Economic Organisations and Regulatory Bodies in India Questions and Answers

Answer: A

Correct answer: Reserve Bank of India

The National Housing Bank began operations in July 1988 as a wholly-owned subsidiary of the Reserve Bank, established under the National Housing Bank Act 1987.

Its functions were regulation of housing finance companies and refinance for them. Both halves have since changed: regulatory powers over housing finance companies passed to the Reserve Bank in 2019, and the RBI's shareholding was transferred to the Government in the same year - the same divestment logic that had already moved its holdings in SBI and NABARD.

Answer: A

Correct answer: High Tech Start Up & Other New Business Platform

SEBI proposed renaming the Institutional Trading Platform as the High Tech Start Up and Other New Business Platform, alongside relaxations to its rules.

The platform had been created to let start-ups list and raise capital without meeting the profitability and track-record requirements of a main-board listing, but it attracted almost no listings. The rename and the relaxed rules - on shareholding, allotment and disclosure - were an attempt to make it usable, and to keep Indian start-ups from listing abroad for want of a domestic route.

Answer: D

Correct answer: Manila

The ADB was founded in 1966 and is headquartered in Manila, the Philippines. Japan and the United States are its largest shareholders, and India is among the biggest borrowers.

Answer: C

Correct answer: UK Sinha

U. K. Sinha, who became SEBI Chairman in February 2011, received a series of extensions taking his tenure to the end of February 2017 - more than six years, the second longest in the regulator's history.

His chairmanship covered the merger of the Forward Markets Commission into SEBI, the introduction of REITs and InvITs, and the tightening of rules on participatory notes. He was succeeded by Ajay Tyagi with effect from 1 March 2017. Arundhati Bhattacharya chaired the State Bank of India and Raghuram Rajan was RBI Governor over an overlapping period.

Answer: B

Correct answer: Ajay Tyagi

Ajay Tyagi, an IAS officer then serving as Additional Secretary in the Department of Economic Affairs, took charge as SEBI Chairman with effect from 1 March 2017.

He succeeded U. K. Sinha, whose term had been extended to that date after more than five years in the post - a tenure second in length only to that of the first chairman. Tyagi's own term was subsequently extended, and his chairmanship covered the tightening of P-note norms and the fair market conduct reforms that followed the Viswanathan committee.

Answer: B

Correct answer: Insurance Regulatory and Development Authority.

The Insurance Regulatory and Development Authority, constituted under the IRDA Act 1999, is empowered by the legislation to specify a code of conduct for surveyors and loss assessors, along with their qualifications, licensing and practical training.

Surveyors matter because they assess the loss on which a claim is settled, so their independence and competence bear directly on whether a policyholder is paid fairly - which is why the regulator licenses them individually rather than leaving it to insurers. SEBI regulates securities, not insurance, and the Life Insurance Council is an industry body without statutory rule-making power.

Answer: A

Correct answer: Fair market conduct

SEBI constituted the committee under T. K. Viswanathan, former Secretary General of the Lok Sabha, to review the framework governing fair market conduct.

Its remit covered insider trading and market manipulation - the regulations on prohibition of insider trading and on fraudulent and unfair trade practices - together with SEBI's own surveillance, investigation and enforcement machinery. Its 2018 report proposed a clearer definition of unpublished price sensitive information and an informant mechanism with rewards, both of which SEBI subsequently adopted.

Answer: D

Correct answer: a &b

The Reserve Bank uses both kinds of control and they answer different questions. Quantitative controls act on the volume of credit in the system without regard to its destination - the bank rate, the cash reserve ratio, the statutory liquidity ratio and open market operations.

Qualitative or selective controls act on its direction: margin requirements on particular securities, ceilings on credit for a specified purpose, differential rates for certain advances, and moral suasion. "Fixed control" is not a category in monetary policy at all, which is what leaves the first two.

Answer: B

Correct answer: International market.

A depositary receipt programme is set up because investors outside the issuer's home country want exposure to its shares but face obstacles in buying them directly - foreign account opening, currency conversion, unfamiliar settlement, and mandates that restrict some institutions to locally traded securities.

The receipt removes those obstacles by turning a foreign share into a locally traded instrument. Local demand needs no such device, since domestic investors can already buy the underlying shares on their own exchange; the whole point of the instrument is to reach beyond that market.

Answer: D

Correct answer: None of the above.

All three are risks that attach to an ADR, so none of them is unassociated with it.

Political risk is the risk that events in the issuer's country - expropriation, capital controls, instability - affect the underlying shares. Exchange rate risk arises because the underlying shares and their dividends are denominated in the home currency while the receipt trades in dollars. Inflationary risk in the home economy erodes the real value of those earnings. The depositary structure removes settlement inconvenience, not the risks of the underlying investment.