Economy - Terms and definitions

Adam Smith (1723 – 1790) Regarded as the father of modern Economics. Author of Wealth of Nations.

Aggregate monetary resources Broad money without time deposits of post office savings organisation (M3).

Automatic stabilisers Under certain spending and tax rules, expenditures that automatically increase or taxes that automatically decrease when economic conditions worsen, therefore, stabilizing the economy automatically.

Autonomous change A change in the values of variables in a macroeconomic model caused by a factor exogenous to the model.

Autonomous expenditure multiplier The ratio of increase (or decrease) in aggregate output or income to an increase (or decrease) in autonomous spending.

Balance of payments A set of accounts that summarise a country’s transactions with the rest of the world.

Balanced budget A budget in which taxes are equal to government spending.

Balanced budget multiplier The change in equilibrium output that results from a unit increase or decrease in both taxes and government spending.

Bank rate The rate of interest payable by commercial banks to RBI if they borrow money from the latter in case of a shortage of reserves.

Barter exchange Exchange of commodities without the mediation of money.

Base year The year whose prices are used to calculate the real GDP.

Bonds A paper bearing the promise of a stream of future monetary returns over a specified period of time. Issued by firms or governments for borrowing money from the public.

Broad money Narrow money + time deposits held by commercial banks and post office savings organisation.

Capital Factor of production which has itself been produced and which is not generally entirely consumed in the production process.

Capital gain/loss Increase or decrease in the value of wealth of a bondholder due to an appreciation or reduction in the price of her bonds in the bond market.

Capital goods Goods which are bought not for meeting immediate need of the consumer but for producing other goods.

Capitalist country or economy A country in which most of the production is carried out by capitalist firms.

Capitalist firms These are firms with the following features (a) private ownership of means of production (b) production for the market (c) sale and purchase of labour at a price which is called the wage rate (d) continuous accumulation of capital.

Cash Reserve Ratio (CRR) The fraction of their deposits which the commercial banks are required to keep with RBI.

Circular flow of income The concept that the aggregate value of goods and services produced in an economy is going around in a circular way. Either as factor payments, or as expenditures on goods and services, or as the value of aggregate
production.

Consumer durables Consumption goods which do not get exhausted immediately but last over a period of time are consumer durables.

Consumer Price Index (CPI) Percentage change in the weighted average price level. We take the prices of a given basket of consumption goods.

Consumption goods Goods which are consumed by the ultimate consumers or meet the immediate need of the consumer are called consumption goods. It may include services as well.

Corporate tax Taxes imposed on the income made by the corporations (or private sector firms).

Currency deposit ratio The ratio of money held by the public in currency to that held as deposits in commercial banks.

Deficit financing through central bank borrowing Financing of budget deficit by the government through borrowing money from the central bank. Leads to increase in money supply in an economy and may result in inflation.

Depreciation A decrease in the price of the domestic currency in terms of the foreign currency under floating exchange rates. It corresponds to an increase in the exchange rate.

Depreciation Wear and tear or depletion which capital stock undergoes over a period of time.

Devaluation The decrease in the price of domestic currency under pegged exchange rates through official action.

Double coincidence of wants A situation where two economic agents have complementary demand for each others’ surplus production.

Economic agents or units Economic units or economic agents are those individuals or institutions which take economic decisions.

Effective demand principle If the supply of final goods is assumed to be infinitely elastic at constant price over a short period of time, aggregate output is determined solely by the value of aggregate demand. This is called effective demand principle.

Entrepreneurship The task of organising, coordinating and risk-taking during production.

Ex ante consumption The value of planned consumption.

Ex ante investment The value of planned investment.

Ex ante The planned value of a variable as opposed to its actual value.

Ex post The actual or realised value of a variable as opposed to its planned value.

Expenditure method of calculating national income Method of calculating the national income by measuring the aggregate value of final expenditure for the goods and services produced in an economy over a period of time.

Exports Sale of goods and services by the domestic country to the rest of the world.

External sector It refers to the economic transaction of the domestic country with the rest of the world.

Externalities Those benefits or harms accruing to another person, firm or any other entity which occur because some person, firm or any other entity may be involved in an economic activity. If someone is causing benefits or good externality to another, the latter does not pay the former. If someone is inflicting harm or bad externality to another, the former does not compensate the latter.

Fiat money Money with no intrinsic value.

Final goods Those goods which do not undergo any further transformation in the production process.

Firms Economic units which carry out production of goods and services and employ factors of production.

Fiscal policy The policy of the government regarding the level of government spending and transfers and the tax structure.

Fixed exchange rate An exchange rate between the currencies of two or more countries that is fixed at some level and adjusted only infrequently.

Flexible/floating exchange rate An exchange rate determined by the forces of demand and supply in the foreign exchange market without central bank intervention.

Flows Variables which are defined over a period of time.

Foreign exchange Foreign currency, all currencies other than the domestic currency of a given country.

Foreign exchange reserves Foreign assets held by the central bank of the country.

Four factors of production Land, Labour, Capital and Entrepreneurship. Together these help in the production of goods and services.

GDP Deflator Ratio of nominal to real GDP.

Government expenditure multiplier The numerical coefficient showing the size of the increase in output resulting from each unit increase in government spending.

Government The state, which maintains law and order in the country, imposes taxes and fines, makes laws and promotes the economic wellbeing of the citizens.

Great Depression The time period of 1930s (started with the stock market crash in New York in 1929) which saw the output in the developed countries fall and unemployment rise by huge amounts.

Gross Domestic Product (GDP) Aggregate value of goods and services produced within the domestic territory of a country. It includes the replacement investment of the depreciation of capital stock.

Gross fiscal deficit The excess of total government expenditure over revenue receipts and capital receipts that do not create debt.

Gross investment Addition to capital stock which also includes replacement for the wear and tear which the capital stock undergoes.

Gross National Product (GNP) GDP + Net Factor Income from Abroad. In other words GNP includes the aggregate income made by all citizens of the country, whereas GDP includes incomes by foreigners within the domestic economy and excludes incomes earned by the citizens in a foreign economy.

Gross primary deficit The fiscal deficit minus interest payments.

High powered money Money injected by the monetary authority in the economy. Consists mainly of currency.

Households The families or individuals who supply factors of production to the firms and which buy the goods and services from the firms.

Imports Purchase of goods and services by the domestic country to the rest of the world.

Income method of calculating national income Method of calculating national income by measuring the aggregate value of final factor payments made (= income) in an economy over a period of time.

Interest Payment for services which are provided by capital.

Intermediate goods Goods which are used up during the process of production of other goods.

Inventories The unsold goods, unused raw materials or semi-finished goods which a firm carries from a year to the next.

John Maynard Keynes (1883 – 1946) Arguably the founder of Macroeconomics as a separate discipline.

Labour Human physical effort used in production.

Land Natural resources used in production – either fixed or consumed.

Legal tender Money issued by the monetary authority or the government which cannot be refused by anyone.

