Mrunal’s Economy Win21 Updates For UPSC & Other Competitive Exams

⇒ The advantage of buying Iphone, Oneplus, Nokia or AndroidOne series of phones is they
provide (free) operating system updates/security patches for 2-3 years. I believe coaching
industry too needs to adopt similar business practice. महंगा फोन खरीदने पर मु� म� �नय�मत ऑपरेिटंग �स�म
क� अपडेटस �मलती है तो, को�चगं �ास म� भी ऐसी सु�वधा होनी चािहए, इस�लए मेने ये मुहीम शु� क� है. 😅😅 🙏🙏
⇒ So, this ‘Win21 update patch/handout’ is for my old batch students who had joined my economy
classes before Feb-2021. It contains updates since the UPSC Prelim-2021, including Budget
2021,Economic Survey 2021, and other exam-worthy Current Affairs Updates in Economy.
Type of Not joined Attended Attended Attended Attending
Student Unacademy Mrunal’s Mrunal’s Full Mrunal’s Full Mrunal’s
Full Course that Course that ongoing Full
Course ended in Sept- ended in Jan- length paid
that ended 2020 2021 Course from
in May- Feb-2021
2020 OR Discount
BEFORE Code
“Mrunal.org”
Shd see ✅ Yes ✅ Yes ✋ No need ✋ No need ✋ No need
Win20CSP?
Shd see ✅ Yes ✅ Yes ✅ ✅ ✋ No need
Win21CSP?

C ONTENTS

10 : Pillar#1A1: Money-Barter to Bitcoin ke updates ................................................................................ 2

10.1 🐷🐷🐷🐷Bank Money / Deposit Money ............................................................................................ 2

10.1.1 🐷🐷🐷🐷🐷🐷 Cheque → Positive Pay Mechanism for Cheques in CTS ............................. 2

10.1.2 💸💸💸💸Next Generation Treasury Application (NGTA), 2020-Oct .................................. 3

10.1.3 QR Codes: compulsory to implement UPI/Bharat QR from 2022 .................................... 3

10.1.4 �📜📜📜📜 Perpetual Licence for Payment System Operators? ......................................... 4

10.1.5 🕵🕵🕵💳💳💳💳 Payments Infrastructure Development Fund (PIDF) 2020-Jun .................. 4

10.1.6 🕵🕵🕵💳💳 📯📯 Scheme of Offline Retail Payments Using Cards and Mobile Devices....... 5

10.2 🔗🔗🔗🔗 Bitcoin Updates Since Win20 Series............................................................................. 5

10.3 🐯🐯🐯🐯🐯🐯 Central Bank Digital Currency (CBDC) .................................................................... 5

10.3.1 🐯🐯🐯🐯🐯🐯=👌👌👌👌Benefits of CBDC ..................................................................................... 6

10.3.2 🐯🐯🐯🐯🐯🐯= ✋🥵🥵Challenges of CBDC .............................................................................. 6

Mrunal’s Economy Win21 Series Pillar#1A: Money & Monetary Policy → Page 1
 10.3.3 🐯🐯🐯🐯🐯🐯� CBDC: Conclusion / �न�षर् ............................................................................. 7

10.3.4 🤫🤫🤫🤫🤫🤫🤫🤫 Redenomination: drop zeros, change name ................................................ 7

10.3.5 🤫🤫🤫🤫🤫🤫🤫🤫 Iran = Toman to replace Iranian Riyal (2020) ............................................. 7

10.4 �🎷🎷🎷🎷1⃣✋ Mock question for Mains/ESSAY ................................................................... 7

11 Pillar1A2: 🤑🤑 Money Supply (M0-M4) & Monetary Policy- CRR, SLR, Repo............................... 8

11.1 💸💸💸💸Supply of Money (मुद्रा क� पू�त): Deposits ............................................................................ 8

11.2 😷😷😷😷😷😷😷😷Corona-2020 Impact on Money Supply as per 📔📔📔📔ES21 ........................... 8

11.2.1 😷😷Corona-2020 impact on M0 as per 📔📔📔📔ES21 ............................................................. 8

11.2.2 😷😷Corona-2020 impact on [M3] as per 📔📔📔📔ES21 .......................................................... 9

11.2.3 💸💸⚡Money Multiplier Before Corona as per ES20 .......................................................... 9

11.2.4 💸💸⚡: 😷😷Corona-2020 impact on money multiplier as per ES21 ............................... 10

11.3 🐯🐯🐯🐯🐯🐯 MONETARY POLICY: Qualitative Tools .......................................................... 11

11.3.1 (2020) 🐯🐯🐯🐯Reverse Repo Rate cut & Policy corridor Changed asymmetrically ...... 12

11.4 🐯🐯🐯🐯🐯🐯 MONETARY POLICY: QUALITATIVE TOOLS (गुणा�क साधन) ....................... 13

11.4.1 💍💍 Margin Requirements / Loan to Value (LTV) (सीमा अ�नवायर्ता) ....................................... 13

11.5 🐯🐯🐯🐯🐯🐯 Priority Sector Lending (PSL: प्राथ�मकता �ेत्र के �लए ऋण मानक) ..................................... 13

11.5.1 🐯🐯🐯🐯🐯🐯 PSL Reforms-2020: on RRB/SFB/UCB?.......................................................... 14

11.5.2 🐯🐯🐯🐯🐯🐯 PSL Reforms-2020: Startups, Renewable Energy and Healthcare ................ 15

11.5.3 🐯🐯🐯🐯🐯🐯 PSL Reforms-2020: Weightage to poor districts (गरीब/�पछड़े �जलों को भारांक) ...... 15

11.6 📢📢 Bi-Monthly Monetary Policies- A Summary Table ........................................................ 15

11.6.1 �🎺🎺🎺🎺1⃣✋ Mock Questions for UPSC Mains/GSM3 (250 words) ......................... 17

10 : PILLAR#1A1: MONEY-BARTER TO BITCOIN KE UPDATES

10.1 🐷🐷🐷🐷BANK MONEY / DEPOSIT MONEY
10.1.1 🐷🐷🐷🐷🐷🐷 Cheque → Positive Pay Mechanism for Cheques in CTS
CTS= canned image of cheque electronically sent to the drawee branch for faster clearance without
theft or tempering. This system is operated by NPCi

