Green Bonds : A Few Insights

Dear Crusaders,
We all are acquainted that Green Bonds are in the news now days. So here, we are rendering you the few insights of it. It is
a crucial topic from the exam point of view, rest assured you are going to get a few questions from this topic in the upcoming
exams. So go through it meticulously, and keep yourself abreast of it.
Climate change affects all of us to some extent. But it is expected to hit developing countries the hardest. Its potential
effects on temperatures, precipitation patterns, sea levels, and frequency of weather-related disasters pose risks for
agriculture, food, and water supplies. At stake are recent gains in the fight against poverty, hunger and disease, and the
lives and livelihoods of people in developing countries
Few people have heard of "green bonds", yet they could be a way of raising the huge amounts of capital needed to tackle
climate change and protect our natural world.
They could be critically important, but they remain shrouded in mystery and there is a great deal of confusion about their
exact form and structure. What are they? Are they a way for the government to borrow money for green projects? Are they a
new savings product for ethical consumers?
This lack of clarity is understandable and is a direct result of all the different types that have been recently proposed. They
could, in fact, be all of the following: green gilts, green retail bonds and green investment bank bonds. But, there are many
more being proposed as well, including: green infrastructure bonds, *multilateral development bank green bonds, green
corporate bonds, green sectoral bonds, rainforest bonds and index-linked carbon bonds.
All of these different (and sometimes confusing) classes of green bond have an important role in helping to raise finance for
different parts of our low-carbon transition.
What are green bonds?
A bond is a debt instrument with which an entity raises money from investors. The bond issuer gets capital while the
investors receive fixed income in the form of interest. When the bond matures, the money is repaid.
A green bond is very similar. The only difference is that the issuer of a green bond publicly states that capital is
being raised to fund green projects, which typically include those relating to renewable energy, emission
reductions and so on. There is no standard definition of green bonds as of now.
Indian firms like Indian Renewable Energy Development Agency Ltd and Greenko have in the past issued bonds that have
been used for financing renewable energy, however, without the tag of green bonds.
Green bonds are issued by multilateral agencies such as the World Bank, corporations, government agencies and
municipalities. Institutional investors and pension funds also have appetite for such bonds. For instance, investment funds
BlackRock and PIMCO have specific mandates from their investors to invest only in bonds which fund green projects. The
issuer provides periodic reports about the project.
Reason behind being in the News:
In March, the Exim Bank of India issued a five-year $500 million green bond, which is Indias first dollar-denominated green
bond. The issue was subscribed nearly 3.2 times. The bank has said it would use the net proceeds to fund eligible green
projects in countries including Bangladesh and Sri Lanka. Earlier, in February, Yes Bank raised Rs 1,000 crore via a 10-year
bond, which was oversubscribed twice.
Importance of it for India:
India has embarked on an ambitious target of building 175 gigawatt of renewable energy capacity by 2022, from just over 30
gigawatt now. This requires a massive $200 billion in funding. This isnt easy. As reports suggest, higher interest rates and
unattractive terms under which debt is available in India raise the cost of renewable energy by 24-32 per cent compared to
the U.S. and Europe.
Budget allocations have been insufficient. Renewable energy is still part of the larger power/infrastructure funding basket in
most banks, and with most financing going towards coal power projects, there is very little funding left for renewable energy.
Currently, options for raising funds and investing in the renewable energy story in the public markets in India is very
limited. Thats why green bonds seem like a good option.
Still, why are green bonds an attractive option?

Shantanu Jaiswal, analyst at Bloomberg New Energy Finance, says, Green bonds typically carry a lower interest rate than
the loans offered by the commercial banks. Hence, when compared to other forms of debt, green bonds offer better returns
for an independent power producers, Samuel Joseph, Chief General Manager, Treasury and Accounts Group, Exim Bank
of India, says as these bonds are meant for specific investors looking to invest in renewable energy projects, pricing could
be attractive.
The banks green bond was priced at 147.50 basis points over US Treasuries (whereas, usually, bonds are priced at
treasuries plus 150 basis points) at a fixed coupon of 2.75 per cent per annum.
Green Bonds Performance Globally:
According to Bloomberg New Energy Finance, a record $38.8 billion in green bonds were issued in 2014, 2.6 times the $15
billion issued in 2013. Most issuances of international green bonds have been oversubscribed suggesting a strong appetite
for them especially when done by a strong issuer like a large corporate or a government agency, the report says.
In the last two years, studies have shown that around 200bn of low-carbon infrastructure investment is required in the UK
between now and 2020. Ernst & Young estimates though that traditional sources of capital ranging from utilities through to
project finance and infrastructure funds can only provide 50-80bn over the next 15 years.
Issuers of these bonds?
In the period between 2007 and 2012, supranational organisations such as the European Investment Bank and the World
Bank, as also governments, accounted for most of the green bond issue. Since then, corporate interest has risen sharply. In
2014, bonds issued by corporations in the energy and utilities, consumer goods, and real estate sectors accounted for a
third of the market, according to KPMG.
The risks and challenges?
Globally, there have been serious debates about whether the projects targeted by green bond issuers are green enough.
There have been controversies too. Reuters a few months back reported how activists were claiming that the proceeds of
the French utility GDF Suezs $3.4 billion green bond issue were being used to fund a dam project that hurts the Amazon
rainforest in Brazil.
From an Indian perspective, a challenge of making investors subscribe could be the tenor and rating of green bonds,
reckons Bloombergs Jaiswal. The downside is that green bonds in India have a shorter tenor period of about 10 years in
India whereas a typical loan would be for minimum 13 years. This is less when compared to many international issuances.

All about a BANK CARD

A Bank Card is typically a plastic card issued by a bank to its clients that performs one or more of a number of services that
relate to giving the client access to funds, either from the client's own bank account, or through a credit account.

Cards can be classified on the basis of their issuance, usage and payment by the card holder. There are three types of
cards

Debit Cards

Credit Cards

Prepaid Cards

Debit cards

Debit cards are issued by banks and are linked to a bank account.
The debit cards are used to withdraw cash from an ATM, purchase of goods and services at Point of Sale (POS)/Ecommerce (online purchase) both domestically and internationally (provided it is enabled for international use). However, it
can be used only for domestic fund transfer from one person to another.

Credit Cards
Credit cards are issued by banks / other entities approved by RBI. The credit limits sanctioned to a card holder is in the form
of a revolving line of credit (similar to a loan sanctioned by the issuer) and may or may not be linked to a bank account.
The credit cards are used for purchase of goods and services at Point of Sale (POS) and E-commerce (online purchase)/
through Interactive Voice Response (IVR)/Recurring transactions/ Mail Order Telephone Order (MOTO). These cards can be
used domestically and internationally (provided it is enabled for international use). The credit cards can be used to withdraw
cash from an ATM and for transferring funds to bank accounts, debit cards, credit cards and prepaid cards within the
country.

Prepaid Cards
Prepaid cards are issued by the banks / non-banks against the value paid in advance by the cardholder and stored in such
cards which can be issued as smart cards or chip cards, magnetic stripe cards, internet accounts, internet wallets, mobile
accounts, mobile wallets, paper vouchers, etc.
The usage of prepaid cards depends on who has issued these cards. The prepaid cards issued by the banks can be used to
withdraw cash from an ATM, purchase of goods and services at Point of Sale (POS)/E-commerce (online purchase) and for
domestic fund transfer from one person to another. Such prepaid cards are known as open system prepaid cards. However,
the prepaid cards issued by authorised non-bank entities can be used only for purchase of goods and services at Point of
Sale (POS)/E-commerce (online purchase) and for domestic fund transfer from one person to another. Such prepaid cards
are known as semi-closed system prepaid cards. These cards can be used only domestically.
The maximum value that can be stored in any prepaid card (issued by banks and authorised non-bank entities) at any point
of time is Rs 1,00,000/-

The following types of semi closed pre-paid payment instruments can be issued by carrying out Customer Due Diligence as
detailed by the banks and authorised non- bank entities:

Up to Rs.10,000/- by accepting minimum details of the customer provided the amount outstanding at any point of
time does not exceed Rs 10,000/- and the total value of reloads during any given month also does not exceed Rs
10,000/-. These can be issued only in electronic form.

from Rs.10,001/- to Rs.50,000/- by accepting any officially valid document defined under Rule 2(d) of the PML
Rules 2005, as amended from time to time. Such PPIs can be issued only in electronic form and should be nonreloadable in nature;

up to Rs.50,000/- with full KYC and can be reloadable in nature. The balance in the PPI should not exceed
Rs.50,000/- at any point of time.

Something more to a Bank Card.....

Who decides the limits on cash withdrawal or purchase of goods and services through use of a card?

The limits on cash withdrawal at ATMs and for purchase of goods and services are decided by the issuer bank. However, in
case of cash withdrawal at other banks ATM, there is a limit of Rs 10,000/- per transaction. Cash withdrawal at POS has
also been enabled by certain banks wherein, a maximum of Rs.1000/- can be withdrawn daily by using debit cards.

Is the customer charged by his/her bank when he uses his debit card at other banks ATM for withdrawing
cash?

The savings bank account customer will not be charged by his/her bank up to five transactions (inclusive of both financial
and non-financial transactions) in a month if he/she uses an ATM of another bank. However, within this overall limit of five
free transactions, for transactions done at ATM of another bank located in the six metro centres, viz. Mumbai, New Delhi,
Chennai, Kolkata, Bengaluru and Hyderabad, the free transaction limit is set to three transactions per month.

Where should the customer lodge a complaint in the event of a failed ATM transaction (account debited but
cash not dispensed at the ATM)?

The customer has to approach his/her bank (bank that issued the card) to lodge a complaint in the event of a failed ATM
transaction.

What is the time limit for resolution of the complaint pertaining to failed ATM transaction?

The time limit, for resolution of customer complaints by the issuing banks, is within 7 working days from the date of receipt of
customer complaint. Hence the bank is supposed to re-credit the customers account within 7 working days. For failure to
re-credit the customers account within 7 working days of receipt of the complaint from the customer, the bank is liable to
pay Rs 100 per day as compensation to the customer.

What is the option for a card holder if his complaint is not redressed by the issuer?

If a complainant does not get satisfactory response from his/her bank within a maximum period of thirty (30) days from the
date of his lodging the complaint, he/she will have the option to approach the Office of the Banking Ombudsman (in
appropriate jurisdiction) for redressal of his grievance.

How are the transactions carried out through cards protected against fraudulent usage?

For carrying out any transactions at an ATM, the card holder has to key in the PIN which is known only to him/her for
debit/credit and prepaid cards. However, for carrying out transactions at POS too, the card holder has to key-in the PIN
which is known only to the card holder if a debit card is used. In the case of credit card usage at POS the requirement of
PIN depends on the banks policy on security and risk mitigation. In the case of e-commerce transactions, additional factor of
authentication is applicable except in case of international websites.

What are the liabilities of a bank in case of fraudulent use of a card by unauthorised person?

In case of card not present transactions RBI has mandated providing additional factor of authentication (if the issuer bank
and e-commerce merchant bank is in India). Hence, if a transaction has taken place without the additional factor of
authentication and the customer has complained that the transaction is not effected by her/him, then the issuer bank shall
reimburse the loss to the customer without demur.

Is there anyway a customer can come to know quickly whether a fraudulent transaction has taken place
using his/her card?

