Insights Static Quiz -227, 2019–Economy

Solution: b)

Foreign Portfolio Investment (FPI) is investment by non-residents in Indian securities including shares, government bonds, corporate bonds, convertible securities, infrastructure securities etc.

SEBI has recently stipulated the criteria for Foreign Portfolio Investment. According to this, any equity investment by non-residents which is less than or equal to 10% of capital in a company is portfolio investment. While above this the investment will be counted as Foreign Direct Investment (FDI).

As per SEBI regulations, FPIs are not allowed to invest in unlisted shares and investment in unlisted entities will be treated as FDI.

Solution: c)

Revenue receipts are of two types viz. Tax Revenue and Non-tax revenue.

Tax revenues are either direct taxes or indirect taxes. Income Tax, Corporate tax, Gift Tax, Wealth Tax and Property tax etc. are direct taxes. Sales tax, Value Added Tax (VAT), Goods and Services tax (GST) are indirect tax.

Non Tax Revenue Receipts are those revenue receipts which are not generated by Taxing the public. They include:

• Money which the Government earns as “Dividends and profits” from public enterprises (PSUs). Interest which the Government earns on the money lent by it to external or internal borrowers.
• Money received through stamp printing, currency printing, medal printing etc.
• Money which the government accrues as fees, fines, penalties etc.
• Grants the Government of India receives from the external sources.
• In case of the state Governments, it may be the internal grant from the central Government.

            Solution: c)

PMI or a Purchasing Managers’ Index (PMI) is an indicator of business activity — both in the manufacturing and services sectors. It is a survey-based measures that asks the respondents about changes in their perception of some key business variables from the month before. It is calculated separately for the manufacturing and services sectors and then a composite index is constructed.

How is the PMI derived?

The PMI is derived from a series of qualitative questions. Executives from a reasonably big sample, running into hundreds of firms, are asked whether key indicators such as output, new orders, business expectations and employment were stronger than the month before and are asked to rate them.

How does one read the PMI?

A figure above 50 denotes expansion in business activity. Anything below 50 denotes contraction.

The PMI is usually released at the start of the month, much before most of the official data on industrial output, manufacturing and GDP growth becomes available. It is, therefore, considered a good leading indicator of economic activity.

Solution: a)

The objectives of setting up of small finance banks will be to further financial inclusion by (a) provision of savings vehicles, and (ii) supply of credit to small business units; small and marginal farmers; micro and small industries; and other unorganised sector entities, through high technology-low cost operations.

Eligible promoters: Resident individuals/professionals with 10 years of experience in banking and finance; and companies and societies owned and controlled by residents will be eligible to set up small finance banks. Existing Non-Banking Finance Companies (NBFCs), Micro Finance Institutions (MFIs), and Local Area Banks (LABs) that are owned and controlled by residents can also opt for conversion into small finance banks.

Capital requirement: The minimum paid-up equity capital for small finance banks shall be Rs. 100 crore.

Foreign shareholding: The foreign shareholding in the small finance bank would be as per the Foreign Direct Investment (FDI) policy for private sector banks as amended from time to time.

Prudential norms:

1. The small finance bank will be subject to all prudential norms and regulations of RBI as applicable to existing commercial banks including requirement of maintenance of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). No forbearance would be provided for complying with the statutory provisions.
2. The small finance banks will be required to extend 75 per cent of its Adjusted Net Bank Credit (ANBC) to the sectors eligible for classification as priority sector lending (PSL) by the Reserve Bank.
3. At least 50 per cent of its loan portfolio should constitute loans and advances of upto Rs. 25 lakh.

Transition path: If the small finance bank aspires to transit into a universal bank, such transition will not be automatic, but would be subject to fulfilling minimum paid-up capital / net worth requirement as applicable to universal banks; its satisfactory track record of performance as a small finance bank and the outcome of the Reserve Bank’s due diligence exercise.

Solution: b)

e-Kuber is the Core Banking Solution of Reserve Bank of India.  E-Kuber provides the provision of a single current account for each bank across the country, with decentralised access to this account from anywhere-anytime using portal based services in a safe manner.

e-Kuber enables ease of operations. The system also benefits state /central Governments as users. Some of the facilities offered include the provision of portal based access which allows Government departments to access on anywhere-anytime basis and view their balances.

The e-kuber system can be accessed either through INFINET or Internet.