Mrunal PCB 7 Handout

Pillar#1C: SEBI-Share Market
Table of Contents
15 🐮🐮🐮🐮🐮🐮Pillar#1C: SEBI-Share Market .......................................................................................185
15.1 🗃🗃Securities (प्र�तभू�त)................................................................................................................185
15.2 🗃🗃 🛒🛒Financial / Securities market: meaning and types ..................................................186
15.3 🔪🔪🔪🔪 Debt Instruments (ऋण उपकरण) ...................................................................................187
15.3.1 🔪🔪🔪🔪⏰Short term debt instruments (लघु अव�ध ऋण उपकरण ) .................................187
15.3.2 🔪🔪🔪🔪⏰:🧔🧔Short term debt instruments → by Government .............................187
15.3.3 🔪🔪🔪🔪⏰: 🐯🐯🐯🐯 🧔🧔🧔 Short term debt instruments → by Govt → WMA ..188
15.3.4 🐯🐯🐯🐯🐯 Consolidated Sinking Fund (CSF) for State Govts’ repayment .............188
15.3.5 🔪🔪🔪🔪⏰Short term debt instruments → by borrowers other than Govt ...........188
15.4 🔪🔪🔪🔪⏰Debt → Short Term → Factoring & TREDS .......................................................189
15.4.1 🔪🔪🔪🔪⏰Factoring Regulation (Amendment) Act, 2021.............................................189
15.4.2 🔪🔪🔪🔪⏰: 📡📡 TReDS platform to connect factoring-players. ....................................190
15.5 🔪🔪🔪🔪⏰Debt → Interest Rate Benchmarks: LIBOR, MIBOR, MIFOR ............................190
15.6 🔪🔪🔪🔪🔪🔪 Long Term Debt Instruments (दीधर्-अव�ध ऋण- उपकरण).......................................191
15.6.1 🕯🕯🕯🕯🕯🕯🕯🕯Colonial era Govt. to borrow money .....................................................191
15.6.2 💡💡💡💡💡💡💡💡Modern day Government to borrow money.........................................192
15.6.3 🥇🥇🥇🥇🥇🥇Bonds by Modern day Govt. to curb Gold Consumption .......................192
15.6.4 🔪🔪🔪🔪🔪🔪🔪 Long term debt instruments by Companies ........................................193
15.6.5 🔪🔪🔪🔪🔪🔪Long Term Debt Instruments: Other issuers .............................................194
15.6.6 🔪🔪🔪🔪🔪🔪Long Term Debt Instruments: Masala, Maharaja, Panda Bond .............194
15.6.7 🔪🔪🔪🔪🔪🔪 Long Term Debt Instruments: Special purpose: 🚦🚦🚦🚦 Surety Bonds ..195
15.6.8 🔪🔪🔪🔪🔪🔪 Long Term Debt Instruments: Special purpose Bonds- Misc. ...............195
15.6.9 🗳🗳(🔪🔪🔪🔪)⏳Electoral bonds (चुनावी बांड, 2017 ) .........................................................197
15.6.10 🔪🔪🔪🔪: 🤑🤑 Bond Yield, Yield Inversion, Negative Yield ..........................................198
15.7 ⚖🗃🗃 Equity Instruments (इ��टी) .........................................................................................198
15.8 ⚖🗃🗃 Methods of Issuing Shares .........................................................................................200
15.8.1 ⚖🗃🗃 IPOs- Big sized IPOs in recent years................................................................201
15.8.2 ⚖🗃🗃 IPOs → LIC & FDI in LIC?.....................................................................................201
15.8.3 ⚖🗃🗃 🤵🤵 IPO → Special Purpose Acquisition Company (SPAC) ..........................201
15.8.4 ⚖🗃🗃 🌐🌐 ADR/GDR: Shares in Videshi locker ........................................................202
15.8.5 👻👻⚖🗃🗃 🌐🌐 ATMANIRBHAR reforms in ADR/GDR/BharatDR ......................202
15.8.6 🔗🔗🔗🔗 Initial Coin Offering (ICO) ...................................................................................202
15.9 📈📈 Stock Exchanges / Secondary Market: meaning & examples ......................................203
(Batch:PCB7) Mrunal’s Economy Pillar#1C: SEBI Share-market→ Page 182

15.9.1 📈📈 Social Stock Exchange ...................................................................................................203
15.9.2 📈📈 Secondary Market: Significance? (िद्वतीयक बाजार का मह�) .......................................203
15.9.3 🗃🗃🗃🗃 DEMAT Account ................................................................................................204
15.9.4 🛒🛒 (💻💻:�) DEMAT → ASBA Reforms ........................................................................204
15.9.5 �🛒🛒 Types of Investors: Depending on Buying Capacity .....................................205
15.9.6 �🛒🛒 Types of Investors: Depending on Buying Behaviour...................................205
15.10 📈📈 SENSEX & other Notable Indices (उ�ेखनीय सं केतक/ सूचकांक) .........................................206
15.10.1 🐮🐮🐮🐮MSCI Emerging Market (EM) index ................................................................206
15.10.2 🌬🌬🌬🌬:�⚖� Force Majeure (अभेद्य श��) ............................................................207
15.11 🐮🐮🐮🐮🐮🐮 Sharemarket: 2020- Impact of Corona...............................................................207
15.11.1 🐮🐮🐮🐮Sharemarket- 2022: IPO Bubble Burst: Case of Paytm (फू ट गया ग़ु�ारा) ........208
15.11.2 🐮🐮🐮🐮🐮🐮 Share Market: Impact of Bond Yield .........................................................209
15.12 🗃🗃🗃🗃Securities and Exchange Board of India (SEBI) .......................................................209
15.12.1 🗃🗃⚖📜📜Securities Market Code ................................................................................210
15.13 🗃🗃🗃🗃 SEBI Investor charter (�नवेशक अ�धकार पत्र) .................................................................210
15.13.1 🗃🗃🗃🗃 SEBI Charter → Investors’ rights (�नवेशक के अ�धकार) ....................................211
15.13.2 🗃🗃🗃🗃 SEBI Charter → Investors’ responsibilities (�नवेशक क� �ज़�ेदारी है) ...............211
15.13.3 🗃🗃🗃🗃: 😪😪 SEBI’s Investor Charter: Criticism/limitation: ......................................211
15.13.4 🗃🗃🗃🗃: ✍ SEBI’s Investor Charter: Benefit/Conclusion ........................................212
15.13.5 🗃🗃🗃🗃: 🏃🏃 SEBI: why protect investors & ⏫investors participation? .................212
15.13.6 💼💼💼💼: measures to ⏫ retail investors participation- 25% public holding in Govt
Companies 212
15.13.7 🗃🗃🗃🗃: 🏃🏃 SEBI Reforms to boost investors’ confidence? .......................................213
15.13.8 T+1 Settlement instead of T+2 .......................................................................................213
15.13.9 🛒🛒 (💻💻:�:) Dabba-trading, Insider Trading, IPF ...................................................214
15.13.10 🛒🛒 (💻💻⏱:�) Algo Trading & Co-Location ...........................................................214
15.14 🛒🛒 (🔪🔪🔪🔪) Bond Market Reforms.......................................................................................214
15.14.1 🛒🛒 (🔪🔪🔪🔪: 🧔🧔🧔) Unified Bond Market (एक�कृ त बॉ� बाजार) .................................214
15.14.2 🛒🛒 (🔪🔪🔪🔪: 🧔🧔🧔) G-Sec Trading- Retail investors’ RDG @RBI ........................215
15.14.3 🛒🛒 (🔪🔪🔪🔪: 🧔🧔🧔) G-Sec Trading: RBI's NDS-OM, OTC ....................................215
15.15 🌽🌽🌽🌽🌽🌽🌽🌽 Commodity Market, FMC, SEBI merger ....................................................216
15.15.1 💍💍💍💍💍💍💍💍Commodity Market: Gold exchanges & 💼💼Budget-2021 ..................216
15.15.2 💍💍💍💍💍💍💍💍Commodity Market: Electronic Gold Receipts (EGRs) ...........................216
15.16 � Related Bodies with similar sounding names.................................................................217
15.17 📦📦 � � Investment Funds → Mutual fund (MF) for aam-aadmi ...........................217

15.17.1 📦📦 � � Mutual fund → ESG, Shariya Mutual Funds ........................................218
15.17.2 📦📦 � � Mutual fund → SIP, ELSS, ULIP ............................................................218
15.17.3 📦📦 � � Mutual fund → 🎛🎛 Mutual fund risk-o-meter ....................................218
15.17.4 📦📦 � � Mutual Fund: Backstop Entity- SEBI proposal for stressed MF ..............218
15.17.5 🛒🛒 (🔪🔪🔪🔪: 🧔🧔🧔) Bond Buying Institution in 💼💼Budget-2021 ........................219
15.18 📦📦 � � Investment Funds → Hedge Fund (हेज फ�) for rich-aadmi........................219
15.18.1 📦📦 � � Investment Funds: “Accredited Investor” ..............................................219
15.18.2 📦📦 � 🏬🏬 🛩🛩 Investment Funds → REITs / InvITs: for rich-aadmi ..................220
15.18.3 📦📦 � � Investment Funds → Sovereign Wealth Fund (सं प्रभु धन कोष) ..............220
15.19 📦📦 🏛🏛 Investment Funds → CPSE-Exchange Traded Funds (ETF: ईटीएफ) .................220
15.19.1 (🦁🦁🦁🦁)📦📦: (🏛🏛🏛🏛🏛🏛) Bharat Bond (Debt) ETF (2019-Dec) ............................221
15.19.2 (🦁🦁🦁🦁)📦📦: (🏛🏛🏛🏛🏛🏛) CPSE-ETF vs Mutual Fund .............................................222
15.20 📦📦 Investment Funds → Alternative Investment Funds (AIF) .......................................222
15.20.1 (🦁🦁🦁🦁):(🏗🏗🏗🏗) Govt’s AIF for Real Estate Sector (2019) .....................................222
15.21 🗃🗃 ⏱ Forward / Future Contracts & Call / Put Option ...................................................223
15.22 🗃🗃 🔗🔗 Derivatives & Swaps (�ु�� प्र�तभू�तयां और अदला-बदली) ..............................................223
15.22.1 🗃🗃🗃🗃: 🚛🚛🚛🚛🚛🚛 Bilateral Netting of Qualified Financial Contracts Act 2020 .224
15.23 👻👻👻👻👻👻 Participatory notes (P-Notes: पा�ट�सपेटरी नोट्स) ...................................................224
15.23.1 ✍ Conclusion: Financial Markets- �व�ीय बाजारों के बारे म� �न�षर् ...................................225
15.24 🏙🏙🏙🏙 Company types .............................................................................................................226
15.24.1 👶👶Company types based on incorporation .................................................................226
15.24.2 🏙🏙🏙🏙 Company types based on number of members ...............................................226
15.24.3 🏙🏙🏙🏙 Company types based on Ownership ...............................................................227
15.24.4 🏙🏙🏙🏙 Company Types: Misc. .......................................................................................227
15.24.5 🏙🏙🏙🏙 Corporate Governance → Small Companies given compliance relief........228
15.24.6 🏙🏙🏙🏙 Commercial Organizations: Other Types ........................................................228
15.24.7 👬👬👬👬👬👬 Corporate Governance → LLP settlement Scheme 2020 .......................228
15.25 🔨🔨 Statutory bodies in Ministry of Corporate Affairs (MCA) ..........................................229
15.25.1 🔨🔨 � Competition Commission of India (भारतीय प्र�त�धार् आयोग)............................229
15.25.2 🔨🔨 � Insolvency and Bankruptcy Board of India (IBBI) .......................................229
15.25.3 🔨🔨🔨 Ministry of Corporate Affairs also associated with: ......................................230
15.26 �👬👬 Corporate Governance (कॉप�रेट शासन).........................................................................230
15.26.1 �👬👬 Corporate Governance: notable Committees .................................................231
15.26.2 💰💰(🏥🏥🏥🏥)CSR: Corporate Social Responsibility (कॉप�रेट सामा�जक �ज�ेदारी) .............232

15.26.3 👻👻👻🗃🗃⚖ ATMANI: Corporate Governance → Companies Act relaxed .......232
15.26.4 ✍ Conclusion: Corporate Governance- �न�षर् ...........................................................233
15.26.5 ✍🎷🎷 Mock Questions for Mains (GSM3/250 Words Each)..................................233
15 🐮🐮🐮🐮🐮🐮PILLAR#1C: SEBI-SHARE MARKET

MCQs from SEBI/ Share market /Financial Market / Companies Act Topic in UPSC Prelims
Year 2014 2015 2016 2017 2018 2019 2020 2021 2022
MCQs 1 MCQ 0 2 0 1 1 3 1 2
These Qs mostly tested very basic foundation level understanding of share market. So, we are not here
to become Investment Bankers / Mutual Fund managers 🎓🎓✋#🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
15.1 🗃🗃SECURITIES (प्र�तभू�त)
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 of
company. If no profit, then no dividend. whether company makes profit or not.
Company’s owners, proprietors (मा�लक) creditors of the company (लेनदार).
Have last claim during liquidation first claim.
नीलामी से �मलने वाली रकम पर पहला हक इनका
Attractive in boom period, since companies Attractive in slowdown period, since bonds
more likely to make profit so more chances of provides fixed interest to the investor
good dividend. Although during corona, many irrespective of profit of the company. �नवेशकों को
investors tried to buy shares cheap from मं दी के दौरान �ादा अ�े लगते ह�, �ोंिक जो�खम कम
secondary market, with hopes of getting profit
after corona-recovery.
� �FAQ: Bond and Debenture are not same. They’re having internal technical differences.
Ans. UPSC not asking b.Com/M.Com pedantry here. Then why burden brain’s memory card?

15.2 🗃🗃 🛒🛒FINANCIAL / SECURITIES MARKET: MEANING AND TYPES
Financial Market is the place where buying and selling of securities takes place. Doesn’t require
physical location. Can be done online / telephone as well.
Classifi. Market Subtypes
Tenure: 1. ⏰Money Market (<1 year maturity) मुद्रा बाजार
(अव�ध) 2. 🗓🗓Capital Market (1 year/> maturity) पूंजी बाजार
Freshness 1. Primary Market (where new securities are issued for the first time). Helps a
प्राथ�मक company /govt to connect with the investor. It has no separate physical existence
एवं but classified like this, for economic analysis. (इस बाजार का अलग से भौ�तक �ान नहीं होता
िद्वतीयक िकंतु आ�थक आकलन के �लए आंकड़ों म� अलग से िदखाया जाता है)
बाजार 2. Secondary Market (where the old securities are resold). It has physical existence
such as Bombay Stock Exchange (BSE) at Dalal Street, Mumbai.
3. It 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 जाएं गे.)
Settlement 1. Future Market: Where parties write contract today to buy/sell something at
(�नपटान) specific price on a future date. भ�व� क� िकसी तारीख को खरीद/�बक्र� के �लए वतर्मान म�
सौदा/समझौता िकया जाए
2. Spot Market: if bought & sold for immediate delivery.
Asset - Depending on what asset is traded, market can be divided into Bond (Debt)
(प�रसं प��) market, Share (Equity) market, Gilt-Edged Securities Market, Foreign Currency
Market, Commodity Market etc.

