DAY – 46 (InstaTest-46): Insta 75 Days Revision Plan-2022: Topic – Economy, Tests 30, 31, July 2021 CA – INSIGHTSIAS

Solution: D

Cash Reserve Ratio (CRR) RBI meaning, CRR rate: The Cash Reserve Ratio in India is decided by RBI’s Monetary Policy Committee in the periodic Monetary and Credit Policy. The Reserve Bank of India takes stock of the CRR in every monetary policy review, which, at present, is conducted every six weeks. CRR is one of the major weapons in the RBI’s arsenal that allows it to maintain a desired level of inflation, control the money supply, and also liquidity in the economy. The lower the CRR, the higher liquidity with the banks, which in turn goes into investment and lending and vice-versa. Higher CRR can also negatively impact the economy as lesser availability of loanable funds, in turn, slows down investment. It thereby reduces the supply of money in the economy.

What is CRR or Cash Reserve Ratio?

The Reserve Bank of India or RBI mandates that banks store a proportion of their deposits in the form of cash so that the same can be given to the bank’s customers if the need arises. The percentage of cash required to be kept in reserves, vis-a-vis a bank’s total deposits, is called the Cash Reserve Ratio. The cash reserve is either stored in the bank’s vault or is sent to the RBI. Banks do not get any interest on the money that is with the RBI under the CRR requirements.

How is Cash Reserve Ratio calculated? CRR formula:

If the current CRR rate is 4%, a bank is required to store 4% of the total NDTL or the Net Demand and Time Liabilities in the form of cash. The bank cannot use this money for investment or lending.

CRR versus SLR

Unlike Statutory Liquidity Ratio or SLR, which can be maintained in either gold or cash, CRR needs to be maintained only in cash.

Objectives of Cash Reserve Ratio

There are two primary purposes of the Cash Reserve Ratio:

• Since a part of the bank’s deposits is with the Reserve Bank of India, it ensures the security of the amount. It makes it readily available when customers want their deposits back.
• Also, CRR helps in keeping inflation under control. At the time of high inflation in the economy, RBI increases the CRR, so that banks need to keep more money in reserves so that they have less money to lend further.

Solution: D

All the above are correct.

Business Correspondent (BC) – An Introduction

Business correspondents are bank representatives. They help villagers to open bank accounts. Business Correspondents get commission from bank for every new account opening, every transaction made via them, every loan-application processed etc. The Business Correspondent carries a mobile device and helps villagers in banking transactions. (Deposit money, take money out of savings account, loans etc.). The villager gives his thumb impression or electronic signature, and gets the money.

Eligibility to become a Business Correspondent

As per the RBI guidelines, the following entities are eligible for appointment of Business Correspondents (BCS) for banks:

• NGOs/MFls set up under Societies/Trust Acts
• Societies registered under Mutually Aided Cooperative Societies Acts or the Cooperative Societies Acts of States
• Section 25 companies that are standalone entities or in which NBFCs, banks, telecom companies and other corporate entities or their holding companies did not have equity holdings in excess of 10 per cent
• Post offices
• Retired bank employees,
• Ex-servicemen
• Retired government employees.
• Individual kirana / medical / fair price shop owners Individual Public Call Office (PCO) operators
• Agents of Small Savings Schemes of Government of India/Insurance Companies Individuals who own petrol pumps
• Retired teachers
• Authorised functionaries of well-run Self-Help Groups (SHGs) linked to banks Non deposit taking NBFCs (non-banking finance companies) in the nature of loan companies whose micro finance portfolio is not less than 80 per cent of their loan outstanding in the financially excluded districts as identified by the Committee on Financial Inclusion.
• RBI has now permitted banks to engage any individual, including those operating Common Service Centres (CSCs) as BC, subject to banks’ comfort level and their carrying out suitable due diligence as also instituting additional safeguards as may be considered appropriate to minimise the agency risks.