Lender of last resort The function of the monetary authority of a country in which it provides guarantee of solvency to commercial banks in a situation of liquidity crisis or bank runs.

Liquidity trap A situation of very low rate of interest in the economy where every economic agent expects the interest rate to rise in future and consequently bond prices to fall, causing capital loss. Everybody holds her wealth in money and
speculative demand for money is infinite.

Macroeconomic model Presenting the simplified version of the functioning of a macroeconomy through either analytical reasoning or mathematical, graphical representation.

Managed floating A system in which the central bank allows the exchange rate to be determined by market forces but intervene at times to influence the rate.

Marginal propensity to consume The ratio of additional consumption to additional income.

Medium of exchange The principal function of money for facilitating commodity exchanges.

Money multiplier The ratio of total money supply to the stock of high powered money in an economy.

Narrow money Currency notes, coins and demand deposits held by the public in commercial banks.

National disposable income Net National Product at market prices + Other Current Transfers from the rest of the World.

Net Domestic Product (NDP) Aggregate value of goods and services produced within the domestic territory of a country which does not include the depreciation of capital stock.

Net interest payments made by households Interest payment made by the households to the firms – interest payments received by the households.

Net investment Addition to capital stock; unlike gross investment, it does not include the replacement for the depletion of capital stock.

Net National Product (NNP) (at market price) GNP – depreciation.

NNP (at factor cost) or National Income (NI) NNP at market price – (Indirect taxes – Subsidies).

Nominal exchange rate The number of units of domestic currency one must give up to get an unit of foreign currency; the price of foreign currency in terms of domestic currency.

Nominal (GDP) GDP evaluated at current market prices.

Non-tax payments Payments made by households to the firms or the government as non-tax obligations such as fines.

Open market operation Purchase or sales of government securities by the central bank from the general public in the bond market in a bid to increase or decrease the money supply in the economy.

Paradox of thrift As people become more thrifty they end up saving less or same as before in aggregate.

Parametric shift Shift of a graph due to a change in the value of a parameter.

Personal Disposable Income (PDI) PI – Personal tax payments – Non-tax payments.

Personal Income (PI) NI – Undistributed profits – Net interest payments made by households – Corporate tax + Transfer payments to the households from the government and firms.

Personal tax payments Taxes which are imposed on individuals, such as income tax.

Planned change in inventories Change in the stock of inventories which has occurred in a planned way.

Present value (of a bond) That amount of money which, if kept today in an interest earning project, would generate the same income as the sum promised by a bond over its lifetime.

Private income Factor income from net domestic product accruing to the private sector + National debt interest + Net factor income from abroad + Current transfers from government + Other net transfers from the rest of the world.

Product method of calculating national income Method of calculating the national income by measuring the aggregate value of production taking place in an economy over a period of time.

Profit Payment for the services which are provided by entrepreneurship.

Public good Goods or services that are collectively consumed; it is not possible to exclude anyone from enjoying their benefits and one person’s consumption does not reduce that available to others.

Purchasing power parity A theory of international exchange which holds that the price of similar goods in different countries is the same.

Real exchange rate The relative price of foreign goods in terms of domestic goods.

Real GDP GDP evaluated at a set of constant prices.

Rent Payment for services which are provided by land (natural resources).

Reserve deposit ratio The fraction of their total deposits which commercial banks keep as reserves.

Revaluation A decrease in the exchange rate in a pegged exchange rate system which makes the foreign currency cheaper in terms of the domestic currency.

Revenue deficit The excess of revenue expenditure over revenue receipts.

Ricardian equivalence The theory that consumers are forward looking and anticipate that government borrowing today will mean a tax increase in the future to repay the debt, and will adjust consumption accordingly so that it will have the
same effect on the economy as a tax increase today.

Speculative demand Demand for money as a store of wealth.

Statutory Liquidity Ratio (SLR) The fraction of their total demand and time deposits which the commercial banks are required by RBI to invest in specified liquid assets.

Sterilisation Intervention by the monetary authority of a country in the money market to keep the money supply stable against exogenous or sometimes external shocks such as an increase in foreign exchange inflow.

Stocks Those variables which are defined at a point of time.

Store of value Wealth can be stored in the form of money for future use. This function of money is referred to as store of value.

Transaction demand Demand for money for carrying out transactions.

Transfer payments to households from the government and firms Transfer payments are payments which are made without any counterpart of services received by the payer. For examples, gifts, scholarships, pensions.

Undistributed profits That part of profits earned by the private and government owned firms which are not distributed among the factors of production.

Unemployment rate This may be defined as the number of people who were unable to find a job (though they were looking for jobs), as a ratio of total number of people who were looking for jobs.

Unit of account The role of money as a yardstick for measuring and comparing values of different commodities.

Unplanned change in inventories Change in the stock of inventories which has occurred in an unexpected way.

Value added Net contribution made by a firm in the process of production. It is defined as, Value of production – Value of intermediate goods used.

Wage Payment for the services which are rendered by labour.

Wholesale Price Index (WPI) Percentage change in the weighted average price level. We take the prices of a given basket of goods which is traded in bulk.

UN agencies stress on importance of farm co-operatives

The role of agricultural co-operatives in poverty reduction and ensuring food security for millions around the world is one of the themes of the International Year of Co-operatives 2012.

Being part of a larger group, small farmers can negotiate better terms in contract farming and lower prices for agricultural inputs such as seeds, fertilisers and equipment. Also, they can secure land rights and better marketing opportunities, which they may not be able to do individually.

The importance of agricultural co-operatives has been stressed by three United Nations agencies, namely, Food and Agriculture Organisation (FAO), International Fund for Agricultural Development (IFAD) and World Food Programme (WFP).

It has been pointed out that co-operatives in general cover small-scale to multi-million business across the globe and operate in all sectors of the economy. They have an estimated 800 million members and provide 100 million jobs worldwide, with an aggregate turnover of $ 1.1 trillion that is comparable to the GDP of many large countries.

In Brazil, co-operatives accounted for 37.2 per cent of agricultural GDP and 5.4 per cent of overall GDP in 2009, and earned $ 3.6 billion from exports. In Mauritius, co-operatives are responsible for more than 60 per cent of the national production in the food crops sector.

Agriculture, including farming, forestry, fisheries and livestock, is the main source of employment and income in rural areas, where the majority of the world's poor and hungry people live. The agricultural co-operatives can support small farm producers and marginalised groups by creating sustainable rural employment. They will also provide men and women small-holders with services such as better training in natural resource management and access to information, technologies, innovations and extension services.

The UN agencies said in a joint statement that they will promote the growth of agricultural co-operatives through a slew of initiatives. For one, the co-operatives will be supported to form networks for pooling their assets and competencies to overcome market barriers and other constraints such as lack of access to natural resources.

The agencies will assist policy-makers in the design and implementation of policies, laws, regulations and projects and create enabling environment for the successful operation of the co-operatives. They will also help strengthen the dialogue and cooperation between governments, agricultural co-operatives, the international research communities and civil society representatives.

