Académique Documents
Professionnel Documents
Culture Documents
Contents
PREFACE ..................................................................................................................................... 5
Management for RBI GRADE B 2017 Phase 2 Exam .................................................... 6
Chapter 1: Management: Its Nature & Scope........................................................................... 7
Chapter 2: The Management Principles .................................................................................. 10
Chapter 3: Planning, Organisation, Staffing, Directing & Controlling.......................... 12
Chapter 4: The Role of a Manager in an Organisation ....................................................... 21
Chapter 5: Leadership: Tasks of a Leader; Leadership Styles; Leadership Theories;
Successful Leader V/s effective Leader ..................................................................................... 22
Chapter 6: Human Resource Development: Concept of HRD; Goals of HRD;
Performance Appraisal, Potential appraisal, Career Planning, Training &
Development ........................................................................................................................................ 26
Chapter 7: Motivation, Morale & Incentives: Theories of Motivation; How
Managers Motivate; Concept of Morale; Factors determining morale; Role of
Incentives in Building up Morale. ................................................................................................ 34
Chapter 8: Communication: Steps in the Communication Process; Communication
Channels; Oral versus Written Communication; Verbal versus non-verbal
Communication; upward, downward & lateral communication; Barriers to
Communication. .................................................................................................................................. 45
Chapter 9: Corporate Governance: Factors affecting Corporate Governance;
Mechanisms of Corporate Governance...................................................................................... 50
Finance for RBI GRADE B 2017 Phase 2 Exam ............................................................ 53
Part 1: Financial System ................................................................................................................. 54
Topic 1: Regulators of Banks and Financial Institutions ............................................... 54
Topic 2: Reserve Bank of India- functions and conduct of monetary policy,
Banking System in India, Financial Institutions – SIDBI, EXIM, NABARD,
NHB, etc. ............................................................................................................................................. 56
Topic 3: Banking System in India ............................................................................................ 61
Part 2: Financial Markets ............................................................................................................... 62
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Part 3: General Topics ..................................................................................................................... 67
Chapter 1: Risk Management in Banking Sector .............................................................. 67
Chapter 2: Basics of Derivatives: Forward, Futures and Swap................................... 72
Chapter 3: Changing Landscape of Banking sector ......................................................... 75
Chapter 4: Financial Inclusion ................................................................................................. 81
Chapter 5: Corporate Governance in Banking Sector ..................................................... 83
Chapter 6: The Union Budget & all other Economic Parts ............................................... 86
Topic 1: The Union Budget ........................................................................................................ 86
Topic 2: Direct and Indirect taxes ........................................................................................... 97
Topic 3: Sources of Non-Tax Revenue ............................................................................... 101
Topic 4: GST .................................................................................................................................. 103
Topic 5: 14th Finance Commission Recommendations .............................................. 105
Topic 6: Fiscal Responsibility and Budget Management Act (FRBM) ................... 107
Chapter 7: Inflation: Definition, trends, estimates, consequences, and remedies
(control): WPI, CPI - components and trends. ..................................................................... 109
What is Management?
According to Harold Koontz & Heinz Weihrich, ―Management is the
process of designing & maintaining an environment in which individuals,
working together in groups, efficiently accomplish selected aims.‖
Characteristics of Management
It is a goal-oriented process.
It is all pervasive which means that the activities involved in managing
an enterprise are common to all organisations whether economic, social
or political.
It is multidimensional as it includes Management of work, Management of
people, & Management of operations.
It is a continuous process.
7
It is a group activity.
It is a dynamic function.
It is an intangible force.
Management as an Art
It can be considered as an art because:
A successful manager practices the art of management in the day-to-day
job of managing an enterprise based on study, observation & experience.
There is existence of theoretical knowledge.
There are various theories of management. A manager applies those
scientific methods & body of knowledge to a given situation, an issue or a
problem, in his own unique manner.
A manager applies the acquired knowledge in a personalized & skillful
manner in the light of the realities of a given situation. He is involved in
the activities of the organisation, studies critical situations & formulates
his own theories for use in any given situation.
Management as a Science
Middle Management: It is the link between top & lower level managers. It
is responsible for implementing & controlling plans & strategies developed
by top management & are also responsible for all the activities of first line
managers.
Functions of Management
Management is described as the process of planning, organising, directing
& controlling the efforts of organisational members & of using
organisational resources to achieve specific goals. The function includes:
Meaning
Planning means deciding in advance what to do & how to do. It is one of
the basic managerial functions. It involves setting objectives & developing
an appropriate course of action to achieve the decided objectives.
Importance of Planning
It provides directions, reduces risks of uncertainty, reduces overlapping &
wasteful activities, promotes innovative ideas, facilitates decision making &
establishes standards for controlling.
Features of Planning
It focuses on achieving objectives.
It is a primary function of management
It is pervasive, continuous, futuristic & involves decision making
It is a mental exercise.
Topic 2: Organising
Process of Organising
The process of organising consists of the following steps:
Identification & division of work
Departmentalisation
Assignment of Duties
Establishing reporting relationships
Importance of Organising:
It is considered important because it leads to division of work, clarity in
reporting relationships, optimum utilization of resources, growth, better
administration & greater creativity.
