UGC NET Commerce PYQs Series 2025 | UGC NET Commerce Banking and Financial Institutions PYQs 2025

Understanding Inter-Group Conflict in Organizational Behavior

Introduction to the Session

• The session begins with a greeting and confirmation of audio and video functionality.

• The instructor references previous homework related to organizational behavior (OB) and inter-group conflict.

Homework Review: Inter-Group Conflict

• The focus is on understanding different types of conflicts, particularly inter-group conflict.

• Various types of conflicts are introduced: intra-personal, interpersonal, intra-group, inter-group, organizational, role, task, relationship, and process conflicts.

Types of Conflicts Explained

• Intra-Personal Conflict: A dilemma faced by an individual when choosing between options (e.g., products or organizations).

• Interpersonal Conflict: Occurs between two individuals with differing opinions or approaches.

• Intra-Group Conflict: Arises within a single group; Inter-Group Conflict involves disputes between different groups or departments.

Key Concepts in Inter-Group Conflict

• Personal differences lead to interpersonal conflict but do not constitute inter-group conflict.

• Competition for resources can create inter-group conflict; for example, disputes between purchasing and production departments.

Additional Factors Contributing to Inter-Group Conflict

• Role Incompatibility: When individuals compare their roles against others leading to interpersonal issues.

• Task Interdependence: Groups relying on each other’s tasks may experience conflict due to dependency dynamics.

Jurisdictional Conflicts

• Jurisdictional conflicts arise from overlapping responsibilities among different groups.

• Answering the homework question leads to identifying competition for resources as a key factor in inter-group conflict.

Sources of Power in Supervision

Understanding Supervisor Power Dynamics

• A new question is posed regarding which source of power does not compel subordinates to comply with supervisors' directives.

Types of Power Discussed

• Four sources of supervisor power are mentioned:

• Reward Power

• Coercive Power

• Expert Power

• Means and Control

Analysis of Compliance Sources

• Expert power stems from knowledge and experience; subordinates comply out of respect rather than obligation.

Distinctions Among Powers

• Coercive power relies on fear (punishment).

• Reward power motivates compliance through incentives.

• Means and control involve authority that can enforce compliance through various means.

This structured approach provides clarity on the topics discussed while allowing easy navigation through timestamps for further exploration.

Understanding Compliance and Authority in Banking

Expert Power and Subordinate Compliance

• The concept of expert power is discussed, emphasizing that employees follow superiors due to their knowledge, respect, and experience.

• Subordinates comply with directives primarily for rewards or to avoid punishment, indicating a reliance on the superior's authority.

• A transition into banking topics is introduced, highlighting the importance of understanding key concepts related to the Reserve Bank of India (RBI).

Key Aspects of RBI and Its Subsidiaries

• The Hilton Young Commission is noted as significant in establishing banking institutions; however, questions may not frequently arise from this topic.

• Recent changes in RBI subsidiaries are highlighted; NABARD no longer falls under RBI but rather under the central government.

• Discussion on tools used by RBI for controlling inflation includes qualitative and quantitative methods.

Quantitative Tools for Inflation Control

• Quantitative tools involve numerical measures such as Cash Reserve Ratio (CRR), Statutory Liquidity Ratio (SLR), and Open Market Operations (OMO).

• OMO involves selling securities when there’s excess money supply in the market to absorb liquidity effectively.

Qualitative Tools for Inflation Control

• Qualitative tools focus on specific banks or sectors by adjusting collateral margins or limiting loan amounts to control credit flow.

• Moral suasion is employed where pressure is applied on banks to comply with regulatory orders regarding lending practices.

Recent Changes in Rates and Development Banks

• Updates on CRR indicate a reduction from 4% to 3.25%, along with revisions in repo rates which are crucial for exam preparation.

• Important development banks like NABARD, IDBI, National Housing Bank, and SIDBI should be memorized as they frequently appear in exams.

Committees Relevant to Banking Sector

• Various committees such as Rajan Committee and Narasimhan Committee are essential; their names and purposes should be remembered for potential exam questions.

• The Financial Sector Legislative Reforms Commission is also mentioned as an important committee relevant to current banking discussions.

This structured summary provides a comprehensive overview of key concepts discussed within the transcript while linking directly back to specific timestamps for further exploration.

