Both Statements are Correct:
Liquidity Trap:
The liquidity trap is the situation in which the current interest rates are low and savings rates are high, rendering monetary policy ineffective. In a liquidity trap, consumers choose to avoid bonds and keep their funds in savings because of the prevailing belief that interest rates will soon rise.

Because bonds have an inverse relationship to interest rates, many consumers do not want to hold an asset with a price that is expected to decline.

Both Statements are Incorrect:
A Participatory Note (P-Note) is a derivative instrument issued in foreign jurisdictions by a SEBI registered Foreign Institutionalized Investor (FII), against Indian securities. The underlying security can be equity, debt etc. As per SEBI regulations, P-Notes cannot be issued to Non Resident Indians by FIIs. They are also subjected to KYC (Know Your Client) norms.

A P-Note investor doesn‘t own the underlying Indian security. The security is held by FII. So the P-Note holder doesn‘t enjoy any voting rights in relation to the underlying security.

All Options are Correct:
Under the aegis of Pradhan Mantri Mudra Yojana (PMMY), MUDRA has created products / schemes. The interventions have been named ‘Shishu’, ‘Kishor’ and ‘Tarun’ to signify the stage of growth / development and funding needs of the beneficiary micro unit / entrepreneur and also provide a reference point for the next phase of graduation / growth to look forward to :

Shishu : covering loans upto 50,000/-
Kishor : covering loans above 50,000/- and upto 5 lakh
Tarun : covering loans above 5 lakh and upto 10 lakh
It would be ensured that more focus is given to Shishu Category Units and then Kishor and Tarun Categories.

Within the framework and overall objective of development and growth of micro enterprises sector under Shishu, Kishor and Tarun, the products being offered by MUDRA are so designed, to meet requirements of different sectors / business activities as well as business / entrepreneur segments.

The funding support from MUDRA are of four types :
– Micro Credit Scheme (MCS) for loans upto 1 lakh finance through MFIs.
– Refinance Scheme for Commercial Banks / Regional Rural Banks (RRBs) / Scheduled Co-operative Banks
– Women Enterprise programme
– Securitization of loan portfolio

Statement 3 is Incorrect:
At present the Reserve Bank of India (RBI) declared HDFC Bank Ltd to be a domestic systemically important bank (D-SIB). The other two such banks are State Bank of India (SBI) and ICICI Bank Ltd.

Systemically Important Financial Institutions (SIFIs) are perceived as institutions that are Too Big to Fail (TBTF). Financial Stability Board (FSB) refers Systemically Important Financial Institutions (SIFIs) as institutions whose distress or disorderly failure, because of their size, complexity and systemic interconnectedness, would cause significant disruption to the wider financial system and economic activity.

According to the RBI, some banks become systemically important due to their size, cross-jurisdictional activities, complexity and lack of substitute and interconnection. Banks whose assets exceed 2% of GDP are considered part of this group. The RBI stated that should such a bank fail, there would be significant disruption to the essential services they provide to the banking system and the overall economy.

Statement 1 is Incorrect:
It aims to create a business and investor friendly ecosystem in India by making all business and investment related regulatory services across Central, State and local governments available on a single portal.

e-Biz is one of the integrated services projects under the National E-Governance Plan (NEGP). It aims to create a business and investor friendly ecosystem in India by making all business and investment related regulatory services across Central, State and local governments available on a single portal. This project aims at creating an investor-friendly business environment in India by encouraging ease of doing business.

e-Biz is being implemented by Infosys Technologies Limited (Infosys) under the guidance and aegis of Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce & Industry, Government of India.

Statement 1 is Incorrect:
The capital account in Balance of Payment, records all international purchases and sales of assets such as money, stocks, bonds, etc.

The purchase and sale of capital goods such as ship is a current and not a capital account transaction, as it simply relates to export and import of goods.

Investments by Indian residents in shares of foreign companies, foreign sovereign bonds, etc.will form part of capital account in Balance of Payment of India.

Foreign institutional investment (FII), Foreign Direct Investment (FDI), Transactions affecting assets and liabilities by the govt. and its agencies are also forms of capital account transactions.

There are two components of BoP Current Account Capital Account Current Account – It deals with current, ongoing, short term transactions like trade in goods, services (invisible) etc. It reflects the nation’s net income. For instance, if you a buy a laptop from US, it will be a current account transaction and it will be debit on current account as you have to pay to US. There are 4 components of Current Account: Goods – trade in goods Services (invisible) – trade in services e.g. tourism Income – investment income Current unilateral transfers – donations, gifts, grants, remittances Note that grants might appear as component of capital account but are included in current account as they are unilateral, create no liability. Recipient does not have to give anything back in return.

Capital Account – It deal with capital transactions i.e. those transactions which create assets or liabilities. It reflects the net changes in the ownership of national assets.

