money supply, banking & financial institutions section 10 MCQ Questions & Answers Detailed Explanation

Answer: (c)

As per "The Deposit Insurance and Credit Guarantee Corporation (DICGC) Act 1961", DICGC must register all commercial banks (scheduled and non-scheduled both) and Urban Cooperative Banks (UCB) and State and District Central Cooperative Banks (StCB/DCCB) as an insured bank. (StCB/DCCB are rural cooperative banks)

And every insured bank is liable to pay a premium to DICGC as may be notified by DICGC after the approval of RBI. But the premium shall not exceed fifteen paise per annum for every hundred rupees of the total amount of the deposits in that bank.

This means the premium has been capped under the DICGC Act. As per the rules, the premium cost is required to be borne by the bank themselves and cannot be passed on to depositors.

Since the insurance cover has been increased from the present Rs. 1 lakh per depositor per bank to Rs. 5 lakh per depositor per bank, the insurance premium has also been increased from presently 10 paise per Rs. 100 of deposit to 12 paise per Rs. 100 of deposit.

Deposits of foreign governments, deposits of central and state governments, and interbank deposits are not covered/insured.

Answer: (b)

Answer: (a)

‘e-banking’ stands for electronic banking which involves the use of computers to carry out banking transactions such as withdrawals through cash dispensers or transfer of funds at point of sale. It is also known as online or interne banking.

Answer: (c)

Micro Units Development and Refinance Agency Bank (or MUDRA Bank)is a new institution set up by the Government of India to provide funding to the non-corporate small business sector.

It will provide its services to small entrepreneurs outside the service area of regular banks, by using last mile agents.

Answer: (c)

Taxes on Agricultural income and Taxes on consumption/sale of electricity are levied by the State Governments.

Answer: (c)

When the US Federal Bank increases the interest rate, then the foreign investors sell their investments in India (mostly debt instruments) and move to US. In the process they convert the Rupee into dollars in the forex market and the demand for dollar increases and rupee depreciates.

Money supply in the Indian economy will decrease in this case because foreign investors are selling their investments and taking money out of India.