Financial System = One liners

Jay Shree Ram! Here I am sharing one liners on Financial system. Please note them down.

* Van Horne defined the financial system as the purpose of financial markets to allocate savings efficiently in an economy to ultimate users either for investment in real assets or for consumption.

* Christy has opined that the objective of the financial system is to "supply funds to various sectors and activities of the economy in ways that promote the fullest possible utilization of resources without the destabilizing consequence of price level changes or unnecessary interference with individual desires."

* According to Robinson, the primary function of the system is "to provide a link between savings and investment for the creation of new wealth and to permit portfolio adjustment in the composition of the existing wealth."

* It may be said that the primary function of the financial system is the mobilisation of savings, their distribution for industrial investment and stimulating capital formation to accelerate the process of economic growth.

* Goldsmith said that " A case for the hypothesis that the separation of the functions of savings and investment which is made possible by the introduction of financial instruments as well as enlargement of the range of financial assets which follows from the creation of financial institutions increase the efficiency of investments and raise the ratio of capital formation to national production and financial activities and through these two channels increase the rate of growth"

* The financial system has been identified as the most catalyzing agent for growth of the economy, making it one of the key inputs of development.

* The Indian financial system is broadly classified into two broad groups: (i) Organised sector and (ii) unorganised sector.

* Financial institutions sell their services to households, businesses and government. They are the users of the financial services.

* With around two-third share in the total assets in the financial system, banks play an important role.

* The organised financial system comprises the following sub-systems: 1. Banking system 2. Cooperative system 3. Development Banking system (i) Public sector (ii) Private sector 4.Money markets and 5. Financial companies/institutions.

* Unorganised Financial System is not directly amenable to control by the Reserve Bank of India (RBI).

* There are a lots of financial companies, investment companies, chit funds etc., which are also not regulated by the RBI or the government in a systematic manner.

* Hundi were used to finance local trade as well as trade between port towns and inland centers of production.

* Indigenous bankers combined banking with other activities, such as the goldsmiths, merchants, and shippers of eighteenth and nineteenth century Europe had done.

* Indigenous bankers often endorsed hundis issued by traders and sometimes provided personal guarantees for loans from commercial banks.

* Indigenous banking was based on an elaborate and extensive network of personal relations that overcame the problems of dealing with a large number of customers.

* Rural financial system has been evolved over a period of time from the year 1904, when the first Primary Agricultural Credit Society was organized, by accepting and implementing important recommendations of expert committees appointed by the Government of India from time to time.

* The primary cooperative credit society is an association of borrowers and non-borrowers residing in a particular locality.

* The funds of the primary cooperative credit society are derived from the share capital and deposits of members and loans from Central Co-operative banks.

* Money market is concerned with the supply and the demand for investible funds.

* Money market provides a mechanism by which short-term funds are lent out and borrowed; it is through this market that a large part of the financial transactions of a country are cleared.

* The money market is generally expected to perform following three broad functions: (i) To provide an equilibrating mechanism to even out demand for and supply of short term funds. (ii) To provide a focal point for Central bank intervention for influencing liquidity and general level of interest rates in the economy. (iii) To provide reasonable access to providers and users of short-term funds to fulfill their borrowing and investment requirements at an efficient market clearing price.

* In the area of capital market, the Securities and Exchange Board of India (SEBI) was set up in 1992 to protect the interests of investors in securities and to promote development and regulation of the securities market.

* SEBI has issued guidelines for primary markets, stipulating access to capital market to improve the quality of public issues, allotment of shares, private placement, book building, takeover of companies and venture capital.

* In the area of secondary markets, measures to control volatility and transparency in dealings by modifying the badla system, laying down insider regulations to protect integrity of markets, uniform settlement, introduction of screen-based online trading, dematerialising shares by setting up depositories and trading in derivative securities (stock index futures).

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Reserve Bank of India - One liners

 Jay Shree Ram! Welcome to one liners related to Reserve Bank of India.

1) Royal Commission on Indian Currency and Finance – also known as the Hilton-Young Commission – recommended the creation of a central bank for India to separate the control of currency and credit from the Government and to augment banking facilities throughout the country.

2) The Reserve Bank of India Act of 1934 established the Reserve Bank and set in motion a series of actions culminating in the start of operations in 1935.