Staffing has been described as the managerial function of filling & keeping
filled, the positions in an organisation structure. This is achieved by, first of
all, identifying requirement of work force,
followed by recruitment, selection, placement, promotion, appraisal &
development of personnel, to fill the roles designed into the organisation
structure.
Staffing Process
1. Estimating the Manpower Requirements
2. Recruitment: Recruitment may be defined as the process of searching for
prospective employees & stimulating them to apply for jobs in the
organisation.
3. Selection: Selection is the process of choosing from among the pool of the
prospective job candidates developed at the stage of recruitment.
4. Placement & Orientation: Orientation is introducing the selected
employee to other employees & familiarising him with the rules &
policies of the organisation. Placement refers to the employee occupying
the position or post for which the person has been selected.
5. Training & Development
Training Methods
There are various methods of training. These are broadly categorized into
two groups: On-the-Job & Off-the-Job methods.
Topic 4: Directing
Directing is a complex managerial function consisting of all the activities
that are designed to encourage subordinates to work effectively. It includes
supervision, motivation, communication
and leading.
Incentives
Managers offer incentives to employees both financial & non-financial.
Financial incentives are monetary & may be in the form of salary, bonus,
profit sharing, pension etc. Non- financial
incentives provide social & psychological satisfaction. These include status,
promotion, responsibility, job enrichment, job recognition, job security,
employee participation, delegation, empowerment etc.
Communication
Communication refers to process of exchange of ideas between or among
persons & create understanding. Communication process involves the
elements of source, encoding, channel, receiver, decoding & feedback.
In organisations, both formal & informal communications simultaneously
takes place.
Formal communications refers to all official communications in the form
of orders, memos, appeals, notes, circulars, agenda, minutes etc.
Apart from formal communications, informal or grapevine
communications also exist. Informal communications are usually in the
form of rumours, whispers etc. They are unofficial, spontaneous,
unrecorded, spread very fast & usually distorted.
Barriers to Communications
It includes – semantic barriers, organisational barriers, language barriers,
transmission barriers, psychological barriers & personal barriers.
Topic 5: Controlling
Controlling is the process of ensuring that actual activities conform to
planned activities. The importance of managerial control lies in the fact
that it helps in accomplishing organisational goals.
Controlling also helps in judging accuracy of standards, ensuring
efficient utilization of resources, boosting employee morale, creating an
atmosphere of order & discipline in the organisation & coordinating
different activities so that they all work together in one direction to meet
targets.
The process of control involves setting performance standards,
measurement of actual performance, comparison of actual performance
with standards, analysis of deviations & taking corrective action.
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Planning & controlling are inseparable twins of management. Planning
initiates the process of management & controlling completes the process.
Personal observation, statistical reports, breakeven analysis & budgetary
control are traditional techniques of managerial control.
Return on investment, ratio analysis, responsibility accounting,
management audit, PERT & CPM & Management Information System
are modern techniques of managerial control.
Meaning of Leadership
Leadership is defined as the activity of influencing people to cooperate
towards some goal which they come to find desirable.
Chester Barnard added four other qualities of leader which are as follows:
(i) vitality & endurance;
(ii) decisiveness;
(iii) persuasiveness,
(iv) responsibility & intellectual capacity.
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STYLES OF LEADERSHIP
LEADERSHIP THEORIES
The important theories of leadership are trait theory, situational theory,
group theory, etc.
Trait Theory
The major question that was always asked was what qualities or traits make
a person a leader. Some believed that leaders are born & are not made. This
is what is popularly called the 'Greatman Theory' of Leadership. These born
leaders possess certain traits & characteristics, certain natural abilities which
allow them to become leaders. The trait approach is particularly concerned
Group Theory
Group theory emphasises that the leader provides benefits to his followers.
According to this theory, the followers depend upon those leaders who
satisfy their needs. They extend support & cooperation as long as the
leaders satisfy their needs & motivate them to achieve the objectives & goals
of the organisation.
Situational Theory.
This theory believes that leadership emerges from the situation & is
influenced by the situation. As a result, leadership differs from situation to
situation. F.E. Fielder, who is important proponent of this theory, feels that
people welcome leaders because of situational factors.
Sum UP
Autocratic Style: In this style of leadership, the leader has the absolute
authority to take decisions.
Participative Style: In this style of leadership, the employees too
participate in the decision-making process.
Laissez-faire Style: Here, the employees have full freedom to take
decisions, leaders' participation in decision-making is minimal.
Trait Theory: According to this theory, leaders have inborn qualities.
Situational Theory: According to this theory, leadership emerges from
situation & is influenced by situation.
Group Theory: According to this theory, a person is accepted as a leader
as long as he/she satisfies the needs of the groups.
In the first case, the leader is effective because he has influenced the
behaviour of the subordinate & the subordinate sees the accomplishment of
his own needs being satisfied by satisfying the goals of the leader & the
organisation. In the second case, the leader is successful but he is not
effective. It is because of the reason that he has received the desired
response from the subordinates but by using his power.
Effectiveness of Leadership:
Internal shape or predisposition of an individual or a group & thus, it is
attitudinal in nature.
Personal power.
General Supervision.
What is HRD?
It is an organized learning experience within a given period of time with
the objective of producing the possibility of performance change. It is the
process of increasing knowledge, capabilities & positive work attitudes of
all employees working at all levels in a business undertaking.
