Test: Economy - 3 - UPSC MCQ

• Statement 1 is incorrect: States do not need to take permission from the central government for the market borrowing to fulfil their plan expenditure. 
Fiscal Responsibility Management Act (FRBMA), 2003
• It empowers the state governments to go for market borrowings to fulfill their plan expenditure without prior permission from the Central Government (provided they have enacted their respective Fiscal Responsibility Acts).
• This has boosted the participatory planning in the country by guaranteeing greater autonomous plan participation from the states.
Highlights of the FRBMA, 2003
• Government of India (GoI) to take measures to reduce fiscal and revenue deficit so as to eliminate revenue deficit by 31 March, 2008 (which was revised by the UPA Government to March 31, 2009) and thereafter build up adequate revenue surplus.
• Rules to be made under the Act to specify annual targets for the reduction of fiscal deficit (FD) and revenue deficit (RD) contingent liabilities and total liabilities (RD to be cut by 0.5 percent per annum and FD by 0.3 percent per annum).
• FD and RD may exceed the targets only on the grounds such as national security, calamity or exceptional grounds.
• GoI not to borrow from RBI except by Ways and Means Advances (WMAs).
• RBI not to subscribe to the primary issue of the GoI securities from 2006–07 (it means that these government bonds/papers will become market—based instruments to raise long-term funds by the government).
• Steps to be taken to ensure greater transparency in fiscal operations.
•  Along with the Budget and Demands for Grants, the GoI to lay the following three statements before the Parliament in each financial year:
1. Fiscal Policy Strategy Statement (FPSS)
2. Medium Term Fiscal Policy Statement (MTFPS)
3. Macroeconomic Framework Statement (MFS)
• The Finance Minister to make a quarterly review of trends in receipts and expenditure in relation to the Budget and place the review before the Parliament.

• Option (d) is correct
The distinction between Capital Market and Money Market 
The major points of distinction between the two markets are as follows: 
• Participants: 
1. The participants in the capital market are financial institutions, banks, corporate entities, foreign investors and ordinary retail investors from members of the public.
2. Participation in the money market is by and large undertaken by institutional participants such as the RBI, banks, financial institutions, and finance companies. Individual investors although permitted to transact in the secondary money market, do not normally do so. 
• Instruments: 
1. The main instruments traded in the capital market are – equity shares, debentures, bonds, preference shares, etc.
2. The main instruments traded in the money market are short term debt instruments such as T-bills, trade bills reports, commercial paper and certificates of deposit. 
• Investment Outlay: 
1. Investment in the capital market i.e. securities does not necessarily require a huge financial outlay. The value of units of securities is generally low i.e. Rs 10, Rs 100 and so is the case with a minimum trading lot of shares which is kept small i.e. 5, 50, 100 or so. This helps individuals with small savings to subscribe to these securities.
2. In the money market, transactions entail huge sums of money as the instruments are quite expensive.
• Duration: 
1. The capital market deals in medium and long term securities such as equity shares and debentures.
2. Money market instruments have a maximum tenure of 364 days, and may even be issued for a single day.
• Liquidity: 
1. Capital market securities are considered liquid investments because they are marketable on the stock exchanges. However, a share may not be actively traded, i.e. it may not easily find a buyer. 
2. Money market instruments, on the other hand, enjoy a higher degree of liquidity as there is a formal arrangement for this. The Discount Finance House of India (DFHI) has been established for the specific objective of providing a ready market for money market instruments. 
• Safety: 
1. Capital market instruments are riskier both with respect to returns and principal repayment. Issuing companies may fail to perform as per projections and promoters may defraud investors.
2. But the money market is generally much safer with a minimum risk of default. This is due to the shorter duration of investing and also to the financial soundness of the issuers, which primarily are the government, banks and highly rated companies. 
• Expected return: 
1. The investment in capital markets generally yields a higher return for investors than the money markets.
2. The possibility of earnings is higher if the securities are held for a longer duration. First, there is the scope of earning capital gains in equity share. Second, in the long run, the prosperity of a company is shared by shareholders by way of high dividends and bonus issues.