Both Statements are Incorrect:
While earlier the Reserve Bank of India used WPI inflation to manage monetary policy expectations, it is now the CPI inflation which is taken into account. Under the RBI Act, the Central Government, in consultation with the RBI, determines the inflation target in terms of the Consumer Price Index (CPI), once in every five years.

Presently the consumer price indices compiled in India are CPI for Industrial workers CPI (IW), CPI for Agricultural Laboureres CPI (AL) and; Rural Laboureres CPI (RL) and CPI (Urban) and CPI (Rural). The CPI(IW) and CPI(AL& RL) compiled are occupation specific and centre specific and are compiled by Labour Bureau under Ministry of Labour and Employment. CPI(Urban) and CPI(Rural) are compiled by Central Statistical Organisation under Ministry of Statistics and Programme Implementation.

Statement 1 is Incorrect:
The disinvestment commission has defined strategic sale: “Strategic disinvestment would imply the sale of substantial portion of the Government shareholding of a central public sector enterprise (CPSE) of upto 50%, or such higher percentage as the competent authority may determine, along with transfer of management control.

The idea for strategic sale comes from the government’s policy for a comprehensive approach for efficient management of Government investment in CPSEs.

The DIPAM (earlier Dept. Of Divestment) works under Finance Ministry and deals with all the matters relating to management of central government investments in equity including disinvestment of equity in central public sector undertakings.

Statements 2 and 4 are Incorrect:
Because they have no or little risk associated with them, they do not offer very high rates of returns. They are regulated by RBI even in the secondary market.

G-Secs are interest bearing dated securities offered by RBI on behalf of Central and State governments. Governments use these funds to meet their expenditure commitments.

Since these are backed by government (i.e. the government stands guarantee), they are considered risk free. Because they have no or little risk associated with them, they do not offer very high rates of returns (Risk and Return are directly co-related).

They are regulated by RBI even in the secondary market.

All Statements are Incorrect:
Importers and exporters are allowed free conversion of rupee in case of current account convertibility.

India has partial Capital Account Convertibility (CAC). Capital Account Convertibility means that rupee can now be freely convertible into any foreign currencies for acquisition of assets like shares, properties and assets abroad. At present, there are limits on investment by foreign financial investors and also caps on FDI ceiling in most sectors.

India’s current account is today fully convertible (operationalized on August 19, 1994).

Capital Account Convertibility refers to the freedom in converting financial assets of one country to the financial assests of another and vice versa in the market determined rates.In other words it refers to the flexibility in converting currencies of one country to another one for acquisition of capital assets abroad and vice versa. On the other hand current account convertibility refers to the flexibility in exchanging currencies of one nation to another for other purposes like trade, interest payment, amortization, family expenses etc.

All Statements are Correct:
Statutory Liquidity Ratio or SLR is the minimum percentage of deposits that a commercial bank has to maintain in the form of liquid cash, gold or other securities. It is basically the reserve requirement that banks are expected to keep before offering credit to the customers. The SLR is fixed by the RBI and is a form of control over the credit growth in India.

The government uses the SLR to regulate inflation and fuel growth. Increasing the SLR will control the inflation in the economy while decreasing the statutory liquidity rate will cause growth in the economy. The SLR was prescribed by the Section 24 (2A) of Banking Regulation Act, 1949.

Why is the SLR fixed:
To check the expansion of bank credit. To ensure the solvency of commercial banks. To compel banks to invest in government securities like bonds. To fuel growth and demand; this is done by decreasing the SLR so that there is more liquidity with the commercial banks. If a bank fails to maintain the prescribed SLR, it is liable to pay a penalty to the Reserve Bank of India.

Statement 2 is Incorrect:
The Lead Bank Scheme, introduced towards the end of 1969, envisages assignment of lead roles to individual banks (both in public sector and private sector).

The Lead Bank Scheme, introduced towards the end of 1969, envisages assignment of lead roles to individual banks (both in public sector and private sector) for the districts allotted to them for intensive development. All the districts in the country have been allotted to various banks.

The lead bank acts as a leader for coordinating the efforts of all credit institutions in the allotted districts to increase the flow of credit to agriculture, small-scale industries and other economic activities included in the priority sector in the rural and semi-urban areas, with the district being the basic unit in terms of geographical area.

Statement 1 is Incorrect:
National Anti-profiteering Authority is headed by a senior officer of the level of Secretary to the Government of India. There will be four Technical Members from the Centre and/or the States.

The National Anti-profiteering Authority (NAA) is the institutional mechanism under GST law to check the unfair profit-making activities by the trading community. The Authority’s core function is to ensure that the benefits of the reduction is GST rates on goods and services made by GST Council and proportional change in the Input tax credit passed on to the ultimate consumers.

Option C is Correct:
The Base Year of the Index of Eight Core Industries has been revised from the year 2004-05 to 2011-12 from April, 2017. The shift is in line with the new base year of Index of Industrial Production (IIP).

