EduCare247

April Current Affairs: Finance News

(MCQs & Descriptive Questions)

Important for Regulatory Bodies and Banking Exams: RBI Grade B, SEBI
Grade A, IFSCA Grade A, NABARD Grade A/B, PFRDA Grade A, SBI PO etc.

For Daily Current Affairs Quizzes Join the @educare247 Telegram Channel

www.educare247.in/ | +91-9650034187
 EduCare247
Finance News
T+0 settlement cycle
India’s stock exchanges have launched a beta version of same-day transaction
settlement, known as T+0, for select cash segment stocks.
Currently, in a limited rollout phase, T+0 enables trades to settle on the same day they
occur, offering benefits such as faster access to funds and increased flexibility for
investors.
This new system is being tested with around 25 stocks and a select group of brokers,
with the aim of assessing its effectiveness and resolving any issues before wider
implementation.
T+0 settlement allows investors to promptly reinvest funds, react quickly to market
changes, and potentially reduce counterparty risk.
MCQs
1. How many stocks have been included in first phase of T+0 settlement cycle 0
- India’s stock exchanges have launched a beta version of same-day transaction
settlement?
A. 10
B. 25
C. 40
D. 50
E. 75
Answer: B. 25

Domestically systemically important insurance companies

In the financial year 2023-24, three domestic insurance companies have been
identified as systemically important for the stability of the economy:
Life Insurance Corporation of India (LIC), General Insurance Corporation of India
(GIC), and New India Assurance Co. Ltd.
These companies are considered “too important to fail,” and there is an expectation
of government support in case of financial distress.
Designated as Domestic Systemically Important Insurers (D-SIIs), they play a critical
role in ensuring the availability of insurance services to the national economy.
D-SIIs are subject to additional regulatory measures to manage systemic risks and
moral hazard issues, including enhancing corporate governance and implementing
robust risk management frameworks.

www.educare247.in/ | +91-9650034187
 EduCare247
MCQs
2. In the financial year 2023-24, three domestic insurance companies have been
identified as systemically important for the stability of the economy, which of
the following company is not among three?
A. Life Insurance Corporation of India
B. United India Insurance Company Limited
C. General Insurance Corporation of India
D. New India Assurance Co. Ltd
E. None of the above
Answer: B. United India Insurance Company Limited
Descriptive Question
1. Why insurance penetration is low in India and discuss the important government
initiatives to provide the insurance to lower strata of society?

Reserve Bank of India's (RBI) Guidelines on Penal Charges on Loan

Accounts
The Reserve Bank of India's (RBI) latest guidelines on penal charges on loan accounts
have come into effect recently.
About RBI Guidelines on Penal Charges on Loan Accounts
The norms prohibit commercial banks and finance companies from charging
borrowers’ penal rates on loan defaults or any other non-compliance event.
Under the new rules, penalty, if charged, for non-compliance of the material terms and
conditions of the loan contract by the borrower should be treated as ‘penal charges.
It cannot be levied in the form of ‘penal interest’ that is added to the rate of interest
charged on the advances.
There should be no capitalisation of penal charges; that is no further interest computed
on such charges.
The material terms and conditions will be defined as per the credit policy of the
bank, and they may vary from one category of loan to another, and from bank to bank
based on their own assessment.
There is no upper limit or cap for penal charges. However, the guidelines stipulated
that the quantum of penal charges would be reasonable and commensurate with the
non-compliance without being discriminatory within a particular loan category.
The guidelines had also mentioned that the penal charges in the case of loans
sanctioned to individual borrowers for purposes other than business will not be higher
than the penal charges applicable to non-individual borrowers for similar non-
compliance.

www.educare247.in/ | +91-9650034187
 EduCare247
Also, in order to prevent banks from imposing arbitrary rates of interest,
they are meant to follow a board approved policy on penal charges on similar charges
on loans.
These guidelines will not apply to credit cards, which are covered under product
specific directions.
The key rationale of the guidelines was that the intent of levying penal charges is meant
to inculcate a sense of credit discipline, and such charges are not meant to be used as
a revenue enhancement tool over and above the contracted rate of interest.
MCQs
3. According to the new RBI guidelines, how should penal charges for non-
compliance of the material terms and conditions of the loan contract by the
borrower be treated?
A) As an increase in the rate of interest on the loan
B) As a separate penal interest rate
C) As 'penal charges' and not as 'penal interest'
D) As additional fees added to the loan principal
E) As an increased closure charge
Answer: C) As 'penal charges' and not as 'penal interest'
Descriptive Question
2. With reference to increasing credit growth in India, discuss the role of FinTech and
regulation related to transparency in credit.

Digital India Trust Agency

The Reserve Bank of India is considering establishing a Digital India Trust Agency
(DIGITA) to combat cyber fraud and illegal lending apps.
About Digital India Trust Agency
It will be responsible for stopping illegal lending apps from popping up.
It will enable the verification of these digital lending apps and will maintain a public
register of these verified applications.
Any app which will not carry the “verified” tag of DIGITA, will be considered
unauthorised.
Significance: This will create an important and much-needed checkpoint in the fight
against online financial fraud.
What is digital lending?
It is a remote and automated lending process, largely by use of seamless digital
technologies.

www.educare247.in/ | +91-9650034187
 EduCare247
It involves lending through web platforms or mobile apps, utilising
technology in customer acquisition, credit assessment, loan approval, disbursement,
recovery and associated customer service.
It generally involves three parties – a lender, a lending service provider (including a
digital lending platform) and a borrower.
It includes products like Buy Now, Pay Later (BNPL), which is a financing option (or
simply a short-term loan product).
It allows one to buy a product or avail a service without having to worry about paying
for it immediately.
MCQs
4. Which of the following organization is starting digital India Trust Agency to
combat cyber fraud and illegal lending apps?
A. RBI
B. Ministry of Electronics and Information Technology
C. SEBI
D. SIDBI
E. NaBFID
Answer: A. RBI

SEBI Complaints Redress System (SCORES) Platform

SEBI recently launched the new version of the SEBI Complaint Redress System
(SCORES 2.0).
What is SCORES?
SCORES is a web-based centralized grievance redress system of SEBI launched in
2011.
SCORES enables investors to lodge and follow up on their complaints and track the
status of redressal of such complaints online from anywhere.
This enables market intermediaries and listed companies to receive complaints online
from investors, redress such complaints, and report redressal online.
An investor who is not familiar with SCORES or does not have access to SCORES can
lodge complaints in physical form at any of the offices of SEBI.
Such complaints would be scanned and also uploaded in SCORES for processing.
What types of complaints can be registered in the SCORE portal?
Complaints can be lodged on SCORES for any issues covered under the Sebi Act,
Securities Contract Regulation Act, Depositories Act, and rules and regulations
and provisions of the Companies Act, 2013.
Entities against which complaints are handled by SEBI include:
www.educare247.in/ | +91-9650034187
 EduCare247
▪ Listed companies / registrar & transfer agents
▪ Brokers / stock exchanges
▪ Depository participants / depository
▪ Mutual funds
▪ Portfolio Managers
▪ Other entities (KYC Collective investment scheme, Merchant banker, Credit
rating, Foreign institutional investor etc)
Key Features of SCORES 2.0
It will feature reduced and uniform timelines for redressal of investor complaints,
which is 21 calendar days from the date of receipt of the complaint.
An auto-routing of complaints to the concerned regulated entity will be facilitated to
eliminate time lapses, if any, in the flow of complaints.
Designated bodies will have to monitor the timely redressal of investors’ complaints.
There will be two levels of review. The first review will be by the ‘designated body’ if
the investor is dissatisfied with the resolution provided by the concerned regulated
entity. The second review will be by SEBI if the investor is still dissatisfied after the
first review.
If there is non-adherence to the prescribed timelines by the regulated entity, then there
would be auto-escalation of the complaint to the next level.
SCORES 2.0 will be integrated with the KYC Registration Agency database for easy
registration of the investor on SCORES.
MCQs
5. What is the new feature of SEBI's SCORES 2.0 regarding the timeline for
redressal of investor complaints?
A. Investor complaints must be resolved within 30 calendar days of receipt.
B. There is no specified timeline for the redressal of complaints.
C. Investor complaints must be resolved within 21 calendar days of receipt.
D. Complaints will be resolved on a case-by-case basis without a fixed timeline.
E. None of the Above
Answer: C. Investor complaints must be resolved within 21 calendar days of
receipt.
6. With reference to the SEBI Complaints Redress System (SCORES) Platform,
consider the following statements:
1. SCORES is a platform where investors can lodge complaints against entities
regulated by SEBI, such as mutual funds, brokers, and listed companies.
2. Complaints related to issues covered under the Sebi Act, Securities Contract
Regulation Act, and other relevant laws can be registered on the SCORES platform.
3. The new version of SCORES, SCORES 2.0, allows a maximum of 30 days for the
redressal of investor complaints from the date of receipt.
Which of the following statements is/are correct?
www.educare247.in/ | +91-9650034187
 EduCare247
A) 1 and 2 only
B) 2 and 3 only
C) 1, 2, and 3
D) 1 and 3 only
E) None of the Above
Answer: A) 1 and 2 only
Descriptive Question
3. Analyse the role of the Securities and Exchange Board of India (SEBI) in
regulating the securities market in India. How effective has SEBI been in
promoting investor protection and market integrity? Examine.

