Banking 12th Economics Lesson 6 Questions in English

12th Economics Lesson 6 Questions in English

6] Banking

1. Which is generally understood as an institution which provides fundamental financial services such as accepting deposits and lending loans?

1. Industry
2. Bank
3. Agricultural sector
4. United Nations

Explanation

Finance is the life blood of all economic activities such as trade, commerce, agriculture and industry. A bank is generally understood as an institution which provides fundamental financial services such as accepting deposits and lending loans.

2. Which among the following is the oldest central bank in the world established in 1656?

1. The Ricks Banks of Sweden
2. Central Bank of Iceland
3. Reserve Bank of Australia
4. The European Central Bank

Explanation

The Ricks Banks of Sweden, which had sprung from a private bank established in 1656 is the oldest central bank in the world. It acquired the sole right of note issue in 1897.

3. The fundamentals of the art of banking have been developed by the which Bank?

1. European Central Bank
2. Bank of Japan
3. Bank of Canada
4. Bank of England

Explanation

The fundamentals of the art of banking have been developed by the Bank of England (1864) as the first bank of issues.

4. A large number of central banks were established between 1921 and 1954 in compliance with the resolution passed by the which conference?

1. International Finance Conference
2. International Monetary Conference
3. International Funding Conference
4. International Banking Conference

Explanation

A large number of central banks were established between 1921 and 1954 in compliance with the resolution passed by the International Finance Conference held at Brussels in 1920.

5. Which among the following was the first bank of India {Under British Rule}?

1. Bank of Bharath
2. Bank of British
3. Bank of Hindustan
4. Bank of Sindh

Explanation

The first bank of India was Bank of Hindustan (1770) {Under British Rule}.

6. Which among the following was not presidential Banks?

1. Bank of Bengal
2. Bank of Delhi
3. Bank of Bombay
4. Bank of Madras

Explanation

The Banking system in India was controlled and dominated by the Presidency Banks. There were three Presidency Banks; 1. Bank of Bengal (1809) 2. Bank of Bombay (1840) 3. Bank of Madras (1843). They were called Presidential Banks.

7. In year 1921, all three presidency banks were merged in which Bank?

1. Reserve Bank of India
2. State Bank of India
3. Imperial Bank of India
4. Central Bank of India

Explanation

In year 1921, all three presidency banks were merged in Imperial Bank of India.

8. In year 1955, Imperial Bank of India change its name into what?

1. Reserve Bank of India
2. State Bank of India
3. SIDCO
4. Central Bank of India

Explanation

In year 1955, Imperial Bank of India change its name into State Bank of India.

9. Which bank are institutions that conduct business with profit motive by accepting public deposits and lending loans for various investment purposes?

1. Central Bank
2. NBFI
3. NABARD
4. Commercial Bank

Explanation

Commercial banks are institutions that conduct business with profit motive by accepting public deposits and lending loans for various investment purposes. Commercial bank refers to a bank, or a division of a large bank, which more specifically deals with deposit and loan services provided to corporations or large/ middle-sized business – as opposed to individual members of the public/small business. They do not provide, long-term credit, as liquidity of assets is to be maintained.

10. Which among the following is the primary function of Commercial Bank?

1. Accepting Deposits
2. Agency Functions
3. Transferring Funds
4. General Utility Functions

Explanation

The functions of commercial banks are broadly classified into primary functions and secondary functions. The primary functions are 1. Accepting deposits and 2. Advancing Loan

11. Which among the following statement is correct

1. Demand Deposits refers to deposits that can be withdrawn by individuals without any prior notice to the bank. In other words, the owners of these deposits are allowed to withdraw money anytime by writing a withdrawal slip or a cheque at the bank counter or from ATM centres using debit card.
2. Time Deposits refers to deposits that are made for certain committed period of time. Banks pay higher interest on time deposits. These deposits can be withdrawn only after a specific time period by providing a written notice to the bank.
3. Only 1
4. Only 2
5. Both 1 and 2
6. None

12. In which among the following form Commercial banks doesn’t grant loans?

1. Over Draft
2. Demand Draft
3. Cash Credit
4. Discounting bills of exchange

Explanation

Advancing Loans refers to granting loans to individuals and businesses. Commercial banks grant loans in the form of overdraft, cash credit, and discounting bills of exchange.

13. Which among the following is not the Secondary Function of Commercial Banks?

1. Agency Functions
2. General Utility Functions
3. Letter of Credit
4. Credit Creation

Explanation

The secondary functions can be classified under three heads, namely, agency functions, general utility functions, and other functions such as Transferring fund and Letter of Credit.

14. Which among the following statement is correct regarding Agency Functions in Commercial Bank?

1. Collecting Cheques: Banks collect cheques and bills of exchange on the behalf of their customers through clearing house facilities provided by the central bank.
2. Collecting Expenditure: Commercial banks collect dividends, pension, salaries, rents, and interests on investments on behalf of their customers. A credit voucher is sent to Banks for information when any income is collected by the Customer.
3. Paying Expenses: Commercial banks make the payments of various obligations of customers, such as telephone bills, insurance premium, school fees, and rents. Similar to credit voucher, a debit voucher is sent to customers for information when expenses are paid by the bank.
4. Both 1 and 2
5. Both 1 and 3
6. Both 2 and 3
7. All 1, 2 and 3

Explanation

Collecting Income: Commercial banks collect dividends, pension, salaries, rents, and interests on investments on behalf of their customers. A credit voucher is sent to customers for information when any income is collected by the bank.

15. Which among the following statement is correct regarding General Utility Functions of Commercial Bank?

1. Providing Locker Facilities: Commercial banks provide locker facilities to its customers for safe custody of jewellery, shares, debentures, and other valuable items. This minimizes the risk of loss due to theft at homes. Banks are not responsible for the items in the lockers.
2. Issuing Traveller’s Cheques: Banks issue traveller’s cheques to individuals for traveling outside the country. Traveller’s cheques are the safe and easy way to protect money while traveling.
3. Dealing in Foreign Exchange: Commercial banks help in providing foreign exchange to central bank dealing in exports and imports. Commercial banks deals in foreign exchange independently with approval from Government.
4. Both 1 and 2
5. Both 1 and 3
6. Both 2 and 3
7. All 1, 2 and 3

Explanation

Dealing in Foreign Exchange: Commercial banks help in providing foreign exchange to businessmen dealing in exports and imports. However, commercial banks need to take the permission of the Central Bank for dealing in foreign exchange.

16. Funds are transferred from one bank to another bank by which means?

1. Draft
2. Telephonic Transfer
3. Electronic Transfer
4. All the above

Explanation

Transferring Funds refers to transferring of funds from one bank to another. Funds are transferred by means of draft, telephonic transfer, and electronic transfer. Commercial banks issue letters of credit to their customers to certify their creditworthiness.

17. Which among the following does not come under Electronic Banking?

1. Debit Card
2. Demand Draft
3. Credit Card
4. Internet Banking

Explanation

Commercial banks also undertake the task of underwriting securities. As public has full faith in the creditworthiness of banks, public do not hesitate in buying the securities underwritten by banks. It includes services, such as debit cards, credit cards, and Internet banking.

18. Which among the following is not function of Commercial Banks?

1. Money Supply
2. Credit Creation
3. Collection of Statistics
4. Issuing Banking License

Explanation

The other functions of Commercial Banks are money supply, credit creation and collection of statistics.

