Questions 2013

1. Human rights day- 10 Dec. 2. Ghoomar dance belongs to which state- Rajasthan

3. Largest rice producing state in India- West Bengal 4. Riga is the capital of which country- Latvia 5. How many countries in European union- 28 6. Full form of ATM- Automated Teller Machine 7. Uber cup related with- Badminton 8. At present which country has a female president- South Korea 9. Chatrapati Shivaji international airport is located in-Maharashtra 10. Which element is used in pencil? 11. Head Quarter of WHO- Geneva 12. Daniel Day-Lewis won best actor award in 85th academy award played as the role of- Abraham Lincoln 13. Cabinet minister on Agriculture- Sharad Pawar 14. Risk Cover is used in - Hedging Fund 15. Question from Gilt edge fund? 16. Foreign Bank invest in priority sector via - RBI 17. Kimberley process certificate scheme-diamond 18. Imagining India-idea of a renewed nation-author name Nandan Nilekani

19. Baht is the Currency of - Thailand

20. Who is the first person to be listed to start the census operation every time- President 21. Jawahar Gram Samridhi Yojna (JGSY) program is implemented byVillage Panchayat

22. Prime minister of Japan, Shinjo Abe advocated an economy policy known as- Abenomics 23. About Inflation? 24. Bankassurance- Bank & Insurance related products 25. What do u mean by CRR- Cash Reserve Ratio 26. Attorney general of India appointed by: President 27. 28th member of EU Croatia

28. Who is Raghuram Rajan - RBI Governor 29. Financial task action force HQ - Paris 30. SAARC secretariat Ahmad Saleem 31. SAARC head office- Nepal (Kathamandu) 32. Who won the mahathir peace prize Nelson Mandela 33. What does a banking ombudsman do Listen the complaints of the customer related to Banking issues 34. Nirbhaya allocation in budget 1000 35. Max amount transaction in RTGS No Limit 36. CEO of World economic forum - klaus schwab 37. Turning point authour APJ Abdul kalam 38. India helped which country in its Election process? 39. Scheme in Maoist areas Roshini 40. Food security bill:67 percent to get food thru which ? TPDS 41. SHEKEL currency of which country ? Israel 42. FIMMDA stands for - Fixed Income Money Market Dealers Association 43. Blue Revolution Meant for What? Fisheries 44. Bharat Chetri Related to which sport? Hockey 45. Kathakali is folk dance of ---? Kerala 46. P Sathasivam is in news? he is - CJI of India 47. Commercial paper is issued by Corporate 48. About CSR corporate social responsibility. 49. GAAR is applicable from - 1st April 2016 50. Treasury bills, Certificate of deposits, commercial papers traded in which market - Money market 51. PAKISTAN PM - NAWAZ SHARIF 52. Sarajevo is the capital of - BOSNIA 53. HDI Index of Rank of India 136 54. Nishi Vasudeva is the chairman of HPCL 55. Who purchased the business of Royal bank of Scotland - Ratnakar Bank 56. PPF Max amount in a financial Year 100000

57. E-Choupal is from Which Organization ITC 58. Foreign trade policy annoyed by - Ministry of Commerce, Industry 59. UNCTAD HQ- Geneva 60. Highest award in Sport (India) - Rajiv Khel Ratna 61. FCNR Account - Opend by NRI and IPO's 62. Father of Nuclear Programme - Homi J BABA 63. Best Feature film in 60th IIFA Awards - Pan singh Thomar 64. Committee on Below Poverty line Tendulkar Committee 65. Anoop Sridhar is a Famous for- BADMINTON

66. Sea of Pappies is Written by- AMITAV GHOSH 67. EFT means Electronic Funds Transfer 68. Banks didnt allow loans Beyond BASE RATE 69. For participating in President election minimum age is 35 Years 70. Fiscal Deficit in 2012-13 is 4.89% 71. SEBI Chairman U K SINHA 72. PMAEC chairman C Rangarajan 73. Telecom regulator TRAI 74. Palk Starit line India & Sri Lanka 75. Sardar Sarovar Dam is built on which river- Narmada

Banking Concept: Know About Marginal Standing Facility !

1) What is Marginal Standing Facility (MSF)? i. MSF rate is the rate at which banks borrow funds overnight from the Reserve Bank of India (RBI) against approved government securities. ii. This came into effect in may 2011. Under the Marginal Standing Facility (MSF), currently banks avail funds from the RBI on overnight basis against their excess statutory liquidity ratio (SLR) holdings. iii. Additionally, they can also avail funds on overnight basis below the stipulated SLR up to 2.5 per cent of their respective Net Demand and Time Liabilities (NDTL) outstanding at the end of second preceding fortnight. 2) What is the current MSF rate?

In the mid-quarter review of the monetary policy , the Reserve Bank of India (RBI) reduced the Marginal Standing Facility (MSF) rate by 75 basis points to 9.50% and increased the Repo rate by 25 basis points to 7.50% with immediate effect. 3) What is its borrowing limit? i. With a view to enabling banks to meet the liquidity requirements of mutual funds under the RBIs Special Repo Window announced on July 17, 2013, it has been decided to raise the borrowing limit below the stipulated SLR requirement under the MSF from 2% of NDTL to 2.5% of NDTL. ii. The higher MSF limit of 0.5% of NDTL will be available only for the Special Repo Window. This additional limit will be available for a temporary period until further notice. 4) Why is it required? It is required because Commercial banks borrow money from RBI at MSF rate when there is an acute cash shortage or acute asset-liability mismatch. This does not carry any stigma. Current Rates are as Follows: 1. Repo Rate 7.50% 2. Reverse Repo Rate 6.50% 3. CRR 4% 4. MSF 9.50% 5. Bank Rate - 9.50% 6. SLR 23%

What is Causing Down Fall of Rupee?

Rupees free fall continues against the dollar. Wonder what are the reasons behind this? Read on.... This week, the rupee touched a historic all-time low by dropping below Rs 64 (against $1). At the Interbank Foreign Exchange (Forex) market, the rupee on Tuesday fell past 64 mark to trade at fresh low of 64.11, down by 98 paise, or over 1.5 percent.

Reasons why the rupee hit record low against the dollar .! 1. Fundamental law of economics

If the demand for the dollar in India is more than its supply, the dollar appreciates and the rupee depreciates. Demand for dollars may be created by importers requiring more dollars to pay for their imports or by Foreign Institutional Investors (FIIs) withdrawing their investments and taking the dollars outside India, thus creating a shortage of dollar supply, which, in turn, can also increase the demand for the dollar. Similarly, when the supply of dollars in India increases with respect to its demand, the value of the dollar decreases in terms of rupees. Supply can be created by exporters bringing in more dollars from their revenues or FIIs bringing more dollars in India to spur their investments. 2. Price of crude The price of crude puts tremendous stress on the Indian Rupee. India has to import a bulk of her oil requirements to satisfy local demand, which is rising year-on-year. Globally, the price of oil is quoted in dollars. Therefore, as the domestic demand for oil increases or the price of oil increases in the international market, the demand for dollars also increases to pay our suppliers from whom we import oil. This increase in demand for the dollar (see earlier point) weakens the rupee further. 3.Rising Import bill Rising import bill (arising out of gold) is also a major factor that has curtailed governments effort to tackle the fall of rupee. Gold contributes to over 10 percent of the total import bill. Gold imports were 141 tonnes in April and rose to 162 tonnes in May. Due to certain government measures gold imports declined significantly to 31 tonnes in June but could not be held for the month of July. For the first 25 days of July, the imports stood at 45 tonnes. 4.Insufficient FDI inflows Despite all the decisions to allow major reforms in India, the government has failed to tap major FDI inflow in the country. Instead, India has witnessed withdrawal of major projects by global giants like ArcelorMittal and Posco. Posco pulled out of its Rs 30,000 crore steel plant project in Karnataka followed by ArcelorMittal that scrapped its USD 12 billion (Rs 50,000 crore) steel plant project which it was planning to set up in Odisha. Inordinate delays, land acquisition problems, government clearance delays, lack of promptness have all contributed to the withdrawal of major companies. Last year Indian companies spent more overseas than Foreign Investors in India. 5. Current Account Deficit A current account deficit occurs when a countrys total import exceeds the total exports. This makes the country, a net debtor to the rest of the world. This is not good for the country because, the country needs to buy more foreign currency. More

demand for the foreign currency will cut the value of that countrys currency. Indias current account deficit now is more than the projected level and this also contributes to the depreciation of the Indian rupee. 6. Dollar gaining strength against the other currencies

The central banks of Eurozone and Japan are printing excessive money due to which their currency is devalued. On the other hand, the US Federal Reserve has shown signs to end their stimulus making the dollar stronger against the other currencies including the Indian rupee, at least in the short term. In the year to date US dollar index strengthened by 1.91 percent. The strengthening of dollar is beyond governments control which is ultimately hammering the Indian currency. Gradual recovery in US economy coupled with rising expectations that Federal Reserve will withdraw its stimulus package soon is underpinning the US dollar index. 7. Political paralysis A major reason for Rupee Depreciation The parliament is unable to transact any meaningful business and reforms occupy a back seat. Coalition politics make things difficult for the government to push the much-needed reforms in many sectors. This is creating panic among overseas investors who want to invest in India. 8. Volatile equity market Our equity market has been volatile for some time now. So, the FIIs are in a dilemma whether to invest in India or not. Even though they have brought in record inflows to the country in this year, if they pull out, it will result in a decrease of inflow of dollars into the country. Therefore, the decrease in supply and increase in demand of dollars results in the weakening of the rupee against the dollar. The widening current account deficit and the depreciating rupee are definitely cause for concern. A weaker rupee further erodes the returns earned by the foreign investors in the Indian market. FIIs have turned net sellers of debt securities here for the first time in 13 months. Again, the June sell-off is attributed to the weakness in the Indian currency as the rising cost of hedging a volatile rupee hurts the yield differential that FIIs work with.

The main reason for the decline of the rupee is the appreciation in the dollar. The latter has been rising since fear of the Federal Reserve tapering its quantitative easing (QE) has hit all asset classes. The currencies of all emerging markets, such as Indonesia, Thailand, Brazil and India have depreciated. Similarly, as in other countries, the Indian bond market has also seen withdrawals by FIIs. With a risk-off environment setting in globally, there have been redemptions from global exchangetraded funds (ETFs). This has led to selling by FIIs in the Indian equity market, compounding the rupee's woes. Even Rupee is depreciated, Many Big Companies are in a profit from a weakening rupee Eleven companies that account for nearly 45% of the weight age of the BSE Sensex - ITC, Infosys, Tata Motors, Mahindra & Mahindra, Dr Reddy's Laboratories, Tata Consultancy Services, Sun Pharmaceuticals, Wipro, Bajaj Auto, Cipla and BHEL benefit from a weakening rupee. The reason is simple: the total foreign exchange earnings of these firms are far greater than their forex spends. The more the rupee falls, the more these companies gain, other things remaining constant. Even Mukesh Ambani-controlled Reliance Industries - the country's largest exporter gains from a weak rupee. While its forex outgo is more than its forex earnings, a significant part of its rupee earnings are pegged to the dollar. Therefore, a weakening rupee adds to Reliance's margins and profits, and most analysts cite an 'appreciating rupee' as a risk factor for the company. The three biggest gainers are the IT heavyweights - TCS, Infosys and Wipro. At 65 to a dollar, the three will approximately gain an additional 5,700 crore, 3,600 crore and 2,700 crore, respectively, on net dollar earnings for 2013-14. Why and how RBI control exchange rate?

RBI will interfere in this area because a steady value of rupee is essential for the orderly growth of the economy. A depreciating rupee will harm all import oriented businesses. This may help the exporters, who get their payment in dollars. RBI will be watching the position and interfere to stabilize the currency value. In case of depreciation, RBI will sell foreign currency from the reserve and this will help in arresting the fall of rupee to some extent.

IMP. Banking Terms

1. Balance of Trade: The value of a countrys exports minus the value of its imports. Unless specified as the balance of merchandise trade, it normally incorporates trade in services, including earnings (interest, dividends, etc.) on financial assets.

2. Balance of Payments: A list of all of a countrys international transactions for a given time period, usually one year. Payments into the country (receipts) are entered as positive numbers, called credits; Payments out of the country (payments) are entered as negative numbers called debits. A single numbers summarize all of a countrys international transactions: the balance of payments surplus. 3. MFN (Most Favoured Nation): The principle, fundamental to the GATT, of treating imports from a country on the same basis as that given to the most favoured other nation. That is, and with some exceptions, every country gets the lowest tariff that any country gets, and reductions in tariffs to one country are provided also to others. 4. Balanced Budget: A government budget surplus that is zero, thus with net tax revenue equaling expenditure. A balanced budget changes in policy or behavior is one which a component of the government budget, usually taxes, is adjusted as necessary to maintain a balanced budget. 5. Balanced Growth of an Economy: Growth of an economy in which all aspects of it, especially factors of production, grow at the same rate. 6. Bank Rate: The interest rate charges by a central bank to commercial banks for very short term loans. Current Bank Rate 10.25% 7. Repo: Repo is Repurchase Agreement. An agreement to sell a security for a specified price and to buy it back later at another specified price. A repo is essentially a secured loan. 8. Repo Rate: Whenever the banks have any shortage of funds they can borrow it form RBI. Repo rate is the rate at which commercial banks borrows rupees from RBI. A reduction in the repo rate will help banks to get money at cheaper rate. When the repo rate increases borrowing form RBI becomes more expensive. Current Repo Rate is: 7.25% 9. Reverse Repo Rate: Reverse Repo rate is the rate at which RBI borrows money from commercial banks. Banks are always happy to lend money to RBI since their money is in the safe hands

with a good interest. An increase in reverse repo rate can cause the banks to transfer more funds to RBI due to this attractive interest rates. Current R Repo Rate: 6.25% 10. CRR (Cash Reverse Ratio): CRR is the amount of funds that the banks have to keep with RBI. If RBI increases CRR, the available amount with the banks comes down. RBI is using this method (increase of CRR), to drain out the excessive money from the banks. Current CRR 4% 11. SLR (Statutory Liquidity Ratio): SLR 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. Current SLR is 23% Need of SLR: With the SLR, the RBI can ensure the solvency of a commercial banks. It is also helpful to control the expansion of the Bank credits. By changing SLR rates, RBI can increase or decrease bank credit expansion. Also through SLR, RBI compels the commercial banks to invest in the government securities like govt. 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. 12. Fiscal Deficit: A deficit in the government budget of a country and represents the excess of expenditure over income. So this is the amount of borrowed funds require by the government to meet its expenditures completely. 13. Direct Tax: A direct tax is that which is paid directly by someone to taxing authority. Income tax and property tax are an examples of direct tax. They are not shifted to somebody else. 14. Indirect Tax: This type of tax is not paid by someone to the authorities and it is actually passed on to the other in the form of increased cost. They are levied on goods and services produced or purchased. Excise Tax, Sales Tax, Vat, Entertainment tax are indirect taxes. 15. NOSTRO Account: A Nostro account is maintained by an Indian Bank in the foreign countries. 16. VOSTRO Account: A Vostro account is maintained by a foreign bank in India with their corresponding bank.

17. SDR (Special Drawing Rights): SDR are new form of International reserve assets, created by the International Monetary Fund in 1967. The value of SDR is based on the portfolio of widely used countries and they are maintained as accounting entries and not as hard currency or physical assets like Gold.

Banking News
1. Yes Bank first to hike rates Yes Bank became the first lender to hike lending and deposit rates. Yes Bank said it would hike its deposit rates by 0.25 percent to 0.5 percent in select tenors effective from 1August 2013. NOTE: Yes Bank took this step following the RBIs decision to keep key policy rates unchanged and cut growth forecast.