Scope of activities to be undertaken by BC

The scope of activities undertaken by BC is as under:

• Creating awareness about savings and other products and education and advice on managing money and debt counseling.
• Identification of potential customers
• Collection and preliminary processing of various forms for deposits including verification of primary information / data
• Filling of applications / account opening forms including nomination clause and Submission to the Bank.
• KYC will also be completed by the BC.
• Opening of no frill deposit accounts and other products as permitted from time to time by leveraging technology.
• Collection and payment of small value deposits and withdrawals; Min : nil; Max: Rs. 2000/- per transaction.
• Receipt and delivery of small value remittances / other payment instruments, as per Fl Plan of IDBI Bank.
• In respect of all such transactions, the BC/his agent will be authorized to accept / deliver cash either at his place of work or at any convenient location subject to the ceilings per customer (Rs 2000/- in each case).
• Furnishing of mini account statements and other account information, for a period of 3 months.
• Any other service on behalf of the Bank, duly authorized by the appropriate authority.
• The activities undertaken by the Business Correspondents would be within the normal course of the Bank’s banking business, but conducted through and by the entities at places other than the Bank’s premises.
• In respect of all such transactions, the BC/his/her agent will be authorized to accept / deliver cash either at his place of work or at any convenient location subject to the ceilings per day / per customer as laid down. The Business Correspondents will be linked to a nearby branch (base Branch).
• Cross-selling of other financial products like insurance / mutual fund products / pension products / any other third party product, as and when they are assigned to do SO.
• In case duly appointed sub-agents of BCs, BCs to take care of reputational risks involved.

Solution: A

Considering the importance of availability of labour force data at more frequent time intervals, National Statistical Office (NSO) launched Periodic Labour Force Survey (PLFS) on April 2017. The objective of PLFS is primarily twofold:

• to estimate the key employment and unemployment indicators (viz. Worker Population Ratio, Labour Force Participation Rate, Unemployment Rate) in the short time interval of three months for the urban areas only in the Current Weekly Status (CWS).

to estimate employment and unemployment indicators in both usual status (ps+ss) and CWS in both rural and urban areas annually.

Solution: C

What is marginal cost of funds-based lending rate or MCLR?

What is MCLR? How is it determined?

It is the minimum interest rate that a bank can lend. It is a tenor-linked internal benchmark, which means the rate is determined internally by the bank depending on the period left for the repayment of a loan. MCLR is closely linked to the actual deposit rates and is calculated based on four components: the marginal cost of funds, negative carry on account of cash reserve ratio, operating costs and tenor premium.

Genesis of MCLR:

The Reserve Bank of India introduced the MCLR methodology for fixing interest rates from 1 April 2016. It replaced the base rate structure, which had been in place since July 2010.

Solution: A

Frictional unemployment occurs as a result of people voluntarily changing jobs within an economy.

Cyclical unemployment is the variation in the number of unemployed workers over the course of economic upturns and downturns, such as those related to changes in oil prices.

Structural unemployment comes about through technological change in the structure of the economy in which labor markets operate.

Institutional unemployment is unemployment that results from long-term or permanent institutional factors and incentives in the economy.

Solution: B

There has been a divergence between the official tax rate and effective tax rate in India—defined as the ratio of total tax collected to the aggregate tax base. The divergence occurs mainly on account of tax exemptions. Tax expenditure is also known as revenue forgone.

But such forgone taxes does not necessarily mean that they have been waived off by the government. Better, it should be interpreted as incentives given by the government to promote certain sectors, in absence of which they may not have come up.

High tax expenditure can make the tax system unduly complex and bring in distortions in it. As a result of simplification in the tax system and improvements in tax administration in recent years have brought tax expenditure down.

Solution: D

In a fixed exchange rate system, when some government action increases the exchange rate (thereby, making domestic currency cheaper) is called Devaluation. On the other hand, a Revaluation is said to occur, when the Government decreases the exchange rate (thereby, making domestic currency costlier) in a fixed exchange rate system.

