Today’s Topic: Exam Important Current Affairs MCQ’s-11
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Today’s Topic: Exam Important Current Affairs Topics-11
Q1. Right to Privacy is protected as an intrinsic part of Right to Life and Personal Liberty. Which of the following in the Constitution of India correctly and appropriately imply the above statement?
a) Article 14 and the provisions under the 42nd Amendment to the Constitution
b) Article 17 and the Directive Principles of State Policy in Part IV
c) Article 21 and the freedoms guaranteed in Part III
d) Article 21 and the provisions under the 44th amendment to the Constitution
The Supreme Court of India (SCI) in Justice K.S. Puttaswamy (Retd) vs Union of India is a resounding victory for privacy. The ruling is the outcome of a petition challenging the constitutional validity of the Indian biometric identity scheme Aadhaar. The judgment’s ringing endorsement of the right to privacy as a fundamental right marks a watershed moment in the constitutional history of India. The one-page order signed by all nine judges declares:
The right to privacy is protected as an intrinsic part of the right to life and personal liberty under Article 21 and as a part of the freedoms guaranteed by Part III of the Constitution.
The right to privacy in India has developed through a series of decisions over the past 60 years. Over the years, inconsistency from two early judgments created a divergence of opinion on whether the right to privacy is a fundamental right. Judgment reconciles those different interpretations to unequivocally declare that it is. Moreover, constitutional provisions must be read and interpreted in a manner which would enhance their conformity with international human rights instruments ratified by India. The judgment also concludes that privacy is a necessary condition for the meaningful exercise of other guaranteed freedoms.
The opinions cover a wide range of issues in clarifying that privacy is a fundamental inalienable right, intrinsic to human dignity and liberty.
The decision is especially timely given the rapid roll-out of Aahaar. In fact, the privacy ruling arose from a pending challenge to India’s biometric identity scheme. We have previously covered the privacy and surveillance risks associated with that scheme. Ambiguity on the nature and scope of privacy as a right in India allowed the government to collect and compile both demographic and biometric data of residents. The original justification for introducing Aadhaar was to ensure government benefits reached the intended recipients. Following a rapid roll-out and expansion, it is the largest biometric database in the world, with over 1.25 billion Indians registered. The government’s push for Aadhaar has led to its wide acceptance as proof of identity, and as an instrument for restructuring and facilitating government services.
The Two Cases That Casted Doubts on the Right to Privacy
In 2012, Justice K.S. Puttaswamy (Retired) filed a petition in the Supreme Court challenging the constitutionality of Aadhaar on the grounds that it violates the right to privacy. During the hearings, the Central government opposed the classification of privacy as a fundamental right. The government’s opposition to the right relied on two early decisions—MP Sharma vs Satish Chandra in 1954, and Kharak Singh vs State of Uttar Pradesh in 1962—which had held that privacy was not a fundamental right.
In M.P Sharma, the bench held that the drafters of the Constitution did not intend to subject the power of search and seizure to a fundamental right of privacy. They argued that the Indian Constitution does not include any language similar to the Fourth Amendment of the US Constitution, and therefore, questioned the existence of a protected right to privacy. The Supreme Court made clear that M.P Sharma did not decide other questions, such as “whether a constitutional right to privacy is protected by other provisions contained in the fundamental rights including among them, the right to life and personal liberty under Article 21.”
In Kharak Singh, the decision invalidated a Police Regulation that provided for nightly domiciliary visits, calling them an “unauthorized intrusion into a person’s home and a violation of ordered liberty.” However, it also upheld other clauses of the Regulation on the ground that the right of privacy was not guaranteed under the Constitution, and hence Article 21 of the Indian Constitution (the right to life and personal liberty) had no application. Justice Subbarao’s dissenting opinion clarified that, although the right to privacy was not expressly recognized as a fundamental right, it was an essential ingredient of personal liberty under Article 21.
Over the next 40 years, the interpretation and scope of privacy as a right expanded, and was accepted as being constitutional in subsequent judgments. During the hearings of the Aadhaar challenge, the Attorney-General (AG) representing the Union of India questioned the foundations of the right to privacy. The AG argued that the Constitution’s framers never intended to incorporate a right to privacy, and therefore, to read such a right as intrinsic to the right to life and personal liberty under Article 21, or to the rights to various freedoms (such as the freedom of expression) guaranteed under Article 19, would amount to rewriting the Constitution. The government also pleaded that privacy was “too amorphous” for a precise definition and an elitist concept which should not be elevated to that of a fundamental right.