HRD involves matching of the organizations needs for human resource
with the individual need for personal career growth & development.
Terms to look at
What is Training?
It is any attempt to improve current or future employee performance by
increasing an employee‘s ability to perform through learning or
increasing skill & knowledge.
It is an organized procedure for increasing the skill & knowledge of
people for a definite purpose.
It is the formal & systematic modification of behaviour through learning,
which occurs as a result of education, instruction, & development &
planned experience.
(ii) Coaching: In this method, the superior guides and instructs the trainee
as a coach. The coach or counselor sets mutually agreed upon goals,
suggests how to achieve these goals, periodically reviews the trainees
progress and suggests changes required in behavior and performance.
(iv) Job Rotation: This kind of training involves shifting the trainee from
one department to another or from one job to another. This enables the
trainee to gain a broader understanding of all parts of the business and how
the organisation as a whole functions.
(ii) Films: They can provide information and explicitly demonstrate skills
that are not easily represented by the other techniques.
(v) Vestibule Training: Employees learn their jobs on the equipment they
will be using, but the training is conducted away from the actual work floor.
Actual work environments are created in a class room and employees use
the same materials, files and equipment. (vi) Programmed Instruction: This
method incorporates a prearranged and proposed acquisition of some
specific skills or general knowledge.
Meaning
Motivation means incitement or inducement to act or move. It means the
process of making subordinates to act in a desired manner to achieve certain
organisational goals.
Objectives of Motivation
To make an individual being learn what may regarded as positive
behaviour i.e. desirable behaviour.
To provide opportunities to become a better expert on one's job, to
handle more demanding assignments, to control one's own work rather
than be supervised.
Positive Motivation
Positive motivation involves the possibility of increased motive satisfaction.
Positive motivation is a process of attempting to influence others to do their
best, & thereby adopting good human relations. It seeks to create an
environment which will make the individual talent flourish & encourages
informal communications positively.
Performance Counselling
Performance counseling is basically given by the manager to an
employee exhibiting poor performance. Mostly, counseling sessions take
place when an employee fails to improve his performance even after
receiving an informal notification or advice about the same. Therefore,
formal performance counseling sessions take place to discuss the
problem areas and methodologies to overcome it.
Fringe Benefits
The term fringe benefits refers to the extra benefits provided to employees
in addition to the normal compensation paid in the form of wage or salary.
Many years ago, benefits and services were labeled ―fringe‖ benefits
because they were relatively insignificant or fringe components of
compensation. However, the situation now is different, as these have, more
or less, become important part of a comprehensive compensation package
offered by employers to employees.
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The main features of fringe benefits, as they stand today, may be stated as
under:
a. They are paid to all employees (unlike incentives which are paid to
specific employees whose work is above standard) based on their
membership in the organization.
b. They are supplementary forms of compensation.
c. They help raise the living conditions of employees.
d. They are indirect compensation because they are usually extended as a
condition of employment and are not directly related to performance.
e. They may be statutory or voluntary. Provident fund is a statutory
benefit whereas transport is a voluntary benefit.
Importance of Communication
Basis of Decision-Making & Planning.
Smooth & Efficient Working
Facilitates Co-ordination
Increases Managerial Efficiency
Sound Industrial Relations
Helps in Establishing Effective Leadership
Motivation & Morale
Effective Control
Job Satisfaction
Democratic Management
Public Relations
Types of Communication
There are two main types of communication in every organisation – formal
& informal communication.
Formal Communication
It refers to official communication which takes place through a chain of
commands. It flows in formally established channels & is concerned with
work related matters.
Informal Communication
This communication flows through informal channels & may or may not
be work related. Informal communication cuts through the formal
organizational structure. The term ‗grapevine‘ used to describe a network
of informal communication.
Grapevines are present in all organisations. Grapevines flourish because
communication is a natural human tendency. People who know each
other in the organisation talk together informally.
Grapevines carry two types of information: work related and people
related.
What is Clause 49
SEBI monitors & regulates corporate governance of listed companies in
India through Clause 49. This clause is incorporated in the listing
agreement of stock exchanges with companies & it is compulsory for
them to comply with its provisions.
Applicable to all Group A companies of the Exchange, as also others with
minimum paid-up capital of Rs. 3 crore or net worth of Rs. 25 crore.
SEBI
SEBI is the regulator for the securities market in India. It was established in
the year 1988 and was given the statutory powers in 1992 through the SEBI
Act, 1992. The HQ is at Mumbai, Maharashtra. The Current Chairman is
Ajay Tyagi.
IRDAI
Insurance Regulatory and Development Authority of India is an
autonomous, statutary agency tasked with regulating and promoting the
insurance and re-insurance industries in India. It was constituted by the
IRDA Act, 1999. The headquarters is in Hyderabad, Telangana. The current
Chairman is T.S. Vijayan.
PFRDA
Functions of RBI:
Issuance of currency: RBI is the authority in India to issue currency notes
(called bank notes) under signatures of Governor. (One rupee note called
currency note is issued by the Central Govt.&signed by Finance Secretary).
The stock of currency is distributed with the help of currency chests spread
all over the country.
Banker to Govt.: RBI transacts govt. business&manages public debt. SBI or
any other bank is appointed Agent where RBI does not have office. It
provides Ways & Means advances to Govt.
