1. Prologue
2. Banks and interest rates
3. Rural Banking: Background
   • Government’s action
   • Timeline: Banking in rural areas
   • After independence
   • Why RRB?
   • How is RRB different from commercial banks?
   • Rural Infrastructure Development Fund (RIFD)
   • Financial Inclusion
   • Swabhimaan scheme
   • Ultra Small Branches
   • SHG Bank linkage program
4. Development Banks/AIFI
   • 1.ICICI
   • 2.SIDBI
   • 3.IDBI
   • 4.IFCI
   • 5.IIBI
   • 6.NABARD
   • 7.NHB
   • Reverse Mortgage product
5. FINANCIAL PERFORMANCE OF BANKS
   • Capital Adequacy Ratio
   • NPA: steps taken to reduce it
6. Chindu’s Budget speech
   • More cash to NABARD
   • Multilateral Development banks: Roads in NE
   • Bank for Women?
   • Urban housing fund
7. Core Banking Solution (CBS)?
   • Why is CBS in news?
   • Why UCBs haven’t implemented CBS?
8. Conclusion (Chapter 5)
9. Mock Questions

Prologue

• In the earlier articles, we saw
• What is financial intermediaries? Why are they important for Economy?
• Then in part 1 of 3, we saw insurance sector
• In part 2 of 3, capital market
• In this third and final part, we’ll see the banks and NBFCs.

Banks

• What do banks do? They collect deposits from savers and lend it as loan to the borrowers, and earn Commission in between. Hence they’re one type of financial intermediaries.
• We already know that banks have to invest some of their deposit money in govt. securities (and high rated corporate bonds) under the statutory liquidity ratio (SLR).
• For past few years, this SLR rate has remained steady 23-24%. Yet banks have invested more than 30% of their deposits in Government securities.
• Recall that Government securities are “safe investments” and if an investment is “safe” then it won’t give much profit.
• So why are the bank investing more money in Government securities, even above the SLR requirement?

1. because they think it is safer investment (compared to lending it to the likes of Kingfisher) and or
2. because businessmen are not coming forward to take loans and or
3. Consumers are also not coming forward for getting loans for bike, car, or home loans (due to inflation).

Interest rate

• There are mainly three type of bank account:

	Current Account	Savings account	Term deposits/Fixed Deposit
Interest paid by bank	0%	4-6*%	Depends on how long you keep the money. 6-8*%

• These rates change from bank to bank, ^these are just approximate numbers for illustration.
• For banks Current account and savings account (CASA) are most important. Why? Because on these deposits, bank has to pay very low interest. So if bank gets lot money from CASA source, and lends it as car/bike/home/business/personal loans @12-18% =there  is big profit margin.

Interest rate change

Deposit rates (bank pays to accounts holders)	Lending rate (bank charging to loan takers)
RBI controls the interest rates on foreign currency non-resident account (FCNR). In 2011, RBI deregulated the interest rates on savings deposits. Still no public sector bank has increased its savings deposit rate. (they just offer 4%). Although private sector banks offer higher.	2012: RBI deregulated the interest rate on loans given to exporters (in foreign currency). This was done to improve the exports. In 2012-13 period, RBI started reducing the repo rate and consequently banks too lowered their loan interest rates a bit.

Rural Banking: Background

During the British raj and the initial years after independence, the banks (and insurance companies) only operated in the urban areas. Why?

1. Staff/Manpower: easy availability of educated youth in cities.
2. Urban areas had better availability of electricity, telephone, telegram, railways, office supplies etc.
3. Customers: Main Target audience of banks and insurance companies= educated middle class, rich people and businessmen. They live in cities.
4. At that time, Banks and insurance companies were controlled by private players: they had only one motive=Profit. And city folks have more surplus income compared to villagers.

Result:

• Villagers did not get facility of banking / insurance, and they had to rely on the (evil) money lender who charged whatever interest rate he wanted to.
• Sometimes they paid more money in interest, than the actual principle they had borrowed.
• And thus villagers remained in debt and poverty forever.

