banking topics misc

8/18/2019 Banking Topics Misc

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Green Bonds : A Few InsightsDear Crusaders,We all are acquainted that Green Bonds are in the news now days. So here, we are rendering you the few insights of it. It a crucial topic from the eam point of !iew, rest assured you are going to get a few questions from this topic in the upcomineams. So go through it meticulously, and "eep yourself a#reast of it.

$limate change affects all of us to some etent. But it is epected to hit de!eloping countries the hardest. Its potentialeffects on temperatures, precipitation patterns, sea le!els, and frequency of weather%related disasters pose ris"s foragriculture, food, and water supplies. At sta"e are recent gains in the fight against po!erty, hunger and disease, and the

li!es and li!elihoods of people in de!eloping countries

Few people ha!e heard of &green #onds&, yet they could #e a way of raising the huge amounts of capital needed to tac"leclimate change and protect our natural world.

'hey could #e critically important, #ut they remain shrouded in mystery and there is a great deal of confusion a#out theireact form and structure. What are they( Are they a way for the go!ernment to #orrow money for green pro)ects( Are theynew sa!ings product for ethical consumers(

'his lac" of clarity is understanda#le and is a direct result of all the different types that ha!e #een recently proposed. 'heycould, in fact, #e all of the following: green gilts, green retail #onds and green in!estment #an" #onds. But, there are manymore #eing proposed as well, including: green infrastructure #onds, *multilateral de!elopment #an" green #onds, greencorporate #onds, green sectoral #onds, rainforest #onds and inde%lin"ed car#on #onds.

All of these different +and sometimes confusing classes of green #ond ha!e an important role in helping to raise finance fodifferent parts of our low%car#on transition.

What are green bonds?

A #ond is a de#t instrument with which an entity raises money from in!estors. 'he #ond issuer gets capital while thein!estors recei!e fied income in the form of interest. When the #ond matures, the money is repaid.

A green bond is very similar. The only difference is that the issuer of a green bond publicly states that capital isbeing raised to fund ‘green’ projects, which typically include those relating to renewable energy, emissionreductions and so on. There is no standard definition of green bonds as of now.

Indian firms li"e Indian -enewa#le nergy /e!elopment Agency 0td and Green"o ha!e in the past issued #onds that ha!e#een used for financing renewa#le energy, howe!er, without the tag of green #onds.

Green #onds are issued #y multilateral agencies such as the World Ban", corporations, go!ernment agencies andmunicipalities. Institutional in!estors and pension funds also ha!e appetite for such #onds. For instance, in!estment fundsBlac"-oc" and 1I2$3 ha!e specific mandates from their in!estors to in!est only in #onds which fund green pro)ects. 'heissuer pro!ides periodic reports a#out the pro)ect.

Reason behind being in the News:

In 2arch, the im Ban" of India issued a fi!e%year 4566 million green #ond, which is India7s first dollar%denominated gree#ond. 'he issue was su#scri#ed nearly 8.9 times. 'he #an" has said it would use the net proceeds to fund eligi#le greenpro)ects in countries including Bangladesh and Sri 0an"a. arlier, in Fe#ruary, es Ban" raised -s ;,666 crore !ia a ;6%ye#ond, which was o!ersu#scri#ed twice.

Importance of it for India:India has em#ar"ed on an am#itious target of #uilding ;.S. and urope.

Budget allocations ha!e #een insufficient. -enewa#le energy is still part of the larger power?infrastructure funding #as"et inmost #an"s, and with most financing going towards coal power pro)ects, there is !ery little funding left for renewa#le energ$urrently, options for raising funds and in!esting in the @renewa#le energy story in the pu#lic mar"ets in India is !erylimited. 'hat7s why green #onds seem li"e a good option.

Still, why are green bonds an attractie option?


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Shantanu aiswal, analyst at Bloom#erg Cew nergy Finance, says, @Green #onds typically carry a lower interest rate thanthe loans offered #y the commercial #an"s. Dence, when compared to other forms of de#t, green #onds offer #etter returnfor an independent power producers, Samuel oseph, $hief General 2anager, 'reasury and Accounts Group, im Ban"of India, says as these #onds are meant for specific in!estors loo"ing to in!est in renewa#le energy pro)ects, pricing could#e attracti!e.

'he #an"7s green #ond was priced at ;=S 'reasuries +whereas, usually, #onds are priced attreasuries plus ;56 #asis points at a fied coupon of 9.H#etween now and 9696. rnst oung estimates though that traditional sources of capital J ranging from utilities through tpro)ect finance and infrastructure funds J can only pro!ide 56%E6#n o!er the net ;5 years.

Issuers of these bonds?

In the period #etween 966< and 96;9, supranational organisations such as the uropean In!estment Ban" and the WorldBan", as also go!ernments, accounted for most of the green #ond issue. Since then, corporate interest has risen sharply.

96;=, #onds issued #y corporations in the energy and utilities, consumer goods, and real estate sectors accounted for athird of the mar"et, according to H12G.

$he ris%s and challenges?

Glo#ally, there ha!e #een serious de#ates a#out whether the pro)ects targeted #y green #ond issuers are green enough.'here ha!e #een contro!ersies too. -euters a few months #ac" reported how acti!ists were claiming that the proceeds ofthe French utility G/F SueK7s 48.= #illion green #ond issue were #eing used to fund a dam pro)ect that hurts the AmaKonrainforest in BraKil.

From an Indian perspecti!e, a challenge of ma"ing in!estors su#scri#e could #e the tenor and rating of green #onds,rec"ons Bloom#erg7s aiswal. @'he downside is that green #onds in India ha!e a shorter tenor period of a#out ;6 years inIndia whereas a typical loan would #e for minimum ;8 years. 'his is less when compared to many international issuances.

All a#out a BACH $A-/

A "an% Card is typically a plastic card issued #y a #an" to its clients that performs one or more of a num#er of ser!ices th

relate to gi!ing the client access to funds, either from the clientLs own #an" account, or through a credit account.

$ards can #e classified on the #asis of their issuance, usage and payment #y the card holder. 'here are three types of

cards

• /e#it $ards

• $redit $ards

• 1repaid $ards

Debit cards


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/e#it cards are issued #y #an"s and are lin"ed to a #an" account.

'he de#it cards are used to withdraw cash from an A'2, purchase of goods and ser!ices at 1oint of Sale +13S?%

commerce +online purchase #oth domestically and internationally +pro!ided it is ena#led for international use. Dowe!er, i

can #e used only for domestic fund transfer from one person to another.

Credit Cards

$redit cards are issued #y #an"s ? other entities appro!ed #y -BI. 'he credit limits sanctioned to a card holder is in the forof a re!ol!ing line of credit +similar to a loan sanctioned #y the issuer and may or may not #e lin"ed to a #an" account.

'he credit cards are used for purchase of goods and ser!ices at 1oint of Sale +13S and %commerce +online purchase?

through Interacti!e Moice -esponse +IM-?-ecurring transactions? 2ail 3rder 'elephone 3rder +23'3. 'hese cards can

used domestically and internationally +pro!ided it is ena#led for international use. 'he credit cards can #e used to withdra

cash from an A'2 and for transferring funds to #an" accounts, de#it cards, credit cards and prepaid cards within the

country.

repaid Cards

1repaid cards are issued #y the #an"s ? non%#an"s against the !alue paid in ad!ance #y the cardholder and stored in such

cards which can #e issued as smart cards or chip cards, magnetic stripe cards, internet accounts, internet wallets, mo#ile

accounts, mo#ile wallets, paper !ouchers, etc.

'he usage of prepaid cards depends on who has issued these cards. 'he prepaid cards issued #y the #an"s can #e used

withdraw cash from an A'2, purchase of goods and ser!ices at 1oint of Sale +13S?%commerce +online purchase and fo

domestic fund transfer from one person to another. Such prepaid cards are "nown as open system prepaid cards. Dowe!e

the prepaid cards issued #y authorised non%#an" entities can #e used only for purchase of goods and ser!ices at 1oint of

Sale +13S?%commerce +online purchase and for domestic fund transfer from one person to another. Such prepaid cards

are "nown as semi%closed system prepaid cards. 'hese cards can #e used only domestically.

'he maimum !alue that can #e stored in any prepaid card +issued #y #an"s and authorised non%#an" entities at any poin

of time is -s ;,66,666?%

'he following types of semi closed pre%paid payment instruments can #e issued #y carrying out $ustomer /ue /iligence a

detailed #y the #an"s and authorised non% #an" entities:

• >p to -s.;6,666?% #y accepting minimum details of the customer pro!ided the amount outstanding at any point oftime does not eceed -s ;6,666?% and the total !alue of reloads during any gi!en month also does not eceed -s;6,666?%. 'hese can #e issued only in electronic form.

• from -s.;6,66;?% to -s.56,666?% #y accepting any Nofficially !alid document7 defined under -ule 9+d of the 120

-ules 9665, as amended from time to time. Such 11Is can #e issued only in electronic form and should #e non%reloada#le in natureO

• up to -s.56,666?% with full H$ and can #e reloada#le in nature. 'he #alance in the 11I should not eceed-s.56,666?% at any point of time.

!omething more to a "an# Card.....

