Financial Literacy Notes -I PDF

**Financial Literacy -I** **Module No I Basic Concepts Banking and Insurance** **Q.1) Explain the Term income and Expenses. How to control and manage our day to** **day expenses?** **Answer :** **Income:** Income means the money you receive regularly as payment of your work (salary) (profit) ,...

**Financial Literacy -I** **Module No I Basic Concepts Banking and Insurance** **Q.1) Explain the Term income and Expenses. How to control and manage our day to** **day expenses?** **Answer :** **Income:** Income means the money you receive regularly as payment of your work (salary) (profit) , or as interest on money you have saved or invested. **Expenses:** Money which is spent for a particular purpose is known as expenses. Money spent on food, clothing, shelter, housing, transportation and communication etc are the expenses we make our life comfortable. **Budgeting:** A budget is a plan of Income and expenses for each month. There is a need to put together Income and expenses as it helps us to understand and make sure whether we will have enough money every month. The first step in controlling your spending is to get in the habit of tracking your daily expenses so that you know how much you spend and what are the details of your expenses. **-\> Following are the steps to control and manage day to day expenses.** 1\) To understand what are daily, weekly, and monthly expenses. 2\) Record every expense daily. 3\) Keep every receipt 4\) Total all the expenses at the end of the month. 5\) Do this exercise of writing expenses for three months consequently. 6\) Reduce unnecessary spending. **Q.2) Elaborate the Term SMART Goals. Give Example.** **OR** **Illustrate with example SMART Goals.** **Ans - SMART stands for ** **S-** Specific, **M-** Measurable, **A-** Achievable, **R-**Realistic, **T-**Time-bound. **These are five criteria that can help to make your goals clear, realistic, and trackable.** +-----------------------------------+-----------------------------------+ | **Specific** | Your goal has to be specific, not | | | vague. Be clear on what you want | | | to accomplish and ask yourself | | | how this goal will put you in a | | | better financial situation. | +===================================+===================================+ | **Measurable** | Make your financial goal | | | measurable by quantifying it so | | | you can evaluate | | | | | | your progress and overall | | | success. Express your goals in | | | clear numbers, to know | | | | | | where you are and when you\'ve | | | succeeded. | +-----------------------------------+-----------------------------------+ | **Achievable** | One of the biggest obstacles to | | | achieving a goal is setting | | | expectations too high. | | | | | | The surest way to improve | | | financial situation is to take | | | achievable steps. | +-----------------------------------+-----------------------------------+ | **Realistic** | When setting the goal, assess the | | | steps you plan to take to achieve | | | the goal. | | | | | | Setting unrealistic goals usually | | | leads to disappointment and | | | surrender. | +-----------------------------------+-----------------------------------+ | **Time-bound** | Give yourself a time frame to | | | achieve this goal. This will | | | encourage you to follow | | | | | | through, stop procrastinating, | | | and keep yourself accountable. | +-----------------------------------+-----------------------------------+ **Example** "saving for a motorbike" is a vague and hard to measure. How will you know if you are making progress or have achieved it? On the other hand, "saving 50000 rupees for a 100 CC motorbike within 10 months" is **SMART**. It's **specific** -- you know exactly what you are saving for. It's **measurable** -- you know how much you will need. Its **achievable** and **realistic** -- you can break the total amount needed into smaller steps (saving 5000 rupees a month) that will be easier to do. And its **time bound** you've set a deadline of 10 months. **Q.3) Why Savings is important? Discuss the tips and tricks to save money wisely.** **Ans-** Saving refers to the act of setting aside a portion of income for future use rather than spending it immediately. **Why is saving it important?** \*Achieving long- term financial goals like buying a house or retiring comfortably. \*Providing for unexpected expenses or financial emergencies. \*Reducing financial stress and increasing peace of mind. Without savings, when you want to purchase something, you have to borrow money. Borrowing is expensive, because not only you have to pay it back; you also have to pay interest, often at a high monthly rate. Saving lets you avoid the interest you have to pay while borrowing money. **Tips and tricks for Saving wisely: -** 1\] Make a plan for your Saving and spending reducing unnecessary expenses and put your savings in a separate account. 2\] Clear up any high interest debts before starting your savings. 3\] if income goes up put some of the increase into your savings. 