Pillar 1 Complete

Pillar1A2: 🤑🤑 Money Supply (M0-M4) & Monetary Policy- CRR, SLR, Repo
Previous Years' official UPSC MCQs also given in this handout. You can see that UPSC is not going
into microscopic details of RBI's Operational/technical guidelines. Very simple-broad-overview type
MCQs asked. So, ✋ Donot live in 😰😰imaginary fear that.... का��नक डर मे मत �जयो के …
⇒ Inexperienced Pvt Mock Test-walla asking random/technical Qs so I must do PHD 🎓🎓✋
⇒ EconomicTimes / Financial Express/ Hindu-BusinessLine columnist are writing long winded
columns on RBI's Operation Twist or TLTRO so I must do PHD 🎓🎓✋
Table of Contents
11 🤑🤑Money’s Demand, Supply & Creation ....................................................................................... 54
11.11 🤲🤲 Demand of Money: Liquidity Preference Theory (तरलता अ�धमान) ................................. 54
11.12 💸💸💸💸Supply of Money (मुद्रा क� पू�त) ......................................................................................... 54
11.12.1 ☔💸💸 Liquidity of assets ................................................................................................... 55
11.12.2 ☔💸💸 Liquidity Trap ( तरलता जाल).................................................................................... 55
11.12.3 💸💸💸💸💸💸Measures of Money Supply (मुद्रा आपू�त के प�रमाण) .......................................... 55
11.13 💸💸💸💸💸💸 Money Supply [M3]................................................................................................. 57
11.14 💸💸⚡Money Multiplier (मुद्रा गुणक) .......................................................................................... 58
11.14.1 Money Multiplier From 2019 to 2021: why fallen? ....................................................... 59
11.14.2 💸💸⚡Money Multiplier From 1981 to 2020 ................................................................. 59
11.15 💸💸💸💸 M0: Creation of Money (मुद्रा का �नमार्ण) ......................................................................... 60
11.15.1 💸💸💸💸Supply of Money: M0 & M3 (मुद्रा क� आपू�त) Trend as per ES22 ........................ 61
11.15.2 💸💸⚡: Currency in Circulation (CIC) ........................................................................... 62
11.15.3 💸💸 Misc. topic: Velocity of Money Circulation (मुद्रा सं चालन का वेग) .............................. 62
12 🐯🐯🐯🐯 Monetary Policy (मौिद्रक नी�त) ................................................................................................. 62
12.11 🐯🐯🐯🐯🐯🐯 MonPolicy: Quantitative Tools (प�रमाणा�क साधन) ............................................... 63
12.11.1 🗄🗄✂Statutory Reserve Requirements: CRR, SLR (Fight inflation: ↑, deflation: ↓) 63
12.11.2 : 🗄🗄✂CRR SLR on Foreigners/NRI’s deposits in Indian Banks? ............................ 64
12.12 🐯🐯🐯🐯✂🗓🗓 CRR, SLR: Development in Recent Years ....................................................... 65
12.12.1 🐯🐯🐯🐯✂🗓🗓 (2016): Incremental CRR during Demonetization (नोटबं दीमे वृ�द्धशील
सीआरआर) 65
12.12.2 🐯🐯🐯🐯✂🗓🗓 (2020-Feb) CRR Exemption for 5 yrs, depending on loans (सीआरआर म�
छू ट) 65
12.12.3 🐯🐯🐯🐯✂🗓🗓 (2020-Mar) CRR ⏬ from 4% to 3% in 👻👻Atmanirbhar Bharat ..... 65
12.12.4 🚩🚩🚩🚩: 🐯🐯🐯🐯✂🗓🗓 CRR Technical things NOTIMP ............................................... 66
12.13 🐯🐯🐯🐯🐯🐯 MonPolicy → Quant Tools → Rates → LAF Repo (2000) ............................. 66
12.14 🐯🐯🐯🐯 REPO → Special Windows under Atma Nirbhar ................................................... 68
(Batch: PCB7) Mrunal’s Economy Pillar#1A-2: Money Supply & RBI’s Monetary Policy → Page 51
12.14.1 (2020) 🐯🐯🐯🐯🐯🐯 Long Term Repo Operations (LTROs: दीधर् अव�ध के रेपो ऋण) ........... 68
12.14.2 🐯🐯🐯🐯 REPO → TLTRO, SLTRO, On-Tap Windows ............................................... 68
12.14.3 🚩🚩🚩RBI’s Special Windows: Useless Doubts by flag-carrying Babushonas ......... 69
12.14.4 (2020) 🐯🐯🐯🐯Reverse Repo Rate cut .............................................................................. 69
12.14.5 🐯🐯🐯🐯🐯🐯 MonPolicy → Quant Tools → Variable Rate Reverse Repo (VRRR) .. 70
12.14.6 🐯🐯🐯🐯 🎛🎛 Variable Rate Repos (VRRs) ........................................................................ 70
12.14.7 🐯🐯🐯🐯 🎛🎛 Enhanced Reverse Repo Rate for Hardworking Bankers ........................ 71
12.14.8 🐯🐯🐯🐯🐯🐯 MonPolicy → Quant Tools → Rates → MSF (2011).............................. 71
12.14.9 🐯🐯🐯🐯🐯🐯 MonPolicy → Quant Tools → Rates → Bank rate (ब�क दर): ................... 71
12.14.10 🐯🐯🐯🐯🐯🐯 Quanti. Tools → SDF (=Reverse Repo walla game Without Collaterals)
72
12.14.11 MSF Repo vs Reverse Repo vs SDF ................................................................................. 73
12.14.12 Policy Corridor / LAF Corridor....................................................................................... 74
12.14.13 �⚖� Tri-Party Repo (�त्र-प�ीय पुन: क्रय-अनुबंध): ....................................................... 75
12.14.14 🔪🔪🔪🔪 BPLR, MCLR, External Benchmarks, etc: .......................................................... 75
12.14.15 🐯🐯🐯🐯🐯🐯 Market Operations (OMO): (Inflation → Sell G-Sec, Deflation → Buy)
75
12.15 🐯🐯🐯🐯🐯🐯🐯🐯MonPolicy: Quanti Tools: OMO → Operation Twist................................ 75
12.15.1 🔪🔪🔪🔪: Security → Debt → G-Sec & Bonds (ऋण के �लए जारी क� गई प्र�तभू�तयां) ............. 75
12.15.2 🛒🛒 (🔪🔪🔪🔪: 🧔🧔🧔) Deepening of G-Sec market- Retail investors’ RDAG @RBI 76
12.15.3 🔪🔪🔪🔪:🤵🤵Corporate Bonds: factors that determine its interest rate ......................... 76
12.15.4 🔪🔪🔪🔪: 🤑🤑 Bond Yield (बांड म� �नवेश करने पर होने वाली आय या मुनाफा) .................................. 76
12.15.5 🔪🔪🔪🔪: 🤑🤑 Bond Yield ∝ 1/Price (स�े म� खरीदा= तो मुनाफा �ादा) ................................... 77
12.15.6 🔪🔪🔪🔪: 🤑🤑 Bond yield: other factors affecting it (अ� कारक) ...................................... 77
12.15.7 🐯🐯🐯🐯🐯🐯🐯🐯Operation Twist: why? ............................................................................ 77
12.15.8 🐯🐯🐯🐯🐯🐯🐯🐯RBI’s Operation Twist: methodology (2019-Dec) .............................. 78
12.15.9 ✋🎓🎓 🔪🔪🔪🔪: 🤑🤑 Bond Yield & Inverted Yield Curve: poor benefit for exam ...... 79
12.16 🐯🐯🐯🐯🐯🐯: 📅📅 MonPolicy: Quanti Tools: OMO → G-SAP ............................................. 80
12.16.1 🐯🐯🐯🐯🐯🐯:📅📅 OMO → G-SAP : Benefit? .................................................................... 80
12.17 🐯🐯🐯🐯🐯🐯 Monetary Policy: Qualitative Tools (गुणा�क साधन) ............................................. 81
12.17.1 � Moral Suasion (नै�तक दबाव / सलाह) & Publicity (प्रचार) ............................................... 82
12.17.2 �🚯🚯 Direct Action (सीधी कायर्वाही: �ोिक लातो के भुत बातो से नहीं मानते) ............................... 82
12.17.3 💍💍 Margin Requirements / Loan to Value (LTV) (सीमा अ�नवायर्ता) ................................ 82
12.17.4 Selective Credit Control (चयना�क ऋण �नयं त्रण) .................................................................. 83
12.18 🐯🐯🐯🐯🐯🐯 Priority Sector Lending (PSL: प्राथ�मकता �ेत्र के �लए ऋण मानक) ............................... 83
12.18.1 🐯🐯🐯🐯🐯🐯 PSL Reforms-2020: on RRB/SFB/UCB? ..................................................... 85
12.18.2 🐯🐯🐯🐯🐯🐯 PSL Reforms-2020: Startups, Renewable Energy and Healthcare .......... 85
12.18.3 🐯🐯🐯🐯🐯🐯 PSL Reforms-2020: Weightage to poor districts (गरीब/�पछड़े �जलों को भारांक)
85
12.18.4 🐯🐯🐯🐯🐯🐯:📜📜 Priority Sector Lending Certificates (PSLC) from 2016 onwards ... 86
12.19 📢📢 � Monetary Policy Tools: A Ready Reckoner Table ................................................... 87
12.20 📢📢 Monetary Policy in Present-Day India ............................................................................. 88
12.20.1 📢📢 Monetary Policy Making under RBI Act since 2016 ............................................. 89
12.21 📢📢 Review of Bi-Monthly Monetary Policies ........................................................................ 91
12.21.1 🚕🚕🚕🚕 Stance: Calibrated Tightening / Neutral / Accommodative ........................... 91
12.22 🐯🐯🐯🐯🐯🐯RBI’s Monetary Policies: Before 2020-Corona.................................................... 91
12.23 🐯🐯🐯🐯🐯🐯RBI’s Monetary Policies: Corona MarchToMay’20 ........................................... 92
12.23.1 👻👻ATMANIRBHAR → Gist of RBI’s March2May 2020 Announcements:........... 92
12.23.2 🐯🐯🐯🐯🐯🐯RBI’s Monetary Policies: 2020-August (Earlier meeting in May-2020) . 93
12.23.3 🐯🐯🐯🐯🐯🐯RBI’s Monetary Policies: 2020-October (दरों म� कोई बदलाव नहीं) ................... 94
12.23.4 🐯🐯🐯🐯🐯🐯Monetary Policy: 2020-December (दरों म� कोई बदलाव नहीं) ............................. 94
12.23.5 🐯🐯🐯🐯🐯🐯Monetary Policy: Feb-2021 update (दरों म� कोई बदलाव नहीं) ........................... 94
12.23.6 🐯🐯🐯🐯🐯🐯Monetary Policy: April-2021 update(दरों म� कोई बदलाव नहीं) ......................... 94
12.23.7 🐯🐯🐯🐯🐯🐯Monetary Policy: June-2021 update (दरों म� कोई बदलाव नहीं) .......................... 95
12.23.8 🐯🐯🐯🐯🐯🐯Monetary Policy: Aug-2021 update (दरों म� कोई बदलाव नहीं) .......................... 95
12.23.9 🐯🐯🐯🐯🐯🐯Monetary Policy: Oct-2021 update (दरों म� कोई बदलाव नहीं) ........................... 95
12.23.10 🐯🐯🐯🐯🐯🐯Monetary Policy: Dec-2021 update (दरों म� कोई बदलाव नहीं) ...................... 95
12.23.11 🐯🐯🐯🐯🐯🐯Monetary Policy: Feb-2022 update (दरों म� कोई बदलाव नहीं) ....................... 95
12.23.12 🐯🐯🐯🐯🐯🐯Monetary Policy: April-2022 (SDF) ............................................................. 95
12.23.13 🐯🐯🐯🐯🐯🐯Monetary Policy: May-2022 Repo⏫ ......................................................... 96
12.23.14 🐯🐯🐯🐯🐯🐯Monetary Policy: June-2022 Repo⏫ ......................................................... 96
12.23.15 🐯🐯🐯🐯🐯🐯Monetary Policy: future updates................................................................... 96
12.23.16 ✋🚫🚫 Monetary Policy bi-monthly announcements: ignored (कु छ भी काम का नहीं है)
Error! Bookmark not defined.
12.24 🔪🔪🔪🏠🏠🏠🏠 Banks’ Lending Rates % (ब�क ऋण क� �ाज दर�) ................................................... 97
12.25 🔪🔪🔪🏠🏠🏠🏠 Bank’s loan interest rate: External Benchmark (बाहरी ब�चमाकर् ) ...................... 98
12.25.1 🔪🔪🔪🏠🏠🏠🏠 External Benchmark: Formula Components: ...................................... 98
12.25.2 �🏠🏠🏠🏠External Benchmark system: Which borrowers eligible?.......................... 98
12.25.3 �🏠🏠🏠🏠:🚩🚩🚩External Benchmark system: FAQ ................................................... 98
12.25.4 Banks’ Lending Rates % → Fixed vs Floating interest loans, teaser loans, NPA etc.
99
12.25.5 😷😷Corona-2020 impact on Deposits interest rate & Loans interest rate as per ES21
99
12.26 🐯🐯🐯🐯 Limitations of Monetary Policy in India (मौिद्रक नीती क� मयार्दाए) ................................ 99
12.26.1 🐯🐯🔇🔇 Monitory policy limitations: Lazy banking in Corona Crisis ......................100
12.26.2 🐯🐯🐯🐯 Monetary policy limitations: Cheap loans causing inflation? .....................101
12.26.3 🐯🐯🐯🐯US Fed Tapering & Impact on India.................................................................101
12.26.4 🐯🐯🐯🐯 Monetary policy limitations: Black Swan Events ...........................................102
12.26.5 🐯🐯✍ Monetary Policy: Conclusion / �न�षर् ...............................................................102
12.27 �🎺🎺🎺🎺1⃣✋ Mock Questions for UPSC Mains/GSM3 (250 words)............................103
11 🤑🤑MONEY’S DEMAND, SUPPLY & CREATION

11.11🤲🤲 DEMAND OF MONEY: LIQUIDITY PREFERENCE THEORY (तरलता अ�धमान)
British Economist John Maynard Keynes (Book: The General Theory of Employment, Interest and
Money, 1936) noted - people prefer to keep a part of assets in liquid form (cash money) with 3
motives: (लोग अपना कु छ पैसा नकदी म� हाथ म� रख�गे. सारे का सारा पैसा ब�को म� जमा नहीं कर द�गे. �ोंिक तीन कारण होते ह�)
1. 🌽🌽 Transaction motive (सं �वहार उद्दे�): For using money as a medium of exchange e.g. for
buying daily milk, vegetables and fruits. (रोजाना क� खरीद के �लए कु छ पैसा हाथ म� रखा जाता है सारा पैसा ब�क म�
नहीं जमा करते)
2. 💊💊 Precautionary motive (एह�तयाती): To protect against sudden / unforeseen expenditure e.g.
medical emergency or impulsive purchase during a holiday trip. (घर म� कोई बीमार हो गया, प्रवास म� जाना
है)
3. 📉📉 Speculative motive (सट्टा-उद्दे�): Investors hold cash to make the best use of any investment
opportunity that arises later e.g. waiting for gold / land prices to fall, then “I will use my cash to
buy it”. Also known as "Asset Demand of Money". (जो सं प�� मुझे खरीदनी है उसका दाम थोड़ा �गर जाए उसक�
राह देख रहा �ँ )
The amount of money held in cash form vary inversely with (deposit) interest rates. If higher
interest available in Bank Deposits etc. → people would invest money in banks, instead of keeping
money in liquid form (cash). (ब�क वाला अगर बचत खाते पर अ�ा �ाज देगा तो लोग हाथ म� नकदी पैसा कम रख�गे ब�क म�
�नवेश �ादा कर�ग)े
11.12 💸💸📥📥SUPPLY OF MONEY (मुद्रा क� पू�त)
🗓🗓 Time Liabilities of a Bank (FDRD) 💪💪 Demand Liabilities of a Bank (CASA)
समय / मीयादी देयताएँ मांग देयताएं
- Fixed deposits, Cumulative/ recurring - Current Account
deposits, Staff security deposit etc. - Savings Account
🗓🗓 Time Liabilities of a Bank (FDRD) 💪💪 Demand Liabilities of a Bank (CASA)
समय / मीयादी देयताएँ मांग देयताएं
- Bank legally not required to pay customer - Demand Draft
before maturity. But may pay after - Overdue balance in Fixed Deposits
deducting penalty/ interest. (व� से पहले पैसा - Unclaimed deposits. (What does it mean?
�नकाला तो दंड लगेगा) Ans. Explained in Video Lecture.)
Public parks more money here, because better LESS (ऐसे बचत खातों पर �ाज कम �मलता है इस�लए जनता
returns / higher interest rates. कम मात्रा म� पैसा रखती है यहाँ पर)
LESS liquid. More liquid because easily convertible into
cash on demand.
🔠🔠❓ ____ is not included in the assets of a commercial bank in India? (Prelims-2019)
(a) Advances (b) Deposits (c) Investments (d) Money at call and short notice
11.12.1 ☔💸💸 Liquidity of assets

- Liquidity= ease of converting an asset into cash. Cash is the most liquid asset.
- ☔☔Highly liquid assets = Gold, Demand deposits, G-Sec/T-Bill, shares/bonds of reputed
companies. (अ��धक तरल सं प��: तुरंत खरीदार �मल जाते ह�.अपनी सं प�� को आप नगदी धन म� आसानी से प�रव�तत कर
सकते ह�)
- ☂Relatively illiquid assets= Home/Real estate, Paintings/Sculptures etc. Because difficult to
find buyers at right price instantly. खरीदार आसानी से नहीं �मलता इस�लए इन सं प��यों क� तरलता थोड़ी कम है
- 💸💸 💉💉Liquidity injection / infusion refers to phenomenon when RBI buys Bank/NBFCs’ G-
Sec/T-bill/financial assets to give them cash. (HOW? Ans. Watch Video) (तरलता अ�ः�ेपण)
11.12.2 ☔💸💸 Liquidity Trap ( तरलता जाल)

- To be covered separately in 📑📑Pillar-4Z: Microeconomics handout.
11.12.3 💸💸💸💸💸💸Measures of Money Supply (मुद्रा आपू�त के प�रमाण)

- (Objective) To make a good nutrition scheme for India, the government will have to first find the
weight of the citizens. Similarly, to make a good monetary policy, RBI will have to find the
quantity of money in the system. (कु पोषण के �ख़लाफ़ अ�� योजना बनाने से पहले सरकार ने लोगों का वज़न नापना
होगा. उसी तरह देश के �लए अ�� मौिद्रक नी�त बनाने के �लए �रज़वर् ब�क ने सबसे पहले तो देश म� पैसों का ज�ा नापना होगा)
- (Definition) Money supply means the total amount of money in an economy at any given time.
(िदए गए समय पर अथर्तंत्र म� कु ल �मलाकर िकतना पैसा है उसक� मात्रा या ज�े को कहते ह� “मुद्रा आपू�त”)
- (Significance) Money supply plays a crucial role in 1) price level (=inflation) and 2) interest rates
on deposits & loans. (मुद्रा क� आपू�त → महंगाई दर और �ाज दरों पर असर करती है)
- (Types) RBI measures the money supply through indicators: M0, M1, M2, M3, M4
Table 1: *CU: Coins & Currency with Public
Commercial Banks Post Office Savings Bank
Measure Demand Time Demand Liquidity Qty
*CU Time
सं कु �चत, �ापक Deposits Deposits Deposits तरलता मात्रा
Deposits
(CASA) (FDRD) (SA)
Narrow M1 ✓ ✓ ✗ ✗ ✗ ☆☆☆☆ ☆
Money M2 ✓ ✓ ✗ ✓ ✗ ☆☆☆ ☆☆
Broad M3✓ ✓ ✓ ✗ ✗ ☆☆☆☆☆
Money M4✓ ✓ ✓ ✓ ✓ ☆ ☆☆☆☆
Apply logic to derive formula e.g. M3 = M1 + Time deposits with banks. (�यं से फामूर्ला बनाइए)
- M3 is the most commonly used measure of money supply, also known as Aggregate Monetary
Resources / Aggregate Money Supply” (सम� मौिद्रक सं साधन) because out of all the money supply
indicators (M0-M4) this is the indicator RBI will focus the most for its analysis while designing
of monetary policy. (अपनी मौिद्रक नीती बनाते व�, �व�ेषण के �लए �रज़वर् ब�क इस आंकड़े पर खास �ान रखती है)
- In above formulas for money supply, we are only counting the “NET Demand / NET Time
deposits” i.e. only public’s deposits in bank. We are not counting inter-bank deposits i.e. one
commercial bank’s deposit in other commercial banks. एक ब�क से दू सरे ब�क म� पैसा िडपॉ�जट िकया हो तो उसे
इधर नहीं �गनते.
- Corona-2020: Initial months of lockdown (May2May-2020) → deposit⏬⏬ because people
withdrew money in panic / precautionary motive. Although in the later months → Unlockdown
and normalcy → ⏫⏫ bank deposit by Dec-2020. तालाबं दी के शु�आती महीनों म� लोगों ने एह�तयाती कारणों से
ब�कों से अपनी िडपॉ�जट �नकाली हालांिक प�र��त सामा� होने पर, बाद के महीनों म� वापस बचत क� मात्रा म� बढ़ोतरी होने लगी है
🚩🚩🚩🚩 FAQ1: Why M3 is Aggregate Money Supply? ✅Ans. Watch video.

🚩🚩🚩🚩 FAQ2: Why is the liquidity of M4 less than M3? ✅Ans. Watch video.
🚩🚩🚩FAQ3: What is Narrow Money and Broad Money?
M1 and M2 are called Narrow money. Because of their smaller size (since they only cover demand
deposits) M3 and M4 are called broad money, because of their relatively larger size than M1 and M2.
since these terms are given in the NCERT so we have to prepare & accept. It is not some great thing
worthy of mains exam that we have to spend more time than that 1 word association.
🚩🚩🚩FAQ: What is Hard Money vs Soft Money? Definition differs from website to website besides
All such random terms mentioned on Investopedia.com are not automatically important for exam.
My boundary for this money-supply/indicator topic is “NCERT textbook, not the entire internet.”
🚩🚩🚩🚩FAQ4: As per NCERT class12: “M4 = M3 + Total deposits with Post Office savings
organisations (excluding National Savings Certificates)”. So why you revision table doesn’t talk about
National Savings Certificates. ✅Ans. This much pedantry I find it less imp for exam so don’t want
to overcomplicate my revision friendly table.
🔠🔠❓ MCQ. If you withdraw Rs. 1 lakh in cash from your Demand Deposit Account at your bank,
the immediate effect on aggregate money supply in the economy will be _ _ . (UPSC-Prelims-2020)
[a) to reduce it by ₹ 1,00,000 [b) to increase it by ₹ 1,00,000
[c) to increase it by more than ₹ 1,00,000 [d) to leave it unchanged
🚩🚩🚩🚩 FAQ: I’ve 500 jaat-ke doubts in above MCQ ✅Ans. Watch entire pillars’ videos.
11.13💸💸💸💸💸💸 MONEY SUPPLY [M3]
🚩🚩🚩🚩 FAQ: I didn’t understand above chart. ✅Ans. 1st finish the entire pillar’s all video lecture.
💸💸💸💸💸💸Indicator Situation in 2021

M0 = also known as reserve money /high Quantity ⏫increased but % growth lower
powered money than 2020. वृ�द्ध दर �पछले साल क� अपे�ा कम रहा
<formula in separate section>
M3 = “Aggregate Monetary Resources / Quantity ⏫increased but % growth lower
Aggregate Money Supply” (सम� मौिद्रक सं साधन). than 2020
Money multiplier 5.6 in 2020 and 5.2 in 2021. So, Money
= M3 divided by M0 Multiplier decreased than 2020 . (Reason:
(मुद्रा गुणक) Bankers couldn’t find enough loan taker, so,
💸💸💸💸💸💸Indicator Situation in 2021
parked large quantity of deposits with RBI
<more explanation in next section> under Reverse Repo Window.)
11.14💸💸⚡MONEY MULTIPLIER (मुद्रा गुणक)
RBI’s Cash Reserve Ratio (CRR) leads to Fractional Reserve Banking & Credit Creation by the
commercial banks, which creates money multiplier effect as following:
Table 2: this process is called 'Fractional Reserve Banking & Credit Creation'
High Powered money (M0) = 100 Asset Side (Deposits) Loaning 10% Reserve (‘R’)
Bank#1 100 90 10
Bank#2 90 81 9
Bank#3 81 72.9 8.1
Bank#.. .. .. ..
Total Money (here M3) Total sum = ₹1000**
𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 𝑜𝑜𝑜𝑜 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀 (𝑀𝑀3) 1000
𝑴𝑴𝑴𝑴𝑴𝑴𝑴𝑴𝑴𝑴 𝑴𝑴𝑴𝑴𝑴𝑴𝑴𝑴𝑴𝑴𝑴𝑴𝑴𝑴𝑴𝑴𝑴𝑴𝑴𝑴 = = =10
𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 𝑜𝑜𝑜𝑜 𝐻𝐻𝐻𝐻𝐻𝐻ℎ 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚(𝑀𝑀0) 100
🚩🚩🚩🚩 FAQ: How is this possible/ I didn’t understand? ✅Ans. Watch the video.
Here, 10% reserve (R) generated 1/R =(1/(1/10)]= 10x times the high-powered money. [ब�क कजर् देने से
पहले यिद 10% रकम आर��त रखती है तो 10 गुना �ादा पैसों का �नमार्ण]
- 4% reserve ratio will generate [1/(1/25)]= 25x times (in theory). ✋however in reality the
multiplier may be lower, due to poor banking penetration. (गांव गांव तक ब�क क� सु�वधा नहीं है इस�लए
वा��वक जीवन म� इतना मुद्रा गुणक नहीं होगा)
- In a functional economy, money multiplier (MM) is always greater than 1 & CRR will always be
less than 100%. WHY? Ans. Watch video.
- MM directly improves with ⏬reduction in CRR. (सीआरआर घटेगा तो मुद्रा गुणक बढ़ेगा)
- MM indirectly improves as economy develops, consumption / loan demand increases, banking
penetration, digital economy/less-cash economy etc.
- MM improves with the ⏫in banking penetration, financial inclusion (�व�ीय समावेशन)
- Boom period, Whenever loan demand ⏫ (तेजी का माहौल → लोन �ादा �लए जा रहे हो)
- When RBI adopts Cheap / Easy / Dovish / Expansionary monetary policy to combat deflation.
(जब स�ापे/ अप��त से लड़ने के �लए �रज़वर् ब�क लोन के �ाज दर स�े कर दे)
- In 1960s = less than 2x, 90s = more than 3x, At present = more than 5x.
🚩🚩🚩FAQ: What will be the impact of SLR changes on Money Multiplier? Ans. Cann’t be written
mathematically. Reason given in Video.
11.14.1 Money Multiplier From 2019 to 2021: why fallen?
Money multiplier fallen from 5.6 on 31/3/20 to 5.2 on 31/3/21 because
⇒ if banks kept loaning to households & business firms then (M3/M0)=Money Multiplier would
grow thru 'zigzag' lending-deposit activity from One bank account to another bank account.
⇒ But this deposit-to-lending activity seems to have slowed down in Corona & afterwards, and
banks parking more quantity of money in reverse repo in RBI. That’s why multiplier is falling.
यिद वह पैसा �रज़वर् ब�क म� �रवसर् रेपो रेट म� डालने क� वजह, ब�क वाले लोन म� घुमाते तो मुद्रा गुणक म� बढ़ोतरी दजर् होती, लेिकन कोरोना के
चलते लोगों म� लोन क� उ�ुकता कम देखी गई. ब�कर काफ� सारा पैसा �रवसर् �रपो के नाम पे �रजवर् ब�क म� वापस डाल रहे थे, इस�लए मुद्रा
गुणक म� �गरावट।
✋Note: There may be 500 other factors as well affecting these indicators but gives poor:cost benefit
learning all those things from MCQ point of view. वा��वक �जदं गी म� और भी 500 कारकों के चलते इन आंकड़ों पर
असर होता है लेिकन उन सब क� पं चात करने बैठे तो परी�ा के �लए उपयोगी नहीं #⏳📚📚थोड़ा-पढ़ो-आगे-बढ़ो
11.14.2 💸💸⚡Money Multiplier From 1981 to 2020
Figure 1: source- Economic Survey 2020, zigzag pattern means 'not increasing steadily'.
- 📘📘📘📘ES20 observed that between mid-1990’s to 2016-17: Money multiplier (measured as a ratio
of M3/M0) was mostly ⏫.
- But 2017-18 onwards: Money Multiplier is ⏬. Could be attributed to the lack of growth in
loaning activities & slowdown in economy.
🔠🔠❓ MCQ. Money Multiplier in an economy increases with _ _ _? (UPSC-Prelims-2019)
A) Increase in the cash reserve ratio B) Increase in the banking habit of the population
C) Increase in the statutory liquidity ratio D) Increase in the population of the country
👆👆Same above MCQ also repeated in Prelims 2021
11.15💸💸💸💸 M0: CREATION OF MONEY (मुद्रा का �नमार्ण)

M0 / Reserve Money / Government Money / High Powered Money (उ� श�� मुद्रा) is issued under
RBI Act, by RBI’s ISSUE DEPARTMENT, with condition that ISSUE DEPARTMENT’s assets must
match its liabilities. (आरबीआई के वल उतना ही पैसा छाप सकता है �जतनी प�रसं प��यां उसके इ�ू-�वभाग के पास हो)
Assets of Issue Department (प�रसं प��याँ) Liabilities of Issue Department [M0]
1. Rupee coins [RBI ‘buys’ coins & ₹1 notes from Total Bank notes in circulation, which
Govt and circulates it as the ‘Agent of govt’] consists of:
2. Gold coins [Min. ₹ 200 crores] सोने के �स�े 1. Held by Public
3. Gold bullion [Min. ₹ 115 crores] सोने क� �टे 2. Held by other Banks in “Vault cash”
4. Foreign Securities, incl. IMF [Earlier Min. ₹ 400 (i.e. amount kept by banks for day to
crores but Post-1995 no such requirement.] day Operations.)
5. (Indian) Govt. Securities [through which Govt 3. Other Deposits in RBI (of Public*,
borrows money from RBI & returns Principal + Banks & Governments)
Interest at later date] सरकारी प्र�तभू�तयां
Total = suppose 100 Cr @”X”date Total = 100 Cr @”X” date.
- * such as PM Garib Kalyan Yojana (2016) under which Blackmoney holder was required to
deposit 25% of his blackmoney in RBI for a lock-in period of 4 years. More in Pillar#2B
- M0 ⏫increases when RBI’s asset side increases ⏫ e.g. Govt borrowing more from RBI using
G-sec. जब सरकार �रज़वर् ब�क से �ादा पैसा कज� मे ले तब �रज़वर् ब�क क� प�रसं प��यों म� बढ़ोतरी होती है
🚩🚩🚩FAQ: Whose responsibility is it to exchange the public’s torn / soiled ₹ 1 note ?

Ans. RBI will do it as the agent of the Govt.
🚩🚩🚩FAQ: Whose responsibility is it to exchange broken coins?

Ans. First of all it is difficult to break a coin unless with a metal cutter. And secondly I’d not loose
sleep over such JAMES-Bond-Babu-Shona Qs. for UPSC exam point of view. Commonsense
suggests that if RBI is exchanging torn ₹1 Note, then RBI would be exchanges coins as well.
🚩🚩🚩FAQ: All coins and ₹1 paper-note is whose liability ? RBI or Govt

⇒ All coins and ₹1 paper-note are issued by Government. (Ref: Pillar1A1 Handout)
⇒ RBI circulate them as “agent of the government”.
⇒ However these items are liability of government. As per RBI Website.
⇒ So, All coins & ₹1 paper-note are liability of Govt.
⇒ However, some books interpret that since 1) RBI is circulating them 2) RBI is responsible for
getting torn ₹1 rupee notes exchanged, so it is RBI's liability.
⇒ If in Doubt for MCQ → then tick “Govt.” as Answer.
🚩🚩🚩FAQ: Can Govt borrow as much ₹₹ as they want via G-Sec? ✅Ans. No! There are legal
limits on govt borrowing under the Fiscal Responsibility And Budget Management act (FRBM).
(More in 📑📑Pillar#2D) (सरकार अंधाधुंध तरीक़े से उधारी नहीं कर सकती FRBM क़ानून के अंतगर्त उस पर कु छ सीमाएं ह�.)
🚩🚩🚩FAQ: RBI’s money supply is limited by above Asset-liability balance method. But what if govt
issues large number of coins and one rupee notes before election to keep voters happy? Will it not
create problems in the M0 & economy? ✅Ans. Too much money supply without enough goods-
supply → inflation. So, a sensible govt will not do such drama. Beyond that I’ve no interest in
engaging in further PHD-intellectual debates. Not important for exam. Move to next topic. (झं डे वाले
बाबूशोनो को ये ख़ास प्र� होता है यिद सरकार अपनी तरफ़ से अंधाधुंध तरीक़े से �स�े छाप देगी तो �ा M0 पे ख़राब असर निह होगा?
जवाब: अगर ब�त �स�े छापे लेिकन बाज़ार म� माल सामान क� िक़�त होगी तो महँ गाई बढ़ी जाएगी इस�लए एक �ज़�ेदार सरकार ऐसी
नौटंक� नहीं करेगीइससे �ादा मेरे को इसक� चचार् नहीं करनी है �ोंिक वो परी�ा के �लए काम क� निह है।)
🚩🚩🚩FAQ: How did RBI print money in British times? Ans.✅ Watch the lecture videos
🚩🚩🚩FAQ: Where is the repo, where is the RBI’s profit in above table? Ans.✅ Watch the videos
🚩🚩🚩FAQ: If RBI’s gold/G-sec gets stolen/burned/lost then will M0 decrease? ✅ Watch the videos
🚩🚩🚩FAQ: I’ve 500 jaat-ke other doubts. Ans.✅ then u keep looking for answers on Google until Taimur
grows up & gets married. I am done with this topic from Exam point of view.#🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
11.15.1 💸💸💸💸Supply of Money: M0 & M3 (मुद्रा क� आपू�त) Trend as per ES22
11.15.2 💸💸⚡: Currency in Circulation (CIC)
- What is CIC’s exact formula? Ans. Economic Survey didn’t give, so I didn’t bother to Google.
- CIC is an indicator to measure cash as a payment instrument i.e. instead of other payment
instruments such as Cheque, NEFT/RTGS, Card etc. (भुगतान के �लए नक़दी का िकतना प्रयोग हो रहा है)
- Currency in Circulation (CIC) growth (%) declined from 2021-Jan to 2022-Jan.
- Reason: Corona-led precautionary demand for cash has reduced/subsided → People are
keeping less qty of cash in hand, and depositing more qty in Banks. (लोगों म� कोरोना का ख़ौफ़ कम �आ है
इस�लए जनता अब एह�तयादी �प म� हाथ म� नक़दी कम मात्रा म� रखती है।)
11.15.3 💸💸 Misc. topic: Velocity of Money Circulation (मुद्रा सं चालन का वेग)

It is the average number of times money passes from one hand to another, during given time period.
e.g. you bought pen worth Rs.10 from shopkeeper, he uses same ₹10 note to buy tea from another
shop → same currency note performed function of 20 Rupees. िकतनी बार एक नोट एक हाथ से दू सरे हाथ म� जाता
है?
This “Velocity of money circulation” is affected by following factors:
- Income distribution: Money in the hands of poor people has higher velocity than the rich
people. Why/HOW? Ans. Watch Video.
- If more people borrow money for purchase → higher velocity. Hence developed countries =>
higher velocity, because people save less and spend more because of consumerist lifestyle and
confidence in Government’s social-security e.g. USA. (जब लोगों म� बचत क� भावना कम हो)
- Boom period in economy = more raw material purchase & hiring = higher velocity. (तेजी का माहौल)
- Other 500-jaat-ke permutation-combination-PHD = poor cost:benefit for exam
- What is its scene in Corona? Answer not given in 📔📔📔📔ES21 so no point in SELFPHD.
12 🐯🐯📢📢 MONETARY POLICY (मौिद्रक नी�त)

- [Definition] Monetary Policy is a macroeconomic policy (सम�� आ�थक नी�त), designed by Central
bank of a country, to manage money supply & interest rates. It helps shaping variables such as
inflation, consumption, savings, investment, & capital formation (मुद्राआपू�त व �ाजदरो को �नयं �त्रत कर
मुद्रा��त/महंगाई, मांग/खपत, बचत, �नवेश, पूंजी �नमार्ण को आकार देना- क� द्रीय ब�क द्वारा बनाई गई इस प्रकार क� नीती को
मौिद्रक नीती कहते ह�).
- [Significance] Monetary policy plays an important role in price stability [inflation control],
economic growth, job creation and social justice in any economy. (महंगाई-�नयं त्रण, आ�थक वृ�द्ध, रोजगार
सृजन, सामा�जक �ाय के �लए मह�पूणर् साधन है ये मौिद्रक नीती)
- Milton Friedman: This American economist’s research on monetary policy made this subject
more popular, he also won a Nobel in Economics in this regard (1976).
- Philip Curve: Inflation ↑ = unemployment ↓ (and vice versa). मं हगाई बढ़ेगी तो बेरोजगारी घटेगी. मं हगाई कम
होगी तो बेरोजगारी बढ़ेगी. (More in Pillar#4C)
- So, stable & moderate inflation is good for the economy. (��र व म�म�र महंगाई अथर्तंत्र के �लए अ��)
So, RBI tries to keep inflation with 2-6% Consumer Price Index (CPI: All India) using its bi-monthly
monetary policy made by its 6- member statutory Monetary Policy Committee. (छ:-सद�वाली वैधा�नक
स�म�त द्वारा िद्व-मा�सक मौिद्रक नी�त �नमार्ण करके �रजवर् ब�क महंगाई दर को उपभो�ा मू� सूचकांक के िहसाब से २-६% म� �नयं �त्रत
करने क� को�शश करता है)
12.11🐯🐯📢📢📐📐 MONPOLICY: QUANTITATIVE TOOLS (प�रमाणा�क साधन)

Also known as (aka) General or Indirect Tools as they affect the entire economy, and not just a
particular sector. (ये साधन / ह�थयार / उपकरण सामा� या अप्र�� ह� �ोंिक यह िकसी एक �ेत्र-�वशेष को नहीं, िकंतु पूरी
अथर्�व�ा को असर करते ह�)
12.11.1 🗄🗄✂Statutory Reserve Requirements: CRR, SLR (Fight inflation: ↑, deflation: ↓)
Figure 2: depositors waiting in a queue & demanding- हमारा पैसा वापस करो, ABHI KE ABHI!
- CRR and SLR are collectively known as “Variable Reserve Ratios” or “Statutory Reserve Ratios”
(इन दोनों को प�रवतर्नीय आर��त अनुपात / वैधा�नक आर��त अनुपात भी कहा जाता है)
CRR SLR
Full form: Cash Reserve Ratio Full form: Statutory Liquidity Ratio
(नकद कोष अनुपात) (वैधा�नक तरलता अनुपात)
Banks must keep this much deposits (or Banks must keep this much deposits in liquid
balance) with RBI. RBI doesn’t pay interest on assets such as cash, gold, G-Sec, T-Bills, State
this deposit, except in extraordinary Development Loan Bonds and other securities
circumstances like 1999’s Banking slowdown. notified by RBI. (ब�क ने जमाकतार्ओ ं से हांसील क� �ई रकम
(ब�क ने जमाकतार्ओ ं से हांसील क� �ई रकम का कु छ िह�ा �रजवर् का कु छ िह�ा, �रजवर् ब�क द्वारा मा� तरल प�रसं प�तमे �नवेश
ब�क मे जमा करना पड़ेगा।) करना होगा)
CRR SLR
Bank earns no profit / interest, as such. Some profit may be involved. (मुनाफा हो सकता है)
- CRR: first suggested by British economist Mandated under Banking Regulation Act, 1949
J.M. Keynes & first introduced in US (ब�िकंग �व�नयमन अ�ध�नयम के अनुसार इसे लागू िकया जाता है)
Federal Reserves (=Central Bank of USA).
- Mandated under RBI Act, 1934
⇒ RBI can fix any amount of CRR, legally ⇒ Presently it is 18.00% of NDTL.
there is no minimum or maximum limit. ⇒ Legally, SLR can’t be made more than 40%.
Although in real life, RBI will not keep (कानूनन �प से �रज़वर् ब�क इसे 40% से �ादा नहीं रख
CRR@100% otherwise, no bank can give सकतीं.)
loans then economy will stop functioning.
⇒ Corona-2020: it was 3% of Net Demand &
Time Liabilities of a bank (NDTL: �नवल मांग
और समय देयताएँ )
⇒ 2021: CRR be gradually increased to 4%
⇒ 2022: CRR increased to 4.50%
- All Banks must keep CRR. Similar to left cell of this table.
- However, RBI may prescribe separate % (सभी प्रकार के ब�क के �लए अ�नवायर्. हालांिक �ेत्रीय ग्रामीण ब�क
norms/slabs for Regional Rural Banks तथा सहकारी ब�को के �लए इसक� प्र�तशत मात्रा �रज़वर् ब�क, अ�
(RRBs) and Cooperative Banks. ब�को क� तुलना म� थोड़ी �भ� रख सकती है)
- More in 📑📑Pillar1B1: classification
🚩🚩🚩🚩 ✋Difference between NDTL, ODTL, Total DTL?= NOT IMP4IAS. If you want to satisfy
your curiosity, do google search yourself but I don’t t think it as best use of time.
- CRR-SLR are counted on fortnightly basis. If not maintained, bank will have to pay penalty
interest rate to RBI. This Penalty rate is linked with Bank Rate%. (हर 15 िदनों के �लए �गना जाता है. यिद
ब�कर ने निह नहीं माना तो जुमार्ना लगेगा.)
- CRR-SLR ensure monetary stability of India through two primary functions:
1) CRR assists in money multiplier effect.
2) CRR-SLR provide buffer/protection during a Bank Run (ब�कों म� से जमारा�श वापस लेने क� दौड़)
i.e. an emergency when every depositor wants to pull out money from his bank account
at once, mainly due to fake news / rumours sometimes due to war e.g. in Russia-Ukraine
- While in theory CRR/SLR can be used for inflation control but RBI primarily relies on REPO
Rate (=its Policy Rate) to combat inflation, and not CRR/SLR. (हालांिक, सीआरआर और एसएलआर महंगाई
�नयं त्रण के मु� साधन नहीं है. �रज़वर् ब�क महंगाई से लड़ने के �लए मु�ता रेपो रेट का इ�ेमाल करती है)
12.11.2 🌐🌐� : 🗄🗄✂CRR SLR on Foreigners/NRI’s deposits in Indian Banks?

🚩🚩🚩FAQ: does CRR and SLR also apply to the deposits made by foreigners / NRIs / FCNR
Accounts? Has RBI changed any rules regarding this?
Ans. Wait till we reach Pillar3A: Currency Exchange Rate. Presently we are in Pillar1A2.
12.12🐯🐯🐯🐯✂🗓🗓 CRR, SLR: DEVELOPMENT IN RECENT YEARS

12.12.1 🐯🐯🐯🐯✂🗓🗓 (2016): Incremental CRR during Demonetization (नोटबं दीमे वृ�द्धशील सीआरआर)
- During demonetization (2016-17): public required to deposit the banned ₹500-1000 ke notes in
banks. So, banks’ deposits increased drastically.
- During that time, RBI temporarily prescribed Incremental CRR.
✋What was this? how did it work? Ans. 6 years old technical topic for NOT-IMP. Very
poor cost benefit in preparing #🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो.
12.12.2 🐯🐯🐯🐯✂🗓🗓 (2020-Feb) CRR Exemption for 5 yrs, depending on loans (सीआरआर म� छू ट)
2020-Feb: RBI instructed the banks:
⇒ Whatever new (retail) loans you give for (1) automobiles (2) residential housing / home
mortgages. (3) MSMEs [After 31/Jan/2020 upto 31/Jul/2020]. Some of these deadlines later
extended but PHDNOTIMP
⇒ You can subtract that much loaned ₹₹ amount from deposits while computing cash reserve ratio
(CRR) for the next five years (from the date when the loan was given or other technical norms,
which are not important). (यिद ब�कर ने वाहन, मकान और छोटे उद्योगों को कजर् िदया, तो सीआरआर म� उस ब�क को छू ट
�मलेगी)
⇒ In other words, if a bank gives more loans to the above 3 sectors, it’ll have to keep ⏬ CRR →
⏫ loanable funds → profit to the bank. And more loans → more business activity →
economic growth for the country. (देश क� आ�थक वृ�द्ध म� मदद होगी)
12.12.3 🐯🐯🐯🐯✂🗓🗓 (2020-Mar) CRR ⏬ from 4% to 3% in 👻👻Atmanirbhar Bharat
Figure 3: कोरोना महामारी से जुज़ रही अथर्�व�ा पुनज��वत करने के �लए सीआरआर मे कटोती करना मं गता है।
- To revive Indian economy after Corona, RBI made certain changes in its monetary policy during
March-April-2020 period.
- Parallelly, Govt also took announced relief in tax-filling, free-food to poor etc.
- Collectively, Modi labelled these actions of [RBI + Government] = “Atmanirbhar Bharat
Economic revival package”. 📑📑More in Pillar#4C.
⇒ 2020-March: RBI announced 100 basis points (bps) (=1%) cut in CRR. so Earlier 4%-1%=. This
will ⏫ the loanable funds available with the banks. (कोरोना वषर् 2020 के दौरान �रज़वर् ब�क ने सीआरआर म�
1% क� कटौती क� तािक ब�करों के पास लोन म� घूमने के �लए �ादा रा�श उपल� हो जाए)
⇒ 2021: now India moving towards economic recovery, enough loanable funds in banks available
so, RBI ordered restoration/⏫ of CRR in two phases: 3.5% (2021: March2May ) →4% (2021-
May) (�ोंिक भारत के अथर्तंत्र वापस पटरी पर आ रहा है इस�लए �रज़वर् ब�क सीआरआर को वापस मूल ��ती यानी 4% पर ले आ
रहा है)
⇒ 2022: CRR increased to 4.50% to fight inflation. (बढ़ती महँ गाई से लड़ने वा�े CRR म� बढ़ोतरी क� है)
12.12.4 🚩🚩🚩🚩✋: 🐯🐯🐯🐯✂🗓🗓 CRR Technical things NOTIMP

Following technical operational aspects of CRR not imp / poor cost benefit in studying for exam
- What is Automated sweep-in and sweep-out (ASISO) facility? NOT-IMPORTANT.
https://www.youtube.com/watch?v=q-GNbExdTlA&t=2094s (Although explained here)
- What is Flexible Automated Option for Managing CRR? NOT-IMP
- Banks are required to calculate CRR on a fortnightly (15 days) basis. They have to maintain at
least 90% of that amount in CRR on daily basis. RBI also ⏬ minimum daily CRR balance
maintenance from 90% to 80% upto 2020-June. NOTIMP. परी�ा के �लए काम क� नहीं
🚩🚩🚩🚩✋Above type of information is not really important for the scope of civil service exam. So,
don’t lose sleep if some inexperienced private Mocktest quiz master framing MCQs like this.
🔠🔠❓Cash Reserve Ratio refers to _ _ _ . (UPSC-CDS-i-2020)

(a) the share of Net Demand and time liabilities (NDTL) that banks have to hold as liquid assets
(b) the share of NDTL that banks have to hold as balances with the RBI
(c) the share of Net demand and time liabilities that banks have to hold as part of their cash reserves
(d) the ratio of cash holding to reserves of banks
🔠🔠❓Find correct statements about SLR: (UPSC-CDS-2011-II)

1. To meet SLR, Commercial banks must keep cash only.
2. SLR is maintained by the banks with themselves.
3. SLR restricts the banks leverage in pumping more money into the economy.
Answer codes:(a) 1, 2 and 3 (b) 1 and 3 (c) 2 and 3 (d) only 2
🔠🔠❓When RBI reduces SLR by 50 basis points which is likely to happen? (UPSC-Pre-2015)
(a) India's GDP growth rate increases drastically.
(b) Foreign Institutional Investors may bring more capital into our country.
(c) Scheduled Commercial Banks may cut their lending rates.
(d) It may drastically reduce the liquidity to the banking system.
12.13🐯🐯🐯🐯🐯🐯 MONPOLICY → QUANT TOOLS → RATES → LAF REPO (2000)

RBI’s Liquidity Adjustment Facility (LAF, तरलता समायोजन सु�वधा): has two windows:
® LAF-Repo Rate (�रपो दर/पुन: क्रय-अनुबंध) ® ® LAF-Reverse Repo Rate
(उलट �रपो/ पुन: क्रय-अनुबंध)
The Interest rate at which RBI lends short-term It’s the interest rate that clients earn when
loans to its clients, keeping their G-Sec as parking their surplus funds with the RBI for
collaterals. (�रजवर् ब�क अपने ग्राहको को लघु अव�ध के ऋण short periods, to earn interest. (ग्राहक अपना
देता है। उसपर लागू �ाज दर को �रपो दर कहेते है। ग्राहक ने अ�त�र� धन, �रजवर् ब�क मे लघु अव�ध के �लए जमा कर जो
अपनी सरकारी प्र�तभू�तयों को �रजवर् ब�क मे �गरवी रखना पड़ता �ाजदर कमाते है, उसे उलट-�रपो-दर कहेते है)
है)
⇒ Clients enter into an agreement with RBI to Mechanism similar to Repo, RBI gives its G-Sec
repurchase their G-sec at a future date at a as a collateral to client.
(higher) pre-determined price.
⇒ Banks can’t pledge their SLR-quota-G-Secs
for this borrowing.✋
⇒ Repo also called ‘Ready Forward Reverse Repo Rate = Repo% MINUS x%
Transaction’.
⇒ Repo Rate is our Policy Rate to control
inflation. (मौिद्रक नी�त दर)
⇒ Repo = RBI lends short term loans its clients, & demands G-Sec/T-bill as collateral. ✋ At every
place, I’ve not mentioned T-bill, as it just reduces the speed of revision.
⇒ Market Repo = Players other than RBI (such as bank, NBFCs) loaning short money to other
Banks/NBFCs/Corporate Companies, and demanding financial securities (G-Sec/T-
Bill/shares/bonds/commercial paper etc.) as collateral. What do those terms mean? Ans. Ref the
table given in topic Operation Twist.
12.14👻👻🐯🐯🐯🐯📈📈 REPO → SPECIAL WINDOWS UNDER ATMA NIRBHAR
12.14.1 (2020) 🐯🐯🐯🐯🐯🐯 Long Term Repo Operations (LTROs: दीधर् अव�ध के रेपो ऋण)
⇒ Usually, Repo loans are for short term borrowing from overnight to 14-days.
⇒ But, 2020-Feb: RBI announced Long Term Repo Operations (LTROs) of 1 yr & 3 years tenors.
⇒ RBI will loan > ₹ 1,00,000 crore, in various rounds through E-Kuber platform.
⇒ Interest rate: @repo rate. Interest rate will be compounded annually. (वा�षक �प से चक्रवृ�द्ध �ाज)
⇒ This will ⏫ loanable funds with banks → economic growth can be revived. (आ�थक वृ�द्ध म� मदद
होगी)
⇒ MSF and (short term) repo lending will also be continued separately as per their own existing
norms. LTRO doesn’t aim to eliminate / replace them. (बाक� जो लघु अव�ध के उपकरण है, वह भी जारी ही है)
✋Further operational guidelines, how it impacts the bond yields etc. = poor cost:benefit
12.14.2 👻👻🐯🐯🐯🐯📈📈 REPO → TLTRO, SLTRO, On-Tap Windows
Figure 4: कोरोना प�ात लोन म� �ादा पैसा घुमाके अथर्तंत्र को वापस खड़ा करने के �लए �रज़वर् ब�क ने ये नई �खड़िकयाँ खोली है
#In above chart, All Banks doesn’t include Payment Banks. PB can’t give loans (Ref:📑📑Pillar#1B1)
Tools Changes in Corona-2020 upto 2022-Feb

Repo RBI's short term loan interest rate to clients while using non-SLR-quota G-
Sec as collateral. Repo Interest ⏬from 5.15 to 4.00% = 1.15% = 115 basis
points cut= Cheaper loans to revive economy
LTRO Learned in previous section
TLTRO Targeted Long Term Repo Operations (TLTRO): Up to 3 years
loans@Repo% to Banks with condition that they must invest x% of it in
NBFC companies’ Bonds etc.
Special LTRO RBI loan for 3 years @Repo% to ONLY Small Finance Banks (SFB) →
Window (SLTRO) Loans to A) Micro and small industries (सू� और लघु उद्योग) B) Unorganized
sector entities (असं गिठत �ेत्र)
Tools Changes in Corona-2020 upto 2022-Feb
💊💊💊💊 On-Tap RBI loan for 3 years @Repo% to Banker → loans to Hospitals, vaccine
Liquidity Windows manufacturer, vaccine importers, medical device makers, oxygen suppliers
for Healthcare etc (अ�ताल, टीका उ�ादक, आयात करने वाले �चिक�ा साधन बनाने वाले इ�ािद)
🍸🍸⛱ On-Tap RBI loan for 3 years @Repo% to Banker → Hotels, Restaurants, Tour
Liquidity Windows Operators, Bus Operator, Car Repair Service, Beauty Parlours/Spa/Saloons,
for Contact- Event/Conference Organisers ब�कर ने ये पैसा �शर्-सं वेदनशील उद्योग �ेत्र जैसे प्रवासन
Intensive Sectors उड्डयन इ�ािद को कज़र् म� देना होगा
AIFI RBI loaned large amount of money to All India Financial Institutions
(AIFI) i.e., NABARD, NHB, SIDBI and EXIM Bank (More in
📑📑Pillar#1B1)
12.14.3 🚩🚩🚩RBI’s Special Windows: Useless Doubts by flag-carrying Babushonas
1. 🚩🚩🚩FAQ: Why would bank borrow ₹₹ in TLTRO / On-Tap windows, when many conditions
are imposed on it? Ans. maybe the bank feels it will earn profit from such loan/investment. (ब�कर
को ज�रत होगी तो ल�ग,े वरना नहीं ल�ग.े �रज़वर् ब�क के गवनर्र उसको बं दू क िदखाकर ज़बरद�ी नहीं दे रहे)
2. 🚩🚩🚩FAQ: Why would bank borrow ₹₹ in REPO rate (Short term) when LTRO offering long
term loans? Ans. 1) depends on the requirement of the bank 2) TLTRO amount is finite e.g. first
round total ₹1 lakh given. So, if a banker came late to RBI’s office & Parle-G biscuit stock was
finished , banker may have to buy Britannia biscuit.
3. 🚩🚩🚩FAQ: How does LTRO/TLTRO involve “flight of foreign investors & its impact on
exchange rate & bond yield” etc.? Ans. Such long-winded-financial-cause-effect = no
importance in UPSC, even though private mock-test-walla design useless MCQs from it. इतनी दू र
क� बीरबल क� �खचड़ी अपने को पकाने क� ज�रत नहीं है!
4. 🚩🚩🚩FAQ: I want to do PHD on this until Taimur grows up & gets married. Ans. Good luck to
you! You keep doing that, but, I’m finished teaching this topic here. शुभकामनाएँ , आप लेके बैठे रहो.
12.14.4 (2020) 🐯🐯🐯🐯Reverse Repo Rate cut
Figure 5: sir, जब तक आप loan के �लए हाँ नही कं ह�गे, हम आपको telemarketing spam-calls करते रह�गे!
Corona led Economic Slowdown → Loan demand ⏬ → banks parking their excess funds in RBI to
earn interest in the form of reverse repo rate. (कोरोना महामारी के दौरान ब�क वाले अपना अ�त�र� धन �रज़वर् ब�क म�
डाल के बैठे �बठाये �ाज कमा रहे थे. ग्राहकों म� लोन का पैसा घुमाने क� मेहनत नहीं कर रहे थे.)
⇒ By 2020-March: banks parked ₹~3 lakh crores in RBI in Reverse Repo.

⇒ So, RBI has drastically reduced ⏬the reverse repo rate to 3.35% to discourage such laziness of
banks. (ब�को के इस आलसीपन को दू र करने के �लए �रज़वर् ब�क ने �रवसर् रेपो रेट म� कटौती क�)
⇒ 😰😰Benefit of reverse repo reduction?
 IF SBI offers 5.9% Fixed deposit interest rate to depositors, and parks it in the RBI
reverse repo rate (3.35%) then SBI will actually make losses.
 So, RBI hopes SBI will now be ‘forced’ to give loans in a proactive manner (through
SMS-spam, email-spam and unwanted telemarketing calls etc)
Although as per 📔📔📔📔ES21, Banks still continued to park their surplus funds in Reverse repo
because there were not enough loan takers due to Corona slowdown. (हालांिक कु छ खास फायदा नहीं �आ ऐसा
आ�थक सव��ण का कहना है)
12.14.5 🐯🐯🐯🐯🐯🐯 MonPolicy → Quant Tools → Variable Rate Reverse Repo (VRRR)
TRADITIONAL FIXED REVERSE REPO VARIABLE RATE REVERSE REPO
(FRRR) : Interest Rate fixed by RBI e.g. 3.35% Interest Rate decided by Bidding process of
(�रजवर् ब�क द्वारा �रवसर् रेपो रेट क� दर पहले से ही तय कर दी जाती clients (How? Explained in video but not
है.) important.)
Thus, RBI not fixing the percentage% in
advance. It is variable%...depending on bidding
action of clients.
RBI can reject/refuse to accept reverse repo same as the left cell.
deposits from clients without giving him any (आरबीआई �रवसर् रेपो दर मै ग्राहक क� िडपा�जट लेने से मना कर
reasons. (�रज़वर् ब�क मना कर सकता है) सकता है, �बना कोई उस ग्राहक को कारण बताए.)
-- This activity was paused during Corona 2020
but resumed in 2021-January.
Reasons for conducting VRRR (�ों यह “प�रवतर्नीय दर वाला उ�क्रय अनुबंध” खेल खेला जा रहा है?)
⇒ Because RBI wants to suck excess money supply from the market without modifying the 'fixed'
reverse repo % (�रवसर् रेपो के �न��त दरों म� छे ड़छाड़/बदलाव िकए �बना �रजवर् ब�क बाजार से अ�त�र� पैसा चूस सके .)
⇒ Clients may hope to earn more interest rate in VRRR than fixed rate reverse repo. (VRRR नीलामी म�
िकस प्रकार क� बो�लयां लगाई गई है उस िहसाब से ग्राहक को शायद थोड़ा �ादा �ाज कमाने �मले)
🚩🚩🚩FAQ:
⇒ VARIABLE RESERVE RATIO = is a collective term used for describing CRR & SLR.
⇒ VARIABLE RESERVE REPO RATE = is a separate thing under reverse repo.
12.14.6 🐯🐯🐯🐯 🎛🎛 Variable Rate Repos (VRRs)

⇒ 2022-Feb: RBI said It’d also conduct Variable Rate Repos (VRRs) auctions, similar to Variable
Rate Reverse Repo. How it works / what impact will it generate? Ans. Apply logic similar to
TRADITIONAL FIXED REPO Rate. (जेसे �रवसर् रीपो क� नीलामी होगी, वैसे ही रेपो क� नीलामी होगी ऐसी घोषणा क�
है)
⇒ Beyond that PHD / similarity-difference of no use.#🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
12.14.7 🐯🐯🐯🐯 🎛🎛 Enhanced Reverse Repo Rate for Hardworking Bankers
⇒ If Bankers uses Sector Specific On-tap Liquidity Window (e.g. bankers taking loans from RBI to
lend to hotel, beauty parlours, vaccine manufacturer etc). यिद कोई ब�कर �रज़वर् ब�क द्वारा बनाई गई �ेत्र �वशेष
�खड़िकयों से पैसा कजर् म� लेके �व�वध �ेत्रों को देता है
⇒ If this banker achieved Rs.“XX” loan giving target → IF he parks his surplus funds under
Reverse Repo Window → RBI will pay him 3.75% Reverse Repo Rate. (instead of 3.35% FIXED
reverse repo paid to lazy bankers.) तो उस मेहनतकश ब�कर को रीवसर् रीपो रेट म� �रज़वर् ब�क �ादा प्र�तशत �ाज देगी,
अ� आलसी ब�करों क� तुलना म�.
⇒ 🤩🤩Benefit? It encourages bankers to work harder to give loans to various sectors.
🚩🚩🚩 FAQ: How / Why is this possible? How can banker borrow money and yet have surplus
funds? Ans. Banker will not instantly get all borrowers on day1. So, often he would invest his surplus
money (of depositors) temporarily in RBI (under Reverse Repo)- just to earn small amount of profit,
instead of letting the cash stay idle in his bank office. (ब�कर को यिद तुरंत कजर् लेने वाला कोई ग्राहक नहीं �मले तो
छोटी अव�ध के �लए ब�कर अपना पैसा, �रजवर् ब�क म� रखेगा �ोंिक ऐसा करके ब�कर �रज़वर् ब�क से �ाज कमा सकता है)
12.14.8 🐯🐯🐯🐯🐯🐯 MonPolicy → Quant Tools → Rates → MSF (2011)

- Marginal Standing Facility (MSF: सीमांत �ायी सु�वधा) is the Interest rate at which RBI lends short-
term loans to Scheduled Commercial Banks (SCB) & Regional Rural Banks (RRB) with their
SLR-quota G-Sec as collaterals. (ऐसी खास �खड़क� है जहाँ से �रज़वर् ब�क द्वारा अनुसू�चत वा�ण��क ब�को तथा �ेत्रीय
ग्रामीण ब�कों को, उन ब�को के एसएलआर कोटा क� प्र�तभू�तयों को �गरवी लेकर �रजवर् ब�क उ�� लघु अव�ध के कजर् देता है)
- MSF higher than Repo Rate. MSF = Repo% + 0.25%
- What is the difference/meaning of SCB/RRB/SFB/UCB etc? Ans: (📑📑Ref: HDT-Pillar#1B1:
classification)
🚩🚩🚩FAQ:Which types of banks can access MSF facility? ✅Ans. It is given in above note itself.
12.14.9 🐯🐯🐯🐯🐯🐯 MonPolicy → Quant Tools → Rates → Bank rate (ब�क दर):
Bank Rate MSF Repo Rate
Introduced in RBI Act, 1934** 2011 2000
What is the % Since 2012: Monetary Policy
MSF = Repo% + “x”%
rate? Bank Rate% = MSF% Committee decides
Who can All clients of RBI:
borrow from Only banks bank, non-bank,
the RBI? Union & State Govt
Collateral Bank can pledge securities Yes, G-Sec/T-bill. But
**Yes and No
required? from its SLR quota not from SLR
Loan duration Longer than repo Short term usually overnight to 14 days
Bank Rate MSF Repo Rate
Emergency borrowing by
Nowadays mainly
Primary bank, using their securities Short term borrowing
for deciding penalty
Utility? from SLR quota subject to by all clients of RBI.
on errant banks
certain limits.
⇒ **RBI Act, 1934: “Bank rate is the standard rate at which RBI buys or rediscounts first class
securities, bills of exchange or other commercial papers.(-NCERT)” rediscounting basically
means the “repo-walla game= RBI buys @x price, re-sells@y price where y>x”
⇒ But, since the introduction of the Repo rate in the 2000s, the Bank rate has become a dormant
tool (�न��य उपकरण) =not frequently used by RBI for lending or by banks for borrowing).
⇒ So, reference books/websites differ in its present operational status e.g. some of them would say:
o Bank rate requires no collateral and is meant for long term loans.
o Bank rate accepts collateral which can be both GSec/T-bill as well as private companies’
securities.
🚩🚩🚩🚩✋So, in the real exam, it depends on which book/web source the examiner has copied the
statement(s) and accordingly you’ve to take a judgement call in ticking the answer. �व�भ� और िकताबों
और वेब साइटों पर ब�क दर क� �ा�ा/अथर् गठन अलग अलग है इस�लए असल परी�ा म� जो पूछा जाए तो ��ती/�ववेक के िहसाब से
आपने जवाब tick करना है.
12.14.10 🐯🐯🐯🐯🐯🐯 Quanti. Tools → SDF (=Reverse Repo walla game Without Collaterals)
⇒ 2013: Urjit Patel Committee on Monetary policy proposed standing deposit facility (SDF)
⇒ SDF = Clients park/deposit their extra money in RBI. RBI pays them interest. RBI doesn’t give
any collateral (unlike in REVERSE REPO). (�ायी जमा/िडपॉ�ज़ट सु�वधा = �रज़वर् ब�क के ग्राहक अपना अ�त�र�
पैसा �रज़वर् ब�क म� जमा करेगा. �रज़वर् ब�क ग्राहकों को उस िडपॉ�ज़ट के �लए �ाज देगा. �रज़वर् ब�क ग्राहक के पास �गरवी कु छ नहीं
रखेगा.)
⇒ 🤩🤩Benefit of SDF: To combat inflation → RBI can suck extra money supply via SDF window.
RBI will not have to pledge G-Sec as collateral to clients. (महँ गाई से लड़ने वा�े बाज़ार म� से पैसों क� अ�त�र�
आपू�त को चूसने/हटाने/कम करने के �लए �रज़वर् ब�क एसडीएफ़ का इ�ेमाल कर सकता है- �बना कु छ �गरवी रखे।)
⇒ 2018: RBI act amended to add SDF facility. (�रज़वर् ब�क क़ानून म� सुधार िकया गया).
⇒ 2022-April: RBI started/launched SDF. RBI also made changes in Policy corridor. <REF: NEXT
SECTION>
🚩🚩🚩FAQ: SDF is launched so does it mean Reverse Repo discontinued?
> Reverse Repo rate not discontinued. Reverse Repo will remain as part of RBI’s toolkit. RBI will
continue to use it at its discretion from time to time. Presently Reverse Repo is 3.35%
🚩🚩🚩FAQ: what is the deposit time duration of SDF and Reverse Repo?
> Sufficient to know these are for short-term. Now what exactly is short-term? Is it 1 day, 7 day, 14
day? = Not important for exam. Why overburden the memory card of the brain with unnecessary
information?
🚩🚩🚩FAQ: IF SDF and Reverse Repo both present, then why would Bankers go for SDF where no
collateral given?
> The time period and interest rate offered on SDF and Reverse Repo are different. So, it depends on
bankers’ business-requirement, cash-flow management. RBI is not pointing in gun their head to use
it. (ब�कर को ज़�रत होगी तो इ�ेमाल करेगा. �रज़वर् ब�क उसक� कनपटी पर �प�ौल नहीं रखा है.)
12.14.11 ⛓ MSF Repo vs Reverse Repo vs SDF

Tool MSF Repo Reverse Repo SDF
Present rate 5.15% 4.90% 3.35% Fixed 4.65%
(2022-Jul) Reverse Repo
Rate (FRRR)
Lender RBI RBI Banks+some Banks+some
NBFCs NBFCs
Borrower ONLY Scheduled Banks+some RBI RBI
Commercial NBFCs
Banks (SCB)
Borrower need to Yes Yes Yes Not required.
give Collateral?
##Facility Client (SCB) RBI RBI Client
available at (Banks+Some
Discretion of NBFC)
⇒ ## Discretion = here means suppose a client (Bank/NBFC) comes for Reverse Repo= It's not
compulsory for RBI to entertain him. (�रज़वर् ब�क क� मज़� क� बात है िक उसको सेवा देगा या नहीं देगा.)
⇒ But, If client (Banker) comes for MSF = RBI will not say "NO" to him. RBI will help him.
⇒ What is SCB? Ans. Refer Pillar1B1: Classification of Banks
12.14.12 🚧🚧 Policy Corridor / LAF Corridor
⇒ Policy Corridor also known as Liquidity Adjustment Facility (LAF) corridor. (नी�त ग�लयारा / तरलता
सु�वधा ग�लयारा)
⇒ BEFORE 2022-April: Policy Corridor = total width between: MSF <—> REPO <—> Reverse
Repo. (इन तीनों उपकरणों के बीच क� कु ल चौड़ाई)
⇒ After 2022-April: Policy Corridor = MSF (Repo+0.25%) <—> REPO <—> SDF (Repo-0.25%)
⇒ Thus total width is 0.25+0.25= 0.50%
Upper end of Corridor Center Lower end of Corridor Total width
/ Ceiling (छत/ऊपरी सीमा) / Floor (फ़शर्)
Tool? MSF REPO Before: Reverse Repo. (RR)
After: SDF
Before MSF= R+25 bps R% RR = Repo-25 bps 25+25=50bps
Corona
In Corona MSF= R+25 bps R% RR = Repo - 65bps 25+65=90bps
2020-21
2022-Apr MSF = Repo + 25bps R% SDF = Repo-25bps 25+25=50bps
Note: 100 base point system (BPS) = 1% So 25 bps = 0.25%. 50 bps = 0.50%
⇒ SDF has replaced the Reverse Repo Rate as the floor of the Policy corridor.
⇒ However, Reverse Repo was not discontinued.
⇒ Reverse Repo will remain as part of RBI’s toolkit
⇒ Reverse Repo will be used as per the mood/discretions of the RBI from time to time
12.14.13 �⚖� Tri-Party Repo (�त्र-प�ीय पुन: क्रय-अनुबंध):
⇒ Outdated topic. I find it not important for exam anymore. So DELETED from handout.
⇒ Sufficient to know this is not a tool of Monetary Policy. It is a method to meant to help
companies to borrow money from the market.(ये मौिद्रक नीती का िह�ा नहीं है. )
12.14.14 🔪🔪🐰🐰 BPLR, MCLR, External Benchmarks, etc:

Terms related to how individual banks decide their loan rates. Ref: End section of handout.
12.14.15 🐯🐯🐯🐯📁📁 Market Operations (OMO): (Inflation → Sell G-Sec, Deflation → Buy)
Figure 6: Aloo Lelo, Pyaaz Lelo, G-Sec Lelo...

I. Open Market Operations (खुले बाजार क� िक्रयाए): RBI buys and sells Union & State Govts’
securities to control money supply.
o RBI buying= Money supply ⏫increased/liquidity injected in the market.
o RBI selling = Money supply ⏬decreased/liquidity absorbed from the market.
II. Market Stabilization Scheme (बाजार ��रीकरण योजना): RBI sells special type of G-sec, T-Bill &
Cash Management Bills (CMB) to suck excess liquidity. ✋How it works? How is it similar
or different than OMO? Ans. NOTIMP. Very low profile thing for scope of UPSC.
III. Sterilization / Forex Swap: Their primary objective is to control the currency exchange rate
volatility (e.g. $1=₹65,70,80… मुद्रा �व�नमय दर क� ��रता के साथ जुड़ा �आ मामला). <More in
📑📑Pillar#3 >
IV. Operation Twist (2019): a special type of OMO. Explained in next segment.
12.15🐯🐯📢📢🗃🗃🧬🧬MONPOLICY: QUANTI TOOLS: OMO → OPERATION TWIST

Before that, you’ve to be aware of some many basic concepts:
12.15.1 🔪🔪🔪🔪: Security → Debt → G-Sec & Bonds (ऋण के �लए जारी क� गई प्र�तभू�तयां)
A ‘Security’ means a certificate/document indicating that its holder is eligible to receive a certain
amount of money at a particular time. This could be a…
Table 3: प्र�तभू�तयों के �व�भ� प्रकार
Borrower 🦁🦁Govt 🤵🤵Corporate (�नगम)
Short term Treasury bills, Cash Bill of Exchange, Commercial Papers,
(less than 1 year) Management bills Promissory Notes.
→
Long term G-Sec, Sovereign Bonds Bonds / Debentures
(1 year/>) →
Borrower 🦁🦁Govt 🤵🤵Corporate (�नगम)
Usually lower than Corporates’ Depends on following factors →
Interest rate
because risk is low
12.15.2 🛒🛒 (🔪🔪🔪🔪: 🧔🧔🧔) Deepening of G-Sec market- Retail investors’ RDAG @RBI
- RBI launched “Retail Direct Scheme” in 2021.
- Under this scheme, RBI permits “Retail Direct Gilt (RDG) account” for retail investors on its E-
Kuber online platform. (आम �नवेशक �रज़वर् ब�क म� आरडीजी नामक खाता खोल पाएं गे)
- Both Resident Indians & non-resident Indians (NRIs) can open this account. (गैर �नवासी भारतीय भी)
- Then Retail investors can directly buy Treasury Bills (T-Bill), G-Secs (of Union Government),
State Development Loans (SDL are ‘G-secs’ of State Govts) and Sovereign Gold Bonds, from RBI
directly. (आम �नवेशक सीधा �रज़वर् ब�क से इन प्र�तभू�तयों को खरीद सकता है.)
- Application fees to open the account = ₹ ZERO
− 🤩🤩Benefit? 1) Earlier retail investors bought G-sec “indirectly” through mutual funds wherein
mutual fund manager (MF) charged commission/fees. Now retail investor can buy directly so
does not have to pay such commission/fees to MF managers. (�बचौ�लयों को दलाली/कमीशन नहीं देना होगा)
− (More in 📑📑Pillar#1C- SEBI Share market, DEMAT account etc)
12.15.3 🔪🔪🔪🔪:🤵🤵Corporate Bonds: factors that determine its interest rate

If companies want to borrow money, they may issue bonds to investors. e.g. “Whoever buys this
Reliance Bond worth ₹1000, we will pay him 9.40% interest rate per year and return the principal after
15 years.” Usually the interest rate offered on such bonds depends on
Factor (कारक) How it determines corporate bond interest rate?
(Risk) Credit rating Lower credit rating (e.g. CCC or D) → higher interest rate needs to be
of company offered because risk of default is high. जब िदवा�लयेपन का जो�खम �ादा हो
Inflation why/how: Ans. Ref: 📑📑Pillar1C → Inflation Indexed Bonds
Bank deposit interest Higher the (Bank) deposit interest rate, higher bond interest rate needs to
rates be offered to attract households to shift money from bank savings/FD to
corporate bonds. (अगर ब�क जमाकतार्ओ ं को अ�ा �ाज दे रहा है तो कं पनी ने �ादा �ाज
ऑफर करना होगा)
Yield on G-Sec If G-Sec yield ⏫, then corporate will have to offer even higher bond
interest rate to attract the investors from G-Sec investment towards C-
Bond investment.
12.15.4 🔪🔪🔪🔪: 🤑🤑 Bond Yield (बांड म� �नवेश करने पर होने वाली आय या मुनाफा)
⇒ Bond yield is the profit an investor earns on a bond investment.
⇒ Suppose, Government issues a G-Sec or Bond: 8% annual interest, tenure: 1 year
⇒ Bhide Master invests ₹ 100. So, upon 1 year maturity he’ll get ₹ 8 Interest + ₹ 100 Principal = ₹
108. So his profit or yield will be= 8%
⇒ But suppose, before maturity of 1 year, Bhide Master urgently needs cash. So he sells ₹ 100 face-
value bond to Mr.Jethalal at a discounted price of ₹90. पैसों क� अचानक ज�रत पड़ने पर स�े दाम म� िकसी को
बेच दे
⇒ Jethalal keeps the it till maturity → Government pays him ₹ 108. प�रप� होने तक बेचे नहीं
⇒ So, for Jethalal the profit OR current bond yield to maturity is….
108−90
Yield= �
𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜 𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 𝑜𝑜𝑜𝑜 ₹ 90
� ∗ 100 = 20%
12.15.5 🔪🔪🔪🔪: 🤑🤑 Bond Yield ∝ 1/Price (स�े म� खरीदा= तो मुनाफा �ादा)

⇒ Bhide bought @100, his yield is 8%; Jethalal bought @90, his yield is 20%.
⇒ Thus, Bond yield is inversely related to the current selling price of the bond in the secondary
market.
⇒ If a bond’s demand ⏫ → its selling price will ⏫ → bond yield ⏬ (Because of inverse
relation)
12.15.6 🔪🔪🔪🔪: 🤑🤑 Bond yield: other factors affecting it (अ� कारक)
⇒ If the economy is booming (तेजी), companies are making great profit, investors may sell bonds at
lower prices in a hurry to unlock their money to invest it in shares of companies, because they
think it’ll get them more dividend. Then bond’s current selling price in the secondary market
⏬ → yield ⏫.
⇒ If the economy is facing recession (Continuous decline in growth rate: मं दी) → companies will
NOT make great profit → investors sell shares, and prefer to buy bonds hoping they’ll get
secured fixed interest. Then bond’s demand ⏫ in the secondary market → selling price ⏫ →
yield ⏬.
12.15.7 🐯🐯🐯🐯🐯🐯🐯🐯Operation Twist: why?

⇒ Commercial banks were reluctant to lend money to private sector companies because of the
problem of Bad Loans /Non-Performing assets (NPA: More in 📑📑Pillar1B2). िदवा�लयेपन क� घटनाओं
के चलते, ब�कवाले �नजी �ेत्र क� कं प�नयों को कजर् देने से डर रहे थे। आ�थक वृ�द्ध और रोजगार सृजन के �लए यह अ�� बात नहीं थी.
⇒ If such companies could borrow money by issuing corporate bonds (at cheaper interest rate) →
more factories, more jobs, more production, more GDP.
⇒ RBI decided to attack the third factor: “If the yield on long term G-Sec decreased, then
automatically Corporate Bond interest rates could also decrease.”
Figure 7: figures are only for illustration. ✋No need to memorize numbers.
12.15.8 🐯🐯🐯🐯🐯🐯🐯🐯RBI’s Operation Twist: methodology (2019-Dec)
Since RBI’s existing monetary policy tools had failed to make loans cheaper for corporates / boost the
economy. So in 2019-Dec, RBI started a “special OMO” wherein:
RBI Sold→ shorter -term G-Sec (of 1 year & higher tenor) worth ₹10,000 crore
RBI Bought → bought longer -term G-Sec (of 10-14 years tenor) worth ₹10,000 crore (i.e. equal
amount as above, so as to keep money supply unchanged.)
�रज़वर् ब�क ने �जतना बेचा, उतनी ही रकम का कु छ और खरीद �लया तािक मुद्रा आपू�त म� कोई बदलाव न हो.
⇒ Since RBI started buying long-term G-Sec, their demand will ⏫ → price will ⏫ → yield is ⏬.
The 10YearGSec’s yield lowered from 6.75% to 6.60%
⇒ And we’ve already learned, Corporate bonds are priced (benchmarked) keeping G-sec yields in
mind.
So, Op Twist → Lower G-Sec yield means →
 Cheaper borrowing for Private sector Companies. Because
o They can borrow money by issuing their (long term) Corporate-Bonds at much cheaper
interest rate than before. (�नजी �ेत्र क� कं प�नयों के �लए बॉ� जारी कर- ऋण लेना �आ स�ा🤩🤩)
o When a private company meets a bank manager to borrow money, it can negotiate the
loan price, “If your bank does not lend me money at this cheaper interest% then I will
issue my own corporate bonds.” → Even the bank lending rates for corporate loans could
be reduced.
 Cheaper borrowing for Government. For reasons similar to above. (How? Explained in Video)
 Investor of long term G-Sec will feel discouraged to hold the G-Sec till maturity (10-14 years),
He will try to sell it to another party/RBI and pull out his money, then he may park ₹₹ it a
Corporate Bond / Bungalow / car / Goa-vacation etc. Thus, it helps boost the consumption →
economy grows.
समज म� आ गया हो तो ब�ढ़या है, नहीं तो रट्टा मारो �जंदाबाद (if not understood then memorize by Rot-learning)
1. 1961: "Operation Twist" was first used by the US Federal Reserve.
2. 2019: RBI used also done it. Officially called “Special Open Market Operation (OMO) wherein
the Central bank simultaneously buys and sells G-sec of varying maturities to adjust their yields.
Which helps reduce interest rates on corporate bonds/debentures → easier to mobilize
investment → factory expansion → jobs, GDP growth. (यह एक खास िक� क� खुले बाजार क� िक्रया है, जहाँ
अगल अलग �मयादी क� सरकारी प्र�तभू�तयाँ खरीद-व-बेच कर �रजवर् ब�क उनक� उपज को कम करता है, तािक कॉप�रेट कं प�नया
स�े �ाज मे पैसा बाजार से हा�सल कर सके , तािक रोजगार और आ�थक वृ�द्ध मे मदद �मले)
3. Objectives of Op-Twist=
a. To make borrowing cheaper for Companies and Govt. कं पनीओ/�नगमों और सरकार के �लए कजर्
स�ा करवाना (HOW? Ans. Explained in Video).
b. It was NOT MEANT For fighting inflation. महंगाई से लड़ना इसका उद्दे� नहीं है
4. It ensures better Monetary Policy transmission for economic growth. (because, earlier, simply
reducing the repo rate has not helped much in making loans cheaper, for corporates. इससे पहले रेपो
दर कम करने पर भी बाजार म� लोन स�े नहीं हो रहे थे, तो �रज़वर् ब�क ने सोचा ये ऑपरेशन �ट्व� नामक नया साधन आजमाते ह�)
5. Net liquidity remains unchanged because ₹10,000 crore goes in and the same amount comes out
of the market. (सकल तरलता म� कोई बदलाव नहीं �ोंिक ऑपरेशन �ट्व� म� �जतना खरीदा, उतना ही बेचा है)
✋🎓🎓 🚫🚫 Beyond this, further PHD on what/why/how = poor cost:benefit for MCQs.For example
“The simultaneous sale of short-term bonds, on the other hand, helps push up short-term rates
which had fallen below RBI's benchmark rate. This would not only correct the anomaly in the short-
and long-term rates ” …. All this is not important for the scope of competitive exams, even if
inexperienced private mock-test-quiz-masters ask it.
12.15.9 ✋🎓🎓 🔪🔪🔪🔪: 🤑🤑 Bond Yield & Inverted Yield Curve: poor benefit for exam
1. Inverted Yield curve = ✋🎓🎓 इस मुददे को पढने म� हम व� बबार्द नहीं कर�गे
2. Negative Bond Yield = ✋🎓🎓 इस मुददे को पढने म� हम व� बबार्द नहीं कर�गे
3. Chinese Bond Yield ki News, Italian Bond Market crisis = ✋🎓🎓NOT IMP.
🔠🔠❓ India Government Bond Yields are influenced by which of the following? (Prelims-2021)
1. Actions of the United States Federal Reserve [अमे�रक� फे डरल �रजवर् क� िक्रयाओं द्वारा]
2. Actions of the Reserve Bank of India. [�रजवर् ब�क क� िक्रयाओं द्वारा]
3. Inflation and short-term interest rates [महंगाई और लघु अव�ध के �ाज दर]
Answer Code: a) 1 and 2 Only b) 2 Only c) 3 Only d) 1, 2 and 3
🔠🔠❓ MCQ. 'Open Market Operations' refers to: (Prelims-2013)

a) borrowing by banks from the RBI b) lending by commercial banks to industry and trade
c) purchase and sale of government securities by the RBI d) None of the above
🔠🔠❓ MCQ. Which would result in an increase in money supply in economy? (Prelims-2012)
1. Purchase of G-Sec from the public by the Central Bank.
2. Deposit of currency in commercial banks by the public.
3. Borrowing by the government from the Central Bank.
4. Sale of government securities to the public by the Central Bank.
Answer Codes: (a) 1 only (b) 2 and 4 only (c) 1 and 3 (d) 2, 3 and 4
🔠🔠❓ MCQ. Which of them is/are part of Monetary Policy? (Prelims-2015)

1) Bank rate 2) Open market operations 3) Public debt 4) Public Revenue
Answer Codes: (a) 1 only (b) 2, 3 and 4 (c) 1 and 2 (d) 1, 3 and 4
12.16🐯🐯🐯🐯🐯🐯: 📅📅 MONPOLICY: QUANTI TOOLS: OMO → G-SAP

⇒ Full form: (Secondary Market) G-sec acquisition programme
⇒ Mechanism: RBI to buy G-Sec from Secondary market on specified timetable. एक �न��त समय ता�लका
के िहसाब से �रज़वर् ब�क िद्वतीय बाज़ार से सरकारी प्र�तभू�तयां ख़रीदेगा.
G-SAP During these months Total
G-SAP 1.0 (पहला चरण) → 1 Quarter of 2021-22 =April to Jun 2021 (पहली �तमाही)
st
₹1.0 Lakh cr
G-SAP 2.0 (िद्वतीय चरण) → 2nd Quarter of 2021-22 = July to Sept 2021 (दू सरी �तमाही) ₹1.2 Lakh cr
12.16.1 🐯🐯🐯🐯🐯🐯:📅📅 OMO → G-SAP : 🤩🤩Benefit?

⇒ ⏫ Money supply in the economy. (अथर्तंत्र म� मुद्रा आपू�त बढेगी)
⇒ Investors, who sold G-Sec to RBI= those investors got ₹₹ →They may 1) do shopping and/or 2)
invest in other companies shares/bonds→ 1+2=economic growth. मुद्रा आपू�त म� बढ़ोतरी के चलते �नवेशकों
के हाथ म� पैसा आएगा तो वे बाज़ार से ख़रीदारी कर�गे, अ� क��नयों म� �नवेश कर�गे→ देश क� आ�थक वृ�द्ध म� मदद �मलेगी
😤😤FAQ/Moral Outrage: Why G-SAP? Why not achieve this via ⏬ reducing REPO ? Ans.
⇒ Every person may not be interested in taking new bank loans. Some investors may be interested
in selling their previous investments in G-Sec to unlock the money. (हर �� ब�क से कज़र् लेगा ये ज़�री
नहीं है। कु छ �नवेशक अपना पुराना G-sec �नवेश बेचकर पैसा बटोरना चाहते हो तो जी-सेप म� आ सकते है)
⇒ if RBI ⏬decreases the repo rate too much→ it can result in A) inflation and B) ⏬decrease in
the deposit interest rates offered by the bankers on savings account → middle-class and
pensioners affected negatively. (रेपो दर म� ब�त �ादा कटौती �ई तो नई सम�ाए खड़ी होंगी)
Table 4: To Sum up, OMO, GSAP, OP-TWIST (कु ल �मलाकर बात ये है िक)
G-SAP ⇒ RBI is buying G-Sec to increase money supply → Post-corona revival.

⇒ Money amount, date&time/calendar/timetable is transparently & systematically
announced in advance before starting.
⇒ इसम� पैसों क� मात्रा, समय-ता�लका सब कु छ पारदश� और �व��त �प से, ख़रीदारी शु�आत करने से पहले
�रज़वर् ब�क प्रका�शत कर देता है।
OMO ⇒ RBI is selling G-Sec to control inflation.
⇒ RBI is buying G-Sec to fight deflation. मुद्रा��त(मं हगाई)/अप��त(स�ाई) से लड़ने के �लए
�रज़वर् ब�क सरकारी प्र�तभू�तयों को बेचगे ी/खरीदेगी
⇒ Its timetable NOT announced in advance, in detailed manner, unlike G-SAP.
�रज़वर् ब�क के �ववेक/मनमज़� पर अ�नय�मत समय पर ये िक्रया होती थी। समय से पूवर्, �व�ृत �प से इसक�
समय ता�लका प्रका�शत नहीं क� जाती थी।
⇒ OMO window is NOT discontinued. It’ll continue to function as per discretion
of RBI. इस �खड़क� को बं द नहीं िकया गया। �रज़वर् ब�क के �ववेकानुसार भ�व� म� भी जारी रहेगा.
Op.Twist ⇒ RBI is Buying and Selling of G-Sec of varying maturities
⇒ To reduce G-Sec yield → so future borrowing becomes cheaper for Government
and Companies. �रज़वर् ब�क द्वारा �भ� �भ� अव�ध/�मयादी क� सरकारी प्र�तभू�तयों को खरीदना और
बेचना तािक यी� कम हो सके तािक भ�व� म� सरकार तथा कं प�नयों के �लए कजार् लेना स�ा हो सके ।
12.17🐯🐯🐯🐯🌽🌽 MONETARY POLICY: QUALITATIVE TOOLS (गुणा�क साधन)

Quantitative tools (SLR,CRR,Repo etc.) control ‘volume’ of loans. मात्रा�क साधन कज� क� मात्रा तय करते ह�
⇒ Whereas, qualitative tools (PSL,LTV etc.) control “distribution” of loans to a particular sector of
economy. गुणा�क साधन कज� के �वतरण को तय करते ह�
- e.g. how much loan to a particular sector e.g. agriculture, renewable energy.
- how much loan to a particular segment of society (e.g. farmers, women, SC/ST).
- So, qualitative tools also known as SELECTIVE (चयना�क) or DIRECT (प्र��) Tools.
12.17.1 � Moral Suasion (नै�तक दबाव / सलाह) & Publicity (प्रचार)
Figure 8: “म�ने तो अपनी repo-दर कम कर दी लेिकन ये लालची ब�क वाले अपने loan-दर कम नही कर रहे , कम से कम मेरा �लहाज/स�ान रखने के �लए भी उ�े थोड़ा तो स�ा
करना चािहए।“ - RBI Governor
- Moral suasion meaning applying “Persuasion” without applying punitive measures. RBI
governor tries this tactic via conferences, informal meetings, letters, seminars etc
- E.g. RBI-Governor asking banks to transmit repo-rate cuts, open new branches in rural areas,
spread financial literacy, give loans to farmers beyond PSL quota etc.
- E.g. RBI Governor requesting CM or Finance Minister to control fiscal deficit & subsidy leakage
to enhance the efficacy (प्रभावका�रता) of RBI’s monetary policy.
- Publicity: RBI governor could give media statement, speech during university convocation (दी�ांत
पदवीदान समारोह), memorial lectures… “Look I reduced repo rate but banks are not passing the
benefit to customers…and xyz”. By doing so, he can create an effective public opinion which also
pressurizes the banks to stop their thuggery.
12.17.2 �🚯🚯 Direct Action (सीधी कायर्वाही: �ोिक लातो के भुत बातो से नहीं मानते)
- RBI can punish banks (and even non-banks) for not complying with its directives under RBI Act,
Banking Regulation Act, Payment and Settlement Systems Act, Prevention of Money Laundering
Act (PMLA), Foreign Exchange Management Act (FEMA). �रजवर् ब�क के िदशा �नद�शों का पालन न करने पर
�व�भ� कानूनों म� सजा/दंड
- 2019: RBI ordered the banks to have a “Clawback” provision in their CEO & Top executives’
salaries. E.g. If the CEO did any scam/fraud, he’ll have to return his previously paid salary /
bonus, even if he had retired/left the job afterwards. (िकसी ब�क का सीईओ कांड म� पकड़ा गया तो उस सीईओने
पुरानी तन�ाह भी लौटानी होगी.)
12.17.3 💍💍 Margin Requirements / Loan to Value (LTV) (सीमा अ�नवायर्ता)
Figure 9: जब घर मे पड़ा है सोना, िफर काहे को रोना?