2. RBI keeps key interest rates unchanged i. The Reserve Bank of India has decided to keep all the key rates unchanged in its first quarter monetary policy review for 2013-2014. ii. RBI chose to keep all key interest rates unchanged and asked the government to take urgent steps to reign in the high current account deficit. Interest Rates are as Follows: 1. The repo rate was kept unchanged at 7.25 percent. 2. Reverse repo remains at 6.25 percent. 3. Cash reserve ratio unchanged at 4.00 percent 4. Keeps Marginal Standing Facility rate at 10.25 percent. 5. Bank rate stands at 10.25 percent. 6. SLR - 23% 3. RBI lowers GDP growth projection for current fiscal to 5.5 pc The Reserve Bank has lowered the growth projection for the current fiscal to 5.5 percent from its earlier estimate of 5.7 percent.

NOTE: Earlier this month, the Asian Development Bank lowered its growth projection for India to 5.8 percent in calendar 2013 from 6 percent estimated earlier, citing the slow progress of economic reforms.

4. RBI decreases realization Period for exporters from 12 to 9 months:

Responding further to the increasing pressure on Current Account Deficit (CAD) due reduced exports and depreciation of rupee against dollar, the Reserve Bank of India has brought down the period of realization and repatriation for exporters of goods and software from 12 to 9 months with a view to increase foreign exchange inflows. 5. India Emerges as the second largest investor in London

i. India has come up as the 2nd largest investor in the city of London with Indian companies led by software major Infosys with the investment eagerness generated by the 2012 Olympic Games in the British capital. ii. Infosys leads the inward Foreign Direct Investment (FDI) made by a total of 28 Indian companies, which generated 429 additional jobs for the British economy in 2012. 6. RBI opens special liquidity window for mutual funds i. A special window of Rs 25,000 crore was opened by the RBI to help mutual funds industry over liquidity problems. This facility will be made available for a brief period only. ii. A special 3-day REPO auction was decided to be conducted by RBI under which banks can raise funds upto to Rs 25,000 crore at 10.25 per cent for on lending to the mutual funds. iii. In 2012-13 the mutual fund industry lost more than 36 lakh investors. During the last 3 financial years, the mutual fund industry had lost over 15 lakh new investor accounts. iv. In April-June 2013-14 as per the latest SEBI data, Mutual Funds lost 10 lakh investors in terms of individual accounts or folios. 7. 100 percent FDI in Telecom Sector i. The Union Government of India on 16 July 2013 raised the FDI limit in Telecom Sector from 74 percent to 100 percent. ii. Government also cleared that the FDI in the Insurance and Telecom sectors will be up to 49 per cent through automatic route. iii. The Union Government also mentioned that FDI the single brand retail would be up to 49 percent through automatic route and remaining investments would be directed through Foreign Investment Promotion Board (FIPB) route. 8. Poverty in India decreases to 21.9% in 2011-12: Planning Commission As per Planning Commission, poverty ratio in the country has dropped to 21.9% in 2011-12 from 37.2% in 2004-05 on account of increase in per capita consumption. Planning Commission on Poverty i. Using the Tendulkar methodology for determining the poverty line, the national poverty line in rural areas has been estimated at Rs 816 per capita per month in villages and Rs 1,000 per capita per month in urban areas in 2011-12. ii. It implies that persons whose consumption of goods and services exceed Rs 33.33 in cities and Rs 27.20 per capita per day in villages are not poor. iii. In 2011-12, the percentage of BPL (Below Poverty Line) people is estimated at 25.7% in rural areas, 13.7% in urban areas and 21.9% for the country as a whole. Note: A separate committee under Prime Ministers Economic Advisory Council (PMEAC) chairman C. Rangarajan will revisit the Tendulkar Committee methodology for estimating poverty. The Committee is expected to submit its report by mid 2014. 9. RBI hikes short term interest rates to support rupee i. The Reserve Bank of India hiked short term rates in the first strong measure to support the Indian rupee.

ii. The RBI has increased banks' cost of borrowing short term money through the Marginal Standing Facility (MSF) rate and Bank Rate each by 200 basis points (2 per cent) to 10.25 per cent. iii. The measure will make it unattractive for banks to borrow rupee (at cheap rates) and buy dollars (in the forward markets). This will reduce the pressure on the rupee. iv. As per RBI, the overall allocation of funds under the LAF would be limited to 1% of the net demand and time liabilities of the banking system. This is estimated to be around Rs.75,000 crore.

10. Kumar Manglam Birla steps down from RBI Board i. Kumar Mangalam Birla who was nominated as a member of the directors of the Central Board of the RBI in 2006 stepped down from RBI Board. ii. Reason to step down, to avoid any conflict of interest as few weeks back his group firm applied for a bank license. iii. Among the 26 entities his group firm Aditya Birla Nuvo is one of the entities which have applied for a bank license. iv. The RBI is expected to grant new licenses by March 2014 as the last date for applying for a bank license expired on July 1, 2013.

BANKING AWARENESS
1. Bank for Women, by the Women and to the Women: i. India to have first public sector womens Bank. An initial capital of Rs 1,000 crore has been committed in current Budget for the establishment of Indias first public sector Womens Bank by the end of 2013 ii. The bank will run mostly by women and it would provide funds for the entrepreneurial initiatives by women. iii. There is still not much clarity on what will be the specific features of this bank, how many branches, locations etc. iv. On the whole, the first womens bank is going to increase job opportunities for women and will help in the emergence of many women entrepreneurs in the country. NOTE: i. As per RBI, the womens bank would be set up as a PSB and would not require separate guidelines. ii. Currently, there are all-women banks in the co-operative sector. For example, the Self-Employed Womens Association (SEWA) set up a women-only bank in 1974. iii. The bank is owned by self-employed women as shareholders, and policies are formulated by their own elected board of women workers. 2. RBI cuts interest rate by 0.25 per cent: i. Recently Reserve Bank of India (RBI) decided to reduce the key repo rate by 25 basis points from 7.75 per cent to 7.5 per cent with immediate effect. ii. The RBI has left the cash reserve ratio (CRR) unchanged at 4 per cent. iii. Consequently, the reverse repo rate stands adjusted to 6.5 per cent and the marginal standing facility (MSF) rate and the Bank Rate to 8.5 per cent with immediate effect.

NOTE: This is the second policy rate cut by the RBI this calendar year to help revive a faltering economy, taking comfort from moderating core price pressures and the government's commitment to trim the fiscal deficit. CURRENT RBI RATES: 1. CRR 4% (unchanged) 2. Repo Rate 7.5% Previously 7.75% 3. Reverse Repo Rate 6.5% Previously 6.75% 4. MSF 8.5% Previously 8.75% 5. Bank Rate 8.5% Previously 8.75% 6. SLR 23% (unchanged) 3. Government to Infuse Rs. 14,000 cr. in PSU Banks i. In the Budget speech it has been announced that the government will infuse Rs 14,000 crore in public sector banks in next fiscal (2013-14). Objective: To ensure that PSU Banks meet the Basel III regulations regarding capital adequacy. NOTE: i. Implementation of Basel III capital regulations envisages enhancing the requirement of core equity capital by banks due to higher capital ratios.The Basel III capital ratios will be fully phased in as on March 31, 2018. ii. The RBI has extended the date for implementing Basel III regulations by 3 months to April 1, 2013. iii. The Government had poured in about Rs 20,117 crore in public sector banks during 2010-11 and Rs 12,000 crore in 2011-12. 4. United Bank ties up with Tata Power Solar i. United Bank of India has entered into a memorandum of understanding (MoU) with Tata Power Solar to provide credit to the non-renewable energy sector. ii. Under the MoU, Tata Power will leverage the banks branch network in the eastern region to make easy finance available to the purchaser of the off-grid solar home lighting or water heating system. iii. The bank, in turn, will utilise the Tata Power outlets to increase its reach in the country. iv. Deepak Narang, Executive director, United Bank. said: The arrangement will facilitate the bank to further increase its exposure to the micro sector. 5. Banks can sell Insurance products of Multiple firms i. As per Budget 2013-14, banks will also act as brokers for selling insurance products of multiple companies. ii. Life insurers such as LIC and general insurers such as GIC will also be asked to open one branch each in towns with a population of over 10,000. iii. The FM has also asked insurance companies to sell policies to people who have completed KYC obligations with banks. iv. Insurance companies will be allowed to open branches in non-metropolitan cities without approval from the insurance regulator. v. Insurance companies will be directly allowed to trade in debt market. It will mean some reduction in costs and may help deepen debt markets. vi. According to Finance Minister P. Chidambaram, the know-your-customer (KYC) details gathered by banks will be sufficient to purchase an insurance policy, and

group insurance products will now be offered to groups such as self-help groups, domestic workers' associations, among others. NOTE: i. Currently, banks can sell products of one life, one non-life and a standalone health insurer. ii. The bancassurance guidelines are still under consideration of the Insurance Regulatory and Development Authority (IRDA). iii. Reserve Bank of India (RBI) had recently shown concerns about banks becoming brokers. 6. RBI extends deadline for issuance of new format cheques i. The RBI has once again extended the deadline for issuance of new format cheque till July-end. ii. It has asked the banks to issue new cheque books only under the new format and gave them time till July-end to withdraw the old format cheques. iii. All cheques currently with customers in the old format (non-Cheque Truncation System) will continue to be valid for another four months (the earlier deadline was March 31), the apex bank said. iv. The Reserve Bank also said the system of post dated cheques and payment via Equated Monthly Installment (EMI), in either the old or new format, will be banned from now wherever electronic debit facilities are available. v. "All cheques issued by banks (including DDs/POs) with effect from the date of this circular shall necessarily conform to CTS-2010 standard," vi. The CTS-2010 eliminates the current practice of physically presenting a cheque to the payee bank, thereby substantially reducing the time for cheque clearance. 7. Cheque signature mismatch may lead to criminal proceedings: Supreme Court i. A person may face criminal proceedings if a cheque issued by him gets dishonoured on the ground that his signature does not match the specimen signature available with the bank. ii. "Just as dishonour of a cheque on the ground that the account has been closed is a dishonour falling in the first contingency referred to in Section 138 of Negotiable Instrument Act, so also dishonour on the ground that the 'signatures do not match' or that the 'image is not found', which too implies that the specimen signatures do not match the signatures on the cheque would constitute a dishonour within the meaning of Section 138 of the Act," 8. SEBI enables two-way fungibility of IDRs i. The Securities and Exchange Board of India (SEBI) has issued detailed guidelines which will allow shareholders to convert their depository receipts into equity shares of the issuer company and vice-versa. ii. The issuer could provide exchangeability to IDR holders by converting IDRs into underlying shares; or converting IDRs into underlying shares and selling the underlying shares in the foreign market where the shares of the issuer are listed and providing the sale proceeds to the IDR holders. iii. Existing IDR issuers can follow the new framework, and have to provide the option of redemption/conversion within three months from the date of completing a year of listing.

About Indian Depository Receipts (IDRs) IDRs are generally instruments denominated in rupees and allow overseas companies to raise funds from the Indian market. How this step would help Indias capital market? i. This move of allowing for two-way fungibility of IDRs will encourage greater foreign participation in the Indian capital market. ii. So far only the UK-based banking major Standard Chartered PLC was listed as an IDR. 9. India Bhutan Sign Currency Swap Agreement i. India and Bhutan have inked a currency swap agreement for up to $100 million to promote economic co-operation b/w the two nations. ii. The pact was signed by the Reserve Bank of India and the RoyalMonetary Authority of Bhutan (RMAB). iii. It enables RMAB to make withdrawals of US dollar, euro or Indian rupee in multiple tranches up to a maximum of $100 million or its equivalent. NOTE: i. The agreement is in line with RBI announcement in May 2012 to offer swap facilities aggregating $2 billion, both in foreign currency and Indian rupee, to SAARC member nations Afghanistan, Bangladesh, Bhutan, Maldives, Nepal, Pakistan and Sri Lanka. ii. This pact will provide emergency funding for SAARC member countries to meet any balance of payments and liquidity crisis till longer term arrangements are made or if there is need for short-term liquidity due to market upheaval. iii. The arrangement would be for a 3-year period and would help bring financial stability in the region. 10. Direct Cash Transfer scheme from Govt: Aapka Paisa, Aapke Haath i. Governments direct cash transfer programme- the Direct Benefit Transfer Scheme which began on January 1, 2013 which benefitted 11 lakh poor people throughout the country. Main Objective: i. As per Finance Minister, P.Chidambaram, it costs the government Rs 3 to transfer 1 rupee to the pockets of beneficiaries. The rest goes on administrative expenses, waste and corruption. Cash transfers will do away with mediators of all sorts, thus reducing corruption and administrative burdens. ii. No delay in transfer of money to beneficiaries iii. Elimination of falsification and duplication with regard to subsidies iv. Beneficiaries can access it themselves or via banking correspondents who are being set up in all the areas v. At present, beneficiaries have to furnish various paperwork for availing benefit. vi. CTS has the potential to merge all paperwork, thus reducing red tape and improving efficiency. Role of Banks: i. Banks would be the distribution point for cash subsidy initially ii. Subsidies would directly be electronically transferred to the bank accounts of the beneficiaries

iii. The electronic cash transfers will be based on Aadhaar platform Target: i. By January 1, 2013, 51 districts with high Aadhar penetration will be covered. ii. By December 2013, the entire nation will be covered Challenge regarding DCTs: i. Most BPL families dont have bank accounts ii. Several villages dont even have bank branches iii. At present, only about 10% of population has Aadhar cards iv. Politically difficult to withdraw benefits from once-poor folk who become better off.

Banking Concepts: Finance Commission

The government recently constituted the 14th Finance Commission under the chairmanship of former RBI Governor YV Reddy. The commission will submit its report by October 31, 2014.

WHAT IS THE ROLE OF FINANCE COMMISSIONS? A finance commission is set up very five years by the President under Article 280 of the Constitution. Its main function is to recommend how the Union government should share taxes levied by it with the states. These recommendations cover a period of five years. The commission also lays down rules by which the centre should provide grants-in-aid to states out of the Consolidated Fund of India. It is also required to suggest measures to augment the resources of states and ways to supplement the resources of panchayats and municipalities. WHY DOES THE CONSTITUTION PROVIDE FOR SHARING OF TAX PROCEEDS? Under the federal structure envisaged in the Constitution, most of the taxation powers are with the Centre but the bulk of spending is done by the states. Such a federal structure requires transfer of resources from the Centre, which levies and collects the big taxes such as income tax and indirect taxes like excise and customs, to the states. Canada and Australia, which also have federal governments, have a similar tax-sharing system. CAN THE COMMISSION EXAMINE OTHER FISCAL ISSUES AS WELL? Yes. The government can ask the commission to make suggestions on specific fiscal issues that it may want addressed. For instance, the government has asked the 14th Finance Commission to deliberate on the level of subsidies and explore statutory measures to insulate pricing of public utility services like drinking water, irrigation, power and public transport from policy fluctuations. The new commission will also look at the impact of GST and suggest a mechanism to compensate states in case of revenue loss. Besides, it will deliberate on listing, disinvestment and sale of state-owned companies. WHAT IS THE FORCE OF THE COMMISSION'S RECOMMENDATIONS? The Constitution does not make the recommendations of the Finance Commission binding on the government of the day. However, there is a strong precedent that governments generally go by the suggestions as far as sharing of revenues is concerned. These recommendations

relating to distribution of Union taxes and duties and grants-in-aid are usually implemented by a presidential order.

