money supply, banking & financial institutions section 10 MCQ Questions & Answers Detailed Explanation
MOST IMPORTANT indian economy mcq - 12 EXERCISES
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The following question based on Money Supply, Banking and Financial Institutions topic of indian economy mcq
- It was a fixed-term repo operation
- It was done at above the repo rate
- RBI did not conduct an auction to select the bank for this operation
(a) (i) & (iii) only
(b) (ii) & (iii) only
(c) (i) only
(d) None of the above
The correct answers to the above question in:
Answer: (c)
On 6th Feb 2020 monetary policy review meeting, RBI decided to conduct a long term repo operation at a fixed rate of “repo rate” i.e. 5.15% worth Rs. 1 lakh crore (at that time repo rate was 5.15%).
Since it was done at a fixed rate, so the auction was not required but a lot of banks wanted money at the repo rate, so RBI had to do an auction to select the bank which will get money from RBI at the repo rate.
As all banks combined together, during the auction, quoted much more than Rs. 1 lakh crore, so proportionally it was given to banks depending on which bank bid for how much amount during the auction.
LTRO auctions were conducted on the electronic platform called the E-Kuber, the Core Banking Solution (CBS) platform of RBI.
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Read more money and supply banking financial institutions Based Indian Economy Questions and Answers
Question : 1
Match List-I with List-II and select the correct answer using the codes given below the lists.
List I | List II |
a. 1994 | 1. Export-Import Bank of India |
b. 1964 | 2. Industrial Development Bank of India |
c. 1982 | 3. Industrial Credit and Investment Corporation of India |
d. 1987 | 4. Board of Industrial and Financial Reconstruction |
a) 2 3 1 4
b) 4 1 2 3
c) 3 2 1 4
d) 1 2 3 4
Answer »Answer: (c)
Question : 2
Reserve money of the commercial banks includes which of the following:
- All deposits of Public
- Government securities held by banks
- Cash held by banks in their vaults
- Money deposited with RBI
a) (ii), (iii) & (iv) only
b) (iv) only
c) (ii) & (iii) only
d) All of the above
Answer »Answer: (a)
When people deposit money in banks (public deposits), then banks keep only a certain portion with them and the rest they lend. Whatever they keep with themselves is considered as reserves.
The portion that they keep as reserves can be in the form of cash or gold or they can purchase government securities (bonds) or they can also deposit with RBI.
So only (ii), (iii) & (iv) statements are true.
Question : 3
FEMA (Foreign Exchange Management Act) was finally implemented in the year
a) 1997
b) 2007
c) 2000
d) 1991
Answer »Answer: (c)
Question : 4
The Scheduled Commercial Banks (SCB) are required to maintain CRR with RBI as per which act:
a) The Banking Regulation Act 1949
b) Securities Contract (Regulation) 1956
c) Reserve Bank of India Act 1934
d) None of the above
Answer »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.
Question : 5
Consider the following statements regarding the ‘Supervisory Action Framework’:
- It is applicable for UrbanCooperative banks
- It can be initiated in case of serious governance issues
a) (ii) only
b) Both (i) & (ii)
c) (i) only
d) Neither (i) nor (ii)
Answer »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.
Question : 6
Credit creation power of the commercial banks gets limited by which of the following?
a) Cash reserve ratio
b) All of the above
c) Credit policy of the central bank
d) Banking habits of the people
Answer »Answer: (b)
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