19. Which among the following means the multiplication of loans and advances?

1. Money Supply
2. Credit Creation
3. Collection of Statistics
4. Monetary Authority

Explanation

Credit Creation means the multiplication of loans and advances. Commercial banks receive deposits from the public and use these deposits to give loans. However, loans offered are many times more than the deposits received by banks. This function of banks is known as ‘Credit Creation’.

20. Which among the following statement is correct

1. Bank credit refers to bank loans and advances. Money is said to be created when the banks, through their lending activities, make a net addition to the total supply of money in the economy. Likewise, money is said to be destroyed when the loans are repaid by the borrowers to the banks and consequently the credit already created by the banks is wiped out in the process.
2. Banks have the power to expand or contract demand deposits and they exercise this power through granting more or less loans and advances and acquiring other assets. This power of commercial bank to create deposits through expanding their loans and advances is known as credit creation.
3. Only 1
4. Only 2
5. Both 1 and 2
6. None

21. When a customer gives cash to the bank and the bank creates a book debt in his name called a deposit, it is known as _____

1. Primary deposit
2. secondary deposit
3. Demand deposit
4. Credit deposit

Explanation

When a customer gives cash to the bank and the bank creates a book debt in his name called a deposit, it is known as a “primary deposit’. But when such a deposit is created, without there being any prior payment of equivalent cash to the bank, it is called a ‘derived deposit’.

22. The primary Deposits are also called as _____

1. Active deposits
2. Passive deposits
3. Monetary deposits
4. Credit deposits

Explanation

Primary Deposits is out of these primary deposits that the bank makes loans and advances to its customers. The initiative is taken by the customers themselves. In this case, the role of the bank is passive. So, these deposits are also called “Passive deposits”.

23. Who insists the banks to maintain a ratio between the total deposits they create and the cash in their possession?

1. Central Bank
2. NABARD
3. NBFI
4. Regional Rural Banks

Explanation

Credit Creation literally means the multiplication of loans and advances. Every loan creates its own deposits. Central Bank insists the banks to maintain a ratio between the total deposits they create and the cash in their possession.

24. Which among the following is not the Role of Commercial Banks in Economic Development of a Country?

1. Creation of Credit
2. Channelizing the Funds towards Productive Investment
3. Social Formation
4. Encouraging Right Type of Industries

Explanation

Role of Commercial Banks in Economic Development of a Country are 1. Capital Formation 2. Creation of Credit 3. Channelizing the Funds towards Productive Investment 4. Encouraging Right Type of Industries 5. Banks Monetize Debt 6. Finance to Government 7. Employment Generation and 8. Banks Promote Entrepreneurship.

25. Which among the following statement is correct regarding Capital Formation in Commercial Banking?

1. Banks play an important role in capital formation, which is essential for the economic development of a country. They mobilize the small savings of the people scattered over a wide area through their network of branches all over the country and make it available for productive purposes.
2. Now-a-days, banks offer very attractive schemes to induce the people to save their money with them and bring the savings mobilized to the organized money market. If the banks continue to perform this function, savings either remains idle or used in creating other assets (eg. land) which are high in scale of plan priorities.
3. Only 1
4. Only 2
5. Both 1 and 2
6. None

Explanation

Now-a-days, banks offer very attractive schemes to induce the people to save their money with them and bring the savings mobilized to the organized money market. If the banks do not perform this function, savings either remains idle or used in creating other assets (eg. land) which are low in scale of plan priorities.

26. Which among the following statement is correct regarding Role of Commercial Banks in Economic Development?

1. Banks create credit for the purpose of providing more funds for development projects. Credit creation leads to increased production, employment, sales and prices and thereby they bring about faster economic development.
2. Banks invest the savings mobilized by them for productive purposes. Capital formation is not the only function of commercial banks. Pooled savings should be allocated to various sectors of the economy with a view to increase the productivity. Then only it can be said to have performed an important role in the economic development.
3. After the nationalization of big banks, banking industry has grown to a great extent. Bank’s branches are opened frequently, which leads to the creation of new employment opportunities.
4. Both 1 and 2
5. Both 1 and 3
6. Both 2 and 3
7. All 1, 2 and 3

27. Which among the following statement is incorrect regarding Role of Commercial Banks in Economic Development?

1. Many banks help in the development of the right type of industries by extending loan to right type of persons. In this way, they help not only for industrialization of the country but also for the economic development of the country. They grant loans and advances to manufacturers whose products are in great demand.
2. The manufacturers in turn increase their products by introducing traditional methods of production and assist in raising the national income of the country. Sometimes, subprime lending is also clone. That is how there was an economic crisis in the year 2007-08 in the France.
3. Only 1
4. Only 2
5. Both 1 and 2
6. None

Explanation

The manufacturers in turn increase their products by introducing new methods of production and assist in raising the national income of the country. Sometimes, subprime lending is also clone. That is how there was an economic crisis in the year 2007-08 in the US.

28. Which among the following statement is correct regarding Role of Commercial Banks in Economic Development?

1. Commercial banks transform the loan to be repaid after a certain period into cash, which can be immediately used for business activities. Manufacturers and wholesale traders cannot increase their sales without selling goods on credit basis.
2. But credit sales may lead to locking up of capital. As a result, production may also be reduced. As banks are lending money by discounting bills of exchange, business concerns are able to carry out the economic activities without any interruption.
3. Government is acting as the promoter of industries in underdeveloped countries for which finance is needed for it. Banks provide long-term credit to Government by investing their funds in Government securities and short-term finance by purchasing Treasury Bills. RBI has given 68,000 crores to the government of India in the year 2018-19, this is 99% the RBI’s surplus.
4. Both 1 and 2
5. Both 1 and 3
6. Both 2 and 3
7. All 1, 2 and 3

29. Which among the following is a financial institution that does not have a full banking license or is not supervised by the central bank?

1. Commercial Banks
2. Non-Banking Financial Institution
3. NABARD
4. Regional Rural Banks

Explanation

A non-banking financial institution (NBFI) or non-bank financial company (NBFC) is a financial institution that does not have a full banking license or is not supervised by the central bank. The NBFIs do not carry on pure banking business, but they will carry on other financial transactions. They receive deposits and give loans. They mobilize people’s savings and use the funds to finance expenditure on investment activities.

30. Non-Banking Financial Institution can be broadly classified into how many category?

1. Two
2. Three
3. Six
4. Four

Explanation

NBFIs can be broadly classified into two categories. Viz.., (1) Stock Exchange; and (2) Other Financial institutions. Under the latter category comes Finance Companies, Finance Corporations, Chit Funds, Building Societies, Issue Houses, Investment Trusts and Unit Trusts and Insurance Companies.

31. Which among the following is an institution that manages a state’s currency, money supply, and interest rates.?

1. NABARD
2. Regional Rural Bank
3. Central Bank
4. The Agricultural Refinance Development Corporation

Explanation

A central bank, or monetary authority is an institution that manages a state’s currency, money supply, and interest rates. Central banks also usually oversee the commercial banking system of their respective countries.

32. Which among the following is India’s central banking institution, which controls the monetary policy of the Indian rupee?

