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This a MCQ (Multiple Choice Question) based practice test of Chapter 3 - Money and Banking of Economics of Class XII (12) for the quick revision/preparation of School Board examinationsQ Central Bank is a- a)Regional bank
- b)Commercial bank
- c)Rural bank
- d)Apex bank
Correct answer is option 'D'. Can you explain this answer?
This a MCQ (Multiple Choice Question) based practice test of Chapter 3 - Money and Banking of Economics of Class XII (12) for the quick revision/preparation of School Board examinations
Q Central Bank is a
a)
Regional bank
b)
Commercial bank
c)
Rural bank
d)
Apex bank
|
Kiran Mehta answered |
Apex is the top or highest part of something, especially one forming a point. An apex institution is a second-tier or wholesale organization that channels funding (grants, loans, guarantees) to multiple microfinance institutions (MFIs) in a single country or region. Funding may be provided with or without supporting technical services.
The Central Bank is the Apex Bank in India because of the following functions:
- Monetary authority, issue of currency. Banker and debt manager to government, banker to banks, regulation of banking system, manager of foreign exchange, regulator and supervisor of the payment and the settlement systems and maintaining financial stability
What do you mean by credit creation by commercial banks?- a)It is the process of total withdrawal creation
- b)It is the process of total deposit creation
- c)It is the process of loan creation
- d)It is the process of creation of foreign exchange
Correct answer is option 'B'. Can you explain this answer?
What do you mean by credit creation by commercial banks?
a)
It is the process of total withdrawal creation
b)
It is the process of total deposit creation
c)
It is the process of loan creation
d)
It is the process of creation of foreign exchange
|
|
Kavita Joshi answered |
Credit creation is the most significant function of the commercial banks. Commercial banks accept deposits and lend loans and advances. In this process they create two types of deposits, namely primary deposits and derivative or active deposits. The former refers to the cash deposited by a customer in a bank or deposit a cheque with the bank for collection. The banker merely accepts cash am converts it into a deposit. Hence, this is merely a passive role performed by the banks. These primary deposits do not add to the money stock in the economy. From their experience and observation the banks know that not all the customers will withdraw their deposits on any single day. Hence, after providing for some reserve to meet the cash requirement of the depositors, the banks lend the balance to the borrow. The amount of reserve to be maintained by the banks is Cash Reserve Ratio which is determined by the central bank.
Currency notes and coins are called as:- a)Flat money
- b)Legal tenders
- c)Fiat money
- d)Both b and c
Correct answer is option 'D'. Can you explain this answer?
Currency notes and coins are called as:
a)
Flat money
b)
Legal tenders
c)
Fiat money
d)
Both b and c
|
Jeeshan Ahmed answered |
Fiat money refers to any currency lacking intrinsic value that is declared legal tender by a government .so currency notes and coins are called as both legal tender and fiat money
Money is a medium of- a)Communication
- b)Barter
- c)Speculation
- d)Exchange
Correct answer is option 'D'. Can you explain this answer?
Money is a medium of
a)
Communication
b)
Barter
c)
Speculation
d)
Exchange
|
Aryan Khanna answered |
Money is often defined in terms of the three functions or services that it provides. Money serves as a medium of exchange, as a store of value, and as a unit of account.
The process of money creation or credit creation IS done by- a)World bank
- b)commercial banks
- c)Rural bank
- d)Central bank
Correct answer is option 'B'. Can you explain this answer?
The process of money creation or credit creation IS done by
a)
World bank
b)
commercial banks
c)
Rural bank
d)
Central bank
|
|
Kavita Joshi answered |
It will be seen that the most important function of a commercial bank is the creation of credit money a function which overshadows all other banking functions.
Credit creation or money creation refers to the power of the banks to expand or contract demand deposits through the process of more loans, advances and investments.
Barter system is- a)Exchange of money
- b)Exchange of goods
- c)Exchange of trade
- d)Exchange of foreign exchange
Correct answer is option 'B'. Can you explain this answer?
Barter system is
a)
Exchange of money
b)
Exchange of goods
c)
Exchange of trade
d)
Exchange of foreign exchange
|
|
Alok Mehta answered |
A barter system is an old method of exchange. Th is system has been used for centuries and long before money was invented. People exchanged services and goods for other services and goods in return.
One drawback of barter exchange is- a)Lack of goods
- b)Lack of trust
- c)Lack of double coincidence of wants
- d)Lack of coincidence of wants
Correct answer is option 'C'. Can you explain this answer?
One drawback of barter exchange is
a)
Lack of goods
b)
Lack of trust
c)
Lack of double coincidence of wants
d)
Lack of coincidence of wants
|
Rajat Patel answered |
The double coincidence of wants mean that both the parties have to agree to sell and buy each other's commodity i.e. what a person desires to sell is exactly what the other person wishes to buy. In a barter system commodities bare exchanged with commodities of other person without the use of money.
The Reserve Bank of India issues all currency notes except:- a)500 Rupee note
- b)100 Rupee Note
- c)10 Rupee note
- d)1 Rupee note
Correct answer is 'D'. Can you explain this answer?
The Reserve Bank of India issues all currency notes except:
a)
500 Rupee note
b)
100 Rupee Note
c)
10 Rupee note
d)
1 Rupee note
|
Nandini Iyer answered |
Under Section 22 of the Reserve Bank of India Act, RBI has sole right to issue currency notes of various denominations except one rupee notes.
The One Rupee note is issued by Ministry of Finance and It bears the signatures of Finance Secretary, while other notes bear the signature of Governor RBI.
However RBI is the only source of legal tender money because distribution of one rupee notes and coins and small coins all over the country is undertaken by the Reserve Bank as agent of the Government.
The fraction of deposits kept as Cash Reserves by the commercial banks with themselves is called
- a)SLR
- b)LLR
- c)RR
- d)CRR
Correct answer is option 'D'. Can you explain this answer?
The fraction of deposits kept as Cash Reserves by the commercial banks with themselves is called
a)
SLR
b)
LLR
c)
RR
d)
CRR
|
Gowri Nambiar answered |
Definition of CRR
The Cash Reserve Ratio (CRR) is the fraction of deposits that commercial banks keep as reserves with themselves, either in cash or as deposits with the RBI. It is a monetary policy tool used by the central bank to regulate the money supply in the economy.
Importance of CRR
The CRR is an important tool for the RBI to regulate liquidity in the economy. By increasing the CRR, the RBI reduces the amount of money that commercial banks can lend, thereby reducing the money supply in the economy. Similarly, by decreasing the CRR, the RBI increases the amount of money that commercial banks can lend, thereby increasing the money supply in the economy.
