Indian Economy (Mrunal) Pillar #1 - Money : Barter to Bitcoin PDF

INDIAN ECONOMY (MRUNAL) PILLAR # 1 – SUMMARIZER Pillar#1A-1: Money : Barter to Bitcoin “I promise to pay the bearer…”: Earlier -> Equivalent value of gold/...

INDIAN ECONOMY (MRUNAL) PILLAR # 1 – SUMMARIZER Pillar#1A-1: Money : Barter to Bitcoin “I promise to pay the bearer…”: Earlier -> Equivalent value of gold/ silver BUT Now -> Conversion into other Bank notes & “token Barter system & its disadvantages coins” of equal face value. X inflation adjusted X linked with Intro – Mesopotamian tribes; Double coincidence of wants + High Gold/Silver + CURRENCY NOTE = zero interest, anonymous bearer Search/Transaction costs + Perishable -> Value loss + X bond / Promissory Note (Not a Promissory Note as per NEGOTIABLE Specialization/ Division of Labour INSTRUMENTS ACT) Money: Functions Demonetization of Fiat Money (Previously 1946, 1978) -> Pri -> Measure(Val) + Med (Exchange) Removal of legal tender status of currency notes. NOTIFIED BY Sec-> Store & Transfer (Val) + Deferred Payments Ministry of Finance -> Dept (Eco. Affairs) Contingent -> Credit Sys + Production Factors -> Employing Specified Bank Notes (Cessation of Liabilities) Act 2017 -> Cessation (Land,Lab,Cap) + National Income (Creation & Redistribution) - TAX means ending & Liabilities here refer to that of RBI to honor the promise to pay the bearer.. Money: Evolution & Types ₹2000 banknotes continue to be legal tender but Withdrawn from Commodity M (Intrinsic val -> YES) – Use(Commodity as money) - circulation/ Not printing anymore/ Not Demonetized > Ex- Nails, beans, bones, pebbles, etc. (Perishable/ X uniform/ impure/ X universally acceptable) good vs bad money | soft vs hard currency Gresham's law = monetary principle stating "bad money drives out Metallic M (Intrinsic val -> Yes) – uniformity & trust + good". if 2 forms of commodity money in circulation, accepted by representations of a trade currency law with similar face value, then more valuable commodity will COINS -> Study (NITIN SINGHANIA) gradually disappear from circulation (As people will start hoarding Full Bodied (Intrinsic Val >= Face Val; Debasement)vs Token Coins the good money & they will use the less valuable commodity with (Intrinsic Val < Face Val; Token Coins of Tughlaq (1330s); Cupronickel equal face value for transactions) -> Ferritic Stainless Steel (17% Chromium and 83% Iron) ; Lead Coins -> Satvahana Zimbabwe's Central bank -> Gold Coin ‘Mosi-oa-Tunya’ (2022) https://rbi.org.in/Scripts/mc_ancient.aspx named after Victoria Falls-> unique serial number- Bearer Ownership 1st official excavation - coinage in India b/w 7th c. BC & 1st c. AD -> Certificate+ meet regulatory requirements for asset investments + 'punch-marked' coins -> punching &carving metal sheets -> largely transactional value + collateral for loans/ credit. + price of gold coin silver Coinage Act 2011 prohibits melting in Zimbabwe will be published daily at 0800 hours by central bank, + Intrinsic value of a coin? sold at prevailing international price of gold plus 5% to cover cost of Precious Metal Coins vs Paper Currency production and distribution of coin on a Payment vs Delivery basis. Paper Money (Intrinsic Value? No) -> Redenomination? Changing face value of Legal tender in FIAT MONEY 2 conditions MUST BE circulation – usually coz of inflation; Like Iran’s Toman Currency 1. Form (Physical Currency Coin / Physical Currency Notes / (2016) ; News : Nigeria, Indonesia VirtualCoin/ DigitalCoin/ CryptoCoin) which can measure value 2. issued by order of a King / Queen / Govt / Central Bank Bank Money / Deposit Money COINAGE ACT, 2011 -> govt -> Coins Fin. Sec Paper orders: Cheque, Demand Draft (DD) : Viceroy Ripon’s RBI ACT, 1934 -> Currency notes (except Rs. 1 & Coins) = RBI Negotiable Instruments Act, 1881: -> Cheque dishonour & forgery Legal Tender -> FIAT MONEY + Legally valid for all debts & Cheque -> Drawer (Sender); Drawee (Bank) ; Payee (Recipient) transactions (Cant refuse) + (EXCEPTION -> Bitcoin is not a Fiat IFSC Indian Financial System Code- 11 alphanumeric - bank branch money, yet it is legal tender in El-Salvador) MICR Magnetic Ink Character Recognition. 9 digits code in Iron Oxide Commemorative Coins = Fiat money but not legal tender unless ink for automated clearance. notified by Govt/RBI Demand Draft (via Bank) and Overdraft (for short-term operating Legal Tender – Limited (can refuse -> accepting payment; Coinage expenses -> withdraw from A/C when insufficient balance) + Loans is Act 2011 -> LIMITAIONS ON USING COINS -> like 50p x20 coins – Rs mainly for longer term higher value expenses 10) and Unlimited (No restriction -> RBI ACT 1934 -> Cant refuse bank note (LEGAL TENDER) Cheque → NPCi’s Cheque Truncation System (CTS) for banks -> ** Finance Act 2017: “Cash transactions for less than Rs.2 lakh only. Sender bank to relase money & Positive Pay Mechanism – before Beyond that use Cheque, DD, NEFT etc. else penalty. releasing money - match images of cheque by Payee & the sender bank RBI’s App to help the blind identify currency notes -> bleed lines, raised printing of Gandhi etc. => MANI APP -> Audio + Electronic Orders / Digital payment Vibrations [MOBILE AIDED NOTE IDENTIFIER] Payment & Settlement System Act 2007 empowers RBI to regulate card payment, e-payment related products and services Currency related General Knowledge -> 8th schedule (22 lang) -> Note only 17 & both sides different CBS ( full form: Core Banking Solution /system) – banking software with web-platform for centralized data management & branch-less banking. E.g. Finacle software; BanCS software; E-Kuber (used in RBI) Click on the link to Join us on Telegram: https://t.me/justupscpyq for more such pdfs  INDIAN ECONOMY (MRUNAL) PILLAR # 1 – SUMMARIZER Digital Payment Systems- transaction limits may differ, depending Conversational payments in UPI - chat/converse with AI-powered on banks systems to make payments - instruction via TEXT or voice note to UPI RBI's centralised payment systems (CPS) NPCI - IMPS system RTGS : Real time NEFT : National Immediate PRE-SANCTIONED CREDIT LINE - When banker allows a/c holder to borrow upto predetermined amount, w/o loan [Expensive interest Gross Settlement Electronic Funds Payment Service rate] – Faster + No Collateral (unsecured) = [Credit Card + Overdraft Transfer – (Branch Visit/ Bank Website/ UPI) ] 2L --- 2000 Cr (SBI) Interoperable Card-less Cash Withdrawal (ICCW) instantly -> QR Code based Coin Vending Machine using UPI (2023-Feb) Instant settlement Settles net amount b/w Instant settlement UPI facility to foreign tourists coming to India (2023) banks after 30 min. 24/7 UPI Transactions: Volume surges 56% in H2 2023 but average ticket Rs.0 fee + GST# size (ATS) shrinks 8% to Rs 1,515 + UPI transactions = person-to- person (P2P) and person-to-merchant (P2M) transactions. BEFORE-2021: Only Banks can provide this Banks + Prepaid transaction volume - 65.77 billion + value of transactions = Rs 99.68 facility + 2021: RBI announced - non-bank Payment lakh crore entities can also become members of centralized Instrument (PPI)/ payment systems (CPS = NEFT & RTGS) -> mobile-wallets NPCI → UPI BHIM App: Bharat Interface for Money (2016) - Amazonpay, PhonePe etc could directly allow. Phonepe, Mobikwik Money transfer app designed by NPCi + 2 factor of authentication system LPSS- lightweight payment and settlement system RBI’s (emergency/backup) alternative to NEFT, RTGS and IMPS/UPI + NPCI → Rupay Card Payment Gateway (2012) world’s 7th temporary & portable solution during natural disasters & war + Can payment gateway (Mastercard, Visa) + Free w/ PMJDY (Jan Dhan) be operated from anywhere by a bare minimum staff. bank A/C + Collab w/ Singapore & japan National Payment Corporation of India(NPCi) NPCI other notable initiatives 2008 : Reg under Company act -> Not for Profit BBPS Bharat Bill Payment system - monthly payments of utility bills Founder : 10 banks – 100 Cr Capital -> New stakeholders later + cost- (gas, electricity) + NPCi ‘s subsidiary Bharat BillPay Ltd. Co. → in 2022 effective payment solutions / tech for Banks launched Unified Presentment Management System (UPMS) NFS National Financial switch -runs ATM network NPCI → UPI (Unified Payment Interface)- technology for building CTS - Cheque Truncation System (2010) [DONE] digital payment apps based on IMPS + Features : QR Scan + Link A/C NETC - National Electronic Toll Collection – tech support to FASTag + Push Transaction (when you push money out of you’re a/c by toll collection. own discretion ex- sending to relatives) Pull Transactions (when PAI chatbot – AI based – replies to online queries about NPCI’s others automatically pull money out of you’re a/c after approval ex- products like FASTag, RuPay, UPI, AePS etc. monthly electricity bills + signed int’l agreements in Bhutan, Nepal, DigiSaathi Helpline Number - RBI & NPCi launched - for digital Singapore, Europe, Mauritius, Srilanka etc. - Indian tourists in foreign payment & card payments problems. [ 1800 891 3333 ] countries can spend from their Indian bank account by using UPI- DakPay (2020) - Payment App by Dept of Post & its India Post Based Apps Payments Bank UPI: daily transaction limits : ₹1 lakh/day -> Normal transactions. BharatQR(2016) + E-Rupi (2021) + ₹ 2 lakhs/day -> Capital Markets (e.g. Mutual Funds) Credit card NACH-ABPS : Hybrid / Mixed mode in MGNREGA – both by payments, Loan re-payments/ EMI, Insurance premium/fees NPCi-; NACH - National Automated Clearing House for bulk monthly payment etc. + ₹5 lakh/day -> Purchase of G-Sec under Retail Direct payments of utility bills, dividends, salaries, pension / insurance Scheme, IPO Subscriptions. + Medical and educational services premiums etc.