RBI has been taking various steps to ensure that card payment environment is safe and secure. RBI has mandated banks
to send online alerts for all card transactions so that a card holder is aware of transactions taking place on his / her card.

What is the mandate for banks for issuing Magnetic stripe cards or Chip-based cards?

RBI has mandated that banks may issue new debit and credit cards only for domestic usage unless international use is
specifically sought by the customer. Such cards enabling international usage will have to be essentially EMV Chip and Pin
enabled. The banks have also been instructed to convert all existing Mag-stripe cards to EMV Chip card for all customers
who have used their cards internationally at least once (for/through e- commerce/ATM/POS).

The Indian Financial System

The term "finance" in our simple understanding it is perceived as equivalent to
'Money'.Finance exactly is not money, But it is the source of providing funds for a
particular activity.The word "system", in the term "financial system", implies a set of
complex and closely connected or interlined institutions, agents, practices, markets,
transactions, claims, and liabilities in the economy. The financial system is concerned
about money, credit and finance-the three terms are intimately related yet are somewhat
different from each other.
Components/ Constituents of Indian Financial system:

FINANCIAL INSTRUMENTS

Money Market Instruments

The money market can be defined as a market for short-term money and financial assets that are near
substitutes for money.The term short-term means generally a period upto one year and near substitutes to
money is used to denote any financial asset which can be quickly converted into money with minimum
transaction cost.

Some of the important money market instruments are briefly discussed below:

1. Call /Notice-Money Market

Call/Notice money is the money borrowed or lent on demand for a very short period. When money is
borrowed or lent for a day, it is known as Call (Overnight) Money. Intervening holidays and/or Sunday are
excluded for this purpose. Thus money, borrowed on a day and repaid on the next working day, (irrespective
of the number of intervening holidays) is "Call Money". When money
is borrowed or lent for more than a day and up to 14 days, it is "Notice Money". No collateral security is
required to cover these transactions.

2. Inter-Bank Term Money

Inter-bank market for deposits of maturity beyond 14 days is referred to as the term money market. The
entry restrictions are the same as those for Call/Notice Money except that, as per existing regulations, the
specified entities are not allowed to lend beyond 14 days.

3. Treasury Bills.
Treasury Bills are short term (up to one year) borrowing instruments of the union government. It is an IOU of
the Government. It is a promise by the Government to pay a stated sum after expiry of the stated period
from the date of issue(91/182/364 days i.e. less than one year). They are issued at a discount to the face
value, and on maturity the face value is paid to the holder. The rate of discount and the corresponding issue
price are determined at each auction.

4. Certificate of Deposits
Certificates of Deposit (CDs) is a negotiable money market instrument and issued in dematerialised form or
as a Usance Promissory Note, for funds deposited at a bank or other eligible financial institution for a
specified time period.

5. Commercial Paper
CP is a note in evidence of the debt obligation of the issuer. On issuing commercial paper the debt obligation
is transformed into an instrument. CP is thus an unsecured promissory note privately placed with investors
at a discount rate to face value determined by market forces.

Capital Market Instruments

The capital market generally consists of the following long term period i.e., more than one year period,
financial instruments; In the equity segment Equity shares, preference shares, convertible preference
shares, non-convertible preference shares etc and in the debt segment debentures, zero coupon bonds,
deep discount bonds etc.

Hybrid Instruments
Hybrid instruments have both the features of equity and debenture. This kind of instruments is called as
hybrid instruments.Examples are convertible debentures, warrants etc.

FINANCIAL MARKETS
Financial market is a market where financial instruments are exchanged or traded and helps in determining the prices of the
assets that are traded in and is also called the price discovery process.

TYPES OF FINANCIAL MARKETS

Forex Market - The Forex market deals with the multicurrency requirements, which are met by the exchange of currencies.
Depending on the exchange rate that is applicable, the transfer of funds takes place in this market. This is one of the most
developed and integrated market across the globe

MONEY MARKET:
The money market is a market for short-term funds, which deals in financial assets whose
period of maturity is upto one year. It should be noted that money market does not deal in
cash or money as such but simply provides a market for credit instruments such as bills of
exchange, promissory notes, commercial paper, treasury bills, etc.

CAPITAL MARKET
Capital Market may be defined as a market dealing in medium and long-term funds. It is an institutional arrangement for
borrowing medium and long-term funds and which provides facilities for marketing and trading of securities. So it constitutes
all long-term borrowings from banks and financial institutions, borrowings from foreign markets and raising of capital by
issue various securities such as shares debentures, bonds, etc.The market where securities are traded known as Securities
market. It consists of two different segments namely primary and secondary market The primary market deals with new or
fresh issue of securities and is, therefore, also known as new issue market;whereas the secondary market provides a place
for purchase and sale of existing securities and is often termed as stock market or stock exchange.

CREDIT MARKET
Credit market is a place where banks, FIs and NBFCs purvey short, medium and long-term loans to corporate and
individuals.

Bretton Woods Twins

Bretton woods twins mean the organisations i.e.The International Monetary Fund (IMF) set up along with the World Bank
after the Second World War to assist in the reconstruction of war-ravaged countries. Leaders felt that financial stability was
best achieved when countries worked in an environment of interdependence.

The two organisations were agreed to be set up at a conference in Bretton Woods in the US. Hence,they are known as the
Bretton Woods twins.The Bretton Woods Conference, formally known as the United Nations Monetary and Financial
Conference,was the gathering of 730 delegates from all 44 Allied nations at the Mount Washington Hotel, situated in Bretton
Woods, New Hampshire, United States, to regulate the international monetary and financial order after the conclusion of
World War II.The conference was held from the 1st to 22nd of July, 1944. Agreements were executed that later established
the International Bank for Reconstruction and Development (IBRD, which is part of today's (World Bank Group) and the
International Monetary Fund (IMF)
INTERNATIONAL MONETARY FUND
IMF was supposed to oversee and monitor the economic performance of 188 member countries and warn them of any
developing economic crisis.If any crisis does develop and a country approaches IMF for help, the organisation chalks out a
recovery plan, which includes imposition of conditions for keeping the economies on a particular path.
The organization's objectives stated in the Articles of Agreement are:

promote international economic cooperation,

international trade,

employment,

exchange-rate stability including by making financial resources available to member countries to meet balance-ofpayments needs.

When did India take the IMF bailout package?

The Indian government, faced with a balance of payments crisis in 1991, took a loan and agreed to the reforms process.
The liberalisation in the economy was partly a concomitant of that need.
The IMF report is part of its mandate under Article IV of its constitution. The fund holds consultations with finance ministries
and central banks of each member countries annually for its spring meeting in Washington.
The decision of the IMF to intervene in any country is based on the governing board's decision. The voting rights
are determined historically by the economic strength of the countries. India, because of its rapidly growing economic clout,
has demanded a re-drawing of the voting rights, but that did not happen at the recent Singapore meeting.Instead, the fund
gave ad hoc voting right increase to China, South Korea, Turkey and Mexico. It has promised a long-term revision in another
two years.
WORLD BANK GROUP
World Bank group provides loans to developing countries for capital programs. The World Bank is a component of the
World Bank Group, and a member of the United Nations Development Group.
The World Bank's official goal is the reduction of poverty. According to its Articles of Agreement, all its decisions must be
guided by a commitment to the promotion of foreign investment and international trade and to the facilitation of capital
investment.
The World Bank should not be confused with the United Nations World Bank Group, a member of the United Nations
Economic and Social Council and a family of five international organizations that make leveraged loans to poor countries:

International Bank for Reconstruction and Development (IBRD)

International Development Association (IDA)

International Finance Corporation (IFC)

Multilateral Investment Guarantee Agency (MIGA)

International Centre for Settlement of Investment Disputes (ICSID)

International Bank for Reconstruction and Development

IBRD is an international financial institution which offers loans to middle-income developing countries. The IBRD is the first
of five member institutions which compose the World Bank Group and is headquartered in Washington, D.C., United States.
It was established in 1944 with the mission of financing the reconstruction of European nations devastated by World War
II.Following the reconstruction of Europe, the Bank's mandate expanded to advancing worldwide economic development
and eradicating poverty. The IBRD provides commercial-grade or concessional financingto sovereign states to fund projects
that seek to improve transportation and infrastructure, education, domestic policy, environmental consciousness, energy
investments, healthcare, access to food and potable water, and access to improved sanitation.
The International Development Association (IDA)
The IDA is an international financial institution which offers concessional loans and grants to the world's poorest developing
countries.The IDA is a member of the World Bank Group and is headquartered in Washington, D.C., United States. It was
established in 1960 to complement the existing International Bank for Reconstruction and Development by lending to
developing countries which suffer from the lowest gross national income, from troubled creditworthiness, or from the lowest
per capita income.
International Finance Corporation (IFC)
The IFC was established in 1956 to support the growth of the private sector in the developing world. The IFCs stated
mission is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve
peoples lives.IFC provides loans and equity financing,advice, and technical services to the private sector. The IFC also
plays a catalytic role, by mobilizing additional capital through loan syndication and by lessening the political risk for
investors, enabling their participation in a given project.
The International Centre for Settlement of Investment Disputes (ICSID)
The ICSID is considered to be the leading international arbitration institution devoted to resolving disputes between States
and foreign investors, also known as BIT arbitrations.Based in Washington, D.C. (U.S.A.) and operating under the World
Bank, ICSID was established in 1965 by the Convention on the Settlement of Investment Disputes between States and
Nationals of Other States (known as the ICSID Convention or Washington Convention).
The Multilateral Investment Guarantee Agency (MIGA)
The MIGA is an international financial institution which offers political risk insurance and credit enhancement guarantees.
Such guarantees help investors protect foreign direct investments against political and non-commercial risks in developing
countries.MIGA is a member of the World Bank Group and is headquartered in Washington, D.C., United States. It was
established in 1988 as an investment insurance facility to encourage confident investment in developing countries.
World Bank Group Strategy to Help India Achieve Its Vision
The World Bank Groups new Country Partnership Strategy will guide its support to India from 2013 through 2017. The
strategy aims to help the country lay the foundations for achieving its longer-term vision of faster, more inclusive growth.
A key feature of the new strategy is the significant shift in support toward low-income and special category states, where
many of Indias poor and disadvantaged live.The new strategy proposes a lending program of $3 billion to $5 billion each
year over the next five years. Sixty percent of the financing will go to state government-backed projects. Half of this, or 30%
of total lending, will go to low-income or special category states, up from 18% of lending under the previous strategy.

Short Notes on CBS..!!

Hello Readers,
Here we are providing Short Notes on Core Banking Solutions - one of the hot topic asked in the Interviews. Hope you like
the post!!!
The term CORE means - Centralized Online Real-time Exchange.

What is CBS?
CBS refers to the software applications for recording transactions, storing customer information, calculating interest and
completing the process of passing entries in a single database.
What CBS does?
CBS enables accessing of complete customer account details centrally. It makes it possible for a bank customer to access
his bank account through whichever channel he prefers like internet banking, mobile banking, ATM etc.
CBS in India
This initiative was taken by the banks on the basis of First Rangarajan Committee report on bank computerisation
submitted in the year 1984.
The committee was constituted under the chairmanship of Dr. C. Rangarajan (Then deputy governor of RBI).
Old generation banks initially were hesitant about this but with the advent of new generation private sector banks in India
during 1994-1996, the real era of bank marketing started and these banks started to offer any-where and any-time banking
facilities to its customers.
Syndicate Bank was the first among the Public Sector Banks to implement Core Banking.
First CBS branch of Syndicate bank was Jayanagar Branch in Bangalore.
Benefits of CBS
A. Benefits for the customers

Through CBS a bank customer can avail banking facilities (transactions) 24x7.