• $ho decides the limits on cash withdrawal or purchase of goods and services through use of a card%


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'he limits on cash withdrawal at A'2s and for purchase of goods and ser!ices are decided #y the issuer #an". Dowe!er, i

case of cash withdrawal at other #an"7s A'2, there is a limit of -s ;6,666?% per transaction. $ash withdrawal at 13S has

also #een ena#led #y certain #an"s wherein, a maimum of -s.;666?% can #e withdrawn daily #y using de#it cards.

• &s the customer charged by his'her ban# when he uses his debit card at other ban#s AT( for withdrawing

cash%

'he sa!ings #an" account customer will not #e charged #y his?her #an" up to f i!e transactions +inclusi!e of #oth financial

and non%financial transactions in a month if he?she uses an A'2 of another #an". Dowe!er, within this o!erall limit of fi!e

free transactions, for transactions done at A'2 of another #an" located in the si metro centres, !iK. 2um#ai, Cew /elhi,$hennai, Hol"ata, Bengaluru and Dydera#ad, the free transaction limit is set to three transactions per month.

• $here should the customer lodge a complaint in the event of a failed AT( transaction )account debited bu

cash not dispensed at the AT(*%

'he customer has to approach his?her #an" +#an" that issued the card to lodge a complaint in the e!ent of a failed A'2

transaction.

• $hat is the time limit for resolution of the complaint pertaining to failed AT( transaction%

'he time limit, for resolution of customer complaints #y the issuing #an"s, is within < wor"ing days from the date of receipt

customer complaint. Dence the #an" is supposed to re%credit the customer7s account within < wor"ing days. For failure to

re%credit the customer7s account within < wor"ing days of receipt of the complaint from the customer, the #an" is lia#le to

pay -s ;66 per day as compensation to the customer.

• $hat is the option for a card holder if his complaint is not redressed by the issuer%

If a complainant does not get satisfactory response from his?her #an" within a maimum period of thirty +86 days from the

date of his lodging the complaint, he?she will ha!e the option to approach the 3ffice of the Ban"ing 3m#udsman +in

appropriate )urisdiction for redressal of his grie!ance.

• +ow are the transactions carried out through cards protected against fraudulent usage%

For carrying out any transactions at an A'2, the card holder has to "ey in the 1IC which is "nown only to him?her forde#it?credit and prepaid cards. Dowe!er, for carrying out transactions at 13S too, the card holder has to "ey%in the 1IC

which is "nown only to the card holder if a de#it card is used. In the case of credit card usage at 13S the requirement of

1IC depends on the #an"s policy on security and ris" mitigation. In the case of e%commerce transactions, additional factor

authentication is applica#le ecept in case of international we#sites.

• $hat are the liabilities of a ban# in case of fraudulent use of a card by unauthorised person%


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In case of card not present transactions -BI has mandated pro!iding additional factor of authentication +if the issuer #an"

and e%commerce merchant #an" is in India. Dence, if a transaction has ta"en place without the additional factor of

authentication and the customer has complained that the transaction is not effected #y her?him, then the issuer #an" shall

reim#urse the loss to the customer without demur.

• &s there anyway a customer can come to #now uic#ly whether a fraudulent transaction has ta#en place

using his'her card%

-BI has #een ta"ing !arious steps to ensure that card payment en!ironment is safe and secure. -BI has mandated #an"s

to send online alerts for all card transactions so that a card holder is aware of transactions ta"ing place on his ? her card.

• $hat is the mandate for ban#s for issuing (agnetic stripe cards or Chip-based cards%

-BI has mandated that #an"s may issue new de#it and credit cards only for domestic usage unless international use is

specifically sought #y the customer. Such cards ena#ling international usage will ha!e to #e essentially 2M $hip and 1in

ena#led. 'he #an"s ha!e also #een instructed to con!ert all eisting 2ag%stripe cards to 2M $hip card for all customerswho ha!e used their cards internationally at least once +for?through e% commerce?A'2?13S.

'he Indian Financial System

The term "fnance" in our simple understanding it is perceived as equivalent to

'Money'.Finance exactly is not money, But it is the source o providing unds or a

particular activity.The ord "system", in the term "fnancial system", implies a set o

complex and closely connected or interlined institutions, agents, practices, mar!ets,transactions, claims, and liailities in the economy. The fnancial system is concerned

aout money, credit and fnance#the three terms are intimately related yet are somehat

di$erent rom each other.

Components/ Constituents of Indian Financial system:

FINANCIAL INSTRUMENTS


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Money Market Instruments

The money mar!et can e defned as a mar!et or short#term money and fnancial assets that are near

sustitutes or money.The term short#term means generally a period upto one year and near sustitutes to

money is used to denote any fnancial asset hich can e quic!ly converted into money ith minimum

transaction cost.

%ome o the important money mar!et instruments are rie&y discussed elo

1 Call /Notice!Money Ma"#et

(all)*otice money is the money orroed or lent on demand or a very short period. +hen money is

orroed or lent or a day, it is !non as (all -vernight Money. /ntervening holidays and)or %unday are

excluded or this purpose. Thus money, orroed on a day and repaid on the next or!ing day, irrespectiv

o the numer o intervening holidays is "(all Money". +hen money

is orroed or lent or more than a day and up to 01 days, it is "*otice Money". *o collateral security is

required to cover these transactions.

$ Inte"!%an# Te"m Money

/nter#an! mar!et or deposits o maturity eyond 01 days is reerred to as the term money mar!et. The

entry restrictions are the same as those or (all)*otice Money except that, as per existing regulations, the

specifed entities are not alloed to lend eyond 01 days.

& T"easu"y %ills

Treasury Bills are short term up to one year orroing instruments o the union government. /t is an /-2 o

the 3overnment. /t is a promise y the 3overnment to pay a stated sum ater expiry o the stated periodrom the date o issue40)056)781 days i.e. less than one year. They are issued at a discount to the ace

value, and on maturity the ace value is paid to the holder. The rate o discount and the corresponding issue

price are determined at each auction.

' Ce"ti(cate of )eposits

(ertifcates o 9eposit (9s is a negotiale money mar!et instrument and issued in dematerialised orm or

as a 2sance :romissory *ote, or unds deposited at a an! or other eligile fnancial institution or a

specifed time period.

* Comme"cial +ape"

(: is a note in evidence o the det oligation o the issuer. -n issuing commercial paper the det oligatio

is transormed into an instrument. (: is thus an unsecured promissory note privately placed ith investors

at a discount rate to ace value determined y mar!et orces.

Capital Ma"#et Inst"uments


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The capital mar!et generally consists o the olloing long term period i.e., more than one year period,

fnancial instruments; /n the equity segment yrid instruments have oth the eatures o equity and deenture. This !ind o instruments is called as

hyrid instruments.


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Bretton Woods 'wins

Bretton woods twins mean the organisations i.e.'he International 2onetary Fund +I2F set up along with the World Ban"after the Second World War to assist in the reconstruction of war%ra!aged countries. 0eaders felt that financial sta#ility was#est achie!ed when countries wor"ed in an en!ironment of interdependence.

'he two organisations were agreed to #e set up at a conference in Bretton Woods in the >S. Dence,they are "nown as theBretton Woods twins.'he Bretton Woods $onference, formally "nown as the >nited Cations 2onetary and Financial

$onference,was the gathering of nited States, to regulate the international monetary and financial order after the conclusion ofWorld War II.'he conference was held from the ;st to 99nd of uly, ;P==. Agreements were eecuted that later esta#lishedthe International Ban" for -econstruction and /e!elopment +IB-/, which is part of todayLs +World Ban" Group and theInternational 2onetary Fund +I2F

IN$+RN'$I-N'( )-N+$'R &0NDI2F was supposed to o!ersee and monitor the economic performance of ;EE mem#er countries and warn them of anyde!eloping economic crisis.If any crisis does de!elop and a country approaches I2F for help, the organisation chal"s out areco!ery plan, which includes imposition of conditions for "eeping the economies on a particular path.

'he organiKationLs o#)ecti!es stated in the Articles of Agreement are:

• promote international economic cooperation,

• international trade,

• employment,

• echange%rate sta#ility including #y ma"ing financial resources a!aila#le to mem#er countries to meet #alance%of%payments needs.

When did India ta%e the I)& bailout pac%age?

'he Indian go!ernment, faced with a #alance of payments crisis in ;PP;, too" a loan and agreed to the reforms process.'he li#eralisation in the economy was partly a concomitant of that need.

'he I2F report is part of its mandate under Article IM of its constitution. 'he fund holds consultations with finance ministrieand central #an"s of each mem#er countries annually for its spring meeting in Washington.

'he decision of the I2F to inter!ene in any country is #ased on the go!erning #oardLs decision. 'he !oting rightsare determined historically #y the economic strength of the countries. India, #ecause of its rapidly growing economic clout,has demanded a re%drawing of the !oting rights, #ut that did not happen at the recent Singapore meeting.Instead, the fundga!e ad hoc !oting right increase to $hina, South Horea, 'ur"ey and 2eico. It has promised a long%term re!ision in anothtwo years.

