A to Z in Banking - Facts on Indian Economy for Competitive Exams

8/11/2019 A to Z in Banking - Facts on Indian Economy for Competitive Exams

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RBI CURRENT RATES

POLICY RATES

Ban k Rate - 9.00% w.e.f. 15th Jul 2013

Repo Rate - 8.00% w.e.f. 28th Jan 2014

Rev Repo Rate-7.00% w.e.f. 28th Jan 2014

M.S. Faci li ty - 9.00% w.e.f. 28th Jan 2014

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CRR - 4.00% w.e.f. 9th Feb 2013

SLR - 22.50% w.e.f. 14th June 2014

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Economic Terms (Indian Economy)

1) Which major port of India does not possess a natural harbour?

Chennai Port does not posses a natural harbor because it has neither a rugged sea cost norany river makes a mouth here.

2) What is Hydrogen Corpus Fund?

The Ministry of Pe troleum & Natural Gas, Government of India has set up a Hydrogen Corpus Fundon the use of hydrogen as an auto fuel. The Indian Oil Industry has to work synergistically and inclose coordination with reputed technological institutions to make headway in this frontier area.With this object in mind, the Ministry has set up a Hydrogen Corpus Fund of Rs. 100 crore withcontribution from Oil PSUs/OIDB as follows

1. OIDB Rs. 40 crore

2. ONGC, IOC, GAIL Rs. 16 crore each

3. HPCL, BPCL - Rs. 6 crore each.

3) Which refinery was set up as per the provisions of Assam Acord?

Numaligarh Refinery was set-up as a grass-root refinery at Numaligarh in the District ofGolaghat (Assam)infulfillment of the commitment made byGovernment of India in the historic

Assam Accord, signed on 15th August, 1985 f or providing the required thrust towards industrialand economic development of Assam. It started operat ion in 2000.

4) What was the basic difference between the Economic Policy of

Gandhi and Nehru?

The policy of the Congress Government led by Nehru was based upon the fact that there must beindustrial development at all costs. Nehru wanted a country with Modern Large ScaleIndustries, a Large Army, a Strong Navy and Air Force and a socialist development in the countrywith touch of capitalism.

Gandhi, who was in favor of autonomous villages where Panchayats should perform the legislative,executive and Judicial functions, did not find any place in the government. The objection of Gandhiof developing large cities was rejected but Panchayati Raj with modifications was accepted later.

A basic difference between Gandhi & Nehrus economic philosophies was thatGandhi wanted villageas an independent unit, whileNehru wanted it a subordinate unit to a higher organization.Gandhiwanteda cottage based economy, Nehru dreamt of major Industries in India.

5) What is FDI limit in Agriculture ?

In India 100% FDI is permissible via automatic routein following sub sectors of Agricultureand Animal Husbandry:

Sub sectors:

Floriculture, Horticulture, Development of Seeds, Animal Husbandry, Pisciculture, Aquaculture andCultivation of Vegetables & Mushrooms under controlled conditions and services related to agro andallied sectors.

Apart from the above FDI is not allowed in any other agricultural sector/activity.

Companies dealing with Transgenic Seeds:

For companies dealing with development of transgenic seeds/vegetables, the following conditionsapply:

1. When dealing with genetically modified seeds or planting material the company shall

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comply with safety requirements in accordance with laws enacted under theEnvironment (Protection) Act on the genetically modified organisms.

2. Any import of genetically modified materials if required shall be subject to theconditions laid down vide Notifications issued under Foreign Trade (Development andRegulation) Act, 1992.

3. The company shall comply with any other Law, Regulation or Policy governinggenetically modified material in force from time to time.

4. Undertaking of business activities involving the use of genetically engineered cellsand material shall be subject to the receipt of approvals from Genetic Engineering

Approval Committee (GEAC) and Review Committee on Genetic Manipulation(RCGM).

5. Import of materials shall be in accordance with National Seeds Policy.

Meaning of Under controlled conditions

Floriculture, Horticulture, Cultivation of vegetables and Mushrooms

Cultivation under controlled conditions for the categories of Floriculture, Horticulture,Cultivation of vegetables and Mushrooms is the practice of cultivation wherein rainfall,temperature, solar radiation, air humidity and culture medium are controlled artificially.Control in these parameters may be effected through protected cultivation under greenhouses, net houses, poly houses or any other improved infrastructure facilities wheremicroclimatic conditions are regulated anthropogenically.

Development of Seeds

Development of seeds will be considered to be under controlled conditions when seedfarms/laboratories use tissue culture or any other micro-propagation techniques fordevelopment and multiplication of seeds/planting material. Seed development in the caseof anthuriums, orchids and other ornamental crops in green houses/net houses/polyhouses is also be included in this category.

Animal Husbandry

In case of Animal Husbandry, scope of the term under controlled conditions includes

Rearing of animals under intensive farming systems with stall-feeding. Intensive farmingsystem will require climate systems (ventilation, temperature/humidity management),health care and nutrition, herd registering/pedigree recording, use of machinery, wastemanagement systems.

Poultry:

Poultry breeding farms and hatcheries where microclimate is controlled through advancedtechnologies like incubators, ventilation systems etc.

Pisciculture & Aquaculture:

In the case of pisciculture and aquaculture, under controlled conditions includes

Aquariums

Hatcheries where eggs are artificially fertilized and fry are hatched and incubated in an enclosed

environment with artificial climate control.

6) What is a Turnkey project?

A contract under which a firm agrees to fully design, construct and equip a manufacturing orbusiness or facility and turn the project over to the purchaser when it is ready for operation for aremuneration. Mostly used in International business.

7) What is a Cash and Carry store?

They differ from the regular retail chains. the C & C stores target professional customers ratherthan end-consumers. The concept involves self-service and bulk buying and serves registeredcustomers such as hotels, caterers, traders and other business professionals. They prevent themiddlemen.

8) What is Code Sharing?

The Code sharing is a common term in aviation industry which means that a seat is purchased onone airline (for example King Fisher) but is actually operated by a cooperating airline under adifferent f light number or code (for example British Airways). The term code here refe rs to the 2-character IATA airline designator code and flight number, which is used to identify the flights.

9) What are types of NBFCs?

Previously there were 3 ty pes of NBFCs classified by reserve bank of India:

1. Asset Finance Company (AFC)

2. Investment Company (IC)

3. Loan Company (LC)

Which is 4th Category?


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NBFCs engaged predominantly in the infrastructure financing represented to the RBI that thereshould be a separate category of infrastructure financing NBFCs in view of the critical roleplayed by them in providing credit to the infrastructure sector. Accordingly the RBI declared inits Second Quarter Review of the Monetary Policy for the year 2009-10 as f ollows:

To introduce a fourth category of NBFCs as infrastructure NBFCs, defined as entities whichhold minimum of 75 per cent of their total assets for f inancing infrastructure projects.

So, apart from the three categories viz., Asset Finance Companies, Loan companies andInvestment Companies, a fourth category of NBFCs as Infrastructure FinanceCompanies(IFCs) has been introduced.

10) What is the major difference between an NBFC and a Bank?

Unlike the Banks, they cannot accept demand deposits, they are not part of the payment andsettlement sys tem and they cannot issue cheques drawn on them. The facility of deposit insuranceby Deposit insurance and Credit Guarantee Corporation is not available for NBFCs.

11) What is an NBFC?

NBFC or Non Banking Financial Companies is a company in India, which is registered under theCompanies Act, 1956, and which provides banking services without meeting the legaldefinition of a bank. A NBFC is incorporated under the Companies Act, 1956 and desirous ofcommencing business of non-banking financial institution as defined under Section 45 I(a) of the RBI

Act, 1934.

What are the Businesses NBFC do?

The NBFCs do the business of loans and advances, acquisition of shares, stock, bonds, debentures,securities issued by Government. They also deal in other securities of like marketable nature,leasing, hire-purchase, insurance business, chit business. They are no in agriculture activity,industrial activity, sale/purchase/construction of immovable property.

All NBFCs are not entitled to accept public deposits . Only those NBFCs holding a validCertificate of Registration with authorization to accept Public Deposits can accept/hold publicdeposits.

NBFCs authorized to accept/hold public deposits besides having minimum stipulated Net OwnedFund (NOF) should also comply with the Directions such as investing part of the funds in liquidassets, maintain reserves, rating etc. issued by the Bank.