Price-to-Earnings Ratio and Hockey-Stick Effect

The Chairperson of SEBI noted that despite a high P/E ratio, overseas investors are
attracted to the Indian capital markets due to the rapid economic growth, reflecting
global optimism and trust in India, exemplified by the hockey stick effect.
Price-to-Earnings (P/E) Ratio:
The P/E ratio is the company's share price relative to its earnings per share (EPS).
The P/E ratio helps assess a company's stock value compared to others and is also
useful for comparing its valuation historically, against peers, or the market.
A high P/E ratio may indicate overvaluation, while a low ratio could suggest
undervaluation.
Hockey Stick Effect:
The hockey stick effect is characterised by a sharp rise or fall of data points after a
long flat period.
Hockey stick charts visually depict notable changes or rapid growth, seen in areas
like corporate earnings, global temperatures, and poverty statistics, with applications
in business, economics, and policy.
It indicates the need for urgent action due to a drastic shift in data points.

Impact of AI Boom on Interest Rates

What are Interest Rates?
Interest rates represent the cost of borrowing money or the return earned on savings
or investments.
AI boom increases demand for investment in technology. Companies will be willing to
pay higher interest rates to banks, for increased capital investment. This raises interest
rates for everyone.

www.educare247.in/ | +91-9650034187
 EduCare247
The boom in AI could increase the Real (inflation-adjusted) interest
rates due to several factors:
▪ Increased demand for capital expenditure (capex) to develop high-quality
semiconductor chips for AI.
▪ Higher productivity of capital resulting from AI leads to higher real interest rates.
▪ Expansion of energy infrastructure to meet the growing demand for computation,
driven by AI.
▪ Adoption of cost-effective technologies like water desalination, leads to increased
investment in infrastructure and energy consumption.
▪ Investment in AI-driven warfare and drone combat technologies.
▪ Job losses from AI lead to investments in worker assistance programs, putting
pressure on real interest rates.

Bima Sugam
Recently, the Insurance Regulatory and Development Authority of India (IRDAI)
has approved the setting up of Bima Sugam — an online insurance marketplace
(like an e-commerce platform) for buying, selling, and servicing insurance policies as
well as settling claims.
It will onboard all the companies that offer life and non-life insurance products under
one roof.
Bima Sugam will serve as a unified platform, integrating with government databases,
insurers, intermediaries, and insurance repositories.
It will fetch customer details, provide product information, and facilitate the purchase
and servicing of insurance policies.
Acting as a single interface, it will cater to customers, intermediaries, and agents,
enabling them to connect and transact across various insurers (life, health, non-life).
Benefits for Customers:
▪ Insurance policies are available in electronic format, reducing reliance on physical
documents.
▪ Bima Sugam aims to make life insurance more affordable by streamlining processes
and reducing administrative costs.
MCQs:
7. Insurance Regulatory and Development Authority of India (IRDAI) has
approved the setting up of Bima Sugam, which is related to which of the
following?
A. Insurance related grievance portal
B. Online insurance marketplace
C. Complaint portal against insurers
D. Insurance information System
E. Insurance Management System

www.educare247.in/ | +91-9650034187
 EduCare247
Answer: B. Online insurance marketplace

What are Derivatives?

The RBI delays enforcement of regulations on exchange-traded currency derivatives by
one month, prompting traders to close positions.
About Derivatives
The term derivative refers to a type of financial contract whose value is dependent
on an underlying asset, group of assets, or benchmark. These contracts can be used
to trade any number of assets and carry their own risks.
Common derivatives include futures contracts, forwards, options, and swaps. Prices
for derivatives derive from fluctuations in the underlying asset.
The most common underlying assets for derivatives are stocks, bonds, commodities,
currencies, interest rates and market indexes.
They are used for various purposes, including speculation, hedging and getting access
to additional assets or markets.
The basic principle behind entering into derivative contracts is to earn profits by
speculating on the value of the underlying asset in the future.
There are mainly two types of derivatives: one that is subject to standardized terms
and conditions, and thus being traded on stock exchanges, and the other being traded
between private counter-parties in the absence of a formal intermediary.
While the first type is known as exchange-traded derivatives, the other is over-the-
counter derivatives.
What is Exchange Traded Currency Derivatives (ETCDs)?
They are financial contracts that allow traders and investors to speculate on the
future price movements of various currency pairs.
These derivatives are traded on exchanges, and their value is based on the underlying
currency exchange rate.
Common Derivatives:
Futures Contracts: It is an agreement between two parties to buy or sell an asset at
a predetermined price on a specific future date. The underlying asset can be
commodities, financial instruments, or indices.
Options Contracts: It gives the holder the right, but not the obligation, to buy (call
option) or sell (put option) an underlying asset at a specified price (strike price) on
or before a predetermined expiration date.
Swaps: They are agreements between two parties to exchange cash flows based on
specific financial variables. Common types of swaps include interest rate swaps,
currency swaps, and commodity swaps. Swaps are often used to manage interest
rate risks, currency risks, or to change the nature of a debt obligation.

www.educare247.in/ | +91-9650034187
 EduCare247
Forwards: They are similar to futures contracts but are not standardized
or traded on exchanges. They are customized agreements between two parties to buy
or sell an asset at a specified price on a future date.
MCQs
8. What is NOT a common underlying asset for derivatives?
A) Stocks
B) Real estate
C) Currencies
D) Commodities
E) Bonds
Answer: B) Real estate
9. Consider the following statements:
1. Futures contracts require the buyer to purchase an asset at a future date at a price
agreed upon when the contract is signed.
2. Options contracts obligate the holder to buy or sell an asset at a predetermined
price.
3. Swaps are used to manage risks associated with fluctuations in interest rates and
currency values.
Which statements are correct?
A) 1 only
B) 1 and 3 only
C) 2 only
D) All of the above
Answer: B) 1 and 3 only

RBI@90
The Prime Minister addressed the opening ceremony of RBI@90 in Mumbai, marking
90 years of the Reserve Bank of India (RBI).
Brief History of RBI:
Royal Commission on Indian Currency, 1926 (Hilton Young Commission)
recommended the establishment of the RBI, a suggestion reiterated by the Indian
Central Banking Enquiry Committee in 1931.
The RBI was founded in 1935 under the Reserve Bank of India Act, 1934, with Sir
Osborne Smith serving as its inaugural Governor.
In 1949, the RBI was nationalized, marking a pivotal moment in its institutional
history.

www.educare247.in/ | +91-9650034187
 EduCare247
The Reserve Bank of India (RBI) has evolved significantly in recent years:
▪ Inflation-targeting central bank
▪ Foreign exchange reserves
▪ Macroeconomic stability
▪ Reduction in NPAs
▪ Technology in payments
▪ Central bank digital currency
However, the RBI faces several challenges:
▪ Banking Regulation and Supervision
▪ Transparency with Regulated Entities
▪ Regulating New-Age Fintech Firms
▪ Limited Powers over Public-Sector Banks
▪ Potential Fiscal Dominance of Monetary Policy
Descriptive Question
4. Discuss the top 3 challenges faced by RBI in recent years, and what all majors have
been taken to mitigate those challenges.

Anti-Dumping Investigation
India has launched an anti-dumping investigation (initiated by the Directorate
General of Trade Remedies (DGTR)), into the import of a chemical used in the rubber
industry from China and Japan.
What is dumping?
When the goods are exported by a country to a foreign country at a price lower than
the price it charges in its own home market is called dumping.
What is Anti-Dumping?
Anti-dumping duties are taxes imposed on imported goods in order to compensate
for the difference between their export price and their normal value, if dumping causes
injury to producers of competing products in the importing country. This practice can
harm domestic industries by undercutting their prices and creating unfair competition.
Anti-dumping measures are part of WTO regulations aimed at creating a level
playing field for domestic producers against foreign competitors
Why anti-dumping investigation?
An anti-dumping probe is underway for imports of ‘insoluble sulphur’ from China and
Japan. Insoluble sulphur, an amorphous form of sulphur, doesn’t dissolve in carbon
disulphide and is crucial in the rubber industry. It serves as a vital additive agent in
rubber products like tyres and shoes, enhancing their quality and wearability.
Additionally, it acts as a vulcanization accelerator in the rubber manufacturing
process, facilitating the hardening of rubber through cross-linking of molecules with
other substances.

www.educare247.in/ | +91-9650034187
 EduCare247
Descriptive Question
5. Discuss the India-China trade deficit and Indian government initiatives to promote
the domestic industries.

