CORPORATE TRAINING & DEVELOPMENT INSTITUTE (CTDI)

CONTEMPORARY

BANKING & FINANCEVOLUME - 16 No. 11 MAY 2016

CONTENTS

PEER-TO-PEER LENDING 1

PANAMA PAPERS 3

PSLCs

MONETARY & CREDITINFORMATION REVIEW

4

MONETARY POLICY STATEMENTS 8

FINANCIAL NEWS 12

JAIIB SPECIAL 15

RECOLLECTED Q’s 16

SNIPPETS 20

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PEER-TO-PEER LENDING - (P2P) (CONCEPT: Peer-to-Peer lending is a form of crowd-funding which can be defined as theuse of an online platform that matches lenders with borrowers in order to provideunsecured loans. Sometimes abbreviated P2P lending, it involves lendingof money to individuals or businesses particularly through online services. It mayalso be termed as Social Lending or Marketplace Lending. P2P is a method of debt financing that enables individuals to borrow and lendmoney without the use of an official financial institution as an intermediary. Peer-to-peer lending removes the middleman from the process, but it also involvesmore time, effort and risk than the general brick-and-mortar lending scenarios.INTERNATIONAL EXPERIENCE:Peer-to-Peer lending, though an uncommon concept in India, has been aroundin the international markets since a decade. The various international countrieshaving experience of P2P lending is listed as follows: UK: The first country to offer P2P loans in the world. Zopa, founded inFebruary 2005, has issued loans in the amount of 500 million GBP and iscurrently the largest UK peer-to-peer lender with over 500,000 customers. USA: P2P lending industry in US started in February 2006 with the launch ofProsper, followed by Lending Club and many more. As of June 2012, LendingClub is the largest peer-to-peer lender in US based upon issued loan volumeand revenue, followed by Prosper. China: P2P lending sprung into existence in China only after the Internet ande-commerce took off in the country in the 2000s. The most prominent amongthem are CreditEase, Lufax, Tuandai, China Rapid Finance and DianRong.INDIAN CONTEXT: With a view to regulate the nascent peer-to-peer market in the country, theReserve Bank of India came out with a consultation paper that aims to classifyP2P as an NBFC, with a minimum capital requirement of Rs 2 crore. RBI wantsto create a platform that will operate only as an intermediary and that no entityother than a company can undertake this activity. The RBI has placed theConsultation Paper on Peer-to-Peer Lending, for seeking comments/views. According to RBI, considering the present stage of development, the platformcould be registered only as an intermediary, which means the role of theplatform would be limited to bringing the borrower and lender together withoutthe lending and borrowing getting reflected in the balance sheet.The Consultation paper outlines the pros and cons of regulating the sector andproposes a suitable framework for regulating this activity, which includesminimum capital, permitted activity, governance requirements, fair practicescode for customer dealing and data security.CHARACTERISTICS: Peer-to-Peer Lending, also termed as Marketplace Lending or Social Lendingis not any of the three traditional types of financial institutions namely deposittakers, investors, insurers. However, it is sometimes categorized as analternative financial service. Typical characteristics of Peer-to-Peer lending are: It is usually conducted for profit. No necessary common bond or prior relationship between lenders and

borrowers. (Contd. on Page 2)

POSITIVE VISIONPositivity is the biggest strength in life. Success follows who are positive in all situations. Many greatcelebrities had one or more weaknesses but they were always positive for self, others and situations andhence became successful by overcoming all sorts of obstacles. A little poison of negativity about othersin our mind can destroy our relationships with them. Everybody has definitely something that can beappreciated, we only need to apply positive vision and appreciate others.

MAY 2016 2

Intermediation by a peer-to-peer lending company. Transactions take place online. Lenders mayoften choose which borrowers to invest in, if the P2P platform offers that facility.

The loans can be unsecured or secured and are not normally protected by government insurancebut there can be protection funds available also.

Loans are securities that can be transferred to others, either for debt collection or profit, though notall P2P platforms provide transfer facilities or free pricing choices and costs can be very high, tensof percent of the amount sold, or nil.

SERVICES OFFERED: Most peer-to-peer intermediaries provide the following services: Online investment platform to enable borrowers to attract lenders and investors to identify and

purchase loans that meet their investment criteria. Development of credit models for loan approvals and pricing. Verifying borrower identity, bank account, employment and income. Performing borrower credit checks and filtering out the unqualified borrowers. Processing payments from borrowers and forwarding those payments to the lenders who invested

in the loan. Servicing loans, providing customer service to borrowers and attempting to collectpayments from borrowers who are delinquent or in default. Legal compliance and reporting.

Finding new lenders and borrowers (marketing).OTHER DETAILS: Beneficiary of loans: Can either be an individual or a business requiring a loan. Lender: The lender can also be a natural or a legal person. Payment of fee: Fee is paid to the platform by both the lender as well as the borrower. A one-time

fee on funded loans from borrowers is collected and a loan servicing fee is charged to investors orborrowers (either a fixed amount annually or a percentage of the loan amount).

Type of loans: Peer-to-Peer loans are unsecured personal loans where most of large loans arelent to businesses. Secured loans are sometimes offered by using luxury assets such as jewellery,watches, vintage cars, fine art, buildings, aircraft and other business assets as collateral. They aremade to an individual, company or charity. Other forms of peer-to-peer lending include studentloans, commercial and real estate loans, payday loans, as well as secured business loans, leasingand factoring.

Interest rates: The interest rates can be set by lenders who compete for the lowest rate onthe reverse auction model, or fixed by the intermediary company on the basis of an analysis of theborrower's credit.

ADVANTAGES AND DISADVANTAGES: Peer-to-Peer lending platform offers the following benefits to investors: Unlike banks, the borrowers are not asked for a set of documents. Instead information is taken

from them and is then cross-verifed with Aadhaar, voter ID, PAN, utility bill payment details, etc. Banks lend other people’s money, however in P2P lending, borrower lends his own money,

assumes the risk and gets the reward. Since the peer-to-peer lending companies offer these services entirely online, they can run with

lower overheads and provide the service more cheaply than traditional financial institutions. As a result, lenders often earn higher returns compared to savings and investment products

offered by banks, while borrowers can borrow money at lower interest rates. Compared to stock markets, peer-to-peer lending tends to have both less volatility & less liquidity.

For investors interested in socially conscious investing, peer-to-peer lending offers the possibility ofsupporting the attempts of individuals to break free from high-rate debt, assist persons engaged inoccupations or activities that are deemed moral and positive to the community, and avoidinvestment in persons employed in industries deemed immoral or detrimental to community.

Unlike depositing money in banks, peer-to-peer lenders can choose themselves whether to lendtheir money to safer borrowers with lower interest rates or to riskier borrowers with higher returns.

Despite the numerous advantages, peer-to-peer lending is not free from disadvantages andrisks. The major disadvantages are:

The lender has very little assurance that the borrower, who traditional financial intermediaries mayhave rejected due to a high likelihood of defaults, will repay their loan. Furthermore, depending onthe lending system employed, in order to compensate lenders for the risk that they are taking, theamount of interest charged for Peer-to-Peer loans may be higher than traditional prime loans.

Dealing with peer-to-peer lending is connected with the problem of ownership. The person whoowns the loans and how that ownership is transferred between the originator of the loan (theperson-to-person lending company) and the individual lender cannot be clearly distinguished.

Limited operating history of P2P lending platforms. Dependency of P2P lending platforms on low interest rates to stimulate high transaction volumes. P2P lending platforms are not obligated to make any payments to investors if borrowers do not

make payments on the underlying loans. LEGAL REGULATION: At present, there is no clear regulatory framework in India governing the

functioning of the Peer-to-Peer lending platforms.

Contd. from Page 1

VOLUME 16 NO.11 MAY 2016

EDITORIAL BOARDEDITOR:

Dr. G.S. Bhalla

ASSOCIATE EDITORS:Harsimran Singh Bhalla

Harshjot Kaur Bhalla

Jyoti Thakur

EDITORIAL ADVISOR:K.G.S. Nagpal

H.P. Singh

ADVISORY BOARD:Sanjeev Mehan (F.C.A.)

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3MAY 2016

PANAMA PAPERSINTRODUCTION: The Panama Papers are a set of 11.5 million confidential documents detailing information about more than2,14,000 offshore companies compiled by the Panamanian corporate service provider Mossack Fonseca. The firmhad leaked the papers to the International Consortium of Investigative Journalists to expose the offshore holdingsand hidden financial dealings of some of the world's most familiar names. The documents illustrate how wealthy individuals, including public officials, hide assets from public scrutiny.While the use of offshore business entities is not illegal in the jurisdictions in which they are registered, during theirinvestigation, reporters found that some of the shell corporations may have been used for illegal purposes,including fraud, drug trafficking, and tax evasion. Even as the world's wealthiest and most powerful nations have engaged in increasingly complex and intensiveefforts at international co-operation to smooth the wheels of global commerce, they have wilfully chosen to allowthe wealthiest members of Western society to shield their financial assets from taxation by taking advantage ofshell companies and tax havens. Tax havens are used to hide away taxable wealth in places where there are banking systems designed for thevery purpose of providing a tax sanctuary. Account holders use intermediaries and banks to hide the capitalwithin bogus companies, effectively hiding both the money and the account owners’ identities. While the use of taxhavens and offshore banking is not illegal, the system does have loopholes that can be exploited to allow somewealthy people to cheat the system and prevent paying taxes.BACKGROUND: The Panama Papers focussed an uncomfortable light on the small Central American republic, home to 3.9million people. Panama considered as a tax haven is known for its factory-like production of offshore companiesand offshore bank accounts for its worldwide clientele. Offshore bank accounts are located outside a client’s country of resident, usually in ‘tax haven’ territorieschosen because of financial and legal advantages. They can be used to squirrel money away from the oversight ofnational banking systems, evading regulatory oversight or tax obligations. A jurisdiction is typically consideredan offshore financial center, less formally known as a tax haven, when its banking infrastructure:a) Primarily provides services to people or businesses who are not its own residents.b) Requires little or no disclosure of information when doing business.c) Offers low taxes. Mossack Fonseca is a firm which specializes in helping foreigners set up international shell companies toprotect their financial assets. Its services to its clients include incorporating and operating shell companies infriendly jurisdictions on their behalf. They create ‘complex shell company structures’ that, while legal, also allowthe firm's clients to operate behind an often impenetrable wall of secrecy. The leaked papers detail some of theirintricate, multilevel, and multi-national corporate structures. THE LEAK:Over a year ago, an anonymous source contacted the Süddeutsche Zeitung (SZ) and submitted encrypted internaldocuments from Mossack Fonseca. In the months that followed, the number of documents continued to grow farbeyond the original leak. Ultimately, SZ acquired about 2.6 terabytes of data, making the leak the biggest thatjournalists had ever worked with. The data leaked proves how a global industry led by major banks, legal firms, and asset managementcompanies secretly manages the estates of the world’s rich and famous from politicians, FIFA officials, fraudstersand drug smugglers, to celebrities and professional athletes. The data primarily comprises e-mails, pdf files, photofiles, and excerpts of an internal Mossack Fonseca database. It covers a period spanning from the 1970s to thespring of 2016.PEOPLE UNDER SCRUTINY:a) The journalists compiled lists of important politicians, international criminals, and well-known professional

athletes, among others. The digital processing made it possible to then search the leak for the names on theselists. The ‘party donations scandal’ list contained 130 names, and the UN sanctions list more than 600. In just afew minutes, the powerful search algorithm compared the lists with the 11.5 million documents.

b) Popular Indian celebrities Amitabh Bachchan and Aishwarya Rai Bachchan are listed in the papers. Also listedare real estate developer and DLF CEO K.P.Singh, Sameer Gehlaut of the Indiabulls group, and GautamAdani's elder brother Vinod Adani. Indian politicians on the list include Shishir Bajoria from West Bengaland Anurag Kejriwal, former chief of the Delhi Lok Satta Party. All over the world, many leaders, politicians andpublic officials have been exposed.

c) The Organization for Economic Cooperation and Development has called for a meeting of senior tax officials inParis to discuss the Panama Papers. Members of the Joint International Tax Shelter Information andCollaboration (JITSIC) will take part in the meeting that presents tax administrations with a first opportunity toact on the considerable body of information revealed by the 'Panama Papers'.

The European Union will come up with a list of tax havens over the next six months to impose sanctions on thosewho help people and companies hide revenue that could be taxed within the European Union.

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PSLC’sPRIORITY SECTOR LENDING CERTIFICATESOBJECTIVES: The Reserve Bank of India has introducedPriority Sector Lending Certificates (PSLCs), on the lines ofcarbon credit trading, wherein banks can earn premium forexceeding targets. This will enable banks to meet their PrioritySector lending target and sub-targets by purchase of theseinstruments in the event of shortfall and at the same timeincentivise the surplus banks, thereby enhancing lending to thecategories under priority sector.PSLCs will provide a market-driven incentive for efficiency andenable banks to sell their surplus lending and thus earning apremium for their efficiency/geographical spread. NATURE OF THE INSTRUMENTS: The seller will be sellingfulfillment of priority sector obligation and the buyer would bebuying the same. There will be no transfer of risks or loanassets. MODALITIES: The PSLCs will be traded through the CBSportal (e-Kuber) of RBI. SELLERS/BUYERS: Scheduled Commercial Banks (SCBs),Regional Rural Banks (RRBs), Local Area Banks (LABs), SmallFinance Banks (when they become operational) and Urban Co-operative Banks who have originated PSL eligible category loanssubject to such regulations as may be issued by the Bank. TYPES OF PSLCs: There would be four kinds of PSLCs:i) PSLC Agriculture: Counting for achievement towards the totalagriculture lending target.ii) PSLC SF/MF: Counting for achievement towards the sub-target for lending to Small and Marginal Farmers.iii) PSLC Micro Enterprises: Counting for achievement towardsthe sub target for lending to Micro Enterprises.iv) PSLC General: Counting for achievement towards the overallpriority sector target. Priority Sector comprises several categories, includingAgriculture and Micro Enterprises. In addition to the overall targetand sectoral targets for lending to agriculture and microenterprises, banks are required to achieve specified sub-targetfor lending to Small and Marginal Farmers. Accordingly, to avoidcomputational issues in assessing the achievement/shortfall ofPSL targets, RBI has advised that the above four types ofcertificates will represent specific loans and count for specificsub-targets / targets as indicated hereunder:

S.No. Type ofPSLCs REPRESENTING COUNTING FOR

1. PSLC –Agriculture

All eligible Agricultureloans except loans toSF/MF for which separatecertificates are available.