Banking Concepts: Reasons & Impact of Falling Rupee

Dear Aspirants, With USD-Rupee touching all time low and making daily news headlines, we are sharing an extremely useful article for understanding the Reasons for falling Rupee and its impact. Article was featured in Times of India. Points from this article will also be helpful in Interviews. Why is rupee weakening against the dollar? There are several factors. But the recent bout of weakness is fueled by the prospect of the unwinding of the bond purchase program of the US Federal Reserve. The US Fed had been printing money to bolster its economy. Now that there are signs of some strength in the US economy, it may start winding down the program of adding more money into the system. A possible winding down of the asset purchase program of the US Fed and improvement in the health of the US economy will strengthen the US dollar. Investors will withdraw investments from emerging markets such as India in the short term and chase assets in the US, since assets in a strengthening US economy are seen as attractive. The outflow of money from emerging markets may lead to currency weakness. Concerns over the pace of economic reforms, the health of the domestic economy and a yawning trade deficit are also impacting the rupee. How will weaker rupee hurt the economy? A weak currency will make imports more expensive. Normally, theory suggests this should lead to a curtailing of imports. However, given the fact that some of Indias major import items, like crude oil, are immune to price changes, the theory does not quite apply in this case. What is current account deficit (CAD)? The CAD is effectively a measure of the amount of net capital inflows from abroad that an economy depends on, whether in the form of borrowings or investment. What impacts widening of CAD? Two factors have been blamed for widening of CAD. One is the import of gold. India is one of the largest consumers of gold and the heavy import of gold widens CAD as the government has to provide for dollars for every ounce of gold imported. The other factor is crude oil imports. India imports more than 75% of its crude oil requirement. A slowdown in inflows from foreign investors also leads to a weak currency. At a time when the rupee is depreciating, foreign portfolio investors are wary of investing in India since any rupee income they earn could get eroded by a higher exchange rate when they want to take back that income out of India. Thus, a sort of vicious cycle is triggered as the rupee dips, FIIs tend to pull out money and that in turn makes the rupee dip further. This can be offset by boosting longer term capital flows from abroad like FDI or overseas borrowings.

Banking Concepts: New Banking Licence - Final Guidelines

Final Guidelines New Banking Licence Eligibility: 1. Corporates, NBFCs and public sector entities can set up banks. Broking and real estate companies can also apply. 2. Promoters need to be financially sound with track record of 10 years. 3. Positive feedback from other regulators and investigative agencies critical. Structure: 1. Promoters must set up banks through wholly-owned non-operative financial holding companies. 2. Holding company and bank not permitted to lend or invest in any entity belonging to the promoter group. 3. Shares of holding companies cannot be transferred to entities outside the promoter group. Shareholding: 1. Holding company to hold 40% stake in bank for 5 years. 2. Holding company to reduce stake in the bank to 20% in 10 years, 15% in 12 years. 3. Foreign shareholding capped at 49% for 5 years. Capital Requirements: 1. Minimum paid-up capital of the bank must be Rs 500 crore. 2. The bank needs to maintain capital adequacy ratio at 13% for initial 3 years. 3. The bank must get listed within 3 years. Other conditions: 1. At least 25% of new branches must be in unbanked rural centres. 2. At least 50% of the directors of holding company must be independent directors. 3. The bank's board must have a majority of independent directors. Application process:

1. Applications for banking licences need to be submitted by July 1, 2013. 2. RBI to issue in-principle approval after considering recommendations from a high level advisory committee. 3. The in-principle approval will be valid for 1 year.

Banking Concepts - New Ideas in Budget

Dear Aspirants, We came across a very nice article in Economic Times on some new concepts and ideas which were introduced in Budget 2013. SERVICE TAX VOLUNTARY COMPLIANCE ENCOURAGEMENT SCHEME A one-time amnesty for those who have collected service tax but not deposited the same with the government. Those service tax providers that have not filed service tax return since October 2007 can disclose true liability and get an interest or penalty waive off. COMMODITIES TRANSACTION TAX (CTT): This is on the lines of securities transaction tax levied on sale and purchase of shares on stock exchanges. The tax will be levied on nonagricultural commodities futures at 0.01 per cent of the trade value, the same rate as that on equity futures. INVESTMENT ALLOWANCE A tax break given to companies for high value investment in plant and machineries, over and above depreciation benefits enjoyed by them. A company investing Rs 100 crore or more in plant and machinery during the April 2013 to March 2015 will be entitled to deduct an investment allowance of 15 per cent of the investment. This is expected to see enormous spill-over benefits to small and medium enterprises. INFLATION-INDEXED BONDS The government hopes this will help increase financial savings instead of buying gold. In the recent years the rate of return on debt investments has often been below inflation, which effectively means that inflation was eroding savings. Inflation indexed bonds provide will provide returns that are always in excess of inflation, ensuring that price rise does not erode the value of savings.

RBI Lending Rate Cut By 50 Basis Pts To Boost Growth

In its annual monetary policy statement for 2012-13, the Reserve Bank of India (RBI) on 17th April 2012 has cut interest rate by 0.50 per cent after a gap of 3 years, making the credit cheaper. The Changed Key Rates are:-

KEY RATES Bank Rate

CURRENT STATUS 9.00%

PREVIOUS STATUS 9.50%

Cash Reserve Ratio (CRR) Statutory Liquidity Ratio (SLR) Repo Rate Reverse Repo Rate Marginal Standing Facility (MSF)

4.75% (NO CHANGE) 24% (NO CHANGE) 8.00% 7.00% 9.00%

4.75% 24% 8.50% 7.50% 9.50%

New RBI Governor Appointed

Chief Economic Advisor Raghuram G Rajan has been appointed as the next governor of the Reserve Bank of India (RBI). Rajan will replace D Subbarao, who completes his five-year term on September 4, and will be the 23rd governor of the central bank. "Prime Minister Manmohan Singh has approved appointment of Raghuram Rajan as governor of RBI for a term of three years," RBI Governor's functions: The RBI governor is a superstar. He is the bankers' banker. He is also the banker to the government. He is all-powerful. Well, almost. He influences a wide range of micro and macro economic issues in the country. His autograph appears on currency notes and he controls the country's monetary, currency and credit systems. His actions influence not only the entire banking system, but also the stock markets, the economy and people's lives in general. Indeed, if he sneezes, the markets tend to catch a cold. He heads an institution which is the sole authority for issuing bank notes. The central bank chief also supervises all banking operations in the country. He supervises and administers exchange control and banking regulations. Besides administering the government's policy, he also issues licenses for new banks, private banks and foreign banks. The RBI governor helps formulates, implement and monitor the monetary policy. The objective is to maintain price stability and ensure adequate flow of credit to productive sectors. The central bank chief announces the biannual Monetary and Credit Policy. The governor announces the changes (if any) in the policy for the year: whether there will be a cut in the cash reserve ratio, bank rate, lending rate, and interest rate. It will also project the gross domestic product growth of the country for the year. He controls the country's interest rates on deposits and advances, but only to the extent of prescribing interest rate on saving accounts and a minimum lending rate. He prescribes the minimum cash reserve and liquid assets to be maintained as a ratio of net demand and time liabilities, and also lays down norms for investments in other assets by primary co-operative banks. He regulates and supervises the nation's financial system. He sets down broad parameters of banking operations within which the country's banking and financial system functions. The aim is to maintain public confidence in the system, protect depositors' interest and provide cost-effective banking services to the public. He manages the Foreign Exchange Management Act, 1999 to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.

 He monitors the issues and exchange (or destruction) of currency and coins not fit for circulation to give the public adequate quantity of supplies of currency notes and coins and in good quality. The RBI governor also plans a role in helping promote functions to support national objectives. The governor -- with help from his large team, of course -- has to constantly review rules and regulations to make them more customer-friendly. He also governs and supervises primary co-operative banks, popularly known as 'urban cooperative banks,' through his Urban Banks Department. The RBI governor also has a say in monitoring and facilitating flow of credit to rural, agricultural and small-scale industries' sectors, framing policies on priority sector lending, giving support to agriculture banks, and regulates regional rural banks, state/central cooperative banks and local area banks. He also monitors the implementation of government-sponsored poverty alleviation schemes. The RBI governors D Subarao - September 6, 2008 to September 4 2013 Y V Reddy - September 9, 2003 to September 5, 2008 Bimal Jalan - Nov 22 1997 to September 6, 2003 C Rangarajan - December 22, 1992 to November 22, 1997. S Venkitaramanan - December 22, 1990 and served till December 21, 1992 R N Malhotra - February 4,1985 to December 22, 1990 A Ghosh - 15 January 1985 4 February 1985 Manmohan Singh - 16 September 1982 14 January 1985 I G Patel - 1 December 1977 15 September 1982 M Narasimham (May 2, 1977 to November 30, 1977) K R Puri (August 20, 1975 to May 2, 1977) N C Sen Gupta (May 19, 1975 to August 19, 1975) S Jagannathan (June 16, 1970 to May 19, 1975) B N Adarkar (May 4, 1970 to June 15, 1970) L K Jha (July 1, 1967 to May 3, 1970) P C Bhattacharyya (March 1, 1962 to June 30, 1967) H V R Iyengar (March 1, 1957 to February 28, 1962) K G Ambegaonkar (January 14, 1957 to February 28, 1957) Sir Benegal Rama Rau (July 1, 1949 to January 14, 1957) Chintaman D Deshmukh (August 11, 1943 to June 30, 1949) Sir James Braid Taylor (July 1, 1937 to February 17,1943) Sir Osborne A Smith (April 1, 1935 to June 30, 1937)

IMP. Points on Basel III Norms

Basel Committee on Banking Supervision: i. The Basel Committee on Banking Supervision is an institution of Governors of the Central Banks of G-10 nations and was formed in 1974. ii. The Committee is a forum for discussion on the handling of specific supervisory problems.

iii. It coordinates the sharing of supervisory responsibilities among national authorities in respect of banks' foreign establishments with the aim of ensuring effective supervision of banks' activities worldwide. iv. The committee operates from Basel in Switzerland. Basel III Guidelines:are based upon 3 very important aspects which are called 3 pillars of the BASEL II. These III pillars are: 1. Minimum Capital Requirement 2. Supervisory Review Process 3. Market Discipline

Important Points: 1. In accordance with Basel III norms, Indian banks will have to maintain their capital adequacy ratio at 9 per cent as against the minimum recommended requirement of 8 per cent. 2. Under Basel III accord, banks have to maintain Tier-one capital (equity and reserves) at 7 per cent of risk weighted assets (RWA) and a capital conservation bugger of 2.5 per cent of RWA. 3. According to the recent RBI financial stability report, Indian banks will require an additional capital of Rs.5 trillion (5lakh crore) to comply with Basel III norms, including Rs 3.25 trillion (Rs 3.25 lakh crore) as non-equity capital and Rs 1.75 trillion(Rs 1.75 lakh crore) in the form of equity capital over the next five years. 4. To ensure that PSU Banks meet the Basel III regulations regarding capital adequacy, the government will infuse Rs 14,000 crore in public sector banks in next fiscal (2013-14). The Basel III capital ratios will be fully phased in as on March 31, 2018.

Questions Related to BASEL III For RBI Assistant Exam: 1. According to Basel III norms Indian banks will have to maintain their capital adequacy ratio at how much percent? (1) 8% (2) 9% (3) 7% (4) 6% (5) None of these Ans: (2) 9% 2. Under Basel III accord, Indians banks have to maintain Tier-one capital (equity and reserves) at how much____per cent of risk weighted assets (RWA). (1) 8% (2) 7%

(3) 9% (5) None of these Ans: (2) 7%

(4) 5%

3. According to the recent RBI financial stability report, how much additional capital does an Indian bank will require to comply with Basel III norms? (1) Rs 3 Lakh Crore (2) Rs 1.75 Lakh Crore (3) Rs.5 Lakh Crore (4) Rs.4.5 Lakh Crore (5) None of these Ans : (3) Rs.5 Lakh Crore 4. Where is headquarter of Basel Committee on Banking Supervision (BCBS)? (1) Rome (2) Switzerland (3) Belgium (4) Washington DC (5) None of these Ans. (2) Switzerland 5. To meet the Basel III regulations regarding capital adequacy, what is the total capital infusion for Public Sector banks in budget 2013-14? (1) Rs 15,000 crore (2) Rs 30,000 crore (3) Rs 12,000 crore (4) Rs 14,000 crore (5) None of these Ans: (4) Rs 14,000 crore

BANKING QUIZ
1. Which of the following instruments of credit control adopted by the Reserve Bank of India (RBI) does not fall within general or quantitative methods of credit control? (1) Stipulation of certain minimum margin in respect of advance against specified commodities (2) Open market operations (3) Bank rate (4) Variable reserve requirement (5) None of these 2. The term BSR refers to: (1) Banks Selling Rate (2) Basic Statistical Returns (3) Annual returns submitted by banks to RBI in respect of priority sector advances (4) Quarterly statement of advances to agriculture (5) None of the above 3. Participatory Notes (PNs) are associated with which one of the following?

(1) Consolidated Fund of India (2) Foreign Direct Investors (3) Foreign Institutional Investors (4) United Nations Development Programme (5) None of these 4. Interest on savings bank account is now calculated by banks on: (1) Minimum balance during the month (2) Minimum balance from 7th to the last day of the month (3) Minimum balance from 10th to last day of the month (4) Maximum balance during the month (5) Daily product basis 5. Devaluation means: (1) To reduce the value of home currency (2) To appreciate the value of home currency (3) To issue new currency in place of old currency (4) To lower the prices of goods for export (5) None of these 6. Increase in net RBI credit for central government represents: (1) Budgetary deficit (2) Revenue deficit (3) Fiscal deficit (4) Monetised deficit (5) None of these 7. A country is said to be in a debt trap if: (1) It has to borrow to make interest payments on outstanding loans (2) It has to borrow to make interest payments on standing loans (3) It has been refused loans or aid by creditors abroad (4) The World Bank charges a very high rate of interest on outstanding as well as new loans (5) None of these 8. Bank Rate implies the rate of interest: (1) Paid by the Reserve Bank of India on the deposits of commercial banks (2) Charged by banks on loans and advances (3) Payable on bonds (4) At which the Reserve Bank of India discounts the Bills of Exchange (5) None of these 9. Recently Reserve Bank of India projected a GDP growth for 2013-14 at _____? (1) 6.7% (2) 5.7% (3) 5.4% (4) 6.1% (5) None of these 10. According to recent Reserve Bank of India (RBI) guidelines for new bank licenses, how much per cent should a new banks have to set up of its branches in unbanked rural areas.

(1) 49% (3) 25% (5) 35%

(2) 15% (4) 20%

Answers: 1 1 6 2 2 7 3 3 8 4 5 9

4 2 4 2

5 1 10 3

BANKING CONCEPTS: RAJIV GANDHI EQUITY SAVINGS SCHEME

Rajiv Gandhi Equity Savings Scheme Rajiv Gandhi Equity Savings Scheme or RGESS is a new equity tax advantage savings scheme for equity investors in India, with the stated objective of "encouraging the savings of the small investors in the domestic capital markets." It was approved by The Union Finance Minister, Shri. P. Chidambaram on September 21, 2012. Important Facts about the Scheme: 1. Who can invest under this scheme? i. Anybody who has not invested in equities before and has a gross total annual income of Rs12 lakh or less. Which means, you have not opened a demat account in the past. You have not made any transactions in equity and derivatives in the past (until November 23, 2012.) ii. However, if you do have a demat account but have not done equity or futures and options transaction in the past (until November 23, 2012), you can invest in RGESS. If you are a joint demat account holder (2nd or 3rd account holder), you can open a new demat account as the 1st holder and invest in RGESS. 2. How much you can invest? i. You can make any amount of investments, but the amount eligible for an income tax deduction is a maximum amount of Rs 50,000. 3. How to invest? i. To invest in RGESS, you will need to open a demat account. You will also have to fill in declaration Form A to the Depositary Participant (DP).