1. State Bank of India
2. Reserve Bank of India
3. Punjab National Bank
4. IDBI Bank

Explanation

The Reserve Bank of India (RBI) is India’s central banking institution, which controls the monetary policy of the Indian rupee. It commenced its operations on 1 April 1935 in accordance with the Reserve Bank of India Act, 1934. The original share capital was divided into shares of 100 each fully paid, which were initially owned entirely by private shareholders.

33. When Reserve Bank of India was nationalised?

1. 1 January 1952
2. 1 January 1948
3. 1 January 1949
4. 1 January 1954

Explanation

Following India’s independence on 15 August 1947, the RBI was nationalised on 1 January 1949.

34. Which among the following statement is correct regarding Central Bank?

1. Monetary Authority: It controls the supply of money in the economy to stabilize exchange rate, maintain healthy balance of payment, attain financial stability, control inflation, strengthen banking system.
2. The issuer of currency: The objective is to maintain the currency and credit system of the country. It is the sole authority to issue currency. It also takes action to control the circulation of fake currency.
3. Banker to the Government: It acts as banker to the central governments. Central government acts as banker to the state government. It provides long term credit. It manages all new issues of government loans, servicing the government debt outstanding and nurturing the market for government securities.
4. Both 1 and 2
5. Both 1 and 3
6. Both 2 and 3
7. All 1, 2 and 3

Explanation

Banker to the Government: It acts as banker both to the central and the state governments. It provides short term credit. It manages all new issues of government loans, servicing the government debt outstanding and nurturing the market for government securities. It advises the government on banking and financial subjects.

35. In India, every bank has to obtain a banking license from whom to conduct banking business in India?

1. Central Government
2. Reserve Bank of India
3. World Bank
4. IMF

Explanation

The issuer of Banking License: As per Sec 22 of Banking Regulation Act, every bank has to obtain a banking license from RBI to conduct banking business in India.

36. Which among the following statement is correct regarding Functions of Central Bank (Reserve Bank of India)?

1. Custodian of foreign exchange reserves: It acts as a custodian of FOREX. It administers and enforces the provision of Foreign Exchange Management Act (FEMA), 1999. RBI buys and sells foreign currency to maintain the exchange rate of Indian rupee v/s foreign currencies.
2. Banking Ombudsman Scheme: RBI introduced the Banking Ombudsman Scheme in 1954. Under this scheme, the complainants can file their complaints completely through online and can also appeal to the Ombudsman against the awards and the other decisions of the Banks.
3. Regulator and Supervisor of Payment and Settlement Systems: The Payment and Settlement Systems Act of 2007 (PSS Act) gives RBI oversight authority for the payment and settlement systems in the country. RBI focuses on the development and functioning of safe, secure and efficient payment and settlement mechanisms.
4. Both 1 and 2
5. Both 1 and 3
6. Both 2 and 3
7. All 1, 2 and 3

Explanation

Banking Ombudsman Scheme: RBI introduced the Banking Ombudsman Scheme in 1995. Under this scheme, the complainants can file their complaints in any form, including online and can also appeal to the Ombudsman against the awards and the other decisions of the Banks.

37. For settlement of banking transactions, RBI manages how many clearing houses?

1. 8
2. 10
3. 12
4. 14

Explanation

Act as clearing house: For settlement of banking transactions, RBI manages 14 clearing houses. It facilitates the exchange of instruments and processing of payment instructions.

38. Which among the following is not the function of Central Bank (Reserve Bank of India)?

1. Banker’s Bank: RBI is the bank of all banks in India as it provides loan to banks, accept the deposit of banks, and rediscount the bills of banks
2. Lender of last resort: The banks can borrow from the RBI by keeping eligible securities as collateral at the time of need or crisis, when there is no other source.
3. Regulator of Economy: It controls the money supply in the system, monitors different key indicators like GDP, Inflation, etc.
4. Managing Government securities: RBI administers investments in institutions when they invest specified maximum proportions of their total assets/liabilities in government securities.

Explanation

Managing Government securities: RBI administers investments in institutions when they invest specified minimum proportions of their total assets/liabilities in government securities.

39. Which among the following statement is correct regarding Functions of Central Bank (Reserve Bank of India)?

1. Publisher of monetary data and other data: RBI maintains and provides all essential banking and other economic data, formulating and critically evaluating the economic policies in India. RBI collects, collates and publishes data regularly.
2. Exchange manager and controller: RBI represents India as a member of the World Bank. Most of the commercial banks are authorized dealers of World Bank.
3. Banking Codes and Standards Board of India: To measure the performance of banks against Codes and standards based on established global practices, the RBI has set up the Banking Codes and Standards Board of India (BCSBI).
4. Both 1 and 2
5. Both 1 and 3
6. Both 2 and 3
7. All 1, 2 and 3

Explanation

Exchange manager and controller: RBI represents India as a member of the International Monetary Fund [IMF]. Most of the commercial banks are authorized dealers of RBI.

40. Which is the primary mechanism available to the Central banks to realize the objectives of monetary management?

1. Credit control
2. Monetary control
3. Liquidity control
4. Statistic control

Explanation

Credit control is the primary mechanism available to the Central banks to realize the objectives of monetary management. The RBI is much better placed than many of credit control. The statutory basis for the control of the credit system by the Reserve Bank is embodied in the Reserve Bank of India Act, 1934 and the Banking Regulation Act, 1949.

41. Which among the following is not the quantitative credit control method of central Bank?

1. Bank Rate Policy
2. Open Market Operations
3. Rationing of Credit
4. Variable Reserve Ratio

Explanation

The Quantitative credit control method are 1. Bank Rate 2. Open Market Operations 3. Variable Cash Reserve Ratio.

42. Which among the following statement is correct regarding Bank Rate Policy of Central Bank

1. The bank rate is the rate at which the Central Bank of a country is prepared to re-discount the first-class securities. It means the bank is prepared to advance loans on approved securities to its member banks. As the Central Bank is only the lender of the last resort the bank rate is normally higher than the market rate.
2. If the Central Bank wants to control credit, it will raise the bank rate. As a result, the deposit rate and other lending rates in the money-market will go down. Borrowing will be encouraged, and will lead to contraction of credit and vice versa.
3. Only 1
4. Only 2
5. Both 1 and 2
6. None

Explanation

If the Central Bank wants to control credit, it will raise the bank rate. As a result, the deposit rate and other lending rates in the money-market will go up. Borrowing will be discouraged, and will lead to contraction of credit and vice versa.

43. Which among the following statement is correct regarding Quantitative Credit Control method?

1. The Central Bank purchases and sells not only Government securities but also other proper eligible securities like bills and securities of private concerns. When the banks and the private individuals purchase these securities, they have to make payments for these securities to the Central Bank.
2. Under Cash Reserves Ratio system, the Central Bank controls credit by changing the Cash Reserves Ratio. For example, if the Commercial Banks have excessive cash reserves on the basis of which they are creating too much of credit, this will be harmful for the larger interest of the economy. So, it will raise the cash reserve ratio which the Commercial Banks are required to maintain with the Central Bank.
3. When the Central Bank desires that the Commercial Banks should increase the volume of credit in order to bring about an economic revival in the economy. The central Bank will lower down the Cash Reserve Ratio with a view to expand the lending capacity of the Commercial Banks.
4. Both 1 and 2
5. Both 1 and 3
6. Both 2 and 3
7. All 1, 2 and 3

44. Variable Cash Reserve Ratio as an objective of monetary policy was first suggested by whom?

1. Adam Smith
2. J.M. Keynes
3. J.S. Mill
4. David Ricardo

Explanation

Variable Cash Reserve Ratio as an objective of monetary policy was first suggested by J.M. Keynes. If the CRR is high, the commercial bank’s capacity to create credit will be less and if the CRR is low, the commercial bank’s capacity to create credit will be high.

