By : Basava Uppin

By : Basava Uppin
By : Basava Uppin
 Practice MCQ By : Basava Uppin
Practice MCQ
Consider the following statements: Which among the following is/are not the likely effects of Privatisation
1. The Public Sector Banks (PSBs) do not require license from of Public Sector Banks (PSBs)?
the RBI for their operations. 1. Hurt Financial Inclusion
2. The Public sector Banks are regulated by the RBI under the 2. Make Indian Economy more immune to global external shocks.
Bank Nationalisation Acts. 3. Increase financial burden on Government

Which among the statements given above is/are correct? Select the correct answer using the code given below:
(a) 1 only (a) 1 only
(b) 2 only (b) 2 and 3 only
(c) Both 1 and 2 (c) 3 only
(d) Neither 1 nor 2 (d) 1 and 2 only

Practice MCQ
Consider the following statements related to Public Sector Banks in India:
1. The Public Sector Banks are under dual regulation of both RBI and
Government.
2. The Bank Nationalization Acts require the Government to hold majority
ownership in the Public Sector Banks.

Which among the statements given above is/are correct?

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
 By : Basava Uppin
Practice MCQ Practice MCQ
Consider the following statements related to Alternative Which among the following arguments can be put forward in
Mechanism (AM) which has been set up for the merger of the the favour of issuing Banking licenses to Large
Public Sector Banks in India: Industrial/Corporate houses?
1. The Alternative Mechanism is an institutional mechanism 1. Indian Economy would be less prone to external shocks.
which has been set up to give the final approval for the merger 2. Lead to Inter-connected lending
of the Public Sector Banks in consultation with RBI. 3. Improve Credit-GDP ratio
2. The Alternative Mechanism is headed by Union Finance
Minister. Select the correct answer using the code given below:
(a) 1 only
Which of the statements given above is/are correct? (b) 1 and 2 only
(a) 1 only (c ) 3 only
(b) 2 only (d) 1, 2 and 3
(c) Both 1 and 2
(d) Neither 1 nor 2
 By : Basava Uppin

Prelims 2019 Prelims 2022

The Chairman of public sector banks are selected by
the
(a) Banks Board Bureau
(b) Reserve Bank of India
(c) Union Ministry of Finance
(d) Management of concerned bank
With reference to the ‘Banks Board Bureau (BBB)’, which of
the following statements are correct?
1. The Governor of RBI is the Chairman of BBB.
2. The BBB recommends for the selection of heads for
Public Sector Banks.
3. The BBB helps the Public Sector Banks in developing
strategies and capital raising plans.

Select the correct answer using the code given below:

(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
By : Basava Uppin
 By : Basava Uppin
Details about Financial Services Institutions Bureau (FSIB)
Establishment Non-Statutory body under Nationalised Banks (Management and Miscellaneous Provisions) Scheme.
Nodal Department Department of Financial Services, Ministry of Finance.
Functions: • Recommend persons for appointment as whole-time directors (WTDs) and non-executive chairpersons (NECs)
on the Boards of Directors in Public Sector Banks (PSBs), Public Sector insurance companies (PSIs) and
selected financial institutions (FIs) such as NABARD, NHB, SIDBI, EXIM, IFCI, IIFCL etc.
• Advise the Government on matters relating to appointments, transfer or extension of term of office and
termination of services of the said directors.
• Advise the Government on the desired management structure at the Board level for PSBs, FIs and PSIs;
• Advise the Government on a suitable performance appraisal system
• Build a databank containing data related to the performance of PSBs, FIs and PSIs
• Advise the Government on formulation and enforcement of code of conduct and ethics for whole-time
directors in PSBs, FIs and PSIs;
• Advise the Government on evolving suitable training and development programmes for management
personnel in PSBs, FIs and PSIs;
• To help PSBs, Fls and PSIs in terms of developing business strategies and capital raising plan etc.
Composition 11 Members (All the Members including the Chairman are part time members)
• Chairperson
• 4 Ex-officio persons: Secretary, Department Financial Services + Secretary, Department of Public Enterprises +
Deputy Governor, Reserve Bank of India + Chairperson of the Insurance Regulatory and Development
Authority of India (IRDAI)
• 3 Expert Members in field of Banking and Financial Institutions
• 3 Expert Members in field of Insurance.
 By : Basava Uppin
Practice MCQ
With respect to Financial Services Institutions Bureau (FSIB),
consider the following statements:
1. The FSIB has been set up to recommend names of heads of
Nationalised Banks, Public sector insurance companies and
selected financial institutions.
2. Unlike the Banks Board Bureau (BBB), the FSIB has been set
up as a statutory body through an act of Parliament.
3. The FSIB functions under the Reserve Bank of India (RBI).

