 So, welcome to all of you in the next lecture, in the series of lecture which we are giving on economic survey. So, today will be the lecture number 4, where we will be talk about the monetary policy which was undertaken by RBI during the whole of the pandemic period and since then. So, in the last lecture, in the chapter 3, we have discussed about the fiscal policy which has been undertaken by the government and in the current lecture, we are going to discuss about the monetary policy which has been taken by the RBI. So, till now, we have discussed that to fight any kind of economic slowdown, to fight any kind of macroeconomic instability, there are two policies. One is the fiscal policy which is undertaken by the government and the second is the monetary policy which is undertaken by the RBI and both of these policies coordinated action leads to macroeconomic stability, that is, you can ensure growth, you can control the inflation. So, in this lecture, we are going to basically understand what kind of monetary policy, what kind of monetary policy which was undertaken by the RBI to address the slowdown because of the pandemic and since then. So, first of all, monetary policy. So, in the last class, we have already discussed that RBI has a monetary policy committee. RBI has a monetary policy committee whose target is to control the inflation, whose target is to control the inflation between 2 to 6 percent, so this is the top post priority of the RBI monetary policy committee, that it has to control the inflation between 2 to 6 percent and once this target is achieved, once this target is achieved, then RBI monetary policy committee starts to focus on its second priority that is to ensure growth, to ensure growth. So, these are the two major priorities of the RBI monetary policy committee. The first most important priority is to control the inflation and then once the inflation is between this particular limit, then the monetary policy committee starts to focus on its second priority that is to ensure growth. Now, during this pandemic, in the pandemic, the economy contracted, there was a economic slowdown, all the economic activities were put to a complete halt, so during that time the inflation was between this particular limit, so inflation was not a problem during the COVID period, the problem was with the economic slowdown, hence the RBI started to prioritize growth, the RBI started to prioritize growth, but you know, we have discussed already that during the last year, from January 2022, since January 2022, the inflation has been the CPI combined, inflation has been more than 6 percent, so from the time of pandemic till this period, January 2022, when the inflation was between the tolerance limit, RBI was focusing on the growth, but during the last year, when the inflation exceeded this tolerance limit, so RBI has put all its focus on how to control the inflation, bring down the inflation within 6 percent. So, this is how the monetary policy of the RBI changes. So, in this chapter, we are going to basically discuss all these things in a bit of detail. So, before starting with the chapter, let's also do a quick revision of some basic concepts, some basic concepts. So, we have discussed that RBI Monetary Policy Committee's target is to control the inflation from 2 to 6 percent and then focus on growth. So, what are the tools of Monetary Policy Committee? What are the tools of Monetary Policy Committee? So, here comes the report rate, here comes the report rate. So, every Monetary Policy Committee meeting, the report rate or the policy rate is decided because this is the only rate which is decided by the Monetary Policy Committee. So, what is report rate? Basically, for example, this is RBI and this is the bank and these are the consumers or the public. So, public take loans from bank and banks give loan to the public. Banks, public do not directly deal with the RBI, right? So, for just imagine, if the banks do not have money, the banks do not have money to lend to the public. So, in that case, the banks will borrow the money from RBI, banks will borrow the money from RBI, right? Banks will borrow the money from RBI, right? And in return, so for example, suppose banks need 1000 rupees, right? So, what will banks do? Banks will sell their, banks will sell their securities, banks will sell their securities. For example, the government bond paper, right, which might, which banks might have. So, banks will sell those government bonds of 1000 rupees and take 1000 rupees from the RBI, right? And after a particular period, this transaction will reverse. Now, the RBI will return back the securities and banks will return back them the 1000 rupees. Take it. So, if the banks do not have money on a daily basis, then banks can go and take the loan from RBI. For this, it has to sell its securities, the GSEX to the RBI. And in return, it will be getting the hard cash. And after a particular period, generally, it is done on an overnight basis. So, the next day, this transaction will again be reversed. So, the banks will be getting their securities, which they have sold. And in return, they have to pay back the 1000 rupees back to the RBI from which it has taken the money. And for this transaction, RBI charges a commission. RBI charges are interest, right? Because RBI is providing the bank with the money for its immediate requirement. So, for this purpose, RBI charges are interest. That interest is known as reporate. That interest is known as reporate, right? So, this is how the reporate functions. That is why its name we have repurchase agreement, repurchase operations or repurchase agreement. Because this transaction is happening on a reverse basis. Now, if the RBI thinks that the inflation is under control, the inflation is, for example, 4%. The inflation is, for example, 4%. So, in this case, the RBI thinks that let us try to ensure growth. So, for growth, you need more and more money with the public, more and more money with the businessman so that they can invest more, consumers can demand more. So, in that case, the RBI decreases its reporate. In that case, the RBI starts to decrease its reporate to ensure more and more growth happens, right? Because in that case, the banks will be able to lend, take more money from RBI at a cheaper rate and hence banks will be giving that money to the public on a cheaper rate. So, in that case, more and more demand for loans will be created which will incentivize the growth. But now imagine, if the inflation is greater than 6%, inflation is greater than 6%. So, in that case, the RBI will increase its reporate. The RBI will increase its reporate, right? So, this is first, reporate operations. The second thing is reverse reporate. So, reverse reporate is the second tool of the monetary policy. So, the first tool of monetary policy is, so tools of monetary policy is basically what monetary policy committee can do to control the inflation or to ensure growth. So, the first tool with monetary policy committee is to influence the reporate. It can decrease or it can increase depending upon what kind of objectives it want to fulfill. The second comes is the reverse reporate. This is the second tool of monetary policy. Second tool of monetary policy. Now, what is reverse reporate? So, now imagine, if this is RBI and this is bank. Now, in this case, banks do not need money from RBI. Rather, banks have extra money. Banks have surplus money. So, in that case, the banks can deposit its money to RBI. For example, let us take rupees 1000. Because banks do not need that money. So, what banks will do? Banks will deposit that 1000 rupees to the RBI and in return, RBI will sell the securities. So, RBI might have some government securities. So, it will sell that government securities to bank in return to getting 1000 rupees. And then after a day or on a longer period, this again transaction will be reversed. So, the RBI will give back the 1000 rupees to bank and banks will return back the securities. So, these are basically collateral. Because if you want to go to the bank and you want to take a loan, so you have to deposit some collateral. So, this is what securities act as a collateral. So, if the RBI wants to take money from the bank, then RBI needs to give some collateral in return of getting the money. So, this is how the reverse repo operation takes place. So, in this case, the banks charges some interest. Banks charges some interest. Which RBI has to pay? Because in this case, RBI is taking the money from bank. So, in that case, the RBI will have to pay some interest to the bank. Now, imagine if the inflation is greater, if the inflation is less than 6%, let us take the case 1. If the inflation is less than 6%, then in that case, the RBI Monetary Policy Committee is very happy because the inflation is within the tolerance limit. So, now the RBI Monetary Policy Committee will focus on ensuring growth. So, for growth, it wants banks to lend more and more money to the public. RBI will not want the banks to deposit money to the RBI. Rather, RBI will want banks to lend more and more money to the public. So, what is the need of you depositing 1000 rupees to me? Why don't you lend the 1000 rupees to the public? So, in that case, the RBI will say that, if you deposit money to me, I will give you a very low interest rate. That will not incentivize you to deposit money with me. So, in that case, the RBI will reduce the reverse reported. Because RBI does not want the banks to deposit money with them, rather RBI wants that banks should lend more and more money to the public. In that case, the RBI will reduce the reverse reported, so that banks are not incentivized to deposit money with RBI. So, this is the case one. Now, if the inflation is greater than 6%, if the inflation is greater than 