It is time saving, convenient and efficient.

B. Benefits for the banks

This paradigm shift in banking has revolutionised the speed, efficiency and reach of the delivery systems. It gives
greater customer satisfaction which is essential for every bank in this day an age.

Since it offers alternate channels than brick and mortar banking, it is a viable alternative to opening new branches,
therefore reduces a banks operational costs.

Alternative for extended working hours.

Reduces long queues in bank cash counters.

BIS & Basel Norms

The Bank for International Settlements (BIS) established on 17 May 1930,is the world's oldest international
financial organisation. The BIS has 60 member central banks, representing countries from around the world
that together make up about 95% of world GDP.The head office is in Basel,Switzerland and there are two
representative offices: in the Hong Kong Special Administrative Region of the People's, Republic of China and
in Mexico City.

The mission of the BIS is to serve central banks of different of nations in their pursuit of monetary and
financial stability, to foster international cooperation in those areas and to act as a bank for central

banks.The Basel Committee is the primary global standard setter for the prudential regulation of banks and
provides a forum for cooperation on banking supervisory matters.

NORMS ISSUED BY BIS

Basel I
In 1988,The Basel Committee on Banking Supervision (BCBS) introduced capital measurement system called
Basel capital accord,also called as Basel 1. It focused almost entirely on credit risk. It defined capital and
structure of risk weights for banks. The minimum capital requirement was fixed at 8% of risk weighted
assets (RWA). RWA means assets with different risk profiles. For example, an asset backed by collateral
would carry lesser risks as compared to personal loans, which have no collateral. India adopted Basel 1
guidelines in 1999.The Basel I Accord, issued in 1988, has succeeded in raising the total level of equity
capital in the system.Like many regulations, it also pushed unintended consequences because it does not
differentiate risks very well, it perversely encouraged risk seeking. It also promoted the loan securitization
that led to the unwinding in the subprime market.

Basel II
In June 1999, the Committee issued a proposal for a new capital adequacy framework to replace the 1988
Accord. This led to the release of the Revised Capital Framework in June 2004. Generally known asBasel II,
the revised framework comprised three pillars, namely minimum capital, supervisor review and market
discipline.

Minimum capital is the technical, quantitative heart of the accord.Banks must hold capital against 8% of
their assets, after adjusting their assets for risk.Supervisor review is the process whereby national
regulators ensure their home country banks are following the rules. If minimum capital is the rule book, the
second pillar is the referee system.Market discipline is based on enhanced disclosure of risk. This may be an
important pillar due to the complexity of Basel. Under Basel II, banks may use their own internal models (and
gain lower capital requirements) but the price of this is transparency.

Basel III
Even before Lehman Brothers collapsed in September 2008, the need for a fundamental strengthening of the
Basel II framework had become apparent.The banking sector had entered the financial crisis with too much
leverage and inadequate liquidity buffers.Responding to these risk factors, the Basel Committee issued
Principles for sound liquidity risk management and supervision in the same month that Lehman Brothers
failed. In July 2009, the Committee issued a further package of documents to strengthen the Basel II capital
framework, notably with regard to the treatment of certain complex securitisation positions, off balance
sheet vehicles and trading book exposures. In September 2010, the Group of Governors and Heads
of Supervision announced higher global minimum capital standards for commercial banks. This followed an
agreement reached in July regarding the overall design of the capital and liquidity reform package, now
referred to asBasel III.

INDIA AND BASEL NORMS:

Presently indian banking system folllows basel II norms.

The Reserve Bank of India has extended the timeline for full implementation of the Basel III capital
regulations by a year to march 31,2019.March 31, 2019.

Around 10 public sector banks (PSBs) will get a total capital infusion of Rs 12,517 crore from the
government before this financial year ends.

Government of India is scaling disinvesting their holdings in PSBs to 52 per cent.

A Brief of SLR
Statutory Liquidity Ratio is the amount a commercial banks needs to maintain in the form of cash, or gold, or
govt. approved securities (Bonds) before providing credit to its customers. SLR rate is determined and
maintained by RBI in order to control the expansion of the bank credit.

The maximum limit of SLR is 40%

Current SLR is 22% of NDTL

What is a Basis point ?
It is the increase in interest rates in percentage terms. For instance, if the interest rate increases by 50 basis
points (bsp), then it means that interest rate has been increase by 0.50%. One percentage point is broken
down into 100 basis points. Therefore, an increase from 2% to 3% is an increase of one percentage point or
100 basis points.

NDTL - is the sum of all the demand (current account and savings account sum in bank ) and time (fixed deposits or
recurring deposits etc. which are to be paid on maturation), these are assets for us but a liability(debt) for the banks.

Here is an example to show the effect of CRR and SLR.

Let say our Lena Bank had 100 Rs as NDTL they can give this much amount of loan to the needy hence Rs 100 will flow in
the market(can cause inflation), so Mr. Bond (Rajan of RBI) said keep 4% (CRR) with us and 22% as SLR in the form of
govt securities and gold (which cant be given as loans) so Lena bank is left with only 74% [100 - (22 + 4)] of the NDTL
resulting in lesser money to be given as loans and eventually resulting in a check on inflation.

The main objectives for maintaining the SLR ratio are the following:
i. to control the expansion of bank credit. By changing the level of SLR, the Reserve Bank of India can
increase or decrease bank credit expansion.
ii. to ensure the solvency of commercial banks.
iii. to compel the commercial banks to invest in government securities like government bonds.

Main use of SLR:

SLR is used to control inflation and propel growth. Through SLR rate the money supply in the system can be controlled
effectively.

What is the difference between SLR and CRR?

What SLR does is it restricts the bank's leverage in pumping more money into the economy. On the other hand, CRR, or
cash reserve ratio, is the portion of deposits that the banks have to maintain with the RBI. Higher the ratio, the lower is the
amount that banks will be able to use for lending and investment.
The other difference is that to meet SLR, banks can use cash, gold or approved securities where as with CRR it has to be
only cash. CRR is maintained in cash form with RBI, where as SLR is maintained in liquid form with banks themselves.

What does a reduction in SLR mean?

A cut in SLR means that the home, car and commercial loan rates will go down. Banks will have more money with them.
With the reduction of SLR, the RBI is shrinking the market for government securities and simultaneously
enlarging availability of credit to the private sector. With that, the cost of funds to the government will
increase and the rate charged by banks to the private sector decreases.

A quick glance on Balance Sheet

Definition: A balance sheet is a document which summarizes a companys assets, liabilities and
stockholders equity at a point of time. To put it in simple terms, a balance sheet is like a snap shot of
a horse race, shows the financial position of a company at a particular point of time.
Components of a balance sheet:

Assets

Liabilities

Ratios used

Assets:
1. Current Assets: These are assets that may be converted into cash, sold or consumed within a
year or less. Current Assets include cash, marketable securities, Account and notes

receivables, inventories etc.

2. Fixed Assets: Fixed assets are those tangible physical facilities owned by an enterprise, which
are permanent/durable in nature. Fixed assets are not turned over, meaning they are not
converted into cash. For example: Land and building, machinery, tools, equipments etc.
3. Intangible Assets: These assets do not exist in physical form but are notional possessions
owned by an enterprise. These assets generally dont have real money value but are
important for a company. For example: patents, goodwill, trade-mark etc.
Liabilities:
1.Current liabilities : Those obligations of a company which are payable on demand or within a
period of less than 1 year from the date of the balance sheet.
2.Term Liabilities: A term liability is a debt which matures after a period of 12 months from the
date of the balance sheet
3.Net Worth: The net worth of a company is the owners stake in the business. It is a liability of
a company towards its promoters. It is therefore an important item on the balance sheet on
which a lending banker can rely.
4.Specific Reserves and Provisions: Specific Reserves and Provisions are created for the
payment of taxes, dividends and other contingencies.
Ratios:
Ratios Showing Liquidity:

Current Ratio - Ratio of current assets to current liabilities.

Quick Ratio - It is an index of the solvency of an enterprise. Basically quick ratio is the ratio of (Current assetsinventories) and current liabilities.

Ratio showing Financial Stability:

Debt-Equity Ratio - This ratio indicates the relative proportion of shareholders' equity and debt used
to finance a company's assets.

Ratios Showing Profitability:

a.Return on investment ratio- This ratio measures the operating efficiency of a company
without regards to financial structure.
b.Return on Equity Ratio- It is the ratio of net income of a business during a period to its
stockholders' equity during that period.

Financial Inclusion and Business Correspondents

With the objective of ensuring greater financial inclusion and increasing the outreach of the banking sector, RBI decided in
public interest to enable banks to use the services of NGOs / SHGs and Micro Finance Institutions (MFIs) as intermediaries
in providing financial and banking services through the use of Business Facilitator and Correspondent.

Business Correspondent
Under the 'Business Correspondent' Model, NGOs/ MFIs set up under Societies/ Trust Acts, Societies registered under
Mutually Aided Cooperative Societies Acts or the Cooperative Societies Acts of States, In engaging such intermediaries as
Business Correspondents, banks should ensure that they are well established, enjoying good reputation and having the

confidence of the local people. Banks may give wide publicity in the locality about the intermediary engaged by them as
Business Correspondent and take measures to avoid being misrepresented.
Roles of a Business Correspondent

Business correspondents are bank representatives.

They help villagers to open bank accounts.

They help villagers in banking transactions. (deposit money, take money out of savings account, loans etc.)

The Business Correspondent carries a mobile device.

The villager gives his thumb impression or electronic signature, and get the money.

Business Correspondents get commission from bank for every new account opened, every transection made via
them, every loan-application processed etc.

The arrangements with the Business Correspondents shall specify:

Suitable limits on cash holding by intermediaries as also limits on individual customer payments and receipts.

The requirement that the transactions are accounted for and reflected in the bank's books by end of day or next
working day.

All agreements/ contracts with the customer shall clearly specify that the bank is responsible to the customer for
acts of omission and commission of the Business Facilitator/ Correspondent.

Redressal of Grievances in regard to services rendered by Business Facilitators/ Correspondents

Banks should constitute Grievance Redressal Machinery within the bank for redressing complaints about services
rendered by Business Correspondents and Facilitators and give wide publicity about it through electronic and print
media.

The name and contact number of designated Grievance Redressal Officer of the bank should be made known and
widely publicized. The designated officer should ensure that genuine grievances of customers are redressed
promptly.

The grievance redressal procedure of the bank and the time frame fixed for responding to the complaints should be
placed on the bank's website.

If a complainant does not get satisfactory response from the bank within 60 days from the date of his lodging the
compliant, he will have the option to approach the Office of the Banking Ombudsman concerned for redressal of his
grievance/s.

Fiscal System in India

A country's fiscal system is the complete structure of government revenue and expenditures and the
framework within which its agencies collect and disburse those funds. This system is governed by a nation's
economic policy, which comes from decisions made by the governing body.
Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and
influence a nation's economy. It is the sister strategy to monetary policy through which a central bank

influences a nation's money supply. These two policies are used in various combinations to direct a country's
economic goals.