• All statements are correct
Repo Rate 
•  When banks need money they can borrow from the RBI against their surplus government securities at a fixed interest rate. This rate is known as the repo rate.
•  Basically, this is an abbreviated form of the ‘rate of repurchase’ and in western economies, it is known as the ‘rate of discount’.
•  The higher the repo rate, the higher the cost of short-term money to the banks and vice versa. Generally, whenever the repo rate is raised, banks pass the burden on to customers.
•  If the repo rate is lowered, then banks can potentially charge lower interest rates on the loans taken by borrowers and vice versa.
•  Thus, it will benefit the borrowers as EMIs (equated monthly instalments) will decrease.
•  It will inject liquidity over a period. It has several purposes to serve— a stronger money market, stability, and better costing and signalling of the loan products. Injecting liquidity may lead to inflation in the country.
•  Recently, the Reserve Bank of India (RBI) has decided to lower the interest rate for the fourth consecutive policy review as it reduced the repo rate by 35 bps to 5.40%.

• Statement 1 is incorrect: It do not lend directly to the small and micro enterprises.
Mudra Bank
• Pradhan Mantri MUDRA Yojana (PMMY) is a scheme for providing loans up to 10 lakh to the non-corporate, non-farm small/micro enterprises.
• These loans are classified as MUDRA loans under PMMY. These loans are given by Commercial Banks, RRBs, Small Finance Banks, MFIs and NBFCs.
• The borrower has to approach any of the lending institutions mentioned above or can apply online through this portal www.udyamimitra.in. It is not a direct lender.
• MUDRA has three products namely ‘Shishu’, ‘Kishore’ and ‘Tarun’ to signify the stage of growth / development and funding needs of the beneficiary micro unit / entrepreneur and also provide a reference point for the next phase of graduation / growth.
• Micro Units Development and Refinance Agency Ltd. [MUDRA] is an NBFC (NonBanking Financial Company) supporting development of micro enterprise sector in the country. 

• Statement 1 is incorrect: Property taxes are not the only sources of direct tax revenue at the third tier of government. There are other sources too.
Taxation of local governments in India
• The property taxes collected at the second and third tiers of government are land tax assessed and collected at the state level; building tax, including property/house tax collected at the municipality (ULG) and gram panchayats (RLG) level.
• Property taxes are the principal sources of direct tax revenue at the third tier of government, apart from professional taxes.
• The collections from these potentially buoyant sources of revenue are generally stacked at very low levels because of archaic base values—far below market values— applied to properties, low rates of taxes levied, and lack of powers to local bodies in some states like Odisha and Rajasthan.

• All statements are correct
Bank Nationalization
• 50 years ago, the Indian financial sector underwent a tectonic shift, when Indira Gandhi government nationalized the 14 biggest commercial banks in 1969.
• According to many economists nationalization of banks was the singlemost-important economic policy decision taken by any government after 1947. The impact of this decision is considered by some to be, even more than the economic reforms of 1991.
• During that time many Asian countries were switching to more market-oriented policies, India on the other hand, supported the socialist policies.
Objectives of Bank Nationalization
• Bank nationalization aimed to attain three primary objectives:
1. To break the nexus between the banks and the big businesses who were disproportionately cornering bank finance for their narrow, selfish ends and rapidly expand the banking network to the unbanked regions, especially rural areas and deliver institutional credit to the farmers, small businesses and other weaker sections of society, many of whom were caught in a vicious trap of usury.
2. To ensure the balanced flow of credit to all the productive sectors, across various regions and social groups of the country.
3. To provide stability to the banking system by preventing bank failures and speculative activities.

• Both statements are correct
Hybrid Annuity Model (HAM)
• It’s a mix of EPC and BOT-Annuity models.
• In this model the project cost is shared by the government and the private player in ratio of 40:60, respectively. 
• The private player is responsible to construct and hand over the roads to the government which will collect toll (if wishes)—maintenance remaining the responsibility of the private player till the annuity period.
• Private Player is paid a fixed sum of economic compensation (called ‘annuity’, similar to the BOT ANNUITY model of past) by the government for a fixed tenure (normally 15 years, though it is flexible).
• The private player which demands lowest annuity (in bidding) gets the contract.