Manufacturing Purchasing Managers’ Index

According to a survey released by Hong Kong and Shanghai Banking Corporation
Limited (HSBC), India's Manufacturing Purchasing Managers’ Index (PMI) reached
a 16-year peak of 59.1 in March 2024.
PMI is an economic indicator, which is derived after monthly surveys of different
companies. It shows trends in both the manufacturing and services sector.
A PMI above 50 represents an expansion when compared with the previous month.
It helps in determining whether the market conditions, as seen by purchasing
managers, is expanding, contracting or staying the same.
It is used to provide information regarding the current and future business
conditions.
The HSBC India Manufacturing PMI is compiled by S&P Global.
MCQs
10. According to a survey released by Hong Kong and Shanghai Banking
Corporation Limited (HSBC), India's Manufacturing Purchasing Managers’ Index
(PMI) reached a 16-year peak of 59.1 in March 2024. What is frequency of PMI?
A) Weekly
B) Monthly
C) Quarterly
D) Half-yearly
E) Annually
Answer: B) Monthly

RBI Retail Direct scheme

The Reserve Bank of India (RBI) is planning to launch a mobile application aimed at
facilitating seamless investment in government securities by retail investors under
the RBI Retail Direct Scheme.
About RBI Retail Direct Scheme:
It was initially introduced in November 2021.
It gives access to individual investors to maintain gilt accounts with the RBI and
invest in government securities.

www.educare247.in/ | +91-9650034187
 EduCare247
The scheme enables investors to buy securities in primary auctions as
well as buy/sell securities through the NDS-OM platform.
Negotiated Dealing System - Order Matching system (NDS-OM) means RBI’s screen
based anonymous electronic order matching system for trading in Government
securities in the secondary market.
It provides the following facilities to retail investors in government securities
market through an online portal:
▪ Open and maintain a ‘Retail Direct Gilt Account’,
▪ Access to primary issuance of government securities,
▪ Access to NDS-OM.
Eligibility: Retail investors can register under the scheme and maintain an RDG
account, if they have the following:
▪ Rupee savings bank account maintained in India,
▪ PAN, any officially valid document for KYC purpose,
▪ Valid email-ID and registered mobile number.
Payments for transactions can be done conveniently using saving bank account
through internet-banking or Unified Payments Interface (UPI).
Investor services include provisions for transaction and balance statements,
nomination facility, pledge or lien of securities and gift transactions. No fees will be
charged for facilities provided under the scheme.
MCQs
11. Reserve Bank of India (RBI) is planning to launch a mobile application aimed
at facilitating seamless investment in government securities by retail investors
under the RBI Retail Direct Scheme. When was the RBI Retail Direct Scheme
launched?
A) June 2020
B) October 2020
C) March 2021
D) November 2021
E) February 2022
Answer: D) November 2021

What is a Partnership Firm?

Recently, the Supreme Court held that the legal heirs of a deceased partner do not
become liable for any liability of the partnership firm upon the death of the partner.
About Partnership Firm
A partnership firm is a business entity where two or more individuals come together
to manage and operate a business.

www.educare247.in/ | +91-9650034187
 EduCare247
The partners pool their resources, knowledge, and skills to achieve common
business goals.
It is a widely preferred form of business, primarily due to its simplicity and ease of
formation.
The partnership business includes any kind of trade, occupation, and profession.
A partnership consists of three essential elements.
▪ A partnership must be the result of an agreement between two or more individuals.
▪ The agreement must be built to share the profits obtained from the business.
▪ The business must be run by all or any of them representing the rest.
All these conditions must coexist before a partnership can come into existence.
Indian Partnership Act, 1932
A partnership firm in India is governed and regulated by the Indian Partnership Act,
1932.
The act defines partnership as a profit-sharing relation between two or more
partners.
The duties and responsibilities of the partners, along with profit sharing, are defined
in an agreement or deed known as Partnership Agreement.
There are mainly three types of partnerships, which are as follows:
General Partnership:
In a general partnership, all the partners hold equal rights and participate in the
decision-making and management of the firm.
The general partner puts his capital, skills, and labor to achieve the firm’s financial
goals.
In a general partnership, apartner has unlimited liability and has the right to take
decisions regarding the management and operations of the firm.
Partnership at will:
Section 7 of the Indian Partnership Act, 1932, defines partnership at will as when
there is no provision made between the partners for the duration of their partnership,
or for the determination of their partnership.
There are two essential conditions for partnership at will, which are as follows:
▪ There is no fixed period for the partnership to exist
▪ There is no determination of the partnership.
Particular partnership:
A particular partnership is formed to manage and run a particular business or venture.
When the particular purpose is served, the partnership can be dissolved.
However, the partners can continue with the said partnership by making an
agreement. If there is no agreement, the particular partnership is dissolved.

www.educare247.in/ | +91-9650034187
 EduCare247
What is Windfall Profit?
Amid an extended ban on onion exports, farmers and traders are miffed that some
shipments allowed by the government to markets like the UAE have been sold at a
pittance, yielding windfall profits for selected importers.
About Windfall Profit
A windfall profit refers to a sudden increase in profits, typically caused by an
unexpected event or circumstance.
Such profits are generally well above historical norms and may occur due to factors
such as a price spike or supply shortage that are either temporary in nature or longer-
lasting.
Windfall profits are generally reaped by an entire industry sector but can also find
their way to an individual company or individual.
Among the reasons that windfall profits can arise are a sudden change in market
structure, an executive order from the government, a court ruling, or a dramatic shift
in trade policy.
In terms of an individual, a windfall profit/gain could be a spike in income as a result
of a specific, one-time event, such as winning the lottery or inheriting a fortune or
valuable property.
Businesses typically use these profits in part to increase dividends, buy back shares,
reinvest in the business for future growth, or reduce debt.
Windfall Tax:
Windfall profits often receive a windfall tax. It is a tax levied by governments against
certain industries when economic conditions allow those industries to experience
significantly above-average profits.
MCQs
12. What is a windfall profit?
A) A consistent increase in profits due to strategic planning and market expansion.
B) A sudden and unexpected increase in profits, often caused by an unexpected event
or change in market conditions.
C) A steady profit growth experienced by companies due to cost-cutting and efficiency
improvements.
D) A decrease in profits due to unforeseen market challenges and economic downturns.
Answer: B) A sudden and unexpected increase in profits, often caused by an
unexpected event or change in market conditions.

www.educare247.in/ | +91-9650034187
 EduCare247
Change in Global Accounting Rule
Recently the International Accounting Standards Board (IASB) published new
requirements under which Companies will have to publish standardised operating
profit figures from 2027.
Currently, before arriving at a net profit or loss, many companies report earnings
before interest, taxes, depreciation, and amortisation or EBITDA.
This figure is not defined under IASB rules and therefore can be compiled in different
ways to flatter performance.
International Accounting Standards Board (IASB):
The IASB, established in 2001 under the oversight of the International Financial
Reporting Standard Foundation that develops and approves International Financial
Reporting Standards to create a global accounting language for financial reporting,
mandated by over 140 jurisdictions.
Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA):
EBITDA is a financial metric that evaluates a company's operating performance by
excluding the effects of financing and accounting decisions, allowing a focus on core
operational profitability.
MCQs
13. What change did the IASB announce for financial reporting starting in 2027?
A) Standardize operating profit figures
B) Only use net profit for reporting
C) Discontinue IFRS development
D) Remove EBITDA reporting
E) None of the above
Answer: A) Standardize operating profit figures

Political Contribution by Newly Incorporated Firms

Despite regulations prohibiting companies less than three years old from making
political contributions, recent data reveals startling purchases of electoral bonds by
newly established firms in India.
The Companies Act 2013 prohibits companies less than three years old from
making political contributions, aiming to prevent shell companies from contributing
funds into political parties.
The 2017 amendment removed the cap on contributions but retained the three-
year prohibition.

