Money and banking

Statement 1 is correct. The Insolvency and Bankruptcy Code 2016 applies to companies and individuals. The proceedings of the resolution process are adjudicated by the National Companies Law Tribunal (NCLT), for companies; and the Debt Recovery Tribunal (DRT), for individuals.
Statement 2 is correct. Insolvency Professionals are a specialised cadre of licensed professionals. These professionals administer the resolution process, manage the assets of the debtor, and provide information for creditors to assist them in decision making.
Statement 3 is correct. The Insolvency and Bankruptcy Board of India was established under the Insolvency and Bankruptcy Code, 2016 (Code).
It has regulatory oversight over the Insolvency Professionals, Insolvency Professional Agencies, Insolvency Professional Entities and Information Utilities.

The RBI had formed a committee under the chairmanship of former ICICI Bank CEO KV Kamath to make recommendations on the financial parameters to be considered in the restructuring of loans impacted by the COVID-19 pandemic.
The committee has selected 26 sectors which will require restructuring based on its analyses of financial parameters hit due to the economic crash caused by the coronavirus pandemic. The financial parameters selected include total outside liability to adjusted tangible net worth, debt to EBIDTA, current ratio, debt service coverage ratio (DSCR) and average debt service coverage ratio (ADSCR).

Statement 1 is correct. National Payments Corporation of India (NPCI), an umbrella organisation for operating retail payments and settlement systems in India, is an initiative of Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007, for creating a robust Payment & Settlement Infrastructure in India.
The ten core promoter banks are State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, Union Bank of India, Bank of India, ICICI Bank, HDFC Bank, Citibank N. A. and HSBC. In 2016 the shareholding was broad-based to 56 member banks to include more banks representing all sectors.
Statement 2 is correct. RuPay, a new card payment scheme was launched by the National Payments Corporation of India (NPCI). It offers a domestic, open-loop, multilateral system which will allow all Indian banks and financial institutions in India to participate in electronic payments.

Statement 1 is correct. The small finance banks are required to extend 75 per cent of their Adjusted Net Bank Credit (ANBC) to the sectors eligible for classification as priority sector lending (PSL) by the Reserve Bank.
The target for Domestic scheduled commercial banks (excluding Regional Rural Banks and Small Finance Banks) and Foreign banks with 20 branches and above is 40 per cent of Adjusted Net Bank Credit or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher
Statement 2 is correct. The categories under priority sector are: Agriculture, Micro, Small and Medium Enterprises, Export Credit, Education, Housing,Social Infrastructure, Renewable Energy and Others.

Statement 1 is correct. A Government Security (G-Sec) is a tradeable instrument issued by the Central Government or the State Governments. It acknowledges the Government’s debt obligation.
Such securities are short term (usually called treasury bills, with original maturities of less than one year) or long term (usually called Government bonds or dated securities with original maturity of one year or more).
In India, the Central Government issues both, treasury bills and bonds or dated securities while the State Governments issue only bonds or dated securities, which are called the State Development Loans (SDLs).
Statement 2 is correct. SDLs are eligible securities for Statutory Liquidity Ratio (SLR) and Liquidity adjustment facility (LAF) purposes, and are bought by banks, insurance companies, mutual funds, provident funds and other institutional investors.

Statement 1 is correct. EASE (Enhanced Access and Service Excellence) Reforms Index independently measures progress on the Public Sector Banks (PSB) Reforms Agenda.
Statement 2 is incorrect. EASE 2.0 Index Results has been released recently by the Indian Banking Association (IBA). Bank of Baroda, State Bank of India, and erstwhile Oriental Bank of Commerce were felicitated for being the top three (in that order) in the ‘Top Performing Banks’ category according to the EASE 2.0 Index Results.
# As part of the EASE Reforms, Doorstep Banking Services envisaged to provide convenience of banking services to the customers at their door step through the universal touch points of Call Centre, Web Portal or Mobile App, was inaugurated recently by the Finance Minister.

The government has recently set up an expert committee headed by former comptroller and auditor general (CAG) Rajiv Mehrishi to assess the impact of “waiving of interest and waiving of interest on interest on the Covid-19-related moratorium” on the economy and financial stability.
The Reserve Bank of India (RBI) had in March this year allowed banks to offer a three-month moratorium on principal and interest payments beginning March 1 to provide relief to borrowers hit by the Covid-19 pandemic. This was later extended by another three months to August 31.

The definitions of appreciation and revaluation have interchanged.
Currency appreciation refers to the increase in value of one currency relative to another in the forex markets. In a floating rate exchange system, the value of a currency constantly changes based on supply and demand in the forex market.
A revaluation is a calculated upward adjustment to a country’s official exchange rate relative to a chosen baseline, such as wage rates, the price of gold, or a foreign currency. In a fixed exchange rate regime, only a decision by a country’s government, such as its central bank, can alter the official value of the currency.

Option 1 is incorrect. When the RBI feels that there is excess liquidity in the market, it resorts to sale of securities thereby sucking out the rupee liquidity. Similarly, when the liquidity conditions are tight, RBI may buy securities from the market, thereby releasing liquidity into the market.
Option 2 is correct. When the RBI pursues a tight monetary policy, it takes money out of the system by selling government securities. This raises interest rates because the demand for credit is high that lenders price their loans higher to take advantage of the demand.
The purchase of securities by RBI on other hand has potential to lower the lending rates in economy s it increases the money supply.

