Pillar#1C: SEBI-Share Market

Table of Contents

15 Pillar#1C: SEBI-Share Market .................................................... 118

15.1 Securities (प्रतिभतू ि) ................................................................... 118

15.2 Financial / Securities market: meaning and types .......................... 118

15.3 Debt Instruments (ऋण उपकरण)................................................. 119

15.3.1 Short term debt instruments (लघु अवधि ऋण उपकरण ) ............. 119

15.3.2 : Short term debt instruments → by Government ................ 119

15.3.3 : Short term debt instruments → by Govt → WMA . 119
15.3.4 Consolidated Sinking Fund (CSF) for State Govts’ repayment ..... 120
15.3.5 Short term debt instruments → by borrowers other than Govt ... 120

15.4 Long Term Debt Instruments (दीर्ध-अवधर् ऋण उपकरण) .................... 121

15.4.1 Colonial era Govt. to borrow money ................................ 121

15.4.2 Modern day Government to borrow money ........................ 121
15.4.3 Bonds by Modern day Govt. to curb Gold Consumption ............. 121
15.4.4 Long term debt instruments by Companies ....................... 122
15.4.5 Long Term Debt Instruments: Other issuers .......................... 122
15.4.6 Long Term Debt Instruments: Masala, Maharaja, Panda Bond ..... 123
15.4.7 Long Term Debt Instruments: Other Special purpose Bonds ....... 123

15.4.8 ( ) Electoral bonds (चुनावी बाांड, 2017 ) ................................ 125

15.4.9 : Bond Yield, Yield Inversion, Negative Yield........................ 125

15.5 Equity Instruments (इक्ववटी)..................................................... 125

15.6 Methods of Issuing Shares ....................................................... 126

15.6.1 ADR/GDR: Shares in Videshi locker .................................. 127
15.6.2 ATMANIRBHAR reforms in ADR/GDR/BharatDR .............................. 128
15.6.3 Initial Coin Offering (ICO) .................................................. 129
15.7 Stock Exchanges / Secondary Market: meaning & examples ................... 129

15.7.1 Secondary Market: Significance? (महत्व) ..................................... 129

15.7.2 DEMAT Account .............................................................. 130

15.7.3 Types of Investors: Depending on Buying Capacity..................... 130
15.7.4 Types of Investors: Depending on Buying Behaviour ................... 130
15.7.5 Notable Indices .................................................................. 131

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 15.7.6 : Force Majeure (अभेद्य शक्वि) ................................. 132

15.8 Securities and Exchange Board of India (SEBI) ................................ 133

15.8.1 : SEBI: why protect investors & ⏫investors participation? ........ 133
15.8.2 : SEBI Reforms to boost investors’ confidence? ...................... 134
15.8.3 (Full) Budget 2019: to increase retail investors participation ........ 135
15.8.4 Commodity Market, FMC, SEBI merger ........................... 135
15.9 Related Bodies with similar sounding names ..................................... 135
15.10 Investment Funds .................................................................. 136

15.10.1 Mutual fund (MF: म्यूच्यूअल फण्ड ) for aam-aadmi .............. 136

15.10.2 Hedge Fund (हे ज फण्ड) for rich-aadmi ............................ 136

15.10.3 Sovereign Wealth Fund (SWF: सांप्रभु िन कोष) ................... 137

15.10.4 REITs / InvITs: for rich-aadmi ................................. 137

15.10.5 CPSE-Exchange Traded Funds (ETF: ईटीएफ) ......................... 137

15.10.6 ( ) :( ) Bharat Bond (Debt) ETF (2019-Dec) ............... 138

15.10.7 Alternative Investment Funds (AIF: वैकक्पपक तनवेश कोष) .............. 139

15.10.8 ( ):( ) Govt’s AIF for Real Estate Sector (2019) .................. 139
15.11 Forward / Future Contracts & Call / Put Option ......................... 139
15.12 Derivatives & Swaps .......................................................... 139

15.12.1 Participatory notes (P-Notes: पार्टि ससपेटरी नोट्स) ................. 140

15.12.2 Conclusion: Financial Markets .............................................. 141

15.13 Company types ................................................................. 142
15.13.1 Company types based on incorporation.................................... 142
15.13.2 Company types based on number of members ....................... 142
15.13.3 Company types based on Ownership ................................... 143
15.13.4 Company Types: Misc. .................................................... 143
15.13.5 Commercial Organizations: Other Types .............................. 143
15.13.6 1C: Corporate Governance → LLP settlement Scheme 2020 .... 143
15.14 Statutory bodies in Ministry of Corporate Affairs (MCA) ..................... 144

15.14.1 Competition Commission of India (भारिीय प्रतिस्पिाि आयोग) ....... 144

15.14.2 Insolvency and Bankruptcy Board of India (IBBI) .................... 144

15.14.3 Ministry of Corporate Affairs also associated with: ................. 144

15.15 Corporate Governance (कॉपोरे ट शासन) ...................................... 145

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 15.15.1 Corporate Governance: notable Committees ......................... 146
15.15.2 ( )CSR: Corporate Social Responsibility .............................. 146
15.15.3 ATMANI: Corporate Governance → Companies Act relaxed . 147
15.15.4 Conclusion: Corporate Governance ........................................ 147
15.15.5 Mock Questions for Mains (GSM3/250 Words Each) .................. 147

15🐮📈🐻PILLAR#1C: SEBI-SHARE MARKET

MCQs from SEBI/ Share market /Financial Market / Companies Act Topic in UPSC Prelims

Year 2014 2015 2016 2017 2018 2019

MCQs 1 MCQ 0 2 0 1 1
These Qs mostly tested very basic foundation level understanding of share market. So, we
are not here to become Investment Bankers / Mutual Fund managers #थोड़ा-पढ़ो-आगे-बढ़ो

15.1 🗃SECURITIES (प्रतिभतू ि)

A ‘Security’ means a certificate/document indicating that its holder is eligible to receive a
certain amount of money at a particular time. This could be a…

Equity: Share certificate Debt (ऋण): Bond / Debenture

Holder gets dividend from the profits of Holder gets interest & principal
the company. If no profit, then no irrespective of whether company makes
dividend. profit or not.
Company’s owners, proprietors (मासलक) creditors of the company (लेनदार).
Have last claim during liquidation first claim.
Attractive in boom period, since Attractive in slowdown period
companies more likely to make profit.

15.2 🗃 🛒FINANCIAL / SECURITIES MARKET: MEANING AND TYPES

It is the place where buying and selling of securities takes place.

Classifi. Market Subtypes

Tenure: 1. Money Market (<1 year maturity) मुद्रा बाजार
(अवधि)
2. Capital Market (1 year/> maturity) पूांजी बाजार
Freshness 1. Primary Market (where new securities are issued for the first time).
प्राथधिक Helps a company /govt to connect with the investor. It has no separate
एवं physical existence but classified like this, for economic analysis.
धितीयक 2. Secondary Market (where the old securities are resold). It has physical
बाजार existence such as Bombay Stock Exchange (BSE) at Dalal Street,
Mumbai. Provides liquidity & confidence to investors to buy new

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 securities in Primary Market. (compared to a scenario if there was no
market to resale used cars- िो कम लोग नई कार खरीदने जाएंगे.)
Settlement 1. Future Market: Where parties write contract today to buy/sell
(तनपटान) something at specific price on a future date
2. Spot Market: if bought & sold for immediate delivery.
Asset - Depending on what asset is traded, market can be divided into Bond
(पररसांपत्ति) (Debt) market, Share (Equity) market, Gilt-Edged Securities Market,
Foreign Currency Market, Commodity Market etc.
- if there was a supermall where all these products were available in one
place it will be called “Universal Exchange”. SEBI permitted BSE & NSE
to launch such thing (2018).

15.3 🔪🗃 DEBT INSTRUMENTS (ऋण उपकरण)

Creditors to company. First claim during liquidation. Assured interest irrespective of profit
of company. These debt instruments can be classified into short-term vs long term.

15.3.1 🔪🗃⏰Short term debt instruments (लघु अवधि ऋण उपकरण )

- Tenure = less than 1 year. Usually ‘unsecured’ because not backed by any asset.
- Usually sold at discount and re-purchased at Face Value or Par Value. The difference
between these two prices is the interest earned by investor.
- Another synonym for this process: “rediscount the bills.”
- They’re traded at Money Market and are (usually) ‘negotiable & transferable’ in
nature i.e. lender can sell to 3rd party → 3rd party can demand money from borrower.
- Near Money = Asset that is highly liquid = can be readily converted into cash.

