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NOTES/ NOTES/RE RE ADI NG M ATE ATE R I AL BOT BO T H I N ENGLISH AND HI N DI SUB : BA B A N K I N G AN A N D F I N A N C E ( B.COM B.COM PAR T-I T-I ) ON UNIT A & B
BIYANI’S CORPS
P r epared ared by : B .K J ain (M B A-F A- F acult ulty) BI YANI YA NI I NST NST I T UTE OF SCI SCI ENCE & MA MANAG NAGEME EME NT (BISMA)
B i yani G r oup Of C olle llegg es ja j ai pur (R ( R ajast jastha han n)
Syllabus
Syllabus
UNIT-A MEANING OF BANKING & FUNCTIONS FUNCTIONS OF BANK By B.K. Jain MBA Faculty (BISMA, BGS)
Q.1
Define De fine banking and explain in brief functions of a bank. bank.
Banks are institutions dealing in money & credit which attracts deposits from public and use these deposits deposits in inve inve stments and providing p roviding loans and advances. As per Secti Sec tio o n 5 (B) of Banking Regulatio Regulatio n Act-1949 Act-1 949 “Banking means accepting for the purpose of lending or investment of deposits of money from the public repayable on demand or otherwise and withdrawable by cheque, draft order or otherwise” otherwise ”. From this definitio definition n, key ke y function functio ns of o f a bank ba nk emerges as follows: 1. 2. 3.
Accepting deposits (of differe differe nt types such as SB, C urrent rre nt,, FD, RD, etc.) Loans and advances & invest investment mentss (Differe (Differe nt types o f loans e.g e. g. Edu. Loa Loan ns, housing loan, vehicle loan, trade loans, etc.) Repayment of deposits Only on demand
Second Se conda a ry or Supplem Supple mentary Function.
1.
2.
3. 4.
Q.2
Agency Functions - Bank works as agent of customer and as agent, it pays customer‟s cheques, collect cheques, collects income, pays dues/expenses, purchases shares and securities, securities, sa le of o f shares & sec urities urities etc. General Utililty or Service Functions - Various services provided such as custodian
services, issuing D.D, travelers cheques, consultancy/advisory services, personal credit etc. le tter tter o f credit, discount ing o f b ills, ills, guarantee etc. Foreign Trade - Issuing le Creation of Credit - Through issuing letter of credit, credit card, guarantee, overdraft limit, limit, endorseme nt of negotiable instruments.
Explain in brief the term cre credit. dit.
CREDIT- Credit means Trust. Borrower borrows money to make payment with interest after some time. Giving credit depends on 5 C‟s i.e. i.e. Character, Capital, Capacity, Collateral, and Conditio Conditio ns. ns. Besides trust, other main e leme nts of credit are period o f credit and s ize ize of o f credit.
Based Based o n period – period – Cred Cred it ma ma y be for for short term, term, medium term, lo ng ter m, and d e ma nd c redit. red it. Based Based o n security – security – Credit Credit may be secured, unsecured. Based Based on o n prod productivity uctivity – Credit may be productive or unproductive. Basis of debtor – debtor – Credit may be agricultural credit, consumer credit, export credit, industrial credit. Credit creation is thus one of the important function of a bank. Credit is basis of modern age and our e conomic system is based on credit.
Q.3
Write a brief note on RRB’s
created to supplement the efforts of Regional Rural Bank (RRB’S) – RRB‟s were specially created cooperative credit institutio institutio ns in rural rural areas are as with the objectives of of -
Developing rural economy of country through financing to agriculture, trade commerce, commerce, a nd village village ind ustries ustries etc. Providing credit and other facilities to small and marginal farmers, agricultural labour, artisa artisa ns and small sma ll entrepre entrepreneu neurs rs in rural rura l areas.
For this purpose, RRB Act was passed in 1974. These These RRB‟s were created through joint efforts of Central Govt. State Govt. and sponsored bank and all these three contributed share capital in the proportion o f 50%, 50 %, 15% a nd 35% respectively respective ly.. NABARD as a development b ank for agriculture a nd rural de ve lopme op me nt p lays a key ro le in th t he establishment, formulating policies, monitoring their performance and providing overall help in their efficient performance.
Q.4
What do you mean by develo development pment banks?
DEVELOPMENT BANKS : Are specialized spec ialized banking ba nking institut io ns created cre ated fo fo r provi pro vid d ing finance to improve the rate of Growth of our country. They have been assigned the responsibility of promoting their their respective sectors by way wa y of p roviding credit and other facilities. facilities. Core sector of economy
Development bank responsible
Agric Agric ulture & Rural Rural Devel Deve lopment op ment Housing
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National Bank fo r Agri. Rural Rural Development (1982) Nati Nat io nal Housing Bank (19988)
Export & Import Ind Ind ustriesustries-
-
Export & Import Bank (EXIM Bank) Many all India developme de velopmen nt financial institutions institutions like Indu Industrial strial F inance Corporation o f India (IFCI) Indu Industrial strial Development Bank o f India (IDBI)
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-
Indu Industrial strial Credit and Investment Corporation of India (ICICI) Industrial Industria l Reconstruct Reco nstructiio n Bank o f Indi Ind ia (IRBI) Industrial Industria l Investment In vestment Bank o f India Ind ia
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National S mall Industries Industries Corporation of India (NISICI) Risk Risk Cap ital ital and Technology Corporati Corporat io n Ltd. Ltd. (RCTC Ltd.) Further, many specialized financing institutions, state level institutions and investment institutions like LIC, GIC, UTI are there for financing.
Q.5
Write in brief functions of NABARD.
NABARD - It was specially created to look after agriculture and rural development in the country. It came in to being in 1982 by taking over Agr. Credit Dept., Rural Planning & Credit Dept. Dept. of RBI and A gr. Refian Re fianaa nce & Dev.Corpo Dev.Corporation ration (ARDC). Its initial share capital was Rs.100 Crores contributed by Central Govt. & RBI in the ratio of 50: 50. Subsequently, the share capital was raised many times. It is managed by a board of director‟s consisting of 13 members, one Managing Director and one Chairman. NABARD raised funds
through: - Share Share cap ital ital - Deposits - Loans from RBI & Govt. of India - Special funds created - Bonds and debentures Key Function of NABARD are: -
Credit related related functions. functions. Short, Med Med ium and long term credit credit to all a ll three key ke y credit credit disbursing agencies i.e Co-operatives Regional Regional Rural Rura l Banks Banks Commercia Commercia l Banks Banks It also helps micro finance institutions and self help groups (SHG‟s).
-
Promotional functio function ns. Arrange Arrange training to the staff staff of above three agencies, provides assistance for creating technical cells, research and development activities and other institutional developmental activities. Supervisory and regulatory functions- It also regulate, monitor above 3 agencies and also conducts statuto statuto ry insp insp ection of o f co-operative co-operative banks and RRB‟s.
-
Q.6
What do you und unders erstand tand by Investment Banks?
Investment banks are institutions which mobilize savings from public and deploy these savings to productive uses/investment purpose and thereby help in capital formation. In strict sence,
they are not banks as they do not perform core banking functions. Besides collecting savings and capital formation, they help trade and industry through loans, increase employment opportunities, a nd reduce r isk of investor. Key institutions operating as investment ba nks are:-
(1)
- Life Insurance Corporation of India (LIC) - General Insurance Corporation of India (GIC) - Unit Trust of India (UTI) L.I.C. – LIC came to existence in 1956 after nationalism o f insurance companies. It is the largest institution in the field of long ter m finance in our country. It works as investment bank by providing short term and long term loans to industrial institutions, corporate bodies, State Govt. etc. It also invest money in shares/ securities of public and co-operative sector. In rece nt times, it has also started providing loans for housing purpose to State Hous ing Finance Corporations/ Societies to red uce housing gap. During the year 2009-10, its total collection from LIC premium was around Rs. 2.5 lakh crores. Out of such large collection, LIC had large amount of surplus available for providing loans and ad vances for ke y sectors of eco nomy. Its total advances in March 67 were Rs. 799 crores, in March 2001 Rs. 1.4 lakh crores.
(2)
G.I.C. - It consists of 4 companies i.e., New India Assurance Comp, Oriental Insurance Com., United India Insurance Comp., and National Insurance Comp. GIC was set up in 1972 to look after non-life insurance business.
Like LIC, it also collects savings from public in the form of insurance premium and used to invest its surplus in different types of industries like textile, fertilizer, chemicals etc. These companies are also investing their funds in securities of ce ntral and state govts. and public sector bodies. (3)
U.T.I. – UTI is a public sector investment institution established in 1964 under UTI Act 1963. It collects savings from middle and low income groups by selling its units and
provides good return o n these units on maturity. The amount so collected is invested for different sectors of industries for their growth and corporate sector. (4)
Mutual Funds - Since last few years, mutual funds have also become popular avenue for investments. They are combination of shares and debent ures a nd other securities in which investors invest their savings to get attractive return.
Many public sector banks have started mutual funds and the savings so collected are used for capital formation by investment/advances to ind ustrial/corporate sector.
Q.7
Explain in brief key functions of RBI.
RBI was set up as a private share holder‟s bank under RBI Act 1934, it started functioning from 1.4.1935 and was nationalized from 1.1.1949 under RB Transfer & Public Ownership Act 1948. It is fully owned by GOI and managed by a Central Board of Directors, local boards and its offices. Its Head Offices is in Mumbai and local board officers in New Delhi, Chennai, Mumbai & Calcutta. Its branch offices are „their‟ in Ahmadabad, Bangalore, Gauhati, Kanpur, Jaipur, Nagpur & Patna. It has many departments to manage its operations. Key functions of RBI
1.
Issue of notes – All notes except one r upee note are issued by RBI as a monopoly right.
2. 3. 4. 5. 6.
Banker, agent and advisor to the Govt. Bankers ba nk and lender o f the last resort. Clearing house Foreign exchange control Regulation of banking system- Through RBI Act as well as Banking Regulation Act 1949 - License (Under Section 22 of BR Act) - Manage ment Under Section 10 of RBI Act - Branch expansion Under Section 23 of BR Act - Inspection Under Section 25 of RBI and Section 35 of BR Act. - Calling periodic under RBI & BR Act Returns under RBI & BR Act Credit Control- Through various measures. Other functions- Such as agricultural and industrial credit, collection of statistics of
7. 8.
economy, banking education & training, money transfer, transactions with international institutions, purchase and sale of precious metals and acting as a development financing institution for promoting various sectors of economy.
Q.8
Write in brief about electronic banking.
1.
Electronic Banking – Internet banking or e-banking means any user with a personal computer and a browser can get connected to his banks website to perform any of the virtual banking functions. All the services that the bank has permitted on the internet are displayed in menu. It includes telephone banking, credit card, ATM‟s and directs depos it.
2.
Electronic Commerce – Commonly known as e-commerce consists of buying and selling of products and services over electronic system such as internet or other computer net work. A wide variety of commerce is co nducted in this way such as spurring and drawing on innovations in electronic fund transfer, supplies chain management, internet
3.
4.
marketing. On line transaction processing, electronic data inter change, inventory, management systems a nd automatic data collection systems. Real Time Gross Settlement System (RTGS) RTGS is a important mile stone in Indian banking system through which cheques and transfer of money from one bank to other is credited in customers account on the same day. The settlement of accounts takes place through RBI. In RTGS, the transmission, processing and settlement of instructions is do ne on a continuous basis. Tele Banking – Tele banking i.e. the round- the clock, bank on phone service allows the customer to use various facilities through phone such information on balance, cheques book requisition, money transfer, branch to branch q uaries on new schemes etc. Besides above, new technology in banking has helped in expending various services to customers such as Electronic fund transfer, ATM facilities. Electronic clearing system, electronic data interchange, echeques, demat accounts etc.
Q.9
Explain in brief recent trends in Indian banking.
1.
Expansion of Public Sector Banking : Nationalization of RBI in 1948, SBI in 1955, 14 major banks in 1969 and 6 more banks in 1980 have expanded their role in banking sector. These ba nks have around 93% share in total ba nking business in India. Unprecedented branch expansion – Total number of bank branches of commercial banks went up to 80514 on 30th June 2009 as against 4115 branches in 1951, number of rural branches also substantially increased and now around 40% branches are in rural areas. Unprecedented increase in deposits: Total deposits of commercial banks in June 1969
2.
3.
4.
5.
6.
were Rs.3897 crores which went up to Rs. 42, 64, 540 crores in June 2010. Composition of deposits has changed. Time deposits constitute 67% and demand deposits 13% of total deposits due to increase in awareness a mongst public about earning interest on deposits. Amalga mation of Banks – To enlarge scopes of activities, gaining financial strength, area of operation, profitability and service net, large scale amalgamation are resorted in banking sector. New Bank of India was merged in PNB in 1993, United Western Bank in United Bank of India in 2006, and Bank of Rajasthan in ICICI Bank, State Bank of Indore in SBI. Govt. has also taken a policy decision to merge a ll subsidiary banks of SBI in to State Bank of India within next 1-2 years. Expansion in Credit Facilities: Bank loans which were only Rs. 627 crores in 1951 went up to Rs. 30, 20,808 crore in 2010. This amount of credit is constantly increasing along with increase in deposits. Lending to priority sector‟s: Like agriculture, small industry etc have gone up to Rs. 7,20,000 crores in 2009 as against a very small amount of Rs. 441 crores in 1969. Govt. has fixed a perce nta ge of total loans which should go to priority sector.