Classifi. Market Subtypes
- if there was a supermall where all these products were available in one place it
will be called “Universal Exchange”. SEBI permitted BSE & NSE to launch such
thing (2018).
15.3 🔪🔪🗃🗃 DEBT INSTRUMENTS (ऋण उपकरण)
Bond holders are 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 अव�ध ऋण उपकरण )
- Tenure = less than 1 year. Usually ‘unsecured’ because not backed by any asset.
- Usually sold at discount and re-purchased at Face Value or Par Value. The difference between
these two prices is the interest earned by investor. स�े म� बेचकर मूल भाव पर खरीदा जाता है
- 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 3rd party → 3rd party can demand money from borrower. (परक्रा� और ह�ांतरणीय)
- They’re also called Near Money = Asset that is highly liquid = can be readily converted into cash.
15.3.2 🔪🔪🔪🔪⏰:🧔🧔Short term debt instruments → by Government

1. State govt’s treasury bills (T-bill). But stopped since 2001.
2. Union govt’s treasury bills (T-bill: 14, 91, 182 and 364 days) & Cash Management bills (CMB:
upto 90 days, started in 2009).

3. WMA (ways and means advances): given below
15.3.3 🔪🔪🔪🔪⏰: 🐯🐯🐯🐯 🧔🧔� Short term debt instruments → by Govt → WMA
⇒ When Govt faces short term mismatch in receipt (income) and payment (Expenditure)
⇒ RBI Lends money on short term (3 months). Not counted in fiscal deficit figure. (More in
📑📑Pillar2D: FRBM)
⇒ Corona-crisis: ⬆mismatch in cashflow because सरकार क� आमदनी और खचर् म� अंतर बढ़ गया �ोंिक
o ⬇Govt Income: Sales ⬇ GST, Govt gave extension in tax payment deadlines
o ⏫Expenses: free LPG, food, mask etc.
⇒ So, ATMANIRBHAR Bharat → RBI ⏫WMA limits by 60% than before to help the Union
(1.20lcr) and State Governments (₹51,560cr collectively).
⇒ If upto above amount of ₹₹ borrowed = its WMA: loan interest = repo%
⇒ If beyond above amount borrowed then called ‘Overdraft’: loan interest repo+2%
🎓🎓✋^ above % or quantity or figures not imp for scope of exam
15.3.4 🐯🐯🐯🐯🐯 Consolidated Sinking Fund (CSF) for State Govts’ repayment
⇒ Started in 1999. It has >₹1.25 lakh crore by 2019. (समेिकत घाटा �नपटान �न�ध)
⇒ Annually, State Govt has to contribute money equal to 1-3% of its outstanding market loans to
this fund kept with RBI. (रा� ने �जतना कजार् उठाया है उसके सामने इस �न�ध म� थोड़ा पैसा जमा करना है)
⇒ CSF is a fund outside consolidated fund of the State and public account of the State. (Ref
📑📑Pillar2)
⇒ CSF meant to be used for only 1 purpose= repayment/redemption of loans taken by the State
Government. (बकाया ऋण चुकाने के �लए ही इस �न�ध का उपयोग होगा)
⇒ 2020-May: RBI relaxed technical norms related CSF till to help the State Govts. (तकनीक� �नयमो मे
कु छ छू ट दी)
What about GST cess release and end-to-end market borrowing by Union/State?
(Ans 📑📑Pillar#2: Taxation:GST. )
15.3.5 🔪🔪🔪🔪⏰Short term debt instruments → by borrowers other than Govt

Table 1: how does this work in real life? Ans. not important just remember 1-Word Association
Borrower 🔪🔪🔪🔪⏰ Short term debt instrument (लघु अव�ध के ऋण पत्र)
- Bill of Exchange, Hundi, Commercial Papers, Promissory Notes.
- Side note: Currency Note is a ‘Promissory Note’ issued by RBI Governor
Company
however, he’s not bound to pay any interest. He just promises to
exchange it with other currency notes & coins of equal face value.(More

in 📑📑Pillar#1A1)
Merchant to Commercial Bill.
bank
Banks / NBFC Certificate of Deposits (जमा प्रमाण पत्र).
It’s the interest rate when Financial Intermediaries (Banks/NonBanks)
Call Money
borrow for ONE DAY among themselves.
Notice Money Same as above but for 2 to 14 days.
Collateralized Borrowing and Lending Obligation.
CBLO Clearing Corporation of India Ltd (CCIL) helps Financial Intermediaries (FI)
to get short term loans through this instrument.
Repo Repo and Reverse Repo= Ref: Pillar#1A2: Monetary Policy handout.
15.4 🔪🔪🔪🔪⏰DEBT → SHORT TERM → FACTORING & TREDS
⇒ Suppose an MSME seller has sold cardboard boxes for jiophones to Mukesh Ambani but Mukesh
Ambani says he will pay the bill next month. Presently this is an unpaid invoices.
⇒ MSME seller can pledge this invoice to a factor (bank/NBFC) to avail loans. (छोटी कं प�नयां बड़ी
कं प�नयों को सामान और सेवा बेचती है उसका जो बकाया पैसा है उसके �बल को �गरवी रख के लघु अव�ध का कजर् ले आये)
Bill Discounting Factoring
MSME seller collects the money from Buyer Factor (lender: bank/NBFC) directly collects
(Ambani) & delivers ₹ ₹ to the Factor the ₹₹ from unpaid invoices from Buyer
(bank/NBFC). (Ambani).
15.4.1 🔪🔪🔪🔪⏰Factoring Regulation (Amendment) Act, 2021

to amend the Factoring Regulation Act, 2011
Before After
Banks and only “Factoring Companies Banks and all types of NBFCs allowed (After
(NBFC)” allowed to give loans under this registering with RBI). → So now more than

Before After
system. There were only seven NBFCs 9000 NBFCs in India can give loans → this will
registered as Factoring Companies. increase the availability of loans for the MSME.
-- earlier it was less. RBI given more powers to regulate this
business.
-- earlier it was less. More legal clarity about TReDS system.
Earlier this was not clear and so MSME could Need to register the invoice-pledge-factoring-
commit fraud of “dual financing” i.e. Pledging loan transaction on A central registry set up
the same and per invoice as collateral in under the SARFAESI Act. This will prevent the
multiple Bank/NBFCs. dual financing frauds.
15.4.2 🔪🔪🔪🔪⏰: 📡📡 TReDS platform to connect factoring-players.

⇒ Just like quickr/olx connect buyers with sellers, the Trade Receivables Electronic Discounting
System (TrEDS) online-platform Connect the factors (bank/NBFC) with the borrowers (MSME).
⇒ Examples of 3 TReDs platforms: M1xchange, RXIL, and A.TReDS. Have to register with RBI.
⇒ Most famous is RXIL - Owned by the Small Industries Development Bank of India (SIDBI) and
the National Stock Exchange of India Limited (NSE), State Bank, ICICI and Yes Bank .
15.5 🔪🔪🔪🔪⏰DEBT → INTEREST RATE BENCHMARKS: LIBOR, MIBOR, MIFOR

London Inter-bank Offered Rate (LIBOR) is the average interest rate at which
banks in London give short term loans to each other.
🤩🤩Objectives/usage/application of LIBOR?
- (some) global banks decide their call money /notice money rates based on it.
- (some) external commercial borrowing (Indian Bizman taking loans from
abroad),
- (some) FCNR deposit interest rates (Non resident Indians depositing foreign
LIBOR currency savings in Indian banks to earn interest)
😰😰Controversy? LIBOR methodology had become unreliable & fraud-ridden in
recent years. So, UK regulator ordered stopping LIBOR by the end of 2021.
⇒ So accordingly, Financial intermediaries across the world are changing their
LIBOR based contracts/agreements to other benchmarks. e.g. TONAR
(Tokyo/Japan), SARON (Switzerland), SOFR (USA), SONIA (UK-Sterling-
Pound), ESTR (Euro) etc. What are their full forms? how they work is not
important.#🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
In LIBOR definition, replace the word “London” → “Mumbai” and “Global” →
MIBOR
“Indian”, and you’ll know what MIBOR is!
⇒ Mumbai Interbank Forward Outright Rate (MIFOR) is a benchmark that
MIFOR derives values from LIBOR and a few other indicators etc.
⇒ 🤩🤩objectives/usage/application? Similar to LIBOR.

⇒ 😰😰Since LIBOR is expiring by the end of 2021 → MIFOR will also stop
working, Because it derives value from LIBOR value. 2020-Nov: RBI
announced working on a new Indian benchmark to address this issue.
How will above things affect Indian economy in 500 ways? NOTIMP even though
theHindu and Indian Express writing 800 words column it. Just look at previous
MCQs#🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
🔠🔠❓Find Correct statements☹Asked in UPSC-Pre-2018)

1. The RBI manages and services Government of India Securities, but not any State Government
Securities.
2. Treasury bills are issued by Govt of India and there are no treasury bills issued by State Govts.
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
🔠🔠❓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
🔠🔠❓ In Indian economy, non-financial debt includes ___ ? (Prelims-2020 SetB- Q84)
1) Housing loans owed by households
2) Amounts outstanding on credit cards
3) Treasury bills
Codes: [a) 1 only [b) 1 and 2 only [c) 3 only [d) 1, 2 and 3
🔠🔠❓ Which of the following phrases defines the nature of the ‘Hundi’ generally referred to in the
sources of the post-Harsha period? (UPSC-Prelims-2020)
[a) An advisory issued by the king to his subordinates
[b) A diary to be maintained for daily accounts
[c) A bill of exchange [d) An order from the feudal lord to his subordinates
🔠🔠❓Find correct statement(s) (UPSC-Prelims-2020)
1) ‘Commercial Paper’ is a short-term unsecured promissory note.
2) ‘Certificate of Deposit’ is a long-term instrument issued by the Reserve Bank of India to a
corporation.
3) ‘Call Money’ is a short-term finance used for interbank transactions.
4) ‘Zero-Coupon Bonds’ are the interest bearing short-term bonds issued by the Scheduled
Commercial Banks to corporations.
Codes: [a) 1 and 2 only [b) 4 only [c) 1 and 3 only [d) 2, 3 and 4 only
15.6 🔪🔪🗃🗃🗓🗓 LONG TERM DEBT INSTRUMENTS (दीधर्-अव�ध ऋण- उपकरण)

Tenure = 1 year/>. Further sub-division based on who is the Borrower?
15.6.1 🕯🕯🗃🗃🗃🗃🧔🧔Colonial era Govt. to borrow money
1. Coupon Bonds: Contain detachable coupons. Coupons are presented to the issuer to claim the

interest. Therefore, bond interest rate is also called ‘coupon rate’.
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.
15.6.2 💡💡🗃🗃🗃🗃🧔🧔Modern day Government to borrow money

⇒ Government securities, Dated securities, Sovereign bonds (सं प्रभु बांड), Kisan Vikas Patra etc.
(more in 📑📑Pillar 1D: Financial inclusion lecture)
⇒ Also called Gilt Edged securities (उ� / अ�ग्रम दज� क� प्र�तभू�तया) because repayment is assured by
Government. (But then, they give lower interest rate because of low risk to the investor).
⇒ Global Credit Rating Agencies gives ‘rating’ to sovereign bonds. “AAA” is the 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 the Govt bonds of
India, China, Russia despite the economic growth. भारत म� अ��-खासी आ�थक वृ�द्ध के बावजूद भी यह प�पाती
�वदेशी सं �ान भारत को खराब रेिटंग देते ह�
15.6.3 🥇🥇🥇🥇🥇🥇Bonds by Modern day Govt. to curb Gold Consumption
⇒ Real Interest Rate (वा��वक �ाज दर) = Nominal (ना�मत) Interest minus Inflation.
⇒ When Real Interest is negative, purchasing power ⏬ despite ⏫ in money quantity in bank
account. Then people prefer to park money in gold/real estate- which is not very beneficial to
economy. So..
15.6.3.1 🍅🍅🍅🍅🍅🍅🍅🍅 Inflation Indexed Bonds (IIB-मुद्रा��त सूचकांिकत बांड)

⇒ RBI launched in 1997, 2013, 2018 to provide positive Real interest rate to household, thereby
reducing the Gold consumption & Current account Deficit (CAD) & weakening of rupee against
dollar (else expensive crude oil → petrol, diesel inflation.(More in 📑📑Pillar#3).
⇒ e.g. Inflation Indexed National Savings Securities-Cumulative (IINSS-C) with Interest Rate =
CPI + 1.5% [and Principal also protected against inflation.] अगर महंगाई दर बढ़ेगा तो आपको �ादा �ाज दर
िदया जाएगा और मूलधन भी �ादा वापस कर�गे- तािक जनता का सोने म� �नवेश करना का पागलपन थोड़ा कम हो।

�❓MCQ. Find correct about “Inflation-Indexed Bonds (IIBs)” in India (Prelims-2022)
1. Government can reduce the coupon rates on its borrowing by way of IIBs.
2. IIBs provide protection to the investors from uncertainty regarding inflation.
3. The interest received as well as capital gains on IIBs are not taxable.
Codes: (a) 1 and 2 only (b) 2 and 3 only (c) 1 and 3 only (d) 1, 2 and 3
�❓MCQ. Find correct statements about Convertible Bonds (Prelims-2022)
1. As there is an option to exchange bond for equity, Convertible Bonds pay a lower rate of interest.
2. The option to convert to equity affords the bondholder a degree of indexation to rising consumer prices.
Codes: (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2
15.6.3.2 🥇🥇🥇🥇🥇🥇🥇🥇 Sovereign Gold Bond (2015: सं प्रभु �णर् बांड)

RBI issues them on behalf of govt. Denomination: gold grams. But, RBI/Govt doesn’t ‘promise’ to
give you gold. They only promise to give you ₹₹ equivalent of latest gold price on maturity. इस बांड का
मू� सोने के वजन के �च��त होगा. िक�ु प�रप�ता समय पर आपको सोना नहीं, उस सोने के वजन के िहसाब से मू� �जतना �पया द�गे।
- Annual interest 2.5-2.75% (depending on which year’s ‘batch’ you bought.)
- Tenure: after 8 years you get the amount equivalent to prevailing gold prices at that time. हर साल
�नयत �ाज, प�रप�ता समय पर बाजार म� यिद सोने का दाम बड़ा होगा तो आपको मूलधन से भी �ादा ₹₹ वापस िदए जाएं गे.
- Eligible investor categories: Indian resident individuals, Hindu Undivided Families (HUFs),
trusts, universities and charitable institutions. �सफर् यह लोग या सं �ान हीं खरीद सकते ह�
- How much can you buy? Minimum 1 gm to max upto 20kg depending on investor’s category.
- From where to buy? While RBI ‘sells’ it but customers buy it via following outlets: banks (only
selected types of banks), post offices, selected stock exchanges (NSE and BSE) and a few other
institutions.
- 🤩🤩Benefit / challenges ? reduce the import-demand for physical gold and shift a part of the
domestic savings -- used for the purchase of gold -- into financial savings. (More in
📑📑Pillar#3A along with Gold Monetization Scheme. )
15.6.4 🔪🔪🔪🔪🔪🔪� Long term debt instruments by Companies

1) Bonds (British Term), Debentures (American Term): Internal difference not important.
2) If the company has high risk of default on repayment, the Credit Rating Agencies will mark it as
Junk 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. �ादा जो�खम पूणर् कं पनी ने �नवेशक को लुभाने के �लए �ादा �ाज देना होगा
3) Redeemable Bonds (मो�): will repay regular interest and will return principal on maturity.
4) Irredeemable Bonds (अमो�): 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. (Ref: Pillar1B2= AT1 Bonds)
5) Non-convertible Bond/Debenture = can’t be converted into shares.
6) Hybrid instruments: Issued as “Bond” but can be converted into Share. E.g. Optionally Fully
Convertible Debentures (OFCD).

