puyQ1 features scope and Problems of financial services ?

Financial services make up one of the economy's most important and influential
sectors.
Financial services are a broad range of more specific activities such as banking,
investing, and insurance.
Financial services are limited to the activity of financial services firms and their
professionals, while financial products are the actual goods, accounts, or investments
they provide.
Features of Financial Services:

Banking Services:

Deposit accounts (savings, checking, fixed deposits)

Loans and credit facilities
Electronic fund transfers

Investment Services:

Stock and bond trading

Investment advisory services
Asset management

Insurance Services:

Life insurance
Property and casualty insurance
Health insurance

Financial Planning:

Retirement planning
Wealth management
Estate planning

Payment Services:

Credit card services

Payment processing
Mobile and online banking

Real Estate Services:

Mortgages and home loans
Real estate investment advice

Risk Management:

Hedging services
Derivative trading
Scope of Financial Services:

Global Reach:

Financial services operate on a global scale, connecting markets and facilitating

international transactions.

Diversification:

The scope includes a wide array of services to cater to diverse customer needs, from
individuals to businesses.

Innovation:

Constant technological advancements drive innovation in financial services, leading to

new products and solutions.

Regulation and Compliance:

The scope includes adherence to regulatory frameworks to ensure the stability and
integrity of the financial system.
Problems in Financial Services:

Risk Management:

Managing financial risks, including market risk, credit risk, and operational risk, is a
complex challenge for financial institutions.

Security and Fraud:

The digital nature of financial services exposes them to cybersecurity threats, fraud, and
identity theft.

Regulatory Compliance:

Adhering to ever-evolving regulatory requirements can be cumbersome and costly for

financial institutions.

Customer Trust:

Building and maintaining trust with customers is crucial, and any breach or unethical
behavior can lead to reputational damage.

Financial Inclusion:
Access to financial services is not uniform globally, and efforts are needed to ensure
financial inclusion for all segments of society.

Technological Disruption:

Rapid technological changes can challenge traditional financial service providers to

adapt quickly or risk becoming obsolete.

Market Volatility:

Fluctuations in financial markets pose challenges for investment and asset management
services.

Complex Products:

The complexity of some financial products can lead to misunderstandings, mis-selling,

and potential financial crises.
Addressing these problems requires ongoing collaboration between financial
institutions, regulators, and technology providers, along with a commitment to ethical
and transparent business practices.
Q2 what is mutual fund and venture capital financing?
A mutual fund is a type of investment vehicle that pools money from many investors and
uses that money to buy a diversified portfolio of stocks, bonds, or other securities. The
fund is managed by professional fund managers, who make investment decisions on
behalf of the investors. Mutual funds provide individual investors with access to a
diversified portfolio, professional management, and economies of scale. Here are some
key features of mutual funds:

Diversification:

Mutual funds invest in a variety of securities, spreading the risk across different assets.

Professional Management:

Fund managers are responsible for making investment decisions based on the fund's
objectives.

Liquidity:

Investors can buy and sell mutual fund shares on any business day at the net asset value
(NAV).

Transparency:

Mutual funds disclose their holdings and performance regularly, providing transparency
to investors.

Types of Mutual Funds:

Equity funds, bond funds, money market funds, hybrid funds, and sector-specific funds.
Investors buy shares in a mutual fund, and the value of these shares is determined by
the net asset value per share (NAV), which is calculated daily based on the fund's assets
minus liabilities.

Venture Capital Financing:

Venture capital (VC) financing is a form of funding provided by venture capital firms to
startups and small businesses that have high growth potential. In exchange for the
investment, venture capitalists typically take equity (ownership) in the company.
Venture capital is often sought by companies in the early stages of development when
traditional sources of financing, such as bank loans, may be less accessible. Key features
of venture capital financing include:

Equity Investment:

Venture capitalists invest in the equity of the company, becoming partial owners.

Risk and Return:

Venture capital involves a high level of risk, and investors expect high returns if the
startup is successful.

Active Involvement:

Venture capitalists often provide not just capital but also guidance and mentorship to
help the startup grow.

Exit Strategies:

Venture capitalists aim for exits through methods like initial public offerings (IPOs) or
acquisitions, where they can realize their returns.

Focus on Innovation:

Venture capital is often directed towards companies with innovative products,

technologies, or business models.

Stage of Investment:

Venture capital is commonly associated with early-stage and growth-stage financing but
can extend to later stages as well.
Startups seeking venture capital typically go through rounds of funding, with each round
representing a new stage of development. The venture capital firm's involvement helps
the startup scale its operations, enter new markets, and navigate the challenges of rapid
growth. The relationship between the venture capitalist and the startup is crucial for
mutual success.
Q3 explain the concept of leasing and hire purchase?

Hire purchase is an agreement where the buyer makes a downpayment and pays the
balance plus interest in installments.

These types of agreements are generally used for very expensive goods.

Hire purchase agreements are not seen as an extension of credit.

In a hire purchase agreement, ownership is not transferred to the purchaser until all
payments are made.

Hire purchase agreements usually prove to be more expensive in the long run than
purchasing an item outright.

How Hire Purchase Agreements Work

Hire purchase agreements are similar to rent-to-own transactions that give the lessee
the option to buy at any time during the agreement, such as rent-to-own cars. Like rent-
to-own, hire purchases can benefit consumers with poor credit by spreading the cost of
expensive items that they would otherwise not be able to afford over an extended time
period. It's not the same as an extension of credit, though, because the purchaser
technically doesn't own the item until all of the payments are made.
Because ownership is not transferred until the end of the agreement, hire purchase
plans offer more protection to the vendor than other sales or leasing methods for
unsecured items. That's because the items can be repossessed more easily should the
buyer be unable to keep up with the repayments.
Lease financing:

A lease is a legal, binding contract outlining the terms under which one party agrees to
rent property owned by another party.

It guarantees the tenant or lessee use of the property and guarantees the property
owner or landlord regular payments for a specified period in exchange.

Residential leases tend to be the same for all tenants, but there are several different
types of commercial leases.

Consequences for breaking leases range from mild to damaging, depending on the
circumstances under which they are broken.
Certain protected groups are able to vacate their leases without any consequences, for
which some form of proof is usually required.

