money supply, banking & financial institutions section 11 Practice Questions Answers Test with Solutions & More Shortcuts

Answer: (c)

Land development banks started financing long term loans for more significant rural development activities like rural and cottage industries, rural artisans etc.

The main purpose of RRBs is to mobilize financial resources from rural / semi-urban areas and grant loans and advances mostly to small and marginal farmers, agricultural labourers and rural artisans.

Answer: (c)

Capital Adequacy Ratio (CAR) is the ratio of a bank’s capital to its risk-weighted asset ratio. A bank’s capital consists of Tier1 (share) and Tier2 (bonds) capital.

The bank has to maintain this capital so that, if there are defaults then the bank should be able to sustain. RBI mandates how much CAR has to be maintained by banks.

Answer: (d)

MUDRA would be responsible for refinancing all Last Mile Financiers such as

1. NonBanking Finance Companies,
2. Societies,
3. Trusts,
4. Companies,
5. Co-operative Societies,
6. Small Banks,
7. Scheduled Commercial Banks and
8. Regional Rural Banks

Which are in the business of lending to micro/small business entities engaged in manufacturing, trading and services activities (not for agriculture).

Refinancing means MUDRA loans will be available through Banks/NBFCs/MFIs and not directly from MUDRA Bank.

MUDRA loans are available in three categories. For a small business, loans up to 50000/- is available under the ‘Shishu’ category, beyond 50,000 and up to 5 lakhs under the ‘Kishor’ category and between 5 lakhs to 10 lakhs under the 'Tarun' category.

These products have been designed to cater to customers operating at the lower end of the enterprise spectrum i.e. informal/unorganized sector.

Answer: (a)

Answer: (d)

Reserve Bank of India invests the reserves in the following types of instruments:

1. Deposits with Bank for International Settlements
2. Deposits with other central banks
3. Deposits with foreign commercial banks
4. Debt instruments representing sovereign or sovereign-guaranteed liability
5. Other instruments/institutions as approved by the Central Board of RBI