Security Printing & Minting in India

·         18^th Century – Minting of coins started at Calcutta Mint.  In 1790 modern machinery was brought from England and second Mint was established.   Bronze, silver and Gold coins were getting minted from these mints

·         1918- British sovereign were minted during 1918 as the Mint in Mumbai was declared as branch of Royal Mint of London

·         1925 – Printing of postal stationery & stamps started at Nashik

·         1928 – Printing of currency/bank notes started at Nashik

·         1929 onwards –various other security products added

·         1962- Re.1/- printing started at new location

·         1967- A Security Paper manufacturing Mill was commissioned at Hoshangabad (M.P.)

·         1974 – A new press was established at Dewas (M.P) with complete range of printing machines to take care of printing of higher denomination of  bank notes using “Intaglio Printing Technology and Guillotine Machines” for carrying out finishing jobs of processing bank notes.  In Bank Notes Press, Dewas, high quality security inks are also produced and supplied to various security organizations

·         1980- Printing of all currency/bank notes shifted to new location

·         1982-First security printing unit established by Government of India at Hyderabad

·         1988-Government of India came up with first Mint of its own at Noida (U.P.)

BUSSINESS ECONOMY TERMS

Accounting period:

The period of time covered by business, financial and management accounts. Financial accounts are generally prepared once or twice in twelve calendar months, but the interval of management accounts must be much shorter in order to ensure adequate management control over the regular operations.

Annual Depreciation:

The reduction in book value of an asset at a certain percentage rate per annum.

Appreciation:

An increase in the value of an asset over its purchase price or book value.

Asset:

Any business resource both tangible and intangible acquired at monetary cost and which is expected to be of benefit to the business for a period of time, such as buildings, machinery, etc. Intangibles include goodwill etc. Any resource of a deceased or insolvent person from which claims may be met.

Bad Debt:

A debt which is irrecoverable and is therefore written off as a loss in the accounts of a company/bank etc.

Balance sheet:

Statement of the financial position of a company on a particular date, showing the nature and amount of a company's assets and liabilities on a particular date, usually the end of the accounting year. The assets include fixed assets, investment, current assets (which include Inventories, sundry debtors, cash and bank balances) and loans and advances. The liabilities include shareholders' fund (equity capital plus reserves). Loan funds (secured and unsecured loans) and current liabilities and provisions. The assets and liabilities must balance.

Blank cheque:

A cheque which has been signed and dated but in which the amount payable has not been filled in. This is left for the payee to insert.

Break Even Point:

That level of activity of a business at which neither profit nor loss is incurred, total costs equating with total revenue. Also called break-even performance.

Brokerage:

The payment charged by brokers for their services in arranging a contract. It is usually expressed as a percentage of the monetary value of the contract.

Bullion:

Gold and silver, usually in bar form, which is regarded as a commercial commodity at recognised degrees of purity.

Capital:

All resources which have been produced by mankind and which themselves are used in the process of production. Capital is thus different from land, since this is a natural rather than a man made resource. The total resources of a person or business. The sum of money subscribed by the members of a company, by partners or by an individual when starting a company.

Central Bank:

A bank, usually state owned whose operations are directed by the government as an instrument of financial policy. Typical functions of a central bank include acting as banker to the state and the commercial banks, controlling the note issue and managing the state's currency and credit policies. The German Bundesbank and the American Federal Reserve are the most autonomous of all central banks in the world. RBI will surely count amongst the least autonomous ones. Autonomy of the central bank reduces government extravagancea and minimises political interference.

Cheque:

A written order to banker authorising him to pay a specified sum of money to a person named in the order, to his order or to bearer from funds deposited with the banker.

Consumer Durables:

Solid items bought by the general public for use in the house. These may include washing machines, cookers and refrigerators, which are likely to be in use for several years.

Consumer Goods:

Commodities or services consumed directly to satisfy a want rather than one used to produce something else. For Example: Soft drinks etc. Capital goods (like machineries), on the other hand, are used to generate some other goods.

Credit Rating:

The amount which is credit agency states a borrower is capable of repaying. Credit Rating can be done for stocks, bonds or nations themselves. Some global credit rating agencies are Standard and Poor's (S & P), Moody's etc. CRISIL is the Indian agency rating bonds etc.

CRISIL or Credit Rating Information Services of India Limited:

Jointly sponsored by the UTI and the Industrial Credit and Investment Corporation of India (ICICI), CRISIL has been functioning since January 1988. It rates the safety and timely payment of interest on debt securities like debentures and fixed deposits of public and private sector companies. The rating, subjected to periodic review, is given in alphabetical symbols preceded by d for Debentures and F for Fixed Safety, an adequate safety, B inadequate safety, C high risk, D default.

Debentures:

An instrument of debt, called bond in the US. A debenture holder is a creditor to the company who loans funds for a period of 7-10 years against a fixed rate of interest. After the stipulated loan period the debentures are redeemed, i.e., the loan is paid back, sometimes with a very small premium. Debentures are generally secured against the company's assets. Convertible debentures can be either fully or partly converted into a certain number of shares, usually at a premium, after a stated period of time. Convertible debentures may carry a lower rate of interest than non convertible debentures investment; there is little risk but also little prospect of appreciation.

Debt-Equity Ratio:

Also called financial Leverage ratio in the US. There are three methods of calculating this ratio, the last being more common:
1. The total liabilities of a company divided by the shareholders' equity
2. The total long term debt divided by shareholders' equity
3. The total long term debt plus the par value of preference shares divided by the par value of equity shares. All the three ratios measure a company's solvency.

Depreciation:

1. The reduction in the value of an asset through wear and tear, obsolescence, etc. 2. An accounting device by means of which the value of an asset is converted into an expense for each of the accounting periods during which the asset is expected to contribute value.

Disinflation:

The process or policy of removing pressures on the economy which are forcing prices upwards and the real value of the monetary unit downwards. Pressure may be removed by curtailing expenditure through credit restrictions and a dear money policy, and by taxation.

Deficit:

An excess of liabilities over assets or of expenditure over revenue.

Disinvestment:

Especially in the Indian context, it refers to the process of offloading of shares in a firm by a party. The government of India has partially disinvested its holding in several Public Sector undertaking (PSUs) with the ultimate aim of privatising them to increase accountability and productivity.

Elasticity of Demand:

A measurement of economics of the degree of response of a change in one factor to a change in a related factor, expressed in a price demand, price supply or demand income relationships.

Floating Capital:

Funds available for carrying on a business, including funds employed in marketable investments.

Foreign Exchange:

The process of trading one currency for another. This takes place on the international exchange markets where trading sets the exchange rates of currencies. Foreign currency is required by individuals, business and governments to finance the purchase of goods and services and to make loans to other countries.

Free Market Economy:

An economic system where the government does not interfere in any way in business activity.

Golden Handshake:

Compensation paid to an executive of a company on his displacement and especially on his retirement.