4. What is the lock in period? There is a lock-in period of total three years. This lock-in period is further divided into two fixed and flexible. i. Fixed Lock-in: The first one year from the date of investment is a fixed lock-in. During this period, you cannot sell any securities or pledge them to get loans. ii. Flexible Lock-in: The flexible lock-in period is for next two years from the date of the end of the fixed lock-in period. During this period, you are permitted to buy and sell eligible securities, provided that for a cumulative period of 270 days each year, you are maintaining the value of your initial investment. In short, the value of the investment portfolio should be equal to or more than the amount youve claimed as investments for the purpose of deduction under Section 80 CCG. 5. Expiry of period? Once the period of holding expires, the demat account will be converted automatically into an ordinary demat account. 6. Tax benefits? i. To avail of tax deduction, an investor has to open a new RGESS designated demat account or designate for this purpose his existing demat account, where no trading has taken place before 23 November. ii. As per the Indian Income tax, a deduction is up to 50 percent of the amount invested in such equity shares to the extent such deduction does not exceed Rs 25,000. So, if you are in the lowest tax bracket of 10 percent your tax benefit will be Rs 2,500. And, if you are in the 20 percent tax bracket, your tax benefit will be Rs 5,000. 7. Listed securities in which investment can be made? The eligible securities include stocks listed on the BSE-100, CNX 100 indices, Maharatna, Navratna or Miniratna PSU companies, IPOs of PSUs with an annual turnover of more than Rs 4,000 crore and RGESS-compliant mutual fund ETFs. NOTE: i. A first-timer has been defined as the one who has not opened a demat account as a 'first holder' before the notification date of 23 November 2012, even if his name appears in a joint demat account opened before this date. ii. The investor who has opened a demat account as first holder before the notification date but has not bought any shares or traded in the futures and options segment will also be considered as a first-time investor.

BANKING AWARENESS
1. Inflation low to 6.62 percent in January 2013

i. The inflation rate of India dropped down to the three year low in the chart to 6.62 percent in January 2013 from the 7.18 percent, measured in December 2012.

ii. The inflation was measured based upon monthly Wholesale Price Index. iii. The official Wholesale Price Index for All Commodities (Base: 2004-05 = 100) in January, 2013 rose by 0.4 percent to 169.2 (Provisional) from 168.6 (Provisional) for the previous month. 2. NTPL signs 1,000 MW project with banks: i. A groups of banks which includes Bank of India, Indian Bank and Central Bank of India has agreed to lend Rs 937 crore for the 1,000 MW NTPL power project, a joint venture of the Neyveli Lignite Corporation and the Tamil Nadu Power Generation and Distribution Corporration. ii. The project is being set up at Tuticorin in Tamil Nadu. The Project would be taken up at an estimated cost of Rs. 4,909.54 crore. iii. The power generated from the project would be distributed among Tamil Nadu, Kerala, Karnataka and Puducherry. 3. SBI launched Tatkal Scheme... i. Recently Tatkal scheme is launched by SBI (State Bank of India) that enables the people to transfer money to their families in their native towns and villages without actually opening an account. 4. Saxo Bank enters Indian market: i. Saxo Banks has announced its entry into the Indian market to provide trading platform for foreign equities. About Saxo Bank: i. An online Danish investment Bank: Headquater: Copenhagen, Denmark Chairman: Kurt K. Larsen Service offered: i. Trading via an online platform Saxo Trader in Forex, stocks, futures, funds and Bonds ii. Private wealth management services. iii. The bank provides online trading and investment across global financial markets. iv. Saxo Bank is well known internationally for its success in Internet brokerage and it has bagged numbers of awards for the same. 5. 50% increases in Bad loans of listed banks: i. The bad loans or Non Performing Assets of listed banks swelled by 50% at Rs 30,840 crore in the first nine months of the current financial year ended December 31,2012. ii. The net Non-Performing Assets (NPAs) of 40 listed banks surged to Rs 92,398 crore as on December 31, 2012, from Rs 61,558 crore as on March 31, 2012. iii. The net NPAs in State Bank of India, Punjab National Bank and Bank of Baroda rose by 60%, 70% and 118% respectively. 6. Govt. increase NABARD capital base to Rs 20,000 crore i. The Govt. has increased the capital base of Indias apex development bank NABARD to Rs 20,000 crore from existing Rs 5000 crore. ii. The increase will augment the operations and broaden the activities of NABARD. Following these changes NABARD would be able to undertake short term lending operations and introduce new credit products.

7. Financial institutions Syndicated deal Award goes to Yes Bank: i. YES Bank has been awarded the Financial Institutions Syndicated Deal of the Year 2012 in its Asia Pacific Region. ii. The award was given for $155 million loan syndicated by YES bank which was distributed across 9 different countries from 14 banks. iii. The award was given away by Asia Pacific Loan Market Association (APLMA), which is a leading trade association for syndicated loan market in this region. 8. Exports of India Increased By 0.8 Per Cent in January 2013 i. The exports of India increased by 0.8 percent in the month of January 2013 to 25.58 billion US dollars. ii. Comparatively, exports in January 2012 were 25.37 billion US dollars. iii. Imports on the other hand, increased by 6.12 percent to 45.5 billion iv. Oil imports in January 2013 increased by 6.91 percent to 15.89 billion US dollars in comparison to 14.87 billion US dollars in January 2012. 9. Net Direct Tax Collection Grew 12 Percent in April-January in FY 2012-2013 i. Net Direct Tax collections registered a growth of 12.49 percent, i.e., 390310 crore Rupees in 2012-2013 fiscal year against 346959 crore Rupees in 2011-2012 fiscal year. ii. Gross Direct Tax collection from the period of April to January in fiscal year 2012-2013 increased by 7.02 percent at 455125 crore Rupees against 425274 crore Rupees in same period in 2011-2012 fiscal year. iii. 2.85 percent growth was recorded in wealth tax. It increased to 685 crore Rupees in 2012-2013 financial year in comparison to 666 crore Rupees in 20112012 financial year. iv. Gross collection of the corporate taxes increased 3.71 percent, i.e., 296451 crore Rupees in 2012-2013 fiscal year against 285837 crore Rupees in 2011-2012. v. Gross collection of personal income tax increased by 13.81 percent, i.e., 157913 crore Rupees in 2012-2013 fiscal year against 138746 crore in 2011-2012 fiscal year. 10. Dell ready to become private in $24 billion deal i. PC manufacturer Dell is ready to go private in a $24 billion buyout. ii. The company which is facing slump will pay its stockholders $13.65 share to leave the company on its own. iii. The company will be sold to a group of investors that includes investment firm Silver Lake. iv. Once this is done, Dell will stop trading on the NASDAQ v. Dells sale is the highest priced leveraged buyout of a technology company. NOTE: i. Dell did rapid growth through the 1990s which brought its founder Michael Dell into one of the worlds richest people. ii. Michael Dell, who owns nearly 16% stake in the company will remain the CEO after the sale closes.

Banking Concepts: Terms Useful for Banking Aspirants

Dear Readers, The following post is very helpful for all banking aspirants. These are few select definition sourced from RBI which will clear your conceptual level requirement. All these terms will be covered in greater details in separate post in future. Few of the terms are very beneficial for upcoming Specialist Officer Exam for Financial Executive - Scale II and also for Chartered Accountant Scale II. Capital Funds: Equity contribution of owners. The basic approach of capital adequacy framework is that a bank should have sufficient capital to provide a stable resource to absorb any losses arising from the risks in its business. Capital is divided into different tiers according to the characteristics / qualities of each qualifying instrument. For supervisory purposes capital is split into two categories: Tier I and Tier II. Tier I Capital: A term used to refer to one of the components of regulatory capital. It consists mainly of share capital and disclosed reserves (minus goodwill, if any). Tier I items are deemed to be of the highest quality because they are fully available to cover losses Hence it is also termed as core capital. Tier II Capital: Refers to one of the components of regulatory capital. Also known as supplementary capital, it consists of certain reserves and certain types of subordinated debt. Tier II items qualify as regulatory capital to the extent that they can be used to absorb losses arising from a bank's activities. Tier II's capital loss absorption capacity is lower than that of Tier I capital. Revaluation reserves: Revaluation reserves are a part of Tier-II capital. These reserves arise from revaluation of assets that are undervalued on the bank's books, typically bank premises and marketable securities. The extent to which the revaluation reserves can be relied upon as a cushion for unexpected losses depends mainly upon the level of certainty that can be placed on estimates of the market values of the relevant assets and the subsequent deterioration in values under difficult market conditions or in a forced sale. Leverage: Ratio of assets to capital. Capital reserves: That portion of a company's profits not paid out as dividends to shareholders. They are also known as undistributable reserves and are ploughed back into the business. Deferred Tax Assets: Unabsorbed depreciation and carry forward of losses which can be set-off against future taxable income which is considered as timing differences result in deferred tax assets. The deferred Tax Assets are accounted as per the Accounting Standard 22. Deferred Tax Liabilities: Deferred tax liabilities have an effect of increasing future year's income tax payments, which indicates that they are accrued income taxes and meet definition of liabilities. Subordinated debt: Refers to the status of the debt. In the event of the bankruptcy or liquidation of the debtor, subordinated debt only has a secondary claim on repayments, after other debt has been repaid.

Hybrid debt capital instruments: In this category, fall a number of capital instruments, which combine certain characteristics of equity and certain characteristics of debt. Each has a particular feature, which can be considered to affect its quality as capital. Where these instruments have close similarities to equity, in particular when they are able to support losses on an ongoing basis without triggering liquidation, they may be included in Tier II capital. BASEL Committee on Banking Supervision: The BASEL Committee is a committee of bank supervisors consisting of members from each of the G10 countries. The Committee is a forum for discussion on the handling of specific supervisory problems. It coordinates the sharing of supervisory responsibilities among national authorities in respect of banks' foreign establishments with the aim of ensuring effective supervision of banks' activities worldwide. BASEL Capital accord: The BASEL Capital Accord is an Agreement concluded among country representatives in 1988 to develop standardised risk-based capital requirements for banks across countries. The Accord was replaced with a new capital adequacy framework (BASEL II), published in June 2004. BASEL II is based on three mutually reinforcing pillars hat allow banks and supervisors to evaluate properly the various risks that banks face. These three pillars are: Minimum capital requirements, which seek to refine the present measurement framework supervisory review of an institution's capital adequacy and internal assessment process; market discipline through effective disclosure to encourage safe and sound banking practices Risk Weighted Asset: The notional amount of the asset is multiplied by the risk weight assigned to the asset to arrive at the risk weighted asset number. Risk weight for different assets vary e.g. 0% on a Government Dated Security and 20% on a AAA rated foreign bank etc. CRAR(Capital to Risk Weighted Assets Ratio): Capital to risk weighted assets ratio is arrived at by dividing the capital of the bank with aggregated risk weighted assets for credit risk, market risk and operational risk. The higher the CRAR of a bank the better capitalized it is. Credit Risk: The risk that a party to a contractual agreement or transaction will be unable to meet its obligations or will default on commitments. Credit risk can be associated with almost any financial transaction. BASEL-II provides two options for measurement of capital charge for credit risk 1.standardised approach (SA) - Under the SA, the banks use a risk-weighting schedule for measuring the credit risk of its assets by assigning risk weights based on the rating assigned by the external credit rating agencies. 2. Internal rating based approach (IRB) - The IRB approach, on the other hand, allows banks to use their own internal ratings of counterparties and exposures, which permit a finer differentiation of risk for various exposures and hence delivers capital requirements that are better aligned to the degree of risks. The IRB approaches are of two types: a) Foundation IRB (FIRB): The bank estimates the Probability of Default (PD) associated with each borrower, and the supervisor supplies other inputs such as Loss Given Default (LGD) and Exposure At Default (EAD). b) Advanced IRB (AIRB): In addition to Probability of Default (PD), the bank estimates other inputs such as EAD and LGD. The requirements for this approach are more exacting.

The adoption of advanced approaches would require the banks to meet minimum requirements relating to internal ratings at the outset and on an ongoing basis such as those relating to the design of the rating system, operations, controls, corporate governance, and estimation and validation of credit risk components, viz., PD for both FIRB and AIRB and LGD and EAD for AIRB. The banks should have, at the minimum, PD data for five years and LGD and EAD data for seven years. In India, banks have been advised to compute capital requirements for credit risk adopting the SA. Market Risk: Market risk is defined as the risk of loss arising from movements in market prices or rates away from the rates or prices set out in a transaction or agreement. The capital charge for market risk was introduced by the BASEL Committee on Banking Supervision through the Market Risk Amendment of January 1996 to the capital accord of 1988 (BASEL I Framework). There are two methodologies available to estimate the capital requirement to cover market risks: 1) The Standardised Measurement Method: This method, currently implemented by the Reserve Bank, adopts a building block approach for interest-rate related and equity instruments which differentiate capital requirements for specific risk from those of general market risk. The specific risk charge is designed to protect against an adverse movement in the price of an individual security due to factors related to the individual issuer. The general market risk charge is designed to protect against the interest rate risk in the portfolio. 2) The Internal Models Approach (IMA): This method enables banks to use their proprietary in-house method which must meet the qualitative and quantitative criteria set out by the BCBS and is subject to the explicit approval of the supervisory authority. Operational Risk: The revised BASEL II framework offers the following three approaches for estimating capital charges for operational risk: 1) The Basic Indicator Approach (BIA): This approach sets a charge for operational risk as a fixed percentage ("alpha factor") of a single indicator, which serves as a proxy for the banks risk exposure. 2) The Standardised Approach (SA): This approach requires that the institution separate its operations into eight standard business lines, and the capital charge for each business line is calculated by multiplying gross income of that business line by a factor (denoted beta) assigned to that business line. 3) Advanced Measurement Approach (AMA): Under this approach, the regulatory capital requirement will equal the risk measure generated by the banks internal operational risk measurement system. In India, the banks have been advised to adopt the BIA to estimate the capital charge for operational risk and 15% of average gross income of last three years is taken for calculating capital charge for operational risk. Internal Capital Adequacy Assessment Process (ICAAP): In terms of the guidelines on BASEL II, the banks are required to have a board-approved policy on internal capital adequacy assessment process (ICAAP) to assess the capital requirement as per ICAAP at the solo as well as consolidated level. The ICAAP is required to form an integral part of the management and decision-making culture of a bank. ICAAP document is required to clearly demarcate the quantifiable and qualitatively assessed risks. The ICAAP is also required to include stress tests and scenario analyses, to be conducted periodically, particularly in respect of the banks material risk exposures, in order to evaluate the potential vulnerability of the bank to some unlikely but plausible events or movements in the market conditions that could have an adverse impact on the banks capital.

