Financial Markets and Institutions PYQs – Economics, SSC & Railway

Answer: Option 3 — pooled vehicles holding revenue-generating infrastructure assets, still held back by taxation, thin liquidity and transparency
An InvIT is a trust that pools money from many investors and buys operating, cash-generating infrastructure — toll roads, power transmission lines, gas pipelines, telecom towers.
The developer gets its locked-up capital back, and the investor gets a share of the toll or tariff income.
Revision note — Infrastructure Investment Trusts
• InvITs are governed by the SEBI (Infrastructure Investment Trusts) Regulations, 2014 — the regulator is SEBI, not the RBI.
• The structure has four parties: the sponsor, the trustee, the investment manager and the project manager; the trustee must be independent of the sponsor.
• At least 80 per cent of an InvIT's assets must be in completed, revenue-generating projects, which is why it is not a start-up or greenfield funding route.
• A listed InvIT must distribute at least 90 per cent of its net distributable cash flows to unitholders, at least twice a year.
• India's first listed InvIT was the IRB InvIT Fund (2017); the National Highways Infra Trust (NHIT), sponsored by NHAI, monetises highways under the National Monetisation Pipeline.
• SEBI cut the minimum subscription for publicly issued InvITs to about ₹10,000–₹15,000 in 2021, down from ₹1 lakh, to draw in retail investors.
• The parallel vehicle for real estate is the REIT, under the SEBI (REIT) Regulations, 2014; India's first REIT was Embassy Office Parks (2019).
Do not mix these up
• InvIT vs REIT — an InvIT holds infrastructure assets such as roads and transmission lines; a REIT holds rent-yielding real estate such as office parks.
• InvIT vs mutual fund — a mutual fund buys securities; an InvIT owns the underlying infrastructure asset itself, through special purpose vehicles.
• Brownfield vs greenfield — InvITs are built for brownfield (completed) assets; a greenfield project is a new one still to be built.
Also asked from this topic: the year SEBI framed the Insider Trading Regulations (1992); the year SEBI issued the Underwriters Regulations (1993); the year the NSE began operations (1994).

Answer: Option 3 — IRDAI
Insurance-claim reforms are implemented by theIRDAI→ Option 3.

Topic: Stock Exchanges in India
Delhi Stock Exchange (DSE)was one of the oldest stock exchanges in India.
SEBI withdrew recognition of DSE in 2015 due to non-compliance with regulatory norms.
DSE ceased operations and isno longer a functional stock exchange.
Other options (MCX, NCDEX, NSE) are currently operational exchanges.
Answer: Option 4 → Delhi Stock Exchange Ltd.

Correct Answer: 1982 (Option 2)
The Export-Import Bank of India (Exim Bank) was established on January 1, 1982 under the Export-Import Bank of India Act, 1981. It is a wholly government-owned financial institution under the Ministry of Finance. Exim Bank provides financing, facilitation, and promotion of India's international trade and investments. Its headquarters is in Mumbai.
Why others are wrong:
- 1972: Exim Bank did not exist in 1972; India's foreign trade financing was handled by other institutions.
- 1985: Three years after Exim Bank was actually founded.
- 1990: Eight years after its actual establishment.