⇒ RBI can mandate Loan to Value (LTV) for a gold-loan, home loan, auto loan or business loan
etc. so a Bank/NBFC can’t lend more than x% of the value of the collaterals. RBI can change this
x% to boost / curb demand. (�गरवे रखी चीज के मू� के सामने ब�क या गैर-ब�क सं �ान �� को िकतना कजर् दे सकते
है? �रजवर् ब�क उसके मानदंड म� बदलाव द्वारा, बाजार म� चीज-व�ुओ क� मांग को बढ़ा या कम कर सकता है)
LTV reforms in 2020-Aug Before After
Gold Loan 75% value of gold/gold- 90%
jewellary
🤩🤩Benefit? More quantity of loan by pledging same qty of gold → 😷😷 post-corona-biz-revival.
12.17.4 Selective Credit Control (चयना�क ऋण �नयं त्रण)

😰😰In a negative / restrictive direction (नकारा�क) 🤩🤩In a positive direction
(सकारा�क �दशा म�)
- Credit Rationing System: English (in 18th century) - 🚗🚗 Consumer credit control e.g.
and USSR (till 1990s)– their central bank will not During deflation / recession, RBI
give more than “X” amount as loan to individual can relax the down payment / EMI
banks. And an individual can’t get more than installment norms for durables
prescribed amount of loans for each category like Vehicles, TV, Fridge etc. to
(housing, education, business). (एक �� को इससे �ादा boost consumption and demand.
कजार् नहीं �मलेगा) - Priority Sector Lending <see
- 1960s: Credit Authorization Scheme (CAS) in India: below> प्राथ�मक �ेत्र के ऋण मानक
all commercial banks had to obtain prior approval of
the RBI before loaning ₹ 1 crore/> to a single
borrower.
- 1970s: RBI imposed quantitative ceiling on non-food
loans to boost green revolution, food inflation.
😰😰But such measures failed due to lax monitoring and
loopholes. (�श�थल �नगरानी के चलते, बेअसर रहे ये साधन)
12.18 🐯🐯🐯🐯🐯🐯 PRIORITY SECTOR LENDING (PSL: प्राथ�मकता �ेत्र के �लए ऋण मानक)
Figure 10: थोड़ा लोन हमको भी िदलवा दो Governor-sahib, हम बहोत गरीब है!
⇒ 1968: First time RBI used the word “priority sector”: Banks must give 40% of their loans to 3
priority sectors 1) agriculture 2) small industries 3) exporters by 1985. (कृ �ष छोटे उद्योग और �नयार्तक)
⇒ Over the years, more sectors were included in it. (समय के साथ साथ और भी �ेत्रों को इसम� शा�मल िकया गया)
⇒ 2015: some reforms in PSL. → 2019: RBI's UK Sinha Committee on MSME loan reforms
suggested some more reforms in the PSL. →2020-Sept: RBI reformed PSL guidelines as
following: (�न� सुधार िकए गए)
Priority Sector Loans norms → minimum quota after 2020-Sept Reforms BEFORE AFTER
� Weaker Sections (कु ल लोन का कम से कम 12% जाना चािहए कमजोर वगर् को): 10 % ⏫12%*
⇒ SC, ST, Women, PH, Minorities, Manual scavengers, Artisans,
Priority Sector Loans norms → minimum quota after 2020-Sept Reforms BEFORE AFTER
⇒ PM-Jan DhanYojana Overdrafts upto Rs.10,000
⇒ Beneficiaries of Govt's National Rural/Urban Livelihood Mission Schemes
(NRLM/NULM: More in 📑📑Pill#6: HRD →Poverty Removal Schemes)
🌽🌽 Agriculture (कृ �ष) (all farmers: small and big) 10% 8%
🌽🌽 Agriculture: सीमांत िकसान और छोटे िकसान 8% ⏫10%*
⇒ Marginal Farmer (owns upto 1hectre land) सीमांत िकसान
⇒ Small farmer (>1 upto 2ht) छोटे िकसान
🧵🧵 Micro Enterprises (अ�त लघु उद्योग), Khadi-Village industries 7.50% 7.50%
Above categories (Weaker section, agriculture, micro-enterprise ) 4.50% 2.50%
plus, other categories such as
⇒ Small & Medium Enterprises, Affordable housing loans to beneficiaries under
Pradhan Mantri Awas Yojana
⇒ food processing companies, Vermi compost, biofertilizer, seed production,
⇒ Exporters, Student-Education loans (upto Rs.10lakh),
⇒ Social Infrastructure (schools,drinking water, sanitation facilities, health care,
COVID related hospitals/labs etc);
⇒ Renewable Energy Projects (wind mills, biomass generators, solar street light,
micro-hydel plants etc.) etc. (नवीकरणीय ऊजार् प�रयोजनाएं )
Total PSL for Indian Scheduled Commercial Banks and 40% 40%
(Foreign Banks with 20 or more branches).
* Above quota reforms to be implemented in Phase-Wise manner by 2023-24. (क्र�मक �प से नए सुधार
होंगे)
🤩🤩Benefit? It will ⏫ loan-availability for the weaker section and small farmers thus helping in the
United Nations' Sustainable Development Goals related to poverty removal. (📑📑Ref: HDT-Pillar#6)
कमजोर वगर् और छोटे िकसानों को �ादा मात्रा म� कजार् �मल पाएगा. गरीबी �नवारण, सं यु� रा�� के सतत �वकास ल�ों क� प्रा�� म� मदद
करेगा.
⇒ PSL quotas are ‘minimum (�ूनतम/कम से कम)’ & not maximum. So, if bank wishes, it can EVEN
give even 60% of its loans to weaker sections, instead of just 12% “minimum quota” meant for
weaker section.
⇒ Bank’s Loans given to Non-Banking Financial Company (NBFC) who are lending to above PSL
categories = such ‘indirect loan’ to PSL sectors will also be counted for bank’s quota. (ब�कर द्वारा
गेरब�क �व�ीय कं पनी को िदया गया कजार् यिद परो� �प से प्राथ�मक �ेत्र को जाता है तो वह रा�श भी कवोटा-सफलता म� �गन ली
जाती है। )
⇒ Bank + NBFC’s joint lending / co-lending/ co-origination loans – what does it mean? #PHD-
NOT-IMP. (ब�क और गेर-ब�क का साथ मे �मलकर पीएसएल �ेत्र को कजर् िदया, तो उसमे ब�क ने िदया कजर् इस �ोटे म� �गन �लया
जाता है, कु छ शत� के आधीन)
⇒ NOTE: PSL Norms donot apply to NBFCs. PSL Norms apply ONLY to Bankers.
12.18.1 🐯🐯🐯🐯🐯🐯 PSL Reforms-2020: on RRB/SFB/UCB?
What is the difference/meaning of SCB/RRB/SFB/UCB etc? Ans: (📑📑Ref: HDT-Pillar#1B1:
classification)
Type of Bank & PSL Reforms-2020: Before After
Indian Scheduled Commercial Banks (SCB: अनुसू�चत वा�ण��क ब�क) and 40% same 40%
Foreign Banks in India with 20 or more branches
Foreign Bank in India with <20 branches (�वदेशी ब�क) 40% same 40%
Regional Rural Banks (RRB: �ेत्रीय ग्रामीण ब�क) 75% same 75%
Small Finance Banks (SFB: लघु �व� ब�क) 75% same 75%
Urban Cooperative Banks (UCB: शहरी सहकारी ब�क)* 40% ⏫75%
Rural Cooperative Banks (ग्रामीण सहकारी ब�क) N/A N/A
⇒ These quotas implemented in a gradual/phase-wise manner. Will become effective in 2023-24.
⇒ Internal quotas may be different for these Banks e.g. RRBs: Weaker section =15%. But, poor cost-
benefit in chasing all that information. #⏳📚📚थोड़ा-पढ़ो-आगे-बढ़ो
12.18.2 🐯🐯🐯🐯🐯🐯 PSL Reforms-2020: Startups, Renewable Energy and Healthcare
PSL Loans → other category BEFORE AFTER
Startup Company is a company: only eligible categories: All types of Startups
⇒ Age: Not older than 10 years ⇒ Agro/Food processing allowed in PSL quota
AND related Startup
⇒ Annual turnover: Not more ⇒ MSME Startup For loans upto ₹50cr
than ₹100 cr AND [then What is MSME? (📑📑Ref:
⇒ Function: innovation in HDT-Pillar#1D and #4B)]
goods/services. (नवाचार)
(📑📑Ref: HDT-Pillar#4B)
🔌🔌🔌🔌 Renewable energy(अ�य ऊजार्) only loans upto 15cr eligible ⏫30cr
💊💊 Healthcare project/Hospital? 5cr ⏫10cr
12.18.3 🐯🐯🐯🐯🐯🐯 PSL Reforms-2020: Weightage to poor districts (गरीब/�पछड़े �जलों को भारांक)
RBI will classify the districts based on previous PSL loans given by all banks:
Type of district if Axis bank gives ₹100 PSL loan in this district →
RBI will count Axis’s quota-fulfillment as _ _ .
Low Credit penetration e.g. Tawang, ₹125 (आरबीआई ने एक ऐसी भारांक प्रणाली बनाइ है �जसमे ब�क
Dantewada etc. जहां भूतकाल म� ब�क-कजर् क� प�ँ च �पछड़े �जलों म� लोन देकर ब�त आसानी से अपना पीएसएल ल�ं क
कम रही है हा�सल कर सकती है।)
High Credit penetration e.g. Ahmedabad, ₹90 (तािक ब�क जो पहले से स�� जले है, उसे �ादा स�� बनाने
Pune etc. जहाँ पहले से ही काफ� कजार् िदया जा चूका है क� जगह �पछड़े �जले पर �ान दे)
⇒ Thus, RBI’s PSL weightage system will passively discourage banks from giving more PSL-loans
to the developed districts and it will encourage banks to give PSL-loans to backward districts.
This will help in more balanced regional development. �ेत्रीय �प से सं तु�लत �वकास म� यह कदम फायदेमंद
होगा.
🔠🔠❓ MCQ. Priority Sector Lending by banks in India constitutes loans to _ _ _ _ . (Pre-2013)
a) Agriculture b) Micro and Small Enterprises c) Weaker Sections d) All of the above
12.18.4 🐯🐯🐯🐯🐯🐯:📜📜 Priority Sector Lending Certificates (PSLC) from 2016 onwards
Figure 11: भाई आ�मर/Rancho हमने अपना assignment नही िकया, तू अपना "EXTRA-walla" हमे बेच दे!
⇒ In this arrangement, the overachieving Banks can sell their excess PSL in form of ‘certificates’ to
underachieving banks without transferring the loan assets or its risk. (ल�ं कों से �ादा उपल�� हांसील
करने वाली ब�क, अ� ज�रतमं द ब�क को स�टिफके ट बेचती)
⇒ If an underachiever bank can’t fulfil its PSL-quota through PSL-certificates purchase then
ultimately,
⇒ Underachiever bank will have to deposit PSL-shortfall money to NABARD's Rural Infrastructure
Development Fund (RIDF), SIDBI, National Housing Bank (NHB), MUDRA Ltd. etc as per the
norms decided by RBI from time to time. (ल�ं कों को हा�सल नहीं कर पाने वाली ब�क ने आरबीआई द्वारा �च��त
अलग-अलग सं �ाओं म� पैसा �नवेश करना पड़ेगा)
⇒ Underachiever bank will earn interest from such deposited money, but it’ll be (usually) linked
with Bank-Rate & their money will be locked-in a long-term project. ( पैसा लं बे समय तक अटक जाएगा)
12.19📢📢 � MONETARY POLICY TOOLS: A READY RECKONER TABLE
Table 5: समज म� आ गया हो तो बिढ़या है, नहीं तो रट्टा मारो �जदं ाबाद (If understood then well & good, else memorize by Rot-Learning)
Tools & Strategy? <2%CPI= Fight deflation (अप��त) >6%CPI= Fight Inflation (मुद्रा��त)
⇒ Deflation: ↑ money Easy, Cheap, Dovish, Expansionary Tight, Dear, Hawkish,
supply, inject liquidity=> policy. Contractionary

आसान-स�ा �ाजदरे, �व�ारवादी तं ग- मँ हगी �ाजदरे, सं कु चनवादी
make loans cheaper, ↑
consumption
⇒ Inflation: Do reverse
Reserves: CRR, SLR ↓ (Decrease) ↑ (increase)
Key Rates ↓ (Decrease) ↑ (increase) महंगाई से लड़ना है तो
(Repo, MSF, Bank रेपो दर बढ़ा दो
Rate)
↓ (Decrease) – so banks feel less ↑ (increase) : so banks feel
Quantitative
motivation to park ₹ in RBI & more motivation to park ₹ in

Reverse Repo, they become more proactive to RBI → ⏬loanable funds to
SDF give loans to people → people → ⏫loan interest rate
⏫demand → deflation fought → ⏬demand → inflation
fought
Market Ops OMO: RBI Buys G-Sec from OMO: RBI Sells G-Sec
(OMO) market.
Moral Suasion / Nudge / Force the banks to Enforce the Hawkish policy
Direct Action enforce Dovish Policy
Margin Requirement Increase e.g. Do reverse of left cell.
/ Loan to Value (LTV) Gold-LTV: 60% → 90%
Qualitative Tools
↑ loan-flow to sectors that can - ↓the loan-flow to sectors

generate employment e.g. textile where speculative
→workers buying more investment is leading to
Selective Credit
→demand /consumption demand-side inflation e.g.
Control / Priority
increased →deflation fought. लोन real estate & housing.
Sector Lending (PSL)
का बहाव कु छ ऐसे �ेत्रो म� करो िक रोजगार - ↑loan-flow to sectors
�नमार्ण हो और वह सब मजदू र खरीदारी कर� where loans can ↑supply
तािक अथर्तंत्र म� मांग बढे e.g. onion farmers.
** MCQs usually confined to how can CRR,SLR,Repo & OMO be used for inflation /
deflation control. For rest of the tools you need not waste time thinking 500-jaat-ke-
combinations and Birbal-Khichdi.✋
🔠🔠❓ Which of the following is not an instrument of Selective Credit Control? (Pre-1995)
a) Regulation of consumer credit b) Rationing of credit
c) Margin requirements d) Cash reserve ratio
🔠🔠❓ An increase in the Bank Rate generally indicates that _ _ _ (Pre-2013)
a) Market rate of interest is likely to fall.
b) Central Bank is no longer making loans to commercial banks.
c) Central Bank is following an easy money policy.
d) Central Bank is following a tight money policy.
🔠🔠❓ If RBI decides to adopt an expansionist monetary policy, which of the following would it not
do ? (Pre-2020)
1. Cut and optimize the Statutory Liquidity Ratio
2. Increase the Marginal Standing Facility Rate
3. Cut the Bank Rate and Repo Rate
Answer Codes: [a) 1 and 2 only [b) 2 only [c) 1 and 3 only [d) 1, 2 and 3
🔠🔠❓MCQ. Find Correct Statements: (Prelims-2022)
1. If the inflation is too high, Reserve Bank of India (RBI) is likely to buy government securities.
2. If the rupee is rapidly depreciating, RBI is likely to sell dollars in the market.
3. If interest rates in the USA or European Union were to fall, that is likely to induce RBI to buy
dollars.
Codes: (a) 1 and 2 only (b) 2 and 3 only (c) 1 and 3 only (d) 1, 2 and 3
12.20📢📢 MONETARY POLICY IN PRESENT-DAY INDIA

There are 3 strategies / ways of making a monetary policy: (तीन तरीके से मौिद्रक नीती बनाई जा सकती है)
1. 💸💸 Exchange rate stability (�व�नमय दर ��रता): Singapore & other export-oriented economies use
this. They try to keep their local currency at certain rate against US-dollar to boost exports.
(How?Ans📑📑Pillar#3)
2. 🎳🎳 Multiple Indicators (एका�धक सं केतक): Central Bank tries to focus on Economic Growth,
Employment, Inflation Control and Exchange rate stabilization. India's RBI followed this
strategy upto 2016.
3. 🧄🧄 Inflation targeting / Price Stability (मुद्रा��त ल�ीकरण): Central Bank only aims to keep
inflation controlled, THEN other indicators (growth, employment, exchange rate) will
automatically fall in line. Model successful in Western nations → RBI’s Urjit Patel Committee
Report (2013-14) recommended it for India → adopted from 2016-October, by amending RBI
Act Section 45. (2016 म� �रज़वर् ब�क के कानून म� सं शोधन कर भारत ने यह रणनी�त/तरीका अपनाया है)
12.20.1 📢📢 Monetary Policy Making under RBI Act since 2016
Figure 12: जाने �ा होगा रामा रे..... सोचना है �ा? जो होना है होगा, चल पड़े है िफ़क्र यारो….
Table 6: composition of the ⚖� statutory Monetary Policy Committee (MPC: वैधा�नक मौिद्रक नी�त स�म�त):
🐯🐯 RBI side (3 members) 🦁🦁 Govt. Side (3 members)
1. RBI Governor, as the Ex-officio Chairman. 1. Dr. Shashanka Bhide from National
2. Dy.Governor responsible for Monetary Council for Applied Economic Research
Policy. Michael Patra (from 2020-Jan). (NCAER, Delhi)
Earlier Viral Acharya. 2. Dr. Ashima Goyal from Indira Gandhi
3. One person nominated by RBI Central Board: Institute of Development Research
Mridul Saggar (Executive Director, RBI). (Mumbai)
3. Dr. Jayanth R Varma from IIM-A
Their tenure tied with their ex-officio job tenure Tenure: 4 years, no re-appointment. (4 साल का
(पदेन कायर्काल) E.g. Shaktikanta’s shakti (powers) कायर्काल और उसके बाद पुन:�नयु�� असं भव)
will be gone after his 3-years tenure as RBI-
Governor expires, unless he is reappointed.
(Note: Shaktikanta is reappointed till December
2024.)
RBI Governor & Dy.Gov are selected by Financial They’re selected by Search-cum-Selection
Sector Regulatory Appointment Search Committee headed by Cabinet Secretary
Committee (FSRASC) is headed by Cabinet (IAS)
Secretary (IAS)
⇒ Meeting quorum 4 persons, incl. Governor. (कायर्साधक सं �ा: कम से कम चार लोगों क� हाजरी ज�री)
⇒ Legally required to hold minimum four meetings in a year. (सालाना कम से कम 4 बार �मलना ज�री)
⇒ In practice, they meet every two months to decide bi-monthly monetary policy updates.
(Although during 😷😷Corona-lockdown met more frequently).
⇒ Repo rate=Policy rate= benchmark interest rate: decided by Majority vote. (मौिद्रक नी�त दर ब�मत से
तय)
⇒ When they vote for the first time, all members, including the Governor, will vote. If tie →
Governor can vote again for second time as casting vote (यिद मतों म� बराबरी �ई, तो गु�ी सुलझाने के �लए
�नणार्यक मत गवनर्र द�गे).
⇒ To ensure transparency / accountability (पारद�शता / जवाबदेही):
⇒ Govt can send message only in writing. (सरकार के वल �ल�खत म� सं देश भेज सकती है)
⇒ Committee must publish its minutes of the meeting on the 14th day, and “Monetary Policy
report” at every 6 months.(�नयत समय पर कु छ द�ावेज प्रका�शत करने होंगे)
⇒ 🎯🎯 Inflation target decided by Union Government, after consulting with RBI Governor. (गवनर्र से
�वमशर् करने के बाद महंगाई �नयं त्रण का ल� सरकार तय करेगी)
⇒ 🎯🎯 Present target: Keep Consumer Price Index (CPI:All India) within 2-6%.[alternate way of
saying= 4% +/- spread of 2%] (More about CPI/Inflation in 📑📑Pillar#4C)
⇒ 📅📅 Target was Valid for: Originally from 2016-2020 (ending at 31/03/2021). Now same target
extended till 31/3/2026.
⇒ 😰😰Target fail: if inflation not kept in this 2-6% zone for 3 consecutive quarters (=9 months)
then Committee must send report to Govt with reasons and remedies (यिद सतत नौ महीनों तक महंगाई
इन सीमाओं के बाहर रही तो स�म�त क� असफलता मानी जाएगी → असफलता के कारण-उपचार क� �रपोटर् �रज़वर् ब�क ने सरकार को
भेजनी होगी).
🔠🔠❓ MCQ. With reference to inflation in India, find correct statement: (Prelims-2015)
a) Controlling the inflation in India is the responsibility of the Government of India only
b) The Reserve Bank of India has no role in controlling the inflation
c) Decreased money circulation helps in controlling the inflation
d) Increased money circulation helps in controlling the inflation
🔠🔠❓ MCQ. Find correct statements about Monetary Policy Committee: (Prelims-2017)
1) It decides RBI’s benchmark interest rates.
2) It is a 12-member body including the Governor of RBI and is reconstituted every year.
3) It functions under the chairmanship of the Union Finance Minister.
Codes: (a) 1 only (b) 1 and 2 only (c) 3 only (d) 2 and 3 only
🔠🔠❓MCQ. Who is responsible for maintaining price stability by controlling inflation ?
(a) Department of Consumer Affairs (b) Expenditure Management Commission
(c) Financial Stability and Development Council (d) Reserve Bank of India
12.21📢📢 REVIEW OF BI-MONTHLY MONETARY POLICIES
12.21.1 🚕🚕🚕🚕 Stance: Calibrated Tightening / Neutral / Accommodative

After every meeting, RBI MPC will announce its stance i.e. What they’ll do with Repo Rate in the
next Meeting. (भ�व� क� मीिटंग म� रेपो दर के साथ �ा िकया जाएगा, इसका इशारा/ सं केत िदया जाता है)
Stance= what RBI will do Will they Will they Will they hold/keep
in next meeting hike/increase cut/decrease repo unchanged?
⏫repo? ⏬Repo?
Calibrated Tightening ✅ Possible ✋No they’ll not cut ✅ Possible
Neutral ✅ Possible ✅ Possible ✅ Possible
Accommodative ✋No they’ll not ✅ Possible ✅ Possible
hike
⇒ This provides guidance to the investors/borrowers/bankers about future action of RBI.
⇒ However, RBI MPC is not legally bound to follow the stance. E.g. Dec-2018 Governor Urjit-Patel
led MPC announced Calibrated Tightening, yet in next meeting Feb-2019 Governor Shaktikanta
led MPC decreased⏬ repo rate, because they felt it was necessary to combat deflation. (कानून �प
से बा� नहीं. कभी कभी स�म�त इसका उ�ं घन भी कर देती है)
⇒ 2022-May-June: Even though MPC said Accommodative Stance, still they kept increasing the
Repo Rate.
12.22🐯🐯🐯🐯🐯🐯RBI’S MONETARY POLICIES: BEFORE 2020-CORONA
📢📢 Policy Decisions & Regulatory Announcements
[We will study in appropriate pillars/sections, so DONOT LOSE SLEEP YET]
2018 -era ⇒ Inflation was high/rising ⏫ so, Governor Urjit Patel led MPC kept ⏫Repo in
pattern the range of 6-6.50% (मुद्रा��त/महंगाई बढ़ रही थी इस�लए रे पो दरों को ऊंचा रखा गया था)
- Stance: Calibrated Tightening.
2019-era ⇒ Inflation was falling below 2%⏬ so, Governor Shaktikanta Das led MPC kept
pattern decreasing Repo from 6.##% to 5.##%. (अप��त/स�ाई बढ़ रही थी इस�लए �रपो दरों म�
कटौती)
- Stance: Accommodative.
Feb-2020 - Repo: 5.15% accommodative stance
- CPI Inflation rose to 7.4% in December-2019 (which is outside the statutory limit
of 2-6%) & this inflation rate was highest since 2014-July. So, ideally, RBI should
have ⏫repo rate to combat inflation but (वैसे तो महंगाई बढ़ रही थी इस�लए रेपो दरों म� बढ़ोतरी
करनी चािहए िकं�ु)
o 1) December-2019 policy had kept Accommodative stance = repo
couldn’t be increased. It could only be kept same/reduced.
o 2) Union Budget-2020 announced various measures to boost economic
growth so Committee preferred to wait & watch how those measures
impact inflation and growth, before changing repo rate.
RBI announces Measures to promote economic growth::
1. LTRO: Long Term Repo Operations (LTROs) of 1 yr & 3 yr.
2. CRR Exemption based on (new) loans given for 1) automobiles, 2) residential
housing and 3) MSMEs
RBI announces measures to promote digital economy
1. RBI to construct a “Digital Payments Index” (DPI) to capture the growth of
digital payments across India. (📑📑Ref: 1A1).
March - Given below as a separate sub-topic for Corona
toApril
12.23🐯🐯🐯🐯🐯🐯RBI’S MONETARY POLICIES: CORONA MARCHTOMAY’20

By default, RBI’s MPC Committee supposed to meet every 2-2 months. So, After February’s meeting,
they should hold next meetings in April. But in Corona crisis economic slowdown they met more
frequently in March to May. (कोरोना महामारी के चलते आए आ�थक सं कट से �नपटने के �लए स�म�त ने तय समय से पहेले
एका�धक मीिटंग का आयोजन िकया)
The gist of above March-April-May announcements are as following (and they’re considered to be
part of 👻👻ATMANIRBHAR BHARAT, which we’ll learn in Pillar#2D and #4C):
12.23.1 👻👻ATMANIRBHAR → Gist of RBI’s March2May 2020 Announcements:

⇒ ⏬CRR to 3% and ⏬Repo to 4%. (इन दरों म� कटौती क� गई)
⇒ Policy corridor changed, to ⏬Reverse repo rate. #SBI-telemarketing4loans
⇒ 🐯🐯🐯🐯🐯🐯🐯🐯:Targeted Long Term Repo Operations (TLTRO: ल��त दीघर्का�लक रेपो) → RBI gives
loans to banks with condition that banks must invest it in “X” places to help Corporates &
NBFCs. (Refer the full short note in earlier part of this handout.)
⇒ 🐯🐯🐯🐯🐯🐯🐯🐯 RBI’s special or flexible liquidity window to help Mutual fund companies.
👻👻ATMANIRBHAR → Reforms by RBI in Mar2May-2020 We’ll learn in 📑📑Pillar#
🐯🐯🐯🐯🐯🐯✋ Loan/EMI/NPA relief / Moratorium (ऋण 📑📑1B2: NPA
अदायगी पर अ�ाई �प से रोक)
🐯🐯🐯🐯🐯🐯🐯🐯 Special Refinance Facility for AIFI (All India 📑📑1B1: classification of Banks →
Financial Institutions). खास िक� क� पुन�वत योजना, अ�खल भारतीय AIFI (NABARD, SIDBI, EXIM,
�व�ीय सं �ानो के �लए NHB)
RBI defers BASEL Norms, IndAS accounting Norms, orders 📑📑1B2: BASEL norms
bank to pause/halt the Dividend Distribution (�नयमों को ��गत
िकया गया)
🐯🐯🐯🐯🐯👨👨: RBI reforms Ways and Means advances 📑📑1C: SEBI/Sharemarket: Short
(WMA) and Consolidated Sinking Fund (CSF) term Debt instruments
RBI reforms attracting foreign investment: 📑📑3A: Balance of Payment (BoP):
⇒ Voluntary Retention Route (VRR: �ै��क अवधारण मागर्) FDI, FPI
⇒ Fully Accessible Route (FAR: स�ूणर्त: सुग� मागर्)
12.23.2 🐯🐯🐯🐯🐯🐯RBI’s Monetary Policies: 2020-August (Earlier meeting in May-2020)
⇒ Repo unchanged @4% so Automatically [email protected] and [email protected]%. Stance: Accommodative
⇒ No changes in repo because (रेपो दरों म� कोई बदलाव नहीं िकया �ोंिक)
⇒ ⏫ food inflation due to i) corona-lockdown supply chain disruptions and ii) heavy rains. Repo
changes can’t help solving this. (आपू�त श्रृंखला प्रबं धन म� सम�ा और भारी बा�रश के चलते खाद्य महंगाई बढ़ी थी- तो
�रपो दरों म� बदलाव द्वारा उस महंगाई का समाधान असं भव)
⇒ Still if RBI ⏫repo then expensive loans → post-corona economic-revival will be harmed. So,
no changes in Repo. (िफर भी यिद जबरद�ी �रपो म� बढ़ोतरी क� जाए तो मं हगे लोन कोरोंना म� नई सम�ाएं कर�गे)
⇒ Announced to conduct more rounds of Op.Twist, to help Govt & Companies to borrow at a
cheaper rate.
⇒ Gold Loan LTV: Before 75% → AFTER 90%. 🤩🤩benefit? More quantity of loan can be taken by
pledging same quantity of gold → post-corona economic-revival.
⇒ Priority Sector Lending (PSL) reforms: 1) ⏫quota for weaker section, small-marginal farmers.
2) Made all types of Startups eligible for PSL loans. 3) Extra weightage to give PSL-loans in poor
districts. (प्राथ�मक �ेत्र के ऋण मानकों म� सुधार िकए गए)
⇒ RBI Committee under KV Kamath submitted report on how to restructure loans impacted by
the Covid 19 pandemic. RBI assured we’ll implement that report. (More in 📑📑Pillar#1B2: Bad
Loans) (कोरोना से जूझ रहे उद्योगों क� बकाया लोन का पुनगर्ठन िकया जाए ऐसे ही कामथ स�म�त �रपोटर् को लागू कर�गे)
⇒ RBI to loans to All India Financial Institutions (AIFIs: NABARD, SIDBI,EXIM,NHB) → post-
corona economic-revival. (📑📑Ref: HDT-Pillar#1B1- classification of Banks and NBFCs)
⇒ Less Cash Economy / Digital Payment / Fraud Prevention: (1) Scheme of Offline Retail
Payments Using Cards and Mobile Devices (2) Positive Pay Mechanism for Cheques. (📑📑Ref:
HDT-Pillar#1A1)
⇒ We'll create a Reserve Bank Innovation Hub for research in cyber security, digital payment etc.
साइबर सुर�ा, िड�जटल भुगतान इ�ािद म� सं शोधन/नवाचार के �लए �रजवर् ब�क म� एक नवाचार क� द्र बनाएं गे
12.23.3 🐯🐯🐯🐯🐯🐯RBI’s Monetary Policies: 2020-October (दरों म� कोई बदलाव नहीं)

Repo unchanged @4% so Automatically [email protected] and [email protected]%. Stance: Accommodative.
⇒ CPI inflation >6.5% in July-August 2020. This is beyond the statutory 2-6% limit. So, ideally RBI
should ⏫the repo rate to combat inflation, but that will make the loans expensive and harm the
post-corona economic revival. so the RBI kept the repo rate unchanged. (महंगाई से लड़ने के �लए अगर
लोन महंगे कर िदए तो कोरोना के प�ात भारतीय अथर्तंत्र को पुनज��वत करना मु��ल इस�लए �रजवर् ब�क के दरों म� कोई बदलाव नहीं
िकया गया)
⇒ Besides, the present inflation is caused by supply-side problems due to lockdown. Once the
unlockdown progresses → supply ⏫ → inflation ⏬. so changes in the repo rate not required
at present. (तालबं धी हटने प�ात वैसे भी बाजार म� चीज व�ुओ ं क� आपू�त बढ़ेगी तो अपनेआप महंगाई काबू म� आ जाएगी.)
⇒ Promoting Digital Payment: (1) RTGS made 24/7 (📑📑Ref: Pillar#1A1)
12.23.4 🐯🐯🐯🐯🐯🐯Monetary Policy: 2020-December (दरों म� कोई बदलाव नहीं)

12.23.5 🐯🐯🐯🐯🐯🐯Monetary Policy: Feb-2021 update (दरों म� कोई बदलाव नहीं)
⇒ 1) Food inflation is normalizing with arrival / supply of winter fruits & vegetables, but fuel
inflation is worrisome. So can't ⏬ Repo. खाद्य पदाथर् तो स�े होने लगे िकंतु लेिकन इं धन के चलते महंगाई अभी भी
�ाई �प से काबू म� नहीं
⇒ 2) GDP growth yet to fully revived → so cant ⏫ Repo [else Expensive loans= =⏬demand
→⏬GDP growth]. (आ�थक वृ�द्ध दर पुनज��वत नहीं �आ है यिद लोन महंगे �ए तो आ�थक वृ�द्ध दर बढ़ाने म� िद�त� होंगी)
⇒ CRR: During CORONA-2020, CRR was reduced from 4% to 3% (2020-March till 2021-March).
now moving towards economic recovery, enough loanable funds available so, Restoration/⏫ of
CRR in two phases: 3.5% (2021: March2May ) →4% (2021-May)
⇒ 😰😰BEFORE: Retail investors Indirectly invested in G-sec via Mutual funds, stock exchanges.
⇒ 🤩🤩AFTER: Retail Investors can directly open a ‘Retail Direct Gilt Account’ (RDG Account)
with RBI's E-Kuber core banking solution (CBS) platform (More in Pillar1C: SEBI share market)
12.23.6 🐯🐯🐯🐯🐯🐯Monetary Policy: April-2021 update(दरों म� कोई बदलाव नहीं)

⇒ No changes in rates & stance. Repo rate 4%, Reverse Repo rate 3.35%, MSF 4.25%,
Accommodative Stance. (�रज़वर् ब�क क� दरों म� कोई बदलाव नहीं)
⇒ Payment Bank: Before: They can’t accept more than ₹1 lakh per depositor. After: balance limit
increased to ₹2 lakh rupees/ per depositor. (More in 📑📑Pillar#1B1: Classification)
⇒ Centralized Payment Systems (CPS), viz- RTGS and NEFT – Direct Membership allowed to
Non-Bank payment system operators e.g. Phonepe, Amazonpay etc. (More in 📑📑Pillar#1A1)
12.23.7 🐯🐯🐯🐯🐯🐯Monetary Policy: June-2021 update (दरों म� कोई बदलाव नहीं)

⇒ No changes in. Repo rate 4%, Reverse Repo rate 3.35%, MSF 4.25%, Accommodative Stance.
⇒ On-tap Liquidity Window for Contact-intensive sectors such as hotel, tourism, beauty parlours
12.23.8 🐯🐯🐯🐯🐯🐯Monetary Policy: Aug-2021 update (दरों म� कोई बदलाव नहीं)

⇒ No changes in key rates or Stance. Repo unchanged @4% so Automatically [email protected] and
[email protected]%. Stance: Accommodative
⇒ one MPC member Prof. Jayanth Varma voted against the Accommodative stance. He believes
that repo needs to be increased to combat inflation. But the majority members voted in favor of
the continuing Accommodative Stance with 4% Repo. (हालांिक एक सद� ने �वरोध म� वोट डाला िक हमने रेपो
दरों को महंगी करनी चािहए तािक महंगाई से लड़ा जा सके , लेिकन ब�म�त मतानुसार रेपो दर म� बढ़ोतरी नहीं �ई)
⇒ Announced to absorb over Rs.4 lakh crores via Variable Rate Reverse Repo (VRRR)
⇒ We'll continue to do GSAP, Op-Twist and open market operations (OMOs) depending on the
situation/requirement of the economy.
12.23.9 🐯🐯🐯🐯🐯🐯Monetary Policy: Oct-2021 update (दरों म� कोई बदलाव नहीं)

No changes in key rates or Stance. Repo unchanged @4% so Automatically [email protected] and
12.23.10 🐯🐯🐯🐯🐯🐯Monetary Policy: Dec-2021 update (दरों म� कोई बदलाव नहीं)

No changes: Repo unchanged @4% so [email protected] and [email protected]%. Stance: Accommodative
12.23.11 🐯🐯🐯🐯🐯🐯Monetary Policy: Feb-2022 update (दरों म� कोई बदलाव नहीं)

No changes: Repo unchanged @4% so [email protected] and [email protected]%. Stance: Accommodative
- NPCi’s E-Rupi Prepaid Digital Voucher: 1) max limit ⏫from ₹10,000 to ₹1 lakh 2) Before:
Single Use → After: Multi-use (until balance exhausted) So, E-rupi vouchers can be used more
than once (until the amount of the voucher is completely redeemed). (More in 📑📑Pillar#1A1)
12.23.12 🐯🐯🐯🐯🐯🐯Monetary Policy: April-2022 (SDF)

⇒ No changes in key rates or Stance. Repo unchanged @4% so Automatically [email protected] and
⇒ Introduced Standing Deposit Facility (SDF: �ायी िडपॉ�ज़ट सु�वधा).
⇒ BEFORE 2022-April: Policy Corridor = MSF <—> REPO <—> Reverse Repo
⇒ After 2022-April: Policy Corridor = MSF (Repo+0.25%) <—> REPO <—> SDF (Repo-0.25%)
⇒ Digital Payment: proposal for cash withdrawal from ATMs in card-less manner i.e. using UPI
Based Mobile-App. If physical card not inserted in ATM machine → ⏬ dangers of card
skimming, card cloning, etc scams. (ATM मशीन म� �बना काट डाले मोबाइल ऐप के ज़�रए पैसा �नकाला जा सके ऐसी
सु�वधा करवाएं गे )
12.23.13 🐯🐯🐯🐯🐯🐯Monetary Policy: May-2022 Repo⏫

⇒ RBI required to control inflation in 2-6% CPI and RBI MPC usually meets every 2-2- months.
⇒ but inflation crossed 7% (Because Russia Ukraine crisis → imported fertiliser & crude oil prices
increased etc.)
⇒ so emergency MPC meeting held → outcome → (वैसे तो हर दो महीने �मलना था लेिकन महँ गाई हद से �ादा बढ़
गयी तो आपातकालीन मीिटंग बुलायी)
⇒ Repo increased from 4% to 4.40% to combat inflation.
⇒ Automatically, as per the formula: MSF = 4.40% + 0.25% = 4.65%
⇒ Automatically, as per the formula: SDF = 4.40% - 0.25% = 4.15%
⇒ Reverse Repo Unchanged at 3.35%
⇒ Separately, RBI Governor announced to increase CRR from 4% to 4.50%. This will reduce the
loanable funds to by more than ₹85,000 crore. ⏬loanable funds→ ⏫ loan interest rate →
⏬demand/shopping → ⏬inflation. (NOTE: MPC can’t decide CRR. Only RBI Governor
alone can decide CRR.)
⇒ Stance: Accommodative but in future we will ‘withdraw’ it
🚩🚩🚩FAQ: Isn't this repo-increase a violation of the Accommodative stance announced earlier?
Ans. MPC has no legal obligation for accommodative stance. MPC has only 1 legal obligation-
control inflation in 2-6% range. अकोमोडेिटव-रवैये के िहसाब से ही काम करना होगा ऐसा क़ानूनन �प से अ�नवायर् नहीं है।)
12.23.14 🐯🐯🐯🐯🐯🐯Monetary Policy: June-2022 Repo⏫

⇒ Repo ⏫ from 4.40% → 4.90% to fight inflation. So, MSF: 5.15%, SDF: 4.65%.
⇒ Reverse Repo Unchanged at 3.35%
⇒ Stance: Accommodative but in future we will ‘withdraw’ it. = meaning, in future, we’ll take
measures to ⏬money supply / ⏫ loan rates to combat inflation. (धीरे धीरे अकोमोडेिटव-रवैये को कम
कर�ग,े यानी िक भ�व� म� महंगाई से लड़ने के �लए हम ऐसे क़दम उठाते रह�गे जहाँ मुद्रा आपू�त कम हो/ लोन �ाज दर महंगे हो)
12.23.15 🐯🐯🐯🐯🐯🐯Monetary Policy: future updates

Stay tuned for Mrunal’s Free Win23 Series of lectures & handouts for upcoming bi-monthly
monetary policy updates for UPSC Prelims and Mains 2023. Win23 series to start from Feb-2023.
Monetary Policy Committee decides only Repo rate. Other decisions, such as CRR-SLR cut, PSL
norms, banning magnetic-chip cards etc are decided separately alone by RBI Governor. However,
after the meeting, he’ll make above type of announcements, in the Press conference.
🔠🔠❓ MCQ. RBI recent directives relating to ‘Storage of Payment System Data’, popularly known
as data diktat command the payment system providers that : (Prelims-2019)
1) They shall ensure entire data relating to their payment systems are stored in a system only in
India.
2) They shall ensure that the systems are owned and operated by public sector enterprises.
3) They shall submit the consolidated system audit report to the comptroller and Auditor General
of India by the end of the calendar year.
Find Correct Statement(s): codes: (a) 1 only (b)1 and 2 only (c) 3 only (d) 1,2 and 3 only
Ans. After April-2018’s monetary policy RBI governor announced certain regulatory reforms. One of
them was :- Payment System data must be stored in India within next 6 months, to ensure its safety
against misuse / Russian-Chinese-hackers. So, for Prelims-2019, this was D-1 year current affairs. Now
we are targeting 2023, so need not put so much efforts behind 2018’s current affairs.
12.24🔪🔪🔪🏠🏠🏠🏠 BANKS’ LENDING RATES % (ब�क ऋण क� �ाज दर�)
Figure 13: Sir, अब से आपको ये लोन, इतने प्र�तशत �ाज मे पड़ेगी।

RBI’s 6-member statutory MPC decides policy rate (=repo rate) to keep inflation within 2-6%CPI
(All India) but who decides lending rates of individual banks, & how? Ans:
Govt began nationalization of private banks, and ‘administered interest rates’ (प्रशा�सत �ाज
1969 दर�) on them i.e. Govt would decide how much loan interest rate the banks should charge on
borrowers?
M.Narsimham suggested deregulation: Govt should not dictate / administer individual
1991 banks’ interest rates. RBI should only give methodology to banks. (सरकार ने अपने मनमाने �ाज
दर थोपने नहीं चािहए)
2003 RBI introduced Benchmark Prime Lending Rate (BPLR) system
- RBI introduced formula “BASE Rate + Spread = bank’s loan interest rate”;
- update frequency on individual banks’ discretion (अपनी मज�/ �ववेकाधीन). So, it did not
2010 help transmission of monetary policy much. EvenIF RBI reduced repo rate, the banks
would not update their formula figures regularly. �रजवर् ब�क ने अपनी �रपो दर कम करी िकंतु ब�कोने
लोन स�े नहीं िकए😰😰
⇒ RBI introduced formula “Marginal Cost of Funds based Lending Rate (MCLR) +
Spread” system. (how exactly it worked? Outdated info. NOT IMP)
⇒ 😰😰Limitation? From January to Oct 2019, RBI ⏬ repo rate by 1.35% but banks
2016 reduced their loan interest rates by merely 0.40%. Thus, even though RBI reduced its
repo rate, banks are not quickly reducing their loan interest rates. So MCLR system was
ineffective. (�रजवर् ब�क ने अपनी �रपो दर कम करी िकंतु ब�कोने लोन स�े नहीं िकए, इस�लए ये प्रणाली प्रभावी
नहीं)
12.25🔪🔪🔪🏠🏠🏠🏠 BANK’S LOAN INTEREST RATE: EXTERNAL BENCHMARK (बाहरी ब�चमाकर् )

MCLR’s #EPIC-FAIL ultimately forced RBI to order external benchmark formula from 1st Oct 2019.
External Benchmark + Spread(Profit) + Risk premium = Bank’s Loan interest rate.
12.25.1 🔪🔪🔪🏠🏠🏠🏠 External Benchmark: Formula Components:

Individual bank free to pick any one External Benchmark such as
1) RBI repo rate or

2) 91-day T-bill yield or
3) 182-day T-bill yield or
4) any other benchmarks by an organization named Financial Benchmarks India Ltd.
⇒ Banks must feed the latest data of external benchmark in above formula, atleast once every three
months. (हर 3 महीनों पर फामूर्ला म� नए आंकड़े डालने होंगे)
⇒ So both fresh and old/existing borrowers will benefit (e.g.if repo rate decreased).. तो मान ली�जए रेपो
दर स�ी �ई होगी → नए और पुराने लोन ग्राहकों को उस स�े �ाजदर का फायदा �मल जाएगा)
12.25.2 �🏠🏠🏠🏠External Benchmark system: Which borrowers eligible?

1. Personal loans (taken for any sudden emergency expenditure)
2. Retails loans (home, vehicle, electronics etc)
3. Loans to micro & small enterprises
4. Loans medium enterprises (this 4th category is to be added from 1/April/2020).
5. It is applicable to old/previous loans in above categories, if borrower fills the application form.
🤩🤩🤩🤩External Benchmark Benefits? = Better transmission of Monetary Policy; transparency &
accountability to borrowers. (मौिद्रक नी�त का प्रभावी प्रसार म�, लोन ग्राहकों के प्र�त पारद�शता और जवाब देही)
12.25.3 �🏠🏠🏠🏠:🚩🚩🚩External Benchmark system: FAQ

⇒ 🚩🚩🚩FAQ: Can existing existing/old borrowers benefit? Answer is within the handout if
you read it carefully.
⇒ 🚩🚩🚩FAQ: Can bank change external benchmark indicator after giving loan? Ans. Watch
Video
⇒ 🚩🚩🚩FAQ: Can bank change the spread(Profit) in the formula after giving loan to a
client?Ans. Not allowed to change. (and this is not imp for exam)
⇒ 🚩🚩🚩FAQ: Can bank change the “Risk Premium” in the formula after giving loan to a
client? Ans. Yes e.g. Govt employee thrown out of job after getting loan, then banker may
⏫ the risk premium on him because now he’s jobless so the risk probability of his loan
default ⏫. (and this is not imp for exam)
12.25.4 Banks’ Lending Rates % → Fixed vs Floating interest loans, teaser loans, NPA etc.
Refer to 📑📑Pillar1B-2: burning issues → NPA
12.25.5 😷😷Corona-2020 impact on Deposits interest rate & Loans interest rate as per 📔📔📔📔ES21
Deposit ⏬⏬ The saving deposit rates = 3.25-3.5% in 2019 but 2.7-3.0% in 2021.Reason:
interest ⇒ RBI has reduced repo rate, and also provided long term loans in TLTRO so, banks
बचत �ाज are not so greatly desperate to acquire the raw material (i.e. money) from
दर म� �गरावट deposits. �रजवर् ब�क से दीघार्व�ध के �रपोटर् लोन �मलने के चलते ब�कों को िडपॉ�जट कतार्ओ ं क� �ादा ज�रत
नहीं �ई इस�लए उनको बजट का पैसा ब�कों म� जमा करने के �लए लुभाने के �लए �ादा बचत �ाज दर% जारी
करने क� भी ज�रत ब�करों को महसूस नहीं �ई
⇒ 2) ⏬Loan demand So cannot offer high level of profit to depositors. कोरोना क� मं दी
ब�कों का लोन देने का काम वैसे भी धीमा हो गया इस�लए वह िडपा�जट कतार्ओ ं को, अ�ा बचत �ाज दर% नहीं
दे पाए
Loan ⇒ ⏬ due to ⏬in repo rate in the External benchmark system (�ोंिक रेपो दर स�ा
interest िकया गया इस�लए लोन �ाज दर स�े �ए-- ऐसा आ�थक सव��ण का कहना है)
12.26🐯🐯🔇🔇 LIMITATIONS OF MONETARY POLICY IN INDIA (मौिद्रक नीती क� मयार्दाए)
Figure 14: मै काम तो कर रहा �ँ , लेिकन उसक� सकारा�क असर, अथर्�व�ा पर िदख नही रही। 😢😢
Even though monetary policy updated is every 2 months, its efficacy in controlling inflation &
boosting growth is restricted by following factors: (मौिद्रक-नी�त मं हगाई-�नयं त्रण और आ�थक वृध्धीमे असरकारकता
नही िदखा पायी �ोंिक:)
1) 😰😰Western countries’ households → consumerist lifestyle → don’t save large amount of
money in Banks. So their banks borrow more quantum of money from US Federal reserve and
European Central Bank respectively. Whereas in India, Repo is not major source of funds for
Indian banks, due to higher level of savings & deposits. (पा�ा� देशो मे उपभो�ावादी जीवनशैली. जबिक
भारतीयो मे ब�क-बचत क� भावना के चलते हमारे ब�कों के �लए आरबीआई के रेपों लोन, पैसो का मु�य �ोत नहीं है। अंत: �रपो दर
स�े होने पर भारतीय ब�को को खास फकर् नहीं पड़ता। )
2) 😰😰Before the External Benchmark System: Indian Banks did not immediately pass on the RBI
rate cuts to customers, citing NPA/Bad loans / profitability problem. According to RBI’s own
research, it took minimum 6-12 months for repo rate cut to benefit end-customers and it took
about 24 months for repo rate changes to impact inflation. (बाहरी-ब�चमाकर् से पहेले के समय मे,भारतीय ब�क
तुरंत अपने �ाजदर कम नही करते थे।)
3) 😰😰Poor management in Public Sector Banks (PSB), scams in the private sector banks, large level
of Non-Performing Assets (NPA) also stymie the impact of monetary policy. (सावर्ज�नक �ेत्र के ब�कों म�
बेअसर प्रबं धन, �नजी �ेत्र के ब�कों म� घोटाले, अनजर्क प�रसं प��या) 📑📑 More in Pill1B2
4) 😰😰Supply Side Issues: El-Nino/Poor monsoon hurting crop production → food inflation; Wars
& Geopolitical issues ⏫ global crude oil & raw material prices, protectionism by China-US
denting our exports. RBI can’t control them. (कम बा�रश + म�पूवर् क� भूराजनी�तक तनाव= भारत मे क�े माल
क� आपू�त को असर करते है, चीन-अमरीका का सं र�णवाद भारतीय �नयार्तमे बाधा डालता है। इ�े �नयं त्रण मे रखना आरबीआई के
�लए मु��ल।) 📑📑Pill3&4A
5) 😰😰While cheap loans can boost consumption, investment and growth but because of poor-
monsoon-fear and oil-price fear, RBI (during Raghuram Rajan and Urjit Patel’s governorships)
was usually apprehensive of inflation and more inclined to keep repo rate high. Then RBI was get
criticized for not facilitating cheap loans & economic growth because of its ‘Hawkish policy’.
(महंगाई-�नयं त्रण के च�र मे कभी कभी खुद �रजवर् के मं हगे �रपो-�ाजदारों ने अथर्त� को आगे बढ्ने से रोका है।)
6) 😰😰Government Side Issues: Fiscal deficit, Subsidy leakage, Populist Loan-waivers etc. (राजकोषीय
खाध, सब�सडी का �रसाव, लोकलुभावन के �लए िकसानो क� ऋण-माफ�) 📑📑 Pill#2D → FRBM Act
7) 😰😰Structural Issues in Economy: lack of Ease of Doing Biz, electricity-road infrastructure =
production /supply affecting inflation trends. (�ापारमे सुगमता क� कमी, �बजली-सड़क क� अवसं रचना आिद
बु�नयादी मसलो के चलते उ�ादन/आपू�त क� कमी। �रजवर् ब�क जादू क� छड़ी चलाकर इसे दु�� नहीं कर सकता) 📑📑More in
Pill4B&5
8) 😰😰Presence of Informal moneylenders in rural areas who circulate black money at exorbitant
interest rates. Poor penetration of banking sector, lack of financial inclusion, cash-intensive rural
economy etc. (�ाजखोर/सा�कार जो कालाधन ऊंचे �ाज पर घुमाते है, सभी गरीबो के �व�ीय समोवेशन क� कमी, नगदी मुद्रा
पर �ादा आधीन है हमारी ग्रामीण अथर्�व�ा। �रजवर् ब�क अपनी रेपो दर कम भी कर�, इधर कु छ फकर् नहीं पड़ता) 📑📑More in
Pill1D
12.26.1 🐯🐯🐯🐯 Monitory policy limitations: Lazy banking in Corona Crisis

2020-Corona= RBI pursued Easy/Dovish/Expansionary monetary policy wherein it ⏬ CRR,
⏬Repo, opened New windows/Tools such as TLTRO, G-SAP etc. Yet …
Year 2020-21 Loans to households/businessmen. Money invested in G-Sec

Indian Banks→ ~5.8 trillion rupees ~7.2 trillion rupees
Thus, majority of the banks' money invested in G-Sec rather than in Loans to
households/businessmen. This is an evidence of "Lazy Banking". Reasons?
⇒ A) banks are reluctant to give loans to people fearing ⏫ NPA/bad loans (More in Pill#1B2)
⇒ B) People themselves not coming to take loans due to uncertainty in their future income and
business.
कोरोना-आ�थक मं दी से उबरने के �लए �रजवर् ब�क ने �व�ारवादी/आसान मौिद्रक नी�त अपनाई, िकंतु ब�कों ने यह सारा पैसा क़ज़र्/लोन म�
कम घुमाया और �ादातर पैसा तो सरकारी प्र�तभू�तयों म� ही �नवेश िकया है। ऐसी "आलसी ब�िकंग" का कारण= १) क़ज़र्दारों के सं भ�वत
िदवा�लयेपन के डर से ब�कर लोन-आवेदनपत्र/अज� ज�ी से पास निह कर रहे २) नोकरी-�ापार क� आ�थक अ�न��तता के चलते लोगों म�
भी ब�क-लोन लेने का उ�ाह कम है।
12.26.2 🐯🐯🐯🐯 Monetary policy limitations: Cheap loans causing inflation?

⇒ MPC member Prof. Jayanth Varma believes that Covid-19 is becoming like tuberculosis which
kills a very large number of people every year without inflicting major damage to the economy.
And there is a possibility that Covid-19 will haunt us for the next 3-5 years. (�य रोग /टीबी म� भी
सालाना कई लोग मरते ह� लेिकन उससे अथर्तंत्र को कोई नुकसान नहीं होता। भ�व� म� कोरोना भी एसा हो जाएगा। इस�लए कोरोना के
डर से पूरी �जदं गी हम लोन स�े नहीं रख सकते.)
⇒ But we can't continue to keep cheap loans (4% repo) for so long, else it'll cause asset price
inflation. (e.g. suppose rich men buying 3-3 bungalows using cheap loans for 'investment'
→ demand for bungalows increased → home prices increased = inflation in asset prices.
Similar problem in Sharemarket Ref#1C). (वरना यही स�े लोन भ�व� म� मकान, शेयर इ�ािद सं प��यों म� महंगाई
का कारण बन सकते ह�)
⇒ This could also result in Stagflation= Persistent high inflation, high unemployment and low
growth. (अंततः उ� महंगाई दर, उ� बेरोजगारी दर हो सकती है और आ�थक वृ�द्ध दर म� �गरावट हो सकती है)
12.26.3 🐯🐯🐯🐯📈📈US Fed Tapering & Impact on India

2021: USA inflation at 6.2% (highest in 30 years). It may have following negative impact for India
− 😥😥 1) US Feds will ⬆ repo to combat American inflation. US Feds will reduce bond purchase
program (=Fed-Tapering) → ⏫loan interest rates in India → Foreign Portfolio Investors
(FPI-i.e. who invest upto 10% in a single Indian company’s shares)- those FPIs may pullout
money from India to give it as loans in American market → Indian share market ⬇. → Indian
investors also lose money → Indian investors flock towards gold, real-estate & cryptocurrency
for better returns → new set of problems related to tax evasion.
− 😥😥 2) When FPI pullout money from Indian sharemarket → Rupee weakens →⬆ imports
become more expensive (REF: Pillar#3) →⬆ inflation → RBI forced to ⬆ repo to combat
inflation = expensive loans will harm India’s post-Corona economic revival.
− 😥😥3) Imported goods / services from USA to become expensive for India=”imported inflation”.
(अमरीका म� महँ गाई/मुद्रा��त �पछले 30 वष� म� सबसे �ादा अ�धक पाई गई है इससे लड़ने के �लए अमे�रक� क� द्रीय ब�क जो क़दम
उठाएगी उसके प�रणाम��प �वदेशी पोटर्फो�लयो �नवेशक- भारतीय शेयर बाज़ार से भाग जाएं गे। �जससे भारतीय �पया कमज़ोर
होगा,भारत म� क�ा तेल और अ� आयात महँ गे होंगे, िफर भारत म� भी महँ गाई दर बढ़ेगा। उस भारतीय महँ गाई से लड़ने के �लए भारतीय
�रज़वर् ब�क लोन क� �ाज दर महँ गे करेगी तो कोरोना प�ात भारतीय अथर्�व�ा को पुनज��वत करने म� सम�ा/िद�त� आ सकती है)
12.26.4 🐯🐯🐯🐯 Monetary policy limitations: Black Swan Events

⇒ A Black Swan Event means an unprecedented unexpected extreme risk event e.g. 2007’s USA
sub-prime crisis, 2020’s Corona. (ऐसी अप्र�ा�शत घटना �जससे अथर्तंत्र को ब�त नुक़सान हो जाता है)
⇒ RBI report says next black swan event → FPI may pullout $100 billion from Indian market →
it’ll create problems similar to previous section.
⇒ Black Swan Theory was put forward by author Nassim Nicholas Taleb in book– The Black Swan.
🚩🚩🚩FAQ: Can we say “Fed Tapering” is a black swan event? Ans. No. Because it was not
‘unexpected’ event. It was expected by economists. (वो अप्र�ा�शत निह था, पहेले से सब �वशेष�ों को अनुमान था।)
12.26.5 🐯🐯✍ Monetary Policy: Conclusion / �न�षर्

⇒ Monetary policy plays an important role in price stability, economic growth, job creation and
social justice in any economy. But, its efficacy is low for Indian economy, because of the
aforementioned issues. (उ� कारणो के वतर्मानमे मौिद्रक नी�त मं हगाई �नयं त्रण, आ�थक वृ�द्ध, रोजगार सृजन, सामा�जक
�ाय म� मह�पूणर् भू�मका नही अदा कर पाती)
⇒ However, both RBI and Government of India have been making attempts to address it through
various reforms for fixing the bad loan/NPA problem in banking sector, developing the
infrastructure & promoting the ease of doing business, financial inclusion and less-cash
economy. (अनजर्क प�रसं प�तया, बु�नयादी अवसं रचना, �ापार म� सुगमता, �व�ीय समोवेशन, कम-नगदी वाली अथर्�व�ा के
�लए �रजवर् ब�क व सरकार ने कदम उठाए है। )
⇒ In the upcoming time, these reforms will help improving the impact of Monetary policy in
India's economic growth and human development. (इन सुधार/कदमो के चलते भ�व� मे आ�थक- वृ�द्ध, मानव
�वकास मे मौिद्रक नी�त का प्रभावी और सकारा�क असर अव� बढ़ेगा)
12.27�🎺🎺🌞🌞1⃣✋ MOCK QUESTIONS FOR UPSC MAINS/GSM3 (250 WORDS)

1) "Monetary policy is both a catalyst and an impediment to India's growth story." Examine
critically. “भारत क� �वकास-गाथा म� मौिद्रक नी�त एक उद्दीपक भी है और एक अवरोधक भी है।" इस कथन क� समी�ा क��जए।
2) “Monetary policy is a useful medicine, but NOT panacea for economic growth”. Comment in
context of India. “आ�थक �वकास के �लए, मौिद्रक नी�त एक उपयोगी दवा है, लेिकन रामबाण नहीं”.
3) Discuss the significance of Monetary policy in India's economic growth and human
development. भारत क� आ�थक वृ�द्ध और मानव �वकास म� मौिद्रक नी�त के मह� पर चचार् कर�.
4) Give an account of the steps undertaken by RBI to revive the Indian economy from Corona
pandemic. कोरोना महामारी से भारतीय अथर्�व�ा को पुनज��वत करने के �लए आरबीआई द्वारा उठाए गए कदमो का �ववरण
दी�जए।
5) Enumerate the steps taken by the RBI under the Atma Nirbhar Bharat initiative.
आ��नभर्र भारत अ�भयान के अंतगर्त आरबीआई द्वारा उठाए गए कदमो क� सूची दी�जए।
6) Write short notes on 1) Operation Twist 2) G-SAP
📑📑NEXT HDT: Pillar1B1- Classification of Banks and NBFCs
Pillar#1B-1: Classification of Financial Intermediaries: Bank & NBFC
🚩🚩🚩FAQ: This handout is very lengthy, contains lot of Banking GK😰😰!!.
✅Ans. I’ve such Banking-GK for helping UPSC aspirants trying for Bank-exam as backup/Plan-B.
Which GK is imp/notimp for UPSC = Watch lecture, you’ll get idea.
Table of Contents
13 🏛🏛 Financial Intermediaries → Banks....................................................................................................... 105
13.11 🐯🐯🐯🐯 ₹ 🖨🖨 Banks → Reserve Bank of India (RBI): भारतीय �रजवर् ब�क............................................. 106
13.11.1 🏦🏦 ₹ 🖨🖨 RBI Governor & Dy Governor...................................................................................... 107
13.11.2 🏦🏦 ₹ 🖨🖨 RBI Offices & Departments........................................................................................... 107
13.11.3 🏦🏦 ₹ 🖨🖨 RBI: Functions of ........................................................................................................... 107
13.12 🏦🏦 � Scheduled Banks (अनुसू�चत ब�क) ............................................................................................ 108
13.13 🏦🏦 �FI⇒ Commercial Banks⇒ Pre-Independence ................................................................. 110
13.13.1 🦄🦄 → 🦁🦁 Nationalization of Banks After Independence (आजादी के बाद �नजी ब�कों का रा�ी� यकरण)
110
13.14 🤩🤩 Golden Anniversary of nationalization- ES20 ......................................................................... 112
13.14.1 🦄🦄> 🦁🦁: Private sector banks are better than PSBs .................................................................. 112
13.14.2 🦁🦁 = 🐌🐌 PSBs: reasons for inefficiency & remedies?............................................................... 113
13.15 🏦🏦 � 🔂🔂Consolidation of PSBs [एकत्रीकरण] ................................................................................ 113
13.15.1 🔂🔂Consolidation of PSBs → A) Merger (�वलीनीकरण) ................................................................ 113
13.15.2 🔂🔂Consolidation of PSBs → B) Privatization (�नजीकरण) .......................................................... 115
13.15.3 PSB Privatization: Banking Investment Company (BIC-ब�िकंग �नवेश कं पनी)............................ 116
13.15.4 🔂🔂🔂🔂Anti-Arguments against Merger and Privatization of PSBs (�वरोध म� तकर् )...................... 116
13.16 🏦🏦 �Commercial Banks ⇒ Pvt. Sector Banks (PvB) �नजी-�ेत्र के ब�क .......................................... 116
13.16.1 🏦🏦 � 🚗🚗🚗🚗 ‘On-Tap’ License to open Private Sector Banks (जब मन चाहे तब अज� डाल दो) ... 117
13.16.2 🏦🏦 �Steps or procedure to open a bank (एक ब�क �ा�पत करने के क� प्रिक्रया �ा है?) ................ 118
13.17 🚫🚫🚫🚫 � 🚗🚗🚗🚗 Allowing NBFC/Large Corporate to setup Banks ......................................... 118
13.17.1 🚫🚫🚫🚫 � 🚗🚗🚗🚗: Arguments in Favour प� म� तकर् ............................................................. 118
13.17.2 🚫🚫🚫🚫 � 🚗🚗🚗🚗: Arguments Against: �वप� म� तक.............................................................. 119
13.17.3 🚫🚫🚫🚫 � 🚗🚗🚗🚗: Conclusion about banking license to Adani/Ambani? (�न�षर्) ......... 119
13.18 🏦🏦 � 🈶🈶 Commercial Banks ⇒ Foreign Banks (�वदेशी ब�क)....................................................... 120
13.18.1 🤵🤵 Foreign Banks in India: LVB merged with DBS (�वलीनीकरण) ........................................... 120
13.19 🏦🏦 � 🌎🌎🌎🌎Commercial Banks ⇒ Differential Banks ............................................................. 120
13.19.1 🏦🏦 � 🌎🌎🌎🌎 Commercial Banks ⇒ Differential Banks⇒ RRB and LAB .......................... 121
13.19.2 🏦🏦 � 🌎🌎🌎🌎Commercial Banks ⇒ Differential Banks ⇒ SFB & PB ................................. 122
13.19.3 🏦🏦 � 🌎🌎🌎🌎🌎🌎🌎🌎 On-Tap Licenses for starting SFB (मन चाहे तब अज� डालो) ...................... 123
13.19.4 🏦🏦 � 🌎🌎🌎🌎🌎🌎🌎🌎 Unity Small Finance Bank (SFB) gets license (2021) ................... 123
13.19.5 Commercial Banks → 📬📬India Post Payment Bank (IPPB) .................................................... 124
13.19.6 📬📬Post Office Savings Bank (PoSB)?..................................................................................... 124
(Batch:PCB7) Mrunal’s Economy Pillar#1B1: Bank-NBFC Classification → Page 104

13.19.7 🚐🚐 ⏳ (Proposed) Wholesale & Long Term Finance Banks (WLTF) ..................................... 125
13.19.8 💸💸💸💸: Digital Payments- (Proposed) Digital Banks by NITI Aayog (2021)..................... 125
13.19.9 💸💸💸💸: Digital Banking Units in Budget 2022 ...................................................................... 125
13.19.10 💸💸💸💸: Digital Payments- NeoBanks (�चकने चुपड़े श�) ........................................................... 125
13.20 🏦🏦 �FI ⇒ Banks ⇒ Cooperative Banks (सहकारी ब�क) ................................................................. 125
13.20.1 🏦🏦 �😥😥 Cooperative Banks: Negative News (2019): PMC Bank (कांड हो गया)..................... 127
13.20.2 ⚖🐯🐯🐯🐯🐯🐯🐯🐯🐯🐯🐯🐯🐯🐯Banking Regulation (Amendment) Ordinance/Act, 2020......... 128
13.21 🚫🚫🚫🚫🚫 Formal FI ⇒ Non-Banking Financial Institutions .................................................... 129
13.21.1 Development Finance Institutions (DFI: �वकास �व� सं �ान) ......................................................... 129
13.21.2 DFI → NaBFID: National Bank for Financing Infrastructure and Development .............. 130
13.21.3 🚫🚫🚫🚫🚫What is Bad Bank- NARCL-IDRCL? ................................................................... 130
13.21.4 🚫🚫🚫🚫🚫Non Bank ⇒ All India Financial Institutions (AIFI): ............................................. 130
13.21.5 🚫🚫🚫🚫🚫FI ⇒ Non-Bank ⇒ Primary Dealers (PD)- (प्राथ�मक �वक्रेता)..................................... 132
13.21.6 🚫🚫🚫🚫🚫FI ⇒ NBFCs (गेर-ब�िकंग �व�ीय कं प�नया) .......................................................................... 132
13.21.7 🚫🚫🚫🚫🚫 NBFCs Regulated by RBI 🐯🐯 (�नयं त्रण/देखरेख) ........................................................... 134
13.21.8 🚫🚫🚫🚫🚫Credit Information Companies (CIC) versus Credit Rating Agencies (CRA) . 136
13.21.9 🚫🚫🚫🚫🚫 NBFCs Regulated by SEBI 🐱🐱 (📑📑More in Pillar#1C)......................................... 137
13.21.10 🚫🚫🚫🚫🚫 NBFCs Regulated by Others 🦊🦊 ......................................................................... 138
13.21.11 👻👻(🚫🚫🚫🚫): NBFC: Shadow Banking (आभासी / प्र�तछाया ब�िकंग प्रणाली) .................................... 138
13.21.12 🧕🧕NBFC-not allowed in India: Islamic Banking ................................................................... 139
13.21.13 🧔🧔🧔🔪🔪🔪🔪🔪🔪 Informal Financial Intermediaries (अनौपचा�रक �व�ीय म��) ................... 139
13.21.14 ✍🎷🎷 Mock Questions for Mains ......................................................................................... 140
13 🏛🏛 FINANCIAL INTERMEDIARIES → BANKS

- A Financial Intermediary (FI: �व�ीय म��) is an entity that acts as the middleman between two
parties in a financial transaction- between lenders vs. borrowers, investors vs. entrepreneurs,
households vs business firms.
- Such FI can be subdivided into (1) Formal (औपचा�रक) (2) Informal (अनौपचा�रक).
13.11🐯🐯🏦🏦 ₹ 🖨🖨 BANKS → RESERVE BANK OF INDIA (RBI): भारतीय �रजवर् ब�क
1913 Commercial banks were required to register under the Companies Act, but monitoring
was lax. No CRR, SLR, BASEL Norms. (उन पर पहले �नयम स� नहीं थे)
1926 Royal Commission on Indian Currency Hilton Young Commission) recommends
setting up a central bank named 'Reserve Bank of India'. (एक �ब्रिटश आयोग ने �सफा�रश क� �नगरानी
के �लए �रज़वर् ब�क बने)
1929 Great Depression in USA leads to collapse of 450+ banks in India. So British Indian
Govt becomes serious about setting up RBI. अमे�रक� महामं दी के बाद क� द्रीय ब�क क� �ापना क� आव�कता
महसूस �ई
1934 Reserve Bank of India Act was enacted. (इसक� �ापना के �लए कानून बनाया गया)
1935, RBI becomes operational from 1st April, with 1st Governor Sir RBI Gov: Osborne Smith.
April India’s Viceroy: Willingdon. Government ownership was ~4.4% only.
1935, Commercial Banks fulfilling certain conditions were listed in the 2nd Schedule of RBI
July Act, & such “Scheduled Banks” were required to keep CRR with RBI.
1943- C.D. Deshmukh 2nd FM of India becomes the first INDIAN Governor of RBI. He had
49 also participated in the Bretton Woods Conference, USA (1944).
1948- All private investors’ shares transferred to Govt of India under the RBI transfer of
49 ownership act 1948. Therefore, RBI governor answerable to Parliament, has to pay
dividend to Govt from its profits. (�रज़वर् ब�क अपने मुनाफे मे से सरकार को लाभांश �वतरण करता है)
1949 Banking Regulation Act (ब�िकंग �व�नयमन अ�ध�नयम) empowered the RBI to
⇒ Give license to companies to open banks,
⇒ Give permission banks to open new branches.
⇒ Prescribe auditing norms, liquidity norms for Banks such as SLR.
⇒ Protect interest of depositors. Force elimination / merger of weak banks.
⇒ Related Topic: banking regulation ordinance 2020 → Pillar#1B2: Bad loans & other
burning issues in the banking sector.
🔠🔠❓Which was the earliest event to take place? (UPSC Prelims-2009)
A) Nationalization of insurance companies B) Nationalization of State Bank of India
C) Enactment of Banking Regulation Act D) Introduction of first Five year plan
Table 1: RBI Central Board Composition
(Non-Official Directors) (Official Directors)
- 2 Government officials - RBI Governor
- 10 directors nominated by Government. - 4 Dy. Governors
- 4 directors from RBI’s local boards @West, East, North, South

13.11.1 🏦🏦 ₹ 🖨🖨 RBI Governor & Dy Governor
⇒ RBI Act (Section 8) provides for “NOT MORE than 4” Dy. Governors.
⇒ They’re selected by Financial sector regulatory appointment search committee (FSRASC) headed
by the Cabinet Secretary (IAS) → successful candidates’ names sent to Appointments
Committee of the Cabinet headed by the Prime Minister for final approval.
⇒ Governor and Dy.Govs’ tenure usually (not always) 3 years. Re-appointment is possible. कायर्काल
⇒ 2018-Dec: Shaktikanta Das appointed as Governor for 3 years, he replaced Urjit Patel. 2021:
Modi Govt renewed his tenure for three years till Dec- 2024, thus giving him a total tenure of six
years (�रज़वर् ब�क के गवनर्र के �प म� पुनः �नयु��)
⇒ Shaktikanta Das is Retd. IAS, Former finance secretary, Member of 15th Finance Commission.
📑📑 Related Topics: RBI Autonomy, Dividend Controversy, Section 7, PCA/BASEL:

[Handout 1B2 → Burning Issues in Banking Sector]
13.11.2 🏦🏦 ₹ 🖨🖨 RBI Offices & Departments

- RBI 4 regions: Northern: Delhi, Eastern: Kolkata, Southern: Chennai, Western: Mumbai
- RBI has various dept after Banks, NBFCs, Payment Systems, Foreign Exchange Management etc.
13.11.3 🏦🏦 ₹ 🖨🖨 RBI: Functions of
1) Controller of Money Supply: Issues M0 under RBI Act, Makes Monetary Policy. (मुद्रा आपू�त
�नयं त्रक)
2) Controller of Foreign Exchange: through FEMA Act. (�वदेशी मुद्रा का �नयं त्रक, 📑📑more in Pillar#3)
3) Banker to Governments & Public Debt Manager (सावर्ज�नक ऋण प्रबं धक).
4) Banker’s Bank: Lender of Last resort, Advises in monetary matters.
5) Regulator of all “BANKS”: through BR Act’49, Payment Systems’07 (�नयामक)
6) Regulator of AIFI, NBFC-D & others.
7) Promotional Roles (सं वधर्क भू�मका):
a. Customer protection through Ombudsman (�शकायत �नवारण अ�धकारी),
b. Financial Inclusion through PSL norms. Requires bank to open 25% of branches in rural
areas
8) Data Publication & awareness e.g. Annual Financial Stability Report (वा�षक �व�ीय ��रता �रपोटर्)

9) International Cooperation e.g. BASEL, IMF, G20’s Financial Stability Board etc.
a. E.g. 2021: RBI became member of “Network For Greening The Financial System
(NGFS)”. NGFS is a group of central banks to contribute to the development of
environment. HQ: Paris, Foundation Year: 2017 (�व�ीय प्रणाली क� ह�रयाली के �लए नेटवकर् - तािक
अ�य ऊजार्, पयार्वरण आिद को मदद �मले)
🚩🚩🚩FAQ: Article 371-F of Constitution gives special status to Sikkim, as a result their State Bank
of Sikkim is outside RBI’s regulation!! Ans. Such JamesBond/obscure GK = poor cost benefit.
🔠🔠❓ RBI acts as a bankers’ bank. What does it mean? (UPSC-Pre-2012)

1) Other banks retain their deposits with the RBI.
2) The RBI lends funds to the commercial banks in times of need.
3) The RBI advises the commercial banks on monetary matters.
Answer codes: (a) 2 & 3 only (b) 1 and 2 only (c) 1 and 3 only (d) 1, 2 and 3
🔠🔠❓ RBI regulates the commercial banks in matters of (Asked in UPSC-Pre-2013)
1) Liquidity of assets 2) Branch expansion 3) Merger of banks 4) Winding-up of banks
Answer Codes: (a) 1 & 4 only (b) 2, 3 & 4 only (c) 1, 2 & 3 only (d) 1, 2, 3 & 4
🔠🔠❓ In India, the central bank’s function as the ‘lender of last resort’ means what? (क� द्रीय ब�क को
अं�तम उपाय का ऋणदाता कहा जाता है इस श� का मतलब �ा है) (Prelims-2021)
1. Lending to trade and industry bodies when they fail to borrow from other sources. [�ापार औद्यो�गक
सं �ाओं को जब कहीं और से कजर् नहीं �मले तो क� द्रीय ब�क कजर् देता है]
2. Providing liquidity to the banks having a temporary crisis.[अ�ाई सं कट के दौरान ब�कों को तरलता देता है]
3. Lending to governments to finance budgetary deficits [बजट घाटा पूरा करने के �लए सरकार को कजार् देता है]
Codes: a) 1 and 2 b) 2 Only c) 2 and 3 d) 3 Only
13.12🏦🏦 � SCHEDULED BANKS (अनुसू�चत ब�क)
When RBI is satisfied with TWO conditions simultaneously (दो शत� का एक साथ पालन होना चािहए)
⇒ #1: That a public sector or pvt sector bank has (Paid Up Capital + Reserves#1) = Min ₹5 Lakhs

⇒ #2: Bank is not conducting business in a manner harmful to its depositors. (जमाकतार्ओ ं के िहतों का
नुक़सान न हो इस िहसाब से ब�क अपना कायर् कर रहा है)
then such bank is listed in the 2nd Schedule of RBI Act → then it is known as a Scheduled Bank.
⇒ 🚩🚩🚩FAQ: What is paid up capital? Ans. Explained in the video.

⇒ 🚩🚩🚩FAQ#1: Which reserves are included in this ₹5 lakh formula? Ans. Routine books did not
bother to elaborate so I did not bother to do Google search. Such technical things not imp4exam.
⇒ 🚩🚩🚩FAQ: “₹5 lakh is very small!!! It should be ⏫ to ensure safety in bank”. Ans 1) neither
economic survey, NITI Aayog, Court-PIL, nor any big columnists have demanded reform here.
So we need not apply our brain here. 2) Send your suggestion to PM Modi to amend the British
Era provisions of ₹5 lakh from RBI Act. Until that happens, prepare the present facts.
⇒ 🚩🚩🚩FAQ: “nowadays every bank will easily have five lakh rupees of deposits so automatically
all bank will become schedule bank from DAY1!” Ans. No. Because, RBI will also check
condition#2. Usually RBI ticks condition#2 after observing bank for one year from its birth. So
the Scheduled status will not be given on DAY1. (धं धा चालू करने क� एक साल तक तो �रज़वर् ब�क उसका मुआयना
करेगी क� दू सरी शतर् का अनुपालन हो रहा है िक नहीं. पहले ही िदन से �रज़वर् ब�क उसको अनुसू�चत नहीं बना देगी।)
🐴🐴 Scheduled Bank (अनुसू�चत ब�क) 🐭🐭 Non-Scheduled Bank (गैर- अनुसू�चत)

Can be subdivided into two parts Many cooperative banks are non-Schedule. But
1) Scheduled Commercial Banks (SCB) e.g. we need not see their list at
SBI, Axis, ICICI Rbi.org.in/CommonPerson/English
Schedule Cooperative Banks like Haryana Rajya /scripts/banksinindia.aspx
Sahakari Bank, Tamil Nadu State Apex
Cooperative Bank
Required to deposit CRR money to RBI’s Can maintain the CRR money with themselves
office/vault (CRR का पैसा ट�क म� भरके �रज़वर् ब�क म� प�ँ चाना in their own office/vault. (खुद क� �तजोरी म� रख सकते ह�)
होगा)
Eligible to borrow / deposit funds in RBI’s Depends on RBI’s discretion. (�ववेकाधीन/�रज़वर् ब�क
window operations. E.g. LAF-Repo, MSF, etc. क� मज़� – आने भी दे सकता है, लात मार के भगा भी सकता है)
are required to protect the interests of Ofcourse, they also have to do it, else RBI can
depositors and abide to RBI norms. (जमाकतार्ओ के shut them down under Banking Regulation Act.
िहतो क� र�ा करनी होगी, और �रजवर् ब�क के �नयमो का पालन करना
होगा)

🐴🐴 Scheduled Bank (अनुसू�चत ब�क) 🐭🐭 Non-Scheduled Bank (गैर- अनुसू�चत)
Govt departments and big private sector Less likely to happen. (ग़ैर अनुसू�चत ब�कों म� सरकारी �वभाग
companies are more likely to open their bank या बड़ी कं प�नयों वाले अपने ब�क-खाते खोले इसक� सं भावना कम होती
accounts/ employees’ salary deposit accounts in है)
it.
Bank becomes eligible to partner in the govt’s Usually not eligible. (�व�ीय समावेशन क� सरकारी
financial inclusion scheme e.g. PM Jan Dhan योजनाओं म� ग़ैर अनुस�ू चत ब�कों को सामा�त: शा�मल नहीं िकया जाता
Scheme for opening bank accounts of poor है. जैसे िक प्रधानमं त्री जनधन योजना म� गरीबों का ब�क खाता इन ब�को
people. (Ref Pillar1D3: financial inclusion) म� नहीं खोला जा सकता.)
- Airtel Payments Bank and Paytm Payment Bank categorised as a scheduled bank in 2021-22.
🚩🚩🚩FAQ: “After getting scheduled status, Can Payment Banks give loans/credit cards or accept
Fixed Deposits?” Ans. No, they’re prohibited from such activities. Paytm doing such activities as “an
Agent” of a federal bank, IndusIndia bank etc but Paytm cannot do it as ‘its own Banking business’.
13.13🏦🏦 �FI⇒ COMMERCIAL BANKS⇒ PRE-INDEPENDENCE
Table 2: Before Independence (Exact Years Not-IMP.)

1770 Bank of Hindustan, Calcutta (Europeans owned it. So it was not truly ‘Swadeshi’)
1806-42 - Three Presidency Banks at Bengal then Bombay then Madras.
- 1861: all three were given the right to issue currency.
- 1921: They were combined into Imperial Bank of India⇒ SBI (1955)
1865 Allahabad Bank (Europeans owned)
1894 PNB: Indian owned, Lala Lajpat Rai helped in foundation.
1908 Bank of Baroda by Maharaja Sayajirao Gaekwad III
1913-30s State Bank of Mysore, State Bank of Patiala, the rise and collapse of Banking
industry, then Birth of RBI (1935)
1940s State bank of Bikaner, Jaipur, Hyderabad, Travancore by the respective princely
states / Nawabs. Post-Independence, these banks became ‘Associated Banks of SBI’,
and ultimately, merged in SBI (2017).
13.13.1 🦄🦄 → 🦁🦁 Nationalization of Banks After Independence (आजादी के बाद �नजी ब�कों का रा��ीयकरण)
⇒ NEXUS between Banks and Industrialists: From 1950s to 60- only 188 elite people controlled
the economy by being in board of top 20 banks, 1452 companies. This led to reckless lending to
directors and their firms. So, Banks failed frequently, RBI had to close them. (रसूखदार लोग के क�े म�
थी ब�िकंग �व�ा. भाई भतीजावाद म� अंधाधुन कजर् देते थे)

⇒ Private Banks unwilling to open in rural areas- this did not help in financial inclusion of poor,
farmers, MSME or achievement of Five Year Plan (FYP) targets or reducing regional imbalance.
(�व�ीय समोवेशन, पं चवष�य योजनाओ के ल�ाक हा�सल करने म� �नजी �ेत्र के ब�क मदद नहीं करते थे. �ेत्रीय असमनाताए बढ़ी)
Table 3: Nationalization & Merger of Banks after Independence
1948 RBI Transfer of Ownership Act.
1948: Op. Polo, Hyd. → 1951:1st FYP, → 1953: Air India nationalized from Tata
1955 Imperial Bank nationalized and became SBI.
1955-56 LIC Act took over private life insurance cos.
57: 1st Communist Govt in Kerala
61: Operation Vijay for liberation of Goa, Daman and Diu.
1963 State Bank of Jaipur and Bikaner merged together.
1969 ⇒ 'Banking Companies (Acquisition and Transfer of Undertakings) Ordinance,
1969: 14 Private banks with ₹ 50 cr/> deposits were nationalized e.g. Bank of
Baroda, PNB, Dena, Canara etc. (बड़ी जमा-रा�श वाले �नजी ब�को का रा��ीयकरण)
⇒ Catholic Syrian Bank (1920, Kerala), Ratnakar Bank, Dhanlaxmi Bank, etc., did
not have such large deposits, so they were not nationalized. So, they are called
“Old Private Banks”.
1972-73 GIC Act- took over private Non-Life (=General) insurance cos. Later GIC was re-
organized with 4 subsidiaries: National Insurance, New India Assurance, Oriental
Insurance and United India Insurance. More in 📑📑Pillar#1D
1980 6 banks with ₹ 200 cr/> deposits were nationalized e.g. Corporation Bank, Vijaya
Bank, Oriental bank of Commerce etc.
2019 Previously, State Government of J&K owned 60% shares in J&K bank → Article
370 removal → Union Government took-over this shareholding. 🎓🎓✋Further
500 type historical-GK things on how it functioned before and how it’ll function
afterwards...poor cost benefit.
Reform following Committees were made for reforms in banking sector
Committee M Narasimham-I (1991), M Narasimham-I (1997), Dr. Raghuram Rajan
s Committee (2007) and P J Nayak Committee (2014)
Death 2021: Death of M Narasimham. He was ex-Governor of RBI and chairman various
देहांत Committees on Banking Sector Reforms, therefore known as “father of Indian
banking system reforms” (एम नर�संहम भारतीय ब�िकंग प्रणाली सुधार के �पतामह माने जाते है। )
🔠🔠❓(Prelims 2009) Q. In independent India's economy, which was the earlier event to take place?
A) Nationalization of insurance companies B) Nationalization of State Bank Of India
C) Enactment Of Banking Regulation Act D) Introduction of first Five year plan
🔠🔠❓(Prelim-2018) Q. Consider the following events:
1. The first democratically elected communist party government formed in a State in India.
2. India’s then largest bank, ‘Imperial Bank of India’, was renamed ‘State Bank of India’.
3. Air India was nationalised and became the national carrier.

4. Goa became a part of independent India.
Which of the following is the correct chronological sequence of the above events?
A) 4 – 1 – 2 – 3 B) 3 – 2 – 1 – 4 C) 4 – 2 – 1 – 3 D) 3 -1-2 -4
13.14🤩🤩 GOLDEN ANNIVERSARY OF NATIONALIZATION- 📔📔📔📔ES20
Economic Survey 2019-20 (released on 31/01/2020) Vol1Ch.07 observed:

First round of bank nationalisation was done in 1969 so, 2019-1969=50 years Golden anniversary of
the bank nationalisation. (�नजी ब�कों के रा�ी� य करण क� �णर् जयं ती)
😍😍Positive (सकरा�क) 🤢🤢Negative (नकारा�क)
 After nationalisation, the number of Bank  From 1960s to 80s: The Government had
branches in India, the amount of loan launched 1) "green revolution" 2) focused on
given to farmers and villagers= has poverty removal through five year plans.
increased.  RBI had initiated selective credit control
 This greatly contributed to agriculture tools & moral suasion to channelize more
production and poverty removal in rural loans to farmers.
areas. कृ �ष उ�ादन और गरीबी �नवारण म� मदद क� है  So, those actions were responsible for
 PSBs account for 70% of the banking boosting agriculture & reducing poverty.
business in India. Thus, Bank nationalization itself not helped in it
much. सरकार और �रजवर् ब�क के कदमों के चलते थोड़ा ब�त अ�ा
काम �आ था. सावर्ज�नक ब�कों ने खुद से कोई चांद �सतारे नहीं तोड़ �लए.
13.14.1 🦄🦄> 🦁🦁: Private sector banks are better than PSBs
⇒ 😰😰2019: PSBs’ total loss more than ₹ 66,000 crore which is even double than India’s budget
allocation for education. And so on.. सावर्ज�नक �ेत्र के ब�कों के नुकसान क� रकम सरकार के �श�ा बजट से भी �ादा
है
Indicators 🦁🦁:😫😫PSBs =losers 🦄🦄:😍😍Private
Banks
Total NPA in majority of bad loans / Non-Performing assets less
Indian Banks (NPA: अनजर्क परीसं प�तया) (More in 📑📑Pillar#1B2)
Total Bank frauds >90% of cases occur in PSBs (�व�ीय धांधली/गबन) Hardly 7% (घपले कम)
Profitability Usually, less than private sector Banks More (मुनाफा �ादा)
⇒ Thus, PSBs are clearly not efficient today. If they become more efficient = ₹11 lakh+ crore profit
for the Government. अगर सावर्ज�नक �ेत्र के ब�क ढंग से काम कर� तो सरकार को 11 लाख करोड़ से �ादा का मुनाफा हो
सकता है

13.14.2 🦁🦁 = 🐌🐌 PSBs: reasons for inefficiency & remedies?
🐌🐌 Reasons why PSBs are inefficient? Solutions by 📔📔📔📔ES20 (More details in
सावर्ज�नक �ेत्र के ब�क प्रभावहीन है �ोंिक → 📑📑Pillar#1B2) हम �ा सुधार कर सकते है?
😰😰PSB staff’s salary does not depend on the - Allow campus recruitment, lateral entry in
profitability of the bank. Employee unions higher management positions
frequently engage in strikes/hartals. → - Make employees ‘part owners’ through
प्रदशर्न आधा�रत तन�ाह नहीं. बार बार हड़ताल पर चले जाते है Employee Stock Ownership Plan (ESOP)
😰😰They’ve apathetic attitude towards the use - Use Artificial Intelligence (AI), Machine
of artificial intelligence, computer technology, Learning (ML), Big Data Analytics,
marketing, and customer satisfaction. → geotagging of mortgaged assets etc.
नई तकनीक� अपनाने म�, तथा ग्राहकों का सं तोष बढ़ाने म� इन ब�कों का - setup an organization PSBN Network to
उदासीन रवैया है implement above ICT-solutions.
Further, Since the government is the majority shareholder in PSBs, (सरकार ब�मती शेयर धारक है इस�लए)
1) 🤡🤡 Usually the persons favored by the present-day ruling party become the Board of directors,
irrespective of merit or qualification. Thus, political considerations have significant
control/influence over bank’s business operations. (बोडर् मे राजनी�तक त�- �जनम� ब�कों का सही प्रबं धन करने का
अनुभव या कौश� नहीं है)
2) � 🕵🕵:😰😰 PSBs are subjected to Right to Information (RTI) act, Central Vigilance Commission
(CVC), Comptroller Auditor General (CAG), Central Bureau of Investigation (CBI), Courts and
media in a more stringent manner. (ब�कर खौफ म� रहते है क� ईमानदार �नणर्य क� भी शक क� �नगाहो से जांच होगी,
और उनक� पदो��त रोक दी जाएगी)
3) Consequently, PSB officials fear harassment under the veil of vigilance investigations & media-
trials. They prefer safety and conservatism over risk-taking and innovation. (�िढ़वाद पसं द, नवाचार
नापसं द)
13.15🏦🏦 � 🔂🔂CONSOLIDATION OF PSBS [एकत्रीकरण]
PSB consolidation = made up of two types of reforms: A) Merger B) Privatization

13.15.1 🔂🔂Consolidation of PSBs → A) Merger (�वलीनीकरण)
Table 4: Notable PSB Mergers before 2019, April. ✋You need not memorize exact years/ HQ for IAS Exam
2008-10 State Bank of Saurashtra and State Bank of Indore merged into SBI.

2013 - Bharatiya Mahila Bank setup as PSB, HQ Delhi, 100% ownership by Union
Government. (भारत सरकार ने �यं बनाया था)
- BMB’s Board of Directors: All women. Staff & Deposit Holders: both men and
women, Loans given predominantly to women- and that too without collaterals
upto Rs.1 crore.
2017, 1st BMB & 5 Associated Banks of SBI viz. State Bank of Bikaner and Jaipur (SBBJ), State
April Bank of Hyderabad (SBH), State Bank of Mysore (SBM), State Bank of Patiala (SBP)
and State Bank of Travancore (SBT), merged with SBI from 1st April by swapping of
shares.
2017, Nov - Alternative Mechanism Panel setup under the Finance Minister’s chairmanship.
- This panel examine the proposals for merger/consolidation of the Public Sector
Banks (PSBs) and forward to Cabinet for approval.
- Department of Financial Services coordinates the filework.
2019, 1 st
Vijaya & Dena to be merged into Bank of Baroda.
April - Among these three oldest: BoB (1908) > Vijaya (1931)> Dena (1938)
- BoB & Dena nationalized in 1969, HQ: Mumbai
- Vijaya: nationalized in 1980, HQ. Bengaluru
Table 5: 2019, FM Nirmala.S announced merger of 10 banks into 4 anchor banks
Amalgamating Banks → → → Anchor Bank
(एक�कृ त / �वलीन होनेवाली) (सहारा देनेवाली)
− Oriental Bank of Commerce (1943, 1) PNB. (1984, HQ: Delhi, It’ll become the 2nd
HQ: Gurugram, Haryana), largest bank after SBI, in terms of business size
− United Bank of India (1950, Kolkata) and branch network)
Syndicate Bank (1925, HQ: Manipal, 2) Canara Bank (1906, HQ: Bengaluru,
Karnataka) Karnataka)
− Andhra Bank (1923, Hyd) 3) Union Bank of India (1919, Mumbai)
− Corporation Bank (1906, Mangaluru)
− Allahabad Bank (1865, Kolkata) 4) Indian Bank (1907, Chennai)
After this process is over, we’ll be left with only 12 PSBs (+1 India Post Payment Bank).
- Benefit? Geographical & technological synergies in ATM, Branches, Security Staff, Servers cost
etc. (भौगो�लक और तकनीक� तालमेल)
- resulting into reduced cost of business → better lending & deposit rates. Such bigger banks can
even expand business at global level.
📔📔📔📔ES20 Vol1Ch7 on 50 years of bank nationalization also noted:
⇒ 😰😰2019: Global top-100 banks: China (18 banks), USA (12 Banks), Japan > France > …..India
(only 1 bank: SBI at Rank#55). �व� क� 100 सबसे बड़ी ब�कों म� भारत का �सफर् एक ही ब�क है
⇒ 😰😰Even Sweden and Singapore have more global banks than India, even though these countries’
size of economy (GDP: सकल घरेलू उ�ाद) is much smaller than India.

⇒ So, given India’s size of economy (in terms of GDP), India should have 6-8 banks in the global
top 100. → These large banks provide large loans → India can reach $5 trillion GDP by
31/3/2025. (📑📑 More in Pillar4C) Therefore, merger of public sector banks is necessary.
⇒ It’ll increase the manpower, financial strength of the merged entities, then they can compete at
global level. (सावर्ज�नक �ेत्रों के ब�कों का �वलीनीकरण करने से उनक� �मता म� बढ़ोतरी होगी और वह वै��क �र पे �धार् कर
पाएं गी)
13.15.2 🔂🔂Consolidation of PSBs → B) Privatization (�नजीकरण)

It involves Government selling 51% or larger shareholding to private parties. Then such Public
Sector Bank will convert into a private sector bank. For example, Axis Bank and IDBI Bank.
13.15.2.1 UTI Bank → ‘Privatization’ into Axis Bank (2007)

⇒ Setup in 60s as a Sarkaari Mutual Fund Company through Unit Trust of India Act 1963
⇒ 1993: Obtained License to open UTI Bank.
⇒ 2001: Ketan Parekh Sharemarket Scam, Govt has to bailout UTI → further restructuring 2007
→ Became Axis Bank: 77% private shareholding + 23% by Public sector bodies like LIC, New
India Assurance, SUUTI etc. (as of 2019, Jan). So, presently it’s a private sector bank.
13.15.2.2 IDBI Bank → Purchased by LIC (2018)

⇒ 2014: RBI’s P.J. Nayak Committee that suggest Govt should exit shareholding in smaller PSBs, to
enhance their efficiency. सरकार ने छोटी सावर्ज�नक �ेत्र के ब�कों से �नकल जाना चािहए तािक उनक� कायर् �मता म� बढ़ोतरी
हो
⇒ Budget 2016: Govt agreed to reduce its shareholding to <50% in IDBI Bank.
⇒ 2018: IDBI had huge losses among PSB, so no mentally-fit investor willing to buy Govt’s shares.
So, Govt. (forces) LIC to buy its 40% for ~9k crores.
⇒ As of 2022: IDBI Bank ownership: 49.24% by LIC and 45.48% by Govt of India. Government
aims to sell of this shareholding to private investors.
⇒ Though LIC itself is public sector entity, but RBI has declared IDBI as ‘private sector’ bank
(because govt is no longer ‘direct majority shareholder’)
🚩🚩🚩FAQ: Why RBI classified IDBI as 'private sector bank'. Ans. send your suggestion to RBI.
श��कांता को ठीक लगा तो िकया. #🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
⇒ 💼💼Budget-2021: proposed to take up the privatization of two Public Sector Banks. Names yet to
be disclosed. (दो सरकारी ब�कों का �नजीकरण िकया जाएगा ऐसा बजट म� कहा हालांिक नाम घो�षत नहीं क�ये)
⇒ 2021: Newspapers hint 4 PSBs are shortlisted for privatisation- Bank of Maharashtra, Bank of
India, Indian Overseas Bank, Central Bank of India. (But this news not yet confirmed by Finance

Ministry (चार सरकारी ब�को का �नजीकरण होगा ऐसे अखबारों म� समाचार, िकं�ु �व� मं त्रालय ने अभी इन समाचारों क� पु�� नहीं
क� है)
13.15.3 PSB Privatization: Banking Investment Company (BIC-ब�िकंग �नवेश कं पनी)

Removed from handout because outdate/faded topic until Finance Ministry implements it.
13.15.4 🔂🔂🔂🔂Anti-Arguments against Merger and Privatization of PSBs (�वरोध म� तकर् )

- Employees worried seniority, promotion, increments (व�र�ता, पदो��त, वेतन वृ�द्ध);
- Financial burden of Voluntary Retirement Scheme (VRS: �ै��क सेवा�नवृ�� योजना का �व�ीय बोझ).
🚩🚩🚩What is VRS? Ans. Explained in Video lecture.
- Transfer and VRS of employees → Banks may lose regional identities & customer intelligence.
(�ेत्रीय पहचान चली जाएगी)
- Big customers may shift to other banks for faster service and personalized privileges. (तेजी से सेवा
और ��गत सेवाए नहीं �मलने पर �ापारी दू सरे ब�कों म� खाता खोल�गे)
- Private sector banks are no saints. There have been instances of private sector banks engaging in
money laundering activities, taking bribes to pass loans to unworthy borrowers- which
ultimately harm depositors (�नजी �ेत्र के ब�क काले धन को वैध बनाना, �र�त लेकर गलत लोगों के लोन पास करना, और
दू सरी �व�ीय धांधलीयों म� शा�मल है। इस�लए �नजीकरण को हमारी सम�ाओं का रामबाण इलाज मानना गलत होगा। )
13.16🏦🏦 �COMMERCIAL BANKS ⇒ PVT. SECTOR BANKS (PVB) �नजी-�ेत्र के ब�क
While the nationalization of banks was done with the lofty objectives, but politicization in Public
Sector Banks (PSBs) created new set of problems:
- Government administered loan interest rates for populism= Low profitability for PSBs. (मुनाफा
कम)
- Political Interference= Low recovery difficult (राजनी�तक ह��ेप के चलते दबं ग त�ो से ऋण वसूली मु��ल)
- Employees Unions hampering any innovation or customer responsiveness. (नवाचार, ग्राहक सु�वधा
कम)
- 1991: Balance of Payment crisis (BoP: भुगतान सं तुलन,More in Pill#3) finally forced Govt. to set up a
committee for Banking Sector Reforms under The former RBI Governor M.Narasimham. He
suggested:
o Govt should ↓ its shareholding in Public Sector Banks. (सरकार अपनी शेयर िह�ेदारी कम करे)
o RBI should ↓ CRR and SLR (सीआरआर, एसएलआर मे कटोती करे)
o Govt should not dictate interest rates to Banks. Liberalize the branch expansion policy
(ब�कों को लोनदर, शाखा �व�ार नी�त तय करने मे सरकार दखल न करे।)

o Allow entry of New Private Banks and New Foreign Banks. (�वदेशी ब�क और �नजी �ेत्र के ब�कों को
अनुम�त)
Table 6: Three rounds of bank licensing in India
Round-1 (1993-95) Round-2 (2001-04) Round 3 (2013-16)
1) ICICI 1) Kotak Mahindra Rajan invited applications,
2) HDFC 2) Yes Bank (Founder Rana Bimal Jalan Committee made
3) IndusInd Kapoor). Related Topic: selections:
4) DCB Yes bank scam/Crisis 1. Bandhan (A Microfinance
5) #
UTI → later Axis bank 📑📑Pillar#1B2: Bad loans company based in
6) IDBI → now owned by
#
& other Burning issues in W.Bengal)
LIC Bank/NBFC sector 2. IDFC (An infra finance
7) Global Trust Bank → NBFC based in
Merged with Oriental Bank Maharashtra). Later on,
No. 8-9-10: Bank of Punjab, another NBFC “Capital
Centurian Bank, Times Bank First” merged so renamed
were merged into HDFC into IDFC-First
Above banks are also known as new-generation private banks in India. (नयी पीढ़ी के �नजी �ेत्र के ब�क)
🚩🚩🚩FAQ: In early 90s- UTI Bank & IDBI Bank were not private sector banks, then why have you
kept them here in table? Ans. Because presently, they’re private sector banks. I don’t have to submit
this handout as evidence in the Supreme Court so I don’t care being so pedantic about everything.
You need to change your approach towards studies, to finish syllabus faster.
13.16.1 🏦🏦 � 🚗🚗🚗🚗 ‘On-Tap’ License to open Private Sector Banks (जब मन चाहे तब अज� डाल दो)
A private entity can open Bank only after getting license from RBI under Banking Regulation Act,
1949. Previously, one had to wait till RBI invited applications. But in the On-Tap system (WEF
2016), one can apply to RBI whenever he wishes (like a driving license), provided that:
1. It is a Resident Indian individual, NBFC, or private company
2. min. 10 years of experience in Banking-Finance Sector, (अनुभव)
3. Proposed Bank’s shareholding will be initially controlled by Indians. (शेयरमालीक� भारतीयों के हाथ म�)
4. Must be willing to open 25% branches in unbanked rural areas. (ग्रामीण इलाकों म� कु छ शाखाएं खोली होगी)
5. Min. 500 crore capital required. (�ूनतम इतनी पूंजी होनी ज�री पूंजी)
6. ✋Large industrial groups and NBFC with more than ₹5000 crore asset not allowed.
⇒ Examples of On-Tap Universal Bank Applicants in 2020-21: Chaitanya India, Pankaj Vaish etc.
⇒ RBI’s Shyamala Gopinath committee reviews/pass-rejects the applications. ( समी�ा स�म�त)
🚩🚩🚩FAQ: isn’t above definition conflicting with Scheduled Commercial Bank? Ans, given below

13.16.2 🏦🏦 �Steps or procedure to open a bank (एक ब�क �ा�पत करने के क� प्रिक्रया �ा है?)
Ans. If you open a commercial bank at present, the steps are as following
⇒ First you have to register the company with Ministry of Corporate Affairs, under Companies Act
⇒ Then you've to arrange minimum 500 cr capital. For this, If you want to issue shares in the share
market to acquire this ₹₹ → then you have to get permission from SEBI
⇒ Finally, you apply for bank license from RBI using above “ON-TAP” facility → If RBI is
satisfied with, it will give you license as an “non-scheduled (commercial) bank.”
⇒ After that you run the bank → once you satisfy BOTH conditions to become ‘scheduled bank’
o ✅Condition-A) minimum 5 lakh (capital + reserve)… you may already have THAT
BUT STILL SECOND Condition-B also need to be fulfilled that…
o ✅Condition-B) Your bank is not conducting business in a manner harmful to its
depositors. So, RBI may observe your bank’s business/behavior for some months/years,
to satisfy itself in this.
⇒ After RBI is satisfied with A+B= will give you the status of "scheduled (Commercial) bank."
13.17🚫🚫🏦🏦 � 🚗🚗🚗🚗 ALLOWING NBFC/LARGE CORPORATE TO SETUP BANKS

2016: RBI issued guidelines for 'on-tap' Bank licence. ['On-Tap'= You may apply for it whenever you
are ready - just like a driving licence. You don't have to wait for the notification date or "last date to
apply" like UPSC.]
⇒ On-Tap guideline: Company with minimum ₹500 cr capital can apply. However, its technical
rules about assets/ownership were such that Large NBFCs and industrial houses could not apply
for it.
⇒ 2020-June: RBI’s PK Mohanty committee for Corporate Structure for Indian Private Sector
Banks.
⇒ Mohanty committee recommended allowing large NBFCs/Corporate/Industrial Houses to apply
for Bank licenses. (बड़ी गैर ब�क �व�ीय सं �ान और कॉरपोरेट समूह को ब�क बनाने क� छू ट �मले)
13.17.1 🚫🚫🚫🚫 � 🚗🚗🚗🚗: 🤩🤩 Arguments in Favour प� म� तकर्

⇒ ⏫ competition, better interest rates, customer services. �ादा �धार्, अ�े �ाज दर, ग्राहकों को �ादा अ��
सेवाएं
⇒ Existing banks' balance sheets have deteriorated by scams & bad loans. So, they've become
overcautious and slow in lending to large business projects. Entry of fresh new banks to
invigorate the banking sector. पुरानी ब�कों म� �व�ीय घपलो/सम�ाओ के चलते बड़े प्रोजे� म� लोन देने म� सु�ी। नई ब�कों
के प्रवेश से इस �ेत्र म� �ू �त आएगी।
⇒ ⏬Chances of scams associated with NBFCs in futures- IF ILFS & other big NBFCs convert
themselves into Banks → RBI can supervise them more effectively. (More in pillar1B2-NPA)

13.17.2 🚫🚫🚫🚫 � 🚗🚗🚗🚗: 😰😰Arguments Against: �वप� म� तक
⇒ 😰😰Increased competition may lead to a natural tendency of mis-selling the products and
lending money to more risky businesses as evident from 2008's American Subprime crisis.
अ�ा�धक �धार् के चलते येन के न प्रकार से मुनाफा बटोरने के �लए अनाव�क �प से जो�खम लेकर कमजोर कं प�नयों को लोन िदए
जाएं गे
⇒ 😰😰PNB-Nirav Modi loan scam, Yes Bank-Rana Kapoor scam, ICICI-Vodafone loan scam = RBI
has failed to effectively supervise even the existing banks. (�रजवर् ब�क वतर्मान ब�कों क� �नगरानी करने म� भी
कमजोर सा�बत �आ है)
⇒ 😰😰Already large NBFCs are involved in scams: ILFS scam, DHFL scam, Karvy Capital Scam- the
critics are afraid that allowing large NBFCs in the Banking sector = more such scams. �व�ीय घोटालों
क� मात्रा बढ़ेगी
⇒ 😰😰Corporate governance in large industrial houses is not inspiring confidence at present e.g.
Ratan Tata vs Cyrus Mistry, Infosys founder Narayan Murthy versus ex-CEO Vishal Sikka etc.
Allowing them in the banking sector is not advisable. बड़ी कं प�नयों का कॉरपोरेट शासन ठीक नहीं है. सं �ापक
आपस म� ही लड़ते झगड़ते रहते ह�
⇒ 😰😰Large industrial houses like Tata, Ambani, Adani- may use the depositors money mainly to
finance their own projects/ nepotism, even if such projects are not viable- There will be
evergreening of loans for them. भाई भतीजावाद म� लोन िदए जाएं गे, पुरानी लोन चुकाने के �लए नया लोन िदया जाएगा,
भले कजर्दार का प्रोजे� बेकार हो.
⇒ 😰😰Could be misused for money laundering by big industrialists. (काले धन को वैध बनाने म� दु�पयोग)
⇒ 😰😰May concentrate India's economic power, depositors' savings in the hands of few oligarchs.
Then it could destabilize the entire banking system. (बचत कतार्ओ ं क� जमा पूंजी और भारत क� आ�थक श��
कु छ �गने-चुने रसूखदार/कु लीनवगर् के हाथों म� क� िद्रत, �जसे पूरी ब�िकंग �व�ा अ��र होने का खतरा। )
⇒ 😰😰Even in developed countries regulators do not encourage the entry of large corporates in the
banking sector mainly for the apprehensions about governance and financial stability. (�वक�सत
देशों म� भी �व�ीय �नयं त्रक इस प्रकार क� अनुम�त नहीं देते �ोंिक उ�� भी ब�िकंग शासन और �व�ीय ��रता म� जो�खम िदखता है)
2021-Sept: Newspapers indicate that RBI is unlikely to implement PK Mohanty suggestion.
13.17.3 🚫🚫🚫🚫 � 🚗🚗🚗🚗: Conclusion about banking license to Adani/Ambani? (�न�षर्)

⇒ ✋Anti: Considering aforementioned challenges, risks far outweigh the benefits. RBI and
government should focus on improving the administration & supervision of existing bank
instead of allowing large industrial houses here. (आकषर्ण/फायदे कम और चुनौ�तयां �ादा। इस�लए यह करने क�
जगह, वतर्मान ब�कों का प्रशासन और �नगरानी ठीक करने म� जोर देना चािहए.)
⇒ 🤩🤩Pro: Considering above benefits, Large NBFC and industrial houses may be given bank
licences after due diligence & effective supervision. (उ� फायदों को देखते �ए, प्रभावी �नगरानी के साथ इ�� ब�क
का लाइस�स देना चािहए)

13.18🏦🏦 � 🈶🈶 COMMERCIAL BANKS ⇒ FOREIGN BANKS (�वदेशी ब�क)
In Nehruvian Socialist Economy there was disdain & apprehensions about Foreign Banks. So, only a
handful of them were allowed to open branches. But, Post-1991-Reforms: system liberalized. (नेह�-
समाजवादी �वचारधारा के नी�त �नमार्ताओं म� �वदेशी ताकतों के प्र�त घृणा और डर → ब�त कम �वदेशी ब�कों को अनुम�त दी थी)
🤠🤠 Foreign - They’re Incorporated abroad (i.e. registered under the Companies Act of a
Bank in India foreign nation) & opening branch / subsidiary in India e.g. Citibank, Bank of
America, HSBC. उ�ोंने िकसी अ� देश के कं पनी कानून म� पं जीकरण करवाया है और िफर भारत
आकर शाखाएं खुली है
- While CRR, SLR & other norms applicable, but PSL norms vary depending
on number of branches. [📑📑Ref: Prev. Handout: PSL]
- RBI gives them ‘on-tap’ license on reciprocal basis. (REF: Lecture for its
meaning)
🧔🧔 Indian - Foreigners can invest max. 20% in its shareholding. E.g. BoB (15%), SBI
Public Sector (14%), PNB (13%) भारत क� सावर्ज�नक �ेत्रों म� �वदेशी �नवेश क� सीमा
Bank - Although Government thinking of raising it to 49% to help capital
mobilization for BASEL-III norms. [📑📑More in Next NPA handout]
🤵🤵 India - Foreigners can invest upto 49% (automatic-�चा�लत तरीके ) and upto 74% by
Private Sector approval of Government (सरकार क� अनुम�त लेकर). (More in 📑📑Pillar#3A: FDI)
Bank - e.g. HDFC (73%), ICICI (59%) Axis Bank (52%) is owned by Foreigners.
- Although Govt thinking of ⏫ to 100% to help capital mobilization for
BASEL-III norms . [📑📑More in Next Pillar#1B2: NPA handout]
13.18.1 🤵🤵 Foreign Banks in India: LVB merged with DBS (�वलीनीकरण)

⇒ 1926: Lakshmi Vilas Bank (LVB) was set up in Tamilnadu. So it is an Old Private Sector Bank.
(�नजी �ेत्र क� पुराने जमाने क� ब�क) 2020-Nov: Its financial situation became weak.
⇒ So, RBI approved its merger/amalgamation with Development Bank of Singapore DBS- which is,
a Foreign bank operating in India. (�व�ीय हालत कमजोर होने पर अ� एक ब�क म� �वलीनीकरण)
13.19🏦🏦 � 🌎🌎🚫🚫COMMERCIAL BANKS ⇒ DIFFERENTIAL BANKS

Difference 🌎🌎Universal Bank (सावर्�त्रक ब�क) 🌎🌎🌎🌎Differential Bank (भेदकर ब�क)
Open Anywhere: example SBI, ICICI Geographical Restrictions on branch opening
Branches [*After opening 25% of branches in for Local Area Bank (LAB), Regional Rural
शाखाएं unbanked rural areas] Banks (RRB)
Both Time & Demand Deposits of Payment Bank – Accept Max. 1 lakh deposit
Accept
any amount. only. In 2021- This limit increased to ₹2 lakh.
Give Loans Anyone [After 40% PSL] - SFB, RRB: 75% to PSL
to - ✋Payment Bank can’t give loans;
Chronology of differential banks: RRB(1976) → Local Area Bank (1996) → Small Finance Bank &
Payments bank(2015) → Wholesale banks (proposed)
13.19.1 🏦🏦 � 🌎🌎🌎🌎 Commercial Banks ⇒ Differential Banks⇒ RRB and LAB

Regional Rural Banks (�ेत्रीय ग्रामीण ब�क) Local Area Bank (�ानीय �ेत्र ब�क)
- Based on M.Narasimham’s Committee on - Based on Budget-1996 by Finance Minister
Financial Inclusion in 1970s# Manmohan Singh
- Setup under the provisions of RRB act 1976 - Unlike RRBs, they're not setup by Union or
& its amendment in 2015. Voting power: State govts or by any special act or
(Union + State + Sponsor bank) = 51% parliament. But by pvt entities simply
- e.g. Uttar Bihar Gramin Bank (Sponsor applying to RBI under Banking Regulation
bank- Central Bank of India) Act.
- Subjected to CRR, SLR norms but RBI - Can open branches in Max. 3 districts
could prescribe separate norms. sharing borders with each other. only 1
- PSL: 75%.(More in 📑📑Pillar#1A1) urban centre per district allowed.
- Their loan interest rates can’t be more than Remaining branches need to be opened in
prevailing lending rates of Cooperative rural areas of that district.
Banks in the area. - They’re Non-Sch. Banks so while CRR,
- Restricted to few districts. E.g. Baroda SLR, PSL etc very apply but every norm
Gramin Bank branches confined to with caveats.
Gujarat’s southern districts. - Initially 4: (1) Coastal Bank Andhra
- Ultimate regulator: RBI but immediate Pradesh (first to setup in 99), (2) Subhadhra
regulator NABARD. Local Area Bank, Kolhapur; (3) Krishna
Bhima Samruddhi (Andhra & Karnataka)
and (4) Capital Local Area Bank: Punjab
(Largest). But later Capital LAB converted
into Small Finance Bank (2016), so now
only 3 left.
- Only RBI regulates them.