6%, so in that case, what RBI Monetary Policy Committee will want? It will want that now banks should not lend money to the public. Rather, banks should deposit more and more money to the RBI. So, hence in that case, the RBI Monetary Policy Committee will rate the reverse reported because it does not want banks to give more and more money to the public. Hence, RBI will say that, boss, I am giving you more interest. Why are you going and giving the money to the public? I am there to pay you more interest. So, in that case, the banks will deposit the money with RBI rather than depositing it to the public. Now, this report rate and reverse report rate is basically linked by a formula. So, report rate minus 0.65% is equal to reverse report rate. So, the RBI Monetary Policy Committee only announces the report rate. It does not announce the reverse report rate because reverse report rate is directly linked to the formula. So, RBI Monetary Policy Committee announces the report rate. Automatically, the reverse report rate will come out to be minus 0.65% in that case, you will get the reverse report rate. So, this is the second tool of Monetary Policy Committee. There are many other tools like marginal standing facility, market sterilization bonds, bank rate, currency swaps. So, there are many, many tools to influence the liquidity in the market. So, there are many, many tools of Monetary Policy Committee. We have understood only the two basic tools in the current class that what is report rate, what is reverse report rate and what is the basic logic behind it. So, only one thing which you have to understand again and again is that when do we need to reduce the report rate? When do we need to increase the reverse report rate? And second, that these transactions happens on a reversal basis, right? So, 1000 rupees you are giving to RBI and in return you are getting the collateral that is the securities and then after a day, tomorrow that this transaction will be reversed or it can happen also for a longer time. For example, this transaction will be reversed after 30 days, one year that will depend upon how the RBI wants to conduct it, right? So, these are the two basic tools, report rate and reverse report rate. Why I have taught this thing? Because now we will discuss about a new tool of Monetary Policy Committee, which has been discussed in the economic survey, which the survey has discussed about and that is known as standing deposit facility. That is known as standing deposit facility. So, this is a new tool which the Monetary Policy Committee has brought during this period, right? So, what happened in January 2022 when the inflation has been very high? Inflation has been well above 6 percent, right? So, since the whole year the inflation has been above the tolerance limit. So, in that case, the RBI wants to suck more and more money from the bank, right? RBI wants to suck more and more money out of the bank because RBI does not want that public should have money because you want to cut down the supply of money to the public because you want to control the inflation. So, in that case, the RBI wants to suck more and more money out of the banking system. So, for that what it will do? It will increase the reverse report rate. It will increase the report rate, right? It will increase the report rate. That means it will be costlier for banks now to take the loan from RBI and reverse report rate. It will be more incentivized. It will be more favorable for the bank to deposit its money with the RBI rather than lending that money to the public, right? So, reverse report rate will be increased and report rate will be increased. But now there's a one problem. But now there's one problem. If the RBI wants to take money from the bank, suppose RBI wants to take Rs.10,000 from the bank under the reverse report rate operations, banks want to deposit Rs.10,000 to the RBI because RBI is there to give a very good interest rate. RBI is giving very good interest rate. RBI is giving 6% of interest rate, for example. So, banks will be much more incentivized to deposit their money with RBI. But for that, RBI will have to sell securities worth of Rs.10,000 because in the reverse report rate, you have to deposit a collateral. So, RBI will have to give a collateral worth of Rs.10,000 to the bank and then suck out Rs.10,000 from the bank. But this time because the inflation was above 6% because huge money was pumped into the economy during the pandemic because government has expanded its fiscal policy. Globally, many investors brought their money into the India. So, there was a huge money supply into the public. And that's why the RBI wanted to suck a huge amount of a huge quantum of money from the bank, but it did not have the required securities. For example, RBI wanted to suck Rs.1,00,000 from the bank. But it only has a security worth Rs.10,000. It does not have securities. So, how it can take out that Rs.1,00,000? So, this was the problem which RBI was facing. It did not have the required collateral. It did not have the required securities which is required to take the money out of the bank. So, in that case, a new tool was brought that is known as standing deposit facility in which the RBI can take the money from the bank on an overnight basis or for a longer tenure. But it does not need to deposit any kind of collateral. It does not need to deposit any kind of collateral. So, by this, the RBI Monetary Policy Committee was able to extract more and more money out of the banking system, which it was not able to do because of the reverse reported operations because in that case, you have to sell the collateral in order to get the money. So, this is a marginal standing deposit facility which is similar to reverse repo operations except in this case, there is no need for RBI to sell its collateral to sell its collateral in order to get money from banks. Take care. So, this is what a standing deposit facility is. Notes you can refer and still if you have any problem, you can comment so that I can read those comments and I can answer those doubts. But these kind of questions are very important for your prelims part and that's why you need to understand it in a very conceptual manner because otherwise, you will not be able to answer the question in your preliminary examination. So, this is a standing deposit facility. It is a kind of reverse repo operations only. There's only one thing which is not there that is the RBI does not have to sell the collateral to the bank and in this case, the RBI can extract more and more money in a very quick manner. So, with this background, let us come back to the survey now. With this background, let us come back to the survey. So, first of all, global inflation. Inflationary pressures have dominated the global economic landscapes in FY23. We have discussed why. So, this inflation, which we have witnessed throughout the year, it was because of the pent up demand of the pandemic. Second, huge money which was pumped into the economy by every government because of its expansionary fiscal policy. And third, after the conflict in Europe, the prices of energy, the prices of fertilizers, the prices of wheat shot up. So, because of this, the inflation has been the biggest problem part in the financial year 23 and for this globally, every country, every central bank have tightened its monetary policy, have gone for a monetary tightening. Monetary tightening means increase the rate policy rate, increase the policy rate, India-Mexico increase the report rate. That means you want to make it difficult for the banks to take money from the RBI because you want to stop the supply of money into the public. So, that is why every country, every central bank has increased its report rate, has increased its policy rate and this is known as monetary tightening. You are tightening the supply of money into the market. So, you can see that US central bank has raised the policy rate by 425 basis point that is equal to 4.25%. Similarly, European central bank has raised it by 300 basis points. So, this is how globally every central bank have tightened its monetary policy cycle to ensure the inflation comes within the target level and for every country, the inflation target is different. For example, in India, the inflation target is 2 to 6% and for US central bank, the target of inflation is 2%. So, every country has its own inflation depending upon their own macroeconomic fundamentals. Let us come back to India response by the Monetary Policy Committee of RBI. So, Monetary Policy Committee has implemented a 115 basis point that is 1.15% reduction between March 20 and May 2020. So, this was the period of pandemic. So, in pandemic, the inflation was well below 6%. The inflation was well below 6%. So, inflation was not a challenge. So, that is why the RBI reduced the reporate in order to ensure on its second most important priority that is growth. And for that purpose, it reduced the reporate. Then the MPC Monetary Policy Committee has maintained a status quo on the policy reporate between May 20 and February 2022. Because inflation was within that tolerance limit. So, there was no problem with that. But since January 2022, when the inflation reached the limit of 6% and now the RBI Monetary Policy Committee figured into action and now it started to tighten its monetary policy. So, RBI initiated the monetary tightening policy since January 2022. And that is why we were reducing the reporate or we were keeping it as a constant. But since January 2022, the RBI has initiated the monetary tightening cycle and globally every country has done the same. Now, monetary development. So, if that is what we have discussed is that first standing deposit facility. So, this is the new tool of Monetary Policy Committee which has been announced