4\] Automatic savings through regular transfers. 5\] Make use of tax benefit schemes to maximize your savings. Schemes like, EPF, PPF, NSC, NPS etc are a good way to reduce the taxes you pay on your savings. (Employee Provident Fund \[EPF\] ,Public provident Fund \[PPF\] , National Savings Certificate \[ NSC\] ,National pension system \[NPS\]) **Q.4) Explain the term Bank. Discuss the different types of accounts or deposits.** **Ans-** A bank is a financial institution that accepts deposits from public and creates credits. In India the Banking Sector is regulated by The Reserve Bank of India (RBI). A very basic yet important function of all the commercial banks is mobilising public funds, providing safe custody of savings and interest on the savings to depositors. Bank accepts different types of deposits from the public such as: 1. **Saving Deposits:**  encourages saving habits among the public. It is suitable for salary and wage earners. The rate of interest is low. There is no restriction on the number and amount of withdrawals. The account for saving deposits can be opened in a single name or in joint names. The depositors just need to maintain minimum balance which varies across different banks. Also, Bank provides ATM cum debit card, cheque book, and Internet banking facility. Candidates can know about the Types of Cheques at the linked page. 2. **Fixed Deposits:** Also known as Term Deposits. Money is deposited for a fixed tenure. No withdrawal money during this period allowed. In case depositors withdraw before maturity, banks levy a penalty for premature withdrawal. As a lump-sum amount is paid at one time for a specific period, the rate of interest is high but varies with the period of deposit. 3. **Current Deposits**: They are opened by businessmen. The account holders get an overdraft facility on this account. These deposits act as a short term loan to meet urgent needs. Bank charges a high-interest rate along with the charges for overdraft facility in order to maintain a reserve for unknown demands for the overdraft. 4. **Recurring Deposits:** A certain sum of money is deposited in the bank at a regular interval. Money can be withdrawn only after the expiry of a certain period. A higher rate of interest is paid on recurring deposits as it provides a benefit of compounded rate of interest and enables depositors to collect a big sum of money.** **This type of account is operated by salaried persons and petty traders. **Q.5) What is Financial Planning? Discuss the steps in Financial Plan.** **Ans :** Financial planning is the process of creating a comprehensive plan to manage your finances effectively, achieve financial stability, and reach your long-term goals. It involves: 1\. Assessing your current financial situation 2\. Setting financial goals (short-term and long-term) 3\. Creating a budget 4.Building an emergency fund 6\. Investing and growing your wealth 7\. Protecting assets with insurance 8\. Planning for retirement and estate management **Begin your financial planning by answering 3 questions:** Where am I now? Where do I want to go? How do I get from here to there? **Financial Planning Process:** 1. Establish Goals and Objectives 2. Analyse Financial Situation 3. Developing and Presenting Financial plan 4. Implementing Financial Plan 5. Monitoring and Reviewing Financial Plan **A Financial plan can help you to:** - Balance today's needs with goals for the future - Make the best use of your financial resources - Adapt change in your circumstances and needs. - Save money you need to achieve your goals - Prepare for unexpected emergencies - Prepare for retirement - Leave something for your family - Manage your taxes financial planning is a continuous process that helps you make informed decisions to achieve financial freedom and peace of mind. **Q.6) Discuss in detail Traditional Commercial banks and New Banking Models.** **Ans -** Banking refers to the system of financial institutions, such as banks and credit unions, that provide various financial services to individuals, businesses, and governments. Banking services mainly include accepting deposits, lending money, facilitating transactions, and offering various financial products like savings accounts, loans, and credit cards. Banking plays a crucial role in the economy by facilitating the flow of money and enabling economic activities. **Traditional Commercial Banks** 1. **Public Sector Banks:** Government hold majority stakes in public sector banks. In India, the nationalized banks and the regional rural banks come under these categories. Example: State Bank of India, Bank of Baroda, Punjab National Bank etc. 2. **Private Sector Banks:** Private shareholders hold majority stakes in private sector banks. Reserve Bank of India (RBI) lays down all the rules and regulations. Example: HDFC Bank, ICICI Bank. Axis Bank etc. 3. **Regional Rural Banks:** These banks were established mainly to support the weaker section of the society like marginal farmers, laborers, small enterprises, etc. They mainly operate at regional levels at different states. 