Mrunal Sir's Economy 2020 Batch - Handout PDF

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15🐮📈🐻 SEBI-SHARE MARKET (PILLAR#1-C)

MCQs from SEBI/ Share market /Financial Market / Companies Act Topic in UPSC Prelims-
2014 (1 MCQ), 2015 (0 MCQ), 2016 (2 MCQs), 2017 (0 MCQ), 2018 (1 MCQ), 2019 (1 MCQ).
A player should keep in mind the cost : benefit accordingly.
15.1 🗃SECURITIES (प्रतिभतू ि)

A ‘Security’ means a certificate/document indicating that its holder is eligible to receive a
certain amount of money at a particular time. This could be a…
⚖️Equity: Share certificate 🔪Debt (ऋण): Bond / Debenture

Holder gets dividend from the profits of the Holder gets interest & principal irrespective
company. If no profit, then no dividend. of whether company makes profit or not.
Company’s owners, proprietors (मालिक) creditors of the company (िेनदार).
Have _ _ _ _ claim during liquidation _ _ _ _ claim.
Attractive in boom period Attractive in slowdown period
15.2 🗃 🛒FINANCIAL / SECURITIES MARKET: MEANING AND TYPES

It is the place where buying and selling of securities takes place.
Classifi. Market Subtypes

Tenure: 1. _ _ _ _ _ Market (<1 year maturity) मद्र
ु ा बाजार
(अवधि)
2. _ _ _ _ _ Market (1 year/> maturity) पज
ूं ी बाजार
Freshness 1. _ _ _ _ _ _ _ _ _ Market (where new securities are issued for the first
प्राथमिक time). Helps a company /government to connect with the investor. It has
एवं no separate physical existence but classified as such for economic
मितीयक analysis.
बाजार 2. _ _ _ _ _ _ _ _ _ Market (where the old securities are resold). It has
physical existence such as Bombay Stock Exchange (BSE) at Dalal
Street, Mumbai. Provides liquidity & confidence to investors to buy new
securities in Primary Market. (compared to a scenario if there was no
market to resale used cars- तो कम लोग नई कार खरीदने जाएंग.े )
Settlement 1. Future Market: Where parties write contract today to buy/sell something
(ननपटान) at specific price on a future date
2. Spot Market: if bought & sold for immediate delivery.
Asset - Depending on what asset is traded, market can be divided into Bond
(पररसूंपत्ति) (Debt) market, Share (Equity) market, Gilt-Edged Securities Market,
Foreign Currency Market, Commodity Market etc.
- if there was a supermall where all these products were available in one
place it will be called “_ _ _ _ _ _ _ _ Exchange”. SEBI permitted BSE &
NSE to launch such thing (2018).
Mrunal’s Economy Pillar#1C: SEBI/Share market→ Page 67
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15.3 🔪🗃 DEBT INSTRUMENTS (ऋण उपकरण)

Creditors to company. First claim during liquidation. Assured interest irrespective of profit of
company. These debt instruments can be classified into short-term vs long term.
15.3.1 🔪🗃⏰Short term debt instruments (लघु अवधि ऋण उपकरण )

- Tenure = less than 1 year. Usually ‘unsecured’ because not backed by any asset.
- Usually sold at discount and re-purchased at _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _. The
difference between these two prices is the interest earned by investor. Another synonym
for this process: “rediscount the bills.”
- They’re traded at Money Market and are (usually) ‘negotiable & transferable’ in nature
i.e. lender can sell to third party, and third party can demand money from borrower.
- Near Money = Asset that is highly liquid = can be readily converted into cash.
Table 1: Further sub-division based on who is the Borrower?
Borrower 🔪🗃⏰ Short term debt instrument

Govt. 1. State govt’s treasury bills (14 days). But stopped since 2001.
2. Union govt’s treasury bills (91, 182 and 364 days) & Cash Management
bills (CMB: upto 90 days, started in 2009).
3. WMA (ways and means advances): it’s the mechanism through which _
_ _ _ lends money to Govt, for temporary short term needs when there
is mismatch in receipt and expenditure of Govt. This WMA is not
counted in Fiscal Deficit formula (More in Pillar#2: Budget).
Company - Bill of Exchange, Hundi, Commercial Papers, Promissory Notes.
- Side note: Currency Note is a ‘Promissory Note’ issued by RBI
Governor however, he’s not bound to pay any interest. Just promises to
exchange it with other currency notes and coins of equal face value.
Merchant Commercial Bill.
to bank
Banks / Certificate of Deposits (जमा प्रमाण पत्र).
NBFC

Call It’s the interest rate when Financial Intermediaries (Banks/NonBanks)

Money borrow for ONE DAY among themselves.
Notice Same as above but for 2 to 14 days.
Money
Repo Repo and Reverse Repo- already covered with Monetary Policy.
TReDS Trade Receivables Electronic Discounting System (TReDS): an online
mechanism. MSME sellers pledge their (unpaid) invoices made to
corporates → MSME receive (short-term) finance from Banks and NBFCs.
(Full) Budget-2019: we’ll make amendments in Factoring Regulation Act,
2011 to allow all NBFCs to directly participate on the TReDS platform.
MCQ. Find Correct statements:(Asked in UPSC-Pre-2018)
1. The Reserve Bank of India manages and services Government of India Securities, but
not any State Government Securities.
2. Treasury bills are issued by the Government of India and there are no treasury bills
issued by the State Governments.
3. Treasury bills offer are issued at a discount from the par value.
Ans Codes: (a) 1 and 2 only (b) 3 only (c) 2 and 3 only (d) 1, 2 and 3
MCQ. Which of the following is /are example (s) of ‘Near Money’? [UPSC-CDS-2016-I]
1. Treasury Bill 2. Credit Card 3. Saving accounts 4. Money Market Instruments
Answer codes: (a) 1 only (b) 2 only (c) 1, 2 and 3 (d) 1, 3 and 4
15.4 🔪🗃🗓 LONG TERM DEBT INSTRUMENTS (दीर्ध-अवधर् ऋण उपकरण )

Tenure = 1 year/>. Further sub-division based on who is the Borrower?
15.4.1 🕯Colonial era Govt. to borrow money

1. Coupon Bonds: Contain detachable coupons- presented to the issuer to claim the
interest.
2. Zero Coupon Bonds: Are sold on discount and repurchased at face value, do not have
any coupons.
3. Bearer Bonds: Not linked to a PAN card, Aadhar card or passport, voter card or social
security number. Anyone who presents it to the issuer, will get interest and principal.
Usually issued during the war time.
15.4.2 💡Modern day Government to borrow money

 Government securities, Dated securities, Sovereign bonds (सूंप्रभु बाूंड), Kisan Vikas
Patra etc. (more in Financial inclusion lecture)
 Also called Gilt Edged securities (उच्च / अग्रिम दजे की प्रनिभनिया) because repayment
is assured by Government. (But then, they give lower interest rate because of low risk to
investor).
 Global Credit Rating Agencies gives ‘rating’ to sovereign bonds. “_ _ _ ” is best and
highest given to US Treasury Bonds. India’s rating is ~“BAA” = moderate risk of default.
 World’s top three credit rating agencies- Fitch, Moody’s and Standard & Poor have pro-
US/EU allegiance. Critics allege these 3 agencies do not give adequate upgradation to
India, China, Russia despite the economic growth. So, India has proposed the _ _ _ group
to set up its own independent credit rating agency.

