Financial Markets & Instruments

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 Chairman of public sector banks in India are selected by the Banks Board Bureau (BBB). The Banks Board Bureau is an autonomous body responsible for selecting and appointing the Boards of Directors in Public Sector Banks (PSBs) and Financial Institutions. It was established based on the recommendations of the Nayak Committee Report (2014).

The Merchant Discount Rate (MDR) is a fee levied on merchants by payment processors for accepting debit and credit card transactions. It's typically a percentage of the transaction value. So, when a customer uses a debit card at a store, the store pays a fee to the bank that processes the transaction. Hence, option C is the correct answer.

Statement 1 is incorrect. The govt has been infusing large amounts in seven public sector banks through recapitalisation bonds but this has not been steady as statement 1 says. Statement 2 is correct. To put the public sector banks in order, the merger of associate banks with the parent State Bank of India has been affected. For example, the merger of SBI associate banks will result in the creation of a stronger merger entity. Hence, option C is the correct answer.

Statement 1 is incorrect:
The Reserve Bank of India (RBI) manages and services both Central (Government of India) and State Government securities. RBI acts as a debt manager for both levels of government under agreements with the states. Statement 2 is correct:
Treasury Bills (T-bills) are issued only by the Government of India, not by the State Governments. States instead issue State Development Loans (SDLs) for their borrowing needs. Statement 3 is correct:
Treasury Bills are zero-coupon instruments — they are issued at a discount to the par (face) value and redeemed at par on maturity. The difference represents the interest earned.

Statement 1 is Correct: Small Finance Banks (SFBs) are niche banks specifically designed to cater to the underserved and unbanked sections of the population, including small businesses, marginal farmers, and micro-industries. Statement 2 is Correct: SFBs focus on financial inclusion by providing credit facilities to small businesses and marginal farmers. Statement 3 is Incorrect: In conclusion, While SFBs might indirectly contribute to rural development by providing credit to small businesses in rural areas, their primary objective is not explicitly to encourage young entrepreneurs to set up businesses there (option 3). Hence, option A is the correct answer.

Statement 1 is Correct: The National Payments Corporation of India (NPCI) was established to facilitate retail payments and promote financial inclusion in India. They achieve this by
1. Developing and deploying innovative payment infrastructure like RuPay cards, UPI, etc.
2. Enabling participation of a wider range of players in the payments system, including non-bank entities.
3. Setting standards and guidelines to ensure secure and efficient electronic payments. Statement 2 is Correct: RuPay is a domestic debit and credit card payment network launched by NPCI in India. It provides an alternative to international card networks like Visa and Mastercard. This domestic network can potentially lower transaction costs for merchants and banks compared to international schemes. Therefore, both statement 1 and statement 2 are correct.
Hence, option C is the correct answer.

Statement 1 is Incorrect: National Investment and Infrastructure Fund (NIIF) is India's first sovereign wealth fund that was set up by the Government of India in February 2015. The objective behind creating this fund was to maximise economic impact mainly through infrastructure investment in commercially viable projects, both Greenfield and Brownfield. Statement 2 is Incorrect: In the Union Budget 2015-16, India's Finance Minister, Arun Jaitley announced the creation of the National Investment and Infrastructure Fund. It was proposed to be established as an Alternative Investment Fund to provide long-term capital for infrastructure projects with an inflow of Rs. 20,000 crore from the Government of India. NIIF was approved in August 2015 by the Department of Economic Affairs. The first meeting of its governing council was held in December 2015 further to which it was registered with SEBI as Category II Alternative Investment Fund. Hence, option D is the correct answer.

A scheme was launched by the Reserve Bank of India (RBI) on 13 June 2016, named Scheme for Sustainable Structuring of Stressed Assets (S4A Scheme) for addressing the large stressed assets of the corporate sector with banks. The S4A Scheme aims at the deep financial restructuring of big debted projects by allowing lenders (banks) to acquire equity of the stressed project. In this context, the scheme makes the financial restructuring of large projects at the same time helping the lender's ability to deal with such stressed assets. It is intended to restore the flow of credit to critical sectors including infrastructure. Hence, option B is the correct answer.

Statement 1 is Correct. Mobile telephone companies and supermarket chains owned and controlled by residents can be promoters of Payment Banks. This allows entities with a wide reach to expand financial services to unbanked populations. Statement 2 is Incorrect. Payment Banks cannot issue credit cards. They can only issue debit cards linked to a pre-existing bank account. Statement 3 is Correct. Payment Banks are not allowed to undertake lending activities. Their focus is on facilitating basic banking services like deposits, payments, and money transfers.