The AG based his claims on the M.P. Sharma and Kharak Singh judgments, arguing that since a larger bench had found privacy was not a fundamental right, subsequent smaller benches upholding the right were not applicable. Sensing the need for reconciliation of the divergence of opinions on privacy, the Court referred this technical clarification on constitutionality of the right to a larger bench. The bench would determine whether the reasoning applied in M.P. Sharma and Kharak Singh were correct and still relevant in present day. The bench was set up not to not look into the constitutional validity of Aadhaar, but to consider a much larger question: whether right to privacy is a fundamental right and can be traced in the rights to life and personal liberty.
Q2. Regarding Money Bill, which of the following statement is not correct?
a) A bill shall be deemed to be a Money Bill if it contains only provision relating to imposition, abolition, remission, alteration and regulation of any tax.
b) A Money bill has provision for the custody of the Consolidated Fund of India or the Contingency Fund of India.
c) A Money bill is concerned with the appropriation of moneys out of the Contingency Fund of India.
d) A Money bill deals with the regulation of borrowing of money or giving of any guarantee by the Government of India.
Article 110 of Indian constitution talks about Money Bill.
Under Article 110(1) of the Constitution, a Bill is deemed to be a Money Bill if it contains only provisions dealing with all or any of the following matters:
a) The imposition, remission, abolition, alteration or regulation of any tax;
b) Regulation of borrowing by the government;
c) Custody of the Contingency Fund or Consolidated Fund of India, and payments into or withdrawals from these Funds;
d) Appropriation of money out of the Consolidated Fund of India;
e) Declaring of any expenditure to be expenditure charged on the Consolidated Fund of India or the increasing of the amount of any such expenditure;
f) Receipt of money on account of the Consolidated Fund of India or the public account of India or the custody or issue of such money or the audit of the accounts of the Union or of a State; or
g) Any matter incidental to any of the matters specified in sub-clauses (a) to (f).
A Money Bill refers to a draft law introduced in Lok Sabha. The Bill deals with issues such as receipt and spending of money, such as tax laws, laws governing borrowing and expenditure of the government, prevention of black money etc. Instead of being a separate Bill in itself, a money bill is more like a category. The Speaker has the power to decide whether a bill is a money bill or ordinary bill. The examples of Money Bills are Finance Bill and Appropriation Bill. After presenting Budget 2018, Finance Minister Arun Jaitley will bring Finance Bill – categorised under Money Bill.
Q3. With reference to the Election of the President of India, consider the following statements:
- The value of the vote of each MLA varies from State to State.
- The value of the Vote of MPs of the Lok Sabha is more than the value of the vote of MPs of the Rajya Sabha
Which of the statements given above is/are correct?
a) 1 only b) 2 only
c) Both 1 and 2 d) Neither 1 nor 2
The President of India is elected by an electoral college. This college comprises the elected representatives of the government that form the government after being elected in the state assembly and national elections. The citizens of the country directly elect these representatives. It is these elected representatives who then vote for the President, in theory representing the people who would ideally vote for the President. Nominated members of state assemblies and the two Houses are not allowed to participate in the presidential election as they have been nominated by the President herself. Issuing whips to garner votes for a particular candidate is also prohibited.
However, a lengthy calculation designates the value of votes of every elected MLA and MP. For the MLA, the number is decided by the total population of the state divided by the number of elected members to the legislative assembly, further divided by 1000. The population data is taken from the 1971 census. This census will be used until 2026.
For example, the total population of Madhya Pradesh in 1971 was 30,017,180. The total number of elected members of the legislative assembly is 230. So the value of vote of an MLA will be:
The value of the vote of an MP is decided by dividing the total value of votes of all MLAs of the whole country, divided by the total number of elected MPs in Lok Sabha and Rajya Sabha.
The total value of the state vote is calculated by multiplying the value of vote of one MLA with the total number of elected MLAs.