15.4.3 Modern day Govt. to curb Gold Consumption

Real Interest Rate (वास्ित्तवक ब्याज दर) = Nominal (नालमि) Interest minus Inflation. When
Real Interest is negative, purchasing power _ _ _ _ _ despite increase in money quantity in
bank account. Then people prefer to park money in gold/real estate- which is not very
beneficial to economy. So..
15.4.3.1 🍅🔪🗃🗓 Inflation Indexed Bonds (IIB-मुद्रास्फीति सूचकाांककि बाांड)

- Launched in 1997, 2013, 2018 to provide positive _ _ _ _ interest rate to household,
thereby reducing the Gold consumption & Current account Deficit (CAD) & weakening of
rupee against dollar (else expensive crude->petrol, diesel inflation).
- e.g. Inflation Indexed National Savings Securities-Cumulative (IINSS-C) with Interest Rate
= CPI + 1.5% [and Principal also protected against inflation.]
15.4.3.2 🥇🔪🗃🗓 Sovereign Gold Bond (2015: सांप्रभु स्वर्ण बाांड)

- They’re denominated in gold grams. Annual interest 2.5-2.75% (depending on which
‘batch’ you bought), and after 8 years you get the amount equivalent to prevailing gold
prices at that time.
- Benefit / challenges ? = Pillar#3, along with Gold Monetization Scheme.
15.4.4 🔪🗃🗓👨🏼‍✈️ Long term debt instruments by Companies

- Bonds (British Term), Debentures (American Term): Internal difference not important.
- If the company has high risk of default on repayment, the Credit Rating Company will
mark it as _ _ _ Bonds (“BB to D” Grade) e.g. IL&FS. Such company will have to offer a
very high interest rate when issuing bonds next time.
- Redeemable Bonds (मोच्च): will repay regular interest and will return principal on
maturity. Irredeemable Bonds (अमोच्च): will pay only interest but no principal returned.
Sometimes issued by PSB to meet BASEL-capital requirements. Although in reality they
offer ‘redemption’ after 5-10 years when holder has ‘option’ to redeem principal & exit.
- Hybrid instruments: Issued as “Bond” but can be converted into Share. E.g. Optionally
Fully Convertible Debentures (OFCD).
15.4.5 🔪🗃🗓Long Term Debt Instruments: Other issuers

Issuer Objective? उद्दे श्य?
ULB Urban Local Bodies issue Municipal bonds to borrow money from public.
- 2014- BRICS Nations had setup the New Development Bank (NDB, HQ:
BRICS Bond Shanghai, China). Later it launched BRICS Bonds to mobilize money for
its infrastructure loans. Denomination: USD
- 2018: launched world’s first Blockchain Offered New Debt Instrument
called Bond-i.
- Sold in Australia using _ _ _ _ _ _ _ blockchain technology.
World Bank
- Local Manager: Commonwealth Bank of Australia (CBA) [Reserve Bank
🌐
of Australia is separate].
- Tenure: 2 years @~2% interest. Denomination: _ _ _ _ _ Dollars, hence
also called “Kangaroo Bond”.


⛈Catastroph Govt / Insurance company issues such bond. Investor is promised with high
annual interest rate. But, if a natural disaster happens, his principal will not
e Bond (आपदा)
be returned. If disaster doesn’t happen then principal will be returned.
Example, SIDBI issued ₹ 300 cr. worth Women’s Livelihood Bonds (महििा
आजीत्तवका बॉन्ड) with the help of World Bank, UN Women org etc. (2019-Feb)
👩🏼‍🏭 Social
Impact Bonds - These bonds will be offered to High Net worth Individuals (HNI), Impact
Investors (rich people interested in ‘indirect’ social service) etc. They’ll
(सामाजजक
earn 3% annual interest rate for tenure of 5 years.
प्रभाव बाूंड) - Money thus collected → SIDBI → Micro Finance Institutes (MFI) →
loaned to individual women entrepreneurs in sectors like food
processing, agriculture, services etc. for loans upto ₹3 lakhs.
MCQ: With reference to `IFC Masala Bonds', sometimes seen in the news, which of the
statements given below is/are correct? (Asked in UPSC-Pre-2016)
1. The International Finance Corporation, which issues them, is an arm of the World
Bank.
2. They are the rupee-denominated bonds and are a source of debt financing for the
public and private sector.
Answer Code: (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither1 nor 2
MCQ. Which one of the following is a viable alternative to term-loans for raising debt
finance by large publicly traded firms? (UPSC-IEnggS-2018)
(a) Shares (b) Debentures (c) Asset loans (d) Gold loans
15.4.8 🗳🔪🗃⏳Electoral bonds (चुन वी ब ांड )

 Announce in Budget 2017 → Notified by Dept. of Economic Affairs, Finance
Ministry. Only _ _ _ _can issue at present, and in multiples of Rs.1,000, Rs.10,000,
Rs.1,00,000, Rs.10,00,000 and Rs.1,00,00,000.
 When? For ten days at the start of each quarter. (January, April, July and October).
However, during Lok Sabha election year, can sell for another 30 days.
 Who can buy? Only an Indian _ _ _ _ _ _ or Company registered in India → deposit
money in their bank account → use that money to buy Electoral Bond, after giving certain
KYC-documents. So, Electoral Bond can’t be bought anonymously or directly with cash.
 Electoral Bonds can be donated only to a political party registered under Representation
of the People Act (RPA), 1951 and which has secured _ _ /> votes polled in last Lok
Sabha or Vidhan Sabha elections.
 Validity? Only _ _ days from the date of purchase. Within that time, buyer must donate,
and political party must deposit in its SBI (current) bank account. No interest payable.
 Characteristics? Paper / Physical format (not DEMAT / electronic format). Bearer
instrument (Donor or Recipient’s name not mentioned), Promissory Note (promises to
transfer money in bank account) and an interest free banking instrument (zero interest
payable to anyone). Can’t sell it to third party, can’t pledge it for loans.
 Benefits? Transparency in political funding, Reducing influence of cash and black money
in election, Confidentiality to donor because he can give to any political party without his
wife, staff, CA, Lawyers, journalists etc. knowing the name of recipient political party.
Ignored for poor cost:benefit- Bond Yield, Yield To Maturity, bond yield’s linkages with
monetary policy, exchange rate, gold & crude prices.