7.
8. 9. 10.
Social banking - Banks have started in a big way loans for social development by giving loans to unemployed persons, small business man, education loan consumption loans etc. and loans under employment schemes. Investment‟ advisory services: Banks have started advisory/consultancy services to investors for getting better return on their investments. Agricultural and Rural Debt Relief: Govt started exempting farmers and rural debtors from paying their loa ns to banks. Innovat ive c ustomer services: Such as-
Intercity cheque books Payment of cheques at cash counter Loans against NSC ATM facilities Credit cards Mobile banking in rural/remote areas Various I.T. related services Such as e-banking, e-commerce, Online transfer of money, banking services on mobile phone, on line banking, RTGS systems, electronic fund tra nsfer etc.
cS d og la a LFkk gS tks eq nz k ,oa lk[k dk ys uns u djrh a gS a d cS vke turk ls vekurks a dk la dyu dj vekurks a dk mi;ks x fofu;ks x ,oa _.k rFkk vfxz e nku iz djus es a djrk agS A CkS fda a x fu;eu vf/kfu;e 1949 dh /kkjk 5 ¼c½ ds vuq lkj ^^cS fda a x ls rkRi;Z vke turk ls fofu;ks x ,oa _.k rFkk vfxz z e us ns rq gs vekurs ,d= djuk] eka xus ij mUgs a ykS Vkuk] rFkk vekurks a dks d] pS k¶V] Mª vkns’k ;k vU; fdlh lk/ku ls fudkyus dh lq fo/kk nku iz djuk** A mDr ifjHkk"kk ls a dks cS a ds fuEu eq iz [k dk;Z Lor% lkeus vkrs agS% 1- vekurs Lohdkj djuk ¼cpr] pkyw ] LFkkbZ vekurs vkfn½ 2- fofu;ks tu ,oa _.k vfxz e nku iz djuk 3- ekW xus a ij vekurks a dks ykS Vkuk Z % 1- ,ts UV ds rkS j dk;Z djuk & a d cS vekur tek djus okys ds ,ts UV ds rkS j ij mlds }kjk tek djk, a dks pS dk Hkq xrku kIr iz djuk] tkjh fd, a dks pS a dk Hkq xrku djuk] xz kgd ds [kkrs ls [kpks a Z dk Hkq xrku djuk] vk; dk la xz g djuk] fgLlk a th iw ,oa iz frHkw fr;ks a dk dz ;&fodz ; djuk vkfn dk;Z djrk gSaA 2- lkekU; mi;ks fxrk ,oa ls ok lEcU/kh dk;Z & tS ls Mh-Mh- tkjh djuk] cgq ew Y; oLrqv aks dks j[kus rq gs ykW dj lq fo/kk uk] ns O;fDrxr lk[k nku iz djuk] ijke’kZ ls ok,a uk ns vkfnA 3- fons’kh O;kikj gs rq lk[k i= tkjh djuk] fcyks a dk cV~ Vs ij Hkq xrku djuk] xkjUVh uk ns vkfnA 4- lk[k dk fuekZ .k & lk[k&i=] ds z fMV dkMZ] xkjUVh] vks oj kW Mª ¶V lq fo/kk] fofue; i=ks a dk i` "Bka du dj a d cS lk[k dk fuekZ .k djrs agSA (credit)
lk[k vk/kq fud vFkZ O;oLFkk dk vk/kkj ,a o O;kikj dk thou jDr agSA lk[k dk vFkZ agS fo’oklA ls iS us ns okyk O;fDÙk] ys us okys dks ml ij fo’okl dj lk[k lk[k iz nku djrk agS rFkk lk ,s fo’okl djrk agS fd ys us okyk fu;r le; ds ckn C;kt lfgr
ew yjkf’k ykS Vk xkA ns lk[k 5 lh ij fuHkZ j djrh agSA ;s pfj= (Character) {kerk (Capacity), a th iw (Capital), 'krs aZ (Conditions) ,a o lk[k rq gs lEifÙk;kW a (Collatral) lk[k ds vU; rRo gS lk[k dk vkdkj ,a o lk[k dh vof/kA le; vuq lkj & lk[k vYidkyhu] e/;dkyhu] nh?kZ dkyhu gks ldrh agSA lhD;ks fjVh ds vuq lkj & lhD;ks MZ o ,a vuflD;ks MZ lhD;ks fjVh ds vuq lkj & mRiknd o ,a j xS mRiknd lk[k _.kh ds vuq lkj & miHkks Drk lk[k] d` f"k lk[k] O;olk;d lk[k] ljdkjh lk[k vkfn lk[k dk fuekZ .k djuk cS dks a a dk ,d eq iz [k dk;Z agS rFkk lk[k orZ eku le; es a O;olkf;d o ,a fud nS thou dk va x cu xbZ agSA {ks =h; xz keh.k a d cS (Regional Rural Banks) & bu a dks cS a dk xBu xz keh.k {ks =ks a es a lgdkjh lk[k la LFkkvks a ds ;klks iz a dks vkS j vf/kd cy nku iz dj % (i) d` f"k] O;kikj o ,a O;olkf;d] xz keh.k m|ks xks a dks lk[k nku iz dj xz keh.k vFkZ O;oLFkk dk fodkl djuk (ii) y?kq o ,a lhekUr d` "kdks a] d` f"k Jfedks a] Nks Vs m|fe;ks a dks lk[k nku iz dj xz keh.k fodkl es a enn djuk] mDr m)s’;ks a dh frZ iw rq gs i`Fkd ls {ks =h; xz keh.k a d cS vf/kfu;e 1974 ikl fd;k x;kA bu a dks cS dk xBu ds Unz ljdkj] jkT; ljdkj fu;ks Drk a d cS ds la ;q Dr ;klks iz a ls fd;k x;k rFkk bu rhuks a }kjk va’k a th iw 50 fr’kr] iz 15 fr’kr iz o ,a 35 fr’kr iz ds vuq lkj es a ;ks xnku dj ns bu a dks cS a dks kjEHk iz fd;kA
(Development Banks ) – fodkl a d fo’ks cS "k rkS j ij cukbZ xbZ a fda cS x la LFkk,a
gS] tks vkfFkZ d fodkl rq gs lk[k miyC/k djkus dk dk;Z djrh agSA budks ,d fo’ks "k {ks = rq gs lk[k o ,a ml {ks = ds lokZ fx.k fodkl djus dh ftEes a nkjh lkS ih xbZ agSA a vFkZ O;oLFkk dk {ks = lEcfU/kr fodkl a d cS 1- d` f"k ,oa xz keh.k fodkl jk"Vª h; d` f"k ,oa xz keh.k fodkl a d cS (NABARD) 1982 2- vkokl jk"Vª h; vkokl a d cS 3- vk;kr@fu;kZ r vk;kr@fu;kZ r a d cS 4- m|ks x vus d jk"Vª h; foÙkh; la LFkk,a tS ls & Hkkjrh; vkS |ks fxd foÙk fuxe (IFCI) & Hkkjrh; lk[k ,oa fofu;ks x fuxe (ICICI) & Hkkjrh; vkS |ks fxd xZ iq xBu a d cS (IDBI)
& &
Hkkjrh; vkS |ks fxd fofu;ks x a d cS jk"Vª h; y?kq m|ks x fuxe
mDr ds vfrfjDr dbZ vU; jk"Vª Lrjh; la LFkk,a dk;Z jr~ gS aA jkT; Lrj ij Hkh blh iz dkj dh foÙkh; la LFkk,a dk;Z jr~ a gS A
(NABARD)
;g a d cS fo’ks "k rkS j ij d` f"k ,oa xz keh.k fodkl dh jk"Vª Lrj ij ftEes nkjh laHkkyus gs rq cuk;k x;k FkkA bldk xBu 1982 es a fjtoZ a d cS vkW Q bf.M;k ds d` f"k lk[k foHkkx] xz keh.k fu;ks tu ,oa lk[k foHkkx rFkk d` f"k uZ iq foÙk ,oa fodkl fuxe dks feykdj fd;k x;kA bl a d cS dh kjfEHkd iz va’k a th iw 100 djks M+ :Ik, Fkh] ftls 5 % 50 ds vuq ikr es a fjtoZ a d cS ,oa ds Unz ljdkj }kjk nku iz fd;k x;kA blds ckn bl a d cS dh va’k a th iw dks dbZ ckj c<+ k;k x;kA bl a d cS dk la pkyu 13 lnL;h; la pkyd e.My] v/;{k ,oa cU/k iz la pkyd }kjk fd;k tkrk agSA a d cS fuEu foÙkh; lk/kuks a ls viuh foÙkh; vko’;drkvks a dh frZ iw djrk agS% 1- va’k a th iw 2- vekurs 3- Hkkjrh; fjtoZ a d cS o ,a ds Unz ljdkj ls _.k 4- fo’k"k dks "kks a 5- ckW .M ,oa _.k i= tkjh dj Z % 1-
lk[k lEcU/kh dk;Z % d` f"k lk[k ds {ks = es a dk;Z jr~ rhu eq iz [k la LFkkvks a dks vYidkyhu] e/;dkyhu ,oa nh?kZ dkyhu lk[k miyC/k djkukA & lgdkjh la LFkkvks a & O;kolkf;d a dks cS a & {ks =h; xz keh.k a dks cS a mDr rhu la LFkkvks a ds vfjfjDr ;g a d cS vU; lw {e foÙkh; la LFkkvks a (Micro Finance Institutions) ,oa Loa ; ls oh lew gks a s (Self Help Groups) dks Hkh lgk;rk nku iz djrk agS iz ks Rlkgu lEcU/kh dk;Z
;g a d cS xz keh.k lk[k ds {ks = es a dk;Z jr~ mDr rhuks a la LFkkvks a ds vf/kdkfj;ks a] deZ pkfj;ks a gs rq f’k{k.k iz nku iz djuk] rduhdh ls ykSa ds xBu] vuq la/kku o ,a fodkl rq gs lgk;rk] la LFkkxr fodkl ifj;ks ;tuk vkfn rq gs lgk;rk nku iz djukA fuxjkuh ,oa fu;U=.k lEcU/kh dk;Z% ;g a d cS mDr rhuks a la LFkkvks a }kjk forfjr d` f"k ,oa xz keh.k lk[k ij fuxjkuh o ,a fu;U=.k] lgdkjh ,oa {ks =h; xz keh.k a dks cS dk oS/kkfud fujh{k.k djuk vkfnA
(Investment Banks/Institutions)
fofu;ks x a d] cS fofu;ks x dEiuh] vFkok fofu;ks x LV Vª ls rkRi;Z mu la LFkkvks a ls gS tks vke turk ls mudh cprks a dk la xz g dj vius va’k ;k ;w fuV cs prh gS rFkk la xz fgr jkf’k dk ,d cM+ k dks "k cukdj jkf’k dks fofu;ks tu djrh agS rFkk fuos’kdÙkkZv aks dks ykHk iga q pkrh agSA bu la LFkkvks a dk a th iw fuekZ .k es a egRoiw .kZ ;ks xnku gS ftlls ns’k ds fofHkUu {ks =ks a dh lk[k vko’;drk,a jh iw gks rFkk lexz fodkl gksA lgh vFkkZ a s es a a d cS ugha gS D;ks fd ;s a a d cS ds ew y dk;ks a Z dk fuLiknu ugh djrhA a th iw fuekZ .k o ,a lk[k ds lkFk&lkFk ;s la LFkk,a O;olk; o ,a m|ks xks a ds fodkl] jks txkj ds volj miyC/k djkus o ,a fuos’kdÙkkZv aks dh tks f[ke ?kVkus dk egRoiw .kZ dk;Z djrh agSA bl {ks = es a dk;Z jr~ eq iz [k la LFkk,a fuEu agS & Hkkjrh; thou chek fuxe (LIC) & Hkkjrh; lkekU; chek fuxe (GIC) & Hkkjrh; ;q fuV LV Vª (UTI) & lk>k dks "k (Mutual Funds) (LIC)
Hkkjrh; thou chek fuxe dk tUe 1956 es a bl {ks = es a dk;Z jr~ 245 dEifu;ks a ds jk"Vª h;dj.k ds QyLo:Ik gqvkA nh?kdkyhu lk[k nku iz djus ds {ks = es a ;g ,d lcls cM+ h foÙkh; la LFkk agSA ;g Hkkjrh; vFkZ O;oLFkk ds fofHkUu {ks =ks a es a Hkkjh iw a th fuos’k djrh S agSA ;g u ds oy vkS |ks fxd o ,a O;kikfjd dEifu;ks a cfYd ds Unz ljdkj] jkT; ljdkj] ljdkj o ,a xS j ljdkjh la LFkkvks a dks lk[k nku iz dj ns’k ds fodkl es a egRoiw .kZ ;ks xnku rh ns agSA vkokl lq fo/kkvks a ds l` tu es a Hkh bldk eq iz [k ;ks xnku agSA o"kZ 2009&10 es a bldh chek fdLrks a ls kIr iz jkf’k 2-5 yk[k djks M+ :Ik,a FkhA bruh fo’kky jkf’k ds la xz g ds QyLo:Ik rFkk viuk lkekU; O;; ds Ik’pkr~ fofu;ks tu rq gs miyC/k jkf’k 1 yk[k djks M+ ls Hkh vf/kd Fkh ftlds jk"Vª ds lHkh {ks =ks a es a fofu;ks tu ls vFkZ O;OkLFkk es a bldk egRoiw .kZ LFkku LFkkfir gks x;kA
(GIC)
1972 esa xS j thou chek O;olk; rq gs fd;k x;kA bl fuxe es a pkj dEifu;ka dk;Z jr~ gS ftuds uke gS& & us’kuy bU’;ks js Ul dEiuh & U;w bf.M;k bU’;ks js Ul dEiuh & vks jh,s UVy bU’;ks js Ul dEiuh & ;w ukbVs M bf.M;k bU’;ks js Ul dEiuh thou chek fuxe dh rjg lkekU; chek fuxe Hkh fofHkUu iz dkj ds xS j thou chek dj heh;e iz ,d= djrk agS ,a o viuh cpr jkf’k dk fofu;ks tu vFkZ O;oLFkk ds fofHkUu {ks =ks a tS ls diM+ k] lhes UV] jklk;fud [kkn] gYds o ,a Hkkjh m|ks x vkfn fofHkUu la LFkvks a es a fofu;ks x djrk agSA buds vfrfjDr ;g fuxe ds Unz o ,a jkT; ljdkj] lkoZ tfud {ks = dh dEifu;ks a ds va’ akks es a Hkh fuos’k djrk gS rFkk jk"Vª ds fodkl es a egRoiw .kZ ;ks xnku rk ns agSA (UTI)
