International Monetary Fund

 

IMF is an international monetary organisation. It was established on December 27, 1945 in Washington on the recommendations of Bretton Woods Conference. But it started it's operation on March 1, 1947. At present 184 nations are members of the IMF. East Timor became the newest member in July 2002.

In place of Dominique Strauss-Kahn, Christine Lagard has been made as new Managing Director of IMF on July 5, 2011. She is serving as 11th MD of IMF.

Objective of IMF

According to Article of Agreement of the IMF, its main objectives are as follows:

1. To promote international monetary co-operation
2. To ensure balanced international trade
3. To ensure exchange rate stability
4. To eliminate or to minimize exchange restrictions by promoting the system of multilateral payments
5. To grant economic assistance to member countries for eliminating the adverse imbalance in balance payments.
6. To minimize imbalance in quantum and duration of international trade

Constitution, Membership and Capital of IMF

IMF is controlled and managed by a board of Governors. Each member country nominates a Governor. All the nominated Governors make a board of governors. Each country also nominates an alternate Governor who casts his vote in absence of the Governor. Each Governor is allotted a number of votes which is determined by the quota allotted to respective country in the capital of IMF. Each Governor has got the right of 250 votes on the basis of membership and one additional vote for each SDR 1,00,000 of quota. The additional of these two types of votes becomes the actual voting right of the member country. For example, India's voting right is 250 + 30555 = 30805 because India's quota is SDR 30555 lakh. It clearly indicates that the voting right depends on the quantum of quota of a particular country with IMF. This is the reason why the rich and industrialised countries got the higher voting rights due to their higher quotas. with the IMF.

The main source of IMF resources is the quota allotted to the member countries. Till 1971, all the amounts of quotas and the assistance provided were denominated in US dollar, but since December 1971, all the quotas and transactions are expressed in SDR (Special Drawing Right) which is also known as Paper Gold. In 1971, one SDR was assumed equivalent to 1 dollar but due to subsequent decline in dollar value  SDR 1 became equivalent to $1.585 by the end of April 1995. Since January 1, 1981 the value of SDR is being determined by the basket  of currency of 5 largest exporting member countries: US dollar, Deutsche Mark, Yen, Franc, and Pound Sterling.
In 1991, the weight to these 5 currencies in SDR price determination was as follows:

American Dollar	40 %
German Franc	21 %
Japanese Yen	17 %
British Pound	11 %
French Franc	11 %

The currency value of SDR is determined by the IMF each day by summarising the value in US dollars, based on the market exchange rates of a basket of fine currencies.

The IMF's financial year is from 1 May to 30 April. IMF lends to various member countries in the form of various facilities (Extended Fund Facility, Standby Facility, Contingent Credit Lines, Compensatory Facility etc.) designed to serve specific purpose, but essentially aimed at balance of payments stabilisation or meeting the emergent foreign exchange needs. The poor countries are also helped by funding from Poverty Reduction and Growth Facility. As on June 2004, the IMF was lending to 13 members in the from of standby facility, to two members under Extended Arrangements and 38 poor countries under poverty Reduction and Growth Facility.

The quota allotted by the IMF to each member has to be deposited partly in their own currency and remainder in form of foreign exchange.

India's 11th Place in IMF General Quota

After the review of IMF's General Quota, India's quota has been raised to 582.15 crore SDR from the existing level of 415.82 crore SDR. (at the time of increase time 1 SDR = $ 1.54 = Rs 69.48). This quota hike has raised India's vote share from 1.91% to 2.44%.

India has been placed at 11th place in IMF's General Quota. USA remains in biggest quota holder despite its quota share coming down to 17.09%.

Country Quota USA 17.09% Japan 6.13% Germany 5.99% UK 4.94% France 4.94% China 3.72%

Country Quota Italy 3.25% Saudi Arabia 3.21% Canada 2.93% Russia 2.74% India 2.44% - -

India and IMF

IMF has played an important role in Indian economy. IMF has provided economic assistance from time to time to India and has also provided appropriate consultancy in determination of various policies in the country. India is the founder member of IMF. The finance minster is ex-officio governor in IMF board of Governors. Till 1970, India was among the first five nation highest quota with IMF and due to this status India was allotted a permanent Place in executive Board of Directors.

India participate in FTP of the IMF from 2002. 43 countries, including India now participate in FTP. By participation in FTP India is allowing IMF to encash its rupee holding as a part of our quota contribution for hard currency which is then lent to other member countries who are debtors to the IMF. From 2002 to Feb 2006, India has made purchases transactions of SDRs 493.23 million and four repurchase transaction amounting to SDRs 466.474 million.

In July India and IMF joint training program at the National Institution of Bank Management, Pune was established. The training program will provide policy oriented training in economics and related operational fields to Indian officials and officials of countries in South Asia and East Africa. The first training program was held during July 2006. The RBI is a nodal body to co-ordinate the training program with the IMF.

Enhanced Structural Adjustment Facility (ESAF) was established in 1987 with an amount of SDR 6 billion to help the low income countries with heavy debt burdens in difficult external environment and implement comprehensive  macro-economic and structural policy program aiming at strengthening their balance of payments position and fostering growth. India contributes as donations to Subsidy Account and made a commitment to provide grant contribution to the extent of US $ 1 million per year over 15 years for a total of US $ 15 million.

World Trade Organisation

 

The Uruguay round of GATT (1986-93) gave birth to World Trade Organisation. The members of the GATT signed on an agreement of Uruguay round in April 1994 in Morocco for establishing a new organisation named WTO. It was officially constituted on January 1, 1995 which took the place of GATT as an effective formal organisation. GATT was an informal organisation which regulated world trade since 1948. Like GATT, the headquarter of WTO is also in Geneva.

Contrary to the temporary nature of GATT, WTO is a permanent organisation which has been established on the basis of an international treaty approved by participating countries. It achieved the international status like IMF and IBRD but it is not an agency of UNO.

WTO has a General Council for its administration which includes one permanent representative of each member nation. Generally, it has one meeting per month which is held in Geneva.

The highest authority of policy making is WTO's Ministerial Conference which is held after every two years.

The present strength of WTO membership is 151. this includes China and Nepal whose accession was approved by the WTO Ministerial  Conference held in Doha and Cancun in November 2001 and September 2003 respectively. There are presently 30 countries in the process of accession to the WTO. Vietnam joined WTO as 150th member. Tonga is the 151st member of WTO.

There are number of important committees for administration of WTO, out of which two committees play the pivotal role in WTO. They are :

1. Dispute Settlement Body (DSB)
2. Trade Policy Review Body (TRRB)

DSP considers the complaints of member countries against violation of rules by any member country. This body appoints a group of experts to investigate into such complaints. This body meets twice a month for such cases.
TPRB reviews the trade policy of member countries. The trade policy of all big trade powers of the world are reviewed after every 2 years. All the members of WTO are the members of TRPB.
Other important bodies of WTO are:

1. Council for Trade in Goods
2. Council for Trade in Services
3. Council for Trade related aspects of Intellectual Property Rights

Objectives of WTO

1. To improve standard of living of people in the member countries.
2. To ensure full employment and broad increase in effective demand.
3. To enlarge production and trade of goods.
   The above three objectives were also included in GATT, but WTO also included some other objectives which are :
4. To enlarge production and trade of services.
5. To ensure optimum utilisation of world resources.
6. To accept the concept of sustainable development.
7. To protect environment.