Mortgage Back Security: A bond-type security in which the collateral is provided by a pool of mortgages. Income from the underlying mortgages is used to meet interest and principal repayments. Derivative: A derivative instrument derives its value from an underlying product. There are basically three derivatives a) Forward Contract- A forward contract is an agreement between two parties to buy or sell an agreed amount of a commodity or financial instrument at an agreed price, for delivery on an agreed future date. Future Contract- Is a standardized exchange tradable forward contract executed at an exchange. In contrast to a futures contract, a forward contract is not transferable or exchange tradable, its terms are not standardized and no margin is exchanged. The buyer of the forward contract is said to be long on the contract and the seller is said to be short on the contract. b) Options- An option is a contract which grants the buyer the right, but not the obligation, to buy (call option) or sell (put option) an asset, commodity, currency or financial instrument at an agreed rate (exercise price) on or before an agreed date (expiry or settlement date). The buyer pays the seller an amount called the premium in exchange for this right. This premium is the price of the option. c) Swaps- Is an agreement to exchange future cash flow at pre-specified Intervals. Typically one cash flow is based on a variable price and other on affixed one. Duration: Duration (Macaulay duration) measures the price volatility of fixed income securities. It is often used in the comparison of interest rate risk between securities with different coupons and different maturities. It is defined as the weighted average time to cash flows of a bond where the weights are nothing but the present value of the cash flows themselves. It is expressed in years. The duration of a fixed income security is always shorter than its term to maturity, except in the case of zero coupon securities where they are the same. Modified Duration: Modified Duration = Macaulay Duration/ (1+y/m), where y is the yield (%), m is the number of times compounding occurs in a year. For example if interest is paid twice a year m=2. Modified Duration is a measure of the percentage change in price of a bond for a 1% change in yield. Non Performing Assets (NPA): An asset, including a leased asset, becomes non performing when it ceases to generate income for the bank. Net NPA: Gross NPA (Balance in Interest Suspense account + DICGC/ECGC claims received and held pending adjustment + Part payment received and kept in suspense account + Total provisions held). Coverage Ratio: Equity minus net NPA divided by total assets minus intangible assets. Restructuring: A restructured account is one where the bank, grants to the borrower concessions that the bank would not otherwise consider. Restructuring would normally involve modification of terms of the advances/securities, which would generally include, among others, alteration of repayment period/ repayable amount/ the amount of installments and rate of interest. It is a mechanism to nurture an otherwise viable unit, which has been adversely impacted, back to health.

Substandard Assets: A substandard asset would be one, which has remained NPA for a period less than or equal to 12 months. Such an asset will have well defined credit weaknesses that jeopardize the liquidation of the debt and are characterised by the distinct possibility that the banks will sustain some loss, if deficiencies are not corrected. Doubtful Asset: An asset would be classified as doubtful if it has remained in the substandard category for a period of 12 months. A loan classified as doubtful has all the weaknesses inherent in assets that were classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, - on the basis of currently known facts, conditions and values - highly questionable and improbable. Doubtful Asset: An asset would be classified as doubtful if it has remained in the substandard category for a period of 12 months. A loan classified as doubtful has all the weaknesses inherent in assets that were classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, - on the basis of currently known facts, conditions and values - highly questionable and improbable. Loss Asset: A loss asset is one where loss has been identified by the bank or internal or external auditors or the RBI inspection but the amount has not been written off wholly. In other words, such an asset is considered uncollectible and of such little value that its continuance as a bankable asset is not warranted although there may be some salvage or recovery value. Off Balance Sheet Exposure: Off-Balance Sheet exposures refer to the business activities of a bank that generally do not involve booking assets (loans) and taking deposits. Off-balance sheet activities normally generate fees, but produce liabilities or assets that are deferred or contingent and thus, do not appear on the institution's balance sheet until and unless they become actual assets or liabilities. Total income: Sum of interest/discount earned, commission, exchange, brokerage and other operating income. Total operating expenses: Sum of interest expended, staff expenses and other overheads. Operating profit before provisions: Net of total income and total operating expenses. Net operating profit: Operating profit before provision minus provision for loan losses, depreciation in investments, write off and other provisions. Profit before tax (PBT): (Net operating profit +/- realized gains/losses on sale of assets) Profit after tax (PAT): Profit before tax provision for tax. Retained earnings: Profit after tax dividend paid/proposed. Average Yield: (Interest and discount earned/average interest earning assets)*100 Average cost: (Interest expended on deposits and borrowings/Average interest bearing liabilities)*100

Return on Asset (ROA)- After Tax: Return on Assets (ROA) is a profitability ratio which indicates the net profit (net income) generated on total assets. It is computed by dividing net income by average total assets. Formula- (Profit after tax/Av. Total assets)*100 Return on equity (ROE)- After Tax: Return on Equity (ROE) is a ratio relating net profit (net income) to shareholders equity. Here the equity refers to share capital reserves and surplus of the bank. Formula- Profit after tax/(Total equity + Total equity at the end of previous year)/2}*100 Net Non-Interest Income: The differential (surplus or deficit) between non-interest income and non-interest expenses as a percentage to average total assets. Net Interest Income ( NII): The NII is the difference between the interest income and the interest expenses. Net Interest Margin: Net interest margin is the net interest income divided by average interest earning assets. Cost income ratio (Efficiency ratio): The cost income ratio reflects the extent to which noninterest expenses of a bank make a charge on the net total income (total income interest expense). The lower the ratio, the more efficient is the bank. Formula: Non interest expenditure / Net Total Income * 100. CASA Deposit: Deposit in bank in current and Savings account. Liquid Assets: Liquid assets consists of: cash, balances with RBI, balances in current accounts with banks, money at call and short notice, inter-bank placements due within 30 days and securities under held for trading and available for sale categories excluding securities that do not have ready market. ALM: Asset Liability Management (ALM) is concerned with strategic balance sheet management involving all market risks. It also deals with liquidity management, funds management, trading and capital planning. ALCO: Asset-Liability Management Committee (ALCO) is a strategic decision making body, formulating and overseeing the function of asset liability management (ALM) of a bank. Banking Book: The banking book comprises assests and liabilities, which are contracted basically on account of relationship or for steady income and statutory obligations and are generally held till maturity. Venture Capital Fund: A fund set up for the purpose of investing in startup businesses that is perceived to have excellent growth prospects but does not have access to capital markets. Held Till Maturity (HTM): The securities acquired by the banks with the intention to hold them up to maturity. Held for Trading (HFT): Securities where the intention is to trade by taking advantage of short-term price / interest rate movements.

Available for Sale (AFS): The securities available for sale are those securities where the intention of the bank is neither to trade nor to hold till maturity. These securities are valued at the fair value which is determined by reference to the best available source of current market quotations or other data relative to current value. Yield to maturity (YTM) or Yield: The Yield to maturity (YTM) is the yield promised to the bondholder on the assumption that the bond will be held to maturity and coupon payments will be reinvested at the YTM. It is a measure of the return of the bond. Foreign Currency Convertible Bond (FCCB): A bond issued in foreign currency abroad giving the investor the option to convert the bond into equity at a fixed conversion price or as per a pre-determined pricing formula. Trading Book: Investments in trading book are held for generating profits on the short term differences in prices/yields. Held for trading (HFT) and Available for sale (AFS) category constitute trading book. CRR: Cash reserve ratio is the cash parked by the banks in their specified current account maintained with RBI. SLR: Statutory liquidity ratio is in the form of cash (book value), gold (current market value) and balances in unencumbered approved securities. LIBOR: London Inter Bank Offered Rate. The interest rate at which banks offer to lend funds in the interbank market. Basis Point: Is one hundredth of one percent. 1 basis point means 0.01%. Used for measuring change in interest rate/yield. Securitization: A process by which a single asset or a pool of assets are transferred from the balance sheet of the originator (bank) to a bankruptcy remote SPV (trust) in return for an immediate cash payment. Special Purpose Vehicle (SPV): An entity which may be a trust, company or other entity constituted or established by a Deed or Agreement for a specific purpose. Custodian: An entity, usually a bank that actually holds the receivables as agent and bailee of the trustee. Value at Risk (VAR): VAR is a single number (currency amount) which estimates the maximum expected loss of a portfolio over a given time horizon (the holding period) and at a given confidence level. VaR is defined as an estimate of potential loss in a position or asset/liability or portfolio of assets/liabilities over a given holding period at a given level of certainty.

Banking Concepts - SLR Non SLR Investments

What are SLR investments?

As part of prudential guidelines, central banks require lenders to maintain a portion of their deposits in liquid assets. These liquid assets can be cash, gold or government securities. The ratio of prescribed liquid investments to deposits is termed as statutory liquidity ratio. In India, banks invest in bonds issued by the government and notified by the Reserve Bank of India as qualifying for SLR to meet the prescribed ratio. Currently, the prescribed statutory liquidity ratio for banks is 23% of their deposits. SLR is occasionally used as monetary policy tool and the stipulation is made by authorities, keeping in mind the monetary policy objectives. What are non-SLR investments? Besides giving loans to businesses and individuals, RBI has also allowed banks to invest in various capital market instruments such as stocks and bonds issued by public and private sector companies and commercial papers. In addition, banks are also allowed to invest in various mutual fund schemes. Unlike SLR investments, there is no compulsion on banks to invest in these instruments. Investments are entirely guided by commercial considerations and many such investments are in accordance with the prescribed guidelines. How are non-SLR investments and loans linked? RBI treats both loans extended by commercial banks and the non-SLR investments as a resource flow to the commercial sector. Hence, it includes both while making credit projections it is comfortable with to achieve the targeted economic growth at the time of the monetary policy formulation during the beginning of the fiscal year. Is there any differential treatment for the two types of investments? Since SLR investments in bonds are issued by the government or its bodies, these enjoy a sovereign protection, and hence, are perceived to be risk-free. However, in case of non-SLR investments, the central bank attaches risk weights, depending on the industry and the state of the perceived risk on that sector as a prudential measure. 1. PNB buys 30% stake in Met Life India Punjab National Bank has acquired a 30% stake in the Indian subsidiary of the biggest US life insurer MetLife at an unrevealed amount. 2. ICICI Bank ties with Aircel for Mobile Money i. Indias largest private sector bank, ICICI Bank has partnered with Aircel to launch a mobile banking service, Mobile Money. ii. With the help of this service the unbanked customers of these two companies will be able to transfer money securely and instantly through their mobile phones without getting connected to data services. iii. The service will work towards financial inclusion of those who face problems in transferring money due to absence of branches or ATMs closer to them by offering a range of financial services such as deposits and cash withdrawals, money transfer to third parties, self-reload of prepaid mobile credit, and various utility bill payments. NOTE: i. The service will be initially rolled out in Tamil Nadu, specifically for the Chennai Tirunelveli corridor to help migrant labourers send back money to their villages.

ii. It is similar to Vodafones M-Pesa service which first pioneered to great success in Africa. 3. Naseer Ahmed is the new Director of Syndicate Bank i. C R Naseer Ahmed has been appointed as the Director of Syndicate Bank. The Government of India has nominated Ahmed as part-time non-official director on the Board of Directors of Syndicate Bank for a period of 3 years. 4. SBI slashes base rate to 9.7% i. Indias largest public sector bank, State Bank of India, has cut its base rate (minimum lending rate) marginally from current 9.75% to 9.70%. ii. The decision came following RBI cut its key policy rate and the cash reserve ratio by 25 basis points each. NOTE: After RBI announced cut, IDBI Bank was the first off the block to reduce base rate as well as its benchmark prime lending rate by 25 basis points each. 5. Canara Bank to launch e-Lounge services i. Canara Bank is about to unveil its e-Lounge services in Bangalore and Delhi. ii. The bank would launch first e-Lounge at Koramangala Branch, Bangalore About e-Lounge services i. e-Lounge will cater to the needs of corporate, IT and business professionals. ii. It would offer Services of ATM, cash deposit kiosk, check deposit kiosk, pass book update, internet banking terminal, online trading terminal, corporate web site terminal to offer latest information of banks services all under one roof. 6. S S Mundra appointed as the new CMD of BoB S S Mundra has been appointed by the Government of India as the Chairman and Managing Director (CMD) of Indias second largest lender- Bank of Baroda. He is the former Executive Director of Union bank of India. 7. Axis Bank offers e-Gift Card service Axis Bank has launched Axis Bank e- Gift Card which is an online version of physical plastic gift cards. About e-Gift Card service i. The e-Gift card allows the customers to buy gift cards in an alternate way. The card carrying a particular value can be bought by using debit or credit card. ii. This card can be gifted via email or SMS to the recipient who can use it to purchase anything online across categories like apparels, airline tickets, books etc. iii. It also saves the sender from the puzzling situation of what to buy for gift. iv. All purchase transactions shall be limited to sites that support verified by Visa and MasterCard secure code for two factor authentication. 8. World Bank slashed Global Growth to 2.4% i. World Bank sharply slashed the global growth outlook for 2013 to 2.4% from earlier estimate of 3%. The report includes updates to the World Bank's forecasts for growth. i. 2.3 percent global GDP growth in 2012 (down from 2.5 percent) ii. 2.4 percent global GDP growth in 2013 (down from 3.0 percent) iii. 3.1 percent global GDP growth in 2014 (down from 3.3 percent) iv. 3.3 percent global GDP growth in 2015

9. IMF forecasted World Economic Growth Rate would be 3.5 percent in 2013 i. International Monetary Fund (IMF) in at update to World Economic Outlook (WEO) on 23 January 2013, projected that the global economic growth rate would be 3.5 percent in 2013. ii. The update mentioned that the global economic growth would strengthen gradually as the limitations of the economic activities have seen a positive note with the start of the year. 10. IMF forecasted Indian Economic Growth Rate to be 5.9 percent in 2013 i. The International Monetary Fund (IMF) on 23 January 2013 projected that the economic growth rate of India in 2013 would be 5.9 percent. ii. The IMF also projected an increased growth rate of 6.4 percent for 2014 looking forward towards the gradual strengthening of the global expansion in Indias context.

PROCESS EXPLAINED
The government's annual budget is no different from that of a household, only it has a lot more jargon. In this article, we explain the basic architecture of the budget: ANNUAL FINANCIAL STATEMENT: The ordinary man confuses the finance minister's budget speech for the annual budget. But as laid down in the constitution, the budget actually refers to the annual financial statement tabled in Parliament along with the 13-15 other documents. Divided into three parts -- Consolidated Fund, Contingency Fund and Public Account -- it has a statement of receipts and expenditure of each. CONSOLIDATED FUND: This is the core of the govt's finances. All revenues, money borrowed and receipts from loans it has given flow into this account. All government expenditure is made from this fund. Any expenditure from this fund requires the nod of Parliament. CONTINGENCY FUND: All urgent or unforeseen expenditure is met from this ` 500crore fund, which is at the disposal of the President. Any amount withdrawn from this fund is made good from the Consolidated Fund. PUBLIC ACCOUNT: All money in this fund belongs to others, such as public provident fund. The government is merely working as a banker in respect of this fund. REVENUE RECEIPT/EXPENDITURE: All receipts like taxes and expenditure like salaries, subsidies and interest payments that do not entail sale or creation of assets fall under the revenue account. CAPITAL RECEIPT/EXPENDITURE: Capital account shows all receipts from liquidating (eg. selling shares in a public sector company) of assets and spending to create assets (lending to receive interest). REVENUE VS CAPITAL

The budget has to distinguish all receipts/expenditure on revenue account from other expenditure. So all receipts in, say, the consolidated fund, are split into Revenue Budget (revenue account) and Capital Budget (capital account), which include nonrevenue receipts and expenditure. REVENUE/CAPITAL BUDGET
The govt has to prepare a Revenue Budget (detailing revenue receipts and revenue expenditure) and a Capital Budget (capital receipts & capital expenditure).

