The Unorganized Financial Market comprises Money Lenders, Indigenous Bankers, and Nidhi companies. Unlike the organized sector (Banks, NBFCs), it is largely unregulated by the RBI (Statement II is false). Furthermore, interest rates in this sector are typically much higher, not lower, than the organized sector due to higher risk and lack of collateral (Statement III is false).

A Scheduled Bank is one included in the Second Schedule of the RBI Act, 1934. To qualify, it must have a paid-up capital and reserves of not less than ?5 Lakhs and satisfy the RBI that its affairs are not conducted in a manner detrimental to the interests of its depositors.

NaBFID is a specialized DFI established to support long-term infrastructure projects. Unlike commercial banks, DFIs generally do not accept demand deposits (Savings/Current accounts) from the public; they raise funds through bonds, government grants, and multilateral institutions.

The SBR framework has four layers: Base, Middle, Upper, and Top. The Top Layer remains empty by default and is populated only if the RBI identifies specific NBFCs from the Upper Layer that pose extreme systemic risk and require tighter supervision.

Treasury Bills (T-Bills), Commercial Papers (CP), and Certificates of Deposit (CD) are all "Zero Coupon" instruments. They do not pay periodic interest; instead, they are issued at a discount to their face value, and the profit is the difference between the redemption value and the issue price.

The Primary Market is where new securities are issued for the first time (New Issue Market). IPOs (first sale) and FPOs (subsequent sale by existing companies) allow companies to raise fresh capital directly from investors.

As per RBI guidelines (revised), the minimum paid-up voting equity capital for Small Finance Banks is ?200 crore. (For Universal Banks, it is ?500 crore, later revised to ?1000 crore for new licenses).

High SLR and CRR meant a large portion of bank funds were locked up in low-yielding government securities or idle cash (pre-emption of funds). Narasimham-I recommended reducing these ratios to release funds for productive commercial lending, thereby improving bank profitability and efficiency.

The Insurance Amendment Act, 2021 increased the FDI limit in the insurance sector from 49% to 74% under the automatic route, subject to Indian management control safeguards.

To be registered as an NBFC-Factor, a company must have at least 50% of its total assets in the factoring business, and its income derived from factoring must not be less than 50% of its gross income.

"Call Money" refers to lending/borrowing for 1 day (overnight). "Notice Money" refers to lending/borrowing for a period of 2 to 14 days. "Term Money" is for 15 days to 1 year.

Payments Banks are designed to provide small savings accounts and payments/remittance services. They are strictly prohibited from undertaking lending activities or issuing credit cards to avoid credit risk.

SIDBI (Small Industries Development Bank of India) acts as the apex regulatory and financing body for the MSME sector in India.

SEBI regulates the securities market, which includes corporate bonds, shares, and mutual funds. G-Secs are primarily regulated by RBI. Currency is RBI's domain. Bank FDs are regulated by RBI.

Chit Fund companies are regulated by the State Governments under the Chit Funds Act, 1982. Housing Finance Companies are now regulated by RBI (transferred from NHB).

The AMC is the operational arm appointed by the Trustees to manage the funds. Fund Managers within the AMC make the buying/selling decisions.

UCBs operate under dual regulation: Banking functions are regulated by the RBI (Banking Regulation Act), while management/incorporation issues are regulated by the RCS of the State (or Central RCS for multi-state banks).

Following the amalgamation of 10 PSBs into 4 anchor banks, the total number of PSBs in India came down to 12, creating larger and stronger banks.

CP is an unsecured Promissory Note issued by corporates, primary dealers, and FIs to raise short-term funds.

Export-Import Bank of India (EXIM Bank) extends Lines of Credit (LOC) and Buyer's Credit to overseas entities to promote Indian exports.

NSDL and CDSL are Depositories. They hold securities (shares, debentures) in electronic form to facilitate paperless trading and settlement.

GIC Re is the "National Reinsurer". It provides reinsurance support to direct general insurance companies in India and abroad, helping them spread risk.

A CIC is a specialized NBFC whose business is acquisition of shares and securities. It must hold at least 90% of its net assets in the form of investment in group companies, with at least 60% in equity shares.

RBI classifies SBI, HDFC Bank, and ICICI Bank as D-SIBs. These are banks considered "Too Big To Fail" and are subject to higher capital conservation buffer requirements.

TREPS enables tri-party repo borrowing and lending, facilitated by a central counterparty (CCIL). It allows participants to borrow against government securities collateral with a third party mediating the transaction.

A Financial Lease is a long-term lease where the lessee bears the risks (maintenance, obsolescence) and enjoys the rewards of the asset, almost like ownership, though legal title remains with the lessor.

Basel Norms have 3 pillars: Pillar 1 (Minimum Capital Requirements), Pillar 2 (Supervisory Review Process - ICAAP), and Pillar 3 (Market Discipline - Disclosures).