bldh LFkkiuk 1963 es a ikfjr Hkkjrh; ;q fuV LV Vª vf/kfu;e 1963 ds vUrxZ r dh xbZ rFkk 1 Qjojh 1964 ls blus dk;Z kjEHk iz fd;kA ;g LV Vª y?kq ,a o e/;e vk; okyh turk ls mudh cprks a dk la xz g dj mUgs a fuV ;q prh cs gS rFkk bu ;q fuVks a ij vPNk iz frQy ¼fjVuZ½ miyC/k djkrk agSA ,d= jkf’k dk fofu;ks x jk"Vª ds fofHkUu {ks =ks a es a dj vFkZ O;oLFkk ds fodkl es a lg;ks x nku iz djrk agSA (Mutual Funds)
orZ eku es a lk>k dks "kks a ds fr iz fuos’ dks k a dk vf/kd :>ku gqvk agSA lk>k dks "kks a dk iz cU/k is’ oj ks dEifu;ks a }kjk fd;k tkrk agSA lk>k dks "k dEifu;ka fuos’kdks a ls kIr iz jkf’k dks fofHkUu frHkw iz fr;ks a es a fuos’k djrh gS] ftlls fuos’k tks f[ke de gks tkrh agS rFkk fuos’kdks a dks vPNk fjVuZ nku djrh iz agSA fofHkUu jk"Vª h;d`r cS a dks }kjk Hkh lk>k dks "k LFkkfir fd, gS] ftuds ek/;e ls cprks a dk la xz g o ,a mudk fuos’k dj vFkZ O;oLFkk es a egRoiw .kZ ;ks xnku nku iz fd;k tkrk agSA
Hkkjrh; fjtoZ a d cS dh LFkkiuk 1934 es a ikl fd;s x, vf/kfu;e ds vUrxZ r dh xbZ rFkk bl a d cS us futh va’k/kkjdks a ds a d cS ds :i es a 1-4-1935 ls dk;Z kjEHk iz fd;kA bl a d cS dk 1-1-1949 dks jk"Vª h;dj.k fd;k x;kA bl a dks cS dk .kZ iw LokfeRo Hkkjr ljdkj ds ikl agS rFkk bldk cU/ku iz ds Unz h; la pkyd e.My] LFkkuh; cks MZ dk;kZ y; fnYyh] ps UubZ] eq EcbZ o ,a dks ydÙkk es a gSA bldh 'kk[kk,a vgenkckn] a xykS cS j] xkS gkVh] dkuiq j] t;iq j] ukxiq j o ,a iVuk es a agSA bl a d cS ds vus d foHkkx gS tks blds fofHkUu dk;ks a Z dk la pkyu djrs agSA
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Z % uks Vks a dk fuxZ eu % ,d :i, ds uks V dks Nks M+ dj lHkh uks Vks a dk fuxZ eu djukA bl uks V fuxZ eu rq gs U;ure dks "k frHkw iz fr ds :i es a j[kuk vfuok;Z agSA ljdkj ds a d] cS ,ts UV o ,a lykgdkj ds :i es a dk;Z djuk A cS dks a a ds a d cS o ,a vfUre _.knkÙkk ds :i es a dk;Z djuk lek’kks/ku dk;Z (Clearing House Function) fons’kh fofue; fu;U=.k cS fda a x .kkyh iz dk fu;eu@fu;U=.k&ykbls Ul tkjh dj] cU/ku iz ij va dq’k] 'kk[kkvks a ds foLrkj ij fu;U=.k] a dks cS a dk oS/kkfud fujhs{k.k] dks cSa ls le;≤ ij lw puk,a ea xokdj fu;U=.k j[kuk] vkfn lk[k fu;U=.k (Credit Control) ns’k ds ds Unz h; a d cS ds ukrs lk[k ij fu;U=.k j[kuk ,d egRoiw .kZ dk;Z agSA ;g fu;U=.k a d cS nj] udn dks "k vuq ikr (CRR) oS/kkfud rjyrk vuq ikr (SLR)] lk[k dh jk’kfua x] _.k tek vuq ikr vkfn es a ifjorZ u dj djrk agSA vU; dk;Z % tS ls vkS |ks fxd foÙkh; la LFkkvks a dks lgk;rk] lka f[;dh; lw pukvks a dk la xz g ,a o fo’ys "k.k] a fda cS x f’k{kk o ,a f’k{k.k] iz eq nz k dk LFkkukUrj.k] vUrjkZ "Vª h; la LFkkvks a ls ys uns u] cgq ew Y; /kkrqv aks dk dz ; o ,a fodz ; ,a o vFkZ O;oLFkk ds fofHkUOu {ks =ks a ds fodkl dk dk;ZA
% O;kikj o ,a O;olk; djuk] va’ akks dk dz ; fodz ;] vpy lEifÙk dk dz ; fodz ; o ,a vpy lEifÙk ij _.k] vko’;drk ls vf/kd vpy lEifÙk dk dz ; vkfnA
(E-Banking) bls bUVjus V a fda cS x Hkh dgk tkrk agSA bUVjus V a fda cS x us
cS fda a x ds {ks = es a ubZ dz kfUr yk nh agSA bls vkW u ykbZ u a fda cS x ;k us V cS a fda x Hkh dgk tkrk agSA dks bZ Hkh xz kgd vius gks e ihlh ds tfj, a d cS dh clkbZ os V fDyd dj ehuw vuq lkj n’kkZ ,a x, lHkh dk;Z tS ls [kkrs a dk 'ks "k tkuuk] eq nz k dk gLrkukUrj.k] yhQks Vs u cS fda a x] lh/ks tek jkf’k tek djuk] jUr rq Hkq xrku vkfn dh lq fo/kk,a vkfn dk mi;ks x dj ldrk agSA (E-Commerce) fo|q r iz .kkyh ds ek/;e ls mRiknks a o ,a ls okvks a dk dz ; ,a o fodz ; bUVjus V rFkk dEI;w Vjks a ds ek/;e ls fd;k tkuk A blds ek/;e ls vktdy vus d dk;Z lEikfnr fd, tkrs agS tS ls lw pukvks a dk vknku&iz nku] lkexz h fu;U=.k] vkiw frZ cU/ku] iz bUVjus V ds ek/;e ls fcdz h] lw pukvks a dk la xz g vkfnA (Real Time Gross Settlement System) & Hkkjrh; a fda cS x
O;oLFkk es a ;g .kkyh iz ,d egRoiw .kZ miyfC/k agS ftlds ek/;e ls cM+ h dherks a ds pS a dks a
dk la xz g o ,a ,d [kkrs a ls ljs nw [kkrs a esa ;k ,d 'kgj ls ljs nw 'kgj es a jkf’k dk gLrkUrj.k ml h fnu yxHkx 2 ?k.Vs ds le; es a gh xz kgd ds [kkrs a es a jkf’k tek gks tkrh agSA a dks cS a es a vkilh lek;ks tu fjtoZ a d cS ds ek/;e ls fd;k tkrk agSA ls vFkZ agS pks chlks a ?k.Vs Qks u ds ek/;e ls a fda cS x lq fo/kkvks a dk mi;ks x djuk tS ls [kkrs a dk 'ks "k Kkr djuk] pS d d cq eka xuk] ls iS dk gLrkUrj.k] 'kk[kk ls 'kk[kk la okn vkfnA (Tele-Banking)
mDr ds vfrfjDr vk/kq fud rduhdks a ls lq Llftr a dks cS a] ls okvks a ls xz kgd dks cgq r lq fo/kk,a kIr iz gks rh gS tS ls & i. ,-Vh-,e- lq fo/kk ii. ds fMV dkMZ lq z fo/kk iii. bys DVª ks fud ek/;e ls ls iS dk gLrkUrj.k iv. bys DVª ks fud lek’kks/ku v. bys DVª ks fud lw puk dk ys uns u vi. b&pS d lq fo/kk vii. Mh eS V [kkrs
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% Hkkjrh; fjtoZ a d cS dk jk"Vª h;dj.k 1948 esa] LVs V cS d vkW a Q bf.M;k dk 1955 es a] 14 cM+ s a dks cS a dk 1969 es a] 6 vkS j a dks cS dk 1980 es a dj bu a dks cS dk a fda cS x {ks = es a ;ks xnku th rs ls c<+ k agS rFkk dq y cS a fda x O;olk; dk yxHkx 93 fr’kr iz bu a dks cS dk fgLl k agSA % O;kolkf;d a dks cS a dh 'kk[kkvks a es a Hkh th rs ls f) o` bZ gq agS rFkk budh la [;k 80514 30 tw u 2009 dks gks xbZ tks 1951 es a ek= 4115 FkhA blds lkFk xz keh.k {ks =ks a es a [kks yh xbZ 'kk[kk,a Hkh vf/kd gks xbZA yxHkx 39 fr’kr iz 'kk[kk,a xz keh.k {ks =ks a es a gS] ftlls fd xz keh.k {ks =ks a es a a fda cS x ls okvks a dk mfpr ykHk iga psA q % O;kolkf;d a dks cS a es a dq y tek jkf’k tuojh 2010 es a 42]64]500 yk[k djksM+ :i, rd iga p xbZ] tks 1951 esa ds q oy 909 djks M+ :i, Fkh A vke turk ds tekvks a ij C;kt vftZ r djus dh tkx:drk ds dkj.k dq y tekvks a es a fe;knh tekvks a dk izfr’kr 87 ,o eka x tkekvks a dk fr’kr iz 13 jg x;kA (Amalgamation) % a dks cS dks vkfFkZ d :i ls etcw s rh iz nku djus ,a o detks j a dks cS dks Qs y gks us ls cpkus rq gs a dks cS ds ,dhdj.k dh xfr rs t bZ gq agSA gky gh es a a d cS vkW Q jktLFkku dk ,dhdj.k vkbZ-lh-vkbZ-lh-vkbZ- a d cS es a] LVs V a d cS
vkW Q bUnkS j dk LVs V cS a d vkW Q bf.M;k es a foy; gqvk agSA ljdkj us fu.kZ ; fy;k agS fd LVs V a d cS dh lHkh lgk;d acSd aks dks LVs V a d cS vkW Q bf.M;k es a vxys 1&2 lky es a foy; fd;k tk;sA 5% a dks cS a }kjk fn, x, _.k tks 1951 es a ds oy 627 djks M+ :i, Fks a] ;g 2010 es a 30]20]808 djks M+ rd igq a p x,A ;g _.k fujUrj c<+ jgk gS aA 6% tS ls f) o` _.k] y?kq m|ks xks a dks _.k] dq Vhj m|ks x] vkokl _.k vkfn dh jkf’k Hkh tks 1969 es a 1144 djks M+ :i, Fkh] c<+ dj 2009 es a 7]20]000 djks M+ :i, gks xbZA cS a dks dks funs Z’k agS fd os ,d fuf’pr fr’kr iz jkf’k bu _.kks a es a nku iz djs aA 7 % lekt ds mRFkku rq gs Hkh cS dks a a us _.k nku iz djuk iz kjEHk fd;k gS tS ls jks cs txkjks a] y?kq m|fe;ks a] f’k{kk _.k] miHkks x _.k] cs jks txkj ;ks tukvks a ds vUrxZ r _.k vkfnA 8 cS dks a a }kjk fuos’kdks a dks muds fuos’k ij vPNk frQy iz feys bl rq gs lykgdkj ls ok, Hkh kjEHk iz dh gSA 9% a dks cS a }kjk ljdkj dh bl ;ks tuk ds vUrxZ r fdlkuks a o ,a vU; xjhc xz keh.kks a ds dts Z ekQ fd,A 10 % tS ls & lHkh 'kgjks a es a pyus okyh pS d d cq & dkmUVj ij pS dks a dk Hkq xrku & ,-Vh-,e- lq fo/kk & dz fMV dkMZ lq s fo/kk & pyrs fQjrs a dks cS a dh lq fo/kk & lw puk rduhdh ls lEcfU/kr lq fo/kk,a tS ls&b&cS fda a x] b&dkW elZ ] ls iS dk LFkkuokUrj.k] vkW u ykbZ u a fda cS x] eks ckbZ y Qks u ij a fda cS x] vkj-Vh-th-,l- lq fo/kk,a vkfnA
UNIT-B
Q.10 Explain in brief relationship between a banker and a customer. Banker is a institutions which deals in money & credit. It accepts deposits from public for lending or investment and these deposits are payable on demand customer means any person who has a account in bank and for whom a banker undertakes to provide facilities/banking services. General Relationship(i)
(ii)
(iii)
Relationship of debtor & creditor: The first relationship between banker and customer is that of debtor and creditor. The moment customer opens an account with bank and deposits money, banker becomes debtor and customer becomes creditor. When bank provides loan to the customer, bank becomes cred itor and customer becomes debtor. Here as creditor, customer has no right to monitor use of deposit money by banker. Unless depositor demands his deposit back, bank does not pay. For withdrawing money, the customer has to properly draw cheque or withdrawal and there should be a credit balance in his account. Some features of this relationship are: - Bankers r ight of set-off - Bankers r ight of appropriation - Banker‟s right to charge interest and other charges. Bankers as a trustee (Relationship): When a customer keeps his documents valuables with bank for safe custody, bank acts as trusty or bailee. Bank has to ensure safety of these documents/valuables in the same manner as if bank should have ensured as owner. Banker as an agent (Relationship of principal and agent) Bank acts as an agent of his customer while collecting cheq ues, bills, buying and selling of securities acting his
trusty etc. Here, bank has to ensure to act accord ing to the instruction of his principal. Special Relationship (i)
Bankers obligation to honor cheques: A banker is bound to honour cheque iss ued by customer only when: - There is a sufficient balance - Cheque is complete in all respects, presented during banking hours and is not state. - Operation of acco unt has not been stopped.