Banking Concepts: CASA

What is Casa Ratio? Casa is basically the current and savings sccount deposits. Casa ratio is the share of current and savings account deposits to the total deposits of the bank. In India, interest rates paid on current and savings account deposits is administered by banking regulator - the Reserve Bank of India. Why are banks keen on garnering a higher share of CASA? Interest rate paid on Casa is much lower compared to other deposits like term deposits or recurring deposits. While banks do not pay any interest on current account, interest paid on savings account deposit is 4%. Banks therefore make maximum effort to increase the share of Casa on their books to reduce their overall cost of deposits. HDFC Bank has the highest share of Casa to total deposits at 52%, followed by the State Bank of India at 48% and ICICI Bank at 45%. What does Casa mean for customers? Recently, RBI increased interest paid on savings account deposits from 3.5% to 4%. Further a year ago, RBI told banks to pay interest on savings deposits on a daily basis rather than paying on the minimum balance maintained by them in six months. As a result, savings account customers earn better returns compared to what they earned a year ago. Further, interest earned on savings account deposits does not attract TDS (tax deduction at source). Interest income above 10,000 a year attracts TDS of 10% in case of term deposits. However, there is no major benefit for current account deposits, which is mainly maintained by corporates and traders. What are the disadvantages of high CASA? These deposits can move out of banks' books anytime, leading to asset-liability mismatches. While in case of term deposits, banks are almost certain that the depositor may not withdraw money before the maturity of the deposit and may also renew the deposit on maturity. Further, to finance long-term projects, banks need to have long-term liabilities on their books to avoid mismatches. Banks cannot rely on Casa deposits to fund long-term loans.

Banking Concepts: Fiscal Cliff

What is Fiscal Cliff? The phrase "fiscal cliff" was first used by Fed chairman Ben Bernanke to refer to the combination of tax increases and spending cuts that would come into effect.

What impact will the fiscal cliff have? A number of tax cuts, including Bush-era tax cuts, and unemployment benefits will expire almost together at the year-end. The result would be a drop in government spending and lower disposable incomes. These tax benefits and higher government spending had supported the economic recovery at a time when private sector demand was low. Expiry of tax benefits and lower government spending would help reduce the federal budget deficit but could temporarily arrest economic recovery, possibly even driving the US into a recession during the first half of the next year.

What does it imply for the rest of the world? The current fiscal policy in the US has raised concerns over the country's long term fiscal stability and solvency. The increase in taxes and lower government spending are part of the solution. But if the tax increases and spending cuts are allowed, the resulting recessionary climate would then cloud the prospects of even the fastest-growing economies, China and India. So what is the alternative? The two parties could arrive at a compromise before the elections start, which could calm financial markets. But so far they haven't shown any inclination to talk; probably both are waiting to see who will have more negotiating leverage after the November elections.

Banking Concepts: Qualified Foreign Investors

Who are qualified foreign investors? Qualified foreign investors, or QFIs, can be individuals, groups or associations based abroad who are allowed by the government to invest directly in mutual funds and stocks of Indian companies. In 2011, the government opened a new window for this class of investors to buy into Indian mutual funds directly. It has now gone one step further and allowed them to buy into stocks, too, just like registered foreign institutional investors or nonresident Indians, or NRIs. Are QFIS a separate class of foreign investors compared to FIIs? Qualified Foreign Investors will be distinct from foreign portfolio investors and nonresident Indians. A QFI can, for instance, be a foreign individual investor in Singapore or Russia, who can buy into stocks of a Tata group company or Coal India or any other listed stock after fulfilling the Know Your Customer norms through an Indian depository participant and obtaining the approval of the RBI. QFIs can buy up to 5% of the paid-up capital of a company, with the overall limit capped at 10% in a company. And these investment limits are separate or over and above that for FIIs

and NRIs. How does it help by opening up the markets to one more category of investors? Indian policy makers reckon that a diverse set of investors in the local markets will help ensure more capital inflows, reduce market volatility and deepen the markets. It would also mean facilitating the entry of a set of relatively wealthy investors who could not access the Indian markets as there were regulatory restrictions on their entry. For a long time, the government and regulators kept foreign individual investors at bay owing to concerns relating to money laundering and due diligence. With restrictions in place, foreign individual investors had to either buy into Indian stocks through Participatory Notes, or PNs, or invest in India-focused offshore funds. By allowing a new set of investors, the government and regulators are hoping that it will lead to more inflows at a time when capital inflows have virtually dried up. On January 1, the government decided to allow Qualified Foreign Investors, or QFIs, to invest directly in the Indian equities market, a move which it hopes will help boost capital inflows.

Banking Concepts - External Commercial Borrowings

What is ECB? Under the ECB window, companies in India are allowed to borrow from overseas, under certain conditions, through different instruments. The Reserve Bank of India (RBI), in its master circular on external commercial borrowing and trade credits (January 2012), defined ECB as commercial loans in the form of bank loans, buyers credit, suppliers credit, securitized instruments (e.g. floating rate notes and fixed rate bonds, non-convertible, optionally convertible or partially convertible preference shares) availed of from non-resident lenders with a minimum average maturity of three years. ECB is allowed through both direct and approval routes. Under the direct route, companies in businesses, such as hotel, hospitals and software, can access the international market for raising debt up to a limit. Special economic zones and non-government organizations engaged in micro finance activities are also allowed to access the ECB window. Companies of industries that can apply through the direct route can also take the approval route if they need to borrow more than the allowed limit under the direct route. Why do companies take the ECB route? The biggest incentive for companies raising money from overseas is the interest rate arbitrage. For example, even if a company borrows in the international market at 300 basis points (one basis point is a hundredth of a percentage point) above Libor (London Interbank Offered Rate), it will be able to borrow at just about 4% for one year; the cost of borrowing for a similar tenor will cost close to 10% in the domestic market. The idea behind opening up this window for sectors such as infrastructure and healthcare was to promote investment in these by providing the option of lowcost capital. The downside risk It is not that ECB is always beneficial to a company and the country and does not

carry any risk. The borrower can be in trouble if the position is not hedged properly and the currency depreciates sharply, which will lead to increase in the companys liability. Also, at the macro level, higher level of borrowing from overseas may push the currency to appreciate, which makes exports uncompetitive in the international market. It is also argued that access to overseas market and cheaper credit is an advantage for bigger companies that can borrow abroad, while smaller companies have to deal with higher cost of capital in the domestic market. Finally, economists are worried that the dependence of the country on short-term debt flow, including ECB, is rising to fund the current account deficit and can have negative consequences

Banking Concepts: All About Stock Market Index

What is a stock market index? A stock market index is a number that measures the relative value of a group of stocks. As the value of stocks in this group change when they are traded, the value of the index changes as well. If an index goes up by 1%, then it means the total value of the securities which constitute the index has increased 1%. The most common indices such as the Sensex, Nifty or Dow Jones Industrial Average, are stock indices, but there are also indices for bonds, commodities, real estate, to name a few. Usually, the index value is expressed in points. For example, if the Sensex fell by 200 points, it means the Sensex was at 17,700 and closed at 17,500. In isolation the points don't mean anything you have to compare it with a value such as the previous day's number. Why are indices important? Indices provide a historical comparison of returns on money invested in the stock market against other forms of investments such as gold or debt. Many indices are used by financial services firms to benchmark the performance of their portfolios. Indices also serve as a yardstick for measuring the performance of fund managers and their respective funds. For gauging the performance of individual sectors or sectoral mutual funds, sector-specific indices can be used. If you invest in mutual funds or individual stocks, you always want to measure the performance of your investments against a relevant index. So, if your investments are always ahead of the index then your strategy is right. However, if your investment consistently lags behind the index then it might be time to come up with a new investment strategy. What does the index mean? A stock market index in reality reflects the mood of the market. A good stock index captures the movement of well-diversified and highly-liquid stocks. For a layman, it is the pulse rate of the economy. So, if the Nifty moves up today, it implies that the stock markets expect higher future returns from the stocks as compared to the expectations on the previous day and vice-versa. Indices are derived from individual stocks and it is quite possible that a few stocks account for a major portion of the index. Thus, fluctuation in prices of a few stocks may affect the overall index too, which will give an incomplete picture. How is an index constructed? One of the most popular methods of constructing a market index is the value-

weighted method. In this method, the initial market value of these stocks is assigned a base index value. An index is calculated with reference to a base period and a base index value. Say, we take the base year as 1993 and take 50 stocks which have a total market capitalization of Rs 1,000 crore. Let us assume that the base value on the first day is 100. Suppose the market capitalization on the next day of these 50 stocks increases to Rs 1,100 crore. To calculate the index, you take that day's market capitalization divide it by the base figure and multiply by 100 to get the new index. In this case it will be, 1100/1000 multiplied by 100, and so the index on the next day is 110 points. There are various indices constructed by BSE on sectors, such as metals, banks and so on.

Banking Concepts - Islamic Finance

What is Islamic finance? Islamic finance refers to a financial system that is consistent with the principles of Sharia, the sacred law of Islam. It is different from regular banking in that it prohibits earning of interest (or riba) through the business of lending. It also prohibits direct or indirect association with businesses involving alcohol, pork products, firearms and tobacco. It also does not allow speculation, betting and gambling. How does it work? Islamic finance takes the form of Islamic banking and Islamic insurance, also known as Takaful. Islamic banking is done in five ways: 1. Mudarabah, a profit-sharing agreement 2. Wadiah, a safe keeping arrangement 3. Musharakah, or a joint venture for a specific business 4. Murabahah, cost plus arrangement where goods are sold with a pre-determined margin of profit 5. Ijirah, a leasing arrangement Takaful is a form of mutual insurance based on partnership and collective sharing of risk by a group of individuals. How has Islamic banking progressed in recent years? Islamic banking is most prevalent in Malaysia. It is spreading rapidly in West Asia, where the population is predominantly Muslim. New global financial centres such as Singapore, Hong Kong, Geneva, Zurich and London have made changes in regulations to accommodate the Islamic finance industry, which is nearly a trillon dollar in size now. Indian regulations do not allow Islamic banking but the government is considering allowing it. What restricts the growth of Islamic finance? Most banks conducting Islamic operations have a panel of Muslim scholars called Sharia committee or Sharia board, which determines whether a product or practice complies with Islamic provisions. Also, the accounting is done differently for which there is an official standard-setting body known as the accounting and auditing organization for Islamic financial institutions. The strict code makes Islamic banking a very niche product.

Banking Concepts - Cheque Truncation System (CTS)

What is Cheque Truncation? It is one of the major innovations in cheque clearing after the Magnetic Ink Character Recognition (MICR) cheques introduced in the 80s. Cheque truncation is a system between clearing and settlement of cheques based on electronic images. This form of clearing does not involve any physical exchange of instrument. Bank customers would get their cheques realised faster as local cheques are cleared almost the same day as the cheque is presented to the clearing house, while intercity clearing happens the next day. Besides speedy clearing of cheques, banks also have additional advantage of reduced reconciliation and clearing frauds. It is also possible for banks to offer innovative products and services based on CTS. Why is it needed? Though MICR technology helped improve efficiency in cheque handling, clearing is not very speedy as cheques have to be physically transported all the way from the collecting branch of a bank to the drawee bank branch. The CTS is more advanced and more secure. Many countries have sought to address this issue with cheque truncation, in which the movement of the physical instruments is curtailed at a point in the clearing cycle, beyond which the process is completed, purely based only on the electronic data and images of the cheques. What has been the international experience in this regard? Denmark and Belgium are pioneers in CTS. They adopted complete cheque truncation system more than two decades ago. Sweden is the typical example for having achieved complete truncation where all the cheques can be presented and encashed at any branch; irrespective of the bank on which they are drawn. CTS also takes care of the needs of future electronic transactions. What has RBI and banks done? RBI has already enabled CTS to be fully functional in New Delhi. Soon even cheque clearing in Chennai will be settled through CTS. Banks have also taken steps to introduce appropriate technology to facilitate this system. What are the salient features of CTS? The physical cheque is truncated within the presenting bank itself. Settlement is generated on the basis of current MICR code line data. These images will be archived electronically and be preserved for eight years. A centralised agency per clearing location will act as an image warehouse for the banks.

Banking Concepts - Understanding IMPS

Dear Aspirants, On popular demand we are starting a Knowledge Series on various Banking and Economy Concepts which are making news these days...The first of the series discussed the BASEL III Concepts. We will now be discussing concept of IMPS viz. Inter-Bank Mobile Payment Service.

WHAT IS IMPS? IMPS offers an instant, 24X7, interbank electronic fund transfer service through mobile phones. There are two types of IMPS services: A personto-person (P2P) service and a personto-merchant (P2M) service. While the P2P service was launched some 18 months ago, P2M service was made available only recently. HOW TO START A P2P OR P2M SERVICE? Register your mobile number with your bank. Get a seven-digit Mobile Money Identifier, or MMID, number. This number is used to identify your bank and is linked to your account number. The combination of mobile number and MMID is unique for particular account, and the customer can link the same mobile number with multiple accounts in the same bank, and get separate MMID for each account. After this, get a Mobile Banking PIN, or M-PIN, which is a password to be used during transactions for authentication and security. Download mobile banking application or use the SMS facility provided by the bank to make a payment. HOW TO SEND OR RECEIVE FUNDS FOR P2P TRANSACTIONS? To send money, initiate an IMPS transaction using the mobile app or SMS. You need to enter the beneficiary's mobile number and MMID, amount and M-PIN for initiating a transaction. You will then receive a confirmation SMS for the transaction. To receive money, share your mobile number and MMID with the sender. The sender then initiates the above-mentioned steps. And you get an SMS confirmation for the money received. HOW DOES THE P2M SERVICE WORK? There are two ways in which P2M transactions can be performed: customerinitiated transactions (P2M PUSH) and merchantinitiated transactions (P2M PULL). P2M push transactions can be used for paying insurance premium, mobile /DTH recharge, credit card fee, utility bills, over-the-counter payments, and face-to-face payments such as pizza delivery, couriers and cabs. For P2M PUSH, a customer initiates transaction through the mobile banking app or SMS facility provided by the bank. For P2M PULL, the transaction is initiated through the website of the merchant. Plus you need to get a one-time password (OTP) from your bank. IS THERE A CASH LIMIT? Yes. Most banks cap the daily limit via IMPS app at Rs 50,000 per day. SBI limits transfers to Rs 1,000 per day through the SMS mode.

Banking Concepts - Understanding BASEL III

What are the Basel-III norms? These are rules written by the Bank of International Settlement's Committee on Banking Supervision (BCBS) whose mandate is to define the reform agenda for the global banking community as a whole. The new rule prescribes how to assess risks, and how much capital to set aside for banks in keeping with their risk profile. What are the changes which have been made to the way in which capital is defined? Going by the new rules, the predominant component of capital is common equity and retained earnings. The new rules restrict inclusion of items such as deferred tax

assets, mortgage-servicing rights and investments in financial institutions to no more than 15% of the common equity component. These rules aim to improve the quantity and quality of the capital. What do these new rules say? While the key capital ratio has been raised to 7% of risky assets, according to the new norms, Tier-I capital that includes common equity and perpetual preferred stock will be raised from 2-4.5% starting in phases from January 2013 to be completed by January 2015. In addition, banks will have to set aside another 2.5% as a contingency for future stress. Banks that fail to meet the buffer would be unable to pay dividends, though they will not be forced to raise cash. How different is the approach now? The new norms are based on renewed focus of central bankers on macro-prudential stability. The global financial crisis following the crisis in the US sub-prime market has prompted this change in approach. The previous set of guidelines, popularly known as Basel II focused on macro-prudential regulation. In other words, global regulators are now focusing on financial stability of the system as a whole rather than micro regulation of any individual bank. How will these norms impact Indian banks? According to RBI governor D Subbarao, Indian banks are not likely to be impacted by the new capital rules. As such, RBI does not expect our banking system to be significantly stretched in meeting the proposed new capital rules, both in terms of the overall capital requirement and the quality of capital. There may be some negative impact arising from shifting some deductions from Tier-I and Tier-II capital to common equity.