Solution: B

The main feature of the fixed exchange rate system is that there must be credibility that the government will be able to maintain the exchange rate at the level specified. Often, if there is a deficit in the BoP, in a fixed exchange rate system, governments will have to intervene to take care of the gap by use of its official reserves. If people know that the amount of reserves is inadequate, they would begin to doubt the ability of the government to maintain the fixed rate. This may give rise to speculation of devaluation. When this belief translates into aggressive buying of one currency thereby forcing the government to devalue, it is said to constitute a speculative attack on a currency. Fixed exchange rates are prone to these kinds of attacks, as has been witnessed in the period before the collapse of the Bretton Woods System.

The flexible exchange rate system gives the government more flexibility and they do not need to maintain large stocks of foreign exchange reserves. The major advantage of flexible exchange rates is that movements in the exchange rate automatically take care of the surpluses and deficits in the BoP. Also, countries gain independence in conducting their monetary policies, since they do not have to intervene to maintain exchange rate which are automatically taken care of by the market.

Increase in exchange rate implies that the price of foreign currency (dollar) in terms of domestic currency (rupees) has increased. This is called Depreciation of domestic currency (rupees) in terms of foreign currency (dollars).

Similarly, in a flexible exchange rate regime, when the price of domestic currency (rupees) in terms of foreign currency (dollars) increases, it is called Appreciation of the domestic currency (rupees) in terms of foreign currency (dollars). This means that the value of rupees relative to dollar has risen and we need to pay fewer rupees in exchange for one dollar.

Solution: D

Revised Kisan Credit Card Scheme

Objective

The scheme aims at providing adequate and timely cred it for the comprehensive credit requirements of farmers under single window for their cultivation and other needs as indicated below:

• To meet the short-term credit requirements for cultivation of crops
• Post-harvest expenses
• Produce Marketing loan
• Consumption requirements of farmer household
• Working capital for maintenance of farm assets, activities allied to agriculture, like dairy animals, inland fishery and also working capital required for floriculture, horticulture etc.
• Investment credit requirement for agriculture and allied activities like pump sets, sprayers, dairy animals, floriculture, horticulture etc
• Short term credit requirements of rearing of animals, birds, fish, shrimp, other aquatic organisms, capture of fish.

Eligibility and credit limit

Eligibility

• All farmers-individuals/Joint borrowers who are owner cultivators.
• Tenant farmers, Oral lessees and Share Croppers etc.
• SHGs or Joint Liability Groups of farmers including tenant farmers, share croppers etc.,
• The criteria for eligible beneficiaries under KCC for Animal Husbandry and Fisheries is as follows
  • Fishery
    • Inland Fisheries and Aquaculture – Fishers, Fish Farmers (individual & groups/ partners/ share croppers/ tenant farmers), Self Help Groups, Joint Liability Groups and women groups. The beneficiaries must own or lease any of the fisheries related activities such as pond, tank, open water bodies, raceway, hatchery, rearing unit, possess necessary license for fish farming and fishing related activities, and any other State specific fisheries and allied activities.
    • Marine Fisheries – Beneficiaries listed above, who own or lease registered fishing vessel/boat, possess necessary fishing license/permission for fishing in estuary and sea, fish farming/mariculture activities in estuaries and open sea and any other State specific fisheries and allied activities.
  • Poultry and small ruminant – Farmers, poultry farmers either individual or joint borrower, Joint Liability Groups or Self Help Groups including tenant farmer of sheep/goats/pigs/poultry/ birds /rabbit and having owned/rented/leased sheds.
  • Dairy – Farmers and Dairy farmers either individual or joint borrower, Joint Liability Groups or Self Help Groups including tenant farmers having owned /rented/leased sheds.

Solution: D

Special drawing rights (SDR) refer to an international type of monetary reserve currency created by the International Monetary Fund (IMF) in 1969 that operates as a supplement to the existing money reserves of member countries. Created in response to concerns about the limitations of gold and dollars as the sole means of settling international accounts, SDRs augment international liquidity by supplementing the standard reserve currencies.

• Special drawing rights (SDR) are an artificial currency instrument created by the International Monetary Fund, which uses them for internal accounting purposes.
• The value of the SDR is calculated from a weighted basket of major currencies, including the U.S. dollar, the euro, Japanese yen, Chinese yuan, and British pound.
• The SDR interest rate (SDRi) provides the basis for calculating the interest rate charged to member countries when they borrow from the IMF and paid to members for their remunerated creditor positions in the IMF.

