RBI Grade B Phase II Descriptive Super Notes: Finance and Management

RBI – Descriptive – Super-Notes© M S Ahluwalia Sirf Business
Finance and Management
RBI – Grade B Exam
Phase II - Descriptive

RBI – DESCRIPTIVE – SUPER NOTES
Finance and Management

Contents
- The Union Budget - Direct and Indirect Taxes; Non-tax
sources of Revenue; Financial Sector Reforms; Outlays; New
Measures;
- Capital Market, Money Market and Foreign Exchange Market,
- Stock Exchanges and their Regulation; Capital Market
Intermediaries and their Regulation; Role of SEBI;
- Functions of the Money Market;
- Growth and Operation of the Money Market;
The Foreign Exchange Market; From FERA to FEMA; Exchange
Rate Management; Exchange Risk Management,
- Role of Banks and Financial Institutions in Economic
Development;
- Regulation of Banks and Financial Institutions;
- Disinvestment in Public Sector Units.
- Management, its Nature and Scope;
- The Management Processes
- Leadership
- Human Resource Development; Concept of HRD, Goals of
HRD, Performance Appraisal - Potential Appraisal and
Development - Feedback and Performance Counselling -
Career Planning - Training and Development - Rewards -
Employee Welfare,
- Motivation, Morale and Incentives; Theories of Motivation:
How Managers motivate; Concept of Morale; Factors
Determining Moral; Role of Incentives in Building up Morale.
Communication: Steps in the Communication Process;
Communication channels; Oral versus written
communication; Verbal versus Non-Verbal Communication;
Upward, Downward and Lateral Communication; Barriers to
Communication, Role of Information Technology,
- Corporate Governance; Factors affecting Corporate
Governance; Mechanisms of Corporate Governance.

FINANCE
1.

THE UNION BUDGET
1.1.

MANAGEMENT
2.

INTRODUCTION TO MANAGEMENT
2.1.

THE MANAGEMENT PROCESSES
2.2.

The Management Processes
Planning
Organizing
Staffing
Directing
Controlling

CONTROLLING
2.2.5

Controlling
• Measurement and correction to ensure achievement of goals
• Direct control is through the control of managers

Types of Control
Based on
scope
Based on
scope
PartialPartial
CompleteComplete
Based on
nature
Based on
nature
DirectDirect
IndirectIndirect
Based on
timing
Based on
timing
Feedback
Control
Feedback
Control
Feed-forward
Control
Feed-forward
Control
Real Time
Control
Real Time
Control

Control Devices
Budget
Scenarios
Budget
Scenarios
P&L
Statements
P&L
Statements
ROIROI
Enterprise
Self-Audit
Enterprise
Self-Audit

The Control Process
Establishment of StandardsEstablishment of Standards
Measurement of
Performance
Measurement of
Performance
Correction of DeviationsCorrection of Deviations

The Feedback Loop
Measurement
of Actual
Performance
Measurement
of Actual
Performance
Actual Perf. Vs.
Desired Perf.
Actual Perf. Vs.
Desired Perf.
Identification of
Deviations
Identification of
Deviations
Analysis of
causes of
deviations
Analysis of
causes of
deviations
Program of
corrective
action
Program of
corrective
action
Implementation
of Corrections
Implementation
of Corrections
Desired
Performance
Desired
Performance
Actual
Performance
Actual
Performance

Simple feedback vs. Feed-forward
comparison
InputsInputs ProcessProcess OutputsOutputs
Desired
Values of
Outputs
Desired
Values of
Outputs
Simple
Feedback
Simple
Feedback
FeedforwardFeedforward
Information
Corrective Action

Designing Feed-forward Control
ActionAction
Actual input vs. planned input variation to be assessedActual input vs. planned input variation to be assessed
Input data about input variables into the systemInput data about input variables into the system
Update model real-timeUpdate model real-time
Develop a model of the systemDevelop a model of the system
Analysis of Planning & Control System (Identification of important control variables)Analysis of Planning & Control System (Identification of important control variables)

Factors to be kept in mind while designing
controls
Plans to be
controlled
Plans to be
controlled
Position of person
controlling
Position of person
controlling
Critical factorsCritical factors
Organisation
Pattern
Organisation
Pattern
Understanding
levels of individual
managers
Understanding
levels of individual
managers
Personalities of
individual
managers
Personalities of
individual
managers
Should point
exceptions at
critical points
Should point
exceptions at
critical points
Should be
objective
Should be
objective
FlexibilityFlexibility
Economical
(Efficiency)
Economical
(Efficiency)
Should lead to
corrective action
Should lead to
corrective action