Functions of WTO

1. To provide facilities for implementation, administration and operation of multilateral and bilateral agreements of the world trade.
2. To provide a platform to member countries to decide future strategies related to trade and tariff.
3. To administer the rules and processes related to dispute settlement.
4. To implement rules and provisions related to trade policy review mechanism.
5. To assist IMF and IBRD for establishment coherence in universal economic policy determination.

Securities and Exchange Board of India

Securities and Exchange Board of India (SEBI) was initially constituted on April 12, 1988 as a non-statutory body through a resolution of Government for dealing with all matters relating to development and regulation of securities market and investor protection and to advice the Government on all these matters. SEBI was given statutory status and powers through an ordinance promulgated on January 30, 1992.

The statutory powers and functions of SEBI were strengthened through the promulgation of the Securities Laws (Amendment) ordinance on January 25, 1995 which was subsequently replaced by an Act of Parliament. In terms of this Act, SEBI has been vested with regulatory powers over corporate in the issuance of capital, the transfer of securities, and other related matters. Besides, SEBI has also been empowered to impose monetary penalties on capital market intermediaries and other participants for a range of violation.

SEBI is managed by six members ~ one chairman (nominated by Central Government), two members (Officials of central ministries), one member from RBI, and remaining two members are also nominated by Central Government. The office of SEBI is situated in Mumbai with its regional offices in Kolkata, Delhi and Channai. In 1988 the initial capital of SEBI was 7.5 crore which was provided by its promoters (IDBI, ICICI, and IFCI). This amount was invested and its its interest amount day-to-day expenses of SEBI are met.

All statutory powers for regulating Indian capital market are vested with SEBI itself.

Functions of SEBI

1. To safeguard the interests of investors and to regulate capital market with suitable measures.
2. To regulate the business of stock exchanges and other securities market.
3. To regulate the working Stock Brokers, Sub-brokers, Share Transfer Agents, Trustees, Merchant Bankers, Underwriters, Portfolio Managers etc and also to make their registration.
4. To register and regulate collective investment plans of mutual funds.
5. To encourage self-regulatory organisation.
6. To eliminate malpractices of security markets.
7. To train the persons associated with security markets and also to encourage investors' education.
8. To check inside trading of securities.
9. To supervise the working of various organisations trading in security market and also to ensure systematic dealing.
10. To promote research and investigations for ensuring the attainment of above objectives.

Special Economic Zone Act, 2005

As a major step forward meant to instill confidence in investors and signal the government's commitment to a stable SEZ policy regime, a comprehensive Special Economic Zone Act, 2005 was passed by the parliament in May 2005. It received Presidential award on the 23rd of June 2005. This Act came into force w.e.f. February 10, 2006.

The salient features of SEZs Act are:

• Exemption from custom duty, exercise duty etc. on import/ domestic procurement of goods for the development, operation and maintenance of SEZs and the units therein.
• 100% income tax exemption for 5 years, 50% for next five years and 50% of ploughed back export profits for 5 years thereafter for SEZs unit.
• Exemption from capital gains on transfer of an undertaking from an urban area to SEZs.
• 100% income tax exemption to SEZ developers for a block of 10 years in 15 years.
• Exemption from dividend distribution tax to SEZ developers.
• 100% income tax exemption for 5 years and 50% for next 5 years for off shore banking unit located in SEZ.
• Exemption to SEZ developers and units from Minimum Alternate Tax.
• CST exemption to SEZ developers and units on inter-state purchase of goods.
• Constitution of an authority for each SEZ with a view to providing greater administration financial and functional autonomy to these zones.
• Establishment of designated courts and a state enforcement agency to ensure speedy trial and investigation of offences committed in SEZs.
• Encouragement to State Government to liberalise State laws and delegate their power to the Development Commissioners to the SEZs to facilitate single window clearance.

Census findings point to decade of rural distress

Is distress migration on a massive scale responsible for one of the most striking findings of Census 2011: that for the first time since 1921, urban India added more numbers to its population in a decade than rural India did?

At 833.1 million, India's rural population today is 90.6 million higher than it was a decade ago. But the urban population is 91 million higher than it was in 2001. The Census cites three possible causes for the urban population to have risen by more than the rural: ‘migration,' ‘natural increase' and ‘inclusion of new areas as ‘urban.' But all three factors applied in earlier decades too, when additions to the rural population far outstripped those to the urban. Why then is the last decade so different? While valid in themselves, these factors cannot fully explain this huge urban increase. More so in a census in which the decadal growth percentage of population records “the sharpest decline since India's independence.”

Take the 2001 Census. It showed us that the rural population had grown by more than 113 million since 1991. And the urban by over 68 million. So rural India had added 45 million people more than urban. In 2011, urban India's increase was greater than that of rural India's by nearly half a million, a huge change. The last time the urban increase surpassed the rural was 90 years ago, in 1921. Then, the rural total actually fell by close to three million compared to the 1911 Census.

However, the 1921 Census was unique. The 1918 Influenza epidemic that killed 50-100 million people worldwide, ravaged India. Studies of the 1921 Census data say it records between 11 and 22 million deaths more than would have been normal for that decade. There was also the smaller impact of World War I in which tens of thousands of Indian soldiers died as cannon fodder for Imperial Britain in Europe and elsewhere.

If Influenza left its fatal imprint on the 1921 enumeration, the story behind the numbers of the 2011 Census speaks of another tragedy: the collapse of millions of livelihoods in agriculture and its related occupations. And the ongoing, despair-driven exodus that this sparked in the countryside.

The 2011 Census captures only the tip of an iceberg in terms of rural upheaval. The last time urban India added more numbers to its population than rural India was 90 years ago and that followed giant calamities in public health and war. Yet, without such conditions, urban India added 91 million to its 2001 total, against rural India's 90.6 million. . Nor can this reversal be fully captured by the factors Census 2011 cites as driving the urban increase. Take ‘migration.' In public debate, ‘urban' is often equated with big metros. This conjures images of massive waves of people from villages heading straight for the big metros. And this flow, you will be assured, is falling.

The Census data, however, do not convey the harshness and pain of the millions trapped in “footloose” migrations. That is, the desperate search for work driving poorer people in many directions without a clear final destination. Like Oriya migrants who work some weeks in Raipur. Then a couple of months at brick kilns in Andhra Pradesh. Then at construction sites in diverse towns in Maharashtra. Their hunger, and contractor, drive them to any place where there is work, however brief. There are rural migrations to both metros and non-metro urban areas. To towns and smaller cities. There are also rural to rural migrations. There are urban-urban migrations. And even, in smaller measure, urban to rural migrations.