Understanding a Lease

Leases are legal and binding contracts that set forth the terms of rental agreements
in real estate and real and personal property. These contracts stipulate the duties of
each party to effect and maintain the agreement and are enforceable by each. For
example, a residential property lease includes:

The property address

Landlord and tenant responsibilities

The rent amount

A required security deposit

Rent due date

Consequences for breach of contract

The duration of the lease

Pet policies

Other essential information

Not all leases are designed the same, but all of them have some common
features. These include the rent amount, the due date of rent, the expiration
date of the lease. The landlord requires the tenant to sign the lease, thereby
agreeing to its terms before occupying the property.

Q5 explain role and activities of merchant banking?

Merchant banking refers to a range of financial services provided by banks and financial
institutions to businesses and corporations. The role and activities of merchant banking
are diverse and extend beyond traditional banking functions. Here are key aspects:

Corporate Finance Advisory: Merchant banks assist companies in raising capital through
various means, such as issuing stocks or bonds. They advise on the most suitable
financial instruments and structures for fundraising.

Underwriting of Securities: Merchant banks often act as underwriters for securities,

assuming the risk of buying newly issued securities from a company and then reselling
them to investors.

Loan Syndication: Merchant banks help in arranging large loans by forming a syndicate
of banks to share the lending risk. This is common in major project financing.
Mergers and Acquisitions (M&A): Merchant banks play a crucial role in facilitating
mergers and acquisitions. They provide advisory services, valuation, and assist in the
negotiation and structuring of deals.

Portfolio Management: Some merchant banks offer portfolio management services to

high-net-worth individuals and institutions, managing investment portfolios on their
behalf.

Foreign Collaboration and Investment: Merchant banks help businesses establish

foreign collaborations and attract foreign investments. They provide guidance on
international business transactions.

Risk Management: Merchant banks assist companies in managing financial risks through
various instruments like derivatives. This involves helping clients hedge against
unfavorable market movements.

Project Appraisal: Before providing financial assistance, merchant banks evaluate the
feasibility and viability of projects. This includes assessing technical, economic, financial,
and managerial aspects.

Issue Management and Placement: They manage the issuance and placement of
securities in the primary market, helping companies go public through Initial Public
Offerings (IPOs) or issuing additional shares.

Credit Syndication: Merchant banks arrange for credit facilities from multiple sources
for clients who require large amounts of funds.

Advisory Services: Beyond specific transactions, merchant banks provide general

financial advice to businesses, helping them make strategic financial decisions.

The activities of merchant banking are dynamic and tailored to the financial needs of
businesses. They act as financial intermediaries, facilitating complex financial
transactions and providing specialized financial services that go beyond the scope of
traditional banking.

Q5 explain wealth management service?

Wealth management is an investment advisory service that combines other financial

services to address the needs of affluent clients.

A wealth management advisor is a high-level professional who manages an affluent

client’s wealth holistically, typically for one set fee.

This service is usually appropriate for wealthy individuals with a broad array of diverse
needs.
Key components of wealth management services typically include:
Financial Planning: Wealth managers assess a client's financial situation, goals, and
objectives to create a customized financial plan. This plan may cover areas such as
retirement planning, estate planning, tax planning, and risk management.

Investment Management: Wealth managers help clients build and manage investment
portfolios tailored to their financial goals and risk tolerance. This may involve selecting
and monitoring a diverse range of assets, including stocks, bonds, mutual funds, and
alternative investments.

Estate Planning: Wealth management services often include assistance with estate
planning, which involves organizing one's assets and planning for the transfer of wealth
to heirs while minimizing tax implications.

Risk Management: Wealth managers assess and manage various risks, including market
risk, longevity risk, and unexpected events that could impact a client's financial well-
being. Insurance solutions may be recommended to mitigate certain risks.

Tax Planning: Wealth managers work to optimize a client's tax situation by employing
strategies to minimize tax liabilities while staying within the bounds of the law.

Retirement Planning: Wealth management services may include developing strategies

to ensure a comfortable retirement, considering factors such as income needs, lifestyle
goals, and the potential impact of inflation.

Charitable Giving: Some wealth management services assist clients in incorporating

philanthropy into their financial plans, helping them support charitable causes while
maximizing tax benefits.

Client Education: Wealth managers often provide ongoing education to clients, keeping
them informed about market trends, investment opportunities, and changes in the
regulatory environment.

Wealth management services are typically offered by financial institutions, including

banks, investment advisory firms, and specialized wealth management firms. The goal is
to provide holistic financial guidance to clients, taking into account their unique
circumstances and financial objectives.
Unit 2
Q1 explain credit rating agency and there role?
Credit Rating Agencies (CRAs) serve as vital intermediaries in the financial world,
providing assessments of the creditworthiness of issuers and their debt instruments.
These assessments guide investors, both institutional and individual, in making informed
investment decisions, and contribute to the efficient allocation of capital within the
market.
Role of credit rating in India
Borrowing Costs: Credit ratings directly impact the interest rates at which entities can
borrow money financial institutions. Higher credit ratings perceive lower risk in lending
to entities with strong creditworthiness typically leads to lower borrowing costs.

Investor Confidence: Investors, both domestic and international, use credit ratings as a
key indicator to assess the risk associated with investing in various financial instruments.
Higher credit ratings attract more investor confidence, leading to increased investments
and better access to capital markets.

Public Issue: Entities raising funds through the issuance of bonds or other debt
instruments need to have their creditworthiness evaluated. A higher credit rating can
enable them to raise funds at more favourable terms and conditions. A good credit
rating ensures easier access to financing options, essential for business expansion and
capital requirements.

Corporate Governance and Transparency: Credit rating agencies assess the financial
health and governance practices of businesses. Maintaining a good credit rating
encourages companies to adhere to strong corporate governance standards and
maintain transparency, which can ultimately benefit shareholders and other
stakeholders.

Risk Management: Credit ratings help entities identify their own credit risk profiles and
take necessary measures to mitigate risks. This includes improving financial
management, reducing debt levels, and maintaining healthy liquidity positions.

Regulatory Requirements: In some cases, regulatory authorities may use credit ratings
to set capital adequacy requirements for financial institutions, ensuring they hold
enough capital to cover potential credit losses. Non-banking Financial Institutions (NBFC)
and banks are required to secure ratings for every deposit or bond program they
introduce, and they must achieve a specified minimum credit rating to sustain these
programs. If the prescribed minimum credit rating is not attained, the funds collected
through these programs must be returned.

