money supply, banking & financial institutions section 2 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
- 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
The correct answers to the above question in:
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.
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Read more money and supply banking financial institutions Based Indian Economy Questions and Answers
Question : 1
Paper currency was first started in India in
a) 1542
b) 1880
c) 1601
d) 1861
Answer »Answer: (d)
Question : 2
A proportion of total deposits and reserves of the commercial banks deposited with the Reserve Bank of India is called
a) Bank Guarantee
b) Cash Reserve Ratio
c) Caution Money
d) Balance of payment
Answer »Answer: (b)
Question : 3
Consider the following statements:
- RBI is a wholly owned subsidiary of Govt. of India
- RBI’s surplus transfer to the central government has steadily decreased in the last 5 years
a) (ii) only
b) Both (i) & (ii)
c) (i) only
d) Neither (i) nor (ii)
Answer »Answer: (c)
RBI is 100% owned by govt. of India but its surplus transfer to govt has fluctuated in the previous years.
Refer the Trends
Question : 4
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 : 5
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 : 6
In which year did the Government of India Nationalised 14 major private banks?
a) 1970
b) 1965
c) 1969
d) 1968
Answer »Answer: (c)
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