There are 3 parts of the fiscal policy

1. Public Revenue.
2. Public expenditure.
3. Public debt.

Revenues: are the source of income realized by the government and are divided into:

1. Revenue receipts : which consists of revenue from regular sources like Taxation revenues: eg., receipts
from corporate tax, income tax, excise tax, Excise duty, custom duty, service tax etc.Non tax revenue: which
include interest on loans, dividends from Public sector units, Fees and stamp duties.
2. Capital receipts: Which refer to those inflows to government that are not in the nature of regular
income, But are repayments / recoveries, or proceeds from sale of assets. Other receipts like Disinvestment
(selling some shares of a PSU) comes under this head. Borrowings are simply the deficit which can be
covered by taking loans from market.
Expenditure: are the expenses incured by govt and are divided into :

Non plan expenditure: These are on going expenditure not covered under the 5 - year plans. Non-plan
revenue expenditure is accounted for by interest payments, subsidies (mainly on food and fertilisers), wage
and salary payments to government employees, grants to States and Union Territories governments,
pensions, police, economic services in various sectors, other general services such as tax collection, social
services, and grants to foreign governments. Non-plan capital expenditure mainly includes defence, loans to
public enterprises, loans to States, Union Territories and foreign governments.

Plan expenditure: India has adopted economic planning as a strategy for economic development. For
stepping up the rate of economic development five-year plans have been formulated. So far ten five-year
plans have been completed. The expenditure incurred on the items relating to five year plans is termed as
plan expenditure. Such expenditure is incurred by the Central Government.

A provision is made for such expenditure in the budget of the Central Government. Assistance given by the
Central Government to the State Governments and Union Territories for plan purposes also forms part of the
plan expenditure. Plan expenditure is subdivided into Revenue Expenditure and Capital Expenditure.This
expenditure involves funding for programmes and projects covered by the 5 - year plans as decided by the
various ministerial bodies.

Under the above heads there are two components:

Revenue expenditure - It is payments incurred for day - to - day running of government departments and various services
offered to citizens. This also comprises of spending towards subsidies, interest payments. This spurs consumption in
economy.
Capital expenditure: This expenditure spurs asset creation, resulting in increased investment with spending diverted
towards cost associated with acquisition of assets that may include investments in shares, infrastructure as well as loans
and advances given out by government.
Other Important Terms:
Public debt: The money borrowed by the government is eventually a burden on the people of India, and is,
therefore, called public debt. It is split into two heads: internal debt (money borrowed within the country)
and external debt (funds borrowed from non-Indian sources).
Usually the government spends more than what it earns through various sources. This shortfall, which is met
with borrowed funds, is called fiscal deficit. Technically, it is the excess of government expenditure over 'nonborrowed receipts' revenue receipts plus loan repayments received by the govt plus miscellaneous capital
receipts. Fiscal deficit for FY13 is estimated at INR.5.64 lakh crore, revenues of INR 9.18 lakh crores less
expenditure of INR 14.82 lakh crores.
Fiscal deficit is measured as a percentage of GDP, hence INR 5.64 lakh crore / GDP of INR 100.74 lakh crores
work out to estimated fiscal deficit of 5.6% of GDP.

Revenue Deficit: It is the excess of revenue expenditure over revenue receipts. All expenditure on revenue
account should ideally be met from receipts on revenue account; the revenue deficit should be zero. In such
a situation, the government borrowing will not be for consumption but for creation of assets.

Effective revenue deficit: This is an even tighter number than the revenue deficit. It is revenue deficit less
grants for creation of capital assets.

Primary deficit: It is the fiscal deficit less interest payments made by the government on its earlier
borrowings.

Deficit and GDP: Apart from the numbers in rupees, the budget document also mentions deficit as a
percentage of GDP. This is because in absolute terms, the fiscal deficit may be large, but if it is small
compared to the size of the economy, then it's not such a bad thing, especially if it is being used to create
production capacities.

Types of fiscal policy

Fiscal policy has an effect on each of these categories. There are two types of fiscal policy: Expansionary and
Contractionary.
Expansionary Fiscal Policy
When an economy is in a recession, expansionary fiscal policy is in order. Typically this type of fiscal policy
results in increased government spending and/or lower taxes. A recession results in a recessionary gap
meaning that aggregate demand (ie, GDP) is at a level lower than it would be in a full employment situation.
In order to close this gap, a government will typically increase their spending which will directly increase the
aggregate demand curve (since government spending creates demand for goods and services). At the same
time, the government may choose to cut taxes, which will indirectly affect the aggregate demand curve by
allowing for consumers to have more money at their disposal to consume and invest. The actions of this
expansionary fiscal policy would result in a shift of the aggregate demand curve to the right, which would
result closing the recessionary gap and helping an economy grow.

Contractionary Fiscal Policy

Contractionary fiscal policy is essentially the opposite of expansionary fiscal policy. When an economy is in a
state where growth is at a rate that is getting out of control (causing inflation and asset bubbles),
contractionary fiscal policy can be used to rein it in to a more sustainable level. If an economy is growing too
fast or for example, if unemployment is too low, an inflationary gap will form. In order to eliminate this
inflationary gap a government may reduce government spending and increase taxes. A decrease in spending
by the government will directly decrease aggregate demand curve by reducing government demand for
goods and services. Increases in tax levels will also slow growth, as consumers will have less money to
consume and invest, thereby indirectly reducing the aggregate demand curve.

Conclusion On Fiscal Policy

The objectives of fiscal policy such as economic development, price stability, social justice, etc. can be
achieved only if the tools of policy like Public Expenditure, Taxation, Borrowing and deficit financing are
effectively used.Though there are gaps in India's fiscal policy, there is also an urgent need for making India's
fiscal policy a rationalised and growth oriented one. The success of fiscal policy depends upon taking timely
measures and their effective administration during implementation.

Important Facts about Indian Currency

Hello Readers,
Let's know everything about Indian Currency. Hope you all like the post..
The Indian rupee symbol ' ' (officially adopted in 2010) is derived from the Devanagari consonant "" (ra)
and the Latin letter "R". The first series of coins with the rupee symbol was launched on 8 July 2011.
Currency paper is composed of cotton and cotton rag.

RBI issues all the bank notes except Rupees 1 Notes. These notes are issued by Ministry of Finance. Recently
RBI launched a website PaisaBoltaHai to raise awareness of counterfeit or fake currency among users of
the Indian Rupees and also the citizen of India.
The main security features of current banknotes are:

Watermark White side panel of notes has Mahatma Gandhi watermark.

Security thread All notes have a silver or green security band with inscriptions (visible when held
against light) of Bharat in Hindi and "RBI" in English.

Latent image On notes of denominations of Rs.20 and upwards, a vertical band on the right side of
the Mahatma Gandhis portrait contains a latent image showing the respective denominational value
numerally (visible only when the note is held horizontally at eye level).

Micro lettering Numeral denominational value is visible under magnifying glass between security
thread and latent image.

Intaglio On notes with denominations of INR5 and upwards the portrait of Mahatma Gandhi, the
Reserve Bank seal, guarantee and promise clause, Ashoka Pillar Emblem on the left and the RBI
Governor's signature are printed in intaglio (raised print).

Identification mark On the left of the watermark window, different shapes are printed for various
denominations INR20: vertical rectangle, INR50: square, INR100: triangle, INR500: circle, INR1,000:
diamond). This also helps the visually impaired to identify the denomination.

Fluorescence Number panels glow under ultraviolet light.

Optically variable ink Notes of Rs.500 and Rs.1,000 denominations have their numerals printed in
optically variable ink. The number appears green when the note is held flat, but changes to blue
when viewed at an angle.

Seethrough register Floral designs printed on the front and the back of the note coincide
and perfectly overlap each other when viewed against light.

EURion constellation A pattern of symbols found on the banknote helps software detect the
presence of a banknote in a digital image, preventing its reproduction with devices such as colour
photocopiers.

Different Kinds of Notes:

Genuine Notes: Such notes must have a water mark of Asoka Pillar, security thread and serial
number along with alphabet. They have distinctive colours.

Soiled notes: The currency note which has become dirty due to its use or may be in 2 pieces. No
portion of such note should be missing. These notes are accepted for exchange without any
restrictions by the banks.

Mutilated notes: Such currency notes that are composed of various pieces or they are cut note of
which some portion is missing. These notes are exchanged only by the currency chest branches of
banks.

Single/double numbered notes: Notes up to Rs.5 are single numbered while the notes above Rs.5
are double numbered notes.

RBIS Clean Note Policy

RBI had announced Clean Note Policy in January, 1999.

For withdrawing soiled notes from circulation and pumping fresh notes into circulation, the RBI introduced
various changes in the system and procedures related to currency management which include
mechanization of the currency verification and processing as also shredding and briquetting for destruction
of soiled and mutilated notes.
Rules and Instructions Issued by RBI:

Not to staple bank notes.

To Tender soiled notes to the Reserve Bank in unstapled condition.

To use bands instead of staple pins.

To issue only clean notes to members of public.

To open select currency chest branches on Sundays to provide exchange facility to members of public
all over the county.

To provide unrestricted facility for exchange of soiled and mutilated notes to members of public.

Banks should sort notes into reissuables and non issuables, and issue only clean notes to public.

Soiled notes in unstapled condition may be tendered at RBI in inward remittances through Currency
Chests.

Banks should stop writing of any kind on watermark window of bank notes.

Coins of 25 Paise and Below Withdrawal

Govt, of India has decided to withdraw the coins of 25 paise and below from circulation from June 30, 2011.
Coins of 25 paise and below are not accepted for exchange at the bank branches from July 1, 2011 onward.
Withdrawal of Pre2005 Notes:
Reserve Bank of India decided to withdraw from circulation all banknotes issued prior to 2005 as they have
fewer security features as compared to banknotes printed after 2005.
The withdrawal exercise is in conformity with the standard international practice of not having multiple series of notes in
circulation at the same time.
The RBI has already been withdrawing these banknotes in a routine manner through banks.
It is estimated that the volume of such banknotes (pre2005) in circulation is not significant enough to impact the general
public in a large way and the members of public may exchange the pre2005 series banknotes at bank branches at their
convenience.
The deadline for exchanging pre2005 currency notes of various denominations, including Rs.500 and Rs.1,000, has been
extended by another six months till June 30, 2015.