45. In which country Variable Cash Reserve Ratio was first followed by Federal Reserve System?

1. USA
2. UK
3. France
4. India

Explanation

Variable Cash Reserve Ratio was first followed by Federal Reserve System in United States of America. The commercial banks as per the statute has to maintain reserves based on their demand deposit and fixed deposit with central bank is called as Cash Reserve Ratio.

46. Which among the following is the amount which a bank has to maintain in the form of cash, gold or approved securities?

1. Various Liquidity Ratio
2. Statutory Liquidity Ratio
3. Marginal Liquidity Ratio
4. Regional Liquidity Ratio

Explanation

Statutory Liquidity Ratio (SLR) is the amount which a bank has to maintain in the form of cash, gold or approved securities. The quantum is specified as some percentage of the total demand and time liabilities (i.e., the liabilities of the bank which are payable on demand anytime, and those liabilities which are accruing in one month’s time due to maturity) of a bank.

47. Which among the following is not the Qualitative method of Credit Control?

1. Rationing of Credit
2. Method of Publicity
3. Regulation of Consumer’s Credit
4. Monetary Persuasion

Explanation

The qualitative or the selective methods are directed towards the diversion of credit into particular uses or channels in the economy. The following are the frequent methods of credit control under selective or Qualitative method: 1. Rationing of Credit 2. Direct Action 3. Moral Persuasion 4. Method of Publicity 5. Regulation of Consumer’s Credit 6. Regulating the Marginal Requirements on Security Loans.

48. Rationing of credit as an instrument of credit control was first used by whom?

1. Bank of England
2. Bank of America
3. Bank of France
4. Bank of Australia

Explanation

Rationing of Credit is the oldest method of credit control. Rationing of credit as an instrument of credit control was first used by the Bank of England by the end of the 18th Century. It aims to control and regulate the purposes for which credit is granted by commercial banks.

49. Rationing of Credit is generally classified into how many times?

1. Two
2. Three
3. Six
4. Four

Explanation

Rationing of Credit is generally of two types. a) The variable portfolio ceiling: It refers to the system by which the central bank fixes ceiling or maximum amount of loans and advances for every commercial bank. b) The variable capital asset ratio: It refers to the system by which the central bank fixes the ratio which the capital of the commercial bank should have to the total assets of the bank.

50. Which method is frequently adopted by the Central Bank to exercise control over the Commercial Banks?

1. Direct Action
2. Method of Publicity
3. Moral Suasion
4. Regulation of Consumer’s Credit

Explanation

Moral Suasion method is frequently adopted by the Central Bank to exercise control over the Commercial Banks. Under this method Central Bank gives advice, then requests. and persuades the Commercial Banks to co-operate with the Central Bank in implementing its credit policies.

51. Which among the following statement is correct regarding Direct Action of Central Bank

1. Direct action against the erring banks can take the following forms. The central bank may refuse to altogether grant discounting facilities to such banks
2. The central bank may refuse to sanction further financial accommodation to a bank whose existing borrowing are found to be in excess of its capital and reserves.
3. The central bank may refuse charging penal rate of interest on money borrowed by a bank beyond the prescribed limit.
4. Both 1 and 2
5. Both 1 and 3
6. Both 2 and 3
7. All 1, 2 and 3

Explanation

The central bank may start charging penal rate of interest on money borrowed by a bank beyond the prescribed limit.

52. Which among the following statement is correct regarding Qualitative Method of Credit Control of Central Bank?

1. Publicity: Central Bank in order to make their policies successful, take the course of the medium of publicity. A policy can be effectively successful only when an effective public opinion is created in its favour.
2. Regulation of Consumer’s Credit: The down payment is raised and the number of instalments reduced for the credit sale.
3. Only 1
4. Only 2
5. Both 1 and 2
6. None

53. The Changes in the Marginal Requirements on Security Loans system is mostly followed in which among the following country?

1. USA
2. India
3. China
4. France

Explanation

Changes in the Marginal Requirements on Security Loans system is mostly followed in U.S.A. Under this system, the Board of Governors of the Federal Reserve System has been given the power to prescribe margin requirements for the purpose of preventing an excessive use of credit for stock exchange speculation.

54. The rate at which the RBI is willing to lend to commercial banks is called _____

1. Repo Rate
2. Reverse Repo Rate
3. Marginal Repo Rate
4. Consumer Repo Rate

Explanation

The rate at which the RBI is willing to lend to commercial banks is called Repo Rate. Whenever banks have any shortage of funds they can borrow from the RBI, against securities. If the RBI increases the Repo Rate, it makes borrowing expensive for banks and vice versa.

55. The rate at which the RBI is willing to borrow from the commercial banks is called ____

1. Repo Rate
2. Reverse Repo Rate
3. Marginal Repo Rate
4. Consumer Repo Rate

Explanation

The rate at which the RBI is willing to borrow from the commercial banks is called reverse repo rate. If the RBI increases the reverse repo rate, it means that the RBI is willing to offer lucrative interest rate to banks to park their money with the RBI. This results in a decrease in the amount of money available for banks customers as banks prefer to park their money with the RBI as it involves higher safety.

56. Which among the following statement is correct regarding Role of RBI in agricultural credit

1. RBI has been playing a very vital role in the provision of agricultural finance in the country. The Bank’s responsibility in this field had been increased due to the predominance of agriculture in the Indian economy and the inadequacy of the formal agencies to cater to the huge requirements of the sector.
2. In order to full fill this important role effectively, the RBI set up a separate Agriculture Credit Department. However, the volume of informal loans has declined sufficiently. The RBI was providing medium term loans also for a period exceeding 12 months to 10 years for reclamation of land, construction of irrigation works, purchase of machinery, etc.
3. Only 1
4. Only 2
5. Both 1 and 2
6. None

Explanation

In order to full fill this important role effectively, the RBI set up a separate Agriculture Credit Department. However, the volume of informal loans has not declined sufficiently. The RBI was providing medium term loans also for a period exceeding 15 months to 5 years for reclamation of land, construction of irrigation works, purchase of machinery, etc.

57. Which among the following statement is correct regarding Functions of Agriculture Credit Department of Central Bank

1. To maintain an expert staff to study all questions on agricultural credit. To provide expert advice to Central and State Government, State Co-operative Banks and other banking activities.
2. To finance the rural sector through eligible institutions engaged in the business of agricultural credit and to co-ordinate their activities. The duties of the RBI in agricultural credit was not much restricted as it had to function all in an ex-officio capacity being the Central Bank of the country.
3. It could not lend directly to the farmers, but the supply of rural credit was done through the mechanism of refinance with institutions specializing in rural credit. Primary societies may borrow from Central Co-operative Bank, and the latter may borrow from the apex or the State Co-operative Bank, which in its turn might get accommodation facilities from the RBI.
4. Both 1 and 2
5. Both 1 and 3
6. Both 2 and 3
7. All 1, 2 and 3

Explanation

To finance the rural sector through eligible institutions engaged in the business of agricultural credit and to co-ordinate their activities. The duties of the RBI in agricultural credit were much restricted as it had to function only in an ex-officio capacity being the Central Bank of the country.

