Q1. What is/are the facility/facilities the beneficiaries can get from the services of Business Correspondent (Bank Saathi) in branchless areas?
- It enables the beneficiaries to draw their subsidies and social security benefits in their villages.
- It enables the beneficiaries in the rural areas to make deposits and withdrawals.
Select the correct answer using the code given below.
(a) 1 only
(b) 2 only
(c) Both 1 and 2 only
(d) Neither 1 nor 4
Answer – C
- Besides giving access to banking, it also enables government subsidies and social security benefits to be directly credited to the accounts of the beneficiaries, enabling them to draw the money from the bank saathi or business correspondents in their village itself.
Q2. The Reserve Bank of India regulates the commercial banks in matters of
- liquidity of assets
- branch expansion
- merger of banks
- winding-up of banks
Select the correct answer using the codes given below:
(a) 1 and 4 only
(b) 2, 3, and 4 only
(c) 1, 2 and 3 only
(d) 1, 2, 3 and 4
Answer – D
- The Reserve Bank of India is the main monetary authority of the country and besides that, in its capacity as the central bank, acts as the bank of the national and state governments. Sometimes it happens that some of the banks are closed due to nonrecovery of loans or other issues. In such conditions, people have to suffer the loss. For this reason there is a provision for winding up of the banking company under the Banking Regulation Act, 1949. The power of winding up of the Bank lies in the hand of Reserve Bank of India.
Q3. Priority Sector Lending by Banks in India constitutes lending to
(a) Agriculture
(b) Micro and small enterprises
(c) Weaker sections
(d) All of the above
Answer – D
- Priority Sector Lending is an important role given by the (RBI) to the banks for providing a specified portion of the bank lending to a few specific sectors like agriculture and allied activities, micro and small enterprises, poor people for housing, students for education, and other low-income groups and weaker sections.
Q4. The basic aid of the Lead Bank Scheme is that
(a) Big banks should try to open offices in each district.
(b) There should be stiff competition among the various nationalized banks.
(c) Individual banks should adopt particular districts for intensive development
(d)All the banks should make intensive efforts to mobilize deposits
Answer – B
- The basic aim of the Lead Bank Scheme is that there should be stiff competition among the various nationalized banks and big banks should try to open offices in each district.
Q5. The Reserve Bank of India (RBI) acts as a bankers’ bank. This would imply which of the following?
- Other banks retain their deposits with the RBI.
- The RBI lends funds to the commercial banks in times of need.
- The RBI advises the commercial banks on monetary matters.
Select the correct answer using the codes given below:
(a) 2 and 3 only
(b) 1 and 2 only
(c) 1 and 3 only
(d) 1, 2 and 3
Answer – B
- The Reserve Bank of India acts as a banker’s bank because other commercial banks retain their deposit with RBI and RBI lends deposits to commercial banks at the time of emergency need.
Q6. Microfinance is the provision of financial services to people of low-income groups. This includes both the consumers and the self-employed.
The service/services rendered under microfinance is/are:
- Credit facilities
- Savings facilities
- Insurance facilities
- Fund Transfer facilities
Select the correct answer using the codes given below the lists:
(a) 1 only
(b) 1 and 4 only
(c) 2 and 3 only
(d) 1, 2, 3 and 4
Answer – D
- Option (d) is correct: Microfinance is the provision of financial services to low-income clients or solidarity lending groups including consumers and the self-employed, who traditionally lack access to banking and related services. The microfinance sector has grown rapidly over the past few decades.
Q7. The lowering of Bank Rate by the Reserve Bank of India leads to
(a) More liquidity in the market
(b) Less liquidity in the market
(c) No change in the liquidity in the market
(d) Mobilization of more deposits by commercial banks
Answer – A
- The lowering of Bank Rates by the Reserve Bank of India leads to More liquidity in the market. Because when bank rate is low means more lending more customers approach banks for loans,so more liquidity in the market.
Q8. In India, which of the following has the highest share in the disbursement of credit to agriculture and allied activities?
