) Options A & C is correct
(4) Options A, B & C is correct
(5) None of these
Q.9. Which of the following statement is true about
wholesale price index?
(A) It consist of 697 items in total.
(B) Manufactured item has maximum weightage
(C) Its base year was revised to 2011-12 from 2004-
05.
(1) Options A & B is correct.
(2) Options B & C is correct.
(3) Options A & C is correct.
(4) Options A, B & C is correct.
(5) None of these
Q.10. Which of the following products/articles holds
maximum weightage in WPI?
(1) Primary articles (2) Fuel items
(3) Manufactured items (4) Equal weightage
(5) None of these
Q.11. Who among the following benefits the most from
inflation?
(1) Creditor (2) Debtor
(3) Wage employee (4) All of these
(5) None of these
Q.12. Compiling and releasing monthly Wholesale Price
Indices is done by:
(1) The Office of the Economic Adviser (Ministry
of Commerce & Industry).
(2) Ministry of Statistics and Programme
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Implementation
(3) Central Statistical Office
(4) All of these
(5) None of these
Q.13. What is the most powerful tool used by the Reserve
Bank of India to control inflation?
(1) Increasing policy rates.
(2) Decreasing policy rates.
(3) Decreasing government expenditure
(4) Increasing the tax structure
(5) None of these
Q.14. A condition in which both inflation and recession
exists is known as:
(1) Stagnation (2) Stagflation
(3) Walking inflation (4) Deflation
(5) None of the above
Q.15. Which one of the following is ‘most vulnerable’ to
evil effects of inflation?
(1) A salaried employee
(2) An agricultural farmers
(3) A person who have borrowed money from bank.
(4) College student.
(5) None of these
Q.16. The process to correct inflation is:
(1) Stagnation (2) Stagflation
(3) Deflation (4) Disinflation
(5) None of the above
Q.17. Which of the following statement is true regarding
Deficit Financing:
(A) Deficit financing is a method of meeting
government deficits through the creation of new
money.
(B) The deficit is the gap caused by the excess of
government expenditure over its receipts.
(C) Deficit financing provides the government
resources for the plans.
(D) It has been replaces by ‘Ways and Means
Advances’ from April 1997.
(1) All options except D is true
(2) All options except (A), (B) & (C) is true
(3) All options except C is true
(4) All options except (B) is true
(5) All options are true
Q.18. Which of the following is not the stage of inflation?
(1) Hyper-Inflation (2) Walking Inflation
(3) Depression (4) Creeping Inflation
(5) None of these
Q.19. A continuous fall in the GDP for two consecutive
quarter is defined as:
(1) Recession (2) Depreciation
(3) Prosperity (4) Recovery
(5) None of these
Q.20. A phase in the economy characterized by continuous
increase in GDP after an era of negative growth is
termed as:
(1) Recession (2) Depreciation
(3) Prosperity (4) Recovery
(5) None of these
Q.21. A phase in the economy characterized by continuous
fall the in GDP leading to negative growth is termed
as:
(1) Recession (2) Depreciation
(3) Prosperity (4) Recovery
(5) None of these
Q.22. Which of the following economy has faced hyper-
inflation?
(1) Japan (2) Venezuela
(3) Germany (4) All of these
(5) None of these
Q.23. In order to negate the evil effects of Inflation one
must invest in:
(1) Bonds (2) Equity
(3) Saving account (4) Current Account
(5) None of these
Q.24. Which of the following statement is true:
(1) Inflation is inversely related to decreasing money
supply.
(2) Deflation is inversely related to decreasing money
supply.
(3) Reflation is related to decreasing in money
supply.
(4) Disinflation is related to increasing in money
supply.
(5) None of these

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

42 GeneraL Awareness
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National Income

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

GeneraL Awareness 43
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CHAPTER
National
5 Income
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Definition
J.M.Keynes, a famous economist defined national income
as follows -
“National Income is the money value of all goods and services
produced in a country during a year”.
Sources Of Income
It is not that countries which are endowed with a bounty of
natural wealth- minerals or forests or the most fertile lands
- are naturally the richest countries. In fact the resource rich
Africa and Latin America have some of the poorest countries
in the world, whereas many prosperous countries have
scarcely any natural wealth.
There was a time when possession of natural resources was
the most important consideration but even then the resource
had to be transformed through a production process. The
economic wealth, or well-being, of a country thus does not
necessarily depend on the mere possession of resources;
the point is how these resources are used in generating a
flow of production and how, as a consequence, income and
wealth are generated from that process. People combine
their energy with natural and manmade environment within
a certain social and technological structure to generate a flow
of production.
Methods of calculating National Income
Production Method
This method is based on the total production of a country
during a year. First of all production units are classified into
primary, secondary and tertiary sectors then we identify the
various units that come under these sectors. We estimate the
goods and services produced in each of these sectors. The
sum total of products produced in these three sectors is the
total output of the nation. The next step is to find out the
value of these products in terms of money. The money sent
by Indian citizens working abroad is also added to this. Now
we get the gross national income.
GDP = Money value of final goods and services + Income
from abroad
Income Method
Factors of production together produce output and income.
The income received by the factors of production during a
year can be obtained by adding rent to land, wages to labour,
44 GeneraL Awareness
interest to capital and profit to organisations. This will be
equal to the income of the nation. In other words, total income
is equal to the reward given to various factors of production.
By adding the money sent by the Indian citizens from abroad
to the income of the various factors of production, we get the
gross national income.
GDP = Rent + Wage + Interest +Profit + Income from
abroad
This method will help us to know the contributions made
by different agents like landlords, labourers, capitalists and
organizers to national income.
Expenditure Method
National income can also be calculated by adding up the
expenditure incurred for goods and services. Government as
well as private individuals spend money for consumption and
production purposes. The sum total of expenditure incurred
in a country during a year will be equal to national income.
GDP = Individual Expenditure + Government Expenditure
This method will help us to identify the expenditure incurred
by different agents.
Any one of the above methods can be used for calculating
national income.
Production method = Income method = Expenditure
method
Measures of National Income
Gross Domestic Product (GDP)
GDP is the total money value of all final goods and services,
produced with in the geographical boundary of the country
during a financial year.
SOME MACRO ECONOMIC IDENTITIES
Gross Domestic Product measures the aggregate production
of final goods and services taking place within the domestic
economy during a year.
GDP = Value of all services produced within the country
+ value of all goods produced within the country.
Gross National Product (GNP)
But the whole of it may not accrue to the citizens of the
country. For example, a citizen of India working in United
States may be earning her wage and it will be included
in the United States GDP. But legally speaking, she is an

Indian. When we try to compensate this, in order to maintain
symmetry, we must deduct the earnings of the foreigners who
are working within our domestic economy, or the payments
to the factors of production owned by the foreigners. For
example, the profits earned by the Korean-owned Hyundai
car factory will have to be subtracted from the GDP of India.
The macroeconomic variable which takes into account
such additions and subtractions is known as Gross National
Product (GNP). It is,therefore, defined as follows
GNP=GDP + Factor income earned by the domestic
factors of production employed in the rest of the world
- Factor income earned by the factors of production of
the rest of the world employed in the domestic economy.
Various Method for calculating National
Income
Hence, GNP=GDP + Net factor income from abroad
(+)
We have already noted that a part of the capital gets consumed
during the year due to wear and tear. This wear and tear is
called depreciation. Naturally, depreciation does not become
part of anybody’s income. If we deduct depreciation from
GNP the measure of aggregate income that we obtain is called
Net National Product (NNP). Thus,
NNP=GNP - Depreciation
It is to be noted that all these variables are evaluated at market
prices. Through the expression given above, we get the value
of NNP evaluated at market prices. But market price includes
indirect taxes. When indirect taxes are imposed on goods
and services, their prices go up. Indirect taxes accrue to the
government. We have to deduct them from NNP evaluated
at market prices in order to calculate that part of NNP which
actually accrues to the factors of production. Similarly, there
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may be subsidies granted by the government on the prices
of some commodities (in India petrol is heavily taxed by the
government, whereas cooking gas is subsidised). So we need
to add subsidies to the NNP evaluated at market prices. The
measure that we obtain by doing so is called Net National
Product at factor cost or National Income.
Thus, NNP at factor cost =
National Income (NI ) = NNP at market prices -(Indirect
taxes - Subsidies) = NNP at market prices - Net indirect
taxes (Net indirect taxes = Indirect taxes- Subsidies)
Personal Income (PI) = NI - Undistributed profits - Net
interest payments made by households - Corporate tax
+ Transfer payments to the households from the gov.
and firms.
However, even PI is not the income over which the
households have complete say. They have to pay taxes from
PI. If we deduct the Personal Tax Payments (for example
income tax), and Non-tax Payments (such as fines) from
PI, we obtain what is known as the Personal Disposable
Income. Thus
Personal Disposable Income (PDI) = PI - Personal tax
payments - Non-tax payments.
Personal Disposable Income is the part of the aggregate
income which belongs to the households. They may decide
to consume a part of it, and save the rest.
Type Of Goods
Final Goods
An item that is meant for final use and will not pass
through any more stages of production or transformations,
for example an article of clothing which is ready to be sold
finally to the consumers for final use. Such a good is called
a final good.
Final goods may be of two types consumption goods and
capital goods. we can distinguish between Goods like food,
and clothing, and services like recreation that are consumed
when purchased by their ultimate consumers are called
consumption goods or consumer goods. (This also includes
services which are consumed but for convenience we may
refer to them as consumer goods.)Then there are other goods
that are of durable character which are used in the production
process. These are tools, implements and machines. While
they make production of other commodities feasible, they
themselves don’t get transformed in the production process.
They are also final goods yet they are not final goods to be
ultimately consumed.
Intermediate Goods
All the final goods and services produced in an economy
in a given period of time are either in the form of
consumption goods (both durable and non-durable) or
capital goods. As final goods they do not undergo any
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further transformation in the economic process. Of the
total production taking place in the economy a large
number of products don’t end up in final consumption and
are not capital goods either. Such goods may be used by
other producers as material inputs.
Counting them separately will lead to the error of double
counting. Whereas considering intermediate goods may
give a better description of total economic activity, counting
them will highly exaggerate the final value of our economic
activity.
Depreciation
Already existing capital stock suffers wear and tear and
needs maintenance and replacement. A part of the capital
goods produced this year goes for replacement of existing
capital goods and is not an addition to the stock of capital
goods already existing and its value needs to be subtracted
from gross investment for arriving at the measure for net
investment. This deletion, which is made from the value of
gross investment in order to accommodate regular wear and
tear of capital,is called depreciation.
Net Investment = Gross investment - Depreciation
We can imagine as if the machine is being gradually used
up in each year’s production process and each year one
twentieth of its original value is getting depreciated. So,
instead of considering a bulk investment for replacement
after twenty years, we consider an annual depreciation
cost every year. This is the usual sense in which the term
depreciation is used and inherent in its conception is the
expected life of a particular capital good, like twenty years
in our example of the machine. Depreciation is thus an
annual allowance for wear and tear of a capital good.In
other words it is the cost of the good divided by number
of years of its useful life. Notice here that depreciation
is an accounting concept. No real expenditure may have
actually been incurred each year yet depreciation is annually
accounted for.
History of Statistical System In India
The first attempt to calculate national income of India was
made by Dada Bhai Naoroji in 1867-68. The first scientific
attempt was made by Prof.V.K.R.V.Rao in 1931-32. The
first official attempt was made by Prof.P.C.Mahalanobis in
1948- 49. The final report was submitted in 1954. Today
national income is calculated and published by the Central
Statistics office.
Only after India became independent did the Government of
India establish a Central Statistical Unit (1949), which was
later (1951) converted into the Central Statistics office (CSO)
and the Department of Statistics, which constitute presently
the National Statistical Organisation (NSO) of the Ministry
of Statistics and Programme Implementation.
46 GeneraL Awareness
CENTRAL Statistics OFFICE (CSO)
The CSO, headed by a Director General, consists of five
Divisions, namely, the National Accounts Division (NAD),
the Economic Statistics Division (ESD), the Social Statistics
Division (SSD), the Training Division and the Coordination
& Publication Division (CAP). The CSO has wing located
in Kolkata known as Industrial Statistics Wing.
The Central Statistical Office is responsible for coordination
of statistical activities in the country, and for evolving
and maintaining statistical standards. Its activities include
National Income Accounting; conduct of Annual Survey of
Industries, Economic Censuses and its follow up surveys,
compilation of Index of Industrial Production, as well
as Consumer Price Indices, Gender Statistics, imparting
training on Official Statistics, Five Year Plan work relating to
Development of Statistics in the States and Union Territories;
dissemination of statistical information, work relating to
trade, energy, construction, and environment statistics,
revision of National Industrial Classification, etc.
National Sample Survey Organisation (NSSO)
National Sample Survey (NSS) was set up in 1950 on the
recommendations of National Income Committee, chaired by
late Prof. P. C. Mahalanobis to fill up large gaps in statistical
data for computation of national income aggregates, especially
in respect of unorganized / household sector of the economy.
Initially statistical work of NSS except for fieldwork used to
be carried out by Indian Statistical Institute under the guidance
of Prof. Mahalanobis, while NSS Directorate was created and
assigned the fieldwork. NSS was reorganized as National
Sample Survey Organisation (NSSO) in March 1970 on the
recommendation of Review Committee Chaired by Sh. B.
Sivaraman, when all aspects of NSS work was brought under
a single organization under Government of India. However
full integration was not possible until June, 1972 (on the eve of
launching of NSS 27th round). In a way, this marked the end
of an era in the history of NSS. In the new set-up Governing
Council (GC) of NSSO with a non-official Chairman to guide
all the activities of NSSO came in as the apex body of the new
organization and NSS surveys were given a new perspective.
In 2006, consequent to formation of National Statistical
Commission, GC of NSSO was dissolved and a Steering
Committee of National Sample Survey came in its place. The
NSSO is now called as National Sample Survey organisation.
The NSSO functions under the overall direction of a Steering
Committee with requisite independence and autonomy in
the matter of collection, processing and publication of NSS
data. In addition to the non official Chairman, the Steering
Committee is composed of academicians, data users from
Central and State Government departments and senior officers
of the Ministry. The NSSO is headed by the Director General
and Chief Executive Officer (DG & CEO), who is also the
Member Secretary of the Steering Committee.

NATIONAL INCOME
Q.1. Which is the most important source for National
Income in India?
(1) Agriculture (2) Services
(3) Industry (4) Business
(5) None of these
Q.2. When the economy grows, what effect it has on the
tertiary sector -
(1) Decrease and then increases
(2) Increases and then decreases
(3) increases
(4) decreases
(5) none of these
Q.3. What is National Income –
(1) National product value at market cost
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(3) Winning a Lottery
(4) Agent’s Commission for selling a house
(5) None of These
Q.8. With which of the following we divide the National
Income to calculate Per Capita Income?
(1) Total population of a country
(2) Working Population
(3) Total Area of the Country
(4) Total Capital Formation
(5) None of These
Q.9. Which of the following is true about India’s National
Income?
(1) The % of Agriculture is more than that of
services.

(2) Net National Value at Factor cost (2) The % of Industries is more than that of the
Agriculture
(3) Domestic value at market cost
(3) The % of services is more than of Industry
(4) Domestic Value at factor cost
(4) The % of services is more than that of the
(5) None of these combined % of manufacturing and agriculture
Q.4. Which of the following calculates National Income (5) None of these
of India–
Q.10. Which of the following is equal to depreciation?
(1) Planning Commission
(1) Gross National Product - net national product
(2) Finance Ministry
(2) Net National Product - GNP
(3) CSO
(3) Gross national product - personal income
(4) RBI
(4) Personal income – Personal taxes
(5) None of these
(5) None of these
Q.5. In 1867-68 who calculated the per capita income at
20 rupees for the first time in India Q.11. Which of the following is not the method of
measurement of national income -
(1) M.G. Ranade (2) Sir W.Hunter
(1) Production Method
(3) Naoroji (4) R.Dutt
(2) Income method
(5) None of these
(3) Investment method
Q.6. Who gave the concept of ‘Drain of Wealth’?
(4) Expenditure method
(1) Bal Gangadhar Tilak
(5) None of these
(2) Naoroji
Q.12. Which of the following fields in India received the
(3) G.K. Gokhale largest proportion of gross national product -
(4) Govind Sharma (1) In agriculture and related fields
(5) None of these (2) Public Administration in defence
Q.7. Which of the following is not included in National (3) Service sector
Income?
(4) Manufacturing, construction, electricity and gas
(1) Tenant’s rent
(5) None of these
(2) Expenditure on bridges
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Q.13. What is Nation’s National income -
(1) The Government’s annual revenue
(2) The sum value of all products
(3) The surplus production in the commercial sectors
(4) Deducting the imports from exports
(1) Natural Resources (2) Capital Formation
(3) Market size (4) All of these
(5) None of these
Q.20. Which of the following issues Human Development
report?

(5) None of these (1) UNCTAD (2) ASEAN

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

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

48 GeneraL Awareness
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Money Market In India

##Financial Market
##India money market
##Instruments of Money Market
##Negotiable Instruments Act, 1881
##Question & Answer

GeneraL Awareness 49
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Money Market
CHAPTER

6 In India
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Financial Market

Securities and
Reserve Bank
Exchange
of India
Board of India

Capital Commodity Money

Market Market Market

T-Bills Term Money

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

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

Indian Money Market

Unorganised Sector Organised Sector Co-operative Sector

Money Indigenous Nidhi's Chit

Lenders Bankers Funds

RBI Public Sector Private Sector Development Banks DFHI Ltd.

Banks Banks and Financial
Institutions

SBI Other Nationalised UTI, LIC,IFC, IDBI

Banks

Scheduled Banks Non-Scheduled Banks

Indian Banks Foreign Banks

50 GeneraL Awareness

There are certain organisation in the financial market which
deal in money while keeping a synch. These institutions
combined together are called Money Market.
Money Market Institutions are
Government of India and other sovereign bodies
Banks and Development Financial Institutions
PSUs [Public Sector Undertakings
Private sector organizations
The Government /Quasi government owned non-corporate
entities.
Large numbers of instruments that are traded in the money
market are issued by Government of India, State governments
and other statutory bodies. Instruments that are issued by the
Development Financial Institutions [DFI] and banks carry
the highest credit ratings amongst non-government issuers
mainly due to their connection with the Indian Government.
Instruments of Money Market
Call Money Market
Call money market is a market for uncollateralized lending
and borrowing of funds. This market is predominantly
overnight and is open for participation only to schedule
commercial banks and the primary dealers. The largest money
market is - Mumbai
Notice Money
One financial institution borrow money from another
financial institution for 2 days to 14 days.
Term Money
One financial institution borrow money from another
financial institution for more than 14 days.
Treasury Bills
These are the lowest risk category instruments for the short
term. RBI issues treasury bills [T-bills] at a prefixed day and
for a fixed amount. There are 3 types of treasury bills.
##91-day T-bill: maturity is in 91 days, it is auctioned on
wednesday of every week and day of payment thursday.
##182-day T-bills: maturity is in 182 days, it is auctioned
on Wednesday, which is non reporting week and day of
payment Thursday.
##364-day T-bill: maturity is 364 days, it is auctioned on
Wednesday which is a reporting week and payment on
thursday.
Certificates of Deposits
##CDs are issued by banks and Financial Institutions (FI).
##This instrument was first time allowed in India in 1989.
##A CD is a negotiable promissory note, secure and short
term, of up to a year, in nature.
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##The maturity period of CDs issued by banks should not
be less than 7 days and not more than 364 days, from
the date of issue.
##Minimum amount of CD should be Rs. 1 lakh i.e., the
minimum deposit that could be accepted from a single
subscriber should not be less than Rs. 1 lakh & in
multiples of Rs 1 lakh there after.
Commercial Papers
##Commercial papers [CPs] are negotiable short-term
unsecured promissory notes with fixed maturities, issued
by well-rated organizations.
##These are generally sold on discount basis. Organizations
can issue CPs either directly or through banks or
merchant banks [called as dealers]. These instruments
are normally issued in the multiples of five lakh.
##Minimum Time period – 7 days
##Maximum Time Period – 364 days
Dated Government Securities
##These are securities issued by the Government of India
and State Governments.
##The date of maturity is specified in the securities
therefore they are known as dated securities.
Zero -Coupon Bonds
##It is issued at a discount to face value. No interest is
paid during the period of the bond. But at the time of
maturity full payment or bullet payment of the face value
would be done.
Deep-Discount Bonds:
##It was first introduced by IDBI in June 1994 followed
by ICICI. It is similar to zero-coupon bonds with longer
maturity.
Negotiable Instruments Act, 1881
Definition of Negotiable Instruments
According to section 13 of the Negotiable Instruments Act,
1881, a negotiable instrument means “promissory note, bill
of exchange, or cheque, payable either to order or to bearer”.
Types of Negotiable Instruments
According to the Negotiable Instruments Act, 1881 there are
three types of negotiable instruments i.e., promissory note,
bill of exchange and cheque. However many other documents
are also recognized as negotiable instruments on the basis of
custom and usage, like hundis, treasury bills, share warrants,
etc., provided they possess the features of negotiability. In the
following sections, we shall study about Promissory Notes
(popularly called pronotes), Bills of Exchange (popularly
called bills), Cheques and Hundis (a popular indigenous
document prevalent in India), in detail.
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Promissory Note (Section-4 Of N.I. Act 1881)
Suppose you take a loan of Rupees Five Thousand from your
friend Ramesh. You can make a document stating that you
will pay the money to Ramesh or the bearer on demand. Or
you can mention in the document that you would like to pay
the amount after three months. This document, once signed
by you, duly stamped and handed over to Ramesh, becomes a
negotiable instrument. Now Ramesh can personally present it
before you for payment or give this document to some other
person to collect money on his behalf. He can endorse it in
somebody else’s name who in turn can endorse it further till
the final payment is made by you to whosoever presents it
before you. This type of a document is called a Promissory
Note.
Bill of Exchange (Section-5 of N.I. ACT 1881)
Suppose Rajiv has given a loan of Rupees Ten Thousand
to Sameer, which Sameer has to return. Now, Rajiv also
has to give some money to Tarun. In this case, Rajiv can
make a document directing Sameer to make payment up to
Rupees Ten Thousand to Tarun on demand or after expiry
of a specified period. This document is called a Bill of
Exchange, which can be transferred to some other person’s
name by Tarun.
Section 5 of the Negotiable Instruments Act, 1881 defines a
bill of exchange as ‘an instrument in writing containing an
unconditional order, signed by the maker, directing a certain
person to pay a certain sum of money only to or to the order
of a certain person, or to the bearer of the instrument’.
Cheques (Section-6 of N.I. ACT 1881)
Cheque is a very common form of negotiable instrument.
If you have a savings bank account or current account in a
bank, you can issue a cheque in your own name or in favour
of others, thereby directing the bank to pay the specified
amount to the person named in the cheque.
Therefore, a cheque may be regarded as a bill of exchange;
the only difference is that the bank is always the drawee in
case of a cheque.
The Negotiable Instruments Act, 1881 defines a cheque
as a bill of exchange drawn on a specified banker and
not expressed to be payable otherwise than on demand.
Actually, a cheque is an order by the account holder of the
bank directing his banker to pay on demand, the specified
amount, to or to the order of the person named therein or
to the bearer.
Types of Cheque
Open cheque: A cheque is called ‘Open’ when it is possible
to get cash over the counter at the bank. The holder of an
open cheque can do the following:
Receive its payment over the counter at the bank, Deposit
the cheque in his own account
52 GeneraL Awareness
Pass it to some one else by signing on the back of a
cheque.
Crossed cheque: Since open cheque is subject to risk of theft,
it is dangerous to issue such cheques. This risk can be avoided
by issuing another types of cheque called ‘Crossed cheque’.
The payment of such cheque is not made over the counter
at the bank. It is only credited to the bank account of the
payee. A cheque can be crossed by drawing two transverse
parallel lines across the cheque, with or without the writing
‘Account payee’ or ‘Not Negotiable’.
Bearer cheque: A cheque which is payable to any person
who presents it for payment at the bank counter is called
‘Bearer cheque’. A bearer cheque can be transferred by mere
delivery and requires no endorsement.
Order cheque: An order cheque is one which is payable to
a particular person. In such a cheque the word ‘bearer’ may
be cut out or cancelled and the word ‘order’ may be written.
The payee can transfer an order cheque to someone else by
signing his or her name on the back of it.
Hundis : A Hundi is a negotiable instrument by usage. It is
often in the form of a bill of exchange drawn in any local
language in accordance with the custom of the place. Some
times it can also be in the form of a promissory note. A
hundi is the oldest known instrument used for the purpose
of transfer of money without its actual physical movement.
The provisions of the Negotiable Instruments Act shall apply
to hundis only when there is no customary rule known to
the people.
Demand Draft
The Demand Draft is a pre-paid Negotiable Instrument,
wherein the drawee bank undertakes to make payment in full
when the instrument is presented by the payee for payment.
The demand draft is made payable on a specified branch of
a bank at a specified centre. In order to obtain payment, the
beneficiary has to either present the instrument directly to
the branch concerned or have it collected by his / her bank
through the clearing mechanism.
Banker’s Cheque
Banker’s cheque is another payment instrument which is
used by banks to settle payment obligations on behalf of their
customers. This instrument is guaranteed by the bank for its
full value and is similar to a demand draft. In practice, these
instruments are payable at the branch of issue and are used
for payment within the local clearing jurisdiction.
Payment Orders
Payment Orders are issued by banks for payments made on
behalf of the bank. These instruments are signed by a banker
and carry the guarantee of the bank on the availability of the
funds. These instruments are payable at the branch of issue.
 www.mahendras.org