W-R(D "'N* !R-0#

World Ban" group pro!ides loans to de!eloping countries for capital programs. 'he World Ban" is a component of theWorld Ban" Group, and a mem#er of the >nited Cations /e!elopment Group.'he World Ban"Ls official goal is the reduction of po!erty. According to its Articles of Agreement, all its decisions must #eguided #y a commitment to the promotion of foreign in!estment and international trade and to the facilitation of capitalin!estment.

'he World Ban" should not #e confused with the >nited Cations World Ban" Group, a mem#er of the >nited Cationsconomic and Social $ouncil and a family of fi!e international organiKations that ma"e le!eraged loans to poor countries:

• International Ban" for -econstruction and /e!elopment +IB-/

• International /e!elopment Association +I/A


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• International Finance $orporation +IF$

• 2ultilateral In!estment Guarantee Agency +2IGA

• International $entre for Settlement of In!estment /isputes +I$SI/

International "an% for Reconstruction and DeelopmentIB-/ is an international financial institution which offers loans to middle%income de!eloping countries. 'he IB-/ is the firs

of fi!e mem#er institutions which compose the World Ban" Group and is headquartered in Washington, /.$., >nited StateIt was esta#lished in ;P== with the mission of financing the reconstruction of uropean nations de!astated #y World WarII.Following the reconstruction of urope, the Ban"Ls mandate epanded to ad!ancing worldwide economic de!elopmentand eradicating po!erty. 'he IB-/ pro!ides commercial%grade or concessional financingto so!ereign states to fund pro)ecthat see" to impro!e transportation and infrastructure, education, domestic policy, en!ironmental consciousness, energyin!estments, healthcare, access to food and pota#le water, and access to impro!ed sanitation.

$he International Deelopment 'ssociation 1ID'2 'he I/A is an international financial institution which offers concessional loans and grants to the worldLs poorest de!elopincountries.'he I/A is a mem#er of the World Ban" Group and is headquartered in Washington, /.$., >nited States. It wasesta#lished in ;P6 to complement the eisting International Ban" for -econstruction and /e!elopment #y lending tode!eloping countries which suffer from the lowest gross national income, from trou#led creditworthiness, or from the lowesper capita income.

International &inance Corporation 1I&C2'he IF$ was esta#lished in ;P5 to support the growth of the pri!ate sector in the de!eloping world. 'he IF$7s statedmission is @to promote sustaina#le pri!ate sector in!estment in de!eloping countries, helping to reduce po!erty and impro!people7s li!es.IF$ pro!ides loans and equity financing,ad!ice, and technical ser!ices to the pri!ate sector. 'he IF$ alsoplays a catalytic role, #y mo#iliKing additional capital through loan syndication and #y lessening the political ris" forin!estors, ena#ling their participation in a gi!en pro)ect.

$he International Centre for Settlement of Inestment Disputes 1ICSID2'he I$SI/ is considered to #e the leading international ar#itration institution de!oted to resol!ing disputes #etween Statesand foreign in!estors, also "nown as BI' ar#itrations.Based in Washington, /.$. +>.S.A. and operating under the WorldBan", I$SI/ was esta#lished in ;P5 #y the $on!ention on the Settlement of In!estment /isputes #etween States andCationals of 3ther States +"nown as the I$SI/ $on!ention or Washington $on!ention.

$he )ultilateral Inestment !uarantee 'gency 1)I!'2'he 2IGA is an international financial institution which offers political ris" insurance and credit enhancement guarantees.Such guarantees help in!estors protect foreign direct in!estments against political and non%commercial ris"s in de!elopingcountries.2IGA is a mem#er of the World Ban" Group and is headquartered in Washington, /.$., >nited States. It wasesta#lished in ;PEE as an in!estment insurance facility to encourage confident in!estment in de!eloping countries.

World "an% !roup Strategy to 3elp India 'chiee Its 4ision'he World Ban" Group7s new $ountry 1artnership Strategy will guide its support to India from 96;8 through 96;


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What is C"S?$BS refers to the software applications for recording transactions, storing customer information, calculating interest andcompleting the process of passing entries in a single data#ase.

What C"S does?$BS ena#les accessing of complete customer account details centrally. It ma"es it possi#le for a #an" customer to accesshis #an" account through whiche!er channel he prefers li"e internet #an"ing, mo#ile #an"ing, A'2 etc.

C"S in India'his initiati!e was ta"en #y the #an"s on the #asis of NFirst -angara)an $ommittee report7 on #an" computerisationsu#mitted in the year ;PE=.

'he committee was constituted under the chairmanship of /r. $. -angara)an +'hen deputy go!ernor of -BI.

3ld generation #an"s initially were hesitant a#out this #ut with the ad!ent of new generation pri!ate sector #an"s in Indiaduring ;PP=%;PP, the real era of #an" mar"eting started and these #an"s started to offer any%where and any%time #an"ingfacilities to its customers.

Syndicate Ban" was the first among the 1u#lic Sector Ban"s to implement $ore Ban"ing.First $BS #ranch of Syndicate #an" was ayanagar Branch in Bangalore.

"enefits of C"S

A. Benefits for the customers

• 'hrough $BS a #an" customer can a!ail #an"ing facilities +transactions 9=


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an!s. The Basel (ommittee is the primary gloal standard setter or the prudential regulation o an!s and

provides a orum or cooperation on an!ing supervisory matters.

*-M% /%%2


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/*9/E E*9 BE%


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T0e main o-2ecti3es or maintaining the %H ratio are the olloing

i. to control the expansion o an! credit. By changing the level o %H, the eserve Ban! o /ndia can

increase or decrease an! credit expansion.

ii. to ensure the solvency o commercial an!s.

iii to compel the commercial an!s to invest in government securities li!e government onds.

)ain use of S(R:

S0- is used to control inflation and propel growth. 'hrough S0- rate the money supply in the system can #e controlled

effecti!ely.

0at is t0e di4e"ence -et5een SLR and CRR

What S0- does is it restricts the #an"Ls le!erage in pumping more money into the economy. 3n the other hand, $--, or

cash reser!e ratio, is the portion of deposits that the #an"s ha!e to maintain with the -BI. Digher the ratio, the lower is the

amount that #an"s will #e a#le to use for lending and in!estment.

'he other difference is that to meet S0-, #an"s can use cash, gold or appro!ed securities where as with $-- it has to #e

only cash. $-- is maintained in cash form with -BI, where as S0- is maintained in liquid form with #an"s themsel!es.

0at does a "eduction in SLR mean

A cut in S0- means that the home, car and commercial loan rates will go down. Ban"s will ha!e more money with them.

+ith the reduction o %H, the B/ is shrin!ing the mar!et or government securities and simultaneously

enlarging availaility o credit to the private sector. +ith that, the cost o unds to the government ill

increase and the rate charged y an!s to the private sector decreases.

A quic" glance on Balance Sheet

Definition: A #alance sheet is a document which summariKes a company7s assets, lia#ilities andstoc"holders equity at a point of time. 'o put it in simple terms, a #alance sheet is li"e a snap shot of a horse race, shows the financial position of a company at a particular point of time.

Components of a balance sheet:

• Assets

• 0ia#ilities

• -atios used

'ssets:65 Current 'ssets: 'hese are assets that may #e con!erted into cash, sold or consumed within ayear or less. $urrent Assets include cash, mar"eta#le securities, Account and notes


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recei!a#les, in!entories etc.

75 &i.ed 'ssets: Fied assets are those tangi#le physical facilities owned #y an enterprise, whichare permanent?dura#le in nature. Fied assets are not turned o!er, meaning they are notcon!erted into cash. For eample: 0and and #uilding, machinery, tools, equipments etc.

85 Intangible 'ssets: 'hese assets do not eist in physical form #ut are notional possessionsowned #y an enterprise. 'hese assets generally don7t ha!e real money !alue #ut areimportant for a company. For eample: patents, goodwill, trade%mar" etc.

(iabilities:

65Current liabilities : 'hose o#ligations of a company which are paya#le on demand or within aperiod of less than ; year from the date of the #alance sheet.

75$erm (iabilities: A term lia#ility is a de#t which matures after a period of ;9 months from thedate of the #alance sheet

85Net Worth: 'he net worth of a company is the owner7s sta"e in the #usiness. It is a lia#ility of a company towards its promoters. It is therefore an important item on the #alance sheet onwhich a lending #an"er can rely.

95Specific Reseres and #roisions: Specific -eser!es and 1ro!isions are created for thepayment of taes, di!idends and other contingencies.

Ratios:Ratios Showing (iuidity:

• Current Ratio / -atio of current assets to current lia#ilities.

• ;uic% Ratio / It is an inde of the sol!ency of an enterprise. Basically quic" ratio is the ratio of +$urrent assets%in!entories and current lia#ilities.

Ratio showing &inancial Stability:

Debt/+uity Ratio / 'his ratio indicates the relati!e proportion of shareholdersL equity and de#t usedto finance a companyLs assets.

-atios Showing 1rofita#ility:a.-eturn on in!estment ratio% 'his ratio measures the operating efficiency of a companywithout regards to financial structure.

#.-eturn on quity -atio% It is the ratio of net income of a #usiness during a period to itsstoc"holdersL equity during that period.

