Various Acts
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293(1)
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Company Act
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Borrowing limits of the company
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125
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Indian Companies
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Charge created on companies assets have to be
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Act
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registered within 30 days.
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11
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Indian Contract Act
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Lunatics disqualified from contracting
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59
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Indian Contract Act
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Rights of Appropriation is vested with debtor
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60
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Indian Contract Act
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If debtor does not intimate, the right of appropriation is
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vested with creditor
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124
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Indian Contract Act
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Indemnity
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148
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Indian Contract Act
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Bailee-Bailor
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171
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Indian Contract Act
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Banker an absolute right for General Lien
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3
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Indian Majority Act
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A person attains majority at the age of 18
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371
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Indian Succession
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In the absence of will, Legal hairs will have to obtain
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Act
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Succession Certificate from the Court
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Monday, 16 July 2018
Various acts
NABARD ACT
THE NATIONAL BANK FOR AGRICULTURE
AND RURAL DEVELOPMENT ACT, 1981
CHAPTER I
PRELIMINARY
1. (1) This Act may be called the National Bank for Agriculture and Rural
Development Act, 1981.
(2) It extends to the whole of India.
(3) It shall come into force on such date as the Central Government may, by
notification in the Official Gazette, appoint, and different dates may be appointed for
different provisions of this Act, and any reference in any provision to the
commencement of this Act shall be construed as a reference to the coming into force
of that provision.
2. In this Act, unless the context otherwise requires,-
(a) “agriculture” includes horticulture, animal husbandry, forestry, dairy and poultry
farming, pisciculture, and other allied activities, whether or not undertaken jointly
with agriculture and the expression “agricultural operations” shall be construed
accordingly .
Explanation :- For the purposes of this clause, “pisciculture” includes the
development of fisheries, both inland and marine, catching of fish and all activities
connected therewith or incidental thereto;
1. Came into effect from 19 September 2003
2. Subs. by Act No.55 of 2000, S.2
Short title,
extent and
commencement
Definitions
National Bank for Agriculture and Rural Development 2
(b) “Agricultural Refinance and Development Corporation” means the Corporation
established under section 3 of the Agricultural Refinance and Development Corporation
Act, 1963, and renamed under section 3A of that Act as the Agricultural Refinance and
Development Corporation;
(c) “Board” means the Board of Directors of the National Bank;
(d) “central co-operative bank” means the principal co-operative society in a district
in a State, the primary object of which is the financing of other co-operative societies in
that district:
Provided that in addition to such principal society in a district, or where there is no
such principal society in a district, the State Government may declare any one or more cooperative
societies carrying on the business of financing other co-operative societies in
that district to be also or to be a central co-operative bank or central co-operative banks
within the meaning of this definition;
(e) “Chairman” means the Chairman 1[.......] appointed under section 6;
(f) “co-operative society” means a society registered or deemed to be registered,
under the Co-operative Societies Act, 1912 or any other law relating to co-operative
societies for the time being in force in any State;
(g) “crops” includes products of agricultural operations ;
(h) “director” means a director appointed under section 6 ;
(i) “industry in the tiny and decentralised sector” means industrial concerns in the
tiny and decentralised sector and “industrial concern in the tiny and decentralised sector”
means an industrial concern in which the investment in machinery and plant is not in
excess of rupees two lakhs or such higher amount as the Central Government may specify
by notification in this behalf having regard to trends in industrial development and other
relevant factors;
(j) “Managing Director” means the Managing Director appointed under section 6;
(k) “marketing of crops” includes the processing of crops prior to marketing by any
agricultural producers or any organisation of such producers;
(l) “National Bank” means the National Bank for Agriculture and Rural
Development established under section 3;
(m) “notification” means a notification published in the Official Gazette;
(n) “primary rural credit society” means a co-operative society by whatever name
called,-
(1) which has as its object or business the provision of financial accommodation to
its members for agriculture or agricultural operations or for the marketing of crops, or for
rural development; and
(2) the bye-laws of which do not permit admission of any other co-operative
society as member;
1. The words “of the Board” omitted by Act No.55 of 2000, S.3.
10 of 1963
2 of 1912
National Bank for Agriculture and Rural Development 3
Provided that this sub-clause shall not apply to the admission, as a member of a
co-operative society, which is a State co-operative bank or a central co-operative bank by
reason of such bank subscribing to the share capital of the co-operative society out of funds
provided by the State Government for the purpose;
(o) “prescribed” means prescribed by regulations made under this Act;
(p) “regional rural bank” means a regional rural bank established under section 3 of
the Regional Rural Banks Act, 1976;
(q) “rural development” means development of rural areas through any activities
conducive to such development.
Explanation.- For the purposes of this clause,-
(a) activities conducive to development of rural areas include activities relating to
production of goods or provision of services in rural areas and activities for the promotion
of cottage and village industries, industry in the tiny and decentralized sector and smallscale
industry and handicrafts and other rural crafts;
(b) “rural area” means the area comprised in any village and includes the area
comprised in any town, the population of which does not exceed ten thousand or such other
figure as the Reserve Bank may specify from time to time;
(r) “Reserve Bank” means the Reserve Bank of India constituted under section 3 of
the Reserve Bank of India Act, 1934;
THE PAYMENT AND SETTLEMENT SYSTEMS ACT, 2007
THE PAYMENT AND SETTLEMENT SYSTEMS ACT, 2007
[20th December, 2007]
An Act to provide for the regulation and supervision of payment systems in India and to designate the Reserve Bank of India as the authority for that purpose and for atters connected therewith or incidental thereto.
CHAPTER I
PRELIMINARY
1.(1) This Act may be called the Payment and Settlement Systems Act, 2007
(
2) It extends to the whole of India.
(3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint and different dates may be appointed for different provisions of this Act, and any reference to the commencement in any such provision of this Act shall be construed as a reference to the commencement of that provision.
2. (1) In this Act, unless the context otherwise equires,—
r
(
a) “bank” means,—
(i) a bank included in the Second Schedule to the eserve Bank of India Act, 1934;
R
(
ii) a post office savings bank;
(iii) a banking company as defined in clause (c) of ection 5, of the Banking Regulation Act, 1949;
s
(iv) a co-operative bank as defined in clause (cci) of section 5, as inserted by section 56, of the Banking egulation Act, 1949; and
R
(v) such other bank as the Reserve Bank may, be otification, specify for the purposes of this Act;
n
(b) “derivative” means an instrument, to be settled at a future date, whose value is derived from change in interest rate, foreign exchange rate, credit rating or redit index, price of securities (also called
c
“underlying”), or any other underlying or a combination of more than one of them and includes interest rate swaps, forward rate agreements, foreign currency swaps, foreign currency rupee swaps, foreign currency options, foreign currency rupee options or any other instrument, as may be specified by the Reserve Bank rom time to time;
f
(c) “electronic funds transfer” means any transfer of
Short title, extent and commencement
Definitions
funds which is initiated by a person by way of instruction, authorisation or order to a bank to debit or credit an account maintained with that bank through electronic means and includes point of sale transfers; automated teller machine transactions, direct deposits or withdrawal of funds, transfers initiated by telephone, nternet and, card payment;
i
(d) “gross” settlement system means a payment system in which each settlement of funds or securities occurs on the basis of separate or individual nstructions;
i
(e) “netting” means the determination by the system provider of the amount of money or securities, due or payable or deliverable, as a result of setting off or adjusting, the payment obligations or delivery obligations among the system participants, including the claims and obligations arising out of the termination by the system provider, on the insolvency or dissolution or winding up of any system participant or such other circumstances as the system provider may specify in its rules or regulations or bye-laws (by whatever name called), of the transactions admitted for settlement at a future date so that only a net claim be demanded or a et obligation be owned;
n
(f) “notification” means a notification published in he Official Gazette;
t
(g) “payment instruction” means any instrument, authorisation or order in any form, including electronic eans, to effect a payment,
m
(i) by a person to a system participant; or
(ii) by a system participant to another system participant;
(h) “payment obligation” means an indebtedness that is owned by one system participant to another system participant as a result of clearing or settlement of one or more payment instructions relating to funds, securities or foreign exchange or derivatives or other ransactions;
t
(i) “payment system” means a system that enables payment to be effected between a payer and a beneficiary, involving clearing, payment or settlement service or all of them, but does not include a stock exchange;
Explanation.- For the purposes of this clause,
“payment system” includes the systems enabling credit card operations, debit card operations, smart card operations, money transfer operations or similar perations;
o
(j) “prescribed” means prescribed by regulations made under this Act;
(k) “regulation” means a regulation made under
this Act;
2 of 1934
18 of 1944
2
of 1934
10 of 1949
(l) “Reserve Bank” means the Reserve Bank of
India, constituted under the Reserve Bank of India Act, 934;
1
(m) “securities” means the Government securities as defined in the Public Debt Act, 1944 or such, other securities as may be notified by the Central overnment from time to time under that Act;
G
(n) “settlement” means settlement of payment instructions and includes the settlement of securities, foreign exchange or derivatives or other transactions hich involve payment obligations;
w
(o) “systemic risk” means the risk arising from—
(i) the inability of a system participant to meet his payment obligations under the payment system as and hen they become due; or
w
(ii) any disruption in the system,
which may cause other participants to fail to meet their obligations when due and is likely to have an mpact on the stability of the system:
i
Provided that if any doubt or difference arises as to whether a particular risk is likely to have an impact on the stability of the system, the decision of the Reserve ank shall be final;
B
(p) “system participant” means a bank or any other person participating in a payment system and ncludes the system provider;
i
[20th December, 2007]
An Act to provide for the regulation and supervision of payment systems in India and to designate the Reserve Bank of India as the authority for that purpose and for atters connected therewith or incidental thereto.
CHAPTER I
PRELIMINARY
1.(1) This Act may be called the Payment and Settlement Systems Act, 2007
(
2) It extends to the whole of India.
(3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint and different dates may be appointed for different provisions of this Act, and any reference to the commencement in any such provision of this Act shall be construed as a reference to the commencement of that provision.
2. (1) In this Act, unless the context otherwise equires,—
r
(
a) “bank” means,—
(i) a bank included in the Second Schedule to the eserve Bank of India Act, 1934;
R
(
ii) a post office savings bank;
(iii) a banking company as defined in clause (c) of ection 5, of the Banking Regulation Act, 1949;
s
(iv) a co-operative bank as defined in clause (cci) of section 5, as inserted by section 56, of the Banking egulation Act, 1949; and
R
(v) such other bank as the Reserve Bank may, be otification, specify for the purposes of this Act;
n
(b) “derivative” means an instrument, to be settled at a future date, whose value is derived from change in interest rate, foreign exchange rate, credit rating or redit index, price of securities (also called
c
“underlying”), or any other underlying or a combination of more than one of them and includes interest rate swaps, forward rate agreements, foreign currency swaps, foreign currency rupee swaps, foreign currency options, foreign currency rupee options or any other instrument, as may be specified by the Reserve Bank rom time to time;
f
(c) “electronic funds transfer” means any transfer of
Short title, extent and commencement
Definitions
funds which is initiated by a person by way of instruction, authorisation or order to a bank to debit or credit an account maintained with that bank through electronic means and includes point of sale transfers; automated teller machine transactions, direct deposits or withdrawal of funds, transfers initiated by telephone, nternet and, card payment;
i
(d) “gross” settlement system means a payment system in which each settlement of funds or securities occurs on the basis of separate or individual nstructions;
i
(e) “netting” means the determination by the system provider of the amount of money or securities, due or payable or deliverable, as a result of setting off or adjusting, the payment obligations or delivery obligations among the system participants, including the claims and obligations arising out of the termination by the system provider, on the insolvency or dissolution or winding up of any system participant or such other circumstances as the system provider may specify in its rules or regulations or bye-laws (by whatever name called), of the transactions admitted for settlement at a future date so that only a net claim be demanded or a et obligation be owned;
n
(f) “notification” means a notification published in he Official Gazette;
t
(g) “payment instruction” means any instrument, authorisation or order in any form, including electronic eans, to effect a payment,
m
(i) by a person to a system participant; or
(ii) by a system participant to another system participant;
(h) “payment obligation” means an indebtedness that is owned by one system participant to another system participant as a result of clearing or settlement of one or more payment instructions relating to funds, securities or foreign exchange or derivatives or other ransactions;
t
(i) “payment system” means a system that enables payment to be effected between a payer and a beneficiary, involving clearing, payment or settlement service or all of them, but does not include a stock exchange;
Explanation.- For the purposes of this clause,
“payment system” includes the systems enabling credit card operations, debit card operations, smart card operations, money transfer operations or similar perations;
o
(j) “prescribed” means prescribed by regulations made under this Act;
(k) “regulation” means a regulation made under
this Act;
2 of 1934
18 of 1944
2
of 1934
10 of 1949
(l) “Reserve Bank” means the Reserve Bank of
India, constituted under the Reserve Bank of India Act, 934;
1
(m) “securities” means the Government securities as defined in the Public Debt Act, 1944 or such, other securities as may be notified by the Central overnment from time to time under that Act;
G
(n) “settlement” means settlement of payment instructions and includes the settlement of securities, foreign exchange or derivatives or other transactions hich involve payment obligations;
w
(o) “systemic risk” means the risk arising from—
(i) the inability of a system participant to meet his payment obligations under the payment system as and hen they become due; or
w
(ii) any disruption in the system,
which may cause other participants to fail to meet their obligations when due and is likely to have an mpact on the stability of the system:
i
Provided that if any doubt or difference arises as to whether a particular risk is likely to have an impact on the stability of the system, the decision of the Reserve ank shall be final;
B
(p) “system participant” means a bank or any other person participating in a payment system and ncludes the system provider;
i
THE INDIAN PARTNERSHIP ACT 1932
THE INDIAN PARTNERSHIP ACT , 1932.
(ACT NO.9 OF 1932)
(8th April,1932)
An Act to define and amend the law relating to partnership.
WHEREAS it is expedient to define and amend the law relating to
partnership, It is hereby an acted as follows:
CHAPTER - I- PRELIMINARY
1. Short title extend and commencement - (1) This Act may be
called the Indian partnership Act. 1932.
2. It extends to the whole of India except the State of
Jammu & Kashmir.
3. It shall come int0 force on the Ist day of October , 1932,
except Sec. 69 which shall come into force on the Ist day
October, 1933.
2. Definitions - In this Act, unless there is anything repugnant in
the subject or context -
a) An " act of a firm" means any act or omission by all the
partners, or by any partner or agent of the firm which
gives rise to a right enforceable by or against the firm":
b) " business" includes every trade, occupation and
profession.
c) "Prescribed" means prescribed by rules made under this
Act"
d) "Thirdy party " used in relation to a firm or to a partner
therein means any person who is not a partner in the
firms" and
e) expression used but not defined in this Act and defined in
the Indian
3. Application of provisions of Act 9 of 1872 - The unrepealed
provisions of the Indian contract Act, 1872 , save in so far as they are
inconsistent with the express provision of this act, shall continue to
apply to firms
CHAPTER - II - THE NATURE OF PARTNERSHIP
4. Definition of " Partnership", "partner", firm" and "firm
name"- "Partnership" is the relation between persons who have agreed
to share the profits of a business carried on by all or any of them acting
for all.
Persons who have entered into partnership with one another are
called individually " partners" and collectively " a firm" , and the name
under which their business is carried on is called the " firm name"
Short Note'
-Sec.4- Partnership is an association of persons carrying business & in
law the firm name is compendious method of describing partners-
Deoha F.Guzdar Bombay us C.I.T. Air, 1955 SC 74.
5- Partnership not created by status- The relation of partnership
arises from contract and not from status:
and, in particular, the members of a Hindu undivided family
carrying on a family business as such, or a Burmese Buddhist
husband and wife carrying on business as such, are not
partners in such business.
(ACT NO.9 OF 1932)
(8th April,1932)
An Act to define and amend the law relating to partnership.
WHEREAS it is expedient to define and amend the law relating to
partnership, It is hereby an acted as follows:
CHAPTER - I- PRELIMINARY
1. Short title extend and commencement - (1) This Act may be
called the Indian partnership Act. 1932.
2. It extends to the whole of India except the State of
Jammu & Kashmir.
3. It shall come int0 force on the Ist day of October , 1932,
except Sec. 69 which shall come into force on the Ist day
October, 1933.