MONEY MARKET
Q.1. Which of the following is the regulator of money (3) Commercial bills (4) Shares
market? (5) Certificates of deposits
(1) Government of India Q.7. Which of the following statement is true about
(2) Reserve Bank of India commercial paper?
(3) Insurance Regulatory Development Authority (A) It is a promissory note
(4) Telecom Regulatory Authority of India (B) It is traded in the money market
(5) None of these (C) It was introduced in 1990
Q.2. What is call money? (D) It secure instrument
(1) It is an overnight loan in the money market. (1) Option C & D are correct.
(2) It is loan of above 1 day to 14 days in the money (2) Option A & B are correct.
market. (3) Option B & C are correct.
(3) It is loan of above 14 day to 364 days in the (4) Option A, B & C are correct.
money market.
(5) All options are correct.
(4) It is an amount charged on ISD calls.
Q.8. Which of the following statement is true about
(5) None of these certificate of deposit?
Q.3. What is notice money? (A) It is a secure instrument in comparison to
(1) It is an overnight loan in the money market. commercial paper.
(2) It is a loan for 2 days to 14 days in the money (B) It is a promissory note
market. (C) It is traded in the capital market.
(3) It is a loan of above 14 days to 364 days in the (D) It was introduced in 1990.
money market.
(1) Option A & B are false
(4) It an amount given in order to book a delivery.
(2) Option C & D are false
(5) None of these
(3) Option B & C are correct.
Q.4. What is term money?
(4) Option A, C & D are correct.
(1) It is an overnight loan in the money market
(5) All options are correct.
(2) It is a loan of above 1 day to 14 days in the money
market. Q.9. Which of the following statement is false about
Treasury bill?
(3) It is a loan of above 14 days to 364 days in the
money market. (A) It is a secure instrument.
(4) It is a loan provided on certain terms and (B) It is a promissory note.
conditions by bank to its customer. (C) It is issued by the government.
(5) None of these (D) It’s is issued for a maximum maturity of 1 year.
Q.5. Which of the following is related to Money Market? (1) Option A & B are false
(1) Commercial money (2) Only Option C is true
(2) Treasury bills (3) Option B & D are correct.
(3) Cheque (4) Option A, & D are correct.
(4) Shares (5) All options are correct except C.
(5) Derivative Q.10. Which of the following statement is true about
Q.6. Which of the following is not related to money commercial bill?
market? (A) It is a promissory note
(1) Treasury bills (2) Commercial paper (B) It is a bill of exchange
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(C) It is a trade bill of deposit is issued?
(D) It is issued by the Reserve Bank of India (1) The minimum amount for certificate of deposit
(1) Option A & B are correct. is 5 lacs.

(2) Option A & D are correct.
(3) Option B & C are correct.
(4) Option C & D are correct.
(5) All options are correct.
Q.11. Which of the following statement is related to dated
securities?
(A) It is a secure instrument.
(B) It is issued by RBI on the behalf of government.
(C) It acknowledge the debt by a government.
(D) The date of maturity is mentioned on the
certificate
(1) Only Option A & B
(2) Only Option C & D
(3) Only Option B & C
(4) Only Option A, C & D
(5) All of the above
Q.12. What is the minimum amount at which commercial
paper can be issued?
(1) The minimum amount for commercial papers is
5 lacs.
(2) The minimum amount for certificate of deposit
is 5 crores.
(3) The minimum amount for certificate of deposit
is 1 lacs.
(4) The minimum amount for certificate of deposit
is 1 crore
(5) None of these
Q.15. Which of the following is considered to be more
secure instrument?
(1) Cheque (2) Draft
(3) Commercial paper (4) Hundi
(5) All of the above
Q.16. What is the maximum validity of a Cheque?
(1) 30 days (2) 60 days
(3) 90 days (4) 180 days
(5) None of these
Q.17. Which is not a type of Cheque?
(1) Stale Cheque
(2) Mutilated Cheque
(3) Account payee Cheque

(2) The minimum amount for commercial papers is (4) Crossed Cheque
5 crores. (5) Promissory Cheque
(3) The minimum amount for commercial papers is Q.18. Which is a type of crossing in a Cheque?
1 lacs. (1) Negotiable crossing
(4) The minimum amount for commercial papers is (2) Special crossing
1 crore
(3) level crossing
(5) None of these
(4) Precise crossing
Q.13. What is the minimum and maximum maturity of
certificate of deposit issued by financial institutions (5) Named crossing
except bank? Q.19. Which of the following Cheque is payable on the
(1) Certificate of deposit issued by financial counter?
institutions are for 1 year to 3 years. (1) Account payee Cheque
(2) Certificate of deposit issued by financial (2) Crossed Cheque
institutions are for 7 days to 1 year.
(3) Bearer Cheque
(3) Certificate of deposit issued by financial
(4) Special crossing Cheque
institutions are for 15 days to 90 days.
(5) None of these
(4) Certificate of deposit issued by financial
institutions are for 1 years to 10 years. Q.20. A Cheque issued whose maturity date is over is
termed as?
(5) None of these
(1) Dead Cheque (2) Mutilated Cheque
Q.14. What is the minimum amount at which certificate
(3) Stale Cheque (4) Blank Cheque
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(5) None of these Q.24. Which of the following is related to deep discount
Q.21. Which of the following act defines a Cheque? bond?

(1) Reserve Bank of India Act 1934 (A) It is a long term zero coupon bond

(2) Negotiable Instrument Act 1881 (B) The rate of interest is mentioned on the
certificate
(3) Banking Regulation Act 1949
(C) It issued by post office only.
(4) Companies Act 2013
(D) The date of maturity is not defined
(5) Foreign Exchange Management Act 1999
(1) Only Option A
Q.22. Which of the following instrument is defined under
negotiable instrument act? (2) Only Option C & D

(1) Cheque (2) Promissory note (3) Only Option B & C

(3) Bill of exchange (4) Draft (4) Only Option A, C & D

(5) All of these (5) All options are related

Q.23. Which of the following institution cannot participate
in call money market?
(1) Banks (2) NBFC
(3) Primary dealers (4) RBI
(5) None of the above
Q.25. Commercial Bill is a type of-
(1) Promissiory Note (2) Bill of Exchange
(3) Cheque (4) Draft
(5) None of the above

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

NOTES

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Capital Market In India

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

56 GeneraL Awareness
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CAPITAL MARKET
CHAPTER

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

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

Capital Market

Primary Secondary
Market Market

Places/
IPO Tools
Space

FPO Equity Shares BSE

Right Issue Pref. Shares NSE

Issue of Pref.
Mutual Funds OTCEI
Shares

Regional
Private Stock
Debentures
Placement
Exchanges

Issue of
Debenture Bonds

NFO

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

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

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3. Secured Debenture
Type Of Public Issues
4. Unsecured Debenture
Initial Public Offering [IPO]
When an unlisted company in order to raise the capital, invites KINDS OF SHARES
the purchase applications from the public for its new equity Equity Shares
shares through an offer, the offer is known as Initial Public
Equity shares are also known as common stock or
Offering. Any company can bring IPO only once.
common shares. Equity holders are considered to be the
Follow On Public Offering (FPO) actual owners of the company and their claim is known as
When a listed company in order to raise the capital, invites residual claim
the purchase applications from the public for its new equity Preference Shares
shares through an offer, the offer is known as Follow-on
Preference shares are those shares which are given preference
Public Offer. In other word any company issuing its new
as regards to payment of dividend and repayment of capital.
shares to the public other than the first time.
Preference shareholders cannot exercise their voting rights on
Right Issue all the matters. They can vote only on the matters affecting
Here, a listed organization proposes to issue fresh securities their own interest.
to its existing shareholders as on a record date. The rights are Secondary Market
offered in a particular ratio to the number of securities held
prior to the issue. This route is best suited for organizations Working of Primary Market
who would like to raise capital without diluting the stake
of its existing shareholders. In other word the existing Securities

shareholders are offered right of first denial. These shares Issuer of

Securities
Investor

can be sold to others only when existing shareholders don’t Flow of Funds

purchase these shares.

Preferential Issue
This is an issue of either shares or convertible securities by
listed organizations to a select group of people under Section Working of Secondary Market
(81) of the Companies Act,1956. This issue is neither a Rights Intermediaries

issue nor Public issue and is a faster way for any organization Securities

to raise capital. Investor Investor

Flow of Funds

Secondary Market

##The secondary market is the financial market where

Regulated by Regulated by
previously issued securities and financial instruments
RBI SEBI such as stock, bonds, options, and futures are bought
and sold.

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

Forwards
Derivative Market

Futures
Call Option
Options
Put Option
SWAPS

Warrants

ASBA (Application Supported by Blocked Amount):

Commodity Market
Futures
Commodity Over the
Market Counter
Forward
Commodity markets are markets where raw or primary
products are exchanged. These raw commodities are traded
on regulated commodities exchanges, in which they are
bought and sold in standardized contracts.
This article focuses on the history and current debates
regarding global commodity markets. It covers physical
product (food, metals, electricity) markets but not the ways
that services, including those of governments, nor investment,
nor debt, can be seen as a commodity.
MCX (Now known as metropolitan Stock Exchange of
India Limited) - is the first commodity exchange which
launched the ipo of 700 cr.
This is a step towards the capital market reforms and
transparency. Under this when any investor applies for
securities in the new issue market he/ she is not required
to transfer the amount in the issuer’s account with the
application. The amount is blocked in his/ her account
and the issuer company will get the funds only after
the allotment on the basis of number of allotted shares.
With this investors’ interest is protected by reducing the
complication and time lag for refund of excess application
money.
What is A Demat Account?
##Securities (shares, Debenture, Bonds etc) are held
electronically in a dematerialized (or ‘Demat’) account
instead of the investor taking physical possession of
certificates.
##The move from physical certificates to electronic book
keeping.
Advantage of Demat Account-
##No risk due to loss on account of fire, theft or mutilation
##Bonus/Right shares/split allotted to the investor directly
credit into his demat account.
##Transaction Costs are low
##A single demat account can hold both Equity and Debt
instruments

60 GeneraL Awareness

##No stamp duty on transfer of securities
##From April 2006, it has become mandatory for
any person holding a  demat account  to possess a
permanent account number (PAN).
Portfolio Management
It is the practice of soliciting the services of professional
and qualified fund managers for the purpose of investment
in the capital market.
It involves entrustment of investment activities to fund
managers who for a small premium undertake the task of
preparing and managing an investment portfolio for the
investors. This helps ordinary investors in optimizing returns
and lowering risks on their investment.
Net Asset Value (NAV)
The investment efficiency of the mutual fund can be measured
in terms of the NAV values and Net Sales. NAV is the indicator
of the investment performance and it indicates the amount each
ASBA (Application Supported By Blocked Amount
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unit holder will get per unit on redemption or winding up of
mutual fund. Net Sales given by the difference between the
total sales and total repurchases of the units of a fund.
Related Terms
Authorized Capital
It is the maximum amount of share capital fixed in the
Memorandum of Association of a company as required by
the Company’s act. They are also known as nominal capital.
Issued Capital
It is that part of a company’s capital that has been subscribed
and alloted to shareholders. It is a broader concept than paid
up capital.
Paid Up Capital
It is that part of the issued capital of a company, paid up by
the shareholders (promoters). It is that part, invested by the
promoters. Therefore, an issued capital may or may not be
a paid up capital.
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Important Terminology & Important Points
Arbitrage
A company listed in many stock exchanges & the rate of
share is different in different stock exchange. Through this
situation customer got profit through trading & this profit is
known as arbitrage.
Hedging
When customer invest money in different assets like share,
debenture, bond….. To control the risk of market.
Bull Market
A bull market is associated with increasing investor
confidence, and increased investing in anticipation of future
price increases (capital gains). A bullish trend in the stock
market often begins before the general economy shows clear
signs of recovery.
Bear Market
A bear market is a general decline in the stock market over a
period of time. It is a transition from high investor optimism
to widespread investor fear and pessimism.
Blue Chip Stocks
A Blue Chip Stock is the share of a company with Large Market
Capitalization and strong, consistent performance track record
irrespective of stages and siuation of economy. Major Stock
Indexes of Stock Exchanges are made of Blue Chip Stocks.
Margin Trading
When an investor pays for a part of his/her purchases and
remaining part is paid by the broker/banker as a short term
funding to the investor on which no interest charged if repaid
within time, is known as margin trading. This facility is
mainly used in intraday trading.
Kerb Trading
Trading after the official time. It is illegal.
##The first Indian company which was listed in NASDAQ
is INFOSYS.
##First Indian company which was listed in DOWJONES-
ICICI
##1929-30 recession started with the downfall of dow jones.
##Investment- use of money for the purpose of profit.
##Disinvestment- selling of the share of PSUs by Goi.
This process started in India from 1991.
Problem of Stock Market Before SEBI Came
##Market was extremely restrictive regulation on the
issuers enforced by the Controller of capital issues (cci).
First organized stock exchange was established in 1875
in Bombay.
62 GeneraL Awareness
##There were 20 regional stock exchange in Bombay in
1992.
##But trading was concentrated by BSE and it enjoy
monopoly
##User from out side Bombay found it extremely difficult
for trading.
##BSE imposed higher entry barrier
##So the services of brokers were extremely high.
Securities And Exchange Board of India
(SEBI)
The Securities and Exchange Board of India was established
in 1988 & given statutory powers on April 12, 1992 in
accordance with the provisions of the Securities and
Exchange Board of India Act, 1992 (Recommendation of
Narsimhan Committee). BUDGET 2015-16, FMC (Forward
Market Commission) merged in SEBI.
Member of SEBI
##Chairman- Nominated by Govt. of India
##Two member from finance ministry
##A Deputy governor of RBI
##5 member nominated by GOI.
Regional Office
1- New Delhi
2- Chennai
3- Kolkata
4- Ahmedabad
Local Offices— Chandigarh, Bengaluru, Lucknow,
Hyderabad, Dehradun, Kochi, Guwahati, Jaipur,
Bhubaneswar, Indore, Patna, Panaji, Ranchi, Raipur,
Jammu, Shimla, Vijaywada and Andhra Pradesh
Stock Market/Stock Exchange
This is a place where buying & selling of share completed
by common man or financial institution.
Every stock exchange have certain Broker (DALALs) who
are registered. Customer can buy or sell securities through
broker.
listing is important for a company in stock exchange if the
company participating in trading system.
Any company can be listed in different stock exchange.
India’s oldest stock exchange is BSE.
BSE is also known as DALAL STREET.
3 famous stock exchange of Mumbai are
1:- BSE 2:- NSE 3:- OTCEI

Bombay Stock Exchange (BSE)
1. BSE & NSE share 80% business of stock exchange.
2. BSE is the oldest stock exchange of Asia.
3. It was established in 1875.
4. BSE started an index on the basis of 30 companies & it
is known as BSE 30 or Sensex.
5. Sensex- sensitive index of stock exchange. It is the
barometer of indian economy.
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8. Those companies which are in BSE have more than
0.5% market capitalization with compare to total market
capitalization of BSE.
National Stock Exchange (NSE)
National Stock Exchange (NSE) was established in the mid
1990s as a demutualized electronic exchange.
Committee related to NSE- M.J.Ferwani Committee .
NSE was established by IDBI,UTI,LIC,GIC,IFCI etc…..

6. The base year of Sensex is 1978-79. NSE started operation in 1994 with electronic trading.
7. Reliance have largest share in BSE 30 companies. Then By march 31st 1999, all the 23 stock exchange in the country
Infosys & ICICI. has computerized online screen based trading.

Energy, Precious Metals, Base Metals,

Indian Commodities Exchange Ltd. ICEX Mumbai
Agricultural Produces
Energy, Precious Metals, Base Metals,
Metro Politan Stock Exchange of India Ltd. MSEI Mumbai
Agricultural Produces
National Commodity and Derivative
NCDEX Mumbai Agricultural Produces
Exchange Ltd.
National Multi-Commodity Exchange of
NMCE Ahmedabad Agricultural Produces
India Ltd.
Ace Derivatives and Commodity Exchange
ACE Mumbai Agricultural Produces
Ltd.
Energy, Precious Metals, Base Metals,
Universal Commodity Exchange Ltd. UCX Mumbai
Agricultural Produces
COUNTRY WISE MAJOR STOCK EXCHANGES
The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally the
leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.
S.No. Country Stock Index
1 Australia CSE Composite Index, S & P / ASX 100
2 Brazil Ibovespa - Bovespa Index
3 Canada S & P / T S X 60, S & P / T S X Composite Index
4 China SSE Composite Index, SZSE Component Index
5 France CAC 40
6 Germany DAX, TecDAX
7 Hong Kong Hang Seng Index
8 India Sensex, Nifty
9 Japan Nikkei 225
10 New Zealand NZX 50 Index
11 Russia RTS Index
12 Singapore FTSE Group Indices
13 South Korea KOSPI
14 Taiwan Taiwan Capitalization Weighted Stock Index (TAIEX)
15 United Kingdom FT 30 Index, FTSE 100 Index
16 United States NYSE Arca Major Market Index, Dow Jones Industrial Average, NASDAQ Composite

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OTCEI
The OTCEI, which was set up in 1992, was the first
computerized stock exchange in India.
WHAT HAPPENED AFTER THAT……………..
1. Equity trade in at NSE commenced in november 1994.
2. With in one year of operation,NSE surpassed the BSE
in term of turnover.
3. BSE was working since 1875, with monopoly now it had
to face competition with NSE.
4. So in march 1995, bse also adopted similar innovation
to keep up in the race (bolt- BSE online trading system).
M-CAP (MARKET CAPITALIZATION):-
Market Capitalization is the aggregate valuation of the
company based on its current share price and the total number
of outstanding shares.
Companies are divided in to 3 forms on the basis of market
capitalization-
1. LARGE CAP :- Large CAP is more then 10 thousand crore.
2. MID CAP:- MCAP is between 2500 cr. To 10000 cr.
3. SMALL CAP:- Small CAP is less than 2500 cr.
National Securities Clearing Corporation
Ltd- NSCCL
It is a subsidiary of NSE established in 1995. Everyday
trade (sale or buy) done on the NSE, NSCCL becomes the
country party.
CENTRAL DEPOSITORY SERVICES LIMITED
(CDSL) & NATIONAL SECURITIES DEPOSITORIES
LTD.–(NSDL)
CDSL, is the second indian central securities depository
based in Mumbai, its main function is the holding securities
either in certificated or uncertificated (dematerialized) form,
to enable book entry transfer of securities.
In november 1996, National Security Deposit LTD.–NSDL,
the first depository in india was established.
For the purpose of that if you buy any share it will
automatically converted in electronic form & deposited in
your demat a/c.
Index
Index shows how a specified portfolio of share prices is
moving to give an indication of the market trends. It is a
basket of securities and the average price movement of the
basket of securities indicates the index movement, whether
upwards or downwards.
Sensex And Nifty
Sensex is an index based on 30 shares traded on the BSE.
The Sensex is the barometers of the Indian markets. The
indices are composite in nature in that they cover a large
segment of industries
64 GeneraL Awareness
Nifty is an index based on 50 shares traded on the NSE.
The Nifty is also known as national index for fifty
company.
Mutual Fund
A mutual fund is a professionally managed investment
fund that pools money from many investors to purchase
securities. These investors may be retail or institutional in
nature. Primary structures of mutual funds include open-
end funds, unit investment trusts, and closed-end funds.
Exchange-traded funds (ETFs) are open-end funds or unit
investment trusts that trade on an exchange. Mutual funds
are also classified by their principal investments as money
market funds, bond or fixed income funds, stock or equity
funds, hybrid funds or other.
The first company that dealt in mutual funds was the Unit
Trust of India. It was set up in 1963 as a joint venture of the
Reserve Bank of India and the Government of India.
Association of Mutual Funds in India
The Association of Mutual Funds in India (AMFI) is
dedicated to developing the Indian Mutual Fund Industry
on professional, healthy and ethical lines and to enhance and
maintain standards in all areas with a view to protecting and
promoting the interests of mutual funds and their unit holders.
AMFI, the association of SEBI registered mutual funds in
India of all the registered Asset Management Companies, was
incorporated on August 22, 1995, as anon-profit organisation.
As of now, all the 44 Asset Management Companies that are
registered with SEBI, are its members
Mutual Fund
Liberty of Open Ended
Entry & Exit
Close Ended
Debt
Oriented
Mutual Fund Investment
Class
Equity
Balanced
Actively
Management Managed
Style
Passively
Other Managed
##It is an investment vehicle .
##It consists of a pool of funds collected from many
investors for the purpose of investing.
##Investments can be made in securities such as stocks,
bonds, money market instruments and similar assets.
##Mutual funds are operated by Fund managers, who invest
the fund’s capital and attempt to produce income for the
fund’s investors.
##A mutual fund’s portfolio is designed according to its
objectives as specified in its portfolio.
 www.mahendras.org
CAPITAL MARKET
Q.1. NAV calculation of mutual funds means —— (4) All of the above
(1) Liquidity (5) None of these
(2) Dividend payment Q.8. When share are issued at fixed price is known as
(3) Net worth of shares ———