Evolution of SEBI Regulation:

SEBI, established in 1988, was initially tasked with regulating the securities market. Over
time, its mandate expanded to cover various aspects of the financial markets, including
CRAs. The regulatory framework for CRAs was first established through the SEBI (Credit
Rating Agencies) Regulations, 1999. However, recognizing the need for more stringent
oversight, SEBI introduced the SEBI (Credit Rating Agencies) Regulations, 2018, which
replaced the earlier regulations. These updated regulations aimed to reinforce the
credibility and accountability of CRAs and enhance transparency in their operations.

Key Provisions of SEBI Regulation:

Registration and Eligibility Criteria: One of the pivotal aspects of SEBI’s regulation is the
requirement for CRAs to obtain registration from SEBI before conducting rating activities
in India. CRAs must meet strict eligibility criteria, including minimum net worth
thresholds, track record, and governance standards. This ensures that only financially
sound and credible entities operate as CRAs.

Code of Conduct: SEBI’s regulations mandate CRAs to adhere to a comprehensive code

of conduct that encompasses ethical practices, professional integrity, and the avoidance
of conflicts of interest. By following this code, CRAs maintain the impartiality and
objectivity of their credit rating opinions.

Disclosure and Transparency: To enhance investor understanding and confidence, CRAs

are obligated to disclose information about their rating methodologies, processes, and
rating performance on their websites and annual reports. This transparency assists
investors in comprehending the basis of credit ratings and assessing the reliability of the
ratings provided.

Rating Process and Committees: The regulations necessitate CRAs to establish

independent rating committees responsible for determining credit ratings. This setup
ensures that the rating process remains uninfluenced and unbiased, as decisions are
made collectively and independently.

Rating Review and Monitoring: SEBI’s regulations require CRAs to conduct periodic
reviews and monitoring of credit ratings to ensure their accuracy and relevance. If new
information emerges that impacts an issuer’s creditworthiness, CRAs are expected to
adjust ratings accordingly.

Conflict of Interest Management: CRAs are required to have robust policies and
procedures in place to manage and disclose potential conflicts of interest that could
compromise the integrity of their ratings. This ensures that ratings remain objective and
unaffected by external influences.

Regulatory Reporting: CRAs are required to submit regular reports to SEBI, detailing
their financials, operations, and compliance with regulations. This enables SEBI to
maintain a vigilant oversight of their activities, ensuring adherence to established
standards.

Q2 explain rating process and methodologies with symbols and grades ?

The credit rating process is when a credit rating agency, ideally a third party, gathers
information about a bond, stock, security, or company and evaluates it to give it a rating
other investors may use as a benchmark.

Corporations rely on stocks or debt to fund their operations. For equity, they can use
investments from promoters, internal cash flows, or IPOs/FPOs to access financial
markets.

Credit rating agencies determine interest rates based on risk and must be impartial,
vigilant, and unbiased in their evaluations
The credit rating process involves a series of steps that agencies follow. Though these
steps may differ from one agency to another, the basic series is similar. Let us have a
quick at the steps that credit rating agencies follow to rate entities:

Receipt of Formal Request

The agency begins as soon as it receives the request from the rating companies. In short,
the receipt of the formal request to issue a credit rating is the first step of the process.
The companies do that to ensure each and every aspect of the process is thoroughly
taken into consideration.

Signing an Agreement

The issuer company and the agency sign an agreement. According to this contract that
they sign, the agencies are asked to keep the information of the issuer company as
shared with them, confidential. The agreement gives the issuer company the liberty to
accept or reject the ratings provided by the rating agencies.

Assigning to Analysts

As soon as the request is received and the agreement is signed between the parties, an
analyst is assigned the task to look after the rating. Before this task is assigned, the
expertise of the analysts in the agencies is checked. Based on the area they possess
maximum knowledge and skills in, the credit agencies assign a particular credit rating
task to respective analyst teams.

Scheduling Visits & Meetings

The next step is to schedule visits and meetings with the company management.
Through the visits, the analysts and team try to explore the operational aspects of the
clients. They figure out the business activities, production process and cost of
production, and other aspects. The meeting with the management helps analysts assess
the overall position, strategies, risks, and policies of the client.

Forming an Opinion

The next steps are to present a report based on the observation and also mention the
ratings as felt suitable. In short, this is the step where the rating opinion is formed and
then the same is presented to the rating committee.

Communicating the Rating

Then, the rating is communicated to the issuer company with reasons. It is, however, the
issuer company that would further decide whether to accept or reject the rating
assigned by the agency. If they are convinced by the ratings against the reasons, they
accept the decisions, else, they reject it. The final step is to communicate the rating to
the public .

Methodology of Credit Rating

The process of credit rating begins with the prospective issuer approaching the rating
agency for evaluation . he experts in analyzing banks should be given a free hand and
they will collect data and informant and will investigate the business strength and
weaknesses in detail. The entire process of rating stands on the for of confidentiality and
hence even the most confidential business strategies, marketing plans, future outlook
etc., are revealed to the steam of analysis.

The rating is based on the investigation analysis, study and interpretation of various
factors. The world of investment is exposed to the continuous onslaught of political,
economic, social and other forces which does not permit any one to understand
sufficiently certainty. Hence a logical approach to systematic evaluation is compulsory
and within the framework of certain common features the agencies employ different
methodologies.

Unit 3

Q1 explain role of IFCI?

The IFCI, or Industrial Finance Corporation of India, is a financial institution in India that
plays a crucial role in promoting industrial development. Here are some key aspects of
the role of IFCI:

Financial Assistance: IFCI provides financial assistance to a wide range of industrial

projects in India. This includes both new projects and those undergoing expansion or
modernization.

Project Financing: The corporation specializes in project financing, providing long-term

loans and financial support to industrial projects. This helps in the establishment and
growth of various industries across different sectors.

Development of Infrastructure: IFCI contributes to the development of infrastructure by

financing projects related to power generation, transportation, and other key sectors.
This infrastructure development is vital for overall economic growth.

Promoting Entrepreneurship: IFCI plays a role in promoting entrepreneurship by

extending financial support to small and medium-sized enterprises (SMEs). This helps in
fostering entrepreneurship and contributes to economic diversification.

Capital Market Activities: IFCI is involved in capital market activities, including

underwriting of shares and debentures. This participation in the capital market helps in
raising funds for industrial projects.

Technology Upgradation: The corporation supports projects aimed at technological

upgradation and modernization. This is essential for industries to stay competitive and
relevant in the global market.