Financial Inclusion and Business $orrespondents

With the o#)ecti!e of ensuring greater financial inclusion and increasing the outreach of the #an"ing sector, -BI decided inpu#lic interest to ena#le #an"s to use the ser!ices of CG37s ? SDGs and 2icro Finance Institutions +2FIs as intermediariein pro!iding financial and #an"ing ser!ices through the use of Business Facilitator and $orrespondent.

"usiness Correspondent

>nder the LBusiness $orrespondentL 2odel, CG3s? 2FIs set up under Societies? 'rust Acts, Societies registered under2utually Aided $ooperati!e Societies Acts or the $ooperati!e Societies Acts of States, In engaging such intermediaries asBusiness $orrespondents, #an"s should ensure that they are well esta#lished, en)oying good reputation and ha!ing the


15/44

confidence of the local people. Ban"s may gi!e wide pu#licity in the locality a#out the intermediary engaged #y them asBusiness $orrespondent and ta"e measures to a!oid #eing misrepresented.

Roles of a "usiness Correspondent


16/44

in&uences a nation's money supply. These to policies are used in various cominations to direct a country

economic goals.

T0e"e a"e & pa"ts of t0e (scal policy

0. :ulic evenue.

6. :ulic expenditure.

7. :ulic det.

Re3enues: a"e t0e sou"ce of income "eali6ed -y t0e 7o3e"nment and a"e di3ided into:

1 Re3enue "eceipts : hich consists o revenue rom regular sources li!e Taxation revenues eg., receipt

rom corporate tax, income tax, excise tax,


17/44

E provision is made or such expenditure in the udget o the (entral 3overnment. Essistance given y the

(entral 3overnment to the %tate 3overnments and 2nion Territories or plan purposes also orms part o th

plan expenditure. :lan expenditure is sudivided into evenue


18/44

Types of (scal policy

Fiscal policy has an e$ect on each o these categories. There are to types o fscal policy


19/44

B/ issues all the an! notes except upees 0 *otes. These notes are issued y Ministry o Finance. ecentlB/ launched a esite +aisa;%olta;,ai to raise aareness o countereit or a!e currency among users othe /ndian upees and also the citi=en o /ndia.

!he main security "eatures o" current banknotes are#

• $atermark ‐ +hite side panel o notes has Mahatma 3andhi atermar!.

• %ecurity thread ‐ Ell notes have a silver or green security and ith inscriptions visile hen heldagainst light o Bharat in >indi and "B/" in


20/44

B/ had announced R(lean *ote :olicyQ in January, 0444.For ithdraing soiled notes rom circulation and pumping resh notes into circulation, the B/ introducedvarious changes in the system and procedures related to currency management hich includemechani=ation o the currency verifcation and processing as also shredding and riquetting or destructiono soiled and mutilated notes.

Rules and Instructions Issued by RBI#

• *ot to staple an! notes.

• To Tender soiled notes to the eserve Ban! in unstapled condition.

• To use ands instead o staple pins.

• To issue only clean notes to memers o pulic.

• To open select currency chest ranches on %undays to provide exchange acility to memers o puall over the county.

• To provide unrestricted acility or exchange o soiled and mutilated notes to memers o pulic.

•

Ban!s should sort notes into reSissuales and nonS issuales, and issue only clean notes to pulic.

• %oiled notes in unstapled condition may e tendered at B/ in inard remittances through (urrency(hests.

• Ban!s should stop riting o any !ind on atermar! indo o an! notes.

Coins o" 34 2aise and Below 5 $ithdrawal 3ovt, o /ndia has decided to ithdra the coins o 6A paise and elo rom circulation rom June 7@, 6@00(oins o 6A paise and elo are not accepted or exchange at the an! ranches rom July 0, 6@00 onard.

$ithdrawal o" 2re 6 3774 otes#eserve Ban! o /ndia decided to ithdra rom circulation all an!notes issued prior to 6@@A as they haveeer security eatures as compared to an!notes printed ater 6@@A.'he withdrawal eercise is in conformity with the standard international practice of not ha!ing multiple series of notes incirculation at the same time.'he -BI has already #een withdrawing these #an"notes in a routine manner through #an"s.It is estimated that the !olume of such #an"notes +preS9665 in circulation is not significant enough to impact the generalpu#lic in a large way and the mem#ers of pu#lic may echange the preS9665 series #an"notes at #an" #ranches at theircon!enience.'he deadline for echanging preS9665 currency notes of !arious denominations, including -s.566 and -s.;,666, has #eenetended #y another si months till une 86, 96;5.

Facts a#out 1u#lic sector #an"s

List of +u-lic Secto" %an#s < ,ead o=ces< >ea" of esta-lis0ment and Slo7ans :

SN

o

%an# Name ,ead =ce >ea" of

esta-lis0ment

Slo7an


21/44

0 Ellahaad Ban! Dol!ata 058A E tradition o trust

6 Endhra Ban! >yderaad 6@ *ov. 0467 Much more to do. +ith

G-2 in ocus

7 Ban! o Baroda Baroda 6@ July 04@5 /ndiaQs /nternational Ban!

1 Ban! o /ndia Mumai ? %ept. 04@8 elationships eyond

Ban!ing

A Ban! o

Maharashtra

:une 08 sept. 047A -ne Family -ne Ban!

8 (anara Ban! Bangalore 040@ /tQs easy to change or

those ho you love,

Together e (an

? (entral Ban! o

/ndia

Mumai 60 9ec. 0400 Build E Better Hie Eround

2s, (entral to you since

0400

5 (orporationBan!

Mangalore 06 March 04@8 :rosperity or all

4 9ena Ban! Mumai 68 May 0475 Trusted Family Ban!

0@ /ndian Ban! (hennai A March 04@? Ta!ing Ban!ing Technology

to (ommon Man, Gour

Tech#riendly an!

00 /ndian -verseas

Ban!

(hennai 0@ Fe. 047? 3ood people to gro ith

06 -riental Ban! o (ommerce

3urgaon ,>aryana

04 Fe. 0417 +here every individual iscommitted

07 :una *ational

Ban!

*e 9elhi 054A The *ame you can Ban!

2pon

01 :una %ind

Ban!

*e 9elhi 61th June 04@5 +here series is a ay o

lie

0A %yndicate Ban! Manipal,

!arnata!a

046A Gour Faithul End Friendly

Financial :artner

08 2nion Ban! o/ndia

Mumai 0404 3ood people to an! ith

0? 2nited Ban! o

/ndia

Dol!ata 04A@ The Ban! that egins ith

N2L

05 2(- Ban! Dol!ata 0417 >onors Gour Trust

04 Uiaya Ban! Bangalore 0470 E riend Gou can Ban!

2pon

6@ /9B/ Ban! Htd Mumai 0481 Ban!ing or all; N Eao


22/44

%chein BadaL

60 Bharatiya

Mahila Ban!

*e 9elhi 04th *ov. 6@07 eadquarter # 3urgaon, /ndia

• CARE ! (redit Enalysis and esearch # >eadquarters P Mumai

• NICRA ! >eadquarter # 3urgaon, /ndia

• SMERA ! >eadquarters P Mumai

• Fitc0 @India Ratin7s Resea"c0B # >eadquarters P Mumai

ote# CRI%IL is the largest credit rating agency in India, with a market share o" greater than879.


23/44

Leadin7 C"edit Ratin7 A7ency in o"ld ?

• %tandard :oor's %: P >eadquarter P *e Gor!, 2%

• Moody's P >eadquarter # *e Gor!, 2%

• Fitch # >eadquarter # *e Gor!, 2%

Re7ulato"s in India

Re7ulato" Secto"s C0ai"man ,eadua"te"

Rese"3e%an# ofIndia @R%IB

Financial systemand monetarypolicy, MoneyMar!et

aghuramaan

Mumai

Secu"itiesandE8c0an7e%oa"d ofIndia@SE%IB

%ecurity (apitalMar!et, stoc!ro!ing MerchantBan!ing, *idhis,(hit Fund(ompanies

2.D. %inha Mumai

Insu"anceRe7ulato"yand)e3elopment

Aut0o"ity@IR)AB

/nsuranceindustry

T. %. Uiayan >yderaad

TelecomRe7ulato"yAut0o"ityof India@TRAIB

Telecommunication /ndustry

ahulDhullar

*e 9elhi

Fo"5a"dMa"#etsCommission

(ommodityMar!et

ameshEhishe!

Mumai

+ensionFundRe7ulato"yand)e3elopmentAut0o"ity@+FR)AB

:ension sector >emant(ontractor

*e 9elhi

India conomic -eform


24/44

'he economy of India is one of the fastest growing economies in the world. Since its independence in the year ;P=/-A Ban" % Funding the >nfunded


25/44

)icro 0nits Deelopment and Refinance 'gency 1)0DR'2 "an% Dedicated Regulator and Refinancer

'he 2icro >nits /e!elopment -efinance Agency +2>/-A Ban" is set to #e launched on April Eth 96;5 #y our Donoura#l

1rime 2inister Shri Carendra 2odi )i.

'he Ban" will start with a corpus of -s 96,666 crore which would #e allocated to the Ban" from the money a!aila#le from

shortfalls of priority sector lending. Further amount of -s 8666 crores will #e allocated from Budget as a $redit Guarantee

$orpus.

