All questions of Money and Banking for UPSC CSE Exam

Option C is correct that is 2004-05.

Statutory Liquidity Ratio (SLR)
The Statutory Liquidity Ratio (SLR) is the percentage of a bank's Net Demand and Time Liabilities (NDTL) that it needs to maintain in the form of liquid assets such as cash, gold, and approved securities. It is a prudential regulation imposed by the Reserve Bank of India (RBI) on banks to ensure the stability and solvency of the banking system.

Statement 1: It includes cash and gold.
The first statement is correct. The SLR includes cash, gold, and approved securities. Banks are required to maintain a certain proportion of their NDTL as liquid assets, and these assets can include cash, gold, and government securities. However, the SLR does not include all the assets held by a bank, but only those that meet the criteria specified by the RBI.

Statement 2: Banks may earn returns on money parked as SLR
The second statement is also correct. Banks are allowed to earn returns on the money parked as SLR. While maintaining the SLR, banks invest their excess funds in government securities, which are considered safe and provide a return on investment. This allows banks to earn income on the funds that they are required to hold as liquid assets. The returns earned on SLR investments help banks enhance their profitability and manage their liquidity position effectively.

Conclusion
Both statements 1 and 2 are correct. The SLR includes cash, gold, and approved securities, and banks are allowed to earn returns on the money parked as SLR. The SLR requirement serves as a prudential measure to ensure that banks maintain a certain level of liquidity and stability in their operations. It also helps the central bank in regulating the money supply and managing inflation in the economy.

Understanding the Pairs
Let’s evaluate each pair to determine how many are correctly matched.
1. Repo rate : Policy rate set by the central bank
- This pair is correctly matched.
- The repo rate is indeed the rate at which the central bank lends money to commercial banks, acting as a key tool for monetary policy.
2. 91-day Treasury Bill yield : Long-term government security yield
- This pair is incorrectly matched.
- A 91-day Treasury Bill is a short-term security, typically issued for 3 months, which means its yield is associated with short-term financing rather than long-term.
3. 182-day Treasury Bill yield : Short-term government security yield
- This pair is correctly matched.
- Similar to the 91-day Treasury Bill, a 182-day Treasury Bill is also a short-term security, making this pair accurate.
4. Basel III norms : Prudential regulatory framework for banks
- This pair is correctly matched.
- Basel III is indeed a global regulatory framework established to strengthen bank capital requirements and promote financial stability.
Conclusion: Count of Correct Matches
- Correct matches: 1 (Repo rate) + 1 (182-day Treasury Bill yield) + 1 (Basel III norms) = 3 pairs.
- Incorrect match: 2 (91-day Treasury Bill yield).
Thus, the correct answer is that only three pairs are correctly matched, making option 'C' the right choice.

The category of dairy products?

1. Milk
2. Cheese
3. Yogurt
4. Butter
5. Cream
6. Ice cream
7. Sour cream
8. Cottage cheese
9. Whey protein powder
10. Condensed milk.

Payment banks eg paytm

B

Revenue Receipts of Government

Revenue receipts refer to the income received by the government through various sources. These receipts are non-debt receipts and do not create any liability for the government. They are used to meet the day-to-day expenses and operational costs of the government. Revenue receipts can be further classified into tax revenue and non-tax revenue.

Tax Revenue
Tax revenue consists of the income generated through various taxes levied by the government. It includes direct taxes such as income tax, corporate tax, and indirect taxes such as goods and services tax (GST), excise duty, customs duty, etc.

Non-Tax Revenue
Non-tax revenue includes all other sources of income for the government apart from taxes. It includes various receipts such as interest received on loans given, dividends from public sector undertakings, fees and fines, etc.

Analysis of Receipts

1. Recovery of loans given to the states and union territories: This is a non-tax revenue receipt. The government provides loans to the states and union territories for various purposes. When these loans are repaid, it is considered as a revenue receipt for the government. Therefore, option 1 is a revenue receipt.

2. Interest received from telecommunication: This is a non-tax revenue receipt. The government earns revenue through the licensing and spectrum fees charged to telecommunication companies. Additionally, the government may also earn interest on loans given to the telecommunication sector. Therefore, option 2 is a revenue receipt.

3. Debt and profit received from RBI: This is a non-tax revenue receipt. The government may earn revenue in the form of interest on loans given to the Reserve Bank of India (RBI) or profit shared by the RBI. Therefore, option 3 is a revenue receipt.