(ii)
(iii) (iv) (v) (vi) (vii)
Bankers Lien: Lien is right to retain property when debt is due. Banker as creditor has a right to retain the goods and securities in its possession until the debt is discharged. This lien may be particular or general lien. Secrecy of customer‟s account: A bank is under contractual obligation not to disclose customer‟s secrecy of account failing which bank may be held liable for damages. Bankers rigt to claim incidental c hargers on the services provided to customers. Right of set-off: Right to adjust debit balance of one account with credit balance of customers other account. Law of limitation on bank deposit: does not apply as deposits are payable only on demand though bank is a debtor. Garnishi order: It is an order issued by a court under code of civil procedure (CPC) whereby the account of a customer is attached for not payment of dues by customer. In such case, bank is not allowed to operate customer‟s account.
Q.11 What do you mean by negotiable instruments? Negotiable means transferable from one person to another. Accord ing to Ne gotiable I nstruments Act 1881, “ A negotiable instrument means a promissory note, bill of exchange or cheque payable either to order or to bearer:. This section does not prohibit othe r instruments as negotiable instruments such as Govt. securities, bank drafts, hundies, share warrants bearer debentures which are treated as instruments of credit and possess the features of a negotiable instrument. Features of Negotiable instruments are: - Freely transferable till maturity - Negotiability - Holder can sue in his own name
Q.12 Explain in brief a bill of exchange & a cheque. Also differentiate between the both. (i)
Cheque : According to NI Act. “ A cheque is a bill of exchange drawn on a specifie d banker and not expressed to be payable otherwise than on demand.” Features/Characteristics of a Cheuqe A written instrument in the prescribed format. Contains unconditional order Drawn on a specified banker Specified s um of money -
Payee to be certain Dating of cheque
Parties to the cheque: Drawer – person who draws the cheque Drawee – the banker on whom drawn Payee – person named in the cheque to whom amount of cheque is to be (ii)
paid Bill of exchange: According to NI Act, a bill of exchange is “an instrument in writing, containing un-conditional order, signed by the maker, directing a certain person or to the bearer of the instrument”. This intimation reveals the following requirements/ features of a bill of exchange A document in writing It should be conditional In the form of an order For a specified sum of money Payable to a certain person or to his order or to the bearer of instrument Parties to the bill of exchange. Drawer – who writes the bill Drawee – who accepts the bill Payee – who pays the amount of bill Drawee & payee may be the same. In case of endorsement, two more parties i.e. endorser and endorsee may be there. Types of bill of exchange. 1. Inland & foreign bill of exhcna ge 2. Trade and acco mmodation bills 3. Sight or dema nd bill and time bill Difference between a cheque and a bill of exchange:
1. 2. 3. 4.
Cheque Drawn on a banker Payable only on demand No graced time No acceptance is required
5. 6. 7. 8. 9.
Crossing may be done Stopping payment is possible Notice of dishonor is not required Cheque can be counterma nded Noting and protesting is -
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Bill of exchange Drawn on any person including bank. Payable on maturity 3 days grace time is allowed acceptances is necessary No crossing Not possible Required Not possible Noting and protesting
not required in dishonor
is required
Q.13 What is promissory note and how it differs from a bill of exchange? (iii)
Promissory Note: According to NI Act, “A promissory note is an instrument in writing containing an unconditional under taking, signed by the maker, to pay a certain sum of money only to or to the order of certain person or to the order of the instrument.” Features/characteristics: Contains a promise/undertaking to pay. Unconditional Certain sum of money -
Payable on demand or after a particular date Can‟t be made payab le to bearer It must be stamped
Parties in Promissory Note: Only two i.e. Maker i.e. debtor who makes a promise to pay Payee i.e. creditor in whose favour promise to make payment is done Difference between bill of e xchange & promissory note: Bill of exc hange Promissory Note 1. Three parties i.e. drawer, drawee - Only two parties i.e. maker and payee and payee 2. 3. 4. 5.
Unconditional order Acceptance by drawee is must Notice of dishonor is required Liability of drawer is secondary
- Unconditional promise - No need. It is a promise by maker - Not required - Liability of maker is primary
Q.14 Explain in brief the term endorsement. Endorsement is a made by negotiating an instrument and this negotiation is done by endorsement and delivery. According to NI Act. Endorseme nt means. “When the maker or holder of the instrument signs on the same otherwise then a maker for the purpose of negotiation on the back or face thereof, or on the slip of paper annexed there to or sign for the same purpose a stamped paper intended to the co mpleted as a negotiable instrument, he is said to endorse the same and called endorser.” Hence features of a valid endorsement are: - It must be written - It must be for entire instrument/amount - When instrument is payable to two or more, each of them must endorse
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It may be b lank, special or restrictive
Kinds of endorsement (i) Blank – When endorser puts his signature without specifying endorsee. (ii) (iii) (iv) (v)
Special or Full – When name of the endorsee is specified. Restrictive- W hen further ne gotiation of the instrument are restricted. San-recourse – When endorser removes himself from the liability for repayment. Conditional- When transfer of the instrument is dependent on fulfillment of some condition. In case of dishonor, endorser is liable to make payment in the absence of a contract to the contrary.
Q.15 What do you understand by general & special crossing? Crossing means instruction to the bank to pay the amount not on cash counter but to make payment to a bank through credit to customers account. This cross ing ensures safety o f payment of cheque to the payee. There are two types of crossing: (i) General Crossing - It implies putting two para llel transverse lines on the cheque such as:
Implications of such crossing are that paying banker should not make payment on counter and make payment only through a bank by way of credit in acco unt. (ii) Special crossing - In this crossing, na me of banker on the face o f cheque is written between two para llel lines. In this drawer d irects the paying ba nker t hat the a mount should be paid only to the banker whose name has been mentioned in such crossed cheque. Examples of such special crossing are as follows:
This crossing on a cheque can be done by the - Drawer of cheque - Holder of cheque
The drawer can also cancel the crossing by writing the words “pay cash” and putting his signatures on the cheque. Marking of a cheque : When the drawer is not well known to the payee, the payee can approach the bank to certify the cheque as good for payment. This is known as marking of a cheque. The banker keeps the amount of cheque intact for ensuring its payme nt. Bank writes words like “approved”, “Good”, and “good for payment”.
Q.16 Explain in brief presentation and collection of Negotiable Instruments. Presentation Means presentation of NI for acceptance for sight and for payment. Bill of exchange is presented by the d rawer on drawee for ac ceptance. In case of a c heque, etc. presentation for accepta nce is not required. A Promissory note is payable after a fixed period is not required to be presented
before maturity. However, all thr ee NI‟s i.e. Bill of Exchange, cheque and promisory note are required to be presented for payment. Presentation of a NI is done by(i) Holder or his a uthorized agent (ii) Presentation at specified place only. When place is not specified, NI‟s is to be presented at business place or residence. (iii) Presentation during business hours only. In case of a bank business hours may be 10.00 to 4.00 pm (Saturday 10.00 to 1.00 pm). For other business hours, business hours may be 10.00 to 5.00 pm or 8.00 a m to 8.00 p m as the case may be. There may be delay in presentation due to exceptional circumstances such as serious illness, death of a near relative, co mmunal disorder, war in case of international instruments etc. For presentation of cheque, following rules are to be kept in view: -
Payment of bearer cheq ue to the person presenting. Payment of crossed cheque on presentation only through bank by credit to customers account. Presentation of cheque during business hours of bank. Validity period of cheque is 3 months and presentation during validity period only.
Payment of cheques & bills of exchange: Honoring customer‟s cheques is the duty of a bank provided the cheque has been properly drawer and sufficient balance is there in customers account. There are risks in making payment of cheques. Banks have to be care ful in this regard as slight negligence would make him liable for loss/compensation. Wrongful dishonor of cheque would lead to liability on a banker. However, following points should be seen by a ba nker while making payment of cheques. -
Cheque must be in proper form Drawer‟s signature should tally with specimen signatures Cheque should not be post dated or stale. Amount in figures and words must tally
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Proper care in case of mutilated cheques Material alterations on cheque must be co nfirmed with drawer Endorsement should be proper Payment of cross cheque o nly to a ba nker through cred it in account
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No payment of cheques where payment has been stopped. It the negligence of a bank is proved in making payment of cheque, bank can be held responsible for the same.
Collection of cheques: A bank should exercise proper skills, care and diligence while collecting payment of c heques and b ills of customer. A bank acts as a n a gent o f customer while collecting payment of cheques/bills of exc hange. While collecting cheques, a ba nker acts as a: - Holder for value - Agent of customer Acting as an agent o f customer, ba nker does not have better titlle than that of customer.
Q.17 What are the duties & responsibilities of collecting banker? Duties of bank as collecting banker: 1. Bank should present the cheque within a reasonable time 2. Bank should ensure safety of cheques deposited for collection. 3. Bank should confirm that all endorsement on cheque are proper 4. Proper care while collecting crossed cheques 5. Bank has to work in good faith and without negligence as provided order section 131 of NI Act. 6. At times bank acts as a collecting banker and paying banker when it collects cheques issued by his another custo mer. Hence a bank has to be careful in such cases. However, statutory protection is available to a banker as per section 131 of NI Act if a bank has acted in good faith and without negligence. To avoid any negligence on the part of banker, banker should ensure compliance of KYC (Know Your Customer) norms as prescribed by RBI. As regards collection of bill of exchange, bank has to be very careful. A bill needs to be presented on maturity positively a t right place. It case of d ishonor o f b ills of e xchange, banks should return such bills immediately.
Q.18 Under what circumstances, a cheque can be dishonored? What are relative legal provisions in this regard? Dishonor of Cheques : When the drawee of a bill or cheque or maker of a promissory note refuses to make payment, it is called dishonor.
In case o f cheque, t here may be two situations of dishonor. 1. Compulsory dishonor of a cheque by banker in follow ing circumstances: Countermanding payment by customer Death of customer On receipt of garnish order In case o f insanity or insolvenc y of a customer 2. Dishonor at the instance of bank. When a cheq ue is not proper ly drawn When endorsement or crossing is not proper Insufficient funds in the acco unt of customer There is a doubt about the right of holder. While dishonoring a cheque, a bank issues a cheque return memo where in reasons of returning cheques are mentioned. In case of a wrong dishonor, a bank can be held responsible for damages. Legal precisions relating to dishonor o f cheque – After Negotiable instruments Act Amendment in 1988, dishonor of a cheque due to in sufficient balance is a criminal office and s uch person can be given: Imprisonment up to 2 years Fine up to twice the amount of cheque Both of above (imprisonment & fine)
Q.19 Why Banking Regulation Act was passed? Banking Regulation Act 1949 extends to the whole of India and is applicable on all banking companies except nationalized bank as they were established under Banking companies (Acquisition and Transfer of undertakings) Act of 1970. The need for passing an effective Act to regulate working o f banks arose due to following reasons: To avoid failure of banks To ensure ba lanced e xpansion of banking facilities To give more powers to RBI -
To ensure proper deve lopme nt of money market To check abuse of power by the ma nagement of banks To safe guard the interests of depositor and interest of country at large.