Government Initiatives: IFCI often collaborates with government initiatives aimed at

industrial development. It aligns its efforts with national policies and priorities to
contribute effectively to the country's economic growth.

Risk Capital: IFCI provides risk capital to projects that may be considered risky by
traditional financial institutions. This support encourages innovation and investment in
sectors that may face challenges in attracting conventional financing.

the Industrial Finance Corporation of India plays a pivotal role in the economic
development of the country by providing financial assistance, promoting
entrepreneurship, supporting infrastructure development, and contributing to the
growth of various industries.

Q2 Explain role of SIDBI?

SIDBI, or the Small Industries Development Bank of India, plays a crucial role in the
development and promotion of micro, small, and medium enterprises (MSMEs) in India.
Here are some key aspects of SIDBI's role:
Financial Assistance: SIDBI provides financial assistance to MSMEs in the form of loans,
working capital, and term loans. It aims to facilitate the growth and development of
these enterprises by addressing their financial needs.

Refinancing Institutions: SIDBI refinances loans extended by banks and financial

institutions to MSMEs. This helps these institutions manage their risk and promote
lending to the MSME sector.

Developmental Activities: SIDBI engages in various developmental activities to promote

entrepreneurship and skill development among MSMEs. It supports initiatives that
enhance the competitiveness of these enterprises in the global market.

Venture Capital and Risk Capital: SIDBI plays a role in providing venture capital and risk
capital to startups and small businesses. This support is crucial for fostering innovation
and entrepreneurship in the country.

Promotion of Technology Upgradation: SIDBI encourages MSMEs to adopt modern

technologies and upgrade their production processes. This helps enhance the quality of
products and the overall competitiveness of these enterprises.

Microfinance: SIDBI promotes microfinance institutions (MFIs) and facilitates the flow of
credit to the micro-enterprises sector. This is particularly important in rural areas where
small businesses often lack access to formal financial institutions.

International Cooperation: SIDBI collaborates with international financial institutions

and agencies to promote the exchange of knowledge, technology, and best practices for
the benefit of MSMEs in India.

Credit Guarantee: SIDBI provides credit guarantee support to small businesses, which
helps them secure loans from banks and financial institutions by mitigating the risk
associated with lending to this sector.

SIDBI plays a multifaceted role in supporting the growth and development of MSMEs in
India by providing financial assistance, promoting technological upgradation, and
engaging in various developmental activities that contribute to the overall economic
development of the country.

Q3 explain the role of EXIM bank?

The term "EXIM bank" generally refers to Export-Import Banks, which are financial
institutions that play a crucial role in facilitating international trade. These banks are
typically established by governments to promote and support their country's exports
and imports. The specific roles of an EXIM bank include:

Export Financing: EXIM banks provide financing solutions to domestic companies

involved in exporting goods and services. This can include loans, credit insurance, and
guarantees to help mitigate the risks associated with international trade.
Import Financing: These banks may also offer financial assistance to businesses involved
in importing goods. This can include loans and credit facilities to support the acquisition
of goods and services from foreign markets.

Risk Mitigation: EXIM banks often provide insurance and guarantees to protect
exporters and financial institutions from risks associated with international transactions.
This can include political risks, commercial risks, and risks related to currency
fluctuations.

Trade Promotion: EXIM banks actively promote and support the expansion of
international trade. They may offer educational resources, advisory services, and other
initiatives to encourage businesses to explore and engage in global markets.

Economic Development: By +

+supporting international trade, EXIM banks contribute to the economic development of

their countries. They help businesses expand their markets, create jobs, and enhance
economic growth.

Foreign Policy: EXIM banks also play a role in supporting a country's foreign policy
objectives. By facilitating trade, these institutions strengthen economic ties between
nations and contribute to diplomatic relations.

Financing Infrastructure Projects: Some EXIM banks may also finance large
infrastructure projects in other countries, contributing to the development of vital
economic and transportation networks.

It's important to note that the specific functions and roles of EXIM banks can vary from
country to country, depending on the policies and objectives set by the respective
governments. Many countries have their own EXIM banks with specific mandates to
support their national trade interests.

Q4 explain role of UTI?

ROLE OF UTI
Mobilization of Savings:
Unit Trust of India right from its inception has been playing a useful role in the
mobilization of savings of the people.
Pattern of Investment:
The most important aspect of the utilization of
funds is the pattern of investment of the Trust’s funds. The information
available on the direction of the investible funds of the Trust in different investment
outlets discloses that the Unit Trust has tried its best to build a balanced flexible
investment portfolio composed of corporate securities, government securities, and
other investments, representing fixed deposits with companies, advance deposits for
share sand debentures, bridging finance, application money, and money at call and short
notice in order to ensure a reasonable return, consistent with the safety of capital and
capital appreciation.
Assistance to corporate sector undertaking:
By serving as an effective conduit between saving and investment UTI has achieved
spectacular success in rendering financial support to programs of rapid industrialization
in the country. Because of the sizeable resources garnered by the Trust, it has been
possible for it to pump a substantial amount of assistance into the corporate sector
undertakings.
Forms of assistance:
The Trust has granted financial assistance to the corporate sector by investment in
privately placed debentures and loans,underwriting and direct subscription and by way
of special deposits. It is to be noted that about 50 percent of assistance of the Trust was
in the form of underwriting and direct subscription. About one third of the
Trust’s assistance was by way of privately placed debentures and loans.

Purpose wise distribution of assistance :

Until recently, major portion of assistance was given to existing projects for their
expansion and diversification programmes. However, in recent years UTI provided lion’s
share of its funds for other purposes (i.e. working capital).
Sectoral distribution of UTI’s assistance :
UTI has invested bulk portion of its funds in private sector undertakings. Private sector
enterprises received about 80 percent of the total assistance of the trust.
UTI’s assistance to backward areas :
In consonance with the government policy of fostering industrial growth in relatively
backward areas, UTI has been providing sizeable amount of assistance to enterprises
located in these areas. UTI has provided assistance to backward areas through
subscription to privately placed debentures.
State wise distribution of assistance :
The Unit Trust of India has provided assistance to industrial enterprise situated in
different parts of the country in order to accomplish a geographical diffusion in its
investment portfolio. However, a few industrially advanced states have claimed a large
chunk of the Trust’s assistance, Five advanced states –
Gujarat, Karnataka, Maharashtra, Tamil Nadu and West Bengal received more than 70
percent of the total assistance, the remaining 30 percent was distributed among as
many as 16 states and Union Territories. Bigger states like Bihar, Uttar Pradesh and
Madhya Pradesh, had to be content with smaller assistance.