Understanding Basel Norms and Their Impact on Banking

Overview of Basel Norms

• The discussion begins with an introduction to the Basel norms, which were established following the failure of banks like Husted Bank. These norms aim to regulate banking practices globally.

• The Basel norms categorize bank risks into three main types: credit risk (default on loans), operational risk (errors in daily operations), and market risk (losses from market fluctuations).

Key Components of Basel I, II, and III

• Basel I focused primarily on credit risk, emphasizing that banks must maintain sufficient capital to absorb unexpected losses due to defaults.

• Capital Adequacy Ratio (CAR) is introduced as a critical measure; it requires banks to maintain at least 8% total capital adequacy ratio, with India adopting a slightly higher standard of 9%.

• The distinction between Tier 1 (pure capital) and Tier 2 (impure capital that may need to be returned or is used for business purposes) is explained.

Advancements in Basel II and III

• Basel II introduced three pillars: minimum capital requirements, supervisory review by RBI annually, and market discipline requiring transparency from banks regarding their financial health.

• In Basel III, additional measures such as counter-cyclical buffers and enhanced capital adequacy ratios were discussed. This aims to strengthen the resilience of banks during economic downturns.

Systematically Important Banks in India

• The conversation highlights three systematically important banks in India: State Bank of India, HDFC Bank, and ICICI Bank. Their importance stems from their size and impact on the economy.

• Higher ratios are mandated for these systematically important banks under Basel III's Capital Conservation Buffer.

Clarifications on Key Terms

• Participants are encouraged to ask questions about terms related to Basel III that may appear in exams. Specific focus is given to concepts like Capital Conservation Buffer which was not present in Basel II but introduced in Basel III.

• Counter-cyclical buffers are optional measures for banks during periods of high lending activity; they help manage risks associated with economic booms.

Practical Application & Questions

• A question session follows where participants are prompted to think critically about how knowledge of these regulations can aid them even without knowing specific years or dates related to events like the establishment of stock exchanges.

• Discussion includes various options related to trading activities within national stock exchanges highlighting their significance in understanding market dynamics.

This structured overview encapsulates key discussions around the evolution and implications of banking regulations under the Basel framework while providing timestamps for easy reference.

Understanding the Sequence of Financial Instruments

The Role of Equity and Its Subsequent Instruments

• The discussion begins with the listing of equity, which is foundational in financial markets. Following equity, related instruments such as futures and options emerge.

• It is emphasized that trading in index options comes after futures. The sequence is fixed: first equities, then futures, followed by options.

• Indices are created from a collection of equities. For example, multiple banks form the Bank Nifty index, while IT companies create the Nifty IT index.

• After establishing indices from various companies, their respective futures and subsequently options are introduced into the market.

• The Standard & Poor's CNX Nifty is highlighted as an example of an index that follows this established sequence: equity → future → option.

Security Lending and Mutual Funds

• A mention is made about SEBI's scheme for security lending and borrowing, which allows investors to lend securities for a fee after equity listings have occurred.

• Mutual funds are discussed as a later development following the establishment of equities on exchanges like NSE. Their exact placement in the timeline remains uncertain but follows logically after equities.

Analyzing Historical Crises

Understanding Economic Crises

• The speaker transitions to discussing historical economic crises relevant to 2025. Key events include:

• Great Depression (1929)

• Dot-com Bubble (2000)

• Global Financial Crisis (2008)

• COVID Pandemic (2020)

• These crises are sequenced chronologically to illustrate patterns in economic downturns over time.

Current Market Trends

• There’s speculation about a new bubble forming in today's market reminiscent of past bubbles like the dot-com bubble due to inflated valuations in tech sectors.

• The dot-com bubble was characterized by excessive valuations driven by internet-related companies during its peak around 2000.

• Today’s AI companies are experiencing similar inflationary pressures where valuations may not reflect true market value, raising concerns about potential crashes akin to previous bubbles.

The Impending AI Bubble and Financial Crises

The Nature of the AI Bubble

• The speaker discusses how companies are exchanging money among themselves through services, indicating a lack of real value in the current market.

• It is anticipated that the AI bubble will burst within one to two years, leading to a stock market crash as discussions around it fade.

• The moment public interest wanes, the bubble is expected to burst, highlighting a cyclical pattern in financial markets.

