IBPS GENERAL AWARENESS MCQs

1) This agency issued guidelines on distance marketing of products on 6 April 2011 to protect the interest of people who buy policies over phone or Internet. Identify the agency.

a. SEBI

b. IRDA

c. TRAI

d. DoT

2) In India’s first sale of rupee perpetual bonds by a non-finance company Rs 1500 crore ($332 million) was raised. Name the non-finance company.

a. Tata Steel

b. Pantallons Retail

c. RIL

d. Maruti Suzuki

3) Which of the following Indian cricket players took the highest number of wickets in the recently concluded ICC World Cup 2011 along with Pakistan’s Shahid Afridi?

a. Yuvraj Singh

b. Zaheer Khan

c. Munaf Patel

d. Harbhajan Singh

4) Union Sports Ministry on 6 April 2011 formed a committee to fine-tune the draft National Sports Development Bill. Who is heading the committee?

a. Justice Mukul Mudgal

b. Justice Tej Pratap Singh Mann

c. Justice Gurdev Singh

d. Justice Jaswant Singh Phogat

5) Name the cricketer who beat Michael Clarke by a comfortable 15-vote margin to bag the Allan Border Medal besides being named Australia’s ODI Player of the Year in Feb 2010?

a. Shane Watson

b. Simon Katich

c. Mitchell Johnson

d. Sachin Tendulkar

6) Record food grain production helped to reduce food inflation to a four month low for the week ending 26 March 2011. What was the inflation percentage for the week?

a. 9.18%

b. 9.25%

c. 9.21%

d. 9.36%

7) Praveen Kumar Tripathi took over as the Chief Secretary of which of the following governments on 4 April 2011?

a. Delhi Government

b. Haryana Government

c. Uttar Pradesh Government

d. Uttarakhand Government

8) The Union Government gifted a Kendriya Vidyalaya to a nondescript village Indrapura to which of the following Indian states?

a. Bihar

b. Odisha

c. Rajasthan

d. Madhya Pradesh

9) The Supreme Court on 5 April 2011 passed an order to lift iron export ban imposed by which of the following Indian states on 26 July 2010 and also ordered it to implement the new rules for regulating iron ore mining and transportation?

a. Tamil Nadu

b. Andhra Pradesh

c. Karnataka

d. Odisha

10) To enhance credit worthiness of economically weaker sections and LIG households, a Mortgage Risk Guarantee Fund was announced to be created under which of the following scheme or Yojana?

a. Rajiv Awas Yojana

b. Rajiv Gandhi Grameen Vidyutikaran Yojana

c. Indira Awas Yojana

d. Mahatama Gandhi NREGA

11) Which agency issued guidelines on distance marketing of products on 6 April 2011 to protect the interest of people who buy policies over phone or Internet?

a. SEBI

b. IRDA

c. TRAI

d. DoT

12) Buyer's Credit was launched by the Commerce and Industry Minister, Anand Sharma, on 6 April 2011 to boost project exports from India. Under which of the following was Buyer’s Credit launched?

a. National Export Insurance Account

b. Export-Import Bank of India

c. Export Credit Guarantee Corporation of India

d. Reserve Bank of India

13) Read the two statements mentioned with regard to the budgetary allocations for addressing environmental concerns.

1. The budget proposed that the solar lantern used in far-flung villages will attract no duty from 10 per cent charged earlier.

2. To provide green and clean transportation for the masses, National Mission for Hybrid and Electric Vehicles will be launched in the year 2011 in collaboration with all stakeholders. Which of them is true?

a. Only 1

b. Only 2

c. Both 1 & 2

d. None of the above

14) 21 year old Marjan Kalhor is the first Iranian woman to have entered an Olympic event. She is a participant in the 2010 Winter Olympics that began in Vancouver on 12 Feb 2010. Which sport is she associated with?

a. Ski

b. Shot put

c. Cycling

d. Bobsleigh

15) With his victory in the men’s large hill ski jump on 20 Feb 2010 at the Vancouver Olympics, he became the first person to win four individual gold ski jumping medals. Name this sportsperson.

a. Simon Ammann (Switzerland)

b. Ahonen Janne (Finland)

c. Alexander Nicholas (USA)

d. Bardal Anders (Norway)

16) The Indian Government in April 2011 issued a notice to which of the following companies to terminate licences for Kerala, West Bengal and Assam for delay in roll- out of services in

these three circles?

a. Sistema Shyam Teleservices

b. Tata Teleservices

c. Reliance

d. BSNL

17) Which Italian luxury sports car makers on 6 April 2011 announced its entry into the Indian market where it will sell its high-performance cars priced between Rs1.20 crore and Rs1.43 crore?

a. Maserati

b. Bentley

c. Aston Martin

d. Maybach

18) Who did HDFC Bank, the country's second-largest private sector lender appoint in March 2011 to head its investment banking division?

a. Rakesh Singh

b. Charul Madan

c. Gaurav Khungar

d. Atul Singh

19) Gangaur, a festival which marks the union of Lord Shiva and his consort, Goddess Parvati is celebrated for 18 days from the day after Holi in which of the following Indian states?

a. Rajasthan

b. Karnataka

c. Tamil Nadu

d. Uttaranchal

20) Read the following statements with regard to the allocation in the Educational sector as proposed by Union Budget 2011-12.