Q5 explain role and characteristics LIC.

CHARACTERISTICS OF INSURANCE
 Sharing of Risks
Insurance is a co-operative device to share the burden of risk, which may fall on
happening of some unforeseen events, such as the death of head of the family, or on
happening of marine perils or loss of by fire.
 Co-operative Device
Insurance is a co-operative form of distributing a certain risk over a group of persons
who are exposed to it (Ghosh & Agarwal). A large number of persons share the
losses arising from a particular risk.
 Evaluation of Risk
To ascertain the insurance premium, the volume of risk is evaluated, which forms
the basis of insurance contract.
 Payment of happening of specified event
On happening of specified event, the insurance company is bound to makepayment
to the insured. Happening of the specified event is certain in life insurance, but in the
case of fire, marine or accidental insurance, it is not necessary. In such cases, the
insurer is not liable for payment of indemnity.
 Amount of payment
The amount of payment in indemnity insurance depends on the nature of losses
occurred, subject to a maximum of the sum insured. In life insurance, however, a
fixed amount is paid on the happening of some uncertain event or on the maturity of
the policy.

 Large number of insured persons

The success of insurance business depends on the large number of personsinsured
against similar risk. This will enable the insurer to spread the losses of risk among
large number of persons, thus keeping the premium rate at the minimum.

 Insurance is not a gambling

Insurance is not a gambling. Gambling is illegal, which gives gain to one party& loss
to the other. Insurance is a valid contract to indemnity against losses.
Moreover,insurable interest is present in insurance contracts & it has the element
of investment also.

 Insurance is not charity

Charity pays without consideration but in the case of insurance, premium ispaid by
the insured to the insurer in consideration of future payment.
 Protection against risks
Insurance provides protection against risks involved in life, materials &property. It is
a device to avoid or reduce risks

 Transfer of risk
Insurance is a plan in which the insured transfers his risk on the insurer. This may be
the reason that Mayerson observes, that insurance is a device to transfer some
economic losses to the insurer, and otherwise, such losses would have been borne
by the insured themselves.

 Ascertaining of losses
By taking a life insurance policy, one can ascertain his future losses in terms
of money. This is done by the insurer to determining the rate of premium, which is
calculated based on maximum risks.
  A contract
Insurance is a legal contract between the insurer & insured under which the insurer
promises to compensate the insured financially within the scope of insurance policy,
& the insured promises to pay a fixed rate of premium to the insurer.

 Based upon certain principle

Insurance is a contract based upon certain fundamental principles of insurance, which
includes utmost good faith, insurable interest, contribution, indemnity, cause proximal,
subrogation, etc., which are the basis for successful operation of insurance plan.

 Utmost Good Faith

Insurance is a contract based on good faith between the parties. Therefore, both
parties are bound to disclose the important facts affecting to the contract before
each other. Utmost good faith is one of the important principles of insurance . To
conclude, insurance is a device for the transfer of risks from the insured to the
insurers, who agree to it for a consideration (known as premium), & promises that
the specified extent of loss suffered by the insured shall be compensated. It is a legal
contract of a technical nature.

Unit4
Q1 Explain payment system in India
In india, the payment system is diverse and includes various methods to facilitate
transactions. Here are some key aspects of the payment system in India:

1. Traditional Methods:
 Cash: Cash transactions are still widely used in India, especially for small-
value transactions.
 Cheques: While the use of cheques has decreased with the rise of electronic
transactions, they are still used for certain business and financial transactions.

2. Electronic Funds Transfer (EFT):

 NEFT (National Electronic Funds Transfer): NEFT is an electronic fund
transfer system that operates on a deferred net settlement (DNS) basis. It is
suitable for both one-time and recurring transactions.
 RTGS (Real Time Gross Settlement): RTGS is a funds transfer system where
transfer of money takes place from one bank to another on a "real-time" and
on a "gross" basis. It is primarily used for large-value transactions.
 IMPS (Immediate Payment Service): IMPS allows for instant interbank
electronic fund transfer 24/7, enabling users to send and receive money
using mobile phones or internet banking.
 UPI (Unified Payments Interface): UPI is a real-time payment system that
enables users to link multiple bank accounts to a single mobile application. It
facilitates instant money transfers between any two parties.
3. Digital Wallets:
  Paytm, PhonePe, Google Pay, etc.: Digital wallets or mobile wallets allow
users to store money in a virtual wallet and make online and offline
payments. They often offer additional features like bill payments, mobile
recharge, and more.

4. Debit and Credit Cards:

 Visa, MasterCard, RuPay, etc.: Debit and credit cards are widely used for both
online and offline transactions. They are issued by banks and financial
institutions, allowing users to make purchases and withdraw cash.

5. National Payments Corporation of India (NPCI):

 NACH (National Automated Clearing House): NACH is a central bank-driven
clearing system for bulk transactions involving repetitive and periodic
payments.
 Bharat Bill Payment System (BBPS): BBPS is an integrated bill payment
system that offers interoperable and accessible bill payment services to
customers.

India has made significant strides in promoting digital payments, with initiatives such as
demonetization and the promotion of UPI contributing to the growth of electronic
transactions. The Reserve Bank of India (RBI) plays a crucial role in regulating and overseeing
the payment system in the country.

Q2 explain advantages and disadvantages of electronic banking

Electronic banking, also known as online banking or e-banking, comes with several
advantages and disadvantages. Here's an overview of both:

Advantages of Electronic Banking:

1. Convenience:

 Electronic banking allows users to conduct financial transactions from the

comfort of their homes or offices, 24/7. This convenience is especially
beneficial for individuals with busy schedules.

2. Accessibility:

 Users can access their accounts and perform transactions from anywhere
with an internet connection. This accessibility is crucial for those who travel
frequently or live in remote areas.

3. Time-saving:

 Online banking eliminates the need to visit physical branches, saving time for
both customers and financial institutions. Transactions such as fund transfers
and bill payments can be completed quickly.

4. Cost-effective:
  Electronic banking reduces the need for paper-based transactions, leading to
cost savings for banks and, in some cases, lower fees for customers.

5. Account Monitoring:

 Users can easily monitor their account balances, track transactions, and set
up alerts for specific activities, providing better control and awareness of
their financial status.
Disadvantages of Electronic Banking:

1. Security Concerns:

 One of the primary concerns is the risk of security breaches, including

hacking, identity theft, and phishing attacks. Users need to take precautions
to safeguard their online banking information.

