Practice Money and supply banking financial institutions - indian economy mcq Online Quiz (set-1) For All Competitive Exams

Q-1)   Which of the following is/are treated as artificial currency?

(a)

(b)

(c)

(d)


Q-2)   In India, regional rural banks were established in the year

(a)

(b)

(c)

(d)


Q-3)   When the Reserve Bank of India was established?

(a)

(b)

(c)

(d)


Q-4)   In which year the export-import (EXIM) Bank in India was set up?

(a)

(b)

(c)

(d)


Q-5)   Capital market deals with

(a)

(b)

(c)

(d)

Explanation:

Capital markets are financial markets for the buying and selling of long-term debt or equity-backed securities. These markets channel the wealth of savers to those who can put it to long-term productive use, such as companies or governments making longterm investments.


Q-6)   Consider the following statements regarding MUDRA Bank:
  1. It will provide direct lending to small entrepreneurs
  2. MUDRA loans will be available for agriculture, manufacturing, trading and service activities
Select the correct answer using the code given below:

(a)

(b)

(c)

(d)

Explanation:

MUDRA would be responsible for refinancing all Last Mile Financiers such as

  1. NonBanking Finance Companies,
  2. Societies,
  3. Trusts,
  4. Companies,
  5. Co-operative Societies,
  6. Small Banks,
  7. Scheduled Commercial Banks and
  8. Regional Rural Banks

Which are in the business of lending to micro/small business entities engaged in manufacturing, trading and services activities (not for agriculture).

Refinancing means MUDRA loans will be available through Banks/NBFCs/MFIs and not directly from MUDRA Bank.

MUDRA loans are available in three categories. For a small business, loans up to 50000/- is available under the ‘Shishu’ category, beyond 50,000 and up to 5 lakhs under the ‘Kishor’ category and between 5 lakhs to 10 lakhs under the 'Tarun' category.

These products have been designed to cater to customers operating at the lower end of the enterprise spectrum i.e. informal/unorganized sector.


Q-7)   In case of the recent Yes Bank crisis:
  1. RBI superseded the Board of ‘Yes Bank’ through RBI Act 1934
  2. RBI acted as ‘Lender of Last Resort’
Select the correct answer using the code given below:

(a)

(b)

(c)

(d)

Explanation:

When there is a liquidity crisis with a bank, then RBI acts as "Lender of last resort" and provides loans at a particular interest rate to the bank.

But when there is major mismanagement in the bank and there are chances of major default/bankruptcy, then RBI, in consultation with Govt. of India, can supersede the "Board of Directors" of banks in the public interest. (But RBI may not supersede the Board of PSU banks).

Once RBI supersedes the Board of Directors (management), then it appoints an "Administrator". This is done as per the "Banking Regulation Act 1949" Section 36ACA.

So, (i) statement is false as RBI supersedes a bank's Board under "Banking Regulation Act 1949" and not under RBI Act 1934

In case of the Yes Bank Crisis, RBI superseded the management of Yes Bank and it also acted as lender of last resort and provided a 90-day loan AT BANK RATE of 5.4% (at that time Bank Rate was repo plus 0.25%, which comes out as 5.15% + 0.25% = 5.4%), plus 3% (so basically RBI charged 5.4% + 3% = 8.4% as a penalty) to meet the immediate liquidity needs of the Yes Bank.

Under the Lender of Last Resort, RBI gives loans against eligible securities to financial institutions (Banks and NBFCs both) in emergencies.


Q-8)   Consider the following statements regarding the resolution of Financial Service Providers (FSP) under IBC 2016.
  1. Govt. of India in consultation with the appropriate regulator will decide which category of FSPs can be taken up for resolution under IBC 2016
  2. To initiate resolution of FSPs under IBC 2016, the appropriate regulator should make an application
Select the correct answer using the code given below:

(a)

(b)

(c)

(d)

Explanation:

Section 227 of IBC 2016 says that "Notwithstanding anything to the contrary examined in this Code or any other law for the time being in force, the Central Government may, if it considers necessary, in consultation with the appropriate financial sector regulators, notify financial service providers or categories of financial service providers for the purpose of their insolvency and liquidation proceedings, which may be conducted under this Code.”

And the rules also say that to initiate resolution of FSPs under IBC 2016, the appropriate regulator should make an application. This is not applicable in other cases wherein the case of default, either the creditor or the debtor (company), anyone can move for resolution under IBC 2016.