by the RBI. So, this facility allows for the deposit of excess funds by the bank with RBI, excess funds by the banks. Without the necessity of collateral in the form of G6. So, now the RBI does not need to deposit the collateral to the banks to get the money. In contrast to standing deposit facility, reverse repo operations require the RBI to deposit collateral in the form of government assets in order to borrow money from the commercial banks. When the central bank has to absorb a tremendous amount of money from the banking system to the reverse repo window, it becomes difficult because the RBI will not have that much of collateral. This was happened during the time of demonetization also. But at that time, standing deposit facility funny. So, in that case, RBI faced a very huge problem. But this time, RBI has initiated this new fix reverse repo operations will remain a part of RBI's toolkit as its operation will be at the discretion of the RBI, unlike the SDF, where discretion with banks has to bend the store's servers. This basically lines CSP, which already fixed reverse repo rate operation that is a standard RBI Monetary Policy Committee tool that will be as it is. So, fix reverse repo rate operations will still be there. But what happens is that the fixed reverse repo rate operations in which banks deposit their money with the RBI and RBI sells its collateral. So, who will do this? This operation is at the discretion of the RBI. So, for fixed reverse repo rate operations, if RBI thinks that it needs to borrow money, then only this process will be initiated. So, there is no discretion with the banks. If the banks want to deposit its money with RBI and if the RBI is not ready to accept that money, then it will not happen because the power of reverse repo rate operation lies with the RBI. But in the case of standing deposit facility, the discretion lies with the banks. If the banks think that, yes, I want to deposit money with the RBI, so it can do because the discretion in this case lies with the banks and not with the RBI. So, this is again an important point. Who has the power to initiate this process? So, to initiate the fixed reverse repo rate operations, you need the consent of the RBI. RBI is at the leading hand and to do the standing deposit facility, the power lies with the bank. The discretion lies with the bank. As it is non-collectualized, Sdf rate will be higher than FRR. FRR means this one, fixed reverse repo rate. Because just imagine, in fixed reverse repo rate, the RBI has to sell its collateral to get the money. But in standing deposit facility, you don't need to have any collateral. So, if you are not giving any collateral, then you will be charged a higher interest rate. So, that is why if the RBI takes the money through Sdf facility, then it has to give more and more interest to the bank because it is not selling its collateral. So, that is why because Sdf is a non-collectualized facility, Sdf rate will be higher. That means RBI will have to pay. RBI will have to pay a higher interest to the bank, a higher interest to the bank because it is not selling any collateral because it is not selling any collateral to banks. So, this is how it is a new standing deposit facility. So, this is how the RBI Monetary Policy Committee has increased its repo rates. So, it was unchanged and from 4th May 2022, now the RBI Monetary Policy Committee started to increase the repo rate. So, from 4 to 4.4, 4.4 to 4.9 and now it is 6.25. And in the last February 2023 Monetary Policy Committee meeting, the last meeting as of now, it further increased the repo rate to 25-25 basis point. That means by 0.25%. So, currently the repo rate is close to 6.5%. So, that means 2.5% repo rate because inflation is hovering around 6%. So, our core inflation has come down to 5.8% but the core inflation is still around 6% and more than 6%. So, that is the problem and that is why Monetary Policy Committee in its last meeting further increased the repo rate. So, this is the monetary tightening cycle which every country across the globe, every central bank across the globe has performed. So, the supply of money into the economy has been cut down to a great extent. Because now you are making it much more difficult for the public to get money and the public will find it much more difficult to get the money. They will not try to invest or they will not try to demand. They will not try to purchase house. So, in that case the growth might suffer. So, this is the very delicate balance which has to be ensured and that is why Monetary Policy Committee is always in a dilemma. Already the growth is not at its best and the inflation has also increased to a large extent. So, this is the challenge which Monetary Policy Committee has faced throughout the year but it has been very much credible. It has been very much effective in ensuring the balance between growth and inflation. So, next is the reverse money and broad money. So, let us understand basics because in class we discuss this thing in detail. So, this topic is around 4-5 hours we discuss in detail everything but this is only a kind of introductory session where you just need to know about prelims part which has been discussed only in the survey from the survey perspective. That is why the survey perspective is only those things I am telling you. So, here we have to understand one thing, money multiplier. So, the survey has talked about money multiplier and money multiplier is equal to M3 by M0. So, M3 is equal to broad money and this is known as reserve money or high-powered money. Reserve money or high-powered money. Reserve money or high-powered money. Suppose this is the RBI. These are the banks. These are the industries. These are the public. So, first of all, first point. Only RBI in India is responsible or has the authority to pump money into the economy. Because it prints currency, whatever notes you have. So, who has the authority to print RBI? And then this printed currency will be put into the banks and then banks will give it to the public. This is how it functions. So, who has that authority? It is only the authority of RBI to print the money and to then give the money to the banks so that the banks can lend those money to the industry or public. So, suppose RBI has printed 10,000 rupees. RBI has printed 10,000 rupees. So, this is the liability of RBI. This is the liability of RBI. So, this is known as M0. This is known as M0. So, C, 10,000 rupees. This is known as hard currency. Actually, RBI has printed. So, this constitutes the liability of the RBI. And this is known as reserve money or high-powered money. Now, when this money goes to the banks, for example, out of the 10,000, 5,000 goes to this bank and 5,000 goes to this bank. So, what will the banks do? Now, it will be 5,000 rupees. Banks will try to give loans worth rupees 20,000. Banks will try to give loans worth rupees 20,000. Over and above 5,000, the banks will give more and more loans. Because banks can do this. This is 10,000. But because the banks have lent more money over and above what it had, that is why the M3 will be higher than M0. So, this is known as M3. M3 is basically the total money supply. M3 basically measures the total money supply. How much money is basically in the whole economy? That is not how much money the RBI has printed at the first place. Because the banks have created more money out of that which it had. That is why the actual money which is there in the economy is more than how much the RBI has actually printed. So, it is not like, for example, you take the bank, you go to the bank, you deposit your 1 lakh rupees. What is the deposit of your bank? 1 lakh. Now, what will the bank do? The same 1 lakh. Now, will you withdraw 1 lakh? Will you withdraw 5,000? Will you withdraw 10,000? What will the bank do? Will you give someone a loan of 50,000? So, how much total money is in the economy? Suppose you are a person, you go to the bank and you deposited your 10,000 rupees to the bank. But you are not going to take out the money. For example, this is 1 lakh. So, you are not going to take out the money. You might take out 5,000, 4,000. Rarely, it happens that you withdraw 1 lakh and some people withdraw, but maximum people do not do that. So, what the banks will do? Banks will, out of the 10,000 which is deposited with the banks, banks will give 5,000 as a loan to some other person. So, how much total money is there in the economy which is circulating in the economy? It is 10,000 plus 5,000. So, it will be 15,000. So, this is how the money multiplies. This is how the money multiplies. So, if the banks do not lend, then the money will not multiply. The M3 will be equal to M0. But if the banks will multiply those money, then the M3 by M0 will be greater than 1. So, money multiplied can be greater than 1. It can be equal to 1. It can be less than 1. It can be less than 1. So, M3, M1, M3, M0, when will be bigger than M0 when the money is being lending by banks? Banks are lending more and more money. Is equal to 1. Means banks are not lending any money. In that case, M3 is equal to M0. And less than 1 means suppose RBA has printed 10,000 rupees. But 2000 went to black money. It went out of Indian economy. Suppose you made a Swiss bank. So, in that case, M3 will be less than M0. So, it will be less than 1. In the case of black money, it is equal to 1. So, this is how the money multiplies. M0 is equal to the base. This is the base. This is actually the money which has been printed by RBI and put into the economy. So, the higher the value of money multiplier is, that means more and more banks are lending money to the public. So, the survey has used this term. So, first of all, M3 hogya or M0 hogya. So, what is M0? M0 is the total liability of the RBI. It is the total liability of the