money supply, banking & financial institutions section 11 MCQ Questions & Answers Detailed Explanation

Answer: (b)

Answer: (c)

Land development banks started financing long term loans for more significant rural development activities like rural and cottage industries, rural artisans etc.

The main purpose of RRBs is to mobilize financial resources from rural / semi-urban areas and grant loans and advances mostly to small and marginal farmers, agricultural labourers and rural artisans.

Answer: (c)

Capital Adequacy Ratio (CAR) is the ratio of a bank’s capital to its risk-weighted asset ratio. A bank’s capital consists of Tier1 (share) and Tier2 (bonds) capital.

The bank has to maintain this capital so that, if there are defaults then the bank should be able to sustain. RBI mandates how much CAR has to be maintained by banks.

Answer: (c)

Answer: (b)

Directorate of Enforcement is a specialized financial investigation agency under the Department of Revenue, Ministry of Finance, Government of India, which enforces the following laws: -

Foreign Exchange Management Act,1999 (FEMA) - A Civil Law, with officers empowered to conduct investigations into suspected contraventions of the Foreign Exchange Laws and Regulations, adjudicate and impose penalties on those adjudged to have contravened the law.

Prevention of Money Laundering Act, 2002 (PMLA) - A Criminal Law, with the officers empowered to conduct investigations to trace assets derived out of the proceeds of crime, to provisionally attach/ confiscate the same, and to arrest and prosecute the offenders found to be involved in Money Laundering.

Answer: (c)

FDI FPI/FII 1 It is only in equity/shares/ownership It is both in equity and debt (loan) 2 It is through primary market Generally, through the secondary market but can happen through primary market 3 Generally new shares are issued and the new capital (money) comes to the company through which the company invests in the new factory, machines etc.

Generally, only the owners change hands and new capital does not come to the company 4 The foreign investors purchase large shareholding and appoints Board of Directors and get involved in the decision making (active management) of the company Foreign investors generally purchase small shareholdings and do not get involved in the management of the company 5 Foreign investors try to make the company profitable through their decision making and target the profit of the company Foreign investors target the share price of the company and derive their gain from rising of share prices 6 It is sector-specific.

For example, a steel company in the US will invest only in a steel company in India and try to make that company profitable through their management and decision making and get a share of the profit It is in the general capital market.

For example, a foreign investor is not particular about any company/ sector in India and is willing to invest in any company which gives a chance of share price appreciation 7 It is a long-term investment as to turn the company profitable, the foreign investor needs to get invested for a long time.

It is generally short-term investment 8 Generally, the government specify a lock-in period and during this period the foreign investor cannot sell his investment and hence it is quite stable There is no lock-in period and the foreign investor can return any time by selling his investment. This makes the currency volatile