12) What are Bull Market, Bear Market and Chicken Market ?

The term Chicken market in stock markets refers to one of the stock market trends. We mostlyknow about the bearish markets which represent the downward trend of the indices and Bullishmarkets where there is an upward trend in the index. In chicken market there is no significantmovement of the stock market index. However, the investors who are not much risk loveres arealso called Chickens in stock markets.

13) What is Corporate Hedging?

Hedging literally means reducing exposure to risk.

The word is used in share markets, commodity markets and currency markets where the prices arelikely to fluctuate.

A contract to SELL a commodity or a currency over the period of time at a particular price leaves theseller in a open position and exposed to price fluctuations. However, this exposure is covered bythe act of BUYING a Futures Contract.

A perfect hedge is basically a no risk no gainprecaution.

In Corporate hedging, the corporate treasury officials try to save a firm from the exposure to theforeign exchange risk, maximize forex income and minimize costs. The minimizing of transactionalrisks is the main centerpiece of a Corporate Hedging Policy.

The Reserve Bank of India had issued the first guidelines on Corporate Hedging in 2005. The marketdetermined exchange rates in the country have made the rupee more volatile against the majorcurrencies. The strategy is useful for exim traders, who have to face the unpredictability in thecurrency movement.

14) What are Small Cap, mid cap and large cap shares ?

Cap refers to Capital. With the size of the Capital we can classify the companies and measure theirsize. Big/large caps are companies which have a market cap between 10-200 billion dollars. Mid capsrange from 2 billion to 10 billion dollars. The small caps are young and new companies.

15) What is the difference in Green Field Projects and Brownfield

Projects ?

The Greenfield project means that a work which is not following a prior work. In infrastructure theprojects on the unused lands where there is no need to remodel or demolish an existing structureare called Green Field Projects. The projects which are modified or upgraded are called brownfieldprojects.

16) What are Demand Liabilities and Time Liabilities?


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There are mainly two types of liabilities on any bank:Demand Liabilities:The liabilities which bank have to pay on demand. Current deposits, demandliabilities portion of savings bank deposits, margins held against letters of credit/guarantees,balances in overdue fixed deposits, cash cert ificates and cumulative/recurring deposits, outstandingTelegraphic Transfers (TTs), Mail Transfer (MTs), Demand Drafts (DDs), unclaimed deposits, creditbalances in the Cash Credit account and deposits held as security for advances which are payableon demand come under Demand Liabilities.Time Liabilities:The liabilities which bank have to pay af ter specific time period. Fixed deposits,cash certificates, cumulative and recurring deposits, time liabilities portion of savings bank deposits,staff security deposits, margin held against letters of credit if not payable on demand, deposits heldas securities for advances which are not payable on demand and Gold Deposits come under TimeLiabilities.

17) What is REER Model in Currency Markets?

There is difference between the exchange rate of a currency and the real value of a currency. ANominal Effective Exchange Rate (NEER) is weighted with the inverse of the asymptotic tradeweights. A Real Effective Exchange Rate (REER) adjusts NEER by appropriate foreign price leveland deflates by the home country price level. Thus REER model is more useful in determining thereal value of a currency.

18) What is Alpha Factor in Financial Markets?

Alpha Factor is the concept which basically measures the inherent volatility of a particular share.For example, a share which has an Alpha Factor for example 1.5 is slated to rise in price by 50% ina year on its inherent strength such as growth in earnings per share , regardless of inherentstrength such as growth in earning per share regardless of the market behavior.

19) What is FASAL in Agriculture?

In 1988, Government of India started a project Crop Acreage and Production Estimation (CAPE)to collect the statistics of Agricultural Output. But to forecast of Crops at sowing stage requiresweather data and information of economic factors. So Forecasting Agricultural output using Space,

Agro meteorological and Land based observations (FASAL) was designed. The main aim was tocollect Monsoon data through remote sensing, economic data and monitoring of crops whengrowing.

The programme is sponsored by Ministry of Agriculture. A team of ISRO/Department of Space,State Remote Sensing Applications Centers, State Agricultural Universities and many otherinstitutions are working on this project.

20) Which are Ultra Mega Power Projects (UMPPs) located in Indian

States?

These projects are based on the vision Power for All by the end of The Eleventh Five Year Plan.The UMPPs each with the capacity of 4000 MW or above are being developed.The Ministry of Power with the Central Electricity Authority and Power Finance Corporation Ltd.initiated coal based UMPPs in India.

Till now these four UMPPs have been awarded.1. Coastal Gujarat Power Limited in Mundra awarded to M/s Tata Power Limited2. Sasan Power Limited in Sasan (MP) awarded to M/s Reliance Power Limited3. Coastal Andhra Power Limited in Krishnapatnam awarded to M/s Reliance Power Limited4. Jharkhand Integrated Power Limited in Tilaiya awarded to M/s Reliance Power Limited

Apart from this SPVs (Special Purpose Vehicles) have been incorporated for another eight UMPPs.

21) What are Fiscal Policy, Monetary Policy and Macroeconomic

Policy?

Fiscal Policy:

All the policies taken by the Government to control the economy of the country are called FiscalPolicies. The two main instrument of fiscal policy are government expenditure and taxation. How

government decides taxes, collect them and spend them comes under the fiscal policy. In broadlevel all the action done by government to maintain the economy is collectively called fiscal policy.

Monetary Policy:

The actions taken by Reserve Bank of India, which is the monetary authority, to control theeconomy is collectively called Monetary Policy. Time to time RBI makes changes in the various rateslike CRR, Repo Rate, Reverse Repo Rate, SLR etc. to maintain the supply of money that is liquidityin the system.

Microeconomic Policy

How the individual firms, markets, the households are using resources and making the countryproductive is being measured in Microeconomic policy. In these policies the centre of attraction is onvery small level of the economy as it will collectively help the country to become more competitive.

22) What is Fringe Benefit Tax?

This tax is imposed on the f ringe benefits provided by the company to their employee. Here fringebenefit means non wage compensation which are given to employees by their company. This dutywas initiated from 1 April 2005 under the Finance Act 1995.


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23) What is difference between Excise Duty & Custom Duty?

Excise Duty :According to Central Excise act 1944 and the Central Excise Tariff Act 1985, everymanufacturer of the goods in the country has to pay Excise duty. Most of the products attract 16%excise duty But in case of some products it more than that.Custom Duty:The custom duty in India is regulated by Customs Act of 1962. This duty is imposedon the imported and exported goods in the country. This duty is one of the most important dutybecause it hampers illegal import and export of goods

24) What is Service Tax?

Service tax is tax paid on the services provided in the country. According to Finance Act 1994, all

service provider of the country ex cept in the Jammu and Kashmir have to pay service tax. This taxcomes under Indirect Tax. Currently 10% tax is surcharged as serv ice tax.

25) What is Security Transaction Tax?

Security Transaction Tax (STT) is levied on all the transactions done on the stock exchange. Thistax is levied on purchase of equity, sale of equity, derivatives, equity oriented funds and equityoriented Mutual Funds. Current rate of this tax is 0.075% on equity.

26) What are Corporate Tax & Capital Gain Tax?

Corporate Tax:

This tax is imposed on the profits of companies or organizations. It is also depend on the profitsshared to the shareholders. Currently 33.9 % corporate tax is levied on the companies. But inDirect Tax Code, which is proposed to be implemented from 1 April 2012, it is proposed to be at30%.

Capital Gain Tax

This tax is levied on the sale of capital assets/equities. The Gain here means the difference ofprice of asset/share when purchased and when sold. The tax is levied on that gain. For the Capital

Assets the time limit is minimum three years but in the context of equities it is minimum one year.

27) What is Direct Taxes & Indirect Taxes?

Direct Taxes:

As the name suggests Direct tax means the tax which is directly paid to the government byindividuals and the companies.

Ex: Corporate Tax, Personal Income Tax, Securities Transaction Tax, Banking Cash TransactionTax, and the Fringe Benefit Tax

Indirect Taxes:

As the name suggests Indirect Taxes are those taxes which are paid indirectly to government bythe individuals or the companies.

Ex: Sales Tax, Service Tax, Custom and Excise Duties, VAT and Anti-Dumping Duties

28) What is Green Revolution?