Flight from agriculture

Neither the Census nor the National Sample Survey is geared to capture the complexity of India's migrations. A migrant in the Census is someone counted at a place other than his or her last place of residence. This records a single move — not multiple migrations. So it sees only the tip of the mobility iceberg, missing footloose migrations altogether. What we do know from Census 2001 is of the flight from agriculture. Between 1991 and 2001, over seven million people for whom cultivation was the main livelihood, quit farming. That is a mind-boggling figure. It suggests that, on average, close to 2,000 people a day abandon farming in the country. Where do they go? Nothing in employment data suggests they get absorbed in decent work in bustling cities.

What about ‘natural increase' (the difference between the numbers of births and deaths in a population)? That does not explain the switch around in rural-urban increases either. Indeed, the rate of natural increase has declined in both rural and urban areas. Still the urban population and towns get bigger and bigger.

As Registrar General and Census Commissioner of India Dr. C. Chandramouli puts it: “Fertility has declined across the country. There has been a fall in numbers even in the 0-6 age group, as a proportion of the total population. In fact, in absolute numbers too, this group (now 158.8 million) has declined by five million, compared to the previous Census. This would suggest migrations as a significant factor in urban growth. But what kind of migrations we can only ascertain or comment on when their patterns emerge more clearly. The Census in itself is not structured to capture short-term or footloose migrations.”

We also get an extraordinary picture when viewing what demographers call the ‘Urban-rural growth differential.' The URGD is simply the difference between the rates at which rural and urban populations expanded in each decade. It is also a rough and ready index of the extent of rural-urban migrations. The URGD in the 2011 Census is 19.8, the highest in 30 years.

‘Natural increase' does not then account for the growth in urban numbers. Certainly not for the 30 per cent rise in urban population in the States. Thousands of towns today have far larger populations than they used to have — but not due to natural increase. The reason is migrations on a massive scale. Rural folk still outnumber urban people by more than two to one. In the 2001 Census, rural family size (5.4) remained bigger than urban family size (5.1). Also striking, States like Uttar Pradesh and Bihar show massive falls in growth rates in 2011. In the 2001 Census, Uttar Pradesh and Bihar were “the two States with largest number of net migrants migrating out of the state.”

The other factor cited by the current Census for the turnaround is interesting. “Inclusion of new areas under ‘Urban'.” The number of ‘statutory towns' has gone up by a mere 241 since 2001. Compare that with the preceding decade when they rose by 813, or more than three times that number. (A ‘Statutory town' is an urban unit with a municipality, corporation, cantonment board or notified town area committee.)

There is, however, a boom in the number of ‘Census towns.' In the decade 1991-2001, Census towns actually declined from 1,702 to 1,361. In the 2011 Census, they nearly tripled to 3894. That is stunning. How did this happen? And what is a ‘Census town?' This is a village or other unit declared as a town when: its population crosses 5,000; when the number of male workers in agriculture falls to less than 25 per cent of the total; and where population density is at least 400 per square kilometre.

At the very least, this means the male workforce in agriculture has collapsed in thousands of villages, falling to less than a quarter of all workers. So the farm exodus continues. What might the 2011 data on cultivators show us when it is out late next year? It could show us that the numbers quitting cultivation since 2001 might equal or exceed the over seven million dropouts of the previous decade.

SOCIO ECONOMIC DEVELOPMENTS MCQs

1. Which of the following is a General Insurance Company functioning in India ?
1. Life Insurance Corporation of India
2. ICICI Prudential
3. Tata AIG
4. United India Insurance Company
5. All are General Insurance Companies

2. Who amongst the following is the Regulator of Insurance sector in India ?
1. RBI
2. AMFI
3. IRDA
4. SEBI
5. All of these

3. Which of the following terms is NOT used in insurance sector ?
1. Indemnity
2. Coverage
3. Misuse Alert
4. Casualty
5. Annuity

4. Which of the following Public Sector companies/ organizations provides insurance cover to exporters ?
1. ECGC
2. NABARD
3. SIDBI
4. IRDA
5. None of these

5. The main feature of the National Agricultural Insurance Scheme is to insure which of the following?
1. Life of the farmer
2. Crop of the farmer
3. Animals who are used in agricultural activities
4. Land of the farmer
5. Both Land and family of the farmer

6. In which one of the following States was the first UID card issued ?
1. Gujarat
2. Manipur
3. Assam
4. West Bengal
5. Maharashtra

7. Which of the following books is written by Anita Desai ?
1. Magic Seeds
2. The Village by the Sea
3. A Bend in the River
4. My God Died Young
5. None of these

8. Expand the term MGNREGA
1. Mahatma Gandhi National Rural Employment Guarantee Act
2. Mahatma Gandhi National Rural Employment Guarantee Agency
3. Mahatma Gandhi National Rural Employment Generation Act
4. Mahatma Gandhi National Rural Employment Generation Agency
5. None of these

9. Which of the following terms is used in the field of finance and banking?
1. Elasticity
2. Inflation
3. Pulse Rate
4. Hot waves
5. Plasma

10. With which one of the following sports, Saina Nehwal is associated ?
1. Chess
2. Badminton
3. Long Jump
4. Lawn Tennis
5. Table Tennis

11. Which one of the following States has passed a bill to regulate the interest rates on microfinance?
1. Odisha
2. Haryana
3. Karnataka
4. Kerala
5. Andhra Pradesh

12. Which of the following rates are reviewed by the RBI at the time of periodical review of the policy ?
(a) Bank Rate
(b) Repo Rate
(c) Savings Bank Rate
1. Only (a)
2. Only (b)
3. Both (a) and (b)
4. All (a), (b) and (c)
5. Only (c)

13. Which one of the following is not included in TAPI gas project ?
1. Turkmenistan
2. Pakistan
3. Afghanistan
4. India
5. Iran

14. Which one of the following States has passed a legislation to confiscate the property of corrupt officials and to open schools in these properties?
1. West Bengal
2. Jharkhand
3. Bihar
4. Rajasthan
5. Haryana

15. Brihadeeswara Temple has recently celebrated its millennium birthday. In which of the following States is it located ?
1. Karnataka
2. Andhra Pradesh
3. Kerala
4. Odisha
5. Tamil Nadu

16. In which one of the following: States, Jaitapur Nuclear Power plant is proposed to be set up ?
1. Gujarat
2. Haryana
3. Odisha
4. Karnataka
5. Maharashtra

17. According to Planning Commission, in how many years shall the per capita income in India become double ?
1. Nine
2. Five
3. Seven
4. Three
5. None of these

18. Expand the term IFRS.
1. Indian Financial Reporting Standards
2. Indian Financial Reporting Systems
3. International Financial Reporting Standards
4. International Financial Reporting Systems
5. None of these

19. Who is Liu Xiaobo ?
1. North Korean dissident, who has been awarded Nobel peace prize
2. Chinese citizen, who has been awarded Nobel peace prize
3. North Korean dissident, who has been awarded Nobel literature prize
4. Sportsman who was awarded maximum 8 Gold medals in Commonwealth
5. None of these