Seed capital is for the idea stage. Start-up financing supports product development and initial marketing. Expansion is for scaling up. Bridge is for pre-IPO.

RIDF was set up in NABARD. Banks that fail to meet their Priority Sector Lending targets contribute to this fund, which NABARD uses to finance rural infrastructure projects by state governments.

A Green Shoe Option (Over-allotment Option) allows the issuer to authorize underwriters to sell additional shares (usually up to 15%) if demand is high, helping to stabilize the post-listing price.

The Integrated Ombudsman Scheme, 2021 integrates the three existing schemes (Banking Ombudsman, NBFC Ombudsman, and Digital Transactions Ombudsman) into a single centralized scheme, adopting the "One Nation One Ombudsman" approach to make the grievance redressal mechanism simpler and more responsive.

Currently, the Government of India issues Treasury Bills in three standard maturities: 91-day, 182-day, and 364-day. There is no standard 270-day T-Bill.

The Middle Layer includes all Deposit taking NBFCs (NBFC-Ds) irrespective of asset size, and Non-Deposit taking NBFCs with asset size of ?1000 Crore and above.

NAV is the per-unit price of the mutual fund. It is calculated as (Total Market Value of Assets + Cash - Liabilities) / Total Number of Units Outstanding.

NPCI, an umbrella organization for operating retail payments and settlement systems in India, developed and operates the UPI platform.

Unlike "Options" where the buyer has the right but not the obligation, "Futures" impose a binding obligation on both parties to fulfill the contract on the maturity date.

NHB was originally a subsidiary of RBI. However, the Government of India acquired the entire stake of RBI in NHB in 2019, making it a 100% govt-owned entity.

REER takes the NEER (weighted average of nominal exchange rates) and adjusts it for relative inflation rates. It is a better indicator of a country's trade competitiveness.

Credit Rating Information Services of India Limited (CRISIL) was incorporated in 1987 and started operations in 1988, becoming India's first credit rating agency.

In Hire Purchase, the hirer has the option to purchase the asset at the end of the term. Ownership passes only when the final installment is paid. In Lease, ownership typically remains with the lessor.

Forfaiting involves the purchase of export receivables (like bills of exchange) by a forfaiter on a "without recourse" basis. It is typically used for medium to long-term export financing.

Angel Investors invest their personal funds into early-stage companies (startups) that have high growth potential but high risk, often providing mentorship as well.

Tier I is the primary pension account which is restrictive in nature regarding withdrawals (corpus is locked till retirement). Tier II is a voluntary savings facility with unrestricted withdrawals.

Bancassurance is a partnership between a bank and an insurance company, where the bank uses its distribution channels to sell insurance products.

Merchant Bankers mainly facilitate capital raising for companies by managing IPOs, underwriting shares, and providing consultancy on mergers and acquisitions.

The ownership structure of RRBs is fixed: Central Government (50%), Sponsor Bank (35%), and State Government (15%).

CD is a negotiable money market instrument issued by Scheduled Commercial Banks and select FIs. The minimum maturity for a CD issued by banks is 7 days, not 1 day. It is unsecured.

ASBA is a process where the IPO application money remains blocked in the investor's bank account and is debited only if shares are allotted.

IDF-NBFCs are setup to facilitate long-term debt into infrastructure sectors. They raise resources through issue of bonds of minimum 5-year maturity.

REITs pool money to own and operate income-generating real estate. The regulations require at least 80% of the value of the REIT assets to be invested in completed and rent-generating properties.

Section 31(i) of the SARFAESI Act explicitly excludes "any security interest created in agricultural land" from its purview to protect farmers.

TReDS is an electronic platform for facilitating the financing / discounting of trade receivables of MSMEs through multiple financiers, helping them manage working capital.

A Regulatory Sandbox allows FinTech companies to test innovative products with real customers under regulatory supervision but with some relaxed norms for a limited period.

ULIPs combine insurance and investment. The premiums are invested in market-linked funds (equity/debt), and the value of the corpus fluctuates with market performance. Thus, the investment risk lies with the policyholder.

LABs were established as low-cost structures to mobilize rural savings and provide credit in a limited area of operation (typically 3 contiguous districts).

NARCL acquires stressed assets from commercial banks, cleaning up their balance sheets. The assets are then managed/resolved by the IDRCL (India Debt Resolution Company Ltd).

Banks and Primary Dealers act as both borrowers and lenders in the Call/Notice money market. Co-operative banks are also permitted. Corporates are not permitted.

India moved from T+2 to T+1 settlement cycle (Trade date + 1 day) for equities, making it one of the fastest settlement systems globally. SEBI is also testing optional T+0.