Impact of CRR
The impact of CRR on the economy is significant. If the CRR is high, banks will have less money to lend, which can lead to a decrease in economic growth. On the other hand, if the CRR is low, banks will have more money to lend, which can lead to inflation.
Conclusion
In conclusion, the CRR is an important tool for the RBI to regulate the money supply in the economy. It is the fraction of deposits that commercial banks keep as reserves with themselves, either in cash or as deposits with the RBI. The impact of CRR on the economy is significant, and it is important for the RBI to use this tool wisely to achieve its monetary policy objectives.
The Cash Reserve Ratio (CRR) is the fraction of deposits that commercial banks keep as reserves with themselves, either in cash or as deposits with the RBI. It is a monetary policy tool used by the central bank to regulate the money supply in the economy.
Importance of CRR
The CRR is an important tool for the RBI to regulate liquidity in the economy. By increasing the CRR, the RBI reduces the amount of money that commercial banks can lend, thereby reducing the money supply in the economy. Similarly, by decreasing the CRR, the RBI increases the amount of money that commercial banks can lend, thereby increasing the money supply in the economy.
Impact of CRR
The impact of CRR on the economy is significant. If the CRR is high, banks will have less money to lend, which can lead to a decrease in economic growth. On the other hand, if the CRR is low, banks will have more money to lend, which can lead to inflation.
Conclusion
In conclusion, the CRR is an important tool for the RBI to regulate the money supply in the economy. It is the fraction of deposits that commercial banks keep as reserves with themselves, either in cash or as deposits with the RBI. The impact of CRR on the economy is significant, and it is important for the RBI to use this tool wisely to achieve its monetary policy objectives.
Monitory policy is announced in India by _________- a)Ministry of Finance
- b)Reserve Bank of India
- c)Planning Commission
- d)Government
Correct answer is option 'B'. Can you explain this answer?
Monitory policy is announced in India by _________
a)
Ministry of Finance
b)
Reserve Bank of India
c)
Planning Commission
d)
Government
|
Poonam Reddy answered |
B: Reserve Bank of India
In India, monetary policy is announced by the Reserve Bank of India (RBI). The RBI is the central bank of India and is responsible for implementing and managing monetary policy in the country.
Monetary policy refers to the actions taken by the central bank to influence the supply and demand of money in the economy, with the aim of achieving certain macroeconomic objectives such as price stability, full employment, and economic growth. The RBI uses various tools, such as changing the interest rates, altering the reserve requirements for banks, and engaging in open market operations, to implement monetary policy in India.
The Ministry of Finance is responsible for managing the government's finances, including preparing the annual budget, mobilizing financial resources, and formulating fiscal policy. The Planning Commission is a government body that is responsible for formulating the country's five-year plans and for coordinating the development activities of various sectors of the economy. The government refers to the executive branch of government, which is responsible for implementing the policies and laws of the country.
Bank rate is for- a)Central banks by the central bank
- b)Commercial banks by the government
- c)Central bank by the commercial banks
- d)Commercial banks by the central bank
Correct answer is option 'D'. Can you explain this answer?
Bank rate is for
a)
Central banks by the central bank
b)
Commercial banks by the government
c)
Central bank by the commercial banks
d)
Commercial banks by the central bank
|
Shiksha Academy answered |
The Reserve Bank of India (RBI) today gave freedom to banks in deciding their base rate. “Banks may choose any benchmark to arrive at the base rate for a specific tenor that may be disclosed transparently,” RBI said, as it released the final guidelines this evening.
Which of these is a Quantitative Method of Credit control?- a)Bank Rate
- b)Moral Suasion
- c)Margin Requirement
- d)All of the above
Correct answer is option 'A'. Can you explain this answer?
Which of these is a Quantitative Method of Credit control?
a)
Bank Rate
b)
Moral Suasion
c)
Margin Requirement
d)
All of the above
|
|
Ræjû Bhæï answered |
The important quantitative methods of credit control is (a) bank rate.The methods used by the central bank to regulate the flows of credit into particular directions of the economy are called qualitative or selective methods of credit control. Unlike the quantitative methods, which affect the total volume of credit, the qualitative methods affect the types of credit, extended by the commercial banks; they affect the composition rather than the size of credit in the economy.
Money is anything that is- a)Regionally accepted
- b)Accepted by banks
- c)Universally accepted
- d)Locally accepted
Correct answer is option 'C'. Can you explain this answer?
Money is anything that is
a)
Regionally accepted
b)
Accepted by banks
c)
Universally accepted
d)
Locally accepted
|
|
Rajat Patel answered |
Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts in a particular country or socio-economic context. The main functions of money are distinguished as: a medium of exchange, a unit of account, a store of value and sometimes, a standard of deferred payment. Any item or verifiable record that fulfills these functions can be considered as money.
The functions of money is that it is a- a)Store of stocks
- b)Store of currency
- c)Store of value
- d)None of the above
Correct answer is option 'C'. Can you explain this answer?
The functions of money is that it is a
a)
Store of stocks
b)
Store of currency
c)
Store of value
d)
None of the above
|
Ameya Mukherjee answered |
Functions of Money
Money plays several roles in an economy. These roles are known as functions of money. The four key functions of money are:
1. Medium of Exchange: Money is used as a medium of exchange to buy goods and services. It makes transactions more convenient and efficient as it eliminates the need for barter system.
2. Measure of Value: Money serves as a measure of value as it provides a standard unit for measuring the worth of goods and services. This makes it easier for people to compare the values of different goods and services.
3. Standard of Deferred Payment: Money is used as a standard of deferred payment, which means that it allows people to buy goods and services on credit and pay for them later.
4. Store of Value: Money serves as a store of value as it can be saved and used at a later date. This function of money is important as it enables people to save for future needs and invest in assets.
The Correct Answer
The correct answer to the given question is option 'C', which states that money is a store of value. This is because money can be saved and used at a later date, which makes it a store of value. Money serves as a means of storing wealth, which can be used to meet future needs or make investments. The other options mentioned in the question, such as store of stocks and store of currency, are not functions of money.
Money plays several roles in an economy. These roles are known as functions of money. The four key functions of money are:
1. Medium of Exchange: Money is used as a medium of exchange to buy goods and services. It makes transactions more convenient and efficient as it eliminates the need for barter system.
2. Measure of Value: Money serves as a measure of value as it provides a standard unit for measuring the worth of goods and services. This makes it easier for people to compare the values of different goods and services.
3. Standard of Deferred Payment: Money is used as a standard of deferred payment, which means that it allows people to buy goods and services on credit and pay for them later.
4. Store of Value: Money serves as a store of value as it can be saved and used at a later date. This function of money is important as it enables people to save for future needs and invest in assets.
