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BANKING AWARENESS QUIZ 8 TO 15, MAY 2018 *BANKERSADDA@


BANKERS ADDA QUIZ 8 TO 15  ( MAY 2018)

Q1. Small and marginal farmers get special treatment from banks. Who ae these marginal farmers?
(a) Those who have land for cultivation up to 1 acre
(b) They are paid daily wages of Rs. 100/- for working on the land
(c) They have land holdings upto 2 acres
(d) All of the above
(e) None of the given options is true

S1. Ans.(c)
Sol. Farmers with landholding of up to 1 hectare are considered as Marginal Farmers. Farmers with a landholding of more than 1 hectare but less than 2 hectares are considered as Small Farmers. For the purpose of priority sector loans ‘small and marginal farmers’ include landless agricultural labourers, tenant farmers, oral lessees and share-croppers, whose share of landholding is within above limits prescribed for “Small and Marginal Farmer”.

Q2. MFIs currently operate in 29 States, 4 Union Territories and 588 districts in India. MFIs stands for-
(a) Microfinance Institutions
(b) Microfinance Indian
(c) Medium Institutions
(d) Market Institutions
(e) Microfinance International

S2. Ans.(a)
Sol. MFIs stands for Microfinance Institutions.

Q3. Which of the following is the most essential service for the poor in the country to be reckoned as part of financial inclusion efforts?
(a) Pension payments 
(b) Life insurance 
(c) No frills accounts
(d) Consumption loans 
(e) None of the given options is true

S3. Ans.(c)
Sol. No frills accounts is the most essential service for the poor in the country to be reckoned as part of financial inclusion efforts.

Q4. The concept of self groups is one of the crucial working models for promoting micro finance. What is the basis of this model? 
(a) It is linked to the concept of group guarantee
(b) Each member waits for his chance to get the bank loan as per seniority in the group
(c) Such groups prepare their own plan for savings and credit
(d) They work on the principle of sharing their profit among members
(e) None of the given options is true

S4. Ans.(a)
Sol. Self groups is linked to the concept of group guarantee.

Q5. Many banks are presently recruiting large numbers of business correspondents in terms of RBI instructions for financial inclusion. Which of the following is not eligible to be appointed as business correspondent?
(a) Bank staff member
(b) Kirana stores
(c) Retired teachers
(d) Ex-servicemen
(e) None of the given options is true

S5. Ans.(a)
Sol. Bank staff member is not eligible to be appointed as business correspondent.

Q6. The concept of ultra small bank branch for promoting financial inclusion in the country has been introduced. How would it be described?
(a) Branch with two staff members
(b) These Branches may be set up between the base branch and BC locations so as to provide support to about 8-10 BC Units at a reasonable distance of 3-4 kilometres
(c) An ATM with cash payment and cash deposit
(d) Branch controlled by gram panchayat
(e) None of the given options is true

S6. Ans.(b)
Sol. These Ultra Small Branches may be set up between the base branch and BC locations so as to provide support to about 8-10 BC Units at a reasonable distance of 3-4 kilometres. These could be either newly set up or by conversion of the BC outlets.  Such Ultra Small Branches should have minimum infrastructure such as a Core Banking Solution (CBS) terminal linked to a pass book printer and a safe for cash retention for operating large customer transaction and would have to be managed full time by bank officers/ employees.

Q7. Financial inclusion is a major initiative of RBI. Which of the following is promoting this initiative?
(a) Waiver of agricultural loans
(b) Observing KYC norms strictly
(c) Appointment of business correspondents
(d) Opening of more and more ATMs
(e) None of the given options is true

S7. Ans.(c)
Sol. Appointment of business correspondents is a major initiative of RBI for Financial Inclusion.

Q8. Financial literacy programme of RBI is meant to promote which of the following?
(a) For better understanding of banking produts and services
(b) It is meant to stop money laundering 
(c) For enabling compliance with KYC norms
(d) All of the above
(e) None of the given options is true

S8. Ans.(a)
Sol. For better understanding of banking produts and services is a major part of Financial literacy programme.

Q9. Financial inclusion is a programme of the government to cover the maximum population with bank accounts. What is the current coverage approx (As on May 2018)?
(a) 25%
(b) 15%
(c) 40%
(d) 65%
(e) 80%

S9. Ans.(e)
Sol. Up to 80% of Indians now have a bank account.

Q10. Kisan credit cards or KCC are an effective way of reaching out to the farmers by the banks. What assistance does the farmer receive in this way?
(a) Credit facility for crops etc. against an approved limit
(b) Short term credit facility against value of his crops
(c) Long term credit is provided against his land holdings
(d) Loan is permissible against crops sold but payment yet to be received by the farmer
(e) None of the given options is true

S10. Ans.(a)
Sol. Under KCC, Credit facility for crops etc. against an approved limit receive by farmers.

Q11. Which of the following could be considered as an initiative towards promotion of financial inclusion?
(a) Opening of no frills accounts
(b) Appointing business correspondents for servicing rural customers
(c) Opening of bank branches in unbanked districts
(d) All of the above
(e) None of the given options is true

S11. Ans.(d)
Sol. All of the above options could be considered as an initiative towards promotion of financial inclusion.

Q12. Why are interest rates charged by micro finance institutions higher than lending rates of banks?
(a) MFIs are not allowed to source deposits from public 
(b) Banks have the benefit of cheaper funds 
(c) MFIs borrow bulk of their funds from banks
(d) MFIs borrow funds from banks at high cost and also their administrative expenses are more
(e) None of the given options is true

S12. Ans.(d)
Sol. MFIs borrow funds from banks at high cost and also their administrative expenses are more.