Green Revolution is the term first used by former USAID (United States Agency for InternationalDevelopment) director William Gaud. Green Revolution is series of reaserch, development andtechnology transfers by countries. This happened between 1943 and 1970. The father of GreenRevolution was Late Mr. Norman Borlaug. But in India Mr. M S Swaminathan are called the father ofGreen Revolution because of his lot of contribution in the field of food security.

In Green Revolution high yielding varieties of grains, mass distribution of hybrid seeds, syntheticfertilizers, pesticides were given to farmers. And with this a lot was spent on creating irrigationinfrastructure.

29) What is difference betwee n CECA and CEPA?

CEPA stands for Comprehensive Economic Partnership Agreement and CECA stands forComprehensive Economic Cooperation Agreement. Recently India signed a CEPA with Japan andCECA with Malaysia. India had also signed a Comprehensive Economic Partnership Agreement(CEPA) with South Korea. With Singapore signed CECA. The terms that make difference are

Cooperation and partnership. Both these terms are synonymous with each other but the majortechnical difference between a CECA and CEPA is that CECA involves only tariffreduction/elimination in a phased manner on listed / all items except the negative

list and tariff rate quota (TRQ) items , CEPA also covers the trade in services and

investment, and other areas of economic partnership. So CEPA is a wider term that CECAand has the widest coverage.

Please note that usually CECA is signed first with a country and after that negotiations may startfor a CEPA. For example, India-Sri Lanka Free Trade Agreement (CECA) was signed in December,1998 and came into operation since March, 2000. India completed the tariff elimination programmein March 2003, Sri Lanka scheduled to reach zero duty by 2008. After that the two countries havesince initiated negotiations in August 2004 on comprehensive Economic Partnership Agreement(CEPA) which covers trade in serv ices and investment.


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30) What is Free Look Period?

The Free look period means that customer has 15 days from the date of a ULIP (Unit LinkedInsurance Product) or Insurance policys receipt to review his or her purchase decision. With theprovision of the free Look period a policyholder gets 15 days time to go through the policydocuments, understand how the policy is going to work and convince himself that he needs such apolicy before deciding to commit funds every year over the plan tenure. This provision has theobjective to make the process of buying insurance transparent, easy and fulfilling for the customerand curb the misselling by the agents. Usually a customer buys a policy and later rea lizes that it wasinappropriate and was sold to him / her focusing on the companys / agents profits / commissionsrather than her / his own requirements. This leads him/ her to stop paying premiums and let thepolicy lapse or decides to surrender the policy. This earlier than expected drop out is also not good

for the health of the company and the Free Look Period facility makes it more likely that a customerremains with the company for a longer term. Within 15 days a customer may return the policy andget the premium back after deducting the stamp duty charges and the cost of a medical check-upetc.

31) What is the meaning of Share INDEX Increasing or Decreasing by

1% ?

The share market index measures the relative values of the group of stocks of which it is composedof. When the value of stocks in this group changes when they are traded, the value of the indextoo changed. If an index goes up by 1%, the total value of the securities which constitute theindex too goes up by 1%. When the index increases from 17000 to 17170, neither 17000 nor17170 mean anything in isolation. They need to be compared with each other.

The most popular method of constructing a market index is the value weighted method in which the

initial market value of the stocks is assigned as a base index value. For example, lets take baseyear 2000 (imaginary) and take 30 stocks, which have a market capitalization of Rs. 1000 crore. Weassume that the base value was Rs. 100 on the first day. If the market capitalization of the 30shares for which base value is 100 on the first day increases to Rs. 11,00 Crore on the next day,the new index would be

(1100/1000)*100=110

So, 110 will be the index rate on the next day. Neither 110, nor 100 have a meaning until andunless they are compared with each other.

In other words an index provides an historical comparison of returns on money invested. It providesthe comparison of the returns in the stock market against other forms of investments such as goldor debt. Indices are used by financial services firms to benchmark the performance of theirportfolios and to serve as a yardstick for measuring the performance of fund managers and theirrespective funds.

32) What is the issue of insufficient grains stock facilities of FCI?

The Economic Survey 2009-10 had suggested grain should be released in small batches to a largenumber of traders at prices significantly below the market price, but sufficiently above theprocurement price. If the selling price is close to the procurement price, traders might just buy f romthe FCI and sell it back to the FCI, pushing grain off the market so that retail prices would stayhigh. (ET, Editorial March 15, 2010).

The issue of not sufficient grains stock facilities of Food Corporation of India was raised byEconomic Times in March 2010. The newspaper said that 10 million tonnes (MT) of wheat, half of theFood Corporation of Indias (FCI) stock of the grain, is stored in the open and runs the risk ofgetting spoilt. By April 2010, the government was expected to procure another 24 MT of a recordestimated 82 MT wheat output that would start arriving in the markets in April. Mountains of grainwould be built and rot, even as food prices stay stubbornly up. The article in ET had urged thegovernment to liquidate the 10 MT of wheat stored in the open, before f resh procurement begins.The newspaper further endorsed the recommendation as the buffer stocks of cereals are way toolarge for wheat, five times the norm, and f or rice, at 24 MT, twice the requirement.

33) Which country has indigenously produced the Tiba car?

Tiba is an Iranian car made by Saipa Car Manufacturing Company. The car was originally namedMiniator. The automobile plan of Saipa Car Manufacturing Company was inaugurated in May 2010by Iranian President Mahmoud Ahmadinejad at the Kashan city. The cost involved is around $ 400Million. This new domestic automobile plant will produce over 150,000 homemade cars every yearand provide employment to over 23,000 people.

34) In which part of India Slash and Burn agriculture is practiced?

Slash and burn practice involves the cutting and burning of forests or woodlands to create f ields foragriculture or pasture. It is a part of the shifting cultivation and is practiced in Hilly Regions of thecountry particularly in North East Hills. In world, 200-500 million people practice the slash and burnfarming and most of them are in tropical rain forests.

35) What is payment in due course?


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Section 10 of the Negotiable Instruments Act 1881 deals with payment in due course. Payment isdue course means payment made in good faith and without negligence in accordance with theapparent tenor of the instrument. This also includes that payment is made to the person inpossession of the instrument. The payment must be made in money only.

36) Which are highest producer states of Cotton, Jute & Potato?

Gujarat is largest producer of Cotton, West Bengal is of Jute and Uttar Pradesh. Following is the listof largest producer states of v arious commodities in India.

Food Grains

Rice: West Bengal, Andhra Pradesh, Uttar Pradesh

Wheat: Uttar Pradesh, Punjab, Haryana

Maize : Karnataka , Andhra Pradesh, Bihar

Total Coarse Cereals: Maharashtra , Rajasthan, Karnataka

Total Pulses : Madhya Pradesh , Maharashtra, Uttar Pradesh

Total Food grains : Uttar Pradesh, Punjab, Andhra Pradesh

Oil Seeds:

Groundnut: Gujarat, Tamil Nadu , Andhra PradeshRapeseed & Mustard: Rajasthan, Utta r Pradesh, HaryanaSoyabean : Madhya Pradesh, Maharashtra, RajasthanSunflower Karnataka, Andhra Pradesh , MaharashtraTotal Oilseeds : Madhya Pradesh, Rajasthan, Maharashtra

Cash Crops:Sugarcane: Uttar Pradesh, Maharashtra, Tamil NaduCotton : Gujarat , Maharashtra , PunjabJute & Mesta : West Bengal, Bihar, AssamPotato: Uttar Pradesh, West Bengal, PunjabOnion: Gujarat, Maharashtra, Karnataka

37) What is Amortization?

To amortize means to pay off a debt by putting aside money regularly for a period of time. . Weread sometimes, as Capital cost is amortizable over a period of 10 years. In other words,amortization is a schedule of payments in context with a debt such as personal loan or home loanand fixed over a period. The amortization schedule is the table, which gives details of theperiodic principal and interest payments on a loan and the amount outstanding at

any point of time.It also shows the gradual decrease of the loan balance until it reaches zero.

38) Who are the brand ambassadors of Canara Bank and Central bank

of India?