2. Definitions - In this Act, unless there is anything repugnant in
the subject or context -
a) An " act of a firm" means any act or omission by all the
partners, or by any partner or agent of the firm which
gives rise to a right enforceable by or against the firm":
b) " business" includes every trade, occupation and
profession.
c) "Prescribed" means prescribed by rules made under this
Act"
d) "Thirdy party " used in relation to a firm or to a partner
therein means any person who is not a partner in the
firms" and
e) expression used but not defined in this Act and defined in
the Indian
3. Application of provisions of Act 9 of 1872 - The unrepealed
provisions of the Indian contract Act, 1872 , save in so far as they are
inconsistent with the express provision of this act, shall continue to
apply to firms
CHAPTER - II - THE NATURE OF PARTNERSHIP
4. Definition of " Partnership", "partner", firm" and "firm
name"- "Partnership" is the relation between persons who have agreed
to share the profits of a business carried on by all or any of them acting
for all.
Persons who have entered into partnership with one another are
called individually " partners" and collectively " a firm" , and the name
under which their business is carried on is called the " firm name"
Short Note'
-Sec.4- Partnership is an association of persons carrying business & in
law the firm name is compendious method of describing partners-
Deoha F.Guzdar Bombay us C.I.T. Air, 1955 SC 74.
5- Partnership not created by status- The relation of partnership
arises from contract and not from status:
and, in particular, the members of a Hindu undivided family
carrying on a family business as such, or a Burmese Buddhist
husband and wife carrying on business as such, are not
partners in such business.
MARKETING IMPORTANT ABBREVIATIONS:
MARKETING IMPORTANT ABBREVIATIONS:
Ad: Advertising
MKT: Marketing
B2B: Business to Business
F500: Fortune 500
EM: Email
DM: Direct Mail
ABM: Account Based marketing
TAP: Targeted account
programs
DM: Digital Marketing
SE: Search Engine
SERP: Search Engine Results
Page
SEM: Search Engine Marketing
SEO: Search Engine
Optimization
SMM: Social Media Marketing
SMO: Social Media
Optimization
PPC: Pay Per Click
PPA: Pay Per Action
PPI: Pay Per Impression
PPL: Pay Per Lead
CTR: Click through rate
CPC: Cost Per Click
CPL: Cost Per Lead
CPS: Cost Per Sale
CMS: Content Management
System
CRM: Content Relationship
Management
MAP: Marketing Automation
Platform
SFA: Sales Force Automation
BI: Business Intelligence
MLM: Multi Level Marketing
FDI: Foreign Direct Investment
POP: Point of Purchase Display
R&D: Research and
Development
UPC: Universal Product Code
POS: Point of Sale Display
ROI: Return on Investment
CLS: Costumer Location
System
RPM: Resale Price
Maintenance
VAT: Value Added Tax
CR: Concession Rate
DRA: Direct Response
Advertising
CLV: Customer Lifetime Value
ecommerce: Electronic
Commerce
CRM: Customer Relationship
Management
NPD: New Product
Development
ROMI: Return on Marketing
Investment
LTV: Life Time Value
BDI: Brand Development Index
CDI: Category Development
Index
MR: Market Research
AIM: Alternative Investment
Market
MS: Market Share
TMV: True Market Value
MAA: Marketing Authorization
Application
MS: Market Surveillance
WOMM: Word of Mouth
Marketing
IDRA: Industries Development
and Regulation Act
UX: User Experience
GRS: Gross rating Point
BEP: Break Even Point
PAN: Permanent Account
Number
IMF: International Monetary
Fund
EOQ: Economic Order quality
Ad: Advertising
MKT: Marketing
B2B: Business to Business
F500: Fortune 500
EM: Email
DM: Direct Mail
ABM: Account Based marketing
TAP: Targeted account
programs
DM: Digital Marketing
SE: Search Engine
SERP: Search Engine Results
Page
SEM: Search Engine Marketing
SEO: Search Engine
Optimization
SMM: Social Media Marketing
SMO: Social Media
Optimization
PPC: Pay Per Click
PPA: Pay Per Action
PPI: Pay Per Impression
PPL: Pay Per Lead
CTR: Click through rate
CPC: Cost Per Click
CPL: Cost Per Lead
CPS: Cost Per Sale
CMS: Content Management
System
CRM: Content Relationship
Management
MAP: Marketing Automation
Platform
SFA: Sales Force Automation
BI: Business Intelligence
MLM: Multi Level Marketing
FDI: Foreign Direct Investment
POP: Point of Purchase Display
R&D: Research and
Development
UPC: Universal Product Code
POS: Point of Sale Display
ROI: Return on Investment
CLS: Costumer Location
System
RPM: Resale Price
Maintenance
VAT: Value Added Tax
CR: Concession Rate
DRA: Direct Response
Advertising
CLV: Customer Lifetime Value
ecommerce: Electronic
Commerce
CRM: Customer Relationship
Management
NPD: New Product
Development
ROMI: Return on Marketing
Investment
LTV: Life Time Value
BDI: Brand Development Index
CDI: Category Development
Index
MR: Market Research
AIM: Alternative Investment
Market
MS: Market Share
TMV: True Market Value
MAA: Marketing Authorization
Application
MS: Market Surveillance
WOMM: Word of Mouth
Marketing
IDRA: Industries Development
and Regulation Act
UX: User Experience
GRS: Gross rating Point
BEP: Break Even Point
PAN: Permanent Account
Number
IMF: International Monetary
Fund
EOQ: Economic Order quality
Role and Function of the Reserve Bank of India (RBI)
Role and Function of the Reserve Bank of
India (RBI)
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.
The RBI was established in 1935. It was nationalised in 1949. The RBI
plays role of regulator of the banking system in India. The Banking
Regulation Act 1949 and the RBI Act 1953 has given the RBI the power
to regulate the banking system.
The RBI has different functions in different roles. Below, we share and
discuss some of the functions of the RBI.
RBI is the Regulator of Financial System
The RBI regulates the Indian banking and financial system by issuing
broad guidelines and instructions. The objectives of these regulations
include:
• Controlling money supply in the system,
• Monitoring different key indicators like GDP and inflation,
• Maintaining people’s confidence in the banking and financial
system, and
• Providing different tools for customers’ help, such as acting as the
“Banking Ombudsman.
RBI is the Issuer of Monetary Policy
The RBI formulates monetary policy twice a year. It reviews the
policy every quarter as well. The main objectives of monitoring
monetary policy are:
• Inflation control
• Control on bank credit
• Interest rate control
The tools used for implementation of the objectives of monetary
policy are:
• Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio
(SLR),
• Open market operations,
• Different Rates such as repo rate, reverse repo rate, and bank
rate.RBI is the Issuer of Currency
Section 22 of the RBI Act gives authority to the RBI to issue
currency notes. The RBI also takes action to control circulation of
fake currency.
RBI is the Controller and Supervisor of Banking Systems
The RBI has been assigned the role of controlling and supervising
the bank system in India. The RBI is responsible for controlling the
overall operations of all banks in India. These banks may be:
• Public sector banks
• Private sector banks
• Foreign banks
• Co-operative banks, or
• Regional rural banks
The control and supervisory roles of the Reserve Bank of India is
done through the following:
Issue Of Licence: Under the Banking Regulation Act 1949, the RBI
has been given powers to grant licenses to commence new banking
operations. The RBI also grants licenses to open new branches for
existing banks. Under the licensing policy, the RBI provides banking
services in areas that do not have this facility.
Prudential Norms: The RBI issues guidelines for credit control and
management. The RBI is a member of the Banking Committee on
Banking Supervision (BCBS). As such, they are responsible for
implementation of international standards of capital adequacy
norms and asset classification.
Corporate Governance: The RBI has power to control the
appointment of the chairman and directors of banks in India. The
RBI has powers to appoint additional directors in banks as well.
KYC Norms: To curb money laundering and prevent the use of the
banking system for financial crimes, The RBI has “Know Your
Customer“ guidelines. Every bank has to ensure KYC norms are
applied before allowing someone to open an account.
Transparency Norms: This means that every bank has to disclose
their charges for providing services and customers have the right to
know these charges.
Risk Management: The RBI provides guidelines to banks for taking
the steps that are necessary to mitigate risk. They do this through
risk management in basel norms.
Audit and Inspection: The procedure of audit and inspection is
controlled by the RBI through off-site and on-site monitoring
system. On-site inspection is done by the RBI on the basis of
“CAMELS”. Capital adequacy; Asset quality; Management;
Earning; Liquidity; System and control.
Foreign Exchange Control: The RBI plays a crucial role in foreign
exchange transactions. It does due diligence on every foreign
transaction, including the inflow and outflow of foreign exchange. It
takes steps to stop the fall in value of the Indian Rupee. The RBI
also takes necessary steps to control the current account deficit.
They also give support to promote export and the RBI provides a
variety of options for NRIs.
Development: Being the banker of the Government of India, the
RBI is responsible for implementation of the government’s policies
related to agriculture and rural development. The RBI also ensures
the flow of credit to other priority sectors as well. Section 54 of the
RBI gives stress on giving specialized support for rural
development. Priority sector lending is also in key focus area of the
RBI.
Apart from the above, the RBI publishes periodical review and data
related to banking. The role and functions of the RBI cannot be
described in a brief write up. The RBI plays a very important role in
every aspect related to banking and finance. Finally the control of
NBFCs and others in the financial world is also assigned with RBI.
India (RBI)
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.
The RBI was established in 1935. It was nationalised in 1949. The RBI
plays role of regulator of the banking system in India. The Banking
Regulation Act 1949 and the RBI Act 1953 has given the RBI the power
to regulate the banking system.
The RBI has different functions in different roles. Below, we share and
discuss some of the functions of the RBI.
RBI is the Regulator of Financial System
The RBI regulates the Indian banking and financial system by issuing
broad guidelines and instructions. The objectives of these regulations
include:
• Controlling money supply in the system,
• Monitoring different key indicators like GDP and inflation,
• Maintaining people’s confidence in the banking and financial
system, and
• Providing different tools for customers’ help, such as acting as the
“Banking Ombudsman.
RBI is the Issuer of Monetary Policy
The RBI formulates monetary policy twice a year. It reviews the
policy every quarter as well. The main objectives of monitoring
monetary policy are:
• Inflation control
• Control on bank credit
• Interest rate control
The tools used for implementation of the objectives of monetary
policy are:
• Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio
(SLR),
• Open market operations,
• Different Rates such as repo rate, reverse repo rate, and bank
rate.RBI is the Issuer of Currency
Section 22 of the RBI Act gives authority to the RBI to issue
currency notes. The RBI also takes action to control circulation of
fake currency.
RBI is the Controller and Supervisor of Banking Systems
The RBI has been assigned the role of controlling and supervising
the bank system in India. The RBI is responsible for controlling the
overall operations of all banks in India. These banks may be:
• Public sector banks
• Private sector banks
• Foreign banks
• Co-operative banks, or
• Regional rural banks
The control and supervisory roles of the Reserve Bank of India is
done through the following:
Issue Of Licence: Under the Banking Regulation Act 1949, the RBI
has been given powers to grant licenses to commence new banking
operations. The RBI also grants licenses to open new branches for
existing banks. Under the licensing policy, the RBI provides banking
services in areas that do not have this facility.
Prudential Norms: The RBI issues guidelines for credit control and
management. The RBI is a member of the Banking Committee on
Banking Supervision (BCBS). As such, they are responsible for
implementation of international standards of capital adequacy
norms and asset classification.
Corporate Governance: The RBI has power to control the
appointment of the chairman and directors of banks in India. The
RBI has powers to appoint additional directors in banks as well.
KYC Norms: To curb money laundering and prevent the use of the
banking system for financial crimes, The RBI has “Know Your
Customer“ guidelines. Every bank has to ensure KYC norms are
applied before allowing someone to open an account.
Transparency Norms: This means that every bank has to disclose
their charges for providing services and customers have the right to
know these charges.
Risk Management: The RBI provides guidelines to banks for taking
the steps that are necessary to mitigate risk. They do this through
risk management in basel norms.
Audit and Inspection: The procedure of audit and inspection is
controlled by the RBI through off-site and on-site monitoring
system. On-site inspection is done by the RBI on the basis of
“CAMELS”. Capital adequacy; Asset quality; Management;
Earning; Liquidity; System and control.
Foreign Exchange Control: The RBI plays a crucial role in foreign
exchange transactions. It does due diligence on every foreign
transaction, including the inflow and outflow of foreign exchange. It
takes steps to stop the fall in value of the Indian Rupee. The RBI
also takes necessary steps to control the current account deficit.
They also give support to promote export and the RBI provides a
variety of options for NRIs.
Development: Being the banker of the Government of India, the
RBI is responsible for implementation of the government’s policies
related to agriculture and rural development. The RBI also ensures
the flow of credit to other priority sectors as well. Section 54 of the
RBI gives stress on giving specialized support for rural
development. Priority sector lending is also in key focus area of the
RBI.
Apart from the above, the RBI publishes periodical review and data
related to banking. The role and functions of the RBI cannot be
described in a brief write up. The RBI plays a very important role in
every aspect related to banking and finance. Finally the control of
NBFCs and others in the financial world is also assigned with RBI.
FUNCTIONS OF RESERVE BANK OF INDIA
FUNCTIONS OF RESERVE BANK OF INDIA
Main Functions of RBI.
1. Monetary Authority: Formulates, Implements & Monitors the Monetary policy.
2. Regulator & Supervisor of Financial System: Prescribes Board Parameters of
Banking Operations within which the Country's Banking & Financial System
functions.
3. Manages the Foreign Exchange Management Act, 1999: To facilitate External
trade & Payment/Promote Orderly Development & Maintenance of Foreign
Exchange market in India.
4. Issuer of Currency: Issues & Exchanges or Destroys Currency & Coins not fit
for Circulation.
Perform a wide Range of Promotional functions to Support National.
Related Functions.
1. Banker to the Govt: Performs merchants Banking function for the Central & the
Stage Governments; also Acts as their Banker.
2. Banker to Banks: Maintains Banking accounts (A/c's) of all Scheduled Banks.
ACTS ADMINISTERED BY RBI.
1. Reserve Bank of India (RBI) Act, 1934
2. Public Debit Act, 1944/ Govt. Securities Act, 2006
3. Government Securities Regulation Act, 2007
4. Banking Regulation Act, 1949
5. Foreign Exchange Management Act, 1999
6. Securitization & Reconstruction of Financial Asrets & Enforcement of Security
Interest Act, 2002 (CHAPTER-II)
7. Credit Information Companies (Regulation) Act, 2005
8. Payment & Settlement Systems Act, 2007
9. Payment & Settlement Systems Regulations Act, 2008 and Amended upto 2011
& BPSS Regulations Act, 2008
10. Factoring Regulation Act, 2011
11. Payment & Settlement Systems (AMENDMENT) Act, 2015- No: 18/2015.
SOME OTHER BANKING RELEVANT ACTS:
1. NI (Negotiable Instruments) Act, 1881
2. Bankers Books Evidence Act, 1891
3. State Bank of India (SBI) Act, 1955
4. Companies Act, 1956/Companies Act, 2013
5. Securities Contact (Regulation) Act, 1956
6. State Bank of India (SBI)‐(Subsidiary Banks) Act, 1959
7. Deposit Insurance & Credit Guarantee Corporation Act, 1961
8. Banking Companies (Acquisition & Transfer of Undertaking) Act, 1970
9. National Bank for Agriculture & Rural Development (NABARD), Act 1981
10. National Housing Bank Act, 1987
11. Recovery of Debts Due to Banks & Financial Institution Act, 1993
12. Competition Act, 2002
13. Indian Coinage Act, 2011: Governs Currency & Coins
14. Banking Secrecy Act
15. Industrial Development Bank (Transfer of Undertaking & Repeal) Act, 1993.
Main Functions of RBI.
1. Monetary Authority: Formulates, Implements & Monitors the Monetary policy.
2. Regulator & Supervisor of Financial System: Prescribes Board Parameters of
Banking Operations within which the Country's Banking & Financial System
functions.
3. Manages the Foreign Exchange Management Act, 1999: To facilitate External
trade & Payment/Promote Orderly Development & Maintenance of Foreign
Exchange market in India.
4. Issuer of Currency: Issues & Exchanges or Destroys Currency & Coins not fit
for Circulation.
Perform a wide Range of Promotional functions to Support National.
Related Functions.
1. Banker to the Govt: Performs merchants Banking function for the Central & the
Stage Governments; also Acts as their Banker.
