UPSC Essentials | Daily subject-wise quiz : Economy MCQs on All India Financial Institutions, Survey on International Trade in Banking Services and more (Week 170)

5. Non-Banking Financial Companies

6. State Bank of India

Select the correct answer:

(a) 1, 2, 3, 4, 5 and 6

(b) 2, 3 and 4 only

(c) 1, 3, 5 and 6 only

(d) 1, 2 and 4 only

Relevance: Questions on All India Financial Institutions (AIFIs) are important as UPSC frequently tests the classification, functions, and regulatory status of financial institutions in the Indian financial system. Aspirants should be able to distinguish between development financial institutions, commercial banks, regulators, and NBFCs.

Explanation

— The All-India Financial Institutions (AIFIs) are top-tier development banks established by the Indian government. They provide long-term, sector-specific lending under the Reserve Bank of India’s (RBI) regulatory framework and administrative supervision by the Department of Financial Services (DFS).

— All India Financial Institution (AIFI) includes:

(a) Export-Import Bank of India,

(b) National Bank for Agriculture and Rural Development,

(c) National Housing Bank,

(d) Small Industries Development Bank of India and

(e) National Bank for Financing Infrastructure and Development

Therefore, option (d) is the correct answer.

(Source: http://www.rbi.org.in)

QUESTION 2

Consider the following statements about the Survey on International Trade in Banking Services (ITBS):

1. It is conducted annually by the Reserve Bank of India.

2. It provides information on financial services rendered by branches and subsidiaries of Indian banks operating abroad.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Relevance: Aspirants should know the purpose, conducting authority, and scope of such surveys, especially those related to India’s external sector and balance of payments statistics.

Explanation

— The Reserve Bank of India has launched the 2025-26 round of its Survey on International Trade in Banking Services (ITBS). The survey has been conducted annually since 2006-07.

— The survey provides information on financial services rendered by branches/subsidiaries/joint ventures of Indian banks operating abroad and branches/subsidiaries of foreign banks operating in India, based on explicit / implicit fees / commission charged to customers. Hence, statements 1 and 2 are correct.

Therefore, option (c) is the correct answer.

(Source: http://www.rbi.org.in)

QUESTION 3

The term ‘offer for sale’ (OFS) with reference to the stock market refers to:

(a) A mechanism through which a listed company issues fresh shares to the public to raise additional capital for expansion.

(b) It is a type of IPO where a company’s promoters or early investors sell their existing shares on the primary market, rather than issuing new shares to raise fresh capital.

(c) A process by which the government purchases shares of listed public sector enterprises from the stock market to increase its ownership stake.

(d) A facility that allows retail investors to buy unlisted shares directly from a company before it is listed on the stock exchange.

Relevance: Offer for Sale (OFS) is an important capital market mechanism under SEBI regulations and is frequently in the news due to government disinvestment and stake sales by listed companies. UPSC often tests the distinction between OFS, IPO, FPO, rights issue, and buyback.

Explanation

— After nearly a decade of delays caused by regulatory hurdles, the National Stock Exchange (NSE), India’s largest stock exchange, finally submitted its IPO (initial public offering) documents. Market estimates suggest the offering could raise around Rs 20,000 crore through an offer for sale (OFS), although some participants believe the issue could be significantly larger at Rs 25,000 crore-Rs 30,000 crore.

— An OFS is a type of IPO where a company’s promoters or early investors sell their existing shares on the primary market, rather than issuing new shares to raise fresh capital. For instance, India’s largest IPO, by Hyundai Motor, was a pure OFS issue.

Therefore, option (b) is the correct answer.

QUESTION 4

Consider the following statements:

1. Term deposits refer to financial instruments where one locks in their money for a particular tenure to earn interest in return.

2. A certificate of deposit (CD) is a type of term deposit used by corporates and institutions to raise money through the money markets.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Relevance: Term deposits and Certificates of Deposit (CDs) are important components of the money market and banking system. UPSC frequently tests the nature, issuer, maturity, and purpose of money market instruments such as Treasury Bills, Commercial Papers, Certificates of Deposit, and Commercial Bills, making this a high-yield topic.

Explanation

— Credit growth has picked up over the past few months, but banks have struggled to grow their deposit base to match it. Growth in current account and savings account (CASA) deposits has particularly slowed, with retail investors now having a range of avenues to put their savings in, such as stocks, mutual funds, and other types of fixed deposits.

— As CASA deposits have slowed, banks have shifted to other sources of funds such as term deposits and CDs (certificate of deposit). “The growth in term deposits continued to outpace that of current and savings account deposits, indicating sustained preference for interest-bearing term deposits,” RBI’s report said.

— Term deposits refer to financial instruments where one locks in their money for a particular tenure to earn interest in return. This includes retail options such as fixed and recurring deposits. A CD is a type of term deposit used by corporates and institutions to raise money through the money markets. Hence, statements 1 and 2 are correct.

Therefore, option (c) is the correct answer.

QUESTION 5

Consider the following statements:

1. It is India’s ⁠first deep-water container transshipment port and is expected to handle domestic and regional cargo at a lower cost rather than routing it through ⁠Sri Lanka.

2. The port is being developed as a public-private partnership under the Design, Build, Finance, Operate and Transfer (DBFOT) model.

3. The port is located in Kerala.

The above-mentioned statements refer to:

(a) Cochin Port

(b) Azhikkal Port

(c) Vizhinjam Port

(d) Mundra Port

Relevance: Vizhinjam Port is important due to its role in maritime infrastructure, logistics, and India’s port-led development strategy under PM Gati Shakti and Sagarmala. UPSC frequently asks questions on ports, strategic infrastructure, and projects in the news, making its location and unique features highly relevant.

Explanation

— Adani Ports and SEZ (APSEZ) Ltd is moving to sell 49% of its stake in Kerala’s Vizhinjam port to Switzerland-based container shipping behemoth MSC Group for around $1.4 billion (more than Rs 13,000 crore).

— The state government, however, has said that it was kept in the dark about the development. According to the Congress-led government — as well as the Opposition CPI(M) — the concession agreement with Adani mandates the state’s approval for such a deal.

— Vizhinjam is India’s ⁠first deep-water container transshipment port and is expected to handle domestic and regional cargo at a lower cost rather than routing it through ⁠Sri Lanka, according to its website.

— The project is being developed as a public-private partnership between the Kerala government and Adani Vizhinjam Port Pvt Ltd (AVPPL) — the port’s operating company and concessionaire — under the Design, Build, Finance, Operate and Transfer (DBFOT) model.

Therefore, option (c) is the correct answer.

Previous Daily Subject-Wise-Quiz

Daily Subject-wise quiz — History, Culture, and Social Issues (Week 159)

Daily subject-wise quiz — Polity and Governance (Week 170)

Daily subject-wise quiz —  Science and Technology (Week 170)

Daily subject-wise quiz — Economy (Week 169)

Daily subject-wise quiz — Environment and Geography (Week 169)

Daily subject-wise quiz – International Relations (Week 169)

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