Gross Domestic Product:

The value of goods and services produced in an economy. The value may be measured by aggregating market values of goods and services or by aggregating incomes from employment, profits, dividends, etc. (i.e., factor cost, which is equivalent to market values less purchase tax plus subsidies). It is equivalent to gross national product less the value of net property abroad.

Gross National Product:

The total monetary value of all the goods and services produced by a country in a year, expressed either at factor cost or at market prices.

Inflation:

The rate at which prices grow in an economy. Thus, reduced rate of inflation would mean that the rate at which prices will rise has slowed down, but not that the prices will fall.

Liquid Assets:

Assets that can be converted into cash comparatively quickly. They are widely regarded as comprising shares, short term bills of exchange, bank deposits and cash itself.

Lay off:

The temporary dismissal of a worker because there is no work to be done.

Merchandise:

Goods which are offered for sale.

National Income:

The sum of the value of goods and services available to an economy through its economic activity in a given time period. The income many be evaluated:
1. by adding the incomes generated by economic activity, e.g., wages, salaries, dividends, profits and net income from abroad;
2. by adding the prices of goods and services, less indirect taxes plus subsidies, together with government expenditure. Both methods produce similar total and the movement in the total is indicative of economic progress over time, once allowance is made for price inflation, population growth, etc. Growth of national income need not be synonymous with improvement in living standards

Real Interest Rate:

Current interest rate less the rate of inflation; of relevance in decision regarding long term fixed interest securities. Since most current interest is taxed, the post tax interest is likely to fall below double digit inflation rates, which means a steady erosion of capital.

Redemption:

Buying back a loan instrument by paying off the lender. In the case of debentures or preference shares redemption means paying back the investor, either in cash, or through equity shares.

Sensex:

it is the sensitive index of the Bombay Stock Exchange. It reflects the weighted average price of 30 most volatile A Group shares on the BSE. Widely criticised to be an unrepresentative but highly influential index.

Yield:

The actual rate of return received or obtainable from an investment, generally as the annual income calculated as a percentage of the purchase price of the investment. The rate of return for a capital investment project which equates the net capital expenditure with the discounted value of futures net cash inflows. The output of a process.

Food Security: Need to establish food democracy

Over one billion hungry people go to bed every day all over the world; this can be termed as our most tragic achievement in modern days. We have to reclaim our right to food, nutrition and food safety. The need is to produce food where the poor and hungry live and to boost agricultural investment in these regions. Food democracy is the new agenda for ecological sustainability and social justice. The FAO World Food Summit in 1996 had concluded that about 840 million people (15 per cent of population)are undernourished and that under current prospects this would only reduce to 680 million by 2010 (10 per cent ofworld population). This would be 18 per cent of the population in the most vulnerable countries where 3 billion people would live (out of a world population of about 6.8 billion in 2010). The report also highlighted the fact that a third of children (nearly 180 million) are malnourished and this may drop to quarter worldwide by 2020 and remain at 40 per cent in South Asia, a third of the people in Sub-Saharan Africa will be food insecure by 2010. This report and the subsequent reports of the FAO and other major international agencies have continuously underlined the impending problem before the world which is now clearly coming to surface in major parts of the world with varying regional implications.

Food security is access by all people at all times to enough food for an active, healthy life. This implies individual access in all seasons and all years not just for survival but for active participation in society. Further discussions on defining food security have been summarized by Maxwell (1998) as identifying livelihood security as a necessary and often sufficient condition for food security and focuses on the long term viability of the household as a productive and reproductive unit. Maxwell and others now favour the quality of the food entitlement (rather than just the quantity) where the emphasis is more on subjective assessment and on the nutritive value of the food being secured to the individuals. A country and people are called food secure when their food system operates in such a way as to remove the fear that there will not be enough to eat. In particular, food security will be achieved when the poor and vulnerable, particularly women and children and those living in marginal areas, have access to the food they want. Thus food security is a multi-objective phenomenon. The concerns on food security progressed over the last 50 years or so have been purely from physical availability at the global level to the provisions of food to individuals and the role of poverty in ensuring year round access to food. The interaction between agriculture/food policies and socioeconomic factors at the micro and macro-level is now considered crucial to ensuring food availability.

M. S. Swaminathan has divided the post-war era into four phases
(a) 1940/60s - Food security was only considered in physical availability terms; (b) 1970s - Economic access to food was considered equally important; (c) 1980s - Food security was considered at the level of the individual and not merely of the household; and (d) 1990s - Recognition that micronutrients in addition to environmental hygiene and safe drinking water are important.
In adopting any growth model that ensures global food security sufficient amount of flexibility, adaptability, diversification and resilience should be there in policy formulation and implementation. Thus food security must be treated as a multi-objective phenomenon where the identification and weighting of objective should be decided by the food insecure themselves.

Causes and consequences
Today, the food system no longer responds to the nutritional needs of people, nor to sustainable production based on respect for the environment, but is based on a model rooted in a capitalist logic of seeking the maximum profit, optimization of costs and exploitation of the labour force in each of its productive sectors.The on-going food crisis has left 925 million hungry, according to the United Nations Food and Agriculture Organization (FAO). This figure is expected to rise to 1.2 billion hungry in 2017, according to the US Department of Agriculture. But in fact, the current food crisis is already affecting directly or indirectly half of the population worldwide, more than three billion people. A report released by a US based group claimed that South Asia continues to face critical levels of hunger. The report also highlighted that the current hot spots of hunger and under-nutrition are in South Asia and Sub- Saharan Africa. While there has been a dramatic improvement in South Asia, the region remains an area of great concern. The rising food prices and ensuing food scarcity has led to hunger riots in the countries of Africa and many Asian nations, as it is precisely the basic commodities that feed the poor which have experienced the biggest price rise. In countries like Haiti, Pakistan, Mozambique, Bolivia, Morocco, Senegal, Bangladesh and Niger people have come out onto the streets to say “ENOUGH”. Such food/hunger riots have left dozens of people dead and wounded.

Short Term Causes: There are conjectural reasons which partially explain this dramatic increase in food insecurity in recent years: droughts and other meteorological phenomena linked to climate change in producer countries like China, Bangladesh and Australia and India that have affected crops and will continue impacting on food production. From my point of view, there are two short-term causes which have been determinant in rising food prices and should be highlighted: the increase in the price of oil since 2007, which would have had an effect directly or indirectly, and growing speculative investment in raw materials. Both factors have finally unbalanced an agro-food system which was extremely fragile.