Q13. Passing of tough laws against the micro finance companies by a particular state in India has upset the micro finance sector. Which state are we talking about?
(a) Karnataka
(b) Andhra Pradesh
(c) Tamil Nadu
(d) Rajasthan
(e) West Bengal

S13. Ans.(b)
Sol. The microfinance industry has seen tremendous growth over the past five years, growing at a 45% CAGR. It has witnessed rapid evolution with regulatory reforms post the Andhra Pradesh crisis in 2010 to regulate product, pricing and protection of customer interest. This included the growth of regulated NBFC MFIs - a special class of RBI regulated entities carrying out microfinance, the formation of the first ever Self-Regulatory Organizations (SROs) of the RBI, Aadhar based lending by NBFC, MFIs and transformation of some of the entities into universal and small finance banks.

Q14. RBI has largely accepted the recommendations of which committee set up by it to look into the issues of the micro finance sector?
(a) Damodaran committee
(b) Nair committee
(c) Malegam committee
(d) Narasimham committee
(e) Rangarajan Committee

S14. Ans.(c)
Sol. Malegam committee.

Q15. The top rank MFI for the year 2016-17 in India is—
(a) SKF Microfinance Ltd.
(b) Asmitha Microfin
(c) Bandhan Society
(d) Madura Micro Finance Ltd.
(e) Ujjivan Financial Services

S15. Ans.(e)
Sol. Ujjivan Financial Services has the largest geographical spread with operations across 24 states compared to 22 states for Bandhan Bank and 19 states for SKS Microfinance in 2016-17.
Quiz 9
Q1. Which of the following is not considered as a means of foreign capital inflow into the country?
(a) FDI
(b) FCNR accounts
(c) FII
(d) No frills accounts
(e) None of the given options is true

S1. Ans.(d)
Sol. No frills accounts is not considered as a means of foreign capital inflow into the country.

Q2. Which of the following is a depository in the country for handling shares in the demat from?
(a) NSDL
(b) RBI
(c) MCX
(d) SEBI
(e) NABARD

S2. Ans.(a)
Sol. NSDL, the first and largest depository in India, established in August 1996 and promoted by institutions of national stature has established a state-of-the-art infrastructure that handles most of the securities held and settled in dematerialized form in the Indian capital market. Although India had a vibrant capital market which is more than a century old, the paper-based settlement of trades caused substantial problems like bad delivery and delayed transfer of title, etc. The enactment of Depositories Act in August 1996 paved the way for establishment of NSDL.

Q3. Which of the following is not a term associated with the stock markets directly?
(a) Bear hug
(b) Dividend
(c) Insider trading
(d) Interest rate
(e) Sensex

S3. Ans.(d)
Sol. Interest Rate is not a term associated with the stock markets directly.

Q4. Facebook has listed its shares on which stock exchange?
(a) NYSE
(b) NASDAQ
(c) NSE
(d) BSE
(e) None of the given options is true

S4. Ans.(b)
Sol. Face book has listed its shares on which stock exchange in NASDAQ. The NASDAQ Stock Market is an American stock exchange. It is the second-largest exchange in the world by market capitalization, behind only the New York Stock Exchange located in the same city.

Q5. SEBI is the regulatory body for the stock markets. When was it formed?
(a) 1990
(b) 1999
(c) 1992
(d) 1996
(e) 1998

S5. Ans.(c)
Sol. SEBI was formed in 12th April 1992.

Q6. Forward Markets Commission was the regulator for which of the following?
(a) Futures market 
(b) Currency market
(c) Commodities futures market
(d) Bullion market
(e) None of the given options is true

S6. Ans.(c)
Sol. Forward Markets Commission was the regulator for Commodities futures market. In 2015 the FMC was merged with the Securities and Exchange Board of India (SEBI).

Q7. Money markets are meant for trading in which of the following?
(a) Short-term financial instruments
(b) Currency
(c) Shares of blue-chip companies
(d) Debentures
(e) Trading

S7. Ans.(a)

Sol. The money market is where financial instruments with high liquidity and very short maturities are traded. It is used by participants as a means for borrowing and lending in the short term, with maturities that usually range from overnight to just under a year.

Q8. When Indian companies raise funds overseas what is the process known as?
(a) Participatory notes
(b) Foreign currency non-resident accounts
(c) Foreign currency convertible bonds
(d) Nostro accounts
(e) None of the given options is true

S8. Ans.(c)
Sol. A foreign currency convertible bond (FCCB) is a type of convertible bond issued in a currency different than the issuer's domestic currency. In other words, the money being raised by the issuing company is in the form of a foreign currency. A convertible bond is a mix between a debt and equity instrument.

Q9. Which of the following terms is not the terminology of the stock markets?
(a) Application supported by blocked accounts
(b) Rights issue
(c) Red herring prospectus
(d) Takeout financing
(e) None of the given options is true

S9. Ans.(d)
Sol. Takeout financing is an accepted international practice of releasing long-term funds for financing infrastructure projects. It can be used to effectively address Asset-Liability mismatch of commercial banks arising out of financing infrastructure projects and also to free up capital for financing new projects.

Q10. Companies declare dividends based on their financial performances/results. However, dividends at times remain unclaimed even after considerable length of time. What happens to such amounts?
(a) Respective companies take it to their reserve account
(b) The unclaimed amount is distributed among the other share holders the next year
(c) Transferred to the Consolidated Fund of India
(d) Transferred to Investors Education and Protection Fund
(e) None of the given options is true

S10. Ans.(d)
Sol. Transferred to Investors Education and Protection Fund.

Q11. An investor holding paper securities of a well known company wishes to sell the shares in the stock market. He is unable to do so. What would you suggest to him?
(a) Convert the paper securities to dematerialized form
(b) Sell it to a stock broker
(c) Open a demat account and credit the shares to this account after dematerialization 
(d) Wait for the market to improve
(e) None of the given options is true

S11. Ans.(c)
Sol. Open a demat account and credit the shares to this account after dematerialization.

Q12. A retail investor wishes to sell 500 units of his mutual funds holding as he is in need of money. At what price will his mutual funds units be calculated?
(a) At the current NAV prices
(b) The prevailing stock prices of the units
(c) At 10 percent of his buying price plus the original cost
(d) The current NAV price less 2 percent
(e) None of the given options is true

S12. Ans.(a)

Sol. At the current Net Asset Value (NAV) prices.

