1.What is Para Banking?
Para Banking includes all the services provided by banks apart from day to day banking. For example: – Debit cards, Credit cards, Life Insurance products, Cash Management services etc.
2.What are the components of the monetary policy of RBI?
The components of monetary policy include CRR, Repo rate, reverse repo rate, SLR, MSF and Bank Rate.
3.What is priority sector credit?
All Indian banks and foreign banks (which have more than 20 branches in India) are required give 40% of their credit to priority sector out of which 18% is for agriculture. In case of Regional Rural Banks, 60% credit is to be given to priority sector. Priority sector includes- Agriculture, Micro and small enterprise, Education loan (upto 10 lakh for study in India and upto 20 lakhs for study in foreign nations) and housing loan. Priority sector lending is one of the most important part of a bank’s lending and it is devoted towards those sector which are important for public welfare.
4.What is the difference between Micro finance and micro credit?
Micro credit is giving a small amount of loan to the customers whereas Micro Finance is a wide term. It includes small loan + training on financial matters. In other words, Micro finance= Microcredit + Financial Literacy.
What is financial inclusion? – (One of the most important questions).Financial inclusion is the availability of banking services at a affordable cost in order to include the weaker section of the society in the banking system. In 2004, Kofi Annan (UNO Head) was addressing UNESCO conference and the word “Financial Inclusion” was for the first time used by him at that time. In 2006, a committee was made under the chairmanship of Mr. HR Khan for financial inclusion and the report said that 57% of Indian population was deprived of banking facilities.
5.What are the steps taken by banks to promote financial inclusion?
- Publicity of banks so that more and more people open the accounts.
- BSBDA so that poor people can also open their account.
- People with agriculture land are being provided with Kisan Credit Card.
- General Purpose Credit card provided to people with no agricultural land where maximum limit of withdrawal is Rs.15,000 and rate of interest is 4%.
- Ultra small banking and banking correspondents.
CRISIL has made an index to calculate financial inclusion named as “CRISIL INCLUSIX” and in June 2013, there was 40% financial inclusion as per the index.
6.What is REPO rate and reverse REPO rate?
Repo rate is the rate at which banks borrow from RBI during shortage of funds. This is a short term loan provided for upto 90 days by selling securities to RBI and receiving money in lieu of it. Reverse repo rate is the rate at which banks deposit their excess liquidity with the RBI. In other words, the rate at which RBI borrows from banks by selling securities in order to control excess liquidity in the market is reverse repo rate.
Liquidity Adjustment Facility (LAF) introduced in 2000 has a provision that reverse repo rate will be 1% less than the Repo rate.
7.What is Bank rate?
It is same as repo rate but here the time period is for more than 90 days.
8.What is Cash Reserve Ratio (CRR)?
CRR is the part of Net Demand and Time Liabilities (NDTL) or cash of the bank deposited with the RBI. A higher CRR makes loans expensive as liquidity is controlled by RBI. NDTL is the deposits of the customers with the bank. Net demand liabilities are deposits payable on the demand on customer, or when the customer wants. Ex:-current account, savings account. Time liabilities are the deposits which are payable only on a specific time or after a period of maturity. For ex:- Fixed deposits, Recurring Deposits.
9.What is Statutory Liquidity Ratio (SLR)?
SLR is the amount of NDTL which a bank needs to maintain in the form of cash, gold or govt. securities before providing credit to its customers. Through SLR, RBI makes sure that bank always have a reserve amount out of their deposits to meet any future contingencies
10.What is Marginal Standing facility (MSF)?
In MSF, banks borrow money from RBI for upto 24 hours. MSF is always 1% above the repo rate and banks can draw only upto 25 of their NDTL from RBI.