BANKING AWARENESS
1. RBI introduces Dollar Rupee Swap Facility Objective: To increase the flow of Credit to the export Sector to support incremental Pr-Shipment Credit in Foreign Currency (PCFC) by banks. NOTE: i. As per RBI, Banks will have the option to avail rupee refinance to the extent of the Swap with RBI under a special export credit refinance facility. The facility will be available to banks from Jan 21 till June 28, 2013 for a fixed tenor of three or six months. ii. The total limit for the banking system works out to $6.5 billion. Banks will be able to buy US dollars up to its eligible swap limit from RBI and at the same time sell the same amount of dollars forward as per the term of the Swap, at the prevailing markets rates for Swaps of similar tenor. At the end of the Swap term , the Bank will exchange the dollars against the Rupees with RBI. III. RBI will decide upon the number of the banks that can access the facility, the maximum amount of swap that RBI would contract with Banks and the maximum limit each bank can do on a particular day after taking into account market conditions. 2. Banks to ask RBI to permit interest on current accounts:

When central bank RBI will review its Monetary Policy, banks will ask the central bank to allow them to pay interest on current account deposits. NOTE: i. Currently, there is no interest given by banks on Current Accounts. Banks are of the view that providing interest on current account will generate more cash flow into the system which otherwise stays with the establishments. ii. Current Accounts make 9.85% of total deposit with banks. iii. Banks will also demand a cut in CRR as well in Repo Rate. 3. Corporation Bank Unveils RuPay Aadhar Card: i. Corporation Bank has launched Corp RuPay Aadhar Card which has a primary aim to provide easy and smooth banking services to the financially excluded and underprivileged sections of the society having Aadhar number. ii. Corporation Bank is an associate in the direct cash/ benefit transfer scheme launched by the Govt. which will enable direct transfer of various social security and benefits and subsidies straight into the accounts of the beneficiaries. 4. R.K. Dubey assumed charge as CMD of Canara Bank: i. R.K. Dubey has assumed charge as the Chairman and Managing Director of Canara Bank with effect from January 11. ii. Dubey has vast knowledge and multidimensional banking experience, spanning over three decades. His key areas of expertise include planning and budgeting, resource mobilization, credit, risk management, HR, IT and marketing. NOTE: He joined Punjab National Bank in 1977 as a management trainee and moved up to the ranks of a General Manager in 2008 and was appointed as Executive Director of Central Bank of India in 2010. 5. Allahabad Bank Signs MoU with CIMSME: i. Allahabad Bank has inked an MoU with the Chamber of Indian Micro, Small and Medium Enterprises (CIMSME) to pop its priority sector lending. ii. CIMSME communicates the interest of companies in MSME sector, with banks, financial institutions, concerned ministries and other organizations. About Agreement: As per the agreement, CIMSME would mobilize proposals from its members for consideration of the bank. Once the loan is approved, the organization would support the bank in follow up and recovery of dues and provide early warning signals. NOTE: The agreement will help speed up the process of disposal of loan proposals under the MSME and help the bank collect quality proposals and enhance credit flow to the sector. 6. Raj Kumar Goyal appointed as the new ED of Central Bank of India Raj Kumar Goyal appointed as the new Executive Director of Central Bank of India. Goyal replace R.K Dubey, who has taken over the control of Canara Bank as its chairman & Managing Director. 7. SBI unevils MobiCash Easy: SBI has unveiled its mobile wallet named State Bank MobiCash Easy which provides facility such as fund transfer, balance enquiry, mini statement, mobile topups and DTH recharge etc. How does it work: i. SBI is carrying out this plan with collaboration with a private service provider Oxigen which will do round the clock money transfer and other services. ii. To avail the facility one can contact Oxigen outlets by sending SMS to 9870888888.

iii. After registration one can deposit money at the outlet and get his account recharged. iv. The sum of money one deposit with the bank, the money can be used to send remittances to any bank account, transfer funds to other wallets issued by SBI, simply by messaging. NOTE: The facility is available to SBIs customers as well as non customers. ii. SBI customers have an additional option of topping up the wallet using SBIs mobile banking services. iii. The service is currently available in Delhi & Mumbai only. Aim: The service is aimed to migrant labourers who send money back home from SBI branches. It will also address the requirement of financial inclusion as it is facilities to extend financial services. 8. Urjit Patel appointed as the new Deputy Governor of RBI: Urjit Patel succeeded Subir Gokaran to become new deputy governor at the RBI. Patel is PHD in Economics from the Yale University and a non-resident senior fellow at the Brooking Institution, a US-based think tank. He will have the 2 year term. 9. RBI establishes Working group to review Banking Ombudsman Scheme: RBI has constituted a working group which will be headed by Suman Verma with an aim to review, update, and revise the Banking Ombudsman Scheme, 2006. As per the Annual Report of the Banking Ombudsman Scheme , 2011-12 released by the RBI: i. 72,889 number of customer complaints received in Banking Ombudsman office of the RBI in 2011-12. ii. Highest number of customer complaints received by Kanpur and New Delhi in 2011-12, followed by Chennai and Bhopal. iii. Largest no. (25%) of customer complaints were about failure to meet commitments/non observation of fair practices code. iv. 21 % related to (ATM/Debit/Card) complaints. v. 12 % related to deposit accounts. Types of complaints this scheme handles: It looks into a wide range of complaints pertaining to deficiency in banking services rendered by scheduled commercial banks, Scheduled Primary Urban Co-operative banks and the Regional Rural Banks. The Key areas of customer complaints covered under the scheme include: i. Credit card complaints ii. internet banking iii. deficiencies in providing the promised services by bank. iv. levying service charges without prior notice to the customer v. non adherence to Banking codes and Standards Board of Indias Code of Bank commitment to customers. NOTE: There are 27 grounds on which customer can approach Banking Ombudsman mentioning deficiency in banking services.

BANKING TERMS - II
1. Cheque: Cheque is a negotiable (which can be transferred to another person in exchange of money) instrument drawn on a specified banker ordering the banker to pay a certain sum of money to the drawer of cheque or another person. Cheque is

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always payable on demand. 2. Types of Cheque: i. Ante Dated Cheque: A cheque bearing a date prior to actual date of signing the cheque or opening of an account is called an ante dated cheque which is valid and can be paid till it become stale. For Ex. A cheque is dated 9th Jan 2013 for an account opened on January 25, 2013 can be paid. ii. Stale Cheque: If the validity of the cheque has already expired it is called stale cheque which cannot be paid. The normal maximum validity of cheque is 3 months earlier it was 6 months. If the cheque is presented after the 3 months, it will be returned. iii. Post Dated Cheque: The cheque which bears a date subsequent to the date on which it is drawn. For ex. A cheque drawn on 10th January, 2013 bears the date of 12th January, 2013. Crossing of Cheque: Crossings refers to drawing two parallel lines across the face of the cheque. A crossed cheque cannot be paid in cash across the counter, and is to be paid through a bank either by transfer, collection or clearing. A general crossing means that cheque can be paid through any bank and a special crossing means where the name of the Bank is indicated on the cheque can be paid only through the named bank. Dishonour of Cheque: Non payment of cheque by the paying banker with a return memo giving reasons for the non payment. Demand Draft: Demand draft is defined as an order to pay money drawn by one office of a bank upon another office of the same bank for a sum of money payable to order on demand. Cheque and Demand draft both are used for transfer of money. Difference b/w Cheque & DD A cheque can be bounce but D.D cannot be bounce as it is already paid. Current account: Current account with a bank can be opened generally for business purpose. There are no restrictions on withdrawals in this type of account. No interest is paid in this type of account. NEFT (National Electronic Fund Transfer): NEFT enables funds transfer from one bank to another but works a bit differently than RTGS. NEFT is slower than RTGS. The transfer is not direct and RBI acts as the service provider to transfer the money from one account to another. You can transfer any amount through NEFT, even a rupee. Need of NEFT: We can use this facility if we want to transfer funds online in a day or two. NEFT can make life easier for those who need to send money to their parents or children living in another city. It cuts the trouble of issuing a cheque or draft and posting it. It can also be done through internet banking. RTGS (Real time gross settlement ): RTGS system is a funds transfer systems where transfer of money or securities takes place from one bank to another on a "real time" and on "gross" basis. Settlement in "real time" means payment transaction is not subjected to any waiting period. The transactions are settled as soon as they are processed. "Gross settlement" means the transaction is settled on one to one basis without bunching or netting with any other transaction. Once processed, payments are final and irrevocable. Minimum & Maximum Limit of RTGS: 2 lakh and no upper limit.

The implementation of RTGS systems by Central Banks throughout the world is driven by the goal to minimize risk in high-value electronic payment settlement systems. In an RTGS system, transactions are settled across accounts held at a Central Bank on a continuous gross basis. Settlement is immediate, final and irrevocable (which cannot be changed or reversed). 9. CBS (Core Banking Solutions): Core Banking Solutions is the process, 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. Advantages for both to the customers & the banks: Customer: i. Transactions of business from any branch. ii. Lower incidence of errors. iii. Better funds management due to immediate availability of funds. Banks: i. Better customer service. ii. Availability of accurate data. iii. Increased business volume with better asset liability management and risk management. 10. BOND: Publicly traded long term debt securities issued by corporations and governments, whereby the issuer agrees to pay a fixed amount of interest over a specified period of time and to repay a fixed amount of principal maturity.

SOME IMPORTANT BANKING TERMS:

1. Balance of Trade: The value of a countrys exports minus the value of its imports. Unless specified as the balance of merchandise trade, it normally incorporates trade in services, including earnings (interest, dividends, etc.) on financial assets. Balanced Trade: When a balance of trade equal to zero. (exports imports = 0) 3. Balance of Payments: A list of all of a countrys international transactions for a given time period, usually one year. Payments into the country (receipts) are entered as positive numbers, called credits; Payments out of the country (payments) are entered as negative numbers called debits. A single numbers summarize all of a countrys international transactions: the balance of payments surplus. MFN (Most Favoured Nation): The principle, fundamental to the GATT, of treating imports from a country on the same basis as that given to the most favoured other nation. That is, and with some exceptions, every country gets the lowest tariff that any country gets, and reductions in tariffs to one country are provided also to others. Balanced Budget: A government budget surplus that is zero, thus with net tax revenue equaling expenditure. A balanced budget changes in policy or behavior is one which a component of the government budget, usually taxes, is adjusted as necessary to maintain a balanced budget. Balanced Growth of an Economy: Growth of an economy in which all aspects of it, especially factors of production, grow at the same rate. Bank Rate:

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The interest rate charges by a central bank to commercial banks for very short term loans. 8. Repo: Repo is Repurchase Agreement. An agreement to sell a security for a specified price and to buy it back later at another specified price. A repo is essentially a secured loan. 9. Repo Rate: Whenever the banks have any shortage of funds they can borrow it form RBI. Repo rate is the rate at which commercial banks borrows rupees from RBI. A reduction in the repo rate will help banks to get money at cheaper rate. When the repo rate increases borrowing form RBI becomes more expensive. Current Repo Rate is: 8 % 10. Reverse Repo Rate: Reverse Repo rate is the rate at which RBI borrows money from commercial banks. Banks are always happy to lend money to RBI since their money is in the safe hands with a good interest. An increase in reverse repo rate can cause the banks to transfer more funds to RBI due to this attractive interest rates. Current R Repo Rate: 7% 11. CRR (Cash Reverse Ratio): CRR is the amount of funds that the banks have to keep with RBI. If RBI increases CRR, the available amount with the banks comes down. RBI is using this method (increase of CRR), to drain out the excessive money from the banks. Current CRR 4.25% 12. SLR (Statutory Liquidity Ratio): SLR 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. Current SLR is 23% 13. Need of SLR: With the SLR, the RBI can ensure the solvency of a commercial banks. It is also helpful to control the expansion of the Bank credits. By changing SLR rates, RBI can increase or decrease bank credit expansion. Also through SLR, RBI compels the commercial banks to invest in the government securities like govt. bonds. 14. 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. 15. Fiscal Deficit: A deficit in the government budget of a country and represents the excess of expenditure over income. So this is the amount of borrowed funds require by the government to meet its expenditures completely. 16. Direct Tax: A direct tax is that which is paid directly by someone to taxing authority. Income tax and property tax are an examples of direct tax. They are not shifted to somebody else. 17. Indirect Tax: This type of tax is not paid by someone to the authorities and it is actually passed on to the other in the form of increased cost. They are levied on goods and services produced or purchased. Excise Tax, Sales Tax, Vat, Entertainment tax are indirect taxes.

18. NOSTRO Account: A Nostro account is maintained by an Indian Bank in the foreign countries. 19. VOSTRO Account: A Vostro account is maintained by a foreign bank in India with their corresponding bank. 20. SDR (Special Drawing Rights): SDR are new form of International reserve assets, created by the International Monetary Fund in 1967. The value of SDR is based on the portfolio of widely used countries and they are maintained as accounting entries and not as hard currency or physical assets like Gold.

BANKING CONCEPT: COMMERCIAL PAPER

1. What is Commercial Paper (CP)? Commercial Paper (CP) is an unsecured money market instrument issued in the form of a promissory note. 2. When Commercial Paper was introduced? Commercial Paper was introduced in India in 1990. 3. Why Commercial Paper was introduced? It was introduced in India in 1990 with a view to enabling highly rated corporate borrowers to diversify their sources of short-term borrowings and to provide an additional instrument to investors. Subsequently, primary dealers and all-India financial institutions were also permitted to issue CP to enable them to meet their short-term funding requirements for their operations. 4. Who can issue CP? Corporates, primary dealers (PDs) and the All-India Financial Institutions (FIs) are eligible to issue CP. 5. Whether all the corporates would automatically be eligible to issue CP? No. A corporate would be eligible to issue CP provided a. the tangible net worth of the company, as per the latest audited balance sheet, is not less than Rs. 4 crore b. company has been sanctioned working capital limit by bank/s or all-India financial institution/s; and c. the borrowal account of the company is classified as a Standard Asset by the financing bank/s/ institution/s. 6. Is there any rating requirement for issuance of CP? And if so, what is the rating requirement? Yes. All eligible participants shall obtain the credit rating for issuance of Commercial Paper either from Credit Rating Information Services of India Ltd. (CRISIL) or the Investment Information and Credit Rating Agency of India Ltd. (ICRA) or the Credit Analysis and Research Ltd. (CARE) or the FITCH Ratings India Pvt. Ltd. or such other credit rating agency (CRA) as may be specified by the Reserve Bank of India from time to time, for the purpose.

NOTE:- The minimum credit rating shall be A-2 [As per rating symbol and definition prescribed by Securities and Exchange Board of India (SEBI)]. The issuers shall ensure at the time of issuance of CP that the rating so obtained is current and has not fallen due for review. 7. What is the minimum and maximum period of maturity prescribed for CP? CP can be issued for maturities between a minimum of 7 days and a maximum of up to 1 year from the date of issue. However, the maturity date of the CP should not go beyond the date up to which the credit rating of the issuer is valid. 8. What is the limit up to which a CP can be issued? The aggregate amount of CP from an issuer shall be within the limit as approved by its Board of Directors or the quantum indicated by the Credit Rating Agency for the specified rating, whichever is lower. As regards FIs, they can issue CP within the overall umbrella limit prescribed in the Master Circular on Resource Raising Norms for FIs, issued by Department of Banking Operations and Development (DBOD) and updated from time-to-time. 9. In what denominations a CP that can be issued? CP can be issued in denominations of Rs.5 lakh or multiples thereof. 10. How long can the CP issue remain open? The total amount of CP proposed to be issued should be raised within a period of two weeks from the date on which the issuer opens the issue for subscription. 11. Whether CP can be issued on different dates by the same issuer? Yes. CP may be issued on a single date or in parts on different dates provided that in the latter case, each CP shall have the same maturity date. Further, every issue of CP, including renewal, shall be treated as a fresh issue. 12. Who can act as Issuing and Paying Agent (IPA)? Only a scheduled bank can act as an IPA for issuance of CP. 13. Who can invest in CP? Individuals, banking companies, other corporate bodies (registered or incorporated in India) and unincorporated bodies, Non-Resident Indians (NRIs) and Foreign Institutional Investors (FIIs) etc. can invest in CPs. However, investment by FIIs would be within the limits set for them by Securities and Exchange Board of India (SEBI) from time-to-time. 14. Whether CP can be held in Dematerilaised (Demat) form? Yes. CP can be issued either in the form of a promissory note (Schedule I given in the Master Circular-Guidelines for Issue of Commercial Paper dated July 1, 2011 and updated from time to-time) or in a dematerialised form through any of the depositories approved by and registered with SEBI. Banks, FIs and PDs can hold CP only in dematerialised form. 15. Whether CP is always issued at a discount? Yes. CP will be issued at a discount to face value as may be determined by the issuer.

