BANKING SYSTEM : PREVIOUS YEAR QUESTIONS :: ECONOMICS

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2011

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

a

 

In India, which of the following have 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

a

 

Why is the offering of “teaser loans” by commercial banks a cause of economic concern?

1. The teaser loans are considered to be an aspect of sub-prime lending and banks may be exposed to the risk of defaulters in future.

2. In India, the 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

a

 

Microfinance is the provision of financial services to people of low-income goups. This includes both the consumers and the self-employed. The service/services rendered under micro-finance is/are:

1. Credit facilities

2. Savings facilities

3. Insurance facilities

4. 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

d

 

2012

The basic aim of 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 district for intensive development.

(d) all the banks should make intensive efforts to mobilize deposits.

c

 

The Reserve Bank of India (RBI) acts as a bankers” bank. This would imply which of the following?

  1. Other banks retain their deposits with the RBI.
  2. The RBI lends funds to the commercial banks in times of need.
  3. 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

d

 

2013

Which of the following grants/grant direct credit assistance to rural households?

1. Regional Rural Banks

2. National Bank for Agriculture and Rural Development

3. Land Development Banks

Select the correct answer using the codes given below.

(a) 1 and 2 only

(b) 2 only

(c) 1 and 3 only

(d) 1, 2 and 3

c

 

Economic growth in country X will necessarily have to occur if

(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

c

 

Priority Sector Lending by banks in Indian constitutes the lending to

(a) Agriculture

(b) Micro and small enterprises

(c) Weaker sections

(d) All of the above

d

 

In the context of Indian economy, ‘Open Market Operations’ refers to

(a) Borrowing by scheduled banks from the RBI.

(b) Lending by commercial banks to industry and trade.

(c) Purchase and sale of government securities by the RBI.

(d) None of the above

c

 

Consider the following liquid assets:

1. Demand deposits with the banks

2. Time deposits with the banks

3. Savings deposits with the banks

4. Currency

The correct sequence of these assets in the decreasing order of liquidity is

(a) 1–4–3–2

(b) 4–3–2–1

(c) 2–3–1–4

(d) 4–1–3–2

d

 

An increase in the Bank Rate generally indicates that the

(a) market rate of interest is likely to fall

(b) Central Bank is no longer making loans to commercial banks

(c) Central Bank is following an easy money policy

(d) Central Bank is following a tight money policy

d

 

 

The Reserve Bank of India regulates the commercial banks in matters of

  1. liquidity of assets
  2. branch expansion
  3. merger of banks
  4. 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

d

 

2014

If the interest rate is decreased in an economy, it will

(a) decrease the consumption expenditure in the economy.

(b) increase the tax collection of the Government.

(c) Increase the investment expenditure in the economy.

(d) increase the total savings in the economy.

c

 

In the context of Indian economy which of the following is/are the purpose/purposes of “Statutory Reserve Requirements”?

1. To enable the Central Bank to control the amount of advances the banks can create.

2. To make the people”s deposits with banks safe and liquid.

3. To prevent the commercial banks from making excessive profits.

4. To force the banks to have sufficient vault cash to meet their day-to-day requirements.

Select the correct answer using the code given below.

(a) 1 only

(b) 1 and 2 only

(c) 2 and 3 only

(d) 1, 2, 3 and 4 only

a

 

What is/are the facility/facilities the beneficiaries can get from the services of Business Correspondent (Bank Saathi) in branchless areas?

1. It enables the beneficiaries to draw their subsidies and social security benefits in their villages.

2. 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

c

 

The terms “Marginal Standing Facility Rate” and “Net Demand and Time Liabilities”, sometimes appearing in news, are used in relation to

(a) banking operations

(b) communications networking

(c) military strategies

(d) supply and demand of agricultural product

a

 

2015

When the Reserve Bank of India reduces the Statutory Liquidity by 50 basis points, which of the following is likely to happen?
a) India’s GDP growth rate increases drastically
b) Foreign Institutional Investors may bring more capital into our country
c) Scheduled Commercial Banks may cut their lending rates
d) It may drastically reduce the liquidity to the banking system.
Solution: c)

 

With reference to India economy, consider the following :
1. Bank rate
2. Open market operations
3. Public debt
4. Public revenue
Which of the above is/are component/components of Monetary Policy?
a) 1 only
b) 2, 3 and 4
c) 1 and 2
d) 1, 3 and 4
Solution: c)

 

‘Basel III Accord’ or simply ‘Basel III’, often seen in the news, seeks to
(a) develop national strategies for the conservation and sustainable use of biological diversity
(b) improve banking sector’s ability to deal with financial and economic stress and improve risk management
(c) reduce the greenhouse gas emissions but places a heavier burden on developed countries
(d) transfer technology from developed Countries to poor countries to enable them to replace the use of chlorofluorocarbons in refrigeration with harmless chemicals
Solution: b)

 

2016

The establishment of ‘Payment Banks’ is being allowed in India to promote financial inclusion. Which of the following statements is/are correct in this context?