58. When NABARD was established, all the functions of the RBI relating to agricultural credit had been taken over and looked after by NABARD?

1. 1954
2. 1962
3. 1974
4. 1982

Explanation

With the establishment of National Bank for Agriculture and Rural Development (NABARD), all the functions of the RBI relating to agricultural credit had been taken over and looked after by NABARD since 1982. Since then, all activities relating to rural credit are entirely looked after by NABARD.

59. Which among the following statement is correct regarding the Agricultural Refinance Development Corporation (ARDC)?

1. Farmers in India require mainly medium term and long-term loans and they face a lot of difficulties in getting them. The only organization providing long term credit is Land Development Banks which have lagged behind and recorded only limited success. The credit requirements of the agricultural sector are increasing year after year.
2. With the aim of bridging the gap in agricultural finance and to extend credit for projects involving agricultural development, an organization called the Agricultural Refinance Development Corporation (ARDC) was established by an Act of Parliament and it started functioning from January 1, 1982.
3. Only 1
4. Only 2
5. Both 1 and 2
6. None

Explanation

With the aim of bridging the gap in agricultural finance and to extend credit for projects involving agricultural development, an organization called the Agricultural Refinance Development Corporation (ARDC) was established by an Act of Parliament and it started functioning from July 1, 1963.

60. Which among the following statement is incorrect regarding Objectives of the ARDC?

1. To provide necessary funds by way of refinance to eligible institutions such as the Central Land Development Banks, State Co-operative Banks, and Scheduled banks.
2. To subscribe to the debentures floated by the Central Land Development banks, State Co-operative Banks, and Scheduled banks, provided they were approved by the RBI.
3. Only 1
4. Only 2
5. Both 1 and 2
6. None

61. Whose economic program was the liquidation of rural indebtedness by stages and provide institutional credit to farmers and artisans in rural areas?

1. Jawaharlal Nehru
2. Indira Gandhi
3. V.P. Singh
4. Morarji Desai

Explanation

One of the important points of the 20 points economic programme of Mrs. Indira Gandhi during emergency was the liquidation of rural indebtedness by stages and provide institutional credit to farmers and artisans in rural areas.

62. In which year the Government of India setup Regional Rural Banks (RRBs)?

1. 1954
2. 1962
3. 1987
4. 1975

Explanation

In pursuance of the aspect of the New Economic programme that the Government of India setup Regional Rural Banks (RRBs) on 1975. The share capital of RRB is subscribed by the Central Government (50%), the State Government concerned (15%), and the sponsoring commercial bank (35%).

63. Which among the following statement is correct

1. The main objective of the RRBs is to provide credit and other facilities particularly to the small and marginal farmers, agricultural labourers, artisans and small entrepreneurs so as to develop agriculture, trade, commerce, industry and other productive activities in the rural areas.
2. From the beginning, the sponsor banks have continued to provide managerial and financial assistance to RRBs and also other concessions such as lower rate of interest (8.5 per cent) on the latter’s borrowings from sponsor banks.
3. Further, the cost of staff deputed to RRBs and training expenses of RRB staff are borne by the central Government. The RBI has been granting many concessions to RRBs: (a) They are allowed to maintain cash reserve ratio at 10 per cent and statutory liquidity ratio at 35 per cent; and (b) They also provide refinance facilities through NABARD.
4. Both 1 and 2
5. Both 1 and 3
6. Both 2 and 3
7. All 1, 2 and 3

Explanation

Further, the cost of staff deputed to RRBs and training expenses of RRB staff are borne by the sponsor banks. The RBI has been granting many concessions to RRBs: (a) They are allowed to maintain cash reserve ratio at 3 per cent and statutory liquidity ratio at 25 per cent; and (b) They also provide refinance facilities through NABARD.

64. Which among the following statement is correct regarding NABARD

1. Since its inception, RBI has shown keen interest in agricultural credit and maintained a separate department for this purpose. RBI extended short-term seasonal credit as well as medium-term and long-term credit to agriculture through Central level co-operative banks and Regional Development banks.
2. At the same time, RBI has also set up the Agricultural Refinance Development Corporation (ARDC) to provide refinance support to the banks to promote programmes of agricultural development, particularly those requiring term credit.
3. With the widening of the role of bank credit from “agricultural development” to “rural development” the Government proposed to have a more broad-based organization at the apex level to extend support and give guidance to credit institutions in matters relating to the formulation and implementation of rural development programmes.
4. Both 1 and 2
5. Both 1 and 3
6. Both 2 and 3
7. All 1, 2 and 3

Explanation

Since its inception, RBI has shown keen interest in agricultural credit and maintained a separate department for this purpose. RBI extended short-term seasonal credit as well as medium-term and long-term credit to agriculture through State level co-operative banks and Land Development banks.

65. How many Tier Cooperative credit structure are there in NABARD?

1. Two
2. Three
3. Six
4. Four

Explanation

There are Three Tier Cooperative Credit Structure in NABARD. They are 1) State Cooperative Bank 2) Central Cooperative Bank and 3) Primary Cooperative Society.

66. When a National Bank for Agriculture and Rural Development (NABARD) was set up?

1. 1954
2. 1962
3. 1982
4. 1974

Explanation

A National Bank for Agriculture and Rural Development (NABARD), was therefore, set up in July 1982 by an Act of parliament to take over the functions of ARDC and the refinancing functions of RBI in relation to co-operative banks and RRBs.

67. Who among the following is appointed as Chairman of NABARD?

1. Governor of RBI
2. Deputy Governor of RBI
3. Chancellor of RBI
4. Vice President

Explanation

NABARD is linked organically with the RBI by the latter contributing half of its share capital the other half being contributed by the Government of India(GOI). GOI nominates three of its Central Board Directors on the board of NABARD.A Deputy Governor of RBI is appointed as Chairman of NABARD.

68. Which among the following is not the function of NABARD

1. NABARD acts as a refinancing institution for all kinds of production and investment credit to agriculture, small-scale industries, cottage and village industries, handicrafts and rural crafts and real artisans and other allied economic activities with a view to promoting integrated rural development.
2. NABARD gives only short-term loans to institution approved by the Central Government or contribute to the share capital or invests in securities of any institution concerned with agriculture and rural development. It has the responsibility to inspect RRBs and co-operative banks including primary co-operative societies.
3. NABARD has the responsibility of co-ordinating the activities of Central and State Governments, the Planning Commission (now NITI Aayog) and other all India and State level institutions entrusted with the development of small-scale industries, village and cottage industries, rural crafts, industries in the tiny and decentralized sectors, etc.
4. Both 1 and 2
5. Both 1 and 3
6. Both 2 and 3
7. All 1, 2 and 3

Explanation

NABARD gives long-term loans to any institution approved by the Central Government or contribute to the share capital or invests in securities of any institution concerned with agriculture and rural development. It has the responsibility to inspect RRBs and co-operative banks, other than primary co-operative societies.

69. NABARD gives long-term loans up to how many Years to State Government to enable them to subscribe to the share capital of co-operative credit societies?

1. 10 years
2. 15 years
3. 20 years
4. 25 years

Explanation

NABARD gives long-term loans (up to 20 Years) to State Government to enable them to subscribe to the share capital of co-operative credit societies. It provides short-term, medium term and long-term credits to state co-operative Banks (SCBs), RRBs, LDBs and other financial institutions approved by RBI.