2. Banker to Banks: Maintains Banking accounts (A/c's) of all Scheduled Banks.
ACTS ADMINISTERED BY RBI.
1. Reserve Bank of India (RBI) Act, 1934
2. Public Debit Act, 1944/ Govt. Securities Act, 2006
3. Government Securities Regulation Act, 2007
4. Banking Regulation Act, 1949
5. Foreign Exchange Management Act, 1999
6. Securitization & Reconstruction of Financial Asrets & Enforcement of Security
Interest Act, 2002 (CHAPTER-II)
7. Credit Information Companies (Regulation) Act, 2005
8. Payment & Settlement Systems Act, 2007
9. Payment & Settlement Systems Regulations Act, 2008 and Amended upto 2011
& BPSS Regulations Act, 2008
10. Factoring Regulation Act, 2011
11. Payment & Settlement Systems (AMENDMENT) Act, 2015- No: 18/2015.
SOME OTHER BANKING RELEVANT ACTS:
1. NI (Negotiable Instruments) Act, 1881
2. Bankers Books Evidence Act, 1891
3. State Bank of India (SBI) Act, 1955
4. Companies Act, 1956/Companies Act, 2013
5. Securities Contact (Regulation) Act, 1956
6. State Bank of India (SBI)‐(Subsidiary Banks) Act, 1959
7. Deposit Insurance & Credit Guarantee Corporation Act, 1961
8. Banking Companies (Acquisition & Transfer of Undertaking) Act, 1970
9. National Bank for Agriculture & Rural Development (NABARD), Act 1981
10. National Housing Bank Act, 1987
11. Recovery of Debts Due to Banks & Financial Institution Act, 1993
12. Competition Act, 2002
13. Indian Coinage Act, 2011: Governs Currency & Coins
14. Banking Secrecy Act
15. Industrial Development Bank (Transfer of Undertaking & Repeal) Act, 1993.
FACTORING REGULATION ACT, 2011
FACTORING REGULATION ACT, 2011
An Act to provide for and regulate assignment of receivables by making provision for registration therefor and rights and obligations of parties to contract for assignment of receivables and for matters connected therewith or incidental thereto.
Be it enacted by Parliament in the Sixty-second Year of the Republic of India as follows:—
CHAPTER I
PRELIMINARY
Short title, extent and commencement.
1. (1) This Act may be called the Factoring Regulation Act, 2011.
(2) It extends to the whole of India.
(3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint:
Provided that different dates may be appointed for different provisions of this Act, and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.
Definitions.
2. In this Act, unless the context otherwise requires,—
(a) ''assignment'' means transfer by agreement, of undivided interest of any assignor in any receivable due from any debtor in favour of a factor and includes an assignment where either the assignor or the debtor, are situated or established outside India.
Explanation:—For the purposes of this clause, undivided interest of any assignor in any receivable shall not include creation of rights in receivables as security for loans and advances or other obligations by a bank or a financial institution;
(b) "assignee" means a factor in whose favour the receivable is transferred;
(c) "assignor" means any person who is the owner of any receivable;
(d) "bank" means,—
(i) a banking company;
(ii) a corresponding new bank;
(iii) the State Bank of India;
(iv) a subsidiary bank;
(v) such other bank which the Central Government may by notification specify for the purposes of this Act on the recommendations of the Reserve Bank; or
(vi) a Multi-State Co-operative Society registered under the Multi-State Co-operative Societies Act, 2002 (39 of 2002) and licensed to undertake business of banking by the Reserve Bank under the provisions of the Banking Regulation Act, 1949 (10 of 1949);
(e) "banking company" shall have the meaning assigned to it in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);
(f) "business enterprise" means any enterprise or medium enterprise, micro enterprise or small enterprise as defined in clauses (e), (g), (h) and (m) of section 2 of the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006.), respectively engaged in any business activity;
(g) "corresponding new bank" shall have the meaning assigned to it in clause (da) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);
(h) "debtor" means any person liable to the assignor, whether under a contract or otherwise, to pay any receivable or discharge any obligation in respect of the receivable whether existing, accruing, future, conditional or contingent;
(i) "factor" means a non-banking financial company as defined in clause (f) of section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934) which has been granted a certificate of registration under sub-section (1) of section 3 or any body corporate established under an Act of Parliament or any State Legislature or any Bank or any company registered under the Companies Act, 1956 (1 of 1956) engaged in the factoring business;
(j) "factoring business" means the business of acquisition of receivables of assignor by accepting assignment of such receivables or financing, whether by way of making loans or advances or otherwise against the security interest over any receivables but does not include—
(i) credit facilities provided by a bank in its ordinary course of business against security of receivables;
(ii) any activity as commission agent or otherwise for sale of agricultural produce or goods of any kind whatsoever or any activity relating to the production, storage, supply, distribution, acquisition or control of such produce or goods or provision of any services;
Explanation:—For the purposes of this clause—
(i) the expression "agricultural produce" shall have the meaning assigned to it under clause (a) of section 2 of the Agricultural Produce (Grading and Marking) Act, 1937 (1 of 1937); and
(ii) the expressions "goods" and "commission agent" shall have the meanings assigned to them respectively under clause (d) andExplanation (ii) of clause (i) of section 2 of the Forward Contracts (Regulation) Act, 1952 (74 of 1952);
(k) "financial contract" means any spot, forward, future, option or swap transaction involving interest rates, commodities, currencies, shares, bonds, debentures or any other financial instrument, any repurchase of securities and lending transaction or any other similar transaction or combination of such transactions entered into in the financial markets;
(l) "netting agreement" means any agreement among the system participants for the purpose of determination by the system provider of the amount of money or securities due or payable or deliverable as a result of setting off or adjusting the payment obligations or delivery obligations among the system participants, including the claims and obligations arising out of the termination by the system provider, on the insolvency or dissolution or winding up of any
system participant or such circumstances as the system provider, may specify in its rules or regulations or bye-laws (by whatever name called), of the transactions admitted for settlement at a future date so that only a net claim be demanded or a net obligation be owned;
(m) "notification" means a notification published in the Official Gazette;
(n) "prescribed" means prescribed by rules made under this Act;
(o) "property" means,—
(i) the immovable property;
(ii) the movable property;
(iii) any debt or any right to receive payment of money, whether secured or unsecured;
(iv) the receivables;
(v) the intangible assets, being know-how, patent, copyright, design, trade mark, licence, franchise or any other business or commercial right of similar nature;
(p) "receivables" mean all or part of or undivided interest in any right of any person under a contract including an international contract where either the assignor or the debtor or the assignee is situated or established in a State outside India; to payment of a monetary sum whether such right is existing, future, accruing, conditional or contingent arising from and includes, any arrangement requiring payment of toll or any other sum, by whatever name called, for the use of any infrastructure facility or services;
(q) "Reserve Bank", means the Reserve Bank of India constituted under section 3 of the Reserve Bank of India Act, 1934 (2 of 1934)
An Act to provide for and regulate assignment of receivables by making provision for registration therefor and rights and obligations of parties to contract for assignment of receivables and for matters connected therewith or incidental thereto.
Be it enacted by Parliament in the Sixty-second Year of the Republic of India as follows:—
CHAPTER I
PRELIMINARY
Short title, extent and commencement.
1. (1) This Act may be called the Factoring Regulation Act, 2011.
(2) It extends to the whole of India.
(3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint:
Provided that different dates may be appointed for different provisions of this Act, and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.
Definitions.
2. In this Act, unless the context otherwise requires,—
(a) ''assignment'' means transfer by agreement, of undivided interest of any assignor in any receivable due from any debtor in favour of a factor and includes an assignment where either the assignor or the debtor, are situated or established outside India.
Explanation:—For the purposes of this clause, undivided interest of any assignor in any receivable shall not include creation of rights in receivables as security for loans and advances or other obligations by a bank or a financial institution;
(b) "assignee" means a factor in whose favour the receivable is transferred;
(c) "assignor" means any person who is the owner of any receivable;
(d) "bank" means,—
(i) a banking company;
(ii) a corresponding new bank;
(iii) the State Bank of India;
(iv) a subsidiary bank;
(v) such other bank which the Central Government may by notification specify for the purposes of this Act on the recommendations of the Reserve Bank; or
(vi) a Multi-State Co-operative Society registered under the Multi-State Co-operative Societies Act, 2002 (39 of 2002) and licensed to undertake business of banking by the Reserve Bank under the provisions of the Banking Regulation Act, 1949 (10 of 1949);
(e) "banking company" shall have the meaning assigned to it in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);
(f) "business enterprise" means any enterprise or medium enterprise, micro enterprise or small enterprise as defined in clauses (e), (g), (h) and (m) of section 2 of the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006.), respectively engaged in any business activity;
(g) "corresponding new bank" shall have the meaning assigned to it in clause (da) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);
(h) "debtor" means any person liable to the assignor, whether under a contract or otherwise, to pay any receivable or discharge any obligation in respect of the receivable whether existing, accruing, future, conditional or contingent;
(i) "factor" means a non-banking financial company as defined in clause (f) of section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934) which has been granted a certificate of registration under sub-section (1) of section 3 or any body corporate established under an Act of Parliament or any State Legislature or any Bank or any company registered under the Companies Act, 1956 (1 of 1956) engaged in the factoring business;
(j) "factoring business" means the business of acquisition of receivables of assignor by accepting assignment of such receivables or financing, whether by way of making loans or advances or otherwise against the security interest over any receivables but does not include—
(i) credit facilities provided by a bank in its ordinary course of business against security of receivables;
(ii) any activity as commission agent or otherwise for sale of agricultural produce or goods of any kind whatsoever or any activity relating to the production, storage, supply, distribution, acquisition or control of such produce or goods or provision of any services;
Explanation:—For the purposes of this clause—
(i) the expression "agricultural produce" shall have the meaning assigned to it under clause (a) of section 2 of the Agricultural Produce (Grading and Marking) Act, 1937 (1 of 1937); and
(ii) the expressions "goods" and "commission agent" shall have the meanings assigned to them respectively under clause (d) andExplanation (ii) of clause (i) of section 2 of the Forward Contracts (Regulation) Act, 1952 (74 of 1952);
(k) "financial contract" means any spot, forward, future, option or swap transaction involving interest rates, commodities, currencies, shares, bonds, debentures or any other financial instrument, any repurchase of securities and lending transaction or any other similar transaction or combination of such transactions entered into in the financial markets;
(l) "netting agreement" means any agreement among the system participants for the purpose of determination by the system provider of the amount of money or securities due or payable or deliverable as a result of setting off or adjusting the payment obligations or delivery obligations among the system participants, including the claims and obligations arising out of the termination by the system provider, on the insolvency or dissolution or winding up of any
system participant or such circumstances as the system provider, may specify in its rules or regulations or bye-laws (by whatever name called), of the transactions admitted for settlement at a future date so that only a net claim be demanded or a net obligation be owned;
(m) "notification" means a notification published in the Official Gazette;
(n) "prescribed" means prescribed by rules made under this Act;
(o) "property" means,—
(i) the immovable property;
(ii) the movable property;
(iii) any debt or any right to receive payment of money, whether secured or unsecured;
(iv) the receivables;
(v) the intangible assets, being know-how, patent, copyright, design, trade mark, licence, franchise or any other business or commercial right of similar nature;
(p) "receivables" mean all or part of or undivided interest in any right of any person under a contract including an international contract where either the assignor or the debtor or the assignee is situated or established in a State outside India; to payment of a monetary sum whether such right is existing, future, accruing, conditional or contingent arising from and includes, any arrangement requiring payment of toll or any other sum, by whatever name called, for the use of any infrastructure facility or services;
(q) "Reserve Bank", means the Reserve Bank of India constituted under section 3 of the Reserve Bank of India Act, 1934 (2 of 1934)
OVERVIEW OF FOREIGN EXCHANGE MANAGEMENT ACT
OVERVIEW OF FOREIGN EXCHANGE MANAGEMENT ACT
BACKGROUND – EVOLUTION OF FOREIGN EXCHANGE REGULATIONS IN INDIA
Exchange regulations have always remained at the centre of Indian economy. Exchange controls
were first introduced in India during the Second World War (1942). Soon after independence, they
were formally reaffirmed in form of the first Foreign Exchange Regulation Act, 1949 (FERA). This was
followed by FERA, 1973. The control framework under FERA was essentially transaction based in
terms of which all transactions in foreign exchange including those between residents to nonresidents
were prohibited unless specifically permitted.
Transformation from control-to-management: FERA to FEMA
The 1970s and 1980s saw the rise of large external sector imbalances on account of persistent
increase in adverse balance of payments situation. There was over dependence on official foreign
aid. It was this balance of payment crisis that triggered the wave of economic liberalization. The
Indian rupee became market determined in 1993. The need was felt to consolidate and amend the
law relating to foreign exchange with the objectives of facilitating external trade and payments and
for promoting the orderly development and maintenance of foreign exchange market in India.
Accordingly, on June 1, 2000, the Foreign Exchange Management Act, 1999 (FEMA) was brought in
force to replace the then existing Foreign Exchange Regulation Act, 1973 (FERA). FEMA has been
enacted with an objective of facilitating external trade and payments and for promoting the orderly
development and maintenance of foreign exchange market tin India. As such it is quite opposed to
FERA which was enacted to regulate or control the foreign exchange. FEMA provided a de jure status
to the shift in policies with regard to the external sector reforms that began in 1990-91.
STRUCTURE OF FEMA
The present framework of exchange controls in India, consist of basic legislation (FEMA, 1999) and
Notifications, Rules and Circulars [known as Authorized Persons Directions – AP (Dir Series)] issued
by RBI. FEMA applies to the whole of India and all branches, offices and agencies outside India which
are owned or controlled by a person resident in India. It also applies to any contraventions
committed outside India by any person to whom FEMA applies.
There are 49 sections under FEMA, of which 9 sections (section 1 to 9) are substantive and the rest
are procedural / administrative provisions as tabulated below:
Section Description
1 Application and Commencement of FEMA
2 Definitions
3 to 9 Provisions relating to Regulations and Management of Foreign Exchange
10 to 12 Provisions relating to Authorized Person
13 to 15 Provisions relating to Contraventions and Penalties
16 to 38 Provisions relating to Adjudication, Appeal and Directorate of Enforcement
39 to 49 Miscellaneous Provisions
Section 46 of FEMA grants power to the Central Government to make rules to carry out the
provisions of FEMA and Section 47 of FEMA grants power to the Reserve Bank of India (RBI) to make
regulations to implement provisions and the rules made under FEMA. Thus RBI is entrusted with the
administration and implementation of FEMA.
CAPITAL ACCOUNT TRANSACTION AND CURRENT ACCOUNT TRANSACTION:
In August 1994 India accepted Article VIII of the Articles of agreement of the International Monetary
Fund and became fully convertible on the current account. Since India is fully convertible on the
current account, all current account transactions (barring a small list of restricted items) are allowed
through the normal banking channels. In case of capital account transactions, only the transactions
which are explicitly enabled under the guidelines are allowed, remaining require specific approvals
under FEMA.
Accordingly it is very important to understand the concept of Capital and Current Account
Transactions to Comprehend FEMA.
A. Capital Account Transaction:
“Capital Account transaction” is defined under section 2(e) of FEMA as ‘a transaction which
alters the assets or liabilities, including contingent liabilities, outside India of persons resident in
India or assets or liabilities in India of persons resident outside India, and includes transactions
referred to in sub-section (3) of section 6.’
Thus any transaction as a result of which the assets or liabilities outside India of a person who is
resident in India and assets or liabilities in India of a person who is resident outside India are
altered i.e. either increased or decreased, is a capital account transaction.
To put it in example, if a person resident in India acquires shares of a foreign company, his/her
overseas assets will increase. Similarly, if the same person borrows from a non resident through
External Commercial Borrowings (ECBs) his/her liability is created outside India. Hence, both the
transactions lead to creation of asset or liability outside India of a person resident in India. Both
the transactions are capital account transactions.
In case of a person resident outside India, if he acquires shares of an Indian company, his/her
asset is created in India and if same person borrows from an institution in India for acquiring
house in India, his/her liability will be created in India. Both these transactions lead to creation
of asset or liability in India of a person resident outside India. Hence, both the transactions are
capital account transactions.
The concept of Capital and Current Account transaction is to be seen from Balance of Payment
point of view. If after the completion of transaction there remains any obligation to either pay
or receive foreign exchange, the transaction would get colour of Capital Account transaction.
