RBI CONCEPT:VIABILITY GAP FUNDING #67

Oracle IAS, the best coaching institute for RBI grade B/NABARD/SEBI in Dehradun (Uttarakhand), brings to you views on important issues.

What is Viability Gap Funding (VGF)?

  • The main constraint in India’s infrastructure sector is the lack of source for finance. More than the overall difficulty of securing funds, some projects may not be financially viable though they are economically justified and necessary. This is the nature of several infrastructural projects which are long term and development oriented.
  • For the successful completion of such projects, the government has designed Viability Gap Funding (VGF). Viability Gap Finance means a grant to support projects that are economically justified but not financially viable. Continue reading “RBI CONCEPT:VIABILITY GAP FUNDING #67”

RBI CONCEPT:IMPORTANCE OF MANUFACTURING SECTOR IN INDIA

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Why manufacturing is important than services sector in India’s economic development?

  • Over the last few decades, India’s growth performance was driven by services sector, whereas the growth rate of the manufacturing sector remained lower than that of overall GDP growth rate. As a result, the share of manufacturing in GDP stagnated at around 16%. This has caused perpetuation of structural retrogression with nearly 50% of the population remaining in the agricultural sector by producing only 17% of GDP. Continue reading “RBI CONCEPT:IMPORTANCE OF MANUFACTURING SECTOR IN INDIA”

RBI CONCEPT:NATIONAL AUTOMATED CLEARING HOUSE (NACH)#65

Oracle IAS, the best coaching institute for RBI grade B/NABARD/SEBI in Dehradun (Uttarakhand), brings to you views on important issues.

What is the National Automated Clearing House (NACH)?

  • Millions of payments transactions are taking place in the banking system daily. These payments are done by the individuals, corporate and government; and clearing them will be a huge task.
  • For convenience, the clearing of these payments should be done electronically. Such an electronic clearing system was developed by the National Payment Corporation of India (NPCI) and it is known as National Automated Clearing House (NACH). Continue reading “RBI CONCEPT:NATIONAL AUTOMATED CLEARING HOUSE (NACH)#65”

RBI CONCEPT:DEMAT ACCOUNT#64

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What is Demat account?

  • Demat account is the account that should be started by an investor to buy or sell shares in the stock market. The investor should start the demat account with a depository participant who is recognized by SEBI. Now, to understand demat account, we have to understand dematerialization, depository and depository participant. Continue reading “RBI CONCEPT:DEMAT ACCOUNT#64”

RBI CONCEPT:FINANCIAL ACTION TASK FORCE (FATF)#63

Oracle IAS, the best coaching institute for RBI grade B/NABARD/SEBI in Dehradun (Uttarakhand), brings to you views on important issues.

What is the Financial Action Task Force (FATF)?

  • A major economic evil related to the financial sector is the practice of money laundering.  Money laundering involves keeping financial assets from illegal activity in a disguised manner. This money is kept without detection of the illegal activity for future use.
  • Through money laundering, the launderer transforms the monetary proceeds derived from criminal activity into funds with an apparently legal source. Continue reading “RBI CONCEPT:FINANCIAL ACTION TASK FORCE (FATF)#63”

RBI CONCEPT:DIFFERENTIATED BANK#62

Oracle IAS, the best coaching institute for RBI grade B/NABARD/SEBI in Dehradun (Uttarakhand), brings to you views on important issues.

What is Differentiated Bank license Policy?

  • Differentiated bank license policy refers to the new guidelines by the RBI inviting individuals/entities to start banks in the form of either small finance banks or payment banks.
  • Differentiated licensing refers to the system of different licenses in contrast to the existing universal bank (SBI, ICICI etc). The universal banks including the PSBs and private sector banks can provide all banking services and products. Continue reading “RBI CONCEPT:DIFFERENTIATED BANK#62”

RBI CONCEPT:CLASSIFICATION OF ECONOMIES#61

Oracle IAS, the best coaching institute for RBI grade B/NABARD/SEBI in Dehradun (Uttarakhand), brings to you views on important issues.