• Statement  1  is incorrect: payments banks is an examples of differentiated bank in India.
Payment Bank 
• There are two kinds of banking licenses that are granted by the Reserve Bank of India – Universal Bank Licence and Differentiated Bank Licence.
• Differentiated Banks (niche banks) are banks that serve the needs of a certain specific demographic segment of the population.
• Small Finance Banks and Payment Banks are examples of differentiated banks in India.
• Custodian Banks and Wholesale and Long-Term Finance banks (WLTF) are newly proposed differentiated banks.
Scope of Activities
• Acceptance of demand deposits-Payments bank will initially be restricted to holding a maximum balance of Rs. 100,000 per individual customer.
• Issuance of ATM/debit cards-Payments banks cannot issue credit cards.
• Payments and remittance services through various channels.
• Business Correspondents (BC) of another bank, subject to the Reserve Bank guidelines on BCs.
• Distribution of non-risk sharing simple financial products like mutual fund units and insurance products, etc.
• The payments bank cannot undertake lending activities.

• Statement 1 is incorrect: The first economic census of Independent India was conducted during 1977.
Economic Census

• Conducting periodic Economic Census has been the means of measuring the diversity of non-farm economic activities in all its major dimensions.
• In respect of units operating in fixed premises/ locations, the Economic Census is expected to provide updates on units actually operative to the concerned registering /licensing authorities, most of whom have no mechanism to maintain live registers.
• In respect of units without fixed premises / location and invisible units, the Economic Census is expected to provide location-wise information on number of units along with other characteristics.
• The census also provides information on clustering of various economic activities/ occupations at different locations and on lack of adequate involvement in such avocations in some locations.
• Comparing the information provided by two consecutive Economic Censuses will throw light on locations becoming more and more economically active, location that are not so, and on emerging activities/ occupations, and those that are waning away over time.
• All this information is very important for policymakers in the government at all levels for evolving policy interventions.
• The First Economic Census was conducted throughout the country, except Lakshadweep, during 1977 in collaboration with the States/ Union Territories (UTs).
• The coverage was restricted to only nonagricultural establishments employing at least one hired worker on a fairly regular basis. Data on items such as description of activity, number of persons usually working, type of ownership, etc. were collected.  
• Ministry of Statistics and Programme Implementation (MoSPI) conducts the Economic Census of India 2019. 
• CSC e-Governance Services India Limited, a Special Purpose Vehicle (SPV) formed under the Ministry of Electronics and Information Technology (MeITY), has been selected as the implementation agency for the development of ICT platform system and conduction of fieldwork for the 7th Economic Census. 
• The ministry aims to capture the complete count of all establishments located within the geographical boundary of India.
• The exercise will start with the state of Tripura followed by Pondicherry.

• All statements are correct
New Currency Notes
• The new design bank notes are distinctly different from the current Mahatma Gandhi Series of bank notes in colour, size and theme. The theme of the new series notes is India’s heritage sites.
• A few new other elements added in these notes are numerals in Devnagari and the logo of Swachh Bharat. The new notes also have design elements in myriad and intricate forms and shapes.
The new ₹200 denomination banknotes
• The new ₹200 denomination banknotes in the Mahatma Gandhi (New) Series bear signature of the Governor, Reserve Bank of India.
• The note has motif of ‘Sanchi Stupa’ on the reverse, depicting the country’s cultural heritage. 
• The base colour of the note is bright yellow.
• The note has other designs, geometric patterns aligning with the overall colour scheme, both at the observe and reverse.
• The size of the new note is 66mm x 146mm.

• Statement 1 is incorrect: High-speed internet as a core utility shall be made available in all the gram panchayats.
Digital India 
• It is a programme to transform India into digital empowered society and knowledge economy.  This programme has been envisaged by Department of Electronics and Information Technology (DeitY).
• The Digital India is transformational in nature and would ensure that Government services are available to citizens electronically.
• It would also bring in public accountability through mandated delivery of government’s services electronically; a Unique ID and e-Pramaan based on authentic and standard based interoperable and integrated government applications and data basis.
• The vision areas of Digital India:
1. Infrastructure as Utility to Every Citizen:
(i) High speed internet as a core utility shall be made available in all Gram Panchayats.
(ii) Cradle to grave digital identity - unique, lifelong, online and authenticable.
(iii) Mobile phone and Bank account would enable participation in digital and financial space at individual level.
(iv) Easy access to a Common Service Centre within their locality.
(v) Shareable private space on a public Cloud. (vi) Safe and secure Cyber-space in the country.
• Digital India aims to provide the much needed thrust to the nine pillars of growth areas, namely
1. Broadband Highways,
2. Universal Access to Mobile Connectivity,
3. Public Internet Access Programme,
4. e-Governance: Reforming Government through Technology,
5. e-Kranti - Electronic Delivery of Services,
6. Information for All,
7. Electronics Manufacturing,
8. IT for Jobs
9. Early Harvest Programmes.

