Tuesday, October 31, 2017

Membership

 Any country can become the member of world bank if 75% of the existing member countries approved the application.
 Any member nation can also resign from its membership voluntarily or if any country violates the rules of the world bank.

Management
 Management of world bank includes - Board of Governors, Board of Executive Directors, Loan Committee, Advisory Committee, President and other members of the staff.
 Board of Governors of the world bank includes one Governor (Finance Minister) and one alternate governor (governor of central bank) appointed by each member country for a term of 5 years. Each governor has voting power in relation to its financial contribution to the capital of the bank. Board is required to meet at least once in a year.
 Executive Directors are 21 and out of this 6 are appointed by the six largest shareholders like USA, UK, Germany, France and Japan. The remaining 15 members are elected by the rest of member countries. It meets once a month to carry on daily routine work.

Monday, October 30, 2017

WORLD BANK

World Bank is an international financial institution that provides loans to developing countries for development programs.

 World Bank was formed on July 1944 at the Bretton Woods Conference.
 Headquarter of World Bank is located at Washington D.C. (U.S.A.)
 The main purpose of the world bank is ''Reduction of Poverty''.
 Current member nations of world bank are 188.
 Now the president of the World Bank is Jim Yong Kim.
 World Bank is comprises of two institutions - International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA).
 World Bank is member of the United Nations Development Group as well as World Bank Group.
 World Bank Group includes - International Bank for Reconstruction and Development (IBRD), International Development Association, International Finance Corporation, Multilateral Investment Guarantee Agency, International Center for Settlement of Investment Disputes.
 The president of the world bank comes from the largest shareholder. Members are represented by a Board of Governors.
 If a country wants to be a member of world bank, it has to purchase the shares of world bank group institutions as per agreement, rules and regulations set.
 The five largest shareholders are U.S. , U.K. , France, Germany and Japan.
 The largest shareholders nations has their own Executive Directors.

Objectives and Functions of World Bank
 To help in reconstruction and development of member countries.
 Spread peace all over the world regarding financial terms.
 Helps to the economies of those countries destroyed by wars.
 Helps to developing and less developed countries by crediting the finance.

Sunday, October 29, 2017

SOVEREIGN GOLD BOND SCHEME VS GOLD MONETIZATION SCHEME

Government of India recently launched the Sovereign gold bond scheme aimed at discouraging people to invest in physical gold and encouraging them to invest in demat gold bonds to reduce the import of gold.

Objectives of Sovereign Gold Bond scheme

1. To reduce the demand of gold as India is biggest importer of gold .
2. To encourage people to invest in demat gold bonds.

Features Of Sovereign Gold Bond Scheme

In this scheme prices of gold bond is linked to actual gold prices prevailing in market that time and interest of 2 to 3% will be given by government.When one best buys a gold bond by depositing money he is issued a certificate by RBI on the behalf of Government of India which is equivalent to 10gm of physical gold .Prices of this gold bond is linked to prices of gold in market that time. Gold bond will be issue in denomination of 2gm,5gm,10gm or other denominations. There is cap on maximum value of bonds allotted to per person should be 500gm.

The tenor of gold bonds could be between 5 to 7 years, One can also take loans by pledging these gold bonds to bank. These bonds are easily traded on commodity exchanges .In first installment government has decided to issue bonds for 13,500 crore equivalent to 50 tonnes of gold .

KYC for gold bonds is same as when we buy 50,000Rs above gold .Need identification proof like PAN card or Id card.
Capital gain tax is same as for physical gold. 

GOLDMONETIZATION SCHEME
In other scheme launched by government of India known as Gold Monetization scheme in which a person can deposit his or her ideal gold in any foam with authorized dealer which would be melted and stored in bullion .Minimum of 30gms of gold can be deposited.

Thursday, October 26, 2017

INDRADHANUSH APPROACH

Public sector banks play a vital role in development of our economy by providing finance to vital sectors of our economy like infrastructure and industries but these sectors faces various issues like delay in construction ,regulatory approvals,hurdles in land acquisition which turn the loans of these PSB’s in non performing assets which effect the profits of PSB’s and added up to NPA’s of banks.