15.6.5 🔪🔪🔪🔪🔪🔪Long Term Debt Instruments: Other issuers
Issuer Objective? उद्दे�?
- Urban Local Bodies Issue Municipal bonds to borrow money from public.
ULB - Ahmedabad was 1st to launch Municipal bonds (1998). 2020-Lucknow 9th city
in India & 1st in North India.
- 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: US Dollars
- 2018: launched world’s first Blockchain Offered New Debt Instrument called
World Bank Bond-i. Sold in Australia using Ethereum blockchain technology. Tenure: 2
🌐🌐 years @~2% interest. Denomination: Australian Dollars, hence also called
“Kangaroo Bond”.
- Evergrande is a Chinese real estate developer company. Facing trouble
Evergrande
repaying its bonds. Foreign investors panicked, resulting in crisis in Chinese
Crisis
and global financial markets. HOW?NOTIMP.
15.6.6 🔪🔪🔪🔪🔪🔪Long Term Debt Instruments: Masala, Maharaja, Panda Bond

🌶🌶 Masala Bonds: These rupee denominated bonds issued outside India, to borrow money for
Indian companies. World Bank’s sister agency International Financial Corporation (IFC) launched
‘Masala Bonds’ to help Indian public sector and pvt sector companies.
⇒ 2015: RBI allowed Indian entities to launch such Masala Bonds.
⇒ 2017: National Highways Authority of India (NHAI) also issued Masala Bonds in London Stock
Exchange to mobilize money for Indian Highway projects.
⇒ 2019: Kerala became the first State of India to issue Masala Bonds. Its Kerala Infrastructure
Investment Fund Board (KIIFB) issued Masala Bond at the London Stock Exchange.
Denomination: ₹ ₹ Total Size: ₹ 21.5 billion. Tenure: 5 years. Masala Bonds are usually issued by
institutions with AAA rating. Since KIIFB has BB rating, hence offered higher interest rate:
~9.7% (वरना कोई खरीदता नहीं)

Table 2: rapid revision table for Bond types based on currency
🤲🤲Issuer → 🌐🌐 Borrowing from 💸💸 In currency → 🔪🔪🔪🔪 Is called
→
Non-Chinese → China → Renminbi (=yuan) 🐼🐼 Panda Bonds
Non-Australian Australia Australian dollar 🦘🦘 Kangaroo Bonds
Non-Indian India Rupee � Maharaja Bonds
(Indian or Outside India Rupee 🌶🌶 Masala Bonds
a non-Indian on
behalf of Indians)
Non-Taiwanese Taiwan OTHER than Taiwan Formosa Bond
entity dollar (इसके अलावावाली
मुद्रा)
15.6.7 🔪🔪🔪🔪🔪🔪 Long Term Debt Instruments: Special purpose: 🚦🚦🚦🚦 Surety Bonds
⇒ Party#1 Road contractor pays fees/premium to party#2 insurance company. Insurance company
gives him a surety bond.
⇒ Road contractor gives this surety bond to party#3 Highway Ministry.
⇒ if the road contractor is not finishing project within prescribed time-limit/quality-limit →
Insurance company will pay ₹₹ to Highway Ministry.
⇒ Earlier, Insurance companies were not allowed to issue surety bonds in India. So contractors had
to submit ‘Bank Guarantees’ to Govt. But then 👜👜👜👜Budget-2022 said we’ll allow Surety Bonds.
IRDAI will regulate this.
�Sub-types of Surety Bonds: Bid Bonds, Performance Bonds, Advance Payment Bonds and
Retention Money Bonds. But we will not study them OR their internal difference. � � � � �
15.6.8 🔪🔪🔪🔪🔪🔪 Long Term Debt Instruments: Special purpose Bonds- Misc.
Oil Bonds Explained in �
Pillar#2- along with taxes on petrol and diesel.

⇒ US Govt (1870s) and British Govt (1917) had issued Consol bond.
⇒ Consol is short form for ‘consolidated annuities’.
🤧🤧🔪🔪🔪🔪♾ ⇒ Consol bonds have no maturity date. They are perpetual bonds that paid 4-5%
(proposed) interest rate, for an infinite time period. In theory they don’t repay the
Consol Bonds principal amount back to investor. Thus, they’re Irredeemable Bonds (अमो�).
for Corona- ⇒ However, in reality, the Govt may redeem(/buyback) the bonds after certain
revival years, by paying principal to the investor. कु छ वष� बाद सरकार पुनः खरीद लेगी
⇒ Some economists suggesting Indian govt should issue Consol Bonds for Post-
corona economic revival. (अथर्�व�ा को पुनर्जी�वत करने के �लए)
⇒ 2019-May: Commerce ministry’s Dr. Surjit S. Bhalla Committee ‘to improve
🐘🐘 (Proposed) India’s share in global trade’ suggested ‘Elephant Bonds’. Tenure: 25-years.
Elephant Bonds ⇒ People declaring Black Money will be required to invest x%. → ₹ ₹ to be used
for black money only for infrastructure projects. �जनके पास काला धन िक�ु सजा से बचना है तो वे इसम� �नवेश
कर� और पैसा बु�नयादी अवसं रचना �नमार्ण म� उपयोग होगा
For renewable energy, pollution control, environment friendly projects.
- World’s first Green Bond launched by World Bank (2007)
- India’s first Green Bond launched by Yes Bank (2015)
🌿🌿Green bonds - BRICS-New Development Bank issued Yuan- green Bonds (2016)
(ह�रत बांड) - Indian Renewable Energy Development Agency (IREDA) launched India’s
पयार्वरण सं र�ण और first Masala Green Bond at London Stock Exchange (2018).
�� ऊजार् सं बं धी - 2021: Ghaziabad Municipal Corporation (Uttar Pradesh), issued first-ever
Green Municipal bond in India. (भारत का सवर्प्रथम ह�रत नगर �नगम बॉ�)
- 2021: India’s first ever euro currency- denominated green bonds by Power
Finance Corporation (PFC, an NBFC company under Power Ministry).
A sub-type of green bond, where money borrowed for climate resilient water /
💦💦Blue Bond
marine / fisheries projects. E.g. 2018- Seychelles issued world's first 'Blue Bond,' to
(नील बांड)
expand its marine protected areas and fisheries sector. (समुद्री सं र��त �ेत्र और म� �ेत्र)
Money is invested in bonds of companies having good track record of
ESG Bonds Environment, Social and Governance (ESG) बॉ� �नवेश उन कं प�नयों म� जो पयार्वरण, समाज
और शासन क� म� अ�ा काम कर रहे ह�
⇒ Govt / Insurance company issues such bond. Investor is promised with high
annual interest rate. But, if a natural disaster happens, his principal will not be
⛈Catastrophe returned.
Bond (आपदा) ⇒ If disaster doesn’t happen then principal will be returned.
⇒ अ�ा �ाज द�गे िकंतु आपदा �ई तो मूलधन वापस नहीं कर�गे �ोंिक वह सारा मूलधन आपदा प्रबं धन म�
इ�ेमाल कर�गे

2019: SIDBI issued ₹ 300 cr. worth Women’s Livelihood Bonds (मिहला आजी�वका बॉ�)
with the help of World Bank, UN Women org etc.
⇒ These bonds will be offered to High Net worth Individuals (HNI), Impact
� Social Investors (rich people interested in ‘indirect’ social service) etc. They’ll earn
Impact Bonds 3% annual interest rate for tenure of 5 years.
(सामा�जक प्रभाव ⇒ Money collected → SIDBI → Micro Finance Institutes (MFI) → loaned to
बांड) individual women entrepreneurs in food processing, agriculture, services etc.
2021: Skill Impact Bond: By National Skill Development Corporation (NSDC)
with help of global partners from UK, Dubai etc.
$14.4 million for skilling 50,000 Indian youth job.
issued by Not for Profit Organisation (NPO) for social service. They repay
Zero coupon NEITHER principal NOR interest.
zero principal 🚩🚩🚩FAQ: Then why don't they simply accept it as 'donation'? Ans. May be PR /
instrument media drama exercise. May be there is tax-saving in it. Newspaper didn't bother to
explain so I didn't bother to google. #🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
It is a sharia-compliant bond instruments used in Islamic finance. Was in News
☪Sukuk because Pakistan Govt issued such bonds. How it works? In which currency is it
Bond/Islamic issued? How it’s different than ordinary bonds?
Bond
✋NOTIMP4Exam after looking at old papers.
🔠🔠❓ Find correct statement about ‘IFC Masala Bonds' (UPSC-Pre-2016)
1. The International Finance Corporation, which issues them, is an arm of the World Bank.
2. They are rupee-denominated bonds and are a source of debt financing for public & private
sector.
Answer Code: (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither1 nor 2
🔠🔠❓ 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
15.6.9 🗳🗳(🔪🔪🔪🔪)⏳Electoral bonds (चुनावी बांड, 2017 )

⇒ Announce in Budget 2017 → Notified by Dept. of Economic Affairs, Finance Ministry (आ�थक
मामलों का �वभाग). Only SBI 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 Citizen or Company registered in India → deposit money in
their bank account → use that ₹₹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 1951 (RPA: लोक-प्र�त�न�ध� अ�ध�नयम) and which has secured 1% /> votes polled in last
Lok Sabha or Vidhan Sabha elections.
⇒ 🗓🗓Validity (वैधता अव�ध)? Only 15 days from date of purchase. Within that time, buyer must
donate, and political party must deposit in its SBI (current) bank account. No interest payable.
⇒ Characteristics of electoral bonds? (�वशेषताएँ )
○ 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)
○ Interest Free banking instrument (zero interest payable to anyone).
○ Can’t sell it to third party, can’t pledge it for loans. (�गरवी नहीं रख सकते)
⇒ 🤩🤩Benefits of electoral bonds?
○ Transparency in political funding. (राजनी�तक चं दे म� पारद�शता)
○ Reducing influence of cash and black money in election, (काले धन का प्रभाव)
○ Confidentiality to donor- he can give to any political party without his wife, staff, CA,
Lawyers, journalists, local goons etc. knowing the name of recipient political party. (दाता
को गोपनीयता)
15.6.10 🔪🔪🔪🔪: 🤑🤑 Bond Yield, Yield Inversion, Negative Yield
Bond Yield (More in � Pillar#1A2: Operation Twist)
Yield Inversion Not Important but u can do PHD here
youtube.com/watch?v=BDACRJAo-48
Negative Yield Not Important/outdated
15.7 ⚖🗃🗃 EQUITY INSTRUMENTS (इि�टी)

⇒ Equity holders are called owners / proprietors of the company.
⇒ If company makes profit → they get dividend. They’ve last claim during liquidation.
Keywords Features

Ordinary shares have voting power in the meetings of shareholders. Last claim during
साधारण शेयर: liquidation.
Preferential During liquidation, these investors will be given money before the ordinary
Shares shareholders. Further subtypes: (i) with voting power (ii) without voting
अ�धमा� शेयर: power.
Shares sold @discount to directors & employees for their value addition to
Sweet Equity
company [Amount is regulated under Companies Act]
- 1)What is this? NOT IMPORTANT.
- 2) How different from Sweet Equity? NOT IMPORTANT.
- 3) Repeating for third time for Babu-Shonas= NOT IMPORTANT.
🎓🎓✋
Sweat Equity 🚩🚩🚩FAQ: I’m a commerce graduate / hot-shot MBA-walla and I’ve 500
इसका कु छ काम नहीं jaat ke Counter arguments. Ans. Good. Plz Keep it with yourself. This course
परी�ा म� for teaching some basic one liners for seeking MCQ. UPSC not asking
b.Com/M.Com PHD stuff from here. Then why burden brain’s memory card
with extra info?
Employee Stock Option Plan: Shares may be given free to employees to
ESOP increase their loyalty/motivation for company. Ref: (More in 📑📑Pillar#1B2-
कं पनी के कमर्चारी को PSB reforms)
तन�ाह के अलावा PS: ES-2020 used the term Employee Stock Option Plan. So, I’ve written.
शेयसर् भी �दए जाएं Some website mention Employee Stock Ownership Plan- how these two
(ownership/option) are similar or different? 🎓🎓✋ANS NOT IMP.
Shares whose market price remain excessively low compared to its face value.
Such pathetic companies give zero or little dividend.
Penny stocks 🚩🚩🚩FAQ: I’m a commerce graduate / sharemarket ka hot-shot trader and
फालतू कं पनी का I’ve 500 jaat ke Counter arguments. Ans. Good. Plz Keep it with yourself.
This course for teaching some basic one liners for seeking MCQ. बाक़� आप अपना
देख लो। UPSC not asking b.Com/M.Com PHD stuff from here. Then why
burden brain’s memory card with extra info?
Blue Chip stocks Shares of a nationally recognized, well-established and financially sound
दमदार कं पनी का company with a history of generating good dividend.
Venture Capital VCF are professional firms helping startup companies with seed capital.
Funds (could be debt / equity / hybrid) (�ाटर्अप कं प�नयों को शु�आती पूंजी िदलवाते ह�)
Rich person helping startup companies out of his hobby, passion, profit
Angel Investors motive or time pass. e.g Ratan Tata in Urban Ladder app. (could be debt /
ऐंजल �नवेशक equity / hybrid).
Related topic: 📑📑Pillar#2: Angel Tax in Budget/blackmoney
Invests in startup company with goal of acquiring the company or its
Corporate
technology at later date. �ाटर्अप कं पनी म� �नवेश करता है तािक भ�व� म� उसक� टे�ोलॉजी पर
Strategic Investor
क�ा कर सके
RGESS Rajiv Gandhi Equity Savings Scheme= Govt gives income tax benefit to

Started in 2012 people who invest in the share market for the first time. Discontinued by
Budget-2017
म�मवगर् का नया �नवेशक पहली बार शेयर बाजार म� �नवेश कर� तो आयकर म� राहत
When promoter of a company e.g. Mukesh A. of Reliance or Subhash
Chandra of Zeegroup pledges his shares as collateral to borrow loans from a
Share Pledging
bank / NBFC.
जब कं पनी का सं �ापक अपने शेयर �गरवी रखे पैसा उधार लेता है
🔠🔠❓ 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
🔠🔠❓ An individual investor who invests in the e-project usually during an early stage is (UPSC-
IES-2020) A) corporate strategic investor B) founder capital C) angel investor D) venture capital
15.8 ⚖🗃🗃 METHODS OF ISSUING SHARES

Share have printed price on the certificate called Face Value or Par Value (सममू�). 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 bank)

for a fee.
Initial public
offer (IPO) ⇒ Underwriter drafts Red Herring Prospectus for SEBI approval.
प्रारं�भक लोग ⇒ Then, Underwriter invites application from public & sells them shares at face
�नगर्म value or higher. If less people subscribe → then underwriter will buy the
unsold shares by himself.

Sidenote: SEBI’s Innovators Growth Platform Framework = It is a set of
easy/relaxed rules to help Startup companies to launch their IPO/Shares. (शेयर
बाजार म� �ाटर्अप कं पनी के शेयर जारी करने के �लए सेबी ने �नयमों म� कु छ �रयायत� दी है)
⇒ If company had already issued IPO-shares previously, and now again issuing
Follow on
more shares to obtain more capital→ it is called FPO.
public offer
⇒ Rights issue (अ�धकार �नगर्म): Company issues additional shares but gives first
(FPO)
right to existing shareholders to buy them, if they refuse then offered to
अनुसरण…
outsiders.
Offer for sale / Private placement / Qualified institutional placement (QIP)
Other
/Issuing bonus shares / share splitting / share swap / share buyback / PE Ratio etc.
methods /
= NOT IMP. However, to satiate your curiosity you may self-study them from
terms
Investopedia, but that’s not the best use of your time!
15.8.1 ⚖🗃🗃 IPOs- Big sized IPOs in recent years
⇒ 2019: Saudi Arabia’s public sector oil company Aramco issued IPO worth >$25 billion. It was
listed at Riyadh’s Tadawul Stock Exchange.
⇒ 2020: Jack Ma, founder of China's e-commerce company Alibaba. He started "ANT" company to
provide Financial services such as loans, insurance, Mobile payment (App 'Alipay') IPO worth
$30 billion
⇒ 📔📔📔📔ES20 & 📔📔📔📔ES21 : No of IPO-issuing Companies have ⏬: 134 (2017) → 103 (2018) →
49 (2019) Which indicates problems like protectionism (=trade war/nations imposing heavy tax
on imported items to protect local industries (📑📑Ref: Pillar3), NPA (bad loans 📑📑Ref
Pillar1B2), slowdown in consumer demand by Corona= preventing some of the companies from
expanding further.
⇒ 2021: Sharemarket revival → many new IPOs launched e.g. Zomato, Paytm (Company Name
One97- Founder Vijay Shekhar Sharma), Nyakaa Fashion E-commerce (Founer Falguni Nayar
became richest self-made woman billionaire of India).
15.8.2 ⚖🗃🗃 IPOs → LIC & FDI in LIC?