(4) Capitalization (1) Floor price (2) Public issue

(5) None of these (3) Private issue (4) Dividend issue

Q.2. What purchases do not incur any brokerage or stamp (5) None of these
duty—— Q.9. What is a future contract——.
(1) FPO (2) Right issue (1) It is a standardized forward contract
(3) IPO (4) Debenture (2) Is an obligation
(5) None of these (3) May be for financial instruments or commodities
Q.3. Ordinary shares issued to existing shareholders is (4) All of these
known as ? (5) None of these
(1) IPO (2) FPO Q.10. If a person bought ‘option contract’ is ———.
(3) Right issue (4) Bonus share (1) An obligation, but not a right
(5) None of these (2) Both a right and an obligation
Q.4. The difference between cost price and sale price of (3) A right, but not an obligation
share held by an investor is known as ——
(4) Neither a right nor an obligation
(1) Dividend (2) Profit
(5) None of these
(3) Interest (4) Capital gain
Q.11. When a person looking for profit by simultaneously
(5) None of these entering in to transactions in two or more markets
Q.5. Extra dividend provided to ordinary shareholders is called——
who have received their dividend is known as—— (1) Position (2) hedging
(1) Cumulative preference share (3) arbitrage (4) All of these
(2) Convertible preference share (5) None of these
(3) Participating preference share Q.12. When a person buy or sell assets in order to mitigate
(4) Redeemable preference share risk of price fluctuation is called———
(5) None of these (1) Insurance (2) Hedging
Q.6. Preference shares that may be repurchased by the (3) Arbitrage (4) All of these
issuing company are—— (5) None of these
(1) Cumulative preference share Q.13. Long position in two call and put with the same
(2) Convertible preference share strike price to expiration date is called———
(3) Participating preference share (1) Spread (2) Stock
(4) Redeemable preference share (3) Straps (4) Straddle
(5) None of these (5) None of these
Q.7. SEBI act 1992 empowers SEBI with ———— Q.14. Derivative is a product whose value is derived from
power the value of underlying assets is called——
(1) Constitutional power (1) Product (2) Service
(2) Non statutory power (3) Factors (4) Bases
(3) Statutory power (5) None of these

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Q.15. What is a mechanism mandated by SEBI to subscribe for shares on debentures or to deposit
determine the exit price of voluntary delisting—— money with the company———?
(1) Floor price (1) Limited company (2) Unlimited Company
(2) Exit price (3) Public company (4) Proprietary Company
(3) Exit book building (5) None of these
(4) Reverse book building Q.21. If the dividends are unpaid any one year they
(5) None of these accumulate and paid at some later date to preference
shareholder when company has sufficient profit is
Q.16. Listing a company on the stock market requires that known as ——
the company————
(1) Convertible preference share
(1) Be a partnership firm
(2) Equity share
(2) Be proprietary firm
(3) Participatory preference share
(3) A limited liability company
(4) Cumulative preference share
(4) All of these
(5) None of these
(5) None of these
Q.22. It is mandatory that all listed equity share are settled
Q.17. If debt increases then the value of share affects in under compulsory rolling settlement within ———
the following way———— days
(1) The lower the debt the higher the share value (1) T+2 (2) T+5
(2) The lower the debt the lower the share value (3) T+1 (4) T+7
(3) The higher the debt the higher the share value (5) None of these
(4) No Effect Q.23. In ETF “T” stands for———.
(5) None of these (1) Transfer (2) Transaction
Q.18. If the growth factor increases when calculating (3) Traded (4) Term
present value will cause the value to ———
(5) None of these
(1) Decrease (2) Stay the same
Q.24. Who is the present Chairman of SEBI?
(3) Increase (4) Approx. market price
(1) Shri Ajay Tyagi
(5) None of these
(2) Shri Hari Ojha
Q.19. An order to trade in a stock once trigger price is
reached is known as —— (3) K P Singh

(1) An at discretion order (4) Ram Gopal Hari

(2) An at market order (5) None of these

(3) An at passive order Q.25. When people buy IPO from stock market they have
to block his money in his bank account is called.....
(4) An at stop loss order
(1) ABBA (2) AMBA
(5) None of these
(3) ASBA (4) IMPS
Q.20. Which type of company restricts the right to transfer
shares and where the public may not be invited to (5) None of these

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

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Foreign Trade & Exchange

{{ FEATURES OF FOREIGN TRADE

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

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Foreign Trade &

CHAPTER

8 Exchange
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BALANCED BALANCE OF PAYMENTS

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

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

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

Difference Between Current Account And Capital Account

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

Convertibility of Rupee
Current Account Convertibility Capital Account Convertibility
• Money classified under current account can • Money classified under capital account cannot be
be easily converted into Dollar, Yen, Pound, easily converted into different currency. RBI has
Rupee etc. strict guidlines.
• We don’t have Full Capital Account Convertibility.
68 GeneraL Awareness

Foreign Investment
Foreign Direct Investment (FDI)
It refers to direct investment in the productive capacities of
a country by someone from outside the country.
Foreign Institutional Investors (FII)
These are investments by entities from outside the
country into the financial assets like debts and shares
of companies from a different country, in which they
are incorporated. FIIs are required to register with
SEBI (Securities and Exchange Board of India) and any
foreign individual wanting to invest into India has to
copy through one of these FIIs.
Difference Between FDI And FII
##In order to remove the ambiguity that prevails on what
is Foreign Direct Investment (FDI) and what is Foreign
Institutional Investment (FII) the Finance Minister in his
budget speech of 2013 clarified as under–
##“I propose to follow the international practice and lay
down a broad principle that where an investor has a stake
of 10% or less in a company, it will be treated as FII and,
where an investor has a stake of more than 10%, it will
be treated as FDI. Arvind Mayaram committee will be
constituted to examine the application of the principle
and to work out the details expeditiously.
Participatory Notes (P-Notes)
##These are financial instruments used by investors or
hedge funds that are not registered with the Securities
and Exchange Board of India to invest in Indian
securities. Indian-based brokerages buy India-based
securities and then issue participatory notes to foreign
investors. Any dividends or capital gains collected from
the underlying securities go back to the investors.
Global Depository Receipts (GDRs)
These are equity instruments issued in international markets like
London, Luxembourg etc. Indian companies use GDRs to raise
capital from abroad. GDRs are designated in dollars, euros etc.
American Depository Receipts (ADRSs)
These are the equity instruments issued to American retail
and institutional investors. They are listed in New York, either
on Nasdaq or New York Stock Exchange.
Bharat Depository Receipts (BhDRs)
These are similar to ADR/GDR. They are used by non-Indian
companies in the Indian stock markets for issuing equity to
Indian investors.
India’s FDI Policy
To encourage FDI inflows, India has continued to be fine-
tuned and progressively liberalized, allowing FDI in more
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and more industries under the automatic route. In the year
2000, government allowed FDI up to 100% on the automatic
route for most activities; a small negative list was notified,
where either the automatic route was not available or there
were limits on FDI.
FDI is prohibited under the government route as well as
the automatic route in the following sectors, where FDI
is not allowed.
a) Atomic Energy
b) Lottery Business
c) Gambling and Betting
d) Business of Chit Fund
e) Nidhi Companies
Routes For FDI To Enter Into India
Automatic Route
In most sectors, FDI is permitted on the automatic route. FDI
in such sectors does not require any prior approval and only
requires notification of RBI.
Government Approved Route
In respect of sectors/activities which are presently under
automatic route but required Government approval earlier as
per the extant policy during the relevant period, concerned
administrative Ministry/Department would be the Competent
Authorities for the grant of post-facto approval for foreign
investment. In case of proposals involving total foreign equity
inflow of more than Rs 5000 crore, Competent Authority shall
place the same for consideration of Cabinet Committee on
Economic Affairs (CCEA).
The Foreign investgment promotion board (FIPB) the
government abolished in April 2017.
Foreign Exchange
Foreign exchange reserves are an important component of the
BoP and an essential element in the analysis of an economy’s
external position.
India’s Balance of Payments and Foreign Trade
India’s foreign exchange reserves comprise Foreign Currency
Assets (FCAs), gold, Special Drawing Rights (SDRs)
and Reserve Tranche Position (RTF) in the International
Monetary Fund (IMF).
Exchange Rate
Exchange Rate is the rate, at which Indian rupee will be
exchanged with other international currencies, say US dollar,
in the foreign exchange market.
NEER And REER
The Nominal Effective Exchange Rate (NEER) and Real
Effective Exchange Rate (REER) indices are used as
indicators of .external competitiveness of the country over
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a period of time/NEER is the weighted average of bilateral
nominal exchange rates of the home currency in terms of
foreign currencies, while REER is defined as a weighted
average of nominal exchange rates, adjusted for home and
foreign country relative price differentials.
From Foreign Exchange Regulation To
Management (FERA To FEMA)
##High Level Committee on Balance of Payments (BoP)
(Chairman: Dr C Rangarajan, 1993), set the broad
agenda in this regard.
##The committee recommended the following
##The introduction of a market-determined exchange rate
regime within limits.
##Liberalization of current account transactions leading to
current account convertibility.
##Strict regulation of external commercial borrowings,
especially short-term debt.
Special Economic Zone (SEZ)
Asia’s first Export Processing Zone (EPZ), was set up in
Kandla, India in 1965.
The first SEZ policy was announced in April, 2000, which
inter-alia provided for to make SEZ an engine of growth
supported by quality infrastructure backed up by attractive
fiscal package.
To import stability to the SEZ regime, SEZ Act, 2005,
was enacted and which came into effect from February
10, 2006.
As per the provisions of the SEZ Act, 2005, 100% FDI is
allowed in SEZs through the automatic route.
NOTES
70 GeneraL Awareness
Some Important Terms In International
Banking
Offshore Banking Units (OBUs)
##As per RBI policy of Nov 12, 2002, within SEZs, the OBUs
would be virtually foreign branches of Indian banks located
in India. The major aspects of the guidelines are:
##Eligibility Criteria : Banks operating in India viz. public
sector, private sector and foreign banks authorized to
deal in foreign exchange are eligible to set up OBUs.
##Capital: Parent bank to provide a minimum of USD 10
million to its OBU.
Currency Accounts
##NOSTRO ACCOUNT (Our Account with you)
##A nostro account is a record of funds held by a bank
in another country in the currency of that country (in
foreign currency).
##VOSTRO ACCOUNT (your account with us)
##A vostro account will be in the local currency of the
bank where the money is being held i.e. it is the bank in
country B’s record of the money kept by the bank from
country A with it.
##LORO ACCOUNT (their account with them)
##A loro account is a record of an account held by a bank
on behalf of a third party.
Forex Reserves
These are the reserves with the country (with RBI in India
on behalf of Govt. of India) which are used to finance
imports/make payments to countries abroad in settlement
of transactions. The movement in forex reserves is the net
result of all external transactions.

FOREIGN TRADE
Q.1. For any country, in which of the following categories
can we define ‘Balance of Payment’?
(1) Favorable Balance of Payment.
(2) Adverse Balance of Payment.
(3) Balanced Balance of Payment.
(4) Any one of the above term can be used
(5) None of these
Q.2. An economy that do not export or import from other
country, is said to be..
(1) Open economy (2) Closed economy
(3) Mixed economy (4) Socialist economy
(5) Capitalist economy
Q.3. If import increase then the current account deficit of
country is likely to-
(1) will remain constant
(2) is likely to Increase
(3) is likely to decrease
(4) all of the above
(5) none of the above
Q.4. Which of the following is included in Export-Import
of a country?
(1) Visible items (2) Invisible items
(3) Only 1 (4) Both 1 & 2
(5) None of the above
Q.5. Which of the following is not included in invisible
item in balance of payments:
(1) Tour and travels paid by tourist
(2) Foreign remittance
(3) Hotel charges
(4) Food grains
(5) None of these
Q.6. Which of the following organization/institution will
provide fund for the deficit in balance of payments
of a country?
(1) International Monetary Fund
(2) World Trade Organization
(3) Bank for International Settlement
(4) Group of 7 Developed Nations
(5) None of these
Q.7. Which one of the following, clearly defines the
meaning of the balance of payments of a country?
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(1) Balance in consolidated fund of the country.
(2) Balance with International Monetary Fund
(3) Balance in World Bank.
(4) Public debt of that country.
(5) Record of foreign trade of the country.
Q.8. What is the effect of an increase in demand for
exports on the foreign currency reserve of a country?
(1) It will be Positive for the foreign currency reserve
of that country.
(2) It will be Negative for the foreign currency
reserve of that country.
(3) It will be Neutral for the foreign currency reserve
of that country.
(4) All of these
(5) None of these
Q.9. Which of the following is included in the Balance
of payments of a country:
(1) Current account (2) Capital account
(3) Revenue accounts (4) Saving account
(5) Both 1 & 2
Q.10. What will be effect of an increase in the debt of a
country on current account deficit?
(1) It shall be effected positively.
(2) It shall be effected negatively
(3) It shall be effected neutrally
(4) All of these
(5) None of these
Q.11. If the value of rupee declines rapidly in comparison
to dollar, then the price of Indian goods will-
(1) Grew cheaper for foreigners to import our
product.
(2) Grew costlier for foreigners to export their
product.
(3) Remain at the same price
(4) All of the above
(5) None of these
Q.12. In which of the following account is borrowings
from the World Bank be recorded in the balance of
payments?
(1) Capital account (2) Visible Goods
(3) Current account (4) Revenue account
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(5) Saving account. Q.17. Foreign exchange reserves of a country will increase,
Q.13. In which of the following is, the visible items if-
recorded for a country? (1) Increase taxes by the government
(1) Capital account (2) Export increases but import remain unchanged
(2) The balance of trade (3) Import increases but export remain unchanged
(3) Foreign Exchange (4) 1 and 2 both
(4) Reserve Bank of India (5) None of these
(5) None of these Q.18. All type of borrowings from outside the country is
Q.14. Which of the following is the full form of IMF? mentioned in-

(1) International Monetary Finance (1) Trade account (2) Capital account

(2) Internet Monetary Fund (3) Current account (4) Monetary account

(3) International Monetary Fund (5) None of these

(4) International Monetary Function committee Q.19. IMF gives loans:

(5) None of these (1) To fill gap in balance of payments

Q.15. Which of the following is the full form of FDI? (2) To fill gap in government budget

(1) Foreign direct investment (3) To decrease poverty

(2) Foreign development investment (4) To increase opportunities

(3) Fixed deposit interest (5) All of the above

(4) Foreign disinvestment inherent Q.20. A bank account held in foreign country by a domestic
bank denominated in the currency of that country is
(5) None of these called:
Q.16. If balance of payments of country is in deficit, then: (1) Loro account
(1) Current account will be in deficit (2) Nostro account
(2) Export shall increase (3) Vostro account
(3) The country can borrow from abroad (4) Foreign currency convertible account
(4) 1 and 3 both (5) Non-resident ordinary account
(5) None of these

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

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PUBLIC FINANCE

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

GeneraL Awareness 73
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CHAPTER
9 PUBLIC FINANCE
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Historical Background
‘Budget System’ was introduced in
India on 7th April, 1860. Sir James
Wilson the first Indian Finance
Member delivered the budget
speech expounding the Indian
financial policy as an integral whole
for the first time.
The financial year for the Union and the State Governments in
India is from April to March. Each financial year is, therefore,
spread over two calendar years. The period of financial year
as from April to March was introduced in India from 1867.
Prior to that, the financial year in India used to commence
on 1st May and ended on 30th April (L.K. Jha Committee’s
Report of the Committee On Change in Financial Year).
Although the Indian Constitution does not mention the
term ‘Budget’, it provides that the President shall in respect
of every financial year cause to be laid before both the
Houses of Parliament, the House of People (Lok Sabha)
and the Council of States (Rajya Sabha), a statement of the
estimated receipts and expenditure of the Government for
that year. This statement known as the ‘Annual Financial
Statement’ is the main fiscal or budgetary document of the
Government.
Budget has been described in Article-112 of the Indian
Constitution as Annual Financial Statement.
Article-110 Describes Money Bill
Railway Budget was separated from
General Budget in the year 1924 on
the recommendations of Acworth
Committee. However it is again
merged with the Union Budget on
the recommendation of NITI Aayog
Members B. Debroy and K. Desai on
21 Sep. 2016.
Budget was presented each year on the last working day of
February by the Finance Minister of India in Parliament. But
now budget is presented on 1st working day of February. The
budget has to be passed by the House before it can come into
effect on April 1, the start of India’s financial year.
Former Finance Minister Morarji Desai presented the budget
ten times, the most by any finance minister. The first Union
budget of independent India was presented by R. K.
74 GeneraL Awareness
Shanmukham Chetty on November
26, 1947.
In 1950-51 budget, the then Finance
Minister John Mathai announced the
creation of the Planning Commission.
C. D. Deshmukh was the first Indian
Governor of RBI to have presented
the Interim Budget for the year
1951-52.
Morarji Desai was the only Finance Minister to have had
the opportunity to present two budgets on his birthday - in
1964 and 1968. After Desai’s resignation, Indira Gandhi,
the then Prime Minister of India, took over the Ministry of
Finance to become the only woman to hold the post of the
finance minister. The 1965-66 budget contained the first
disclosure scheme for black money. Since 1980, budget
papers are printed in North Block. A week before the budget
is presented, the employees of the press stay in the ministry
and have no means of communicating with the outside world.
Pranab Mukherjee, the first Rajya Sabha member to hold the
Finance portfolio, presented the annual budgets for 1982-83,
1983-84 and 1984-85.
Rajiv Gandhi presented the budget for 1987-89 after V. P.
Singh quit his government and in the process became only
the third Prime Minister to present a budget after his mother
and grandfather. Three interim budgets were presented in the
1990s while Yashwant Sinha presented the interim budget.
Budgets for 1991-92 and 1998-99 Manmohan Singh
presented the 1996-97 interim Budget.
P Chidambaram rewrote India‘s Exim Policy in one non-
stop eight-hour sitting in July 1991, when he became the
Commerce Minister.
R Venkataraman and Pranab Mukherjee were the Finance
Ministers who later became the President of India.
Service Tax was introduced in 1994-95 on services like
telephone services, stock brokers, health clubs, beauty parlours,
dry cleaning services etc. to correct the disparity in taxation
between goods and services, has become a buoyant source of
revenue in recent years. After elections in 1996, a non-Congress
ministry assumed office. Hence the final budget for 1996-97
was presented by P. Chidambaram, who then belonged to Tamil

