money supply, banking & financial institutions section 2 MCQ Questions & Answers Detailed Explanation
MOST IMPORTANT indian economy mcq - 12 EXERCISES
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The following question based on Money Supply, Banking and Financial Institutions topic of indian economy mcq
(a) 1970
(b) 1965
(c) 1969
(d) 1968
The correct answers to the above question in:
Answer: (c)
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Read more money and supply banking financial institutions Based Indian Economy Questions and Answers
Question : 1
In India, $M_3$ includes
a) demand deposits with banks
b) All of the above
c) currency with the public
d) time deposits with banks
Answer »Answer: (b)
Question : 2
Which of the following Banks is the Central Bank of India?
a) Bank of India
b) Reserve Bank of India
c) Union Bank of India
d) State Bank of India
Answer »Answer: (b)
Question : 3
Which of the following statements are true regarding “Shadow Banking”:
- They by and large raise funds from public deposits
- Their activities are transparent and properly regulated
- IL&FS is an example of a Shadow bank
a) (ii) only
b) (iii) only
c) (i) only
d) (i) & (ii) only
Answer »Answer: (b)
Shadow banking operates outside the regular banking system and financial intermediation activities are undertaken with less transparency and regulation than conventional banking.
Shadow banks, like conventional banks, undertake various intermediation activities akin to banks, but they are fundamentally distinct from commercial banks in various respects. NBFCs are examples of shadow banks.
The following are differences between normal banks and shadow banks.
- First, unlike commercial banks, which by dint of being depository institutions can create money, shadow banks cannot create money.
- Second, unlike the banks, which are comprehensively and tightly regulated, the regulation of shadow banks is not that extensive and their business operations lack transparency.
- Third, while commercial banks, by and large, derive funds through the mobilization of public deposits, shadow banks raise funds, by and large, through market-based instruments such as commercial paper, debentures, or other structured credit instruments.
- Fourth, the liabilities of the shadow banks are not insured, while commercial banks’ deposits, in general, enjoy Government guarantees to a limited extent.
- Fifth, in times of distress, unlike banks, which have direct access to central bank liquidity, shadow banks do not have such recourse.
Question : 4
Which one of the following Public Sector Bank’s emblem figures a dog and the words ‘faithful friendly, in it?
a) Punjab National Bank
b) Oriental Bank of Commerce
c) Syndicate Bank
d) State Bank of India
Answer »Answer: (c)
Syndicate Bank. The symbol of dog implies that Bank is trustworthy and a friend. Its slogan is : Your faithful and friendly financial partner.
Question : 5
Which of the following statements are true regarding Foreign Portfolio Investors (FPIs):
- They fund India’s Current Account Deficit (CAD)
- They help in achieving governments disinvestment target
- They are liable to pay capital gain tax in India
a) (ii) & (iii) only
b) (iii) only
c) (i) only
d) All of the above
Answer »Answer: (d)
FPI comes under capital account in Balance of Payment but they bring dollars/foreign currencies and this dollar is used to finance/fund if we have a deficit in the current account.
When the government is listing a PSU on the stock exchange for disinvestment, then FPIs can also purchase the PSU’s shares in the primary market. So, FPIs help in the government’s disinvestment plan.
FPI’s pay tax on the earnings they derive from a gain in shares/bonds prices called capital gain tax.
Question : 6
Consider the following statements:
- As per the Banking Regulation Act 1949, RBI, in the public interest, can supersede the management of a banking company.
- As per the RBI Act 1934, RBI, in the public interest can supersede the management of a non-banking financial company
a) (ii) only
b) Both (i) & (ii)
c) (i) only
d) Neither (i) nor (ii)
Answer »Answer: (b)
As per the Banking Regulation Act 1949 (Section 36), RBI, in the public interest, can supersede the Board of Directors (management) of a banking company. This is generally done if there is mismanagement in the bank or it is on the verge of default.
As per RBI Act 1934, RBI, in the public interest, can supersede the Board of Directors (management) of a non-banking financial company. (RBI can supersede a bank’s board through Banking Regulation Act 1949, but NBFCs are not covered in that Act.
So, an amendment was done to RBI Act 1934 in July 2019, to allow RBI to supersede the board of NBFCs, in the wake of the crisis faced by various NBFCs like DHFL, IL&FS etc.)
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