Refer to �Pillar#1D1: Insurance Sector
15.8.3 ⚖🗃🗃 🤵🤵 IPO → Special Purpose Acquisition Company (SPAC)

⇒ SPAC is a type of company which does not do production of goods and services by itself, so it's
also labelled as shell company/blank cheque company. (�यं से िकसी व�ु या सेवा का उ�ादन नहीं करती)
⇒ It is created only to acquire share (equity) capital from the public through initial public offering
(IPO) & use that money to buy / acquire another company. (मात्र अ� कं पनी का अ�धग्रहण करने के �लए
बनाया)
⇒ If the acquisition is not made within two years of the IPO, the SPAC is delisted and the money is
returned to the investors.
⇒ Why in the news? USA's RMG-II is a Nasdaq stock exchange-listed Special Purpose Acquisition

Company (SPAC). RMG-II acquired an Indian company "ReNew Power" through this process.
15.8.4 ⚖🗃🗃 🌐🌐 ADR/GDR: Shares in Videshi locker
Figure 1: �बना अमरीक� SEBI मे पं जीकरण िकए, उनके शेयरबाजार से पैसा उठाऊँ , तो कै से?
- A non-American company wants to mobilize money from American share market but does not
want to go through the lengthy & complex process of registration with the American
sharemarket regulator.
- Then such non-American company gives its shares to an American bank.
- Based on those (non-American) shares, the American bank will issue American Depositary
Receipts (ADR: अमरीक� �नपे�ागार 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: usually USD or Euro.
Share issuing company → Deposits his company’s shares That bank issues -- in local
in a bank of → market in – currency
Non-American company American Bank → Issues ADR (in $) in American
→ Sharemarket
Non-Indian company → Indian Bank → Issues Bharat / Indian depositary
receipt (IDR) (in ₹) in Indian
Sharemarket
15.8.5 👻👻⚖🗃🗃 🌐🌐 ATMANIRBHAR reforms in ADR/GDR/BharatDR
Too technical / getting outdated so DELETED from latest Handout.
15.8.6 🔗🔗🔗🔗 Initial Coin Offering (ICO)
Figure 2: Cryptocurrency मे पागल �ई प��क को िफरसे बेवकू फ बनाऊ, तो कै से?

⇒ Company wants investors’ money for launching new cryptocurrency, or service/app related to
an existing cryptocurrency.
⇒ Then, it’ll issue Initial Coin Offering (ICO) → Investor subscribes to it, and receives ‘tokens’
(and not SHARES). Investors can use the ‘tokens’ to buy companies coins/services or may sell it

to a third party.
⇒ RBI has cautioned Indians not to invest in such instruments, because of the dangers which we
already learned in the Handout Pillar#1A-1: Bitcoins.
15.9 📈📈 STOCK EXCHANGES / SECONDARY MARKET: MEANING & EXAMPLES
Shares are issued through IPO @Primary market. Then, they can be resold at secondary market,
commonly known as Share market or Stock Exchange or Bourses.
⇒ World’s Oldest: Amsterdam Stock exchange, Netherlands (1602)
⇒ Asia’s Oldest: Bombay Stock Exchange (BSE: 1875)
⇒ India’s stock exchanges chronology: BSE → A’bad → Kolkata → NSE (early 90s)
⇒ Just like Banks have Core Banking Solutions for e-banking, Stock exchanges have their electronic
platforms for trading. E.g. BOLT (BSE's On-line Trading System), NEAT (National Exchange for
Automated Trading). They communicate using VSAT (Very Small Aperture Terminal) Satellite.
15.9.1 📈📈 🌈🌈Social Stock Exchange

⇒ It is a market for buying/selling shares/bonds/mutual fund for projects/organizations related to
hunger/malnutrition, poverty, gender equality, LGBT welfare, rural sports, Slum Area
Development, affordable housing. Etc.
⇒ 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 share/bond/mutual funds for
eradicating hunger, malnutrition, poverty, gender equality,LGBTQIA+ communities, rural
sports, slum area development, affordable housing
⇒ Then SEBI setup Ishaat Hussain panel to study it. Then SEBI setup Harsh Bhanwala panel to
study is further. They’ve given recommendations but NOTIMP
15.9.2 📈📈🤩🤩 Secondary Market: Significance? (िद्वतीयक बाजार का मह�)

⇒ ⏬ Cost of Transactions . You don't have to search around for buyers/sellers manually. सब लोग
एक जगह पे �मल जाते है। एक दू सरे को ढू ंढने मे �र�ा का खचार्/लागत बच जाता है।
⇒ Providing Liquidity to Financial Assets. तरलता बढती है �ोिक खरीदार �मल जाता है।
⇒ Facilitating Price Discovery of shares / bonds. औकात पता चल जाती है कं पनी क�।
⇒ Investor sells securities in secondary market→ ₹₹ could be re-invested to a new company’s IPO
in primary market → Contributes to Economic Growth. (पुरानी घिटया कं पनी म� से �नवेश क� रकम �नकाल
कर नई और बहेतर कं पनी म� �नवेश हो सकता है )

15.9.3 🗃🗃🗃🗃 DEMAT Account
Figure 3: कागजी शेयसर् को चोरी/आग से बचाऊँ , तो कै से?

⇒ If shares and bonds are traded in paper-form, then transactions are slow & prone to the risk of
theft, forgery and fire. कागजी ��प म� शेर से रखे जाएं तो चोरी होने का जालसाजी का आग लगने का डर😰😰
⇒ Depositary is an organization that holds the securities (like shares/bonds etc.) in electronic
(=DEMATERIALIZED) form. Then facilitates its trading online.
⇒ Upon client’s request, Depository can ‘rematerialize’ it as well (i.e. giving physical/hard copy of
share/bond etc) to client.
⇒ 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:
- Central Depository services Limited (CDSL: owned by BSE, HDFC, Canara Bank etc.)
- National Securities Depository Limited (NSDL: owned by SBI, IDBI, UTI, NSE etc.)
NSDL also has RBI license to operate Payment Bank
15.9.4 🛒🛒 (💻💻:�) DEMAT → ASBA Reforms

⇒ Scamster 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 (Application Supported by Blocked Amount)- 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.
15.9.4.1 🗃🗃🔢🔢 ISIN Number

⇒ International Securities Identification Number (ISIN) is a Unique 12 characters, consisting of
both letters and numbers. प्र�तभू�तयों का अंतररा��ीय पहचान सं �ांक
⇒ 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. तािक �मलते जुलते नाम वाली कं प�नयों म� गलती

ना हो
⇒ RBI issues ISIN for G-sec/T-bill. NSDL issues ISIN for securities other than G-Sec/T-bill.
⇒ 💼💼 Budget-2019: technical reforms in ISIN. HOW? NOTIMP.
15.9.5 �🛒🛒 Types of Investors: Depending on Buying Capacity
1. � Qualified Institutional Buyers (QIB अहर्ता प्रा� सं �ागत �नवेशक): 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 sub-type of 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. (आम/खुदरा �नवेशक)
Underwriter will keep quota for each category of investors, as per SEBI norms.
15.9.6 �🛒🛒 Types of Investors: Depending on Buying Behaviour
1. Jobbers (आढ़ती): 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. प्राथ�मक बाजार से खरीद के िद्वतीयक बाजार म� मोटे मुनाफे पर बेचने क� इ�ा रखता
3. 🐮🐮Bull (तेज�ड़या ): 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 (मं द�ड़या ) – A pessimistic speculator who fears prices will fall ⏬ so, he sells. A bear
usually presses its victim down to ground. Similarly, bear speculator tends to force down the
prices of securities.
5. ⏲Day trading / Intra-day trading: Individuals buy and sell shares over the Internet over a
period of a single day's trading, with the speculative intention of profiting from small price
fluctuations.

Further subtypes with various animal / bird names can be found on Investopedia but with
poor cost : benefit in exam. #🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
15.10📈📈 SENSEX & OTHER NOTABLE INDICES (उ�ेखनीय सं के तक/ सूचकांक)

⇒ SENSEX?: Sensitive Index/ सं वेदी सूचकांक. It’s the weighted average of Free Float Market
Capitalization (FFMC) of 30 companies, selected by Bombay Stock Exchange (BSE)’s officials
⇒ NIFTY? National Stock Exchange (NSE)’s 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 → cheap 💧💧 Tight monetary policy (More in
loan & credit cards → consumers to spend 📑📑Pillar#1A2)
more → more profit to company → more सं कुचन वादी मौिद्रक नी�त के दौरान स�से� नीचे �गरेगा
dividend : investor thinks “better I buy more
shares to get more dividend”: Bullish
Peace, Economic boom / prosperity, Political ⚔ War, recession, political instability →
Stability (शां�त, आ�थक समृ�द्ध, राजनी�तक ��रता) Bearish market. (युद्ध, मं दी, राजनी�तक अ��रता)
When govt. hikes foreign direct investment When govt reduces FDI limit
limits
Merger-Acquisition, New product launched, CEO/MD arrest/FIR, Courts slapping fine,
Environmental clearance given to factory media exposing scandal… (कोई कांड हो जाए)
15.10.1 🐮🐮📈📈🐻🐻MSCI Emerging Market (EM) index

⇒ MSCI is a New York based company that publishes various type of stock index indicators.
⇒ Its MSCI Emerging Market (EM) index tracks equity (share) performance of 1400+ companies
in 25 emerging market countries including India.
⇒ 2022: Russian companies removed from this index (due to Ukraine war) → MSCI weightage
given to India⏫ → Western/foreign investors may bring more money towards Indian share
market in future.
⇒ 📙📙📙📙ES22 has also given big descriptions about how much weight is given to Indian companies
in this index & how rivers of milk and honey are flowing but I am not finding such technical
details very useful from exam point of view.

15.10.2 🌬🌬🌬🌬:�⚖� Force Majeure (अभेद्य श��)
Figure 4: Corona के चलते �बजनेस प्रोजे� पूरा नही िकया, तो �ा जेल मे भेज दोगे, या फांसी पे लटका दोगे? कु छ नहीं उखाड़ सकते मेरा!
⇒ French word for ‘superior force’. It refers to unexpected external circumstances (अप्र�ा�शत बाहरी
प�र��तयाँ) that prevent a party to a contract from meeting their obligations. e.g. Acts of God
(natural disasters, epidemics), war, terror attacks.
⇒ In such cases, courts may not punish party for dishonoring contract. (करारनामे के दाय�� को न �नभाना)
⇒ E.g. Corona (COVID-19) Virus → Singapore Govt put restrictions on entry of Chinese →
Singapore construction firms facing labour crunch (श्र�मकों क� कमी) → invoked ‘Force Majeure’ to
clients, “we can’t finish building your homes/offices in time.” Coronavirus: >55million people
infected across the world (as of 2020-Oct).
⇒ Restriction on global travel and trade. Investors fear that companies will not generate much
profit. Many contracts/ payments will be stuck by Force Majeure. So, large scale withdrawal / exit
of share investors from stock exchanges across the world. Even the BSE SENSEX fell by 1400+
points in a single day in 2020-June Month. However in later months, share market has ⏫⏫
significantly.
15.11🐮🐮🐮🐮🐮🐮 SHAREMARKET: 2020- IMPACT OF CORONA

📔📔📔📔ES21 Vol2Ch4: observed When comparing Year 2020 (Jan to Dec) to 2019:
⇒ Nifty50 & BSE SENSEX both have greatly increased ⏫
⇒ Stock Exchange Volatility declined ⏬, esp after March-2020, as measured by "India VIX index"
of NSE. (अ��रता कम �ई है)
⇒ Share Prices of Pharma, IT companies ⏫, But Airline/Luxury goods/fashion ⏬
⇒ Biz of Mutual Funds ⏫ (धं धे म� बरकत)
⇒ Incoming Foreign Portfolio Investment (FPI) has ⏫ [270 billion$] (More in 📑📑Pillar#3A)
2020- Initial months of lockdown, ⏬⏬ due panic among investors, Force Majure but then
⏫⏫ because (शु�-शु� के महीनों म� �गरावट िकंतु बाद म� ब�त तेजी आई �ोंिक…)
1. Cheap Loans / Expansionary Monetary Policy → Some of that money may have entered the
share market through to large investors. (�व�ार वादी मौिद्रक नी�त)
2. 'work from home' + RBI loan Moratorium- may have encouraged many service sector employees
to invest ₹ in the sharemarket. (तालाबं दी के दौरान लोन क� िक� नहीं चुकानी थी तो कु छ ने वह रकम शेयर बाजार म�
�नवेश क� होगी)
3. Unprecedented demand and profit for IT and Pharma sector- Encouraged the investors to park
their money in such shares at very high price. (तालाबं दी के दौरान सूचना प्रौद्यो�गक� और औषधीय कं प�नयों म�
अप्र�ा�शत तेजी)

4. Youtubers/Reddit/Social media influencers giving online share trading Tips. Many Apps
available.
5. American video game store company GAMESTOP's shares ⏫1625% in 1 year. Such gimmickry
will attract more small investors to invest. Associated keyword "short squeeze trading" [✋What
it means? how it works? Ans. not important]
6. 2021-Aug: Finance Minister in Parliament “Even though economic growth seem to be
slow/down but stock market rising ⏫⏫ because, The movement in stock market indices is
driven primarily by expectations of future economic growth.” E.g. Even though hotel business
may be slow at present, but in future unlockdown, people will go on vacation trips with more
enthusiasm. So, in anticipation of future profit, some investors will start buying hotel shares right
now. Then demand for hotel companies shares ⏫ → hotel companies share prices⏫ (शेयर
बाजार �ादा भ�व� म� िकतना और अ�धक मुनाफा होगा उस अपे�ा/सट्टेबाजी से बढ़ता है उदाहरण - हालांिक अभी तो कोरोना म�
होटल धं धे म� मं दी है, िकंतु भ�व� म� ब�त लोग वेकेशन म� होटल म� जाएं गे तब हमे ब�त मुनाफा होगा ये सोचकर कु छ �नवेशक अभी से
होटल कं प�नयों के शेयर जमा करना शु� करते ह� तो शेयर क� मांग बढ़ती है और दाम बढ़ता है)
15.11.1 🐮🐮📈📈🐻🐻Sharemarket- 2022: IPO Bubble Burst: Case of Paytm (फू ट गया ग़ु�ारा)
⇒ 📙📙📙📙ES22- 2021: more than 70 IPOs issued worth nearly ₹90,000 crores - this is higher than in
any year in last decade. More than 2 crore retail investors have open demat account in 2021.
⇒ 2021-Oct: Sensex and Nifty crossed 61,000 and 18,400 respectively on October 18, 2021.
⇒ However by 2022-March these stock indices have started to fall because of FPI-pullout-by-Fed
Tapering & Russia war.
⇒ 2021-Nov: Paytm collected ₹18,300 crore from IPO. (Company’s name is One 97
Communications, CEO Vijay Shekhar Sharma. Other partners-China’s Alibaba-Ant group (6%),
Japan's SoftBank and Warren Buffett's Berkshire Hathaway).
⇒ Stag (Male Deer) Investor - buys shares in IPO (initial public offering in the primary market)
with hopes of selling it at a very high price on LISTING in Secondary market. Often they get
lucky with almost 80-100% profit but their gameplan failed in Paytm. (नर-िहरन �नवेशक जो प्राथ�मक
बाज़ार म� IPO ख़रीदते और तुरंत उसे िद्वतीयक बाज़ार म� मुनाफ़े म� बेचने क� िफ़राक़ म� होते ह�)
⇒ 2021-Nov: Paytm Primary market Price Rs.2150 but but on day1 of listing (in the secondary
market), Paytm fell by almost 25%. → by 2022-March fallen to ₹750 (that is >60% loss to
investor!). CarTrade, Zomato etc also trading @loss. Reason?
⇒ 😥😥 General slowdown in the share market by fed tapering / FPI pullout (Ref:1a2), Russia-
Ukraine War.
⇒ 😥😥 high valuation of Paytm IPO (₹2150 per share) but institutional investors (Mutual Fund,
Pension Fund etc) not very confident of the growth prospects of Paytm. Once upon a time,
Paytm had superiority but faces stiff competition from NPCi’s UPI-Bhim, Mobikwick, PayU,
PhonePe etc. (ऑनलाइन भुगतान म� ब�त सारी कं प�नयों के साथ �धार्. पेटीएम का एका�धकार नहीं है.)
⇒ 😥😥startup bubble, no free lunches in economy- said Raghuram Rajan. Cashback discount is
given to build subscriber base to create hype- ultimately startup founders recovered all the
cashback money from Paytm retail investors (who lost 25% on listing day). → this could also
negatively affect the future IPOs of Startup Companies (अथर्तंत्र म� कोई मु� म� भोजन नहीं देता इन सब

