money supply, banking & financial institutions section 9 MCQ Questions & Answers Detailed Explanation

Answer: (b)

ATMs set up, owned and operated by non-banks are called WLAs. Non-bank ATM operators are authorised under the Payment & Settlement Systems Act, 2007 by the Reserve Bank of India (RBI).

The rationale to allow non-bank entities to set up WLAs has been to increase the geographical spread of ATMs for increased/enhanced customer service, especially in semi-urban / rural areas.

In case of Brown Label ATMs, the service providers own the hardware of the ATM machines. The responsibility of identifying ATM site, lease agreement with the landlord, power supply to ATM kiosk lies with the service provider.

Thus, the service provider takes the responsibility of maintenance of the ATM whereas the sponsor bank takes the responsibility of cash management and provide connectivity to ATM to the banking network.

Logo of sponsor bank is displayed on brown label ATM kiosk premises. Brown Label ATMs are the most cost-effective solution for banks. Unlike Brown Label ATMs, White Label ATMs will not display the logo of any bank like SBI, CANARA BANK, PNB ETC.

Logo of White Label ATM operator like Tata Indicash, Muthoot Finance etc.

Answer: (a)

Answer: (c)

RBI intervenes in the forex market to contain volatility in the exchange rate of the Rupee with respect to the dollar. There is no targeted band in which RBI tries to keep the Rupee-Dollar exchange rate.

For example, if the Rupee starts depreciating slowly over a period of time and it moves to $1 = Rs 85, then RBI may not intervene in the forex market.

Answer: (d)

One of the most famous axioms in economics is “bad money drives out good.” This rule has generally been attributed to Sir Thomas Gresham (1519–1579), an English financier who advised King Edward VI and Queen Elizabeth I with regard to financial matters, and it is popularly known as Gresham’s Law.

The key prerequisite is that there must be two forms of money or currency (with the same face value) in circulation simultaneously.

The acceptance of both currencies at the same face value is required by legal tender laws enacted by the government. One of the currencies is artificially overvalued, and the other currency is artificially undervalued.

In such situations, the bad money (the artificially overvalued one) tends to drive the good money (the artificially undervalued one) out of circulation. In other words, people spend the bad money and hoard the good money.

Answer: (c)

Answer: (b)

Government has accepted the international practice regarding the definitions of FDI and FPI. Where the investor's stake is 10 per cent or less in a company it will be treated as FPI and, where an investor has a stake of more than 10 per cent, it will be treated as FDI.

A single foreign portfolio investor can invest a maximum of up to 10 per cent in an Indian company and all FPIs on an aggregate basis can maximum invest up to 24% or the sectoral cap/ statutory ceiling as applicable for that sector under foreign investment.

Government now specifies composite cap/ceiling for foreign investors (rather than separate limits for FDI and FPI) in various sectors under which all kinds of foreign investments are allowed.

Foreign Investment in an unlisted company irrespective of threshold limit may be treated as FDI. An investor may be allowed to invest below the 10 per cent threshold and this can be treated as FDI subject to the condition that the FDI stake is raised to 10 per cent or beyond within one year from the date of the first purchase. The obligation to do so will fall on the company.

If the stake is not raised to 10% or above, then the investment shall be treated as portfolio investment. In case an existing FDI falls to a level below 10 per cent, it can continue to be treated as FDI, without an obligation to restore it to 10% or more.

In a particular company, an investor can hold the investments either under the FPI route or under the FDI route, but not both.