Q13. SEBI allows retail investors to apply for shares of Initial Public Offerings without actual transfer of their funds from their accounts. What is this facility known as?
(a) Systematic transfer plans
(b) Systematic investment plans
(c) Hedge fund accounts
(d) Applications Supported by Blocked Amount
(e) None of the given options is true

S13. Ans.(d)
Sol. ASBA (Applications Supported by Blocked Amount) is a process developed by the India's Stock Market Regulator SEBI for applying to IPO. In ASBA, an IPO applicant's account doesn't get debited until shares are allotted to them.

Q14. Which of the following are traded on the bullion market?
(a) Cash
(b) Gold
(c) Silver
(d) Diamond
(e) Both (b) and (c)

S14. Ans.(e)
Sol. A bullion market is a market through which buyers and sellers trade gold and silver as well as associated derivatives.

Q15. Which of the following institutions is not directly associated with the financial sector in India?
(a) Bombay Stock Exchange
(b) BIFR
(c) SEBI
(d) Railway Ministry
(e) NABARD

S15. Ans.(d)

Sol. Railway Ministry is not directly associated with the financial sector in India.
Quiz 10
Q1. Which discussing investments there is mention of short-term government security? What is this type of investment known as?
(a) Debenture
(b) Mutual fund
(c) Treasury bill
(d) Share
(e) None of the given options is true

S1. Ans.(c)
Sol. Treasury Bills are short-term (up to one year) borrowing instruments of the Government of India which enable investors to park their short-term surplus funds while reducing their market risk. They are auctioned by Reserve Bank of India at regular intervals and issued at a discount to face value.

Q2. Which of the following schemes available in the financial markets is not meant for investment purposes?
(a) National savings certificates
(b) Infrastructure bonds
(c) Mutual funds 
(d) Letter of credit
(e) None of the given options is true

S2. Ans.(d)
Sol. A letter of credit is a letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. In the event that the buyer is unable to make payment on the purchase, the bank will be required to cover the full or remaining amount of the purchase.

Q3. Systematic Investment Plans are a customer-centric facility provided by which of the following?
(a) Mutual funds
(b) Stockbrokers
(c) Commercial banks
(d) Post office savings schemes
(e) None of the given options is true

S3. Ans.(a)
Sol. Systematic investment plan (full form of SIP) is an investment strategy offered by fund houses to investors, making it convenient to invest small sums of money in their mutual funds. 

Q4. NBFCs are an important part of the Indian financial system. What is the full form of this term?
(a) New Banking Financial Companies
(b) Non-Banking Financial Companies
(c) Neo Banking Financial Confederation
(d) Non-Banking Fiscal Companies
(e) None of the given options is true

S4. Ans.(b)
Sol. NBFCs stands for Non-Banking Financial Companies.

Q5. What does the term ‘bancassurance’ mean?
(a) Assurance from the bank to its account holder regarding the safety of his money
(b) A special product designed by the bank 
(c) Selling of insurance policies by banks
(d) The understanding between banks and insurance companies
(e) None of the given options is true

S5. Ans.(c)
Sol. Bancassurance means selling insurance product through banks. Banks and insurance company come up in a partnership wherein the bank sells the tied insurance company's insurance products to its clients. 

Q6. Which of the following is a non-banking financial company?
(a) SBI 
(b) ICICI Bank
(c) Muthoot Finance Limited
(d) NABARD
(e) Standard Chartered Bank

S6. Ans.(c)
Sol. Muthoot Finance Ltd. is an Indian financial corporation. It is known as the largest gold financing company in the world. Muthoot Finance Ltd. is a NBFCs.

Q7. Which of the following is true?
(a) NBFCs can accept deposits from the public
(b) NBFCs cannot offer deposit schemes to the public
(c) Deposits of NBFCs are insured with DICGC
(d) NBFCs can accept deposits from the public if they are registered and permitted by RBI
(e) None of the given options is true

S7. Ans.(d)
Sol. NBFCs lend and make investments and hence their activities are akin to that of banks; however there are a few differences as given below:
i. NBFC cannot accept demand deposits;
ii. NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself;
iii. deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks.

Q8. Till what amount are deposits of public in NBFCs insured?
(a) Rs. 1 lakh
(b) Rs. 50,000/-
(c) Not insured
(d) Rs. 10,000
(e) None of the given options is true

S8. Ans.(c)
Sol. The deposits with NBFCs are not insured.

Q9. Which of following institutions regulate non-banking financial companies?
(a) RBI
(b) SEBI
(c) IRDA
(d) Finance Ministry
(e) NABARD

S9. Ans.(a)
Sol. Financial activity as principal business is when a company’s financial assets constitute more than 50 percent of the total assets and income from financial assets constitute more than 50 percent of the gross income. A company which fulfills both these criteria will be registered as NBFC by RBI.

Q10. Which apex body regulates insurance companies in India?
(a) RBI
(b) IRDAI
(c) PERDA
(d) SEBI
(e) NABARD

S10. Ans.(b)
Sol. Insurance Regulatory and Development Authority of India (IRDAI), is a statutory body formed under an Act of Parliament, i.e., Insurance Regulatory and Development Authority Act, 1999 (IRDAI Act 1999) for overall supervision and development of the Insurance sector in India.

Q11. There is a possibility of account holders retaining the same bank account number even when banks are being changed. What is this facility known as?
(a) Number portability 
(b) Deposit portability
(c) Bank portability
(d) Account number portability
(e) None of the given options is true

S11. Ans.(d)
Sol. Account Number Portability (ANP) is generally referred to as the ability of a customer to move to another current account providers while retaining the same account details.