RBI. So, M0 is equal to currency in circulation plus total currency deposited in banks. So, currency in circulation plus total currency deposited with currency in circulation plus total deposited with RBI. So, currency in circulation, what does currency in circulation means? It is basically the total amount of currency which is with the public. The hard cash. And this is the total currency which is deposited in the RBI. How much currency is deposited with the RBI? So, currency in circulation is equal to physical currency, hard currency which is with us. And then this is the total currency which is deposited with the RBI. So, this is basically the liability of the RBI. But M3 will be more than M0 and what is M3? It is the currency with public plus demand deposit of public with banks plus time deposit of public with banks. So, this is the difference between M0 and M3. So, M3 is equal to currency with the public. So, for example, you might have some currency, hard cash with you right now, 100 rupees, 1000 rupees and then you might have your demand deposit. So, demand deposit that means your current account, whether those money which you can take out any time. You go to the ATM and you can take out any money. So, that is the demand deposit of public with the banks and then you have the time deposit, time deposit come with the fixed deposit which you cannot take out at any point of time. You can take it only after a particular year. So, all those FDs and other things. So, those are known as time deposit of the public with the banks. So, this is known as M3. This is known as M3 right and then survey is talking about money multiplied right. So, M3 is this and M0 is this. So, there is only one thing you have to remember in the last which is relevant for you. You have to understand what is M0. That is the reserve money, reserve money, monetary base, high powered money just come look M0. So, M0 is basically the total amount of money currency which RBA has printed and put into the economy. M3 is basically the current money supply. So, this is basically the money which is totally available there in the economy. Take care which is totally available there in the economy. So, M3 will be equal to M0 if the banks do not lend money right. But generally all the banks lend money that's why M3 is better than M3. So, is it used to survey and discuss here right. The money multiplier, the ratio of M3 by M0. M3 is equal to what money supply, broad money and M0 is equal to monetary base, high powered money, reserve money. So, this is the total liability of the RBI and this is actually the money which is there in the economy has broadly remained stable at an average of 5.1 over April to December 2022 compared to 5.2 in the corresponding period of the previous year. 5.1 if the RBA prints currency and puts into the economy 100 rupees but the total supply in the money that but the total supply of the money in the economy is 5 times that means 500 right. So, this is the money multiplier and money multiplier has been stable. So, last year it was 5.2 during the same period this year it was 5.1 that means banks are lending less money 5.2 to 5.1. So, that is good because we want to control the inflation we want banks to not lend more and more money. So, as a question prelims may I got so if the inflation is high the money multiplier should reduce or increase right. If the report it increases the money multiplier will increase or decrease if the reverse report it increases what will be its impact on money multiplier. So, if reverse report it increases that means banks has much more incentive to deposit its money with RBI. So, why will the bank lend it to the public so in that case the money multiplier will come down. So, by that you have to understand all these links which leads to inflation right. Then cash reserve ratio so cash reserve ratio is basically the amount of cash which every bank in India have to deposit with RBI. So, cash reserve ratio was also increased because the RBI wanted to control the inflation. So, now more and more money the banks has to deposit with the RBI. Then the monetary policy transmission so what do you mean by monetary policy transmission. So, see one is monetary policy and the other one is the monetary policy transmission. So, monetary policy is between RBI and banks. So, this is here the monetary policy comes and between banks and public the monetary policy transmission comes. So, monetary policy if the RBI is increasing the repo rate because it wants the banks it wants to make it difficult for the banks to take money from the RBI. But that means whether that repo rate is transmitting to the bank's lending rate and deposit rate because repo rate is the thing which is happening between these two parties right. So, how effectively the changes in repo rate is leading to changes in the lending rate and deposit rate. If it is very quick then it is good for us RBI and repo rate increased in day after two these thing also increases. But the problem with India and Indian monetary policy thing is that the transmission takes a lot of time. So, if the RBI increase increasing the repo rate but the transmission to this particular thing is not happening. But during this time during this whole period we have seen that the lending rate and deposit rate of banks have increased in consonance with the changes in the policy rate that means monetary policy transmission has been better as compared to the previous time. Now, development of the GSEC market so this we have already understood in the last class because the GSEC market's yield it was increasing. So, you can see the yield of the GSEC is on rise and why we have seen that US Fed has raised the interest rates or a lot of money was sucked out of the Indian economy and put to the US economy. So, that we have already understood. So, the GSEC yield has spiked due to the hawkish stance of the major central banks and the hardening of the global bond yield in banking sectors. Because monetary policy may this chapter has also been talked about this section has also been discussed about the financial stability the financial stability for banking sector is a very important element of that. So, last class again we have discussed about the whole crisis. The twin deficit, the twin balance sheet problem which is the banking sector the NPA was very high and because of this growth you did not know. So, this chapter basically gives the exact details that what is the current status of Indian banks. So, the continuous efforts of the again has led to a healthier balance sheet of the banks. We have discussed how this government has effectively resolved this whole issue. So, first of all let us understand some basic term what is NPA? So, NPA means any loan any loan for which the principal or interest payment any loan for which the interest or the principal payment has not been paid for more than 90 days. So, that means three months. So, any loan whose interest or principal has not been paid beyond three months so, we call it non-performing asset because it becomes a non-performing asset for the it becomes a non-performing asset for the bank. Then what is the provisioning coverage ratio? So, provisioning coverage ratio means for example, if there is a bank it has given a loan of 100 rupees to a company A right? But the company has returned 30 rupees and 70 rupees the company is not able to return right? So, now it has been more than three months. So, this is known as gross non-performing asset because 70 rupees the company has not been able to pay back and it has been more than three months. So, now it will be counted as a gross non-performing asset but generally what the banks do that banks out of their profit out of their profit they reserve certain money they reserve certain money to compensate for the loss to compensate for the loss. The company was not a while the company did not pay in the future. So, the banks kind to the banks try to reserve some money out of their profit to compensate for the losses. So, the provisioning coverage ratio how much the banks is provisioning money out of its profit to compensate for the losses in future out of its gross non-performing assets. So, that means 73 rupees not 63 49 rupees. So, 49 rupees banks will keep it as a reserve so that if this loan is not able to come back if that 70 rupees is not able to come back to the bank. So, bank have said money to compensate for that loss. So, this is known as provisioning coverage ratio and the third is the capital adequacy ratio. Capital adequacy ratio just understand this is a very important concept which is very very important for your exams what is capital adequacy ratio let us understand. Now, suppose industry, agriculture and services sector. Suppose these are the three sectors industrial sector, agriculture sector and services sector. Now, the banks have given any bank SBI. So, SBI has given 100 rupees of loan to industry 50 rupees of loan to the agriculture sector and 200 rupees loan to the services sector. So, what is the total loan which SBI has given it is equal to 350 right. But don't you think that all these three sectors are quite different in nature they have their own set of challenges. So, the probability of agriculture sector to pay back the loan is lower than the probability of the services sector to pay back the loan because service sector is quite good in India as compared to agriculture sector and industrial sector is quite good as compared to agriculture sector right. So, this is where the risk for the bank, the risk for the bank is different for different sector right. So, in that case RBI gives a risk to every sector for example, the RBI will give a risk factor of 2 to industry, 3 to agriculture and 1.5 for services sector. Because service sector has the least probability, agriculture