2. Technical Issues:

 Electronic banking relies on technology, and technical glitches can occur.

System outages, server problems, or connectivity issues may temporarily
disrupt access to online banking services.

3. Dependence on Technology:

 Some individuals, especially older generations, may not be comfortable or

familiar with technology, making it challenging for them to use electronic
banking services.

4. Fraud Risk:

 Despite security measures, electronic banking transactions are not immune

to fraud. Users need to be cautious about phishing attempts, malware, and
other fraudulent activities.

5. Limited Services for Cash Transactions:

 Electronic banking may not be suitable for individuals who frequently deal
with cash transactions, as certain services like depositing or withdrawing
physical cash may be limited.
It's important for users to weigh these advantages and disadvantages based on their
individual needs, preferences, and comfort level with technology. Additionally, staying
informed about security practices is crucial to mitigate potential risks associated with
electronic banking.

Q3 explain RBI initiatives for development of banking and insurance sector

The Reserve Bank of India (RBI) has undertaken various initiatives to foster the development
of the banking and insurance sectors in the country. Some key initiatives include:

1. Financial Inclusion:

 RBI has been promoting financial inclusion to ensure that banking and
financial services reach all sections of society. This involves measures to
provide banking services to the unbanked and underbanked regions of the
country.

2. Payment and Settlement Systems:

 The RBI has introduced and enhanced various payment and settlement
systems to facilitate efficient and secure electronic transactions. Initiatives
like the Unified Payments Interface (UPI) have played a crucial role in
promoting digital payments.

3. Regulatory Reforms:

 The RBI regularly reviews and updates regulations to create a conducive

environment for the growth of the banking and insurance sectors. This
includes measures to enhance transparency, risk management, and
governance standards.

4. Priority Sector Lending:

 The RBI mandates banks to allocate a certain percentage of their lending to

priority sectors such as agriculture, small and medium enterprises (SMEs),
and low-income groups. This ensures that credit is directed towards sectors
that need it the most.

5. Insurance Regulatory and Development Authority of India (IRDAI):

 While IRDAI is the primary regulatory body for the insurance sector, the RBI
collaborates with it to ensure overall financial stability. Joint efforts are made
to align policies and regulations for the seamless functioning of the banking
and insurance industries.

6. Financial Stability and Risk Management:

 The RBI plays a crucial role in maintaining financial stability. It conducts

regular assessments of systemic risks and takes preventive measures to
ensure the soundness of financial institutions.

7. Technology and Innovation:

 The RBI encourages the adoption of technology in the banking and insurance
sectors to improve efficiency and customer service. This includes guidelines
on the use of fintech and digital innovations.
 8. Customer Protection and Education:

 The RBI focuses on ensuring customer protection and education. Measures

are taken to enhance consumer awareness and protect the rights of banking
and insurance customers.
These initiatives collectively aim to create a robust and inclusive financial ecosystem in
India, fostering the growth and development of the banking and insurance sectors while
ensuring stability and customer protection.

Q4 explain principles of insurance

Principles of Insurance

The concept of insurance is risk distribution among a group of people. Hence, cooperation
becomes the basic principle of insurance.

To ensure the proper functioning of an insurance contract, the insurer and the insured have
to uphold the 7 principles of Insurances mentioned below:

1. Utmost Good Faith

2. Proximate Cause
3. Insurable Interest
4. Indemnity
5. Subrogation
6. Contribution
7. Loss Minimization
Let us understand each principle of insurance with an example.

Principle of Utmost Good Faith

The fundamental principle is that both the parties in an insurance contract should act in
good faith towards each other, i.e. they must provide clear and concise information related
to the terms and conditions of the contract.

The Insured should provide all the information related to the subject matter, and the insurer
must give precise details regarding the contract.

Example – Jacob took a health insurance policy. At the time of taking insurance, he was a
smoker and failed to disclose this fact. Later, he got cancer. In such a situation, the
Insurance company will not be liable to bear the financial burden as Jacob concealed
important facts.
Principle of Proximate Cause

This is also called the principle of ‘Causa Proxima’ or the nearest cause. This principle applies
when the loss is the result of two or more causes. The insurance company will find the
nearest cause of loss to the property. If the proximate cause is the one in which the
property is insured, then the company must pay compensation. If it is not a cause the
property is insured against, then no payment will be made by the insured.

Example –

Due to fire, a wall of a building was damaged, and the municipal authority ordered it to be
demolished. While demolition the adjoining building was damaged. The owner of the
adjoining building claimed the loss under the fire policy. The court held that fire is the
nearest cause of loss to the adjoining building, and the claim is payable as the falling of the
wall is an inevitable result of the fire.

In the same example, the wall of the building damaged due to fire, fell down due to storm
before it could be repaired and damaged an adjoining building. The owner of the adjoining
building claimed the loss under the fire policy. In this case, the fire was a remote cause, and
the storm was the proximate cause; hence the claim is not payable under the fire policy.

Principle of Insurable interest

This principle says that the individual (insured) must have an insurable interest in the
subject matter. Insurable interest means that the subject matter for which the individual
enters the insurance contract must provide some financial gain to the insured and also lead
to a financial loss if there is any damage, destruction or loss.

Example – the owner of a vegetable cart has an insurable interest in the cart because he is
earning money from it. However, if he sells the cart, he will no longer have an insurable
interest in it.

To claim the amount of insurance, the insured must be the owner of the subject matter
both at the time of entering the contract and at the time of the accident.

Principle of Indemnity

This principle says that insurance is done only for the coverage of the loss; hence insured
should not make any profit from the insurance contract. In other words, the insured should
be compensated the amount equal to the actual loss and not the amount exceeding the
loss. The purpose of the indemnity principle is to set back the insured at the same financial
position as he was before the loss occurred. Principle of indemnity is observed strictly for
property insurance and not applicable for the life insurance contract.

Example – The owner of a commercial building enters an insurance contract to recover the
costs for any loss or damage in future. If the building sustains structural damages from fire,
then the insurer will indemnify the owner for the costs to repair the building by way of
reimbursing the owner for the exact amount spent on repair or by reconstructing the
damaged areas using its own authorized contractors.

Principle of Subrogation

Subrogation means one party stands in for another. As per this principle, after the insured,
i.e. the individual has been compensated for the incurred loss to him on the subject matter
that was insured, the rights of the ownership of that property goes to the insurer, i.e. the
company.