+ ABPS – Adhaar Based Payment System & AEPS – payment. Aadhaar Enabled Payment System -> for Direct Benefit Transfer NPCI → UPI → 123PAY for FeaturePhones No smartphone -> can (DBT) into beneficiary’s account for MNREGA wages, LPG subsidy, use UPI using USSD (Unstructured Supplementary Service Data) code scholarship etc. ; Also req for Bankmitra-MicroATM system (99#). -> 2022 - RBI + NPCi launched new UPI platform - 123PAY -> Mahatma Gandhi National Rural Employment Guarantee Act, 2005: more UPI-payment options + Features: USSD + Interactive voice [Mo Rural dt] - 100 days work to villagers. -> Uses both NACH & ABPS response + missed call-based payments + proximity sound-based for salaries to MGNREGA workers => Mixed payment mode/hybrid payments (for contactless payments) + easier utility bill payment + mode for MGNREGA wages. -> Govt plans to shift to ABPS only need to link bank a/c with feature phone. → Money transfer, check (Delay) – Issue people w/o adhaar a/c balances, pay utility bills, recharge FAST Tags UPI observations by Economic Survey-ES-2023 : FY -> 8840 Cr DBT → E-Rupi by NPCi (2021) -SMS /QR Code based -Prepaid – Total Digital Transactions + 52% UPI’s Share of Digital Transactions Cashless- Electronic Voucher by NPCI - on UPI Platform. + supported UPI-Lite (on-device wallet) : User adds money from his bank by Mo Finance (Dept of Financial Services) & Mo Health (National account to his UPI Lite wallet on his mobile App. (e.g. Google Pay Health Authority (NHA)) + USES 1) Food for mother, child, poor App, BHIM App) under schemes. 2) Medicines - TB, Corona etc. 3) Fertilizer subsidies UPI-Lite + NFC = Offline Retail Payment / Tap-and-pay offline Who can Buy? Govt + Companies + Individuals transactions + contactless + faster Who can Sell? Banks + Non-bank Prepaid Payment Instrument (PPI) e.g. AmazonPay, Mobikwick etc. Click on the link to Join us on Telegram: https://t.me/justupscpyq for more such pdfs  INDIAN ECONOMY (MRUNAL) PILLAR # 1 – SUMMARIZER Interoperability Problem –Can’t use Paytm Cashback on amazon – White label Non-Bank Non-Bank itself Ex- Muthooth Not interoperable b/w many wallets -> RBI making rules. operates Finance Micro-ATM Bankmitra – manual deposits/ withdrawl + Adhaar + NPCi’s AEPS tech. QR Codes: compulsory to implement UPI/Bharat QR from 2022 Japan in 1990s: 2 dimensional (2D) Quick Response (QR) Code sys Indian E-payment systems - 3 types of QR Codes Measures to promote Cashless Economy : Nandan Nilekani RBI Proprietary QR code : Exclusive QR of Paytm/Phonepe -> RBI committee (2019) -> restrictions on cash transactions prohibited new proprietary QR code -> Interoperability issue UPI QR code -> Generated by UPI app of NPCi- can be scanned by all RBI’s Payments Infrastructure Development Fund (PIDF) 2020 Apps developed using UPI tech Subsidy to merchants on adoption of PoS devices : Rs. 500 Cr fund Bharat QR code- Developed by NPCi + Visa + Mastercard - can be (250 Cr RBI + 250 Cr Banks & Gateway operators) : Subsidy also to scanned by all Apps - developed using UPI techn PM SVANidhi : Govt helps street vendor to get Biz loan + PM RBI ordered all Payment System Operators (PSOs e.g. Paytm, Vishwakarma : Govt helps artisans (carpenter,potter,blacksmith) - in PhonePe, MobiKwik, Google Pay etc) to shift to UPI QR or Bharat QR skill training & Bank loans. Benefit? All Payment apps - scan these QR codes → 'interoperability'. Global Money Transfer rMQR (Rectangular Micro QR Code) UPI facility to foreign tourists coming to India (2023): 1990s: JAPANESE ENGINEER Foreigners (G20 nations’ tourists) can open Indian bank A/c and use Masahiro Hara, designed square QR code -> Now working on rMQR - UPI to pay ; Non-Resident Indians/foreigners -> bank A/C’s in Indian > can be printed in narrow spaces -> same scanning speed as Square banks = NRE/NRO/FCNR (Foreign Currency Non-Resident Account). Card Types based on Security Features Nostro-Vostro / Rupee-Ruble / Rupee-Rial Agreement? -> Magnetic Card – Banned coz of Cloning/ Skimming issues Rupee-Rouble trade arrangement = alternative payment mechanism EVM Card [Europay + Mastercard + Visa chip infrastructure w/ to settle dues in Rs. instead of Dollars or Euros. Idea was first encryption] = Contactless (RFID) + Contact based (in PoS) conceived in 1953 under the Indo-Soviet trade agreement. Ruble – Russia ; Rial - Iran Credit & Debit Cards (also called ‘Plastic Money’) – payment NOSTRO : “Our Money on VOSTRO : “Your Money on modality : Credit C : borrowing – interest – reward pts + Debit C – deposit at your bank” + A/c deposit at our bank” + A/c held existing balance – Overdraft + Hybrid/ Duo C – 2 chips in 1 C for held by our bank in foreign by foreign bank in domestic Credit & Debit each - E.g. Indusbank Hybrid C + Pre-paid C – subtype currency at another bank currency at our bank of Debit C – can buy w/o any bank a/c ex- Union Bank of India & Ex- SBI holding money in Ex- Russian bank holding NPCi’s Rupay -> IRCTC’s UBI Prepaid Card - rail tickets, meals etc. Rubals in a bank A/c in Russia money in Rs. in SBI A/c in India Card Tokenization (from Oct2022)- Token – hide sensitive card RUPAY Cards- International acceptance – Allowed by RBI data – digital safety 2023-June: Indian travellers can use them abroad for ATM money withdrawal & shopping. (subject to T&C) + 2024 NEWS: UPI & Rupay CVC Less transactions - Cardholder Verification Code -> X Req Connectivity with – Mauritius & Sri Lanka + Integration of UPI with every time after RBI’s Tokenization norms National Payments Interface (NPI) of Nepal for cross-border remittances. + UPI also available at Bhutan, Oman, UAE, South Asian FASTag by NHAI for paying toll fees at highways (2017) - nations, Nepal and France etc. prepaid rechargeable tags - automatic electronic toll collection – India-UAE: LCSS: UPI-IPP linkage (2023-Aug) RFID. + Done Using NPCi’s NETC (National Electronic Toll Collection) 2023: Central banks of India & UAE signed for easier Local Currency tech. + 2021 – mandatory else more toll Settlement System (LCSS) agreement. -> allow importers/ exporters/ investors/ tourists to pay in their respective domestic currencies (INR MDR: Merchant Discount Rate - charge to a merchant by a bank + UAE Dirham (AED) – W/o using $$ Dollars. IPP = Instant Payment for accepting payments from his customers through the bank’s cards. Platform of UAE. merchant must pay to his (acquirer) bank for every credit / debit card transaction. -> 3 parties Financial Messaging Systems: SWIFT- Russia gets banned Customer’s card issuing bank [SBI]; Merchant’s acquiring bank [Axis]; Globally Within India Payment gateway provider [Visa/Mastercard] + Issue: ↓ Profit Society for Worldwide Interbank Structured Financial Messaging margin of merchants -> ↓ Point of Sale (PoS) device adop on. financial telecommunication System (SFMS) MDR Subsidy by MEITY -> 0% MDR on Rupay/UPI -> Loss (banks (SWIFT) commissions) -> Subsidy by MEITY => To ↑ adop on of PoS devices. By a Cooperative organization in designed by TCS for IDRBT Belgium’s La Hulpe city (1973). (=Research arm of RBI) To serve messaging function for messaging function in NEFT, RTGS, Interchange fee by NPCi (2023-March) : fees charged on prepaid Banks, NBFCs & brokers who may / and other inter-bank, intra-bank e- wallet transactions above Rs 2k/- by NPCi on using UPI may not have direct int’l bank transactions platforms within India. relations / settlement systems with ATM (Automated Teller Machine) and its Types – NPCi’s NFS; each other Owner Operations Other Nations banned -> Iran + Russia (2022) => difficult to receive money Bank label Bank itself Bank itself Ex- SBI internationally. Brown label Bank owns Outsourced Ops: cash refilling, guard Click on the link to Join us on Telegram: https://t.me/justupscpyq for more such pdfs  INDIAN ECONOMY (MRUNAL) PILLAR # 1 – SUMMARIZER Payment System Operators? Hot Wallet vs Cold Wallet RBI gives licence under Payment and Settlement Systems Act, 2007: Store BTC & other cryptocurrency in Crypto Digital Wallets to Payment System Operators (PSOs); Types of PSO -> Examples Hot wallets are connected to internet, (online app) Umbrella Entity For Retail Payments →NPCi Cold wallets are not connected to internet (USB pendrive). Card Payment Gateway Operator → MasterCard, Visa, Rupay Crossborder / Int’l Remittance → Western Union, MoneyGram Crypto-Winter in Bitcoin Prices Prepaid Payment Instrument (PPI) → AmazonPay, Mobikwik, PayU… B/w 2021-Nov & 2022-Jun: Bitcoin fell from ~$70,000 to $20,000 → Payment Aggregators (PAs) →help merchant collect digital payment almost 70% loss! & similar situation in many cryptos. + experts fear from customer - Paytm, Amazon, GPay, Zomato, CCBill, CCAvenue, prices will remain frozen in this range for upcoming months, hence Razerpay, Stripe etc. using term "Crypto-Winter" to denote it. ATM Operators → SBI etc's own ATMs; White label ATMs by Tata, Muthoot, SREI etc. Crypto-scams - Recent Global Scams of online exchange/portal to Financial Market Infrastructure Provider → Clearing Corpora on of buy/sell cryptocurrency : India (CCI): digital infra for share/bond/foreign currency deals Binance ->. Remains in -ve news coz of frauds/scams. FTX -> went bankrupt - losses for investors - founder/CEO arrested New Umbrella Entity (NUE) for Retail Payments System 2019) for scam → 10 lakh+ investors’ money got stuck. Rival Companies : Paytm vs Phonepe; Mastercard vs Visa; SBI vs Axis Bank; BUT NO RIVAL -> NPCi = umbrella entity for retail payments Crypto currency observations by EcoSurvey’23 system - operates -> card payment (RuPay), Money transfer (IMPS), Cryptocurrencies are primarily held by few big players/“whales”. So Mobile Apps (UPI, BHIM), ATM Network (NFS) etc. they can manipulate prices by manipulating supply. + Problems: 2020: RBI seeking companies to rival NPCi in retail payment segment electricity-consumption, tax-evasion, abnormal fluctuation in prices, by licensing them as new umbrella entity (NUE) + 2023-Jan: RBI put investors-fraud, no-intrinsic value..