Banking Financial Awareness · Commerce Accountancy

Credit, Debt, and Finance

1,382 Questions

This topic covers essential concepts of credit, debt, and finance including bankruptcy, debt recovery, and financial acts. These questions are frequently asked in banking and IBPS exams. Test your knowledge of financial terminology and loan classifications.

Debt recovery actsBankruptcy filing proceduresFinancial classificationsMedium term financeCredit loss management

Credit, Debt, and Finance Questions

Multiple choice instruments of monetary policy and the reserve bank of india money and banking economics

One of the most important quantitative tools of credit control is _______.

  1. deficit financing

  2. moral suasion

  3. market borrowings

  4. statutory liquidity ratio
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

 SLR (Statutory Liquidity Ratio) is the reserve requirement given by the Reserve Bank of India that the commercial banks in India are required to maintain in the form of cash, gold reserves, government approved securities before providing credit to the customers.

If the SLR is increased by the RBI, it will reduce the money supply in the economy and vice versa.

Multiple choice instruments of monetary policy and the reserve bank of india money and banking economics

Loans against Shares/Debentures can be sanctioned against the security of ________.

  1. preference share and convertible debentures

  2. fully paid equity shares and debentures in demat form

  3. all shares and debentures in physical form

  4. only preference share and partly paid debentures
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The loans taken for the purchase of shares and debentures of any company can be sanctioned by any bank against a collateral security of some fully paid equity shares and debentures of some other company in demat form i.e. non materialistic form. 

Multiple choice instruments of monetary policy and the reserve bank of india money and banking economics

Match the items of List-I with those in List-II and select the correct answer.

List-I List-II
(a) Bank Rate Policy 1. Involving the shortening of the currency of bills eligible for rediscount
(b) Credit Rationing 2. Involving the Purchase and sale of securities in the open market
(c) Variable Reserve System 3. Involving the alteration of discount rate
(d) Open Market Operations 4. Involving the variation of the minimum reserves
  1. $(a) - 1, (b) - 4, (c) - 2, (d) - 3$
  2. $(a) - 2, (b) - 1, (c) - 3, (d) - 4$
  3. $(a) - 4, (b) - 2, (c) - 1, (d) - 3$
  4. $(a) - 3, (b) - 1, (c) - 4, (d) - 2$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Bank Rate Policy involves altering the discount rate (a-3). Credit Rationing involves shortening the currency of bills (b-1). Variable Reserve System involves varying minimum reserves (c-4). Open Market Operations involve buying/selling securities (d-2).

Multiple choice instruments of monetary policy and the reserve bank of india money and banking economics

Bonds or debentures issued by Securitization company should bear interest not less than ______.

  1. Bank Rate

  2. Prime Lending Rate

  3. 1.5% over the Bank Rate

  4. 1.5% over the Saving Rate
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Securitization companies issue security receipts or bonds to investors. Regulations typically mandate a minimum interest rate to ensure attractiveness and fairness, which is set at 1.5% above the Bank Rate.

Multiple choice instruments of monetary policy and the reserve bank of india money and banking economics

If a country's lending is more than its borrowing from the rest of the world,it is a _________.

  1. net borrower

  2. net lender

  3. surplus state

  4. deficit state
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

If a country's lending is more than its borrowing from the rest of the world, it is known as a net lender. In such a case, the country is regarded as a creditor nation. It is very easy for such nations to raise credit from other nations in monetary terms. 

Multiple choice instruments of monetary policy and the reserve bank of india money and banking economics

A country is treated a debtor nation if ______.

  1. it has a history of more lending than borrowing

  2. it has a history of more borrowing than lending

  3. it has positive surplus

  4. it has negative surplus
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

If a country's borrowing is more than its lending to the rest of the world, it is known as a net borrower. In such a case, the country is treated as a debtor nation because it has a history of more  borrowings(taking credits) than 

lending(giving credits). 

Multiple choice instruments of monetary policy and the reserve bank of india money and banking economics

If a country's borrowing is more than its lending from the rest of the world,it is a _______.