• Both statements are correct
Marginal Standing Facility (MSF)
Marginal Standing Facility (MSF) was announced by the Reserve Bank of India (RBI) in its Monetary Policy (2011-12) and refers to the penal rate at which banks can borrow money from the central bank over and above what is available to them through the LAF window.
• Marginal standing facility (MSF) is a window for banks to borrow from the Reserve Bank of India in an emergency situation when inter-bank liquidity dries up completely.
• Banks borrow from the central bank by pledging government securities at a rate higher than the repo rate under liquidity adjustment facility or LAF in short. The MSF rate is pegged 100 basis points or a percentage point above the repo rate. Under MSF, banks can borrow funds up to one percentage of their net demand and time liabilities (NDTL).
• The banks under MSF can borrow funds by pledging government securities within the limits of the statutory liquidity ratio. Only scheduled commercial banks can borrow under this window.
• The objective of MSF is to reduce volatility in the overnight lending rates in the interbank market and to enable smooth monetary transmission in the financial system.
• MSF represents the upper band of the interest corridor with repo rate at the middle and reverses repo as the lower band.

• Statement 1 is incorrect: It not only promotes manufacturing sector but other sectors too.
Make in India
• The Government has launched the ‘Make in India’ Programme to promote manufacturing in the country;
• The “Make in India” initiative is based on four pillars, which have been identified to give boost to entrepreneurship in India, not only in manufacturing but also other sectors. The four pillars are:
• New Processes: ‘Make in India’ recognizes ‘ease of doing business’ as the single most important factor to promote entrepreneurship. A number of initiatives have already been undertaken to ease business environment.
• New Infrastructure: Government intends to develop industrial corridors and smart cities, create world class infrastructure with state-of-the-art technology and high-speed communication. Innovation and research activities are supported through a fast paced registration system and improved infrastructure for IPR registration. The requirement of skills for industry are to be identified and accordingly development of workforce to be taken up.
• New Sectors: FDI has been opened up in Defense Production, Insurance, Medical Devices, Construction and Railway infrastructure in a big way. Similarly FDI has been allowed in Insurance and Medical Devices.
• New Mindset: In order to partner with industry in economic development of the country Government shall act as a facilitator and not a regulator.

• All pairs are correctly matched
Narasimham Committee on Financial System 
• The economic reforms of 1991 required greater private participation for economic development and thus a need was felt to restructure the whole financial system in India. Accordingly, a high level Committee on Financial System (CFS) headed by M. Narasimham was set up in 1991 to examine all aspects relating to structure, organization, function and procedures of the financial system.
• Major recommendations were:
1. Market-based borrowing programme for government so that banks benefit from their SLR investments.
2. Concept of PSL (Priority Sector Lending) should be redefined to include only the weakest sections of the rural community such as marginal farmers, rural artisans, village and cottage industries etc.
3. Interest rates to be broadly determined by market forces.
4. Substantial reduction in the number of the PSBs through mergers and acquisitions—to bring about greater efficiency in banking operations.
5. Setting up of Asset Reconstruction Companies (ARC’s) to tackle the menace of non-performing assets.
6. Introduction of capital adequacy norms (i.e., CAR provisions) with international standard started.
Working Group on the Issues and Concerns in the NBFC Sector
• It was chaired by Smt. Usha Thorat was constituted to review the existing regulatory and supervisory framework of non-banking finance companies (NBFCs) with special focus on the risks in the sector. The Working Group was also to recommend appropriate regulatory and supervisory measures to address these risks, with the aim of creating a strong and resilient financial sector, vital for all round economic growth of the country.
Development and Technology Funds
• There is a cost involved in this massive exercise of extending financial services to hitherto excluded segments of population. Such costs may come down over a period of time with the resultant business expansion. However, in the initial stages some funding support is required for promotional and developmental initiatives that will lead to better credit absorption capacity among the poor and vulnerable sections and for application of technology for facilitating the mandated levels of inclusion. The  Committee headed by Dr. C. Rangarajan had proposed the constitution of two funds with NABARD – the Financial Inclusion Promotion & Development Fund and the Financial Inclusion Technology Fund with an initial corpus of Rs. 500 crore each to be contributed in equal proportion by GoI / RBI / NABARD.

