UNIT-1

1. Discuss the evolution and development of banks in India. Discuss

the policy measures relating to development of financial
institutions in India.
 Discuss the evolution and development of banks in India

The banking sector development can be divided into three phases:

 Phase I: The Early Phase which lasted from 1770 to 1969

 Phase II: The Nationalisation Phase which lasted from 1969 to 1991
 Phase III: The Liberalisation or the Banking Sector Reforms Phase which
began in 1991 and continues to flourish till date

 Pre Independence Period (1786-1947)

The first bank of India was the “Bank of Hindustan”, established in 1770 and
located in the then Indian capital, Calcutta. However, this bank failed to work
and ceased operations in 1832.

During the Pre Independence period over 600 banks had been registered in
the country, but only a few managed to survive.

Following the path of Bank of Hindustan, various other banks were established
in India. They were:

 The General Bank of India (1786-1791)

 Oudh Commercial Bank (1881-1958)
 Bank of Bengal (1809)
 Bank of Bombay (1840)
 Bank of Madras (1843)
During the British rule in India, The East India Company had established three
banks: Bank of Bengal, Bank of Bombay and Bank of Madras and called them
the Presidential Banks. These three banks were later merged into one single
bank in 1921, which was called the “Imperial Bank of India.”

The Imperial Bank of India was later nationalised in 1955 and was named The
State Bank of India, which is currently the largest Public sector Bank.
  Post Independence Period (1947-1991)
At the time when India got independence, all the major banks of the country
were led privately which was a cause of concern as the people belonging to
rural areas were still dependent on money lenders for financial assistance.

With an aim to solve this problem, the then Government decided to

nationalise the Banks. These banks were nationalised under the Banking
Regulation Act, 1949. Whereas, the Reserve Bank of India was nationalised in
1949.

Following it was the formation of State Bank of India in 1955 and the other 14
banks were nationalised between the time duration of 1969 to 1991. These
were the banks whose national deposits were more than 50 crores.

Given below is the list of these 14 Banks nationalised in 1969:

1. Allahabad Bank
2. Bank of India
3. Bank of Baroda
4. Bank of Maharashtra
5. Central Bank of India
6. Canara Bank
7. Dena Bank
8. Indian Overseas Bank
9. Indian Bank
10.Punjab National Bank
11.Syndicate Bank
12.Union Bank of India
13.United Bank
14.UCO Bank
In the year 1980, another 6 banks were nationalised, taking the number to 20
banks. These banks included:

1. Andhra Bank
2. Corporation Bank
3. New Bank of India
 4. Oriental Bank of Comm.
5. Punjab & Sind Bank
6. Vijaya Bank
Apart from the above mentioned 20 banks, there were seven subsidiaries of
SBI which were nationalised in 1959:

1. State Bank of Patiala

2. State Bank of Hyderabad
3. State Bank of Bikaner & Jaipur
4. State Bank of Mysore
5. State Bank of Travancore
6. State Bank of Saurashtra
7. State Bank of Indore
All these banks were later merged with the State Bank of India in 2017, except
for the State Bank of Saurashtra, which merged in 2008 and State Bank of
Indore, which merged in 2010.

 Liberalisation Period (1991-Till Date)

Once the banks were established in the country, regular monitoring and
regulations need to be followed to continue the profits provided by the
banking sector. The last phase or the ongoing phase of the banking sector
development plays a hugely significant role.

To provide stability and profitability to the Nationalised Public sector Banks,

the Government decided to set up a committee under the leadership of Shri.
M Narasimham to manage the various reforms in the Indian banking industry.