sector is the most complicated, it is already a loan. So, in that case the risk factor will be the highest and in the industrial sector it will be the risk sector will be in average of the two things. So, it will around two. So, now the banks so now every bank has to calculate its now every bank as per the risk factor given by RBI has to calculate its risk weighted assets RWA risk weighted assets because these are the asset to the bank because these are the loans which the banks have given but now we have to calculate the risk weighted assets. Means we have to account for the risk according to that asset. So, in that case what will be the total risk weighted assets? So, 100 into 2 plus 15 into 3 plus 200 into 1.5 that is equal to 200 plus 150 plus 300 that is equal to 3, 4, 450, 550 that is equal to 550. So, this is the risk weighted assets. So, this was the asset for the bank initially but now if you account it for the risk. So, now the new risk weighted assets accounting for the risk to that asset it will be 550. Now what is car? It is basically the amount of capital amount of capital as a percentage to RWA which you have to reserve which you have to keep. So, out of this asset you have to reserve some money or you have to keep some money to compensate for the losses. So, as per the Basel norms as per the Basel 3 norms the car has to be kept as 10.5 percent of risk weighted assets that means 10.5 percent of 550. So, this is how you have to keep the risk weighted assets. So, how much capital a bank has to keep as a proportion to its risk weighted assets so that in future if there is any loss the banks are able to compensate for that loss. So, as per the Basel 3 the guidelines but RBI has made it compulsory that every bank has to keep 11.5 percent. So, that is somewhere else we will discuss but this is what is capital adequacy ratio and this is known as risk weighted assets you have to understand this right. So, now we'll understand what the survey has to talk about the status of the bank. So, now you can see so RBI has mandated the banks to keep the car above 11.5 percent. So, status of bank there was a credit boom in the last lecture we have understood there was a credit boom. So, the total loan as a percentage of GDP it increased from 36.5 percent to 57.3 percent. So, the total loan as a percentage of GDP increased by this time last class we will see that a lot of reckless loans were given by the banks also the banks for hiding their bad loans because a lot of loans have converted into a liability banks were not able to get that interest or principal back but banks were hiding it. Finally, at the end of 2015 Hussi Sabeh Raghuram Rajan was there and he brought and he told that let us do an asset quality review. Because we don't know what is the problem how much NPS there because banks are hiding it. So, we have to have a very strong effective asset quality review. So, the NPS in FY15 was 4.3 percent which increased by 11.2 percent in FY18. So, this policy was brought by Raghuram Rajan after that he retired but after that asset quality review took place and we started to know about what is the exact state of crisis and now it was exposed that first look at 4.3 percent NPA means if the bank has given 100 rupees, its 4.3 percent bank NPA means it has not paid more than 90 days but now it increased to 11.2 percent. After that, the government made a lot of reforms like insolvency, bankruptcy courts, RFC Act amendments, asset reconstruction companies, bank recapitalization bonds and government has brought many things and that is why the NPA in FY 2021 fell to 7.3 percent. So, from 4.3 to 11.2 to 11.2 to 7.3 and there is again a very good news that in September 2022, it has fell to its 7 year load of 5 percent. So, this is the credit which has to be given to the government of India that they have really worked with the banks to ensure that the banks balance sheet improves and that is why the NPA has reached to its 7 year low in the September 2022. Similarly, the capital adequacy ratio and the provisioning coverage ratio, capital adequacy ratio is 16 percent. What is the requirement? 11.5 percent. So, capital adequacy ratio is also at a very good level and similarly the provisioning coverage ratio is at 71.5 percent. So, generally provisioning coverage ratio, if it is more than 70 percent, it is good. So, you can see that it is at 71.5 percent. So, that is why the banks are in a very good position and we have seen that corporate balance sheet has also improved and because of this, the banks are ready to loan, they give loan and the corporates are ready to take loan and that is why the investment cycle is going to pick up in the year if the conflict in Europe does not escalate beyond a point. So, India's fundamentals are very strong and that is why India will be growing in its Amrit Karl now. So, these are the comparisons. How is it declining? Schedule commercial banks, GNPA, gross NPA or provisioning coverage ratio? How it has increased? Right. Broad-based improvement in GNPA. So, for every sector, the gross non-performing asset has reduced. So, you can see for agriculture it has reduced, for industry it has reduced, for services it has reduced and for personal loans it has reduced. So, that is the credit which should be given to the government and also to the RBI. That is how NPA has decreased in every sector. Okay. And because of that, because of the strong balance sheet in the banks, you can see the bank credit growth, non-food bank credit growth method, the credit, the banks which gives to the non-food sector that is for the public, to the industry, to the house loans and other things like. So, you can see that because the banks balance sheet has improved, banks are lending now more and more money and that's why the investment cycle will be rising up in the future. Similarly, you can see the status of NBFC to NBFC, I don't know if you know, in 2018, the ILS crisis came, but despite that, the NBFC has been performing at a very, in a very much resilient manner. You can see that credit to NBFC has also increased and the aggregate credit by NBFC is also increased. So, the non-banking financial sector which is very important for the ruler sector and it is very important for the infrastructure sector because NBFC reaches to those people, to those consumers which are inaccessible by the banks. So NBFC, it is generally for the first industrial sector which needs a long-term loan for 30-40 years and for those people who does not have that kind of paperwork and things which they need to do to take loans from the banks. So, they go to the NBFCs. So, NBFCs reach to those people who are unreachable by the traditional banking sector and you can see that declining and GNPF, so for NBFC also that NPA has declined and it has declined in all the sectors. So, this is the gross and these are the sector price. So, you can see the largest sector with the GNP is 46.2 and after that services, after that personal and then IBC insolvency in Bankruptcy Road has been a big band reform which has been brought by the government. I have an industry, I have taken a loan from the bank of 200 crores but now I am not in a situation to pay back the money to the bank. That means I have gone bankrupt. I do not have any money to pay back to the bank. So, in that case I have to apply for the insolvency that I do not have the money. Please sell my assets, do whatever you can but I am not in a situation to give the money back to you. So, initially it was at the discretion of that person. If that person does not go to the bank, insolvency resolution against the company cannot initiate. So, even if I am not able to pay back the money, I will just sit, I will enjoy, I will not do anything because the creditors, the banks do not have any power to initiate insolvency proceedings against me. So, until I do not go to the banks and say that, boss, I have gone bankrupt, I wish to apply for insolvency, then till that nothing will happen. I have to go and apply for that but under IBC, this has been the structural change. Now the creditors, the banks can themselves initiate our insolvency proceedings against you. So, even if you try to hide, even if you try to budge, even if you try to escape, it will not help because the creditors have the power. So, that is why it is said that India is now no longer a defaulter's paradise. India is now no longer a defaulter's paradise. Defaulter's paradise means what used to be before, you default paying back the money to the banks but no one is going to do anything, you just enjoy, you just wait and watch. But now, if you are not able to pay back the money, your loan has become NPA. The creditors, that is the banks, can initiate insolvency proceedings against you and if the insolvency resolution passed by them is accepted, then they will be taking control of your company. So, see how does it functions? So, suppose these are the creditors. For example, let us say creditors means SBI, HDFC, these are the banks. Now, these creditors have not got their money back. So, they will go to the NCLT, National Company Law Tribunal and they will say that, see this company has got insolvency, this company has got bankrupt, this company is not in a state to pay back my money. So, I want to initiate an insolvency proceeding against this company. Earlier, these companies can go to the NCLT and request for that. If the NCLT accepts it, yes, you are right, this company has got bankrupt, it needs to be brought under the insolvency proceedings. So, once the NCLT accepts that, then insolvency professionals will be constituted, IP. It will constitute the insolvency bankruptcy board of India, which is a statutory body. So, insolvency professionals are being constituted and these insolvency professionals are people who are very much