1. For Sarva Siksha Abhiyan the allocation was increased by 40 percent to 21000 crore rupees.

2. All institutions of higher learning will be connected through optical fibers by March 2012.

3. 500 crore rupees was proposed to be provided for national skill development fund.

4. For the needy scheduled castes ad scheduled tribe candidates studying in class-IX and Xth prematric scholarship scheme was proposed to be introduced. Which of the above mentioned statements is not true?

a. 1

b. 2

c. 3 & 4

d. 4

21) Scientists recently developed a computer that could be controlled by the power of thought.

It would help people unable to speak or move. What is the name of the technology which they

used to develop this kind of computer?

a. electrocortiography

b. symbian C++

c. java

d. flash lite

22) Which of the following companies bought the Pringles brand from Procter & Gamble Co

for $1.5 billion?

a. Diamond Foods Inc

b. PepsiCo's Frito-Lay

c. Emerald Nuts

d. Kettle Potato Chips

23) Online marketplace eBay India, in association with leading apparel brand Reebok

auctioned a bat autographed by Indian cricketer Mahendra Singh Dhoni. The proceeds of the

auction will go to which of the following NGOs?

a. Oxfem

b. CRY

c. All Bengal Women’s Union

d. UNEM

24) Which Indian hockey player was in April 2011 named captain of the Indian Hockey team

the upcoming Sultan Azlan Shah Cup scheduled to be played in Malaysia from 5-15 May 2011?

a. Arjun Halappa

b. Rajpal Singh

c. Bharat Kumar Chetri

d. Mohd. Amir Khan

25) Under the Godfrey Phillips Zonal Bravery Awards given away by the former ruler of

Jodhpur, Gaj Singh in Jaipur on 5 April 2011, which of the following NGOs was honoured with

the Amodhini Award of Rs.1 lakh?

a. Udyogini

b. Charities Aid Foundation

c. CRY

d. Akhil Bharatiya Vanavasi Kalyan Ashram

26) The Basic Customs Duty exemption was proposed to be extended to which of the following

sectors?

a. art and antiquities for exhibition or display in private art galleries

b. Cinematographic film, factory-built ambulances

c. syringes and needles

d. agricultural machinery

27) A massive Tsunami caused by a devastating earthquake of the 8.9 magnitude hit about 400

km north-east of Tokyo, capital of Japan. Where is the Pacific Tsunami Warning System

headquartered?

a. Hawai

b. Tokyo

c. Manila

d. Jakarta

28) Which of the following companies announced on 6 April 2011 that it won contract to

provide broadband internet connectivity to Indian Railways through state-run RailTel Corp of

India Ltd?

a. DEL

b. IBM

c. Infosys

d. HCL Infosystems

29) Which super luxury carmaker on 7 April 2011 unveiled Continental GT sedan in India?

a. Ferrati

b. Bentley

c. Maybach

d. Maserati

30) What amount of money was allocated for Bharat Nirman?

a. 1000 crore

b. 58000 crore

c. 55438 crore

d. 14362 crore

31) Who defeated Tamarine Tanasugarn on 15 Feb 2010 to retain the Pattaya Open title?

a. Vera Zvonareva of Russia

b. Sabine Lisicki of Germany,

c. Ayumi Morita of Japan

d. Kimiko Date Krumm of Japan

32) A massive Tsunami caused by a devastating earthquake of the 8.9 magnitude hit about 400

km north-east of Tokyo, capital of japan. What are the possible factors which can cause

Tsunami?

i) An Earthquake

ii) A landslide

iii) A volcanic eruption or explosion

iv) Impact by a meteorite

Please choose the right option

a. i, ii, iii and iv

b. i and ii only

c. ii and iii only

d. i and iv only

33) Which of the following Indian cricket is the most heavily insured player for the

forthcoming Indian Premier League (IPL) 4 T-20 tournament which begins on 8 April 2011?

a. Sachin Tendulkar

b. Yuvraj Singh

c. M S Dhoni

d. Virender Sehwag

34) The Union Budget for 2011-12 proposed lowering of qualifying age for tax relief for senior

citizens from 65 years to _?

a. 55

b. 58

c. 60

d. 62

35) Finance Minister Pranab Mukherjee proposed to increase the Income Tax Exemption

Limit for individual tax payers from 1 lakh 60 to _?

a. 1 lakh 80 thousand

b. 1 lakh 90 thousand

c. 2 lakh

d. 2 lakh 20 thousand

36) Noted Social worker Anna Hazare on 5 April 2011 started his hunger strike at Jantar

Mantar in New Delhi to protest against the reported delay in bringing in which of the following

bills to effectively deal with corruption?

a. Lokpal Bill

b. The Competition (Amendment) Bill

c. The Airports Economic Regulatory Authority of India Bill

d. The Appropriation (No.3 ) Bill

37) Who became the world number one badminton player?

a. Saina Nehwal

b. Wang Xin

c. Sania Mirza

d. Wang Shixian

38) When is the National Youth Day observed?

a. January 14

b. February 14

c. August 31

d. January 12

39) What is Tejas?

a. Spacecraft

b. Missile

c. Submarine

d. Light combat aircraft

40) Who is the Chairperson of the Central Board Film Certification?

a. Sharmila Tagore

b. Karan Johar

c. Nafisa Ali

d. Om Puri

e. None of these

41) Ali Akbar Salehi is the foreign minister of

a. Israel

b. Iran

c. Afghanistan

d. Indonesia

42) Who is the new chief of Research and Analysis Wing (RAW)?

a. AP Singh

b. Arun Shourie

c. Sanjeev Tripathi

d. BK Gupta

43) According to an extensive genetic study on modern humans, two conclusions were drawn

out.

i) There is an enormous amount of diversity in the African hunter-gatherer populations.

ii) The genetic diversity among 27 present-day African populations originated in southern Africa and progressed to northern Africa.

