Podcast
Questions and Answers
What is the recovery rate of the Corporate Insolvency Resolution Process (CIRP)?
What is the recovery rate of the Corporate Insolvency Resolution Process (CIRP)?
Which threshold for filing an application under IBC was increased during Covid?
Which threshold for filing an application under IBC was increased during Covid?
What was the time taken for liquidation mentioned in the content?
What was the time taken for liquidation mentioned in the content?
Which of the following outcomes results in a full or near to full settlement as stated in the content?
Which of the following outcomes results in a full or near to full settlement as stated in the content?
Signup and view all the answers
What was the recommended SLR reduction by the Narasimham Committee in 1998?
What was the recommended SLR reduction by the Narasimham Committee in 1998?
Signup and view all the answers
What happens to the money supply when the Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) are reduced?
What happens to the money supply when the Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) are reduced?
Signup and view all the answers
What does M2 represent in the context of money supply?
What does M2 represent in the context of money supply?
Signup and view all the answers
What is the formula for calculating the money multiplier?
What is the formula for calculating the money multiplier?
Signup and view all the answers
Which of the following actions will NOT lead to an increase in the money supply?
Which of the following actions will NOT lead to an increase in the money supply?
Signup and view all the answers
What is included in M4 of the money supply?
What is included in M4 of the money supply?
Signup and view all the answers
Who has the exclusive right to mint coins in India?
Who has the exclusive right to mint coins in India?
Signup and view all the answers
In credit creation, which amount needs to be deducted from the total when calculating the credit creation amount?
In credit creation, which amount needs to be deducted from the total when calculating the credit creation amount?
Signup and view all the answers
What responsibility does the Reserve Bank have regarding coins in India?
What responsibility does the Reserve Bank have regarding coins in India?
Signup and view all the answers
What is a primary disadvantage of the barter system?
What is a primary disadvantage of the barter system?
Signup and view all the answers
Which system maintains a minimum reserve of gold and foreign securities?
Which system maintains a minimum reserve of gold and foreign securities?
Signup and view all the answers
What characteristic of metallic money demonstrates it has intrinsic value?
What characteristic of metallic money demonstrates it has intrinsic value?
Signup and view all the answers
What does 'Double Coincidence of Wants' refer to in the barter system?
What does 'Double Coincidence of Wants' refer to in the barter system?
Signup and view all the answers
Why is the Full Reserve System less commonly adopted today?
Why is the Full Reserve System less commonly adopted today?
Signup and view all the answers
Which type of money is considered to have less intrinsic value?
Which type of money is considered to have less intrinsic value?
Signup and view all the answers
What aspect of the barter system could be seen as a positive when compared to modern monetary systems?
What aspect of the barter system could be seen as a positive when compared to modern monetary systems?
Signup and view all the answers
Which system was used in India since 1956 for currency issuance?
Which system was used in India since 1956 for currency issuance?
Signup and view all the answers
What is the minimum duration of unpaid dues categorized as SM 1?
What is the minimum duration of unpaid dues categorized as SM 1?
Signup and view all the answers
Under the SARFAESI Act, which entity has the adjudicating power?
Under the SARFAESI Act, which entity has the adjudicating power?
Signup and view all the answers
Which of the following describes a situation where a bank recognizes a loan as unrecoverable?
Which of the following describes a situation where a bank recognizes a loan as unrecoverable?
Signup and view all the answers
What process can be used to remove non-recoverable loans from a bank's balance sheet?
What process can be used to remove non-recoverable loans from a bank's balance sheet?
Signup and view all the answers
What is the primary outcome of the SARFAESI Act established in 2002?
What is the primary outcome of the SARFAESI Act established in 2002?
Signup and view all the answers
What primary function does an Asset Reconstruction Company (ARC) serve?
What primary function does an Asset Reconstruction Company (ARC) serve?
Signup and view all the answers
Which term indicates the legal process to recover debts when liabilities exceed assets?
Which term indicates the legal process to recover debts when liabilities exceed assets?
Signup and view all the answers
Which mechanism can be employed by banks to recover NPAs informally?
Which mechanism can be employed by banks to recover NPAs informally?
Signup and view all the answers
What are the small coins in India defined as?
What are the small coins in India defined as?