Statement 1 is correct. Prompt Corrective Action or PCA is a framework under which banks with weak financial metrics are put under watch by the RBI.
The Reserve Bank has specified certain regulatory trigger points, as a part of prompt corrective action (PCA) Framework, in terms of three parameters, i.e. capital to risk weighted assets ratio (CRAR), net non-performing assets (NPA) and Return on Assets (RoA), for initiation of certain structured and discretionary actions in respect of banks hitting such trigger points.
Statement 2 is correct. The PCA framework is applicable only to commercial banks and not extended to co-operative banks, non-banking financial companies (NBFCs) and Financial Market Infrastructure (FMI).

Statement 1 is correct. Entry 32 in the Seventh Schedule’s State List mentions ‘Incorporation, regulation and winding up of corporations, other than those specified in List I, and universities; unincorporated trading, literary, scientific, religious and other societies and associations; cooperative societies.’
Statement 2 is incorrect. In 1965, certain provisions of the Banking Regulation Act, 1949 (BR Act) were made applicable to co-operative banks. This gave Reserve Bank of India (RBI) some powers to regulate co-operative banks.
RBI regulated state co-operative banks, district (central) co-operative banks and primary co-operative banks (also called urban co-operative banks).
The Banking Regulation (Amendment) Act, 2020 amended the Act to further expand RBI’s regulatory control over co-operative banks in terms of management, capital, audit and liquidation.

The Raghuram Rajan Committee on Financial Sector Reforms was a committee constituted by the Government of India in 2007 for proposing the next generation of financial sector reforms in India.
An Internal Working Group of the Reserve Bank of India (RBI) has recently recommended that corporate houses be given bank licenses. The Raghuram Rajan committee had said that it is premature to allow industrial houses to own banks.

India’s forex reserves comprise foreign currency assets (FCAs), gold reserves, special drawing rights (SDRs) and India’s reserve position with the International Monetary Fund (IMF).
# The country’s foreign exchange reserves rose to reach a lifetime high of $542.013 billion in the week ended September 4.

# Guidotti Rule suggests that the countries should hold external assets sufficient to ensure that they could live without access to new foreign borrowings for up to twelve months.

Major policy objectives in regard to forex reserves:
-maintaining confidence in monetary and exchange rate policies,
-enhancing capacity to intervene in forex markets,
-limiting external vulnerability by maintaining foreign currency liquidity to absorb shocks during times of crisis including national disasters or emergencies;
-providing confidence to the markets especially credit rating agencies that external obligations can always be met, thus reducing the overall costs at which forex resources are available to all the market participants, and
-incidentally adding to the comfort of the market participants, by demonstrating the backing of domestic currency by external assets.

Statement 1 is correct. The Insolvency and Bankruptcy Code 2016 applies to companies and individuals. The proceedings of the resolution process are adjudicated by the National Companies Law Tribunal (NCLT), for companies; and the Debt Recovery Tribunal (DRT), for individuals.

Statement 2 is correct. Insolvency Professionals are a specialised cadre of licensed professionals. These professionals administer the resolution process, manage the assets of the debtor, and provide information for creditors to assist them in decision making.

Statement 3 is correct. The Insolvency and Bankruptcy Board of India was established under the Insolvency and Bankruptcy Code, 2016 (Code).

It has regulatory oversight over the Insolvency Professionals, Insolvency Professional Agencies, Insolvency Professional Entities and Information Utilities.

After nearly eight decades, the Reserve Bank of India (RBI) has decided to change its accounting year from July-June to April- May.

 Accordingly, the next accounting year will be a nine-month period, which starts from July 2020 and ends on March 31, 2021.

 Thereafter, all the financial years will start from April every year, the RBI.

 The Bimal Jalan Committee on Economic Capital Framework (ECF) of the RBI had proposed a more transparent presentation of the RBI‘s annual accounts and change in its accounting year from July to June to April to March from the financial year 2020-21.

The RBI had formed a committee under the chairmanship of former ICICI Bank CEO KV Kamath to make recommendations on the financial parameters to be considered in the restructuring of loans impacted by the COVID-19 pandemic.

The committee has selected 26 sectors which will require restructuring based on its analyses of financial parameters hit due to the economic crash caused by the coronavirus pandemic. The financial parameters selected include total outside liability to adjusted tangible net worth, debt to EBIDTA, current ratio, debt service coverage ratio (DSCR) and average debt service coverage ratio (ADSCR).

Statement 1 is correct. National Payments Corporation of India (NPCI), an umbrella organisation for operating retail payments and settlement systems in India, is an initiative of Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007, for creating a robust Payment & Settlement Infrastructure in India.

The ten core promoter banks are State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, Union Bank of India, Bank of India, ICICI Bank, HDFC Bank, Citibank N. A. and HSBC. In 2016 the shareholding was broad-based to 56 member banks to include more banks representing all sectors.

Statement 2 is correct. RuPay, a new card payment scheme was launched by the National Payments Corporation of India (NPCI). It offers a domestic, open-loop, multilateral system which will allow all Indian banks and financial institutions in India to participate in electronic payments.

National Payments Corporation of India (NPCI), an umbrella organisation for operating retail payments and settlement systems in India, is an initiative of Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007, for creating a robust Payment & Settlement Infrastructure in India.

 Considering the utility nature of the objects of NPCI, it has been incorporated as a “Not for Profit” Company under the provisions of Section 25 of Companies Act 1956 (now Section 8 of Companies Act 2013), with an intention to provide infrastructure to the entire Banking system in India for physical as well as electronic payment and settlement systems.

 The Company is focused on bringing innovations in the retail payment systems through the use of technology for achieving greater efficiency in operations and widening the reach of payment systems.

 The ten core promoter banks are State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, and Union Bank of India, Bank of India, ICICI Bank, HDFC Bank, Citibank N. A. and HSBC.

