SEBI, NISM and IICA sign MoU to Advance Corporate Governance, ESG and Capital Markets

India has seen a massive rise in equity options trading and stock market capitalization, but investor protection is actively overseen by SEBI. ✅ Statement I: Correct India leads globally in equity options trading volume, reflecting a major boom in the derivatives market. ✅ Statement II: Correct In early 2024, India's stock market temporarily overtook Hong Kong’s, becoming the 4th largest by market cap. ❌ Statement III: Incorrect India has a regulatory body—SEBI—which issues warnings and acts against unregistered advisors.

Participatory Note (P-Note): This is a financial instrument issued by registered foreign portfolio investors (FPIs) to overseas investors. It allows overseas investors to participate in the Indian stock market indirectly without directly registering with the Securities and Exchange Board of India (SEBI). The FPI holds the underlying Indian securities, and the P-Note represents ownership for the overseas investor. The other options are not used for this purpose: Certificate of Deposit (CD): Issued by banks to raise short-term funds, not related to stock markets. Commercial Paper (CP): Short-term debt instrument issued by companies, not related to foreign investment in stocks. Promissory Note: A written promise to repay a debt, not used in this context of stock market participation.

The Business Responsibility and Sustainability Report (BRSR) is a disclosure framework introduced by SEBI to promote transparency in a company’s non-financial performance, particularly in Environmental, Social, and Governance (ESG) areas. ❌ Statement I: Incorrect
* SEBI, not the RBI, mandates the submission of BRSR.
* It applies to the top 1,000 listed companies by market capitalization. ✅ Statement II: Correct
* BRSR disclosures are mostly non-financial and focus on areas like environment, social responsibility, and governance.

* Statement I is Incorrect : Earlier, InvITs offered some tax benefits to investors. However, the budget in 2023 changed the taxation structure. Currently, all income distributed by InvITs, including interest income, dividend income, and rental income, is taxable in the hands of the unitholders according to their income tax slab. * Statement II is Correct : InvITs are indeed recognized as borrowers under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). This Act allows InvITs to access various financing options and enforce security interests in case of defaults.

The following statements are correct concerning the Indian economy: - Commercial Paper is a short-term unsecured promissory note. It's a money market instrument issued by companies to raise short-term funds.
- Call Money is a short-term finance used for interbank transactions. Banks borrow or lend money from each other for overnight periods to meet their liquidity requirements. Incorrect statements: - Certificate of Deposit is not issued by the Reserve Bank of India. It's a negotiable instrument issued by commercial banks to depositors for a fixed maturity period at a predetermined interest rate.
- Zero-Coupon Bonds can be long-term or short-term, but they are not issued by Scheduled Commercial Banks. These bonds don't pay periodic interest, but are sold at a discount to their face value. The difference between the purchase price and the maturity value represents the return on investment. Therefore, the correct codes are 1 and 3 only.

Statement 1 is Incorrect: The FSDC is not an organ of NITI Aayog. It's a separate apex-level body under the Ministry of Finance. Statement 2 is Correct: The FSDC is headed by the Union Finance Minister. Statement 3 is Correct: The FSDC plays a crucial role in monitoring macro-prudential supervision of the economy. Macro-prudential supervision focuses on preventing systemic risks within the financial system that could destabilize the entire economy. Therefore, the correct answer is 2 and 3 only.

Statement 1 is correct: While NBFCs do not have routine, direct access to the Liquidity Adjustment Facility (LAF) like scheduled commercial banks, they can access RBI liquidity indirectly through eligible participants such as Primary Dealers and banks, and through special liquidity windows and RBI operations linked to LAF mechanisms. Statement 2 is correct: Foreign Institutional Investors (now FPIs) are permitted to invest in Government Securities (G-Secs) and Treasury Bills. The RBI has even introduced the Fully Accessible Route (FAR), which allows non-residents to invest in specified government bonds without any investment upper limit. Statement 3 is correct: To develop a robust corporate and government bond market, the RBI and SEBI have permitted Stock Exchanges to set up dedicated debt trading platforms. For example, the NSE's Wholesale Debt Market (WDM) and Retail Debt Market (RDM) provide transparent platforms for these transactions.

* Insurance Companies: Insurance companies have large funds that they need to invest securely for long-term returns. Corporate bonds and government securities fit this investment profile. Hence, this statement is correct. * Pension Funds: Similar to insurance companies, pension funds manage retirement savings and need safe, long-term investment avenues like corporate bonds and government securities. Hence, this statement is correct. * Retail Investors: Retail investors can also invest in corporate bonds and government securities, though the process might be slightly more complex than investing in stocks. Various platforms and brokers facilitate such investments. Hence, this statement is correct. Therefore, all three statements are correct.

Statement 1 is incorrect. Credit Rating Agencies (CRA) analyse a debtor's ability to repay the debt and also rate their credit risk. All the credit rating agencies in India are regulated by SEBI (Credit Rating Agencies) Regulations, 1999 of the Securities and Exchange Board of India Act, 1992. There are a total of six credit agencies in India viz, CRISIL, CARE, ICRA, SMREA, Brickwork Rating, and India Rating and Research Pvt. Ltd. Statement 2 is correct. ICRA Limited is a public limited company that was set up in 1991 in Gurugram. The company was formerly known as Investment Information and Credit Rating Agency of India Limited. Statement 3 is correct. Brickwork Ratings is recognized as an external credit assessment agency (ECAI) by the Reserve Bank of India (RBI) to carry out credit ratings in India. Brickwork Rating was established in 2007 and is promoted by Canara Bank. It offers ratings for bank loans, SMEs, corporate governance ratings, municipal corporations, capital market instruments, and financial institutions.

Capital markets are financial markets where long-term securities, such as stocks and bonds, are traded. They provide a platform for raising capital for businesses and governments.  On the other hand, Money markets are financial markets where short-term securities such as T-Bill, C-Paper, Cash Management Bills, Ways and Means advances, etc are traded.  * Statement 1 is correct- Government bonds are long-term debt securities issued by governments to finance their activities. The government bond market is a part of the capital market as it involves the trading of long-term debt securities.  * Statement 2 is incorrect- The call money market is a short-term market where funds are borrowed and lent for very short durations, usually overnight. It deals with short-term funds, and its transactions are not classified as part of the capital market. * Statement 3 is incorrect- Treasury bills are short-term debt instruments issued by governments to finance their short-term cash flow requirements. The treasury bill market, similar to the call money market, deals with short-term instruments and is not considered part of the capital market.  * Statement 4 is correct\- The stock market, also known as the equity market or share market, is where shares or stocks of publicly listed companies are bought and sold. The stock market is a part of the capital market as it involves the trading of ownership interests (equity securities) in companies.