4. Income by tax: This is a tax revenue receipt. Taxes levied on individuals and businesses form a major part of the government's revenue. Therefore, option 4 is a revenue receipt.

Conclusion

Based on the analysis, options 2, 3, and 4 are revenue receipts of the government. Therefore, the correct option is b) 2, 3, 4.

• Statement 1 is not correct: The Marginal Standing Facility (MSF) is not exactly the same as the repo rate; it is an emergency borrowing rate for banks above the repo rate. The MSF allows banks to borrow funds overnight from the RBI against government securities.
• Statement 2 is correct: The MSF is on the lines of the Liquidity Adjustment Facility (LAF) and is a part of it, designed to help banks manage overnight liquidity shortages.
• Statement 3 is not correct: While the MSF is a costlier route compared to the repo rate, it is considered a penal rate since it is higher than the repo rate to discourage excessive reliance on it.
• Statement 4 is not correct: Although banks typically use the MSF after exhausting other avenues for raising short-term funds, the nature of MSF being a penal rate and its higher cost is implied in the statement, making it misleading.

Concept Explanation:
The concept of Effective Revenue Deficit is used to measure the revenue deficit after deducting grants for the creation of capital assets. It provides a more accurate picture of the revenue deficit by excluding grants that are used for capital expenditures.

Revenue Deficit:
Revenue deficit refers to the excess of revenue expenditure over revenue receipts. It indicates that the government is not able to meet its current expenses through its current revenue sources. Revenue deficit represents the borrowing by the government to finance its current expenses.

Grants for Creation of Capital Assets:
Grants for the creation of capital assets are funds provided by the government for the development of infrastructure and other capital projects. These grants are used for long-term investments and are not considered as revenue expenditure. They are used to create assets that will generate income or provide services in the future.

Effective Revenue Deficit:
Effective revenue deficit is calculated by deducting grants for the creation of capital assets from the revenue deficit. This helps in assessing the true revenue deficit of the government by excluding the capital expenditure component from the revenue deficit.

Example:
Let's consider an example to understand this concept better. Suppose the revenue deficit of the government is Rs. 100 crore and grants for the creation of capital assets are Rs. 50 crore. In this case, the effective revenue deficit would be Rs. 50 crore (Rs. 100 crore - Rs. 50 crore).

Significance:
The concept of effective revenue deficit is important as it provides a more accurate measure of the revenue deficit. It helps in identifying the extent to which the government is relying on borrowings to finance its current expenses, excluding the capital expenditure component. This measure is particularly useful for assessing the sustainability of the government's fiscal position and its impact on the economy.

Conclusion:
In conclusion, the concept of effective revenue deficit is used to measure the revenue deficit after deducting grants for the creation of capital assets. It provides a more accurate picture of the revenue deficit by excluding grants used for capital expenditures. This measure helps in assessing the true revenue deficit and the government's reliance on borrowings to finance its current expenses.

Market Borrowing:
Market borrowing is a debt creating capital receipt because it involves borrowing money from the financial markets by issuing bonds or securities. This type of borrowing creates a liability for the government as it has to repay the borrowed amount along with interest in the future.

Disinvestment Proceed from PSU:
Disinvestment proceeds from PSU are not considered a debt creating capital receipt. It is a non-debt capital receipt as it involves selling the government's stake in public sector undertakings (PSUs) to raise funds. This does not create any additional debt for the government.

Interest Received:
Interest received is not a capital receipt, it is a revenue receipt. It represents income earned by the government on its investments or loans given to other entities. It does not involve borrowing or creating any debt.

Loan Recovery:
Loan recovery is also not a debt creating capital receipt. It involves the repayment of loans given by the government to other entities. It is a recovery of funds previously lent out by the government and does not create any new debt.

Explanation:

Fiscal policy refers to the use of government spending and taxation to influence the economy. In India, there are several fiscal policy tools that are used to manage the economy. Among the options given, the correct ones are:

1. Goods and Services Tax (GST):
The Goods and Services Tax (GST) is a comprehensive indirect tax levied on the supply of goods and services in India. It is a fiscal policy tool because it affects both government revenue and consumer spending. By adjusting the GST rates, the government can influence the prices of goods and services, which in turn affects consumption and investment.