Achievement ofagriculture targetand overall PSLtarget.

2. PSLC –SF/MF

All eligible loans tosmall/marginal farmers.

Achievement ofSF/MF sub-target,agriculture targetand overall PSLtarget.

3. PSLC –MicroEnterprises

All PSL Loans to MicroEnterprises.

Achievement ofmicro-enterprisesub-target andoverall PSL target.

4. PSLC –General

The residual prioritysector loans i.e. other thanloans to agriculture andmicro enterprises forwhich separate certificatesare available.

Achievement ofoverall PSL target.

Thus, a bank having shortfall in achievement of any sub-target(e.g. SF/MF, Micro), will have to buy the specific PSLC toachieve the target. However, if a bank is having shortfall inachievement of the overall target only, as applicable to it, maybuy any of the available PSLCs. COMPUTATION OF PSL ACHIEVEMENT: A bank’s PSLachievement would be computed as the sum of outstandingpriority sector loans, and the net nominal value of the PSLCsissued and purchased. Such computation will be done separatelywhere sub targets are prescribed as on the reporting date. AMOUNT ELIGIBLE FOR ISSUE: Normally PSLCs will beissued against the underlying assets. However, with theobjective of developing a strong and vibrant market for PSLCs, abank is permitted to issue PSLCs upto 50 percent of previousyear’s PSL achievement without having the underlying in itsbooks. However, as on the reporting date, the bank must havemet the priority sector target by way of the sum of outstandingpriority sector lending portfolio and net of PSLCs issued andpurchased. To the extent of shortfall in the achievement oftarget, banks may be required to invest in RIDF/other funds ashitherto. CREDIT RISK: There will be no transfer of credit risk on theunderlying as there is no transfer of tangible assets or cash flow. EXPIRY DATE: All PSLCs will expire by March 31st and willnot be valid beyond the reporting date (March 31st), irrespectiveof the date it was first sold.SETTLEMENT: The settlement of funds will be done throughthe platform as explained in the e-Kuber portal. VALUE AND FEE: The nominal value of PSLC wouldrepresent the equivalent of the PSL that would get deductedfrom the PSL portfolio of the seller and added to the PSLportfolio of the buyer. The buyer would pay a fee to the sellerwhich will be market determined. LOT SIZE: The PSLCs would have a standard lot size of ₹25 lakh and multiples thereof. ACCOUNTING: The fee paid for purchase of the PSLC wouldbe treated as an ‘Expense’ and the fee received for the sale ofPSLCs would be treated as ‘Miscellaneous Income’. DISCLOSURES: Both seller and buyer shall report theamount of PSLCs (category-wise) sold and purchased during theyear in the ‘Disclosures to the Balance Sheet’. ILLUSTRATIONS:1) Bank A may sell PSLCs with a nominal value of ₹100 croresto Bank B on July 15, 2016. Bank B will reckon ₹ 100 croretowards its priority sector achievement as on the reporting datesof September 30, 2016, December 31, 2016 & March 31, 2017,while Bank A will subtract the same from its achievement figuresfor the respective reporting dates. The PSLC will expire byMarch 31, 2017.2) Bank C may buy ₹ 100 crore PSLC on March 30, 2017 fromBank D. Bank D will subtract ₹ 100 crore from its PSL reportingon March 31, 2017 while Bank C will reckon the same towardsits achievement. The PSLC will expire by March 31, 2017.

TAX CALCULATOR ON WEBSITEThe Income Tax department has launched a computer-based tax calculator on itsofficial website that will allow users to obtain their annual tax liability. The facilitycan be used by any individual, corporate or any other entity for computing taxliability. The I-T Department has also launched E-filing of income tax returns for the

assessment year 2016-17 for a select category of entities and individuals. Two Income Tax Returns have been activated over the official e-filing portal of

the department. These are ITR 1 (SAHAJ) meant for individuals having incomefrom salary and interest and ITR 4S (Sugam) meant for individuals, HUF,partnership firms having income from presumptive business.

5MAY 2016

POLICY GUIDELINESPROVISIONING PERTAINING TO FRAUD ACCOUNTS The Reserve Bank of India has amended the provisioningnorms in respect of all cases of fraud, as under:a) Banks should normally provide for the entire amount due tothe bank or for which the bank is liable (including in case ofdeposit accounts), immediately upon a fraud being detected.While computing the provisioning requirement, banks may adjustfinancial collateral eligible under Basel III Capital Regulations -Capital Charge for Credit Risk (Standardised Approach), if any,available with them with regard to the accounts declared as fraudaccount;b) To smoothen the effect of such provisioning on quarterly profitand loss, banks have the option to make the provisions over aperiod, not exceeding four quarters, commencing from thequarter in which the fraud has been detected;c) Where the bank chooses to provide for the fraud over two tofour quarters and this results in the full provisioning being madein more than one financial year, banks should debit ‘otherreserves’ [i.e., reserves other than the one created in terms ofSection 17(2) of the Banking Regulation Act 1949] by the amountremaining un-provided at the end of the financial year by credit toprovisions. However, banks should proportionately reverse thedebits to ‘other reserves’ and complete the provisioning bydebiting profit and loss account, in the subsequent quarters ofthe next financial year;d) Banks shall make suitable disclosures with regard to numberof frauds reported, amount involved in such frauds, quantum ofprovision made during the year and quantum of unamortisedprovision debited from ‘other reserves’ as at the end of the year.

INVESTMENT ADVISORY SERVICES The Reserve Bank of India has advised that banks desirous ofoffering Investment Advisory Services (IAS) may do so eitherthrough a separate subsidiary set up for the purpose or one ofthe existing subsidiaries after ensuring that there is an arm’slength relationship between the bank and the subsidiary. Other guidelines in this regard are: The Sponsor bank should obtain specific prior approval of

Department of Banking Regulation before offering IAS throughan existing subsidiary or for setting up a subsidiary for thispurpose. (Setting up of any subsidiary will, as hitherto, besubject to the extant guidelines on Para-banking activities ofbanks).

All bank sponsored subsidiaries offering IAS will be registeredwith SEBI and regulated as per the SEBI (InvestmentAdvisors) Regulations, 2013, and shall adhere to all relevantSEBI rules and regulations in this regard.

IAS provided by the bank sponsored subsidiaries should onlybe for the products and services in which banks are permittedto deal in as per Banking Regulation Act, 1949.

The instructions/guidelines on KYC/AML/CFT applicable to thesubsidiary, issued by the concerned regulator, as amendedfrom time to time, may be adhered to in respect of customersto whom IAS is being provided.

Banks which are presently offering IAS may reorganise theiroperations in accordance with these guidelines within a periodof three years from the date of issue of this circular.CAUTION PUBLIC AGAINST DUBIOUS SCHEMES

The Reserve Bank has advised banks in their own interestand as customer education effort in the interest of the public, to

consider designing suitable posters or pamphlets or flyers ornotices containing following messages: Never respond to unsolicited offers of money received through

emails/phone/other media. No one really gives you money for free. Be careful while investing in seemingly attractive schemes

offering high returns. Don’t invest in unregulated companies/entities. Don’t rely on hearsay - Check for yourself. High return means higher risk including potential loss of entire

money – Check your risk-appetite. Take care of your money – It is hard to earn but easy to lose. When in doubt check with a trusted financial adviser. RBI has advised that wherever feasible, such messages maybe displayed or distributed in the bank branches (in the officiallanguage of the state) for easy notice by the customers. Sincebank branches are vantage points where members of public visit,it will help to disseminate the information to the public. Banksmay consider places like Automated Teller Machines orBusiness Correspondent Points where such messages could getwider visibility. This would also be beneficial to the bank as theircustomers would be aware and vigilant of any such fraudulentschemes/calls.FOREIGN INVESTMENT IN UNITS OF INVESTMENT

VEHICLES The Reserve Bank of India has decided to allow foreigninvestment in the units of Investment Vehicles registered andregulated by SEBI or any other competent authority. At present, Investment Vehicle will include the following: Real Estate Investment Trusts (REITs) registered and

regulated under the SEBI (REITs) Regulations 2014; Infrastructure Investment Trusts (InvITs) registered and

regulated under the SEBI (InvITs) Regulations, 2014; Alternative Investment Funds (AIFs) registered and regulated

under the SEBI (AIFs) Regulations 2012.Further, unit shall mean beneficial interest of an investor in theInvestment Vehicle and shall include shares or partnershipinterests. The salient features of the new investment regime are:i) A person resident outside India including a Registered ForeignPortfolio Investor (RFPI) and a Non-Resident Indian (NRI) mayinvest in units of Investment Vehicles.ii) The payment for the units of an Investment Vehicle acquiredby a person resident or registered / incorporated outside Indiashall be made by an inward remittance through the normalbanking channel including by debit to an NRE or an FCNRaccount.iii) A person resident outside India who has acquired orpurchased units in accordance with the regulations may sell ortransfer in any manner or redeem the units as per regulationsframed by SEBI or directions issued by RBI.iv) Downstream investment by an Investment Vehicle shall beregarded as foreign investment if either the sponsor or theManager or the Investment Manager is not Indian ‘owned andcontrolled’ as defined in Regulation 14 of the PrincipalRegulations.v) In case the sponsors or managers or investment managersare organised in a form other than companies or LLPs, SEBIshall determine whether the sponsor or manager or investmentmanager is foreign owned and controlled.

6MAY 2016

vi) The extent of foreign investment in the corpus of theInvestment Vehicle will not be a factor to determine as towhether downstream investment of the Investment Vehicleconcerned is foreign investment or not.vii) Downstream investment by an Investment Vehicle that isreckoned as foreign investment shall have to conform to thesectoral caps and conditions / restrictions, if any, as applicable tothe company in which the downstream investment is made asper the FDI Policy or Schedule 1 of the Principal Regulations.viii) Downstream investment in an LLP by an Investment Vehiclethat is reckoned as foreign investment has to conform to theprovisions of Schedule 9 of the Principal Regulations as well asthe extant FDI policy for foreign investment in LLPs.ix) An Alternative Investment Fund Category III with foreigninvestment shall make portfolio investment in only thosesecurities or instruments in which a RFPI is allowed to invest.x) The Investment Vehicle receiving foreign investment shall berequired to make such report and in such format to ReserveBank of India or to SEBI as may be prescribed by them from timeto time.

COMPUTATION AND DISSEMINATION OF RBIREFERENCE RATE

BACKGROUND The Reserve Bank had constituted a Committee on FinancialBenchmarks (Chairman: Shri P. Vijaya Bhaskar) to study thevarious issues relating to financial benchmarks in India and thecommittee had also reviewed the process of computation anddissemination of Rupee Reference Rate published by theReserve Bank. The Committee had recommended that theUSD/INR Reference Rate of the Reserve Bank should bederived based on the actual market transactions so as to ensurethat the Reference Rate appropriately represents the prevailingspot rate. The Reserve Bank compiles and publishes on a daily basisthe Reference Rate for Spot USD/INR. Under the existingmethodology, the rate is arrived at through a polling processinvolving rates obtained from select banks. As announced in the First Bi-monthly policy statement for theyear 2016-17, the Reserve Bank has revised the existingmethodology for computation of the RBI Reference Rate bymaking the following changes: The rate for spot US Dollar against the Indian Rupee will be

computed on the basis of the Volume Weighted Average of theactual market transactions that have taken place during arandomly selected 15 minute window between 11.30 a.m. and12.30 p.m. every week- day (excluding Saturdays, Sundaysand Bank Holidays in Mumbai).

The transactions data from electronic trading platforms,obtained by RBI, would be used for computation of theUSD/INR Reference Rate.

In case the required transactions data is not available onaccount of technical failure/snag or for any other reason, RBImay, in that case, compute the USD/INR Reference Rate byconducting polling of rates from select major banks as atpresent.

The other three Reference Rates viz EUR/INR, GBP/INR andJPY/INR would continue to be computed by crossing theUSD/INR Reference Rate with the ruling EUR/USD, GBP/USDand USD/JPY rates.

The span of the time window will be increased from 15minutes over a period of time on the basis of the experiencegained.

The daily press release of the RBI Reference Rate of USDollar will be issued every week- day (excluding Saturdays,Sundays and Bank Holidays in Mumbai) at around 1.30 p.m.

These changes shall come into effect from May 2, 2016(Monday).

RUPEE DENOMINATED BONDS OVERSEAS CONCEPT: Offshore rupee bonds are financial instrumentsissued by foreign multilateral institutions, such as ADB and IFC,which allow foreign investors to take exposure to Indiancurrency. These bonds are denominated in rupees but settled ina foreign currency i.e., the investment is made in the foreigncurrency which is then converted into Indian rupees and investedin India. These offshore rupee bond programmes are intended toprovide an alternative source of funding for Indian companies. The Reserve Bank, in its Monetary Policy Statementannounced on April 5, 2016, had fixed the current limit of USD51 billion for foreign investment in corporate debt in Rupee termsat ₹ 2443.23 billion. Issuance of Rupee denominated bondsoverseas will be within this aggregate limit of foreign investmentin corporate debt. As the overall limit is now prescribed in Rupee terms, theReserve Bank has modified the instructions with regard toissuance of Rupee denominated bonds overseas as under: The maximum amount which can be borrowed by an entity in a

financial year under the automatic route by issuance of thesebonds will be ₹ 50 billion and not USD 750 million. Proposalsto borrow beyond ₹ 50 billion in a financial year will requireprior approval of the Reserve Bank.