www.educare247.in/ | +91-9650034187
 EduCare247
Section 182 of the Companies Act 2013 outlines penalties for
contravention, including fines and imprisonment for officers.
MCQs
14. Which section of the Companies Act 2013 outlines penalties for companies
making political contributions in contravention of regulations?
A) Section 150
B) Section 182
C) Section 195
D) Section 210
Answer: B) Section 182

RBI to Review Framework on Liquidity Coverage Ratio

Why in News?
The Reserve Bank of India (RBI) is likely to review the framework on Liquidity
Coverage Ratio for better management of liquidity risk by banks.
Recent incidents in certain jurisdictions, like Silicon Valley and Signature Bank in the
US, have shown the potential for quick fund withdrawals through digital banking
channels during stressful times.
The RBI Governor highlighted the need to reevaluate the LCR framework in response
to these emerging risks.
What is the Liquidity Coverage Ratio (LCR)?
The LCR was introduced as part of the Basel III reforms following the 2008 global
financial crisis.
The LCR is a ratio that measures the proportion of high-quality liquid assets (HQLA)
that financial institutions hold.
Banks covered under the LCR framework must maintain a stock of HQLA to cover
30 days' net outflow under stressed conditions, with a minimum LCR of 100% since
1st January 2019.
HQLA are liquid assets that can be sold immediately or converted to cash at little
or no loss of value. HQLA can also be used as collateral for borrowing purposes.
HQLAs include cash, short-term bonds, and other cash equivalents, as well as
excess Statutory Liquidity Ratio (SLR), Marginal Standing Facility (MSF) assets and the
Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR) (set at 15% of
the bank's deposits since 1st April 2020).
The LCR is a preventive measure that can be beneficial for a bank during a financial
crisis.

www.educare247.in/ | +91-9650034187
 EduCare247
Limitation: The LCR may lead to banks holding more cash and issuing
fewer loans, potentially slowing economic growth.
Status of LCR: Scheduled Commercial Banks currently maintain an LCR of 131.4%,
significantly above the minimum requirement of 100%.
LCR = High-Quality Liquid Asset Amount (HQLA) / Total Net Cash Flow Amount
MCQs
15. What is the purpose of the Liquidity Coverage Ratio (LCR)?
A) To ensure banks have enough capital to cover loans
B) To measure a bank's long-term financial stability
C) To ensure banks have enough liquid assets to cover short-term liabilities
D) To regulate the interest rates banks can offer
Answer: C) To ensure banks have enough liquid assets to cover short-term
liabilities

Fiscal Monitor Report

Recently, in its Fiscal Monitor the International Monetary Fund said industrial
policy initiatives pursued by the United States, Europe and other countries to steer
innovation in certain sectors were no panacea to boost economic growth.
About Fiscal Monitor Report:
It provides an overview of latest public finance developments, updates the medium-
term fiscal outlook, and assesses fiscal implications of policies relevant to the global
economy.
It is prepared twice a year by the IMF’s Fiscal Affairs Department.
Its projections are based on the same database used for the World Economic Outlook
(WEO) and the Global Financial Stability Report (GFSR).
The fiscal projections for individual countries have been prepared by IMF desk
economists, and, in line with the WEO guidelines.
Key facts about the International Monetary Fund
It was formed in 1944 at the Bretton Woods Conference with the goal of
reconstructing the international monetary system.
Its mission is to promote global economic growth and financial stability, encourage
international trade, and reduce poverty around the world.
It gets its money through quotas and subscriptions from its member countries.
Objective: It fosters economic growth and employment by providing temporary
financial assistance to countries to help ease the balance of payments adjustment
and technical assistance.

www.educare247.in/ | +91-9650034187
 EduCare247
Reports by IMF: World Economic Outlook and Global Financial
Stability Report
Headquarters: Washington, DC, USA
MCQs
16. How often is the Fiscal Monitor report prepared?
A) Annually
B) Biannually
C) Quarterly
D) Monthly
Answer: B) Biannually
17. What is the main mission of the International Monetary Fund?
A) To enforce global trade laws
B) To promote global economic growth and financial stability
C) To create an international currency
D) To regulate tariffs and trade barriers
Answer: B) To promote global economic growth and financial stability

MPC Keeps Repo Rate Unchanged

Recently, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI)
voted in its meeting to keep interest rates unchanged. The repo rate stands at 6.5%.
The committee also decided to remain focused on the withdrawal of accommodation.
Note:
Accommodative Monetary Policy: An accommodative stance means the central bank
is prepared to expand the money supply to boost economic growth.
The withdrawal of accommodative policy means a reduction of the money supply in
the system which will rein in inflation.
Outcomes of the MPC Meeting
The RBI has retained the GDP growth forecast at 7% for FY25 as against the 7.6%
growth projected by the National Statistical Office (NSO).
It has projected a growth of 7.1% in the first quarter of FY25, 6.9 per cent in Q2, and
7% each in Q3 and Q4.
The MPC decided to keep the policy repo rate under the liquidity adjustment facility
(LAF) unchanged at 6.50% and the standing deposit facility (SDF) at 6.25%.

www.educare247.in/ | +91-9650034187
 EduCare247
The MPC remains committed to aligning inflation with the 4% target within a band
of +/- 2% while supporting the objective of growth.
Descriptive Question
6. Analyze the role of the Reserve Bank of India (RBI) in maintaining monetary stability
and suggest ways to improve its effectiveness.

Financial Services Institutions Bureau (FSIB)

The Financial Services Institutions Bureau (FSIB) has recommended Manoj Mittal,
currently the Managing Director of IFCI, as the new Chairman and Managing Director
of the Small Industries Development Bank of India (SIDBI).
Additionally, Sanjay Shukla has been selected as the Managing Director of the
National Housing Bank (NHB)
About FSIB:
Constituted in 2022 under Department of Financial Services (Ministry of Finance),
by Central Government replacing Bank Board Bureau.
The Financial Services Institutions Bureau (FSIB) is an organization responsible for
selecting directors for state-owned banks and financial institutions in India.
It acts as a head-hunter, identifying and recommending suitable candidates for
leadership positions within the financial sector.
MCQs
18. Who has the FSIB recommended as the new Chairman and Managing Director
of the Small Industries Development Bank of India (SIDBI)?
A) Sanjay Shukla
B) Manoj Mittal
C) Rajnish Kumar
D) Anshuman Sharma
Answer: B) Manoj Mittal
19. When was the Financial Services Institutions Bureau (FSIB) constituted?
A) 2019
B) 2020
C) 2021
D) 2022
Answer: D) 2022

www.educare247.in/ | +91-9650034187
 EduCare247
Special Rupee Vostro Account (SRVA)
The Indian government has simplified the payment mechanism for traders importing
pulses from Myanmar by implementing the Rupee/Kyat direct payment system
through the Special Rupee Vostro Account (SRVA) via Punjab National Bank.
What is SRVA?
SRVA is an account that domestic banks hold for foreign banks in the former’s
domestic currency, the rupee, which allows domestic banks to provide international
banking services to their clients who have global banking needs without having to be
physically present abroad.
The SRVA is an additional arrangement to the existing system that uses freely
convertible currencies and works as a complimentary system.
It has three important components:
▪ All exports and imports must be denominated and invoiced in domestic currency
(e.g. Rupee)
▪ The exchange rate between the currencies of the trading partner countries would
be market-determined
▪ The final settlement also takes place in domestic currency (e.g. Rupee)
MCQs
20. What is the purpose of the Special Rupee Vostro Account (SRVA) used by the
Indian government?
A) To facilitate direct trade in USD between India and Myanmar.
B) To provide loans to foreign traders.
C) To enable direct payment in domestic currencies between trading partners.
D) To invest in foreign currencies.
Answer: C) To enable direct payment in domestic currencies between trading partners.
21. How does the SRVA complement the existing payment systems for
international trade?
A) By replacing all existing systems with the SRVA only.
B) By providing an alternative to transactions in non-convertible currencies.
C) By offering an additional arrangement to the existing system using freely convertible
currencies.
D) By mandating all international transactions to use the SRVA.
Answer: C) By offering an additional arrangement to the existing system using freely
convertible currencies.

