RBI Grade B Finance and Management (FM) Syllabus

Finance and Management (FM) syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Finance and Management (FM) in RBI Grade B, not a summary of it.

1. 1

   Financial System

   3 topics

   • Structure of Indian Financial System
     • Money market vs capital market
     • Financial intermediaries
   • Regulators
     • RBI, SEBI, IRDAI, PFRDA
     • Roles and jurisdiction
   • Financial Sector Reforms
     • Narasimham Committee recommendations
     • Recent reform measures
2. 2

   Financial Markets

   4 topics

   • Money Market Instruments
     • Treasury bills, commercial paper, certificates of deposit
     • Call money and repo
   • Capital Market Instruments
     • Equity and debt securities
     • Primary vs secondary markets
   • Stock Exchanges and Indices
     • NSE, BSE, SENSEX, NIFTY
     • Trading and settlement
   • Foreign Exchange Market
     • Exchange rate mechanisms
     • FEMA framework
3. 3

   Financial Instruments and Institutions

   4 topics

   • Derivatives
     • Forwards, futures, options, swaps
     • Hedging and speculation
   • Mutual Funds and Pension Funds
     • Types and NAV
     • NPS structure
   • Development Financial Institutions
     • NABARD, SIDBI, EXIM Bank, NaBFID
   • Non-Banking Financial Companies
     • Classification and regulation
     • NBFC vs bank distinction
4. 4

   Basics of Derivatives and Risk Management

   3 topics

   • Risk Types
     • Credit, market, operational, liquidity risk
   • Basel Framework
     • Basel I, II, III norms
     • Capital adequacy ratio
   • Time Value of Money
     • Present and future value
     • Annuities and discounting
5. 5

   Principles and Functions of Management

   3 topics

   • Evolution of Management Thought
     • Scientific management (Taylor)
     • Administrative theory (Fayol)
     • Human relations approach
   • Functions of Management
     • Planning, organising, staffing
     • Directing and controlling
   • Organisational Structure
     • Functional, divisional, matrix
     • Centralisation vs decentralisation
6. 6

   Human Resource Development and Motivation

   4 topics

   • Motivation Theories
     • Maslow's hierarchy of needs
     • Herzberg two-factor theory
     • McGregor Theory X and Y
     • Vroom expectancy theory
   • Leadership
     • Trait, behavioural, contingency theories
     • Transactional vs transformational
   • Communication
     • Channels and barriers
     • Formal vs informal networks
   • Corporate Governance and Ethics
     • Stakeholder theory
     • Corporate social responsibility

Finance and Management (FM) flashcards for RBI Grade B

25 of 52 cards from the Finance and Management (FM) deck — real questions with worked answers.

1. What are the four broad components of the Indian Financial System?

   Financial Institutions (banks, NBFCs, DFIs), Financial Markets (money, capital, forex, derivatives), Financial Instruments/Assets (shares, bonds, etc.), and Financial Services (broking, insurance, depository, etc.).

2. Distinguish between the money market and the capital market.

   Money market deals in short-term funds (maturity up to 1 year) for liquidity needs; capital market deals in medium/long-term funds (over 1 year) for investment in equity and debt. Money market is largely OTC; capital market includes organised stock exchanges.

3. Name the four main financial-sector regulators in India and what each oversees.

   RBI (banking, money market, NBFCs, payments, forex); SEBI (securities/capital market); IRDAI (insurance); PFRDA (pensions/NPS). FMC merged into SEBI in 2015 for commodity derivatives.

4. Under which Act and in what year was the Reserve Bank of India established?

   Established under the RBI Act, 1934; commenced operations on 1 April 1935. It was nationalised on 1 January 1949.

5. What were the main recommendations associated with the Narasimham Committee on financial sector reforms?

   Narasimham-I (1991): reduce SLR/CRR, deregulate interest rates, prudential norms, reduce directed credit, capital adequacy. Narasimham-II (1998): stronger banking system, raise CAR, asset classification, mergers of strong banks, autonomy and the idea of a banking supervision board.

6. What was the Liberalisation, Privatisation, Globalisation (LPG) reform year and its trigger in India?

   1991, triggered by the balance-of-payments crisis; led to deregulation, opening to foreign investment, dismantling of the licence raj, and financial-sector liberalisation.