Which of the above statements is/are correct?

a. Both i and ii

b. Neither I and ii

c. Only i

d. Only ii

44) Which one of the following Indian states recently released a Braille version of the RTI

(Right to Information) Act and its rules for the benefit of visually challenged?

a. Gujarat

b. Bihar

c. Haryana

d. Madhya Pradesh

45) Roger Federer won his fourth Australian Open Tennis Championship and 16th Grand

Slam on 31 Jan 2010. Who did he defeat in the final of the Australian Open 2010?

a. Rafael Nadal

b. Andy Murray

c. Fred Perry

d. Rod Laver

46) Which of the following Bollywood Actress won the Best Actress trophy at the 13th London

Asian Film Festival for her performance in Onir’s I AM?

a. Nandita Das

b. Juhi Chawla

c. Tabu

d. Konkona Sen Sharma

47) In tiger census 2010,

i) Pugmarks were used as the only indicator of tiger numbers.

ii) An advanced Scientific process was adopted which included video trapping and use of satellite data. Which of the above statements is/are incorrect?

Choose the right option:

a. Only i is incorrect

b. Only ii is incorrect

c. Both i and ii are incorrect

d. Both i and ii are not incorrect

48) India defeated Pakistan by 29 runs in the semi finals of the ICC World Cup 2011 played at Mohali. Who was declared man of the match of the high powered game?

a. Saeed Ajmal

b. Sachin Tendulkar

c. Munaf Patel

d. Wahab Riaz

49) Which of the following bodies put off indefinitely the new rules governing unwanted telemarketing calls which were supposed to be implemented from 21 March 2011?

a. Department of Telecommunication (DoT)

b. Telecom Regulatory Authority of India (TRAI)

c. Indian Ministry of communication & Technology

d. HRD Ministry

50) The Indian government in March 2011 conferred the Miniratna status on which of the

following PSUs?

a. National Small Industries Corporation (NSIC)

b. Air India Charters Ltd

c. Cement Corporation of India

d. HMT Machine Tools Ltd

Answers:

1) B 2) A 3) B 4) A 5) A 6) A 7) A 8) C 9) C 10) A  

11) B 12) A 13) B 14) A 15) A 16) A 17) C 18) A  

19) A 20) B 21) A 22) A 23) B 24) A 25) A 26) A  

27) A 28) D 29) B 30) B 31) A 32) A 33) C 34)C  

35) A 36) A 37) B 38) D 39) D 40) A 41) B 42) C  

43) A 44) A 45) B 46) B 47) A 48) B 49) B 50) A

IBPS GENERAL AWARENESS PRACTICE MODEL QUESTIONS

1.Michael D.Higgins replaced Mary McAleese as the President of which of the following countries?
1) Colombia
2) Ireland
3) Switzerland
4) Zimbabwe
5) Sweden
Answer: (2)

2.Who is the author of the book 'I was There-Memoirs of a Cricket Administrator'?
1) Ajit Wadekar
2)Chandu Borde
3) Jaywant Lele 
4) Kirti Azad
5) Sharad Pawar
Answer: (3)


3.Devinder Pal Singh became the Chairman and Managing Director of which of the following banks in November 2011?
1) BOB
2) IOB
3) OBC
4) Punjab & Sind Bank
5) Punjab National Bank
Answer: (4)

4.Irom Sharmila Chanu's fast entered 12th year in November 2011. She is demanding the repeal of the Armed Forces (Special Powers) Act, 1958 in which of the following states?
1) Manipur
2) Nagaland
3) Tripura
4) West Bengal
5) Jammu & Kashmir
Answer: (1)

5.Bhupen Hazarika, Dada Saheb Phalke award winner, passed away recently. He was a music legend from which of the following states?
1) Orissa
2) Assam
3) Bihar
4) Jharkhand
5) West Bengal
Answer: (2)

6.Which city hosted the G20 Summit in November 2011?
1) Beijing
2) Toronto
3)Cannes
4) London
5) Seoul
Answer: (3)

7.India signed an agreement to promote oil exploration in South China Sea with which of the following countries during its President Troung Tan Sang's visit to New Delhi in October 2011?
1) Myanmar
2) China
3) Cambodia
4) Vietnam
5) Thailand
Answer: (4)

8.India's Polar Satellite Launch Vehicle(PSLV-C18)put VesselSat in orbit recently. Which country has built this satellite that will help in locating ships?
1) France
2) Luxembourg
3) USA
4) Germany
5) Russia
Answer: (2)

9.Which of the following statements about the HDI is/are correct?
1)The Human Development Report (HDR) 2011, released by the United Nations Development Programme (UNDP), has ranked India at 134th among 187 countries in the Human Development Index (HDI).
2)Norway topped the list for the second consecutive year. Democratic Republic of the Congo is ranked the last.
3)The HDI is a comparative measure of life expectancy, literacy and standards of living for countries worldwide.
4)The index was developed in 1990 by economists Mahbub ul Haq (Pakistan) and Amartya Sen (India).
5) All the above statements are correct.
Answer: (5)