70. Which year Industrial Finance Corporation of India (IFCI) was established?

1. 1948
2. 1962
3. 1976
4. 1984

Explanation

Industrial Finance Corporation of India (IFCI) was first in the chain of establishment of financial corporations to provide financial assistance for industrial development. This was established on July 1, 1948 under the Act of the Parliament.

71. In which among the following way IFCI provides assistance to the industrial concerns?

1. Long-term loans; both in rupees and foreign currencies. Underwriting of equity, preference and debenture issues. Subscribing to equity, preference and debenture issues.
2. Guaranteeing the deferred payments in respect of machinery imported from abroad or purchased in India; and Guaranteeing of loans raised in foreign currency from foreign financial institutions.
3. Only 1
4. Only 2
5. Both 1 and 2
6. None

72. Which among the following statement is correct regarding Industrial Finance Corporation of India (IFCI)

1. Financial assistance of IFCI can be availed by any Limited Company in the public, private or joint sector, or by a cooperative society incorporated in India, which is engaged or proposes to be engaged in the specified industrial activities. Such, financial assistance will be available for the setting up of new industrial projects and also for the expansion diversification, renovation or modernisation of existing ones.
2. The IFCI also provides financial assistance on concessional terms for setting up industrial projects in industrially less developed districts in the States or Union Territories notified by the State Government.
3. Only 1
4. Only 2
5. Both 1 and 2
6. None

Explanation

The IFCI also provides financial assistance on concessional terms for setting up industrial projects in industrially less developed districts in the States or Union Territories notified by the Central Government.

73. In which among the following way IFCI does not raises its resources?

1. Issue of bonds in the market
2. Credit consumption from medium or small-scale industries
3. Borrowing from Industrial Development Bank of India and the Central Government
4. Foreign credit secured from foreign financial institutions and borrowings in the international capital markets.

Explanation

The IFCI raises its resources by way of (a) issue of bonds in the market; (b) borrowing from Industrial Development Bank of India and the Central Government; (c) foreign credit secured from foreign financial institutions and borrowings in the international capital markets.

74. When Industrial Credit and Investment Corporation of India (ICICI) was set up?

1. 1949
2. 1955
3. 1966
4. 1976

Explanation

Industrial Credit and Investment Corporation of India (ICICI) was set up on 5th January 1955.

75. Industrial Credit and Investment Corporation of India (ICICI) was set as a joint-stock company on the advice given by a three-man mission sponsored by whom?

1. International Monetary Fund and The Government of Britain
2. World Bank and The Government Britain
3. International Monetary Fund and The Government of USA
4. World Bank and The Government of USA

Explanation

Industrial Credit and Investment Corporation of India (ICICI) was set up as a joint-stock company on the advice given by a three-man mission sponsored by the World Bank and The Government of USA to the Government of India. The principal purpose of this institution is to channelize the World Bank funds to industry in India and also to help build up a capital market.

76. Which among the following statement is correct regarding Industrial Credit and Investment Corporation of India (ICICI)?

1. Initially the capital of ICICI was held by public sector institutions, such as banks, LIC, GIC and its subsidiaries. But now, a very large part of its equity capital is held by private companies, institutions and individuals, as ‘this private institution was denationalized.
2. The significant feature of the operations of ICICI is the foreign currency loans sanctioned by this institution to industries. Since its inception, nearly 50 per cent of its disbursement had been in foreign currencies. This is possible because of the facility it enjoys of raising funds in foreign currencies.
3. The World Bank has been the single largest source of such funds. Since 1973, the ICICI has entered the international capital markets also for raising foreign currency loans. The major portion of its rupee resources is raised by way of debentures in the capital market. The ICICI also borrows from the Industrial Development Bank of India and the Government.
4. Both 1 and 2
5. Both 1 and 3
6. Both 2 and 3
7. All 1, 2 and 3

Explanation

Initially the capital of ICICI was held by private companies, institutions and individuals. But now, a very large part of its equity capital is held by public sector institutions, such as banks, LIC, GIC and its subsidiaries, as ‘this private institution was nationalized.

77. When Industrial Development Bank of India was delinked from the RBI?

1. 1953
2. 1967
3. 1976
4. 1983

Explanation

The Industrial Development Bank of India has been conceived with the primary object of creating an apex institution to co-ordinate the activities of other financial institutions, including banks. The Development Bank was a wholly owned subsidiary of the Reserve Bank of India upto February 15, 1976. It was delinked from the RBI with effect from February 16, 1976 and made an autonomous corporation fully owned by the Government of India.

78. Which among the following statement is correct regarding functions of IDBI?

1. The functions of IDBI fall into three groups (i) Assistance to other financial institutions (ii) Direct assistance to industrial concerns either on its own or in participation with other institutions and (iii) Assistance to the direct central government Industries and Institution for public related service.
2. The IDBI can provide refinance in respect of term loans to industrial concerns given by the IFC, the SFCs, other financial institutions notified by the Government, scheduled banks and state cooperative banks. A special feature of the IDBI is the provision for the creation of a special fund known as the Development Assistance Fund.
3. The fund is intended to provide assistance to industries which require heavy investments with low anticipated rate of return. Such industries may not be able to get assistance in the normal course. The financing of exports was also undertaken by the IDBI till the establishment of EXIM BANK in March, 1982.
4. Both 1 and 2
5. Both 1 and 3
6. Both 2 and 3
7. All 1, 2 and 3

Explanation

The functions of IDBI fall into two groups (i) Assistance to other financial institutions; and (ii) Direct assistance to industrial concerns either on its own or in participation with other institutions.

79. When the government of India passed the State Financial Corporations Act?

1. 1951
2. 1964
3. 1976
4. 1984

Explanation

The government of India passed in 1951 the State Financial Corporations Act and SFCs were set up in many states. The SFCs are mainly intended for the development of small and medium industrial units within their respective states. However, in some cases they extend to neighbouring states as well.

80. What is the maximum amount that can be sanctioned to an industrial concern by SFC?

1. 25 lakhs
2. 50 lakhs
3. 60 lakhs
4. 1 crore

Explanation

The SFCs provide loans and underwriting assistance to industrial units having paid-up capital and reserves not exceeding ₹ 1 crore. The maximum amount that can be sanctioned to an industrial concern by SFC is ₹ 60 lakhs.

81. SFCs depend upon whom for refinance in respect of the term loans granted by them?

1. IFCI
2. ICICI
3. IDBI
4. SBI

Explanation

SFCs depend upon the IDBI for refinance in respect of the term loans granted by them. Apart from these, the SFCs can also make temporary borrowings from the RBI and borrowings from IDBI and by the sale of bonds.

