Important Banking Awareness Materials: Crack SBI PO Mains 2017 (Day-3)- Download in PDF

Important Banking Awareness Materials: Crack SBI PO Mains 2017 (Day-3)- Download in PDF:

Dear Readers, SBI PO Mains Examination is approaching shortly and to Gear Up your preparation we have provided the “15 days Action Plan – Preparation Time Table for SBI PO Mains 2017”, based on the schedule we are provided Important Banking Awareness Materials, kindly make use of it.

IMPORTANT POINTS ABOUT RBI

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 nationalisation in 1949, the Reserve Bank is fully owned by the Government of India.

The Preamble of the Reserve Bank of India describes the basic functions of the Reserve Bank as:

"...to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage."

Central Board

The Reserve Bank's affairs are governed by a central board of directors. The board is appointed by the Government of India in keeping with the Reserve Bank of India Act.

·         Appointed/nominated for a period of four years

·         Constitution:

Official Directors

·         Full-time : Governor and not more than four Deputy Governors

Non-Official Directors

·         Nominated by Government: ten Directors from various fields and two government Official

·         Others: four Directors - one each from four local boards

Present Governor and Deputy Governor of RBI
Dr. Urjit R. Patel
Shri S. S. Mundra	Deputy Governor
Shri N. S. Vishwanathan	Deputy Governor
Dr. Viral V. Acharya	Deputy Governor
Shri B.P. Kanungo	Deputy Governor

FUNCTIONS OF RESERVE BANK OF INDIA

     There are seven major functions of the Reserve Bank of India. They are,

1). Issue of Bank Notes:

·         The Reserve Bank of India has the right to issue currency notes except one rupee notes which are issued by the Ministry of Finance.

·         There are many advantages of Reserve Bank of India.

(i) brings uniformity in notes issue

(ii) makes possible effective state supervision

(iii) easy to control and regulate with requirements in the economy.

(iv) Keeps faith of the public in the paper currency.

2). Banker to Government:

·         The Reserve Bank manages the banking needs of the Government.

·         It has to maintain and operate the Government’s deposit accounts.

·         It represents the Government of India as the member of the IMF and the World Bank.

3). Custodian of Cash Reserves of Commercial Banks:

·         The Commercial banks hold deposits in the Reserve Bank and the latter has the custody of the cash reserves of the commercial banks.

4). Custodian of country’s Foreign Currency Reserves:

·         The Reserve Bank has the custody of the country’s reserves of international currency, and this enables the Reserve Bank to deal with crisis connected with adverse balance of payments position.

5). Lender of Last Resort:

·         The commercial banks approach the Reserve Bank in times of emergency to tide over financial difficulties, and the Reserve bank comes to save from their danger from higher rate of interest.

6). Central Clearance and Accounts Settlement:

·         It is easy to deal with each other and settle the claim of each on the other through book keeping entries in the books of the Reserve Bank.

·         The clearing of accounts has now become an essential function of the Reserve Bank.

7). Controller of Credit:

·         The supply of money has important implications for economic stability and the importance of control of credit becomes obvious

·         Credit is controlled by the Reserve Bank in accordance with the economic priorities of the Government.

MAJOR ROLES OF RESERVE BANK OF INDIA

·         In every country there is one organization which works as the Central Bank.

·         The function of the central bank of a country is to control and monitor the banking and financial system of the country

·         In, India the Reserve Bank of India (RBI) is the Central Bank.

·         RBI is the Regulator of Financial System. The objectives of these regulation include:

o   Controlling money supply in the system,

o   Monitoring different key indicators.

o   Maintaining people’s confidence in banking and financial system.

·         RBI is the Controller and Supervisor of Banking systems. These banks may be:

o   Public sector banks

o   Private sector banks

o   Foreign banks

o   Co-operative banks, or

o   Regional rural banks.

Important RBI Acts and its Functions

Umbrella Act:

·         RBI Act, 1934: It governs the central bank’s functions.

·         Banking Regulation Act, 1949: It governs the financial sector.

Acts Governing Specific Functions:

·         Public Debt Act, 1944/Government Securities Act (proposed): Governs the government debt market.

·         Securities Contract (Regulation) Act, 1956: It regulates the government securities market.

