Capital markets, insurance & financial instruments

Answer: (a) 1, 2 and 3

Tokenisation represents rights in a real asset such as property, bonds or commodities as digital tokens on a distributed ledger. India’s IFSCA paper sees advantages such as fractional ownership, lower entry barriers, new avenues for diversification and 24/7 market operations, so the key treats all three statements as correct.

• ✓ 1. IFSCA’s consultation paper describes tokenization as using technologies such as distributed ledger technology (DLT) to issue or represent assets in digital forms known as tokens.
• ✓ 2. The paper points to demand for 24/7 market operations and to lower entry barriers, which is the basis for wider access.
• ✓ 3. The paper says tokenization can create an organised marketplace for real-world assets with fractionalisation and newer avenues for diversification, opening asset classes to more investors.

Remember · RWA tokenisation = putting rights in real assets on a ledger as tokens; benefits cited include fractional ownership, lower entry barriers and 24/7 markets.

Question and answer: UPSC's provisional GS Paper I (2026, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). Permalink · Report an error

Answer: (c) Sustainability Bond

The label depends on what the proceeds fund. Green bonds fund environmental projects, social bonds fund social projects, and a sustainability bond funds a combination of both green and social projects.

• ✓ (c) Sustainability bonds apply proceeds exclusively to finance or re-finance a combination of green and social projects.
• ✗ (a) A green bond finances projects with clear environmental benefits only.
• ✗ (b) A social bond finances projects that address a specific social issue or achieve positive social outcomes, not a combination of environmental and social projects.
• ✗ (d) ‘Sovereign’ describes the issuer (a government), not the use of proceeds.

Remember · Use of proceeds decides the label: green = environment, social = social outcomes, sustainability = both together.

Question and answer: UPSC's provisional GS Paper I (2026, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 1 Oct 2026 (how we verify). Permalink · Report an error

Answer: (b) 2 only

M1xchange is one of the RBI-authorised TReDS platforms, an electronic exchange where MSME invoices and bills of exchange are discounted by competing financiers. It is a marketplace, not a lender that takes collateral and not a rating agency.

• ✗ 1. M1xchange does not lend. Banks and NBFC-Factors bid on the platform, and financing is collateral-free and ‘without recourse’ to the MSME seller.
• ✓ 2. In TReDS an invoice or bill of exchange is uploaded as a Factoring Unit, financiers bid, and the winning bidder pays the MSME seller at the agreed discount.
• ✗ 3. TReDS participants are sellers, buyers and financiers; the platform runs the discounting auction and does not rate MSMEs.

Remember · M1xchange = RBI-authorised TReDS platform for discounting MSME invoices and bills of exchange; collateral-free and without recourse to the seller.

Question and answer: UPSC's provisional GS Paper I (2026, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). Permalink · Report an error

Answer: (c) Both 1 and 2

Both statements are correct. Aviation hull insurance is the cover for physical loss or damage to the aircraft itself, and under Article 21 of the Montreal Convention an airline cannot escape liability for a passenger's death up to a fixed limit, whether or not it was at fault.

• ✓ 1. Hull (all-risk) insurance pays for physical loss or damage to the insured aircraft, including total loss. It is separate from liability cover, which pays claims made by passengers or third parties.
• ✓ 2. The 1999 Montreal Convention makes the carrier liable for a passenger's death on board or while embarking or disembarking. Up to 100,000 SDRs (raised to 151,880 SDRs in December 2024) the carrier cannot exclude or limit that liability, so the family need not prove fault. Above that, the airline can defend itself by proving it was not negligent. India became a party in 2009.

Remember · Hull cover insures the aircraft; the Montreal Convention gives strict (no-fault) liability for passenger death up to the first-tier limit, now 151,880 SDRs.

Question and answer: UPSC's provisional GS Paper I (2026, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). Permalink · Report an error

Answer: (c) Both 1 and 2

Both statements follow SEBI’s consultation paper on crowdfunding. It defines crowdfunding as soliciting small amounts from many investors through a web platform, and lists among its benefits that SMEs can raise funds at lower cost of capital without rigorous procedures.

• ✓ 1. SEBI’s paper defines crowdfunding as solicitation of small amounts of funds from multiple investors through a web-based platform or social networking site for a specific project, business venture or social cause.
• ✓ 2. SEBI lists this as a benefit of crowdfunding for SMEs: lower cost of capital without going through rigorous procedures.

Remember · Crowdfunding: small sums from many investors via a web platform; SEBI’s 2014 consultation paper notes it as an alternative funding route for start-ups and SMEs.

Question and answer: UPSC's provisional GS Paper I (2026, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). Permalink · Report an error

Answer: (d) 2 and 4

Rows 2 and 4 are fully matched: SEBI appointed the L.C. Gupta Committee on derivatives, and the RBI constituted the Malegam sub-committee on microfinance. Row 1 fails because the Malhotra Committee (1993) came years before IRDA existed (2000), and row 3 fails because the Urjit Patel Committee dealt with the monetary policy framework, not housing credit.

• ✗ 1. The Malhotra Committee on insurance sector reforms was set up in 1993 and reported in 1994; IRDA was formed only in 2000 after the IRDA Act, 1999, so IRDA could not have formed it.
• ✓ 2. SEBI appointed the L.C. Gupta Committee, which recommended the introduction of derivatives trading.
• ✗ 3. The RBI’s Urjit R. Patel Committee (report January 2014) was set up to revise and strengthen the monetary policy framework, not to reform bank lending to the housing sector.
• ✓ 4. In October 2010 the RBI constituted a sub-committee under Y.H. Malegam to study issues and concerns of the microfinance sector; its 2011 report proposed NBFC-MFIs as a new category.

Remember · Malhotra: insurance reform (1993, before IRDA); L.C. Gupta: derivatives (SEBI); Urjit Patel: monetary policy framework (RBI, 2014); Malegam: microfinance (RBI, 2010).

Question and answer: UPSC's provisional GS Paper I (2026, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). Permalink · Report an error