RBI CONCEPT:TRADE RELATED INVESTMENT MEASURES:#71

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

What is Trade Related Investment Measures (TRIMs)?

  • WTO prohibit investment restricting measures that discriminates foreign investment
  • The argument of WTO is that such investment restricting steps are violating trade itself (WTO is an institution formed to promote trade).
  • Historically countries impose measures that restrict foreign investment (called as investment measures and WTO term this as Trade Related Investment Measures).
  • Under TRIMs, the WTO names the list of investment measures that discriminates foreign investment and hence violates the basic WTO principle of National Treatment. Continue reading “RBI CONCEPT:TRADE RELATED INVESTMENT MEASURES:#71”

RBI CONCEPT:MINIMUM RESERVE SYSTEM#69

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

What is Minimum Reserve System? How new currencies are issued by the RBI?

  • The relationship between note issue and its reserve backing is usually done on the basis of a reserve system by central banks across the world. The reserve system provides guidelines for the issue of new currencies.
  • In India, currencies are issued by the RBI with the backing of reserves comprised of gold and foreign exchange (foreign currencies). For the issue of currencies, the RBI follows Minimum Reserve System at present. The Minimum Reserve System (MRS) is followed from 1956 onwards. Continue reading “RBI CONCEPT:MINIMUM RESERVE SYSTEM#69”

RBI CONCEPT:WAYS AND MEANS ADVANCES#68

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

What is Ways and Means Advances (WMA)?

  • The Reserve Bank of India gives temporary loan facilities to the centre and state governments as a banker to the government.  This temporary loan facility is called Ways and Means Advances (WMA).

The WMF for the Central Government

  • The WMA scheme for the Central Government was introduced on April 1, 1997, after putting an end to the four-decade old system of adhoc (temporary) Treasury Bills to finance the Central Government deficit. The WMA scheme was designed to meet temporary mismatches in the receipts and payments of the government.
  • This facility can be availed by the government if it needs immediate cash from the RBI. The WMA is to be vacated after 90 days. Interest rate for WMA is currently charged at the repo rate. The limits for WMA are mutually decided by the RBI and the Government of India.

Overdraft

  • When the WMA limit is crossed the government takes recourse to overdrafts, which are not allowed beyond 10 consecutive working days. The interest rate on overdrafts would be 2 percent more than the repo rate.
  • The minimum balance required to be maintained by the Government of India with the Reserve Bank of India will not be less than Rs.100 crore on Fridays, on the date of closure of Government of India’s financial year and on June 30, the date of closure of the annual accounts of the RBI, and not less than Rs.10 crore on other days.
  •   The cash management of GoI has considerably deteriorated in the recent past, with situations of large surplus and large deficit. This has put tremendous pressure of RBI with respect to liquidity management and conduct of monetary policy.

WMA Scheme for State Governments

  • Under the WMA scheme for the State Governments, there are two types of WMA – Special and Normal WMA. Special WMA is extended against the collateral (mortgaging) of the government securities held by the State Government.
  • After the exhaustion of the special WMA limit, the State Government is provided a normal WMA. The normal WMA limits are based on three-year average of actual revenue and capital expenditure of the state. The withdrawal above the WMA limit is considered an overdraft. A State Government account can be in overdraft for a maximum 14 consecutive working days with a limit of 36 days in a quarter. The rate of interest on WMA is linked to the Repo Rate. Surplus balances of State Governments are invested in Government of India 14-day Intermediate Treasury bills in accordance with the instructions of the State Governments.

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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

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

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

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

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”