banking, security market & insurance section 3 Practice Questions Answers Test with Solutions & More Shortcuts

Question : 1

Consider the following statements in regard to devaluation and depreciation of a currency:

  1. Devaluation is an activity conducted by central government whereas depreciation happens due to market forces.
  2. In both the devaluation and depreciation currency loses value against other currencies in a floating currency exchange market.
Which of the statements given above is/are correct?

a) Both 1 and 2

b) 2 only

c) 1 only

d) Neither 1 nor 2

Answer: (c)

Devaluation happens in countries with a fixed exchange rate. In a fixed-rate economy, the government decides what its currency should be worth compared with that of other countries.

The exchange rate can change only when the government decides to change it. If a government decides to make its currency less valuable, the change is called devaluation. Depreciation happens in countries with a floating exchange rate.

A floating exchange rate means that the global investment market determines the value of a country’s currency.

Question : 2 [UP-PCS 2009]

Non - performing assets in commercial banks means

a) loans in which interest or principal amount is not recovered.

b) capital assets not in use.

c) bank deposits which are not invested.

d) low - interest rate loans.

Answer: (a)

According to Indian Reserve Bank. Non performing assets in commercial bank means the loans in which interest or principal amount is not recovered.

Question : 3

Consider the following statements :

  1. Fiat money is a term used for Gold coins
  2. Currency Deposit Ratio is the proportion of the total deposits commercial banks keep as reserves.
Which of the above statements is/are correct?

a) Both 1 and 2

b) 2 only

c) 1 only

d) Neither 1 nor 2

Answer: (d)

Currency notes and coins are called fiat money. They don’t have intrinsic value like a gold or silver coin. The currency-deposit ratio measures the relationship between the cash people have on hand and what they have in their accounts.

Question : 4 [BOM-PO 2016]

In case of Small Finance Banks (SFB), the loan size and investment limit exposure to single

a) 15 per cent of capital funds

b) 10 per cent of capital funds

c) 15 per cent of total advances

d) 10 per cent of total advances

Answer: (b)

The maximum loan size and investment limit exposure to a single and group obligor would be restricted to 10 per cent and 15 per cent of its capital funds, respectively.

Question : 5 [BOM-PO 2016]

The last six characters of the alphanumeric IFSC printed on the cheque helps in identifying the

a) Bank name

b) Type of account

c) Bank branch

d) Business or profession

Answer: (c)

The IFSC is an 11-character code with the first four alphabetic characters representing the bank name, and the last six characters (usually numeric, but can be alphabetic) representing the branch.

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