Bankers‘ bank: It keeps a part of deposits of commercial banks (as CRR) &
acts as lender of last resort by providing financial assistance to banks. It
provides export credit refinance, Liquidity Adjustment Facility&Marginal
Standing Facility.
Controller of Banks: An entity which is to conduct banking business in
India has to obtain license from RBI. It acts as controller of banks by
including the banks in 2nd Schedule of the Act. It issues directions, carries
inspection (on-site as well as off-site) & exercises management control.
Controller of credit: RBI can fix interest rates (including Bank Rate) &
exercise selective credit controls. Various tools such as change in cash
reserve ratio, stipulation of margin on securities, directed credit guidelines
POLICY RATES
Current Rates
Bank Rate 6.50%
Repo Rate 6.25%
Reverse Repo Rate 6.00%
CRR 4.00%
SLR 20.50%
MSF 6.50%
Repo Rate
Repo rate is the rate of interest which is levied on Short-Term loans taken by
commercial banks from RBI. Whenever the banks have any shortage of
funds they can borrow it from RBI.
SLR Rate
SLR (Statutory Liquidity Ratio) is the amount a commercial bank needs to
maintain in the form of cash, or gold or government approved securities
(Bonds) before providing credit to its customers.
It is determined as the %age of total Net Demand&Time Liabilities (NDTL).
BANK RATE
It is defined in Sec 49 of RBI Act 1934 as the ‗standard rate at which RBI is
prepared to buy or rediscount bills of exchange or other commercial papers
eligible for purchase under this act‘.
CASH RESERVE RATIO
FINANCIAL INSTITUTIONS
EXIM BANK:
The Export-Import (EXIM) Bank of India is the principal financial
institution in India for coordinating the working of institutions engaged
in financing export&import trade.
It is a statutory corporation wholly owned by the Government of India.
It was established on January 1, 1982 for the purpose of financing,
facilitating&promoting foreign trade of India.
Chairman- Yaduvendra Mathur
Head Quarters : Mumbai
ECGC
Export Credit Guarantee Corporation of India. This organisation
provides risk as well as insurance cover to the Indian exporters.
Chairman- GeethaMuralidhar
Head Quarters : Mumbai
SCHEDULED BANK
a) As per Sec 2 (e) of RBI Act, a scheduled bank means a bank whose name
is included in the 2nd schedule of RBI Act 1934.
b) A scheduled bank should satisfy the conditions which include paid-up
capital&reserves requirement of not less than Rs. 5 lac, satisfaction of
RBI that the affairs will not be conducted by the bank in a way to
jeopardize the interests of the depositor. (Commercial, Rural&many
State Coop Banks are classified as Scheduled Banks).
c) A bank that is not included in the 2nd Schedule of RBI is called Non-
scheduled Bank.
MONEY MARKET
It is a market for short-term debt securities, such as commercial paper,
repos, negotiable certificates of deposit & Treasury Bills with a maturity of
one year or less.
TREASURY BILLS
These are the instruments (in the form of promissory notes) of short term
borrowing by the Central govt., first issued in India in 1917.
DATED SECURITIES
These are long term securities & carry a fixed or floating coupon (interest
rate) paid on the face value, payable at fixed time periods (half-yearly).
The tenor of dated securities can be up to 40 years.
Public Debt Office of RBI acts as the registry/depository of Govt.
securities & deals with the issue, interest payment & repayment of
principal at maturity.
CERTIFICATE OF DEPOSIT
This scheme was introduced in July 1989, to enable the banking system to
mobilize bulk deposits from the market, which they can attract at
competitive rates of interest.
Who can issue Scheduled commercial banks (except RRBs) & All India
Financial Institutions within their ‗Umbrella limit‘.
CRR/SLR Applicable on the issue price in case of banks
Investors Individuals (other than minor), corporations, companies,
trusts, funds, associations etc.
Maturity Min: 7 days Max : 12 Months (in case of FIs minimum 1
year&maximum 3 years).
Amount Min: Rs. 1 lac, beyond which in multiple of Rs. 1 lac
Int. Rate Market related. Fixed or floating
Loan Against collateral of CD not permitted
Nature Usance Promissory note. Can be issued in
Dematerialisation form only wef June 30, 2002
COMMERCIAL PAPER
i. CP introduced during 1990, is a short term money market instrument
issued as an unsecured usance promissory note&privately placed.
ii. Who can issue Commercial paper (CP): Companies, primary dealers
(PDs)&all-India financial institutions (FIs).
iii. A company is eligible to issue CP if:
(a) Its tangible net worth, as per latest audited balance sheet, is not less than
Rs. 4 crore.
(b) Sanctioned working capital limit by bank/s or all-India financial
institution/s;
(c) The borrower accounts are classified as a Standard Asset by financing
bank/s/ institution/s&‗
(d) Minimum credit rating from SEBI approved credit rating agency (CRA)
is A3. Rating should not be due for review.
iv. Maturity : Min 7 days & max upto one year
MERCHANT BANKING
Merchant banking stands for providing various services relation to capital
market & financing the corporate sector. The Merchant Bankers provide
consultancy to the corporate sector on the issues like finance, capital
structure & investment, mergers, takeover & amalgamations, establishing
coordination between the government & the corporate sector.