An Operating Lease is like a rental agreement (e.g., renting a car for a week). It is short-term, doesn't cover the full asset cost, and the lessor handles maintenance. Financial Lease is the opposite.

"AAA" ratings indicate the highest degree of safety regarding timely servicing of financial obligations and carry the lowest credit risk.

Hard Underwriting involves a firm commitment by the underwriter to subscribe to a certain number of shares even before the public issue opens, providing certainty to the issuer.

A Put Option allows the holder to sell the asset at the strike price. They will exercise this option if the market price falls below the strike price, profiting from the decline.

In non-recourse factoring, the Factor assumes the credit risk. If the debtor fails to pay due to insolvency, the Factor cannot claim the money back from the seller (client).

An IPO allows the VC firm to sell its shares to the public at a market valuation, often yielding significantly higher returns compared to other exit strategies like buybacks or secondary sales.

A typical forex swap consists of a spot transaction and a simultaneous forward transaction in the opposite direction. It is used to manage liquidity or hedge risk without open currency exposure.

Unlike universal banks (target 40%), SFBs have a higher mandate to serve the underserved, hence their Priority Sector Lending (PSL) target is set at 75% of ANBC.

Green Bonds are debt instruments specifically earmarked to raise money for climate and environmental projects like renewable energy, clean transportation, and water management.

TER covers investment management fees, registrar fees, trustee fees, audit fees, and marketing expenses. SEBI sets limits on the maximum TER that can be charged.

TPAs act as intermediaries between the insurance company and the policyholder/hospital. They handle the administrative aspects of claims processing, network hospital management, and cashless approvals.

APY provides five slabs of guaranteed minimum pension: ?1000, ?2000, ?3000, ?4000, and ?5000 per month, depending on the contribution amount and age of entry.

Under the Integrated Ombudsman Scheme, the Appellate Authority is the Executive Director in charge of the Consumer Education and Protection Department of RBI (Note: Earlier it was Deputy Governor, recently designated to ED level, but often referred to as Appellate Authority within RBI).

The Integrated Ombudsman Scheme covers NBFCs (both deposit-taking and non-deposit taking) having customer interface and asset size of ?100 crore or more.

To ensure safety and liquidity, Payment Banks are mandated to invest at least 75% of their demand deposit balances in Government Securities with maturity up to one year.

LCR promotes short-term resilience by ensuring banks have sufficient High-Quality Liquid Assets (HQLA) to survive a significant stress scenario lasting 30 calendar days.

The IBC mandates a time-bound resolution process. The initial deadline is 180 days from the date of admission, extendable by 90 days. The Supreme Court has emphasized a mandatory outer limit of 330 days including litigation time.

RBI raised the minimum Net Owned Fund requirement for ARCs from ?100 crore to ?300 crore to ensure they have sufficient financial strength to acquire distressed assets.

Reporting entities (banks) must maintain records of transactions and KYC information for a period of 5 years from the date of transaction or the end of the business relationship.

The CIBIL score ranges from 300 to 900. A score closer to 900 indicates high creditworthiness and lower risk for the lender.

For SGBs, the interest (2.5% p.a.) is taxable. However, capital gains arising on redemption of the bond (held till maturity) are exempt from tax for individual investors. No TDS is deducted on interest.

Masala Bonds are debt instruments issued outside India but denominated in Indian Rupees rather than foreign currency. This shifts the currency risk from the issuer to the investor.

Category I AIFs are those which invest in sectors which the government or regulators consider as socially or economically desirable (Venture Capital Funds, SME Funds, Social Venture Funds, Infrastructure Funds).

REITs are required to distribute at least 90% of their Net Distributable Cash Flows to investors at least once every six months, ensuring they function as income-generating vehicles.

To attract global financial institutions, the government provides a 100% income tax holiday for 10 consecutive years out of a block of 15 years for units in IFSC.

The target for Advances to Weaker Sections (which includes small and marginal farmers, SC/ST, beneficiaries of govt schemes) has been increased to 12% of ANBC (Adjusted Net Bank Credit).

The Lead Bank Scheme assigns a specific bank in each district the responsibility of surveying credit needs, developing credit plans, and coordinating with other banks and government agencies to ensure banking development in that district.

Under SAA, each rural and semi-urban bank branch was assigned a specific service area comprising 15 to 25 villages for planned and orderly development of that area.

Unlike standard Repo where G-Secs are used, Corporate Bond Repo allows borrowing funds by pledging Corporate Bonds. This aims to deepen the corporate bond market.

NBFC-ND-SI are those non-deposit taking NBFCs with an asset size of ?500 crore and above. They are subject to stricter prudential norms compared to smaller NBFCs.

SEBI mandates that a Large Cap Fund must invest a minimum of 80% of its total assets in equity and equity-related instruments of large-cap companies (top 100 companies by market capitalization).

