Subsidiaries — Set 2

Correct Answer: C. Reinvested to promote the company's objectives

• **Reinvested to promote the company's objectives** = Under Section 8 of the Companies Act, 2013, a company is prohibited from paying dividends; all profits must be applied solely to advance the charitable or social objectives for which it was formed. • For RBIH, this means every rupee of surplus goes back into fintech research, digital lending pilots, and innovation programmes for financial inclusion. • This structure prevents commercial profit motives from distorting the public-interest mission of the hub. • 💡 'Kept in RBI's contingency fund' (Option A) is wrong — RBIH's surplus stays within RBIH, not transferred to RBI reserves; 'Distributed as dividends to RBI' (Option B) is wrong — Section 8 explicitly bans dividends; 'Transferred to the Government of India' (Option D) is wrong — profits do not flow to the government; they remain within the entity.

Correct Answer: D. RBIH

• **RBIH** = The Reserve Bank Innovation Hub was established with the explicit mandate to promote 'Responsible Financial Innovation' in India's fintech ecosystem. • It acts as a tripartite bridge connecting the regulator (RBI), the industry (banks and fintechs), and academia to design sustainable, inclusive financial products. • Its Bengaluru base positions it within India's leading technology and startup cluster. • 💡 NHB (Option A) is wrong — it refinances and regulates housing finance, with no innovation mandate; BRBNMPL (Option B) is wrong — its role is physical banknote printing; IFTAS (Option C) is wrong — it provides IT and messaging infrastructure, not fintech innovation.

Correct Answer: D. A Deputy Governor of RBI

• **A Deputy Governor of RBI** = The Deputy Governor of the RBI who holds charge of the Department of Banking Regulation serves ex-officio as the Chairman of DICGC. • This arrangement maintains a direct supervisory link between the central bank and the deposit insurance body it fully owns. • The board also includes representatives from RBI and the Government of India to ensure oversight. • 💡 Prime Minister (Option A) is wrong — the PM heads the executive branch and has no ex-officio role in a specialised financial corporation; Finance Minister (Option B) is wrong — the FM oversees the budget but does not chair DICGC; Governor of RBI (Option C) is wrong — the Governor's role is to govern the central bank, not to chair its subsidiary.

Correct Answer: C. Maintaining currency supply and quality

• **Maintaining currency supply and quality** = BRBNMPL's core function is to ensure an uninterrupted supply of high-quality banknotes in all required denominations, using advanced security features to prevent counterfeiting. • It manufactures its own security ink at 'Varnika' and sources special paper, maintaining end-to-end control over the production chain. • This is a sovereign function delegated by RBI to its wholly owned subsidiary. • 💡 'Overseeing foreign trade' (Option A) is wrong — that is the mandate of the DGFT and Commerce Ministry; 'Providing loans to farmers' (Option B) is wrong — agricultural credit is handled by NABARD and regional rural banks; 'Regulating stock markets' (Option D) is wrong — that authority belongs to SEBI.

Correct Answer: C. Reserve Bank of India

• **Reserve Bank of India** = ReBIT is a 'captive' subsidiary — its primary and almost exclusive client is the RBI itself, for which it manages all IT systems, cybersecurity, and digital infrastructure. • The captive model was chosen because RBI needed world-class IT talent that the government salary structure could not attract. • While ReBIT also audits external regulated entities, its foundational service is to the RBI. • 💡 Foreign Investors (Option A) is wrong — ReBIT does not offer services to overseas investment entities; Public Sector Banks (Option B) is wrong — while PSBs are regulated by RBI, they are not ReBIT's clients; NBFCs (Option D) is wrong — non-banking financial companies deal with RBI's regulation department, not with ReBIT directly.

Correct Answer: A. Mumbai

• **Mumbai** = IFTAS's corporate office is located in Mumbai, the financial capital of India and the city where RBI's own central office is situated. • Being in Mumbai allows IFTAS to maintain close coordination with major commercial banks, clearing houses, and the RBI's payment systems department. • From Mumbai, it operates the INFINET network and the SFMS messaging system for the entire country. • 💡 Kolkata (Option B) is wrong — it hosts RBI's eastern regional office but not IFTAS; Bengaluru (Option C) is wrong — that is the home of BRBNMPL's HQ and RBIH, not IFTAS; Chennai (Option D) is wrong — RBI's southern regional office is there, but IFTAS has no base in Chennai.

Correct Answer: D. No, it only covers deposits in India

• **No, it only covers deposits in India** = DICGC insurance is strictly limited to deposits held at bank branches physically located within Indian territory. • Overseas branches of Indian banks fall under the deposit protection laws of the host country, not under DICGC's jurisdiction. • Additionally, DICGC does not cover deposits of Central and State governments, inter-bank deposits, or deposits with foreign governments. • 💡 'Yes, fully covered' (Option A) is wrong — DICGC has no jurisdiction outside India; 'Only if the branch is in a SAARC country' (Option B) is wrong — DICGC makes no regional exception for SAARC; 'Yes, up to 50% coverage' (Option C) is wrong — DICGC provides no partial overseas coverage whatsoever.

Correct Answer: B. Wholly owned subsidiary

• **Wholly owned subsidiary** = RBI owns 100% of the equity capital of BRBNMPL, making it a wholly owned subsidiary — giving the central bank complete control over banknote printing strategy and security protocols. • This structure ensures that sensitive currency-production decisions remain within the central bank's direct governance framework. • It is governed by an RBI-appointed Board of Directors under the Companies Act. • 💡 'Joint venture with private firms' (Option A) is wrong — no private entity holds any stake in BRBNMPL; 'Autonomous government department' (Option C) is wrong — it is a registered company under the Companies Act, not a government department; 'Partnership with 50% stake' (Option D) is wrong — RBI holds the full 100%, not a 50-50 share.

Correct Answer: B. RBIH

• **RBIH** = The Reserve Bank Innovation Hub was specifically designed to collaborate with India's startup ecosystem to identify and scale innovative solutions for financial challenges. • It evaluates emerging technologies and supports their deployment within the regulatory framework, aligning with the government's broader Startup India mission. • Programmes like its digital lending hackathons and regulatory sandbox directly engage new-age fintechs. • 💡 IFTAS (Option A) is wrong — it provides established IT and messaging infrastructure, not startup incubation; DICGC (Option C) is wrong — it insures deposits and has no innovation mandate; ReBIT (Option D) is wrong — it focuses on RBI's internal cybersecurity and IT audits, not on promoting startup culture.

Correct Answer: C. The bank must pay interest on the delayed amount

• **The bank must pay interest on the delayed amount** = When a bank defaults on its DICGC premium, the corporation levies interest on the overdue sum to enforce compliance without immediately withdrawing coverage. • Depositor insurance remains active as long as the bank is registered with DICGC, regardless of premium delays. • Persistent default can, however, lead RBI to initiate regulatory action against the bank separately. • 💡 'Government pays the premium' (Option A) is wrong — DICGC has no provision for government substitution of premium; 'Bank's licence cancelled by RBI' (Option B) is wrong — licence cancellation is a separate RBI regulatory action, not an automatic DICGC response; 'Depositors lose insurance immediately' (Option D) is wrong — coverage continues as long as the bank remains registered.