For example, import of Plant & Machinery is a current account transaction, as upon import the
machinery is received in India and overseas supplier is say paid within six months from import
and accordingly there is no future obligation on India as a country to honour foreign exchange
obligation. In this example, from accounting perspective, though Plant & Machinery would be
capital goods, but for FEMA it would be a current account transaction.
RBI has been empowered under section 6(2) of FEMA to specify, in consultation with the Central
Government, any class or classes of Capital Account transactions which are permissible [i.e. over
and above the transactions permitted under section 6(3)]. Section 6(3) of FEMA specifies the
classes of capital account transactions which are regulated by RBI. Every transaction listed in this
section is regulated by a corresponding notification/regulation.
FEMA Notification No. 1/2000-RB dated 3-5-2000 contains the list of permissible capital account
transactions as well as list of prohibited capital account transactions.
Prohibited Capital Account Transactions:
General Prohibition:
A person shall not undertake or sell or draw foreign exchange to or from an Authorized person
for any capital account transactions other than those permitted in the Schedules, provided the
transaction is within the limit.
Special Prohibition:
No person resident outside India shall make investment in India, in any form, in any company or
partnership firm or proprietary concern or any entity, whether incorporated or not, which is
engaged or proposes to engage-
In the business of chit fund, or
As nidhi company, or
In agricultural or plantation activities, or
In real estate business, or construction of farm houses, or
In trading in Transferable Development Rights (TDRs)
(real estate shall not include development of townships, construction of residential/commercial
premises, roads or bridges).
B. Current Account Transaction:
“Current account transaction” is defined under section 2(j) of FEMA to mean ‘a transaction
other than a capital account transaction and without prejudice to the generality of the foregoing
such transaction includes,-
(i) payments due in connection with foreign trade, other current business, services and shortterm
banking and credit facilities in the ordinary course of business,
(ii) payments due as interest on loans and as net income from investments,
(iii) remittances for living expenses of parent, spouse and children residing abroad, and
(iv) expenses in connection with foreign travel, education and medical care of parents, spouse
and children.’
All Current Account transactions are generally permitted unless specifically prohibited whereas
all Capital Account transactions are generally prohibited unless specifically permitted.
Current Account transactions are divided into 3 schedules in Current Account Transaction rules:
Schedule I – Prohibited Transactions
Schedule II – Transactions requiring prior approval of Government of India
Schedule III – Transactions requiring prior approval of RBI
EXAMPLES TO UNDERSTAND CAPITAL AND CURRENT ACCOUNT TRANSACTIONS:
a. Import of Machinery on hire purchase:
In this transaction the person has created future obligation for making payment to nonresident
and hence has liability towards the non-resident. Therefore the said transaction is a
capital account transaction.
b. Transaction representing creation or acquisition of wealth, shares, loans or immovable
properties:
Since such types of transactions would lead to creation of assets in or outside India by
person resident outside or in India, as the case may be, the same are in nature of capital
account transactions.
c. Remittances out of winnings from lottery:
This comes under Prohibited list (Schedule I) of the Current account transaction. Hence
although the same is in nature of current account such transactions are prohibited.
However, an entity engaged in lottery business, imports any software or machinery to be
utilized in lottery business in India, the same is a permissible transaction. Import of software
or machinery will not result in violation of FEMA regulations in relation to current account
transactions.
But any type of technical collaboration for lottery business including licensing for franchise,
trademark, brand name, management contract or any contract for payment of royalty as
such for such collaboration is prohibited under both current account transaction rules and
also under FDI Policy. Hence, such transactions are not permissible.
d. Options premium payable under NASDAQ:
Options premium is the price paid by a person to buy an option contract, whether it is a call
or put. So option premium is paid to acquire only specified rights for a contract. Under
option contract there is no future obligation in addition to option premium paid at the time
of entering into contract so it does not result into creation of any contingent liability and
hence is a current account transaction. Whereas future contract would be a capital account
transaction. Option contract may result into creation of contingent asset, and such
contingent asset is not covered in the definition of Capital Account transaction.
e. Opening a branch outside India:
Opening a branch outside India is a current account transaction as it does not result into
alteration of any assets and liabilities overseas, since overseas branch would be regarded as
Resident of India. If however, such overseas branch proposes to acquire immovable
property (say office premises) outside India, such acquisition would be regarded as Capital
Account Transaction.
Opening a branch outside India is a permissible current account transaction and regulated
by Notification No. 10/2000-RB dated 3-5-2000 dealing with Foreign Currency accounts by a
person resident in India.
OTHER IMPORTANT SECTIONS – SEC 6(4) AND SEC 6(5):
Section 6(4):
A person resident in India may hold, own, transfer or invest in foreign currency, foreign security or
any immovable property situated outside India if such currency, security or property was acquired,
held or owned by such person when he was resident outside India or inherited from a person who
was resident outside India.
However, there was no clarity on the type of transactions that would be covered under section 6(4).
Hence, RBI with a view to resolve the doubts, vide its A. P. (DIR Series) Circular No. 90 dated January
9, 2014 clarified that the following transactions shall be covered under Section 6(4) of FEMA, 1999:
a. Foreign currency accounts opened and maintained by such a person when he was resident
outside India.
b. Income earned through employment or business or vocation outside India taken up or
commenced, or from investments made, or from gift or inheritance received while such a person
was resident outside India.
c. Foreign exchange including any income arising there from, and conversion or replacement or
accrual to the same, held outside India acquired by way of inheritance from a person resident
outside India.
d. A person resident in India may freely utilize all their eligible assets abroad as well as income on
such assets or sale proceeds thereof received after their return to India for making any
payments or to make any fresh investments abroad without prior approval of RBI
Thus, section 6(4) gives liberty to a person resident in India to keep with him any foreign currency or
foreign security or immovable property which he might have acquired when he was resident outside
India, without any compliance and reporting under FEMA.
Section 6(5):
A person resident outside India may hold, own, transfer or invest in Indian currency, security or any
immovable property situated in India if such currency, security or property was acquired, held or
owned by such person when he was resident in India or inherited from a person who was resident in
India.
This section allows a person resident outside India to keep with him any currency, security or
immovable property which he might have acquired when he was resident in India. In case if the
person liquidates his investment owned by him in India, he can keep the funds in his NRO account.
RBI vide Notification 13 (Remittance of assets) allows to remit the balances of sales proceeds of
assets held by NRI subject to the limit of USD 1 million per financial year.
BACKGROUND – EVOLUTION OF FOREIGN EXCHANGE REGULATIONS IN INDIA
Exchange regulations have always remained at the centre of Indian economy. Exchange controls
were first introduced in India during the Second World War (1942). Soon after independence, they
were formally reaffirmed in form of the first Foreign Exchange Regulation Act, 1949 (FERA). This was
followed by FERA, 1973. The control framework under FERA was essentially transaction based in
terms of which all transactions in foreign exchange including those between residents to nonresidents
were prohibited unless specifically permitted.
Transformation from control-to-management: FERA to FEMA
The 1970s and 1980s saw the rise of large external sector imbalances on account of persistent
increase in adverse balance of payments situation. There was over dependence on official foreign
aid. It was this balance of payment crisis that triggered the wave of economic liberalization. The
Indian rupee became market determined in 1993. The need was felt to consolidate and amend the
law relating to foreign exchange with the objectives of facilitating external trade and payments and
for promoting the orderly development and maintenance of foreign exchange market in India.
Accordingly, on June 1, 2000, the Foreign Exchange Management Act, 1999 (FEMA) was brought in
force to replace the then existing Foreign Exchange Regulation Act, 1973 (FERA). FEMA has been
enacted with an objective of facilitating external trade and payments and for promoting the orderly
development and maintenance of foreign exchange market tin India. As such it is quite opposed to
FERA which was enacted to regulate or control the foreign exchange. FEMA provided a de jure status
to the shift in policies with regard to the external sector reforms that began in 1990-91.
STRUCTURE OF FEMA
The present framework of exchange controls in India, consist of basic legislation (FEMA, 1999) and
Notifications, Rules and Circulars [known as Authorized Persons Directions – AP (Dir Series)] issued
by RBI. FEMA applies to the whole of India and all branches, offices and agencies outside India which
are owned or controlled by a person resident in India. It also applies to any contraventions
committed outside India by any person to whom FEMA applies.
There are 49 sections under FEMA, of which 9 sections (section 1 to 9) are substantive and the rest
are procedural / administrative provisions as tabulated below:
Section Description
1 Application and Commencement of FEMA
2 Definitions
3 to 9 Provisions relating to Regulations and Management of Foreign Exchange
10 to 12 Provisions relating to Authorized Person
13 to 15 Provisions relating to Contraventions and Penalties
16 to 38 Provisions relating to Adjudication, Appeal and Directorate of Enforcement
39 to 49 Miscellaneous Provisions
Section 46 of FEMA grants power to the Central Government to make rules to carry out the
provisions of FEMA and Section 47 of FEMA grants power to the Reserve Bank of India (RBI) to make
regulations to implement provisions and the rules made under FEMA. Thus RBI is entrusted with the
administration and implementation of FEMA.
CAPITAL ACCOUNT TRANSACTION AND CURRENT ACCOUNT TRANSACTION:
In August 1994 India accepted Article VIII of the Articles of agreement of the International Monetary
Fund and became fully convertible on the current account. Since India is fully convertible on the
current account, all current account transactions (barring a small list of restricted items) are allowed
through the normal banking channels. In case of capital account transactions, only the transactions
which are explicitly enabled under the guidelines are allowed, remaining require specific approvals
under FEMA.
Accordingly it is very important to understand the concept of Capital and Current Account
Transactions to Comprehend FEMA.
A. Capital Account Transaction:
“Capital Account transaction” is defined under section 2(e) of FEMA as ‘a transaction which
alters the assets or liabilities, including contingent liabilities, outside India of persons resident in
India or assets or liabilities in India of persons resident outside India, and includes transactions
referred to in sub-section (3) of section 6.’
Thus any transaction as a result of which the assets or liabilities outside India of a person who is
resident in India and assets or liabilities in India of a person who is resident outside India are
altered i.e. either increased or decreased, is a capital account transaction.
To put it in example, if a person resident in India acquires shares of a foreign company, his/her
overseas assets will increase. Similarly, if the same person borrows from a non resident through
External Commercial Borrowings (ECBs) his/her liability is created outside India. Hence, both the
transactions lead to creation of asset or liability outside India of a person resident in India. Both
the transactions are capital account transactions.
In case of a person resident outside India, if he acquires shares of an Indian company, his/her
asset is created in India and if same person borrows from an institution in India for acquiring
house in India, his/her liability will be created in India. Both these transactions lead to creation
of asset or liability in India of a person resident outside India. Hence, both the transactions are
capital account transactions.
The concept of Capital and Current Account transaction is to be seen from Balance of Payment
point of view. If after the completion of transaction there remains any obligation to either pay
or receive foreign exchange, the transaction would get colour of Capital Account transaction.
For example, import of Plant & Machinery is a current account transaction, as upon import the
machinery is received in India and overseas supplier is say paid within six months from import
and accordingly there is no future obligation on India as a country to honour foreign exchange
obligation. In this example, from accounting perspective, though Plant & Machinery would be
capital goods, but for FEMA it would be a current account transaction.
RBI has been empowered under section 6(2) of FEMA to specify, in consultation with the Central
Government, any class or classes of Capital Account transactions which are permissible [i.e. over
and above the transactions permitted under section 6(3)]. Section 6(3) of FEMA specifies the
classes of capital account transactions which are regulated by RBI. Every transaction listed in this
section is regulated by a corresponding notification/regulation.
FEMA Notification No. 1/2000-RB dated 3-5-2000 contains the list of permissible capital account
transactions as well as list of prohibited capital account transactions.
Prohibited Capital Account Transactions:
General Prohibition:
A person shall not undertake or sell or draw foreign exchange to or from an Authorized person
for any capital account transactions other than those permitted in the Schedules, provided the
transaction is within the limit.
Special Prohibition:
No person resident outside India shall make investment in India, in any form, in any company or
partnership firm or proprietary concern or any entity, whether incorporated or not, which is
engaged or proposes to engage-
In the business of chit fund, or
As nidhi company, or
In agricultural or plantation activities, or
In real estate business, or construction of farm houses, or
In trading in Transferable Development Rights (TDRs)
(real estate shall not include development of townships, construction of residential/commercial
premises, roads or bridges).
B. Current Account Transaction:
“Current account transaction” is defined under section 2(j) of FEMA to mean ‘a transaction
other than a capital account transaction and without prejudice to the generality of the foregoing
such transaction includes,-
(i) payments due in connection with foreign trade, other current business, services and shortterm
banking and credit facilities in the ordinary course of business,
(ii) payments due as interest on loans and as net income from investments,
(iii) remittances for living expenses of parent, spouse and children residing abroad, and
(iv) expenses in connection with foreign travel, education and medical care of parents, spouse
and children.’
All Current Account transactions are generally permitted unless specifically prohibited whereas
all Capital Account transactions are generally prohibited unless specifically permitted.
Current Account transactions are divided into 3 schedules in Current Account Transaction rules:
Schedule I – Prohibited Transactions
Schedule II – Transactions requiring prior approval of Government of India
Schedule III – Transactions requiring prior approval of RBI
EXAMPLES TO UNDERSTAND CAPITAL AND CURRENT ACCOUNT TRANSACTIONS:
a. Import of Machinery on hire purchase:
In this transaction the person has created future obligation for making payment to nonresident
and hence has liability towards the non-resident. Therefore the said transaction is a
capital account transaction.
b. Transaction representing creation or acquisition of wealth, shares, loans or immovable
properties:
Since such types of transactions would lead to creation of assets in or outside India by
person resident outside or in India, as the case may be, the same are in nature of capital
account transactions.
c. Remittances out of winnings from lottery:
This comes under Prohibited list (Schedule I) of the Current account transaction. Hence
although the same is in nature of current account such transactions are prohibited.
However, an entity engaged in lottery business, imports any software or machinery to be
utilized in lottery business in India, the same is a permissible transaction. Import of software
or machinery will not result in violation of FEMA regulations in relation to current account
transactions.
But any type of technical collaboration for lottery business including licensing for franchise,
trademark, brand name, management contract or any contract for payment of royalty as
such for such collaboration is prohibited under both current account transaction rules and
also under FDI Policy. Hence, such transactions are not permissible.
d. Options premium payable under NASDAQ:
Options premium is the price paid by a person to buy an option contract, whether it is a call
or put. So option premium is paid to acquire only specified rights for a contract. Under
option contract there is no future obligation in addition to option premium paid at the time
of entering into contract so it does not result into creation of any contingent liability and
hence is a current account transaction. Whereas future contract would be a capital account
transaction. Option contract may result into creation of contingent asset, and such
contingent asset is not covered in the definition of Capital Account transaction.
e. Opening a branch outside India:
Opening a branch outside India is a current account transaction as it does not result into
alteration of any assets and liabilities overseas, since overseas branch would be regarded as
Resident of India. If however, such overseas branch proposes to acquire immovable
property (say office premises) outside India, such acquisition would be regarded as Capital
Account Transaction.
Opening a branch outside India is a permissible current account transaction and regulated
by Notification No. 10/2000-RB dated 3-5-2000 dealing with Foreign Currency accounts by a
person resident in India.
OTHER IMPORTANT SECTIONS – SEC 6(4) AND SEC 6(5):
Section 6(4):
A person resident in India may hold, own, transfer or invest in foreign currency, foreign security or
any immovable property situated outside India if such currency, security or property was acquired,
held or owned by such person when he was resident outside India or inherited from a person who
was resident outside India.
However, there was no clarity on the type of transactions that would be covered under section 6(4).
Hence, RBI with a view to resolve the doubts, vide its A. P. (DIR Series) Circular No. 90 dated January
9, 2014 clarified that the following transactions shall be covered under Section 6(4) of FEMA, 1999:
a. Foreign currency accounts opened and maintained by such a person when he was resident
outside India.
b. Income earned through employment or business or vocation outside India taken up or
commenced, or from investments made, or from gift or inheritance received while such a person
was resident outside India.
c. Foreign exchange including any income arising there from, and conversion or replacement or
accrual to the same, held outside India acquired by way of inheritance from a person resident
outside India.
d. A person resident in India may freely utilize all their eligible assets abroad as well as income on
such assets or sale proceeds thereof received after their return to India for making any
payments or to make any fresh investments abroad without prior approval of RBI
Thus, section 6(4) gives liberty to a person resident in India to keep with him any foreign currency or
foreign security or immovable property which he might have acquired when he was resident outside
India, without any compliance and reporting under FEMA.
