Banking Sector: Inflation & RBI- 1 - UPSC MCQ

1. 90-day overdue norm - Correctly matched. Under the current policy, a loan is considered NPA if it has not been serviced for 90 days.

2. 5 / 25 Refinancing - Correctly matched. This scheme offers a larger window for revival of stressed assets by allowing the extension of the tenure of loans to 25 years with interest rates adjusted every 5 years.

3. SDR (Strategic Debt Restructuring) - Correctly matched. This scheme allows banks to convert the debt of companies into 51% equity and sell it to the highest bidder.

4. S4A (Scheme for Sustainable Structuring of Stressed Assets) - Incorrectly matched. The S4A scheme does not involve a change in company ownership. Instead, it involves deciding how much of the stressed debt is sustainable, converting the rest into equity and preference shares.

Thus, only the first three pairs are correctly matched.

The establishment of Regional Rural Banks (RRBs) in India aimed to provide credit to the weaker sections of society in rural areas at concessional rates of interest and to mobilize rural savings for supporting productive activities in those regions. This initiative was particularly targeted at those who were previously reliant on private money lending. RRBs played a crucial role in taking banking services to remote rural areas where access to formal banking services was limited, thereby fostering economic development in these regions.

They are subjected to the rbi regulations and prudential norms. CRR and SLR limits both apply to these banks

They cannot issue credit cards. Also, they cannot offer fixed deposits and recurring deposits

Statement-I correctly summarizes the objectives of Regional Rural Banks (RRBs) established in 1975, emphasizing their role in providing credit to weaker sections at concessional rates and mobilizing rural savings for productive activities in rural areas. Statement-II accurately describes the function of co-operative banks in India, highlighting their focus on agriculture, rural-based industries, and limited involvement in urban trade and industry under dual regulatory control. Furthermore, the statement clarifies the two-tier structure of co-operative banks with different levels of operation. Therefore, both statements are factually correct, and Statement-II indeed elaborates on the functions of co-operative banks, aligning well with the objectives of RRBs as mentioned in Statement-I.

RBI is also responsible for regulating banks, directs their credit policies and provides advice to them.

Non-Performing Assets (NPAs) in the banking sector are loans or advances that have not been serviced for a specific period, usually 90 days, which indicates that the borrower has not paid the interest and/or principal. This classification helps banks in identifying assets that are at risk of default. NPAs are a crucial parameter for assessing the health of a bank and are closely monitored by regulators like the Reserve Bank of India (RBI).

1. Differential Rate of Interest (DRI) - Obligates all public sector banks to lend 1% of total lending to 'the poorest among the poor' at 4% interest rate. - Correct: The DRI scheme requires public sector banks to lend 1% of their total advances from the previous year to the poorest sections at an interest rate of 4% per annum.

2. Regional Rural Banks (RRBs) - Share capital contributed by GoI, State government, and sponsoring bank in the ratio 50:15:35. - Correct: The share capital of RRBs is indeed contributed by the Government of India, the concerned state government, and the sponsoring nationalized bank in the ratio of 50%, 15%, and 35% respectively.

3. Urban Cooperative Banks (UCBs) - Regulated solely by the RBI. - Incorrect: UCBs are under dual regulatory control. They are governed by the cooperative societies acts of the respective states for managerial aspects and by the RBI for matters related to banking.

4. District Central Cooperative Banks (DCCBs) & State Cooperative Banks (SCBs) - Supervised by NABARD. - Correct: Initially supervised by the RBI, the supervision of DCCBs and SCBs was later delegated to NABARD.

Thus, pairs 1, 2, and 4 are correctly matched, while pair 3 is incorrectly matched.

Answer: Option B

-On Site ATM - ATMs Inside the Bank

-Off site ATM - ATM outside the bank premises but is located at other places, such as shopping centres, airports, railways station and petrol stations.

-White Label ATM - ATM Provided by NBFC (Non Banking Financial Company)

-Green Label ATM - ATM Provided for Agricultural Transaction

-Orange Label ATM - ATM Provided for Share Transactions

-Yellow Label ATM - ATM provided for E-commerce

-Pink Label ATM - ATM for women banking

-Brown Label ATM - ATM are those Automated Teller Machines where hardware and the lease of the ATM machine is owned by a service provider but cash management and connectivity to banking networks is provided by a sponsor bank .

Statement-I is correct as the Insolvency and Bankruptcy Code, 2016 was indeed amended and put into force by the Government in November 2017. Statement-II is also correct as one of the significant factors contributing to the effectiveness of the new Code has been the Judiciary's adjudication, which imposes strict time limits for various procedures. However, Statement-II does not provide an explanation for Statement-I; instead, it highlights another aspect of the effectiveness of the new Code, making option (b) the correct choice.