15.3.2 🔪🗃⏰:🧔Short term debt instruments → by Government

1. State govt’s treasury bills. But stopped since 2001.
2. Union govt’s treasury bills (14, 91, 182 and 364 days) & Cash Management bills (CMB:
upto 90 days, started in 2009).
3. WMA (ways and means advances): given below

15.3.3 🔪🗃⏰: 🐯🔪 🧔👨‍🦲 Short term debt instruments → by Govt → WMA

 When Govt faces short term mismatch in receipt (income) and payment (Expenditure)

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 RBI Lends money on short term (3 months). Not counted in fiscal deficit figure.
 Corona-crisis: ⬆mismatch in cashflow because
o ⬇Govt Income: Sales ⬇ GST, Govt gave extension in tax payment deadlines
o ⏫Expenses: free LPG, food, mask etc.
 So, RBI ⏫WMA limits by 60% than before to help the Union (1.20lcr) and State
Governments (₹51,560cr collectively).
 If upto above amount of ₹₹ borrowed = its WMA: loan interest = repo%
 If beyond above amount borrowed then called ‘Overdraft’: loan interest repo+2%

^ above % or quantity or figures not imp for scope of exam

15.3.4 🐯🔪👨‍🦲 Consolidated Sinking Fund (CSF) for State Govts’ repayment
 Started in 1999. It has >₹1.25 lakh crore by 2019. (समेककि घाटा तनपटान तनधि)
 Annually, State Government has to contribute money equal to 1-3% of its outstanding
market loans to this fund. This fund is kept with RBI.
 CSF is a fund outside consolidated fund of the State and public account of the State.
(More in Pillar2: budget.)
 CSF meant to be used for only 1 purpose= repayment/redemption of loans taken by the
State Government. (बकाया ऋण चुकाने के सलए ही इस तनधि का उपयोग होगा)
 2020-May: RBI relaxed technical norms related to withdrawal of ₹₹ from CSF till
31/3/2021 to help the State Governments. (िकनीकी तनयमो मे कुछ छूट दी गयी)

15.3.5 🔪🗃⏰Short term debt instruments → by borrowers other than Govt

Borrower Short term debt instrument
Company - Bill of Exchange, Hundi, Commercial Papers, Promissory Notes.
- Side note: Currency Note is a ‘Promissory Note’ issued by RBI
Governor however, he’s not bound to pay any interest. He just
promises to exchange it with other currency notes & coins of equal
face value.
Merchant Commercial Bill.
to bank
Banks / Certificate of Deposits (जमा प्रमाण पत्र).
NBFC
Call It’s the interest rate when Financial Intermediaries (Banks/NonBanks)
Money borrow for ONE DAY among themselves.
Notice Same as above but for 2 to 14 days.
Money
LIBOR London Inter-bank Offered Rate (LIBOR) is the average interest rate at
which banks in London give short term loans to each other.
It serves a benchmark, using which Global banks decide their call money
/notice money rates.
MIBOR In LIBOR definition, replace the word “London” → “Mumbai” and
“Global” → “Indian”, and you’ll know what MIBOR is!
CBLO Collateralized Borrowing and Lending Obligation.
Clearing Corporation of India Ltd (CCIL) helps Financial Intermediaries
(FI) to get short term loans through this instrument.
Repo Repo and Reverse Repo= Ref: Pillar#1A2: Monetary Policy handout.

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 TReDS Trade Receivables Electronic Discounting System (TReDS): an online
mechanism. MSME sellers pledge their (unpaid) invoices made to
corporates → MSME receive (short-term) finance from Banks and NBFCs.
(Full) Budget-2019: we’ll make amendments in Factoring Regulation
Act, 2011 to allow all NBFCs to directly participate on the TReDS
platform.
❓Find Correct statements:(Asked in UPSC-Pre-2018)

1. The Reserve Bank of India manages and services Government of India Securities, but
not any State Government Securities.
2. Treasury bills are issued by the Government of India and there are no treasury bills
issued by the State Governments.
3. Treasury bills offer are issued at a discount from the par value.
Ans Codes: (a) 1 and 2 only (b) 3 only (c) 2 and 3 only (d) 1, 2 and 3

❓Which of the following is /are example (s) of ‘Near Money’? [UPSC-CDS-2016-I]

1. Treasury Bill 2. Credit Card 3. Saving accounts 4. Money Market Instruments
Answer codes: (a) 1 only (b) 2 only (c) 1, 2 and 3 (d) 1, 3 and 4

15.4 🔪🗃🗓 LONG TERM DEBT INSTRUMENTS (दीर्ध-अवधर् ऋण- उपकरण)

Tenure = 1 year/>. Further sub-division based on who is the Borrower?

15.4.1 🕯🗃🗓🧔Colonial era Govt. to borrow money

1. Coupon Bonds: Contain detachable coupons. Coupons are presented to the issuer to
claim the interest. Therefore, bond interest rate is also called ‘coupon rate’.
2. Zero Coupon Bonds: Are sold on discount and repurchased at face value, do not have
any coupons.
3. Bearer Bonds: Not linked to a PAN card, Aadhar card or passport, voter card or social
security number. Anyone who presents it to the issuer, will get interest and principal.
Usually issued during the war time.

15.4.2 💡🗃🗓🧔Modern day Government to borrow money

 Government securities, Dated securities, Sovereign bonds (सांप्रभु बाांड), Kisan Vikas
Patra etc. (more in Pillar 1D: Financial inclusion lecture)
 Also called Gilt Edged securities (उच्च / अधिम दजे की प्रतिभतू िया) because repayment
is assured by Government. (But then, they give lower interest rate because of low risk
to the investor).
 Global Credit Rating Agencies gives ‘rating’ to sovereign bonds. “AAA” is the best and
highest given to US Treasury Bonds. India’s rating is ~“BAA” = moderate risk of default.
 World’s top three credit rating agencies- Fitch, Moody’s and Standard & Poor have pro-
US/EU allegiance. Critics allege these 3 agencies do not give adequate upgradation to
the Govt bonds of India, China, Russia despite the economic growth. So, India has
proposed the BRICS group to set up its own independent credit rating agency.

15.4.3 🥇🗃🗓Bonds by Modern day Govt. to curb Gold Consumption

 Real Interest Rate (वास्ित्तवक ब्याज दर) = Nominal (नासमि) Interest minus Inflation.
 When Real Interest is negative, purchasing power ⏬ despite increase in money
quantity in bank account. Then people prefer to park money in gold/real estate- which
is not very beneficial to economy. So..

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15.4.3.1 🍅🔪🗃🗓 Inflation Indexed Bonds (IIB-मुद्रास्फीति सूचकाांककि बाांड)
 RBI launched in 1997, 2013, 2018 to provide positive Real interest rate to household,
thereby reducing the Gold consumption & Current account Deficit (CAD) & weakening
of rupee against dollar (else expensive crude oil ->petrol, diesel inflation.(More in
Pillar#3).
 e.g. Inflation Indexed National Savings Securities-Cumulative (IINSS-C) with Interest
Rate = CPI + 1.5% [and Principal also protected against inflation.]

15.4.3.2 🥇🔪🗃🗓 Sovereign Gold Bond (2015: सांप्रभु स्वर्ण बाांड)

- They’re denominated in gold grams. Annual interest 2.5-2.75% (depending on which
year’s ‘batch’ you bought), and after 8 years you get the amount equivalent to
prevailing gold prices at that time.
- Benefit / challenges ? Ref: Pillar#3A, along with Gold Monetization Scheme.

15.4.4 🔪🗃🗓👨🏼‍✈‍ Long term debt instruments by Companies

1) Bonds (British Term), Debentures (American Term): Internal difference not important.
2) If the company has high risk of default on repayment, the Credit Rating Company will
mark it as Junk Bonds (“BB to D” Grade) e.g. IL&FS. Such company will have to offer a
very high interest rate when issuing bonds next time.
3) Redeemable Bonds (मोच्च): will repay regular interest and will return principal on
maturity.
4) Irredeemable Bonds (अमोच्च): will pay only interest but no principal returned.
Sometimes issued by PSB to meet BASEL-capital requirements. Although in reality they
offer ‘redemption’ after 5-10 years when holder has ‘option’ to redeem principal &
exit. (Ref: Pillar1B2=Yes Bank AT1 Bonds)
5) Non-convertible Bond/Debenture = can’t be converted into shares.
6) Hybrid instruments: Issued as “Bond” but can be converted into Share. E.g. Optionally
Fully Convertible Debentures (OFCD).

15.4.5 🔪🗃🗓Long Term Debt Instruments: Other issuers

Issuer Objective? उद्दे श्य?
ULB Urban Local Bodies Issue Municipal bonds to borrow money from public.
- 2014- BRICS Nations had setup the New Development Bank (NDB, HQ:
BRICS Bond Shanghai, China). Later it launched BRICS Bonds to mobilize money for
its infrastructure loans. Denomination: US Dollars
- 2018: launched world’s first Blockchain Offered New Debt Instrument
World Bank called Bond-i. Sold in Australia using Ethereum blockchain technology.
Tenure: 2 years @~2% interest. Denomination: Australian Dollars,
hence also called “Kangaroo Bond”.

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15.4.6 🔪🗃🗓Long Term Debt Instruments: Masala, Maharaja, Panda Bond
Masala Bonds: These rupee denominated bonds issued outside India, to borrow money
for Indian companies. World Bank’s sister agency International Financial Corporation (IFC)
launched ‘Masala Bonds’ to help Indian public sector and pvt sector companies.
 2015: RBI allowed Indian entities to launch such Masala Bonds.
 2017: National Highways Authority of India (NHAI) also issued Masala Bonds in London
Stock Exchange to mobilize money for Indian Highway projects.
 2019-May: Kerala became the first state to issue Masala Bonds. Its Kerala Infrastructure
Investment Fund Board (KIIFB) issued Masala Bond at the London Stock Exchange.
Denomination: ₹ ₹ Total Size: ₹ 21.5 billion. Tenure: 5 years. Masala Bonds are usually
issued by institutions with AAA rating. Since KIIFB has BB rating, hence offered higher
interest rate: ~9.7% (वरना कोई खरीदिा नहीां)
Issuer → Borrowing from → In currency → Is called
Non-Chinese → China → Renminbi (=yuan) Panda Bonds
Non-Australian Australia Australian dollar Kangaroo Bonds
Non-Indian India Rupee Maharaja Bonds
(Indian or Outside India Rupee Masala Bonds
a non-Indian on
behalf of Indians)

15.4.7 🔪🗃🗓 Long Term Debt Instruments: Other Special purpose Bonds
 US Govt (1870s) and British Govt (1917) had issued Consol bond.
 Consol is short form for ‘consolidated annuities’.
 Consol bonds have no maturity date. They are perpetual bonds that
♾
paid 4-5% interest rate, for an infinite time period. Thus, they’re
(proposed)
Consol Bonds Irredeemable Bonds (अमोच्च).
for Corona-  However, in reality, the Government may redeem(/buyback) the bonds
revival after certain years, by paying principal to the investor.
 Some economists suggesting Indian govt should issue Consol Bonds for
Post-corona economic revival. (अथिव्यवस्था को पन ु ज
ि ीत्तवि करने के सलए)