Facts about Public sector banks

List of Public Sector Banks , Head offices, Year of establishment and Slogans :

S.N Bank Name

o

Head Office

Year of
establishment

Slogan

Allahabad Bank

Kolkata

1865

A tradition of trust

Andhra Bank

Hyderabad

20 Nov. 1923

Much more to do. With

YOU in focus

Bank of Baroda

Baroda

20 July 1908

Indias International Bank

Bank of India

Mumbai

7 Sept. 1906

Relationships beyond
Banking

Bank of
Maharashtra

Pune

16 sept. 1935

One Family One Bank

Canara Bank

Bangalore

1910

Its easy to change for

those who you love,
Together we Can

Central Bank of
India

Mumbai

21 Dec. 1911

Build A Better Life Around

Us, Central to you since
1911

Corporation
Bank

Mangalore

12 March 1906

Prosperity for all

Dena Bank

Mumbai

26 May 1938

Trusted Family Bank

10

Indian Bank

Chennai

5 March 1907

Taking Banking Technology

to Common Man, Your
Tech-friendly bank

11

Indian Overseas Chennai

Bank

10 Feb. 1937

Good people to grow with

12

Oriental Bank of Gurgaon ,

Commerce
Haryana

19 Feb. 1943

Where every individual is

committed

13

Punjab National New Delhi

Bank

1895

The Name you can Bank

Upon

14

Punjab & Sind

Bank

New Delhi

24th June 1908

Where series is a way of

life

15

Syndicate Bank

Manipal,
karnataka

1925

Your Faithful And Friendly

Financial Partner

16

Union Bank of
India

Mumbai

1919

Good people to bank with

17

United Bank of
India

Kolkata

1950

The Bank that begins with

U

18

UCO Bank

Kolkata

1943

Honors Your Trust

19

Vijaya Bank

Bangalore

1931

A friend You can Bank

Upon

20

IDBI Bank Ltd

Mumbai

1964

Banking for all; Aao

Schein Bada
21

Bharatiya
Mahila Bank

New Delhi

19th Nov. 2013

Empowering women,
Empowering India

State Bank Group

Mumbai

1st July 1956

State Bank of
India

The Nation banks on us;

Pure Banking Nothing Else;
With you all the way

State Bank of
Rajasthan
Bikaner & Jaipur

1963

State Bank of
Patiala

Punjab

1917

Blending Modernity with

Tradition

State Bank of
Hyderabad

Hyderabad

1941

You can always bank on us

State Bank of
Mysore

Bangalore

1913

Working for a better

tomorrow

State Bank of
Travancore

Thiruvananthapu
ram

1945

A Long Tradition of Trust

Credit Rating Agencies of India & World

Important Credit Rating Agencies

Leading Credit Rating Agency in India
Indian credit rating industry mainly comprises of CRISIL, ICRA, CARE, ONICRA, FITCH (India Ratings &
Research) & SMERA.

CRISIL - Credit Rating Information Services of India Limited - Headquarter Mumbai

ICRA - Investment information and credit rating agency - Headquarter - Gurgaon, India

CARE - Credit Analysis and Research - Headquarters Mumbai

ONICRA - Headquarter - Gurgaon, India

SMERA - Headquarters Mumbai

Fitch (India Ratings & Research) - Headquarters Mumbai

Note: CRISIL is the largest credit rating agency in India, with a market share of greater than
60%.

Leading Credit Rating Agency in World

Standard & Poor's (S&P) Headquarter New York, US

Moody's Headquarter - New York, US

Fitch - Headquarter - New York, US

Regulators in India
Regulator

Sectors

Reserve
Bank of
India (RBI)

Financial system
and monetary
policy, Money
Market
Securities
Security & Capital
and
Market, stock
Exchange
broking &
Board of
Merchant
India
Banking, Nidhis,
(SEBI)
Chit Fund
Companies
Insurance
Insurance
Regulatory industry
and
Developm
ent
Authority
(IRDA)
Telecom
Telecommunicatio
Regulatory n Industry
Authority
of India
(TRAI)
Forward
Commodity
Markets
Market
Commissio
n
Pension
Pension sector
Fund
Regulatory
and
Developm
ent
Authority
(PFRDA)

India Economic Reform

Chairman
Raghuram
Rajan

Headquar
ter
Mumbai

U.K. Sinha

Mumbai

T. S. Vijayan

Hyderabad

Rahul
Khullar

New Delhi

Ramesh
Abhishek

Mumbai

Hemant
Contractor

New Delhi

The economy of India is one of the fastest growing economies in the world. Since its independence in the year 1947, a
number of economic policies have been taken which have led to the gradual economic development of the country. On a
broader scale, India economic reform has been a blend of both social democratic and liberalization policies.

Economic reforms during the post independence period

The post independence period of India was marked by economic policies which tried to make the country self sufficient.
Under the economic reform, stress was given more to development of defense, infrastructure and agricultural sectors.
Government companies were set up and investment was done more on the public sector. This was made to make the base
of the country stronger. To strengthen the infrastructure, new roads, rail lines, bridges, dams and lots more were
constructed.
During the Five Years Plans initiated in the 1950s, the economic reforms of India somewhat followed the democratic
socialist principle with more emphasis on the growth of the public and rural sector. Most of the policies were meant towards
the increase of exports compared to imports, central planning, business regulation and also intervention of the state in the
finance and labor markets. In the mid 50's huge scale nationalization was done to industries like mining,
telecommunications, electricity and so on.
Economic Reforms during 1960s and 1980s
During the mid 1960's effort was made to make India self sufficient and also increase the production and export of the food
grains. To make the plan a success, huge scale agricultural development was undertaken. The government initiated the
Green Revolution movement and stressed on better agricultural yield through the use of fertilizers, improved seed and lots
more. New irrigation projects were undertaken and the rural banks were also set up to provide financial support to the
farmers.
The first step towards liberalization of the economy was taken up by Rajiv Gandhi. After he became the Prime Minister, a
number of restrictions on various sectors were eased, control on pricing was removed, and stress was given on increased
growth rate and so on.

Economic Reforms during 1990s to the present times

Due to the fall of the Soviet Union and the problems in balance of payment accounts, the country faced economic crisis and
the IMF asked for the bailout loan. To get out of the situation, the then Finance Minister, Manmohan Singh initiated the
economic liberation reform in the year 1991. This is considered to be one of the milestones in India economic reform as it
changed the market and financial scenario of the country. Under the liberalization program, foreign direct investment was
encouraged, public monopolies were stopped, and service and tertiary sectors were developed.
Since the initiation of the liberalization plan in the 1990s, the economic reforms have put emphasis on the open market
economic policies. Foreign investments have come in various sectors and there has been a good growth in the standard of
living, per capital income and Gross Domestic Product.
Due to the global meltdown, the economy of India suffered as well. However, unlike other countries, India sustained the
shock as an important part of its financial and banking sector is still under government regulation. Nevertheless, to cope with
the present situation, the Indian government has taken a number of decisions like strengthening the banking and tertiary
sectors, increasing the quantity of exports and lots more.

MUDRA Bank - Funding the Unfunded

Micro Units Development and Refinance Agency (MUDRA) Bank Dedicated Regulator and Refinancer

The Micro Units Development Refinance Agency (MUDRA) Bank is set to be launched on April 8th 2015 by our Honourable
Prime Minister Shri Narendra Modi ji.
The Bank will start with a corpus of Rs 20,000 crore which would be allocated to the Bank from the money available from
shortfalls of priority sector lending. Further amount of Rs 3000 crores will be allocated from Budget as a Credit Guarantee
Corpus.

Key Responsibilities of MUDRA Bank

- Laying down policy guidelines for micro/small enterprise financing business
- Registration and Regulation of MFI entities
- Accreditation/rating of MFI entities
- Laying down responsible financing practices to prevent over indebtedness, ensuring client protection principles and
methods of recovery
- Development of standardized covenants governing last mile lending to micro/small enterprises
- Promoting right technology solutions for the last mile
- Formulating and running a credit guarantee scheme for providing guarantees to the loans which are being extended to
micro-enterprises

- Creating a good architecture of last mile credit delivery to micro businesses under the scheme of Pradhan Mantri Mudra
Yojana

Benefits of Launching MUDRA Bank

- Uniformity in regulations and best practices for the SHG Bank linkage programme, NBFC-MFIs, and trusts/societies/not for
profit NBFCs/Section 25 companies engaging in MFI activities as MUDRA Bank would be the sole regulator for all players in
the MFI sector.
- Increased liquidity and access to low cost funding support to MFIs
- Increased access to low cost funding for MFIs could lead to a reduction in the cost of funds for MFIs.

Insurance Sector
Dear all, in view of upcoming insurance exams, were are presenting you a brief write-up on insurance sector
and companies in this sector.

In India, insurance has a deep-rooted history. It finds mention in the writings of Manu ( Manusmrithi),
Yagnavalkya (Dharmasastra) and Kautilya ( Arthasastra ). The writings talk in terms of pooling of resources
that could be re-distributed in times of calamities such as fire, floods, epidemics and famine. This was
probably a pre-cursor to modern day insurance. Ancient Indian history has preserved the earliest traces of
insurance in the form of marine trade loans and carriers contracts. Insurance in India has evolved over time
heavily drawing from other countries, England in particular.

Brief history of insurance sector

The insurance sector in India has completed all the facets of competition - from being an open competitive
market to being nationalized and then getting back to the form of a liberalized market once again. The
history of the insurance sector in India reveals that it has witnessed complete dynamism for the past two
centuries approximately.With the establishment of the Oriental Life Insurance Company in Kolkata, the
business of Indian life insurance started in the year 1818.
Important milestones in the Indian life insurance business
1912: The Indian Life Assurance Companies Act came into force for regulating the life insurance business.
1928: The Indian Insurance Companies Act was enacted for enabling the government to collect statistical
information on both life and non-life insurance businesses.
1938: The earlier legislation consolidated the Insurance Act with the aim of safeguarding the interests of the
insuring public.
1956: 245 Indian and foreign insurers and provident societies were taken over by the central government
and they got nationalized. LIC was formed by an Act of Parliament, viz. LIC Act, 1956. It started off with a
capital of Rs. 5 crore and that too from the Government of India. The history of general insurance business in
India can be traced back to Triton Insurance Company Ltd. (the first general insurance company) which was
formed in the year 1850 in Kolkata by the British.
Important milestones in the Indian general insurance business
1907: The Indian Mercantile Insurance Ltd. was set up which was the first company of its type to transact all
general insurance business.
1957: General Insurance Council, an arm of the Insurance Association of India, framed a code of conduct for
guaranteeing fair conduct and sound business patterns.
1968: The Insurance Act improved for regulating investments and set minimal solvency levels and the Tariff
Advisory Committee was set up.
1972: The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance
business in India. It was with effect from 1st January 1973.
107 insurers integrated and grouped into four companies viz. the National Insurance Company Ltd., the New
India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance
Company Ltd. GIC was incorporated as a company.
Insurance Repository in India
The Insurance Repository in India is a database of insurance policies. It allows policy holders to make
revisions to a policy with speed and accuracy. It launched on 16 September 2013. It is the world's first of its
kind. India's Insurance Regulatory and Development Authority has issued licenses to five entities to act as
Insurance Repositories:

Central Insurance Repository Limited (CIRL)

SHCIL Projects Limited

Karvy Insurance repository Limited

NSDL Database Management Limited

CAMS Repository Services Limited

E-Insurance Account
E-Insurance account is the facility available to the policy holder to keep all of their insurance policies in a
demat form by opening an account with an insurance repository, it`s a one point of contact for all of the
insurance contracts, if any change is needed in any of the personal information then instead of going to an
each insurer and submitting the request separately to each one of them, here through an e-insurance
account, the policy holder can submit a request to an insurance repository for that change and it will be
applicable for all the policies the policyholder posses.It works in a similar manner like we keep our securitiesshares, mutual funds in an electronic form.
What type of an Insurance Policies can be kept in an E Insurance Account:

1.All of the below mention policies can be kept in an electronic form provided these have been issued
the companies registered with Insurance Regulatory Development Authority(IRDA)
2.All the Life insurance policies including individual or group.
3. All the general insurance policies including individual or group.
4. Any other form of an insurance policy approved by an IRDA.