Venkatesh Prasad had been associated with Canara Bank in past as its Brand ambassador. Howeverlater in 2007, Canara Bank appointed O&M for its image change. The new logo for Canara Bank twoentwined triangles in blue (for stability, scale and depth), and bright yellow (for optimism, warmthand energy) was designed by the WPP owned Ray & Keshavan. The current advertisement themeof Canara bank is we change for the ones we love. The creative and heart touching ads havebeen produced relying on models.Ms Perizaad Zorabian Irani has been associated as Brand Ambassador of the central Bak of India.However,recently , the Central bank of India has released two animated cartoon TV commercials

The Race & The Trap.

39) What are dematerialization and Re materialization?

A process by which paper certificates of an investor are taken back by the company (or Registrar)

and equivalent number of securities is credited in electronic holdings of the same investor is calleddematerialization. This is to avoid problems of the paper certificates such as mutilation of sharecertificates, forged certificates etc. Depository discharges the function of providing the paperlesselectronic or dematerialized security transactions. A bank is called depository where the securitiesare held in electronic form. Re-materialization is the conversion of electronic holding to papers byprinting of new share certificates.

40) What is Baroda Sun?

The logo of the bank of Baroda is called by the Banks people as Baroda Sun. This new logo withdual B letters holds the rays of rising Sun. The logo is inspired by the Sun as single most powerfulsource of light and energy and indicates the Banks vision to become one stop reliable partner of thecustomers. The single color vermillion palette has been selected as a symbol of hope and energy.The Baroda Sun also indicates universal symbol of Dynamism and Optimism. The rays indicate thediversification of Business and network of Branches.

41) What is a NBFC?


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NBFC or Non Banking Financial Companies is a company in India, which is registered under theCompanies Act, 1956, and which provides banking services without meeting the legal definition of abank.

The NBFCs do the business of loans and advances, acquisition of shares, stock, bonds, debentures,securities issued by Government. They also deal in other securities of like marketable nature,leasing, hire-purchase, insurance business, chit business. They are no in agriculture activity,industrial activity, sale/purchase/construction of immovable property.

Unlike the Banks,they cannot accept demand deposits, they are not part of the payment andsettlement sys tem and they cannot issue cheques drawn on them. The facility of deposit insuranceby Deposit insurance and Credit Guarantee Corporation is not available for NBFCs.

There are 3 types of NBFCs classified by reserve bank of India:(i) Asset Finance Company (AFC)(ii) Investment Company (IC)(iii) Loan Company (LC)

A NBFC is incorporated under the Companies Act, 1956 and desirous of commencing business ofnon-banking financial institution as defined under Section 45 I(a) of the RBI Act, 1934 should havea minimum net owned fund of Rs. 2 Crores.

All NBFCs are not entitled to accept public deposits. Only those NBFCs holding a valid Certificate ofRegistration with authorization to accept Public Deposits can accept/hold public deposits. NBFCsauthorized to accept/hold public deposits besides having minimum stipulated Net Owned Fund (NOF)should also comply with the Directions such as investing part of the funds in liquid assets, maintainreserves, rating etc. issued by the Bank. RBI has a well documented FAQ page dedicated to NBFC.

42) What is the difference between Cheque Truncation and an

Electronic Cheque?

Cheque truncation and electric cheques are two different things. In cheque truncation thephysical movement of a paper cheque issued stops and electronic flow begins while theelectronic cheque isissued electronically and no paper is involved.

In cheque truncation, a t some point in the flow of the cheque, the physical cheque is replaced withan electronic image of the cheque and that image moves further. The processing is done on thebasis of this truncated cheque and physical cheque is stored. MICR data is very useful in checktruncation.

The electronic cheques are issued in electronic form with digital signatures / biometric signatures /encrypted data.

The negotiable Instruments (Amendment) Act of 2002 gives constitutional validity to the electroniccheques.

43) What is a Currency Chest?

India is the seventh-largest country by geographical area, the second-most populous country withover 1.18 billion people. The Reserve Bank of India is responsible for issuing coins and notes to thepublic on demand and for maintaining the quality of the notes issued. Several agencies are involved

in the printing and distribution of the currency (notes and coins of various denominations). Some ofthem are Govt. mint, RBI press, Government press and banks designated as currency chests.

In order to satisfactorily discharge this duty without recourse, the RBI maintains currency chests ofits own at treasuries and branches of the banks at all important centres. The currency notes printedat the press flow to the RBI offices and from the RBI office to these currency chests before theyreach the public. The same is for coins which are minted in 4 mints then taken to 4 mint related RBIoffices from where they are taken to currency chests to distribute in the market.In summary: Distribution of notes and coins throughout the country is done through designatedbank branches, called chests. Chest is a receptacle in a commercial bank to store notes and coins onbehalf of the Reserve Bank. Deposit into chest leads to credit of the commercial banks account andwithdrawal, debit.

The Functions of the Currency Chests are:

1. The major functions of the currency chests are:2. To meet currency requirement of public3. To withdraw unfit notes4. To provide exchange facility from one denomination to another5. To make payment requirement of the Government6. To ex change the mutilated notes7. To avoid f requent movement of cash

Apart f rom having its own chests a t certain places, RBI also has arrangements with other bankswhich are entrusted with custody of the currency notes and coins for the same purpose.

44) What is Cross Selling?

Cross selling means off ering new products and services to the ex isting customers. In Banking crossselling is to of fer new banking services to the existing customers of the bank. The purpose of thecross selling is twofold. One is to expand banking operations and another is to reduce the cost ofoperations. For example: a bank sells a loan product such as a credit card, home loan, personal loanetc. to a deposit customer or vice versa.

The cost of adding up a new customer to a bank is more than serving the existing customer withnew products and this reduces the per person cost of running for a bank. However, please not its


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transaction that matters in cross selling. The value building, relationship building and winning acustomer loyalty for bank does matter more when it promotes cross selling.Its worth mention that in 2004, RBI had issued its guidelines to banks in context with the crossselling. The RBI said that banks should not share customer data with its affiliates and subsidiariesfor cross-selling purposes.

RBI had constituted a committee on Procedures and Performances Audit on Public Services whichwas headed by S.S. Tarapore. The committee observed that the information collected from thecustomer is being used for cross-selling of services of various products by banks, their subsidiariesand affiliates.

The banks collect a database of the confidential and personal information about the customers tofulfill the Know Your customer requirements as directed by the RBI. This information was used by

banks for retailing loan instruments such as aggressively selling credit cards and mortgage loans tothe customers.

In this context RBI said that while this information which is collected as per KYC norms when acustomers opens an account, using the same information for cross selling purpose is a breach ofcustomer confidentiality obligations.

45) What are RBIs qualitative and quantitative instruments of credit

control?

The government through the reserve bank of India employs the monetary policy as an instrumentof achieving the objectives of general economic policy. The main objectives of the monetary policyare as f ollows:

1. Regulation of monetary growth and maintenance of price stability

2. Ensuring adequate expansion of credit

3. Assist economic growth

4. Encourage flow of credit into priority and neglected sectors

5. Strengthening of the banking system of the country

The quantitative or general measures influence the tota l volume of the credit while the qualitativemeasures influence the selective or particular use of credit.Reserve Bank of India has the power to influence the volume of credit created by banks in India.The banking regulation act 1949 says that the Reserve Bank of India can ask any particular bank(or even all the banks i.e. banking system of the country) to not to lend to particular groups/persons.

Apart from this RBI is armed with weapons to control the money market in India. For example eachbank has to get a license from RBI to do banking business in India and this license is always subjectto cancellation by RBI provided the bank does not fulfill the requirements stipulated by RBI. Eachscheduled bank needs to send a weekly report to RBI which shows its assets and liabilities.

The quantitative measures of credit control are :

1. Bank Rate Policy:The bank rate is the Off icial interest rate at which RBI rediscounts the

approved bills held by commercial banks. For controlling the credit, inflation and money

supply, RBI will increase the Bank Rate.

2. Open Market Operations:OMO The Open market Operations refer to direct sales and

purchase of securities and bills in the open market by Reserve bank of India. The aim is to

control volume of credit.

3. Cash Reserve Ratio: Cash reserve ratio refers to that portion of total deposits in

commercial Bank which it has to keep with RBI as cash reserves.

4. Statutory Liquidity Ratio:It refers to that portion of deposits with the banks which it

has to keep with itself as liquid assets(Gold, approved govt. securities etc. ) .