Correct Answer: 1993 — Option (c)
In 1993, the Government of India constituted the Malhotra Committee (officially the 'Committee on Reforms in the Insurance Sector') to recommend reforms for the insurance sector. Key details of the Malhotra Committee: Constituted: 1993; Chairman: R.N. Malhotra, former Governor of the Reserve Bank of India (RBI); Report submitted: January 1994; Mandate: To examine the structure of the insurance industry, assess whether the existing insurance companies were meeting the needs of the economy, and to recommend policy reforms; Key recommendations: Private sector should be allowed to enter the insurance market (breaking the LIC monopoly); Foreign companies should be allowed with a joint venture partner; A statutory regulatory body should be set up for the insurance sector; Policyholders' interests should be protected; Impact: The committee's recommendations led to the passage of the Insurance Regulatory and Development Authority (IRDA) Act, 1999, which established the IRDA (now IRDAI) as the statutory regulator for the Indian insurance sector; Private and foreign companies (with 26% FDI cap, later increased) were allowed to enter the market.
Option (a) 1983 — Incorrect: The Malhotra Committee on insurance sector reforms was NOT constituted in 1983; it was set up in 1993; in 1983, the insurance sector was still under the nationalized LIC (Life Insurance Corporation, nationalized 1956) and GIC (General Insurance Corporation, nationalized 1972). The candidate selected this incorrect option.
Option (b) 1963 — Incorrect: The Malhotra Committee was not formed in 1963; in 1963, R.N. Malhotra was not yet the RBI Governor; the committee was constituted in 1993 and submitted its report in 1994.
Option (d) 1999 — Incorrect: 1999 is the year when the IRDA Act was passed (based on the Malhotra Committee recommendations), NOT the year when the Malhotra Committee itself was constituted; the committee was set up in 1993.

Correct Answer: Mobilizing savings for planned development — Option (d)
The Life Insurance Corporation of India (LIC) was nationalized in 1956 under the LIC Act, 1956 by merging 245 private insurance companies into a single state-owned entity. The primary objective of nationalization was to mobilize the savings of the Indian public for planned economic development. The government recognized that insurance premiums, collected from millions of policyholders, could be channeled into long-term investments in infrastructure, public sector undertakings, and national development projects. It also aimed to protect policyholders from the malpractices of private insurers.
Option (a) Promoting rural employment — Incorrect: While LIC does contribute to rural outreach, promoting rural employment was not the primary stated objective of its nationalization.
Option (b) Developing agriculture — Incorrect: Agricultural development is the domain of institutions like NABARD; LIC nationalization aimed at mobilizing savings for broader planned development.
Option (c) Regulating foreign trade — Incorrect: Regulating foreign trade is the function of DGFT (Directorate General of Foreign Trade) and RBI; LIC's nationalization was not for foreign trade regulation.

Correct Answer: EXIM Bank — Option (b)
The Export-Import Bank of India (EXIM Bank) is the premier financial institution for coordinating the working of institutions engaged in financing exports and imports of India. It was established on January 1, 1982 under the Export-Import Bank of India Act, 1981, as a wholly owned Government of India undertaking. EXIM Bank provides: Pre-shipment and post-shipment export financing; Buyer's credit and supplier's credit for Indian exporters; Lines of credit to overseas financial institutions; Project finance for Indian companies setting up overseas ventures; Guarantees and other services for importers and exporters. EXIM Bank plays a key role in promoting India's international trade and investment.
Option (a) NABARD — Incorrect: NABARD (National Bank for Agriculture and Rural Development) provides finance and development support for agriculture and rural areas; it does not specialize in export-import finance.
Option (c) World Bank — Incorrect: The World Bank is an international financial institution providing loans and grants to developing nations for capital programs; it is not India's primary institution for supporting export-import activities.
Option (d) SIDBI — Incorrect: SIDBI (Small Industries Development Bank of India) provides finance and development support to micro, small and medium enterprises (MSMEs); while it supports export-oriented MSMEs, the lead institution for India's export-import activities is EXIM Bank.

Industrial Financing Institutions - Formation Years:
IFCI- Established in 1948 (first development finance institution)
ICICI- Established in 1955 (private sector initiative)
IDBI- Established in 1964 (apex institution)
SIDBI- Established onApril 2, 1990(subsidiary of IDBI)
SIDBI was created to promote, finance and develop small-scale industries.
Answer: Option 2 → Small Industries Development Bank of India (SIDBI)

The General Insurance Corporation of India (GIC) was formed under the General Insurance Business (Nationalisation) Act, 1972. It was incorporated on 22 November 1972 and commenced its operations on January 1, 1973, when the general insurance industry was nationalised in India.
Why other options are incorrect:
- 1965: GIC did not exist in this form at this time.
- 1969: 1969 was the year of bank nationalisation, not general insurance.
- 1971: GIC had not yet been established by this year.