3) In 1933, The White Paper on Indian Constitutional Reforms recommended the creation of a Reserve Bank.

4) The Reserve Bank commenced operations as India’s central bank on April 1, 1935.

5) RBI was operating as a private shareholders’ bank during its initial working years.

6) RBI was having  paid up capital of rupees five crore in 1935.

7) In 1942, The Reserve Bank ceased to be the currency issuing authority of Burma (now Myanmar).

8) In 1947, The Reserve Bank stopped acting as banker to the Government of Burma.

9) In 1948, The Reserve Bank stopped rendering central banking services to Pakistan.

10) In 1949, The Government of India nationalised the Reserve Bank under the Reserve Bank (Transfer of Public Ownership) Act, 1948.

11) The functions of the Reserve Bank today can be categorised as a) Monetary policy b) Regulation and supervision of the banking and non-banking financial institutions, including credit information companies c) Regulation of money, forex and government securities markets as also certain financial derivatives d) Debt and cash management for Central and State Governments e) Management of foreign exchange reserves f) Foreign exchange management—current and capital account management g) Banker to banks h) Banker to the Central and State Governments i) Oversight of the payment and settlement systems j) Currency management k) Developmental role l) Research and statistics

12) As per preamble of RBI Act, 1934 the objectives of RBI are a) to regulate the issue of Bank notes, b) to keep the reserves for securing monetary stability in country, c) to operate the currency and credit system in country.

13) The Reserve Bank designs and implements the regulatory policy framework for banking and non-banking financial institutions with the aim of providing people access to the banking system, protecting depositors’ interest, and maintaining the overall health of the financial system.

14) Before 1947, the Reserve Bank carried out the regulation of foreign exchange transactions under the Defence of India Rules, 1939

15) After 1947, the Reserve Bank carried out the regulation of foreign exchange transactions under the Foreign Exchange Regulation Act of 1947.

16) The Central Board of Directors is at the top of the Reserve Bank’s organisational structure.

17) The Central Board of Directors of RBI is appointed by the Government under the provisions of the Reserve Bank of India Act, 1934.

18) The Governor is the Reserve Bank’s chief executive.

19) The Central Government nominates fourteen Directors on the Central Board, including one Director each from the four Local Boards. The other ten Directors represent different sectors of the economy, such as, agriculture, industry, trade, and professions.

20) All these appointments of directors of RBI are made for a period of four years.

21) The Government also nominates one Government official as a Director representing the Government, who is usually the Finance Secretary to the Government of India. There is no specific period of appointment of this director post.

22)  Reserve Bank Governor and a maximum of four Deputy Governors are also ex officio Directors on the Central Board of RBI.

23) The Reserve Bank also has four Local Boards, constituted by the Central Government under the RBI Act, one each for the Western, Eastern, Northern and Southern areas of the country, which are located in Mumbai, Kolkata, New Delhi and Chennai.

24)  Each of these Boards has five members appointed by the Central Government for a term of four years.

25) Mumbai has the Central office of Head office of RBI.

26) The Board for Financial Supervision (BFS) was constituted in November 1994 under Section 58 of the RBI Act.

27) Board for Financial Supervision (BFS) undertakes integrated supervision of banks, financial institutions and non-banking financial companies (including Primary Dealers).

28) The Reserve Bank Governor is the Chairman of the BFS.

29) One Deputy Governor, usually the Deputy Governor in-charge of banking regulation and supervision, is nominated as the Vice-Chairperson of BFS

30) The BFS has constituted an Audit Sub-Committee under the BFS Regulations to assist the Board in improving the quality of the statutory audit and internal audit in banks and financial institutions.

31) The Board for Regulation and Supervision of Payment and Settlement Systems provides an oversight and direction for policy initiatives on payment and settlement systems within the country.

32) The BPSS lays down policies for regulation and supervision of payment and settlement systems, sets standards for existing and future systems, authorises such systems, and lays down criteria for their membership.

33) The Deposit Insurance Corporation and Credit Guarantee Corporation of India were merged and the present Deposit Insurance and Credit Guarantee Corporation (DICGC) came into existence on July 15, 1978.

34) Deposit Insurance and Credit Guarantee Corporation (DICGC), established under the DICGC Act 1961, is one of the wholly owned subsidiaries of the Reserve Bank of India.