If RBI wishes to control credit and discourage credit it would increase CRR & SLR.

Qualitative measures:

Qualitative credit is used by the RBI for selective purposes. Some of them are

1. Margin requirements:This refers to difference between the securities offered and and

amount borrowed by the banks.

2. Consumer Credit Regulation:This refers to issuing rules regarding down payments and

maximum maturities of installment credit for purchase of goods.

3. Guidelines:RBI issues oral, written statements, appeals, guidelines, warnings etc. to the

banks.

4. Rationing of credit:The RBI controls the Credit granted / allocated by commercial banks.

5. Moral Suasion:psychological means and informal means of selective credit control.

6. Direct Action:This step is taken by the RBI against banks that dont fulfill conditions and

requirements. RBI may refuse to rediscount their papers or may give excess credits or

charge a penal rate of interest over and above the Bank rate, for credit demanded beyong

a limit.


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http://atozinbanking.com/index.php/study-mater ial-for-bank-po-exams/136-facts-on- indian-economy-for-competi tive-exams 10

46) What is the difference between Gold Exchange Traded Fund & Gold

Fund?

Gold exchange Trade funds (ETFs) invest in Gold bars and hold them on a investors behalf. On theother hand in Gold Funds, the fund manager buys stocks and shares of those companies thatproduce Gold.. Gold ETFs were introduced in India in 2007 and yet to gain popularity. The prices ofthe Gold ETFs are closely related to Bullion rates; however the same may or may not be applicableto Gold Funds. Thus, the prices of the Gold ETF and Gold Fund vary. Apart f rom this, the domesticmovement of Gold affect s the returns on Gold ETF, while in case of the Gold Funds; InternationalStock Price performance plays a very important role.

47) Is a Bank Account required for a Credit Card?

No. Its not mandatory for banks to issue credit cards for only those who have accounts with them.In fact, issuing unsolicited credit cards by banks was a big problem for customers in past.

RBI had issued its first comprehensive guidelines on November 21, 2005, as a sequel to anannouncement made by RBI in Annual Policy Statement 2004-05. The guidelines were based uponthe findings of t he Working Group on Regulatory Mechanism for Cards, constituted by RBI in 2004-05.

In summary, the Reserve Bank of India has directed the banks & Non Banking Finance Companies(NFBCs) to have a well documented policy and folow Fair Practices Code for credit card operations.RBI asked the banks to assess the credit limits of the customers on the basis of self declaration andcredit information. Apart from this RBI asked also mandated that the card issuing banks will besolely responsible for fulfilling all the KYC requirements. The banks were clearly directed to fulfill theKYC requirements even in case where DSAs & DMAs (Direct Sales Agents and Direct Marketing

Agents) solicited the business on their behalf.Prior to this, In March 2005, the IBA (Indian banking Association) had released a Fair PracticesCode for credit card operations.

In an effort to make the credit card business more transparent RBI directed the card issuers toquote annualized percentage rates (APRs) on card products and late payment charges and numberof days.

The banks were given a time of 60 days for complaint redressal.RBI said in this policy that, if an unsolicited card is issued and activated without the consent of thecustomer (recipient) and the customer is billed for the same, the bank shall not only reverse the

charges but also pay penalty.

Further to the above developments, In July 2008, RBI took strict measures to the unsolicited cardsissue. The RBI announced that the person in whose name the card is issued can also approach theBanking Ombudsman who would determine the amount of compensation payable by the bank to therecipient of the unsolicited credit card as per the provisions of the Banking Ombudsman Scheme,2006 i.e. for loss of complainants time, expenses incurred, harassment and mental anguishsuffered by him.

From August 1, 2009, RBI took one more step to increase online security measures. It directed thebanks to make additional authentication mandatory for credit/debit card online transactions. Nowthe banks have to issue a PIN code, called as Verified by Visa or MasterCard Secure Code, which willbe known only to the customers. Customers have to use this second verification PIN code, apartfrom the Card Verification Value Number (CVV), for making purchases.

Banks now issue credit cards to only their customers as a custom and to fulfill the RBI requirementsand KYC requirements.

48) What is the exact current status of IDBI & IDBI Ltd?

Industrial Development Bank of India (IDBI) was set in July 1964 (under IndustrialDevelopment bank of India act 1964) as wholly owned subsidiary of Reserve Bank ofIndia and to function as apex institution in the field of industrial development banking.

The basic functions of IDBI were to provide financial assistance to industrial enterprises and

promote institutions engaged in industrial development.

IDBI remained as a subsidiary bank of RBI till in 1976. In 1976 (February 16, 1976) , it was

separated f rom Reserve bank of India and the 100% ownership was transferred to Government of

India.

After this arrangement IDBI became Indias principal financial institution for coordinating the

activities of institutions engaged in financing, promoting and developing industry in the country.

In 1995 IDBIs domestic IPO came which reduced the Govt. of Indias stake to 72%. The post-

capital restructuring lead to 58.1 % share of Government of India.

The current stake of Government of India in the bank is around 53%.

The Industrial Development Bank (Transfer of undertaking and repeal) Act 2003 was passed by the

Parliament of India to form it a company under the companies act 1956 and repeal the IDBI act

1964.

Subsequently IBDI got the certificate of commencement of business on 2 September 2004.


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This transformed IDBI to IBDI Ltd. on October 1, 2004. Subsequently IDBI became a company

under the companies act 1956.

IDBI Bank Ltd was hitherto subsidiary of IDBI Ltd which got the status of a scheduled bank under

the RBI act 1934 on October 11, 2004. It got merged with its parent company IDBI Ltd on April 2,

2005 (however appointed date of merger was fixed October 1, 2004)

On 3 October 2006, United Western Bank Ltd (UWB), a private sector bank merged with IDBI. In

2006 IDBI forayed into Life Insurance Business jointly with Federal Bank and Fortis Insurance

International N.V. Fortis.

IDBI Gilts Ltd was incorporated as a wholly subsidiary of IDBI Bank in 2006.

Thus we can understand that af ter October 2004 merger of the ers twhile IDBI Bank with its parentcompany IDBI Ltd, has now become a universal Bank. Today IDBI Ltd is one of the Indias largest

Banks. RBI categorized IDBI as an other public sector bank. Currently IDBI is fourth Largest Bankin India.

49) What is the significance of schedule A, B, C, D enterprises with

respect to central public sector enterprises?

The most popular categories of Central Public Sector Enterprises are Navratna, Miniratna (CategoryI & II) CPSEs based upon the powers vested in their Board of Directors. A new category,Maharatna has been recently added to this group. Other groupings are based upon profit making,loss making & sick units etc.

Apart from this, the Department of Public Enterprises (DPE) formulates policy guidelines on theBoard structure of Public Enterprises and advises on the shape and size of organizational structureof CPSEs. The public enterprises are categorized in four Schedules namely A, B, C and Dbased on various quantitative, qualitative and other factors.

Quantitative factors:Quantitative factors include the investment, capital employed, net sales,

profit before tax, number of employees, number of units and value added per employee.

Qualitative Factors: national importance, complexities of problems, level of technology,

prospects for expansion and diversification of activities and competition from other sectors,

strategic importance of the corporation etc.

How Schedules affect?

The pay scalesof Chief Executives and full time Functional Directors in CPSEs are determined asper the schedule of the concerned enterprise. For example the Chief Executives of SchedulesCPSEs is Rs. 80,000-1, 25000. The new pay scales start from Rs. 12,600-32,500 (for E-0 grade).These are revised rates. The revised pay scales a re based upon the recommendations of 2nd PayRevision Committee.

What is Second Pay Revision Committee (2nd PRC)?

Second Pay Revision Committee also known as 2nd PRC was headed by Justice M.Jagannadha Rao, a retired Supreme Court judge. The Government of India had constituted thiscommittee via resolution (30.11.06) to recommend revision of scales of pay of Board level andbelow Board level executives (including non-unionized supervisors) of CPSEs following Industrial

Dearness Allowance (IDA) pattern scales of pay w.e. f. 01.01.2007.

Based upon recommendation of this committee , the government had issued order on 26.11.08 and09.02.09.

How Many Companies have been categorized?