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 (Proposed)  2019-May: Commerce ministry’s Dr. Surjit S. Bhalla Committee ‘to
Elephant improve India’s share in global trade’ suggested ‘Elephant Bonds’.
Bonds for Tenure: 25-years. People declaring Black Money will be required to
black money invest x%. → ₹ ₹ to be used only for infrastructure projects.
 Party#1 Road contractor pays fees/premium to party#2 insurance
company. Insurance company gives him a surety bond.
 Road contractor gives this surety bond to party#3 Highway Ministry.
(Proposed)
Surety Bond  if the road contractor is not finishing project within prescribed time-
limit/quality-limit → Insurance company will pay ₹₹ to Highway
for road
Ministry.
construction
 Presently, Insurance companies are not allowed to issue surety bonds
in India. So, 2020-Jul: IRDAI (insurance regulator) has set up a
committee, whose chairman's name is not greatly imp for exam.
For renewable energy, pollution control, environment friendly projects.
Green - World’s first Green Bond launched by World Bank (2007)
bonds - India’s first Green Bond launched by Yes Bank (2015)
- BRICS Bank (New Development Bank) issued Yuan- denominated green
(हरित ब ांड) Bonds (2016)
- Indian Renewable Energy Development Agency (IREDA) launched India’s
first Masala Green Bond at London Stock Exchange (2018).
Blue Bond A sub-type of green bond, where money borrowed for climate resilient
water / marine / fisheries projects. E.g. 2018- Seychelles issued world's
(नील ब ांड) first 'Blue Bond,' to expand its marine protected areas and fisheries sector.
 Govt / Insurance company issues such bond. Investor is promised with
Catastroph high annual interest rate.
e Bond (आपदा)  But, if a natural disaster happens, his principal will not be returned.
 If disaster doesn’t happen then principal will be returned.
2019-Feb: SIDBI issued ₹ 300 cr. worth Women’s Livelihood Bonds (मर्हला

Social आजीत्तवका बॉन्ड) with the help of World Bank, UN Women org etc.
Impact Bonds - These bonds will be offered to High Net worth Individuals (HNI),
Impact Investors (rich people interested in ‘indirect’ social service)
(सामाजिक
etc. They’ll earn 3% annual interest rate for tenure of 5 years.
प्रभाव बाांड) - Money thus collected → SIDBI → Micro Finance Institutes (MFI) →
loaned to individual women entrepreneurs in sectors like food
processing, agriculture, services etc.
❓ With reference to ‘IFC Masala Bonds', sometimes seen in the news, which of the
statements given below is/are correct? (UPSC-Pre-2016)
1. The International Finance Corporation, which issues them, is an arm of the World
Bank.
2. They are the rupee-denominated bonds and are a source of debt financing for the
public and private sector.
Answer Code: (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither1 nor 2

❓ Which one of the following is a viable alternative to term-loans for raising debt
finance by large publicly traded firms? (UPSC-IEnggS-2018)
(a) Shares (b) Debentures (c) Asset loans (d) Gold loans

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15.4.8 🗳(🔪🗃)⏳Electoral bonds (चुन वी ब ांड, 2017 )

Figure 1: राजनीतिक पक्ष को चांदा कैसे द,ु की त्तवकास दब

ु े को पिा न चले?

 Announce in Budget 2017 → Notified by Dept. of Economic Affairs, Finance Ministry

(आधथिक मामलों का त्तवभाग). Only SBI can issue at present, and in multiples of Rs.1,000,
Rs.10,000, Rs.1,00,000, Rs.10,00,000 and Rs.1,00,00,000.
 When? For ten days at the start of each quarter. (January, April, July and October).
However, during Lok Sabha election year, can sell for another 30 days.
 Who can buy? Only an Indian Citizen or Company registered in India → deposit money
in their bank account → use that ₹₹to buy Electoral Bond, after giving certain KYC-
documents. So, Electoral Bond can’t be bought anonymously or directly with cash.
 Electoral Bonds can be donated only to a political party registered under
Representation of the People Act 1951 (RPA: लोक-प्रतितिधित्व अधितियम) and which
has secured 1% /> votes polled in last Lok Sabha or Vidhan Sabha elections.
 Validity (वैििा)? Only 15 days from date of purchase. Within that time, buyer must
donate, and political party must deposit in its SBI (current) bank account. No interest
payable.
 Characteristics of electoral bonds? (त्तवशेषिाएँ)
○ Paper / Physical format (not DEMAT / electronic format).
○ Bearer instrument (Donor or Recipient’s name not mentioned),
○ Promissory Note (promises to transfer money in bank account)
○ Interest Free banking instrument (zero interest payable to anyone).
○ Can’t sell it to third party, can’t pledge it for loans.
 Benefits of electoral bonds?
○ Transparency in political funding. (राजनीतिक चांदे में पारदसशििा)
○ Reducing influence of cash and black money in election, (काले िन का प्रभाव)
○ Confidentiality to donor because he can give to any political party without his
wife, staff, CA, Lawyers, journalists, local goons etc. knowing the name of
recipient political party. (दािा को गोपनीयिा)

15.4.9 🔪🗃: 🤑 Bond Yield, Yield Inversion, Negative Yield

Ref Pillar#1A2: RBI’s Monetary Policy → Operation Twist

15.5 ⚖️🗃 EQUITY INSTRUMENTS (इक्ववटी)

 Equity holders are called owners / proprietors of the company.
 If company makes profit → they get dividend. They’ve last claim during liquidation.
Keywords Features
Ordinary shares सािारण शेयर: have voting power in the meetings of shareholders.

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 Last claim during liquidation.
अधिमान्य शेयर: During liquidation, these investors will be given
Preferential
Shares money before the ordinary shareholders. Further subtypes:i) with
voting power ii) without voting power.
Shares given @discount to directors & employees for their value
Sweet Equity
addition to company [Amount is regulated under Companies Act]
Shares whose market price remain excessively low compared to its
Penny stocks
face value. Such pathetic companies give zero or little dividend.
Shares of a nationally recognized, well-established and financially
Blue Chip stocks
sound company with a history of generating good dividend.
Venture capital Professional firms helping startup companies with seed capital.
funds (VCF) (could be debt / equity / hybrid)
Rich person helping startup companies out of his hobby, passion,
Angel Investors profit motive or time pass. e.g Ratan Tata in Urban Ladder app.
ऐांिल तिवेशक (could be debt / equity / hybrid).
Related topic: Pillar#2: Angel Tax in Budget/blackmoney
Corporate Invests in startup company with goal of acquiring the company or its
Strategic technology at later date.
Investor
Rajiv Gandhi Equity Savings Scheme= Govt gives income tax benefit
RGESS
to people who invest in the share market for the first time.
Started in 2012
Discontinued by Budget-2017 (instead of renaming after DeenDayal).
When promoter of a company e.g. Mukesh A. of Reliance or Subhash
Share Pledging Chandra of Zeegroup pledges his shares as collateral to borrow loans
from a bank / NBFC.
❓ What does ‘Venture Capital’ mean? (Asked in UPSC-Pre-2014)

A. A short-term capital provided to industries

B. A long-term start-up capital provided to new entrepreneurs
C. Funds provided to industries at times of incurring losses
D. Funds provided for replacement and renovation of industries
❓ An individual investor who invests in the e-project usually during an early stage
is (UPSC-IES-2020)
A) corporate strategic investor B) founder capital
C) angel investor D) venture capital
15.6 ⚖️🗃 METHODS OF ISSUING SHARES
Share have printed price on the certificate called Face Value or Par Value (सममूपय). If
they’re sold at higher price than face value, it’s called “Premium Value”- that usually
happens when investor is confident of getting high dividend/return on his investment.
Related keyword: Price Earnings Ratio (P/E Ratio)- what it means NOTIMP.

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  Company hires an underwriter (usually, a merchant bank, investment
Initial public bank) for a fee.
offer (IPO)  Underwriter drafts Red Herring Prospectus for SEBI approval.
प्रारां भभक लोग  Then, Underwriter invites application from public & sells them
तिगणम shares at face value or higher. If less people subscribe → then
underwriter will buy the unsold shares by himself.
 If company had already issued shares previously, and now again
Follow on
issuing more shares to obtain more capital→ it is called FPO.
public offer
(FPO)  Rights issue (अधिकार तनगिम): Company issues additional shares but
अिस
ु रर्… gives first right to existing shareholders to buy them, if they refuse
then offered to outsiders.
Offer for sale / Private placement / Qualified institutional placement
Other (QIP) /Issuing bonus shares / share splitting / share swap / share
methods / buyback / PE Ratio etc. = NOT IMP. However, to satiate your curiosity
terms you may self-study them from Investopedia, but that’s not the best use
of your time!
 2019: Saudi Arabia’s public sector oil company Aramco issued world largest IPO worth
>$25 billion. It was listed at Riyadh’s Tadawul Stock Exchange.
 ES20: No of IPO-issuing Companies have declined: 134 (2017) → 103 (2018) → 47
(2019). Which indicates problems like protectionism (trade war, Ref: Pillar3), NPA (Ref
Pillar1B2), slowdown in consumer demand are preventing some of the companies from
expanding further. Although the total amount of ₹₹ raised has increased.
15.6.1 ⚖️🗃 🌐 ADR/GDR: Shares in Videshi locker

Figure 2: बबना अमरीकी SEBI मे पांजीकरण ककए, उनके शेयरबाजार से पैसा उठाऊँ, िो कैसे?

