Chapter 6: FINANCE PART 2

Foreign Investment Promotion Board

  1. It is under the Dept of Economic Affairs under the Finance ministry
  2. Rs 1200 crore is the limit for clearance and beyond that the cabinet committee on economic affairs handles.

GIFT [Gujarat International Financial Tech] City, Gandhinagar, Gujarat

London, New York, Singapore are the three biggest financial centers.GIFT city has two shareholders Gujarat Urban development cooperative ltd and International leasing & financial services ltd. ILFS is a company where shareholders are commercial banks SBI, HDFC, insurance companies and RBI.

It is a greenfield project with SMART city like facilities.


  1. All investors are treated as NRI outside India for tax purposes.
  2. Invest in hedge funds and mutual funds in foreign currency only.
  3. NSE to setup international exchange for trading equities.
  4. Foreign banks and Indian banks with foreign presence can setup only 1 unit.
  5. They cant take rupee deposits or retail customers.
  6. CRR, SLR limits are there.

Sovereign Gold Bonds

SGB's have a 8 year maturity period and were launched during the Budget 2015. Launched to reduce India's dependence on imported gold and lower current account deficit.

  1. Can be purchased by resident citizens. 2 -500 gm per person per year.
  2. No capital gains if redeemed at maturity.
  3. 2.75% compound interest half yearly.
  4. Tradable on exchanges can be redeemed faster.
  5. Gold reserve fund to cover risk of gold price movement.
  1. Interest rate too low and lockin period very high.
  2. Less returns compared to small savings instruments.

Fig 1: Sovereign gold bond scheme

Gold Monetization Scheme

  1. Resident Citizens can avail scheme by depositing 30gm min wit no upper limit in BIS certified collection, purity,testing centers.
  2. The gold savings account in ICICI bank can be availed. Denomination in gm.
  3. Scheme has three tenures: short [1-3 yrs] where cash / gold can be redeemed; medium [5-7yrs] where cash can be redeemed; 12-15 yrs where cash can be redeemed.
  4. Interest of 2.5% is paid on deposit.
  5. Capital gains exemption is provided.

Fig 2: Gold schemes of India


Twin deficit problem is high fiscal deficit and high current account deficit.

JAPAN PLUS team of Indian and Japanese representatives who fast track investments of Japan in India and it operates under DIPP, Commerce ministry.

International finance corporation, World Bank arm has two type of bonds:

  1. Masala bonds: Offshore rupee bonds, tenure 15 yrs. Finance to both private and public companies.
  2. Maharaja bonds: Better rating than Govt of India bonds but lower interest rate. Rupee denominated. Tenure is 5 / 10 years. Issued within India's domestic financial market.

White Label ATM's

These are owned and operated by third party owners. They have their own brand and not the brand of any bank.

Non banking financial corporations have been allowed by RBI to setup White Label ATM's.

Three Schemes are allowed:

  1. Minimum 9000 ATM's should be setup with 1000 in 1st year and 2000 in 2nd year and 6000 in third year. The ratio of rural to urban ATM's is 3:1.

  2. Minimum 15000 ATM's should be setup with 5000 each year for three years. The ratio of rural to urban ATM's is 2:1.

  3. Minimum 50000 ATM's should be setup with 25000 in 1st year and 25000 in next two years. The ratio of rural to urban ATM's is 1:1.

Q. Which of the following brings out the ‘Consumer Price Index Number for the Industrial Workers’?(UPSC CSAT 2015)

  • The Reserve Bank of India

  • The Department of Economic Affairs

  • The Labour Bureau

  • The department of Personnel and Training

Ans . C

  1. The CPI-IW series on scientific lines was first introduced with base 1960=100 which was based on the results of Family Living Survey conducted in 1958-59 at 50 industrially important centres.

  2. The series was then, updated on base 1982=100 and a revision in 1999-2000 has further updated the base on 2001=100.

  3. The current series of CPI-IW with base year 2001=100 covers 78 industrially important centers spread across the country.


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