Maanila Congress. Following a constitutional crisis when the
I. K. Gujral Ministry was on its way out, a special session of
Parliament was convened just to pass Chidambaram’s 1997-98
budget. This budget was passed without a debate.
Until the year 2000, the Union Budget was announced at 5
pm on the last working day of the month of February. This
practice was inherited from the Colonial Era, when the British
Parliament would pass the budget in the noon followed by
India in the evening of the day.
It was Yashwant Sinha, the then Finance Minister of India in
the NDA government (led by BJP) of Atal Bihari Vajpayee,
who changed the ritual by announcing the 2001 Union Budget
at 11 am. It also showed, how the previous governments
had continued the processes from pre-independence period,
without giving it any thought. Jaswant Singh was Finance
Minister for 13 days. Both Yaswant Sinha and Manmohan
Singh have presented five Union Budgets in a row. In an
election year, Budget may be presented twice - first to secure
vote on account for a few months and later in full. The Budget
is presented in Parliament on a date fixed by the President.
Concepts of Budget
On the budget day, the Finance Minister tables 14 documents.
Of these, the main and most important document is the
Annual Financial Statement.
Annual Financial Statement
Article 112 of the constitution requires the government to present
to the Parliament a statement of estimated receipts and expenditure
in respect of every financial year, April 1 to March 31. This
statement is the annual financial statement. The annual financial
statement is usually a white 10-page document. It is divided into
three parts, Consolidated Fund, Contingency Fund and Public
Account Fund. For each of these funds, the government has to
present a statement of receipts and expenditure.
Consolidated Fund
This is the most important of all the government funds. All
revenues raised by the government, money borrowed and
receipts from loans given by the government flow into the
consolidated fund of India. All government expenditure is
made from this fund, except for exceptional items met from the
Contingency Fund or the Public Account. Importantly, no money
can be withdrawn from this fund without Parliament’s approval.
Contingency Fund
As the name suggests, any urgent or unforeseen expenditure is
met from this fund. The Rs 500-crore fund is at the disposal of
the President. Any expenditure incurred from this fund requires
a subsequent approval from Parliament and the amount
withdrawn is returned to the fund from the consolidated fund.
Public Account Fund
This fund is to account for flows for those transactions where the
government is merely acting as a banker, for instance, provident
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funds, small savings and so on. These funds do not belong to
the government. They have to be paid back at some time to their
rightful owners. Because of this nature of the fund, expenditures
from it are not required to be approved by Parliament.
Supplementary, Additional Or Excess Grants
If the amount authorized through appropriations for a
particular service is found to be insufficient for the purposes
of that year or when a need has arisen during the current
financial year for supplementary or additional expenditure
upon some new service not contemplated in the annual
financial statement for that year, a supplementary demands for
grants proposal shall be made before Parliament. However, if
any money has been spent on any service during a financial
year in excess of the amount granted for that service and for
that year, demand for such excess, as the case may be is to
be laid before both the Houses of Parliament for authorizing
(subject to the report of the Public Accounts Committee) the
expenditure incurred in excess.
The House of the People shall have power relating to : -
(a) Vote on Account- to make any grant in advance in respect
of the estimated expenditure for apart of any financial year
pending the completion of the parliamentary procedure.
(b) Vote of Credit- to make a grant for meeting an
unexpected demand upon the resources of India when on
account of the magnitude or the indefinite character of
the service the demand cannot be stated with the details
ordinarily given in an annual financial statement;
(c) Exceptional Grant- to make provision for an exceptional
grant that does not form part of the current service of any
financial year.
Revenue Receipt/ Expenditure
All receipts and expenditure that in general do not entail sale
or creation of assets are included under the revenue account.
On the receipts side, taxes would be the most important
revenue receipt. On the expenditure side, anything that
does not result in creation of assets is treated as revenue
expenditure. Salaries, subsidies and interest payments are
good examples of revenue expenditure.
Capital Receipt/ Expenditure
All receipts and expenditure that liquidate or create an asset,
would in general be under capital account. For instance,
if the government sells shares (disinvests) in public sector
companies, like it did in the case of Maruti, it is in effect selling
an asset. The receipts from the sale would go under capital
account. On the other hand, if the government gives someone a
loan from which it expects to receive interest, that expenditure
would go under the capital account. In respect of all the funds
the government has to prepare a Revenue Budget (detailing
revenue receipts and revenue expenditure) and a Capital
Budget (capital receipts and capital expenditure). Contingency
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Fund is clearly not that important. Public Account is important
in that it gives a view of select savings and how they are being
used, but not that relevant from a budget perspective. The
consolidated fund is the key to the budget.
Revenue Of Central Government
Receipt estimates on revenue account are divided into two
parts i.e. tax revenue and non tax revenue.
Tax revenue is divided into three parts:
(a) Tax on income and expenditure
(b) Tax on assets and capital transaction; and
(c) Tax on goods and services
Non-Tax Revenue is divided into two parts
(a) Fiscal and other services
(b) Interest receipts, dividends and profits
Taxes On Income And Expenditure
Taxes on income are of two kinds i.e. Personal Income Tax
and Corporation Tax i.e. tax on profits of companies.
Income Tax
Central government imposes personal income tax on
individual’s income and revenue received from this is
distributed between the Centre and the States. Income tax
is not imposed on all individuals but on those who are
prosperous. Its basis is ‘Ability to Pay ‘ principle.
Corporation Tax
Corporation tax is tax on income of companies. This tax is
imposed by Central Government on the profits of small and
big companies.
Securities Transaction Tax (STT)
Sale of any asset (shares, property etc-) results in loss or
profit. Depending on the time the asset is held, such profits
and losses are categorised as long term or short term capital
gain/loss. In the year 2004-05 budget, the government
abolished long-term capital gains tax on shares (tax on profits
made on sale of shares held for more than a year) and replaced
it with STT. It is a kind of turnover tax where the investor has
to pay a small tax on the total consideration paid/received
in a share transaction. In budget 2018-19, again 10% LTCG
(long term capital gain) tax introduced.
Custom Duty
Taxes imposed on imports. While revenue is an important
consideration, custom duties may also be levied to protect
the domestic industry or sector (agriculture, for one), in
retaliation against measures by other countries etc.
Union Excise Duty:
Duties imposed on goods manufactured in the country by
the Central Government, but those goods are exempted from
union excise duties, on which State Government imposes
76 GeneraL Awareness
excise duty for example Sugar, Cotton, Textile, Tobacco,
Motor Spirit, Match Box and Cement etc.
GST (GOODS AND SERVICE TAX):
A single common “Goods and Services Tax” was pioneered
by Prime Minister Atal Bihari Vajpayee. Vajpayee set up a
committee headed by the Finance Minister of West Bengal,
Asim Dasgupta to design a GST model.
Goods and Services Tax is an indirect tax (or consumption
tax) imposed in India on the supply of goods and services.
GST is imposed at every step in the production process, but
is meant to be refunded to all parties in the various stages
of production other than the final consumer. The GST was
launched at midnight on 1 July 2017 by the President of India.
Goods and services tax are divided into five tax slabs for
collection of tax - 0%, 5%, 12%, 18% and 28%. However,
Petroleum products, alcoholic drinks, electricity, are not
taxed under GST. The tax came into effect from July 1,
2017 through the implementation of One Hundred and
First Amendment of the Constitution of India by the Indian
government. The tax replaced existing multiple flowing taxes
levied by the central and state governments.
GST Council
GST Council is the governing body of GST having 33
members. It is chaired by the Union Finance Minister. GST
Council is an apex member committee to modify, reconcile or
to procure any law or act or regulation based on the context
of goods and services tax in India.
Article 279A (4) specifies that the Council will make
recommendations to the Union and the States on the important
issues related to GST, such as, the goods and services will be
subject or exempted from the Goods and Services Tax.
They lay down GST laws, principles that govern the following:
##Place of Supply
##Threshold limits
##GST rates on goods and services
##Special rates for raising additional resources during a
natural calamity or disaster
##Special GST rates for certain States
Goods and Services Tax Network (GSTN)
The GSTN software is developed by Infosys Technologies
and the Information Technology network that provides the
computing resources is maintained by the NIC. “Goods and
Services Tax” Network (GSTN) is a non-profit organisation
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GST

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formed for creating a sophisticated network, accessible
to stakeholders, government and taxpayers to access
information from a single source (portal).
Direct Tax
Traditionally, these are taxes where the burden of tax falls on
the person on whom it is levied. These are largely taxes on
income or wealth. Income tax (on corporates and individuals),
FBT, STT and BCTT are direct taxes.
Indirect Tax
In the case of indirect taxes the incidence of tax is usually
not on the person who pays the tax. These are largely taxes
on expenditure and include customs, excise and GST.
Indirect taxes are considered regressive, the burden on the
rich and the poor is alike. That is why governments strive
to raise a higher proportion of taxes through direct taxes.
Moving on, we come to the next important receipt item in
the revenue account, non-tax revenue.
Non-Tax Revenue
The most important receipts under this head are interest
payments (received on loans given by the government to
states, railways and others) and dividends and profits received
from public sector companies.
Various services provided by the government - general
services such as police and defence, social and community
services such as medical services and economic services
such as power and railways - also yield revenue for the
government. Though Railways are a separate department,
all its receipts and expenditures are routed through the
consolidated fund.
Public Debt
In normal accounting, debt is a stock, to be measured at a
point of time, while borrowing and repayment during a year
are flows, to be measured over a period of time. In Budget
parlance, however, you’ll find public debt receipts and
public debt disbursals. These are respectively borrowings
and repayments during the year. The difference between the
two is the net accretion to the public debt.
Public debt can be split into two heads, internal debt (money
borrowed within the country) and external debt (funds
borrowed from non-Indian sources).
The internal debt comprises of Treasury Bills, Market
Stabilisation Scheme, Ways and Means Advance, and
securities against small savings.
Scheme Expenditure
This is essentially the Budget support to the central plan and
the central assistance to state and Union territory plans. Like
all Budget heads, this is also split into revenue and capital
components.
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Non-Scheme Expenditure
This is largely the revenue expenditure of the government. The
biggest item of expenditure are interest payments, subsidies,
salaries, defence and pension. The capital component of the
non-scheme expenditure is relatively small with the largest
allocation going to defence.
Types of Deficit
Revenue Deficit
Revenue Expenditure – Revenue Income
Budgetary Deficit
Total Expenditure – Total Income
Fiscal Deficit
Budgetary Deficit + Borrowing & Other Liabilities
Primary Deficit
Fiscal Deficit – Interest Payment
It is important to note that the entire defence expenditure is
non-scheme expenditure. We will now take up the various
deficits and the components of scheme and non-scheme
expenditure.
FRBM Act:
Enacted in 2003, the Fiscal Responsibility and Budget
Management Act requires the elimination of revenue deficit
by 2008-09. This means that from 2008-09, the government
will have to meet all its revenue expenditure from its
revenue receipts. Any borrowing would then only be to meet
capital expenditure - repayment of loans, lending and fresh
investment. The Act also mandates a 3% limit on the fiscal
deficit after 2008-09. This is a reasonable limit that allows
significant leverage to the government to build capacities in
the economy without compromising fiscal stability.
It is important to note that since the entire Budget is at current
market prices, the deficits are also calculated with reference
to GDP at current market prices.
Value-Added Tax (VAT) And GST:
VAT helps avoid cascading of taxes (tax being levied upon a
price that includes one or more elements of tax) as a product
passes through different stages of production/value addition.
The tax is based on the difference between the value of the
output and the value of the inputs used to produce it. The aim
is to tax a firm only for the value added by it to the inputs it
is using for manufacturing its output and not the entire input
cost. VAT brings in transparency to commodity taxation: right
now, only the final tax paid by the consumer is apparent to
them, while with value added tax generalised to goods and
services tax (GST) that subsumes both central and state
level taxation, the entire element of tax borne by a good (or
a service) would be represented by the GST paid on it.

PUBLIC FINANCE (BUDGET)
Q.1. What is budget?
(1) It is a monthly financial statement of estimated
receipts and expenditures of the Government of India
in a financial year.
(2) It is an annual financial statement of estimated
expenditures of the Government of India in respect
of each financial year.
(3) It is quarterly financial statement of estimated
receipts of the Government of India in respect of
each financial year.
(4) It is an annual financial statement of estimated
receipts and expenditures of the Government of India
in respect of each financial year.
(5) None of these
Q.2. Which of the following is true regarding a budget?
(A) Budget is a legal document.
(B) It is passed by the legislature
(C) It is approved by the President.
(1) Only option A is correct.
(2) Only option A & B are correct.
(3) Only option B & C are correct.
(4) All of these
(5) None of these
Q.3. What were the different types of budget presented
in India?
(A) The Union Budget is presented to the Parliament
in two parts.
(B) Railway Budget consists of the detail of Indian
Railway.
(C) General Budget consists the financial detail of
Indian Government.
(1) Only option A, B & C is correct.
(2) Only option A & B are correct.
(3) Only option B & C are correct.
(4) Only option A & C are correct.
(5) None of these
Q.4. Which of the following is true regarding the nature
and objective of budget?
(A) Government Budget is designed for optimal
allocation of scarce resources.
(B) The main objective of Government financial
management is to determine how adequately the
financial and resource management responsibilities
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have been discharged
(C) The broad objectives of the Government to be
broken down into detailed work plans.
(1) Only option B & C is correct.
(2) Only option A & B are correct.
(3) Only option A, B & C are correct.
(4) Only option A & C are correct.
(5) None of these
Q.5. Which of the following is true regarding budget
preparation in India?
(A) Budget preparation in India is a calculative
process between the Ministry of Finance and the
spending Ministries.
(B) Top down approach with the Ministry of Finance
issuing guidelines or communicating instructions to
spending Ministries.
(C) A bottom-up approach, wherein the spending
Ministries plan and present requests for budget
allocation.
(1) Only option B & C is correct.
(2) Only option A, B & C are correct.
(3) Only option A & B are correct.
(4) Only option A & C are correct.
(5) None of these
Q.6. What are the components of a budget?
(1) Annual Financial Statement
(2) Finance Bill
(3) Appropriation Bill
(4) Demands for Grants
(5) All of the above
Q.7. When is a budget presented in the Lok Sabha?
(A) It is presented in accordance with article 204(1)
of rules of procedure and conduct of business.
(B) The budget is presented in the Lok Sabha on the
day as fixed by the president of India
(C) Now it is presented at 11 am on the first working
day of February.
(1) Option A, B & C is correct.
(2) Only option B & C are correct.
(3) Only option A & B are correct.
(4) Only option A & C are correct.
(5) None of these
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Q.8. Which of the following is related to budget? (1) Deficit budget (2) Surplus Budget
(1) Plan expenditure (3) Balanced budget (4) Interim Budget
(2) Decided expenditure (5) All of these
(3) Undecided expenditure Q.16. Which of the following fund is related to article
(4) Option 1 & 2 are true 266(i)?

(5) Options 2 & 3 is true (1) Contingency Fund

Q.9. Which of the following is included to scheme (2) Consolidated Fund

expenditure? (3) Public Account Fund
(1) Central plans (4) All of these
(2) Centrally sponsored state plans (5) None of these
(3) Only option 2 is true Q.17. Which of the following fund is related to article
(4) Only option 1 is true 266(ii)?

(5) Both 1 and 2 is true (1) Contingency Fund

Q.10. Which of the following is included to non-scheme (2) Consolidated Fund

expenditure? (3) Public Account Fund
(1) Interest payments (4) All of these
(2) Subsidies (5) None of these
(3) wage and salary payments to government Q.18. Which of the following fund is related to article 267?
employees (1) Contingency Fund
(4) All of these (2) Consolidated Fund
(5) None of these (3) Public Account Fund
Q.11. Borrowing is included in which of the following (4) All of these
account?
(5) None of these
(1) Current account (2) Saving account
Q.19. What is the amount allocated for Contingency Fund?
(3) Capital account (4) Social account
(1) Rs. 50 crores
(5) None of these
(2) Rs. 500 crores
Q.12. Article 112 of the Constitution of India is related to:
(3) Rs. 5,000 crores
(1) Budget (Annual Financial Statement)
(4) Rs. 50,000 crores
(2) Financial Emergency
(5) None of these
(3) National Emergency
Q.20. Revenue Deficit is defined as:
(4) State budget
(1) Total Revenue Expenditure - Total Revenue
(5) None of these Receipt
Q.13. Article 110 of the Constitution of India is related to: (2) Revenue receipt plus Revenue expenditure
(1) Budget (2) Financial Bill (3) Revenue receipt minus Capital expenditure
(3) Money Bill (4) State budget (4) Capital receipt minus Revenue expenditure
(5) None of these (5) None of these
Q.14. Article 117 of the Constitution of India is related to- Q.21. Fiscal Deficit is defined as:
(1) Budget (2) Financial Bill (1) Total Capital receipt minus Revenue expenditure
(3) Money Bill (4) State budget (2) Total Borrowing minus Total expenditure
(5) None of these (3) Total Revenue receipt plus Revenue expenditure
Q.15. Which of the following is a type of budget? (4) Total Receipt minus Total expenditure
80 GeneraL Awareness

(5) Total (non-borrowed) Receipt minus Total
expenditure
Q.22. Primary Deficit is defined as:
(1) Fiscal Deficit – interest payments
(2) Fiscal Deficit + interest payments
(3) Fiscal Deficit – Revenue Expenditure
(4) Fiscal Deficit – Capital Expenditure
(5) None of these
Q.23. Which of the following Deficit indicates lack of
resources to accomplish a decided target for coming
year:
(1) Revenue Deficit (2) Capital Deficit
(3) Primary Deficit (4) Fiscal Deficit
(5) None of these
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(C) Payment for Pensions, police, economic services
in various sectors, other general services such as
tax collection, social services, and grants to foreign
governments.
(1) Only option A & C is correct
(2) Only option B & C are correct
(3) Only option A, B & C are correct
(4) All of the above
(5) None of these
Q.25. Non-scheme capital expenditure mainly includes:
(A) Defence expenditure
(B) Loans to public enterprises and loans to States.
(C) Loans to Union Territories and foreign
governments.

Q.24. Non-scheme revenue expenditure includes: (1) Only option A & C are correct

(A) Interest payments, subsidies (mainly on food (2) Only option B & C are correct
and fertilizers). (3) Only option A & B are correct
(B) Wage and salary payments to government (4) All of the above
employees, grants to States and Union Territories (5) None of these
governments.

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

NOTES

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Economic Planning in India

{{ HISTORY OF PLANNING IN INDIA

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

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CHAPTER
Economic
10 Planning in India
Scan the QR code to get video of this chapter.

a. Make an assessment of the material, capital and human

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

GeneraL Awareness 83
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Finance and Planning Ministers of that State and some
technical experts. District Planning Committee is also there
comprising both official and non - official members.
12th Five Year Plan
12th Five Year Plan of the Government of India (2012–17)
is under drafting which aims at one direction will help doing
so the growth rate at 9.56%.
With the deteriorating global situation, the Deputy Chairman
of the Planning Commission Montek Singh Ahluwalia has
said that achieving an average growth rate of 9 per cent in
the next five years is not possible. The final growth target has
been set at 9% by the endorsement of plan at the National
Development Council (NDC) meeting held in New Delhi.
It is not possible to think of an average of 9 per cent (in
12th Plan). I think somewhere between 8 and 8.5 per cent
is feasible”, Ahluwalia said on the sidelines of a conference
of State Planning Boards and departments. The approached
paper for the 12th Plan, approved last year, talked about an
annual average growth rate of 9 per cent.
When I say feasible...that will require major effort. If you
don’t do that, there is no God given right to grow at 8 per
cent. I think given that the world economy deteriorated very
sharply over the last year...the growth rate in the first year of
the 12th Plan (2012-13) is 6.5 to 7 per cent.
He also indicated that soon he would share his views with
other members of the Commission to choose a final number
(economic growth target) to put before the country’s NDC
for its approval.
Though the 12th Plan has taken off, it is yet to be formally
approved. The Planning Commission has set a deadline of
September for taking the approval of the NDC. The council
is expected to meet after July subject to the convenience of
the Prime Minister.
NITI Aayog has replaced the Previous Planning Commission of India.
Parameter NITI Aayog
Financial Clout To be an advisory body, or a think tank. The
powers to allocate funds might be vested
in the Finance Ministry.
Full Time The number of full-time members could be
Members fewer than Planning Commssion.
State’s Role State Governments are expected to play a
more significant role than they did in the
Planning Commission.
Member Secretary To be known as the CEO and to be
appointed by the Prime Minister.
Part-Time To have a number of part time members,
Members depending on the need from time to time.
84 GeneraL Awareness
The government intends to reduce poverty by 10 per cent
during the 12th Five-Year Plan. Ahluwalia said, We aim
to reduce poverty estimates by 2 per cent annually on a
sustainable basis during the Plan period.
According to the Tendulkar methodology, the percentage of
population below the poverty line was 29.8 per cent at the
end of 2009-10. This number includes 33.8 per cent in the
rural areas. He also said that the rate of decline in poverty
doubled during the 11th Plan. The commission had said,
while using the Tendulkar poverty line, the rate of reduction
in the five years between 2004–05 and 2009–10, was about
1.5 percentage points each year, which was twice that when
compared to the period between 1993-95 to 2004-05.
After 12th Five Year Plan: NITI Aayog to replace 5 years
plan with 15 years vision document. it is come into effect
2017-18. Seven years national development Agenda (It will
be lay down the scheme, programmes and strategies to achive
the long term vision), from 1 April 2017-3 years action plan
(strategic paper)
Niti Aayog (Main Points)
Vice Chairperson: Rajiv Kumar
Ex-Officio Members: Amit Shah, Rajnath Singh, Nirmala
Sitaraman and Narendra Singh Tomar
Special Invitees: Nitin Gadkari, Piyush Goyal, Thawar
Chand Gehlot and Rao Inderjit Singh
Full-time Members: V. K. Saraswat (former DRDO Chief),
Ramesh Chand (Agriculture Expert) and Dr. Vinod Paul
(Public Health expert)
Chief Executive Officer (CEO): Amitabh Kant
Governing Council: All Chief Ministers of States (and
Delhi and Puducherry), Lieutenant Governor of Andaman
& Nicobar Islands, and Special Invites
Planning Commission
Enjoy the powers to allocate funds to ministries and
State Governments.
The last commission had 8 full time members.
State’s role was limited to the National Development
Council and annual interaction during Plan Meetings.
Secretaries or Member Secretaries were appointed
through the usual process.
Planning Commission had no provision for Part-Time
Members.