  1. Mobile telephone companies and supermarket chains that are owned and controlled by residents are eligible to be promoters of Payment Banks.
  2. Payment Banks can issue both credit cards and debit cards.
  3. Payment Banks cannot undertake lending activities.

Select the correct answer using the code given below.

(a) 1 and 2 only

(b) 1 and 3 only

(c) 2 only

(d) 1, 2 and 3

Solution: B

 

What is/are the purpose/purposes of the `Marginal Cost of Funds based Lending Rate (MCLR)’ announced by RBI?

  1. These guidelines help improve the transparency in the methodology followed by banks for determining the interest rates on advances.
  2. These guidelines help ensure availability of bank credit at interest rates which are fair to the borrowers as well as the banks.

Select the correct answer using the code given below.

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Solution: C

 

The term ‘Core Banking Solutions’ is sometimes seen in the news. Which of the following statements best describes/describe this term?

  1. It is a networking of a bank’s branches which enables customers to operate their accounts from any branch of the bank on its network   regardless of where they open their accounts.
  2. It is an effort to increase RBI’s control over commercial banks through computerization.
  3. It is a detailed procedure by which a bank with huge non- performing assets is taken over by another bank.

Select the correct answer using the code given below.

(a) 1 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2 and 3

Solution: A

 

2017

Which of the following statements is/are correct regarding the ‘Monetary Policy Committee (MPC)?

 

  1. It decides the RBI’s benchmark interest rates.
  2. It is a 12-member body including the Governor of RBI and is reconstituted every year.
  3. It functions under the chairmanship of the Union Finance Minister.

Select the correct answer using the code given below:

(a)1 only

(b)1 and 2 only

(c)3 only

(d)2 and 3 only

ANS:A

 

Which of the following is a most likely consequence of implementing the ‘Unified Payments Interface (UPI)?

(a)Mobile wallets with not be necessary for online payments.

(b)Digital currency will totally replace the physical currency in about two decades.

(c)FDI inflows will drastically increase.

(d)Direct transfer of subsidies to poor people will become very effective.

ANS:A

 

What is the purpose of setting up of Small Finance Banks (SFBs) in India?

  1. To supply credit to small business units
  2. To supply credit to small and marginal farmers
  3. To encourage young entrepreneurs to set up business particularly in rural areas.

Select the correct answer using the code given below:

(a)1 and 2 only

(b)2 and 3 only

(c)1 and 3 only

(d)1, 2 and 3

ANS:A

 

Consider the following statements:

  1. National Payment Corporation of India (NPCI) helps in promoting the financial inclusion in the country.
  2. NPCI has launched RuPay, a card payment scheme.

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

ANS:C

 

Which of the following statements best describes the term ‘Scheme for Sustainable Structuring of Stressed Assets (S4A)’, recently seen in the news?

(a)It is a procedure for considering ecological costs of developmental schemes formulated by the Government.

(b)It is a scheme of RBI for reworking the financial structure of big corporate entities facing genuine difficulties.

(c)It is a disinvestment plan of the Government regarding Central Public Sector Undertakings.

(d)It is an important provision in ‘The Insolvency and Bankruptcy Code’ recently implemented by the Government.

ANS:B

 

2018

With reference to the governance of public sector banking in India, consider the following statements:

  1. Capital infusion into public sector banks by the Government of India has steadily increased in the last decade.
  2. To put the public sector banks in order, the merger of associate banks with the parent State Bank of India has been affected.

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

ANS:B

 

Consider the following statements:

  1. The Reserve Bank of India manages and services Government of India Securities but not any State Government Securities.
  2. Treasury bills are issued by the Government of India and there are no treasury bills issued by the state Governments.
  3. Treasury bills offer are issued at a discount from the par value.

Which of the statements given above is/are correct?

(a)1 and 2 only

(b)3 only

(c)2 and 3 only

(d)1, 2 and 3

ANS:C

 

Which one of the following statements correctly describes the meaning of legal tender money?

(a)The money which is tendered in courts of law to defray the fee of legal cases

(b)The money which a creditor is under compulsion to accept in settlement of his claims

(c)The bank money in the form of cheques, drafts, bills of exchange etc.

(d)The metallic money in circulation in a country

ANS:B

 

With reference to digital payments, consider the following statements:

  1. BHIM app allows the user to tranfer money to anyone with a UPI-enabled bank account.
  2. While a chip-pin debit card has four factors authentication, BHIM app has only two factors of authentication.

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

ANS:A

 

Consider the following statements:

  1. Capital Adequacy Ratio (CAR) is the amount that banks have to maintain in the form of their own funds to offset any loss that banks incur if the account-holders fail to repay dues.
  2. CAR is decided by each individual bank.

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

ANS:A

 

Which one of the following links all the ATMs in India

(a)Indian Banks’ Association

(b)National Securities Depository Limited

(c)National Payments Corporation of India

(d)Reserve Bank of India

ANS:C

 

Which one of the following best describes the term “Merchant Discount Rate” sometimes seen in news?

(a)The incentive given by a bank to a merchant for accepting payments through debit cards pertaining to that bank.