Mrunal’s Economy Win21 Series Pillar#1A: Money & Monetary Policy → Page 2
 Table 1: Suppose Roman (Axis Bank, Bengaluru) sends ₹50,000 cheque to Mrunal (SBI, A'bad)
Cheque clearance Until 🤩🤩Positive Pay Mechanism (Extra-steps)
now
Sender (Roman) Roman writes check, gives Roman (issuer) clicks cheque’s photo
to recipient Mrunal (🤳🤳IMAGE#A) & uploads on Axis Bank's
App / Bank's Webportal or send details via
SMS2Axis ke "I've given this cheque number-
X with Amount-Y to Mrunal on Date-Z"
Reciepient Deposits cheque in SBI, Same
(Mrunal) A’bad
Recipient’s Bank SBI staff sends scans Same
(SBI) cheque → sends
(📠📠IMAGE#B) to Axis
via NPCi’s CTS
Sender’s Bank Receives msg via CTS, → Axis crosschecks whether
(Axis) verifies (📠📠IMAGE#B) → 📠📠IMAGE#B = 🤳🤳IMAGE#A?
releases ₹₹ If, no mismatch/discrepancy → releases ₹₹
Benefit? 😰😰What if Mrunal 🤩🤩Positive Pay Mechanism prevents such
(reciepient) manipulated/ tempering / fraud by Cheque Recipient.
tempered cheque. E.g. 50k
add “00” → 50 lakhs!
⇒ 2016: ICICI Bank introduced Positive Pay for its customers.
⇒ 2020: RBI has ordered all banks to implement it from 1/1/2021 onwards. (✋Exact DATE NOT
IMP)
o (Optionally available to customers) for amounts above ₹50,000/- (✋Exact AMT NOT
IMP)
o (Compulsory required) IF amount = ₹5 lakh and above. (✋Exact AMT NOT IMP)
10.1.2 💸💸💸💸Next Generation Treasury Application (NGTA), 2020-Oct
⇒ RBI planning this web based application / software for management of
o 🗃🗃Money Market Securities (📑📑Ref: HDT-Pillar#1C)
o Gold Reserves, 💱💱Foreign exchange, 💱💱Multi currency transactions (📑📑Ref: HDT-
Pillar#3A)
⇒ ✋Will this replace E-Kuber? How will it work? Ans. Topic still under development. Further
operational aspects not important for the scope of IAS exam. #🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो
10.1.3 QR Codes: compulsory to implement UPI/Bharat QR from 2022
- 1990s: 2 dimensional (2D) Quick Response (QR) Code system developed in Japan.
- Indian E-payment systems function on 3 types of QR Codes, namely,
Table 2: ✋Difference between UPI QR vs Bharat QR? NOT.IMP.4.EXAM ⏳📚📚थोड़ा-पढ़ो-आगे-बढ़ो
Proprietary e.g. Paytm or PhonePe ke exclusive QR codes.
QR code 😰😰Problem? Other companies’ app may not be able to scan and pay it.

Mrunal’s Economy Win21 Series Pillar#1A: Money & Monetary Policy → Page 3
 UPI QR code Generated by UPI app of NPCi
Bharat QR code Developed by NPCi with help of Visa and Mastercard.
⇒ RBI has ordered all the Payment System Operators (PSOs e.g. Paytm, PhonePe, MobiKwik,
Google Pay etc) to shift to UPI QR or Bharat QR by March 31, 2022. RBI has prohibited them
from launching any new proprietary QR code.
⇒ 🤩🤩Benefit? All Payment apps will be able to scan these QR codes → 'interoperability'.
10.1.4 �📜📜📜📜 Perpetual Licence for Payment System Operators?
Payment and Settlement Systems Act, 2007: RBI gives license to Payment System Operators (PSOs).
Type of PSO Examples
Umbrella Entity For Retail Payments NPCi (learned in previous section)
Card Payment Gateway Operator MasterCard, Visa, Rupay
Crossborder / International Western Union, MoneyGram
Remittance
Prepaid Payment Instrument (PPI) AmazonPay, Mobikwik, Phonepe, PayU, PayTM Wallet
etc
Atm Operators SBI etc's own ATMs
White label ATMs by Tata, Muthoot, SREI etc
Financial Market Infrastructure Clearing Corporation of India (CCI): provides backend
Provider digital infrastructure for share/bond/foreign currency
deals etc. (📑📑Ref: HDT-Pillar#1C)
2020-Oct: RBI introduced following reforms in PSO-licence validity
😰😰Before 🤩🤩After (2020-Oct)
📜📜📜📜 License validity= 5 years. 📜📜📜📜 Perpetual License = valid for infinite time
Afterwards, RBI may renew again. हर 5 period. (सदा के �लए/ सतत अव�ध के �लए मा� लाइस�स)
साल पर लाइस�स का पुनः नवीनीकरण कराना था
⇒ Company owner's uncertainty: ⇒ Ease of Doing Biz. Now company owner can focus
whether my licence will be on his business peacefully.🤩🤩 (�ापार म� सुगमता/
renewed or not? 😰😰 आसानी/ �न��ता)
⇒ RBI officers' time also wasted in ⇒ RBI officers' time saved. (समय क� बचत)
processing the files / docs
every5yrs.
10.1.5 🕵🕵🕵💳💳💳💳 Payments Infrastructure Development Fund (PIDF) 2020-Jun
 ₹250cr from RBI + ₹250 cr from (Banks and Card Gateway Operators) → ₹500 cr fund setup.
 Objective? Provide funding/ subsidy to encourage merchants in the small towns, villages and
North Eastern states to adopt point-of-sale (PoS) card swiping machines.
भुगतान इं फ्रा���र के �लए �न�ध/कोष: गांव, छोटे शहरों और उ�र-पूव� इलाकों म� �ापा�रयों को काडर् मशीन अपनाने के �लए मदद

