money supply, banking & financial institutions section 11 Practice Questions Answers Test with Solutions & More Shortcuts
Money Supply, Banking and Financial Institutions PRACTICE TEST [12 - EXERCISES]
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money supply, banking & financial institutions section 11
money supply, banking & financial institutions section 12
Question : 16
Which of the following statements are true regarding the "Prompt Corrective Action (PCA)" framework:
- It is applicable to banks and non-banking financial companies (NBFCs)
- The institutions under PCA may cease to lend
- It is a supervisory tool of RBI for banks
- It applies once financial institutions reach a certain threshold level regarding Capital and NPAs.
a) (iii) & (iv) only
b) (ii), (iii) & (iv) only
c) (i), (ii) & (iii) only
d) All of the above
Answer »Answer: (b)
RBI, under its supervisory framework, uses various measures/tools to maintain the sound financial health of banks. Prompt Correction Action (PCA) framework is one of such supervisory tools under which RBI has specified certain regulatory trigger points in terms of three parameters,
i.e. capital to risk-weighted assets ratio (CRAR), net non-performing assets (NPA) and Return on Assets (RoA), for initiation of certain structured and discretionary actions in respect of banks hitting such trigger points. It involves monitoring certain performance indicators of the banks as an early warning exercise and is initiated once such thresholds are breached.
Its objective is to facilitate the banks to take corrective measures including those prescribed by the Reserve Bank, in a timely manner, in order to restore their financial health.
The framework also provides an opportunity for the Reserve Bank to pay focused attention to such banks by engaging with the management more closely in those areas. The PCA framework is, thus, intended to encourage banks to eschew certain riskier activities and focus on conserving capital so that their balance sheets can become stronger.
The RBI has clarified that the PCA framework is not intended to constrain normal operations of the banks for the general public like lending and depositing. But in extreme cases, RBI can put restrictions on lending activity also.
The PCA framework is applicable only to commercial banks and not extended to co-operative banks and non-banking financial companies (NBFCs).
Question : 18
Consider the following statements:
- In Banks, the “Staff Security Deposits” come under Time Liabilities
- In Banks. “Cash certificates” come under the Demand Liabilities
a) Only 2 is correct
b) Only 1 is correct
c) Both 1 and 2 are correct
d) Neither 1 nor 2 is correct
Answer »Answer: (b)
Question : 19
Consider the following statements regarding currency circulation in India:
- Govt. of India has the sole right to mint coins
- The coins are issued for circulation only through RBI in terms of the RBI Act 1934
- Coins can be issued up to the denomination of Rs. 1000 as per the Coinage Act 1906
a) (i) & (ii) only
b) (iii) only
c) (i) only
d) All of the above
Answer »Answer: (d)
[The Government of India has the sole right to mint coins. The responsibility for coinage vests with the Government of India in terms of the Coinage Act, 1906.
The designing and minting of coins in various denominations is also the responsibility of the Government of India. Coins are minted at the India Government Mints at Mumbai, Alipore (Kolkata), Saifabad (Hyderabad), Cherlapally (Hyderabad) and NOIDA (UP).
The coins are issued for circulation only through the Reserve Bank in terms of the RBI Act. Coins can be issued up to the denomination of Rs.1000 as per the Coinage Act, 1906.
The RBI shall issue rupee coins on demand and the Govt. of India shall supply/mint such coins to the RBI on demand.
Question : 20 [UPSC (Pre) 2010]
With reference to the Non-banking Financial Companies (NBFCs) in India. Consider the following statements.
- They cannot engage in the acquisition of securities issued by the government.
- They cannot accept demand deposits like Saving Accounts.
a) Only 2
b) Neither 1 nor 2
c) Both 1 and 2
d) Only 1
Answer »Answer: (a)
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Money Supply, Banking and Financial Institutions Shortcuts »
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indian economy MCQ CATEGORIES
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» Introduction to Indian Economy
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» Planning, Economic Development & Five year Plans
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» National Income & Human Development Index
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» Agriculture Sector, Subsidy and Food Processing
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» Industries, Manufacturing & Service Sectors
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» Inclusive growth, Sustainable development and employment
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» Poverty & Unemployment
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» Introduction to Micro Economics
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» Introduction to Macro Economics
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» Macro fundamentals, GDP, Investment, Growth
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» Demand & Supply, Profit Loss, Inflation & Price Index
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» Fiscal Policy, Public Finance and Monetary Policy
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» Money Supply, Banking and Financial Institutions
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» Taxes Types, Methods & Budgeting Process
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» Banking, Security Market & Insurance
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