*ey Responsibilities of )0DR' "an%

% 0aying down policy guidelines for micro?small enterprise financing #usiness

% -egistration and -egulation of 2FI entities

% Accreditation?rating of 2FI entities

% 0aying down responsi#le financing practices to pre!ent o!er inde#tedness, ensuring client protection principles and

methods of reco!ery

% /e!elopment of standardiKed co!enants go!erning last mile lending to micro?small enterprises

% 1romoting right technology solutions for the last mile

% Formulating and running a credit guarantee scheme for pro!iding guarantees to the loans which are #eing etended to

micro%enterprises

% $reating a good architecture of last mile credit deli!ery to micro #usinesses under the scheme of #radhan )antri )udra

oBana

"enefits of (aunching )0DR' "an%

% >niformity in regulations and #est practices for the SDG Ban" lin"age programme, CBF$%2FIs, and trusts?societies?not f

profit CBF$s?Section 95 companies engaging in 2FI acti!ities as 2>/-A Ban" would #e the sole regulator for all players

the 2FI sector.

% Increased liquidity and access to low cost funding support to 2FIs

% Increased access to low cost funding for 2FIs could lead to a reduction in the cost of funds for 2FIs.

Insurance Sector

9ear all, in vie o upcoming insurance exams, ere are presenting you a rie rite#up on insurance sectoand companies in this sector.

/n /ndia, insurance has a deep#rooted history. /t fnds mention in the ritings o Manu Manusmrithi, Gagnaval!ya 9harmasastra and Dautilya Erthasastra . The ritings tal! in terms o pooling o resourcesthat could e re#distriuted in times o calamities such as fre, &oods, epidemics and amine. This asproaly a pre#cursor to modern day insurance. Encient /ndian history has preserved the earliest traces oinsurance in the orm o marine trade loans and carriersQ contracts. /nsurance in /ndia has evolved over time

heavily draing rom other countries,


26/44

%"ief 0isto"y of insu"ance secto"

The insurance sector in /ndia has completed all the acets o competition # rom eing an open competitivemar!et to eing nationali=ed and then getting ac! to the orm o a lierali=ed mar!et once again. Thehistory o the insurance sector in /ndia reveals that it has itnessed complete dynamism or the past tocenturies approximately.+ith the estalishment o the -riental Hie /nsurance (ompany in Dol!ata, theusiness o /ndian lie insurance started in the year 0505.

Impo"tant milestones in t0e Indian life insu"ance -usiness1D1$: The /ndian Hie Essurance (ompanies Ect came into orce or regulating the lie insurance usiness.

1D$: The /ndian /nsurance (ompanies Ect as enacted or enaling the government to collect statisticalinormation on oth lie and non#lie insurance usinesses.1D& The earlier legislation consolidated the /nsurance Ect ith the aim o saeguarding the interests o thinsuring pulic.1D*: 61A /ndian and oreign insurers and provident societies ere ta!en over y the central governmentand they got nationali=ed. H/( as ormed y an Ect o :arliament, vi=. H/( Ect, 04A8. /t started o$ ith acapital o s. A crore and that too rom the 3overnment o /ndia. The history o general insurance usiness /ndia can e traced ac! to Triton /nsurance (ompany Htd. the frst general insurance company hich asormed in the year 05A@ in Dol!ata y the British.

Impo"tant milestones in t0e Indian 7ene"al insu"ance -usiness1DGH: The /ndian Mercantile /nsurance Htd. as set up hich as the frst company o its type to transact ageneral insurance usiness.

1D*H: 3eneral /nsurance (ouncil, an arm o the /nsurance Essociation o /ndia, ramed a code o conduct oguaranteeing air conduct and sound usiness patterns.1D: The /nsurance Ect improved or regulating investments and set minimal solvency levels and the TariEdvisory (ommittee as set up.1DH$: The 3eneral /nsurance Business *ationali=ation Ect, 04?6 nationali=ed the general insuranceusiness in /ndia. /t as ith e$ect rom 0st January 04?7.0@? insurers integrated and grouped into our companies vi=. the *ational /nsurance (ompany Htd., the *e/ndia Essurance (ompany Htd., the -riental /nsurance (ompany Htd. and the 2nited /ndia /nsurance(ompany Htd. 3/( as incorporated as a company.

Insu"ance Reposito"y in India The /nsurance epository in /ndia is a dataase o insurance policies. /t allos policy holders to ma!erevisions to a policy ith speed and accuracy. /t launched on 08 %eptemer 6@07. /t is the orld's frst o its!ind. /ndia's /nsurance egulatory and 9evelopment Euthority has issued licenses to fve entities to act as/nsurance epositories

• (entral /nsurance epository Himited (/H

• %>(/H :roects Himited

• Darvy /nsurance repository Himited

• *%9H 9ataase Management Himited

• (EM% epository %ervices Himited

E!Insu"ance Account


27/44

0.Ell o the elo mention policies can e !ept in an electronic orm provided these have een issued ythe companies registered ith /nsurance egulatory 9evelopment Euthority/9E6.Ell the Hie insurance policies including individual or group.7. Ell the general insurance policies including individual or group.1. Eny other orm o an insurance policy approved y an /9E.

+u-lic Secto" Insu"ance Companies

Hie /nsurance (orporation o /ndia

3eneral /nsurance (orporation o /ndia*ational /nsurance (o. Htd.-riental /nsurance (o. Htd.*e /ndia Essurance (o. Htd.2nited /ndia /nsurance (o. Htd.

Life Insu"ance Co"po"ation of India

,eado=ce! Mum-aiC0ai"man ! S0"i S Roy

The :arliament o /ndia enacted the Hie /nsurance (orporation Ect on the 04th o June 04A8, and the Hie/nsurance (orporation o /ndian as estalished on 0st %eptemer, 04A8, ith the oective o spreading liinsurance much more idely and in particular to the rural areas ith a vie to reach all insurale persons ithe country, providing them adequate fnancial cover at a reasonale cost

9ene"al Insu"ance Co"po"ation

,eado=ce ! Mum-aiC0ai"man ! A Roy3eneral /nsurance (orporation o /ndia 3/( e as approved as R/ndian einsurerQ on 7rd *ovemer,6@@@.Es an /ndian reinsurer 3/( has een giving reinsurance support to our pulic sector other private generainsurance companies.

T0e Ne5 India Assu"ance Co Ltd

,eado=ce! Mum-aiC0ai"man ! 9S"ini3asan/t is the "largest general insurance company o /ndia on the asis o gross premium collection inclusive ooreign operations". /t as ounded y %ir 9orai Tata in 0404, and as nationalised in 04?7.

National Insu"ance Company Limited @NICLB

,eado=ce! ol#ataC0ai"man ! S0"i AJ 9i"i2a uma"/t is a state oned general insurance company in /ndia. The company as estalished in 04@8 andnationalised in 04?6. /t's portoolio consists o a multitude o general insurance policies, o$ered to a idearena o clients encompassing di$erent sectors o the economy.W7X Epart rom eing leading insuranceprovider in /ndia, */(H also serves *epal.

United India Insu"ance Company Limited

,eado=ce ! C0ennaiC0ai"man ! Milind 0a"atunder 9epartment o Financial %ervices, Ministry o Finance /ndia, is a pulic sector 3eneral /nsurance(ompany o /ndia and one o the top 3eneral /nsurers in Esia. +ith the net orth o s A1@? crores and proo s A65 crores, the company has collected gross premium o s 4?@4 crores as o in the fnancial year6@07#01. The company has more than seven decades o experience in *on#lie /nsurance usiness and asormed to its present orm y the merger o 66 companies, consequent to the nationalisation o 3eneral/nsurance companies in /ndia.

"iental Insu"ance Company Ltd


28/44

>eadoCce # *e 9elhi(hairman # 9r. E.D.%axena /t as estalished on %eptemer 06, 041? in the then Bomay. /t as a completely oned susidiary o-riental 3overnment %ecurity Hie Essurance (ompany Htd. /t as created ith the mandate o executing itparent odyQs general insurance operations.

2inimum Alternati!e 'a % An Insight

' Definition /

/irect ta in lay terms is a ta on income that you ha!e to pay, it cannot #e shifted to

others. Some of its forms include income ta, wealth ta, etc. /irect taes are directly le!ied on indi!iduals, corporations aorganisations and collected #y way of income ta returns to #e filed each year.

An indirect ta is collected #y an intermediary +such as a retail store from the person who #ears the ultimate economic#urden of the ta +such as the customer. Indirect taes include sales ta, ser!ice ta, !alue%added ta, commoditytransaction ta and securities transaction ta among others.

3ne such indirect ta is the minimum alternate ta +2A'. Going forward, we will eplain what 2A' is, the reasons for itsintroduction, and who is lia#le to pay the ta.

Cormally, a company is lia#le to pay ta on the income computed in accordance with the pro!isions of the Income%'a Act#ut the profit and loss account of the company is prepared as per pro!isions of the $ompanies Act.

In the past, a large num#er of companies showed #oo" profits on their profit and loss account and at the same timedistri#uted huge di!idends. Dowe!er, these companies didn7t pay any ta to the go!ernment as they reported either nil ornegati!e income under pro!isions of the Income%'a Act.

'hese companies were showing #oo" profits and declaring di!idends to their shareholders #ut were not paying any ta.'hese companies are popularly "nown as NKero ta7 companies.