Land Reform Measures
• To realize the objectives of land reforms, the government took three main steps which had many internal sub-steps:
• Abolition of Intermediaries
1. Under this step, the age-old exploitative land tenure systems of the Zamindari, Mahalwari and Ryotwari were fully abolished. 
• Tenancy Reforms
1. Under this broader step, three interrelated reforms protecting the landtenants were effected:
2. Regulation of rent so that a fixed and rational rate of rent could be paid by the share-croppers to the land owners;
3. Security of tenure so that a share-cropper could feel secure about his future income and his economic security;
4. Ownership rights to tenants so that the landless masses (i.e., the tenants, the share-croppers) could get the final rights for the land they plough—“land to the tillers”. 
• Reorganization of Agriculture 
1. Redistribution of land among the landless poor masses after promulgating timely ceiling laws—the move failed badly with few exceptions, such as West Bengal, Kerala and partially in Andhra Pradesh.
2. Consolidation of land could only succeed in the regions of the Green Revolution (i.e., Haryana, Punjab and western Uttar Pradesh) and remained marred with many loopholes and corruption.
3. Cooperative farming, which has a high socio-economic moral base, was only used by the big farmers to save their lands from the draconian ceiling laws.

• Statement 1 is incorrect: Merger of Punjab National Bank with Oriental Bank of Commerce and United bank of India will make it the second-largest lender in the country after SBI
Mergers of Banks
• Recently the Finance Minister announced that 10 public sector banks are to be merged into four.
• Punjab National Bank, Oriental Bank of Commerce and United Bank of India to merge to form the country’s secondlargest lender (anchor bank- PNB)
• Canara Bank and Syndicate Bank to amalgamate (anchor bank- Canara)
• Union Bank of India to acquire Andhra Bank and Corporation Bank (anchor bank- Union Bank of India)
• Indian Bank to merge with Allahabad Bank (anchor bank- Indian Bank)
• In 2017, the State Bank of India absorbed five of its associates (State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Travancore, State Bank of Mysore and State Bank of Patiala.) and the Bharatiya Mahila Bank.
• Last year, the government had approved the merger of Vijaya Bank and Dena Bank with Bank of Baroda (BoB) that become effective from April 1, 2019.
• India needs fewer, mega banks which are strong, because in every sense, from borrowing rates to optimum utilization, the economies of scale as far as banking sector are concerned are of great help.
• Narasimham Committee (1991&1998), Verma Committee (1996 ), Khan Committee (1997) and P.J. Nayak Committee (2013) have all recommended merger of PSB’s for a strong banking system in India.

• Both statements are correct
UDAN Scheme
• UDAN is an innovative scheme to develop the regional aviation market. It is a marketbased mechanism in which airlines bid for seat subsidies.
• This first-of-its-kind scheme globally will create affordable yet economically viable and profitable flights on regional routes so that flying becomes affordable to the common man even in small towns.
• The scheme UDAN envisages providing connectivity to un-served and under-served airports of the country through revival of existing air-strips and airports.
•  UDAN has a unique market-based model to develop regional connectivity.
•  Interested airline and helicopter operators can start operations on hitherto unconnected routes by submitting proposals to the Implementing Agency.
•  The operators could seek a Viability Gap Funding (VGF) apart from getting various concessions.
•  All such route proposals would then be offered for competitive bidding through a reverse bidding mechanism and the route would be awarded to the participant quoting the lowest VGF per Seat.