Q12. What is the role of a third-party administrator in a medi claim policy?
(a) Approves the list of hospitals whose bills are acceptable
(b) Scrutinizes the bills submitted by the policyholder for reimbursement
(c) Does audit work for the insurance companies
(d) Arranges for the issue of policies after verification of application form
(e) None of the given options is true

S12. Ans.(b)
Sol. Scrutinizes the bills submitted by the policyholder for reimbursement.

Q13. Just like banks have to maintain a stipulated capital adequacy ratio similarly non-banking finance companies NBFCs are also required to do so. What is the minimum stipulation for NBFCs with asset size of Rs.100 crore and above?
(a) 15 percent
(b) 12 percent
(c) 10 percent
(d) 8 percent
(e) 30 percent

S13. Ans.(a)
Sol. At present, all NBFCs with asset size of Rs.100 crore and above are required to have minimum CRAR of 15%.

Q14. Which body/official determines the risk coverage for calculation of premium for life insurance policies?
(a) Actuary of the life insurance company
(b) IRDAI
(c) The chief executive of the life insurance company
(d) The board of directors of the life insurance company
(e) None of the given options is true

S14. Ans.(a)
Sol. Actuary of the life insurance company determines the risk coverage for calculation of premium for life insurance policies.

Q15. RuPay payment system is a major initiative in the banking sector in India. What is its contribution?
(a) It is an Indian payment system for debit cards
(b) It is a clearinghouse for payments
(c) It is meant for implementation of cheque truncation services
(d) It scrutinizes retail loan applications
(e) None of the given options is true

S15. Ans.(a)
Sol. RuPay payment system is an Indian payment system for debit cards.
Quiz 11
Q1. Under Section 19 of the Reserve Bank of India Act, 1934, the RBI has been prohibited from- 
(a) making loans or advances
(b) drawing or accepting bills payable otherwise than on demand
(c) allowing interest on deposits or current accounts
(d) All of the above
(e) None of the given options is true

S1. Ans.(d)
Sol. i. make loans or advances;
ii. draw or accept bills payable otherwise than on demand;
iii. allow interest on deposits or current accounts.

Q2. Section 31 (2) of the Reserve Bank of India Act, 1934 prohibits of making or issuing of a expressed to be payable to bearer thereof
(a) cheque
(b) bill of exchange
(c) promissory note
(d) demand draft
(e) None of the given options is true

S2. Ans.(c)
Sol. Section 31 (2) of the Reserve Bank of India Act, 1934- Notwithstanding anything contained in the Negotiable Instrument Act, 1881 (26 of 1881), no person in India other than the Bank or, as expressly authorised by this Act, the Central Government shall make or issue any promissory note expressed to be payable to the bearer of the instrument.

Q3. Drawing, accepting, making or issuing of any promissory note, hundi or bill of exchange expressed to be payable to bearer on demand by a person other than the Reserve Bank of India or the Central Government is prohibited under-
(a) Banking Regulation Act, 1949
(b) Section 31 (1) of the Reserve Bank of India Act, 1934
(c) Negotiable Instruments Act, 1881
(d) Indian Contract Act, 1872
(e) None of the given options is true

S3. Ans.(b)
Sol. Section 31. Issue of demand bills and notes-
Under Section 31 (1) No person in India other than the Bank, or, as expressly authorised by this Act the Central Government shall draw, accept, make or issue any bill of exchange, hundi, promissory note or engagement for the payment of money payable to bearer on demand, or borrow, owe or take up any sum or sums of money on the bills, hundis or notes payable to bearer on demand of any such person:

PROVIDED that cheques or drafts, including hundis, payable to bearer on demand or otherwise may be drawn on a person’s account with a banker, shroff or agent.

Q4. Rupee coins are the legal tender in India under the provisions of-
(a) Reserve Bank of India Act, 1934
(b) Negotiable Instruments Act, 1881
(c) Banking Regulation Act, 1949
(d) Indian Coinage Act, 1906
(e) None of the given options is true

S4. Ans.(d)
Sol. The 1906 Coinage Act, is an Act to govern the laws related to Coinage and Mints in India.

Q5. In India, the system of decimal coinage was introduced on-
(a) 15th August 1947
(b) 26th January 1950
(c) 1st April 1957
(d) All of the above
(e) None of the given options is true

S5. Ans.(c)
Sol. The move towards decimalization was afoot for over a century. However, it was in September 1955 that the Indian Coinage Act was amended for the country to adopt a metric system for coinage. The Act came into force with effect from 1stApril, 1957. The rupee remained unchanged in value and nomenclature. It, however, was now divided into 100 'Paisa' instead of 16 Annas or 64 Pice. For public recognition, the new decimal Paisa was termed 'Naya Paisa' till 1stJune, 1964 when the term 'Naya' was dropped.

Q6. Sub-section 12AB of Section 17 of the Reserve Bank of India Act, 1934 defines the term as an instrument for borrowing funds by selling securities of the Central Government or a State Government or of such securities of a local authority as may be specified in this behalf by the Central Government or foreign securities, with an agreement to repurchase the said securities on a mutually agreed future date at an agreed price which includes interest for the funds borrowed?
(a) Bank rate
(b) LAF
(c) Repo
(d) CRR
(e) None of the given options is true

S6. Ans.(c)
Sol. Sub-section (12AB) of section 17 of the RBI Act, 1934, defines-
"repo" as "an instrument for borrowing funds by selling securities of the Central Government or a State Government or of such securities of a local authority as may be specified in this behalf by the Central Government or foreign securities, with an agreement to repurchase the said securities on a mutually agreed future date at an agreed price which includes interest for the funds borrowed".

"reverse repo" means an instrument for lending funds by purchasing securities of the Central Government or a State Government or of such securities of a local authority as may be specified in this behalf by the Central Government or foreign securities, with an agreement to resell the said securities on a mutually agreed future date at an agreed price which includes interest for the funds lent."

