Insights Static Quiz -343, 2019–Economy

Solution: c)

Banking regulator RBI has bought eight tonnes of gold after almost nine years. The RBI last bought 200 tonnes of gold from the International Monetary Fund in November 2009.

Of the 566 tonnes gold reserves, 292 tonnes is held as backing for Notes issued and the balance 274 tonnes (265.49 tonnes) is treated as an asset of the Banking Department.

The RBI’s decision to buy gold is significant because unlike many other central banks such as the People’s Bank of China, RBI does not regularly trade in gold, although the RBI Act permits it to do so.

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Solution: a)

As a part of this customer-centric approach, to enhance the independence of the IO while simultaneously strengthening the monitoring system over functioning of the IO mechanism, RBI has reviewed the arrangement and issued revised directions under Section 35 A of the Banking Regulation Act, 1949 in the form of ‘Internal Ombudsman Scheme, 2018’. The Scheme covers, inter-alia, appointment / tenure, roles and responsibilities, procedural guidelines and oversight mechanism for the IO.

All Scheduled Commercial Banks in India having more than ten banking outlets (excluding Regional Rural Banks), are required to appoint IO in their banks.

RBI said that bank ombudsmen have to be appointed for a fixed tenure, directly reporting to the bank’s customer service committee and they must be people from outside the bank, giving this post an independent standing in a bank hierarchy.

An ombudsman is a person officially charged with investigating and addressing public complaints or violation of rights.

The implementation of IO Scheme, 2018 will be monitored by the bank’s internal audit mechanism apart from regulatory oversight by RBI.

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Solution: b)

Recently, the government relaxed several rules related to startups and levy of angel tax on funds raised by startups. (It is a direct tax).

• Angel tax is a kind of direct tax that the receiver (startup) of the fund from an angel investorhas to pay. It was introduced in the 2012 Budget. Under the Income-tax Act, 1961, where a startup (company) receives any consideration for issue of shares which exceeds the fair market value (FMV) of such shares, such excess consideration is taxable in the hands of the recipient as income from other sources. Angel tax is charged at the maximum marginal rate of 30%. The government has prescribed a specific method of calculating FMV.
• Why is Angel tax problematic?
  • There is no definitive or objective way to measure the ‘fair market value’ of a startup. Investors pay a premium for the idea and the business potential at the angel funding stage. However, tax officials seem to be assessing the value of the startups based on their net asset value at one point. Several startups say that they find it difficult to justify the higher valuation to tax officials.

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Solution: d)

REITs are similar to mutual funds. While mutual funds provide for an opportunity to invest in equity stocks, REITs allow one to invest in income-generating real estate assets.

They are collective investment vehicles that operate and manage property portfolios and give returns to investors. Securities and Exchange Board of India (Sebi) mandated that all REITS be listed on exchanges and make an initial public offer to raise money.

REITs can reduce the risk related to your property investments as 80 per cent of the value of the REIT should be in completed and rent-generating assets. They are required to be run by professional managements with specified years of experience notified by SEBI.

A REIT can be launched as an initial public offer (IPO). An investor can apply for investment in the REIT through his demat account, either online or by filling up the IPO form and indicating demat account details. After the issue is closed, the REIT will allot units to eligible investors.

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            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.