4. **Co-operative Banks:** The rural co-operative credit system in India is primarily mandated to ensure flow of credit to the agriculture sector. It operates with three-tier system Primary Agricultural Credit Societies at the village level, Central Cooperative Banks, at the district level and State Cooperative Banks at the State level. **New Banking Models** 1. **Payments banks: Payment Banks** are a new model of banks, conceptualised by the Reserve Bank of India (RBI), which cannot issue credit. These banks can accept a restricted deposit, which is currently limited to [₹](https://en.wikipedia.org/wiki/Indian_rupee)200,000 per customer and may be increased further. These banks cannot issue loans and credit cards. Both current account and savings accounts can be operated by such banks. Payments banks can issue ATM cards or debit cards and provide online or mobile banking. Bharti Airtel set up India\'s first payments bank, Airtel Payments Bank. 2. **Small Finance Banks:** Provide basic banking service of acceptance of deposits and basic lending. The aim behind these is to provide financial inclusion to sections of the economy not being served by other banks, such as small business units, small and marginal farmers, micro and small industries and unorganized sector entities. These banks are governed by the central bank of the country. e.g. AU Small Finance Bank, Ujjivan small finance Bank, Suryoday Small Finance Bank etc. **Q.7) What is Non - Banking Financial Company (NBFC) and Development Financial** **Institutions?** 1. **Non-Banking Financial Company (NBFC):** A non-banking Financial Company is a company registered under Companies Act 1956/2013 regulated by RBI. NBFC engaged in the business of loans and advances, acquisition of securities, leasing business, hire-purchase, insurance business, chit business etc. 2. **Development Financial Institutions:** A development finance institution (DFI), also known as a development bank is a financial institution that provides risk capital for economic development projects on non- commercial basis. **Objectives of Development Finance Institutions** - The prime objective of DFI is the economic development of the country - These banks provide financial as well as the technical support to various sectors - DFIs do not accept deposits from people - They also provide technical assistance like Project Report, Viability study, and consultancy services. **Examples:** - Small Industries Development Bank of India (SIDBI) -- Loans for a small-scale industry or business can be taken from SIDBI. Financing small industries with modern technology and equipment is done with the help of this bank - EXIM Bank -- EXIM Bank stands for Export and Import Bank. To get loans or other financial assistance with exporting or importing goods by foreign countries can be done through this type of bank - National Bank for Agricultural & Rural Development (NABARD) -- To get any kind of financial assistance for rural, handicraft, village, and agricultural development, people can turn to NABARD. There are various other specialized banks and each possesses a different role in helping develop the country financially. **Q.8) What is Debit Card and Credit Card?** Ans - **A debit card** is a payment card that allows you to make purchases or withdraw cash by drawing directly from your checking account. Here are some key features and benefits: **Features:** 1\. Linked to your checking account 2\. Funds are deducted immediately 3\. No credit limit, can only spend what\'s available 4\. Often has a PIN or signature for authentication 5\. Can be used for online transactions, in-store purchases, or ATM withdrawals **Benefits:** 1\. Convenient and easy to use 2\. No interest charges 3\. Helps with budgeting and tracking expenses 4\. Wide acceptance worldwide 5\. Often comes with rewards or cashback programs 6\. Provides transaction history and statements **A credit card** is a payment card that allows you to borrow money from the card issuer to make purchases, pay bills, or get cash advances. Here are some key features and benefits: **Features:** 1\. Credit limit: A maximum amount you can charge 2\. Interest rate: Applied to outstanding balances 3\. Payment due date: Minimum payment required each month 4\. Rewards programs: Points, cashback, or travel benefits 5\. Security features: Chip technology, PIN, or signature **Benefits:** 1\. Convenience and flexibility 2\. Building credit history 3\. Rewards and benefits programs 4\. Purchase protection and insurance 5\. Emergency cash advances **Q.9)** **What is the difference between Debit Card and Credit Card?** **OR** **Differentiate/Distinguish between Debit Card and Credit Card?** **Ans-** - **Credit Limit**\ Credit Cards have monthly credit limits, which will depend on the kind of card and credit-worthiness of customers.