Section 6(5):
A person resident outside India may hold, own, transfer or invest in Indian currency, security or any
immovable property situated in India if such currency, security or property was acquired, held or
owned by such person when he was resident in India or inherited from a person who was resident in
India.
This section allows a person resident outside India to keep with him any currency, security or
immovable property which he might have acquired when he was resident in India. In case if the
person liquidates his investment owned by him in India, he can keep the funds in his NRO account.
RBI vide Notification 13 (Remittance of assets) allows to remit the balances of sales proceeds of
assets held by NRI subject to the limit of USD 1 million per financial year.
The Indian Contract Act, 1872
The Indian Contract Act, 1872
PREAMBLE
Whereas it is expedient to define and amend certain parts of the law relating to
contract; it is hereby enacted as follows :-
1. Short title
This Act may be called be the Indian Contract Act, 1872.
Extent, commencement - It extends to the whole of except the State of Jammu and
Kashmir; and it shall come into force on the first day of September, 1872.
Enactment repealed - Nothing herein contained shall affect the provisions of any
Statute, Act or Regulation not hereby expressly repealed, nor any usage or customs
of trade, nor any incident of any contract, not inconsistent with the provisions of this
Act.
2. Interpretation -clause
In this Act the following words and expressions are used in the following senses,
unless contrary intention appears from the context:
(a) When one person signifies to another his willingness to do or to abstain from
doing anything, with a view to obtaining the assent of that other to such act or
abstinence, he is said to make a proposal;
(b) When a person to whom the proposal is made, signifies his assent thereto, the
proposal is said to be accepted. A proposal, when a accepted, becomes a promise;
(c) The person making the proposal is called the "promisor", and the person
accepting the proposal is called "promisee",
(d) When, at the desire of the promisor, the promisee or any other person has done
or abstained from doing, or does or abstains from doing, or promises to do or to
abstain from doing, something, such act or abstinence or promise is called a
consideration for the promise;
(e) Every promise and every set of promises, forming the consideration for each
other, is an agreement;
(f) Promises which form the consideration or part of the consideration for each other,
are called reciprocal promises;
(g) An agreement not enforceable by law is said to be void;
(h) An agreement enforceable by law is a contract;
(i) An agreement which is enforceable by law at the option of one or more of the
parties thereto, but not at the option of the other or others, is a voidable contract;
(j) A contract which ceases to be enforceable by law becomes void when it ceases to
be enforceable.
Chapter I Of the communication, acceptance and revocation of proposals
3. Communication, acceptance and revocation of proposals
The communication of proposals, the acceptance of proposals, and the revocation of
proposals and acceptance, respectively, are deemed to be made by any act or
omission of the party proposing, accepting or revoking, by which he intends to
communicated such proposal, acceptance or revocation, or which has the effect of
communicating it.
4. Communication when complete
The communication of a proposal is complete when it becomes to the knowledge of
the person to whom it is made.
The communication of an acceptance is complete -as against the proposer, when it is
put in a course of transmission to him so at to be out of the power of the acceptor;
as against the acceptor, when it comes to the knowledge of the proposer.
The communication of a revocation is complete -as against the person who makes it,
when it is put into a course of transmission to the person to whom it is made, so as
to be out of the power of the person who makes it;as against the person to whom it
is made, when it comes to his knowledge.
5. Revocation of Proposals and acceptance
A proposal may be revoked at any time before the communication of its acceptance
is complete as against the proposer, but not afterwards.
An acceptance may be revoked at any time before the communication of the
acceptance is complete as against the acceptor, but no afterwards.
6. Revocation how made
A proposal is revoked -
PREAMBLE
Whereas it is expedient to define and amend certain parts of the law relating to
contract; it is hereby enacted as follows :-
1. Short title
This Act may be called be the Indian Contract Act, 1872.
Extent, commencement - It extends to the whole of except the State of Jammu and
Kashmir; and it shall come into force on the first day of September, 1872.
Enactment repealed - Nothing herein contained shall affect the provisions of any
Statute, Act or Regulation not hereby expressly repealed, nor any usage or customs
of trade, nor any incident of any contract, not inconsistent with the provisions of this
Act.
2. Interpretation -clause
In this Act the following words and expressions are used in the following senses,
unless contrary intention appears from the context:
(a) When one person signifies to another his willingness to do or to abstain from
doing anything, with a view to obtaining the assent of that other to such act or
abstinence, he is said to make a proposal;
(b) When a person to whom the proposal is made, signifies his assent thereto, the
proposal is said to be accepted. A proposal, when a accepted, becomes a promise;
(c) The person making the proposal is called the "promisor", and the person
accepting the proposal is called "promisee",
(d) When, at the desire of the promisor, the promisee or any other person has done
or abstained from doing, or does or abstains from doing, or promises to do or to
abstain from doing, something, such act or abstinence or promise is called a
consideration for the promise;
(e) Every promise and every set of promises, forming the consideration for each
other, is an agreement;
(f) Promises which form the consideration or part of the consideration for each other,
are called reciprocal promises;
(g) An agreement not enforceable by law is said to be void;
(h) An agreement enforceable by law is a contract;
(i) An agreement which is enforceable by law at the option of one or more of the
parties thereto, but not at the option of the other or others, is a voidable contract;
(j) A contract which ceases to be enforceable by law becomes void when it ceases to
be enforceable.
Chapter I Of the communication, acceptance and revocation of proposals
3. Communication, acceptance and revocation of proposals
The communication of proposals, the acceptance of proposals, and the revocation of
proposals and acceptance, respectively, are deemed to be made by any act or
omission of the party proposing, accepting or revoking, by which he intends to
communicated such proposal, acceptance or revocation, or which has the effect of
communicating it.
4. Communication when complete
The communication of a proposal is complete when it becomes to the knowledge of
the person to whom it is made.
The communication of an acceptance is complete -as against the proposer, when it is
put in a course of transmission to him so at to be out of the power of the acceptor;
as against the acceptor, when it comes to the knowledge of the proposer.
The communication of a revocation is complete -as against the person who makes it,
when it is put into a course of transmission to the person to whom it is made, so as
to be out of the power of the person who makes it;as against the person to whom it
is made, when it comes to his knowledge.
5. Revocation of Proposals and acceptance
A proposal may be revoked at any time before the communication of its acceptance
is complete as against the proposer, but not afterwards.
An acceptance may be revoked at any time before the communication of the
acceptance is complete as against the acceptor, but no afterwards.
6. Revocation how made
A proposal is revoked -
The Banking Ombudsman Scheme 2006
The Banking Ombudsman Scheme 2006
The Reserve Bank hereby directs that all commercial banks,
regional rural banks and scheduled primary co-operative banks shall comply with
the Banking Ombudsman Scheme, 2006 as amended hereby.
2. The amendments in the Scheme shall come into force from February 3, 2009
(Usha Thorat)
THE BANKING OMBUDSMAN SCHEME, 2006
The Scheme is introduced with the object of enabling resolution of complaints
relating to certain services rendered by banks and to facilitate the satisfaction or
settlement of such complaints.
CHAPTER I
PRELIMINARY
1. SHORT TITLE, COMMENCEMENT, EXTENT AND APPLICATION
(1) This Scheme may be called the Banking Ombudsman Scheme, 2006.
(2) It shall come into force on such date as the Reserve Bank may specify.
(3) It shall extend to the whole of India.
(4) The Scheme shall apply to the business in India of a bank as defined under
the Scheme.
2. SUSPENSION OF THE SCHEME
(1) The Reserve Bank, if it is satisfied that it is expedient so to do, may by order
suspend for such period as may be specified in the order, the operation of all or
any of the provisions of the Scheme, either generally or in relation to any
specified bank.
(2) The Reserve Bank may, by order, extend from time to time, the period of any
suspension ordered as aforesaid by such period, as it thinks fit.
3. DEFINITIONS
(1) ‘award’ means an award passed by the Banking Ombudsman in accordance
with the Scheme.
(2) ‘Appellate Authority’ means the Deputy Governor in charge of the Department
of the Reserve Bank implementing the Scheme.
(3) ‘authorised representative’ means a person duly appointed and authorised by
a complainant to act on his behalf and represent him in the proceedings under
the Scheme before a Banking Ombudsman for consideration of his complaint.
(4) ‘Banking Ombudsman’ means any person appointed under Clause 4 of the
Scheme.
(5) ‘bank’ means a ‘banking company’, a ‘corresponding new bank’, a ‘Regional
Rural Bank’, ‘State Bank of India’ a ‘Subsidiary Bank’ as defined in Section 5 of
the Banking Regulation Act, 1949 (Act 10 of 1949), or a ‘Primary Co-operative
Bank’ as defined in clause (c) of Section 56 of that Act and included in the
Second Schedule of the Reserve Bank of India Act, 1934 (Act 2 of 1934), having
a place of business in India, whether such bank is incorporated in India or
outside India.
(6) ‘complaint’ means a representation in writing or through electronic means
containing a grievance alleging deficiency in banking service as mentioned in
clause 8 of the Scheme.
(7) ‘Reserve Bank’ means the Reserve Bank of India constituted by Section 3 of
the Reserve Bank of India Act, 1934 (2 of 1934).
The Reserve Bank hereby directs that all commercial banks,
regional rural banks and scheduled primary co-operative banks shall comply with
the Banking Ombudsman Scheme, 2006 as amended hereby.
2. The amendments in the Scheme shall come into force from February 3, 2009
(Usha Thorat)
THE BANKING OMBUDSMAN SCHEME, 2006
The Scheme is introduced with the object of enabling resolution of complaints
relating to certain services rendered by banks and to facilitate the satisfaction or
settlement of such complaints.
CHAPTER I
PRELIMINARY
1. SHORT TITLE, COMMENCEMENT, EXTENT AND APPLICATION
(1) This Scheme may be called the Banking Ombudsman Scheme, 2006.
(2) It shall come into force on such date as the Reserve Bank may specify.
(3) It shall extend to the whole of India.
(4) The Scheme shall apply to the business in India of a bank as defined under
the Scheme.
2. SUSPENSION OF THE SCHEME
(1) The Reserve Bank, if it is satisfied that it is expedient so to do, may by order
suspend for such period as may be specified in the order, the operation of all or
any of the provisions of the Scheme, either generally or in relation to any
specified bank.
(2) The Reserve Bank may, by order, extend from time to time, the period of any
suspension ordered as aforesaid by such period, as it thinks fit.
3. DEFINITIONS
(1) ‘award’ means an award passed by the Banking Ombudsman in accordance
with the Scheme.
(2) ‘Appellate Authority’ means the Deputy Governor in charge of the Department
of the Reserve Bank implementing the Scheme.
(3) ‘authorised representative’ means a person duly appointed and authorised by
a complainant to act on his behalf and represent him in the proceedings under
the Scheme before a Banking Ombudsman for consideration of his complaint.
(4) ‘Banking Ombudsman’ means any person appointed under Clause 4 of the
Scheme.
(5) ‘bank’ means a ‘banking company’, a ‘corresponding new bank’, a ‘Regional
Rural Bank’, ‘State Bank of India’ a ‘Subsidiary Bank’ as defined in Section 5 of
the Banking Regulation Act, 1949 (Act 10 of 1949), or a ‘Primary Co-operative
Bank’ as defined in clause (c) of Section 56 of that Act and included in the
Second Schedule of the Reserve Bank of India Act, 1934 (Act 2 of 1934), having
a place of business in India, whether such bank is incorporated in India or
outside India.
(6) ‘complaint’ means a representation in writing or through electronic means
containing a grievance alleging deficiency in banking service as mentioned in
clause 8 of the Scheme.
(7) ‘Reserve Bank’ means the Reserve Bank of India constituted by Section 3 of
the Reserve Bank of India Act, 1934 (2 of 1934).
BANKING COMPANIES (ACQUISITION AND TRANSFER OF UNDERTAKINGS) ACT,1970
BANKING COMPANIES
(ACQUISITION AND TRANSFER
OF UNDERTAKINGS) ACT,1970
(5 of 1970)
[As amended by The Banking Companies (Acquisition and Transfer of
Undertakings) and Financial Institutions Laws (Amendment) Act,
2006 vide amendment dated 25.9.2006, effective 16.10.2006]
An Act to provide for the acquisition and transfer of the undertakings of
certain banking companies, having regard to their size, resources,
coverage and organisation, in order to control the heights of the economy
and to meet progressively and serve better, the needs of development of
the economy in conformity with national policy and objectives and for
matter connected therewith or incidental thereto.
Be it enacted by Parliament in the Twenty-first Year of the Republic of India
as follows:-
CHAPTER I
Preliminary
1. Short title and commencement.
(1) This Act may be called the Banking Companies (Acquisition and
Transfer of Undertakings) Act, 1970.
(2) The provisions of this Act (except section 21, which shall come into
force on the appointed day) shall be deemed to have come into force
on the 19th day of July, 1969.
2. Definitions.--
In this Act, unless the context otherwise requires,-
(a) "appointed day" means the 14th day of February, 1970, being the
day on which the Banking Companies (Acquisition and Transfer
of Undertakings) Ordinance, 1970 (3 of 1970), was promulgated;
(b) "banking company" does not include a foreign company within the
meaning of section 591 of the Companies Act, 1956 (1 of 1956);
(c) "commencement of this Act" means the 19th day of July, 1969;
(d) "corresponding new bank", in relation to an existing bank,
means the body corporate specified against such bank in
column 2 of the First Schedule;
(e) "Custodian" means the person who becomes, or is appointed,
a Custodian under section 7;
(f) "existing bank" means a banking company specified in column 1
of the First Schedule, being a company the deposits of which, as
shown in the return as on the last Friday of June, 1969, furnished
to the Reserve Bank under section 27 of the Banking Regulation
Act, 1949, (10 of 1949), were not less than rupees fifty crores;
(fa) “prescribed" means prescribed by regulations made under this Act;
(g) "Schedule" means a Schedule to this Act;
(h) words and expressions used herein and not defined but
defined in the Banking Regulation Act, 1949 (10 of 1949), have
the meanings respectively assigned to them in that Act.
(i) Words and expressions used herein and not defined either in this
Act or in the Banking Regulation Act, 1949 (10 of 1949) but defined
in the Companies Act, 1956 (1 of 1956) shall have the meanings
respectively assigned to them in the Companies Act, 1956.
CHAPTER II
Transfer of the Undertakings of Existing Banks and Share Capitals of
the Corresponding New Banks
3. Establishment of corresponding new banks and business thereof.
(1) On the commencement to this Act, there shall be constituted such
corresponding new banks as are specified in the First Schedule.
(2) The paid-up capital of every corresponding new bank
constituted under sub-section (1) shall, until any provision is
made in this behalf in any scheme made under section 9, be
equal to paid-up capital of the existing bank in relation to
which it is the corresponding new bank.
(2A) Subject to the provisions of this Act, the authorised capital of
every corresponding new bank shall be one thousand five
hundred crores of rupees divided into one hundred fifty crores
fully paid-up shares of ten rupees each:
PROVIDED that the Central Government may, after consultation with
the Reserve Bank and by notification in the Official Gazette, increase
or reduce the authorised capital as it thinks fit, so however that after
such increase or reduction, the authorised capital shall not exceed
three thousand crores or be less than one thousand five hundred
crores, of rupees.
(ACQUISITION AND TRANSFER
OF UNDERTAKINGS) ACT,1970
(5 of 1970)
[As amended by The Banking Companies (Acquisition and Transfer of
Undertakings) and Financial Institutions Laws (Amendment) Act,
2006 vide amendment dated 25.9.2006, effective 16.10.2006]
An Act to provide for the acquisition and transfer of the undertakings of
certain banking companies, having regard to their size, resources,
coverage and organisation, in order to control the heights of the economy
and to meet progressively and serve better, the needs of development of
the economy in conformity with national policy and objectives and for
matter connected therewith or incidental thereto.
Be it enacted by Parliament in the Twenty-first Year of the Republic of India
as follows:-
CHAPTER I
Preliminary
1. Short title and commencement.
(1) This Act may be called the Banking Companies (Acquisition and
Transfer of Undertakings) Act, 1970.
(2) The provisions of this Act (except section 21, which shall come into
force on the appointed day) shall be deemed to have come into force
on the 19th day of July, 1969.