3. Corporate tax:
Corporate tax refers to the tax levied on the profits of companies. By adjusting the corporate tax rate, the government can influence the profitability of businesses and their investment decisions. Lowering corporate taxes can incentivize companies to invest more, stimulate economic growth, and create job opportunities.

4. Public infrastructure spending:
Public infrastructure spending refers to government expenditure on infrastructure projects such as roads, bridges, railways, and airports. This form of spending is a fiscal policy tool because it directly impacts economic activity. Increased public infrastructure spending can stimulate aggregate demand, create jobs, and boost economic growth.

2. Repo rate:
The repo rate is not a fiscal policy tool but a monetary policy tool. It is the rate at which the central bank lends money to commercial banks. Changes in the repo rate influence interest rates in the economy, which in turn affects borrowing costs and investment decisions. The repo rate is set by the Reserve Bank of India (RBI) and is used to manage inflation and economic growth.

Therefore, the correct option is b) 1, 3, and 4 only.

Regional Rural Banks (RRBs) work at the District level.

Explanation:
Regional Rural Banks (RRBs) are financial institutions that were established with the aim of providing banking services to rural areas and promoting agricultural and rural development. RRBs were set up under the provisions of the Regional Rural Banks Act, 1976.

RRBs are established as a partnership between the Central Government, the State Government, and the sponsoring bank. The sponsoring bank can be a nationalized bank or a public sector bank.

Structure of Regional Rural Banks:
RRBs are organized at multiple levels, including the District level. The structure of RRBs can be summarized as follows:

1. District Level: RRBs operate at the District level and have their headquarters in the respective Districts. Each RRB is assigned a specific area of operation, which usually corresponds to a District or a group of Districts.

2. Branches: RRBs have a network of branches within their operational area. These branches are responsible for providing banking services to the rural population, including farmers, agricultural laborers, and other rural residents.

3. State Level: RRBs are sponsored by a nationalized bank or a public sector bank, which operates at the State level. The sponsoring bank provides financial and managerial support to the RRBs.

4. Central Level: The Central Government, through the Ministry of Finance, provides overall supervision and control over RRBs. The National Bank for Agriculture and Rural Development (NABARD) is responsible for coordinating and regulating the activities of RRBs at the national level.

Conclusion:
In conclusion, Regional Rural Banks (RRBs) work at the District level. They have their headquarters in the respective Districts and operate through a network of branches within their operational area. RRBs play a crucial role in providing banking services to the rural population and promoting agricultural and rural development.

Explanation:
The correct answer is option 'D' - all of the above statements are true. The Reserve Bank of India (RBI) issued a set of guidelines for the private sector in 2001. Let's break down each statement and explain it in detail.

Statement a) Initial paid-up capital should be 200 crore rupees:
According to the guidelines issued by RBI, the initial paid-up capital for setting up a private sector bank should be a minimum of 200 crore rupees. Paid-up capital refers to the amount of money that shareholders have invested in a company. This requirement ensures that the bank has adequate financial resources to carry out its operations and meet regulatory requirements.

Statement b) Share of the promoters in paid-up capital should not be less than 40%:
Another guideline mentioned by RBI is that the share of the promoters (the individuals or entities promoting the bank) in the paid-up capital should not be less than 40%. This requirement ensures that the promoters have a significant stake in the bank's ownership, which aligns their interests with the long-term growth and stability of the bank.

Statement c) Big corporate houses are not allowed to promote any bank:
The third guideline stated in the question is that big corporate houses are not allowed to promote any bank. This means that large companies or corporate groups cannot be the promoters of a bank. This guideline aims to prevent concentration of economic power and potential conflicts of interest that may arise when corporate entities have control over banking institutions.

Conclusion:
To summarize, the RBI issued guidelines for the private sector in 2001, which included requirements such as a minimum initial paid-up capital of 200 crore rupees, a minimum promoter share of 40% in the paid-up capital, and a prohibition on big corporate houses promoting banks. Therefore, option 'D' - all of the above statements are true.

Explanation:

The percentage of demand and time liabilities that banks have to keep with the Reserve Bank of India (RBI) is known as the Cash Reserve Ratio (CRR).

Cash Reserve Ratio (CRR):
- The CRR is a monetary policy tool used by the RBI to control the liquidity in the economy.
- It refers to the portion of bank deposits that banks are required to keep with the RBI in the form of cash reserves.
- The CRR is determined as a percentage of the bank's net demand and time liabilities (NDTL).
- NDTL refers to the total demand and time liabilities of a bank, which includes the total deposits held by the bank.
- The CRR is applicable to both scheduled commercial banks and cooperative banks.

