introduction to indian economy section 9 MCQ Questions & Answers Detailed Explanation

Answer: (d)

Hedge funds invest in a diverse range of markets and use a wide variety of investment styles and financial instruments. Hedge funds are open only to certain types of investors in a country specified by the regulator and cannot be offered or sold to the general public.

Legally, hedge funds are most often set up as private investment partnerships that are open to a limited number of investors and require a very large initial minimum investment.

Answer: (c)

Postal Life Insurance was started on 01.02.1884 as a welfare measure for the employees of Posts & Telegraphs Department under Government of India dispatch No. 299 dated 18 October 1882 to the Secretary of State. Due to the popularity of its schemes, various departments of Central and State Governments were extended their benefits.

Now Postal Life Insurance is open for employees of all central and state government departments, nationalised banks, public sector undertakings, financial institutions, local municipalities and District councils and educational institutions aided by the Government.

Answer: (c)

The Reserve Bank of India (RBI) is India’s central banking institution, which controls the monetary policy of the Indian rupee. It was established on 1 April 1935 during the British Raj in accordance with the provisions of the Reserve Bank of India Act, 1934.

Following India’s independence in 1947, the RBI was nationalised in the year 1949. Though originally set up as a shareholders’ bank, the RBI has been fully owned by the Government of India since its nationalization in 1949.

Answer: (c)

Devaluation happens in countries with a fixed exchange rate. In a fixed-rate economy, the government decides what its currency should be worth compared with that of other countries. The exchange rate can change only when the government decides to change it.

If a government decides to make its currency less valuable, the change is called devaluation. Depreciation happens in countries with a floating exchange rate. A floating exchange rate means that the global investment market determines the value of a country’s currency.

Answer: (b)

Two expert Committees were set up in the 1990s under the chairmanship of M. Narasimhan (an exRBI (Reserve Bank of India) governor).

The first Narasimhan Committee (Committee on the Financial System - CFS) was appointed by Manmohan Singh as India’s Finance Minister on 14 August 1991, and the second one (Committee on Banking Sector Reforms) was appointed by P. Chidambaram as Finance Minister in December 1997.

The 1991 committee submitted its report to the Finance Minister in November 1991 which was placed on the table of Parliament on December 17, 1991.

It recommended the introduction of a four-tier banking system in the country:

1. tier: 3 or 4 International Banks;
2. tier: 8 to 10 National Banks; .
3. tier Regional Banks; and
4. tier: Rural Banks.

Answer: (b)