10.The Special Protection Group (SPG) is responsible for the protection of the Prime Minister of India. Who was appointed the new Director of the SPG in November 2011?
1) B.V.Wanchoo
2) K.Durga Prasad
3) S.Subramaniam
4) K.Aravind Rao
5) None of these
Answer: (2)

11.The President of Myanmar visited India recently. His name?
1) U Thein Sein
2) U Aye Myint
3) Than Shwe
4) U Thant
5) None of these
Answer: (1)

12.Which country will host the World Steel Conference in October 2012?
1) China
2) India
3) Japan
4) USA
5) Australia
Answer: (2)

13.The American computer scientist who created the C programming language passed away recently. His name?
1) Steve Jobs
2) Dennis Ritchie
3) Ken Thompson
4) Patrick Fischer
5) None of these
Answer: (2)

14.Two former Presidents were awarded the 2011 World Food Prize for their success in tackling chronic hunger in their countries. One is Luiz Inacio Lula da Silva (Brazil) and the other is John Ag-yekum Kufuor. John Kufuor is the former President of which of the following African countries?
1) Sudan
2) Angola
3) Nigeria
4) Ghana
5) Ethiopia
Answer: (4)

15.Which team won the Durand Cup football tournament in October 2011? (It is the oldest football tournament in India)
1) Churchill Brothers
2) Prayag United
3) Mohun Bagan
4) Chirag United Kerala
5) None of these
Answer: (1)

16.Indian-American Bobby Jindal has been re-elected to a second term as the Governor of which of the following states in the USA?
1) Texas
2) Louisiana
3) Alaska
4) California
5) South Carolina
Answer: (2)

17.World Diabetes Day is observed every year on which of the following days?
1) October 31
2) November 19
3) November 21
4) November 14
5) November 9
Answer: (4)

18.Queen Elizabeth is the constitutional monarch of how many sovereign nations in the world?
1) 9
2) 16
3) 25
4) 8
5) 11
Answer: (2)

19.Which country has test -fired nuclear capable Hatf-7 or Babur cruise missile with a range of 700 km?
1) Afghanistan
2) Pakistan
3) Iran
4) Syria
5) Iraq
Answer: (2)

20.In the October 2011 Tunisian Constituent Assembly election, the first elections since the Tuni-sian Revolution, which party won 91 of the 217 assembly sea-ts, far more than any other party?
1) Ennahda
2) PDP
3) Ettakatol
4) Al Aridha
5) Congress for the Republic
Answer: (1)

21.November 11 is celebrated as the National Education Day. It commemorates the birthday of which of the following eminent personalities?
1) S.Radhakrishnan
2) C.V.Raman
3) B.C.Roy
4) A.P.J Abdul Kalam
5) Maulana Abul Kalam Azad
Answer: (5)

22.Which country has unveiled the world's biggest and heaviest gold coin, weighing 1,012 kilograms?
1) USA
2) UK
3) Qatar
4) Australia
5) Saudi Arabia
Answer: (4)

23.Which country has the world's largest uranium reserves (24% of the planet's known reserves)?
1) Australia
2) Russia
3) Namibia
4) Ukraine
5) Mongolia
Answer: (1)

24.According to the latest Forbes India 100 richest persons list who is the world's richest Indian with a net worth of $ 22.60 billion?
1) Mukesh Ambani
2) Lakshmi Mittal
3) Azim Premji
4) Shashi Ruia & Ravi Ruia
5) Savitri Jindal
Answer: (1)

25.Whose autobiography is titled "A Shot at History"?
1) Gagan Narang
2) Abhinav Bindra
3) Rahul Dravid
4) Manavjit Singh Sandhu
5) None of these
Answer: (2)

26.Megha Tropiques, the satellite that studies the patterns and dynamics of the monsoon was launched from Sriharikota in October 2011. It is a joint venture between India and which of the following countries?
1) Spain
2) Greece
3) France
4) Portugal
5) USA
Answer: (3)

27.Who was crowned the Miss World 2011 at the 61st edition of the Miss World pageant that was held in London in November 2011?
1) Ivian Sarcos (Venezuela)
2)Gwendoline Ruais (Philippines)
3) Amanda Perez (Puerto Rico)
4) Kanishtha Dhankhar (India)
5) None of these
Answer: (1)

28.Fed Cup is the premier team competition in women's tennis. Which country won the Fed Cup in November 2011?
1) Czech Republic
2) Russia
3) USA
4) Spain
5) Italy
Answer: (1)

29.Which of the following statements is not true with regard to Census 2011?
1)Census 2011 is the 15th Natio-nal Census since 1872 and the 7th after indePendence.
2)The population of India is 121.01 crores compared to the 2001 population of 102.87 crores. (An increase by 181 million)
3)Uttar Pradesh is the most populous state with 19.95 crores while Sikkim is the least populated state (6.07 lakhs)
4)India is now home to 17.5 percent of the world's population-compared to China which hosts 19.4 percent.
5)The literacy rate has increased from 64.83 percent in 2001 to 70.04 percent in 2011.
Answer: (5)
 

30. The Order of St. Andrew, Russia’s top medal was conferred on which of the following given personality recently?
1) Vladimir Putin 

2) Dmitry Medvedev 

3) Mikhail Gorbachev 

4) Boris Yeltsin

5) None 

Answer: (3)

Moody’s cuts outlook on Indian banking system to negative

Moody's Investors Service has downgraded its outlook for India's banking system to negative from stable due to concerns that an increasingly challenging operating environment will adversely affect asset quality, capitalisation, and profitability.