Masala-Bonds
Masala Bonds are the bonds issued for rupee-denominated borrowings by
Indian entities in overseas markets.
What is a Risk?
A risk can be defined as an unplanned event with financial consequences
resulting in loss or reduced earnings. Two most important developments in
the banking sector because of which banks have to emphasise on risk
management:
Liquidity Risk: Liquidity risk is the risk of a bank not being able to have
enough cash to carry out its day-to-day operations.
Interest Rate Risk: The risk of an adverse impact on Net Interest Income
(NII) due to variations of interest rate may be called Interest Rate Risk. It is
the exposure of a Bank‘s financial condition to adverse movements in
interest rates.
Other Risks
Strategic Risk: Strategic Risk is the risk arising from adverse business
decisions, improper implementation of decisions or lack of responsiveness
to industry changes.
Reputation Risk: Reputation Risk is the risk arising from negative public
opinion. This risk may expose the institution to litigation, financial loss or
decline in customer base.
RBI has been using CAMELS rating to evaluate the financial soundness of
the Banks. CAMELS Model consists of six components namely Capital
Adequacy, Asset Quality, Management, Earnings Quality, Liquidity and
Sensitivity to Market risk.
After the evolution of the BIS prudential norms in 1988, the RBI took a
series of measures to realign its supervisory and regulatory standards and
bring it at par with international best practices.
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Finally, it was in the year 1999 that RBI recognised the need of an
appropriate risk management and issued guidelines to banks regarding
assets liability management, management of credit, market and operational
risks. The entire supervisory mechanism has been realigned since 1994
under the directions of a newly constituted Board for Financial Supervision
(BFS), which functions under the aegis of the RBI, to suit the demanding
needs of a strong and stable financial system.
Basel Norms
Basel is a city in Switzerland. It is the headquarters of Bureau of
International Settlement (BIS), which fosters co-operation among central
banks with a common goal of financial stability and common standards of
banking regulations.
Basel guidelines refer to broad supervisory standards formulated by this
group of central banks - called the Basel Committee on Banking Supervision
(BCBS). The purpose of the accord is to ensure that financial institutions
have enough capital on account to meet obligations and absorb unexpected
losses.
Regulating tools & frameworks for dealing with peripheral risks that bank
face.
Pillar 3: Market Discipline:
Derivative Instruments
A derivative is an instrument whose value is derived from the value of one
or more underlying, which can be commodities, precious metals, currency,
bonds, stocks, stocks indices, etc. Four most common examples of derivative
instruments are Forwards, Futures, Options and Swaps.
Forward Contracts
A forward contract is a customized contract between two parties, where
settlement takes place on a specific date in future at a price agreed today.
The main features of forward contracts are:
They are bilateral contracts and hence exposed to counter-party risk.
Each contract is custom designed, and hence is unique in terms of
contract size, expiration date and the asset type and quality.
The contract price is generally not available in public domain.
The contract has to be settled by delivery of the asset on expiration date.
In case the party wishes to reverse the contract, it has to compulsorily
go to the same counter party, which being in a monopoly situation can
command the price it wants.
Options
An Option is a contract which gives the right, but not an obligation, to buy
or sell the underlying at a stated date and at a stated price. While a buyer of
an option pays the premium and buys the right to exercise his option, the
writer of an option is the one who receives the option premium and
therefore obliged to sell/buy the asset if the buyer exercises it on him.
Further the Options are classified based on type of exercise. At present the
Exercise style can be European or American.
American Option - American options are options contracts that can be
exercised at any time upto the expiration date. Options on individual
securities available at NSE are American type of options.
European Options - European options are options that can be exercised
only on the expiration date. All index options traded at NSE are European
Options.
What is the Expiration Day?
Rs500 Note
The new Rs500 notes in the Mahatma Gandhi (New) Series are different
from the previous series in colour, size, theme, location of security features
and design elements. The size of the new note is 66mm x 150mm. The
colour of the notes is stone grey and the predominant new theme is Indian
heritage site - Red Fort. Denomination numeral is in Devnagari. Guarantee
clause, Governor's signature, RBI emblem shifted towards right. Ashoka
pillar emblem is on right. 15 languages are written on the reverse side of
Note. For visually impaired, Circle with Rs. 500 in raised print on the right
and Bleed lines on left and right in raised print. Swachh Bharat logo with
slogan is on the reverse side of the Note.
Rs2000 Note
The Reserve Bank of India has introduced new design banknotes in the
denomination of Rs2000 as part of Mahatma Gandhi (New) Series. The size
of the new note is 66mm x 166mm. The new denomination has motif of
the Mangalyaan on the reverse, depicting the country's first venture in
interplanetary space. The base colour of the note is magenta. The note has
other designs, geometric patterns aligning with the overall colour scheme,
both on the obverse and the reverse. Denomination numeral is in
Devnagari. For visually impaired, Rectangle with Rs.2,000 in raised print
A Brief on NPCI
National Payments Corporation of India (NPCI) is an umbrella organization
for all retail payments system in India. NPCI was incorporated in December
2008 & the Certificate of Commencement of Business was issued in April
2009. The authorized capital was pegged at Rs 300 crore & paid up capital
was Rs 100 crore. The Board constitutes of Shri Balachandran M as the
Chairman, & Shri A. P. Hota, Managing Director & Chief Executive Officer,
NPCI.