Unlike a traditional ballot, where the voter casts one vote only for her selected candidate, a presidential election ballot does not follow this system. What it follows is the Single Transferable Vote system. According to this, each voter marks out her preference for the presidential candidate. If there are five candidates for example, the voter will give five preferences. It is mandatory to give a first preference as the vote will be declared invalid in its absence. However, if the voter doesn’t give other preferences, the vote will be considered valid.
The vote quota has come about as a result of Proportional Representation which ensures equal representation to all groups. Simply casting votes or indicating preference is not enough as the person with the most number of votes or first preference does not win the presidential election. The total number of valid votes decide how many votes will a candidate need in order to be declared winner. This number is divided by two and added to one to form the benchmark of winning. For example, if there are 50,000 valid votes, then the candidate would require (50,000/2)+1, which is equal to 25,001 votes.
Should any candidate fail to reach the vote quota, the candidate with the minimum number of votes is eliminated and her votes are transferred to the other candidates on the basis of the second preference. If the vote quota is achieved, a winner emerges but if it doesn’t, the candidate with the least number of votes is eliminated again and others get her votes on the basis of the third preference.
Once the vote quota is achieved by one candidate, the winner is announced.
Consider this example. Out of four candidates, A, B, C, and D, the results of the first preference counting are
In this case, candidate B will be eliminated and her votes will be distributed to the rest of the candidates on the basis of the second preference. Post this, suppose, A gets 3000 votes, C gets 2000 votes and D gets 3000 votes. The new results are:
D: 13, 000
Now, candidate D gets eliminated with, suppose, A getting 2,000 votes and C getting 11,000 votes.
Exceeding the vote quota, candidate C will be declared as the President of India.
Q4. Consider the following statements :
- In India, State Governments do not have the power to auction non-coal mines.
- Andhra Pradesh and Jharkhand do not have gold mines.
- Rajasthan has iron ore mines.
Which of the statements given above is/are NOT correct ?
a) 1 and 2 b) 2 only
c) 1 and 3 d) 3 only
In India, State Governments have the power to auction non-coal mines.Opening up commercial coal mining for Indian and foreign companies in the private sector, the Cabinet Committee on Economic Affairs on February 20 approved the methodology for auction of coal mines/blocks for sale of the commodity.
The government described the move as the most ambitious reform of the sector since its nationalisation in 1973. Coal accounts for around 70% of the country’s power generation, and the move for energy security through assured coal supply is expected to garner attention from majors including Rio Tinto, BHP, Vedanta, Anglo American, Glencore and Adani Group.
The auction — on an online transparent platform — will be an ascending forward auction whereby the bid parameter will be the price offer in rupees per tonne, which will be paid to the State government on the actual production of coal. There shall be no restriction on the sale and/or utilisation of coal from the mine, an official statement said on the decision taken by.
Jharkhand have gold mines , At Jharkahand the Subarnarekha river has been a source of gold for the locals, who sieve hundreds of kilograms of river sand to pick up a few ounces of the yellow metal.
Andhra Pradesh have gold mines. There are known deposits of gold bearing quartz rocks in the Rayalaseema region of AP, including Anantapur, Chittoor and Kurnool, as per experts. Last year at the Partnership Summit in AP, the state government had signed a memorandum of understanding (MoU) with Australian Indian Resources Ltd to commence mining at Kurnool. With the project already on track, the state has inked another MoU with the same firm for mining gold and processing it at Chittoor district.
Q5. Which one of the following best describes the term “Merchant Discount Rate” sometimes seen in news?
a) The incentive given by a bank to a merchant for accepting payments through debit cards pertaining to that bank.
b) The amount paid back by banks to their customers when they use debit cards for financial transactions for purchasing goods or services.
c) The charge to a merchant by a bank for accepting payments from his customers through the bank’s debit cards.
d) The incentive given by the Government to merchants for promoting digital payments by their customers through Point of sale (PoS) machines and debit cards.
MDR is the fee that the store accepting your card has to pay to the bank when you swipe it for payments. The MDR compensates the bank issuing the card, the bank which puts up the swiping machine (Point-of-Sale or PoS terminal) and network providers such as Mastercard or Visa for their services. MDR charges are usually shared in a pre-agreed proportion between them. In India, the RBI specifies the maximum MDR charges that can be levied on every card transaction.