Mrunal’s Economy Win21 Series Pillar#1A: Money & Monetary Policy → Page 4
10.1.6 🕵🕵🕵💳💳 📯📯 Scheme of Offline Retail Payments Using Cards and Mobile Devices
 While mobile phones, cards, e-wallets, etc.⏫ but, internet connectivity issues especially in
remote areas= obstacle to digital economy 😰😰😰😰
 So, 2020-Aug: RBI announced trials /pilot-testing for Off-line payments through cards, wallets
and mobile devices for small value transactions. (इं टरनेट बं द हो तब भी छोटी रकम के भुगतान िड�जटली िकए जा
सके , इस प्रकार के परी�ण आरबीआई करवा रहा है.)
 How this thing really works is not important for the scope of the exam. #�🚫🚫🚫🚫
10.2 🔗🔗🔗🔗 BITCOIN UPDATES SINCE WIN20 SERIES
WEF’s ⇒ World Economic Forum (WEF) is a non-government organization in
Bill of Rights Cologny-Geneva, Switzerland. (�व� आ�थक मं च. गैर सरकारी सं गठन)
⇒ 2020-May: Published a document, ‘Blockchain Bill of Rights’ . Document
talks about rights to accountability, transparency, data privacy, data
protection etc. (�ॉकचेन अ�धकार पत्र/�वधेयक: जवाबदेही, पारद�शता, डेटा गोपनीयता, डेटा
सुर�ा आिद के अ�धकार)
⇒ Aims to set global standards for web-developers, corporates and
governments who’re building/using blockchain technology. (वै��क मानदंड
बनाएगा)
But, WEF not as big body as UN, and this report not as great as the United
Nations’ Universal Declaration of Human Rights. So, ✋DON'T LOSE SLEEP.
MEITY & They’re also releasing similar reports with blockchain applications,
NITI accountability, transparency, data privacy, data protection etc.
Elon Musk Announced "🚗🚗🚗🚗Tesla Electric car can be purchased using bitcoin, in future"
(2021) → This is created crazy demand for bitcoins among investors→ 1BTC selling
for over $50,000.
🈶🈶China 2020: started trials to for Central Bank Digital Currency (CBDC)-given below

10.3 🐯🐯🐯🐯🐯🐯 CENTRAL BANK DIGITAL CURRENCY (CBDC)

क� द्रीय ब�क िड�जटल मुद्रा / सं प्रभु िड�जटल मुद्रा

2020-May: People's Bank of China (PBC) started trials to issue its paper fiat money Yuan/Renminbi
in digital format. (कागजी �प म� मुद्रा छापने क� जगह, िड�जटल �प म� जारी करना → और उसे लाभाथ� को ई-ब�िकंग के ज�रए
मुहैया कराना)
⇒ PBC will use supercomputer to create its fiat currency (Yuan also called ‘Renminbi’) in digital
format → transfer it to the recipient via e-banking e.g. loan to govt, salary to employee etc.
⇒ European Central Bank (ECB) and RBI have also setup internal committees to study the
feasibility of CBDC. (क� द्रीय ब�क िड�जटल मुद्रा क� �वहायर्ता के �लए स�म�तयां बनाई गई है)
⇒ 2020-Jan to Oct: China's digital Yuan trial experiment # ⚾📻📻⚾✋⏳📚📚थोड़ा-पढ़ो-आगे-बढ़ो

Mrunal’s Economy Win21 Series Pillar#1A: Money & Monetary Policy → Page 5
⇒ 2020-Oct: USA's stand: " we don't want to be the 1st to launch the digital currency, rather, we
want to do it error-free. Because there are many risks associated" (इसम� जो�खम ब�त है इस�लए हमको
ज�बाजी म� सबसे पहले इसे लागू करना नहीं है)
10.3.1 🐯🐯🐯🐯🐯🐯=👌👌👌👌Benefits of CBDC
CBDC/ Sovereign Digital Fiat Money / Digital Base Money will provide following benefit
1. ⏬ Cost printing and transporting physical currency. लागत और प�रवहन खचर् म� कमी
2. ⏬ Scope for counterfeiting. जाली नोट बनाना मु��ल
3. ⏫Traceability, ⏬Anonymity: सुराग लगाना आसान, गुमनाम/अ�ात रहेना मु��ल
a. Whether money is reaching the intended beneficiary or not? (लाभाथ� को योजना का पैसा �मला
िक नहीं)
b. From where did the businessman accumulate this money, did he pay an appropriate
amount of tax or not? Else auto-alert to the Income tax department for tax evasion.
(करचोरी पर �नगरानी आसान)
4. ⏬ masshysteria of Bitcoin & other Cryptocurrencies, which are issued by private actors & pose
danger of Terror Finance, Narcotics etc. (�नजी �ेत्र द्वारा जारी िक्र�ोमुद्रा के प्र�त लोगों का आकषर्ण/ सामूिहक
पागलपन कम होगा.)
5. ⏫ Homogeneity and promptness of disbursal: (��रत और एक �प तरीके से पेसा हर जगह/ हर ��� को
भेजना)
a. With the click of a button, Money could be sent to beneficiaries’ account whether he is
located in Kashmir or Kanyakumari. Irrespective of Curfew/Lockdown/Floods/Bank
Hartals- Students will receive scholarship, farmers will receive subsidy, and senior
citizens will receive pension.
6. Can be evolved into a Programmable Digital Currency to control the allocation of new money
for development of various sectors. (अलग-अलग �ेत्रों के �वकास के �लए पैसे को "प्रोग्राम" करके भेजना)
a. E.g. if RBI issues Programmable-Digital-Rupee → SBI → Student Loan → its Interest
rate will be automatically “X%”,
b. but if SBI manager tries to circulate this money as loan-4-buying-luxury-iphone then A)
either computer system will reject it or B) change interest rate to Y%
c. [How will that work? Ans. ✋🎓🎓 #Boycott-PHD #थोड़ा-पढ़ो-आगे-बढ़ो.]
7. ⏬🤮🤮 Spread of virus through physical currency notes. [Mains Logical Structure: low level
benefits should be written at the bottom part of the answer.]
10.3.2 🐯🐯🐯🐯🐯🐯= ✋🥵🥵Challenges of CBDC
1. Digital Divide, Financial Literacy, Access Points: (िड�जटल उपकरणों क� उपल�ता क� खाई, �व�ीय सा�रता का
भाव, िड�जटल भुगतान इ�ेमाल करने के प�ंच �बंदओ
ु ं क� कमी)
a. Not everyone has electronic gadgets or internet connectivity,
b. Not everyone knows how to operate bank account digitally,
c. Not every village shopkeeper accepts payments in the digital form.
2. Cyber Terrorism/Nuclear Attack/Natural Disaster. If electronic equipment stops functioning →
economy will stop functioning. (साइबर आतं कवाद / परमाणु हमला / प्राकृ �तक आपदा: �वद्युत उपकरण बं द तो
अथर्�व�ा बं द)