 In 2016 the shareholding was broad-based to 56 member banks to include more banks representing all sectors.

Statement 1 is correct. The small finance banks are required to extend 75 per cent of their Adjusted Net Bank Credit (ANBC) to the sectors eligible for classification as priority sector lending (PSL) by the Reserve Bank.

The target for Domestic scheduled commercial banks (excluding Regional Rural Banks and Small Finance Banks) and Foreign banks with 20 branches and above is 40 per cent of Adjusted Net Bank Credit or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher

Statement 2 is correct. The categories under priority sector are: Agriculture, Micro, Small and Medium Enterprises, Export Credit, Education, Housing,Social Infrastructure, Renewable Energy and Others.

Both statements are correct.

Open Market Operations (OMOs) are the market operations conducted by the RBI by way of sale/ purchase of G-Secs to/ from the market with an objective to adjust the rupee liquidity conditions in the market on a durable basis.

When the RBI feels that there is excess liquidity in the market, it resorts to sale of securities thereby sucking out the rupee liquidity. Similarly, when the liquidity conditions are tight, RBI may buy securities from the market, thereby releasing liquidity into the market.

Statement 1 is correct. As inflation increases, the prices of goods increase too. Due to this, the purchasing power of money falls. Cost Inflation Index (CII) is a tool used in the calculation of an estimated yearly increase in an asset’s price as a result of inflation.

Statement 2 is correct. The Central Government fixes this index and publishes it in its official gazette for measuring inflation. This index, notified each year by the CBDT is mandated under Section 48 of the Income Tax Act, 1961.

CII has a base year concept, currently the base year is 2001 having CII of 100. CII for 2020-21 has been notified at 301.

Both statements are correct.

The Labour Bureau, an attached office of the M/o Labour & Employment, has been compiling Consumer Price Index for Industrial Workers every month on the basis of the retail prices of selected. The index is compiled for 78 centres and All-India and is released on the last working day of succeeding month.

The Labour and Employment Ministry has recently revised the base year of the Consumer Price Index for Industrial Workers (CPI-IW) from 2001 to 2016.

The number of items directly retained in the index basket has increased to 463 items as against 392 items in the 2001 series. The weight to food and beverage was reduced from 46.2% to 39%, while spending on housing increased from 15.2% to 17%.

Statement 1 is correct. A Government Security (G-Sec) is a tradeable instrument issued by the Central Government or the State Governments. It acknowledges the Government’s debt obligation.

Such securities are short term (usually called treasury bills, with original maturities of less than one year) or long term (usually called Government bonds or dated securities with original maturity of one year or more).

In India, the Central Government issues both, treasury bills and bonds or dated securities while the State Governments issue only bonds or dated securities, which are called the State Development Loans (SDLs).

Statement 2 is correct. SDLs are eligible securities for Statutory Liquidity Ratio (SLR) and Liquidity adjustment facility (LAF) purposes, and are bought by banks, insurance companies, mutual funds, provident funds and other institutional investors.

Statement 1 is correct. EASE (Enhanced Access and Service Excellence) Reforms Index independently measures progress on the Public Sector Banks (PSB) Reforms Agenda.

Statement 2 is incorrect. EASE 2.0 Index Results has been released recently by the Indian Banking Association (IBA). Bank of Baroda, State Bank of India, and erstwhile Oriental Bank of Commerce were felicitated for being the top three (in that order) in the ‘Top Performing Banks’ category according to the EASE 2.0 Index Results.

# As part of the EASE Reforms, Doorstep Banking Services envisaged to provide convenience of banking services to the customers at their door step through the universal touch points of Call Centre, Web Portal or Mobile App, was inaugurated recently by the Finance Minister.

The government has recently set up an expert committee headed by former comptroller and auditor general (CAG) Rajiv Mehrishi to assess the impact of “waiving of interest and waiving of interest on interest on the Covid-19-related moratorium” on the economy and financial stability.
The Reserve Bank of India (RBI) had in March this year allowed banks to offer a three-month moratorium on principal and interest payments beginning March 1 to provide relief to borrowers hit by the Covid-19 pandemic. This was later extended by another three months to August 31.

The definitions of appreciation and revaluation have interchanged.
Currency appreciation refers to the increase in value of one currency relative to another in the forex markets. In a floating rate exchange system, the value of a currency constantly changes based on supply and demand in the forex market.
A revaluation is a calculated upward adjustment to a country’s official exchange rate relative to a chosen baseline, such as wage rates, the price of gold, or a foreign currency. In a fixed exchange rate regime, only a decision by a country’s government, such as its central bank, can alter the official value of the currency.

Option 1 is incorrect. When the RBI feels that there is excess liquidity in the market, it resorts to sale of securities thereby sucking out the rupee liquidity. Similarly, when the liquidity conditions are tight, RBI may buy securities from the market, thereby releasing liquidity into the market.
Option 2 is correct. When the RBI pursues a tight monetary policy, it takes money out of the system by selling government securities. This raises interest rates because the demand for credit is high that lenders price their loans higher to take advantage of the demand.
The purchase of securities by RBI on other hand has potential to lower the lending rates in economy s it increases the money supply.

Statement 1 is correct. Prompt Corrective Action or PCA is a framework under which banks with weak financial metrics are put under watch by the RBI.
The Reserve Bank has specified certain regulatory trigger points, as a part of prompt corrective action (PCA) Framework, in terms of three parameters, i.e. capital to risk weighted assets ratio (CRAR), net non-performing assets (NPA) and Return on Assets (RoA), for initiation of certain structured and discretionary actions in respect of banks hitting such trigger points.
Statement 2 is correct. The PCA framework is applicable only to commercial banks and not extended to co-operative banks, non-banking financial companies (NBFCs) and Financial Market Infrastructure (FMI).