professional to ensure that all those companies which have gone bankrupt, they can resolve it. So, how that company can be helped so that that company again starts to become active or if that company is not being able to is not being able to become active, that company has completely lost whatever it had, the company cannot be revived. So, in whose case may the company needs to be sold. So, this insolvency professionals can either resolve that company or it can sell that company. That means, liquidate that company, you can liquidate the company. So, insolvency professionals are constituted by insolvency bankruptcy board of India. And then also, the committee of creditors is constituted. So, committee of creditors means that all creditors like SBI, HDFC, Punjab National Bank, all of them will be constituted. And this will get the entire power of the company. Entire management of the company will come under their control. So, the entire management of this company which has gone bankrupt. And the management will shift to the committee of creditors. So, that is why the defaulters of fear, they are very very in a state of fear because the control of their company will be taken away once the NCLCLT accepts their insolvency proceedings against them. So, committee of creditors will accept there, will take the complete control of the management of that company. So, this is why now to do not be alone and escape has become a very difficult job. So, that is why insolvency in bankruptcy board has been a very instrumental. Now the people are very much afraid of defaulting their interest payment or principal payment. This has brought a structural change. So, IBC has presented an exit of Dispressed firms via public auction based resolution model. Public auction come at them. That company sold to the public if that company is not able to you know pay back its amount to the bank. It has led to a behavioral change, it has led to a behavioral change among the debtors. And this whole process is known as corporate insolvency resolution process. This whole process called CIRP. Insolvency professionals are appointed by IBBI, Insolvency Bankruptcy Board of India and the minimum default threshold. What is the minimum threshold? So, 1 crore. If the interest or the principal is more than 1 crore, then such cases can be brought under this particular quote. So, this is the table which has been put by the economic survey or economic survey that 553 companies have been brought under resolution. That means those company has been resolved and 1,807 companies were not being able to resolve. That is why those companies were completely sold. Those companies were liquidated. So, this is how it is. And then aggregate resolution value as a percentage of aggregate claim that is 30.8. So, this figure you have to just remember 30.8. This means that for example, total loan, the NPA which was to be resolved, if that was 100 rupees, insolvency professionals resolved that 100 rupees. How much value did the banks get? 31 rupees. So, how much did the banks get? Initially 100 rupees. But 100 rupees is not possible. So, insolvency professionals managed that and returned it as much as possible. So, only 30% was resolved. The rest 70% was lost for the bank. So, this is the resolution value. So, total value of the claims was 100. So, the banks wanted it. But how much was resolved that you got 30 rupees. So, 30 by 100 is equal to 30%. So, only 30% of that. So, these are aggregate claims. 7.990,626 crore. 7.990,000. How much was the claim for the banks? How much did the banks get? How much? 2.43,452. So, basically 31% came. Then, the company's order for liquidation was how much? 1,807. And how much time did it take? So, insolvency in the bankruptcy code has a time limit as well. How much time it takes to fulfill this? So, it has 30 days. But that time period can also be extended. So, how much time did it take on an average of 5, 61 days to resolve it? And there was an average of 437 days. But it is very less because before the IBC era, before the insolvency in bankruptcy code, it was around 4.5 years on an average. It took to resolve such kind of issues. But now the time period has been brought development in the capital markets. Next chapter, which the survey has discussed, is about the capital markets. So, capital markets are the important, but you should understand some basic things. Capital market, that is broadly the capital market. So, in the capital market, basically the depth and the equity instruments. The depth instruments come at the bond and equity instruments come at the share market. So, all those things are traded. Capital market is basically the sale and exchange of the capital market is basically a market where depth and equity instruments are transacted. To depth come at the bond instruments, not government bonds, only corporate bonds. Because government bonds come under the money market and that is regulated by RBI. Capital market is regulated by SEBI. And equity means share market. So, that is all it is. So, you must know that in the last year, there was a lot of problems. Capital market was very volatile because US Fed increased monetary tightening. So, a lot of people took their money out of the Indian capital market and they shifted their money to the US capital market. So, this market was very volatile during this whole year. So, let us understand the tools of primary market. So, initial public offer IPO. So, IPO, for example, I have a company or suppose you are watching this lecture. So, suppose any institute, for example, Institute, issues it shared to the public for the first time. For the first time, it has never done that thing in the past. It is doing this for the first time. So, that is known as IPO. So, whenever a company which has, for the first time, issued a share to the public. So, one is a private company and the second one is a public company. Private company means those companies which has not issued it shared to the public. But a public company means a company which has issued it shared to the public. So, whenever a private company for the first time thinks about selling its share to the public that offer is known as IPO that offer is known as IPO so suppose this company was there it has its 100% share the promoter the promoter had 100% share now the company decides to sell 20% of share to the public so this is happening for the first time so this is known as IPO. But now for example in 2023 the company sold 20% share for the first time now in 2024 the company intends to sell more 10% but the now it tries to sell extra 10% of share. So this is the second time it is going to the public it is not happening for the first time for the first time it is known as IPO and when it goes for the second time it is known as FPU that is known as follow on public offer right so company already listed on exchange that the company has already issued a share to the public in the past now it intends to sell extra share to the public so such kind of offer is known as FPU and IPO means for the first time then rights issue so rights issue means that whenever a company sells its share to the existing shareholder who already is that company's shareholder you are giving extra share to him so it's called rights issue similarly your preferential allotment so preferential allotment means that you are selling your share differentially to a select group of investors you're not going to the public you're not selling it to your existing shareholder rather you are selling those share to a selected group of investors which can be anyone for a company so company has to decide to which investor it wants to sell the share okay so you are selling the share to the public anyone can buy that rights issue may you're selling the share to the existing shareholders or you are selling the share to a selected group of investors which can be anyone and then comes the qualified institutional placement here listed companies raise finance to issue of share to qualified institutional buyers qualified institutional buyers what are the big buyers for example mutual funds they're very sophisticated investors so mutual funds is a comes under this qualified institutional buyers that means they're qualified they're very matured they're sophisticated investors so other quick company up to share co directly qualified institutional buyers to be it's the head not the public co in general they pay so that is known as qualified institutional placements okay so this is a IPO FPO rights issue preferential allotment qualified institutional placements all these terms has been used in the survey so you should be knowing about all these five things then how the primary market has followed public sector last year companies IPO as a matter of time I can't take a LIC be Pahli war IPO PGA so last year was a huge large number of companies which has been for that initial public offer initial matter Pahli war ATM ticket to get a call IPOS ticket last year 76 company was there in April to November 2021 this year from April or the last year April to November 2022 it increased to 104 so 104 companies went for IPO take a similarly they go up a preferential allotment 233 to 298 to a ticket debt debt come up up a bond bond the bond may be 871 to 976 967 PGA TK FPO's 0 7 so generally the capital market has performed very well many companies many startups have went for that IPO and a huge investment has also come so the cool last year investment I thought a lot of the assault or a come I am because this year the market has been very volatile because of the monetary tightening by the US so just a US monetary titling Karthi ragi less money will come to the India more money will go to the US that's why the amount raised what a coffee come him as compared to what was the amount raised last year and