The Correct Answer
The correct answer to the given question is option 'C', which states that money is a store of value. This is because money can be saved and used at a later date, which makes it a store of value. Money serves as a means of storing wealth, which can be used to meet future needs or make investments. The other options mentioned in the question, such as store of stocks and store of currency, are not functions of money.
The Reserve Bank of India issues all currency notes except:- a)500 Rupee note
- b)100 Rupee Note
- c)10 Rupee note
- d)1 Rupee note
Correct answer is option 'D'. Can you explain this answer?
The Reserve Bank of India issues all currency notes except:
a)
500 Rupee note
b)
100 Rupee Note
c)
10 Rupee note
d)
1 Rupee note
|
Vinit Gupta answered |
Because the power is in hands of government
Which of the following is a qualitative method of credit control - a)Bank rate
- b)Open market operations
- c)Variation in the reserve requirement
- d)Regulation of consumer credit
Correct answer is option 'D'. Can you explain this answer?
Which of the following is a qualitative method of credit control
a)
Bank rate
b)
Open market operations
c)
Variation in the reserve requirement
d)
Regulation of consumer credit
|
|
Amita Das answered |
Credit control is most important function of Reserve Bank of India. Credit control in the economy is required for the smooth functioning of the economy. By using credit control methods RBI tries to maintain monetary stability. There are two types of methods: Quantitative control to regulates the volume of total credit.
Which one of the following statement defines the term “Reverse Repo Rate?- a)The rate at which the commercial banks borrow money from RBI
- b)The rate at which RBI borrows from other banks
- c)The rate at which the commercial banks borrow from each other
- d)None of the above.
Correct answer is option 'A'. Can you explain this answer?
Which one of the following statement defines the term “Reverse Repo Rate?
a)
The rate at which the commercial banks borrow money from RBI
b)
The rate at which RBI borrows from other banks
c)
The rate at which the commercial banks borrow from each other
d)
None of the above.
|
Arka Kaur answered |
Reverse repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) borrows money from commercial banks within the country. It is a monetary policy instrument which can be used to control the money supply in the country.
The fraction of deposits kept as Cash Reserves by the commercial banks is called- a)LLR
- b)CRR
- c)PLR
- d)SLR
Correct answer is option 'B'. Can you explain this answer?
The fraction of deposits kept as Cash Reserves by the commercial banks is called
a)
LLR
b)
CRR
c)
PLR
d)
SLR
|
Vikas Kapoor answered |
Cash Reserve Ratio is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves with the central bank.
Which among the following is considered to be the most liquid asset?- a)Gold
- b)Money
- c)Land
- d)Treasury bonds
Correct answer is option 'B'. Can you explain this answer?
Which among the following is considered to be the most liquid asset?
a)
Gold
b)
Money
c)
Land
d)
Treasury bonds
|
Meera Rane answered |
Most Liquid Asset: Money
Liquid assets are those assets that can be easily converted into cash without losing its value. The most liquid asset is considered to be money. Money is the most liquid of all assets because it is widely accepted in transactions for goods and services. It can be easily exchanged for goods and services, and it is universally recognized as a store of value.
Other assets such as gold, land, and treasury bonds may have value, but they are not as easily converted into cash as money. Gold, for instance, needs to be sold in the market, which may take time, and the value of land may vary depending on the location, demand, and other factors. Treasury bonds have a fixed maturity period and may not be easily sold in the market if the demand is low.
Money, on the other hand, can be readily used to settle debts, pay bills or purchase goods and services. It is widely accepted and can be used in any currency. Money can also be stored in different forms like cash, bank deposits, or other financial instruments. With the rise of digital payment systems, money can now be easily transferred electronically, making it even more liquid.
Conclusion
In conclusion, money is the most liquid asset because it can be easily converted into cash and is widely accepted in transactions. While other assets may have value, they are not as easily convertible into cash as money.
Liquid assets are those assets that can be easily converted into cash without losing its value. The most liquid asset is considered to be money. Money is the most liquid of all assets because it is widely accepted in transactions for goods and services. It can be easily exchanged for goods and services, and it is universally recognized as a store of value.
Other assets such as gold, land, and treasury bonds may have value, but they are not as easily converted into cash as money. Gold, for instance, needs to be sold in the market, which may take time, and the value of land may vary depending on the location, demand, and other factors. Treasury bonds have a fixed maturity period and may not be easily sold in the market if the demand is low.
Money, on the other hand, can be readily used to settle debts, pay bills or purchase goods and services. It is widely accepted and can be used in any currency. Money can also be stored in different forms like cash, bank deposits, or other financial instruments. With the rise of digital payment systems, money can now be easily transferred electronically, making it even more liquid.
Conclusion
In conclusion, money is the most liquid asset because it can be easily converted into cash and is widely accepted in transactions. While other assets may have value, they are not as easily convertible into cash as money.
The portion of total deposit of commercial banks which is required to be kept with Central Bank in the form of cash deposit is called _________.- a)SLR
- b)CRR
- c)Bank Rate
- d)Mandatory deposit
Correct answer is option 'B'. Can you explain this answer?
The portion of total deposit of commercial banks which is required to be kept with Central Bank in the form of cash deposit is called _________.
a)
SLR
b)
CRR
c)
Bank Rate
d)
Mandatory deposit
|
Anjana Sen answered |
Understanding CRR (Cash Reserve Ratio)
The Cash Reserve Ratio (CRR) is a crucial aspect of the banking system that regulates the amount of funds that commercial banks must hold in reserve with the Central Bank. Here’s a detailed look at the concept:
Definition of CRR
- CRR is the percentage of a bank's total deposits that must be maintained as reserves with the Central Bank in the form of cash.
- It is a regulatory requirement aimed at ensuring liquidity and stability within the banking system.
Purpose of CRR
- Liquidity Management: It ensures that banks have enough liquid cash to meet customer withdrawals and other obligations.
- Control Inflation: By adjusting the CRR, the Central Bank can influence the amount of money that banks can lend, thereby controlling inflation.
- Encourage Stability: A higher CRR can help prevent banks from overextending their loans, promoting financial stability.
Impact on Banking Operations
- Lending Capacity: A higher CRR means less money available for banks to lend, which may lead to higher interest rates for borrowers.
- Interest Rates: Changes in CRR directly affect the interest rates set by banks for loans and deposits.
Comparison with Other Terms
- SLR (Statutory Liquidity Ratio): Different from CRR, SLR is the ratio of liquid assets that banks must maintain. It includes cash, gold, and government securities.
- Bank Rate: This is the rate at which the Central Bank lends money to commercial banks. It impacts overall lending rates in the economy but is not a reserve requirement.