Correct Answer: 1 (2003)
FX-CLEAR is an electronic foreign exchange (forex) dealing system launched by Clearcorp Dealing Systems (India) Ltd. on August 7, 2003. It was developed as an anonymous order matching system for inter-bank forex transactions in India. Clearcorp is a wholly owned subsidiary of the Clearing Corporation of India Ltd. (CCIL).
Option 2 (2005) is incorrect.
Option 3 (2007) is incorrect.
Option 4 (2009) is incorrect.

Correct Answer: 3 – 1956.
The Life Insurance Corporation (LIC) of India was established on 1 September 1956 after the Life Insurance Corporation Act was passed in June 1956 by the Indian Parliament. The government nationalised the life insurance business by merging 245 private life insurance companies into a single entity – LIC.
Option 1 (1961) is incorrect.
Option 2 (1949) is incorrect.
Option 4 (1951) is incorrect.

The correct answer is (c) 58 years.
Under the Employees' Pension Scheme (EPS-95), the standard age of superannuation for receiving the Member Pension is 58 years. An employee can also opt for a reduced pension at age 50 (with a 4% reduction for each year before 58), or can defer the pension up to 60 years (with a 4% increment per year).
(a) 55 years: Not the standard superannuation age under EPS-95; an early pension may be available at 50 with reduction.
(b) 56 years: Not a prescribed age under EPS-95 for pension.
(d) 60 years: This is the maximum age up to which pension commencement can be deferred under EPS-95 (not the standard age).

EXIM Bank (Export-Import Bank of India) was established on 1 January 1982, under the Export-Import Bank of India Act, 1981, with the mandate to finance, facilitate, and promote India's international trade and investment.
(a) Incorrect: EXIM Bank was not established in 1975; it was set up in 1982.
(b) Incorrect: EXIM Bank was not established in 1991; 1991 was the year of India's economic liberalisation .
(c) Incorrect: EXIM Bank was not established in 1995; it has been operational since 1982.

SEBI stands for Securities and Exchange Board of India. It was established in 1988 and given statutory powers through the SEBI Act, 1992. SEBI regulates the securities and commodity markets in India to protect investors and promote the development of these markets.
(b) Incorrect: 'Stock Exchange Bank of India' is not a real institution; SEBI is a regulatory board, not a bank.
(c) Incorrect: 'Savings and Earnings Board of India' is an incorrect expansion of the acronym SEBI.
(d) Incorrect: 'State Economy Bureau of India' is not a real institution; SEBI is a market regulator, not a state economic bureau.

SEBI (Securities and Exchange Board of India) was first set up as a non-statutory body in 1988 through a government resolution. It was later given statutory powers through the SEBI Act, 1992.
(b) Incorrect: 1992 is when SEBI became a statutory body through the SEBI Act, not when it was set up as a non-statutory body.
(c) Incorrect: 1995 has no significance in SEBI's establishment history.
(d) Incorrect: 2000 saw the introduction of Internet trading through SEBI regulations, but SEBI was not established then.

The National Stock Exchange (NSE) was established in 1992 and is headquartered in Mumbai (Bandra-Kurla Complex). It is India's largest stock exchange by trading volume and the world's largest derivatives exchange.
(a) Incorrect: New Delhi is not the headquarters of NSE.
(b) Incorrect: Kolkata is home to the Calcutta Stock Exchange (CSE).
(d) Incorrect: Chennai has the Madras Stock Exchange, not NSE.

Under EPS-95 (Employees' Pension Scheme 1995), the Child's Pension is available for a maximum of 2 children at a time. The pension is payable until the child attains 25 years of age, or gets married, or starts earning, whichever is earlier. If the child is disabled, the pension continues for life regardless of age.
(a) Incorrect: EPS-95 covers 2 children (not 3), and the age limit is 25 years (not 18).
(c) Incorrect: EPS-95 covers a maximum of 2 children, not 3, and age limit is 25 years, not 21.
(d) Incorrect: While the number of children (2) is correct, the age limit under EPS-95 is 25 years, not 21 years.