+ ES gave examples of legal this license process on halt/suspension. provisions in EU, Japan, Switzerland, Nigeria etc. + coordinated int’l effort required to regulate sector. OECD & G20 group are working in Third Party Application Providers (TPAPs): this direction. + ideally, need strict rules over crypto-market NON-Banks (Amazon Pay, GPay, Mobikwik, PhonePe, WhatsApp) -> Cryptocurrency Profit - 30% Tax + 1% TDS in Budget-22 tie up w/ Partner bank -> TPAP license from NPCI to use FastTag/ UPI / other NPCi services. Cryptocurrency Banned in other nations? Nepal, Algeria, Egypt, Morocco, Turkey , Iran etc: Bitcoin is illegal. Digital Payment Regulatory bodies Chinese prohibited banks from providing buying/selling/investment services for BTC etc cryptocurrencies. After this crackdown, BTC Digital Transactions Ombudsman (DTO-2019) : prices fallen ↓ by 30% RBI designates senior RBI officials at 21 places across India as DTO -> customer complaints < ₹ 20L against PPIs, Mobile wallets, Apps, Crypto currencies as legal tender is in some countries NEFT/RTGS & other digital transactions + can order company / bank Venezuela -> Petro Crypto issued by govt to fix problem & pay upto additional ₹ 1L for mental agony of Marshall Islands -> 1st country to launch sovereign crypto currency customer → Higher Appeal to Dy.Gov of RBI. If matter > ₹ 20L, then (Sovereign – SOV) matter outside jurisdiction. Victim has to approach courts. El-Salvador -> 1st to allow BTC as Legal tender RBI: BPSS (Statutory body) Cryptocurrency Permitted in Other Nations/Groups : 1998: Narsimham-II Committee on Banking Reforms suggested UNICEF : 1st Un org to accept crypto - setup a Cryptocurrency Fund to regulatory framework for e-banking, card payment etc. -> 2007: accept donations in cryptocurrencies. Payment & Settlement Systems Act → RBI → (Statutory) Board for World Bank : World’s 1st blockchain bond called “Bond-i” in Regulation and Supervision of Payment and Settlement Systems Australia, denomina on: Australian Dollars → public invests, gets (BPSS) -> All payment system providers - register with RBI’s BPSS- ~2% interest after 2 yrs bank, non-bank, wallet/Prepaid Payment Instrument (PPI) etc. ‘Blockchain Bill of Rights’ by World Economic Forum (WEF) – talks of rights to accountability, transparency, data privacy, data protection… Digital Payment related Index / Competitions/Reports by RBI Like : RBI Digital Payments Index; RBI’s Financial Inclusion Index etc. Cryptocurrency → Global Regulations → MiCA (Markets in Crypto Assets) regulation/rules by EU Crypto-Currency & Blockchain Technology (2023) - protect people from scams /frauds in crypto investment + Cryptocurrency: digital / virtual currency created & stored using combat tax-evasion, money laundering & terror-finance + X regulate blockchain tech CBDC & NFTs Blockchain: secured decentralized database/ distributed ledger → CARF (Crypto Asset Reporting Framework) by OECD (2022) technology (DLT) that maintains continuously growing list of records objective similar to MiCA / transactions. X Delete Old entries, new entries visible to all. Can store any type of data (Mainly for Cryptocurreny). Stable-coins = type of cryptocurrency whose price is backed by a USA’s Subprime Crisis (2007) eroded purchasing power of USD Dollar reserve asset like gold / dollar / fiat currency e.g. Facebook’s -> Anarchist groups lost faith in FIAT MONEY + dislike Banks & Card proposed ‘Libra’, Tether, Basecoin, and TrueUSD. + Challenges : Companies : transaction charges on e-banking, card payments, MDR, money laundering, terror financing, consumer protection, financial interoperability issues- > 2009: anonymous user Satoshi Nakomoto frauds + 2019: France, EU, G20 group opposed. launched a cryptocurrency ‘Bitcoin’. total 21 million Bitcoins(BTC), 1 BTC = 108 Satoshi (smallest unit) + other eg. Ethereum, Litecoin, Digicoin, Laxmicoin, Ripple, Dogecoin etc. Click on the link to Join us on Telegram: https://t.me/justupscpyq for more such pdfs  INDIAN ECONOMY (MRUNAL) PILLAR # 1 – SUMMARIZER World Coin Project (2021–22) : Non-fungible token (NFT) = Digital file photo file (JPEG), Animated ChatGPT CEO -> Orb Machine -> Scan Iris -> get Unique ID using image (GIF), music file (MP3) etc Stored using blockchain Tech. Blockchain tech -> get Free WorldCoin crypto NFT may also be used in storing physical assets. E.g. Ownership document of house, boat, physical-painting etc. + cannot be Central Bank Digital Currency (CBDC) : currency by Central banks subdivided- individual sub-units cannot be exchanged with one in digital form instead of printing : Bahamas (1st nation to issue CBDC another. Because their values are different based on buyer’s – “sand dollar” ; non- interest bearing CBDC + Nigeria launched preference. + E.g. Robot Sophia created a digital painting/art "Sophia eNaira Instan a on" (NFT)→ Auc oned for > 6 lakh dollar$. Budget-2022 announced Digital Rupee using blockchain tech. NFT-Charms? NFT-Challenges SYMBOL -> Normal rupee = ₹ or INR. CBDC rupee = e₹ or eINR. 1) Multimedia Creators: 1) Started 2017→ 2021 steep (e₹) CBDC wholesale vs Retail - RBI trials/experiment/pilot- Easier to trade digital assets price rise. Single GIF file selling studies in 2 segments: CBDC Retail (e₹-R) -> P2P, P2M + CBDC 2) Easier to verify ownership for millions dollar$ crypto. -> Wholesale (e₹-W) -> Sec. mkt transactions in G-Sec/ Interbank records. Prevent plagiarism. investment-bubble will collapse. borrowing of short-term loans/ Crossborder payments 3) Cinema / Sports 2) Money laundering & terror -> RBI allowed non-bank payment system operators to participate in tournament / Travel tickets Finance. retail CBDC pilot + first use cases for CBDC is for farmers looking to etc can be stored with 3) Maintaining such computer buy farm inputs with subsidy money. ownership records. Helps in blockchain record → ↑Electricity (e₹) Indian CBDC = digital token of legal tender Paperless administration consumption → CO2 Emission. Indian CBDC (e₹) is based on blockchain + is a digital token representing legal tender + created under RBI Act, 1934 by amending some sections in 2022 + RBI issued (e₹) on behalf of Govt of India. + is liability of RBI + being distributed through financial intermediaries, (banks) + Not earn any savings interest. + features of physical cash like trust, safety and settlement finality. (e₹) Settlement finality – no risk of reversal/cancellation after financial transaction completes. e.g. Cash or CBDC-e₹ + Whereas, if payment via Credit card/ cheque-book → customers can later block payment by banker within a time-limit. So they (creditcard / cheque) do not have instant-settlement finality. (e₹) Indian CBDC = no interest earning: stored in separate digital wallet/separate mobile created by bankers.+ not earn savings interest rate as you keep it with yourself in a digital wallet. Is not treat it as a deposit + can be converted to other forms of money, like deposits with banks. (e₹) CBDC - Interoperability permitted with UPI QR Codes 2022–23: CBDC trials/experiments started in a few cities. + bankers developed separate apps to use CBDC money - SBI-e₹ App = Interoperability present with SBI YONO app after Sept 2023 (e₹) CBDC - programability & offline features Presently (e₹) can be used for Person to Person (P2P) and Person to Merchant (P2M) transactions. 