The criteria for investors and location for issuance of thesebonds has been modified in order to have consistencyregarding eligibility of foreign investors in corporate debt.

The minimum maturity period for Rupee denominated bondsissued overseas has been reduced to three years in order toalign with the maturity prescription regarding foreigninvestment in corporate bonds through the Foreign PortfolioInvestment (FPI) route.

Borrowers issuing Rupee denominated bonds overseas shouldincorporate clause in the agreement / offer document so as toenable them to obtain the list of primary bond holders andprovide the same to the regulatory authorities in India as andwhen required.

ANNUAL PERFORMANCE REPORT FOR ODIThe Reserve Bank of India has issued revised instructionsrelating to submission of the Annual Performance Report (APR)in Overseas Direct Investment (ODI) for Indian Party (IP) /Resident Individual (RI), who have to submit an APR to theReserve Bank by June 30 every year in respect of each JointVenture (JV) / Wholly Owned Subsidiary (WOS) outside India setup or acquired by the IP / RI. The objective was to provideAuthorised Dealer (AD) banks greater capability to tracksubmission of APRs and also improve compliance level in thematter of submission of APRs by the IPs /ACCEPTANCE OF DEPOSITS BY INDIAN COMPANIESThe Reserve Bank on April 13, 2016 clarified that keepingdeposits with an Indian company by persons resident outsideIndia, in accordance with Section 160 of the Companies Act,2013, is a current account (payment) transaction and, as such,does not require any approval from Reserve Bank. All refunds ofsuch deposits, arising in the event of selection of the person asdirector or getting more than twenty five percent votes, shall betreated similarly.

NBFC-MFIS TO ACT AS CHANNELISING AGENTS The Reserve Bank has allowed Non-Banking FinancialCompany-Micro Finance Institutions (NBFC-MFIs) to act aschannelising agents for providing loans under special schemesof Central/State Government Agencies to targeted socio-economic sections of the population subject to select conditions.

7MAY 2016

With a view to facilitate the use of NBFC-MFI network todistribute such targeted loans, the Reserve Bank advisedthat: Loans disbursed or managed by NBFC-MFIs in their capacity

as channelising agents for Central/State GovernmentAgencies shall be considered as a separate businesssegment. These loans shall not be included either in thenumerator (qualifying assets) or the denominator (total assets)for the purpose of determining the minimum qualifying assetscriteria, at present, 85 percent;

The interest charged on such loans shall be excluded fordetermining the variance between the maximum and minimuminterest rate;

The cost of such funds shall not be reckoned for arriving ataverage cost of funds as well as interest rates charged toborrowers as per NBFC-MFIs directions.

INFRASTRUCTURE DEBT FUNDS CONCEPT: IDFs are investment vehicles which can besponsored by commercial banks and NBFCs in India in whichdomestic/offshore institutional investors, specially insurance andpension funds can invest through units and bonds issued by theIDFs. IDFs act as vehicles for refinancing existing debt ofinfrastructure companies, thereby creating fresh headroom forbanks to lend to fresh infrastructure projects. With a view to facilitate better Asset Liability Management, theReserve Bank of India in consultation with the Government ofIndia, has decided to allow Infrastructure Debt Fund-Non-Banking Financial Companies (IDF-NBFCs) to raise fundsthrough shorter tenor bonds and Commercial Papers (CPs) fromthe domestic market to the extent of upto 10 per cent of theirtotal outstanding borrowings.CONCENTRATION OF CREDIT/ INVESTMENT NORMSThe Reserve Bank of India has advised all the SystemicallyImportant Non-Banking Financial (Non-Deposit Accepting orHolding) Companies that concentration of credit/ investmentnorms shall not apply to a systemically important non-bankingfinancial company not accessing public funds in India, eitherdirectly or indirectly, and not issuing guarantees.

SECURITY / INSPECTION NEEDS AND MOVEMENTOF TREASURE

The Reserve Bank of India has advised all the banks havingcurrency chests to ensure conducting of fire audits bi-annually(once in two years) by the officials from the District FireDepartment. The banks may also ensure that the workingcondition of the hotline and other security related gadgets, viz.access control, CCTV, etc. are checked once in a fortnight by theCC officials.

IMPLEMENTATION OF CBS With the objective of ensuring implementation of standardisedCore Banking Solution (CBS) in Urban Cooperative Banks(UCBs), the Reserve Bank of India has prescribed standards andbenchmarks for CBS in UCBs and decided to provide technicalsupport to UCBs through Institute for Development andResearch in Banking Technology (IDRBT). Accordingly, a scheme for providing financial assistance toUCBs for implementation of CBS has been formulated inconsultation with IDRBT and would be implemented byIDRBT/Indian Financial Technology and Allied Services (IFTAS)(a subsidiary of IDRBT). The initial set up cost of ₹ 4 lakh will be paid by the ReserveBank to IFTAS. Thereafter, the recurring cost of ₹ 15,000 perbranch per month will be borne by the UCB.

UCBs which have not implemented / partially implemented CBSwill be eligible for financial assistance under the scheme. SuchUCBs may approach IDRBT/IFTAS for availing benefits underthe scheme.

UNSECURED EXPOSURE NORMS FOR UCBS In order to provide further impetus to Urban CooperativeBanks (UCBs) engaged in financial inclusion, the Reserve Bankof India has allowed UCBs whose priority sector loan portfolio isnot less than 90 per cent of the gross loans, to grant unsecuredadvances to the extent of 35 per cent of their total assets as perthe audited balance sheet at the end of the preceding financialyear, subject to select conditions. The dispensation for bankswhose priority sector lending portfolio is less than 90 per cent willremain unchanged. For being eligible for the dispensation, the UCB should haveCRAR of not less than 9 per cent and Gross NPAs of not morethan 7 per cent as per the latest Inspection Report and auditedfinancial statements. Eligible banks may apply to the RegionalOffice of the RBI under whose jurisdiction its head office issituated.

OVERSIGHT OF GOVERNMENT BUSINESS INAGENCY BANKS

The Reserve Bank on April 7, 2016 put in place a new systemof oversight of government business in agency banks and themain changes in the new system are:a) The scope of the review/inspection will now also covergovernment business at the Head Offices of agency banks.Various branches and Centralised Pension Processing Centres(CPPCs) will continue to be visited as hitherto.b) The current practice of issuing reports at the end of thereview/ inspection will be discontinued. However, theoffices/branches will be advised of action points, if any, with acopy to its controlling office.c) Comments in respect of action points marked as “Major” maybe submitted to the Regional Offices of the Reserve Bank underwhich the branch/office falls.d) As regards other action points, necessary rectification may beensured by the bank itself. However, its quality and sustenancemay be examined and commented upon by internal audit. As a part of the new arrangement, offsite monitoring ofgovernment business and periodical interactions with seniorexecutives of your bank dealing with government business, havealso been introduced.

FDI IN SERVICES SECTOR UP 85.5% With the Government taking steps to improve ease of doing

business and attract foreign investment, FDI inflows into theservices sector grew by 85.5 per cent to $4.25 billion in theApril-December period.

The sector, which includes banking, insurance, outsourcing,R&D, courier and technology testing, had received foreigndirect investment (FDI) worth $2.29 billion during April-December 2014, according to the Department of IndustrialPolicy and Promotion (DIPP).

The other sectors where inflows have recorded growth are:computer software and hardware ($5.3 billion), trading ($2.71billion), automobiles ($1.78 billion) and chemicals ($1.19 bn).

In the Insurance and Pension sectors, foreign investment willbe allowed through the automatic route for up to 49% subjectto the guidelines on Indian management and control, to beverified by the regulators whereas earlier, foreign investmentup to 26% was allowed through the automatic route.

8MAY 2016

MONETARY POLICY STATEMENT, 2016-17 ((FIRST BI-MONTHLY))

The Reserve Bank of India, in its First Bi-Monthly MonetaryPolicy Review for FY 2016-17, has shifted its stance on liquidityin the banking system, from keeping it in a certain amount ofdeficit (about one per cent of net demand and time depositliabilities) to one of keeping it close to zero (or ‘neutrality’).Moving from a one per cent deficit to about neutral means anadditional Rs 80,000 to 90,000 crore.A rate cut is consistent with the RBI's approach to ease rates,based on inflation and growth dynamics. In addition, theframework announced by RBI to improve liquidity conditions arewelcome and these measures are expected to significantlyenhance the effectiveness of rate cuts and aid in transmission.TARGETS:The Monetary Policy has pegged 2016-17 growth forecast

at 7.6%.The Policy expects Inflation at around 5%.MONETARY & LIQUIDITY MEASURES:Following are the revised Monetary and Liquidity Measures. CASH RESERVE RATIO: Cash Reserve Ratio (CRR) ofscheduled banks unchanged at 4.00 per cent of their netdemand and time liabilities (NDTL). However, RBI has reducedthe minimum daily maintenance of the Cash Reserve Ratio from95% of the requirement to 90% effective from the fortnightbeginning April 16, 2016. SLR: As per the time frame the Statutory Liquidity Ratio ofscheduled commercial banks reduced by 25 basis points to21.25% as on 2nd April 2016. Further, SLR to be reduced by 25basis points on 9th July 2016, 25 basis points on 1st Oct 2016,and another 25 basis points on 1st Jan 2017 to reach to 20.5%. REPO RATE: The policy Repo rate under the liquidityadjustment facility (LAF) reduced by 25 basis points from 6.75per cent to 6.5 per cent w.e.f. 5th April, 2016.Further, RBI has decided to narrow the policy rate corridor from+/-100 basis points (bps) to +/- 50 bps by reducing the MSF rateby 75 bps & increasing the reverse repo rate by 25 bps, with aview to ensuring finer alignment of the weighted average call rate(WACR) with the repo rate; REVERSE REPO RATE: The Reverse repo rate determinedwith a spread of 50 bps points below the repo rate, stands at6.0% w.e.f. 5th April, 2016. MARGINAL STANDING FACILITY (MSF): The MSF rate (anemergency funding window) stands at 7% w.e.f. 5th April, 2016. BANK RATE: The Bank Rate stands decreased to 7% w.e.f.5th April, 2016. With these changes, the MSF rate and the BankRate are recalibrated to 50 basis points above the repo rate. TERM REPOS: To continue to provide liquidity underovernight repos at 0.25% of bank-wise NDTL and liquidity under7-day and 14-day term repos of up to 0.75% of NDTL of thebanking system through auctions. Further, RBI has decided tocontinue with daily one-day term repos and reverse repos tosmooth liquidity.

ASSESSMENTGLOBAL ECONOMY: The global economic activity has beenquiescent. Perceptions of downside risks to recovery in someadvanced economies (AEs) at the beginning of 2016 haveeased, while major emerging market economies (EMEs)continue to contend with weak growth and still elevated inflationamidst tighter financial conditions. World trade remains subdueddue to falling import demand from EMEs.

DOMESTIC ECONOMY: Agriculture: Gross value added (GVA) in agriculture and allied activitiesmoderated in H2 of 2015-16, pulled down by the contraction dueto the year-on-year decline in kharif production. Turning to Q4, second advance estimates of the Ministry ofAgriculture indicate that despite acutely low reservoir levels anda deficient north-east monsoon, rabi foodgrains productionincreased over its level a year ago – mainly in wheat and pulses. On the other hand, fertiliser production has picked up andhorticulture as well as allied activities have remained resilient. Industry: Value added in industry accelerated in H2, led bymanufacturing which benefited from the sustained softness ininput costs. By contrast, industrial production remained flat withmanufacturing output shrinking since November. Robustexpansion in coal output has buoyed both mining activity andelectricity generation and stemmed the weakening of industrialoutput. However, capital goods production fell into deepcontraction since November, even after excluding lumpy andvolatile items like rubber insulated cable. With improved perceptions on overall economic conditionsand income, the Reserve Bank’s Consumer Confidence Surveyof March 2016 shows marginal improvement in consumersentiments. The Reserve Bank’s industrial outlook surveysuggests that business expectations for Q1 of 2016-17 continueto be positive. Services Sector: Services sector activity expanded steadily through the year,with trade, hotels, transport, communication and publicadministration, defence and related services turning out to be themain drivers in H2. The construction sector continues to be overburdened byunsold inventory in the residential space, although commercialreal estate is being boosted by demand from informationtechnology (IT) and IT-enabled services. Road construction hasaccelerated, including in terms of new awards. Retail Inflation: Retail inflation measured by the consumer price index (CPI)dropped sharply in February after rising for six consecutivemonths due to a larger than anticipated decline in vegetableprices, helped by prices of pulses starting to come off the surgethat began in August, and effective supply management thathelped limit cereal price increases. Inflation in the fuel group moderated across electricity,kerosene, cooking gas and firewood, the latter easing pressureson rural inflation. CPI Inflation: CPI inflation excluding food and fuel edged up mainly underhousing, education, personal care and transport and communication,suggesting capacity constraints in the services sector. Excluding petrol and diesel from this category, inflation stayedelevated and persistent at or above 5 per cent, indicating a possibleresistance level for further downward movements in the headline. Liquidity Conditions: Liquidity conditions, which had tightened since mid-December, were stretched further by the larger-than-usualaccumulation of cash balances by the Government, unusuallyheightened and persistent demand for currency, a pick-up inbank credit and flatter deposit mobilisation at this time relative topast years. The Reserve Bank undertook liquidity operations to quellthese pressures and supplemented normal operations with largeamounts of liquidity injected through fine-tuning variable raterepo auctions in tenors ranging between overnight and 56 days.

9MAY 2016

The average daily liquidity injection (including variable rateovernight and term repos) increased from 1,345 billion inJanuary to 1,935 billion in March. Besides, durable liquidity wasalso provided through open market operations (OMOs) of theorder of 514 billion and 375 billion through buy-back operationsin February and March. The Reserve Bank also startedconducting reverse repo and MSF operations to enable thefrictionless functioning of the payment and settlement system.