Mrunal’s Economy Win21 Series Pillar#1A: Money & Monetary Policy → Page 6
10.3.3 🐯🐯🔗🔗🔗🔗� CBDC: Conclusion / �न�षर्
 Considering above charms and challenges, CBDC
 can ‘supplement’ physical currency BUT cannot substitute/replace it completely, for India.
(िड�जटल मुद्रा, कागजी मुद्रा क� 'पूरक' तो हो सकती है, लेिकन 'स�ूणर् �वक�/एवज' नही)
10.3.4 🤫🤫🤫🤫🤫🤫🤫🤫 Redenomination: drop zeros, change name

Figure 1: expression when you need 2.5 lakh riyal for a box of eggs👜👜
REDENOMINATION involves removing zeros from currency’s face value, to facilitate transactions
during high inflation. Here, the old currency is not instantly declared illegal / withdrawn from
circulation immediately. Old currency is allowed to continue side by side with new currency (upto
some time limit).
10.3.5 🤫🤫🤫🤫🤫🤫🤫🤫 Iran = Toman to replace Iranian Riyal (2020)
Iran suffering from
⇒ 1) High levels of inflation. 1 box of eggs cost ~250,000 Iranian rials.
⇒ 2) Weak exchange rate (कमजोर �व�नमय दर). $1 costs ~42,000 Iranian rials.
⇒ So, very inconvenient to carry/count such a large quantity of paper currency.
⇒ 2020-May: Iranian Parliament approved a new paper currency “Toman” to replace its existing
paper currency “Iranian Rial” at the rate of 1 TOMAN = 10,000 Rial.
⇒ Although it’s not an ‘instant demonetization’ of Iranian Riyal. It will be replaced with TOMAN
gradually in the next 2-5 years.
⇒ 🤩🤩Benefit? Ease of carrying currency and making transactions. 😰😰Challenge? it will not
increase the purchasing power or reduce inflation.
10.4 �🎷🎷🎷🎷1⃣✋ MOCK QUESTION FOR MAINS/ESSAY
Q01. (GSM3) In 2020, People's Bank of China started experimentation on Central Bank Digital
Currency (CBDC). Examine critically, the charms and challenges of such initiatives for Indian
monetary system. 250 words. चीन का ‘क� द्रीय ब�क िड�जटल मुद्रा’ प्रयोग. भारतीय मौिद्रक प्रणाली के �लए, इस तरह क� पहल के
आकषर्ण और चुनौ�तयां क� समी�ा क��जए

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Mrunal’s Economy Win21 Series Pillar#1A: Money & Monetary Policy → Page 7
11 PILLAR1A2: 🤑🤑 MONEY SUPPLY (M0-M4) & MONETARY
POLICY- CRR, SLR, REPO
11.1 💸💸💸💸SUPPLY OF MONEY (मुद्रा क� पू�त): DEPOSITS
📔📔📔📔ES21: Corona-2020: Initial months of lockdown the growth of (demand) deposit⏬⏬
because people withdrew money in panic / precautionary motive. Although in the later months →
Unlock down and normalcy → ⏫⏫Quantity of deposit. तालाबं दी के शु�आती महीनों म� लोगों ने एह�तयाती
कारणों से ब�कों से अपनी िडपॉ�जट �नकाली हालांिक प�र���त सामा� होने पर, बाद के महीनों म� वापस बचत क� मात्रा म� बढ़ोतरी होने
लगी है

11.2 😷😷💸💸💸💸💸💸CORONA-2020 IMPACT ON MONEY SUPPLY AS PER 📔📔📔📔ES21

✋Note: There may be 500 other factors as well affecting these indicators but gives poor:cost benefit
learning all those things from MCQ point of view. वा��वक �जदं गी म� और भी 500 कारकों के चलते इन आंकड़ों पर
असर होता है लेिकन उन सब क� पं चात करने बैठे तो परी�ा के �लए उपयोगी नहीं #⏳📚📚थोड़ा-पढ़ो-आगे-बढ़ो
💸💸💸💸💸💸Indicator / measure of money supply 😷😷Impact of corona-2020
M0 = also known as reserve money /high powered money ⏫
M3 = is the most commonly used measure of money supply, also ⏫
known as “Aggregate Monetary Resources / Aggregate Money
Supply” (सम� मौिद्रक सं साधन).
Money multiplier= M3 divided by M0 No significant change /
remained supressed
11.2.1 😷😷Corona-2020 impact on M0 as per 📔📔📔📔ES21
M0 = Total Currency in circulation (CIC), which consists of:
 Held by Public/Bank/NBFCs/Commercial entities/Govts [Which may have been given by RBI in
the form of payments & loans, Ways and means advances (WMA) etc]
 Held by other Banks in “Vault cash” (i.e. amount kept by banks for day to day Operations.)

