JAIIB Paper 1 Module C Quiz 10

Group-based microfinance models commonly use peer monitoring and joint responsibility to encourage repayment and reduce information and enforcement costs. The exact legal liability depends on the contract and applicable rules; it does not imply an unconditional government guarantee or exemption from responsible lending.

The RBI’s microfinance framework emphasises assessment of household income and repayment obligations and requires lenders to follow fair practices. Affordability assessment helps prevent over-indebtedness. Automatic renewals and coercive recovery are not substitutes for responsible credit appraisal and lawful recovery.

NOF is a regulatory measure derived from owned funds with specified deductions and adjustments under the applicable RBI framework. It is not the same as deposits, annual loan disbursements or the value of a single physical asset. Exact calculation should follow the current applicable directions.

The SBR framework uses a layered approach to calibrate regulatory requirements for NBFCs. Size, activities and risk/systemic significance help determine the applicable layer. Geography, branch count or digital-only distribution alone do not determine the classification.

IRDAI regulates the insurance sector, including insurers and insurance intermediaries, under the applicable insurance legislation. SEBI regulates securities markets, PFRDA regulates the pension sector, and NABARD focuses on agriculture and rural development.

Insurance penetration is generally measured as total insurance premiums relative to GDP, indicating the scale of insurance activity in the economy. Insurance density, by contrast, is typically premium per capita. These indicators measure different aspects of insurance development.

Insurance density is commonly defined as insurance premium per capita, whereas insurance penetration expresses total premiums as a proportion of GDP. Both are widely used indicators, and neither is restricted exclusively to life or general insurance.

SEBI is the principal securities-market regulator and oversees market intermediaries and products, including mutual funds under its regulations. IRDAI is responsible for insurance, PFRDA for pensions, and NABARD for rural/agricultural development.

Reinsurance allows an insurer to cede part of the risks it has accepted to a reinsurer. It can increase underwriting capacity, smooth results and manage concentration or catastrophe exposure. It does not eliminate all risk or guarantee that insured events will not happen.

The National Bank for Financing Infrastructure and Development (NaBFID) was established as a development financial institution to address long-term financing needs for infrastructure. It is not the banking regulator, monetary-policy authority, insurance ombudsman or a payments bank.

An ARC acquires eligible stressed assets from lenders and works on recovery or resolution through permitted mechanisms. ARCs are not currency issuers, pension regulators or deposit-guarantee agencies. Deposit insurance is a separate statutory function.

The post-1990s reforms sought to improve competition, efficiency, governance and prudential soundness in the financial system. Banks remained important, but private participation and market-based mechanisms expanded. The reforms did not eliminate regulation or replace banks with informal lenders.

The 1991 Narasimham Committee recommended a broad programme of banking-sector reforms, including stronger prudential norms, improved competition, operational autonomy and a more efficient financial system. It did not propose abolishing the RBI or ending deposit-taking.

A scheduled bank is a bank included in the Second Schedule to the RBI Act, 1934, subject to the statutory conditions. “Scheduled” is a legal classification; it does not mean that the bank is owned by the government or that it is necessarily a commercial bank of one particular ownership type.

Payments banks were designed to promote small savings and payments/remittance services. Under the RBI licensing framework, they cannot undertake lending activities as payments banks. Their permitted activities and deposit limits must be read with the latest applicable RBI directions.

The RBI Act, 1934 provides the statutory framework for the Reserve Bank, including its note-issue function and related currency management provisions. The other listed statutes concern insurance, securities markets and pension regulation respectively.

The Act defines “banking” around accepting deposits of money from the public for lending or investment, with the specified repayability and withdrawal characteristics. Activities such as insurance distribution or payment technology may be related services but do not, by themselves, constitute the statutory definition of banking.

NABARD is the apex development financial institution focused on agriculture and rural development. Its functions include refinance, institutional development and support for rural credit. EXIM Bank focuses on international trade, NHB on housing finance development, and SIDBI on the MSME sector.

SIDBI (Small Industries Development Bank of India) is dedicated to the promotion, financing and development of the MSME sector. NABARD focuses on agriculture and rural development; PFRDA regulates pensions; IRDAI regulates insurance.

The SHG–Bank Linkage Programme uses group savings, mutual support and collective discipline to facilitate access to formal banking. SHGs often build a record of saving and internal lending before or alongside bank linkage. Stock-exchange listing and foreign-currency borrowing are not defining features.