15.5 ⚖️🗃 EQUITY INSTRUMENTS (इक्ववटी)

Equity holders are called owners / proprietors of the company. If company makes profit, they
get dividend. Last claim during liquidation.
keywords Features
साधारण शेयर: have voting power in the meetings of shareholders. Last
Ordinary shares
claim during liquidation.
अग्रधमान्य शेयर: During liquidation, these investors will be given money
Preferential
Shares before the ordinary shareholders. Further subtypes: with or without
voting powers.
Shares given @discount to directors & employees for their value
Sweet Equity
addition to company [Amount is regulated under Companies Act]
Shares whose market price remain excessively low compared to its
Penny stocks
face value. Such pathetic companies give zero or little dividend.
Blue Chip Shares of a nationally recognized, well-established and financially
stocks sound company with a history of generating good dividend.
Venture capital Professional firms helping startup companies with seed capital. (could
funds (VCF) be debt / equity / hybrid)
Angel Investors Rich person helping startup companies out of his hobby, passion,
profit motive or time pass. e.g Ratan Tata in Urban Ladder app. (could
ऐांजल तिवेशक
be debt / equity / hybrid). Related: Angel Tax in Budget Handout
Rajiv Gandhi Equity Savings Scheme= Govt gives income tax benefit
RGESS
to people who invest in the share market for the first time.
Started in 2012
Discontinued by Budget-2017 (instead of renaming after DeenDayal).
When promoter of a company e.g. Mukesh A. of Reliance or Subhash
Share Pledging Chandra of Zeegroup pledges his shares as collateral to borrow loans
from a bank / NBFC.
MCQ. What does ‘Venture Capital’ mean? (Asked in UPSC-Pre-2014)
A. A short-term capital provided to industries
B. A long-term start-up capital provided to new entrepreneurs
C. Funds provided to industries at times of incurring losses
D. Funds provided for replacement and renovation of industries
15.6 ⚖️🗃 METHODS OF ISSUING SHARES
Share have printed price on the certificate called Face Value or Par Value (सममल्य). If
they’re sold at higher price than face value, it’s called “Premium Value”- that usually
happens when investor is confident of getting high dividend/return on his investment.
Related keyword: Price Earnings Ratio (P/E Ratio)- what it means NOTIMP.

 Company hires an underwriter (usually, a merchant bank, investment

Initial public bank) for a fee.
offer (IPO)  Underwriter drafts Red Herring Prospectus for SEBI approval.
प्रारां भभक लोग  Then, Underwriter invites application from public & sells them shares
तिगणम at face value or higher. If less subscription, then underwriter will buy
the unsold securities by himself.
 If company had already issued shares previously, and now again
Follow on
issuing more shares to obtain more capital→ it is called FPO.
public offer
(FPO)  Rights issue (अग्रधकार ननर्गम): Company issues additional shares but
अिस
ु रर्… gives first right to existing shareholders to buy them, if they refuse
then offered to outsiders.
Other Offer for sale / Private placement /Issuing bonus shares / share splitting /
methods / share swap / share buyback / PE Ratio etc. = NOT IMP. However, to
terms satiate your curiosity you may self-study them from Investopedia.
Economic survey 2018-19 observed there has been a huge decline in the number of new
IPOs in 2018, against 2017. (which indicates the troubles related to protectionism, NPA
etc.)
15.6.1 ⚖️🗃 🌐 ADR/GDR: Indian shares in Videshi locker

- An Indian (or any non-American) company wants to mobilize money from American
share market but does not want to go through the process of registration with the
American regulator.
- Then Indian company gives the Indian shares to an American bank, and based on those
Indian shares, the American bank will create American Depositary Receipts (ADR:
अमरीकी ननपेक्षार्ार रसीद) & sell them to American investors. Denomination: USD.
- Global Depositary Receipt (GDR): Same as above, but when single bank issues
receipts for investors in multiple countries. Denomination: USD or Euro.
- Bharat / Indian depositary receipt (IDR): Similar concept- American (or any foreign)
company wanting to mobilize money from Indian investors, they give their shares to an
Indian bank →……... Permitted since 2009-10. Denomination: INR (₹)

15.7 📈 STOCK EXCHANGES / SECONDARY MARKET

Shares are issued through IPO @Primary market. Then, they can be resold at secondary
market, commonly known as Share market or Stock Exchange.
 World’s Oldest: Amsterdam Stock exchange, Netherlands (1602)

 Asia’s Oldest: Bombay Stock Exchange (1875)
 India’s stock exchanges chronology: BSE->A’bad->Kolkata->NSE
 Just like the Banks have Core Banking Solutions for e-banking, Stock exchanges also
have their electronic platforms for trading. E.g. BOLT (BSE's On-line Trading System)
and NEAT (National Exchange for Automated Trading). They run using internet facility
from VSAT (Very Small Aperture Terminal) Satellite.
 (Full) Budget-2019: we’ll set up a Social Stock Exchange under SEBI’s regulation. It’ll
help social enterprises and voluntary organizations to raise capital as equity, debt or
mutual funds.
15.7.1 DEMAT Account
 If shares and bonds are traded in paper-form, then transactions are slow & prone to the
risk of theft, forgery and fire.
 Depositary is an organization that stores the physical securities in its vault and allows
investors to trade them in electronic (=DEMATERIALIZED) form.
 Customer must open a “Demat” account in a depository-partner (DP) which can be a
bank or an NBFC.
 SEBI regulates them under the Depositories Act 1996. Notable examples are Central
Depository services Limited (CDSL) and National securities depository Limited (NSDL:
started by SBI, IDBI, UTI, NSE et al). NSDL also has RBI license to operate_ _
15.7.1.1 🔢 ISIN Number

 International Securities Identification Number (ISIN) is a Unique 12 characters, consisting
of both letters and numbers.
 It’s a serial code to identify securities e.g. Reliance Industries Limited Shares ISIN:
INE002A01018; Infosys Shares: INE009A01021.
 Prevents mistakes in buying/selling shares/bonds of companies with similar sounding
names. Facilitates the digital transactions through DEMAT account.
 RBI issues ISIN for G-sec/T-bill. NSDL issues ISIN for securities other than G-Sec/T-bill.
 (Full) Budget-2019: we’ll make technical reforms in ISIN for ease in launching Corporate
Bonds.
15.7.2 🙋🏻‍♂️🛒 Types of Investors: Depending on Buying Capacity

1. Qualified Institutional Buyers (QIB): Investors with expertise and financial muscle to
make large investments in capital markets. E.g. Mutual Funds, Insurance Company,
Foreign Venture Capital Funds etc. SEBI has separate registration norms for them.
a. Anchor investors: They’re QIBs who are offered shares before IPO-launch. This
gives confidence to other investors to subscribe the given IPO.
2. Retail investor: An individual investor who is not a QIB.
Underwriter will keep quota for each category of investors, as per SEBI norms.
15.7.3 🙋🏻‍♂️🛒 Types of Investors: Depending on Buying Behaviour

1. Jobbers (आढ़िी): Full time engaged in buying / selling securities using money from their
own pockets. (Whereas brokers / commission agents buy/sell using money/shares of
their clients).
2. STAG (Male Deer): He buys newly issued securities from primary market & sells them
in secondary market for quick profit.
3. 🐮Bull (तेजड़िय ): Optimistic speculator who hopes share prices will rise, so purchases
(to sell them later at much higher price). Just like a bull tends to throw his victim up in the
air, the bull speculator stimulates the price to rise.
4. 🐻Bear (मांदड़िय ) – A pessimistic speculator who fears prices will fall so, he sells. A bear
usually presses its victim down to ground. Similarly, the bear speculator tends to force
down the prices of securities.
Further subtypes with various animal / bird names can be found on
Investopedia but with poor cost : benefit in exam.
15.7.4 📈 Notable Indexes