Mrunal’s Economy Win21 Series Pillar#1A: Money & Monetary Policy → Page 8
 Other Deposits in RBI (of Public**, Banks, NBFCs & Govts)
**such as PM Garib Kalyan Yojana (2016) under which Blackmoney holder was required to deposit
25% of his blackmoney in RBI for a lock-in period of 4 years.
⇒ Corona-2020: M0 increased mainly ⏫ because: To keep the ₹:$ exchange rate stable, Reserve
Bank’s ⏫purchases (of Dollars & other Foreign Currency) from Authorised Dealers (ADs) in
the Foreign Currency Exchange Market → ⏫ ₹₹ Currency supply in the market. [More in
Pillar#3: Balance of Payment] �पया और डॉलर क� �व�नमय दर को ��र रखने के �लए �रजवर् ब�क ने बाजार से डॉलर करी
दे और सामने �पए मुहैया कराए �जसके चलते आर��त मुद्रा (M0) क� मात्रा म� बढ़ोतरी �ई - �पछले साल क� तुलना म�

11.2.2 😷😷Corona-2020 impact on [M3] as per 📔📔📔📔ES21

M3 =Coin and currency with public + Demand deposits with banks + Time deposits with bank
⇒ Corona-2020: overall M3⏫ due to expansionary monetary policy of RBI (CRR⏬, Repo⏬
etc) �रजवर् ब�क क� �व�ार वादी नी�तयों के चलते बढ़ोतरी �ई - �पछले साल क� तुलना म�
🔠🔠❓ If you withdraw Rs. 1,00,000 in cash from your Demand Deposit Account at your bank, the
immediate effect on aggregate money supply in the economy will be _ _ . (UPSC-Prelims-2020)
[a) to reduce it by ₹ 1,00,000 [b) to increase it by ₹ 1,00,000
[c) to increase it by more than ₹ 1,00,000 [d) to leave it unchanged

11.2.3 💸💸⚡Money Multiplier Before Corona as per 📔📔📔📔ES20

Figure 2: source- Economic Survey 2020, zigzag pattern means 'not increasing steadily'.

Mrunal’s Economy Win21 Series Pillar#1A: Money & Monetary Policy → Page 9
- 📘📘📘📘ES20: Between mid-1990’s to 2016-17: Money multiplier (measured as a ratio of M3/M0)
was mostly ⏫. But 2017-18 onwards: Money Multiplier is ⏬. Could be attributed to the lack
of growth in loaning activities & slowdown in economy.
11.2.4 💸💸⚡: 😷😷Corona-2020 impact on money multiplier as per 📔📔📔📔ES21

⇒ Money Multiplier = M3 divided by M0

⇒ Money Multiplier mostly ⏫increasing from 1980s onwards up to 2016-17, has however been
declining ⏬since then. multiplier 5.6 (2019) but ⏬ to 5.5 (2020) = Money Multiplier didn't
grow / remained suppressed / muted / Impaired in Corona-2020. Reasons? → कोरोना के दौरान मुद्रा
गुणांक दबा �आ या मूक रहा �ोंिक:
⇒ 😰😰Slowdown in economy, demand for loans ⏬ → so, bank deposited large amount of money
with RBI under reverse repo. लोग लोन म� पैसा लेने के �लए कमाए इस�लए ब�कों ने अपनी अ�त�र� रा�श �रजवर् ब�क म� ही
�रवसर् रेपो रेट के ��प म� जमा करा दी
⇒ 😰😰if banks continuously loaned ₹₹ to households & business firms then M3 would grow thru
'zigzag' lending-deposit activity from One bank account to another bank account यिद वह पैसा �रज़वर्
ब�क म� �रवसर् रेपो रेट म� डालने क� वजह, ब�क वाले लोन म� घुमाते तो मुद्रा गुणक म� बढ़ोतरी दजर् होती, लेिकन कोरोना के चलते लोगों म�
लोन क� उ�ुकता कम देखी गई
⇒ 😰😰Then 📔📔📔📔ES21 tried to entered in technical commentary that If we ignore the Reverse repo
rate money parked in RBI then "Y" thing would have happened etc but Poor cost benefit for
exam. #⏳📚📚थोड़ा-पढ़ो-आगे-बढ़ो Even if some inexperienced to pvt quizmaster setup faltu MCQs
from it.
⇒ 😰😰if people keep more portion of cash in hand and less in banks-deposits then Money
multiplier will not improve. Corona= ⏫ rise in cash:deposit ratio, as people drawing cash from
bank account fearing lockdown / precautionary motives [Atleast, in the initial months of
lockdown]. तालाबं दी के शु�आती महीनों म� लोगों ने एह�तयाती कारणों से ब�कों से अपनी िडपॉ�जट �नकाली इस कारण भी, मुद्रा
गुणक म� बढ़ोतरी नहीं हो पाई.

Mrunal’s Economy Win21 Series Pillar#1A: Money & Monetary Policy → Page 10
11.3 🐯🐯🐯🐯🐯🐯 MONETARY POLICY: QUALITATIVE TOOLS

- To revive Indian economy after Corona, RBI pursued

EXPANSIONARY/CHEAP/EASY/DOVISH Monetary policy measures to ⏫money supply in
the economy to revive economy after Corona.
- Parallelly, Govt also took announced relief in tax-filling, free-food to poor etc.
- Collectively, Modi labelled these actions of [RBI + Government] = “Atmanirbhar Bharat
Economic revival package”. 📑📑More in Pillar#4C.

Tool Changes in Corona-2020 upto 2021-Feb

CRR 2020= 4% to 3% to ⏫loanable funds
2021: now enough loanable funds available& economy recovering so to be
increased gradually from 3% to 4%
SLR Unchanged @18%

Mrunal’s Economy Win21 Series Pillar#1A: Money & Monetary Policy → Page 11
 Tool Changes in Corona-2020 upto 2021-Feb
Repo RBI's short term loan interest rate to clients while using non-SLR-quota G-
Sec as collateral. Repo Interest ⏬from 5.15 to 4.00% = 1.15% = 115 basis
points cut= Cheaper loans to revive economy
TLTRO Targeted Long Term Repo Operations (TLTRO): Up to 3 years Repo loans
to Banks with condition that they must invest x% of it in y sector. ("Y"
could be debt instruments of NBFC & other stressed sectors)
RBI injected injected over ₹1.25 lakh crore via this route
MSF Marginal Standing Facility (MSF) = RBI short term loan interest rate to
banks while taking SLR quota g-sec as collateral. RBI increased the quantity
of ₹₹ that banks can borrow from this MSF window. [this quantity is
expressed as a % of NDTL But poor cost benefit chasing this for UPSC]
Helping MF Special Liquidity Facility for mutual funds to inject ₹50kcr
OMO Open market operations (OMOs)- RBI purchased State Development
Loans (SDLs) papers from Investors to inject ₹30kcr
AIFI RBI loaned ₹75kcr to all India financial institutions i.e., NABARD, NHB,
SIDBI and EXIM Bank
11.3.1 (2020) 🐯🐯🐯🐯Reverse Repo Rate cut & Policy corridor Changed asymmetrically