�ाटर्अप वालों ने कै शबैक/ िड�ाउं ट के दम पे पहले ग्राहकों को लुभाया → िफर हमारी कं पनी म� ब�त ग्राहक है, एसा िदखाके
�नवेशकों को चूना लगाया)
⇒ 😥😥Ethical Aspect:- Retail investors with huge greed were blindly applying IPOs hoping to 2x
double their money. At some point they were bound to pay for excess greed. (�बना मेहनत के 25 िदन म�
पैसे डबल करने क� लालच रखने वाले आम �नवेशकों ने भी अपने नै�तक मू�ों पर सोच �वचार करना चािहए- क� लालच बुरी बला है)
15.11.2 🐮🐮🐮🐮🐮🐮 Share Market: Impact of Bond Yield

⇒ Bond yield is the profit you make on Bond investment. (More in 📑📑Pillar#1A2: Op-Twist)
⇒ If Mr.Bhide buys ₹100 principal bond with 10% interest = his yield = (₹110-100) / ₹100
investment= 10% but if he sells it to Mr.Jetha at ₹90 then Jetha's yield = ₹(110-90) interest / ₹90
investment= 22% Profit. Thus bond yield (profit) ⏫, If you manage to buy bond at a cheaper
than the original (face value) price.
⇒ 2021-Feb-March: When bond yield ⏫, some investors sold their shares of the low performing
companies → to invest into bonds → sharemarket⏬ fell for some days/weeks.
🔠🔠❓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
15.12🗃🗃🗃🗃SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)
⇒ HQ- Mumbai भारतीय प्र�तभू�त और �व�नमय बोडर्,

⇒ (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. (खोज अ�भग्रहण, सं प��यों क� ज�ी/कु क�, �गर�ारी और �नरोध)
⇒ 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.
⇒ 2022: Madhabi Puri Buch-first woman chairperson in history of SEBI. She replaced Ajay Tyagi
(Ex-IAS). Selection was done by Financial Sector Regulatory Appointments Search Committee
(FSRASC) headed by the Cabinet Secretary (IAS).
⇒ Regulates Process of issuing securities (Bonds, Shares, IPO, ETF, ReIT, INVITs, etc.) using the
Securities Contracts Regulation Act, 1956 [SCRA: प्र�तभू�त सं �वदा �व�नयमन]
⇒ 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 ₹100 cr/> [In the aftermath of SAHARA
scam & Chit Fund scams. सामूिहक �नवेश योजनाए ]
⇒ Further appeal: Securities Appellate Tribunal (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).(More in 📑📑Pillar#1D)
⇒ SEBI has “SCORES” online portal for complaint. (�नवेशक इधर ऑनलाइन फ़�रयाद करे)
⇒ SEBI has Securities Market Trainers (SMARTs) Program for investor education (�नवेशक प्र�श�ण)
⇒ Saarthi app: Sebi’s app for investor awareness. (�नवेशकों म� जागृ�त के �लए सेबी का नया एप)
15.12.1 🗃🗃⚖📜📜Securities Market Code

⇒ 💼💼Budget-2021: we’ll create a single new law named "Securities Markets Code" by merging
older acts 1) SEBI Act, 1992, 2) Depositories Act, 1996, 3) Securities Contracts (Regulation) Act,
1956 4) Government Securities Act, 2007. (पुराने �व�भ� कानूनों का एक�करण �वलीनीकरण करके "प्र�तभू�त बाजार
सं िहता" नामक नया कानून बनेगा)
⇒ Benefits? Same as the bullet points written in conclusion of “SEBI Investor Charter.”
15.13🗃🗃💪💪 SEBI INVESTOR CHARTER (�नवेशक अ�धकार पत्र)

⇒ (Definition) A citizens’ charter (नाग�रक अ�धकारपत्र) is a document of commitments made by a
government agency to the citizens in respect of the services being provided to them. e.g. if "X"
problem is not solved in "Y" days then complain to "Z" officer on ABC Phone number / email
address etc.
⇒ (Origin) 💼💼Budget-2021: we’ll create an "investor charter" (�नवेशक अ�धकार पत्र) for financial
investors across all financial products (Share, Bond, derivatives, Commodities market etc).
⇒ SEBI notified this in 2021-November.
o This charter applies on Entities/actors e.g. investors, mutual funds, stock brokers, stock
exchanges, depositories, underwriters, real estate investment trusts (REITs),
infrastructure investment trusts (InvITS), & other collective investment schemes,

o This charter applies on Events e.g. initial public offerings (IPO), FPO, etc.
15.13.1 🗃🗃🗃🗃 SEBI Charter → Investors’ rights (�नवेशक के अ�धकार)

⇒ Investors are entitled to fair treatment from SEBI & its regulated entities (E.g. Mutual fund,
stock-brokers IPO-underwriters etc). (सेबी और उसके द्वारा �नयं �त्रत सं �ाओं से �नवेशक को �ायो�चत �वहार का
अ�धकार होगा।)
⇒ Investors can expect complaint resolution from SEBI’s SCORES Portal in a time bound manner
(if his complaint not solved by the ) (सेबी के ऑनलाइन �ोर पोटर्ल पे समय पर �ाय/ �शकायत �नवारण का
अ�धकार )
⇒ SEBI regulated entities (E.g. Mutual fund, stock-brokers IPO-underwriters etc) Will be required
to display on their website average time taken to solve complaints internally. (सेबी द्वारा �नयं �त्रत
सं �ाओं ने अपनी वेबसाइट पर दशार्ना होगा िक वे आंत�रक �प से ग्राहक �शकायत �नवारण म� िकतना समय लेते ह�)
15.13.2 🗃🗃🗃🗃 SEBI Charter → Investors’ responsibilities (�नवेशक क� �ज़�ेदारी है)

⇒ Investor must not share critical information such as DEMAT passwords with anyone. (िडमेट खाते
का पासवडर् इ�ािद साझा न करने क� �ज़�ेदारी)
⇒ Before making an investment, investors must read and understand offer documents related to a
financial instrument (e.g. share, bond, ETF etc), know the risks involved (िकसी भी जगह �व�ीय �नवेश
करने से पहले उससे जुड़े जो�खमों क� सारी जानकारी पढ़ने क� �ज़�ेदारी �नवेशक क� होगी)
⇒ Investor must read about various fees/service charges involved in a transaction
⇒ Investor must keep track of DEMAT/Bank account statements. if any discrepancy, he must
communicate to the concerned authorities. e.g. password hacked & shares transferred without
knowledge (�नवेशक ने अपनी �व�भ� खातों म� हो रहे लेनदेन पर �नगरानी रखनी होगी। कोई �वसं ग�त िदखे तो तुरंत सं ल� सं �ा
को सु�चत करने क� �ज़�ेदारी �नवेशक क� होगी)
⇒ Investor preserve all transaction documents that will come in handy when filing complaints.
(लेनदेन से जुड़े सभी द�ावेजों का सं ग्रहण करना, तािक �शकायत के दौरान सुबूत के �प म� जमा िकया जा सके )
⇒ While investing, Investor must not make payments in cash, beyond the prescribed limits. Pay
through cheque/NEFT etc. (So it helps tracing fraudsters, tax-evaders. REF: 1A1 & 2B for more
on cash transaction limits). �नवेश करते व� तय मात्रा से �ादा म� नक़दी भुगतान निह करना। �ोंिक यिद ब�क खाते द्वारा
भुगतान िकया जाए तो �व�ीय-धोखेबाज़ों और कर-चोरों को पकड़ने म� सु�वधा रहे।
15.13.3 🗃🗃🗃🗃: 😪😪 SEBI’s Investor Charter: Criticism/limitation:

⇒ 😰😰The charter is treated as reference guide. It has no legal binding / legal rights to investors. (ये
के वल एक पथदशर्क है. क़ानूनी �प से बा� नहीं है)
⇒ 😰😰SEBI could not prevent recent scams/disasters in stock markets such as Franklin Templeton
Mutual Fund, Karvy Broker DEMAT scam, IL&FS crisis etc. This charter’s features not
specifically giving confidence on how SEBI will prevent scams in future. (वतर्मान वष� म� �व�वध शेयर
बाज़ार घोटालों को रोकने म� सेबी असफल रहा है। और इस नए अ�धकार पत्र के मुद्दे पढ़कर �व�ास सं पादन नहीं हो रहा िक भ�व� म�
एसे कांड नहीं होंगे)
⇒ 😰😰Retail investors get fooled into investing in bad/weak companies based on
‘tips/recommendations’ by social media influencers/telegram/Youtubers. But, charter not

sufficiently addressing this menace. (सोशल मीिडया म� बदमाशों क� झूठी सलाहों के चलते कमज़ोर कं प�नयों के शेयर-
बोंड म� भोले �नवेशक फँ स जाते ह�-कोई स� प्रावधान निह।)
15.13.4 🗃🗃🗃🗃: ✍ SEBI’s Investor Charter: Benefit/Conclusion

Appreciable step by SEBI. This will help in a long way in... प्रशं सनीय क़दम
 Ease of doing business & Ease of doing investment (�ापार और �नवेश म� सुगमता होगी)
 More clarity over rights and responsibilities financial market participants [Individual Investor,
Share Broker, Stock Exchange, Depository, Underwriter, Companies etc] अ�धकार और �ज�ेदा�रयों म�
��ता होगी
 Deepening of the financial market, Mobilisation of savings to the productive channels of
economy. पूंजी बाज़ार क� जड़ों को गहरा करने म� मदद �मलेगी.
15.13.5 🗃🗃🗃🗃: 🏃🏃 SEBI: why protect investors & ⏫investors participation?
Figure 5: पूंजी बाजार क� जड़ो को गहरा करना है तो �सफर् अमीरों का नही, गरीबो क� बचत का पैसा भी जाना चािहए!
⇒ Share market scams erode publics’ hard-earned savings → alcoholism, depression, suicide and
other social ills. (जनता क� बचत का पैसा घपले म� बबार्द तो जनता म� शराब, अवसाद, आ�ह�ा और अ� सामा�जक बुराई)
⇒ Duped investors will shy away from share market & they may invest in gold / real estate = not
very beneficial to economy as it our import-bill, creates black money opportunities.
⇒ If households don’t participate in capital market → companies will have to approach the banks
to get more loans. But banks’ lending capacity is limited by CRR, SLR, PSL, NPA, PCA.(REF in
📑📑Pillar#1B2)
⇒ If more retail investors participate in capital market = “Deepening of the capital market” →
factory expansion, job creation, and economic growth. (खुदरा �नवेशक क� मदद से पूंजी बाजार क� जड़ों क� ओर
गहरा करना- तािक रोजगार सृजन और आ�थक वृ�द्ध म� मदद �मले)
15.13.6 💼💼💼💼: measures to ⏫ retail investors participation- 25% public holding in Govt
Companies
⇒ Budget 2019: For all the listed government companies, we will strive for minimum 25% public
shareholding. (आम जनता को भी सरकारी कं प�नयों के शेयर खरीदने का मौका �मले)
⇒ SEBI to raise minimum public shareholding in listed private sector companies to 35%.
⇒ 👻👻ATMANIRBHAR: minimum shareholding related norms deferred under Corona crisis.

15.13.7 🗃🗃🗃🗃: 🏃🏃 SEBI Reforms to boost investors’ confidence?
⇒ 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. ब�कों से गबन बं द करके पैसा लाए �जससे कं प�नयों के शेयर जमकर खरीद के उसक� मांग और दामों
को बढ़ाया तािक लालच म� अ� �नवेशक भी उन कं प�नयों के शेयर ऊँ ची क�मतों म� खरीदने लगे अंत म� यह लोग अपने शेयर बेच कर
भाग गए
⇒ To prevent such scams, SEBI introduced Circuit Breaker System, wherein if fluctuation in the
share prices is more than “x%” than previous day, then stock exchange must stop trading for “y”
minutes.
15.13.8 🤝🤝⏰T+1 Settlement instead of T+2
⇒ Badla System/Carry forward system: Buying of shares using borrowed money & making
promises to carry forward the settlement for upto 72 days. scamsters misused (इसक� टोपी उसके सर पे:
सौदा आज करते लेिकन पैसों का भुगतान/शेयर क� िडलीवरी ७२ िदनो बाद होती- और इस समय के दौरान वही घपलेबाज उ�ी शेयर
बेचने क� टोपी दू सरों को पहेनाते रहेता)
⇒ so SEBI discontinued Badla System (in 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).
⇒ Settlement cycle represents the time period within which the stock exchanges have to settle
security transactions. Until now we had T+2 days but from 2022: T+1 started.
⇒ T+1 means settlements will have to be cleared within one day of the actual transactions taking
place. (सौदा होने के एक िदन के भीतर ही पाट�ने पैसा चुकाना है और सामने वाली पाट� ने उसको शेयर क� िडलीवरी देनी है)
⇒ 🤩🤩Benefits? ⏬ Volatility, Speculation, Faster Release of shares/funds. HOW?NOTIMP.
(अ��रता,सट्टेबाज़ी)
⇒ 😰😰Foreign investors unhappy due to Time zone difference creating operational challenges for
them. (�वदेशी �नवेशक नाराज़ �ोंिक भारत म� जब सुबह होती है तो अमे�रका म� रात इस�लए एक िदन के भीतर सौदा समेटना उनके
�लए मु��ल!)