The biggest development was the introduction of Private sector banks in India.
RBI gave license to 10 Private sector banks to establish themselves in the
country. These banks included:

1. Global Trust Bank

2. ICICI Bank
3. HDFC Bank
4. Axis Bank
5. Bank of Punjab
 6. IndusInd Bank
7. Centurion Bank
8. IDBI Bank
9. Times Bank
10.Development Credit Bank
The other measures taken include:

 Setting up of branches of the various Foreign Banks in India

 No more nationalisation of Banks could be done
 The committee announced that RBI and Government would treat both
public and private sector banks equally
 Any Foreign Bank could start joint ventures with Indian Banks
 Payments banks were introduced with the development in the field of
banking and technology
 Small Finance Banks were allowed to set their branches across India
 A major part of Indian banking moved online with internet banking and
apps available for fund transfer
Thus, the history of banking in India shows that with time and the needs of
people, major developments have been brought about in the banking sector
with an aim to prosper it.

 Discuss the policy measures relating to development of

financial institutions in India.

The development of financial institutions in India has been facilitated through

various policy measures aimed at promoting financial stability, inclusiveness,
and growth. Here are some key policy measures related to the development of
financial institutions in India:

1. Liberalization and Deregulation: In the early 1990s, India embarked on

a path of economic liberalization and financial sector reforms. The
government initiated measures to liberalize and deregulate the financial
sector, including easing restrictions on the establishment of new
financial institutions and promoting competition.
2. Licensing of New Banks: The Reserve Bank of India (RBI) plays a crucial
role in the development of financial institutions in India. It is responsible
for issuing licenses to new banks, both in the public and private sectors.
The licensing process involves rigorous scrutiny of the applicant's
financial soundness, governance structure, and compliance with
regulatory norms.

3. Foreign Direct Investment (FDI): The Indian government has allowed

FDI in the banking and financial services sector to attract foreign
investments, foster innovation, and bring in advanced technology and
expertise. The FDI policy has been periodically revised to relax
restrictions and enhance the ease of doing business.

4. Prudential Regulations: The RBI formulates and implements prudential

regulations to ensure the stability and soundness of financial
institutions. These regulations cover aspects such as capital adequacy,
risk management, asset quality, and liquidity. Prudential norms are
periodically updated to align with international best practices and
evolving market dynamics.

5. Financial Inclusion Initiatives: The Indian government has launched

several financial inclusion initiatives to extend banking services to the
unbanked and underbanked population. The Pradhan Mantri Jan Dhan
Yojana (PMJDY) aims to provide basic banking services, including no-
frills accounts, to every household. Financial inclusion programs
facilitate the establishment of banking correspondents, mobile banking,
and digital payment systems.

6. Priority Sector Lending: Financial institutions in India are mandated to

allocate a specified percentage of their lending to priority sectors such
as agriculture, micro, small, and medium enterprises (MSMEs), housing,
and education. Priority sector lending ensures that credit flows to
sectors that are critical for inclusive growth and development.
7. Credit Guarantee Schemes: The government has introduced credit
guarantee schemes to mitigate the risks associated with lending to small
and medium-sized enterprises (SMEs) and other priority sectors. These
schemes provide collateral-free credit and partial guarantees to
 encourage financial institutions to extend loans to borrowers who may
have limited collateral or credit history.

8. Consolidation and Merger: The recent policy focus has been on

consolidation and merger of financial institutions, especially in the
public sector. The government initiated the consolidation of public
sector banks to create stronger entities with enhanced operational
efficiency, economies of scale, and improved risk management practices.

9. Regulatory Framework for Non-Banking Financial Companies

(NBFCs): The RBI has put in place a regulatory framework for NBFCs,
which play a significant role in providing credit and other financial
services. The regulations aim to ensure the financial stability of NBFCs,
promote transparency, and safeguard the interests of borrowers and
investors.

10.Digital Payments and Fintech: Policy measures have been

implemented to promote digital payments and fintech innovations in
the financial sector. Initiatives such as the Unified Payments Interface
(UPI) and the establishment of regulatory sandboxes encourage the
adoption of digital payment systems and foster innovation in financial
technology.

These policy measures collectively aim to develop a robust, inclusive, and

technology-driven financial system in India. The government and regulatory
authorities continue to review and update these policies to address emerging
challenges and seize opportunities for the growth and development of
financial institutions.