Government’s action

Over the years, Government certain things to achieve following objectives:

1. To help the villagers get easy loans for buying cows, buffalos, diesel pump sets, seeds, fertilizers, digging wells and bores in their farms etc.
2. increase the penetration of banking services in rural areas
3. To achieve financial inclusion in rural areas

Timeline: Banking in rural areas

50s	Cooperative banks / societies
55	Birth of SBI and ICICI (although not related with rural banking directly)
60s	Bank nationalization (first round)
75	Regional rural banks were setup
80s	NABAD was setup.+ Bank nationalization (second round)
Early 90s	Self Help groups (SHG) and bank linking
Late 90s	Kisan Credit Card
Mid-2000s	No-frills account Banking Business correspondence Agents (BCA) Interest subvention scheme on crop loans
2011	Swabhiman scheme

Now let’s fill in the details

After independence

The structure looked like this (for rural banking)

1. RBI
2. State cooperative banks
3. Central cooperative banks (@District level.) || Urban cooperative banks (in cities and small towns)
4. Primary Agriculture Credit societies (PCAS) (@village level)

Then came RRB and NABARD.

Why RRB?

• 1975: Government appointed MM Narsimhan Committee to look into rural banking.
• Narsimhan observed that Commercial banks (such as SBI, BoB) have high cost structure (building, staff etc.) so they prefer to open branches in cities rather than villages- Because city branches make more profit.
• The staff of commercial banks= expert in banking and financial matters but not aware of the problems of rural people.
• On the other hand, the Primary agriculture Cooperative societies have members from the villagers themselves, so they are more aware of the needs and problems of the villagers.
• Therefore, we need to create a hybrid institution that has positive characters of both

1. Financial strength and expertise of commercial banks) +
2. Grassroot problem awareness of cooperative society).

• Thus, Regional rural banks were born.

RRB provides loan and savings facilities to villagers. These villagers include

1. farmers (small and marginal)
2. agri laborers
3. rural artisans
4. rural entrepreneurs
5. cooperative societies
6. primary agriculture credit societies

• RRBs are sponsored by Commercial banks.
• The Sponsor bank provides training to the staff of Regional rural bank.
• The sponsor bank also provides initial capital to setup the regional rural bank.
• According to the RRB Act, the paid up capital is Central Government : State Government : Sponsor bank = 50 : 15 : 35

How is RRB different from commercial banks?

	Commercial Bank	RRB
Area of operation	Huge.	Small.
	Whole India (although mainly concentrated in urban areas and small towns)	One or a few districts. (rural)
Source of finance	Savings accounts, fixed deposit etc. Borrowing from RBI and other sources	Borrowing from NABARD, SIDBI. They also have savings account of villagers, but it is not sufficient to cover the loan demands.

• Apart from RRBs, villagers also get services from cooperative credit societies, Microfinance institutions;
• Even commercial banks such as SBI also serve the villagers via BCA (Banking correspondence agents).
• And the urban-rural geographical breakup has changed a lot since the birth of RRBs. (Many places that were villages in 70s have now become small towns).
• In this context, it was necessary to consolidate/merge various RRBs- to reduce their overhead expenses and make them more competitive
• Therefore in 2005: Government of India started amalgamation of RRB. So now the number of RRBs have decreased.
• Till 1 January 2013, 22 RRBs had already been amalgamated into 9 RRBs.

Rural Infrastructure Development Fund (RIFD)

• Started in mid 90s.
• NABARD operates the Rural Infrastructure Development Fund (RIDF).
• This fund provides cheap loans to states and state-owned corporations
• So they can quickly complete projects related to

1. medium and minor irrigation,
2. soil conservation,
3. watershed management
4. Flood Protection;
5. Forest Development;
6. Cold storage
7. Community Irrigation wells for the village as a whole;
8. Village Knowledge Centres;
9. Desalination plants in coastal areas;
10. Building schools, Anganwadi Centres etc.
11. Building toilet blocks in existing schools, specially for girls
12. Rural Roads, Bridges
13. and other forms of rural infrastructure.

Banks who do not meet their Priority sector lending requirements, provide money to this rural infrastructure development fund.

Financial Inclusion

• Financial inclusion = getting all poor people in the banking, insurance, pension net. So they don’t become victims of evil money lenders who charge 36% compound interest rates (or even more).