15.13.9 🛒🛒 (💻💻:�:😈😈) Dabba-trading, Insider Trading, IPF
⇒ 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. So, SEBI declared it illegal.
⇒ Insider Trading (भेिदया लेनदेन): Whenever company launches new products, wins unique patents,
or undergoes merger/acquisition- its share prices may ⏫. If a person associated with company
uses such confidential information for buying/selling shares to make windfall gains. Such insider
trading is illegal.
⇒ SEBI requires Stock exchanges (BSE, NSE etc) and commodity exchanges (NSEL, MCX etc) to
setup Investor Protection Fund (IPF: �नवेशक सुर�ा कोष). IPF covers investors’ ‘non-speculative’
type of losses. e.g. if the other party is not delivering shares because of some court case. IPF also
promotes investor education and awareness.
15.13.10 🛒🛒 (💻💻⏱:�) Algo Trading & Co-Location

⇒ Algo-Trading = Some 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. (कं �ूटर अलगो�रदम द्वारा ब�त तेज़ी से ऑडर्र देना)
⇒ 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. (सं पूणर् �प से प्र�तबं �धत नहीं लेिकन सेबी ने कु छ सीमाएं लगायी है)
⇒ Co-location = stock exchange allowing the share broker to install their office/computer systems
very close to Stock Exchange. Then broker's computers can monitor/buy/sell shares quicker than
a computer sitting 500 kilometers away: So, co-location gives added advantage, esp for the Algo-
Traders. (�ॉक ए�च�ज के एक दम �नकट अपना ऑिफ़स �ा�पत करना तािक कं �ूटर पर डेटा और तेज़ी से प�ँ च सक� िक)
⇒ 2021: SEBI fines NSE For violation of some norms related to co-location.
15.14🛒🛒 (🔪🔪🔪🔪) BOND MARKET REFORMS
15.14.1 🛒🛒 (🔪🔪🔪🔪: 🧔🧔🧔) Unified Bond Market (एक�कृ त बॉ� बाजार)
⇒ At present (1) Govt bonds’ (G-Sec) market (2) private sector / Corporate Bonds market are
functioning separately. Because
o (A) RBI depository for G-Sec/ T-Bill is separate. Where govts, banks, NBFCs and
primary dealers can participate, and minimum investment guidelines are high (e.g.
investor’s g-sec buying order must be minimum “X” lakh rupees, else RBI rejects
application)
o (B) SEBI regulated depositories (For non-Government = private sectors’ share/bonds) is
separate- where retail investors/common men register & participate.
⇒ 💼💼Budget-2019 promised reform to connecting these two platforms, to facilitate retail investors’
participation in G-sec. (आम जनता भी सरकारी प्र�तभू�तयां सीधे ही खरीद सक� )
⇒ 2020: SEBI proposed “unified bond market” where both G-sec & Corporate Bonds will be
available for buying/selling. This will (1) help govt mobilize public’s savings more easily for its

welfare schemes (2) Give small/retail investors easier opportunity to invest directly in G-sec.
लेिकन ये असल म� अभी बनना बाक� है।
15.14.2 🐯🐯🛒🛒 (🔪🔪🔪🔪: 🧔🧔🧔) G-Sec Trading- Retail investors’ RDG @RBI
- RBI launched “Retail Direct Scheme” in 2021.
- Under this scheme, RBI permits “Retail Direct Gilt (RDG) account” for retail investors on its E-
Kuber online platform. (आम �नवेशक �रज़वर् ब�क म� आरडीजी नामक खाता खोल पाएं गे)
- Both Resident Indians & non-resident Indians (NRIs) can open this account. (गैर �नवासी भारतीय भी)
- Then Retail investors can directly buy Treasury Bills (T-Bill), G-Secs (of Union Government),
State Development Loans (SDL are ‘G-secs’ of State Govts) and Sovereign Gold Bonds, from RBI
directly. (आम �नवेशक सीधा �रज़वर् ब�क से इन प्र�तभू�तयों को खरीद सकता है.)
- Application fees to open the account = ₹ ZERO
− 🤩🤩Benefit? 1) Earlier retail investors bought G-sec “indirectly” through mutual funds wherein
mutual fund manager (MF) charged commission/fees. Now retail investor can buy directly so
does not have to pay such commission/fees to MF managers. (�बचौ�लयों को दलाली/कमीशन नहीं देना होगा)
− 🤩🤩2) Deepening of G-Sec market through ⏫retail participation (बाजार क� जड़ों को गहरा करेगा)
15.14.3 🐯🐯🛒🛒 (🔪🔪🔪🔪: 🧔🧔🧔) G-Sec Trading: RBI's NDS-OM, OTC

⇒ RBI owns and regulates Negotiated Dealing System (NDS) for trading in G-Sec.
⇒ Clearing Corporation of India Limited (CCIL a company founded by SBI, IDBI, ICICI, LIC etc)
maintains this system.
⇒ NDS system for recording the transactions of G-Sec buy-sell. NDS has following components:
i.e. buyer/seller call each other on the telephone, make the deal about buying
Telephonic and selling and then inform the reserve bank's NDS system (ke we've done this
deal).
Buyer physically walks into the seller's office (or vice versa) and conducts the
Over-The- transaction. Later they report transactions to RBI's NDS System (ke we've done
Counter (OTC) this deal). (ऑिफ़स म� �ब� �मलके ख़रीद-�बक्र� कर�गे, बाद म� �रज़वर् ब�क को सू�चत कर�गे िक हमने ये
िकया था)
Negotiated Dealing System-Order Matching system (NDS-OM): electronic,
computer screen based, anonymous, order driven trading system for dealing in
NDS-OM G-sec's secondary market.
Buyer-seller places orders online without knowing names/phone numbers of
each other. (ख़रीददार और �वक्रेता एक दू सरे क� असली नाम पहचान नहीं जान पाएं गे)
🚩🚩🚩FAQ: Then what is E-Kuber?
⇒ Ans. E-Kuber is the core banking solution (CBS: REF Pillar1A1) platform of RBI to digitally
handle all operations of RBI e.g. NEFT-RTGS, Repo, MSF, CRR, PSLC certificate trading, G-Sec,
Sovereign Gold Bond, Retail Direct Scheme (RDG) etc.
⇒ You may think of E-kuber as a Windows Operating system, & NDS as a sub-component/excel-
software inside of it that handles G-Sec buying-selling database management/account keeping.

🔠🔠❓MCQ. Find correct statement(s): (Asked in Prelims-2021)
1. Retail investors through demat account can invest in ‘Treasury Bills’ and ‘Government of India
Debt Bonds’ in primary market. [आम �नवेशक डीमैट खाते द्वारा प्राथ�मक बाजार म� सरकारी प्र�तभू�तयों म� �नवेश कर
सकता है]
2. The ‘Negotiated Dealing System-Order Matching’ is a govt securities trading platform of the
Reserve Bank of India. [NDS-OM सरकारी प्र�तभू�तयों म� खरीद �बक्र� करने के �लए �रजवर् ब�क द्वारा बनाया गया मं च है]
3. The ‘Central Depository Services Ltd.’ is jointly promoted by the Reserve Bank of India and the
Bombay Stock Exchange. [CDSL को �रजवर् ब�क और बॉ�े �ॉक ए�च�ज द्वारा सं यु� �प से बनाया गया था]
Codes: a) 1 Only b) 1 and 2 c) 3 Only d) 2 and 3
15.15🌽🌽🧶🧶🧶🧶🧶🧶 COMMODITY MARKET, FMC, SEBI MERGER

⇒ A commodity market / exchange (व�ु बाजार) is a place where buyers & sellers trade goods in bulk
- food grains, cotton, precious metals or energy resources (coal, 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 Forward Market Commission (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. (एक कांड हो गया था)
⇒ So first FMC transferred to Finance Ministry and FMC ultimately merged with SEBI (2015).
15.15.1 💍💍🎖🎖🎖🎖🎖🎖Commodity Market: Gold exchanges & 💼💼Budget-2021

⇒ Gold exchange is a special type of commodity market devoted only to Gold trading.
⇒ 💼💼Budget-2021: We will undertake reforms in the regulation of gold exchange markets in India.
1) SEBI will be the regulator 2) Warehousing Development and Regulatory Authority (WDRA-
Statutory body under Dept of Food and Public Distribution) Will be responsible for
Warehousing/Vaulting, Assaying, Logistics of gold exchanges. (भं डारण, गुणव�ा परी�ण, रसद के मामलों
क� �ज�ेदारी)
15.15.2 💍💍💍💍💍💍💍💍Commodity Market: Electronic Gold Receipts (EGRs)

�णर् कं प�नयां “ड�ूडीआरए” नाम क� वैधा�नक सं �ा द्वारा पं जीकृ त गोदामों म� सोने क� ईट/�ब��ट जमा कर� गे, उसक� “इले��ॉ�नक
�णर् रसीद�” सेबी द्वारा पं जीकृ त इले��ॉ�नक गो� ए�च�ज पर बेची जाएगी। ग्राहक/�नवेशक ऑनलाइन तरीके से उसे खरीद पाएगा
- Stage1: Gold companies deposit their gold in the warehouses authorized by Warehousing
Development and Regulatory Authority (WDRA, it is a statutory body under Ministry of
Consumer Affairs, Food & Public Distribution.)
- Stage2: Warehouse manager generates Electronic Gold Receipts (EGRs).
- Stage3: EGR are listed on the SEBI regulated electronic gold exchanges. → Buyer can buy the
gold electronically and be assured of the quality. Later he may even sell this EGR to another

investor or he may goto warehouse to collect physical gold.
🤩🤩Benefits: 1) Assured quality. 2) Tax evasion is difficult due to online transactions monitored by
SEBI. इसे ग्राहक को �णर् क� गुणव�ा के बारे म� सु�न��त होगी। कर चोरी मु��ल होगी �ोंिक ऑनलाइन खातों क� �नगरानी होगी.
15.16� RELATED BODIES WITH SIMILAR SOUNDING NAMES
Figure 6: अभी भी इतने सारे "कांड" �ो हो रहे है, गवनर्र साहब?- �व�मं त्री @FSDC meeting.
- Financial Stability & Development Council: Chairman – Finance Minister. Other
FSDC members – 1. RBI Governor 2. SEBI chief 3. IRDAI chief 4. PFRDA chief 5. IBBI
(2010) chief & govt officials
�व�ीय - Functions? Supervision of the economy & large financial conglomerates,
��रता coordination among the financial regulators, financial literacy and financial
और �वकास inclusion.
प�रषद - Secretariat assistance by: FinMin → Dept. of Economic Affairs (आ�थक मामलों का
�वभाग)
FSB - Financial Stability Board is a brainchild of G20. (�व�ीय ��रता बोडर्)
(2009) - Functions? Financial monitoring at global level, Coordination between national
HQ: financial regulators bodies. (अलग-अलग देशों के �व�ीय �नयं त्रक के बीच तालमेल)
BASEL - India has 3 seats in FSB: 1) Secretary of Department of Economic Affairs (IAS) 2)
Dy. Governor of RBI 3) SEBI chairman
FATF - Financial Action Task Force (�व�ीय कारर्वाई कायर्दल) is a brainchild of G7.
(1989) - India member in 2010. Function? Combating Money laundering and terror
HQ: Paris finance. (More 📑📑Pill#2) (धन शोधन और आतं क� �व�पोषण से लड़ना)
- International Organization of Securities Commissions (IOSCO) is the
IOSCO international body of world's securities regulators. SEBI is a member.
- Famous for its IOSCO Guidelines for Investors Protection & risk prevention
🔠🔠❓ 'Financial Stability and Development Council': find correct statement(s): (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
15.17📦📦 � � INVESTMENT FUNDS → MUTUAL FUND (MF) FOR AAM-AADMI
Figure 7: swag से कर�गे 'middle-class' का '�ागत'। Observe colors in logo, meant for attracting ordinary crowd

⇒ Mutual Fund is an Asset Management Company (AMC-NBFC) that pools savings of (retail)
investors and gives them “Units”.
⇒ MF Manager parks this 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 pays Entry Load (= fees for joining), 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, corona crisis, charm declining because mutual funds are subject to such market risks.
⇒ ⚾📻📻⚾🎙🎙✋ “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.
15.17.1 📦📦 � � Mutual fund → ESG, Shariya Mutual Funds

⇒ ESG Mutual Funds= These mutual funds will invest clients’ money in companies that have good
performance on Environmental, Social, And Governance (ESG) aspects.
⇒ Shariya Mutual Fund= These mutual funds will invest clients’ money in companies that are
compliant with Islamic Shariya law. E.g. They will not invest in alcohol, pork, gambling etc
related companies.
15.17.2 📦📦 � � Mutual fund → SIP, ELSS, ULIP
⇒ Traditional Mutual Fund = client invests entire amount at once. एक साथ पूरी रकम जमा करानी होती है
⇒ Systematic Investment Plan (SIP)= Mutual fund wherein client deposits small-small fixed
amounts at fixed interval e.g. month basis etc. ग्राहक छोटी-छोटी िक�ों म� रकम जमा करवाता है
⇒ Equity Linked Savings Scheme (ELSS)= It is a sub-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.
⇒ Unit linked insurance policy (ULIP)= client invest money in a scheme wherein → (1) some ₹₹
goes into Mutual Fund (2) some ₹₹ goes into insurance policy (📑📑Ref: HDT-Pillar#1D)
15.17.3 📦📦 � � Mutual fund → 🎛🎛 Mutual fund risk-o-meter

⇒ SEBI requires mutual fund company to disclose how much risk is present in their scheme, on a
monthly basis, thru a digital dashboard called 'risk-o-meter'. (िकतने जो�खम पूणर् तरीके से �नवेश कर रहा है)
⇒ It shows 6 categories of risk: low, low to moderate, moderate, moderately high, high, (#)very
high risk. (#) SEBI added this new category 'very high risk' in 2020-Oct.
⇒ This helps the investor to make decision- which Mutual fund he wants to joins depending on his
risk appetite. (उस िहसाब से �नवेशक तय कर� उसे कौन से सलामती पूणर् या जो�खमपूणर् �ूचुअल फं ड म� जाना है.)
15.17.4 📦📦 � � Mutual Fund: Backstop Entity- SEBI proposal for stressed MF

तं गहाल �ूचुअल फं ड क� मदद के �लए “बैक�ॉप” नाम क� नई इकाई/सं �ा

- Mutual Funds invest clients money in shares and bonds.
- Sometimes due to scam/bad news the bond becomes ‘less liquid / illiquid’
- e.g. MF bought bonds of Vodafone or Spicejet, later those companies facing difficulties in
Business. Now MF wants to exit/sell-away its bond in secondary market but no other investors
willing to buy those bonds due to negative news about Vodafone or Spicejet. So bond has
become ‘less liquid / illiquid’
- So, SEBI proposed to set up a ‘backstop entity/organization’
- Backstop entity will buy Corporate Bonds from such mutual funds to reduce their stress. So, MF
can return money to its clients.
🚩🚩🚩FAQ: How is this similar/different than Bad BANK / RBI’s Special Windows for MF/TLTRO?
How will Backstop entity cover its own losses? = NOT IMPORTANT because this organization is yet
to be established.
15.17.5 🛒🛒 (🔪🔪🔪🔪: 🧔🧔🧔) Bond Buying Institution in 💼💼Budget-2021

⇒ Secondary market-Provides liquidity to the investor -Since he can sell existing shares/bonds and
hand to others → motivation to buy new shares/bonds in primary market → capital to healthy
new company.
⇒ But in India, the secondary market for bonds is not fully developed. Inadequate number of large
players → Difficult to re-sell the bonds at the right prices → 😰😰discourages the investors from
bonds → Difficult for companies to mobilize ₹₹ (िद्वतीयक बाजार म� बांड को बेचने म� असु�वधा के चलते �नवेशक
बांड से कतराते ह�)
⇒ So, 💼💼Budget-2021: Proposed to setup a body/organization to purchase investment grade debt
securities. This body will buy bonds both in stressed and normal times.
⇒ 🤩🤩Benefit? development/Deepening of the Bond market. (बांड बाजार क� जड़ों को गहरा कर�)
⇒ ✋Exact name of the organisation? headquarter? Ans. details yet to be announced.
15.18📦📦 � � INVESTMENT FUNDS → HEDGE FUND (हेज फ�) FOR RICH-AADMI
Figure 8: Swag से नही कर�गे 'middle-class' का '�ागत'। Observe ‘premium’ logo-designs to attract rich people
⇒ 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. (�सफर् अमीरों के �लए है)
⇒ Hedge Fund manager will invest their money in Junk Bonds, Risky assets; he’ll do risky trading
activities such as Arbitrage, Leverage, Short Selling, Future&Options(F&O) trading, Derivatives
Trading etc. to generate maximum return. (how is that done in real life, what do these words
mean? = UPSC-CSE not for recruitment of HF managers.)
15.18.1 📦📦 � � Investment Funds: “Accredited Investor”

Deleting from handout. Not finding exam-worthy anymore.