2. What is EXIM Bank? What are the objective of EXIM Bank? Discuss
in detail the function of EXIM Bank.
 What is EXIM Bank
EXIM Bank, short for the Export-Import Bank of India, is a specialized
financial institution established by the Government of India in 1982. It
serves as the country's principal export credit agency, supporting and
promoting India's international trade activities.

EXIM Bank plays a crucial role in facilitating exports by providing a

range of financial products and services to Indian exporters. It offers
export credit facilities such as pre-shipment and post-shipment credit,
export bills rediscounting, and export finance schemes. These credit
facilities help exporters meet their working capital needs, extend credit
to overseas buyers, and enhance their competitiveness in global
markets.

In addition to export credit, EXIM Bank provides buyer's credit and lines
of credit to foreign buyers and governments. This enables Indian
exporters to secure export orders and expand their reach into new
markets. It also supports project exports by offering project finance to
Indian companies involved in overseas construction and infrastructure
projects.

 What are the objective of EXIM Bank

The objectives of EXIM Bank (Export-Import Bank of India) are centered
around promoting and facilitating India's international trade. Here are
the key objectives of EXIM Bank:

I. Financing of Export and Import: EXIM Bank aims to provide

financial assistance and credit facilities to Indian exporters and
importers. It offers a range of financial products, including export
credit, pre-shipment and post-shipment credit, lines of credit, and
buyer's credit. The objective is to support exporters in meeting
their working capital requirements, extending credit to overseas
buyers, and facilitating imports.

II. Promotion of Export and Import Activities: EXIM Bank actively

promotes Indian exports and imports by conducting market
research, economic analysis, and feasibility studies of potential
trade destinations. It provides guidance, advisory services, and
trade-related information to Indian businesses to help them
identify market opportunities, understand trade regulations, and
overcome trade-related challenges.

III. Enhancing Export Competitiveness: EXIM Bank's objective is to

enhance the competitiveness of Indian exporters in global
markets. It achieves this by providing financial assistance and
 support, enabling exporters to offer competitive pricing, improve
product quality, and adopt advanced technologies. The bank also
assists exporters in expanding into new markets and diversifying
their export base.

IV. Project and Infrastructure Financing: EXIM Bank plays a

significant role in financing project exports and overseas
infrastructure projects undertaken by Indian companies. It
provides project finance, lines of credit, and guarantees to
support Indian companies involved in overseas construction,
infrastructure development, and engineering projects.

V. Trade Finance Services: EXIM Bank offers various trade finance

services to facilitate smooth and secure international trade
transactions. These services include issuing letters of credit, bank
guarantees, export credit insurance, and export bills
rediscounting. The objective is to mitigate risks, improve liquidity,
and foster trust between buyers and sellers in cross-border trade.

VI. Market Intelligence and Research: EXIM Bank conducts

research, analysis, and market intelligence activities to provide
valuable insights on global trade trends, market opportunities,
and policy developments. The objective is to equip Indian
exporters with the necessary information and knowledge to make
informed decisions, adapt to market dynamics, and enhance their
competitiveness.

VII. Cooperation and Collaboration: EXIM Bank seeks to foster

cooperation and collaboration with international financial
institutions, export credit agencies, and trade promotion
organizations. It aims to establish partnerships and exchange best
practices to enhance the effectiveness of its operations and
support India's international trade activities.

 Discuss in detail the function of EXIM Bank.

The Export-Import Bank of India (EXIM Bank) performs several

functions to support and facilitate India's international trade. Its
functions encompass financial assistance, credit facilitation, market
research, and advisory services. Let's delve into the details of the
functions performed by EXIM Bank:

I. Export Credit: EXIM Bank provides various export credit

facilities to Indian exporters. These include pre-shipment
credit, post-shipment credit, export bills rediscounting, and
export finance schemes. Pre-shipment credit helps exporters
meet their working capital requirements for procuring,
processing, and packing goods prior to shipment. Post-
shipment credit assists exporters by providing financing
against the receivables arising from exports. Export bills
rediscounting allows exporters to discount their export bills at
favorable rates. Export finance schemes offer tailor-made
credit facilities to exporters based on their specific
requirements.