\ Debit Cards can be used only up to the amount that is present in bank account. However, the bank may have a daily purchase limit on debit card. - **ATM withdrawals **\ Cash withdrawals on a Credit Card attract a withdrawal fee and interest whereas\ Debit Cards generally do not levy a cash withdrawal fee, especially if you transact at your bank's ATM.\ Both Debit Cards and Credit Cards have a daily cash withdrawal limit. In addition, Credit Cards may have a monthly withdrawal limit. - **Interest**\ Credit Cards come with up to 50-days of interest free credit. To avoid interest, you must pay your outstanding amount by the due date.\ Since the amount is paid directly out of your account in the case of a Debit Card, you need not pay any interest. - **Annual fees **\ Many Credit Cards have no annual fee. Some do charge an annual fee, which is waived off on achieving a certain amount of spends on the card. A few specialised cards charge an annual fee.\ Banks usually do not charge annual or renewal fees on Debit Cards. - **Benefits **\ Credit Cards offer a wide range of benefits and perks including cashbacks, discounts and, most important, rewards that can be converted into free flights and exciting gifts.\ Debit Cards also offers benefits such as discounts and cashbacks. - **Usage **\ In terms of usage, there is generally no difference between Debit Cards and Credit Cards. Both can be used at merchant outlets and online.\ However, there may be certain types of transactions or websites which only allow the use of Credit Cards. 1. **Eligibility**\ Most Credit Cards have basic eligibility criteria, based on income, existing relationship and credit-worthiness\ However, customers can get Debit Card easily if have a savings or current account. - **Security features **\ \ Both Credit Cards and Debit Cards have similar security features, such as SMS notifications, PIN and OTP.\ Many Credit Cards come with zero liability insurance\* for stolen and lost cards, which Debit Cards don't offer. **Q.10) Explain different Government Credit Schemes.** **Ans**- Government credit schemes are programs designed to provide financial assistance to individuals, businesses, or specific groups, often with favourable terms, such as low interest rates or flexible repayment options. Here are some examples: **1)Educational Loans through Vidyalakshmi Portal** - The government of India launched the Vidya Lakshmi Portal to ease the education loan process for students looking for financial support to study abroad or in India. The government of India launched Vidya Lakshmi Portal in August 2015 and developed by the Ministry of Finance, the Ministry of Education and the Indian Banks Association (IBA). Vidyalakshmi Portal is not only helpful for exploring student loans but also students can apply for education loans and track the process. [[www.vidyalakshmi.co.in]](http://www.vidyalakshmi.co.in/) 2. **Pradhan Mantri Awas Yojana (PMAY)** **PMAY** is a credit-linked subsidy scheme by the Government of India to facilitate access to affordable housing for the low and moderate-income residents of the country. It is Credit Linked Subsidy Scheme for Lower Income Group/ Economically Weaker section and middle-income group. Individuals are eligible to avail subsidy when they are purchasing their first house or it is a new construction. It has two components: Pradhan Mantri Awas Yojana (Urban) (PMAY-U) for the urban poor and Pradhan Mantri Awaas Yojana (Gramin) (PMAY-G and also PMAY-R) for the rural poor. This scheme converges with other schemes to ensure that houses have a toilet, Saubhagya Scheme for universal electricity connection, Ujjwala Yojana LPG connection, access to drinking water and Jan Dhan banking facilities, etc [ ] 3. **Pradhan Mantri Mudra Yojana (PMMY)** Pradhan Mantri Mudra Yojana (PMMY) is a flagship scheme of Government of India. The scheme facilitates micro credit/Loan up to Rs. 10 lakhs to income generating micro enterprises engaged in the non farm sector in manufacturing, trading or service sectors including activities allied to agriculture such as poultry, dairy, beekeeping, etc. The Scheme provides financial assistance extended by Member Lending Institutions to the non-corporate, non-farm sector income generating activities of micro and small entities. These micro and small entities comprise of millions of proprietorship / partnership firms running as small manufacturing units, service sector units, shopkeepers, fruits / vegetable vendors, truck operators, food-service units, repair shops, machine operators, small industries, artisans, food processors and others. [https://[www.mudra.org.in](http://www.mudra.org.in/)] **Q.11) What is Digital Payment? State and explain its advantages.