In summary, CRR is essential for maintaining the financial health of banks and the overall economy, ensuring that banks can meet their obligations while helping to regulate credit in the market.
The Cash Reserve Ratio (CRR) is a crucial aspect of the banking system that regulates the amount of funds that commercial banks must hold in reserve with the Central Bank. Here’s a detailed look at the concept:
Definition of CRR
- CRR is the percentage of a bank's total deposits that must be maintained as reserves with the Central Bank in the form of cash.
- It is a regulatory requirement aimed at ensuring liquidity and stability within the banking system.
Purpose of CRR
- Liquidity Management: It ensures that banks have enough liquid cash to meet customer withdrawals and other obligations.
- Control Inflation: By adjusting the CRR, the Central Bank can influence the amount of money that banks can lend, thereby controlling inflation.
- Encourage Stability: A higher CRR can help prevent banks from overextending their loans, promoting financial stability.
Impact on Banking Operations
- Lending Capacity: A higher CRR means less money available for banks to lend, which may lead to higher interest rates for borrowers.
- Interest Rates: Changes in CRR directly affect the interest rates set by banks for loans and deposits.
Comparison with Other Terms
- SLR (Statutory Liquidity Ratio): Different from CRR, SLR is the ratio of liquid assets that banks must maintain. It includes cash, gold, and government securities.
- Bank Rate: This is the rate at which the Central Bank lends money to commercial banks. It impacts overall lending rates in the economy but is not a reserve requirement.
In summary, CRR is essential for maintaining the financial health of banks and the overall economy, ensuring that banks can meet their obligations while helping to regulate credit in the market.
Who is the custodian of National reserves of international currency?- a)SBI
- b)IDBI
- c)RBI
- d)ICICI
Correct answer is option 'C'. Can you explain this answer?
Who is the custodian of National reserves of international currency?
a)
SBI
b)
IDBI
c)
RBI
d)
ICICI
|
|
Lipika Kumari answered |
The RBI acts as the custodian of the country's foreign exchange reserves, manages exchange control and acts as the agent of the government in respect of India's membership of the IMF
One of the measures of money supply is- a)N1
- b)O1
- c)M1
- d)P1
Correct answer is option 'C'. Can you explain this answer?
One of the measures of money supply is
a)
N1
b)
O1
c)
M1
d)
P1
|
|
Arjun Singhania answered |
There are several standard measures of the money supply, including the monetary base, M1, and M2. The monetary base is defined as the sum of currency in circulation and reserve balances (deposits held by banks and other depository institutions in their accounts at the Federal Reserve).
Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:Assertion (A): Commercial banks contribute to the quantum of money supply in the economy through credit creation.Rcason(R): As they do have note-issuing authority.- a)Both assertion (A) and reason (R) are true and reason (R) is the correct explanation of assertion (A).
- b)Both assertion (A) and reason (R) are true but reason (R) is not the correct explanation of assertion (A).
- c)Assertion (A) is true but reason (R) is false.
- d)Assertion (A) is false but reason (R) is true.
Correct answer is option 'C'. Can you explain this answer?
Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:
Assertion (A): Commercial banks contribute to the quantum of money supply in the economy through credit creation.
Rcason(R): As they do have note-issuing authority.
a)
Both assertion (A) and reason (R) are true and reason (R) is the correct explanation of assertion (A).
b)
Both assertion (A) and reason (R) are true but reason (R) is not the correct explanation of assertion (A).
c)
Assertion (A) is true but reason (R) is false.
d)
Assertion (A) is false but reason (R) is true.
|
|
Aryan Khanna answered |
Commercial banks contribute to quantum of money supply in the economy through credit creation.
Commercial banks do not have the note-issuing authority, but they do contribute to the money supply in the economy.
The portion of total deposit which a commercial bank has to keep with itself in liquid assets is known as - a)CRR
- b)SLR
- c)REPO
- d)Reverse REPO
Correct answer is option 'B'. Can you explain this answer?
The portion of total deposit which a commercial bank has to keep with itself in liquid assets is known as
a)
CRR
b)
SLR
c)
REPO
d)
Reverse REPO
|
Freedom Institute answered |
SLR means liquid statutory ratio. Every bank has to keep that amount of money every time. because customers can withdrew money any time. Bank can not give that money on loan or for any other purpose.
Which system of issue of currency note is followed by RBI?- a)Fixed Fiduciary System
- b)Proportional Reserve System
- c)Percentage Reserve System
- d)Minimum Reserve System
Correct answer is option 'D'. Can you explain this answer?
Which system of issue of currency note is followed by RBI?
a)
Fixed Fiduciary System
b)
Proportional Reserve System
c)
Percentage Reserve System
d)
Minimum Reserve System
|
|
Anjali Sharma answered |
D: Minimum Reserve System
The Reserve Bank of India (RBI) follows the minimum reserve system for issuing currency notes. Under this system, the RBI is required to maintain a certain minimum amount of gold and foreign exchange reserves as a backing for the notes it issues. The RBI can issue currency notes up to a certain limit, known as the statutory liquidity ratio (SLR), based on the value of these reserves.
In the minimum reserve system, the RBI can issue notes up to a certain limit based on the value of its reserves, but it is not required to hold reserves in proportion to the amount of notes it issues. This allows the RBI to have some flexibility in issuing currency notes to meet the demand for cash in the economy.
The fixed fiduciary system, proportional reserve system, and percentage reserve system are other systems that have been used by central banks to issue currency notes. However, they are no longer in use in modern times. The fixed fiduciary system required the central bank to maintain a fixed amount of reserves for every unit of currency issued, while the proportional reserve system required the central bank to hold reserves in proportion to the amount of notes issued. The percentage reserve system required the central bank to hold a certain percentage of its deposits as reserves.
What among the following is NOT an example of 'public goods'?- a)National defense
- b)Roads
- c)Cars
- d)National Forests
Correct answer is option 'C'. Can you explain this answer?
What among the following is NOT an example of 'public goods'?
a)
National defense
b)
Roads
c)
Cars
d)
National Forests
|
|
Rajat Patel answered |
Examples. Common examples of public goods include: defence, public fireworks,
Which of the following is not a quantitative measure of credit control?- a)The Bank Rate Policy
- b)Open Market Operations
- c)Consumer Credit Regulation
- d)The Repo Rate.
Correct answer is option 'C'. Can you explain this answer?