To solve these problems faced by PSB’s, GOI has taken various steps to revitalize these PSB’s:-

1. Appointments
In appointments for post of MD and CEO’s of PSB’s private candidates are allowed to apply and in subsequent process two MD & CEO of major PSB’s was appointed from private sector and post of chairman has been separated from MD &CEO to bring transparency in the working of PSB’s.

2. Bank Board Bureau
The Bank Board Bureau(BBB) will replace the Appointment Board for the appointment of Directors and non executive chairman of PSB’s.The BBB will engange bank board of directors of various PSB,s and formulate policies for growth .

3. Capitalization
Government of India has provided adequate financial assistance to PSB’s bank to meet Basel III norms and also taken steps to built capital buffer over and above basel norms Government has decided to allocate 70,000 cr to banks in four years. In current financial year i.e 2015-16 -25,000 cr will be infused by government and in 2016-17- 25,000cr, 2017-18- 10,000cr,2018-19- 10,000cr.

4. De- stressing
To distress public sector banks as major recipient of loans from PSB’s are core infrastructure companies which faces regulatory issues in clearances of different project thus leading to NPA for banks. Thus government has set up Project Monitoring Group within concerned ministries for speedy clearances of stalled or new

project and flexible restructuring of long term project loans.

Wednesday, October 25, 2017

CURRENCY DEVALUATION

Devaluation means when the one’s country reduce the value of its currency with respect to those good , services and monetary units with which currency can be exchanged. This is done to increase export as export become cheaper when one country devalued its currency and import to that country become costlier .For E.g.1$
cost 65 rupees for country XYZ but after devaluation 1$ might be cost Rs70, so after devaluation country XYZ export to different countries become cheaper because have to pay less dollar for XYZ goods become cheaper and import become costlier as to import have to shed more money for import so it can also increase import bills one one’s country.

Why China Devalued the yuan
Recently China has devalued the value of its currency Yuan upto 4% against dollar which produced ripple effects in financial markets. As China export to other countries is declining and its economy is getting slower ,So in a surprise move People Bank of
China (PBoF) devalued the value of yuan against dollar as in China government uses the U.S dollar as a benchmark against which they mange their currency value.A weaker currency will help China exporter to sell their goods abroad and put American and other countries companies at disadvantage which export goods to China as their goods becomes costlier in China , so this move by PBoC will put pressure on Central Banks of different countries to help their own exporters. So it will reignite the currency war .

Tuesday, October 24, 2017

Pros and Cons of GST

Pros of GST

 Easier to understand for the taxpayers and will simplify compliance
 Uniformity of rules and regulations of levy, assessment, collection and rates will mean easier administration and proper collection and voluntary compliance
 Bringing India at par with international taxation standards.
 Increase in revenue for the Governments.

Cons of GST

 States will have revenue sharing issue
 If the dual rate and control system which is existing under the current taxation schemes in India not properly combined – then the purpose of GST is defeated. It’ll be the same ol’ Service Tax/ Excise Duty and VAT bur under a different name!

That is all folks on GST worth knowing – for bank and insurance exam purposes!
For the successful candidates of IBPS SO (written), SBI Clerical (final), and SSC CGL 14 (Tier 1) – a big congratulations – and for the hopefuls of IBPS PO and Clerical ’14 (finals) – keep the prayers on full mode!

Monday, October 23, 2017

Value Added Tax - VAT

VAT – or Value Added Tax is a stage wise levy of tax on value addition – thus at every stage of ‘value addition’ VAT is levied and passed on to the next person in the chain of changing hands.

Sales Tax is a tax on sale of goods – interstate and intrastate.

The rules and regulations and compliance procedures of all are different – and complex and tedious – and we’re only talking about the popular four indirect taxes!

To bring all these varied and sometimes overlapping taxes under one umbrella and to plug the loopholes that invariably comes with such multiple and confusing and dual taxation system – the concept of GST was formulated.

Goods and Service Tax or GST

GST is a combined or ‘one’ tax on both goods and services – incorporating the concept of ‘value addition’ – extending from manufacturing to consumption.