II. Buyer's Credit and Lines of Credit: EXIM Bank extends

buyer's credit to overseas buyers of Indian goods and services.
It facilitates financing for importers to purchase goods from
India on deferred payment terms. This helps Indian exporters
secure export orders and provides a competitive advantage in
global markets. EXIM Bank also provides lines of credit to
foreign governments and institutions to support Indian
exports and project exports. These lines of credit help finance
imports into foreign countries and promote bilateral trade
relations.

III. Project Export Finance: EXIM Bank offers project export

finance to Indian companies involved in overseas construction,
infrastructure, and engineering projects. It provides financial
assistance in the form of loans, lines of credit, and guarantees.
Project export finance enables Indian companies to undertake
 and execute large-scale projects abroad by meeting their
working capital and long-term financing requirements.

IV. Trade Finance Services: EXIM Bank provides a range of trade

finance services to facilitate smooth and secure international
trade transactions. It issues letters of credit and guarantees to
provide assurance to exporters and importers. These
instruments mitigate risks and enhance the trust between
buyers and sellers. EXIM Bank also offers export credit
insurance to protect exporters against non-payment risks.
Moreover, it offers export bills rediscounting services, enabling
exporters to convert their export receivables into immediate
cash flow.

V. Market Research and Analysis: EXIM Bank conducts market

research, feasibility studies, and economic analysis to provide
valuable insights to Indian exporters. It identifies potential
markets, evaluates market opportunities, and assesses the
viability of export projects. The bank offers market intelligence
reports, country-specific studies, and trade-related information
to help exporters make informed decisions and strategize their
export plans effectively.

VI. Advisory Services: EXIM Bank provides guidance and advisory

services to Indian exporters and importers. It offers assistance
in areas such as export promotion, trade finance, risk
management, and project export. The bank advises exporters
on market entry strategies, export finance options, export
credit insurance, and other trade-related matters. This advisory
support helps exporters navigate the complexities of
international trade and maximize their export potential.

VII. Capacity Building and Training: EXIM Bank conducts capacity

building programs, workshops, and training sessions to
 enhance the knowledge and skills of exporters and importers.
These programs focus on various aspects of international
trade, export finance, risk management, and project exports.
By imparting knowledge and promoting best practices, EXIM
Bank helps exporters and importers improve their
competitiveness and ability to access global markets.

VIII. Cooperation and Collaboration: EXIM Bank collaborates with

international financial institutions, export credit agencies, and
trade promotion organizations. It enters into partnerships and
cooperation agreements to foster knowledge exchange, share
best practices, and facilitate cross-border trade. Such
collaborations enhance the effectiveness of EXIM Bank's
operations and contribute to a favorable trade environment.

Overall, EXIM Bank plays a vital role in supporting and promoting

India's international trade activities. Its multifaceted functions
encompass financial assistance, credit facilitation, market research,
advisory services, and capacity building. By providing comprehensive
support to Indian exporters and importers, EXIM Bank contributes to
the growth, competitiveness, and resilience of India's trade sector.

3. What is Central Bank? Discuss the role of Central Bank and its
various functions.
 What is Central Bank
The central bank of India is the Reserve Bank of India (RBI). It is the
supreme monetary authority responsible for regulating and overseeing
the country's banking system and monetary policy. The RBI was
established in 1935 and serves as the central bank of the Republic of
India.