Residual value is the expected fair market value of the leased asset at the conclusion of the lease period. In a financial lease, the lessee often guarantees this value.

Section 24 mandates that every banking company shall maintain in India, liquid assets (cash, gold, or unencumbered approved securities) valued at a price not exceeding the current market price, an amount not less than a prescribed percentage of its total Demand and Time Liabilities.

The Ombudsman has the power to award compensation up to ?20 Lakh for any loss suffered by the complainant due to the act or omission of the Regulated Entity. Additionally, up to ?1 Lakh can be awarded for mental harassment.

The Cut-off Price is finalized by the issuer in consultation with the Merchant Bankers based on the bids received. Investors bidding at the "Cut-off" agree to pay whatever final price is discovered.

While a trade bill acts as evidence of debt, it becomes a liquid money market instrument only when a commercial bank "Accepts" it, guaranteeing payment. It can then be discounted.

Subrogation allows the insurance company to claim legal rights against third parties that caused the loss, preventing the insured from collecting twice (once from insurer, once from the negligent party).

Both track an index (passive), but ETFs trade like stocks with real-time pricing, whereas Index Fund units are created/redeemed by the AMC at the day's closing NAV.

Under Active Choice, a subscriber can allocate up to 75% of their funds in Equity (Asset Class E). However, this limit tapers down as the subscriber's age increases beyond 50.

The committee suggested "Narrow Banking" for banks with high NPAs, aiming to restrict their activities to risk-free investments (like G-Secs) to ensure depositors' safety.

When Forward Rate > Spot Rate, the currency is at a Premium. When Forward Rate < Spot Rate, it is at a Discount.

Receivables Exchange of India Ltd (RXIL) is a joint venture promoted by SIDBI and NSE to operate the TReDS platform.

Both can accept deposits (Payment Banks have a limit). The critical difference is that SFBs can undertake lending activities, whereas Payment Banks are strictly prohibited from lending to minimize risk.

Forfaiting is a specialized form of export finance involving the purchase of medium to long-term export receivables (deferred payment obligations) on a non-recourse basis.

AS-19 criteria for Finance Lease include: transfer of ownership, option to purchase at bargain price, lease term covering major economic life, and PV of MLP essentially equaling fair value.

Angel investors are typically high-net-worth individuals investing their own money. Venture Capitalists are professional firms that invest money pooled from institutional investors (LPs).

While the FSDC is chaired by the Finance Minister, its Sub-Committee, which handles operational coordination, is chaired by the RBI Governor.

Sovereign ratings give investors insight into the level of risk associated with investing in the debt of a particular country (national government).

NARCL acts as the ARC (buying bad loans), while IDRCL acts as the AMC (managing and selling the assets).

SME Platform listing is for companies with post-issue paid-up capital up to ?25 Crore. If it exceeds this limit, they must migrate to the Main Board.

While RBI sets policy rates (Repo), the Call Money Rate is a market-determined rate based on the demand for and supply of overnight funds among banks.

MCLR replaced the Base Rate system in April 2016 to ensure better transmission of RBI rate cuts to borrowers. (Note: EBLR has now replaced MCLR for new retail/MSME loans).

To strengthen liquidity risk management, RBI mandated LCR for larger NBFCs (Asset size = ?5000 Cr) and all deposit-taking NBFCs.

Micro-insurance aims to protect low-income people against specific perils in exchange for regular premium payments proportionate to the likelihood and cost of the risk involved.

SEBI introduced "Very High" as the sixth category in the Risk-o-meter (replacing the earlier 5 categories) to alert investors about schemes with the highest risk profile.

ASPs are IRDAI regulated insurance companies empanelled by PFRDA to provide annuity services (pension payments) to subscribers upon their exit/retirement from NPS.

NDF markets (like in Singapore or London for INR) allow trading in currencies that have restricted convertibility. Settlement is done in a convertible currency (usually USD), with no delivery of the underlying domestic currency.

Being a DFI for infrastructure, NaBFID has diverse funding sources, including government grants, loans from RBI/banks, and borrowings from international multilateral institutions.

Mission Indradhanush was a 7-pronged plan to resolve issues of PSBs, including Appointments, Banks Board Bureau, Capitalization, De-stressing, Empowerment, Framework of Accountability, and Governance Reforms.

The WOS model ensures that the Indian operations are a separate legal entity with its own capital and board, protecting it if the parent bank abroad fails (Ring-fencing).

TReDS brings together MSME sellers (to upload invoices), Buyers (to accept invoices), and Financiers (to bid and provide funding against invoices).

In a Leveraged Lease, the lessor borrows a large portion of the asset cost from a lender (non-recourse debt). The lessor provides only a small equity portion but enjoys tax benefits of ownership.