money supply, banking & financial institutions section 12 MCQ Questions & Answers Detailed Explanation

Answer: (c)

Committee of Creditors (CoC) consists of only financial creditors (like banks, NBFCs etc.). But the proceeds/money from the resolution process is shared by the financial and operational creditors boht.

Only CoC will decide how the resolution proceeds will be shared among financial and operational creditors and NCLT will not have any say.

NCLT cannot interfere in the merits of the commercial decision taken by the CoC but a “limited judicial review” was possible to see that the CoC had taken into account, inter alia, the fact that the interest of all stakeholders, including operational creditors, had been taken care of.

Answer: (d)

Whenever something is surplus, its value decreases. So, when there is surplus liquidity (money) in the economy, the value of money decreases, which means money is available at a cheaper rate

i.e. lesser interest rate. And since the value of money (Rupee) has decreased, it also means that the same amount of rupee will be able to purchase fewer dollars i.e. rupee will depreciate. And it also means that purchasing power of rupees will decrease.

When the interest rate comes down in the economy then if you will purchase bonds then your return/yield will also be less.

This you can also determine as, when the interest rate comes down in the economy, the bond prices go up and return/yield comes down.

Answer: (d)

Commercial Paper (CP) is an unsecured money market debt instrument issued in the form of a promissory note for less than one year.

NBFCs and high rated companies also are allowed to issue commercial papers to raise short term money.

Answer: (d)

When inflation in the economy is low, people expenses decrease and they are able to save more.

When per capital income increases it leads to higher savings in the economy.

The growth of financial intermediaries means financial institutions like banks. An increase in banks in the economy leads to increased saving behaviour.

So, all the statements are true.

Answer: (d)

Answer: (d)

A tight monetary policy is a course of action undertaken by the Central bank to constrict spending in an economy, or to curb inflation when it is rising too fast.

The increased bank rate increases the cost of borrowing and effectively reduces its attractiveness.