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

Answer: (b)

Answer: (b)

Since a lot of urban-cooperative banks (UCBs) were also facing issues, RBI has brought in the “Supervisory Action Framework” (SAF) for UCBs in place of PCA for commercial banks. The three parameters (NPA level, Return on Assets

i.e. profit and Capital Adequacy Ratio), based on which PCA is invoked, SAF is also invoked based on three similar parameters (NPA level, two consecutive years loss and capital adequacy ratio), but the level may be different at which SAF is triggered.

SAF in UCB can also be initiated in case of serious governance issues. Once a UCB has been put under SAF, various restrictions on dividends, donations, new loans, capital expenditure etc. can be imposed, which are again similar to PCA restrictions.

Answer: (c)

As per Section 42 of the RBI Act 1934, every Scheduled (included in the second schedule of RBI Act 1934, whether commercial or cooperative) bank need to maintain CRR with RBI.

Answer: (c)

When inflation becomes very high, the RBI decreases supply of money (to check inflation) by adopting light monetary policy.

Answer: (b)

Answer: (d)

With a view to improving the Governance of Public Sector Banks (PSBs), the GoI appointed an autonomous Banks Board Bureau (BBB) which started functioning from 1st April 2016. The Board has three ex-officio members and three expert members in addition to a Chairman. The following are the functions of the BBB

It will be responsible for the selection and appointment of Board of Directors in PSBs and Financial Institutions (FIs) It will advise the Government on matters relating to appointments, confirmation or extension of tenure and termination of services of the Board of Directors

It will help banks to develop a robust leadership succession plan for critical positions

It will build a data bank containing data relating to the performance of PSBs/FIs and their officers It will advise the Government on the formulation and enforcement of a code of conduct and ethics for managerial personal in PSBs/FIs

It will advise the Government on evolving suitable training and developmentØ programmes for management personnel in PSBs/FIs

It will help banks in terms of developing business strategies and capital raising planØ etc.