Figure 3: sir, जब तक आप loan के �लए हाँ नही कं ह�गे, हम आपको telemarketing calls करते रह�गे!
MSF REPO Reverse Repo Total width
What? Banks borrow short All clients borrow short Clients park Policy corridor
term funds from RBI term funds by pledging surplus funds (नी�त ग�लयारा)
by pledging G-Sec G-Sec. But, banks can’t in RBI to earn
from SLR-quota pledge SLR quota G-Sec interest
Before R+25 bps R% R-25 bps 25+25=50bps
After R+25 bps R% R-65bps* 25+65=90bps
2020- 4.25% 4.00% 3.35% 25+65=90bps
May (40bps cut than earlier
rate)
⇒ *Corona led economic slowdown → Loan demand ⏬ → banks parking their excess funds in
RBI to earn interest in the form of reverse repo rate. ब�क वाले अपना अ�त�र� धन �रज़वर् ब�क म� डाल के बैठे
�बठाये �ाज कमा रहे थे.
⇒ By 2020-March: banks parked ₹~3 lakh crores in RBI in Reverse Repo.
⇒ So, RBI has drastically ⏬the reverse repo rate to discourage such laziness of banks.
⇒ Benefit of reverse repo reduction?
 IF SBI offers 5.9% Fixed deposit interest rate to depositors, and parks it in the RBI
reverse repo rate (3.35%) then SBI will actually make losses.

Mrunal’s Economy Win21 Series Pillar#1A: Money & Monetary Policy → Page 12
  So, RBI hopes SBI will now be ‘forced’ to give loans in a proactive manner (through
SMS-spam, email-spam and unwanted telemarketing calls)
Although as per 📔📔📔📔ES21, Banks still continued to park their surplus funds in Reverse repo
because there were not enough loan takers due to Corona slowdown.😰😰
11.4 🐯🐯🐯🐯🐯🐯 MONETARY POLICY: QUALITATIVE TOOLS (गुणा�क साधन)
11.4.1 💍💍 Margin Requirements / Loan to Value (LTV) (सीमा अ�नवायर्ता)

Figure 4: जब घर मे पड़ा है सोना, िफर काहे को रोना?

⇒ RBI can mandate Loan to Value (LTV) for a gold-loan, home loan, auto loan or business loan
etc. so a Bank/NBFC can’t lend more than x% of the value of the collaterals. RBI can change this
x% to boost / curb demand. (�गरवे रखी चीज के मू� के सामने ब�क या गैर-ब�क सं �ान ��� को िकतना कजर् दे सकते
है? �रजवर् ब�क उसके मानदंड म� बदलाव द्वारा, बाजार म� चीज-व�ुओ क� मांग को बढ़ा या कम कर सकता है)
LTV reforms in 2020-Aug Before After
Gold Loan 75% value of gold/gold- 90%
jewellary
🤩🤩Benefit? More quantity of loan by pledging same quantity of gold → 😷😷 post-corona-economic-
revival.
11.5 🐯🐯🐯🐯🐯🐯 PRIORITY SECTOR LENDING (PSL: प्राथ�मकता �ेत्र के �लए ऋण मानक)

Figure 5: थोड़ा लोन हमको भी िदलवा दो Governor-sahib!

⇒ 1968: First time RBI used the word “priority sector”: Banks must give 40% of their loans to 3
priority sectors 1) agriculture 2) small industries 3) exporters by 1985. (कृ �ष छोटे उद्योग और �नयार्तक)
⇒ Over the years, more sectors were included in it. (समय रहते और भी �ेत्रों को इसम� शा�मल िकया गया)
⇒ 2015: some reforms in PSL. → 2019: RBI's UK Sinha Committee on MSME loan reforms and a
few Other committees had suggested the reforms in the PSL.
⇒ 2020-Sept: RBI reformed PSL guidelines as following:
Priority Sector Loans norms → minimum quota after 2020-Sept Reforms BEFORE AFTER
� Weaker Sections (कमजोर वगर्): 10 % ⏫12%*
⇒ SC, ST, Women, PH, Minorities, Manual scavengers, Artisans,
⇒ PM-Jan DhanYojana Overdrafts upto Rs.10k,
⇒ Beneficiaries of Govt's National Rural/Urban Livelihood Mission
Schemes (NRLM/NULM: More in 📑📑Pill#6: HRD →Poverty Removal
Schemes)