Impact of CRR:
- By increasing the CRR, the RBI reduces the liquidity in the banking system as banks have to keep a higher portion of their deposits with the RBI.
- On the other hand, by decreasing the CRR, the RBI increases the liquidity in the banking system as banks have more funds available for lending and investment.

Significance of CRR:
- The CRR serves as a tool for the RBI to control inflation and money supply in the economy.
- By increasing the CRR, the RBI reduces the excess liquidity in the economy, which helps in controlling inflation.
- Additionally, the CRR helps in maintaining the stability of the banking system by ensuring that banks have a certain amount of funds readily available in the form of cash reserves.

Difference between CRR and SLR:
- SLR stands for Statutory Liquidity Ratio, which is the percentage of NDTL that banks have to maintain in the form of specified liquid assets such as cash, gold, and government securities.
- While both CRR and SLR are tools used by the RBI to control liquidity, the key difference is that the CRR is in the form of cash reserves held with the RBI, whereas the SLR is in the form of liquid assets held by the banks themselves.

In conclusion, the correct answer to the question is option 'B', CRR. The CRR refers to the percentage of demand and time liabilities that banks have to keep with the RBI in the form of cash reserves. It is an important tool used by the RBI to control liquidity in the banking system and maintain stability in the economy.

Understanding the Effectiveness of Bank Rate
The bank rate is a crucial monetary policy tool used by the Reserve Bank of India (RBI) to manage liquidity and control inflation. For the bank rate to be effective, several conditions must be met:
1. Banks Should Be Ready to Avail Rediscounting Facility from RBI
- Banks must be willing to utilize the rediscounting facility offered by the RBI. This indicates their readiness to access funds when needed, thereby ensuring liquidity in the banking system.
2. Banks Should Have Adequate Quantity of Credit Instruments That Can Be Rediscounted
- It is essential for banks to possess a sufficient number of credit instruments, such as bills of exchange and promissory notes, that can be rediscounted. This availability ensures that banks can effectively manage their short-term funding needs through the RBI.
3. Banks Do Not Have Surplus Cash and Depend on RBI for Extraordinary Needs
- When banks lack surplus cash, they often rely on the RBI for additional funding. This dependency highlights the importance of the bank rate as a mechanism for obtaining liquidity during times of need, especially when unexpected withdrawals or demands arise.
Conclusion
In summary, all the outlined conditions (options a, b, and c) are interconnected and crucial for the effective functioning of the bank rate. Without banks' readiness to utilize rediscounting facilities, an adequate supply of rediscountable instruments, and a reliance on RBI for liquidity, the utility of the bank rate as a monetary policy tool would be significantly diminished. Thus, option 'D' is indeed the correct answer.

< b="" />Statement i:< />
The statement i is incorrect. According to the Constitution of India, the Central government has the exclusive power to impose taxes that are not mentioned in the State or Concurrent List. The Union List in the Seventh Schedule of the Constitution includes subjects on which only the Central government can make laws, and this includes the power to levy taxes not mentioned in the State or Concurrent List.

< b="" />Statement ii:< />
The statement ii is correct. The Constitution provides for transferring certain tax revenues from the Union List to the states. This is done through the mechanism of devolution of taxes. The Constitution has provisions for the sharing of tax revenues between the Central government and the state governments. These provisions are aimed at ensuring fiscal autonomy and financial stability for the states.

< b="" />Devolution of Taxes:< />
Devolution of taxes refers to the sharing of tax revenues between the Central government and the state governments. As per the provisions of the Constitution, taxes collected by the Central government are shared with the states through various mechanisms. This includes taxes like the Goods and Services Tax (GST), which is levied by the Central government but shared with the states.

< b="" />Article 270 of the Constitution:< />
Article 270 of the Constitution deals with the distribution of taxes between the Union and the states. It provides for the distribution of certain taxes, such as the income tax, corporation tax, and taxes on inter-state trade or commerce, between the Central government and the states. The sharing of these taxes is done based on the recommendations of the Finance Commission.

< b="" />Finance Commission:< />
The Finance Commission is a constitutional body that is responsible for recommending the distribution of taxes between the Centre and the states. It is constituted every five years and submits its report to the President of India. The recommendations of the Finance Commission play a crucial role in determining the devolution of taxes to the states.