Solution: A

A reserve tranche is a portion of the required quota of currency each member country must provide to the International Monetary Fund (IMF) that can be utilized for its own purposes—without a service fee or economic reform conditions.

The IMF is funded through its members and their quota contributions. The reserve tranche is basically an emergency account that IMF members can access at any time without agreeing to conditions or paying a service fee.

In other words, a portion of a member country’s quota can be withdrawn free of charge at its own discretion.

Solution: B

Global Innovation & Technology Alliance (GITA) is a “not–for–profit” Section-8 Public Private Partnership (PPP) company promoted jointly by the Technology Development Board (TDB), Department of Science & Technology (DST), Government of India and the Confederation of Indian Industry (CII).

The Prime Minister’s Council on Trade & Industry had, in 2010, recommended incorporation of a Government’s arm’s length entity under PPP mode to professionally manage the Government’s funds for providing flexibility to industry for undertaking R&D along with global partners.

The GITA platform encourages industrial investments in innovative technology solutions by

• Mapping technology gaps,
• Undertaking expert evaluation of technologies available across the globe,
• Facilitating techno–strategic collaborative partnerships appropriate for Indian economy
• Connecting industrial and institutional partners for synergistic matchmaking and
• Providing soft funding for technology development / acquisition / deployment.

Solution: A

The main difference between the International Monetary Fund (IMF) and the World Bank lies in their respective purposes and functions. The IMF oversees the stability of the world’s monetary system, while the World Bank’s goal is to reduce poverty by offering assistance to middle-income and low-income countries.

World Bank assistance is typically long-term, funded by countries—mainly the world’s richest that are members of the bank—through the issuing of bonds. The bank’s loans are not used as a type of bailout, as is the case with the IMF, but as a fund for projects that help develop an underdeveloped or emerging market nation and make it more productive economically.

The size of the World Bank’s shareholders, like that of the IMF’s shareholders, depends on the size of a country’s economy. Thus, the cost of a subscription to the World Bank is a factor of the quota paid to the IMF.

Solution: C

The World Bank Group (WBG) was established in 1944 to rebuild post-World War II Europe under the International Bank for Reconstruction and Development (IBRD). It is one of a variety of organizations seeking to shape the world economy.

Today, the World Bank functions as an international organization that fights poverty by offering developmental assistance to middle-income and low-income countries. By giving loans and offering advice and training in both the private and public sectors, the World Bank aims to eliminate poverty by helping people help themselves. Under the World Bank Group (WBG), there are complementary institutions that aid in its goals to provide assistance.2

The World Bank is an international organization that offers developmental assistance to middle-income and low-income countries. 

There are 189 member countries that are shareholders in the IBRD, the primary arm of the WBG. To become a member, however, a country must first join the International Monetary Fund (IMF). The size of the World Bank’s shareholders, like that of the IMF’s shareholders, depends on the size of a country’s economy. Thus, the cost of a subscription to the World Bank is a factor of the quota paid to the IMF.

Solution: C

The International Union of Credit and Investment Insurers (Berne Union) is an international not-for-profit trade association, representing the global export credit and investment insurance industry.

Its members include government-backed export credit agencies, private credit and political risk insurers and multilateral institutions from across the globe who provide insurance products, guarantees, and, in some cases, types of direct financing in the support of cross-border trade – providing a vital link in the flow of goods, services and investment capital world-wide.

The Berne Union has 83 member companies from around the world, including 2 observers. The membership is diverse – member organisations may be private or state linked, small or large. They represent all aspects of the export credit and investment insurance industry worldwide.

Export Credit Guarantee Corporation of India represents India at the Union.

Solution: A

Solution:

• Ethiopia, Madagascar, South Sudan and Yemen are among countries where 584,000 people currently face famine-like conditions as climate change intersects with the other huge driver of hunger, conflict – pushing 45 million to the brink of famine. This number has risen from 27 million in 2019.