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- A non-American company wants to mobilize money from American share market but
does not want to go through the lengthy & complex process of registration with the
American sharemarket regulator.
- Then such non-American company gives its shares to an American bank.
- Based on those (non-American) shares, the American bank will issue American
Depositary Receipts (ADR: अमरीकी तनपेक्षागार रसीद) & sell them to American investors.
Denomination: USD.
- Global Depositary Receipt (GDR): Same as above, but when single bank issues receipts
for investors in multiple countries. Denomination: usually USD or Euro.
Share issuing company → Deposits his company’s That bank issues -- in local
shares in a bank of → market in – currency
Non-American company → American Bank → Issues ADR (in $) in American
Sharemarket
Non-Indian company → Indian Bank → Issues Bharat / Indian
depositary receipt (IDR) (in ₹)
in Indian Sharemarket

15.6.2 👻ATMANIRBHAR reforms in ADR/GDR/BharatDR

Company Wants to BEFORE AFTER ATMANI
Indian company wants to acquire ✅Allowed ✅Allowed
capital from
abroad, via
ADR/GDR
Indian company wants to acquire Not allowed by ✅now it’s allowed
capital from abroad Indian authorities
by directly listing its
shares in a foreign
stock exchange
Foreign company wants to acquire ✅Allowed ✅Allowed
capital from India,
via BharatDR/iDR
Foreign company wants to acquire Not allowed by Not allowed by
capital from India Indian authorities Indian authorities
by directly listing its
shares in Indian
stock exchange
 Before: Direct listing by the Indian companies on foreign/overseas stock exchanges
was not permitted. (due to danger of money laundering, China/ISI mischief etc.)
 So Indian companies had to use ADR/GDR type mechanisms, But, relatively difficult to
attract investors in through ADR/GDR routes, nowadays. (compared to directly listing
shares.)
 After ATMANIRBHAR: Indian public companies allowed to directly list their shares in
foreign nations stock exchanges. → Foreign capital/dollars can be attracted towards
India → factory expansion, jobs⏫ → economic revival. (अथिित्र
ां को पूनज
ि ीत्तवि करना)

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15.6.3 🔗🥏 Initial Coin Offering (ICO)

Figure 3: Cryptocurrency मे पागल हुई पक्ब्लक को कफरसे बेवकूफ बनाऊ, िो कैसे?

 Company wants investors’ money for launching new cryptocurrency, or service/app

related to an existing cryptocurrency.
 Then, it’ll issue Initial Coin Offering (ICO) → Investor subscribes to it, and receives
‘tokens’ (and not SHARES). Investors can use the ‘tokens’ to buy companies
coins/services or may sell it to a third party.
 RBI has cautioned Indians not to invest in such instruments, because of the dangers
which we already learned in the Handout Pillar#1A-1: Bitcoins.

15.7 📈 STOCK EXCHANGES / SECONDARY MARKET: MEANING & EXAMPLES

Shares are issued through IPO @Primary market. Then, they can be resold at secondary
market, commonly known as Share market or Stock Exchange or Bourses.

 World’s Oldest: Amsterdam Stock exchange, Netherlands (1602)

 Asia’s Oldest: Bombay Stock Exchange (BSE: 1875)
 India’s stock exchanges chronology: BSE → A’bad → Kolkata → NSE (early 90s)
 Just like the Banks have Core Banking Solutions for e-banking, Stock exchanges also
have their electronic platforms for trading. E.g. BOLT (BSE's On-line Trading System)
and NEAT (National Exchange for Automated Trading). They run using internet facility
from VSAT (Very Small Aperture Terminal) Satellite.
 (Full) Budget-2019: we’ll set up a Social Stock Exchange under SEBI’s regulation. It’ll
help social enterprises and voluntary organizations to raise capital as equity, debt or
mutual funds. Then SEBI setup Ishaat Hussain panel to study it.

15.7.1 📈 Secondary Market: Significance? (महत्व)

 ⏬ Cost of Transactions . You don't have to search around for buyers/sellers manually.
सब लोग एक जगह पे समल जािे है । एक दस
ू रे को ढूांढने मे ररवशा का खचाि/लागि बच जािा है ।
 Providing Liquidity to Financial Assets. िरलिा बढिी है वयोकक खरीदार समल जािा है ।
 Facilitating Price Discovery of shares / bonds. औकाि पिा चल जािी है कांपनी की।

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 Investor sells securities in secondary market→ ₹₹ could be re-invested to a new
company’s IPO in primary market → Contributes to Economic Growth.

15.7.2 🗃💾 DEMAT Account

Figure 4: कागजी शेयसि को चोरी/आग से बचाऊँ, िो कैसे?

 If shares and bonds are traded in paper-form, then transactions are slow & prone to
the risk of theft, forgery and fire.
 Depositary is an organization that holds the securities (like shares/bonds etc.) in
electronic (=DEMATERIALIZED) form. Then facilitates its trading online.
 Upon client’s request, Depository can ‘rematerialize’ it as well (i.e. giving
physical/hard copy of share/bond etc) to client.
 Customer must open a “Demat” account in a depository-partner (DP) which can be a
bank or an NBFC.
 SEBI regulates them under the Depositories Act 1996. Notable examples:
- Central Depository services Limited (CDSL)
- National securities depository Limited (NSDL: started by SBI, IDBI, UTI, NSE et
al). NSDL also has RBI license to operate Payment Bank

15.7.2.1 🗃🔢 ISIN Number

 International Securities Identification Number (ISIN) is a Unique 12 characters,
consisting of both letters and numbers.
 It’s a serial code to identify securities e.g. Reliance Industries Limited Shares ISIN:
INE002A01018; Infosys Shares: INE009A01021.
 Prevents mistakes in buying/selling shares/bonds of companies with similar sounding
names. Facilitates the digital transactions through DEMAT account.
 RBI issues ISIN for G-sec/T-bill. NSDL issues ISIN for securities other than G-Sec/T-bill.
 (Full) Budget-2019: technical reforms in ISIN for ease in issuing Corporate Bonds.

15.7.3 🙋🏻‍♂‍🛒 Types of Investors: Depending on Buying Capacity

1. Qualified Institutional Buyers (QIB): Investors with expertise and financial muscle to
make large investments in capital markets. E.g. Mutual Funds, Insurance Company,
Foreign Venture Capital Funds etc. SEBI has separate registration norms for them.
a. Anchor investors: They’re sub-type of QIBs who are offered shares before IPO-
launch. This gives confidence to other investors to subscribe the given IPO.
2. Retail investor: An individual investor who is not a QIB.
Underwriter will keep quota for each category of investors, as per SEBI norms.

15.7.4 🙋🏻‍♂‍🛒 Types of Investors: Depending on Buying Behaviour

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1. Jobbers (आढ़िी): Full time engaged in buying / selling securities using money from
their own pockets. (Whereas brokers / commission agents buy/sell using money/shares
of their clients).
2. STAG (Male Deer): He buys newly issued securities from primary market & sells them
in secondary market for quick profit.
3. Bull (तेजड़िय ): Optimistic speculator who hopes share prices will rise⏫, so
purchases (to sell them later at much higher price). Just like a bull tends to throw his
victim up in the air, the bull speculator stimulates the price to rise.
4. Bear (मांदड़िय ) – A pessimistic speculator who fears prices will fall ⏬ so, he sells. A
bear usually presses its victim down to ground. Similarly, the bear speculator tends to
force down the prices of securities.
5. Day trading / Intra-day trading: Individuals buy and sell shares over the Internet
over a period of a single day's trading, with the speculative intention of profiting from
small price fluctuations.
Further subtypes with various animal / bird names can be found on
Investopedia but with poor cost : benefit in exam.

15.7.5 📈 Notable Indices

● SENSEX?: Sensitive Index/ सांवेदी सच
ू काांक. It’s the weighted average of Free Float
Market Capitalization (FFMC) of 30 companies, selected by BSE’s “Index Cell”.
● NIFTY? NSE index of 50 companies. Nikkei? Tokyo Stock Exchange index of 225
companies.
SENSEX – when does it go up Goes down when
RBI’s soft /easy monetary policy → Tight monetary policy
cheap loan & credit cards → consumers to
spend more → more profit to company →
more dividend : investor thinks “better I
buy more shares to get more dividend”:
Bullish
Peace, Economic boom / prosperity, War, recession, political instability →
Political Stability Bearish market.
When govt. hikes foreign investment limits Inverse.
Merger-Acquisition, New product CEO/MD arrest/FIR, Courts slapping fine,
launched, Environmental clearance given media exposing scandal…
to factory

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15.7.6 🌬🌪:🤷🏾‍♂‍ 👨‍⚖‍ Force Majeure (अभेद्य शजति)

Figure 5: Corona के चलिे बबजनेस प्रोजेवट पूरा नही ककया, िो वया जेल मे भेज दोगे, या फाांसी पे लटका दोगे?

 French word for ‘superior force’. It refers to unexpected external circumstances

(अप्रत्यासशि बाहरी पररक्स्थतियाँ) that prevent a party to a contract from meeting their
obligations. e.g. Acts of God (natural disasters, epidemics), war, terror attacks.
 In such cases, courts may not punish party for dishonoring contract. (करारनामे के
दायक्त्व को न तनभाना)
 E.g. Corona (COVID-19) Virus → Singapore Govt put restrictions on entry of Chinese
→ Singapore construction firms facing labour crunch (श्रसमकों की कमी) → invoked
‘Force Majeure’ to clients, “we can’t finish building your homes/offices in time.”
 Coronavirus: >12million people infected across the world (as of 2020-July).
 Restriction on global travel and trade. Investors fear that companies will not generate
much profit. Many contracts/ payments will be stuck by Force Majeure. So, large scale
withdrawal / exit of share investors from stock exchanges across the world.
 Even the BSE SENSEX fell by 1400+ points in a single day.

Further ball-by-ball on why/how SENSEX up/down in Corona = not imp

UNTIL 📔📔ES2021 give its own analysis.