  • There are numerous classifications to categorize economies based on their economic development. The most popular classification is the one designed by the World Bank where the economies are categorized into different income groups in terms of their per capita income. World Bank classification also helps us to understand the size and importance of the Indian economy compared to other economies while taking the criterion of per capita income.
  • World Bank classification is widely followed as an evaluation criterion for economic development. Continue reading “RBI CONCEPT:CLASSIFICATION OF ECONOMIES#61”

RBI CONCEPT:IMF QUOTA #60

Oracle IAS, the best coaching institute for RBI grade B/NABARD/SEBI in Dehradun (Uttarakhand), brings to you views on important issues.

What is IMF’s Quota?

  • An important factor that helps the IMF’s functioning is the quota. This quota is basically money that a member country has to give to the IMF.
  • As per the norms, each member has to subscribe a quota of the IMF. It is out of this quota which is basically money, that the IMF gives loans to its members.
  • Continue reading “RBI CONCEPT:IMF QUOTA #60”

RBI CONCEPT:WHAT IS THE GREENFIELD VERSUS BROWNFIELD FDI DEBATE?

Oracle IAS, the best coaching institute for RBI grade B/NABARD/SEBI in Dehradun (Uttarakhand), brings to you views on important issues.

What is the Greenfield versus Brownfield FDI debate?

  • The classification between Greenfield FDI and Brownfield FDI has its origin in two types of investment- Greenfield investment and Brownfield investment.

Greenfield and Brownfield investments

  • Greenfield investment is investment in new plants. It is establishing new production capacity by an investor or company. On the other, Brownfield investment is an investor investing in an existing plant. Brownfield investment is mainly made through merger and acquisitions.

Greenfield and Brownfield FDI Continue reading “RBI CONCEPT:WHAT IS THE GREENFIELD VERSUS BROWNFIELD FDI DEBATE?”

RBI CONCEPT:DOMESTIC SUPPORT UNDER WTO’S AGREEMENT ON AGRICULTURE

What is domestic support under WTO’s Agreement on Agriculture?

Oracle IAS, the best coaching institute for RBI grade B/NABARD/SEBI in Dehradun (Uttarakhand), brings to you views on important issues.

  • The World Trade Organization’s basic objective is to promote international trade.
  • In the case of agricultural goods also, it stipulates rules and regulations for conducting as well as promoting international trade in agriculture goods. These rules and regulations are contained in the Agreement on Agriculture (AoA). The AoA contains the policies to be adopted by member countries while promoting agricultural trade.
  • For this, the AoA has three important clauses:
  • Market Access
  • Domestic Support and
  • Export Subsidy
  • The market access clause instructs the level of tariff or import duty that members can impose on imports. Obviously, the AoA’s attempt is to limit tariff as low as possible.
  • The second clause, domestic support is the most important of the three. It generally contains regulations regarding the provision of domestic support or subsidy by member countries to their farmers.
  •  The third clause of Export subsidy or export competition restricts member countries to give subsides for the promotion of agricultural exports.

Domestic Support

  •  Domestic supports are subsidies given by member countries to promote their agricultural sector. On the contrary, export subsidy is to promote exports.
  •  Different types of subsidies are given by governments to the farmers–including input subsidies, subsidies for R&D, subsidies for food security etc.
  • The AoA classifies domestic support into trade distorting (reducible) and non-distorting (which are non reducible) categories. For trade distorting type of subsidies, the WTO sets limit beyond which members can’t give subsidies.
  •  The AoA classifies domestic subsidies into different types; under various boxes by assigning certain colours– Green Box, Blue Box and AMS (Amber Box). This colour classification is based upon their effects on trade.
  • The colour of the boxes is as in traffic lights: green (permitted), amber (slow down — i.e. be reduced) and a red box (prohibited); which symbolically indicates whether they have to be continued or not.
  • The AoA signed at Uruguay has no red box.
  •  The amber box is directly linked to production and prices and hence is considered to be trade distorting.
  • Blue box is production limiting programs that may not distort trade.
  • The green box doesn’t distort trade or may cause only minimum distortion.
  • Out of these domestic support measures, WTO agreement requires reduction (non exempt/not permissible/reducible) only in AMS (amber box), whereas, support under all other heads is exempted (permissible).
  • Besides these, three, there is a De minimis support and a Special and differential treatment box. The de minimis indicates the level trade distorting domestic support that can be given by a country within prescribed limit. For developing countries including India, the de minimis support is 10 per cent of the agricultural GDP.

 

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