Statement 1 is correct. Entry 32 in the Seventh Schedule’s State List mentions ‘Incorporation, regulation and winding up of corporations, other than those specified in List I, and universities; unincorporated trading, literary, scientific, religious and other societies and associations; cooperative societies.’
Statement 2 is incorrect. In 1965, certain provisions of the Banking Regulation Act, 1949 (BR Act) were made applicable to co-operative banks. This gave Reserve Bank of India (RBI) some powers to regulate co-operative banks.
RBI regulated state co-operative banks, district (central) co-operative banks and primary co-operative banks (also called urban co-operative banks).
The Banking Regulation (Amendment) Act, 2020 amended the Act to further expand RBI’s regulatory control over co-operative banks in terms of management, capital, audit and liquidation.

The Raghuram Rajan Committee on Financial Sector Reforms was a committee constituted by the Government of India in 2007 for proposing the next generation of financial sector reforms in India.
An Internal Working Group of the Reserve Bank of India (RBI) has recently recommended that corporate houses be given bank licenses. The Raghuram Rajan committee had said that it is premature to allow industrial houses to own banks.

Both statements are correct.
The National Cooperative Development Corporation (NCDC) ‘Yuva Sahakar-Cooperative Enterprise Support and Innovation Scheme’ aims for attracting youth into cooperative business ventures.
The scheme is linked to Rs 1000 crore ‘Cooperative Start-up and Innovation Fund (CSIF)’ created by the NCDC and has more incentives for cooperatives of North Eastern region, Aspirational Districts and cooperatives with women or SC or ST or PwD members.
The scheme envisages 2% less than the applicable rate of interest on term loan for the project cost up to Rs 3 crore including 2 years moratorium on payment of principal. All types of cooperatives in operation for at least one year are eligible.
Agriculture Ministry has recently launched the Sahakar Cooptube NCDC Channel, a new initiative by National Cooperative Development Corporation.

All of the are included in the Priority Sector Lending norm of Reserve Bank of India (RBI).
Priority Sector includes the following categories: Agriculture, Micro, Small and Medium Enterprises, Export Credit, Education, Housing, Social Infrastructure, Renewable Energy and Others.
The 40 per cent of Adjusted Net Bank Credit or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher is mandatory to be given to priority sector.
The Reserve Bank of India (RBI) has recently declared to bring startups under the purview of priority sector lending (PSL).

To enhance the safety of cheque payments, Reserve Bank of India has decided to introduce a mechanism of Positive Pay for all cheques of value Rs 50,000 and above.
Statement 1 is correct. It is aimed to end cheque frauds including altering, counterfeiting and forging of the financial instruments by confirming details with details electronically uploaded information by issuer.
Statement 2 is correct. The Positive Pay system demands that an account holder electronically uploads the details of the high value cheque through the bank’s net banking system.
The details are cross checked with details provided by the issuing party or the individual. Only a match will lead to the drawee’s bank clearing the cheque and in the event of a ‘no match’ scenario, the issuing authority/individual will be contacted for verification, cancellation or withdrawal of the cheque.

Statement 1 is correct. The Payment and Settlement Systems Act, 2007 empowers Reserve Bank of India to regulate and oversee the various payments and settlement systems in India.
Every person operating a payment and settlement system (system provider) needs to be authorized by the RBI. The form and manner of application for authorization is prescribed by RBI.
The Reserve Bank of India (RBI) recently released a framework for setting up of a pan-India umbrella entity for retail payments systems. It will manage and operate new payments systems in the retail space comprising ATMs, white label PoS, Aadhaar-based payments and remittance services.
The formation of the umbrella entity has been authorised under the Payment and Settlement Systems Act, 2007.
Statement 2 is incorrect. The Payment and Settlement Systems Act, 2007 does not prohibit foreign entities from operating a payment system in India and the Act does not discriminate or differentiate between foreign entities and domestic entities.
All entities, whether domestic or foreign, need to obtain a licence, approval or authorization from the RBI before commencing payment system operations in the country.

Statement 1 is incorrect. The Contingency Fund of India is established by the Contingency Fund of India Act 1950, not the CF of RBI.
As per Section 47 of the RBI Act, profits or surplus of the RBI are to be transferred to the government, after making various contingency provisions, public policy mandate of the RBI, including financial stability considerations.
RBI’s income comes mainly through interest on the securities it holds. RBI’ Surplus represents the amount RBI transfers to the government. There are two unique features about RBI’s financial statements. It is not required to pay income tax and has to transfer to the government the surplus left over after meeting its needs.
Statement 2 is correct. Contingency Fund of the RBI is a specific provision meant for meeting unexpected and unforeseen contingencies, including depreciation in the value of securities, risks arising out of monetary/exchange rate policy operations, systemic risks and any risk arising on account of the special responsibilities enjoined upon the Reserve Bank. This amount is retained within the RBI.

Option 1 is incorrect. The Contingency Fund (CF) is a specific provision meant for meeting unexpected contingencies that arise from RBI’s monetary policy and exchange rate operations. It is not part of Currency and Gold Revaluation Account (CGRA) of RBI.
Option 2 and 3 are correct. RBI reserves are invested mainly in foreign and Indian government securities (essentially promissory notes bearing an interest rate against which these governments borrow) and gold.
The Currency & Gold Revaluation Account (CGRA) is a type of reserve with RBI that represents the value of the gold and foreign currency that the RBI holds on behalf of India. It is maintained by the Reserve Bank to take care of currency risk, interest rate risk and movement in gold prices.