"India's economic momentum is slowing because of high inflation, monetary tightening, and rapidly rising interest rates.

"At the same time, concerns have emerged over the sustainability of the recovery in the US and Europe, and the rise in the borrowing programme of the Indian Government, which could drain funds away from the private credit market," said Mr Vineet Gupta, Vice-President and Senior Analyst, Moody’s.

The credit rating agency’s latest outlook for the Indian banking system is valid for the next 12-18 months.

Given the tightening environment, Moody’s is anticipating that the asset quality will deteriorate over the next 12-18 months, thereby causing an increase in provisioning needs for the banks in FY2012 and FY2013. 

Loan growth, a stress on banks' capital

The rating agency expects loan growth to be a strain on the banks' capital over the horizon of this outlook. As monetary conditions tighten and economic activities slow, it sees bank loan growth to fall to 16-18 per cent in FY2012 and FY2013, from 21 per cent in FY2011 

Profitability to come under pressure

When it comes to profitability, Moody’s expects it to come under pressure due to lower interest margins as deposit rates re-price and get a further push from the latest liberalisation on savings deposit rates.

Bank ratings may come under downward pressure, although currently, the negative outlook on the banking system contrasts with the stable outlook assigned to the bank financial strength ratings of 14 of the 15 rated banks, said the agency in a statement.

For those banks with weaker capital ratios on average and higher asset quality pressures, their standalone ratings are likely to come under pressure as underscored by Moody's downgrade of the State Bank of India's banking financial strength rating to ‘D+/Stable/Baa3’ from ‘C-/Stable/Baa2’ on October 4.

But, on the positive side, Moody's has recognised Indian banks' stable customer deposit base and high level of Government securities holdings, which provide them with a resilient funding and liquidity profile that buffer them against destabilising shocks.

Moody's also expects the Government to remain committed towards providing support to both public and 'private' banks. Such potential support translates to an average one-notch uplift to the banks' debt and deposit ratings to ‘Baa2’, compared with their standalone base line credit assessment of Baa3.

Moody's rates 15 commercial banks in India, which together account for about 66 per cent of the banking system's total assets as at March 2011.

The banking system is dominated by public-sector banks, which account for around 75 per cent of the market in asset terms. The weighted average stand-alone banking financial strength rating is ‘D+’, and mapping to a Baseline Credit Assessment of ‘Baa3’. The average long-term deposit rating is ‘Baa2/Prime-2’.

Taxation system in India

India has a well-developed tax structure with clearly demarcated authority between Central and State Governments and local bodies. Central Government levies taxes on income (except tax on agricultural income, which the State Governments can levy), customs duties, central excise and service tax.

Value Added Tax (VAT), (Sales tax in States where VAT is not yet in force), stamp duty, State Excise, land revenue and tax on professions are levied by the State Governments. Local bodies are empowered to levy tax on properties, octroi and for utilities like water supply, drainage etc.

In last 10-15 years, Indian taxation system has undergone tremendous reforms. The tax rates have been rationalized and tax laws have been simplified resulting in better compliance, ease of tax payment and better enforcement. The process of rationalization of tax administration is ongoing in India.

Since April 01, 2005, most of the State Governments in India have replaced sales tax with VAT.


Taxes Levied by Central Government

Direct Taxes
Tax on Corporate Income
Capital Gains Tax
Personal Income Tax
Tax Incentives
Double Taxation Avoidance Treaty

Indirect Taxes
Excise Duty
Customs Duty
Service Tax
Securities Transaction Tax

Taxes Levied by State Governments and Local Bodies
Sales Tax/VAT
Other Taxes

Direct Taxes

Taxes on Corporate Income

Companies residents in India are taxed on their worldwide income arising from all sources in accordance with the provisions of the Income Tax Act. Non-resident corporations are essentially taxed on the income earned from a business connection in India or from other Indian sources. A corporation is deemed to be resident in India if it is incorporated in India or if it’s control and management is situated entirely in India.

Domestic corporations are subject to tax at a basic rate of 35% and a 2.5% surcharge. Foreign corporations have a basic tax rate of 40% and a 2.5% surcharge. In addition, an education cess at the rate of 2% on the tax payable is also charged. Corporates are subject to wealth tax at the rate of 1%, if the net wealth exceeds Rs.1.5 mn ( appox. $ 33333).

Domestic corporations have to pay dividend distribution tax at the rate of 12.5%, however, such dividends received are exempt in the hands of recipients.

Corporations also have to pay for Minimum Alternative Tax at 7.5% (plus surcharge and education cess) of book profit as tax, if the tax payable as per regular tax provisions is less than 7.5% of its book profits.

Following measures were taken in the union budget 2007-08

Surcharge on income tax on all firms and companies with a taxable income
of Rs.1 crore or less to be removed.

A five year income tax holiday for two, three or four star hotels and for convention centres with a seating capacity of not less than 3,000; they should be completed and begin operations in National Capital Territory of Delhi or in the adjacent districts of Faridabad, Gurgaon, Ghaziabad or Gautam Budh Nagar during April 1, 2007 to March 31, 2010.