Q7. In terms of Section 24 of the Reserve Bank of India Act, 1934, the Reserve Bank of India may issue bank notes for the maximum denomination of-
(a) Rs. 500
(b) Rs. 5000
(c) Rs. 10000
(d) Rs. 1000
(e) Rs. 10

S7. Ans.(c)

Sol. In terms of Section 24 of the Reserve Bank of India Act, 1934, the Reserve Bank of India may issue bank notes for the maximum denomination of Rs. 10,000.

Q8. The term ‘moral suasion’ refers to-
(a) the moral duty of a borrower to deal with only one bank
(b) the banker’s duty of secrecy as regards the affairs and accounts of his customers
(c) the advice was given by Reserve Bank to banks/financial institutions in the matter of their lending land other operations with the objective that they might implement or follow it
(d) All of the above
(e) None of the given options is true

S8. Ans.(c)
Sol. the advice was given by Reserve Bank to banks/financial institutions in the matter of their lending land other operations with the objective that they might implement or follow it.

Q9. Which of the following is the sale authority for issue of currency in India?
(a) Government of India
(b) Reserve Bank of India
(c) Controller of Currency
(d) All of the above
(e) SEBI

S9. Ans.(b)
Sol. RBI is the sale authority for issue of currency in India.

Q10. The minting of rupee coin is governed by-
(a) Coinage Act, 1906
(b) Reserve Bank of India Act, 1934
(c) Banking Regulation Act, 1949
(d) Currency Act, 1902
(e) None of the given options is true

S10. Ans.(a)
Sol. The minting of rupee coin is governed by Coinage Act, 1906.

Q11. One rupee notes and coins are issued by-
(a) Reserve Bank of India
(b) State Bank of India on behalf of Government of India
(c) Ministry of Finance
(d) Finance Minister of Central Government
(e) None of the given options is true

S11. Ans.(c)
Sol. The One Rupee note is issued by Ministry of Finance and it bears the signatures of Finance Secretary, while other notes bear the signature of Governor RBI.

Q12. Bank rate policy, open market operations, variable reserve requirements and statutory liquidity requirements employed by Reserve Bank as measures of credit control are classified as-
(a) quantitative methods
(b) qualitative methods
(c) RBI methods
(d) All of the above
(e) None of the given options is true

S12. Ans.(a)
Sol. Quantitative Measures or methods- Bank Rate Policy. Open Market Operations. Cash Reserve Ratio. Statutory Liquidity Ratio.

Q13. Which of the following instruments of credit control adopted by Reserve Bank of India does not fall within ‘general’ or ‘quantitative’ methods of credit control?
(a) Stipulation of certain minimum margin in respect of advance against specified commodities
(b) Open market operations
(c) Bank rate
(d) Variable reserve requirements
(e) None of the given options is true

S13. Ans.(a)
Sol. Stipulation of certain minimum margin in respect of advance against specified commodities.

Q14. The opening of branches by banks is governed by the provisions of-
(a) Section 23 of the Banking Regulation Act, 1949
(b) Section 24 of Reserve Bank of India Act, 1934
(c) Section 131 of the Negotiable Instruments Act, 1881
(d) Section 45 and Bank Nationalisation Act, 1969
(e) None of the given options is true

S14. Ans.(a)
Sol. The opening of new branches and shifting of existing branches of banks is governed by the provisions of Section 23 of the Banking Regulation Act, 1949. In terms of these provisions, banks cannot, without the prior approval of the Reserve Bank of India (RBI), open a new place of business in India or abroad or change, otherwise than within the same city, town or village, the location of the existing place of business. Section 23 (2) of the Banking Regulation Act lays down that before granting any permission under this section, the Reserve Bank may require to be satisfied, by an inspection under Section 35 or otherwise, as to the financial condition and history of the banking company, the general character of its management, the adequacy of its capital structure and earning prospects and that public interest will be served by the opening or, as the case may be, change of location of the existing place of business. RRBs should approach the concerned Regional Offices of RBI in this regard.

Q15. Which of the following fall under the qualitative methods of credit control adopted by Reserve Bank of India?
(a) Selective Credit Control
(b) Credit Authorisation Scheme
(c) Moral Suasion
(d) All of the above
(e) None of the given options is true

S15. Ans.(d)
Sol. All of the above fall under the qualitative methods of credit control adopted by Reserve Bank of India.
Quiz 12
Q1. Reverse Repo is a tool used by RBI to-
(a) inject liquidity
(b) absorb liquidity
(c) increase the liquidity with the banking system
(d) to keep the liquidity at one level
(e) None of the given options is true

S1. Ans.(b)
Sol. Repo operations therefore inject liquidity into the system. Reverse repo operation is when RBI borrows money from banks by lending securities. The interest rate paid by RBI is in this case is called the reverse repo rate. Reverse repo operation therefore absorbs the liquidity in the system.

Q2. The ratio of the Cash Reserves that the banks are required to keep with the RBI is known as-
(a) Liquidity Ratio
(b) SLR
(c) CRR
(d) Net Demand and Time Liability
(e) None of the given options is true

S2. Ans.(c)
Sol. Cash Reserve Ratio (CRR) is the amount of funds that the banks have to keep with the RBI.

Q3. The term ‘Ways and Means’ advances refers to-
(a) the advances allowed under DRI Scheme by commercial banks
(b) the advances allowed by commercial banks under Twenty Point Economic Programme
(c) the temporary advances made to the government by its bankers to bridge the interval between expenditure and the flow of receipts of revenues
(d) All of the above
(e) None of the given options is true

S3. Ans.(d)

Sol. All of the above

Q4. The rate of interest banks charge it main/major and prime customers is popularly called as-
(a) Risk Premium
(b) Prime Lending Rate
(c) Repo Rate
(d) Reverse Repo Rate
(e) Cost of Fund

S4. Ans.(b)

Sol. The interest rate charged by banks to their largest, most secure, and most creditworthy customers on short-term loans. This rate is used as a guide for computing interest rates for other borrowers.