With effect from January 1 2018, small merchants will pay a maximum MDR of 0.40 per cent of the bill value and others will shell out 0.90 per cent. To prevent those MDR charges from sky-rocketing, RBI has also set a monetary cap at RS. 200 per bill for small merchants and RS.1,000 for large ones.
As per RBI rules, the merchant must cough up the MDR out of his own pocket and cannot pass it on to the customer.
To ensure wider adoption of plastic, banks must have more cards/PoS machines in circulation and more merchants need to install PoS terminals. Getting small merchants to install PoS machines has been a challenge, as cash transactions entail no extra costs to them, while cards do. Banks on their part are willing to increase PoS coverage only if their MDR share is lucrative.
The RBI’s latest move seems to be an attempt to resolve this tug-of-war. It allows banks to make a higher MDR fee off large merchants, while allowing the smaller fry to pay nominal fees. To calculate MDR, small merchants are defined as those with a turnover of upto ₹20 lakh in the previous year. They will pay an MDR of 0.4 per cent against 0.9 per cent for others.
Strictly speaking, because the MDR charges are borne by the store, you shouldn’t have to worry about how the RBI’s changes have impacted it. But you may still like to know that the RBI’s latest move helps to lightly pad up the profits of banks. Banks now stand to earn a higher fee from merchants on their card services and PoS machines. Earlier, MDR charges were based on the bill value for which the debit card was swiped. The size of the merchant swiping the card didn’t really matter. A fee of 0.25 per cent was levied on transactions up to ₹1,000, 0.50 per cent on those between ₹1,000 and ₹2,000, and a hefty 1 per cent on bigger-ticket purchases.
But come January, even tiny transactions with ‘large’ merchants like Reliance Retail, Flipkart, Big Bazaar or an Ola will attract a 0.90 per cent MDR. In fact, as most merchants with whom we use cards make a turnover of over ₹20 lakh a year, chances that a lion’s share of debit card payments will now attract a higher charge than before.
So, while your neighbourhood kirana store or boutique may acquire a brand-new swiping machine, the big-box retailer may nudge you to use cash for transactions below ₹1,000.
Q6. Consider the following statements:
- Capital Adequacy Ratio (CAR) is the amount that banks have to maintain in the form of their own funds to offset any loss that banks incur if the account-holder fails to repay dues.
- CAR is decided by each individual bank.
Which of the statements given above is/are correct?
a) 1 only b) 2 only
c) Both 1 and 2 d) Neither 1 nor
Capital Adequacy Ratio (CAR) is the ratio of a bank’s capital in relation to its risk weighted assets and current liabilities. It is decided by central banks and bank regulators to prevent commercial banks from taking excess leverage and becoming insolvent in the process.
Description: It is measured as
Capital Adequacy Ratio = (Tier I + Tier II + Tier III (Capital funds)) /Risk weighted assets
The risk weighted assets take into account credit risk, market risk and operational risk.
The Basel III norms stipulated a capital to risk weighted assets of 8%. However, as per RBI norms, Indian scheduled commercial banks are required to maintain a CAR of 9% while Indian public sector banks are emphasized to maintain a CAR of 12%.
Q7. Consider the following statements:
- The Fiscal Responsibility and Budget Management (FRBM) Review Committee Report has recommended a debt to GDP ratio of 60% for the general (combined) government by 2023, comprising 40% for the Central Government and 20% for the State Governments.
- The Central Government has domestic liabilities of 21% of the GDP as compared to that of 49% of GDP of the State Government
- As per the Constitution of India, it is mandatory for a state to take the Central Government’s consent for raising any loan if the former owes any outstanding liabilities to the latter.
Which of the statement given above is/are correct?
a) 1 only b) 2 and 3 only
c) 1 and 3 only d) 1, 2 and 3
The Fiscal Responsibility and Budget Management (FRBM) Act was enacted in 2003 which set targets for the government to reduce fiscal deficits. The targets were put off several times. In May 2016, the government set up a committee under NK Singh to review the FRBM Act. The government believed the targets were too rigid. The committee recommended that the government should target a fiscal deficit of 3 per cent of the GDP in years up to March 31, 2020 cut it to 2.8 per cent in 2020-21 .