Q.20 Explain in brief main provisions of BR Act 1949. Important Provisions of BR Act 1949 : Section No. Main Provision
5 (b)
5 (c) 8
9 11, 12 18.
21. 22. 23. 24
31 35. 37, 38
44A 46
Defines banking as “Accepting for the purpose of lending or investment deposits of money from the public, repayable on demand or otherwise and withdraw able by cheque, draft, order or otherwise” Banking companies mean “any company which transacts business of banking in India”. Prohibition of business by a bank such as purchase and sale of shares and debentures in the companies where their directors are involved immovable property, purchase and sale of goods directly, can‟t give loans beyond limits prescribed by RBI Banks can‟t acquire non-banking assets or immorable property except for its own use. Provides req uirement of minimum paid up capital and reserves to different types of banks. Cash reserve: all banks other than scheduled banks are required to maintain cash reserve at least 3% of time and demand liabilities present rate for sheduled banks is 6%. Empowers RBI to control advances by banking compa nies-RBI issues directions in this regard under this section. Every banking company is required to obtain a license from RBI to start banking business. RBI‟s permission is required for opening/closing a branch or changing place of a branch. Liquid assets. Each bank is required to maintain SLR of its total time and demand liabilities in the form of cash, gold or unremembered approved securities not less than 20%. Prese ntly this SLR is 25%. A banking company has to submit audited balance sheet & profit & loss A/c duly published in three cop ies to RBI within 3 months from year c losing. This section empowers RBI to conduct statutory inspection of banks. This inspection may b e general or specific. RBI can recommend to the High Court for winding business of a bank if business of a bank is being conducted in the manner detrimental to the interest of depositors. Permission of RBI is required for amalgamation of banking companies. Empowers RBI to impose penalties on banking compa nies as follows: (i) For submitting false or Imprisonment up to 3 to 5 years (ii)
Inaccurate return Failure to submit information at the time of inspectio n
(iii)
For accepting deposits in
Fine of Rs. 2000/- and if de fault persists fine @ Rs.100 per day till Default Penalty @ twice of deposit amount
Contra venation to RBI accepted directives Further, a bank which is violating provisions of this Act or not following directions of RBI is also subject to fines and penalties. Some of the pro visions of this Act have been made applicable on co-operative ba nks through Banking Laws (Ac applicable to co-opera tive societies) Act o f 1965.
cS d og la LFkk agS tks eq a nz k o ,a lk[k dk ys uns u djrh gS aA ;g vke turk ls vekurs a Lohdkj dj mudk _.k o ,a fofu;ks tu es a mi;ks x djrh a gS rFkk eka xus ij vekurs okil djrh agSA bu vekurks a dks fofHkUu ek/;eks a ls fudkyus dh lq fo/kk Hkh nku iz djrh agSA
lkekU;r;k lk ,s dks bZ O;fDr ftldk a d cS es a [kkrk gks xz kgd dgykrk gSA og a d cS ls fu;fer ys u u ns o ,a ls ok,a ys uk Hkh Lohdkj djrk agSA
(Debtor and Creditor)
tS ls gh xz kgd a d cS es a [kkrk [kks ydj jkf’k tek djokrk agS] a dj cS Vj MS cu tkrk agS rFkk tek djkus okyk O;fDr ds z fMVj cu tkrk agSA ys fdu tc a d cS _.k rk ns agS rc a d cS ds fMVj rFkk xz z kgd Vj MS cu tkrk agSA ,d _.knkrk ds :i es a a d cS dks ;g vf/kdkj gks rk agS fd og _.k ds mfpr mi;ks x ij fuxjkuh j[ks ys fdu vekur tek djus okys O;fDr dks xz kgd ds rkS j ij ;g vf/kdkj ugha gS fd a d cS }kjk tek jkf’k ds mi;ks x ij fuxjkuh j[ks aA vekur jkf’k ds mi;ks x ij a d cS LorU= agSA (Principal & Agent)
xz kgd iz/kku ds :i es a rFkk a d cS mlds ,ts UV ds :i es a dk;Z djrk agSA xz kgd a d cS dks vkns’k ns ldrk agS fd mlds [kkrs es a uke fy[kdj fofHkUu O;;ks a dk Hkq xrku djs a] vk; mlds [kkrs es a tek djs a] frHkw iz fr;ks a dk dz ; fodz ; djs vkfnA a d cS dh ftEes nkjh gS fd og vkns’ akks dh ikyuk djs rFkk vkns’kks a dh lhek es a jgdj mudh ikyuk djs a vU;Fkk cS d dks {kfriw a frZ rq gs ftEes nkj Bgjk;k tk ldrk agSA (Bailer & Bailee)
xz kgd viuh cgq ew Y; ,a o ega xh oLrq , o ,a i= iz d a cS es a lq jf{kr j[krs gS rFkk xz kgd }kjk eka xus ij mUgs a lq jf{kr yks Vkus dh ftEes nkjh ys rs agSA bu oLrqv aks dh lq j{kk a d cS dh ftEes nkjh gks rh agSA a d cS dks bu oLrqv aks dh lq j{kk ls ,s djuh gS tS ls fd og Lo;a mudk ekfyd gks us ij djrk agSA
xz kgdks a }kjk tkjh pS dks a dk Hkq xrku djuk & ys fdu blds fy, a d cS ;g vo’; ns [ks xk fd xz kgd ds [kkrs es a lk iS gks] d pS gj rjg ls .kZ iw rFkk a fda cS x le; es a iz lrq r fd;k x;k gS rFkk d pS ds Hkq xrku ij jks d ugha agSA (ii) xz g.kkf/kdkj (Bankers Lien) cS d a xz kgd ls kIr iz lEifÙk i= iz vkfn dks vius ikl j[k ldrk gS tc rd fd a d cS }kjk fn, x, _.k dk Hkq xrku ugha gks rkA (iii) xz kgd ds [kkrs dh xks iuh;rk cuk, j[kuk (Secrecy of Customers Account) cS d dh ftEes a nkjh gS fd og vius xz kgd dh xks iuh;rk cuk, j[ks a vU;Fkk a d cS dks {kfriw frZ rq gs ftEes nkj Bgjk;k tk ldrk agSA (iv) iz frlkn o ,a Hkq xrkuks a ds fu;ks tu dk vf/kdkj (Right of set-off and (i)
appropriation of payments )
cS d dks vf/kdkj gks a rk gS fd og xz kgd ds [kkrs es a cdk;k jkf’k dk xz kgd ds nw ljs [kkrs es a tek jkf’k ls ,MtLV djys rFkk xz kgd }kjk funs f’kr [ Z kpks Z rFkk deh’ku vkfn dh jkf’k kgd xz ds [kkrs a es a uke fy[kdj lek;ks ftr djys a (v) S Cka d vekurks ij le; lhek dkuw a u ykxw ugha gks rk tcfd cS a d vekurs Lohdkj dj ,d Vj MS ds :i es a dk;Z djrk gSA (vi) XkkfuZ’kh vkW MZ j & fdlh dks VZ ls xz kgd ds [kkrs ij jks d yxus dh fLFkfr es a a d cS dh ftEes nkjh gS fd og xz kgd ds [kkrs ls ys uns u ij jks d yxk,A
(Negotiable Instruments)
fofue; lk/;rk dk vFkZ S gs fd lq iq nZ xh }kjk gLrkukUrj.kA foys [k dk vFkZ gS dkuw uh nLrkos tA fofue; lk/; foys [k vf/kfu;e 1881 ds vuq lkj fofue; lk/; foys [k ls rkRi;Z gS & & ; ns frKk iz i= Promisory Note & fofue; fcy Bill of exchange Cheque & pS d bl vf/kfu;e es a of.kZ r mDr rhu foys [kks a ds vfrfjDr dq N vkS j foys [k Hkh gS ftUgs a fofue; lk/; ekuk tkrk gS tS ls a d cS k¶V] Mª ljdkjh frHkw iz fr;ka ] .Mht] gq ch;jj _.k i= vkfnA fofue; lk/;rk ls rkRi;Z gS%
& & &
I.
LorU=rk oZ iw d foys [kks a dk gLrkUrj.k oS/kkfud LokfeRo kIrdÙkkZ iz vius uke ls nkok dj ldrk s agSA
(Cheque): pS d ,d lk ,s fue; i= gS tks fdlh a d cS fo’ks "k ij fy[kk tkrk
gS rFkk ftldk Hkq xrku Li"V :i ls eka x fd, tkus ds vfrfjDr vU; fdlh dkj iz ls ugha gks ldrkA pS d ds vko’;d rRo % & fu’fpr k:i iz es a fyf[kr ys iz [k & 'krZ jfgr vkns’k & fo’ks "k a d cS dks vkns’k & fuf’pr jkf’k & iz kIrdÙkkZ fuf’pr & Lrq iz r djus ij Hkq xrku & pS d ij gLrk{j ,a o fnuka d dk gks uk & pS d dh lq iq nZ xh djuk pS d es a rhu ikfV;ka gks rh gS 1- fy[kus okyk] 2- Hkq xrku kIrdÙkkZ iz ,oa 3- Hkq xrku ns us okyk ¼cS d½ a II.
fofue; fcy ,d fyf[kr foi= gS ftles mldk ys [kd vius gLrk{kj dj fdlh O;fDr dks 'krZ jfgr vkKk rk ns gS fd og ,d fuf’pr /kujkf’k fdlh O;fDr fo’ks "k ;k mlds vkns’kkuq lkj fdlh vU; O;fDr ;k mlds okgd dks Hkq xrku djns**A bl ifjHkk"kk ls fofue; fcy dh fuEu fo’ks "krk,a nf’kZ iz r gks rh gS& & ;g ,d fyf[kr i= iz gS & 'krZ jfgr vkns’k gS & vkns’k fuf’pr jkf’k ds Hkq xrku dk & vkns’k ij Lohd` fr vko’;d & jkf’k us ns dk vkns’k ,d fuf’pr O;fDr dks ;k mlds vkns’k ij vU; O;fDr dks ;k ch;jj dksA fofue; fcy a es i{kdkj (Parties to Bill of Exchange) eq [;r% rhu % & ys [kd & ;kuh fy[kus@vkns’k us ns okyk & unkj ns & tks fcy ij Lohd` fr rk ns gS & kid iz & ftls Hkq xrku kIr iz gks uk gSA ys [kd ,a o kid iz ,d Hkh gks ldrs gSA (Bill of Exchange)
fcy dk "Bka i` du gks us ij mDr rhu ds vfrfjDr nks vkS j i{kdkj gks tkrs gS i` "Bka du ,oa /kkjd (Holder).
12345678-
ds oy a d cS ij fy[kk tkrk gSA fdlh O;fDr ij ;k a d cS ij iz Lrq r djus ij ; ns ifjiDork ij ; ns (Maturity) dks bZ xz l le; ugha s 3 fnu dh xz l vof/k s cS d dh Lohd` a fr vko’;d ugha ns unkj dh Lohd` fr vko’;d Hkq xrku dks jks duk lEHko lEHko ugha vuknz r gks us ij uks fVl vko’;d ugh uks fVl vko’;d js [kka du (Crossing) lEHko lEHko ugha vuknz r gks us ij uks fVa x vko’;d ugha vko’;d
(Promisory Note) ^^iz frKk i= ,d fyf[kr foys [k gS ftl ij ys [kd
III.