16. Whether CP can be underwritten? No issuer shall have the issue of Commercial Paper underwritten or co-accepted. 17. Whether CPs are traded in the secondary market? Yes. CPs are actively traded in the Over The Counter (OTC) market. Such transactions, however, are to be reported on the Fixed Income Money Market and Derivatives Association of India (FIMMDA) reporting platform within 15 minutes of the trade for dissemination of trade information to market participation thereby ensuring market transparency. 18. What is the mode of redemption? Initially the investor in CP is required to pay only the discounted value of the CP by means of a crossed account payee cheque to the account of the issuer through IPA. On maturity of CP, (a) when the CP is held in physical form, the holder of the CP shall present the instrument for payment to the issuer through the IPA. (b) when the CP is held in demat form, the holder of the CP will have to get it redeemed through the depository and receive payment from the IPA. 19. Whether Stand by facility is required to be provided by the bankers/FIs for CP issue? CP being a `stand alone product, it would not be obligatory in any manner on the part of banks and FIs to provide stand-by facility to the issuers of CP. However, Banks and FIs have the flexibility to provide for a CP issue, credit enhancement by way of stand-by assistance/credit backstop facility, etc., based on their commercial judgement and as per terms prescribed by them. This will be subjected to prudential norms as applicable and subject to specific approval of the Board. 20. Whether non-bank entities/corporates can provide guarantee for credit enhancement of the CP issue? Yes. Non-bank entities including corporates can provide unconditional and irrevocable guarantee for credit enhancement for CP issue provided : a. the issuer fulfils the eligibility criteria prescribed for issuance of CP; b. the guarantor has a credit rating at least one notch higher than the issuer by an approved credit rating agency and c. the offer document for CP properly discloses: the networth of the guarantor company, the names of the companies to which the guarantor has issued similar guarantees, the extent of the guarantees offered by the guarantor company, and the conditions under which the guarantee will be invoked.

BANKING CONCEPTS : THE RTGS SYSTEM

Q1. What is RTGS System? Ans. The acronym 'RTGS' stands for Real Time Gross Settlement, which can be defined as the continuous (real-time) settlement of funds transfers individually on an order by order basis (without netting). 'Real Time' means the processing of instructions at the time they are received rather than at some later time.'Gross

Settlement' means the settlement of funds transfer instructions occurs individually (on an instruction by instruction basis). Considering that the funds settlement takes place in the books of the Reserve Bank of India, the payments are final and irrevocable. Q2. How RTGS is different from National Electronics Funds Transfer System (NEFT)? Ans. NEFT is an electronic fund transfer system that operates on a Deferred Net Settlement (DNS) basis which settles transactions in batches. In DNS, the settlement takes place with all transactions received till the particular cut-off time. These transactions are netted (payable and receivables) in NEFT whereas in RTGS the transactions are settled individually. For example, currently, NEFT operates in hourly batches - there are eleven settlements from 9 am to 7 pm on week days and five settlements from 9 am to 1 pm on Saturdays. Any transaction initiated after a designated settlement time would have to wait till the next designated settlement time Contrary to this, in the RTGS transactions are processed continuously throughout the RTGS business hours. Q3. Is there any minimum / maximum amount stipulation for RTGS transactions? Ans. The RTGS system is primarily meant for large value transactions. The minimum amount to be remitted through RTGS is ` 2 lakh. There is no upper ceiling for RTGS transactions. Q4. What is the time taken for effecting funds transfer from one account to another under RTGS? Ans. Under normal circumstances the beneficiary branches are expected to receive the funds in real time as soon as funds are transferred by the remitting bank. The beneficiary bank has to credit the beneficiary's account within two hours of receiving the funds transfer message. Q5. Would the remitting customer get back the money if it is not credited to the beneficiary's account? When? Ans. Yes.It is expected that the receiving bank will credit the account of the beneficiary instantly. If the money cannot be credited for any reason, the receiving bank would have to return the money to the remitting bank within 2 hours. Once the money is received back by the remitting bank, the original debit entry in the customer's account is reversed. Q6. Till what time RTGS service window is available? Ans. The RTGS service window for customer's transactions is available from 9.00 hours to 16.30 hours on week days and from 9.00 hours to 13.30 hours on Saturdays for settlement at the RBI end. However, the timings that the banks follow may vary depending on the customer timings of the bank branches. Q7. What about Processing Charges / Service Charges for RTGS transactions? Ans. With a view to rationalize the service charges levied by banks for offering funds transfer through RTGS system, a broad framework has been mandated as under: a) Inward transactions Free, no charge to be levied. b) Outward transactions Rs. 2 lakh to Rs. 5 lakh - not exceeding Rs. 30 per transaction. Above Rs. 5 lakh - not exceeding Rs. 55 per transaction. Q8. What is the essential information that the remitting customer would have to furnish to a bank for the remittance to be effected? Ans. The remitting customer has to furnish the following information to a bank for effecting a RTGS remittance:

1. Amount to be remitted 2. Remitting customers account number which is to be debited 3. Name of the beneficiary bank 4. Name of the beneficiary customer 5. Account number of the beneficiary customer 6. Sender to receiver information, if any 7. The IFSC Number of the receiving branch Q9. How would one know the IFSC code of the receiving branch? Ans. The beneficiary customer can obtain the IFSC code from his bank branch. The IFSC code is also available on the cheque leaf. This code number and bank branch details can be communicated by the beneficiary to the remitting customer. Q10. Do all bank branches in India provide RTGS service? Ans. No. All the bank branches in India are not RTGS enabled. As on September 29, 2011, there are more than 78,000 RTGS enabled bank branches.

BANKING CONCEPTS :THE NEFT SYSTEM

Q.1. What is NEFT? Ans: National Electronic Funds Transfer (NEFT) is a nation-wide payment system facilitating one-to-one funds transfer. Under this Scheme, individuals, firms and corporates can electronically transfer funds from any bank branch to any individual, firm or corporate having an account with any other bank branch in the country participating in the Scheme. Q.2. Are all bank branches in the country part of the NEFT funds transfer network? Ans: For being part of the NEFT funds transfer network, a bank branch has to be NEFTenabled. Q.3. Who can transfer funds using NEFT? Ans: Individuals, firms or corporates maintaining accounts with a bank branch can transfer funds using NEFT. Even such individuals who do not have a bank account (walk-in customers) can also deposit cash at the NEFT-enabled branches with instructions to transfer funds using NEFT. However, such cash remittances will be restricted to a maximum of Rs.50,000/- per transaction. Such customers have to furnish full details including complete address, telephone number, etc. NEFT, thus, facilitates originators or remitters to initiate funds transfer transactions even without having a bank account. Q.4. Who can receive funds through the NEFT system? Ans: Individuals, firms or corporates maintaining accounts with a bank branch can receive funds through the NEFT system. It is, therefore, necessary for the beneficiary to have an account with the NEFT enabled destination bank branch in the country. The NEFT system also facilitates one-way cross-border transfer of funds from India to Nepal. This is known as the Indo-Nepal Remittance Facility Scheme. A remitter can transfer funds from any of the NEFT-enabled branches in to Nepal, irrespective of whether the beneficiary in Nepal maintains an account with a bank branch in Nepal or not. The beneficiary would receive funds in Nepalese Rupees. Q.5. Is there any limit on the amount that could be transferred using NEFT? Ans: No. There is no limit either minimum or maximum on the amount of funds that could be transferred using NEFT. However, maximum amount per transaction is limited to Rs.50,000/- for cash-based remittances and remittances to Nepal. Q.6. Whether the system is centre specific or has any geographical restriction? Ans: No. There is no restriction of centres or of any geographical area within the country. The NEFT system takes advantage of the core banking system in banks. Accordingly, the

settlement of funds between originating and receiving banks takes places centrally at Mumbai, whereas the branches participating in NEFT can be located anywhere across the length and breadth of the country. Q.7. What are the operating hours of NEFT? Ans : Presently, NEFT operates in hourly batches - there are eleven settlements from 9 am to 7 pm on week days (Monday through Friday) and five settlements from 9 am to 1 pm on Saturdays. Q.8. How does the NEFT system operate? Step-1 : An individual / firm / corporate intending to originate transfer of funds through NEFT has to fill an application form providing details of the beneficiary (like name of the beneficiary, name of the bank branch where the beneficiary has an account, IFSC of the beneficiary bank branch, account type and account number) and the amount to be remitted. The application form will be available at the originating bank branch. The remitter authorizes his/her bank branch to debit his account and remit the specified amount to the beneficiary. Customers enjoying net banking facility offered by their bankers can also initiate the funds transfer request online. Some banks offer the NEFT facility even through the ATMs. Walk-in customers will, however, have to give their contact details (complete address and telephone number, etc.) to the branch. This will help the branch to refund the money to the customer in case credit could not be afforded to the beneficiarys bank account or the transaction is rejected / returned for any reason. Step-2 : The originating bank branch prepares a message and sends the message to its pooling centre (also called the NEFT Service Centre). Step-3 : The pooling centre forwards the message to the NEFT Clearing Centre (operated by National Clearing Cell, Reserve Bank of India, Mumbai) to be included for the next available batch. Step-4 : The Clearing Centre sorts the funds transfer transactions destination bank-wise and prepares accounting entries to receive funds from the originating banks (debit) and give the funds to the destination banks(credit). Thereafter, bank-wise remittance messages are forwarded to the destination banks through their pooling centre (NEFT Service Centre). Step-5 : The destination banks receive the inward remittance messages from the Clearing Centre and pass on the credit to the beneficiary customers accounts. Q.9. What is IFSC? Ans : IFSC or Indian Financial System Code is an alpha-numeric code that uniquely identifies a bank-branch participating in the NEFT system. This is an 11 digit code with the first 4 alpha characters representing the bank, and the last 6 characters representing the branch. The 5th character is 0 (zero). IFSC is used by the NEFT system to identify the originating / destination banks / branches and also to route the messages appropriately to the concerned banks / branches. Q.10. What are the processing or service charges for NEFT transactions? Ans: The structure of charges that can be levied on the customer for NEFT is given below: a) Inward transactions at destination bank branches (for credit to beneficiary accounts) Free, no charges to be levied from beneficiaries b) Outward transactions at originating bank branches (charges for the remitter) - For transactions up to Rs 1 lakh not exceeding Rs 5 (+ Service Tax) - For transactions above Rs 1 lakh and up to Rs 2 lakhs not exceeding Rs 15 (+ Service Tax) - For transactions above Rs 2 lakhs not exceeding Rs 25 (+ Service Tax) c) Charges applicable for transferring funds from India to Nepal using the NEFT system (under the Indo-Nepal Remittance Facility Scheme). With effect from 1st July 2011, originating banks are required to pay a nominal charge of 25

paise each per transaction to the clearing house as well as destination bank as service charge. However, these charges cannot be passed on to the customers by the banks. Q.11. Can remittances be sent abroad using NEFT? Ans: No. However, a facility is available to send outward remittances to Nepal under the Indo-Nepal Remittance Facility Scheme. Q.12. What are the other transactions that could be initiated using NEFT? Ans: Besides personal funds transfer, the NEFT system can also be used for a variety of transaction including payment of credit card dues to the card issuing banks. It is necessary to quote the IFSC of the beneficiary card issuing bank to initiate the bill payment transactions using NEFT. Q.13. Can a transaction be originated to draw (receive) funds from another account? Ans : No. NEFT is a credit-push system i.e., transactions can be originated only to transfer / remit funds to a beneficiary. Q.14. What are the benefits of using NEFT? Ans: NEFT offers many advantages over the other modes of funds transfer: The remitter need not send the physical cheque or Demand Draft to the beneficiary. The beneficiary need not visit his / her bank for depositing the paper instruments. The beneficiary need not be apprehensive of loss / theft of physical instruments or the likelihood of fraudulent encashment thereof. Cost effective. Credit confirmation of the remittances sent by SMS or email. Remitter can initiate the remittances from his home / place of work using the internet banking also. Near real time transfer of the funds to the beneficiary account in a secure manner.

IMPORTANT ABBREVIATIONS-2 (BANKING) for SBI/IBPS

2. 3. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 1. GDR Global Depository Receipts ALM- Asset Liability Management ARC Asset Reconstruction Companies 4. FINO- Financial Inclusion Network Operation CTT- Commodities Transaction Tax CRM- Customer Relationship Management KYC-Know Your Customer SLR-Statutory Liquidity Ratio CRR-Cash Reserve Ratio MSF-Marginal Standing Facility REPO-Repurchase Option NBFC-Non Banking Finance Companies OSMOS- Off-Site Monitoring & Surveillance IFSC- Indian Financial System Code BSE-Bombay Stock Exchange NSE-National Stock Exchange SWIFT- Society for Worldwide Interbank Financial Telecommunication FSLRC Financial Sector Legislative Reforms Commission LAF Liquidity Adjustment Facility DRT Debt Recovery Tribunals

Tagline of Banks
1. Indias International Bank- Bank of Baroda

2. 3. 5. 6. 7. 8.

With you all the way- SBI Relationship beyond banking Bank of India 4. We Understand Your World Indeed- HDFC Bank Trusted Family Bank- Dena Bank The Name You Can Bank Upon Punjab National Bank The worlds local bank HSBC One family one bank Bank of Maharashtra 9. A friend you can bank on- Vijaya Bank 10. A Tradition of Trust- Allahabad Bank

Important Banking Terms (IBPS 2012)

Given below are some of the important banking terms, important from the point of view of IBPS PO 2012 exam as well as IBPS Interview Preparation FII - Is a form of International Financial Institute investor registered outside India , investing in India . FDI - Is a direct form of Investment by an Individual or a Corporation registered outside India , investing in India. BOP - It is the difference between value of Exports and Imports of all goods and services during a particular period of Time. BOT - The difference between value of merchandise (or visible) imports or exports of any country during any particular period of time. Current Account - A form of Bank account which is maintained by Business men and traders which allows them to carry out transactions allowing them overdraft facilities and unlimited transactions . However they doesn't enjoy interest on deposits. Capital Account Convertibility- It is the feature of a nation's financial regime that centers on the ability to conduct transactions of local financial assets into foreign financial assets freely and at market determined exchange rates. GDP - Aggregate value of all Final goods and services Produced within the domestic territory of a country during any particular period of Time. GNP - Aggregate value of all Final goods and services Produced within the domestic territory of a country during any particular period of Time less income earned by residents of India living abroad. GDP of India $1.53 trillion (nominal 2010) $4.06 trillion (PPP 2010)

Private Equity - Equity capital that is not quoted on a public exchange. Private equity consists of investors and funds that make investments directly into private companies .