Which of the following is not a quantitative measure of credit control?
a)
The Bank Rate Policy
b)
Open Market Operations
c)
Consumer Credit Regulation
d)
The Repo Rate.
|
Amrutha Goyal answered |
Quantitative Measures of Credit Control
Quantitative measures of credit control are the tools used by the central bank to regulate the supply of money in the economy. There are various quantitative measures of credit control, such as:
1. Bank Rate Policy - This is the interest rate at which the central bank lends money to commercial banks. By increasing or decreasing the bank rate, the central bank can control the amount of money in circulation in the economy.
2. Open Market Operations - This involves the buying and selling of government securities by the central bank. By buying government securities, the central bank injects money into the economy, while selling government securities withdraws money from the economy.
3. Repo Rate - This is the interest rate at which the central bank borrows money from commercial banks. By increasing or decreasing the repo rate, the central bank can influence the cost of borrowing for commercial banks and thereby regulate the supply of money in the economy.
4. Consumer Credit Regulation - This refers to the regulation of credit facilities provided by banks to consumers. The central bank can regulate the amount of credit that banks can provide to consumers by imposing limits on interest rates, loan amounts, and repayment periods.
Not a Quantitative Measure of Credit Control
Consumer Credit Regulation is not a quantitative measure of credit control because it does not directly regulate the supply of money in the economy. Instead, it regulates the credit facilities provided by banks to consumers. While it can indirectly affect the supply of money in the economy by influencing the amount of credit provided by banks, it is not a direct tool used by the central bank to regulate the supply of money. Therefore, option 'C' is the correct answer.
Quantitative measures of credit control are the tools used by the central bank to regulate the supply of money in the economy. There are various quantitative measures of credit control, such as:
1. Bank Rate Policy - This is the interest rate at which the central bank lends money to commercial banks. By increasing or decreasing the bank rate, the central bank can control the amount of money in circulation in the economy.
2. Open Market Operations - This involves the buying and selling of government securities by the central bank. By buying government securities, the central bank injects money into the economy, while selling government securities withdraws money from the economy.
3. Repo Rate - This is the interest rate at which the central bank borrows money from commercial banks. By increasing or decreasing the repo rate, the central bank can influence the cost of borrowing for commercial banks and thereby regulate the supply of money in the economy.
4. Consumer Credit Regulation - This refers to the regulation of credit facilities provided by banks to consumers. The central bank can regulate the amount of credit that banks can provide to consumers by imposing limits on interest rates, loan amounts, and repayment periods.
Not a Quantitative Measure of Credit Control
Consumer Credit Regulation is not a quantitative measure of credit control because it does not directly regulate the supply of money in the economy. Instead, it regulates the credit facilities provided by banks to consumers. While it can indirectly affect the supply of money in the economy by influencing the amount of credit provided by banks, it is not a direct tool used by the central bank to regulate the supply of money. Therefore, option 'C' is the correct answer.
The most liquid asset among the following is?- a) Gold
- b) Share
- c) Cash
- d) Land
Correct answer is option 'C'. Can you explain this answer?
The most liquid asset among the following is?
a)
Gold
b)
Share
c)
Cash
d)
Land
|
Arpita Nambiar answered |
Cash is a highly liquid asset followed by the banking accounts, checkable account, short-term promissory notes, treasury bills and other government bonds.
The RBI can decrease the money supply in the market by:
- a)Selling government securities
- b)buying government securities
- c)borrowing money from commercial banks
- d)none of the above
Correct answer is option 'A'. Can you explain this answer?
The RBI can decrease the money supply in the market by:
a)
Selling government securities
b)
buying government securities
c)
borrowing money from commercial banks
d)
none of the above
|
|
Arun Khanna answered |
RBI controls money supply in the market through various tools and measures.CRR - Cash Reserve Ratio is the proportion of
The fraction of deposits kept as Cash Reserves by the commercial banks are also called as- a)LRR
- b)CRR
- c)SLR
- d)PLR
Correct answer is option 'A'. Can you explain this answer?
The fraction of deposits kept as Cash Reserves by the commercial banks are also called as
a)
LRR
b)
CRR
c)
SLR
d)
PLR
|
|
Rajat Patel answered |
Fractional-reserve banking is the common practice by commercial banks of accepting deposits, and making loans or investments, while holding reserves at least equal to a fraction of the bank's deposit liabilities. Reserves are held as currency in the bank, or as balances in the bank's accounts at the central bank.
Bank Rate is also known as _______.- a)Discount Rate
- b)REPO Rate
- c)Reserve Repo Rate
- d)Lending Rate
Correct answer is option 'A'. Can you explain this answer?
Bank Rate is also known as _______.
a)
Discount Rate
b)
REPO Rate
c)
Reserve Repo Rate
d)
Lending Rate
|
|
Alok Mehta answered |
Bank rate, also referred to as the discount rate in American English, is the rate of interest which a central bank charges on its loans and advances to a commercial bank. ... Whenever a bank has a shortage of funds, they can typically borrow from the central bank based on the monetary policy of the country.
छोटानागपुर पठार कितने राज्यों में फैला है?- a)4
- b)3
- c)6
- d)5
Correct answer is option 'D'. Can you explain this answer?
छोटानागपुर पठार कितने राज्यों में फैला है?
a)
4
b)
3
c)
6
d)
5
|
Sanjay Rana answered |
यह 5 राज्यों में फैला है: बिहार, झारखंड, छत्तीसगढ़ पश्चिम बंगाल, ओडिशा
The Reserve Bank of India was nationalized in the year:- a)1935
- b)1949
- c)1969
- d)1991
Correct answer is option 'B'. Can you explain this answer?
The Reserve Bank of India was nationalized in the year:
a)
1935
b)
1949
c)
1969
d)
1991
|
|
Freedom Institute answered |
B: 1949
The Reserve Bank of India (RBI) was nationalized in the year 1949. Prior to nationalization, the RBI was a privately-owned institution that was established in 1935.
The nationalization of the RBI was carried out through the Reserve Bank of India (Transfer to Public Ownership) Act, 1948, which came into effect on 1 January 1949. Under the act, the RBI became a state-owned institution and the government of India acquired a controlling stake in the bank.
After nationalization, the RBI continued to perform its functions as the central bank of the country, including issuing and distributing currency notes, regulating and supervising the banking system, and managing the country's monetary policy.
The RBI was not nationalized in 1935, 1969, or 1991. These are all incorrect dates.