PLANNING AND NITI Aayog
Q.1. What does N stand for in “NITI Aayog”?
(1) Nominal (2) National
(3) Numerical (4) Numbered
(5) Numismatic
Q.2. Who is the CEO of NITI Aayog?
(1) Sindhushree Khullar
(2) Montek Ahluwalia
(3) C.B. Krishnamurthy
(4) Amitabh Kant
(5) Sushma Swaraj
Q.3. Which of the following is a special invitee in the
NITI Aayog?
(1) Suresh Prabhu (2) Rajnath Singh
(3) Kiran Rijiju (4) Nitin Gadkari
(5) None of these
Q.4. What is the intial capital of SETU under NITI
Aayog?
(1) 500 Crore (2) 1000 Crore
(3) 1500 Crore (4) 2000 Crore
(5) 2500 Crore
Q.5. What does S stand for in SETU?
(1) Solar (2) Seminal
(3) Silicon (4) Sole
(5) Self
Q.6. Who was the 1st Chairman of Planning Commission?
(1) Rajendra Prasad (2) S. Radhakrishnan
(3) B.R. Ambedkar (4) Mahatma Gandhi
(5) J.L. Nehru
Q.7. What is the maximum limit of part-time members
in the erstwhile Planning Commission?
(1) 0 (2) 1
(3) 2 (4) 3
(5) 4
Q.8. After which Former Prime Minister “AIM” scheme
under NITI Aayog has been setup?
(1) C.M. Annadurai (2) K. Kamraj
(3) A.B. Vajpayee (4) L.K. Advani
(5) None of these
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Q.9. The Economic Planning concept in India is taken
from which country?
(1) U.K. (2) U.S.A
(3) Spain (4) Russia
(5) Italy
Q.10. What was the Basis of First Five Year Plan?
(1) Harold -Domar Model
(2) P.C. Mahalanobis Model
(3) Both of the Above
(4) All of the Above
(5) None of these
Q.11. Which Plan is also known as Gadgil Yojna?
(1) 1st Five year plan (2) 2nd Five year plan
(3) 3rd Five year plan (4) 4th Five year plan
(5) 5th Five year plan
Q.12. When was the National Development Council
constituted?
(1) 2 August, 1952 (2) 6 August, 1952
(3) 8 August, 1952 (4) 12 August, 1952
(5) 22 August,1952
Q.13. Who appoints the Vice-Chairman of NITI Aayog?
(1) Prime Minister
(2) President of India
(3) Chief Justice of the Supreme Court
(4) Attorney General
(5) None of these
Q.14. What is the total number of composition of Ex-
officio members under NITI Aayog?
(1) 2 (2) 4
(3) 6 (4) 8
(5) 10
Q.15. Who was nominated for the full time membership
of NITI Aayog?
(1) Bibek Shastri (2) Varun Agarwal
(3) Arun Shourie (4) Ramesh Chand
(5) None of these
Q.16. When the Government did announced the formation
of NITI Aayog?
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www.mahendras.org
(1) 1st Jan,2014 (2) 1st Jan,2015 (3) National Initiative for Developing and Harnessing
(3) 1 Jan,2016
st
(4) 1 April,2015
st Innovation
(4) National Invitation for Development and
(5) 1st March,2015
Harnessing Innovation
Q.17. Who was the first CEO of the NITI Aayog?
(5) None of these
(1) Montek Ahluwalia
Q.22. Which was the last Five year plan?
(2) D.R. Gadgil
(1) 10th (2) 11th
(3) Sindhushree Khullar
(3) 12th (4) 8th
(4) Arundhati Bhattacharya
(5) None of these
(5) D. Subbarao
Q.23. What is the total number of part-time members under
Q.18. What was the maximum strength of full time NITI Aayog?
members in the Planning Commission?
(1) 0 (2) 1
(1) 8 (2) 9
(3) 2 (4) 3
(3) 10 (4) 11
(5) 4
(5) 12
Q.24. NITI Aayog will have which of the following bodies
Q.19. What is the full form of AIM? comprising of Chief Ministers of States and Lt.
(1) Atal Invitation Mission Governors of Union Territories?
(2) Atal Invention Mission (1) Governing committee
(3) Atal Impression Mission (2) Governing Panel
(4) Atal Innovation Mission (3) Governing select committee
(5) None of these (4) Governing Council
Q.20. Grand Innovation Challenge is associated with which (5) None of these
scheme/mission? Q.25. Which of the following statements is/are correct
(1) AIM (2) SETU about NITI Aayog?
(3) AMRUT (4) JNNURM (A) A serving IES officer can become a part time
member of Niti Aayog
(5) None of these
(B) A union minister can become a full time members
Q.21. What is the full form of NIDHI under Atal Innovation
of NITI Aayog
Mission?
(C) It was established in 2015.
(1) National Invitation for Developing and
Harnessing Innovation (1) Only A (2) Only B
(2) National Initiative for Development and (3) Only C (4) Both B and C
Harnessing Innovation (5) None of these

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

86 GeneraL Awareness
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Social Welfare Schemes

{{ Pradhan Mantri suraksha bima Yojana

{{ pradhan mantri mudra yojana
{{ ujala yojana
{{ Pradhan Mantri Ujjwala Yojana
{{ Namami Gange Yojana
{{ MAKE IN INDIA PROJECT
{{ PRADHAN MANTRI KRISHI SINCHAYEE YOJANA
{{ Upgrading the Skills and Training in Traditional
Arts/Crafts for Development (USTTAD) Scheme
{{ Mission Indradhanush
{{ UDAY Scheme
{{ Stand-Up India Scheme
{{ Pradhan Mantri Fasal Bima Yojana
{{ Ayushman Bharat Yojana
{{ GOBAR-Dhan Yojana
{{ Mission Solar Charkha
{{ Pradhan Mantri Annadata Aay Sanrakshan Abhiyan
(PM-AASHA)
{{ Pradhan Mantri Kisan Samman Nidhi
{{ Pradhan Mantri Shram Yogi Mandhan
{{ Sukanya Samriddhi Yojana
{{ NIRVIK Scheme
{{ Kisan Rail Yojana
{{ Udaan Yojana
{{ Deendayal Antyodaya Scheme
{{ KUSUM yojana
{{ Question & Answer

GeneraL Awareness 87
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Social Welfare
CHAPTER

11 Schemes
Scan the QR code to get video of this chapter.

Pradhan Mantri Suraksha Bima Yojana Ujala Yojana

(PMSBY)
Pradhan Mantri Suraksha Bima Yojana allows the
common man to get insurance at a very low premium. The
goal of this scheme is that even the poorest of the poor
people of the country can avail insurance so that there
will not be any financial trouble during any accident in
their life. Under PMSBY you get accident insurance of
Rs 2 lakh. The scheme can be availed by investing only
Rs 12 per year.
Under the Pradhan Mantri Suraksha Bima Yojana, you
are paid in three cases:
1. On the death of accident, a payment of 2 lakh rupees
will be made.
2. In case of permanent complete disability in accident, a
payment of Rs 2 lakh will be made.
3. In case of permanent partial disability in the accident,
ie in the case of loss of sight in one eye or in the event
of not being able to use one arm or one leg, Rs. 1 lakh
will be paid.
Benefits of the scheme
The benefit of Pradhan Mantri Suraksha Bima Yojana can
be availed by any citizen from the age of 18 to 70 years. In
this plan, the insurance holder will have to pay a premium
of 1 rupee per month.
Pradhan Mantri Mudra Yojana
The scheme was launched on 8th April 2015. Under the
scheme a loan of upto Rs. 50,000 is given under sub-scheme
‘Shishu’; between Rs. 50,000 to 5.0 Lakhs under sub-scheme
‘Kishore’; and between 5.0 Lakhs to 10.0 Lakhs under sub-
scheme ‘Tarun’. Loans taken do not require collaterals.
These measures are aimed at increasing the confidence
of young, educated or skilled workers who would now be
able to aspire to become first generation entrepreneurs;
existing small businesses, too, will be able to expand
their activates. As on 31.03.2019, Rs. 3,21,722 crores
sanctioned (Rs. 142,345 cr. - Shishu, Rs. 104,386 cr.
Kishore and Rs. 74,991 cr. - Tarun category), in 5.99
crores accounts.
Main purpose: State run Energy Efficiency Services
Ltd (EESL) has distributed over 30 crore light emitting
diode (LED) bulbs across country under zero-subsidy
Unnat Jyoti by Affordable LEDs for All (UJALA)
scheme.
Pradhan Mantri Ujjwala Yojana
Main purpose: Pradhan Mantri Ujjwala Yojana (PMUY) was
launched by Prime Minister of India Narendra Modi on May
1, 2016 to distribute 50 million LPG connections to women
of BPL families.
Namami Gange Yojana
Main purpose: The Government launched an integrated
Ganga conservation mission called ‘Namami Gange’ to arrest
the pollution of Ganga River and revive the river.
Make In India Project
With the objective of making the country a manufacturing
hub for domestic and foreign companies, Prime Minister
Narendra Modi  on Thursday launched the NDA
Government’s “Make in India” campaign rolling out a
red carpet to attract industrialists to make India a global
manufacturing hub, to help create jobs and boost economic
growth.
Adding that the FDI is also a responsibility for the people
of India, he said, foreign direct investment (FDI) has a
different meaning for him, and not just how the world
looks at it only as an opportunity. For him, FDI means
“first develop India”.

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Government Schemes in India

Scheme Full-Form Date of Launch Government Ministry
PMJDY Pradhan Mantri Jan Dhan Yojana August 28, 2014 Ministry of Finance
PMSSY Pradhan Mantri Swasthya Suraksha Yojana January 22, 2015 Ministry of Health & Family
Welfare
PMMY Pradhan Mantri Mudra Yojana April 8, 2015 Ministry of Finance
PMJJBY Pradhan Mantri Jeevan Jyoti Bima Yojana May 9 2015 Ministry of Finance
PMSBY Pradhan Mantri Suraksha Bima Yojana May 9, 2015 Ministry of Finance
APY Atal Pension Yojana May 9, 2015 Ministry of Finance
KVP Kisan Vikas Patra March 3, 2015 Ministry of Finance
GMS Gold Monetisation Schemes November 4 2015 Ministry of Finance
PMFBY Pradhan Mantri Fasal Bima Yojana October 11, 2014 Ministry of Agriculture
PMGKY Pradhan Mantri Krishi Sinchai Yojana July 1, 2015 Ministry of Agriculture
DDUGJY Deen Dayal Upadhyaya Gram Jyoti Yojana July 25, 2015 Ministry of Power
RGM Rashtriya Gokul Mission December 16, Ministry of Agriculture and
2014 Farmers Welfare
DI Digital India July 1, 2015 Ministry of Electronics and
Information Technology
SI Skill India July 16, 2015 Ministry of Skill Development
and Entrepreneurs
(PMKVY) Pradhan Mantri Kaushal Vikas Yojana January 8, 2017 Ministry of Skill Development
and Entrepreneurs
Important Schemes launched in India related to Employment and Poverty Alleviation

Government Schemes in India

Scheme Full-form Date of Launch Government Ministry

MI Make in India September 25, Ministry of Commerce and

2014 Industry

SUI, SUI Startup India, Standup India 5 April, 2016 Government of India

PMGKY Pradhan Mantri Garib Kalyan Yojanaye April, 2015 Ministry of Skill Development
(PMGKY) and Entrepreneurs

Important Schemes launched in India related to Health and Sanitation

Government Schemes in India

Full-Form Name of Scheme Date of Launch Government Ministry

Swachh Bharat Abhiyan SBA October 2nd, 2014 Ministry of Housing and Urban
Affairs

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Namami Gange NG July 10, 2014 Ministry of Water Resources

National Bal Swachhta NBS November 10, 2014 Ministry of Women and Child
Development

Pradhan Mantri Jan Aushadhi (PMJAY) March 2016 Ministry of Chemicals and
Yojana Fertilizers

Other Government Schemes launched by the Government of India.

Government Schemes in India

Scheme Full-Form Date of Launch Government Ministry
BBBPY Beti Bachao, Beti Padhao Yojana January 22, 2015 Ministry of Women and Child
Development
PDUSJY Pandit Deendayal Upadhyay Shramev Jayate October 16, 2014 Ministry of Labour and Em-
Yojana ployment
NSTSS National Sports Talent Search Scheme February 20, Ministry of Youth Affairs &
2015 Sports

Funding Pattern: Centre- States will be 75: 25 per cent.

Pradhan Mantri Krishi Sinchayee Yojana
Union Cabinet meeting chaired by Narendra Modi approved
Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) or PM’s
Agriculture Irrigation Scheme.
PMKSY is central scheme that aims at providing irrigation
facilities to every village in the country by converging ongoing
irrigation schemes implemented by various ministries.
Salient features
Ensure access to some means of protective irrigation to all
agricultural farms in the country in order to produce ‘per
drop more crop’ to bring desired rural prosperity.
Flexibility and autonomy:to states in the process of planning
and executing irrigation projects in order to ensure water to
every farm.
Irrigation plans: ensure that state and district irrigation plans
are prepared on the basis of sources of availability of water
and agro-climatic conditions in that region.
Promoting extension activities: related to ‘on farm water
management and crop alignment’ for farmers as well as grass
root level field functionaries.
Agencies involved: nodal agency for implementation of
PMKSY projects will be state agriculture department.
Inter-ministerial National Steering Committee (NSC) will
periodically review these projects.
Budgetary allocation: PMKSY - Harkhet Kopani -
Country’s 96 irrigation - deprived districts Budget allocation
is rupees 2600 cr.
In case of north-eastern region and hilly states it will be 90:10.
Upgrading The Skills And Training In
Traditional Arts/Crafts For Development
(USTAAD) Scheme
Union Government formally launched Upgrading the Skills and
Training in Traditional Arts/Crafts for Development (USTTAD)
Scheme. It was launched by Union Minister of Minority Affairs
Dr. Najma Heptullah in Varanasi, Uttar Pradesh in order to
improve degrading conditions of world famous Banaras Saree
weavers who belong to minority communities.
Facts about USTAAD Scheme:
The Scheme aims at upgrading Skills and Training of
minority communities by preservation of traditional ancestral
Arts and Crafts.
It also envisages boosting the skill of craftsmen, weavers and
artisans who are already engaged in the traditional ancestral work.
Under the scheme, assistance will be provided to traditional
artisans to sell their products in order to make them more
compatible with modern markets.
It is fully funded by Union Government and Union Ministry
of Minority Affairs is nodal agency in implementing it.
Mission Indradhanush
Union Ministry of Health and Family Welfare has launched
the Mission Indradhanush to achieve full immunisation of
children below two years.

90 GeneraL Awareness

Mission Indradhanush depicts 7 colours of the rainbow
which aims to cover all those children by 2020 who are either
unvaccinated or are partially vaccinated against 7 vaccine
preventable diseases
These 7 diseases are :
• Diphtheria
• Whooping cough
• Tetanus
• Polio
• Tuberculosis
• Measles
• Hepatitis B
WHO, UNICEF, Rotary International and others are donor
partners for Mission Indradhanush.
The mission was launched in December 2014 on the occasion
of National Good Governance Day (Dec. 25)
UDAY Scheme
Union Cabinet chaired by Prime Minister Narendra Modi
has given its nod Ujwal DISCOM Assurance Yojna (UDAY)
for financial restructuring of debt of power distribution
companies.
The Scheme aims for financial turnaround and revival of
Power Distribution companies (DISCOMs).
Allows power DISCOMs in selected states to convert their
debt into state bonds as well as roll out number of measures
to improve efficiency at power plants.
Seeks to ensure that struggling DISCOMs can shake off years
of losses and start on a path to profitability.
Assures the rise of vibrant and efficient DISCOMs: through
four initiatives
(i) Improve operational efficiencies of DISCOMs
(ii) Reduce of cost of power
(iii) Reduce interest cost of DISCOMs
(iv) Enforce financial discipline on DISCOMs through
alignment with State finances.
Debt Burden: Shifts 75 per cent of power DISCOMs debt
burden to states’ balance sheets.
This step would result in interest cost savings to the tune of
3-5 per cent.
State Power Bonds or loans: Selected states would be able
to sell the balance 25 per cent as state-backed power bonds
or loans which will carry interest rates of G-Sec plus 50
basis points.
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Improve operational efficiency: by implementing steps like
(i) swapping of coal linkages
(ii) monitoring aggregate technical and commercial (AT&C)
losses
(iii) Focus on smart metering and feeder separation in states.
So far 21 out of the 29 states have opted for this scheme,Andhra
Pradesh has become the 1st state to opt for this scheme
Stand-Up India Scheme
The Union Cabinet has approved the Stand Up
India Scheme to promote entrepreneurship among
Scheduled Caste/Scheduled Tribes (SC/ST) and Women
entrepreneurs.
Features of Stand Up India Scheme
It will refinance window through Small Industries
Development Bank of India (SIDBI) with an initial amount
10,000 crore rupees.
Under it, a credit guarantee mechanism would be created
through the National Credit Guarantee Trustee Company
(NCGTC).
It will be the operating agency for the loan.
It will provide handholding support to the borrowers at both
pre loan stage and during operations stage.
It would seek to increase their familiarity with factoring
services, e-market places and registration with online
platforms as well as sessions on best practices and problem
solving.
It would provide women and SC/ST entrepreneurs bank loans
repayable up to 7 years.
It would be between 10 lakh to 1 crore rupees for greenfield
enterprises in the non-farm sector.
The overall intent is to leverage the institutional credit
structure to reach out to this under-served population.
For this margin money of the composite loan will be up to
25%.
It is expected that this scheme would benefit atleast 2.5
lakh borrowers and expected date of reaching the target of
approvals is 36 months from the launch of the Scheme.
Pradhan Mantri Fasal Bima Yojana
The Union Cabinet has approved Pradhan Mantri Fasal Bima
Yojana, a new crop insurance scheme to boost farming sector
in the country.
It is farmers’ welfare scheme that aims to reduce the premium
burden on farmers and ensure early settlement of crop
assurance claim for the full insured sum.
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www.mahendras.org
Highlights of Scheme Uniform premium: Farmers will
pay uniform premium of 2 per cent for all Kharif crops and
1.5 percent for all Rabi crops.
In case of annual horticultural and commercial crops, farmers
will pay 5 per cent premium.
These premium rates are very low.
Government will pay balance premium to provide full insured
amount to the farmers against crop loss on account of natural
calamities.
Government subsidy: There will be no upper limit
subsidy given by Government even if balance premium is
90 percent.
Capping the Premium: The provision of capping the
premium rate has been removed and farmers will get claim
against full sum insured without any reduction.
It was removed as it resulted in low claims being paid to
farmers and was mainly done to limit Government outgo on
the premium subsidy.
Use of technology: Government will encourage use of
technology especially Smart phones and remote sensing to
a great extent.
In order to reduce the delays in claim payment to farmers,
smart phones will be used to capture and upload data of
crop cutting.
To reduce the number of crop cutting experiments remote
sensing will be used.
Ayushman Bharat Yojana
##Ayushman Bharat Yojana or Pradhan Mantri Jan Arogya
Yojana (PMJAY) or National Health Protection Scheme
or ModiCare is a centrally sponsored scheme launched
on 23 September 2018, under the Ayushman Bharat
Mission.
##It is an umbrella of two major health initiatives namely,
Health and Wellness centres and National Health
Protection Scheme (NHPS).
Ayushman Bharat consists of two major elements.
National Health Protection Scheme
• Ayushman Bharat-National Health Protection Scheme,
which will cover over 10 crore (one hundred million)
poor and vulnerable families providing coverage up to 5
lakh rupees per family per year for secondary and tertiary
care hospitalization.
Wellness centre
• Under this 1.5 lakh centres will be setup to provide ##Price Deficiency Payment Scheme (PDPS)
comprehensive health care, including for non-
communicable diseases and maternal and child health ##Pilot of Private Procurement & Stockist Scheme (PPPS).
92 GeneraL Awareness
services, apart from free essential drugs and diagnostic
services.
GOBAR-Dhan Yojana
##The Galvanizing Organic Bio-Agro Resources Dhan
(GOBAR-DHAN) scheme was first announced by
Finance Minister Arun Jaitley during his budget speech
on February 1. The scheme would focus on managing
and converting cattle dung and solid waste in farms to
compost, biogas and bio-CNG.
Mission Solar Charkha
##The Solar Charkha Mission is a Ministry of Micro Small
& Medium Enterprises (MSME) initiative launched
during June 2018. The Khadi and Village Industries
Commission (KVIC) would implement the programme.
Government of India has accorded approval to set up 50
such clusters with a budget of Rs. 550 Crore for 2018-19
and 2019-20. The scheme is envisaged to generate direct
employment nearly to one lakh persons in the approved
Fifty (50) clusters.
Scheme Objectives
The objectives of the Scheme are as follows:
##To ensure inclusive growth by generation of employment,
especially for women and youth, and sustainable
development through solar charkha clusters in rural
areas.
##To boost rural economy and help in arresting migration
from rural to urban areas.
##To leverage low-cost, innovative technologies and
processes for sustenance
##The target is to cover 50 solar clusters across
the country, whereby approx. 1, 00,000 artisans/
beneficiaries are to be covered under the various
scheme components.
Pradhan Mantri Annadata Aay Sanrakshan
Abhiyan (PM-AASHA)
##The Scheme is aimed at ensuring remunerative prices to
the farmers for their produce as announced in the Union
Budget for 2018. Government has already increased the
MSP of kharif crops by following the principle of 1.5
times the cost of production.
Components of PM-AASHA:
The Scheme is comprised of:
##Price Support Scheme (PSS),

Expenditure:
The Cabinet has decided to give additional government
guarantee of Rs.16, 550 crore making it Rs. 45,550 crore
in total.
Pradhan Mantri Kisan Samman Nidhi
(PM-KISAN)
##On 24 February 2019, PM Narendra Modi launched
Pradhan Mantri Kisan Samman Nidhi ( PM-KISAN)
scheme in Uttar Pradesh’s Gorakhpur by transferring
the first instalment of Rs. 2,000 each to over one crore
farmers. It is cash transfer scheme.
##The Finance Minister has announced a Farmer Income
Support Scheme called Pradhan Mantri Kisan Samman
Nidhi Yojana. The scheme was presented in the interim
budget 2019 in the national assembly on the 1st February
2019. All small and marginal farmers with land will
receive financial assistance of Rs. 6,000 every year
under the scheme.
##A small and marginal landholder farmer is primarily
a family comprising of a husband, wife and minor
children. The family possess a cultivable land up to 2
hectares as per land records of the concerned State and
Union Territory. The existing land-ownership system
is used for the identification of the beneficiaries for the
calculation of benefits.
Pradhan Mantri Shram Yogi Mandhan
Pradhan Mantri Shram Yogi Mandhan is a 2019 scheme
introduced by Government of India for poor labourers in
the unorganised sector from minimum 18years of age to
maximum 40 years. Under the scheme, a monthly pension of
Rs. 3,000 per month is provided to workers in the unorganised
sector over 60 years of age. However, to benefit from the
scheme, workers have to contribute Rs. 55 monthly (for age
18) and it varies according to age. Maximum contribution for
a year cannot exceed Rs. 2400 (Rs.200 per month).
Sukanya Samriddhi Yojana
Sukanya Samriddhi Yojana is a major scheme of the Modi
government. It is a small savings scheme, launched by
Prime Minister Narendra Modi on 22 January 2015. Savings
accounts of girls are opened under this scheme. In which you
can deposit from Rs 250 to Rs 1.5 lakh.
Benefits of Sukanya Samriddhi Yojana -
##It provides tax benefits under Section 80C of Income
Tax Act, 1961.
##It offers higher interest rate as compared to other fixed
deposit schemes.
##An amount from Rs 250 to Rs 1.5 lakh can be invested in it.
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NIRVIK Scheme
To achieve higher export credit disbursement, which provides
for higher insurance coverage. Reduction in premium for
small exporters simplified procedure for claim settlements.
Exporters have been assured that the new export credit
insurance scheme, NIRVIK (Niryat Rin Vikas Yojana),
offering lower premiums, higher insurance cover and faster
claim settlement, will be implemented in FY2020-21.
##High insurance coverage.
##Reduction in premium for small exporters.
##Simple procedure for claim settlement.
Kisan Rail Yojana
##Kisan Rail is to be set up by Indian Railways under
PPP (Public Private Partnership) model to transport
perishable goods. This will help in building a seamless
national cold supply chain for perishables goods can be
transported quickly.
##To build a seamless national cold supply chain for
perishables (milk, meat, fish, etc. o Express and Freight
trains to have refrigerated coaches.
Udaan Yojana
The Union Government of India has launched the fourth
round of UDAN (Ude Desh Ka Aam Nagrik) to enhance the
connectivity to regional areas of the country. This phase is to
focus on Hilly states, North East Region, Ladakh, Jammu and
Kashmir, and Islands. 100 more airports will be developed
by 2024 to support the flight plan. Finance Minister Nirmala
Sitharaman said on 1 February 2020 that the aviation ministry
would launch an agro-industry scheme to assist farmers in
the transportation of agricultural products so that it could
improve their “price perception”. The scheme will be
launched by the Ministry of Civil Aviation on international
and national routes. This will go a long way in improving
price realization (on agricultural products), especially in the
northeast and tribal districts. The Modi government launched
the Udaan scheme in 2016 to improve regional connectivity.
Under the scheme, selective airlines are extended by giving
financial incentives in terms of concessions from the central,
state governments and airport operators to encourage
operations from airports and to keep airfares cheaper. Since at
least half of the seats on flights are given concessional fares,
and participating carriers are provided with a certain amount
of feasibility gap funding (VGF), a sum shared between the
center and the state.
Deendayal Antyodaya Scheme
The Deendayal Antyodaya Yojana aims to reduce urban and
rural poverty by increasing livelihood opportunities through
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www.mahendras.org
skill development and other measures. Keeping in mind the
objective of the program, Make in India, skill development
is necessary for social and economic betterment. Deendayal
Antyodaya Yojana was launched under the Ministry of
Housing and Urban Poverty Alleviation (HUPA). The
government of India has made a provision of 500 crores for
this scheme.
The scheme is an integration of the National Urban
Livelihoods Mission (NULM) and National Rural Livelihoods
Mission (NRLM).
The Rural Ministry signed a MoU with Bill and Melinda
Gates Foundation on 20 January 2020 to strengthen grassroots
institutions under the Deendayal Antyodaya Yojana - National
Rural Livelihood Mission (DAY-NRLM).
National Urban Livelihoods Mission (NULM) has been
named Deen Dayal Antyodaya Yojana (DAY-NULM)
and National Urban Livelihood Mission in Hindi. Under
the scheme, for the urban areas, under the Deendayal
Upadhyay Antyodaya Yojana, covering all 4041 cities
and towns, the entire urban population will be covered.
All urban poverty alleviation programs cover only 790
towns and cities.
NOTES
94 GeneraL Awareness
PM-KUSUM
The Ministry of New and Renewable Energy (MNRE)
has launched Pradhan Mantri Kisan Suraksha Abhiyan
Utthan Mahabhiyan (PM Kusum) scheme for farmers
for setting up solar pumps and grid connected solar and
other renewable plants in the country. Kusum Yojana is
a scheme dedicated to the farmers of the Government of
India. Under this scheme, solar pumps will be provided
to the farmers, which will be of great benefit in farming.
Under the Kusum scheme, the government will provide
subsidy to farmers for setting up solar power plants on their
wastelands. The Kusum scheme will install agricultural
pump sets to double farmers’ income by 2022. The Central
Government has allocated Rs 48,000 / - crore in the Union
Budget 2018-19 for the coming 5 years for the successful
implementation of this scheme.
Objective of Kusum Yojana- Farmers in India have to face a
lot of problems in irrigation and crops of farmers are damaged
due to more or less rain. Through the Kusum scheme of the
central government, farmers can irrigate their fields by putting
solar energy equipment and pumps in their land.