The Reserve Bank of India operates under the Reserve Bank of India Act,
1934, which provides the legal framework for its functions and powers. It
functions as an autonomous institution with the primary objective of
maintaining price stability while promoting economic growth and
financial stability.
  Discuss the role of Central Bank and its various functions
The key functions and roles of the Reserve Bank of India include:

I. Monetary Policy: The RBI formulates and implements monetary policy

in India. It sets interest rates, manages liquidity in the banking system,
and regulates the money supply to maintain price stability and control
inflation.

II. Banking Regulation and Supervision: The RBI regulates and

supervises banks and financial institutions in India. It issues licenses for
the establishment of banks, sets prudential norms, and oversees their
operations to ensure financial stability, soundness, and compliance with
regulatory guidelines.

III. Lender of Last Resort: Central banks act as the lender of last resort
during times of financial stress. They provide liquidity support to banks
and financial institutions to prevent systemic disruptions and maintain
the stability of the banking system. This function helps ensure that
banks have access to emergency funding when facing liquidity
shortages.

IV. Currency Issuance: The RBI has the sole authority to issue currency
notes in India. It designs, prints, and distributes currency notes across
the country to maintain an adequate supply of currency and facilitate
monetary transactions.

V. Foreign Exchange Management: The RBI manages the foreign

exchange reserves of the country. It formulates and implements policies
to promote orderly development and functioning of the foreign
exchange market, facilitating external trade and payments.

VI. Payment Systems Oversight: Central banks play a vital role in

overseeing and regulating payment and settlement systems. They
establish and maintain efficient, secure, and reliable payment systems,
which are essential for the smooth functioning of the economy. Central
banks monitor and regulate payment systems to ensure efficiency,
transparency, and financial stability.
VII. Developmental Functions: The RBI performs various developmental
functions aimed at promoting financial inclusion, banking infrastructure
development, and sustainable economic growth. It provides refinancing
facilities to financial institutions, promotes priority sector lending, and
supports initiatives for financial inclusion and literacy.

VIII. Financial Stability and Regulation: The RBI plays a crucial role in
maintaining financial stability in the country. It monitors and regulates
financial markets, including money, government securities, and foreign
exchange markets. The RBI also oversees the functioning of payment
and settlement systems to ensure their efficiency and safety.

IX. Research and Data Analysis: The RBI conducts research, data analysis,
and economic studies to support evidence-based decision-making and
policy formulation. It publishes reports, economic indicators, and
statistical data to provide insights into the Indian economy and financial
system.

Overall, the Reserve Bank of India acts as the central monetary authority
and plays a pivotal role in the formulation and implementation of
monetary policy, regulation and supervision of banks, management of
currency and foreign exchange, and promotion of financial stability and
development in India.

4. Define ECGC. Discuss its various functions.

 Define ECGC
The ECGC Limited, formerly known as the Export Credit Guarantee
Corporation of India, is a specialized financial institution established in
1957. It operates under the administrative control of the Ministry of
Commerce and Industry, Government of India. ECGC plays a crucial role
in promoting and supporting India's exports by providing export credit
insurance and related services.

The primary objective of ECGC is to protect Indian exporters against the

risks associated with non-payment or delayed payment by overseas
buyers. It offers export credit insurance schemes that cover the risks of
commercial and political nature, such as insolvency of the buyer,
protracted default, political disturbances, and foreign exchange
fluctuations.

ECGC provides various insurance policies and products tailored to meet

the diverse needs of exporters. These include pre-shipment export
credit insurance, post-shipment export credit insurance, and specific
policies for small exporters and banks. Exporters can obtain insurance
coverage for their export receivables, enabling them to mitigate risks,
enhance creditworthiness, and access working capital finance.

 Functions of ECGC
Here are the primary functions of ECGC:

I. Export Credit Insurance: The core function of ECGC is to provide

export credit insurance to Indian exporters. It offers insurance
coverage against commercial and political risks associated with
export transactions. ECGC's insurance policies protect exporters
against non-payment or delayed payment by overseas buyers due
to various factors such as insolvency, protracted default, political
unrest, or foreign exchange fluctuations.