DEVELOPMENTAL AND REGULATORY POLICIES Liquidity Framework for Monetary Policy Operations: Liquidity management is driven by two objectives: first, theneed to supply or withdraw short term liquidity from the marketso as to accommodate seasonal and frictional liquidity needssuch as the build-up of Government balances and demand forcash; and second, the need to supply durable liquidity in theeconomy so as to facilitate growth, while ensuring that themonetary policy stance is supported. The first objective of meeting short term liquidity needs hasbeen accomplished through the provision of liquidity by theReserve Bank under its regular facilities - variable rate 14-day/7-day repo auctions equivalent to 0.75 per cent of banking systemNDTL, supplemented by daily overnight fixed rate repos (at therepo rate) equivalent to 0.25 per cent of bank-wise NDTL. The Reserve Bank aims to meet the second objective bymodulating net foreign assets (NFA) and net domestic assets(NDA) growth over the course of the year, broadly consistentwith the demand for liquid assets to meet transaction needs ofthe economy. This will ensure adequate availability of durableliquidity, regardless of short term seasonal and frictionalfluctuations.BANKING STRUCTURE: Revision of Regulatory Framework: The Basel Committee on Banking Supervision (BCBS) hasissued final standards on the standardised approach formeasuring counterparty credit risk (SA-CCR), a revisedframework for the capital treatment of bank exposures to centralcounterparties (CCPs) and final rules on revised Pillar 3disclosure requirements. These standards will be implementedby January 1, 2017 by BCBS member jurisdictions. The Reserve Bank will also undertake revision of theguidelines on the securitisation framework in the light of theBCBS revisions to the securitisation framework which is to beimplemented by January 2018. Rationalisation of Branch Authorisation Policy:With a view to facilitating financial inclusion and providingflexibility on the choice of delivery channel, it is proposed toredefine branches and permissible methods of outreach keepingin mind the various attributes of the banks and the types ofservices that are sought to be provided. Differentiated Licensing of Banks:In addition to recently licensed differentiated banks such aspayments banks and small finance banks, the Reserve Bank willexplore the possibilities of licensing other differentiated bankssuch as custodian banks and banks concentrating on whole-saleand long-term financing. Margin Requirements for Over the Counter Derivatives: InMarch 2015, the BCBS and the International Organisation ofSecurities Commissions (IOSCO) finalised a framework onmargin requirements for non-centrally cleared derivatives. Aconsultative paper outlining the Reserve Bank’s approach toimplementation of these requirements will be issued by end-April2016 with a target of finalising the framework by end-July 2016.

Countercyclical Capital Buffers (CCCB): On the basis of areview and empirical testing of CCCB indicators, RBI hasdecided that it is not necessary to activate CCCB at this point intime. Supervisory Enforcement Framework: For improvedsupervisory framework the framework, which meets theprinciples of natural justice and global standards of transparency,predictability, standardisation, consistency, severity andtimeliness of action, will be formalised by June 2016. Cyber Risks - Supervisory Assessment of Preparednessof Banks: To strengthen the information security preparedness of banksas well as to assess the effectiveness of IT adoption by banks,RBI plans to cover major banks in 2016-17 and all banks from2017-18. The Reserve Bank has constituted an Expert Panel(Chairperson: Smt. Meena Hemachandra) on IT Examinationand Cyber Security to provide broad guidance on its approach. Technology Support to Urban Cooperative Banks (UCBs):RBI has been decided to prescribe standards and benchmarksfor CBS in UCBs and provide financial assistance and technicalsupport through the Institute for Development and Research inBanking Technology (IDRBT). The initial set-up cost in thisregard will be borne by the RBI while the recurring cost will beborne by the UCBs.FINANCIAL MARKETS: Introduction of Money Market Futures: The Working Group on Enhancing Liquidity in the GovernmentSecurities and Interest Rate Derivatives (Chairman: Shri R.Gandhi) had recommended introduction of interest rate futuresbased on the overnight call money borrowing rate. RBI has decided to allow futures on an appropriate moneymarket rate. The contract specifications will be decided inconsultation with market participants and the Securities andExchange Board of India (SEBI) by end-September 2016. Easier Market Access to Gilt Account Holders: With a view to easing the process of investment by giltaccount holders, it will be made incumbent on custodians toprovide all gilt account holders access to the NDS-OM webfacility to enable them to trade directly on the platform. A similar facility is also proposed to be extended to foreignportfolio investors (FPIs). Broadening Market Participation - Electronic TradingPlatforms: In order to broaden participation in OTC derivatives and toprovide a safe trading environment, RBI has proposed to put inplace a policy framework for authorisation of electronic platformswith linkage to an approved central counterparty for settlement. The framework will also cover forex platforms to facilitatehedging by small and retail customers. Tripartite Repo in Government Securities Market: The Working Group on Enhancing Liquidity in the GovernmentSecurities and Interest Rate Derivatives (Chairman: Shri R.Gandhi) had recommended introduction of tripartite repo todevelop a term repo market. In this context, RBI has decided to undertake acomprehensive review of collateralised money market segments,including introduction of tripartite repo, in consultation withmarket participants. The review will be placed on the ReserveBank’s website by September 2016 for wider feedback. Review of Guidelines for Commercial Paper (CP): With a spurt in the issuance of CPs, market participants andthe Fixed Income Money Market and Derivatives Association(FIMMDA) have expressed the need for greater transparencyand better dissemination of information.

10MAY 2016

Accordingly, RBI has proposed to undertake a comprehensivereview of guidelines with the objective of strengtheningdisclosure requirements by issuers of CPs, reviewing the role ofissuing and paying agents (IPAs) and putting in place aninformation dissemination mechanism. Guidelines for Accounting of Repo/Reverse RepoTransactions:It is proposed to align the accounting norms to be followed bymarket participants for repo/reverse repo transactions under theliquidity adjustment facility (LAF) and the marginal standingfacility (MSF) with the accounting guidelines prescribed formarket repo transactions. Easing of Restrictions on Plain Vanilla Forex Options: Currently, plain vanilla currency options require adherence tostringent suitability and appropriateness norms although they areconsidered a generic product, while forward contracts areexempt from the same. It is proposed to bring plain vanilla forex options bought bybank clients at par with forex forwards on regulatoryrequirements. Forex Benchmark-RBI Reference Rate:As recommended by the Committee on Financial Benchmarks(Chairman: Shri P. Vijaya Bhaskar), RBI has decided to moveover to a process of determining the reference rate based onactual market transactions on volume weighted basis with effectfrom May 2, 2016. NRIs to Participate in the Exchange Traded CurrencyDerivatives (ETCD) Market:RBI has decided to permit NRIs to participate in the ETCDs,subject to limits and other conditions that are stipulated by theexchanges recognised by the SEBI. Guidelines in this regard willbe issued by the Reserve Bank in consultation with the SEBI . Initiatives for Start-ups: In the Sixth Bi-Monthly Monetary Policy Statement for 2015-16, the Reserve Bank had highlighted the steps being taken withrespect to the Government’s initiatives to promote ease of doingbusiness for start-ups. Guidelines/clarifications have already been issued in areassuch as online submission of Form A2 for outward remittancesup to certain thresholds, issue of shares without cash paymentsand acceptance of payments by the Indian start-ups on behalf oftheir overseas subsidiaries. In addition, guidelines in respect of deferred payment throughescrow / indemnity arrangement for transfer of shares, enablinginvestment by foreign venture capital investors (FVCIs) in start-ups and overseas investment operations for start-ups will beissued soon in consultation with the Government. Furthermore, the simplification of process for dealing withdelayed reporting of FDI transactions and provisions for anenabling external commercial borrowing regime for start-ups arebeing examined by the Government and the Reserve Bank.NBFCs, FINANCIAL INCLUSION AND PAYMENT ANDSETTLEMENT: Simplification of Process of Registration of New Non-banking Financial Companies (NBFCs):In order to make the process of registration of new NBFCssmoother and hassle free, RBI has decided to simplify andrationalise the process of registering new NBFCs. The newapplication forms will be simpler and the number of documentsrequired to be submitted will be reduced to a minimum.

Peer to Peer Lending (P2P):P2P lending has shown accelerated growth over the last oneyear and the contours of regulating P2P lending will be decidedin consultation with the SEBI.Strengthening Business Correspondent Infrastructure:The BC model offers significant scope for further strengthening.Accordingly, the following initiatives are proposed:i) In order to ensure the competence of BCs and to promotequality delivery of financial services, a graded certification /training programme for BCs is proposed to be introduced. Thiswould enable BCs with a good track record and advancedtraining to be entrusted with more complex tasks such ashandling/delivery of financial products that go beyond depositand remittance.ii) In order to have a tracking system of BCs, RBI has proposedto create a registry covering all BCs, both existing and new. Theregistration will be online and will capture basic details includinglocation of fixed point BCs, nature of operations and the like.This database will be updated on a quarterly basis and the IBAwill be requested to put in place a registry of BC agents inconsultation with all stakeholders. Micro, Small and Medium Enterprises (MSMEs):The Reserve Bank will shortly lay down a framework foraccreditation of credit counsellors who can act as facilitators forentrepreneurs to access the formal financial system with greaterease and flexibility. Credit counsellors will also assist MSMEs inpreparing project reports in a professional manner which would,in turn, help banks make more informed credit decisions. Payment and Settlement Systems in India – Vision 2018: The Reserve Bank will publish Vision 2018 for the paymentand settlement systems in the country by end-April 2016. Vision2018 will continue to focus on migrating to a ‘less-cash’ andmore digital society. This would be complemented by enhanced supervision ofpayment system operators, improvement in customer grievanceredressal mechanisms and for the strengthening of the paymentsinfrastructure.

UNIFORM DEFINITION FOR BAD LOANS ON THECARDS:

Global banking regulators body, ‘The Bank for InternationalSettlements' (BIS), has proposed a uniform definition forNon-Performing Assets (NPAs) and forbearance to ensureconsistency in disclosures.

Coming out with the detailed consultative paper titled as'Prudential treatment of problem assets - definitions of non-performing exposures and forbearance', BIS said thedefinitions are aimed at promoting ‘harmonisation in themeasurement and application of two important measuresof asset quality and thereby, foster consistency insupervisory reporting and disclosures by banks.

The BIS has said that the definition of non-performingexposures introduces criteria for categorising loans anddebt securities that are centred around delinquency status(90 days past due) or the unlikeliness of repayment.Besides, it seeks to clarify the consideration of collateral incategorising assets as non-performing, apart from mootingclear rules with respect to upgrading of an exposure from'non-performing' to 'performing' asset.

The proposed definition sets out the criteria on when anexposure would cease to be identified as forborne and alsotakes into account the soundness of the borrower concerned.

11MAY 2016

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BRANCH OFFICES ADDRESS:HYDERABAD BRANCH: Aman Arcade, 3rd Fl, Opp. Canara Bank Flats, P.G. Road, BehindParadise, Secunderabad (A.P.), Ph. 040-32946088, Mob – 09395140742PATNA: Office No. 203, Opp. PNB Union Office, Exhibition Road, Saboo Chambres, BehindRepublic Hotel, Patna. Mob: 07050131270TRIVANDRUM BRANCH: TC NO. 2/2131, T.P.J. Road, Plamood, Pattom, Trivandrum(Kerala), Mob No. 09447883042BANGALORE BRANCH: HOUSE NO. 26, INDIAN EXPRESS LAYOUT, VERPAKASHPURA,VIDHAYARANIPUR – POST, BANGALORE – 560097 (KARNATAKA), Mob: 09449524992

12MAY 2016

BANKING & FINANCIAL NEWS FISCAL DEFICIT OF 3.9% OF GDP ACHIEVED: TheGovernment has surpassed its revised indirect tax collection estimate of Rs7.04 lakh crore for 2015-16 and has collected Rs 7.09 lakh crore as perprovisional estimates. This follows Finance Ministry's announcement that thefiscal deficit target of 3.9% of GDP and the disinvestment target for FY16 havebeen met. The fiscal deficit target has been met after reducing the Planexpenditure from the revised FY16 estimate by Rs.7,197 crore. Further, theestimated tax revenue of Rs.9.47 lakh crore is expected to be fully met whilethe revised disinvestment target of Rs 25,000 crore has been achieved. IRDAI OKAYS LIC INVESTMENTS IN PSBs: The InsuranceRegulatory and Development Authority of India has given a clean chit to theLife Insurance Corporation, after a scrutiny of its investments in public sectorbanks. Earlier, the RBI had expressed concerns over LIC’s investments, sayingit can ‘affect the financial stability’ of the economy, after the latter increased itsstake in several public sector banks last year. CONTACTLESS MOBILE PAYMENTS OPTION: ICICI Bankhas launched a contactless option in its app 'Pockets' that will allow users tomake payments at outlets by tapping their smartphones. Currently, the featureis made available to the bank's employees which will be extended to all ICICIcard holders. The service creates 'virtual' cards for the physical cards that arestored on the banks' servers. INDIA’S FIRST G-SEC FACILITY VIA ATM’S: IDBI Bankhas launched India's first-of-its-kind facility which will allow retail customers ofthe bank to invest in government bonds (G-Sec) through the bank's ATMs.Customers need to do a one-time registration to avail the facility. This is in linewith RBI's efforts towards broad-basing and expanding retail holding ofgovernment securities in the country. PAY INTEREST ON SB ACCOUNTS ON QUARTERLYBASIS: The RBI has asked banks to pay interest on their customers’ savingsaccounts on a quarterly basis or shorter duration. Currently the interest iscredited in savings account on a half-yearly basis. Interest on savings depositshall be credited at quarterly or shorter intervals (on domestic savingsdeposits). CURRENCY SWAP AGREEMENT WITH BHUTAN: TheReserve Bank of India has signed a SAARC Currency Swap Agreement withthe Royal Monetary Authority of Bhutan (RMBA). Under the arrangement, theRMBA can make withdrawals of US dollar, Euro or Indian Rupee in multipletranches up to a maximum of US$ 100 million or its equivalent. The agreementis valid for a period of three years from the date of signing. FERRARI RANGE OF CREDIT CARDS: ICICI Bank has launched its new range of co-branded credit cards inassociation with the Italian luxury sports car manufacturer, Ferrari for the elitecustomers, who are enthusiasts of the iconic luxury brand. The Ferrari credit cards will be available in two variants – Ferrari PlatinumCredit Card by ICICI Bank and Ferrari Signature Credit Card by ICICI Bank. Available on the Visa platform, these cards offer a wide range of exclusiveprivileges to complement Ferrari and motor racing fans’ lifestyle. SMARTUP FOR STARTUPS: HDFC Bank Ltd has launchedSmartUp, a first-of-its-kind dedicated solution for start-ups, to meet all therequirements of a start-up, offering banking and payment solutions, along withadvisory and forex services. The five startups are Senseforth Technologies,Tagnpin, Safe 2 Pay, Bugclipper and Taptis Technology. SBI PARTNERS WITH UBER FOR HASSLE FREE VEHICLEFINANCING: State Bank of India has undertaken partnership with Uber,world's largest on-demand transport aggregation company, to provide vehiclefinance for driver-partners on its platform. The partnership with Uber will also help in simplifying the documentation

requirements thereby eliminating traditional financial statements like incometax returns and all these loans will be issued as collateral free and carry avery competitive interest rate.