Banks See Worst Deposit Crunch in 20 Years

A recently released report revealed that despite robust credit growth, Indian banks
faced difficulty in garnering deposits in 2023-24, resulting in the highest credit-
deposit ratio in at least two decades.
www.educare247.in/ | +91-9650034187
 EduCare247
Indian banks are grappling with a severe deposit cash crunch that has not been
witnessed in the past two decades.
Currently standing at 80%, the credit-deposit ratio is at its highest since 2015.
The CD ratio indicates how much of a bank’s deposit base is being utilized for loans.
Deposit Cash Crunch:
A deposit cash crunch occurs when banks have insufficient funds on hand to lend
to their customers.
As a result, businesses face challenges in operating smoothly, and employees may
experience delays in receiving their salaries.
This ripple effect can disrupt economic stability and financial well-being.
Reasons for the Deposit Crunch:
Investors are increasingly pursuing high-return, equity-linked products due to
strong market performance and growing financial awareness, presenting banks with
the dual challenge of attracting deposits and supporting credit growth.
A portion of mobilised deposits is also set aside for regulatory requirements such
as cash reserve ratio (CRR) and statutory liquidity ratio (SLR), reducing lendable funds
and intensifying competition for deposits.
In recent quarters, banks used their surplus SLR holdings to boost credit growth
amid slower deposit growth, but as SLR buffers shrink, they face the challenge of
balancing deposit rate hikes with profitability.
Banks raised deposit rates last fiscal to attract retail deposits amidst rising
competition, alternative investment options, and a shift toward real assets.
The merger of HDFC and HDFC Bank resulted in the incorporation of HDFC's loans
and deposits into the banking system, contributing to the overall figures.
MCQs
22. What does the credit-deposit (CD) ratio indicate?
A) The proportion of a bank’s assets that are liquid.
B) The percentage of deposits that is used to fund loans.
C) The ratio of a bank’s capital to its liabilities.
D) The rate at which banks lend to other banks.
Answer: B) The percentage of deposits that is used to fund loans.
23. What impact does a deposit cash crunch have on the economy?
A) It promotes increased savings among consumers.
B) It enhances the liquidity of banks.

www.educare247.in/ | +91-9650034187
 EduCare247
C) It leads to challenges in business operations and potential delays in
salary payments.
D) It causes an increase in foreign direct investment.
Answer: C) It leads to challenges in business operations and potential delays in
salary payments.

What is Gross Fixed Capital Formation (GFCF)?

The failure of private investment, as measured by private Gross Fixed Capital
Formation (GFCF) as a percentage of GDP at current prices, to pick up pace has been
one of the major issues plaguing the Indian economy.
About Gross Fixed Capital Formation (GFCF)
GFCF refers to the growth in the size of fixed capital in an economy.
Fixed assets/capital are tangible or intangible assets produced as outputs from
production processes that are used repeatedly, or continuously, for more than one
year.
GFCF consists of resident producers’ investments, deducting disposals, in fixed
assets during a given period.
It also includes certain additions to the value of non-produced assets realized by
producers or institutional units.
Private GFCF can serve as a rough indicator of how much the private sector in an
economy is willing to invest.
Overall GFCF also includes capital formation as a result of investment by the
government.
GFCF matters because fixed capital, by helping workers produce a greater amount of
goods and services each year, helps to boost economic growth and improve living
standards.
In other words, fixed capital is what largely determines the overall output of an
economy and, hence, what consumers can actually purchase in the market.
Developed economies such as the U.S. possess more fixed capital per capita than
developing economies such as India.
GFCF in the Indian economy increased significantly from INR 32.78 lakh crore in
2014-15 to INR 54.35 lakh crore in 2022-2023.
This surge in capital formation reflects substantial investments in infrastructure,
industry, and public goods.

MCQs
24. What are included in the investments counted under Gross Fixed Capital
Formation (GFCF)?

www.educare247.in/ | +91-9650034187
 EduCare247
A) Only government investments in fixed assets.
B) Investments in financial products by private entities.
C) Resident producers’ investments in fixed assets, minus disposals, during a given
period.
D) Annual profits earned by corporations.
Answer: C) Resident producers’ investments in fixed assets, minus disposals,
during a given period

Bitcoin halving
The cryptocurrency community is gearing up for the upcoming Bitcoin halving event,
which is likely to be held in last week of April.
About Bitcoin halving
The halving refers to an alteration in the foundational blockchain technology of
Bitcoin, aimed at decreasing the pace of generating new bitcoins.
Since its creation by the pseudonymous figure Satoshi Nakamoto, Bitcoin has been
structured to possess a finite supply of 21 million tokens.
The process of halving will persist until 2041, by which time all Bitcoins will have been
mined.
How does it happen?
Blockchain technology involves creating records of information - called 'blocks' - which
are added to the chain in a process called 'mining'.
Miners use computing power to solve complex mathematical puzzles to build the
blockchain and earn rewards in the form of new bitcoin.
The blockchain is designed so that a halving occurs every time 210,000 blocks are
added to the chain, roughly every four years.
At the halving, the amount of bitcoin available as rewards for miners is cut in half.
This makes mining less profitable and slows the production of new bitcoins.
Experts say that the halving event might impact Bitcoin's price as its heightened
scarcity could result in upward pressure on prices and attract a wave of new
investors to the cryptocurrency market.
MCQs
25. What is the primary purpose of the Bitcoin halving event?
A) To increase the pace of generating new bitcoins.
B) To decrease the scarcity of bitcoins in circulation.
C) To reduce the energy consumption associated with Bitcoin mining.
D) To slow down the production of new bitcoins and control the inflation rate.

www.educare247.in/ | +91-9650034187
 EduCare247
Answer: D) To slow down the production of new bitcoins and control
the inflation rate.
26. How many bitcoins will ultimately be in circulation according to the Bitcoin
protocol?
A) 100 million
B) 21 million
C) 1 billion
D) 50 million
Correct Answer: B) 21 million

Global Financial Stability Report

Recently, the International Monetary Fund (IMF) released the latest global financial
stability report.
About Global Financial Stability Report
It is a semi-annual report by the International Monetary Fund (IMF) that assesses the
stability of global financial markets and emerging-market financing.
It is released twice per year, in April and October.
It focuses on current conditions, especially financial and structural imbalances, that
could risk an upset in global financial stability and access to financing by emerging-
market countries.
Highlights of the report
It has warned about the risks to the global financial system from persistent high
inflation, rising lending in the unregulated credit market, and increasing cyber-
attacks on financial institutions.
Geopolitical risks such as the ongoing war in West Asia and Ukraine could affect
aggregate supply and lead to higher prices. This, it believes, might stop central banks
from lowering rates anytime soon.
In calendar year 2023, India was the second-largest recipient of foreign capital
after the U.S. But things could change quickly if western central banks signal that they
could keep interest rates high for a long time.
In its report also noted that the growing unregulated private credit market, in which
non-bank financial institutions lend to corporate borrowers, is a growing concern as
troubles in the market might affect the broader financial system in the future.
The borrowers in the private credit market may not be financially sound and noted
that many of them do not have current earnings that exceed even their interest
costs.
MCQs
27. How often is the Global Financial Stability Report released?

www.educare247.in/ | +91-9650034187
 EduCare247
A) Annually
B) Quarterly
C) Biannually
D) Monthly
Answer: C) Biannually

Safeguard Measures under World Trade Organization (WTO)

India and some other nations, including Switzerland, Brazil, China, Japan, Korea and
Russia, have criticized the EU for deciding against terminating its safeguard measure
on imports of certain steel products after carrying out a review.
About Safeguard Measures
Safeguard measures are measures introduced by a country that qualify as “emergency”
actions under the WTO Agreement on Safeguards.
A WTO member may take a “safeguard” action (i.e., restrict imports of a product
temporarily) under the WTO Agreement on Safeguards to protect a specific domestic
industry from an increase in imports of any product which is causing, or which is
threatening to cause, serious injury to the industry.
These actions are intended to prevent or mitigate serious injury to the member
state’s domestic industry.
Such measures, which in broad terms take the form of suspension of concessions or
obligations, can consist of quantitative import restrictions or duty increases to
higher than bound rates.
They are one of three types of contingent trade protection measures, along with anti-
dumping and countervailing measures, available to WTO members.
The guiding principles of the agreement with respect to safeguard measures are that
such measures
▪ Must be temporary;
▪ That they may be imposed only when imports are found to cause or threaten
serious injury to a competing domestic industry;
▪ That they (generally) be applied on a non-selective (i.e., most-favoured-nation, or
“MFN”) basis;
▪ That they be progressively liberalized while in effect;
▪ And that the member imposing them (generally) must pay compensation to the
members whose trade is affected.
Thus, safeguard measures, unlike anti-dumping and countervailing measures, do not
require a finding of an “unfair” practice.
The agreement defines “serious injury” as a significant overall impairment in the
position of a domestic industry.

www.educare247.in/ | +91-9650034187
 EduCare247
MCQs
28. What is the primary purpose of introducing safeguard measures under the
WTO Agreement on Safeguards?
A) To permanently restrict imports of specific products.
B) To temporarily protect a domestic industry from serious injury caused by increased
imports.
C) To sanction countries for unfair trade practices.
D) To increase global trade tariffs uniformly.
Answer: B) To temporarily protect a domestic industry from serious injury caused
by increased imports.
29. Safeguard measures must generally be applied on a basis that is:
A) Selective to specific countries.
B) Most-favoured-nation (MFN) or non-selective.
C) Only to neighbouring countries.
D) Only to countries outside the WTO.
Answer: B) Most-favoured-nation (MFN) or non-selective.

