Important Topics From Financial Awareness- Banks, Financial System, Union Budget

FA is an important component of any exam since its scores determine the final merit list. As a result, doing well in it is critical. Unlike other areas of the Main test, candidates may quickly complete the Financial Awareness section. To get a decent grade on it, you need to cover all the facts and figures. Below are the Important Topics from Financial Awareness which one should consider first while preparing:

1. Banks In India- Commercial Bank, Exim Bank Of India, Payment Bank, Co-Operative Banks, Regional Rural Banks, Small Finance Banks

• A commercial bank is a for-profit financial institution that offers services such as receiving deposits, issuing business loans, and offering basic investment products. 
• The Export-Import Bank of India (EXIM) is an Indian financial institution founded in 1982 under the Export-Import Bank of India Act 1981.
• Retail and commercial banking is structured in cooperative banking. In most regions of the globe, cooperative banking organisations accept deposits and lend money.
• Under the Companies Act of 1956, small banks are formed as public limited companies in the private sector. The Reserve Bank of India Act, 1934, the Banking Regulation Act, 1949, and other related legislation control them.

2. Indian Financial System

 The financial system comprises the services supplied to a person by numerous financial institutions such as banks, insurance firms, pension funds, and mutual funds.

The following are characteristics of the Indian financial system:

• It is critical to the country’s economic success since it stimulates both savings and investment.
• It aids in the mobilisation and allocation of savings.
• It makes it easier for financial institutions and marketplaces to grow.
• Has a significant impact on capital creation.
• It aids in forming a bond between the investor and the saver.
• It also has to do with the distribution of finances.

3. Union Budget

Union Finance Minister, Nirmala Sitharaman is presenting the Union Budget 2021 for the 3rd time in a row. The Union Budget is the yearly financial report estimating the income and expenditure presented to outline future policies to be adopted by the government for sustainable growth and development. The total financial effect of all AtmaNirbhar Bharat packages, including RBI actions, was anticipated to be over ‘27.1 lakh crores, or more than 13% of GDP.

4. Public Finance

The study of the government’s role in the economy is known as public finance. It is a discipline of economics that examines the government’s revenue and spending and how to modify one or the other to accomplish desired outcomes while avoiding unwanted ones.

5. Measures Of Government Deficit

To deal with the revenue shortfall, the government may cut important expenditures or boost tax and non-tax collections.

Let’s take a look at some of the reforms that have been put in place to address the government deficit.

• Increasing the income tax rate
• New levies are being implemented.
• Keeping track on excessive spending
• Selling of assets

6. Fiscal Responsibility And Budget Management (FRBM) Act

The FRBM Act is all about keeping the government’s revenue and expenditure under check. The Budgetary Responsibility and Budget Management Act was enacted to establish fiscal discipline. Effective budgeting, income, and debt management macroeconomic stability are important for improved fiscal and monetary policy cooperation.

7. Monetary Policy

Monetary policy is the approach taken by a country’s monetary authority to control either the interest rate paid on very short-term borrowing (banks borrowing from each other to meet their short-term needs) or the money supply, often in an attempt to reduce inflation or the interest rate, to maintain price stability and public confidence in the currency’s value and stability.

8. Goods and Services Tax (GST)

GST (Goods and Services Tax) is an indirect tax (sometimes known as a consumption tax) imposed on the supply of goods and services in India. It is a destination-based, multistage, comprehensive tax: comprehensive since it includes practically all indirect taxes, with the exception of a few state levies. The GST, as a multi-staged tax, is imposed at each stage of the production process, but it is intended to be refunded to all parties involved in the various stages of production except the final consumer, and as a destination-based tax, it is collected from the point of consumption rather than the point of origin, as previous taxes were.

9. Derivatives

A derivative is a financial contract whose value is based on the performance of an underlying entity. This underlying entity, which might be an asset, an index, or an interest rate, is commonly referred to as the “underlying.” Derivatives can be used for a variety of objectives, including hedging against price changes, increasing exposure to price swings for speculation, and gaining access to assets or marketplaces that are otherwise difficult to trade. Forwards, futures, options, swaps, and derivatives of these, such as synthetic collateralized debt obligations and credit default swaps, are some of the most prevalent derivatives.

10. Securities And Exchange Board Of India

SEBI (Securities and Exchange Board of India) was created in 1988 as a non-statutory organisation to regulate the securities market. The SEBI Act of 1992 gave it legislative authority on the 30th of January 1992. SEBI was established as an autonomous entity on April 12, 1992, and was quickly appointed as the government of India’s capital market regulator. The Security and Exchange Board of India has four regional offices in New Delhi, Kolkata, Chennai, and Ahmedabad, with its headquarters in Mumbai, Maharashtra.SEBI established local offices in Jaipur, Bangalore, Guwahati, Bhubaneshwar, Patna, Kochi, and Chandigarh during the financial year 2013-2014.

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