• Statement 2 is incorrect: Bankers deposits to RBI are RBI’s liabilities.
Asset and Liabilities of RBI
• Assets
1. Gold
2. Foreign Exchange Reserve
3. Government Securities
4. Loans given to banks.
• Liabilities  of RBI
1. Currencies in circulation
2. Bankers deposit to RBI
3. Government’s deposit to RBI

• Option (d) is correct
Harmonized Master List of Infrastructure Sub-sectors

• Option (a) is correct: Dated Securities (G-Sec) is part of Capital market.
Money Market Instruments 
• Treasury Bill: It is basically an instrument of short-term borrowing by the Government of India maturing in less than one year. They are also known as Zero-Coupon Bonds issued by the Reserve Bank of India on behalf of the Central Government to meet its short-term requirement of funds.
• Commercial Paper: It is a short-term promissory note, negotiable and transferable by endorsement and delivery with a fixed maturity period. It is issued by large and creditworthy companies to raise short-term funds at lower rates of interest than market rates. It usually has a maturity period of 15 days to one year.
• Call Money: It is short term finance repayable on demand, with a maturity period of one day (more than 1 day up to 14 days it is called as notice money.), used for inter-bank transactions. Call money is a method by which banks borrow from each other to be able to maintain the cash reserve ratio. The interest rate paid on call money loans is known as the call rate. It is a highly volatile rate that varies from day-to-day and sometimes even from hour-to-hour.
• Certificate of Deposit: It is negotiable, short-term instruments in bearer form, issued by commercial banks and development financial institutions. They can be issued to individuals, corporations, and companies during periods of tight liquidity when the deposit growth of banks is slow but the demand for credit is high.
• Commercial Bill: It is a bill of exchange used to finance the working capital requirements of business firms. It is a short-term, negotiable, self-liquidating instrument which is used to finance the credit sales of firms. 

• Both statements are correct
Monetary Policy Tools
Liquidity Adjustment Facility (LAF)
• The LAF is the key element in the monetary policy operating framework of the RBI (introduced in June 2000). On a daily basis, the RBI stands ready to lend to or borrow money from the banking system, as per the need of the time, at fixed interest rates (repo and reverse repo rates).
• Together with moderating the fundmismatches of the banks, LAF operations help the RBI to effectively transmit interest rate signals to the market.
Open Market Operations (OMOs)
• OMOs are conducted by the RBI via the sale/purchase of government securities (G-Sec) to/from the market with the primary aim of modulating rupee liquidity conditions in the market.
• OMOs are an effective quantitative policy tool in the armory of the RBI but are constrained by the stock of government securities available with it at a point in time.

• Both statements are correct
Micro ATMs
• Micro ATMs are card swipe machines through which banks can remotely connect to their core banking system.
• This machine comes with a fingerprint scanner attached to it. In other words, micro ATMs are the handheld point of sale terminals used to disburse cash in remote locations where bank branches cannot reach. Micro ATMs are similar to point of sale (PoS) terminals and are a doorstep mobile banking arrangement cum-mobile ATM device.
How is it more convenient?
• According to bankers, the cost of deployment of a micro ATM is lesser than that of an ordinary ATM. ATMs need at least 80-100 transactions a day to be viable as they cost several lakhs. Micro ATM costs less than Rs 20,000. 
• It is portable
• Micro ATM has connectivity through GSM, hence it can travel from village to village.
How does the micro ATM work?
• Bank will assign a correspondent who will sign up customers in remote areas after verifying their identity (fingerprint can be used as an authentication tool for rural people ).
• The fingerprint and personal details may also be linked to the Aadhaar Card, which will then serve as the ID proof required to withdraw money.

• Statement 1 is incorrect: The entry of FDI’s by non-resident citizens is regulated through automatic and approval route.
Foreign Direct Investment (FDI)
• The entry of Foreign Direct Investment by non-residents into India is regulated through two routes automatic route and approval route.
• The automatic route means less restriction or more liberalized regulation.Any approval from the Reserve Bank or Government of India for the investment is not required by foreign investor and Indian company.
FDI in Service Sector
• FDI equity inflows into the services sector accounted for more than 60 per cent of the total FDI equity inflows into India.
• During 2018-19, FDI equity inflows into services sector fell by US$696 million or 1.3 per cent from the previous year to about
•  The Government has implemented FDI reforms in a number of sectors, including defense, construction development, insurance/pension/other financial services, asset reconstruction companies, broadcasting, civil aviation, pharmaceuticals and trading etc.
•  An investor-friendly FDI policy has been put in place under which up to 100 per cent FDI is permitted via automatic route in most sectors, including singlebrand retail trading, construction development and regulated financial sector activity.