🚩🚩🚩FAQ#: M.Narasimham committee was made in 1990s so how can he be in 1970s? Ans. Same
gentleman was chairman of many committees ✅(1) Financial inclusion (1970s) ✅(2) banking
reforms-I (1990s) ✅(3) banking reforms-II (1990s).
🚩🚩🚩FAQ: I’ve 500 jaat-ke Doubts about Local Area Banks. Ans. Not Important for UPSC. I’ve
only given short-note of LAB for helping UPSC aspirants trying for Bank-exam as backup/Plan-B.
13.19.2 🏦🏦 � 🌎🌎🌎🌎Commercial Banks ⇒ Differential Banks ⇒ SFB & PB

On Nachiket Mor Committee’s recommendations (2013-14), Governor Raghuram Rajan approved
these new types of banks for (1) financial inclusion (2) competition & innovation among players.
Parameters Small Finance Banks लघु �व� ब�क Payment banks भुगतान ब�क
Examples Capital Small Finance Bank (Punjab), 6 at present: Airtel, India Post, FINO,
Ujjivan (Karnataka), Utkarsh (UP): Paytm, Jio, NSDL. (Total 11 were
Total 10 list at selected; but AdityaBirla-Idea & other
rbi.org.in/scripts/banklinks.aspx withdrew later)
Eligibility Min.100cr. capital-walla Resident Min.100cr. capital-walla resident Indians,
during 1st Indian, Local Area Bank, NBFC, NBFCs, PPI-wallets (pre-paid payment
instrument), mobile telephone companies,
round of Micro-finance, with 10 years exp. in
super-market chains, cooperatives & companies
licensing banking / finance controlled by resident Indians
📌📌Area RBI Committee gave selection preference Anywhere
North East & Central India clusters where
Universal Banks’ penetration is poor
CRR, SLR, Same as Indian private banks Same as Indian Private Banks, but
Repo, FDI? special terms & condition in SLR.
Rural Must have 25% branches in unbanked No need but 25% access points must be
Penetration rural areas in rural areas like Business
correspondence (BC), Kiraana Stores
🛒🛒Target Unserved Underserved Farmers, Promoting Small savings
Consumers Micro, Small industries: िकसान, सू�, लघु Remittance of migrant labors, low income
households, unorganized sector, small business.
उद्योग
💰💰Accept Yes, without any restrictions ✋No NRI deposits, ✋No Fixed
Deposits िडपॉ�जट �ीकार करने म� कोई पाबं दी नहीं है deposit**
- Can accept only Demand Deposits
and Max. balance Rs.1 lakh per
customer. (In 2021- limit increased
to ₹2 lakhs)
Debit cards 💳💳 YES can give. 💳💳 YES can give.

Parameters Small Finance Banks लघु �व� ब�क Payment banks भुगतान ब�क
Credit cards 💳💳 YES can give. ✋No (because can’t give “loan”)
Loans - Yes, but 75% in PSL, - Can’t loan, So no PSL.
- 50% of loan portfolio of Rs. 25 - They’re required to invest all
lakhs/< loans. deposits in G-sec, T-Bill and in other
SCBs. ✋How much% notimp.
Evolve/ After 5 years can become Universal After 5 years can become Small Finance
future Commercial Bank, If RBI is satisfied. Bank, If RBI is satisfied with their record.
growth?
- BASEL-III norms applicable on both of SFB & PB. (More in 📑📑Pillar#1B2:BASEL Norms)
- Both SFB & PB can sell Mutual Fund (MF), Pension, Insurance policies with approvals of
respective regulators i.e. SEBI, IRDAI, PFRDA.
🚩🚩�FAQ: You wrote that Payment Banks can't accept FD or give loans or credit card but Paytm
is doing that!!?? Ans: Paytm doing FD/Credit Card/Loan activities as “an Agent” of a federal bank,
IndusIndia bank etc. Similarly, Although India Post Payments Bank (IPPB) cannot give loans
because it is a payment bank but signed a deal with HDFC Bank to give home loans as an ‘Agent’.
🚩🚩🚩FAQ: if payment banks cannot give loans, then what do they do with deposit money? Ans. It
is answered within the above table itself. Read properly. If you’re going to glance over this handout
casually & carelessly like a WhatsApp message then handout cannot help you in the UPSC exam.
13.19.3 🏦🏦 � 🌎🌎🌎🌎🚗🚗🚗🚗 On-Tap Licenses for starting SFB (मन चाहे तब अज� डालो)
- RBI reviewed & found SFBs have achieved their priority sector targets and helped in financial
inclusion. More competition and new players will help. (अ�धक ब�कों को अनुम�त देने से �धार् म� बढ़ोतरी
�व�ीय समावेशन म� मदद)
- so 2019-June, RBI announced it’ll allow ‘On-Tap’ license for SFB soon. (i.e. no need to wait for
notification unlike IAS exam, apply whenever you wish like a driving license)
Eligibility conditions to start SFB license ‘On Tap’: (Exact norms NOT IMP for IAS Exam)
- Indian persons/Indian companies with minimum “X” years experience in banking/finance.
- Existing NBFCs, MicroFinance, local area banks, Urban cooperative banks (UCB) and Payments
Banks (with 5 years’ experience) may also apply for license.
- Examples of On-Tap SFB Applicants in 2020-21: VSoft Technologies, Akhil Kumar Gupta, and
Dvara Kshetriya Gramin Financial Services, Centrum etc.
- RBI’s Shyamala Gopinath committee reviews/pass-rejects the applications.
13.19.4 🏦🏦 � 🌎🌎🌎🌎🌎🌎🌎🌎 Unity Small Finance Bank (SFB) gets license (2021)
⇒ 2021: RBI approved Unity Small Finance Bank, under ‘On-Tap’ licensing system.

⇒ Unity Small Finance Bank’s Ownership: 50:50 between 1) Centrum Finance 2) BharatPe
⇒ Unity-SFB has acquired scam-walli PMC cooperative bank. (= PMC’s depositors, staff,
buildings, assets etc). (से��म ग्रुप पीएमसी ब�क का अ�धग्रहण िकया है)
🔠🔠❓ Find correct Statement(s) about Payment Banks? (Prelims-2016)

1) Mobile telephone companies and supermarket chains that are owned and controlled by residents are
eligible to be promoters of Payment Banks.
2) Payment Banks can issue both credit cards and debit cards.
3) Payment Banks cannot undertake lending activities.
Codes: (a) 1 and 2 only (b) 1 and 3 only (c) 2 only (d) 1, 2 and 3
🔠🔠❓ What is the purpose of setting up of Small Finance Banks (SFBs) in India? (Prelims-2017)
1. To supply credit to small business units
2. To supply credit to small and marginal farmers
3. To encourage young entrepreneurs to set up business particularly in rural areas.
13.19.5 Commercial Banks → 📬📬India Post Payment Bank (IPPB)

- Registered as a Public Limited Company under Companies Act, 100% owned by Department of
Posts (Ministry of Communication and Information Technology.) → Obtained RBI’s License
under Banking Regulation Act to start working as a Payment Bank.
- Airtel Payments Bank was first to launch operations in 2017. Later, IPPB launched in 2018.
- Largest customer reach with 1.55 lakh Post offices across India.
- Doorstep banking through Postmen.
- Bank Account Types: Safal, Sugam, Saral (internal differences not imp4UPSC).
- Account can be opened with zero balance, no minimum balance requirement. Max. Balance 1
lakh per person. Minor Customer Aged 10 years or more can also open account. (नाबा�लग का भी खाता
खुलवा सकते ह�)
- 2019: IPPB announced it desires to convert itself from Payment Bank into a Small Finance Bank
(SFB), so it can offer loans to customers. (But as per RBI guidelines, Payment bank need 5 years’
experience before upgrading their license to SFB. या�न क� अभी मं �जल दू र है। )
13.19.6 📬📬Post Office Savings Bank (PoSB)?

Refer to Pillar: 1D3: Financial Inclusion → Small Savings Schemes.
🔠🔠❓ MCQ. Find correct about India Post Payments Bank (IPPB)? [Asked in UPSC-CDS-2018-1]
1) It has been incorporated as a Public Limited Company.
2) It started its operation by establishing two pilot branches at Hyderabad and Varanasi.
Answer codes: (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2

13.19.7 🚐🚐 ⏳ (Proposed) Wholesale & Long Term Finance Banks (WLTF)
- 2017: RBI proposed WLTF Bank. दीघर्का�लक थोक �व� ब�क.
- Entry capital 1000 crores, can’t accept deposits less than 10 crores, can give loans only to large
corporates & infrastructure projects. Other banks may use it for PSLC-certificate trading.
- 🎓🎓✋But since it’s not yet formed, so we need not loose sleep about how exactly it’ll work.
13.19.8 💸💸💸💸: 🏦🏦 Digital Payments- (Proposed) Digital Banks by NITI Aayog (2021)
⇒ 2021: NITI Aayog proposed setting up 'full-stack digital banks’.
⇒ This will be new type of banks under the Banking Regulation Act, 1949 (BR Act).
⇒ Digital Banks will not have physical branches. They will rely on internet for delivering banking
services. 🤩🤩Benefit? financial inclusion of rural area. (नी�त आयोग ने ऐसा प्र�ा�वत िकया है िक नए िक़� के
िड�जटल ब�क बनाए जाएं जो क� भौ�तक भौगो�लक �प से ब्रांच न हो िक�ु इं टरनेट के ज़�रए ब�िकंग सु�वधा दे इसे गाँव गाँव तक
�व�ीय समावेशन म� मदद �मलेगी)
⇒ 🎓🎓✋But since it’s not yet formed, so we need not loose sleep about how exactly it’ll work.
13.19.9 💸💸💸💸: 🏦🏦 Digital Banking Units in Budget 2022

⇒ Budget-2022 announced to setup 75 DBUs. Then RBI announced rules.
⇒ Basically commercial banks open fancy type of offices wherein every service provided digitally /
paper-less application forms with help of digital kiosks e.g. opening bank account, getting credit
cards etc.
⇒ How is this similar or different than NITI Aayog's Digital Banks? NOT IMP.
13.19.10 💸💸📡📡: 🏦🏦 Digital Payments- NeoBanks (�चकने चुपड़े श�)

- This is a fancy term for Financial technology (FinTech) related startups & Non-Banking
Financial Companies (NBFC) that are helping banking connectivity using digital channels.
🚩🚩🚩FAQ: How NeoBanks are similar or different than “DIGITAL BANKS”? Ans. ✋Not
important. When Startup-wallas want to attract inventors, they plant a lot of paid/PR/embellished
news items & columns with fancy terms like “NEOBANK” → it doesn’t automatically become
“exam worthy current affairs”…First of all let RBI/NITI/Finance Ministry/HC-SC etc make repeated
big headlines around this, then we’ll see. Observe previous years question papers. (�नवेशकों को आक�षत
करने के �लए �ाटर्अप क�नीओ द्वारा �चकने चुपड़े श�ों वाले समाचार �ांट िकए जाते ह�. तो वो अपने आप परी�ा के �लए काम का नहीं बन जाता.
पहले बड़े सरकारी सं �ानों द्वारा कु छ बड़ी बड़ी सु�खयां बटोरने दो िफर देख�ग.े )
13.20🏦🏦 �FI ⇒ BANKS ⇒ COOPERATIVE BANKS (सहकारी ब�क)

Type 🏦🏦 �Commercial 🏦🏦 �Cooperative Banks
Banks
Banking Reg. Applicable since 1949 Applicable since 1966.
Act

Regulator RBI Under RBI’s supervision:
- Multistate Cooperative Banks
- Urban Cooperative Banks
Under Dual supervision
- Other types of cooperative banks are under
dual supervision of RBI + respective State
govt’s registrar for cooperative society.
CRR, SLR, Yes Yes, but, RBI could keep different slabs/ norms.
BASEL-III
Repo, MSF Eligible to borrow Yes, but only selected category of Cooperative
Banks
PSL Lending Yes 40-75% Only urban cooperative banks
Who can Anyone First preference to members
borrow
Vote power Based on Shareholding, According to Cooperative Society norms,
like a Commercial members have vote power. So, 1 member = 1 vote
Company irrespective of how much capital contributed.
Profit Motive Yes, purely profit motive, Desire to help community. So, lending rates little
(मुनाफा करने क� so lending rates may be lower than commercial bank
चाह?) higher than Coop.
Presence (कहा पाई All India & overseas Mainly in Gujarat, Maharashtra, Andhra,
जाती है?) branches. Tamilnadu.
😰😰Challenges: Politicization, casteism, poor recovery of loans, scams, money laundering.
(राजनी�तकरण , जा�तवाद, कजार् वसूली म� अ�नय�मतता, घोटाले, धन-शोधन/ काले धन को वैध बनाना)

Table 7: Classification of Cooperative Banks
Urban Cooperative Banks (UCB: शहरी) Rural Cooperative Banks (ग्रामीण)
Further subcategories depending on 1) Notable State Cooperative Bank → District
- Scheduled / Non-Scheduled; OR Central Cooperative Bank (DCCB) →
- Single State / Multi State. Primary Agricultural Credit Societies
From 2018, RBI allowed them to voluntarily (PACS: प्राथ�मक कृ �ष ऋण स�म�तयां)**
upgrade to Small Finance Banks, with certain 2) Misc Types: Land Banks, Cooperative
conditions. Agriculture & Rural Development Banks.
(they give longer duration loans compared
to above banks. How long-duration?
NOTIMP)
**PACS are not ‘banks’. They can’t issue
chequebooks. RBI doesn’t regulate them. Only
State registrar regulates them.
- 2021: RBI setup NS Vishwanathan Panel for strengthening Urban Cooperative Banks (UCBs).
🔠🔠❓ Find correct statement(s) (asked in UPSC-Prelims-2020)

1. In terms of short-term credit delivery to the agriculture sector, District Central Cooperative Banks
(DCCBs) deliver more credit in comparison to Scheduled Commercial Banks and Regional Rural Banks
2. One of the most important functions of DCCBs is to provide funds to the PACS.
Answer Codes: [a) 1 only [b) 2 only [c) Both 1 and 2 [d) Neither It nor 2
13.20.1 🏦🏦 �😥😥 Cooperative Banks: Negative News (2019): PMC Bank (कांड हो गया)
⇒ The Punjab and Maharashtra Cooperative (PMC, HQ-Mumbai, setup 1984) is a Multi-State
Scheduled Urban Co-operative Bank. It functions in Maharashtra, Delhi, Karnataka, Goa,
Gujarat, Andhra and MP.
⇒ PMC bank loaned large amount to a weak company named ‘HDIL’, because of its cozy relations
with bank directors. Company who couldn’t repay it. NPA became so large, bank might collapse.
⇒ RBI imposed withdrawal limits on the depositors using the powers of Banking Regulation Act.
Because, if there was no withdrawal limit → ‘bank run’ would have been so high even CRR-SLR
can’t fulfill it.
⇒ ⚾📻📻⚾🎓🎓✋Then ball-by-ball commentary of RBI/Govt/SC/HC action = poor cost benefit.
⇒ Budget-2020: Promised to amend the Banking Regulation Act to increase RBI's powers over
cooperative banks. → done through Ordinance, which was later passed as Act ब�िकंग �व�नयमन
(सं शोधन) अ�ादेश/कानून
⇒ 2021-22: Scam-hit Punjab and Maharashtra Cooperative Bank Ltd (PMC Bank) aquired by /
merged with Unity Small Finance Bank Ltd. (USFBL). Now, PMC bank’s victim depositors will
get ₹5 lakh from DICGC (What is this org? Ans. 1B2). → if any remaining due amount beyond
₹5 lakhs → Victim depositors to get it from USFBL bank in instalments in next 10 years

🔠🔠❓ MCQ. Recently the RBI has imposed limitations, initially for a period of six months, on the
withdrawal of amount by account holders of this banks: (UPSC-CDS-i-2020) (a) IndusInd Bank
(b) Dhanlaxmi Bank (c) Punjab and Maharashtra Cooperative Bank (d) South Indian Bank
13.20.2 ⚖🐯🐯🐯🐯🐯🐯🐯🐯🐯🐯🐯🐯🐯🐯Banking Regulation (Amendment) Ordinance/Act, 2020

- 2020-June: Ordinance issued to amend the Banking Regulation Act, 1949. 2020-Sept: Act passed
- Objective? protect depositors, prevent cooperative banks from falling into fraudulent activities.
Table 8:भूतकाल म� दोहरे �नयं त्रण के चलते घोटाले/कांड के बाद कायर्वाही धीमी होती थी, इस�लए अब �ादातर सहकारी ब�को को �सफर् �रजवर् ब�क के दायरे मे लाया गया
Type of Bank 😰😰BEFORE: Regulator(s) 🤩🤩After:
Regulator(s)
Commercial (SBI Axis) 🐯🐯RBI 🐯🐯RBI
Coop (Single State: rural) 🐯🐯RBI + �State Govt (=dual 🐯🐯RBI + �State
regulation) Govt
Coop (Single State: urban) 🐯🐯RBI + �State Govt(=dual 🐯🐯RBI ONLY
regulation)
Coop (Multi State 🐯🐯RBI + 🧔🧔Union Govt(=dual 🐯🐯RBI ONLY
Cooperative) regulation)
Coop: Primary Agricultural �State Govt �State Govt
Credit Societies ("PACS")
⇒ �State Government = State Govt’s Registrar for Coop Societies
⇒ 🧔🧔Union= Agro Ministry’s Registrar Multi-State Coop Societies
Before 😿😿 😿😿 After this Ordinance/Act/Amendment 😾😾 😾😾
If a commercial / cooperative bank was on ⇒ It makes technical reforms for easier/faster
verge of collapse, then RBI would first issue amalgamation / merger / restructuring of weak
“moratorium (रोक)” e.g. banks. (कमजोर ब�कों का आसानी-तेजी से समामेलन / �वलय /
⇒ “single depositor can’t withdraw more पुनगर्ठन)
than XX amount,
⇒ Bank can’t give loans until YY Date.
⇒ Then RBI will begin the process of fixing
the bank. → This disrupted the normal
business of the bank and created panic
among investors. (�नवेशकों म� दहशत फे लती थी)
It was difficult for a coop bank to raise Technical norms relaxed, to make it Easier.
capital/money by issuing IPO-
Shares/Bonds-Debentures. (Ref📑📑#1C)

Before 😿😿 😿😿 After this Ordinance/Act/Amendment 😾😾 😾😾
Provisions were vague / weak. Bank chairman must not be insolvent or a convicted
(कानून म� ��ता नहीं थी / कानूनी प्रावधान कमजोर थे) person etc., else RBI can remove him/her. (िदवा�लया या
अपराधी नहीं होना चािहए)
Provisions were vague / weak. Coop Bank’s Board of directors must have at least
51% of members with knowledge or experience in
accountancy, banking, economics or law. ELSE RBI
can replace board members (हर �ा�नक छू टभैये नेता को अब
बोडर्-सद� नहीं बना सकते)
Provisions were vague / weak. However, if scam in a cooperative bank → RBI can
takeover/supersede its board of directors for upto 5
years, subject to some technical conditions. (घोटाला �आ
तो सहकारी ब�क के बोडर् का अ�धग्रहण कर, �रजवर् ब�क वहाँ अपने लोगों/अफसरों
को 5 सालों तक वहाँ बैठा सकता है- हालाक� कु छ तकनीक� शत� के अधीन)
🔠🔠❓MCQ. Find correct Statements about ‘Urban Cooperative Banks’ in India (Pre-21)
1. They are supervised and regulated by local boards set up by the State Governments. [रा� सरकार
उनक� �नगरानी और �नयं त्रण करता है]
2. They can issue equity shares and preference shares. [वे इ��टी शेयर और वरीयता शेयर जारी कर सकते ह�।]
3. They were brought under the purview of Banking Regulation Act, 1949 through an Amendment
in 1966. [उ�� 1966 म� एक सं शोधन के मा�म से ब�िकंग �व�नयमन अ�ध�नयम, 1949 के दायरे म� लाया गया था।]
Codes: a) 1 only b) 2 and 3 only c) 1 and 3 only d) 1, 2 and 3
Related topics: Refer to
DICGC, UCB’s Supervisory Action Framework Pillar##1B2: Bad loans & other burning issues
(SAF)→ refer to in Banking Sector
Jan Dhan Yojana, Lead Bank Scheme etc → Pillar##1D: Financial Inclusion
13.21🚫🚫🚫🚫🚫 FORMAL FI ⇒ NON-BANKING FINANCIAL INSTITUTIONS

13.21.1 Development Finance Institutions (DFI: �वकास �व� सं �ान)
⇒ are meant for Medium to long term loans to industries, including support services like arranging
foreign currency, underwriting, technical / management consultancy, Bank guarantee etc.
⇒ They don't accept DEPOSITs from ordinary people.
⇒ Previously the financial intermediaries (�व�ीय म��) were classified into three categories 1) Bank,
2) Non-Bank 3) DFI
⇒ But M.Narasimham-II Committee on Banking sector reforms (1998): recommended only two
categories: Bank or non-bank. DFI were required to join either one category.

Table 9: Exact Years, Full Forms not very important but Chronology is important
Industrial Finance Corporation of India (IFCI) owned by the Finance Ministry's

1948
Department of Financial Services.
National Small Industries Corporation (NSIC) under the Ministry of Micro, Small and
1955
Medium Enterprises (MSME).
ICICI: Industrial credit and Investment Corporation of India Ltd was setup by GoI, World
1955
Bank etc. Later became a Private Sector Bank.
Industrial Development Bank Of India (IDBI) Act. 2004: Transformed into a Public Sector
1964
Bank. 2018: Government sold its majority shareholding to LIC.
India Infrastructure Finance Company Ltd (IIFCL) owned by the Finance Ministry's
2006
Department of Financial Services.
National Bank for Financing Infrastructure and Development (NaBFID) Bill, 2021 (बु�नयादी
2021
अवसं रचना और �वकास के �व� पोषण के �लए रा��ीय ब�क)
13.21.2 DFI → NaBFID: National Bank for Financing Infrastructure and Development
⇒ 💼💼Budget-2021: We'll set up this org with ₹20,000cr capital.
⇒ NaBFID will give loans worth ₹5 lakh crore in 3 years. Chairman: K.V. Kamath.
⇒ It'll get funding from RBI, Govt, World Bank etc & by issuing bonds in market etc
⇒ As per news reports 1) The govt may order Insurance & Pension companies to invest some ₹₹ in
NaBFID. 2) This org may replace the India Infrastructure Finance Company Limited (llFCL)
⇒ 🤩🤩Benefit? It’ll help in National Infrastructure Pipeline (NIP) project.(📑📑Ref: HDT-
Pillar#5:Infrastructure)
13.21.3 🚫🚫🚫🚫🚫What is Bad Bank- NARCL-IDRCL?

📑📑Ref: HDT-Pillar#1B2: Bad Loans
13.21.4 🚫🚫🚫🚫🚫Non Bank ⇒ All India Financial Institutions (AIFI):

अ�खल भारतीय �व�ीय सं �ान were setup by respective acts of Parliament
EXIM (Jan 1982) NABARD (Jul 1982) NHB (1988) SIDBI (1990)
आयात �नयार्त के �लए कृ �ष और गाँव �वकास के �लए गृह/आवास �नमार्ण छोटे उद्योगों के �वकास के �लए
Export-Import National Bank for National Housing Small Industries
Bank of India Agriculture and Bank Development
Rural Development Bank of India
Boss: Government Previously RBI had Original boss: RBI Originally 100% owned by
of India (100%) minority-stakes in (100%). But, IDBI. Later on shareholding
NABARD but 2018: 2019-Apr: RBI transferred → SBI, LIC etc
100% Govt owned. sold 100% to
Govt.
Promotes cross - Regulatory - Finance to - Operates Credit
border trade and supervision: banks and Guarantee fund, Small
investment, helps Coop + RRB NBFCs for Enterprises Development
importers-exports - + Indirect housing Fund (SEDF).
with loans and refinance to projects. - Operates udyamimitra.in
foreign currency. farmers, artisans - RESIDEX for loans to small
- Operates Rural index to entrepreneurs via schemes
Infra. monitor like Mudra, Stand-up-
Development residential India. (📑📑Ref: HDT-
fund (RIDF) real estate Pillar#1D: to know more
prices. abt these schemes)
- Earlier it was
Regulator of
Housing
Finance Cos
(NBFC)**
⇒ ** Budget-2019: shifted NHB’s regulatory powers to RBI.
⇒ NABARD Amendment Act 2017: facilitated transfer of RBI shares to Govt.
⇒ AIFIs are not ‘banks’ because can’t accept direct deposits from the public.
⇒ RBI is the regulator over AIFI, BASEL norms applicable but RBI can prescribe different / slabs
norms / deadlines. What/why/how?NotIMP.
⇒ Atmanirbhar Bharat 2020→ RBI announced Special refinance facility for AIFI → they can
borrow more ₹₹ from RBI → circulate loan towards to agriculture, housing, MSME, foreign
trade. (�वशेष पुन�व� सु�वधा)
⇒ ✋5th AIFI = Industrial Investment Bank of India (IIBI) closed in 2012.

🚩🚩🚩FAQ: Whether NABARD is 100% owned by govt or 100% owned by RBI- what difference
does it make? Ans. Shareholders vote for selecting board of directors. Shareholders receive dividend
from the profit of the organization. So Govt or RBI gets power/benefits depending on who owns
majority shareholding.
🔠🔠❓ MCQ. Which of the following grants direct credit assistance to rural households? (UPSC-Pre-2013)
1) Regional Rural Banks
2) National Bank for Agriculture and Rural Development
3) Land Development Banks
Answer Codes:(a) 1 and 2 only (b) 2 only (b) 1 and 3 only (d) 1, 2 and 3
🔠🔠❓Find Correct Statement(s) (Asked in UPSC-Prelims-2004)
A) NHB, the apex institution of housing finance in India, was setup as a wholly owned subsidiary of RBI
B) SIDBI was established as a wholly owned subsidiary of the Industrial development bank of India
C) Both A and B D) Neither A nor B
13.21.5 🚫🚫🚫🚫🚫FI ⇒ Non-Bank ⇒ Primary Dealers (PD)- (प्राथ�मक �वक्रेता)
⇒ They deal in "primary" market i.e. directly buy fresh G-sec from RBI’s E-Kuber platform and sell
it in the secondary market. Total 20+ PD licensed by RBI: 14 of them are Banks. E.g. Standard
Chartered Bank, HSBC (HongKong), SBI, Kotak etc. (Numbers not important)
Related Topic: Retail/Ordinary Investors also buy G-Sec directly from RBI by opening a ‘Retail
Direct Gilt Account’ (RDG Account). (More in 📑📑Pillar#1C: Deepening of Capital Market)
13.21.6 🚫🚫🚫🚫🚫FI ⇒ NBFCs (गेर-ब�िकंग �व�ीय कं प�नया)

Parameter Commercial Banks Non-Banking Financial Companies (NBFCs)
Registration Banking Regulation Act Companies Act
Supervision RBI Depends.Mutual funds-SEBI, Insurance Co:
IRDAI etc.
Entry Capital 500 Cr. Differs. Rs. 5cr for MicroFinance Company, 200
cr. For reinsurer etc. [figures not imp]
Numbers 13 Public Sector (incl. Post Payment Total 10,190. Out of them 108 deposit Taking,
Bank), 56 RRBs, 39 private sectors remaining are non-deposit-taking (ND).
(including SFB, PB), 44 Foreign Banks.
[figures not imp]
Can accept - Can accept Time & Demand - Only NBFC-Deposit-Taking (NBFC-D) &
Deposits? deposits [also known as even they can accept only Time Deposits. E.g.
chequable deposit]. Bajaj Finance.
- Payment banks- can’t accept - Deposits are not insured under DICGC Act.
time deposits e.g. Fixed 📑📑 More in Pillar#1B1
Deposits.
- Their deposits are insured
under DICGC Act.
Can issue - Yes, Banker can issue these - Can’t issue their chequebook, debit/credit
Chequebook, instruments. card.
Credit Card, - 🚩🚩🚩FAQ: Bajaj Finserv is issuing Credit
Debit Card? Cards!!?? Ans. Bajaj Finserv is giving you the
credit card of RBL-Bank. So Bajaj Finserv is
acting as an 'Agent' of the RBL Bank.
Prudential CRR, SLR, applicable - SLR applicable ONLY on NBFC-D. but RBI
Norms सावधानी can prescribe different slabs / formulas than
के मानदंड banks.
- CRR not applicable on any type of NBFC.
BASEL Yes, Applicable. - Applicable on 108 NBFC-D and
Capital 📑📑 More in Pillar#1B2 - Applicable on 276 NBFCs – ND – SI (non-
Adequacy deposit taking Systematically Important with
Norms, LCR- assets over ₹ 500 crores)
HQLA norms - e.g. L&T Finance, Cholamandalam etc.
But RBI can prescribe different slabs / norms /deadlines.
Investment They can keep depositor’s money Can invest clients’ money in share market. E.g.
ग्राहक का पैसा in RBI approved securities. But Mutual Funds, Insurance Companies.
िकधर �नवेश करते can’t invest in share market per se,
directly.

Parameter Commercial Banks Non-Banking Financial Companies (NBFCs)
Loan Interest Decided as per RBI’s methodology Varies & depends on nature of biz.
Rate �ाज दर from time to time (BPLR, MCLR,
External Benchmark etc.) Ref:
1A1
Recovery Loan recovery powers under - Housing Finance Companies have SARFAESI
बकाया रा�श क� SARFAESI Act. powers. But, all types of NBFCs don’t have it.
वसूली 📑📑 More in Pillar#1B2 (More in 📑📑Pillar#1B2)
Consumer RBI’s Ombudsman, Bank’s RBI’s separate Ombudsman for NBFCs starting
Complaints Internal Ombudsman ** �शकायत the NBFC-D since 2018**.
�नवारण
**More about these Ombudsman in 📑📑Pillar#1D: Insurance handout
🔠🔠❓ Find correct Statement(s) about NBFCs in India [Asked in UPSC-Prelims-2010]
A) They cannot engage in the acquisition of securities issued by government.
B) They cannot accept demand deposits like savings account.
C) Both A and B D) Neither A nor B
🔠🔠❓ The main functioning of the banking system is to [Asked in UPSC-CDS-2013-II]
(a) accept deposits and provide credit (b) accept deposits and subsidies
(c) provide credit and subsidies (d) accept deposits, give credit and subsidies
13.21.7 🚫🚫🚫🚫🚫 NBFCs Regulated by RBI 🐯🐯 (�नयं त्रण/देखरेख)
Table 10: 🎓🎓✋no need to remember examples, just observe pattern

Investment and They mainly help buying ‘assets/machinery’ like tractor, bulldozer, etc
Credit Company E.g. SREI Equipment Finance, Limited
Consumer Durable - Help buying TV, Fridge, Mobile, AC etc. with Buy now Pay later
Loan Finance /BNPL (BNPL) / Equated Monthly Instalment (EMI) model. (How they’re
similar or different = PHD not required. हर चीज़ का �विकपीिडया बनना ज�री
नहीं है पुराने पेपर देख लो)
- Eg. Bajaj Finserv, Flexpay, Zestpay etc.

Core Investment - They do long term investment in Companies. E.g. Tata Capital,
Company (CIC) Reliance Capital, Infrastructure Leasing & Financial Services Limited
(IL&FS)
- IL&FS in controversy because couldn’t repay interest to lenders. 📑📑
More in next NPA handout.
Infrastructure Internal difference notimp for UPSC. Basically, they give loan for infra.
Finance Company Projects like highway, airport, powerplants. ( बु�नयादी अवसं रचना के �लए दीघर् अव�ध के
(IFC) लोन)
Infrastructure Debt - E.g. Rural Electrification Company ltd. (REC)
Fund (IDF) - L&T IDF, Kotak IDF, IDFC IDF (“IDFC First” has separate license
for Private Sector Bank).
Asset Reconstruction They buy bad loans / NPA from Banks & other NBFCs, and try to salvage
Companies (ARC) value from the underlying assets. E.g Anil Ambani’s Reliance ARC.
Factoring They lend short term money to client against his invoices / accounts
Companies receivable. E.g. IFCI Factors, Siemens Factoring. (What is Factoring?
Ans. 📑📑Pillar#1C)
Gold Loan e.g. Muthoot gold loan, Mannapuram Gold.
Companies RBI decides their Loan to Value ratio (LTV) (More in 📑📑Pillar#1A2).
Micro Finance - 2010: RBI’s Y. H. Malegam Committee → RBI created a new NBFC
Institutions category called Micro Finance Institution (MFI)
(MFI: सू� �व� सं �ान) - They give small loans to poor without collateral, flexible EMI.
- eg:Bandhan (W.Bengal, separately got PvB license), Disha (A'Bad:
separately got SFB license), SKS (Andhra), Cashpor (UP), Ujjivan
(Karnataka).
- 📔📔📔📔ES20 appreciated the role of MFI in Helping the weaker section
because Majority of its borrowers are women (97%), SC/ST(30%) and
minorities (29%)
- Who regulates them? RBI + Ministry of Corporate Affairs
- Who can borrow from MFI? Ans. Household whose annual income is
not more than ₹ 1.25 lakh (rural) or ₹ 2 lakhs (urban).
- How much can one person borrow from an MFI? Ans. Not More than
₹ 1.25 lakh. [**Before 2019-Oct above limits were lowers.]
MUDRA (2015) - A non-deposit taking NBFC owned by SIDBI. It gives indirect loans to
Micro enterprises through PM Mudra Yojana.
- 📑📑 More in Pillar1D- Financial Inclusion.

Fintech cos: P2P - It is like Olx-Quickr connecting sellers of second hand goods with
Lenders buyers. the P2P lending websites connect borrowers and lenders. E.g.
Faircent.com, Cashkumar.com, CRED Mint etc.
- 2021- CRED Mint launched. Newspapers gone crazy so Babushonas
are demanding that I should teach them PHD thesis on its business
model. ✋Bhai, I’ll not teach it. Look @previous exam MCQs in this
Handout
Fintech cos: Account - They manage information of a customer’s financial assets & display it
Aggregators (AA) to him or to third party (like loan giver, credit rating company &
Apps)
- 2018: RBI gave license to 5 cos- NeSL,Cookiejar etc.
Fintech cos: - E.g. Loanadda.com, Moneytap.com, Loanbazaar, Paisabazaar etc.
Loan Aggregators portals
(ऋण समूहन) - 😰😰Challenges? Often these digital platforms that act as outsourced
agents of banks/NBFCs to sell loans.
- But, customers face difficulty in complaint/grievance redressal.
- Now even Google Pay app developing features for loans. So RBI has
expressed its displeasure and is presently working on rules to fix this.
Residuary (अव�श�) Any NBFC not regulated by any other regulator- falls under RBI’s
purview.
13.21.8 🚫🚫🚫🚫🚫Credit Information Companies (CIC) versus Credit Rating Agencies (CRA)
Credit Information Credit Rating Agencies (CRA)
Companies (CIC)
Regulator RBI SEBI
E.g. CIBIL TransUnion, CRIF Standards and Poor's, Moody’s, CRISIL,
High Mark, Equifax and CARE, ICRA, FITCH Ratings India Pvt.
Experian. Ltd, Brickwork Ratings India, SMERA.
check the credit “Individual Persons” (एकल companies, NBFCs, governments, local
worthiness/ loan �� के कजर् वापस चुकाने क� औकात है िक bodies, non-profit organizations.
repayment capacity of नहीं उसका मू�ांकन करते ह�) They do not check it for individual
persons. ( सं �ानों क� कजार् वापस चुकाने क� औकात
का मू�ांकन करते ह�. एक एक इं सान के �लए नहीं करते)
Rating numerical scores. e.g. CIBIL alphabetical symbols e.g. AAA, AA-, D-
Score between 300-900. etc.
Utility? Better the score → similar to the left cell.

🤩🤩1) your loan application
will be passed more easily by
the Bank/loan-giving NBFC.
🤩🤩2) You'll have to pay lower
interest rate.
🔠🔠❓MCQ. Find Correct about credit rating agencies (CRA) in India? (Prelims-2022)
1. They are regulated by the Reserve Bank of India.
2. The rating agency popularly known as ICRA is a public limited company.
3. Brickwork Ratings is an Indian credit rating agency.
Which of the statements given above are correct ?
(a) 1 and 2 only (b) 2 and 3 only (c) 1 and 3 only (d) 1, 2 and 3
13.21.9 🚫🚫🚫🚫🚫 NBFCs Regulated by SEBI 🐱🐱 (📑📑More in Pillar#1C)
- They help clients buy-sell shares and bonds (=debentures) depending

on his instructions E.g. Motilal Oswal, Indiabulls, Sherkhan, Karvy etc.
Stock Broker - 2019: Karvy Stock Broking transferred clients money & shares into its
own group company Karvy Realty without clients’ consent, so SEBI
banned Karvy.
- They pool clients’ money and MF-manager invests it in shares/bonds
using his own discretion & expertise.
Mutual Funds (MF) - E.g. SBI's Shariah Equity Mutual Fund: clients' money invested in
Sharia compliant Cos. That don’t deal with alcohol, pork, debt, tobacco
or weapons.
- Pool & invest money in real estate / infra projects e.g. IRB. <📑📑More
REITs / InvITs
in Pillar#1C: SEBI Handout>
⇒ Underwriting, Merger & Acquisition, Wealth Management of rich
Investment Banks: people:
(USA term) & ⇒ E.g. Kotak Mahindra, Citigroup, Bank of America, DSP Merrill Lynch,
Merchant Banking Morgan Stanley, SBI capital
Companies: ⇒ 2021: SEBI allowed payments banks to act as investment bankers (after
(UK term) fulfilling the rules/regulations of SEBI). सेबी से अनुम�त लेकर भुगतान ब�क ये कर
सकते ह�
Venture Capital VCF Help startup companies to arrange capital e.g. IFCI-VCF, IDG-VCF
Fund

13.21.10 🚫🚫🚫🚫🚫 NBFCs Regulated by Others 🦊🦊
Regulator Example NBFC Companies

Insurance Regulatory and Development Authority (IRDAI) regulates:
IRDAI
- 1) Life Insurance companies e.g. LIC, HDFC Standard Life Insurance
(📑📑More in
- 2) Non-Life (=General) insurance e.g. IFFCO-Tokyo General Insurance.
Pill1D)
- 3) Policy aggregator web-platforms such Policybazaar.com
PFRDA Pension Fund Regulatory and Development Authority (PFRDA) regulates all
(📑📑More in Pill1D) Pension Funds, except EPFO & other statutory funds.
National - Housing Finance Companies such as DHFL, Muthoot Housing finance
Housing Bank etc. These companies were earlier regulated by NHB but after Budget-
(NHB) 2019, this category’s is regulated by RBI.
1. NIDHI Companies: Mutual benefit club, only members can borrow. e.g.
Ministry of South Madras Benefit Fund ltd, Maben Nidhi Ltd (of Mannapuram group)
Corporate 2. Microfinance Companies: learned in previous section. Microfinance
Affairs Companies’ some of the regulation work done by RBI and some of the
regulation work done by Corporate Affairs Ministry.
It regulates ‘Chit funds’. e.g. Shriram
State Registrar
Chit fund is a type of collective investment scheme with monthly
of Chit Funds
contributions & borrowing by contributing members Chits. (Ref 📑📑Pillar#1D)
13.21.11 👻👻(🚫🚫🚫🚫): NBFC: Shadow Banking (आभासी / प्र�तछाया ब�िकंग प्रणाली)

⇒ 📔📔📔📔ES20 observed: Shadow banking is a set of activities and institutions. They operate
partially (or fully) outside the traditional commercial banking sector. They are not fully regulated
by the RBI. ये सं �ाए पारंप�रक ब�िकंग �नयमो के दायरे से बाहर काम करती है.
⇒ A shadow banking system can be composed of a single institution or multiple entities forming a
chain.
⇒ They mobilize funds by borrowing from banks, issuing Commercial Papers (CP) and Bonds
(=Non-convertible debentures)
Table 11: Three important segments of the shadow banking system in India
HFCs Housing Finance Companies. E.g. Dewan Housing Finance Limited (DHFL)
LDMFs - Liquid Debt Mutual Funds invest clients money into short term debt instruments
such as T-bill (of Govt) and Commercial Papers (of companies).
- e.g. certain schemes by UTI, Kotak, L&T, Tata mutual funds
Retail- Retail Non-Banking Financial Companies such As Gold Loan Companies, Asset
NBFCs Finance Companies etc.

Shadow banking system’s assets are risky. Sometimes they can’t honour their obligations/bond
repayments. It results into severe crisis, as seen in the ILFS crisis (2019). (उनक� सं प�तया जो�खमपूणर् होती है)
(More in 📑📑Pillar#1B2)
13.21.12 🧕🧕NBFC-not allowed in India: Islamic Banking
- Interest (Riba) is prohibited (Haram) in Islam. So, Islamic Banking operates through Ijara,
Murbaha, Musharaka mechanisms- in which depositors’ money is invested in borrower’s
property / business and returns are shared in form of rent / profit but not in the form of Interest.
- While previous committees said give permission to Islamic Banks in India, but RBI is opposed
(2017).
- 2017: Kerala Govt allowed opening of a Islamic Bank by registering it as “co-operative society”,
so as to avoid the RBI’s ban. But further, legal controversy notimp. 🎓🎓✋
- 👍👍Pro-Arguments? Financial inclusion of Minorities/Muslims. अ�सं �कों का �व�ीय समावेशन
👎👎Anti-Arguments against allowing Islamic Banking in India?
- Specialized Manpower required. Secular India’s PM-Jan-Dhan Yojana & Post Office Payment
bank efforts are sufficient. (ब�क-बचत क� धमर्�नरपे� सेवाएं उपल�. अलग से एक धमर् �वशेष के �लए �व�ीय सेवा
अनाव�क)
- USA Govt alleges their involvement in terror finance & money laundering. (आतं क� �व�पोषण, काले
धन को वैध बनाना)
13.21.13 🧔🧔🧔🔪🔪💵💵😱😱 Informal Financial Intermediaries (अनौपचा�रक �व�ीय म��)
- Unlike banks/NBFCs, they provide loans without formal application procedure, etc but require
Property/Vehicle/Home/Goods/Crop/Gold etc. as collaterals/pawn. (सं प�� गरवी रखवा के कजर्)
- They charge very high compound interest rates & use muscle power for recovery (ऊंचे �ाजदर,
वसूली के �लए धमकाना-बलप्रयोग करना.)
- For every Rs.100 borrowed by a rural household, 33% from informal money lenders, remining
from banks, friends-family etc. (2012 data)
- They don’t fall under RBI purview, but State Govts have individual laws to regulate them e.g.
Bombay Moneylenders Act 1947, Kerala (1958), Gujarat (2011). These laws require such
informal lenders to register, impose ceiling on the interest rate & prohibit strong-arm tactics.
(�रजवर् ब�क क� �नगरानी म� नहीं िकंतु रा� सरकारों ने �नयं त्रण के �लए कानून बनाएं - पं जीकरण, �ाज क� मह�म सीमा �नधार्�रत
करना, बलप्रयोग/जबरन वसूली पर रोक)

Table 12: Following Examples/Differentiation not imp for IAS Exam but Banking Exams
Types → Indigenous Banker (देशी ब�कर) Moneylender / Brokers

Shroff, Shikarpuri, Chettiar, Kabuli Pathan, Quistwala, Arhatia,
Medieval time
Marwari, Aiyar, Rastogi Village Bania, Soni, Mahajan & Seth,
known as →
Pawnbrokers, Financial Brokers
They used to mobilize money They use their own savings-money
Money
from Public via: 1) Hundi: bill of (or sometimes some villain’s black
mobilization →
exchange; money- �यं का पैसा कज� पर देते या िकसी भ्र� नेता
पैसा कहां से लाते ह�
2) Commercial bills अफसर का काला धन कज� पर घुमाते)
13.21.14 ✍🎷🎷 Mock Questions for Mains

1. “Discuss the evolution / structure / function / objective of Payment bank/RRB etc”= This is a too
simplistic Mains Question for UPSC. These institutions have to be seen in the context of
GDP/Economic Growth, Investment/NPA-Bad loans, Inclusive growth/Financial Inclusion. So,
indirectly you may use’em as fodder points in such questions. (इस प्रकार के सामा� प्र� नहीं पूछे जाते
यूपीएससी मु� परी�ा म�)
2. “Suggest reforms for public sector bank, discussion their success after nationalization” etc. =
Those topics are still half-finished until we study Pillar#1B2: Bad loans, BASEL and other
burning issues in the banking sector. (सावर्ज�नक �ेत्र के ब�को म� सुधार िक चचार् क��जए ये मुद्दा अभी हमने पूरा नहीं
पढ़ा �ोंिक िदवा�लयापन क� सम�ा के बारे म� अगले Pillar#1b2 म� और पढ़ाई होगी)
📑📑Next HDT: 🔥🔥 1B2: Burning Issues in Banking: Bad Loans, NPA, IBC, SARFAESI, BASEL etc.

Pillar#1B-2: Bad loans & other Burning issues in Banking sector
Table of Contents
14 🔥🔥🔥🔥 Bad Loans & Other Burning Issues in Banking ............................................................................ 143
14.11 🔪🔪Types of loans: Based on Interest Rate ....................................................................................... 143
14.12 🔪🔪Types of loans: Based on Borrowers ........................................................................................... 143
14.13 🔪🔪💀💀Non-Performing Assets (अनजर्क प�रसं प��यां) ........................................................................... 144
14.13.1 🔪🔪🔪🔪-🤑🤑-😕😕-😭😭NPA / TBS Problem: Three Stages of................................................... 144
14.13.2 🔪🔪🔪🔪NPA related definitions in Banking Sector ................................................................. 145
14.14 👻👻👻👻👻👻✋ ATMANIRABHAR → Loan/EMI/NPA relief / Moratorium ............................... 146
14.15 🐯🐯🐯🐯🐯🐯 RBI “3R” Framework for Revitalizing Stressed Assets (2015-19) .............................. 146
14.15.1 ✔Rectification (सुधार) ................................................................................................................ 146
14.15.2 ⛏Restructuring (पुनगर्ठन: �ाज दर या कजर् चुकाने क� अव�ध या मा�लक� म� बदलाव) ............................... 146
14.15.3 🔪🔪 Recovery (वसूली) .................................................................................................................. 147
14.15.4 🦁🦁 🔪🔪RBI’s Prudential Framework (2019) .......................................................................... 147
14.15.5 🦁🦁 🔪🔪RBI’s KV Kamath Report Resolution Framework for Corona-related Stress ........ 147
14.15.6 🦁🦁 🔪🔪Resolution Framework 1.0 and 2.0 (2020-21) ........................................................... 148
14.16 ⚖🔪🔪 SARFAESI Act 2002: Origin, Objective & Limitations...................................................... 148
14.16.1 ⚖🔪🔪🔪💪💪 Which lenders have SARFAESI powers? ....................................................... 148
14.16.2 🔨🔨⚖ SC Judgement: Yes, Cooperative banks also have SARFAESI powers (2020) ....... 148
14.16.3 ⚖🔪🔪: �Limitations of SARFAESI Act (मयार्दाए)................................................................ 149
14.17 ⚖🔪🔪🔪🔪 Insolvency and Bankruptcy (I&B) Code 2016 ............................................................. 149
14.17.1 ⚖🔪🔪🔪🔪: IBC Not applicable on following borrowers....................................................... 150
14.17.2 ⚖🔪🔪🔪🔪 Insolvency and Bankruptcy Code Amendment (2018: सं िहता सं शोधन)................. 151
14.17.3 ⚖🔪🔪🔪🔪 IBC Code (first) Amendment Act (2019: सं िहता सं शोधन) ....................................... 151
14.17.4 ⚖🔪🔪🔪🔪 IBC Code (second) Amendment Act 2019.......................................................... 151
14.17.5 ⚖🔪🔪🔪🔪:🤫🤫 IBC Pre-Packs (पद� के पीछे ज�ी से के स सुलटा लेते है!)............................................ 152
14.17.6 ⚖🔪🔪🔪🔪: 🥱🥱 IBBI directive on Avoidance Transaction and 500 other technical things
153
14.17.7 👻👻� (⚖🔪🔪🔪🔪) ATMANIRBHAR → IBC Ordinance/Act 2020 to suspend new cases
153
14.17.8 🕵🕵(⚖🔪🔪🔪🔪) Insolvency and Bankruptcy Board of India (IBBI) .................................... 153
14.17.9 🕵🕵 📡📡IBBI → Information Utility ........................................................................................ 154
14.17.10 🕵🕵(⚖🔪🔪🔪🔪)Insolvency → Misc. Org: Indian Institute of Corporate Affairs ............... 154
14.17.11 💪💪 Project Sashakt by Finance Ministry (2018).................................................................... 154
14.17.12 👻👻👻👻👻 ATMA-NIRBHAR → Insolvency → Micro,Small,Medium Enterprises ...... 155
14.17.13 (⚖🔪🔪🤝🤝)🈶🈶🈶🈶 Cross-border Insolvency (सीमा-पार का िदवा�लयापन) .................................. 155
14.18 (⚖🔪🔪🔪🔪) Voluntary Liquidation of Companies ........................................................................ 156
14.18.1 (⚖🔪🔪🔪🔪) : 😥😥 Challenges in voluntary liquidation (चुनौ�तयाँ):......................................... 156
14.19 (⚖🔪🔪🔪🔪)📘📘 📘📘 Economic SurveyS on IBC/NPA (आ�थक सव��ण) ............................................. 156
14.19.1 Economic Survey 2018-19 on IBC/NPA................................................................................. 156
(Batch:PCB7) Mrunal’s Economy Pillar#1B2: Bad loans & Burning Issues in Banking → Page 141
14.19.2 (⚖🔪🔪🔪🔪)Economic Survey 2020 on IBC/NPA (released in 2020-Jan-31st) ................... 157
14.20 🤒🤒🤒 💊💊 📅📅: ES21: Regulatory Forbearance (�व�नयामक� �मा/सहनशीलता) ..................................... 157
14.21 👁👁👁🗨🗨🔪🔪🔪🔪 Borrowers’ Database & Surveillance (उधारकतार्ओ ं का डेटाबेज व् �नगरानी) ......................... 158
14.21.1 👁👁👁🗨🗨🗨🗨🗨🗨-📔📔📔📔ES20: Use AI-ML Technology................................................................... 158
14.21.2 👁👁👁🗨🗨🗨🗨🗨🗨-📔📔📔📔 ES20: setup PSBN Network ...................................................................... 159
14.21.3 👁👁👁🗨🗨🗨🗨🗨🗨- 🐯🐯 RBI → Public Credit Registry (ऋण क� सावर्ज�नक र�ज��ी)................................ 159
14.21.4 👁👁👁🗨🗨🗨🗨🗨🗨- 🌐🌐 Legal Entity Identifier (LEI) Number: (कानूनी इकाई पहचान सं �ांक) ............... 160
14.22 🔪🔪🔪🔪🔪🔪🔪🔪- ⚖ Fugitive Economic Offenders Act, 2018 ......................................................... 160
14.23 🕵🕵 🏦🏦 💸💸💸💸 DICGC Act: Objective & Limitations .................................................................... 161
14.23.1 🕵🕵 🏦🏦 💸💸💸💸- 👎👎 Limitation of DICGC (मयार्दाएँ ) ............................................................... 162
14.24 �(🏦🏦 🔪🔪🔪🔪) Bad Bank (NARCL, IDRCL-2021): Intro............................................................ 162
14.24.1 �(🏦🏦 🔪🔪🔪🔪): 🧬🧬 Bad Bank Structure .............................................................................. 163
14.24.2 �(🏦🏦 🔪🔪🔪🔪) Bad Bank: 🗃🗃 functioning ........................................................................... 164
14.24.3 �(🏦🏦 🔪🔪🔪🔪) Bad Bank: Benefits & Challenges? ............................................................. 164
14.24.4 �(🏦🏦 🔪🔪🔪🔪) Bad Bank: ✍Conclusion (�न�षर्) .............................................................. 165
14.25 🐯🐯🐯🐯🐯🐯🐯🐯🐯🐯� Prompt Corrective Action (PCA) Framework ............................................ 165
14.25.1 🐯🐯🐯🐯🐯🐯🐯🐯🐯🐯� RBI’s Prompt Corrective Action (PCA) for NBFCs .......................... 166
14.25.2 😼😼😼😼😼😼😼😼😼😼� Supervisory Action Framework for Urban Co-operative Banks ...... 166
14.25.3 👻👻ATMANIRBHAR → 🤧🤧🤧🤧🏎🏎� RBI orders bank to halt Dividend Distribution .. 167
14.25.4 🐯🐯: 🦋🦋Regulations Review Authority (RRA 2.0)- for Ease of implementing RBI rules .. 167
14.26 🌐🌐🌐 BASEL-III Norms (बेसल
े -3 मानदंड).......................................................................................... 167
14.26.1 🌐🌐🌐🌐 🕵🕵 BASEL-III norms: Capital Tiers........................................................................... 168
14.26.2 🔪🔪🔪🔪🔪Additional Tier 1 (AT1) Bonds ............................................................................. 169
14.26.3 🔪🔪🔪🔪🔪Zero Coupon Bonds for PSB recapitalization ...................................................... 169
14.26.4 🌐🌐🌐 D-SIB: Domestic Systematic Important Banks.......................................................... 169
14.27 🐯🐯🐯🐯: BASEL Norms deferred / Suspended in Corona............................................................... 170
14.28 🐯🐯🐯🐯🐯🐯 Banks’ Balance sheet / Audit Norms (तुलन पत्र लेखा परी�ण) ............................................ 170
14.28.1 🐯🐯🐯🐯🐯🐯 IndAS Accounting Norms deferred (लेखा मानदंड ��गत/टाल िदये) ........................... 170
14.29 🌐🌐🌐💸💸 Recapitalization of PSBs: [सावर्ज�नक �ेत्र के ब�को का पुन:पूंजीकरण] ......................................... 170
14.30 �Banking Sector: Governance / Administrative Reforms .......................................................... 171
14.30.1 �Gyan-Sangam-I, 2015, Pune .............................................................................................. 171
14.30.2 � Personnel Selection → Bank Board Bureau (BBB), 2016 .............................................. 171
14.30.3 � Personnel Selection → FSIB replaces BBB (2022).......................................................... 172
14.30.4 �PSB Banking Personnel Reforms→ ES20 suggestions .................................................... 172
14.30.5 �Enhanced Access and Service Excellence (EASE) Agenda 2018 .................................... 173
14.30.6 �Ease 3.0: Tech-Enabled Banking (2020-21) ..................................................................... 173
14.30.7 �👮👮:🛡🛡Staff Accountability Framework for PSB-NPA ..................................................... 174
14.30.8 ✍ Conclusion for Public Sector Banks? (सावर्ज�नक �ेत्र के ब�कों के बारे म� �न�षर्) ....................... 174
14.31 🧹🧹🧹🧹: 👹👹(🚫🚫🚫🚫) NEGATIVE News: ILFS & Shadow Banking ............................................. 174
14.31.1 👹👹(🚫🚫🚫🚫) NBFC: Shadow Banking (आभासी / प्र�तछाया ब�िकंग प्रणाली) ..................................... 174
14.31.2 👹👹(🚫🚫🚫🚫) Shadow Banks → IL&FS & NBFC Liquidity Crisis ........................................ 175
14.31.3 👻👻 ATMANIRBHAR → 🐯🐯: 👹👹(🚫🚫🚫🚫) RBI Helping NBFCs/ Shadow Banks .......... 175
14.31.4 👻👻 ATMANIRBHAR → 🧔🧔🧔🧔🧔🧔🧔🧔 Partial Credit Guarantee Scheme (PCGS) 2.0 .. 175
14.31.5 👻👻 ATMANIRBHAR → 🧔🧔🧔🧔🧔🧔🧔🧔 Special Liquidity Scheme for NBFC/HFC......... 176
14.31.6 👹👹(🚫🚫🚫🚫)💊💊💊💊Shadow Banking → other Remedies by Govt post-ILFS crisis .......... 176
14.31.7 👹👹(🚫🚫🚫🚫) 💊💊💊💊 Shadow Banking → Remedies by RBI ................................................ 176
14.31.8 👹👹(🚫🚫🚫🚫) 💊💊 Shadow Banking → Remedies by SEBI .................................................... 176
14.31.9 👹👹(🚫🚫🚫🚫) 💊💊 Shadow Banking → Remedies suggested by ES20 .................................. 177
14.32 🧹🧹🧹🧹🧹🧹 Negative News: PNB, LoU, SWIFT, & Nirav Modi ...................................................... 177
14.32.1 📞📞Financial Messaging Systems: SWIFT- Russia gets banned............................................ 177
14.33 �� RBI Dividend, Reserves, Economic Capital Framework ................................................... 178
14.33.1 �� RBI’s Bimal Jalan panel (2018) ................................................................................... 178
14.33.2 📆📆 RBI’s Financial / Accounting Year (�व�ीय वषर् म� बदलाव)..................................................... 179
14.33.3 🐯🐯🐯Section-7 Directive & Urjit Patel’s Resignation (इ�ीफा) ........................................... 179
14.33.4 🐯🐯🐯🧔🧔 Section-7 of RBI Act .............................................................................................. 180
14.34 ✍🏻🏻🎷🎷 Mock Question for Mains GSM3 (250 Words Each) ........................................................... 180
14 🔥🔥🔥🔥 BAD LOANS & OTHER BURNING ISSUES IN BANKING

14.11🔪🔪TYPES OF LOANS: BASED ON INTEREST RATE
Table 1: Type of Loans based on Lending Rates
Fixed Interest Loan (�न��त �ाजदर का ऋण) 🎈🎈 Floating Interest Loan (चलायमान)
e.g. Short-term crop loans upto ₹3 lakh for e.g. (External Benchmark) + spread + risk
farmers at fixed Interest 7%. premium = 12% originally. (Ref#1A2-
This interest rate will not be changed MonPolicy).
throughout the loan tenure. But benchmark is regularly updated. So
resultant interest rate may increase or decrease
throughout the tenure of loan.
टीजर लोन यानी िक ऐसे लुभावने लोन जहाँ शु�आती वष� म� �ाज Teaser Loan: A sub-type of Floating interest
दर ब�त कम रहे लेिकन बाद के वष� म� ग्राहक पर बड़ा �ाज दर rate loan, wherein initial years have low
थोप िदया जाए. अमे�रका म� सबप्राइम सं कट के पीछे इसे कारण interest, but afterwards- higher interest rate.
माना जाता था While RBI has not banned Teaser loans but has
put stricter regulations on them from 2011.
14.12🔪🔪TYPES OF LOANS: BASED ON BORROWERS
Table 2: Type of Borrowers
🤵🤵 Prime Borrower He has the capacity to repay loans. (वो कजार् वापस चुकाने क� �मता रखता है)
� Subprime Such person doesn’t have the capacity to repay loan. Giving teaser rate
Borrower home loans to them caused Sub-prime Crisis in USA (2007-08),
(Individual) ultimately led to Global Financial Crisis (GFC). (More in 📑📑Pillar#3).
🧔🧔 Overleveraged Such company has borrowed too much money than its ability to pay it
Borrower back. An Overleveraged company has high ratio of Debt (Bonds/loans)
(Company) to Equity (Shares). वापस करने क� �मता से भी अ�धक कजर् ले �लया है
When a weak bank keeps giving new loans to a subprime / overleveraged
� Zombie Lending
borrower. कमजोर ब�क, कमजोर कजर्दार को लोन देता रहे है
🔠🔠❓Why is the offering of "teaser loans" by commercial banks a cause of economic concern? (Pre-2011)
1. The teaser loans are considered to be an aspect of sub-prime lending and banks may be
exposed to the risk of defaulters in future.
2. In India, the teaser loans are mostly given to inexperienced entrepreneurs to set up
manufacturing or export units. (�बनअनुभवी नौसी�खए उद्य�मयों को �व�नमार्ण और �नयार्त इकाइयों बनाने के �लए
टीजर लोन िदए जाते ह�)
Answer Codes: (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 or 2
14.13🔪🔪🔪🔪NON-PERFORMING ASSETS (अनजर्क प�रसं प��यां)
14.13.1 🔪🔪🔪🔪-🤑🤑-😕😕-😭😭NPA / TBS Problem: Three Stages of

1. 🤑🤑Till mid-2000s: Boom period in global economy. Indian Corporates were taking large
amount of loans & became overleveraged. (भुगतान क� �मता से बड़ा लोन लेना)
2. 😟😟From 2007-08: Subprime & Global Financial Crisis (GFC: वै��क आ�थक सं कट): Indian exports
⏬. UPA govt’s policy paralysis & judicial activism, environment activism (नी�तगत प�ाघात और
�ा�यक सिक्रयता, पयार्वरण सिक्रयता) ⇒ projects delayed. Companies began facing difficulties finishing
projects & repaying loans.
3. 😰😰By 2013: ~1/3rd of the bank loans were owned by “IC1 companies” i.e. companies with
interest coverage ratio less than 1, meaning they were not generating enough revenue even to
repay the loan interest. (IC>1 is good and IC <1 is bad.)
Thus, balance-sheets of (1) some Large Corporates Companies & (2) Public Sector Banks (PSB)
became weak. It is called “Twin balance sheet syndrome (TBS)” [दोहरे तुलनपत्र क� सम�ा] by Economic
Survey 2015-16.
🔠🔠❓What is the importance of “Interest Coverage Ratio” of a firm in India? (Prelims-2020)

1. It helps in understanding the present risk of a firm that a bank is going to give a loan to.
2. It helps in evaluating the emerging risk of a firm that a bank is going to give a loan to.
3. The higher a borrowing firm’s level of ICR, the worse is its ability to service its debt.
Answer Code: (a) 1 and 2 only (b) 2 only (c) 1 and 3 only (d) 1, 2 and 3
14.13.2 🔪🔪🔪🔪NPA related definitions in Banking Sector

Loan account where borrower is repaying the principal and interest in timely
Std. Assets
fashion. (आदशर् परीसं प�तया= �नय�मत �ाज मुद्दल/ मूलधन �मला)
If loan principal or interest unpaid for 1-30 days from its due date, then such
SMA-0
loan account is classified as Special Mention Account-0.
SMA-1 31-60 days
SMA-2 61-90 days
- If loan principal or interest is not paid for more than 90 days from its due
🥂🥂🥂🥂✈ date, then such loan account is classified as Non-Performing Asset (NPA).
NPA िक� जमा करने क� �नयत �त�थ/तारीख के ऊपर भी 90 िदनों से अ�धक हो चुके हो िक�ु िक� जमा
अनजर्क नहीं क� गयी तो….
प�रसं प��यां - For farm loans, NPA is not counted on number of days but on number of
या cropping seasons. कृ �ष ऋण म� महीनों के िहसाब से नहीं फसल क� मौसम/ऋतु के िहसाब से होता है
गैर-�न�ा�दत - 📙📙📙📙ES22: NPA as a % of total loans : declined from 11% (2017) to 7%
प�रसं प��यां (2021-Sept) Public Sector Banks (PSBs): 2016-2020= losses . 2020-June
onwards= profits.
Provisioning As per RBI norms, banks must set aside funds to cover losses against their NPA.
प्रावधानीकरण Such ‘provisioning of funds’ ⏬decrease profitability of the Bank.
- Gross non-performing assets = grand total of all NPA loans(कु ल योग)
- Indian Commercial Banks’ (Gross) NPA approx. ₹8 lakh crores: within that
Gross NPA PSB (₹6 lakh cr) > private Sector banks (₹2lakh cr)
(GNPA: सकल - Exact Amount: ₹8.2 lakh crore (2021-Mar). ₹8.8 lakh Cr (2020-Mar). Thus
एनपीए) NPA⏬ than last year because 1) better loan recoveries 2) higher write-offs.
- Sectors with highest % NPA= 1) Industries > 2) Agriculture > 3) Service
Sector > 4) Personal Loans [As of 2020]
NET NPA (शुद्ध एनपीए) = GNPA Minus Provisioning
NET NPA
🎓🎓✋WHATITMEANSNOTIMP
Substandard When loan account remains in the NPA classification for 12 months/>
asset (रद्दी/घिटया परीसं प�तया- जब कोई लोन खाता 12 महीना या उससे �ादा एनपीए श्रेणी म� रहे)
Doubtful Asset When loan account in substandard classification for 12 months/>
When a bank, its auditor or RBI declares that given doubtful asset has little / no
Loss Asset
salvageable value. (नीलामी करके भी नुकसान भरपाई असं भव)
- Loan write off= banker removes a loan amount from the ‘asset-side’ of the
bank balance sheet, to save corporation tax (How? = we-are-not-here-for-
Loan write-off CA-exam).
- Loan write-off doesn’t waive bank’s right to recover that bad loan, it’s
merely an accounting exercise for tax-benefits. (कराधान म� कु छ �रयायतों के �लए
िहसाबी प्रिक्रया क� जाती है। हालांिक ऐसा करने के बावजूद भी ब�कर कजर्दार से पैसा वापस तो मांग ही
सकता है)
- Loan write-off⏬ reduces the NPA% of the Bank (Because amount is
written-off/cancelled from balance sheet)
- 2020-21: Indian Commercial Banks written off ₹1.85 lakh crore worth loans
Restructured When principal / interest rate / tenure of the loan is modified. Banks may do it
loan when borrower facing difficulty in repaying loans. (पुनगर्िठत कजर् / ऋण)
Stressed Asset NPA + Loans Written-Off + Restructured Loans = Stressed Assets (तनावपूणर् सं प��)
For example, If bank allows the borrower to pay 60% of dues & forgoes 40% as
OTS with
loss, then bank has offered “One time Settlement (OTS) with 40% haircut”
Haircut
कजर् का कु छ िह�ा ब�क खुद ही नुकसानी समझकर माफ कर दे।
Evergreening When a borrower taking a new loan to pay off his old loan.
of loans पुराना कजर् चुकाने के �लए नया कजर् िदया जाए।
14.14👻👻🤧🤧🤧🤧✋ ATMANIRABHAR → LOAN/EMI/NPA RELIEF / MORATORIUM
⇒ IF a loan is outstanding as of THEN 2020-March: RBI allowed (optional)
moratorium/suspension of loan repayment for 6 months for March, April, May, June, July, Aug.
⇒ So, If a borrower’s income ⏬ due to Corona, he gets relief from Equated Monthly Instalments
(EMIs) for “X” months. (ऋण अदायगी पर 6 महीने के �लए अ�ायी �प से मु��/रोक)
⇒ It WAS NOT compulsory to skip EMI. Borrower MAY repay loan regularly, if his financial
situation was strong. (इन महीनों म� िक�े भरना वैक��क होगा. वो आ�थक �प से सश� हो तो भर सकता है)
⇒ Loan was not ‘removed/waived’. It was only temporarily suspended. (ये कज़ार् माफ़� नहीं था. के वल कु छ
महीने के �लए िक�� भरने म� छु ट्टी दी गई थी- िक बाद म� धीरे धीरे पूरा भर देना। उसने �जतना उधार �लए, वो सारा अंत म� तो पूरा
चुकाना ही होगा।)
💡💡Note: In last handout, I had kept a very big short note here discussing how some banks demanded
compound interest rate for 6 months / matter went to SC / Govt gave subsidy to those banks. But for
2023 exam-cycle all that microscopic details are outdated / faded/not grabbing headlines anymore.
so I am deleting.
14.15🐯🐯🐯🐯🐯🐯 RBI “3R” FRAMEWORK FOR REVITALIZING STRESSED ASSETS (2015-19)

14.15.1 ✔Rectification (सुधार)
- 2015: RBI ordered the Banks to conduct Asset Quality Review (AQR: प�रसं प�� गुणव�ा समी�ा) and
begin rectification of bad loans i.e. Bank doesn’t change in loan interest, tenure or terms, but
asks client to rectify his irregularity in loan-repayment.
- In genuine case, additional loan may be given. Bank may also try to find a new partner / investor
for reviving the project. ब�क अ�त�र� कजर् दे सकता था, नया �नवेशक ढू ंढने मदद कर सकता था।
14.15.2 ⛏Restructuring (पुनगर्ठन: �ाज दर या कजर् चुकाने क� अव�ध या मा�लक� म� बदलाव)

Restructuring = Changing the loan interest (%) or tenure or ownership. it consisted of following
schemes:
- 5/25 for Infrastructure loans: RBI allowed banks to extend infra-loan tenure upto 25 yrs, & even
⏬loan interest rate. But such interest rate will be reviewed each 5yrs. (e.g. airport, powerplant,
highway project etc. ke loans.)
- CDR, SDR, S4A schemes for: non-infrastructure loans. (what was their full form? how did they
work? Ans. not important / outdated current.)
Figure 1: तनावग्र� प�रस��ओं को पुनज��वत करने हेतु आरबीआई का ढांचा: 2019 से पहेले का
14.15.3 🔪🔪 Recovery (वसूली)
Bank liquidates loan-defaulter’s assets under either of the following acts: (सं प��यों क� ज�ी और नीलामी)
1) SARFAESI Act 2002 (सरफाएसी अ�ध�नयम/कानून) OR
2) Insolvency and Bankruptcy Code 2016 (शोधन-अ�मता एवं िदवा�लयापन सं िहता 2016)
🔠🔠❓ ‘Scheme for Sustainable Structuring of Stressed Assets (S4A)’ is related to: (Prelim-2017)
a) procedure for ecological costs of developmental schemes.
b) scheme of RBI for reworking the financial structure of big corporates with genuine difficulties.
c) disinvestment plan for Central Public Sector Undertakings.
d) Provision in ‘The Insolvency and Bankruptcy Code’.
14.15.4 🦁🦁 🔪🔪RBI’s Prudential Framework (2019)

This is outdated topic but, only basic idea required.
2019: RBI released Prudential Framework for Resolution of Stressed Assets Directions 2019
(तनावग्र� प�रसं प��यों के िदशा-�नद�शों के �लए �ववेकपूणर् �परेखा)
1) It discontinued CDR, S4A, SDR, etc. Now IBC to be main tool for resolving business loans.
2) Lenders must upload data of ₹5 crore /> loans to RBI’s CRILC portal on weekly basis.
3) Forbids loan restructuring for borrowers who have committed frauds/willful default in past.
✋😷😷 most of above directives suspended / postponed in Corona so don’t lose sleep
14.15.5 🦁🦁 🔪🔪RBI’s KV Kamath Report Resolution Framework for Corona-related Stress
⇒ 2020: RBI had setup this Committee to look into loan restructuring for large companies, who
are hit by Corona pandemic.
⇒ KV Kamath identified 26 vulnerable sectors (e.g. power, construction, steel, road, cement etc..)
He and gave various technical guidelines for loan restructuring.
14.15.6 🦁🦁 🔪🔪Resolution Framework 1.0 and 2.0 (2020-21)
Based on the recommendations of the aforementioned KV Kamath committee, RBI issued a set of
guidelines for Bank/NBFCs for dealing with the bad loans:
Resolution Framework Applicable to borrowers who are
1.0 Large companies
2.0 Individual persons and small companies
What exactly is written in above frameworks? Ans. 1) Giving extra loans to genuine cases 2)
Extending the loan tenure 3) reducing loan interest rate etc.. We’ll NOT PHD. #🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
14.16⚖🔪🔪 SARFAESI ACT 2002: ORIGIN, OBJECTIVE & LIMITATIONS

कजर् नहीं चुकाया तो सं प�� क� ज�ी और नीलामी करने के �लए कानून
⇒ 1991: Narsimham-I Committee on banking sector reforms observed that borrowers obtain stay
orders from ordinary courts = banks have difficulty recovering NPA. So, Debt Recovery
Tribunals (DRT: ऋण वसूली �ाया�धकरण) were set up (1993)= ordinary courts can’t interfere in the
loan recovery process.
⇒ 1998: Narsimhan-II Committee observed that DRTs need to be strengthened with a law, so,
Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest
(SARFAESI) Act enacted in 2002. [प्र�तभूतीकरण और �व�ीय आ��यों का पुनगर्ठन और प्र�तभू�त िहत को प्रभावी करने
का अ�ध�नयम 2002]
⇒ Under SARFAESI act, lenders can attach the mortgaged assets when loan is not repaid. They can
change board of directors in such companies, can auction such assets, can also sell such assets to
Asset Reconstruction Companies (ARC, NBFC: प�रसं प�� पुन�नमार्ण कं पनी). [2021: RBI setup
Sudarshan Sen Committee to suggest reforms for ARCs]
⇒ SARFAESI not applicable on farm loans. (कृ �ष ऋण पर ये कानून लागू नहीं होता)
⇒ If loan-defaulter wants to obtain a stay order, he cannot go to ordinary courts. He will have to
approach for DRT. If DRT doesn’t help then ⇒ higher appeal to Debt Recovery Appellate
Tribunal (DRAT: ऋण वसूली अपीलीय �ाया�धकरण), but DRAT will require him to deposit minimum
50% of the loan dues (to discourage frivolous appeals). ⇒ higher appeal to high court.
14.16.1 ⚖🔪🔪�💪💪 Which lenders have SARFAESI powers?

 All types of Banks (सभी प्रकार के ब�को को इस कानून के अंतगर्त �मलकत ज�ी करने क� स�ाएँ है)
 Housing Finance Companies (HFCs)
 if an NBFC fulfills two conditions SIMULTANEOUSLY: (गैर ब�क �व�ीय कं प�नयों को भी यह स�ा है यिद)
o 1) The NBFC having asset size of ₹100 cr or more, AND
o 2) loan given is at least ₹50 lakhs. [💼💼Budget-2021 reduced minimum limit to ₹20 lakh]
 For example Bajaj Finserv, Reliance Capital, Muthoot Finance, IL&FS.
14.16.2 🔨🔨⚖ SC Judgement: Yes, Cooperative banks also have SARFAESI powers (2020)
⇒ Constitution: 7th Schedule → Union List: (सं �वधान क� 7वीं अनुसूची → सं घ सूची)
o Entry 43: Incorporation, regulation and winding up of trading corporations, including
banking, insurance and financial corporations, but not including co-operative societies.
o Entry 45: Banking.
⇒ 2007: A High Court judgments said “Union’s SARFAESI Act doesn’t apply to Cooperative
banks. Because cooperative banks are outside the law-making power of the.”
⇒ 2020: Supreme court finally clarified the matter: “Entry 45: banking involves all types of banks-
both commercial and cooperative banks. Therefore, when the Union made the SARFAESI Act to
empower the banking sector, → same powers are also available to Cooperative banks.” (सहकारी
ब�क भी इस कानून का इ�ेमाल करके कजर्दार क� सं प�� ज� कर सकते ह�= एस सुप्रीम कोटर् ने फे सला िकया।)
14.16.3 ⚖🔪🔪: �Limitations of SARFAESI Act (मयार्दाए)

⇒ 😰😰The DRTs & DRATs are understaffed. 1 lakh+ cases pending (2016), so, case will go on for
years, borrower remained in possession of asset. जजों क� कमी के चलते के स �नपटान क� प्रिक्रया ब�त धीमी है
⇒ 😰😰This leads to erosion of asset-value (machinery, vehicles) even when DRT allows auction at a
later time. (गाडी/ मशीन क� ज�ी नीलामी नहीं होगी तो उसके मू� म� �गरावट आती है- �जतनी पुरानी गाड़ी, उतना कम दाम।)
⇒ In some businesses, auction or liquidation may not yield the best returns for the banks e.g. hotel
resort in remote area, where no other hoteliers are keen to invest. (हर प्रकार क� सं प�� क� नीलामी म� अ��
बोली लगाने वाली �मल जाए यह ज�री नहीं। कु छ बार म�म माग� समाधान बेहतर होता है)
⇒ In such cases, if the loans were restructured (i.e. reducing % interest rate, extending tenure,
finding new partners), then banks could salvage more value. (इस�लए नीलामी क� जगह अगर कु छ आपसी
समझौता / बीच का रा�ा/ मांडवाली िकया जाए तो बेहतर)
⇒ But, SARFAESI act doesn’t facilitate such arbitration So, Govt. came up with a new law: IBC.
14.17 ⚖🔪🔪🤝🤝 INSOLVENCY AND BANKRUPTCY (I&B) CODE 2016

शोधन-अ�मता एवं िदवा�लयापन सं िहता 2016: कजर्दार का लेनदार के साथ समझौता/मांडवली करवाने के �लए
⇒ IBC code classifies creditors into two categories
o A) Operational Creditors (OC) = Suppliers, contractors, salaried employees etc.
(कायर्संबंधी लेनदार : �ज�ोंने कं पनी को कु छ व�ु/सेवा मुहैया कराई थी लेिकन उस पर पैसा बकाया है)
o B) Financial Creditors (FC) = banks, NBFC, bond & other debt security holders, +
Home buyers. (�व�ीय लेनदार).
⇒ IF an Individual or Partnership firm or Company defaults on a business loan of ₹ “X” lakh or
more, then, above types of creditor(s) approach National Company Law Tribunal (NCLT: रा��ीय
कं पनी कानून अ�धकरण), to initiate proceedings under the I&B Code.
o NCLT has over 10 benches across India. Also has facility for e-filing of applications.
o NCLT must accept/reject application within 14 days.
⇒ Within that period, an Insolvency Professional (IP: शोधन-अ�मता सं बंधी पेशेवर) will make a resolution
plan e.g. ⏬ loan interest, extend loan tenure, or IP could even find another investor to finance
the pending project etc. (वो पेशेवर लोन-पुनगर्ठन क� कोशीश करे गा िक जैसे �ाज दर कमी, समयाव�ध म� बढ़ोतरी, नया
भागीदार ढूँ ढना)
⇒ IP will present the plan to Committee of Creditors (CoC: लेनदारों क� स�म�त) madeup of the Financial
Creditors (FC). In this Committee. FCs’ voting power is based on amt of loans given by lender.
⇒ If x% of the FCs agree with such resolution plan, then it will be set in motion, otherwise, IP will
liquidate the assets to recover the loan. (यिद �व�ीय कजर्दाताओं क� स�म�त ब�म�त से पुनगर्ठन प्र�ाव पा�रत न करे तो
नीलामी/ प�रसमापन)
⇒ Appeal Structure? (इस प्रिक्रया के �खलाफ़ कजर्दार अपील म� िकधर जा सकता है?)
A. If Borrower is individual / partnership firm: @DRT → DRAT of SAFAESI Act. OR
B. If Borrower is a Company: @ National Company Law Appellate Tribunal (NCLAT: रा��ीय
कं पनी कानून अपीलीय �ाया�धकरण) of the Companies Act.
14.17.1 ⚖🔪🔪🔪🔪: ✋IBC Not applicable on following borrowers
(�न� िक� के कजर्दारो को IBC कानून म� समाधान का लाभ नहीं �मलेगा)
🔪🔪 � Wilful Defaulter A borrower who has the capacity to repay, but he’s not repaying the
(जान-बूझकर बकाएदार) : loan. E.g. Vijay Mallya was declared wilful defaulter by SBI (2017).
Total number of wilful defaulters 2,017 (Year 2019), 2,208 (Year
2020), 2,494 (2021).
🔪🔪 � Incapable A borrower whose loan account is in NPA for more than a year, and
Defaulter (असमथर् बकाएदार): he has no capacity to repay even partial loan amount. (िजसक� औकात
ु ाने क�, उसके साथ क्या समजौता करोगे?)
ही नही लोन चक
Above two categories of borrowers are not eligible for I&B resolution process. Their assets will be
directly liquidated under SARFAESI Act. (उनक� तो बस सं प�� ज� करके नीलामी होगी, इनके साथ कोई समझौता िकया
नहीं जाएगा)
14.17.2 ⚖🔪🔪🤝🤝 Insolvency and Bankruptcy Code Amendment (2018: सं िहता सं शोधन)
- RERA registered building (home & office) buyers are classified as ‘financial creditors’. So, if
builder unable to finish project, unable to repay the loans to banks → homebuyers will have
voting power in the I&B resolution process. (More RERA in Pill#6)
- It ⏬the voting requirements for faster resolution:
Table 3: these % are for observation. ✋Exact numbers NOT important for exam.
Lenders’ Voting requirements (ऋणदाताओ का प्र�ाव के समथर्न म� मतदान) Before After

Routine decisions (सामा� �नणर्यों के �लए) 75% 51%
Key decisions like appointing IP, extending deadlines for resolution process, 75% 66%
approving the resolution plan (मह�पूणर् �नणर्य के �लए)
Withdrawing resolution plan from NCLT NotIMP 90%
14.17.3 ⚖🔪🔪🤝🤝 IBC Code (first) Amendment Act (2019: सं िहता सं शोधन)
2019-Aug: it was passed by Parliament, with following features
- Must finish entire process within 330 days, instead of earlier 180-270 days walli limit.
- If too many FCs (e.g. homebuyers): they may appoint a representative (प्र�त�न�ध) for to attend the
Committee of Creditors on their behalf, for smoother & systematic conduct of meeting.
14.17.4 ⚖🔪🔪🤝🤝 IBC Code (second) Amendment Act 2019

⇒ More technical reforms in the law. It shows that IBC is a ‘work in progress’…many operational
difficulties= govt has to keep changing the norms/amendments.
⇒ IBC is like a ‘Mobile App’ which is still in ‘Beta/under-development’ stage. So frequently new-
updates have to be released.
⇒ This is a ‘criticism/ shortcoming’ of IBC act. (हम� समझना यह है िक बार बार इस कानून म� सुधार करने क�
ज�रत..एक तरह से इसक� खामी है- �ोंिक अगर शु� से ही ठीक से क़ानून बनाते तो इसम� बार बार सुधार नहीं करने पड़ते.।)
14.17.5 ⚖🔪🔪🔪🔪:🤫🤫 IBC Pre-Packs (पद� के पीछे ज�ी से के स सुलटा लेते है!)
Figure 2: इज्ज़त क� इतनी परवाह थी, तो आप टाइम पे ही लोन चुका देते, भाई!
⇒ Pre-Pack System is found in United Kingdom and the United States

⇒ IBC 2021 Ordinance (and later Amendment Bill) aim to enable this in India for MSMEs.
Corporate Insolvency Pre-packaged Insolvency Resolution Process (PIRP)
Resolution Process (CIRP)
IBC's Formal process: lenders - Pre-packaging = Borrower company informally
file complaint to NCLT → (discreetly) negotiates a resolution plan with its lenders /
Insolvency professional buyer-parties who may be interested in its action, before
appointed → Loan approaching IBC/NCLT process. (प्री पैिकंग = �व�धवत �प से
restructuring proposal → If कोटर्/कानूनी प्रिक्रया शु� होने से पहले ही अनौपचा�रक �प से कजर्दार कं पनी
NOT approved by lenders → अपने कजर्दाता तथा भ�व� क� नीलामी म� ��च रखने वाले खरीदारों से पद� के
Auctioning. (औपचा�रक प्रिक्रया कु छ पीछे /बं द दरवाजे म� चुपचाप समझौता कर कर ले.)
इस तरह से होती है) - e.g. Anil proposes, “I’m unable to repay loan but I’m
getting new partner/investor Mahindra. Together we’ll
revive the biz & repay 80% loan.”
- If this is agreeable to lenders, they’ll send letter to NCLT,
“We’ve internally agreed for this plan. Plz give judicial
approval to it.”
If Resolution Plan not Public auction not conducted but Swiss Challenge allowed.
aggregable to Lenders then What is the meaning of this word? Ans. Explained in Video
Public Auction / Open Auction Lecture.
Conducted.
(सावर्ज�नक �प से नीलामी होती)
Time limit: upto 330 days Time limit = 120 days = faster than CIRP (ज� �नपटान)
More number of days = more - 🤩🤩Benefit? a quick (speedy) and discreet (confidential)
negative headlines in newspaper way of completing the insolvency resolution process. ��रत
= ⏬confidence of customers & और गु� �प से मसले को समेट �लया जाए
investors (e.g. Customer may
Corporate Insolvency Pre-packaged Insolvency Resolution Process (PIRP)
Resolution Process (CIRP)
not buy Videocon refrigerator, if - 🤩🤩Prevents the stigma/bad publicity/damage to brand
he continuously sees negative image associated with formal IBC proceedings. else in
news & starts to fear that future difficult to get investors/customers/clients. मामला
company will shut down, he’ll औपचा�रक �प से कोटर् तक नहीं प�ंचेगा= अखबारों म�/जनमानस म� कं पनी
not get warranty/repair service बदनाम/कलं िकत ना हो वरना भ�व� म� �नवेशकों/ग्राहकों को आक�षत करना
after 3-5 years) मु��ल हो जाता है.
- least disruptive to the businesses. Cost-effective. Helps in
workers’ job preservation (compared to a scenario where
company is shut down)
CIRP applicable to all small and Only available to micro, small and medium enterprises
big enterprises. (MSMEs) as per 2021’s IBC Ordinance / Amendment Bill.
(के वल चु�नंदा श्रेणी के �लए है)
14.17.6 ⚖🔪🔪🔪🔪: 🥱🥱 IBBI directive on Avoidance Transaction and 500 other technical things
✋Such technical topics not important for the scope of the exam. If any teacher teaching it / private
quizmaster is asking MCQ on it then please ask them to first go through previous years official
papers and ask him to prove where's the pattern of such questions being asked in real
exam?#🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
14.17.7 👻👻� (⚖🔪🔪🔪🔪) ATMANIRBHAR → IBC Ordinance/Act 2020 to suspend new cases
⇒ 2020: Govt issues ordinance to amend IBC Code. (अ�ादेश)
⇒ Corona = business is down, difficult to work out any resolution plan. So, No fresh case will be
registered in IBC code for next “X” months Because Corona (नए के सों के दा�खले को ��गत िकया गया.)
⇒ “X” = 24 March 2021 ✋Exact dates notIMP
IBC Ordinance / Act 2020 Case can start if loan default of minimum _ _ amount
BEFORE Minimum ₹1 lakh/>.
AFTER Minimum ₹1 crore/>**
**So even after suspension is lifted, most of the small businessmen will be spared from IBC
proceedings. (रोक हटाने के बाद भी नए के स दजर् िकए जाएं गे, तो �सफर् बड़े लोन के �लए के स दजर् िकए जाएं गे)
14.17.8 🕵🕵(⚖🔪🔪🔪🔪) Insolvency and Bankruptcy Board of India (IBBI)
⇒ भारतीय शोधन-अ�मता एवं िदवा�लयापन बोडर् - वैधा�नक सं �ा

⇒ IBBI is the statutory body that monitors and implements I&B Code 2016.
⇒ IBBI’s administrative control rests with Ministry of Corporate Affairs (कॉप�रेट मामलों का मं त्रालय).
⇒ It has 1 Chairman, 1 nominated member from RBI, 8 from Govt’s side = total 10 people.
⇒ 1st chairman of IBBI: M.S.Sahoo. Present Chairman: Ravi Mittal (2022). (अ��)
⇒ Chairman has 5 years / 65 age tenure. Also eligible for reappointment (पुन:�नयु�� सं भव).
⇒ IBBI selects Insolvency Professionals Agencies (IPAs). These IPAs enroll and supervise the
members practicing as Insolvency Professionals (IPs). Presently, 3 organizations given “IPA”
status viz. 1) ICAI (Chartered Accounts) 2) ICSI (Company Secretaries) and 3) Institute of Cost
Accountants.
14.17.9 🕵🕵 📡📡IBBI → Information Utility

IBBI also selects Information Utility (IU: सूचना उपयो�गता सं �ा) organization to maintain database of
borrowers. In 2017, NeSL: National E-Governance Services Ltd (owned by consortium of SBI, LIC
etc.) was the first to get the IU status from IBBI. It is compulsory for lenders to share data with IU.
😍😍IU helps lenders in two ways:
1. 😍😍by looking @borrowers’ credit history, lenders can make informed decisions about whether
to give loan or not, and how much interest to charge? कजर्दाता को जानकारी उपल� कराता है िक लोन-
अज़�कतार् �वजय मा�ा का इ�तहास/�व�ीय च�रत्र के सा है, �ा वो लोन देने लायक़ भरोसेमंद �� है क� निह?
2. 😍😍 This database helps establishing documentary proofs during NCLT / DRT / judicial /
liquidation proceedings. कानूनी प्रिक्रया म� द�ावेजी सबूत मुहैया/उपल� कराता है
14.17.10 🕵🕵(⚖🔪🔪🔪🔪)Insolvency → Misc. Org: Indian Institute of Corporate Affairs

- IICA an autonomous body under Ministry of Corporate Affairs. (�ाय� सं �ा)
- It has launched a two-year Graduate Insolvency Programme (GIP). �ातक कायर्क्रम शु� िकया
- The student passing this program can register as IP, without the mandatory 10 years' experience.
14.17.11 💪💪 Project Sashakt by Finance Ministry (2018)
2018-Jul: Finmin’s Project Sashakt for PSB-NPA on report by Sunil Mehta (PNB CEO).
Gave guidelines to resolve the NPA problem in a timebound manner in Public Sector Banks.
What were those guidelines? Too outdated. So, I’m removing it from latest handout.
🔠🔠❓What was the purpose of the Inter-Creditor Agreement signed by Indian banks and financial
institutions under Project Shashakt? (UPSC-Prelims-2019)
a) To lessen the Government of India’s perennial burden of fiscal deficit and current account deficit
b) To support the infrastructure projects of Central and State Governments
c) To act as independent regulator in case of applications for loans of ₹ 50 crore or more
d) ✅To aim at faster resolution of stressed assets of ₹ 50 cr or more which are under consortium
lending.
Answer to Above MCQ is Option D. but now it is outdated current affairs so we will not study the
exact matter.
14.17.12 👻👻👻👻👻 ATMA-NIRBHAR → Insolvency → Micro,Small,Medium Enterprises

- 📑📑Ref Pillar#1D: Financial Inclusion → Mudra and other loans schemes
14.17.13 (⚖🔪🔪🔪🔪)🈶🈶🈶🈶 Cross-border Insolvency (सीमा-पार का �दवा�लयापन)
- Cross-border insolvency has two facets: [1) foreign creditors should be able to recover money
lent to Indian corporates & VICE VERSA. [2) During Indian company's insolvency in India, the
Indian lenders should be able to recover money from Indian company's foreign assets easily,
AND VICE VERSA.
- IBC sections 234 & 235 have provisions for it, BUT they are not notified yet, so they are not
enforced.
- This leads to uncertainty of outcomes for creditors and debtors.
2018: Corporate Affairs Ministry's Insolvency Law (reforms) Committee under Injeti Srinivas
recommended
- We should create a separate law for Cross-border Insolvency. अलग से कानून बने
- More than 40 nations use United Nations Commission on International Trade Law
(UNCITRAL)'s Model Law of Cross Border Insolvency (1997) So, we can use it as a template
while making our own law → 📙📙📙📙ES22 also recommended the same.
- 👜👜👜👜Budget-2022: - We will amend IBC Code to facilitate cross border insolvency resolution.
14.18(⚖🔪🔪🔪🔪)👋👋👋👋 VOLUNTARY LIQUIDATION OF COMPANIES
Liquidation is the process of shutting down a company. Two type of liquidations (प�रसमापन दो िक़�) →
 1) �Involuntary Liquidation: Due to loan default → it can be conducted either through I) IBC
code or II) SARFAESI Act depending on the case. (अनै��क प�रसमापन- जब कं पनी कज़र् म� िदवा�लयापन िदखा
दे)
 2) �Voluntary Liquidation: when the owner has not committed any loan default but wants to
shut down the business. Voluntary liquidation can be done through A) sending application to
the registrar of companies under Companies Act, 2013 B) sending application under the
insolvency bankruptcy code. However Method-A is more popular than B at present. (�ै��क
प�रसमापन. कं पनी ने अभी तक कज़र् म� िदवा�लयापन नहीं िदखाया लेिकन उसके धं धे/�ापार म� अ�ा भ�व� निह िदख रहा इस�लए
क�नी का मा�लक ख़ुद क� कं पनी �यं बं द करना चाहता है.)
14.18.1 (⚖🔪🔪🔪🔪)👋👋👋👋 : 😥😥 Challenges in voluntary liquidation (चुनौ�तयाँ):

Owner of the company needs to get no objection certificate (NoC) from various org such as CBDT &
CBIC (More about them in Pillar#2), EPFO & ESIC (More about them in Pillar#1D2)
- 😰😰But, no well-defined Standard Operating Procedures (SoPs) / timelimits in the Govt
organisations for granting NOC. This results in delays / demand for bribes / harassment of the
owner. (िक�ु एनऑसी क� समयाव�ध क� ��ता क� कमी के चलते उद्योगप�त उ�ीड़न/�र�तख़ोरी का �शकार बनाता है।)
- 📙📙📙📙ES22 suggested simplify the procedure, give clarity in rules, setup an online portal that
combines all the steps at one place.
- 👜👜👜👜Budget-2022: we’ll setup a Centre for Processing Accelerated Corporate Exit (C-PACE)-
to faster voluntary liquidation / winding-up of the companies. Presently, this process takes
nearly 2 years → we will reduce it to just six months. (वै��क प�रसमापन से पहेले कं पनी के मा�लक ने आयकर,
ईपीएफऑ जेसी �व�भ� सरकारी सं �ाओं से अनाप�� प्रमाण पत्र-एनओसी हा�सल करना होता है, इस�लए आ�थक सव��ण ने इन
�नयम-कानूनों म� ��ता, एक ऑनलाइन पोटर्ल क� ज़�रत जतायी थी. नए बजट म� इस वा�े ’सी-पेस’ नामक एक नई सं �ा बनाने क�
घोषणा क� गई।)
14.19(⚖🔪🔪🔪🔪)📘📘 📘📘 ECONOMIC SURVEYS ON IBC/NPA (आ�थक सव��ण)
14.19.1 Economic Survey 2018-19 on IBC/NPA

- With I&B Code and other measures by RBI=NPA % has ⏬ अनजर्क प�रसं प��यों के �नपटान म� मदद �मली
- I&B code's time-bound mechanisms have prompted 'behavioural changes' in corporate
borrowers. Now they fear losing control of the company. This has improved corporate
governance, cash and financial discipline. (कॉप�रेट देनदार के �वहार म� प�रवतर्न, कं पनी क� मा�लक क� मेरे हाथ से
चली जाएगी इस डर म� �नय�मत कजार् वापस कर रहे ह�)
- By 31/3/2018: ₹ 50,000 crores worth NPAs have been upgraded to std assets (meaning the
(arrogant) borrowers have been forced to resume paying principal & interest regularly.)
- Due to IBC Code, India's rank has improved in World Bank's Ease of Doing Biz report. (More in
Pillar#4). However, we also need to begin more reforms:
 We need to increase the number of NCLT benches, number of IP Professionals, use ICT
technology for faster case proceedings. (�ायपीठ, मानव बल और टे�ोलॉजी के उपयोग म� बढ़ोतरी क� ज�रत)
 We should enact separate law on cross-border insolvency. (सीमा-पार िदवा�लयापन के �लए अलग से
कानून बने)
 Group Insolvency: Big Industrialists usually operate through groups of companies, each
having a separate identity e.g. Tata Sons ltd → 1) TCS 2) Tata Motors 3) Tata Steel etc. If one
of these company become insolvent, it creates negative ripples on entire group's financial
health. Certain legal-technical reforms are necessary to address such group-insolvency. (समूह
िदवा�लयापन के मामलों का �नपटान करने के �लए कानून म� कु छ तकनीक� सुधार िकए जाएं )
 Certain legal-technical reforms to address insolvency cases involving individual proprietors
and partnership firms. (��गत मा�लक और साझेदारी फमर् के �लए कानून म� कु छ सुधार िकए जाएं : They’re
legally different entities than ‘Companies under companies Act. More in 1C: SEBI handout)
14.19.2 (⚖🔪🔪🔪🔪)📔📔📔📔Economic Survey 2020 on IBC/NPA (released in 2020-Jan-31st)

- NPA had reached its peak in 2018 but now it appears to be declining because of various measures
taken by the Government and RBI. (धीरे-धीरे अनजर्क प�रसं प��यों क� सम�ा कम हो रही है)
- 🤩🤩Appreciated that IBC proceedings take on average 340 days to complete, unlike SARFAESI
legal proceedings which take 4.3 years. के स का �नपटारा �ादा ज�ी से हो पाता है
- 🤩🤩Appreciated that IBC helps recovering more amount of loan than SARFAESI in 2018-19
Approx. Amount recovered in crores 2017-18 2018-19
SARFAESI and DRT 33,000 52,000
IBC 5000 71,000
(सरफ़ाएसी कानून के तुलना/मुकाबले आईबीसी कानून म� �ादा मोटी मात्रा म� बकाया कजर्/ऋण क� वसूली हो पाती है ऐसी प्रशं सा)
14.20🤒🤒🤒 💊💊 📅📅:📔📔📔📔 ES21: REGULATORY FORBEARANCE (�व�नयामक� �मा/सहनशीलता)

During a great financial crisis the Reserve Bank may allow for some relaxation in above guidelines.
(�व�ीय सं कट काल म� �रजवर् ब�क उ� �नयमों म� �रयायत दे सकता है)
⇒ For example, Restructuring of loans: A stressed / NPA walla borrower's loan tenure⏫ and/or
loan interest rate ⏬ as per RBI norms. (�ण का पुनगर्ठन. लोन क� अव�ध-�मयादी/�ाज दरों म� बदलाव)
⇒ Then such restructured loan account will be reclassified from NPA to Standard account.
⇒ such temporary relief from the strict rules is called "Regulatory Forbearance". (�व�नयामक� �मा)
⇒ RBI permitted it after 2007-08's Subprime & Global Financial Crisis.
But then it results into following side effects:
⇒ Zombie Lending (= weak bank keeps giving new loans to weak / subprime / Over Leveraged
borrower)
⇒ Evergreening of loans (=Companies taking new loans to repay the previous bad loans- (कज� का
�नरंतर ह�रतकरण)
⇒ 😰😰Many loan scams occurred: ICICI-Videocon loan, Yes Bank-Rana Kapoor, PNB-Nirav Modi,
Punjab and Maharashtra Co-operative Bank (PMC) etc. (ढेरों �व�ीय गबन सामने आए)
⇒ Corona-2020-onwards: RBI again relaxed many rules. So Economic Survey recommended RBI
must stop these relaxation immediately after Corona crisis is over. Else, NPA problem could
worsen. (आपातकाल ख� होने के बाद इस प्रकार क� �मा/�रयायतों को तुरंत बं द करना चािहए, वनार् नए कांड होंगे।)
⇒ Because “Those who do not learn from history are condemned to repeat it.” (- said Spanish
philosopher George Santayana) (जो इ�तहास क� गल�तयों से सीखेगा नहीं वह उन गल�तयों को दोहराएगा)
14.21 👁👁👁🗨🗨🔪🔪💻💻 BORROWERS’ DATABASE & SURVEILLANCE (उधारकतार्ओ ं का डेटाबेज व् �नगरानी)
14.21.1 👁👁👁🗨🗨🗨🗨🗨🗨-📔📔📔📔ES20: Use AI-ML Technology

In PSBs, most of the loan-information processing (=Credit analytics) happens manually (ऋण �व�ेषण
ह�चा�लत �प से करते है). This causes inefficiency, frauds and loan default. Tools such as Artificial
Intelligence (AI), Machine Learning (ML) (कृ �त्रम बु�द्धम�ा/आसूचना और मशीन प्र�श�ण) can help them in
following ways:
⇒ Willful defaulters usually create fictitious companies to transfer their assets / shares / money just
before they stop paying loan installments. (जान-बूझकर लोन न चुकाने वाले, फज� क�नी बनाकर लोन के पैसो का
गबन करते है, उसपर �नगरानी सं भव)
⇒ Artificial Intelligence (AI) can alert the authorities through real time surveillance & data
analytics of the borrower’s NEFT/RTGS/DEMAT account transaction. (अलग-अलग खातों पर �नगरानी)
⇒ Geo-tagging of assets i.e. adding longitude and latitude data with the photos & videos of the
Factory building, machinery, vehicles, aeroplanes, helicopter etc. (सं प�� क� �जयो-टै�गंग) Then, →
o Scamster can’t pledge fictitious assets as collaterals for loans (फज� सं प�� जसका अ�� ही नहीं,
उसे धोखेबाज़ �गरवी निह रख पाएगा।)
o Scamster can’t pledge the same asset as collateral to multiple banks/NBFCs. (एक ही सं प��
को एका�धक लोगों के पास �गरती रखकर लोन म� धांधली करना स�व निह होगा।)
⇒ GPS chips may be embedded in factory-machines and vehicle to track their real time location →
o If scamsters move the machinery out of the factory, the banker will be alerted.
o Bankers can remotely disable machines/vehicles, if loans are unpaid.
⇒ Blockchain Technology can used for storing and verifying the authenticity of the data.
⇒ AI can monitor Social media activities e.g. Borrower is not paying the loan and yet sharing the
Switzerland vacation photos on Instagram = He is a wilful defaulter → Attach his assets under
the SARFAESI Act. (कजर्दार के सोशल मीिडया ग�त�व�धयों पर �नगरानी रखी जाए)
✋ Caution? borrower’s privacy and dignity should also be respected while doing such
computerized surveillance. (उ� कदम उठाते व� कजर्दार क� �नजता का भी स�ान रखना चािहए)
Figure 3: Instagram फोटो मे भले हम मोरेशीयश मे ऐ�ाशी करे, ब�क को बोल�गे लोन चुकाने का पैसा नही है।
14.21.2 👁👁👁🗨🗨🗨🗨🗨🗨-📔📔📔📔 ES20: setup PSBN Network