Swabhimaan scheme

• We’ve already discussed this scheme and Banking business correspondents (BCs) in earlier article. Click me
• Budget 2012, Chindu Pranab had announced that Swabhimaan would be extended to habitations with population more than 1,000 in the north-eastern and hilly states and population more than 1,600 in the plains areas as per Census 2001.

Ultra Small Branches

• Ultra small branches (USBs) are being set up in all villages covered through Banking Correspondence Agents. (We’ve already discussed Banking business correspondents in earlier article. Click me)
• These Ultra small branches (USBs) will have a small area of 100-200 sq. feet.
• A bank officer will be available here with a laptop on pre-determined days.
• The Banking Correspondence agents will offer cash service to villagers (e.g. depositing or taking out money),
• This bank officer (in Ultra small branch) will offer other services, undertake field verification (for loan applications), and follow up banking transactions.
• A total of over 40,000 Ultra small branches (USBs) have so far been set up in the country.

SHG Bank linkage program

Self-Help Group (SHG)-Bank Linkage Programme started in early 90s.

Under this programs, self-help group open savings account in the bank. They get loans for their projects, deposit money from members (and NGOs earn commission in between).

It is being implemented by

1. commercial banks,
2. regional rural banks (RRBs)
3. Cooperative banks.

Development Banks/AIFI

They can be further classified based on their target audience

Agro	Housing	Industry	Import-export
NABARD	National Housing Bank	SIDBI IDBI ICICI IFCI IIBI	EXIM bank

• Out of ^them, names highlighted in bold (NABARD, NHB, SIDBI, EXIM) = All Indian financial institutions (AIFI). Rest are development banks.

Industrial Development Bank?

First question: How is industrial development bank different from regular (commercial) banks such as  SBI, PNB etc.?

	Industrial development bank	Commercial Bank
Examples	ICICI* IDBI SIDBI (AIFI) IFCI IIBI	Public Sector SBI PNB BoB Pvt.Sector ICICI* HDFC
Accept deposit from public?	No	Yes
Job?	Provide medium/long term finance to ONLY industries.	Provide short/medium/long term finance to both common men (car/bike/home/education/personal loans) + to industries.

*The ICICI started in 1955 to provide finance to industries. In 1994 they also started ICICI Bank. And in 2002, the original parent (ICICI) was merged with ICICI Bank Ltd.

how do Industrial development banks provide finance to industries?

1. By directly giving loans to a company.
2. By buying shares and bonds of a company.
3. By underwriting new IPOs.

In the beginning, these organizations started as “All India financial institutions”, their job was to provide medium / long term finance to companies.

• But after the LPG reforms in the 90s, capital market become popular. Now businessmen had more options to arrange for finance (via IPOs, bonds). So these All India financial institutions (AIFI) lost their original glamour and government converted them into Development banks (as per Narsimhan Committee’s recommendation).

• Now only four AIFI left: NABARD, SIDBI, EXIM and NHB. They are regulated by RBI.
• In the (part 2 of 3), we had seen that now SIDBI and NHB are allowed to borrow via external commercial borrowing (ECB) route.

1.ICICI	Full name: Industrial Credit and Investment Corporation of India. Private sector development bank Setup in ‘55. (same year SBI was also born). 2002: Merged it with ICICI Bank ltd.
2.SIDBI	Small industries development bank of India Started in 1990. SIDBI helps the micro, small and medium enterprises (MSME). It provides finance to State Industrial Development Corporation (SIDC), State finance corporations, Commercial banks, cooperative banks and regional rural banks. And then those organizations deliver loans/finance to the ultimate target group (MSME industries).
3.IDBI	Industrial development bank of India UTI is a subsidiary of IDBI It borrows money by issuing bonds (and then lends that money to industries at a higher interest rate.)
4.IFCI	Industrial finance corp. of India Setup in 1948: that makes it the first industrial financial institution in India.
5.IIBI	Industrial investment Bank of India.
6.NABARD	NABARD = National bank for Agriculture and rural development It was setup in early 80s. (Regional rural banks (RRB) were started in ‘75, that means first RRB came and then NABARD came). It acts as the regulatory authority for cooperative banks and regional rural banks NABARD lends it downwards to State cooperative banks (SCB),  Regional Rural banks (RRBs), Microfinance institutions, cooperative credit societies etc. That’s how farmers, villagers, cottage/handicraft, self help group (SHG) get loans at reasonable interest rate. NABARD operates the Rural Infrastructure Development Fund (RIFD)
7.NHB	National Housing Bank (NHB) Started in late 80s As the subsidiary of RBI It is the apex institution for housing finance in India  (just like how NABARD is for rural / agri).