Fiscal Responsibility and Budget Management (FRBM) became an Act in 2003. The objective of the Act is to ensure inter-generational equity in fiscal management, long run macroeconomic stability, better coordination between fiscal and monetary policy, and transparency in fiscal operation of the Government.
The Government notified FRBM rules in July 2004 to specify the annual reduction targets for fiscal indicators. The FRBM rule specifies reduction of fiscal deficit to 3% of the GDP by 2008-09 with annual reduction target of 0.3% of GDP per year by the Central government. Similarly, revenue deficit has to be reduced by 0.5% of the GDP per year with complete elimination to be achieved by 2008-09. It is the responsibility of the government to adhere to these targets. The Finance Minister has to explain the reasons and suggest corrective actions to be taken, in case of breach.
FRBM Act provides a legal institutional framework for fiscal consolidation. It is now mandatory for the Central government to take measures to reduce fiscal deficit, to eliminate revenue deficit and to generate revenue surplus in the subsequent years. The Act binds not only the present government but also the future Government to adhere to the path of fiscal consolidation. The Government can move away from the path of fiscal consolidation only in case of natural calamity, national security and other exceptional grounds which Central Government may specify.
Further, the Act prohibits borrowing by the government from the Reserve Bank of India, thereby, making monetary policy independent of fiscal policy. The Act bans the purchase of primary issues of the Central Government securities by the RBI after 2006, preventing monetization of government deficit. The Act also requires the government to lay before the parliament three policy statements in each financial year namely Medium Term Fiscal Policy Statement; Fiscal Policy Strategy Statement and Macroeconomic Framework Policy Statement.
To impart fiscal discipline at the state level, the Twelfth Finance Commission gave incentives to states through conditional debt restructuring and interest rate relief for introducing Fiscal Responsibility Legislations (FRLs). All the states have implemented their own FRLs.
Indian economy faced with the problem of large fiscal deficit and its monetization spilled over to external sector in the late 1980s and early 1990s. The large borrowings of the government led to such a precarious situation that government was unable to pay even for two weeks of imports resulting in economic crisis of 1991. Consequently, Economic reforms were introduced in 1991 and fiscal consolidation emerged as one of the key areas of reforms. After a good start in the early nineties, the fiscal consolidation faltered after 1997-98. The fiscal deficit started rising after 1997-98. The Government introduced FRBM Act,2003 to check the deteriorating fiscal situation.
The implementation of FRBM Act/FRLs improved the fiscal performance of both centre and states. The States have achieved the targets much ahead the prescribed timeline. Government of India was on the path of achieving this objective right in time. However, due to the global financial crisis, this was suspended and the fiscal consolidation as mandated in the FRBM Act was put on hold in 2007-08.The crisis period called for increase in expenditure by the government to boost demand in the economy. As a result of fiscal stimulus, the government has moved away from the path of fiscal consolidation. However, it should be noted that strict adherence to the path of fiscal consolidation during pre crisis period created enough fiscal space for pursuing counter cyclical fiscal policy.
Through Finance Act 2012, amendments were made to the Fiscal Responsibility and Budget Management Act, 2003 through which it was decided that in addition to the existing three documents, Central Government shall lay another document – the Medium Term Expenditure Framework Statement (MTEF) – before both Houses of Parliament in the Session immediately following the Session of Parliament in which Medium-Term Fiscal Policy Statement, Fiscal Policy Strategy Statement and Macroeconomic Framework Statement are laid.
Amendments to the FRBM Act were introduced subsequent to the recommendations of 13th Finance Commission.
Concept of “Effective Revenue Deficit” and “Medium Term Expenditure Framework” statement are the two important features of amendment to FRBM Act in the direction of expenditure reforms. Effective Revenue Deficit is the difference between revenue deficit and grants for creation of capital assets. This will help in reducing consumptive component of revenue deficit and create space for increased capital spending. Effective revenue deficit has now become a new fiscal parameter. “Medium-term Expenditure Framework” statement will set forth a three-year rolling target for expenditure indicators.
As per the amendments in 2012, the Central Government has to take appropriate measures to reduce the fiscal deficit, revenue deficit and effective revenue deficit to eliminate the effective revenue deficit by the 31st March, 2015 and thereafter build up adequate effective revenue surplus and also to reach revenue deficit of not more than 2 % of Gross Domestic Product by the 31st March, 2015 and thereafter as may be prescribed by rules made by the Central Government.
