money supply, banking & financial institutions section 4 Practice Questions Answers Test with Solutions & More Shortcuts

Answer: (b)

The reasons for deflation in the economy are:

1. When the Government withdraws money from circulation.
2. When Government imposes heavy direct taxes or takes heavy loans from the public (voluntary or compulsory or both).
3. When the Central Bank sells the securities in the open market (which reduces the quantity of money in circulation).
4. When Central Bank controls the credit money and adopts various measures such as an increase in CRR, credit rationing and direct action.
5. When the Central Bank increases the Bank rate (which curtails the quantity of credit in the economy).
6. When a state of over-production (excess supply over demand) takes place.

Answer: (d)

Capital market deals with long-term finance (more than 365 days) funds. It includes all facilities and institutional arrangements available for borrowing and lending of term funds (including medium-term).

The difference between the money market and capital market is not so much in the institutions involved as in their term of borrowing or lending. Long-term funds are raised either by borrowing from certain institutions or by issuing securities.

Answer: (c)

Answer: (a)

National Centre for Financial Education (NCFE) is a Section 8 (Not for Profit) Company promoted (owned) by the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority of India (IRDAI) and Pension Fund Regulatory and Development Authority (PFRDA).

Indian Financial Technology & Allied Services (IFTAS) is a wholly-owned subsidiary of the Reserve Bank of India, mandated to design, deploy & support IT-related services to the Reserve Bank of India, and all Banks and Financial Institutions in the country.

Answer: (b)

Recent changes: National Housing Bank was a wholly-owned (100%) subsidiary of RBI. But in 2019, Govt. of India took over the entire stake of NHB from RBI.

Housing finance companies (HFCs) are a category of NBFCs and till recently, HFCs were regulated by National Housing Bank (NHB). But this was changed in 2019 and now HFCs have come under the direct regulation of RBI.

This may have been done because of the bankruptcy issues going on in various housing finance companies like DHFL. Even if housing finance companies (HFCs) were a category of NBFCs, in the news the newspapers always mentioned NBFC and HFC separately.

The reason being NBFCs were regulated by RBI and HFC by National Housing Bank (which was regulated by RBI).