Reverse Mortgage product

• Launched by National Housing bank.
• For senior citizen
• The senior citizen can mortgage his house and he’ll be given monthly income.
• He doesn’t need to repay loan or pay any EMIs, but when he dies, bank will take over his house and auction it to recover the loan money. (and if house fetches more than loan dues,  then bank will give that extra money to heirs of the dead person.)
• Punjab National bank also has a scheme like that, called “PNB Baghban”.

FINANCIAL PERFORMANCE OF BANKS

• NPA = Non performing asset, in crude term, bank gave loan to someone but he is not repaying it back on time.
• Reasons for rising NPAs

1. current macroeconomic situation in the country;
2. increased interest rates in the recent past;
3. lower economic growth;
4. aggressive lending by banks in  earlier good economic times (i.e. prior to 2007). And now some of those businessmen / salaried individuals are not earning enough due to slow down, hence unable to repay the loans.
5. Our banks had also loaned to some State electricity boards and airline companies (but they are not paying back on time) so the banks’ NPA increased.
6. switchover to system-based identification of NPAs by Public Sector Banks

Capital Adequacy Ratio

• A measure of a bank’s ability to absorb losses.
• Formula: value of its capital divided by the value of risk-weighted assets.
• To put this crudely : CAR= bank’s capital / bank’s risky assets.
• A low capital adequacy ratio (CAR) = bank has a limited ability to absorb losses (meaning bank is more likely to collapse if people start defaulting on their loans.)
• High CAR= bank has good ability to absorb losses.

• In public sector banks, government of India (GoI) has regularly infused capital to keep the CAR high. But over the years, GoI too is running low on cash (thanks to fiscal deficit), so government had formed a committee, and committee recommended that
• Government should create a new financial holding company. This company will raise money from domestic and international sources and then infuse it as equity in public sector banks.

NPA: steps taken to reduce it

1. SARFAESI act and asset reconstruction companies (ARCs) (already discussed, click me)
2. nodal officers in banks for each Debts Recovery Tribunal (DRT);
3. close watch on NPAs

RBI has also announced the following remedial measures:

1. sanction of fresh loans/ad-hoc loans from 1st Jan 2013 will be made on the basis of sharing of information among banks;
2. banks will conduct sector- /activity-wise analysis of NPAs;
3. banks will put in place a robust mechanism for early detection of sign of distress, amendments in recovery laws, and strengthening of loan appraisal and post credit monitoring.

Chindu’s Budget speech

Interest subvention scheme

• It was started in 2006
• Govt. will continue this scheme for 2013-14 also.
• Given for short term crop loans
• For loan Upto Rs.3 lakh
• Time period: 1 year.
• Under this scheme, farmer can get loan @7% interest rate.
• But if he repays the loan on time, then he will get additional 4% interest subvention. (meaning  loan would cost him 7-4=3% interest rate only.)
• So far, the scheme has been applied to loans taken from public sector banks, RRBs and cooperative banks.
• Chindu proposed to extend this scheme to crop loans borrowed from private sector scheduled commercial banks as well.

In case you wonder “WHY”? Why is govt. giving 3% interest subversion to farmer who repay the loans on time? Earlier the interest  subvention was 1% (2009), It was increased to 2% (2010) and 3%(2011).

• Because, in 2009, govt. had launched debt waiver scheme.  (Meaning farmers didn’t have to repay the loans they had taken earlier.) Govt. say they are doing it to prevent ‘farmers’ suicides’, but experts believe it was more of an election gimmick.
• It hurt the economy in two ways

1. It increased fiscal deficit of the government.
2. The farmers who had been regularly repaying loan, felt cheated. Now they also don’t repay the loans on time, thinking sooner or later govt. would announce another debt-waiver.