'he Indian Income%'a Act allows a large num#er of eemptions from total income. Besides eemptions, there are se!eraldeductions permitted from the gross total income. Further, depreciation allowa#le under the Income%'a Act, is not the samas required under the $ompanies Act. 'he latter pro!ides a lower rate !iK%a%!iK the I%' Act which computes a higher rate ofdepreciation.

'he result of such eemptions, deductions, and other incenti!es under the Income%'a Act in the form of li#eral rates of

depreciation is the emergence of Kero ta companies, which in spite of ha!ing high #oo" profit are a#le to reduce theirtaa#le income to nil.

!oernments ta%e on )'$

• Go!ernment formed panel to resol!e ta dispute with foreign in!estors.

• Finance 2inister Arun aitley announced that a high%le!el committee will loo" into the contro!ersial issue ofpayment of 2inimum Alternate 'a +2A' #y FIIs.

• 'he $ommittee is requested to gi!e its recommendation of the specific issues of 2A' on FIIs epeditiously.


29/44

• Go!ernment also declared that minimum alternate ta +2A' would not #e applica#le on foreign companies7 earninfrom capital gains on securities, royalty, fee on technical ser!ices and interest, pro!iding a huge #reather to foreignin!estors.

Citty%Gritty of F/s

+ello eaders,

+ere we are presenting to you all a brief about /i0ed Deposits, which was shared by ohan Anand. Don1t forget to

than# him222

&Ds 1&i.ed Deposits2: A comprehensi#le approach towards defining the nitty%gritty of a popular in!esting instrument.

Fied deposit +F/ is a financial instrument where a sum of money gi!en to a #an", financial institution or company where#

the recei!ing entity pays interest at a specified percentage for the time duration of the deposit.

Fied deposit, in fact, gi!es you a fied interest either annually or on a cumulati!e #asis. WhatLs important to note is that thinterest income is taed on accrual #asis. 'his means irrespecti!e of when you recei!e it, you will ha!e to pay ta at the en

of the financial year. !en if it is not taa#le, you still ha!e to show it in your I%' returns.

'here is no dou#t that #an" fied deposits +F/s are considered safe in that you will most li"ely get your money #ac". But

did you "now that #an" F/s can negati!ely affect your sa!ings o!er the long term(

0et7s try to answer this question,

2ost F/s only gi!e you a#out E.56 Q interest #efore ta and around < Q after ta. 'his means, you are effecti!ely losing

money e!ery year you in!est your money in a F/.

In correlation with equity mutual funds, long term returns from which are ta free, F/ interest is taa#le at your current ta

sla#. 'he higher your income, the lower your F/ return will #e.

Cow, another question ensued from these a#o!e answers. If F/s are pricey enough ta"ing a long term perspecti!e then

where one should in!est. 2utual Funds might #e the answer. But let7s stic" to the su#)ect on which we are discussing.

Another aspect of the F/ which is su#tle is '/S. '/S or 'a /educted at Source is the Income 'a department7s way of

automating ta collection, to an etent. 'he ta on interest from any F/ is paid partially !ia '/S deducted #y the #an" andthe rest is paid as Self%Assessment 'a #y the indi!idual.

Ban"s deduct '/S on interest only if the interest amount for an F./ is greater than -s.;6, 666 per year. 'he rate of '/S

deducted #y #an"s is ;6Q on interest income, pro!ided your 1AC num#er is a!aila#le with the #an". If the #an" doesn7t

ha!e your 1AC in its records, '/S is deducted at 96Q on interest income.

If your total income is #elow the minimum ta sla# +;6Q, the '/S on F/ interest that is deducted #y #an"s can #e

reco!ered #y claiming a refund for the '/S amount at the time of ta filing.


30/44

Alternately, ou can su#mit the @Form ;5G to the #an" declaring that since your taa#le income for the year will #e #elow

the minimum ta sla#, the #an" shouldn7t deduct '/S on your F/ Interest.

Senior $itiKens are also eempt from paying '/S on F/ interest as a special concession #y the I' department. 'hey need

to su#mit Form ;5D to ensure they aren7t charged '/S on their F./s.

3n the whole, one of the ma)or #enefits of F/ is its liquidity. For any immediate requirement, it can #e #ro"en and the

money is credited youLre your account within a short span of time. With higher interest rates it is surely a good in!estment

opportunity. Senior citiKens, who generally get higher interest rates, will #enefit if they fall in a lower ta sla#. In a nutshell,

one should in!est in F/s, if one finds difficulty in comprehending the most elusi!e and !olatile stoc" mar"et.

Inflation and -BI

To understand "& monetary policy we have to understand why "& has to do all this mehnat, "& has a biggest

villain standing against him called as &3/4AT&53.

IN&('$I-N/

Inflation is the #iggest parasite in the Indian economy. In the condition of inflation there is flow of etra money in the

economy creating ecess of demand in the mar"et for the products as compared to supply in midst of all this maara maari

the producers gra# this opportunity with #oth arms and if possi#le with legs too +too greedy these fellows, they mar" highe

prices for the goods that are ecess in demand and this creates a rise in price of the products resulting in inflation.

Inflation has the following ad!erse effects on the economy:

3ere is story of )r5 "echara 1common man2

Inflation and #urchasing #roducts/

1urchasing 1ower%'he !alue of a currency epressed in terms of the amount of goods or ser!ices that one unit of moneycan #uy. 1urchasing power is important #ecause, all else #eing equal, inflation decreases the amount of goods or ser!ices

youLd #e a#le to purchase. 2r.Bechara is fetching a salary of -s.96H monthly, he was doing his #est to "eep up to the

epectations his o!er siKed wife and etra demanding "ids, Cow in inflation his salary is the same #ut his 96H will now

cannot complete the demands of his family, #ecause that 96H has #ecome equi!alent to say, ;EH and now they can ha!e

less resources in the same prices, 'his will result in the de#t conditions , lesser purchase of goods and ser!ices+due to

higher prices and will directly hurt the economy.


31/44

Inflation and Debt/

1rice inflation is a de#torLs #est friend and a creditorLs worst enemy. 0et7s see how, our 2r. Bechara ga!e -s. ;6H to a

de#tor in 966 for a period of three years, after two years inflation occurred, now the !alue of that ;6" #ecomes equi!alent

to E" +loss in the !alue of -s, 'he effect of inflation on de#tors is positi!e #ecause de#tors can pay their de#ts with money

that is less !alua#le.

-ther negatie impacts/

"lac%/mar%eting% pecting inflation many mafias start to collect the onions and "erosene in their #ac"yards for releasing

these when the inflation stri"es, hence they will ma"e #ig #uc"s in no time and our 2r. Bechara has to pay more than hefty

amount for the daily "a aaloo ,pyaKK..

0nemployment% Inflation comes along with a gift pac"age of unemployment, companies with limited resources will start tofire people on the name of cost cutting and also the new recruitments will not happen resulting in not so aache din for

aspirants.

Different stages of Inflation/

Creeping Inflation:

$reeping or mild inflation is when prices rise 8Q a year or less.

Wal%ing Inflation:

'his type of strong, or pernicious, inflation is #etween 8%;6Q a year. It is harmful to the economy #ecause it heats up

economic growth too fast.

!alloping Inflation:

When inflation rises to ten percent or greater, it wrea"s a#solute ha!oc on the economy. 2oney loses !alue so fast that

#usiness and employee income canLt "eep up with costs and prices. Foreign in!estors a!oid the country.

3yperinflation:

Dyperinflation is when the prices s"yroc"et, the currency #ecomes a piece of trash, Vim#a#we eperienced a similar

conditions in pre!ious years.

Calculation of Inflation/


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In India inflation is calculated #y the help of $1I+$onsumer 1rice Inde,pre!iously it was calculated #y W1I+Wholesale

1rice Inde, $1I as a scale was adopted #y -BI ,due the recommendations of >ri)it 1atel committee.

-BI% the B3SS of all Ban"s

R%I is the cent"al %an# of India and controls the entire money issue, circulation the entire money issue,circulation and control y its monetary policies and lending policies y periodical updates or corrections todiscipline the economy.

T0e cent"al -an# of India.. Dhan 9eputy 3overnor

• 9r. 2rit . :atel 9eputy 3overnor

• %hri . 3andhi 9eputy 3overnor

• %hri %. %. Mundra 9eputy 3overnor

%ubsidiaries o" RBI#


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Fully o5ned: 9eposit /nsurance and (redit 3uarantee (orporation o /ndia9/(3(, Bharatiya eserve Ban*ote Mudran :rivate HimitedBB*M:HY(ther Imortant "acts related to RBI#

• eserve Ban! o /ndia Ect passed in 0471.

• eserve Ban! o /ndia B/ estalished on 0 Epril 047A.

• eserve Ban! o /ndia B/ estalished on the recommendation o >ilton#Goung (ommission.

• B/ is the sole authority in /ndia to issue Ban! notes in /ndia.