ds gLrk{kj gks rs gS rFkk ftles a fdl h fuf’pr O;fDr dks vFkok fdlh vkns f’kr O;fDr dks vFkok foys [k ds okgd dks fuf’pr jde dk Hkq xrku djus dh frKk iz gks rh gS**A bl ifjHkk"kk ls bldh fuEu fo’ks "krk,a nf’kZ iz r gks rh gS& & Hkq xrku djus dh ;g frKk iz gS & frKk iz fcuk 'krZ ds & Hkq xrku dh jkf’k fuf’ pr & ekW xus a ;k fuf’pr frfFk ds ckn ; ns & Hkq xrku ch;jj dks ugha & bl ij LVkEi vko’;d i{kdkj (Parties) ds oy nks % & fy[kus okyk & tks Hkq xrku djus dh frKk iz ys rk gSA & kIrd iz & ys unkj ftldks Hkq xrku djus dh frKk iz dh tkrh gSA
1-
rhu i{kdkj& fy[kus okyk] Lohdkj djus okyk o ,a kIrd iz
ds oy nks i{kdkj&fy[kus okyk o ,a Hkq xrku kIrdÙkkZ iz
2345-
fcuk 'krZ dk vkns’k ftl ij vkns k ’ fn;k x;k gS] dh Lohd` fr vko’;d vuknz r gks us ij uks fVl dh vko’;drk fy[kus okys dh ftEes nkjh f}rh; (Secondary)
fcuk 'krZ dh frKk iz Hkq xrku us ns okyk gh frKk iz djrk gSA vko’;drk ugha fy[kus@ frKk iz djus okys dh ftEes nkjh kFkfed iz
fofue; lk/; ys iz [k vf/kfu;e vuq lkj ^^tc fdlh fofue; lk/; foys [k dk ys [kd ;k /kkjd foys [k ds ihNs ;k eq [k "B i` ij ;k la yXu iphZ ij ijkdz e.k ds m)s’; ls ys [kd ls fHkUu vU; :i ls gLrk{kj djrk gS rks ;g dgk tk;s xk fd mlus ml foi= dks "Bka i` fdr fd;k gS vkS j og mldk "Bka i` du djrk gS** o ,a fofue; kys iz [k dk ijdz ke.k "Bka i` du }kjk ,oa "Bka i` du vkS j lq iq nZ xh }kjk fd;k tkrk gSA a% 1- ;g fyf[kr es a gks uk pkfg, 2- ;g lEiw .kZ foys [k o ,a jkf’k dk gks uk pkfg, 3- foys [k ij gLrk{kj gks us pkfg, 4- ;g [kkyh] fo’ks "k o ,a frcfU/kr iz gks ldrk gS 5- lq iq nZ xh vfuok;Z
(i) (ii) (iii) (iv) (v)
% lk/kkj.k ;k Cys d & tc "Bka a i` du fcuk fdlh dk uke fy[ks gLrk{kj djrk agSA iw .kZ ;k fo’ks "k & tc "Bka i` du fdlh dk uke fy[kdj gLrk{kj djrk agSA iz frcfU/kr & tc foys [k dk Hkfo"; es a gLrkUrj.k ij frcU/k iz yxk fn;k tk;sA nkf;Rofoghu (Sans Resource) & tc "Bka i` du ;g Li"V dj rk ns gS fd vuknz r gks us ij /kkjd ds fr iz og mÙkjnk;h ugha gks xkA 'krZ lfgr (Conditional) & tc foys [k dk gLrkUrj.k fdlh 'krZ ds .kZ iw djus ls tks M+ fn;k tk;sA
pS d ds Hkq xrku dks lq jf{kr cukus rq gs pS d dk ys [kd a d cS dks ;g vkns’k ns ldrk gS fd d pS dk Hkq xrku f[kM+ dh ij u djds fdlh a d cS ds [kkrs ls kIr iz fd;k tk;sA blds fy, pS d dks js [kka fdr djuk iM+ rk gS rFkk ls ,s dks pS a dks [kka js fdr d pS dgk tkrk agSA
js [kka du d pS ds eq [; "B i` ij gks uk pkfg,] ;g nks lekuokUrj [kkvks js a ds }kjk rFkk [kkvks js a ds chp es a dq N 'kCnks] tS ls& & Co, Not negotiable, Account payee only fy[kk tkrk gS rFkk ;g [kka js du ds oy d pS ij gh lEHko agSA
js [kka du nks dkj iz dk gks rk gSA (General Crossing)
bl [kka js du es a pS d ds eq [; i` "B ij nks lekUrj [kk,a js rFkk [kkvks js a ds e/; es a dq N 'kCn fy[ks tkrs gS] tS ls&
bl dkj iz ds [kka js fdr d pS dk Hkq xrku f[kM+ dh ij u gks dj a d cS ds ek/;e ls gh fd;k tk;s xkA 2-
fo’ks "k [kka js du (Special crossing) tc fdlh d pS ds eq [; "B i` ij & nks lekUrj js [kkvks a ds chp a d cS dk uke fy[k fn;k tkrk gS] mls fo’ks "k [kka js du ;k fo’ks "k a d cS ds uke [kka js fdr dgk tkrk agS tS ls&
bl [kka js du ls d pS vkS j Hkh vf/kd lq jf{kr gks tkrk gS D;ks fd d a pS dk Hkq xrku ukfer cS d ds ek/;e ls gh fd;k tk;s xkA thou chek fuxe vnk;xh ds le; ikW a fylh /kkjd dks fo’ks "k [kka js fdr pS d gh tkjh djrh agSA (Marking of cheques)
tc Hkq xrku kIrdÙkkZ iz pS d dks fy[kus okys ls vPNh rjg ifjfpr ugha gS] og a d cS tkdj d pS ls lR;kfir ;k ekf.kr iz djk ys rk gS rFkk a d cS pS d dh jkf’k dk Hkq xrku lq jf{kr j[k ys rk gS ftlls fd Hkq xrku kIrdÙkkZ iz dks .kZ iw fo’okl gks tkrk gS fd d pS dk uf’pr f :i ls Hkq xrku gks xkA a d cS pS d ij ^^Lohd` r** ^^Hkq xrku gs rq vPNk** 'kCn fy[k rk ns gS bls d pS ij ekfdZ x dgk tkrk a a gS A
iz Lrq rhdj.k & ls rkRi;Z gS fofue; lk/; ys iz [ akks dk Lohd` fr ,a o Hkq xrku gs rq Lrq iz r djukA fcy dks fy[kus okyk mls Hkq xrkudÙkkZ dks Lohd` fr rq gs Lrq iz r djrk agSA d pS dks a d cS dh Lohd` fr rq gs Lrq iz r ugha fd;k tkrkA frKk iz i= ftldk Hkq xrku ,d fuf’pr frfFk ds ckn ; ns gS mls ; ns frfFk ls oZ iw Lrq iz r ugha fd;k tkrkA rhuks gh fofue; lk/; ys iz [kksa dks Hkq xrku rq gs iz Lrq r fd;k tkrk agSA ;g Lrq iz rhdj.k fuEu }kjk fd;k tkrk agS& (i) /kkjd ;k mlds vf/kd` r ,ts UV }kjk (ii) iz Lrq rh fuf’pr LFkku ij rFkk fuf’pr LFkku ds vHkko es a Hkq xrkudÙkkZ ds fuokl ;k O;kolkf;d LFkku ij (iii) iz Lrq rh ds oy O;olk; le; es aA cS a d ds lEcU/k es a O;olk; le; ls rkRi;Z gS 10 cts ls nks igj 4 cts rd ¼’kfuokj dks 10 cts ls 1 cts rd½ vU; O;kolkf;d la LFkkvks es a ;g le; 10 ls 5 cts ;k kr% iz 8 ls 'kke 8 cts gks ldrk agSA fo’ks "k ifjLFkfr;ks a es a Lrq iz r djus e a s jh ns Hkh gks ldrh agS tS ls iz Lrq rdÙkkZ ds chekj gks tkus] utnhdh fj’rs nkj dh e` R;q] leq nk;d vjktdrk ,a o vUrjkZ "Vª h; foys [kks a ds fy, ;q ) A pS d dks Lrq iz r djrs le; fuEu ckrks a dk /;ku j[kuk pkfg,& (i) vjs [kka fdr d pS dk xrku Hkq Lrq iz r djus okys O;fDr dks (ii) js [kka fdr d pS dk xrku Hkq ds oy a d cS ds ek/;e ls (iii) pS d a d cS ds O;olk; le; es a gh Lrq iz r gks uk pkfg, (iv) pS d dh oS/krk vof/k 3 ekg gks rh gS] vr% 3 ekg dh vof/k ds vUnj gh Lrq iz r gks uk pkfg,A pS d ,oa fcy dk Hkq xrku (Payment of cheque & Bill of Exchange) xz kgd ds pS d dk Hkq xrku djuk a d cS dh ftEes nkjh gS] ys fdu blds fy, vko’;d gS fd lgh <+ x ls Hkjk x;k gS rFkk xz a kgd ds [kkrs es a i;kZ Ir jkf’k gks A pS dks a ds Hkq xrku es a tks f[ke gks rh gS vr% a d cS dks .kZ iw lko/kkuhiw oZ d ;g dk;Z djuk pkfg, D;ks fd Nks a Vh lh ykijokgh ds dkj.k gq , uq dlku ds fy, a d cS dks ftEes nkj Bgjk;k tk ldrk gS aA bl lEcU/k es a a d cS dks fuEu ckrks a ij /;ku uk ns pkfg,& & pS d fu/kkZ fjr k:i iz es a gS & fy[kus okys ds gLrk{kj a d cS fjdkW MZ ls feyrs gS & pS d vkxs dh rkjh[k ;k 6 ekg ls jkuk iq u gks & va d ks a o ,a 'kCnks es a fy[kh jkf’k feyrh sgS & xys] QVs dks pS a ds lEcU/k es a vko’;d lko/kkuh & "Bka i` du lgh gks & [kka js fdr d pS dk xrku Hkq ds oy a d cS ds ek/;e ls & ls ,s dks pS ] ftudk Hkq xrku jks d fn;k x;k gS dk Hkq xrku ugha djuk vxj a d cS dh ykijokgh lkfcr gks tkrh gS rc a d cS dks ftEes nkj Bgjk;k tk ldrk gSA
(Collection of Cheques)
,d a d cS dks pS dks a o ,a fcyks a dk la xz g.k djrs le; .kZ iw lko/kkuh o ,a gks f’k;kjh cjruh pkfg,A bl dk;Z es a a d cS vius xz kgd ds ,ts UV ds :i es a dk;Z djrk agSA ,d ,ts UV ds rkS j ij cS a d dks d pS dk vius xz kgd ls vPNk LokfeRo ugha feyrkA
cS d }kjk d a pS fuf’pr le; es a Lrq iz r fd;k tkuk pkfg, cS d dks la a xz g.k rq gs kIr iz dks pS a dh iw .kZ lq j{kk lq fuf’pr djuh gks xh pS d ij lHkh "Bka i` du lgh gS ;g [kuk ns gks xk js [kka fdr dks pS a ds la xz g.k es a .kZ iw lko/kkuh cjruh gks xh cS d dks leLr dk;Z lgh eUO’kk o a ,a cxS j ykijokgh ds djuk gks xk tS lk fd vf/kfu;e dh /kkjk 131 es a of.kZ r gSA (vi) dHkh&dHkh a cSd la xz gdÙkkZ ,oa Hkq xrkudÙkkZ dk ,d lkFk dk;Z djrk gS rFkk lh ,s fLFkfr es a a d cS dks vkS j vf/kd lko/kkuh cjruh pkfg,A (i) (ii) (iii) (iv) (v)
cS dks dks fofue; lk/; vf/kfu;e dh /kkjk 131 ds vUrxZ a r oS/kkfud la j{k.k iz kIr gS a vxj cS d vPNs fo’okl o a ,a cxS j fdlh ykijokgh ds dk;Z fd; k agSA a d cS bl lEcU/k es a fjtoZ a d cS }kjk fu/kkZ fjr ^^vius xz kgd dks tkuks** lEcUO/kh fu;eks a dh ikyuk djuh pkfg,A fofue; fcy ds la xz g.k ds lEcU/k es a a d cS dks iw .kZ lko/kku jguk pkfg,A fcy dks ifjiDork ij fuf’pr LFkku ij vko’;d :i ls Lrq iz r djuk gks rk agSA vuknz r gks us ij a d cS dks ;g fcy rq jUr yks Vk uk ns pkfg,A
(Dishonor of Cheques)
tc d pS ;k fcy dk Hkq xrkudÙkkZ ;k frKk iz i= dks cukus okyk Hkq xrku ugha djrk] bls vuknz r gks uk dgk tkrk agSA ,d d pS ds vuknz r gks us es a nks ifjfLFkfr;ka gks ldrh agSA 1- cS d }kjk vko’;d :i ls d a pS dks vukfnz r djuk I. tc xz kgd }kjk Hkq xrku jks d fnj;k gks II. xz kgd dh e` R;q gks us ij III. Hkq xrku ugha djus lEcUO/kh dks VZ ds vkns’k kIr iz gks us ij IV. xz kgd ds ikxy gks tkus ;k fnokfy;k gks tkus dh lw puk feyus ij 2- cS d }kjk viuh vks a j ls d pS dks vuoknz r djuk I. tc d pS lgh + x
III. xz kgd ds [kkrs es a i;kZ Ir jkf’k u gks IV. iz Lrq rdÙkkZ ds lEcU/k es a dks bZ lUns g gksA
pS d dks vuknz r djrs le; ,d pS d okfilh eheks Hks tuk gks rk gS ftles a d pS ds vuoknz r gks us ds dkj.kks a dk mYys [k fd;k tkrk gSA vxj a d cS dh xyrh ls pS s d vuknz r fd;k x;k gS] rks a d cS blds fy, ftEes nkj gks xkA
fofue; lk/; vf/kfu;e es a o"kZ 1988 es a fd, x, la’kks/kuks a ds vuq lkj vxj dks bZ pS d xz kgd ds [kkrs es a i;kZ Ir jkf’k u gks us ds dkj.k vuknz r gks rk gS ] mls n.Muh; vijk/k ekuk x;k gS rFkk fy[kus okys xz kgd dks & nks lky rd dk dkjkokl & pS d jkf’k dh xuh nq jkf’k rd tq ekZ uk & ;k mijks Dr nks uks n.M fn, tk ldrs gSA ;g a fda cS x fu;eu dkuw u 1949 js iw ns’k es a leLr a fda cS x dEiuht ij ykxw gks rk gS a ds oy jk"Vª h;d` r a dks cS ds ftudk jk"Vª h;dj.k a fda cS x dEiuht dkuw u 1970 ds vUrxZ r fd;k x;k gS] i j ;g ykxw ugha gks rkA bl fo’ks "k vf/kfu;e dks ikl djus ds fuEu dkj.k Fks & vkS j a dks cS dks QS y gks us ls jks duk & fda a cS x lq fo/kkvks a dk lUrq fyr fodkl djus & Hkkjrh; fjtoZ a d cS dks vkS j vf/kd 'kfDr;ka us ns & eq nz k cktkj dk lgh fodkl lq fuf’pr djus & d a cS cU/ku iz }kjk viuh 'kfDr;ks a ds :i;ks nq x ls jks duk & jkf’k tekdÙkkZ ,oa jk"Vª fgr dh lq j{kk rq gs A
5 ¼ch½
acS x O;olk; dh ifjHkk"kk ^^cS a fda fda x O;olk; ls rkRi;Z gS vke turk ls _.k o ,a vfxz e nku iz djus rq gs vekurs Lohdkjuk] eka xus ij ykS Vkuk o ,a mUgs d] pS k¶V] Mª vkns’k ;k vU; fdlh rjhds ls fudkyus dh lq fo/kk iz nku djuk**
5 ¼lh½
acS x dEiuh ls rkRi;Z lh fda ,s dEiuh ls gS tks Hkkjro"kZ es a cS fda a x O;olk; djrh gksA
8
acS ds frcfU/kr d iz dk;Z tS ls 'ks ;j ;k _.k i=ks a dh [kjhn ;k fcdz h mu la LFkkvks a es a tgka a d cS ds funs’kdks a dk fgr gks] vpy lEifÙk;ks a dk dz ; fodz ; o ,a fjtoZ }kjk fn, x, funs Z’ akks ds Åij _.k nku iz djukA
9
acS lh d ,s vpy lEifÙk xz g.k ugha dj ldrk ftldh a fda cS x O;olk; rq gs vko’;drk u gksA
11 vkS j 12
bu /kkjkvks a es a a dks cS }kjk U;w uÙke fgLlk a th iw ,a o ko/kku iz j[kus lEcU/kh iz ko/kku gSA
18
jks dM+ la p; (cash reserve) vuq lw fpr a dks cS ds vfrfjDr lHkh a dks cS dks bl jks dM+ vuq ikr dh orZ eku nj 6 fr’kr iz gSA
21
bl /kkjk ds vUrxZ r Hkkjrh; fjtoZ a d cS dks a dks cS }kjk fn, tkus okys _.k o ,a vfxz e dks fu;fU=r djus rq gs funs Z’k tkjh djus dk vf/kdkj agSA