II. Pre-shipment Credit Insurance: ECGC provides pre-shipment

credit insurance, which covers the exporter's credit risk during the
pre-shipment stage. It safeguards the exporter against non-
payment or default by the buyer before the goods are shipped.
This insurance coverage helps exporters secure pre-shipment
finance from banks and other financial institutions by offering
them protection against potential losses.

III. Post-shipment Credit Insurance: ECGC offers post-shipment

credit insurance to exporters, which covers the credit risk after the
shipment of goods. This insurance protects exporters from non-
payment or default by the buyer after the goods have been
dispatched. It enables exporters to obtain post-shipment finance
from banks and minimize the risk of non-payment.
 IV. Buyer Credit Insurance: ECGC provides buyer credit insurance,
which covers the risk of non-payment by overseas buyers. This
insurance is particularly useful for exporters extending credit to
buyers, allowing them to protect their receivables against buyer
defaults or insolvency.

V. Credit Rating of Overseas Buyers: ECGC offers credit rating

services for overseas buyers. It assesses the creditworthiness and
financial stability of buyers in different countries, helping
exporters make informed decisions and evaluate the risks
associated with potential buyers.

VI. Market Intelligence and Information: ECGC conducts market

research, gathers data, and provides market intelligence to
exporters. It offers insights into global trade trends, country-
specific risks, and market opportunities. This information helps
exporters identify potential markets, make strategic decisions, and
navigate the complexities of international trade.

VII. Guidance and Assistance: ECGC provides guidance and

assistance to exporters on export-related matters. It offers
advisory services on risk management, export credit insurance,
export documentation, and export finance. ECGC's expertise helps
exporters understand and manage risks associated with
international trade, enhancing their competitiveness and
confidence in exploring global markets.

VIII. Support for Small Exporters: ECGC offers specialized policies

and support for small and medium-sized exporters. It provides
tailored insurance solutions and advisory services to meet the
specific needs and challenges faced by small exporters, enabling
them to participate in international trade with confidence.

Overall, ECGC's functions revolve around providing export credit

insurance, credit rating services, market intelligence, and guidance to
exporters. By managing risks, facilitating access to finance, and offering
 valuable information, ECGC plays a crucial role in supporting and
promoting India's export trade.

5. Discuss the role and functions of RBI in the field of exchange

control in our country.
The Reserve Bank of India (RBI) plays a significant role in the field of
exchange control in India. It formulates and implements policies and
regulations related to foreign exchange management to ensure orderly
development, stability, and integrity of the foreign exchange market.
Here are the key roles and functions of RBI in the field of exchange
control:

I. Regulation of Foreign Exchange Market: RBI regulates and

oversees the functioning of the foreign exchange market in India.
It formulates rules, regulations, and guidelines to govern foreign
exchange transactions, including cross-border trade, capital flows,
and remittances. RBI's objective is to maintain an efficient,
transparent, and orderly foreign exchange market.

II. Management of Foreign Exchange Reserves: RBI is responsible

for managing India's foreign exchange reserves. It formulates and
implements strategies to build and maintain an adequate level of
reserves to meet the country's international payment obligations,
safeguard against external shocks, and maintain stability in the
exchange rate. RBI also undertakes foreign exchange
interventions to manage exchange rate volatility.

III. Foreign Exchange Policy Formulation: RBI formulates and

reviews foreign exchange policies in consultation with the central
government. It sets guidelines for various aspects of foreign
exchange transactions, including current account transactions,
capital account transactions, external borrowings, and investment
by residents and non-residents. The objective is to ensure
consistency, clarity, and alignment with the overall economic
policy objectives.
 IV. Exchange Rate Management: The RBI plays a critical role in
managing and stabilizing exchange rates in India. It intervenes in
the foreign exchange market to regulate excessive volatility and
maintain orderly conditions. The RBI may buy or sell foreign
currencies to influence exchange rates, manage capital flows, and
support the balance of payments position.