Subrogation gives the right to the insurance company to claim the amount of loss from the
third-party responsible for the same.

Example – If Mr A gets injured in a road accident, due to reckless driving of a third party, the
company with which Mr A took the accidental insurance will compensate the loss occurred
to Mr A and will also sue the third party to recover the money paid as claim.

Principle of Contribution

Contribution principle applies when the insured takes more than one insurance policy for
the same subject matter. It states the same thing as in the principle of indemnity, i.e. the
insured cannot make a profit by claiming the loss of one subject matter from different
policies or companies.

Example – A property worth Rs. 5 Lakhs is insured with Company A for Rs. 3 lakhs and with
company B for Rs.1 lakhs. The owner in case of damage to the property for 3 lakhs can claim
the full amount from Company A but then he cannot claim any amount from Company B.
Now, Company A can claim the proportional amount reimbursed value from Company B.

Principle of Loss Minimisation

This principle says that as an owner, it is obligatory on the part of the insurer to take
necessary steps to minimise the loss to the insured property. The principle does not allow
the owner to be irresponsible or negligent just because the subject matter is insured.
Example – If a fire breaks out in your factory, you should take reasonable steps to put out
the fire. You cannot just stand back and allow the fire to burn down the factory because you
know that the insurance company will compensate for it.

Q5 types of insurance
There are two broad categories of insurance:

1. Life Insurance
2. General insurance
Life Insurance – The insurance policy whereby the policyholder (insured) can ensure
financial freedom for their family members after death. It offers financial compensation in
case of death or disability.

While purchasing the life insurance policy, the insured either pay the lump-sum amount or
makes periodic payments known as premiums to the insurer. In exchange, of which the
insurer promises to pay an assured sum to the family if insured in the event of death or
disability or at maturity.

Depending on the coverage, life insurance can be classified into the below-mentioned types:

 Term Insurance: Gives life coverage for a specific time period.

 Whole life insurance: Offer life cover for the whole life of an individual
 Endowment policy: a portion of premiums go toward the death benefit, while the
remaining is invested by the insurer.
 Money back Policy: a certain percentage of the sum assured is paid to the insured in
intervals throughout the term as survival benefit.
 Pension Plans: Also called retirement plans are a fusion of insurance and investment.
A portion from the premiums is directed towards retirement corpus, which is paid as
a lump-sum or monthly payment after the retirement of the insured.
 Child Plans: Provides financial aid for children of the policyholders throughout their
lives.
 ULIPS – Unit Linked Insurance Plans: same as endowment plans, a part of premiums
go toward the death benefit while the remaining goes toward mutual fund
investments.
General Insurance – Everything apart from life can be insured under general insurance. It
offers financial compensation on any loss other than death. General insurance covers the
loss or damages caused to all the assets and liabilities. The insurance company promises to
pay the assured sum to cover the loss related to the vehicle, medical treatments, fire, theft,
or even financial problems during travel.
General Insurance can cover almost anything, and everything but the five key types of
insurances available under it are –

 Health Insurance: Covers the cost of medical care.

 Fire Insurance: give coverage for the damages caused to goods or property due to
fire.
 Travel Insurance: compensates the financial liabilities arising out of non-medical or
medical emergencies during travel within the country or abroad
 Motor Insurance: offers financial protection to motor vehicles from damages due to
accidents, fire, theft, or natural calamities.
 Home Insurance: compensates the damage caused to home due to man-made
disasters, natural calamities, or other threats
Q6 measure product of insurance and market player

Unit5
Q1 Explain depository participants
What is a Depository
A bank holds your funds, and just like that, a depository contains your financial assets. A
depository is a financial institute that does this and you have to pay certain dp charges to
open an account with a depository participant linked to a main depository. The depository
has the responsibility of keeping your financial assets like bonds, mutual funds, stocks, and
other assets in dematerialized format safe. India has two primary depositories - NSDL
(National Securities Depository Limited) and CSDL (Central Depository Services Limited).
Since it isn’t possible to open an account and trade directly with either of these bodies,
depository participants step in.
Who Is a Depository Participant
You can think of a depository participant as a mediator between CDSL and NSDL, and
traders and investors. Essentially, a depository participant means a place that resembles a
bank that stores money and conducts transactions. Instead of money, a depository
participant acts as a store of assets such as securities. With a DP or depository participant,
you can open a Demat account and store securities and then trade with them as your
account may be linked if you open a trading account. Serving as an agent of one or both the
NSDL and CDSL, a depository participant helps you manage your assets efficiently.
The Role of a Depository Participant
Now that you have enough understanding as to what is depository participant, you may
want to know why you need one. This can be best explained by knowing the role of
depository participants, described below:

1. Eliminates Unnecessary Paperwork - Previously, trading produced a massive amount

of paperwork with investors keeping track of assets. Through a depository
participant, all this is managed digitally and conveniently.
2. Eliminates Fraud - Since the processes of a DP are executed electronically, they are
safe and you don’t have to take care to prevent loss/theft of physical assets.
3. Rapid Processes - In line with depository participants working in a transparent and
efficient manner, the whole process of buying assets, storing them and trading with
them is quicker than it was earlier.
4. Managing Bulk - Since depository participants execute all their business online,
managing affairs with a bulk of investors becomes easy.

Q2 objective of SEBI

The Securities and Exchange Board of India (SEBI) is the regulatory body for the securities
market in India. Its primary objective is to protect the interests of investors in securities and
to promote the development and regulation of the securities market. SEBI aims to achieve
the following objectives:

1. Investor Protection: SEBI works to safeguard the interests of investors by ensuring

fair and transparent dealings in the securities market. This includes taking measures
to prevent fraudulent and unfair trade practices.

2. Regulation of Securities Market: SEBI regulates various participants in the securities

market, such as stock exchanges, brokers, merchant bankers, and other
intermediaries. It formulates and implements regulations to ensure the orderly and
efficient functioning of the market.

3. Development of the Securities Market: SEBI is involved in the development of the

securities market by introducing new financial instruments, promoting fair
competition, and encouraging innovation in the market.

4. Regulation of Intermediaries: SEBI regulates various intermediaries in the securities

market, including stockbrokers, sub-brokers, registrars, transfer agents, and others.
It sets standards and practices to ensure their fair and ethical conduct.