What is TINA Factor in Investing?

The recent surge in gold prices is due to the TINA (there is no alternative) factor in
China, with retail shoppers, investors, futures traders, and central bank, all turning
to the bullion in uncertain times.
About TINA Factor
TINA stands for There Is No Alternative.
It refers to a situation where investors perceive a particular asset class or investment
as the best option available given the prevailing market conditions.
This perception arises when other investment options are deemed unattractive due
to factors such as low returns, high volatility, or economic uncertainty.
Essentially, people fearful of possible uncertainties in the future consider investing
in the safest investment instrument.
People feel that there is simply no other alternative.
The TINA effect can explain a price bubble. That is, prices rise to unrealistic heights
due to a lack of reasonable alternatives.
TINA has historically been a response to certain economic conditions where
investments typically seen as safe have become less favorable.
This might include bonds or real estate, which might offer lower returns due to low
interest rates or an inflated real estate market.

www.educare247.in/ | +91-9650034187
 EduCare247
In these scenarios, TINA takes hold, with investors feeling as if their options have
shrunk substantially.
In periods when stock prices soar and bond returns languish, TINA has been used to
justify investing in anything other than stocks or bonds, such as gold,
cryptocurrencies, and non-fungible tokens (NFTs).
MCQs
30. What does TINA stand for in investment terminology?
A) This Is New Age
B) There Is No Alternative
C) Trade Investment North America
D) Total Investment Needs Analysis
Answer: B) There Is No Alternative

What is a Payment Aggregator?

The Reserve Bank of India (RBI) has floated two consultation papers seeking
enhanced regulation of payment aggregators carrying out face-to-face transactions.
About Payment Aggregator (PA):
A PA (also known as a merchant aggregator) is a third-party service provider that
allows merchants to accept payments from customers by integrating it into their
websites or apps.
PAs enable their clients to accept various payment methods such as debit cards,
credit cards, cardless EMIs, UPI, bank transfers, e-wallets, and e-mandates.
PA provides a stack of multiple payment methods to merchants so that their
customers can pay using their preferred mode of payment.
Also, a payment aggregator does fund settlement, i.e., it moves the money from banks
and other issuing entities to the merchants.
Similarly, they also enable disbursing payments to various stakeholders, such as
partners, employees, suppliers, and authorities.
It allows merchants to accept bank transfers without setting up a bank-based
merchant account. It means a merchant need not have a merchant account directly
with the bank.
A PA in India is incorporated under the Companies Act 2013.
A PA can be a bank or a non-bank entity.
Since a PA handles funds, it requires a license from the RBI.
Only non-bank PAs require unique authorization from RBI as ‘handling funds’ is
considered a part of the normal banking relationships for bank PAs.
www.educare247.in/ | +91-9650034187
 EduCare247
Examples: Amazon (Pay) India, Google India, Razorpay, Pine Labs, etc.
What is a Payment Gateway?
It is a software service that connects your bank account to the platform where you
need to transfer your money.
It authorizes you to conduct an online transaction through different payment modes
like net banking, credit card, debit card, UPI, or other online wallets.
A Payment gateway plays the role of a third party that securely transfers your money
from the bank account to the merchant’s payment portal.
MCQs
31. What is the primary function of a Payment Aggregator (PA)?
A) To provide legal advice to merchants on financial transactions
B) To enable merchants to accept various payment methods from customers
C) To issue debit and credit cards to consumers
D) To provide loans and financial assistance to merchants
Answer: B) To enable merchants to accept various payment methods from
customers
32. What kind of license is required for a non-bank Payment Aggregator in India?
A) A unique trading license from multiple regulators
B) A unique authorization license from the Reserve Bank of India (RBI)
C) A general business license from the Ministry of Corporate Affairs
D) No special license is required
Answer: B) A unique authorization license from the Reserve Bank of India (RBI)

Compulsory convertible debentures

The Competition Commission of India (CCI) has approved the International
Finance Corporation’s (IFC) subscription to Compulsory Convertible Debentures
(CCDs) of Napino Auto and Electronics Limited (Napino).
IFC, established in 1956, aims to promote economic growth in developing countries
by fostering private sector development.
Compulsory convertible debentures (CCDs) are debt instruments that are
automatically and mandatorily converted into equity after a specific time period or
when certain events occur.
CCDs are hybrid instruments that are debt when issued but are guaranteed to be
converted into equity at a later date.
CCDs help companies repay debt without spending cash and benefit investors by
offering fixed interest and later ownership of company shares.

www.educare247.in/ | +91-9650034187
 EduCare247
MCQs
33. What is the primary purpose of the International Finance Corporation (IFC)?
A) To provide educational grants to students globally.
B) To promote economic growth in developing countries through private sector
development.
C) To regulate international financial transactions.
D) To insure multinational corporations against economic losses.
Answer: B) To promote economic growth in developing countries through private sector
development.
34. What are Compulsory Convertible Debentures (CCDs)?
A) Equity shares that are converted into debentures based on market performance.
B) Debt instruments that are mandatorily converted into equity after a specific period
or event.
C) Government bonds that convert into international stocks.
D) Permanent debt instruments with no maturity date.
Answer: B) Debt instruments that are mandatorily converted into equity after a
specific period or event.

Small Finance Bank

The Reserve Bank of India (RBI) has said Small Finance Banks (SFBs) should have a
minimum net worth of Rs 1,000 crore to become universal banks in accordance
with the on-tap licensing norms.
About Small Finance Bank
SFBs are specialized banks that are licensed by RBI to provide financial services and
products to low-income individuals and underserved communities, including
microfinance and micro-enterprise services, as well as other basic banking services.
SFBs are granted the scheduled bank status after being operational and are deemed
suitable under section 42 of the RBI Act, 1934.
Objectives
▪ To provide financial inclusion to those segments of the population who are often
excluded from the traditional banking system.
▪ SFBs help them to have access to financial products such as small loans, savings,
insurance, and other basic banking services.
Eligibility
▪ Resident individuals/professionals (Indian citizens), singly or jointly, each having
at least 10 years of experience in banking and finance at a senior level are eligible
for SFBs.

www.educare247.in/ | +91-9650034187
 EduCare247
▪ Companies and Societies in the private sector, that is owned and controlled by
residents and having successful track record of running their businesses for at
least a period of five years.
▪ Existing Non-Banking Finance Companies (NBFCs), Micro Finance Institutions
(MFIs), and Local Area Banks (LABs) in the private sector, that are controlled by
residents and having successful track record of running their businesses for at least
a period of five years, can also opt for conversion into small finance banks after
complying with all legal and regulatory requirements of various authorities.
Other norms to be followed by SFBs
Capital to Risk Weighted Assets Ratio: They are required to maintain a minimum
CRAR of 15%.
Priority Sector Lending: They are required to extend 75% of their Adjusted Net
Bank Credit to Priority Sector Lending.
SFBs are required to open at least 25% of their total branches in unbanked rural
areas.
Required paid up capital: The minimum paid-up voting equity capital for small
finance banks shall be Rs.200 crore.
MCQs
35. What is the minimum required paid-up voting equity capital for Small
Finance Banks?
A) Rs. 100 crore
B) Rs. 200 crore
C) Rs. 300 crore
D) Rs. 500 crore
Answer: B) Rs. 200 crore
36. What percentage of a Small Finance Banks’ (SFB) net bank credit must be
extended to Priority Sector Lending?
A) 50%
B) 60%
C) 75%
D) 80%
Answer: C) 75%
37. What is the requirement for branch locations for Small Finance Banks?
A) All branches must be located in urban areas.
B) At least 25% of their branches must be located in unbanked rural areas.
C) No more than 10% of branches in rural areas.

www.educare247.in/ | +91-9650034187
 EduCare247
D) All branches must be in metropolitan cities.
Answer: B) At least 25% of their branches must be located in unbanked rural
areas.
38. With reference to RBI circular regarding the voluntary transition of Small
Finance Banks (SFBs) to Universal Banks, consider the following statements:
1. Small Finance Banks (SFBs) can voluntarily transition to Universal Banks after a
minimum of five years of satisfactory performance and meeting certain regulatory
requirements.
2. An eligible SFB must have a minimum net worth of ₹500 crore to be considered for
transition to a Universal Bank.
3. On transitioning to a Universal Bank, there is no requirement for an SFB to have
an identified promoter, and no new lock-in period for promoters' minimum
shareholding is mandated.
Which of the following statements is/are correct?
A) 1 and 2 only
B) 1 and 3 only
C) 2 and 3 only
D) 1, 2, and 3
Answer: B) 1 and 3 only

What are Lending Service Providers (LSPs)?