Q5. What is Repo Rate?
(a) It is a rate at which RBI sell government securities to banks
(b) The rate at which banks borrow money from the RBI by selling their surplus government securities to RBI
(c) It is a rate at which RBI allows small loans in the market
(d) It is a rate which is offered by Banks to their most valued customers or prime customers
(e) None of the given options is true

S5. Ans.(b)
Sol. The rate at which banks borrow money from the RBI by selling their surplus government securities to RBI is known as "Repo Rate.

Q6. The term ‘BSR’ refers to-
(a) Bank’s Selling Rate
(b) Basic Statistical Returns
(c) Annual returns submitted by banks to RBI in respect of priority sector advances
(d) Quarterly statement of advances to agriculture
(e) None of the given options is true

S6. Ans.(b)
Sol. Basic Statistical Return (BSR) System. The BSR system was introduced in December 1972 following the recommendation of the Committee on Banking Statistics adapting from the erstwhile data reporting system called Uniform Balance Book (UBB).

Q7. One rupee notes bear the signature of-
(a) Governor of Reserve Bank of India
(b) Prime Minister of India
(c) President of India
(d) Secretary, Ministry of Finance (Government of India)
(e) None of the given options is true

S7. Ans.(d)
Sol. The One Rupee note is issued by Ministry of Finance and it bears the signatures of Finance Secretary, while other notes bear the signature of Governor RBI.

Q8. The note-issue system in India is based on-
(a) Gold Deposit system
(b) Minimum Reserve System
(c) Proportional Reserve System
(d) Simple Deposit System
(e) None of the given options is true

S8. Ans.(b)
Sol. Initially, the proportional reserve system was adopted in India. Later on, India adopted the minimum reserve system and is still continuing with this system of note issue. The entire issue of currency notes is subjected to the regulations framed in the RBI Act, 1935.

Q9. The Indian rupee is a-
(a) token coin
(b) standard-token coin
(c) standard coin
(d) gold coin
(e) None of the given options is true

S9. Ans.(b)
Sol. Indian rupee coin is a mixture of the standard coin and the token coin. Like standard money, Indian rupee is of unlimited tender. Like token money it's face value exceeds its intrinsic value.

Q10. The currency notes are issued by the Reserve Bank of India under the signature of-
(a) Executive Director
(b) Deputy Governor
(c) Governor
(d) Secretary
(e) None of the given options is true

S10. Ans.(c)
Sol. The currency notes are issued by the Reserve Bank of India under the signature of Governor of RBI.

Q11. Which of the following Institute was established in 1969 by the Reserve Bank of India, in consultation with the Government of India, as an autonomous apex institution for research, training, education and consultancy in bank management?
(a) Bankers Training College, Bombay
(b) College of Agricultural Banking, Pune
(c) NIBM
(d) All of the above
(e) None of the given options is true

S11. Ans.(c)
Sol. National Institute of Bank Management (NIBM) was established in 1969 by the Reserve Bank of India, in consultation with the Government of India, as an autonomous apex institution for research, training, education and consultancy in bank management. Its mandate is to play a proactive role of “think-tank” of the banking system. NIBM is part of the grand vision of giving a new direction to the banking industry in India and making the industry a more cost-effective instrument for national development.

Q12. In periods of depression when the Reserve Bank desires to encourage the banking system to create more credit it-
(a) reduces the bank rate
(b) raises the bank rate
(c) permits the bank rate to be decided by market forces
(d) All of the above
(e) None of the given options is true

S12. Ans.(a)
Sol. When Bank Rate is increased by RBI, the borrowing costs of the banks increase which, in return, reduce the supply of money in the market. Additionally, when the unemployment rate within a country increases, the central bank decreases the bank rate so that individuals can get loan at a reduced rate.

Q13. For the performance of its duties as the regulator of credit, the Reserve Bank of India possesses the usual instruments of general credit control, viz-?
(a) bank rate
(b) open market operation
(c) the power to vary the reserve requirement of banks
(d) All of the above
(e) None of the given options is true

S13. Ans.(d)
Sol. All of the above.

Q14. When the Reserve Bank desires to restrict expansion of credit it-
(a) raises the bank rate
(b) reduces the bank rate
(c) freezes the bank rate
(d) None of the given options is true
(e) All of the above

S14. Ans.(a)
Sol. When Bank Rate is increased by RBI, the borrowing costs of the banks increase which, in return, reduce the supply of money in the market. Additionally, when the unemployment rate within a country increases, the central bank decreases the bank rate so that individuals can get loan at a reduced rate.

Q15. The currency notes issued by RBI have a cent percent cover is-
(a) approved assets
(b) gold
(c) foreign exchange
(d) trustee securities
(e) None of the given options is true

S15. Ans.(a)
Sol. Reserve Bank notes have a cent per cent cover in approved assets. There is no ceiling on the amount of notes that can be issued by the Bank at any time. According to Section 33 of the RBI Act, the assets of the Issue Department against which currency notes are issued have to consist of gold coin and bullion, foreign securities, rupee coin.
Quiz 14
Q1. Which of the following do not fall within the functions of the Reserve Bank of India?
(a) Regulation of currency 
(b) Control of credit
(c) Banker to the government, banker’s bank and lender of the last resort.
(d) Accepting deposits and making loans and advances to public
(e) None of the given options is true

S1. Ans.(d)
Sol. Accepting deposits and making loans and advances to public is not fall within the functions of the Reserve Bank of India.

Q2. Which of the following are the main functions of the Reserve Bank of India?
(a) Granting licenses to commercial banks for opening branches in rural areas 
(b) Accepting deposits from the public
(c) Regulating foreign exchange business
(d) Acting as note issuing authority, bankers’ bank and banker to the government
(e) None of the given options is true

S2. Ans.(d)
Sol. Acting as note issuing authority, bankers’ bank and banker to the government is the main functions of the Reserve Bank of India.

Q3. The approved assets against which currency notes are issued by RBI comprise of-
(a) gold coin and bullion and rupee coin
(b) foreign securities and Government of India rupee securities of any maturity 
(c) bills of exchange and promissory notes payable in India which are eligible for purchase by RBI
(d) All of the above
(e) None of the given options is true

S3. Ans.(d)
Sol. All of the above.

