Paper 3 in RBI Grade B phase 2 Exam is finance and management. Almost 50-60% of the questions will be from finance section and the rest shall be from management. In this post, let us see what all can be done as far as finance is concerned.
The syllabus:
(a) Financial System
- Regulators of Banks and Financial Institutions
- Reserve Bank of India- functions and conduct of monetary policy, Banking System in India, Financial Institutions – SIDBI, EXIM, NABARD, NHB, etc.
(b) Financial Markets
Primary and Secondary Markets (Forex, Money, Bond, Equity, etc.), functions, instruments, recent developments.
(c) General Topics
- Risk Management in Banking Sector
- Basics of Derivatives: Forward, Futures and Swap
- Changing Landscape of Banking sector
- Recent Developments in the Financial Sector, Portfolio Investment, Public Sector Reforms, Disinvestments
- Financial Inclusion- use of technology
- Alternate source of finance, private and social cost-benefit, PublicPrivate Partnership
- Corporate Governance in Banking Sector, role of e-governance in addressing the issues of corruption and inefficiency in the government sector.
- The Union Budget – Direct and Indirect taxes; Non-tax sources of Revenue, GST, Fourteenth Finance Commission and GST, Finance Commission, Fiscal Policy, Fiscal Responsibility and Budget Management Act (FRBM),
- Inflation: Definition, trends, estimates, consequences, and remedies (control): WPI, CPI – components and trends.
Also, these are the readings mentioned:
- An introduction to Economics – A W Stonier and D C Hauge
- Monetary Theory and Public Policy – Kenneth Kurihara
- Indian Economy – Mishra and Puri
- Indian Economy – R. Dutt and KPM Sundaram
- Economic Growth and Development – Mayer and Baldwin
- Major economic newspapers and Economic and Political Weekly
- Public Finance – K K Andley and Sundaram
- Financial Management – Prasanna Chandra
This seems to be too much when it comes to a first timer. But lets demystify this section. First of all, you don’t need to go through all the readings. In fact, the recommended books just suggest the level in which you need to cover each subject. The current reading list shows that one need to definitely work beyond books available for UPSC but then these books can be starting point.
Let us take each component of syllabus and discuss it in detail
(a) Financial System
- Regulators of Banks and Financial Institutions
- Reserve Bank of India- functions and conduct of monetary policy, Banking System in India, Financial Institutions – SIDBI, EXIM, NABARD, NHB, etc.
This portion is part static and part dynamic. One should cover the history of RBI, SEBI and various other regulators and also keep an eye on latest development. Best resource to learn about these institutes is their official website. Books on Indian economy can also help you on this.
(b) Financial Markets
Primary and Secondary Markets (Forex, Money, Bond, Equity, etc.), functions, instruments, recent developments.
Now, this is critical and RBI has exploited this section against the aspirants. Normally, a UPSC guy will just cover theory in this section. They would mug up the instruments and think that their preparation is over. But RBI is asking numerical questions from this section. So you need to do numerical questions as well. Prasanna Chandra covers this portion pretty well. They have numerical questions on bonds, money market, equity markets, etc. You may want to read chapters 2 to 9 of this book to cover this. This will also take care of balance sheet and ratio numerical questions they ask.
Recent development in this section is also very important. Keep on eye on news like movement of money market, RBI role in various instruments, how it is effecting various parameters in our economy, etc
We suspect that their could be numerical questions from behaviour of money i.e. how money behaves in an economy – the multiplier effect, velocity of money, etc. Do read it.
(c) General Topics
- Risk Management in Banking Sector
This is important but very difficult portion as well. There one need to cover the following.
- Theory of banking risks
- Asset liability management of bank
- Gap and VaR analysis
- Interest rate risk numericals
- BASEL III is very important
We recommend to leave this chapter if you are not from finance background. If you study it, you will end up wasting too much of your time, effort and confidence.
If someone wants to do it then there is a risk management manual by Macmillan which is used to prepare for JAIIB and CAIIB
- Basics of Derivatives: Forward, Futures and Swap
This can and should be done from internet. They will be going to ask the following stuff:
- Static theory about derivative markets in India – Can be covered from SEBI website
- Understanding instruments – Investopedia can come handy here
- Just do very basic numerical questions from internet. Look for numerical problems for futures, options
Don’t go into details of derivative strategies like various spreads, etc. Don’t read models like blacksholes, etc.
- Changing Landscape of Banking sector
Very important topic this time. Read about the following:
- Payment banks
- NPAs in banks
- Private banks and public banks
- Banking and demonetization
Most of the questions from this topic shall be based on current issues
- Recent Developments in the Financial Sector, Portfolio Investment, Public Sector Reforms, Disinvestments
This is also very important and most of the stuff can be covered by reading any national daily. All the important topics mentioned in this head appears regularly in a business daily or national daily. Important things to be read are:
- Public disinvestments
- FDIs and FIIs
- Various international investments in India
- New kind of financial tools
- Any other relevant financial news
- Financial Inclusion- use of technology
- What is banked and unbanked population
- Jan dhan yojna
- Demonetization
- Digitizations
- JAM trinity
- ATMs
- Core Banking solutions
- Direct subsidy schemes
- Corruption in financial industry
- Alternate source of finance, private and social cost-benefit, PublicPrivate Partnership –
Not a very important topic. But can be easily covered from internet
- Startup funding in India
- Venture capital
- Private equity
- P2P lending – RBI regulatory paper
- Crowd funding
- Corporate Governance in Banking Sector, role of e-governance in addressing the issues of corruption and inefficiency in the government sector.
This will be very important this year given that we have huge NPAs, twin balance sheet problem, etc. You need to do all the recent topics as well as various recommendations made by RBI on this. Need to include various digital programs of government of India – BHIM, etc
- The Union Budget – Direct and Indirect taxes; Non-tax sources of Revenue, GST, Fourteenth Finance Commission and GST, Finance Commission, Fiscal Policy, Fiscal Responsibility and Budget Management Act (FRBM),
The most important topic. Do cover Budget 2017 with all the frills attached (i.e. Economic survey of India). Do fourteenth finance commission recommendations in detail. There will be 5-7 questions from this topic
- Inflation: Definition, trends, estimates, consequences, and remedies (control): WPI, CPI – components and trends.
Numerical Alert – Do cover theory of Inflation. You might get a numerical from this portion. Apart from this, normal UPSC study shall be sufficient i.e. understanding current numbers, their implications, etc
As the paper evolves, RBI would ask more fundamental questions. So do focus on your basic concepts.
All the Best for your Exams
AIMSUCCESS.IN