As on 31. 3.2009, there were 247 CPSEs in the country. Out of the 247 CPSEs, there are 58Schedule A, 70 CPSEs in Schedule B, 46 CPSEs in Schedule C and 6 CPSEs Schedule D. The restare covered under the uncategorized category.

50) What is Business Facilitation Council?

The Business Facilities Council (BFC) has been established in December 2009 by StateGovernment of Delhi as a single point clearence to encourage entrepreneurs intersted in settingup units in Delhi.

The idea is to facilitate the entrepreneurs in obtaining clearances from variousdepartments/agencies for setting up of enterprises in a time bound manner and relieve

entrepreneurs from the difficulties of running to various departments for clearences. The objectiveof BFC would be to ensure grant of all approvals required from various departments through a timebound, simplified and single point contact system.

Following are some of the features:

1. Single point contact

2. Common application form fulfilling the requirements of all departments dealing with

statutory and non-statutory clearances

3. Facility of filling up of the common application form by the entrepreneurs through officers of

the BFC

4. Prime role in suggesting policy changes and procedural reforms to remove bottlenecks in

setting up of industrial unit

5. Strive to improve the processing mechanism of applications


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51) What is New Pension Scheme?

New pension System was introduced by the Government of India in 2004, when it was mademandatory for newly recruited employees (except personnel of armed forces). The scheme cameinto operation on April 1, 2008. In August 2008, a decision was taken by the government to of ferNPS to all citizens of India. The Pension Fund Regulatory & Development Authority (PFRDA) openedthe scheme to all citizens w.e. f. May 1, 2009.

What is the Product?

New pension Scheme is a pure definedcontribution product.A subscriber can choose the fundoption as well as the fund manager. The subscriber gets a retirement corpus when he/ she turns60.

Permanent Retirement Account Number: (PRAN)

The PFRDA has appointed 22 points of presence (PoPs) which are mainly banks and 6 Pension Fundmanagers. (Interim arrangements have been made till appointments) . The branches of PoPs arecalled PoP Service providers. These PoP service providers act as initial points of contact and alsocollection point, for all citizens who need to get a Permanent Retirement Account Number or PRAN.This number is needed under the NPS

Who is eligible?

Resident & Non Resident Indians between the age of 18-55 years are eligible for new pensionScheme.

Where to open a account?

An account can be opened & operated from anywhere in India. If a subscriber changes a job &

location, the pension fund manager can also be changed. To open an account one can approachany branch of bank designated by PFRDA.

Contribution:

The contribution amount is

1. Minimum Rs. 600 per contribut ion

2. Minimum per year Rs. 6000

3. Minimum number of contributions per year 4

Withdrawal:

The subscriber gets the retirement corpus when he/ she turn 60, which is the normal age ofretirement. On turning 60, he/she has to annuitize (convert a sum of money into a series ofpayments) at least 40% of pension wealth. The remaining 60% can be withdrawn in lump sum.

Tier I and tier II Accounts:

There are two separate accounts in New Pension Scheme.

Tier I

The tier I account is the basic account in which withdrawals are not allowed till the age of 60.

Employees contribution is @ 10% of pay +DA+DP and involves matching contribution by

Govt.Payment only at the time of ex it or after 60 years.

Tier II

In the tier II account from which withdrawals are allowed. 20 % of the sum is withdrawnin lump sum and 80% will have to be annuitized. There is no contribution by thegovernment.

Investment Approaches:

One can invest in NPS in two ways:Active Choice:The subscriber can allocate his / her f unds across 3 f und options:

1. Equity (E) : 50% of portfolio is allowed.

2. Fixed Income instruments other than government securities (C)

3. Government Securities (G)

Auto Choice:

In this approach, the funds of a subscriber automatically begin with a maximum equity exposure of50% till the age of 35 and then regularly tapers off to 10% by age of 55. This is aimed to providethe customer stability as he / she approaches the maturity age.

Tax Savings:

The contributions to New pension scheme get benefit under section 80C. At the time of withdrawl,the lump sum would be taxable as per the slab of the subscriber.

Latest Decision: Swavalamban Scheme

A new initiative, Swavalamban, will be implemented f or those who join the NPS with a minimumcontribution of Rs 1000 and a maximum contribution of Rs 12000 per annum during financial year2010-11, wherein the government will contribute Rs 1000 per year to each NPS account opened in2010-11.


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52) What is GST?

The goods and services tax (GST) is a comprehensive value-added tax (VAT) levy on manufacture,sale and consumption of goods and services at a national level.This makes India a single, unifiedmarket and expected to create a stronger economy.

53) What is the difference between Current Account and Savings

Account?

The differences of the Current Accounts and Savings Accounts have been discussed as below:Basic Objective:

The basic objective of a Savings Bank Account is to enable the customer save his / her liquid assetsand also earn money on that sav ing. The Savings banks Accounts are preferred by individuals andprovide liquidity for private and small businesses sometimes. On the other hand the current accountis basically a transactional accountwhich is preferred by business people. The basic objectiveof the current accounts is to provide flexible payment methods to the business people and entities.These payment methods include special arrangements such a overdraft facility, accommodation ofstanding orders, direct debits, offse t mortgage facility.

Transactions:

Usually sav ing accounts have low transactions while current accounts have large transactions.

Handling:

Savings accounts involve personal handling of assets, while current accounts are aimed to make theaccount holder free of personal handling of liquid funds. The current account facility helps thebusiness to run without hurdles due to non availability of funds and short term deficits.

Interest Income:

Usually the current accounts dont earn interests. The saving accounts earn 3.5% interest atpresent in India. The interest is compounded half yearly. (Please note that in case of death of thecurrent account holder his legal heirs are paid interest at the rates applicable to Savings bank

deposit from the date of death till the date of settlement)Overdrafts:

As discussed above saving accounts have no overdraft facility, current accounts have. The moneycan be borrowed for short term and to be paid back with interest.

Minimum Balance:

Usually saving accounts need a minimum balance in the banks to keep the account active (howeverNo Frill accounts require either nil or low minimum balance to be maintained). In current accountsthere are no minimum balance requirements.

54) What is the difference between a Cheque and a Demand

Draft?

Cheque has been defined in Negotiable Instruments Act 1881 section 6. A cheque is a bill ofexchange drawn on a specified bank and not expressed to be payable otherwise than on demand.

A demand draft has been defined by Negotiable Instruments Act 1881 in section 85. A demanddraft is an order to pay money drawn by one office of a bank upon another office of t he same bank

bank for a sum of money payable to order on demand.Following are some more differences:

1. A cheque can be made payable to bearer but a Demand Draft cannot.

2. A demand draft can be cleared in a specified branch of the issuer bank

3. A cheque can get dishonored but Demand draft is always honored.

4. An issuer party of the cheque is liable to the cheque and not backed by a Bank Guarantee,

A demand draft is backed by a bank guarantee

55) What does the SBI logo signify?

SBI and associate banks that fall under SBI, t ogether constitute the State Bank Group. All use thesame logo of a blue keyhole and all the associates use the State Bank of name followed by theregional headquarters name. This blue keyhole signifies security.

56) What is the difference between a Crossed cheque and A/C Payee

cheque?

Before we understand the difference between the Crossed chequeandA/C Payee cheque, itis necessary to understand the concept of Endorsements. The section 15 of the NegotiableInstruments Act 1881 defines endorsing as signing on the f ace or an instrument for the purpose ofnegotiating a negotiable instrument (such as Cheque).

A person who signs the cheque and transfers the instrument isan endorserand in whose favor itis transferred is endorsee. The endorsee acquires a right to negotiate the instrument to anyonehe / she likes. By making an endorsement the endorser promises that in case of dishonor, he / sheprovides a guarantee to compensate the holder. C rossing a cheque by making two parallel lines withor without such words as ___& company is general crossing. Section 126 of the NI Act says thatthis is a direction to the bank to not to pay the cheque across the counter.

This crossed cheque is no more a bearer cheque where anyone can negotiate and get paymentacross the counter.

In case of a crossed cheque, the payee is free to make further endorsements. For example ,Ayesha receives a check from Rohan which has been crossed,Ayesha can get this payment in her


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account only and not across the counter. But in this case Ayesha is free to endorse the

cheque in favor of Suresh and further Suresh is free to endorse the instrument in

favor of Mukesh and so onThis means that crossing a cheque does not put restrictions onendorsements. In case the cheque gets dishonored, Mukesh can sue Suresh and Suresh can sue

Ayesha and Ayesh can sue Rohan.

