The above question and its concept related to expansionary monetary/fiscal policy and liquidity in economy, inflation and impact on currency appreciation/depreciation is very important for this year PRELIMS.
Because since last one and half year RBI is trying to increase liquidity in economy through Forex Swap (March 2019), Operation Twist (Jan 2020), LTRO (Feb 2020)...........earlier because of the NBFC crisis and now because of COVID-19.
And now govt has also started following expansionary fiscal policy in various transfer programmes like more money through MGNREGA, cash transfers in light of COVID-19 crisis.
Because since last one and half year RBI is trying to increase liquidity in economy through Forex Swap (March 2019), Operation Twist (Jan 2020), LTRO (Feb 2020)...........earlier because of the NBFC crisis and now because of COVID-19.
And now govt has also started following expansionary fiscal policy in various transfer programmes like more money through MGNREGA, cash transfers in light of COVID-19 crisis.
Nothing relevant in newspapers today as far as economy is concerned.
The above is link for RBI Governor's address to the media today. He has discussed general macroeconomic situation in light of COVID-19 crisis and further measures which RBI proposes, to keep the financial system safe and sound.
Every term/measure which he has discussed regarding financial/monetary system has already been covered in ECO-500 MCQ PDF and on this channel. I will be providing an analysis of the same tomorrow when the details will be out.
Every term/measure which he has discussed regarding financial/monetary system has already been covered in ECO-500 MCQ PDF and on this channel. I will be providing an analysis of the same tomorrow when the details will be out.
In the last six months, various changes happened in structure of cooperative banking system. Within this cooperative banking system, certain are under dual regulation certain not. Some are under Banking Regulation Act 1949 and some are not. Some cooperative banks are covered under DICGC and some are not. So let us understand and clarify all these things. But before that we will have to understand the entire "Financial System" of India, which we can through the following image.
Cooperatives (it can be banks, fertilizer companies, sugar mills, milk processing etc.) come under state subject and every state has enacted their Acts to regulate the cooperatives. But if a cooperative has operations in multiple states, then it is regulated by Central govt and registered under central act, Multi State Cooperative Societies Act 2002.
Though the Banking Regulation Act came in to force in 1949, the banking laws were made applicable to cooperative societies only in 1966 through an amendment to the Banking Regulation Act, 1949. Since then there is ‘duality of control’ over cooperative banks (urban and rural both) between the State Registrar of Cooperative Societies/Central Registrar of Cooperative Societies and the Reserve Bank of India.
The Reserve Bank regulates and supervises the banking functions of UCBs/StCB/DCCB under the provisions of Section 22 and 23 of Banking regulation Act, 1949 AND the non-banking aspects like registration, management, administration and recruitment, amalgamation and liquidation are regulated by the State/ Central Governments.
PACS and long-term credit co-operatives (SCARDB and PCARDB) are outside the purview of the Banking Regulation Act, 1949 and are hence not regulated by the Reserve Bank. (Following is the image representation of the same).
The Reserve Bank regulates and supervises the banking functions of UCBs/StCB/DCCB under the provisions of Section 22 and 23 of Banking regulation Act, 1949 AND the non-banking aspects like registration, management, administration and recruitment, amalgamation and liquidation are regulated by the State/ Central Governments.
PACS and long-term credit co-operatives (SCARDB and PCARDB) are outside the purview of the Banking Regulation Act, 1949 and are hence not regulated by the Reserve Bank. (Following is the image representation of the same).
As you can see that "MANAGEMENT" of UCB/StCB/DCCB are still under Central/State Govt. and this results in governance issues which happened in PMC bank. Hence, Cabinet approved an Amendment on 5th Feb 2020 in Banking Regulation Act 1949 to bring in "MANAGEMENT" function of UCB/StCB/DCCB also under RBI but not administrative and others. (So, it will be come Act soon)
PACS, SCARDB and PCARDB are still out of the Banking Regulation Act 1949 and hence these three category of cooperative banks are NOT registered with Deposit Insurance and Credit Guarantee Corporation (DICGC) and hence your deposit in these category of banks are not insured (5lakhs).
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MoS Jitendra Singh Statement on news channel over postpone of Civil Services Prelims 2020. So now the chances are it may get postponed.
All India Financial Institutions (also called development financial institutions) were established by govt to boost credit for the specific sectors of the economy which were important for the country in terms of jobs and society. These five institutions (NABARD, EXIM Bank, NHG, SIDBI and MUDRA) were established as refinance (on-lending) institutions and not for direct finance at individual level. This means that Govt. of India in 1980's, 1990's, with its budgetary resources created these institutions and then these institutions give funds to BANKS and NBFCs both for onward lending to the public.
Following are Sources of funds for Development Financial Institutions:
1) These institutions earn interest when the refinance (on lending) and their fund grows.
2)Time to time govt may also provide funds from its budgetary resources, if it thinks that there is shortage of liquidity in these sectors.
3)RBI may also provide them with credit.
4)And these institutions can also raise money from the market.
1) These institutions earn interest when the refinance (on lending) and their fund grows.
2)Time to time govt may also provide funds from its budgetary resources, if it thinks that there is shortage of liquidity in these sectors.
3)RBI may also provide them with credit.
4)And these institutions can also raise money from the market.
Q. Why does the world current account balance not equal to zero?
Ans:
In principle, since one country's export is another country's import, current account balances across the world should sum to zero. In practice, however, this is not the case. While a discrepancy is difficult to analyze by its very nature, there is broad agreement that the global current account discrepancy likely reflects in part the following economic factors:
1)transportation lags, if exports are recorded in one year, while the corresponding imports are not recorded until the next;
2)underreporting of investment income, partly related to tax evasion and the growth of offshore centers;
3)asymmetric valuation, where the export and import of the same good are valued at different prices; and
4)data quality issues, especially for transportation services and workers' remittances.
(source: IMF)
Ans:
In principle, since one country's export is another country's import, current account balances across the world should sum to zero. In practice, however, this is not the case. While a discrepancy is difficult to analyze by its very nature, there is broad agreement that the global current account discrepancy likely reflects in part the following economic factors:
1)transportation lags, if exports are recorded in one year, while the corresponding imports are not recorded until the next;
2)underreporting of investment income, partly related to tax evasion and the growth of offshore centers;
3)asymmetric valuation, where the export and import of the same good are valued at different prices; and
4)data quality issues, especially for transportation services and workers' remittances.
(source: IMF)
With respect to yesterdays measures announced by RBI, HIND/Express has covered those measures in a fragmented way at different pages. RBI has also released the entire set of measures (basically the speech) on its own official website in a point wise manner. So, I think it would be better if we do analysis from the official source of RBI, point wise. There are 25 points, and i will be discussing only those points which are relevant for your exam. So, what u should do is READ RBI's point (in general or in detail way as i would be suggesting) and follow my analysis.
The following is the RBI measures, i am attaching the PDF.
The following is the RBI measures, i am attaching the PDF.