Structural causes: If we look beyond these short term causes, there are various underlying reasons that explain the current food crisis. The neoliberal policies applied indiscriminately in the course of the last thirty years like trade liberalisation at all costs, privatization of public services and goods and so on and the model of agriculture and food at the service of a capitalist logic bear the primary responsibility for this situation. We can thus say that we are facing a deeper systemic problem with a global food model which is extremely vulnerable to economic, ecological and social shocks.The WTO policies forced developing countries to eliminate tariffs on imports, end protection for and subsidies to small producers and open their borders to the products of transnational corporations while the markets of the North remained highly protected. In the same way, regional treaties like the and North American Free Trade Agreement (NAFTA) Central America Free Trade Agreement (CAFTA) deepened trade liberalization, leading to bankruptcy for the farmers of the developing and under developed nations and made them dependent on food imports from the countries of the West. American and European agricultural subsidies, directed mainly towards the agro-food industry, obliterate the small local producer. This support to agribusiness accounts for a quarter of the value of agricultural production in the US and 40 per cent in the European Union.Thus the economic “development” policies driven by the Western countries from the 1960s onwards (Structural adjustment programmes, regional free trade treaties, the World Trade Organization and agricultural subsidies in the West) have led to the destruction of food systems and have continuously increased the food insecurity threat for the people of the developing and poor nations.
The Corporate Food System is another blow to the global food security. “Food economy” has made the corporates rule the trade in food items. In effect, the rich countries are ruling the roost and the poor nations already reeling under severe poverty and hunger, bear the brunt of the trade in food. The corporates have found another way in terms of investments in food items which has made the food market speculative, often leading to inflation. The result is unbearable for the poor. La Via Campesina is an international farmers’ organization that talks of New Localism in agriculture sector, giving the farmers’ their rights in food security instead of the intervention of multi-national corporations.

Financial Crisis and Food Crisis
The year 2007 and 2008 witnessed the biggest international financial crisis since 1929. The crisis of subprime mortgages in mid-2007 was one of its detonators, leading to historical stock exchange collapses worldwide, numerous financial bankruptcies, constant unprecedented interventions by central banks and government bailouts, and an unprecedented deterioration of the real economy.The financial and food crises are interlinked and are the result of the same policies of deregulation. With the crisis of high risk mortgages in 2007 investors began to seek safer places to invest, like agricultural products and oil. This led to the increase in the prices of food and agricultural supplies, contributing to the situation of food crisis and pushing 2008 prices upward.

Indian Scenario
India is one of the fastest growing economies of the world. The fast growth that India has achieved in the last several years has placed India as a key player in the global economy. In the year 1997, the then President Shri K. R. Narayan listed our adherence to a democratic system of governance and our launching of a green revolution in agriculture as the two most important achievements of the first 50 years of our tryst with the destiny. In the past concerted efforts have been made by India to achieve food security by increasing food grain production. Thanks to the Green Revolution India attained national food self-sufficiency 35 years ago through investment in technology, institutions and infrastructure, but still 35 per cent Indians remain food insecure. In India the low income of the majority of the population and high food prices prevent complete food security for all. Another lacuna of the Indian food security scenario has been the drawbacks in our Public Distribution System. Surging food grain prices and worsening global supplies are challenging the food security in India. The grain yield of Indian farmers is not going up and there is growing gap between demand and supply. After three decades of relatively comfortable production and availability of food grains, India once again seems to be sliding back to those humiliating days of 1960’s we used to live from ship to mouth on imported wheat obtained from the USA. Though we are still away from that point but steeps need to be taken in right direction before we enter into dire consequential situation.

Reasons for RisingFood Insecurity in India
The problem of food insecurity in India is not of general systemic failure that arises due to a supply shortage. It is in fact more a problem where certain sector (mainly the rural agrarian population and the urban informal sector) suffer from a shortage of food in general climate of increasing production. It can easily be observed that the main determinant of food insecurity in India today are the shrinking of agrarian and informal sector incomes and failures (both due to policy framing as well as implementation) of support led measures to combat poverty. The latter includes the poor results yielded by the targeted public distribution system in most regions of the country. In spite of the significant progress that India has made in food production and sufficiency over the last 50 years, most of the rural population is still had to deal with uncertainties of food security on a daily basis year after year and even generation after generation. In aggregate over one fifth of India’s population suffers from chronic hunger.
The late 1960’s saw the Green Revolution and the production of food grains started yielding high results. But since then the North and North West India were deemed by public policy to become the grannies of India and other states such as Karnataka, Tamil Nadu and Assam thrust into the role of cash crop production with a small amount of arable land being used for food grain cultivation. Agriculture with a regional thrust such as this has meant that over time there has developed an iniquitous pattern of food grain production. An often cited reason for an increase in hunger is the demand deflation that accompanies a lowering of agrarian incomes. It is true that in India the distribution of income within the population is more skewed that it was some decades ago. The rapid opening up of the agricultural sector to foreign competition has led to rise in rural poverty and a lowering of food security. The supply side issues to food security related to problems like drought and famines. These supply side cuts contribute to further exacerbate the already existing problems with dwindling agrarian incomes and a failing PDS by causing more hunger and poverty that arise due to shortage in production. Another reason for the fall in the availability of food is that our farm output is just not growing. Since the mid-1990s, the output has hovered around 415 million tonne. In the eight years between 1996 and 2004, when agriculture was growing at a low 2 per cent, there was, in fact, zero growth in food-grains. The neglect of government to made adequate investment in the country’s food storage system is another major reason for rising level of threat to the available food to the poor and hungry. The increase in population can be cited as another major reason for the rising food threat in India. India is the second populated state with more than billion living in it. It is projected that the population will increase to 1.3 billion in 2020, and would leave behind China in 2050 if the population growth remains unchanged. To feed the large population we require millions of tons of food grain. It is estimated that India would require 343.0 million metric tons of food grains in 2020 to feed the whole population. Environmental scientists believe that our climate is changing very fast. IPCC (Intergovernmental Panel for Climate Change) warned us that climate change could cause change in the pattern of rainfall and it will thus require special arrangements to make agriculture possible. Thus we are facing several new problems, of which the following are important:

• First, increasing population leads to increased demand for food and reduced per capita availability of arable land and irrigation water.
• Second, improved purchasing power and increased urbanisation lead to higher per capita food grain requirements due to an increased consumption of animal products.
• Fourth, there is increasing damage to the ecological foundations of agriculture, such as land, water, forests, biodiversity and the atmosphere and there are distinct possibilities for adverse changes in climate and sea level.
• Fifth, while dramatic new technological developments are taking place, particularly in the field of biotechnology, their environm-ental, food safety and social implications are yet to be fully understood.
• Finally, gross capital formation in agriculture is tending to decline in both public and private sectors during the present decade. The rate of growth in rural non-farm employment has been poor.

The issue of food insecurity, especially in a developing nation like India, thus raises the twin problems of uncertain food production and unequal food distribution. The impact of unequal food distribution can have adverse effects on the rural and urban population living below the poverty line. Food insecurity is not only economic problem but also problem of non-humanity approach in India. The broader socio-economic context is marked by powerful poverty generating process like growing landlessness in villages, casualization of rural labour and proliferation of small and marginal holdings with severe constraints in raising agricultural productivity and growth. These processes operated along with weak rural programmes for supply of safe drinking water in adequate quantities, improved rural sanitation, provision of houses to the rural poor etc. The result is the growing development gap between what is described as India and Bharat.