Now lets discuss A/C Payee cheques. The NI act does not ta lk about the A/C payee crossing. Thereis no definition of A/C payee crossing in the NI act and it is a child of banking practice. Making acheque A/C Payee is a result of custom, use and practice and is now accepted legally.But, the A/C payee cheque cannot be further endorsed. This means that if the cheque inthe above example which is in favor of Ayesha bears A/C Payee, payment can be collectedin Ayeshas account only.The paying bank makes sure that amount is being credited to theaccount of the payee only.

57) With which country India shares longest border?

India has 15,106.7 km of land border and a coastline of 7,516.6 km including island territories. Thelength of our land borders with neighbouring countries is as under :Name of the country:Length of the border (in km)

Bangladesh:4,096.7

China:3,488

Pakistan:3,323

Nepal:1,751

Myanmar:1,643

Bhutan: 699

Afghanistan: 106

Total :15,106.7

58) Which bank was established to for rehabilitating repatriates from Sri

Lanka & Myanmar?

Government of India had launched REPCO BANK Ltd. in 1969 with main objective of rehabilitatingrepatriates from Burma and Sri Lanka. Repco Bank Ltd, whose operation is confined in South India isgoverned by the Ministry of Home Affa irs, Govt. of India. Its shareholders are Govt. of India, Stategovernments of Tamil Nadu, Andhra Pradesh, Karnataka, Kerala & individual Repatriate members.The bank operates in Tamil Nadu, Andhra Pradesh, Karnataka, Kerala, and the Union Territory ofPondicherry.

59) What is the difference between debit card & credit card?

Both Debit card and credit card and other cards like smart card are plastic money. Plastic moneyrefers to plastic cards which play the role of medium of payment. In credit cards the customer(credit card holder) can avail the facility of buying goods and services a t a Point of Sale (POS) frommerchant establishments (provided such arrangements exist) without making a prior payment. Thiscredit facility is provided by the issuer bank to the customer for a specific period.

However, in the case of debit cards, the customer (debit card holder) can buy goods and servicesby automatically debiting the payments to card holders banks account.

In case of a credit card, the card holder uses credit line by making drawings within a specified orsanctioned limit and makes payment on receiving the bill along with the applicable charges andinterests.In case of debit cards, the card holder uses the balance in his / her own bank account and paymentis made immediately on purchases.

60) How are Rupee-Dollar rates determined?

The value of a currency against another is based on demand. Greater demand makes a currencystronger and vice versa . When there is a good inflow of dollars in India, the v alue of dollar will godown and value of Rupees will go up, because Rupees will be required to convert all dollars.However, there are many determinants of the exchange rates of a particular currency againstanother currency. If these determinant factors are f avorable to a country, there is a possibility thatvalue of that countrys currency will rise.

Some of these determinants are :

International Parity Conditions

Balance of Payments

Economic Policies of a government (Fiscal Policy, Budget, Investment policy and Foreign Trade

Policies) and a countrys central Bank (Cost of money, interest rates, monetary policy)

General macroeconomic conditions of the country

Inflation levels and trends

Balance of Trade

Market Psychology & perception

General political stability

There are two types of exchange rate regimes. One is fixed exchange rate regime where theexchange rates are decided by the government. Another is floating exchange rate regime (anexample is China, but now the Chinese leaders say that it will switch to Floating Rate regime verysoon). In most countries Floating Exchange Rate regime prevails. In f loating exchange rate regime,the combined forces of the market and the above determinants decide the exchange rate.


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Thailand & Malaysia:

India has a separa te Free Trade Agreement with Thailand and Malaysia other than the India-ASEANFTA.

CEPA with Singapore and South Korea:

India and South Korea had signed a comprehensive economic partnership agreement in August2009. This was the second CEPA signed by India, the other being with Singapore. This was alsoIndias first bilateral trade agreement with an OECD country.

PTA:

Apart from the above, India has PTA (Preferential Trade Agreements with) Chile, Afghanistan,Bhutan, Nepal & MERCOSUR

SAFTA:The Agreement on South Asian Free Trade Area (SAFTA) came into force from 1st January, 2006.India, Pakistan and Sri Lanka are categorized as Non-Least Developed Contracting States (NLDCS)and Bangladesh, Bhutan, Maldives and Nepal are categorized as Least Developed ContractingStates (LDCS). Afghanistan which became the eighth member of SAARC during the 14th SAARCSummit held on 3-4 April 2007 in New Delhi is due to become a party to the SAFTA Agreement as anLDC member.

64) What is a micro, small and medium enterprise?

Two classes of enterprise manufacturing and service are recognized by the MSME Act of 2006.The MSMED Act 2006 provides the legal framework for recognizing the concept of enterprise,facilitating its development and enhancing its competitiveness. These can be defined as micro, smalland medium depending upon their investment levels. A manufacturing enterprise is termed as microsmall and medium based upon its investment in plant and machinery up to Rs. 25 Lakh for Micro,Rs. 25 lakh to Rs. 5 crore for small and Rs. 5 crore to Rs. 10 crore for Medium Enterprise. For aservice enterprise, an investment in equipment up to Rs. 10 Lakh qualifies as micro, Rs. 10 Lakh to2 Crore as Small and Rs. 2 Crore to 5 crore as medium.

65) Which is busiest airport in the world?

Hartsfield-Jackson Atlanta International Airport, Atlanta, Georgia, United States is the busiestairport in the world by traffic movements. The preliminary figures for 2009 from Airports CouncilUnited States estimate 970,235 Aircraft Movements (landing and take-off of an aircraft). Hartsfield-Jackson Atlanta International Airport is also worlds number 1 airport in passenger traffic. Itrecorded 6,448,193 passengers in January 2010. Top 5 busiest airports by passenger tra ffic are:

1. Hartsf ield-Jackson Atlanta International Airport Atlanta, Georgia, United States

2. Beijing Capital International Airport Chaoyang, Beijing, China

3. London Heathrow Airport Hillingdon, Greater London, England, United Kingdom

4. Tokyo International Airport ta, Tokyo, Japan

5. OHare International Airport Chicago, Illinois, United States

As far as International Traffic is concerned, the top slot is occupied by London Heathrow AirportHillingdon, Greater London, England, United Kingdom. In Cargo Traffic , Memphis International

Airport Memphis, Tennessee, United States is worlds most busy airport.

66) What is Statutory Liquidity Ratio (SLR)?

As per Section 24 (2A) of Banking Regulation Act 1949, every banking company in India has tomaintain equivalent to an amount which shall not at the close of the business on any day be lessthan 25% of the total of its net demand and time liabilities. The components of SLR are Cash inhand, Gold owned by the bank, Balance with RBI, Net balance in current account & Investment inGovernment securities. SLR has to be maintained at the close of business on every day.

67) What is the difference between Nationalized Bank and Public Sector

Bank?

What is the difference between Nationalized Bank and Public Sector Bank?

Please note that Nationalization is an act of taking an industry or assets into the public ownership ofa national government. Nationalization refers to private assets being transferred to the publicsector to be operated by or owned by the state. So there is no difference between a nationalizedbank and a public sector Bank. The opposite of nationalization is privatization. The Banks whichwere earlier in private sector were transferred to the public Sector by the act of nationalization.The first nationalized bank was Imperial Bank of India (under the SBI Act of 1955) and re-christenedas State Bank of India (SBI) in July 1955. In 1969 , 14 banks were nationalized and in 1980, thesecond phase of nationalization of Indian banks took place, in which 7 more banks werenationalized. Currently total 26 public sector banks in India all were Nationalized over a period oftime.

68) What is the significance of crossing a cheque?

Crossing of cheques has been discussed in Negotiable Instruments Act 1881 Section 123-131.Crossing provides an additional security. Crossing means that sum of that cheque can onlyrecovered from a specified banker and it will be credited to the holders account. The crossedcheques are not paid at the counter. Crossing is applicable in case of cheques only and not in caseof Bill of Exchange or promissory notes. Crossing may be General crossing or Special crossing.


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General crossing (NI Act Section 123) is where a cheque bears two parallel lines with words such asa/c payee etc. In Special crossing (NI Act Section 124) the cheque bears the name of the bankeralso. Section 126 directs that such cheques shall be paid to the banker to whom it is crossedspecially or to his agent for collection.