Which among the statements given above is/are correct?

(a) 1 only
(b) 2 and 3 only
(c) 3 only
(d) 1 and 3 only
 By : Basava Uppin
Salient Features of Integrated Ombudsman Scheme
Coverage • All Scheduled Banks + Non-Scheduled Primary (Urban) Co-operative Banks with deposits size of
Rupees 50 crore and above.
• NBFCs (excluding Housing Finance Companies) which (a) are authorised to accept deposits; or (b)
have customer interface, with an assets size of Rupees 100 crore.
• Payment system operators such as Paytm, Phonepe, TReDS platform etc.
Grounds on which complaints Deficiency in services provided by above entities
can be filed
Mode for registering complaints Centralised Receipt and Processing Centre to be set up by RBI.

Institutional Framework to Ombudsman and Deputy Ombudsman

handle complaints

Limits on compensation payable Rs 20 Lakhs

to Customer
 By : Basava Uppin

Practice MCQ
Which among the following statements related to RBI’s Integrated Ombudsman
Scheme is incorrect?
(a) Under this scheme, customers can file complaints for deficiency in services
provided by financial institutions.
(b) This scheme does not cover NBFCs and payment system operators.
(c) The scheme provides for the limits on the compensation payable to
customer.
(d) The scheme provides for appointment of dedicated Ombudsman by the RBI.
 By : Basava Uppin

Name of the Chapter Terms related to Banking

Relative Importance High
Previous Year • Prelims 2020- Interest Coverage ratio; Non-Financial Debt
Questions • Prelims 2019- Inter Creditor Agreement
• Prelims 2018- Capital Adequacy Ratio
• Prelims 2017- S4A scheme
What to study? • Important Concepts: Categories of NPAs; PCR; Twin Balance Sheet syndrome; Interest
Coverage Ratio; Zombie Firms; D-SIBs etc.
• BASEL III Norms: Capital Adequacy Ratio; Leverage ratio; Liquidity Coverage Ratio; Capital
Conservation Buffer; Counter Cyclical Capital Buffer
• Measures to reduce NPAs: SARFAESI Act, IBC, Prompt Corrective action etc.
• Important Terms in News: AT-1 Bonds; Wilful Defaulter; Fugitive Economic Offender;
Regulatory Forbearance; Co-Origination of loans, LIBOR, SWIFT etc.
By : Basava Uppin
By : Basava Uppin
By : Basava Uppin
By : Basava Uppin
By : Basava Uppin
By : Basava Uppin
By : Basava Uppin
By : Basava Uppin
By : Basava Uppin
 By : Basava Uppin

Criteria Lost Assets Written off Assets

Included in Balance Yes No
Sheet of Banks
Provisioning Required Yes No
Considered as Asset Loss
Will Banks recover the Yes. Yes.
loan?
By : Basava Uppin
By : Basava Uppin
 By : Basava Uppin

Regulatory Forbearance between 2007-08 to Policy Lessons:

2015
Reality Vs Expectation 1. Regulatory forbearance – emergency medicine
2. Accompanied by restrictions on Zombie lending and
Banks evergreening of loans
3. Conduct AQR immediately after end of forbearance
4. Infuse capital to meet regulatory requirements
Gives loans 5. Improve governance of Banks