The correct answer is Regulate capital markets, protect investors, and ensure fair practices (Option 3).
SEBI was given statutory powers in 1992 through the SEBI Act. Its primary role became regulating and developing the Indian securities markets, protecting the interests of investors, and ensuring fair and transparent trading practices, particularly following the Harshad Mehta securities scam.
Option 1 - Manage fiscal deficit: Fiscal deficit management is the responsibility of the Ministry of Finance and the RBI, not SEBI.
Option 2 - Control bank lending: Bank lending is regulated by the Reserve Bank of India (RBI), not SEBI.
Option 4 - Fix interest rates: Interest rates are determined by the RBI's Monetary Policy Committee, not by SEBI.

The correct answer is Death of the member or pensioner (Option 3).
Under the Employees' Pension Scheme, 1995 (EPS-95), the Widow/Widower Pension becomes payable to the spouse of a member upon the death of the member or pensioner. This provides financial security to the surviving spouse.
Option 1 - Permanent disability: Permanent disability triggers the Disablement Pension, not the Widow/Widower Pension.
Option 2 - Retirement: Retirement triggers the Member's Pension, not the Widow/Widower Pension.
Option 4 - Member switching employment: Changing employment does not trigger the Widow/Widower Pension; it may affect pension accumulation but not this specific pension.

The SEBI Act, 1992 gave SEBI statutory powers primarily to strengthen capital market regulation — protecting investor interests, ensuring fair and transparent market practices, regulating stockbrokers and intermediaries, and developing the securities market. SEBI was set up to address malpractices and restore investor confidence after the Harshad Mehta stock scam. Option 1 is correct.
Option 2 is wrong: Regulating foreign banks is the mandate of the Reserve Bank of India (RBI) under the Banking Regulation Act; SEBI does not regulate banks.
Option 3 is wrong: Controlling fiscal deficit is a function of the Finance Ministry through budget management and fiscal responsibility legislation; SEBI's role is limited to capital markets.
Option 4 is wrong: Promoting public sector monopoly was the opposite of the 1991-1992 reform spirit; the 1991 LPG reforms and the formation of SEBI were aimed at liberalizing and opening markets, not creating monopolies.

The SEBI Act, 1992 strengthened capital markets primarily by providing SEBI with statutory (legal) powers to regulate and oversee stock exchanges, brokers, and other securities market participants. Before the Act, SEBI (established in 1988) was an advisory body without statutory powers. The 1992 Act gave it full regulatory authority to register intermediaries, investigate market malpractices, prohibit insider trading, and protect investor interests.
Option 2 is incorrect: Removing corporate tax on dividends is a fiscal/tax policy matter handled by the Finance Ministry, not SEBI.
Option 3 is incorrect: Allowing unrestricted foreign borrowing is related to external commercial borrowing (ECB) policy under RBI and Ministry of Finance, not SEBI's mandate.
Option 4 is incorrect: Stamp duty on securities transactions is a state subject; SEBI has no authority to abolish stamp duty.

The correct answer is Protecting the interests of insurance policyholders . The Insurance Regulatory and Development Authority of India (IRDAI) was established in 1999 under the IRDA Act, 1999. Its primary responsibilities include regulating and promoting the insurance industry, ensuring the financial soundness of insurers, and most importantly, safeguarding the interests of policyholders by setting fair practices, grievance redressal mechanisms, and solvency norms. It does not deal with stock markets (regulated by SEBI), nor with disinvestment in PSUs (handled by the Department of Investment and Public Asset Management), nor with foreign trade (regulated by the Ministry of Commerce).

The National Stock Exchange (NSE) of India began its operations in 1994. It was incorporated in 1992 and started trading in 1994, quickly becoming one of the largest stock exchanges in the world.
1998, 2002, and 1996 are incorrect years. Hence, 1994 is correct.

The R.N. Malhotra Committee, set up to recommend reforms in the insurance sector in India, submitted its report in 1994. Based on its recommendations, the Insurance Regulatory and Development Authority of India (IRDAI) was established and the insurance sector was opened to private players.
1991, 1992, and 1995 are incorrect years for submission of this report.