● SENSEX?: Sensitive Index/ सूंवेदी सचकाूंक. It’s the weighted average of Free Float
Market Capitalization (FFMC) of _ _ companies, selected by BSE’s “Index Cell”.
● NIFTY? NSE index of 50 companies. Nikkei? Tokyo Stock Exchange index of 225
companies.
📈 SENSEX – when does it go up 📉 Goes down when
💦 RBI’s soft /easy monetary policy → 💧 _ _ _ _ _ _ monetary policy
cheap loan & credit cards → consumers to
spend more → more profit to company →
more dividend : investor thinks “better I buy
more shares to get more dividend”: Bullish
Peace, Economic boom / prosperity, ⚔️ War, recession, political instability →
Political Stability Bearish market.
When govt. hikes foreign investment limits Inverse.
Merger-Acquisition, New product launched, CEO/MD arrest/FIR, Courts slapping fine,
Environmental clearance given to factory media exposing scandal…
MCQ. In the parlance of financial investment, ‘Bear’ denotes [UPSC-CDS-2012]
(a) an investor, who feels that the price of a particular security is going to fall.
(b) an investor, who expects the price of a particular share to rise.
(c) a shareholder, who has an interest in a company, financially or otherwise.
(d) any lender, whether by making a loan or buying a bond.
MCQ. Which of the following statements is/ are correct? [UPSC-CDS-2012-I]

1. NIFTY is based upon 50 firms in India.

2. NIFTY is governed and regulated by the Reserve Bank of India.
3. NIFTY is the stock index of Bombay Stock Exchange.
Answer Codes: (a) Only 1 (b) Only 2 (c) Only 3 (d) 1 and 3
15.8 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ (SEBI)
 भारतीय प्रधतभूधत और धवधनमय बोर्ध, HQ- Mumbai
 (1988) Formed by an executive order → (1992) Became Statutory Body → powers
increased through amendments in 1999 & 2014. Now it can order search and seizure,
attachment of properties, arrest and detention.
 SEBI Board Composition: Chairman + 1 officer from RBI + 2 officers from Union
Government + 5 members appointed by Union Government.
 Chairman: upto 5 years / 65 age. Reappointment possible. Ajay Tyagi (IAS) initially
given 3 years term in 2017, could be extended in future.
 Regulates Process of issuing securities (Bonds, Shares, IPO, ETF, ReIT, INVITs, etc.)
using the Securities Contracts Regulation Act, 1956 [SCRA: प्रमतभूमत संमवदा मवमियिि]
 Regulates Places (Depositories, Stock exchanges, Commodity Exchanges etc.)
 Regulates Persons (Investors, Brokers, Fund Managers, Public Limited companies etc.)
 Regulates any Collective Investment Scheme (CIS) of ₹_ _ _ _ cr/> [In the aftermath of
SAHARA scam & Chit Fund scams.]
 Further appeal: _ _ _ _ _ _ _ _ _ _ _ _ _ _ (SAT) → Supreme Court. Same SAT also hears
appeals against the orders passed by Insurance Regulatory Development Authority of
India (IRDAI) and Pension Fund Regulatory and Development Authority (PFRDA).
 “SCORES” online portal for complaint. Financial literacy of investors.
SEBI has to protect the investors & increase their participation because:
 Share market scams erode publics’ hard-earned savings → alcoholism, depression,

suicide and other social ills.
 Duped investors will shy away from share market & they may invest in gold / real
estate = not very beneficial to economy.
 If households don’t participate in capital market → corporate companies will have to
approach the banks to get more loans. But banks’ lending capacity is limited by CRR,
SLR, PSL, NPA, PCA= bottleneck in factory expansion, job creation, and economic
growth.
15.8.1 🕵🏻‍♀️ SEBI Reforms

 Harshad Mehta (1992), Ketan Parekh (2001) arranged money from banks, used it for
rigging the share prices to make windfall gains during Bull-runs by other investors. Once
the prices crashed, small investors suffered. To prevent such scams, SEBI introduced _ _
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ System, wherein if fluctuation in the share prices is more
than “x%” than previous day then stock exchange must stop trading for “y minutes / hrs”.
 Badla System/Carry forward system: It’s buying of shares using borrowed money and
making promises & carrying forward the settlement for upto 72 days. This helped
scamsters so SEBI discontinued it (2001) & introduced (T+2) rolling settlement system
i.e. after trade is conducted, the parties must settle it within two working days (= buyer
pays money, seller deliver shares/bonds/securities).
 Rupal Panchal (2005) opened multiple fake DEMAT accounts to increase the chances of
getting share allocations in IPO. Then she’d sell such shares in stock-exchange for higher

prices. Subsequently, SEBI made PAN Card (issued by Income Tax Dept) compulsory for
opening DEMAT Accounts. SEBI also introduced ASBA (_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
_ _ _ _ _ _ _ _ _ _ _ _ _ )- it allows the underwriter to block the amount in IPO-investor-
applicant’s bank account, but only IF shares allotted to the applicant, his bank money will
be deducted. ASBA-Benefits:
- (1) only serious investors with sufficient bank balance can apply.
- (2) investor continues to earn bank interest on his blocked amount until the
process of IPO-share allotment is over.
 Dabba Trading / Bucketing / Box Trading: While share trade occurs at stock exchange
linked with DEMAT accounts, the Dabba Trades occur in the unofficial books/ledgers of
an unscrupulous broker. He may or may not execute those orders in actual DEMAT
account. Investor prone to scam, govt deprived of taxes hence SEBI declared it illegal.
 Insider Trading (भेहदया िेनदे न): Whenever company launches new products, wins
unique patents, or undergoes merger and acquisition- its share prices will increase. If a
person associated with company uses such confidential information for buying/selling
shares to make windfall gains. Such insider trading is illegal.
 _ _ _ _ _ _ Trading: Some large brokers / companies use algorithmic trading computer
programmes to automatically buy / sell securities at a speed and frequency that is
impossible for a human trader. This can be misused for manipulating the share prices.
While SEBI has not banned it but issued technical measures e.g. a single broker /
investor can’t place more than 100 online orders per second.
15.8.2 (Full) Budget 2019: measures to increase retail investors participation

 SEBI to raise minimum public shareholding in listed companies (other than PSUs) from
25% to 35%.
 For all the listed PSUs, Government will strive for minimum 25% public shareholding.
 We’ll give the ELSS-walla income tax benefits to CPSE-ETF-investors as well.
 At present, RBI depository for G-Sec/ T-Bill is separate. SEBI regulated depositories
(For non Government securities) is separate. We’ll make reform for ‘interoperability’
between them to facilitate retail investors’ participation.
 Parallelly, RBI said it’ll work on mechanism wherein retail investors give money to
stock exchange and stock exchange invests it in G-sec/T-bill.
15.8.3 🌽 Commodity Market, FMC, SEBI merger

 A commodity market / exchange (वस्िु बाजार) is a place where buyers and sellers trade
goods in bulk such as food grains, precious metals or energy resources (oil / gas)
 “Commodity Futures”: Type of contract for future delivery and settlement of
commodity e.g. “on 1/5/2021, I shall deliver you 500 quintals of wheat at X price”.
 Commodity exchanges were under a statutory regulator _ _ _ _ _ _ _ _ _ _ _ _ _ (FMC)
under the ministry of Consumer Affairs and Public Distribution. But Jignesh Shah
generated fake receipts without any commodities in the warehouses & traded at NSEL-
commodity exchange. FMC failed to prevent scam-it was transferred to Finance Ministry
and ultimately merged with SEBI (2015).

