banking, security market & insurance section 1 Practice Questions Answers Test with Solutions & More Shortcuts

Question : 1

In the context of Indian economy; which of the following is/are the purpose/purposes of ‘Statutory Reserve Requirements’?

  1. To enable the Central Bank to control the amount of advances the banks can create
  2. To make the people’s deposits with banks safe and liquid
  3. To prevent the commercial banks from making excessive profits
  4. To force the banks to have sufficient vault cash to meet their day-to-day requirements
Select the correct answer using the code given below.

a) 2 and 3 only

b) 1 and 2 only

c) 1 only

d) 1, 2, 3 and 4

Answer: (b)

Because Reserve requirements are designed as “precautionary measures” and not to stop banks from “excessive” profit.

Question : 2 [IAS 2017]

What is the purpose of setting up Small Finance Banks (SFBs) in India?

  1. To supply credit to small business units
  2. To supply credit to small and marginal farmers
  3. To encourage young entrepreneurs to set up businesses particularly in rural areas.
Select the correct answer using the code given below:

a) 1 and 3 only

b) 2 and 3 only

c) 1 and 2 only

d) 1, 2 and 3

Answer: (c)

While directly or indirectly all three will be encouraged because of Small Finance banks. But when RBI invited applications, the specific purpose were 1 and 2 only.

Question : 3 [IAS 2017]

Which of the following is a most likely consequence of implementing the ‘Unified Payments Interface (UPI)’?

a) FDI inflows will drastically increase.

b) Digital currency will totally replace the physical currency in about two decades.

c) Mobile wallets will not be necessary for online payments.

d) Direct transfer of subsidies to poor people will become very effective.

Answer: (c)

“A” is the most appropriate choice. Mobile wallets will not be necessary, because your mobile number is directly linked with the bank account using bank’s ‘customized app’ which is built on the UPI platform.

Question : 4

Which of the following statements is/are correct in regard to ‘microfinance’?

  1. Micro-credit extended by banks to individual is reckoned as a part of their priority sector lending.
  2. RBI has prescribed a particular model the banks to provide microfinance.
Choose the correct answer using the codes given below:

a) Both 1 and 2

b) 2 only

c) 1 only

d) Neither 1 nor 2

Answer: (c)

Micro-credit extended by banks to individuals is reckoned as a part of their priority sector lending and no particular model has been prescribed for micro-finance and banks have been extended freedom to formulate their own models.

Question : 5

Which of the following grants/grant direct credit assistance to rural households ?

  1. Regional Rural Banks
  2. National Bank for Agriculture and Rural Development
  3. Land Development Banks
Select the correct answer using the codes given below :

a) 1 and 3 only

b) 2 only

c) 1 and 2 only

d) 1, 2 and 3 only

Answer: (a)

NABARD doesn’t give “direct” credit assistance. It provides credit via intermediaries such as micro finance companies, cooperative society, RRB. Therefore, 2 is false.

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