•


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Z


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Ente"p"ises In3estment in euipment

Micro


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/n the event o a an! ailure, 9/(3( protects an! deposits that are payale in /ndia. The 9/(3( insures al

deposits such as savings, fxed, current, recurring, etc. except the olloing types o deposits.

i 9eposits o oreign 3overnments;

ii 9eposits o (entral)%tate 3overnments;

iii/nter#an! deposits;

iv 9eposits o the %tate Hand 9evelopment Ban!s ith the %tate co#operative an!;

v Eny amount due on account o any deposit received outside /ndia

vi Eny amount, hich has een specifcally exempted y the corporation ith the previous approval o

eserve Ban! o /ndia.

Ma8imum deposit amount insu"ed -y t0e )IC9C:


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Folloing is the article related to 9rips o oreign currency.This article as provided y ohan

Enand one o the regular readers.

)"ips of fo"ei7n cu""ency: nly potion fo" t0e ailin7 "upee

Es rupee continues to plummet, no trailing at 81.16 per 2%9, recently the apex an! has made some

changes in the interest rates o F(* B account. This step has een ta!en to olster the tardy oreign

export credit in&o. This is suCced to say that /ndiaQs rupee strength overtly depends on the amount o

oreign currency, mostly dollar. The more dollars tric!le in, the stronger is the rupee.

>ere, this article is presenting you precise ut succinct inormation aout types o oreign accounts availa

in /ndia.

Many */s are oten aced ith the situation o maintaining a upee account in /ndia. To encourage *on

esident /ndians */Qs and :ersons o /ndian -rigin :/-Qs staying aroad to invest in /ndia, the 3ovt. has

alloed these /ndividuals to open 7 types o */ Eccount in /ndia#

NRE

NR

FCNR@%B

0. NRE Account ie Non!Resident E8te"nal Account is a rupee denominated account and the amount in

this type o account is reely repatriale. This type o */ Eccount can either e in the orm o %avings,

(urrent, ecurring or Fixed 9eposit.

Es this orm o */ Eccount is rupee denominated, the investor ill have to convert Foreign (urrency into

upees and in case he intends to ta!e the unds ac! to his home country, he ill again have to convert the

upees into Foreign (urrency This orm o */ Ban! Eccount is est suited or overseas savings hich have

een remitted to /ndia y converting the oreign currency into /*.

oint ,oldin7: *< account can e ointly held ith another */ ut not ith resident /ndian. -n the other

hand *- account discussed elo can e held ith */ as ell as resident /ndian close relative as

defned under %ection 8 o the (ompanies Ect 04A8.

6. NR Account ie Non!Resident "dina"y Account is a rupee denominated account and can e in the

orm o savings or current or recurring or fxed deposit. The income hich is deemed to accrue or arise in

/ndia can e deposited only this type o account.


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Rupees;

want to maintain savings in Ruee but kee them lioint account with another RI=

want Ruee savings to be "reely reatriable

Choose R( account i" you#

(Primary reason) want to park India based earnings in Rupees in India;

want account to deosit income earned in India such as rent, dividends etc=

want to oen account with resident Indian ?close relative@

7. FCNR @%B stands fo" Fo"ei7n Cu""ency Non Resident Account @%an#sB and can only e opened in

Foreign (urrency and not in the /ndian (urrency. /t is a orm o fxed deposit on hich regular interest is pai

Es /nterest ates in /ndia approx ?#5 are much higher as compared to the interest rates in estern

countries approx 0#6, many */Qs invest their surplus unds in fxed deposits in /ndia through this type o*/ Eccount Enother eneft o this type o */ Ban! Eccount is that the investor ill not have to ear any

ris! o &uctuations in the oreign currency. %ay or e.g. Mr. E invests [0@ in this orm o */ Eccount and the

/nterest ate is 0@ p.a., he ould get [ 00 at the end o the year irrespective o the upee#9ollar exchang

rates. End thereore in this orm o */ Ban! Eccount, he is ree rom any oreign exchange ris!.

This type o */ Ban! Eccount can e opened or a minimum o 0 year and a maximum o A years.

Moreover, t0e interest earned on this "orm o" RI Bank :ccount is also eAemted "rom taA in

India.

N% The Foreign (urrency *on#esident F(*B scheme as introduced ith e$ect rom May 0A, 0447 toreplace the then prevailing F(*E scheme introduced in 04?A, here the oreign exchange ris! as orne

y B/ and susequently y the 3ovt. o /ndia. The F(* E scheme as ithdran in Eugust, 0441 in vie

o its implications or the central an!Qs alance sheet and quasi#fscal costs to the 3overnment.

-M-S 23-'GAG 03AC : A Delping Dand For Senior $itiKens

Good 2orning -eaders,

'oday we are pro!iding you some small #ut important concepts of re!erse mortgage loan. 'his is one of the important

topics. So #elow are the details.

'he scheme of re!erse mortgage has #een introduced for the #enefit of senior citiKens owning a house #ut ha!ing

inadequate income to meet their needs. Some important


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&eatures of reerse mortgage are:

a A homeowner who is a#o!e 6 years of age is eligi#le for re!erse mortgage loan. It allows him to turn the equity in his

home into one lump sum or periodic payments mutually agreed #y the #orrower and the #an"er.

# C3 -1A2C' is required as long as the #orrower li!es, Borrower should pay all taes lating to the house and

maintain the property as his primary residence.

c 'he amount of loan is #ased on se!eral factors : #orrower7s age, !alue of the property, current interest rates and thespecific plan chosen. 'he !aluation of the residential property is done at periodic inter!als and it shall #e clearly specified t

the #orrowers upfront. 'he #an"s shall ha!e the option to re!ise the periodic ? lump sum amount at such frequency or

inter!als #ased on re!aluation of property.

Settlement % 'he loan shall #ecome due and paya#le only when the last sur!i!ing #orrower dies or would li"e to sell the

home, or permanently mo!es out. 3n death of the home owner, the legal heirs ha!e the choice of "eeping or selling the

house. If they decide to sell the house, the proceeds of the sale would #e used to repay the mortgage, with the remainder

going to the heirs.

As per the scheme formulated #y Cational Dousing Ban" +CDB, the maimum period of the loan period is ;5 years. 'he

residual life of the property should #e at least 96 years. Where the #orrower li!es longer than ;5 years, periodic payments

will not #e made #y lender. Dowe!er, the #orrower can continue to occupy.

-e%1ost: Bitcoins

In the recent days, we are hearing a lot a#out a new type of currency, &Bitcoin&. It is #asically a &!irtual currency&, which is

ma"ing quite hype in mar"et today. 'here are !arious myths and speculations surrounding this currency. So, here we are

presenting to you the #rief a#out &Bitcoins&. Dope you li"e the postRRR

What is "itcoin?

Bitcoin is a distri#uted peer%to%peer digital currency that can #e transferred instantly and securely

#etween any two people in the world. ItLs li"e electronic cash that you can use to pay friends or merchants.

Who created bitcoins?

According to !arious newspaper article, a =%year%old apanese%American physicist Satoshi Ca"amoto is speculated as th

creater of Bitcoin.


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What are bitcoins?

Bitcoins are the unit of currency of the Bitcoin system. A commonly used shorthand for this is @B'$ to refer to a price or

amount +e.g. @;66 B'$. 'here are such things as physical #itcoins, #ut ultimately, a #itcoin is )ust a num#er associated

with a Bitcoin Address. A physical #itcoin is simply an o#)ect, such as a coin, with the num#er carefully em#edded inside.

See also an easy intro to Bitcoin.

3ow can I get bitcoins?

'he entire #itcoins currency is generated #y algorithms, it is !ery easy to ma"e sure that once the 9; million mar" is reach

there are no more #itcoins to #e issued. Bitcoins, their issue and their maimum circulation ha!e #een predetermined from

the #eginning and therein lies its innate !alue.

ou can o#tain Bitcoins #y purchasing them from someone else using regular currency or #y earning them through a syste

called Bitcoin 2ining. Bitcoins are stored in Bitcoin wallets which also manage addresses from which you can send and

recei!e payments. Cew and different addresses can #e generated for different transactions and can #e done as many time

as required.

3ow does it wor%?

As a new user, you can get started with Bitcoin without understanding the technical details. 3nce you ha!e installed a

Bitcoin wallet on your computer or mo#ile phone, it will generate your first Bitcoin address and you can create more

whene!er you need one. ou can disclose your addresses to your friends so that they can pay you or !ice !ersa. In fact, th

is pretty similar to how email wor"s, ecept that Bitcoin addresses should only #e used once.

"alances / bloc% chains / 'he #loc" chain is a shared pu#lic ledger on which the entire Bitcoin networ" relies. All

confirmed transactions are included in the #loc" chain. 'his way, Bitcoin wallets can calculate their spenda#le #alance and

new transactions can #e !erified to #e spending #itcoins that are actually owned #y the spender. 'he integrity and the

chronological order of the #loc" chain are enforced with cryptography.

'ransactions % pri!ate "eys % A transaction is a transfer of !alue #etween Bitcoin wallets that gets included in the #loc"

chain. Bitcoin wallets "eep a secret piece of data called a pri!ate "ey or seed, which is used to sign transactions, pro!iding

mathematical proof that they ha!e come from the owner of the wallet. 'he signature also pre!ents the transaction from

#eing altered #y any#ody once it has #een issued. All transactions are #roadcast #etween users and usually #egin to #e

confirmed #y the networ" in the following ;6 minutes, through a process called mining.