2024-Feb: RBI 2 new experiments: (1) Offline functionality (similar to UPI-Lite) in areas with limited internet connectivity. + (2) Programability Like a specific function, Expiry/Validity, Geographical E-Rupee [RBI – CBDC – Legal Tender] vs E-Rupi [NPCi – digital gift card – Not a fiat money ] Fungibility: Divisibility into subunits with some value + Mutual substitution is possible in terms of value Fungible ex- 500 Rs note, 1kg Gold bar, 1 BTC etc Non-Fungible ex- diamond, shares, bonds, NFT (e₹): Fungibility of CBDC - programmability not violate/destroy fungibility (of e-Rupee), it is only a specific use binding.” Click on the link to Join us on Telegram: https://t.me/justupscpyq for more such pdfs  INDIAN ECONOMY (MRUNAL) PILLAR # 1 – SUMMARIZER Pillar#1A-2: Money Supply & RBI’s Monetary Policy Time Deposits -> GREEN DEPOSITS – 2023: RBI guidelines = Type of FD – money is further loaned by bankers to environment Money’s Demand, Supply & Creation related (renewable energy, waste management, clean transportation, energy efficiency, afforestation) + Collected by Demand of Money: Liquidity Preference Theory British banks, deposit-taking NBFCs (e.g. Bajaj Finserv), Housing Finance Economist John Maynard Keynes (Book: The General Theory of companies (e.g. Canfin Homes) + NOT ALLOWED FOR Biz involved Employment, Interest and Money, 1936) noted - people prefer to in– fossil fuels, Nuclear power, tobacco etc. keep part of assets in liquid form (cash money) w/ 3 motives: These are NOT-Short term deposits -> available only for medium & Transaction (For using as medium of exchange e.g. buying) long term + If unable to find green-borrower (for long term loans) Precautionary (protect against sudden / unforeseen expenditure then bank/NBFC can invest into liquid instruments (max. maturity e.g. medical emergency) + Speculative – Investors hold cash for upto 1 yr) e.g. T-Bill, Commercial Papers etc. + No RBI penalty for if future investment opportunity (waiting for gold / land prices to unable to find green borrowers + Covered by DICGS - ₹5 lakh + fall) Also known as "Asset Demand of Money". Only in Rupee currency + Voluntary for Bank/NBFC to raise/accept Money held in cash vary inversely w/ (deposit) interest rates. If green deposits higher interest in Bank Deposits → people invest money in banks, instead of liquid (cash). Inoperative & unclaimed accounts : Inoperative A/C - if no transaction by depositor > 2yrs [>1L Cr] TOTAL demand of money = TRANSACTION DEMAND + Unclaimed Deposits – SA/CA– Not operated OR FD/RD Not SPECULATIVE DEMAND ; Transaction demand -> directly claimed within 10 years [> 42k Cr] proportional to inflation (price lvl) + GDP (for salaries/ buying raw Bank can’t charge penalty on such customer + bank must continue material) ;Speculative demand (inversely proportional to interest paying interest on it if it is a Savings A/C rates) -> if less interest in bank/bond => withdraw more to invest UDGAM Portal: Unclaimed Bank Deposits (2023) in gold/ property Unclaimed Deposits (10yrs) -> Need to be transferred to “Depositor Education and Awareness FUND” (DEA) of RBI. -> 2023 Liquidity of assets - RBI setup UDGAM (Unclaimed Deposits Gateway To Access Liquidity= ease of converting an asset into CASH (most liquid asset) inforMation) portal for it. Highly liquid assets = Gold, Demand deposits, G-Sec/ T-Bill, shares/ bonds of reputed companies Full Reserve Banking vs. Fractional Reserve Banking Relatively illiquid assets= Home/Real estate, Paintings/Sculptures Full Reserve -> Banker CANNOT lend loans from Demand Deposits Liquidity injection/infusion - RBI buys Bank/NBFCs’ G-Sec/T- (CA/SA) of other customers + Low Vulnerability during BANK RUN + bill/financial assets to give them cash. Can give less loans so less help in Economic Growth Fractional Reserve -> Yes, CAN lend; More Vulnerable during panic Liquidity Trap = adverse economic situation - consumers & withdrawals by clients + More ability to help in economic growth + investors hoard cash rather than spend/invest - even when Used in India interest rates are low + 1st used by John Keynes - defined it as *In both, banks can lend loans from Time deposits [FD/RD] when interest rates fall so low that most people prefer to let cash sit rather than put money into bonds and other debt Measures of Money Supply (total amount of money in an instruments. + occur when short-term interest rate is at 0% & economy at any given time.) -> Plays role in inflation & interest individuals hold on to money in their possession at given interest rates on deposits & loans. RBI measures through M0 M1 M2 M3 rates - fear (-ve events) -> People choose savings A/C over bonds M4 Measure *CU Commercial Banks Post Office Savings Deposit types = Bank Demand Time Demand Time Assets Liabilities Deposits Deposits Deposits Deposits Company Factory Payments (Raw (CASA) (FDRD) (CASA) (FDRD) Machines Material); Salary; Loans Narrow M1 √ √ x x x Money Banks Loans, Investments, Deposits (banks liable to M2 √ √ x √ x Advances, Money at repay back) Broad M3 √ √ √ x x call & short Notice Money M4 √ √ √ √ √ 2 type of Liabilities of Banks -> Time & Demand Time Liabilities of a Bank Demand Liabilities of a *CU: Coins & Currency with Public (FD/RD) – bank pays after Bank (CA/SA) – only counting “NET Demand / NET Time deposits [NOT counting maturity inter-bank deposits i.e. one commercial bank’s deposit in other Fixed deposits (FD), Have to repay when commercial banks.] Cumulative/ recurring deposits customer demands Liquidity: M1>M2>M3>M4; Quantity: M4>M3>M2>M1 (RD), Staff security deposit etc. + Current A/C , Savings A/C, M1 = *CU + Commercial Banks’ (Demand Deposits) may pay after deducting Demand Draft, Overdue M2 = M1 + Post office Savings Bank’s (Demand Deposits) penalty/ interest before balance in FD, Unclaimed M3 = M1 + Time deposits with banks maturity. deposits. M3 = Aggregate Monetary Resources / Aggregate Money Supply Better interests -> More money Less interest -> but more = most commonly used measure of money supply- out of all indicators (M0-M4) - RBI focus most on M3 for its analysis while parked here + But less liquid liquid - easily convertible to designing of monetary policy. (needs maturity) cash M1 & M2 = Narrow money - smaller size (only demand deposits) M3 & M4 = broad money, relatively larger size. Click on the link to Join us on Telegram: https://t.me/justupscpyq for more such pdfs  INDIAN ECONOMY (MRUNAL) PILLAR # 1 – SUMMARIZER Call Money | Notice Money | Term Money - used when bank/ Short term ( Treasury bills (TBill), Cash Management bills NBFC lend/borrow money among themselves for short term (< 1 (CMB) ; Corporate (reg. in company's Act) -> Bill of Exchange, Commercial Papers, Promissory Notes. Long Term (>1yr) Govt -> G-Sec, Sovereign yr) + Call M -> borrowed for 1 day = This duration also called Bonds; Corporates -> Bonds / Debentures “overnight”. + Notice M -> 2d – 14 d ; Term M -> 14d – 1yr Money Supply & FRBM Act Money Supply [M3] Suppose govt wants to borrow loans and issues Debt Securities -> M0 = also known as reserve money /high powered money RBI as PUBLIC DEBT MANAGER -> E-Kuber Portal ->Lists on Primary M3 = “Aggregate Monetary Resources / Aggregate Money Supply” & Secondary Markets + G-Sec is purchased by investors here to Quantity of both M0 & M3 ↑ed but % growth lower than 2020. earn interest -> money as loan to Govt Money multiplier = M3 divided by M0 = 5.6 in 2020 & 5.2 in 2021. FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT ACT 2003 -> MM ↓ed than 2020. (Not enough loan takers with Banks -> Govt has to control its fiscal deficit within X% of GDP.+ Govt parked deposits with RBI under Reverse Repo) CANNOT borrow from RBI (RBI cannot buy govt’s instruments for itself from primary market **Except in 2 situations:** i) Short term Money Multiplier - RBI’s CRR controls Fractional Reserve Ways & Means Advances (WMA) ii) During war, disaster, agri-crisis, Banking & Credit Creation by commercial banks (ZIG-ZAG) big fall in GDP. + BUT RBI can buy/sell govt’s loan instruments from 𝑆𝑡𝑜𝑐𝑘 𝑜𝑓 𝑇𝑜𝑡𝑎𝑙 𝑀𝑜𝑛𝑒𝑦 (𝑀3) 𝑀𝑜𝑛𝑒𝑦 𝑀𝑢𝑙𝑡𝑖𝑝𝑙𝑖𝑒𝑟 = secondary market (i.e. from other investors in OMO/ Open market 𝑆𝑡𝑜𝑐𝑘 𝑜𝑓 𝐻𝑖𝑔ℎ 𝑃𝑜𝑤𝑒𝑟𝑒𝑑 𝑀𝑜𝑛𝑒𝑦 (𝑀0) 1 1 1 operations - NEWS FROM 2021 : RBI net purchased Rs 34,175 crore of 𝑀𝑜𝑛𝑒𝑦 𝑀𝑢𝑙𝑡𝑖𝑝𝑙𝑖𝑒𝑟 = = = = 25 𝑡𝑖𝑚𝑒𝑠 [In theory] 𝐶𝑅𝑅 4% 1/25 sovereign papers b/w April 22 - May 4 from secondary market to ensure In reality – MM < 25x due to poor banking penetration lower borrowing costs for corporates. In functional economy -> [MM >1 & CRR < 100% ] - MM directly improves with ↓CRR+ indirectly improves as economy Monetisation of deficit – If govt budget is in deficit & govt wants develops, consumption / loan demand ↑es, ↑ in banking penetration, to MONETIZE deficit through loans via RBI by asking it to print digital economy, less-cash economy, financial inclusion + Boom period, more currency [* Difficult due to FRBM limits & Conditions] – When loan demand↑ + When RBI adopts Cheap / Easy / Dovish / Expansionary monetary policy to combat deflation + In 1960s < 2x ; 90s > PRINTING MORE CURRENCY IS MOST INFLATIONARY so avoided. 