M.B.A. (GENERAL) DEGREE EXAMINATION,
NOVEMBER 2017
Third Semester
FINANCIAL MARKETS AND INSTITUTIONS
(CBCS 2016 onwards)
Time 3 Hours Maximum 75 Marks
Part A x 3 15)
Answer all the questions.
1. What do we mean by Non-banking finance companies

2. List out the objectives of SIDCs.
3. Write notes on IBRD.
4. What is credit rating? Describe its process.
5. Distinguish between primary, secondary and derivative
markets.
Part B 10 50)
Answer all the questions.
6. Explain in detail of stock holding corporation of
India limited (SHCIL).
Or
Describe the various types of risks encountered by
commercial banks.
Sub. Code
641316
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7. Explain the working and progress of industrial
reconstruction bank of India.
Or
Describe the promotional and developmental role
played by IFCI.
8. Write notes on international monetary fund.
Explain in detail about the function of Asian
development bank.
Or
Comment on any three international financial
institution roles in India.
9. Discuss the role of leading financial institutions in
the promotion of venture capital in India.
Or
Discuss in brief the life and non-life insurance
organizations in India.
10. "Money market instruments have helped the money
market to become more organised then before".
Explain with reference to role and working of
Treasury bills and inter company deposit market in
India.
Or
SEBI and IRDA are two important regulatory
agencies for capital markets and insurance
segment, respectively in India. Discuss the
measures taken by SEBI in the recent past for
investor protection.
Part C x 10 10)
Compulsory.
11. Case Study:
How much is enough and is economic growth being
sacrificed for the "comfort" of accumulating foreign
exchange reserves? A sharply defined debate on these two
questions facing the forex managers was kicked off here
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on Friday by Reserve Bank of India Deputy Governor
Shri. Yaga Venugopal Reddy, with opinion divided among
economists on whether the central bank should continue
to accumulate reserves or use them to stimulate growth.
Defining "comfort" in a variety of ways, Dr. Reddy
zeroed in on "the stability of financial markets" and the
assurance of external confidence as the driving elements
defining the country's forex management. In a world of
liberal flows and globalization of financial markets, it is
no longer import cover that defines forex adequacy but
the insurance against risk, the assurance of stability, the
management of "lumpiness" in the demand and supply of
currency, geopolitical and strategic factors and so on
which define the "adequacy" of reserves, he asserted.
When the level of forex reserves crossed the $50
billion mark earlier this year, several economists
criticized the RBI for continuing to stock forex and not
casing up fast enough on capital account and trade
liberalization. Use the money to stimulate growth said
Professor Deepak Lal, estimating that India may have
lost anything between 3 to 5 percentages points of growth
during the second half of the 1990s with the policy of
reserve build up.
In the face of such damning numbers, Dr. Reddy
was not at all defensive. Yes, he conceded, there are
political and institutional factors at play which prevent
the RBI from being more pro-active in letting reserves be
drawn down. After all, the RBI does not any longer look
at only the import cover that reserves afford. More
importantly, forex reserves are not maintained for the
sake of the cash alone, though there is a precautionary
motive in maintaining adequate reserves. Nor are they
maintained to earn revenues, though there is some
income that accrues from such reserves. But they are also
maintained, and increasingly so, to impart stability to
markets and boost investor confidence as well as general
confidence in the sovereign.
Given the fact that Brazil saw its whopping $80 bn
reserve dwindle down in days and several other countries
have had to fight rearguard battles to defend their
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currencies and reserves, an economy like India, with its
political, institutional and infrastructural rigidities, can
ill-afford to run the risk of letting reserves be whittled
down by the play of speculative market forces in the forex
market. Hence, a bit of considered management is a good
option and Dr. Reddy seemed to receive the endorsement
of most of his New Delhi audience as well as the many
experienced policy makers who turned up to hear him.
All indications are that India will continue to
liberalize the trade sector. We will continue to export
more goods and services. True, we will also import more,
but the exchange rate mechanism (and tariffs) will act as
a restraining factor. All indicators point to a more liberal
regime for foreign direct investment. So long as the rate
of inflation is under control and there is an interest
differential, private remittances will continue to flow into
the country. Our corporate have shown a remarkable
capacity to access foreign capital. It is a sign of their
growing competitiveness and efficiency, and there is
reason to believe that more companies will be able to
raise both debt and equity abroad. That leaves tourism.
Even with muddled policies and meddling governments,
2.3 million tourists arrive in India. If we can get our act
together, this number can be easily raised to, first, 5
million and then to 10 million. Given these objective
conditions, I believe that India's foreign exchange
reserves will continue to grow.
Our reserves are "adequate" if they give us the
confidence to leverage that strength. Our reserves will be
useless if we continue to treat them as hoard and believe
they will always be inadequate.
Questions
What are the sources of forex reserves in India?
What are the motives behind holding 'adequate'
forex reserves?
What according to you can RBI do, with such large
forex reserves?
What is full convertibility of Rupee? Can we go for it
now?
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