Further, the Central Government may entrust the Comptroller and Auditor-General of India to review periodically as required, the compliance of the provisions of FRBM Act and such reviews shall be laid on the table of both Houses of Parliament.
Vide the Finance Act 2015, the target dates for achieving the prescribed rates of effective deficit and fiscal deficit were further extended. The effective revenue deficit which had to be eliminated by March 2015 will now need to be eliminated only after 3 years i.e., by March 2018. The 3% target of fiscal deficit to be achieved by 2016-17 has now been shifted by one more year to the end of 2017-18.
The Union Cabinet chaired by the Hon’ble Prime Minister on 6 April 2016 gave its approval to Recommendations on Fiscal Deficit Targets and Additional Fiscal Deficit to States during Fourteenth Finance Commission (FFC) award period 2015-20 under the two flexibility options recommended in para 14.64 to 14.67 of its Report (volume – I). FFC has adopted the fiscal deficit threshold limit of 3 per cent of Gross State Domestic Product (GSDP) for the States. Further, FFC has provided a year-to-year flexibility for additional fiscal deficit to States. FFC, taking into account the development needs and the current macro- economic requirement, provided additional headroom to a maximum of 0.5 per cent over and above the normal limit of 3 per cent in any given year to the States that have a favourable debt-GSDP ratio (means if debt-GSDP is not more than 25%, then an additional 0.25% fiscal deficit can be afforded) and interest payments-revenue receipts ratio (means if IP-RR is not more than 10%, then an additional 0.25% fiscal deficit can be afforded) in the previous two years. However, the flexibility in availing the additional fiscal deficit will be available to State if there is no revenue deficit in the year in which borrowing limits are to be fixed and immediately preceding year. If a State is not able to fully utilise its sanctioned fiscal deficit of 3 per cent of GSDP in any particular year during the 2016-17 to 2018-19 of FFC award period, it will have the option of availing this un-utilised fiscal deficit amount (calculated in rupees) only in the following year but within FFC award period.
Further, the Government of India launched the scheme Ujwal DISCOM Assurance Yojana (UDAY) for the financial and operational turnaround of state-owned Power Distribution Companies (DISCOMs) in 2015. The scheme aims to reduce interest burden, reduce the cost of power, reduce power losses in Distribution sector, and improve operational efficiency of DISCOMs. The scheme also incentivizes the States by exempting State takeover of DISCOM debts from FRBM limits for two years. [Under UDAY, States shall take over 75% of DISCOM debt as on 30 September 2015 over two years – 50% of DISCOM debt shall be taken over in 2015-16 and 25% in 2016-17. Government of India will not include the debt taken over by the States as per the above scheme in the calculation of fiscal deficit of respective States in the financial years 2015-16 and 2016-17. States will issue bonds in the market or directly to the respective banks / Financial Institutions (FIs) holding the DISCOM debt to the appropriate extent. DISCOM debt not taken over by the State will be converted by the Banks / FIs into loans or bonds with interest rate not more than the bank’s base rate plus 0.1%. Alternately, this debt may be fully or partly issued by the DISCOM as State guaranteed DISCOM bonds at the prevailing market rates which shall be equal to or less than bank base rate plus 0.1%. Further, States have to take over the future losses of DISCOMs in a graded manner and shall fund them too.
In the Union Budget 2016-17 it was proposed to constitute a Committee to review the implementation of the FRBM Act and give its recommendations on the way forward. This was in view of the new school of thought which believes that instead of fixed numbers as fiscal deficit targets, it may be better to have a fiscal deficit range as the target, which would give necessary policy space to the Government to deal with dynamic situations. There is also a suggestion that fiscal expansion or contraction should be aligned with credit contraction or expansion respectively, in the economy. While remaining committed to fiscal prudence and consolidation, Budget stated that a time has come to review the working of the FRBM Act, especially in the context of the uncertainty and volatility which have become the new norms of global economy.