• Statement 4 is incorrect: To strengthen banks and foster a culture of clean and responsible banking, the Government has followed a comprehensive 4 R’s approach of recognition, resolution, recapitalization and reforms.
Non-Performing Assets (NPAs)
• Non-Performing Assets (NPAs) are the bad loans of the banks.
• A loan is considered NPA if it has not been serviced for one term (i.e., 90 days). This is known as ‘90 day’ overdue norm.
• NPAs are classified into three types:
1. Sub-standard: remaining NPAs for less than or equal to 12 months;
2. Doubtful: remaining NPAs for more than 12 months; and
3. Loss assets: where the loss has been identified by the bank or internal/ external auditors or the RBI inspection, but the amount has not been written off.
Recent Initiatives for NPAs
• To strengthen banks and foster a culture of clean and responsible banking, the Government has followed a comprehensive 4 R’s approach of recognition, resolution, recapitalization and reforms.
• addition to 4R’s approach, Government has taken a number of steps to expedite and enable resolution of NPAs of PSBs:
• The Insolvency and Bankruptcy Code, 2016 (IBC) has been enacted, which has provided for the taking over management of the affairs of the corporate debtor at the outset of the corporate insolvency resolution process. Coupled with debarment of willful defaulters and persons associated with NPA accounts from the resolution process, this has effected a fundamental change in the creditor-debtor relationship.
• Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act has been amended to make it more effective, with provision for three months’ imprisonment in case the borrower does not provide asset details and for the lender to get possession of mortgaged property within 30 days.
• 6 new Debt Recovery tribunals have been set up.

• Statement 1 is incorrect: There  is no uniform premium for all the crops.
‘Pradhan Mantri Fasal Bima Yojana’ 
The highlights of this scheme are as under:
• A premium of only 2% to be paid by farmers for all Kharif crops and 1.5% for all Rabi crops. In case of annual commercial and horticultural crops, the premium to be paid by farmers will be only 5%. The premium rates to be paid by farmers are very low and balance premium will be paid by the Government to provide full insured amount to the farmers against crop loss on account of natural calamities.
• There is no upper limit on Government subsidy. Even if balance premium is 90%, it will be borne by the Government.
• Earlier, there was a provision of capping the premium rate which resulted in low claims being paid to farmers. This capping was done to limit Government outgo on the premium subsidy. This capping has now been removed and farmers will get claim against full sum insured without any reduction.
• The use of technology will be encouraged to a great extent. Smart phones will be used to capture and upload data of crop cutting to reduce the delays in claim payment to farmers. Remote sensing will be used to reduce the number of crop cutting experiments.

• Statement 3  is incorrect: It Issues and exchanges or destroys currency and coins not fit for circulation.
Reserve Bank of India
• The Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934.
• The Central Office of the Reserve Bank was initially established in Calcutta but was permanently moved to Mumbai in 1937. The Central Office is where the Governor sits and where policies are formulated.
Though originally privately owned, since nationalization in 1949, the Reserve Bank is fully owned by the Government of India.
Main Functions
• Monetary Authority:
1. Formulates, implements and monitors the monetary policy.
2. Objective: maintaining price stability while keeping in mind the objective of growth.
• Regulator and supervisor of the financial system:
• Prescribes broad parameters of banking operations within which the country’s banking and financial system functions.
• Objective: maintain public confidence in the system, protect depositors’ interest and provide cost-effective banking services to the public.
• Manager of Foreign Exchange:
1. Manages the Foreign Exchange Management Act, 1999.
2. Objective: to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.
• Issuer of currency:
1. Issues and exchanges or destroys currency and coins not fit for circulation.
2. Objective: to give the public an adequate quantity of supplies of currency notes and coins and in good quality.
• Developmental role:
1. Performs a wide range of promotional functions to support national objectives.
• Regulator and Supervisor of Payment and Settlement Systems:
1. Introduces and upgrades safe and efficient modes of payment systems in the country to meet the requirements of the public at large.
2. Objective: maintain public confidence in payment and settlement system
• Related Functions:
1. Banker to the Government: performs merchant banking function for the central and the state governments; also acts as their banker.
2. Banker to banks: maintains banking accounts of all scheduled banks.