INDIA OFFERS HIGHEST OVERSEAS CREDIT TOBANGLADESH: India has signed an agreement to extend $2 billion as lineof credit to Bangladesh, the highest ever credit offered by India to any country.

The credit would be used in implementing 14 different projects covering power,roads and health sectors etc. RBI TO BUY GOVT BONDS: The RBI has stated that it will buygovernment securities via Open Market Operations (OMOs) to infuse liquidityof Rs.15,000 crore into the system. Under this, the RBI will purchase securitiesmaturing between 2018 and 2030. OMOs are buying or selling operationsundertaken by the RBI with an objective to adjust rupee liquidity conditions. ADVANCING ASIA CONFERENCE 2016:The Government of India and the International Monetary Fund (IMF) jointlyhosted a conference named ‘Advancing Asia: Investing for the future’ in NewDelhi. Key issues discussed in the conference included slowing potentialgrowth, rising debt, infrastructure bottlenecks, role of trade and other structuralreforms in boosting output and macroeconomic resilience. STAND UP INDIA SCHEME: PM has launched Stand up Indiascheme with the aim to promote entrepreneurship among the SCs/STs tribesand women by facilitating loans in the range of Rs 10 lakh and one crore. A corpus of Rs.10,000 crore has been allocated to the scheme. SCs / STs

and women entrepreneurs who avail loan would be given a RuPay DebitCard for withdrawal, besides comprehensive support like pre-loan training,facilitating loan, factoring and marketing.

It is expected to benefit a large number of such entrepreneurs, as it isintended to facilitate at least two such projects per bank branch.

REDEMPTION OF GMS DEPOSITS IN GOLD: TheFinance Ministry tweaked the norms for the Gold Monetisation Scheme (GMS)by making gold deposited by investors under medium and long-term depositsredeemable in terms of gold. However, the interest accrued will be paid only incash. It is expected that the modification will make the scheme more attractivefor potential depositors. INDIA BECOMES 4th LARGEST SPENDER ON DEFENCE:According to research firm IHS, India has become the world’s fourth-largestspender on defence, following a 13.1% increase in its 2016-17 defence budget.India’s rise in rankings from sixth position last year is also attributed to cuts inmilitary spending by Russia and Saudi Arabia, where low oil prices have putconsiderable strain on their finances. CRISIL DOWNGRADES HIGHEST EVER DEBT INFY16: Rating agency Crisil has downgraded debt of Indian companies worthRs.3.8 lakh crore in 2015-16, the highest ever amount downgraded in a fiscal.Firms in the metal sector accounted for more than half of the debt followed byinfrastructure companies. INDIA’S FIRST AADHAR BASED ATM: DCB Bank has launched an India’s first of its kind Aadhaar-based Automatic

Teller Machine (ATM) usage facility. Currently, this ATM has been placed inpilot site at DCB Bank at Peninsula Business Park, Mumbai.

Under this facility, DCB customers can transact using their biometric detailsinstead of the PIN. Thus it is a cardless and PIN less ATM. The customercan swipe the card at an ATM or key-in the 12-digit Aadhaar number to starta transaction. Customers need to link their Aadhaar number with the bankaccount to avail the facility.

CENTRE ALLOWS STATES TO EXPAND FISCALDEFICIT: The Union Cabinet has allowed states to relax the existing capon fiscal deficit of 3% of gross state domestic product (GSDP) by an additional0.5%. However, only those states that have a debt-GSDP ratio of under 25%and interest payments-revenue receipts ratio of under 10% in the previous twoyears will be eligible to raise their fiscal deficits. NEW ITR FORMS: The Income Tax Department has introducedfresh reporting columns in the new forms (ITR-2 and 2A) called ‘asset andliability at the end of the year’ which is applicable in cases where the totalincome exceeds Rs. 50 lakh. WTO CUTS 2016 GLOBAL TRADE FORCAST: TheWorld Trade Organization (WTO) has revised its 2016 global trade updatedforecast for 2016 downward by more than one percentage point to 2.8% from3.9%. The main reasons for cutting the forecast rate is slowdown in China andbroad market volatility that continues to threaten growth.

13MAY 2016

I-T DEPARTMENT LAUNCHED E-APPEAL FILINGSYSTEM: The Income Tax department operationalised a facility on itswebsite that will allow taxpayers to file appeals before tax officers. Theapplication can be submitted using a digital signature from now on. Further, anew feature that will allow taxpayers to append the 'statement of facts' in theappeal has been included. ATMs NOT TO BE REFILLED AFTER 8PM: The Home Ministry has proposed that ATMs should not be refilled with cash

after 8 pm in cities amid incidents of attacks on cash carrying vans. Further, the deadline in rural areas and Naxal-affected districts was

proposed at 5 pm and 3 pm respectively. Also, the vans must not carry overRs.5 crore per trip.

FPI INVESTMENT CAP IN GOVT SECURITIESHIKED: To boost inflows of foreign funds into Indian capital markets, Sebihas raised the Foreign Portfolio Investors (FPI) in government securities,including those of the states, by Rs.14,000 crore to Rs.2 lakh crore, with effectfrom April 4. This follows decisions by RBI and SEBI to increase foreign fundinflows into government securities. Notably, the limit was earlier hiked in 2015and in January 2016. The FPI investment limit in central government securities will be increased

in two tranches, i.e., Rs 1,40,000 crore on April 4, 2016 & Rs 1,44,000 cron July 5, 2016 respectively, from the existing limit of Rs 1,35,400 crore.

In addition, limit for investment by FPIs in state development loans hasbeen enhanced to Rs 10,500 cr on April 4 and further enhanced by Rs14,000 cr on July 5, respectively. Presently, the existing limit is Rs 7,000 cr.

The limit for long term FPIs (Sovereign Wealth Funds, MultilateralAgencies, Endowment Funds, Insurance Funds, Pension Funds & ForeignCentral Banks) in central government securities has been enhanced to Rs50,000 cr on April 4 and by Rs 56,000 cr by July 5, respectively. Currently,the existing limit is Rs 44,100 crore for long term FPIs.

$100 MN EXPORT PACT WITH IDB: India has signed an MoU with the Islamic Development Bank (IDB) for a

possible $100 million line of credit to facilitate exports to IDB's membercountries.

The Saudi Arabia-based bank currently has 56 member states includingEgypt, Qatar and Kuwait, and promotes development in these countries byproviding facilities and investments which are in accordance with the IslamicSharia law.

EPFO SETTLES 1.18 CRORE CLAIMS IN 2015-16:The Employees' Provident Fund Organisation (EPFO) has settled 1.18 croreclaims including provident fund withdrawals in 2015-16. While 96% of theseclaims were settled within the stipulated time of 20 days, 79% were resolvedwithin 10 days. Further, over 2.2 lakh grievances were addressed by EPFOduring the fiscal. 7129 WILLFUL DEFAULTERS UPTIL DEC 2015: Thenumber of wilful defaulters rose to 7,129, as of December 2015, compared to6,458 in June that year, according to credit information firm Cibil. Maharashtratopped the list with 1,366 defaulting entities followed by West Bengal (1,059)and Andhra Pradesh (679). Nationalised Banks owed the highest of Rs.39,218crore followed by SBI and its associate banks. (Rs.18,576 crore). E-PLATFORM TO SELL FARM PRODUCE: Prime Minister has launched an electronic trading platform, the National

Agriculture Market (eNAM), for farmers to sell their produce. It proposes tointegrate 585 regulated agriculture produce market committees within acouple of years.

eNAM will allow the farmers to sell their produce to the highest bidders andhas been allocated a budget of Rs. 200 crore.

BANKS TO COMPUTE PENSION POST DR HIKE: Thebanks have been asked to calculate revised amount of pension following therecent 6% hike in Dearness Relief. The Union Cabinet had on March 23,

approved release of an additional installment of Dearness Allowance (DA) tocentral government employees and DR to pensioners from this year onwardsto compensate for price rise. WORLD BANK, AIIB SIGN CO-FINANCINGAGREEMENT: The World Bank and the Asian Infrastructure Investment Bank (AIIB) have

signed their first co-financing framework agreement. Under the agreement,the World Bank will prepare and supervise the co-financed projects inaccordance with its policies and procedures.

The China-backed AIIB, in which India is the second largest shareholder,was inaugurated in January this year.

RBI REDUCES MINIMUM TENURE OF MASALABONDS TO 3 YEARS: The RBI has reduced the minimum tenure of the masala bonds issued by

companies to three years from the previously stated five years. Masala bonds are rupee-denominated bonds issued by Indian companies in

foreign capital markets that can be settled in US dollars. Further, a singleissuer can raise a maximum of Rs. 5,000 crore through such bonds.

NSE LAUNCHES NEW INDEX:The National Stock Exchange has launched a new index Nifty MidSmallcap400 which will represent companies of the mid and small market capitalizationsegments of the Indian stock market. The new index will comprise of 400companies which are the constituents of Nifty Midcap 150 and Nifty smallcap250 indices. INDIA AMONG WORLD’S TOP 10MANUFACTURING COUNTRIES: India has been ranked sixthamong the world’s Top-Ten largest manufacturing countries in the UnitedNations Industrial Development Organization (UNIDO) 2015 Yearbook reportas compared to earlier ninth position in the previous report. The top fivepositions are held by China, United States, Japan, Germany and South Korea.Indonesia was placed at the bottom at the tenth position. In India,Manufacturing Value Added has grown by 7.6 per cent in 2015 compared tothe year 2014. INDIA MAY EXPAND BY 7.7% IN CURRENTFISCAL: Fitch Ratings has maintained its GDP growth forecast for India for the fiscal

year ending March 2016 at 7.5 per cent. Growth is expected to graduallyaccelerate to 7.7 per cent in FY17 and 7.9 per cent in FY18. The gradualrecovery in FY17 and FY18 is to be supported by higher real disposableincome, assuming a normal monsoon after two years of below-averagerainfall and a substantial wage increase for central government employees.

The gradual implementation of the structural reform agenda is expected tocontribute to higher growth, even though progress is lacking so far on big-ticket reforms such as the Land Acquisition Amendment Bill and the Goodsand Services Tax.

Fitch stated that it expects another 25 bps of monetary policy loosening,facilitated by the government's recent announcement to maintain its fiscaltargets for FY17 and FY18.

PSBs MAY GET A PANEL TO SETTLE BAD LOANS: The Indian government is contemplating a move to form a three-member

committee to approve the bad loan settlement plans of public sector banks. The Ombudsman-type panel will consist of an ex-Supreme Court judge, a

former chief vigilance commissioner and a retired official of the Comptrollerand Auditor General.

Banks can approach the panel with settlement proposals for approval andexecute them without fearing action against them.

The Reserve Bank of India's Asset Quality Review (AQR) requires banks tocorrectly classify their loan portfolios, with a deadline of March 2017 to cleanup the books by making full provisions.

14MAY 2016

‘MAKE IN INDIA ACTION PLAN’ INAUGURATED: Minister of State Commerce & Industry has inaugurated the ‘Make in India

Action Plan’ and ‘State level Business Reform Action Plan’ Dashboardsdeveloped by DIPP to monitor progress made on two action plans in theCapital.

The Make in India Dashboard will allow Ministries covered under the ActionPlan to update progress made by them on short-term and medium-termtargets, facilitate timely delivery of identified action points, and facilitatemonitoring and identification of delays in implementation, if any.

RBI TO ISSUE RS.10 BANKNOTES WITH INSETLETTER ‘L’: The Reserve Bank of India will shortly issue Rs.10 denomination banknotes

in the Mahatma Gandhi Series-2005, with the inset letter ‘L’, bearing thesignature of Dr. Raghuram G.Rajan.

The design of these banknotes to be issued now is similar in all respects tothe Rs.10 banknotes in Mahatma Gandhi Series- 2005 issued earlier, exceptthat the numerals in both the number panels will be in the ascending sizefrom left to right while the first three alpha-numeric characters (prefix) willremain constant in size.

INDIA’S WORLD LARGEST REMITTANCE RECEIPIENT: As per a recent report of the World Bank, India remained the world’s largest

remittance recipient in 2015. In 2015, India attracted about 69 billion US dollars in remittances, down from

70 billion in 2014. Other large remittance recipients in 2015 were China (64 billion dollars),

Philippines (28 billion), Mexico (25 billion) and Nigeria (21 billion dollar). RESERVE BANK MOVES TO ELIMINATE SHARPCURRENCY VOLATILITY: The Reserve Bank of India (RBI) says its frameworks

on inflation and liquidity are aimed at ensuring that the volatility in the rupeeis ironed out. So far, RBI has intervened directly to deal with currencyvolatility. Investors are concerned about volatility because they stand to loseif the currency depreciates more than the actual returns in the investmentperiod.

The key to neutralising rupee volatility lies in the inflation targeting to bring itdown to a predictable path to eventually settle at around four per cent. Thenew liquidity framework would ensure liquidity remains comfortable at alltimes, negating the chances of short-term rates to harden.