·         Indian Coinage Act, 2011: Governs laws related to currency and coins.

·         Foreign Exchange Regulation Act, 1973/ Foreign Exchange Management Act, 1999: Governs foreign exchange market.

·         Payment and Settlement System Act, 2007: Provides for regulation and supervision of payment systems in India.

·         Government Securities Regulations, 2007.

Acts Governing Banking Operations:

·         Companies Act, 2013: Governs banks as companies.

·         Banking Companies (Acquisition and Transfer of Undertakings) Act 1970/1980: On Nationalization of Banks.

·         Bankers Books Evidence Act.

·         Banking Secrecy Act.

·         Negotiable Instruments Act, 1881.

Acts Governing Individual Institutions:

·         State Bank of India Act, 1954.

·         The Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003.

·         The Industrial Finance Corporation (Transfer of Undertaking and Repeal) Act, 1993.

·         National Bank for Agriculture and Rural Development Act.

·         National Housing Bank Act.

·         Deposit Insurance and Credit Guarantee Corporation Act.

WORLD BANK

1). The World Bank is an international financial institution that provides loans to developing countries for capital programs

2). It comprises of 2-institutions

·         International Bank for Reconstruction and Development (IBRD) – 188 countries

·         International Development Association (IDA) – 172 countries

3). The World Bank’s official goal is the reduction of poverty

4). It was established in 1944

5). Headquarters – Washington DC, United States

6). Founders – Lord Keynes and Harry Dexter White – Fathers of both the World Bank and the International Monetary Fund

7). Parent Organization – World Bank Group (WBG)

8). President – same as the President of WBG – presently Jim Yong Kim (12^th President)

9). Objectives of World Bank

·         To provide guarantee for loans granted to small and large units and other projects of member countries

·         To ensure the implementation of development projects so as to bring about a smooth transference from a war-time to peace economy

10). It has 2-types of members:

a.   Founder members

b.   General members

11). India is a founder member

12). Voting right of every member is based on the member country’s share in the total capital of the Bank

13). Every member of the IMF is automatically a member of World Bank

14). Any member can be debarred from World Bank under the following conditions

·         By written notice to the bank, but such country has to repay the granted loans on terms and conditions decided at the time of sanctioning the loan

·         Any country working against the guidelines of Bank can be debarred by the Board of Governors

15). Top 5-member countries with voting powers are as follows:

·         United States – 15.85%

·         Japan – 6.84%

·         China – 4.42%

·         Germany – 4%

·         United Kingdom – 3.75%

16). The initial authorized capital of the World Bank was 10,000 million which was divided into 1lakh shares each

17). The authorized capital of the Bank has been increased from time to time with the approval of the member countries. The member countries repay the share amount to the World Bank in the following ways:

·         2% allotted share are repaid in gold, US dollar or SDR

·         18% of the country’s capital share in its own currency

·         Remaining 80% share is deposited by the member country on the demand of World Bank

18). World Bank can grant loans up to 20% of the member country’s share paid up as capital

19). World Bank takes guidance of the following international institutions

·         FAO

·         WHO

·         UNESCO

·         UNIDO

20). 75% of its total loans are sanctioned to developing countries while 25% to developed countries

NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT

1). National Bank for Agriculture and Rural Development (NABARD) is an apex development bank in India

2). Headquarters – Mumbai

3). It was established by the Committee set up by RBI to Review Arrangements for Institutional Credit for Agriculture and Rural Development (CRAFICARD) under the Chairman Shri. B. Sivaraman on 12^th July 1982

4). Its main aim is to uplift rural India by increasing the credit flow for evaluation of agricultural and rural farm sector

5). Chairman – Dr. Harsh Kumar Bhanwala

6). The government of India now holds 99% of NABARD’s shares which were sold by RBI

7). NABARD is active member of Alliance for Financial Inclusion

8). NABARD replaced the following organizations

·         Agricultural Credit Department

·         Rural Planning and Credit Cell

·         Agricultural Refinance and Development Corporation

9). The initial capital of NABARD was Rs. 100 crore

10). Present share details of NABARD are as follows

·         Government of India – Rs.4680 crore – 99%

·         RBI – Rs. 20 crore – 1%

11). NABARD takes measures towards institutions which help in improving absorptive capacity of the credit delivery system including