69) Which country is Indias Largest Trade partner?

By 2008-09 China had emerged as Indias Largest Trade partner, leaving behind USA, which hasbeen Indias largest trade partner traditionally. The total trade with China was worth Rs. 1, 63,202Crore. However this included a t rade balance of -92,676 crore Rupees which means Indias importsfrom china are much bigger than Indias exports to China. Total trade with USA stood at Rs.1,55,353 Crore, where trade balance was Rs. 12,254 Crore. In continents , Europe has emergedas Indias single largest trading partner.

70) What is the Difference in Gross NPA & Net NPA?

Gross NPA is the amount outstanding in the borrowal account, in books of the bank other than theinterest which has been recorded and not debited to the borrowal account. Net NPAs is the amountof grosss NPAs less (1) interest debited to borrowal and not recovered and not recognized asincome and kept in interest suspense (2) amount of provisions held in respect of NPAs and (3)amount of claim received and not appropriated.

The Reserve Bank of India defines Net NPA as:

Net NPA = Gross NPA (Balance in Interest Suspense account + DICGC/ECGC claims received andheld pending adjustment + Part payment received and kept in suspense account + Total provisionsheld).

The Reserve Bank of India Banks has advised the banks to compute their Gross Advances, NetAdvances, Gross NPAs and Net NPAs as per the following format w.e. f. September 2009.

www.gktoday.in

71) What are Riders on an insurance policy?

The riders are meant to provide additional cover against risks. Depending upon the risk perceptionadditional covers can be brought with the basic policy. These riders may cover accidental death,critical illnesses, disability etc. Though extra premium would be charged for each of the additionalrisk covers it would still be much less when compared to separate policies.

72) What is Free look period for insurance policies?

Free look period is a fortnight given to a new insurance policy holder to examine the life insurancecontract that he has signed. In case he does not want to continue with it, he can rescind thecontract and the insurance company shall refund the amount paid. In India IRDA has made itmandatory for all insurance companies to grant 15 days free look period. The free look period startsfrom the day of receipt of policy documents by an individual and the cancellation of the policy mustbe intimated to the insurance company within this time period.


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73) What is Plastic Money?

With the increasing use of credit, debit cards for withdrawal of cash from ATMs, the use of the termplastic money is common. These cards being of plastic facilitating availability of cash or money to thecard holder, have come to be referred commonly as plastic money.

74) What is meant by credit score?

It is the sta tistical summary of the individual bits of information on the credit report of an entity. Acredit score predicts how likely it is that a company or individual will repay debts. Banks use thisinformation to take a decision whether to sanction the loan or not and if so, the applicable rate ofinterest.

75) What is meant by insurance cover for deposits in banks?

All deposits upto Rs 1 lakh in a commercial or cooperative bank in India are insured by the DepositInsurance and Credit Guarantee Corporation of India DICGC. The insurance protection is availablefree of cost to the depositors and covers the principal and interest dues taken together. Deposits indifferent banks are separately insured with each deposit eligible for Rs1lakh cover. Insurance coveris available across savings accounts, current accounts, recurring and fixed deposit accounts.

76) Who is a Banking Ombudsman?

An independent dispute resolution authority provided by RBI to deal with disputes that bankcustomers have with their respective banks. The authority is to be approached af ter the customerfails to get his grievance resolved from the concerned bank in terms of the grievance redressalmechanism.

77) What are Banking Codes and Standards Board of India BCSBI?

BCSBI is an independent and autonomous body set up by RBI to ensure that comprehensive codeof conduct for fair treatment of customers was evolved and adhered to. In substance the boardhas been set up to ensure that the common consumer of banking services is in no way in adisadvantageous position and really gets what he has been promised by the banks.Member banks of the board have voluntarily agreed to abide by the provisions enumerated in thecodes which have been drawn up for the benef it of customers. These are:Code of Banks Commitment to Customers, and

Code of Banks Commitment to Micro and Small Enterprises.

78) What is Capital adequacy ratio?

CRAR is the acronym for capital to risk weighted assets ratio, a standard metric to measure balancesheet strength of banks.

BASEL I and BASEL II are global capital adequacy rules that prescribe a minimum amount of capital a

bank has to hold given the size of its risk weighted assets. The old rules mandate banks to backevery Rs 100 of commercial loans with Rs 9 of capital irrespective of the nature of these loans. Thenew rules suggest the amount of capital needed depends on the credit rating of the customer.

79) What is Financial Inclusion?

Financial inclusion means providing to the large unbanked population of India access to financialproducts and serv ices like:

Bank accounts, immediate credit, savings products, remittance and payment services, insurance,mortgage, entrepreneurial credit, financial advisory services.

Steps taken so far for promotion of financial inclusion have been the cooperative movement,setting up of State Bank of India, nationalization of banks, lead bank scheme, regional rural banks,service area approach, self help groups.Out of 611 districts in the country, only 68 districts have

been covered by so called financial inclusion (as of July 2009).

80) Who are forensic accountants?

Forensic accountants are trained to detect evidence of frauds in financial statements. They gobeyond the numbers and attempt to analyze 100% of the data as against the sampling procedureadopted by auditors. When the extended procedures are invoked, cases like the overvaluation ofthe sales or the debtors become easy to investigate. In India there is an urgent need of largenumber of f orensic accountants in view of the preponderance of corporate f rauds.

81) What is India VIX?

India VIX is a volatility index based on the Nifty 50 Index Option prices. The implied volatility iscaptured by the volatility index which reflects risk associated with equity market. When the marketis steadily moving upside or range bound then implied volatility is observed to be low, and whenmarket declines sharply due to heavy selling or bad sentiments then implied volatility rises to high.


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82) What are RBI guidelines to banks for ATMs for persons with

disabilities?

The banks have to provide all the4 existing ATMs and future ATMs with ramps so that wheel chairusers / persons with disabilities can easily access them and also make arrangement in such a waythat height of the ATM does not create an impediment in its use by the wheel chair user. Banksmake at least one third of the new ATMs installed as talking ATMs with Braille key pads place themstrategically, in consultation with other banks so that Braille Keypad is generally available in eachlocality.

83) In which summit, decision to replace G-8 by G-20 was taken?

At the Pittsburgh Summit on September 24-25, 2009, the leaders determined that the G-20 willreplace the G-8 as the permanent council for international economic cooperation. There are alsoproposals for an Economic Security Council elected by UN members or a representative Group of 20(plus/minus) countries.

84) What is Integrated Nutrient Management (INM)?

Integrated Nutrient Management (INM)is being promoted by Government of India and it involvesconjunctive use of both inorganic and organic sources of nutrients to sustain good soil health andhigher crop productivity in the country. For this purpose National Project on Management of SoilHealth and Fertility (NPMSHF) has been introduced during 2008-09 to promote soil test basedbalanced and judicious use of chemical fertilizer in conjunction with organic manure and bio-fertilizer.

85) In which country Kiwi the first modern shoe polish was invented in

1906?

Kiwi brand was the first shoe polish which resembles the modern varieties of shoe polishes as it isaimed primarily at inducing shine. It was first manufactured in a very small factory in Melbourne

Australia by two Scottish expatriates William Ramsay and Hamilton. The brand was named as Kiwiwhich is the national bird of New Zealand & Ramsays wife was a native of Oamaru, New Zealand.

After success in Australia Kiwi expanded in other countries and adopted by both the British andAmerican armies in World War I.

Today Kiwi is sold in 180 countries and dominated the market share in UK & USA. Currently it isowned by the Sara Lee Corporation which bought it in 1984.

86) In collboration with which countries India established Durgapur,

Rourkela & Bhilai Steel Plants?

Durgapur Steel plant was established in collaboration with Britain, Rourkela Steel plant incollaboration with Germany and Bhilai steel plant was started in collaboration with Russia.

87) What are primary, secondary and tertiary sectors of Economy?

Primary sector of the economy is mining, agriculture and fishing, Secondary sector is manufacturing,the tertiary sector of the economy is also known as the service sector or the service industry.Information sharing (knowldge economy) is also a part of te rtiary sector, however now some peoplehave started using

Documents

A to Z in Banking - Facts on Indian Economy for Competitive Exams