(a) Commercial Banks
(b) Cooperative Banks
(c) Regional Rural Banks
(d) Microfinance Institutions
Answer – A
- Commercial banks have the highest share in the disbursement of credit to agriculture and allied activities.
Q9. Why is the offering of “teaser loans” by commercial banks a cause of economic concern?
- The teaser loans are considered to be an aspect of sub-prime lending and banks may be exposed to the risk of defaulters in the future.
- In India, teaser loans are mostly given to inexperienced entrepreneurs to set up manufacturing or export units.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer – A
- Statement 1 is correct because it includes the definition of teaser loans but statement 2 is not correct because in India teaser loans is provided to home buyers not setting up manufacturing or export units.
Q10. Consider the following statements: The Functions of commercial banks in India include
- Purchase and sale of shares and securities on behalf of customers.
- Acting as executors and trustees of wills.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer – C
- Miscellaneous functions of commercial banks in India include: Transfer and collection of funds purchase and sale of shares on behalf of customers acting as executors and transfers of wills purchase and sale of foreign exchange etc.
Q11. With reference to the institution of the Banking Ombudsman in India, which one of the statements is not correct?
(a) The Banking Ombudsman is appointed by the Reserve Bank of India
(b) The Banking Ombudsman can consider complaints from Non-Resident Indians having accounts in India
(c) The orders passed by the Banking Ombudsman, are final and binding on the parties concerned
(d) The service provided by the Banking Ombudsman is free of any fee
Answer – C
- The Banking Ombudsman is a quasi-judicial authority functioning under India’s Banking Ombudsman Scheme 2006, and was created pursuant to the a decision by the Government of India to enable the resolution of complaints of customers of banks relating to certain services rendered by the banks The Banking Ombudsman Scheme was first introduced in India in 1995, and was revised The current scheme became operative from 1st January 2006, and replaced and superseded the bankingOmbudsman Scheme of 2002.
Q12. With reference to India, consider the following:
- Nationalization of Banks
- Formation of Regional Rural Banks
- Adoption of villages by Bank Branches
Which of the above can be considered as steps taken to achieve the “financial inclusion” in India?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 3 only
(d) 1, 2 and 3
Answer – D
- Financial inclusion” is the delivery of financial services at affordable costs to vast sections of disadvantaged and low-income groups. Unrestrained access to public goods and services is the sine qua non of an open and efficient society.
- Banking services are in the nature of the public good. It is essential that availability of banking and payment services be available to the entire population without discrimination. This is the prime objective of the government.
Q13. When the Reserve Bank of India announces an increase in the Cash Reserve Ratio, what does it mean?
(a) The commercial banks will have less money to lend
(b) The Reserve Bank of India has less money to lend
(c) The Union Government will have less money to lend
(d) The commercial banks will have more money to lend
Answer – A
- CRR refers to the percentage of deposits banks have to keep as reserves (in cash). This reserve sum is not available for banks to lend and thus if the CRR increases, banks will have less money to lend
Q14. In India, the interest rate on savings accounts in all the nationalized commercial banks is fixed by
(a) Union Ministry of Finance
(b) Union Finance Commission
(c) Indian Banks’ Association
(d) None of the above
Answer – D
- It is fixed by the Reserve Bank of India. In 2011 RBI permitted commercial banks to fix interest rates on savings accounts independently. The rate of interest up to Rs. 1 lakh has to be the same for every bank.
Q15. With reference to the Non-banking Financial Companies (NBFCs) in India, consider the following statements:
- They cannot engage in the acquisition of securities issued by the government.
- They cannot accept demand deposits like Savings Accounts.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer – B
- A non-banking financial company (NBFC) is a company registered under the Companies Act, 1956 and is engaged in the business of loans and advances, acquisition of shares/stock/bonds/ debentures/ securities issued by a government or local authority or other securities of like marketable nature, leasing, hire-purchase, insurance business, chit business, but does not include any institution whose principal business is that of agriculture activity, industrial activity, sale/purchase/ construction of immovable property. They cannot accept demand deposits like commercial banks as they are not a part of the clearance and settlement.