** **Ans -** Digital payments are those payments in which the payer and the payee both use electronic modes to send and receive money. A digital payment, sometimes called an electronic payment, is the transfer of value from one payment account to another using a digital device or channel. This definition may include payments made with bank transfers, mobile money, QR codes, and payment instruments such as credit, debit, and prepaid cards. The benefits of using digital payments are as follows: - **Instant and convenient mode of payment:** Unlike cash, money can be instantaneously transferred to the beneficiary account using digital modes like BHIM-UPI and IMPS. Moreover, using the BHIM-UPI mode, one can effect a digital transaction via mobile phone using mobile number or easy-to-remember virtual payment address (email-like address). BHIM-UPI has enabled access to multiple Bank accounts in a single mobile app, facilitating ease of payments. - **Enhanced financial inclusion: **Digital payments offer anytime, anywhere access to accounts, thus making it easy for citizens to receive payments in their accounts and to also make payments using their phone. - **Increased transparency in government system**: Earlier cash payments were subject to "leakage" (payments that do not reach the recipient in full) and "ghost" (fake) recipients, particularly in the context of social security benefits by government transfers. Now, benefits are directly transferred to target beneficiary (direct benefit transfer) account through digital modes of payments. - **Improved speed and timely delivery**: In contrast to a cash payment that travels at the speed of its carrier, digital payments can be virtually instantaneous, regardless of whether the sender and receiver are in the same town, district or country. - **National Electronic Toll Collection (NETC) system: **NETC system enables the customer to make electronic payments at NETC-enabled toll plazas on the highway without stopping at the toll, using Radio Frequency Identification technology. - **Safe and secure: **Recipients of cash payments not only often have to travel considerable distances to receive their payments but are also particularly vulnerable to theft. Digital payments across India are secure as multiple levels of authentication are required for making transactions. **Q.12) State and Explain Do's and Don'ts of Digital Payments.** Ans- +-----------------------------------+-----------------------------------+ | Use password for your Mobile and | Never save your mobile banking | | Computer so that no one else can | login and password on the phone. | | access your systems. | Either memorize it or write it | | | down somewhere else. | +-----------------------------------+-----------------------------------+ | Always visit your bank's | Never Leave your handset | | | | | secured internet Banking site | unattended and logged into a | | regularly | mobile banking app. | +-----------------------------------+-----------------------------------+ | Log out of your internet banking | Never leave your phone un- | | immediately after you have | attended while carrying out | | completed your transaction | financial transactions through | | | mobile | +-----------------------------------+-----------------------------------+ | If you suspect unauthorized | Never download apps from | | transactions in your account, | untrustworthy and dubious sources | | report it to your bank | | | immediately | | +-----------------------------------+-----------------------------------+ - When making online transactions it would advisable to avoid using public devices or Wi-Fi networks since they are more prone to cyber-attacks, theft, and other fraudulent activities. - It is also important to use only reputed, verified websites. Trusted websites often offer higher levels of protection for online payment transaction. **Q.13) What is internet Banking? Explain various modes to transfer money through Net Banking.** **Ans-** Internet banking, also known as online banking, e-banking or virtual banking, is an electronic payment system that enables customers of a bank or other financial institution to conduct a range of financial transactions through the financial institution\'s website. Internet banking allows users to transfer funds through different modes like NEFT, RTGS, IMPS or UPI. Funds can be transferred between their own accounts as well as to other accounts within the same bank or to accounts in different banks. **Following are the benefits of Internet Banking** - Check balances on accounts and view records of transactions. - Pay bills automatically each month with easy-to-set-up auto payment. - Transfer funds between accounts. - Download or print statements for tax or personal records. - Access your account 24/7 **Modes to transfer money through Net Banking** 1. **NEFT-** The full form of NEFT is National Electronic Funds Transfer. Owned and managed by the Reserve Bank of India (RBI), NEFT is a pan-India unified electronic payment system that enables fund transfers between bank accounts within the country. While NEFT is available 24×7, the time taken for funds to be credited to the beneficiary\'s account can vary. There is no maximum or minimum limit on the amount of funds that could be transferred through NEFT. With NEFT, you can initiate transactions to transfer funds from one bank account to another throughout India. The settlements take place in hourly intervals. 