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

Answer: (d)

Answer: (c)

Recently RBI included HDFC Bank under the list of DSIB, while SBI and ICICI were already in the list.

Answer: (c)

Government is planning a bank recapitalization program under which it will issue bonds of Rs. 80,000 crore in FY 2017-18.

This recapitalization programme has been integrated with an ambitious reform agenda, under the rubric of an "Enhanced Access and Service Excellence (EASE)" programme and the six pillars to achieve this include

1. Customer responsiveness,
2. Responsible banking,
3. Credit offtake,
4. PSBs as Udyami Mitra,
5. Deepening financial inclusion, and
6. Digitalisation and developing personnel.

Answer: (b)

“In terms of Section 42(1) of the RBI Act, 1934 the Reserve Bank, having regard to the needs of securing the monetary stability in the country, prescribes the CRR for Scheduled Commercial Banks (SCBs) without any floor or ceiling rate”.

The other purpose of CRR is to manage liquidity (RBI can increase CRR to decrease liquidity in the economy) and it also ensures that a part of the bank’s deposit is with the Central Bank and is hence, safe.

As a depositor, the CRR and SLR requirements together ensure that some portion of the deposits with Indian banks remain secure, even if banks make poor lending decisions.

In absence of the CRR and SLR requirements, to make more profits banks may lend most of the deposits and if there is a sudden rush to withdraw, banks will struggle to meet the repayments to the depositors. The maximum limit for SLR is 40%.

Answer: (a)

Currencies and coins are fiat money because they derive their value from government "fiat"/ order. If the coin is melted then it will not fetch the same value in the market and the paper of which the currency note is made does not have any value in the market.

Hence, Currency notes and coins are called fiat money and they do not have intrinsic value.

They are also called legal tenders as they cannot be refused by any citizen of the country for settlement of any kind of transaction. Cheques were drawn on savings or current accounts, however, can be refused by anyone as a mode of payment. Hence cheques are not legal tenders.

So only (i) & (iii) statements are true.

Answer: (a)