22
R;s iz d a d cS dks bl /kkjk ds vUrxZ r fjtoZ a d cS ls a fda cS x O;olk; kjEHk iz djus rq gs ykbZ ls Ul ys uk vko’;d gSA
23
,d ubZ 'kk[kk [kks yus ;k 'kk[kk cUn djus rq gs fjtoZ a d cS dh vuq efr ys uk vko’;d agSA
24
rjy lEifÙk;ka (Liquid Assets) iz R;s d a d cS dks viuh le; o ,a eka x ns unkfj;ks a dk udnh] lks uk ;k Hkkj jfgr Lohd` r frHkw iz fr;ks a es a 20 iz fr’kr ls Åij ij fofu;ks x djuk gks rk gS] bls oS/kkfud rjyrk vuq ikr djuk gks rk gS A bls oS/kkfud rjyrk vuq ikr (Statutory Liquid Ratio SLR) dgk tkrk gS fjtoZ a d cS }kjk bls orZ eku es a 25 izfr’kr fuf’pr dj j[kk gSA
31
R;s iz d a d cS dks o"kZ lekfIr ds 3 eghus ds vUnj va ds f{kr ykHk gkfu [kkrk o ,a la rq yu fp= dh rhu fr;ka iz v[kckj es a Nih bZ gq fr iz ds lkFk iz Lrq r djuh gks rh gSA
35
bl /kkjk ds vUrxZ r fjtoZ a d cS dks lHkh a dks cS ds oS/kkfud fujh{k.k djus dk vf/k dkj agSA ;g fujh{k.k lkekU; ;k fo’ks "k gks ldrk agSA
37&38
bu /kkjkvks a ds vUrxZ r fjtoZ dks ;g vf/kdkj kIr iz gS fd mPp U;k;ky; dks fdlh Hkh a d cS }kjk O;olk; dks cUn djus ds fy, vuq jks/k dj ldrk gS vxj fjtoZ a d cS dks yxs fd veq d a d cS vekur tekdÙkkZv aks ds vfgr es a dk;Z dj jgk agSA
46
bl /kkjk ds vUrxZ r fjtoZ a d cS dks 'kfDr;ka kIr iz gS fd og fdlh a d cS ij n.M yxk ldrk agSA
(i)
fjtoZ a d cS dks Hks ts tkus okys fooj.kks a dks xyr Hks tuk
(ii) fujh{k.k ds le; fujh{k.k
vf/kdkfj;ks a dks eka xh xbZ lw puk ugha uk ns
(iii)
Hkkjrh; fjtoZ a d cS ds funs’ a Zkks ds foijhr vekurs Lohdkj djuk
3 ls 5 o"kZ dk dkjkokl 2000 :Ik, tq ekZ uk o ,a vijk/k pkyw jgus ij frfnu iz 100 :i, vekur dh xuh nq jkf’k rd n.M
mDr n.Muh; ko/kkuks iz a ds vfrfjDr vxj dks bZ d acS bl vf/kfu;e ds fdlh Hkh /kkjk dk mYya ?ku ;k fjtoZ a d cS }kjk fn, x, funs Z’ akks dk mYya ?ku djrk ik;k x;k gks] ml ij fjtoZ cS d tq a ekZ us ;k n.M yxkus dk vf/kdkj j[krk agSA bl vf/kfu;e ds dq N ko/kkuks iz a dks lgdkjh a dks cS a ij ykxw fd;k x;k agS] ftls a fda cS x dkuw u ¼lgdkjh la LFkkvks a ij ykxw ½ 1965 ds uke ls tkuk tkrk agSA
PART-C PUBLIC FINANACE 1. Ans.
Discuss in brief meaning, scope and importance of public finance. Public finance is the science which deals with income and expenditure of Govt. and public bodies. With the increasing role of Govt., Govt. not only perform obligatory functions like law and order maintenance but also other functions of infrastructural development like communication, transport, dams, development of banking & financial institutions and various social over heads like education , medical & health, sanitation drinking water and creating atmosphere for growth of agriculture & industries. Public finance is also known as that part of economics which deals with public revenue, public expenditure, public debt and financial administration of Govt.
With the increasing activities of Govt., the scope of public finance has widened and broadly includes following: 1) Public Revenue : - In which study of various sources of revenue i.e. tax and non -tax, their cannons, and their impact is done. 2) Public Expenditure : - It deals with cannons of public expenditure, types of expenditure, effect of expenditure and method of control. 3) Public Debt: - It deals with types of public debt internal or external, classification of debt, incidence and impact and reasons for increase in public debt. 4) Financial Administration : - It deals with administration of Govt. at different committees like Public Accounts Committee (PAC) Estimates Committee (EC), Committee on public undertakings and comptroller and Auditor General of India (CAG) 5) Economic Stabilation:- Economic development with stability is the major objective or fiscal policy announced by the Govt./Central bank. Importance of Public Finance: - With the constant increase in the activities of state, the importance of public finance is also increasing which is clear from the following points: a. Increase in economic and social overheads : - Govt. expenditure on various economic and social activities is increasing. b. Capital Formation: - Increase in expenditure, grants, subsidities and various tax relief measures savings are increasing and capital formation takes place. c. Through proper economic planning : -Under public finance, economic disparities are minimized. d. Creation of employment opportunities e. Raising of per capital income and national income . f. Promotion of public enterprises
2.
Explain in brief the principle of Maximum Social Advantage.
Ans.
Famous economist Dr. Dalton said that the “best system of public finance is that which secures maximum social advantage from operation it conducts”. It refers to optimum advantage to the society at large. He further explained that any expenditure is productive or not is to be examined from the productivity of economic welfare of that expenditure. For example – expenditure on health and education is more productive than expenditure on capital goods. Similarly, tax on an item is not bad. For example a tax on tobacco products is not bad as it reduces use of tobacco for more social welfare. This principle of maximum social advantage is based upon law of marginal utility and law of marginal sacrifice. When taxes are imposed by Govt. public sacrifice increases to that extent and when Govt. makes public expenditure, utility to public increases. Hence Govt. has to plan its revenue and income in such a way so that it leads to equilibrium in marginal utility and marginal sacrifice. Marginal Social Sacrifice (MSS): - When Govt. increases tax, society makes more and more sacrifice. Hence, by increase in tax, marginal social sacrifice increases. Marginal Social Benefit (MSB): - When Govt. incurs public expenditure, utility or benefit to the society increases. With the operation of law of diminishing marginal utility, the marginal utility from additional unit of expenditure declines. Thus with the increase in public expenditure, marginal social benefits (MSB) declines.
The point of equilibrium will be at that point where marginal social sacrifices (MSS) are equal to marginal social benefit (MSB). It both MSS and MSB are not equal, maximum social advantage cannot be attained. It tells us that public expenditure should be made in such a way that it matches with public sacrifice by levying new taxes. The extent of maximum social advantage can be tested from the following: 1. Improvement in production: -i.e. improvement in production capacity, form of production, organization of production and category of production. 2. Improvement in distribution of output : - It can be seen from reduction in economic in-equalities and stability in income. 3. Defence & peace: - Which can be seen if proper law & order situation is maintained and country is protected from foreign aggression. 4. Long Run effect: - of schemes operated on long term bases. 5. Economic stability: - When least changes take places during inflation, output, foreign trade, recessionary situation in the country. It is a guiding principle to the Govt. which avoids over taxation and is also based on cost benefit analysis.
3.
What do you understand by “Public Expenditure”? Explain in brief cannons of Public expenditure.
Ans.
Public expenditure deals with all expenditures incurred by Government on economic development, defence and social welfare activities in a country. Its features are: -
It is incurred by Govt. and Govt. bodies/institutions. It is based on budgetary provisions. It has pre determined objectives. It is incurred on feelings of public welfare. It is continuously increasing.
The importance of politic expenditure has considerably increased because of the following: 1. It helps in accelerating economic growth. 2. Major portion of expenditure is on defence to protect the country from foreign aggression. 3. It maintains economic stability in the country and reduction on in-equalities of income and wealth. 4. It improves economic and social standard of people. 5. It helps in reducing regional disparities. 6. It also motivates to save and thus leads to capital formation which is very crucial for growth and development. 7. It also leads to political stability which is also essential for growth. Cannons of Public Expenditure : - Some rules/principles/cannons need to be followed so that maximum utilization of scare resources can attain maximum benefits to the society.
These cannons can be discussed in two parts. Part-I cannons propogated by Findlay Shirras. These are four in number such as-
1. Cannon of benefit: - Public expenditure to be spent in such a way that benefit to the society is equal to loss incurred by society in the form of tax burden. 2. Cannon of economy: - There should be economy in carrying public expenditure. There should be rational and forsightedness while spending public expenditure besides economy. 3. Cannon of surplus: - Quantum of public expenditure should not exceed income. 4. Cannon of sanction: - Public expenditure on any part of it should not be spent without sanction of competent authority. Part-II other cannons 1. Cannon of elasticity: - Structure of public expenditure should be so flexible that it can be changed according to changed circumstances & requirements of Govt.
2. Cannon of Productivity: - Public expenditure programmes need to be carried out in such a way that it increases the productive capacity of the country. 3. Cannon of equitable distribution : - Allocation of public expenditure should be carried out in such a way that it distributes income and wealth in an equitable manner. 4. Cannon of coordination: - Expenditure need to be incurred in such a way that it leads to proper coordination between centre, state and local self Govt. and it should not be repetitive in nature. 5. Cannon of certainty: - The amount should be certain and expenditure should be on a variety of items.
Hence public expenditure should be carried on it such a way that it has favourable effect on-
Output Employment and Economic stability
4.
Explain in brief causes of increase in public expenditure.
Ans.
