Daily Quiz #16 UPSC Prelims Marathon – August 20, 2019

Explanation: MSF is a new scheme announced by the RBI in its Monetary Policy, 2011-12 which came into effect from May, 2011. Under this scheme, banks can borrow overnight up to 1 per cent of their net demand and time liabilities (NDTL) from the RBI, at the interest rate 1 per cent (100 basis points) higher than the current repo rate. In an attempt to strengthen rupee and checking its falling exchange rate, the RBI increased the gap between ‘repo’ and MSF to 3 per cent (late July 2013). The MSF rate has been floated as a penal rate and since mid-2015 RBI has maintained it 1 per cent higher than the prevailing repo rate. By end March 2017 it was at 6.75 per cent, fully aligned with the Bank rate (i.e., equal to the Bank rate).

Explanation: The Regional Rural Banks (RRBs) were first set up on 2 October, 1975 (only
5 in numbers) with the aim to take banking services to the doorsteps of the rural masses specially in the remote areas with no access to banking services with twin duties to fulfill
•To provide credit to the weaker sections of the society at concessional rate of interest who previously depended on private money lending, and
•To mobilize rural savings and channelize them for supporting productive activities in the rural areas.
The Government of India, the concerned state government and the sponsoring nationalized bank contribute the share capital of the RRBs in the proportion of 50 per cent, 15 per cent and 35 per cent, respectively. The area of operation of the RRB is limited to notify few districts in a state.
Following the suggestions of the Kelkar Committee, the government stopped opening new RRBs in 1987-by that time their total number stood at 196. Due to excessive leanings towards social banking and catering to the highly economically weaker sections, these banks started incurring huge losses by early 1980s. For restructuring and strengthening of the banks, the governments set up two committees-the Bhandari Committee (1994–95) and the Basu Committee (1995–96).

Explanation: All Indian banks have to follow the compulsory target of priority sector lending (PSL). The priority sector in India are at present the sectors-agriculture, small and medium enterprises (SMEs), road and water transport, retail trade, small business, small housing loans (not more than Rs. 10lakhs), software industries, self help groups (SHGs), agro-processing, small and marginal farmers, artisans, distressed urban poor and indebted non-institutional debtors besides the SCs, STs and other weaker sections of society. The PSL target must be met by the banks operating in India in the following way:
•Indian Banks need to lend 40 per cent to the priority sector every year (public sector as well as private sector banks, both) of their total lending.
•Foreign Banks (having less than 20 branches) have to fulfill only 32 per cent PSL target which has sub-targets for the exports (12 per cent) and small and medium enterprises (10 per cent).

Explanation: The public sector insurance company, Agriculture Insurance Company of India Limited (AICIL) was set up by the Government of India in December 2002 (commenced its business in April 2003). This is a dedicated agri-insurance company and aims “to serve the needs of farmers better and to move towards a sustainable actuarial regime”. This company was responsible to look after the National Agriculture Insurance Scheme (NAIS) which was launched in 1999. Since January 2016, the company is looking after the newly launched PMFBY (Prime Minister Fasal Bima Yojana) which subsumed the existing agri-insurance schemes-the NAIS and the Modified NAIS (of 2010).

Explanation: A new stock exchange to promote liquidity to the stocks of the small enterprises (SMEs) was launched in 2005 jointly and medium the BSE and the FISE (Federation of Indian Stock Exchanges, representing 18 regional stock exchanges). It is better known as the BSE Indo Next.