SOCIAL WELFARE SCHEMES
Q.1. Which one of the following PMJDY is related to-
(1) Female education (2) Literacy
(3) Bank (4) Financial inclusion
(5) All the above
Q.2. What is the amount for life insurance cover in
PMJDY?
(1) 1.00 lac rupees (2) 5000 rupees
(3) 30,000 rupees (4) 2.00 lacs rupee
(5) None of these
Q.3. What is the amount for accidental insurance cover
in PMJDY?
(1) 1.00 lac rupees (2) 5000 rupees
(3) 30,000 rupees (4) 2.00 lacs rupee
(5) None of these
Q.4. What is the amount under overdraft facility in
PMJDY?
(1) 1.00 lac rupees (2) 10,000 rupees
(3) 3,000 rupees (4) 50,000 rupees
(5) None of these
Q.5. Under PMJDY to claim the benefits of accidental
insurance policy, the RuPay Debit Card must be
used at least once in how many days?
(1) in 90 days (2) in 30 days
(3) in 60 days (4) in 65 days
(5) None of these
Q.6. PM MUDRA yojna has classified micro units under
following the categories?
(1) Shishu (2) Kishore
(3) Tarun (4) All of the above
(5) None of the above
Q.7. Which of the following category will be given loan
upto 50,000 under PM MUDRA yojna?
(1) Shishu (2) Kishore
(3) Tarun (4) All of the above
(5) None of these
Q.8. Which of the following category will be given loan
between 50,000 and upto 5 lacs under PM MUDRA
yojna?
(1) Shishu (2) Kishore
(3) Tarun (4) All of the above
(5) None of these
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Q.9. Which of the following categories will be given loan
between 5 lacs and upto 10 lacs under PM MUDRA
yojna?
(1) Shishu (2) Kishore
(3) Tarun (4) All of the above
(5) None of these
Q.10. In which of the following schemes we receive sixty
percent of the loan offered under PM MUDRA
yojna?
(1) Shishu (2) Kishore
(3) Tarun (4) All of the above
(5) None of these
Q.11. Which of the given statements is true regarding
‘Make in India’?
(A) The program was launched by PM Modi in
September 2014
(B) It is to transform India into a global design and
manufacturing hub
(C) ‘Make in India’ is just an inspiring slogan.
(D) Department of Industry Policy and Promotion
works on this program.
(1) All options are false
(2) Only option (A), (B) & (C) are true
(3) Only option (A), (B) & (D) are true
(4) Only (C) is true
(5) All statements are true
Q.12. MUDRA bank will be....
(1) Commercial Bank (2) Regulating Agency
(3) Refinance Agency (4) Credit Rating Agency
(5) None of these
Q.13. The objective of Beti Bachao Beti Padhao yojna is-
(A) Prevention of gender biased selective elimination
(B) Ensuring survival & protection of the girl child
(C) Ensuring education and participation of the girl
child
(1) Only (A) (2) Both (A) & (B)
(3) Both (B) & (C) (4) All (A), (B) and (C)
(5) None
Q.14. Beti Bachao Beti Padhao yojna was launched on-
(1) 21 January 2014 (2) 21 January 2015
(3) 22 January 2014 (4) 22 January 2015
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(5) None of these Q.21. What is the amount provided as an insurance cover
Q.15. Sukanya Samridhi account was launched on- under the PMJJB Yojna?

(1) 21 January 2014 (2) 21 January 2015 (1) Rs. 1 lac (2) Rs. 2 lacs

(3) 22 January 2015 (4) 22 January 2014 (3) Rs. 3 lacs (4) Rs. 4 lacs

(5) None of these (5) Rs. 5 lacs

Q.16. The minimum investment limit in one financial year
under Sukanya Samridhi account is-
(1) Rs. 250 (2) Rs. 5000
(3) Rs. 100 (4) Rs. 10000
(5) Rs. 500
Q.17. The maximum investment limit in one financial year
under Sukanya Samridhi account is-
(1) Rs. 12000 (2) Rs. 1.5 lacs
(3) Rs. 1 lac (4) Rs. 10000
(5) Rs. 100
Q.18. The amount in Sukanya Samridhi account can be
deposited until the completion of ..........years from
date of opening the account.
(1) 18 years (2) 21 years
(3) 12 years (4) 10 years
(5) 14 years
Q.19. The maximum age eligibility for PMJJBY is-
(1) 100 years (2) 40 years
(3) 50 years (4) 60 years
(5) 70 years
Q.20. What is the amount as premium in PMJJBY?
(1) Rs. 12 (2) Rs. 33
(3) Rs. 330 (4) Rs. 70
(5) Rs. 100
Q.22. The maximum age eligibility for PMSBY is-
(1) 100 years (2) 40 years
(3) 50 years (4) 60 years
(5) 70 years
Q.23. What is the amount as premium in PMSBY?
(1) Rs. 12 (2) Rs. 33
(3) Rs. 330 (4) Rs. 70
(5) Rs. 100
Q.24. What is the amount provided as insurance cover
under PMSBY?
(1) Rs. 1 lac (2) Rs. 2 lacs
(3) Rs. 3 lacs (4) Rs. 4 lacs
(5) Rs. 5 lacs
Q.25. Swachh Bharat Abhiyan-
(A) It was started on 02 October 2014.
(B) It is started to celebrate the 150th anniversary
of Indira Gandhi
(C) It is a cleanliness drive targeting to clean India
by 2019.
(1) Option (B) is true
(2) Only (C) is true
(3) Only (C) is true
(4) Both (A) & (C) are true
(5) All are true

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

96 GeneraL Awareness
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INSURANCE SECTOR

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

GeneraL Awareness 97
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CHAPTER
INSURANCE
12 SECTOR
Scan the QR code to get video of this chapter.
What Is Insurance
The business of insurance is related to the protection of the
economic values of assets. Every asset has a value. The asset
would have been created through the efforts of the owner. The
asset is valuable to the owner, because he expects to get some
benefits from it. It is a benefit because it meets some of his
needs. The benefit may be an income or in some other form.
In the case of a factory or a cow, the product generated by it
is sold and income is generated. In the case of a motor car,
it provides comfort and convenience in transportation. There
is no direct income. Both are assets and provide benefits.
Every asset is expected to last for a certain period of time
during which it will provide the benefits. After that, the
benefit may not be available. There is a life-time for a
machine in a factory or a cow or a motor car. None of them
will last for ever. The owner is aware of this and he can so
manage his affairs that by the end of that period or life-time,
a substitute is made available. Thus, he makes sure that the
benefit is not lost. However, the asset may get lost earlier.
An accident or some other unfortunate event may destroy
it or make it incapable of giving the benefits. An epidemic
may kill the cow suddenly. In that case, the owner and those
enjoying the benefits therefrom, would be deprived of the
benefits. The planned substitute would not have been ready.
There is an adverse or unpleasant situation. Insurance is a
mechanism that helps to reduce the effects of such adverse
situations. It promises to pay to the owner or beneficiary of
the asset, a certain sum if the loss occurs.
Types of Insurance
1. Life Insurance life insurance business in India. After the amendments to the
2. Non Life Insurance (General Insurance)
Brief History of Insurance
Insurance has been known to exist in some form or other since
3000 BC. The Chinese traders, traveling treacherous river
rapids would distribute their goods among several vessels, so
that the loss from any one vessel being lost, would be partial
and shared, and not total. The Babylonian traders would agree
to pay additional sums to lenders, as the price for writing off the
loans, in case of the shipment being stolen. The inhabitants of
Rhodes adopted the principle of ‘general average’, whereby, if
goods are shipped together, the owners would bear the losses
in proportion, if loss occurs, due to jettisoning during distress.
(Captains of ships caught in storms, would throw away some
98 GeneraL Awareness
of the cargo to reduce the weight and restore balance. Such
throwing away is called jettisoning) The Greeks had started
benevolent societies in the late 7th century AD, to take care of
the funeral and families of members who died. The friendly
societies of England were similarly constituted. The Great Fire
of London in 1666, in which more than 13000 houses were lost,
gave a boost to insurance and the first fire insurance company,
called the Fire Office, was started in 1680.
The origins of insurance business as in vogue at present, is traced
to the Lloyd’s Coffee House in London. Traders, who used to
gather in the Lloyd’s coffee house in London, agreed to share the
losses to their goods while being carried by ships. The losses used
to occur because of pirates who robbed on the high seas or because
of bad weather spoiling the goods or sinking the ship. In India,
insurance began in 1818 with life insurance being transacted by an
English company, the Oriental Life Insurance Co. Ltd.. The first
Indian insurance company was the Bombay Mutual Assurance
Society Ltd, formed in 1870 in Mumbai. This was followed by
the Bharat Insurance Co. in 1896 in Delhi, the Empire of India in
1897 in Mumbai, the United India in Chennai,the National Indian
and the Hindusthan Cooperative in Kolkata.
Later, were established the Cooperative Assurance in Lahore,
the Bombay Life (originally called the Swadeshi Life), the
Indian Mercantile, the New India and the Jupiter in Mumbai
and the Lakshmi in New Delhi. These were all Indian
companies started as a result of the swadeshi movement in
the early 1900s. By the year 1956, when the life insurance
business was nationalised and the Life Insurance Corporation
of India (LIC) was formed on 1st September 1956, there were
170 companies and 75 provident fund societies transacting
relevant laws in 1999, the L.I.C. did not have the exclusive
privilege of doing life insurance business in India.
Purpose And Need of Insurance
Assets are insured, because they are likely to be destroyed or
made nonfunctional before the expected life time, through
accidental occurrences. Such possible occurrences are called
perils. Fire, floods, breakdowns, lightning, earthquakes, etc,
are perils. If such perils can cause damage to the asset, we say
that the asset is exposed to that risk. Perils are the events. Risks
are the consequential losses or damages. The risk to a owner
of a building, because of the peril of an earthquake, may be
a few lakhs or a few crores of rupees, depending on the cost
of the building, the contents in it and the extent of damage.

Insurance does not protect the asset. It does not prevent its
loss due to the peril. The peril cannot be avoided through
insurance. The risk can sometimes be avoided, through better
safety and damage control measures. Insurance only tries
to reduce the impact of the risk on the owner of the asset
and those who depend on that asset. They are the ones who
benefit from the asset and therefore, would lose, when the
asset is damaged. Insurance only compensates for the losses
and that too, not fully.
Only economic consequences can be insured. If the loss is not
financial, insurance may not be possible. Examples of non-
economic losses are love and affection of parents, leadership
of managers, sentimental attachments to family heirlooms,
innovative and creative abilities, etc.
How Insurance Works
People facing common risks come together and make their
small contributions to a common fund. The contribution to
be made by each person is determined on the assumption that
while it may not be possible to tell beforehand, which person
will suffer, it is possible to tell, on the basis of past experiences,
how many persons, on an average, may suffer losses.
Human Asset
A human being is an income generating asset. One’s
income generating ability depends on one’s skills, (manual,
professional, problem solving, entrepreneurial, etc). These
are the assets. The value of the asset can be measured by
considering the income that is generated by the person
concerned. The concept of Human Life Values, provides
scientific ways to determine the asset value of the human life
and therefore, the amount of life insurance required.. These
techniques, like other techniques related to selling, will have
to be learnt for the job.
These assets also can be lost through unexpectedly early
death or through sickness and disabilities caused by accidents.
Accidents may or may not happen. Death will happen, but
the timing is uncertain. If it happens around the time of one’s
retirement, when it could be expected that the income will
normally cease, the person concerned could have made some
other arrangements to meet the continuing needs. But if it
happens much earlier when the alternate arrangements are
not in place, there can be losses to the person and dependents.
Those dependent on the income are helped to overcome their
difficulties, by insurance.
A person, who may have made arrangements for his needs
after his retirement, also would need insurance. This is
because the arrangements would have been made on the basis
of some expectations like, likely to live for another 15 years,
or that children will be able to look after the aged parents.
If any of these expectations do not become true, the original
arrangement would become inadequate and there could be
difficulties. Living too long can be as much a problem as
dying too young. Both are risks, which need to be safeguarded
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against. Insurance takes care. Thus, the risks in the case of a
human being are related to
##Early death
##Living too long
##Disabilities
##Sickness
##Unemployment
Insurance of Intangibles
The concept of insurance has been extended beyond the
coverage of tangible assets. Exporters run the risk of losses,
if the importers in the other country default in payments or
in collecting the goods. They will also suffer heavily due
to sudden changes in currency exchange rates, economic
policies or political disturbances in the other country.
These are dynamic risks and are insured. Doctors and other
professionals run the risk of being charged with negligence
and subsequent liability for damages. The amounts in question
can be fairly large, beyond the capacity of individuals to bear.
These are insured. Thus, insurance is extended to intangibles.
In some countries, the voice of a singer or the legs of a
dancer may be insured. These are assets which produce the
income and provide living to the owners. The object insured
is intangible, but it is linked to a financial loss, and therefore
becomes insurable. Indian non-life insurers are perhaps,
considering the feasibility to insure such risks.
The Business of Insurance in India
In India, insurance business is classified primarily as life and
non-life or general. Life insurance includes all risks related to
the lives of human beings and general insurance covers the
rest. General insurance has three classifications viz., (1) Fire
(dealing with all fire related risks). (2) Marine (dealing with
all transport related risks and ships) (3) Miscellaneous (dealing
with all others like liability, fidelity, motor, crop, engineering,
construction, I aviation, personal accident, etc). Personal
accident and sickness insurance, which are related to human
beings, is classified as ‘non-life’ in India, but is classified as
‘life’ in many other countries. What is ‘non-life’ in India is
termed as ‘Property and Casualty’ in some other countries.
In India, the IRDA has, in 2005, issued Regulations enabling
micro-insurance (broadly meaning insurance for small Sums
Assured, like 5 to 50 thousands) to be done by both life and
general insurers on the basis of mutual tie-ups. A policy
may be issued by a life insurer covering both life and non-
life risks, but premium on account of the non-life business
will be passed on to a general insurer and the claim amount
collected from the latter.
The premium for insurance is based on expectations of the
losses. These expectations are based on studies of occurrences
in the past and the use of statistical principles. There is, in
statistics, a “law of large numbers”. When you toss a coin, the
chance, or probability, of a head or tail coming up is half. If
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the coin is tossed 100 times, one cannot be sure that the head
will come up 50 times. If the coin is tossed 1 million times, the
number of heads will be closer to half a million proportionately
than in the case of 10. The variation will be less as a percentage.
Reinsurance: Reinsurance is a contract between the
insurance company (insurer) and a third party (re-insurer),
wherein the latter will protect the former by paying losses
sustained by it under the original contract of insurance.
Re-insurers from London, as well as other parts of Europe,
see significant potential in the re-insurance market in India.
Top four global reinsurers, Lloyds, Swiss Re, Munich Re and
Berkshire Hathaway amongst those eyeing India. In India the
general insurance corporation of India is the national reinsurer.
Bancassurance : Bancassurance is distribution of insurance
product through a bank’s network. Under this channel of
distribution and selling of insurance product bank acts as
insurance agent and considering the volume of business
insurance companies used to associate their employees with
the branches for support and assistance.
What is Premium
In a contract of insurance, the insurer promises to pay to
the policyholder a specified sum of money, in the event of a
specified happening. The policyholder has to pay a specified
amount to the insurer, in consideration of this promise.
‘Premium’ is the name given to this consideration that the
policyholder has to pay in order to secure the benefits offered
by the insurance contract. It can be looked upon as the price
of the insurance policy. It may be a one-time payment. That is
not common. Often, it has to be paid regularly over a period
of time. A default in premium can endanger the continuance
of the policy. If that happens, the policy will be treated as
‘lapsed’ and the expected benefits may not be available. The
consequences of default are specified in the policy conditions.
The calculation of premium is a complex technical process,
involving actuarial and statistical principles. Only trained
professionals, called actuaries, do it. Tables of premium rates
for each plan of insurance are made available by insurance
companies for the use of agents, who are required to quote the
premium for a particular policy being offered to a prospect.
With Profit And Without Profit Policies
Without profit’ or ‘Non-participating’ policies are not entitled
to bonuses, which are declared after actuarial valuations. ‘With
profit’ or ‘Participating’ policies pay a slightly higher premium
for the right to participate in the progress of the insurer. ‘With
profit’ policies are popular because the bonuses are expected
to be more than the extra premium paid. ‘With Profit’ policies,
where the premium is payable for a limited period, will
continue to participate even after the premiums have ceased.
Joint Life Policies
Two or more lives can be covered under one policy. Such
policies usually cover married couples or partners. The SA
100 GeneraL Awareness
(Sum Assured) is paid on the death of any of the insured
persons during the term or at the end of the term. Some plans
also provide payment of SA on the death of one life and the
policy is continued to cover the second life till maturity,
without payment of further premium.
Childrens Plans
Insurance can be taken on the lives of children, who are
minors. The proposal will have to be made by a parent or a
guardian.
Group Insurance
Group insurance is a plan of insurance, which provides cover
to a large number of individuals under a single policy called
the “Master Policy”. The individuals covered under the
master policy are not parties to the contract. The contract will
be between the insurer and a body that represents the group
of individuals covered. This body may be the employer, who
is interested in obtaining benefits for his employees through
insurance. The body may be an association of individuals
through whom the collective interests of the individuals are
safeguarded, like a trade or professional association. A bank
or financier can make arrangements through a group policy
to protect his interests against defaults occurring because of
the death of the debtors.
First Premium Receipt (FPR)
The underwriter’s decision on the proposal may be to accept
at OR or otherwise. If it is accepted at OR, the policy can
be commenced immediately, provided the full premium had
been paid along with the proposal. The FPR will be issued. If
the acceptance is not at OR, the proposer has to agree to the
modified terms and pay the balance premium if any, before
the FPR can be issued. The IRDA regulations require that
the decision on the proposal should be made by the insurer
within 15 days.
Law And Regulations
Insurance Act, 1938
The Insurance Act 1938, which came into effect from 1st
July 1939, and was amended in 1950 and later in 1999, is
the principal enactment relating to the business of insurance
in India. The Act contains provisions regarding licensing of
agents and their remunerations, prohibition of rebates, and
protection of policyholder’s interests. It also has provisions
placing limits on the expenses of insurers, use of funds and
patterns of investments, maintaining solvency levels, and
constitution of Insurance Associations and Insurance Councils
and the Tariff Advisory Committee for general insurance.
Till the constitution of the IRDA by the IRDA Act in
1999, the Controller of Insurance was responsible for the
administration of the Insurance Act. Since 1999, the IRDA
has replaced the Controller of Insurance. The Insurance Act
vests the IRDA with powers to Register insurance companies
and also cancel their registrations.