Over the years, the increase in public expenditure is many folds both in terms of total volume as well as items of public expenditure due to the following reasons: 1. Provision of welfare activities : - Ours is a welfare state and welfare activities are constantly increasing such as unemployment insurance, maternity & sickness benefit, old age pension, accident compensation, education and health etc. and hence public expenditure is on rise. 2. Nationalisation: - After independence, trend of nationalization has emerged in banking, finance, insurance and industrial sector leading to increase in public expenditure. 3. Economic planning, economic assistance and economic stability : - It planning era, lot of emphasis is on developmental activities. Economic assistance is also increasing on natural calamities like flood, earthquakes, epidemics etc. similarly, lot of expenditure is required to attain economic stability in the country and due to all these economic factors, public expenditure is increasing. 4. Inflationary situation: - Public expenditure also increases due to increase in prices leading to more expenditure on various infrastructure and welfare projects. 5. Population Growth: - Due to population increase, demand for various services is constantly increasing and hence public expenditure is increasing to meet growing
needs of population Spending on social services is also increasing due to increase in population. 6. Increase in defence Expenditure: - Competition to acquire latest technology weapon has led to increase expenditure on defence. 7. Problem of Refugees and Terrorism: - After independence, we are facing a big problem of refugees on which huge expenditure is there. Similarly, terrorism is becoming a worldwide problem and hence expenditure on overcoming these problems is also increasing. 8. Increasing debt burden: - Govt. has to pay back loan amount and interest on borrowings leading to increase in public expenditure. 5.
Narrate in brief latest trends of public expenditure in India.
Ans.
1. The public expenditure of central Govt. and states has been increasing with a rapid rate. All types of expenses i.e. -
Revenue and Capital expenditure Plant & non plant expenditure Developmental and non-development expenditure.
have considerably increased due to increased pressure on Govt. to meet the increasing demand of society. 2. The total Govt. expenditure as an average both in case of capital & revenue expenditure.
of G.D.P. are constantly declining
3. Capital outlay of Govt. as proportion of GDP are constantly declining which is a matter of serious concern. 4. Increase in revenue deficit – Total revenue deficit is also constantly increasing as percentage of GDP which is also a serious matter of concern. 5. As a public welfare measure and to provide fertilizers and oil products to public at reasonable rates, amount of subsidies has considerably increased. These subsidies have also increased due to the effect of globalization. The increase in crude prices in oil producing countries and world market, Govt. expenditure on imports of crude is also constantly on rise. Govt. even now providing heavy subsidity on domestic Gas (LPG), Kerosene petrol and diesel causing a great burden on Govt. exchequer. 6. Expenditure Management by Govt. has started to control public expenditure under which various steps have been initiated such as – -
Zero based budgeting
-
Critical evaluation of man power requirement in various Govt. departments.
-
Large scale computerization to achieve greater efficiency and man power saving.
-
Voluntary retirement schemes in Govt. and public sector banks and other organizations.
-
Cuts in subsidies and passing on the burden on consumers. Schemes are order way where prices of some products like domestic gas would be fixed in such a way that high income group will have to pay more as compared to low income group.
-
Expenditure reform commissions are being set up by Govt. to make recommendations to Govt. to bring reforms in public expenditure. These commissions have been advising Govt. to cut food subsidies, subsidities on fertilizers, oil products and optimum utilization of man power working in Govt. and public sector undertakings.
6.
What do you understand by tax? Explain key objects of taxation.
Ans.
Though different authors have defined tax in their own way, in simple words, “tax is compulsory contribution to the Govt. without expectation of any direct service, convenience or any benefit to the tax payer. In addition to Govt., Govt. bodies are also levying tax. Special features of tax are:
-
Tax is a compulsory payment. It is levied by public/statutory body It is payment to Govt./Govt. body There is a element of sacrifice by payer It is collected for public welfare Taxes are paid out of income Tax is not the cost of benefit It imposes personal duty on tax payer.
The modern Governments are imposing taxes to collect revenue for various developmental and social welfare activities. However, a few key objectives of taxation are given below: 1. Collecting revenue for Govt.: For spending on economic and social purposes. 2. Regulation & Control
On use/consumption e.g. more tax on luxury goods, high value cars etc.
3. To reduces inequalities in income & wealth
Taxes are collected from those who have more wealth and spent on economic and social welfare activities particularly for poor strata. 4. To promote capital formation Tax relief to those who save more leading to capital formation. 5. Business stability and full employment
With the help of tax revenue, new business activities are undertaken by Govt. with the purpose of providing employment. 6. Protecting local business/production At times, import duty is levied to protect domestic business and promote domestic production. 7. To raise national income Key source of national income is tax. Income received from taxes is used for productive purposes and finally leads to increase in per capita income. Increase in per capita income is a sign of growth and development. 7. Explain in brief cannons of taxation . Ans. Cannons are principles on the basis of which taxes are levied. These cannons can be divided in to two categories: 1. Cannons as propogated by Adam Smith 2. Other cannons. 1. Cannons of Adam Smith – According to Adam Smith, there are four cannons of taxation such as: i) Cannon of equity: - Burden of tax should be equally distributed and tax payer should pay tax in proportion to the income. ii) Cannon of certainty: - Amount of tax, time of tax method of paying tax, place of paying tax should be certain. iii) Cannon of convenience : - Levying of tax should be according to the convenience of tax payer with reference to place, period and mode of payment putting payer least inconvenience. iv) Cannon of economy: - Tax system should not be expensive. The cost of collecting tax should be minimum 2. Other cannons of taxation: - Other economists have propagated following cannons of taxation. i) Cannon of simplicity: - Tax system should be simple and easily understandable to tax payer. ii) Cannon of Productivity: - Tax system should not only provide revenue for present but also income in future.
iii) iv) v) vi) vii) viii) ix)
Cannon of elasticity: - Tax system should be elastic which would be adjusted according to the requirements of Govt. Cannon of diversity: -Instead of a single tax, different types of taxes need to be levied on different sections of society. Cannon of uniformity: - Tax system should be uniform in respect of imposition of tax and determination of tax rates. Cannon of flexibility: - Tax system should be flexible in the sence that tax could be realized without any resistance/opposition by tax payers. Cannon of expediency: - Imposition of tax should be done keeping in view reactions of tax payers. Cannon of coordination: - Tax system should insure proper coordination between different taxes and tax imposing/collecting authorities. Cannon of desirability: - There should be proper justification for imposing tax and this justificationshould be properly understood by all concerned.
For easy recollection of various cannons, students may remember following: Adom Smith Cannons
Other Ca nnons
E – Equality C – Certainty C – Conveniences E – Economy
SPDUFEC-
Simplicity Productivity Diversity & desirability Uniformity Flexibility Elasticity & expediency Coordination
8. Explain in brief the classification of taxes. Ans. Following chart shows the classification of taxes Classification of Taxes
Tax System
Single Multiple Tax Tax Regressive
Tax Burden
Direct Tax
On the bases of Tax rate
Basis of Tax assessment
Indirect Tax
Progressive
Specific
Proportionate
Digressive
Advalorem
Personal Tax
9.
Single Tax
-
When Govt. raises its revenue through single tax only
Multiple Tax
-
When Govt. raises its revenue through multiple or several taxes
Direct Tax
-
Where burden of tax lies on specific person and cont be shifted e.g. income tax.
Indirect Tax
-
Impact of which lies on different persons indirectly e.g. excise duties, sales tax, octroi etc.
Regressive rate
-
Rate of tax decreases with the increase in income
Progressive rate
-
Rate of tax increases with increase in income e.g. income tax where rate of tax increases with increase in income
Proportionate
-
Where tax rate is same for all income groups
Digressive
-
Mixture of progressive and proportionate rate of tax where rate of tax decreases with increase in income
Specific
-
Where tax is levied on the basis of unit, quantity, weight, measurement etc.
Advalorem
-
Tax is levied according to the value of a commodity
Personal tax
-
Levied on the basis of number of persons e.g. toll tax, entertainment tax.
What do you understand by public debt? What are the reasons of increase in public debt in India? Ans. Public debt is a part of public finance under which Govt. borrows money both internally and externally to meet various objectives whem public expenditure is greater than public revenue during a given period of time. This public debt in India has considerability increased after independence due to launching of various developmental programme on planned basis. Public debt can be classified into two1. Internal Public debt - Borrowings from individuals, banks, non banking finance companies and borrowings from RBI 2. External Public debt - Borrowings from private investors, foreign Govts. International financing institutions like IMF, IDA etc Public debt in India has increased due to increase in expenditure of central Govt. development expenditure during 5 year plans. External debt has also considerably
increased due to growing demands of economy. Major portion of internal public debt has come from public finance institutions. Causes of increase in public debt in India:
In India, public debt of both from internal & external sources have increased due to following reasons: 1. Economic Planning – India Govt. has adopted development through five year plans under which huge investment is required on economic and social overheads leading to increase in expenditure. 2. Population growth – Our population have crossed 120 million and to meet growing needs of population like health, housing, sanitation, drinking water, means of communication, expenditure of Govt. has gone up. 3. Defence expenditure – Due to tight relations with neibouring countries like, Pakistan, China our expenditure on defence has considerably increased. 4. Increase in welfare activities of Govt . for providing unemployment opportunities, developmental activities as well as various schemes of health, education, and social security have increased. 5. Increase in prices – has also lead to increase in Govt. expenditure on various services and cost of projects has also increased. 6. Democratic system – Under this system, elections to parliament and state assemblies are conducted once in five years requiring huge expenditure. Similarly many public institutions like Panchayats, Zila Parished etc. are also democratically managed requiring huge amount on election of their office bearers. To exercise due control on public expenditure Govt. has initiated various measures like check on non-developmental expenditure, ensuring productive use of debts, optimum utilization of human resource, control on population growth and export promotion. 10. Ans.
Write a detailed note on Central / State Finance relationship.
In India, as per constitutional provisions, federal system of administration is followed where there are two authorities i.e. central Govt. or federal Govt. and state Govt. Functions of national importance are carried out by central govt. & subjects of regional importance are given to state & local govt. Both the govts. i.e. central and state have their operational jurisdiction for raising the resources and items on which these resources are spent. Special features of Central State Finance relationship (A)
Section 245 to 300 of Indian constitution has determined central state financial relations. The sources of income between central and state have been divided in the VII schedule of constitution. Under article 268, sources have been divided in 3 lists i.e.
1. 2. 3.
(B)
There elements in relationship between central and state are: 1. Specific jurisdiction of taxes have been defined for collection taxes 2. Share in taxes - Some taxes are levied by central govt. but part of income is shared with states. 3. Grant in aid – when there is a deficit in the budget of a state, central govt. provides grant in aid to bridge the gap.
(C)
Distribution and allocation of central revenue is done amongst states as per article 269 to 272
(D)
Consolidated Fund – In both Central and State Governments, income/revenue is credited in consolidated fund and expenditure from that fund in case of central govt. is with the approval of parliament and in case of state, with the approval of state Assembly. Loans - Under article 292 of constitution central and state governments are authorized to raise loans from market. State govt. can also raise loan from central govt. Finance Commission: - Under article 280 of constitution Finance Commission is constituted by the President of India to make recommendation for distribution of income between centre and states. This commission also recommends basis for providing grant in aid to states as well as other matters of financial relationship between centre and states.
(E)
(F)
11. Ans.
Central List: - Consisting of matters on which Central Govt. imposes tax e.g. income tax, custom duty, excise etc. State List: - Which provides jurisdiction to states to impose tax e.g. land revenue, taxes on sale & purchase, land & building tax etc. Concurrent List: - Which have items on which central and state Govts. imposes tax. Both have concurrent powers to impose tax.
Explain in brief “deficit financing”. What are its positive and negative effects on the economy? Due to increased activities of government, its expenditure is increasing over income. This gap is managed through new taxes, raising rates of old taxes and internal as well as external borrowing. Even if there is a gap, the last resort to bridge the gap is deficit financing. This deficit financing is arranged through following 3 methods: 1. Borrowings from RBI 2. Withdrawal of cash from RBI 3. Issuing new currency
This deficit financing is resorted to with the following objectives:
1. To arrange for extra expenditure during war. 2. To promote economic development and accelerating rate of growth, huge investment is required for which deficit financing is at times resorted. 3. To face depression – during depression, there is a glut of goods and services and problem of mass unemployment. To overcome this situation and to increase money supply, deficit finance is a step. 4. To create more purchasing power for better utilization of resources of economy
This deficit may be of different types such as: -
Revenue deficit – When revenue receipts are less than revenue expenditure. Budget deficit – When total expenditure exceeds total receipts. Fiscal deficit – Budget deficit plus market borrowings and liabilities of govt. Primary deficit – Means fiscal deficit less interest payments.
The quantum of deficit financing of central govt. in increasing with a rapid speed during planning from first five year plan till current five year plan. Positive impact of deficit financing 1. It helps a developing economy to accelerate rate of economic growth in a country and raises rate of capital formation. 2. It helps in overcoming deflationary/depression situation by adding to purchasing power. It also helps in overcoming problem of unemployment in deflationary situation. 3. Increases demand of goods and services which leads to increase in production of goods and services. 4. Increases in prices helps traders, industrialists sellers to get more benefit/profit. Negative effects of deficit financing : 1. It leads to increase in public debt and liabilities of govt. As a result preparation of a viable budget becomes a difficult task. 2. It leads to inflationary trend in economy which effect almost all sectors of economy particularly fixed income group/salary earners. 3. It raises credit creation by banks which leads to more loans and advances which further adds to inflationary trend in the economy.
These evil effects can be controlled by increasing production of goods, supply of raw material, rationing and monitory policy measures. However, deficit financing should be used judicially by government.