Core Investment Companies.
A CICs-ND-SI is a Non-Banking Financial Company
•with asset size of Rs 100crore and above
•carrying on the business of acquisition of shares and securities and which satisfies the following conditions as on the date of the last audited balance sheet,
•it holds not less than 90% of its net assets in the form of investment in equity shares, preference shares, bonds, debentures, debt or loans in group companies;
•its investments in the equity shares (including instruments compulsorily convertible into equity shares within a period not exceeding 10 years from the date of issue) in group companies constitutes not less than 60% of its net assets as mentioned in clause (iii) above;
•it does not trade in its investments in shares, bonds, debentures, debt or loans in group companies except through block sale for the purpose of dilution or disinvestment;
•it does not carry on any other financial activity referred to in Section 45I(c) and 45I(f) of the RBI act, 1934 except investment in bank deposits, money market instruments, government securities, loans to and investments in debt issuances of group companies or guarantees issued on behalf of group companies.
•it accepts public funds

Simply, default means non-payment of a loan availed by a borrower. A willful
defaulter is an entity or a person that has not paid the loan back despite the ability to repay
it.
Statement 1 is correct: Wilful default occurs when firms take loans, divert the proceeds
out of the firm for the personal benefit of owners, default on loans and declare bankruptcy,
thereby expropriating a range of stakeholders – lenders, minority shareholders, employees,
regulators and state coffers.
Statement 2 is incorrect: While the penal measures would normally be attracted by all the
borrowers identified as wilful defaulters or the promoters involved in diversion / siphoning
of funds, keeping in view the present limit of Rs.25 lakh fixed by the Central Vigilance
Commission for reporting of cases of wilful default by the banks / FIs to RBI, any wilful
defaulter with an outstanding balance of Rs.25 lakh or more, would attract the penal
measures
Statement 3 is incorrect: From 2009 to 2018 the money owed by willful defaulters has
constantly increased.

Repatriates Cooperative Finance and Development Bank Ltd., (REPCO BANK) was registered on 19.11.1969 as a Cooperative Society under the relevant provisions of Madras Cooperative Societies Act, 1961 with Jurisdiction over the State of Tamilnadu, Andhra Pradesh, Karnataka, Kerala and Union Territory of Puducherry for the purpose of promoting the rehabilitation activities for repatriates from neighbouring countries mainly from Sri Lanka and Burma.

•Though originally registered under the Madras Cooperative Societies Act, 1961, the
Bank is deemed to be registered under the Multi State Cooperative Societies Act,
2002.
•The Bank is under the administrative control of FFR Division, Ministry of Home
Affairs, Govt. of India. Constitutionally, the Bank is a Multi-State Cooperative
Society.
•The Bank was promoted by Government of India, Ministry of Home Affairs in association with the State Governments of Tamil Nadu, Kerala, Karnataka and Andhra Pradesh. The Society’s rules and regulations are governed by its byelaws.
•In terms of the byelaws, as the share of the Government is more than 51%, the Board of Directors are appointed by the Govt. of India.
•The area of operation of the bank covers the south Indian states viz., Tamil Nadu,
Andhra Pradesh, Karnataka, Kerala, and the Union Territory of Puducherry.
•As on March 31, 2019 the government of India held 49.15 per cent of the share capital, four southern state governments held 6.24 per cent and the remaining 45 percent was held by individual repatriates.

Basel is a city in Switzerland. It is the headquarters of Bureau of
International Settlement (BIS), which fosters co-operation among central banks with a
common goal of financial stability and common standards of banking regulations.
•Basel guidelines refer to broad supervisory standards formulated by this group of
central banks – called the Basel Committee on Banking Supervision (BCBS).
•The set of agreement by the BCBS, which mainly focuses on risks to banks and the
financial system are called Basel accord.
•The purpose of the accord is to ensure that financial institutions have enough
capital on account to meet obligations and absorb unexpected losses. India has
accepted Basel accords for the banking system.
In June 2004, Basel II guidelines were published by BCBS. The guidelines were based on
three parameters, which the committee calls it as pillars.
•Capital Adequacy Requirements: Banks should maintain a minimum capital
adequacy requirement of 8% of risk assets
•Supervisory Review: According to this, banks were needed to develop and use
better risk management techniques in monitoring and managing all the three types
of risks that a bank faces, viz. credit, market and operational risks
•Market Discipline: This need increased disclosure requirements. Banks need to
mandatorily disclose their CAR, risk exposure, etc to the central bank. Basel II
norms in India and overseas are yet to be fully implemented.

The Reserve Bank of India (RBI) on June 7, 2019 issued a new framework for resolution of bad loans, replacing the previous norms quashed by the Supreme Court in April, offering a 30-day gap for stress recognition instead of the one-day default earlier.
• The new norms replaces all the earlier resolution plans such as the framework for revitalising distressed assets, corporate debt restructuring scheme, flexible structuring of existing long-term project loans, strategic debt restructuring scheme (SDR), change in ownership outside SDR, and scheme for sustainable structuring of stressed assets (S4A), and the joint lenders’ forum with immediate effect.
• The central bank said lenders shall recognise incipient stress in loan accounts, immediately on default, by classifying such assets as special mention accounts (SMA).
• Since default with any lender is a lagging indicator of financial stress faced by the borrower, it is expected that the lenders initiate the process of implementing a resolution plan (RP) even before a default.
• The central bank said once a borrower is reported to be in default by any lenders, financial institutions, small finance banks or NBFCs, the lenders shall undertake a prima facie review of the borrower account within 30 days from the day of default.