15.18.2 📦📦 � 🏬🏬 🛩🛩 Investment Funds → REITs / InvITs: for rich-aadmi
REITs: Real Estate Investment Trusts InvITs: Infrastructure Investment
-(भू-भवन-सं प�� नवेश �ास ) Trusts-(अ�धसं रचना)
Who can HNI / institutions: Min. ₹2 lakh ₹10 lakh. ₹1 lakh
invest? ₹50,000 investment (SEBI ⏬ reduced minimum limits
in 2019 to attract more investors)
Manager parks in real estate projects that are soon to In airport, highway, thermal plants,
the money in? complete. gas grid etc. He’ll earn from toll
He’ll earn income 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. हर तकनीक� �नयम अपने �लए काम का नहीं
15.18.3 📦📦 � � Investment Funds → Sovereign Wealth Fund (सं प्रभु धन 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. 2020-Jun: Abu Dhabi Investment Authority (ADIA) bought 1.16% of Reliance Jio for
₹5600+cr. Singapore's GIC sovereign wealth fund, Qatar Investment Authority (QIA) also active
in Indian market.
⇒ Sidetopic: What is National Investment & Infrastructure Fund (NIIF) Ans. Ref: Pillar#5:
Infrastructure
15.19📦📦 🏛🏛 INVESTMENT FUNDS → CPSE-EXCHANGE TRADED FUNDS (ETF: ईटीएफ)

⇒ Disinvestment (�व�नवेश): government sells it shares from Central Public Sector Enterprises
(CPSE: क� द्रीय सावर्ज�नक �ेत्र के उद्यम) but does not reduce its shareholding below 51%.
⇒ If Govt’s shareholding reduced below 51%, then it is called Privatization (�नजीकरण), although
NITI prefers the term ‘Strategic Disinvestment’. (More in Pill#2)
⇒ 2014: Govt wanted to disinvest 10 CPSE (ONGC, GAIL ltd etc). If govt tried to sell individual
company- 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
called Exchange Traded Funds.
Figure 9: how do exchange traded funds (ETF) work?

⇒ 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.
⇒ Later govt announced, “We’ll give the ELSS-walla income tax benefits to CPSE-ETF-investors as
well” to attract investors.
15.19.1 (🦁🦁🔪🔪)📦📦: (🏛🏛🛒🛒🛒🛒) Bharat Bond (Debt) ETF (2019-Dec)
⇒ Fund Manager (Edelweiss Asset Management ltd) → He’ll issue Bharat Bond-ETF.
⇒ Maturity: 3 yrs and 10 years. Unit Size: ₹1000 each. So even middle-class investors buy these
Bond-ETFs.
⇒ Fund managers will invest this ₹₹ into a basket of bonds issued by Central Public Sector
Enterprises, Central Public Financial Institutions (CPFIs such as public sector bank and
insurance companies) and other Government organizations. ETF will be tradable at the stock
exchange.
👍👍 Bharat bond ETF: Benefits?
 For Government companies = Easier and more efficient to borrow ₹₹ instead of individually
launching their bonds in the market. एक एक सरकारी कं पनी अलग से बांड जारी करती तो शायद �नवेशक सब को नहीं
�मल पाते
 For Investors = Safety, assured return on bonds, irrespective of Government company’s profit.
 ⏫retail participation → deepening capital market. (खुदरा �नवेशक क� मदद से पूंजी बाजार क� जड़ों क� ओर
गहरा करना)
 💼💼Budget-2020: given success of Bharat bond ETF, we are planning to launch another debt-
ETF containing G-sec. This will help the retail investors to invest in G-sec.

Misc. : 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. How/why/NOTIMP
15.19.2 (🦁🦁🦁🦁)📦📦: (🏛🏛🏛🏛🏛🏛) CPSE-ETF vs Mutual Fund
Table 3: Sad that I’ve to spoonfeed this much
Mutual Fund CPSE-ETF
Objective = invest clients’ money in Objective different than Mutual Fund
shares/bonds (1) help Government for its disinvestment
(2) help Government company to borrow money
(Bharat-Bond ETF)
fund managers may buy/sell variety of He’s not doing that. His objective given above.
shares and bonds of Government
companies and private sector companies
for best returns through out the scheme.
a fund manager may also change the His portfolio (list of govt companies’ shares/bonds)
composition of the portfolio for example if is fixed. It’ll not change.
Infosys shares are not performing well →
he may sell them and fill up the box with
Wipro shares for better dividend.
15.20📦📦 INVESTMENT FUNDS → ALTERNATIVE INVESTMENT FUNDS (AIF)
It’s a technical classification by SEBI (वैक��क �नवेश कोष)

- AIF Category I: They generate positive 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. जो िक अथर्तंत्र म� सकारा�क असर उ�� करते ह�
- AIF Category II: Neither in Cat-1 nor in Cat-3 E.g. Private Equity or Debt Fund. जो ना तो ऊपर क�
श्रेणी म� है ना नीचे क� श्रेणी म� है
- AIF Category III: They undertake excessive risk to generate high returns in short period of time.
E.g. Hedge Funds. SEBI norms are stricter/heavier on them, because otherwise they may
destabilize the capital market. जो िक अथर्तंत्र म� जो�खम बढ़ाते ह�, नकारा�क असर उ�� करते ह�
15.20.1 (🦁🦁🦁🦁):(🏗🏗🏠🏠) Govt’s AIF for Real Estate Sector (2019)
⇒ 2019: Govt to setup an alternative investment fund (AIF Category-II) using ₹₹ of govt, SBI and

LIC. (Total 25,000 cr). [Moral outrage: why not in Cat1? Ans. Send your suggestion to SEBI.]
⇒ AIF Fund manager: SBI Cap ventures ltd.
⇒ AIF Fund manager will give ₹ (as Debt finance) to builders with unfinished housing projects →
demand for steel, cement, construction workers= economic growth.
15.21🗃🗃 ⏱ FORWARD / FUTURE CONTRACTS & CALL / PUT OPTION
Figure 10: भ�व� मे खरीदने का सोदा तो िकया, लेिकन दाम �गर जाए, तो खुद को बचाऊँ तो कै से?
- 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. नुकसानी से बचने के �लए बीमा �लया जाए
- 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.
🔠🔠❓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
15.22🗃🗃 🔗🔗 DERIVATIVES & SWAPS (�ु�� प्र�तभू�तयां और अदला-बदली)

⇒ 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. इस प्र�तभू�त का मू� िकसी और सं प�� से उद्भ�वत होकर
आता है
⇒ 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. (प्र�तभू�तकरण क� प्रिक्रया से इसे बनाते ह�)
⇒ 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 (CDS) agreement against the risk of default, Interest
swap agreement to protect against volatility in interest rates. But their mechanisms NOT IMP.

15.22.1 🗃🗃🗃🗃: 🚛🚛🚛🚛🚛🚛 Bilateral Netting of Qualified Financial Contracts Act 2020
DELETED from 2022 because outdated/faded topic.
15.23👻👻👻👻👻👻 PARTICIPATORY NOTES (P-NOTES: पा�ट�सपेटरी नोट्स)

⇒ A foreigner wishes to invest his money 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. (िकसी अ� �� को भी बेच सकता है)
⇒ P-Notes are Offshore Derivative Instruments that derive the value from the underlying Indian
shares and bonds. (अपतटीय �ु�� उपकरण)
⇒
⇒ Figure 11: �बना SEBI पं जीकरण के भारतीय पूंजी बाजार मे �नवेश क�, तो कै से?
😱😱P-Notes are harmful for Indian economy because:
⇒ P-note investors are not directly registered with SEBI. Identity of the actual investor, source of
funds remain disguised= chances of Tax evasion, money laundering, terror finance (इसके �नवेशक ने
�यं सेबी म� पं जीकरण नहीं करवाया वह पैसा िकधर से लेकर आया यह सब जानकारी नहीं �मल पाती, कर चोरी, काले धन को वैध
बनाना,आतं क� �व�पोषण)
⇒ 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 PAN card.
More on PAN card@Pillar#2 → BlackMoney)
Therefore, SEBI 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.
Table 4: Sad that even for such simple things I’ve to create such spoonfeeding-tables just to prevent FAQs from weak students
P-Notes Foreign investor wants to invest in Indian share/bond market without
registering with SEBI. He wants to buy Indian companies’ shares/bonds in
India. �फरंगी आदमी भारत क� कं पनी म� �नवेश करना चाहता है लेिकन सेबी से पं जीकरण नहीं
करवाना चाहता
Bharat-DR Foreign Company wants to Indian to invest in its foreign/firangi-shares,
without registering with SEBI. �फरंगी कं पनी अपनी कं पनी के शेयसर् भारतीयों को बेचना
चाहती है लेिकन सेबी से पं जीकरण नहीं करवाना चाहती
ADR/GDR Non-American Company wants to American people to invest in its shares
without registering with American SEBI. गैर-अमे�रक� कं पनी अपनी कं पनी के शेयर
अमरीक� जनता को बेचना चाहती है लेिकन अमे�रका के शेयरबाजार �नयं त्रक से पं जीकरण नहीं
करवाना चाहती.
GDR- similar concept, refer to respective segment.
Masala/Panda/ Foreign company/org wants to borrow money, in a particular currency from
Kangaroo Bonds a particular country. Refer to respective segment
etc
🔠🔠❓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?
(Pre19-SetA Q67) (a) Certificate of Deposit (b) Commercial Paper
(c) Promissory Note (d) Participatory Note
15.23.1 ✍ Conclusion: Financial Markets- �व�ीय बाजारों के बारे म� �न�षर्

 A well functioning financial market catalyzes the process of economic development. It is
therefore essential that such markets operate in a free, fair, competitive and transparent manner.
एक सु�वक�सत �व�ीय बाजार आ�थक �वकास क� प्रिक्रया मे उद्दीपक का काम करता है। ऐसे बाजार का �तं त्र, �न��, प्र�त�ध� और
पारदश� �प से सं चा�लत होना आव�क है।
 Deepening the financial market helps mobilize the savings of poor households into the
productive channels of the economy. पूंजी बाजार को गहरा करने से गरीब प�रवारों क� बचत को अथर्�व�ा के �व�भ�
�ेत्रो को िक्रया��त करने मे म� मदद �मलती है।
 Aforementioned initiatives /issues are greatly important in that regard need to be addressed in
priority basis. इस सं बंध म� पूव�� पहल / मुद्दे ब�त मह�पूणर् ह� / उ�े अग्रताक्रम से सं बो�धत करना आव�क.
Pillar 1C2: Corporate Governance

15.24🏙🏙🏙🏙 COMPANY TYPES
15.24.1 👶👶Company types based on incorporation
🤴🤴Chartered Setup by a charter given by a king / queen. E.g. East India Company in
Companies 1600. (चाटर्डर् कं प�नया)
⚖Statutory Setup by special acts of Parliament or State legislature. E.g. RBI, LIC,
Companies SBI. (वैधा�नक कं प�नया)
✒Registered Registered under the Companies Act, 1956 (and later 2013)
Companies e.g. Tata Motors, Infosys. (पं जीकृ त कं प�नया)
15.24.2 🏙🏙🏙🏙 Company types based on number of members
Private ltd. Public Limited Company (Companies Act 2013)

Members Min. 2 to Min. 7 to Max. unlimited number (depending on how many
Max. 200 shares issued & purchased by the people)
can they Can’t ⇒ A public ltd. company can invite public at large, to subscribe
invite public to its shares and bonds.
at large, to ⇒ If their shares are listed on a stock exchange (BSE, NSE etc),
buy shares
it’s a ‘Listed Public Limited Company’ (e.g. Reliance), else
/bonds?
it’s an ‘Unlisted Public Limited Company’ (e.g. India Post
�ा सामा� जनता
Payment Bank : IPPB)
को �व�ापन देकर
अपने शेयर-बांड
बेच सकते है?

Private ltd. Public Limited Company (Companies Act 2013)
Directors 2-15 ⇒ Min 3 to Max 15. out of them one must be Indian Resident,
(Min-Max) 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. (अ�सं �क शेयरधारकों के िहतों क� र�ा करने
के �लए �तं त्र डायरे�र)
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…
FAQ: How can pvt limited company have shareholding?
- Ans. They can ask friends and family, venture capital funds, angel investors and other type of
investors to invest in the company. They cannot put an advertisement in the newspaper that we
are inviting the public at large to buy our shares. IF they want to invite public at large, → they
need to convert registration from private limited company to public limited company.
- Companies usually start as originally as private limited companies. e.g. Infosys (private ltd) in
early 80s → when their business grows and they want more capital they will convert into public
limited companies. → they will issue shares for the first time for the public at large → so we
call it Initial Public Offer (IPO) e.g. same infosys (public ltd) in early 90s launched IPO..
- In future same public ltd. company may also require more capital so again they will issue more
shares for the the second time, third time etc. → then we call it Follow on Public Offer (FPO)
15.24.3 🏙🏙🏙🏙 Company types based on Ownership
🧔🧔 Government / Public Sector / सावर्ज�नक �ेत्र 🤵🤵 Private Sector / �नजी �ेत्र क�
When Government owns 51%/> shares. When private parties own 51%>. E.g. Reliance,
Examples: Steel Authority of India (SAIL), Tata, Adani
India Post Payment Bank (IPPB)
Holding Company / �नयं त्रक कं पनी Subsidiary Company / �नयं �त्रत कं पनी
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, Tata
majority shares of Tata Consultancy Services Sky are subsidiary co of Tata Sons.
(TSC), Tata Steel, Tata Sky etc.
15.24.4 🏙🏙🏙🏙 Company Types: Misc.
Under ⇒ One Person Company: special type of private ltd company having only
Companies Act one member. 💼💼Budget-2021: One Person Companies (OPCs)- Legal

reforms in Companies Act to [1) allow NRIs to easily register OPC in
India [2) OPC can be converted to other types of companies any time
⇒ Not for Profit Company: e.g. GSTN, NPCi etc. their profit is re-invested
in business expansion. They get certain tax benefits & relief in how
frequently they’ve to submit data to MCA. (लाभ-रिहत कं पनी, जो कं पनी मुनाफे के
�लए नहीं बनाई गई)
⇒ Dormant Companies: A) setup to start business in future B) setup to store
intellectual property C) not filled annual returns for two consecutive
years. (�न��य/सु� कं पनी)
👬👬👬👬Under ⇒ Limited Liability Partnership (LLP) Company is formed by minimum 2 or
LLP Act 2008 more partners.
सी�मत देयता ⇒ Individual partners are shielded from joint liability created by another
भागीदारी अ�ध�नयम partner's wrongful business decisions or misconduct. E.g. Vajiram and
Ravi IAS Study Centre LLP
⇒ 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. उनके �लए �नयमो म� �रयायत/आसानी होती है।
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.
15.24.5 🏙🏙🏙🏙 Corporate Governance → Small Companies given compliance relief
⇒ 💼💼Budget-2021: Companies with paid up capital not more than ₹2cr & annual turnover not
more than ₹20cr = treated as ‘Small Companies’.
⇒ They’ll be given relief in Companies Act related compliance e.g. how frequently they’ve to
submit accounts and ownership related documents to the Ministry of Corporate Affairs etc.
15.24.6 🏙🏙🏙🏙 Commercial Organizations: Other Types
PSU, CPSE Ref: Pillar2: Disinvestment
MSME Ref: Pillar1D: financial inclusion, Pillar4B
Startups Ref: Pillar4B
15.24.7 👬👬👬👬👬👬 Corporate Governance → LLP settlement Scheme 2020
सरकार म� कु छ द�ावेज जमा कराने होते ह�. अगर नहीं कराए तो इतना दंड भरकर मामला सुलझा लेते ह� / मुकदमा दजर् नहीं कर�गे
⇒ Limited Liability Partnership (LLP) companies are required to submit accounts and ownership
related documents to the Ministry of Corporate Affairs.
⇒ But many of them did not submit the documents on the deadline → Govt ordered them to pay
late fees/penalties, threatened them with prosecuting cases under the LLP Act and cancelling
their registration.
⇒ LLP settlement Scheme, 2020: “If you submit the required documents between x to y date →
Then you will have to pay less penalty and we will give you immunity from prosecution.”, said
the Government.
⇒ 💼💼Budget-2021: we’ll amend LLP Act for further ease of doing biz.