Since section 227 got notified, the Ministry of Corporate Affairs (GoI) (using the powers under section 227) consulted the regulator (RBI) and said that those NBFCs with asset size of more than Rs. 500 crores can be brought under the IBC code for resolution.

This has been done only for those NBFCs which are regulated by RBI and not for those NBFCs which are regulated by other regulatory bodies like SEBI, IRDAI etc.


Q-9)   Consider the following statements:
  1. Disinflation is declining rate of inflation but the rate of inflation remains positive
  2. Deflation is general decrease in price level and the inflation rate is negative
Select the correct answer using the code given below:

(a)

(b)

(c)

(d)

Explanation:


Q-10)   Consider the following statements regarding cryptocurrencies in India:
  1. Trading of cryptocurrencies is banned in India
  2. Cryptocurrencies acquired value because they can be created only in a limited number
Select the correct answer using the code given below:

(a)

(b)

(c)

(d)

Explanation:

Cryptocurrencies are not legal tender but as such, there is no blanket ban on trading in cryptocurrencies.

There is a draft bill "Banning of Cryptocurrency and Regulation of Official Digital Currency Bill 2019", as per which holding, selling or dealing in cryptocurrencies such as Bitcoin could soon land you in jail for 10 years. But till now it is just in the draft stage and has not become an act.

Cryptocurrencies acquire value as they can be generated/mined only in limited numbers and if more and more people would like to hold/possess it, its value increases.

In a circular in April 2018, RBI had imposed a virtual ban on cryptocurrency trading in India and had directed all entities which fall under the purview of (regulated by) RBI to not deal in virtual currencies or provide services to those who want to deal in it.

In March 2020 the Supreme court has set aside (quashed) the order, allowing trade in digital assets.


Q-11)   Pegging up of a currency means, fixing the value of a currency

(a)

(b)

(c)

(d)

Explanation:

Currency pegging is the idea of fixing the exchange rate of a currency by matching its value to the value of another single currency or to a basket of other currencies, or to another measure of value, such as gold or silver.

A fixed exchange rate is usually used to stabilize the value of a currency, with respect to the currency or the other valuable it is pegged to.


Q-12)   Bank deposits that can be withdrawn without notice are called

(a)

(b)

(c)

(d)

Explanation:

Demand deposits are funds held in an account from which deposited funds can be withdrawn at any time without any advance notice to the depository institution. Demand deposits can be “demanded” by an account holder at any time.

Many checking and savings accounts today are demand deposits and are accessible by the account holder through a variety of banking options, including teller, ATM and online banking.

In contrast, a term deposit is a type of account that cannot be accessed for a predetermined period (typically the loan’s term).


Q-13)   Which of the following is the largest holder of Government securities?

(a)

(b)

(c)

(d)

Explanation:

As commercial banks are required to keep SLR (cash, gold, government securities) of 18.25%, they keep the maximum per cent of government securities. Out of cash, gold and government securities, the government securities give the best returns (interest), so they prefer this instrument.

Cooperative banks also keep government securities under SLR but since cooperative banks overall share in deposit and lending is around 10 per cent of the Scheduled commercial banks, so commercial banks have the highest share of government securities.


Q-14)   The largest commercial bank of India is

(a)

(b)

(c)

(d)


Q-15)   Consider the following statements:
  1. not all banks come under the regulation of the Right to Information Act
  2. not all banks come under Schedule 2 of RBI
Which among the above statements is/are correct?

(a)

(b)

(c)

(d)

Explanation:


Q-16)   Which of the following is not a function of Reserve Bank of India?

(a)

(b)

(c)

(d)


Q-17)   The Bank rate is the rate at which

(a)

(b)

(c)

(d)


Q-18)   The main source of long-term credit for a business unit is

(a)

(b)

(c)

(d)

Explanation:

Companies issue securities called stocks and bonds to raise necessary capital which funds the company’s daily operations and growth. Stock represents fractional ownership in the company. Investors may purchase preferred or common stock.

Bonds represent loans of the company to lenders called bondholders. A company decides to sell stock when it needs long-term access to capital.

Unlike bond loans, issuing stock to owners called stockholders doesn’t require the company’s repayment of investor principal.


Q-19)   Which of the following agencies conducts ‘inflation expectation survey’ of households in India?

(a)

(b)

(c)

(d)

Explanation:

RBI conducts quarterly 'inflation expectation survey' of households wherein RBI gauges the household’s expectation regarding inflation for the next one year. These surveys are used for monetary policy purpose.


Q-20)   Which among the following correctly defines the Net Interest Income?

(a)

(b)

(c)

(d)