⇒ Government should create a new organization named PSBN (Public Sector Bank Network),
which will act as a Financial Technology/Fintech Hub (FinTech: �व�ीय प्रौद्यो�गक� के �लए एक नई सं �ा
बनाई जाए).
⇒ Whenever a borrower applies for a loan to a public sector bank → Details will be sent to PSBN.
→ PSBN will verify the creditworthiness (�व�ीय साख) and risk profile (िदवा�लयेपन का जो�खम) of the
applicant through:
o Artificial Intelligence (AI), machine learning (ML) and Big Data Analytics- as explained
in the previous section
o E-KYC (Know Your Customer): Aadhar verification → cross checking his Aadhar
number against Financial data from Corporate Affair Ministry, SEBI/share market,
Income Tax Department, GST, etc. (आधार काडर् के ज�रए उस �� के शेयर बाजार, आयकर, जीएसटी
इ�ािद का �व�ीय इ�तहास जांचा जाएगा)
🤩🤩 Benefit? fraud prevention, ⏬ chances NPAs, quicker decision making, process loan
applications faster, cost saving for individual banks as all of them can use a single hub instead of
spending on separate servers/tech. (�व�ीय घोटाले का जो�खम कम होगा, लोन अज�ओं का ज�ी से �नपटान सं भव होगा)
14.21.3 👁👁👁🗨🗨🗨🗨🗨🗨- 🐯🐯 RBI → Public Credit Registry (ऋण क� सावर्ज�नक र�ज��ी)

Presently, multiple organizations keep borrowers’ database / credit history viz.
1) Under the I&B code, Insolvency and bankruptcy board of India (IBBI) has authorized the
National e-governance services Ltd (NeSL) to act as an Information Utility (IU).
2) Separately there are Credit Information Companies (CIC) and Credit Rating Company (CRA)
(More in 📑📑Pillar#1B1- Classification of NBFCs.)
3) RBI has its own “Central Repository of Information on Large Credits (CRILC)” for Loans above
Rs 5 cr. Banks & NBFCs have to submit weekly updates in this portal.
😰😰But, not all of these databases are under the direct control of RBI. Each has their own
methodology for data collection & tabulation. Not all of these databases are covering all individual &
corporate borrowers.
Figure 4: �बग बॉस क� तरह सब पे नजर रखूँ गा। चुन चुन के डेटा �नकालूँगा।
So, RBI’s Yeshwant M. Deosthalee Committee (2017-18) recommended setting up a Digital Public
Credit Registry (PCR) with following features:
1) PCR will be setup under RBI, using data from SEBI, Corporate Affairs Ministry, GST authorities,
IBBI, Banks, NBFCs etc. अलग-अलग सं �ाओं से को डाटा हा�सल करेगा
2) PCR will help lenders to get complete 360-degree profile of borrower on real time basis.
3) PCR will help RBI in early detection of systematic stress, checking the efficacy of monetary
policy & other big data analytics. मौिद्रक नी�त क� अ�धका�रता को जानने म� भी मदद करेगा
🔠🔠❓MCQ. RBI constituted a high-level task force on Public Credit Registry (PCR), headed by _ _ _ (CDS-
2018-I) (a) Sekar Karnam (b) Vishakha Mulye (c) Sriram Kalyanaraman (d) Y. M. Deosthalee
🚩🚩🚩FAQ: “WHY not merge PSBN Network with RBI’s PCR registry? Ans=Send
suggestion to RBI + CEA that they shd not do duplication of work.#🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
14.21.4 👁👁👁🗨🗨🗨🗨🗨🗨- 🌐🌐 Legal Entity Identifier (LEI) Number: (कानूनी इकाई पहचान सं �ांक)
Figure 5: �वदेश मे नयी कं पनी बनाकर �वदेशो क� ब�कों को चुना लगाएं गे तो �ा उखाड़ लोगे?
- Objective? Even if a company is blacklisted by Indian banks, it could apply for loans overseas,
and those overseas bankers may not be aware of company’s history.
- So, there should be a global “Aadhar card” number for companies, and they must be forced to
quote that number during every financial transaction.
- After USA’s Sub-Prime Crisis and Global Financial Crisis (GFC), the G20 and its Financial
Stability Board (FSB: �व�ीय ��रता बोडर्) came up this LEI concept- a 20-digit alphanumeric code.
- LEI’s Global Boss: Global Legal Entity Identifier Foundation (GLEIF), Frankfurt, Germany. LEI’s
Indian agent: Clearing Corporation of India.
- From 1/10/2022 RBI has ordered all companies undertaking crossborder transactions of Rs 50
crore or more to quote this number in financial transaction.
- RBI has power to issue such directives under: Payment and Settlement Systems Act, 2007 &
Banking Regulation Act 1949. (�व�ीय लेन देन के दौरान कं पनी ने अ�नवायर् �प से ये नं बर �लखना होगा)
14.22🔪🔪🈶🈶🈶🈶🈶🈶- ⚖ FUGITIVE ECONOMIC OFFENDERS ACT, 2018
Figure 6: देश छोड़ के भाग जाऊंगा, 9 लाख का लेधर जेकेट पहेनके लं डन क� ग�लयो मे घूमँ गू ा, तो �ा उखाड़ लोगे मेरा?
भगोड़ा आ�थकर् अपराधी अ�ध�नयम: This act targets economic offenders accused of cheque dishonor, loan /
investment / chit-fund scam, money laundering etc. worth ₹ 100 crores /> & left India to avoid
facing prosecution / arrest.
- Special courts under the PMLA (Prevention of Money-laundering Act, 2002) will order the
villain to appear within 6 weeks, if not then he is declared “Fugitive Economic Offender”⇒ His
Indian & Overseas & Benami properties will be attached (भगोडे आ�थक अपराधी क� भारतीय तथा �वदेशी
सं प��यों को ज� िकया जाएगा).
- Once property attached- the Union Govt will oversee its administration / liquidation
(नीलामी/प�रसमापन).
- No ordinary civil court / tribunal can give stay order. Villain can make appeal only in High Court
and Supreme Court. (भगोड़ा आ�थक अपराधी के वल उ� �ायालय और सव�� ायालय म� जाकर मदद मांग सकता है).
If Borrowers don’t repay, SARFAESI auctions give little recovery, CRR-SLR insufficient
to repay deposits then bank collapse imminent. Then, how to protect the depositors? →
14.23🕵🕵 🏦🏦 💸💸💸💸 DICGC ACT: OBJECTIVE & LIMITATIONS
Figure 7: ब�क तो घोटाले मे बं ध हो गया। कोन करेगा हमारा पैसा वापस?
- 1961: Deposit Insurance and Credit Guarantee Corporation Act - mandates that all types of
banks must buy insurance on their deposit accounts from DICGC. Banks have to pay premium
for this insurance. (�न�ेप बीमा और प्र�य गारंटी �नगम: प्र�ेक ब�क ने अ�नवायर् �प से अपनी जमाकतार्ओ क� िडपो�जत को
बीम� द्वारा सुर��त करना होगा)
- DICGC is 100% owned by RBI. RBI Dy. Governor acts as chairman of DICGC. HQ: Mumbai.
- When a bank shuts down, DICGC will pay upto ₹ 1 lakh insurance to every deposit holder for
his principal and interest. (यिद ब�क बं द हो गया तो जमाकतार् के नुकसान क� भरपाई यहां से होगी)
- 💼💼Budget-2020: announced ⏫the insurance coverage to ₹ 5 lakhs (नुकसान भरपाई क� रा�श म� बढ़ोतरी)
- 2021: Government introduces Deposit Insurance & Credit Guarantee Corporation
(Amendment) Bill →
BEFORE (सुधार/सं शोधन �वधेयक से पहले) AFTER REFORM (सुधार प�ात)
Upto ₹1 lakh deposit insured Protection increased upto Rs 5 lakh
When will depositors get back above amount? When RBI imposes (withdrawal) moratorium
No clear timelines. Often they had to wait for on a weak bank → within 90 days of that event,
many years (पैसा/मुआवजा कब आएगा उसक� समय सीमा DICGC will pay depositors. (�रज़वर् ब�क जब कमजोर
तय नहीं थी) ब�क म� से ग्राहकों के पैसे उठाने पर रोक लगाए उसके 90 िदनों के
भीतर ही मुआवजा �मल जाएगा)
Banks had to pay premium/fees to DICGC at DICGC can ⏫increase the premium fees to
the rate of ₹10 paise to insure every ₹100 worth ₹12-₹15 paise (i.e. 20%-50% more than the
of deposits. (ब�को ने हर ₹100 के िडपॉ�जट का बीमे के �लए
original fees) ✋Exact figures NOTIMP. (बीमा
10 पैसे क� बीमा िक�/फ�स देनी होती थी) िक� म� बढ़ोतरी क� गई)
All types of Banks covered Same as left cell. (सभी प्रकार के ब�क के ग्राहकों को सुर��त
But NBFCs not covered. करता है, िकंतु ग़ैर ब�क �व�ीय सं �ान के ग्राहकों को सुर��त नहीं
करता.)
- Previously, DICGC provided guarantee cover to bank on the loans granted to Priority Sector
Borrowers.
- E.g. if Micro enterprise owner did not repay PSL-loans → DICGC would cover losses of the
banks, hence its name contains the word ‘Credit Guarantee Corporation’.
- But, with formation of SIDBI (1990), National Credit Guarantee Trustee Company Ltd.
[NCGTC, 2016] etc, this credit guarantee work divided among many organizations
(REF:📑📑Pillar#1D), but we need not PHD over it.#🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
14.23.1 🕵🕵 🏦🏦 💸💸💸💸- 👎👎 Limitation of DICGC (मयार्दाएँ )

- 😰😰If a customer deposited more than ₹5 lakh in a single commercial / cooperative bank, then he
gets only ₹5 lakh from DICGC. And for the remaining amount he must wait till RBI /
Cooperative Registrar liquidates the bank. (📑📑Ref 1B1: Banking Regulation Ordinance 2020)
- 😰😰DICGC doesn’t cover PACS and NBFCs. Those victims may have to approach courts.
- 2002: UTI (a Govt owned mutual fund company) made big losses. DICGC not liable to protect
UTI-clients because it is NOT A BANK. So, Govt had to pay ₹14,500 crores to customers of UTI-
Mutual Fund.
- So, Financial Sector Legislative Reform Commission (FSLRC: �व�ीय �ेत्र �वधायी सुधार आयोग) under
Justice B.N. Srikrishna (2011-13) recommended a new org called Resolution Corporation (RC)
via -Financial Resolution and Deposit Insurance (FRDI) Bill/law. (DIGCG को बं ध कर एक नयी सं �ा
बनाने का सूजाव)
- Govt had proposed the FRDI bill in 2017, but too much opposition in media & public, so
withdrew it in 2018. It’s a defunct topic. We’ll not WASTE TIME learning its salient features.
#🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
14.24�(🏦🏦 🔪🔪🔪🔪) BAD BANK (NARCL, IDRCL-2021): INTRO

⇒ (DATA) 📙📙📙📙ES2016-17 had found that total ₹ 2 lakh crore of bank money is stuck in large
sized NPA-accounts. Each of this loan account having ₹500cr or more. (ब�कों का क़रीब 2,00,000 करोड़
�पया ऐसे लोन खातों म� अटका है �जनमे एक-एक क� मात्रा 500 करोड़ या उससे अ�धक है)
⇒ (Origin) Sometimes, the resolution of large sized NPA accounts is difficult under IBC Code (e.g.
Vijay Mallya being a wilful defaulter so he is not eligible for IBC).
⇒ Under SARFAESI act such assets could be auctioned off but sometimes bidders and ARCs (e.g
Anil Ambani’s ARC) do not have enough financial capacity to purchase such big assets (worth
₹500-500 crores!). (इस प्रकार के बड़े लोन खातों का समाधान आईबीसी/सरफ़ाएसी क़ानून म� करते व� सम�ाएं आ रही है)
⇒ Therefore, Economic Survey 2016-17 had suggested to setup a BAD BANK named “Public
Sector Asset Rehabilitation Agency” (PARA). To buy bad loans from, try to get the maximum
value from loan-restructuring / liquidation-auction and absorb the losses. (इस�लए आ�थक सव��ण ने
सुझाव िदया एक बेड-ब�क बनाया जाए जो िक ब�कों के खराब लोन पेपर/ अनअजर्क प�रसं प��यों को खरीदेगा.)
⇒ Then, 💼💼Budget-2021 announced set up an Asset Reconstruction Company (ARC) and Asset
Management Company (AMC) to take over the bad loans from banks. (बजट 2021 ने अमल िकया).
⇒ Govt will not have any shareholding in ARC/AMC. Banks will set these organization(s) up with
their own funds. (सरकार इसम� शेयर धारक नहीं बन�गी. ब�कवाले खुद से शेयर पूंजी देकर इसको बनाएं गे)
⇒ Examples of such bad banks in other countries- Danaharta in Malaysia, UKAR in UK.
14.24.1 �(🏦🏦 🔪🔪🔪🔪): 🧬🧬 Bad Bank Structure
NARCL-ARC (founded in 2021) IDRCL-AMC (founded in 2021)

Type Asset Reconstruction Company (ARC) Asset Management Company
प�रसं प�� पुनगर्ठन कं पनी (AMC)
प�रसं प�� प्रबं धन कं पनी
Full Form National Asset Reconstruction Company India Debt Resolution Company Ltd.
Limited (NARCL) (IDRCL) =
Type Registered company under companies Registered company under
act. (So not a statutory/constitutional companies Act. (कं पनी क़ानून म� पं जीकृ त
body) कं प�नयां है. ये कोई वैधा�नक या सं वैधा�नक सं �ाएं
Given license by RBI for ARC. नहीं है)^^
Function To purchase bad loan assets from banks. To manage/value addition/ auction
(यह ब�कों से अनजर्क प�रस��यां ख़रीदेगा) those bad loan assets which were
purchased by NARCL. (e.g. factory,
airplanes, bulldozer). (ख़रीदी �ई सं प��यों
का प्रबं धन, मू� वधर्न, नीलामी करेगा)
Ownership/ ⇒ 51% PSBs like SBI, BoB, PNB** ⇒ 49% (Public Sector Banks,
Shareholding ⇒ 49% by Pvt banks and NBFCs# NBFCs)
NARCL-ARC (founded in 2021) IDRCL-AMC (founded in 2021)
⇒ 51% (private sector bank,
NBFCs).#
Tenure This organization will exist for five years. Same as left cell
** NARCL Ownership 51% shareholding/ownership among 8 public sector banks (PSB) viz. SBI
(13.17%), Punjab National Bank (12%), Bank of Baroda, Canara Bank, Bank of Maharashtra, Union
Bank of India, Indian Bank, Bank of India. (Note: Future Some of these PSBs may get merged so the
% may change.)
🚩🚩🚩FAQs:
⇒ #what are their names? Ans. Not explicitly mentioned in Pressnote. #🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
⇒ ^^AMC got license from RBI or SEBI? Ans. Same as above
⇒ Bad Bank means “ONLY NARCL” or (NARCL+IDRCL) Ans. Same as above. But from how
📙📙📙📙ES17 had given the vision of Bad bank, it should be the combined work of
(NARCL+IDRCL)= Bad Bank.
14.24.2 �(🏦🏦 🔪🔪🔪🔪) Bad Bank: 🗃🗃 functioning

बैड ब�क नीलामी म� ब�कों क� अनजर्क प�रसं प��यां ख़रीदेगा, और वह भुगतान क� रक़म: 15%मुद्रा और 85% सुर�ा रसीदों के �प म� ब�कर
को चुकाएगा। ऐसी Rs.30,600 cr करोड़ क� सुर�ा रसीदों के पीछे भारत सरकार ने अपनी सं प्रभु गारंटी अगले पाँच वष� के �लए दी है।
⇒ Suppose Axis Bank has a bad loan account worth ₹200. Axis may conduct an (Swiss Challenge)
Auction. Bad Bank offers ₹100, Anil Ambani’s ARC offers ₹95, Mahindra offers ₹92.
⇒ Then Axis will sell to Bad Bank for ₹100 (because its the highest bidder)
⇒ BadBank will pay Axis ₹100= Partially in currency (₹15) + partially in Security receipts (SR
worth ₹85).
⇒ Security receipts (SR) is a piece of paper issued by BadBank promising to pay the remaining
dues/amount (₹85) to banker in 5 years.
⇒ Security receipts (SR) is a legally valid instrument under the Sarfaesi Act.
⇒ If the Axis banker very urgently requiring money then he may resell the SR at discount (e.g. at
₹80) to another Bank, Insurance/Pension Company, AIFI (e.g. SIDBI, NABARD) etc.
⇒ Then those new SR-holders will receive the money (₹85) from Bad Bank in future.
⇒ IF Bad Bank faces problems in honoring the SR payment deadlines→ then, Union Govt has
given sovereign guarantee of Rs.30,600 cr to Security Receipts (SR). This sovereign guarantee
valid for 5 years.
14.24.3 �(🏦🏦 🔪🔪🔪🔪) Bad Bank: 🤩🤩😰😰 Benefits & Challenges?

⇒ 😍😍 Faster resolution of large sized NPA. (तेज �नपटान)
⇒ 😍😍 Individual Bank’s Bad loan size⬇ = BASEL-III Capital requirement ⬇ (ब�को क� अनजर्क प�रसं प��यां
कम होगी तो उ�ोंने बासेल मानदंड के �लए कम पूंजी प्रावधान करना होगा)
⇒ Further benefits = RE-Paste the points given in Intro & Conclusion. (प�रचय और �न�षर् म� जो मुददे �लखे
ह� उसक� वापस पीपूड़ी बजाओ)
⇒ 😥😥Ultimately the losses caused by Vijay Mallyas are paid by depositors/investors (of the
Banks/NBFCs who own NARCL & IDRCL) and Taxpayers (using whose money Govt’s is giving
sovereign guarantee to Security receipts). (अंत म� तो परो� �प से इस नुकसान क� भरपाई जमाकतार् �नवेशक और
करदाताओं द्वारा ही हो रही है)
14.24.4 �(🏦🏦 🔪🔪🔪🔪) Bad Bank: ✍Conclusion (�न�षर्)

NARCL aims to resolve stressed loan accounts above ₹500 crore each. Total about ₹ 2 lakh crore
stuck in such loan accounts. Thus, individual banks will be relieved from not having to waste time
haggling with NPA-borrower. Bankers will be able to focus energy on business expansion, financial
inclusion. Thus, Govt taken an appreciable step, it will help in a long way in re-invigorating Indian
banking sector. (दो लाख करोड़ क� अनजर्क-प�रसं प��यों का �नपटान होगा। ब�कर अपनी समय और ऊजार् पुराने बकायदारों से लोन
पुनगर्ठन क� माथाप�ी करने क� जगह, अपने ब�क के �ापार �व�ारण तथा �व�ीय समावेशन म� लगा पाएगा। सरकार ने प्रशं सनीय क़दम
उठाया है, �जससे भारतीय ब�िकंग �ेत्र म� नवऊजार् का सं चार होगा.)
14.25🐯🐯💉💉👹👹👹👹👹👹� PROMPT CORRECTIVE ACTION (PCA) FRAMEWORK
Figure 8: need not loose too much sleep, unless preparing for RBI officers' exam
🚩🚩🚩FAQ: What about “XYZ” type of Bank/NBFC which is not mentioned in above Chart? Ans.
Then “XYZ” type of Bank/NBFC is not subjected to above PCA norms at present. �जनका नाम यहाँ नहीं
�लखा पर ये लागू नहीं.
🚩🚩🚩FAQ: Does it mean non-scheduled banks are not supervised by RBI!!? Ans. They are
supervised by RBI under Banking Regulation Act.
- 2002: RBI Governor Bimal Jalan designed it for all Scheduled Commercial Banks, except RRBs.
(��रत सुधारा�क कारर्वाई �परेखा)
- 2018: NABARD announced separate ‘Prompt Corrective Action (PCA) Framework’ framework
for Regional Rural Banks (RRBs �ेत्रीय ग्रामीण ब�कों के �लए नाबाडर् क� अलग से �नयमावली है).
BEFORE-2022: RBI monitored bankers on From 2022: RBI will monitor this under
following indicators PCB framework
🎯🎯 Capital Sufficiency (BASEL-III), पयार्� पूंजी है क� SAME as left cell
नही?
🎯🎯 Asset Quality (NPA or bad loans), परीस��यों same as left cell
क� गुणव�ा अ�� है क� बुरी?
🎯🎯 Profitability (Return on Assets: RoA), पयार्� Replaced with "Leverage". What it means,
मुनाफा हो रहा है क� नही? how it works. how is it different than past? =
NOTIMP.
But sufficient to know that “Bigger/Higher”
leverage is NOT a good sign.
Then RBI classifies the banks into Risk threshold #1, #2, #3. Higher the number, higher the risk.
Then, accordingly, RBI will take corrective actions such as: (जो�खम के िहसाब से ब�कों को वग�कृ त करता है)
⇒ RBI giving strict warning, conducting deeper audit & supervision. (�ादा कड़ी �नगरानी)
⇒ Restricting bank’s directors’ salaries and dividend distribution to its investors. (वेतन, लाभांश �वतरण
पर रोक)
⇒ Restricting bank’s branch expansion & lending operations. (शाखा �व�ार और ऋण देने पर रोक लगाना)
⇒ Forcing merger / shutdown (under Banking regulation Act 1949). (कमजोर ब�क को बं ध करना)
⇒ If a PCA-listed bank wants to get ‘whitelisted’, it’ll have to ⏬its NPA, obtain additional capital,
⏫its profitability. (इस सूची से बाहर �नकलना है तो अनजर्क सं प��यों को कम करना होगा, �ादा पूंजी बटोरनी होगी, �ादा
मुनाफा लाना होगा)
⇒ PCA is “Monetary Policy → Qualitative / Selective Tool → Direct Action”. (मौिद्रक नी�त →
गुणा�क → सीधी कायर्वाही का यह एक साधन है)
⇒ As of 2020-Feb: 4 PSBs in this list viz. Indian Overseas Bank (IOB), Central Bank of India, UCO
Bank and United Bank of India. ✋Dynamically changing info so we need not remember / loose
sleep for MCQs.
14.25.1 🐯🐯🐯🐯🐯🐯🐯🐯🐯🐯� RBI’s Prompt Corrective Action (PCA) for NBFCs

(ग़ैर ब�क �व�ीय कं पनीयो के लीए ��रत सुधारा�क कारर्वाई)
⇒ From 1/10/2022- RBI to monitor NBFCs using 3 indicators/parameters: - 1) Non-Performing
Assets, - 2) BASEL-capital adequacy ratio - 3) BASEL- Tier 1 capital. (What do they mean?
NOTIMP। इन पैमानो पर �नगरानी)
⇒ Accordingly, RBI to classify the NBFCs in risk category#1-2-3. (जो�खम के िहसाब से वग�करण)
⇒ Higher risk → higher restrictions e.g. ✋1) restriction on branch expansion ✋2) halt on
dividend distribution, ✋3) promoters will be asked to infuse capital in NBFC etc. etc (ग़ैर ब�क
�व�ीय कं पनी म� �जतना �ादा जो�खम → तो उतनी �ादा पाबं िदया �रज़वर् ब�क उसपे डालेगी)
⇒ Above PCA-norms applicable on ✅ deposit-taking-NBFCs (e.g BajajFinServ).
⇒ But ✋Not Applicable on govt owned NBFCs (e.g UTI Mutual Fund), primary dealers, housing
finance companies (HFC), non-deposit taking NBFCs (e.g. ILFS).
14.25.2 😼😼😼😼😼😼😼😼😼😼� Supervisory Action Framework for Urban Co-operative Banks

- 2012: RBI launched Supervisory Action Framework (SAF) for Urban Co-operative Banks
(UCBs). (शहरी सहकारी ब�को पर �नरी�णा�क कारर्वाई �परेखा) It is similar to PCA framework on
commercial banks.
- ⏫Tightened it further in 2014, → tightened further in 2020 (इन �नयमों को और स� िकया गया)
- 2022: Launched 4-tier regulation framework. BUT NOTIMP for IAS Exam. #🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
- �FAQ: How is SAF similar or different than PCA framework? NOT IMP for IAS.
14.25.3 👻👻ATMANIRBHAR → 🤧🤧🤧🤧🏎🏎� RBI orders bank to halt Dividend Distribution

⇒ Scheduled commercial banks and cooperative banks shall not make any further dividend payouts
from profits made during FY 2020-21 until further instructions. (मुनाफे म� से लाभांश �वतरण पर रोक) →
2021: RBI relaxes these norms to allow dividend release. (हालांिक अब �रज़वर् ब�क ने इस पाबं दी पर छू ट दी है)
⇒ This will help the banks to conserve funds and absorb losses in an environment of heightened
uncertainty in CORONA. (धन का सं र�ण और नुकसान को अवशो�षत/सोखना)
⇒ Separately, FinMin has ordered PSBs to reduce 20% non-core spending E.g. PSBs have habit of
buying Audi cars for their Managing Directors, but now they’ll not be able to waste money like
that. (सरकारी ब�कों को िफजूल खच� म� 20% क� कटोती करने का आदेश)
14.25.4 🐯🐯: 🦋🦋Regulations Review Authority (RRA 2.0)- for Ease of implementing RBI rules
- RBI has setup RRA 1.0 (in 1999, for one year) and RRA 2.0 (in 2021, for one year)
- Chairman: RBI’s Dy. Governor M Rajeshwar Rao. Who are other members? NOTIMP.
- Objective: To give suggestions to RBI to simplify its rules/regulations so Bank/NBFCs have ease
of doing business. (�नयं त्रण समी�ा प्रा�धकरण जो िक �रज़वर् ब�क को सुझाव देगा िक कै से �रज़वर् ब�क के �नयमों म� सरलीकरण
िकया जाए तािक उनके अनुपालन मे ब�क और एनबीफ़सी को आसानी रहे।)
14.26🌐🌐🌐 BASEL-III NORMS (बेसेल-3 मानदंड)

Bank for International Settlements (BIS) is an international institution made up of 60 countries’
Central Banks. HQ @ BASEL, Switzerland. Its committee on banking supervision set norms in 1988
(I), 2004 (II), 2011(III) to ensure global financial stability. (वै��क �व�ीय ��रता के �लए मानदंड बनाए ह� इस
स�म�त ने)
- From 1/4/2013, RBI began phased implementation of BASEL-III norms in India:

- First, a bank needs to calculate its Risk-Weighted Assets (RWA: जो�खमपूणर् सं प��).
- Against these RWA, (Universal) Scheduled Commercial Banks (SCB) must keep:
o “Minimum Capital to Risk Weighted Assets Ratio” (CRAR) at 9% or higher from
31/3/2019.
o “a%” Capital Conversation Buffer (CCB) from XX date..
o “b%” Counter Cyclic Capital Buffer (CCCB): whenever RBI notifies.
- “c%” Leverage ratio (LR)
- “d”% Net Stable Funding Ratio (NSFR)
- “e%” High quality liquid assets (HQLA)
- “f%” Liquidity Coverage Ratio (LCR)
- and so on…many things.
Figure 9: We need not bother with Tier-1 Tier-2 Capital etc, #थोड़ा-पढ़ो-आगे-बढ़ो
✋FAQ. How exactly do CCB, CCCB, LR, NSFR, HQLA, LCR etc work? Ans. Not
important for exam, beyond the basic ‘word-association’ that they’re related to BASEL
Norms. #🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
⇒ Each member country’s Central Bank can prescribe different %, ratios depending on their
country’s situation. (हर देश क� क� द्रीय ब�क अलग-अलग िदशा �नद�श जारी कर सकती है)
⇒ As Bad loans (NPA) ⏫ = bank’s asset quality degrades ⏬= its Risk-weighted assets (RWA)
⏫ → bank must arrange more capital to comply with these ratios, norms and buffers.
⇒ If a bank can’t comply with BASEL norms → RBI puts it in PCA list. In worst case, bank will
have to merge/ sell off its business to another bank or shut down. (इन मानदं डों को नहीं माना तो अंत म� ब�क
बं द हो सकता है)
⇒ BASEL Norms also apply on Differential Commercial Banks (LAB, RRB,
SFB, PyB), Cooperative Banks, AIFI (EXIM, NABARD, NHB, SIDBI) and certain category of
NBFCs, but RBI can prescribe separate norms / limits / deadlines for them. (�व�भ� प्रकार क� �व�ीय
म�� ऊपर सं �ाओं पर इन मानदंडों क� सीमा अलग-अलग ह�)
14.26.1 🌐🌐🌐🌐 🕵🕵 BASEL-III norms: Capital Tiers
BASEL-III norms require banks to keep capital against their risk weighted asset ratio. This capital is
subdivided into:
Capital of a Bank Instruments / subtypes: List not exhaustive
Tier1 / ⇒ Common Equity Tier-1 (CET1) e.g. ordinary shares.
core capital → ⇒ Additional Tier1 (AT1) e.g. 🔪🔪🔪🔪🔪AT1 Bonds, Preferential shares
etc.
Tier2 → ⇒ Bonds/Debenture, Hybrid instruments
BASEL-III prescribed that banks must keep minimum x%, y% etc in each of these tiers, depending
on their Risk Weighted Asset (RWA).
14.26.2 🔪🔪🔪🔪🔪Additional Tier 1 (AT1) Bonds

They have no maturity date (i.e. bank has to pay interest for infinite time / perpetuity and principal
will not be returned). However, bank may ‘buyback’ them after certain years.
If / when a bank makes huge losses → AT1 Bonds’ liability may be
A. written off (खा�रज कर देना) OR
B. converted into shares (process called ‘Bail-In’).
AT1 Bonds are in news because of scam in Yes-Bank.
✋🎓🎓Beyond this any what/why/how/PHD, ball by ball commentary on AT1 and SC
judgements and PILs =poor cost benefit for MCQ. Outdated Current.#🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
14.26.3 🔪🔪🔪🔪🔪Zero Coupon Bonds for PSB recapitalization

⇒ Ref: Pillar1C- Sharemarket.
🔠🔠❓ What is the objective of BASEL-III norms? (UPSC-Prelim-2016)

a) Develop national strategies for biological diversity.
b) reduce the GHG emissions but places a heavier burden on developed countries.
c) transfer technology from developed Countries to poor countries to replace chlorofluorocarbons
in refrigeration.
d) improve banking sector’s ability to deal with financial and economic stress and improve risk
management.
🔠🔠❓ Basel Convention provides: (UPSC-IES-2020)
(a) Indian standards for pollution measurement and prevention
(b) International guidelines to control the transboundary movements of hazardous wastes between
different countries
(c) Indian standards for the disposal of municipal and industrial wastes
(d) International standards to categorize pollution in air and wastewater
14.26.4 🌐🌐🌐 D-SIB: Domestic Systematic Important Banks

⇒ In 2010, G-20’s brainchild Financial Stability board (HQ: BASEL) asked countries to identify
Systematically Important Financial institutions and put framework to reduce risk in them. [Side
note: Same parents responsible for birth of Legal Entity Identifier (LEI)]
⇒ Each year, RBI identifies banks that ‘too big to fail’ (=if they fail, it’ll severely hurt the economy)’
and labels them as Domestic Systematic Important Banks (D-SIB), & orders them keep
additional equity capital against their Risk Weight Assets (RWA) & other technical norms.
⇒ Presently, 3 D-SIBs in India: SBI, ICICI, HDFC (Latest Entry).
14.27🐯🐯🐯🐯: BASEL NORMS DEFERRED / SUSPENDED IN CORONA

self-explanatory from the topic-title itself. (कुछ मानदंडों क� अितम ितिथ को टाल िदया गया।)
We need not loose sleep over new deadlines, as they may again get extended. So, dynamic
information = dangers of answerkey becoming invalid, so, smart examiners usually avoid it.#🕰🕰थोड़ा-
पढ़ो-आगे-बढ़ो
14.28🐯🐯🐯🐯🐯🐯 BANKS’ BALANCE SHEET / AUDIT NORMS (तुलन पत्र लेखा परी�ण)
14.28.1 🐯🐯🐯🐯🐯🐯 IndAS Accounting Norms deferred (लेखा मानदंड ��गत/टाल �दये)
⇒ Ministry of Corporate Affairs (MCA) ordered all the companies to keep their balancesheet as per
the format prescribed in the Indian Accounting Standards (IndAS).
⇒ 🤩🤩Benefit? IndAS accounting format makes it easier for the local and global investors and
regulators to compare, analyze and understand a company’s financial position from its
balancesheet. (इस �रपोटर् को देखकर �नवेशक को आसानी से कं पनी क� �व�ीय �मता का अंदाज़ा लग जाता है.)
⇒ IndAS is not part of BASEL norm. But, since commercial banks are basically ‘companies doing
banking activity’, so they also have to comply to IndAS norms. But, only RBI has the power to
notify its implementation deadline on banks. (ब�कों के ऊपर भी इ�ी �नयमों को लागू करना है.)
⇒ 2020- Critics demanded RBI should implement it. What is the deadline? NOTIMP.
14.29🌐🌐🌐💸💸 RECAPITALIZATION OF PSBS: [सावर्ज�नक �ेत्र के ब�को का पुन:पूंजीकरण]

If a bank doesn’t have enough capital to comply with BASEL-III norms it can issue debt (bonds) and
equities (shares) to gather new capital. (बा�सल मानदं डो का अनुपालन करने के �लए ब�क ने पूंजी जमा करनी होती है)
- 2015: Estimation that Public Sector Banks (PSBs) will require ₹ 1.8 lakh crore additional capital
by 31/3/19 to comply with BASEL-III norms.
- So, Finance Ministry’s Dept. of Financial Services up with Indradhanush PLAN for phased-
recapitalization of PSBs with ₹ 70,000 crores from 2015 to 2018. Individual PSB will get funding
based on outcomes / performance. (इं द्रधनुष �ान के अंतगर्त �व� मं त्रालय सरकारी ब�को म� पूंजी दे रहा था-बा�सल
मानदंड के अनुपालन के �लए)
- 2017: It became clear ₹70,000 crores was insufficient for BASEL-III compliance. So, Modi Govt.
announced more amount. (हालांिक बाद म� पता चला क� वो रकम पयार्� नहीं थी और �ादा रकम चािहए होगा)
- To arrange ₹₹ for this, Govt began to issue Bank Recapitalization Bonds (RcB) in the market with
following features: These bonds will have interest rate of ~7%, mature@ 2028-2033. Non-
transferable to third party, Non-convertible into shares. (तो �ादा रकम बटोरने के �लए सरकार ने बाजार म�
बॉ� जारी िकये)
- Govt instructed PSBs to mobilize equity (share) capital from private investors. However,
investors shy away from smaller banks with weak balancesheets, so BMB & 5 Associated Banks
merged with SBI (2017). Vijaya & Dena to be merged with BoB (2019, 1st April) etc. (More in
📑📑Pillar#1B1)
- 💼💼 Budget-2020: FM said we’ve given ₹3.50 lakh cr in the last years years.
- 💼💼Budget-2021: ₹20,000 crores for PSB recapitalization in Financial Year 2021-22.
- 💼💼Budget-2022: No money given for this. Govt’s rationale is that PSBs profitability improving
so PSBs can take care of their capitalization problems by themselves by issuing shares/bonds in
market. (सरकार ने नए बजट म� पुनः पं जीकरण के �लए कोई पैसा नहीं िदया. सरकारी ब�को अब तुम खुद अपना देख लो!)
🔠🔠❓MCQ. Find Correct Statement(s) abt Governance in PSBs:( UPSC-Pre-2018)

1. Capital infusion into PSBs by the Govt of India has steadily increased in the last decade.
2. To put the public sector banks in order, the merger of associate banks with the parent State Bank
of India has been affected.
Answer Codes: (a) 1 only (b) 2 only (c) Both 1 and 2(d) Neither 1 nor 2.
14.30�BANKING SECTOR: GOVERNANCE / ADMINISTRATIVE REFORMS

14.30.1 �Gyan-Sangam-I, 2015, Pune
FinMin’s Dept of Financial Services (�व�ीय सेवा �वभाग) organized a workshop of financial regulators,
Public Sector Bank, Insurance Companies etc. It resulted in 3 outcomes:
1) PSBs’ CMD post bifurcated into 1) separate chairman and 2) separate MD&CEO so that banks
can function in more professional and accountable manner.
2) Indradhanush plan for bank recapitalization (₹ 70,000 crores)
3) Finance Ministry setting up an autonomous body- Bank Board Bureau (BBB). →
14.30.2 � Personnel Selection → Bank Board Bureau (BBB), 2016
Figure 10: यूपीएससी क� तरह हम ल�गे नोकरी का इं टर�ू

- It is non-constitutional, non-statutory body (यह सं �ान न तो सं वैधा�नक है न तो वैधा�नक)
- It interviews & selects top officials (MD, CEO, Chairman and full-time Directors) for PSBs,
public sector insurance companies, and other public sector financial institutions (e.g. NABARD,
SIDBI etc.).
- Actual appointment done by FinMin’s Department of Financial Services. (Just like UPSC selects
candidates suitable for IAS but DoPT notifies appointment.)
- BBB also helps the banks in governance reforms, raising capital for BASEL-III etc.
- BBB has 1 Chairman (usually a retired IAS) and some members.
🔠🔠❓MCQ. Chairman of public sector banks are selected by the _ _? (Prelims-2019)
(a) Banks Board Bureau (b) RBI (c) Ministry of Finance (d) Management of concerned bank
🔠🔠❓MCQ. Find Correct about ‘Banks Board Bureau (BBB)’ (Prelims-2022)

1. The Governor of RBI is the Chairman of BBB.
2. BBB recommends for the selection of heads for Public Sector Banks.
3. BBB helps the Public Sector Banks in developing strategies and capital raising plans.
14.30.3 � Personnel Selection → FSIB replaces BBB (2022)

⇒ 2022: Delhi High Court ruled, “BBB cannot select public sector (govt owned) insurance
companies because of conflict with the other laws related to public sector insurance companies.
⇒ 2022: Then Govt replaced BBB with new body named “Financial Services Institutions Bureau
(FSIB)” to comply with court order.
⇒ Every thing else (function, feature etc) about FSIB is same as BBB.
🚩🚩🚩FAQ: is this not unethical / big-joke to subvert court order?

Ans. Court has not banned FSIB yet. Govt did not bother to justify loudly in news headlines.
Columnist did not bother to loudly criticise. So, I did not bother to PHD.#🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
14.30.4 �PSB Banking Personnel Reforms→ 📔📔📔📔ES20 suggestions

- PSBs should be allowed to do 1) campus recruitment of atleast some specialists (कु छ �वशेष�ों क�
के �स प�रसर से सीधी भत�) 2) lateral entry in higher management (उ� प्रबं धन म� पा��क भत� ).
- PSBs should give Employee Stock Option Plan (ESOP) to their employees. ESOP is a type of
benefit plan wherein employees given some shares of the company (Apart from their regular
monthly salary). [कमर्चारी �ॉक �वक� योजना: वेतन/तन�ाह के अलावा ब�िकंग कं पनी के शेयर भी कमर्चारी को िदए जाये]
When/if company makes profit → How does employee benefit from ESOP? (�ा फायदा होगा)
1) Market price of shares⏫ He can sell his shares to a third party for a large gain.
2) the dividend to the shareholders He can keep the shares with himself, and will get large
will increase. dividend from the company (in addition of his regular
salary) तन�ाह के अलावा कं पनी के मुनाफे म� से लाभांश भी �मलेगा
- As shareholders, some of these employees may even join as board members → help designing
more realistic business policies at the apex level. Thus, ESOP changes mind-set from an
“employee” to that of an “owner”. (कमर्चारी म� कं पनी का मा�लक होने क� भावना जगाता है)
- It encourages the employee to work harder with more dedication, loyalty and passion for the
company’s profitability and brand image. (वह समपर्ण �न�ा और जुनून से ब�क के �लए काम करना शु� करता है)
14.30.5 �Enhanced Access and Service Excellence (EASE) Agenda 2018
- 2017, October: Government announced ₹2 lakh+ crore package for recapitalization of PSB. But
critiques argued such relief measures will just make the PSBs officials lazy & undisciplined
(moral hazard). So,
- 2017, November: First Public Sector Bank (PSB)-Manthan organized by Dept of Financial
Services (DFS) at Gurugram. Based on the participants’ inputs…
- 2018, January: FinMin’s Dept of Financial Services released EASE framework (बढ़ी प�ंच और सेवा
उ�ृ �ता) with 6 pillars to make PSBs more Responsive and Responsible viz.
1. Customer Responsiveness. (ग्राहको के प्र�त जवाबदेही)
2. Responsible Banking: Reduce NPA, prevent frauds. (धोखाधड़ी पर अंकुश)
3. Credit Off Take: Try to reach out to potential borrowers for home, auto, education, loans.
(�यम ब�क ही उधारकतार्ओ को खोज �नकाले)
4. Help MSME entrepreneurs via SIDBI’s Udyamimitra.com portal. Approve/reject loans in
not more than 15 days. (लघुउधोगों क� मदद)
5. Deepening Financial Inclusion & Digitalization. (�व�ीय समोवेशन)
6. Employees’ Human Resource Management (HRM: मानव सं साधन प्रबं धन): improve with training,
performance linked promotion-salaries-posting-transfers etc.
Implementation? Each whole-time director of a PSB will be entrusted with one pillar of the EASE-
framework. Their performance will be checked by the PSB’s board of directors. An independent
agency will be tasked to check public perception. Finally PSB banks will be ranked: E.g. 2018: PNB#1.
14.30.6 �Ease 3.0: Tech-Enabled Banking (2020-21)

- 2018= Ease 1.0 → 2019: Ease 2.0 (some more fancy feature but NOTIMP) → 2020: ease 3.0
- Finance minister proposed Smart, Tech-enabled Banking for Aspiring India.
- Associated keywords: Doorstep Banking, Dial-a-loan, Credit@click, Palm banking (using
phone/tablets).
Table 4: Points for assembling Mains Answers Rapidly
Eco.Survey-2015: “4R” framework Eco.Survey-2014: “4D” framework
Recognition (पहचान): of bad loans via asset Disinter(खोदकर �नकालना): "Digup graves, recover
quality review (AQR) money": using SARFAESI Act, I&B code, Sashakt
Resolution (समाधान): via Differentiate among PSB (�भ� �वहार करना):
schemes/mechanisms I&B, Project Government should recapitalize Profit Making PSB:
Sashakt while merge or privatize Loss Making PSB.
Recapitalization(पुनपू�जीकरण): for BASEL- Diversify (वै�व� लाना): Allow more number and
III norms ⇒ Indradhanush, Bank Recap variety of Banks.⇒ SFB & PyB allowed. Wholesale
Bonds & other measures: Total ₹ >3.5 lakh Bank proposed.
cr lakh crore mobilized.
Reforms(सुधार): Governance & Deregulate (�नयं त्रण मु�): Lower SLR, Promote
Administration of PSB⇒ BBB, EASE Corporate Bond market so they borrow less from
Banks e.g. Tri-Party Repo mechanism.
Further, you can also mention: PCA Norms, PCR registry, PSBN Network, ESOP etc.
14.30.7 �👮👮:🛡🛡Staff Accountability Framework for PSB-NPA
⇒ Finance Ministry’s issued this for NPA accounts up to Rs 50 crore in PSBs from 1/4/2022.
⇒ If PSB Banker took bonafide business decisions to approve loan application but it turned NPA
then banker will be protected from undue inquiries/harassment by 3Cs — CBI (Central Bureau
of Investigation), CVC (Central Vigilance Commission) and CAG (Comptroller and Auditor
General).
⇒ Previously the fear of 3C was discouraging the public sector bank managers from sanctioning big
loans (in the aftermath of TBS, Mallya, Nirav Modi).
(सरकारी ब�क और लोन पास करने से डरते ह� �ोंिक उ�� तो CBI, CVC, CAG क� कारर् वाई का डर लगता है तो अब �वत् मं त्रालय ने
कु छ नए “सावर्ज�नक ब�क कम� जवाबदेही ढांचा” िदशा�नद�श जारी िकए ह� तािक ईमानदारी से �लए गए फै सलों म� अगर लोन का पैसा
वापस न आए तो सरकारी ब�क के ईमानदार ब�कर पर अनाव�क �प से कोई कारर्वाई न हो)
14.30.8 ✍ Conclusion for Public Sector Banks? (सावर्ज�नक �ेत्र के ब�कों के बारे म� �न�षर्)
 A vibrant banking system can support India’s growth story/ PSBs are growth levers for India.
 Inefficient PSBs can severely handicap the country's economic development.
 35% of Indians are in the 15-29 years age group. Majority of them live in rural areas and many of
them require education loans and business loans to progress in life.
 Therefore, aforementioned initiatives are imp in that regard/ need to be addressed on priority
basis to
o 1) Reap India’s demographic dividend and
o 2) To achieve $5 trillion economy status by 2025.
o 3) to achieve V-Shaped recovery Post-Corona
(भारत क� �वकासगाथा को आगे बढ़ाने, तथा जनसां��क�य लाभांश को प्रा� करने के �लए जीवं त बेिकंग प्रणाली आव�क। अत: उ�
�रजवर् ब�क|सरकार के उ� कदम सरहनीय है/ उ� सुधारो क� आव�कता है।)
14.31🧹🧹🧹🧹: 👹👹(🚫🚫🏦🏦) NEGATIVE NEWS: ILFS & SHADOW BANKING
14.31.1 👹👹(🚫🚫🚫🚫) NBFC: Shadow Banking (आभासी / प्र�तछाया ब�िकंग प्रणाली)

📔📔📔📔ES20 Vo1 Chapter 08 on ‘NBFC’s Financial Fragility’ (�व�ीय भं गुरता) observed
⇒ Shadow banking is a set of activities and institutions. They operate partially (or fully) outside the
traditional commercial banking sector. They are not fully regulated by the RBI. ये सं �ाए पारंप�रक
ब�िकंग �नयमो के दायरे से बाहर काम करती है.
⇒ They mobilize funds by borrowing from banks, issuing Commercial Papers (CP) and Bonds
(Non-convertible debentures)
Table 5: Three important segments of the shadow banking system in India
HFCs Housing Finance Companies. E.g. Dewan Housing Finance Limited (DHFL)
LDMFs - Liquid Debt Mutual Funds invest clients money into short term debt instruments
such as T-bill (of Govt) and Commercial Papers (of companies).
- e.g. certain schemes by UTI, Kotak, L&T, Tata mutual funds
- 2019: Some of these LDMFs had invested clients money in IL&FS and DHFL, but
failed to get the money back. Nearly ₹4000 crore of investors’ money is stuck,
triggering the NBFC crisis in India.
Retail- Retail Non-Banking Financial Companies such as Gold loan companies, asset finance
NBFCs companies etc.
Shadow banking system’s assets are risky and illiquid. If there is a ‘bank run’ like situation
(depositors / investors demanding the money bank) these shadow banks can’t honour the
obligations. As seen in the ILFS crisis (2019) →
14.31.2 👹👹(🚫🚫🚫🚫) Shadow Banks → IL&FS & NBFC Liquidity Crisis
- Infrastructure Leasing & Financial Services (IL&FS) is a Systemically Important Non Deposit
Taking Non - Banking Finance Company (NBFC - ND – SI: प्रणालीगत �प से मह�पूणर्- िडपॉ�ज़ट न
लेनेवाली- गैर-ब�िकंग �व� कं पनी) Setup in 1987 HQ@Mumbai.
- Shareholders: LIC > Japan’s Orix group > Abu Dhabi’s group > Central Bank of India > SBI.
- Challenge? 1-2-3 of above diagram. + loans given to unworthy borrowers with forged
documents, bribes were paid to IL&FS board directors & auditors.
14.31.3 👻👻 ATMANIRBHAR → 🐯🐯: 👹👹(🚫🚫🚫🚫) RBI Helping NBFCs/ Shadow Banks

- RBI has launched 1) TLTRO and 2) special liquidity window. (Ref 📑📑1A2 Monetary Policy)
- Govt has announced following 1) Partial credit guarantee 2) Sp. Liquidity scheme 3) Credit
Guarantee Enhancement Corporation
14.31.4 👻👻 ATMANIRBHAR → 🧔🧔🧔🧔🧔🧔🧔🧔 Partial Credit Guarantee Scheme (PCGS) 2.0

- Budget 2019: If NBFCs/ MFCs/Micro Finance Institutions (MFIs) borrowed money by issuing
debt securities (Bonds or Commercial Papers) → Public sector banks (PSB) invested in it → but
borrower default then the government paid 10% of loss to PSB.
- Corona= total 20% loss cover guaranteed to PSB. (सावर्ज�नक ब�कों को आं�शक क्रेिडट गारंटी)
14.31.5 👻👻 ATMANIRBHAR → 🧔🧔🧔🧔🧔🧔🧔🧔 Special Liquidity Scheme for NBFC/HFC

Outdated Current. Deleted from Handout. Sufficient to know it helps NBFCs.
14.31.6 👹👹(🚫🚫🚫🚫)💊💊🧔🧔Shadow Banking → other Remedies by Govt post-ILFS crisis

1) Under Companies Act: Ministry of Corporate Affairs (MCA:) replaced the IL&FS’s Board
members. Uday Kotak made new Chairman. कारपोरेट मामलों के मं त्रालय ने बोडर् ऑफ डायरे �र म� अपने �वशेष�ों
को आसीन िकया
2) MCA constituted the statutory body National Financial Reporting Authority (NFRA) under
Companies Act 2013 for stricter vigilance over Chartered accountants and auditors. (More in
📑📑1C: SEBI Handout) कं पनी कानून के अंतगर्त रा��ीय �व�ीय �रपो�टग प्रा�धकरण नामक एक वैधा�नक सं �ा क� �ापना
3) Corporate Affairs Ministry’s Serious Fraud Investigation Office (SFIO) investigating the IL&FS
officials & auditors. (गं भीर धोखाधड़ी जांच कायार्लय- इसके अफसरों और लेखा परी�कों क� जांच कर रहा है)
4) LIC says we’ll not allow IL&FS to collapse (=we may use Policy holders’ money to rescue it just
like IDBI)
5) 2019: Govt increased ⏫ RBI powers (under RBI Act) to regulate NBFCs in following ways: RBI
can remove NBFC’s board of directors, can inspect any NBFC or its associated group of
companies, RBI can force merger/splitting of non-viable NBFCs, higher fines/penalties for
violation. �रजवर् ब�क क� �नगरानी श��यों म� बढ़ोतरी क� गई
6) Budget-2019: we will setup a Credit Guarantee Enhancement Corporation to help NBFCs.
(CGEC: क्रेिडट गारंटी वधर्न �नगम). (How it’ll work? Ans. We’ll study when it is actually started).
14.31.7 👹👹(🚫🚫🚫🚫) 💊💊🐯🐯 Shadow Banking → Remedies by RBI

⇒ RBI tightened norms of Asset-Liability Management (ALM) norms for NBFCs.
⇒ 2019 July: Dy. Gov Viral Acharya Committee → RBI board approved 3 year medium term
framework to improve RBI regulation & supervision, based on global best practices = “Utkarsh-
2022” roadmap. (वै��क मानदंडों का अनुसरण करते �ए �रजवर् ब�क क� �नयं त्रण और �नगरानी करने क� प्रणा�लयों म� अगले 3
सालों म� सुधार करने के �लए उ�षर् कायर्क्रम )
⇒ 2021: RBI proposes 4-tier structure for tighter regulation of NBFCs: NBFCs to be classified into
four categories BASE, MIDDLE, UPPER & TOP LAYER (most risky companies). Accordingly
tighter regulation on them. ✋Exact details notIMP, Until they actually implemented. (चार श्रे�णयों
म� जो�खम के िहसाब से बांटा जाएगा सबसे उ� श्रेणी म� सबसे �ादा जो�खम पूणर् कं प�नयों को रखा जाएगा और उन पर �रजवर् ब�क क�
�नगरानी सबसे �ादा स� होगी.)
14.31.8 👹👹(🚫🚫🚫🚫) 💊💊📔📔📔📔 Shadow Banking → Remedies by SEBI

⇒ SEBI tightened norms on Mutual Funds, regarding where/how they invest clients’ money. (सेबी ने
भी �नयमों को स� िकया है)
14.31.9 👹👹(🚫🚫🚫🚫) 💊💊📔📔📔📔 Shadow Banking → Remedies suggested by ES20
- CEA Subramanian K. has created a “Health Score for NBFCs” to monitors given NBFC
company’s Asset Liability Management (ALM) problems, balance sheet strength, etc. and gives
them a score between -100 to +100. (�ा� सूचकांक बनाया जाए).
- Higher scores indicating higher financial stability of the firm. This health score can provide early
warning signals to the Financial regulators → they can initiate appropriate measures before it's
too late. (सूचकांक के आंकड़ों म� �गरावट एक प्रकार से पूवर् चेतावनी देगी → उसे देखकर �व�ीय �नयं त्रक तुरंत
आव�क/ज�री/यो� कदम उठा सके )
🔠🔠❓In September 2019, which one of the following travel giants declared itself bankrupt? (CDS-
i-2020) (a) Expedia (b) Cox & Kings (c) SOTC (d) ANS: Thomas Cook
14.32🧹🧹🧹🧹💍💍 NEGATIVE NEWS: PNB, LOU, SWIFT, & NIRAV MODI
PNB (Mumbai Branch): Give foreign currency loan to our client Nirav Modi for purchase of goods (diamonds,
airplanes, whatever), if he doesn’t pay, we’ll pay.
- If such bank guarantee given to another bank in a foreign country, it’s called Letter of
Undertaking/ Letter of Credit/ Letter of Comfort: internal difference not important.
- Bank earns commission / fees from client for issuing such letters / guarantees.
- The foreign currency thus loaned, goes into PNB’s Nostro (Latin:Ours) account, & Nirav uses
the dollars to buy diamonds in HongKong.
- PNB Scam: PNB-Mumbai’s corrupt manager kept issuing LoUs to diamond merchants Nirav
Modi & Mehul Chowkasi without due-diligence or collaterals for 7 years, worth ~₹12,000 crores.
And 2018-January: Nirav & Mehul left India.
- PNB officials couldn’t detect scam because LoUs were generated through SWIFT platform,
which was not integrated with their Core Banking Solution (CBS) server.
14.32.1 💸💸📞📞Financial Messaging Systems: SWIFT- Russia gets banned
Globally (वै��क �र पे पैसा भेजना हो) Within India (भारत के भीतर ही पैसा भेजना हो!)
Society for Worldwide Interbank Structured Financial Messaging System (SFMS)
financial telecommunication (SWIFT)
By a Cooperative organization in designed by Tata Consultancy Services (TCS) for
Belgium’s La Hulpe city (1973). IDRBT (=Research arm of RBI)
To serve the messaging function for to serve the messaging function in NEFT, RTGS, and
Banks, NBFCs & brokers who may / may other inter-bank, intra-bank e-transactions
not have direct bank relations / platforms within India.
settlement systems with each other due to
international borders.
😥😥 Nations banned from SWIFT: 1) Iran (Capital Tehran) 2) 2022: Russia got ban, after invading
Ukraine. This will make it very difficult for the Russian banks/ NBFCs /businessmen to send and
receive money internationally (यूक्रेन-आक्रमण के �ख़लाफ़ �स को ��फ़्ट-�व�ीय सं देश प्रणाली से प्र�तबं �धत िकया गया है
�जसके चलते �सी ब�क �व�ीय सं �ान और उद्योगप�तयों को अंतररा��ीय �र पर पैसों के लेन म� िद�त� आएं गी।)
Afterwards, ⚾📻📻⚾🎓🎓✋ball by ball commentary on Nirav Modi case =NOTIMP
14.33��🐯🐯 RBI DIVIDEND, RESERVES, ECONOMIC CAPITAL FRAMEWORK

RBI’s income sources include � From its income, RBI allocates funds to�
1. Interest on G-Sec that are not sold in Open 1. Staff retirement fund, provisions for bad
Market Ops. loans, depreciation in assets…
2. Interest on Foreign G-Sec / Sovereign 2. Reserves for contingency (emergency): ~₹
Bonds. 2.5 Lcr. आपातकाल के �लए आर��त भं डार
3. Interest on Loans given to other Banks / 3. Reserves for Exchange Rate Stability
NBFCs. कजर् पर �मलने वाला �ाज (Technically called “Currency & Gold
4. Revaluation of foreign currency and gold in Revaluation Reserve: ~₹7 lakh cr �व�नमय दर म�
RBI reserves. �वदेशी मुद्रा और �णर् भं डारों के मू� म� ��रता के �लए आर��त भं डार)
बढ़ोतरी After making these allocations, profit is shared
5. Seigniorage: profits from printing money- with Union Govt. in form of ‘Dividend’ (RBI
because face value > intrinsic value. Act Section 47). �रज़वर् ब�क के मुनाफे म� से ये भं डार/ �न�ध म�
HOW?NOTIMP पैसा रखने के बाद यिद कोई रा�श बची तो वह सरकार को लाभांश
6. Penalties imposed on errant banks. के �प म� देनी होगी
14.33.1 ��🐯🐯 RBI’s Bimal Jalan panel (2018)
- 2017: RBI Governor Urjit Patel gave ₹50,000 crore dividend to Govt but Govt wanted ₹3.6 lakh
crore dividend. Then, (गवनर्र उ�जत पटेल �जतना दे रहा था उससे कई गुना �ादा िड�वड�ड सरकार चाहती थी)
- RBI setup Bimal Jalan panel to decide the principles for dividend transfer to Govt. (आ�थक पूंजी
सं रचना तथा लाभांश �वतरण के �सद्धांत)
- 2019- August: RBI board approved Bimal Jalan report.
- It updated norms in such manner that RBI will be able to transfer more dividend / surplus to the
Government. (तकनीक� मानदंडों म� सुधार तािक �रजवर् ब�क अपने मुनाफे म� से भारत सरकार को अ�धक लाभांश दे सक� . )
14.33.2 🐯🐯📆📆 RBI’s Financial / Accounting Year (�व�ीय वषर् म� बदलाव)
2019: Bimal Jalan panel recommended �reform → RBI’s central board accepted it
� Before � After
RBI’s financial year - From 1 April, 2021, RBI will switch to
st
- 1934 onwards: January to December annual April-March format.

- 1940 onwards: July to June
But Govt’s financial year is April-March so, RBI After this reform, no need for interim dividend
had to give interim dividend to govt until RBI’s (अंत�रम लाभांश �वतरण नही देना होगा।)
final balancesheet was prepared, then another
(full) dividend was given.
14.33.3 🐯🐯�Section-7 Directive & Urjit Patel’s Resignation (इ�ीफा)
Isn’t this topic outdated? Ans. Its points need to be understood for “GSM2-Regulatory Bodies
Problems”. (because earlier UPSC has asked why national commission for woman / Human rights
commission not unable to pay effective role et cetera?)
2018: RBI Governor Urjit Patel was unhappy with Govt interfering / criticizing his work. Such as:
- Higher Dividend: Govt. demanded higher dividend from RBI to finance the recapitalization of
PSBs for BASEL-III, and to finance its own fiscal deficit & populist welfare programs. Urjit Patel
felt RBI’s higher reserves are necessary to check any financial crisis. Excessive dividend could
increase inflation. He did not oblige. (सरकारी योजनाएं चलाने के �लए �ादा िड�वड�ड /लाभांश क� मांग)
- BASEL-III-relaxation: These norms will become fully effective on 31/3/2019 but PSBs don’t
have enough capital to comply so they requested Finance Minister to tell Urjit Patel to extend the
deadline, Urjit Patel did not oblige. (बासेल मानदंडों क� अं�तम �त�थ म� �रयायत क� मांग)
- PCA-relaxation: Urjit Patel vigorously implemented Prompt Corrective Action framework, so
Public Sector Banks’ branch expansion, lending operations were restricted, they came running to
FM. FM asked Urjit to relax PCA. He did not oblige. (पीसीए �नयमों म� �रयायत क� मांग)
- Tight Money Policy: CEA Arvind Subramanian & BJP-Ministers were criticizing RBI’s “Tight”
Monetary Policy depriving MSMEs of cheap loans and thus harming India’s growth rate.
Whereas Urjit Patel deemed tight policy necessary to keep inflation @2-6%CPI (All India) on
durable basis so he did not oblige. (महंगाई से लड़ने के �लए लोन और महंगे क�ए → �ापारी वगर् नाराज)
- PNB Scam: Jaitley expressed displeasure that RBI couldn’t detect PNB-Nirav Modi fraud,
whereas Urjit Patel defended that he lacks effective powers under Banking Regulation Act to take
punitive actions against Public Sector Banks. (पं जाब नेशनल ब�क - नीरव मोदी कांड को पकड़ने रोकने म� असमथर्
रहे ऊ�जत पटेल)
All these forced Govt. to issue Section -7 Directive to RBI.
14.33.4 🐯🐯�🧔🧔 Section-7 of RBI Act
⇒ Section 7(1) of the RBI Act empowers the Government to consult with RBI Governor in Public
Interest. (जनिहत के �लए, �रजवर् ब�क कानून क� धारा नं बर 7 के अंतगर्त सरकार गवनर्र के साथ �वमशर् कर सकती है)
⇒ In, 2018-October, for the first time in the history of Independent India, Govt began a Section-
7(1) consultation with RBI Governor Urjit Patel, on the issues of PCA norms, BASEL-III
deadline, higher dividend to Govt., Cheap Monetary Policy etc.
⇒ If RBI Governor doesn’t positively respond in such Section-7(1) consultation, then Section 7(2):
Government can issue binding direction / orders to RBI Central Board to implement its wishes.
(यिद गवनर्र, एसे �वमशर् मे, सरकार क� बात नही सुनते तो, क� द्रीय बोडर् द्वारा सरकार अपनी बात को लागू करवा सकती है)
⇒ Although, fearing backlash from media & opposition parties, Govt did not issue any specific
directions to the RBI Board. But, 2018-Dec: Urjit Patel resigned before completing 3-year term.
He is not the first RBI governor to resign & we need not prepare list all the RBI governors who
resigned before their term.
🔠🔠❓MCQ. Find Correct statements about RBI: (UPSC Prelims-2021)

1. The Governor appointed by the Central Govt. (�रजवर् ब�क के गवनर्र क� �नयु�� क� द्र सरकार करती है)
2. Certain provisions in the Constitution of India give the Central Government the right to issue
directions to the RBI in public interest. ( कु छ सं वैधा�नक प्रावधानों के अंतगर्त क� द्र सरकार जनिहत म� �रजवर् ब�क को
िदशा �नद�श दे सकती है)
3. The Governor draws his power from the RBI Act. (गवनर्र को आरबीआई कानून से श��यां �मलती है)
Code: a) 1 and 2 only b) 2 and 3 only c) 1 and 3 only d) 1, 2 and 3
14.34✍🏻🏻🎷🎷 MOCK QUESTION FOR MAINS GSM3 (250 WORDS EACH)

1. After 50 years of nationalization, the Public Sector Banks are lagging behind private sector banks
in majority of the performance indicators. Suggest remedies in this regard. रा��ीयकरण के 50 वष� के
बाद, सावर्ज�नक �ेत्र के ब�क प्रदशर्न सं केतकों के �नजी �ेत्र के ब�कों से पीछे ह�। इस सं बंध म� उपाय सुझाएं
2. Explain the significance of governance reforms in Public Sector Banks (PSBs) for India’s
economic growth. भारत के आ�थक �वकास के सं बंध म� सावर्ज�नक �ेत्र के ब�कों म� शासन सुधारों के मह� को समझाइए.
3. Suggest the ways in which information-technology can be utilized for combating the NPA in
Indian economy. अनजर्क प�रस��तयों से �नपटने के �लए सुचना प्रौद्यो�गक� कै से मदद कर सकती है?
4. What is “Twin Balancesheet Syndrome”? Enumerate steps taken by RBI to resolve it. "दोहरे तुलनपत्र
क� सम�ा" �ा है? इसके हल के �लए भारतीय �रज़वर् ब�क द्वारा उठाए कदमों क� सू�च दी�जए.
5. “While Insolvency & Bankruptcy Code doesn’t fully cure the Twin Balance sheet Syndrome, it
certainly helps alleviating the pain.” Elaborate. "हालांिक शोधन-अ�मता एवं िदवा�लयापन सं िहता भारत के दोहरे
तुलनपत्र क� सम�ा को पूरी तरह से ठीक नहीं करता है, लेिकन यह �न��त �प से ददर् को कम करने म� मदद करता है." �व�ृत क��जए.
6. With respect to India’s financial stability, explain significance of (i) PCA framework (ii) BASEL-
III Norms (iii) Public Credit Registry. भारत क� �व�ीय ��रता के सं बंध म� इ�े समझाइए: (i) पीसीए ढांचा (ii)
बेसल-III मानदंड (iii) ऋण क� सावर्ज�नक र�ज��ी
7. Why are shadow banks considered to be a threat to the Indian economy? Discuss the reforms
undertaken by the authorities to address this challenge. प्र�तछाया ब�कों को भारतीय अथर्�व�ा के �लए खतरा
�ों माना जाता है? इस अनुसंधान मे �लए गए सुधारों पर चचार् कर�।
8. Justify the rationale behind Govt’s decision to setup a Bad Bank, despite the existence of IBC
Code and SARFAESI Act. How will this proposed bad bank alleviate the pain of NPA? (आईबीसी
कोड और सरफे सी अ�ध�नयम के अ�� के बावजूद, एक बैड ब�क �ा�पत करने के सरकार के �नणर्य के पीछे के तकर् का औ�च�
सा�बत कर�। यह प्र�ा�वत बैड ब�क कै से एनपीए का ददर् कम करेगा ?)
Next Handout 📑📑Pillar#1C: SEBI SHAREMARKET
Pillar#1C: SEBI-Share Market
Table of Contents
15 🐮🐮🐮🐮🐮🐮Pillar#1C: SEBI-Share Market .......................................................................................185
15.1 🗃🗃Securities (प्र�तभू�त)................................................................................................................185
15.2 🗃🗃 🛒🛒Financial / Securities market: meaning and types ..................................................186
15.3 🔪🔪🔪🔪 Debt Instruments (ऋण उपकरण) ...................................................................................187
15.3.1 🔪🔪🔪🔪⏰Short term debt instruments (लघु अव�ध ऋण उपकरण ) .................................187
15.3.2 🔪🔪🔪🔪⏰:🧔🧔Short term debt instruments → by Government .............................187
15.3.3 🔪🔪🔪🔪⏰: 🐯🐯🐯🐯 🧔🧔🧔 Short term debt instruments → by Govt → WMA ..188
15.3.4 🐯🐯🐯🐯🐯 Consolidated Sinking Fund (CSF) for State Govts’ repayment .............188
15.3.5 🔪🔪🔪🔪⏰Short term debt instruments → by borrowers other than Govt ...........188
15.4 🔪🔪🔪🔪⏰Debt → Short Term → Factoring & TREDS .......................................................189
15.4.1 🔪🔪🔪🔪⏰Factoring Regulation (Amendment) Act, 2021.............................................189
15.4.2 🔪🔪🔪🔪⏰: 📡📡 TReDS platform to connect factoring-players. ....................................190
15.5 🔪🔪🔪🔪⏰Debt → Interest Rate Benchmarks: LIBOR, MIBOR, MIFOR ............................190
15.6 🔪🔪🔪🔪🔪🔪 Long Term Debt Instruments (दीधर्-अव�ध ऋण- उपकरण).......................................191
15.6.1 🕯🕯🕯🕯🕯🕯🕯🕯Colonial era Govt. to borrow money .....................................................191
15.6.2 💡💡💡💡💡💡💡💡Modern day Government to borrow money.........................................192
15.6.3 🥇🥇🥇🥇🥇🥇Bonds by Modern day Govt. to curb Gold Consumption .......................192
15.6.4 🔪🔪🔪🔪🔪🔪🔪 Long term debt instruments by Companies ........................................193
15.6.5 🔪🔪🔪🔪🔪🔪Long Term Debt Instruments: Other issuers .............................................194
15.6.6 🔪🔪🔪🔪🔪🔪Long Term Debt Instruments: Masala, Maharaja, Panda Bond .............194
15.6.7 🔪🔪🔪🔪🔪🔪 Long Term Debt Instruments: Special purpose: 🚦🚦🚦🚦 Surety Bonds ..195
15.6.8 🔪🔪🔪🔪🔪🔪 Long Term Debt Instruments: Special purpose Bonds- Misc. ...............195
15.6.9 🗳🗳(🔪🔪🔪🔪)⏳Electoral bonds (चुनावी बांड, 2017 ) .........................................................197
15.6.10 🔪🔪🔪🔪: 🤑🤑 Bond Yield, Yield Inversion, Negative Yield ..........................................198
15.7 ⚖🗃🗃 Equity Instruments (इ��टी) .........................................................................................198
15.8 ⚖🗃🗃 Methods of Issuing Shares .........................................................................................200
15.8.1 ⚖🗃🗃 IPOs- Big sized IPOs in recent years................................................................201
15.8.2 ⚖🗃🗃 IPOs → LIC & FDI in LIC?.....................................................................................201
15.8.3 ⚖🗃🗃 🤵🤵 IPO → Special Purpose Acquisition Company (SPAC) ..........................201
15.8.4 ⚖🗃🗃 🌐🌐 ADR/GDR: Shares in Videshi locker ........................................................202
15.8.5 👻👻⚖🗃🗃 🌐🌐 ATMANIRBHAR reforms in ADR/GDR/BharatDR ......................202
15.8.6 🔗🔗🔗🔗 Initial Coin Offering (ICO) ...................................................................................202
15.9 📈📈 Stock Exchanges / Secondary Market: meaning & examples ......................................203
(Batch:PCB7) Mrunal’s Economy Pillar#1C: SEBI Share-market→ Page 182

15.9.1 📈📈 Social Stock Exchange ...................................................................................................203
15.9.2 📈📈 Secondary Market: Significance? (िद्वतीयक बाजार का मह�) .......................................203
15.9.3 🗃🗃🗃🗃 DEMAT Account ................................................................................................204
15.9.4 🛒🛒 (💻💻:�) DEMAT → ASBA Reforms ........................................................................204
15.9.5 �🛒🛒 Types of Investors: Depending on Buying Capacity .....................................205
15.9.6 �🛒🛒 Types of Investors: Depending on Buying Behaviour...................................205
15.10 📈📈 SENSEX & other Notable Indices (उ�ेखनीय सं केतक/ सूचकांक) .........................................206
15.10.1 🐮🐮🐮🐮MSCI Emerging Market (EM) index ................................................................206
15.10.2 🌬🌬🌬🌬:�⚖� Force Majeure (अभेद्य श��) ............................................................207
15.11 🐮🐮🐮🐮🐮🐮 Sharemarket: 2020- Impact of Corona...............................................................207
15.11.1 🐮🐮🐮🐮Sharemarket- 2022: IPO Bubble Burst: Case of Paytm (फू ट गया ग़ु�ारा) ........208
15.11.2 🐮🐮🐮🐮🐮🐮 Share Market: Impact of Bond Yield .........................................................209
15.12 🗃🗃🗃🗃Securities and Exchange Board of India (SEBI) .......................................................209
15.12.1 🗃🗃⚖📜📜Securities Market Code ................................................................................210
15.13 🗃🗃🗃🗃 SEBI Investor charter (�नवेशक अ�धकार पत्र) .................................................................210
15.13.1 🗃🗃🗃🗃 SEBI Charter → Investors’ rights (�नवेशक के अ�धकार) ....................................211
15.13.2 🗃🗃🗃🗃 SEBI Charter → Investors’ responsibilities (�नवेशक क� �ज़�ेदारी है) ...............211
15.13.3 🗃🗃🗃🗃: 😪😪 SEBI’s Investor Charter: Criticism/limitation: ......................................211
15.13.4 🗃🗃🗃🗃: ✍ SEBI’s Investor Charter: Benefit/Conclusion ........................................212
15.13.5 🗃🗃🗃🗃: 🏃🏃 SEBI: why protect investors & ⏫investors participation? .................212
15.13.6 💼💼💼💼: measures to ⏫ retail investors participation- 25% public holding in Govt
Companies 212
15.13.7 🗃🗃🗃🗃: 🏃🏃 SEBI Reforms to boost investors’ confidence? .......................................213
15.13.8 T+1 Settlement instead of T+2 .......................................................................................213
15.13.9 🛒🛒 (💻💻:�:) Dabba-trading, Insider Trading, IPF ...................................................214
15.13.10 🛒🛒 (💻💻⏱:�) Algo Trading & Co-Location ...........................................................214
15.14 🛒🛒 (🔪🔪🔪🔪) Bond Market Reforms.......................................................................................214
15.14.1 🛒🛒 (🔪🔪🔪🔪: 🧔🧔🧔) Unified Bond Market (एक�कृ त बॉ� बाजार) .................................214
15.14.2 🛒🛒 (🔪🔪🔪🔪: 🧔🧔🧔) G-Sec Trading- Retail investors’ RDG @RBI ........................215
15.14.3 🛒🛒 (🔪🔪🔪🔪: 🧔🧔🧔) G-Sec Trading: RBI's NDS-OM, OTC ....................................215
15.15 🌽🌽🌽🌽🌽🌽🌽🌽 Commodity Market, FMC, SEBI merger ....................................................216
15.15.1 💍💍💍💍💍💍💍💍Commodity Market: Gold exchanges & 💼💼Budget-2021 ..................216
15.15.2 💍💍💍💍💍💍💍💍Commodity Market: Electronic Gold Receipts (EGRs) ...........................216
15.16 � Related Bodies with similar sounding names.................................................................217
15.17 📦📦 � � Investment Funds → Mutual fund (MF) for aam-aadmi ...........................217

15.17.1 📦📦 � � Mutual fund → ESG, Shariya Mutual Funds ........................................218
15.17.2 📦📦 � � Mutual fund → SIP, ELSS, ULIP ............................................................218
15.17.3 📦📦 � � Mutual fund → 🎛🎛 Mutual fund risk-o-meter ....................................218
15.17.4 📦📦 � � Mutual Fund: Backstop Entity- SEBI proposal for stressed MF ..............218
15.17.5 🛒🛒 (🔪🔪🔪🔪: 🧔🧔🧔) Bond Buying Institution in 💼💼Budget-2021 ........................219
15.18 📦📦 � � Investment Funds → Hedge Fund (हेज फ�) for rich-aadmi........................219
15.18.1 📦📦 � � Investment Funds: “Accredited Investor” ..............................................219
15.18.2 📦📦 � 🏬🏬 🛩🛩 Investment Funds → REITs / InvITs: for rich-aadmi ..................220
15.18.3 📦📦 � � Investment Funds → Sovereign Wealth Fund (सं प्रभु धन कोष) ..............220
15.19 📦📦 🏛🏛 Investment Funds → CPSE-Exchange Traded Funds (ETF: ईटीएफ) .................220
15.19.1 (🦁🦁🦁🦁)📦📦: (🏛🏛🏛🏛🏛🏛) Bharat Bond (Debt) ETF (2019-Dec) ............................221
15.19.2 (🦁🦁🦁🦁)📦📦: (🏛🏛🏛🏛🏛🏛) CPSE-ETF vs Mutual Fund .............................................222
15.20 📦📦 Investment Funds → Alternative Investment Funds (AIF) .......................................222
15.20.1 (🦁🦁🦁🦁):(🏗🏗🏗🏗) Govt’s AIF for Real Estate Sector (2019) .....................................222
15.21 🗃🗃 ⏱ Forward / Future Contracts & Call / Put Option ...................................................223
15.22 🗃🗃 🔗🔗 Derivatives & Swaps (�ु�� प्र�तभू�तयां और अदला-बदली) ..............................................223
15.22.1 🗃🗃🗃🗃: 🚛🚛🚛🚛🚛🚛 Bilateral Netting of Qualified Financial Contracts Act 2020 .224
15.23 👻👻👻👻👻👻 Participatory notes (P-Notes: पा�ट�सपेटरी नोट्स) ...................................................224
15.23.1 ✍ Conclusion: Financial Markets- �व�ीय बाजारों के बारे म� �न�षर् ...................................225
15.24 🏙🏙🏙🏙 Company types .............................................................................................................226
15.24.1 👶👶Company types based on incorporation .................................................................226
15.24.2 🏙🏙🏙🏙 Company types based on number of members ...............................................226
15.24.3 🏙🏙🏙🏙 Company types based on Ownership ...............................................................227
15.24.4 🏙🏙🏙🏙 Company Types: Misc. .......................................................................................227
15.24.5 🏙🏙🏙🏙 Corporate Governance → Small Companies given compliance relief........228
15.24.6 🏙🏙🏙🏙 Commercial Organizations: Other Types ........................................................228
15.24.7 👬👬👬👬👬👬 Corporate Governance → LLP settlement Scheme 2020 .......................228
15.25 🔨🔨 Statutory bodies in Ministry of Corporate Affairs (MCA) ..........................................229
15.25.1 🔨🔨 � Competition Commission of India (भारतीय प्र�त�धार् आयोग)............................229
15.25.2 🔨🔨 � Insolvency and Bankruptcy Board of India (IBBI) .......................................229
15.25.3 🔨🔨🔨 Ministry of Corporate Affairs also associated with: ......................................230
15.26 �👬👬 Corporate Governance (कॉप�रेट शासन).........................................................................230
15.26.1 �👬👬 Corporate Governance: notable Committees .................................................231
15.26.2 💰💰(🏥🏥🏥🏥)CSR: Corporate Social Responsibility (कॉप�रेट सामा�जक �ज�ेदारी) .............232

15.26.3 👻👻👻🗃🗃⚖ ATMANI: Corporate Governance → Companies Act relaxed .......232
15.26.4 ✍ Conclusion: Corporate Governance- �न�षर् ...........................................................233
15.26.5 ✍🎷🎷 Mock Questions for Mains (GSM3/250 Words Each)..................................233
15 🐮🐮🐮🐮🐮🐮PILLAR#1C: SEBI-SHARE MARKET

MCQs from SEBI/ Share market /Financial Market / Companies Act Topic in UPSC Prelims
Year 2014 2015 2016 2017 2018 2019 2020 2021 2022
MCQs 1 MCQ 0 2 0 1 1 3 1 2
These Qs mostly tested very basic foundation level understanding of share market. So, we are not here
to become Investment Bankers / Mutual Fund managers 🎓🎓✋#🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
15.1 🗃🗃SECURITIES (प्र�तभू�त)
A ‘Security’ means a certificate/document indicating that its holder is eligible to receive a certain
amount of money at a particular time. This could be a…
🤝🤝Equity: Share certificate 🔪🔪Debt (ऋण): Bond / Debenture
Holder gets dividend from the profits of the Holder gets interest & principal irrespective of
company. If no profit, then no dividend. whether company makes profit or not.
Company’s owners, proprietors (मा�लक) creditors of the company (लेनदार).
Have last claim during liquidation first claim.
नीलामी से �मलने वाली रकम पर पहला हक इनका
Attractive in boom period, since companies Attractive in slowdown period, since bonds
more likely to make profit so more chances of provides fixed interest to the investor
good dividend. Although during corona, many irrespective of profit of the company. �नवेशकों को
investors tried to buy shares cheap from मं दी के दौरान �ादा अ�े लगते ह�, �ोंिक जो�खम कम
secondary market, with hopes of getting profit
after corona-recovery.
� �FAQ: Bond and Debenture are not same. They’re having internal technical differences.
Ans. UPSC not asking b.Com/M.Com pedantry here. Then why burden brain’s memory card?

15.2 🗃🗃 🛒🛒FINANCIAL / SECURITIES MARKET: MEANING AND TYPES
Financial Market is the place where buying and selling of securities takes place. Doesn’t require
physical location. Can be done online / telephone as well.
Classifi. Market Subtypes
Tenure: 1. ⏰Money Market (<1 year maturity) मुद्रा बाजार
(अव�ध) 2. 🗓🗓Capital Market (1 year/> maturity) पूंजी बाजार
Freshness 1. Primary Market (where new securities are issued for the first time). Helps a
प्राथ�मक company /govt to connect with the investor. It has no separate physical existence
एवं but classified like this, for economic analysis. (इस बाजार का अलग से भौ�तक �ान नहीं होता
िद्वतीयक िकंतु आ�थक आकलन के �लए आंकड़ों म� अलग से िदखाया जाता है)
बाजार 2. Secondary Market (where the old securities are resold). It has physical existence
such as Bombay Stock Exchange (BSE) at Dalal Street, Mumbai.
3. It provides liquidity & confidence to investors to buy new securities in Primary
Market. (compared to a scenario if there was no market to resale used cars- तो कम
लोग नई कार खरीदने जाएं गे.)
Settlement 1. Future Market: Where parties write contract today to buy/sell something at
(�नपटान) specific price on a future date. भ�व� क� िकसी तारीख को खरीद/�बक्र� के �लए वतर्मान म�
सौदा/समझौता िकया जाए
2. Spot Market: if bought & sold for immediate delivery.
Asset - Depending on what asset is traded, market can be divided into Bond (Debt)
(प�रसं प��) market, Share (Equity) market, Gilt-Edged Securities Market, Foreign Currency
Market, Commodity Market etc.

Classifi. Market Subtypes
- if there was a supermall where all these products were available in one place it
will be called “Universal Exchange”. SEBI permitted BSE & NSE to launch such
thing (2018).
15.3 🔪🔪🗃🗃 DEBT INSTRUMENTS (ऋण उपकरण)
Bond holders are creditors to company. First claim during liquidation. Assured interest irrespective
of profit of company. These debt instruments can be classified into short-term vs long term.
15.3.1 🔪🔪🔪🔪⏰Short term debt instruments (लघु अव�ध ऋण उपकरण )
- Tenure = less than 1 year. Usually ‘unsecured’ because not backed by any asset.
- Usually sold at discount and re-purchased at Face Value or Par Value. The difference between
these two prices is the interest earned by investor. स�े म� बेचकर मूल भाव पर खरीदा जाता है
- Another synonym for this process: “rediscount the bills.”
- They’re traded at Money Market and are (usually) ‘negotiable & transferable’ in nature i.e.
lender can sell to 3rd party → 3rd party can demand money from borrower. (परक्रा� और ह�ांतरणीय)
- They’re also called Near Money = Asset that is highly liquid = can be readily converted into cash.
15.3.2 🔪🔪🔪🔪⏰:🧔🧔Short term debt instruments → by Government

1. State govt’s treasury bills (T-bill). But stopped since 2001.
2. Union govt’s treasury bills (T-bill: 14, 91, 182 and 364 days) & Cash Management bills (CMB:
upto 90 days, started in 2009).

3. WMA (ways and means advances): given below
15.3.3 🔪🔪🔪🔪⏰: 🐯🐯🐯🐯 🧔🧔� Short term debt instruments → by Govt → WMA
⇒ When Govt faces short term mismatch in receipt (income) and payment (Expenditure)
⇒ RBI Lends money on short term (3 months). Not counted in fiscal deficit figure. (More in
📑📑Pillar2D: FRBM)
⇒ Corona-crisis: ⬆mismatch in cashflow because सरकार क� आमदनी और खचर् म� अंतर बढ़ गया �ोंिक
o ⬇Govt Income: Sales ⬇ GST, Govt gave extension in tax payment deadlines
o ⏫Expenses: free LPG, food, mask etc.
⇒ So, ATMANIRBHAR Bharat → RBI ⏫WMA limits by 60% than before to help the Union
(1.20lcr) and State Governments (₹51,560cr collectively).
⇒ If upto above amount of ₹₹ borrowed = its WMA: loan interest = repo%
⇒ If beyond above amount borrowed then called ‘Overdraft’: loan interest repo+2%
🎓🎓✋^ above % or quantity or figures not imp for scope of exam
15.3.4 🐯🐯🐯🐯🐯 Consolidated Sinking Fund (CSF) for State Govts’ repayment
⇒ Started in 1999. It has >₹1.25 lakh crore by 2019. (समेिकत घाटा �नपटान �न�ध)
⇒ Annually, State Govt has to contribute money equal to 1-3% of its outstanding market loans to
this fund kept with RBI. (रा� ने �जतना कजार् उठाया है उसके सामने इस �न�ध म� थोड़ा पैसा जमा करना है)
⇒ CSF is a fund outside consolidated fund of the State and public account of the State. (Ref
📑📑Pillar2)
⇒ CSF meant to be used for only 1 purpose= repayment/redemption of loans taken by the State
Government. (बकाया ऋण चुकाने के �लए ही इस �न�ध का उपयोग होगा)
⇒ 2020-May: RBI relaxed technical norms related CSF till to help the State Govts. (तकनीक� �नयमो मे
कु छ छू ट दी)
What about GST cess release and end-to-end market borrowing by Union/State?
(Ans 📑📑Pillar#2: Taxation:GST. )
15.3.5 🔪🔪🔪🔪⏰Short term debt instruments → by borrowers other than Govt

Table 1: how does this work in real life? Ans. not important just remember 1-Word Association
Borrower 🔪🔪🔪🔪⏰ Short term debt instrument (लघु अव�ध के ऋण पत्र)
- Bill of Exchange, Hundi, Commercial Papers, Promissory Notes.
- Side note: Currency Note is a ‘Promissory Note’ issued by RBI Governor
Company
however, he’s not bound to pay any interest. He just promises to
exchange it with other currency notes & coins of equal face value.(More

in 📑📑Pillar#1A1)
Merchant to Commercial Bill.
bank
Banks / NBFC Certificate of Deposits (जमा प्रमाण पत्र).
It’s the interest rate when Financial Intermediaries (Banks/NonBanks)
Call Money
borrow for ONE DAY among themselves.
Notice Money Same as above but for 2 to 14 days.
Collateralized Borrowing and Lending Obligation.
CBLO Clearing Corporation of India Ltd (CCIL) helps Financial Intermediaries (FI)
to get short term loans through this instrument.
Repo Repo and Reverse Repo= Ref: Pillar#1A2: Monetary Policy handout.
15.4 🔪🔪🔪🔪⏰DEBT → SHORT TERM → FACTORING & TREDS
⇒ Suppose an MSME seller has sold cardboard boxes for jiophones to Mukesh Ambani but Mukesh
Ambani says he will pay the bill next month. Presently this is an unpaid invoices.
⇒ MSME seller can pledge this invoice to a factor (bank/NBFC) to avail loans. (छोटी कं प�नयां बड़ी
कं प�नयों को सामान और सेवा बेचती है उसका जो बकाया पैसा है उसके �बल को �गरवी रख के लघु अव�ध का कजर् ले आये)
Bill Discounting Factoring
MSME seller collects the money from Buyer Factor (lender: bank/NBFC) directly collects
(Ambani) & delivers ₹ ₹ to the Factor the ₹₹ from unpaid invoices from Buyer
(bank/NBFC). (Ambani).
15.4.1 🔪🔪🔪🔪⏰Factoring Regulation (Amendment) Act, 2021

to amend the Factoring Regulation Act, 2011
Before After
Banks and only “Factoring Companies Banks and all types of NBFCs allowed (After
(NBFC)” allowed to give loans under this registering with RBI). → So now more than

Before After
system. There were only seven NBFCs 9000 NBFCs in India can give loans → this will
registered as Factoring Companies. increase the availability of loans for the MSME.
-- earlier it was less. RBI given more powers to regulate this
business.
-- earlier it was less. More legal clarity about TReDS system.
Earlier this was not clear and so MSME could Need to register the invoice-pledge-factoring-
commit fraud of “dual financing” i.e. Pledging loan transaction on A central registry set up
the same and per invoice as collateral in under the SARFAESI Act. This will prevent the
multiple Bank/NBFCs. dual financing frauds.
15.4.2 🔪🔪🔪🔪⏰: 📡📡 TReDS platform to connect factoring-players.

⇒ Just like quickr/olx connect buyers with sellers, the Trade Receivables Electronic Discounting
System (TrEDS) online-platform Connect the factors (bank/NBFC) with the borrowers (MSME).
⇒ Examples of 3 TReDs platforms: M1xchange, RXIL, and A.TReDS. Have to register with RBI.
⇒ Most famous is RXIL - Owned by the Small Industries Development Bank of India (SIDBI) and
the National Stock Exchange of India Limited (NSE), State Bank, ICICI and Yes Bank .
15.5 🔪🔪🔪🔪⏰DEBT → INTEREST RATE BENCHMARKS: LIBOR, MIBOR, MIFOR

London Inter-bank Offered Rate (LIBOR) is the average interest rate at which
banks in London give short term loans to each other.
🤩🤩Objectives/usage/application of LIBOR?
- (some) global banks decide their call money /notice money rates based on it.
- (some) external commercial borrowing (Indian Bizman taking loans from
abroad),
- (some) FCNR deposit interest rates (Non resident Indians depositing foreign
LIBOR currency savings in Indian banks to earn interest)
😰😰Controversy? LIBOR methodology had become unreliable & fraud-ridden in
recent years. So, UK regulator ordered stopping LIBOR by the end of 2021.
⇒ So accordingly, Financial intermediaries across the world are changing their
LIBOR based contracts/agreements to other benchmarks. e.g. TONAR
(Tokyo/Japan), SARON (Switzerland), SOFR (USA), SONIA (UK-Sterling-
Pound), ESTR (Euro) etc. What are their full forms? how they work is not
important.#🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
In LIBOR definition, replace the word “London” → “Mumbai” and “Global” →
MIBOR
“Indian”, and you’ll know what MIBOR is!
⇒ Mumbai Interbank Forward Outright Rate (MIFOR) is a benchmark that
MIFOR derives values from LIBOR and a few other indicators etc.
⇒ 🤩🤩objectives/usage/application? Similar to LIBOR.

⇒ 😰😰Since LIBOR is expiring by the end of 2021 → MIFOR will also stop
working, Because it derives value from LIBOR value. 2020-Nov: RBI
announced working on a new Indian benchmark to address this issue.
How will above things affect Indian economy in 500 ways? NOTIMP even though
theHindu and Indian Express writing 800 words column it. Just look at previous
MCQs#🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
🔠🔠❓Find Correct statements☹Asked in UPSC-Pre-2018)

1. The RBI manages and services Government of India Securities, but not any State Government
Securities.
2. Treasury bills are issued by Govt of India and there are no treasury bills issued by State Govts.
3. Treasury bills offer are issued at a discount from the par value.
Ans Codes: (a) 1 and 2 only (b) 3 only (c) 2 and 3 only (d) 1, 2 and 3
🔠🔠❓Which of the following is /are example (s) of ‘Near Money’? [UPSC-CDS-2016-I]
1. Treasury Bill 2. Credit Card 3. Saving accounts 4. Money Market Instruments
Answer codes: (a) 1 only (b) 2 only (c) 1, 2 and 3 (d) 1, 3 and 4
🔠🔠❓ In Indian economy, non-financial debt includes ___ ? (Prelims-2020 SetB- Q84)
1) Housing loans owed by households
2) Amounts outstanding on credit cards
3) Treasury bills
Codes: [a) 1 only [b) 1 and 2 only [c) 3 only [d) 1, 2 and 3
🔠🔠❓ Which of the following phrases defines the nature of the ‘Hundi’ generally referred to in the
sources of the post-Harsha period? (UPSC-Prelims-2020)
[a) An advisory issued by the king to his subordinates
[b) A diary to be maintained for daily accounts
[c) A bill of exchange [d) An order from the feudal lord to his subordinates
🔠🔠❓Find correct statement(s) (UPSC-Prelims-2020)
1) ‘Commercial Paper’ is a short-term unsecured promissory note.
2) ‘Certificate of Deposit’ is a long-term instrument issued by the Reserve Bank of India to a
corporation.
3) ‘Call Money’ is a short-term finance used for interbank transactions.
4) ‘Zero-Coupon Bonds’ are the interest bearing short-term bonds issued by the Scheduled
Commercial Banks to corporations.
Codes: [a) 1 and 2 only [b) 4 only [c) 1 and 3 only [d) 2, 3 and 4 only
15.6 🔪🔪🗃🗃🗓🗓 LONG TERM DEBT INSTRUMENTS (दीधर्-अव�ध ऋण- उपकरण)

Tenure = 1 year/>. Further sub-division based on who is the Borrower?
15.6.1 🕯🕯🗃🗃🗃🗃🧔🧔Colonial era Govt. to borrow money
1. Coupon Bonds: Contain detachable coupons. Coupons are presented to the issuer to claim the

interest. Therefore, bond interest rate is also called ‘coupon rate’.
2. Zero Coupon Bonds: Are sold on discount and repurchased at face value, do not have any
coupons.
3. Bearer Bonds: Not linked to a PAN card, Aadhar card or passport, voter card or social security
number. Anyone who presents it to the issuer, will get interest and principal. Usually issued
during the war time.
15.6.2 💡💡🗃🗃🗃🗃🧔🧔Modern day Government to borrow money

⇒ Government securities, Dated securities, Sovereign bonds (सं प्रभु बांड), Kisan Vikas Patra etc.
(more in 📑📑Pillar 1D: Financial inclusion lecture)
⇒ Also called Gilt Edged securities (उ� / अ�ग्रम दज� क� प्र�तभू�तया) because repayment is assured by
Government. (But then, they give lower interest rate because of low risk to the investor).
⇒ Global Credit Rating Agencies gives ‘rating’ to sovereign bonds. “AAA” is the best🤩🤩 and
highest given to US Treasury Bonds. India’s rating is ~“BAA” = moderate risk of default😰😰.
⇒ World’s top three credit rating agencies- Fitch, Moody’s and Standard & Poor have pro-US/EU
allegiance. Critics allege these 3 agencies do not give adequate upgradation to the Govt bonds of
India, China, Russia despite the economic growth. भारत म� अ��-खासी आ�थक वृ�द्ध के बावजूद भी यह प�पाती
�वदेशी सं �ान भारत को खराब रेिटंग देते ह�
15.6.3 🥇🥇🥇🥇🥇🥇Bonds by Modern day Govt. to curb Gold Consumption
⇒ Real Interest Rate (वा��वक �ाज दर) = Nominal (ना�मत) Interest minus Inflation.
⇒ When Real Interest is negative, purchasing power ⏬ despite ⏫ in money quantity in bank
account. Then people prefer to park money in gold/real estate- which is not very beneficial to
economy. So..
15.6.3.1 🍅🍅🍅🍅🍅🍅🍅🍅 Inflation Indexed Bonds (IIB-मुद्रा��त सूचकांिकत बांड)

⇒ RBI launched in 1997, 2013, 2018 to provide positive Real interest rate to household, thereby
reducing the Gold consumption & Current account Deficit (CAD) & weakening of rupee against
dollar (else expensive crude oil → petrol, diesel inflation.(More in 📑📑Pillar#3).
⇒ e.g. Inflation Indexed National Savings Securities-Cumulative (IINSS-C) with Interest Rate =
CPI + 1.5% [and Principal also protected against inflation.] अगर महंगाई दर बढ़ेगा तो आपको �ादा �ाज दर
िदया जाएगा और मूलधन भी �ादा वापस कर�गे- तािक जनता का सोने म� �नवेश करना का पागलपन थोड़ा कम हो।

�❓MCQ. Find correct about “Inflation-Indexed Bonds (IIBs)” in India (Prelims-2022)
1. Government can reduce the coupon rates on its borrowing by way of IIBs.
2. IIBs provide protection to the investors from uncertainty regarding inflation.
3. The interest received as well as capital gains on IIBs are not taxable.
�❓MCQ. Find correct statements about Convertible Bonds (Prelims-2022)
1. As there is an option to exchange bond for equity, Convertible Bonds pay a lower rate of interest.
2. The option to convert to equity affords the bondholder a degree of indexation to rising consumer prices.
Codes: (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2
15.6.3.2 🥇🥇🥇🥇🥇🥇🥇🥇 Sovereign Gold Bond (2015: सं प्रभु �णर् बांड)

RBI issues them on behalf of govt. Denomination: gold grams. But, RBI/Govt doesn’t ‘promise’ to
give you gold. They only promise to give you ₹₹ equivalent of latest gold price on maturity. इस बांड का
मू� सोने के वजन के �च��त होगा. िक�ु प�रप�ता समय पर आपको सोना नहीं, उस सोने के वजन के िहसाब से मू� �जतना �पया द�गे।
- Annual interest 2.5-2.75% (depending on which year’s ‘batch’ you bought.)
- Tenure: after 8 years you get the amount equivalent to prevailing gold prices at that time. हर साल
�नयत �ाज, प�रप�ता समय पर बाजार म� यिद सोने का दाम बड़ा होगा तो आपको मूलधन से भी �ादा ₹₹ वापस िदए जाएं गे.
- Eligible investor categories: Indian resident individuals, Hindu Undivided Families (HUFs),
trusts, universities and charitable institutions. �सफर् यह लोग या सं �ान हीं खरीद सकते ह�
- How much can you buy? Minimum 1 gm to max upto 20kg depending on investor’s category.
- From where to buy? While RBI ‘sells’ it but customers buy it via following outlets: banks (only
selected types of banks), post offices, selected stock exchanges (NSE and BSE) and a few other
institutions.
- 🤩🤩Benefit / challenges ? reduce the import-demand for physical gold and shift a part of the
domestic savings -- used for the purchase of gold -- into financial savings. (More in
📑📑Pillar#3A along with Gold Monetization Scheme. )
15.6.4 🔪🔪🔪🔪🔪🔪� Long term debt instruments by Companies

1) Bonds (British Term), Debentures (American Term): Internal difference not important.
2) If the company has high risk of default on repayment, the Credit Rating Agencies will mark it as
Junk Bonds (“BB to D” Grade) e.g. IL&FS. Such company will have to offer a very high interest
rate when issuing bonds next time. �ादा जो�खम पूणर् कं पनी ने �नवेशक को लुभाने के �लए �ादा �ाज देना होगा
3) Redeemable Bonds (मो�): will repay regular interest and will return principal on maturity.
4) Irredeemable Bonds (अमो�): will pay only interest but no principal returned. Sometimes issued
by PSB to meet BASEL-capital requirements. Although in reality they offer ‘redemption’ after 5-
10 years when holder has ‘option’ to redeem principal & exit. (Ref: Pillar1B2= AT1 Bonds)
5) Non-convertible Bond/Debenture = can’t be converted into shares.
6) Hybrid instruments: Issued as “Bond” but can be converted into Share. E.g. Optionally Fully
Convertible Debentures (OFCD).

15.6.5 🔪🔪🔪🔪🔪🔪Long Term Debt Instruments: Other issuers
Issuer Objective? उद्दे�?
- Urban Local Bodies Issue Municipal bonds to borrow money from public.
ULB - Ahmedabad was 1st to launch Municipal bonds (1998). 2020-Lucknow 9th city
in India & 1st in North India.
- 2014- BRICS Nations had setup the New Development Bank (NDB, HQ:
BRICS Bond Shanghai, China). Later it launched BRICS Bonds to mobilize money for its
infrastructure loans. Denomination: US Dollars
- 2018: launched world’s first Blockchain Offered New Debt Instrument called
World Bank Bond-i. Sold in Australia using Ethereum blockchain technology. Tenure: 2
🌐🌐 years @~2% interest. Denomination: Australian Dollars, hence also called
“Kangaroo Bond”.
- Evergrande is a Chinese real estate developer company. Facing trouble
Evergrande
repaying its bonds. Foreign investors panicked, resulting in crisis in Chinese
Crisis
and global financial markets. HOW?NOTIMP.
15.6.6 🔪🔪🔪🔪🔪🔪Long Term Debt Instruments: Masala, Maharaja, Panda Bond

🌶🌶 Masala Bonds: These rupee denominated bonds issued outside India, to borrow money for
Indian companies. World Bank’s sister agency International Financial Corporation (IFC) launched
‘Masala Bonds’ to help Indian public sector and pvt sector companies.
⇒ 2015: RBI allowed Indian entities to launch such Masala Bonds.
⇒ 2017: National Highways Authority of India (NHAI) also issued Masala Bonds in London Stock
Exchange to mobilize money for Indian Highway projects.
⇒ 2019: Kerala became the first State of India to issue Masala Bonds. Its Kerala Infrastructure
Investment Fund Board (KIIFB) issued Masala Bond at the London Stock Exchange.
Denomination: ₹ ₹ Total Size: ₹ 21.5 billion. Tenure: 5 years. Masala Bonds are usually issued by
institutions with AAA rating. Since KIIFB has BB rating, hence offered higher interest rate:
~9.7% (वरना कोई खरीदता नहीं)

Table 2: rapid revision table for Bond types based on currency
🤲🤲Issuer → 🌐🌐 Borrowing from 💸💸 In currency → 🔪🔪🔪🔪 Is called
→
Non-Chinese → China → Renminbi (=yuan) 🐼🐼 Panda Bonds
Non-Australian Australia Australian dollar 🦘🦘 Kangaroo Bonds
Non-Indian India Rupee � Maharaja Bonds
(Indian or Outside India Rupee 🌶🌶 Masala Bonds
a non-Indian on
behalf of Indians)
Non-Taiwanese Taiwan OTHER than Taiwan Formosa Bond
entity dollar (इसके अलावावाली
मुद्रा)
15.6.7 🔪🔪🔪🔪🔪🔪 Long Term Debt Instruments: Special purpose: 🚦🚦🚦🚦 Surety Bonds
⇒ Party#1 Road contractor pays fees/premium to party#2 insurance company. Insurance company
gives him a surety bond.
⇒ Road contractor gives this surety bond to party#3 Highway Ministry.
⇒ if the road contractor is not finishing project within prescribed time-limit/quality-limit →
Insurance company will pay ₹₹ to Highway Ministry.
⇒ Earlier, Insurance companies were not allowed to issue surety bonds in India. So contractors had
to submit ‘Bank Guarantees’ to Govt. But then 👜👜👜👜Budget-2022 said we’ll allow Surety Bonds.
IRDAI will regulate this.
�Sub-types of Surety Bonds: Bid Bonds, Performance Bonds, Advance Payment Bonds and
Retention Money Bonds. But we will not study them OR their internal difference. � � � � �
15.6.8 🔪🔪🔪🔪🔪🔪 Long Term Debt Instruments: Special purpose Bonds- Misc.
Oil Bonds Explained in �
Pillar#2- along with taxes on petrol and diesel.