Q4. What is the Public Debt Office of Reserve Bank of India?
(a) is a central depository for all types of Government securities except Treasury Bills
(b) attends to the function of note issue the Reserve Bank of India
(c) is responsible for maintaining external value of the rupee
(d) controls balance of payment position of the Government of India
(e) None of the given options is true

S4. Ans.(a)
Sol. Public Debt Office of RBI is a central depository for all types of Government securities except Treasury Bills.

Q5. RBI has directed banks that the exercise of verification of asset classification and income recognition should be done as part of the audit work by the branch and statutory Auditors work by the branch and statutory Auditors effective from the year ending-
(a) 31st March 1993
(b) 31st March 1994
(c) 31st March 1995
(d) 31st March 1996
(e) 31st March 1997

S5. Ans.(b)
Sol. From 31st March 1994, RBI has directed banks that the exercise of verification of asset classification and income recognition should be done as part of the audit work by the branch and statutory Auditors work by the branch and Statutory Auditors.

Q6. Which of the following are the instruments of Credit Control in the hands of the RBI?
I. Lowering or raising the discount and interest rates.
II. Raising the minimum support price of the major agro products.
III. Lowering or raising the minimum cash reserves maintained by the commercial banks.
Select the correct answer using the codes given below.
(a) Only I
(b) Only II
(c) Only III
(d) Both I and III
(e) Both II and III

S6. Ans.(d)
Sol. Both I and III.

Q7. RBI’s open market operation transactions are carried out with a view to regulate-
(a) liquidity in the economy
(b) prices of essential commodities conflation
(c) borrowing power of the banks
(d) All of the above
(e) None of the given options is true

S7. Ans.(d)
Sol. All of the above.

Q8. The stance of RBI monetary policy is-
(a) inflation control with adequate liquidity for growth
(b) improving the credit quality of the banks
(c) strengthening credit delivery mechanism 
(d) supporting investment demand in the economy 
(e) All of the above

S8. Ans.(e)
Sol. All of the above

Q9. Which of the following is not a function of the RBI?
(a) Maintaining Forex
(b) Deciding Bank Rate, CRR, and SLR from time to time
(c) Opening Savings Accounts for the general public
(d) Prescribing the Capital Adequacy Ratio 
(e) Currency Management

S9. Ans.(c)
Sol. Opening Savings Accounts for the general public is not a function of the RBI.

Q10. What does the letter ‘L’ denote in the term ‘LAF’ as referred to every now and then in relation to the monetary policy of the RBI?
(a) Liquidity
(b) Liability
(c) Leveraged
(d) Longitudinal
(e) Linear

S10. Ans.(a)
Sol. LAF stands for Liquidity Adjustment Facility.

Q11. Which of the following is not a measure adopted by the Government or RBI to control inflation?
(a) Monetary policy 
(b) Fiscal policy
(c) Bank Rate
(d) Price control
(e) Financial inclusion

S11. Ans.(e)
Sol. Financial inclusion is where individuals and businesses have access to useful and affordable financial products and services by Banks or other Financial Institutions that meet their needs that are delivered in a responsible and sustainable way.

Q12. Whenever RBI does some Open Market Operation transactions, actually it wishes to main regulate which of the following?
(a) Inflation only
(b) Liquidity in economy
(c) Borrowing powers of the banks
(d) Flow of foreign direct investments
(e) None of the given options is true

S12. Ans.(b)
Sol. Liquidity in economy.

Q13. Interest rates on which of the following deposit schemes is fixed or deregulated by the Reserve Bank of India?
(a) Fixed deposits above 5 years’ maturity 
(b) Recurring deposits
(c) Savings bank
(d) Flexi Deposit Scheme
(e) None of the given options is true

S13. Ans.(c)
Sol. Savings bank interest rate decided by RBI. But sometimes commercial bank change this interest rate.

Q14. Which of the following are decided by the Reserve Bank of India?
I. Deposit rates
II. Base Rate
III. Prime Lending Rate
Select the correct answer using the codes given below
(a) Only I
(b) Only II
(c) Only III
(d) II and III
(e) None of these

S14. Ans.(b)
Sol. Base rate is the minimum rate set by the Reserve Bank of India below which banks are not allowed to lend to its customers. Base rate is decided in order to enhance transparency in the credit market and ensure that banks pass on the lower cost of fund to their customers. Loan pricing will be done by adding base rate and a suitable spread depending on the credit risk premium. 

Q15. On which rate, RBI has recently deregulated the rates of interest to be provided by various banks to their depositors/customers with on their accounts.
(a) Time deposit
(b) Saving bank
(c) Loan
(d) Fixed deposit
(e) Current

S15. Ans.(b)
Sol. On Saving bank rate, RBI has recently deregulated the rates of interest to be provided by various banks to their depositors/customers with on their accounts.
Quiz 15
Q1. As we all know, banks in India are required to maintain a portion of their demand and time liabilities with the Reserve Bank of India. This portion is called?
(a) statutory liquidity ratio
(b) cash reserve ratio
(c) bank deposit
(d) reverse repo
(e) government securities

S1. Ans.(b)
Sol. As we all know, banks in India are required to maintain a portion of their demand and time liabilities with the Reserve Bank of India. This portion is called Cash Reserve Ratio (CRR).

Q2. Reserve Bank of India is the lender of the last resort to scheduled commercial banks because-
(a) the parties can approach RBI when their limits are exhausted
(b) they are not able to get loans from other banks
(c) RBI can come to the rescue of a bank that is solvent but faces temporary liquidity problems by supplying it with much-needed liquidity when no one else is willing to extend credit to that bank
(d) All of the above
(e) None of the given options is true

S2. Ans.(c)
Sol. As a Banker to Banks, the Reserve Bank also acts as the ‘lender of the last resort’. It can come to the rescue of a bank that is solvent but faces temporary liquidity problems by supplying it with much-needed liquidity when no one else is willing to extend credit to that bank. The Reserve Bank extends this facility to protect the interest of the depositors of the bank and to prevent possible failure of the bank, which in turn may also affect other banks and institutions and can have an adverse impact on financial stability and thus on the economy.