Although there has been a large
number involved in agriculture, still three is a food crisis in India. In India, agriculture got its dimension during the green revolution period. This introduced several new scientific methods, which increased food production several folds. But still, 26 per cent of Indians live below the poverty line and several hundred die due to malnutrition. This section of the article tries to enumerate the ways and measures to achieve food security for all. Food security depends not only on production but also on policies and institutions that translate production into food availability, access and utilization by the population. There has a clear cut increase in the food production but the productivity of food has been stalling. The current food and agriculture policies are suboptimal to revive a second round of agriculture revolution in India. Food security can be achieved by increasing production and a combination of policies that improves domestic, regional and international trade along with programs that improve the quantity and quality of food consumed by the population. Increasing the accessibility of food depends on food prices and the income of the population. 
The present food crisis is due to lack of proper distribution and the trading system impeding free flow of food. Even increase in agricultural productivity also one of the solution for this problem. This should be based on integrating inputs and outputs-the supply of high yielding varieties of seeds, fertilizers, and irrigation, supported by credit alongside remunerative output prices. A second “green revolution” is essential to stimulate food production in many India. . It is crucial to ensure that farm and trade policies of developed countries do not artificially reduce the prices of their food grains. This makes it virtually impossible for farmers from developing countries to compete both in their own domestic markets, due to cheap food imports, and also in the international market. 
Technology can also play a key role in reducing the cost of production of commodities. The role of research in increasing the productivity of crops is crucial. With functional genomics, proteomics and recombinant DNA technology we can address simultan-eously the quantitative, qualitative and sustainability aspects of crop production. The recent development in the science of agriculture we are able to manage biotic and abiotic stresses and genetically modified crops provide opportunities for avoiding damage by drought, high temperature, floods and sea level rise caused by global warming and climate change. Thus “food for all” has now become an achievable goal, thanks to the new genetics which has opened opportunities for precision breeding and toolbox-made crop varieties.
Achieving higher yield levels is a long term process through focused research programs that use resources effectively, in the short run effective social welfare programs could reduce the severity of hunger. The social welfare programs need to implement effectively either individually or jointly. Effective monitoring of the food distribution system including the food for work programs can aid in redressing the food insecurity.

Trade can also play an important role in achieving national food security through appropriate policies that are designed to import food when we are in deficient and export when we harvest surplus. But achieving household food security will require higher levels of income for people who are unable to feed adequate quantity and quality of food.
To increase food production, area under agriculture should be increased. But rather than increasing, agricultural land is now being converted into industrial land. The recent example is of Singur, where thousand acre of agricultural land is converted into a car factory.
Urbanization is another problem. Agricultural lands are now being converted into housing plots and are converted into cities and towns. This has increased the pressure on agriculture. The need is to avoid such policy formulation which deliberately converts the agricultural land into commercial land. The poor and hungry should top the agenda of government policies. Solving the problem of food insecurity in India requires agro-ecological approaches. Blanket recommendations of technology and policy cannot be effective in solving localized food security problems. Thus there is a strong need to revisit the agricultural developmental strategies reorient them according to agro-ecological systems. The proposed National Food Security Bill can go a long way in addressing the problem of food security in India if formulated and implemented in its true contours. The proposed Food Security Act should combine the features of Food for Work and MGNREGA. The National Advisory Council (NAC) that is formulating the Bill has recommended that legal entitlements to subsidised food grains be extended to at least 75 per cent of the populations in rural areas and 50 per cent in urban areas. In the first phase, food entitlements should be extended to 85 per cent of the rural population and 40 per cent of the urban population. Full coverage of food entitlements should be extended to March 2014. The NAC has suggested that Priority (BPL) should have monthly entitlement of 35 kg of subsidised food grains at Re. 1 per kg for millets, Rs 2 per kg for wheat and Rs 3 per kg for rice.

The General (APL) households should have a monthly entitlement of 20 kg at a price not exceeding 50 per cent of the current minimum support price for millets, wheat and rice. The draft Bill as suggested by the NAC also contains a provision for setting up a National Food Commission to ensure implementation of the proposed bill and enforcement of penalties for violations.

It is here suggested that the demands of the Civil Society groups and NGO’s should be taken with the propose of seeking an all-inclusive, universal public distribution system, fool proof delivery system and decentralised production of grains, procurement and distribution that address rampant malnutrition in the country.

At the institutional level we need to promote the organisation of Community Grain and Water Banks by the Village Panchaytas with the Gram Sabhas providing social oversight. Simultane-ously opportunities need to be enlarged for on-farm and non-farm employment through the bio village model of human centred development and improve the productivity and profitability of small farmers.
The world’s population is expected to reach to around 9 billion by 2050, global demand for food, feed and fibre will nearly double while, increasingly, crops may also be used for bioenergy and other industrial purposes. New and traditional demand for agricultural produce will thus put growing pressure on already scarce agricultural resources. And while agriculture will be forced to compete for land and water with sprawling urban settlements, it will also be required to serve on other major fronts: adapting to and contributing to the mitigation of climate change, helping preserve natural habitats, protecting endangered species and maintaining a high level of biodiversity.
We will need new technologies to grow more from less land, with fewer hands. Attaining long term food security will thus require the raising of incomes and making food affordable for the poor. This requires a multi-prolonged strategy. All the anti-poverty programs need to be made more transparent with better governance that minimizes leakages and benefits the poorest of the poor. Simultaneously the governments all over the world should take effective reforms to improve the agriculture by increasing the incentives, increasing the investment etc. so that agriculture production can be increased manifolds.

RESERVE BANK OF INDIA

The Reserve Bank of India (RBI) was established under the Reserve Bank of India Act, 1934 on 1 April 1935 and nationalised on 1 January 1949. The Bank acts as banker to the Central Government, state governments, commercial banks, state co-operative banks and some of the financial institutions. It formulates and administers monetary policy with a view to ensuring stability in prices while promoting higher production in the real sector through proper deployment of credit. RBI plays an important role in maintaining the stability of exchange value of the rupee and acts as an agent of the Government in respect of India’s membership of International Monetary Fund. The Reserve Bank also performs a variety of developmental and promotional functions. These apart, the Reserve Bank also handles the borrowing programme of the Government of India.

The Reserve Bank is the sole authority for issue of currency in India other than one rupee coins and subsidiary coins and notes.

As the agent of the Central Government, the Reserve Bank undertakes distribution of one-rupees notes and coins, as well as small coins issued by the Government.

Composition of Banking System- Commercial Banking system in India consisted of 218 scheduled commercial books (including foreign banks) as on 31 March 2006. Of the scheduled commercial banks, 116 are in public sector of  which 133 are regional rural banks (RRBs) and these account for about 75.2 percent of the deposits of all scheduled commercial banks. The regional rural banks were specially set up to increase the flow of credit to small borrowers in the rural areas. The remaining 28 banks in the public sector (i.e.), 19 nationalized banks, 8 Banks in SBI group and IDBI Ltd. are commercial banks and transact all types of commercial banking business.