20. Who is Hardeep Puri ?
1. India’s permanent representative at UN
2. Vice President, IMF
3. Vice President, World Bank
4. India’s ambassador in USA
5. India’s ambassador in UK

21. With which one of the following games is Ishant Sharma associated ?
1. Chess
2. Badminton
3. Table Tennis
4. Volley Ball
5. Cricket

22. With which one of the following games, France’s Zinedine Zidane is associated ?
1. Hockey
2. Football
3. Snooker
4. Volley Ball
5. Base Ball

23. As per recent newspaper reports, which one of the following countries was second largest importer of goods and services in the world during year 2009-10 ?
1. China
2. USA
3. Japan
4. Russia
5. India

24. According to RBI governor, which one of. the following is the challenge in its monetary policy?
1. Inflation
2. Inflation and Supportive recovery
3. Inflation and fiscal deficit
4. Inflation and high cost of imports
5. None of these

25. Which one of the following Public Sector Organisations has offered largest ever equity offer ?
1. SAIL
2. Coal India
3. Power Grid
4. Shipping Corporation of India
5. None of these

26. Through which one of the following sources domestic funds are raised by Companies ?
(a) IPO only
(b) FPO only
(c) Commercial papers
1. Only (a) and (b)
2. All (a), (b) and (c)
3. Only (a),and (c)
4. Only (a)
5. Only (c)

27. Which one of the following was the reason owing to which Govt. want Reserve Bank of India to tighten prudential norms for NBFCs?
1. To reduce liquidity in the market
2. It is as per Basel II requirements
3. It is as per Bank for International Settlement (BIS) directives
4. It is to protect NBFCs from any impact of possible economic slowdown
5. None of these

28. In the financial year 2009-10, which one of the following Banks has made highest Total dividend Payout?
1. SBI 2. PNB
3. Bank of India
4. Canara Bank
5. None of these

29. In respect of which one of the following countries, India has proposed non payments for import of crude oil ?
1. Iran
2. Iraq
3. Kuwait
4. Sudan
5. U.A.E.

30. Through which one of the following methods, RBI has allowed Indian companies to hedge exchange rate risks associated with trade transactions ?
1. Forwards
2. FRA
3. Swaps
4. Currency options
5. Cross currency options

31. Which of the following books is written by V. S. Naipaul ?
1. A Handful of Dust
2. A House for Mr. Biswas
3. A Passage to India
4. Darkness at Noon
5. None of these

32. With which one of the following countries, India has signed agreement to build Multi Model Transit Transport Project ?
1. Bangladesh
2. Myanmar
3. Sri Lanka
4. Nepal
5. Maldives

33. Which one of the following countries is Number One Country in terms of Purchasing Power ?
1. USA
2. Germany
3. China
4. South Korea
5. None of these

34. Which one of the following directions has been given by Government to Civic bodies ?
1. They must use 70 per cent of the funds for BPL families
2. They must use 70 per cent of the funds for the poor living within their jurisdiction
3. They must use 25 per cent of the funds for BPL families
4. They must use 25 per cent of the funds for the poor living within their jurisdiction
5. None of these

35. On which one of the following issues a group of business leaders and other eminent citizens have expressed concern ?
1. E-Governance
2. Governance
3. Fiscal deficit
4. Governance deficit
5. None of these

36. ‘Yuan’ is the currency of which one of the following countries ?
1. Japan
2. South Korea
3. North Korea
4. Taiwan
5. China

37. Which one of the following is a leading power in 17 nation Euro Region ?
1. Germany
2. France
3. Norway
4. Greece
5. Portugal

38. What are teaser loan rates charged by banks ?
1. Fixed rate of interest charged by banks
2. Floating rate of interest charged by banks
3. Rate of interest in the initial period is less and goes up subsequently
4. Rate of interest in the initial period is more and it goes down subsequently
5. None of these

39. Expand the term FSDC which is used in financial sectors ?
1. Financial Security and Development Council
2. Financial Stability and Development Council
3. Fiscal Security and Development Council
4. Fiscal Stability and Development Council
5. None of these

40. According to the 8th Annual Global Retail Development Index (GRDI), which one of the following countries is ‘most attractive’ retail market in the world ?
1. China
2. India
3. UAE
4. Saudi Arabia
5. Japan

41. Govt.’s ‘Food-for-work’ programme means
1. to pay in kind to work and build rural infrastructure
2. supplying balanced diet to workers in rural areas
3. no-work-no-pay principle
4. ensuring enough food to rural workerhouseholds
5. None of these

42. The insurance companies collect a fixed amount from its customers at a fixed interval of time. What is it called ?
1. Instalment
2. Contribution
3. Premium
4. EMI
5. Service Charge

43. Which of the following is/ are the various types of insurance ?
(a) Life Insurance
(b) Health Insurance
(c) Liability Insurance
1. Only (a)
2. Only (b)
3. Only (c)
4. All (a), (b) and (c)
5. Only (a) and (b)

44. What is the full form of ‘ESOPs’ as seen in financial newspapers ?
1. Employee Stock Ownership Plan
2. Executive Salary Options
3. Emergency Stock Operations
4. Early Sales Opportunities
5. Executive Stock Ownership

45. Who are considered Super Senior Citizen as per budget 2011-12 ? Those who have completed a minimum age of
1. 65 years
2. 70 years
3. 75 years
4. 80 years
5. 90 years

46. Pohang Steel Company (POSCO) is a company originally based in
1. China
2. Vietnam
3. USA
4. Italy
5. South Korea

47. As per the revised data released by the Central Statistical Organisation, the GDP growth in 2010 has been at which of the following levels?
1. 6%
2. 6.5%
3. 8%
4. 7.5%
5. None of these

48. Who amongst the following was awarded Padma Vibhushan recently (2011) ?
1. Kumar Mangalam Birla
2. Harbhajan Singh
3. Nirupama Rao
4. Montek Singh Ahluwalia
5. Saina Nehwal

49. Annual meeting of World Economic Forum was organized in January 2011 in which of the following cities ?
1. Davos
2. Milan
3. Tokyo
4. London
5. Lisbon

50. India recently signed a deal on the sharing of Teesta and Feni river waters. This agreement is signed with which of the following countries?
1. Nepal
2. China
3. Pakistan
4. Bangladesh
5. Bhutan

ANSWERS:

1. (4) 2. (3) 3. (3) 4. (1) 5. (2) 6. (5) 7. (2) 8. (1) 9. (2) 10. (2)
11. (5) 12. (4) 13. (5) 14. (3) 15. (5) 16. (5) 17. (1) 18. (3) 19. (2) 20. (1)
21. (5) 22. (2) 23. (5) 24. (3) 25. (2) 26. (3) 27. (4) 28. (5) 29. (1) 30. (4)
31. (2) 32. (2) 33. (1) 34. (2) 35. (2) 36. (5) 37. (1) 38. (3) 39. (2) 40. (2)
41. (5) 42. (1) 43. (4) 44. (1) 45. (4) 46. (5) 47. (3) 48. (4) 49. (1) 50. (4)