  1. net borrower

  2. net lender

  3. surplus state

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

If a country's borrowing is more than its lending to the rest of the world, it is known as a net borrower. In such a case, the country is treated as a debtor nation. . It is very difficult for such nations to raise credit from other nations in monetary terms. 

Multiple choice instruments of monetary policy and the reserve bank of india money and banking economics

A country is treated a creditor nation if ________.

  1. it has a history of more lending than borrowing

  2. it has a history of more borrowing than lending

  3. it has positive trade surplus

  4. it has negative trade surplus
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

If a country's lending is more than its borrowing from the rest of the world, it is known as a net lender. In such a case, the country is treated as a creditor nation because it has a history of more lending(giving credits) than borrowings(taking credits). 

Multiple choice instruments of monetary policy and the reserve bank of india money and banking economics

Repo transactions are allowed in ________.

  1. Government securities/ Treasury bills of all maturity

  2. State Government securities

  3. PSU bonds/ Private corporate bonds

  4. All the three
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Repo transactions are permitted across a wide range of debt instruments, including government securities, state government securities, and certain corporate bonds, to facilitate liquidity in the money market.

Multiple choice instruments of monetary policy and the reserve bank of india money and banking economics

Selective credit control method is used to __________.

  1. regulate credit for some specific purpose

  2. redirect credit for some specific purpose

  3. restrict supply of credit to check inflation

  4. restrict credit to some identified companies
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Selective credit control method of monetary policy includes those instruments which focus on the selected sectors of the economy and not the size of the total credit in economy as it is a qualitative method used by the central bank to change affected areas only and not the whole economy. It regulates the credit for some specific purpose which can be prices for a specific commodity etc. 

Multiple choice instruments of monetary policy and the reserve bank of india money and banking economics

Repo Market means _________.

  1. a money market instrument which helps in collateral short term borrowing and leading through sale and purchase operation in debt instrument

  2. a money market instrument which helps in collateral long term borrowing and leading through sale and purchase operation in debt instrument

  3. a money market instrument which helps in collateral short term leading through sale and purchase operation in debt instrument

  4. a money market instrument which helps in collateral short term borrowing through sale and purchase operation in debt instrument
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The Repo market is a segment of the money market that allows for short-term borrowing and lending against collateral in the form of debt instruments.

Multiple choice history industrial sector growth of banks in india nationalisation and privatisation of banks private sector anddifference between public and private sector

In order to control credit ______________.

  1. CRR should be increased and bank rate should be decreased

  2. CRR should be decreased and bank rate should be decreased

  3. CRR should be increased and bank rate should be increased

  4. CRR should be decreased and bank rate should be increased
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In order to control credit, CRR and bank rate should be increased and both will assist in control of credit.

Multiple choice history industrial sector growth of banks in india nationalisation and privatisation of banks private sector anddifference between public and private sector

In the accounts of banks "loans and advances" are

  1. High interest income

  2. Loans given to customer

  3. Liabilities of bank

  4. Both a & b
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Loans and advances are assets for a bank because they represent money lent to customers that will be repaid with interest. Since they are loans given to customers, both the description of them as assets and the nature of the transaction are relevant.

Multiple choice history industrial sector growth of banks in india nationalisation and privatisation of banks private sector anddifference between public and private sector

Land development banks provide loans for a period of  _____.

  1. 1 year

  2. 2 to 5 years

  3. 5 to 7 years

  4. 15 to 20 years
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Land development banks are specialized institutions designed to provide long-term credit to farmers for land improvement and agricultural development, typically ranging from 15 to 20 years.

Multiple choice history industrial sector growth of banks in india nationalisation and privatisation of banks private sector anddifference between public and private sector

A bank requiring a higher interest rate on an automobile loan than on a home mortgage loan is demonstrating the core principle that says __________.

  1. "Time has value."

  2. "Markets determine prices and allocate resoucers."

  3. "Risks requires compensation."

  4. "Information is the basis for decisions."
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Banks charge higher interest rates on riskier loans to compensate for the higher probability of default. This is a fundamental principle of finance where higher risk requires a higher potential return.