35) The DICGC insures all deposits (such as savings, fixed, current, and recurring deposits) with eligible banks except the following: (i) Deposits of foreign Governments; (ii) Deposits of Central/State Governments; (iii) Inter-bank deposits; (iv) Deposits of the State Land Development Banks with the State cooperative bank; (v) Any amount due on account of any deposit received outside India; (vi) Any amount, which has been specifically exempted by the corporation with the previous approval of Reserve Bank of India.

36) Every eligible bank depositor is insured upto a maximum of Rs.1,00,000 (Rupees One Lakh) for both principal and interest amount held by him.

37) National Housing Bank was set up on July 9, 1988 under the National Housing Bank Act, 1987.

38) National Housing Bank is  wholly-owned subsidiary of the Reserve Bank to act as an apex level institution for housing.

39)  NHB has been established to achieve, among other things, the following objectives: * To promote a sound, healthy, viable and cost effective housing finance system to all segments of the population and to integrate the housing finance system with the overall financial system. * To promote a network of dedicated housing finance institutions to adequately serve various regions and different income groups. * To augment resources for the sector and channelise them for housing. * To make housing credit more affordable. * To regulate the activities of housing finance companies based on regulatory and supervisory authority derived under the Act. * To encourage augmentation of supply of buildable land and also building materials for housing and to upgrade the housing stock in the country. * To encourage public agencies to emerge as facilitators and suppliers of serviced land for housing.

40) The Reserve Bank of India as the central bank of the country, is at the head of the group of banks.

41) 

Judiciary in Bharat

Jay Shree Ram!

A notable feature of the Constitution is that it accords a dignified and crucial position to the judiciary. Well-ordered and well-regulated judicial machinery had been introduced in the country with the Supreme Court at the apex. The jurisdiction of the Supreme Court is very broadly worded. It is a general court of appeal from the High Court, is the ultimate arbiter in all-constitutional matters and enjoys an advisory jurisdiction. It can hear appears from any court or tribunal in the country and can issue writ for enforcing the Fundamental Rights. There is thus a good deal of truth in the assertion that the highest court in any other federation. There is a High Court in each State.

The High Courts have wide jurisdiction and have been constituted into important instruments of justice. The most signification aspect of their jurisdiction is the power to issue writs.

The judiciary in India has been assigned role to play. It has to dispense justice not only between one person and another, but also between the state and the citizens. It interprets the constitution and acts as its protector and guardian by keeping all authorities legislative, executive, administrative, judicial and quasi-judicial-within bounds. The judiciary is entitled to scrutinize any governmental action in order to assess whether or to it conforms to the constitution and the valid laws made there under. The judiciary has powers to protect people’s Fundamental Rights from any unreasonable encroachment by any organ of the state. The judiciary supervises the administrative process in the country, and acts as the balance wheel of federalism by settling disputes between the center and the states or among the state inter se.

India’s Constitution is of the federal type. It established a dual polity, a two tier governmental system with the Central Government at one level and the state Governments at the other. The Constitution marks off the sphere of action of each level of government by devising an elaborate scheme of distribution of legislative, administrative, and financial powers between the Centre and the States. A government is entitled to act within its assigned field and cannot go out of it, or encroach on the field assigned to the other government. Thus the Constitution of India is having significant effect on laws including administrative law. It is under this fundamental laws are made and executed, all governmental authorities and the validity of their functioning adjudged. No legislature can make a law and no governmental agency can act, contrary to the constitution no act, executive, legislative, judicial or quasi-judicial, of any administrative agency can stand if contrary to the constitution. The constitution thus conditions the whole government process in the country. The judiciary is obligated to see any governmental organ does not violate the provisions of the constitution. This function of the judiciary entitles it to be called as guardian of the constitution.

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Adult Suffrage

Jay Shree Ram!

India has adopted adult suffrage as a basis of elections to the Lok Sabha and the State Legislative Assemblies. Every citizen, male or female, who has reached the age of 18 years or over, has a right to vote without any discrimination. It was indeed a very bold step on the part of the constitution-makers to adopt adult suffrage in a country of teeming millions of illiterate people, but they did so for some very sound reasons. If democracy is to be broad-based and the system of government is to have the ultimate sanction of the people as a whole, in a country like India where large masses of people are poor an illiterate, the introduction of any property or educational qualification for exercising the franchise would have amounted to a negation of democratic principles. Any such qualification would have disenfranchised a large number of depressed people. Further, it cannot be assumed that a person with a bare elementary education is in a better position to exercise the franchise are and choose his representatives accordingly.