Economic Slowdown Promote Growth Turns into NPAs: Higher Losses Restructuring of Zombie Firms
Extend Maturity Period

Low Credit Higher Credit Freedom to restructure the NPAs Reduce Principal or
Interest
Covert Debt into Equity
Asset Quality Review
Restructured loans categorized as Standard Assets

Evergreening of Loans
Lower Losses to Banks and Lower Provisioning leading to higher NPAs
 By : Basava Uppin
Practice MCQ Practice MCQ
Which among the following best describes the concept Which among the following best describes the concept of "Special
of Non-Performing Asset (NPA) of a bank? Mention Account (SMA)" introduced by the RBI?
(a) Loan whose principal/Interest is due for a period of (a) NPA of more than Rs 500 crores.
more than 30 days (b) Loans that have defaulted for a period of less than 90 days.
(b) Loan whose principal/Interest is due for a period of (c) NPA of more than Rs 1000 crores.
more than 90 days (d) NPA that has undergone restructuring.
(c) Loan which has been identified as unrecoverable by
Internal auditors
Practice MCQ
(d) Loan which has written off from the balance sheet
With respect to Provisioning Coverage Ratio (PCR), consider the
of the Bank
following statements:
1. Under PCR norms, the banks are required to set aside percentage
Prelims MCQ
of their profits to cover the risk arising from NPAs.
Which among the following is/are Stressed Assets of
2. The PCR norms are applicable only for NPAs and not for standard
the Banks in India?
assets.
1. Non-Performing Assets (NPAs)
2. Restructured Assets
Which of the statements given above is/are correct?
3. Written off Assets
(a) 1 only
(b) 2 only
Select the correct answer using the code given below:
(c) Both 1 and 2
(a) 1 only
(d) Neither 1 nor 2
(b) 1 and 2 only
(c) 1 and 3 only
(d) 1, 2 and 3
 By : Basava Uppin

What is the importance of “Regulatory Forbearance” for a bank to deal with the
Economic crisis?

1. It enables the Bank to undertake restructuring of NPAs.

2. It enables the Bank to treat the restructured assets as Standard Assets rather than
NPAs.

Which of the statements given above is/are correct?

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
 By : Basava Uppin
Recovery of NPAs

Prelims
• Reasons for higher NPAs
• Twin Balance sheet Syndrome
• Zombie firms
• Interest Coverage Ratio
• Evolution in Framework for NPAs- DRTs, SARFAESI etc.
• Asset Reconstruction Companies and Security Receipts
• Wilful Defaulter
• Fugitive Economic Offender
 By : Basava Uppin
WHAT WENT WRONG- AND WHEN?

INDUCED LAUNCH OF NEW

PROJECTS IN INFRASTRUCTURE INCREASE IN THE INVESTMENT
HIGHER GDP GROWTH RATE
AREAS SUCH AS POWER, STEEL TO GDP RATIO TO 38% BY 2008-
DURING 2004-05
ETC 09

CREDIT BOOM IN INDIA DECLINE IN ECONOMIC

(LARGEST IN THE NATION'S GLOBAL FINANCIAL CRISIS GROWTH
HISTORY) (2007-08)
LOWER PROFITS
CREDIT BOOM FINANCED BY DELAY IN LAND AND
DOMESTIC BANKS AS WELL AS ENVIRONMENTAL CLERANCES REDUCED ABILITY TO REPAY THE
FOREIGN LOANS LOANS
 By : Basava Uppin
OTHER REASONS FOR RISING BAD LOANS

Laxity in Credit
Political
risk Appraisal Increase in Lacklustre
Interference in Priority Sector
and Loan Wilful recovery of
working of Lending
Monitoring Defaulters loans by banks
PSBs
By : Basava Uppin
 By : Basava Uppin
Evolution of Framework to deal with NPAs