BANKING IN INDIA

Overview

• Organized banking in India originated in the late 18^th century
• The State Bank of India, headquartered in Mumbai, is the largest bank in India
  
• Currently, India has 88 Scheduled Banks – 27 public sector banks, 31 private banks and 38 foreign banks
• The public sector banks hold over 75% of banking assets in the country, followed by private banks (18.2%) and foreign banks (6.5%)
• Central banking in India is the responsibility of the Reserve Bank of India
• Banking in India is the responsibility of the Department of Financial Services, Ministry of Finance
  
• Currently there are 170 scheduled commercial banks, which includes 91 regional rural banks, 19 nationalised banks, 8 banks in the SBI group and the IDBI
  
• There are 4 non-scheduled commercial banks in the country
  

History of banking in India

• The oldest banks in India were the General Bank of India and the Bank of Hindustan, both founded in 1786. However both banks are now defunct
• The oldest existing bank in India is the State Bank of India. The origins of the SBI go back to the Bank of Calcutta (founded 1806, renamed Bank of Bengal in 1809)
• The Bank of Madras was established in 1843 and the Bank of Bombay in 1868
• The Bank of Bengal, Bank of Bombay and Bank of Madras merged to form the Imperial Bank of India in 1921. The Imperial Bank of India was renamed the State Bank of India in 1955. Although a normal commercial bank, the Imperial Bank of India also functioned as a central governmental until 1935
  
• The Reserve Bank of India was established in 1935
  
• The oldest joint stock bank is the Allahabad Bank, established in 1865.
  
• The first entirely Indian joint stock bank was the Oudh Commercial Bank (Faizabad, 1881). However, it failed in 1958. The next oldest is the Punjab National Bank (Lahore, 1895)
  
• The Dakshina Kannada and Udipi districts of Karnataka (called South Canara), is known as the Cradle of Indian Banking
  

Nationalisation of banks

• The Government of India nationalised 14 of the largest banks in 1969
  
• This achieved by an ordinance to the effect in July 1969. This was formalized by the Banking Companies (Acquisition and Transfer of Undertaking) Bill 1969
• The banks that were nationalized in 1969 were: Allahabad Bank, Bank of Baroda, Bank of India, Bank of Maharastra, Canara Bank, Central Bank of India, Dena Bank, Indian Bank, Indian Overseas Bank, Punjab National Bank, Syndicate Bank, UCO Bank, Union Bank of India and United Bank of India
• In 1980, six more banks were nationalized. The banks that were nationalized in 1980 were: Andhra Bank, Corporation Bank, Oriental Bank of Commerce, Punjab and Sind Bank, New Bank of India and Vijaya Bank
• In 1993, the New Bank of India was merged with Punjab National Bank. There are 19 nationalized banks in operation today
  
• Following this, the GoI controlled about 91% of the banking business in India

RESERVE BANK OF INDIA

Overview

• The Reserve Bank of India is the central bank of India
  
• It was established in 1935 and nationalised in 1949. Its headquarters was initially Calcutta, but moved to Bombay in 1937. It is currently headquartered in Mumbai.
  
• The first Governor of the RBI was Sir Osborne Smith. The current Governor of the RBI is Dr. Duvvuri Subbarao
  
• The RBI functions under the provisions of the Reserve Bank of India Act 1934
  

Objectives

• Maintain price stability
• Ensure adequate flow of credit
  
• Protect depositor’s interests
• Provide cost-effective banking services to the public
• Facilitate external trade and payment
• Promote development of foreign exchange market in India
  
• Provide supplies of currency notes and coins in the country
  

Functions

• Formulates, implements and monitors monetary policies
• Regulates operations of banking and financial services sector in the country
• Manages the Foreign Exchange Management Act 1999
  
• Issues, exchanges and destroys currency notes and coins
• Perform promotional functions to support national objectives
• Acts as banker to banks by maintaining accounts of all scheduled banks
• Acts as banker to the Central and state governments

List of RBI Governors

S. No.	Governor	Tenure	Notes
1	Sir Osborne Smith	1935-1937	First Governor of the RBI Did not sign any bank notes
2	Sir James Taylor	1937-1943	Governor during WWII Started the practice of signing bank notes
3	Sir C D Deshmukh	1943-1949	First Indian Governor of RBI Oversaw Independence & Partition Represented India at the Bretton Woods Conference 1944 Served as Minister of Finance 1950-1956
4	Sir Benegal Rama Rao	1949-1957	Longest serving Governor Was Indian Ambassador to USA prior to RBI Witnessed commencement of Five Year Plans, and transformation of Imperial Bank of India to SBI
5	K G Ambegaonkar	Jan 1957 – Feb 1957	Did not sign any bank notes
6	H V R Iyengar	1957-1962	Witnessed introduction of decimal coinage Variable cash reserve ration (CRR) introduced
7	P C Bhattacharya	1962-1967
8	L K Jha	1967-1970	Witnessed nationalization of banks (1969) Appointed as Ambassador to US in 1970
9	B N Adarkar	May 1970 – June 1970	Served as India’s Executive Director at the IMF
10	S Jagannathan	1970-1975	Witnessed oil shock, expansion of banking services, shift to floating rates Relinquished office to serve as Executive Director at IMF
11	N C Sen Gupta	May 1975 – Aug 1975
12	K R Puri	1975-1977
13	M Narasimhan	May 1977 – Nov 1977	Only Governor to be appointed from the Reserve Bank cadre Chairperson of Committee on Financial System (1991) and Committee on Banking Sector Reforms (1998) Served as Executive Director for India at the World Bank and the IMF
14	Dr. I G Patel	1977-1982	Served as Secretary at the United Nations Development Programme (UNDP) Witnessed demonetisation of high denomination bank notes and “gold auctions” Witnessed nationalization of six banks (1980) Secured IMF’s Extended Fund Facility (1981). This was the largest arrangement of the IMF at the time
15	Dr. Manmohan Singh	1982-1985	Witnessed comprehensive legal reforms in banking sector
16	A Ghosh	Jan 1985 – Feb 1985
17	R N Malhotra	1985-1990	Served as Executive Director of IMF prior to RBI Made efforts to develop money markets
18	S Venkitaraman	1990-1992	Managed balance of payments crisis Adopted IMF’s stabilisation programme Supervised devaluation of the Rupee Witnessed launch of economic reforms
19	Dr. C Rangarajan	1992-1997	Ushered in unprecedented central bank activism Introduced comprehensive measures to strengthen and improve efficiency of banking sector Establishment of unified exchange rate Cap on automatic finance by the Bank to the Government
20	Dr. Bimal Jalan	1997-2003	Represented India on the Executive Boards of the IMF and World Bank prior to RBI
21	Dr Y V Reddy	2003-2008	Executive Director to IMF prior to RBI
22	Dr. D Subbarao	2008-Present	Prior to RBI, he has been Secretary to the PM’s Economic Advisory Council (2005-2007) Lead economist in the World Bank (1999-2004) Finance Secretary to the Government of Andhra Pradesh (1993-1998) Joint Secretary, Dept. of Economic Affairs (1988-1993)