Q3. Banks without the prior approval of the RBI, cannot-
(a) one a new place of business in India or abroad
(b) shift otherwise that within the same centers (city/town/village) of the existing place of business
(c) shift their sole rural branch outside the centre/village is not permitted, as such shifting would render the centre unbanded 
(d) All of the above
(e) None of the given options is true

S3. Ans.(d)
Sol. All of the above.

Q4. The interest rate at which the RBI lends to commercial banks in the short term to maintain liquidity is known as-?
(a) interest rate
(b) repo rate
(c) reverse repo rate
(d) bank rate
(e) None of the given options is true

S4. Ans.(b)
Sol. The interest rate at which the RBI lends to commercial banks in the short term to maintain liquidity is known as repo rate.

Q5. Who is the final authority for deciding the design, form and material of bank notes?
(a) Central Government
(b) Reserve Bank of India
(c) Indian Banks Association
(d) Note Issuing Authority of India
(e) None of the given options is true

S5. Ans.(a)
Sol. Central Government is the final authority for deciding the design, form and material of bank notes.

Q6. The bank rate is-
(a) free to fluctuate according to the forces of demand and supply
(b) set by the RBI
(c) set by the RBI is directed by the Union Ministry of Finance 
(d) set by the RBI as advised by the Indian Banks Association
(e) set by the Government of India on the recommendation of the Planning Commission

S6. Ans.(b)
Sol. The bank rate is set by the RBI.

Q7. As per the reports in various newspapers many private companies are trying to obtain the licences to launch a banking company in India. Which of the following organisations /agencies issue the licence for the same?
(a) Securities and Exchange Board of India (SEBI) 
(b) Indian Institute of Banking and Finance (IIBF)
(c) Indian Banks’ Association
(d) Registrar of Companies
(e) None of the given options is true

S7. Ans.(e)
Sol. RBI is issue the licence for the the licences to launch a banking company in India.

Q8. Many times we read a term ‘Hot Money’ in newspapers. What is/are the characteristics of Hot Money?
I. The term is used for fresh currency notes issued by the RBI.
II. It is the fund which flows in the market to take advantage of high interest rates.
III. It is the fund which is thrown in the market to create imbalance in the stock markets.
Select the correct answer using the codes given below
(a) Only I
(b) Only II
(c) Only III 
(d) All of the above
(e) None of the given options is true

S8. Ans.(b)
Sol. Hot Money is the fund which flows in the market to take advantage of high-interest rates.

Q9. What are the cooperative banks at the village level known as?
(a) Central cooperative banks
(b) Primary agricultural cooperative societies
(c) Village cooperative banks
(d) State cooperative banks
(e) None of the given options is true

S9. Ans.(b)
Sol. The rural co-operative credit system in India is primarily mandated to ensure flow of credit to the agriculture sector. It comprises short-term and long-term co-operative credit structures. The short-term co-operative credit structure operates with a three-tier system - Primary Agricultural Credit Societies (PACS) at the village level, Central Cooperative Banks (CCBs) at the district level and State Cooperative Banks (StCBs) at the State level. PACS are outside the purview of the Banking Regulation Act, 1949 and hence not regulated by the Reserve Bank of India. StCBs/DCCBs are registered under the provisions of State Cooperative Societies Act of the State concerned and are regulated by the Reserve Bank. Powers have been delegated to National Bank for Agricultural and Rural Development (NABARD) under Sec 35 A of the Banking Regulation Act (As Applicable to Cooperative Societies) to conduct inspection of State and Central Cooperative Banks.

Q10. Which of the following would result in a fall in asset prices?
(a) Low liquidity in the economy
(b) High liquidity in the economy
(c) RBI increasing the Reserve Repo Rates
(d) RBI allowing more banks to play
(e) None of the given options is true

S10. Ans.(a)
Sol. Low liquidity in the economy.

Q11. As per reports in the newspapers, the Indian Rupee is appreciating these days. What does it really mean?
I. The value of the Rupee has gone up. It is now 110 paise and not 100 paise.
II. The exchange rate of Rupee has gone up.
III. Now we can purchase more in one Rupee,
Which was not possible earlier?
(a) Only I
(b) Only II
(c) Only III
(d) Both I and II
(e) None of the given options is true

S11. Ans.(b)
Sol. The exchange rate of Rupee has gone up.

Q12. A customer wishes to purchase some US dollars in India. He/she should go to-
(a) Public Debt Division of the RBI only
(b) American Express Bank Only
(c) RBI or any branch of a Bank which is authorized for such business
(d) Ministry of Foreign Affairs
(e) None of the given options is true

S12. Ans.(c)
Sol. RBI or any branch of a Bank which is authorized for such business.

Q13. Consider the following- 
I. Bank Rate Policy
II. Open Market Operations
III. Devaluation of Rupee
Which of the above are called fiscal measures?
(a) Only II
(b) Both I and II
(c) Both I and III
(d) Only III
(e) None of the given options is true

S13. Ans.(d)
Sol. Devaluation of Rupee.

Q14. The names of which of the following rates/ratios cannot be seen in financial newspapers?
(a) Bank Rate
(b) Repo Rate
(c) Statutory Liquidity Ratio
(d) Cash Reserve Ratio
(e) Pulse Rate

S14. Ans.(e)
Sol. Pulse rate is used in medical science. 

Q15. Prior approval (as also a licence) of RBI is required for opening-
(a) personal banking branches 
(b) merchant banking branches
(c) asset recovery branches 
(d) All of the above
(e) None of the given options is true

S15. Ans.(d)
Sol. All of the above.
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