FINANCIAL AWARENESS MCQs

1. When did Regional Rural Banks start functioning in India?
(A) 1975
(B) 1947
(C) 1956
(D) 1960
Answer: (A)
2. Who was the Chairman of the Sixth Central Pay Commission?
(A) Justice B. N. Srikrishna
(B) Prof. Ravindra Dholakia
(C) J. S. Mathur
(D) Sushma Nath
Answer: (A)
3. The 11th Five Year Plan is termed as plan for.
(A) India’s Health
(B) Eradication of poverty from India
(C) India’s Education
(D) Development of Rural India
Answer: (C)
4. Which of the following correctly describes what sub-prime lending is?
(1) Lending to the people with less than ideal credit status.
(2) Lending to the people who are high value customers of the banks.
(3) Lending to those who are not a regular customer
(A) Only 1
(B) Only 2
(C) Only 3
(D) All
Answer: (A)
5. The actual return of an investor is reduced sometimes as the prices of the commodities go up all of a sudden. In financial sector this type of phenomenon is known as:
(A) Probability risk
(B) Market risk
(C) Inflation risk
(D) Credit risk
Answer: (A)
6. Which of the following is the limitation of the ATMs owing to which people are required to visit branches of the bank?
(1) It does not accept deposits.
(2) It has a limited cash disbursement capacity.
(3) Lack of human interface.
(A) Only (1)
(B) Only (2)
(C) Only (3)
(D) All
Answer: (D)
7. The World Development Report 2009 is released by which of the following Organisations?
(A) UNESCO
(B) ADB
(C) IMF
(D) World Bank
Answer: (D)
8. Which of the following statements is/are TRUE about the Lehman Brothers Holdings Inc. which was in news sometimes back?
(1) The US government provided a US$ 7000 million bailout package to the company.
(2) The company filed for bankruptcy in a court in New York.
(3) The company is now out of financial crisis and is busy in its restructuring so that it can start afresh.
(A) Only (1)
(B) Only (2)
(C) Only (3)
(D) All of the Above
Answer: (B)
9. The Reserve Bank of India has recently issued guidelines to banks on Pillar 2 of Basel II framework. Pillar 2 deals with which of the following?
(1) Better human resource management
(2) Adequate capital to support risks
(3) Better profitability with minimum number of employees
(A) Only (1)
(B) Only (2)
(C) Only (3)
(D) None of these
Answer: (D)
10.The World Investment Report 2008 was released in September 20This report is published every year by:
(A) Government of India
(B) World Trade Organisation (WTO)
(C) Asian Development Bank (ADB)
(D) United Nations Conference on Trade and Development (UNCTAD)
Answer: (D)
11. As we all know some new initiatives were introduced in the area of Fiscal Management by the government of India. Which of the following acts was passed a few years back to keep a check on the fiscal indiscipline on macroeconomic parameters?
(A) FERA
(B) FRBMA
(C) FEMA
(D) Public Debt Act
Answer: (B)
12. Which of the following has the sole right of issuing paper notes in India?
(A) Union Government
(B) Reserve Bank of India
(C) Ministry of Finance
(D) Supreme Court
Answer: (B)
13. Decision taken at Bretton Woods Conference led to the formation of
(A) IDA
(B) IMF
(C) ADB
(D) IFC
Answer: (B)
14. Which of the following is known as plastic money?
(A) bearer cheques
(B) credit cards
(C) demand drafts
(D) gift cheques
Answer: (B)
15. Euro is the currency of European Union. When did it come into being?
(A) 1999
(B) 1995
(C) 2000
(D) 2001
Answer: (A)
16. Which is the largest commercial bank in India?
(A) Reserve Bank of India
(B) State Bank of India
(C) ICICI Bank
(D) Bank of India
Answer: (B)
17. The Bank of Calcutta, Bank of Bombay and Bank of Madras were merged in 1921 to form
(A) Reserve Bank of India
(B) Imperial Bank of India
(C) Bank of India
(D) Union Bank of India
Answer: (B)
18.In India, income tax is levied by
(A) Union Government
(B) State Governments
(C) Ministry of Finance
(D) RBI
Answer: (A)
19. The Reserve Bank of India was nationalized in?
(A) 1947
(B) 1948
(C) 1950
(D) 1956
Answer: (B)
20. What is a Bank which has capital and reserves of over Rs. 5 lakhs called?
(A) National Bank
(B) Cooperative Bank
(C) Scheduled Bank
(D) Unscheduled Bank
Answer: (C)

India Canada agree on FIPA and SSA

Anand Sharma, the Union Minister for Commerce, Industry and Textiles, and Mr. Edward Fast, Minister of International Trade and Minister for the Asia Pacific Gateway of Government agreed that residual issues with regard to Foreign Investment Protection Agreement (FIPA) and Bilateral Social Security Agreement (SSA) between the two countries have been resolved and both agreements could now be signed at an opportune time. Minister Fast also confirmed that the Canadian side has delinked the SSA from FIPA. The Canadian Minister flew down to New York to meet with, on 23 September.

Minister Sharma raised the issue of constrained supply of Potash from Canada to the Indian buyers. He said that the Government of Canada should view this matter from a strategic perspective and urge the Canadian businesses to enter into long term agreements with the Indian buyers on commercial terms.

The two Ministers took stock of the current status of trade and commercial linkages between India and Canada. They also discussed steps to be taken by both sides to intensify the interaction between the government and the private sector stakeholder on both sides.

Minister Sharma underscored the need to convene the meeting of the India-Canada CEO Forum at an early date so that the agenda for positive engagement between the businesses of the two countries could be furthered.

Minister Sharma strongly raised the problems being faced by professionals of the Indian IT industry in obtaining appropriate visas for Canada. He said that this was limiting services trade between the two countries. In this regard, he asked Minister Fast to sensitize the relevant Canadian authorities to remove impediments to the movement of IT professionals from India to Canada. Minister Fast said that the Canadian government had recently changed its policy and under the revised guidelines Canada was giving appropriate multiple entry visas if the passports were of 10 year validity.

Nilekani Panel Submits Report on Cash Transfer Scheme

UIDAI Chairman Nandan Nilekani submitted the report of the committee headed by him regarding direct transfer of subsidy to the beneficiaries, to the Finance Minister Pranab Mukherjee. The interim report of the task force on direct transfer of subsidies on Kerosene, LPG and Fertilisers suggested creation of a Core Subsidy Management System (CSMS) for maintaining information on entitlements and subsidies for all beneficiaries. The CSMS, as indicated in the report, will provide increased transparency in the movement of goods, level of stocks, prediction and aggregation of demand and identification of beneficiaries.

Nilekani Panel on Cash Transfer Scheme
Highlights of Recommendations Nade in Interim Report Submitted by the Panel
LPG:

• Phase I: Cap consumption of subsidised cylinders (Policy decision of government and not a specific task force recommendation).
• Phase II: Consumers buy LPG at market price, with direct transfer of subsidy to their bank account.
• Phase III: Identify and target segmented customers for subsidy.

Fertiliser:

• Phase I: Information visibility up to the retailer level. Phase II: Direct transfer of subsidy to the retailer.
• Phase III: Farmers buy fertilisers at market price, with direct transfer of subsidy to their bank account.