82. Which among the following statement is correct regarding State Industrial Development Corporations (SIDCOs)

1. The Industrial Development Corporations have been set up by the state governments and they are wholly owned by them. These institutions are not merely financing agencies; they are entrusted with the responsibility of accelerating the industrialization of their states.
2. SIDCOs provide financial assistance to industrial concerns by way of loans guarantees and underwriting of or direct subscriptions to shares and debentures. In addition to these, they undertake various promotional activities, such as conducting techno-economic surveys, project identification, preparation of feasibility studies and selection and training of entrepreneurs
3. They also promote joint sector projects in association with private promoter in such type of projects. SIDCOs take 26 percent, private co-promoter takes 25 percent of the equity, and the rest is offered to the investing public. SIDCOs undertake the development of industrial areas by providing all infrastructural facilities and initiation of new growth centres.
4. Both 1 and 2
5. Both 1 and 3
6. Both 2 and 3
7. All 1, 2 and 3

83. State Industrial Development Corporations (SIDCO) get refinance facilities form whom?

1. IFCI
2. ICICI
3. IDBI
4. SBI

Explanation

SIDCOs get refinance facilities form IDBI. They also borrow through bonds and accept deposits.

84. Which is the macroeconomic policy being laid down by the Central Bank towards the management of money supply and interest rate?

1. Monetary Policy
2. Review Policy
3. Credit Policy
4. Finance Policy

Explanation

Monetary Policy is the macroeconomic policy being laid down by the Central Bank towards the management of money supply and interest rate. It is the demand side economic policy used by the government of a country to achieve macroeconomic objectives like inflation, consumption, growth and liquidity.

85. Who made initiation for monetary policy and is associated with the doctrine of “monetarism” and who received Nobel Prize in 1976?

1. Adam Smith
2. J.M. Keynes
3. Paul Samuelson
4. Milton Friedman

Explanation

The monetary policy gained its significance after the World War II, thanks to the initiation made by Milton Friedman, who is associated with the doctrine of “monetarism” and who received Nobel Prize in 1976. He boldly announced in his book “Monetary History of the United States, 1867 – 1960” that the Great Depression of the 1930’s was largely the outcome of the bungling monetary policies of the Federal Reserve System.

86. Which is cheap money policy when a monetary authority uses its tools to stimulate the economy?

1. Contractionary policy
2. Expansionary policy
3. Primitive policy
4. Secretion policy

Explanation

Expansionary policy is cheap money policy when a monetary authority uses its tools to stimulate the economy. An expansionary policy maintains short term interest rates at a lower than usual rate or increases the total supply of money in the economy more rapidly than usual.

87. Which is dear money policy, which maintains short-term interest rates higher than usual or which slows the rate of growth in the money supply or even shrinks it?

1. Contractionary policy
2. Expansionary policy
3. Primitive policy
4. Secretion policy

Explanation

The Contractionary monetary policy is dear money policy, which maintains short-term interest rates higher than usual or which slows the rate of growth in the money supply or even shrinks it. This slows short-term economic growth and lessens inflation.

88. Which among the following statement is incorrect regarding monetary policy

1. Expansionary policy is traditionally used to try to combat over employment by increasing interest rates in the hope that less expensive credit will entice businesses into expanding. This increases aggregate demand, which boosts long-term growth as measured by gross domestic product (GDP) growth.
2. Contractionary monetary policy can lead to increased unemployment and depressed borrowing and spending by consumers and businesses, which can eventually result in an economic recession if implemented too vigorously.
3. Only 1
4. Only 2
5. Both 1 and 2
6. None

Explanation

Expansionary policy is traditionally used to try to combat unemployment by lowering interest rates in the hope that less expensive credit will entice businesses into expanding. This increases aggregate demand (the overall demand for all goods and services in an economy), which boosts short-term growth as measured by gross domestic product (GDP) growth.

89. In which among the following case the monetary policy has to be more dynamic so as to meet the requirements of an expanding economy by creating suitable conditions for economic progress?

1. Developed country
2. Developing country
3. Underdeveloped country
4. All the above

Explanation

In case of underdeveloped countries, the monetary policy has to be more dynamic so as to meet the requirements of an expanding economy by creating suitable conditions for economic progress. The monetary policy in developed economies has to serve the function of stabilization and maintaining proper equilibrium in the economic system.

90. Which among the following is not the objectives of monetary policy?

1. Exchange Rate Stability
2. Lender of last resort
3. Price Stability
4. Full Employment

Explanation

The objectives of monetary policies are 1. Neutrality of Money 2. Stability of Exchange Rates 3. Price Stability 4. Full Employment 5. Economic Growth 6. Equilibrium in the Balance of Payments.

91. Who among the following is not the chief exponents of neutral money?

1. Wicksteed
2. Hayek
3. Robertson
4. Gladwell

Explanation

Economists like Wicksteed, Hayek and Robertson are the chief exponents of neutral money. They hold the view that monetary authority should aim at neutrality of money in the economy. Monetary changes could be the root cause of all economic fluctuations. According to neutralists, the monetary change causes distortion and disturbances in the proper operation of the economic system of the country.

92. Which among the following statement is correct regarding Exchange Rate Stability?

1. Exchange rate stability was the traditional objective of monetary authority. This was the main objective under Gold Standard among different countries. When there was disequilibrium in the balance of payments of the country, it was automatically corrected by movements. It was popularly known as “Expand Currency and Credit when gold is coming in; contract currency and credit when gold is going out”.
2. This system will correct the disequilibrium in the balance of payments and exchange rate stability will be maintained. It must be noted that if there is instability in the exchange rates, it would result in outflow or inflow of gold resulting in unfavourable balance of payments. Therefore, stable exchange rates are advocated.
3. Only 1
4. Only 2
5. Both 1 and 2
6. None

93. Which among the following statement is correct regarding Price stability?

1. Economists like Crustave Cassel and Keynes suggested price stabilization as a main objective of monetary policy. Price stability is considered the most genuine objective of monetary policy. Stable prices repose public confidence. It promotes business activity and ensures equitable distribution of income and wealth.
2. As a consequence, there is general wave of prosperity and welfare in the community. But it is well admitted that price stability means ‘price rigidity’ or price stagnation’. A mild decrease in the price level provides a tonic for economic growth. It keeps all virtues of a stable price.
3. Only 1
4. Only 2
5. Both 1 and 2
6. None

Explanation

As a consequence, there is general wave of prosperity and welfare in the community. But it is admitted that price stability does not mean ‘price rigidity’ or price stagnation’. A mild increase in the price level provides a tonic for economic growth. It keeps all virtues of a stable price.

94. Who published the General Theory of Employment, Interest and Money in 1936?

1. Adam Smith
2. J.M. Keynes
3. Paul Samuelson
4. Milton Friedman

Explanation

During world depression, the problem of unemployment had increased rapidly. It was regarded as socially dangerous, economically wasteful and morally deplorable. Thus, full employment was considered as the main goal of monetary policy. With the publication of Keynes’ General Theory of Employment, Interest and Money in 1936, the objective of full employment gained full support as the chief objective of monetary policy.

95. Which among the following statement is incorrect regarding Economic Growth?

1. Economic growth is the process whereby the real per capita income of a country increases over a long period of time. It implies an increase in the total physical or real output, production of goods for the satisfaction of human wants.
2. Therefore, monetary policy should promote sustained and continuous economic growth by maintaining equilibrium between the total demand for money and total production capacity and further creating favourable conditions for saving and investment. For bringing equality between demand and supply, flexible monetary policy is the best course.
3. Only 1
4. Only 2
5. Both 1 and 2
6. None

96. Which among the following statement is incorrect regarding Equilibrium in the Balance of Payments?

1. Equilibrium in the balance of payments is another objective of monetary policy which emerged significant in the post war years. This is simply due to the problem of international liquidity on account of the growth of world trade at a faster speed than the world liquidity
2. It was felt that decrease of deficit in the balance of payments reduces the ability of an economy to achieve other objectives. As a result, many developing countries have to curtail their imports which adversely affects development activities. Therefore, monetary authority makes efforts to maintain equilibrium in the balance of payments.
3. Only 1
4. Only 2
5. Both 1 and 2
6. None

Explanation

It was felt that increasing of deficit in the balance of payments reduces the ability of an economy to achieve other objectives. As a result, many less developed countries have to curtail their imports which adversely affects development activities. Therefore, monetary authority makes efforts to maintain equilibrium in the balance of payments.