< b="" />Conclusion:< />
In conclusion, statement i is incorrect as the Central government does have the exclusive power to impose taxes not mentioned in the State or Concurrent List. However, statement ii is correct as the Constitution provides for the transfer of certain tax revenues from the Union List to the states through the mechanism of devolution of taxes.

Explanation of Statements
The question evaluates two statements regarding financial institutions in India.
Statement-I: Regional Rural Banks (RRBs)
- Established in 1975.
- Primary objectives include:
- Providing credit to weaker sections at concessional rates.
- Mobilizing rural savings for productive activities in rural areas.
This statement is correct as it accurately describes the role and objectives of RRBs.
Statement-II: Co-operative Banks
- Predominantly cater to needs of:
- Agriculture.
- Rural-based industries.
- Lesser extent: Trade and industry in urban centers.
- Operate under dual regulatory control, which refers to oversight by both the Reserve Bank of India (RBI) and state governments.
This statement is also correct. Co-operative banks indeed play a crucial role in rural financing and are regulated by multiple authorities.
Analysis of Correctness
- Both statements are true.
- However, Statement-II does not directly explain the objectives or functions of Statement-I.
Thus, it accurately leads to the conclusion that:
Correct Answer: Option A
- Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I.

Understanding the Pairs
Let's analyze each of the pairs to determine how many are correctly matched:
1. 90-day overdue norm
- Correctness: This is accurate; a loan is classified as a Non-Performing Asset (NPA) if it has not been serviced for 90 days.
2. 5 / 25 Refinancing
- Correctness: This is also correct; this refinancing option allows borrowers to extend their loan tenure to 25 years, with interest rates adjusted every 5 years.
3. SDR (Strategic Debt Restructuring)
- Correctness: This pair is correctly matched. SDR involves converting a portion of the debt into equity, allowing the lender to take control of the company by obtaining 51% ownership, which can then be sold to the highest bidder.
4. S4A (Scheme for Sustainable Structuring of Stressed Assets)
- Correctness: This pair is incorrect. S4A does not inherently involve a change in ownership; rather, it aims to restructure stressed assets to make them sustainable while maintaining the existing ownership structure.
Conclusion
- Out of the four pairs, three are correctly matched (1, 2, and 3). Thus, the correct answer is option 'C', which indicates that only three pairs are accurate.

Overview of the Market Stabilisation Scheme (MSS)
The Market Stabilisation Scheme (MSS) was introduced by the Reserve Bank of India (RBI) in 2004 to address the challenges posed by excessive liquidity in the financial system, particularly due to large capital inflows.
Primary Purpose
- The primary objective of the MSS is to absorb surplus liquidity that arises from significant capital inflows into the Indian economy. This helps in maintaining liquidity at optimal levels and stabilizes the financial system.
Mechanism of the MSS
- Under the MSS, the RBI issues government securities to absorb excess liquidity. This is a key mechanism to counterbalance the inflow of foreign funds that can lead to inflationary pressures.
Importance of Liquidity Management
- Effective liquidity management is crucial for:
- Controlling inflation: Excess liquidity can lead to increased spending, pushing up prices.
- Stabilizing interest rates: By absorbing liquidity, the RBI can influence short-term interest rates, helping to maintain economic stability.
Conclusion
- Overall, the MSS is a vital tool for the RBI to ensure that the capital inflows do not destabilize the economy, making option 'B' the correct answer. By absorbing surplus liquidity, the RBI aims to maintain balance in the financial markets and promote sustainable economic growth.

Reasons for Inflation

Inflation refers to the sustained increase in the general price level of goods and services in an economy over a period of time. It erodes the purchasing power of money and can have significant economic impacts. There are several factors that can contribute to inflation, and the given options - deficit financing, growth in per capita income, and structural deficiencies - all play a role in causing inflation.

Deficit Financing
Deficit financing refers to the situation when a government spends more money than it collects in revenue, resulting in a budget deficit. This deficit is often financed through borrowing, either from the central bank or by issuing government bonds. Deficit financing can lead to inflation for the following reasons:

1. Increased Money Supply: When the government borrows money to finance its deficit, it increases the money supply in the economy. This excess money can lead to an increase in aggregate demand, which in turn can push up prices.