The Reserve Bank of India (RBI) recently issued the draft regulatory framework for
loan products aggregated by lending service providers to ensure transparency for
borrowers.
About Lending Service Providers (LSPs)
LSPs are engaged by the Regulated Entities (REs) (banks or NBFCs) to carry out
some functions of RE in connection with lenders’ functions on digital platforms.
The LSPs generally, under an outsourcing arrangement, offer their services to REs
for a fee or commission.
RBI defines an LSP as an agent of an RE that carries out one or more functions of the
lender, including customer acquisition, underwriting support, pricing support,
disbursement, servicing, monitoring, collection, and loan recovery on behalf of the RE.
In simple terms, LSPs are loan aggregators which provide loans from their partner
REs.
In some cases, a RE can also act as an LSP.
They are technology-centric entities which have the client reach and are thus
capable of offering a marketplace for both lenders and borrowers.

www.educare247.in/ | +91-9650034187
 EduCare247
MCQs
39. What is the primary role of Lending Service Providers (LSPs)?
A) To provide personal loans directly to consumers.
B) To act as intermediaries between borrowers and regulated entities (REs) like banks
or NBFCs.
C) To regulate and supervise the operations of financial institutions.
D) To offer investment advice to individuals.
Answer: B) To act as intermediaries between borrowers and regulated entities
(REs) like banks or NBFCs.
40. How do Lending Service Providers (LSPs) typically earn from their services
provided to Regulated Entity (RE)?
A) By charging direct fees to borrowers.
B) Through fees or commissions from REs for the services provided.
C) By collecting taxes on behalf of the government.
D) Through interest payments made by borrowers on loans.
Answer: B) Through fees or commissions from REs for the services provided.
41. With reference to the Draft Guidelines on ‘Digital Lending – Transparency in
Aggregation of Loan Products from Multiple Lenders’ issued by the Reserve Bank of India
(RBI), consider the following statements to determine their accuracy:
1. Lending Service Providers (LSPs) must provide a digital view of all loan offers
available to the borrower, including key terms and conditions.
2. LSPs are permitted to promote specific loans over others on their platforms.
3. LSPs are required to disclose the mechanism used to ascertain lenders’ willingness
to offer a loan on their website.
How many of the above statements are correct?
A) Only one
B) Only two
C) All three
D) None
Answer: B) Only two

RBI Guidelines for Asset Reconstruction Companies

The Reserve Bank of India (RBI) has issued a direction outlining updated guidelines
for Asset Reconstruction Companies (ARCs), effective from 24th April 2024.
Increased Minimum Capital Requirement:

www.educare247.in/ | +91-9650034187
 EduCare247
ARCs are now required to have a minimum capital of Rs 300 crore, a
significant increase from the previous requirement of Rs 100 crore.
Existing ARCs are granted a transition period to achieve the new minimum Net Owned
Fund (NOF) threshold of Rs 300 crore by 31st March 2026.
ARCs must ensure a minimum capital of Rs 200 crore by 31st March 2024, as part
of the transition towards the higher capital requirement.
In case of non-compliance at any of the above stages, the non-complying ARC shall be
subject to supervisory action, including a prohibition on undertaking incremental
business till it reaches the required minimum NOF applicable at that time.
Eligibility as Resolution Applicants:
ARCs with a minimum NOF of Rs 1000 crore are permitted to act as resolution
applicants in the asset resolution process under Insolvency and Bankruptcy Code,
2016 (IBC).
Investment Opportunities:
ARCs are allowed to deploy funds in government securities and deposits with
scheduled commercial banks, Small Industries Development Bank of India (SIDBI),
National Bank for Agriculture and Rural Development (NABARD) or such other entities
as may be specified by the central bank from time to time.
Additionally, ARCs can invest in short-term instruments like money market mutual
funds, certificates of deposit, and corporate bonds/commercial papers with a short-
term rating equivalent to AA- or above by an eligible credit rating agency. However,
there is a cap of 10% of the NOF on the maximum investment in such short-term
instruments.
What are Asset Reconstruction Companies?
ARCs are financial institutions that buy Non-Performing Assets (NPAs) or bad
assets from banks and financial institutions.
This allows the banks and institutions to clean up their balance sheets.
It is incorporated under the Companies Act, 2013 and registered with the Reserve
Bank of India under the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest (SARFAESI) Act, 2002.
National Asset Reconstruction Company Limited (NARCL) has been established by
banks to aggregate and consolidate stressed assets for subsequent resolution. It is
majority-owned by Public Sector Banks (PSBs) with a 51% stake.
India Debt Resolution Company Ltd. (IDRCL) is another entity that will then attempt
to sell the stressed assets in the market. PSBs and Public Financial Institutes (FIs) will
hold a maximum of 49% stake in IDRCL. The remaining 51% stake will be with
private-sector lenders.
Function:
▪ Empowered by the SARFAESI Act, 2002. ARCs specialize in the recovery and
turnaround of distressed assets.

www.educare247.in/ | +91-9650034187
 EduCare247
▪ They purchase bad debt from lenders either in cash or through a
combination of cash and security receipts.
Business Model:
Acquisition of Stressed Loans: Lenders sell stressed loans to ARCs at a discount,
freeing up their resources to focus on fresh loans.
Security Receipts: ARCs issue security receipts to lenders, redeemable upon
recovery of the specific loan.
They also charge a management fee of 1.5% to 2% of the asset value annually and
earn from recoveries, sharing upside with the selling financial institutions.
MCQs
42. Under which Act are Asset Reconstruction Companies (ARCs) registered with
the Reserve Bank of India?
A) Companies Act, 2013
B) Banking Regulation Act, 1949
C) Securities and Exchange Board of India Act, 1992
D) Securitisation and Reconstruction of Financial Assets and Enforcement of Security
Interest (SARFAESI) Act, 2002
Answer: D) Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest (SARFAESI) Act, 2002
43. What financial instrument do ARCs issue to banks in exchange for bad loans?
A) Bonds
B) Equities
C) Mutual Funds
D) Security Receipts
Answer: D) Security Receipts
44. With reference the updated guidelines for Asset Reconstruction Companies
(ARCs) issued by the Reserve Bank of India (RBI), consider the following
statements:
1. ARCs must now maintain a minimum capital of Rs 300 crore, up from the earlier
requirement of Rs 100 crore.
2. As part of the transition to the new capital requirements, ARCs must ensure a
minimum capital of Rs 250 crore by 31st March 2024.
3. ARCs with a Net Owned Fund (NOF) of at least Rs 1000 crore are eligible to act as
resolution applicants under the Insolvency and Bankruptcy Code, 2016 (IBC).
4. ARCs are permitted to invest up to 10% of their NOF in short-term instruments
such as money market mutual funds and corporate bonds with a rating of AA- or
above.
Which of the following statements is/are correct?

www.educare247.in/ | +91-9650034187
 EduCare247
A) 1 and 3 only
B) 1, 3, and 4 only
C) 2 and 4 only
D) All of the above
Answer: B) 1, 3, and 4 only
Descriptive Question
7. Evaluate the effectiveness of the Insolvency and Bankruptcy Code (IBC) in
addressing non-performing assets (NPAs) and its implications for asset reconstruction
companies (ARCs) in India. (250 Words)

India’s declining net Household Savings

Recent data from the Reserve Bank of India reveals that India’s net household savings
are at a 47-year low, standing at 5.3% of the GDP in the fiscal year 2023, down from
7.3% in 2022.
This decline is accompanied by a sharp increase in household debt (at 5.8% of GDP)
reaching the second-highest level since the 1970s.
What is the Household Saving Rate?
The Household Saving Rate refers to the percentage of disposable income that
households save instead of spending on consumption. It is a key economic indicator
that reflects the propensity of households to save for the future.
Household savings consist of three main parts:
▪ Financial assets: This includes cash, bank deposits, retirement funds, insurance
policies, stocks, and other investments.
▪ Physical assets: These are investments in tangible assets like real estate, land, and
property.
▪ Gold and silver ornaments: Savings in the form of precious metals like gold and
silver jewellery or bullion.
A higher saving rate indicates greater financial prudence and potential for investment,
while a lower saving rate may suggest higher consumer spending and less savings for
future needs.
Household net savings are the total money and investments families have, like
deposits, stocks and bonuses, minus any money they owe, like loans and debt.
Why are domestic savings important for India’s economy?
Domestic savings are vital for India’s economy as they fuel investment in key sectors
like infrastructure and industries. This capital formation supports economic growth,
job creation, and prosperity.
What is Household debt?