A Brief on BHIM
Bharat Interface for Money is an app that lets you make simple, easy &
quick payment transactions using Unified Payments Interface (UPI).
This can be done using just Mobile number or Virtual Payment Address
(VPA). Currently it is available in 12 languages.
A Virtual Payment Address (VPA) is a unique identifier which you can
use to send & receive money on UPI.
Amount of money that can be sent using BHIM is uptoRs 10,000 per
transaction & a maximum of Rs 20,000 per day for one bank account.
MMID
MMID stands for Mobile Money Identifier. MMID is a 7-digit code issued
by the bank to their customers for availing IMPS.
A Brief on QSAM
*99*99# service, is alternatively known as QSAM (Query Service on
Aadhaar Mapper). Using this service, a person can check the Aadhaar
seeding/linking status in his/her bank account.
A Brief on NACH
NPCI implemented ―National Automated Clearing House (NACH)‖ for
Banks, Financial Institutions, Corporates & Government, is a web based
solution to facilitate interbank, high volume, electronic transactions which
are repetitive & periodic in nature. NACH System can be used for making
bulk transactions towards distribution of subsidies, dividends, interest,
salary, pension etc. for bulk transactions towards collection of payments
pertaining to telephone, electricity, water, loans, investments in mutual
funds, insurance premium etc.
NACH‘s Aadhaar Payment Bridge (APB) System, developed by NPCI has
been helping the Government & Government Agencies in making the Direct
Benefit Transfer scheme a success.
Payments Banks
The objective is to further financial inclusion by providing (i) small
savings accounts(ii) payments/remittance services to migrant labour
workforce, low income households, small businesses, other unorganised
sector entities&other users.
Scope of activities: Acceptance of demand deposits. Payments bank
will initially be restricted to holding a maximum balance of Rs. 100,000
per individual customer.
The payments banks cannot undertake lending activities. Apart from
amounts maintained as Cash Reserve Ratio (CRR) on its outside
demand&time liabilities, it will be required to invest minimum 75 % of
its "demand deposit balances" in SLR eligible. The minimum paid-up
equity capital shall be Rs. 100 crore.
The promoter's minimum initial contribution to the paid-up equity
capital of such payments bank shall at least be 40 % for the first five
years from the commencement of its business.
Merger of Associates of SBI and Bhartiya Mahila Bank (BMB) on 01st April
2017 with State Bank of India (SBI) was a historic move in the history of
India. SBI is not only the largest Public lender of India but also the most
reliable and Employment providing organization of the country. Here is all
the relevant information that you must know before appearing the
examinations.
1. 1st April was the record date in India as the merger of State Bank of
India took place (SBI) with five of its associate banks and Bhartiya
Mahila Bank. The five associate banks are State Bank of Bikaner and
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Jaipur (SBBJ), State Bank of Mysore (SBM), State Bank of Travancore
(SBT), State Bank of Hyderabad (SBH) and State Bank of Patiala (SBP).
2. SBI has rebranded its corporate website as "bank.sbi" from the earlier
sbi.co.in.
3. The background to the SBI signboard has been changed from white to
―inky blue‖ and SBI will be written in a new font called Effra.
4. The designing and rebranding of SBI logo has been done by a company
called Design Stack.
5. The SBI logo symbolizes its role of a custodian that will keep customers‘
money safe.
6. With the merger, State Bank of India has entered the league of 'Top 50
Global Banks' with a balance sheet size of Rs. 41 trillion. SBI was earlier
placed at 54th rank globally but after the merging it moved to 44th
position making it in the top 50 leading banks globally.
7. The last time such a rebranding exercise was undertaken in 1971, after
the government nationalized banks under former Prime Minister's
Indira Gandhi regime.
8. Post-merger, SBI‘s market share will increase to nearly 22 per cent from
17 per cent.
9. After the merger the tagline of SBI has remained same i.e. "Banker to
every Indian".
10. The total customer base of the bank reaches 37 crore with a branch
network of around 24,000 and nearly 59,000 ATMs across the country.
The merged entity now has a deposit base of more than Rs 26 lakh-crore
and advances level of Rs 18.50 lakh crore.
No Frill Account
'No Frills 'account is a basic banking account. Such account requires
either nil minimum balance or very low minimum balance. Charges
applicable to such accounts are low.
BSBDA
Business Correspondent
Business correspondents are bank representatives. They personally go
to the area allotted to them&carry out banking. They help villagers to
open bank accounts, in banking transactions etc.
Business Correspondents get commission from bank for every new account
opened, every transaction made via them, every loan-application processed
etc.
Principle 9: Compliance
The bank‘s board of directors is responsible for overseeing the management
of the bank‘s compliance risk. The board should establish a compliance
function and approve the bank‘s policies and processes for identifying,
assessing, monitoring and reporting and advising on compliance risk.
What is Budget?
Now, let discuss all the important points related to this year‘s Budget
Proposals.
Finance Minister Shri Arun Jaitley presented the Union Budget 2017-18
which focused on 10 broad themes which are:
farmers, rural population, youth, poor and health care for the
underprivileged; infrastructure; financial sector for stronger institutions;
speedy accountability; public services; prudent fiscal management; tax
administration for the honest.