Critical Points
• In the sense either of being limiting factors in the operation or
of showing better than other factors whether plans are
working out

Types of Critical Point Standards
•Non-monetary measurements
Physical StandardsPhysical Standards
•Monetary Measurements
Cost StandardsCost Standards
•Application of monetary measurements to physical items (related to Balance sheet & not P&L)
Capital StandardsCapital Standards
•Attaching monetary value to sales
Revenue StandardsRevenue Standards
•Usually subjective, objective standards such as program performance, timing and other factors
Program StandardsProgram Standards
•Standards for goals that cannot be given clear quantitative or qualitative measurement (ex: success of PR program)
Intangible StandardsIntangible Standards
•Through research and thinking it is possible to define goals that can be used as performance standards
Goals as StandardsGoals as Standards

Control Techniques
Traditional
Control
Techniques
The Budget
Revenue and
Expense Budgets
Sales Budget
Operating
Expense Budget
Time, Space,
Material and
Product Budgets
Capital
Expenditure
Budgets
Cash Budgets
Traditional Non-
Budgetary Control
Devices
Statistical Data
Special reports
and analysis
Operational Audit
Personal
Observation
Time Event
Network Analysis
Milestone
budgeting
PERT – Optimistic,
Most Likely,
Pessimistic
Program planning
and Budgeting

The Budget
• The Budget: Formulation of plan for a given future period in
numerical terms
• Variable or Flexible Budgets: Vary with variance in sales or some
other measure of output
• Zero-Base Budgeting: To start entire budgeting from a zero base
instead of only previous period changes
• Alternative Budget: Budget for alternative eventualities
• Supplementary Budget: Budget prepared on a more frequent basis
in addition to the basic budget prepared for a period

The Budget: Dangers in Budgeting
Over-budgeting
Budgetary goals
becoming more
important than
enterprise goals
Hiding
inefficiencies
Inflexibility

Control of Overall Performance
• Budget summaries and reports:
– Profit and Loss control
– Control through ROI
– The enterprise self-audit

LEADERSHIP
2.3.

Leadership
• About coping with change
• Establish direction by developing a vision of the future
• Ability to influence a group towards the achievement of goals

THE TASKS OF A LEADER
2.3.1

LEADERSHIP STYLES
2.3.2

LEADERSHIP THEORIES
2.3.3

Leadership Theories
LeadershipTheoriesLeadershipTheories
Trait TheoriesTrait Theories
Behavioral TheoriesBehavioral Theories
Ohio State StudiesOhio State Studies
University of Michigan
Studies
University of Michigan
Studies
Managerial GridManagerial Grid
Scandinavian StudiesScandinavian Studies
Contingency TheoriesContingency Theories
Fiedler ModelFiedler Model
Hershey and Blanchard’s
Situational Theory
Hershey and Blanchard’s
Situational Theory
Leader Member
Exchange Theory
Leader Member
Exchange Theory
Path-goal TheoryPath-goal Theory
Leader Participation
Model
Leader Participation
Model

Trait Theories
• High self-monitors => Flexible behavior as per situation
• 6 Traits:
Ambition
and Energy
Ambition
and Energy
Desire to
Lead
Desire to
Lead
Honesty and
Integrity
Honesty and
Integrity
Self
Confidence
Self
Confidence
IntelligenceIntelligence
Job Relevant
Knowledge
Job Relevant
Knowledge

Trait Theories
• Limitations:
– No universal traits
– Traits predict behavior in ‘weak’ situations
– Evidence is unclear in separating cause from effect
– Predicts behavior of leadership, not effective/ineffective leadership

Behavioral Theories :: Ohio State Studies
• Sought to identify independent dimensions of leader behavior
• Two dimensions:
– Initiating Structure: Behavior that attempts to organize work, work
relationships and goals
– Consideration: Extent to which a person is likely to have job relationships
• High-High leaders achieved high employee performance and
satisfaction more frequently
• Weakness: Situational factors not considered

Behavioral Theories :: University of
Michigan Studies
• Two dimensions:
– Employee Oriented: High productivity and job satisfaction
– Production Oriented