15.8.4 🕵🏻‍♀️ Misc Bodies

FSDC (2010) - Financial Stability & Development Council: Chairman – Finance
त्तविीय Minister. Other members – 1. RBI Governor 2. SEBI chief 3. IRDAI
chief 4. PFRDA chief 5. IBBI chief & govt officials
जस्िरिा - Functions? Supervision of the economy & large financial
और त्तवकास conglomerates, coordination among the financial regulators, financial
literacy and financial inclusion.
पररषद - Secretariat assistance by: Dept. of _ _ _ _ _ _ _ _ _ _
FSB (2009) - Financial Stability Board is a brainchild of G20.
HQ: BASEL - Function? Financial monitoring at global level, Coordination between
ववत्तीय national financial regulators bodies.
- India has 3 seats in FSB: 1) Secretary of Department of Economic
स्थिरिा बोर्ड Affairs (IAS) 2) Dy. Governor of RBI 3) SEBI chairman
FATF - Financial Action Task Force (मवत्तीय कारर वाई कायरदल) is a brainchild of
(1989) G7, with HQ@_ _ _ _ _ . India became member in 2010.
HQ: _ _ _ - Function? Combating Money laundering and terror finance.
- International Organization of Securities Commissions (IOSCO) is the
international body of world's securities regulators. SEBI is a member.
IOSCO
- It’s known for its IOSCO Guidelines for Investors Protection and
systematic risk in global economy.
MCQ. With reference to 'Financial Stability and Development Council', find correct
statement(s): (Asked in UPSC-Pre-2016)
1. It is an organ of NITI Aayog.
2. It is headed by the Union Finance Minister
3. It monitors macro-prudential supervision of the economy.
Answer Codes: (a) 1 and 2 only (b) 3 only (c) 2 and 3 only (d) 1, 2 and 3
15.9 📦 INVESTMENT FUNDS

15.9.1 📦 🤹🏻‍♂️ 👴🏻 Mutual fund (MF: म्यच्
ू यअ
ू ल फण्ड ) for aam-aadmi
 is an Asset Management Company (AMC-NBFC) that pools savings of (retail) investors
and gives them “Units”. MF Manager then parks the money in securities & builds his
‘portfolio’.
 Whatever dividend/ interest is generated from the portfolio, it is distribute among
investors in the proportion of their units.
 Investor has to pay Entry Load (= fees for joining) and Exit Load (= fees while quitting).
SEBI regulates these fees.
 Due to low deposit rates in banks, people invested money in mutual funds however post-
IL&FS crisis, charm declining because mutual funds are subject to such market risks.
 Equity Linked Savings Scheme (ELSS): It is a type of mutual fund where money is
locked in for 3 years and invested in equities (shares). It’s eligible for certain benefits in
Income Tax.
 “Side pocketing”: SEBI ‘s technical guidelines to help MFs to separate their IL&FS type
stressed/toxic assets from their standard assets. Helps protecting the investors.
How?NOTIMP.

15.9.2 📦 🤹🏻‍♂️ 🤵🏻 Hedge Fund (हे ज फण्ड) for rich-aadmi

 Special type of Mutual Fund meant for HNI (High Net Worth Individual) who wants high
risk high return. SEBI norms: Minimum investment per person is ₹1 crore.
 Hedge Fund manager will invest their money in Junk Bonds, Risky assets; he’ll do risky
trading activities such as Arbitrage, Leverage, Short Selling etc. to generate maximum
return. (how is that done in real life = UPSC-CSE not for recruitment of HF managers.)
15.9.3 📦 🤹🏻‍♂️ 🤴🏻 Sovereign Wealth Fund (SWF: सांप्रभु धि कोष)

- State owned investment fund, wherein central bank, finance ministry and other
public sector financial intermediaries park their surplus fund. →money used for
investment. E.g. Singapore's GIC sovereign wealth fund, Abu Dhabi Investment
Authority (ADIA)’s funds, Qatar Investment Authority (QIA) etc.
- Sidetopic: What is National Investment & Infrastructure Fund (NIIF) Ans.
Pillar#5: Infrastructure handout.
15.9.4 📦 🤵🏻 🏬 🛩 REITs / InvITs: for rich-aadmi

REITs: (Real Estate Investment InvITs: Infrastructure Investment
Trusts)- (भ-ू भवन संपवत्त तनवेश न्यास ) Trusts-(अधिसंरचना तनवेश न्यास)
Who can HNI / institutions: Min. ₹2 lakh ₹10 lakh. ₹1 lakh (SEBI reduced
invest? ₹50000 investment per ASBA Minimum limits in 2019 to attract
application more investors)
Manager in real estate projects that are soon In airport, highway, thermal plants,
parks the to complete. He’ll earn income gas grid etc. He’ll earn from toll
money in? from rent / sale. collection at highways, services
fees at airports etc.
Example Blackstone-Embassy group IRB, India-grid
Benefits of REITs and InvITs-
- Stressed developer gets new finance to finish the project while HNI gets new opportunity
to invest his money, and he may also sell the units to third party via stock exchange.
- SEBI permitted these instruments in 2014. Later SEBI relaxed technical norms related to
capital, leverage, issue size but they are not important for us. (Full) Budget-2019: FPIs
will be permitted to subscribe to listed debt securities issued by ReITs and InvITs.
15.9.5 📦 🏛 CPSE-Exchange Traded Funds (ETF: ईटीएफ)
- Disinvestment (ववतनवेश): government sells it shares from Central Public Sector
Enterprises (CPSE: कें द्रीय सावधजधनक क्षेत्र के उद्यम) but does not reduce its shareholding
below 51%. If Govt’s shareholding reduced below 51%, then it is called Privatization
(तनजीकरण), although NITI prefers the term ‘Strategic Disinvestment’ for it. More in Pill#2.
- 2014: Government wanted to disinvest 10 CPSE (ONGC, GAIL ltd etc). If govt tried to sell
the individual company-wise shares, it would be more time consuming, and govt may not
get good prices for each company.
- So, Govt gave CPSE-shares to a fund manager Goldman Sachs - who created new
securities out of it, called “Exchange Traded Funds (ETF)”, and made a “New Fund Offer
(NFO)” to the public to subscribe to these securities at ₹ 10 per unit.