GST is the new ‘it’ word in today’s economic scene – with economists and Finance Ministers to tax payers and Chartered Accountants all eyeing the 2016 roll out with either eager, optimistic, skeptical or doubtful outlooks!

But until GST is a 100% reality – we the students need to know the 101s of what on earth GST is? What is this GST? Is it a three headed tax monster out to chew and drool on out life styles and expendable incomes?

The Salient Features of GST:

 GST will combine the best of all indirect taxes to bring a compact, singular and easy system for levy, collection and assessment of indirect taxes in India.

Sunday, October 22, 2017

Input Credit

Input Credit means, if you’ve paid tax on purchase of any good(s) or procurement of any service(s) and – when selling your goods or services you’re required to further pay tax – you can set off your tax payment liability with the tax already paid by you when you
procured your inputs.

Example: You are ‘special muffin manufacturer’. You buy a whole lot of special ingredients to manufacture your muffin – say you bought multi flavoured syrups for the flavours – you had to pay tax (indirect you see!) to procure the syrups.

Now you used these syrups and made your muffins (this is value addition – without the process of baking, adding of ingredients there would be no muffin) – you sell them – but you got to pay tax on the ‘manufactured’ muffins!

So you paid tax when you bought the ingredients (input tax) and when you manufactured/ sold them you paid tax again (output tax) – here, you will get the credit of the input tax paid to decrease your liability of output tax.

This is the Input tax credit system simplified for understanding.

 GST will be levied at every stage of value addition.
 Value addition would mean – applying effort on the goods or services to make worth more. By undergoing a certain process, or set of activities – ‘value’ is being added to the goods or services.
 Under GST – the rate of tax – ‘Revenue Neutral Rate’ or RNR – is set to not exceed 27% combining both central and state tax rates.
 It will bring more people under the indirect taxes net thereby increasing revenue and also dealing with tax evasion and black money issues.

Thursday, October 19, 2017

GST (GOODS AND SERVICE TAX)

Indirect Tax = Tax the burden of which is indirectly put on us!

We buy garments – there’ll be VAT. We eat at KFC – there’ll be the sneaky VAT and Service Tax!

We are not paying these taxes as an Assessee - the respective tax departments don’t know it is us who are paying the taxes for what specific goods/ service we took – it is collected from the mass, everyone who buys or uses a service, at the same rate, irrespective of a person’s income level.

You buy a pack of biscuits or a person under BPL – both pay indirect tax – and most of the times you don’t even know or pay attention as to how much you are paying in indirect taxes!

It could be very easily more than what you pay for your income tax!

What is the scenario today?

Currently India (I mean us the consumers) is reeling under a lot of different indirect taxes – excise duty, VAT, Service Tax, sales tax etc.

Some are levied by the Central Government, while others by the State Government – as India has a ‘federal’ system of Governments – i.e. two governments, one in the centre and the ones in the states.

Excise and Service tax are central government levied indirect taxes. VAT and Sales tax are State Government levied indirect taxes.

Wednesday, October 18, 2017

NARASIMHAM COMMITTEE ON BANKING SECTOR REFORMS

The Government constituted another committee on the banking sector reforms under the chairmanship of M. Narasimhan in 1997.

The following are the major recommendation of Narasimhan Committee II on the banking sector reforms.
1. Creation of stronger banking system by merging public sector Banks and the financial institutions.
2. Stronger Banks and development financial institutions should be merged while weaker and unviable one should be moved up.
3. 10% increase of capital-to-risk weighted adequacy ratio.
4. Do away with budgetary, recapitalization of public sector banks.
5. Strengthening the legal framework for loan recovery.
6. All banks to cut down their net Non Performing Assets (NPAs) to below 5% by 2000 and to 3% by 2002.
7. Continuation of licensing to both Domestic and foreign Private Banks.

Frequently asked questions

Define Financial Inclusion.
Financial inclusion means providing to the large inbanked population of India access to financial products and services like deposit accounts and credit facilities, financial advisory services. Steps taken so far promotion for financial inclusion have been the
co-operative movement, nationalization of bank, lead bank scheme, regional rural banks, and self help groups and last but not the least no frill accounts.