Government constituted the Committee in May, 2016 under the Chairmanship of Shri N.K. Singh, former Revenue and Expenditure Secretary and former Member of Parliament. The Committee consisted of Dr. Urjit R. Patel, Governor, Reserve Bank of India (RBI), Shri Sumit Bose, former Finance Secretary, Dr. Arvind Subramanian, Chief Economic Adviser and Dr. Rathin Roy, Director, National Institute of Public Finance & Policy (NIPFP) as members.
The Committee had wide ranging Terms of Reference (ToR) to comprehensively review the existing FRBM Act in the light of contemporary changes, past outcomes, global economic developments, best international practices and to recommend the future fiscal framework and roadmap for the country. Subsequently, the Terms of Reference were enlarged to seek the Committee’s views on certain recommendations of the Fourteenth Finance Commission and the Expenditure Management Commission. These primarily related to strengthening the institutional framework on fiscal matters as well as certain issues connected with new capital expenditures in the budget. Committee submitted its report in January 2017
Q8. Consider the following statements:
- The Reserve Bank of India manages and services Government of India Securities but not any State Government Securities.
- Treasury bills are issued by the Government of India and there are no treasury bills issued by the State Governments.
- Treasury bills offer are issued at a discount from the par value.
Which of the statements given above is/are correct?
a) 1 and 2 only b) 3 only
c) 2 and 3 only d) 1, 2 and 3 only
Public Debt in India includes only Internal and External Debt incurred by the Central Government. Internal Debt includes liabilities incurred by resident units in the Indian economy to other resident units, while External Debt includes liabilities incurred by residents to non-residents.
The major instruments covered under Internal Debt are as follows:
- Dated Securities: Primarily fixed coupon securities of short, medium and long term maturity which have a specified redemption date. These are the single-most important component of financing the fiscal deficit of the Central Government (around 91 % in 2010-11) with average maturity of around 10 years.
- Treasury-Bills: Zero coupon securities that are issued at a discount and redeemed in face value at maturity. These are issued to address short term receipt-expenditure mismatches under the auction program of the Government. These are primarily issued in three tenors, 91,182 and 364 day.
- 14 Day Treasury Bills.
- Securities issued to International Financial Institutions: Securities issued to institutions viz. IMF, IBRD, IDA, ADB, IFAD etc. for India’s contributions to these institutions etc.
- Securities issued against ‘Small Savings’: All deposits under small savings schemes are credited to the National Small Savings Fund (NSSF). The balance in the NSSF (net of withdrawals) is invested in special Government securities.
- Market Stabilization Scheme (MSS) Bonds: Governed by a MoU between the GoI and the RBI, MSS was created to assist the RBI in managing its sterilization operations. GoI borrows under this scheme from the RBI, while proceeds from such borrowings are maintained in a separate cash account with the latter and is used only for redemption of T-bills /dated securities raised under this scheme.
The concept of ‘adjusted debt’ of Government was introduced in the status report titled Government Debt: Status and Road Ahead issued in November 2010. Adjusted debt indicates the debt amount after factoring in the impact of external debt at current change rate and netting out Market Stabilization Scheme and NSSF liabilities not used for financing Central Government deficit. While analyzing the general Government debt (consolidated debt for Central and State Governments), 14 days T-bills investment by States and Central loans to State Governments have also been netted out to avoid double accounting. However, this concept of adjusted debt is not reported in the quarterly reports.
Q9. To put the public sector banks in order, the merger of associate banks with the parent State Bank of India has been affected.
Which of the statements given above is/are correct?
a) 1 only b) 2 only
c) Both 1 and 2 d) Neither 1 nor 2
Merger of SBI with its 5 associate banks and Bharatiya Mahila Bank which took place on 1 April, 2017 is the largest merger in history of Indian Banking Industry. The research has been conducted to know from where the journey of SBI to reach this point of success where postmerger it is at 45th position among top banks of the world.
Merger of SBI with its 5 associates namely State Bank of Bikaner and Jaipur (SBBJ), State Bank of Mysore(SBM), State Bank of Travancore (SBT), State Bank of Hyderabad (SBH), State Bank of Patiala (SBP) and Bharatiya Mahila Bank1 took place on 1 April, 2017. profits of Bank shall increase by Rs. 3000 crore in upcoming 3 years.