·         Monitoring

·         Formulating rehabilitation schemes

·         Restructuring of credit institutions

·         Training of personnel

12). It coordinates the rural financing activities of the

·         Government of India

·         State Governments

·         Reserve Bank of India

·         Other national institutions concerned with policy formulation

13). NABARD refinances financial institutions which finance the rural sector. These refinances are availed by the following organizations

·         State Co-operative Agriculture and Rural Development Bank (SCARDB)

·         State Co-operative Banks(SCB)

·         Regional Rural Banks(RRBs)

·         Commercial Banks(CB)

·         Other financial institutions approved by RBI

14). It has 336 District offices across the country including 1-sub office at Port Blair and one special cell at Srinagar

15). It has 6 training establishments

16). NABARD is also known as Self Help Group (SHG) Bank Linkage Programme. About 22 lakh SGHs were credited through this programme

17). NADARD has a portfolio of Natural Resource Management Programmes in the following fields

·         Watershed development

·         Tribal development

·         Farm innovation

18). The RBI and NABARD has laid out guidelines for commercial, Regional Rural and Cooperative banks to provide data regarding loans given by banks to the microfinance institutions

INTERNATIONAL MONETARY FUND

1). The International Monetary Fund (IMF) is an international organization of 188 countries working together to

·         Foster global monetary co-operation

·         Secure financial stability

·         Facilitate international trade

·         Promote high employment and sustainable economic growth

·         Reduce poverty around the world

2). It was formed in 1944 at the Bretton Woods Conference

3). Established on 27^th December 1945, with 29 member countries initially

4). Headquarters – Washington DC

5). Managing Director – Christine Lagarde

6). Regional offices – Paris and Geneva

7). It was formed with the following objectives

·         To stabilize exchange rates

·         Assist the reconstruction of the world’s international payment system post the World War II

8). Now the role of IMF is much more active managing the economic policy instead of just exchange rates

9). Low income countries can borrow on concessional terms i.e., there is a period of time with no interest rates through the

·         Extended Credit Facility(ECF)

·         Standby Credit Facility(SCF)

·         Rapid Credit Facility(RCF)

10). IMF also provides non-concessional loans which has interest rates as follows

·         Standby Arrangements(SBA)

·         Flexible Credit Line(FCL)

·         Precautionary and Liquidity Line(PLL)

·         Extended Fund Facility(EFF)

11). IMF provides emergency assistance to all its members facing urgent balance of payment needs through the newly introduced Rapid Financing Instrument (RFI)

12). To become a member of IMF, a country must apply and then be accepted by a majority of the existing 188 members

·         Each member is assigned a quota based on its relative size of their economy upon joining

·         A member’s quota determines the maximum amount of financial resources

·         A member must pay its subscription – 25% to be paid in the IMF’s own currency called as Special Drawing Rights(SDR) and the remaining 75% in the member’s own currency

13). Each member of IMF has 250 Basic votes and one additional vote for each SDR100,000 of quota.

Top 5-members of IMF based on their voting power are as follows

·         United states – 16.75% - 421,961 votes

·         Japan – 6.23% - 157,022 votes

·         Germany – 5.81% - 146,392 votes

·         France – 4.29% - 108,122 votes

·         United kingdom – 4.29% - 108,122 votes

14). India has 58,952 votes with 2.34% voting power

15). Palau is the last member country having voting power of 0.01% and 281 votes

16). The amount of finance that a member can obtain from IMF is based on its quota. There are two types of loans which are as follows

·         Stand-By  loans – 200% of its quota

·         Extended arrangements loans – 600% of its quota

ASIAN DEVELOPMENT BANK

1). Asian Development Bankis a regional development bank which facilitates the economic development in Asia

2). It was formed on 22^nd August 1966

3). Headquarters – Metro Manila, Philippines

4). Members include the non-regional developed countries and members of United Nations Economic and Social Commission for Asia and the Pacific

5). Consists of 67 member countries out of which

·         48-countries within Asia and the Pacific

·         19-outside Asia-Pacific region

6). Major Organs of Bank

·         Board of Governors

·         Board of Directors and Managers

·         President

7). President – Takehiko Nakao from 2013

PRESIDENTS
Takeshi Watanabe
Shiro Inoue
Taroichi Yoshida
Masao Fujioka
Kimimasa Tarumizu
Mitsuo Sato
Tadao Chino
Haruhiko Kuroda

8). Important projects undertaken by Asian Development Bank

·         Afghan Diaspora Project.