7. List the major instruments traded in the Indian money market.

   Treasury Bills (T-Bills), Commercial Paper (CP), Certificates of Deposit (CD), Call/Notice/Term Money, Commercial Bills, and Repo/Reverse Repo (including the Collateralised Borrowing and Lending Obligation, CBLO/TREPS).

8. What is Commercial Paper (CP) and who issues it?

   An unsecured, short-term promissory note issued at a discount to face value by creditworthy corporates, primary dealers, and financial institutions; maturity 7 days to 1 year; minimum denomination Rs 5 lakh.

9. What is a Certificate of Deposit (CD)?

   A negotiable, unsecured money-market instrument issued by banks and select financial institutions against funds deposited; bank CDs have maturity 7 days to 1 year (FIs up to 3 years).

10. What are Treasury Bills and what maturities are they issued in?

    Short-term sovereign debt instruments issued by the RBI on behalf of the Government of India, sold at a discount and redeemed at face value (zero-coupon). Standard tenors: 91-day, 182-day, and 364-day.

11. Differentiate equity shares from preference shares.

    Equity shares carry voting rights, residual/variable dividends, and ownership with no maturity. Preference shares get a fixed dividend and priority over equity in dividend and capital repayment but usually no voting rights.

12. What is a debenture and how does it differ from a share?

    A debenture is a debt instrument (loan to the company) paying fixed interest, with no ownership or voting rights and a defined maturity; a share represents ownership with dividends and voting rights.

13. What is an IPO versus an FPO?

    IPO (Initial Public Offering) is a company's first issue of shares to the public. FPO (Follow-on Public Offer) is a subsequent issue of shares by an already-listed company.

14. What are the two main stock exchanges in India and their benchmark indices?

    Bombay Stock Exchange (BSE) with the SENSEX (30 stocks), and National Stock Exchange (NSE) with the NIFTY 50 (50 stocks).

15. What is the base year and base value of the BSE SENSEX?

    Base year 1978-79 with a base value of 100. It is a free-float market-capitalisation weighted index of 30 large companies.

16. What is meant by a 'free-float market capitalisation' weighted index?

    An index weighting method that counts only shares readily available for trading in the market (excluding promoter/locked-in holdings), so each company's weight reflects its publicly tradable market value.

17. What are the participants in the foreign exchange market?

    Central banks, commercial banks, authorised dealers, brokers, corporates, exporters/importers, FPIs, and speculators/arbitrageurs.

18. Distinguish a spot exchange rate from a forward exchange rate.

    Spot rate is for immediate currency delivery (settlement usually T+2). Forward rate is agreed today for delivery on a specified future date, used to hedge currency risk.

19. What is the difference between currency appreciation and depreciation under a floating regime?

    Appreciation is a rise in a currency's value relative to another (fewer rupees per dollar); depreciation is a fall in its value (more rupees per dollar), both driven by market demand and supply.

20. Define a financial derivative and name its four main types.

    A derivative is a contract whose value is derived from an underlying asset (stock, index, currency, commodity, rate). Main types: Forwards, Futures, Options, and Swaps.

21. How does a futures contract differ from a forward contract?

    Futures are standardised, exchange-traded, and cleared through a clearinghouse with daily mark-to-market and margins; forwards are customised, OTC, with counterparty risk and settlement at maturity.

22. What is the difference between a call option and a put option?

    A call option gives the holder the right (not obligation) to buy the underlying at the strike price; a put option gives the right to sell the underlying at the strike price, before/at expiry.

23. What is a swap in derivatives, and name a common type?

    A swap is an agreement to exchange cash flows over time; the most common is an interest-rate swap, where fixed-rate payments are exchanged for floating-rate payments on a notional principal.

24. What is a mutual fund and how is its price (NAV) determined?

    A mutual fund pools investors' money to invest in a diversified portfolio managed by an AMC. NAV (Net Asset Value) = (Total assets - liabilities) / number of outstanding units, computed daily.

25. Differentiate open-ended from close-ended mutual fund schemes.

    Open-ended funds allow continuous buying/redemption at NAV with no fixed maturity. Close-ended funds have a fixed maturity and a set number of units, traded on the exchange after the NFO.

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