15.25🔨🔨 STATUTORY BODIES IN MINISTRY OF CORPORATE AFFAIRS (MCA)
15.25.1 🔨🔨 � Competition Commission of India (भारतीय प्र�त�धार् आयोग)
⇒ Competition among companies= consumer gets goods and services at the most competitive /
affordable prices. कं प�नयों के बीच �धार् होगी तभी तो ग्राहक को अ�� सेवा और िकफायती दाम म� चीजे �मल�गीं
⇒ 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 MRTP Act replaced with Competition Act, 2002- which has a statutory regulator
Competition Commission of India (CCI: 1 Chairman + 6 Members)
⇒ In past, CCI has imposed penalties on cement companies, real estate companies. It is also
investigating Airtel, and other telecom companies for alleged cartelization.
15.25.2 🔨🔨 � Insolvency and Bankruptcy Board of India (IBBI)

This too is a statutory body under the Ministry of Corporate Affairs (MCA). Read previous
Pillar#1B-2: NPA-handout for more on IBC Code.
Table 5: Bodies under Companies Act 2013
Features National Company National Financial Investor Serious Fraud
Law Tribunal Reporting Education & Investigation
(NCLT) Authority (NFRA) Protection Fund Office (SFIO)
रा�ी� य क�नी �व�ध रा�ी� य �व�ीय प्र�तवेदन �नवेशक एवं �श�ा र�ण गं भीर धोखाधडी अ�ेषण
अ�धकरण प्रा�धकरण कोष कायार्लय
Members Judicial + technical. Chairman + Boss: Corp. Affairs Civil servants &
They’ve benches members Secretary (IAS). financial experts
@Delhi, Kolkata, Plus, members
Jaipur etc. 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 Companies Auditors & (CA), in unclaimed money collar (financial)
Act, Board room listed companies from shares/bonds frauds. Powers to
battles, Merger- and large unlisted for financial search, seize,
Acquisition, companies. If literacy and arrest.
Corporate malpractices-> awareness Once SFIO gets
investigate and case, other

Features National Company National Financial Investor Serious Fraud
Law Tribunal Reporting Education & Investigation
(NCLT) Authority (NFRA) Protection Fund Office (SFIO)
Insolvency & debar them, Powers agencies (like CBI)

Bankruptcy (I&B) of civil court. can’t proceed.
15.25.3 🔨🔨🔨 Ministry of Corporate Affairs also associated with:
Chartered Accountants Regulates the CA profession through a
Act 1949 Statutory body: Institute of Chartered Accountants of India (ICAI).
ICAI also has IPA status under I&B Code.
Company Secretaries Act, Statutory Body: Institute of Company Secretaries of India (ICSI).
1980 Also has IPA status. REF (More in 📑📑Pillar#1B2)
Cost and Works Statutory Body: Institute of Cost Accountants of India (ICAI). Also
Accountants Act, 1959 has IPA status. What does it mean? REF (More in 📑📑Pillar#1B2)
Legislative ⇒ 1860: Societies Registration Act- for registration of literary,
Responsibilities of MCA scientific and charitable societies. E.g. Sahitya Akademi,
National School of Drama etc. जो मुनाफे के �लए नहीं लेिकन कला सािह�
�व�ान के प्रसार के �लए बने
⇒ 1932: Partnership Act
⇒ Companies Act 1956 → 2013.
⇒ 2008: Limited Liability Partnership Act
E-governance initiatives ⇒ INC-29 online form to registration of new company. Later it
of MCA was replaced with Simplified Proforma for Incorporating
Companies (SPICe) online form.
⇒ MCA-21 portal, where companies can file online documents
related to Companies Act compliance. MCA21 Version 3.0=
this latest Version 3.0 portal will have additional modules for e-
scrutiny, e-Adjudication, e-Consultation and Compliance
Management.
Officers Indian Corporate Law service (ICLS) via UPSC CSE-exam
15.26�👬👬 CORPORATE GOVERNANCE (कॉप�रेट शासन)
Figure 12: तुम मेरे पापा के दो� हो? - Cyrus Mistry

It is a way of directing the company to protect the interest of all stakeholders, and ensure three types
of compliance: (कं पनी �नद��शत करने का एक तरीका �जससे िहतधारकों क� र�ा हो)

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
कानूनी-�नयामक
Sexual Harassment of Women at Workplace (Prevention, Prohibition
and Redressal) Act, 2013 / “POSH Act”
⇒ Companies keeping balance sheets as per the Ind-AS accounting
Technical standards.
तकनीक� ⇒ Automobile company producing car engines as per BHARAT-Stage
emission norms.
Moral-Ethical Gillette scrapping the ad-contract with cricketer Hardik Pandya for his
नै�तक-सदाचार-पूणर् 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 fighting, 2019: whistle-blower complaint about financial
irregularities), 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
whistle-blower protection (��सल�ोअर सुर�ा) mechanism, Company can’t give loan to its directors
and so forth.
⇒ An auditor is authorised personnel that verifies the accuracy of financial records. Their primary
objective is to protect businesses from fraud. Companies Act → Companies Auditor’s Report
Order (CARO) = Auditors have to annually submit reports to the Ministry of Corporate Affairs
⇒ Companies Act also has provisions for Related Party Transactions (RPT) to avoid
scam/embezzlement. (More in 📑📑Pillar#4: Ease of Doing Biz)
15.26.1 �👬👬 Corporate Governance: notable Committees
⇒ 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…
Table 6:✋ not imp to memorize all provision. just observe pattern. Most of the Deadlines postponed due to Corona
SEBI implemented Uday Kotak committee’s suggestions From 2020-Apr#
Split CEO/MD and Chairman. One person can’t occupy Top 500 listed cos.
both positions in his company (e.g. Gautam Adani) although now SEBi

SEBI implemented Uday Kotak committee’s suggestions From 2020-Apr#
made it voluntary
now. (�ै��क)
Companies Act requires min.3 directors in Public Listed Top-2000 listed
company, but SEBI mandated to have min. 6 directors cos
Companies Act doesn’t prescribe gender of independent Top 1,000 listed
director but SEBI mandated atleast one independent woman cos.
director.
one person can serve as director in how many companies? 7
(Companies Act: Max.10), but SEBI required
⇒ #👻👻ATMANIRBHAR = SEBI deferred many of above guidelines. Dynamically changing info so
we need not chase it @ball-by-ball commentary.
15.26.2 💰💰(🏥🏥🏥🏥)CSR: Corporate Social Responsibility (कॉप�रेट सामा�जक �ज�ेदारी)

कं पनी ने अपने मुनाफे का कु छ िह�ा समाज क�ाण म� लगाना होगा
⇒ 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.
15.26.3 👻👻👻🗃🗃⚖ ATMANI: Corporate Governance → Companies Act relaxed

ब�त सारे अपराधों म� अब जेल नहीं होगी के वल जुमार्ना, और जुमार्ने क� रकम भी कम क� गयी
⇒ Companies Act requires the companies to hold Meeting of the board of directors, and meeting of
the shareholders every “x” number of days etc. This norm is relaxed due to corona lockdown.
Guidelines also provided for e-voting and video conferencing.
⇒ Companies (Amendment) Bill, 2020 → Many offences under Companies Act have been
decriminalized i.e. villains can settle by paying fines, & he’ll not face arrest/jail.
o E.g. if Corporate social responsibility reports not submitted to Government on time,
delay in holding Annual General Meeting of the shareholders etc.
⇒ ⏬ Fines/penalties for Small Companies, One person Companies, Start Ups and Producer
Companies*.
o *A Producer Company (PC) is a registered company by a group of farmers/
agriculturists. We will learn in 📑📑pillar4A: Farmer Producer Company (FPC)

15.26.4 ✍ Conclusion: Corporate Governance- �न�षर्
⇒ A healthy corporate sector plays an important role in creating jobs, improving exports, and
boosting GDP growth rate. एक �� कॉप�रेट �ेत्र रोजगार-�नमार्ण/सृजन, �नयार्त और जीडीपी �वकास दर को बढ़ाने म�
मह�पूणर् भू�मका �नभाता है।
⇒ But, lack of corporate governance erodes investors confidence and prevents deepening of the
financial market. Thereby it harms economic growth of a country. लेिकन, कॉरपोरेट शासन क� कमी/
धांधली- �नवेशकों के �व�ास को ख� करती है, और �व�ीय बाजार को गहरा करने से रोकती है। �जससे देश क� आ�थक वृ�द्ध को
नुकसान प�ँ चाता है।
⇒ Aforementioned initiatives /issues are greatly important in that regard need to be addressed in
priority basis.इस सं बंध म� पूव�� पहल / मुद्दे ब�त मह�पूणर् ह� / उ�े अग्रताक्रम से सं बो�धत करना आव�क.
15.26.5 ✍🎷🎷 Mock Questions for Mains (GSM3/250 Words Each)

1) (GSM2-2015) In the light of the Satyam Scandal (2009), discuss the changes brought in
corporate governance to ensure transparency, accountability. स�म �� डल (2009) पश्�ात पारद�शता,
जवाबदेही सु�न��त करने के �लए कॉप�रेट प्रशासन म� लाए गए बदलावों पर चचार् कर�।
2) (GSM3-2015) 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). भारतीयों म� सोने के �लए
सनक के चलते हाल के वष� म� सोने के आयात म� वृ�द्ध और भुगतान के सं तल
ु न और �पये के बाहरी मू� पर दबाव बढ़ा है। इसे देखते
�ए, सं प्रभु �णर् बॉ� ��म और मुद्रा��त सूचकांिकत बांड क� खू�बयों क� जांच कर�।सं तुलन और �पये के बाहरी मू� पर दबाव
डाला है। इसे देखते �ए, सं प्रभु �णर् बॉ� ��म और मुद्रा��त सूचकांिकत बांड क� खू�बयों क� जांच कर�।
3) "Just as good governance is necessary for vibrant Indian democracy, corporate governance is
necessary for vibrant Indian economy." elaborate. "�जस प्रकार जीवं त भारतीय लोकतं त्र के �लए सुशासन आव�क
है, उसी प्रकार जीवं त भारतीय अथर्�व�ा के �लए कॉप�रेट शासन आव�क है।"
4) Discuss the significance of deepening the capital market to resolve the Twin Balance sheet
Syndrome (TBS) in Indian Economy. दोहरे तुलन पत्र क� चुनौती को हल करने के �लए पूंजी बाजार को गहरा करने के
मह� पर चचार् कर�।
5) Discuss the significance of the Securities Market Code and Investors Charter in deepening the
capital market of India. भारत के पूंजी बाजार को गहरा करने म� प्र�तभू�त बाजार सं िहता और �नवेशक अ�धकारपत्र के मह�
पर चचार् कर�।
6) Why are Indian financial regulators apprehensive about (1) P-Notes (2) Cryptocurrencies?
भारतीय �व�ीय �नयामक (1) पी-नोट्स (2) िक्र�ोकर�सी से आशं िकत �ों ह�?
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Pillar#1C: SEBI-Share Market

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(Batch:PCB7) Mrunal’s Economy Pillar#1C: SEBI Share-market→ Page 183

(Batch:PCB7) Mrunal’s Economy Pillar#1C: SEBI Share-market→ Page 184

15 🐮🐮🐮🐮🐮🐮PILLAR#1C: SEBI-SHARE MARKET

(Batch:PCB7) Mrunal’s Economy Pillar#1C: SEBI Share-market→ Page 185

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15.3.2 🔪🔪🔪🔪⏰:🧔🧔Short term debt instruments → by Government

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15.3.5 🔪🔪🔪🔪⏰Short term debt instruments → by borrowers other than Govt

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15.4 🔪🔪🔪🔪⏰DEBT → SHORT TERM → FACTORING & TREDS

15.4.1 🔪🔪🔪🔪⏰Factoring Regulation (Amendment) Act, 2021

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15.4.2 🔪🔪🔪🔪⏰: 📡📡 TReDS platform to connect factoring-players.

15.5 🔪🔪🔪🔪⏰DEBT → INTEREST RATE BENCHMARKS: LIBOR, MIBOR, MIFOR

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🔠🔠❓Find Correct statements☹Asked in UPSC-Pre-2018)

15.6 🔪🔪🗃🗃🗓🗓 LONG TERM DEBT INSTRUMENTS (दीधर्-अव�ध ऋण- उपकरण)

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15.6.2 💡💡🗃🗃🗃🗃🧔🧔Modern day Government to borrow money

15.6.3 🥇🥇🥇🥇🥇🥇Bonds by Modern day Govt. to curb Gold Consumption

15.6.3.1 🍅🍅🍅🍅🍅🍅🍅🍅 Inflation Indexed Bonds (IIB-मुद्रा���त सूचकांिकत बांड)

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15.6.3.2 🥇🥇🥇🥇🥇🥇🥇🥇 Sovereign Gold Bond (2015: सं प्रभु �णर् बांड)

15.6.4 🔪🔪🔪🔪🔪🔪� Long term debt instruments by Companies

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15.6.6 🔪🔪🔪🔪🔪🔪Long Term Debt Instruments: Masala, Maharaja, Panda Bond

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15.7 ⚖🗃🗃 EQUITY INSTRUMENTS (इि�टी)

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(Batch:PCB7) Mrunal’s Economy Pillar#1C: SEBI Share-market→ Page 199

15.8 ⚖🗃🗃 METHODS OF ISSUING SHARES

⇒ Company hires an underwriter (usually, a merchant bank, investment bank)

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15.8.2 ⚖🗃🗃 IPOs → LIC & FDI in LIC?

15.8.3 ⚖🗃🗃 🤵🤵 IPO → Special Purpose Acquisition Company (SPAC)

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15.8.4 ⚖🗃🗃 🌐🌐 ADR/GDR: Shares in Videshi locker

15.8.6 🔗🔗🔗🔗 Initial Coin Offering (ICO)

Figure 2: Cryptocurrency मे पागल �ई प��क को िफरसे बेवकू फ बनाऊ, तो कै से?

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15.9.1 📈📈 🌈🌈Social Stock Exchange

15.9.2 📈📈🤩🤩 Secondary Market: Significance? (िद्वतीयक बाजार का मह�)

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Figure 3: कागजी शेयसर् को चोरी/आग से बचाऊँ , तो कै से?

15.9.4 🛒🛒 (💻💻:�) DEMAT → ASBA Reforms

15.9.4.1 🗃🗃🔢🔢 ISIN Number

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15.9.5 �🛒🛒 Types of Investors: Depending on Buying Capacity

15.9.6 �🛒🛒 Types of Investors: Depending on Buying Behaviour

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15.10📈📈 SENSEX & OTHER NOTABLE INDICES (उ�ेखनीय सं के तक/ सूचकांक)

15.10.1 🐮🐮📈📈🐻🐻MSCI Emerging Market (EM) index

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15.11🐮🐮🐮🐮🐮🐮 SHAREMARKET: 2020- IMPACT OF CORONA

15.6.3.1 🍅🍅🍅🍅🍅🍅🍅🍅 Inflation Indexed Bonds (IIB-मुद्रा��त सूचकांिकत बांड)