Financial Awareness and Government Schemes
Why This Chapter Matters
Financial awareness questions (Budget, GDP, government schemes, financial institutions) appear in every banking exam — 10-15 marks in IBPS PO, 5-8 in Clerk. This section requires current affairs plus conceptual understanding.
Core Concepts
1. Union Budget Key Terms
Fiscal Policy: Government's plan for revenue (taxes) and expenditure. Main tool is the Union Budget.
Key Budget components:
Revenue Budget: day-to-day income and expenses
Capital Budget: long-term assets and liabilities (infrastructure spending, loans)
Fiscal Deficit: Government's total expenditure minus total receipts (excluding borrowings).
Fiscal Deficit = Total Expenditure − Total Revenue Receipts − Capital Receipts (excluding borrowings)
A higher fiscal deficit means more government borrowing.
Revenue Deficit: Revenue expenditure − Revenue receipts. If negative, operating deficit exists.
Primary Deficit = Fiscal Deficit − Interest payments
Disinvestment: Government selling its stake in public sector companies to raise funds.
2. Economic Indicators
GDP (Gross Domestic Product): Total value of all goods and services produced in India in a year.
GDP growth rate: if GDP grows, economy is expanding.
GDP calculation methods: Expenditure approach, Income approach, Production approach.
GNP (Gross National Product): GDP + income from abroad − income paid abroad.
GNI (Gross National Income): Same as GNP in modern national accounts.
Inflation: Rise in general price level.
Measured by: CPI (Consumer Price Index — used by RBI for monetary policy target), WPI (Wholesale Price Index — used for inflation in manufacturing/wholesale)
RBI's inflation target: 4% (+/-2%), i.e., 2%-6% acceptable range.
Core inflation: Inflation excluding food and fuel (more stable measure of underlying price pressure).
3. Important Government Schemes (Banking Relevant)
Financial Inclusion Schemes:
Jan Dhan Yojana (PMJDY): Bank account for every household. Includes Rs 2 lakh accident insurance and Rs 30,000 life insurance.
PM Mudra Yojana: Loans up to Rs 10 lakh for micro enterprises (Shishu: up to 50,000 | Kishore: 50,000-5 lakh | Tarun: 5-10 lakh).
Stand Up India: Loans to SC/ST and women entrepreneurs (Rs 10 lakh to Rs 1 crore).
Atal Pension Yojana: Pension scheme for unorganised sector workers.
PMSBY (Suraksha Bima Yojana): Rs 2 lakh accident insurance for Rs 20/year.
PMJJBY (Jeevan Jyoti Bima): Rs 2 lakh life insurance for Rs 436/year.
PMFBY (Fasal Bima Yojana): Crop insurance for farmers.
Credit Schemes:
CGTMSE (Credit Guarantee for MSMEs): Collateral-free loans up to Rs 2 crore for MSMEs.
KCC (Kisan Credit Card): Short-term credit for farmers (includes PM Kisan scheme link).
4. Financial Institutions and Their Roles
| Institution | Role |
|---|
|---|---|
| SEBI | Regulates stock markets and securities |
|---|---|
| IRDAI | Regulates insurance companies |
| PFRDA | Regulates pension funds (NPS) |
| NHB | Regulates housing finance companies |
| RBI | Regulates banks and monetary policy |
| NABARD | Rural and agricultural credit |
| SIDBI | MSME financing |
5. International Financial Organisations
IMF: Provides loans to countries facing balance of payment crises.
World Bank: Long-term development loans to developing countries.
ADB (Asian Development Bank): Infrastructure and development in Asia.
NDB (New Development Bank): BRICS nations' development bank (HQ: Shanghai).