Solution:D

Solution:

The World Bank has launched a new ‘Cybersecurity Multi-Donor Trust Fund’, to better roll out a cybersecurity development agenda in a systematic manner. The new fund has been developed as an associated trust fund under the broader Digital Development Partnership (DDP) umbrella program.

Solution: C

Solution:

• The Safe Cities Index 2021 is the fourth and the latest report released from The Economist Intelligence Unit (EIU), sponsored by the NEC Corporation.
• It covers 60 cities across 76 indicators and five parameters.
• The latest edition of World’s Safe Cities Index 2021 was released in September 2021. Mumbai and New Delhi were the only Indian cities to make it to the top 60 and were placed not very high in the safe cities index list, with Delhi ranked 48 and Mumbai being placed at 50.

Solution:A

Solution:

The Sun’s corona is the outermost part of the Sun’s atmosphere. The corona is usually hidden by the bright light of the Sun’s surface. That makes it difficult to see without using special instruments. However, the corona can be viewed during a total solar eclipse.

Solution: B

Solution:

• Event horizon is the boundary marking the limits of a black hole. At the event horizon, the escape velocity is equal to the speed of light. Since general relativity states that nothing can travel faster than the speed of light, nothing inside the event horizon can ever cross the boundary and escape beyond it, including light. Thus, nothing that enters a black hole can get out or can be observed from outside the event horizon. It is a point of no return.

Solution: C

Solution: 30 by 30 initiative of COP15 of Convention on Biodiversity (CBD) held at China. It is a worldwide initiative for governments to conserve 30% of Earth’s land and ocean area by 2030 through area based conservation measures.

Solution : B

Solution: Devasthal Fast Optical Telescope (DFOT) telescopes located at Devasthal, Nainital. To derive accurate value of Pluto’s atmospheric pressure at its surface. It is more than 80,000 times less than the atmospheric pressure at mean sea level on Earth.

Solution : B

Solution: ENCORE is funded by World Bank, implemented by Ministry of environment forest and climate change.It aims to enhance the coastal resources, protect coastal population from pollution, erosion and sea level rise and improve their livelihood opportunities.

It covers only eight Coastal states and three UTs.

Solution: B 

Solution: Bheem Kol is an indigenous variety of bananas found only in Assam and parts of North East India. The most preferred banana is called ‘Bheem Kol’ in Assamese.

Solution: A 

Solution : GI was introduced in 2003 and is governed under the Geographical Indications of Goods (Registration & Protection) Act, 1999

Generic GI – When a GI-certified product becomes more popular by the name of the origin of the place, it is termed as Generic GI. 

Homonymous GI – When two or more products, which have been granted GI status, are spelled or pronounced alike, but their source of origin is different (usually in different countries), such GI are termed as Homonymous GI.

Correct Answer : B

Explanation:

Numbers divisible by 3 = 100/3 = 33 Numbers divisible by 7 = 100/7 = 14

Numbers divisible by 21 (LCM of 3 and 7) = 100/21 = 4

Total numbers divisible by 3 or 7 = 33 + 14 – 4 = 43

Total numbers which are not divisible by 3 or 7 = 100 – 43 = 57

Correct Answer : B

Explanation:

‘256’ = ‘red colour chalk’

‘589’ = ‘green colour flower’

‘254’ = ‘white colour chalk’

5 and colour are common in all three. So, 5 = Colour, 2 = Chalk

Red = 6, White =4

Correct Answer : B

Explanation:

Downstream speed = 9+6 = 15

Upstream speed = 9-6 = 3

Now total time is 28 hours

If distance between A and B is d, then distance BC = d/2 Now distance/speed = time, so

d/15 + (d/2)/3= 28, solve d = 120

Correct Answer : C

Solution:

Milk = (7/10) *60 = 42 litres.

Water = (3/10) *60 = 18 litres.

So water must be added = 42 – 18 = 24

Correct Answer : D

Solution: 1. No discussion on water intensive crops—so A is wrong

2. There is no comparison of GW with other sources of water—so B is wrong
3. C is relevant but not the most important implication
4. Since GW issues caused by Climate change is the least understood issue as per the

passage—D is correct.

Thus, D is the answer.