SEBI (Securities and Exchange Board of India) issued regulations for underwriters in 1993. These regulations govern the activities of underwriters who agree to purchase any unsold shares or securities from a public offering. SEBI was established in 1988 and given statutory powers in 1992, after which it issued various market regulations.
1991, 1997, and 1995 are incorrect years for SEBI's underwriter regulations.

Correct Answer: 1993 (Option 2)
The R.N. Malhotra Committee was set up in 1993 to recommend reforms in India's insurance sector. R.N. Malhotra was the former Governor of the Reserve Bank of India. The committee's recommendations led to the liberalisation of the insurance sector and the establishment of the Insurance Regulatory and Development Authority of India (IRDAI) in 1999.
Why others are wrong:
Option 1 - 1992: The committee was constituted in 1993, not 1992.
Option 3 - 1995: Incorrect year; the committee was formed two years earlier.
Option 4 - 1996: Incorrect year.

The National Stock Exchange (NSE) introduced trading in Index Options based on the Nifty 50 index on June 4, 2001. This was a landmark development in India's financial derivatives market. Index Futures on Nifty 50 were introduced earlier in June 2000. Options 1 (2006), 3 (2003), and 4 (2005) are incorrect dates.

The Clearing Corporation of India Limited (CCIL) was established in April 2001 to provide guaranteed clearing and settlement functions for transactions in government securities, foreign exchange, and money market instruments. It is promoted by the Reserve Bank of India along with banks and financial institutions. Why other options are wrong: Option 1 (2004): CCIL was already operational for several years by 2004. Option 2 (2006): Incorrect; CCIL was set up 5 years earlier in 2001. Option 3 (2005): Incorrect; the correct year of establishment is 2001.

Correct Answer: 2003
The Pension Fund Regulatory and Development Authority (PFRDA) was established on 23 August 2003 by the Government of India through an executive order. It was given statutory status through the PFRDA Act, 2013. PFRDA regulates and develops the pension sector in India and administers the National Pension System (NPS) launched on 1 January 2004.
Why other options are wrong:
- 1992: LPG ( Liberalisation , Privatisation , Globalisation ) reforms year; PFRDA was not established then.
- 2009: PFRDA Act was introduced in Parliament around this time, but the body was established in 2003.
- 2012: Not the year of PFRDA establishment.

The National Pension System (NPS) was launched in India on January 1, 2004, for all new government employees (except armed forces). It replaced the Old Pension Scheme (OPS) which was a defined benefit scheme. NPS is a defined contribution pension system regulated by PFRDA (Pension Fund Regulatory and Development Authority). The years 1995, 1998, and 2010 do not correspond to its launch.

Correct Answer: 1992
SEBI (Securities and Exchange Board of India) formulated the SEBI (Insider Trading) Regulations in 1992. These regulations prohibited insider trading - the practice of buying or selling securities based on material, non-public information by persons connected with the company. SEBI was itself established as a statutory body in 1992 under the SEBI Act, 1992.
Why other options are wrong:
- 1996: SEBI issued revised/updated regulations in 1992 initially; 1996 is not the year of original formulation.
- 1990: SEBI was a non-statutory body before 1992; formal regulations were not in place.
- 1994: Not the year of the original Insider Trading Regulations.

Correct Answer: Option 2 – Industrial Development Bank of India (IDBI)
The Industrial Development Bank of India (IDBI), established in 1964, served as the apex development finance institution for industrial financing in India. During the Fifth Five-Year Plan (1974–1978), IDBI played a pivotal role in providing long-term finance for large and medium industrial projects, refinancing other financial institutions, and coordinating industrial credit.
Option 1 (RBI): RBI is India's central bank responsible for monetary policy and banking regulation; not directly a project finance institution for industry.
Option 3 (SBI): SBI is a commercial bank; while it provides credit, it was not the apex institution for industrial project financing.
Option 4 (EXIM Bank): The Export-Import Bank of India was established in 1982 — after the Fifth Plan period — so it did not exist during 1974–1978.