97. The two systems of Inter Bank Transfer – RTGS and NEFT are maintained by whom?

1. RBI
2. SBI
3. World Bank
4. IDBI

Explanation

Inter Bank Transfer enables electronic transfer of funds from the account of the remitter in one Bank to the account of the beneficiary maintained with any other Bank branch. There are two systems of Inter Bank Transfer – RTGS and NEFT. Both these systems are maintained by RBI.

98. Which among the following statement is correct

1. NEFT operates in half hourly batches. Currently there are twenty-three settlements from 8 am to 7 pm on all working days including working Saturdays. Therefore, the beneficiary can expect to get the credit for the transactions put through between 8 am to 5.30 pm on all working days including working Saturdays on the same day.
2. In NEFT for transactions settled in the 6.30 and 7 pm batches on all working days except Saturdays, the credit will be afforded either on the Next working day or on day another working day. RTGS operates from Timings: 9:00 am to 5:30 pm. Minimum amount for RTGS transfer is ₹ 3 lakhs.
3. Only 1
4. Only 2
5. Both 1 and 2
6. None

Explanation

In NEFT for transactions settled in the 6.30 and 7 pm batches on all working days including working Saturdays, the credit will be afforded either on the same day or on the next working day. RTGS operates from Timings: 9:00 am to 4:30 pm. Minimum amount for RTGS transfer is ₹ 2 lakhs.

99. When the ATM (Automated Teller Machine) was introduced?

1. 1956
2. 1967
3. 1973
4. 1987

Explanation

ATMs transformed the bank tech system when they were first introduced in 1967. The next revolution in ATMs is likely to involve contactless payments. Much like Apple Pay or Google Wallet, soon we will be able to conduct contactless ATM transactions using a smartphone.

100. Which is a card allowing the holder to transfer money electronically from their bank account when making a purchase?

1. Debit card
2. Credit card
3. Pan card
4. Deposit card

Explanation

A Debit card is a card allowing the holder to transfer money electronically from their bank account when making a purchase.

101. Which among the following statement is correct

1. Payments Bank. In August 2013, Paytm received a license from central government to launch a payments bank. The Paytm Payments Bank is a separate entity in which founder Vijay Shekhar Sharma will hold 61% share, One97 Communications holds 29% and 10% will be held by a subsidiary of One97 and Sharma.
2. A credit card is a payment card issued to users (cardholders) to enable the cardholder to pay a merchant for goods and services based on the cardholder’s promise to the card issuer to pay them for the amounts so paid plus the other agreed charges.
3. The card issuer (usually a bank) creates a revolving account and grants a line of credit to the cardholder, from which the cardholder can borrow money for payment to a merchant or as a cash advance. In other words, credit cards combine payment services with extensions of credit. Complex fee structures in the credit card industry may limit customers’ ability to shopping.
4. Only 2
5. Both 1 and 2
6. Both 1 and 3
7. Both 2 and 3

Explanation

Payments Bank. In August 2015, Paytm received a license from RBI to launch a payments bank. The Paytm Payments Bank is a separate entity in which founder Vijay Shekhar Sharma will hold 51% share, One97 Communications holds 39% and 10% will be held by a subsidiary of One97 and Sharma.

102. Once the borrower fails to make interest or principal payments for 90 days the loan is considered to be what?

1. Non credential asset
2. Non-performing asset
3. Non profitable asset
4. Non derivative asset

Explanation

Once the borrower fails to make interest or principal payments for 90 days the loan is considered to be a nonperforming asset (NPA). NPAs are problematic for financial institutions since they depend on interest payments for income. As on now the size of NPAs is estimated to be around 10 lakh crores. As a result, the banks do not have adequate capital. Hence the Government (of India) is forced to infuse capital to the banks by using poor tax – payers’ money.

103. when the Union Cabinet decided to merge all the remaining five associate banks of State Bank Group with State Bank of India?

1. 2013
2. 2015
3. 2017
4. 2019

Explanation

Union Cabinet decided to merge all the remaining five associate banks of State Bank Group with State Bank of India in 2017. After the Parliament passed the merger Bill, the subsidiary banks have ceased to exist.

104. Which Bank along with five associate banks of State Bank Group have become the part of State Bank of India (SBI) beginning April 1, 2017?

1. Andhra Bank
2. Bharatiya Mahila Bank
3. Punjab National Bank
4. Dena Bank

Explanation

Five associates and the Bharatiya Mahila Bank have become the part of State Bank of India (SBI) beginning April 1, 2017. This has placed State Bank of India among the top 50 banks in the world.

105. Which among the following is not the five associate banks that were merged with State Bank of India (SBI) in 2017?

1. State Bank of Hyderabad
2. State Bank of Travancore
3. State Bank of Mysore
4. State Bank of Pune

Explanation

The five associate banks that were merged are State Bank of Bikaner and Jaipur (SBBJ), State Bank of Hyderabad (SBH), State Bank of Mysore (SBM), State Bank of Patiala (SBP) and State Bank of Travancore (SBT). The other two Associate Banks namely State Bank of Indore and State Bank of Saurashtra had already been merged with State Bank of India.

106. Which is the mechanism through which short term funds are loaned and borrowed?

1. Credit Market
2. Capital Market
3. Money Market
4. Social Market

Explanation

Money market is the mechanism through which short term funds are loaned and borrowed. It designates financial institutions which handle the purchase, sale and transfer of short-term credit instruments. Commercial banks, acceptance houses, Non-Banking Financial Institutions and the Central Bank are the institutions catering to the requirements of short-term funds in the money Market.

107. Which is a part of financial system which is concerned with raising capital by dealing in shares, bonds and other long-term investments?

1. Credit Market
2. Capital Market
3. Marginal Market
4. Social Market

Explanation

Capital Market is a part of financial system which is concerned with raising capital by dealing in shares, bonds and other long-term investments. The market where investment instruments like bonds, equities and mortgages are traded is known as the capital market.

108. Which is the act of stripping a currency unit of its status as legal tender?

1. Black Market
2. Corruption
3. Demonitisation
4. Inflation

Explanation

Demonitisation is the act of stripping a currency unit of its status as legal tender. It occurs whenever there is a change of national currency. The current form or forms of money is pulled from circulation, often to be replaced with new coins or notes. On 8 November 2016, the Indian Prime Minister Mr. Narendra Modi announced the demonetization of all ₹500 and ₹1000 bank notes of the Mahatma Gandhi Series.

109. Which among the following is not the Objectives of Demonetisation?

1. Stopping of Corruption.
2. Improving Employment
3. Stopping Terror Funds
4. Removing Black Money from the country

Explanation

Objectives of Demonetisation 1. Removing Black Money from the country. 2. Stopping of Corruption. 3. Stopping Terror Funds. 4. Curbing Fake Notes.