by

Public Sector Insurance Companies

Life Insurance Corporation of India
General Insurance Corporation of India
National Insurance Co. Ltd.
Oriental Insurance Co. Ltd.
New India Assurance Co. Ltd.
United India Insurance Co. Ltd.
Life Insurance Corporation of India
Headoffice- Mumbai
Chairman - Shri S. K. Roy
The Parliament of India enacted the Life Insurance Corporation Act on the 19th of June 1956, and the Life
Insurance Corporation of Indian was established on 1st September, 1956, with the objective of spreading life
insurance much more widely and in particular to the rural areas with a view to reach all insurable persons in
the country, providing them adequate financial cover at a reasonable cost
General Insurance Corporation
Headoffice - Mumbai
Chairman - A K Roy
General Insurance Corporation of India (GIC Re) was approved as Indian Reinsurer on 3rd November,2000.
As an Indian reinsurer GIC has been giving reinsurance support to four public sector & other private general
insurance companies.
The New India Assurance Co. Ltd.
Headoffice- Mumbai
Chairman - G.Srinivasan
It is the "largest general insurance company of India on the basis of gross premium collection inclusive of
foreign operations". It was founded by Sir Dorabji Tata in 1919, and was nationalised in 1973.
National Insurance Company Limited (NICL)
Headoffice- Kolkata
Chairman - Shri A.V. Girija Kumar
It is a state owned general insurance company in India. The company was established in 1906 and
nationalised in 1972. It's portofolio consists of a multitude of general insurance policies, offered to a wide
arena of clients encompassing different sectors of the economy.[3] Apart from being leading insurance
provider in India, NICL also serves Nepal.
United India Insurance Company Limited
Headoffice - Chennai
Chairman - Milind Kharat
under Department of Financial Services, Ministry of Finance (India), is a public sector General Insurance
Company of India and one of the top General Insurers in Asia. With the net worth of Rs 5407 crores and profit
of Rs 528 crores, the company has collected gross premium of Rs 9709 crores as of in the financial year
2013-14. The company has more than seven decades of experience in Non-life Insurance business and was
formed to its present form by the merger of 22 companies, consequent to the nationalisation of General
Insurance companies in India.
Oriental Insurance Company Ltd

Headoffice - New Delhi

Chairman - Dr. A.K.Saxena
It was established on September 12, 1947 in the then Bombay. It was a completely owned subsidiary of
Oriental Government Security Life Assurance Company Ltd. It was created with the mandate of executing its
parent bodys general insurance operations.

Minimum Alternative Tax - An Insight

A Definition -

Direct tax in lay terms is a tax on income that you have to pay, it cannot be shifted to
others. Some of its forms include income tax, wealth tax, etc. Direct taxes are directly levied on individuals, corporations and
organisations and collected by way of income tax returns to be filed each year.
An indirect tax is collected by an intermediary (such as a retail store) from the person who bears the ultimate economic
burden of the tax (such as the customer). Indirect taxes include sales tax, service tax, value-added tax, commodity
transaction tax and securities transaction tax among others.
One such indirect tax is the minimum alternate tax (MAT). Going forward, we will explain what MAT is, the reasons for its
introduction, and who is liable to pay the tax.
Normally, a company is liable to pay tax on the income computed in accordance with the provisions of the Income-Tax Act,
but the profit and loss account of the company is prepared as per provisions of the Companies Act.
In the past, a large number of companies showed book profits on their profit and loss account and at the same time
distributed huge dividends. However, these companies didnt pay any tax to the government as they reported either nil or
negative income under provisions of the Income-Tax Act.
These companies were showing book profits and declaring dividends to their shareholders but were not paying any tax.
These companies are popularly known as zero tax companies.
The Indian Income-Tax Act allows a large number of exemptions from total income. Besides exemptions, there are several
deductions permitted from the gross total income. Further, depreciation allowable under the Income-Tax Act, is not the same
as required under the Companies Act. The latter provides a lower rate viz-a-viz the I-T Act which computes a higher rate of
depreciation.
The result of such exemptions, deductions, and other incentives under the Income-Tax Act in the form of liberal rates of
depreciation is the emergence of zero tax companies, which in spite of having high book profit are able to reduce their
taxable income to nil.
Government's take on MAT

Government formed panel to resolve tax dispute with foreign investors.

Finance Minister Arun Jaitley announced that a high-level committee will look into the controversial issue of
payment of Minimum Alternate Tax (MAT) by FIIs.

The Committee is requested to give its recommendation of the specific issues of MAT on FIIs expeditiously.

Government also declared that minimum alternate tax (MAT) would not be applicable on foreign companies earning
from capital gains on securities, royalty, fee on technical services and interest, providing a huge breather to foreign
investors.

Nitty-Gritty of FDs
Hello Readers,
Here we are presenting to you all a brief about Fixed Deposits, which was shared by Rohan Anand. Don't forget to
thank him!!!
FDs (Fixed Deposits): A comprehensible approach towards defining the nitty-gritty of a popular investing instrument.
Fixed deposit (FD) is a financial instrument where a sum of money given to a bank, financial institution or company whereby
the receiving entity pays interest at a specified percentage for the time duration of the deposit.
Fixed deposit, in fact, gives you a fixed interest either annually or on a cumulative basis. What's important to note is that this
interest income is taxed on accrual basis. This means irrespective of when you receive it, you will have to pay tax at the end
of the financial year. Even if it is not taxable, you still have to show it in your I-T returns.

There is no doubt that bank fixed deposits (FDs) are considered safe in that you will most likely get your money back. But
did you know that bank FDs can negatively affect your savings over the long term?

Lets try to answer this question,

Most FDs only give you about 8.50 % interest before tax and around 7 % after tax. This means, you are effectively losing
money every year you invest your money in a FD.

In correlation with equity mutual funds, long term returns from which are tax free, FD interest is taxable at your current tax
slab. The higher your income, the lower your FD return will be.

Now, another question ensued from these above answers. If FDs are pricey enough taking a long term perspective then
where one should invest. Mutual Funds might be the answer. But lets stick to the subject on which we are discussing.

Another aspect of the FD which is subtle is TDS. TDS or Tax Deducted at Source is the Income Tax departments way of
automating tax collection, to an extent. The tax on interest from any FD is paid partially via TDS deducted by the bank and
the rest is paid as Self-Assessment Tax by the individual.
Banks deduct TDS on interest only if the interest amount for an F.D is greater than Rs.10, 000 per year. The rate of TDS
deducted by banks is 10% on interest income, provided your PAN number is available with the bank. If the bank doesnt
have your PAN in its records, TDS is deducted at 20% on interest income.

If your total income is below the minimum tax slab (10%), the TDS on FD interest that is deducted by banks can be
recovered by claiming a refund for the TDS amount at the time of tax filing.

Alternately, You can submit the Form 15G to the bank declaring that since your taxable income for the year will be below
the minimum tax slab, the bank shouldnt deduct TDS on your FD Interest.

Senior Citizens are also exempt from paying TDS on FD interest as a special concession by the IT department. They need
to submit Form 15H to ensure they arent charged TDS on their F.Ds.

On the whole, one of the major benefits of FD is its liquidity. For any immediate requirement, it can be broken and the
money is credited you're your account within a short span of time. With higher interest rates it is surely a good investment
opportunity. Senior citizens, who generally get higher interest rates, will benefit if they fall in a lower tax slab. In a nutshell,
one should invest in FDs, if one finds difficulty in comprehending the most elusive and volatile stock market.

Inflation and RBI

To understand RBI monetary policy we have to understand why RBI has to do all this mehnat, RBI has a biggest
villain standing against him called as INFLATION.

INFLATIONInflation is the biggest parasite in the Indian economy. In the condition of inflation there is flow of extra money in the
economy creating excess of demand in the market for the products as compared to supply in midst of all this maara maari
the producers grab this opportunity with both arms and if possible with legs too (too greedy these fellows), they mark higher
prices for the goods that are excess in demand and this creates a rise in price of the products resulting in inflation.

Inflation has the following adverse effects on the economy:

Here is story of Mr. Bechara (common man)

Inflation and Purchasing ProductsPurchasing Power-The value of a currency expressed in terms of the amount of goods or services that one unit of money
can buy. Purchasing power is important because, all else being equal, inflation decreases the amount of goods or services
you'd be able to purchase. Mr.Bechara is fetching a salary of Rs.20K monthly, he was doing his best to keep up to the
expectations his over sized wife and extra demanding kids, Now in inflation his salary is the same but his 20K will now
cannot complete the demands of his family, because that 20K has become equivalent to say, 18K and now they can have
less resources in the same prices, This will result in the debt conditions , lesser purchase of goods and services(due to
higher prices) and will directly hurt the economy.

Inflation and DebtPrice inflation is a debtor's best friend and a creditor's worst enemy. Lets see how, our Mr. Bechara gave Rs. 10K to a
debtor in 2006 for a period of three years, after two years inflation occurred, now the value of that 10k becomes equivalent
to 8k (loss in the value of Rs), The effect of inflation on debtors is positive because debtors can pay their debts with money
that is less valuable.

Other negative impacts-

Black-marketing- Expecting inflation many mafias start to collect the onions and kerosene in their backyards for releasing
these when the inflation strikes, hence they will make big bucks in no time and our Mr. Bechara has to pay more than hefty
amount for the daily ka aaloo ,pyazz..

Unemployment- Inflation comes along with a gift package of unemployment, companies with limited resources will start to
fire people on the name of cost cutting and also the new recruitments will not happen resulting in not so aache din for
aspirants.

Different stages of Inflation-

Creeping Inflation:
Creeping or mild inflation is when prices rise 3% a year or less.

Walking Inflation:
This type of strong, or pernicious, inflation is between 3-10% a year. It is harmful to the economy because it heats up
economic growth too fast.

Galloping Inflation:
When inflation rises to ten percent or greater, it wreaks absolute havoc on the economy. Money loses value so fast that
business and employee income can't keep up with costs and prices. Foreign investors avoid the country.

Hyperinflation:
Hyperinflation is when the prices skyrocket, the currency becomes a piece of trash, Zimbabwe experienced a similar
conditions in previous years.

Calculation of Inflation-

In India inflation is calculated by the help of CPI(Consumer Price Index),previously it was calculated by WPI(Wholesale
Price Index), CPI as a scale was adopted by RBI ,due the recommendations of Urijit Patel committee.

RBI- the BOSS of all Banks

RBI is the central Bank of India and controls the entire money issue, circulation the entire money issue,
circulation and control by its monetary policies and lending policies by periodical updates or corrections to
discipline the economy.
The central bank of India, founded in 1935, which maintains the monetary policy of its national currency,
the rupee, and the nation's currency reserves.
It is also known as the Bank of last resort/Bankers bank/Governments bank.
Establishment:
The reserve bank of India was established on April 1, 1935 in accordance with the provisions of the Reserve
Bank of India Act, 1934. The Central Office of the Reserve Bank of India was initially established in Calcutta
but was permanently moved to Mumbai in 1937. Though originally privately owned, since nationalization in
1949, the Reserve Bank is fully owned by the Government of India.
MAIN FUNCTIONS OF RBI:
1) Monetary Authority: Formulates implements and monitors the monetary policy.
2) Regulator and supervisor of the financial system: Prescribes broad parameters of banking
operations within which the countrys banking and financial system functions.
3) Manager of Foreign Exchange: Manages the Foreign Exchange Management Act, 1999.
4) Issuer of Currency: Issues and exchanges or destroys currency and coins not fit for circulations.
5) Development role: Performs a wide range of promotional functions to support national objectives.
6) Bankers to the Government: performs merchant banking function for the central and the state
governments; also acts as their banker.
7) Bankers to banks: maintains banking accounts of all scheduled banks.
Central Board of RBI:
The Reserve Bank's affairs are governed by a central board of directors. The board is appointed by the
Government of India in keeping with the Reserve Bank of India Act. They are appointed/nominated for a
period of four years
Official Directors:
Full-time : Governor and not more than four Deputy Governors
Currently:

Dr. Raghuram Rajan (Governor)

Shri H.R. Khan (Deputy Governor)

Dr. Urjit R. Patel (Deputy Governor)

Shri R. Gandhi (Deputy Governor)

Shri S. S. Mundra (Deputy Governor)

Subsidiaries of RBI:

Fully owned: Deposit Insurance and Credit Guarantee Corporation of India(DICGC), Bharatiya Reserve Bank
Note Mudran Private Limited(BRBNMPL)

Other Important facts related to RBI:

Reserve Bank of India Act passed in 1934.