##Monitor and certify the soundness of the terms of life
insurance business.
##Make regulations relating to the conduct of the business
of insurance.
##Inspect documents of insurers.
##Appoint additional directors.
##Issue directions.
##Take over the management of an insurer and appoint
administrators.
##Adjudicate on disputes between insurers and
intermediaries or between intermediaries.
##Decide on disputes relating to settlement of claims of
amounts not .exceeding Rs. 2000.
Life Insurance Corporation Act, 1956
This Act was the basis for the establishment of the L.I.C. as
a body corporate consisting of not more than 16 members
appointed by the Central Government, one of them being
Chairman. The Corporation’s duty was to carry on life
insurance business to the best advantage of the community.
Section 30 gave the L.I.C exclusive privilege to transact life
insurance business in India. This exclusive privilege ceased as
a result of the amendments made in 1999. These amendments
were made in pursuance of the Government’s policy of
economic reforms. 24 insurance companies were registered
and had commenced life insurance business till 11.02.2020.
Insurance Regulatory And Development
Authority Act 1999
This Act, passed in December 1999, provided for the
establishment of the IRDA to protect the interests of holders
of insurance policies, to regulate, promote and ensure orderly
growth of the insurance industry and for matters connected
therewith or incidental thereto. It also sought to amend the
Insurance Act, 1938, the Life Insurance Corporation Act,
1956 and the General Insurance Business (Nationalization)
Act, 1972.
The IRDA is a corporate body. It is advised by an Insurance
Advisory Committee consisting of not more than 25
members to represent the interests of commerce, industry,
transport, agriculture, consumer forums, surveyors, agents,
intermediaries, organisations engaged in safety and loss
prevention, research bodies and employees’ associations in
the insurance sector. It replaces the ‘Controller of Insurance’
to administer the provisions of the Insurance Act. That
includes registrations, licensing, and laying down regulations
for the proper conduct of the business and the protection of
the interests of policyholders.
Essentials of IRDA Act
Composition of Authority under IRDA Act, 1999
As per the section 4 of IRDA Act’ 1999, Insurance Regulatory
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and Development Authority (IRDA, which was constituted
by an act of parliament) specify the composition of Authority
The Authority is a ten member team consisting of
(a) One Chairman;
(b) Five whole-time members
(c) Four part-time members. (all appointed by the
Government of India)
Duties, Powers and Functions of IRDA under IRDA Act,
1999
Section 14 of IRDA Act, 1999 laysdown the duties,powers and
functions of IRDA..(1) Subject to the provisions of this Act
and any other law for the time being in force, the Authority
shall have the duty to regulate, promote and ensure orderly
growth of the insurance business and re-insurance business.
(2) Without prejudice to the generality of the provisions
contained in sub-section (1), the powers and functions
of the Authority shall include, -
(a) Issue to the applicant a certificate of registration,
renew, modify, withdraw, suspend or cancel such
registration;
(b) Protection of the interests of the policy holders in
matters concerning assigning of policy, nomination
by policy holders, insurable interest, settlement of
insurance claim, surrender value of policy and other
terms and conditions of contracts of insurance;
(c) Specifying requisite qualifications, code of conduct
and practical training for intermediary or insurance
intermediaries and agents;
(d) Specifying the code of conduct for surveyors and
loss assessors;
(e) Promoting efficiency in the conduct of insurance
business;
(f) Promoting and regulating professional organisations
connected with the insurance and re-insurance
business;
(g) Levying fees and other charges for carrying out the
purposes of this Act;
(h) Calling for information from, undertaking inspection
of, conducting enquiries and investigations including
audit of the insurers, intermediaries, insurance
intermediaries and other organisations connected
with the insurance business;
(i) Control and regulation of the rates, advantages,
terms and conditions that may be offered by insurers
in respect of general insurance business not so
controlled and regulated by the Tariff Advisory
Committee under section 64U of the Insurance Act,
1938 (4 of 1938);
(j) Specifying the form and manner in which books
of account shall be maintained and statement of
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accounts shall be rendered by insurers and other
insurance intermediaries;
(k) Regulating investment of funds by insurance companies;
(l) Regulating maintenance of margin of solvency;
(m) Adjudication of disputes between insurers and
intermediaries or insurance intermediaries;
(n) Supervising the functioning of the Tariff Advisory
Committee;
(o) Specifying the percentage of premium income of
the insurer to finance schemes for promoting and
regulating professional organisations referred to in
clause (f);
(p) Specifying the percentage of life insurance business
and general insurance business to be undertaken by
the insurer in the rural or social sector; and
(q) Exercising such other powers as may be prescribed.
Consumer Protection Act 1986 (COPA)
Under this Act, a consumer, as an individual or along with other
individuals, or through a consumer organisation, can approach
the various forums prescribed under the Act for redress, in case
he is not satisfied with the goods or service provided. He has to
allege a defect in the goods or service. A defect or deficiency
is a fault, imperfection, shortcoming or inadequacy in the
quality, nature or manner of performance, which is required
to be maintained by or under any law or in pursuance of a
contract or undertaking in relation to that service.
In order to attend to complaints under this Act, consumer
dispute redressal forums are established in each district
and for each State. The forum at the district level will hear
complaints up to the value of Rs.20,00,000 and the forum
at the State level will hear complaints up to the value of Rs.
1,00,00,000. The National Commission will attend formatters
beyond the jurisdiction of the State forums and also appeals
against the decisions of a State forum.
Insurance OMBUDSMAN
The Governing body of the Insurance Council is authorized
by law to appoint Ombudsmen for the insurance industry.
The function of the Ombudsman is to resolve complaints in
respect of disputes between policyholders and insurers in
cost effective, efficient and impartial manner.
The complaints to the Ombudsman may relate to (1) partial or
total repudiation of claims (2) any dispute regarding premium
paid or payable in terms of the policy (3) any dispute on the
legal construction of the policy relating to claims (4) delay in
settlement of claims (5) non-issue of any insurance document
to customers after receipt of premium.
The Ombudsman acts as counsel and mediator in matters
within its terms of reference. It is not a judicial authority. It
has no right to summon witnesses. It has to make its decision
on the basis of documents submitted to it. The complainant
102 GeneraL Awareness
and the insurer are allowed to make personal submissions.
But lawyers are not permitted to argue the case.
Complaints to the Ombudsman lie only when the insurer had
rejected the complaint or no reply was received within one
month of the complaint or the reply was not satisfactory. A
complaint can be made within one year after the insurer had
rejected the representation. The subject matter should not be
already before any court or consumer forum or arbitration.
The Ombudsman is expected to make a recommendation
within one month from the date of receipt of complaint. If
the complainant accepts this recommendation, the insurer
has to comply within 15 days and inform the Ombudsman
accordingly. If the complainant does not accept the
Ombudsman’s recommendation, the Ombudsman shall
pass an award in writing, stating the amount awarded which
shall not be in excess of what is necessary to cover the loss
suffered by the complainant as a direct consequence of the
insured peril or for an amount not exceeding Rs. 30,00,000,
whichever is lower. The award has to be passed within 3
months. The complainant has to intimate his acceptance of
the award within one month by a letter of acceptance to the
insurer and the insurer has, to comply within 15 days and
inform the Ombudsman. If the Complainant does not intimate
acceptance, the award cannot be implemented.
General Insurance
Products
1. Fire Insurance : Fire Insurance is desgined to provide
financial protection for property against loss or damage by
Fire and others specified perils.
2. Marine Insurance : Marine insurance, comprises (a) cargo
insurance and (b) hull insurance. Cargo insurance provides
insurance cover in respect of loss of or damage to goods
during transit by rail, road, sea or air. Thus cargo insurance
concerns the following:
##Export and import shipments- by ocean-going vessels of
all types, coastal shipments by steamers, sailing vessels,
mechanized boats, etc., shipments by inland vessels or
country craft, and consignments by rail, road, or air and
articles sent by post.
##Hull insurance, on the other hand, concerns the insurance
of ships (hull, machinery, etc.)
3. Motor Insurance : The insurance of motor vehicles
against damage is not made compulsory, but the insurance
of third party liability arising out of the use of motor vehicles
in public places is made compulsory. No motor vehicle can
ply in a public place without such insurance.
4. Personal Accident Insurance : The policy provides that,
if the insured shall sustain any bodily injury resulting solely
and directly from accident caused by external violent and
visible means, then the company shall pay to the insured or
his legal personal representative(s), as the case may be, the
sum or sums set forth, in the policy.

5. Health Insurance : This insurance provides for
reembersment of hospitalization/domicilary hospital
expenses for illness/disease suffered are accidental injury
sustained during the policy period.
6. Liability Insurance : The purpose of liability insurance
is to provide indemnity in respect of damages payable under
law for personal injury to third parties or damage to their
property. This legal liability may arise under common law
on the basis of negligence or under statutory law (e.g. Public
Liability Insurance Act or Workman’s Compensation Act)
on ‘no-fault’ basis, that is even when there is no negligence.
Another class of legal liability insurance relates to employer’s
legal liability towards his employees for death or bodily
and the policy is known as employer’s liability insurance or
workman’s compensation insurance.
7. Engineering Insurance : This policy is designed to
protect the interests of contractors and principals in respect
of civil engineering projects, like buildings, bridges, tunnels,
etc. The policy provides an “All Risk” cover. Every risk is
covered which is not specifically excluded. This means that
almost any sudden and unforeseen loss or damage occuring
during the period of insurance to the property insured on the
construction site is indemnified.
8. Rural Insurance : Rural policies comprise the insurances
of various livestock e.g., cattle, sheep, goat, etc. sub-animals
e.g., silkworm and honeybee, plantation and horticultural
crops e.g. rubber, grapes, etc. property e.g. agricultural
pumpsets, etc. e.g. gramin accident.
9. Burglary Insurance :
1. The policy is available to commercial establishments,
factories, godowns, shops etc. Property in any form,
including cash, in the business premises can be covered.
The risks covered are :
a) Theft of property after actual forcible and violent entry
into the premises or theft following actual, forcible
and violent - exit from the premises.
b) Damage to insured property or premises by burglars
Cash cover operates only when the cash is secured in a safe
and is granted only if the safe is burglar proof and is of an
approved make and design.
The cover is granted subject to the following two clauses :-
(i) The loss of cash abstracted from the safe following
the use of the key to the said safe or any duplicate
thereof belonging to the insured is not covered unless
such key has been obtained by violence or threats of
violence. This is generally known as “key clause”
(ii) A complete list of the amounts of cash in safe should
be kept secure in some place other than the safe.
Some important exclusions under the policy are :
a) Theft by persons lawfully on the premises (larceny
GeneraL Awareness
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or ordinary theft is not covered).
b) Loss insurable under fire or plate glass policy.
2. The policy can be extended to cover riot, strikes and
terrorism risks at extra premium.
10. House Holder Insurance : This is a package insurance
scheme designed to meet the requirements of a householder
by combining under a single policy a number of contingencies
which are otherwise covered under separate policies.
11. Shopkeeper’s Insurance : The policy is designed for
small shopkeepers. The policy is comprised of 10 sections.
Section 1. Loss or damage to (A) building / (B) contents
(excluding money and valuables) whilst contained in insured
premises by specified perils.
Section 2. Loss of or damage to contents (excluding money
and valuables) whilst contained in the premises by burglary
and housebreaking. (No theft risk is covered)
Section 3.
a) Loss of money in transit due to accident/ misfortune.
b) Loss of or damage to money / valuables by Burglary /
housebreading whilst contained in a burglar proof safe.
c) Loss of money whilst lying in cashier’s till and or
counter in insured’s premises by Burglary, house-
breaking or following assault /violence on insured or his
employees.
Section 4. Loss of or damage to pedal cycle (s) and legal
liability to third parties.
Section 5. Loss of or damage to fixed plate glass in the
insured premises.
Section 6. Loss of or damage to Neon Sign/glow sign.
Section 7. Loss of or damage to Personal Baggage of insured
or baggage in connection with trade, any where in India.
Section 8. Personal Accident cover for insured/his employees
as per PA practice.
Section 9. Direct pecuniary loss suffered by the insured due
to fraud or dishonesty committed by any salaried employees.
Section 10.
a) Legal liability to a third party.
b) Liability to employees under the W.C. Act/common
law.
12. Misc. Insurance : Such as bankers blanket policy,
jewllers block policy, horse insurance etc.
Difference between life insurance and general insurance
1. General insurance works on the principle of indemnity but
in life insurance it is only the principle of financial security
2. In life Insurance Insurers insured the life of the human
being and in general insurance insurers insured other than
human life. But there is few exception such as health
insurance, which is provided by both.
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Important Abbreviation Related to Insurance
IRDA Insurance Regulatory and development Authority.
LIC Life Insurance Corporation of India
ULIP Unit Linked Insurance Plans
COPA Consumer Protection Act
GIC General Insurance Corporation of India
NAV Net Asset Value
SSS Salary Savings Scheme
SA Sum Assured
FPR First Premium Receipt
IDV Insured’s declared Value
CC Cubic Capacity
TPA Third Party Administrator
NCB No Claim Bonus
NSDL National Securities Depository Limited
CDSL Central Depository Services Limited

Insurance Companies Operating In India Life Insurers

Public Sector Private Sector
1. Life Insurance Corporation of India 1. Bajaj Allianz Life Insurance Company Limited .
2. Aditya Birla Sun Life Insurance Co. Ltd
3. HDFC Life Insurance Co. Ltd
4. ICICI Prudential Life Insurance Co. Ltd
5. Exide Life Insurance Company Limited
6. Max Life Insurance Co. Ltd
7. PNB Metlife India Insurance Co. Ltd.
8. Kotak Mahindra Life Insurance Limited
9. SBI Life Insurance Co. Ltd
10. Tata AIA Life Insurance Company Limited
11. Reliance Nippon Life Insurance Company Limited.
12. Aviva Life Insurance Company India Limited
13. Sahara India Life Insurance Co, Ltd.
14. Shriram Life Insurance Co, Ltd.
15. Bharti AXA Life Insurance Company Ltd.
16. IDBI Federal Life Insurance Company Ltd.,
17. Future Generali India Life Insurance Company Ltd.
18. Canara HSBC Oriental Bank of Commerce Life Insurance
19. AEGON Life Insurance Company Limited.
20. DHFL Pramerica Life Insurance Co. Ltd.
21. Star Union Dai-ichi Life Insurance Co. Ltd.,
22. India First Life Insurance Company Limited
23. Edelweiss Tokio Life Insurance Co. Ltd.
As on 11/ February/ 2020
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Non-Life Insurers
Public Sector Private Sector
1. IFFCO Tokio General Insurance Co. Ltd. 1. Bajaj Allianz General Insurance Co. Ltd.
2. National Insurance Co. Ltd. 2. ICICI Lombard General Insurance Co. Ltd.
3. The New India Assurance Co. Ltd. 3. Reliance General Insurance Co. Ltd.
4. The Oriental Insurance Co. Ltd. 4. Royal Sundaram General Insurance Co. Limited
5. United India Insurance Co. Ltd. 5. Tata AIG General Insurance Co. Ltd.
6. Export Credit Guarantee Corporation of India Ltd. 6. Cholamandalam MS General Insurance Co. Ltd.
7. Agriculture Insurance Co. of India Ltd. 7. HDFC ERGO General Insurance Co. Ltd.
8. Universal Sompo General Insurance Co. Ltd. 8. Star Health and Allied Insurance Company Ltd.
9. SBI General Insurance Company Ltd. 9. Apollo Munich Health Insurance Company Ltd.
10. Future General India Insurance Company Ltd.
11. Shriram General Insurance Company Ltd.
12. Bharti AXA General Insurance Company Ltd.
13. Raheja QBE General Insurance Company Ltd.
14. Max Bupa Health Insurance Company Limited
15. Religare Health Insurance Company Limited
16. Magma HDI General Insurance Company Ltd.
17. Liberty Videocon General Insurance Co. Ltd.
18. Cigna TTK Health Insurance Company Limited.
19. Kotak Mahindra General Insurance Co. Ltd.
20. Adiya Birla Healt Insurance Co. Ltd.
21. DHFL General Insurance Ltd.
22. Acko General Insurance Ltd.
23. Go Digit General Insurance Ltd.
24. Edelweiss General Insurance Co. Ltd.
25. Reliance Health Insurance

As on 11/02/2020
Re- Insurer
1. General Insurance Corporation of India As on 11/02/2020
2. ITI Re-Insurance Limited
Companies With Foreign Partners
Indian Partner Foreign Partner Country
Religare AEGON USA
Dabur Invest Corp. AVIVA Group UK
Bajaj Finserv Ltd. Allianz SE Germany
Bharti Enterprises AXA Group France
Aditya Birla Group Sun Life Financial Canada
Canara Bank & Oriental Bank HSBC Insurance UK
Deewan Housing Finance Corporation Prudential Intl. Holdings Ltd. USA
Future Group & Industrial Inv. Trust Ltd. Generali Group Italy
HDFC Ltd . Standard Life UK
ICICI Bank Prudential UK
Bank of India & Union Bank Dai-Chi Life Japan
TATA Group AIG USA
HDFC Ltd. Ergo International AG Germany
IFFCO Tokio Marine and Nichido Fire Group Japan
Max India Ltd. Bupa UK

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INSURANCE
Q.1. Which of the following types of companies/
organisations issue ULIP?
(1) Insurance companies
(2) Banks
(3) NABARD
(4) RBI
(5) All of these
Q.2. If an insurance policy holder is not satisfied with
the award of the insurance ombudsman, he / she can
approach to__?
(1) Courts of law
(2) Consumer forums
(3) Either 1 or 2
(4) The award of insurance ombudsman can not be
challenged
(5) Govt
Q.3. Which one of the following is the example of
Insurance depositories?
(1) Central Insurance Repository Limited (CIRL)
(2) Karvy Insurance repository Limited
(3) NSDL Database Management Limited
(4) All of these
(5) None of these
Q.4. Which of the following is correct full form of IGMS
with reference to insurance sector?
(1) Integrated Grievance Management System
(2) Internal Grievance Management System
(3) Important Grievance Management System
(4) Integral Grievance Management System
(5) Insurance Grievance Management System
Q.5. Which Insurance policy gives holder the benefits of
both Insurance and Investment?
(1) Term Insurance Policies
(2) Money-back Policies
(3) Unit-linked Investment Policies
(4) Pension Policies
(5) Reinsurance Policies
Q.6. Which of the following cannot be ensured?
(1) Property (both movable and immovable)
(2) Result of any competition
(3) liability towards others
(4) dishonesty
(5) cash
Q.7. Select the correct statement from the following:
(A) Premium is the fixed amount of sum paid over
the period by the insured to the insurance company
to take insurance policy and to complete the contract
of insurance.
(B) Underwriting is the consideration of material
fact to asses the risk and to take the decision whether
to accept the risk for insurance contract and if so at
what rate of premium.
(C) Reinsurance is an arrangement by which
insurance companies spread their risk with other
underwriters or reinsurance companies called
Reinsurance.
(D) Deductible is the amount, which the insured has
to bear in all cases and this amount is first, deducted
from the total assessed payable claims amount before
determining insurance company’s liability.
(1) A, B & C (2) A, B & D
(3) A, C & D (4) B, C & D
(5) All are correct
Q.8. FPR stands for:
(1) Final Proposal Report
(2) First Proposal Report
(3) First Premium Receipt
(4) Final Premium Receipt
(5) None of the above
Q.9. Who is responsible to bear the cost of Medical
Checkups when the person for whom the policy
have been applied?
(1) Insurance Company
(2) the person for whom the policy have been applied
(3) Proposer
(4) The Sales Officer
(5) any of the above
Q.10. Select the correct statement in respect to Marine
Insurance:
(A) It coveres the goods in transit from one place to
another through Sea
(B) It coveres the goods in transit from one place to
another through Rail & Road
(C) It coveres the goods in transit from one place to
another through Air
(D) It does not covere the goods in transit from one
place to another through a any possible combination
of Sea, Rail, Road and Air.
(1) A, B & C (2) A, B & D
(3) A, C & D (4) B, C & D

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(5) All are correct (5) Actuarial science is used to decide the rate of
Q.11. Which ofthe following works as Re-Insurer in India? premium for both Life and Non- Life insurance.
(1) National Insurance Co. Ltd. Q.16. The concept of indemnity is based on the key
principle that policyholders should be prevented
(2) The Oriental Insurance Co. Ltd.
from.
(3) General Insurance Corporation of India
(1) Making false insurance claims.
(4) Export Credit Guarantee Corporation of India
(2) Insuring existing losses.
Ltd.
(3) Paying excessively for insurance cover.
(5) The New India Assurance Co. Ltd.
(4) Profiting from insurance
Q.12. IRDAI was incorporated as a statutory body on -
(5) None of these
(1) 06 January 2000 (2) 01 April 1999
Q.17. Which among the following is a non-traditional life
(3) 19 April 1999 (4) 01 April 2000
insurance product?
(5) 19 April 2000
(1) Endowment insurance
Q.13. Insurance works on the principal of Indemnity it
(2) General insurance
means:
(3) Whole life insurance
(1) Under this insurance contract both the parties
should have faith over each other. As a client it is (4) Term assurance
the duty of the insured to disclose all the facts to the (5) None of these
insurance company. Any fraud or misrepresentation Q.18. Under what circumstances would the policyholder
of facts can result into cancellation of the contract. need to appoint an appointee?
(2) That an insured may not be compensated by (1) Policyholder is a Politician.
the insurance company in an amount exceeding the
(2) Insured is minor
insured’s economic loss.
(3) Nominee is a minor
(3) Under this principle of insurance, the insured
must have interest in the subject matter of the (4) Policyholder is in Army
insurance. Absence of interest makes the contract (5) None of these
null and void. Q.19. IRDAI stands for __________.
(4) It enables the insured to claim the amount from (1) Issuance Regulatory & Development Authority
the third party responsible for the loss. It allows of India.
the insurer to pursue legal methods to recover the (2) International Regulatory & Development
amount of loss. Authority of India.
(5) None of the above (3) Indian Regulatory & Development Authority of
Q.14. Which of the following is covered under General India.
Insurance: (4) Income Regulatory & Development Authority
(1) Term Plans (2) ULIPs of India.
(3) Mediclaim Policies (4) 2 and 3 both (5) Insurance Regulatory & Development Authority
(5) None of the above of India.
Q.15. Slect the wrong satetement from the following: Q.20. Which of the below party is not eligible to enter into
(1) Insurance follow the ‘Law of Large Numbers’ a life insurance contract?
(2) Principal of ‘Probability’ is required to followed. (1) Business owner
(3) The Principal of Subrogation is applicable to (2) House wife
Life Insurance only. (3) Government employee
(4) General Isurance has wider scope and penetration (4) Private employee
in India as compared to Life Insurance. (5) Minor

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

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MISCELLANEOUS

{{ LIST OF ABBREVIATIONS
{{ International Organizations 
{{ International organization and member country
{{ List of Sports Terms
{{ List of Cups And Trophies
{{ BOOKS AND AUTHORS
{{ State/Union Territory capital
{{ Missile
{{ CENSUS 2011
{{ MAJOR CLASSICAL DANCE FORMS OF INDIA
{{ IMPORTANT FINANCIAL ORGANIZATIONS IN INDIA & THEIR
HEADQUARTERS
{{ Question & Answer

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

List Of Abbreviations DBS Department of Banking Supervision,

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

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GDR Global Depository Receipt NSC National Statistical Commission
GIC General Insurance Corporation NSC National Saving Certificate
G-Sec Government Securities NSSF National Social Scurity Fund
HDFC Housing Development Finance Corporation OD Over Draft
HFT Held For Trading OECD Organization for Economic Cooperation
HTM Held to Maturity and Development
HUDCO Housing & Urban Development Corporation OECO Organization for Economic-operation
IBRD International Bank for Reconstruction OLTAS Online Tax Accounting System
and Development OMO Open Market Operations
IBS International Banking Statistics PACS Primary Agriculture Credit Societies
IDBI Industrial Development Bank of India PD Primary Deficit
ICICI Industrial Credit and Investment Corporation PDAI Primary Dealers Association of India
of India PDs Primary Dealers
IFC International Finance Corporation PDS Public Distribution System
IIBI Industrial Investment Bank of India PIO Persons of Indian Origin
IIP Index of Industrial Production PNB Punjab National bank
IIP/InIP International Investment Position PSE Public Sector Enterprise
IMF International Monetary Fund PUC Paid Up Capital
IRBI Industrial Reconstruction Bank of India PUC Pro University Courses
ISO International Organization for Standardization RBI Reserve Bank of India
KVIC Khadi & Village Industries Commission REER Real Effective Exchange Rate
LAF Liquidity Adjustment Facility RIDF Rural Infrastructure Development Fund
LAMPS Large-sized Adivasi Multipurpose RNBC Residuary Non-Banking Company
Societies
RWA Risk Weighted Asset
LERMS Liberalised Exchange Rate Management
SCARDB State Cooperative Agriculture and Rural
System
Development Bank
LIC Life Insurance Corporation of India
SCB State Cooperative Bank
MIGA Multilateral Investment Guarantee Agency
SCB Scheduled Commercial Bank
MSS Market Stabilisation Scheme
SCB Standard Chartered Bank
NABARD National Bank for Agriculture and Rural
SDR Special Drawing Rights
Development
SEBI Securities and Exchange Board of India
NASSCOM National Association of Software and
Services Companies SGL Subsidiary General Ledger
NBFC Non Banking Financial Company SGSY Swarnajayanti Gram Swarojgar Yojana
NEER Nominal Effective Exchange Rate SHGs Self-Help Groups
NGO Non-Governmental Organization SIDBI Small Industries Development Bank of
India
NHB National Housing Bank
SJSRY Swarna Jayanti Shahari Rojgar Yojana
NPV Net Present Value
SSI Small-Scale Industries
NR(E)RA Non-Resident (External) Rupee Account
UCB Urban Cooperative Bank
NR(NR)RA Non-Resident (Non-Repatriable) Rupee
Account UTI Unit Trust of India
NRE Non-Resident External VC Venture Capital
NRG Non-Resident Government WPI Wholesale Price Index
NRI Non-Resident Indian YTM Yield to Maturity

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

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

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IBSA 3 India, Brazil, and South Africa
Commonwealth Country which has The Queen as Sovereign, while ‘monarchy’ Indicates a
53
Commonwealth country
NATO Belgium, Canada, Denmark, France, Iceland, Italy, Luxembourg, Neatherlands,
Norway, Portugal, United Kingdom, United States, Greece, Turkey, Germany,
28
Spain, Czech Republic, Hungary, Poland, Bulgaria, Estonia, Latvia, Lithuania,
Romania, Slovakia, Slovenia, Albania, Croatia.
ARAB LEAGUE Algeria, Bahrain, the Comoros Islands, Djibouti, Egypt, Iraq, Jordan, Kuwait,
22 Lebanon, Libya, Morocco, Mauritania, Oman, Palestine, Qatar, Saudi Arabia,
Somalia, Sudan, Syria, Tunisia, the United Arab Emirates, and Yemen.
ARAB PETROLEUM Algeria, Bahrain, Egypt, Iraq, Kuwait, Libya, Qatar, Saudi Arabia, Syria, United
11
Arab Emirates and Tunisia.