What is Balanced Growth of an economy?

Growth of an economy in which all aspects of it especially factors of production, grow at the same rate.

What is Gross Domestic Product (GDP)?
Gross Domestic Product (GDP) is the total value of all final goods and services currently produced within the domestic territory of a country in a year.

Tuesday, October 17, 2017

Bond or Debt

Bond market is also know as Debt market. A debt instrument is used by government
or organization to generate funds for longer duration. The relation between person
who invest in debt instrument is of lender and borrower .This gives no ownership
right .A person receives fixed rate of interest on debt instrument.

If any company or organization want to raise money for long term purpose
without diluting his ownership that it is know as Debentures. These are backed by security so there is no risk involves but return on these instrument is low as compared to shares .Company pay fixed rate of interest on debentures.

If government want to generate funds to meet long term needs like infrastructure it issue bonds know as sovereign bonds which are backed by government security so there is no risk

NARASIMHAM COMMITTEE

A high level committee on Financial System (CFS) was constituted by Government of India in 1991 to examine all aspects relating to structure, organization, function and procedures of the financial system under the Chairmanship of M. Narasimhan.

The Narasimham Committee’s recommendations aimed at
ensuring

 A degree of operational flexibility of the banks.
 Internal autonomy for Public Sector Banks in their decision making process.
 Considerable professionalism in banking operations.

Monday, October 16, 2017

CAPITAL MARKET

Capital market is also very important part of Indian financial system .This segment of financial market meant to meet long term financial needs usually more than one year or more .Companies like manufacturing , infrastructure power generation and governments which need funds for longer duration period raise money from capital market. Individuals and financial institutions who have surplus fund and want to earn higher rate of interest usually invest in capital market.

S.E.B.I. regulate the capital market in India .It set the transparent mechanism rules and regulations for investors and borrowers .It task is to protect the interest of investors and promote the growth of capital market.

Capital market can be primary market and secondary market . In primary market new securities are issued where as in secondary market already issue securities are traded.
Capital market is divided into two
1.Equity
2.Bond

Capital Market Instruments
1. Shares
2. Debentures
3. Bonds

Equities
Equity market generally known as stock .In this company want to raise money issue shares in share market like B.S.E. or N.S.E.to individual or financial institutions who want to invest their surplus money 

Sunday, October 15, 2017

Money Market Instruments

Certificate Of Deposit

Certificate of Deposit (CD) is a money market instrument. CDs can be issued by scheduled commercial banks and select All-India Financial Institutions (FIs) that have been permitted by RBI to raise short-term resources. Minimum amount of a CD should be Rs.1 lakh, i.e., the minimum deposit that could be accepted from a single
subscriber should not be less than Rs.1 lakh, and in multiples of Rs. 1 lakh thereafter.
The maturity period of CDs issued by banks should not be less than 7 days and not more than one year, from the date of issue. CDs may be issued at a discount on face value.

In this a person invest his money in COD and after the end of maturity period he receives money along with interest.

Bankers Acceptance

Bankers Acceptance is also a money market instrument to meet short term liquidity requirement .In this company provides bank guarantee to seller to pay amount of good purchased at agreed future date . In case buyer failed to pay on agreed date , seller can

invoke bank guarantee . It is usually used to finance export and import.

Thursday, October 12, 2017

Major Players in Money Market

Money Market is regulated by R.B.I in India and instrument having maturity less than one year usually traded in money markets

Major Players in Money Market

1. RBI
2. Central Government
3. State Governments
4. Banks
5. Financial Institutions
6. Micro Finance Institutions
7. Foreign Institutional Investors (FII)
8. Mutual Funds

Money Market Instruments
1. Treasury Bills
2. Commercial Papers
3. Certificate of Deposit
4. Bankers Acceptance
5. Repurchase Agreement

1. Treasury Bills

Treasury Bills are also know as T-Bills. This is one of safest instrument to invest .Tbills are issued by RBI backed by government security. RBI issue treasury bills on the behalf of central government to meet the short term liquidity needs of central
government bills are issued at a discount to face value, on maturity face value is paid to holder.
At present, the Government of India issues three types of treasury bills through auctions, for 91-day, 182-day and 364-day. Treasury bills are available for a minimum amount of Rs.25,000 and in multiples of Rs.25,000.