(b)The amount paid back by banks to their customers when they use debit cards for financial transactions for purchaing goods or services.

(c)The charge to a merchant by a bank for accepting payments from his customers through the bank’s debit cards.

(d)The incentive given by the Government to merchants for promoting digital payments by their customers through Point of Sale (PoS) machines and debit cards.

ANS/:C

 

2019

What was the purpose of Inter-Creditor Agreement signed by Indian banks and financial institutions recently?

(a)To lessen the Government of India’s perennial burden of fiscal deficit and current account deficit.

(b)To support the infrastructure projects of Central and State Governments

(c)To act as independent regulator in case of application for loans of Rs. 50 core or more

(d)To aim at faster resolution of stressed assets of Rs. 50 crore or more which are under consortium lending

ANS: D

 

The Chairman of public sector banks are selected by the

(a)Banks Board Bureau

(b)Reserve Bank of India

(c)Union Ministry of Finance

(d)Management of concerned bank

ANS:A

 

 

The Service Area Approach was implemented under the purview of

(a)Integrated Rural Development Programme

(b)Lead Bank Scheme

(c)Mahatma Gandhi National Rural Employment Guarantee Scheme

(d)National Skill Development Mission

ANS:B

 

Which of the following is not included in the assets of a commercial bank in India?

(a)Advances

(b)Deposits

(c)Investments

(d)Money at call and short notice

ANS:B

 

Which one of the following is not the most likely measure the Government/ RBI takes to stop the slide of Indian rupee?

(a)Curbing imports of non-essential goods-and promoting exports

(b)Encouraging Indian borrowers to issue rupee denominated Masala Bonds

(c)Easing conditions relating to external commercial borrowing

(d)Following an expansionary monetary policy

ANS:D

 

The Reserve Bank of India’s recent directives relating to ‘Storage of Payment System Data’, popularly known as data diktat, command the payment system providers that

1.They shall ensure that entire data relating to payment systems operated by them are store in a system only in India.

2.They shall ensure that the systems are owned and operated by public sector enterprises.

3.They shall submit the consolidated system audit report to the Comptroller and Auditor General of India by the end of the calendar year

Which of the statements given above is/are correct?

(a)1 only

(b)1 and 2 only

(c)3 only

(d)1, 2 and 3

ANS:A

 

The money multiplier in an economy increases with which one of the following?

(a)Increase in the cash reserve ratio

(b)Increase in the banking habit of the population

(c)Increase in the statutory liquidity ratio

(d)Increase in the population of the country

ANS:B

 

2020

If you withdraw 1,00,000 from your in cash from your Demand Deposit Account at your bank, the immediate effect on aggregate money supply in the economy will be

(a) To reduce it by 1,00,000

(b) To increase it by 1,00,000

(c) To increase it by more than 1,00,000

(d) To leave it unchanged

Answer: D

 

What is the importance of the term “Interest Coverage Ratio” of a firm in India?

1. It helps in understanding the present risk of a firm that a bank is going to give loan to.

2. It helps in evaluating the emerging risk of a firm that a bank is going to give loan to.

3. The higher a borrowing firm’s level of Interest Coverage Ratio, the worse is its ability to service its debt.

Select the correct answer using the code given below:

(a) 1 and 2 only

(b) 2 only

(c)1 and 3 only

(d) 1,2 and 3

Answer: A

 

With reference to the Indian Economy, consider the following statements:

1.’Commercial Paper’ is a short term unsecured promissory note.

2. ‘Certificate of Deposit’ is a long-term instrument issued by the Reserve Bank of India to a corporation.

3. ‘Call Money’ is a short term finance used for interbank transactions.

4. ‘Zero-Coupon Bonds’ are the interest bearing short term bonds issued by the Scheduled Commercial Banks to corporations.

Which of the statements given above is/are correct ?

(a) 1 and 2 only

(b) 4 only

(c) 1 and 3 only

(d) 2,3 and 4 only

Answer: C

 

In the context of the Indian economy, non-financial debt includes which of the following?

1. Housing loans owned by household
2. Amounts outstanding on credit cards
3. Treasury Bills

Select the correct answer using the code given below:

(a) 1 only

(b) 1 and 2 only

(c) 3 only

(d) 1,2 and 3

Answer: D

 

If the RBI decides to adopt an expansionist monetary policy, which of the following it would NOT do?

  1. Cut and optimize the statutory liquidity ratio
  2. Increase the Marginal Standing Facility Rate
  3. Cut the Bank Rate and Repo Rate

Select the correct answer using the code given below:

(a) 1 and 2 only

(b) 2 only

(c) 1 and 3 only

(d) 1, 2 and 3

Answer: B

 

Consider the following statements:

1. In terms of short term credit delivery to the agriculture sector, District Central Cooperative Banks(DCCBs) deliver more credit in comparison to Scheduled Commercial Banks and Regional Rural Banks.

2. One of the most important functions of DCCBs is to provide funds to the Primary Agricultural Credit Societies.

Which of the statements is/are correct ?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer: B

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