List of Sports Terms

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

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List of Cups And Trophies

Sport Cups and Trophies
Hockey Aga khan Cup, Begam Rasul Torphy (woman’s), Maharaja Ranjit Singh Gold Cup, Lady Ratan
Tata Trophy (woman’s), Gurunanak Championship (woman’s) Dhyanchand Trophy, Nehru Trophy,
Sindhia Gold cup, Murugappa Gold Cup, Wellington Cup etc,
Football Begum Hazarat Mahal Cup, BILT Cup, Bordoloi Trophy Colombo Cup, Confederation cup, DCM
Trophy, Durand Cup, Rovers Cup, B.C. Raj Trophy (National Championship), FIFA world Cup, Jules
Rimet Trophy, Kalinga Cup, Santosh Trophy (National Championship), IFA Shield, Scissor Cup,
Subroto Mukherjee Cup, Sir Ashutosh Mukherjee Trophy, Todd Memorial Trophy, Vittal Trophy, etc,
Cricket Anthony D, Mellow Trophy, Ashes, Asia Cup, Benson and Hedges Cup, Bose Trophy, Champions
Trophy, Charminar Challenger Cup, C.K Naidu Trophy, Cooch – Behar Trophy, Deodhar Trophy,
Duldeep Trophy, Gavaskar –Border Trophy, G.D. Birla Trophy, Gillette Cup, Ghulam Ahmad
Trophy, Hamkumat Rai Trophy, ICC World Cup, Irani Trophy Interface Cup, Jawaharlal Nehru Cup,
Lomboard World Challenge Cup, Mc Dowells Challenge Cup, Merchant Cup, Moin –ud –Dowla
Cup, Net West Trophy, Prudential Cup(World Cup), Rani Jhansi Trophy, Ranji Trophy, Rohinton
Barcia Trophy, Rothmans Cup, Sahara Cup, Sharjah Cup, Sheesh Mahal Trophy, Sheffield Shield,
Singer Cup, Sir Frank Worrel Trophy, Texaco Cup, Titan Cup, Vijay Hazare Trophy, Vijay Merchant
Trophy, Vizzy Trophy, Wisden Trophy, Wills Trophy, World Series Cup.
Table Tennis Berna Bellack cup( Men), Cobillion Cup (women), Jai Laxmi cup(women),Rajkumari Challenge
Cup (women junior), Ramanuja Trophy (men Junior), Travancore Cup (women), Swathling Cup
(men) etc.
Badminton Aggrawal Cup, Amrit Diwan Cup, Asia Cup, Australasia Cup, Chaddha Cup, European Cup, Harilela
Cup, Ibrahim Rahimatillah Challenger Cup, Konica Cup, Sophia Cup, Kitiakara Cup, Thomas Cup
Tunku Abdulrahman Cup, Uber Cup, Yonex Cup etc.
Basketball Basalat Jha Trophy, B.C. Gupta Trophy, Federation Cup, S.M. Arjun Raja Trophy, Todd memorial
Trophy, William jones Cup, Bangalore Bules Challenge Cup, Nehru Cup, Federation Cup etc.
Bridge Basalat Jha Trophy, Holkar Trophy, Ruia Gold Cup, Singhania Trophy. etc
Polo Ezra Cup, Gold Cup, King’s Cup, Prithi Pal Singh Cup, Radha Mohan Cup, Winchester Cup etc.
Athletics Charminar Trophy, Federation Cup etc.
Air Racing Jawaharlal Challenge Trophy, King’s Cup, Schneider Cup etc.
Billiards Arthur Walker Trophy, Thomas Cup etc.
Boxing Aspy Adjahia Trophy, Federations Cup,Val Baker Trophy etc.
Golf Canada Cup, Eisenhower Trophy, Muthiah Gold Cup, Nomura Trophy, President ‘s Trophy, Prince
of wales Cup, Ryder Cup, Solheim Cup, Topolino Trophy, Walker Cup, World Cup etc.
Chess Naidu Trophy, Khaitan Torphy , Lin Are City Trophy, World Cup etc.
Horse Racing Beresford Cup, Blue Riband Cup, Derby, Grand National Cup etc.
Netball Anantrao Pawar Trophy etc.
Rugby Football Bledisloe Cup, Calcutta Cup, Webb Ellis Trophy, etc.
Shooting North Wales Cup, Welsh Grand Prix etc.
Volleyball Centennial Cup, Federation Cup, and Indira Pradhan Trophy, Shivanthi Gold Cup, etc.
Yatch Racing America Cup etc.

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State/Union Territory capital
 S.No. State Capital

1 Andhra Pradesh Hyderabad

2 Arunachal Pradesh Itanagar

3 Assam Dispur

4 Bihar Patna

5 Goa Panaji

6 Chhattisgarh Raipur

7 Gujarat Gandhinagar

8 Haryana Chandigarh

9 Himachal Pradesh Shimla 

10 Jharkhand Ranchi

11 Karnataka Bengaluru

12 Kerala Thiruvananthapuram

13 Madhya Pradesh Bhopal

14 Maharashtra Mumbai

15 Manipur Imphal

16 Meghalaya Shillong

17 Mizoram Aizawl

18 Nagaland Kohima

19 Odisha Bhubaneswar

20 Punjab Chandigarh

21 Rajasthan Jaipur

22 Sikkim Gangtok

23 Tamil Nadu Chennai

24 Telangana Hyderabad

25 Tripura Agartala

26 Uttar Pradesh Lucknow

27 Uttarakhand Dehradun

28 West Bengal Kolkata

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Union Territory Capital
1 Andaman and Nicobar Islands Port Blair

2 Chandigarh Chandigarh

3 Dadra and Nagar Haveli & Daman and Diu Daman

4 Ladakh Leh

5 Delhi New Delhi

6 Lakshadweep Kavaratti

7 Puducherry Puducherry

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

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

Nirbhay Land, Naval, Air 1000 Km

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

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

It is the 7th Census of Independent India

Tag line of Census 2011 – Our Census Our Future

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

India is the Second Most Populous Country in the World

Every 6th Person in the World is an Indian.

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

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

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

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

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

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

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

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

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

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

Bhiwandi (Maharashtra) has lowest Sex Ratio of 709 female per 1000 males.

Aizawl (Mizoram) has highest literacy rate city with 98.40%.

Sambhal (Uttar Pradesh) is the least literacy city with 48.20%.

Maharashtra is having 18 cities with more than 5 lakh population

POPULATION 2011 PERCENTAGE DECADAL CHANGE

TOTAL RURAL URBAN TOTAL RURAL URBAN

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

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

TOTAL MALE FEMALE

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

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India Urban Population (%) Rural Population (%)

  31.20% 68.80%

Highest Population – State Uttar Pradesh (19.98 Crore)

Lowest Population – State Sikkim (6.10 Lakhs)

Highest Population – UT New Delhi (1.67 Crore)

Lowest Population – UT Lakshadweep (64 Thousand)

Highest Urban Population- State Maharashtra (5.08 Crore)

Lowest Urban Population - State Sikkim (1.53 Lakh)

Highest Rural Population – State Uttar Pradesh ( 15.53 Crore)

Lowest Rural Population – State Sikkim (4.5 Lakhs)

Density Of Population [Per Sq. Km]

Density Of Population – India 382

Bihar (1106)
Highest Density – State

Lowest Density – State Arunachal Pradesh (17)

Highest Density – UT New Delhi (11,320)

A & N Islands (46)
Lowest Density – UT
Sex Ratio [No. Of Female Per 1000 Males]
Sex Ratio – India 943

Highest Sex Ratio – State Kerala (1084)

Lowest Sex Ratio – State Haryana (879)

Highest Sex Ratio – UT Puducherry (1037)

Daman & Diu (618)
Lowest Sex Ratio – UT

Child Population (0-6 Years)

16.44 Crore (15.9% of Total Population)
Child Population (0-6 Years) – India
Uttar Pradesh (3.07 Crore)
Highest Child Population – State

Lowest Child Population – State Sikkim (64 Thousand)

Highest Child Population – UT Delhi (20 Lakhs)

Lakshadweep (7 Thousand)
Lowest Child Population – UT

Child Sex Ratio - India 919

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Scheduled Caste Population
INDIA SC POPULATION DECADAL CHANGE % OF SC

  20,13,78,086 20.80% 16.60%

Highest SC Population – State Uttar Pradesh (4.13 Crore)

Lowest SC Population – State Mizoram (1280)

SCHEDULED TRIBE POPULATION

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

Highest ST Population – State Madhya Pradesh (1.53 Crore)

Lowest ST Population – State Goa (1.5 Lakhs)

Literates & Literacy Rate (Age 7 Years & Above)

LITERACY RATE %

INDIA TOTAL LITERATES TOTAL RURAL URBAN

  76,34,98,517 74.04% 68.90% 85.00%

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

Highest Literacy Rate – UT Lakshadweep (92%)

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

Religious Demographics
RELIGION % OF TOTAL POPULATION

Hindus 78.35%

Muslims 14.20%
Christians 2.30%
Sikhs 1.90%

Buddhists 0.80%
Jains 0.40%

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Linguistic Demographics

LANGUAGE % OF TOTAL POPULATION

Hindi 41.03%

Bengali 8.11%

Telugu 7.19%

Marathi 6.99%
Tamil 5.91%

Number of States/UT 35

Number of Districts 640

Number of Statutory Towns 4041

Number of Villages 6,40,930

Major Classical Dance Forms of India

S.NO. CLASSICAL DANCE FORM STATE OF ORIGIN

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

Major Folk Dance Forms Of India

S.NO. FOLK DANCE FORM STATE OF ORIGIN

1 Bhangra Punjab

2 Charkula Uttar Pradesh

3 Dhandiya Raas Gujarat

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4 Garba Gujarat

5 Bihu Assam

6 Giddha Punjab

7 Thirayattam Kerala

8 Tutsa Naga Arunachal Pradesh

9 Yakshagana Karnataka

10 Jhumar Punjab

11 Rasiya Uttar Pradesh

12 Gombhira West Bengal

13 Raibenshe West Bengal

14 Dhali Tamil Nadu

15 Kummi Kerala

16 Kikkli Punjab

17 Cheraw Mizoram

18 Bagurumba Asom

19 Panthi Chhattisgarh

20 Dhimsa Odisha

List Of Famous Classical Dancers

S.NO. NAME OF THE DANCER DANCE FORM

1 Mallika Sarabhai Kuchipudi & Bharatanatyam

2 Pt. Birju Maharaj Kathak

3 Rukmini Devi Arundale Bharatanatyam

4 Shovana Narayan Kathak

5 Sonal Mansingh Bharatanatyam, Kuchipudi & Chhau

6 Yamini Krishnamurthy Kuchipudi & Bharatanatyam

7 Raja Reddy & Radha Reddy Kuchipudi

8 Shambhu Maharaj Kathak

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9 Sitara Devi Kathak

10 Kalamandalam Ramankutty Nair Kathakali

11 Kalamandalam Gopi Kathakali

12 Madavoor Vasudevan Nair Kathakali

13 Kelucharan Mahapatra Odissi

14 T Chinnammu Amma Mohiniyattam

15 Kalamandalam Sugandhi Mohiniyattam

16 Indira P Bora Sattriya

17 Maniram Datta Moktar Sattriya

FOREIGN DIRECT INVESTMENT

Foreign Direct Investment Is Prohibited In Following Sectors
Lottery Business Gambling and Betting

Chit funds Nidhi company

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

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

Sector FDI Limit Entry Route

Agriculture & Animal Husbandry
a) Floriculture, Horticulture, and Cultivation
of Vegetables & Mushrooms under controlled
conditions
b) Development and Production of seeds and 100% Automatic
planting material
c)Animal Husbandry (including breeding of dogs),
Pisciculture, Aquaculture, Apiculture.
d) Services related to agro and allied sectors
Plantation Sector
(i) Tea sector including tea plantations
(ii) Coffee plantations
(iii) Rubber plantations 100% Automatic
(iv) Cardamom plantations
(v) Palm oil tree plantations
(vi) Olive oil tree plantations

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Mining and Exploration of metal and non-metal ores 100% Automatic

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

Domestic Scheduled Passenger Airline NRIs) Government route beyond

49%
(ii) Regional Air Transport Service

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Air Transport Services 100% Automatic
(i) Non-Scheduled Air Transport Services
(ii) Helicopter services/seaplane services
requiring DGCA approval
Civil Aviation - Ground Handling Services 100% Automatic
Civil Aviation -Maintenance and Repair organizations
Construction Development: Townships, Housing, Built-up 100% Automatic
Infrastructure
Industrial Parks -new and existing 100% Automatic
Satellites- establishment and operation 100% Government
Private Security Agencies 74% Automatic up to 49% Government
route beyond 49% and up to 74%
Telecom Services 100% Automatic up
to 49%
Government
route beyond
49%
Trading Cash & Carry Wholesale Trading/Wholesale Trading 100% Automatic
(including sourcing from MSEs)
E-commerce activitie 100% Automatic
Single Brand product retail trading 100% Automatic up to 49%
Government route
beyond 49%
Multi Brand Retail Trading 51% Government
Duty Free Shops 100% Automatic
Railway Infrastructure 100% Automatic
Asset Reconstruction Companies 100% Automatic
Banking- Private Sector 74% Automatic up to 49% Government
route beyond 49% and up to 74%.
Banking- Public Sector 20% Government
Credit Information Companies 100% Automatic
Infrastructure Company in the Securities Market 49% Automatic
Insurance 49% Automatic
Pension Sector 49% Automatic
Power Exchanges 49% Automatic
White Label ATM Operations 100% Automatic
Pharmaceuticals - Greenfield 100% Automatic
Pharmaceuticals - Brownfield 100% Automatic up to 74%
Government route beyond 74%

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

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Important Financial Organizations In India & Their Headquarters
NAME OF THE ORGANIZATION ESTD. HEADQUARTERS
Reserve Bank of India RBI 1935 Mumbai

Securities & Exchange Board of India SEBI 1988 Mumbai

State Bank of India SBI 1955 Mumbai

Life Insurance Corporation of India LIC 1956 Mumbai

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

National Bank for Agriculture & Rural Development NABARD 1982 Mumbai

Export Import Bank of India EXIM 1982 Mumbai

Export Credit Guarantee Corporation ECGC 1957 Mumbai

Deposit Insurance & Credit Guarantee Corporation DICGC 1978 Mumbai

The New India Assurance Company Limited NIACL 1919 Mumbai

National Payments Corporation of India NPCI 2008 Mumbai

Banking Codes & Standards Board of India BCSBI 2006 Mumbai

Credit Information Bureau of (India) Limited CIBIL 2000 Mumbai

Credit Rating Information Services of India Limited CRISIL 1987 Mumbai

Bombay Stock Exchange BSE 1875 Mumbai

National Stock Exchange NSE 1992 Mumbai

Metropolitan Stock Exchange (MCX Stock Exchange) MSE 2008 Mumbai

Multi Commodity Exchange MCX 2003 Mumbai

National Securities Depository Limited NSDL 1996 Mumbai

Central Depository Services Limited CDSL 1998 Mumbai

Asset Reconstruction Company (India) Limited ARCIL 2002 Mumbai

Indian Railway Finance Corporation IRFC 1987 Mumbai

Credit Analysis & Research Limited CARE 1993 Mumbai

SME Rating Agency of India SMERA 2005 Mumbai

Unit Trust of India UTI 1964 Mumbai

Industrial Development Bank of India IDBI 1964 Mumbai

Industrial Credit Investment Corporation of India ICICI 1955 Mumbai

Pension Fund Regulatory & Development Authority PFRDA 2003 New Delhi

National Housing Bank NHB 1988 New Delhi

Micro Units Development & Refinance Agency Bank MUDRA Bank 2015 New Delhi

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Agriculture Insurance Company AIC 2002 New Delhi

Employees Provident Fund Organization EPFO 1952 New Delhi

Employee State Insurance Corporation ESIC 1952 New Delhi

The Oriental Insurance Company Limited OICL 1947 New Delhi

Power Finance Corporation PFC 1986 New Delhi

Industrial Financial Corporation of India IFCI 1948 New Delhi

Investment Information & Credit Rating Agency ICRA 1991 New Delhi

Security Printing & Minting Corporation of India SPMCIL 2006 New Delhi

United India Insurance Company Limited UIIC 1938 Chennai

Infrastructure Development Finance Company IDFC 1997 Chennai

Insurance Regulatory & Development Authority of India IRDAI 2000 Hyderabad

National Insurance Company Limited NICL 1906 Kolkata

Small Industries Development Bank of India SIDBI 1990 Lucknow

Bharatiya Reserve Bank Note Mudran Pvt. Limited BRBNMPL 1995 Bengaluru

Public Sector Banks In India

Name Of The Bank Estd. Headquarters Tagline / Slogan

State Bank Group

The banker to every Indian

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

Nationalised Banks
1ST PHASE

Bank of India 1906 Mumbai Relationship beyond Banking

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

Union Bank of India 1919 Mumbai Good people to bank with

Bank of Maharashtra 1935 Pune Ek parivar, Ek bank

Canara Bank 1906 Bengaluru Together we can

Syndicate Bank 1925 Manipal Faithful & friendly

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

Indian Overseas Bank 1937 Chennai Good people to grow with

Indian Bank 1907 Chennai Your own bank

Allahabad Bank 1865 Kolkata A tradition of trust

UCO Bank 1943 Kolkata Honours your trust

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

Bank of Baroda 1908 Vadodara India’s international bank

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

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

Andhra Bank 1923 Hyderabad Where India banks

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

Old Private Sector Banks

City Union Bank 1904 Kumbakonam Trust & excellence since 1904

Lakshmi Vilas Bank 1926 Chennai The changing face of prosperity

Karur Vysya Bank 1916 Karur Smart way to bank

Tamilnad Mercantile Bank 1921 Tuticorin Be a step ahead of life

Catholic Syrian Bank 1920 Trissur Support all the way

South Indian Bank 1929 Trissur Experience next generation banking

Dhanlakshmi Bank 1927 Trissur Tann. Mann. Dhan.

Federal Bank 1945 Kochi Your perfect banking partner

Karnataka Bank 1924 Mangalore Your family bank across India

Jammu & Kashmir Bank 1938 Srinagar Serving to empower

Nainital Bank 1922 Nainital -

RBL Bank Ltd 1943 Kolhapur Apno ka bank

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New Private Sector Banks

Axis Bank (UTI Bank) 1994 Mumbai Badhti ka nam zindagi
ICICI Bank 1994 Mumbai Hum hain naa! / Khayaal aapka
We understand your world /
HDFC Bank 1994 Mumbai
Bank aapki mutthi mein
Kotak Mahindra Bank 1985 Mumbai Let’s make money simple
IndusInd Bank 1994 Mumbai We make you feel richer
Yes Bank 2004 Mumbai Experience our expertise
DCB Bank 1930 Mumbai We value you
Bandhan Bank 2015 Kolkata Aapka bhala, Sabki bhalai
IDFC First Bank 2015 Mumbai The bank of now / Always You First
IDBI 1964 Mumbai Bank Aisa Dost Jaisa/Banking For All

Top Foreign Banks In India

Name Of The Foreign Bank Country Tagline

Citi Bank USA The citi never sleeps

BNP Paribas France The Bank for the changing world

HSBC Bank UK The world’s local bank

Standard Chartered Bank UK Your right partner

DBS Bank Singapore Living, breathing Asia

Barclays Bank UK Fluent in finance

Deutsche Bank Germany A passion to perform

Institutions Established By Financial Regulators

Name of The Institution Estd By. Location

National Institute of Bank Management NIBM RBI Pune

Institute for Development & Research in Banking Technology IDRBT RBI Hyderabad

Indira Gandhi Institute of Development Research IGIDR RBI Mumbai

Centre for Advanced Financial Research and Learning CAFRAL RBI Mumbai

National Institute of Securities Market NISM SEBI Mumbai

National Insurance Academy NIA IRDAI Pune

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

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