Mrunal’s Economy Win21 Series Pillar#1A: Money & Monetary Policy → Page 13
 🌽🌽 Agriculture (कृ �ष) (all farmers: small and big) 10% 8%
🌽🌽 Agriculture: सीमांत िकसान और छोटे िकसान 8% ⏫10%*
⇒ Marginal Farmer (owns upto 1hectre land) सीमांत िकसान
⇒ Small farmer (>1 upto 2ht) छोटे िकसान
🧵🧵 Micro Enterprises (अ�त लघु उद्योग), Khadi-Village industries 7.50% 7.50%
Above categories (Weaker section, agriculture, micro-enterprise ) 4.50% 2.50%
plus, other categories such as
⇒ Small & Medium Enterprises, Affordable housing loans to beneficiaries
under Pradhan Mantri Awas Yojana
⇒ food processing companies, Vermi compost, biofertilizer, seed
production,
⇒ Exporters, Student-Education loans (upto Rs.10l),
⇒ Social Infrastructure (schools, health care, drinking water, sanitation
facilities);
⇒ Renewable Energy Projects (wind mills, biomass generators, solar
street light, micro-hydel plants etc.) etc.
Total PSL for Indian Scheduled Commercial Banks and 40% 40%
(Foreign Banks with 20 or more branches).
* These quota⏫ is implemented in Phase Wise manner by 2023-24. (क्र�मक �प से लागू होंगे)
🤩🤩Benefit? It will ⏫ loan-availability for the weaker section and small farmers thus helping in the
United Nations' Sustainable Development Goals related to poverty removal. (📑📑Ref: HDT-Pillar#6)
कमजोर वगर् और छोटे िकसानों को �ादा मात्रा म� कजार् �मल पाएगा. गरीबी �नवारण, सं यु� रा�� के सतत �वकास ल�ों क� प्रा�� म� मदद
करेगा.
⇒ PSL quotas are ‘minimum (�ूनतम/कम से कम)’ & not maximum. So, if bank wishes, it can EVEN
give even 60% of its loans to weaker sections, instead of just 12% “minimum quota” meant for
weaker section.
⇒ Bank’s Loans given to Non-Banking Financial Company (NBFC: गेरब�क �व�ीय कं पनी) who are
lending to above PSL categories = such ‘indirect loan’ to PSL sectors will also be counted for
bank’s quota. (परो� �प से दी लोन भी �गन ली जाती है। )
⇒ Bank + NBFC’s joint lending / co-lending/ co-origination loans to PSL categories are also
eligible, with certain caveats but #PHD-NOT-IMP. (ब�क और गेर-ब�क का साथ मे �मलकर पीएसएल �ेत्र को कजर्
िदया, तो उसमे ब�क ने िदया कजर् इस �ोटे म� �गन �लया जाता है, कु छ शत� के आधीन)
11.5.1 🐯🐯🐯🐯🐯🐯 PSL Reforms-2020: on RRB/SFB/UCB?
What is the difference/meaning of SCB/RRB/SFB/UCB etc? Ans: (📑📑Ref: HDT-Pillar#1B1:
classification)
Type of Bank & PSL Reforms-2020: Before After
Indian Scheduled Commercial Banks (SCB: अनुसू�चत वा�ण��क ब�क) and 40% same 40%
Foreign Banks in India with 20 or more branches
Foreign Bank in India with <20 branches (�वदेशी ब�क) 40% same 40%

Mrunal’s Economy Win21 Series Pillar#1A: Money & Monetary Policy → Page 14
 Regional Rural Banks (RRB: �ेत्रीय ग्रामीण ब�क) 75% same 75%
Small Finance Banks (SFB: लघु �व� ब�क) 75% same 75%
Urban Cooperative Banks (UCB: शहरी सहकारी ब�क)* 40% ⏫75%
Rural Cooperative Banks (ग्रामीण सहकारी ब�क) N/A N/A
⇒ *These quota⏫ implemented in Phasewise manner. Will be fully effective in 2023-24.
⇒ Internal quotas may be different e.g. RRBs: Weaker section =15%. But, poor cost-benefit in
chasing all that information. #⏳📚📚थोड़ा-पढ़ो-आगे-बढ़ो
11.5.2 🐯🐯🐯🐯🐯🐯 PSL Reforms-2020: Startups, Renewable Energy and Healthcare
PSL Loans → other category BEFORE AFTER
Startup Company is a company: only eligible categories: All types of Startups
⇒ Age: Not older than 10 years ⇒ Agro/Food processing related allowed in PSL quota
AND Startup
⇒ Annual turnover: Not more ⇒ MSME Startup For loans upto ₹50cr
than ₹100 cr AND [then What is MSME? (📑📑Ref:
⇒ Function: innovation in HDT-Pillar#1D and #4B)]
goods/services. (नवाचार)
(📑📑Ref: HDT-Pillar#4B)
🔌🔌🔌🔌 Renewable energy(अ�य only loans upto 15cr eligible ⏫30cr
ऊजार्)
💊💊 Healthcare project/Hospital? 5cr ⏫10cr
11.5.3 🐯🐯🐯🐯🐯🐯 PSL Reforms-2020: Weightage to poor districts (गरीब/�पछड़े �जलों को भारांक)
RBI will classify the districts based on previous PSL loans given by all banks:
Type of district if Axis bank gives ₹100 PSL loan in this district →
RBI will count Axis’s quota-fulfillment as _ _ .
Low Credit penetration e.g. Tawang, ₹125 (आरबीआई ने एक ऐसी भारांक प्रणाली बनाइ है �जसमे ब�क
Dantewada etc. जहां भूतकाल म� ब�क-कजर् क� प�ँ च �पछड़े �जलों म� लोन देकर ब�त आसानी से अपना पीएसएल ल�ं क
कम रही है हा�सल कर सकती है।)
High Credit penetration e.g. Ahmedabad, ₹90 (तािक ब�क जो पहले से स�� �जले है, उसे �ादा स�� बनाने
Pune etc. जहाँ पहले से ही काफ� कजार् िदया जा चूका है क� जगह �पछड़े �जले पर �ान दे)
⇒ Thus, RBI’s PSL weightage system will passively discourage banks from giving more PSL-loans
to the developed districts and it will encourage banks to give PSL-loans to backward districts.
This will help in more balanced regional development. �ेत्रीय �प से सं तु�लत �वकास म� यह कदम फायदेमंद
होगा.
11.6 📢📢 BI-MONTHLY MONETARY POLICIES- A SUMMARY TABLE
Feb-2020 covered in Mrunal’s Win20 Series Handout
Mar-Apr-May-2020 By default, RBI’s MPC Committee supposed to meet every 2-2 months. So,
Stance After February’s meeting, they should hold next meetings in April. But in
Accommodative Corona crisis economic slowdown they met more frequently. कोरोना महामारी