- If an investor holds the ETF → he will get returns from the dividend generated by those
CPSE-companies in the backend. He may also sell these ETF to a third party via stock
exchange, hence they are called Exchange Traded Funds.
- BHARAT-22: Another CPSE-ETF when Govt wanted to disinvest shares from 22

companies including CPSE, PSBs and UTI using ICICI Prudential as fund manager (2017-
18). However, PSB-NPA problem → poor dividends → BHARAT-22 not giving good
returns, so, investors response was initially lukewarm.
- We’ll give the ELSS-walla income tax benefits to CPSE-ETF-investors as well.
- Gold-ETF: Investors give money → manager buys gold for safekeeping and trades it
depending on price movements → returns are divided among the unit-holders. In
between, the investor may sell his Gold-ETF to third party via Stock Exchange therefore
they’re also Exchange Traded Funds.
15.9.6 📦 Alternative Investment Funds (AIF: वैकल्पिक तिवेश कोष)
It’s a technical classification by SEBI:
- AIF Category I: They generate _ _ _ _ _ _ spillover effects on the economy. Example:

Venture Capital Funds, Angel investors fund, SME Funds, social venture fund,
Infrastructure funds. SEBI keeps relaxed / lighter norms on them.
- AIF Category II: Neither in Cat-1 nor in Cat-3 E.g. Private Equity or Debt Fund.
- AIF Category III: They undertake excessive risk to generate high returns in short period
of time. E.g. _ _ _ _ Funds. SEBI norms are stricter/heavier on them, because otherwise
they may destabilize the capital market.
15.10 🗃 ⏱ FORWARD / FUTURE CONTRACTS & CALL / PUT OPTION

- A Forward / Future contract is a customized contract between two parties where
settlement takes on a future date at a price/quantity agreed upon today. E.g. on 1/5/2021
I shall sell you 100 nos. of Infosys shares at ₹1000 each.
- In such contracts, there is a risk of other party not honoring commitment if he’s getting
better deal elsewhere in the future. So, for protecting (=hedging) themselves, they
(=buyer or seller) may buy “Option” from a third party by paying fees.
- Option is a type of insurance for executing the forward/future contract in a manner
beneficial to them e.g. I’ll sell you for ₹1000 on X date, & you must buy, but if I’m getting

another buyer who is willing to pay ₹1500 then I may not sell you & you can’t compel me.
Such ‘insurance options’ are further subdivided into Call Option and Put Option, their
internal difference & real-life mechanism not imp. for UPSC.
MCQ. Which one of the following terms is used in Economics to denote a technique for
avoiding a risk by making a counteracting transaction? [UPSC-CDS-2016-I]
(a) Dumping (b) Hedging (c) Discounting (d) Deflating
15.11 🗃 🔗 DERIVATIVES & SWAPS

 A derivative is a contract whose value is derived from the value of another underlying
asset which could be a share, bond, commodity or currency. They’re usually generated
by the process of ‘securitization’. E.g. NHB taking loan papers from banks, using them to
generate new Mortgage Backed Securities.
 SWAP: is derivative instrument to swap one financial asset with another financial asset
(usually) to reduce the risk e.g. Currency Swap Agreement between two countries to
protect themselves against dollar volatility (more in Pillar#3).
 Similarly, there are Credit Default Swap agreement against the risk of default,
Interest swap agreement to protect against volatility in interest rates. But their
mechanisms NOT IMP.
15.11.1 Participatory notes (P-Notes: िार्टण भसिेटरी िोट्स)
 A foreigner wishes to invest in India but does not want to go through the hassles of
registering with SEBI, getting PAN card number, opening a DEMAT account etc. So, he
will approach a SEBI registered foreign institutional investor (FII) / foreign portfolio
investor (FPI) such as Morgan Stanley, Citigroup or Goldman Sachs. He’ll pay them &
instruct them to purchase particular shares and bonds and store them in their Demat
account. Then FII will give him P-Notes, and he’ll receive interest and dividend
accordingly. He may also sell those P-notes to a third party.
 P-Notes are _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ that derive the value from the underlying
Indian shares and bonds.

P-Notes are harmful for Indian economy because:
 P-note investors are not directly registered with SEBI, the identity of the actual investor
and source of funds remain disguised= chances of _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _
________
 If P-Note owner sells his P-Notes to another foreign investor, Government of India may
be deprived of taxes. (Compared to a scenario where Indian share owner is selling his
shares to another Indian investor at profit, then government gets securities transaction
tax and capital gains tax on his profit, & he can’t dodge it because DEMAT accounts
linked with _ _ _ _ card. More on PAN card@Pillar#2->BlackMoney)
 Therefore, SEBI is tightening the control P-Notes e.g. “X” category of FPIs can’t issue P-
Notes. “Y” category of FPI can issue P-Notes but every time they issue P-notes-they’ll
have to deposit $1,000 to SEBI etc.
(Pre19-SetA) Q67. Which of the following is issued by registered foreign portfolio

investors to overseas investors who want to be part of the Indian stock market without
registering themselves directly?
(a) Certificate of Deposit (b) Commercial Paper (c) Promissory Note (d) Participatory Note
15.12 🏙 COMPANY TYPES

15.12.1 Company types based on incorporation
Chartered Setup by a charter given by a king / queen. E.g. East India
Companies Company in _ _ _ _ _ . चार्ड र्ड कंपतनया
Statutory Setup by special acts of Parliament or State legislature. E.g._ _ _ _
Companies _ _ _ _ _ _ __ _ . वैिातनक कंपतनया
Registered Registered under the Companies Act, 1956 (and later 2013) e.g.
Companies Tata Motors, Infosys. पंजीकृि कंपतनया
15.12.2 Company types based on Ownership

Holding Company / ननयांत्रक कांपनी _ _ _ Company / ननयांत्रत्रत कांपनी
A company that owns majority shares in A company that is controlled by a parent
another company. E.g. Tata Sons ltd. holds holding company. E.g TCS, Tata Steel,
majority shares of Tata Consultancy Tata Sky are subsidiary companies of Tata
Services (TSC), Tata Steel, Tata Sky etc. Sons.
Government / Public Sector / स ववजननक Private Sector / ननजी क्षेत्र की
When Government owns 51%/> shares. When private parties own 51%>. E.g.
Examples: Steel Authority of India (SAIL), Reliance, Tata, Adani
India Post Payment Bank (IPPB)

15.12.3 Company types based on number of members

Private ltd. _ _ _ _ Company (Companies Act 2013)
Members Min. 2 to Min. _ _ to Max. unlimited number (depending on how
Max. 200 many shares issued & purchased by the people)
Can’t  A public ltd. company can invite public to subscribe to
its shares and bonds.
 If their shares are listed on a stock exchange (BSE,
NSE etc), it’s a ‘Listed Public Limited Company’ (e.g.
Reliance), else it’s an ‘Unlisted Public Limited
Company’ (e.g. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ : IPPB)
Min. ₹1 lakh ₹5 lakhs (अग्रधकृि पज ूं ी). It’s the amount of shares the
authorized
company can issue.
capital
Min. Paid up ₹0 ₹0 (दे य पज
ूं ी). The amount of money a company has
Capital actually received from the selling of shares.
Directors 2-15  Min 3 to Max 15. out of them one must be Indian
(Min-Max) Resident, 1 must be Woman and 1/3rd of the directors
must be independent directors.
 Independent directors are persons without any
pecuniary interest in company, they are supposed to
protect minority shareholders’ interests.
Term limit N/A Their directors have age limit, term limit.
Corporate Norms Companies Act requires them
Governance either not  to hold specific number of annual meetings of board of
Norms applicable directors, norms for quorum, mechanism for e-voting,
or relaxed.  have to appoint Company Secretary,
UPSC-  Implement mechanism for protecting whistleblowers
CSE≠CA And so on…
15.12.4 Company Types: Misc.