❓In the parlance of financial investment, ‘Bear’ denotes [UPSC-CDS-2012]

(a) an investor, who feels that the price of a particular security is going to fall.
(b) an investor, who expects the price of a particular share to rise.
(c) a shareholder, who has an interest in a company, financially or otherwise.
(d) any lender, whether by making a loan or buying a bond.

❓Which of the following statements is/ are correct? [UPSC-CDS-2012-I]

1. NIFTY is based upon 50 firms in India.

2. NIFTY is governed and regulated by the Reserve Bank of India.
3. NIFTY is the stock index of Bombay Stock Exchange.
Answer Codes: (a) Only 1 (b) Only 2 (c) Only 3 (d) 1 and 3

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15.8 🗃😼SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)

 भारिीय प्रतिभूति और ववतनमय बोर्ड, HQ- Mumbai

 (1988) Formed by an executive order → (1992) Became Statutory Body → powers
increased through amendments in 1999 & 2014. Now it can order search and seizure,
attachment of properties, arrest and detention.
 SEBI Board Composition: Chairman + 1 officer from RBI + 2 officers from Union
Government + 5 members appointed by Union Government.
 Chairman: upto 5 years / 65 age. Reappointment possible. Ajay Tyagi (IAS) initially
given 3 years term in 2017, could be extended in future.
 Regulates Process of issuing securities (Bonds, Shares, IPO, ETF, ReIT, INVITs, etc.)
using the Securities Contracts Regulation Act, 1956 [SCRA: प्रधतभूधत संधवदा धवधियिि]
 Regulates Places (Depositories, Stock exchanges, Commodity Exchanges etc.)
 Regulates Persons (Investors, Brokers, Fund Managers, Public Limited companies etc.)
 Regulates any Collective Investment Scheme (CIS) of ₹100 cr/> [In the aftermath of
SAHARA scam & Chit Fund scams.]
 Further appeal: Securities Appellate Tribunal (SAT) → Supreme Court.
○ Same SAT also hears appeals against the orders passed by Insurance Regulatory
Development Authority of India (IRDAI) and Pension Fund Regulatory and
Development Authority (PFRDA).(More in Pillar#1D)
 SEBI runs “SCORES” online portal for complaint.

15.8.1 🗃😼: 🏃 SEBI: why protect investors & ⏫investors participation?

Figure 6: पूांजी बाजार की जड़ो को गहरा करना है िो ससफि अमीरों का नही, गरीबो की बचि का पैसा भी जाना चार्हए!

 Share market scams erode publics’ hard-earned savings → alcoholism, depression,

suicide and other social ills.
 Duped investors will shy away from share market & they may invest in gold / real
estate = not very beneficial to economy.
 If households don’t participate in capital market → corporate companies will have to
approach the banks to get more loans. But banks’ lending capacity is limited by CRR,
SLR, PSL, NPA, PCA.
 If more retail investors participate in capital market = “Deepening of the capital
market” (खुदरा तनवेशक की मदद से पूांजी बाजार की जड़ों की ओर गहरा करना) → factory
expansion, job creation, and economic growth.

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15.8.2 🗃😼: 🏃 SEBI Reforms to boost investors’ confidence?

 Harshad Mehta (1992), Ketan Parekh (2001) arranged money from banks, used it for
rigging the share prices to make windfall gains during Bull-runs by other investors.
Once the prices crashed, small investors suffered.
 To prevent such scams, SEBI introduced Circuit Breaker System, wherein if fluctuation
in the share prices is more than “x%” than previous day, then stock exchange must
stop trading for “y” minutes.
 Badla System/Carry forward system:
- Buying of shares using borrowed money & making promises to carry forward the
settlement for upto 72 days. scamsters misused (इसकी टोपी उसके सर पे)
- so SEBI discontinued it (2001) & introduced (T+2) rolling settlement system
i.e. after trade is conducted, the parties must settle it within two working days
(= buyer pays money, seller deliver shares/bonds/securities).
 Rupal Panchal (2005) opened multiple fake DEMAT accounts to increase the chances
of getting share allocations in IPO. Then she’d sell such shares in stock-exchange for
higher prices. Subsequently, SEBI made PAN Card (issued by Income Tax Dept)
compulsory for opening DEMAT Accounts. SEBI also introduced ASBA (Application
Supported by Blocked Amount)- it allows the underwriter to block the amount in IPO-
investor-applicant’s bank account, but only IF shares allotted to the applicant, his
bank money will be deducted. ASBA-Benefits:
- (1) only serious investors with sufficient bank balance can apply.
- (2) investor continues to earn bank interest on his blocked amount until the
process of IPO-share allotment is over.
 SEBI requires Stock exchanges (BSE, NSE etc) and commodity exchanges (NSEL, MCX
etc) to setup Investor Protection Fund (IPF: तिवेशक सुरक्षा कोष). IPF covers investors’
‘non-speculative’ type of losses. e.g. if the other party is not delivering shares because
of some court case. IPF also promotes investor education and awareness.
 Dabba Trading / Bucketing / Box Trading: While share trade occurs at stock exchange
linked with DEMAT accounts, the Dabba Trades occur in the unofficial books/ledgers of
an unscrupulous broker. He may or may not execute those orders in actual DEMAT
account. Investor prone to scam, govt deprived of taxes. So, SEBI declared it illegal.
 Insider Trading (भेर्दया लेनदे न): Whenever company launches new products, wins
unique patents, or undergoes merger and acquisition- its share prices will increase. If a
person associated with company uses such confidential information for buying/selling
shares to make windfall gains. Such insider trading is illegal.
 Algo Trading: Some large brokers / companies use algorithmic trading computer
programmes to automatically buy / sell securities at a speed and frequency that is
impossible for a human trader. This can be misused for manipulating the share prices.
While SEBI has not banned it, but issued technical measures e.g. a single broker /
investor can’t place more than 100 online orders per second.

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15.8.3 💼🏃 (Full) Budget 2019: measures to increase retail investors participation
 We’ll give the ELSS-walla income tax benefits to CPSE-ETF-investors as well.
 At present, RBI depository for G-Sec/ T-Bill is separate. SEBI regulated depositories
(For non Government = private sector securities) is separate. We’ll make reform for
‘interoperability’ between them to facilitate retail investors’ participation.
 Parallelly, RBI promised to work on mechanism wherein retail investors give money to
stock exchange → stock exchange invests it in G-sec/T-bill.
 For all the listed PSUs, Government will strive for minimum 25% public shareholding.
 SEBI to raise minimum public shareholding in listed companies (other than PSUs) from
25% to 35%.
 ATMANI: minimum shareholding related norms deferred under Corona crisis.

15.8.4 🌽🧶🏦🤝 Commodity Market, FMC, SEBI merger

 A commodity market / exchange (वस्िु बाजार) is a place where buyers & sellers trade
goods in bulk - food grains, cotton, precious metals or energy resources (coal, oil gas)
 “Commodity Futures”: Type of contract for future delivery and settlement of
commodity e.g. “on 1/5/2021, I shall deliver you 500 quintals of wheat at X price”.
 Commodity exchanges were under a statutory regulator Forward Market Commission
(FMC) under the Ministry of Consumer Affairs and Public Distribution.
 But Jignesh Shah generated fake receipts without any commodities in the warehouses
& traded at NSEL-commodity exchange. FMC failed to prevent scam. So first FMC
transferred to Finance Ministry and FMC ultimately merged with SEBI (2015).

15.9 🕵🏻‍♀‍ RELATED BODIES WITH SIMILAR SOUNDING NAMES

Figure 7: अभी भी इिने सारे "काांड" वयो हो रहे है, गवनिर साहब?- त्तविमांत्री @FSDC meeting.

FSDC - Financial Stability & Development Council: Chairman – Finance Minister.

(2010) Other members – 1. RBI Governor 2. SEBI chief 3. IRDAI chief 4. PFRDA
धवत्तीय chief 5. IBBI chief & govt officials
- Functions? Supervision of the economy & large financial conglomerates,
धथथरता
coordination among the financial regulators, financial literacy and
और धवकास
financial inclusion.
पररषद - Secretariat assistance by: Dept. of Economic Affairs
FSB - Financial Stability Board is a brainchild of G20. (त्तविीय क्स्थरिा बोडि)
(2009) - Functions? Financial monitoring at global level, Coordination between
HQ: national financial regulators bodies.
BASEL - India has 3 seats in FSB: 1) Secretary of Department of Economic Affairs
(IAS) 2) Dy. Governor of RBI 3) SEBI chairman
FATF - Financial Action Task Force (धवत्तीय कारध वाई कायधदल) is a brainchild of G7.
(1989) India became member in 2010.
HQ: Paris - Function? Combating Money laundering and terror finance. More Pill#2

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 -
International Organization of Securities Commissions (IOSCO) is the
international body of world's securities regulators. SEBI is a member.
IOSCO
- It’s known for its IOSCO Guidelines for Investors Protection and
systematic risk in global economy.
❓With reference to 'Financial Stability and Development Council', find correct
statement(s): (Asked in UPSC-Pre-2016)
1. It is an organ of NITI Aayog.
2. It is headed by the Union Finance Minister
3. It monitors macro-prudential supervision of the economy.
Answer Codes: (a) 1 and 2 only (b) 3 only (c) 2 and 3 only (d) 1, 2 and 3

15.10 📦 INVESTMENT FUNDS

15.10.1 📦 🤹🏻‍♂‍ 👴🏻 Mutual fund (MF: म्यच्
ू यअ
ू ल फण्ड ) for aam-aadmi

Figure 8: swag से करें गे 'middle-class' का 'स्वागि'। Observe colors in logo, meant for attracting ordinary crowd

 is an Asset Management Company (AMC-NBFC) that pools savings of (retail) investors

and gives them “Units”.
 MF Manager parks this money in securities & builds his ‘portfolio’.
 Whatever dividend/ interest is generated from the portfolio, it is distribute among
investors in the proportion of their units.
 Investor has to pay Entry Load (= fees for joining) and Exit Load (= fees while
quitting). SEBI regulates these fees.
 Due to low deposit rates in banks, people invested money in mutual funds however
post-IL&FS crisis, corona crisis, charm declining because mutual funds are subject to
such market risks.
 Equity Linked Savings Scheme (ELSS): It is a type of mutual fund where money is
locked in for 3 years and invested in equities (shares). It’s eligible for certain benefits
in Income Tax.
 “Side pocketing”: SEBI ‘s technical guidelines to help MFs to separate their IL&FS type
stressed/toxic assets from their standard assets. Helps protecting the investors.
How?NOTIMP.
15.10.2 📦 🤹🏻‍♂‍ 🤵🏻 Hedge Fund (हे ज फण्ड) for rich-aadmi

Figure 9: Swag से िही करें गे 'middle-class' का 'स्वागि'। Observe ‘premium’ logo-designs to attract rich people

 Special type of Mutual Fund meant for HNI (High Net Worth Individual) who wants high
risk high return. SEBI norms: Minimum investment per person is ₹1 crore.
 Hedge Fund manager will invest their money in Junk Bonds, Risky assets; he’ll do risky
trading activities such as Arbitrage, Leverage, Short Selling etc. to generate maximum
return. (how is that done in real life = UPSC-CSE not for recruitment of HF managers.)

