Wednesday, April 24, 2013

BUDGET TERMS - IBPS EXAMINATIONS - BANKING AWARENESS TIPS




BUDGET TERMS



01. Appropriation bill is a bill that enables withdrawal of money from the consolidated fund to pay off expenses. These are instruments that Parliament clears after the demand for grants has been voted by the Lok Sabha
02. Bank credit includes loans, cash credit and overdrafts and inland bills and foreign bills purchased and discounted
03. Bill is a draft legislative proposal which becomes an act when passed by both houses of Parliament and assented to by the President
04. Budget deficit is a part of the fiscal deficit and it represents the borrowing requirement of the centre
05. Budget estimates – The estimates of government spending on various sectors during the year plus income in the form of tax revenues
06. Capital revenues – Expenses incurred on acquisition of assets by the government
07. Capital receipts – Include loans raised by center from the market, government borrowings from Reserve Bank of India and proceeds from disinvestment
08. Consolidated fund – includes all revenues received by Government, loans raised and receipts from recoveries of loans granted by it.
09. Consumer Price Index – is a price index covering the prices of consumer goods
10. Contingency fund – is used by the government in emergencies to meet unforeseen expenditures, that cannot wait for Parliament authorization
11. Corporate tax – is levied on the profits of firms, as distinct from taxation of the incomes of their owners
12. Current account deficit – excess of expenditure over receip0ts on current account in a country’s balance of payments
13. Current account surplus – excess or receipts over expenditure on current account in a country’s balance  of payments
14. Direct taxes – are levied on the consumers directly. These include income tax, corporate tax and capital gains tax
15. Disposable income – Income minus income tax. This is income available in your hands for expenditure
16. Disinvestment – The dilution or selling of the government stake (ownership) in public sector undertakings
17. Excise duties – are levied on items manufactured within the country and are paid by the manufacturers.
18. Finance bill- Government’s plans for imposing new taxes, modifying of the existing tax structure or continuing the existing tax structure beyond the period approved by the Parliament
19. Fiscal deficit – difference between the revenue receipts and total expenditure
20. Foreign direct investment – is made in India by a company incorporated abroad, through a branch or a subsidiary company set up in India
21. Foreign Institutional Investor – an institution established outside India which proposes to invest in India
22. GDP – Total market value of finished goods and services produced in the country in a given year
23. Gross National Product – GDP plus income of residents from investments made abroad minus income earned by foreigners in domestic market
24. Indirect taxes – are charged on goods produced, imported or exported in the country. These taxes include excise and customs duties
25. Inflation – Inflation rate is the percentage rate of change in the price level
26. National debt – Total outstanding borrowings of the central government exchequer
27. Peak rate – the higher rate of customs duty applicable on an item
28. Per capita income – the national income of a country, or region, divided by its population
29. Progressive tax structure – a tax structure in which the marginal tax rate increases as the level of income increases
30. Revenue expenditure – expenses incurred for functioning of government departments, interest on debt, subsidies etc
31. Revenue receipts – include tax and duties collected by government and interest and dividend on investments made by government
32. Revised estimates – difference between budget estimates and the actual figures pertaining to the economy
33. Sales tax – a tax levied at a percentage of retail sales
34. Vote on account – it is a sort of interim budget where the government presents accounts required to keep the machinery running until the next government takes over
35. Wholesale price index – Prices of goods that are dealt with wholesale (mostly inputs to production, rather than finished commodities)