5. Promotion of Research and Education: SEBI promotes research and education in the
securities market. It conducts training programs for intermediaries and investors to
enhance their understanding of the market and to promote informed decision-
making.
 6. Prohibition of Insider Trading: SEBI aims to prevent insider trading and fraudulent
activities in the securities market. It formulates and enforces regulations to curb
unfair practices related to trading based on non-public information.

7. Monitoring and Surveillance: SEBI monitors and supervises the securities market to
detect and prevent market manipulations, frauds, and other malpractices. It has the
authority to take corrective measures when necessary.

Overall, SEBI plays a crucial role in ensuring the integrity and stability of the securities
market in India while protecting the interests of investors and promoting its development.

Q3 functions and powers of SEBI

Functions of SEBI

 To protect the interests of Indian investors in the securities market.

 To promote the development and hassle-free functioning of the securities market.

 To regulate the business operations of the securities market.

 To serve as a platform for portfolio managers, bankers, stockbrokers, investment

advisers, merchant bankers, registrars, share transfer agents and others.

 To regulate the tasks entrusted to depositors, credit rating agencies, custodians of

securities, foreign portfolio investors and other participants.

 To educate investors about securities markets and their intermediaries.

 To prohibit fraudulent and unfair trade practices within the securities market and
related to it.

 To monitor company takeovers and acquisition of shares.

 To keep the securities market efficient and up to date through proper research and
developmental tactics.

Powers of SEBI

Following are the key powers of SEBI-

 Quasi-judicial Powers
In cases of fraud and unethical practices in the securities market, SEBI India can pass
judgements.

The said power of SEBI facilitates transparency, accountability and fairness in the securities
market.

 Quasi-executive Powers

SEBI can examine the Book of Accounts and other vital documents to identify or gather
evidence against violations. If it finds one violating the regulations, the regulatory body can
impose rules, pass judgements and take legal actions against violators.

 Quasi-Legislative Powers

To protect the interest of investors, the authoritative body has been entrusted with the
power to formulate pertinent rules and regulations. Such rules tend to encompass listing
obligations, insider trading regulations and essential disclosure requirements.

The body formulates rules and regulations to eliminate malpractices in the securities
market.

The Supreme Court of India and the Securities Appellate Tribunal have the upper hand when
it comes to the powers and functions of SEBI. The two apex bodies must go through all their
functions and related decisions.

Q4 explain NSE And BSE

The NSE (National Stock Exchange) and BSE (Bombay Stock Exchange) are two of the major
stock exchanges in India.

National Stock Exchange (NSE):

1. Establishment: NSE was established in 1992 and began its operations in 1994.
2. Location: The NSE is headquartered in Mumbai, Maharashtra, India.
3. Index: NSE is known for its flagship index called Nifty, which consists of 50 actively
traded stocks across various sectors.
 4. Technology: NSE is known for its advanced and sophisticated electronic trading
platform. It was the first exchange in India to implement a fully automated, screen-
based electronic trading system.
Bombay Stock Exchange (BSE):

1. Establishment: BSE is one of the oldest stock exchanges in Asia, established in 1875.
2. Location: The BSE is also headquartered in Mumbai, Maharashtra, India.
3. Index: BSE is known for its benchmark index, the Sensex, which represents the
performance of 30 large, well-established companies listed on the exchange.
4. Historical Significance: BSE has a long and rich history and played a crucial role in the
development of the Indian capital market.

Key Differences:

1. Formation: NSE is relatively newer compared to BSE, which has a much longer
history.
2. Indices: Nifty is the key index for NSE, while Sensex is the primary index for BSE.
3. Trading Technology: NSE is known for its advanced electronic trading system, while
BSE has transitioned to electronic trading from traditional floor trading.
Both NSE and BSE play a vital role in the Indian financial markets, providing a platform for
companies to list and for investors to buy and sell securities. They contribute significantly to
the development and regulation of the Indian capital market.

Q7 functions of RBI

Functions of RBI
1. Monetary Authority: The main function of RBI is formulating and
implementing the monetary policies of India. Creating and balance between
“Price stability” and “future economic growth” is the main challenge of RBI
as a monetary authority. Read more on the monetary authority role of RBI
2. Regulator and supervisor of the financial system: RBI sets the rules and
regulations under which Indian banks and financial systems must operate.
The idea is to run the banks and financial system so efficiently that public
trust in the system is maintained. When people feel confident about the
financial system, it’s a win for RBI. How RBI ensures public confidence?
By ensuring that the depositor’s money is safe with the banks, and all
banking & financial functions are operating seamlessly as per rules. Read
more on how RBI manages the financial system.
3. Manager of Foreign Exchange: In India, all foreign currency flow must be
done as per FEMA (Foreign Exchange Management Act). It is the RBI that
ensures that transactions happen as per FEMA. The bigger role of RBI is in
ensuring that external trade happens in a seamless manner. Whether the
trader is a resident Indian or a foreign national, they must be able to deal in
foreign exchange in an easy and transparent manner. Read more
about Foreign Exchange Management by RBI.
4. The Issuer of Currency: It is the responsibility of the RBI to print and
issue new currency notes in India. It is also the RBI’s responsibility to
exchange old or damaged notes for new ones. This way RBI can manage the
availability of enough “good quality cash” needed in the market at a given
point in time. Here, “cash” means both notes and coins. Read more
about RBI’s role as an issuer of currency.
5. Regulator and Supervisor of Payment and Settlement Systems:In India,
all payments must be settles as per PSS Act, 2007 (Payment and Settlement
Systems Act). It is the RBI who ensures that transactions happens as per
PSS. In India there are several payments systems like ECS, Credit Card,
Debit Card, RTGS, NEFT, IMPS and UPI. All these payments system are
covered by PSS Act, 2007. The overall objective of RBI is to provide fast,
safe and efficient payment system for the public. Efficient payment flows is
one of the main confidence booster of the public in the Indian financial
system. Read more here.
6. Banker to Government: Like retail and commercial banks gives service to
common public, RBI is the retail bank for the Government of India (GOI).
RBI also acts as a merchant banker for the GOI. Read more about role
of RBI as Banker to GOI.
7. Banker to Banks: All Banks in India maintains an account with the RBI.
They keep their statutory reserves and other deposits in this account. Hence,
this way RBI also functions as banker to the banks. It is RBI’s responsibility
to ensure inter-bank transactions. RBI can also lend money to banks as a
special case. Read more about role of RBI as Banker to Banks.