Thus, banks, particularly regional rural banks (RRBs) are facing really hard time recovering the loan money. That’s why Chindu is doing two things

1. On one hand, he offers additional interest subersion to farmers who repay loans on time.
2. On the other hand, he is also working for amalgation of RRBs.

More cash to NABARD

• Govt. will provide Rs. 5000 crore to NABARD
• NABARD will give it as loan for construction of warehouses, godowns, silos and cold storage units both in the public and the private sectors.
• Panchayats can also use this money for construction of godowns to help farmers to store their produce.

Multilateral Development banks: Roads in NE

• These banks operate at international level. They are formed by group of countries.
• Examples of MDB= Word Bank, Asian Development Bank (ADB), African development bank.
• Chindu wants to get loan from both World Bank and the Asian Development Bank to build roads connecting North East India with Myanmar. This will help in our “look east” policy and improve the economic prosperity of north eastern States of India.

Bank for Women?

• At present, there is no bank that exclusively serves women.
• Chindu porposed that we should have have a bank that

1. lends mostly to women and women-run businesses,
2. supports women SHGs and women’s livelihood,
3. employs predominantly women,
4. addresses gender related aspects of empowerment and financial inclusion

for this,

• MBN Rao committee = they’ll prepare the blueprint for the country’s first women’s bank.
• Govt. shall provide Rs 1,000 crore as initial capital to start this bank.
• Chindu hopes RBI will give banking license to this by October, 2013.

Urban housing fund

• There is already Rural Housing Fund set up through the National Housing Bank.
• In this system, govt. gives cash to NHB. And NHB lends it to other banks operating in rural areas >> finally those bank lend it to villagers to construct houses.
• Chindu has proposed to start similar fund for Urban housing under National housing bank.

Banking

1. Govt. will provide capital infusion to public sector banks and make sure they meet BASEL III norms.
2. All scheduled commercial banks and all RRBs are on core banking solution (CBS) and on the electronic payment systems (NEFT and RTGS).
3. Public sector banks have assured Chindu that we’ll set up ATM in all our branches by the end of March 2014
4. We are working with RBI and NABARD to bring all other banks, including some cooperative banks, on CBS and e-payment systems by the end of December 2013.

What is Core Banking Solution (CBS)?

• Core banking solution= Bank integrates all of its branches in a single IT network.
• Whenever you take out money or deposit money from your account, the database is updated in the central server directly.
• Any branch of the bank, can access this date from the central server.
• Thus Core banking solution helps customers to operate their accounts, and avail banking services from any branch of the Bank on CBS network, regardless of which branch he had opened the account.
• The customer is no more the customer of a Branch. He becomes the Bank’s Customer.
• Thus CBS = Anywhere and Anytime Banking.
• You can deposit money in any branch-office, you can give cheque, you can take out money, you can get your account statement, etc.…..as long as that branch is part of the core banking solution.
• CBS branch is like a Sales & Service Delivery Center. Internet banking, mobile banking, ATM are all interconnected in Core banking solution.

Why is CBS in news?

Because of two reasons

#1: Chindu’s budget speech

• All scheduled commercial banks and all RRBs are on core banking solution (CBS) and on the electronic payment systems (NEFT and RTGS).
• We are working with RBI and NABARD to bring all other banks, including some cooperative banks, on CBS and e-payment systems by the end of December 2013.

#2: RBI’s notice to UCB

• in March 2013, RBI issued a notice that
• Many Urban Co-operative Banks (UCBs) haven’t implemented the core banking solutions (CBS) yet. We’re giving them deadline: Dec 2013.
• If they do not implement core-banking solutions by that time, then we (RBI) could deny them various approvals (e.g. permission to open new branch etc.)

Why UCBs haven’t implemented CBS?

• All the state-owned commercial banks have implemented CBS system already.
• But other Urban cooperative banks at district level are unable do it due Lack of funds (takes lot of money to setup server, buy licensed softwares, intenet bill etc).
• Although RBI maintains that in long term, use of Information technology and CBS  will reduce the cost of operation so it’s a win-win situation if UCBs implemented the CBS.