⇒ US Govt (1870s) and British Govt (1917) had issued Consol bond.
⇒ Consol is short form for ‘consolidated annuities’.
🤧🤧🔪🔪🔪🔪♾ ⇒ Consol bonds have no maturity date. They are perpetual bonds that paid 4-5%
(proposed) interest rate, for an infinite time period. In theory they don’t repay the
Consol Bonds principal amount back to investor. Thus, they’re Irredeemable Bonds (अमो�).
for Corona- ⇒ However, in reality, the Govt may redeem(/buyback) the bonds after certain
revival years, by paying principal to the investor. कु छ वष� बाद सरकार पुनः खरीद लेगी
⇒ Some economists suggesting Indian govt should issue Consol Bonds for Post-
corona economic revival. (अथर्�व�ा को पुनर्जी�वत करने के �लए)
⇒ 2019-May: Commerce ministry’s Dr. Surjit S. Bhalla Committee ‘to improve
🐘🐘 (Proposed) India’s share in global trade’ suggested ‘Elephant Bonds’. Tenure: 25-years.
Elephant Bonds ⇒ People declaring Black Money will be required to invest x%. → ₹ ₹ to be used
for black money only for infrastructure projects. �जनके पास काला धन िक�ु सजा से बचना है तो वे इसम� �नवेश
कर� और पैसा बु�नयादी अवसं रचना �नमार्ण म� उपयोग होगा
For renewable energy, pollution control, environment friendly projects.
- World’s first Green Bond launched by World Bank (2007)
- India’s first Green Bond launched by Yes Bank (2015)
🌿🌿Green bonds - BRICS-New Development Bank issued Yuan- green Bonds (2016)
(ह�रत बांड) - Indian Renewable Energy Development Agency (IREDA) launched India’s
पयार्वरण सं र�ण और first Masala Green Bond at London Stock Exchange (2018).
�� ऊजार् सं बं धी - 2021: Ghaziabad Municipal Corporation (Uttar Pradesh), issued first-ever
Green Municipal bond in India. (भारत का सवर्प्रथम ह�रत नगर �नगम बॉ�)
- 2021: India’s first ever euro currency- denominated green bonds by Power
Finance Corporation (PFC, an NBFC company under Power Ministry).
A sub-type of green bond, where money borrowed for climate resilient water /
💦💦Blue Bond
marine / fisheries projects. E.g. 2018- Seychelles issued world's first 'Blue Bond,' to
(नील बांड)
expand its marine protected areas and fisheries sector. (समुद्री सं र��त �ेत्र और म� �ेत्र)
Money is invested in bonds of companies having good track record of
ESG Bonds Environment, Social and Governance (ESG) बॉ� �नवेश उन कं प�नयों म� जो पयार्वरण, समाज
और शासन क� म� अ�ा काम कर रहे ह�
⇒ Govt / Insurance company issues such bond. Investor is promised with high
annual interest rate. But, if a natural disaster happens, his principal will not be
⛈Catastrophe returned.
Bond (आपदा) ⇒ If disaster doesn’t happen then principal will be returned.
⇒ अ�ा �ाज द�गे िकंतु आपदा �ई तो मूलधन वापस नहीं कर�गे �ोंिक वह सारा मूलधन आपदा प्रबं धन म�
इ�ेमाल कर�गे

2019: SIDBI issued ₹ 300 cr. worth Women’s Livelihood Bonds (मिहला आजी�वका बॉ�)
with the help of World Bank, UN Women org etc.
⇒ These bonds will be offered to High Net worth Individuals (HNI), Impact
� Social Investors (rich people interested in ‘indirect’ social service) etc. They’ll earn
Impact Bonds 3% annual interest rate for tenure of 5 years.
(सामा�जक प्रभाव ⇒ Money collected → SIDBI → Micro Finance Institutes (MFI) → loaned to
बांड) individual women entrepreneurs in food processing, agriculture, services etc.
2021: Skill Impact Bond: By National Skill Development Corporation (NSDC)
with help of global partners from UK, Dubai etc.
$14.4 million for skilling 50,000 Indian youth job.
issued by Not for Profit Organisation (NPO) for social service. They repay
Zero coupon NEITHER principal NOR interest.
zero principal 🚩🚩🚩FAQ: Then why don't they simply accept it as 'donation'? Ans. May be PR /
instrument media drama exercise. May be there is tax-saving in it. Newspaper didn't bother to
explain so I didn't bother to google. #🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
It is a sharia-compliant bond instruments used in Islamic finance. Was in News
☪Sukuk because Pakistan Govt issued such bonds. How it works? In which currency is it
Bond/Islamic issued? How it’s different than ordinary bonds?
Bond
✋NOTIMP4Exam after looking at old papers.
🔠🔠❓ Find correct statement about ‘IFC Masala Bonds' (UPSC-Pre-2016)
1. The International Finance Corporation, which issues them, is an arm of the World Bank.
2. They are rupee-denominated bonds and are a source of debt financing for public & private
sector.
Answer Code: (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither1 nor 2
🔠🔠❓ Which one of the following is a viable alternative to term-loans for raising debt finance by
large publicly traded firms? (UPSC-IEnggS-2018)
(a) Shares (b) Debentures (c) Asset loans (d) Gold loans
15.6.9 🗳🗳(🔪🔪🔪🔪)⏳Electoral bonds (चुनावी बांड, 2017 )

⇒ Announce in Budget 2017 → Notified by Dept. of Economic Affairs, Finance Ministry (आ�थक
मामलों का �वभाग). Only SBI can issue at present, and in multiples of Rs.1,000, Rs.10,000,
Rs.1,00,000, Rs.10,00,000 and Rs.1,00,00,000.
⇒ When? For ten days at the start of each quarter. (January, April, July and October). However,
during Lok Sabha election year, can sell for another 30 days.
⇒ Who can buy? Only an Indian Citizen or Company registered in India → deposit money in
their bank account → use that ₹₹to buy Electoral Bond, after giving certain KYC-documents. So,
Electoral Bond can’t be bought anonymously or directly with cash.
⇒ Electoral Bonds can be donated only to a political party registered under Representation of the
People Act 1951 (RPA: लोक-प्र�त�न�ध� अ�ध�नयम) and which has secured 1% /> votes polled in last
Lok Sabha or Vidhan Sabha elections.
⇒ 🗓🗓Validity (वैधता अव�ध)? Only 15 days from date of purchase. Within that time, buyer must
donate, and political party must deposit in its SBI (current) bank account. No interest payable.
⇒ Characteristics of electoral bonds? (�वशेषताएँ )
○ Paper / Physical format (not DEMAT / electronic format).
○ Bearer instrument (Donor or Recipient’s name not mentioned),
○ Promissory Note (promises to transfer money in bank account)
○ Interest Free banking instrument (zero interest payable to anyone).
○ Can’t sell it to third party, can’t pledge it for loans. (�गरवी नहीं रख सकते)
⇒ 🤩🤩Benefits of electoral bonds?
○ Transparency in political funding. (राजनी�तक चं दे म� पारद�शता)
○ Reducing influence of cash and black money in election, (काले धन का प्रभाव)
○ Confidentiality to donor- he can give to any political party without his wife, staff, CA,
Lawyers, journalists, local goons etc. knowing the name of recipient political party. (दाता
को गोपनीयता)
15.6.10 🔪🔪🔪🔪: 🤑🤑 Bond Yield, Yield Inversion, Negative Yield
Bond Yield (More in � Pillar#1A2: Operation Twist)
Yield Inversion Not Important but u can do PHD here
youtube.com/watch?v=BDACRJAo-48
Negative Yield Not Important/outdated
15.7 ⚖🗃🗃 EQUITY INSTRUMENTS (इि�टी)

⇒ Equity holders are called owners / proprietors of the company.
⇒ If company makes profit → they get dividend. They’ve last claim during liquidation.
Keywords Features

Ordinary shares have voting power in the meetings of shareholders. Last claim during
साधारण शेयर: liquidation.
Preferential During liquidation, these investors will be given money before the ordinary
Shares shareholders. Further subtypes: (i) with voting power (ii) without voting
अ�धमा� शेयर: power.
Shares sold @discount to directors & employees for their value addition to
Sweet Equity
company [Amount is regulated under Companies Act]
- 1)What is this? NOT IMPORTANT.
- 2) How different from Sweet Equity? NOT IMPORTANT.
- 3) Repeating for third time for Babu-Shonas= NOT IMPORTANT.
🎓🎓✋
Sweat Equity 🚩🚩🚩FAQ: I’m a commerce graduate / hot-shot MBA-walla and I’ve 500
इसका कु छ काम नहीं jaat ke Counter arguments. Ans. Good. Plz Keep it with yourself. This course
परी�ा म� for teaching some basic one liners for seeking MCQ. UPSC not asking
b.Com/M.Com PHD stuff from here. Then why burden brain’s memory card
with extra info?
Employee Stock Option Plan: Shares may be given free to employees to
ESOP increase their loyalty/motivation for company. Ref: (More in 📑📑Pillar#1B2-
कं पनी के कमर्चारी को PSB reforms)
तन�ाह के अलावा PS: ES-2020 used the term Employee Stock Option Plan. So, I’ve written.
शेयसर् भी �दए जाएं Some website mention Employee Stock Ownership Plan- how these two
(ownership/option) are similar or different? 🎓🎓✋ANS NOT IMP.
Shares whose market price remain excessively low compared to its face value.
Such pathetic companies give zero or little dividend.
Penny stocks 🚩🚩🚩FAQ: I’m a commerce graduate / sharemarket ka hot-shot trader and
फालतू कं पनी का I’ve 500 jaat ke Counter arguments. Ans. Good. Plz Keep it with yourself.
This course for teaching some basic one liners for seeking MCQ. बाक़� आप अपना
देख लो। UPSC not asking b.Com/M.Com PHD stuff from here. Then why
burden brain’s memory card with extra info?
Blue Chip stocks Shares of a nationally recognized, well-established and financially sound
दमदार कं पनी का company with a history of generating good dividend.
Venture Capital VCF are professional firms helping startup companies with seed capital.
Funds (could be debt / equity / hybrid) (�ाटर्अप कं प�नयों को शु�आती पूंजी िदलवाते ह�)
Rich person helping startup companies out of his hobby, passion, profit
Angel Investors motive or time pass. e.g Ratan Tata in Urban Ladder app. (could be debt /
ऐंजल �नवेशक equity / hybrid).
Related topic: 📑📑Pillar#2: Angel Tax in Budget/blackmoney
Invests in startup company with goal of acquiring the company or its
Corporate
technology at later date. �ाटर्अप कं पनी म� �नवेश करता है तािक भ�व� म� उसक� टे�ोलॉजी पर
Strategic Investor
क�ा कर सके
RGESS Rajiv Gandhi Equity Savings Scheme= Govt gives income tax benefit to

Started in 2012 people who invest in the share market for the first time. Discontinued by
Budget-2017
म�मवगर् का नया �नवेशक पहली बार शेयर बाजार म� �नवेश कर� तो आयकर म� राहत
When promoter of a company e.g. Mukesh A. of Reliance or Subhash
Chandra of Zeegroup pledges his shares as collateral to borrow loans from a
Share Pledging
bank / NBFC.
जब कं पनी का सं �ापक अपने शेयर �गरवी रखे पैसा उधार लेता है
🔠🔠❓ What does ‘Venture Capital’ mean? (Asked in UPSC-Pre-2014)
A. A short-term capital provided to industries
B. A long-term start-up capital provided to new entrepreneurs
C. Funds provided to industries at times of incurring losses
D. Funds provided for replacement and renovation of industries
🔠🔠❓ An individual investor who invests in the e-project usually during an early stage is (UPSC-
IES-2020) A) corporate strategic investor B) founder capital C) angel investor D) venture capital
15.8 ⚖🗃🗃 METHODS OF ISSUING SHARES

Share have printed price on the certificate called Face Value or Par Value (सममू�). If they’re sold at
higher price than face value, it’s called “Premium Value”- that usually happens when investor is
confident of getting high dividend/return on his investment.
Related keyword: Price Earnings Ratio (P/E Ratio)- what it means NOTIMP.
⇒ Company hires an underwriter (usually, a merchant bank, investment bank)

for a fee.
Initial public
offer (IPO) ⇒ Underwriter drafts Red Herring Prospectus for SEBI approval.
प्रारं�भक लोग ⇒ Then, Underwriter invites application from public & sells them shares at face
�नगर्म value or higher. If less people subscribe → then underwriter will buy the
unsold shares by himself.

Sidenote: SEBI’s Innovators Growth Platform Framework = It is a set of
easy/relaxed rules to help Startup companies to launch their IPO/Shares. (शेयर
बाजार म� �ाटर्अप कं पनी के शेयर जारी करने के �लए सेबी ने �नयमों म� कु छ �रयायत� दी है)
⇒ If company had already issued IPO-shares previously, and now again issuing
Follow on
more shares to obtain more capital→ it is called FPO.
public offer
⇒ Rights issue (अ�धकार �नगर्म): Company issues additional shares but gives first
(FPO)
right to existing shareholders to buy them, if they refuse then offered to
अनुसरण…
outsiders.
Offer for sale / Private placement / Qualified institutional placement (QIP)
Other
/Issuing bonus shares / share splitting / share swap / share buyback / PE Ratio etc.
methods /
= NOT IMP. However, to satiate your curiosity you may self-study them from
terms
Investopedia, but that’s not the best use of your time!
15.8.1 ⚖🗃🗃 IPOs- Big sized IPOs in recent years
⇒ 2019: Saudi Arabia’s public sector oil company Aramco issued IPO worth >$25 billion. It was
listed at Riyadh’s Tadawul Stock Exchange.
⇒ 2020: Jack Ma, founder of China's e-commerce company Alibaba. He started "ANT" company to
provide Financial services such as loans, insurance, Mobile payment (App 'Alipay') IPO worth
$30 billion
⇒ 📔📔📔📔ES20 & 📔📔📔📔ES21 : No of IPO-issuing Companies have ⏬: 134 (2017) → 103 (2018) →
49 (2019) Which indicates problems like protectionism (=trade war/nations imposing heavy tax
on imported items to protect local industries (📑📑Ref: Pillar3), NPA (bad loans 📑📑Ref
Pillar1B2), slowdown in consumer demand by Corona= preventing some of the companies from
expanding further.
⇒ 2021: Sharemarket revival → many new IPOs launched e.g. Zomato, Paytm (Company Name
One97- Founder Vijay Shekhar Sharma), Nyakaa Fashion E-commerce (Founer Falguni Nayar
became richest self-made woman billionaire of India).
15.8.2 ⚖🗃🗃 IPOs → LIC & FDI in LIC?

Refer to �Pillar#1D1: Insurance Sector
15.8.3 ⚖🗃🗃 🤵🤵 IPO → Special Purpose Acquisition Company (SPAC)

⇒ SPAC is a type of company which does not do production of goods and services by itself, so it's
also labelled as shell company/blank cheque company. (�यं से िकसी व�ु या सेवा का उ�ादन नहीं करती)
⇒ It is created only to acquire share (equity) capital from the public through initial public offering
(IPO) & use that money to buy / acquire another company. (मात्र अ� कं पनी का अ�धग्रहण करने के �लए
बनाया)
⇒ If the acquisition is not made within two years of the IPO, the SPAC is delisted and the money is
returned to the investors.
⇒ Why in the news? USA's RMG-II is a Nasdaq stock exchange-listed Special Purpose Acquisition

Company (SPAC). RMG-II acquired an Indian company "ReNew Power" through this process.
15.8.4 ⚖🗃🗃 🌐🌐 ADR/GDR: Shares in Videshi locker
Figure 1: �बना अमरीक� SEBI मे पं जीकरण िकए, उनके शेयरबाजार से पैसा उठाऊँ , तो कै से?
- A non-American company wants to mobilize money from American share market but does not
want to go through the lengthy & complex process of registration with the American
sharemarket regulator.
- Then such non-American company gives its shares to an American bank.
- Based on those (non-American) shares, the American bank will issue American Depositary
Receipts (ADR: अमरीक� �नपे�ागार रसीद) & sell them to American investors. Denomination: USD.
- Global Depositary Receipt (GDR): Same as above, but when single bank issues receipts for
investors in multiple countries. Denomination: usually USD or Euro.
Share issuing company → Deposits his company’s shares That bank issues -- in local
in a bank of → market in – currency
Non-American company American Bank → Issues ADR (in $) in American
→ Sharemarket
Non-Indian company → Indian Bank → Issues Bharat / Indian depositary
receipt (IDR) (in ₹) in Indian
Sharemarket
15.8.5 👻👻⚖🗃🗃 🌐🌐 ATMANIRBHAR reforms in ADR/GDR/BharatDR
Too technical / getting outdated so DELETED from latest Handout.
15.8.6 🔗🔗🔗🔗 Initial Coin Offering (ICO)
Figure 2: Cryptocurrency मे पागल �ई प��क को िफरसे बेवकू फ बनाऊ, तो कै से?

⇒ Company wants investors’ money for launching new cryptocurrency, or service/app related to
an existing cryptocurrency.
⇒ Then, it’ll issue Initial Coin Offering (ICO) → Investor subscribes to it, and receives ‘tokens’
(and not SHARES). Investors can use the ‘tokens’ to buy companies coins/services or may sell it

to a third party.
⇒ RBI has cautioned Indians not to invest in such instruments, because of the dangers which we
already learned in the Handout Pillar#1A-1: Bitcoins.
15.9 📈📈 STOCK EXCHANGES / SECONDARY MARKET: MEANING & EXAMPLES
Shares are issued through IPO @Primary market. Then, they can be resold at secondary market,
commonly known as Share market or Stock Exchange or Bourses.
⇒ World’s Oldest: Amsterdam Stock exchange, Netherlands (1602)
⇒ Asia’s Oldest: Bombay Stock Exchange (BSE: 1875)
⇒ India’s stock exchanges chronology: BSE → A’bad → Kolkata → NSE (early 90s)
⇒ Just like Banks have Core Banking Solutions for e-banking, Stock exchanges have their electronic
platforms for trading. E.g. BOLT (BSE's On-line Trading System), NEAT (National Exchange for
Automated Trading). They communicate using VSAT (Very Small Aperture Terminal) Satellite.
15.9.1 📈📈 🌈🌈Social Stock Exchange

⇒ It is a market for buying/selling shares/bonds/mutual fund for projects/organizations related to
hunger/malnutrition, poverty, gender equality, LGBT welfare, rural sports, Slum Area
Development, affordable housing. Etc.
⇒ Budget-2019: we’ll set up a Social Stock Exchange under SEBI’s regulation. It’ll help social
enterprises and voluntary organizations to raise capital as share/bond/mutual funds for
eradicating hunger, malnutrition, poverty, gender equality,LGBTQIA+ communities, rural
sports, slum area development, affordable housing
⇒ Then SEBI setup Ishaat Hussain panel to study it. Then SEBI setup Harsh Bhanwala panel to
study is further. They’ve given recommendations but NOTIMP
15.9.2 📈📈🤩🤩 Secondary Market: Significance? (िद्वतीयक बाजार का मह�)

⇒ ⏬ Cost of Transactions . You don't have to search around for buyers/sellers manually. सब लोग
एक जगह पे �मल जाते है। एक दू सरे को ढू ंढने मे �र�ा का खचार्/लागत बच जाता है।
⇒ Providing Liquidity to Financial Assets. तरलता बढती है �ोिक खरीदार �मल जाता है।
⇒ Facilitating Price Discovery of shares / bonds. औकात पता चल जाती है कं पनी क�।
⇒ Investor sells securities in secondary market→ ₹₹ could be re-invested to a new company’s IPO
in primary market → Contributes to Economic Growth. (पुरानी घिटया कं पनी म� से �नवेश क� रकम �नकाल
कर नई और बहेतर कं पनी म� �नवेश हो सकता है )

15.9.3 🗃🗃🗃🗃 DEMAT Account
Figure 3: कागजी शेयसर् को चोरी/आग से बचाऊँ , तो कै से?

⇒ If shares and bonds are traded in paper-form, then transactions are slow & prone to the risk of
theft, forgery and fire. कागजी ��प म� शेर से रखे जाएं तो चोरी होने का जालसाजी का आग लगने का डर😰😰
⇒ Depositary is an organization that holds the securities (like shares/bonds etc.) in electronic
(=DEMATERIALIZED) form. Then facilitates its trading online.
⇒ Upon client’s request, Depository can ‘rematerialize’ it as well (i.e. giving physical/hard copy of
share/bond etc) to client.
⇒ Customer must open a “Demat” account in a depository-partner (DP) which can be a bank or an
NBFC.
⇒ SEBI regulates them under the Depositories Act 1996. Notable examples:
- Central Depository services Limited (CDSL: owned by BSE, HDFC, Canara Bank etc.)
- National Securities Depository Limited (NSDL: owned by SBI, IDBI, UTI, NSE etc.)
NSDL also has RBI license to operate Payment Bank
15.9.4 🛒🛒 (💻💻:�) DEMAT → ASBA Reforms

⇒ Scamster Rupal Panchal (2005) opened multiple fake DEMAT accounts to increase the chances
of getting share allocations in IPO. Then she’d sell such shares in stock-exchange for higher
prices.
⇒ Subsequently, SEBI made PAN Card (issued by Income Tax Dept) compulsory for opening
DEMAT Accounts. SEBI also introduced ASBA (Application Supported by Blocked Amount)- it
allows the underwriter to block the amount in IPO-investor-applicant’s bank account, but only
IF shares allotted to the applicant, his bank money will be deducted. ASBA-Benefits:
- (1) only serious investors with sufficient bank balance can apply.
- (2) investor continues to earn bank interest on his blocked amount until the process of
IPO-share allotment is over.
15.9.4.1 🗃🗃🔢🔢 ISIN Number

⇒ International Securities Identification Number (ISIN) is a Unique 12 characters, consisting of
both letters and numbers. प्र�तभू�तयों का अंतररा��ीय पहचान सं �ांक
⇒ It’s a serial code to identify securities e.g. Reliance Industries Limited Shares ISIN:
INE002A01018; Infosys Shares: INE009A01021.
⇒ Prevents mistakes in buying/selling shares/bonds of companies with similar sounding names.
Facilitates the digital transactions through DEMAT account. तािक �मलते जुलते नाम वाली कं प�नयों म� गलती

ना हो
⇒ RBI issues ISIN for G-sec/T-bill. NSDL issues ISIN for securities other than G-Sec/T-bill.
⇒ 💼💼 Budget-2019: technical reforms in ISIN. HOW? NOTIMP.
15.9.5 �🛒🛒 Types of Investors: Depending on Buying Capacity
1. � Qualified Institutional Buyers (QIB अहर्ता प्रा� सं �ागत �नवेशक): Investors with expertise and
financial muscle to make large investments in capital markets. E.g. Mutual Funds, Insurance
Company, Foreign Venture Capital Funds etc. SEBI has separate registration norms for them.
a. Anchor investors: They’re sub-type of QIBs who are offered shares before IPO-launch.
This gives confidence to other investors to subscribe the given IPO.
2. �Retail investor: An individual investor who is not a QIB. (आम/खुदरा �नवेशक)
Underwriter will keep quota for each category of investors, as per SEBI norms.
15.9.6 �🛒🛒 Types of Investors: Depending on Buying Behaviour
1. Jobbers (आढ़ती): Full time engaged in buying / selling securities using money from their own
pockets. (Whereas brokers / commission agents buy/sell using money/shares of their clients).
2. STAG (Male Deer): He buys newly issued securities from primary market & sells them in
secondary market for quick profit. प्राथ�मक बाजार से खरीद के िद्वतीयक बाजार म� मोटे मुनाफे पर बेचने क� इ�ा रखता
3. 🐮🐮Bull (तेज�ड़या ): Optimistic speculator who hopes share prices will rise⏫, so purchases (to sell
them later at much higher price). Just like a bull tends to throw his victim up in the air, the bull
speculator stimulates the price to rise.
4. 🐻🐻Bear (मं द�ड़या ) – A pessimistic speculator who fears prices will fall ⏬ so, he sells. A bear
usually presses its victim down to ground. Similarly, bear speculator tends to force down the
prices of securities.
5. ⏲Day trading / Intra-day trading: Individuals buy and sell shares over the Internet over a
period of a single day's trading, with the speculative intention of profiting from small price
fluctuations.

Further subtypes with various animal / bird names can be found on Investopedia but with
poor cost : benefit in exam. #🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
15.10📈📈 SENSEX & OTHER NOTABLE INDICES (उ�ेखनीय सं के तक/ सूचकांक)

⇒ SENSEX?: Sensitive Index/ सं वेदी सूचकांक. It’s the weighted average of Free Float Market
Capitalization (FFMC) of 30 companies, selected by Bombay Stock Exchange (BSE)’s officials
⇒ NIFTY? National Stock Exchange (NSE)’s index of 50 companies.
⇒ Nikkei? Tokyo Stock Exchange index of 225 companies.
📈📈 SENSEX – when does it go up 📉📉 Goes down when
💦💦 RBI’s soft /easy monetary policy → cheap 💧💧 Tight monetary policy (More in
loan & credit cards → consumers to spend 📑📑Pillar#1A2)
more → more profit to company → more सं कुचन वादी मौिद्रक नी�त के दौरान स�से� नीचे �गरेगा
dividend : investor thinks “better I buy more
shares to get more dividend”: Bullish
Peace, Economic boom / prosperity, Political ⚔ War, recession, political instability →
Stability (शां�त, आ�थक समृ�द्ध, राजनी�तक ��रता) Bearish market. (युद्ध, मं दी, राजनी�तक अ��रता)
When govt. hikes foreign direct investment When govt reduces FDI limit
limits
Merger-Acquisition, New product launched, CEO/MD arrest/FIR, Courts slapping fine,
Environmental clearance given to factory media exposing scandal… (कोई कांड हो जाए)
15.10.1 🐮🐮📈📈🐻🐻MSCI Emerging Market (EM) index

⇒ MSCI is a New York based company that publishes various type of stock index indicators.
⇒ Its MSCI Emerging Market (EM) index tracks equity (share) performance of 1400+ companies
in 25 emerging market countries including India.
⇒ 2022: Russian companies removed from this index (due to Ukraine war) → MSCI weightage
given to India⏫ → Western/foreign investors may bring more money towards Indian share
market in future.
⇒ 📙📙📙📙ES22 has also given big descriptions about how much weight is given to Indian companies
in this index & how rivers of milk and honey are flowing but I am not finding such technical
details very useful from exam point of view.

15.10.2 🌬🌬🌬🌬:�⚖� Force Majeure (अभेद्य श��)
Figure 4: Corona के चलते �बजनेस प्रोजे� पूरा नही िकया, तो �ा जेल मे भेज दोगे, या फांसी पे लटका दोगे? कु छ नहीं उखाड़ सकते मेरा!
⇒ French word for ‘superior force’. It refers to unexpected external circumstances (अप्र�ा�शत बाहरी
प�र��तयाँ) that prevent a party to a contract from meeting their obligations. e.g. Acts of God
(natural disasters, epidemics), war, terror attacks.
⇒ In such cases, courts may not punish party for dishonoring contract. (करारनामे के दाय�� को न �नभाना)
⇒ E.g. Corona (COVID-19) Virus → Singapore Govt put restrictions on entry of Chinese →
Singapore construction firms facing labour crunch (श्र�मकों क� कमी) → invoked ‘Force Majeure’ to
clients, “we can’t finish building your homes/offices in time.” Coronavirus: >55million people
infected across the world (as of 2020-Oct).
⇒ Restriction on global travel and trade. Investors fear that companies will not generate much
profit. Many contracts/ payments will be stuck by Force Majeure. So, large scale withdrawal / exit
of share investors from stock exchanges across the world. Even the BSE SENSEX fell by 1400+
points in a single day in 2020-June Month. However in later months, share market has ⏫⏫
significantly.
15.11🐮🐮🐮🐮🐮🐮 SHAREMARKET: 2020- IMPACT OF CORONA

📔📔📔📔ES21 Vol2Ch4: observed When comparing Year 2020 (Jan to Dec) to 2019:
⇒ Nifty50 & BSE SENSEX both have greatly increased ⏫
⇒ Stock Exchange Volatility declined ⏬, esp after March-2020, as measured by "India VIX index"
of NSE. (अ��रता कम �ई है)
⇒ Share Prices of Pharma, IT companies ⏫, But Airline/Luxury goods/fashion ⏬
⇒ Biz of Mutual Funds ⏫ (धं धे म� बरकत)
⇒ Incoming Foreign Portfolio Investment (FPI) has ⏫ [270 billion$] (More in 📑📑Pillar#3A)
2020- Initial months of lockdown, ⏬⏬ due panic among investors, Force Majure but then
⏫⏫ because (शु�-शु� के महीनों म� �गरावट िकंतु बाद म� ब�त तेजी आई �ोंिक…)
1. Cheap Loans / Expansionary Monetary Policy → Some of that money may have entered the
share market through to large investors. (�व�ार वादी मौिद्रक नी�त)
2. 'work from home' + RBI loan Moratorium- may have encouraged many service sector employees
to invest ₹ in the sharemarket. (तालाबं दी के दौरान लोन क� िक� नहीं चुकानी थी तो कु छ ने वह रकम शेयर बाजार म�
�नवेश क� होगी)
3. Unprecedented demand and profit for IT and Pharma sector- Encouraged the investors to park
their money in such shares at very high price. (तालाबं दी के दौरान सूचना प्रौद्यो�गक� और औषधीय कं प�नयों म�
अप्र�ा�शत तेजी)

4. Youtubers/Reddit/Social media influencers giving online share trading Tips. Many Apps
available.
5. American video game store company GAMESTOP's shares ⏫1625% in 1 year. Such gimmickry
will attract more small investors to invest. Associated keyword "short squeeze trading" [✋What
it means? how it works? Ans. not important]
6. 2021-Aug: Finance Minister in Parliament “Even though economic growth seem to be
slow/down but stock market rising ⏫⏫ because, The movement in stock market indices is
driven primarily by expectations of future economic growth.” E.g. Even though hotel business
may be slow at present, but in future unlockdown, people will go on vacation trips with more
enthusiasm. So, in anticipation of future profit, some investors will start buying hotel shares right
now. Then demand for hotel companies shares ⏫ → hotel companies share prices⏫ (शेयर
बाजार �ादा भ�व� म� िकतना और अ�धक मुनाफा होगा उस अपे�ा/सट्टेबाजी से बढ़ता है उदाहरण - हालांिक अभी तो कोरोना म�
होटल धं धे म� मं दी है, िकंतु भ�व� म� ब�त लोग वेकेशन म� होटल म� जाएं गे तब हमे ब�त मुनाफा होगा ये सोचकर कु छ �नवेशक अभी से
होटल कं प�नयों के शेयर जमा करना शु� करते ह� तो शेयर क� मांग बढ़ती है और दाम बढ़ता है)
15.11.1 🐮🐮📈📈🐻🐻Sharemarket- 2022: IPO Bubble Burst: Case of Paytm (फू ट गया ग़ु�ारा)
⇒ 📙📙📙📙ES22- 2021: more than 70 IPOs issued worth nearly ₹90,000 crores - this is higher than in
any year in last decade. More than 2 crore retail investors have open demat account in 2021.
⇒ 2021-Oct: Sensex and Nifty crossed 61,000 and 18,400 respectively on October 18, 2021.
⇒ However by 2022-March these stock indices have started to fall because of FPI-pullout-by-Fed
Tapering & Russia war.
⇒ 2021-Nov: Paytm collected ₹18,300 crore from IPO. (Company’s name is One 97
Communications, CEO Vijay Shekhar Sharma. Other partners-China’s Alibaba-Ant group (6%),
Japan's SoftBank and Warren Buffett's Berkshire Hathaway).
⇒ Stag (Male Deer) Investor - buys shares in IPO (initial public offering in the primary market)
with hopes of selling it at a very high price on LISTING in Secondary market. Often they get
lucky with almost 80-100% profit but their gameplan failed in Paytm. (नर-िहरन �नवेशक जो प्राथ�मक
बाज़ार म� IPO ख़रीदते और तुरंत उसे िद्वतीयक बाज़ार म� मुनाफ़े म� बेचने क� िफ़राक़ म� होते ह�)
⇒ 2021-Nov: Paytm Primary market Price Rs.2150 but but on day1 of listing (in the secondary
market), Paytm fell by almost 25%. → by 2022-March fallen to ₹750 (that is >60% loss to
investor!). CarTrade, Zomato etc also trading @loss. Reason?
⇒ 😥😥 General slowdown in the share market by fed tapering / FPI pullout (Ref:1a2), Russia-
Ukraine War.
⇒ 😥😥 high valuation of Paytm IPO (₹2150 per share) but institutional investors (Mutual Fund,
Pension Fund etc) not very confident of the growth prospects of Paytm. Once upon a time,
Paytm had superiority but faces stiff competition from NPCi’s UPI-Bhim, Mobikwick, PayU,
PhonePe etc. (ऑनलाइन भुगतान म� ब�त सारी कं प�नयों के साथ �धार्. पेटीएम का एका�धकार नहीं है.)
⇒ 😥😥startup bubble, no free lunches in economy- said Raghuram Rajan. Cashback discount is
given to build subscriber base to create hype- ultimately startup founders recovered all the
cashback money from Paytm retail investors (who lost 25% on listing day). → this could also
negatively affect the future IPOs of Startup Companies (अथर्तंत्र म� कोई मु� म� भोजन नहीं देता इन सब

�ाटर्अप वालों ने कै शबैक/ िड�ाउं ट के दम पे पहले ग्राहकों को लुभाया → िफर हमारी कं पनी म� ब�त ग्राहक है, एसा िदखाके
�नवेशकों को चूना लगाया)
⇒ 😥😥Ethical Aspect:- Retail investors with huge greed were blindly applying IPOs hoping to 2x
double their money. At some point they were bound to pay for excess greed. (�बना मेहनत के 25 िदन म�
पैसे डबल करने क� लालच रखने वाले आम �नवेशकों ने भी अपने नै�तक मू�ों पर सोच �वचार करना चािहए- क� लालच बुरी बला है)
15.11.2 🐮🐮🐮🐮🐮🐮 Share Market: Impact of Bond Yield

⇒ Bond yield is the profit you make on Bond investment. (More in 📑📑Pillar#1A2: Op-Twist)
⇒ If Mr.Bhide buys ₹100 principal bond with 10% interest = his yield = (₹110-100) / ₹100
investment= 10% but if he sells it to Mr.Jetha at ₹90 then Jetha's yield = ₹(110-90) interest / ₹90
investment= 22% Profit. Thus bond yield (profit) ⏫, If you manage to buy bond at a cheaper
than the original (face value) price.
⇒ 2021-Feb-March: When bond yield ⏫, some investors sold their shares of the low performing
companies → to invest into bonds → sharemarket⏬ fell for some days/weeks.
🔠🔠❓MCQ. In the parlance of financial investment, ‘Bear’ denotes [UPSC-CDS-2012]

(a) an investor, who feels that the price of a particular security is going to fall.
(b) an investor, who expects the price of a particular share to rise.
(c) a shareholder, who has an interest in a company, financially or otherwise.
(d) any lender, whether by making a loan or buying a bond.
🔠🔠❓ MCQ. Which of the following statements is/ are correct? [UPSC-CDS-2012-I]
1. NIFTY is based upon 50 firms in India.
2. NIFTY is governed and regulated by the Reserve Bank of India.
3. NIFTY is the stock index of Bombay Stock Exchange.
Answer Codes: (a) Only 1 (b) Only 2 (c) Only 3 (d) 1 and 3
15.12🗃🗃🗃🗃SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)
⇒ HQ- Mumbai भारतीय प्र�तभू�त और �व�नमय बोडर्,

⇒ (1988) Formed by an executive order → (1992) Became Statutory Body → powers increased
through amendments in 1999 & 2014. Now it can order search and seizure, attachment of

properties, arrest and detention. (खोज अ�भग्रहण, सं प��यों क� ज�ी/कु क�, �गर�ारी और �नरोध)
⇒ SEBI Board Composition: Chairman + 1 officer from RBI + 2 officers from Union Government
+ 5 members appointed by Union Government.
⇒ Chairman: upto 5 years / 65 age. Reappointment possible.
⇒ 2022: Madhabi Puri Buch-first woman chairperson in history of SEBI. She replaced Ajay Tyagi
(Ex-IAS). Selection was done by Financial Sector Regulatory Appointments Search Committee
(FSRASC) headed by the Cabinet Secretary (IAS).
⇒ Regulates Process of issuing securities (Bonds, Shares, IPO, ETF, ReIT, INVITs, etc.) using the
Securities Contracts Regulation Act, 1956 [SCRA: प्र�तभू�त सं �वदा �व�नयमन]
⇒ Regulates Places (Depositories, Stock exchanges, Commodity Exchanges etc.)
⇒ Regulates Persons (Investors, Brokers, Fund Managers, Public Limited companies etc.)
⇒ Regulates any Collective Investment Scheme (CIS) of ₹100 cr/> [In the aftermath of SAHARA
scam & Chit Fund scams. सामूिहक �नवेश योजनाए ]
⇒ Further appeal: Securities Appellate Tribunal (SAT) → Supreme Court.
○ Same SAT also hears appeals against the orders passed by Insurance Regulatory
Development Authority of India (IRDAI) and Pension Fund Regulatory and
Development Authority (PFRDA).(More in 📑📑Pillar#1D)
⇒ SEBI has “SCORES” online portal for complaint. (�नवेशक इधर ऑनलाइन फ़�रयाद करे)
⇒ SEBI has Securities Market Trainers (SMARTs) Program for investor education (�नवेशक प्र�श�ण)
⇒ Saarthi app: Sebi’s app for investor awareness. (�नवेशकों म� जागृ�त के �लए सेबी का नया एप)
15.12.1 🗃🗃⚖📜📜Securities Market Code

⇒ 💼💼Budget-2021: we’ll create a single new law named "Securities Markets Code" by merging
older acts 1) SEBI Act, 1992, 2) Depositories Act, 1996, 3) Securities Contracts (Regulation) Act,
1956 4) Government Securities Act, 2007. (पुराने �व�भ� कानूनों का एक�करण �वलीनीकरण करके "प्र�तभू�त बाजार
सं िहता" नामक नया कानून बनेगा)
⇒ Benefits? Same as the bullet points written in conclusion of “SEBI Investor Charter.”
15.13🗃🗃💪💪 SEBI INVESTOR CHARTER (�नवेशक अ�धकार पत्र)

⇒ (Definition) A citizens’ charter (नाग�रक अ�धकारपत्र) is a document of commitments made by a
government agency to the citizens in respect of the services being provided to them. e.g. if "X"
problem is not solved in "Y" days then complain to "Z" officer on ABC Phone number / email
address etc.
⇒ (Origin) 💼💼Budget-2021: we’ll create an "investor charter" (�नवेशक अ�धकार पत्र) for financial
investors across all financial products (Share, Bond, derivatives, Commodities market etc).
⇒ SEBI notified this in 2021-November.
o This charter applies on Entities/actors e.g. investors, mutual funds, stock brokers, stock
exchanges, depositories, underwriters, real estate investment trusts (REITs),
infrastructure investment trusts (InvITS), & other collective investment schemes,

o This charter applies on Events e.g. initial public offerings (IPO), FPO, etc.
15.13.1 🗃🗃🗃🗃 SEBI Charter → Investors’ rights (�नवेशक के अ�धकार)

⇒ Investors are entitled to fair treatment from SEBI & its regulated entities (E.g. Mutual fund,
stock-brokers IPO-underwriters etc). (सेबी और उसके द्वारा �नयं �त्रत सं �ाओं से �नवेशक को �ायो�चत �वहार का
अ�धकार होगा।)
⇒ Investors can expect complaint resolution from SEBI’s SCORES Portal in a time bound manner
(if his complaint not solved by the ) (सेबी के ऑनलाइन �ोर पोटर्ल पे समय पर �ाय/ �शकायत �नवारण का
अ�धकार )
⇒ SEBI regulated entities (E.g. Mutual fund, stock-brokers IPO-underwriters etc) Will be required
to display on their website average time taken to solve complaints internally. (सेबी द्वारा �नयं �त्रत
सं �ाओं ने अपनी वेबसाइट पर दशार्ना होगा िक वे आंत�रक �प से ग्राहक �शकायत �नवारण म� िकतना समय लेते ह�)
15.13.2 🗃🗃🗃🗃 SEBI Charter → Investors’ responsibilities (�नवेशक क� �ज़�ेदारी है)

⇒ Investor must not share critical information such as DEMAT passwords with anyone. (िडमेट खाते
का पासवडर् इ�ािद साझा न करने क� �ज़�ेदारी)
⇒ Before making an investment, investors must read and understand offer documents related to a
financial instrument (e.g. share, bond, ETF etc), know the risks involved (िकसी भी जगह �व�ीय �नवेश
करने से पहले उससे जुड़े जो�खमों क� सारी जानकारी पढ़ने क� �ज़�ेदारी �नवेशक क� होगी)
⇒ Investor must read about various fees/service charges involved in a transaction
⇒ Investor must keep track of DEMAT/Bank account statements. if any discrepancy, he must
communicate to the concerned authorities. e.g. password hacked & shares transferred without
knowledge (�नवेशक ने अपनी �व�भ� खातों म� हो रहे लेनदेन पर �नगरानी रखनी होगी। कोई �वसं ग�त िदखे तो तुरंत सं ल� सं �ा
को सु�चत करने क� �ज़�ेदारी �नवेशक क� होगी)
⇒ Investor preserve all transaction documents that will come in handy when filing complaints.
(लेनदेन से जुड़े सभी द�ावेजों का सं ग्रहण करना, तािक �शकायत के दौरान सुबूत के �प म� जमा िकया जा सके )
⇒ While investing, Investor must not make payments in cash, beyond the prescribed limits. Pay
through cheque/NEFT etc. (So it helps tracing fraudsters, tax-evaders. REF: 1A1 & 2B for more
on cash transaction limits). �नवेश करते व� तय मात्रा से �ादा म� नक़दी भुगतान निह करना। �ोंिक यिद ब�क खाते द्वारा
भुगतान िकया जाए तो �व�ीय-धोखेबाज़ों और कर-चोरों को पकड़ने म� सु�वधा रहे।
15.13.3 🗃🗃🗃🗃: 😪😪 SEBI’s Investor Charter: Criticism/limitation:

⇒ 😰😰The charter is treated as reference guide. It has no legal binding / legal rights to investors. (ये
के वल एक पथदशर्क है. क़ानूनी �प से बा� नहीं है)
⇒ 😰😰SEBI could not prevent recent scams/disasters in stock markets such as Franklin Templeton
Mutual Fund, Karvy Broker DEMAT scam, IL&FS crisis etc. This charter’s features not
specifically giving confidence on how SEBI will prevent scams in future. (वतर्मान वष� म� �व�वध शेयर
बाज़ार घोटालों को रोकने म� सेबी असफल रहा है। और इस नए अ�धकार पत्र के मुद्दे पढ़कर �व�ास सं पादन नहीं हो रहा िक भ�व� म�
एसे कांड नहीं होंगे)
⇒ 😰😰Retail investors get fooled into investing in bad/weak companies based on
‘tips/recommendations’ by social media influencers/telegram/Youtubers. But, charter not

sufficiently addressing this menace. (सोशल मीिडया म� बदमाशों क� झूठी सलाहों के चलते कमज़ोर कं प�नयों के शेयर-
बोंड म� भोले �नवेशक फँ स जाते ह�-कोई स� प्रावधान निह।)
15.13.4 🗃🗃🗃🗃: ✍ SEBI’s Investor Charter: Benefit/Conclusion

Appreciable step by SEBI. This will help in a long way in... प्रशं सनीय क़दम
 Ease of doing business & Ease of doing investment (�ापार और �नवेश म� सुगमता होगी)
 More clarity over rights and responsibilities financial market participants [Individual Investor,
Share Broker, Stock Exchange, Depository, Underwriter, Companies etc] अ�धकार और �ज�ेदा�रयों म�
��ता होगी
 Deepening of the financial market, Mobilisation of savings to the productive channels of
economy. पूंजी बाज़ार क� जड़ों को गहरा करने म� मदद �मलेगी.
15.13.5 🗃🗃🗃🗃: 🏃🏃 SEBI: why protect investors & ⏫investors participation?
Figure 5: पूंजी बाजार क� जड़ो को गहरा करना है तो �सफर् अमीरों का नही, गरीबो क� बचत का पैसा भी जाना चािहए!
⇒ Share market scams erode publics’ hard-earned savings → alcoholism, depression, suicide and
other social ills. (जनता क� बचत का पैसा घपले म� बबार्द तो जनता म� शराब, अवसाद, आ�ह�ा और अ� सामा�जक बुराई)
⇒ Duped investors will shy away from share market & they may invest in gold / real estate = not
very beneficial to economy as it our import-bill, creates black money opportunities.
⇒ If households don’t participate in capital market → companies will have to approach the banks
to get more loans. But banks’ lending capacity is limited by CRR, SLR, PSL, NPA, PCA.(REF in
📑📑Pillar#1B2)
⇒ If more retail investors participate in capital market = “Deepening of the capital market” →
factory expansion, job creation, and economic growth. (खुदरा �नवेशक क� मदद से पूंजी बाजार क� जड़ों क� ओर
गहरा करना- तािक रोजगार सृजन और आ�थक वृ�द्ध म� मदद �मले)
15.13.6 💼💼💼💼: measures to ⏫ retail investors participation- 25% public holding in Govt
Companies
⇒ Budget 2019: For all the listed government companies, we will strive for minimum 25% public
shareholding. (आम जनता को भी सरकारी कं प�नयों के शेयर खरीदने का मौका �मले)
⇒ SEBI to raise minimum public shareholding in listed private sector companies to 35%.
⇒ 👻👻ATMANIRBHAR: minimum shareholding related norms deferred under Corona crisis.

15.13.7 🗃🗃🗃🗃: 🏃🏃 SEBI Reforms to boost investors’ confidence?
⇒ Harshad Mehta (1992), Ketan Parekh (2001) arranged money from banks, used it for rigging the
share prices to make windfall gains during Bull-runs by other investors. Once the prices crashed,
small investors suffered. ब�कों से गबन बं द करके पैसा लाए �जससे कं प�नयों के शेयर जमकर खरीद के उसक� मांग और दामों
को बढ़ाया तािक लालच म� अ� �नवेशक भी उन कं प�नयों के शेयर ऊँ ची क�मतों म� खरीदने लगे अंत म� यह लोग अपने शेयर बेच कर
भाग गए
⇒ To prevent such scams, SEBI introduced Circuit Breaker System, wherein if fluctuation in the
share prices is more than “x%” than previous day, then stock exchange must stop trading for “y”
minutes.
15.13.8 🤝🤝⏰T+1 Settlement instead of T+2
⇒ Badla System/Carry forward system: Buying of shares using borrowed money & making
promises to carry forward the settlement for upto 72 days. scamsters misused (इसक� टोपी उसके सर पे:
सौदा आज करते लेिकन पैसों का भुगतान/शेयर क� िडलीवरी ७२ िदनो बाद होती- और इस समय के दौरान वही घपलेबाज उ�ी शेयर
बेचने क� टोपी दू सरों को पहेनाते रहेता)
⇒ so SEBI discontinued Badla System (in 2001) & introduced (T+2) rolling settlement system i.e.
after trade is conducted, the parties must settle it within two working days (= buyer pays money,
seller deliver shares/bonds/securities).
⇒ Settlement cycle represents the time period within which the stock exchanges have to settle
security transactions. Until now we had T+2 days but from 2022: T+1 started.
⇒ T+1 means settlements will have to be cleared within one day of the actual transactions taking
place. (सौदा होने के एक िदन के भीतर ही पाट�ने पैसा चुकाना है और सामने वाली पाट� ने उसको शेयर क� िडलीवरी देनी है)
⇒ 🤩🤩Benefits? ⏬ Volatility, Speculation, Faster Release of shares/funds. HOW?NOTIMP.
(अ��रता,सट्टेबाज़ी)
⇒ 😰😰Foreign investors unhappy due to Time zone difference creating operational challenges for
them. (�वदेशी �नवेशक नाराज़ �ोंिक भारत म� जब सुबह होती है तो अमे�रका म� रात इस�लए एक िदन के भीतर सौदा समेटना उनके
�लए मु��ल!)

15.13.9 🛒🛒 (💻💻:�:😈😈) Dabba-trading, Insider Trading, IPF
⇒ Dabba Trading / Bucketing / Box Trading: While share trade occurs at stock exchange linked
with DEMAT accounts, the Dabba Trades occur in the unofficial books/ledgers of an
unscrupulous broker. He may or may not execute those orders in actual DEMAT account.
Investor prone to scam, govt deprived of taxes. So, SEBI declared it illegal.
⇒ Insider Trading (भेिदया लेनदेन): Whenever company launches new products, wins unique patents,
or undergoes merger/acquisition- its share prices may ⏫. If a person associated with company
uses such confidential information for buying/selling shares to make windfall gains. Such insider
trading is illegal.
⇒ SEBI requires Stock exchanges (BSE, NSE etc) and commodity exchanges (NSEL, MCX etc) to
setup Investor Protection Fund (IPF: �नवेशक सुर�ा कोष). IPF covers investors’ ‘non-speculative’
type of losses. e.g. if the other party is not delivering shares because of some court case. IPF also
promotes investor education and awareness.
15.13.10 🛒🛒 (💻💻⏱:�) Algo Trading & Co-Location

⇒ Algo-Trading = Some brokers / companies use algorithmic trading computer programmes to
automatically buy / sell securities at a speed and frequency that is impossible for a human trader.
This can be misused for manipulating the share prices. (कं �ूटर अलगो�रदम द्वारा ब�त तेज़ी से ऑडर्र देना)
⇒ While SEBI has not banned it, but issued technical measures e.g. a single broker / investor can’t
place more than 100 online orders per second. (सं पूणर् �प से प्र�तबं �धत नहीं लेिकन सेबी ने कु छ सीमाएं लगायी है)
⇒ Co-location = stock exchange allowing the share broker to install their office/computer systems
very close to Stock Exchange. Then broker's computers can monitor/buy/sell shares quicker than
a computer sitting 500 kilometers away: So, co-location gives added advantage, esp for the Algo-
Traders. (�ॉक ए�च�ज के एक दम �नकट अपना ऑिफ़स �ा�पत करना तािक कं �ूटर पर डेटा और तेज़ी से प�ँ च सक� िक)
⇒ 2021: SEBI fines NSE For violation of some norms related to co-location.
15.14🛒🛒 (🔪🔪🔪🔪) BOND MARKET REFORMS
15.14.1 🛒🛒 (🔪🔪🔪🔪: 🧔🧔🧔) Unified Bond Market (एक�कृ त बॉ� बाजार)
⇒ At present (1) Govt bonds’ (G-Sec) market (2) private sector / Corporate Bonds market are
functioning separately. Because
o (A) RBI depository for G-Sec/ T-Bill is separate. Where govts, banks, NBFCs and
primary dealers can participate, and minimum investment guidelines are high (e.g.
investor’s g-sec buying order must be minimum “X” lakh rupees, else RBI rejects
application)
o (B) SEBI regulated depositories (For non-Government = private sectors’ share/bonds) is
separate- where retail investors/common men register & participate.
⇒ 💼💼Budget-2019 promised reform to connecting these two platforms, to facilitate retail investors’
participation in G-sec. (आम जनता भी सरकारी प्र�तभू�तयां सीधे ही खरीद सक� )
⇒ 2020: SEBI proposed “unified bond market” where both G-sec & Corporate Bonds will be
available for buying/selling. This will (1) help govt mobilize public’s savings more easily for its

welfare schemes (2) Give small/retail investors easier opportunity to invest directly in G-sec.
लेिकन ये असल म� अभी बनना बाक� है।
15.14.2 🐯🐯🛒🛒 (🔪🔪🔪🔪: 🧔🧔🧔) G-Sec Trading- Retail investors’ RDG @RBI
- RBI launched “Retail Direct Scheme” in 2021.
- Under this scheme, RBI permits “Retail Direct Gilt (RDG) account” for retail investors on its E-
Kuber online platform. (आम �नवेशक �रज़वर् ब�क म� आरडीजी नामक खाता खोल पाएं गे)
- Both Resident Indians & non-resident Indians (NRIs) can open this account. (गैर �नवासी भारतीय भी)
- Then Retail investors can directly buy Treasury Bills (T-Bill), G-Secs (of Union Government),
State Development Loans (SDL are ‘G-secs’ of State Govts) and Sovereign Gold Bonds, from RBI
directly. (आम �नवेशक सीधा �रज़वर् ब�क से इन प्र�तभू�तयों को खरीद सकता है.)
- Application fees to open the account = ₹ ZERO
− 🤩🤩Benefit? 1) Earlier retail investors bought G-sec “indirectly” through mutual funds wherein
mutual fund manager (MF) charged commission/fees. Now retail investor can buy directly so
does not have to pay such commission/fees to MF managers. (�बचौ�लयों को दलाली/कमीशन नहीं देना होगा)
− 🤩🤩2) Deepening of G-Sec market through ⏫retail participation (बाजार क� जड़ों को गहरा करेगा)
15.14.3 🐯🐯🛒🛒 (🔪🔪🔪🔪: 🧔🧔🧔) G-Sec Trading: RBI's NDS-OM, OTC

⇒ RBI owns and regulates Negotiated Dealing System (NDS) for trading in G-Sec.
⇒ Clearing Corporation of India Limited (CCIL a company founded by SBI, IDBI, ICICI, LIC etc)
maintains this system.
⇒ NDS system for recording the transactions of G-Sec buy-sell. NDS has following components:
i.e. buyer/seller call each other on the telephone, make the deal about buying
Telephonic and selling and then inform the reserve bank's NDS system (ke we've done this
deal).
Buyer physically walks into the seller's office (or vice versa) and conducts the
Over-The- transaction. Later they report transactions to RBI's NDS System (ke we've done
Counter (OTC) this deal). (ऑिफ़स म� �ब� �मलके ख़रीद-�बक्र� कर�गे, बाद म� �रज़वर् ब�क को सू�चत कर�गे िक हमने ये
िकया था)
Negotiated Dealing System-Order Matching system (NDS-OM): electronic,
computer screen based, anonymous, order driven trading system for dealing in
NDS-OM G-sec's secondary market.
Buyer-seller places orders online without knowing names/phone numbers of
each other. (ख़रीददार और �वक्रेता एक दू सरे क� असली नाम पहचान नहीं जान पाएं गे)
🚩🚩🚩FAQ: Then what is E-Kuber?
⇒ Ans. E-Kuber is the core banking solution (CBS: REF Pillar1A1) platform of RBI to digitally
handle all operations of RBI e.g. NEFT-RTGS, Repo, MSF, CRR, PSLC certificate trading, G-Sec,
Sovereign Gold Bond, Retail Direct Scheme (RDG) etc.
⇒ You may think of E-kuber as a Windows Operating system, & NDS as a sub-component/excel-
software inside of it that handles G-Sec buying-selling database management/account keeping.

🔠🔠❓MCQ. Find correct statement(s): (Asked in Prelims-2021)
1. Retail investors through demat account can invest in ‘Treasury Bills’ and ‘Government of India
Debt Bonds’ in primary market. [आम �नवेशक डीमैट खाते द्वारा प्राथ�मक बाजार म� सरकारी प्र�तभू�तयों म� �नवेश कर
सकता है]
2. The ‘Negotiated Dealing System-Order Matching’ is a govt securities trading platform of the
Reserve Bank of India. [NDS-OM सरकारी प्र�तभू�तयों म� खरीद �बक्र� करने के �लए �रजवर् ब�क द्वारा बनाया गया मं च है]
3. The ‘Central Depository Services Ltd.’ is jointly promoted by the Reserve Bank of India and the
Bombay Stock Exchange. [CDSL को �रजवर् ब�क और बॉ�े �ॉक ए�च�ज द्वारा सं यु� �प से बनाया गया था]
Codes: a) 1 Only b) 1 and 2 c) 3 Only d) 2 and 3
15.15🌽🌽🧶🧶🧶🧶🧶🧶 COMMODITY MARKET, FMC, SEBI MERGER

⇒ A commodity market / exchange (व�ु बाजार) is a place where buyers & sellers trade goods in bulk
- food grains, cotton, precious metals or energy resources (coal, oil gas)
⇒ “Commodity Futures”: Type of contract for future delivery and settlement of commodity e.g.
“on 1/5/2021, I shall deliver you 500 quintals of wheat at X price”.
⇒ Commodity exchanges were under a statutory regulator Forward Market Commission (FMC)
under the Ministry of Consumer Affairs and Public Distribution.
⇒ But Jignesh Shah generated fake receipts without any commodities in the warehouses & traded at
NSEL-commodity exchange. FMC failed to prevent scam. (एक कांड हो गया था)
⇒ So first FMC transferred to Finance Ministry and FMC ultimately merged with SEBI (2015).
15.15.1 💍💍🎖🎖🎖🎖🎖🎖Commodity Market: Gold exchanges & 💼💼Budget-2021

⇒ Gold exchange is a special type of commodity market devoted only to Gold trading.
⇒ 💼💼Budget-2021: We will undertake reforms in the regulation of gold exchange markets in India.
1) SEBI will be the regulator 2) Warehousing Development and Regulatory Authority (WDRA-
Statutory body under Dept of Food and Public Distribution) Will be responsible for
Warehousing/Vaulting, Assaying, Logistics of gold exchanges. (भं डारण, गुणव�ा परी�ण, रसद के मामलों
क� �ज�ेदारी)
15.15.2 💍💍💍💍💍💍💍💍Commodity Market: Electronic Gold Receipts (EGRs)

�णर् कं प�नयां “ड�ूडीआरए” नाम क� वैधा�नक सं �ा द्वारा पं जीकृ त गोदामों म� सोने क� ईट/�ब��ट जमा कर� गे, उसक� “इले��ॉ�नक
�णर् रसीद�” सेबी द्वारा पं जीकृ त इले��ॉ�नक गो� ए�च�ज पर बेची जाएगी। ग्राहक/�नवेशक ऑनलाइन तरीके से उसे खरीद पाएगा
- Stage1: Gold companies deposit their gold in the warehouses authorized by Warehousing
Development and Regulatory Authority (WDRA, it is a statutory body under Ministry of
Consumer Affairs, Food & Public Distribution.)
- Stage2: Warehouse manager generates Electronic Gold Receipts (EGRs).
- Stage3: EGR are listed on the SEBI regulated electronic gold exchanges. → Buyer can buy the
gold electronically and be assured of the quality. Later he may even sell this EGR to another

investor or he may goto warehouse to collect physical gold.
🤩🤩Benefits: 1) Assured quality. 2) Tax evasion is difficult due to online transactions monitored by
SEBI. इसे ग्राहक को �णर् क� गुणव�ा के बारे म� सु�न��त होगी। कर चोरी मु��ल होगी �ोंिक ऑनलाइन खातों क� �नगरानी होगी.
15.16� RELATED BODIES WITH SIMILAR SOUNDING NAMES
Figure 6: अभी भी इतने सारे "कांड" �ो हो रहे है, गवनर्र साहब?- �व�मं त्री @FSDC meeting.
- Financial Stability & Development Council: Chairman – Finance Minister. Other
FSDC members – 1. RBI Governor 2. SEBI chief 3. IRDAI chief 4. PFRDA chief 5. IBBI
(2010) chief & govt officials
�व�ीय - Functions? Supervision of the economy & large financial conglomerates,
��रता coordination among the financial regulators, financial literacy and financial
और �वकास inclusion.
प�रषद - Secretariat assistance by: FinMin → Dept. of Economic Affairs (आ�थक मामलों का
�वभाग)
FSB - Financial Stability Board is a brainchild of G20. (�व�ीय ��रता बोडर्)
(2009) - Functions? Financial monitoring at global level, Coordination between national
HQ: financial regulators bodies. (अलग-अलग देशों के �व�ीय �नयं त्रक के बीच तालमेल)
BASEL - India has 3 seats in FSB: 1) Secretary of Department of Economic Affairs (IAS) 2)
Dy. Governor of RBI 3) SEBI chairman
FATF - Financial Action Task Force (�व�ीय कारर्वाई कायर्दल) is a brainchild of G7.
(1989) - India member in 2010. Function? Combating Money laundering and terror
HQ: Paris finance. (More 📑📑Pill#2) (धन शोधन और आतं क� �व�पोषण से लड़ना)
- International Organization of Securities Commissions (IOSCO) is the
IOSCO international body of world's securities regulators. SEBI is a member.
- Famous for its IOSCO Guidelines for Investors Protection & risk prevention
🔠🔠❓ 'Financial Stability and Development Council': find correct statement(s): (Pre-2016)
1. It is an organ of NITI Aayog.
2. It is headed by the Union Finance Minister
3. It monitors macro-prudential supervision of the economy.
Answer Codes: (a) 1 and 2 only (b) 3 only (c) 2 and 3 only (d) 1, 2 and 3
15.17📦📦 � � INVESTMENT FUNDS → MUTUAL FUND (MF) FOR AAM-AADMI
Figure 7: swag से कर�गे 'middle-class' का '�ागत'। Observe colors in logo, meant for attracting ordinary crowd

⇒ Mutual Fund is an Asset Management Company (AMC-NBFC) that pools savings of (retail)
investors and gives them “Units”.
⇒ MF Manager parks this money in securities & builds his ‘portfolio’.
⇒ Whatever dividend/ interest is generated from the portfolio, it is distribute among investors in
the proportion of their units.
⇒ Investor pays Entry Load (= fees for joining), Exit Load (= fees while quitting). SEBI regulates
these fees.
⇒ Due to low deposit rates in banks, people invested money in mutual funds however post-IL&FS
crisis, corona crisis, charm declining because mutual funds are subject to such market risks.
⇒ ⚾📻📻⚾🎙🎙✋ “Side pocketing”: SEBI ‘s technical guidelines to help MFs to separate their
IL&FS type stressed/toxic assets from their standard assets. Helps protecting the investors.
How?NOTIMP.
15.17.1 📦📦 � � Mutual fund → ESG, Shariya Mutual Funds

⇒ ESG Mutual Funds= These mutual funds will invest clients’ money in companies that have good
performance on Environmental, Social, And Governance (ESG) aspects.
⇒ Shariya Mutual Fund= These mutual funds will invest clients’ money in companies that are
compliant with Islamic Shariya law. E.g. They will not invest in alcohol, pork, gambling etc
related companies.
15.17.2 📦📦 � � Mutual fund → SIP, ELSS, ULIP
⇒ Traditional Mutual Fund = client invests entire amount at once. एक साथ पूरी रकम जमा करानी होती है
⇒ Systematic Investment Plan (SIP)= Mutual fund wherein client deposits small-small fixed
amounts at fixed interval e.g. month basis etc. ग्राहक छोटी-छोटी िक�ों म� रकम जमा करवाता है
⇒ Equity Linked Savings Scheme (ELSS)= It is a sub-type of mutual fund where money is locked in
for 3 years and invested in equities (shares). It’s eligible for certain benefits in Income Tax.
⇒ Unit linked insurance policy (ULIP)= client invest money in a scheme wherein → (1) some ₹₹
goes into Mutual Fund (2) some ₹₹ goes into insurance policy (📑📑Ref: HDT-Pillar#1D)
15.17.3 📦📦 � � Mutual fund → 🎛🎛 Mutual fund risk-o-meter

⇒ SEBI requires mutual fund company to disclose how much risk is present in their scheme, on a
monthly basis, thru a digital dashboard called 'risk-o-meter'. (िकतने जो�खम पूणर् तरीके से �नवेश कर रहा है)
⇒ It shows 6 categories of risk: low, low to moderate, moderate, moderately high, high, (#)very
high risk. (#) SEBI added this new category 'very high risk' in 2020-Oct.
⇒ This helps the investor to make decision- which Mutual fund he wants to joins depending on his
risk appetite. (उस िहसाब से �नवेशक तय कर� उसे कौन से सलामती पूणर् या जो�खमपूणर् �ूचुअल फं ड म� जाना है.)
15.17.4 📦📦 � � Mutual Fund: Backstop Entity- SEBI proposal for stressed MF

तं गहाल �ूचुअल फं ड क� मदद के �लए “बैक�ॉप” नाम क� नई इकाई/सं �ा

- Mutual Funds invest clients money in shares and bonds.
- Sometimes due to scam/bad news the bond becomes ‘less liquid / illiquid’
- e.g. MF bought bonds of Vodafone or Spicejet, later those companies facing difficulties in
Business. Now MF wants to exit/sell-away its bond in secondary market but no other investors
willing to buy those bonds due to negative news about Vodafone or Spicejet. So bond has
become ‘less liquid / illiquid’
- So, SEBI proposed to set up a ‘backstop entity/organization’
- Backstop entity will buy Corporate Bonds from such mutual funds to reduce their stress. So, MF
can return money to its clients.
🚩🚩🚩FAQ: How is this similar/different than Bad BANK / RBI’s Special Windows for MF/TLTRO?
How will Backstop entity cover its own losses? = NOT IMPORTANT because this organization is yet
to be established.
15.17.5 🛒🛒 (🔪🔪🔪🔪: 🧔🧔🧔) Bond Buying Institution in 💼💼Budget-2021

⇒ Secondary market-Provides liquidity to the investor -Since he can sell existing shares/bonds and
hand to others → motivation to buy new shares/bonds in primary market → capital to healthy
new company.
⇒ But in India, the secondary market for bonds is not fully developed. Inadequate number of large
players → Difficult to re-sell the bonds at the right prices → 😰😰discourages the investors from
bonds → Difficult for companies to mobilize ₹₹ (िद्वतीयक बाजार म� बांड को बेचने म� असु�वधा के चलते �नवेशक
बांड से कतराते ह�)
⇒ So, 💼💼Budget-2021: Proposed to setup a body/organization to purchase investment grade debt
securities. This body will buy bonds both in stressed and normal times.
⇒ 🤩🤩Benefit? development/Deepening of the Bond market. (बांड बाजार क� जड़ों को गहरा कर�)
⇒ ✋Exact name of the organisation? headquarter? Ans. details yet to be announced.
15.18📦📦 � � INVESTMENT FUNDS → HEDGE FUND (हेज फ�) FOR RICH-AADMI
Figure 8: Swag से नही कर�गे 'middle-class' का '�ागत'। Observe ‘premium’ logo-designs to attract rich people
⇒ Special type of Mutual Fund meant for HNI (High Net Worth Individual) who wants high risk
high return. SEBI norms: Minimum investment per person is ₹1 crore. (�सफर् अमीरों के �लए है)
⇒ Hedge Fund manager will invest their money in Junk Bonds, Risky assets; he’ll do risky trading
activities such as Arbitrage, Leverage, Short Selling, Future&Options(F&O) trading, Derivatives
Trading etc. to generate maximum return. (how is that done in real life, what do these words
mean? = UPSC-CSE not for recruitment of HF managers.)
15.18.1 📦📦 � � Investment Funds: “Accredited Investor”

Deleting from handout. Not finding exam-worthy anymore.

15.18.2 📦📦 � 🏬🏬 🛩🛩 Investment Funds → REITs / InvITs: for rich-aadmi
REITs: Real Estate Investment Trusts InvITs: Infrastructure Investment
-(भू-भवन-सं प�� नवेश �ास ) Trusts-(अ�धसं रचना)
Who can HNI / institutions: Min. ₹2 lakh ₹10 lakh. ₹1 lakh
invest? ₹50,000 investment (SEBI ⏬ reduced minimum limits
in 2019 to attract more investors)
Manager parks in real estate projects that are soon to In airport, highway, thermal plants,
the money in? complete. gas grid etc. He’ll earn from toll
He’ll earn income from rent / sale. collection at highways, services fees
at airports etc.
Example Blackstone-Embassy group IRB, India-grid
✅Benefits of REITs and InvITs-
 Stressed developer gets new finance to finish the project while HNI gets new opportunity to
invest his money, and he may also sell the units to third party via stock exchange.
 SEBI permitted these instruments in 2014. Later SEBI relaxed technical norms related to capital,
leverage, issue size but they are not important for us. हर तकनीक� �नयम अपने �लए काम का नहीं
15.18.3 📦📦 � � Investment Funds → Sovereign Wealth Fund (सं प्रभु धन कोष)

⇒ State owned investment fund, wherein central bank, finance ministry and other public sector
financial intermediaries park their surplus fund. →money used for investment.
⇒ E.g. 2020-Jun: Abu Dhabi Investment Authority (ADIA) bought 1.16% of Reliance Jio for
₹5600+cr. Singapore's GIC sovereign wealth fund, Qatar Investment Authority (QIA) also active
in Indian market.
⇒ Sidetopic: What is National Investment & Infrastructure Fund (NIIF) Ans. Ref: Pillar#5:
Infrastructure
15.19📦📦 🏛🏛 INVESTMENT FUNDS → CPSE-EXCHANGE TRADED FUNDS (ETF: ईटीएफ)

⇒ Disinvestment (�व�नवेश): government sells it shares from Central Public Sector Enterprises
(CPSE: क� द्रीय सावर्ज�नक �ेत्र के उद्यम) but does not reduce its shareholding below 51%.
⇒ If Govt’s shareholding reduced below 51%, then it is called Privatization (�नजीकरण), although
NITI prefers the term ‘Strategic Disinvestment’. (More in Pill#2)
⇒ 2014: Govt wanted to disinvest 10 CPSE (ONGC, GAIL ltd etc). If govt tried to sell individual
company- shares, it would be more time consuming, and govt may not get good prices for each
company.
⇒ So, Govt gave CPSE-shares to a fund manager Goldman Sachs - who created new securities out
of it, called “Exchange Traded Funds (ETF)”, and made a “New Fund Offer (NFO)” to the
public to subscribe to these securities at ₹ 10 per unit.

⇒ If an investor holds the ETF → he will get returns from the dividend generated by those CPSE-
companies in the backend. He may also sell these ETF to a third party via stock exchange, hence
called Exchange Traded Funds.
Figure 9: how do exchange traded funds (ETF) work?

⇒ BHARAT-22: Another CPSE-ETF when Govt wanted to disinvest shares from 22 companies
including CPSE, PSBs and UTI using ICICI Prudential as fund manager (2017-18). However,
PSB-NPA problem → poor dividends → BHARAT-22 not giving good returns, so, investors
response was initially lukewarm.
⇒ Later govt announced, “We’ll give the ELSS-walla income tax benefits to CPSE-ETF-investors as
well” to attract investors.
15.19.1 (🦁🦁🔪🔪)📦📦: (🏛🏛🛒🛒🛒🛒) Bharat Bond (Debt) ETF (2019-Dec)
⇒ Fund Manager (Edelweiss Asset Management ltd) → He’ll issue Bharat Bond-ETF.
⇒ Maturity: 3 yrs and 10 years. Unit Size: ₹1000 each. So even middle-class investors buy these
Bond-ETFs.
⇒ Fund managers will invest this ₹₹ into a basket of bonds issued by Central Public Sector
Enterprises, Central Public Financial Institutions (CPFIs such as public sector bank and
insurance companies) and other Government organizations. ETF will be tradable at the stock
exchange.
👍👍 Bharat bond ETF: Benefits?
 For Government companies = Easier and more efficient to borrow ₹₹ instead of individually
launching their bonds in the market. एक एक सरकारी कं पनी अलग से बांड जारी करती तो शायद �नवेशक सब को नहीं
�मल पाते
 For Investors = Safety, assured return on bonds, irrespective of Government company’s profit.
 ⏫retail participation → deepening capital market. (खुदरा �नवेशक क� मदद से पूंजी बाजार क� जड़ों क� ओर
गहरा करना)
 💼💼Budget-2020: given success of Bharat bond ETF, we are planning to launch another debt-
ETF containing G-sec. This will help the retail investors to invest in G-sec.

Misc. : Gold-ETF: Investors give money → manager buys gold for safekeeping and trades it
depending on price movements → returns are divided among the unit-holders. In between, the
investor may sell his Gold-ETF to third party via Stock Exchange therefore they’re also Exchange
Traded Funds. How/why/NOTIMP
15.19.2 (🦁🦁🦁🦁)📦📦: (🏛🏛🏛🏛🏛🏛) CPSE-ETF vs Mutual Fund
Table 3: Sad that I’ve to spoonfeed this much
Mutual Fund CPSE-ETF
Objective = invest clients’ money in Objective different than Mutual Fund
shares/bonds (1) help Government for its disinvestment
(2) help Government company to borrow money
(Bharat-Bond ETF)
fund managers may buy/sell variety of He’s not doing that. His objective given above.
shares and bonds of Government
companies and private sector companies
for best returns through out the scheme.
a fund manager may also change the His portfolio (list of govt companies’ shares/bonds)
composition of the portfolio for example if is fixed. It’ll not change.
Infosys shares are not performing well →
he may sell them and fill up the box with
Wipro shares for better dividend.
15.20📦📦 INVESTMENT FUNDS → ALTERNATIVE INVESTMENT FUNDS (AIF)
It’s a technical classification by SEBI (वैक��क �नवेश कोष)

- AIF Category I: They generate positive spillover effects on the economy. Example: Venture
Capital Funds, Angel investors fund, SME Funds, social venture fund, Infrastructure funds. SEBI
keeps relaxed / lighter norms on them. जो िक अथर्तंत्र म� सकारा�क असर उ�� करते ह�
- AIF Category II: Neither in Cat-1 nor in Cat-3 E.g. Private Equity or Debt Fund. जो ना तो ऊपर क�
श्रेणी म� है ना नीचे क� श्रेणी म� है
- AIF Category III: They undertake excessive risk to generate high returns in short period of time.
E.g. Hedge Funds. SEBI norms are stricter/heavier on them, because otherwise they may
destabilize the capital market. जो िक अथर्तंत्र म� जो�खम बढ़ाते ह�, नकारा�क असर उ�� करते ह�
15.20.1 (🦁🦁🦁🦁):(🏗🏗🏠🏠) Govt’s AIF for Real Estate Sector (2019)
⇒ 2019: Govt to setup an alternative investment fund (AIF Category-II) using ₹₹ of govt, SBI and

LIC. (Total 25,000 cr). [Moral outrage: why not in Cat1? Ans. Send your suggestion to SEBI.]
⇒ AIF Fund manager: SBI Cap ventures ltd.
⇒ AIF Fund manager will give ₹ (as Debt finance) to builders with unfinished housing projects →
demand for steel, cement, construction workers= economic growth.
15.21🗃🗃 ⏱ FORWARD / FUTURE CONTRACTS & CALL / PUT OPTION
Figure 10: भ�व� मे खरीदने का सोदा तो िकया, लेिकन दाम �गर जाए, तो खुद को बचाऊँ तो कै से?
- A Forward / Future contract is a customized contract between two parties where settlement takes
on a future date at a price/quantity agreed upon today. E.g. on 1/5/2021 I shall sell you 100 nos. of
Infosys shares at ₹1000 each.
- In such contracts, there is a risk of other party not honoring commitment if he’s getting better
deal elsewhere in the future. So, for protecting (=hedging) themselves, they (=buyer or seller)
may buy “Option” from a third party by paying fees. नुकसानी से बचने के �लए बीमा �लया जाए
- Option is a type of insurance for executing the forward/future contract in a manner beneficial to
them e.g. I’ll sell you for ₹1000 on X date, & you must buy, but if I’m getting another buyer who
is willing to pay ₹1500 then I may not sell you & you can’t compel me. Such ‘insurance options’
are further subdivided into Call Option and Put Option, their internal difference & real-life
mechanism not imp. for UPSC.
🔠🔠❓Which one of the following terms is used in Economics to denote a technique for avoiding a
risk by making a counteracting transaction? [UPSC-CDS-2016-I]
(a) Dumping (b) Hedging (c) Discounting (d) Deflating
15.22🗃🗃 🔗🔗 DERIVATIVES & SWAPS (�ु�� प्र�तभू�तयां और अदला-बदली)

⇒ A derivative is a contract whose value is derived from the value of another underlying asset
which could be a share, bond, commodity or currency. इस प्र�तभू�त का मू� िकसी और सं प�� से उद्भ�वत होकर
आता है
⇒ They’re usually generated by the process of ‘securitization’. E.g. NHB taking loan papers from
banks, using them to generate new Mortgage Backed Securities. (प्र�तभू�तकरण क� प्रिक्रया से इसे बनाते ह�)
⇒ SWAP: is derivative instrument to swap one financial asset with another financial asset (usually)
to reduce the risk e.g. Currency Swap Agreement between two countries to protect themselves
against dollar volatility (more in 📑📑Pillar#3).
⇒ Similarly, there are Credit Default Swap (CDS) agreement against the risk of default, Interest
swap agreement to protect against volatility in interest rates. But their mechanisms NOT IMP.

15.22.1 🗃🗃🗃🗃: 🚛🚛🚛🚛🚛🚛 Bilateral Netting of Qualified Financial Contracts Act 2020
DELETED from 2022 because outdated/faded topic.
15.23👻👻👻👻👻👻 PARTICIPATORY NOTES (P-NOTES: पा�ट�सपेटरी नोट्स)

⇒ A foreigner wishes to invest his money in India but does not want to go through the hassles of
registering with SEBI, getting PAN card number, opening a DEMAT account etc. So, he will
approach a SEBI registered foreign institutional investor (FII) / foreign portfolio investor (FPI)
such as Morgan Stanley, Citigroup or Goldman Sachs. He’ll pay them & instruct them to
purchase particular shares and bonds and store them in their Demat account.
⇒ Then FII will give him P-Notes, and he’ll receive interest and dividend accordingly.
⇒ He may also sell those P-notes to a third party. (िकसी अ� �� को भी बेच सकता है)
⇒ P-Notes are Offshore Derivative Instruments that derive the value from the underlying Indian
shares and bonds. (अपतटीय �ु�� उपकरण)
⇒
⇒ Figure 11: �बना SEBI पं जीकरण के भारतीय पूंजी बाजार मे �नवेश क�, तो कै से?
😱😱P-Notes are harmful for Indian economy because:
⇒ P-note investors are not directly registered with SEBI. Identity of the actual investor, source of
funds remain disguised= chances of Tax evasion, money laundering, terror finance (इसके �नवेशक ने
�यं सेबी म� पं जीकरण नहीं करवाया वह पैसा िकधर से लेकर आया यह सब जानकारी नहीं �मल पाती, कर चोरी, काले धन को वैध
बनाना,आतं क� �व�पोषण)
⇒ If P-Note owner sells his P-Notes to another foreign investor, Government of India may be
deprived of taxes. (Compared to a scenario where Indian share owner is selling his shares to
another Indian investor at profit, then government gets securities transaction tax and capital

gains tax on his profit, & he can’t dodge it because DEMAT accounts linked with PAN card.
More on PAN card@Pillar#2 → BlackMoney)
Therefore, SEBI tightening the control P-Notes e.g. “X” category of FPIs can’t issue P-Notes. “Y”
category of FPI can issue P-Notes but every time they issue P-notes-they’ll have to deposit $1,000 to
SEBI etc.
Table 4: Sad that even for such simple things I’ve to create such spoonfeeding-tables just to prevent FAQs from weak students
P-Notes Foreign investor wants to invest in Indian share/bond market without
registering with SEBI. He wants to buy Indian companies’ shares/bonds in
India. �फरंगी आदमी भारत क� कं पनी म� �नवेश करना चाहता है लेिकन सेबी से पं जीकरण नहीं
करवाना चाहता
Bharat-DR Foreign Company wants to Indian to invest in its foreign/firangi-shares,
without registering with SEBI. �फरंगी कं पनी अपनी कं पनी के शेयसर् भारतीयों को बेचना
चाहती है लेिकन सेबी से पं जीकरण नहीं करवाना चाहती
ADR/GDR Non-American Company wants to American people to invest in its shares
without registering with American SEBI. गैर-अमे�रक� कं पनी अपनी कं पनी के शेयर
अमरीक� जनता को बेचना चाहती है लेिकन अमे�रका के शेयरबाजार �नयं त्रक से पं जीकरण नहीं
करवाना चाहती.
GDR- similar concept, refer to respective segment.
Masala/Panda/ Foreign company/org wants to borrow money, in a particular currency from
Kangaroo Bonds a particular country. Refer to respective segment
etc
🔠🔠❓Which of the following is issued by registered foreign portfolio investors to overseas
investors who want to be part of the Indian stock market without registering themselves directly?
(Pre19-SetA Q67) (a) Certificate of Deposit (b) Commercial Paper
(c) Promissory Note (d) Participatory Note
15.23.1 ✍ Conclusion: Financial Markets- �व�ीय बाजारों के बारे म� �न�षर्

 A well functioning financial market catalyzes the process of economic development. It is
therefore essential that such markets operate in a free, fair, competitive and transparent manner.
एक सु�वक�सत �व�ीय बाजार आ�थक �वकास क� प्रिक्रया मे उद्दीपक का काम करता है। ऐसे बाजार का �तं त्र, �न��, प्र�त�ध� और
पारदश� �प से सं चा�लत होना आव�क है।
 Deepening the financial market helps mobilize the savings of poor households into the
productive channels of the economy. पूंजी बाजार को गहरा करने से गरीब प�रवारों क� बचत को अथर्�व�ा के �व�भ�
�ेत्रो को िक्रया��त करने मे म� मदद �मलती है।
 Aforementioned initiatives /issues are greatly important in that regard need to be addressed in
priority basis. इस सं बंध म� पूव�� पहल / मुद्दे ब�त मह�पूणर् ह� / उ�े अग्रताक्रम से सं बो�धत करना आव�क.
Pillar 1C2: Corporate Governance

15.24🏙🏙🏙🏙 COMPANY TYPES
15.24.1 👶👶Company types based on incorporation
🤴🤴Chartered Setup by a charter given by a king / queen. E.g. East India Company in
Companies 1600. (चाटर्डर् कं प�नया)
⚖Statutory Setup by special acts of Parliament or State legislature. E.g. RBI, LIC,
Companies SBI. (वैधा�नक कं प�नया)
✒Registered Registered under the Companies Act, 1956 (and later 2013)
Companies e.g. Tata Motors, Infosys. (पं जीकृ त कं प�नया)
15.24.2 🏙🏙🏙🏙 Company types based on number of members
Private ltd. Public Limited Company (Companies Act 2013)

Members Min. 2 to Min. 7 to Max. unlimited number (depending on how many
Max. 200 shares issued & purchased by the people)
can they Can’t ⇒ A public ltd. company can invite public at large, to subscribe
invite public to its shares and bonds.
at large, to ⇒ If their shares are listed on a stock exchange (BSE, NSE etc),
buy shares
it’s a ‘Listed Public Limited Company’ (e.g. Reliance), else
/bonds?
it’s an ‘Unlisted Public Limited Company’ (e.g. India Post
�ा सामा� जनता
Payment Bank : IPPB)
को �व�ापन देकर
अपने शेयर-बांड
बेच सकते है?

Private ltd. Public Limited Company (Companies Act 2013)
Directors 2-15 ⇒ Min 3 to Max 15. out of them one must be Indian Resident,
(Min-Max) 1 must be Woman and 1/3rd of the directors must be
independent directors.
⇒ Independent directors are persons without any pecuniary
interest in company, they are supposed to protect minority
shareholders’ interests. (अ�सं �क शेयरधारकों के िहतों क� र�ा करने
के �लए �तं त्र डायरे�र)
Term limit N/A Their directors have age limit, term limit.
Corporate Norms Companies Act requires them
Governance either not ⇒ to hold specific number of annual meetings of board of
Norms applicable directors, norms for quorum, mechanism for e-voting,
or relaxed. ⇒ have to appoint Company Secretary,
UPSC- ⇒ Implement mechanism for protecting whistleblowers
CSE≠CA And so on…
FAQ: How can pvt limited company have shareholding?
- Ans. They can ask friends and family, venture capital funds, angel investors and other type of
investors to invest in the company. They cannot put an advertisement in the newspaper that we
are inviting the public at large to buy our shares. IF they want to invite public at large, → they
need to convert registration from private limited company to public limited company.
- Companies usually start as originally as private limited companies. e.g. Infosys (private ltd) in
early 80s → when their business grows and they want more capital they will convert into public
limited companies. → they will issue shares for the first time for the public at large → so we
call it Initial Public Offer (IPO) e.g. same infosys (public ltd) in early 90s launched IPO..
- In future same public ltd. company may also require more capital so again they will issue more
shares for the the second time, third time etc. → then we call it Follow on Public Offer (FPO)
15.24.3 🏙🏙🏙🏙 Company types based on Ownership
🧔🧔 Government / Public Sector / सावर्ज�नक �ेत्र 🤵🤵 Private Sector / �नजी �ेत्र क�
When Government owns 51%/> shares. When private parties own 51%>. E.g. Reliance,
Examples: Steel Authority of India (SAIL), Tata, Adani
India Post Payment Bank (IPPB)
Holding Company / �नयं त्रक कं पनी Subsidiary Company / �नयं �त्रत कं पनी
A company that owns majority shares in A company that is controlled by a parent
another company. E.g. Tata Sons ltd. holds holding company. E.g TCS, Tata Steel, Tata
majority shares of Tata Consultancy Services Sky are subsidiary co of Tata Sons.
(TSC), Tata Steel, Tata Sky etc.
15.24.4 🏙🏙🏙🏙 Company Types: Misc.
Under ⇒ One Person Company: special type of private ltd company having only
Companies Act one member. 💼💼Budget-2021: One Person Companies (OPCs)- Legal

reforms in Companies Act to [1) allow NRIs to easily register OPC in
India [2) OPC can be converted to other types of companies any time
⇒ Not for Profit Company: e.g. GSTN, NPCi etc. their profit is re-invested
in business expansion. They get certain tax benefits & relief in how
frequently they’ve to submit data to MCA. (लाभ-रिहत कं पनी, जो कं पनी मुनाफे के
�लए नहीं बनाई गई)
⇒ Dormant Companies: A) setup to start business in future B) setup to store
intellectual property C) not filled annual returns for two consecutive
years. (�न��य/सु� कं पनी)
👬👬👬👬Under ⇒ Limited Liability Partnership (LLP) Company is formed by minimum 2 or
LLP Act 2008 more partners.
सी�मत देयता ⇒ Individual partners are shielded from joint liability created by another
भागीदारी अ�ध�नयम partner's wrongful business decisions or misconduct. E.g. Vajiram and
Ravi IAS Study Centre LLP
⇒ LLP’s registration fees, auditing/reporting norms, tax liabilities, winding
up process etc. are more flexible than a (public or pvt) ltd. company
registered under Companies Act. उनके �लए �नयमो म� �रयायत/आसानी होती है।
Under Indian ⇒ A Partnership firm is formed by minimum 2 or more partners.
Partnership ⇒ Each partner is liable jointly with all the other partners for losses,
Act 1932 wrongful biz. decisions and misconduct.
15.24.5 🏙🏙🏙🏙 Corporate Governance → Small Companies given compliance relief
⇒ 💼💼Budget-2021: Companies with paid up capital not more than ₹2cr & annual turnover not
more than ₹20cr = treated as ‘Small Companies’.
⇒ They’ll be given relief in Companies Act related compliance e.g. how frequently they’ve to
submit accounts and ownership related documents to the Ministry of Corporate Affairs etc.
15.24.6 🏙🏙🏙🏙 Commercial Organizations: Other Types
PSU, CPSE Ref: Pillar2: Disinvestment
MSME Ref: Pillar1D: financial inclusion, Pillar4B
Startups Ref: Pillar4B
15.24.7 👬👬👬👬👬👬 Corporate Governance → LLP settlement Scheme 2020
सरकार म� कु छ द�ावेज जमा कराने होते ह�. अगर नहीं कराए तो इतना दंड भरकर मामला सुलझा लेते ह� / मुकदमा दजर् नहीं कर�गे
⇒ Limited Liability Partnership (LLP) companies are required to submit accounts and ownership
related documents to the Ministry of Corporate Affairs.
⇒ But many of them did not submit the documents on the deadline → Govt ordered them to pay
late fees/penalties, threatened them with prosecuting cases under the LLP Act and cancelling
their registration.
⇒ LLP settlement Scheme, 2020: “If you submit the required documents between x to y date →
Then you will have to pay less penalty and we will give you immunity from prosecution.”, said
the Government.
⇒ 💼💼Budget-2021: we’ll amend LLP Act for further ease of doing biz.