2. **RTGS-** The acronym \'RTGS\' stands for Real Time Gross Settlement, which can be explained as a system where there is continuous and real-time settlement of fund-transfers, individually on a transaction-by-transaction basis. This is the fastest possible money transfer system through the banking channel. RTGS settles transactions in real time, meaning the funds are instantly transferred into beneficiary accounts. 3. **IMPS-** Immediate Payment Service is a new facility added to Mobile Banking Service. It facilitates funds transfer to an account of the beneficiary with a participating bank, based on beneficiary\'s Mobile Number, IFSC etc. **Q.14) What is Insurance? State and explain various categories of Insurance.** **Ans-** Insurance is a contract, represented by a policy, in which a policyholder receives financial protection or reimbursement against losses from an insurance company. The document which contains all the terms and conditions of insurance (i.e. the written contract) is called the 'insurance policy'. The amount for which the insurance policy is taken is called 'sum assured'. The consideration in return for which the insurer agrees to make good the loss is known as 'insurance premium'. This premium is to be paid regularly by the insured. It may be paid monthly, quarterly, half yearly or yearly. **Categories/Types of Insurance** 1. **Life Insurance -** Life insurance is a type of insurance policy in which the insurance company undertakes the task of insuring the life of the policyholder for a premium that is paid on a daily/monthly/quarterly/yearly basis. Life Insurance policy is regarded as a protection against the uncertainties of life. It may be defined as a contract between the insurer and insured in which the insurer agrees to pay the insured a sum of money in the case of cessation of life of the individual (insured) or after the end of the policy term. 2. **General Insurance-** General Insurance is related to all other aspects of human life apart from the life aspect and it includes health insurance, motor insurance, fire insurance, marine insurance and other types of insurance such as cattle insurance, sport insurance, crop insurance, etc. Fire insurance is a type of general insurance policy where the insurer helps in paying off for any damage that is caused to the insured by an accidental fire till the specified period of time, as mentioned in the insurance policy. Marine insurance is a contract between the insured and the insurer. In marine insurance, the protection is provided against the perils of the sea. **Q.15) Discuss in detail Insurance schemes of Government of India.** **Ans- Following are the insurance schemes of government of India.** 1. **Pradhan Mantri Suraksha BimaYojana (PMSBY)** - Provides accidental insurance cover of upto2 Lakh to bank account holders in the age of 18 to 70 years - A fixed annual premium of Rs.12/- is deducted from the bank account through auto-debit facility - Person would be eligible to join the scheme through one savings bank account only - This Insurance scheme covers permanent and partial disability due to accident 2. **Pradhan Mantri Jan Arogya Yojana (PMJAY)** **Ayushman Bharat** - Provides health care facilities targeting poor, deprived rural families and identified occupational category of urban worker's families - There is no restriction on family size, age or gender - No money needs to be paid by the family for treatment in case of hospitalization 3. **Pradhan Mantri Fasal Bima Yojana (PMFBY)** - Crop insurance scheme aimed at shielding farmers from the crop failure through insurance - The scheme insures farmers against a wide range of external risks -- droughts, dry spells, floods, inundation, pests and diseases, landslides, natural fire and lightning, hailstorms, cyclones, typhoons etc. - Scheme covers post-harvest losses up to a period of 14 days **Q. 16) Discuss in detail Pradhan Mantri Jan Dhan Yojana.** **Ans-** PMJDY is the biggest financial inclusion initiative in the world, was announced by the Hon\'ble Prime Minister Shri Narendra Modi on 15^th^August 2014 from the ramparts of the Red Fort and launched by him on 28^th^ August 2014 across the country.  - Pradhan Mantri Jan-DhanYojana (PMJDY)\" under the National Mission for Financial Inclusion was launched initially for a period of 4 years (in two phases) on 28th August 2014. - It envisages universal access to banking facilities with at least one basic banking account for every household, financial literacy, access to credit, insurance and pension. - The Government has decided to extend the comprehensive PMJDY program beyond 28.8.2018 with the change in focus on opening accounts from **"every household" to "every adult",** with following modification: i. Existing Over Draft (OD) limit of Rs. 5,000 revised to Rs. 10,000. ii. No conditions attached for active PMJDY accounts availing OD uptoRs. 