Reserve Bank of India (RBI) established on 1 April 1935.

Reserve Bank of India (RBI) established on the recommendation of Hilton-Young Commission.

RBI is the sole authority in India to issue Bank notes in India.

Emblem of RBI: Panther and Palm Tree.

Chintaman Dwarkanath Deshmukh (C D Deshmukh) was the governor of RBI at the Time of
nationalization of RBI in 1949.

1st women Deputy Governor of RBI -K.J.Udeshi.

RBI is not expected to perform the function of accepting deposits from the general public

The first Governor of the Reserve Bank of India from 01.04.1935 to 30.06.1937 was Sir Osborne Smith

RBI decides the following rates namely; Bank rate, repo rate, reverse repo rate and cash reserve
ratio.

Inko toh LOAN dena hi padega kyunki BOSS (RBI) ka nirdesh haiPRIORITY SECTOR LENDING
Dear readers, today we are providing you the highlights of the one of the most important topic of General
awareness section, i.e. the Priority Sector Lending. It is very relevant for all the upcoming banking
exams, IBPS/SBI/RRB etc. and also being asked in the banking interviews.

Highlights of PSL

It means provide credit to the needy sectors of the society. The sectors are:
Agriculture
Micro and Small Enterprises
Education
Housing

 Export
Weaker Sections
Social Infrastructure
Renewable Energy

Targets under PSL

Agriculture: 18 percent of ANBC. Out of this 18 percent, a target of 8 percent of ANBC is for Small and
Marginal Farmers, to be achieved in a phased manner i.e., 7 per cent by March 2016 and 8 per cent by
March 2017.
Weaker Sections: 10 percent of ANBC.
Micro Enterprises: 7.5 percent of ANBC has been prescribed for Micro Enterprises, to be achieved in a
phased manner i.e. 7 percent by March 2016 and 7.5 percent by March 2017.
Overall PSL Target for Domestic Bank/Foreign Bank with more than 20 Branches: 40 percent of Adjusted
Net Bank Credit.
Overall PSL Target for Foreign Bank with less than 20 Branches: 40 percent of Adjusted Net Bank
Credit to be achieved in a phased manner-

2015-16
2016-17
2017-18
2018-19
2019-20

Categorization of MSME according to MSME ACT 2006

Manufacturing Sector (Goods)

Enterprises

Investment in plant and machinery

Micro Enterprises

Does not exceed twenty five lakh rupees

Small Enterprises

More than twenty five lakh rupees but does not exceed
five crore rupees

Medium Enterprises

More than five crore rupees but does not exceed ten
crore rupees

Service Sector

Enterprises

Investment in equipment

Micro Enterprises

Does not exceed ten lakh rupees

Small Enterprises

More than ten lakh rupees but does not exceed two crore rupees

Medium Enterprises

More than two crore rupees but does not exceed five crore rupees

Other Facts:

Farmers with landholding of up to 1 hectare are considered as Marginal Farmers. Farmers with a
landholding of more than 1 hectare and upto 2 hectares are considered as Small Farmers.
Scheduled Commercial Banks having any shortfall in lending to priority sector shall be allocated amounts
for contribution to the Rural Infrastructure Development Fund (RIDF) established with NABARD.
For Renewable Energy, bank loans up to a limit of Rs.15 crore to borrowers for purposes like solar based
power generators, etc. For individual households, the loan limit will be Rs.10 lakh per borrower.
For Housing, banks can provide loans to individuals up to Rs. 28 lakh in metropolitan centres (with
population of ten lakh and above) and loans up to Rs. 20 lakh in other centres for purchase/construction of a
dwelling unit per family.
Export credit will be allowed up to 32 percent of ANBC for Foreign banks with less than 20 branches in
India.
For Education, banks can provide loans to individuals for educational purposes including vocational courses
upto Rs. 10 lakh for studies in India and Rs. 20 lakh for studies abroad.

hamare deposits insured hai kyunki- DICGC hai na...

Deposit Insurance and Credit Guarantee Corporation is a 100% subsidiary of Reserve Bank of India. It
was established on July 15, 1978 under Deposit Insurance and Credit Guarantee Corporation Act, 1961 for
the purpose of providing insurance of deposits and guaranteeing of credit facilities. It insures all bank
deposits, such as saving, fixed, current, recurring deposits for up to the limit of Rs. 100,000 of each deposits
in a bank.
Banks which are insured by DICGC:
Commercial Banks: All commercial banks including branches of foreign banks functioning in India, local area
banks and regional rural banks are insured by the DICGC.

DICGC insured?

In the event of a bank failure, DICGC protects bank deposits that are payable in India. The DICGC insures all
deposits such as savings, fixed, current, recurring, etc. except the following types of deposits.
(i) Deposits of foreign Governments;
(ii) Deposits of Central/State Governments;
(iii)Inter-bank deposits;
(iv) Deposits of the State Land Development Banks with the State co-operative bank;
(v) Any amount due on account of any deposit received outside India
(vi) Any amount, which has been specifically exempted by the corporation with the previous approval of
Reserve Bank of India.

Maximum deposit amount insured by the DICGC:

Each depositor in a bank is insured upto a maximum of Rs.1,00,000 (Rupees One Lakh) for both principal
and interest amount held by him in the same capacity.

Does the DICGC insure just the principal on an account or both principal and accrued interest?
The DICGC insures principal and interest upto a maximum amount of Rs. One lakh.

Are deposits in different banks separately insured?

Yes. If you have deposits with more than one bank, deposit insurance coverage limit is applied separately to
the deposits in each bank.

Can the bank deduct the amount of dues payable by the depositor?
Yes. Banks have the right to set off their dues from the amount of deposits. The deposit insurance is
available after netting of such dues.

Can any insured bank withdraw from the DICGC coverage?

No. The deposit insurance scheme is compulsory and no bank can withdraw from it.

Drips of foreign currency-Foreign Accounts

Dear Readers,

Following is the article related to Drips of foreign currency.This article was provided by Rohan
Anand one of the regular readers.

Drips of foreign currency: Only potion for the ailing rupee

As rupee continues to plummet, now trailing at 64.42 per USD, recently the apex bank has made some
changes in the interest rates of FCNR (B) account. This step has been taken to bolster the tardy foreign
export credit inflow. This is sufficed to say that Indias rupee strength overtly depends on the amount of
foreign currency, mostly dollar. The more dollars trickle in, the stronger is the rupee.
Here, this article is presenting you precise but succinct information about types of foreign accounts available
in India.
Many NRIs are often faced with the situation of maintaining a Rupee account in India. To encourage Non
Resident Indians (NRIs) and Persons of Indian Origin (PIOs) staying abroad to invest in India, the Govt. has
allowed these Individuals to open 3 types of NRI Account in India:NRE
NRO
FCNR(B)

1. NRE Account i.e. Non-Resident External Account is a rupee denominated account and the amount in
this type of account is freely repatriable. This type of NRI Account can either be in the form of Savings,
Current, Recurring or Fixed Deposit.

As this form of NRI Account is rupee denominated, the investor will have to convert Foreign Currency into
Rupees and in case he intends to take the funds back to his home country, he will again have to convert the
Rupees into Foreign Currency This form of NRI Bank Account is best suited for overseas savings which have
been remitted to India by converting the foreign currency into INR.
Joint Holding: NRE account can be jointly held with another NRI but not with resident Indian. On the other
hand NRO account (discussed below) can be held with NRI as well as resident Indian (close relative) as
defined under Section 6 of the Companies Act 1956.

2. NRO Account i.e. Non-Resident Ordinary Account is a rupee denominated account and can be in the
form of savings or current or recurring or fixed deposit. The income which is deemed to accrue or arise in
India can be deposited only this type of account. Examples of such forms of incomes are Rent, Dividend and
Commission etc. the interest earned in NRO account and credit balances are subject to respective income
tax bracket and are also subject to applicable wealth tax (Govt. has done away with this tax and subsumed it
in indirect tax system in the form service tax.)
Such incomes cannot be deposited in NRE Account. Moreover, the interest earned on this form of account is
also taxable as compared to NRE and FCNR Account in which Tax on Interest is not levied in India. TDS on
the amount accrued in the form of Interest is applicable in NRO account.
Choose N RE accounts if you:
(Primary reason) want to park your overseas earnings remitted to India converted to Indian

Rupees;

want to maintain savings in Rupee but keep them liquid;

want to make a joint account with another NRI;

want Rupee savings to be freely repatriable

Choose NRO account if you:

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

want account to deposit income earned in India such as rent, dividends etc;

want to open account with resident Indian (close relative)

3. FCNR (B) stands for Foreign Currency Non Resident Account (Banks) and can only be opened in
Foreign Currency and not in the Indian Currency. It is a form of fixed deposit on which regular interest is paid.
As Interest Rates in India (approx 7-8%) are much higher as compared to the interest rates in western
countries (approx 1-2%), many NRIs invest their surplus funds in fixed deposits in India through this type of
NRI Account Another benefit of this type of NRI Bank Account is that the investor will not have to bear any
risk of fluctuations in the foreign currency. Say for e.g.: Mr. A invests $10 in this form of NRI Account and the
Interest Rate is 10% p.a., he would get $ 11 at the end of the year irrespective of the Rupee-Dollar exchange
rates. And therefore in this form of NRI Bank Account, he is free from any foreign exchange risk.
This type of NRI Bank Account can be opened for a minimum of 1 year and a maximum of 5 years.
Moreover, the interest earned on this form of NRI Bank Account is also exempted from tax in
India.

NB. The Foreign Currency Non-Resident (FCNR(B)) scheme was introduced with effect from May 15, 1993 to
replace the then prevailing FCNR(A) scheme introduced in 1975, where the foreign exchange risk was borne
by RBI and subsequently by the Govt. of India. The FCNR (A) scheme was withdrawn in August, 1994 in view
of its implications for the central banks balance sheet and quasi-fiscal costs to the Government.

REVERSE MORTGAGE LOAN : A Helping Hand For Senior Citizens

Good Morning Readers,
Today we are providing you some small but important concepts of reverse mortgage loan. This is one of the important
topics. So below are the details.

The scheme of reverse mortgage has been introduced for the benefit of senior citizens owning a house but having
inadequate income to meet their needs. Some important

Features of reverse mortgage are:

a) A homeowner who is above 60 years of age is eligible for reverse mortgage loan. It allows him to turn the equity in his
home into one lump sum or periodic payments mutually agreed by the borrower and the banker.
b) NO REPAYMENT is required as long as the borrower lives, Borrower should pay all taxes lating to the house and
maintain the property as his primary residence.
c) The amount of loan is based on several factors : borrowers age, value of the property, current interest rates and the
specific plan chosen. The valuation of the residential property is done at periodic intervals and it shall be clearly specified to
the borrowers upfront. The banks shall have the option to revise the periodic / lump sum amount at such frequency or
intervals based on revaluation of property.