Direct taxes are all those taxes that cannot be transferred or shifted to
another person, for instance the income tax an individual pays directly to
the government. In this case, the burden of the tax falls flatly on the
individual who earns a taxable income and cannot shift the tax to others.
Indirect taxes, on the other hand, are taxes which can be shifted to another
person. An example would be the Value Added Tax (VAT) that is included
in the bill of goods and services that you procure from others.
The tax on incomes, customs duties, central excise and service tax are levied
by the Central Government. The state Government levies agricultural
income tax (income from plantations only), Value Added Tax (VAT)/ Sales
Tax, Stamp Duty, State Excise, Land Revenue, Luxury Tax and Tax On
Professions. The local bodies have the authority to levy tax on properties,
octroi/entry tax and tax for utilities like water supply, drainage etc.
DIRECT TAXES-
These taxes are levied directly on the persons.These contributes major
chunk of the total taxes collected in India.
INCOME TAX-
This is a type of tax levied on the individuals whose income falls under the
taxable category (2.5 lakhs per annum).
The Indian Income Tax Department is governed by CBDT and is part of the
Department of Revenue under the Ministry of Finance, Govt. of India.
INDIRECT TAXES-
You go to a super market to buy goods or to a restaurant to have a mouthful
there at the time of billing you often see yourself robbed by some more
amount than what you enjoyed of, these extra amounts are indirect taxes,
which are collected by the intermediaries and when govt tax the income of
the intermediaries this extra amount goes in to government‘s kitty, hence as
the name suggests these are levied indirectly on common people.
Indirect Taxes :
Sales Tax
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Vat(Value Added Tax)
Custom Duty
Octroi
Excise Duty
Anti Dumping Duty
Entertainment Tax
Toll Tax
Service Tax
Gst-Goods & Service Tax
Customs Duty –
Customs Duty is a type of indirect tax levied on goods imported into India
as well as on goods exported from India. In India, the basic law for levy and
collection of customs duty is Customs Act, 1962. It provides for levy and
collection of duty on imports and exports.
Service Tax-
Service Tax is a tax imposed by Government of India on services provided
in India. The service provider collects the tax and pays the same to the
government. It is charged on all services except the services in the negative
list of services.
Sales Tax :
Sales tax charged on the sales of movable goods.
Excise Duty:
An excise duty is a type of tax charged on goods produced within the
country. Another name of this tax is CENVAT (Central Value Added Tax).
The revenue obtained by the government from sources other then tax is
called Non-Tax Revenue. The sources of non-tax revenue are :
1. Fees
Fees are another important source of revenue for the government. A fee is
charged by public authorities for rendering a service to the citizens. For
example, fees are charged for issuing of passports, driving licenses, etc.
2. Fines or Penalties
Fines or penalties are imposed as a form of punishment for breach of law or
non-fulfillment or certain conditions or for failure to observe some
regulations. Fines are imposed as a form of punishment or to prevent
people from breaking the law. They are not expected to be a major source of
revenue to the government.
Goods and Service Tax (GST) has been in News since early 2017. The GST Bill
is already passed in so many states including Madhya Pradesh, Uttarakhand,
Arunachal Pradesh etc. The GST Council has also recently finalised the tax rates
on Goods and Services.
A Brief on GST
GST is one indirect tax for the whole nation, which will make India one unified
common market. GST is a single tax on the supply of goods and services, right
from the manufacturer to the consumer. Credits of input taxes paid at each stage
will be available in the subsequent stage of value addition, which makes GST
essentially a tax only on value addition at each stage. The final consumer will
thus bear only the GST charged by the last dealer in the supply chain, with set-
off benefits at all the previous stages.
It will be a national sales tax that will be levied on either consumption of goods
or use of services. It will replace 16 current levies -seven central taxes like excise
duty and service tax and nine state taxes like VAT and entertainment tax, this
will lead to one market with one tax rate. France was the first country to
implement the GST in 1954.
GST Council finalises the tax rates on Goods & Services under the 4-slab
structure
GST Council finalised tax rates on goods and services under the four-slab
structure with essential items of daily use being kept in the lowest bracket of 5
percent. The Council was headed by Finance Minister Arun Jaitley and
comprising representatives of all states in the meeting that was held in J&K. GST
will be applicable from 1st July 2017.
According to GST slabs, seven per cent of the items fall under the exempt list
while 14 per cent have been put in the lowest tax bracket of 5 per
cent. Another 17 per cent items are in 12 per cent tax bracket, 43 per cent in 18
per cent tax slab and only 19 per cent of goods fall in the top tax bracket of 28 per
cent.
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No GST Slab
Foodgrains, milk and other articles of daily use have been exempted from
taxation under the GST regime.The items are: foodgrains, gur, milk, eggs, curd,
lassi, unpacked paneer, natural honey, fresh vegetables, fruits, atta, besan, maida,
vegetable oil, Prasad, common salt, contraceptive, bread, bindi, vermillion,
stamp, judicial documents, printed books, bangles and handloom products.
1) The 14th Finance Commission is of the view that tax devolution should
be the primary route for transfer of resources to the States.
