money supply, banking & financial institutions section 6 MCQ Questions & Answers Detailed Explanation

Answer: (a)

Answer: (d)

VAT is the State Subject.

Answer: (a)

Deficit financing, practice in which a government spends more money than it receives as revenue, the difference being made up by borrowing or minting new funds.

Although budget deficits may occur for numerous reasons, the term usually refers to a conscious attempt to stimulate the economy by lowering tax rates or increasing government expenditures. The influence of government deficits upon a national economy may be very great.

It is widely believed that a budget balanced over the span of a business cycle should replace the old ideal of an annually balanced budget. Some economists have abandoned the balanced budget concept entirely, considering it inadequate as a criterion of public policy.

Answer: (a)

Answer: (b)

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 was enacted to regulate securitisation and reconstruction of financial assets and enforcement of security interests.

The act allows banks and financial institutions to sell the security in case the debt/ loan is secured and it has become non-performing.

The provisions have enabled banks and financial institutions to improve recovery by exercising powers to take possession of securities (without moving to court), sell them and reduce nonperforming assets by adopting measures for recovery or reconstruction.

Answer: (b)

As announced in July 2019 budget presentation, Govt. on 10.08.2019 launched a Partial Credit Guarantee offered by the Government of India (GoI) to Public Sector Banks (PSBs) for purchasing high-rated pooled assets from financially sound Non-Banking Financial Companies (NBFCs)/Housing Finance Companies (HFCs)".

Under the above scheme, Public Sector Banks can purchase the loan papers of NBFCs (only through the Direct Assignment route and not through securitisation) to provide liquidity to NBFCs and manage their asset-liability mismatch issue. Central govt. will provide partial credit guarantee on these assets

i.e. if in future these loan papers turn NPA, then Govt. of India will pay to Public Sector Banks. But there are restrictions on what kind of loan papers of NBFCs can be purchased by PSU banks and only high rated loans is allowed up to Rs. 1 lakh crore by February 2020.