Concession under section 35(2AB) to be extended for five more years until March 31, 2012.

Tax holiday to undertakings in Jammu & Kashmir to be extended for another five years up to March 31, 2012.

Minimum Alternate Tax (MAT) to be extended to income in respect of which deduction is claimed under sections 10A and 10B; deduction under section 36(1) (viii) to be restricted to 20% of profits each year.

Rate of dividend distribution tax to be raised from 12.5% to 15% on dividends distributed by companies; and to 25% on dividends paid by money market mutual funds and liquid mutual funds to all investors.

Expenditure on free samples and on displays to be excluded from the scope of Fringe Benefit Tax (FBT); ESOPs to be brought under FBT.

An additional cess of 1% on all taxes to be levied to fund secondary education and higher education and the expansion of capacity by 54% for reservation for socially and educationally backward classes.

Tax is payable on capital gains on sale of assets.

Long-term Capital Gains Tax is charged if
• Capital assets are held for more than three years and
• In case of shares, securities listed on a recognized stock exchange in India, units of specified mutual funds, the period for holding is one year.

Long-term capital gains are taxed at a basic rate of 20%. However, long-term capital gain from sale of equity shares or units of mutual funds are exempt from tax.

Short-term capital gains are taxed at the normal corporate income tax rates. Short-term capital gains arising on the transfer of equity shares or units of mutual funds are taxed at a rate of 10%.

Long-term and short-term capital losses are allowed to be carried forward for eight consecutive years. Long-term capital losses may be offset against taxable long-term capital gains and short-term capital losses may be offset against both long term and short-term taxable capital gains.

Personal Income tax

Personal income tax is levied by Central Government and is administered by Central Board of Direct taxes under Ministry of Finance in accordance with the provisions of the Income Tax Act. The rates for personal income tax are as follows:-

Income range (Rupee) Tax Rate (%)

0-100,000 Nil
1,00,000-1,50,000 10
1,50,000-2,50,000 20
2,50,000 and above 30

Surcharges of 10% on total tax is levied if income exceeds Rs. 8,50,000

Recent budget initiatives in this regard are as follows:

Threshold limit of exemption in the case of all assessees to be increased by Rs.10,000 thus giving every assessee a relief of Rs.1,000; in the case of a woman assessee, threshold limit to be increased from Rs.135,000 to Rs.145,000 and in case of a senior citizen from Rs.185,000 to Rs.195,000 giving him or her a relief of Rs.2,000; deduction in respect of medical insurance premium under section 80D to be increased to a maximum of Rs.15,000 and, in case of a senior citizen, a maximum of Rs.20,000.

Rates of Withholding Tax

Current rates for withholding tax for payment to non-residents are:-

(i) Interest 20%
(ii) Dividends Dividends paid by domestic companies: Nil
(iii) Royalties 10%
(iv) Technical Services 10%
(v) Any other services Individuals: 30% of the income
Companies: 40% of the net income

The above rates are general and are applicable in respect of countries with which India does not have a Double Taxation Avoidance Agreement (DTAA).

Tax Incentives

Government of India provides tax incentives for:-
• Corporate profit
• Accelerated depreciation allowance
• Deductibility of certain expenses subject to certain conditions.

These tax incentives are, subject to specified conditions, available for new investment in
• Infrastructure,
• Power distribution,
• Certain telecom services,
• Undertakings developing or operating industrial parks or special economic zones,
• Production or refining of mineral oil,
• Companies carrying on R&D,
• Developing housing projects,
• Undertakings in certain hill states,
• Handling of food grains,
• Food processing,
• Rural hospitals etc.

Overview of Indian Financial System

Financial System of any country consists of financial markets, financial intermediation and financial instruments or financial products. This paper discusses the meaning of finance and Indian Financial System and focus on the financial markets, financial intermediaries and financial instruments. The brief review on various money market instruments are also covered in this study. 

The term "finance" in our simple understanding it is perceived as equivalent to 'Money'. We read about Money and banking in Economics, about Monetary Theory and Practice and about "Public Finance". But finance exactly is not money, it is the source of providing funds for a particular activity. Thus public finance does not mean the money with the Government, but it refers to sources of raising revenue for the activities and functions of a Government. Here some of the definitions of the word 'finance', both as a source and as an activity i.e. as a noun and a verb.

The American Heritage® Dictionary of the English Language, Fourth Edition defines the term as under-

1:"The science of the management of money and other assets.";
2: "The management of money, banking, investments, and credit. ";
3: "finances Monetary resources; funds, especially those of a government or corporate body"
4: "The supplying of funds or capital."

Finance as a function (i.e. verb) is defined by the same dictionary as under-
1:"To provide or raise the funds or capital for": financed a new car
2: "To supply funds to": financing a daughter through law school.
3: "To furnish credit to".
Another English Dictionary, "WordNet ® 1.6, © 1997Princeton University " defines the term as under-
1:"the commercial activity of providing funds and capital"
2: "the branch of economics that studies the management of money and other assets"
3: "the management of money and credit and banking and investments"
The same dictionary also defines the term as a function in similar words as under-
1: "obtain or provide money for;" " Can we finance the addition to our home?"
2:"sell or provide on credit "
All definitions listed above refer to finance as a source of funding an activity. In this respect providing or securing finance by itself is a distinct activity or function, which results in Financial Management, Financial Services and Financial Institutions. Finance therefore represents the resources by way funds needed for a particular activity. We thus speak of 'finance' only in relation to a proposed activity. Finance goes with commerce, business, banking etc. Finance is also referred to as "Funds" or "Capital", when referring to the financial needs of a corporate body. When we study finance as a subject for generalising its profile and attributes, we distinguish between 'personal finance" and "corporate finance" i.e. resources needed personally by an individual for his family and individual needs and resources needed by a business organization to carry on its functions intended for the achievement of its corporate goals.