2. Increased Aggregate Demand: Deficit financing can also lead to increased government spending, which stimulates aggregate demand. As demand for goods and services rises, producers may increase prices to take advantage of the increased demand.

3. Expectations of Future Inflation: Deficit financing can create expectations of future inflation among the public. If people anticipate that prices will rise in the future, they may adjust their behavior by demanding higher wages or raising prices, which can contribute to inflationary pressures.

Growth in Per Capita Income
As per capita income increases, people have more purchasing power, which can lead to increased demand for goods and services. This increased demand can put upward pressure on prices, leading to inflation. Additionally, growth in per capita income often leads to increased investment and economic activity, which can further contribute to inflationary pressures.

Structural Deficiencies
Structural deficiencies refer to imbalances, inefficiencies, or distortions in an economy's structure that can contribute to inflation. Some examples of structural deficiencies include:

1. Supply-side Constraints: If an economy faces supply-side constraints, such as shortages of key inputs or infrastructure bottlenecks, it can limit the production capacity of goods and services. This imbalance between supply and demand can lead to inflation as prices rise due to scarcity.

2. Market Imperfections: Market imperfections, such as monopolies or oligopolies, can reduce competition and allow firms to exert market power. This can result in higher prices, leading to inflation.

3. Policy Failures: Inadequate or ineffective government policies, such as price controls or excessive regulation, can distort markets and lead to inflationary pressures.

In conclusion, inflation can be caused by a combination of factors including deficit financing, growth in per capita income, and structural deficiencies. These factors can create imbalances in the economy, increase aggregate demand, or lead to supply-side constraints, all of which can contribute to the rise in prices over time.

Tools used by RBI to maintain money supply in the economy:

Statutory Liquidity Ratio:
- Statutory Liquidity Ratio (SLR) is the percentage of Net Demand and Time Liabilities (NDTL) that banks are required to maintain in the form of liquid assets like cash, gold, or securities.
- By changing the SLR, RBI can control the liquidity in the banking system. If the SLR is increased, banks have to hold more reserves, reducing the amount available for lending and vice versa.

Repo Rate:
- Repo Rate is the rate at which the central bank (RBI) lends money to commercial banks in case of any shortfall of funds.
- By changing the repo rate, RBI can influence the lending capacity of banks. A decrease in the repo rate encourages banks to borrow more from RBI, increasing liquidity in the system.

Bank Rate:
- Bank Rate is the rate at which the central bank (RBI) lends money to commercial banks for long-term funds.
- By changing the bank rate, RBI can control the cost of borrowing for banks, affecting their lending rates and ultimately impacting the money supply in the economy.

Conclusion:
- All three tools, namely Statutory Liquidity Ratio, Repo Rate, and Bank Rate, are used by RBI to maintain money supply in the economy. Each tool plays a crucial role in regulating liquidity and credit flow in the financial system, thereby influencing economic growth and stability.

Analysis of Statements
To determine the correctness of the statements regarding India's monetary policy and banking reforms, let’s analyze each one in detail.
Statement 1: Status Quo on Repo Rate Until January 2022
- This statement is incorrect. The MPC of India actually began increasing the repo rate in May 2022, reacting to rising inflation. Prior to that, the repo rate had been held steady, but it did not maintain a status quo until January 2022.
Statement 2: Monetary Tightening Cycle in April 2022
- This statement is correct. The RBI initiated a monetary tightening cycle in April 2022 as headline inflation crossed the upper limit of its tolerance band (which is typically set at 6%). The MPC raised interest rates to curb inflationary pressures.
Statement 3: Banking Consolidation Process in 1998
- This statement is incorrect. The banking consolidation process in India began following the recommendations of the Narasimham Committee in 1991, not in 1998. The committee laid the groundwork for reforms in the banking sector aimed at enhancing efficiency and stability.
Conclusion
Based on the analysis:
- Correct Statements: Only Statement 2 is accurate.
- Final Answer: The correct option is B) 1 and 2 Only.

The correct answer is option 'B', which means that statements 1 and 2 are correct, while statement 3 is incorrect. Let's analyze each statement individually to understand why.

1. Revenue deficit target of 0.8% by 2023:
The N.K. Singh Committee on Fiscal Responsibility and Budget Management (FRBM) has recommended a revenue deficit target of 0.8% by 2023. This means that the government aims to reduce its revenue deficit to 0.8% of the Gross Domestic Product (GDP) by 2023. Revenue deficit occurs when the government's total revenue falls short of its total expenditure, excluding borrowing. The committee has suggested this target to ensure fiscal discipline and sustainable growth. Therefore, statement 1 is correct.