Read the following case study paragraph carefully and answer the question based on the same.The central bank of India i.e. Reserve Bank of India is the apex institution that controls the entire financial market. It’s one of the major functions is to maintain the reserve of foreign exchange. Also, it intervenes in the foreign exchange market to stabilize the excessive fluctuation in the foreign exchange rate.In other words, it is the central bank’s job to control a country’s economy through monetary policy; if the economy is moving slowly or going backward, there are steps that the central bank can take to boost the economy. These steps, whether they are asset purchases or printing more money, all involve injecting more cash into the economy. The simple supply and demand economic projection occurs and currency will devalue.When the opposite occurs, and the economy is growing, the central bank will use various methods to keep that growth steady and in-line with other economic factors such as wages and prices. Whatever the central bank does or doesn’t do, will affect the currency of that country. Sometimes, it is within the central bank’s interest to purposefully affect the value of a currency. For example, if the economy is heavily reliant on exports and their currency value becomes too high, importers of that country’s commodities will seek cheaper supply; hence directly affecting the economy.Q. Which of the following steps should be taken by the central bank if there is an excessive rise in the foreign exchange rate?- a)Supply foreign exchange from its stock
- b)Demand more of other foreign exchange
- c)Not intervene in the market as the exchange rate is determined by the market forces
- d)Help the central government to stabilize the foreign exchange rate.
Correct answer is option 'A'. Can you explain this answer?
Read the following case study paragraph carefully and answer the question based on the same.
The central bank of India i.e. Reserve Bank of India is the apex institution that controls the entire financial market. It’s one of the major functions is to maintain the reserve of foreign exchange. Also, it intervenes in the foreign exchange market to stabilize the excessive fluctuation in the foreign exchange rate.
In other words, it is the central bank’s job to control a country’s economy through monetary policy; if the economy is moving slowly or going backward, there are steps that the central bank can take to boost the economy. These steps, whether they are asset purchases or printing more money, all involve injecting more cash into the economy. The simple supply and demand economic projection occurs and currency will devalue.
When the opposite occurs, and the economy is growing, the central bank will use various methods to keep that growth steady and in-line with other economic factors such as wages and prices. Whatever the central bank does or doesn’t do, will affect the currency of that country. Sometimes, it is within the central bank’s interest to purposefully affect the value of a currency. For example, if the economy is heavily reliant on exports and their currency value becomes too high, importers of that country’s commodities will seek cheaper supply; hence directly affecting the economy.
Q. Which of the following steps should be taken by the central bank if there is an excessive rise in the foreign exchange rate?
a)
Supply foreign exchange from its stock
b)
Demand more of other foreign exchange
c)
Not intervene in the market as the exchange rate is determined by the market forces
d)
Help the central government to stabilize the foreign exchange rate.
|
|
Arun Yadav answered |
As regards control on rise in the price of the foreign exchange, Central Bank will increase the Bank role. It will attract foreign Direct Investment, that will increase the flow of foreign exchange and it will automatically control the price of foreign exchange. Simultaneously, it will increase the job potentials due to induction of MNCs and common man will be benefitted.
The rate at which the RBI rediscounts the Bills of Commercial banks is known as. - a)Repo rate
- b)Bank rate
- c)SLR
- d)CRR
Correct answer is option 'B'. Can you explain this answer?
The rate at which the RBI rediscounts the Bills of Commercial banks is known as.
a)
Repo rate
b)
Bank rate
c)
SLR
d)
CRR
|
|
Priya Patel answered |
Bank Rate refers to the official interest rate at which RBI will provide loans to the banking system which includes commercial / cooperative banks, development banks etc. Such loans are given out either by direct lending or by rediscounting (buying back) the bills of commercial banks and treasury bills. Thus, bank rate is also known as discount rate. Bank rate is used as a signal by the RBI to the commercial banks on RBI’s thinking of what the interest rates should be.
Impact of Bank Rate
When RBI increases the bank rate, the cost of borrowing for banks rises and this credit volume gets reduced leading to decline in supply of money. Thus, increase in Bank rate reflects tightening of RBI monetary policy.
Open market operations is- a)Buying and selling of securities by the central bank
- b)Buying and selling of foreign exchange by the central bank
- c)Buying and selling of securities by the commercial banks
- d)Buying and selling of currency by the central bank
Correct answer is option 'A'. Can you explain this answer?
Open market operations is
a)
Buying and selling of securities by the central bank
b)
Buying and selling of foreign exchange by the central bank
c)
Buying and selling of securities by the commercial banks
d)
Buying and selling of currency by the central bank
|
|
Alok Mehta answered |
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. Securities' purchases inject money into the banking system and stimulate growth, while sales of securities do the opposite and contract the economy.
The Federal Reserve (Fed) facilitates this process and uses this technique to adjust and manipulate the federal funds rate, which is the rate at which banks borrow reserves from one another.
Central Bank of a country does not deal with ________.- a)State Government
- b)Public
- c)Central Government
- d)Commercial Banks
Correct answer is option 'B'. Can you explain this answer?
Central Bank of a country does not deal with ________.
a)
State Government
b)
Public
c)
Central Government
d)
Commercial Banks
|
Saumya Desai answered |
Central Bank of a country does not deal with State Government.
Explanation:
Central Bank is the apex financial institution of a country that controls and regulates the money supply in the economy. It performs various functions for maintaining the stability and growth of the economy. However, it does not deal with the State Government directly, as the state government has its own financial institution known as State Bank of India (SBI).
The Central Bank of a country deals with the following entities:
Public:
Central Bank of a country deals with the public directly by providing various financial services like opening bank accounts, providing loans, issuing currency notes, etc.
Central Government:
Central Bank is also responsible for dealing with the Central Government of the country. It performs various functions like managing the government's accounts, issuing and managing government securities like bonds and treasury bills, etc.
Commercial Banks:
Central Bank is responsible for regulating and supervising commercial banks in the country. It provides loans and advances to commercial banks and also acts as a lender of the last resort.
Conclusion:
Although the Central Bank of a country does not deal with the State Government directly, it indirectly affects the state government by regulating and controlling the money supply in the economy.
Explanation:
Central Bank is the apex financial institution of a country that controls and regulates the money supply in the economy. It performs various functions for maintaining the stability and growth of the economy. However, it does not deal with the State Government directly, as the state government has its own financial institution known as State Bank of India (SBI).
The Central Bank of a country deals with the following entities:
Public:
Central Bank of a country deals with the public directly by providing various financial services like opening bank accounts, providing loans, issuing currency notes, etc.
Central Government:
Central Bank is also responsible for dealing with the Central Government of the country. It performs various functions like managing the government's accounts, issuing and managing government securities like bonds and treasury bills, etc.
Commercial Banks:
Central Bank is responsible for regulating and supervising commercial banks in the country. It provides loans and advances to commercial banks and also acts as a lender of the last resort.
Conclusion:
Although the Central Bank of a country does not deal with the State Government directly, it indirectly affects the state government by regulating and controlling the money supply in the economy.