Behavioral Theories :: Managerial Grid
• Also known as Leadership Grid
• Two dimensions:
– Concern for people
– Concern for production
• It shows the leader’s thinking, not the result produced

Behavioral Theories :: Scandinavian Studies
• Leaders would exhibit development oriented behaviour
• Leaders who value experimentation, seek new ideas, and
generate and implement change
• Added a third dimension – Development Orientation

Contingency Theories :: Fiedler Model
• Group performance depends on proper match between the
leader’s style and degree to which the situation gives control
to the leader
• Process for model implementation given on following page
• Cognitive Resource Theory: Stress unfavorably affects a
situation; intelligence and experience can lessen the
influence of stress on a leader

Contingency Theories :: Fiedler Model
Identify leadership style
• Relationship/Task Oriented
Identify leadership style
• Relationship/Task Oriented
Define the Situation
• 3 dimensions:
• Leader member relations
• Task structure
• Position power
Define the Situation
• 3 dimensions:
• Leader member relations
• Task structure
• Position power
Matching leaders and situations
• Task oriented: favorable/unfavorable situations
• Relationship oriented: Moderately favorable situation
• Change leader to fit situation or vice-a-versa
Matching leaders and situations
• Task oriented: favorable/unfavorable situations
• Relationship oriented: Moderately favorable situation
• Change leader to fit situation or vice-a-versa

Contingency Theories :: Situational
Leadership Theory
• Also known as Hershey and Blanchard’s Situational Theory
• Leaders can compensate for ability and motivational limitations in their
followers
Supportive/P
articipative
Style
Supportive/P
articipative
Style
Clear and
Specific
Directions
Clear and
Specific
Directions
Leader
doesn’t do
much
Leader
doesn’t do
much
High
Task/High
Relationship
orientation
High
Task/High
Relationship
orientation
UnableAble
Unwilling
Willing

Contingency Theories :: LMX Theory
• LMX: Leader Member Exchange Theory
• Highly satisfied in-group

Contingency Theories :: Path-Goal Theory
• Leader’s job is to assist followers in attaining their goals
• Same leader can display all these behaviors based on situation
Directive
Leader
Supportive
Leader
Participative
Leader
Achievement
Oriented
Leader
Leader Behavior
Subordinate
Contingency Factors
Environmental
Contingency Factors
Outcomes
•Performance
•Satisfaction

Contingency Theories :: Leader
Participation Model
• Leader behavior must adjust to reflect the task structure
• 12 contingency variables

A SUCCESSFUL LEADER VERSUS AN
EFFECTIVE LEADER
2.3.4

THE ROLE OF A MANAGER IN AN
ORGANISATION
2.3.5

HUMAN RESOURCE DEVELOPMENT
2.4

CONCEPT OF HRD
2.4.1

GOALS OF HRD
2.4.2

PERFORMANCE APPRAISAL
2.4.3

Purpose of Performance Evaluation
General HR Decisions
Identify training &
development needs
Can be used as a
criterion against which
selection and
development programs
are validated
Measuring effectiveness
of training programs
Providing feedback to
employees

What to and Who should evaluate?
What is
evaluated?
Individual
task
outcomes
Behaviors
(subjective/
contextual
factors)
Traits
Who should
evaluate?
(360 Degree
Evaluations)
Immediate
Supervisor
Peers
Self-
Evaluation
Immediate
Subordinates

Methods of Performance Evaluation
Written Essays Critical Incidents
Graphic Rating
Scales
Behaviorally
Anchored Rating
Scales
Forced Comparisons
• Group Order Ranking
• Individual Ranking
• Paired Comparison

Suggestions for Improving Performance
Evaluation
(To avoid leniency, halo and similarity errors and intentional political intervention)
Emphasize
behaviors rather
than traits*
Document
performance
behaviors in a diary
Use multiple
evaluators
Evaluate selectively Train evaluators
Provide employees
with due process
* Traits suffer from weak inter-rater agreement

Do you have any questions or queries or some feedback to give?
Just mark an email to super.msahluwalia@yahoo.com

For more Super-Notes: Click Here
M S Ahluwalia, amongst other things, is a visual artist, blogger,
blog designer, MBA, CAIIB (First Class with
Distinction) and Ex-Banker from New Delhi, India.
To know more visit : Estudiante De La Vida

RBI Grade B Phase II Descriptive Super Notes: Finance and Management

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