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Fundamental Rights

Jay Shree Ram!

India is a country of religions. There exist multifarious religious groups in the country but, in spite of this, the Constitution stands for a secular state of India. The essential basis of the Indian Constitution is that all citizens are equal, and that the religion of a citizen is entirely irrelevant in the matter of his fundamental rights. The Constitution answers equal freedom for all religions and provide that the religion of the citizen has nothing to do in socio-economic matters.

The Indian Constitution has a chapter on Fundamental Rights and thus guarantees to the people certain basic rights and freedoms, such as, inter alia, equal protection of laws, freedom of speech and expression, freedom of worship and religion, Freedom of assembly and association, freedom to move freely and to reside and settle anywhere in India, freedom to follow any occupation, trade or business, freedom of person, freedom against double jeopardy and against export facto laws. Untouchables, the age-old scourge afflicting the Hindu society, have been formally abolished. The people can claim their Fundamental Rights against the state subject to some restrictions, which the state can impose in the interests of social control. These restrictions on Fundamental Rights are expressly mentioned in the Constitution itself and, therefore, these rights can be qualified or a bridged only to the extent laid down. These rights, in substance, constitute inhibitions on the legislative and executive organs of the state. No law or executive action infringing a Fundamental Right can be regarded as valid. In this way, the Constitution demarcates an area of individual freedom and liberty wherein government cannot interfere. The judiciary ensures an effective and speedy enforcement of these rights. Since the inauguration of the Constitution, many significant legal battles have been fought in the area of Fundamental Rights and, thus, a mass of interesting case law has come into being in this area.

The Indian society lacks homogeneity, as there exist differences of religion, language, culture, etc. There are sections of people who are comparatively weaker than others-economically, socially and culturally and their lot can be ameliorated only when the state makes a special effort to that end. Mutual suspicion and distrust exist between various religious and linguistic groups. To promote a sense of security among the minorities, to ameliorate the conditions of the depressed and backward classes, to make them useful members of society, to weld the diverse elements into one national and political stream, the Constitution contains a liberal scheme of safeguards to minorities, backward classes and scheduled castes. Provisions have thus been made, inter alia, to reserve seats in the State Legislatures and Lok Sabha and to make reservations services, for some of these groups, to promote the welfare of the depressed and backward classes and to protect the languages and culture of the minorities.

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Preamble of Constitution of Bharat

 Jay Shree Ram!

The preamble to the Constitution declares India to be a Sovereign Democratic Republic. The term ‘Sovereign’ denotes that India is subject to no external authority. The term ‘democratic’ signifies that India has a parliamentary form of government, which means a government responsible to an elected legislature. The preamble to the Constitution enunciates the great objectives and the socio-economic goals for the achievement of which the Indian Constitution has been established. These are: to secure to all citizens of India social, economic and political justice; to secure to all Indian citizens liberty of thought, expression, belief, faith and worship; to secure to them equality of status and opportunity, and to promote among them fraternity so as to secure the dignity of the Individual and the unity of the nation.

The Indian Constitution has been conceived and drafted in the mid-twentieth century-an era when the concept of social welfare state is predominant. It is thus pervaded with the modern outlook regarding the objectives and functions of the state. It embodies a distinct philosophy of government, and explicitly declares that India will be organized as a social welfare state, i.e., a state that renders social services to the people and promotes their general welfare. In the formulations and decelerations of the social objectives contained in the preamble, one can clearly discern the impact of the modern political philosophy, which regards the state as an organ to secure the good and welfare of the people.

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Training package on administrative law

Constitutional value of administrative law

Jay Shree Ram!