·         Earthquake and Tsunami Emergency Support Project in Indonesia.

·         Greater Mekong Subregional Program.

·         ROC Ping Hu Offshore Oil and Gas Development.

·         Colombo Harbour Expansion Project.

·         Trans-Afghanistan Gas Pipeline Feasibility Assessment.

9). ADB offers two type of loans

·         Hard loans – from Ordinary Capital Resources (ORC) and Asian Development Fund(ADF).

·         Soft loans – from special fund resources including 50% paid-in and callable elements.

10). Top 5-share holders of ADB

·         Japan – 15.67%

·         United States – 15.56%

·         China – 6.47%

·         India – 6.35%

·         Australia – 5.81%

11). Top five countries voting power in %

·         Japan – 12.84%

·         United States – 12.75%

·         China – 5.47%

·         India – 5.38%

·         Australia – 4.94%

NEW DEVELOPMENT BANK

1). New Development Bank or the BRICS Development Bank is a multilateral development bank operated by the BRICS states.

2). An alternative to the existing

·         World Bank

·         International Monetary Fund

3). Aims to mobilize resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries.

4). Headquarters in Shanghai, China.

5). Participant countries:

·         Brazil

·         Russia

·         India

·         China

·         South Africa

6). None of the above country has veto power.

7). Each country holds equal number of shares and equal voting rights.

8). Idea for setting up NDB – 4^th BRICS summit 2012, Delhi.

9). Leaders agreed to set up NDB – 5^th BRICS summit 2013, Durban, South Africa.

10). BRICS states signed the Agreement of Articles for NDB – 6^th BRICS summit 2014, Brazil.

11). Initial capital for NDB – 100 billion, of which 12.5% to be paid by each member in 1^st7 years.

12). Separate agreement for 100 billion reserve currency pool was also signed.

13). 1^st President of NDB from India – K. V. Kamath – former non-executive chairman of ICICI bank.

14). Main organs of Articles of Agreement:

·         Board of ministers or governors

·         Board of Directors

·         President, Vice President

15). NDB will allow new member to join but the BRICS capital share cannot fall below 55%.

16). For all the BRICS states

·         Number of shares – 100,00

·         Shareholding capacity – 20%

·         Voting right  – 20%

·         Authorized capital – 10 billion USD

ASIAN INFRASTRUCTURE INVESTMENT BANK

1). Asian Infrastructure Investment Bank (AIIB) is an international financial institution focused on crediting infrastructure construction in the Asian-Pacific region

2). Was proposed by China in 2013, supported by

·         37 – regional members

·         20 – non-regional members

3). AIIB to compete with

·         World Bank of India

·         Asian Development Bank

4). AIIB headquarters in Beijing, China

5). Initially consisted of

·         1 – Founding member(FM) – Burma

·         56 – Prospected Founding Members(PFM)

6). President – Jin Liqun (Former Finance Minister of China)

7). On July 2015, 57 PFMs were supposed to become FMs by

·         Signing the 60-Articles of Agreement in 2015

·         Ratifying the 60-Articles of Agreement in 2015 or 2016

8). 7-countries from the PFM did not sign the Articles of agreement. They are

·         Denmark

·         Malaysia

·         Kuwait

·         Holland

·         Philippines

·         South-Africa

·         Thailand

9). Shares are based on the size of each member country’seconomy

10). 3- categories of votes exist:

·         Basic votes: equal for all members and constitute 18% of the total votes

·         Share votes: equal to the number of shares

·         Founding Member votes: each FM gets 600 votes

11). China is the highest share holder with 30.34% and voting share 26.06%

12). India 2^nd highest share holder with 8.52% andvoting share of 7.5%

13). Russia 3^rd highest share holder with 6.66% and voting share of 5.92%

14). Maldives is the smallest PFM

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