Under  One Person Company: special type of private ltd company having
Companies only one member.
Act  Not for Profit Company: e.g. GSTN, NPCi etc. their profit is re-
invested in business expansion. They get certain tax benefits.
 Dormant Companies: A) setup to start business in future B) setup
to store intellectual property C) not filled annual returns for two
consecutive years.
Under LLP  Limited Liability Partnership (LLP) Company is formed by minimum
Act 2008 2 or more partners.
सीलमि दे यिा  Individual partners are shielded from joint liability created by
another partner's wrongful business decisions or misconduct. E.g.
भार्ीदारी
Vajiram and Ravi IAS Study Centre LLP
अग्रधननयम  LLP’s registration fees, auditing/reporting norms, tax liabilities,
winding up process etc. are more flexible than a (public or pvt) ltd.
company registered under Companies Act.

Under Indian  A Partnership firm is formed by minimum 2 or more partners.

Partnership  Each partner is liable jointly with all the other partners for losses,
Act 1932 wrongful biz. decisions and misconduct.
15.13 🔨 STATUTORY BODIES IN MINISTRY OF CORPORATE AFFAIRS (MCA)
15.13.1 🔨 👨‍⚖️ Competition Commission of India (भारतीय प्रधतस्पर्ाध आयोग)

 Competition among companies= consumer gets goods and services at the most
competitive / affordable prices.
 Therefore, government must prevent cartelization (price fixing or production fixing by a
group of Companies), prevent monopoly (single company commanding the production /
supply), protect consumers’ interests and ensure freedom of trade.
 1970: Monopolies and Restrictive Trade Practices (MRTP) Act. Later replaced with
Competition Act, 2002- which has a statutory regulator Competition Commission of India
(CCI: 1 Chairman + 6 Members)
15.13.2 🔨 👨‍⚖️ Insolvency and Bankruptcy Board of India (IBBI)

This too is a statutory body under the Ministry of Corporate Affairs (MCA). Read previous
NPA-handout for more on I&B Code.
Table 2: Statutory Bodies under Companies Act 2013
Features National Company National Investor SFIO (_ _ _

Law Tribunal Financial Education &
(NCLT) Reporting Protection Fund
Authority (NFRA)
राष्ट्रीय कम्पनी धवधर् राष्ट्रीय धवत्तीय धनवेशक एवं धशक्षा गंभीर र्ोखार्र्ी
अधर्करण प्रधतवेदन प्राधर्करण रक्षण कोष अन्वेषण कायाधलय
Members Judicial + technical. Chairman + 3 full Boss: Corp. Civil servants &
They’ve benches time + 9 part time. Affairs Secretary financial experts
@Delhi, Kolkata, 3 yr/65, 1-time (IAS). Plus,
Jaipur etc. reappointment. members from
RBI, SEBI,
financial experts
Appeal NCLAT (Appellate NFRAA (Appellate Regular Courts Regular Courts
tribunal) Authority)
Cases Hear the cases Sets standards for They use Investigate white-
related to Auditors & (CA), unclaimed collar (financial)
Companies Act, in listed money from frauds. Powers to
Board room battles, companies and shares/bonds for search, seize,
Merger-Acquisition, large unlisted financial literacy arrest.
Corporate companies. If and awareness Once SFIO gets
Insolvency & malpractices-> case, other
Bankruptcy (I&B) investigate and agencies (like
Debarr them, CBI) can’t
Powers of civil proceed.
court.

15.13.3 🔨👨‍⚖️ Ministry of Corporate Affairs also associated with:

Chartered Regulates the CA profession through a
Accountants Act 1949 Statutory body: Institute of Chartered Accountants of India
(ICAI). ICAI also has IPA status under I&B Code.
Company Secretaries Statutory Body: Institute of Company Secretaries of India (ICSI).
Act, 1980 Also has IPA status.
Cost and Works Statutory Body: Institute of Cost Accountants of India (ICAI). Also
Accountants Act, 1959 has IPA status.
Legislative  Companies Act 1956 → 2013.
Responsibilities of  Limited Liability Partnership Act
MCA  Partnership Act
 Societies Registration Act, 1860: for registration of literary,
scientific and charitable societies.
E-governance  INC-29 online form to registration of new company.
initiatives of MCA  MCA-21 portal, where companies can file online
documents related to Companies Act compliance.
15.14 🤼‍♀️👬 CORPORATE GOVERNANCE (कॉपोरे र् शासन)

It is a way of directing the company to protect the interest of all stakeholders, and ensure
three types of compliance:
Compliance Example(s)
 Company obtaining Legal Entity Identifier (LEI) number as
mandated by RBI.
Legal-Regulatory  Company setting up ‘Internal Complaints Committee’ as
mandated by Sexual Harassment of Women at Workplace
(Prevention, Prohibition and Redressal) Act, 2013 / “POSH Act”
 Companies keeping balance sheets as per the Ind-AS
accounting standards.
Technical
 Automobile company producing car engines as per BHARAT-
Stage emission norms.
Gillette scrapping the ad-contract with cricketer Hardik Pandya for
Moral-Ethical
his sexist comments against women on Koffee with Karan Show.
 Absence of Corporate Governance leads to fraud, embezzlement (ग़बन), erosion of
investors’ confidence. E.g. Satyam Computer Scandal (Chairman Ramalinga Raju
manipulated account books), Boardroom battles at Tata Group (Cyrus Mistry vs Ratan
Tata) and Infosys Group (Narayana Murthy vs Vishal Sikka), ICICI (Boss Chanda Kochhar
gave ₹3000 crore loan to Videocon company without due-diligence, which turned NPA.)
 Therefore, Companies Act 2013 mandates companies to impose term limits on directors,
appoint independent directors, one person can’t become director in more than “X”
number of companies, one CA can’t audit more than “Y” number of companies,
Company has to setup whistleblower protection mechanism, Company can’t give loan to
its directors and so forth.
 Notable committees for improving corporate governance in India: Kumar Mangalam Birla
(1999), Narayana Murthy (2003), Adi Godrej (2012), Uday Kotak (2017).