Finally, conclusion, summary, what do we get from fifth chapter?

Conclusion

• Indian Government started reforming the financial markets under LPG reforms in 90s.
• The results of these reforms have been encouraging.
• Today, India has one of the most vibrant and transparent capital markets in the world.
• But still there are certain challenges before Indian capital market becomes an important avenue for investors – both foreign and domestic.
• 1) Our corporate sector requires long term funds (@low cost), and
• 2) we need lot of money for infrastructure project.

To help ^these two, we need three things

1. Well developed Banking system…already present
2. Well developed equity market….already present.
3. Well developed corporate bond market…yet to develop.

So, Government needs to take policy initiatives for developing a robust corporate bond market. These policy initiatives include:

1. Need to strengthen the legal, regulatory framework for corporate debt market.
2. Legal regulatory framework for financial products which is new or still in nascent stage e.g. municipal bonds, credit default swaps.
3. At present our public sector organizations related to pension-insurance sector (LIC, EPFO) cannot invest lot money in corporate debts. Government needs to relax their investment guidelines.

Infrastructure development funds (IDF)

• IDF are already discussed in earlier article click me
• Infrastructure Development funds will financing the long term infrastructure projects @cheaper cost.
• However, for the IDF to become effective, Government needs to take policy initiatives. (allowing public sector insurance and pension funds to invest in them).

Financial literacy

• Investment will not come just by relaxing the legal/regulatory framework.
• You need to encourage people to invest in capital market.  (and to prevent them from investing all their money in gold- because gold purchase increases current account deficit and creates more problems for Indian economy).
• Govt also tried to give the “carrot” of RGESS. But challenge : much of the target audience doesn’t have PAN card and DEMAT account.

Banks

• Banking Laws (Amendment) Act 2012 already discussed click me
  • This will  give more regulatory and supervisory to RBI and
  • help banks in raising funds from the capital market for expanding their banking business.
• SARFAESI act amendment help banks reduce their NPAs.
• Other issues related to RRBs, NABARD etc given in this article itself.

Pension

Pension reforms in India

1. Will facilitate the flow of long-term savings for development
2. Will help establish a credible and sustainable social security system in the country

But challenge: NPS is not popular due to low commission, bill pending in parliament.  More explained earlier, click me

Insurance

• Chindu gave revival package.
• Challenge: Less insurance penetration, FDI Bill pending in parliament