Both frameworks would ensure the exchange rate would become a lot morestable.If inflation overshoots the target, RBI will not hesitate to raise rates.The predictability in the market, then, aids in a stable environment attractinginflows.

POSTAL DEPARTMENT TO LAUNCH PAYMENTSBANK BY JANUARY: The Department of Post will launch itspayments bank by January next year and top management of the new-ageventure would be in-place by July. The Department of Post (DoP), along with10 other entities had received in-principle approval from RBI to launchpayments banks in August last year. BHARTI AIRTEL-KOTAK MAHINDRA BANK JVGETS PAYMENT BANK LICENSE FROM RBI:Reserve Bank of India has granted payments bank license to telecommajor Bharti Airtel. Bharti Airtel had applied for the payments bank license lastyear in partnership with Kotak Mahindra Bank through AMSL (Airtel MCommerce Services Limited). YES BANK INKS PACT TO 'ON-LEND' $50 MILLIONTO WOMEN: Yes Bank has inked a tripartite agreement for on-lending $50 million loan

from World Bank arm IFC to women entrepreneurs. The bank will engageGoldman Sachs for identification and lending methodology to reach out tocredit worthy businesswomen.

The project is part of the Women Entrepreneurs Opportunity Facility(WEOF), a global facility dedicated to expanding access to capital to about 1

lakh women entrepreneurs. It was launched by IFC through its Banking onWomen programme and 'Goldman Sachs 10,000 Women' in 2014.

The loan facility aims to help close to an estimated $285 billion credit gap forwomen-owned SMEs around the world.

ICICI BANK SELLS PART STAKE IN INSURANCEFIRMS FOR RS 2,200 CRORE: ICICI Bank has sold 9 per centstake in its general insurance venture ICICI Lombard General InsuranceCompany to its joint venture partner Fairfax Financial Holdings whereas 2 percent stake in life insurance subsidiary ICICI Prudential for about Rs.2,200crore. PM INAUGURATES MARITIME INDIA SUMMIT 2016 Prime Minister inaugurated the Maritime India Summit 2016 in Mumbai,

Maharashtra. This is India’s first ever Maritime Summit and the flagshipevent organised by Union Ministry of Shipping.

The main focus of summit is to give impetus to Make In India and blueeconomy under the Union Government’s ambitious Sagarmala Projectemphasising on port-led development.

PSB MAY FACE FURTHER STRESS ON ASSETQUALITY: Citing "under-recognition" of bad loans by banks as a concern, Moody's

Investors Service has said the 11 rated public sector banks may face furtherstress on their asset quality.

According to Moody’s, around 40% of standard restructured loans wouldultimately slip into non-performing loans. RBI had earlier asked banks toclassify non-viable loans as bad assets.

DoPT DECIDES AGAINST SCRAPPING PENSIONSACT 1871: The Department of Personnel and Training (DoPT) has decided against

scrapping the Pensions Act, 1871 which exempts pension from beingattached by a court or confiscated.

Earlier, the DoPT had asked the Law Ministry to include the 145-year-oldlaw in the repealing bill so that it can be removed. Currently, the bill ispending in the Rajya Sabha.

BANKS STREESED ASSETS MAY HIT Rs 10LCRORE: The stressed assets (gross non-performing assets and restructured assets

combined) of banks may be pushed to Rs 10 lakh crore in the January-March 2017 quarter against Rs 8 lakh crore at December-end 2015.

The slowdown in key sectors including steel, textiles and aluminium and theongoing asset quality review by RBI may cause the increase.

SEBI TO TIGHTEN NORMS FOR RATING FIRMS: Concerned over the spill-over of drastic downgrades by rating agencies,

markets regulator Sebi is reportedly planning to strengthen its disclosureguidelines for issuance and review of ratings by such entities.

Further, Sebi is considering asking these agencies to separate theiractivities involving rating of instruments other than securities, as they do notfall under Sebi's jurisdiction.

CHINA MAY HAVE $1.3 TN OF RISKY LOANS: IMF China may have $1.3 trillion loans extended to borrowers that do not have

sufficient income to cover interest payments. Potential losses on such loanshave been estimated at $756 billion (7% of the country’s GDP). Further,loans "potentially at risk" would amount to 15.5% of the total commerciallending.

BRICS NEW DEVELOPMENT BANK APPROVESFIRST LOAN FOR RENEWABLE ENERGY PROJECTS: The BRICS New Development Bank (NDB) has approved its first package of

loans worth 811 million dollars for four renewable energy projects in Brazil,China, South Africa and India.

The NDB in its first loan tranche will provide $300 million to Brazil, $250million to India, $180 million to South Africa and $81 million to China.

These funds will be used in area of green and renewable energy projectswith a combined capacity of 2.37MW together.

15MAY 2016

JAIIB SPECIALPRINCIPLES OF BANKING

1) One of the pre-emptive reserves is CRR. This is required to bemaintained by banks on an ongoing basis and represents ______:a) Balances with RBI only.b) Balances with the bank’s currency chests only.c) Balances with RBI and also the balances with the bank’s currency chests.d) Idle assets with the bank.2) Banks like any other commercial establishment would face variousrisks in their operations. The non-payment of interest charged andinstallments due in an account results in what is called :a) Credit risk b) Operational risk c) Market risk d) Interest rate risk3) A request has come to you for financing of Rs. 1 crore against a FDR ofyour bank’s branch located in a different city. Your branch is networkedwith that branch. You :a) Cannot give the loan and request him to approach other branch wheredeposit is maintained.b) Can give the loan but only after sending the receipt to other branch fornoting the lien in your branch favour.c) Can give the loan immediately after marking your branch lien on the depositwith the other branch.d) This is nothing but money laundering and should be avoided.4) Call Money is lent by a banker for how many days:a) One day b) Two days c) Five days d) Seven days5) In India interest rate swaps are commonly traded on which of thefollowing benchmark?a) LIBOR b) MIFOR c) FEMA d) FERA6) The aim of balanced funds is to provide:a) Growth (capital appreciation) b) Regular incomec) Both growth and regular income d) Only a7) Which one of the following is not one of the principles governing ininsurance contracts?a) Principle of Utmost good faith b) Principle of Insurable interestc) Principle of Indemnity d) Principle of Honesty8) Account holder ABC draws a cheque for Rs. 5,000 favouring Rohan (aminor aged 13 years) or bearer. Rohan presents the cheque on counterduly signed on the back. What should the banker do with the cheque of aminor?a) Refuse, since no contractual capacityb) Pay the cheque after inquiring with ABCc) Pay to Rohan without any responsibility of bankd) Ask Rohan to bring his parentse) Section 26 N.I. Act, 1881, does not allow minor to receive payment9) The liability of drawee of cheque is to make payment, when there isavailability of ______:a) Sufficient funds b) Properly applicable for paymentc) Required so by drawer d) All of above10) Which one of the following crossings is not provided in the N.I. Act:a) Account payee crossing b) Not negotiable crossingc) General crossing d) Special crossing11) Who shall be natural guardian in case of married minor girl?a) Father b) Mother c) Father-in-law d) Mother-in-law e) Husband12) Primary Dealers mainly deal in:a) Shares b) Mutual funds c) Govt. Securities d) None of these13) Section 20 of the Banking Regulation Act prohibits a bank fromgranting any advance against the security of_____:a) Own shares b) Other company share c) Jewels d) NSC14) The increase or decrease in the SLR & CRR by RBI ______ the creditcreation:a) Contracts b) Enhances c) Both of the above d) None15) Investment Bankers are also known as:a) Foreign Bankers b) Merchant Bankersc) Institutional Bankers d) None of these

16) A Banking company is issued license for banking operationsunder___________:a) Sec 22 of B.R. Act b) Sec 23 of B.R. Actc) Sec 24 of RBI Act d) Sec 23 of RBI Act17) Cash Reserve Ratio is to be maintained by banks as a per cent of:a) Time liabilities b) Demand liabilitiesc) Time and demand liabilities d) Net demand and time liabilities18) Issuing and servicing of Government debt is managed by:a) Commercial Bank b) NABARD c) RBI d) All of the above19) Tandon, Chore, Laxminarayan & Nayak committees are regarding:a) Working capital finance b) SSI financec) Project finance d) Priority credit20) Banker-Customer relation gets terminated in the event of _________:a) Death of the customer b) Receipt of Garnishee orderc) Insanity d) All of the above21) A commercial Bank can acquire, hold and deal with any propertywhich is received as security for a maximum period of ______ years asper Sec 8 of B.R. Act:a) Eight b) Seven c) Nine d) Indefinitely22) Urban Co-operative Banks are controlled by:a) NABARD b) State Government c) RBI d) Both b and c above23) In a Garnishee Order, the banker on whom Garnishee Order served is:a) Judgement Debtors Creditor b) Judgement Creditors Creditorc) Judgement Creditors Debtor d) Judgement Debtors Debtor24) When banks extend loans against LIC Policies, the charge created is:a) Hypothecation b) Pledge c) Assignment d) Mortgage25) ________ is not barred by law of limitation:a) Pledge b) Hypothecation c) Term Loan d) Guarantee26) Banks in India need to take registration from _____ to undertakecapital market activities:a) AMFI b) RBI c) GOI d) SEBI27) Under Gilt fund, Government securities have ______ default risk:a) More b) Less c) No d) None28) LAN is used to connect computers within a branch. Each independentsystem is known as:a) Node b) Server c) ALM d) Computer29) Navdeep wants a demand draft striking the word ‘Order’ and writingthe word ‘Bearer’. Can bank help him or not:a) Bearer draft is unlawful under Section 31 of RBI.b) Bearer Draft can be issued like a cheque.c) Signature of the payee should be attested on the back of draft by the issuingbranch.d) Attestation of the signature of the payee on a separate slip of paper by bank(without striking out the word ‘Order’ on draft).30) An NRE account can be opened by _____:a) Foreign nationals onlyb) Foreign Institutional investors onlyc) It can be opened by both NRI as well as foreign nationald) It can be opened jointly by NRI with a close relative on ‘F or S’ basis.31) Right to combine two accounts by banks is called _____:a) Garnishee b) Lien c) Set-off d) None of the above.32) Attachment order is issued by whom:a) Income tax officer b) Sales tax officerc) Both a and b d) public debt office.33) Under the Consumer Protection Act, District Forum has a power todeal with cases up to Rs. _____ lakhs:a) 10 b) 50 c) 20 d) 10034) Which of the following alteration in a CTS Cheque is permitted ifauthenticated by the drawer:a) Name of payee b) Amount in words c) Date d) None of the above35) For meeting day-to-day receipt and expenditure mismatch, RBIprovides _____ to governments.a) Treasury Bills b) Ways and means advancec) Dated securities d) None of the above

16MAY 2016

ACCOUNTING & FINANCE FOR BANKERS36) Which of the following equation is true:a) Assets=Capital +Liabilities b) Assets- Capital=Liabilitiesc) Assets-Liabilities=Capital d) All of the above37) The purpose of accommodation bill is:a) To facilitate trade transactionb) To finance actual purchase or sale of goodsc) To provide financial help to the parties without considerationd) none of these38) Entry in the books of Drawer, when bill is sent to the Bank forcollection:a) Bank for Bill Collection A/c Dr

To Bills Receivableb) Bills Receivable A/c Dr

To Bankc) Bank A/c Dr

To Bills Payabled) Cash A/c Dr

To Bills Receivable39) Bond Price and YTM area) Inversely related to each other b) Directly proportional to each otherc) Absolutely the same d) Not related to each other40) Credit purchases are calculated by preparing:a) Debtors account b) Creditors accountc) Bills Receivable account d) Bills payable account41) If Current ratio is 2:1, Quick ratio is 1:1 and the current assets120,000. Compute Liquid assets and the Current Liabilities:a) 60,000, 60,000 b) 60,000, 80,000c) 67,000, 60,000 d) 80,000, 54,00042) Calculate Stock Turnover ratio from the following information:Opening stock 58,000 Purchases 4,84,000 Sales 6,40,000 Gross profitratio 25% on Sales:a) 6 Times b) 8 Timesc) 10 Times d) 7 Times43) In Diminishing Value Method, depreciation is calculated:a) Original cost b) Diminished Valuec) Cost Price d) Opening Value44) If the total assets of the business are Rs. 1,30,000 and Capital is Rs.80,000, calculate creditors:a) 50,000 b) 2,10,000 c) 65,000 d) 1,60,00045) Personal accounts are related to :a) Assets and Liabilities b) Expenses, losses and incomesc) Debtors, creditors etc d) All of these.46) If Purchases are made for Rs.2,000 and both cash discount and tradediscount is equal to 10%, then Net purchases will be:a) Rs. 1,620 b) Rs. 1,700 c) Rs. 1,500 d) Rs. 1,44047) If Current ratio is 2:1, Quick ratio is 1:1 and the current assets120,000. Compute Liquid assets and the current liabilities:a) 60,000, 60,000 b) 60,000, 80,000c) 67,000, 60,000 d) 80,000, 54,00048) Purchase: Rs. 80,000, Office expenses: Rs.15,000, Direct expenses:Rs.10,000, Sales: Rs.1,50,000: Office furniture: Rs. 24,000, Find Net Profit:a) Rs. 60,000 b) Rs. 45,000 c) Rs. 21,000 d) Rs. 29,00049) Capital Budgeting Technique helps in_________:a) Investment decision making b) Cash flow decision makingc) Profit decision making d) Management decision making50) In the Balance sheet of a firm, the debt equity ratio is 2:1. The amountof long term sources is Rs.12 lac. What is the amount of Tangible NetWorth of the firm?a) Rs.12 lac b) Rs. 6 lac c) Rs. 4 lac d) Rs. 2 lac51) An expense of installation charges of machinery is:a) Credited is machinery account b) Debited to machinery a/cc) Credited to cash account d) Debited to cash a/c52) If cost price of the machine is 80,000, Rate of Depreciation is 10%.find the depreciated value after 4 years by reducing value method:a) 80,000X.9X.9 b) 80,000X.81X.81