Kerosene:
Phase I: Cash transfer through state governments.
Phase II: Cash transfer to accounts of beneficiaries.

Report recommends creation of centralised software for the product and service transfer. The poors have been recommended to get the share of subsidies directly through bank branches, Automated Teller Machines (ATMs), business correspondents, the internet or mobile banking channels. Pilot projects for such direct cash transfers have been recommended to begin in seven places— Tamil Nadu, Assam, Maharashtra, Haryana, Delhi Rajasthan and Orissa—from October 2011.

Country’s Exports Register 45.7% Growth in Q 1 Of 2011-12

Country’s exports in June 2011 rose for the third month in a row by growing 46.4 per cent to $ 29.2 billion, driven by high-end products such as engineering goods. Imports increased 42.4 per cent to $ 36.2 billion. About one-third of this import bill was accounted for by petroleum, oil and lubricant. This resulted trade deficit at $ 7.7 billion.

During the first quarter of 2011-12 (i.e. April- June 2011), exports rose 45×7% to $ 79 billion. With imports growing 36×2% to $ 110.6 billion, the trade deficit stood at $ 7.7 billion.

Export sector’s good performance was well supported by various industries like engineering, oil, electronics, drugs, chemicals and readymade garments. The main components in the import bill on the other hand were oil, gold and silver, machinery, electronics and pearls/ precious stones. Oil import bill has been a major head in country’s total import bill. During the first quarter of 2011-12, oil imports rose 18 per cent to $ 30.5 billion and it is projected to be around $ 120-130 billion during the entire financial year 2011-12. Machinery imports valued at $ 9 billion showing 49 per cent growth. With 71 per cent growth electronics imports went to $ 7.6 billion.

It may be recalled that during last year 2010-11, merchandise exports had grown 37.55% to $ 246 billion compared with 2009-10 while imports were up 21.6 per cent at $ 350 billion, resulting trade deficit at $ 104 billion.

The government has set a target of $ 500 billion worth of exports by 2014 and doubling of India’s share of global exports by 2020.

RBI Asks Government To Improve Expenditure Quality

RBI in its quarterly review of Monetary and Credit Policy 2011-12 pointed out the risk of high fiscal deficit pushing up inflation and consequently it suggested central government to improve the quality of expenditure to contain demand in the economy.

Trade Figures (Ap11)
Exports–The Break-up			Imports–The Break-up
Sector	Value ($ b)	(% growth)	Sector	Value ($ b)	(% growth)
Engineering	23	94	Oil	30.5	18
Oil	14	60	Pearls, gems	7.5	10
Gems &jewellery	9.25	19	Gold & silver	17.7	200
Readymade garments	3.6	34	Machinery	9	49
Manmade yarn & fabrics	1.2	30	Electronics	7.6	71
Cotton yarn & fabrics	1.5	9.1	Chemicals	4.5	19
Electronics	2.8	69	Coal	3.7	27
Drugs & pharma	3.08	25	Iron & steel	2.7	-10
Chemicals	2.9	52	Transport equipment	2.5	34
Plastics & linoleum	1.5	50	Ores & scrap	3.4	37
Leather	1.1	26	Vegetable Oil	2	55
Mica, coal & ores	2.7	270	Resins & plastics	1.8	0
Marine products	0.6	27	Fertilisers	1.28	-28

As per RBI’s viewpoint, the large fiscal deficit has been a key source of demand pressures, therefore, fiscal consolidation is critical to maintain inflationary pressure in the economy. The government can support RBI’s efforts to achieve low and stable inflation by re-allocating resources to finance supply bottle-necks in food and infrastructure.

Outstanding Liabilities and Gross Fiscal Deficit (as % of GDP)
Year	Outstanding Liabilities	Gross Fiscal Deficit
2009-10	53.7	5.4
2010-11	49.9	4.7
2011-12 (BE)	48.5	4.6

Despite the hike in administered prices of fuel products, RBI still finds an element of suppressed inflation in the economy. As per RBI’s estimates, about 1 per cent of gross domestic product is still to be financed and becomes a major portion of this subsidy Bill. This subsidy Bill will result in inflationary pressure which, according to RBI is a major concern on the part of the government.

Food Accounts Largest Share in Consumer’s Spending : NSSO

NSSO’s 66th round of survey household consumer expenditure reveals that Indians are still spending a major chunk of their expenditure on food items. The survey, covering the period from July 2009 to June 2010 shows an average rural household to have allocated 53.6 per cent of its monthly consumption expenditure on food items. The corresponding share for urban household was less, at 40×7 per cent. According to the latest figures on consumption expenditure, per capita consumption expenditure in a month was 88 per cent more in case of urban India compared to rural. India during 2009-10, a trend which was more or less five years ago.

Share of Food in Total Consumption Expenditure (in%)
Year	Rural	Urban
1987-1988	64.0	56.4
1993-1994	63.2	54.7
1999-2000	59.4	48.1
2004-2005	55.0	42.5
2009-2010	53.6	40.6

Per capita expenditure on consumption for the bottom 10 per cent of the people in rural areas was five times less than the top 10 per cent of the people while in case of urban parts, it was 10 per cent less.

Survey results show that cereals still make up the largest chunk of an average Indian household’s consumption budget—15.6 per cent in rural and 9.1 per cent in urban areas.

This is followed by fuel and light (9.5 per cent in rural and 8 per cent in urban), milk and milk products (8.6 per cent and 7.8 per cent), vegetables (6.2 per cent and 4.3 per cent) and clothing (4.9 per cent and 4.7 per cent).

The survey has estimated the all-India average monthly per capita expenditure at Rs. 1,053.64 in rural and Rs. 1,984.46. The States among the top in spending  are Kerala (Rs. 1,835.22 in rural and Rs. 2,412.58 in urban
areas), Punjab ( 1,648.92 and Rs. 2,108.79), Haryana (Rs. 1,509.91 and Rs. 2,321.49) and Maharashtra (Rs. 1,152.79 and Rs. 2,436.75).

The States at the bottom of the consumption chart are Bihar (Rs. 780.15 and Rs. 1,23754), hhattisgarh (Rs. 783.57 and Rs. 1,647.32), Orissa (Rs. 818.47 and Rs. 1,548.36) and Jharkhand (Rs. 825.15 and Rs. 1,583.75).

Institutional Credit Disbursement to Agriculture Sector Shows Big Rise in 2010-11

Institutional credit disbursement to agriculture sector during 2010-11 registered a big rise. As against the target of Rs. 3,75,000 crore for agriculture credit in 2010-11, the banking system disbursed Rs.4,26,531 crore to the agriculture sector, thereby exceeding the target by around 13.7 per cent. As per the data released by the Ministry of Agriculture, out of the total disbursed credit of Rs. 4,26,531 crore, Commercial Banks, Cooperative Banks and Regional Rural Banks contributed Rs. 3,14,182 crore, Rs. 69,076 crore and Rs. 43,273 crore respectively. Thus during 2010-11, the share of Commercial Banks, Cooperative Banks and Regional Rural Banks in total disbursed credit stood at 73.7 per cent, 16.2 per cent and 10.1 per cent respectively.