Historical Context of Financial Crises

• Reference is made to the Great Depression of 1929, where numerous scams occurred in accounting firms, leading to the establishment of new accounting standards by 1932-34.

• The Global Financial Crisis is discussed, particularly focusing on AIG's excessive mortgage lending and subsequent demand for homes that led banks to seize properties when loan repayments ceased.

Future Predictions and Concerns

• Questions arise about potential scams emerging from smaller companies as part of an impending financial crisis; concerns are raised regarding mutual funds and banking developments by 2025.

Understanding Investment Principles

• Clarification on mutual funds indicates no doubts remain; all options presented are correct.

• Discussion shifts towards accounting principles related to debit and credit accounts when goods are withdrawn by proprietors.

Economic Indicators and Their Impact

• The conversation touches on debt funds providing lower but safer returns compared to other investments.

• An analysis reveals that banks will borrow less due to increased repo rates, which leads to decreased liquidity in the economy as public borrowing also declines.

This structured summary encapsulates key insights from the transcript while linking back directly to specific timestamps for further exploration.

Understanding Currency Appreciation and Credit Creation

Currency Appreciation Factors

• The discussion emphasizes that identifying wrong options is more challenging than finding the correct one. It highlights the importance of understanding why the Indian Rupee may appreciate.

• An increase in repo rates leads to higher borrowing costs, which subsequently raises deposit interest rates, encouraging more deposits in banks.

• As deposit interest rates rise, foreign capital begins to flow into India due to attractive returns, increasing demand for the Rupee.

• The conversation transitions to minimum capital standards and supervisory reviews as part of market discipline and credit risk management.

Credit Creation Process

• Credit creation involves generating multiple credits from a single customer's deposit, thereby increasing the money supply. Initial deposits are termed primary deposits while subsequent credits are secondary deposits.

• The principle of subrogation allows insurance companies to recover amounts from third parties after settling claims with clients, emphasizing their rights post-settlement.

Insurance Principles

• Subrogation principles dictate that once an insurance company compensates a client, it can pursue recovery from responsible third parties for losses incurred by its insured clients.

• The concept of insurable interest determines whether an insurance company will provide compensation based on actual loss occurrence.

Risk Management in Insurance

• Insurance cannot prevent risks but can provide coverage for losses when they occur. This distinction is crucial in understanding insurance contracts' limitations.

• Questions arise regarding how insurance contracts address losses; they only cover losses if they have occurred rather than preventing them outright.

Market Operations and Credit Capacity

• Open market operations involve central banks selling securities, impacting public purchasing behavior and consequently affecting money flow between public entities and RBI (Reserve Bank of India).

• Selling securities reduces commercial banks' credit creation capacity since funds move from banks to RBI, limiting available deposits for lending purposes.

This structured summary captures key insights from the transcript while providing timestamps for easy reference.

Understanding Credit Creation and RBI's Role

The Impact of Deposits on Credit Creation

• When there are no deposits in the bank, credit creation will still occur, but the commercial capacity of banks will decrease.

• The Reserve Bank of India (RBI) is selling securities to absorb additional liquidity from the market, which helps control inflation by reducing excess money supply.

• By absorbing liquidity through securities sales, RBI prevents commercial banks from lending more, thereby controlling inflation.

Commercial Banks and Lending Capacity

• With reduced liquidity in commercial banks due to RBI's actions, their ability to create credit diminishes significantly.

• This chain reaction illustrates how RBI’s measures directly affect the lending capabilities of commercial banks.

Repo Rate and Its Effects

• An increase in repo rates makes loans more expensive for both commercial banks and the public, further tightening liquidity and controlling inflation.

Understanding Non-Performing Assets (NPAs)

• Loans given by banks are considered assets; if a bank receives regular interest and principal payments, these are termed performing assets.

• If a loan does not receive any payment for 90 consecutive days, it becomes classified as a non-performing asset (NPA).

Categories of Non-Performing Assets

• NPAs can be categorized into substandard, doubtful, or loss assets based on how long payments have been overdue.

• As time passes without recovery of dues, the bank's confidence in collecting these debts decreases.

Provisions for Non-Performing Assets

• Banks create provisions against NPAs similar to business prudence practices; this ensures they account for potential losses effectively.

Conclusion and Future Discussions

• The session concludes with an invitation for questions regarding banking topics that may arise before future discussions scheduled on Friday.