15.25🔨🔨 STATUTORY BODIES IN MINISTRY OF CORPORATE AFFAIRS (MCA)
15.25.1 🔨🔨 � Competition Commission of India (भारतीय प्र�त�धार् आयोग)
⇒ Competition among companies= consumer gets goods and services at the most competitive /
affordable prices. कं प�नयों के बीच �धार् होगी तभी तो ग्राहक को अ�� सेवा और िकफायती दाम म� चीजे �मल�गीं
⇒ Therefore, government must prevent cartelization (price fixing or production fixing by a group
of Companies), prevent monopoly (single company commanding the production / supply),
protect consumers’ interests and ensure freedom of trade.
⇒ 1970: Monopolies and Restrictive Trade Practices (MRTP) Act.
⇒ Later MRTP Act replaced with Competition Act, 2002- which has a statutory regulator
Competition Commission of India (CCI: 1 Chairman + 6 Members)
⇒ In past, CCI has imposed penalties on cement companies, real estate companies. It is also
investigating Airtel, and other telecom companies for alleged cartelization.
15.25.2 🔨🔨 � Insolvency and Bankruptcy Board of India (IBBI)

This too is a statutory body under the Ministry of Corporate Affairs (MCA). Read previous
Pillar#1B-2: NPA-handout for more on IBC Code.
Table 5: Bodies under Companies Act 2013
Features National Company National Financial Investor Serious Fraud
Law Tribunal Reporting Education & Investigation
(NCLT) Authority (NFRA) Protection Fund Office (SFIO)
रा�ी� य क�नी �व�ध रा�ी� य �व�ीय प्र�तवेदन �नवेशक एवं �श�ा र�ण गं भीर धोखाधडी अ�ेषण
अ�धकरण प्रा�धकरण कोष कायार्लय
Members Judicial + technical. Chairman + Boss: Corp. Affairs Civil servants &
They’ve benches members Secretary (IAS). financial experts
@Delhi, Kolkata, Plus, members
Jaipur etc. from RBI, SEBI,
financial experts
Appeal NCLAT (Appellate NFRAA (Appellate Regular Courts Regular Courts
tribunal) Authority)
Cases Hear the cases Sets standards for They use Investigate white-
related to Companies Auditors & (CA), in unclaimed money collar (financial)
Act, Board room listed companies from shares/bonds frauds. Powers to
battles, Merger- and large unlisted for financial search, seize,
Acquisition, companies. If literacy and arrest.
Corporate malpractices-> awareness Once SFIO gets
investigate and case, other

Features National Company National Financial Investor Serious Fraud
Law Tribunal Reporting Education & Investigation
(NCLT) Authority (NFRA) Protection Fund Office (SFIO)
Insolvency & debar them, Powers agencies (like CBI)

Bankruptcy (I&B) of civil court. can’t proceed.
15.25.3 🔨🔨🔨 Ministry of Corporate Affairs also associated with:
Chartered Accountants Regulates the CA profession through a
Act 1949 Statutory body: Institute of Chartered Accountants of India (ICAI).
ICAI also has IPA status under I&B Code.
Company Secretaries Act, Statutory Body: Institute of Company Secretaries of India (ICSI).
1980 Also has IPA status. REF (More in 📑📑Pillar#1B2)
Cost and Works Statutory Body: Institute of Cost Accountants of India (ICAI). Also
Accountants Act, 1959 has IPA status. What does it mean? REF (More in 📑📑Pillar#1B2)
Legislative ⇒ 1860: Societies Registration Act- for registration of literary,
Responsibilities of MCA scientific and charitable societies. E.g. Sahitya Akademi,
National School of Drama etc. जो मुनाफे के �लए नहीं लेिकन कला सािह�
�व�ान के प्रसार के �लए बने
⇒ 1932: Partnership Act
⇒ Companies Act 1956 → 2013.
⇒ 2008: Limited Liability Partnership Act
E-governance initiatives ⇒ INC-29 online form to registration of new company. Later it
of MCA was replaced with Simplified Proforma for Incorporating
Companies (SPICe) online form.
⇒ MCA-21 portal, where companies can file online documents
related to Companies Act compliance. MCA21 Version 3.0=
this latest Version 3.0 portal will have additional modules for e-
scrutiny, e-Adjudication, e-Consultation and Compliance
Management.
Officers Indian Corporate Law service (ICLS) via UPSC CSE-exam
15.26�👬👬 CORPORATE GOVERNANCE (कॉप�रेट शासन)
Figure 12: तुम मेरे पापा के दो� हो? - Cyrus Mistry

It is a way of directing the company to protect the interest of all stakeholders, and ensure three types
of compliance: (कं पनी �नद��शत करने का एक तरीका �जससे िहतधारकों क� र�ा हो)

Compliance Example(s)
⇒ Company obtaining Legal Entity Identifier (LEI) number as mandated
by RBI.
Legal-Regulatory
⇒ Company setting up ‘Internal Complaints Committee’ as mandated by
कानूनी-�नयामक
Sexual Harassment of Women at Workplace (Prevention, Prohibition
and Redressal) Act, 2013 / “POSH Act”
⇒ Companies keeping balance sheets as per the Ind-AS accounting
Technical standards.
तकनीक� ⇒ Automobile company producing car engines as per BHARAT-Stage
emission norms.
Moral-Ethical Gillette scrapping the ad-contract with cricketer Hardik Pandya for his
नै�तक-सदाचार-पूणर् sexist comments against women on Koffee with Karan Show.
⇒ Absence of Corporate Governance leads to fraud, embezzlement (ग़बन), erosion of investors’
confidence. E.g. Satyam Computer Scandal (Chairman Ramalinga Raju manipulated account
books), Boardroom battles at Tata Group (Cyrus Mistry vs Ratan Tata) and Infosys Group
(Narayana Murthy vs Vishal Sikka fighting, 2019: whistle-blower complaint about financial
irregularities), ICICI (Boss Chanda Kochhar gave ₹3000 crore loan to Videocon company
without due-diligence, which turned NPA.)
⇒ Therefore, Companies Act 2013 mandates companies to impose term limits on directors,
appoint independent directors, one person can’t become director in more than “X” number of
companies, one CA can’t audit more than “Y” number of companies, Company has to setup
whistle-blower protection (��सल�ोअर सुर�ा) mechanism, Company can’t give loan to its directors
and so forth.
⇒ An auditor is authorised personnel that verifies the accuracy of financial records. Their primary
objective is to protect businesses from fraud. Companies Act → Companies Auditor’s Report
Order (CARO) = Auditors have to annually submit reports to the Ministry of Corporate Affairs
⇒ Companies Act also has provisions for Related Party Transactions (RPT) to avoid
scam/embezzlement. (More in 📑📑Pillar#4: Ease of Doing Biz)
15.26.1 �👬👬 Corporate Governance: notable Committees
⇒ Notable committees for improving corporate governance in India: Kumar Mangalam Birla
(1999), Narayana Murthy (2003), Adi Godrej (2012), Uday Kotak (2017).
⇒ Further, SEBI too can issue directives to Public Limited Companies in the interest of investors,
beyond what is required under Companies Act. Such as…
Table 6:✋ not imp to memorize all provision. just observe pattern. Most of the Deadlines postponed due to Corona
SEBI implemented Uday Kotak committee’s suggestions From 2020-Apr#
Split CEO/MD and Chairman. One person can’t occupy Top 500 listed cos.
both positions in his company (e.g. Gautam Adani) although now SEBi

SEBI implemented Uday Kotak committee’s suggestions From 2020-Apr#
made it voluntary
now. (�ै��क)
Companies Act requires min.3 directors in Public Listed Top-2000 listed
company, but SEBI mandated to have min. 6 directors cos
Companies Act doesn’t prescribe gender of independent Top 1,000 listed
director but SEBI mandated atleast one independent woman cos.
director.
one person can serve as director in how many companies? 7
(Companies Act: Max.10), but SEBI required
⇒ #👻👻ATMANIRBHAR = SEBI deferred many of above guidelines. Dynamically changing info so
we need not chase it @ball-by-ball commentary.
15.26.2 💰💰(🏥🏥🏥🏥)CSR: Corporate Social Responsibility (कॉप�रेट सामा�जक �ज�ेदारी)

कं पनी ने अपने मुनाफे का कु छ िह�ा समाज क�ाण म� लगाना होगा
⇒ Mandated under Companies Act 2013: Last 3 years' avg. profit → spend 2% of that on CSR
(education, environment, public health, sanitation, disaster management etc.)
⇒ Applicable on both public ltd and private ltd. with very huge profit / turnover / networth
(🎓🎓✋what’s the difference between these terms, what’s the exact figure? Ans. UPSC is not
Chartered Account exam.)
⇒ Ministry of Corporate Affairs (MCA) gives National CSR Awards to companies.
15.26.3 👻👻👻🗃🗃⚖ ATMANI: Corporate Governance → Companies Act relaxed

ब�त सारे अपराधों म� अब जेल नहीं होगी के वल जुमार्ना, और जुमार्ने क� रकम भी कम क� गयी
⇒ Companies Act requires the companies to hold Meeting of the board of directors, and meeting of
the shareholders every “x” number of days etc. This norm is relaxed due to corona lockdown.
Guidelines also provided for e-voting and video conferencing.
⇒ Companies (Amendment) Bill, 2020 → Many offences under Companies Act have been
decriminalized i.e. villains can settle by paying fines, & he’ll not face arrest/jail.
o E.g. if Corporate social responsibility reports not submitted to Government on time,
delay in holding Annual General Meeting of the shareholders etc.
⇒ ⏬ Fines/penalties for Small Companies, One person Companies, Start Ups and Producer
Companies*.
o *A Producer Company (PC) is a registered company by a group of farmers/
agriculturists. We will learn in 📑📑pillar4A: Farmer Producer Company (FPC)

15.26.4 ✍ Conclusion: Corporate Governance- �न�षर्
⇒ A healthy corporate sector plays an important role in creating jobs, improving exports, and
boosting GDP growth rate. एक �� कॉप�रेट �ेत्र रोजगार-�नमार्ण/सृजन, �नयार्त और जीडीपी �वकास दर को बढ़ाने म�
मह�पूणर् भू�मका �नभाता है।
⇒ But, lack of corporate governance erodes investors confidence and prevents deepening of the
financial market. Thereby it harms economic growth of a country. लेिकन, कॉरपोरेट शासन क� कमी/
धांधली- �नवेशकों के �व�ास को ख� करती है, और �व�ीय बाजार को गहरा करने से रोकती है। �जससे देश क� आ�थक वृ�द्ध को
नुकसान प�ँ चाता है।
⇒ Aforementioned initiatives /issues are greatly important in that regard need to be addressed in
priority basis.इस सं बंध म� पूव�� पहल / मुद्दे ब�त मह�पूणर् ह� / उ�े अग्रताक्रम से सं बो�धत करना आव�क.
15.26.5 ✍🎷🎷 Mock Questions for Mains (GSM3/250 Words Each)

1) (GSM2-2015) In the light of the Satyam Scandal (2009), discuss the changes brought in
corporate governance to ensure transparency, accountability. स�म �� डल (2009) पश्�ात पारद�शता,
जवाबदेही सु�न��त करने के �लए कॉप�रेट प्रशासन म� लाए गए बदलावों पर चचार् कर�।
2) (GSM3-2015) Craze for gold in Indians have led to a surge in import of gold in recent years and
put pressure on balance of payments and external value of rupee. In view of this, examine the
merits of Sovereign Gold Bond Scheme and Inflation Indexed Bonds (IIB). भारतीयों म� सोने के �लए
सनक के चलते हाल के वष� म� सोने के आयात म� वृ�द्ध और भुगतान के सं तल
ु न और �पये के बाहरी मू� पर दबाव बढ़ा है। इसे देखते
�ए, सं प्रभु �णर् बॉ� ��म और मुद्रा��त सूचकांिकत बांड क� खू�बयों क� जांच कर�।सं तुलन और �पये के बाहरी मू� पर दबाव
डाला है। इसे देखते �ए, सं प्रभु �णर् बॉ� ��म और मुद्रा��त सूचकांिकत बांड क� खू�बयों क� जांच कर�।
3) "Just as good governance is necessary for vibrant Indian democracy, corporate governance is
necessary for vibrant Indian economy." elaborate. "�जस प्रकार जीवं त भारतीय लोकतं त्र के �लए सुशासन आव�क
है, उसी प्रकार जीवं त भारतीय अथर्�व�ा के �लए कॉप�रेट शासन आव�क है।"
4) Discuss the significance of deepening the capital market to resolve the Twin Balance sheet
Syndrome (TBS) in Indian Economy. दोहरे तुलन पत्र क� चुनौती को हल करने के �लए पूंजी बाजार को गहरा करने के
मह� पर चचार् कर�।
5) Discuss the significance of the Securities Market Code and Investors Charter in deepening the
capital market of India. भारत के पूंजी बाजार को गहरा करने म� प्र�तभू�त बाजार सं िहता और �नवेशक अ�धकारपत्र के मह�
पर चचार् कर�।
6) Why are Indian financial regulators apprehensive about (1) P-Notes (2) Cryptocurrencies?
भारतीय �व�ीय �नयामक (1) पी-नोट्स (2) िक्र�ोकर�सी से आशं िकत �ों ह�?
📑📑Next Handout: 1D: Insurance, Pension, Financial Inclusion

1D: ⚰Insurance, Pension & Financial Inclusion
Table of Contents
16 ⚰Insurance (बीमा): Meaning and Significance ............................................................................................ 237
16.11.1 Insurance Principles (�सद्धा�: hindi not required but understand gist for case studies) .......... 237
16.12 ⚰🏺🏺 History of insurance in India (भारत मे बीमा कं . का इ�तहास) ........................................................ 237
16.13 ⚰💀💀Life Insurance (जीवन बीमा) ....................................................................................................... 239
16.13.1 ⚰💀💀 🦁🦁 Life Insurance → entities in public sector (सावर्ज�नक �ेत्र के जीवन बीमा सं �ान) ......... 239
16.13.2 ⚰💀💀💀💀 🦁🦁 Life Insurance Corporation of India (1956) ..................................................... 239
16.13.3 ⚰💀💀💀💀 🦁🦁 LIC’s Disinvestment (2020, �व�नवेश) ................................................................... 240
16.13.4 ⚰💀💀💀💀 🦁🦁 LIC IPO gets SEBI Approval (2022-March)................................................. 240
16.13.5 ⚰💀💀💀💀💀 LIC- Aam Admi Bima Yojana (AABY), Janshree Bima Yojana: .................... 240
16.13.6 🧔🧔⚰PM schemes for Life Insurance & Accidental (Gen) insurance .................................... 241
16.14 ⚰ 💊💊💊💊💊💊General Insurance (सामा� बीमा) ................................................................................ 241
16.14.1 ⚰🚕🚕🚕🚕 🦁🦁 Public Sector General Insurance Entities: Timeline (समय रेखा)........................ 241
16.14.2 ⚰🚕🚕🚕🚕 🦁🦁: (🤵🤵) General Insurance Business (Nationalisation) Amendment Bill, 2021242
16.14.3 🦁🦁(💉💉💉) Employees' State Insurance Corporation.............................................................. 243
16.14.4 👻👻👻👻⚰Gen Insurance → Corona Warrior ₹50 lakh cover by Govt (2020-March)......... 244
16.15 💊💊 Gen → Health Insurance Schemes (�ा� बीमा योजनाएं ) ............................................................ 245
16.15.1 💊💊 😵😵: 🧐🧐Arogya Sanjeevani Policy (2020) ............................................................................ 245
16.15.2 ⚰ 😵😵: 🧐🧐SARAL JEEVAN BIMA-Standardized term Life Insurance policy ..................... 246
16.15.3 💊💊💊💊Gen→ Health Insurance → Corona Kavach vs Rakshak ............................................ 246
16.15.4 💊💊♿ Niramya Health Insurance for PH. OLD SCHEME DONOT-LOOSE-SLEEP ......... 246
16.15.5 💊💊💊💊 Rashtriya Swasthya Bima Yojana (RSBY: 2008)............................................................ 246
16.15.6 💊💊💊💊: 🧔🧔Why public health insurance for poor? (गरीबों को सरकारी �ा� बीमा �ों िदया जाए) .... 247
16.15.7 💊💊💊💊5⃣L /👪👪/📆📆 Ayushman Bharat / PM Jan Aroyga Yojana (PMJAY) ............................ 247
16.15.8 PM-JAY Sub-schemes ................................................................................................................... 248
16.15.9 Ayushman Bharat Digital Mission .......................................................................................... 249
16.16 ⚰ 💊💊💊💊💊💊 General Insurance → other than Health Insurance............................................. 252
16.16.1 🧔🧔⚰🌽🌽 Pradhan Mantri Fasal Bima Yojana (2016).............................................................. 252
16.16.2 🧔🧔⚰🌽🌽 PM-FBY (2.0) revamped in 2020 .............................................................................. 253
16.16.3 🧔🧔⚰🌽🌽 Other Agriculture Insurance Schemes? (अ� कु छ फ़सल बीमा योजना) .......................... 253
16.16.4 ⛴🔪🔪(�🏦🏦) Insurance to Banks on Exporters’NPA → NIRVIC Scheme (2019) .............. 253
16.16.5 🚕🚕🚕🚕 Third Party Motor Insurance (थडर् पाट� मोटर इं �ोर�स) ........................................................ 254
16.16.6 🚕🚕🚕🚕 Own Damage Insurance (OD: मोटर सं बं�धत �यं के नुकसान का बीमा ) .................................... 254
16.16.7 🏗🏗⚖📜📜Title Insurance (जमीन / इमारत का टाइटल बीमा) ................................................................. 254
16.16.8 💉💉⚖📜📜Clinical Trial Liability Insurance............................................................................... 254
16.16.9 🔥🔥🔥🔥🔥🔥🔥🔥 Bharat Griha Raksha & other: Standardized home/factory insurance policies255
(Batch:PCB7) Mrunal’s Economy Pillar#1D: Insurance, Pension, FinInclusion → Page 234

16.16.10 🌬🌬🌬🌬(Proposed) Catastrophe Insurance (आपदा बीमा) ............................................................. 255
16.16.11 🌬🌬🌬🌬 Catastrophe Bonds, Surety Bonds: ................................................................................ 255
16.16.12 👿👿👿👿General Insurance → Cyber Insurance (साइबर बीमा) .................................................. 255
16.16.13 💻💻eIA: e-Insurance account ................................................................................................... 255
16.17 ⚰↗⚰Re-insurance (पुनब�मा) ....................................................................................................... 256
16.17.1 😷😷(🤵🤵🤵🤵🤵🤵)PANDEMIC RISK POOL proposal by IRDAI ................................................ 256
16.18 ⚰�IRDAI: the insurance sector regulator (बीमा �ेत्र �नयं त्रक) ....................................................... 257
16.18.1 ⚰�Domestic Systemically Important Insurers (D-SIIs, (घरेलु प्रणालीबद्ध मह�पूणर् बीमाकतार्) ..... 257
16.19 ⚰😿😿 Challenges to insurance industry (चुनौ�तयां) ......................................................................... 257
16.19.1 �Insurance progress indicators (बीमा प्रग�त सं के तक) ....................................................................... 258
16.19.2 FDI limits in Insurance sector? (बीमा �ेत्र मे प्र�� वदेशी �नवेश क� सीमा)........................................... 258
16.19.3 Should we ⏫ FDI beyond 49% in insurance companies? (�ा सीमा बढ़ाए?) ............................. 259
17 � → � (💰💰💰💰) PENSION (प�शन) ............................................................................................................. 259
17.11 �🦁🦁 Employee Provident Fund Org. (कमर्चारी भ�व� �न�ध सं गठन)................................................... 260
17.11.2 🧔🧔🧔� (2016) Pradhan Mantri Rojgar Protsahan Yojana (Labour Min) .......................... 262
17.11.3 👻👻ATMANIRBHAR Reforms in EPFO 🧔🧔🧔� (March to August) ................................. 262
17.11.4 👻👻Atmanirbhar Bharat Rozgar Yojana= Subsidy from Central Govt in EPFO contribution
262
17.11.5 🚩🚩🚩FAQ: “why not merge EPFO with ESIC!!? ” ................................................................. 263
17.12 �→�Pension for Govt Employees & Middle Class? = NPS .................................................. 263
17.12.1 �→� Pension: NPA: Minimum Assured Return Scheme (MARS) .............................. 264
17.12.2 Old Pension Scheme (OPS) will not be re-introduced says Govt in Lok Sabha ...................... 264
17.13 �→�Pension for Senior Citizens WITH CAPACITY to Invest? ........................................... 265
17.13.1 Pradhan Mantri Vaya Vandana Yojana (2017-DFS, LIC) ......................................................... 265
17.14 �→�Pension for Poor People WITH capacity to INVEST? .................................................. 266
17.14.1 � → 👴👴👴👴👴👴: 🧔🧔 Pension: Three Maan Dhan Yojanas .................................................... 267
17.14.2 🚩🚩🚩FAQ: “why not merge all these schemes into one!?? ................................................... 268
17.15 �→� Pension for Poor People WITHOUT capacity to INVEST? ........................................ 268
17.16 �� PFRDA, the Pension Funds’ Regulator ............................................................................... 269
17.17 🛫🛫🛫Social Security for Overseas Indians (Pension / Insurance) .............................................. 269
17.17.1 🛫🛫🛫Pravasi Bharatiya Bima Yojana, 2017 .............................................................................. 270
18 (��:💰💰)→💳💳Financial Inclusion (�व�ीय समोवेशन) ................................................................................. 270
18.11 (��:💰💰)→💳💳 Fin. inclusion: Bank accounts for Everyone ................................................... 271
18.11.1 🧔🧔(��:💰💰)→💳💳 Pradhan Mantri Jan Dhan Yojana (प्रधान मं त्री जन धन योजना)................... 271
18.11.2 � Jan Dhan Darshak App (2018) .............................................................................................. 272
18.12 (��:💰💰)→ 📮📮 Fin inclusion: Investments other than Bank .................................................. 273
18.12.1 📮📮 (Yearbook) Dept of Post: POSB vs IPPB............................................................................... 273
18.12.2 (�:💰💰)→(�:💳💳)Sukanya Samriddhi Yojana (2015) .......................................................... 274

18.12.3 ⚖Proposed Government Savings Promotion Act (in 2018)................................................... 275
18.12.4 ⭐📫📫 📫📫
📫 📫 ��
� Five Star Village scheme by Dept of Post (2020) .......................................... 275
18.12.5 ⚰💀💀💀💀💀💀💀💀 ��
� Sampoorna Bima Gram Yojana (2017) .................................................... 275
18.12.6 ⚰💀💀💀💀💀💀💀💀 ��
� Model Insurance Villages (MIV) proposal by IRDAI (2021) ................ 275
18.12.7 (��:💰💰)→ 📦📦 Chit Funds and Prize Chits ........................................................................ 276
18.12.8 📦📦📦📦 Chit Fund Scams? धांधली/ गबन / का� ............................................................................... 276
18.13 �� ←(💰💰💰💰) Financial inclusion: Credit (Loans: ऋण) .......................................................... 277
18.13.1 ��: 🧔🧔 ←(💰💰💰💰) Credit Guarantee (ऋण अदायगी गारंटी) ..................................................... 277
18.13.2 (💰💰💰💰)↗🗃🗃=(💰💰💰💰) Refinance (पुन�व�)................................................................................. 278
18.13.3 👻👻 �🏭🏭 MSME: Definition changed in ATMANIRBHAR (2020) ..................................... 278
18.13.4 👻👻👻👻 �🏭🏭 MSME Non-NPA borrower → ECLGS 1.0 ...................................................... 279
18.13.5 👻👻👻👻 �🏭🏭 MSME Non-NPA borrower → ECLGS 2.0 (Atma-Nirbhar 3.0) ................... 280
18.13.6 👻👻👻👻👻🏭🏭 MSME NPA borrower → Subordinate Debt (गौण ऋण) ..................................... 280
18.13.7 👻👻👻👻👻🏭🏭 MSME → Equity infusion via Fund of Funds (�न�धयो क� �न�ध) .......................... 280
18.13.8 🚫🚫🚫🚫🚫🚫🚫🚫 NBFC → Mudra (2015, 100% SIDBI subsidiary) ...................................... 281
18.13.9 👻👻👻👻 �🏭🏭 Mudra Loans → Shishu Loans pe 2% Interest subvention ............................. 281
18.13.10 ⏰🔪🔪 psbloansin59minutes.com (2018) .............................................................................. 282
18.13.11 🙋🙋Stand Up India Scheme, 2016 (उ�� भारत)......................................................................... 282
18.13.12 👭👭Self-help group (�-सहायता समूह) → Credit........................................................................ 282
18.13.13 🤑🤑🤑Street Vendors’s AtmaNirbhar Nidhi Scheme (PM-SVANidhi)............................. 283
18.13.14 🤑🤑🤑Street vendors’s PM-SVANidhi → Main Bhi Digital (2021) ................................... 283
18.13.15 �PaiSA Portal (2018) ............................................................................................................ 283
18.13.16 �💳💳 Kisan Credit Card (1998) ............................................................................................ 284
18.13.17 ��: 🧔🧔 ←(💰💰💰💰) Interest Subvention (�ाज सहायता) .................................................... 285
18.14 🌽🌽🌽🌽🌽🌽🌽🌽Farm Loan Waiver (कृ �ष ऋण माफ�) ............................................................................... 285
18.14.1 🌽🌽🌽🌽🌽🌽🌽🌽Agri-Finance → Loan waivers for the farmers .................................................... 285
18.14.2 🌽🌽🌽🌽🌽🌽🌽🌽=👌👌Agri-Finance → Farm loan waivers: arguments in favour .......................... 286
18.14.3 🌽🌽🌽🌽🌽🌽🌽🌽=👎👎Agri-Finance → Farm loan waivers: arguments against ............................ 286
18.14.4 🌽🌽🌽🌽🌽🌽🌽🌽=👎👎☠Anti-Argument: Loan waiver will not stop farmer suicide................... 287
18.14.5 🌽🌽🌽🌽🌽🌽🌽🌽 ✍ Farm Loan Waiver: Conclusion .................................................................... 287
18.14.6 👻👻👻👻👻👻 Atma-Nirbhar Farm Loan Reforms (2020) ............................................................. 287
18.15 ⚰� Financial inclusion: Insurance & Pension........................................................................... 288
18.15.1 ⚰🔬🔬 Micro Insurance (सू� बीमा) ............................................................................................... 288
18.15.2 🏍🏍🏍🏍🏍🏍 Gig Workers’ social security code (�गग कम� क� सामा�जक सुर�ा सं िहता) .............................. 288
18.15.3 👻👻ATMANIRBHAR → 👷👷Workers’ Social security (2020) ................................................. 288
18.16 ��: �Financial Inclusion: Customer Protection (ग्राहक सुर�ा) ............................................... 289
18.16.1 😾😾RBI’s 3 Ombudsman (ओमबड्समेन/ �शकायत �नवारण अ�धकारी/लोक प्रहरी) ....................................... 289
18.17 📈📈📈📈📈📈Financial Inclusion: India’s Performance (भारत का प्रदशर्न) ............................................. 290

18.17.1 📈📈📈📈 Global Microscope Report ............................................................................................... 290
18.17.2 📈📈📈📈 Global Findex Database 2017: (released in 2018, April) ............................................... 291
18.17.3 📈📈📈📈 Mercer CFA Institute Global Pension Index for 2021: ............................................. 291
18.17.4 📈📈📈📈 (India’s own) Financial Inclusion Index by DFS........................................................... 291
18.17.5 📈📈📈📈 (India’s own) RBI’s National Strategy for Financial Inclusion (NSFI) ....................... 291
18.17.6 📈📈📈📈 (India’s own) RBI’s Financial Inclusion Index (�व�ीय समावेशन सूचकांक) ......................... 291
18.18 ✍🏼🏼🎺🎺 Mock Questions for Mains (250 words Each) ...................................................................... 291
16 ⚰INSURANCE (बीमा): MEANING AND SIGNIFICANCE

- Meaning: insurance policy is a Debt instrument / Legal contract against eventualities of death or
damage. (मृ�ु या ��त क� घटनाओं के �खलाफ कानूनी अनुबंध).
- 2 parties in this contract: 1) Insured / client 2) Insurer / Underwriter.
- Insurance provide stability to the households (against death, disability, damage) and
entrepreneurs (against fire, theft, natural disasters etc.) बीमा प�रवार और उद्योगप�तयों को जो�खमों के सामने
��रता मुहैया कराता है
- Insurance companies invest clients’ premium in various public and private sector projects,
thereby channelizing savings towards investment & economic growth. बीमा-िक� के द्वारा लोगों क� बचत
�नवेश म� जाती है
16.11.1 Insurance Principles (�सद्धा�: hindi not required but understand gist for case studies)
⇒ Uberrima fides- Good faith, hide nothing. (HIV+ve in Health Insurance)
⇒ Indemnity- Only “REAL” loss, not imaginary. (couldn’t give CAT exam due to fire)
⇒ Subrogation- Insurer can recover from negligent 3rd party.
⇒ Causa Proxima - Direct loss link. Bollywood fan can’t buy policy for Bachchan.
⇒ Insurable interest- If “risk-x” not happen, client remains in same position, “risk-x” happens
client in bad position. (I didn’t win lottery, I lost in horse race betting)
16.12⚰🏺🏺 HISTORY OF INSURANCE IN INDIA (भारत मे बीमा कं . का इ�तहास)

- (1818): Europeans started insurance companies in India, but they charged higher premium on
Indian clients with racist bias that Indians belong to an inferior race = higher probability to die.
अंग्रेज कं प�नयां भारतीय लोगों पर �ादा बीमा िक� मांगते थे
- (1870): Bombay Mutual Life Insurance was the first Swadeshi life insurance company and they
did not charge extra premium on Indian clients.
- (1912): Life Insurance Companies Act to regulate them, but lax norms, so just like the banking
industry, the insurance industry too faced problems in the aftermath of Great Depression in
USA. So, 1938: Insurance Act for tougher regulation. पहले कांड होते रहेते थी िफर क़ानून बनाया गया

- Just like the banking, the insurance industry had to be nationalized after independence due to
scams, financial inclusion and Five-Year Plans. धांधली, �व�ीय समावेशन और पं चवष�य योजना के �लए रा��ीयकरण
Chronology �Bank ⚰ Insurance
1948-49 RBI nationalized -----
1955 SBI nationalized -----
1956 ---- LIC Act took over ~245 (private owned) Life insurance
companies.
1969 Nationalization of 14 ----
Private Banks
1972 ---- GIC Act: GIC and its 4 subsidiaries tookover ~107
(private owned) General insurance companies.
Private Banks
Reforms Narasimham ‘91 & ‘98 Malhotra Committee 1993→ Private insurance
सुधार स�म�त companies were allowed, FDI was liberalized
Safeguards CRR, SLR, BASEL Investment Pattern, Solvency Margin. E.g. They must
सुर�ा के �लए invest minimum “x%” of premium in G-Sec, they can’t
कु छ मानदंड invest more than “y%” of premium in pvt companies
shares/debentures etc. They must not invest in
companies having less than “AA” credit rating etc.
Exact norms not imp.
Financial PSL norms Rural & Social Obligation Norms: every year “x”
Inclusion, 25% branches in number of policies must be sold in rural areas,
Welfarism unbanked rural areas PH/backward etc. Further Insurance companies
required to invest minimum “x%” in affordable
housing projects, State Govt’s fire equipment etc. Else
IRDAI imposes penalty. ग्रामीण और सामा�जक दा�य� मानदंड
Delivery ⇒ Bank branch, Insurance Intermediaries: (म��/ �बचौ�लया)
Channel ⇒ Business - Agents/brokers.
Correspondence - Bankers selling insurance (Bancassurance)
Agent (BankMitra) - Surveyor/Loss Assessor (सव��क).
- Third Party Administrators (e.g. Hospital where
treatment is given for health insurance जहां आप का
इलाज हो)

16.13⚰💀💀LIFE INSURANCE (जीवन बीमा)
Life Insurance Type → Money returned? 📆📆At maturity 💀💀At death
Whole life= Longer policy: (e.g. 35-40 yrs) Yes, savings YES
Endowment= Shorter policy: (e.g. 10-20) returned with
interest
Term life= Short Policy, Low Premium e.g. PM Jeevan ✋No Yes
Jyoti Bima Yojana. मृ�ु नहीं �ई तो बीमा िक� वापस नहीं �मलेगी
ULIP: Unit Linked Insurance Plans: Part of money goes in Yes, savings YES
insurance, part in Mutual fund returned with some
profit
16.13.1 ⚰💀💀 🦁🦁 Life Insurance → entities in public sector (सावर्ज�नक �ेत्र के जीवन बीमा सं �ान)
16.13.1.1 ⚰💀💀 📮📮 Post Office Life Insurance (डाक जीवन बीमा)
- Initially started as postal life insurance for postal employees (1884), later extended to rural
people as well.
- Presently, 6 schemes for govt employees and 6 schemes for rural areas (usually with prefix of
“GRAM” e.g. gram Suvidha / Suraksha / Santosh….)
- They’ve developed “DARPAN” PLI (Postal Life Insurance) App for this.
16.13.2 ⚰💀💀💀💀 🦁🦁 Life Insurance Corporation of India (1956)
⇒ To take over/nationalize the private life insurance companies → LIC Act, 1956. So, LIC is a
statutory corporation/statutory company. (वैधा�नक �नगम)
⇒ Rigveda: “योग�ेम” (Yogakshema: well being) = name of LIC HQ@Mumbai & its corporate
magazine.
⇒ Gita: “योग�ेमं वहा�हम्” (Yogakshemam Vahamyaham:- I ensure safety and well being (of my
devotees) = LIC motto.
⇒ 2018: LIC became majority shareholder in IDBI bank. (More in 📑📑Pillar#1B1- Classification)
⇒ 2021: 1) Govt ⏫retirement age of LIC chairman from 60 to 62 years. 2) LIC launched ‘Ananda’
App for insurance agents.

16.13.3 ⚰💀💀💀💀 🦁🦁 LIC’s Disinvestment (2020, �व�नवेश)
⇒ Disinvestment (�व�नवेश): Reducing ⏬ govt shareholding in a Government company but govt
keeps atleast 51% shareholding with itself. (e.g. if govt selling its shares of ONGC from 100% to
75%, 51% etc)
⇒ Privatization / Divestment / Strategic Disinvestment (�नजीकरण/रणनी�तक �व�नवेश): Govt selling the
majority shareholding/ownership of a Govt company to a private entity (e.g. Adani/Ambani को
पूरी क� पूरी सरकारी कं पनी बेच दी जाए) (More in 📑📑Pillar# 2D)
- 💼💼Budget-2020: LIC Act will be amended → LIC : Initial Public Offering (IPO) → Government
will sell part of its shareholding. 2022: SEBI permitted.
WHY is Govt doing disinvestment of LIC?
⇒ LIC’s insurance products come with a sovereign guarantee (सं प्रभु गारंटी) by the Govt. So people
prefer to buy it over private sector insurance policies. This hampers perfect competition (LIC क�
जीवन बीमा पॉ�लसी के पीछे सरकारी गारंटी – �नजी कं प�नयों को पूणर् प्र�तयो�गता अवसर नहीं देती).
⇒ If Govt shareholding ⬇ → LIC functioning becomes independent → less financial repression
of households e.g. how LIC bought loss making IDBI under Government’s pressure. Ref
📑📑Pillar#1B-1: Banks’ classification. (सरकारी दबाव म�, एलआईसी घाटे वाले �ेत्रों म� �नवेश करता है, �जससे �नवेशकों
का �व�ीय दमन)
⇒ So, earlier, International Monetary Fund (IMF) and Justice B.N.SriKrishna’s Financial Sector
Legislative Reforms Commission (FSLRC-2011) had also advised the same to Government of
India. (आईएमएफ तथा �व�ीय �ेत्र �वधायी सुधार आयोग ने भी कु छ ऐसी ही �सफा�रश� क� थी)
⇒ 🤩🤩1) Disinvestment = Government will earn some ₹₹ by selling its shares → welfare schemes.
(�व�नवेश से कमाई रकम- सरकार गरीब क�ाण योजनाओं म� इ�ेमाल कर सकती है)
⇒ 🤩🤩2) LIC becoming a public limited company → independent directors, women directors,
more transparent disclosure of balance sheet, whistleblower protection, accountability and good
governance. (Ref: Pillar#1C) (कॉप�रेट शासन सु�ढ़ होगा, जवाब देही बढ़ेगी)
16.13.4 ⚰💀💀💀💀 🦁🦁 LIC IPO gets SEBI Approval (2022-March)

⇒ 100% shareholding is presently with the government → 5% to be sold to public in IPO @total
₹50,000 crore to Rs 1 lakh crore from the IPO.
⇒ LIC-IPO share allotment quotes: 1) 5% for LIC’s employees 2) 10% for Insurance policy
subscribers 3) 35% for retail investors. 4) Remaining % for others (इस IPO म� शेयर आवं टन म� �व�वध
समूह के �लए आर�ण कोटा रखा गया है.)
16.13.5 ⚰💀💀💀💀💀 LIC- Aam Admi Bima Yojana (AABY), Janshree Bima Yojana:
✋OLD SCHEMEs of Congress Raj. Discontinued / phased-out in Modi Raj. #🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो

16.13.6 🧔🧔⚰PM schemes for Life Insurance & Accidental (Gen) insurance
Figure 1: शराब पी के मर गए देवदास बाबू तो PM-सुर�ा बीमा योजना मे कु छ नही �मलेगा!

Table 1: 2015: Finance Ministry → Dept of Financial Services launched these two schemes.
Features 🧔🧔⚰💀💀 🕯🕯✔♿✖ Pradhan Mantri 🧔🧔⚰💀💀♿✔🍾🍾✖
Jeevan Jyoti Bima Yojana (PMJJB) Pradhan Mantri Suraksha Bima
Yojana (PMSBY)
Age 18-50 years with bank account in India. 18-70 years. Remaining same as
NRIs eligible but payment in rupee PMJJB
currency only.
Purchase LIC or any empaneled pvt. life insurance 4 Public Sector, or any empaneled
from company. pvt. General Insurance company.
Premium Rs. 330 per person/ annum Rs.12/- per person/ annum
Type LIFE Insurance General Insurance
Nature of 1 year “term” LIFE insurance. 1-year “term” accident cum
Plan Term LIFE insurance = no death, no death insurance.
money returned.
Return? Any type of death: ₹ 2 lakhs Accidental Death: murder,
िकसी भी प्रकार क� मृ�ु पर प�रवार को मुआवजा �मलेगा natural disaster etc. ₹2 lakhs
- Loss 1 eye/hand/leg: 1 lakh
- Loss 2 organs/>: max. 2 lakhs
Suicide, alcohol-drugs related
death: not eligible
Neither scheme gives hospitalization cost. (अ�ताल म� �चिक�ा खचर् के �बल क� अलग से कोई रा�श नहीं �मलेगी)
16.14 ⚰ 💊💊💊💊💊💊GENERAL INSURANCE (सामा� बीमा)
An insurance policy other than ‘life insurance’, is called General Insurance. e.g. Accident Insurance,
Health Insurance, Crop Insurance, Fire-Theft-Marine & Vehicle Insurance. दुघर्टना बीमा, �ा� बीमा,
फसल बीमा, आग-चोरी-समुद्री और वाहन बीमा
16.14.1 ⚰🚕🚕🚕🚕 🦁🦁 Public Sector General Insurance Entities: Timeline (समय रेखा)
⇒ 1948: Employees' State Insurance Corporation (ESIC) under Labour Ministry – through an act of
Parliament to protect selected category of workers. मजदू रों का �ा� बीमा
⇒ 1957: Export Credit Guarantee Corporation of India (ECGC: �नयार्त ऋण गारंटी �नगम) under
Commerce Ministry. Gives insurance cover to exporters, and credit guarantee to Bank/NBFC
who loan to exporters.

⇒ 1961: DICGC Act: banks must buy deposit insurance from it. Although not considered a General
Insurance Company in textbook sense because doesn’t directly sell insurance policy to any
individual household/businessman. (पाठ्यपु�क क� प�रभाषा म� उसको बीमा कं पनी नहीं बोल सकते)
⇒ 1972: General Insurance Nationalization Act: 107 (private) general insurance companies were
taken over by GIC and its 4 subsidiaries (viz. National insurance, New India Assurance, United
India, Oriental). Later, Govt took direct shareholding-control over these 4 subsidiaries, and left
GIC to take care of re-insurance biz. (पुन:बीमा)
⇒ 2002: Agriculture Insurance Company ltd, (formed with funding of GIC, above 4 public sector
Gen. Insurance Cos and NABARD.) कृ �ष बीमा कं पनी
⇒ 2018: Budget announced to merge (�वलीनीकरण) National Insurance Company, United India
Insurance Company, Oriental India Insurance Company- but the plan has not materialized yet.
⇒ 2018-Oct: FinMin → Dept of Financial services organized ‘Insurance Manthan’ for Public
Sector GI @Delhi. Outcome? six-point agenda: fully insured society, customer orientation,
digital -analytics for future, sustainable-prudent business, reach for everyone and talent
management. ✋How? NotIMP.
⇒ ⚾📻📻⚾🎓🎓✋2020: 1) IRDAI allows insurers to give three-month moratorium on loans. 2)
Union Cabinet has approved the capital infusion of Rs.12,450 crore in the three Public Sector
General Insurance Companies to improve their financial solvency. THIS TYPE OF Technical
NEWS IS NOTIMP for the scope of the exam. DONT WASTE TIME. #🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
General Insurance Nationalisation Act 1972 General Insurance Business (Nationalisation)
(सामा� बीमा रा��ीयकरण कानून) Amendment Bill, 2021
Five General Insurance (GI) Companies To facilitate privatization of these public
brought under Govt control sector/Government owned GIs. सामा� बीमा �ेत्र क�
1) General Insurance Corp of India (GIC) सरकारी कं प�नयों के �नजीकरण का रा�ा आसान बनाने के �लए
2) National Insurance, �वधेयक
3) New India Assurance,
4) Oriental Insurance
5) United India Insurance.
Majority shareholding (minimum 51%) must Removed this rule. So, in future, govt may sell
remain under Government control (ब�मत its majority shareholding to private party (e.g.
शेयरहो��ंग सरकार के हाथ म� अ�नवायर् �प से होनी चािहए) Adani/Ambani etc) [इन पांच कं प�नयों म� ब�मत
शेयरहो��ंग सरकार के पास होना अ�नवायर् नहीं यानी िक �नजी
�ेत्र का आदमी भी मा�लक बन सकता है]
These companies’ employees’ service by the board of directors (and not by
conditions (salary, tenure, promotion, transfer, Government)- so in future if a particular
discipline rules etc) will be decided Govt. [इन government insurance company is privatised
सरकारी बीमा कं प�नयों के कमर्चारीओ क� then the private companies new bosses (e.g.

तन�ाह/वेतन,पदो�ती/तर��, तबादला इ�ािद सेवा और Adani/Ambani etc) will decide. [कं पनी के बोडर् ऑफ
�श�/अनुशासन के �नयम सरकार तय करती थी] डायरे�र यह �नयम तय कर�गे]
- 🤩🤩Pro-Arguments? Privatization will help in Professionalism, Profitability, Customer
responsiveness of these Govt companies (�नजीकरण के प� म� तकर् : पेशेवर तरीके से सं चालन होगा, मुनाफा बढ़ेगा,
ग्राहकों क� सु�वधा बढ़ेगी)
- 😰😰Anti-Arguments? 1] Similar to anti-arguments against Banking merger/consolidation (Ref:
📑📑Pillar#1B1) and [2) Similar to anti-arguments against Insurance FDI
16.14.3 🦁🦁(💉💉💉) Employees' State Insurance Corporation
- 1948: Employees' State Insurance Act → 1952: ESIC corporation (ESIC) setup under Labour
Ministry. (कमर्चारी रा� बीमा �नगम, श्रम मं त्रालय)
ESIC applicability? BEFORE 👻👻ATMA-NIRBHAR (2020)
any establishment with 10/> Compulsory Compulsory (अ�नवायर्)
employees
If establishment less than 10 workers Voluntary Compulsory (खतरनाक उधोगों के मजदू रो
→ but it’s a hazardous industry e.g. (�ै��क/वैक��क) का क-रा-बी-�न मे पं जीकरण अ�नवायर्)
(firecrackers, toxic chemicals, acid)
If establishment less than 10 workers Voluntary Voluntary
→ Non-hazardous industries (�ै��क/वैक��क) (�ै��क/वैक��क)
- 👷👷 Who are ESIC subscribers? Employee in above establishment, with monthly salary less than
₹21,000/-
- 👷👷 � Who pays ESIC premium? “x%” of employee’s wages+ “y%” from employer’s side.
- What is X and Y? notimp unless preparing for ESIC/Insurance Exams. Furthermore, Factoids
like ESIC vision-2022 to enrol 100 million workers. notIMP4UPSC
- ESIC covers both permanent employees & casual/temporary employees (= employed only for a
few days/weeks/months.) �ायी-कम� और अ�ायी/अयाथव�ध-कम� दोनो को लाभ �मलता है।

- 💼💼Budget-2021: we’ll expand this to cover more workers. But exact details yet to be disclosed.
🤩🤩An ESIC subscriber gets following benefits:

1) Medical insurance for the worker and his family from day#1 of joining (�ा� बीमा)
2) Maternity Benefit to women employees (मातृ� लाभ)
3) Monthly pension to family, if worker dies by employment related injuries. Corona-2020-21→ if
worker died of Corona, family member to be given pension. (originally such pension was to be
given for workers’ death in factory employment related accident, and not for corona illness.)
नौकरी करते व� ऑिफस/फै ��ी म� हादसे के चलते मजदू र मर गया तो प�रवार को प�शन। नया सुधार: कोरोना क� बीमारी म� मर गया
तो भी प�रवार को प�शन
4) Sickness benefit: partial wages during medical leave. (बीमारी प्रसु�वधा)
5) Monthly payment on disability (�वकलांगता मा�सक भुगतान)
6) Unemployment allowance if involuntary loss of employment- through the scheme ‘Atal Bimit
Vyakti Kalyan Yojna’. (अटल-बी�मत क�ाण = अनै��क �प से उसक� नौकरी चली गई तो बेरोजगारी भ�ा)
🪔🪔Project Panchdeep digitization and automation of ESIC processes by WIPRO (2017)
🏹🏹 📩📩Project Arrow Modernization of India Post (2008) डाक �वभाग का आधु�नक�करण
🔠🔠❓ Consider the following: [Asked in UPSC-Pre-2012]

1) Hotels and restaurants 2) Motor transport undertakings
3) Newspaper establishments 4) Private medical institutions
The employees of which of the above can have coverage under ESIC?
(a) 1, 2 and 3 only (b) 4 only (c) 1, 3 and 4 only (d) 1, 2, 3 and 4
16.14.4 👻👻🤧🤧⚰Gen Insurance → Corona Warrior ₹50 lakh cover by Govt (2020-March)
Deleting because outdated for 2023-exam cycle.

16.15💊💊 GEN → HEALTH INSURANCE SCHEMES (�ा� बीमा योजनाएं )
Fixed Benefit (�न��त लाभ) Indemnity Based (��तपू�त आधा�रत)
Fixed payment given depending on illness. Upto to the “actual hospitalization cost” from the
⇒ If the Policy agreement said “if you get total insured sum.
cancer, we’ll give you ₹50 lakhs.” ⇒ "Indemnity" = upto actual cost in treatment,
⇒ So, even if a patient spends ₹10 lakh subject to max limit. so, if ₹5 lakh ki policy=
on hospitalization, still the company ⇒ Actual treatment cost ₹2 lakh → company pays
will pay ₹50l. only ₹2 lakh
इससे कोई फकर् नहीं पड़ता िक हॉ��टल का �बल िकतना ⇒ Actual treatment cost ₹7 lakh→ company pays
आया आपको एक �न��त रकम दी जाएगी max ₹5 lakh
Further Subtypes
⇒ Cashless policy: patient simply goes to an
empanelled hospital = free treatment.
⇒ Non-Cashless policy: patient first pays hospital
bill from own pocket → submits bills to
insurance company → gets refund.
16.15.1 💊💊 😵😵: 🧐🧐Arogya Sanjeevani Policy (2020)
Figure 2: पोलीसी खरीदु तो कौन सी, Features क� तुलना करना है ब�त मु��ल! िदमाग चक्रम हो गया मेरा 😵😵
😰😰Too many types of health insurance policies with various features and premiums = a common
man gets confused which health policy is best for him. (आम आदमी भ्र�मत हो जाता है िक कौन सी �ा� �बमा
पॉ�लसी उसके �लए सव��म)
So, IRDAI ordered health insurance companies to launch a Standard Health Insurance Product
(SHIP: आदशर् �ा� बीमा उ�ाद) to cover the basic health insurance requirements of every person. With
following Features:
Table 2: you don't have to remember all features.✋✋
Name must be “Arogya Sanjeevani Policy -<name of the company>”. Any other name
NOT allowed.
Type Indemnity based Health insurance policy. (��तपू�त आधा�रत �ा� बीमा)
Premium Decided by individual insurance company. (बीमा िक�)
Benefit?  Minimum ₹50k to maximum any amount in multiple of 50k e.g. e.g.1l,1.5l…
 However higher cover = higher premium/subscription fees
 What costs will be covered? hospitalization cost, pre and post hospitalization cost, Ayush
treatment (=Ayurveda, homeopathy etc).

16.15.2 ⚰ 😵😵: 🧐🧐SARAL JEEVAN BIMA-Standardized term Life Insurance policy
Matter / logic is similar to previous topic given above.
16.15.3 💊💊💊💊Gen→ Health Insurance → Corona Kavach vs Rakshak
Figure 3: है कोई �ा� बीमा पॉ�लसी जो कोरोना के भारी हॉ��टल �बल से 'र�ा' करवा दे मेरी?!
2020: IRDAI issued guidelines for the general insurance & health insurance companies to launch
standard health policies against Covid-19, with following standard names:
🤧🤧🛡🛡😵😵Corona Kavach 🤧🤧�🤑🤑 Corona Rakshak
Compulsion Gen. insurance & health insurance optional for company to launch this
companies have to compulsorily launch policy (अ�नवायर् नहीं है वैक��क)
this
Type "Indemnity" = upto actual cost in ⇒ Fixed Benefit Plan
treatment, subject to max limit. so, if ₹5 ⇒ Fixed amount of money if
lakh ki policy= subscribers gets Corona.
⇒ Actual treatment cost 2 lakh → Irrespective of actual treatment
company pays only 2 lakh cost.
⇒ Actual treatment cost 7 lakh→
company pays max 5 lakh
Coverage ₹50,000 to ₹5 lakh ₹50k to 2.5 lakh
Premium Decided by an individual company. same as left column
🎓🎓✋further the technical details / differences = poor cost:benefit for UPSC.#🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
16.15.4 💊💊♿ Niramya Health Insurance for PH. ✋OLD SCHEME DONOT-LOOSE-SLEEP
⇒ Boss? By Dept. of Empowerment of Person with disabilities (िद�ांगजन सश��करण �वभाग)→
Oriental Insurance Company. 🤩🤩Benefit? upto ₹1 lakh health insurance for handicapped
⇒ Premium? Orphan Minor PH= ZERO; Other PH: ₹250-500, depending on poverty level
16.15.5 💊💊💊💊 Rashtriya Swasthya Bima Yojana (RSBY: 2008)

Fee? One time registration ₹ 30. No premium by beneficiary. Govt pays premium.🤩🤩Benefits?
⇒ ₹ 30k for medical treatment [smartcard, cashless: even existing ailment, even private hospital.]
⇒ ₹ 25k for accidental death. And if breadwinner dies: ₹ 50 x 15 days.
⇒ ++Senior Citizen Health Insurance Scheme (SCHIS) –if 60/> they get additional ₹ 30k for
treatment. (व�र� नाग�रक �ा� बीमा योजना)

⇒ Both RSBY and SCHIS are subsumed in PM-JAY (2018) आयु�ान भारत के साथ �वलीन
16.15.6 💊💊💊💊: 🧔🧔Why public health insurance for poor? (गरीबों को सरकारी �ा� बीमा �ों �दया जाए)
⇒ Public goods = water, sanitation, transport, medical care, schools (सावर्ज�नक व�ुएं-पानी ��ता प�रवहन
�ू ल �चिक�ा). Rich people can seek private alternatives/Even migrate to better countries. But Poor
cannot do it → Govt support necessary. अमीर लोग अ�� सेवाएं �बजी बाजार से खरीद सकते ह�, लेिकन गरीब को
सरकारी मदद क� ज�रत
⇒ “Time Horizon Problem” in a democracy: Frequent election cycles = Govts focus more on short
term gain but Healthcare, nutrition, schools: Long gestation period so govts may neglect it. लोकतं त्र
म� समय ��तज सम�ा: चुनाव के च�र म� सरकार दीघर् अव�ध के सुधारों क� जगह लघु अव�ध के लोकलुभावन पर �ान देती है,
�ा� पोषण �श�ा नजरअंदाज.
16.15.7 💊💊💊💊5⃣L /👪👪/📆📆 Ayushman Bharat / PM Jan Aroyga Yojana (PMJAY)

� (Introduction: DATA) In the last decade, in-patient hospitalization (अ�ताल म� भत� रोगी i.e. patient
who stays in hospital overnight) has increased nearly 300% in India. More than 80% of the hospital
expenditure met by out of pocket (खुद क� जेब से). So, rural households are forced to use household
savings and borrowings = vicious cycle of poverty (गरीबी का �वषचक्र). So, Ayushman Bharat launched
in Budget 2018, with two components:
Figure 4: ब�े के इलाज के �लए कोई पैसा दे दो!
A) 1.5 lakh Primary Health Care Centers (PHC) to be transformed into Health & Wellness Centres
with Free drugs, checkup, mother-child care etc. (�ा� और क�ाण क� द्र)
B) National Health Protection Scheme (AB-NHPS) → Later renamed ‘PM Jan Arogya Yojana
(PMJAY)’ and launched with Motto “Swasthya Aapka, Saath Hamara” from Ranchi, Jharkhand
(2018, Sept). It has subsumed Rashtriya Swasthya Bima Yojana (RSBY) & Senior Citizen Health
Insurance Scheme (SCHIS).

16.15.7.1 🧔🧔🧔🧔🧔🧔5⃣L /👪👪/📆📆 PM Jan Arogya Yojana (PMJAY, 2018)?
⇒ What is given? A FREE insurance cover upto ₹ 5 lakh per family,

per year for secondary and tertiary hospitalization. All pre-existing disease covered from day 1.
Pre and post hospitalization & medicine expenses.
⇒ Cashless and paperless access [NITI partnered web portal, with privacy protection]
⇒ Beneficiaries? Socio-Economic Caste Census (SECC: सामा�जक आ�थक जा�त जनगणना) data → + 8 cr
rural + 2 cr urban = 10 cr families= ~50 crore people.
⇒ No limit on family size. No limit on age. (प�रवार म� िकतने सद�, उनक� �ा उम्र है- कोई सीमा नहीं)
⇒ Where to get treatment? (इलाज कहां पर होगा)= All public hospitals and empaneled private hospitals
(by the respective States). [इलाज होगा सरकारी अ�ताल और रा� सरकार द्वारा अ�धकृ त �नजी अ�ताल म�]
⇒ Hospitals to have Pradhan Mantri Aarogya Mitras (PMAMs/hospital-receptionist-type-ke-log) to
help/guide patients in this scheme. These PMAMs are trained by Ministry of Skill
Development. (कौश� �वकास मं त्रालय द्वारा आरो� �मत्र को तालीम)
16.15.8 PM-JAY Sub-schemes

1. PM SEHAT (Social Endeavour for Health and Telemedicine) 2020- ज�ू क�ीर के सभी �नवा�सयों के �लए
a. BEFORE: 6 lakh families of the J&K getting Ayushman Bharat Scheme. (= poor family
selected through socio economic caste census 2011)
b. AFTER PM SEHAT: All residents of J&K (=21 families, rich-poor everyone) eligible for
₹5 lakh health insurance of PM-JAY scheme. Even if they are traveling outside Jammu
Kashmir, in other parts of India, they can avail treatment at PM-JAY-walli hospitals.
2. Ayushman CAPF scheme (2021-Jan) क� द्रीय सश� पु�लस बल
a. Joint initiative of Home Ministry & National Health Authority

b. Assam Rifles, Border Security Force ( BSF), Sashastra Seema Bal (SSB), Central Reserve
Police Force (CRPF), Central Industrial Security Force (CISF), National Security Guard
(NSG), and Indo-Tibetan Border Police (ITBP)
c. Their Personnel & their family members also covered
16.15.8.1 �PMJAY → National Health Authority (रा��ीय �ा� प्रा�धकरण)

⇒ Originally it was an “Agency”, then restructured & renamed into “Authority” (2019).
⇒ NHA oversees the implementation of PM-JAY, operational guidelines, collaborate with
insurance companies & IRDAI, running web-platform etc. (योजना को िक्रया��त करेगा बीमा कं प�नयों के साथ
तालमेल �बठाएगा)
⇒ NHA is an ‘attached (adjunct) office (सं ल� कायार्लय)’ with health ministry (�ा� मं त्रालय). i.e. Health
Ministry only looks after parliamentary matters like replying in question hour, annual reports
etc. thus giving NHA more freedom in day to day functions. (रोजाना काय� म� मं त्रालय क� दखल कम)
⇒ NHA has a Chief Executive Officer (CEO) with status of Secretary to Govt of India (स�चव).
⇒ Above NHA → “Governing Board” (शासक-मं डल)
⇒ Chairman: Minister of Health & Family Welfare (�ा�-प�रवार क�ाण मं त्रालय)
⇒ Members: NITI Ayog CEO, NHA-CEO & other govt officials and experts (�वशेष�).
⇒ States will be represented in the Governing Board on rotational basis (चक्रानुक्रम).
16.15.9 Ayushman Bharat Digital Mission

⇒ NHA also implements “Ayushman Bharat National Digital Health Mission” (Basically Sarkaari-
google-drive mein x-ray report store kro yojana!) More in 📑📑Pillar#6:health schemes
16.15.9.1 PMJAY → State Health Agency (SHA)
- Each State to form a State Health Agency (SHA: रा� �ा� एज�सी) to get the scheme
implementation.
16.15.9.2 PMJAY → Funding / Cost:sharing
Category (श्रेणी) Cost sharing (खचर् क� साझेदारी)
"Special Category States" (�वशेष श्रेणी के रा�): Union contributes 90%: while
- North-Eastern States, and State contributes 10% of the
A
- TWO Himalayan Hilly States: Himachal Pradesh and cost
Uttarakhand#
- Other States: who are not in above category (UP, Bihar, 60:40
etc.)
B - Union territory (UT) with legislature: Delhi,
Puducherry, Jammu & Kashmir. (�वधा�यका वाले क� द्र शा�सत
प्रदेश)

- UT without legislature: Ladakh, Andaman Nicobar etc. 100%
C
(�बना �वधा�यका के क� द्र शा�सत प्रदेश)
- #
Before the removal of Article 370 (in 2019), the State of J&K was previously in Special category,
so it got 90:10 funding.
- Afterwards: J&K is UT with legislature, so, J&K will get 60:40. So, 2019-Aug: Central
Government considering creating a new category ‘Hill Union Territory (पहाड़ी क� द्र शा�सत प्रदेश)’ so
J&K may continue to received 90:10 funding. But, no need for 🎓🎓✋#🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
16.15.9.3 💼💼Budget-2020 on Ayushman Bharat PM-JAY
 We’ll setup hospitals in aspirational (=backward) districts for treatment of PM-JAY
beneficiaries. Hospital construction Funding: Public private partnership (PPP) → Public side’s
funding will be provided using ₹₹ from health cess on imported medical devices.(More about
health cess in 📑📑Pillar#2-Taxation) आयात होने वाले �चिक�क उपकरणों पर �ा� उपकर लगाकर उस पैसों से
�पछड़े �जलों म� अ�ताल बनाएं गे
 We’ll use Artificial Intelligence and Machine Learning (AI-ML) to take preventive actions
against the spread of diseases. Total ₹6400 cr allotted for PM-JAY. (बीमा�रयों का प्रसार रोकने के �लए कृ �त्रम
बु�द्धम�ा का उपयोग)
16.15.9.4 � PMJAY → Challenges? (चुनौ�तयां)
- 😰😰⚔ Cooperative Federalism spirit is missing. (सहकारी सं घवाद क� भावना क� कमी)

o States have to sign agreement with Union to begin operations. But, W.Bengal already has
state-govt sponsored “Swasthyasathi” scheme in State with similar features so CM
Mamta has left PM-JAY (2019, Jan).
o 2021: Rajasthan Right To Health Bill 2021 (�ा� अ�धकार �वधेयक) ₹5lakh health insurance
coverage available at 1) free of cost for workers, small- marginal farmers. 2) others (e.g.
Middle class) can avail at ₹850/year.
o Similar issues in other Non-BJP states. गैर बीजेपी रा� इसे अपनाने म� उ�ुकता / सहयोग नहीं िदखा रहे
- 😰😰💵💵 Fiscal Challenges (राजकोषीय चुनौ�तयां): Budgetary allocations insufficient. If govt borrows
more money→ ⏫ in fiscal deficit. Private hospitals may perform unnecessary surgeries &
prescribe excessive amount of medicines to extract more money from govt. (अनाव�क �प से महंगी
दवाई और श�िक्रया)
- 😰😰🗃🗃 Administrative Challenges (प्रशास�नक चुनौ�तयां):
o Beneficiary identification (लाभाथ� क� सही पहचान. अमीर लोग भी गरीब होने का नाटक करके मु� इलाज
करवा ले)
o Doctor to patient ratio (मरीजो के अनुपात मे डोकटरों क� कमी)

o Physical and IT infrastructure, Transport, connectivity upto village level. (बु�नयादी सं रचना,
प�रवहन, सं चार िक गांव गांव तक प�ंचन नहीं है)
o Medical privacy of Patient- data may be leaked to pharma companies for their clinical
trials and commercial motives. (�चिक�ा डाटा क� गोपनीयता/�नजता.)
16.15.9.5 📔📔📔📔ES21 on PM-JAY (कु ल �मलाकर घी-दू ध क� न�दयां बह रही है-आ�थक सव��ण)
⇒ 📔📔📔📔ES21 analysed the health outcomes of West Bengal (Which did not implement PM-JAY
scheme) and its neighbouring States - Bihar, Assam and Sikkim (Who have implemented the
PM-JAY scheme) between 2015-2019. And found out W.Bengal has lagged behind them on
various health indicators, including Family planning and HIV/AIDS.. प��म बं गाल क� तृणमूल सरकार ने
प्रधानमं त्री जन आरो� योजना नहीं लागू क� इस�लए वह �ा� म� �पछड़ी रह गई और �बहार आसाम और �स��म आगे बढ़ गए
�ोंिक उन पड़ोसी रा�ों म� इस योजना का अमल �आ है
⇒ PMJAY also helped increasing awareness regarding Family planning and HIV/AIDS. (अ�ताल यात्रा
के चलते प�रवार �नयोजन और एचआईवी क� जागृ�त भी बढ़ी है)
⇒ During the Corona lockdown → Many of the surgical procedures were postponed due to
infection fear, Transportation lockdown, Financial hardships= so PM-JAY claims ⏬reduced.
हालांिक कोरोना के चलते ब�त सारी सजर्री/श� िक्रया को ��गत िकया गया था
⇒ Still Poor people continued to avail dialysis in PM-JAY. = Proves success and reliance of the
scheme. लेिकन गरीब लोग िफर भी डाय�ल�सस करवाने आते ही रहे �जससे सा�बत होता है िक गरीब इस योजना म� �व�ास रखते ह�
16.15.9.6 � Conclusion: PM-JAY (�न�षर्)

⇒ Sustainable Development Goal (SDG#3): ensure healthy lives and well-beings at all ages. PM-
JAY is a right step in this regard, provided that aforementioned challenges are addressed.(More
about SDG in 📑📑Pillar#6) [सतत �वकास ल�#3- सभी के �लए �� जीवन सु�न��त करने म� योजना मदद करेगी] OR
⇒ Disease burden robs a poor person of his wages and savings. If aforementioned challenges are
addressed, PM-JAY can greatly help in poverty removal and human development in India. OR
(बीमारी म� गरीब आदमी के वेतन और बचत के पैसे बबार्द नहीं होंगे- �जससे गरीबी �नवारण और मानव �वकास म� मदद)
⇒ If above challenges are addressed, PM-JAY can improve health outcomes, productivity and
efficiency of Indian population, thus leading to improvement GDP and in quality of life. (भारतीय
जनसं �ा क� उ�ादकता और द�ता म� बढ़ोतरी → सकल घरेलू उ�ाद और और जीवन के �र म� सुधार)
🔠🔠❓ MCQ. Which is not a feature of the Ayushman Bharat Scheme? (CDS-i-2020)
(a) There is no cap on family size and age. (प�रवार क� सद�ों क� सं �ा और आयु पर कोई सीमा नहीं)
(b) The scheme includes pre- and post-hospitalization expenses.
(c) A defined transport allowance per hospitalization will also be paid to the beneficiary.
(d) The scheme provides a benefit cover of Rs. 10 lakh per family.
🔠🔠❓ MCQ. Ayushman Bharat is a national health insurance system for: (UPSC-Geologist-2020)
a) women b) every citizen c) old age people d) poor and vulnerable.

🔠🔠❓ MCQ. Which are the benefits of the Pradhan Mantri Jan Arogya Yojana? (CDS-i-2019)
1. Free treatment available at all public and empanelled private hospitals.
2. Cashless and paperless access to quality health care services. नकदी रिहत और कागज रिहत प्रशास�नक प्रिक्रया
3. Govt provides health insurance up to ₹ 5 lakh per family per year.
4. Pre-existing diseases are not covered. पहले से मौजूद बीमा�रयों को कवर नहीं िकया जाता है
Codes: a) 1 and 3 only b) 1 , 2 and 3 c) 2 and 4 only d) 2, 3 and 4
16.16 ⚰ 💊💊💊💊💊💊 GENERAL INSURANCE → OTHER THAN HEALTH INSURANCE

16.16.1 🧔🧔⚰🌽🌽 Pradhan Mantri Fasal Bima Yojana (2016)
- Against natural calamities, pests, diseases; (प्राकृ �तक आपदाएँ , क�ट, बीमा�रयाँ;)
- Protects before, during and after harvest (फसल क� कटाई).
- Premium (बीमा-िक�) paid by farmers against the total insured amount: Rabi winter crops (1.5%)
– Kharif summer monsoon crops (2%) –Horticulture & Commercial crops other than oilseed &
pulses (5%). Remainder premium is paid by Union: State Gov. It’s optional for States to join.
- Nodal Ministry: Agri Min → Public sector general insurance companies, and empanelled private
sector insurance companies. सरकारी सामा� बीमा कं प�नयां तथा �नजी �ेत्र क� ऐसी सामा� बीमा कं प�नयां �जनको कृ �ष
मं त्रालय ने इस योजना लागू करने के �लए सूचीबद्ध िकया है
- 😰😰Challenges? (इस योजना म� �ा चुनौ�तयां ह�)
o States not paying their portion- they feel premium amount very high, so, Pvt insurance
companies not settling claims quickly. रा� सरकार बीमा कं प�नयों क� िक� का िह�ा नहीं चुका पा रहे,
बीमा कं पनी वाले िकसानों को मुआवजा नहीं दे रहे, गुजरात, प��म बं गाल सिहत कई रा�ों ने इस योजना का अमल बं द
कर िदया है.
o W.Bengal stopped it, & launched its own Bangla Fasal Bima Yojana (2019). Gujarat
stopped it & launched ‘Mukhya Mantri Kisan Sahay Yojana (2020)’ so cooperative
federalism missing.
o Union upgraded technical guidelines to fix the delays, but response not good. (भुगतान म�
देरी क� सम�ा को दु�� करने के �लए क� द्र सरकार ने िदशा�नद�शों म� बदलाव तो िकए लेिकन कु छ ख़ास सुधार नहीं आया)

16.16.2 🧔🧔⚰🌽🌽 PM-FBY (2.0) revamped in 2020
Before-2020 From 2020-Kharif
Suppose a kharif crop insurance premium = Suppose a kharif crop insurance premium = ₹100.
₹100. ⇒ Farmer pays ₹2 of the premium
⇒ Farmer paid ₹2 of the premium ⇒ Union pays only ₹25 to 30 based on whether
⇒ Union paid ₹49 + State paid ₹49. In it’s irrigated or unirrigated respectively.
other words, Union and States shared ⇒ State may have to pay ₹68-73. So, states’
their premium burden half-half (50:50). burden increased.
⇒ However, the Union will bear 90:10 of the
burden in case of North Eastern States.
Compulsory for farmer to buy this insurance Voluntary (�ै��क) for farmers. (ब�क लोन पास करवाने के
policy, IF he wanted crop loans from bank �लए िकसान को यह योजना यह बीमा �नकलवाना अ�नवायर् निह)
Multiple Perils (एका�धक आपदाए) covered such ‘Single-peril’ (एकाक� आपदा) insurance can be taken
as flood, drought, hailstorm. But, farmers in e.g. “protection only against drought.” This will
Rajasthan had no fear of floods. help reduce ⏬premium amount.
------ Updated methodology for assessment of crop loss
🔠🔠❓MCQ. Find correct statements about ‘Pradhan Mantri Fasal Bima Yojana': (Prelims-2016)
1. Under this scheme, farmers will have to pay a uniform premium of 2% for any crop they
cultivate in any season of the year. िकसी भी फसल म� �सफर् 2% बीमा िक� िकसान ने चुकानी होगी
2. This scheme covers post-harvest losses arising out of cyclones and unseasonal rains.
16.16.3 🧔🧔⚰🌽🌽 Other Agriculture Insurance Schemes? (अ� कु छ फ़सल बीमा योजना)
- Apart from PM Fasal Bima, there is Restructured Weather Based Crop Insurance Scheme
(RWBCIS, 2016)- protects against weather only. (so not pests/diseases).
- There was a National Agricultural Insurance Scheme and Modified (NAIS), but PM Fasal Bima
subsumed it. लेिकन वो सब याद रखने से परी�ा म� बहोत लाभ नहीं.
16.16.4 ⛴🔪🔪(�🏦🏦) Insurance to Banks on Exporters’NPA → NIRVIC Scheme (2019)
Figure 5: �नयार्तक ब�क का कजार् नहीं चुकाएगा तो नुकसान क� भरपाई कौन करेगा
Boss? Commerce Ministry → Export Credit Guarantee Corporation (ECGC)

⇒ NIRVIK (Niryat Rin Vikas Yojana) is an Export Credit Insurance Scheme (ECIS).

⇒ Exporter takes a loan from a bank. But if he defaults then ECGC will cover upto 90% of his
principal + interest losses to the bank. (Before NIRVIC scheme, it was only 60%)
⇒ Exporters pay ‘premium (बीमा-िक�)’ to the bank → bank pays it to ECGC. (Exporter need not
goto ECGC office himself. He can get the application form from the loan giving bank itself.)
⇒ Premium rates depend on sector e.g. diamond, chemical etc. exact figures=NOTIMP
16.16.5 🚕🚕🚕🚕 Third Party Motor Insurance (थडर् पाट� मोटर इं�ोर�स)
- Motor Vehicles Act (1988) requires all motor vehicle owners to purchase it. (कानूनी �प से अ�नवायर्)
- Third party (TP) insurance: When your vehicle hits another vehicle, person or property → that
victim (third party) registers a case, gets compensation. IRDAI regulates premium rates & other
norms.
- SC judgement (2019): TP insurance validity should be 3-5 years, so even if owner forgets to
renew annually, the third party is protected. (अवधी �ादा होनी चािहए)
16.16.6 🚕🚕🚕🚕 Own Damage Insurance (OD: मोटर सं बं �धत �यं के नुकसान का बीमा )
- It protects owner of vehicle against theft, vandalism, accident, fire.
16.16.7 🏗🏗⚖📜📜Title Insurance (जमीन / इमारत का टाइटल बीमा)
Figure 6: जमीन मकान �ववादों के कानूनी लफड़ो म� नुकसान से बचने का �बमा #गुलाबो-�सताबो
- 'Title' (अ�धकार-�वलेख) means a legal document showing ownership of a property. 'Title dispute':
usually happens when multiple persons are claiming ownership of the same land / building.
- 'Title Insurance' protects the new buyer in case of such legal disputes (by refunding the money he
had spent in buying land, construction, legal expenses etc).
- Real Estate Regulation and Development Act 2016 (RERA) requires the builders to buy this type
of insurance. More on RERA in 📑📑pillar#5: urban infrastructure.
16.16.8 💉💉⚖📜📜Clinical Trial Liability Insurance

⇒ Type: General Insurance Cover
⇒ Objective: To protect the pharmaceutical company From legal expenses/Lawsuits, if a volunteer
patient suffers damage/death in clinical trials. (यिद कोई �� नैदा�नक परी�णों म� ��त / मृ�ु तो फ़ामार् क�नी
को बीमा क�नी मदद करेगी।)

16.16.9 🔥🔥🔥🔥🏡🏡🏭🏭 Bharat Griha Raksha & other: Standardized home/factory insurance policies
- IRDAI ordered @General Insurance companies to sell 1) Bharat Griha Raksha, 2) Bharat
Sookshma Udyam Suraksha 3) Bharat Laghu Udyam Suraksha from 1/4/2021 onwards.
- Type? Standard Fire and Special Perils (SFSP) Policy.
- Beneficiaries? protect homes and factories of micro, small and medium enterprises (MSMEs).
- What damages are covered? fire, natural catastrophes, riot, strike/hartal, malicious damages,
terrorism,, overflowing water tanks etc upto ₹50 crores.
16.16.10 🌬🌬🌬🌬(Proposed) Catastrophe Insurance (आपदा बीमा)

⇒ Protects the client from natural and manmade disasters.
⇒ Presently, farmers’ crops are protected from natural disasters through PM-Fasal Bima Yojana.
But, if his own home was destroyed in floods, it’s not covered → Union & State Governments
forced to use taxpayers' money for paying compensation to victims of floods, cyclones etc.
⇒ IRDAI doing some studies to launch catastrophe insurance (or CAT cover) for poor people.
16.16.11 🌬🌬🌬🌬 Catastrophe Bonds, Surety Bonds:
📑📑Refer Pillar#1C: SEBI-Sharemarket-यह हम पहले ही पढ़ चुके ह�
16.16.12 👿👿👿👿General Insurance → Cyber Insurance (साइबर बीमा)

- It covers the losses related to malware attack, phishing and data, identity theft, ransom payment
demand made by the hackers, data restoration costs, business interruption losses due to
cyberattacks. The loss of reputation, damage to mental health etc.
- Corona lockdown → home-from-home through computer → demand for such policies ⏫.
- Bajaj Allianz and HDFC ERGO are notable general insurance companies offering such products.
🔠🔠❓In India, under cyber insurance for individuals, which of the following benefits are generally covered,
in addition to payment for the loss of funds and other benefits? (UPSC-Prelims-2020 SetB.Q90)
1. Cost of restoration of the computer system in case of malware disrupting access to one’s
computer
2. Cost of a new computer if some miscreant wilfully damages it, if proved so
3. Cost of hiring a specialized consultant to minimize the loss in case of cyber extortion
4. Cost of defence in the Court of Law if any third party files a suit
Answer Codes: [a) 1, 2 and 4 only [b) 1, 3 and 4 only [c) 2 and 3 only [d) 1, 2, 3 and 4
16.16.13 💻💻eIA: e-Insurance account

⇒ Shares/Bonds are stored digitally in DEMAT accounts. (More in 📑📑Pillar#1C)

⇒ Similarly, Insurance policies can be stored digitally in e-Insurance accounts e.g. NSDL's National
Insurance Repository (NIR). (बीमा द�ावेजों को िड�जटल �प से सं ग्रिहत करना)
⇒ 🤩🤩Benefit? convenience to customers especially if he bought insurance policies from different
companies e.g. Vehicle insurance, fire insurance, Health Insurance, Life Insurance. He can easily
track their expiry date/ online renewal etc. in one portal. (सद�ता का ऑनलाइन नवीनीकरण आसान होगा)
16.17⚰↗⚰RE-INSURANCE (पुनब�मा)
- DICGCI Act (1961) requires banks to take deposit insurance from DICGCI.
- Similarly, Insurance Act (1938) requires insurance companies take ‘re-insurance’ on their biz.
बीमा कं पनी ने �यं का "धं धा चौपट बचाओ" बीमा लेना होगा
- Previously, only GIC was the sole-reinsurer, but then norms liberalized (2015). New re-
insurance cos allowed. e.g. India’s ITI Reinsurance Ltd. Even foreign re-insurers such as Swiss
Re, Munich Re, General Reinsurance (Warren Buffet) are permitted. (पहले के वल जीआईसी, लेिकन अब
अनेक कं प�नयों को अनुम�त दी गई)
- 🤩🤩Benefits of multiple re-insurance cos? GIC’s monopoly in dictating re-insurance premium
rates is gone. So, insurance cos’ cost of operations to decline → biz. expansion, launch
innovative products etc.
16.17.1 😷😷(🤵🤵🤵🤵🤵🤵)PANDEMIC RISK POOL proposal by IRDAI

⇒ Corona= many people died/sick = insurance companies required to pay large sum of
compensation. This is putting lot of Business stress/losses on insurance and reinsurance
companies. (महामारी म� काफ� लोग बीमार �ए/मर गए. बीमा कं प�नयों ने मुआवजा देना पड़ा, मुनाफ़े पर गहरा तनाव)
⇒ PANDEMIC RISK POOL = Insurance companies and government will contribute ₹₹ into this
fund to help in insurance companies in future pandemics. (बीमा कं प�नयां और सरकार �मलकर एक
�न�ध/कोष/फं ड म� पैसा जमा कर� तािक भ�व� म� महामारीज� तनावपूणर् ��तयों म� बीमा कं पनी क� मदद हो सके ।)

16.18 ⚰�IRDAI: THE INSURANCE SECTOR REGULATOR (बीमा �ेत्र �नयं त्रक)
- 1996: IRDA setup→ given statutory status in 1999 (वैधा�नक सं �ा बनी)
Org - 2014: Its name changed to Insurance Regulatory and Development
सं गठन Authority of India (IRDAI: भारतीय बीमा �व�नयामक एवं �वकास प्रा�धकरण)
- HQ: @Hyderabad, Telangana. (Whereas RBI & SEBI HQs @Mumbai.)
Structure 1 Chairman: Dr. Debasish Panda (Ex-IAS) (5/65),
सं रचना 9 members (5/62) = Total 10. They can be re-appointed. (पुन�नयु�� सं भव है)
⇒ IRDAI gives separate licenses for life, general & re-insurance companies.
⇒ Prescribes norms for insurance companies for accounting, solvency, audit,
commission to agents etc. It can penalize companies, suspend or cancel
Functions registration. Appeal → Securities appellate Tribunal (SAT) (More in
कायर् 📑📑Pillar#1C)
⇒ Norms for agents & brokers, banks selling products (Bancassurance), Surveyor/
Loss Assessor, and Third-Party Administrators (e.g. Hospital)
⇒ Consumer grievance redressal via Insurance Ombudsman (�शकायत �नवारण अ�धकारी).
IRDAI is member of Financial Stability & Development Council (FSDC). Ref: 📑📑1C
16.18.1 ⚰�Domestic Systemically Important Insurers (D-SIIs, (घरेलु प्रणालीबद्ध मह�पूणर् बीमाकतार्)
- IRDAI prepares a list of big insurance companies that are “too big to fail” i.e. they feel it will
create very great economic distress for India. (यिद ये बीमा कं प�नयां �गर गयी तो अथर्तंत्र म� भारी तबाही होगी)
- IRDAI labels them as D-SIIs & imposes additional rules/monitoring/supervision on them.
- Latest List: 1) Life Insurance Corporation of India (LIC), 2) General Insurance Corporation of
India (GIC), 3) The New India Assurance Co. Ltd. (NIACL) (उनपर �ादा स� �नयम/�नगरानी रख�गे)
16.19⚰😿😿 CHALLENGES TO INSURANCE INDUSTRY (चुनौ�तयां)
1) 😰😰Capital intensive industry (पूंजी प्रधान उद्योग): Private players not generating enough profits due
to poor returns in sharemarket. Heavy costs in paying agent commission rates and marketing
advertisements.
2) 😰😰Corona= many people died/sick = insurance companies required to pay large sum of
3) 😰😰Premiums expensive. Will become more expensive to cover Corona losses. (फ़�स महंगे हो रही है)
4) 😰😰Insurance agents need more skill, network than banker. For bankers- loan recovery easier
(SARFAESI, I&B) compared to an insurance company that invested into equities/shares of a
weak company. (बीमा एज�ट भी एक ब�कर के मुक़ाबले �ादा कौशल चािहए)
5) 😰😰Rural people: either disinterested / un-served despite IRDAI norms. (ग्रामीण लोग नीरसता िदखाते ह�)
6) 😰😰People hesitate in buying House / Factory / Fire / Theft insurance due to fear of discovery of
‘asset value’- IT/GST raids & ransom demands. → India’s “insurance gap” is high i.e. all the

assets are not insured. (लोग अपनी सं प�� का पूणर् �प से �बमा नहीं करवाते, �ोंिक उ�� आयकर �वभाग के छापे और
दबं गों क� िफरोती से डर लगता है)
7) 😰😰Insurance: Highly regulated, but Healthcare: highly unregulated, so
o Supply demand mismatch: between (doctors-hospitals) vs. patients.
o Standardized medical treatment costs difficult to ascertain, unlike car damage.
8) 😰😰Delays in claim settlement= fewer repeat customers for health insurance. (मुआवज़े म� �वलं ब)
16.19.1 ⚰📈📈Insurance progress indicators (बीमा प्रग�त सं के तक)

Table 3:✋ figures are not important.
As per Insurance penetration (%: बीमा प्रवेश) Insurance Density ($:बीमा घन�)
📔📔📔📔ES22 =Premium divided by GDP =Premium divided by population
Life (2020) 3.20% $59
Non-Life (2020) 1.00% $19
⇒ For India, these indicators ↗Improved in 2011-2020, but zigzag /non-steady graph pattern
⇒ For India, these indicators are low compared to Malaysia, Thailand & many other developing
countries due to aforementioned challenges. (उ� सूचकांकों म� भारत अ� देशों के मुक़ाबले मे काफ़� पीछे है)
16.19.2 🇺🇺🇸🇸💸💸FDI limits in Insurance sector? (बीमा �ेत्र मे प्र�� वदेशी �नवेश क� सीमा)
⇒ Foreign Direct Investment (FDI) is the (more than 10% equity / share) investment made by a
foreign entity into an Indian company, with the objective to get involved in the management /
production of that Indian company. (िकसी �वदेशी इकाई द्वारा एक भारतीय कं पनी म� 10% से �ादा शेयर �नवेश
करना उसे कहते ह� प्र�� वदेशी �नवेश) (More on FDI 📑📑Pillar#3A)
⇒ e.g. 2018: Walmart-USA bought 77% shares in Flipkart-India @$16 billion.
FDI limits in insurance sector→ 😰😰BEFORE 🤩🤩AFTER (Automatic Route)

State owned/public sector Life insurance NO RULE 20% (done in 2022)
corporation i.e. LIC (सावर्ज�नक �ेत्र का जीवन बीमा �नगम)
Insurance company itself (Except LIC) 49% 74%** (done in 2021)
Insurance intermediaries e.g. agent/broker, 49% 100% (done in 2020)
surveyor/loss-assessor, third party
administrators (hospital who give treat to health
insurance clients) (बीमा �ेत्र के �बचौ�लये/द�े)
** 💼💼Budget-2021: announced to amend Insurance Act, 1938 to ⏫ FDI limit from 49% to 74% in
Insurance Companies. With following safeguards: हालांिक कु छ शत� के साथ →
⇒ the Majority of Directors on the Board and key management persons must be Resident Indians.
बोडर् ऑफ डायरे�र तथा कं पनी प्रबं धन के व�र� पदा�धका�रयों म� ब�म�त भारतीय �नवासी होने चािहए
⇒ At least 50% of Directors must be Independent directors. (�तं त्र डायरे�र) (Ref#1C)
⇒ Certain % of profits must be retained as general reserve. मुनाफे का कु छ प्र�तशत सामा� आर��त �न�ध के �प
म� अलग से रखना होगा, ताक� अगर कोई कांड हो जाए तो इन पैसों से ��तपू�त हो सके .
16.19.3 Should we ⏫ FDI beyond 49% in insurance companies? (�ा सीमा बढ़ाए?)
🤗🤗 � yes we should raise FDI limits (हां बढ़ाई जाए) 😣😣 � No, we shouldn’t raise FDI
Indian insurance companies will get additional capital Foreign investors will put pressure on
from Foreign investors = this can help mitigating above Indian insurance companies to
challenges.(�वदेशी �नवेशकों से अ�त�र� पूंजी �मलेगी तो फ़ायदा है) generate more profit. So
- They can expand overseas, mobilize money from - investment in junk bonds that offer
Bangladesh/Kenya’s market etc. & invest it in higher return → Collapse. (तुरंत
Indian economy. (�वदेशो का पैसा भारतीय अथर्त� मे लाना) मुनाफा कमाने क� चाह म� �ादा जो�खम वाले
- IRDAI prescribes “Investment pattern”, there is बॉ� म� �नवेश)
ombudsman for customer complaints. - Insurance company may reject
- Further, Companies Act has norms for independent insurance claims for frivolous
directors, auditing, whistleblower protection, CSR. reasons to increase its profitability
So, apprehension that foreign investors will cause to keep foreign investors happy.
mischief = unlikely. (�नगरानी/�नयं त्रण के पयार्� प्रावधान है, (मुनाफाखोरी के �लए ग्राहकों के बीमादावों को
कं प�नयो के �लए बदमाशी करना मु��ल) अ�ीकार करना)
- 💼💼Budget-2021 too has mentioned safeguards.
- China, Thailand, Indonesia et al ⏫ FDI limits in
insurance sector. We should also follow their path.
17 � → � (💰💰💰💰) PENSION (प�शन)

- ⚰Insurance: person/his family eligible to receive ₹ ₹ if he suffers death / damage. e.g. PM
Jeevan Jyoti: ₹ 2 lakhs on death. जीवन बीमा का लाभ लेना है तो �� का मरना ज�री है

- �Pension: Person eligible to receive monthly ₹ ₹ when he retires. And when he dies, his wife
(is usually) eligible to receive monthly ₹ ₹. When she also dies, scheme stops. बुढ़ापे म� प�शन �मलता रहे.
आपके मरने पर आपके प�त या प�ी को भी प�शन �मलता रहे।
17.11�🦁🦁 EMPLOYEE PROVIDENT FUND ORG. (कमर्चारी भ�व� �न�ध सं गठन)
- 1951-52: EPFO was setup initially by ordinance & then Act.
- Nodal: Labour Ministry (श्रम मं त्रालय).
- EPFO governed by Tri-partite “Central Board of Trustees” �त्रदलीय के �ीय �ास बोडर् -
I. Government (Union + state) – 15 nominees (मनोनीत सद�)
II. Employers (industrialists) - 10 nominees
III. Employees (workers) – 10 nominees
- They make policy decision about where to invest money (usually G-sec>C-Bonds>Shares; with
minimum and maximum slabs) and they decide how much interest should be paid to
subscribers.
Chronology Scheme (Tech. norms not written here as they’re not imp4IASexam)
1952 Employee Provident Fund (EPF)
⇒ Principal + interest returned upon retirement age/ death. Interest Rate:
8.5%(2020-21) → ⏬ Reduced to 8.1%(2021-22)- lowest in last 40 years.
⇒ Partial withdrawal upto “X%” allowed for education, marriage, illness and
house construction. (अव�ध से पहेले आं�शक �प से पैसा �नकालना)
⇒ 2020: 👻👻ATMANIRBHAR → PM Garib Kalyan Package→ labour ministry
allowed EPFO subscribers’ to withdraw upto “X%” of EPF fund to help the
workers during lockdown. (कोरोना के चलते ज़�रतमं द मज़दू र अपने खाते से प�रप�ता-अव�ध से
पहेले आं�शक �प से पैसा �नकाल सके )
1976 Employees Deposit Linked Insurance Scheme (EDLI)
⇒ Boss pays Premium. If worker dies → family gets insurance.
⇒ 2020-Reform: if worker died of Corona family member will be given insurance
(min 2.5 lakh to max 7 lakh). कोरोना मृतक श्र�मक के प�रजनो को बीमा रा�श
1995 Employee Pension Scheme (EPS)
⇒ Monthly pension on retirement (once they attain the age of 58 years old) /
permanent disability (वय-�नवृ�त/�ायी �वकलांगता म� प�शन �मलेगा).

- EPFO covers both permanent employees & casual/temporary employees (= employed only for a
few days/weeks/months.) �ायी कम� और अ�ायी/अयाथव�ध कम� दोनो को लाभ �मलता है।
- EPFO subscriber worker has UAN (Universal Account Number) that remains unchanged even if
he changes job from one organization to another. (मजदू र का खाता नं बर- नौकरी बदलने पर भी वही रहता है)
- Previously, employee himself couldn’t generate his UAN, he had to request his boss to send
forms to EPFO. But 2019: EPFO allowed employees to generate UAN online by simply giving
Aadhar & Mobile Number. (एक जमाने म� मजदू र ने मा�लक द्वारा फॉमर् �भजवाना होता, लेिकन अब मजदू र खुद अपना
खाता खोल सकता है)
- Factory owner/Employer has LIN (Labour Identification Number)- which he uses while
uploading EPFO documents on Shramsuvidha webportal of Labour Ministry.

- EPFO & ESIC transactions can be done through:
o Through public and pvt sector banks (ब�क खाते द्वारा पैसा भेज सकते ह�)
o through Ministry of Electronics and Information Technology (MeitY)’s UMANG App
(Unified Mobile Application for New-age Governance).
17.11.1.1 EPF Commutation (2020)

⇒ EPFO: Employees’ Pension Scheme (EPS: कमर्चा�रयों क� प�शन योजना) = worker gets pension after
retirement age (58 years).
⇒ EPF Pension commutation= Worker can partially withdraw his pension in advance before
reaching retirement age. But, then EPFO will pay him less pension afterwards when he actually
reaches retirement age. (प�शन �पांतरण: वय�नवृ�� उम्र/प�रप�ता समय से पहले पैसा उठाना। हालाँिक ऐसा करने पर बाद
के वष� म� प�शन कम �मलेगा)
⇒ 2020: some technical reforms made to help workers here. NOTIMP#🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
17.11.2 🧔🧔🧔� (2016) Pradhan Mantri Rojgar Protsahan Yojana (Labour Min)
- Private sector employers hire workers informally, but don’t report them in official formal
records lest they’ve to contribute to EPFO-funds under statutory norms, face harassment of
EPFO officials. (उधोगप�त मजदू र को औपचा�रक �प से नोकरी देने का रेकडर् नही रखते, तािक EPFO क� वैधा�नक
�ज�ेदा�रयो से �छप सके .)
- So, worker is hired informally, denied job-security & social security. Economic Survey 2015-16
diagnosed it as “EPFO Regulatory Cholesterol preventing formal-job creation. (मजदू रों को नौकरी पर
अनौपचा�रक �प से रखा जाता था. औपचा�रक नौकरीओ का सृजन नही हो रहा था)
So, to encourage pvt companies to hire new workers ‘formally’ → Govt announced to pay
employer (Factory owners) portion (12%) for the first 3 years under following schemes: →
Pradhan Mantri Paridhan Rojgar Protsahan Textile ministry scheme for textile factories.
Yojana →
Pradhan Mantri Rojgar Protsahan Yojana → Labour ministry scheme for non-textile factories
💡💡Note: Above schemes expired/discontinued by 2019. Then 2020: Corona → new schemes- given
below.
17.11.3 👻👻ATMANIRBHAR Reforms in EPFO 🧔🧔🧔� (March to August)

Govt agreed to pay for workers & bosses contribution to EPFO in specific cases (e.g. if small factory
with upto 100 workers.) We’ll NOT prepare exact norms because 2022- it’s faded/outdated info.
It was launched during the Atmanirbhar Bharat 3.0 package (November 2020)
Beneficiary eligibility: Worker's Monthly wages upto ₹15,000 AND
A) Fresh EPFO-Worker got new job in an EPFO registered firm OR

B) Past EPFO-Worker had lost job between March1 to Sept30 of 2020, BUT got a job
on/after October1, 2020 in an EPFO registered firm
🤩🤩Entitlement: यह योजना म� फायदा �ा �मलेगा
EPF scheme 👷👷worker (मजदू र) �Boss (मा�लक)
if the firm has up to 12% of wages → 🧔🧔 12% → 🧔🧔 Govt to contribute to EPFO
1000 employees Govt to contribute to (सरकार देगी)
EPFO
if the firm has >1000 12% of wages → 🧔🧔 ✋12%: Boss has to contribute from his
employees Govt to contribute to pocket. Govt will not contribute. (सरकार नहीं
EPFO देगी)
🤩🤩Benefit? Formal Job creation, more money in the hands of workers → demand⏫ → Post
corona economy Revival. (औपचा�रक रोजगार सृजन, मजदू र के हाथ म� �ादा पैसा आएगा �जससे बाजार म� मांग म� बढ़ोतरी)
🗓🗓Scheme validity? (यह योजना िकतने �दनों तक वैद्य/जारी रहेगी)
⇒ Scheme registration open till June 2021.
⇒ Registered worker will continue to receive benefit for two years. e.g. if registered in January 2021
→ then ₹₹ upto January 2023.
🎓🎓Note: for faster revision I have used the term worker and boss (मजदू र और मा�लक) But, in real mains
exam, you should write employee and employer/Entrepreneur (कमर्चारी और नोकरीदाता / उद्यमी)
17.11.5 🚩🚩🚩FAQ: “why not merge EPFO with ESIC!!? ”

Their laws are different. To merge them you’ve to merge two laws. But this is not some priority for
govt like ‘Triple Talaq bill’ or Article 370. So, prepare facts as given in the handout. #थोड़ा-पढ़ो-आगे-बढ़ो
17.12 �→�PENSION FOR GOVT EMPLOYEES & MIDDLE CLASS? = NPS

Govt Employees (from 2004) Middle Class (from 2009)
- 2004: New Pension Scheme (नवीन प�शन योजना) - In 2009, the Government employee-walla
→(2009) renamed into National Pension National Pension System was made open
System. (रा��ीय प�शन प्रणाली) for all citizens (and NRIs) aged 18-55 on
- Subscriber? Those who joined govt. service voluntary basis. You contribute money till
on or after 01/01/2004** age of 60, as per your capacity →invested
- Mechanism? Employees (10 % of basic →pension.
pay) + Govt. contribution (14% of basic - 2010: NPS-Lite (Swavlamban): If poor
pay: since Interim-Budget-2019) → goes to person from unorganized sector (असं गिठत
PFRDA →NPS Trust → empaneled NPS- �ेत्र) joined NPS, then govt to co-contribute
Fund-manager → Invested G-sec, (समान योगदान) money for five years**.
Corporate Bonds and Shares depending on
your preference in Tier1/Tier2**.
- ** subject to some technical norms which are not imp for exam. (कु छ शत� के अधीन)
- NPS subscribers have PRAN: Permanent Retirement Account Number, Just like EPFO
subscriber has UAN Number.
- 📔📔📔📔ES20: in NPS: number of of State Govt employees >> union govt employees. And within
State govt employees: UP > Madhya Pradesh >Raj > Maharashtra.
- Corona: Subscribers allowed to withdraw funds partially from NPS for treatment of Corona.
17.12.1 �→� Pension: NPA: Minimum Assured Return Scheme (MARS)

⇒ PFRDA yet to release the guidelines so for the sake of simple example ….
⇒ suppose you contribute ₹100 & PFRDA gave MARS of 8% on the NPS account
⇒ Then if NPS unable to give u 8% return on ₹60 of subscription then whatever loss- will be paid
by PFRDA/other org to subscriber. 😍😍Benefit? It’ll attract more people to join NPS.
�ूनतम सु�न��त वापसी योजना (MARS) - मान ली�जए PFDRA कहता है िक कम से कम 8% सालाना मुनाफ़ा िदया जाएगा और
अगर शेयर /बोंड बाज़ार �सफ़र् 7% दे पाता है तो 1% नुक़सान क� भरपाई PFRDA या कोई और अ� सं �ा द्वारा क� जाएगी। असल म�
�नयम बनने बाक़� है, इस�लए ये तो एक का��नक उदाहरण िदया है)
17.12.2 ✋Old Pension Scheme (OPS) will not be re-introduced says Govt in Lok Sabha
- Before-2004: Government was entirely responsible for arranging the pension money for its
Government employees. (सरकारी कमर्चारी का प�शन सरकार स्�म क� जेब से देती)
- But after 2004’s NPS: Govt Employee’s salary is partially deducted and invested in financial
securities, his pension is thus “NOT FIXED nor fully paid by Government” but it’s dynamically
linked with dividend & interest generated by those financial securities. (प�शन क� रकम �न��त नहीं है.
शेयर/बोंड बाज़ार पर �नभर्र करती है)
- Thus, in NPS, Govt employee himself is ‘contributing money’ towards his pension.

- So, some government employee organizations oppose NPS because it does not provide a fixed
pension amount but depends on uncertainty in financial market. They keep demanding re-
introduction of the old pension scheme (OPS: पुरानी प�शन योजना वापस लाने क� माँग कु छ सरकारी क�मयों के
सं गठन करते ह�, लेिकन सरकार मानती निह).
- 2019-July: Govt clarified in Lok Sabha, “We have no plans of reverting to OPS. Because in OPS,
Government has to arrange entire pension money = less funds available for poor people’s welfare
schemes. So, we’re going to keep NPS for Government employees.”
- 2022: Rajasthan State Govt Budget 2022 announced to revert to OPS. Some other States also
planning similar. 😰😰However, critiques argue that State govts don’t have enough money to
sustain OPS forever. (राज�ान सरकार ने कहा पुरानी प�शन योजना पुनः �ा�पत कर�गे. हालाँिक आलोचकों का मानना है िक
रा� सरकारों के पास इतना पैसा नहीं, क� वो हमेशा के �लए पुरानी प�शन योजना को चला सके ।)
17.12.2.1 �📜📜 → � Jeevan Pramaan (2014)

- Previously, a pensioner (in any Govt / public sector org.) had to submit a physical life certificate
in November each year to prove that he’s alive = hardship, bribery.
- "Jeevan Pramaan" – an "Aadhar-based Digital Life Certificate“ by Ministry of Electronics &
Information Technology (MEITY) (आधार काडर् और अंगूठा लगा के �ज़दं ा होने का प्रमाण पत्र तािक प�शन �मलता रहे)
- Pensioner's Aadhar number + biometric reading device→ PC, Mobile→ “Digital Life
Certificate”→ submit to the authority → pension released.
- 2020: Jeevan Pramaan system also expanded to EPFO subscribers.
- 2022: EPFO also allows facial recognition system because in some very old pensioners, difficult
to scan finger-print/iris.
17.13 �→�PENSION FOR SENIOR CITIZENS WITH CAPACITY TO INVEST?

17.13.1 Pradhan Mantri Vaya Vandana Yojana (2017-DFS, LIC)
⇒ Post-demonetisation, banks were flush with deposits, so deposit interest rates were likely to fall
→ so to protect the senior citizens’ income government launched this.
⇒ A 60 years/> senior citizen can join. (व�र� / बुजुगर् नाग�रक के �लए ह�)

⇒ He can invest minimum ₹ (approx.) 1.5 lakhs to maximum ₹ 15 lakhs.
⇒ Money remains invested in the scheme for 10 years.
⇒ LIC guaranteed approx. 8% annual interest. original amount returned after 10 years. This
resulted into ₹1,000 to ₹10,000 monthly pension.
⇒ In between, if senior citizen dies then nominee (spouse, children) gets original amount back.
⇒ If LIC can’t generate guaranteed return, then Govt (Dept of Financial Services) to pay subsidy for
shortfall to LIC. (यिद जीवन बीमा �नगम इतना मुनाफ़ा नहीं दे पाएगा तो सरकार द्वारा स��डी)
⇒ 2020: Govt reduced guarantee from 8% to 7.40%.
⇒ Other similar schemes: Senior Citizen Savings Scheme, LIC Varistha Pension Bima Yojana but
they are old schemes so poor cost: benefit in preparing for UPSC.
🔠🔠❓ [Asked in UPSC-CDS-2019-1] Consider the following passage about a scheme : It was
launched to provide social security during old age and to protect elderly persons aged 60 years and
above against a future fall in their interest income due to uncertain market conditions. The scheme
enables old age income security for senior citizens through provision of assured pension / return
linked to the subscription amount based on government guarantee to Life Insurance Corporation of
India (LIC). Identify the scheme. Answer Choices:
a) Pradhan Mantri Swasthya Suraksha Yojana b) Pradhan Mantri Vaya Vandana Yojana
c) Liveability Index Programme d) Rashtriya Vayoshri Yojana
17.14 �→�PENSION FOR POOR PEOPLE WITH CAPACITY TO INVEST?
ग़रीब आदमी जो ख़ुद क� जेब से थोड़ा पैसा �नवेश कर सके - उनके �लए प�शन योजना
👴👴Atal Pension Yojana (APY) 🧔🧔Pradhan Mantri Shram-Yogi Maandhan

By Dept of Financial Services, 2015 By labor Ministry, 2019
Only 18-40 age Indian citizen residing in India Income Tax-payer, NPS,EPFO,ESIC-
subscribers not eligible.

No minimum or maximum income limits. unorganized sector workers with monthly
Mukesh Ambani can also join, but given that fact income upto ₹15k. E.g. street vendors,
that maximum pension is ₹5,000 a month so rickshaw pullers, construction workers, rag
target-audience is poor people, unorganized pickers, agricultural workers, beedi workers
workers outside EPFO security. etc. in the age of 18-40
Monthly pay ₹42-210 rupees till the age of 60 Monthly invest ₹55-200 (depending on age of
joining). Govt to co-contribute equal amount.
Till the age of 60
₹1k-5k monthly pension- depends on @which Fixed ₹3k pension per month after 60.
age joined, how much contributed?
- If subscriber dies after 60, then spouse If subscriber dies after 60, spouse
(Husband/wife) continues to receive same (husband/wife) gets ₹1500pm as family
amt. pension. pension.
- Both Husband & Wife die → Nominee (e.g. Both Husband & Wife die → Nominee (e.g.
their child) receives the entire principal their child) get nothing.
(premium) back. (माँ बाप दोनो मर गये तो ब�े को �नवेशक-प�त/प�ी के देहांत पर उसके प�ी/प�त को आधा ही
मूलधन वापस) प�शन �मले। दोनो मर गये तो ब�े को कु छ नहीं �मलेगा।
One person-1-subscription account only. (एक Same as left cell.
�� का �सफ़र् एक ही खाता खुल सकता है)
💡💡Note: 1) Atal Pension Yojana 2) PM Jivan Jyoti Yojana and 3) PM Suraksha Bima Yojana are
collectively known as Pradhan Mantri Jansuraksha Schemes.
🔠🔠❓ [Asked in Prelim 2016] Find correct statement(s) regarding ‘Atal Pension Yojana’:
1. It is a minimum guaranteed pension scheme mainly targeted at unorganized sector workers.
2. Only one member of a family can join the scheme.
3. Same amount of pension is guaranteed for the spouse for life after subscriber's death.
Codes: (a) 1 only (b) 2 and 3 only (c) 1 and 3 only (d) 1, 2 and 3
17.14.1 � → 👴👴👴👴👴👴: 🧔🧔 Pension: Three Maan Dhan Yojanas
18-40 Age; ₹ 55-200 fees; LIC Fund manager Who?

Pension @60=3000 → family + This Ministry
pension ₹ 1500 co-contributes
1) Pradhan Mantri Shram-Yogi Labour Ministry unorganized sector workers with
Maan-dhan (Feb’19) monthly income upto ₹15k

2) PM Laghu Vyapari Maan- Labour Ministry Small trader / shopkeepers whose annual
dhan Yojana (Jul’19)# also turnover does not exceed Rs 1.5 crore,
known as ‘NPS-Traders’ based on self-declaration.
3) Pradhan Mantri KISAN Agri small / marginal farmers with upto 2ht
Maan-dhan Yojana (Aug’19) land.
- 1 person can join only 1 type of above scheme. (एक �� का �सफर् एक बार ही पं जीकरण होता)
- Income Taxpayers & those who joined EPFO/ESIC are not eligible for any of these schemes.
- 💼💼Budget-2020: we’ll launch a Universal Pension coverage with auto enrolment for workers.
It’ll cover workers even when they change jobs. <update when actually done>
17.14.2 🚩🚩🚩FAQ: “why not merge all these schemes into one!??
- More schemes = more speech points during election-rally for the minister. िफर चुनाव म� बोल�गे �ा?
- So, you may send merger-suggestion to Prime Minister. But until your suggestion is
implemented, prepare the facts as given in the handout. #थोड़ा-पढ़ो-आगे-बढ़ो
17.15 �→� PENSION FOR POOR PEOPLE WITHOUT CAPACITY TO INVEST?
- For Below Poverty Line (BPL) people, Rural Development Ministry’s National Social Assistance
Programme (NSoAP: रा��ीय सामा�जक सहायता कायर्क्रम) in 1995, where direct money is given without
asking for any premium from the beneficiary (लाभाथ�).
- It’s a core of the core scheme (अ�त-मह�पूणर् योजना) with 100% cost is paid by Union. It’s optional
for state govt. to contribute money- They may contribute, if they want to enhance the scheme’s
features. For example: (इस योजना म� रा� सरकार ने पैसा देना वैक��क है) (More in 📑📑Pillar#2D- Schemes
types)

NSoAP Components 🧔🧔Union �State (Optional to give extra)
Old age pension @60 ₹200-500* State Govt may give extra ₹₹ & rename
(depending on how old) it. e.g. Samajwadi Pension in UP
Widow pension ₹200 State Govt may give extra ₹₹ and
Aged 40-59 rename it e.g. UP Vidhva Pension @1k
Disability pension: Same as widow State Govt may give extra ₹₹ and
Aged 18-59 rename it e.g. Guj: Sant Surdas Scheme
National Family Benefit Death of bread winner: ₹10k e.g. Guj: Sankat Mochan (Total 20k)
INSURANCE
Annapurna (2001) If senior citizen uncovered in May give additional
any other scheme 10kg grain
/ pm for FREE.
⇒ 2020: 👻👻🤧🤧ATMANIRBHAR→ PM GaribKalyan → single time ₹1,000 to poor senior citizen,
poor widows & poor disabled (total 3cr person covered)
17.16�� PFRDA, THE PENSION FUNDS’ REGULATOR
2003: Executive order to setup PFRDA- Pension Fund Regulatory and Development
Org Authority (प�शन �न�ध �व�नयामक एवं �वकास प्रा�धकरण)
2013: given statutory status. HQ: New Delhi, just like IBBI.
1 Chairman: (5years / 65age), 5 members (5/62) = 6 people.
Structure
Re-appointment is possible.
⇒ Implement National pension system (NPS), select its fund-managers.
⇒ Regulate all public and private pension funds except EPFO, Seaman, Coal miners,
Assam tea plantations related pension schemes as they’ve their separate acts /
mechanisms.
Functions ⇒ Protect Clients, Pensioners
⇒ Prescribe liquidity, auditing, investment norms for Pension funds.
⇒ Powers of civil court. (दीवानी अदालत क� स�ा/अ�धकार िदए गये है)
⇒ financial awareness generation through pensionsanchay.org.in
⇒ Pension FDI is linked with insurance FDI (49%) so not decided by PFRDA.
17.17🛫🛫🛫SOCIAL SECURITY FOR OVERSEAS INDIANS (PENSION / INSURANCE)
Following schemes’ boss? Ministry of External Affairs (�वदेश मं त्रालय)

17.17.1 🛫🛫🛫Pravasi Bharatiya Bima Yojana, 2017
Some nations do not have strict laws regulating the entry, employment or safety of foreign workers.
So, the Indian Government classifies them under Emigration Check Required (ECR: उ�वास जांच क�
आव�कता) countries. e.g. Saudi, Qatar, UAE, Libya, Malaysia, etc.
 It’s compulsory for Indian workers going ECR nations to join Pravasi Bharatiya Bima Yojana.
(ईसीआर देशों म� जाने वाली प्रवासी भारतीय मज़दू रों के �लए ये ख़रीदना अ�नवायर् है)
 Insurance cover of Rs. 10 lakhs if accidental death/permanent disability while abroad,
 Maternity expenses (प्रसू�त खचर्) cover for women worker, Family Hospitalization etc.
18 (��:💰💰)→💳💳FINANCIAL INCLUSION (�व�ीय समोवेशन)
⇒ Financial Inclusion: providing access to banking, investment, pension, insurance and credit
(loan) facilities to each citizen. This ensures social, economic and transaction security (लेनदेन म�
सुर�ा) (S-E-T), improves social harmony, women empowerment, helps reaping the benefit of
“LESS CASH Economy” (📑📑Ref: Handout#1A1) सभी नाग�रकों को ब�िकंग, �नवेश, प�शन, बीमा और ऋण क� सेवा
प्रदान करना= उसे �व�ीय समोवेशन कहेते है
⇒ Social Security (सामा�जक सुर�ा): a system of payments / assistance by the government to citizens
who are ill, handicapped, poor, aged or unemployed. (बीमार, �वकलांग, गरीब, वृद्ध या बेरोजगार को आ�थक
मदद करना)
o The foundation of SS in our constitution @DPSP Article 41- State to provide public
assistance to its citizens in case of unemployment, old age, sickness and disablement; and
o DPSP Article 42- The State shall make provision for securing just and humane
conditions of work and for maternity relief. (राजनी�तक पथदशर्क �सद्धांतों म� �जक्र)
⇒ Social Justice (सामा�जक �ाय): distribution of wealth, opportunities, and privileges within a
society- through reservation in jobs, admissions and election and through legal safeguards for

protection of civil rights, prevention of atrocity and personnel laws. (समाज के �व�भ� जाती/वग� म�
आर�ण चुनाव तथा कानूनन अ�धकारों द्वारा सं प��, अवसरों और �वशेषा�धकारों का �वतरण= उसे समा�जक �ाय कहेते है)
⇒ Collectively, these three (FI,SS,SJ) help in human development, inclusive economic growth and
Sustainable Development Goals (SDG). (More in 📑📑Pillar#6) [कु ल �मलाकर �व�ीय समावेशन, सामा�जक
सुर�ा और सामा�जक �ाय इन तीनों क� मदद से मानव-�वकास,समावेशी आ�थक वृ�द्ध, और सतत् �वकास ल�ों को हां�सल करने मे
हम� मदद होगी]
18.11 (��:💰💰)→💳💳 FIN. INCLUSION: BANK ACCOUNTS FOR EVERYONE
⇒ Nationalization of Banks (1955, ‘69, ’80)  1961: DICGC Act 1966 Cooperative Banks under
RBI’s Ambit  1969 Lead Bank Scheme (SCB:Pvt or Public) given lead role in district. They
prepared credit plan with ‘Service Area Approach’, and coordinate with the efforts of
Government, banks and NBFCs.
⇒ 1971: State level Bankers’ Committee to moniter progress of financial inclusion
⇒ 1976: Regional Rural Bank (RRB) setup through Act. (�ेत्रीय ग्रामीण ब�कों क� �ापना)
⇒ Further, RBI requires commercial banks to setup atleast 25% of their branches in unbanked rural
areas. Similar norms for White label ATM Companies. (एक चौथाई शाखाएं गाँव म� खोली होगी)
⇒ 2005: RBI permitted no-frills savings account with no penalties on zero balance
⇒ 2006: RBI permitted Banking Business Correspondent Agents (BCA)
⇒ 2011: Government’s Swabhiman to increase banking presence in rural area.
⇒ 2013: e-KYC permitted.e.g. write Aadhar number, put fingerprint in biometric reading device,
no photocopies/xerox required. (काग़ज़ी नक़ल जमा करने क� ज़�रत नहीं, ऑनलाइन प्रमाणीकरण)
⇒ 2014: JanDhan Yojana, new Private Commercial Banks (Bandhan, IDFC First)
⇒ 2015: Small Finance Banks and Payment Banks.(लघु �वत् ब�क और भुगतान ब�क क� �ापना)
⇒ 2017-18: India Post Payment Bank(More in 📑📑Pillar#1B1)
🔠🔠❓ MCQ. Service Area Approach was implemented under the purview of (UPSC Prelims-2019)
(a) Integrated Rural Development Programme (b) Lead Bank Scheme
(c) Mahatma Gandhi National Rural Employment Guarantee Scheme
(d) National Skill Development Mission
18.11.1 🧔🧔(��:💰💰)→💳💳 Pradhan Mantri Jan Dhan Yojana (प्रधान मं त्री जन धन योजना)
⇒ 2014: launched by FinMin → Dept of Financial Services with

⇒ Motto “Meraa Khaataa, Bhagya Vidhaataa”. Scheme in two phases, 6 objectives:

PM JDY – phase I (2014-15) प्रथम चरण म� PM JDY – phase II (2015-18) िद्वतीय चरण
1. Financial literacy (�व�ीय सा�रता) 1. Credit Guarantee Fund (For Overdraft
2. Banking within 5 kms defaults) उधर से ब�क के नुक़सान क� भरपाई
3. Account for every family with overdraft, 2. Direct Benefit Transfer (DBT)
with Rupay ATM-cum-DEBIT Card 3. Sell Micro insurance & pension products
through bank.
⇒ PM-JDY bank account can be opened in any Commercial or Cooperative Bank provided that (1)
bank has CBS (2) bank is tied with Rupay Payment Gateway. अब िकसी वा�ण��क या सहकारी ब�क म� खाता
खोल सकते ह�
⇒ Basic Savings Bank Deposit Account - Age 10/>; Zero balance- no penalty. But, Chequebook
only with “balance”; (नाबा�लगों के भी खाते खोले जा सकते ह�। �बना एक �पया बचत जमा िकए भी खाता खोल सकते ह�।)
⇒ There are restrictions on max. number of money withdrawals per month. (पैसे �नकालने पर कु छ सीमाएं )
⇒ Overdraft upto ₹ 10k (originally ₹5k) depending on balance history of min. 6 months. Overdraft
given on only one account holder in household (preferably woman). (प�रवार क� मिहला को 10,000 �पये
तक क� ओवरड�ा�)
⇒ Money has to be returned with interest within 3 years. Banks to decide the loan interest rate.
(ओवरड�ाफ़्ट म� िदया पैसा �ाज के साथ वापस करना होगा। ओवरड�ा� कोई दान-ख़ैरात निह है, वो एक िक़� का क़ज़र्/ऋण है।)
⇒ EVERY Jan Dhan account comes with FREE Accident Insurance; Premium paid by NPCi, it’s
therefore necessary to regularly use card- atleast for checking balance. Union Government
employees, and income tax payers not eligible for this free insurance. (दुघर्टना/अक�ात् सुर�ा बीमा भी
मु� म� �मलता है)
⇒ 🤩🤩Significance? JAM trinity (JanDhan, Adhar, Mobile) for targeted and direct transfer of
subsidies, scholarship and payments to beneficiaries. (लाभाथ� के खाते म� सीधा /प्र�� लाभ ह�ांतरण)
⇒ 😰😰Criticism? PM-JDY accounts used as money mules during demonetization.
⇒ 2020: 👻👻ATMANIRBHAR→ PM GaribKalyan → ₹500 per month to 20 crore women Jan
Dhan accounts for 3 months. (कोरोना म� मिहलाओं के जन धन ब�क खातों म� 3 महीनों के �लए थोड़ी-थोड़ी रकम जमा क�)
🔠🔠❓ [Asked in Pre-2015] Pradhan Mantri Jan-Dhan Yojana’ has been launched for:
(a) providing housing loan to poor people at cheaper interest rates
(b) promoting women’s Self-Help Groups in backward areas
(c) promoting financial inclusion in the country
(d) providing financial help to the marginalized communities
18.11.2 � Jan Dhan Darshak App (2018)

Jointly developed by Department of Financial Services (DFS) & National Informatics Centre (NIC).
It helps people find the nearby financial touch points such as Bank branches, ATMs, Post Offices etc.

