money supply, banking & financial institutions section 7 MCQ Questions & Answers Detailed Explanation

Answer: (d)

A Sovereign Wealth Fund (SWF) is a State (Government) owned investment fund or entity that is commonly established from export surpluses, fiscal surpluses, proceeds from privatization etc.

Countries generally create SWFs to diversify their revenue streams to protect and stabilize the budget and economy from excess volatility. For ex., UAE relies on oil exports for its wealth.

Hence, it devotes a portion of its reserves to an SWF that invests in diversified assets that can act as a shield against oil-related risks (when oil prices plunge, govt’s budgetary resources/taxes decline, and SWFs act as a buffer).

SWFs typically invest in multiple asset classes including publicly listed shares, fixed income, private equity, private debt, real estate, infrastructure etc.

Answer: (b)

Disinflation is when inflation is decreasing but prices are still increasing.

So, in an economy when inflation decreases, the demand for goods and services increases and people spending increases and it supports business activity resulting in a decrease in unemployment.

So, all the statements are wrong.

Answer: (b)

Mergers and Acquisitions of commercial banks require the approval of the Competition Commission of India (CCI) and the Reserve Bank of India (RBI) both.

CCI is the "Fair Trade Regulator".

CCI looks into the competition part of such dealings and RBI looks into the prudential aspects. The RBI is the sector regulator, so the health of banks is its concern. The CCI’s concern is their behaviour in the market and the consumers in the market,”

If any merger/amalgamation/acquisition is happening and after the merger/amalgamation/acquisition the combined asset value is more than Rs. 1000 crore or Turnover (sales in a year) is more than Rs 3000 crore then they are required to take the approval of the Competition Commission of India (CCI) under the Competition Commission of India Act 2002.

But as per section 54 of the CCI Act, the Central government may be exempt from the application of the CCI Act, any class of enterprises, if such exemption is necessary for the interest of the security of the State or public interest.

So, when SBI and its associates got merged, the Central government had waived the approval of CCI. When SBI was acquiring a 49% stake in Yes Bank the also central government waived off the CCI approval.

A merger is a process wherein two or more companies/entities are combined together to form either a new company or an existing company absorbing the other target companies.

Basically, it’s a process to consolidate multiple businesses into one business entity.

Amalgamation is a type of merger process in which two or more companies combine their businesses to form an entirely new entity/company.

An acquisition is when one company purchases most or all of another company's shares to gain control of that company.

Consolidation is a general term that means the action or process of combining a number of things into a single more effective or coherent whole. So, mergers, amalgamation and acquisitions all will come under consolidation.

Answer: (a)

The terms ‘bull’ and ‘bear’ describe upward and downward trends respectively of the stock market.

A bear market refers to a decline in prices, usually for a period of a few months, in a single security or asset, group of securities or the securities market as a whole.

A bull market is when prices are rising.

Answer: (c)

Answer: (b)

The Gross Non-Performing Advances ratio of Scheduled Commercial Banks has remained unchanged at 9.3 per cent between March and September 2019 and increased slightly for the Non-Banking Financial Corporations from 6.1 per cent to 6.3 per cent.

The capital to Risk-weighted Asset ratio (Capital adequacy ratio) of Scheduled Commercial Banks increased from 14.3 per cent to 15.1 per cent between March 2019 and September 2019.