Which one of the following measures is not adopted by RBI for controlling credit in India?- a)Cash Deposit ratio
- b)Cash Reserve ratio
- c)Statutory Liquidity ratio
- d)Selective credit control
Correct answer is 'A'. Can you explain this answer?
Which one of the following measures is not adopted by RBI for controlling credit in India?
a)
Cash Deposit ratio
b)
Cash Reserve ratio
c)
Statutory Liquidity ratio
d)
Selective credit control
|
|
Hrishikesh Mukherjee answered |
Introduction:
The Reserve Bank of India (RBI) is the central bank of India, responsible for controlling and regulating the monetary policy of the country. One of the key roles of the RBI is to control credit in order to maintain stability in the financial system. To achieve this, the RBI adopts various measures, including cash deposit ratio, cash reserve ratio, statutory liquidity ratio, and selective credit control.
Cash Deposit Ratio:
The cash deposit ratio refers to the ratio of cash deposits that commercial banks are required to maintain with the RBI as a percentage of their net demand and time liabilities. This measure helps in controlling credit by reducing the availability of funds with commercial banks for lending purposes. When the cash deposit ratio is increased, banks have to keep a larger portion of their deposits with the RBI, reducing the amount of money available for lending.
Cash Reserve Ratio:
The cash reserve ratio is the percentage of net demand and time liabilities that commercial banks are required to maintain as cash reserves with the RBI. This measure also helps in controlling credit by reducing the lendable resources of the banks. When the cash reserve ratio is increased, banks have to maintain a larger portion of their deposits as cash reserves, limiting their ability to lend.
Statutory Liquidity Ratio:
The statutory liquidity ratio refers to the percentage of net demand and time liabilities that banks are required to maintain in the form of liquid assets, such as cash, gold, and government securities. This measure also helps in controlling credit by restricting the lendable resources of the banks. When the statutory liquidity ratio is increased, banks have to maintain a higher proportion of their liabilities in the form of liquid assets, reducing the amount available for lending.
Selective Credit Control:
Selective credit control refers to the measures adopted by the RBI to regulate the flow of credit to specific sectors or activities. This includes prescribing the maximum loan-to-value ratio for certain types of loans, setting limits on sectoral lending, and imposing restrictions on the purchase of certain types of assets. Selective credit control helps in directing credit towards priority sectors and preventing excessive lending to sectors that may pose risks to the financial system.
Conclusion:
Among the measures mentioned, the cash deposit ratio is not adopted by the RBI for controlling credit in India. The RBI primarily uses the cash reserve ratio, statutory liquidity ratio, and selective credit control to regulate credit and maintain financial stability in the country.
The Reserve Bank of India (RBI) is the central bank of India, responsible for controlling and regulating the monetary policy of the country. One of the key roles of the RBI is to control credit in order to maintain stability in the financial system. To achieve this, the RBI adopts various measures, including cash deposit ratio, cash reserve ratio, statutory liquidity ratio, and selective credit control.
Cash Deposit Ratio:
The cash deposit ratio refers to the ratio of cash deposits that commercial banks are required to maintain with the RBI as a percentage of their net demand and time liabilities. This measure helps in controlling credit by reducing the availability of funds with commercial banks for lending purposes. When the cash deposit ratio is increased, banks have to keep a larger portion of their deposits with the RBI, reducing the amount of money available for lending.
Cash Reserve Ratio:
The cash reserve ratio is the percentage of net demand and time liabilities that commercial banks are required to maintain as cash reserves with the RBI. This measure also helps in controlling credit by reducing the lendable resources of the banks. When the cash reserve ratio is increased, banks have to maintain a larger portion of their deposits as cash reserves, limiting their ability to lend.
Statutory Liquidity Ratio:
The statutory liquidity ratio refers to the percentage of net demand and time liabilities that banks are required to maintain in the form of liquid assets, such as cash, gold, and government securities. This measure also helps in controlling credit by restricting the lendable resources of the banks. When the statutory liquidity ratio is increased, banks have to maintain a higher proportion of their liabilities in the form of liquid assets, reducing the amount available for lending.
Selective Credit Control:
Selective credit control refers to the measures adopted by the RBI to regulate the flow of credit to specific sectors or activities. This includes prescribing the maximum loan-to-value ratio for certain types of loans, setting limits on sectoral lending, and imposing restrictions on the purchase of certain types of assets. Selective credit control helps in directing credit towards priority sectors and preventing excessive lending to sectors that may pose risks to the financial system.
Conclusion:
Among the measures mentioned, the cash deposit ratio is not adopted by the RBI for controlling credit in India. The RBI primarily uses the cash reserve ratio, statutory liquidity ratio, and selective credit control to regulate credit and maintain financial stability in the country.
What is the currency deposit ratio (cdr)?- a) ratio of money held in demand drafts to that of money held in treasury bonds
- b)ratio of money held by public in bank deposits to that of money held by public in currency
- c)the total proportion of money that commercial banks lend to the customers
- d)ratio of money held by the public in currency to that of money held in bank deposits
Correct answer is option 'D'. Can you explain this answer?
What is the currency deposit ratio (cdr)?
a)
ratio of money held in demand drafts to that of money held in treasury bonds
b)
ratio of money held by public in bank deposits to that of money held by public in currency
c)
the total proportion of money that commercial banks lend to the customers
d)
ratio of money held by the public in currency to that of money held in bank deposits
|
|
Aniket Nair answered |
Currency Deposit Ratio (CDR) refers to the ratio of money held by the public in currency to that of money held in bank deposits. It is an important indicator of the liquidity position of the economy.
Explanation:
CDR is a measure of the amount of currency that people hold relative to the amount of money they hold in bank deposits. It is calculated by dividing the total amount of currency in circulation by the total amount of bank deposits. CDR is an important indicator of the liquidity position of the economy, as it reflects the willingness of people to hold money in banks versus keeping it in the form of cash.
Factors affecting CDR:
The CDR is influenced by various factors, such as:
1. Interest rates: When interest rates are high, people tend to hold more money in bank deposits, which can lower the CDR.
2. Inflation: High inflation can increase the demand for currency, as people may prefer to hold cash rather than keeping it in bank deposits.
3. Economic conditions: During periods of economic uncertainty, people may prefer to hold more cash as a precautionary measure, which can increase the CDR.
4. Banking regulations: Banking regulations can influence the CDR by affecting people's confidence in the banking system.
Importance of CDR:
The CDR is an important indicator for policymakers, as it can provide insights into the liquidity position of the economy. A high CDR may indicate low levels of confidence in the banking system, while a low CDR may indicate a healthy level of liquidity.