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15.10.3 📦 🤹🏻‍♂‍ 🤴🏻 Sovereign Wealth Fund (SWF: सांप्रभु िि कोष)
 State owned investment fund, wherein central bank, finance ministry and other public
sector financial intermediaries park their surplus fund. →money used for investment.
 E.g. 2020-Jun: Abu Dhabi Investment Authority (ADIA) bought 1.16% of Reliance Jio for
₹5600+cr. Similarly, Singapore's GIC sovereign wealth fund, Qatar Investment Authority
(QIA) also active in Indian market.
 Sidetopic: What is National Investment & Infrastructure Fund (NIIF) Ans. Ref: Pillar#5:
Infrastructure handout.

15.10.4 📦 🤵🏻 🏬 🛩 REITs / InvITs: for rich-aadmi

REITs: Real Estate Investment InvITs: Infrastructure
Trusts -(भ-ू भवन-सांपत्ति ननवेश न्य स ) Investment Trusts-(अधर्संरचना)
Who can HNI / institutions: Min. ₹2 lakh ₹10 lakh. ₹1 lakh, ASBA (SEBI ⏬
invest? ₹50,000 investment per ASBA Minimum limits in 2019 to attract
application more investors)
Manager in real estate projects that are In airport, highway, thermal
parks the soon to complete. He’ll earn plants, gas grid etc. He’ll earn
money in? income from rent / sale. from toll collection at highways,
services fees at airports etc.
Example Blackstone-Embassy group IRB, India-grid
✅Benefits of REITs and InvITs-

✓ Stressed developer gets new finance to finish the project while HNI gets new
opportunity to invest his money, and he may also sell the units to third party via stock
exchange.
✓ SEBI permitted these instruments in 2014. Later SEBI relaxed technical norms related
to capital, leverage, issue size but they are not important for us. (Full) Budget-2019:
FPIs will be permitted to subscribe to listed debt securities issued by ReITs and InvITs.
15.10.5 📦 🏛 CPSE-Exchange Traded Funds (ETF: ईटीएफ)
 Disinvestment (ववतनवेश): government sells it shares from Central Public Sector
Enterprises (CPSE: केंद्रीय सावडजतनक क्षेत्र के उद्यम) but does not reduce its shareholding
below 51%. If Govt’s shareholding reduced below 51%, then it is called Privatization
(तनजीकरण), although NITI prefers the term ‘Strategic Disinvestment’. More in Pill#2.
 2014: Government wanted to disinvest 10 CPSE (ONGC, GAIL ltd etc). If govt tried to
sell the individual company-wise shares, it would be more time consuming, and govt
may not get good prices for each company.
 So, Govt gave CPSE-shares to a fund manager Goldman Sachs - who created new
securities out of it, called “Exchange Traded Funds (ETF)”, and made a “New Fund
Offer (NFO)” to the public to subscribe to these securities at ₹ 10 per unit.
 If an investor holds the ETF → he will get returns from the dividend generated by
those CPSE-companies in the backend. He may also sell these ETF to a third party via
stock exchange, hence called Exchange Traded Funds.

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 Figure 10: how do exchange traded funds (ETF) work?

 BHARAT-22: Another CPSE-ETF when Govt wanted to disinvest shares from 22

companies including CPSE, PSBs and UTI using ICICI Prudential as fund manager (2017-
18). However, PSB-NPA problem → poor dividends → BHARAT-22 not giving good
returns, so, investors response was initially lukewarm.
 Later govt announced, “We’ll give the ELSS-walla income tax benefits to CPSE-ETF-
investors as well” to attract investors.

15.10.6 (🦁🔪)📦: (🏛🛒🤝) Bharat Bond (Debt) ETF (2019-Dec)

 Fund Manager (Edelweiss Asset Management ltd) → He’ll issue Bharat Bond-ETF.
 Maturity: 3 years and 10 years
 Unit Size: ₹1000 each. So even middle-class investors buy these Bond-ETFs.
 Fund managers will invest this ₹₹ into a basket of bonds issued by Central Public Sector
Enterprises, Central Public Financial Institutions (CPFIs such as public sector bank and
insurance companies) and other Government organizations.
 ETF will be tradable at the stock exchange.
Bharat bond ETF: Benefits?

✓ For Government companies = Easier and more efficient to borrow ₹₹ instead of

individually launching their bonds in the market.
✓ For Investors = safety because of assured return on bonds, irrespective of Government
company’s profit.
✓ Enhanced retail participation → deepening capital market. (खुदरा तनवेशक की मदद से
पांज
ू ी बाजार की जड़ों की ओर गहरा करना)
✓ In future, more fund managers may be selected, and even non-AAA rated public sector
bonds may also be included.
✓ Budget-2020: given success of Bharat bond ETF, we are planning to launch another
debt-ETF containing G-sec. This will help the retail investors to invest in G-sec.

Misc. : Gold-ETF: Investors give money → manager buys gold for safekeeping and trades
it depending on price movements → returns are divided among the unit-holders. In
between, the investor may sell his Gold-ETF to third party via Stock Exchange therefore
they’re also Exchange Traded Funds. How/why/NOTIMP

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15.10.7 📦 Alternative Investment Funds (AIF: वैकजपपक तिवेश कोष)
It’s a technical classification by SEBI:
- AIF Category I: They generate positive spillover effects on the economy. Example:
Venture Capital Funds, Angel investors fund, SME Funds, social venture fund,
Infrastructure funds. SEBI keeps relaxed / lighter norms on them.
- AIF Category II: Neither in Cat-1 nor in Cat-3 E.g. Private Equity or Debt Fund.
- AIF Category III: They undertake excessive risk to generate high returns in short period
of time. E.g. Hedge Funds. SEBI norms are stricter/heavier on them, because
otherwise they may destabilize the capital market.

15.10.8 (🦁📦):(🏗🏠) Govt’s AIF for Real Estate Sector (2019)

 2019-Nov: Govt to setup an alternative investment fund (AIF Category-II) using ₹₹ of
govt, SBI and LIC. (Total 25,000 cr). [Moral outrage: why not in cat1? Ans. Send your
suggestion to SEBI.]
 AIF Fund manager: SBI Cap ventures ltd.
 AIF Fund manager will give ₹ (as Debt finance) to builders with unfinished housing
projects → demand for steel, cement, construction workers= economic growth.

15.11 🗃 ⏱ FORWARD / FUTURE CONTRACTS & CALL / PUT OPTION

Figure 11: भत्तवष्य मे खरीदने का सोदा िो ककया, लेककन दाम धगर जाए, िो खुद को बचाऊँ िो कैसे?

- A Forward / Future contract is a customized contract between two parties where

settlement takes on a future date at a price/quantity agreed upon today. E.g. on
1/5/2021 I shall sell you 100 nos. of Infosys shares at ₹1000 each.
- In such contracts, there is a risk of other party not honoring commitment if he’s
getting better deal elsewhere in the future. So, for protecting (=hedging) themselves,
they (=buyer or seller) may buy “Option” from a third party by paying fees.
- Option is a type of insurance for executing the forward/future contract in a manner
beneficial to them e.g. I’ll sell you for ₹1000 on X date, & you must buy, but if I’m
getting another buyer who is willing to pay ₹1500 then I may not sell you & you can’t
compel me. Such ‘insurance options’ are further subdivided into Call Option and Put
Option, their internal difference & real-life mechanism not imp. for UPSC.
❓Which one of the following terms is used in Economics to denote a technique for
avoiding a risk by making a counteracting transaction? [UPSC-CDS-2016-I]
(a) Dumping (b) Hedging (c) Discounting (d) Deflating

15.12 🗃 🔗 DERIVATIVES & SWAPS

 A derivative is a contract whose value is derived from the value of another underlying
asset which could be a share, bond, commodity or currency.
 They’re usually generated by the process of ‘securitization’. E.g. NHB taking loan
papers from banks, using them to generate new Mortgage Backed Securities.

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  SWAP: is derivative instrument to swap one financial asset with another financial asset
(usually) to reduce the risk e.g. Currency Swap Agreement between two countries to
protect themselves against dollar volatility (more in Pillar#3).
 Similarly, there are Credit Default Swap (CDS) agreement against the risk of default,
Interest swap agreement to protect against volatility in interest rates. But their
mechanisms NOT IMP.
15.12.1 👻🔗📦 Participatory notes (P-Notes: पार्टण भसपेटरी िोट्स)

Figure 12: बबना SEBI पांजीकरण के भारिीय पूांजी बाजार मे तनवेश करू, िो कैसे?