Signup and view all the answers
Which of the following denominations is not currently printed in India?
Which of the following denominations is not currently printed in India?
Signup and view all the answers
What is the formula for High Powered Money as per the content?
What is the formula for High Powered Money as per the content?
Signup and view all the answers
What does M1 represent in the context of money supply?
What does M1 represent in the context of money supply?
Signup and view all the answers
According to Gresham's Law, what happens when there are both good and bad money?
According to Gresham's Law, what happens when there are both good and bad money?
Signup and view all the answers
What is High Powered Money primarily used for?
What is High Powered Money primarily used for?
Signup and view all the answers
What was one of the reasons for the issuance of Rs.5 notes being discontinued initially?
What was one of the reasons for the issuance of Rs.5 notes being discontinued initially?
Signup and view all the answers
What is the relationship between High Powered Money and Money Supply?
What is the relationship between High Powered Money and Money Supply?
Signup and view all the answers
Study Notes
Barter System of Exchange
- Real value exchanged between goods; each has intrinsic value.
- Full reserve system simplifies trading compared to the old barter.
- Demands double coincidence of wants; both must have desired goods.
- Lacks common measure of value and can face indivisibility issues.
- Difficulties in deferred payments and lack of specialization reduce efficiency.
Systems of Note Issue
- Full reserve system: Currency notes fully backed by gold/silver.
- Current predominant system in India: Minimum reserve system since 1956.
- Minimum reserves include 20-40% gold and partial foreign currencies.
- Proportional reserve system backed by a fixed proportion; used historically from 1927 to 1957.
Types of Money
- Metallic money categorized as:
- Standard Money: Gold/silver with full intrinsic value.
- Token Money: Made from inferior metals, lower than coin value.
- Money supply can increase when CRR/SLR are reduced, introducing more regulated money.
Money Supply Measurements
- M1: Currency held by public + demand deposits.
- M2: M1 + short-term money market instruments.
- M3: M2 + long-term capital market instruments.
- M4: M3 + total post office deposits, excluding NSS and NSC.
Money Multiplier Concept
- Calculated as 1/Reserve Ratio (RR); influences credit creation.
- Initial deposit affects credit calculation based on its pre-existence in the system.
RBI's Role in Currency Issuance
- Government of India solely responsible for minting coins and designing denominations.
- Current coin denominations range from 10 paise to 5 rupees; coins above 50 paise are rupee coins.
- Note denominations include Rs.5, Rs.10, Rs.20, Rs.50, Rs.100, Rs.500, and Rs.2000; lower denominations phased out.
Pareto Efficiency
- The trickle-down effect necessitates compensation for losses, which may not occur automatically.
Gresham’s Law
- Concept illustrated with the Tughlaq era; good money (gold) hoarded, bad money (copper) circulated.
- Counterfeiting of less valuable coins especially prevalent.
High Powered Money and Monetary Base
- High Powered Money includes currency notes and commercial bank reserves.
- Money Supply (M1) count reflects total currency held by the public and demand deposits.
- Reserve changes influence monetary base without altering high-powered money itself.
Non-Performing Assets (NPAs)
- NPAs result from loans unlikely to be recovered; these are written off to clean bank balance sheets.
- Recovering NPAs involves formal methods like serving notices or utilizing DRT/NCLT under respective acts.
Government Initiatives for Employment
- PM Svarozgar Yojana supports self-employment through subsidies.
SARFAESI Act (2002)
- Established to address NPAs; has successfully reduced their numbers post-implementation.
Corporate Debt Restructuring Options
- CDR and SDR utilized for managing corporate debts, with mechanisms in place for different loan types.
Game Theory in Financial Context
- Explains dynamics around high and low-cost strategies within bankruptcy discussions.
- Distinguishes insolvency from bankruptcy based on asset-liability ratios.
Recommendations by Narasimhan Committee
- Suggested reduction in SLR from 38.5% and CRR from 15% for banking efficiency.
- Emphasized structural changes in banking, advocating creation of larger banks with greater international presence.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Explore the merits and demerits of the barter system of exchange in this quiz. Learn how goods are exchanged based on intrinsic value and the challenges it presents, such as the double coincidence of wants. Perfect for economics students looking to understand this foundational concept.