2. Fiscal policy anchor should be public debt to GDP ratio:
The N.K. Singh Committee has recommended that the fiscal policy anchor should be the public debt to GDP ratio. The public debt to GDP ratio is a measure of the government's debt burden relative to the size of the economy. The committee believes that maintaining a sustainable level of public debt is crucial for fiscal stability and long-term growth. By making the public debt to GDP ratio the fiscal policy anchor, the committee aims to align fiscal policy decisions with debt sustainability considerations. Therefore, statement 2 is correct.

3. Target of fiscal deficit of 3.5% by 2023:
The third statement is incorrect. The N.K. Singh Committee has not recommended a target of fiscal deficit of 3.5% by 2023. Fiscal deficit is the difference between the government's total expenditure and its total revenue, including borrowing. While the committee has made various recommendations to improve fiscal discipline and consolidation, it has not specifically mentioned a target of 3.5% for fiscal deficit by 2023. Therefore, statement 3 is incorrect.

In conclusion, the correct statements regarding the N.K. Singh Committee recommendations are 1 and 2. The revenue deficit target of 0.8% by 2023 and the recommendation to make the public debt to GDP ratio the fiscal policy anchor are in line with the committee's recommendations. However, the target of fiscal deficit of 3.5% by 2023 is not mentioned in the committee's recommendations.

Received by the government for violation of laws
4. Dividends received by the government from public sector enterprises

1, 3, and 4 are sources that form part of the Revenue Receipts of the government.

Non-Debt Capital Receipts in the Government of India
Non-debt capital receipts refer to the funds received by the government that do not result in an increase in its debt burden. These receipts are crucial for the government as they help in reducing fiscal deficits and financing development projects. Let's analyze the given options to identify the non-debt capital receipts:

1. Recovery of loans
Recovery of loans refers to the repayment of loans given by the government to various entities. When these loans are repaid, they do not result in an increase in the government's debt as the principal amount is returned. Hence, recovery of loans is considered a non-debt capital receipt.

2. Securities against Public Provident Fund
Securities against Public Provident Fund refer to the investments made by the government in securities on behalf of individuals who have invested in the Public Provident Fund. When the government receives interest or dividends on these securities, it is considered a non-debt capital receipt.

3. Disinvestment receipts
Disinvestment receipts refer to the funds raised by the government through the sale of its equity holdings in public sector enterprises. These receipts do not lead to an increase in the government's debt and are considered non-debt capital receipts.
Therefore, options 1 and 3 (Recovery of loans and Disinvestment receipts) are correct as they represent non-debt capital receipts for the Government of India. Option 2, Securities against Public Provident Fund, may not always result in non-debt capital receipts depending on the specific transaction.

The correct answer is option 'C' - Both 1 and 2.

Explanation:
1. Marginal Standing Facility (MSF) is always fixed above the Repo rate:
The Marginal Standing Facility (MSF) is a facility provided by the central bank of a country to the scheduled commercial banks to borrow funds overnight. It is an additional window for banks to borrow funds from the central bank over and above the liquidity provided through the repo rate. The MSF rate is always fixed above the repo rate. The repo rate is the rate at which the central bank lends money to banks against the collateral of government securities. The difference between the MSF rate and the repo rate is known as the MSF rate spread. The purpose of setting the MSF rate above the repo rate is to discourage banks from borrowing too frequently and to encourage them to explore other sources of funds, as borrowing from the MSF comes at a higher cost.

2. Marginal Standing Facility (MSF) is an overnight scheme of lending funds to banks by the central bank:
The Marginal Standing Facility is an overnight scheme provided by the central bank to banks for borrowing funds. Banks can borrow funds under the MSF by pledging government securities as collateral. The MSF is a liquidity adjustment facility that allows banks to borrow funds in case of any emergency or temporary shortage of funds. The MSF is commonly used by banks when they are unable to meet their liquidity requirements through other sources. Since the MSF is an overnight scheme, the borrowed funds need to be repaid by the banks the next day along with the applicable interest.

In conclusion, both statements are correct. The MSF rate is always fixed above the repo rate, and the MSF is an overnight scheme provided by the central bank for lending funds to banks.