3x, At present > 5x. Money Multiplier From 2019 to 2021: why fallen? deposit-to- Money Supply: observation–graphs are zigzag no trend lending activity slowed – covid Money Multiplier From 1981 to 2020 – mid 1990s to 2016-17 showed ↑coz of ↑in banking habit; 2017-18 onwards decreased -> Lack of growth in loaning activities & slowdown in economy. Currency in Circulation (CIC) – indicator to measure cash as a M0: Creation of Money : M0 / Reserve Money / Government payment instrument instead of other payment instruments - Money / High Powered Money -> Issued under RBI Act by RBI's Cheque, NEFT/RTGS, Card etc. CIC changes due to precautionary ISSUE DEPT => condition = ISSUE DEPT’s Assets MUST MATCH its demand for cash liabilities : Assets = Rupee coins [RBI ‘buys’ coins & ₹1 notes from Govt and circulates it as ‘Agent of govt’] + Gold coins [Min. ₹ 200 crores] + Gold bullion [Min. ₹ 115 crores] + Foreign Securities, incl. IMF [Earlier Min. ₹ 400 crores but Post-1995 no such requirement.] + (Indian) Govt. Securities [through it Govt borrows money from RBI & returns back Principal + Interest] (**RBI also acquires other assets for currency exchange rate control Ex- > RBI buys American Velocity of Money Circulation - avg no. of times money passes Treasury bonds, Gold Coins, Bullion) Liabilities of Issue Dept from 1 hand to another, during given time. FACTORS affecting – (M0/Reserve, High powered) = Total Bank notes in circulation: Income distribution (Poor>Rich); More borrowers in economy Currency in circulation (Help by Public/ other banks in “Vault Cash - (developed countries); Boom period is economy daily ops”) + Banker’s deposits with RBI (CRR) + Other deposits with RBI (of Public*/NBFCs/Govt orgs/ Int’l org) => to print more Monetary Policy – macroeconomic policy by Central banks – notes/ circulate more money [↑ Liabilities] -> must add assets on manage money supply & interest rates -> Shapes inflation, opposite side of equal amount to balance the Asset vs Liability consumption, savings, investment, & capital formation + Role in Scale. ; M0 ↑ when RBI’s asset side ↑e.g. Govt issuing G-Sec to price stability [inflation control], economic growth, job creation & borrow more from RBI social justice. {Monetary Policy – CRR,SLR/ Repo, MSF / OMO, PSL M0 = Currency in circulation + Deposits w/ RBI (Bankers’ & others’) + Fiscal Policy – Taxation, Subsidy / Public Expenditure/ Divestment, PPP + Both Help in : ↑Savings ↑GDP ↑Investment Concept : Debt Securities financial instruments - represent ↓Unemployment ↓Inflation, Inclusive Growth, etc.} loan/ debt obligation (Bonds/debentures/notes) -> are typically Philip Curve: Inflation ↑ = unemployment ↓ (& vice versa). issued with legal contract [bond indenture / trust deed] -> RBI tries to keep inflation with 2-6% (CPI: All India) using its bi- outlining debt’s T&C (interest, maturity date, provisions for monthly monetary policy made by its 6- member statutory MPC. repayment /default) + Wants to borrow (> 1yr) : Govt issue – G-Sec & Corporates issues Bonds; [have relatively high liquidity due to guaranteed return; Can sell/resell them for cash before maturity] Click on the link to Join us on Telegram: https://t.me/justupscpyq for more such pdfs  INDIAN ECONOMY (MRUNAL) PILLAR # 1 – SUMMARIZER Deposits by public -> MonPolicy → Quant Tools → Rates → LAF Repo B CRR – 4.5% in cash with RBI (RBI pays CRR, SLR = A zero interest) buffer/safety N SLR – 18% in Cash, Gold, G-Sec (profits strategy during K possible on Gold & G-Sec) bank run S Loans – 40% PSL (Farmer, Weaker sec., Small Biz, Green) SDF If NOT enough loan takers - bank invest Reverse Repo surplus funds in RBI to earn interest. MonPolicy: Quantitative/ General/ Indirect Tools - affect entire economy, & not just a particular sector. Statutory/ Variable Reserve Requirements: CRR, SLR (Fight RBI’s Liquidity Adjustment Facility (LAF) – 2 windows Repo rate & inflation: ↑, deflation: ↓) Reverse Repo Rate CRR: Cash Reserve Ratio SLR: Statutory Liquidity LAF – Repo Rate LAF- Reverse Repo Rate RBI Act, 1934: Share of NDTL - Ratio Banking Regulation It is an agreement with RBI to Clients – park surplus Net Demand & Time Liabilities Act, 1949 : Maintained by repurchase their G-Sec in future at a funds for short periods banks must keep as deposits w/ Bank with themselves as predetermined price. + Also called in RBI (& earn interest) ; RBI – usually X interest, except deposits in liquid assets ‘Ready forward transaction” + Reop RBI gives Collateral. extraordinary (1999’s Banking (cash, gold, G-Sec, T- Bills, = Policy rate to ctrl Inflation. Rev Repo < Repo slowdown) + No profit / interest. SDL Bonds, PSU-debenture & RBI –lends short term loans to -> + RBI can fix any CRR, legally no securities notified by RBI) + Clients (banks/NBFC etc) – G-Sec as min floor/max ceiling + COVID – profit possible – Gold price collateral (Can’t pledge SLR quota was 3%; Presently 4.5% [CRR: 1st ↑ or interest from G-sec. + G-Sec); suggested by British economist Legally can’t be > 40% + Market Repo - Banks, NBFCs, etc. (NOT RBI) loaning short money J.M. Keynes & 1st intro in US presently 18% NDTL to other Banks/NBFCs/Corporate Companies, & demanding Federal Reserves ] + If RBI If RBI reduces SLR by 50 basis financial securities (G-Sec/T-Bill/shares/bonds/commercial paper reduces CRR then money supply points – what can happen? etc.) as collateral will (↑/↓/same)? Current repo = Present Repo Rate - All Banks must keep CRR & SLR + RBI may prescribe separate % Neutral/Terminal repo rate - % repo rate at which inflation is norms for Regional Rural Banks (RRBs) & Cooperative Banks. under control, & full employment achieved. RBI Will not increase CRR-SLR - counted fortnightly (15 d) + Penalty interest rate (linked repo rate beyond this point ELSE it’ll damage consumer demand & with Bank Rate%) to RBI if not maintained + ensure monetary GDP growth [Theoretical – No official %age] stability of India through 2 primary functions: assist in Money NAIRU – Non-Accelerating Inflation Rate of Unemployment Multiplier effect + provide buffer/protection during a Bank Run + – term associated with Unemployment can be used for inflation control – RBI primarily relies on REPO Rate (=its Policy Rate) to combat inflation, & not CRR/SLR. REPO → SPECIAL WINDOWS UNDER ATMA NIRBHAR -> DEPOSITs Green Deposit - SBI wants lower CRR (2023) : 4.5% TLTRO, SLTRO, On-Tap Windows CRR + Reason - ↑ loanable funds ↓ loan interest rates for green projects Net Interest Margin (NIM) = Loan Interest – Deposit Interest Rate (3-4% NIM healthy for bank’s profitability & growth) Liquidity overhang = situation in monetary policy where Money supply >> Demand for Money (Loans) -> Cheaper loan rates – may lead to high inflation; It may occur 1) During Very Dovish (Easy) monetary policy e.g USA’s Quantitative Easing (QE) 2) During Demonetisation or withdrawal of currency. e.g. ₹2000 in 2023 All Banks# not include Payments Banks (Can’t give loans) ₹2000 Withdrawal -> 87% of 2k notes as bank deposits not ↓Repo to 4% = Cheaper loans to revive economy exchanged for other notes -> can cause Liquidity overhang => So LTRO – Long Term Repo Operations – 1 to 3 yrs RBI temporary measure -> Incremental CRR –10% extra CRR on TLTRO – Targeted LTRO – upto 3yrs – conditional like invest x% in additional deposits – to absorb excess liquidity after withdrawal of NBFC bonds etc. 2k notes => i-CRR locked ₹1 trillion worth money SLTRO – Special LTRO – Only to Small finance banks loans to Micro & Small industries & unorganized sector On-Tap Liquidity Windows : RBI loan for 3 years @Repo% to Banker - for Healthcare→ loans to Hospitals, vaccine manufacturer, vaccine importers, medical device makers, oxygen suppliers AIFI - RBI loaned large amount of money to All India Financial Institutions (AIFI) i.e., NABARD, NHB, SIDBI, EXIM, NaBFID Click on the link to Join us on Telegram: https://t.me/justupscpyq for more such pdfs  INDIAN ECONOMY (MRUNAL) PILLAR # 1 – SUMMARIZER Reverse Repo Rate cut (2020) -> Corona led Eco Slowdown -> Sterilization / Forex Swap: to control currency exchange rate ↓ Loan demand -> Banks park excess in RBI under reverse repo -> volatility RBI reduced rev Repo to 3.35% to discourage banks Operation Twist (2019): a special type of OMO Variable Rate Reverse Repo (VRRR) – RBI auctions for lowest Security certificate – holder eligible – receive money bid interest – variable rate + Objective same as Rev Repo. @particular time → Debt → G-Sec & Bonds Short Term = () MonPolicy → Quant Tools → Rates → MSF (2011) Govt : Treasury Bill, Cash G-Sec, Sovereign Bonds RBI – lends short term loans to – SCB & RRB with SLR-quota G-Sec Management Bills as collateral. MSF = Repo% +0.25% Corporate : Bill of Corporate : Bond/ Exchange, Commercial Debenture MonPolicy → Quant Tools → Rates → Bank rate Papers, Promissory Notes **RBI Act, 1934: “Bank rate = standard rate at which RBI buys/ Interest - securities by Govt usually < Corporates (low risk) rediscounts first class securities, bills of exchange or other Deepening of G-Sec market- Retail investors’ RDAG commercial papers.