INDIAN FINANCIAL SYSTEM

 The economic development of a nation is reflected by the progress of the various economic units, broadly classified into corporate sector, government and household sector.  While performing their activities these units will be placed in a surplus/deficit/balanced budgetary situations.
There are areas or people with surplus funds and there are those with a deficit.  A financial system or financial sector functions as an intermediary and facilitates the flow of funds from the areas of surplus to the areas of deficit.  A Financial System is a composition of various institutions, markets, regulations and laws, practices, money manager, analysts, transactions and claims and liabilities.

Financial System;

The word "system", in the term "financial system", implies a set of complex and closely connected or interlined institutions, agents, practices, markets, transactions, claims, and liabilities in the economy.  The financial system is concerned about money, credit and finance-the three terms are intimately related yet are somewhat different from each other. Indian financial system consists of financial market, financial instruments and financial intermediation. These are briefly discussed below;

FINANCIAL MARKETS

A Financial Market can be defined as the market in which financial assets are created or transferred. As against a real transaction that involves exchange of money for real goods or services, a financial transaction involves creation or transfer of a financial asset. Financial Assets or Financial Instruments represents a claim to the payment of a sum of money sometime in the future and /or periodic payment in the form of interest or dividend.

Money Market- The money market ifs a wholesale debt market for low-risk, highly-liquid, short-term instrument.  Funds are available in this market for periods ranging from a single day up to a year.  This market is dominated mostly by government, banks and financial institutions.

Capital Market -  The capital market is designed to finance the long-term investments.  The transactions taking place in this market will be for periods over a year.

Forex Market - The Forex market deals with the multicurrency requirements, which are met by the exchange of currencies.  Depending on the exchange rate that is applicable, the transfer of funds takes place in this market.  This is one of the most developed and integrated market across the globe.

Credit Market- Credit market is a place where banks, FIs and NBFCs purvey short, medium and long-term loans to corporate and individuals.

Constituents of a Financial System

FINANCIAL INTERMEDIATION

Having designed the instrument, the issuer should then ensure that these financial assets reach the ultimate investor in order to garner the requisite amount.  When the borrower of funds approaches the financial market to raise funds, mere issue of securities will not suffice.  Adequate information of the issue, issuer and the security should be passed on to take place.  There should be a proper channel within the financial system to ensure such transfer. To serve this purpose, Financial intermediaries came into existence. Financial intermediation in the organized sector is conducted by a widerange of institutions functioning under the overall surveillance of the Reserve Bank of India. In the initial stages, the role of the intermediary was mostly related to ensure transfer of funds from the lender to the borrower.  This service was offered by banks, FIs, brokers, and dealers.  However, as the financial system widened along with the developments taking place in the financial markets, the scope of its operations also widened. Some of the important intermediaries operating ink the financial markets include; investment bankers, underwriters, stock exchanges, registrars, depositories, custodians, portfolio managers, mutual funds, financial advertisers financial consultants, primary dealers, satellite dealers, self regulatory organizations, etc. Though the markets are different, there may be a few intermediaries offering their services in move than one market e.g. underwriter.  However, the services offered by them vary from one market to another.

Intermediary	Market	Role
Stock Exchange	Capital Market	Secondary Market to securities
Investment Bankers	Capital Market, Credit Market	Corporate advisory services, Issue of securities
Underwriters	Capital Market, Money Market	Subscribe to unsubscribed portion of securities
Registrars, Depositories, Custodians	Capital Market	Issue securities to the investors on behalf of the company and handle share transfer activity
Primary Dealers Satellite Dealers	Money Market	Market making in government securities
Forex Dealers	Forex Market	Ensure exchange ink currencies

FINANCIAL INSTRUMENTS

Money Market Instruments

The money market can be defined as a market for short-term money and financial assets that are near substitutes for money. The term short-term means generally a period upto one year and near substitutes to money is used to denote any financial asset which can be quickly converted into money with minimum transaction cost.

Some of the important money market instruments are briefly discussed below;

1. Call/Notice Money
2. Treasury Bills
3. Term Money
4. Certificate of Deposit
5. Commercial Papers

1. Call /Notice-Money Market

Call/Notice money is the money borrowed or lent on demand for a very short period. When money is borrowed or lent for a day, it is known as Call (Overnight) Money. Intervening holidays and/or Sunday are excluded for this purpose. Thus money, borrowed on a day and repaid on the next working day, (irrespective of the number of intervening holidays) is "Call Money". When money is borrowed or lent for more than a day and up to 14 days, it is "Notice Money". No collateral security is required to cover these transactions.

2. Inter-Bank Term Money

Inter-bank market for deposits of maturity beyond 14 days is referred to as the term money market. The entry restrictions are the same as those for Call/Notice Money except that, as per existing regulations, the specified entities are not allowed to lend beyond 14 days.