BULLET POINTS - PART: 033

UNION BUDGET HIGHLIGHTS



·      Compliance of Public sector banks with Basel III regulations to be ensured; Rs. 14000 crore provided in BE 2013-2014 for infusing capital
·      All branches of Public sector banks to have automated teller machines by 31.03.2014
·      Proposal to set up India’s first women’s bank as a public sector bank. Provision of Rs. 1000 crore as initial capital
·      Foreign investment is imperative in view of the high current account deficit, FII, FDI and ECB are three main sources of CAD financing. Foreign investment that is consistent with our economic objectives to be encouraged
·      Interest subvention scheme for short term crop loans to be continued; scheme extended for crop loans borrowed from private sector scheduled commercial banks
·      Benefits or preferences enjoyed by MSME to continue upto three years after they grow out of this category
·      Rs. 6000 crore to Rural Housing Fund in 2013-2014
·      National Housing Bank to set up Urban Housing Fund
·      A multi pronged approach to increase the penetration of insurance, both life and general, in the country.
·      Number of proposals finalized in consultation with Insurance Regulatory Development Authority such as empowering insurance companies to open branches in Tier II cities and below without prior approval of IRDA; KYC of banks to be sufficient to acquire insurance policies, banks to be permitted to act as insurance brokers, banking correspondent allowed to sell micro insurance products.
·      Rashtriya Swasthya Bima Yojana to be extended to other categories such as rikshaw, auto rikshaw and taxi drivers, sanitation workers, rag pickers and mine workers
·      A comprehensive social security package to be evolved for unorganized sector by facilitating convergence among different schemes; Rs. 2000 crore to be provided in the fund in 2013-2014
·      FIIs will be permitted to participate in the exchange traded currency derivate segment to the extent of their Indian rupee exposure in India
·      FIIs will also be permitted to use their investment in corporate bonds and Government securities as collateral to meet their margin requirements
·      Small and medium enterprises to be permitted to list on the SME exchange without being required to make an initial public offer
·      An ambitious IT driven project to modernize the postal network at a cost of Rs. 4909 crore. Post offices to become part of the core banking solution and offer real time banking services.

Reserve Bank of India issues final guidelines for new bank licences and the norms are as furnished below

Eligible promoters:
·      Companies, Non Banking Finance Companies and public sector entities
·      Broking and real estate firms
·      Promoters need to be financially sound with a track record of 10 years
·      Positive feedback from other regulators and investigative agencies crucial
Risk fenced structure:
·      Promoters must set up banks through wholly owned non operative financial holding companies
·      Holding company and bank not permitted to lend or invest in any entity belonging to the promoter group
·      Shares of holding companies cannot be transferred to entities outside the promoter group
Shareholding in the bank:
·      Holding company to hold 40% stake in the bank for five years
·      Holding company to reduce stake in the bank to 20 % in ten years, 15% in 12 years
·      Foreign shareholding capped at 49% for five years
Other conditions:
·      At least 25 percent of new branches must be in unbanked rural centres
·      At least 50 percent of the directors of holding company must be independent directors
·      The bank’s board must have a majority of independent directors
Application process:
·      Applications for banking licences need to be sent by July 1
·      RBI to issue in principle approval after considering the recommendations from a high level advisory committee
·      The in principle approval will be valid for a year

News in brief

·      Syndicate Bank had tied up with Maruti Suzuki for financing cars under Syndvahan scheme
·      IDBI Bank Limited had tied up with EXIM Bank to co finance, co arrange syndicate rupee and foreign currency loans; jointly finance export oriented projects in India; and provide and avail refinance facility in Indian rupees and foreign currency for extending short term export credit and long term Capex loans to eligible export oriented companies, particulars in the SME sector
·      HDFC bank in association with Times Internet had a launched a credit card that will enable customers to enjoy discounts as high as 25% in restaurants and movie halls
·      ICICI bank has tied up with Aircel and VISA to offer mobile banking service for its customers across the country.
·      Mr T S Vijayan took over as the Chairman of the Insurance Regulatory and Development Authority

What do you mean by Federal Discount Rate ?:
·      The interest rate set by the Federal Reserve that is offered to eligible commercial banks or other depository institutions in an attempt to reduce liquidity problems and the pressures of reserve requirements
·      The discount rate allows the federal reserve to control the supply of money and is used to assure stability in the financial markets.
·      A decrease in the discount rate makes it cheaper for commercial banks to borrow money, which results in an increase in the supply of money in the economy
·      Conversely, a raised discount rate will make it more expensive for the banks to borrow and would thereby decrease the money supply
·      Funds borrowed from the fed are processed through the discount window and the rate is reviewed every 14 days
What do you mean by Priority sector lending ?:
·      Some areas or fields in a country depending on its economic condition or government interest are prioritized and are called priority sectors – i.e.  industry, agriculture.
·      Banks are directed by RBI that loans must be given on reduced interest rates with discounts to promote these fields
·      It means lending to priority sector in such a way to ensure maximum credit flow to remotest and farthest person of the country by setting up a strong network and series of financial channels. The main objective of Priority sector lending is providing finance to all those sectors which are deprived of easy access to finance and credit.
·      It also includes facilitation of growth via development of healthy financial system as well as high living standards of poor living below poverty line

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