Q16. Which of the following terms indicates the mechanism used by commercial banks for providing credit to the government?
(a) Cash Credit Ratio
(b) Debt Service Obligation
(c) Liquidity Adjustment Facility
(d) Statutory Liquidity Ratio
Answer – D
- Statutory Liquidity Ratio (SLR) is the mechanism used to by the RBI to regulate the liquidity of the commercial banks. Under SLR, commercial banks invest a certain percentage of their money in Government securities and other assets like gold so as to comply with RBI guidelines.
Q 17. Consider the following statements:
- The repo rate is the rate at which other banks borrow from the Reserve Bank of India.
- A value of 1 for the Gini Coefficient in a country implies that there is a perfectly equal income for everyone in its population.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer – A
- Repo Rate is the rate at which commercial banks borrow funds from RBI. A reduction in the repo rate will help banks to get money from the central bank at a cheaper rate. When the repo rate increases borrowing from RBI becomes more expensive. A value of 0 for the Gini Coefficient in a country implies that there is perfect equality in the system. If the value is 1 then there is complete inequality in the country
Q18. The National Housing Bank was set up in India as a wholly-owned subsidiary of which one of the following?
(a) State Bank of India
(b) Reserve Bank of India
(c) ICICI Bank
(d) Life Insurance Corporation of India
Answer – B
- The National Housing Bank, the apex institution of housing finance in India, was set up as a wholly-owned subsidiary of the RBI.
Q19. In India, deficit financing is used to raise resources for
(a) economic development
(b) redemption of public debt
(c) adjusting the balance of payments
(d) reducing the foreign debt
Answer – A
- Deficit financing is used to raise resources for economic development.
Q20. The national income of a country for a given period is equal to the
(a) the total value of goods and services produced by the nationals
(b) the sum of total consumption and investment expenditure
(c) the sum of personal income of all individuals
(d) money value of final goods and services produced
Answer – D
- The national income of a country for a given period is equal to the Money value of final goods and services produced.
Q21. Economic growth in country X will necessarily have to occur it
(a) there is technical progress in the world economy
(b) there is population growth in X
(c) there is capital formation in X
(d) the volume of trade grows in the world economy
Answer – C
- Capital formation brings additional income production in the economy, which enhances growth. Other choices do not lead to growth.
Q22. Which one of the following is likely to be the most inflationary in its effect?
(a) Repayment of public debt
(b) Borrowing from the public to finance a budget deficit
(c) Borrowings from banks to finance a budget deficit
(d) Creating new money to finance a budget deficit
Answer – D
- Deficit financing always brings inflationary pressure whatever the means but ‘creation’ (printing) of new money has the highest inflationary impact.
Q23. A rise in the general level of prices may be caused by
- An increase in the money supply
- A decrease in the aggregate level of output
- An increase in the effective demand
Select the correct answer using the codes given below:
(a) 1 only
(b) 1 and 2 only
(c) 2 and 3 only
(d) 1, 2 and 3
Answer -D
- A rise in price means inflation can be caused by money supply, by reducing the supply i.e. decrease in aggregate level of output, and due to an increase in demand
Q24. Consider the following statements:
- Inflation benefits the debtors.
- Inflation benefits the bondholders.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer – A
- Inflation redistributes wealth from creditors to debtors i.e. lenders suffer and borrowers benefit from inflation.
- Bond holders This person has lent money (to debtor) and received a bond in return. So he is a lender, and he suffers.
- Therefore Answer choice is (A) 1 only (Debtor benefits from inflation).
Q25. Consider the following statements:
- The price of any currency in international the market is decided by the World Bank
- Demand for goods/services provided by the country concerned
- Stability of the government of the concerned country
- The economic potential of the country in question.
Which of the statements given above are correct?
(a) 1, 2 3, and 4
(b) 2 and 3 only
(c) 3 and 4 only
(d) 1 and 4 only
Answer – B
- The price of any currency is the international market is determined by the forces of demand and supply. Demand for a currency increases if the demand for the goods and services provided by that country increases. Moreover, a stable Govt gives confidence to investors and raises the demand for the currency of that country.
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