(NCERT)” Bank Rate MSF Repo @RBI – 2021– permit Retail Direct Gilt A/C for retail Intro RBI Act 1934 2011 2000 investors on E-Kuber (Both Resident Indians & NRIs can Rate% = MSF% =Repo% + Monetary Policy open A/C)- can directly buy T-Bill, G-Sec, SDL, Sovereign ’x’% Committee Gold bonds directly from RBI Borrower Only Banks + Only Banks + All RBI Clients – Bank, Corporate Bonds: factors that determine its interest +Collateral Yes & No ** Can use SLR Non-bank, Union & rate – Credit Rating of Co. (Risk), Inflation rate, Bank securities state govt + NOT from Deposit Interest rate, Yield on G-Sec SLR securities Duration > Repo Short term : Overnight to 14d Bond Yield (BY) – profit earned on bond investment Utility for deciding Emergency Short term borrowing BY ∝ 1/Price (current selling price/SP of bond in secondary penalty on borrowing by all clients of RBI mkt.) ; If Bond’s Demand ↑ it’s SP ↑ & BY ↓ errant banks BY: other factors affecting it – Economic Boom (Investors sell bonds to invest in shares – more dividend – SP↓ in Quanti. Tools → SDF (=Reverse Repo W/o Collaterals) : secondary mkt – BY ↑ + Economic Recession – sell shares Clients deposit extra money in RBI for interest w/o RBI collateral. buy bonds - Bond’s Demand ↑ it’s SP ↑ & BY ↓ + Inflation + Political Instability + Actions of Central Bank + short term MSF Repo vs Reverse Repo vs SDF interest rates MSF Repo Rev Repo SDF Rates 6.75% 6.5% 3.35% 6.25% MonPolicy: Quanti Tools: OMO → Operation Twist Lender RBI Banks + NBFCs Borrower Only SCB & Banks + RBI Why? – Commercial Banks – reluctant to lend to pvt sector coz of RRB NBFCs NPA – RBI ↓ BY of long-term G-sec – to help ↓ corporate bond Collateral? Need Collateral NO interest rates (RBI starts buying G-Sec - Demand ↑ SP ↑ BY ↓) – #Facility Client (SCB) RBI Clients Corporate Bonds are benchmarked against G-Sec BY Not compulsory for RBI to entertain Client (Bank/NBFC) for RBI’s Operation Twist: methodology (2019-Dec) – Special Reverse Repo + But for MSF – RBI will help OMO to make loans cheaper for corporates & boost economy – Op Twist – 1st used by US Fed (1961) -> 2019 – RBI – Sp. OMO – Policy Corridor / LAF Corridor simultaneously buys & sells G-Sec of varying maturities to adjust After 2022-April: Policy Corridor = their BY – Main objective = Make borrowing cheaper for MSF (Repo+0.25%) REPO SDF (Repo-0.25%) Corporates (NOT to fight inflation) SDF replaced Reverse Repo as floor of Policy corridor. Bond Yield & Inverted Yield Curve: Under normal conditions, System level liquidity = [(Reverse repos +SDF) – (Repo + MSF)] interest rates go up with increase in time to maturity. If interest +ve = System surplus liquidity ; -ve = System deficit liquidity rates & time to maturity are -vely correlated = inverted yield curve 2023: deficit of ₹0.42–1.61 lakh crore. [coz RBI reducing money Ex- Chinese BY, Italian Bond Mkt Crisis supply to combat inflation] MonPolicy: Quanti Tools: OMO → G-SAP Tri-Party Repo - not a tool of Monetary Policy. It is a method to (Secondary Market) G-sec Acquisition Programme – RBI buy G-Sec meant to help companies to borrow money from the market. from sec. mkt on specified times to ↑ Money Supply; (Indirect tool to manage Money supply – Like Repo – which has low Open market operations- 2 types transmission) Repo-OMO – RBI buys/sells G-Sec with repurchase agreement G-SAP - Buy G-Sec @Fixed timetable + ↑ Money Supply – post Outright-OMO – RBI buys/sells G-Sec w/o any promise to buy back Covid revival + (Money amount, date & time/ calendar/ time- table - transparently & systematically announced in advance) Market Operations (OMO): (Inflation → Sell G-Sec, Deflation → Op. Twist – Buy/Sell G-Sec of Varying maturities for Yield Buy) OMO – RBI buys/sells Union & State govts’ Security to ctrl Manipulation – Make future borrowing for Govt & Corporates money supply. Buying - ↑Money supply/ liquidity injected in mkt; Cheaper Selling - ↓Money Supply/ liquidity absorbed from mkt. OMO – Buy/Sell G-Sec @RBI discretion – to combat Inflation Market Stabilization Scheme- RBI sells special type of G-sec, T-Bill (sell G-Sec) / Deflation (Buy G-Sec) & Cash Management Bills (CMB) to suck excess liquidity. Click on the link to Join us on Telegram: https://t.me/justupscpyq for more such pdfs  INDIAN ECONOMY (MRUNAL) PILLAR # 1 – SUMMARIZER Monetary Policy: Quantitative tools - Ctrl Volume of Loans – PSL Reforms-2020: on RRB/SFB/UCB? SLR, CRR, Repo Qualitative Tools (SELECTIVE/ DIRECT Tools)- 40% SCB + Foreign banks Ctrl Distribution of Loans to particular Sectors (PSL, LTV, …) 75% RRB + SFB + UCB N/A on Rural Cooperative Banks Moral Suasion (apply Persuasion w/o Punitive measures – (Internal quota for each category may differ) conferences, meetings, letters, seminars E.g. RBI-Governor asking banks to transmit repo-rate cuts, open new branches in rural PSL Reforms-2020: Weightage to poor districts based on areas, spread financial literacy, give loans to farmers beyond PSL Credit Penetration – PSL loans Counted more if given in low credit quota etc. OR requesting CM/ Finance Minister to ctrl fiscal deficit penetration area (e.g. Tawang, Dantewada …) & counted less in & subsidy leakage to enhance efficacy of RBI’s monetary policy. high credit penetration areas (Ahemedabad, Pune …) Publicity (Media Statements, Speeches, lectures etc. – to create effective public opinion) PSL Shortfalls: RIDF and UIDF Underachiever bank – deposit PSL shortfall money to NABARD’s Direct Action- Punish banks/Non-banks – for non-complying w/ Rural Infrastructure Development Fund (RIDF), or other funds RBI directives under [RBI Act, Banking Regulation Act, Payment & under SIDBI, National Housing Bank (NHB), MUDRA Ltd. etc as per Settlement Systems Act, PMLA, FEMA] – Ex- 2019: RBI ordered norms decided by RBI + banks earn interest on such deposits + banks to have a “Clawback” provision in CEO & Top executives’ Budget 2023 - one more fund UIDF, for PSL-shortfalls. salaries – Any fraud/scam by CEO – return previous salary/bonus Rural Infrastructure Urban Infrastructure Development Fund (RIDF) under Development Fund (UIDF) under NABARD – 1995-96 NHB – 2023 budget Margin Requirements / Loan to Value (LTV) for gold-loan, for Agriculture, Social sector, for urban infra projects especially home loan, auto loan or business loan etc. so Bank/NBFC can’t Rural connectivity projects. in Tier 2 (popln 50k-1L) & Tier 3 lend > x% of value of collaterals. RBI can change this x% to boost / cities (popln 20k-50k) curb demand. Ex- Gold loan 90% PSL Certificates (PSLC) from 2016 onwards - overachieving Selective Credit Control Banks can sell excess PSL as ‘certificates’ to underachieving banks. - In –ve / restrictive direction – Credit Rationing system English (in 18th c.) & USSR (till 1990s)– their central bank will not loan > “X” Monetary Policy Tools: A Ready Reckoner Table amount to individual banks + individual can’t get > prescribed 6%CPI = Inflation amount of loans for each category (housing, education, business). Easy, Cheap, Dovish, Tight, Dear, Hawkish, + 1960s: Credit Authorization Scheme (CAS) in India: all Expansionary policy Contractionary commercial banks -prior approval of RBI before loaning ₹ 1 crore/> to single borrower. + 1970s: RBI imposed quantitative ceiling on QUANTITATIVE TOOLS non-food loans to boost green revolution, food inflation.- failed Reserves CRR, ↓ ↑ SLR due to lax monitoring & loopholes. Key Rates (Repo, ↓ ↑ - In +ve direction – Consumer credit control e.g. During deflation / MSF, Bank Rate) recession, RBI can relax down payment / EMI installment norms for RevRepo, SDF ↓ - less motivation ↑ - Banks park more in RBI durables like Vehicles, TV, Fridge etc. to boost consumption for Bank to park in - ↓ loanable funds - ↑ /demand. + Priority Sector Lending RBI – more interest rates - ↓ demand proactive to lend - Priority Sector Lending (PSL) – 1st time use of “priority sector” ↑ demand by RBI (1968) - Banks 40% loan to 3 sectors 1) agri 2) small Mkt Ops (OMO) RBI buys G-Sec from RBI Sells G-Sec industries 3) exporters by 1985. + 2015: PSL reforms 2019: RBI's UK Mkt Sinha Committee on MSME loan reforms suggested more PSL QUALITATIVE TOOLS Moral Suasion/ Nudge/ Force Banks Enforce hawkish policy reforms + 2020-Sept: RBI reformed PSL guidelines: Direct action to enforce Easy 12% Weaker Sections: - SC, ST, Women, PH, Minorities, money policy Manual scavengers, Artisans, PM-Jan DhanYojana Overdrafts Margin Req./ ↑ (ex- Gold LTV : ↓ upto Rs.10,000, Beneficiaries of Govt's National Rural/Urban LTV 60% -> 90%) Livelihood Mission Schemes Selective Credit ↑ loan flow to ↓ loan flow to sectors 8% Agriculture (all farmers : small & big): 8% Ctrl/ PSL sectors generating where speculative 10% Agriculture : Marginal Farmers (< 1 ht land) + Small more employment investment is leading Farmer (1-2 ht land) ex- textile – workers demand side inflation (ex- 7.5% Micro Enterprises, Khadi-Village industries buy more - ↑ real estate, housing) + ↑ demand / loan flow to sectors where 2.5 % Other categories - Small & Medium Enterprises, consumption loans can ↑ supply ex- Affordable housing loans to beneficiaries under PM Awas onion farmers Yojana + food processing companies, Vermi compost, Deflation – ↑money supply – inject liquidity – make loans cheap - biofertilizer, seed production, + Exporters, Student-Education ↑consumption loans (upto Rs.10lakh), + Social Infrastructure (schools,drinking Inflation – ↓money supply – withdraw liquidity – make loans expensive - water, sanitation facilities, health care, COVID related ↓consumption hospitals/labs etc); + Renewable Energy Projects (wind mills, biomass generators, solar street light, micro-hydel plants etc.) Bank loans to NBFCs lending to PSL categories – counted in PSL quota + PSL Norms do not apply to NBFCs - apply ONLY to Bankers Click on the link to Join us on Telegram: https://t.me/justupscpyq for more such pdfs  INDIAN ECONOMY (MRUNAL) PILLAR # 1 – SUMMARIZER Monetary Policy in Present-Day INDIA - There are 3 strategies reforms Ways & Means advances (WMA) and Consolidated Sinking / ways of making a monetary policy: 1. Exchange rate stability: Fund (CSF) + RBI reforms attracting foreign investment: Voluntary Used by Singapore & other export-oriented economies – try to Retention Route (VRR) & Fully Accessible Route (FAR) keep their local currency at certain rate against US-dollar to boost exports. 