The RBI has slapped restrictions on Punjab and Maharashtra Cooperative Bank Ltd (PMC Bank).It has also appointed an administrator and superseded its board of directors.
•The PMC had been placed under ‘directions’ of the Reserve Bank of India (RBI) for six months, after irregularities had been found in lending.
• The RBI has issued directions in exercise of powers vested in it under sub section (1) of Section 35 A of the Banking Regulation Act, 1949, read with Section 56 of the Banking Regulation Act, 1949 (AACS).

The functions of the DICGC are governed by the provisions of ‘The Deposit Insurance and Credit Guarantee Corporation Act, 1961’ (DICGC Act) and ‘The Deposit Insurance and Credit Guarantee Corporation General Regulations, 1961’ framed by the Reserve Bank of India in exercise of the powers conferred by sub-section (3) of Section 50 of the said Act.
Banks covered by Deposit Insurance Scheme are:
• All commercial banks including the branches of foreign banks functioning in India, Local Area Banks and Regional Rural Banks.
• Co-operative Banks – All eligible co-operative banks as defined in Section 2(gg) of the DICGC Act are covered by the Deposit Insurance Scheme.
• All State, Central and Primary co-operative banks functioning in the States/Union Territories which have amended their Co-operative Societies Act as required under the DICGC Act, 1961, empowering RBI to order the Registrar of Co-operative Societies of the respective States/Union Territories to wind up a co-operative bank or to supersede its committee of management and requiring the Registrar not to take any action for winding up, amalgamation or reconstruction of a co-operative bank without prior sanction in writing from the RBI, are treated as eligible banks.
• At present all Co-operative banks are covered by the Scheme. The Union Territories of Lakshadweep and Dadra and Nagar Haveli do not have Co-operative Banks.

RBI’s Prompt Corrective Action (PCA) Framework is a set of guidelines for banks that are weak in terms of identified indicators including – poor asset quality, insufficient capital and insufficient profit or losses.
• The Reserve Bank of India initiated the Scheme of Prompt Corrective Action (PCA) in 2002 to discipline banks when they report poor and risky financial performance.
• PCA is a policy action guideline (first in May 2014 and revised effective from April 1, 2017) if a commercial bank’s financial condition worsens below a mark.
• The PCA framework specifies the trigger points or the level in which the RBI will intervene with corrective action. This trigger points are expressed in terms of parameters for the banks.

The parameters that invite corrective action from the central bank are:
• Capital to Risk weighted Asset Ratio (CRAR)
• Net Non-Performing Assets (NPA)
• Return on Assets (RoA) and
• Leverage ratio

Bimal Jalan Committee was set up to review the economic capital framework of the RBI.
• Its mandate was to review global best practices followed by the central banks in making assessment and provisions.
• It has suggested that the framework may be periodically reviewed after every five years.
• The panel recommended to align the central bank’s accounting year with the financial year which could reduce the need for paying interim dividend.
• The panel also suggested a clearer distinction between the two components of economic capital — realized equity and revaluation balances — mainly because of the volatile nature of the revaluation balances.

The central bank has three different funds that together comprise its reserves. These are the Currency and Gold Revaluation Account (CGRA), the Contingency Fund (CF) and the Asset Development Fund (ADF).
•Of these, the CGRA is by far the largest and makes up the significant bulk of the RBI’s reserves.
• The fund, which in essence is made up of the gains on the revaluation of foreign exchange and gold, stood at ₹6.91 lakh crore as of financial year 2017-18.
• The CGRA has grown quite significantly since 2010, at a compounded annual growth rate of 25%.
• The CF is the second biggest fund, amounting to ₹2.32 lakh crore in 2017-18.
• It is designed to meet contingencies from exchange rate operations and monetary policy decisions and is funded in large part from the RBI’s profits.
• The ADF makes up a much smaller share of the reserves.

Maidavolu Narasimham, the 13th governor of the Reserve Bank of India (RBI), in 1991 recommended merger of public sector banks to make them stronger.
• It had envisaged a three-tier banking structure with three large banks with international presence at the top, eight to 10 national banks at tier two, and a large number of regional and local banks at the bottom.
• Bank consolidation procedures are laid out in the Banking Regulation Act, 1949.
• Any two public sector banking entities can initiate merger talks, but the scheme of the merger must be finalized by the government in consultation with the central bank and it must be placed in Parliament.
• Parliament reserves the right to modify or reject the scheme. In case of a merger between a public sector bank and a private bank too, parliamentary approval is a must.

RBI has placed the financially troubled Yes Bank under a moratorium (temporary suspension).
• After placing this bank under a moratorium, the RBI announced a draft Scheme of Reconstruction.
• This scheme entails the State Bank of India (SBI) investing capital to acquire a 49% stake in the restructured private lender.

An RBI concept paper (March 2016) on expanding the card acceptance infrastructure in the country had suggested that besides card issuers (banks) and card payment networks (such as Visa, MasterCard and RuPay), the government and the RBI to consider contributing to the Acceptance Development Fund (ADF).
• ADF is to develop debit and credit card acceptance infrastructure in the country.
• While the government’s contribution to the ADF could be routed through the Financial Inclusion Fund (FIF), which is operated by the National Bank for Agriculture and Rural Development (Nabard), the RBI’s contribution could come from the Depositors’ Education and Awareness (DEA) Fund.