www.educare247.in/ | +91-9650034187
 EduCare247
Household debt refers to the total amount of money that individuals owe
to creditors, such as banks, financial institutions, or other lenders.
MCQs
45. Why are domestic savings crucial for India's economy?
A) They increase the import of luxury goods.
B) They provide capital for investment and economic growth.
C) They are used exclusively for government expenditure.
D) They lead to higher inflation rates.
Answer: B) They provide capital for investment and economic growth.
46. What is household debt?
A) The per capita money owed by the government to international creditors
B) The amount saved by households in bank accounts
C) The total amount of money that households owe to creditors
D) The financial assistance provided to households by the government
Answer: C) The total amount of money that households owe to creditors

India's Forex Reserves Drop

India's forex reserves fell by USD 2.282 billion to USD 640.334 billion in the week
ending 19th April 2024, as per the Reserve Bank of India (RBI).
Components of Reserves:
▪ Foreign currency assets decreased by USD 3.793 billion to USD 560.86 billion.
▪ Gold reserves increased by USD 1.01 billion to USD 56.808 billion.
▪ Special Drawing Rights (SDRs) decreased by USD 43 million to USD 18.034
billion.
▪ Reserve position with the International Monetary Fund (IMF) declined by USD
2 million to USD 4.631 billion.
Factors Influencing Decline:
This decrease was primarily attributed to strategic interventions by the central
bank, which deployed the reserves to defend the rupee amidst economic uncertainties
and currency depreciation.
The RBI intervenes in the market to manage liquidity, including selling dollars to
prevent sharp rupee depreciation and prevent excessive volatility in the exchange rate.
It can be noted that in April 2024, India's forex kitty had reached an all-time high of
USD 645.6 billion.

www.educare247.in/ | +91-9650034187
 EduCare247
PayU Gets Approval as Payment Aggregator
Fintech firm PayU has recently announced that it has received in-principle approval
from the Reserve Bank of India (RBI) to operate as a payment aggregator (PA), under
the Payment and Settlement Systems (PSS) Act, 2007.
The in-principle approval from RBI permits PayU to onboard new merchants, yet final
approval typically takes six months to a year.
What is a Payment Aggregator?
PA acts as an intermediary between businesses and financial institutions,
handling payment processing on behalf of merchants.
A payment aggregator simplifies the process of accepting electronic payments for
businesses.
Payment aggregators streamline the payment acceptance process, allowing businesses
to avoid the complexities of establishing direct relationships with financial entities.
They enable businesses to accept various payment methods, including credit cards,
debit cards, e-wallets, and bank transfers, through a single platform.
Some examples of payment aggregators include Google Pay, Amazon Pay, Phone pe,
and PayPal.
Capital Requirements:
New PAs must have a minimum net worth of Rs 15 crore at the time of application
and reach Rs 25 crore by the end of the third financial year post-authorisation.
Authorisation Process: While banks provide PA services as part of their normal
banking relationship and do not require separate authorisation, non-bank PAs must
obtain authorisation from the RBI under the Payment and Settlement Systems Act,
2007 (PSS).
Settlement and Escrow Account Management: Non-bank PAs are mandated to
maintain funds collected in an escrow account with a scheduled commercial bank.
PAs must adhere to specific timelines for settling funds with merchants based on
the transaction lifecycle and agreed-upon terms.
MCQs
47. What is the minimum net worth requirement for new payment aggregators at
the time of application as per RBI guidelines?
A) Rs 5 crore
B) Rs 15 crore
C) Rs 25 crore
D) Rs 35 crore
Answer: B) Rs 15 crore
48. Which Act requires non-bank payment aggregators to obtain authorization
from the RBI?

www.educare247.in/ | +91-9650034187
 EduCare247
A) Banking Regulation Act, 1949
B) Companies Act, 2013
C) Payment and Settlement Systems Act, 2007
D) Reserve Bank of India Act, 1934
Answer: C) Payment and Settlement Systems Act, 2007

IMF's Stand-By Arrangement

The International Monetary Fund has approved an immediate disbursal of USD 1.1
billion to Pakistan as part of a bailout package supported by the IMF's Stand-By
Arrangement (SBA).
About IMF's Stand-By Arrangement:
The Stand-by Arrangement (SBA) provides short-term financial assistance to
countries facing balance of payments problems.
Historically, it has been the IMF lending instrument most used by advanced and
emerging market countries.
Eligibility: All member countries facing actual or potential external financing
needs. Most often used by advanced and emerging market countries, but low-income
countries sometimes use the SBA together with the Standby Credit Facility (SCF).
Conditionality
▪ Countries’ economic policies must address the problems that led the country to
seek funding.
▪ Disbursements conditional on the observance of quantitative performance
criteria.
▪ Progress in implementing structural measures that are critical to achieving the
objectives of the program is assessed in a holistic way, including via benchmarks.
Duration of the assistance: Flexible. Typically covers a period of 12–24 months, but
not more than 36 months.
MCQs
49. What is the primary purpose of the IMF's Stand-By Arrangement (SBA)?
A) To provide long-term development loans to countries
B) To offer short-term financial assistance to countries with balance of payments
problems
C) To fund educational programs in developing countries
D) To invest in infrastructure projects globally
Answer: B) To offer short-term financial assistance to countries with balance of
payments problems
50. Who is eligible to use the IMF's Stand-By Arrangement?

www.educare247.in/ | +91-9650034187
 EduCare247
A) Only low-income countries
B) Any IMF member country facing external financing needs
C) Only European Union member states
D) Only countries in the Western Hemisphere
Correct Answer: B) Any IMF member country facing external financing needs
51. What is the typical duration of financial assistance under the SBA?
A) 6 months
B) 12-24 months, extendable up to 36 months
C) 5 years
D) Indefinite
Answer: B) 12-24 months, extendable up to 36 months

What is Paradox of Savings?

The paradox of savings argues that a rise in individuals’ savings can, in effect, cause
a significant fall in overall savings and investment.
About Paradox of Savings:
The paradox of savings, also known as the paradox of thrift, refers to the theory that
a rise in the savings rate of individuals can surprisingly cause a fall rather than a rise
in the overall savings in an economy.
This is in contrast to the general belief that a rise in individuals’ savings rates will
cause a rise in overall savings in the economy.
So even though savings may be good for an individual household, it is believed that it
may not be good for the wider economy.
The idea is part of the under-consumption theories of the business cycle, which
attribute economic downturns to weak consumption and high savings.
Origins of the theory:
The concept was popularized by British economist John Maynard Keynes in his
1936 book, The General Theory of Employment, Interest, and Money.
Keynesian economists believe that higher savings is bad for the wider economy, and
that boosting consumer spending is the way to grow an economy.
They argue that savings are invested by capitalists with the ultimate aim of selling
their output in the form of final goods and services to consumers.
So, if consumers fail to spend enough money on the output that capitalists bring to
the market to sell, it can cause losses for capitalists and discourage further
investment.

www.educare247.in/ | +91-9650034187
 EduCare247
On the other hand, a rise in consumer demand for final goods and services
is expected to encourage people to save more and invest.
Criticisms of the idea:
Critics of the idea argue that saving more is not bad for the economy and that a fall
in consumer spending does not actually cause a fall in investment.
In fact, they argue that a fall in consumer spending leads to a rise in savings and
investment.
This is simply because any money that people don’t spend on consumer goods or hoard
under their beds has to go towards their savings, which in turn gets invested.
An increase in savings allows banks to lend more. This will make interest rates go
down and lead to an increase in lending and, therefore, spending.
MCQs
52. What does the paradox of savings suggest about individual saving behaviour?
A) It increases total economic investment.
B) It has no effect on the economy.
C) It may lead to a decrease in overall economic savings and investment.
D) It always improves economic stability.
Answer: C) It may lead to a decrease in overall economic savings and investment.
53. Who popularized the concept of the paradox of savings?
A) Adam Smith
B) Milton Friedman
C) John Maynard Keynes
D) David Ricardo
Answer: C) John Maynard Keynes

www.educare247.in/ | +91-9650034187