1rocessing % mining % 2ining is a distri#uted consensus system that is used to confirm waiting transactions #y including

them in the #loc" chain. It enforces a chronological order in the #loc" chain, protects the neutrality of the networ", and

allows different computers to agree on the state of the system. 'o #e confirmed, transactions must #e pac"ed in a #loc" th

fits !ery strict cryptographic rules that will #e !erified #y the networ". 'hese rules pre!ent pre!ious #loc"s from #eing

modified #ecause doing so would in!alidate all following #loc"s. 2ining also creates the equi!alent of a competiti!e lottery

that pre!ents any indi!idual from easily adding new #loc"s consecuti!ely in the #loc" chain. 'his way, no indi!iduals can

control what is included in the #loc" chain or replace parts of the #loc" chain to roll #ac" their own spends


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3ow do we do business? 0sing bitcoins

ou offer to pay me for my ser!ices !ia #itcoins and I accept the same. Why #itcoins( Because #itcoins are anonymous an

are not tracea#le #y anyone. 'hey are the perfect way for people to do #usiness with each other without re!ealing identitie

'hey donLt lea!e any digital footprints li"e credit card records, #an" transactions, etc.

So letLs say that we agree to a LdealL and you agree to send me #itcoins in ad!ance to pay me for my )o#. I set the price at

#itcoins for my wor". 'he current rate is a#out -s 8E,666 per #itcoin. So, you are paying me a#out -s ;.;5 la"h for this

co!ert operation.

Why are bitcoins so aluable?

'he a#solute #rilliance of #itcoins is that only 9; million #itcoins will e!er #e made a!aila#le in the mar"et. +So far ;8 millio

are in circulation and E million more will #e gradually released into the system #y the end of 9;=6. Gi!en that the entire

#itcoins currency is generated #y algorithms, it is !ery easy to ma"e sure that once the 9; million mar" is reached there ar

no more #itcoins to #e issued.

Does "itcoin guarantee an influ. of free money?

Since Bitcoin is a new technology, what it is and how it wor"s may #e initially unclear. Bitcoin is sometimes presented as

#eing one of three things:

A. Some sort of online Lget%rich%quic"L scam.

B. A loophole in the mar"et economy, the installation of which guarantees a steady influ of cash.

$. A sure in!estment that will almost certainly yield a profit.

In fact, none of the a#o!e is true.

Is "itcoin a get/rich/uic% scheme?

If youL!e spent much time on the Internet, youL!e pro#a#ly seen ads for many Lget%rich%quic"L schemes. 'hese ads usually

promise huge profits for small amounts of easy wor". Bitcoin is in no way similar to these schemes. Bitcoin doesnLt promis

windfall profits. 'here is no way for the de!elopers to ma"e money from your in!ol!ement or to ta"e money from you. Bitco

is an eperimental, !irtual currency that may succeed or may fail.

's an inestment, is "itcoin a sure thing?

Bitcoin is a new and interesting electronic currency, the !alue of which is not #ac"ed #y any single go!ernment or

organiKation. 0i"e other currencies, it is worth something partly #ecause people are willing to trade it for goods and ser!ice

Its echange rate fluctuates continuously, and sometimes wildly. It lac"s wide acceptance and is !ulnera#le to manipulatio

#y parties with modest funding. Anyone who puts money into Bitcoin should understand the ris" they are ta"ing and

consider it a high%ris" currency.


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3ow are new bitcoins created?

Cew #itcoins are generated #y the networ" through the process of &mining&. In a process that is similar to a continuous raff

draw, mining nodes on the networ" are awarded #itcoins each time they find the solution to a certain mathematical pro#lem

+and there#y create a new #loc". $reating a #loc" is a proof of wor" with a difficulty that !aries with the o!erall strength of

the networ". 'he reward for sol!ing a #loc" is automatically ad)usted so that, ideally, e!ery four years of operation of the

Bitcoin networ", half the amount of #itcoins created in the prior = years are created.

Bloc"s are mined e!ery ;6 minutes, on a!erage and for the first four years +9;6,666 #loc"s each #loc" included 56 new#itcoins. As the amount of processing power directed at mining changes, the difficulty of creating new #itcoins changes.

Is "itcoin a #onEi scheme?

In a 1onKi Scheme, the founders persuade in!estors that they7ll profit. Bitcoin does not ma"e such a guarantee. 'here is n

central entity, )ust indi!iduals #uilding an economy.

A ponKi scheme is a Kero sum game. arly adopters can only profit at the epense of late adopters. Bitcoin has possi#le

win%win outcomes. arly adopters profit from the rise in !alue. 0ate adopters, and indeed, society as a whole, #enefit from

the usefulness of a sta#le, fast, inepensi!e, and widely accepted p9p currency.

&acts about "itcoin

% Bitcoin is a real currency that fluctuates in price and which can #e echanged to conduct real #usiness.

% 'he #usiness of transacting #itcoins and earning #itcoins in return is really the ner!e centre of this esoteric currency, and

this is what ma"es it unique.

% Bitcoin is a wor" of not one #ut many geniuses. Satoshi Ca"amoto may ha!e #een the chief #lueprint architect whosemaster design many other super cle!er architects used to #uild on.

% Bitcoins will get harder and harder to earn. Dence they will only "eep growing in !alue as the years roll #y.

% Bitcoin is !ulnera#le despite #eing proclaimed as a digital currency with a permanent trace. But its theft only points to the

fact that it is potentially !ery !alua#le.

% Bitcoin is here to stay. It may ha!e its share of trou#les, #ut its accepta#ility is growing leaps and #ounds.

BACHICG 1A'DWA 96;5: S32 FICAC$IA0 '-2S

9ear eaders, e are providing you the important fnancial terms hich are mainly the part o 3eneral

Eareness in all the upcoming Ban! exams. >ope you li!e this post as this ill ma!e your fnancial portion

strong.

1B Type of assets


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T0e assets po"tfolio of t0e -an#s is "eui"ed to -e classi(ed as

0 standard assets6 su#standard assets7 doutul assets and1 loss assets.%tandard asset is one that

does not disclose any prolems and hich does not carry more than normal ris! attached to the usiness .E

asset hich has een classifed as *:E or a period not exceeding 06 months is considered as su#standard

asset.9outul asset is one hich has remained *:E or a period exceeding 06 months.En asset hich is

considered uncollectile and loss has een identifed y the an! or internal or external auditors or the B/

inspection and the loss has not een ritten o$ is regarded as loss asset.

$B Co"e %an#in7 Solutions @C%SB

(ore Ban!ing %olutions is a u== ord in /ndian an!ing at present, here ranches o the an! are

connected to a central host and the customers o connected ranches can do an!ing at any reach ith

core an!ing acility.

&B +"ime Lendin7 Rate

The minimum short#term interest rate charged y commercial an!s to their most creditorthy clients. /t is

reerence interest rate used y an!s or its lending purposes.

'B +a"ties of a C0eue:

There are three parties to the cheque

0#9raer or Ma!er

6#The an! 9raee # on hom the cheque is dran i.e. the an! ith hom the account is maintained y

the draer

7# :ayee P :ayee is the person hose name is mentioned on the cheque to hom or to hose order the

money is directed to e paid.

*B Special )"a5in7 Ri70ts @S)RsB

/t is a reserve asset !non as R:aper 3oldQ created ithin the rameor! o the /nternational Monetary Fun

in an attempt to increase international liquidity, and no orming a part o countries oCcial orex reserves

along ith gold, reserve positions in the /MF and convertile oreign currencies

B Ne7otiated )ealin7 System

The *egotiated 9ealing %ystem *9% or electronic dealing and reporting o transactions in government

securities as introduced in Feruary 6@@6. /t acilitates the memers to sumit electronically, ids or

applications or primary issuance o 3overnment %ecurities hen auctions are conducted. *9% also provide

an interace to the %ecurities %ettlement %ystem %%% o the :ulic 9et -Cce, B/, Mumai therey

acilitating settlement o transactions in 3overnment %ecurities oth outright and repos conducted in the

secondary mar!et.


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HB N)S M @"de" Matc0B

/n Eugust, 6@@A, B/ introduced an anonymous screen ased order matching module on *9%, called *9%#

-M. This is an order driven electronic system, here the participants can trade anonymously y placing the

orders on the system or accepting the orders already placed y other participants. *9%#-M is operated y

the (learing (orporation o /ndia Htd. ((/H on ehal o the B/.

B 0at is Asset Mana7ement Companies

E company that invests its clients' pooled und into securities that match its declared fnancial oectives.

Esset management companies provide investors ith more diversifcation and investing options than they

ould have y themselves. Mutual unds, hedge unds and pension plans are all run y asset management

companies. These companies earn income y charging service ees to their clients.

DB Soiled Note: means a note hich, has ecome dirty due to usage and also includes a to piece note

pasted together herein oth the pieces presented elong to the same note, and orm the entire note.

@iiB Mutilated -an#note is a an!note, o hich a portion is missing or hich is composed o more than

to pieces.

1GB Impe"fect -an#note means any an!note, hich is holly or partially, oliterated, shrun!, ashed,

altered or indecipherale ut does not include a mutilated an!note.

banking topics misc

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