Constitutional value of administrative law: -

Thus the growth of administrative law is to be attributed to a change of philosophy as to the role and function of state. The shifting of gears from laissez faire state to social welfare state has resulted in change of role of the state. This trend may be illustrated very forcefully by reference to the position in India. Before 1947, India was a police state. The ruling foreign power was primarily interested in strengthening its own domination; the administrative machinery was used mainly with the object in view and the civil service came to be designated as the “steel frame”. The state did not concern itself much with the welfare of the people. But all this changed with the advent of independence with the philosophy in the Indian constitution the preamble to the constitution enunciates the great objectives and the socioeconomic goals for the achievement of which the Indian constitution has been conceived and drafted in the mid-20th century an era when the concept of social welfare state was predominant. It is thus pervaded with the modern outlook regarding the objectives and functions of the state. It embodies a distinct philosophy which regards the state as on organ to secure good and welfare of the people this concept of state is further strengthened by the Directive Principles of state policy which set out the economic, social and political goals of Indian constitutional system. These directives confer certain non-justiceable rights on the people, and place the government under an obligation to achieve and maximize social welfare and basic social values of life education, employment, health etc. In consonance with the modern beliefs of man, the Indian constitution sets up machinery to achieve the goal of economic democracy along with political democracy, for the latter would be meaningless without former.

Therefore, the attainment of socio-economic justice being a conscious goal of state policy, there is a vast and inevitable increase in the frequency with which ordinary citizens come into relationship of direct encounter with state power-holder. The Administrative law is an important weapon for bringing about harmony between power and justice. The basic law of the land i.e. the constitution governs the administrators.

Provisions of COI for administrative law: -

Administrative law essentially deals with location of power and the limitations thereupon. Since both of these aspects are governed by the constitution, we shall survey the provisions of the constitution, which act as sources of limitations upon the power of the state. This brief outline of the Indian constitution will serve the purpose of providing a proper perspective for the study of administrative law.

India’s Constitution is a very lengthy, elaborate and detailed document. It consists of 470 articles in 25 parts, 12 schedules and 5 appendices. It is probably the longest of the organic law now extant in the world. Several reasons have contributed to the prolixity of the Indian Constitution.

Firstly, the Constitution deals with the organization and structure not only of the central Government but also of the states.

Secondly, in a federal constitution, Center-State relationship is a matter of crucial importance. While other federal constitutions have only skeletal provisions on this matter the Indian Constitution has detailed norms.

Thirdly, the Constitution has reduced to writing many unwritten conventions of the British Constitution as for example, the principle of collective responsibility of the Ministers, parliamentary procedure etc.

Fourthly, there exist various communities and groups in India. To remove mutual distrust among them, it was felt necessary to include in the Constitution detailed provisions on Fundamental Rights, safeguards to minorities, Scheduled tribes scheduled castes and backward classes.

Fifthly, to promote the social welfare concept, on which the state of India is to be based, the constitution includes Directive Principles of State Policy.

Lastly, the Constitution contains not only the fundamental principles of governance but also many administrative details, such as the provisions regarding citizenship, official languages, government services, electoral machinery etc.

In other constitutions, these are usually left to be regulated by the ordinary law of the land. The framers of the Indian Constitution however felt that unless these provisions were contained in the Constitution, an infant democracy might find itself in difficulties, and the smooth and efficient working of the Constitution and the democratic process in the country might be jeopardized. The form of administration has a close relation with the form of the Constitution and the former must be appropriate to the latter. It is quite possible to pervert the constitutional mechanism, without changing its form, by merely changing the form of the administration and making it inconsistent with, and opposed to, the spirit of the constitution. Since India was emerging as an independent country after a long spell of foreign rule, the country lacked democratic values. The constitution-makers therefore thought it prudent not to take unnecessary risks, and to incorporate in the constitution itself in the form of administration as well, instead of leaving it to the legislature, so that the whole mechanism may become viable.

Today in India, the Administrative process has grown so much that it will not be out of place to say that today we are not governed but administered. It may be pointed out that the constitutional law deals with fundamentals while administrative with details. The learned author, Sh. I.P. Messey, has rightly pointed out, whatever may be the arguments and counter arguments, the fact remains that the administrative law is recognized as separate, independent branch of legal discipline,. Though at times the disciplines of constitutional law and administrative law may over lap. Further clarifying the point he said the correct position seems to be that if one draws two circles of administrative law and constitutional law at a certain place they may over lap and this area may termed as watershed in administrative law.

In India, in the Watershed one can include the whole control mechanism provided in the constitution for the control of the administrative authorities that is article 32, 226,136,300 and 311.

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Administrative law

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