Mrunal’s Economy Win21 Series Pillar#1A: Money & Monetary Policy → Page 15
 के चलते आए आ�थक सं कट से �नपटने के �लए स�म�त ने तय समय से पहेले एका�धक मीिटंग का
आयोजन िकया:
- CRR was cut to 3% & Repo cut to 4%
- 🐯🐯🐯🐯🐯🐯✋ Loan/EMI/NPA relief / Moratorium (ऋण अदायगी पर रोक)
Ref 📑📑Pillar#1B2: NPA
- RBI defers BASEL Norms, IndAS accounting Norms, orders bank to
pause/halt the Dividend Distribution. Ref: 📑📑1B2: BASEL norms
- 🐯🐯🐯🐯🐯👨👨: RBI reforms Ways and Means advances (WMA) and
Consolidated Sinking Fund (CSF) Ref: 📑📑1C: SEBI/Sharemarket:
Short term Debt instruments
- RBI took reforms in 1) Voluntary Retention Route (VRR: �ै��क
अवधारण मागर्) 2) Fully Accessible Route (FAR: स�ूणर्त: सुग� मागर्) Ref:
📑📑3A: Balance of Payment (BoP): FDI, FPI
2020-Aug - Gold Loan LTV: Before 75% → AFTER 90%. benefit? More quantity
of loan can be taken by pledging same quantity of gold → post-corona
Repo economic-revival.
Unchanged@4% - Priority Sector Lending (PSL) reforms: 1) ⏫quota for weaker section,
Stance small-marginal farmers. 2) Made all types of Startups eligible for PSL
Accommodative loans. 3) Extra weightage to give PSL-loans in poor districts.
- RBI Committee under KV Kamath submitted report on how to
restructure loans impacted by the Covid 19 pandemic. "We'll take
reforms accordingly".
- RBI to loan ₹75,000cr to All India Financial Institutions (AIFIs:
NABARD, SIDBI,EXIM,NHB) → post-corona economic-revival
- Less Cash Economy / Digital Payment / Fraud Prevention: (1) Scheme
of Offline Retail Payments Using Cards and Mobile Devices (2) Online
Dispute Resolution (ODR) for Digital Payments (3) Positive Pay
Mechanism for Cheques.
- We'll create a Reserve Bank Innovation Hub for research in cyber
security, digital payment etc. साइबर सुर�ा, िड�जटल भुगतान इ�ािद म�
सं शोधन/नवाचार के �लए �रजवर् ब�क म� एक नवाचार क� द्र बनाएं गे
2020-Oct - Less Cash Economy / Digital Payment: (1) RTGS made 24/7 (2)
perpetual license. (📑📑Ref: Pillar#1A1)
Repo
- ✋Technical reform NOT important for the scope of exam such as (1)
Unchanged@4%
SLR holding reforms (2) banks and NBFCs: co-lending for PSL loans
Stance
(3) Export Data Processing and Monitoring System (EDPMS), the
Accommodative
‘Caution / De-caution Listing’ of exporters for Authorised Dealer (AD)
banks. यह सब तकनीक� िदशा�नद�श अपनी परी�ा म� काम के नहीं. फालतू म� व� बबार्द मत
करो। #🕰🕰थोड़ा-पढ़ो-आगे-बढ़ो

Mrunal’s Economy Win21 Series Pillar#1A: Money & Monetary Policy → Page 16
 2020-Dec - RBI is required to control the inflation within 2 to 6% of CPI all India.
Inflation @7.6%(Oct), So in theory repo⏫ required, but corona-
Repo slowdown = RBI does not want the loans to become more expensive.
Unchanged@4% So repo rate unchanged at 4%. Stance accommodative. हालांिक महंगाई
Stance �नयं त्रण के �लए रेपो दर को बढ़ाना ज�री है िकंतु कोरोना के बाद अथर्�व�ा को पुनज��वत करने
Accommodative के �लए स�े लोन मुहैया कराना भी उतना ही ज�री! इस�लए रेपो दर म� कोई बदलाव नहीं.
- Banks prohibited from from paying dividend to shareholders from
their profits (So as to build buffer against the Corona loan defaults) ब�कों
ने अपने मुनाफे म� से शेयरधारकों को लाभांश �वतरण करने पर रोक
2021-Feb - 1) Food inflation is normalizing with arrival / supply of winter fruits &
vegetables, but fuel inflation is worrisome. So can't ⏬ Repo. खाद्य पदाथर्
Repo तो स�े होने लगे िकंतु लेिकन इं धन के चलते महंगाई अभी भी �ाई �प से काबू म� नहीं
Unchanged@4%
- 2) GDP growth yet to fully revived → so cant ⏫ Repo [else
Stance
Expensive loans= =⏬demand →⏬GDP growth].
Accommodative
- CRR: During CORONA-2020, CRR was reduced from 4% to 3% (2020-
March till 2021-March). now moving towards economic recovery,
enough loanable funds available so, Restoration/⏫ of CRR in two
phases: 3.5% (2021: March2May ) →4% (2021-May)
- 😰😰BEFORE: RBI appointed 3 types of ombudsman for consumer
complaints: (i) Banking Ombudsman Scheme (ii) NBFC Ombudsman
(iii) Digital Transaction Ombudsman. 🤩🤩After: Integrate these 3 into
a One Nation One Ombudsman / Integrated Ombudsman Scheme
(एक�कृ त �शकायत �नवारण अ�धकारी योजना)
- 😰😰BEFORE: Retail investors Indirectly invested in G-sec via Mutual
funds, stock exchanges. 🤩🤩AFTER: Retail Investors can directly Open
"Gilt Securities Accounts Retail Direct" with RBI's E-Kuber core
banking solution (CBS) platform. 🤩🤩Benefits: [1) Deepening of the g-
sec market (सरकारी प्र�तभू�तयों के बाजार क� जड़ों को गहरा करेगा) [2) New
investment opportunities for aam-aadmi. (�नवेश के नए अवसर) (More in
📑📑Pillar1C: SEBI share market)
11.6.1 �🎺🎺🎺🎺1⃣✋ Mock Questions for UPSC Mains/GSM3 (250 words)
1) Give an account of the steps undertaken by RBI to revive the Indian economy from Corona
pandemic. कोरोना से भारतीय अथर्�व�ा को पुनज��वत करने के �लए आरबीआई द्वारा उठाए गए कदमो का �ववरण दी�जए।
2) Enumerate the steps taken by the RBI under the Atma Nirbhar Bharat initiative in 2020.
आ��नभर्र भारत अ�भयान के अंतगर्त आरबीआई द्वारा उठाए गए कदमो क� सूची दी�जए।
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📑📑NEXT HDT: Pillar1B- Classification of Banks and NBFCs, NPA & other Burning Issues in
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Mrunal’s Economy Win21 Series Pillar#1A: Money & Monetary Policy → Page 17