2. Multiple Indicators :Central Bank tries to focus on April-2022 Onwards : No changes in key rates or Stance. Repo Economic Growth, Employment, Inflation Control & Exchange rate unchanged @4% => [email protected] & [email protected]%. Stance: stabilization. Followed by RBI upto 2016 3. Flexible Inflation Accommodative + Introduced SDF + Earlier Policy Corridor = MSF Targeting/ Price Stability: Central Bank – aims to ctrl inflation – REPO Reverse Repo ; After 2022- April changed floor to other indicators (growth, employment, exchange rate) newly introduced SDF: Policy Corridor = MSF (Repo+0.25%) automatically adjust. Recommended by RBI’s Urjit Patel REPO SDF (Repo-0.25%) + Slowly RBI increased Repo from 4% Committee Report (2013-14) → amended RBI Act Sec. 45 & to 6.5% (by 2023-Feb)& it is same till 2024 Feb adopted in 2016 Monetary Policy: Governors other regulatory Monetary Policy Making under RBI Act since 2016 – announcements - MPC decides only Repo. Other decisions: CRR- Monetary policy committee – 6 member body + Chair : RBI Gov SLR cut, PSL norms, banning magnetic-chip cards etc decided 3 mem – RBI side (RBI Gov + Dy Gov of Monetary policy + 1 person separately alone by RBI Governor + However, after MPC meeting, nominated by RBI Central Board) + are ex-officio members -> he’ll make above type of announcements, in Press conference. tenure as per post + RBI Gov & Dy Gov selected by Financial Sector Regulatory Appointment Search Committee (FSRASC) headed by Banks’ Lending Rates % : RBI’s loan interest (Repo) – decided by Cabinet Sec. MPC + Banker’s loan interest – decided by formulas like Base rate, 3 mem – Govt. side (Tenure 4 yrs, No reappointment + Selected by MCLR, external benchmark. Search-cum-selection committee headed by Cabinet Sec. 1969 Govt began nationalization of private banks, & ‘administered MPC – Min. Quorum 4 person (incl. Gov) + Legally req. to meet min interest rates’-> 1991 M.Narsimham suggested deregulation (Not 4x per year + Meet every 2 months – bi-monthly policy updates + govt but only RBI) -> 2003 RBI intro Benchmark Prime Lending Rate Repo rate=Policy rate= benchmark interest rate: decided by (BPLR) system -> 2010 RBI intro “BASE Rate + formula = bank’s loan Majority vote + Price stability by controlling inflation + Gov – interest rate” - update frequency on individual banks’ discretion – Casting vote in tie + Govt can send message only in writing + MPC Not help transmission of monetary policy -> 2016 RBI intro MCLR must publish minutes of meetings on 14th day & Monetary Policy “Marginal Cost of Funds based Lending Rate + Spread” system Report @ every 6 months (Issue – RBI ↓Repo by 1.35% but banks ↓loan interest by 0.4% -> Inflation target – decided every 5 yrs by Union govt after 2019 – RBI intro external benchmark formula for Better/faster consultation with RBI Gov transmission of Monetary Policy; transparency & accountability to Present Target – Keep CPI:All India 2-6% [4% +/- spread of 2%] borrowers Target fail: if inflation not kept in 2-6% zone for 3 consecutive quarters (=9 months) - MPC must report Govt reasons & remedies Bank’s loan interest rate: External Benchmark (EB) (Ex- 2022- Nov = Inflation >6% for > 9 continuous months) EB + Spread(Profit) + Risk premium = Bank’s Loan interest rate Stance: Calibrated Tightening / Neutral / Accommodative Spread – Bank’s margins – Can’t change after lending After every MPC meet – it announces its stance wrt Repo in next Risk Premium – Charge for risk (Bank can update later ex- if client meet (√ - Possible) lost job etc.) Stance - Will ↑ Will ↓ Will Repo EB: Formula Components: Repo? Repo? unchanged? Banks – pick any 1 EB [RBI repo rate/ 91-day T-bill yield/ 182-day T- Calibrated √ X √ bill yield/ any other benchmarks by Financial Benchmarks India Ltd Tightening -> Banks must feed latest EB data in above formula atleast once Neutral √ √ √ every 3 months => Benefit both fresh & existing borrowers Accommodative X √ √ Borrowers eligible? Personal loans (for sudden emergency – provide guidance to investors/borrowers/bankers about future expenditure) + Retails loans (home, vehicle, electronics etc) + action of RBI + Not legally bound to follow stance Ex- 2022-May- Loans to micro & small enterprises + Loans medium enterprises June: Even though MPC said Accommodative Stance, still they kept (category added 2020) + applicable to previous loans in above increasing Repo to fight inflation categories, if borrower fills application form. RBI’s Monetary Policies: Before 2020-Corona : Interest Rate Reset of EMI based Floating Interest Loans 2018 pattern – Inflation ↑ –> ↑ Repo (6-6.5%) 2 type of Loan interest rates – Fixed (like 10% 5yr car loan) & 2019 pattern – Inflation < 2% –>↓ Repo (5%) – boost economy floating (like EB – keeps changing); 2020-2023 – repo ↑ed from 4% 2020 pattern – Covid – supply chain disruptions - Inflation ↑- to 6.5% -> EMI burden on EB based loans => RBI asked bankers to Expensive loans wont fix –>↓ Repo (4%) & CRR(3%) – boost give option to borrower after every change in floating interest loan demand & consumption : 1. Ability to RESET (switch from Floating to fixed rate loans) & 2. Foreclosure of Loan -> full repayment of remaining amount in 1 Corona 2020 : ATMANIRBHAR → Reforms by RBI 2020-2021 single payment instead of multiple EMIs. ↓ Repo (4%) & CRR(3%) + Opened new loan windows such as Loan repayment based on repayment of principal & interest: TLTRO, On-Tap Window etc.+ Gold LTV 75% -> 90% + Loan/EMI/ Bullet repayment (in 1 instalment @end of loan tenure) vs NPA relief / Moratorium + Special Refinance Facility for AIFI + RBI Equated Monthly Instalments (EMI – monthly instalments) KV Kamath Committee report - restructure loans impacted by 2023 – RBI - If UBC completes PSL target - RBI allows to give upto Covid 19 pandemic + RBI defers BASEL Norms, IndAS accounting ₹4L gold loan (bullet repayment) to customers. (Earlier 2 lakh) Norms, orders bank to pause/halt Dividend Distribution + RBI Click on the link to Join us on Telegram: https://t.me/justupscpyq for more such pdfs  INDIAN ECONOMY (MRUNAL) PILLAR # 1 – SUMMARIZER Limitations of Monetary Policy in India Rate hikes since 2022: RBI vs Other Central banks Monetary policy updated every 2 months – still restricted efficacy US Federal Reserve - 4.25% | European Central Bank (ECB) - 3% | in controlling inflation & boosting growth due to following factors: Bank of England - 2.50% | India’s RBI - 2.25% 1) Western countries → consumerist lifestyle → less saving in Tight monetary policy - pursued in all major countries + RBI not Banks -> banks borrow more from US Federal reserve/ European increased loan rates much compared to developed economies e.g. Central Bank : INDIAN Banks - Repo not major source of funds, due USA, as RBI wants to do ‘soft landing’ & not ‘hard landing’ to higher savings & deposits. 2) Before External Benchmark System: Banks not pass RBI rate Monetary Policy: Soft landing vs Hard Landing cuts, citing NPA/Bad loans / profitability problem. RBI’s research -> Inflation = RBI makes loans Expensive (↓Shopping ↓Production it took min 6-12 months for repo rate cut to benefit end-customers ↓GDP growth) – If done in gradual manner = Soft landing (GDP & took ~ 24 months for repo changes to impact inflation. growth falls gradually) + If done in extremely fast manner – Hard 3) Poor management in PSB, scams in pvt sector banks, large level Landing (Rapid fall in GDP growth) of NPA also ↓ impact of monetary policy. 