18.12 (��:💰💰)→ 📮📮 FIN INCLUSION: INVESTMENTS OTHER THAN BANK
What if poor / lower middle-class person wants better returns than bank deposit? He may opt for…
Act Small Savings Schemes: लघु बचत योजनाएं
Govt Savings Bank Act 1873 📮📮 Post Office schemes: monthly, 5 year, savings, time
deposit
Govt Savings Bank Act 1873 Senior Citizen Savings (2004)
Government Savings Certi Act ’59 National Savings Scheme (NSC)’59
Government Savings Certi Act ’59 Kisan Vikas Patra 1988-11, 2014
PPF Act 1968 Public Provident Fund (PPF)
No Act → Sukanya Samriddhi Yojana ‘2015
- Individual eligibility, upper-lower limits etc. poor cost: benefit…except Sukanya Samriddhi.
- Money (usually) goes into National Small Savings Fund (NSSF)→ loans to Union and (selected
States), with technical norms which not imp for us.
- Here, interest rates are decided by FinMin’s Dept of Economic Affairs on quarterly basis. (�व�
मं त्रालय का आ�थक मामलों का �वभाग इन योजनाओं क� �ाज दर तय करता है हर 3-3 महीने पर)
- 2021 March:- Corona = Govt’s Tax collection⏬ while Govt’s Expenditure ⏫ So, Finance
Ministry ⏬⏬ decreased interest rates on various small saving schemes. But just after a day of
announcement, fearing public outcry (& Bengal election populism), Govt withdrew the decision.
[महामारी के दौरान सरकार क� आमदनी कम और खचर् �ादा �ए तो सरकार ने लघु बचत योजनाओं के �ाज दर म� कटौती क�
घोषणा क�, लेिकन िफर जनता के �वरोध (और प��म बं गाल चुनाव लोकलुभावन) के चलते एक ही िदन म� �नणर्य को वापस �लया!]
18.12.1 📮📮 (Yearbook) Dept of Post: POSB vs IPPB

Ministry of Communications two dept: 1) Depart of Telecommunications 2) Department of Posts →
 Setup by Clive (1766), expanded by Warren Hastings (1774)
 1854: Dalhousie- Post Office Act; 1st postal stamp, rates by weight & not by distance.
 2008: Project Arrow for modernization.
 2013: Telegram stopped by India Post, due to onset of SMS & email.
 Dept of Post sells
o Gangajal sourced from Rishikesh and Gangotri.
o UTI-Mutual funds and Sovereign Gold bonds.
 Post Shoppe = special outlet in big post offices for philately (stamp collection hobby)
 RTI fees can be submitted by buying Indian Postal Orders (IPO). E-IPO = overseas Indians can
pay RTI fees online using this mechanism.
 Deen Dayal SPARSH Yojana: Students in class 6-9 given scholarship for philately.
 Dhai Akhar Letter Writing Competition-students asked to write letters to Mother Teresa,
Tagore etc.

 Officers’ training conducted at Rafi Ahmed Kidwai National Postal Academy at Ghaziabad, UP.
Kidwai was India's first Minister for Communications.
Table 4: ✋No need to loose sleep, UNLESS preparing for Post-Office staff exams.
Dept of Post → Post Office Savings India Post Payments Bank (IPPB)
Bank (PoSB)
foundation Govt Savings Bank Act Companies act 2013 → Public ltd
1873 company registered in 2016
Accept demand Savings account only 1. Current account
deposits? 2. Savings account
Accept time deposits? YES No, bcoz it is a payment bank
Can keep more than ₹2 YES No, bcoz payment bank. But u can link IPPB
lakh balance? account with PoSB account to auto-transfer
(=SWEEP) excess balance to PoSB.
E-Banking and online Not directly but you yes , UPI, BHIM, NEFT, IMPS and BBPS
bill payment can do it by linking (Bharat Bill pay) available.
PoSB account with
IPPB account
Sukanya Smriddhi Can be opened Not possible. Because time deposits are not
(daughter’s fixed allowed in Payment Banks.
deposit account)
loans to individual? No. ₹₹ goes to NSSF Not until it becomes Small Finance Bank
Objective? Promote savings habits Remittance & digital payments
among poor
- 👜👜Budget-2022: Post Office Savings Bank (POSB) will be connected with Core Banking System
(CBS). So, their depositors too can use E-banking/net-banking, mobile banking, ATMs etc.
- Benefits? 🤩🤩1) Convenience for POSB depositors esp. villagers, farmers and senior citizens.
🤩🤩2) interoperability= (ability to use POSB deposit money in above NEFT/ATM etc facilities)
- Interoperability is the ability of customers to transact across commercially and technically
independent payment platforms. �ावसा�यक और तकनीक� �प से �तं त्र �ेटफाम� के बीच लेन-देन करने क� सु�वधा
18.12.2 (�:💰💰)→(�:💳💳)Sukanya Samriddhi Yojana (2015)
- Parents open a (fixed deposit type) bank account in the name of a 0-10 years girl child, and
deposit annually ₹ 250 to ₹ 1.5 lakhs till she reaches age of 14.
- FinMin’s Dept of Economic Affairs announces interest rate (originally 9.1%, presently ~8.5%)

- Money (principal and interest) can be withdrawn @ the age of 18-21 depending on whether
married or not. So, it indirectly prevents child marriages & empowers the grown-up daughter
with money to pursue higher education, small business etc.
- 1 daughter = ONLY 1 account can be opened in this scheme. (एक बेटी के नाम पर �सफर् एक)
- Maximum two daughters can be enrolled by parents/legal guardians.
18.12.3 ⚖Proposed Government Savings Promotion Act (in 2018)
It aims to merge (outdated) laws related to small saving schemes (ref: previous table)
🤩🤩Benefits? (फ़ायदे)
- Easier withdrawal during medical emergency, college fees etc,
- Clarification on Minor account, PH people- guardian rights; Grievances redressal.
18.12.4 ⭐📫📫 �� Five Star Village scheme by Dept of Post (2020)
गाँव वालों को �व�वध लघु बचत योजना और बीमा योजनाओं से जोड़ने क� डाक �वभाग क� को�शश
⇒ by Ministry of Communications Department of Post (सं चार मं त्रालय → डाक �वभाग)

⇒ Post offices will spread more awareness, enrol more villagers in the following schemes:
⇒ Small saving schemes such as Post office Savings Bank accounts, National small savings
certificate Kisan Vikas Patra, Sukanya Samridhi Accounts, public provident fund (PPF)
⇒ Insurance schemes such as Rural Postal Life Insurance Policy, Pradhan Mantri Suraksha Bima
Yojana Account, Pradhan Mantri Jeevan Jyoti Bima Yojana Account.
18.12.5 ⚰💀💀📫📫 ��

� Sampoorna Bima Gram Yojana (2017)
⇒ In every district, atleast 1 village identified → In that village, cover all households with a
minimum of one RPLI (Rural Postal Life Insurance) policy. (गांव के हर प�रवार को कम से कम एक ग्रामीण
डाक बीमा पॉ�लसी बेची जाए)
18.12.6 ⚰💀💀🌽🌽 �� Model Insurance Villages (MIV) proposal by IRDAI (2021)
- Insurance Regulatory and Development Authority of India (IRDAI) proposed this
- To give complete insurance coverage to a village for its people’s life insurance, health insurance,
farm/crop insurance, animal (livestock) insurance, tractor/vehicle insurance etc.
- Funding/Subsidy by Union, State, Companies CSR Funds, NABARD & other AIFIs.
- (गाँववालों के �लए म� सभी प्रकार के जीवन बीमा, सामा� बीमा पॉ�लसी उपल� हो, तािक वह एक आदशर् बीमा ग्राम बन जाए। ऐसी
बीमा पॉ�लसी खरीदने के �लए सरकार तथा अ� सं �ानों द्वारा गांव वालों को स��डी/�रयायत दी जाए)

18.12.7 (��:💰💰)→ 📦📦 Chit Funds and Prize Chits
Chit Funds (�चट् फं ड/कोष)- गैरकानूनी नहीं है Prize Chits (इनामी �चट्स)- गैर कानूनी
Legally valid investment Scheme runs for a definite Scheme is illegal and vaguely designed.
period of e.g. 12 months from Jan to Dec-2020. (�न��त It runs until idiot investors keep coming,
समय तक चलती) then it collapses.
⇒ Every month each subscriber deposits equal ₹₹, as ⇒ There are no official documents or
stipulated in the scheme document account books.
⇒ Every month Foreman draws ‘chit’ → whichever ⇒ Scamster will accept whatever small
subscribers’ name comes he may get loan / prize. / large amount is offered by the poor
(in next month, previous winners’ names may not person who falls prey.
be added to the lottery pool). This way, everyone ⇒ Investor doesn't know with surety
has an equal chance of winning. how much is contributed by other
investors?
Even if you won in Feb-2020, still you'll have to Not compulsory to pay the monthly
compulsorily pay monthly deposits until Dec-2020 deposits after you’ve won the prize.
when the scheme is officially over. (Therefore the scheme will collapse
eventually, when new subscribers stop
coming).
This is legal, under Chit Funds Act (गैरकानूनी नहीं है) This is illegal under Prize Chits and
Money Circulation Schemes Banning
Act, 1978
Beyond that, - How does that work? How’s that different from NIDHI companies (regulated by
Ministry of Corporate Affairs) = B.com thing not. Imp. For UPSC.
18.12.7.1 (��:💰💰)→ 📦📦 Chit Funds (Amendment) Act, 2019

⇒ To amend 1982’s Chit Funds Act.
⇒ Will regulate: ‘Chit Funds’, ‘Kuri’, ‘fraternity fund’, ‘rotating savings and credit institution
(ROSCA)’. (they’re basically synonyms)
⇒ Made some reform to prevent scams. What are those reforms? Ans. Deleting because outdated
for 2023-24.
18.12.8 📦📦📦📦 Chit Fund Scams? धांधली/ गबन / का�

- Chit fund is a type of “contract” = subject to Concurrent list. So, UNION has Prize Chits and
Money Circulation Schemes 1978, Chit Funds Act 1982 (2019); Further state have their own acts
/ rules / State regulator of Chit Funds. (समवत� सूची म� होने के कारण क� द्र और रा� दोनों के कानून)
- Saradha Chit Fund scam, Rose Valley Chit Fund Scam: The scamsters ran multiple schemes in
W.Bengal and neighbouring states, invested money in sharemarket, real-estate, shopping malls
etc. thus violating the chit-fund laws.

- Further, any collective investment scheme of ₹100 cr/> requires SEBI permission. Yet they didn’t
obtain permission. (100 करोड़ �पए से बड़ी िकसी भी सामूिहक �नवेश योजना म� सेबी क� अनुम�त अ�नवायर्)
- They also engaged in Multi-level marketing (MLM) / Pyramid /Ponzy Selling = they’d use new
investors’ money to pay-off old investors. But once new investors stop coming, it’ll collapse.
Further Modus Operandi / Timeline not IMP. (इसक� टोपी उसके सर पर)
- ⚖Action? CBI & other agencies investigating. Union Govt proposed “Banning of Unregulated
Deposit Schemes Bill 2018”→ later Act 2019.
18.12.8.1 ⚖ 📦📦📦📦 Banning of Unregulated Deposit Schemes Act, 2019

- अ�नय�मत जमा योजनाओं पर प्र�तबं ध कानून
- If an entity is soliciting public to deposit /invest money, then it could be regulated by RBI (Bank,
NBFC-D, Home loan NBFCs etc), SEBI (MF, ReITs, InvITs etc), IRDAI & PFRDA, Corporate
Affairs ministry (NIDHI), State Governments (chit fund), EPFO, etc.
- A deposit-taking scheme is defined as ‘unregulated’ if person is asking people to deposit/invest
money but he has not registered with any of the above organizations. E.g. builders, jewellers, etc.
Act prohibits advertisement & money collection in it. (ऐसी कोई भी बचत योजना जो िकसी भी �व�ीय �नयं त्रक
के दायरे म� नहीं आती उसे गैरकानूनी माना जाएगा)
- Penalty upto ₹50 crores and jailtime upto 10 years + attaching the assets to refund depositors
within prescribed timelines. (जुमार्ना, कारावास, सं प�� क� ज�ी)
- Union to setup an online central database of deposit-taking activities in the country.
18.13�� ←(💰💰💰💰) FINANCIAL INCLUSION: CREDIT (LOANS: ऋण)

Self Study? Pillar#1A2: Monetary Policy → PSL. Pillar#1B1: Classification → microfinance
18.13.1 ��: 🧔🧔 ←(💰💰💰💰) Credit Guarantee (ऋण अदायगी गारंटी)

- Meaning? if borrower defaults, then losses of banks/NBFCs will be covered by credit guarantor.
So, Bank/NBFC can lend confidently without requiring borrower to pledge collaterals.
- Earlier DICGCI used to give credit guarantee for PSL borrowers, but now this work is done by
organizations such as:

Organization Credit Guarantee Fund Loans covered
SIDBI + Govt Credit Guarantee fund trust for Micro & Loans to Micro & Small
Small Enterprise (CGTMSE) Enterprise
Dept. of Financial National Credit Guarantee Trustee Mudra, ECLGS, Stand up India,
Services Company (NCGTC) Skill & Education loans
Commerce Export Credit Guarantee Corporation of Exporters
Ministry India fund (ECGC)
18.13.2 (💰💰💰💰)↗🗃🗃=(💰💰💰💰) Refinance (पुन�व�)
- When an AIFI (or MUDRA) gives new finance to Banks/NBFCs based on the quantum of
finance they (Bank/NBFC) have already given to end-borrowers.
- Usually works via the process of securitization of the previous loan papers. How it happens in
real life? Ans. NOT IMP.#🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
18.13.3 👻👻 �🏭🏭 MSME: Definition changed in ATMANIRBHAR (2020)

- 2006: Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 gave definition
of micro, small and medium enterprises
- 2020: ATMANIRBHAR → MSME ministry changed the definition as following: �नवेश और कु ल
�बक्र� के िहसाब से उधयोगों को वग�कृ त िकया जाएगा. �व�नमार्ण (mfg) और सेवा (services) �ेत्र के उधोगों के �लए एकसमान
�ा�ा।
💡💡 Note: This handout only deals with ‘loan’ component of MSME. For other MSME
issues/challenges, refer (More in 📑📑Pillar#4B → MSME)

✋in above image, read "<" sign as "NOT MORE THAN (से अ�धक नहीं)
Investment: �नवेश annual turnover: वा�षक कारोबार
18.13.4 👻👻🔪🔪 �🏭🏭 MSME Non-NPA borrower → ECLGS 1.0
ऋण अदायगी गारंटी -उन उधोगों के �लए �जनके लोन-खाते अभी एनपीए/अनजर्क प�रसं प�त क� श्रेणी मे नही है
⇒ Corona Lockdown → MSME business hurt → need loans to restart business → Emergency
Credit Line Guarantee Scheme (ECLGS: आपातकालीन क्रेिडट लाइन गारंटी योजना).
⇒ �Eligibility?
o MSME Previous outstanding loan account can’t be more than ₹25 crores, and can’t be
not an NPA.
⇒ New/ Extra Loan Amount? 20% of the outstanding loan.
⇒ Loan Tenure? 4 Years (�मयादी/समयकाल)
⇒ Loan Interest? 9.25% (Bank), 14% (NBFC).
⇒ Collateral? Not required. (�गरवी कु छ भी नही रखना होगा)

⇒ If the borrower doesn’t repay loan principal or interest→ Credit guarantee covered by NCGTC
(National Credit Guarantee Trustee Company Limited), a company under the Dept of financial
services in FinMin.
18.13.5 👻👻👻👻 �🏭🏭 MSME Non-NPA borrower → ECLGS 2.0 (Atma-Nirbhar 3.0)
It was launched during the Atmanirbhar Bharat 3.0 package(November 2020)
�Eligibility? (Two conditions must be fulfilled simultaneously)
1) MSME as well as Non-MSME(large) firms operating in
(a) Healthcare sector (�ा� �ेत्र) OR
(b) 26 stressed sectors Identified by RBI is KV Kamath committee (e.g automobiles,
tourism, cement, gems and jewellery etc तनावग्र� �ेत्र) AND
2) Its outstanding loans are > ₹50 crore - upto ₹ 500 Crore (as on 29.2.2020)
🤩🤩Benefit?
 Extra 20% loans against outstanding loans. (कजार् बकाया है उसके सामने 20% अ�त�र� कजर् िदया जाएगा)
 Interest Rate not explicitly mentioned in Press-Statement. (योजना क� प्रेस �व�� म� �� प से खुलकर
नहीं बताया, तो हमने खुद से गूगल सचर् मारने क� कोई ज�रत नहीं है#🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो )
 Repayment tenure of above loan: 5 years including 1 year moratorium on principal
repayment. (5 साल म� कजर् चुकाना होगा और उसम� भी 1 साल तक मूलधन चुकाने पर रोक)
👜👜👜👜Budget-2022: This scheme is continued, with more funds.
18.13.6 👻👻🔪🔪🔪🏭🏭 MSME NPA borrower → Subordinate Debt (गौण ऋण)

ऋण अदायगी गारंटी- उन आ�थक तनावग्र� उधोगों के �लए �जनके लोन-खाते पहेले से एनपीए श्रेणी मे आ चुके है।
⇒ Beneficiary? MSME whose loan account is in NPA/ stressed category. लघु/
⇒ Such stressed MSME to be given subordinate loan Upto ₹75 lakhs to revive business.
⇒ Tenure/Interest? Not clearly mentioned.
⇒ If the borrower doesn’t repay loan principal or interest→ Credit guarantee by CGTMSE (Credit
Guarantee Trust for Micro and Small enterprises, an org funded by SIDBI + Govt).
18.13.7 👻👻🗃🗃🗃🏭🏭 MSME → Equity infusion via Fund of Funds (�न�धयो क� �न�ध)
⇒ Govt will set up a Fund of Funds with ₹10,000 crore.
⇒ This FoF will invest in daughter funds (who’ll supply ₹40k cr from their funds). So, total
10k+40k=50k equity funding/infusion to MSME. (इ��टी के �प म� कं पनी म� जान फूं कना)

18.13.8 🚫🚫🚫🚫🚫🚫🚫🚫 NBFC → Mudra (2015, 100% SIDBI subsidiary)
- Micro Units Development & Refinance Agency. (सू� इकाई �वकास एवं पून: �व�पोषण एज�सी)
- Objective? provides indirect lending via SCB, RRB, Cooperative Banks, MicroFinance Inst &
other NBFCs. (अनुसू�चत वा�ण� ब�क �ेत्रीय ग्रामीण ब�क सहकारी ब�क गैर ब�क �व�ीय कं प�नयों द्वारा परो� �प से कजर् देता है)
- Ownership? It’s wholly owned by SIDBI, and also receives the funding from PSL-shortfalls via
RBI, and budgetary support via Department of Financial Services.
- Beneficiary? Micro Enterprises from Agri-allied sectors, mfg & service sector who are not
registered under the companies act = Non-corporate type. (�ज�ोंने कं पनी कानून म� पं जीकरण नहीं करवाया)
Table 5: Mudra-Products:
Pradhan Mantri MUDRA Yojana MUDRA Rupay Card
1) Shishu : loans upto 50,000/- - ATM cum Debit Card issued against MUDRA loan
2) Kishor : >50,000/- upto 5 lakh account.
3) Tarun : > 5 lakh and upto 10 - For working capital component.
lakhs - Can be accessed in all modes like a routine debit card
(ATM, MicroATM, PoS, Online)
- Mudra loans are collateral-free (जमानत से मु�). If borrower defaults on loan, then lender’s losses
are covered through Credit Guarantee Fund for Micro Units [CGFMU] which is operated by
National Credit Guarantee Trustee Company Ltd. [NCGTC, 2016]- which is a private ltd
company by Dept of Financial Services in Finance Ministry.
- 😰😰MUDRA Challenges? (1) Loan Interests are high (2) Rising NPA/Bad loans.
18.13.9 👻👻👻👻 �🏭🏭 Mudra Loans → Shishu Loans pe 2% Interest subvention

⇒ 👻👻ATMANIRBHAR-2020: Shishu loan borrowers = 2% Interest subvention (�ाज-अदायगी मे
सरकारी-मदद) IF they’re prompt payees (=repaying the loans regularly).
⇒ This offer is valid for 12 months.
🔠🔠❓ Pradhan Mantri MUDRA Yojana is aimed at (Asked in UPSC-Pre-2016)

a) bringing the small entrepreneurs into formal financial system
b) providing loans to poor farmers for cultivating particular crops.

c) providing pensions to old and destitute persons.
d) funding the voluntary orgs involved in the promotion of skill development and employment
generation.
18.13.10 ⏰🔪🔪💻💻 psbloansin59minutes.com (2018)

portal by SIDBI & 5 PSBs. GST-registered MSME get loans 10L to 1 cr. Without collaterals. if loan
approved then ₹1000 fees need to be paid
18.13.11 🙋🙋Stand Up India Scheme, 2016 (उ�� भारत)

- Boss? FinMin’s Dept of Financial Services (�व�ीय सेवा �वभाग)
- Objective? Each SCB bank branch to give Greenfield Loans between ₹10 lakh and ₹1 Crore to at
least 1 SC/ST and atleast 1 Woman entrepreneur with tenure upto 7 years.
- Collateral? Bank can ask collaterals. If loan without collaterals, then Credit Guarantee Fund for
Standup India (CGFSI) operated by NCGTC.
- Budget-2019: this scheme extended till 31/3/2025.
- Margin money =is the amount of money that a bizman has to arrange by himself from his own
pocket/savings for the given biz-project. Remaining amount is given as a loan by the bank.
💼💼Budget-2021: 1) ⏬ margin money requirement from 25% to 15%. 2) Agri-biz projects also
eligible.
18.13.12 👭👭Self-help group (�-सहायता समूह) → Credit
- is an informal group of 10-20 local people to combine their savings/ resources, engage in biz
activity like weaving, agarbatti etc अपनी बचत और सं साधनों क� मदद से कु छ छोटा उ�ादन करने वाला गरीब लोगों का
एक अनौपचा�रक समूह
- and not registered in as a firm / company under partnership act or companies act etc.
- Self-Help Groups are formed under the government schemes like National rural livelihood
mission (NRLM). More in 📑📑Pillar#6]
- Budget-2019:
o 1 woman in each self-help group (SHG) will be made eligible for ₹ 1 lakh loan under
Mudra scheme.
o Every verified woman SHG member with a PM Jan Dhan account eligible for
overdraft of ₹5,000.
- 👻👻ATMANIRBHAR → PM GaribKalyan → Women Self Help Groups (SHGs) to be given ₹20
lakh collateral free loans. Further,

o Government will procure masks and sanitizers prepared by SHG = ₹₹ income for
poor families. (सरकार इनसे मा� और से�नटाइज़र ख़रीदेगी)
o These SHG are given additional 10-15k rupees as Revolving funds (RF: प�रक्रमण �न�ध),
if they’re holding – regular meetings, regular savings, and maintenance of proper
books of accounts etc. ATMANI= RF fund disbursal will be done through PAISA
webportal.
18.13.13 🤑🤑🤑Street Vendors’s AtmaNirbhar Nidhi Scheme (PM-SVANidhi)
⇒ Boss? Ministry of Housing and Urban Affairs (MoHUA)- आवास और शहरी मामलों का मं त्रालय
⇒ Pradhan Mantri Street Vendor’s AtmaNirbhar Nidhi Scheme (PM SVANidhi)
⇒ Street Vendors will be given ₹10,000 loan via banks and NBFCs (e.g. Micro Finance
institutions). (सड़क �वक्रेता/फे रीवाला को ब�क तथा गैर-ब�क �व�ीय सं �ान जेसे क� सू� �व� सं �ान से कजार् �मलेगा)
⇒ Loan Tenure: 1 year. Repayment to be done on a monthly basis.
⇒ Loan Interest? approx @7.25% & if vendor repays in timely fashion → govt will give 7% interest
subsidy in his bank account. (फे रीवाला ने �ण अदायगी �नय�मत �प से क� तो �ाज म� सरकार राहत/स��डी देगी)
⇒ Scheme Valid till: 2022-March.
18.13.14 🤑🤑🤑Street vendors’s PM-SVANidhi → Main Bhi Digital (2021)

⇒ MoHUA to give ₹₹ to Urban Local Bodies (ULBs: नगरपा�लका को शहरी मं त्रालय पैसा देगा)
⇒ To spread digital literacy among street vendors who took SVANidhi Loans e.g. How to use UPI,
BHIM, Netbanking. Connect food-street vendors with online e-commerce players like Swiggy-
Zomato etc to expand street-vendors’ sales etc. (सड़क �वक्रेताओं को िड�जटल भुगतान और िड�जटल �बक्र� मा�मों
क� जानकारी देना)
⇒ 🤩🤩Benefit? Digital Economy-walle benefits (Ref: in 📑📑Pillar#1A1)
18.13.15 �PaiSA Portal (2018)

- Ministry of Housing and Urban Affairs (MOHUA) → Deendayal Antyodaya Yojana-National
Urban Livelihoods Mission (NULM) → urban poor are given skill training, bank loans to setup
business → interest subvention. (more in Pill#6).

- 2018: MoHUA launched PaiSA (Portal for Affordable Credit and Interest Subvention Access)
with the help of Allahabad Bank as the nodal / coordinator. [2020: Allahabad Bank merged with
Indian Bank. So, tick accordingly, depending on what options are given in MCQ.]
- PaiSA portal to connect with all banks for delivering the loan interest subsidies.
18.13.16 �💳💳 Kisan Credit Card (1998)
1998: Launched by RBI +NABARD. Farmer gets credit card from PSB, RRB, State Coop Banks for:
- Can swipe it to buy farm inputs (seeds, fertilizers, pesticides etc.)
- Investment credit requirement for agriculture
- Working capital for maintenance of farm assets
- Post-harvest expenses, (फसल काटने के बाद होने वाले खचर्)
- Consumption requirements of farmer household; (घर म� उपभोग हेतु खच�)
- Can withdraw cash (as loan).
- Money to be repaid with interest. Accidental insurance also given.
- Budget-2018: Kisan Credit Card (KCC) extended to Animal Husbandry and Fisheries farmers.
Interim-Budget-2019: they (animal/fisheries-walla) too will get the interest subvention
- Interim-Budget-2019: comprehensive drive with a simplified application form to get all farmers
under KCC cards.
🔠🔠🔠 MCQ. Under the Kisan Credit Card scheme, short-term credit support is given to farmers
for which of the following purposes ? (UPSC-Prelims-2020)
1. Working capital for maintenance of farm assets
2. Purchase of combine harvesters, tractors and mini trucks
3. Consumption requirements of farm households
4. Post-harvest expenses
5. Construction of family house and setting up of village cold storage facility
Codes: [a) 1, 2 and 5 only [b) 1, 3 and 4 only [c) 2, 3, 4 and 5 only [d) 1, 2, 3, 4 and 5

18.13.17 ��: 🧔🧔 ←(💰💰💰💰) Interest Subvention (�ाज सहायता)
Govt pays part of the interest rate for borrower. (farmer, MSME, affordable housing etc) such as:
- Farm loans upto 3 lakhs→ 9% MINUS 2% (to all farmers) MINUS 3% (regular paying farmers)=
only 4% loan interest farmer has to pay.
- Interim-Budget-2019:
o KCC-card-walla Animal Husbandry and Fisheries farmers also eligible.
o If natural disaster- then crop loans are rescheduled, we’ll streamline the subvention
norms there.
o MSME: incremental loans upto ₹1 crore to GST registered MSME industry= 2%
subvention. (As such already announced by Modi in 2018)
18.14🌽🌽🌽🌽🌽🌽🌽🌽FARM LOAN WAIVER (कृ �ष ऋण माफ�)

18.14.1 🌽🌽🌽🌽🌽🌽🌽🌽Agri-Finance → Loan waivers for the farmers
− 2008: 💼💼Budget → Agricultural Debt Waiver and Debt Relief Scheme (ADWDRS). On their
outstanding crop-loans upto 29/Feb/2008→
o Small and marginal farmers given 100% debt waiver : कजर् माफ�;
o Other farmers were given 25% debt relief : ऋण राहत.
− FinMin → Department of Financial Services → paid the dues to the banks in a phased manner
on behalf of farmers → 2009: 15th Lok Sabha Election won by UPA/Congress.
− 2016-18: The state governments of Tamilnadu, Maharashtra, Karnataka, Uttar Pradesh, Jammu
Kashmir, Punjab, Chhattisgarh, Andhra,Telangana et al. also launched in similar debt waiver and
debt relief.
− 2017: 💼💼Budget gave 60 days interest waivers to farmers on account of the problems farmers
suffered during demonetization in 2016. (नोटबं दी के बाद कु छ िदनों के �लए �ाज माफ िकया था)

18.14.2 🌽🌽🌽🌽🌽🌽🌽🌽=👌👌Agri-Finance → Farm loan waivers: arguments in favour
1. 2008: Post-subprime crisis and global financial crisis, the demand for textile declined in the
international market → cotton prices fell in India → farmers suffered. वै��क आ�थक सं कट के बाद
कपास/�ई �नयार्त म� कमी
2. 2014: drought, 2015: again drought. अकाल 😰😰
3. 2016-17: Demonetization → cash shortage → price of agricultural commodities fell.
4. Thus, farmers are suffering for a decade (2008-18), as evident from the violent agrarian
agitations in Madhya Pradesh, Uttar Pradesh and Maharashtra in 2017 and 2018.
5. While corporate borrowers are eligible for loan restructuring, farmers are not given such
benefits. So farmers should be given loan waiver. उद्योगप�तयों के कजर् का तो पुनगर्ठन हो जाता है
6. “Debt overhang” (ऋण क� अ�धकता): a situation where all current income gets used up in repaying
the accumulated debt. Farmer feels no motivation to invest in his ‘business’. Debt waiver cleans
up his liability. It’ll spare his income /savings for investing in better seeds/fertilizers and
machines. (Counter: 📔📔📔📔ES20 found no such evidence.)
18.14.3 🌽🌽🌽🌽🌽🌽🌽🌽=👎👎Agri-Finance → Farm loan waivers: arguments against

1. 🚭🚭Moral Hazard (नै�तक जो�खम): Lack of incentive to be "disciplined", when risky behavior is
insured by someone. If the government continue to give loan waivers, farmers will have no
discipline to be efficient, cost-savvy and hard working. (ज�री नहीं िक कजर् माफ� के बाद वह �ज�ेदार बनके
श्रम करे)
2. “Loan waivers undermine honest credit culture. NPA problem will get aggravated.”, said ex-RBI
Governor Urjit Patel.
3. 🗳🗳Whenever elections are near, agri-loan defaults are increasing. It hints farmers are
strategically defaulting on loans, in anticipation of waiver. ( चुनाव के कारण कजर् माफ कर िदया जाएगा, ऐसी
रणनी�त के साथ, जानबूझकर िकसान लोन वापस नहीं कर रहे)
4. Loan waiver did not ⏫ our crop production or GDP growth, said 📔📔📔📔ES17 (कजर् माफ़� के बाद
फसल उ�ादन तथा सकल घरेलू उ�ाद म� बढ़ोतरी होने के कोई सबूत नहीं �मले)
5. Thus, Government Intervention has hurt more than it has helped., says 📔📔📔📔ES20 (सरकारी दखल से
यहाँ पर मदद कम और तकलीफ �ादा �ई है-ऐसा आ�थक सव��ण का मानना है)
6. Loan waivers → ⏫fiscal deficit → households and business firms will be hurt. (More in
📑📑Pillar#2)

7. Total farm loans: ~5.5 lakh cr (2013). Out of that ~60% by formal lenders (banks, Microfinance
etc.) Rest by informal money lenders (Village Baniya, Shroff etc.) So even if loan waivers are
announced, all farmers will not benefit from it. �ज�ोंने अनौपचा�रक स्रोतों से कजार् �लया उन िकसानों को कोई लाभ
नहीं �मलेगा
8. Govt’s expenditure on healthcare is LESS than 2% of GDP. WHO recommends 5%. If all the
farm loans are waived it will cost 1.5% of GDP. So, if government has so much spare money to
spend, it’ll be better to spend in public healthcare which will benefit both farming and non-
farming families. Similar argument for education expenditure. बेहतर होगा हम �ा� तथा �श�ा पर पैसा
खचर् कर� ना िक िकसानों का कजर् माफ करने म�
18.14.4 🌽🌽🌽🌽🌽🌽🌽🌽=👎👎☠Anti-Argument: Loan waiver will not stop farmer suicide
Farmer suicide is a result of: (िकसान क� आ�ह�ा के �व�भ� कारण)
1. farmer have small sized farm, lack of irrigation, good quality seeds and fertilizers → Not large
quantity of agro-production = can’t earn lot of money by selling it. (खेत छोटे ह�, उ�ादन इतने �ादा
ज�े/हज़ारों िकलोग्राम म� नहीं कर पा रहे िक �जसे बेचकर मोटी रकम कमा सके )
2. Lack of remunerative prices because of challenges in APMC, MSP and transport-storage
infrastructure. (उ�ादन क� िकसान को अ�� क�मती नहीं �मल रही)
3. Lack of financial inclusion and financial planning. Even after good monsoon and good harvest,
they waste money on social events and pilgrimage. (अ�� फसल-िकसान सामा�जक प्रसं गों, तीथर् यात्राओ म� पैसा
बबार्द करते ह�)
So, loan waiver is a short-term remedy that can’t prevent farmer suicide until above three issues are
addressed. (क़ज़र् माफ़� एक अ�ाई उपाय है, �जससे कायमी/�ायी �प से िकसान-आ�ह�ा क� सम�ा हल नहीं होगी)
18.14.5 🌽🌽🌽🌽🌽🌽🌽🌽 ✍ Farm Loan Waiver: Conclusion
 From the aforementioned analysis, it’s evident that farm debt waiver will have negative
consequences for Indian economy. (कजर् माफ� से भारतीय अथर्तंत्र पर नकारा�क असर होगी. यह िकसानों क�
सम�ाओं को �ाई �प से हल नहीं करेगा)
 Debt waiver is not a sustainable solution against agrarian distress, we should work on more
efficient and targeted ways to help farmers. (ल��त �प से िकसानों क� मदद क� जाए) (More in
📑📑Pillar#4A-Agri Schemes)
18.14.6 👻👻👻👻👻👻 Atma-Nirbhar Farm Loan Reforms (2020)
⇒ Suspension/Moratorium on the farm loans for “X” months from March 2020. Originally X=3
months, then 6 months…… (कृ �ष ऋण-अदायगी ��गत क� गई)
⇒ Cheap loans via Kisan Credit Card will be given to PM KISAN beneficiaries, Fishermen and
Animal Husbandry farmers. (�रयायती �ाज दर पे कृ �ष-ऋण द�गे)
⇒ NABARD to give additional refinance to Regional Rural Banks and Cooperative banks and.
(�ेत्रीय ग्रामीण ब�क और सहकारी ब�कों को पहले से अ�धक पुनर�व� िदया जाएगा)
(More AGRO SCHEMES in in 📑📑Pillar#4A-Agri Schemes)

18.15⚰� FINANCIAL INCLUSION: INSURANCE & PENSION
- Various schemes are given in previous sections: But just to quickly recall the notable terms:
Insurance: Postal Life, ESIC, PM Jeevan Jyoti & Surkasha Bima (₹2 lakh), PM-JAY (₹5 lakh
annual health insurance per family), PM-Fasal Bima (1.5-5% premium);
- Pension: EPFO, NPS, Atal Pension (1-5k), PM Shram Yogi Mandhan (3k), PM Vay-Vandana
(8%@LIC), Maan-Dhan Yojanas (3k/pm)
18.15.1 ⚰🔬🔬 Micro Insurance (सू� बीमा)

⇒ Insurance policy may be Life / General Insurance with a very low premium.
⇒ When small sum insured (upto ₹50k) & target audience is poor / villagers / farmers.
⇒ It may be an individual / group based insurance. Intermediaries such as NGO, SHG, MFI help in
selling such policy. Policy/ Contracts are given in local language. e.g. LIC’s Jeevan Madhur and
Jeevan Mangal
18.15.2 🏍🏍🏍🏍🏍🏍 Gig Workers’ social security code (�गग कम� क� सामा�जक सुर�ा सं िहता)
⇒ Informal workers (अयथा�व�ध कम�)= doesn’t have formal job contracts with employers. E.g.
Domestic Maids, Brick Kiln Workers, Construction Labourers, Chowkidar, Dhaabaa
cooks/waiters etc.
⇒ Gig workers (�गग कम�)= Uber Taxi Drivers, Amazon/Zomato Delivery boys, Urbanclap’s
beauticians/ plumbers/ AC repairman, Unacademy Educators etc. They are freelancers /
independent contractors (�तं त्र ठे केदारों) hired by startup or digital companies for short-term
engagements. While they may have some written contract to deliver services to the company, but
the contract is worded in such manner they are not “regular employees” of a company = not
eligible for EPFO, ESIC etc.
⇒ 2019-Sept: Labour Ministry drafting a “social security code for all informal & gig workers”. It
aims to provide ‘insurance on death/disability/sickness’, maternity benefit, pension, scholarship
for their children etc. (मृ�ु / �वकलांगता / बीमारी पर बीमा, मातृ� लाभ, प�शन, �गग कम� के ब�ों को छात्रवृ��)
18.15.3 👻👻ATMANIRBHAR → 👷👷Workers’ Social security (2020)

⇒ Annual health check-up for all employees. (�ा� जांच)
⇒ Govt’s Social security schemes will be extended to Gig workers and platform workers (e.g.
Zomato delivery boys, Urbanclap beautician, uber taxi drivers etc.) (गीग प्रणाली के श्र�मक को भी सरकारी
सामा�जक सुर�ा योजनाओं का लाभ)

⇒ Central Government’s Building and Other Construction Workers Act, 1996: → workers
contribute ₹₹ to a fund held by the State Government → they get pension after
retirement/accident compensation etc. 👻👻ATMANI→ PM GaribKalyan → State Governments
ordered to use this ₹₹ for helping construction workers during Corona.
⇒ Portability of social security benefits to migrant workers. E.g. If a construction worker deposits a
premium in Gujarat building workers welfare fund → Afterwards he returns back to home state
Odisha, he will get pension from there. (सामा�जक सुर�ा लाभ क� सुवाह्यता- अपने वतन वापस जाए तो भी लाभ
�मलते रहे)
18.16��: �FINANCIAL INCLUSION: CUSTOMER PROTECTION (ग्राहक सुर�ा)
😾😾Bank/NBFC 📈📈Share/Bond ⚰Insurance (IRDAI) �Pension
(under RBI) (SEBI)
Ombudsman: Bank, SCORES ⇒ Insurance - If EPFO- then its
NBFC, Digital Portal→ Ombudsman via internal machinery
Transaction (given SEBI→SAT IRDAI Act ‘1999, - If NPS: NSDL→
below) hears matters upto PFRDA.
₹30 lakhs. If higher - If pvt sector pension
claim then consumer company’s scheme:
courts / other courts. PFRDA → SAT.
⇒ Higher appeal against
IRDAI → SAT
18.16.1 😾😾RBI’s 3 Ombudsman (ओमबड्समेन/ �शकायत �नवारण अ�धकारी/लोक प्रहरी)
Table 6: DONOT LOOSE SLEEP unless preparing for RBI officers' Exam
Banking NBFC Digital Transactions

Ombudsman Ombudsman Ombudsman�
When 1995 2018 2019
RBI designates Banking powers to regulate Payment and Settlement
a senior RBI Regulation Act, NBFCs under RBI Act, Systems Act, 2007
official under 1949 1934
Where does he 21 offices across 4@ Chennai, Kolkata, Same as BO
sit? India New Delhi and Mumbai,
looking after respective
zones.
Customer can Any type of bank - Any NBFC-Deposit- Prepaid payment instruments,
file free taking (e.g Mahindra, Mobile wallets, Apps,
complaint Jindal, Sriram), OR NEFT/RTGS and other digital
against transactions

- Any NBFC with
assets size of ₹1
billion
For amounts* upto ₹20 lakhs upto ₹10 lakhs upto ₹20 lakhs
Penalty Ombudsman can order penalty upto ₹1 lakh for customer’s mental agony, waste
of time and money
Higher Dy. Gov
Appeal?
- *subject to changes in future, so, don’t lose sleep over it.
- ** gradually RBI keeps adding more category of NBFCs here.
- 2019: RBI launched online Complaint Management System (CMS): Customers can lodge
complaints against any RBI regulated Bank or NBFC → Complaint would be directed to the
appropriate Ombudsman
- 2021-Feb: 😰😰BEFORE: RBI appointed 3 types of ombudsman for consumer complaints: (i)
Banking Ombudsman Scheme (ii) NBFC Ombudsman (iii) Digital Transaction Ombudsman.
🤩🤩After: Integrate these 3 into a One Nation One Ombudsman / Integrated Ombudsman
Scheme (एक�कृ त �शकायत �नवारण अ�धकारी योजना)
18.17📈📈🌐🌐🦁🦁FINANCIAL INCLUSION: INDIA’S PERFORMANCE (भारत का प्रदशर्न)

18.17.1 📈📈🌐🌐 Global Microscope Report
- Annual report started in 2007, to measure financial inclusion levels, this report is prepared by
The Economist Magazine’s Economist Intelligence Unit, Accion global NGO &partners like Bill
& Melinda Gates Foundation, Metlife foundation etc.
- 2019’s report measured gender gap in financial inclusion for the first time.
- 2020’s report measures role of financial inclusion in the COVID-19 response:
 E-banking can help in cash transfers to beneficiaries
 ⏫Digital financial frauds in Corona lockdown etc.
- Over the years, this report identified following challenges in India:
 full interoperability across payment systems. Lack of financial literacy, no trust in
financial system or buying insurance. (Ref:1A1 for more)
 Digital divide, grievances redressal. extreme poverty, no surplus to save / invest.
 No land / property records→ access to loans is difficult.
- 2020’s Ranking? #1 tie-Columbia and Peru, ….. #6:India (last year India was #5) …total 55
nations. I don’t find this report so IMP that I shd update its ranking every year.

18.17.2 📈📈🌐🌐 Global Findex Database 2017: (released in 2018, April)
- By World Bank with help of Bill & Melinda Gates Foundation
- It’s published every 3 years. It doesn’t give ranking but measures how many % of people have
access to banking, credit etc. in a given nation.
- What is India’s data? Ans. for UPSC, Poor cost:Benefit for memorizing such low profile reports.
18.17.3 📈📈📈📈 Mercer CFA Institute Global Pension Index for 2021:
Rank#1- Iceland. India #40 among 47 nations. (⚾📻📻⚾🎓🎓✋ low profile report not greatly
important. )
18.17.4 📈📈🦁🦁 (India’s own) Financial Inclusion Index by DFS

- 2018-Sept: Proposed by Department of Financial Services (DFS).
- This annual index will have three measurement dimensions; (i) Access to financial services (ii)
Usage of financial services and (3) Quality. It complies with the format prescribed by the G20.
- Ranking? Poor Cost benefits memorizing for exam. Save brain’s memory card for gender-gap,
human development Index report etc.
18.17.5 📈📈🐯🐯 (India’s own) RBI’s National Strategy for Financial Inclusion (NSFI)
⇒ 2020-Jan: RBI released this report covering the timeframe “2019-2024.”
⇒ Exact points / salient features = poor cost benefit for UPSC. We already have sufficient points for
a 250 words answer. (अपने पास पयार्� मुद्दे है, इसको असल म� पढ़ने क� ज�रत नहीं)
18.17.6 📈📈🐯🐯 (India’s own) RBI’s Financial Inclusion Index (�व�ीय समावेशन सूचकांक)
⇒ 2021: RBI Governor announced to publish Financial Inclusion Index to capture the extent of
financial inclusion across the country in Banking, Investments, Insurance, Pension Sector.
⇒ (More in 📑📑Pillar#1A1)
18.18�🎺🎺 MOCK QUESTIONS FOR MAINS (250 WORDS EACH)

1. Explain the significance of financial inclusion & social security for achievement of Sustainable
Development Goals (SDG) for India. भारत के �लए सतत �वकास ल�ों क� प्रा�� के �लए �व�ीय समावेशन और
सामा�जक सुर�ा के मह� को समझाएं । Note: SDG-topic is unfinished until we learn Pillar6.
2. Discuss the significance of crop insurance and health insurance in eradication of rural poverty.
Enumerate the notable initiatives of the Government in this regard. ग्रामीण गरीबी उ�ूलन म� फसल बीमा
और �ा� बीमा के मह� पर चचार् कर�। इस सं बंध म� सरकार क� उ�ेखनीय कदमो क� सू�च दी�जए.
3. How is Ayushman Bharat-PM-JAY is different from the previous centrally sponsored schemes
on health insurance? Identify the fiscal and administrative challenges in its implementation. रा��ीय
�ा� सं र�ण �मशन इससे पूवर् क� क� द्र सरकार द्वारा प्रायो�जत योजानाओसे अलग कै से है? �व�ीय व् प्रशास�नक चुनौ�तयो को
�च��त क��जए.

4. Discuss in the need for enhancing participation of domestic and foreign players in insurance
sector of India. Enumerate steps taken by Government in this regard. (भारतीय बीमा �ेत्र म� घरेलू और
�वदेशी �खलािड़ओ क� भागीदारी बढ़ाने क� आव�कता पर चचार् कर�। इस सं बंध म� सरकार द्वारा उठाए गए कदमों क� सू�च दी�जए)
5. (Asked in Mains-2016) Pradhan Mantri Jan-Dhan Yojana (PMJDY) is necessary for bringing
unbanked to the institutional finance fold. Do you agree with this for financial inclusion of the
poorer section of the Indian society? Give arguments to justify your opinion. प्रधान मं त्री जन-धन
योजना (पीएमजेडीवाई) ब�िकंग से वं �चत लोगो को सं �ागत �व� /ऋण के दायरे म� लाने के �लए आव�क है। �ा आप भारतीय
समाज के गरीब वगर् के �व�ीय समावेशन के �लए इससे सहमत ह�? अपनी राय को सही ठहराने के �लए तकर् द�।
6. Discuss in the brief, the reforms ushered by 👻👻ATMANIRBHAR package in providing ‘ease of
credit’. (आ� �नभर्र पैकेज द्वारा 'ऋण म� आसानी' के हेतु से िकए गए सुधारो के मह� क� चचार् करे।)
7. Critically examine the need and feasibility of providing agriculture-debt waiver to small and
marginal farmers of India. कजार् माफ� देने क� ज�रत और �वहा�रकता पर गं भीर समी�ा क��जए
8. (Asked in Mains-2020) “Micro-Finance as an anti-poverty vaccine, is aimed at asset creation and
income security of the rural poor in India”. Evaluate the role of Self Help Groups in achieving
the twin objectives along with empowering women in rural India. ("सू�-�व� एक गरीबी-रोधी िटका है जो
भारत म� ग्रामीण द�रद्र क� प�रसं प�� नमार्ण और आयसुर�ा के �लए ल��त है". �यं सहायता समूहों क� भू�मका का मू�ांकन ग्रामीण
भारत म� मिहलाओं के सश��करण के साथ साथ उपरो� दोहरे उद्दे�ों के �लए क��जए ) Answered in FREE sp.classes
9. (Asked in Mains-2021) Can the vicious cycle of gender inequality, poverty and malnutrition be
broken through microfinancing of women SHGs? Explain with examples. (Answer in 150
words) [ �ा ल��गक असमानता, गरीबी और कु पोषण के दुष्चक्र को मिहलाओं को �यं सहायता समूहों को सू� �व�
(माइक्रोफाइने�) प्रदान करके तोड़ा जा सकता है ? सोदाहरण �� क��जए। ] Answered in FREE sp.classes
NEXT Handout: Pillar2: Budget, Taxation

1D: ⚰Insurance, Pension & Financial Inclusion
Table of Contents
16 ⚰Insurance (बीमा): Meaning and Significance ............................................................................................ 237
16.11.1 Insurance Principles (�सद्धा�: hindi not required but understand gist for case studies) .......... 237
16.12 ⚰🏺🏺 History of insurance in India (भारत मे बीमा कं . का इ�तहास) ........................................................ 237
16.13 ⚰💀💀Life Insurance (जीवन बीमा) ....................................................................................................... 239
16.13.1 ⚰💀💀 🦁🦁 Life Insurance → entities in public sector (सावर्ज�नक �ेत्र के जीवन बीमा सं �ान) ......... 239
16.13.2 ⚰💀💀💀💀 🦁🦁 Life Insurance Corporation of India (1956) ..................................................... 239
16.13.3 ⚰💀💀💀💀 🦁🦁 LIC’s Disinvestment (2020, �व�नवेश) ................................................................... 240
16.13.4 ⚰💀💀💀💀 🦁🦁 LIC IPO gets SEBI Approval (2022-March)................................................. 240
16.13.5 ⚰💀💀💀💀💀 LIC- Aam Admi Bima Yojana (AABY), Janshree Bima Yojana: .................... 240
16.13.6 🧔🧔⚰PM schemes for Life Insurance & Accidental (Gen) insurance .................................... 241
16.14 ⚰ 💊💊💊💊💊💊General Insurance (सामा� बीमा) ................................................................................ 241
16.14.1 ⚰🚕🚕🚕🚕 🦁🦁 Public Sector General Insurance Entities: Timeline (समय रेखा)........................ 241
16.14.3 🦁🦁(💉💉💉) Employees' State Insurance Corporation.............................................................. 243
16.14.4 👻👻👻👻⚰Gen Insurance → Corona Warrior ₹50 lakh cover by Govt (2020-March)......... 244
16.15 💊💊 Gen → Health Insurance Schemes (�ा� बीमा योजनाएं ) ............................................................ 245
16.15.1 💊💊 😵😵: 🧐🧐Arogya Sanjeevani Policy (2020) ............................................................................ 245
16.15.2 ⚰ 😵😵: 🧐🧐SARAL JEEVAN BIMA-Standardized term Life Insurance policy ..................... 246
16.15.3 💊💊💊💊Gen→ Health Insurance → Corona Kavach vs Rakshak ............................................ 246
16.15.4 💊💊♿ Niramya Health Insurance for PH. OLD SCHEME DONOT-LOOSE-SLEEP ......... 246
16.15.5 💊💊💊💊 Rashtriya Swasthya Bima Yojana (RSBY: 2008)............................................................ 246
16.15.6 💊💊💊💊: 🧔🧔Why public health insurance for poor? (गरीबों को सरकारी �ा� बीमा �ों िदया जाए) .... 247
16.15.7 💊💊💊💊5⃣L /👪👪/📆📆 Ayushman Bharat / PM Jan Aroyga Yojana (PMJAY) ............................ 247
16.15.8 PM-JAY Sub-schemes ................................................................................................................... 248
16.15.9 Ayushman Bharat Digital Mission .......................................................................................... 249
16.16 ⚰ 💊💊💊💊💊💊 General Insurance → other than Health Insurance............................................. 252
16.16.1 🧔🧔⚰🌽🌽 Pradhan Mantri Fasal Bima Yojana (2016).............................................................. 252
16.16.2 🧔🧔⚰🌽🌽 PM-FBY (2.0) revamped in 2020 .............................................................................. 253
16.16.3 🧔🧔⚰🌽🌽 Other Agriculture Insurance Schemes? (अ� कु छ फ़सल बीमा योजना) .......................... 253
16.16.4 ⛴🔪🔪(�🏦🏦) Insurance to Banks on Exporters’NPA → NIRVIC Scheme (2019) .............. 253
16.16.5 🚕🚕🚕🚕 Third Party Motor Insurance (थडर् पाट� मोटर इं �ोर�स) ........................................................ 254
16.16.6 🚕🚕🚕🚕 Own Damage Insurance (OD: मोटर सं बं�धत �यं के नुकसान का बीमा ) .................................... 254
16.16.7 🏗🏗⚖📜📜Title Insurance (जमीन / इमारत का टाइटल बीमा) ................................................................. 254
16.16.8 💉💉⚖📜📜Clinical Trial Liability Insurance............................................................................... 254
16.16.9 🔥🔥🔥🔥🔥🔥🔥🔥 Bharat Griha Raksha & other: Standardized home/factory insurance policies255

16.16.10 🌬🌬🌬🌬(Proposed) Catastrophe Insurance (आपदा बीमा) ............................................................. 255
16.16.11 🌬🌬🌬🌬 Catastrophe Bonds, Surety Bonds: ................................................................................ 255
16.16.12 👿👿👿👿General Insurance → Cyber Insurance (साइबर बीमा) .................................................. 255
16.16.13 💻💻eIA: e-Insurance account ................................................................................................... 255
16.17 ⚰↗⚰Re-insurance (पुनब�मा) ....................................................................................................... 256
16.17.1 😷😷(🤵🤵🤵🤵🤵🤵)PANDEMIC RISK POOL proposal by IRDAI ................................................ 256
16.18 ⚰�IRDAI: the insurance sector regulator (बीमा �ेत्र �नयं त्रक) ....................................................... 257
16.18.1 ⚰�Domestic Systemically Important Insurers (D-SIIs, (घरेलु प्रणालीबद्ध मह�पूणर् बीमाकतार्) ..... 257
16.19 ⚰😿😿 Challenges to insurance industry (चुनौ�तयां) ......................................................................... 257
16.19.1 �Insurance progress indicators (बीमा प्रग�त सं के तक) ....................................................................... 258
16.19.2 FDI limits in Insurance sector? (बीमा �ेत्र मे प्र�� वदेशी �नवेश क� सीमा)........................................... 258
16.19.3 Should we ⏫ FDI beyond 49% in insurance companies? (�ा सीमा बढ़ाए?) ............................. 259
17 � → � (💰💰💰💰) PENSION (प�शन) ............................................................................................................. 259
17.11 �🦁🦁 Employee Provident Fund Org. (कमर्चारी भ�व� �न�ध सं गठन)................................................... 260
17.11.2 🧔🧔🧔� (2016) Pradhan Mantri Rojgar Protsahan Yojana (Labour Min) .......................... 262
17.11.3 👻👻ATMANIRBHAR Reforms in EPFO 🧔🧔🧔� (March to August) ................................. 262
262
17.11.5 🚩🚩🚩FAQ: “why not merge EPFO with ESIC!!? ” ................................................................. 263
17.12 �→�Pension for Govt Employees & Middle Class? = NPS .................................................. 263
17.12.1 �→� Pension: NPA: Minimum Assured Return Scheme (MARS) .............................. 264
17.12.2 Old Pension Scheme (OPS) will not be re-introduced says Govt in Lok Sabha ...................... 264
17.13 �→�Pension for Senior Citizens WITH CAPACITY to Invest? ........................................... 265
17.13.1 Pradhan Mantri Vaya Vandana Yojana (2017-DFS, LIC) ......................................................... 265
17.14 �→�Pension for Poor People WITH capacity to INVEST? .................................................. 266
17.14.1 � → 👴👴👴👴👴👴: 🧔🧔 Pension: Three Maan Dhan Yojanas .................................................... 267
17.14.2 🚩🚩🚩FAQ: “why not merge all these schemes into one!?? ................................................... 268
17.15 �→� Pension for Poor People WITHOUT capacity to INVEST? ........................................ 268
17.16 �� PFRDA, the Pension Funds’ Regulator ............................................................................... 269
17.17 🛫🛫🛫Social Security for Overseas Indians (Pension / Insurance) .............................................. 269
17.17.1 🛫🛫🛫Pravasi Bharatiya Bima Yojana, 2017 .............................................................................. 270
18 (��:💰💰)→💳💳Financial Inclusion (�व�ीय समोवेशन) ................................................................................. 270
18.11 (��:💰💰)→💳💳 Fin. inclusion: Bank accounts for Everyone ................................................... 271
18.11.1 🧔🧔(��:💰💰)→💳💳 Pradhan Mantri Jan Dhan Yojana (प्रधान मं त्री जन धन योजना)................... 271
18.11.2 � Jan Dhan Darshak App (2018) .............................................................................................. 272
18.12 (��:💰💰)→ 📮📮 Fin inclusion: Investments other than Bank .................................................. 273
18.12.1 📮📮 (Yearbook) Dept of Post: POSB vs IPPB............................................................................... 273
18.12.2 (�:💰💰)→(�:💳💳)Sukanya Samriddhi Yojana (2015) .......................................................... 274

18.12.3 ⚖Proposed Government Savings Promotion Act (in 2018)................................................... 275
18.12.4 ⭐📫📫 📫📫
📫 📫 ��
� Five Star Village scheme by Dept of Post (2020) .......................................... 275
18.12.5 ⚰💀💀💀💀💀💀💀💀 ��
� Sampoorna Bima Gram Yojana (2017) .................................................... 275
18.12.6 ⚰💀💀💀💀💀💀💀💀 ��
� Model Insurance Villages (MIV) proposal by IRDAI (2021) ................ 275
18.12.7 (��:💰💰)→ 📦📦 Chit Funds and Prize Chits ........................................................................ 276
18.12.8 📦📦📦📦 Chit Fund Scams? धांधली/ गबन / का� ............................................................................... 276
18.13 �� ←(💰💰💰💰) Financial inclusion: Credit (Loans: ऋण) .......................................................... 277
18.13.1 ��: 🧔🧔 ←(💰💰💰💰) Credit Guarantee (ऋण अदायगी गारंटी) ..................................................... 277
18.13.2 (💰💰💰💰)↗🗃🗃=(💰💰💰💰) Refinance (पुन�व�)................................................................................. 278
18.13.3 👻👻 �🏭🏭 MSME: Definition changed in ATMANIRBHAR (2020) ..................................... 278
18.13.4 👻👻👻👻 �🏭🏭 MSME Non-NPA borrower → ECLGS 1.0 ...................................................... 279
18.13.5 👻👻👻👻 �🏭🏭 MSME Non-NPA borrower → ECLGS 2.0 (Atma-Nirbhar 3.0) ................... 280
18.13.6 👻👻👻👻👻🏭🏭 MSME NPA borrower → Subordinate Debt (गौण ऋण) ..................................... 280
18.13.7 👻👻👻👻👻🏭🏭 MSME → Equity infusion via Fund of Funds (�न�धयो क� �न�ध) .......................... 280
18.13.8 🚫🚫🚫🚫🚫🚫🚫🚫 NBFC → Mudra (2015, 100% SIDBI subsidiary) ...................................... 281
18.13.9 👻👻👻👻 �🏭🏭 Mudra Loans → Shishu Loans pe 2% Interest subvention ............................. 281
18.13.10 ⏰🔪🔪 psbloansin59minutes.com (2018) .............................................................................. 282
18.13.11 🙋🙋Stand Up India Scheme, 2016 (उ�� भारत)......................................................................... 282
18.13.12 👭👭Self-help group (�-सहायता समूह) → Credit........................................................................ 282
18.13.13 🤑🤑🤑Street Vendors’s AtmaNirbhar Nidhi Scheme (PM-SVANidhi)............................. 283
18.13.14 🤑🤑🤑Street vendors’s PM-SVANidhi → Main Bhi Digital (2021) ................................... 283
18.13.15 �PaiSA Portal (2018) ............................................................................................................ 283
18.13.16 �💳💳 Kisan Credit Card (1998) ............................................................................................ 284
18.13.17 ��: 🧔🧔 ←(💰💰💰💰) Interest Subvention (�ाज सहायता) .................................................... 285
18.14 🌽🌽🌽🌽🌽🌽🌽🌽Farm Loan Waiver (कृ �ष ऋण माफ�) ............................................................................... 285
18.14.1 🌽🌽🌽🌽🌽🌽🌽🌽Agri-Finance → Loan waivers for the farmers .................................................... 285
18.14.2 🌽🌽🌽🌽🌽🌽🌽🌽=👌👌Agri-Finance → Farm loan waivers: arguments in favour .......................... 286
18.14.3 🌽🌽🌽🌽🌽🌽🌽🌽=👎👎Agri-Finance → Farm loan waivers: arguments against ............................ 286
18.14.4 🌽🌽🌽🌽🌽🌽🌽🌽=👎👎☠Anti-Argument: Loan waiver will not stop farmer suicide................... 287
18.14.5 🌽🌽🌽🌽🌽🌽🌽🌽 ✍ Farm Loan Waiver: Conclusion .................................................................... 287
18.14.6 👻👻👻👻👻👻 Atma-Nirbhar Farm Loan Reforms (2020) ............................................................. 287
18.15 ⚰� Financial inclusion: Insurance & Pension........................................................................... 288
18.15.1 ⚰🔬🔬 Micro Insurance (सू� बीमा) ............................................................................................... 288
18.15.2 🏍🏍🏍🏍🏍🏍 Gig Workers’ social security code (�गग कम� क� सामा�जक सुर�ा सं िहता) .............................. 288
18.15.3 👻👻ATMANIRBHAR → 👷👷Workers’ Social security (2020) ................................................. 288
18.16 ��: �Financial Inclusion: Customer Protection (ग्राहक सुर�ा) ............................................... 289
18.16.1 😾😾RBI’s 3 Ombudsman (ओमबड्समेन/ �शकायत �नवारण अ�धकारी/लोक प्रहरी) ....................................... 289
18.17 📈📈📈📈📈📈Financial Inclusion: India’s Performance (भारत का प्रदशर्न) ............................................. 290

18.17.1 📈📈📈📈 Global Microscope Report ............................................................................................... 290
18.17.2 📈📈📈📈 Global Findex Database 2017: (released in 2018, April) ............................................... 291
18.17.3 📈📈📈📈 Mercer CFA Institute Global Pension Index for 2021: ............................................. 291
18.17.4 📈📈📈📈 (India’s own) Financial Inclusion Index by DFS........................................................... 291
18.17.5 📈📈📈📈 (India’s own) RBI’s National Strategy for Financial Inclusion (NSFI) ....................... 291
18.17.6 📈📈📈📈 (India’s own) RBI’s Financial Inclusion Index (�व�ीय समावेशन सूचकांक) ......................... 291
18.18 ✍🏼🏼🎺🎺 Mock Questions for Mains (250 words Each) ...................................................................... 291
16 ⚰INSURANCE (बीमा): MEANING AND SIGNIFICANCE

- Meaning: insurance policy is a Debt instrument / Legal contract against eventualities of death or
damage. (मृ�ु या ��त क� घटनाओं के �खलाफ कानूनी अनुबंध).
- 2 parties in this contract: 1) Insured / client 2) Insurer / Underwriter.
- Insurance provide stability to the households (against death, disability, damage) and
entrepreneurs (against fire, theft, natural disasters etc.) बीमा प�रवार और उद्योगप�तयों को जो�खमों के सामने
��रता मुहैया कराता है
- Insurance companies invest clients’ premium in various public and private sector projects,
thereby channelizing savings towards investment & economic growth. बीमा-िक� के द्वारा लोगों क� बचत
�नवेश म� जाती है
16.11.1 Insurance Principles (�सद्धा�: hindi not required but understand gist for case studies)
⇒ Uberrima fides- Good faith, hide nothing. (HIV+ve in Health Insurance)
⇒ Indemnity- Only “REAL” loss, not imaginary. (couldn’t give CAT exam due to fire)
⇒ Subrogation- Insurer can recover from negligent 3rd party.
⇒ Causa Proxima - Direct loss link. Bollywood fan can’t buy policy for Bachchan.
⇒ Insurable interest- If “risk-x” not happen, client remains in same position, “risk-x” happens
client in bad position. (I didn’t win lottery, I lost in horse race betting)
16.12⚰🏺🏺 HISTORY OF INSURANCE IN INDIA (भारत मे बीमा कं . का इ�तहास)

- (1818): Europeans started insurance companies in India, but they charged higher premium on
Indian clients with racist bias that Indians belong to an inferior race = higher probability to die.
अंग्रेज कं प�नयां भारतीय लोगों पर �ादा बीमा िक� मांगते थे
- (1870): Bombay Mutual Life Insurance was the first Swadeshi life insurance company and they
did not charge extra premium on Indian clients.
- (1912): Life Insurance Companies Act to regulate them, but lax norms, so just like the banking
industry, the insurance industry too faced problems in the aftermath of Great Depression in
USA. So, 1938: Insurance Act for tougher regulation. पहले कांड होते रहेते थी िफर क़ानून बनाया गया

- Just like the banking, the insurance industry had to be nationalized after independence due to
scams, financial inclusion and Five-Year Plans. धांधली, �व�ीय समावेशन और पं चवष�य योजना के �लए रा��ीयकरण
Chronology �Bank ⚰ Insurance
1948-49 RBI nationalized -----
1955 SBI nationalized -----
1956 ---- LIC Act took over ~245 (private owned) Life insurance
companies.
Private Banks
1972 ---- GIC Act: GIC and its 4 subsidiaries tookover ~107
(private owned) General insurance companies.
Private Banks
Reforms Narasimham ‘91 & ‘98 Malhotra Committee 1993→ Private insurance
सुधार स�म�त companies were allowed, FDI was liberalized
Safeguards CRR, SLR, BASEL Investment Pattern, Solvency Margin. E.g. They must
सुर�ा के �लए invest minimum “x%” of premium in G-Sec, they can’t
कु छ मानदंड invest more than “y%” of premium in pvt companies
shares/debentures etc. They must not invest in
companies having less than “AA” credit rating etc.
Exact norms not imp.
Financial PSL norms Rural & Social Obligation Norms: every year “x”
Inclusion, 25% branches in number of policies must be sold in rural areas,
Welfarism unbanked rural areas PH/backward etc. Further Insurance companies
required to invest minimum “x%” in affordable
housing projects, State Govt’s fire equipment etc. Else
IRDAI imposes penalty. ग्रामीण और सामा�जक दा�य� मानदंड
Delivery ⇒ Bank branch, Insurance Intermediaries: (म��/ �बचौ�लया)
Channel ⇒ Business - Agents/brokers.
Correspondence - Bankers selling insurance (Bancassurance)
Agent (BankMitra) - Surveyor/Loss Assessor (सव��क).
- Third Party Administrators (e.g. Hospital where
treatment is given for health insurance जहां आप का
इलाज हो)

16.13⚰💀💀LIFE INSURANCE (जीवन बीमा)
Life Insurance Type → Money returned? 📆📆At maturity 💀💀At death
Whole life= Longer policy: (e.g. 35-40 yrs) Yes, savings YES
Endowment= Shorter policy: (e.g. 10-20) returned with
interest
Term life= Short Policy, Low Premium e.g. PM Jeevan ✋No Yes
Jyoti Bima Yojana. मृ�ु नहीं �ई तो बीमा िक� वापस नहीं �मलेगी
ULIP: Unit Linked Insurance Plans: Part of money goes in Yes, savings YES
insurance, part in Mutual fund returned with some
profit
16.13.1 ⚰💀💀 🦁🦁 Life Insurance → entities in public sector (सावर्ज�नक �ेत्र के जीवन बीमा सं �ान)
16.13.1.1 ⚰💀💀 📮📮 Post Office Life Insurance (डाक जीवन बीमा)
- Initially started as postal life insurance for postal employees (1884), later extended to rural
people as well.
- Presently, 6 schemes for govt employees and 6 schemes for rural areas (usually with prefix of
“GRAM” e.g. gram Suvidha / Suraksha / Santosh….)
- They’ve developed “DARPAN” PLI (Postal Life Insurance) App for this.
16.13.2 ⚰💀💀💀💀 🦁🦁 Life Insurance Corporation of India (1956)
⇒ To take over/nationalize the private life insurance companies → LIC Act, 1956. So, LIC is a
statutory corporation/statutory company. (वैधा�नक �नगम)
⇒ Rigveda: “योग�ेम” (Yogakshema: well being) = name of LIC HQ@Mumbai & its corporate
magazine.
⇒ Gita: “योग�ेमं वहा�हम्” (Yogakshemam Vahamyaham:- I ensure safety and well being (of my
devotees) = LIC motto.
⇒ 2018: LIC became majority shareholder in IDBI bank. (More in 📑📑Pillar#1B1- Classification)
⇒ 2021: 1) Govt ⏫retirement age of LIC chairman from 60 to 62 years. 2) LIC launched ‘Ananda’
App for insurance agents.

16.13.3 ⚰💀💀💀💀 🦁🦁 LIC’s Disinvestment (2020, �व�नवेश)
⇒ Disinvestment (�व�नवेश): Reducing ⏬ govt shareholding in a Government company but govt
keeps atleast 51% shareholding with itself. (e.g. if govt selling its shares of ONGC from 100% to
75%, 51% etc)
⇒ Privatization / Divestment / Strategic Disinvestment (�नजीकरण/रणनी�तक �व�नवेश): Govt selling the
majority shareholding/ownership of a Govt company to a private entity (e.g. Adani/Ambani को
पूरी क� पूरी सरकारी कं पनी बेच दी जाए) (More in 📑📑Pillar# 2D)
- 💼💼Budget-2020: LIC Act will be amended → LIC : Initial Public Offering (IPO) → Government
will sell part of its shareholding. 2022: SEBI permitted.
WHY is Govt doing disinvestment of LIC?
⇒ LIC’s insurance products come with a sovereign guarantee (सं प्रभु गारंटी) by the Govt. So people
prefer to buy it over private sector insurance policies. This hampers perfect competition (LIC क�
जीवन बीमा पॉ�लसी के पीछे सरकारी गारंटी – �नजी कं प�नयों को पूणर् प्र�तयो�गता अवसर नहीं देती).
⇒ If Govt shareholding ⬇ → LIC functioning becomes independent → less financial repression
of households e.g. how LIC bought loss making IDBI under Government’s pressure. Ref
📑📑Pillar#1B-1: Banks’ classification. (सरकारी दबाव म�, एलआईसी घाटे वाले �ेत्रों म� �नवेश करता है, �जससे �नवेशकों
का �व�ीय दमन)
⇒ So, earlier, International Monetary Fund (IMF) and Justice B.N.SriKrishna’s Financial Sector
Legislative Reforms Commission (FSLRC-2011) had also advised the same to Government of
India. (आईएमएफ तथा �व�ीय �ेत्र �वधायी सुधार आयोग ने भी कु छ ऐसी ही �सफा�रश� क� थी)
⇒ 🤩🤩1) Disinvestment = Government will earn some ₹₹ by selling its shares → welfare schemes.
(�व�नवेश से कमाई रकम- सरकार गरीब क�ाण योजनाओं म� इ�ेमाल कर सकती है)
⇒ 🤩🤩2) LIC becoming a public limited company → independent directors, women directors,
more transparent disclosure of balance sheet, whistleblower protection, accountability and good
governance. (Ref: Pillar#1C) (कॉप�रेट शासन सु�ढ़ होगा, जवाब देही बढ़ेगी)
16.13.4 ⚰💀💀💀💀 🦁🦁 LIC IPO gets SEBI Approval (2022-March)

⇒ 100% shareholding is presently with the government → 5% to be sold to public in IPO @total
₹50,000 crore to Rs 1 lakh crore from the IPO.
⇒ LIC-IPO share allotment quotes: 1) 5% for LIC’s employees 2) 10% for Insurance policy
subscribers 3) 35% for retail investors. 4) Remaining % for others (इस IPO म� शेयर आवं टन म� �व�वध
समूह के �लए आर�ण कोटा रखा गया है.)
16.13.5 ⚰💀💀💀💀💀 LIC- Aam Admi Bima Yojana (AABY), Janshree Bima Yojana:
✋OLD SCHEMEs of Congress Raj. Discontinued / phased-out in Modi Raj. #🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो

16.13.6 🧔🧔⚰PM schemes for Life Insurance & Accidental (Gen) insurance
Figure 1: शराब पी के मर गए देवदास बाबू तो PM-सुर�ा बीमा योजना मे कु छ नही �मलेगा!

Table 1: 2015: Finance Ministry → Dept of Financial Services launched these two schemes.
Features 🧔🧔⚰💀💀 🕯🕯✔♿✖ Pradhan Mantri 🧔🧔⚰💀💀♿✔🍾🍾✖
Jeevan Jyoti Bima Yojana (PMJJB) Pradhan Mantri Suraksha Bima
Yojana (PMSBY)
Age 18-50 years with bank account in India. 18-70 years. Remaining same as
NRIs eligible but payment in rupee PMJJB
currency only.
Purchase LIC or any empaneled pvt. life insurance 4 Public Sector, or any empaneled
from company. pvt. General Insurance company.
Premium Rs. 330 per person/ annum Rs.12/- per person/ annum
Type LIFE Insurance General Insurance
Nature of 1 year “term” LIFE insurance. 1-year “term” accident cum
Plan Term LIFE insurance = no death, no death insurance.
money returned.
Return? Any type of death: ₹ 2 lakhs Accidental Death: murder,
िकसी भी प्रकार क� मृ�ु पर प�रवार को मुआवजा �मलेगा natural disaster etc. ₹2 lakhs
- Loss 1 eye/hand/leg: 1 lakh
- Loss 2 organs/>: max. 2 lakhs
Suicide, alcohol-drugs related
death: not eligible
Neither scheme gives hospitalization cost. (अ�ताल म� �चिक�ा खचर् के �बल क� अलग से कोई रा�श नहीं �मलेगी)
16.14 ⚰ 💊💊💊💊💊💊GENERAL INSURANCE (सामा� बीमा)
An insurance policy other than ‘life insurance’, is called General Insurance. e.g. Accident Insurance,
Health Insurance, Crop Insurance, Fire-Theft-Marine & Vehicle Insurance. दुघर्टना बीमा, �ा� बीमा,
फसल बीमा, आग-चोरी-समुद्री और वाहन बीमा
16.14.1 ⚰🚕🚕🚕🚕 🦁🦁 Public Sector General Insurance Entities: Timeline (समय रेखा)
⇒ 1948: Employees' State Insurance Corporation (ESIC) under Labour Ministry – through an act of
Parliament to protect selected category of workers. मजदू रों का �ा� बीमा
⇒ 1957: Export Credit Guarantee Corporation of India (ECGC: �नयार्त ऋण गारंटी �नगम) under
Commerce Ministry. Gives insurance cover to exporters, and credit guarantee to Bank/NBFC
who loan to exporters.

⇒ 1961: DICGC Act: banks must buy deposit insurance from it. Although not considered a General
Insurance Company in textbook sense because doesn’t directly sell insurance policy to any
individual household/businessman. (पाठ्यपु�क क� प�रभाषा म� उसको बीमा कं पनी नहीं बोल सकते)
⇒ 1972: General Insurance Nationalization Act: 107 (private) general insurance companies were
taken over by GIC and its 4 subsidiaries (viz. National insurance, New India Assurance, United
India, Oriental). Later, Govt took direct shareholding-control over these 4 subsidiaries, and left
GIC to take care of re-insurance biz. (पुन:बीमा)
⇒ 2002: Agriculture Insurance Company ltd, (formed with funding of GIC, above 4 public sector
Gen. Insurance Cos and NABARD.) कृ �ष बीमा कं पनी
⇒ 2018: Budget announced to merge (�वलीनीकरण) National Insurance Company, United India
Insurance Company, Oriental India Insurance Company- but the plan has not materialized yet.
⇒ 2018-Oct: FinMin → Dept of Financial services organized ‘Insurance Manthan’ for Public
Sector GI @Delhi. Outcome? six-point agenda: fully insured society, customer orientation,
digital -analytics for future, sustainable-prudent business, reach for everyone and talent
management. ✋How? NotIMP.
⇒ ⚾📻📻⚾🎓🎓✋2020: 1) IRDAI allows insurers to give three-month moratorium on loans. 2)
Union Cabinet has approved the capital infusion of Rs.12,450 crore in the three Public Sector
General Insurance Companies to improve their financial solvency. THIS TYPE OF Technical
NEWS IS NOTIMP for the scope of the exam. DONT WASTE TIME. #🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
General Insurance Nationalisation Act 1972 General Insurance Business (Nationalisation)
(सामा� बीमा रा��ीयकरण कानून) Amendment Bill, 2021
Five General Insurance (GI) Companies To facilitate privatization of these public
brought under Govt control sector/Government owned GIs. सामा� बीमा �ेत्र क�
1) General Insurance Corp of India (GIC) सरकारी कं प�नयों के �नजीकरण का रा�ा आसान बनाने के �लए
2) National Insurance, �वधेयक
3) New India Assurance,
4) Oriental Insurance
5) United India Insurance.
Majority shareholding (minimum 51%) must Removed this rule. So, in future, govt may sell
remain under Government control (ब�मत its majority shareholding to private party (e.g.
शेयरहो��ंग सरकार के हाथ म� अ�नवायर् �प से होनी चािहए) Adani/Ambani etc) [इन पांच कं प�नयों म� ब�मत
शेयरहो��ंग सरकार के पास होना अ�नवायर् नहीं यानी िक �नजी
�ेत्र का आदमी भी मा�लक बन सकता है]
These companies’ employees’ service by the board of directors (and not by
conditions (salary, tenure, promotion, transfer, Government)- so in future if a particular
discipline rules etc) will be decided Govt. [इन government insurance company is privatised
सरकारी बीमा कं प�नयों के कमर्चारीओ क� then the private companies new bosses (e.g.

तन�ाह/वेतन,पदो�ती/तर��, तबादला इ�ािद सेवा और Adani/Ambani etc) will decide. [कं पनी के बोडर् ऑफ
�श�/अनुशासन के �नयम सरकार तय करती थी] डायरे�र यह �नयम तय कर�गे]
- 🤩🤩Pro-Arguments? Privatization will help in Professionalism, Profitability, Customer
responsiveness of these Govt companies (�नजीकरण के प� म� तकर् : पेशेवर तरीके से सं चालन होगा, मुनाफा बढ़ेगा,
ग्राहकों क� सु�वधा बढ़ेगी)
- 😰😰Anti-Arguments? 1] Similar to anti-arguments against Banking merger/consolidation (Ref:
📑📑Pillar#1B1) and [2) Similar to anti-arguments against Insurance FDI
16.14.3 🦁🦁(💉💉💉) Employees' State Insurance Corporation
- 1948: Employees' State Insurance Act → 1952: ESIC corporation (ESIC) setup under Labour
Ministry. (कमर्चारी रा� बीमा �नगम, श्रम मं त्रालय)
ESIC applicability? BEFORE 👻👻ATMA-NIRBHAR (2020)
any establishment with 10/> Compulsory Compulsory (अ�नवायर्)
employees
If establishment less than 10 workers Voluntary Compulsory (खतरनाक उधोगों के मजदू रो
→ but it’s a hazardous industry e.g. (�ै��क/वैक��क) का क-रा-बी-�न मे पं जीकरण अ�नवायर्)
(firecrackers, toxic chemicals, acid)
If establishment less than 10 workers Voluntary Voluntary
→ Non-hazardous industries (�ै��क/वैक��क) (�ै��क/वैक��क)
- 👷👷 Who are ESIC subscribers? Employee in above establishment, with monthly salary less than
₹21,000/-
- 👷👷 � Who pays ESIC premium? “x%” of employee’s wages+ “y%” from employer’s side.
- What is X and Y? notimp unless preparing for ESIC/Insurance Exams. Furthermore, Factoids
like ESIC vision-2022 to enrol 100 million workers. notIMP4UPSC
- ESIC covers both permanent employees & casual/temporary employees (= employed only for a
few days/weeks/months.) �ायी-कम� और अ�ायी/अयाथव�ध-कम� दोनो को लाभ �मलता है।

- 💼💼Budget-2021: we’ll expand this to cover more workers. But exact details yet to be disclosed.
🤩🤩An ESIC subscriber gets following benefits:

1) Medical insurance for the worker and his family from day#1 of joining (�ा� बीमा)
2) Maternity Benefit to women employees (मातृ� लाभ)
3) Monthly pension to family, if worker dies by employment related injuries. Corona-2020-21→ if
worker died of Corona, family member to be given pension. (originally such pension was to be
given for workers’ death in factory employment related accident, and not for corona illness.)
नौकरी करते व� ऑिफस/फै ��ी म� हादसे के चलते मजदू र मर गया तो प�रवार को प�शन। नया सुधार: कोरोना क� बीमारी म� मर गया
तो भी प�रवार को प�शन
4) Sickness benefit: partial wages during medical leave. (बीमारी प्रसु�वधा)
5) Monthly payment on disability (�वकलांगता मा�सक भुगतान)
6) Unemployment allowance if involuntary loss of employment- through the scheme ‘Atal Bimit
Vyakti Kalyan Yojna’. (अटल-बी�मत क�ाण = अनै��क �प से उसक� नौकरी चली गई तो बेरोजगारी भ�ा)
🪔🪔Project Panchdeep digitization and automation of ESIC processes by WIPRO (2017)
🏹🏹 📩📩Project Arrow Modernization of India Post (2008) डाक �वभाग का आधु�नक�करण
🔠🔠❓ Consider the following: [Asked in UPSC-Pre-2012]

1) Hotels and restaurants 2) Motor transport undertakings
3) Newspaper establishments 4) Private medical institutions
The employees of which of the above can have coverage under ESIC?
(a) 1, 2 and 3 only (b) 4 only (c) 1, 3 and 4 only (d) 1, 2, 3 and 4
16.14.4 👻👻🤧🤧⚰Gen Insurance → Corona Warrior ₹50 lakh cover by Govt (2020-March)
Deleting because outdated for 2023-exam cycle.

16.15💊💊 GEN → HEALTH INSURANCE SCHEMES (�ा� बीमा योजनाएं )
Fixed Benefit (�न��त लाभ) Indemnity Based (��तपू�त आधा�रत)
Fixed payment given depending on illness. Upto to the “actual hospitalization cost” from the
⇒ If the Policy agreement said “if you get total insured sum.
cancer, we’ll give you ₹50 lakhs.” ⇒ "Indemnity" = upto actual cost in treatment,
⇒ So, even if a patient spends ₹10 lakh subject to max limit. so, if ₹5 lakh ki policy=
on hospitalization, still the company ⇒ Actual treatment cost ₹2 lakh → company pays
will pay ₹50l. only ₹2 lakh
इससे कोई फकर् नहीं पड़ता िक हॉ��टल का �बल िकतना ⇒ Actual treatment cost ₹7 lakh→ company pays
आया आपको एक �न��त रकम दी जाएगी max ₹5 lakh
Further Subtypes
⇒ Cashless policy: patient simply goes to an
empanelled hospital = free treatment.
⇒ Non-Cashless policy: patient first pays hospital
bill from own pocket → submits bills to
insurance company → gets refund.
16.15.1 💊💊 😵😵: 🧐🧐Arogya Sanjeevani Policy (2020)
Figure 2: पोलीसी खरीदु तो कौन सी, Features क� तुलना करना है ब�त मु��ल! िदमाग चक्रम हो गया मेरा 😵😵
😰😰Too many types of health insurance policies with various features and premiums = a common
man gets confused which health policy is best for him. (आम आदमी भ्र�मत हो जाता है िक कौन सी �ा� �बमा
पॉ�लसी उसके �लए सव��म)
So, IRDAI ordered health insurance companies to launch a Standard Health Insurance Product
(SHIP: आदशर् �ा� बीमा उ�ाद) to cover the basic health insurance requirements of every person. With
following Features:
Table 2: you don't have to remember all features.✋✋
Name must be “Arogya Sanjeevani Policy -<name of the company>”. Any other name
NOT allowed.
Type Indemnity based Health insurance policy. (��तपू�त आधा�रत �ा� बीमा)
Premium Decided by individual insurance company. (बीमा िक�)
Benefit?  Minimum ₹50k to maximum any amount in multiple of 50k e.g. e.g.1l,1.5l…
 However higher cover = higher premium/subscription fees
 What costs will be covered? hospitalization cost, pre and post hospitalization cost, Ayush
treatment (=Ayurveda, homeopathy etc).

16.15.2 ⚰ 😵😵: 🧐🧐SARAL JEEVAN BIMA-Standardized term Life Insurance policy
Matter / logic is similar to previous topic given above.
16.15.3 💊💊💊💊Gen→ Health Insurance → Corona Kavach vs Rakshak
Figure 3: है कोई �ा� बीमा पॉ�लसी जो कोरोना के भारी हॉ��टल �बल से 'र�ा' करवा दे मेरी?!
2020: IRDAI issued guidelines for the general insurance & health insurance companies to launch
standard health policies against Covid-19, with following standard names:
🤧🤧🛡🛡😵😵Corona Kavach 🤧🤧�🤑🤑 Corona Rakshak
Compulsion Gen. insurance & health insurance optional for company to launch this
companies have to compulsorily launch policy (अ�नवायर् नहीं है वैक��क)
this
Type "Indemnity" = upto actual cost in ⇒ Fixed Benefit Plan
treatment, subject to max limit. so, if ₹5 ⇒ Fixed amount of money if
lakh ki policy= subscribers gets Corona.
⇒ Actual treatment cost 2 lakh → Irrespective of actual treatment
company pays only 2 lakh cost.
⇒ Actual treatment cost 7 lakh→
company pays max 5 lakh
Coverage ₹50,000 to ₹5 lakh ₹50k to 2.5 lakh
Premium Decided by an individual company. same as left column
🎓🎓✋further the technical details / differences = poor cost:benefit for UPSC.#🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
16.15.4 💊💊♿ Niramya Health Insurance for PH. ✋OLD SCHEME DONOT-LOOSE-SLEEP
⇒ Boss? By Dept. of Empowerment of Person with disabilities (िद�ांगजन सश��करण �वभाग)→
Oriental Insurance Company. 🤩🤩Benefit? upto ₹1 lakh health insurance for handicapped
⇒ Premium? Orphan Minor PH= ZERO; Other PH: ₹250-500, depending on poverty level
16.15.5 💊💊💊💊 Rashtriya Swasthya Bima Yojana (RSBY: 2008)

Fee? One time registration ₹ 30. No premium by beneficiary. Govt pays premium.🤩🤩Benefits?
⇒ ₹ 30k for medical treatment [smartcard, cashless: even existing ailment, even private hospital.]
⇒ ₹ 25k for accidental death. And if breadwinner dies: ₹ 50 x 15 days.
⇒ ++Senior Citizen Health Insurance Scheme (SCHIS) –if 60/> they get additional ₹ 30k for
treatment. (व�र� नाग�रक �ा� बीमा योजना)

⇒ Both RSBY and SCHIS are subsumed in PM-JAY (2018) आयु�ान भारत के साथ �वलीन
16.15.6 💊💊💊💊: 🧔🧔Why public health insurance for poor? (गरीबों को सरकारी �ा� बीमा �ों �दया जाए)
⇒ Public goods = water, sanitation, transport, medical care, schools (सावर्ज�नक व�ुएं-पानी ��ता प�रवहन
�ू ल �चिक�ा). Rich people can seek private alternatives/Even migrate to better countries. But Poor
cannot do it → Govt support necessary. अमीर लोग अ�� सेवाएं �बजी बाजार से खरीद सकते ह�, लेिकन गरीब को
सरकारी मदद क� ज�रत
⇒ “Time Horizon Problem” in a democracy: Frequent election cycles = Govts focus more on short
term gain but Healthcare, nutrition, schools: Long gestation period so govts may neglect it. लोकतं त्र
म� समय ��तज सम�ा: चुनाव के च�र म� सरकार दीघर् अव�ध के सुधारों क� जगह लघु अव�ध के लोकलुभावन पर �ान देती है,
�ा� पोषण �श�ा नजरअंदाज.
16.15.7 💊💊💊💊5⃣L /👪👪/📆📆 Ayushman Bharat / PM Jan Aroyga Yojana (PMJAY)

� (Introduction: DATA) In the last decade, in-patient hospitalization (अ�ताल म� भत� रोगी i.e. patient
who stays in hospital overnight) has increased nearly 300% in India. More than 80% of the hospital
expenditure met by out of pocket (खुद क� जेब से). So, rural households are forced to use household
savings and borrowings = vicious cycle of poverty (गरीबी का �वषचक्र). So, Ayushman Bharat launched
in Budget 2018, with two components:
Figure 4: ब�े के इलाज के �लए कोई पैसा दे दो!
A) 1.5 lakh Primary Health Care Centers (PHC) to be transformed into Health & Wellness Centres
with Free drugs, checkup, mother-child care etc. (�ा� और क�ाण क� द्र)
B) National Health Protection Scheme (AB-NHPS) → Later renamed ‘PM Jan Arogya Yojana
(PMJAY)’ and launched with Motto “Swasthya Aapka, Saath Hamara” from Ranchi, Jharkhand
(2018, Sept). It has subsumed Rashtriya Swasthya Bima Yojana (RSBY) & Senior Citizen Health
Insurance Scheme (SCHIS).

16.15.7.1 🧔🧔🧔🧔🧔🧔5⃣L /👪👪/📆📆 PM Jan Arogya Yojana (PMJAY, 2018)?
⇒ What is given? A FREE insurance cover upto ₹ 5 lakh per family,

per year for secondary and tertiary hospitalization. All pre-existing disease covered from day 1.
Pre and post hospitalization & medicine expenses.
⇒ Cashless and paperless access [NITI partnered web portal, with privacy protection]
⇒ Beneficiaries? Socio-Economic Caste Census (SECC: सामा�जक आ�थक जा�त जनगणना) data → + 8 cr
rural + 2 cr urban = 10 cr families= ~50 crore people.
⇒ No limit on family size. No limit on age. (प�रवार म� िकतने सद�, उनक� �ा उम्र है- कोई सीमा नहीं)
⇒ Where to get treatment? (इलाज कहां पर होगा)= All public hospitals and empaneled private hospitals
(by the respective States). [इलाज होगा सरकारी अ�ताल और रा� सरकार द्वारा अ�धकृ त �नजी अ�ताल म�]
⇒ Hospitals to have Pradhan Mantri Aarogya Mitras (PMAMs/hospital-receptionist-type-ke-log) to
help/guide patients in this scheme. These PMAMs are trained by Ministry of Skill
Development. (कौश� �वकास मं त्रालय द्वारा आरो� �मत्र को तालीम)
16.15.8 PM-JAY Sub-schemes

1. PM SEHAT (Social Endeavour for Health and Telemedicine) 2020- ज�ू क�ीर के सभी �नवा�सयों के �लए
a. BEFORE: 6 lakh families of the J&K getting Ayushman Bharat Scheme. (= poor family
selected through socio economic caste census 2011)
b. AFTER PM SEHAT: All residents of J&K (=21 families, rich-poor everyone) eligible for
₹5 lakh health insurance of PM-JAY scheme. Even if they are traveling outside Jammu
Kashmir, in other parts of India, they can avail treatment at PM-JAY-walli hospitals.
2. Ayushman CAPF scheme (2021-Jan) क� द्रीय सश� पु�लस बल
a. Joint initiative of Home Ministry & National Health Authority

b. Assam Rifles, Border Security Force ( BSF), Sashastra Seema Bal (SSB), Central Reserve
Police Force (CRPF), Central Industrial Security Force (CISF), National Security Guard
(NSG), and Indo-Tibetan Border Police (ITBP)
c. Their Personnel & their family members also covered
16.15.8.1 �PMJAY → National Health Authority (रा��ीय �ा� प्रा�धकरण)

⇒ Originally it was an “Agency”, then restructured & renamed into “Authority” (2019).
⇒ NHA oversees the implementation of PM-JAY, operational guidelines, collaborate with
insurance companies & IRDAI, running web-platform etc. (योजना को िक्रया��त करेगा बीमा कं प�नयों के साथ
तालमेल �बठाएगा)
⇒ NHA is an ‘attached (adjunct) office (सं ल� कायार्लय)’ with health ministry (�ा� मं त्रालय). i.e. Health
Ministry only looks after parliamentary matters like replying in question hour, annual reports
etc. thus giving NHA more freedom in day to day functions. (रोजाना काय� म� मं त्रालय क� दखल कम)
⇒ NHA has a Chief Executive Officer (CEO) with status of Secretary to Govt of India (स�चव).
⇒ Above NHA → “Governing Board” (शासक-मं डल)
⇒ Chairman: Minister of Health & Family Welfare (�ा�-प�रवार क�ाण मं त्रालय)
⇒ Members: NITI Ayog CEO, NHA-CEO & other govt officials and experts (�वशेष�).
⇒ States will be represented in the Governing Board on rotational basis (चक्रानुक्रम).
16.15.9 Ayushman Bharat Digital Mission

⇒ NHA also implements “Ayushman Bharat National Digital Health Mission” (Basically Sarkaari-
google-drive mein x-ray report store kro yojana!) More in 📑📑Pillar#6:health schemes
16.15.9.1 PMJAY → State Health Agency (SHA)
- Each State to form a State Health Agency (SHA: रा� �ा� एज�सी) to get the scheme
implementation.
16.15.9.2 PMJAY → Funding / Cost:sharing
"Special Category States" (�वशेष श्रेणी के रा�): Union contributes 90%: while
- North-Eastern States, and State contributes 10% of the
A
- TWO Himalayan Hilly States: Himachal Pradesh and cost
Uttarakhand#
- Other States: who are not in above category (UP, Bihar, 60:40
etc.)
B - Union territory (UT) with legislature: Delhi,
Puducherry, Jammu & Kashmir. (�वधा�यका वाले क� द्र शा�सत
प्रदेश)

- UT without legislature: Ladakh, Andaman Nicobar etc. 100%
C
(�बना �वधा�यका के क� द्र शा�सत प्रदेश)
- #
Before the removal of Article 370 (in 2019), the State of J&K was previously in Special category,
so it got 90:10 funding.
- Afterwards: J&K is UT with legislature, so, J&K will get 60:40. So, 2019-Aug: Central
Government considering creating a new category ‘Hill Union Territory (पहाड़ी क� द्र शा�सत प्रदेश)’ so
J&K may continue to received 90:10 funding. But, no need for 🎓🎓✋#🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
16.15.9.3 💼💼Budget-2020 on Ayushman Bharat PM-JAY
 We’ll setup hospitals in aspirational (=backward) districts for treatment of PM-JAY
beneficiaries. Hospital construction Funding: Public private partnership (PPP) → Public side’s
funding will be provided using ₹₹ from health cess on imported medical devices.(More about
health cess in 📑📑Pillar#2-Taxation) आयात होने वाले �चिक�क उपकरणों पर �ा� उपकर लगाकर उस पैसों से
�पछड़े �जलों म� अ�ताल बनाएं गे
 We’ll use Artificial Intelligence and Machine Learning (AI-ML) to take preventive actions
against the spread of diseases. Total ₹6400 cr allotted for PM-JAY. (बीमा�रयों का प्रसार रोकने के �लए कृ �त्रम
बु�द्धम�ा का उपयोग)
16.15.9.4 � PMJAY → Challenges? (चुनौ�तयां)
- 😰😰⚔ Cooperative Federalism spirit is missing. (सहकारी सं घवाद क� भावना क� कमी)

o States have to sign agreement with Union to begin operations. But, W.Bengal already has
state-govt sponsored “Swasthyasathi” scheme in State with similar features so CM
Mamta has left PM-JAY (2019, Jan).
o 2021: Rajasthan Right To Health Bill 2021 (�ा� अ�धकार �वधेयक) ₹5lakh health insurance
coverage available at 1) free of cost for workers, small- marginal farmers. 2) others (e.g.
Middle class) can avail at ₹850/year.
o Similar issues in other Non-BJP states. गैर बीजेपी रा� इसे अपनाने म� उ�ुकता / सहयोग नहीं िदखा रहे
- 😰😰💵💵 Fiscal Challenges (राजकोषीय चुनौ�तयां): Budgetary allocations insufficient. If govt borrows
more money→ ⏫ in fiscal deficit. Private hospitals may perform unnecessary surgeries &
prescribe excessive amount of medicines to extract more money from govt. (अनाव�क �प से महंगी
दवाई और श�िक्रया)
- 😰😰🗃🗃 Administrative Challenges (प्रशास�नक चुनौ�तयां):
o Beneficiary identification (लाभाथ� क� सही पहचान. अमीर लोग भी गरीब होने का नाटक करके मु� इलाज
करवा ले)
o Doctor to patient ratio (मरीजो के अनुपात मे डोकटरों क� कमी)

o Physical and IT infrastructure, Transport, connectivity upto village level. (बु�नयादी सं रचना,
प�रवहन, सं चार िक गांव गांव तक प�ंचन नहीं है)
o Medical privacy of Patient- data may be leaked to pharma companies for their clinical
trials and commercial motives. (�चिक�ा डाटा क� गोपनीयता/�नजता.)
16.15.9.5 📔📔📔📔ES21 on PM-JAY (कु ल �मलाकर घी-दू ध क� न�दयां बह रही है-आ�थक सव��ण)
⇒ 📔📔📔📔ES21 analysed the health outcomes of West Bengal (Which did not implement PM-JAY
scheme) and its neighbouring States - Bihar, Assam and Sikkim (Who have implemented the
PM-JAY scheme) between 2015-2019. And found out W.Bengal has lagged behind them on
various health indicators, including Family planning and HIV/AIDS.. प��म बं गाल क� तृणमूल सरकार ने
प्रधानमं त्री जन आरो� योजना नहीं लागू क� इस�लए वह �ा� म� �पछड़ी रह गई और �बहार आसाम और �स��म आगे बढ़ गए
�ोंिक उन पड़ोसी रा�ों म� इस योजना का अमल �आ है
⇒ PMJAY also helped increasing awareness regarding Family planning and HIV/AIDS. (अ�ताल यात्रा
के चलते प�रवार �नयोजन और एचआईवी क� जागृ�त भी बढ़ी है)
⇒ During the Corona lockdown → Many of the surgical procedures were postponed due to
infection fear, Transportation lockdown, Financial hardships= so PM-JAY claims ⏬reduced.
हालांिक कोरोना के चलते ब�त सारी सजर्री/श� िक्रया को ��गत िकया गया था
⇒ Still Poor people continued to avail dialysis in PM-JAY. = Proves success and reliance of the
scheme. लेिकन गरीब लोग िफर भी डाय�ल�सस करवाने आते ही रहे �जससे सा�बत होता है िक गरीब इस योजना म� �व�ास रखते ह�
16.15.9.6 � Conclusion: PM-JAY (�न�षर्)

⇒ Sustainable Development Goal (SDG#3): ensure healthy lives and well-beings at all ages. PM-
JAY is a right step in this regard, provided that aforementioned challenges are addressed.(More
about SDG in 📑📑Pillar#6) [सतत �वकास ल�#3- सभी के �लए �� जीवन सु�न��त करने म� योजना मदद करेगी] OR
⇒ Disease burden robs a poor person of his wages and savings. If aforementioned challenges are
addressed, PM-JAY can greatly help in poverty removal and human development in India. OR
(बीमारी म� गरीब आदमी के वेतन और बचत के पैसे बबार्द नहीं होंगे- �जससे गरीबी �नवारण और मानव �वकास म� मदद)
⇒ If above challenges are addressed, PM-JAY can improve health outcomes, productivity and
efficiency of Indian population, thus leading to improvement GDP and in quality of life. (भारतीय
जनसं �ा क� उ�ादकता और द�ता म� बढ़ोतरी → सकल घरेलू उ�ाद और और जीवन के �र म� सुधार)
🔠🔠❓ MCQ. Which is not a feature of the Ayushman Bharat Scheme? (CDS-i-2020)
(a) There is no cap on family size and age. (प�रवार क� सद�ों क� सं �ा और आयु पर कोई सीमा नहीं)
(b) The scheme includes pre- and post-hospitalization expenses.
(c) A defined transport allowance per hospitalization will also be paid to the beneficiary.
(d) The scheme provides a benefit cover of Rs. 10 lakh per family.
🔠🔠❓ MCQ. Ayushman Bharat is a national health insurance system for: (UPSC-Geologist-2020)
a) women b) every citizen c) old age people d) poor and vulnerable.