2. Definitions.--
In this Act, unless the context otherwise requires,-
(a) "appointed day" means the 14th day of February, 1970, being the
day on which the Banking Companies (Acquisition and Transfer
of Undertakings) Ordinance, 1970 (3 of 1970), was promulgated;
(b) "banking company" does not include a foreign company within the
meaning of section 591 of the Companies Act, 1956 (1 of 1956);
(c) "commencement of this Act" means the 19th day of July, 1969;
(d) "corresponding new bank", in relation to an existing bank,
means the body corporate specified against such bank in
column 2 of the First Schedule;
(e) "Custodian" means the person who becomes, or is appointed,
a Custodian under section 7;
(f) "existing bank" means a banking company specified in column 1
of the First Schedule, being a company the deposits of which, as
shown in the return as on the last Friday of June, 1969, furnished
to the Reserve Bank under section 27 of the Banking Regulation
Act, 1949, (10 of 1949), were not less than rupees fifty crores;
(fa) “prescribed" means prescribed by regulations made under this Act;
(g) "Schedule" means a Schedule to this Act;
(h) words and expressions used herein and not defined but
defined in the Banking Regulation Act, 1949 (10 of 1949), have
the meanings respectively assigned to them in that Act.
(i) Words and expressions used herein and not defined either in this
Act or in the Banking Regulation Act, 1949 (10 of 1949) but defined
in the Companies Act, 1956 (1 of 1956) shall have the meanings
respectively assigned to them in the Companies Act, 1956.
CHAPTER II
Transfer of the Undertakings of Existing Banks and Share Capitals of
the Corresponding New Banks
3. Establishment of corresponding new banks and business thereof.
(1) On the commencement to this Act, there shall be constituted such
corresponding new banks as are specified in the First Schedule.
(2) The paid-up capital of every corresponding new bank
constituted under sub-section (1) shall, until any provision is
made in this behalf in any scheme made under section 9, be
equal to paid-up capital of the existing bank in relation to
which it is the corresponding new bank.
(2A) Subject to the provisions of this Act, the authorised capital of
every corresponding new bank shall be one thousand five
hundred crores of rupees divided into one hundred fifty crores
fully paid-up shares of ten rupees each:
PROVIDED that the Central Government may, after consultation with
the Reserve Bank and by notification in the Official Gazette, increase
or reduce the authorised capital as it thinks fit, so however that after
such increase or reduction, the authorised capital shall not exceed
three thousand crores or be less than one thousand five hundred
crores, of rupees.
LATEST RBI POLICY GUIDE LINES ON BASEL & RISK MANAGEMENT
Eligible Credit Rating Agencies- Rating of NBFC-FD by Infomerics Valuation and Rating Private Limited (IVRPL) As perMaster Direction
dated 25.08.16, the names of six approved Credit Rating Agencies and theirminimuminvestment grade credit ratings have been listed. RBI
decided on 14.07.17, that NBFCs can also use the ratings of Infomerics Valuation and Rating Private Limited for rating the fixed deposit
portfolios of NBFCs with IVR BBB as theminimuminvestment grade credit rating.
RiskManagement and Interbank Dealings- Reports to the Reserve Bank
In terms RBI circular dated July 05, 2016, the Head/Principal Office of AD Category-I banks are required to submit a statement in form BAL
giving details of their holdings of all foreign currencies on fortnightly basis through Online Returns Filing System(ORFS) within seven
calendar days fromthe close of the reporting period towhich it relates. RBI decided (on 10.08.17) that w.e.f. August 16, 2017 (i.e. for
the statement of first fortnight of August 2017), this statement may be submitted through the web portal at https:// bop.rbi.org.in
as per prescribed format. Head/Principal Office of AD Cat-I banks earlier required to submit a monthly statement of Nostro/Vostro
account balances are to discontinue this report.
Basel III Framework on Liquidity Standards – Liquidity Coverage Ratio (LCR), Liquidity Risk Monitoring Tools and LCR Disclosure
Standard
In partial modification of extant guidelines, RBI decided (02.08.17) that Level 1 assets of banks would comprise of following. These
assets can be included in the stock of liquid assets without any limit as also without applying any haircut: i. Cash including cash
reserves in excess of required CRR.
(a). For banks incorporated in India,
Reserves held with foreign Central Banks in excess of reserve requirement, where a foreign sovereign has been assigned a
0% risk weight as per rating by an international rating agency.
(Central bank’s reserves would include banks overnight deposits with central banks, and term deposits with the central banks that:
(i) are explicitly and contractually repayable on notice from the depositing bank; or (ii) that constitute a loan against which the bank
can borrow on a term or on an overnight basis but automatically renewable basis (only where the bank has existing deposit with the
relevant central bank). Other term deposits with central banks are not eligible for the stock of HQLA. However, if the term expires
within 30 days, the term deposits could be considered as an inflow).
Reserves held with foreign Central Banks in excess of the reserve requirement, to the extent these balances cover the
bank’s stressed net cash outflows in that specific currency, in cases where a foreign sovereign has been assigned a non-0% risk
weight as per rating by an international rating agency, but a 0% risk weight has been assigned at national discretion under Basel II
Framework.
ii. Government securities in excess of the minimum SLR requirement.
iii. Within the mandatory SLR requirement, Government securities to the extent allowed by RBI, under Marginal Standing Facility
(MSF). (Government securities to the extent of 2 per cent of NDTL may be included i.e. currently allowed under marginal standing
facility (MSF).
iv. Marketable securities issued or guaranteed by foreign sovereigns satisfying all the following conditions:
(These securities will include only marketable securities which attract a 0% risk-weight in terms RBI Master Circular dated 01.07.13.
In cases where a foreign sovereign has been assigned a non-0% risk weight as per rating by an international rating agency, but a 0%
risk-weight has been assigned at national discretion under Basel II Framework, marketable securities issued or guaranteed by that
foreign sovereign within its domestic jurisdiction will be allowed to the extent those securities cover a bank’s stressed net cash
outflows in that specific foreign currency stemming from the bank’s operations in the jurisdiction where the bank’s liquidity risk is
being taken.)
(a) assigned a 0% risk weight under the Basel II standardized approach for credit risk;
(b) Traded in large, deep and active repo or cash markets characterised by a low level of concentration; and proven record as a
reliable source of liquidity in the markets (repo or sale) even during stressed conditions.
(c) not issued by a bank/FI/NBFC or any of its affiliated entities.
(d) Prudential Guidelines on Capital Adequacy andMarket Discipline- New Capital Adequacy Framework (NCAF) - Eligible Credit
Rating Agencies— INFOMERICS Valuation and Rating Pvt Ltd. (INFOMERICS)
(e) In terms exant guidelines, six domestic credit rating agencies viz. CARE, CRISIL, FITCH India,, ICRA/, Brickwork Ratings and
dated 25.08.16, the names of six approved Credit Rating Agencies and theirminimuminvestment grade credit ratings have been listed. RBI
decided on 14.07.17, that NBFCs can also use the ratings of Infomerics Valuation and Rating Private Limited for rating the fixed deposit
portfolios of NBFCs with IVR BBB as theminimuminvestment grade credit rating.
RiskManagement and Interbank Dealings- Reports to the Reserve Bank
In terms RBI circular dated July 05, 2016, the Head/Principal Office of AD Category-I banks are required to submit a statement in form BAL
giving details of their holdings of all foreign currencies on fortnightly basis through Online Returns Filing System(ORFS) within seven
calendar days fromthe close of the reporting period towhich it relates. RBI decided (on 10.08.17) that w.e.f. August 16, 2017 (i.e. for
the statement of first fortnight of August 2017), this statement may be submitted through the web portal at https:// bop.rbi.org.in
as per prescribed format. Head/Principal Office of AD Cat-I banks earlier required to submit a monthly statement of Nostro/Vostro
account balances are to discontinue this report.
Basel III Framework on Liquidity Standards – Liquidity Coverage Ratio (LCR), Liquidity Risk Monitoring Tools and LCR Disclosure
Standard
In partial modification of extant guidelines, RBI decided (02.08.17) that Level 1 assets of banks would comprise of following. These
assets can be included in the stock of liquid assets without any limit as also without applying any haircut: i. Cash including cash
reserves in excess of required CRR.
(a). For banks incorporated in India,
Reserves held with foreign Central Banks in excess of reserve requirement, where a foreign sovereign has been assigned a
0% risk weight as per rating by an international rating agency.
(Central bank’s reserves would include banks overnight deposits with central banks, and term deposits with the central banks that:
(i) are explicitly and contractually repayable on notice from the depositing bank; or (ii) that constitute a loan against which the bank
can borrow on a term or on an overnight basis but automatically renewable basis (only where the bank has existing deposit with the
relevant central bank). Other term deposits with central banks are not eligible for the stock of HQLA. However, if the term expires
within 30 days, the term deposits could be considered as an inflow).
Reserves held with foreign Central Banks in excess of the reserve requirement, to the extent these balances cover the
bank’s stressed net cash outflows in that specific currency, in cases where a foreign sovereign has been assigned a non-0% risk
weight as per rating by an international rating agency, but a 0% risk weight has been assigned at national discretion under Basel II
Framework.
ii. Government securities in excess of the minimum SLR requirement.
iii. Within the mandatory SLR requirement, Government securities to the extent allowed by RBI, under Marginal Standing Facility
(MSF). (Government securities to the extent of 2 per cent of NDTL may be included i.e. currently allowed under marginal standing
facility (MSF).
iv. Marketable securities issued or guaranteed by foreign sovereigns satisfying all the following conditions:
(These securities will include only marketable securities which attract a 0% risk-weight in terms RBI Master Circular dated 01.07.13.
In cases where a foreign sovereign has been assigned a non-0% risk weight as per rating by an international rating agency, but a 0%
risk-weight has been assigned at national discretion under Basel II Framework, marketable securities issued or guaranteed by that
foreign sovereign within its domestic jurisdiction will be allowed to the extent those securities cover a bank’s stressed net cash
outflows in that specific foreign currency stemming from the bank’s operations in the jurisdiction where the bank’s liquidity risk is
being taken.)
(a) assigned a 0% risk weight under the Basel II standardized approach for credit risk;
(b) Traded in large, deep and active repo or cash markets characterised by a low level of concentration; and proven record as a
reliable source of liquidity in the markets (repo or sale) even during stressed conditions.
(c) not issued by a bank/FI/NBFC or any of its affiliated entities.
(d) Prudential Guidelines on Capital Adequacy andMarket Discipline- New Capital Adequacy Framework (NCAF) - Eligible Credit
Rating Agencies— INFOMERICS Valuation and Rating Pvt Ltd. (INFOMERICS)
(e) In terms exant guidelines, six domestic credit rating agencies viz. CARE, CRISIL, FITCH India,, ICRA/, Brickwork Ratings and
TREASURY PRODUCTS
TREASURY PRODUCTS
1) Which of the following currency is not fully convertible?
a) USD b) EURO c) INR d) GBP
2) What are the Spot Trades?
a) It is the process of settlement where payment and receipts of funds are settled in respective currencies.
b) The settlement takes place within 2 working days from the trade date.
c) Currency may be bought or sold with settlement on the same date i.e. To day (TOD)
d) The settlement can be on the -next day he. Tomorrow (TOM)
3) Which of the following is significant about spot trade?
a) All rates quoted on the screen are for spot trade unless otherwise mentioned
b) TOD and TOM rates are generally quoted at a discount to the spot rate.
c) TOD and TOM rates are less favourable to buyer d) All these
4) What is forward contract?
a) It is a contract for purchase and sale of currency at a future date.
b) The exchange rate for a future contract is quoted on the day of contract.
c) The contract between buyer and seller is called forward contract.
d) All the above
5) Which of the following is true regarding a forward contract?
a) Treasury may have forward contracts with customers or Banks as counterparties.
b) Customers cover currency risk through forward contract.
c) Treasury may cover its customer exposure by taking reverse position in Inter-Bank market.
d) All the above
6) The features of forward rates are:
a) They are not projected on the basis of exchange rate movement in the market
b) Forward rates are decided on the basis of interest rate differential of two currencies.
c) The interest rate differential is added to the spot rate for low interest yielding currency and deducted
from the spot rate for high interest yielding currency
d) All the above
7) Which of the following are True?
a) Forward rate reflects interest rate differential only in prefect markets.
b) Perfect markets are where currency is fully convertible and highly liquid.
c) When currency is not fully convertible the demand for forward contract influences
the forward exchange rate d) All these
8) The features of a swap are:
a) A combination of spot and forward transactions is called a swap.
b) Buying in the spot market and selling same amount in forward market or vice-versa is swap.
c) Swap is mainly used for funding requirements_ d) All these
9) A Bank may have foreign exchange surpluses from the following sources:
a) Profit from overseas Branch operations
b) Forex Borrowing in foreign domestic market
c) Foreign currency and convertible rupee deposits with branches
d) All the above
10) A Treasury may have surplus forex from the following sources:
a) Surpluses net of Bank's -lending in foreign currency
b) Floating funds on account of customer transactions
c) EEFC funds maintained in current account d) All these
11) The surplus forex can be invested by a Treasury in:
a) Inter-Bank loans b) Short term investments c) Nostro Account
d) Any or all of these
12) Which of the followings are the sources for short-term investments?
a) Treasury Bills issued by foreign governments
b) Commercial paper
c) Other debt instruments issued by multi lateral institutions
d) All the above
13) What is a Nostro Account?
a) This is a current account denominated in foreign currency maintained by a Bank with the correspondent Bank in the
home country of the currency.
b) Nostro Account does not attract any interest.
c) Many correspondent Banks provide automatic investment facility for funds held
overnight which earn nominal interest. d) All these
14)What is Money Market?
a) It is place for raising and deploying short term resources where maturity does not exceed one year.
b) Inter-Bank market is divided as call money and term money.
c) Call money market is also overnight market where borrowed funds are repaid on the next working day.
d) Notice money market is where funds are placed beyond overnight and upto 14 days.
15) The participants in call/notice money market are:
a) The major players are Banks and primary dealers.
b) Non-Banking financial companies can only lend the surplus funds upto specified limit_
c) NBFC can not participate in this market d) Both (a) and (c)
16) Which of the followings are the features to Treasury Bills?
a) The T-Bills are issued by the RBI on behalf of central govt. for pre-determined amount.
b) The interest is by way of discount.
c) The price is determined through an auction process d) All these
17) The maturity period of T-Bills is:
a) 91 days b) 364 days c) (a) and (b) both d) None of these
18) Which of the followings is relevant to T-Bills?
a) Each issue of 91 days T-Bill is for Rs_ 500 crore and auction is conducted weekly onWednesday.
b) Each issue of 364 days is for Rs. 1000 crore and it is auctioned fortnightly
c) The Banks park short term funds in T-Bills d) All these
19) The Benefits of T-Bills are:
a) It is Risk free investment
b) It yields interest higher than the call money market.
c) It is possible to trade T-Bill in secondary market d) All these
20) Which of the followings is correct regarding T-Bill?
a) It is in the Electronic form and held in SGL Account maintained by Banks with RBI.
b) Depository participants can also operate through SGL Account.
c) The settlement of T-Bills is through Clearing Corporation of India d) All these
21) If a T-Bill is of 91 days is priced at 99.26, what does it signify?
a) It will yield interest at 2.99%
b) This is known as implicit yield.
c) (a) and (b) both d) None of these
22) The_ features of the commercial paper are:
a) It is an unsecured money market instrument issued in the form of promissory note.
b) The highly rated corporate Borrowers can raise short term funds through this instrument.
c) It is an additional instrument to the investing community d) All these
23) -The time limit for issuing a CP is:
a) Minimum maturity 7 days b) Maximum maturity one year
c) (a) and (b) both d) None of these
24) The requirements for issuing a commercial paper are:
a) The company issuing CP should have minimum credit rating of P2.
b) Banks can invest in CP only if it is issued in D-mat form
c) The minimum amount of CP is Rs. 5 lac d) All these
25) Who issues guidelines for issue of CP?
a) RBI
b) Market practices prescribed by FIMMDA (Fixed Income and Money Market and Derivatives Association of India) c) (a)
and (b) both d) None of these
26) A company issuing CP must satisfy the conditions:
a) Tangible Net worth of the company should not be less than Rs. 4 crore
b) The company should be enjoying working capital limit with Bank/financial institution
c) The Borrowal Account should be classified as standard Asset d) All these
27) How does Tangible Net Worth is arrived at?
