Tag: money and banking

Quizzes (9) Questions (109)

Questions Related to money and banking

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

Which of the following is not a cure for inflation?

  1. Better capacity utilization

  2. Lowering of bank rate

  3. Public distribution system

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

When banks want to borrow long term funds from RBI, bank rate is the interest rate which RBI charges to them. Increase in the bank rate will be useful to control inflation.

It is currently set to 6.75 % (Second Bi-monthly Monetary Policy Statement, 2018–19). The bank rate is not used to control money supply these days.

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

Open Market Operation (OMO) refers to the purchase and sale of __________.

  1. gold

  2. foreign exchange

  3. iron and steel

  4. government securities
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Open market operations (OMO) refer to the buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system.

This is one of the tools used bu the Reserve Bank of India to increase or decrease the money supply in the economy.

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

In respect of "Door Step Banking", RBI has issued directives under the provisions of _______.

  1. reserve bank of India act, 1934

  2. negotiable instruments act, 1881

  3. banking regulation act, 1949

  4. shops and establishments act
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

 In a bid to facilitate seamless banking for all sections of the society, the Reserve Bank of India directed all banks to implement doorstep banking facilities for differently-abled citizens and those above 70 years of age by December this year under Section 23 of the Banking Regulation Act, 1949.

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

If a cheque presented to the clearinghouse is returned unpaid for any reason, the banker has to enclose the cheque to a Returning Memo while returning the instrument to the customer. This provision has been prescribed under which of the following?

  1. Negotiable Instruments Act, 1881

  2. Reserve Bank of India Act, 1934

  3. Banking Regulation Act, 1949

  4. RBI Clearing House, Rules
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

According to the Reserve Bank of India Clearing House, Rules which list the basic guidelines for clearing all types of dues of the clearing house, if any cheque presented to the clearinghouse is returned unpaid for any reason, the banker has to enclose the cheque to a Returning Memo which  records all such transactions when he returns the instrument to the account holder or the customer. 

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

In order to encourage investment in the country, the RBI may ____________.

  1. reduce CRR

  2. increase CRR

  3. sell securities in the open market

  4. increase bank rate
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

In order to encourage investment in the country, the RBI may reduce CRR. Reduction in CRR will increase the lending capacity of the banks, leading to higher credit creation which will encourage investment.

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

In order to control credit and investment, the Central Bank of a country should _____________.

  1. Sell securities in the open market and hike the Cash Reserve Ratio.

  2. Buy securities from the open market and lower the Cash Reserve Ratio.

  3. Buy securities from the open market and hike the Cash Reserve Ratio.

  4. Sell securities in the open market and lower the Cash Reserve Ratio.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

To control credit and investment, the Central Bank needs to reduce liquidity. Selling securities drains cash from the system, and hiking the Cash Reserve Ratio (CRR) forces banks to hold more idle reserves, thereby restricting lending capacity.