this yet also witness the largest IPO ever in the history of India LIC life insurance corporation who's got the IPO and that was the largest IPO in the history of the India so this is how you should understand IPO FPU rights issue QIP's preferential allotments right then comes secondary market the secondary market or primary market mentor ka hatha so primary market ka matla for example the transactions happening for the first time for example I am the company and I've issued 1% share to you so this is the primary market for the first time I'm selling of this is the first point of transaction right now the second now what will you do you will sell your share to any other public to any other person so that is known as secondary market so what I'm not selling my share I have sold my share to you this is for the first time now you are selling that share among yourself so this is known as a secondary market transaction so whatever happens in the sensex share market but the secondary market and IPOs FPUs are the primary market because the first time the shares are being sold but here the shares are traded among different people so this is the stock market right so this is the stock market the stock market performance was also a resilient okay so you can see this last year the stock market so during the pandemic the stock market saw a growth of sensex nifty saw a growth of 18% and sensex saw a growth of 17% share market increase was a huge increase in the share market but this year the share market has been very volatile and the reason taking the money to the US because of the tightening by the US Fed and because of that most of the countries this year most of the countries this year and other because of the conflict in Europe high inflation so that's why the market this year has been very volatile and that's why most countries have saw have seen a negative increase in their stock market as compared to the last year so you can see the Shanghai China Brazil Korea US France Germany most of the stock market has seen a negative growth as compared to the last year but just see about India nifty 3.7 and 3.9 that means the stock market increased during the pandemic because a huge money was pumped into the economy so investors had a lot of money so they invested all over the world a lot of money came from outside but gradually after the pandemic monetary tightening started the conflict in Europe increased inflation so now the money started coming out of the market and because of the tightening of the US Fed all the developing countries and all the developed countries all the money came out of the US economy in the US stock market along with inflation and other things because of this year's stock market performance it was not as good as what was seen in the pandemic but despite all those things still India's stock market has been resilient because it has seen a positive growth rate vis-a-vis the last year as compared to all other countries you can see these are the all other countries and every country have seen a negative growth rate you can see that every country China Brazil Korea US France Germany UK Hong Kong Japan every country has witnessed a negative growth rate of its stock market this year as compared to the last year this is why this is why it is still positive in India because what happened foreign portfolio investors those people who have come from abroad to invest in India those people took the money out because those people went back to the US and invested money but there came the domestic investors so last year domestic investors who put money in the share market that is much bigger the dimit accounts the registration was much bigger so despite the FBI is taking back their money to the US the domestic investors and has invested huge amount of money to the stock market and that's why the stock market this year also was very resilient as what was there in the last year so the retail participation the capital market has increased although now it has started to decline because which a golden period of stock market up and make a summer job in look was other attract the stock market was increasing at a very exponential rate now the stock market has started to stabilize and that's why the retail participation that is the participation of public in the stock market is declining to give the FBI they could find portfolio investors to find portfolio investors is the Rikega you can see this so this is the year of pandemic 2020 to 2021 you can see this is the graph which basically shows FBI and this is that domestic institutional investors domestic investors and this is the mutual funds so you can see that during the pandemic year with domestic investors and mutual funds took out the money from the stock market but the same year foreign portfolio investors because US may pandemic is a may it not pass a chapter here in London may it not pass a chapter here that those people had huge surplus of money so that's why they were looking where to invest those monies because government has printed the money and given them given it to them so they were sitting on a huge cash pile and that's why they were looking across the world where to invest and that's why in that point of time they came to India and invested but since then when the US has started with monetary tightening most of the foreign portfolio investors have started to take out their money from India the domestic investors positive maya mutual funds positive maya and that is why still the total money invested in secondary market has been positive so despite FBI is taking back their money the domestic institutional investors and mutual fund have invested huge amount of money and that's why our stock market has been resilient this year also then the survey capital market may lastly talks about the threat from the crypto market you know that cryptocurrency or crypto asset was something which everyone was attracted towards at some point of time but now if you will see the last year most of the cryptocurrencies have completely crashed and you know that cryptocurrency regulator exchange FTX has also collapsed so that's why the survey talks about that we need to have a global collaboration because if we don't control cryptocurrencies then what will be the impact of it it will affect the overall financial stability of the country it will affect the overall financial stability of the country and to control or to regulate cryptocurrency it cannot be done by a single country you need to have a global collaboration and hence the survey says that globally every countries should come together and try to solve these issues otherwise every country will face this financial stability issue which might affect the basic fundamentals of any economy so that's why the survey says that and there's a necessity of common approach to regulate the crypto ecosystem right so this is all about the capital market next the survey talks about it gives some basic detail about the insurance market so insurance market is also very important so insurance market right so insurance market is also very important right so survey basically uses two terms which is important for our film's perspective but the survey uses insurance penetration and the second the survey uses insurance density so these are the two terms which is important from our film's perspective what is insurance penetration so insurance penetration is basically the insurance premium to GDP but the next time a total insurance premium it not pay kya jata hai divided by GDP so insurance premium divided by GDP so that is that has been increasing and now it has increased to 4.2% of the GDP so insurance penetration ka matta premium by GDP total sare loko itna insurance premium dette hai life insurance or non-life insurance ab mila ke and a vehicle insurance phone insurance laptop insurance life insurance every insurance ka sabka premium amount milado divide kardo GDP so that is known as insurance penetration and insurance density is equal to insurance premium by population total premium hai kithna ek saal mein usko divide kardo total country ka population so that has also increased from US dollar 11.1 to US dollar 19 1 in 2021 that means the insurance premium divide by population has also increased isi liye abhi jo India mein pehle kya tha ki most of the people were unaware about the insurance sector bohot kam tha awareness and that's why none of the people were interested in going for life insurance or for vehicle insurance but now with more and more awareness and better product delivery by the government and the life insurance and the other insurance companies are more and more people have been investing or have been depositing or have been coming another insurance sector right so important government initiatives people more awareness about health security post the COVID-19 strong demographic factors that means more and more people are shift are in the younger age population and they're much more aware about the importance of insurance conducive regulatory environment product innovations and a vibrant distribution channels are supporting the insurance markets is that it is a survey has given a diagram he how the insurance penetration is increasing how the insurance density is increasing and these are the different schemes which has been brought by the government is why I have written it over here you can go and check more about these things because you have a brief description here but in exam these schemes might be asked what is the number Aishmaan Bharat Yojana what is pre-empts Raksha Bhima Yojana Jeevan Jyoti Bhima Yojana Pasal Bhima Yojana so you can go and check on the Google on the government's website what are these schemes who are covered how much insurance benefit is being provided what is the premium with someone has to pay