During 2009-10, as against the target of Rs. 3,25,000 crore for agriculture credit, the banking system disbursed Rs. 3,84,514 crore to the agriculture sector, thereby exceeding the target by about 18 per cent. For the financial year 2011-12, the target of disbursing agriculture credit to farmers in Rs. 4,75,000 crore. It is worthnoting that government is providing concessional crop loans to farmers from the year 2006-07. The farmers who repay loans well in time get concession on their crop loans. In 2009—10, this concession was 1% which was raised to 2% in 2010- 11. For 2011-12, it now stands at 3%.

Flow of Institutional Credit to Agriculture Sector (in Rs. crore)
Agency	2009-10			2010-11
	Target	Actual Credit Disbursement	Target	Actual Credit Disbursement
Commercial Banks	2,50,000	2,85,000	2,80,000	3,14,182
Cooperative Banks	45,000	63,497	55,000	69,076
Regional Rural Banks	30,000	35,217	40,000	43,273
Total	3,25,000	3,84,514	3,75,000	4,26,531

Central Coordination -Cum- Empowered Committee Reviewed Position of Mineral Concession Regime in the Country

The quarterly meeting of the Central Coordination-cum¬-Empowered Committee (CEC) on monitoring and minimizing delays in grant of approvals for mineral concessions was held under the chairmanship of Shri S. Vijay Kumar, Secretary, Ministry of Mines on September 23.

The Committee reviewed the position regarding various important aspects of the mineral concession regime in the country, and took decisions aimed at bringing about more efficiency and transparency in the system. Some of the important issues that came up for discussions and review in the meeting were: action taken to curb illegal mining including use of satellite imagery; improving monitoring of the mineral system through a State Empowered Committee and District level Task Forces; plugging loopholes in the royalty collection system; strengthening governance by gearing up the State Mining Directorates; expediting approval including forest clearance cases to clear long pending mineral concession applications.

Major decisions taken included:

(i) Action Plan to be prepared to increase capacity of State Mining Directorates.

(ii) End-to-end accounting system for mineral transaction to prevent and detect illegal mining through an All Indian Online System.

(iii) Ensuring proper exploration in leasehold areas in a time-bound way to enable execution of Mining Plans in a scientific manner.

Presentations were also made by (i) M/s Ernest & Young on Mining Tenement System; (ii) by M/s E-Connect Solution Pvt. Ltd., Udaipur, on the Online Management System developed by them for the Government of Rajasthan; and (iii) by the Ministry of Environment and Forests on their new software on forest clearance that is proposed to be launched shortly.

Representatives of various Central Ministries/Departments concerned with the subject, viz. Environment and Forests, Defence, Civil Aviation, Steel, Revenue, Railways, Shipping and Fertilizer attended the meeting. The Governments of all mineral-rich States, viz. Andhra Pradesh, Chhattisgarh, Goa, Gujarat, Jharkhand, Karnataka, Madhya Pradesh, Maharashtra, Orissa, Rajasthan and Tamil Nadu also participated in the meeting.

Kendriya Vidyalaya Sangathan Signs MoU with Goethe-Institute for Teaching of German

A Memorandum of Understanding was signed between the Kendriya Vidyalaya Sangathan (KVS) (represented by Mr. Avinash Dikshit Commissioner) and Goethe-Institute/Max Mueller Bhavan (represented by Mr. Heiko Sievers, Regional Director) here today. It was signed in the presence of Shri E. Ahamed, Minister of State, Human Resource Development and Ms. Cornelia Pieper, Minister of State, German Federal Foreign Office.

The MoU aims at

• imparting communicative German language training to students of Kendriya Vidyalayas.

• Training and supporting teachers of KVs in implementing the German project involving teaching German language in Kendriya Vidyalayas.

• Equipping schools with materials to support the teaching of German language.

• To gradually enable KVS staff to independently take over German language education, with the MMB playing an advisory role.

The KVS has taken a decision to offer German as a third language in its schools. A large number of the Kendriya Vidyalayas have shown an interest in introducing German into their school network and have already started teaching German as a part of the curriculum. The Kendriya Vidyalaya Sangathan is a premier organization in India administering over a 1000 schools

The Goethe-Institute Max Mueller Bhavan (MMB) is an organization that supports the teaching of German. It offers organizational and academic support to partner institutions in the host country that choose to offer German as a Foreign Language as a part of their curriculum. .

Resource Mobilization for NGBRA Under World Bank Assistance

The Cabinet Committee on Economic Affairs (CCEA) has approved the Ministry of Environment and Forests’s proposal for ‘World Bank assistance to NGRBA for abatement of pollution of river Ganga’ at an estimated cost of Rs.7000 crore. The World Bank Board has also accorded approval to this project on 31.05.2001. The Loan agreement with World Bank has been signed on 14.06.2011 and the Bank will support the Government of India by providing technical assistance and financing of US $ 1 billion (approx. Rs.4600 crore). The share of Government of India will be Rs.5100 crore and that of the State Governments of Uttarakhand, Uttar Pradesh, Bihar, Jharkhand and West Bengal will be Rs.1900 crore. To facilitate project implementation project and monitoring, National Mission Clean Ganga, a registered society is being formed at the Central level. Similar Project Management Groups are being set up in the States. Implementation of the Project will be spread over a period of 8 years. The principal objective of the project is to set up institutional structure at Centre and States and fund priority infrastructure investments for conservation and structure at Centre and States and fund priority infrastructure investments for conservation and restoration of the water quality of the river Ganga. The project will render benefits of significant order to the local populations. It would contribute to lessening the pollution loads due to untreated sewage from cities and towns located along Ganga. Tackling of industrial effluents and municipal solid wastes impacting the river water quality would also help move towards the objective of Mission Clean Ganga.

The capital and O&M costs for the first five years are to be borne by the Central and State Government in 70:30 ratio. Any cost escalation, over and above the sanctioned costs, shall be borne by the State Government (s) concerned. The terms and conditions of the World Bank loan assistance would be as mutually decided between the World Bank and the Govt. of India.

Security Printing & Minting in India

·         18^th Century – Minting of coins started at Calcutta Mint.  In 1790 modern machinery was brought from England and second Mint was established.   Bronze, silver and Gold coins were getting minted from these mints

·         1918- British sovereign were minted during 1918 as the Mint in Mumbai was declared as branch of Royal Mint of London

·         1925 – Printing of postal stationery & stamps started at Nashik

·         1928 – Printing of currency/bank notes started at Nashik

·         1929 onwards –various other security products added

·         1962- Re.1/- printing started at new location

·         1967- A Security Paper manufacturing Mill was commissioned at Hoshangabad (M.P.)