Industries covered in the revised index remain the same as in the 2004-05 series. The revised Eight Core Industries have a combined weight of 40.27 per cent in the IIP.
Petroleum Products carry the highest weight around 28%.

Statement 2 is Incorrect:
There are 20 Banking Ombudsman offices in the country at present. Hence statement 2 is incorrect.
The Reserve Bank’s initiatives in the field of consumer protection include the setting up of a Customer Redressal Cell, creation of a Customer Service Department in 2006 which was recently rechristened as Consumer Education and Protection Department. Further, the setting up of the Banking Codes and Standards Board of India (BCSBI), an autonomous body for promoting adherence to self-imposed codes by banks for committed customer service.

In order to strengthen the institutional mechanism for dispute resolution, the Reserve Bank in the year 1995 introduced the Banking Ombudsman (BO) scheme. The BO is an Alternate Dispute Redressal mechanism for resolution of disputes between a bank and its customers.

The scheme covers grievances of the customers against Commercial Banks, Scheduled Primary Cooperative Banks and Regional Rural Banks.
In 2006, the Reserve Bank revised the BO scheme. Under the revised scheme, the BO and the staff in the offices of the BO are drawn from the serving employees of the Reserve Bank. The new scheme is fully funded by the Reserve Bank and virtually covers all banking transactions related grievances except their business decisions like sanctioning of credit etc.

The middle income trap connotes that middle income countries would grow more slowly than what would be expected given their level of income (i.e., slower than richer countries), impeding the transition from middle income to high income status.

The reasons given for the trap/stall are twofold. On the one hand, as countries attained middle income status, they would be squeezed out of manufacturing and other dynamic sectors by poorer, lower-cost competitors. On the other hand, they would lack the institutional, human, and technological capital to carve out niches higher up the value-added chain. Thus, pushed from below and unable to grasp the top, they would find themselves doomed to, well, middle-income status.

As it turned out, there was neither a middle income trap nor stall. Middle income countries as a group continued to grow as fast or faster than the convergence standard demanded.

Demand Liabilities
Demand Liabilities include all liabilities which are payable on demand that include current deposits, demand liabilities portion of savings bank deposits, margins held against letters of credit/guarantees, balances in overdue fixed deposits, cash certificates and cumulative/recurring deposits, outstanding Telegraphic Transfers (TTs), Mail Transfer (MTs), Demand Drafts (DDs), unclaimed deposits, credit balances in the Cash Credit account and deposits held as security for advances which are payable on demand. Money at Call and Short Notice from outside the Banking System should be shown against liability to others.

Time Liabilities
Time Liabilities are those which are payable otherwise than on demand that include fixed deposits, cash certificates, cumulative and recurring deposits, time liabilities portion of savings bank deposits, staff security deposits, margin held against letters of credit, if not payable on demand, deposits held as securities for advances which are not payable on demand and Gold deposits.

What is CRR or Cash Reserve Ratio?
• The Reserve Bank of India or RBI mandates that banks store a proportion of their deposits in the form of cash so that the same can be given to the bank’s customers if the need arises.
• The percentage of cash required to be kept in reserves, vis-a-vis a bank’s total deposits, is called the Cash Reserve Ratio.
• The cash reserve is either stored in the bank’s vault or is sent to the RBI.
• Banks do not get any interest on the money that is with the RBI under the CRR requirements.
Hence, statement 1 is correct.
• It is mandated under RBI Act, 1934.
Hence, statement 2 is incorrect.
• Legally there is no minimum floor or maximum ceiling.
Hence, statement 3 is incorrect.

Features of the Fiscal Responsibility and Budget Management (FRBM) Act
• It was mandated by the act that the following must be placed along with the Budget documents annually in the Parliament:
– Macroeconomic Framework Statement
– Medium Term Fiscal Policy Statement and
– Fiscal Policy Strategy Statement
• It was proposed that the four fiscal indicators i.e, revenue deficit as a percentage of GDP, fiscal deficit as a percentage of GDP, tax revenue as a percentage of GDP, and total outstanding liabilities as a percentage of GDP be projected in the medium-term fiscal policy statement.

• Economics, business, accounting, and related fields often distinguish between quantities that are stocks and those that are flows. These differ in their units of measurement.
• A stock is measured at one specific time, and represents a quantity existing at that point in time which may have accumulated in the past.
• A flow variable is measured over an interval of time. Therefore, a flow would be measured per unit of time. Flow is roughly analogous to rate or speed in this sense.
• For example, U.S. nominal gross domestic product refers to a total number of dollars spent over a time period, such as a year. Therefore, it is a flow variable, and has units of dollars/year. In contrast, the U.S. nominal capital stock is the total value, in dollars, of equipment, buildings, and other real productive assets in the U.S. economy, and has units of dollars.
• A person or country might have stocks of money, financial assets, liabilities, wealth, real means of production, capital, inventories, and human capital. Flow magnitudes include income, spending, saving, debt repayment, fixed investment, inventory investment, and labor utilization.