🔠🔠❓ MCQ. Which are the benefits of the Pradhan Mantri Jan Arogya Yojana? (CDS-i-2019)
1. Free treatment available at all public and empanelled private hospitals.
2. Cashless and paperless access to quality health care services. नकदी रिहत और कागज रिहत प्रशास�नक प्रिक्रया
3. Govt provides health insurance up to ₹ 5 lakh per family per year.
4. Pre-existing diseases are not covered. पहले से मौजूद बीमा�रयों को कवर नहीं िकया जाता है
Codes: a) 1 and 3 only b) 1 , 2 and 3 c) 2 and 4 only d) 2, 3 and 4
16.16 ⚰ 💊💊💊💊💊💊 GENERAL INSURANCE → OTHER THAN HEALTH INSURANCE

16.16.1 🧔🧔⚰🌽🌽 Pradhan Mantri Fasal Bima Yojana (2016)
- Against natural calamities, pests, diseases; (प्राकृ �तक आपदाएँ , क�ट, बीमा�रयाँ;)
- Protects before, during and after harvest (फसल क� कटाई).
- Premium (बीमा-िक�) paid by farmers against the total insured amount: Rabi winter crops (1.5%)
– Kharif summer monsoon crops (2%) –Horticulture & Commercial crops other than oilseed &
pulses (5%). Remainder premium is paid by Union: State Gov. It’s optional for States to join.
- Nodal Ministry: Agri Min → Public sector general insurance companies, and empanelled private
sector insurance companies. सरकारी सामा� बीमा कं प�नयां तथा �नजी �ेत्र क� ऐसी सामा� बीमा कं प�नयां �जनको कृ �ष
मं त्रालय ने इस योजना लागू करने के �लए सूचीबद्ध िकया है
- 😰😰Challenges? (इस योजना म� �ा चुनौ�तयां ह�)
o States not paying their portion- they feel premium amount very high, so, Pvt insurance
companies not settling claims quickly. रा� सरकार बीमा कं प�नयों क� िक� का िह�ा नहीं चुका पा रहे,
बीमा कं पनी वाले िकसानों को मुआवजा नहीं दे रहे, गुजरात, प��म बं गाल सिहत कई रा�ों ने इस योजना का अमल बं द
कर िदया है.
o W.Bengal stopped it, & launched its own Bangla Fasal Bima Yojana (2019). Gujarat
stopped it & launched ‘Mukhya Mantri Kisan Sahay Yojana (2020)’ so cooperative
federalism missing.
o Union upgraded technical guidelines to fix the delays, but response not good. (भुगतान म�
देरी क� सम�ा को दु�� करने के �लए क� द्र सरकार ने िदशा�नद�शों म� बदलाव तो िकए लेिकन कु छ ख़ास सुधार नहीं आया)

16.16.2 🧔🧔⚰🌽🌽 PM-FBY (2.0) revamped in 2020
Before-2020 From 2020-Kharif
Suppose a kharif crop insurance premium = Suppose a kharif crop insurance premium = ₹100.
₹100. ⇒ Farmer pays ₹2 of the premium
⇒ Farmer paid ₹2 of the premium ⇒ Union pays only ₹25 to 30 based on whether
⇒ Union paid ₹49 + State paid ₹49. In it’s irrigated or unirrigated respectively.
other words, Union and States shared ⇒ State may have to pay ₹68-73. So, states’
their premium burden half-half (50:50). burden increased.
⇒ However, the Union will bear 90:10 of the
burden in case of North Eastern States.
Compulsory for farmer to buy this insurance Voluntary (�ै��क) for farmers. (ब�क लोन पास करवाने के
policy, IF he wanted crop loans from bank �लए िकसान को यह योजना यह बीमा �नकलवाना अ�नवायर् निह)
Multiple Perils (एका�धक आपदाए) covered such ‘Single-peril’ (एकाक� आपदा) insurance can be taken
as flood, drought, hailstorm. But, farmers in e.g. “protection only against drought.” This will
Rajasthan had no fear of floods. help reduce ⏬premium amount.
------ Updated methodology for assessment of crop loss
🔠🔠❓MCQ. Find correct statements about ‘Pradhan Mantri Fasal Bima Yojana': (Prelims-2016)
1. Under this scheme, farmers will have to pay a uniform premium of 2% for any crop they
cultivate in any season of the year. िकसी भी फसल म� �सफर् 2% बीमा िक� िकसान ने चुकानी होगी
2. This scheme covers post-harvest losses arising out of cyclones and unseasonal rains.
16.16.3 🧔🧔⚰🌽🌽 Other Agriculture Insurance Schemes? (अ� कु छ फ़सल बीमा योजना)
- Apart from PM Fasal Bima, there is Restructured Weather Based Crop Insurance Scheme
(RWBCIS, 2016)- protects against weather only. (so not pests/diseases).
- There was a National Agricultural Insurance Scheme and Modified (NAIS), but PM Fasal Bima
subsumed it. लेिकन वो सब याद रखने से परी�ा म� बहोत लाभ नहीं.
16.16.4 ⛴🔪🔪(�🏦🏦) Insurance to Banks on Exporters’NPA → NIRVIC Scheme (2019)
Figure 5: �नयार्तक ब�क का कजार् नहीं चुकाएगा तो नुकसान क� भरपाई कौन करेगा
Boss? Commerce Ministry → Export Credit Guarantee Corporation (ECGC)

⇒ NIRVIK (Niryat Rin Vikas Yojana) is an Export Credit Insurance Scheme (ECIS).

⇒ Exporter takes a loan from a bank. But if he defaults then ECGC will cover upto 90% of his
principal + interest losses to the bank. (Before NIRVIC scheme, it was only 60%)
⇒ Exporters pay ‘premium (बीमा-िक�)’ to the bank → bank pays it to ECGC. (Exporter need not
goto ECGC office himself. He can get the application form from the loan giving bank itself.)
⇒ Premium rates depend on sector e.g. diamond, chemical etc. exact figures=NOTIMP
16.16.5 🚕🚕🚕🚕 Third Party Motor Insurance (थडर् पाट� मोटर इं�ोर�स)
- Motor Vehicles Act (1988) requires all motor vehicle owners to purchase it. (कानूनी �प से अ�नवायर्)
- Third party (TP) insurance: When your vehicle hits another vehicle, person or property → that
victim (third party) registers a case, gets compensation. IRDAI regulates premium rates & other
norms.
- SC judgement (2019): TP insurance validity should be 3-5 years, so even if owner forgets to
renew annually, the third party is protected. (अवधी �ादा होनी चािहए)
16.16.6 🚕🚕🚕🚕 Own Damage Insurance (OD: मोटर सं बं �धत �यं के नुकसान का बीमा )
- It protects owner of vehicle against theft, vandalism, accident, fire.
16.16.7 🏗🏗⚖📜📜Title Insurance (जमीन / इमारत का टाइटल बीमा)
Figure 6: जमीन मकान �ववादों के कानूनी लफड़ो म� नुकसान से बचने का �बमा #गुलाबो-�सताबो
- 'Title' (अ�धकार-�वलेख) means a legal document showing ownership of a property. 'Title dispute':
usually happens when multiple persons are claiming ownership of the same land / building.
- 'Title Insurance' protects the new buyer in case of such legal disputes (by refunding the money he
had spent in buying land, construction, legal expenses etc).
- Real Estate Regulation and Development Act 2016 (RERA) requires the builders to buy this type
of insurance. More on RERA in 📑📑pillar#5: urban infrastructure.
16.16.8 💉💉⚖📜📜Clinical Trial Liability Insurance

⇒ Type: General Insurance Cover
⇒ Objective: To protect the pharmaceutical company From legal expenses/Lawsuits, if a volunteer
patient suffers damage/death in clinical trials. (यिद कोई �� नैदा�नक परी�णों म� ��त / मृ�ु तो फ़ामार् क�नी
को बीमा क�नी मदद करेगी।)

16.16.9 🔥🔥🔥🔥🏡🏡🏭🏭 Bharat Griha Raksha & other: Standardized home/factory insurance policies
- IRDAI ordered @General Insurance companies to sell 1) Bharat Griha Raksha, 2) Bharat
Sookshma Udyam Suraksha 3) Bharat Laghu Udyam Suraksha from 1/4/2021 onwards.
- Type? Standard Fire and Special Perils (SFSP) Policy.
- Beneficiaries? protect homes and factories of micro, small and medium enterprises (MSMEs).
- What damages are covered? fire, natural catastrophes, riot, strike/hartal, malicious damages,
terrorism,, overflowing water tanks etc upto ₹50 crores.
16.16.10 🌬🌬🌬🌬(Proposed) Catastrophe Insurance (आपदा बीमा)

⇒ Protects the client from natural and manmade disasters.
⇒ Presently, farmers’ crops are protected from natural disasters through PM-Fasal Bima Yojana.
But, if his own home was destroyed in floods, it’s not covered → Union & State Governments
forced to use taxpayers' money for paying compensation to victims of floods, cyclones etc.
⇒ IRDAI doing some studies to launch catastrophe insurance (or CAT cover) for poor people.
16.16.11 🌬🌬🌬🌬 Catastrophe Bonds, Surety Bonds:
📑📑Refer Pillar#1C: SEBI-Sharemarket-यह हम पहले ही पढ़ चुके ह�
16.16.12 👿👿👿👿General Insurance → Cyber Insurance (साइबर बीमा)

- It covers the losses related to malware attack, phishing and data, identity theft, ransom payment
demand made by the hackers, data restoration costs, business interruption losses due to
cyberattacks. The loss of reputation, damage to mental health etc.
- Corona lockdown → home-from-home through computer → demand for such policies ⏫.
- Bajaj Allianz and HDFC ERGO are notable general insurance companies offering such products.
🔠🔠❓In India, under cyber insurance for individuals, which of the following benefits are generally covered,
in addition to payment for the loss of funds and other benefits? (UPSC-Prelims-2020 SetB.Q90)
1. Cost of restoration of the computer system in case of malware disrupting access to one’s
computer
2. Cost of a new computer if some miscreant wilfully damages it, if proved so
3. Cost of hiring a specialized consultant to minimize the loss in case of cyber extortion
4. Cost of defence in the Court of Law if any third party files a suit
Answer Codes: [a) 1, 2 and 4 only [b) 1, 3 and 4 only [c) 2 and 3 only [d) 1, 2, 3 and 4
16.16.13 💻💻eIA: e-Insurance account

⇒ Shares/Bonds are stored digitally in DEMAT accounts. (More in 📑📑Pillar#1C)

⇒ Similarly, Insurance policies can be stored digitally in e-Insurance accounts e.g. NSDL's National
Insurance Repository (NIR). (बीमा द�ावेजों को िड�जटल �प से सं ग्रिहत करना)
⇒ 🤩🤩Benefit? convenience to customers especially if he bought insurance policies from different
companies e.g. Vehicle insurance, fire insurance, Health Insurance, Life Insurance. He can easily
track their expiry date/ online renewal etc. in one portal. (सद�ता का ऑनलाइन नवीनीकरण आसान होगा)
16.17⚰↗⚰RE-INSURANCE (पुनब�मा)
- DICGCI Act (1961) requires banks to take deposit insurance from DICGCI.
- Similarly, Insurance Act (1938) requires insurance companies take ‘re-insurance’ on their biz.
बीमा कं पनी ने �यं का "धं धा चौपट बचाओ" बीमा लेना होगा
- Previously, only GIC was the sole-reinsurer, but then norms liberalized (2015). New re-
insurance cos allowed. e.g. India’s ITI Reinsurance Ltd. Even foreign re-insurers such as Swiss
Re, Munich Re, General Reinsurance (Warren Buffet) are permitted. (पहले के वल जीआईसी, लेिकन अब
अनेक कं प�नयों को अनुम�त दी गई)
- 🤩🤩Benefits of multiple re-insurance cos? GIC’s monopoly in dictating re-insurance premium
rates is gone. So, insurance cos’ cost of operations to decline → biz. expansion, launch
innovative products etc.
16.17.1 😷😷(🤵🤵🤵🤵🤵🤵)PANDEMIC RISK POOL proposal by IRDAI

⇒ Corona= many people died/sick = insurance companies required to pay large sum of
⇒ PANDEMIC RISK POOL = Insurance companies and government will contribute ₹₹ into this
fund to help in insurance companies in future pandemics. (बीमा कं प�नयां और सरकार �मलकर एक
�न�ध/कोष/फं ड म� पैसा जमा कर� तािक भ�व� म� महामारीज� तनावपूणर् ��तयों म� बीमा कं पनी क� मदद हो सके ।)

16.18 ⚰�IRDAI: THE INSURANCE SECTOR REGULATOR (बीमा �ेत्र �नयं त्रक)
- 1996: IRDA setup→ given statutory status in 1999 (वैधा�नक सं �ा बनी)
Org - 2014: Its name changed to Insurance Regulatory and Development
सं गठन Authority of India (IRDAI: भारतीय बीमा �व�नयामक एवं �वकास प्रा�धकरण)
- HQ: @Hyderabad, Telangana. (Whereas RBI & SEBI HQs @Mumbai.)
Structure 1 Chairman: Dr. Debasish Panda (Ex-IAS) (5/65),
सं रचना 9 members (5/62) = Total 10. They can be re-appointed. (पुन�नयु�� सं भव है)
⇒ IRDAI gives separate licenses for life, general & re-insurance companies.
⇒ Prescribes norms for insurance companies for accounting, solvency, audit,
commission to agents etc. It can penalize companies, suspend or cancel
Functions registration. Appeal → Securities appellate Tribunal (SAT) (More in
कायर् 📑📑Pillar#1C)
⇒ Norms for agents & brokers, banks selling products (Bancassurance), Surveyor/
Loss Assessor, and Third-Party Administrators (e.g. Hospital)
⇒ Consumer grievance redressal via Insurance Ombudsman (�शकायत �नवारण अ�धकारी).
IRDAI is member of Financial Stability & Development Council (FSDC). Ref: 📑📑1C
16.18.1 ⚰�Domestic Systemically Important Insurers (D-SIIs, (घरेलु प्रणालीबद्ध मह�पूणर् बीमाकतार्)
- IRDAI prepares a list of big insurance companies that are “too big to fail” i.e. they feel it will
create very great economic distress for India. (यिद ये बीमा कं प�नयां �गर गयी तो अथर्तंत्र म� भारी तबाही होगी)
- IRDAI labels them as D-SIIs & imposes additional rules/monitoring/supervision on them.
- Latest List: 1) Life Insurance Corporation of India (LIC), 2) General Insurance Corporation of
India (GIC), 3) The New India Assurance Co. Ltd. (NIACL) (उनपर �ादा स� �नयम/�नगरानी रख�गे)
16.19⚰😿😿 CHALLENGES TO INSURANCE INDUSTRY (चुनौ�तयां)
1) 😰😰Capital intensive industry (पूंजी प्रधान उद्योग): Private players not generating enough profits due
to poor returns in sharemarket. Heavy costs in paying agent commission rates and marketing
advertisements.
2) 😰😰Corona= many people died/sick = insurance companies required to pay large sum of
3) 😰😰Premiums expensive. Will become more expensive to cover Corona losses. (फ़�स महंगे हो रही है)
4) 😰😰Insurance agents need more skill, network than banker. For bankers- loan recovery easier
(SARFAESI, I&B) compared to an insurance company that invested into equities/shares of a
weak company. (बीमा एज�ट भी एक ब�कर के मुक़ाबले �ादा कौशल चािहए)
5) 😰😰Rural people: either disinterested / un-served despite IRDAI norms. (ग्रामीण लोग नीरसता िदखाते ह�)
6) 😰😰People hesitate in buying House / Factory / Fire / Theft insurance due to fear of discovery of
‘asset value’- IT/GST raids & ransom demands. → India’s “insurance gap” is high i.e. all the

assets are not insured. (लोग अपनी सं प�� का पूणर् �प से �बमा नहीं करवाते, �ोंिक उ�� आयकर �वभाग के छापे और
दबं गों क� िफरोती से डर लगता है)
7) 😰😰Insurance: Highly regulated, but Healthcare: highly unregulated, so
o Supply demand mismatch: between (doctors-hospitals) vs. patients.
o Standardized medical treatment costs difficult to ascertain, unlike car damage.
8) 😰😰Delays in claim settlement= fewer repeat customers for health insurance. (मुआवज़े म� �वलं ब)
16.19.1 ⚰📈📈Insurance progress indicators (बीमा प्रग�त सं के तक)

Table 3:✋ figures are not important.
As per Insurance penetration (%: बीमा प्रवेश) Insurance Density ($:बीमा घन�)
📔📔📔📔ES22 =Premium divided by GDP =Premium divided by population
Life (2020) 3.20% $59
Non-Life (2020) 1.00% $19
⇒ For India, these indicators ↗Improved in 2011-2020, but zigzag /non-steady graph pattern
⇒ For India, these indicators are low compared to Malaysia, Thailand & many other developing
countries due to aforementioned challenges. (उ� सूचकांकों म� भारत अ� देशों के मुक़ाबले मे काफ़� पीछे है)
16.19.2 🇺🇺🇸🇸💸💸FDI limits in Insurance sector? (बीमा �ेत्र मे प्र�� वदेशी �नवेश क� सीमा)
⇒ Foreign Direct Investment (FDI) is the (more than 10% equity / share) investment made by a
foreign entity into an Indian company, with the objective to get involved in the management /
production of that Indian company. (िकसी �वदेशी इकाई द्वारा एक भारतीय कं पनी म� 10% से �ादा शेयर �नवेश
करना उसे कहते ह� प्र�� वदेशी �नवेश) (More on FDI 📑📑Pillar#3A)
⇒ e.g. 2018: Walmart-USA bought 77% shares in Flipkart-India @$16 billion.
FDI limits in insurance sector→ 😰😰BEFORE 🤩🤩AFTER (Automatic Route)

State owned/public sector Life insurance NO RULE 20% (done in 2022)
corporation i.e. LIC (सावर्ज�नक �ेत्र का जीवन बीमा �नगम)
Insurance company itself (Except LIC) 49% 74%** (done in 2021)
Insurance intermediaries e.g. agent/broker, 49% 100% (done in 2020)
surveyor/loss-assessor, third party
administrators (hospital who give treat to health
insurance clients) (बीमा �ेत्र के �बचौ�लये/द�े)
** 💼💼Budget-2021: announced to amend Insurance Act, 1938 to ⏫ FDI limit from 49% to 74% in
Insurance Companies. With following safeguards: हालांिक कु छ शत� के साथ →
⇒ the Majority of Directors on the Board and key management persons must be Resident Indians.
बोडर् ऑफ डायरे�र तथा कं पनी प्रबं धन के व�र� पदा�धका�रयों म� ब�म�त भारतीय �नवासी होने चािहए
⇒ At least 50% of Directors must be Independent directors. (�तं त्र डायरे�र) (Ref#1C)
⇒ Certain % of profits must be retained as general reserve. मुनाफे का कु छ प्र�तशत सामा� आर��त �न�ध के �प
म� अलग से रखना होगा, ताक� अगर कोई कांड हो जाए तो इन पैसों से ��तपू�त हो सके .
16.19.3 Should we ⏫ FDI beyond 49% in insurance companies? (�ा सीमा बढ़ाए?)
🤗🤗 � yes we should raise FDI limits (हां बढ़ाई जाए) 😣😣 � No, we shouldn’t raise FDI
Indian insurance companies will get additional capital Foreign investors will put pressure on
from Foreign investors = this can help mitigating above Indian insurance companies to
challenges.(�वदेशी �नवेशकों से अ�त�र� पूंजी �मलेगी तो फ़ायदा है) generate more profit. So
- They can expand overseas, mobilize money from - investment in junk bonds that offer
Bangladesh/Kenya’s market etc. & invest it in higher return → Collapse. (तुरंत
Indian economy. (�वदेशो का पैसा भारतीय अथर्त� मे लाना) मुनाफा कमाने क� चाह म� �ादा जो�खम वाले
- IRDAI prescribes “Investment pattern”, there is बॉ� म� �नवेश)
ombudsman for customer complaints. - Insurance company may reject
- Further, Companies Act has norms for independent insurance claims for frivolous
directors, auditing, whistleblower protection, CSR. reasons to increase its profitability
So, apprehension that foreign investors will cause to keep foreign investors happy.
mischief = unlikely. (�नगरानी/�नयं त्रण के पयार्� प्रावधान है, (मुनाफाखोरी के �लए ग्राहकों के बीमादावों को
कं प�नयो के �लए बदमाशी करना मु��ल) अ�ीकार करना)
- 💼💼Budget-2021 too has mentioned safeguards.
- China, Thailand, Indonesia et al ⏫ FDI limits in
insurance sector. We should also follow their path.
17 � → � (💰💰💰💰) PENSION (प�शन)

- ⚰Insurance: person/his family eligible to receive ₹ ₹ if he suffers death / damage. e.g. PM
Jeevan Jyoti: ₹ 2 lakhs on death. जीवन बीमा का लाभ लेना है तो �� का मरना ज�री है

- �Pension: Person eligible to receive monthly ₹ ₹ when he retires. And when he dies, his wife
(is usually) eligible to receive monthly ₹ ₹. When she also dies, scheme stops. बुढ़ापे म� प�शन �मलता रहे.
आपके मरने पर आपके प�त या प�ी को भी प�शन �मलता रहे।
17.11�🦁🦁 EMPLOYEE PROVIDENT FUND ORG. (कमर्चारी भ�व� �न�ध सं गठन)
- 1951-52: EPFO was setup initially by ordinance & then Act.
- Nodal: Labour Ministry (श्रम मं त्रालय).
- EPFO governed by Tri-partite “Central Board of Trustees” �त्रदलीय के �ीय �ास बोडर् -
I. Government (Union + state) – 15 nominees (मनोनीत सद�)
II. Employers (industrialists) - 10 nominees
III. Employees (workers) – 10 nominees
- They make policy decision about where to invest money (usually G-sec>C-Bonds>Shares; with
minimum and maximum slabs) and they decide how much interest should be paid to
subscribers.
Chronology Scheme (Tech. norms not written here as they’re not imp4IASexam)
1952 Employee Provident Fund (EPF)
⇒ Principal + interest returned upon retirement age/ death. Interest Rate:
8.5%(2020-21) → ⏬ Reduced to 8.1%(2021-22)- lowest in last 40 years.
⇒ Partial withdrawal upto “X%” allowed for education, marriage, illness and
house construction. (अव�ध से पहेले आं�शक �प से पैसा �नकालना)
⇒ 2020: 👻👻ATMANIRBHAR → PM Garib Kalyan Package→ labour ministry
allowed EPFO subscribers’ to withdraw upto “X%” of EPF fund to help the
workers during lockdown. (कोरोना के चलते ज़�रतमं द मज़दू र अपने खाते से प�रप�ता-अव�ध से
पहेले आं�शक �प से पैसा �नकाल सके )
1976 Employees Deposit Linked Insurance Scheme (EDLI)
⇒ Boss pays Premium. If worker dies → family gets insurance.
⇒ 2020-Reform: if worker died of Corona family member will be given insurance
(min 2.5 lakh to max 7 lakh). कोरोना मृतक श्र�मक के प�रजनो को बीमा रा�श
1995 Employee Pension Scheme (EPS)
⇒ Monthly pension on retirement (once they attain the age of 58 years old) /
permanent disability (वय-�नवृ�त/�ायी �वकलांगता म� प�शन �मलेगा).

- EPFO covers both permanent employees & casual/temporary employees (= employed only for a
few days/weeks/months.) �ायी कम� और अ�ायी/अयाथव�ध कम� दोनो को लाभ �मलता है।
- EPFO subscriber worker has UAN (Universal Account Number) that remains unchanged even if
he changes job from one organization to another. (मजदू र का खाता नं बर- नौकरी बदलने पर भी वही रहता है)
- Previously, employee himself couldn’t generate his UAN, he had to request his boss to send
forms to EPFO. But 2019: EPFO allowed employees to generate UAN online by simply giving
Aadhar & Mobile Number. (एक जमाने म� मजदू र ने मा�लक द्वारा फॉमर् �भजवाना होता, लेिकन अब मजदू र खुद अपना
खाता खोल सकता है)
- Factory owner/Employer has LIN (Labour Identification Number)- which he uses while
uploading EPFO documents on Shramsuvidha webportal of Labour Ministry.

- EPFO & ESIC transactions can be done through:
o Through public and pvt sector banks (ब�क खाते द्वारा पैसा भेज सकते ह�)
o through Ministry of Electronics and Information Technology (MeitY)’s UMANG App
(Unified Mobile Application for New-age Governance).
17.11.1.1 EPF Commutation (2020)

⇒ EPFO: Employees’ Pension Scheme (EPS: कमर्चा�रयों क� प�शन योजना) = worker gets pension after
retirement age (58 years).
⇒ EPF Pension commutation= Worker can partially withdraw his pension in advance before
reaching retirement age. But, then EPFO will pay him less pension afterwards when he actually
reaches retirement age. (प�शन �पांतरण: वय�नवृ�� उम्र/प�रप�ता समय से पहले पैसा उठाना। हालाँिक ऐसा करने पर बाद
के वष� म� प�शन कम �मलेगा)
⇒ 2020: some technical reforms made to help workers here. NOTIMP#🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
17.11.2 🧔🧔🧔� (2016) Pradhan Mantri Rojgar Protsahan Yojana (Labour Min)
- Private sector employers hire workers informally, but don’t report them in official formal
records lest they’ve to contribute to EPFO-funds under statutory norms, face harassment of
EPFO officials. (उधोगप�त मजदू र को औपचा�रक �प से नोकरी देने का रेकडर् नही रखते, तािक EPFO क� वैधा�नक
�ज�ेदा�रयो से �छप सके .)
- So, worker is hired informally, denied job-security & social security. Economic Survey 2015-16
diagnosed it as “EPFO Regulatory Cholesterol preventing formal-job creation. (मजदू रों को नौकरी पर
अनौपचा�रक �प से रखा जाता था. औपचा�रक नौकरीओ का सृजन नही हो रहा था)
So, to encourage pvt companies to hire new workers ‘formally’ → Govt announced to pay
employer (Factory owners) portion (12%) for the first 3 years under following schemes: →
Pradhan Mantri Paridhan Rojgar Protsahan Textile ministry scheme for textile factories.
Yojana →
Pradhan Mantri Rojgar Protsahan Yojana → Labour ministry scheme for non-textile factories
💡💡Note: Above schemes expired/discontinued by 2019. Then 2020: Corona → new schemes- given
below.
17.11.3 👻👻ATMANIRBHAR Reforms in EPFO 🧔🧔🧔� (March to August)

Govt agreed to pay for workers & bosses contribution to EPFO in specific cases (e.g. if small factory
with upto 100 workers.) We’ll NOT prepare exact norms because 2022- it’s faded/outdated info.
It was launched during the Atmanirbhar Bharat 3.0 package (November 2020)
Beneficiary eligibility: Worker's Monthly wages upto ₹15,000 AND
A) Fresh EPFO-Worker got new job in an EPFO registered firm OR

B) Past EPFO-Worker had lost job between March1 to Sept30 of 2020, BUT got a job
on/after October1, 2020 in an EPFO registered firm
🤩🤩Entitlement: यह योजना म� फायदा �ा �मलेगा
EPF scheme 👷👷worker (मजदू र) �Boss (मा�लक)
if the firm has up to 12% of wages → 🧔🧔 12% → 🧔🧔 Govt to contribute to EPFO
1000 employees Govt to contribute to (सरकार देगी)
EPFO
if the firm has >1000 12% of wages → 🧔🧔 ✋12%: Boss has to contribute from his
employees Govt to contribute to pocket. Govt will not contribute. (सरकार नहीं
EPFO देगी)
🤩🤩Benefit? Formal Job creation, more money in the hands of workers → demand⏫ → Post
corona economy Revival. (औपचा�रक रोजगार सृजन, मजदू र के हाथ म� �ादा पैसा आएगा �जससे बाजार म� मांग म� बढ़ोतरी)
🗓🗓Scheme validity? (यह योजना िकतने �दनों तक वैद्य/जारी रहेगी)
⇒ Scheme registration open till June 2021.
⇒ Registered worker will continue to receive benefit for two years. e.g. if registered in January 2021
→ then ₹₹ upto January 2023.
🎓🎓Note: for faster revision I have used the term worker and boss (मजदू र और मा�लक) But, in real mains
exam, you should write employee and employer/Entrepreneur (कमर्चारी और नोकरीदाता / उद्यमी)
17.11.5 🚩🚩🚩FAQ: “why not merge EPFO with ESIC!!? ”

Their laws are different. To merge them you’ve to merge two laws. But this is not some priority for
govt like ‘Triple Talaq bill’ or Article 370. So, prepare facts as given in the handout. #थोड़ा-पढ़ो-आगे-बढ़ो
17.12 �→�PENSION FOR GOVT EMPLOYEES & MIDDLE CLASS? = NPS

Govt Employees (from 2004) Middle Class (from 2009)
- 2004: New Pension Scheme (नवीन प�शन योजना) - In 2009, the Government employee-walla
→(2009) renamed into National Pension National Pension System was made open
System. (रा��ीय प�शन प्रणाली) for all citizens (and NRIs) aged 18-55 on
- Subscriber? Those who joined govt. service voluntary basis. You contribute money till
on or after 01/01/2004** age of 60, as per your capacity →invested
- Mechanism? Employees (10 % of basic →pension.
pay) + Govt. contribution (14% of basic - 2010: NPS-Lite (Swavlamban): If poor
pay: since Interim-Budget-2019) → goes to person from unorganized sector (असं गिठत
PFRDA →NPS Trust → empaneled NPS- �ेत्र) joined NPS, then govt to co-contribute
Fund-manager → Invested G-sec, (समान योगदान) money for five years**.
Corporate Bonds and Shares depending on
your preference in Tier1/Tier2**.
- ** subject to some technical norms which are not imp for exam. (कु छ शत� के अधीन)
- NPS subscribers have PRAN: Permanent Retirement Account Number, Just like EPFO
subscriber has UAN Number.
- 📔📔📔📔ES20: in NPS: number of of State Govt employees >> union govt employees. And within
State govt employees: UP > Madhya Pradesh >Raj > Maharashtra.
- Corona: Subscribers allowed to withdraw funds partially from NPS for treatment of Corona.
17.12.1 �→� Pension: NPA: Minimum Assured Return Scheme (MARS)

⇒ PFRDA yet to release the guidelines so for the sake of simple example ….
⇒ suppose you contribute ₹100 & PFRDA gave MARS of 8% on the NPS account
⇒ Then if NPS unable to give u 8% return on ₹60 of subscription then whatever loss- will be paid
by PFRDA/other org to subscriber. 😍😍Benefit? It’ll attract more people to join NPS.
�ूनतम सु�न��त वापसी योजना (MARS) - मान ली�जए PFDRA कहता है िक कम से कम 8% सालाना मुनाफ़ा िदया जाएगा और
अगर शेयर /बोंड बाज़ार �सफ़र् 7% दे पाता है तो 1% नुक़सान क� भरपाई PFRDA या कोई और अ� सं �ा द्वारा क� जाएगी। असल म�
�नयम बनने बाक़� है, इस�लए ये तो एक का��नक उदाहरण िदया है)
17.12.2 ✋Old Pension Scheme (OPS) will not be re-introduced says Govt in Lok Sabha
- Before-2004: Government was entirely responsible for arranging the pension money for its
Government employees. (सरकारी कमर्चारी का प�शन सरकार स्�म क� जेब से देती)
- But after 2004’s NPS: Govt Employee’s salary is partially deducted and invested in financial
securities, his pension is thus “NOT FIXED nor fully paid by Government” but it’s dynamically
linked with dividend & interest generated by those financial securities. (प�शन क� रकम �न��त नहीं है.
शेयर/बोंड बाज़ार पर �नभर्र करती है)
- Thus, in NPS, Govt employee himself is ‘contributing money’ towards his pension.

- So, some government employee organizations oppose NPS because it does not provide a fixed
pension amount but depends on uncertainty in financial market. They keep demanding re-
introduction of the old pension scheme (OPS: पुरानी प�शन योजना वापस लाने क� माँग कु छ सरकारी क�मयों के
सं गठन करते ह�, लेिकन सरकार मानती निह).
- 2019-July: Govt clarified in Lok Sabha, “We have no plans of reverting to OPS. Because in OPS,
Government has to arrange entire pension money = less funds available for poor people’s welfare
schemes. So, we’re going to keep NPS for Government employees.”
- 2022: Rajasthan State Govt Budget 2022 announced to revert to OPS. Some other States also
planning similar. 😰😰However, critiques argue that State govts don’t have enough money to
sustain OPS forever. (राज�ान सरकार ने कहा पुरानी प�शन योजना पुनः �ा�पत कर�गे. हालाँिक आलोचकों का मानना है िक
रा� सरकारों के पास इतना पैसा नहीं, क� वो हमेशा के �लए पुरानी प�शन योजना को चला सके ।)
17.12.2.1 �📜📜 → � Jeevan Pramaan (2014)

- Previously, a pensioner (in any Govt / public sector org.) had to submit a physical life certificate
in November each year to prove that he’s alive = hardship, bribery.
- "Jeevan Pramaan" – an "Aadhar-based Digital Life Certificate“ by Ministry of Electronics &
Information Technology (MEITY) (आधार काडर् और अंगूठा लगा के �ज़दं ा होने का प्रमाण पत्र तािक प�शन �मलता रहे)
- Pensioner's Aadhar number + biometric reading device→ PC, Mobile→ “Digital Life
Certificate”→ submit to the authority → pension released.
- 2020: Jeevan Pramaan system also expanded to EPFO subscribers.
- 2022: EPFO also allows facial recognition system because in some very old pensioners, difficult
to scan finger-print/iris.
17.13 �→�PENSION FOR SENIOR CITIZENS WITH CAPACITY TO INVEST?

17.13.1 Pradhan Mantri Vaya Vandana Yojana (2017-DFS, LIC)
⇒ Post-demonetisation, banks were flush with deposits, so deposit interest rates were likely to fall
→ so to protect the senior citizens’ income government launched this.
⇒ A 60 years/> senior citizen can join. (व�र� / बुजुगर् नाग�रक के �लए ह�)

⇒ He can invest minimum ₹ (approx.) 1.5 lakhs to maximum ₹ 15 lakhs.
⇒ Money remains invested in the scheme for 10 years.
⇒ LIC guaranteed approx. 8% annual interest. original amount returned after 10 years. This
resulted into ₹1,000 to ₹10,000 monthly pension.
⇒ In between, if senior citizen dies then nominee (spouse, children) gets original amount back.
⇒ If LIC can’t generate guaranteed return, then Govt (Dept of Financial Services) to pay subsidy for
shortfall to LIC. (यिद जीवन बीमा �नगम इतना मुनाफ़ा नहीं दे पाएगा तो सरकार द्वारा स��डी)
⇒ 2020: Govt reduced guarantee from 8% to 7.40%.
⇒ Other similar schemes: Senior Citizen Savings Scheme, LIC Varistha Pension Bima Yojana but
they are old schemes so poor cost: benefit in preparing for UPSC.
🔠🔠❓ [Asked in UPSC-CDS-2019-1] Consider the following passage about a scheme : It was
launched to provide social security during old age and to protect elderly persons aged 60 years and
above against a future fall in their interest income due to uncertain market conditions. The scheme
enables old age income security for senior citizens through provision of assured pension / return
linked to the subscription amount based on government guarantee to Life Insurance Corporation of
India (LIC). Identify the scheme. Answer Choices:
a) Pradhan Mantri Swasthya Suraksha Yojana b) Pradhan Mantri Vaya Vandana Yojana
c) Liveability Index Programme d) Rashtriya Vayoshri Yojana
17.14 �→�PENSION FOR POOR PEOPLE WITH CAPACITY TO INVEST?
ग़रीब आदमी जो ख़ुद क� जेब से थोड़ा पैसा �नवेश कर सके - उनके �लए प�शन योजना

By Dept of Financial Services, 2015 By labor Ministry, 2019
Only 18-40 age Indian citizen residing in India Income Tax-payer, NPS,EPFO,ESIC-
subscribers not eligible.

No minimum or maximum income limits. unorganized sector workers with monthly
Mukesh Ambani can also join, but given that fact income upto ₹15k. E.g. street vendors,
that maximum pension is ₹5,000 a month so rickshaw pullers, construction workers, rag
target-audience is poor people, unorganized pickers, agricultural workers, beedi workers
workers outside EPFO security. etc. in the age of 18-40
Monthly pay ₹42-210 rupees till the age of 60 Monthly invest ₹55-200 (depending on age of
joining). Govt to co-contribute equal amount.
Till the age of 60
₹1k-5k monthly pension- depends on @which Fixed ₹3k pension per month after 60.
age joined, how much contributed?
- If subscriber dies after 60, then spouse If subscriber dies after 60, spouse
(Husband/wife) continues to receive same (husband/wife) gets ₹1500pm as family
amt. pension. pension.
- Both Husband & Wife die → Nominee (e.g. Both Husband & Wife die → Nominee (e.g.
their child) receives the entire principal their child) get nothing.
(premium) back. (माँ बाप दोनो मर गये तो ब�े को �नवेशक-प�त/प�ी के देहांत पर उसके प�ी/प�त को आधा ही
मूलधन वापस) प�शन �मले। दोनो मर गये तो ब�े को कु छ नहीं �मलेगा।
One person-1-subscription account only. (एक Same as left cell.
�� का �सफ़र् एक ही खाता खुल सकता है)
💡💡Note: 1) Atal Pension Yojana 2) PM Jivan Jyoti Yojana and 3) PM Suraksha Bima Yojana are
collectively known as Pradhan Mantri Jansuraksha Schemes.
🔠🔠❓ [Asked in Prelim 2016] Find correct statement(s) regarding ‘Atal Pension Yojana’:
1. It is a minimum guaranteed pension scheme mainly targeted at unorganized sector workers.
2. Only one member of a family can join the scheme.
3. Same amount of pension is guaranteed for the spouse for life after subscriber's death.
Codes: (a) 1 only (b) 2 and 3 only (c) 1 and 3 only (d) 1, 2 and 3
17.14.1 � → 👴👴👴👴👴👴: 🧔🧔 Pension: Three Maan Dhan Yojanas

1) Pradhan Mantri Shram-Yogi Labour Ministry unorganized sector workers with
Maan-dhan (Feb’19) monthly income upto ₹15k

2) PM Laghu Vyapari Maan- Labour Ministry Small trader / shopkeepers whose annual
dhan Yojana (Jul’19)# also turnover does not exceed Rs 1.5 crore,
known as ‘NPS-Traders’ based on self-declaration.
3) Pradhan Mantri KISAN Agri small / marginal farmers with upto 2ht
Maan-dhan Yojana (Aug’19) land.
- 1 person can join only 1 type of above scheme. (एक �� का �सफर् एक बार ही पं जीकरण होता)
- Income Taxpayers & those who joined EPFO/ESIC are not eligible for any of these schemes.
- 💼💼Budget-2020: we’ll launch a Universal Pension coverage with auto enrolment for workers.
It’ll cover workers even when they change jobs. <update when actually done>
17.14.2 🚩🚩🚩FAQ: “why not merge all these schemes into one!??
- More schemes = more speech points during election-rally for the minister. िफर चुनाव म� बोल�गे �ा?
- So, you may send merger-suggestion to Prime Minister. But until your suggestion is
implemented, prepare the facts as given in the handout. #थोड़ा-पढ़ो-आगे-बढ़ो
17.15 �→� PENSION FOR POOR PEOPLE WITHOUT CAPACITY TO INVEST?
- For Below Poverty Line (BPL) people, Rural Development Ministry’s National Social Assistance
Programme (NSoAP: रा��ीय सामा�जक सहायता कायर्क्रम) in 1995, where direct money is given without
asking for any premium from the beneficiary (लाभाथ�).
- It’s a core of the core scheme (अ�त-मह�पूणर् योजना) with 100% cost is paid by Union. It’s optional
for state govt. to contribute money- They may contribute, if they want to enhance the scheme’s
features. For example: (इस योजना म� रा� सरकार ने पैसा देना वैक��क है) (More in 📑📑Pillar#2D- Schemes
types)

NSoAP Components 🧔🧔Union �State (Optional to give extra)
Old age pension @60 ₹200-500* State Govt may give extra ₹₹ & rename
(depending on how old) it. e.g. Samajwadi Pension in UP
Widow pension ₹200 State Govt may give extra ₹₹ and
Aged 40-59 rename it e.g. UP Vidhva Pension @1k
Disability pension: Same as widow State Govt may give extra ₹₹ and
Aged 18-59 rename it e.g. Guj: Sant Surdas Scheme
National Family Benefit Death of bread winner: ₹10k e.g. Guj: Sankat Mochan (Total 20k)
INSURANCE
Annapurna (2001) If senior citizen uncovered in May give additional
any other scheme 10kg grain
/ pm for FREE.
⇒ 2020: 👻👻🤧🤧ATMANIRBHAR→ PM GaribKalyan → single time ₹1,000 to poor senior citizen,
poor widows & poor disabled (total 3cr person covered)
17.16�� PFRDA, THE PENSION FUNDS’ REGULATOR
2003: Executive order to setup PFRDA- Pension Fund Regulatory and Development
Org Authority (प�शन �न�ध �व�नयामक एवं �वकास प्रा�धकरण)
2013: given statutory status. HQ: New Delhi, just like IBBI.
1 Chairman: (5years / 65age), 5 members (5/62) = 6 people.
Structure
Re-appointment is possible.
⇒ Implement National pension system (NPS), select its fund-managers.
⇒ Regulate all public and private pension funds except EPFO, Seaman, Coal miners,
Assam tea plantations related pension schemes as they’ve their separate acts /
mechanisms.
Functions ⇒ Protect Clients, Pensioners
⇒ Prescribe liquidity, auditing, investment norms for Pension funds.
⇒ Powers of civil court. (दीवानी अदालत क� स�ा/अ�धकार िदए गये है)
⇒ financial awareness generation through pensionsanchay.org.in
⇒ Pension FDI is linked with insurance FDI (49%) so not decided by PFRDA.
17.17🛫🛫🛫SOCIAL SECURITY FOR OVERSEAS INDIANS (PENSION / INSURANCE)
Following schemes’ boss? Ministry of External Affairs (�वदेश मं त्रालय)

17.17.1 🛫🛫🛫Pravasi Bharatiya Bima Yojana, 2017
Some nations do not have strict laws regulating the entry, employment or safety of foreign workers.
So, the Indian Government classifies them under Emigration Check Required (ECR: उ�वास जांच क�
आव�कता) countries. e.g. Saudi, Qatar, UAE, Libya, Malaysia, etc.
 It’s compulsory for Indian workers going ECR nations to join Pravasi Bharatiya Bima Yojana.
(ईसीआर देशों म� जाने वाली प्रवासी भारतीय मज़दू रों के �लए ये ख़रीदना अ�नवायर् है)
 Insurance cover of Rs. 10 lakhs if accidental death/permanent disability while abroad,
 Maternity expenses (प्रसू�त खचर्) cover for women worker, Family Hospitalization etc.
18 (��:💰💰)→💳💳FINANCIAL INCLUSION (�व�ीय समोवेशन)
⇒ Financial Inclusion: providing access to banking, investment, pension, insurance and credit
(loan) facilities to each citizen. This ensures social, economic and transaction security (लेनदेन म�
सुर�ा) (S-E-T), improves social harmony, women empowerment, helps reaping the benefit of
“LESS CASH Economy” (📑📑Ref: Handout#1A1) सभी नाग�रकों को ब�िकंग, �नवेश, प�शन, बीमा और ऋण क� सेवा
प्रदान करना= उसे �व�ीय समोवेशन कहेते है
⇒ Social Security (सामा�जक सुर�ा): a system of payments / assistance by the government to citizens
who are ill, handicapped, poor, aged or unemployed. (बीमार, �वकलांग, गरीब, वृद्ध या बेरोजगार को आ�थक
मदद करना)
o The foundation of SS in our constitution @DPSP Article 41- State to provide public
assistance to its citizens in case of unemployment, old age, sickness and disablement; and
o DPSP Article 42- The State shall make provision for securing just and humane
conditions of work and for maternity relief. (राजनी�तक पथदशर्क �सद्धांतों म� �जक्र)
⇒ Social Justice (सामा�जक �ाय): distribution of wealth, opportunities, and privileges within a
society- through reservation in jobs, admissions and election and through legal safeguards for

protection of civil rights, prevention of atrocity and personnel laws. (समाज के �व�भ� जाती/वग� म�
आर�ण चुनाव तथा कानूनन अ�धकारों द्वारा सं प��, अवसरों और �वशेषा�धकारों का �वतरण= उसे समा�जक �ाय कहेते है)
⇒ Collectively, these three (FI,SS,SJ) help in human development, inclusive economic growth and
Sustainable Development Goals (SDG). (More in 📑📑Pillar#6) [कु ल �मलाकर �व�ीय समावेशन, सामा�जक
सुर�ा और सामा�जक �ाय इन तीनों क� मदद से मानव-�वकास,समावेशी आ�थक वृ�द्ध, और सतत् �वकास ल�ों को हां�सल करने मे
हम� मदद होगी]
18.11 (��:💰💰)→💳💳 FIN. INCLUSION: BANK ACCOUNTS FOR EVERYONE
⇒ Nationalization of Banks (1955, ‘69, ’80)  1961: DICGC Act 1966 Cooperative Banks under
RBI’s Ambit  1969 Lead Bank Scheme (SCB:Pvt or Public) given lead role in district. They
prepared credit plan with ‘Service Area Approach’, and coordinate with the efforts of
Government, banks and NBFCs.
⇒ 1971: State level Bankers’ Committee to moniter progress of financial inclusion
⇒ 1976: Regional Rural Bank (RRB) setup through Act. (�ेत्रीय ग्रामीण ब�कों क� �ापना)
⇒ Further, RBI requires commercial banks to setup atleast 25% of their branches in unbanked rural
areas. Similar norms for White label ATM Companies. (एक चौथाई शाखाएं गाँव म� खोली होगी)
⇒ 2005: RBI permitted no-frills savings account with no penalties on zero balance
⇒ 2006: RBI permitted Banking Business Correspondent Agents (BCA)
⇒ 2011: Government’s Swabhiman to increase banking presence in rural area.
⇒ 2013: e-KYC permitted.e.g. write Aadhar number, put fingerprint in biometric reading device,
no photocopies/xerox required. (काग़ज़ी नक़ल जमा करने क� ज़�रत नहीं, ऑनलाइन प्रमाणीकरण)
⇒ 2014: JanDhan Yojana, new Private Commercial Banks (Bandhan, IDFC First)
⇒ 2015: Small Finance Banks and Payment Banks.(लघु �वत् ब�क और भुगतान ब�क क� �ापना)
⇒ 2017-18: India Post Payment Bank(More in 📑📑Pillar#1B1)
🔠🔠❓ MCQ. Service Area Approach was implemented under the purview of (UPSC Prelims-2019)
(a) Integrated Rural Development Programme (b) Lead Bank Scheme
(c) Mahatma Gandhi National Rural Employment Guarantee Scheme
(d) National Skill Development Mission
18.11.1 🧔🧔(��:💰💰)→💳💳 Pradhan Mantri Jan Dhan Yojana (प्रधान मं त्री जन धन योजना)
⇒ 2014: launched by FinMin → Dept of Financial Services with

⇒ Motto “Meraa Khaataa, Bhagya Vidhaataa”. Scheme in two phases, 6 objectives:

PM JDY – phase I (2014-15) प्रथम चरण म� PM JDY – phase II (2015-18) िद्वतीय चरण
1. Financial literacy (�व�ीय सा�रता) 1. Credit Guarantee Fund (For Overdraft
2. Banking within 5 kms defaults) उधर से ब�क के नुक़सान क� भरपाई
3. Account for every family with overdraft, 2. Direct Benefit Transfer (DBT)
with Rupay ATM-cum-DEBIT Card 3. Sell Micro insurance & pension products
through bank.
⇒ PM-JDY bank account can be opened in any Commercial or Cooperative Bank provided that (1)
bank has CBS (2) bank is tied with Rupay Payment Gateway. अब िकसी वा�ण��क या सहकारी ब�क म� खाता
खोल सकते ह�
⇒ Basic Savings Bank Deposit Account - Age 10/>; Zero balance- no penalty. But, Chequebook
only with “balance”; (नाबा�लगों के भी खाते खोले जा सकते ह�। �बना एक �पया बचत जमा िकए भी खाता खोल सकते ह�।)
⇒ There are restrictions on max. number of money withdrawals per month. (पैसे �नकालने पर कु छ सीमाएं )
⇒ Overdraft upto ₹ 10k (originally ₹5k) depending on balance history of min. 6 months. Overdraft
given on only one account holder in household (preferably woman). (प�रवार क� मिहला को 10,000 �पये
तक क� ओवरड�ा�)
⇒ Money has to be returned with interest within 3 years. Banks to decide the loan interest rate.
(ओवरड�ाफ़्ट म� िदया पैसा �ाज के साथ वापस करना होगा। ओवरड�ा� कोई दान-ख़ैरात निह है, वो एक िक़� का क़ज़र्/ऋण है।)
⇒ EVERY Jan Dhan account comes with FREE Accident Insurance; Premium paid by NPCi, it’s
therefore necessary to regularly use card- atleast for checking balance. Union Government
employees, and income tax payers not eligible for this free insurance. (दुघर्टना/अक�ात् सुर�ा बीमा भी
मु� म� �मलता है)
⇒ 🤩🤩Significance? JAM trinity (JanDhan, Adhar, Mobile) for targeted and direct transfer of
subsidies, scholarship and payments to beneficiaries. (लाभाथ� के खाते म� सीधा /प्र�� लाभ ह�ांतरण)
⇒ 😰😰Criticism? PM-JDY accounts used as money mules during demonetization.
⇒ 2020: 👻👻ATMANIRBHAR→ PM GaribKalyan → ₹500 per month to 20 crore women Jan
Dhan accounts for 3 months. (कोरोना म� मिहलाओं के जन धन ब�क खातों म� 3 महीनों के �लए थोड़ी-थोड़ी रकम जमा क�)
🔠🔠❓ [Asked in Pre-2015] Pradhan Mantri Jan-Dhan Yojana’ has been launched for:
(a) providing housing loan to poor people at cheaper interest rates
(b) promoting women’s Self-Help Groups in backward areas
(c) promoting financial inclusion in the country
(d) providing financial help to the marginalized communities
18.11.2 � Jan Dhan Darshak App (2018)

Jointly developed by Department of Financial Services (DFS) & National Informatics Centre (NIC).
It helps people find the nearby financial touch points such as Bank branches, ATMs, Post Offices etc.

18.12 (��:💰💰)→ 📮📮 FIN INCLUSION: INVESTMENTS OTHER THAN BANK
What if poor / lower middle-class person wants better returns than bank deposit? He may opt for…
Act Small Savings Schemes: लघु बचत योजनाएं
Govt Savings Bank Act 1873 📮📮 Post Office schemes: monthly, 5 year, savings, time
deposit
Govt Savings Bank Act 1873 Senior Citizen Savings (2004)
Government Savings Certi Act ’59 National Savings Scheme (NSC)’59
Government Savings Certi Act ’59 Kisan Vikas Patra 1988-11, 2014
PPF Act 1968 Public Provident Fund (PPF)
No Act → Sukanya Samriddhi Yojana ‘2015
- Individual eligibility, upper-lower limits etc. poor cost: benefit…except Sukanya Samriddhi.
- Money (usually) goes into National Small Savings Fund (NSSF)→ loans to Union and (selected
States), with technical norms which not imp for us.
- Here, interest rates are decided by FinMin’s Dept of Economic Affairs on quarterly basis. (�व�
मं त्रालय का आ�थक मामलों का �वभाग इन योजनाओं क� �ाज दर तय करता है हर 3-3 महीने पर)
- 2021 March:- Corona = Govt’s Tax collection⏬ while Govt’s Expenditure ⏫ So, Finance
Ministry ⏬⏬ decreased interest rates on various small saving schemes. But just after a day of
announcement, fearing public outcry (& Bengal election populism), Govt withdrew the decision.
[महामारी के दौरान सरकार क� आमदनी कम और खचर् �ादा �ए तो सरकार ने लघु बचत योजनाओं के �ाज दर म� कटौती क�
घोषणा क�, लेिकन िफर जनता के �वरोध (और प��म बं गाल चुनाव लोकलुभावन) के चलते एक ही िदन म� �नणर्य को वापस �लया!]
18.12.1 📮📮 (Yearbook) Dept of Post: POSB vs IPPB

Ministry of Communications two dept: 1) Depart of Telecommunications 2) Department of Posts →
 Setup by Clive (1766), expanded by Warren Hastings (1774)
 1854: Dalhousie- Post Office Act; 1st postal stamp, rates by weight & not by distance.
 2008: Project Arrow for modernization.
 2013: Telegram stopped by India Post, due to onset of SMS & email.
 Dept of Post sells
o Gangajal sourced from Rishikesh and Gangotri.
o UTI-Mutual funds and Sovereign Gold bonds.
 Post Shoppe = special outlet in big post offices for philately (stamp collection hobby)
 RTI fees can be submitted by buying Indian Postal Orders (IPO). E-IPO = overseas Indians can
pay RTI fees online using this mechanism.
 Deen Dayal SPARSH Yojana: Students in class 6-9 given scholarship for philately.
 Dhai Akhar Letter Writing Competition-students asked to write letters to Mother Teresa,
Tagore etc.

 Officers’ training conducted at Rafi Ahmed Kidwai National Postal Academy at Ghaziabad, UP.
Kidwai was India's first Minister for Communications.
Table 4: ✋No need to loose sleep, UNLESS preparing for Post-Office staff exams.
Dept of Post → Post Office Savings India Post Payments Bank (IPPB)
Bank (PoSB)
foundation Govt Savings Bank Act Companies act 2013 → Public ltd
1873 company registered in 2016
Accept demand Savings account only 1. Current account
deposits? 2. Savings account
Accept time deposits? YES No, bcoz it is a payment bank
Can keep more than ₹2 YES No, bcoz payment bank. But u can link IPPB
lakh balance? account with PoSB account to auto-transfer
(=SWEEP) excess balance to PoSB.
E-Banking and online Not directly but you yes , UPI, BHIM, NEFT, IMPS and BBPS
bill payment can do it by linking (Bharat Bill pay) available.
PoSB account with
IPPB account
Sukanya Smriddhi Can be opened Not possible. Because time deposits are not
(daughter’s fixed allowed in Payment Banks.
deposit account)
loans to individual? No. ₹₹ goes to NSSF Not until it becomes Small Finance Bank
Objective? Promote savings habits Remittance & digital payments
among poor
- 👜👜Budget-2022: Post Office Savings Bank (POSB) will be connected with Core Banking System
(CBS). So, their depositors too can use E-banking/net-banking, mobile banking, ATMs etc.
- Benefits? 🤩🤩1) Convenience for POSB depositors esp. villagers, farmers and senior citizens.
🤩🤩2) interoperability= (ability to use POSB deposit money in above NEFT/ATM etc facilities)
- Interoperability is the ability of customers to transact across commercially and technically
independent payment platforms. �ावसा�यक और तकनीक� �प से �तं त्र �ेटफाम� के बीच लेन-देन करने क� सु�वधा
18.12.2 (�:💰💰)→(�:💳💳)Sukanya Samriddhi Yojana (2015)
- Parents open a (fixed deposit type) bank account in the name of a 0-10 years girl child, and
deposit annually ₹ 250 to ₹ 1.5 lakhs till she reaches age of 14.
- FinMin’s Dept of Economic Affairs announces interest rate (originally 9.1%, presently ~8.5%)

- Money (principal and interest) can be withdrawn @ the age of 18-21 depending on whether
married or not. So, it indirectly prevents child marriages & empowers the grown-up daughter
with money to pursue higher education, small business etc.
- 1 daughter = ONLY 1 account can be opened in this scheme. (एक बेटी के नाम पर �सफर् एक)
- Maximum two daughters can be enrolled by parents/legal guardians.
18.12.3 ⚖Proposed Government Savings Promotion Act (in 2018)
It aims to merge (outdated) laws related to small saving schemes (ref: previous table)
🤩🤩Benefits? (फ़ायदे)
- Easier withdrawal during medical emergency, college fees etc,
- Clarification on Minor account, PH people- guardian rights; Grievances redressal.
18.12.4 ⭐📫📫 �� Five Star Village scheme by Dept of Post (2020)
गाँव वालों को �व�वध लघु बचत योजना और बीमा योजनाओं से जोड़ने क� डाक �वभाग क� को�शश

⇒ Post offices will spread more awareness, enrol more villagers in the following schemes:
⇒ Small saving schemes such as Post office Savings Bank accounts, National small savings
certificate Kisan Vikas Patra, Sukanya Samridhi Accounts, public provident fund (PPF)
⇒ Insurance schemes such as Rural Postal Life Insurance Policy, Pradhan Mantri Suraksha Bima
Yojana Account, Pradhan Mantri Jeevan Jyoti Bima Yojana Account.
18.12.5 ⚰💀💀📫📫 ��

� Sampoorna Bima Gram Yojana (2017)
⇒ In every district, atleast 1 village identified → In that village, cover all households with a
minimum of one RPLI (Rural Postal Life Insurance) policy. (गांव के हर प�रवार को कम से कम एक ग्रामीण
डाक बीमा पॉ�लसी बेची जाए)
18.12.6 ⚰💀💀🌽🌽 �� Model Insurance Villages (MIV) proposal by IRDAI (2021)
- Insurance Regulatory and Development Authority of India (IRDAI) proposed this
- To give complete insurance coverage to a village for its people’s life insurance, health insurance,
farm/crop insurance, animal (livestock) insurance, tractor/vehicle insurance etc.
- Funding/Subsidy by Union, State, Companies CSR Funds, NABARD & other AIFIs.
- (गाँववालों के �लए म� सभी प्रकार के जीवन बीमा, सामा� बीमा पॉ�लसी उपल� हो, तािक वह एक आदशर् बीमा ग्राम बन जाए। ऐसी
बीमा पॉ�लसी खरीदने के �लए सरकार तथा अ� सं �ानों द्वारा गांव वालों को स��डी/�रयायत दी जाए)

18.12.7 (��:💰💰)→ 📦📦 Chit Funds and Prize Chits
Chit Funds (�चट् फं ड/कोष)- गैरकानूनी नहीं है Prize Chits (इनामी �चट्स)- गैर कानूनी
Legally valid investment Scheme runs for a definite Scheme is illegal and vaguely designed.
period of e.g. 12 months from Jan to Dec-2020. (�न��त It runs until idiot investors keep coming,
समय तक चलती) then it collapses.
⇒ Every month each subscriber deposits equal ₹₹, as ⇒ There are no official documents or
stipulated in the scheme document account books.
⇒ Every month Foreman draws ‘chit’ → whichever ⇒ Scamster will accept whatever small
subscribers’ name comes he may get loan / prize. / large amount is offered by the poor
(in next month, previous winners’ names may not person who falls prey.
be added to the lottery pool). This way, everyone ⇒ Investor doesn't know with surety
has an equal chance of winning. how much is contributed by other
investors?
Even if you won in Feb-2020, still you'll have to Not compulsory to pay the monthly
compulsorily pay monthly deposits until Dec-2020 deposits after you’ve won the prize.
when the scheme is officially over. (Therefore the scheme will collapse
eventually, when new subscribers stop
coming).
This is legal, under Chit Funds Act (गैरकानूनी नहीं है) This is illegal under Prize Chits and
Money Circulation Schemes Banning
Act, 1978
Beyond that, - How does that work? How’s that different from NIDHI companies (regulated by
Ministry of Corporate Affairs) = B.com thing not. Imp. For UPSC.
18.12.7.1 (��:💰💰)→ 📦📦 Chit Funds (Amendment) Act, 2019

⇒ To amend 1982’s Chit Funds Act.
⇒ Will regulate: ‘Chit Funds’, ‘Kuri’, ‘fraternity fund’, ‘rotating savings and credit institution
(ROSCA)’. (they’re basically synonyms)
⇒ Made some reform to prevent scams. What are those reforms? Ans. Deleting because outdated
for 2023-24.
18.12.8 📦📦📦📦 Chit Fund Scams? धांधली/ गबन / का�

- Chit fund is a type of “contract” = subject to Concurrent list. So, UNION has Prize Chits and
Money Circulation Schemes 1978, Chit Funds Act 1982 (2019); Further state have their own acts
/ rules / State regulator of Chit Funds. (समवत� सूची म� होने के कारण क� द्र और रा� दोनों के कानून)
- Saradha Chit Fund scam, Rose Valley Chit Fund Scam: The scamsters ran multiple schemes in
W.Bengal and neighbouring states, invested money in sharemarket, real-estate, shopping malls
etc. thus violating the chit-fund laws.

- Further, any collective investment scheme of ₹100 cr/> requires SEBI permission. Yet they didn’t
obtain permission. (100 करोड़ �पए से बड़ी िकसी भी सामूिहक �नवेश योजना म� सेबी क� अनुम�त अ�नवायर्)
- They also engaged in Multi-level marketing (MLM) / Pyramid /Ponzy Selling = they’d use new
investors’ money to pay-off old investors. But once new investors stop coming, it’ll collapse.
Further Modus Operandi / Timeline not IMP. (इसक� टोपी उसके सर पर)
- ⚖Action? CBI & other agencies investigating. Union Govt proposed “Banning of Unregulated
Deposit Schemes Bill 2018”→ later Act 2019.
18.12.8.1 ⚖ 📦📦📦📦 Banning of Unregulated Deposit Schemes Act, 2019

- अ�नय�मत जमा योजनाओं पर प्र�तबं ध कानून
- If an entity is soliciting public to deposit /invest money, then it could be regulated by RBI (Bank,
NBFC-D, Home loan NBFCs etc), SEBI (MF, ReITs, InvITs etc), IRDAI & PFRDA, Corporate
Affairs ministry (NIDHI), State Governments (chit fund), EPFO, etc.
- A deposit-taking scheme is defined as ‘unregulated’ if person is asking people to deposit/invest
money but he has not registered with any of the above organizations. E.g. builders, jewellers, etc.
Act prohibits advertisement & money collection in it. (ऐसी कोई भी बचत योजना जो िकसी भी �व�ीय �नयं त्रक
के दायरे म� नहीं आती उसे गैरकानूनी माना जाएगा)
- Penalty upto ₹50 crores and jailtime upto 10 years + attaching the assets to refund depositors
within prescribed timelines. (जुमार्ना, कारावास, सं प�� क� ज�ी)
- Union to setup an online central database of deposit-taking activities in the country.
18.13�� ←(💰💰💰💰) FINANCIAL INCLUSION: CREDIT (LOANS: ऋण)

Self Study? Pillar#1A2: Monetary Policy → PSL. Pillar#1B1: Classification → microfinance
18.13.1 ��: 🧔🧔 ←(💰💰💰💰) Credit Guarantee (ऋण अदायगी गारंटी)

- Meaning? if borrower defaults, then losses of banks/NBFCs will be covered by credit guarantor.
So, Bank/NBFC can lend confidently without requiring borrower to pledge collaterals.
- Earlier DICGCI used to give credit guarantee for PSL borrowers, but now this work is done by
organizations such as:

Organization Credit Guarantee Fund Loans covered
SIDBI + Govt Credit Guarantee fund trust for Micro & Loans to Micro & Small
Small Enterprise (CGTMSE) Enterprise
Dept. of Financial National Credit Guarantee Trustee Mudra, ECLGS, Stand up India,
Services Company (NCGTC) Skill & Education loans
Commerce Export Credit Guarantee Corporation of Exporters
Ministry India fund (ECGC)
18.13.2 (💰💰💰💰)↗🗃🗃=(💰💰💰💰) Refinance (पुन�व�)
- When an AIFI (or MUDRA) gives new finance to Banks/NBFCs based on the quantum of
finance they (Bank/NBFC) have already given to end-borrowers.
- Usually works via the process of securitization of the previous loan papers. How it happens in
real life? Ans. NOT IMP.#🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
18.13.3 👻👻 �🏭🏭 MSME: Definition changed in ATMANIRBHAR (2020)

- 2006: Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 gave definition
of micro, small and medium enterprises
- 2020: ATMANIRBHAR → MSME ministry changed the definition as following: �नवेश और कु ल
�बक्र� के िहसाब से उधयोगों को वग�कृ त िकया जाएगा. �व�नमार्ण (mfg) और सेवा (services) �ेत्र के उधोगों के �लए एकसमान
�ा�ा।
💡💡 Note: This handout only deals with ‘loan’ component of MSME. For other MSME
issues/challenges, refer (More in 📑📑Pillar#4B → MSME)

✋in above image, read "<" sign as "NOT MORE THAN (से अ�धक नहीं)
Investment: �नवेश annual turnover: वा�षक कारोबार
18.13.4 👻👻🔪🔪 �🏭🏭 MSME Non-NPA borrower → ECLGS 1.0
ऋण अदायगी गारंटी -उन उधोगों के �लए �जनके लोन-खाते अभी एनपीए/अनजर्क प�रसं प�त क� श्रेणी मे नही है
⇒ Corona Lockdown → MSME business hurt → need loans to restart business → Emergency
Credit Line Guarantee Scheme (ECLGS: आपातकालीन क्रेिडट लाइन गारंटी योजना).
⇒ �Eligibility?
o MSME Previous outstanding loan account can’t be more than ₹25 crores, and can’t be
not an NPA.
⇒ New/ Extra Loan Amount? 20% of the outstanding loan.
⇒ Loan Tenure? 4 Years (�मयादी/समयकाल)
⇒ Loan Interest? 9.25% (Bank), 14% (NBFC).
⇒ Collateral? Not required. (�गरवी कु छ भी नही रखना होगा)

⇒ If the borrower doesn’t repay loan principal or interest→ Credit guarantee covered by NCGTC
(National Credit Guarantee Trustee Company Limited), a company under the Dept of financial
services in FinMin.
18.13.5 👻👻👻👻 �🏭🏭 MSME Non-NPA borrower → ECLGS 2.0 (Atma-Nirbhar 3.0)
It was launched during the Atmanirbhar Bharat 3.0 package(November 2020)
�Eligibility? (Two conditions must be fulfilled simultaneously)
1) MSME as well as Non-MSME(large) firms operating in
(a) Healthcare sector (�ा� �ेत्र) OR
(b) 26 stressed sectors Identified by RBI is KV Kamath committee (e.g automobiles,
tourism, cement, gems and jewellery etc तनावग्र� �ेत्र) AND
2) Its outstanding loans are > ₹50 crore - upto ₹ 500 Crore (as on 29.2.2020)
🤩🤩Benefit?
 Extra 20% loans against outstanding loans. (कजार् बकाया है उसके सामने 20% अ�त�र� कजर् िदया जाएगा)
 Interest Rate not explicitly mentioned in Press-Statement. (योजना क� प्रेस �व�� म� �� प से खुलकर
नहीं बताया, तो हमने खुद से गूगल सचर् मारने क� कोई ज�रत नहीं है#🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो )
 Repayment tenure of above loan: 5 years including 1 year moratorium on principal
repayment. (5 साल म� कजर् चुकाना होगा और उसम� भी 1 साल तक मूलधन चुकाने पर रोक)
👜👜👜👜Budget-2022: This scheme is continued, with more funds.
18.13.6 👻👻🔪🔪🔪🏭🏭 MSME NPA borrower → Subordinate Debt (गौण ऋण)

ऋण अदायगी गारंटी- उन आ�थक तनावग्र� उधोगों के �लए �जनके लोन-खाते पहेले से एनपीए श्रेणी मे आ चुके है।
⇒ Beneficiary? MSME whose loan account is in NPA/ stressed category. लघु/
⇒ Such stressed MSME to be given subordinate loan Upto ₹75 lakhs to revive business.
⇒ Tenure/Interest? Not clearly mentioned.
⇒ If the borrower doesn’t repay loan principal or interest→ Credit guarantee by CGTMSE (Credit
Guarantee Trust for Micro and Small enterprises, an org funded by SIDBI + Govt).
18.13.7 👻👻🗃🗃🗃🏭🏭 MSME → Equity infusion via Fund of Funds (�न�धयो क� �न�ध)
⇒ Govt will set up a Fund of Funds with ₹10,000 crore.
⇒ This FoF will invest in daughter funds (who’ll supply ₹40k cr from their funds). So, total
10k+40k=50k equity funding/infusion to MSME. (इ��टी के �प म� कं पनी म� जान फूं कना)

18.13.8 🚫🚫🚫🚫🚫🚫🚫🚫 NBFC → Mudra (2015, 100% SIDBI subsidiary)
- Micro Units Development & Refinance Agency. (सू� इकाई �वकास एवं पून: �व�पोषण एज�सी)
- Objective? provides indirect lending via SCB, RRB, Cooperative Banks, MicroFinance Inst &
other NBFCs. (अनुसू�चत वा�ण� ब�क �ेत्रीय ग्रामीण ब�क सहकारी ब�क गैर ब�क �व�ीय कं प�नयों द्वारा परो� �प से कजर् देता है)
- Ownership? It’s wholly owned by SIDBI, and also receives the funding from PSL-shortfalls via
RBI, and budgetary support via Department of Financial Services.
- Beneficiary? Micro Enterprises from Agri-allied sectors, mfg & service sector who are not
registered under the companies act = Non-corporate type. (�ज�ोंने कं पनी कानून म� पं जीकरण नहीं करवाया)
Table 5: Mudra-Products:
Pradhan Mantri MUDRA Yojana MUDRA Rupay Card
1) Shishu : loans upto 50,000/- - ATM cum Debit Card issued against MUDRA loan
2) Kishor : >50,000/- upto 5 lakh account.
3) Tarun : > 5 lakh and upto 10 - For working capital component.
lakhs - Can be accessed in all modes like a routine debit card
(ATM, MicroATM, PoS, Online)
- Mudra loans are collateral-free (जमानत से मु�). If borrower defaults on loan, then lender’s losses
are covered through Credit Guarantee Fund for Micro Units [CGFMU] which is operated by
National Credit Guarantee Trustee Company Ltd. [NCGTC, 2016]- which is a private ltd
company by Dept of Financial Services in Finance Ministry.
- 😰😰MUDRA Challenges? (1) Loan Interests are high (2) Rising NPA/Bad loans.
18.13.9 👻👻👻👻 �🏭🏭 Mudra Loans → Shishu Loans pe 2% Interest subvention

⇒ 👻👻ATMANIRBHAR-2020: Shishu loan borrowers = 2% Interest subvention (�ाज-अदायगी मे
सरकारी-मदद) IF they’re prompt payees (=repaying the loans regularly).
⇒ This offer is valid for 12 months.
🔠🔠❓ Pradhan Mantri MUDRA Yojana is aimed at (Asked in UPSC-Pre-2016)

a) bringing the small entrepreneurs into formal financial system
b) providing loans to poor farmers for cultivating particular crops.

c) providing pensions to old and destitute persons.
d) funding the voluntary orgs involved in the promotion of skill development and employment
generation.
18.13.10 ⏰🔪🔪💻💻 psbloansin59minutes.com (2018)

portal by SIDBI & 5 PSBs. GST-registered MSME get loans 10L to 1 cr. Without collaterals. if loan
approved then ₹1000 fees need to be paid
18.13.11 🙋🙋Stand Up India Scheme, 2016 (उ�� भारत)

- Boss? FinMin’s Dept of Financial Services (�व�ीय सेवा �वभाग)
- Objective? Each SCB bank branch to give Greenfield Loans between ₹10 lakh and ₹1 Crore to at
least 1 SC/ST and atleast 1 Woman entrepreneur with tenure upto 7 years.
- Collateral? Bank can ask collaterals. If loan without collaterals, then Credit Guarantee Fund for
Standup India (CGFSI) operated by NCGTC.
- Budget-2019: this scheme extended till 31/3/2025.
- Margin money =is the amount of money that a bizman has to arrange by himself from his own
pocket/savings for the given biz-project. Remaining amount is given as a loan by the bank.
💼💼Budget-2021: 1) ⏬ margin money requirement from 25% to 15%. 2) Agri-biz projects also
eligible.
18.13.12 👭👭Self-help group (�-सहायता समूह) → Credit
- is an informal group of 10-20 local people to combine their savings/ resources, engage in biz
activity like weaving, agarbatti etc अपनी बचत और सं साधनों क� मदद से कु छ छोटा उ�ादन करने वाला गरीब लोगों का
एक अनौपचा�रक समूह
- and not registered in as a firm / company under partnership act or companies act etc.
- Self-Help Groups are formed under the government schemes like National rural livelihood
mission (NRLM). More in 📑📑Pillar#6]
- Budget-2019:
o 1 woman in each self-help group (SHG) will be made eligible for ₹ 1 lakh loan under
Mudra scheme.
o Every verified woman SHG member with a PM Jan Dhan account eligible for
overdraft of ₹5,000.
- 👻👻ATMANIRBHAR → PM GaribKalyan → Women Self Help Groups (SHGs) to be given ₹20
lakh collateral free loans. Further,

o Government will procure masks and sanitizers prepared by SHG = ₹₹ income for
poor families. (सरकार इनसे मा� और से�नटाइज़र ख़रीदेगी)
o These SHG are given additional 10-15k rupees as Revolving funds (RF: प�रक्रमण �न�ध),
if they’re holding – regular meetings, regular savings, and maintenance of proper
books of accounts etc. ATMANI= RF fund disbursal will be done through PAISA
webportal.
18.13.13 🤑🤑🤑Street Vendors’s AtmaNirbhar Nidhi Scheme (PM-SVANidhi)
⇒ Boss? Ministry of Housing and Urban Affairs (MoHUA)- आवास और शहरी मामलों का मं त्रालय
⇒ Pradhan Mantri Street Vendor’s AtmaNirbhar Nidhi Scheme (PM SVANidhi)
⇒ Street Vendors will be given ₹10,000 loan via banks and NBFCs (e.g. Micro Finance
institutions). (सड़क �वक्रेता/फे रीवाला को ब�क तथा गैर-ब�क �व�ीय सं �ान जेसे क� सू� �व� सं �ान से कजार् �मलेगा)
⇒ Loan Tenure: 1 year. Repayment to be done on a monthly basis.
⇒ Loan Interest? approx @7.25% & if vendor repays in timely fashion → govt will give 7% interest
subsidy in his bank account. (फे रीवाला ने �ण अदायगी �नय�मत �प से क� तो �ाज म� सरकार राहत/स��डी देगी)
⇒ Scheme Valid till: 2022-March.
18.13.14 🤑🤑🤑Street vendors’s PM-SVANidhi → Main Bhi Digital (2021)

⇒ MoHUA to give ₹₹ to Urban Local Bodies (ULBs: नगरपा�लका को शहरी मं त्रालय पैसा देगा)
⇒ To spread digital literacy among street vendors who took SVANidhi Loans e.g. How to use UPI,
BHIM, Netbanking. Connect food-street vendors with online e-commerce players like Swiggy-
Zomato etc to expand street-vendors’ sales etc. (सड़क �वक्रेताओं को िड�जटल भुगतान और िड�जटल �बक्र� मा�मों
क� जानकारी देना)
⇒ 🤩🤩Benefit? Digital Economy-walle benefits (Ref: in 📑📑Pillar#1A1)
18.13.15 �PaiSA Portal (2018)

- Ministry of Housing and Urban Affairs (MOHUA) → Deendayal Antyodaya Yojana-National
Urban Livelihoods Mission (NULM) → urban poor are given skill training, bank loans to setup
business → interest subvention. (more in Pill#6).

- 2018: MoHUA launched PaiSA (Portal for Affordable Credit and Interest Subvention Access)
with the help of Allahabad Bank as the nodal / coordinator. [2020: Allahabad Bank merged with
Indian Bank. So, tick accordingly, depending on what options are given in MCQ.]
- PaiSA portal to connect with all banks for delivering the loan interest subsidies.
18.13.16 �💳💳 Kisan Credit Card (1998)
1998: Launched by RBI +NABARD. Farmer gets credit card from PSB, RRB, State Coop Banks for:
- Can swipe it to buy farm inputs (seeds, fertilizers, pesticides etc.)
- Investment credit requirement for agriculture
- Working capital for maintenance of farm assets
- Post-harvest expenses, (फसल काटने के बाद होने वाले खचर्)
- Consumption requirements of farmer household; (घर म� उपभोग हेतु खच�)
- Can withdraw cash (as loan).
- Money to be repaid with interest. Accidental insurance also given.
- Budget-2018: Kisan Credit Card (KCC) extended to Animal Husbandry and Fisheries farmers.
Interim-Budget-2019: they (animal/fisheries-walla) too will get the interest subvention
- Interim-Budget-2019: comprehensive drive with a simplified application form to get all farmers
under KCC cards.
🔠🔠🔠 MCQ. Under the Kisan Credit Card scheme, short-term credit support is given to farmers
for which of the following purposes ? (UPSC-Prelims-2020)
1. Working capital for maintenance of farm assets
2. Purchase of combine harvesters, tractors and mini trucks
3. Consumption requirements of farm households
4. Post-harvest expenses
5. Construction of family house and setting up of village cold storage facility
Codes: [a) 1, 2 and 5 only [b) 1, 3 and 4 only [c) 2, 3, 4 and 5 only [d) 1, 2, 3, 4 and 5

18.13.17 ��: 🧔🧔 ←(💰💰💰💰) Interest Subvention (�ाज सहायता)
Govt pays part of the interest rate for borrower. (farmer, MSME, affordable housing etc) such as:
- Farm loans upto 3 lakhs→ 9% MINUS 2% (to all farmers) MINUS 3% (regular paying farmers)=
only 4% loan interest farmer has to pay.
- Interim-Budget-2019:
o KCC-card-walla Animal Husbandry and Fisheries farmers also eligible.
o If natural disaster- then crop loans are rescheduled, we’ll streamline the subvention
norms there.
o MSME: incremental loans upto ₹1 crore to GST registered MSME industry= 2%
subvention. (As such already announced by Modi in 2018)
18.14🌽🌽🌽🌽🌽🌽🌽🌽FARM LOAN WAIVER (कृ �ष ऋण माफ�)

18.14.1 🌽🌽🌽🌽🌽🌽🌽🌽Agri-Finance → Loan waivers for the farmers
− 2008: 💼💼Budget → Agricultural Debt Waiver and Debt Relief Scheme (ADWDRS). On their
outstanding crop-loans upto 29/Feb/2008→
o Small and marginal farmers given 100% debt waiver : कजर् माफ�;
o Other farmers were given 25% debt relief : ऋण राहत.
− FinMin → Department of Financial Services → paid the dues to the banks in a phased manner
on behalf of farmers → 2009: 15th Lok Sabha Election won by UPA/Congress.
− 2016-18: The state governments of Tamilnadu, Maharashtra, Karnataka, Uttar Pradesh, Jammu
Kashmir, Punjab, Chhattisgarh, Andhra,Telangana et al. also launched in similar debt waiver and
debt relief.
− 2017: 💼💼Budget gave 60 days interest waivers to farmers on account of the problems farmers
suffered during demonetization in 2016. (नोटबं दी के बाद कु छ िदनों के �लए �ाज माफ िकया था)

18.14.2 🌽🌽🌽🌽🌽🌽🌽🌽=👌👌Agri-Finance → Farm loan waivers: arguments in favour
1. 2008: Post-subprime crisis and global financial crisis, the demand for textile declined in the
international market → cotton prices fell in India → farmers suffered. वै��क आ�थक सं कट के बाद
कपास/�ई �नयार्त म� कमी
2. 2014: drought, 2015: again drought. अकाल 😰😰
3. 2016-17: Demonetization → cash shortage → price of agricultural commodities fell.
4. Thus, farmers are suffering for a decade (2008-18), as evident from the violent agrarian
agitations in Madhya Pradesh, Uttar Pradesh and Maharashtra in 2017 and 2018.
5. While corporate borrowers are eligible for loan restructuring, farmers are not given such
benefits. So farmers should be given loan waiver. उद्योगप�तयों के कजर् का तो पुनगर्ठन हो जाता है
6. “Debt overhang” (ऋण क� अ�धकता): a situation where all current income gets used up in repaying
the accumulated debt. Farmer feels no motivation to invest in his ‘business’. Debt waiver cleans
up his liability. It’ll spare his income /savings for investing in better seeds/fertilizers and
machines. (Counter: 📔📔📔📔ES20 found no such evidence.)
18.14.3 🌽🌽🌽🌽🌽🌽🌽🌽=👎👎Agri-Finance → Farm loan waivers: arguments against

1. 🚭🚭Moral Hazard (नै�तक जो�खम): Lack of incentive to be "disciplined", when risky behavior is
insured by someone. If the government continue to give loan waivers, farmers will have no
discipline to be efficient, cost-savvy and hard working. (ज�री नहीं िक कजर् माफ� के बाद वह �ज�ेदार बनके
श्रम करे)
2. “Loan waivers undermine honest credit culture. NPA problem will get aggravated.”, said ex-RBI
Governor Urjit Patel.
3. 🗳🗳Whenever elections are near, agri-loan defaults are increasing. It hints farmers are
strategically defaulting on loans, in anticipation of waiver. ( चुनाव के कारण कजर् माफ कर िदया जाएगा, ऐसी
रणनी�त के साथ, जानबूझकर िकसान लोन वापस नहीं कर रहे)
4. Loan waiver did not ⏫ our crop production or GDP growth, said 📔📔📔📔ES17 (कजर् माफ़� के बाद
फसल उ�ादन तथा सकल घरेलू उ�ाद म� बढ़ोतरी होने के कोई सबूत नहीं �मले)
5. Thus, Government Intervention has hurt more than it has helped., says 📔📔📔📔ES20 (सरकारी दखल से
यहाँ पर मदद कम और तकलीफ �ादा �ई है-ऐसा आ�थक सव��ण का मानना है)
6. Loan waivers → ⏫fiscal deficit → households and business firms will be hurt. (More in
📑📑Pillar#2)

7. Total farm loans: ~5.5 lakh cr (2013). Out of that ~60% by formal lenders (banks, Microfinance
etc.) Rest by informal money lenders (Village Baniya, Shroff etc.) So even if loan waivers are
announced, all farmers will not benefit from it. �ज�ोंने अनौपचा�रक स्रोतों से कजार् �लया उन िकसानों को कोई लाभ
नहीं �मलेगा
8. Govt’s expenditure on healthcare is LESS than 2% of GDP. WHO recommends 5%. If all the
farm loans are waived it will cost 1.5% of GDP. So, if government has so much spare money to
spend, it’ll be better to spend in public healthcare which will benefit both farming and non-
farming families. Similar argument for education expenditure. बेहतर होगा हम �ा� तथा �श�ा पर पैसा
खचर् कर� ना िक िकसानों का कजर् माफ करने म�
18.14.4 🌽🌽🌽🌽🌽🌽🌽🌽=👎👎☠Anti-Argument: Loan waiver will not stop farmer suicide
Farmer suicide is a result of: (िकसान क� आ�ह�ा के �व�भ� कारण)
1. farmer have small sized farm, lack of irrigation, good quality seeds and fertilizers → Not large
quantity of agro-production = can’t earn lot of money by selling it. (खेत छोटे ह�, उ�ादन इतने �ादा
ज�े/हज़ारों िकलोग्राम म� नहीं कर पा रहे िक �जसे बेचकर मोटी रकम कमा सके )
2. Lack of remunerative prices because of challenges in APMC, MSP and transport-storage
infrastructure. (उ�ादन क� िकसान को अ�� क�मती नहीं �मल रही)
3. Lack of financial inclusion and financial planning. Even after good monsoon and good harvest,
they waste money on social events and pilgrimage. (अ�� फसल-िकसान सामा�जक प्रसं गों, तीथर् यात्राओ म� पैसा
बबार्द करते ह�)
So, loan waiver is a short-term remedy that can’t prevent farmer suicide until above three issues are
addressed. (क़ज़र् माफ़� एक अ�ाई उपाय है, �जससे कायमी/�ायी �प से िकसान-आ�ह�ा क� सम�ा हल नहीं होगी)
18.14.5 🌽🌽🌽🌽🌽🌽🌽🌽 ✍ Farm Loan Waiver: Conclusion
 From the aforementioned analysis, it’s evident that farm debt waiver will have negative
consequences for Indian economy. (कजर् माफ� से भारतीय अथर्तंत्र पर नकारा�क असर होगी. यह िकसानों क�
सम�ाओं को �ाई �प से हल नहीं करेगा)
 Debt waiver is not a sustainable solution against agrarian distress, we should work on more
efficient and targeted ways to help farmers. (ल��त �प से िकसानों क� मदद क� जाए) (More in
📑📑Pillar#4A-Agri Schemes)
18.14.6 👻👻👻👻👻👻 Atma-Nirbhar Farm Loan Reforms (2020)
⇒ Suspension/Moratorium on the farm loans for “X” months from March 2020. Originally X=3
months, then 6 months…… (कृ �ष ऋण-अदायगी ��गत क� गई)
⇒ Cheap loans via Kisan Credit Card will be given to PM KISAN beneficiaries, Fishermen and
Animal Husbandry farmers. (�रयायती �ाज दर पे कृ �ष-ऋण द�गे)
⇒ NABARD to give additional refinance to Regional Rural Banks and Cooperative banks and.
(�ेत्रीय ग्रामीण ब�क और सहकारी ब�कों को पहले से अ�धक पुनर�व� िदया जाएगा)
(More AGRO SCHEMES in in 📑📑Pillar#4A-Agri Schemes)

18.15⚰� FINANCIAL INCLUSION: INSURANCE & PENSION
- Various schemes are given in previous sections: But just to quickly recall the notable terms:
Insurance: Postal Life, ESIC, PM Jeevan Jyoti & Surkasha Bima (₹2 lakh), PM-JAY (₹5 lakh
annual health insurance per family), PM-Fasal Bima (1.5-5% premium);
- Pension: EPFO, NPS, Atal Pension (1-5k), PM Shram Yogi Mandhan (3k), PM Vay-Vandana
(8%@LIC), Maan-Dhan Yojanas (3k/pm)
18.15.1 ⚰🔬🔬 Micro Insurance (सू� बीमा)

⇒ Insurance policy may be Life / General Insurance with a very low premium.
⇒ When small sum insured (upto ₹50k) & target audience is poor / villagers / farmers.
⇒ It may be an individual / group based insurance. Intermediaries such as NGO, SHG, MFI help in
selling such policy. Policy/ Contracts are given in local language. e.g. LIC’s Jeevan Madhur and
Jeevan Mangal
18.15.2 🏍🏍🏍🏍🏍🏍 Gig Workers’ social security code (�गग कम� क� सामा�जक सुर�ा सं िहता)
⇒ Informal workers (अयथा�व�ध कम�)= doesn’t have formal job contracts with employers. E.g.
Domestic Maids, Brick Kiln Workers, Construction Labourers, Chowkidar, Dhaabaa
cooks/waiters etc.
⇒ Gig workers (�गग कम�)= Uber Taxi Drivers, Amazon/Zomato Delivery boys, Urbanclap’s
beauticians/ plumbers/ AC repairman, Unacademy Educators etc. They are freelancers /
independent contractors (�तं त्र ठे केदारों) hired by startup or digital companies for short-term
engagements. While they may have some written contract to deliver services to the company, but
the contract is worded in such manner they are not “regular employees” of a company = not
eligible for EPFO, ESIC etc.
⇒ 2019-Sept: Labour Ministry drafting a “social security code for all informal & gig workers”. It
aims to provide ‘insurance on death/disability/sickness’, maternity benefit, pension, scholarship
for their children etc. (मृ�ु / �वकलांगता / बीमारी पर बीमा, मातृ� लाभ, प�शन, �गग कम� के ब�ों को छात्रवृ��)
18.15.3 👻👻ATMANIRBHAR → 👷👷Workers’ Social security (2020)

⇒ Annual health check-up for all employees. (�ा� जांच)
⇒ Govt’s Social security schemes will be extended to Gig workers and platform workers (e.g.
Zomato delivery boys, Urbanclap beautician, uber taxi drivers etc.) (गीग प्रणाली के श्र�मक को भी सरकारी
सामा�जक सुर�ा योजनाओं का लाभ)

⇒ Central Government’s Building and Other Construction Workers Act, 1996: → workers
contribute ₹₹ to a fund held by the State Government → they get pension after
retirement/accident compensation etc. 👻👻ATMANI→ PM GaribKalyan → State Governments
ordered to use this ₹₹ for helping construction workers during Corona.
⇒ Portability of social security benefits to migrant workers. E.g. If a construction worker deposits a
premium in Gujarat building workers welfare fund → Afterwards he returns back to home state
Odisha, he will get pension from there. (सामा�जक सुर�ा लाभ क� सुवाह्यता- अपने वतन वापस जाए तो भी लाभ
�मलते रहे)
18.16��: �FINANCIAL INCLUSION: CUSTOMER PROTECTION (ग्राहक सुर�ा)
😾😾Bank/NBFC 📈📈Share/Bond ⚰Insurance (IRDAI) �Pension
(under RBI) (SEBI)
Ombudsman: Bank, SCORES ⇒ Insurance - If EPFO- then its
NBFC, Digital Portal→ Ombudsman via internal machinery
Transaction (given SEBI→SAT IRDAI Act ‘1999, - If NPS: NSDL→
below) hears matters upto PFRDA.
₹30 lakhs. If higher - If pvt sector pension
claim then consumer company’s scheme:
courts / other courts. PFRDA → SAT.
⇒ Higher appeal against
IRDAI → SAT
18.16.1 😾😾RBI’s 3 Ombudsman (ओमबड्समेन/ �शकायत �नवारण अ�धकारी/लोक प्रहरी)
Table 6: DONOT LOOSE SLEEP unless preparing for RBI officers' Exam

When 1995 2018 2019
RBI designates Banking powers to regulate Payment and Settlement
a senior RBI Regulation Act, NBFCs under RBI Act, Systems Act, 2007
official under 1949 1934
Where does he 21 offices across 4@ Chennai, Kolkata, Same as BO
sit? India New Delhi and Mumbai,
looking after respective
zones.
Customer can Any type of bank - Any NBFC-Deposit- Prepaid payment instruments,
file free taking (e.g Mahindra, Mobile wallets, Apps,
complaint Jindal, Sriram), OR NEFT/RTGS and other digital
against transactions

- Any NBFC with
assets size of ₹1
billion
For amounts* upto ₹20 lakhs upto ₹10 lakhs upto ₹20 lakhs
Penalty Ombudsman can order penalty upto ₹1 lakh for customer’s mental agony, waste
of time and money
Higher Dy. Gov
Appeal?
- *subject to changes in future, so, don’t lose sleep over it.
- ** gradually RBI keeps adding more category of NBFCs here.
- 2019: RBI launched online Complaint Management System (CMS): Customers can lodge
complaints against any RBI regulated Bank or NBFC → Complaint would be directed to the
appropriate Ombudsman
- 2021-Feb: 😰😰BEFORE: RBI appointed 3 types of ombudsman for consumer complaints: (i)
Banking Ombudsman Scheme (ii) NBFC Ombudsman (iii) Digital Transaction Ombudsman.
🤩🤩After: Integrate these 3 into a One Nation One Ombudsman / Integrated Ombudsman
Scheme (एक�कृ त �शकायत �नवारण अ�धकारी योजना)
18.17📈📈🌐🌐🦁🦁FINANCIAL INCLUSION: INDIA’S PERFORMANCE (भारत का प्रदशर्न)

18.17.1 📈📈🌐🌐 Global Microscope Report
- Annual report started in 2007, to measure financial inclusion levels, this report is prepared by
The Economist Magazine’s Economist Intelligence Unit, Accion global NGO &partners like Bill
& Melinda Gates Foundation, Metlife foundation etc.
- 2019’s report measured gender gap in financial inclusion for the first time.
- 2020’s report measures role of financial inclusion in the COVID-19 response:
 E-banking can help in cash transfers to beneficiaries
 ⏫Digital financial frauds in Corona lockdown etc.
- Over the years, this report identified following challenges in India:
 full interoperability across payment systems. Lack of financial literacy, no trust in
financial system or buying insurance. (Ref:1A1 for more)
 Digital divide, grievances redressal. extreme poverty, no surplus to save / invest.
 No land / property records→ access to loans is difficult.
- 2020’s Ranking? #1 tie-Columbia and Peru, ….. #6:India (last year India was #5) …total 55
nations. I don’t find this report so IMP that I shd update its ranking every year.

18.17.2 📈📈🌐🌐 Global Findex Database 2017: (released in 2018, April)
- By World Bank with help of Bill & Melinda Gates Foundation
- It’s published every 3 years. It doesn’t give ranking but measures how many % of people have
access to banking, credit etc. in a given nation.
- What is India’s data? Ans. for UPSC, Poor cost:Benefit for memorizing such low profile reports.
18.17.3 📈📈📈📈 Mercer CFA Institute Global Pension Index for 2021:
Rank#1- Iceland. India #40 among 47 nations. (⚾📻📻⚾🎓🎓✋ low profile report not greatly
important. )
18.17.4 📈📈🦁🦁 (India’s own) Financial Inclusion Index by DFS

- 2018-Sept: Proposed by Department of Financial Services (DFS).
- This annual index will have three measurement dimensions; (i) Access to financial services (ii)
Usage of financial services and (3) Quality. It complies with the format prescribed by the G20.
- Ranking? Poor Cost benefits memorizing for exam. Save brain’s memory card for gender-gap,
human development Index report etc.
18.17.5 📈📈🐯🐯 (India’s own) RBI’s National Strategy for Financial Inclusion (NSFI)
⇒ 2020-Jan: RBI released this report covering the timeframe “2019-2024.”
⇒ Exact points / salient features = poor cost benefit for UPSC. We already have sufficient points for
a 250 words answer. (अपने पास पयार्� मुद्दे है, इसको असल म� पढ़ने क� ज�रत नहीं)
18.17.6 📈📈🐯🐯 (India’s own) RBI’s Financial Inclusion Index (�व�ीय समावेशन सूचकांक)
⇒ 2021: RBI Governor announced to publish Financial Inclusion Index to capture the extent of
financial inclusion across the country in Banking, Investments, Insurance, Pension Sector.
⇒ (More in 📑📑Pillar#1A1)
18.18�🎺🎺 MOCK QUESTIONS FOR MAINS (250 WORDS EACH)

1. Explain the significance of financial inclusion & social security for achievement of Sustainable
Development Goals (SDG) for India. भारत के �लए सतत �वकास ल�ों क� प्रा�� के �लए �व�ीय समावेशन और
सामा�जक सुर�ा के मह� को समझाएं । Note: SDG-topic is unfinished until we learn Pillar6.
2. Discuss the significance of crop insurance and health insurance in eradication of rural poverty.
Enumerate the notable initiatives of the Government in this regard. ग्रामीण गरीबी उ�ूलन म� फसल बीमा
और �ा� बीमा के मह� पर चचार् कर�। इस सं बंध म� सरकार क� उ�ेखनीय कदमो क� सू�च दी�जए.
3. How is Ayushman Bharat-PM-JAY is different from the previous centrally sponsored schemes
on health insurance? Identify the fiscal and administrative challenges in its implementation. रा��ीय
�ा� सं र�ण �मशन इससे पूवर् क� क� द्र सरकार द्वारा प्रायो�जत योजानाओसे अलग कै से है? �व�ीय व् प्रशास�नक चुनौ�तयो को
�च��त क��जए.

4. Discuss in the need for enhancing participation of domestic and foreign players in insurance
sector of India. Enumerate steps taken by Government in this regard. (भारतीय बीमा �ेत्र म� घरेलू और
�वदेशी �खलािड़ओ क� भागीदारी बढ़ाने क� आव�कता पर चचार् कर�। इस सं बंध म� सरकार द्वारा उठाए गए कदमों क� सू�च दी�जए)
5. (Asked in Mains-2016) Pradhan Mantri Jan-Dhan Yojana (PMJDY) is necessary for bringing
unbanked to the institutional finance fold. Do you agree with this for financial inclusion of the
poorer section of the Indian society? Give arguments to justify your opinion. प्रधान मं त्री जन-धन
योजना (पीएमजेडीवाई) ब�िकंग से वं �चत लोगो को सं �ागत �व� /ऋण के दायरे म� लाने के �लए आव�क है। �ा आप भारतीय
समाज के गरीब वगर् के �व�ीय समावेशन के �लए इससे सहमत ह�? अपनी राय को सही ठहराने के �लए तकर् द�।
6. Discuss in the brief, the reforms ushered by 👻👻ATMANIRBHAR package in providing ‘ease of
credit’. (आ� �नभर्र पैकेज द्वारा 'ऋण म� आसानी' के हेतु से िकए गए सुधारो के मह� क� चचार् करे।)
7. Critically examine the need and feasibility of providing agriculture-debt waiver to small and
marginal farmers of India. कजार् माफ� देने क� ज�रत और �वहा�रकता पर गं भीर समी�ा क��जए
8. (Asked in Mains-2020) “Micro-Finance as an anti-poverty vaccine, is aimed at asset creation and
income security of the rural poor in India”. Evaluate the role of Self Help Groups in achieving
the twin objectives along with empowering women in rural India. ("सू�-�व� एक गरीबी-रोधी िटका है जो
भारत म� ग्रामीण द�रद्र क� प�रसं प�� नमार्ण और आयसुर�ा के �लए ल��त है". �यं सहायता समूहों क� भू�मका का मू�ांकन ग्रामीण
भारत म� मिहलाओं के सश��करण के साथ साथ उपरो� दोहरे उद्दे�ों के �लए क��जए ) Answered in FREE sp.classes
9. (Asked in Mains-2021) Can the vicious cycle of gender inequality, poverty and malnutrition be
broken through microfinancing of women SHGs? Explain with examples. (Answer in 150
words) [ �ा ल��गक असमानता, गरीबी और कु पोषण के दुष्चक्र को मिहलाओं को �यं सहायता समूहों को सू� �व�
(माइक्रोफाइने�) प्रदान करके तोड़ा जा सकता है ? सोदाहरण �� क��जए। ] Answered in FREE sp.classes
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Pillar1A2: 🤑🤑 Money Supply (M0-M4) & Monetary Policy- CRR, SLR, Repo

11 🤑🤑MONEY’S DEMAND, SUPPLY & CREATION

11.12.1 ☔💸💸 Liquidity of assets

11.12.2 ☔💸💸 Liquidity Trap ( तरलता जाल)

11.12.3 💸💸💸💸💸💸Measures of Money Supply (मुद्रा आपू�त के प�रमाण)

🚩🚩🚩🚩 FAQ1: Why M3 is Aggregate Money Supply? ✅Ans. Watch video.

💸💸💸💸💸💸Indicator Situation in 2021

Money multiplier fallen from 5.6 on 31/3/20 to 5.2 on 31/3/21 because

👆👆Same above MCQ also repeated in Prelims 2021

11.15💸💸💸💸 M0: CREATION OF MONEY (मुद्रा का �नमार्ण)

🚩🚩🚩FAQ: Whose responsibility is it to exchange the public’s torn / soiled ₹ 1 note ?

🚩🚩🚩FAQ: Whose responsibility is it to exchange broken coins?

🚩🚩🚩FAQ: All coins and ₹1 paper-note is whose liability ? RBI or Govt

11.15.1 💸💸💸💸Supply of Money: M0 & M3 (मुद्रा क� आपू�त) Trend as per ES22

11.15.3 💸💸 Misc. topic: Velocity of Money Circulation (मुद्रा सं चालन का वेग)

12 🐯🐯📢📢 MONETARY POLICY (मौिद्रक नी�त)

12.11🐯🐯📢📢📐📐 MONPOLICY: QUANTITATIVE TOOLS (प�रमाणा�क साधन)

12.11.2 🌐🌐� : 🗄🗄✂CRR SLR on Foreigners/NRI’s deposits in Indian Banks?

12.12🐯🐯🐯🐯✂🗓🗓 CRR, SLR: DEVELOPMENT IN RECENT YEARS

12.12.3 🐯🐯🐯🐯✂🗓🗓 (2020-Mar) CRR ⏬ from 4% to 3% in 👻👻Atmanirbhar Bharat

12.12.4 🚩🚩🚩🚩✋: 🐯🐯🐯🐯✂🗓🗓 CRR Technical things NOTIMP

🔠🔠❓Cash Reserve Ratio refers to _ _ _ . (UPSC-CDS-i-2020)

🔠🔠❓Find correct statements about SLR: (UPSC-CDS-2011-II)

12.13🐯🐯🐯🐯🐯🐯 MONPOLICY → QUANT TOOLS → RATES → LAF REPO (2000)

12.14.2 👻👻🐯🐯🐯🐯📈📈 REPO → TLTRO, SLTRO, On-Tap Windows

Tools Changes in Corona-2020 upto 2022-Feb

12.14.4 (2020) 🐯🐯🐯🐯Reverse Repo Rate cut

⇒ By 2020-March: banks parked ₹~3 lakh crores in RBI in Reverse Repo.

12.14.6 🐯🐯🐯🐯 🎛🎛 Variable Rate Repos (VRRs)

12.14.8 🐯🐯🐯🐯🐯🐯 MonPolicy → Quant Tools → Rates → MSF (2011)

🚩🚩🚩FAQ: SDF is launched so does it mean Reverse Repo discontinued?

12.14.11 ⛓ MSF Repo vs Reverse Repo vs SDF

12.14.14 🔪🔪🐰🐰 BPLR, MCLR, External Benchmarks, etc:

Figure 6: Aloo Lelo, Pyaaz Lelo, G-Sec Lelo...

12.15🐯🐯📢📢🗃🗃🧬🧬MONPOLICY: QUANTI TOOLS: OMO → OPERATION TWIST

12.15.3 🔪🔪🔪🔪:🤵🤵Corporate Bonds: factors that determine its interest rate

12.15.5 🔪🔪🔪🔪: 🤑🤑 Bond Yield ∝ 1/Price (स�े म� खरीदा= तो मुनाफा �ादा)

12.15.7 🐯🐯🐯🐯🐯🐯🐯🐯Operation Twist: why?

🔠🔠❓ MCQ. 'Open Market Operations' refers to: (Prelims-2013)

🔠🔠❓ MCQ. Which of them is/are part of Monetary Policy? (Prelims-2015)

12.16🐯🐯🐯🐯🐯🐯: 📅📅 MONPOLICY: QUANTI TOOLS: OMO → G-SAP

12.16.1 🐯🐯🐯🐯🐯🐯:📅📅 OMO → G-SAP : 🤩🤩Benefit?

G-SAP ⇒ RBI is buying G-Sec to increase money supply → Post-corona revival.

12.17🐯🐯🐯🐯🌽🌽 MONETARY POLICY: QUALITATIVE TOOLS (गुणा�क साधन)

Figure 9: जब घर मे पड़ा है सोना, िफर काहे को रोना?

12.17.4 Selective Credit Control (चयना�क ऋण �नयं त्रण)

supply, inject liquidity=> policy. Contractionary

motivation to park ₹ in RBI & more motivation to park ₹ in

↑ loan-flow to sectors that can - ↓the loan-flow to sectors

12.20📢📢 MONETARY POLICY IN PRESENT-DAY INDIA

12.21.1 🚕🚕🚕🚕 Stance: Calibrated Tightening / Neutral / Accommodative

12.23🐯🐯🐯🐯🐯🐯RBI’S MONETARY POLICIES: CORONA MARCHTOMAY’20

12.23.1 👻👻ATMANIRBHAR → Gist of RBI’s March2May 2020 Announcements:

12.23.3 🐯🐯🐯🐯🐯🐯RBI’s Monetary Policies: 2020-October (दरों म� कोई बदलाव नहीं)

12.23.4 🐯🐯🐯🐯🐯🐯Monetary Policy: 2020-December (दरों म� कोई बदलाव नहीं)

12.23.6 🐯🐯🐯🐯🐯🐯Monetary Policy: April-2021 update(दरों म� कोई बदलाव नहीं)

12.23.7 🐯🐯🐯🐯🐯🐯Monetary Policy: June-2021 update (दरों म� कोई बदलाव नहीं)

12.23.8 🐯🐯🐯🐯🐯🐯Monetary Policy: Aug-2021 update (दरों म� कोई बदलाव नहीं)

12.23.9 🐯🐯🐯🐯🐯🐯Monetary Policy: Oct-2021 update (दरों म� कोई बदलाव नहीं)

12.23.10 🐯🐯🐯🐯🐯🐯Monetary Policy: Dec-2021 update (दरों म� कोई बदलाव नहीं)