money supply, banking & financial institutions section 7 Practice Questions Answers Test with Solutions & More Shortcuts

Answer: (d)

Continuing its financial inclusion drives, RBI has announced a “National Strategy for Financial Inclusion (NSFI)” for India 2019-2024.

The NSFI sets forth the vision and key objectives of the financial inclusion policies in India to help expand and sustain the financial inclusion process at the national level through a broad convergence of action involving all the stakeholders in the financial sector.

The strategy aims to provide access to formal financial services in an affordable manner, broadening & deepening financial inclusion and promoting financial literacy & consumer protection.

Following are the strategic objectives/pillars of the National Strategy for Financial Inclusion.

1. Universal Access to Financial Services
2. Effective co-ordination
3. Providing a basic bouquet of financial services
4. Customer protection and grievance redressal
5. Financial literacy and education
6. Access to livelihood and skill development
7. Some of the important milestones under the NSFI are:
8. Banking access to every village within 5-km of the radius or a hamlet of 500 households in hilly areas by March 2020
9. Every adult should have access to the financial service provider through a mobile device by March 2024
10. Every willing and eligible adult, who has been enrolled under the PMJDY, should be enrolled under an insurance scheme (PMJJBY, PMSBY, etc.), and a pension scheme (NPS, APY, etc.) by March 2020
11. Public Credit Registry (PCR) fully operational by March 2020

Answer: (c)

A bank run is a situation that occurs when a large number of bank's customers withdraw their deposits simultaneously due to concerns about the bank's solvency (Solvency is the ability of a company to meet its long-term financial obligations which is essential to staying in business).

As more and more people withdraw their funds, the probability of default increases, thereby prompting more people to withdraw their deposits. In extreme cases, the bank's reserves may not be sufficient to cover the withdrawals. A bank run is typically the result of panic which can ultimately lead to default.

In such a situation, the RBI stands by the commercial banks as a guarantor and extends loans to ensure the solvency of the banks. This function of RBI is also called 'lender of last resort'.

RBI comes to the rescue of a bank as a ‘lender of last resort’ that is solvent (has not gone bankrupt) but faces temporary liquidity/funds problems.

Answer: (c)

Answer: (c)

Answer: (d)

National Housing Bank (NHB) was set up in 1988 under the National Housing Bank Act, 1987. It operates as a principal agency to promote Housing Finance Companies (HFC) both at local and regional levels and to provide financial and other support to such institutions.

NHB is regulated by RBI. Earlier, NHB regulated the activities of HFCs based on regulatory and supervisory authority derived under the NHB Act 1987, but now RBI does it.

It does not extend direct credit at the individual level but extends indirect financial assistance by way of refinancing (i.e. NHB finances those institutions which provide finance to individual borrowers, builders etc.)