AT-1, short for Additional Tier-1 bonds, are a type of unsecured, perpetual bonds that banks issue to shore up their core capital base to meet the Basel-III norms.
• After a string of banks turned turtle in the global financial crisis, central banks got together and decided to formulate new rules (called the Basel-III norms) that would make them maintain stronger balance sheets.
• In India, one of the key new rules brought in was that banks must maintain capital at a minimum ratio of 11.5 per cent of their risk-weighted loans. Of this, 9.5 per cent needs to be in Tier-1 capital and 2 per cent in Tier-2.
• Tier-1 capital refers to equity and other forms of

CDS is in operation in India since October 2011-launched in only corporate bonds.
• The eligible participants are commercial banks, primary dealers, NBFCs, insurance companies and mutual funds.
• CDS is a credit derivative transaction in which two parties enter into an agreement, whereby one party (called as the ‘protection buyer’) pays the other party (called as the ‘protection seller’) periodic payments for the specified life of the agreement.
• The protection seller makes no payment unless a credit event relating to a pre-determined reference asset occurs.
• If such an event occurs, it triggers the Protection Seller’s settlement obligation, which can be either cash or physical (India follows physical settlement).
• It means, CDS is a credit derivative that can be used to transfer credit risk from the investor exposed to the risk (called protection buyer) to an investor willing to take risk (called protection seller).
• It operates like an insurance policy. In an insurance policy, the insurance firm pays the loss amount to the insured party.

Regional Rural Banks (RRBs) are financial institutions which ensure adequate credit for agriculture and other rural sectors.
• Regional Rural Banks were set up on the basis of the recommendations of the Narasimham Working Group (1975), and after the legislations of the Regional Rural Banks Act, 1976.
• The first Regional Rural Bank “Prathama Grameen Bank” was set up on October 2, 1975. At present there are 82 RRBs in India.
• The equity of a regional rural bank is held by the Central Government, concerned State Government and the Sponsor Bank in the proportion of 50:15:35.
• The RRBs combine the characteristics of a cooperative in terms of the familiarity of the rural problems and a commercial bank in terms of its professionalism and ability to mobilise financial resources.
• Each RRB operates within the local limits as notified by Government.
• The main objectives of RRB’s are to provide credit and other facilities‚ especially to the small and marginal farmers‚ agricultural labourers artisans and small entrepreneurs in rural areas with the objective of bridging the credit gap in rural areas, checking the outflow of rural deposits to urban areas and reduce regional imbalances and increase rural employment generation.

All Indian banks have to follow the compulsory target of priority sector lending (PSL).
The priority sector in India are at present the sectors-agriculture, small and medium enterprises (SMEs), road and water transport, retail trade, small business, small housing loans (not more than Rs. 10lakhs), software industries, self-help groups (SHGs), agro-processing, small and marginal farmers, artisans, distressed urban poor and indebted non-institutional debtors besides the SCs, STs and other weaker sections of society.
The PSL target must be met by the banks operating in India in the following way:
• Indian Banks need to lend 40 per cent to the priority sector every year (public sector as well as private sector banks, both) of their total lending.
• Foreign Banks (having less than 20 branches) have to fulfill only 32 per cent PSL target which has sub-targets for the exports (12 per cent) and small and medium enterprises (10 per cent).

The Service Area Approach (SAA) introduced in April 1989 for planned and orderly development of rural and semi-urban areas was applicable to all scheduled commercial banks including Regional Rural Banks.
• Under SAA, each bank branch in rural and semi-urban area was designated to serve an area of 15 to 25 villages and the branch was responsible for meeting the needs of bank credit of its service area.
• The primary objective of SAA was to increase productive lending and forge effective linkages between bank credit, production, productivity and increase in income levels.
• The SAA scheme was reviewed from time to time and appropriate changes were made in the scheme to make it more effective.

Statement 1 is correct. The small finance banks are required to extend 75
per cent of their Adjusted Net Bank Credit (ANBC) to the sectors eligible for classification
as priority sector lending (PSL) by the Reserve Bank.
The target for Domestic scheduled commercial banks (excluding Regional Rural Banks
and Small Finance Banks) and Foreign banks with 20 branches and above is 40 per cent of
Adjusted Net Bank Credit or Credit Equivalent Amount of Off-Balance Sheet Exposure,
whichever is higher
Statement 2 is correct. The categories under priority sector are: Agriculture, Micro, Small
and Medium Enterprises, Export Credit, Education, Housing, Social Infrastructure,
Renewable Energy and Others.

Statement 1 is correct. EASE (Enhanced Access and Service Excellence)
Reforms Index independently measures progress on the Public Sector Banks (PSB)
Reforms Agenda.
Statement 2 is incorrect. EASE 2.0 Index Results has been released recently by the Indian
Banking Association (IBA). Bank of Baroda, State Bank of India, and erstwhile Oriental
Bank of Commerce were felicitated for being the top three (in that order) in the ‘Top
Performing Banks’ category according to the EASE 2.0 Index Results.
# As part of the EASE Reforms, Doorstep Banking Services envisaged to provide
convenience of banking services to the customers at their door step through the universal touch points of Call Centre, Web Portal or Mobile App, was inaugurated recently by the
Finance Minister.

Statement 1 is correct. The Department of Posts has launched a scheme
called Five Star Villages, to ensure universal coverage of flagship postal schemes in rural
areas of the country. The scheme seeks to bridge the gaps in public awareness and reach of
postal products and services, especially in interior villages.
Statement 2 is correct. The schemes covered under the Five Star scheme include: i)
Savings Bank accounts, Recurrent Deposit Accounts, NSC / KVP certificates, ii) Sukanya
Samridhi Accounts/ PPF Accounts, iii) Funded Post Office Savings Account linked India
Post Payments Bank Accounts, iv) Postal Life Insurance Policy/Rural Postal Life Insurance
Policy and v) Pradhan Mantri Suraksha Bima Yojana Account / Pradhan Mantri Jeevan
Jyoti Bima Yojana Account If a village attains universal coverage for four schemes from the above list, then that village
gets four-star status; if a village completes three schemes, then that village get three-star
status and so on.
The scheme will be implemented by a team of five Gramin Dak Sevaks who will be
assigned a village for marketing of all products, savings and insurance schemes of the
Department of Posts.