Wednesday, October 11, 2017

Recently appointed members to Niti Aayog

 Arvind Panagariya appointed as Vice Chairman of Niti Aayog.
 Bibek Debroy and VK Saraswat DRDO chief were appointed as full-time members.
 Union Ministers Rajnath Singh, Arun Jaitley, Suresh Prabhu and Radha Mohan Singh will be the Ex-Officio members .
 Nitin Gadkari, Smriti Zubin Irani and Thawar Chand Gehlot -- Special Invitees.

There are many challenges that lie ahead in front of Niti Aayog ,the biggest challenge is to take all stakeholders on board to full fill the aspirations of common man and take the development to village level by making policies that are people centric or it just prove to be old wine in new bottle .

MONEY MARKET AND CAPITAL MARKET
INSTRUMENTS
Financial Market plays a very important role in development of any country because it is place where liquidity requirement who needs money like industries to meet their expansion plans and those who want to earn better rate of interest on the surplus funds are met .Individuals and financial institution having surplus money  come to earn better rate of interest Financial market is a platform where buyers and sellers are involved in sale and purchase of financial products like shares, mutual funds, certificate of deposit ,bonds and so on.

Any industry like reliance ,tatas or government needs money to meet liquidity requirement come to financial market .Financial market act as intermediary between those who need money and who want to invest their money to earn better rate of interest.

Financial market are divided in two types depends on duration for which they need money.

Tuesday, October 10, 2017

Planning Commission with Niti Aayog

So Why the need felt to replace Planning Commission with Niti Aayog

1. Most of the criticism regarding planning commission was that it thrust his development agenda on states without their active collaboration and not considering their social economic uniqueness. One size fit for all solution was followed by planning commission.

2. Niti Aayog will be more like think tank advising central and state governments on strategic and technical issues across the spectrum of key elements of policy where as in planning commission there was no active participation of stakeholders.

3. In Niti Aayog will have all the state chief ministers and Lt. Governors included in the governing council where as in planning commission state chief ministers were not actively involved .

4. The mantra of Niti Aayog is inclusiveness with states as partners ,equality, transparency ,pro people ,empowering which was not visible in planning commission.

Monday, October 9, 2017

What is India’s stance on FDIs and FIIs?

India is now taking a positive and progressive stance towards FDIs and FIIs with encouraging talks on about FDI cap increase in News Media and the ongoing debate on multiple brand retailing.

Recent talks with USA has seen India inviting the US to ‘make, innovate and invest’ in India – signaling considerable inflow of FDI in the coming months. FIIs are witnessing a surge because of the over upward trend of the economy, the markets and the recent RBI rate cut. With the economies of US and other developed and
developing countries still in the ‘recovery’ stage – worldwide investors have turned India’s way!

Trivia

 FDI was introduced in India way back in 1991 by the then Finance Minister Dr. Manmohan Singh.
 USA has the maximum incoming FDI followed by UK and other counties likeHong Kong, China etc.(not necessarily in the same order)
 Singapore has made maximum FDI in India as per F.Y. 2014’s stats. The previous 1st place was held by Mauritius!
 Service Sector has always received maximum FDI in India.

 Focus now shifting to Manufacturing sector – with the Make in India vision.

NITI AAYOG

History is all set to change with all over for planning commission and new institution know as NITI Aayog set to take his role.

The main aim of forming Niti Aayog is pro people development by following up bottom up approach and with active participation of all stakeholders. It has been set up as a think-tank for formulating a new policy framework in keeping with the changes and challenges of rapidly evolving socio-economic scenario in the country.

Sunday, October 8, 2017

Sectors where FDI is NOT ALLOWED

FDI in the following sectors are prohibited completely – i.e., under both Automatic and Government routes it is not allowed.

 Atomic Energy
 Agricultural and Plantation activities
 Gambling, betting and lottery
 Nidhis and Chit Funds
 Real Estate
 Manufacture of cigarettes and tobacco

What are FIIs?