STATE BANK OF INDIA

• The State Bank of India is derived from the Imperial Bank of India (1921), which was nationalised in 1955
  
• The State Bank of India is the oldest bank in India. It traces its ancestry to the Bank of Calcutta, founded in 1806.
• It is headquartered in Mumbai
• The State Bank of India is also the largest bank in India. It has a market share of about 20% in deposits and advances
  
• The State Bank Group consists of the SBI and its subsidiary banks viz. State Bank of Indore, State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala, State Bank of Travancore
  
• The SBI is one of the Big Four Banks in India, along with ICICI Bank, Axis Bank and HDFC Bank
  
• The SBI was ranked as the 29^th most reputable company in the world by Forbes in 2009
  

CATEGORIES OF BANKS IN INDIA

Structure of banking in India. Number of banks given in brackets

• Commercial Banks
  
  • Commercial banks are those that cater to the regular banking and financial needs of the public
    
  • Commercial banks include public sector banks and private sector banks. Public sector banks include the State Bank Group and other nationalised banks, while private sector banks include Indian banks and foreign banks
    
• Cooperative Banks
  
  • Cooperative banking is retail and commercial banking organised on a cooperative basis. Cooperative banks include credit unions, savings and loans associations and building societies and cooperatives
  • Cooperative banks operate on the principles of cooperation – mutual help, democratic decision making and open membership
  • They are governed by controls of the RBI as well as state governments. Cooperative banks in general operate under the Cooperative Credit Societies Act 1904, but large Urban Cooperative Banks operate under the Banking Regulation Act 1949
    
  • Cooperative banks in India are the primary financiers of agricultural activities, small scale industries and self-employed workers
    
  • Cooperative banks in India were first established in the late 19^th century, following the success of such banks in Britain and Germany
    
  • The Anyonya Cooperative Bank Ltd. (ABCL) was the first cooperative bank in India. It was established Vithal Laxman (aka Bhausaheb Kavthekar) in 1889 under the name Anyonya Sahayakari Mandali Cooperative Bank Ltd. The bank closed functioning in March 2008 following an order by the RBI. Re-opening is under consideration
    
• Regional Rural Banks
  
  • Regional Rural Banks (RRBs) were first established in 1975
    
  • Initially five RRBs were established at Moradabad (UP), Gorapkhpur (UP), Bhiwani (Haryana), Jaipur (Rajasthan), Malda (WB). Currently there are 91 RRBs
    
  • RRBs exist in all states except Goa and Sikkim
    
  • The share of RRBs in agricultural credit is around 5%
    
• Scheduled Banks
  
  • Scheduled Banks are those banks that have been included in Second Schedule of the RBI Act 1934
    
  • Scheduled Banks must fulfil two conditions
    
    • The paid up capital and collected funds of the bank must not be less than Rs 5 lakhs
    • Any activity of the bank should not adversely affect the interest of deposition
  • Scheduled Banks enjoy the following benefits
    • They are eligible for obtaining loans on Bank Rate from the RBI
    • They acquire membership of the clearing house
  • Scheduled Banks include commercial banks, cooperative banks and regional rural banks
  • There are around 302 Scheduled Banks in operation
• Non-Scheduled Banks
  
  • Non-Scheduled Banks are those that are not included in the list of Scheduled Banks
  • They have to follow the Cash Reserve Ratio (CRR) condition. However, they are not compelled to deposit these funds with the RBI
  • They can avail loans from the RBI only under emergencies, and not for daily activities
    
  • There are only 4 Non-Scheduled Banks in operation

GOVERNMENT ENTITIES IN BANKING

1. Small Industries Development Bank of India (SIDBI)
   
   1. Established in 1990, headquarters Lucknow
   2. The main objective of the SIDBI is to aid the growth and development of micro, small and medium scale industries in India
   3. It provides direct credit to micro, small and medium enterprises, supports microfinance institutions and refinancing to state level finance bodies
2. Industrial Development Bank of India (IDBI)
   
   1. Established in 1964, headquarters Mumbai
   2. The IDBI is the tenth largest development bank in the world. It is one of India’s largest public sector bank
   3. Its main objective is to provide credit and other banking facilities to industries in India
   4. However, in 2004 the IDBI was re-designated as a commercial bank, following the Industrial Development Bank (Transfer of Undertaking and Repeal) Act 2003, and renamed IDBI Ltd
   5. Following this, the commercial banking division, IDBI Bank was merged into IDBI
3. Industrial Finance Corporation of India (IFCI)
   
   1. The IFCI is the first development finance institution in the country to cater to the needs of Indian industry
   2. Established 1948, headquarters New Delhi
   3. The IFCI was established to provide long term low interest credit to corporate borrowers
   4. In 1993, the IFCI was re-registered as a commercial company under the Indian Companies Act 1956, and renamed IFCI Ltd
4. National Bank for Agricultural and Rural Development (NABARD)
   
   1. Partly owned by the RBI
      
   2. Established 1982, headquarters Mumbai
   3. NABARD serves as the apex development bank in India for economic activities in rural areas
      
   4. The main objective of NABARD is to facilitate credit flow for agriculture and small scale industries
      
   5. NABARD provides refinance to State Cooperative Agriculture and Rural Development Banks (SCARDBs), State Cooperative Banks (SCBs), Regional Rural Banks (RRBs), Commercial Banks and other financial institutions approved by the RBI
      
   6. NABARD coordinates the rural financing activities of all institutions engaged in developmental work
      
   7. NABARD has 28 regional offices (state capitals), one Sub Office (in Port Blair) and one Special Cell (in Srinagar)
      
   8. NABARD is famous for its Self Help Group (SHG) Bank Linkage Programme, which serves as an important tool for microfinance
      
5. National Housing Bank (NHB)
   
   1. Wholly owned subsidiary of the RBI
   2. Established in 1987, headquarters New Delhi
   3. Established mainly to provide long term finance to individual households
6. Export-Import Bank of India (EXIM Bank)
   
   1. Established 1981, headquarters Mumbai
   2. The main objective of the EXIM Bank is to provide financial assistance to exporters and importers with a view to promoting the country’s international trade
   3. It acts as the apex financial institution for financing foreign trade in India
7. Bharatiya Reserve Bank Note Mudran Private Ltd (BRBNMPL)
   
   1. Wholly owned subsidiary of the RBI
   2. Established in 1995, headquarters Bangalore
   3. Main function is to augment the product of bank notes to meet demand
   4. The company manages two presses: Mysore and Salboni (West Bengal)
8. Deposit Insurance and Credit Guarantee Corporation (DICGC)
   
   1. Wholly owned subsidiary of the RBI
   2. Established in 1962, headquarters Mumbai
   3. India was one of the first countries to provide deposit insurance
   4. Main objective is to provide insurance to depositors against collapse and bankruptcy of banks
   5. Provides deposit insurance coverage up to Rs 100,000