 A foreigner wishes to invest his money in India but does not want to go through the
hassles of registering with SEBI, getting PAN card number, opening a DEMAT account
etc. So, he will approach a SEBI registered foreign institutional investor (FII) / foreign
portfolio investor (FPI) such as Morgan Stanley, Citigroup or Goldman Sachs. He’ll pay
them & instruct them to purchase particular shares and bonds and store them in their
Demat account.
 Then FII will give him P-Notes, and he’ll receive interest and dividend accordingly.
 He may also sell those P-notes to a third party.
 P-Notes are Offshore Derivative Instruments that derive the value from the
underlying Indian shares and bonds.
P-Notes are harmful for Indian economy because:

 P-note investors are not directly registered with SEBI, the identity of the actual
investor and source of funds remain disguised= chances of Tax evasion, money
laundering, terror finance (कर चोरी, काले िन को वैि बनाना,आिांकी त्तविपोषण)
 If P-Note owner sells his P-Notes to another foreign investor, Government of India may
be deprived of taxes. (Compared to a scenario where Indian share owner is selling his
shares to another Indian investor at profit, then government gets securities transaction
tax and capital gains tax on his profit, & he can’t dodge it because DEMAT accounts
linked with PAN card. More on PAN card@Pillar#2 → BlackMoney)

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 Therefore, SEBI is tightening the control P-Notes e.g. “X” category of FPIs can’t issue
P-Notes. “Y” category of FPI can issue P-Notes but every time they issue P-notes-
they’ll have to deposit $1,000 to SEBI etc.
❓Which of the following is issued by registered foreign portfolio investors to
overseas investors who want to be part of the Indian stock market without registering
themselves directly? (Pre19-SetA Q67)
(a) Certificate of Deposit (b) Commercial Paper (c) Promissory Note (d) Participatory Note

15.12.2 ✍️ Conclusion: Financial Markets

✓ A well functioning financial market catalyzes the process of economic development. It
is therefore essential that such markets operate in a free, fair, competitive and
transparent manner. AND/OR
✓ Deepening the financial market helps mobilize the savings of poor households into the
productive channels of the economy.
✓ Aforementioned initiatives /issues are greatly important in that regard need to be
addressed in priority basis.
✓ एक सुधवकधसत धवत्तीय बाजार आर्थधक धवकास की प्रक्रिया िे उद्दीपक का काि करता है। ऐसे बाजार का थवतंत्र,
धिष्पक्ष, प्रधतथपर्ी और पारदर्शी रूप से संचाधलत होिा आवश्यक है। पूंजी बाजार को गहरा करिे से गरीब
पररवारों की बचत को अथधव्यवथथा के धवधभन्न क्षेत्रो को क्रियाधववत करिे िे िें िदद धिलती है। इस संबंर् िें
पूवोक्त पहल / िुद्दे बहुत िहत्वपूणध हैं / उवहे अग्रतािि से संबोधर्त करिा आवश्यक.

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 Pillar 1C2: Corporate Governance

15.13 🏙🤵 COMPANY TYPES

15.13.1 👶Company types based on incorporation
Chartered Setup by a charter given by a king / queen. E.g. East India
Companies Company in 1600. (चार्ड र्ड कंपतनया)
Statutory Setup by special acts of Parliament or State legislature. E.g. RBI,
Companies LIC, SBI. (वैिातनक कंपतनया)
Registered Registered under the Companies Act, 1956 (and later 2013) e.g.
Companies Tata Motors, Infosys. (पंजीकृि कंपतनया)

15.13.2 🏙🤵 Company types based on number of members

Private Public Limited Company (Companies Act 2013)
ltd.
Members Min. 2 to Min. 7 to Max. unlimited number (depending on how many
Max. 200 shares issued & purchased by the people)
can they Can’t  A public ltd. company can invite public at large, to
invite public subscribe to its shares and bonds.
at large, to  If their shares are listed on a stock exchange (BSE,
buy shares NSE etc), it’s a ‘Listed Public Limited Company’
/bonds? (e.g. Reliance), else it’s an ‘Unlisted Public Limited
Company’ (e.g. India Post Payment Bank : IPPB)
Min. ₹1 lakh ₹5 lakhs (अधिकृि पूांजी). It’s the amount of shares the
authorized
company can issue.
capital
Min. Paid up ₹0 ₹0 (दे य पांज
ू ी). The amount of money a company has
Capital
actually received from the selling of shares.
Directors 2-15  Min 3 to Max 15. out of them one must be Indian
(Min-Max) Resident, 1 must be Woman and 1/3rd of the directors
must be independent directors.
 Independent directors are persons without any
pecuniary interest in company, they are supposed to
protect minority shareholders’ interests.
Term limit N/A Their directors have age limit, term limit.
Corporate Norms Companies Act requires them
Governance either not  to hold specific number of annual meetings of board
Norms applicable of directors, norms for quorum, mechanism for e-
or relaxed. voting,
UPSC-  have to appoint Company Secretary,
CSE≠CA  Implement mechanism for protecting whistleblowers
And so on…

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15.13.3 🏙🤵 Company types based on Ownership
Government / Public Sector / Private Sector / ननजी क्षेत्र की
स ववजननक क्षेत्र की
When Government owns 51%/> shares. When private parties own 51%>. E.g.
Examples: Steel Authority of India (SAIL), Reliance, Tata, Adani
India Post Payment Bank (IPPB)
Holding Company / ननयांत्रक कांपनी Subsidiary Company / ननयांत्रत्रत कांपनी
A company that owns majority shares in A company that is controlled by a parent
another company. E.g. Tata Sons ltd. holding company. E.g TCS, Tata Steel,
holds majority shares of Tata Consultancy Tata Sky are subsidiary co of Tata Sons.
Services (TSC), Tata Steel, Tata Sky etc.

15.13.4 🏙🤵 Company Types: Misc.

Under  One Person Company: special type of private ltd company having
Companies only one member.
Act  Not for Profit Company: e.g. GSTN, NPCi etc. their profit is re-
invested in business expansion. They get certain tax benefits &
relief in how frequently they’ve to submit data to MCA.
 Dormant Companies: A) setup to start business in future B) setup
to store intellectual property C) not filled annual returns for two
consecutive years.
Under  Limited Liability Partnership (LLP) Company is formed by minimum
LLP Act 2008 2 or more partners.
सीसमि दे यिा  Individual partners are shielded from joint liability created by
another partner's wrongful business decisions or misconduct. E.g.
भागीदारी Vajiram and Ravi IAS Study Centre LLP
अधितनयम  LLP’s registration fees, auditing/reporting norms, tax liabilities,
winding up process etc. are more flexible than a (public or pvt)
ltd. company registered under Companies Act.
Under Indian  A Partnership firm is formed by minimum 2 or more partners.
Partnership  Each partner is liable jointly with all the other partners for losses,
Act 1932 wrongful biz. decisions and misconduct.

15.13.5 🏙🤵 Commercial Organizations: Other Types

PSU, CPSE Ref: Pillar2: Disinvestment
MSME Ref: Pillar1D: financial inclusion, Pillar4B
Startups Ref: Pillar4B

15.13.6 👬🤝🧔 1C: Corporate Governance → LLP settlement Scheme 2020

 Limited Liability Partnership (LLP) companies are required to submit accounts and
ownership related documents to the Ministry of Corporate Affairs.
 But many of them did not submit the documents on the deadline, and the Government
ordered them to pay late fees/penalties, threatened them with prosecuting cases
under the LLP Act and cancelling their registration.
 LLP settlement Scheme, 2020: “If you submit the required documents between x to y
date → Then you will have to pay less penalty and we will give you immunity from
prosecution.”, said the Government.

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15.14 🔨 STATUTORY BODIES IN MINISTRY OF CORPORATE AFFAIRS (MCA)

15.14.1 🔨 👨‍⚖‍ Competition Commission of India (भ ितीय प्रनतस्पर् व आयोग)

 Competition among companies= consumer gets goods and services at the most
competitive / affordable prices.
 Therefore, government must prevent cartelization (price fixing or production fixing by
a group of Companies), prevent monopoly (single company commanding the production
/ supply), protect consumers’ interests and ensure freedom of trade.
 1970: Monopolies and Restrictive Trade Practices (MRTP) Act. Later replaced with
Competition Act, 2002- which has a statutory regulator Competition Commission of
India (CCI: 1 Chairman + 6 Members)

15.14.2 🔨 👨‍⚖‍ Insolvency and Bankruptcy Board of India (IBBI)

This too is a statutory body under the Ministry of Corporate Affairs (MCA). Read previous
Pillar#1B-2: NPA-handout for more on IBC Code.
Table 1: Statutory Bodies under Companies Act 2013

Features National Company National Investor Serious Fraud

Law Tribunal Financial Education & Investigation
(NCLT) Reporting Protection Fund Office (SFIO)
Authority (NFRA)
राष्ट्रीय कम्पनी ववधि राष्ट्रीय ववत्तीय तनवेशक एवं शशक्षा गंभीर िोखािर्ी
अधिकरण प्रतिवेदन प्राधिकरण रक्षण कोष अन्वेषण कायाडलय
Members Judicial + Chairman + 3 full Boss: Corp. Civil servants &
technical. time + 9 part Affairs Secretary financial experts
They’ve benches time. 3 yr/65, 1- (IAS). Plus,
@Delhi, Kolkata, time members from
Jaipur etc. reappointment. RBI, SEBI,
financial experts
Appeal NCLAT (Appellate NFRAA (Appellate Regular Courts Regular Courts
tribunal) Authority)
Cases Hear the cases Sets standards for They use Investigate
related to Auditors & (CA), unclaimed white-collar
Companies Act, in listed money from (financial)
Board room companies and shares/bonds for frauds. Powers
battles, Merger- large unlisted financial literacy to search, seize,
Acquisition, companies. If and awareness arrest.
Corporate malpractices-> Once SFIO gets
Insolvency & investigate and case, other
Bankruptcy (I&B) debar them, agencies (like
Powers of civil CBI) can’t
court. proceed.