4) Supply Side Issues: El-Nino/Poor monsoon hurting crop Monetary policy limitations: Cantillon Effect When money production → food inflation; Wars & Geopolitical issues - global supply is ↑ed, purchasing power of people who 1st receive crude oil & raw material prices, protectionism by China-US denting freshly-created money is ↑ed @cost of rest of people our exports. (Difficult to target such inflationary factors) [Ex- If RBI ↑ed money supply by 1000 Rs. -> Distribution expected 5) Cheap loans can boost consumption, investment & growth but is 333.33 (Rich); 333.33 (Middle class); 333.33 (Poor) BUT in reality fears (poor-monsoon/ oil-price), RBI usually apprehensive of CANTILLON Effect – Uneven distribution of the created money & inflation & inclined to keep repo high. -> Criticism on RBI for not majority of created money lands with the rich -> ↑ demand of facilitating cheap loans & economic growth - ‘Hawkish policy’. Goods/ Services used by rich (ex- bunglow) -> ↑ Price of bunglows 6) Govt Side Issues: Fiscal deficit, Subsidy leakage, Populist Loan- -> Becomes expensive for middle class & poor waivers etc. 7) Structural Issues in Economy: lack of Ease of Doing Biz, Liquidity Trap occurs when interest rates are very low, yet electricity-road infra = production/supply affecting inflation trends. consumers prefer to hoard cash rather than spend/ invest money 8) Rural Informal moneylenders - circulate black money at high in higher-yielding bonds/ other investments. In such cases, main interests. Poor penetration of banking sector, lack of financial tool used by central bank has failed to be effective. [Investopedia] inclusion, cash-intensive rural economy etc. [Mrunal] -> Suppose – RBI ↓Repo rate to combat recession – but Monetary policy limitations: Cheap loans causing inflation? after some level banks won’t reflect repo cuts due to operational MPC Member -> can't continue cheap loans (4% repo) for so long, expenses (Salaries, rent, marketing, etc.) + When Repo is too low else it'll cause asset price inflation. (e.g. rich buying bungalows then banks get cheap loans from RBI -> they don’t need depositors using cheap loans for 'investment' → demand for bungalows ↑ed money (Banks keep low Deposit interests) -> Households – → home prices ↑ed = inflation in asset prices. Similar problem in withdraw money as not good interest & wait to invest in Gold, Sharemarket + This could also result in Stagflation= high inflation, Land, Property, Bonds etc. (Speculative demand of Money) => But high unemployment & low growth as Recession/ Economic Slowdown – Households loose job/ biz -> they won’t take loans from banks as they can’t repay. So despite USA Quantitative Easing (QE) & Fed Tapering : Impact on RBi increasing money supply – Loan interest don’t decrease This India cycle is called Liquidity trap. QE = Cheap loans To boost Economy (by US Federal Bank) 2020; Investors borrowed from US to invest in India -> 2022 – Fed Tapering – To combat inflation in US (loans expensive – high interest rates) -> Investors pullout money from Indian mkt to return to US -> Impact on India = Imported inflation; Bearish Indian Sharemarket; Price of Dollars Monetary policy limitations: Black Swan Events - means unprecedented unexpected extreme risk event e.g. 2007’s USA sub-prime crisis, 2020’s Corona. + RBI report - next black swan event FPI may pullout $100 billion from Indian mkt →it’ll create problems similar to previous section. Monetary policy observations by ES23 Click on the link to Join us on Telegram: https://t.me/justupscpyq for more such pdfs  INDIAN ECONOMY (MRUNAL) PILLAR # 1 – SUMMARIZER Pillar#1B-1: Classification of Financial Intermediaries: Bank RBI: Functions & NBFC Controller of –Money Supply (Issues M0), Inflation (Monetary Policy Committee) through RBI Act, Foreign Exchange [FEMA Act] Financial Intermediary (FI) = middleman b/w 2 parties in financial Banker to Union & State govts – Public Debt manager + Banker’s transaction- b/w lenders vs. borrowers, investors vs. Bank: (CRR); Lender of Last resort (Repo/ MSF/ Bank rate); Advises entrepreneurs, households vs business firms. + 2 subdivision (1) in monetary matters (Advisor); (All banks have “Current A/C” With Formal (2) Informal (Moneylenders) RBI, E-Kuber CBS) + Regulator of All Banks [BR Act’49, Payment Systems’07] + AIFI, NBDC-D & others + Promotional Roles : Financial Intermediaries → Banks Ombudsman (Customer Protection) ; Financial Inclusion (PSL FINANCIAL INTERMEDIARIES BANKS NON-BANKS Norms – 25% bank branches in rural areas) Commercial Banks AIFI NBFCs Data publication – Annual Financial Stability Report -Public Sector -EXIM -Pri Dealers Int’l Cooperation [BASEL, IMF, G20’s Financial Stability Board …] -Pvt Sectior Coop -NABARD -Mutual fund 2021 – RBI mem of NGFS – N/w for Greening the Financial sys – gp -Foreign Banks -NHB -Insurance Fund of central banks to contribute to development of environment Differential Bs : -SIDBI -Pension Fund RRB ; Local Area B -NaBFID -Microfinance *State Bank of Sikkim outside RBI regulation (Art371-F) SFB; Payment Bs -Mudra ltd. Agency Banks of RBI Union & State govt -> RBI as Banker to Govt Reserve Bank of India (RBI) - 1913 Anyone could open Bank (Collects Tax, Salary, Pension, Small Savings) -> RBI does this after registering in Companies Act => Commercial banks required through Agency banks (pvt / public sector) -> Agency banks deal to register under Companies Act - Lax monitoring - No RBI NO CRR, with aspect of money collection/storage/transfer work from tax SLR, BASEL Norms -> No regulation. 1926 Royal Commission on payer’s bank a/c to govt’s a/c. Indian Currency (Hilton Young Commission) recommends setting up central bank to regulate banking sector. 1929 Great Depression RBI’s notable portals in USA -> Share market collapse + collapse of 450+ banks in India -> UDGAM Portal: Unclaimed Bank Deposits (2023) – unclaimed British Indian Govt in 1934 enacted Reserve Bank of India Act -> Br deposits (10yrs) -> “Depositor Education and Awareness FUND” govt -> printed shares -> Rs. 100 (face Value) x 5 lakh shares = Rs. 5 (DEA) OF RBI. Cr capital ->Investors bought shares -> Finance -> through RBI’s Central Board -> estd. RBI (land, office, staff etc) 1935 RBI PRAVAAH Portal for license from RBI (2023) – for Banks/ operational from April - 1st Governor Osborne Smith. -> RBI starts NBFC/ Digital payment related companies functioning [Viceroy: Willingdon]- Govt ownership ~4.4% only. Daksh Web Portal for supervision (2022) – Banks/NBFCs sends 1935, July Commercial Banks fulfilling certain conditions were reports to RBI for monitoring listed in 2nd Schedule of RBI Act, & such “Scheduled Banks” must E-Kuber Portal – RBI’s Core Banking Solution portal – All bankers keep CRR with RBI. 1943-49 C.D. Deshmukh 2nd FM of India have C/A here + handling NEFT/RTGS, Repo, OMO & other becomes 1st INDIAN Governor of RBI- also participated in Bretton instruments + Retail investors can buy G-Sec Woods Conference, USA (1944). 1948-49 RBI Before independence (Ownership : British Indian Govt, 4.4%, Pvt investors 95.6%) RBI Scheduled Banks : Register a company -> Acquire Capital via transfer of ownership Act 1948: All private investors’ shares shares & bonds -> RBI license – Conditions 1. [ Paid Up Capital + transferred to GOI. 100% ownership => RBI governor answerable to Reserves] = Min ₹5 Lakhs + 2. Bank biz manner not harmful to Parliament, RBI pay dividend to Govt from its profits. 1948-> RBI depositor-> Listed in 2nd Schedule (RBI Act) = Scheduled Bank = nationalized -> 1949 Banking Regulation Act : Empowered RBI to Access to RBI windows + Trusted by Govt/Pvt Co. for bank a/c or license companies to open banks & branches; auditing & liquidity employees’ salary deposit a/c + Partner in Delivery of Govt norms for Banks (SLR); Protect depositors. Force elimination / Schemes (PMJDY- Financial inclusion scheme) + 2 types - merger of weak banks; Scheduled Commercial Banks (SCB) e.g. SBI, Axis, ICICI + Schedule Companies -> shareholders -> provide money => Board of Director Cooperative - Haryana Rajya Sahakari Bank, Tamil Nadu State Apex -> elect head (Chairman/ CEO/ Governor) | For RBI -> 100% Coop Bank [Airtel Payments Bank & Paytm Payment Bank shareholder = govt -> Makes RBI's Central Board categorised as a scheduled bank in 2021-22.] RBI Central Board Composition – 5 Official Directors – 1 Gov + 4 Scheduled Bank Non-Scheduled bank Dy. Gov 16 Non-Official Directors – 2 Govt officials + 10 directors Need to deposit CRR money Can maintain CRR with nominated by Govt + 4 from RBI’s local boards @W/E/N/W to RBI’s office themselves in own vault RBI Governor & Dy Governor -> RBI Act (Sec. 8) = “NOT MORE Eligible to borrow / deposit Depends on RBI’s discretion. than 4” Dy. Gov + selected by Financial sector regulatory funds in RBI’s window appointment search committee (FSRASC) headed by Cabinet operations. LAF-Repo, MSF … Secretary (IAS) → names to Appointments Committee of Cabinet required to protect interests of depositors & abide to RBI norms head PM - final approval. + tenure usually 3 yrs + Can Re-appoint+ Informal convention Dy GOV : 2 from RBI’s officers cadre. + 2 from FI⇒ Commercial Banks⇒ Pre-Independence outside (Economist ) British owned -> target audience (Judges, Civil Servants, Army RBI Offices & Departments : 4 regions N (DL) E (Kolkata) S Personnel + Remittance @UK) | SWADESHI – Target - Merchants, Indian civil servants, elites (NO FINANCIAL INCLUSION) (Chenna) W (Mumbai) + depts. Like Banks, NBFCs, Payment 1707 : Bank of Hindustan, Calcutta -> Europeans owned Systems, Foreign Exchange Management etc. [Different from 1806-42 : 3 Presidency Banks @Bengal then Bombay then Madras. FinMin’s Enforcement Directorate -> looks after FEMA, 1999 & 1861: all 3 were given right to issue currency. 1921: combined into PMLA, 2002] Imperial Bank of India later SBI (1955) 1865 : Allahabad Bank (Stakeholders - GROUP OF EUROPEANS) Click on the link to Join us on Telegram: https://t.me/justupscpyq for more such pdfs  INDIAN ECONOMY (MRUNAL) PILLAR # 1 – SUMMARIZER 1881 : Negotiable instruments Act (Rippon) – Bank Cheques 1894: Commercial Banks ⇒ Differential Banks Punjab National Bank - Indian owned: Lajpat Lajpat Rai helped in Universal Banks Differential Banks foundation by asking friends to invest et al -> 1908: Bank of Baroda 25% branch in unbanked rural Geographical Restrictions on - Maharaja Sayajirao Gaekwad III -> 1913 onwards : Anyone could areas -> then anywhere branch opening fo