In history of SBI it is not the first time when SBI has merged with other banks. Earlier in 2008, State Bank of Saurashtra was merged with SBI and in 2010 State Bank of Indore was merged with SBI. In fact, SBI came into existence when Bank of Bengal, Bank of Madras and Bank of Bombay amalgamated to form Imperial Bank of India in 1921 which was subsequently converted to State Bank of India in 1955.
Objectives Being the largest amalgamation in history of Indian Banking Industry it attracts attention towards following objectives: 1) To study the reasons behind the merger. 2) To find out the effects of merger on shareholders, general public etc 4. Research Methodology Data for the purpose of research has been collected form secondary sources. The data has then been analysed in order to find out reasons of merger and its effects on Indian banking system.
The reasons behind the merger of SBI with its associate banks and Bharatiya Mahila Bank are listed as follows:
1) Government of India provides subsidy and contribution for bad debt recovery and share capital to SBI and its associate banks. It will become easy for government to provide aid to this single amalgamated bank instead of giving it separately to SBI and its associate banks.
2) Profitability of SBI was going down for last few years and this merger will be able to show better position of profitability in books of SBI. Net profit of the group fell from Rs. 12,225 crores in Financial Year 2016 to Rs. 241 crores in Financial Year 2017 and the losses were mainly due to associate banks.5 3) To recover loans which have turned bad and to reduce NPA of SBI and associate banks in future, merger of SBI with associate banks was important.
4) For reconstruction of SBI and associate banks in face of financial crises so that it can meet its liabilities.
5) With the merger, SBI has become bigger than before. Now it has a larger asset base and ranks 45th among top banks of the world.
6) Management of bank will become easier as earlier all the branches were managed by separate management though the holding was same and it used to make the whole process cumbersome.
7) Cost of managing large number of branches will reduce which will increase profitability of bank.
As a result of merger SBI will be among top 50 large banks of the world. Now SBI will have an asset base of Rs. 37 lakh crores. Presently number of SBI offices along with its associates are 809 which is likely to be reduced to approximately 687 after merger.6 Employees will be reallocated mainly to customer interface operations of those branches which are likely to be shut down. The task has been lightened as around 13000 employees have retired this year and 3600 have taken voluntary retirement. However, bank will hire less employees in this financial year. Out of total asset base of SBI, 28 shares of SBI will be given to shareholders.
Q10. Which of the following links all the ATMs in India?
a) Indian Banks Association
b) National Security Depository limited
c) National Payment Corporation of India
d) Reserve Bank of India
National Payments Corporation of India (NPCI), an umbrella organisation for operating retail payments and settlement systems in India, is an initiative of Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007, for creating a robust Payment & Settlement Infrastructure in India.
Considering the utility nature of the objects of NPCI, it has been incorporated as a “Not for Profit” Company under the provisions of Section 25 of Companies Act 1956 (now Section 8 of Companies Act 2013), with an intention to provide infrastructure to the entire Banking system in India for physical as well as electronic payment and settlement systems. The Company is focused on bringing innovations in the retail payment systems through the use of technology for achieving greater efficiency in operations and widening the reach of payment systems.
The ten core promoter banks are State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, Union Bank of India, Bank of India, ICICI Bank, HDFC Bank, Citibank N. A. and HSBC. In 2016 the shareholding was broad-based to 56 member banks to include more banks representing all sectors.
NPCI, during its journey in the last seven years, has made a significant impact on the retail payment systems in the country. Dedicated to the nation by our former President, Shri Pranab Mukherjee, endorsed by the Hon’ble Prime Minister, Shri Narendra Modi and later made the card of choice for the ambitious Pradhan Mantri Jan Dhan Yojana, RuPay is now a known name. With Immediate Payment Service (IMPS), India has become the leading country in the world in real time payments in retail sector. Needless to mention, National Financial Switch (NFS) and Cheque Truncation System (CTS) continues to be the flagship products of NPCI. Unified Payments Interface (UPI) has been termed as the revolutionary product in payment system and Bharat Bill Payment System (BBPS) has also been launched in pilot mode. The other products include RuPay Credit Card, National Common Mobility Card (NCMC) and National Electronic Toll Collection (NETC). With these products the aim is to transform India into a ‘less-cash’ society by touching every Indian with one or other payment services. With each passing year we are moving towards our vision to be the best payments network globally.
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