c) 80,000X.9X.9X.9 d) 80,000X.88X.953) If the cost of equipment is Rs.50,000, Salvage value is Rs.10,000 andits useful life is 6 years, compute depreciation amount in the 4th year bySYD Method:a) 5700 b) 5714.28 c) 6500 d) 620054) If BRS is prepared with balance as per Passbook on 31 Dec., then outof Rs. 20,500 paid by X by cheques on 31 Dec., a cheque of Rs.7,500 wascollected on 7th Jan., the effect will be:a) Rs 13,000 will be deducted from balanceb) Only Rs. 7,500 be deducted from balancec) Rs. 20,500 is added is the balance d) None of these55) Find out the EMI, if the loan is 500,000 repayable in 10 years withinterest @7% per annum:a) 5800 b) 5600 c) 5805 d) 546756) Which of the following are Deferred Revenue expenditure:a) Heavy advertising expenditure for launching a new productb) Expenditure for the issue or raising loan or capitalc) Expenditure for the formation or registration of a companyd) All of the above57) Bank overdraft is a:a) Personal Account b) Real Accountc) Nominal Account d) All the above58) If a bill made on 25th May matures after 4 months, then maturity datewill be:a) 26th Sept. b) 25th Sept. c) 28th Sept. d) 1st Sept.59) Accounting concepts are:a) Methods of presenting financial accountsb) Broad assumptionsc) Bases selected to prepare a specific set of accountsd) None of these60) Reduction in expenses causes:a) Increase in proprietor equity b) Increase in Assetc) Decrease in properitor equity d) Increase in losses.61) Duration and Interest rate elasticity of bond are:a) Directly related b) Inversely related c) Not related d) None62) 100 equity shares of Rs.100 each of a company were forfeited for non-payment of the final call of Rs.30 per share. These shares were re-issuedat Rs.90 per share fully paid. Calculate the amount to be transferred tocapital reserve account.a) Rs.5000 b) Rs.6,000 c) Rs.7,000 d) Rs.8,00063) Which of the following is used for redeeming Preference shares?a) General Reserve b) Dividend Equalization fundc) Profit & loss a/c d) All of the above64) If drawings exceed capital introduced in business, capital a/c mayhave:a) Debit balance b) Credit balance c) Either of above d) None65) As a general rule for independent investment project, invest in theproject where IRR is:a) IRR = Cost of Capital b) IRR > Cost of Capitalc) IRR < Cost of Capital d) IRR method is decisive66) What is the discounting factor for 3 year if rate is 10%?a) .75 b) .46 c) .909 d) .4167) Payment of wages to Ram Lal debited to his personal a/c is:a) Compensating error b) Principal errorc) Commission error d) None of these68) Time value of money is relevant in:a) Accounting rate of return method b) Pay back period methodc) Internal rate of return method d) All of the above69) Total of Rs.1400 is forfeited and only Rs.1000 was reissued onforfeiture share a/c. So _______:a) 400 is transferred to capital reserveb) 400 is transferred to general reservec) 400 is transferred to share premiumd) 400 is transferred to shown in asset side70) What will be the cross currency rate for Euro/GBP if following are therates: US$ / Euro € 0.7798 ; US$ / GBP £ 0.6577a) 0.8434 b) 1.1856 c) 0.1528 d) 0.1221

17MAY 2016

71) If Sales are of Rs. 2,00,000 and Gross profit is @ 25%, then grossprofit will be:a) Rs.80,000 b) Rs.50,000 c) Rs.40,000 d) Rs.82,00072) Rebate is a expense for drawer, so it is a ______:a) Nominal a/c b) Real a/c c) Personal a/c d) None73) When payment is required at the beginning of each period, itis___________:a) Ordinary annuity b) Future Value c) Annuity due d) Present value74) Company purchased assets of Rs.1,80,000 payable in fully paid shareof Rs.100 each issued at discount of 10%. What will be no of shares?a) 1000 shares b) 2000 shares c) 3000 shares d) 500 shares75) Unfavaourable Bank Balance means:a) Credit Balance in the Cash Book b) Credit Balance in the Pass Bookc) Debit Balance in the Cash Book d) Favourable Balance in the Cash Book76) If NPV<0, the project is:a) Accepted b) Rejected c) Partly accepted d) partly rejected77) Rs.15,000 received from Nalini is credited in the account of Meetu. Itis an error of :a) Principle b) Omission c) Commission d) Compensatory78) Duality principle is also known as:a) Historical cost principle b) Dual Aspect principlec) Revenue Recognition principle d) Matching principle79) Expenditure incurred on shifting the stock to a new site is:a) Capital expenditure b) Revenue expenditurec) Deferred revenue expenditure d) Deferred capital expenditure80) Entry of Rs.1,000 wrongly posted to wages a/c instead of building a/c:a) Error of principle b) Error of omissionc) Error of commission d) All above81) Sales book was overcast by Rs. 2,000. If the total of credit side of trialbalance is showing Rs. 92,000, what should be the actual balance?a) 90,000 b) 92,000 c) 94,000 d) 88,00082) Stock in trade doesn’t include:a) Goods in process of manufacture b) Raw materialsc) Items held as fixed assets d) Finished goods83) A reduction in the amount of assets or increases in the amount ofliabilities will means ______ in the amount of capital:a) Increased b) Reduction c) Constant d) None of these84) EOD operations starts around ___ at the Central data centre:a) 11PM b) 10pm c) 10AM d) 2AM85) Describe the nature of purchase a/c:a) Real a/c b) Personal a/c c) Artificial personal a/c d) Nominal a/c86) What is the time frame stipulated by RBI for updation of KYC data inrespect of high/medium/low risk customers?a) 2/5/7 b) 2/5/10 c) 2/8/10 d) 5/8/1087) Cheque issued but not presented is ______ in Bank Reconciliationstatement, when started with overdraft as per cash book:a) Added b) Subtracted c) Multiply d) Divide88) Profit before Interest and Tax /Capital employed X100 is the formulaefor:a) Return on Investment b) Gross profit ratioc) Return on equity d) Net profit ratio89) A person deals in purchase and sale of machinery. He sold onemachinery for Rs. 25,000/- and it has been credited to sales a/c. Whatshould be the correct entry?a) Dr. sales credit machinery b) Dr. cash credit machineryc) Dr. sales credit machinery d) None of above90) The full form of GLIF is ________________:a) General ledger Interface folio b) General ledger Interface filec) Group ledger inter facts d) Group ledger inter faces91) If Net profit is Rs.50,100 and a sales manager is to providecommission of 5% after charging such commission, what would be hisamount of commission?a) 2386 b) 2505 c) Rs. 2610 d) None of these92) Bill is made payable to:a) Drawer b) Endorseec) Payee d) All the above

93) Rs.550 is posted to Depreciation Account as depreciation on furniturebut was not posted to furniture account. If the total of Debit side of Trialbalance is Rs.1,31,000, what it should be after rectification:a) 1,31,000 b) 1,29,900 c) 1,31,550 d) 1,30,45094) A endorsed a bill drawn on B for Rs. 4,000 in favour of C. On the duedate the bill is honoured by B. Which account will be debited by B in hisbooks?a) Bills Payable Account b) C\'s Accountc) A's Account d) Bills Receivable95) Profit & Loss a/c shows position of firm:a) On particular day b) Of Accounting periodc) Gross profits d) Only a/cs

LEGAL ASPECTS OF BANKING96) The essential features of a Contract include_________:a) Consideration b) Free consentc) Capacity to Contract for all the parties involved d) All of the above97) A Contract that arises out of certain circumstances and not made by aregular offer and acceptance such as is known as______:a) Void Contract b) Valid Contract c) Quasi Contract d) Semi Contract98) Banks extend cash credit limits to borrowers against third partyguarantees. Here the guarantee can said to be a:a) Continuous Guarantee b) Limit Guaranteec) Performance Guarantee d) Credit Guarantees99) In a Contract of Guarantee, the liability of the surety covers any sumowed by the principal debtor. Therefore, the liability includes -------- also:a) Interest b) Costs c) Charges d) All of the above100) A Contract of Insurance is a Contract of:a) Guarantee b) Indemnityc) Indemnity & Guarantee d) None of the above101) Rights of an unpaid Seller are:a) Lien b) Stoppage in transitc) Lien & Stoppage in Transit d) None of the above102) The maximum number of Directors in a Private or Public Companycan be ________:a) Eight b) Fifteen c) Ten d) No limit103) The minimum number of Directors in a Public Company is threewhile as it is ____ in a Private Company.a) Two b) One c) No minimum d) Four104) Intra-vires means ‘within the powers’ while ________ means ‘beyondthe powers’ of a company.a) Extra-vires b) Ultra-vires c) Ultra-discretionary d) a & c105) In the case of Allahabad Bank versus Canara Bank 2000, AIR SCW1347, one of the issues was whether the permission of company court isneeded when the winding up petition is pending there before filing ofcase before the debt recovery tribunal. Among other things, thehonorable Supreme Court held that ‘application under DRT Act isexclusive and jurisdiction of civil court and company court is ousted’.This meant that the DRT Act _____ the Company Act:a) Overrides b) Does not overridec) Comes before d) None of the above106) Mr. Anil is a partner in a real estate firm. He collected advanceamount by several individuals towards booking flats in a new residentialcomplex and then disappeared. Now the other partners are refusing topay the money or book the flats stating that the firm is not responsible forMr Anil’s actions. What is the legal position?a) Firm is responsible b) Firm responsible to the extent of his sharesc) Firm is not responsible d) None of the above107) The Implied authority of a partner does not empower him to _____on behalf of the firm, among other things:a) Open the firm’s bank account b) Acquire immovable propertyc) Transfer immoveable property d) All of the above108) Earlier, Banker’s Book as the Banker’s Book of Evidence Actincluded only the traditional records such as bank ledgers. It wasamended by Sec 91-95 of _________ to include data stored in electro-magnetic data storage such as in floppies and CDs:a) Banking Regulation Act b) Cyber Crime Act c) IT Act 2000 d) B & C

18MAY 2016

109) Section 8 of Banking Regulation Act _______a bank from engagingdirectly or indirectly in trading activities or taking trading risks:a) Prohibits b) Permits c) Regulates (the activity of) d) None110) If a Co-operative Bank is operating in more than one state, _____ lawapplies:a) State law b) Central law c) Both apply d) Company Act applies111) Deferred Payment Guarantee constitutes an undertaking by theissuing bank to ensure ____:a) Timely payment b) There is no loss c) Timely interest servicing d) b&c112) In a Bank Guarantee, if the beneficiary is a municipal corporation,then they can sue the bank within _____:a) Validity period b) 30 years c) 6 months d) Claim period113) A Reconstruction Company has to obtain a license from _______:a) SEBI b) Registrar of Companies c) RBI d) B & C114) A Certified Copy of any entry in a Banker’s book shall be treated as:a) Evidence b) Secondary evidencec) Prima facie evidence d) No more treated as evidence.115) A person employed by and acting under the control of the originalagent is called____:a) Junior Agent b) Sub-Agent c) Broker d) Can not be employed.116) Under Sarfaesi Act,______ has the power to condone delay in filingthe particulars.a) National Company Law Board b) RBI c) Central Registrar d) SEBI117) The limitation period for filing a suit of foreclosure is ____:a) 12 years b) 3 years c) 30 years d) No limitation118) Given below are names of certain acts followed by the year ofenactment. Which one of them is not right?a) Banking Regulation Act 1949 b) RBI Act 1934c) Partnership Act 1932 d) Banker’s Book of Evidence Act 1981119) Bankers’ Book of Evidence Act is not applicable to:a) Goa b) Pondichery c) Andamans & Nicobar d) Jammu & Kashmir120) As per Banker’s Book of Evidence Act as amended by IT Act 2000,Banker’s Book includes ___:a) Day book b) Ledgers c) Floppies and CDs d) All121) As per Negotiable Instruments Act, a Cheque is a ______:a) Bill of Exchangeb) Drawn on a specified Banking Regulation Act 1949c) Should not be expressed to be payable otherwise than on demandd) All of the above122) In case a banker refuses payment of a cheque wrongfully, he isliable only to the drawer and no one else except________:a) When the bank is being wound up and a holder becomes a creditor.b) When payment has been made disregarding the crossingc) Both of the above d) Neither of the above123) In Canara Bank vs. Canara Sales Corporation & Others (1987), thebrief facts were that the accountant of the Company forged 42 Chequesover a period of time and withdrew Rs. 326,047.92. The company ondetection demanded the amount from the bank. The bank appealed up toSupreme Court. The Supreme Court dismissed its application. The mainpoints that emerged from the decision were that the bank _____:a) Had no authority to pay a cheque with forged signature.b) Had no mandate for the bank to payc) Is not entitled to debit the customer’s account d) All of the above124) In the famous English case of R.D. Harbottle Ltd. vs. National WestMinister Bank (1978), which is related to a banker’s obligation under aBank Guarantee issued by him and invoked, it was held that ______.a) Bank’s obligation to pay is primary.b) Bank Guarantees are autonomous & independent contractsc) Except in case of fraud, banks need not concern themselves withrelationship the Supplier’s performances. d) All as above125) In most states, indemnities taken by banks while issuing duplicatedrafts are stamped as an agreement. In case they are witnessed, theywould be treated as an indemnity bond and become liable for ______:a) Advalorem stamp duty b) Revenue stamps affixingc) Limitation Act d) B & C

126) Mortgage suit before DRT can be filed:a) Where the mortgage property is situatedb) Where the cause of action has been arisenc) Where defendant resides d) b or c127) Sarfaesi Act, 2002 is not applicable in the _________ cases?a) Security interest not exceeding Rs 1 lac.b) Security interest in agriculture land / Pledge of movables.c) Rights of unpaid seller under Sec 47 of Sales of Goods Act.d) All of the above128) According to Sale of Goods Act 1930, goods exclude ___a) Actionable claims b) Immoveable propertiesc) Trade goods d) a & b129) The rationale behind the provision that a minor does not have thecapacity to contract is that a minor may not have a mature judgment. Hemay not be able decide what is good for him. Yet if a person chooses toenter in to an agreement with a minor, it is ______:a) Void ab inito—void from the beginningb) An Illegal Transaction c) Extortion d) B&C130) A is a very valuable customer of a bank. He offers to help the bank togarner business if they open an Extension Counter (EC) in his factorypremises. Though he places the company deposits with the EC, he doesnot introduce any other business. The branch has incurred considerablesunk cost in this venture. Can the bank sue ?a) Yes, he has failed to keep up with his offerb) No, a written agreement is necessaryc) No, the offer is not definited) No, only bank employees can garner business

ANSWER (JAIIB SPECIAL)

Q A Q A Q A Q A Q A1 C 2 A 3 B 4 A 5 B6 C 7 D 8 C 9 D 10 A11 E 12 C 13 A 14 C 15 B16 A 17 D 18 C 19 A 20 B21 B 22 D 23 D 24 C 25 A26 D 27 C 28 A 29 D 30 D31 C 32 C 33 C 34 C 35 B36 D 37 C 38 A 39 A 40 B41 A 42 B 43 B 44 A 45 C46 A 47 A 48 B 49 A 50 B51 B 52 B 53 B 54 B 55 C56 D 57 A 58 C 59 B 60 A61 A 62 B 63 D 64 A 65 B66 A 67 B 68 C 69 A 70 A71 B 72 A 73 C 74 B 75 A76 B 77 C 78 B 79 B 80 A81 A 82 C 83 B 84 B 85 A86 C 87 B 88 A 89 D 90 B91 A 92 D 93 D 94 A 95 B96 D 97 C 98 A 99 D 100 B101 C 102 B 103 A 104 D 105 A106 A 107 D 108 C 109 A 110 B111 A 112 B 113 C 114 C 115 B116 C 117 C 118 D 119 D 120 D121 D 122 C 123 D 124 D 125 A126 D 127 D 128 D 129 A 130 C

19MAY 2016

LATEST RECOLLECTED Q’s The extent of coverage under CGTMSE for Micro units up to

Rs 5 lacs is ______: 85% with maximum amount of claimupto Rs 4.25 lacs.