Mock Questions

1. Correct Chronological order (older to newer)
   1. NABARD, RRB, SHG-Bank linking program
   2. SHG-Bank linking program, RRB, NABARD
   3. RRB, NABARD, SHG-Bank linking program
   4. None of Above
2. RRBs are sponsored by
   1. NABARD
   2. RBI
   3. Commercial banks
   4. None of Above
3. Correct statement about Priority sector lending (PSL)
   1. RBI has mandated that banks should lend maximum 40% of their advances to PSL.
   2. As per RBI rules, the Priority sector lending target for foreign banks is higher than Indian banks.
   3. Both A and B
   4. None
4. Who benefits from Priority Sector Lending?
   1. Small scale industrialist
   2. exporter
   3. education loan seeker
   4. All of above
5. Priority sector lending targets _____
   1. Are Uniform for all foreign banks in India
   2. Depend on number of branches a foreign bank has.
   3. Donot apply to any foreign banks.
   4. None of above.
6. Priority sector lending (PSL) target for foreign banks, is decided by
   1. Department of Economic affairs
   2. NABARD
   3. RBI
   4. None of above
7. Ultra Small (bank) branches are meant for
   1. Army cantonments
   2. Near SEZ units
   3. Village covered through Banking Correspondence Agents
   4. Major and Minor sea Ports
8. The main purpose of Ultra Small (Bank) branches is
   1. Provide easy loans to exporters
   2. Provide easy loans to importers
   3. Achieve financial inclusion
   4. None of above
9. Swabhiman scheme is associated with _____ sector.
   1. Healthcare
   2. Pension
   3. Education
   4. Banking
10. Swavalamban scheme is associated with _____ sector.
    1. Healthcare
    2. Pension
    3. Education
    4. Banking
11. Rural Infrastructure Development Fund is operated by
    1. Ministry of Rural affairs
    2. Planning commission
    3. NABARD
    4. None of above
12. Who among the following implements SHG-Bank linkage program?
    1. Commercial banks
    2. Regional rural banks (RRBs)
    3. Cooperative banks.
    4. All of above
13. RBI regulates the interest rates on
    1. Interest rates on loans given to exporters
    2. FCNR
    3. Savings deposits
    4. None of above
14. Arrange these bank accounts in the ascending order of interest offered to customer (smaller to bigger)
    1. Current, Savings, Term deposit
    2. Term deposit, savings, current
    3. current, term deposit, savings
    4. none of above.
15. What is the similarity between industrial development bank and a commercial bank?
    1. Both accept deposits from public
    2. both provide short term finance to industries.
    3. Both A and B
    4. None
16. Which of the following is All India Financial institution
    1. SIDBI
    2. NABARD
    3. NHB
    4. All of above
17. first industrial financial institution in India was
    1. IFCI
    2. ICICI
    3. SIDBI
    4. UTI
18. National housing bank has launched Reverse mortgage product for benefits
    1. Senior citizens
    2. students
    3. industrialists setting up new colonies
    4. None of above
19. Which of the following has not fully implemented core banking solution yet?
    1. Scheduled commercial banks
    2. Regional rural banks
    3. Urban cooperative banks
    4. None of above
20. Core banking solution means
    1. Bank doesn’t sell mutual funds, insurance policies but concentrates on its core banking operation.
    2. Information related to a customer’s account is stored in a centralized server.
    3. Indian bank offering outsourcing services to foreign banks.
    4. None of above.
21. For a bank customer, Core banking solution
    1. Prevents him from getting services from branches other than his local branch.
    2. helps him avail banking services from any branch of his bank.
    3. Helps him buy mutual fund and insurance policies via local branch.
    4. None of above.
22. Which of the following is an example of NBFC?
    1. Infrastructure Finance Companies,
    2. Infrastructure Debt Fund
    3. Both A and B
    4. None
23. correct statement about NBFC-factoring companies
    1. They’re infrastructure companies that help entrepreneur in setting up new factory.
    2. They’ve to register themselves with RBI.
    3. Both A and B
    4. None
24. A gold loan company
    1. is an example of NBFC
    2. Has to follow the Loan to Value ratio stipulated by SEBI
    3. Both A and B
    4. None
25. for a bank, low Capital adequacy ratio (CAR) means
    1. It has low capacity to absorb losses.
    2. It has high capacity to absorb losses.
    3. Bank will be exempted from SLR requirement
    4. None of above
26. If you have to deposit your savings, which of the following bank is most reliable?
    1. Bank with low CAR and low NPA
    2. Bank with low CAR and high NPA
    3. Bank with high CAR and high NPA
    4. Bank with high CAR and low NPA
27. If you have to deposit your savings, which of the following bank is least reliable?
    1. Bank with low CAR and low NPA
    2. Bank with low CAR and high NPA
    3. Bank with high CAR and high NPA
    4. Bank with high CAR and low NPA
28. Correct statement
    1. A Bank customer doesn’t earn interest on current account
    2. A Bank doesn’t earn interest on CRR
    3. Both A and B
    4. None
29. Who among the following, will help a bank reduce its NPA?
    1. Asset reconstruction company
    2. NBFC-factor company
    3. Both A and B
    4. None
30. Interest subvention scheme
    1. was started in 2006 and stopped in 2012
    2. is applicable to long term agriculture loans
    3. both
    4. None
31. Example of Multilateral development bank?
    1. SIDBI
    2. IDBI
    3. ADB
    4. None of above
32. Who among the following, is outside the regulatory control of RBI?
    1. Urban cooperative banks
    2. SIDBI, NHB and EXIM bank
    3. Multilateral development banks
    4. None of above
33. MBN Rao is to prepare the blueprint for _____
    1. GAAR
    2. Food security
    3. India’s first women’s bank
    4. India’s first multilateral bank

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