Test: Acts Related to Banking - Bank Exams MCQ

A Development Financial Institution (DFI)

• It is defined as “an institution endorsed or supported by the Government of India primarily to provide development/Project finance to one or more sectors or sub-sectors of the economy.
• India’s first DFI was operationalized in 1948 and it set up State Financial Corporations (SFCs) at the state level after passing of the SFCs Act, 1951, succeeded by the development of the Industrial Finance Corporation of India (IFCI).
• DFIs can be classified into four categories of institutions as per their functions:
  • National Development Banks e.g. IDBI, SIDBI, ICICI, IFCI, IRBI, IDFC
  • Sector-specific financial institutions e.g. TFCI, EXIM Bank, NABARD, HDFC, NHB
  • Investment Institutions e.g. LIC, GIC, and UTI
  • State-level Institutions e.g. State Finance corporations and SIDCs
  • Specialized development financial institutions (DFIs), such as Industrial Finance Corporation of India (IFCI), Industrial Development Bank of India (IDBI), National Bank for Agriculture and Rural Development (NABARD), National Housing Board (NHB) and Small Industry Development Bank of India (SIDBI), with majority ownership of the RBI were launched to meet the long-term financing needs of industry and agriculture in India for driving growth in our economy post-independence.

Though, RBI does not engage in direct financing. There is no specific use of the term 'DFI' in either the RBI Act, 1934 or the Companies Act, 1956 or various statutes establishing DFIs.
Hence, Option 4 is the correct answer.

• The Insurance Regulatory and Development Authority of India (IRDAI) is a regulatory body under the jurisdiction of the Ministry of Finance, Government of India.
• It is tasked with regulating and licensing the insurance and re-insurance industries in India.
• It was constituted by the Insurance Regulatory and Development Authority Act, 1999, an Act of Parliament passed by the Government of India.

Based on the major activity undertaken by them, Financial Institutions (FIs) get classified into three broad categories:

• Term-lending institutions, whose main activity is direct lending by way of term loans and investments. IFCI Ltd., IDBI, IDFC Ltd., IIBI Ltd. comes under the term-lending institutions in India.
• Refinance institutions, such as the National Bank for Agriculture and Rural Development (NABARD), Small Industries Development Bank of India (SIDBI) and National Housing Bank (NHB), which mainly extend refinance to banks as well as non-banking financial institutions and;
• Investment institutions such as Life Insurance Corporation (LIC), which deploy their assets largely in marketable securities.
• SBI and PNB are also term-lending institutions in India.

Securities and exchange Board of India (SEBI) was first established in the year 1988 AQF as a non-statutory body for regulating the, securities market. It became an autonomous body by The Government of India on 12 April 1992 and given statutory powers in 1992 with SEBI Act 1992 being passed by the Indian Parliament.

• Pension Fund Regulatory and Development Authority (PFRDA) is a pension regulator of India.
• It headquartered in New Delhi.
• It was established by the Government of India on 23rd August 2003
• Ami is to promote old age income security by establishing, developing and regulating pension funds.
• It administers and regulates National Pension System (NPS) and also administers Atal Pension Yojana (APY).
• Recently, in April 2020 amid pandemic, it allowed the NPS subscribers to partially withdraw for covering expenses related to the treatment of COVID-19.
• Chairperson: Supratim Bandyopadhyay (as of July 2021)

The IRDAI(Insurance Regulatory and Development Authority of India) was incorporated as a statutory body on 19th April 2000.

• It is an independent, legislative body responsible for overseeing and promoting the Indian insurance and reinsurance industries.
• It was established by the Insurance Regulatory and Development Authority Act, 1999, a legislative act passed by the Indian Government.
• The headquarters of the organization are in Hyderabad, Telangana where it relocated in 2001 from Delhi.
• Subhash Chandra Khuntia is the chairman of IRDAI.

Export - Import Bank of India is the premier export finance institution in India, established in 1982 under Export - Import Bank of India Act 1981. Since its inception, Exim Bank of India has been both a catalyst and a key player in the promotion of cross border trade and investment.

Important points about DICGC:

• DICGC stands for Deposit Insurance and Credit Guarantee Corporation
• All deposits in commercial and cooperative banks, both domestic and international are insured by DICGC except for deposits by government both domestic and foreign
• Primary cooperative societies are not insured by the DICGC.
• DICGC insures maximum of Rupees One Lakh for each depositor which includes both principal and interest

Option 1 : In a lease, the lessee (user) does not own the asset, but only has the right to use it for a specified period. In a loan, the borrower owns the asset from the outset.

SIDBI majorly follows 4 major objectives which are Development, Promotion, Coordination and Financing. Some of its key functions include:

1. SIDBI offers financial support to MSMEs, Small Scale Industries (SSIs), and other service sectors
2. It provides funding via banks, NBFCs, SFCs, and other financial institutions
3. SIDBI aims to create equilibrium in the financial sector by strengthening credit flows and promoting skill development.