Daily Quiz: UPSC Prelims Marathon – October 24

Bank Rate

• When banks borrow long term loans from RBI, they’ve to pay a fixed interest rate to RBI
• Bank can borrow money without pledging government securities to RBI
• Bank rate is linked with penal rates viz.
• If CRR, SLR not maintained
• Penalty → Bank rate + 3%
• For repeat offender → Bank rate + 5%
• If Bank Rate is increased banks will have less money  → Cost of Borrowing increases.
• Bank Rate decreased → More money with banks → Cost of borrowings decreases.

1. Peer-to-peer lending is a form of crowd-funding used to raise loans for people who need to borrow, from people who want to invest.
2. It enables individuals to borrow and lend money without any financial institution as an intermediary, and extends credit to borrowers who are unable to get it through traditional financial institutions.
3. The main idea is savers getting higher interest by lending out their money instead of saving it, and borrowers getting funds at comparatively low interest rates.
4. It typically uses an online platform where the borrowers and lenders register themselves. Due diligence is carried out before allowing the parties to participate in any lending or borrowing activity.
5. All P2P platforms will now be considered non-banking financial companies and regulated by the RBI.

• CPI is a measure of change in retail prices of goods and services consumed by defined population group in a given area with reference to a base year.The formula for calculating Consumer Price Index is Laspeyre’s  with base year 2010.It is calculated by Central Statistics Office (CSO) < In the Ministry of Statistics and Programme Implementation (MOSPI)
• The WPI measures the price of a representative basket of wholesale goods. WPI captures price movements in a most comprehensive way.  It is calculated by – Office of the Economic Adviser <In DIPP (Department of Industrial Policy and Promotion) < In Ministry of Commerce & Industry.
• Index of Industrial Production (IIP) measures the quantum of changes in the industrial production in an economy and captures the general level of industrial activity in the country. It is a composite indicator expressed in terms of an index number which measures the short term changes in the volume of production of a basket of industrial products during a given period with respect to the base period(2004).It is calculated by Central Statistics Office (CSO) < In the Ministry of Statistics and Programme Implementation (MOSPI)

The budget consists of two types of expenditure—the expenditure ‘charged’ upon the Consolidated Fund of India and the expenditure ‘made’ from the Consolidated Fund of India. The charged expenditure is non-votable by the Parliament, that is, it can only be discussed by the Parliament, while the other type has to be voted by the Parliament. The list of the charged expenditure is as follows:

1. Emoluments and allowances of the President and other expenditure relating to his office.
2. Salaries and allowances of the Chairman and the Deputy Chairman of the RajyaSabha and the Speaker and the Deputy Speaker of the LokSabha.
3. Salaries, allowances and pensions of the judges of the Supreme Court.
4. Pensions of the judges of high courts.
5. Salary, allowances and pension of the Comptroller and Auditor General of India.
6. Salaries, allowances and pension of the chairman and members of the Union Public Service Commission.
7. Administrative expenses of the Supreme Court, the office of the Comptroller and Auditor General of India and the Union Public Service Commission including the salaries, allowances and pensions of the persons serving in these offices.
8. The debt charges for which the Government of India is liable, including interest, sinking fund charges and redemption charges and other expenditure relating to the raising of loans and the service and redemption of debt.
9. Any sum required to satisfy any judgement, decree or award of any court or arbitral tribunal.
10. Any other expenditure declared by the Parliament to be so charged.

Recently, 21-member Committee on corporate governance headed by banker UdayKotak has submitted its report to the Securities and Exchange Board of India (SEBI).

The panel was constituted by SEBI in June 2017. It was given four months to submit its recommendations. In its suggestions it has recommended major overhaul of corporate governance norms for listed firms.

Statement 1 is Incorrect:

• National Income – Total value of final goods and services produced by the normal residents during an accounting year, after adjusting depreciation.

Statement 2 and 3 are correct

• It is Net National Product (NNP) at Factor Cost (FC)
• It does not include taxes, depreciation and non-factor inputs (raw materials).

Money Supply is the total stock of all types money (currency + deposit money) held with public.

Concepts/Measurement of Money Supply:

M1 = C + DD + OD (Narrow Money)

• C – Currency held by the public
• DD – Demand Deposits with Banks
• OD – Other deposits (Demand Deposits held by RBI)

M2 = M1 + Savings account deposits with Post Offices

M3 = M1 + TD (Broad Money)

• TD – Time Deposits with Banks Includes fixed deposits, Recurring deposits and time liability of Savings accounts

M4 = M3 + Total Deposits with Post Office.