15.14.3 🔨👨‍⚖‍ Ministry of Corporate Affairs also associated with:

Chartered Accountants Regulates the CA profession through a
Act 1949 Statutory body: Institute of Chartered Accountants of India
(ICAI). ICAI also has IPA status under I&B Code.

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 Company Secretaries Statutory Body: Institute of Company Secretaries of India (ICSI).
Act, 1980 Also has IPA status.
Cost and Works Statutory Body: Institute of Cost Accountants of India (ICAI).
Accountants Act, 1959 Also has IPA status.
Legislative  1860: Societies Registration Act- for registration of
Responsibilities of MCA literary, scientific and charitable societies.
 1932: Partnership Act
 Companies Act 1956 → 2013.
 2008: Limited Liability Partnership Act
E-governance  INC-29 online form to registration of new company. Later
initiatives of MCA it was replaced with Simplified Proforma for
Incorporating Companies (SPICe) online form.
 MCA-21 portal, where companies can file online
documents related to Companies Act compliance.
Officers Indian Corporate Law service (ICLS) via UPSC CSE-exam

15.15 🤼‍♀‍👬 CORPORATE GOVERNANCE (कॉपोरे र् शासन)

Figure 13: िुम मेरे पापा के दोस्ि हो? - Cyrus Mistry

It is a way of directing the company to protect the interest of all stakeholders, and ensure
three types of compliance: (कांपनी तनदे सशि करने का एक िरीका क्जससे र्हििारकों की रक्षा हो)

Compliance Example(s)
 Company obtaining Legal Entity Identifier (LEI) number as
mandated by RBI.
Legal-Regulatory  Company setting up ‘Internal Complaints Committee’ as
कानूनी-तनयामक mandated by Sexual Harassment of Women at Workplace
(Prevention, Prohibition and Redressal) Act, 2013 / “POSH
Act”
 Companies keeping balance sheets as per the Ind-AS
Technical accounting standards.
िकनीकी  Automobile company producing car engines as per BHARAT-
Stage emission norms.
Moral-Ethical Gillette scrapping the ad-contract with cricketer Hardik Pandya
for his sexist comments against women on Koffee with Karan
नैतिक-सदाचार-पण
ू ि
Show.
 Absence of Corporate Governance leads to fraud, embezzlement (ग़बन), erosion of
investors’ confidence. E.g. Satyam Computer Scandal (Chairman Ramalinga Raju
manipulated account books), Boardroom battles at Tata Group (Cyrus Mistry vs Ratan
Tata) and Infosys Group (Narayana Murthy vs Vishal Sikka fighting, 2019: whistle-

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 blower complaint about financial irregularities), ICICI (Boss Chanda Kochhar gave
₹3000 crore loan to Videocon company without due-diligence, which turned NPA.)
 Therefore, Companies Act 2013 mandates companies to impose term limits on
directors, appoint independent directors, one person can’t become director in more
than “X” number of companies, one CA can’t audit more than “Y” number of
companies, Company has to setup whistle-blower protection (क्व्हसलब्लोअर सरु क्षा)
mechanism, Company can’t give loan to its directors and so forth.
 An auditor is authorised personnel that verifies the accuracy of financial records. Their
primary objective is to protect businesses from fraud. Companies Act → Companies
Auditor’s Report Order (CARO) = Auditors have to annually submit reports to the
Ministry of Corporate Affairs (MCA).
 Companies Act also has provisions for Related Party Transactions (RPT) to avoid
scam/embezzlement. (More in Pillar#4: Ease of Doing Biz)

15.15.1 🤼‍♀‍👬 Corporate Governance: notable Committees

 Notable committees for improving corporate governance in India: Kumar Mangalam
Birla (1999), Narayana Murthy (2003), Adi Godrej (2012), Uday Kotak (2017).
 Further, SEBI too can issue directives to Public Limited Companies in the interest of
investors, beyond what is required under Companies Act. Such as…
Table 2: not imp to memorize all provision. just observe pattern

SEBI implemented Uday Kotak committee’s suggestions From 2019-Apr From 2020-Apr
Split CEO/MD and Chairman. One person can’t occupy N/A Top 500 listed
both positions in his company (e.g. Gautam Adani) cos.
Companies Act requires min.3 directors in Public Listed Top-1000 listed Top-2000 listed
company, but SEBI mandated to have min. 6 directors cos cos
Companies Act doesn’t prescribe gender of independent Top 500 listed Top 1,000
director but SEBI mandated atleast one independent cos. listed cos.
woman director.
one person can serve as director in how many 8 7
companies? (Companies Act: Max.10), but SEBI required
 SEBI also tightened norms related to salaries to directors, ‘related party transactions’
(meaning not important but the fact that term associated with corporate governance /
companies act).
 ATMANI = SEBI deferred many of above guidelines. Dynamically changing info so we
need not chase it @ball-by-ball commentary.
15.15.2 💰(🏥🚽)CSR: Corporate Social Responsibility (कॉपोिे ट स म क्जक क्जम्मेद िी)
⇒ Mandated under Companies Act 2013: Last 3 years' avg. profit → spend 2% of that on
CSR (education, environment, public health, sanitation, disaster management etc.)
⇒ Applicable on both public ltd and private ltd. with very huge profit / turnover /
networth (what’s the difference between these terms, what’s the exact figure? Ans.
UPSC is not Chartered Account exam.)
⇒ Ministry of Corporate Affairs (MCA) gives National CSR Awards to companies.

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15.15.3 👻👨‍💼🗃⚖️ ATMANI: Corporate Governance → Companies Act relaxed
 Companies Act requires the companies to hold Meeting of the board of directors, and
meeting of the shareholders every “x” number of days etc. This norm is relaxed due to
corona lockdown. Guidelines also provided for e-voting and video conferencing.
 Companies (Amendment) Bill, 2020 → Many offences under Companies Act have been
decriminalized i.e. villains can settle by paying fines, & he’ll not face arrest/jail.
 E.g. if Corporate social responsibility reports not submitted to Government on time,
delay in holding Annual General Meeting of the shareholders etc.
 Reduced Fines/penalties for Small Companies, One person Companies, Start Ups and
Producer Companies*.
 *A Producer Company (PC) is a registered company by a group of farmers/
agriculturists. We will learn in pillar4A: Farmer Producer Company (FPC)

15.15.4 ✍️ Conclusion: Corporate Governance

 A healthy corporate sector plays an important role in creating jobs, improving exports,
and boosting GDP growth rate.
 But, lack of corporate governance erodes investors confidence and prevents deepening
of the financial market. Thereby it harms economic growth of a country.
 Aforementioned initiatives /issues are greatly important in that regard need to be
addressed in priority basis.
 एक थवथथ कॉपोरे ट क्षेत्र रोजगार-धििाधण/सृजि, धियाधत और जीडीपी धवकास दर को बढािे िें िहत्वपूणध
भूधिका धिभाता है। लेक्रकि, कॉरपोरे ट र्शासि की किी/ र्ांर्ली- धिवेर्शकों के धवश्वास को खत्ि करती है, और
धवत्तीय बाजार को गहरा करिे से रोकती है। धजससे देर्श की आर्थधक वृधि को िुकसाि पहुुँचाता है।
 इस संबंर् िें पूवोक्त पहल / िुद्दे बहुत िहत्वपूणध हैं / उवहे अग्रतािि से संबोधर्त करिा आवश्यक.

15.15.5 ✍️🎷 Mock Questions for Mains (GSM3/250 Words Each)

1) (GSM2-2015) In the light of the Satyam Scandal (2009), discuss the changes brought in corporate
governance to ensure transparency, accountability. सत्यि थकैं डल (2009) पश्च्यात पारदर्र्शधता, जवाबदेही
सुधिधित करिे के धलए कॉपोरे ट प्रर्शासि िें लाए गए बदलावों पर चचाध करें ।
2) (GSM3-2015) Craze for gold in Indians have led to a surge in import of gold in recent years and
put pressure on balance of payments and external value of rupee. In view of this, examine the
merits of Sovereign Gold Bond Scheme and Inflation Indexed Bonds (IIB). भारतीयों िें सोिे के धलए
सिक के चलते हाल के वषों िें सोिे के आयात िें वृधि और भुगताि के संतुलि और रुपये के बाहरी िूल्य पर दबाव बढा है।
इसे देखते हुए, संप्रभु थवणध बॉवड थकीि और िुद्राथफीधत सूचकांक्रकत बांड की खूधबयों की जांच करें ।संतुलि और रुपये के
बाहरी िूल्य पर दबाव डाला है। इसे देखते हुए, संप्रभु थवणध बॉवड थकीि और िुद्राथफीधत सूचकांक्रकत बांड की खूधबयों की
जांच करें ।
3) "Just as good governance is necessary for vibrant Indian democracy, corporate governance is
necessary for vibrant Indian economy." elaborate. "धजस प्रकार जीवंत भारतीय लोकतंत्र के धलए सुर्शासि
आवश्यक है, उसी प्रकार जीवंत भारतीय अथधव्यवथथा के धलए कॉपोरे ट र्शासि आवश्यक है।" धवथतृत कीधजए।
4) Discuss the significance of deepening the capital market to resolve the Twin Balance sheet
Syndrome (TBS) in Indian Economy. भारतीय अथधव्यवथथा िें दोहरे तुलि पत्र की चुिौती को हल करिे के धलए
पूंजी बाजार को गहरा करिे के िहत्व पर चचाध करें ।
5) Why are Indian financial regulators apprehensive about (1) P-Notes (2) Cryptocurrencies? भारतीय
धवत्तीय धियािक (1) पी-िोट्स (2) क्रिप्टोकरें सी से आर्शंक्रकत क्यों हैं?

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