2,000. iii. Age limit for availing Overdraft facility revised from 18-60 years to 18-65 years. iv. The accidental insurance cover for new RuPay card holders raised from existing Rs.1lakh to Rs. 2 lakhs to new PMJDY accounts opened after 28.8.2018. **Q.17) Write a note on Mediclaim.** **Ans-** A Mediclaim policy is a sort of health insurance policy in which the insurer reimburses the policyholder for medical expenses incurred in treating their medical condition. - Health insurance and Mediclaim are two popular ways to insure your health-related costs. - They are not the same. While health insurance has wide coverage, Mediclaim caters to only hospitalisation-related expenses.  - Medical insurance policies provide coverage for specific medical expenses related to a serious illness or injury. - Under Section 80D of the Income Tax Act, a policyholder can claim mediclaim deductions - The full form of TPA is Third Party Administrator. TPA is the agent of the health insurance corporation. It acts as a mediator between the insurance provider & the insured individual. Its primary role is to address all cashless and insurance claims linked to hospitalisation and medical expenses. **Q.18) Write a note on Investment and its Types.** **Ans-** Investment refers to putting money in an asset with the aim of generating income. Financial investments come in different forms, such as mutual funds, unit linked investment plans, endowment plans, stocks, bonds and more. However, the primary goal behind all investments remains the same, i.e., to increase the value of your invested money. **There are multiple opportunities to invest in India. ** - **Public Provident Fund (PPF)-** You can invest in PPF through your bank or the post office. The returns on PPF are slightly higher than prevailing interest rates from banks. PPF investment comes with a lock-in period of 15 years. The minimum investment amount is ₹ 500 per annum, and the maximum is ₹ 1.5 lakh per annum. The contribution to PPF is eligible for tax deduction as per conditions mentioned under section 80C of the Income Tax Act, 1961. Returns recovered from PPF are exempt under the Income Tax Act, 1961. - **Fixed deposits-** A fixed deposit is a type of investment. You can deposit an amount as a fixed deposit with your preferred bank and earn fixed returns. They are low-risk investment options and come with a lock-in period. - **Stocks-**Investing in stocks refers to purchasing shares of listed companies. This requires an understanding of the stock market and carries high risk. The returns are market-linked and can be affected by market-related volatility. - **Mutual funds-** Mutual funds are market-linked instruments. Professional fund managers usually manage investments in mutual funds. You can select from a large number of options which include equity, debt or a mix of both funds. The investments can be made as lump sum, or in a periodic manner. The returns from mutual funds are market-linked and hence, are affected by market conditions. - **Real estate-** Purchasing real estate is a traditional investment option in India. With real estate investments, you can have the option to get a regular income in the form of rent or sell it for a lump sum amount. The returns from real estate can vary depending on market conditions, the property\'s location, and more. - **NPS-** The National Pension System is a defined-contribution pension system in India regulated by the Pension Fund Regulatory and Development Authority which is under the jurisdiction of the Ministry of Finance of the Government of India. Under NPS, the individual contributes to his retirement account and his employer can also co- contribute for the social security/welfare of the individual. - **Gold -** Gold investment can be done in many forms like buying jewellery, coins, bars, gold exchange-traded funds, Gold funds, sovereign gold bond scheme, etc. **Q.19) Write a note on KYC and eKYC** **Ans**-  **KYC** is a process that the RBI has made mandatory for financial institutions to carry out when verifying and authenticating a customer\'s personal data. **eKYC** means the digitised version of the \'know your customer\' protocol. - SEBI has prescribed KYC (Know Your Client) requirements for all security market investors. SEBI has allowed the use of technological innovations which can facilitate online KYC (e-KYC). The use of technology would facilitate the investors to complete the KYC without the requirement of physically visiting the Bank. - KYC process includes ID card verification, face verification, document verification such as utility bills as proof of address, and biometric verification. - In India, Electronic Know Your Customer or Electronic Know Your Client, or eKYC, is a process wherein the customer\'s identity and address are verified electronically through Aadhaar authentication.  - eKYC also refers to capturing information from IDs (OCR mode), extracting digital data from government-issued smart IDs (with a chip) with a physical presence, or using certified digital identities and facial recognition for online identity verification.  \*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*