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

Answer: (d)

[The Government of India has the sole right to mint coins. The responsibility for coinage vests with the Government of India in terms of the Coinage Act, 1906.

The designing and minting of coins in various denominations is also the responsibility of the Government of India. Coins are minted at the India Government Mints at Mumbai, Alipore (Kolkata), Saifabad (Hyderabad), Cherlapally (Hyderabad) and NOIDA (UP).

The coins are issued for circulation only through the Reserve Bank in terms of the RBI Act. Coins can be issued up to the denomination of Rs.1000 as per the Coinage Act, 1906.

The RBI shall issue rupee coins on demand and the Govt. of India shall supply/mint such coins to the RBI on demand.

Answer: (a)

Answer: (b)

Cryptocurrencies are not legal tender but as such, there is no blanket ban on trading in cryptocurrencies.

There is a draft bill "Banning of Cryptocurrency and Regulation of Official Digital Currency Bill 2019", as per which holding, selling or dealing in cryptocurrencies such as Bitcoin could soon land you in jail for 10 years. But till now it is just in the draft stage and has not become an act.

Cryptocurrencies acquire value as they can be generated/mined only in limited numbers and if more and more people would like to hold/possess it, its value increases.

In a circular in April 2018, RBI had imposed a virtual ban on cryptocurrency trading in India and had directed all entities which fall under the purview of (regulated by) RBI to not deal in virtual currencies or provide services to those who want to deal in it.

In March 2020 the Supreme court has set aside (quashed) the order, allowing trade in digital assets.

Answer: (d)

Answer: (b)

RBI, under its supervisory framework, uses various measures/tools to maintain the sound financial health of banks. Prompt Correction Action (PCA) framework is one of such supervisory tools under which RBI has specified certain regulatory trigger points in terms of three parameters,

i.e. capital to risk-weighted assets ratio (CRAR), net non-performing assets (NPA) and Return on Assets (RoA), for initiation of certain structured and discretionary actions in respect of banks hitting such trigger points. It involves monitoring certain performance indicators of the banks as an early warning exercise and is initiated once such thresholds are breached.

Its objective is to facilitate the banks to take corrective measures including those prescribed by the Reserve Bank, in a timely manner, in order to restore their financial health.

The framework also provides an opportunity for the Reserve Bank to pay focused attention to such banks by engaging with the management more closely in those areas. The PCA framework is, thus, intended to encourage banks to eschew certain riskier activities and focus on conserving capital so that their balance sheets can become stronger.

The RBI has clarified that the PCA framework is not intended to constrain normal operations of the banks for the general public like lending and depositing. But in extreme cases, RBI can put restrictions on lending activity also.

The PCA framework is applicable only to commercial banks and not extended to co-operative banks and non-banking financial companies (NBFCs).

Answer: (d)

Reserve Bank of India invests the reserves in the following types of instruments:

1. Deposits with Bank for International Settlements
2. Deposits with other central banks
3. Deposits with foreign commercial banks
4. Debt instruments representing sovereign or sovereign-guaranteed liability
5. Other instruments/institutions as approved by the Central Board of RBI