V. Liberalization and Simplification: RBI has played a crucial role in

the liberalization and simplification of India's foreign exchange
regime. It has progressively relaxed restrictions, simplified
procedures, and introduced measures to promote ease of doing
business and attract foreign investments. RBI's efforts have
facilitated cross-border trade, encouraged capital flows, and
enhanced India's integration with the global economy.

VI. Foreign Exchange Control: RBI exercises control over foreign

exchange transactions to safeguard national interests and
maintain macroeconomic stability. It sets limits and guidelines on
various transactions, including remittances, external commercial
borrowings, foreign direct investment, and outward investments
by residents. RBI's control measures aim to prevent money
laundering, maintain balance of payments equilibrium, and
manage risks associated with cross-border transactions.

VII. Monitoring and Enforcement: RBI monitors foreign exchange

transactions and enforces compliance with foreign exchange
regulations. It undertakes surveillance, inspections, and audits to
ensure adherence to foreign exchange norms by banks, financial
institutions, and other entities engaged in foreign exchange
transactions. RBI also takes necessary enforcement actions against
non-compliant entities.

VIII. Development of Foreign Exchange Market Infrastructure: RBI

plays a key role in developing and strengthening the
infrastructure for the foreign exchange market. It facilitates the
establishment and functioning of authorized dealer (AD) banks,
money changers, and foreign exchange clearing systems. RBI also
 promotes technological advancements, automation, and
standardization in foreign exchange transactions to enhance
efficiency and transparency.

IX. Anti-Money Laundering and Combating Financing of

Terrorism: RBI collaborates with other regulatory bodies and
enforcement agencies to combat money laundering, terrorist
financing, and other illicit activities related to foreign exchange
transactions. It enforces strict due diligence, reporting
requirements, and anti-money laundering regulations to
safeguard the integrity of the financial system.

X. Promotion of Cross-Border Trade and Investment: The RBI

plays a supportive role in facilitating cross-border trade and
investment. It collaborates with government agencies and other
stakeholders to promote export-import activities, encourage
foreign direct investment (FDI), and foster an environment
conducive to international economic cooperation.

Overall, RBI's role in the field of exchange control is crucial for

maintaining stability, facilitating international trade and investment,
managing risks, and ensuring compliance with foreign exchange
regulations. Its functions encompass policy formulation, regulation,
supervision, enforcement, and development of the foreign exchange
market in India.

6. What do you mean by Central Bank? Enumerate the various functions

performed by the Central Bank in India.

7. What is ECGC? Discuss the nature and guarantee of ECGC.

The nature and guarantee provided by the ECGC (Export Credit

Guarantee Corporation of India) can be understood in terms of its
insurance coverage and risk mitigation services for exporters. Here are
the key aspects of the nature and guarantee provided by ECGC:

I. Export Credit Insurance: ECGC offers export credit insurance to

Indian exporters. This insurance coverage protects exporters
 against the risk of non-payment or delayed payment by overseas
buyers. It safeguards exporters' receivables and provides financial
security by compensating them in case of buyer default due to
various commercial and political risks.

II. Coverage Against Commercial and Political Risks: ECGC's

insurance policies cover both commercial and political risks
associated with export transactions. Commercial risks include
insolvency of the buyer, protracted default, and commercial
disputes leading to non-payment. Political risks encompass risks
arising from political disturbances, war, civil unrest, import/export
restrictions, and non-convertibility of currencies.

III. Pre-shipment and Post-shipment Coverage: ECGC provides

insurance coverage for both pre-shipment and post-shipment
stages of export transactions. Pre-shipment coverage protects
exporters from the risk of non-payment or default by the buyer
before the goods are shipped. Post-shipment coverage protects
against non-payment or default after the goods have been
dispatched.

IV. Coverage for Small Exporters: ECGC offers specialized insurance

products and support for small and medium-sized exporters.
These tailored policies cater to the specific needs and challenges
faced by small exporters, enabling them to manage risks
effectively and access export credit facilities.