which ministry has brought these schemes so you can go and check it on the Internet then similarly pension sector pension sector is also growing at a very good pace survey talks about pension Q Chahi Amrita what why we need a pension it is important because in old age you're not that productive so you need a basic social security at one point of age the rise of nuclear family so most of the old people or most of the parents are living alone and their child is working in cities so that's why you again need a good pension so that you are financially independent rise in the cost of living increase longevity so now more and more people are the life expectancy has increased in India because of the better health infrastructure assured monthly income ensures a dignified life in a gold age it is also just it is also important to to live a life of dignity that is why it also ensures a dignified life in an old age then what are the various pension schemes so pension schemes again up school that can you Google to check her now because survey may is of schemes mentioned up to that's why it again becomes important for your freedom so you go to Google to check what are these schemes and what are the provisions of it so first we have National Social Assistance Program this is a flagship program in which there are a lot of sub schemes like our national old age pension scheme Indira Gandhi national window pension scheme Indira Gandhi national disability pension schemes so these are the schemes insurance schemes which is basically for the poor underprivileged people and the total beneficiary of all these schemes collectively is 4.7 crore then you know in 2007 we have a national pension system NPS now what is NPS and OPS look at what is this so first is the old pension system which you already know that the government employees used to have it was the old pension system so old pension system what used to be that you will get a you will get a fixed pension you will get a fixed pension of 50 percent of your last drawn salary of your last drawn salary so suppose you are earning one lakh before retirement to retirement before you earn just one lakh so how much you will get after retirement you will be getting 50,000 that is fixed that is fixed you will be getting 50% of what you were doing just before the retirement and also you will be getting a lump sum amount lump sum amount lump sum amount okay so 50,000 you will get if you are earning one lakh and also you will be getting a fixed amount at the age of retirement and the contribution the contribution to this pension amount the contribution to this pension amount was entirely was entirely gone by the government okay that means the pension will be spent because at the end you are getting 50% of your last drawn salary and also you are getting a fixed amount at the time of retirement so who is going to pay for that thing you are not going to pay anything the entire purpose the entire fund which is required has to be paid by the government has to be paid by the government so this was the basic problem this is why the government has to spend huge amount of money on the pension and because of that the government is not able to have the resources to spend on capital infrastructure right so that is why the scheme has now been changed so two things is important Pahila it is fixed how much you will be getting 50% of your last drawn salary it is fixed there is no if and buts and the second the entire cost for this thing was borne by the government now what is new pension scheme which has been brought by which has been brought in 2004 so initially it was only for the government employees but in 2009 it has been extended to all people within 80 to 60 years of age Sare Lok ke liye whether they belong to unorganized sector also it does not matter but now any people can get itself or self or himself registered under the new pension scheme in 2000 which has been brought in 2004 abhisme kya hain yaha pe your pension is not fixed your pension amount is your pension amount is not fixed apka pension amount is not fixed thing in suppose this is the your this is your nps account this is your nps account and sub and it may apko kuch payas ek contribute karne parenge this nps account may apko kuch payas ek contribute karne parenge hain le kya tha apko kuch contribute ne karna tha because sara kharch korn kar rai government but yaha pe you have to also contribute to your pension corpus so you have to pay 10% of your salary of your salary jobi salvi apka you're earning 1 lakh you're earning 2 lakh you're earning 1 crore jobi apka salvi out of that 10% you have to contribute to the nps account and 14% of that amount will be paid by the government so jitna apdoge uska 14% government we add karegi nps so yaha pe dik rahe both the government and public both have to contribute to their pension so that's why apya kya hua government ka kharch kafi kum ho kya dik hai so that is one major improvement ki now the governments ahele kya tha entire amount was being borne by the government now the government is also paying and also the that person who will get the pension that person has to also pay some amount of money into its nps corpus now this nps account me suppose you have deposited 20 lakhs apka total amount 10 saal bhi saal jitna bhi kaam kya ho apne 20 lakhs accumulated ho gya hai to ye jo 20 lakh hai this is being invested this is being invested by PFRDA ek regulatory agency hai iska full form hai apka a pension fund regulatory pension fund regulatory and developmental authority so ap kya ho gha this particular regulatory body has appointed some has appointments appointed some investment professionals investment professionals and these investment professionals have to invest this 20 lakh into different different kind of market share market bond market any other market to ye jo 20 lakh hai apka total accumulated amount ye apka different different market me invest ho gha and now at the time of retirement now at the time of your retirement this 20 lakh jo apka poora iski through aya tha this 20 lakh might become 40 lakh because of the right investment and these are the very smart sophisticated investment professionals in ka yehi kaam hai to ye apke 20 lakh go barhake 40 lakh us 40 lakhs me se apko you will be getting you have to purchase a annuity at the time of your retirement ye 20 lakh convert ho jata because of investment it doubles and now your total corpus is 40 lakh ap is 40 lakh me se apko kuch lump sum amount lena parega for example you took 20 lakh of lump sum amount and baki 20 lakh ka you have purchased an annuity annuity ka matlab ki every month you will be getting sum amount of money so 20 lakh ka different different companies hote hain wo us tari ke se annuity apko sell karte hain so you can buy that annuity from any you know company which has been empaneled by the government ap us ek annuity kharit sakte ho jiske andar apko every month a fixed salary bilega fixed pension bilega ticket every month you will be getting some fixed pension you have to purchase that annuity so ye hain nps so nps mein doh important changes hai pehla ki yaha pe the entire cost is not won by government so that is why it is physically beneficial it is physically it is fiscal sound second pension amount is not fixed it is not 50% of your last non-salary it depends upon it depends upon how much you have invested in this corpus what is the return because these money are being invested aur ye hosakta 20 lakh kalko 50 lakh hojai ya 20 lakh 30 lakh hojai kam toh ho gani it will be 20 lakhs might convert to 60 lakh who knows that depends upon how effectively you are investing that money so that is why the return which you will be getting is also not fixed so two changes first yaha pe the government is not only contributing government as well as the person they both are contributing and second the return which was an OPS fixed at 50% of your last non-salary in this it is not fixed right it is depending upon the market right so this is the thing which they have talked about this right so ye ap dekhle na the same thing is written over here yaha pe OPS aur NPS ke beech ma have given the comparison so whatever we have discussed it is written over here similarly utter pension yojna has also been brought by the government and this is basically for the underprivileged people how they they can be brought under the social security net how they can be brought under this pension sector so that's why this scheme has been brought again you have to go to the Google and check out which ministry and other things as responsible for that and overall the pension sector is is bound to grow because more and more people are getting you know awareness about the pension sector and hence their awareness is also increased and the income is also going to increase so more and more people will be contributing to this thing so that is how the survey concludes by giving a broad overview about the pension sector so this is the fourth chapter we have completed in the most comprehensive manner so that you are able to answer every question from your problems as well as from means perspective right so you have to understand what a standing deposit facility you have to understand what is insurance penetration insurance premium waters capital requested issue because until unless your concepts are not clear then you will not be able to answer any question in your exam so again revise this thing watch the lecture again if you have any problem and if you have any doubt you can put your question in the comment box so that I can address it whenever I see those comment right so I hope you enjoy the lecture again we will come with the chapter number five in the coming days so stay tuned to the channel if you 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