·         1974 – A new press was established at Dewas (M.P) with complete range of printing machines to take care of printing of higher denomination of  bank notes using “Intaglio Printing Technology and Guillotine Machines” for carrying out finishing jobs of processing bank notes.  In Bank Notes Press, Dewas, high quality security inks are also produced and supplied to various security organizations

·         1980- Printing of all currency/bank notes shifted to new location

·         1982-First security printing unit established by Government of India at Hyderabad

·         1988-Government of India came up with first Mint of its own at Noida (U.P.)

Role of Banks and Financial Institutions in Economy

Money lending in one form or the other has evolved along with the history of the mankind. Even in the ancient times there are references to the moneylenders. Shakespeare also referred to ‘Shylocks’ who made unreasonable demands in case the loans were not repaid in time along with interest. Indian history is also replete with the instances referring to indigenous money lenders, Sahukars and Zamindars involved in the business of money lending by mortgaging the landed property of the borrowers.

 

Towards the beginning of the twentieth century, with the onset of modern industry in the country, the need for government regulated banking system was felt.  The British government began to pay attention towards the need for an organised banking sector in the country and Reserve Bank of India was set up to regulate the formal banking sector in the country. But the growth of modern banking remained slow mainly due to lack of surplus capital in the Indian economic system at that point of time. Modern banking institutions came up only in big cities and industrial centres. The rural areas, representing vast majority of Indian society, remained dependent on the indigenous money lenders for their credit needs.

 

Independence of the country heralded a new era in the growth of modern banking. Many new commercial banks came up in various parts of the country. As the modern banking network grew, the government began to realise that the banking sector was catering only to the needs of the well-to-do and the capitalists. The interests of the poorer sections as well as those of the common man were being ignored.

 

In 1969, Indian government took a historic decision to nationalise 14 biggest private commercial banks. A few more were nationalised after a couple of years. This resulted in transferring the ownership of these banks to the State and the Reserve Bank of India could then issue directions to these banks to fund the national programmes, the rural sector, the plan priorities and the priority sector at differential rate of interest.  This resulted in providing fillip the banking facilities to the rural areas, to the under-privileged and the downtrodden. It also resulted in financial inclusion of all categories of people in almost all the regions of the country.

 

However, after almost two decades of bank nationalisation some new issues became contextual. The service standards of the public sector banks began to decline. Their profitability came down and the efficiency of the staff became suspect. Non-performing assets of these banks began to rise. The wheel of time had turned a full circle by early nineties and the government after the introduction of structural and economic reforms in the financial sector, allowed the setting up of new banks in the private sector.

 

The new generation private banks have now established themselves in the system and have set new standards of service and efficiency. These banks have also given tough but healthy competition to the public sector banks.

 

Modern Day Role
Banking system and the Financial Institutions play very significant role in the economy. First and foremost is in the form of catering to the need of credit for all the sections of society. The modern economies in the world have developed primarily by making best use of the credit availability in their systems. An efficient banking system must cater to the needs of high end investors by making available high amounts of capital for big projects in the industrial, infrastructure and service sectors. At the same time, the medium and small ventures must also have credit available to them for new investment and expansion of the existing units. Rural sector in a country like India can grow only if cheaper credit is available to the farmers for their short and medium term needs.

 

Credit availability for infrastructure sector is also extremely important. The success of any financial system can be fathomed by finding out the availability of reliable and adequate credit for infrastructure projects. Fortunately, during the past about one decade there has been increased participation of the private sector in infrastructure projects.

 

The banks and the financial institutions also cater to another important need of the society i.e. mopping up small savings at reasonable rates with several options. The common man has the option to park his savings under a few alternatives, including the small savings schemes introduced by the government from time to time and in bank deposits in the form of savings accounts, recurring deposits and time deposits. Another option is to invest in the stocks or mutual funds.

 

In addition to the above traditional role, the banks and the financial institutions also perform certain new-age functions which could not be thought of a couple of decades ago. The facility of internet banking enables a consumer to access and operate his bank account without actually visiting the bank premises. The facility of ATMs and the credit/debit cards has revolutionised the choices available with the customers. The banks also serve as alternative gateways for making payments on account of income tax and online payment of various bills like the telephone, electricity and tax. The bank customers can also invest their funds in various stocks or mutual funds straight from their bank accounts. In the modern day economy, where people have no time to make these payments by standing in queue, the service provided by the banks is commendable.

 

While the commercial banks cater to the banking needs of the people in the cities and towns, there is another category of banks that looks after the credit and banking needs of the people living in the rural areas, particularly the farmers. Regional Rural Banks (RRBs) have been sponsored by many commercial banks in several States. These banks, along with the cooperative banks, take care of the farmer-specific needs of credit and other banking facilities.

 

Future
Till a few years ago, the government largely patro-nized the small savings schemes in which not only the interest rates were higher, but the income tax rebates and incentives were also in plenty. The bank deposits, on the other hand, did not entail such benefits. As a result, the small savings were the first choice of the investors. But for the last few years the trend has been reversed. The small savings, the bank deposits and the mutual funds have been brought at par for the purpose of incentives under the income tax. Moreover, the interest rates in the small savings schemes are no longer higher than those offered by the banks.

 

Banks today are free to determine their interest rates within the given limits prescribed by the RBI. It is now easier for the banks to open new branches. But the banking sector reforms are still not complete. A lot more is required to be done to revamp the public sector banks. Mergers and amalgamation is the next measure on the agenda of the government. The government is also preparing to disinvest some of its equity from the PSU banks. The option of allowing foreign direct investment beyond 50 per cent in the Indian banking sector has also been under consideration.

 

Banks and financial intuitions have played major role in the economic development of the country and most of the credit- related schemes of the government to uplift the poorer and the under-privileged sections have been implemented through the banking sector. The role of the banks has been important, but it is going to be even more important in the future. 

R. Sridhar elected FIDC Chairman

The Finance Industry Development Council, a self-regulatory organisation for NBFC-AFCs, has a new Chairman in Mr R. Sridhar, who is currently Managing Director of Shriram Transport Finance Company Ltd. He was elected as FIDC Chairman for period of two years at a meeting of the Council held in Mumbai. Mr Sridhar is a fellow member of the Institute of Chartered Accountants of India .

Bank of India, Brickwork Ratings sign MoU for MSME

Brickwork Ratings, a SEBI-approved credit ratings agency, has signed a Memorandum of Understanding (MoU) with public sector lender Bank of India for certification of units in the MSME sector.

The MoU was signed on September 20 by Brickwork Ratings Founder Director Mr D Ravishankar and Mr Rakesh Sethi, the General Manager, Bank of India, Mumbai.

Under the MoU, the bank would encourage its MSME customers to have a professional rating done by Brickwork Ratings.

“The bank feels it is an important step toward encouraging the sector to enhance its accounting practices and corporate governance and bring it in line with the best practices in the industry,” a Brickwork Ratings statement said.

Mr Vivek Kulkarni, the Founder Managing Director of Brickwork Ratings, said: “We have a strong focus on the MSME sector. We feel a professional rating helps the sector in getting its due recognition and hence, can act as a catalyst for growth.”

Brickwork Ratings said it has a talented team that understands the sector, with offices in Mumbai, Delhi, Kolkata, Chennai, Hyderabad and Bangalore.