a) Capital b) Free Reserves c) (a) + (b) — Intangible Assets if any
d) None of these
28) Which of the following is relevant about commercial paper?
a) It is issued for discounted amount i.e. less than face value
b) The price is quoted for face value
c) It is negotiable instrument d) All these
29) Which of the following statements regarding commercial paper is
not correct?
a) CP is a substitute to working capital
b) Interest rates are at par with PLR
c) It should be compulsory in D-mat form
d) Purchase and sale of CP is effected through the depository participants
30) Banks prefer to invest in CP through Treasury because :
a) Credit Risk is relatively low.
b) Yield on CP is higher than inter-bank money market.
c) There is no liquidity risk d) All these
31) Which of the following- Credit Rating Agencies have been authorized by RBI for
Rating?
a) ICRA b) CRISIL c) CARE and FITCH Ratings India Ltd. d) All these
32) The provisions for issue of commercial paper are:
a) Maximum period for subscription to an issue of CP is two weeks from the date of opening of issue.
b) CPs can be issued on a single date or in parts on different dates.
c) The same issue of CP should have the same date of maturity d) All these
33) The process of issue a CP involves:
a) The Bank is appointed as issuing and paying agent.
b) The Bank would assess the requirement and the extent to which the CP issue is linked with credit limit.
c) The potential investors are given a copy of IPA certificates d) All these
34) The features of certificate of Deposit are:
a) It is a debt instrument issued-by Bank against deposit of funds
b) It is a negotiable instrument
c) It bears interest rate higher than regular deposits of the Bank. d) All these
35) The requirements of certificate of Deposit are:
a) Minimum amount of deposit is Rs. 1 lac
b)_ The maturity period may range from 7 days to one year
c) It is an additional source for investment to Banks and corporates d) All these
36) What is a Reverse Repo?
a) It is a contract to buy securities and then to sell them back at an agreed future date and price.
b) It provides opportunity for short term investments of surplus funds
c) (a) and (b) both d) None of these
37) What is Repo?
a) It is an instrument of borrowing funds for a short period.
b) It involves selling a security and simultaneously agreeing to repurchase it at a future date for a slightly higher price.
c) The price difference is called interest d) All these
38) The significance of Repo is:
a) It is a tool used by RBI for open market operations.
b) It affects liquidity in the system.
c) None of these d) Both (a) and (b)
39) The commercial Banks participate in Repo transactions because of:
a) To meet short fall of CRR --
b) To meet short fall in SLR
e) The interest on Repo is lower than call market d) All these
40) Repo transactions are regulated by:
a) RBI b) Securities Contracts Regulations Act c) (a) and (b) both d) None
41) Which of the following statements is correct?
a) Repo is a short term money market instrument
b) The Repo Rate and period is announced by RBI,c) (a) and (b) both d) None of these
42) What is the Repo Rate with effect from 16th Sept 2010?
a) 5% b) 5.25% C) 5.75% d) 6% e) None of these
43) What is the Reverse Repo Rate with effect from lSept 2010?
a) 4% b) 4.25% c) 4.75% d) 5% e) None of these
44) The process of Repo transaction is:
a) A Bank may sell securities to the counterparty with an agreement to repurchase the same securities after a certain
period at pre determined price.
b) The bank gets cash in exchange of securities and pays back the cash after a certain period and get back the securities.
c) The difference between sale price and repurchase price is interest d) All these
45) The advantage to the counterparty under a Repo transaction is:
a) It earns interest on secured [ending.
b) It holds securities which serves the purpose of meeting SLR requirements.
c) The value of securities is higher by a margin to cover price Risk. d) All these
46) Which of the following statements is correct? .
a) The margin maintained on Repo securities is called hair cut as principal amount exchanged against
securities is lower than the market value of securities
b) RBI uses Repo to control liquidity
c) Banks and primary dealers sell govt. securities to RBI and avail liquidity d) All these
47) Which of the following statements is not correct?
a) RBI uses Repo Transactions under liquidity adjustment facility
b) Liquidity is not affected through lending to Banks under a Repo Transaction.
c) Absorption of liquidity is done by accepting deposits from Banks.
d) Absorption of liquidity by accepting deposits from Banks is known as Reverse Repo.
48) Which of the following statements is correct?
a) RBI has commercial repo auctions on overnight basis.
b) Repo and Reverse Repo Rates have been pre-fixed.
c) RBI has full discretion to change the frequency of auction. d) All these
49) The process of Bill Re-discounting is:
a) Treasury will discount Bill of Exchange of short term nature which are already discounted with the banks.
b) Rediscounting is done at money market rates.
c) The rediscounting rates are negotiable between the lending Bank and borrowing Bank. d) All the above
50) The advantage to the lending Bank is:
a) The surplus funds are invested at term money rate
b) Credit Risk is low as lending Bank has recourse to the discounting Bank
c) (a) and (b) both d) None of these
51) The benefits to borrowing Bank is :
a) It is able to infuse liquidity from out of existing Assets
b) Its capital adequacy ratio is improved or rediscounted bills are added to Inter-Bank liability c) (a) and (b) both
d) All these
52) Which of the followings is significant regarding government securities?
a) They are issued by Public Debt Office of RBI.
b) State govts. Issue state development Bonds.
c) Govt. securities are sold through auction conducted by RBI d) All these
53) Which of the followings is correct?
a) Interest is paid on face value of the bond at coupon rate.
b) RBI arrives at a cut off price based on bids submitted by Banks and primary dealers.
c) The price may be higher or lower than the face value d) All these
54) Price movement of Bond depends on:
a) Demand of the Bond which depends on liquidity in the system.
b) The yield on Bond is different from coupon rate.
c) (a) and (b) both d) None of these
55) If 10 years G. sec. at 7.37 per cent is priced at 104.80, what would be the yield'
a) 6.67% b) 5.42% c) 6.15% d) None of these
56) The interest rates in the economy depends on:
a) Rate of inflation b) GDP growth c) Other economic indicators
d) A combination of all these
57) The variety of Bonds may include: a) Step up coupons b) Coupons linked to inflation c) Floating rate coupons
d) Any of these
58) What is STRIPS:
a) Separately registered interest and principal securities
b) Under this process principal and interest are treated as separate zero coupon securities c) (a) and (b) both
d) None of these
59) What is corporate debt paper?
a) It includes medium and long term bonds and debentures issued by corporates and financial institutions
b) Yield on Bonds is higher than the govt. securities
c) They are called non-SLR securities where banks can invest d) All these
60) Which of the following statements is not correct?
a) Tier-2 capital Bonds issued by Banks fall under the category of corporate debt paper.
b) Bonds issued by corporates are not that liquid_
c) The bonds are issued in D-mat form.
d) Bank Treasury finds an attractive investment in corporate debt paper.
61) Which of the following statements is correct regarding corporate debt paper?
a) Higher the credit risk higher is the yield.
b) Global ratings are necessary if the debt paper is issued in International market.
c) Treasury can invest FCNR deposit funds and other forex surpluses in global debt paper. d) All the above
62) Which of the followings is correct?
a) Debentures are issued by private companies.
b) Bonds mainly issued by public sector companies.
c) Government does not provide guaranter on PSU Bonds d) All these
63) The material difference between debentures and bonds is:
a) Debentures are governed by relevant provisions of company law.
b) Debentures are transferable on registration
c) Bonds are negotiable instrument governed by Law of Contract. d) All these
64) The Bond can be : a) Zero Coupon Bond b) Floating Rate Bond c) Deep Discount Bond
d) Any of these
65) Which of the followings is not correct?
a) Debenture and Bonds can be issued with redemption in instruments over a period.
b) They can be issued with a premium or redemption.
c) There are no Bonds with put and call option
d) Bonds secured by stocks or other collateral are called collaterised obligations
66) Which of the followings is relevant regarding issue of Bonds and debentures?
a) The holders have prior legal claim over the equity and preference stock holders.
b) The Trustee appointed by issuing company protects the rights of debenture holders.
c) The Trustee can initiate legal action against the company in case of any default.
d) All of the above
67) Companies i s suing unsecured debentures and bonds have to compl y wi th the
provision of :
a) Companies Acceptance of Deposit Rules 1975 b) SEBI
c) (a) and (b) both d) None of these
68) What is a convertible Bond?
a) It is a mix of Debt and Equity.
b) Bond holder has an option to convert debt into equity on a fixed date.
c) The conversion price is pre-determined d) All these
69) The advantages of convertible Bonds are:
a) If the stock price is higher than prefixed conversion price, the investor would convert debt into Equity.
b) Company will have no debt repayment
c) The Equity of the company will be strengthened d) All these
70) Which of the followings are derivative products treated on stock exchange?
a) Index features b) Index options c) Stock futures and options d) All these
71) Provisions to invest in Equities are:
a) Banks can invest in Equities upto 20% of their net owned funds
b) Stock prices are highly volatile
c) Banks prefer low risk investments d) All these
72) The provision on Fll investments are:
a) Foreign currency funds are converted into rupee for portfolio investors.
b) Rupee funds with profits are converted into foreign currency for repatriation
c) Flls are allowed to invest in debt market d) All these
73) What is External Commercial Borrowings?
a) Indian companies can borrow on global market through Bank loan or issue of debt paper.
b) The debt can be repaid by reconversion of rupee funds into foreign currency
c) (a) and. (b) both d) None of these
74) The guidelines for investment of foreign currency funds of Banks are?
a) FCNR deposits can be invested in overseas market and for domestic lending :n foreign currency.
b) Banks are permitted to borrow/invest in overseas market 50% of Tier-I Capital.
c) (a) and (b) both d) None of these
75) What is Export Earners Foreign Currency Account?
a) Exporters are allowed to hold 100% export proceeds in a Current Account. wtth
b) No interest is paid on such deposits
c) (a) and (b) both d) None of these
76) What is Gilts?
a) Securities issued by government or Treasuries.
b) They do not have any credit Risk, c) (a) and (b) both d) None of these
77) SGL Account is:
a) Subsidiary General Ledger
b) It is maintained by public debt office of RBI
c) Banks maintain exclusively government Securities Accounts d) All of these
78) Which of the followings is correct?
a) Counterparty is the other party to a Transaction
b) Yield is internal rate of return where interest is also reinvested at original coupon rate.
c) Foreign currency deposits are denominated in foreign currency d) All of these
79) The features of FCNR deposit are:
a) They are denominated either in USD, GBP, JPY or EURO, Can- Dollar and Aus Dollar.
b) The deposits are maintained by non-resident Indians.
c) Interest on FCNR deposits is regulated by RBI d) All of these
80) Broad money or M3 consists of :
a) Currency in circulation b) Demand and time deposits with Banks
c) Deposits of Banks and other deposits with RBI d) All of these
81) Monetary policy of RBI aims at:
a) Controlling rate of inflation b) Ensuring stability of financial market
c) Regulating money supply d) All of these
82) The tools in the hands of RBI for direct control of money supply are:
a) CRR b) SLR c) (a)-and (b) both d) None of these
83) CRR is calculated on net Demand and Time liabilities which contain:
a) Demand deposits and Time deposits
b) Overseas Borrowings
c) Foreign outward remittances and other demand and time liabilities d) All of these
84) The Demand deposits include:
a) Current and Savings Deposits b) Margin Money for Letter of Credits
c) Overdue Fixed Deposits d) All these
85) Other Demand and Time Liabilities include:
ayAccrued Interest b) Credit Balance in Suspense Account
c) Any other liability d) All these
86) In which of the following categories only 3% minimum CRR is required to be
maintained?
a) Net Inter-Bank call borrowing/deposits where maturity does not exceed 14 days,
b) Credit Balance in ACU (Asian Currency Unit) Accounts
c) Demand and Time liabilities in respect of off shore Banking units d) None of these
87) Banks need not maintain CRR on :
a) Paid up capital, reserves, retained profits, refinance from apex institutions.
b) Excess provision for Income tax .
c) Claims received from DICGC/ECGC d) All these
88) Which of the followings is correct?
a) CRR need not be maintained on Inter-Bank term deposits of original maturity upto one year
b) RBI does not pay interest on CRR Balance
c) The Demand and Time l iabil i ties as on the report ing Friday of second previous
fortnight will be basis for CRR calculation d) All these
89) SLR can be maintained in the form of following Assets:
a) Cash Balance in excess of CRR requirements
b) ,Gold at current market price
c) Approved securities valued as per RBI norms d) All these
90) What is Liquidity Adjustment Facility?
a) It is the mechanism whereby RBI lends funds to Banking sector through repo instrument
b) This is used to monitor day to day market liquidity
c) This is exclusively applicable to repo and reverse repo transactions with RBI
d) All these
91) The features of Negotiated Dealing System are:
a) This is a system where securities clearing against assured payment is handed by Clearing Corporation of India.
b) Physical delivery of cheques are not required.
c) All Inter-Bank Money Market deals are done through Negotiated Dealing System
d) All the above
92) The feature of Real Time Gross Settlement System are:
a) All Inter-Bank payments are settled instantly.
b) Banks' Accounts with all the Branch offices of RBI are also integrated.
c) Since it is instant payment system, Banks need to maintain adequate funds
throughout the day.
d) All the above
93) Which of the following is correct?
a) Asian currency unit is a mechanism for payment to/from members of Asian clearing union.
b) Off shore Banking units render special Banking services only to overseas customers.
c) SWIFT is a secure worldwide financial messaging system exclusive to Banks.
d) All the above
94) What is DVP?
a) Delivery vesus Payment system where one account is debited and another account is credit at the same time.
b) In case of securities purchase funding account is debited and securities account is credited.
c) This facilitates prompt settlement of security transactions. d) All these
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1) Which of the following currency is not fully convertible?
a) USD b) EURO c) INR d) GBP
2) What are the Spot Trades?
a) It is the process of settlement where payment and receipts of funds are settled in respective currencies.
b) The settlement takes place within 2 working days from the trade date.
c) Currency may be bought or sold with settlement on the same date i.e. To day (TOD)
d) The settlement can be on the -next day he. Tomorrow (TOM)
3) Which of the following is significant about spot trade?
a) All rates quoted on the screen are for spot trade unless otherwise mentioned
b) TOD and TOM rates are generally quoted at a discount to the spot rate.
c) TOD and TOM rates are less favourable to buyer d) All these
4) What is forward contract?
a) It is a contract for purchase and sale of currency at a future date.
b) The exchange rate for a future contract is quoted on the day of contract.
c) The contract between buyer and seller is called forward contract.
d) All the above
5) Which of the following is true regarding a forward contract?
a) Treasury may have forward contracts with customers or Banks as counterparties.
b) Customers cover currency risk through forward contract.
c) Treasury may cover its customer exposure by taking reverse position in Inter-Bank market.
d) All the above
6) The features of forward rates are:
a) They are not projected on the basis of exchange rate movement in the market
b) Forward rates are decided on the basis of interest rate differential of two currencies.
c) The interest rate differential is added to the spot rate for low interest yielding currency and deducted
from the spot rate for high interest yielding currency
d) All the above
7) Which of the following are True?
a) Forward rate reflects interest rate differential only in prefect markets.
b) Perfect markets are where currency is fully convertible and highly liquid.
c) When currency is not fully convertible the demand for forward contract influences
the forward exchange rate d) All these
8) The features of a swap are:
a) A combination of spot and forward transactions is called a swap.
b) Buying in the spot market and selling same amount in forward market or vice-versa is swap.
c) Swap is mainly used for funding requirements_ d) All these
9) A Bank may have foreign exchange surpluses from the following sources:
a) Profit from overseas Branch operations
b) Forex Borrowing in foreign domestic market
c) Foreign currency and convertible rupee deposits with branches
d) All the above
10) A Treasury may have surplus forex from the following sources:
a) Surpluses net of Bank's -lending in foreign currency
b) Floating funds on account of customer transactions
c) EEFC funds maintained in current account d) All these
11) The surplus forex can be invested by a Treasury in:
a) Inter-Bank loans b) Short term investments c) Nostro Account
d) Any or all of these
12) Which of the followings are the sources for short-term investments?
a) Treasury Bills issued by foreign governments
b) Commercial paper
c) Other debt instruments issued by multi lateral institutions
d) All the above
13) What is a Nostro Account?
a) This is a current account denominated in foreign currency maintained by a Bank with the correspondent Bank in the
home country of the currency.
b) Nostro Account does not attract any interest.
c) Many correspondent Banks provide automatic investment facility for funds held
overnight which earn nominal interest. d) All these
14)What is Money Market?
a) It is place for raising and deploying short term resources where maturity does not exceed one year.
b) Inter-Bank market is divided as call money and term money.
c) Call money market is also overnight market where borrowed funds are repaid on the next working day.
d) Notice money market is where funds are placed beyond overnight and upto 14 days.