Settlement - The loan shall become due and payable only when the last surviving borrower dies or would like to sell the
home, or permanently moves out. On death of the home owner, the legal heirs have the choice of keeping or selling the
house. If they decide to sell the house, the proceeds of the sale would be used to repay the mortgage, with the remainder
going to the heirs.

As per the scheme formulated by National Housing Bank (NHB), the maximum period of the loan period is 15 years. The
residual life of the property should be at least 20 years. Where the borrower lives longer than 15 years, periodic payments
will not be made by lender. However, the borrower can continue to occupy.

Re-Post: Bitcoins
In the recent days, we are hearing a lot about a new type of currency, "Bitcoin". It is basically a "virtual currency", which is
making quite hype in market today. There are various myths and speculations surrounding this currency. So, here we are
presenting to you the brief about "Bitcoins". Hope you like the post!!!

What is Bitcoin?

Bitcoin is a distributed peer-to-peer digital currency that can be transferred instantly and securely

between any two people in the world. It's like electronic cash that you can use to pay friends or merchants.

Who created bitcoins?

According to various newspaper article, a 64-year-old Japanese-American physicist Satoshi Nakamoto is speculated as the
creater of Bitcoin.

What are bitcoins?

Bitcoins are the unit of currency of the Bitcoin system. A commonly used shorthand for this is BTC to refer to a price or
amount (e.g. 100 BTC). There are such things as physical bitcoins, but ultimately, a bitcoin is just a number associated
with a Bitcoin Address. A physical bitcoin is simply an object, such as a coin, with the number carefully embedded inside.
See also an easy intro to Bitcoin.

How can I get bitcoins?

The entire bitcoins currency is generated by algorithms, it is very easy to make sure that once the 21 million mark is reached
there are no more bitcoins to be issued. Bitcoins, their issue and their maximum circulation have been predetermined from
the beginning and therein lies its innate value.

You can obtain Bitcoins by purchasing them from someone else using regular currency or by earning them through a system
called Bitcoin Mining. Bitcoins are stored in Bitcoin wallets which also manage addresses from which you can send and
receive payments. New and different addresses can be generated for different transactions and can be done as many times
as required.

How does it work?

As a new user, you can get started with Bitcoin without understanding the technical details. Once you have installed a
Bitcoin wallet on your computer or mobile phone, it will generate your first Bitcoin address and you can create more
whenever you need one. You can disclose your addresses to your friends so that they can pay you or vice versa. In fact, this
is pretty similar to how email works, except that Bitcoin addresses should only be used once.

Balances - block chains - The block chain is a shared public ledger on which the entire Bitcoin network relies. All
confirmed transactions are included in the block chain. This way, Bitcoin wallets can calculate their spendable balance and
new transactions can be verified to be spending bitcoins that are actually owned by the spender. The integrity and the
chronological order of the block chain are enforced with cryptography.

Transactions - private keys - A transaction is a transfer of value between Bitcoin wallets that gets included in the block
chain. Bitcoin wallets keep a secret piece of data called a private key or seed, which is used to sign transactions, providing a
mathematical proof that they have come from the owner of the wallet. The signature also prevents the transaction from
being altered by anybody once it has been issued. All transactions are broadcast between users and usually begin to be
confirmed by the network in the following 10 minutes, through a process called mining.

Processing - mining - Mining is a distributed consensus system that is used to confirm waiting transactions by including
them in the block chain. It enforces a chronological order in the block chain, protects the neutrality of the network, and
allows different computers to agree on the state of the system. To be confirmed, transactions must be packed in a block that
fits very strict cryptographic rules that will be verified by the network. These rules prevent previous blocks from being
modified because doing so would invalidate all following blocks. Mining also creates the equivalent of a competitive lottery
that prevents any individual from easily adding new blocks consecutively in the block chain. This way, no individuals can
control what is included in the block chain or replace parts of the block chain to roll back their own spends

How do we do business? Using bitcoins!

You offer to pay me for my services via bitcoins and I accept the same. Why bitcoins? Because bitcoins are anonymous and
are not traceable by anyone. They are the perfect way for people to do business with each other without revealing identities.
They don't leave any digital footprints like credit card records, bank transactions, etc.

So let's say that we agree to a 'deal' and you agree to send me bitcoins in advance to pay me for my job. I set the price at 3
bitcoins for my work. The current rate is about Rs 38,000 per bitcoin. So, you are paying me about Rs 1.15 lakh for this
covert operation.

Why are bitcoins so valuable?

The absolute brilliance of bitcoins is that only 21 million bitcoins will ever be made available in the market. (So far 13 million
are in circulation and 8 million more will be gradually released into the system by the end of 2140). Given that the entire
bitcoins currency is generated by algorithms, it is very easy to make sure that once the 21 million mark is reached there are
no more bitcoins to be issued.

Does Bitcoin guarantee an influx of free money?

Since Bitcoin is a new technology, what it is and how it works may be initially unclear. Bitcoin is sometimes presented as
being one of three things:
A. Some sort of online 'get-rich-quick' scam.
B. A loophole in the market economy, the installation of which guarantees a steady influx of cash.
C. A sure investment that will almost certainly yield a profit.
In fact, none of the above is true.

Is Bitcoin a 'get-rich-quick' scheme?

If you've spent much time on the Internet, you've probably seen ads for many 'get-rich-quick' schemes. These ads usually
promise huge profits for small amounts of easy work. Bitcoin is in no way similar to these schemes. Bitcoin doesn't promise
windfall profits. There is no way for the developers to make money from your involvement or to take money from you. Bitcoin
is an experimental, virtual currency that may succeed or may fail.

As an investment, is Bitcoin a sure thing?

Bitcoin is a new and interesting electronic currency, the value of which is not backed by any single government or
organization. Like other currencies, it is worth something partly because people are willing to trade it for goods and services.
Its exchange rate fluctuates continuously, and sometimes wildly. It lacks wide acceptance and is vulnerable to manipulation
by parties with modest funding. Anyone who puts money into Bitcoin should understand the risk they are taking and
consider it a high-risk currency.

How are new bitcoins created?

New bitcoins are generated by the network through the process of "mining". In a process that is similar to a continuous raffle
draw, mining nodes on the network are awarded bitcoins each time they find the solution to a certain mathematical problem
(and thereby create a new block). Creating a block is a proof of work with a difficulty that varies with the overall strength of
the network. The reward for solving a block is automatically adjusted so that, ideally, every four years of operation of the
Bitcoin network, half the amount of bitcoins created in the prior 4 years are created.

Blocks are mined every 10 minutes, on average and for the first four years (210,000 blocks) each block included 50 new
bitcoins. As the amount of processing power directed at mining changes, the difficulty of creating new bitcoins changes.

Is Bitcoin a Ponzi scheme?

In a Ponzi Scheme, the founders persuade investors that theyll profit. Bitcoin does not make such a guarantee. There is no
central entity, just individuals building an economy.

A ponzi scheme is a zero sum game. Early adopters can only profit at the expense of late adopters. Bitcoin has possible
win-win outcomes. Early adopters profit from the rise in value. Late adopters, and indeed, society as a whole, benefit from
the usefulness of a stable, fast, inexpensive, and widely accepted p2p currency.

Facts about Bitcoin

- Bitcoin is a real currency that fluctuates in price and which can be exchanged to conduct real business.
- The business of transacting bitcoins and earning bitcoins in return is really the nerve centre of this esoteric currency, and
this is what makes it unique.
- Bitcoin is a work of not one but many geniuses. Satoshi Nakamoto may have been the chief blueprint architect whose
master design many other super clever architects used to build on.
- Bitcoins will get harder and harder to earn. Hence they will only keep growing in value as the years roll by.
- Bitcoin is vulnerable despite being proclaimed as a digital currency with a permanent trace. But its theft only points to the
fact that it is potentially very valuable.
- Bitcoin is here to stay. It may have its share of troubles, but its acceptability is growing leaps and bounds.

BANKING PATHWAY 2015: SOME FINANCIAL TERMS

Dear Readers, we are providing you the important financial terms which are mainly the part of General
Awareness in all the upcoming Bank exams. Hope you like this post as this will make your financial portion
strong.

1) Type of assets

The assets portfolio of the banks is required to be classified as

(1) standard assets(2) sub-standard assets(3) doubtful assets and(4) loss assets.Standard asset is one that
does not disclose any problems and which does not carry more than normal risk attached to the business .An
asset which has been classified as NPA for a period not exceeding 12 months is considered as sub-standard
asset.Doubtful asset is one which has remained NPA for a period exceeding 12 months.An asset which is
considered uncollectible and loss has been identified by the bank or internal or external auditors or the RBI
inspection and the loss has not been written off is regarded as loss asset.

2) Core Banking Solutions (CBS)

Core Banking Solutions is a buzz word in Indian banking at present, where branches of the bank are
connected to a central host and the customers of connected branches can do banking at any breach with
core banking facility.

3) Prime Lending Rate

The minimum short-term interest rate charged by commercial banks to their most creditworthy clients. It is a
reference interest rate used by banks for its lending purposes.

4) Parties of a Cheque:
There are three parties to the cheque

1-Drawer or Maker

2-The bank (Drawee) - on whom the cheque is drawn (i.e. the bank with whom the account is maintained by
the drawer)
3- Payee Payee is the person whose name is mentioned on the cheque to whom or to whose order the
money is directed to be paid.

5) Special Drawing Rights (SDRs)

It is a reserve asset (known as Paper Gold) created within the framework of the International Monetary Fund
in an attempt to increase international liquidity, and now forming a part of countries official forex reserves
along with gold, reserve positions in the IMF and convertible foreign currencies.

6) Negotiated Dealing System

The Negotiated Dealing System (NDS) for electronic dealing and reporting of transactions in government
securities was introduced in February 2002. It facilitates the members to submit electronically, bids or
applications for primary issuance of Government Securities when auctions are conducted. NDS also provides
an interface to the Securities Settlement System (SSS) of the Public Debt Office, RBI, Mumbai thereby
facilitating settlement of transactions in Government Securities (both outright and repos) conducted in the
secondary market.

7) NDS OM (Order Match)

In August, 2005, RBI introduced an anonymous screen based order matching module on NDS, called NDSOM. This is an order driven electronic system, where the participants can trade anonymously by placing their
orders on the system or accepting the orders already placed by other participants. NDS-OM is operated by
the Clearing Corporation of India Ltd. (CCIL) on behalf of the RBI.

8) What is Asset Management Companies?

A company that invests its clients' pooled fund into securities that match its declared financial objectives.
Asset management companies provide investors with more diversification and investing options than they
would have by themselves. Mutual funds, hedge funds and pension plans are all run by asset management
companies. These companies earn income by charging service fees to their clients.

9) "Soiled Note:" means a note which, has become dirty due to usage and also includes a two piece note
pasted together wherein both the pieces presented belong to the same note, and form the entire note.
(ii) Mutilated banknote is a banknote, of which a portion is missing or which is composed of more than
two pieces.

10) Imperfect banknote means any banknote, which is wholly or partially, obliterated, shrunk, washed,
altered or indecipherable but does not include a mutilated banknote.