The definitions of appreciation and revaluation have interchanged.
Currency appreciation refers to the increase in value of one currency relative to another in
the forex markets. In a floating rate exchange system, the value of a currency constantly
changes based on supply and demand in the forex market.
A revaluation is a calculated upward adjustment to a country’s official exchange rate
relative to a chosen baseline, such as wage rates, the price of gold, or a foreign currency. In a fixed exchange rate regime, only a decision by a country’s government, such as its central bank, can alter the official value of the currency.

Accommodative monetary policy, also known as loose credit or easy monetary policy, occurs when a central bank attempts to expand the overall money supply to boost the economy when growth is slowing.
It does this by running a succession of decreases in the Interest rates, making the cost of borrowing cheaper. Accommodative money policy is triggered to encourage more spending from consumers and businesses by making money less expensive to borrow through the lowering of short-term interest rates.

E-kuber is the core banking solution of the RBI that gives high degree of access to commercial banks and other institutions to their current account with the RBI. Several financial engagements like the auction of Government securities are done through e-kuber system.
Core Banking Solutions (CBS) is a facility or arrangement that helps banks to offer large number of customer-centric services on a 24×7 basis from a single location. The core banking solution can support retail as well as corporate banking activities.
It enables banks access with their current account at any time, everywhere across the coutnry. The e-kuber is used by the RBI to execute various transactions with banks. Utility of e-kuber is that it is used to conduct exercises like auctioning of government securities

Statement 1 is incorrect. Real Time Gross Settlement (RTGS) is a system where there is continuous and real-time settlement of fund-transfers, individually on a transaction-by-transaction basis (without netting). ‘Real Time’ means the processing of instructions at the time they are received; ‘Gross Settlement’ means that the settlement of funds transfer instructions occurs individually.
National Electronic Funds Transfer (NEFT) System is an electronic fund transfer system in which the transactions received up to a particular time are processed in batches.
Statement 2 is incorrect. The Real Time Gross Settlement System (RTGS) for high-value transactions has been made available round-the-clock recently, making India one of the few countries in the world to operate the system 24X7.
# In December 2019, RBI had made the national electronic funds transfer (NEFT) available 24X7.

Liquidity Adjustment Facility (LAF) is a facility extended by RBI to the scheduled commercial banks and Primary Dealers to avail of liquidity in case of requirement or park excess funds with RBI in case of excess liquidity on an overnight basis against the collateral of G-Secs including SDLs. Basically, LAF enables liquidity management on a day-to-day basis.
The operations of LAF are conducted by way of repurchase agreements (repos and reverse repos) with RBI being the counter-party to all the transactions.
As per a recent RBI circular, in order to provide an additional avenue for liquidity management to Regional Rural Banks (RRBs), it has been decided that Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF) will be extended to Scheduled RRBs meeting the following criteria:
–Implemented Core Banking Solution (CBS)
–There is a minimum CRAR of nine per cent and
–Fully compliant with the terms and conditions for availing LAF and MSF issued by Financial Markets Operations Department (FMOD), Reserve Bank of India.

From January 1, 2021 onwards Reserve Bank of Inida has decided to introduce a mechanism of Positive Pay for all cheques of value ₹50,000 and above. Under this mechanism, cheques will be processed for payment by the drawee bank based on information passed on by its customer at the time of issuance of cheque.
Under this process, the issuer of the cheque submits electronically, through channels like SMS, mobile app, Internet banking and ATM, certain minimum details of that cheque (like date, name of the beneficiary, or payee and amount) to the drawee bank, details of which are cross-checked with the presented cheque by Cheque Truncation System (CTS).
Any discrepancy is flagged by CTS to the drawee bank and presenting bank, who then take redressal measures.

The B.D. Kumar Committee, which submitted its report in 1975, recommended for setting up of an export-import Bank type institution to finance and promote exports of engineering goods and turnkey projects.

The Reserve Bank of India (RBI) at the insistence of the Government of India, constituted a Committee to Review the Arrangements For Institutional Credit for Agriculture and Rural Development (CRAFICARD) to look into these very critical aspects.

 The Committee was formed on 30 March 1979, under the Chairmanship of Shri B. Sivaraman, former member of Planning Commission, Government of India.

 Its recommendation was formation of a unique development financial institution which would address these aspirations and formation of National Bank for Agriculture and Rural Development (NABARD) was approved by the Parliament through Act 61 of 1981.

The banking sector plays a crucial role in promoting sustainable development.

 It can lead the way to a more sustainable economy by lending to economic activities that yield the best return from society’s point of view and by guiding customers and stakeholders to manage social and environmental challenges and opportunities.

 At UNEP FI, we work hand in hand with our member banks to increase lending that supports socially and environmentally sustainable economic activities.

 The Principles for Responsible Banking are a unique framework for ensuring that signatory banks’ strategy and practice align with the vision society has set out for its future in the Sustainable Development Goals and the Paris Climate Agreement.

 More than 185 banks have now joined this movement for change, leading the way towards a future in which the banking community makes the kind of positive contribution to people and the planet that society expects.

 These banks represent more than a third of the global banking industry. This is a journey of unprecedented scale and scope at a time when such ambition is urgently needed.