Statutory Liquidity Ratio (SLR) defined in which section:Section 24 (2) of Banking Regulation Act.

Interest @ ____ is given by RBI on CRR balance maintainedby banks: Nil.

Cash Reserve Ratio is maintained as a percentage of : NetDemand & Time liabilities. (NDTL)

What should be annual income of a BPL family to be eligiblefor getting interest subvention under educational loan? Rs4.50 lac.

What is the Banker- Customer relationship in case of chequesent for collection: Agent and Principal.

No bank can issue bearer demand draft/pay order as perwhich act: Sec 31 of Reserve Bank of India Act.

If Net Working Capital is 48 and Current Liabilities are 12,what is the Current Ratio: 5:1 (Current assets 60; Currentliability 12).

Cluster based approach is applicable for: a) Priority creditadvance b) SME* c) SHG.

What is Hybrid debt instrument? a) Debenture b) Bondc) Preference shares d) Convertible Bonds*

Implied authority of a partner does not allow ______ singly?Settle a dispute relating to the business of the firm thruarbitration.

What is the minimum and maximum period for FCNR (B) : 1year and 5 years.

What is full form of MCLR: Marginal cost of funds basedlending rate.

Full form of LRS: Liberalized Remittance Scheme. In case of equitable mortgage, the deposit of title deeds has

to be at ______: Any notified town notified by the StateGovt.

What is the % age of provision on Standard assets in case ofDirect Agriculture and Direct MSE advances: 0.25% ofoutstanding.

Bailment of goods for securing a repayment of loan is called:Pledge.

As per the revised guidelines, the withdrawal of all oldMahatma Gandhi pre- 2005 series Bank notes is: 30-06-2016.

If ____ number of counterfeit notes are detected in singletransaction, a consolidated report sent to police station: Lessthan 5.

In case of House loan where loan amount is above Rs. 75lac, Loan to value is 75% the risk weight is _____: 75 %.

What is the risk weight in case of Staff loan secured bymortgage or superannuation benefits: 20%

Mortgage means: Transfer of interest in a specificimmovable property.

What is the interest rate in case of Sovereign Gold Bondscheme: 2.75%.

What is the premium in case of PMFSY : 1.5% Rabi 2%Kharif.

What is the rate of TDS in case of Savings Bank depositaccount as per Income Tax Act Section 80TTA : TDS is notapplicable in savings bank interest.

What is the rate of TDS in case the customer does not submitPAN card and 15G/ 15H : @ 20%.

Certificate of Incorporation refers to: Birth certificate for acompany issued by ROC.

Hypothecation is defined in: Sec 2(n) of SARFAESI Act.

Negative Lien refers to: Undertaking given by the companynot to create any charge / not to get the assetsencumbered to any other bank during the currency ofbank borrowings.

When guarantor on payment of all dues of principal debtor,gets which rights as that of creditor?

a) Subrogation* b) Lien c) Assignment d) Pledge. Rating of Bank is carried by RBI on CAMELS criteria, what do

“C” stands for? Capital Adequacy. Bank is not required to produce original book of records but

true copy can be submitted when court has demanded as perwhich act? a) Civil procedure code b) Registration act c) B.R.Act d) RBI Act e) Banker Books Evidence Act*

To improve Current Ratio of 2:1, what has to be done?:a) Recover cash from Receivables b) Cash sales c)Decrease the Bills payables*

Whether “WILL” has to be registered? Not required. Which of the following does not come under Tier II capital?

a) Capital reserves b) Undisclosed reserves c) Revaluationreserves d) Cumulative Perpetual shares: Capital Reserves.

Which of the following can purchase NPA? a) ARC b) Banksc) Financial Institutions d) NBFC e) All of the above*

Nominee can claim payment when: Only after the death ofdepositor as a trustee of legal heir.

A foreign tourist who is in India and is having USD 5,000wants to open a/c. Which type of deposit account he canopen: NRO for a maximum period of 6 months

What is the target in DRI scheme for women: No Target forwomen.

Food & Processing Industry up to what amount can be givenunder priority sector: Rs. 100 crores.

Unspent Foreign Currency to be surrendered within: 180days

Special Crossing - what is essential: Bank's name mustappear with or without two parallel lines.

Locker Operation to be categorised under High and Low risk.In case of non-operation of such accounts for ____ and______: 1 year and 3 years respectively.

Why International Financial Reporting System (IFRS) shouldbe implemented: For comparison of financials ofcompanies operating in two different internationaljurisdictions.

Agent dies - Cheque signed by him presented for payment:Can be paid as for all acts of agent, principal is liable.

Financial Director dies - Cheque signed by him presented forpayment: Can be paid as he is signing in representativecapacity.

If Garnishee Order does not specify any amount, it will beapplicable or not: Applicable and full amount in the a/c willbe attached.

As per LTV guidelines, what is the risk weight for housingloan up to 30 lakhs with LTV of 75%: 35%

As per the Task Force committee headed by T.K.A. Nair, thebanks to achieve annual growth of _____% in Microenterprise accounts: 10% p.a.

NPA - D3 Category (Beyond three years): 100% Provisionboth on secured and unsecured.

MSE single window ceiling of the amount with CGTMSEcoverage: Rs. 1 crore.

Banks undertake BEP analysis to assess: Margin for safety. Guarantee given by a minor: Cannot be ratified even when

he becomes major. NABARD undertakes supervision on which type of Bank:

RRBs.

20MAY 2016

SNIPPETS SAUDI ARABIA’S HIGHEST CIVILIAN AWARD: PrimeMinister Narendra Modi has been conferred with Saudi Arabia’shighest civilian honour - the King Abdulaziz Sash by KingSalman Bin Abdulaziz. ‘ORDER OF THE RISING SUN, GOLD AND SILVER’:Former bureaucrat and parliamentarian Nand Kishore Singh hasbeen selected for prestigious ‘Order of the Rising Sun, Gold andSilver’, Japan’s highest civilian award. He has been chosen forthis prestigious award for promoting economic, educational andcultural ties between India and Japan. ‘GLOBAL INDIAN OF THE YEAR 2016’ : BollywoodActress Ashwaria Bachan has been awarded with ‘Global Indianof the Year 2016’. The award recognises the outstandingachievements of the Indians across the globe. PERMOD KOHLI: Retired Chief Justice of Sikkim HighCourt Justice Permod Kohli has sworn in as the Chairman ofCentral Administrative Tribunal (CAT). SUSHILA KARKI: Sushila Karki has become the firstfemale acting Chief Justice of Nepal’s Supreme Court ending themale domination in higher posts in the judiciary. She replacedKalyan Shrestha. BHUPENDRA KAINTHOLA: Indian InformationService (IIS) officer Bhupendra Kainthola has been appointedas Director of Film and Television Institute of India (FTII). AJAY BANGA: US President Barack Obama hasnominated MasterCard’s Indian-American CEO Ajay Banga as amember of the Commission on Enhancing National Cybersecurity. SACHIN TENDULKAR: The Ministry for Skill Developmentand Entrepreneurship (MSDE) has appointed Sachin Tendulkaras brand ambassador of the ‘Skill India Campaign’ which ismeant for the talents of young generation and is an opportunityfor the nation to make full use of its young population. RAHUL JOHRI: The BCCI has appointed Rahul Johri as itsfirst CEO. He will be responsible for smooth functioning ofoperations, stakeholder management and building robuststrategies for further promoting the sport. ASIA 50 POWER BUSINESS WOMEN 2016: RelianceIndustries director Nita Ambani and State Bank on IndiaChairman, Arundhati Bhattacharya have been ranked at top 2places in Forbes’ ‘Asia 50 Power Businesswomen 2016’ list. INDIA’S FIRST FASTEST TRAIN: The Railway Ministerhas flagged off India’s first fastest train Gatimaan Express atNizamudin railway station, Delhi which will cover nearly 190 kmdistance between Delhi and Agra in 100 minutes and has amaximum speed of 160 km per hour. CITIES TO BE RENAMED: Haryana Govt. has announcedto rename Gurgaon as Gurugram and Mewat as Nuh.‘NAVIC’: The Indian Space Research Organisation launchednavigation satellite IRNSS-1G from AP's Sriharikota spaceport.With this launch, India is now among the only five nations thathave their own GPS or navigation system. India has decidedto name it as ‘NAVIC’ (Navigation with Indian Constellation). 189TH MEMBER OF IMF: The Republic of Nauru, a tinySouth Pacific island nation in Pacific Ocean became the 189th

member of the International Monetary Fund (IMF) and WorldBank i.e. Bretton-Woods Institutions.MINIMUM WAGE TO BE HIKED: The CentralGovernment has increased the minimum wage for contractworkers to Rs. 10,000 per month.

MARITIME INDIA SUMMIT 2016: The Maritime IndiaSummit 2016 was held in Mumbai, Maharashtra. The main focusof summit is to give impetus to Make in India and blueeconomy under the Union Government’s ambitious SagarmalaProject emphasizing on port-led development. 100 MOST INFLUENTIAL PEOPLE IN THE WORLD:Time Magazine has released the list of 100 most influentialpeople which featured six Indians. The six Indians are RBIGovernor Raghuram Rajan, Priyanka Chopra, Tennis PlayerSania Mirza, Environmentalist Sunita Narain, and Flipcart co-founder Sachin and Binny Bansal. The list also featured Indianorigin Google CEO Sundar Pichai. WORLD PRESS FREEDOM INDEX: In recently released2016 World Press Freedom Index (WPFI), India ranked 133rd

out of 180 nations surveyed worldwide in terms of PressFreedom in 2015. India with a score of 43.17 has jumped threespots from the 136th position it had in 2015. UNEMPLOYMENT RATE: The unemployment rate in Indiastood at 7.97%, as of April 6, according to an Index prepared bythe BSE and the Centre for Monitoring Indian Economy. Thefigure was 9.62% for urban & 7.15% for rural areas. GLOBAL CONNECTIVITY INDEX: India has beenranked 44th with total score of 30 among 50 different countries inthe 2016 Global Connectivity Index (GCI) report compiled byChinese telecom giant Huawei. The GCI analyzes the fullspectrum of measurements for connectivity and provides adetailed map of the global digital economy. PARIS CLIMATE PACT: India has signed the ParisClimate Agreement at United Nations along with more than 170nations, to combat global warming. In the agreement, allcountries agreed to work to limit global temperature rise to wellbelow 2 degrees Celsius and to strive for 1.5 degrees Celsius. WORLD’S FIFTY FUTURE READY CITIES: Delhi hasbeen ranked 44th among the world’s 50 ‘future-ready economiescities’ that are embracing technology for growth. The list istopped by San Jose, followed by San Francisco, Singapore,London, Washington DC, etc. These cities were evaluated on theparameters of human capital, infrastructure and commerce.WORLD’S FIRST REGION TO END MALARIA: Europehas become the world’s first region to wipe out Malaria, amosquito-borne vetor disease with zero cases reported in theyear 2015. The region was able to wipe out the deadly diseasebecause of strong political commitment, improved detection andsurveillance, mosquito control, cross-border collaboration.COMMEMORATIVE COIN ON TATYA TOPE: The Govt.has released Rs.200 commemorative coin and a Rs.10circulation coin on the occasion of the Martyrdom day of TatyaTope, one of the Indian leaders of the 1857 revolt.‘DIPAM’: The Department of Disinvestment has beenrenamed as Department of Investment and Public AssetManagement (Dipam). The division working under FinanceMinistry will advise the government in the matters of financialrestructuring of central public sector enterprise. NOISIEST CITY IN INDIA: The Central Pollution ControlBoard (CPCB) has identified Mumbai as the noisiest city in thecountry, followed by Delhi, Chennai, and Bengaluru. Accordingto reports, some areas in Mumbai and Delhi are noisier than thebusiest parts of New York, London, and Beijing.EPF INTEREST RATE HIKED TO 8.8%: TheGovernment has hiked Employee Provident Fund (EPF) interestrates to 8.8% from 8.7% amid nation-wide protests from tradeunions. With this 5 crore subscribers will be benefited.