15) The participants in call/notice money market are:
a) The major players are Banks and primary dealers.
b) Non-Banking financial companies can only lend the surplus funds upto specified limit_
c) NBFC can not participate in this market d) Both (a) and (c)
16) Which of the followings are the features to Treasury Bills?
a) The T-Bills are issued by the RBI on behalf of central govt. for pre-determined amount.
b) The interest is by way of discount.
c) The price is determined through an auction process d) All these
17) The maturity period of T-Bills is:
a) 91 days b) 364 days c) (a) and (b) both d) None of these
18) Which of the followings is relevant to T-Bills?
a) Each issue of 91 days T-Bill is for Rs_ 500 crore and auction is conducted weekly onWednesday.
b) Each issue of 364 days is for Rs. 1000 crore and it is auctioned fortnightly
c) The Banks park short term funds in T-Bills d) All these
19) The Benefits of T-Bills are:
a) It is Risk free investment
b) It yields interest higher than the call money market.
c) It is possible to trade T-Bill in secondary market d) All these
20) Which of the followings is correct regarding T-Bill?
a) It is in the Electronic form and held in SGL Account maintained by Banks with RBI.
b) Depository participants can also operate through SGL Account.
c) The settlement of T-Bills is through Clearing Corporation of India d) All these
21) If a T-Bill is of 91 days is priced at 99.26, what does it signify?
a) It will yield interest at 2.99%
b) This is known as implicit yield.
c) (a) and (b) both d) None of these
22) The_ features of the commercial paper are:
a) It is an unsecured money market instrument issued in the form of promissory note.
b) The highly rated corporate Borrowers can raise short term funds through this instrument.
c) It is an additional instrument to the investing community d) All these
23) -The time limit for issuing a CP is:
a) Minimum maturity 7 days b) Maximum maturity one year
c) (a) and (b) both d) None of these
24) The requirements for issuing a commercial paper are:
a) The company issuing CP should have minimum credit rating of P2.
b) Banks can invest in CP only if it is issued in D-mat form
c) The minimum amount of CP is Rs. 5 lac d) All these
25) Who issues guidelines for issue of CP?
a) RBI
b) Market practices prescribed by FIMMDA (Fixed Income and Money Market and Derivatives Association of India) c) (a)
and (b) both d) None of these
26) A company issuing CP must satisfy the conditions:
a) Tangible Net worth of the company should not be less than Rs. 4 crore
b) The company should be enjoying working capital limit with Bank/financial institution
c) The Borrowal Account should be classified as standard Asset d) All these
27) How does Tangible Net Worth is arrived at?
a) Capital b) Free Reserves c) (a) + (b) — Intangible Assets if any
d) None of these
28) Which of the following is relevant about commercial paper?
a) It is issued for discounted amount i.e. less than face value
b) The price is quoted for face value
c) It is negotiable instrument d) All these
29) Which of the following statements regarding commercial paper is
not correct?
a) CP is a substitute to working capital
b) Interest rates are at par with PLR
c) It should be compulsory in D-mat form
d) Purchase and sale of CP is effected through the depository participants
30) Banks prefer to invest in CP through Treasury because :
a) Credit Risk is relatively low.
b) Yield on CP is higher than inter-bank money market.
c) There is no liquidity risk d) All these
31) Which of the following- Credit Rating Agencies have been authorized by RBI for
Rating?
a) ICRA b) CRISIL c) CARE and FITCH Ratings India Ltd. d) All these
32) The provisions for issue of commercial paper are:
a) Maximum period for subscription to an issue of CP is two weeks from the date of opening of issue.
b) CPs can be issued on a single date or in parts on different dates.
c) The same issue of CP should have the same date of maturity d) All these
33) The process of issue a CP involves:
a) The Bank is appointed as issuing and paying agent.
b) The Bank would assess the requirement and the extent to which the CP issue is linked with credit limit.
c) The potential investors are given a copy of IPA certificates d) All these
34) The features of certificate of Deposit are:
a) It is a debt instrument issued-by Bank against deposit of funds
b) It is a negotiable instrument
c) It bears interest rate higher than regular deposits of the Bank. d) All these
35) The requirements of certificate of Deposit are:
a) Minimum amount of deposit is Rs. 1 lac
b)_ The maturity period may range from 7 days to one year
c) It is an additional source for investment to Banks and corporates d) All these
36) What is a Reverse Repo?
a) It is a contract to buy securities and then to sell them back at an agreed future date and price.
b) It provides opportunity for short term investments of surplus funds
c) (a) and (b) both d) None of these
37) What is Repo?
a) It is an instrument of borrowing funds for a short period.
b) It involves selling a security and simultaneously agreeing to repurchase it at a future date for a slightly higher price.
c) The price difference is called interest d) All these
38) The significance of Repo is:
a) It is a tool used by RBI for open market operations.
b) It affects liquidity in the system.
c) None of these d) Both (a) and (b)
39) The commercial Banks participate in Repo transactions because of:
a) To meet short fall of CRR --
b) To meet short fall in SLR
e) The interest on Repo is lower than call market d) All these
40) Repo transactions are regulated by:
a) RBI b) Securities Contracts Regulations Act c) (a) and (b) both d) None
41) Which of the following statements is correct?
a) Repo is a short term money market instrument
b) The Repo Rate and period is announced by RBI,c) (a) and (b) both d) None of these
42) What is the Repo Rate with effect from 16th Sept 2010?
a) 5% b) 5.25% C) 5.75% d) 6% e) None of these
43) What is the Reverse Repo Rate with effect from lSept 2010?
a) 4% b) 4.25% c) 4.75% d) 5% e) None of these
44) The process of Repo transaction is:
a) A Bank may sell securities to the counterparty with an agreement to repurchase the same securities after a certain
period at pre determined price.
b) The bank gets cash in exchange of securities and pays back the cash after a certain period and get back the securities.
c) The difference between sale price and repurchase price is interest d) All these
45) The advantage to the counterparty under a Repo transaction is:
a) It earns interest on secured [ending.
b) It holds securities which serves the purpose of meeting SLR requirements.
c) The value of securities is higher by a margin to cover price Risk. d) All these
46) Which of the following statements is correct? .
a) The margin maintained on Repo securities is called hair cut as principal amount exchanged against
securities is lower than the market value of securities
b) RBI uses Repo to control liquidity
c) Banks and primary dealers sell govt. securities to RBI and avail liquidity d) All these
47) Which of the following statements is not correct?
a) RBI uses Repo Transactions under liquidity adjustment facility
b) Liquidity is not affected through lending to Banks under a Repo Transaction.
c) Absorption of liquidity is done by accepting deposits from Banks.
d) Absorption of liquidity by accepting deposits from Banks is known as Reverse Repo.
48) Which of the following statements is correct?
a) RBI has commercial repo auctions on overnight basis.
b) Repo and Reverse Repo Rates have been pre-fixed.
c) RBI has full discretion to change the frequency of auction. d) All these
49) The process of Bill Re-discounting is:
a) Treasury will discount Bill of Exchange of short term nature which are already discounted with the banks.
b) Rediscounting is done at money market rates.
c) The rediscounting rates are negotiable between the lending Bank and borrowing Bank. d) All the above
50) The advantage to the lending Bank is:
a) The surplus funds are invested at term money rate
b) Credit Risk is low as lending Bank has recourse to the discounting Bank
c) (a) and (b) both d) None of these
51) The benefits to borrowing Bank is :
a) It is able to infuse liquidity from out of existing Assets
b) Its capital adequacy ratio is improved or rediscounted bills are added to Inter-Bank liability c) (a) and (b) both
d) All these
52) Which of the followings is significant regarding government securities?
a) They are issued by Public Debt Office of RBI.
b) State govts. Issue state development Bonds.
c) Govt. securities are sold through auction conducted by RBI d) All these
53) Which of the followings is correct?
a) Interest is paid on face value of the bond at coupon rate.
b) RBI arrives at a cut off price based on bids submitted by Banks and primary dealers.
c) The price may be higher or lower than the face value d) All these
54) Price movement of Bond depends on:
a) Demand of the Bond which depends on liquidity in the system.
b) The yield on Bond is different from coupon rate.
c) (a) and (b) both d) None of these
55) If 10 years G. sec. at 7.37 per cent is priced at 104.80, what would be the yield'
a) 6.67% b) 5.42% c) 6.15% d) None of these
56) The interest rates in the economy depends on:
a) Rate of inflation b) GDP growth c) Other economic indicators
d) A combination of all these
57) The variety of Bonds may include: a) Step up coupons b) Coupons linked to inflation c) Floating rate coupons
d) Any of these
58) What is STRIPS:
a) Separately registered interest and principal securities
b) Under this process principal and interest are treated as separate zero coupon securities c) (a) and (b) both
d) None of these
59) What is corporate debt paper?
a) It includes medium and long term bonds and debentures issued by corporates and financial institutions
b) Yield on Bonds is higher than the govt. securities
c) They are called non-SLR securities where banks can invest d) All these
60) Which of the following statements is not correct?
a) Tier-2 capital Bonds issued by Banks fall under the category of corporate debt paper.
b) Bonds issued by corporates are not that liquid_
c) The bonds are issued in D-mat form.
d) Bank Treasury finds an attractive investment in corporate debt paper.
61) Which of the following statements is correct regarding corporate debt paper?
a) Higher the credit risk higher is the yield.
b) Global ratings are necessary if the debt paper is issued in International market.
c) Treasury can invest FCNR deposit funds and other forex surpluses in global debt paper. d) All the above
62) Which of the followings is correct?
a) Debentures are issued by private companies.
b) Bonds mainly issued by public sector companies.
c) Government does not provide guaranter on PSU Bonds d) All these
63) The material difference between debentures and bonds is:
a) Debentures are governed by relevant provisions of company law.
b) Debentures are transferable on registration
c) Bonds are negotiable instrument governed by Law of Contract. d) All these
64) The Bond can be : a) Zero Coupon Bond b) Floating Rate Bond c) Deep Discount Bond
d) Any of these
65) Which of the followings is not correct?
a) Debenture and Bonds can be issued with redemption in instruments over a period.
b) They can be issued with a premium or redemption.
c) There are no Bonds with put and call option
d) Bonds secured by stocks or other collateral are called collaterised obligations
66) Which of the followings is relevant regarding issue of Bonds and debentures?
a) The holders have prior legal claim over the equity and preference stock holders.
b) The Trustee appointed by issuing company protects the rights of debenture holders.
c) The Trustee can initiate legal action against the company in case of any default.
d) All of the above
67) Companies i s suing unsecured debentures and bonds have to compl y wi th the
provision of :
a) Companies Acceptance of Deposit Rules 1975 b) SEBI
c) (a) and (b) both d) None of these
68) What is a convertible Bond?
a) It is a mix of Debt and Equity.
b) Bond holder has an option to convert debt into equity on a fixed date.
c) The conversion price is pre-determined d) All these
69) The advantages of convertible Bonds are:
a) If the stock price is higher than prefixed conversion price, the investor would convert debt into Equity.
b) Company will have no debt repayment
c) The Equity of the company will be strengthened d) All these
70) Which of the followings are derivative products treated on stock exchange?
a) Index features b) Index options c) Stock futures and options d) All these
71) Provisions to invest in Equities are:
a) Banks can invest in Equities upto 20% of their net owned funds
b) Stock prices are highly volatile
c) Banks prefer low risk investments d) All these
72) The provision on Fll investments are:
a) Foreign currency funds are converted into rupee for portfolio investors.
b) Rupee funds with profits are converted into foreign currency for repatriation
c) Flls are allowed to invest in debt market d) All these
73) What is External Commercial Borrowings?
a) Indian companies can borrow on global market through Bank loan or issue of debt paper.
b) The debt can be repaid by reconversion of rupee funds into foreign currency
c) (a) and. (b) both d) None of these
74) The guidelines for investment of foreign currency funds of Banks are?
a) FCNR deposits can be invested in overseas market and for domestic lending :n foreign currency.
b) Banks are permitted to borrow/invest in overseas market 50% of Tier-I Capital.
c) (a) and (b) both d) None of these
75) What is Export Earners Foreign Currency Account?
a) Exporters are allowed to hold 100% export proceeds in a Current Account. wtth
b) No interest is paid on such deposits
c) (a) and (b) both d) None of these
76) What is Gilts?
a) Securities issued by government or Treasuries.
b) They do not have any credit Risk, c) (a) and (b) both d) None of these
77) SGL Account is:
a) Subsidiary General Ledger
b) It is maintained by public debt office of RBI
c) Banks maintain exclusively government Securities Accounts d) All of these
78) Which of the followings is correct?
a) Counterparty is the other party to a Transaction
b) Yield is internal rate of return where interest is also reinvested at original coupon rate.
c) Foreign currency deposits are denominated in foreign currency d) All of these
79) The features of FCNR deposit are:
a) They are denominated either in USD, GBP, JPY or EURO, Can- Dollar and Aus Dollar.
b) The deposits are maintained by non-resident Indians.
c) Interest on FCNR deposits is regulated by RBI d) All of these
80) Broad money or M3 consists of :
a) Currency in circulation b) Demand and time deposits with Banks
c) Deposits of Banks and other deposits with RBI d) All of these
81) Monetary policy of RBI aims at:
a) Controlling rate of inflation b) Ensuring stability of financial market
c) Regulating money supply d) All of these
82) The tools in the hands of RBI for direct control of money supply are:
a) CRR b) SLR c) (a)-and (b) both d) None of these
83) CRR is calculated on net Demand and Time liabilities which contain:
a) Demand deposits and Time deposits
b) Overseas Borrowings
c) Foreign outward remittances and other demand and time liabilities d) All of these
84) The Demand deposits include:
a) Current and Savings Deposits b) Margin Money for Letter of Credits
c) Overdue Fixed Deposits d) All these
85) Other Demand and Time Liabilities include:
ayAccrued Interest b) Credit Balance in Suspense Account
c) Any other liability d) All these
86) In which of the following categories only 3% minimum CRR is required to be
maintained?
a) Net Inter-Bank call borrowing/deposits where maturity does not exceed 14 days,
b) Credit Balance in ACU (Asian Currency Unit) Accounts
c) Demand and Time liabilities in respect of off shore Banking units d) None of these
87) Banks need not maintain CRR on :
a) Paid up capital, reserves, retained profits, refinance from apex institutions.
b) Excess provision for Income tax .
c) Claims received from DICGC/ECGC d) All these
88) Which of the followings is correct?
a) CRR need not be maintained on Inter-Bank term deposits of original maturity upto one year
b) RBI does not pay interest on CRR Balance
c) The Demand and Time l iabil i ties as on the report ing Friday of second previous
fortnight will be basis for CRR calculation d) All these
89) SLR can be maintained in the form of following Assets:
a) Cash Balance in excess of CRR requirements
b) ,Gold at current market price
c) Approved securities valued as per RBI norms d) All these
90) What is Liquidity Adjustment Facility?
a) It is the mechanism whereby RBI lends funds to Banking sector through repo instrument
b) This is used to monitor day to day market liquidity
c) This is exclusively applicable to repo and reverse repo transactions with RBI
d) All these
91) The features of Negotiated Dealing System are:
a) This is a system where securities clearing against assured payment is handed by Clearing Corporation of India.
b) Physical delivery of cheques are not required.
c) All Inter-Bank Money Market deals are done through Negotiated Dealing System
d) All the above
92) The feature of Real Time Gross Settlement System are:
a) All Inter-Bank payments are settled instantly.
b) Banks' Accounts with all the Branch offices of RBI are also integrated.
c) Since it is instant payment system, Banks need to maintain adequate funds
throughout the day.
d) All the above
93) Which of the following is correct?
a) Asian currency unit is a mechanism for payment to/from members of Asian clearing union.
b) Off shore Banking units render special Banking services only to overseas customers.
c) SWIFT is a secure worldwide financial messaging system exclusive to Banks.
d) All the above
94) What is DVP?
a) Delivery vesus Payment system where one account is debited and another account is credit at the same time.
b) In case of securities purchase funding account is debited and securities account is credited.
c) This facilitates prompt settlement of security transactions. d) All these
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