All questions of Other Banking & Financial Organisations for Bank Exams Exam

There are currently 4 All India Financial Institutions regulated by the Reserve Bank of India (RBI).

The Four All India Financial Institutions are:
1. National Bank for Agriculture and Rural Development (NABARD)
2. Export-Import Bank of India (EXIM Bank)
3. National Housing Bank (NHB)
4. Small Industries Development Bank of India (SIDBI)

1. National Bank for Agriculture and Rural Development (NABARD): NABARD was established in 1982 with the aim of promoting rural development by providing credit and other facilities for agriculture and rural sectors. It serves as a financing institution for rural development programs and provides refinance support to commercial banks, regional rural banks, and cooperative banks.

2. Export-Import Bank of India (EXIM Bank): EXIM Bank was established in 1982 to promote international trade and facilitate cross-border investment. It provides financial assistance to Indian exporters and importers, offers export credit insurance, and supports export-oriented companies by providing lines of credit and guarantees.

3. National Housing Bank (NHB): NHB was established in 1988 as a subsidiary of the RBI to promote housing finance and provide financial and other support to institutions engaged in housing finance. It regulates and supervises housing finance companies and provides refinancing facilities to such institutions.

4. Small Industries Development Bank of India (SIDBI): SIDBI was established in 1990 to promote, finance, and develop small-scale industries in India. It provides financial assistance to small-scale industries through direct and indirect lending, venture capital, and microfinance. SIDBI also coordinates with other institutions and agencies involved in the promotion and development of small-scale industries.

These All India Financial Institutions play a crucial role in the development of various sectors of the Indian economy. They provide financial support, promote entrepreneurship, facilitate international trade, and contribute to the overall growth and development of the country. The RBI regulates and supervises these institutions to ensure their proper functioning and adherence to regulatory guidelines.

Understanding Trade Credit
Trade credit is a vital financial practice that occurs in business-to-business (B2B) transactions. It allows one business to purchase goods or services from another with an agreement to pay at a later date. The correct answer to the question is option 'B', which refers to B2B credit. Here's a detailed explanation:
Definition of Trade Credit
- Trade credit is an arrangement where a buyer can acquire goods or services from a supplier without immediate payment.
- It is essentially a short-term financing option that helps businesses manage cash flow.
Why It Is B2B Credit
- Trade credit is primarily found in B2B transactions, where businesses sell to other businesses rather than to individual consumers (B2C).
- In B2B relationships, suppliers often extend credit terms to their customers, allowing them to purchase inventory and pay later, which is crucial for operational efficiency.
Benefits of Trade Credit
- Cash Flow Management: Businesses can maintain operations without immediate cash outlay.
- Building Supplier Relationships: Regular use of trade credit can strengthen relationships with suppliers.
- Flexibility: It provides businesses with the flexibility to manage their finances effectively.
Conclusion
In summary, trade credit is fundamentally a B2B credit mechanism that facilitates smooth transactions between businesses, enabling them to manage their cash flow and operations more efficiently. Understanding this concept is essential for anyone preparing for banking exams or working in finance.