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SSC CGL Economics · Formula sheet

Money, Banking and Public Finance formulas

2 formulas, 5 reference tables and 7 common traps for SSC CGL Economics Money, Banking and Public Finance, grouped by subtopic.

Full notes with worked examples

Money, the RBI and Monetary Policy

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Money: functions, measures and demand

Fisher's equation of exchange

MV=PTMV = PT
  • MMMoney supply
  • VVVelocity of circulation
  • PPPrice level
  • TTVolume of transactions

The RBI and credit control

PointFact
RBI recommended byHilton Young CommissionQ
Inflation targeting2016 amendment; 4% CPIQ
To discourage creditRaise the bank rateQ
SLR applies toTotal demand and time depositsQ
Higher CRRLower money multiplierQ

Common traps

M2 is post office, M3 is banks

M2 adds post office savings; M3 adds banks' net time deposits. Options swap the two, and offer M4's definition for M3.

CRR and SLR cut lending

A statement that CRR and SLR increase banks' lending capacity is false. They lock up deposits and reduce lending.

Banks, Microfinance and Financial Inclusion

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Banks, development institutions and inclusion schemes

NameFact
IFCI, ICICI, IDBI1948, 1955, 1964Q
Lead Bank Scheme1969Q
India Post Payments BankBanking through postmenQ
PM Jan Dhan YojanaFinancial inclusion missionQ
Stand-Up IndiaSC, ST and women entrepreneursQ
PM MUDRA YojanaCollateral-free micro loansQ

Microfinance and self-help groups

PointFact
SHG-Bank LinkageNABARD, 1992-93Q
Regulator of MFIsRBIQ
Malegam Committee2010; NBFC-MFI categoryQ
NBFC-MFI minimum75% of total assetsQ
Self-regulatory bodyMFINQ

Common traps

Jan Dhan is inclusion, not microfinance

PM Jan Dhan Yojana opens basic bank accounts. It is not a microfinance-sector initiative, unlike E-Shakti, MUDRA and the India Micro Finance Equity Fund.

Total assets, not equity

The NBFC-MFI rule is 75% of total assets in microfinance loans. Options give 75% of equity or 90% of assets.

Budget, Fiscal Policy and Taxation

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Deficits and fiscal policy

Primary deficit

Primary deficit=Fiscal deficit−Interest payments\text{Primary deficit} = \text{Fiscal deficit}-\text{Interest payments}
  • Fiscal deficitTotal expenditure minus receipts other than borrowings
  • Interest paymentsInterest on past borrowing

Revenue and capital receipts

ItemKind
Taxes, GSTRevenue receiptQ
Fees and finesNon-tax revenueQ
Loan from the RBICapital receiptQ
Sale of government assetsCapital receiptQ
Grants for asset creationRevenue expenditureQ

GST, Finance Commissions and the order of taxes

ItemFact
GSTIndirect taxQ
GST stepsAmendment, Council, launchQ
15th Finance CommissionN. K. SinghQ
Tax orderLand revenue, sales tax, MODVAT, service taxQ

Common traps

Disinvestment is not revenue

Disinvestment brings in money, but it reduces the government's assets, so it is a capital receipt. A statement calling it revenue is false.

All three borrowings are added

The gross fiscal deficit adds all three: home borrowing, RBI borrowing and foreign borrowing. A formula that subtracts any of them is wrong.

The amendment came before the Council

The 101st Amendment created Article 279A, and only then could the GST Council be formed. An order with the Council first is wrong.

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