 Further, SEBI too can issue directives to Public Limited Companies in the interest of
investors, beyond what is required under Companies Act. Such as…
SEBI implemented Uday Kotak committee’s suggestions From 2019-Apr From 2020-Apr
Split CEO/MD and Chairman. One person can’t occupy N/A Top 500 listed
both positions in his company (e.g. Gautam Adani) cos.
Companies Act requires min.3 directors in Public Listed Top-1000 listed Top-2000 listed
company, but SEBI mandated to have min. 6 directors cos cos
Companies Act doesn’t prescribe gender of independent Top 500 listed Top 1,000
director but SEBI mandated atleast one independent cos. listed cos.
woman director.
one person can serve as director in how many 8 7
companies? (Companies Act: Max.10), but SEBI required
SEBI also tightened norms related to salaries to directors, ‘related party transactions’
(meaning not important but the fact that term associated with corporate governance /
companies act).
15.14.1 CSR: Corporate Social Responsibility (कॉपोिे ट स म क्जक क्जम्मेद िी)

⇒ Mandated under Companies Act 2013: Last 3 years' avg. profit → spend 2% of that on
CSR (education, environment, public health, sanitation, disaster management etc.)
⇒ Applicable on both public ltd and private ltd. with very huge profit / turnover / networth
(what’s the difference between these terms, what’s the exact figure? Ans. UPSC is not
Chartered Account exam.)
⇒ Ministry of Corporate Affairs (MCA) gives National CSR Awards to companies.
15.15 ✍️ MOCK QUESTIONS FOR MAINS (GSM3/250 WORDS EACH)

1. "Just as good governance is necessary for vibrant Indian democracy, corporate
governance is necessary for vibrant Indian economy." elaborate. "जजस प्रकार जीवूंि भारिीय
िोकिूंत्र के लिए सश
ु ासन आवश्यक िै , उसी प्रकार जीवूंि भारिीय अिगव्यवस्िा के लिए कॉपोरे ट शासन
आवश्यक िै ।" त्तवस्िि
ृ कीजजए।
2. Discuss the significance of deepening the capital market to resolve the Twin Balance
sheet Syndrome (TBS) in Indian Economy. भारिीय अिगव्यवस्िा में दोिरे िि
ु न पत्र की चुनौिी
को िि करने के लिए पज
ूं ी बाजार को र्िरा करने के मित्व पर चचाग करें ।
3. Why are Indian financial regulators apprehensive about (1) P-Notes (2)
Cryptocurrencies? भारिीय त्तविीय ननयामक (1) पी-नोट्स (2) क्रिप्टोकरें सी से आशूंक्रकि क्यों िैं?
4. Craze for gold in Indians have led to a surge in import of gold in recent years and put
pressure on balance of payments and external value of rupee. In view of this, examine
the merits of Sovereign Gold Bond Scheme and Inflation Indexed Bonds (IIB). भारिीयों में
सोने के लिए सनक के चििे िाि के वषों में सोने के आयाि में वद्
ृ ग्रध और भर्
ु िान के सूंिि
ु न और रुपये
के बािरी मल्य पर दबाव बढ़ा िै । इसे दे खिे िुए, सूंप्रभु स्वणग बॉन्ड स्कीम और मद्र
ु ास्फीनि सचकाूंक्रकि
बाूंड की खबबयों की जाूंच करें ।सूंिि
ु न और रुपये के बािरी मल्य पर दबाव डािा िै । इसे दे खिे िुए, सूंप्रभु
स्वणग बॉन्ड स्कीम और मद्र
ु ास्फीनि सचकाूंक्रकि बाूंड की खबबयों की जाूंच करें ।

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15🐮📈🐻 SEBI-SHARE MARKET (PILLAR#1-C)

15.1 🗃SECURITIES (प्रतिभतू ि)

⚖️Equity: Share certificate 🔪Debt (ऋण): Bond / Debenture

15.2 🗃 🛒FINANCIAL / SECURITIES MARKET: MEANING AND TYPES

Classifi. Market Subtypes

Mrunal’s Economy Pillar#1C: SEBI/Share market→ Page 67

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15.3 🔪🗃 DEBT INSTRUMENTS (ऋण उपकरण)

15.3.1 🔪🗃⏰Short term debt instruments (लघु अवधि ऋण उपकरण )

Table 1: Further sub-division based on who is the Borrower?

Borrower 🔪🗃⏰ Short term debt instrument

Mrunal’s Economy Pillar#1C: SEBI/Share market→ Page 68

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Call It’s the interest rate when Financial Intermediaries (Banks/NonBanks)

15.4 🔪🗃🗓 LONG TERM DEBT INSTRUMENTS (दीर्ध-अवधर् ऋण उपकरण )

15.4.1 🕯Colonial era Govt. to borrow money

15.4.2 💡Modern day Government to borrow money

Mrunal’s Economy Pillar#1C: SEBI/Share market→ Page 69

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15.4.3 Modern day Govt. to curb Gold Consumption

15.4.3.1 🍅🔪🗃🗓 Inflation Indexed Bonds (IIB-मुद्रास्फीति सूचकाांककि बाांड)

15.4.3.2 🥇🔪🗃🗓 Sovereign Gold Bond (2015: सांप्रभु स्वर्ण बाांड)

15.4.4 🔪🗃🗓👨🏼‍✈️ Long term debt instruments by Companies

15.4.5 🔪🗃🗓Long Term Debt Instruments: Other issuers

Mrunal’s Economy Pillar#1C: SEBI/Share market→ Page 70

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15.4.8 🗳🔪🗃⏳Electoral bonds (चुन वी ब ांड )

Mrunal’s Economy Pillar#1C: SEBI/Share market→ Page 72

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15.5 ⚖️🗃 EQUITY INSTRUMENTS (इक्ववटी)

Mrunal’s Economy Pillar#1C: SEBI/Share market→ Page 73

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 Company hires an underwriter (usually, a merchant bank, investment

15.6.1 ⚖️🗃 🌐 ADR/GDR: Indian shares in Videshi locker

Mrunal’s Economy Pillar#1C: SEBI/Share market→ Page 74

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15.7 📈 STOCK EXCHANGES / SECONDARY MARKET

 World’s Oldest: Amsterdam Stock exchange, Netherlands (1602)

15.7.1 DEMAT Account

15.7.1.1 🔢 ISIN Number

15.7.2 🙋🏻‍♂️🛒 Types of Investors: Depending on Buying Capacity

Mrunal’s Economy Pillar#1C: SEBI/Share market→ Page 75

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15.7.3 🙋🏻‍♂️🛒 Types of Investors: Depending on Buying Behaviour

15.7.4 📈 Notable Indexes

Mrunal’s Economy Pillar#1C: SEBI/Share market→ Page 76

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1. NIFTY is based upon 50 firms in India.

 Share market scams erode publics’ hard-earned savings → alcoholism, depression,

15.8.1 🕵🏻‍♀️ SEBI Reforms

Mrunal’s Economy Pillar#1C: SEBI/Share market→ Page 77

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15.8.2 (Full) Budget 2019: measures to increase retail investors participation

15.8.3 🌽 Commodity Market, FMC, SEBI merger

Mrunal’s Economy Pillar#1C: SEBI/Share market→ Page 78

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15.8.4 🕵🏻‍♀️ Misc Bodies