Foreign Institutional Investors (FIIs) are persons or companies incorporated outside India(companies can be Mutual funds, Pension funds, investment companies, foreign banks etc.), investing in shares of a company – where their investment is very
less. They do not have any sizeable investment – they do not have any controlling power in the company.
It is just like you and me investing in shares of Reliance Industries – only investing is done by people who are not Indian residents; and they have to be registered with SEBI to participate in the market.
So, basically FIIs are the financial market players – and the source of liquidity in the markets. Their investing in the Indian markets project a +ve image and brings in more investors.
There is a ceiling limit of 24% FII of paid-up capital of an Indian company, and 20% in case of PSU banks.

Saturday, October 7, 2017

What does FDI mean to the home/ host country – India

 FDI brings in more capital into the economy.
 It brings in the much needed foreign exchange – foreign currency.
 It also boosts the domestic economy and industries and generally triggers a positive economic ripple effect.
 It brings in more revenues for the Income Tax Department.
 Advanced technology touches the shores of the host country, along with technically superior human resource.
 Creation of new jobs also happens – and in India jobs can never be few!

The above mentioned points can also be considered to be the pros or benefits from FDI.
Which leads us to the cons of FDI in India:

 It can lead to the domestic companies losing their market share.
 Domestic companies may lose out to the competition altogether.
 Thus cons are always from the point of view of the host country and how FDI will effect its own economy.

Friday, October 6, 2017

FDI IN INDIA

FDI is a hot topic, with the current government increasing the caps on many sectors; it is something that will definitely shape the economy in the months to come – also having far reaching consequences with the Make in India vision of PM Modi.

So what is FDI? How does it actually work? And some latest news!

1. What is FDI – Foreign Direct Investment?
Foreign Direct Investment is when persons/companies who/which are non-Indian, invest in Indian companies.
Thus, through FDI, the investors become the shareholders in Indian companies and usually have stake that will give them controlling power of the company. 
FDI can be done in many ways – popular of which are through acquiring of shares and merger and acquisition.

Also important to know is that there are two ‘routes’ of FDI, namely, Automatic Route(does not require RBI or CG approval) and the Government Route (requires the approvals for those not covered under the automatic route).

2. Why would anyone invest in another country?
Well, there are plenty of reasons – why would a foreign company invest in any Indian Company?
 There could be tax incentives,
 The company believes that doing a particular business will be more profitable in India,
 There could be tax exemptions favorable to the company both in India and in the company’s home country,
 Or, it might be up for some concessions in the home country as a part of the country’s trade agreement with India …
 Or, the company might be aiming at starting operations in South Asia and India is the most developing economy in this part of the world!

Wednesday, October 4, 2017

DIFFERENT TYPES OF CHEQUES

A cheque is an unconditional order addressed to a banker,signed by the person who has deposited money with a banker, requesting him to pay on demand a certain sum of money only to the order of certain person or to the bearer of the instrument.

TYPES OF CHEQUES

1) BEARER CHEQUE
Bearer cheque are the cheques which withdrawn to the cheque's owner.These types of cheques normally used for cash transaction.

2) ORDER CHEQUE
Order cheque are the cheques which is withdrawn for the payee(the cheque withdrawn for whose person).Before withdrawn to that payee,banks cross check the identity of the payee.

3) CROSSED CHEQUE
On that type of cheques two parallel line made on the upper part of the cheques,then that cheques formed to crossed cheques.This type of cheques payment does not formed in cash while the payment of that type pf cheques transferred to the payee account and the normal person's account who recommend by the holder on the
cheque.

4) ACCOUNT PAYEE CHEQUE
When two parallel lines along with a crossed made on the cheque and the word 'ACCOUNT PAYEE' written between these lines,then that types of cheques are called account payee cheque. The payment of the account payee cheque taken place on the person,firm or company on which name the cheque issue.

5) COMPANY CROSSED CHEQUES
When two parallel lines along with a crossed made on the cheque and the word 'COMPANY' written between these lines,then that types of cheques are called company crossed cheques.Then type of withdrawn does not taken in cash while the person on which the cheque issue,transferred on its account.Normally crossed cheque
and company crossed cheque are same.

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