• Statement 2 is incorrect: Computer &  Information  and Communication Technology (ICT) services has largest share of the total services exports.
Trade in Services Sector

• Both statements are correct
Banks Board Bureau (BBB)
• It is an autonomous body of the Government of India tasked to improve the governance of Public Sector Banks, recommend selection of chiefs of government-owned banks and financial institutions and to help banks in developing strategies and capital raising plans.
• As part of its mandate, and guided by a spirit of collaboration, the bureau is engaging with various stakeholders. The objective of such engagement is to help prepare the banks to take on the competition, have the ability to appropriately manage and price risk across business cycles, develop resilience to generate internal capital and have the capacity to generate external capital warding of the moral hazard in counting on the scarce budgetary resources of taxpayers.
• The Bureau is also engaging with the Public Sector Banks (PSBs) to help build capacity to attract, retain and nurture both talent and technology - the two key differentiators of business competencies in the days to come.
• In its endeavor, the Bureau is mindful of the need to have a fully empowered board in each and every PSB. While the Bureau is working towards attracting the best personages on the boards, it is these boards which should drive the overall strategy of a bank within its risk capacity and also act as custodians who should reconcile the diverse interests of various stakeholders.
• It was set up under the government’s Indradanush program.

• Statement 1 is incorrect: It has been constituted under GST Act 2017.
National Anti-Profiteering Authority (NAA)
• The National Anti-Profiteering Authority (NAA) has been constituted under Section 171 of the Central Goods and Services Tax Act, 2017 to ensure that the reduction in rate of tax or the benefit of input tax credit is passed on to the recipient by way of commensurate reduction in prices.
• Further, the following steps have been taken by the NAA to ensure that customers get the full benefit of tax cuts:
1. Holding regular meetings with the Zonal Screening Committees and the Chief Commissioners of Central Tax to stress upon consumer awareness programmes;
2. Launching a helpline to resolve the queries of citizens regarding registration of complaints against profiteering.
3. Receiving complaints through email and NAA portal.
4. Working with consumer welfare organizations in order to facilitate outreach activities.

• Pair 1, 2 and 3 are incorrectly matched:
1. India Government Mint: Hyderabad
2. Indian Security Press: Nasik Road
3. Bank Note Press: Dewas
4. Bhartiya Reserve Bank Note Mudran Private Limited: Mysore
Currency Printing press and Mints
• The Reserve Bank of India (RBI) prints and manages currency in India, whereas the Indian government regulates what denominations to circulate.
• The Indian government is solely responsible for minting coins.
• The production of bank notes, coins, nonjudicial stamps, postage stamps and other government related documents is managed by Security Printing and Minting Corporation of India Limited (SPMCIL). It was established in 2006 after the corporatization of presses and mints functioning under the Indian Ministry of Finance. SPMCIL contains nine units, out of which there are four presses, four mints and a paper mill.
Presses 
• The first printing press of India Currency Note Press (CNP) was established in 1928 for printing bank notes in India. This press is located in Nashik, Maharashtra.
• Bank Note Press (BNP) was established later. It has two branches located in Mysore, Karnataka and Dewas,Madhya Pradesh. Currently both CNP and BNP print Indian currency.
• BNP has an ink factory as well and it produces ink for security printing.
• Currency is also printed by Reserve Bank of India. It has two printing presses which are owned by Bhartiya Reserve Bank Note Mudran Private Limited. These printing presses are located in Mysore, Karnataka and Salboni, West Bengal.
• Indian security Press is located in Nashik and Security Printing Press is located in Hyderabad. Both of these printing presses produce travel documents, postage stamps and other government related documents.
Mints
• Security Printing and Minting Corporation of India Limited (SPMCIL) comprises four mints:
1. India Government Mint, Mumbai
2. India Government Mint, Kolkata
3. India Government Mont, Hyderabad
4. India Government Mint, Noida