money supply, banking & financial institutions section 3 MCQ Questions & Answers Detailed Explanation

Answer: (c)

Foreign Banks and Regional Rural Banks also come under the category of Scheduled Commercial Banks. Now, the banks are free to determine their savings bank deposit interest rate, subject to the following two conditions:

1. Each bank will have to offer a uniform interest rate on savings bank deposits up to ` 1 lakh,irrespective of the amount in the account within this limit.

2. For savings bank deposits over ` 1 lakh, a bank may provide differential rates of interest, if it so chooses. However, there should not be any discrimination from customer to customer on interest rates for similar amount of deposit.

Answer: (a)

Answer: (b)

Brent Crude is a major trading classification of sweet light crude oil that serves as a major benchmark price for purchases of oil worldwide. Brent Crude is extracted from the North Sea and comprises Brent Blend, Forties Blend, Oseberg and Ekofisk crudes.

The Brent Crude oil marker is also known as Brent Blend, London Brent and Brent petroleum. The index represents the average price of trading in the 25 days Brent Blend, the Forties, Oseberg, Ekofisk (BFOE) market in the relevant delivery month as reported and confirmed by the industry media.

Answer: (c)

Cheap money is a loan or credit with a low interest rate, or the setting of low-interest rates by a central bank like the Federal Reserve.

Cheap money is good for borrowers, but bad for investors, who will see the same low-interest rates on investments like savings accounts, money market funds, CDs and bonds.

Cheap money can have detrimental economic consequences as borrowers take on excessive leverage.

Answer: (b)

Those transactions which happen between Indian residents and Foreigners or non-resident Indians (NRIs) are recorded in India’s balance of payment.

In the first statement, an Indian resident is earning income from abroad from a foreign entity and in the second statement also, an Indian family is getting money free from an NRI.

So, both will be recorded in India’s balance of payments under the current account.

Answer: (c)

When the government offers high rates on its own savings scheme then banks are apprehensive of reducing their deposit rates as it will lead to people depositing money in government savings schemes rather than in banks.

When the banks are not able to reduce their deposit rate, they do not reduce the lending rate also as it will squeeze/reduce their profits.

It hinders monetary policy transmission and benefits mostly rich people.

[Ref: Economic Survey 2015-16 Vol-I, Page 96, Small Savings]