Banking Financial Awareness · Economics

Banking Regulation and Monetary Policy

1,219 Questions

Banking regulation and monetary policy questions test your understanding of the Reserve Bank of India functions, regulatory frameworks, and monetary tools. Topics include KYC guidelines, repo rates, and foreign exchange reserves management. This section is crucial for candidates preparing for banking and financial awareness exams.

RBI monetary toolsKYC guidelinesInterest rate regulationsCurrency issuanceBanking business acts

Banking Regulation and Monetary Policy Questions

Multiple choice

As reported in various newspapers many banks have revised their interest rates on home loans, car loans and other such loans. Which of the following phenomenon promted these banks to make such an upward revision in their interest rates?(1) RBI has revised the CRR and other such rates upwardly which has created a liquidity crunch in the market. (2) Stock markets in the country are showing very high fluctuations as visible through their indexes.As a result banks have lost a huge amount of money in trading. Banks now want to recover that money by increasing their interest rates. (3) Banks are in need of a huge amount of money, as they have to give revised pay to all its employees.

  1. Only 1

  2. Only 2

  3. Only 3

  4. All 1,2 & 3

  5. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When the RBI increases the Cash Reserve Ratio (CRR), banks are required to keep more cash with the central bank, which reduces the liquidity available for lending, thereby prompting banks to increase interest rates.

Multiple choice

Many times we read a term "Hot Money" in newspapers. What is/are the characteristics of Hot Money? (1) The term is used for fresh currency notes issued by the RBI. (2) It is the fund which flows in the market to take advantage of high interest rates. (3) It is the Fund which is thrown in the market to create imbalance in the stock markets.

  1. Only 1

  2. Only 2

  3. Only 3

  4. All 1,2 & 3

  5. None of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Hot money refers to capital that flows rapidly between financial markets to take advantage of short-term interest rate differentials or currency fluctuations, rather than for long-term investment.

Multiple choice

Very often we read in the newspapers about various measures taken up to control the flow of the capital in the Indian markets. Who amongst the following is/are the regulators who can control the flow of the same in India? (1) Scheme is aimed to provide nutritional food to children , pregnant woman and lactating mothers. (2) Scheme will be implemented in the State of Chhattisgarh only. (3) The finance for the scheme would be provided by the World Bank and Asian Development Bank.

  1. Only 1

  2. Only 2

  3. Only 3

  4. Both 2 & 3

  5. Both 1 & 2
Reveal answer Fill a bubble to check yourself
B Correct answer
Multiple choice

The Government of India has bought RBI' s entire stake in the State Bank of India in about Rs. 35,531 crores. What is the share of the RBI in total stake of the State Bank? About

  1. 40%

  2. 48%

  3. 50%

  4. 52%

  5. 60%
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

The Government of India acquired the Reserve Bank of India's stake in the State Bank of India to ensure the central bank remained independent of commercial banking operations. This stake represented approximately 60 percent of the total shareholding.

Multiple choice

The RBI classifies currency with public plus demand deposits with the public as

  1. M1

  2. M2

  3. M3

  4. M4
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

 In 1979, the RBI classified money stock in India in the following four categories: M1 = Currency with the public, i.e. coins and currency notes + demand deposits of the public known as narrow money M2 = M1 + Post office saving deposits M3 = M1 + Time deposits of the pubic with banks called broad money M4 = M3 + Total post office deposits (excluding National Saving Certificates)

Multiple choice

Directions: The short passage below is followed by a question based on its content. Answer the question on the basis of what is stated or implied in the passage.

Currency convertibility is not by any means an unmixed blessing. There are several issues that need to be carefully examined before rushing headlong towards full convertibility. The first, obviously, is with reference to the advantages & costs of a fully convertible currency. The second issue concerns the distinction between convertibility on the current account and on the capital account and the sequencing of the two. The final issue has to do with the preconditions that have to exist in the domestic economy before it is possible to maintain a fully convertible currency. It is a moot question whether the Indian economy will achieve these in the near future.

What is the theme of the passage?

  1. Currency convertibility is not advisable in India at this stage.

  2. Indian policy makers must think hard before taking the plunge on the currency convertibility issue.

  3. Currency convertibility has several aspects requiring a thorough analysis.

  4. The issue of currency convertibility in India has brought forth several unsolved questions.

  5. Indian economy is not yet ready for currency convertibility on capital account.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

 The first line gives us hint that the author talks about 'currency convertibility'. The second line and last line indicate that many issues and questions need to be analyzed before going headlong for convertibility. This marks options (4).

Multiple choice

Which of the following statements about Subir Gokarn who was appointed Deputy Governor of the RBI recently are correct? I.          He was Asia-Pacific Chief Economist at credit rating agency Moody's before his appointment as RBI Deputy Governor II.         He was Chief Economist at Indian credit rating firm ICRA before joining Moody's in 2007 III.        He has also served as Chief Economist at the National Council of Applied Economic Research (NCAER)

  1. I and II only

  2. II only

  3. III and I only

  4. III only
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

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