3. Treasury Bills.

Treasury Bills are short term (up to one year) borrowing instruments of the union government. It is an IOU of the Government. It is a promise by the Government to pay a stated sum after expiry of the stated period from the date of issue (14/91/182/364 days i.e. less than one year). They are issued at a discount to the face value, and on maturity the face value is paid to the holder. The rate of discount and the corresponding issue price are determined at each auction.

4. Certificate of Deposits

Certificates of Deposit (CDs) is a negotiable money market instrument nd issued in dematerialised form or as a Usance Promissory Note, for funds deposited at a bank or other eligible financial institution for a specified time period. Guidelines for issue of CDs are presently governed by various directives issued by the Reserve Bank of India, as amended from time to time. CDs can be issued by (i) scheduled commercial banks excluding Regional Rural Banks (RRBs) and Local Area Banks (LABs); and (ii) select all-India Financial Institutions that have been permitted by RBI to raise short-term resources within the umbrella limit fixed by RBI. Banks have the freedom to issue CDs depending on their requirements. An FI may issue CDs within the overall umbrella limit fixed by RBI, i.e., issue of CD together with other instruments viz., term money, term deposits, commercial papers and intercorporate deposits should not exceed 100 per cent of its net owned funds, as per the latest audited balance sheet.

5. Commercial Paper

CP is a note in evidence of the debt obligation of the issuer. On issuing commercial paper the debt obligation is transformed into an instrument. CP is thus an unsecured promissory note privately placed with investors at a discount rate to face value determined by market forces. CP is freely negotiable by endorsement and delivery. A company shall be eligible to issue CP provided - (a) the tangible net worth of the company, as per the latest audited balance sheet, is not less than Rs. 4 crore; (b) the working capital (fund-based) limit of the company from the banking system is not less than Rs.4 crore and (c) the borrowal account of the company is classified as a Standard Asset by the financing bank/s. The minimum maturity period of CP is 7 days. The minimum credit rating shall be P-2 of CRISIL or such equivalent rating by other agencies.

Capital Market Instruments

The capital market generally consists of the following long term period i.e., more than one year period, financial instruments; In the equity segment Equity shares, preference shares, convertible preference shares, non-convertible preference shares etc and in the debt segment debentures, zero coupon bonds, deep discount bonds etc.

Hybrid Instruments

Hybrid instruments have both the features of equity and debenture. This kind of instruments is called as hybrid instruments. Examples are convertible debentures, warrants etc.

Financial System in India

India has a financial system that is regulated by independent regulators in the sectors of banking, insurance, capital markets, competition and various services sectors. In a number of sectors Government plays the role of regulator.

Ministry of Finance, Government of India looks after financial sector in India. Finance Ministry every year presents annual budget on February 28 in the Parliament. The annual budget proposes changes in taxes, changes in government policy in almost all the sectors and budgetary and other allocations for all the Ministries of Government of India. The annual budget is passed by the Parliament after debate and takes the shape of law.

Reserve bank of India (RBI) established in 1935 is the Central bank. RBI is regulator for financial and banking system, formulates monetary policy and prescribes exchange control norms. The Banking Regulation Act, 1949 and the Reserve Bank of India Act, 1934 authorize the RBI to regulate the banking sector in India.

India has commercial banks, co-operative banks and regional rural banks. The commercial banking sector comprises of public sector banks, private banks and foreign banks. The public sector banks comprise the ‘State Bank of India’ and its seven associate banks and nineteen other banks owned by the government and account for almost three fourth of the banking sector. The Government of India has majority shares in these public sector banks.

India has a two-tier structure of financial institutions with thirteen all India financial institutions and forty-six institutions at the state level. All India financial institutions comprise term-lending institutions, specialized institutions and investment institutions, including in insurance. State level institutions comprise of State Financial Institutions and State Industrial Development Corporations providing project finance, equipment leasing, corporate loans, short-term loans and bill discounting facilities to corporate. Government holds majority shares in these financial institutions.

Non-banking Financial Institutions provide loans and hire-purchase finance, mostly for retail assets and are regulated by RBI.

Insurance sector in India has been traditionally dominated by state owned Life Insurance Corporation and General Insurance Corporation and its four subsidiaries. Government of India has now allowed FDI in insurance sector up to 26%. Since then, a number of new joint venture private companies have entered into life and general insurance sectors and their share in the insurance market in rising. Insurance Development and Regulatory Authority (IRDA) is the regulatory authority in the insurance sector under the Insurance Development and Regulatory Authority Act, 1999.

RBI also regulates foreign exchange under the Foreign Exchange Management Act (FERA). India has liberalized its foreign exchange controls. Rupee is freely convertible on current account. Rupee is also almost fully convertible on capital account for non-residents. Profits earned, dividends and proceeds out of the sale of investments are fully repatriable for FDI. There are restrictions on capital account for resident Indians for incomes earned in India.

Securities and Exchange Board of India (SEBI) established under the Securities and Exchange aboard of India Act, 1992 is the regulatory authority for capital markets in India. India has 23 recognized stock exchanges that operate under government approved rules, bylaws and regulations. These exchanges constitute an organized market for securities issued by the central and state governments, public sector companies and public limited companies. The Stock Exchange, Mumbai and National Stock Exchange are the premier stock exchanges. Under the process of de-mutualization, these stock exchanges have been converted into companies now, in which brokers only hold minority share holding. In addition to the SEBI Act, the Securities Contracts (Regulation) Act, 1956 and the Companies Act, 1956 regulates the stock markets.