V. Credit Rating of Overseas Buyers: ECGC provides credit rating

services for overseas buyers. It assesses the creditworthiness and
financial stability of buyers in different countries. This credit rating
information helps exporters make informed decisions about
entering into trade transactions with specific buyers and assesses
the risk associated with them.

VI. Guidance and Assistance: ECGC offers guidance and assistance

to exporters on export-related matters. It provides advisory
services on risk management, export credit insurance, export
 documentation, and export finance. The aim is to help exporters
understand and manage the risks associated with international
trade, enhance their creditworthiness, and confidently explore
global markets.

VII. Market Intelligence and Information: ECGC conducts market

research, gathers data, and provides market intelligence to
exporters. It offers insights into global trade trends, country-
specific risks, and market opportunities. This information helps
exporters identify potential markets, make informed decisions,
and navigate the complexities of international trade.

VIII. Support for Export Promotion: ECGC's guarantee and support

contribute to the promotion of exports from India. By offering
insurance coverage and risk mitigation services, it enhances
exporters' confidence, improves their creditworthiness, and
encourages them to explore new markets and expand their export
business.

In summary, the nature and guarantee provided by ECGC revolve around

export credit insurance, coverage against commercial and political risks,
credit rating services, guidance and assistance to exporters, market
intelligence, and support for export promotion. ECGC's services aim to
mitigate risks, protect exporters' interests, and facilitate India's export
growth by providing a reliable safety net and financial security to
exporters.

8. Write an essay on ECGC.

ECGC Limited, formerly known as the Export Credit Guarantee
Corporation of India, is a specialized financial institution established in
1957. It operates under the administrative control of the Ministry of
Commerce and Industry, Government of India. ECGC plays a crucial role
in promoting and supporting India's exports by providing export credit
insurance and related services.

ECGC's primary objective is to protect Indian exporters against the risks

associated with non-payment or delayed payment by overseas buyers. It
offers insurance coverage against commercial and political risks,
safeguarding exporters' receivables and providing financial security. The
coverage extends to various risks, including buyer insolvency, protracted
default, political disturbances, and foreign exchange fluctuations.

One of the key services provided by ECGC is export credit insurance. It

offers pre-shipment and post-shipment credit insurance, protecting
exporters at different stages of the export process. Pre-shipment
insurance covers the risk of non-payment before goods are shipped,
while post-shipment insurance covers the risk after the shipment has
taken place. This coverage allows exporters to secure pre-shipment and
post-shipment finance, enabling smooth trade operations.

ECGC also provides buyer credit insurance, which safeguards exporters

against non-payment by overseas buyers. This insurance is particularly
beneficial for exporters extending credit to buyers, offering protection
for their receivables in case of buyer defaults or insolvency.

In addition to insurance coverage, ECGC offers credit rating services for

overseas buyers. It assesses the creditworthiness and financial stability
of buyers in different countries, providing valuable information for
exporters to make informed decisions about entering into trade
transactions.

ECGC goes beyond insurance and credit rating services. It offers

guidance and assistance to exporters, including advisory services on risk
management, export credit insurance, export documentation, and
export finance. ECGC also provides market intelligence by conducting
research, gathering data, and offering insights into global trade trends,
country-specific risks, and market opportunities. This information helps
exporters identify potential markets and make strategic decisions.

ECGC plays a crucial role in supporting small and medium-sized

exporters by providing specialized insurance products and support
tailored to their needs. This enables smaller exporters to manage risks
effectively, enhance their creditworthiness, and access export credit
facilities.
 Overall, ECGC serves as a valuable partner to Indian exporters, providing
them with export credit insurance, credit rating services, guidance, and
market intelligence. By mitigating risks, enhancing creditworthiness, and
fostering confidence in international trade, ECGC contributes to the
growth and success of India's export sector.

9. Discuss the role of Central Bank and its various functions.

10. What is Central Bank? Discuss the functions.