money supply, banking & financial institutions section 6 Practice Questions Answers Test with Solutions & More Shortcuts

Answer: (c)

Money supply is money with the public either in cash form or in deposit form (demand and time both) with the bank (and Post offices).

Securities like bonds and shares are tradable instruments and their prices fluctuate and hence are not part of the money supply.

Answer: (b)

As announced in July 2019 budget presentation, Govt. on 10.08.2019 launched a Partial Credit Guarantee offered by the Government of India (GoI) to Public Sector Banks (PSBs) for purchasing high-rated pooled assets from financially sound Non-Banking Financial Companies (NBFCs)/Housing Finance Companies (HFCs)".

Under the above scheme, Public Sector Banks can purchase the loan papers of NBFCs (only through the Direct Assignment route and not through securitisation) to provide liquidity to NBFCs and manage their asset-liability mismatch issue. Central govt. will provide partial credit guarantee on these assets

i.e. if in future these loan papers turn NPA, then Govt. of India will pay to Public Sector Banks. But there are restrictions on what kind of loan papers of NBFCs can be purchased by PSU banks and only high rated loans is allowed up to Rs. 1 lakh crore by February 2020.

Answer: (b)

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 was enacted to regulate securitisation and reconstruction of financial assets and enforcement of security interests.

The act allows banks and financial institutions to sell the security in case the debt/ loan is secured and it has become non-performing.

The provisions have enabled banks and financial institutions to improve recovery by exercising powers to take possession of securities (without moving to court), sell them and reduce nonperforming assets by adopting measures for recovery or reconstruction.

Answer: (a)

Answer: (a)