money supply, banking & financial institutions section 1 MCQ Questions & Answers Detailed Explanation
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The following question based on Money Supply, Banking and Financial Institutions topic of indian economy mcq
(a) repayment of loans in terms of rupees
(b) determination of rate of exchange between rupee and foreign currencies freely by the market forces of demand and supply
(c) purchase of foreign exchange for rupees freely
(d) payment for imports in terms of ruppes
The correct answers to the above question in:
Answer: (b)
The full convertibility of the Indian currency means that the rupee would be made freely exchangeable into other currencies and vice versa. The rupee was made partially convertible in 1994.
Currently, it can be changed freely into foreign currency for business and trade expenses but not free for activities like acquiring overseas assets. Full conversation of the currency means the local currency can be exchanged for foreign currency without any governmental control.
Presently, the issue of capital account convertibility is in the discussion stage.
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Question : 1
Consider the following statements. The function of commercial banks in India includes
- Purchase and sale of shares and securities on behalf of customers.
- Acting as executors and trustees of wills.
a) Only 2
b) Neither 1 nor 2
c) Both 1 and 2
d) Only 1
Answer »Answer: (a)
Question : 2
‘Green Banking’ means :
a) Banks financing farmers
b) Banks financing proenvironmental projects
c) Banks financing agriculture
d) Banks financing irrigation projects
Answer »Answer: (b)
Green Banking refers to practices and guidelines that make banks sustainable in the economic, environmental, and social dimensions.
Green banking is also known as environment-friendly banking, ethical banking or sustainable banking.
A conventional bank becomes a green bank by directing its core operations towards the betterment of the environment.
Question : 3
Tarapore Committee was associated with which one of the following?
a) Full capital account convertibility
b) Effect of oil prices on the Indian economy
c) Foreign exchange reserves
d) Special Economic Zones
Answer »Answer: (a)
Question : 4
Which of the following statements are true regarding “Term Repo Operations”?
- The interest rate is between reverse repo and repo rate
- The interest rate is above the repo rate
- The interest rate is generally fixed
- The interest rate is generally variable
a) (i) & (iv) only
b) (ii) & (iii) only
c) (i) & (iii) only
d) (ii) & (iv) only
Answer »Answer: (d)
RBI lends to banks @repo rate but only up to 0.25% of banks NDTL. RBI further lends from time to time above the repo rate up to 0.75% of the overall NDTL in the system. And in this case, the interest rate is decided by auction
i.e. if more banks want money, the interest rate will go higher, if fewer banks are competing for RBI money then the interest rate will be less but it will always be above the repo rate (actually RBI puts a condition that all the bids at or below the repo rate will be rejected).
This is called "term repo" which means RBI gives money for a fixed long term. Term Repo is also called Variable Term Repo Operations.
Question : 5
Consider the following statements:
- In Narrow Banking, Banks just accept deposits and provide loans.
- In Narrow Banking, there is rarely Asset Liability Mismatch.
a) Only 2 is correct
b) Only 1 is correct
c) Both 1 and 2 are correct
d) None of them is correct
Answer »Answer: (a)
Question : 6
Which of the following systems of Note-issue is followed by RBI?
a) Minimum Reserve System
b) None of the above
c) Fixed Fiduciary System
d) Proportional Reserve System
Answer »Answer: (a)
GET Money Supply, Banking and Financial Institutions PRACTICE TEST EXERCISES
money supply, banking & financial institutions section 1
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