2) In understanding the States‘ needs, it has ignored the Plan and non-Plan
distinctions
3) According to the Commission, the increased devolution of the divisible
pool of taxes is a ``compositional shift in transfers‘‘ – from grants to tax
devolution
4) In recommending an horizontal distribution, it has used broad
parameters – population (1971), changes in population since then,
income distance, forest cover and area, among others.
5) It has recommended distribution of grants to States for local bodies
using 2011 population data with weight of 90 per cent and area with
weight of 10 per cent
6) Grants to States are divided into two
7) One, grant to duly constituted gram panchayats
8) Two, grant to duly constituted municipal bodies
9) And, it has divided grants into two parts
10) A basic grant, and a performance one for gram panchayats and
municipal bodies
11) The ration of basic to performance grant is 90:10 for panchayats; and
80:20 for municipalities
12) The total grant recommended is Rs. 2,87,436 crore for a five-year period.
Out of which, the grant to panchayats is Rs.2,00,292 crore. And, the
reminder goes to municipalities
13) The Commission has significantly departed from previous commission
vis-à-vis recommendation of the principles governing grants-in-aid to
the States by the Centre
14) It has chosen to take the entire revenue expenditure for this purpose.
Hence, it has decided to take into account a state‘s entire revenue
expenditure needs without making a distinction between plan and non-
plan expenditure
The main purpose was to eliminate revenue deficit of the country (building
revenue surplus thereafter) and bring down the fiscal deficit to a
manageable 3% of the GDP by March 2008.
However, due to the 2007 international financial crisis, the deadlines for the
implementation of the targets in the act was initially postponed and
subsequently suspended in 2009.
CPI
CPI measures price change from the perspective of the retail buyer. It is the
real index for the common people. It reflects the actual inflation that is
borne by the individual. CPI is designed to measure changes over time in
the level of retail prices of selected goods and services on which consumers
of a defined group spend their incomes.
Revision in CPI
It was in 2011 that the government announced a new Consumer Price Index
(CP) – CPI (Rural); CPI (Urban) and by combining them a ‗national‘ CPI-C
(where ‗C‘ stands for ‗Combined‘).
The major changes introduced in the revised series are as given below:
1. The Base Year has been changed from 2010 = 100 to 2012 = 100.
2. The basket of items and their weighing diagrams have been prepared
using the Modified Mixed Reference Period (MMRP) data of Consumer
Expenditure Survey (CES), 2011-12, of the 68th Round of National
Sample Survey (NSS).
3. The number of Groups, which was five in the old series, has now been
increased to six. ‗Pan, tobacco and intoxicants‘, which was a Sub-group
under the Group ‗Food, beverages and Tobacco‘, has now been made as
a separate Group.
The other groups are
(i) Food and beverages
(ii) Clothing and Footwear
(iii) Housing
(iv) Fuel and Light
(v) Miscellaneous
A Brief on CPI
Types of Inflation
Creeping inflation or low inflation- It exists where the inflation is less
than 3%.
Walking Inflation: It is the inflation between 3-10% a year. It is harmful
because it heats up economic growth too fast.
Running or galloping inflation -When the inflation is running in the
range of double digits i.e greater than 10%, then it can be termed as
galloping.
A BRIEF ON DEPRESSION
Major traits of depression could be as given below:
(i) An extremely low aggregate demand in the economy causes activities to
decelerate;
(ii) The inflation being comparatively lower;
(iii) The employment avenues start shrinking forcing unemployment rate to
grow fast;
(iv) To keep the business going, production houses go for forced labour-
cuts or retrenchment (to cut down production cost and be competitive
in the market,) etc.
A BRIEF ON BOOM
The Major economic traits of boom may be listed as given below:
(i) An accelerated and prolonged increase in the demand;
(ii) Demand peaks up to such a high level that it exceeds sustainable
output/production levels;
(iii) The economy heats up and a demand-supply lag is visible;
(iv) The market forces mismatch (i.e., demand and supply disequilibirium)
and tend to create a situation where inflation start going upward;
(v) The economy might face structural problems like shortage of investible
capital, lower savings, falling standard of living, creation of a sellers‘
market.
A BRIEF ON RECESSION
Major traits of recession, may be summed up as follows:
(i) There is a general fall in demand as economic activities takes a
downturn;
(ii) Inflation remains lower or/and shows further signs of falling down;
(iii) Employment rate falls/unemployment rate grows;
(iv) Industries resort to ‗price cuts‘ to sustain their business.
Monetary Measures:
Monetary measures aim at reducing the supply of money in the Market.
This can be done through Credit Control which can be done by RBI by
using the tools of Monetary Policy.
Fiscal Measures:
Fiscal measures are highly effective for controlling government
expenditure, personal consumption expenditure, and private and public
investment.
The principal fiscal measures are the following:
(a) Reduction in Unnecessary Expenditure:
(b) Increase in Taxes:
(c) Increase in Savings:
(d) Surplus Budgets: This means that government should give up deficit
financing and instead have surplus budgets. It means collecting more in
revenues and spending less.
(e) Check on Public Debt
Other Measures:
The other types of measures are those which aim at increasing aggregate
supply and reducing aggregate demand directly.
(a) To Increase Production
(b) Price control and rationing is another measure of direct control to check
inflation.
(c) Rationing:
Rationing aims at distributing consumption of scarce goods so as to make
them available to a large number of consumers.