Conclusion:
The CDR is an important indicator of the liquidity position of the economy. It reflects the willingness of people to hold money in banks versus keeping it in the form of cash. Factors such as interest rates, inflation, economic conditions, and banking regulations can influence the CDR. Policymakers can use the CDR to monitor the liquidity position of the economy and take appropriate measures to ensure its stability.
Explanation:
CDR is a measure of the amount of currency that people hold relative to the amount of money they hold in bank deposits. It is calculated by dividing the total amount of currency in circulation by the total amount of bank deposits. CDR is an important indicator of the liquidity position of the economy, as it reflects the willingness of people to hold money in banks versus keeping it in the form of cash.
Factors affecting CDR:
The CDR is influenced by various factors, such as:
1. Interest rates: When interest rates are high, people tend to hold more money in bank deposits, which can lower the CDR.
2. Inflation: High inflation can increase the demand for currency, as people may prefer to hold cash rather than keeping it in bank deposits.
3. Economic conditions: During periods of economic uncertainty, people may prefer to hold more cash as a precautionary measure, which can increase the CDR.
4. Banking regulations: Banking regulations can influence the CDR by affecting people's confidence in the banking system.
Importance of CDR:
The CDR is an important indicator for policymakers, as it can provide insights into the liquidity position of the economy. A high CDR may indicate low levels of confidence in the banking system, while a low CDR may indicate a healthy level of liquidity.
Conclusion:
The CDR is an important indicator of the liquidity position of the economy. It reflects the willingness of people to hold money in banks versus keeping it in the form of cash. Factors such as interest rates, inflation, economic conditions, and banking regulations can influence the CDR. Policymakers can use the CDR to monitor the liquidity position of the economy and take appropriate measures to ensure its stability.
Read the below case and answer the question that follow:In a 40-minute long speech Prime Minister Narendra Modi announced the demonetisation of existing notes of ₹ 500 and ₹ 1,000 during a televised address on Tuesday evening.Modi announced that the notes of ₹ 500 and ₹ 1,000 will not be legal tender from midnight tonight and these will be “just worthless pieces of paper''. The PM also urged people to ‘join this mahayojna against the ills of corruption.Q. ______________ is issued by the government of India.- a)Coins
- b)₹500 note
- c)₹1000 note
- d)All of these
Correct answer is option 'A'. Can you explain this answer?
Read the below case and answer the question that follow:
In a 40-minute long speech Prime Minister Narendra Modi announced the demonetisation of existing notes of ₹ 500 and ₹ 1,000 during a televised address on Tuesday evening.
Modi announced that the notes of ₹ 500 and ₹ 1,000 will not be legal tender from midnight tonight and these will be “just worthless pieces of paper''. The PM also urged people to ‘join this mahayojna against the ills of corruption.
Q. ______________ is issued by the government of India.
a)
Coins
b)
₹500 note
c)
₹1000 note
d)
All of these
|
|
Arun Yadav answered |
It is the sole responsibility of the Government of India to mint coins of all denominations.
An increase in money supply ______ in a nation’s Economy will decrease the following.- a)Open market purchase by the nation’s Central Bank
- b)A deserve in the bank rate
- c)A decrease in the reserve ratio
- d)A decrease in the margin requirement.
Correct answer is option 'A'. Can you explain this answer?
An increase in money supply ______ in a nation’s Economy will decrease the following.
a)
Open market purchase by the nation’s Central Bank
b)
A deserve in the bank rate
c)
A decrease in the reserve ratio
d)
A decrease in the margin requirement.
|
|
Nikita Singh answered |
During open market situations the central bank sells the the securities which enables transfer of money from households to the central bank which reduces money supply in the economy and stabilizes the inflation
Which of the following is not qualitative credit control measure of the RBI?- a)Capital Rationing
- b)Moral Suasion
- c)SLR
- d)Margin requirement
Correct answer is option 'C'. Can you explain this answer?
Which of the following is not qualitative credit control measure of the RBI?
a)
Capital Rationing
b)
Moral Suasion
c)
SLR
d)
Margin requirement
|
|
Lakshmi Kaur answered |
The correct answer is option 'C' - SLR (Statutory Liquidity Ratio).
Explanation:
The Reserve Bank of India (RBI) uses various quantitative and qualitative measures to control credit in the economy. These measures are implemented to regulate the flow of credit and manage inflation.
Qualitative credit control measures are non-quantifiable measures that are aimed at influencing the credit behavior of banks and financial institutions. These measures are more flexible and discretionary compared to quantitative measures. They include:
a) Capital Rationing:
Capital rationing is a qualitative credit control measure where the RBI restricts or limits the amount of capital that banks can allocate for lending purposes. By imposing capital limits, the RBI ensures that banks have sufficient capital to meet regulatory requirements and maintain their financial stability. This measure helps in controlling excessive lending and prevents the banks from taking excessive risks.
b) Moral Suasion:
Moral suasion is a persuasive technique used by the RBI to influence the lending behavior of banks. It involves informal communication, discussions, meetings, and directives to convince banks to adopt certain credit policies. The RBI uses moral suasion to encourage banks to increase or decrease their lending activities in line with the monetary policy objectives.
c) SLR (Statutory Liquidity Ratio):
SLR is a quantitative credit control measure and not a qualitative measure. It refers to the percentage of a bank's net demand and time liabilities (NDTL) that it is required to maintain in the form of liquid assets such as cash, gold, government securities, etc. The purpose of SLR is to ensure the solvency and liquidity of banks. By adjusting the SLR, the RBI can control the flow of credit in the economy. An increase in the SLR reduces the funds available for lending, while a decrease in the SLR expands the lending capacity of banks.
d) Margin Requirement:
Margin requirement is a qualitative credit control measure that pertains to the lending against specific securities. The RBI can impose higher margin requirements, i.e., increasing the proportion of collateral that borrowers need to provide, to restrict the availability of credit for certain types of loans. Higher margin requirements reduce the amount of loans that can be availed against a given collateral, thus limiting credit expansion.
In conclusion, the correct answer is option 'C' - SLR, as it is a quantitative credit control measure rather than a qualitative measure.
Explanation:
The Reserve Bank of India (RBI) uses various quantitative and qualitative measures to control credit in the economy. These measures are implemented to regulate the flow of credit and manage inflation.
Qualitative credit control measures are non-quantifiable measures that are aimed at influencing the credit behavior of banks and financial institutions. These measures are more flexible and discretionary compared to quantitative measures. They include:
a) Capital Rationing:
Capital rationing is a qualitative credit control measure where the RBI restricts or limits the amount of capital that banks can allocate for lending purposes. By imposing capital limits, the RBI ensures that banks have sufficient capital to meet regulatory requirements and maintain their financial stability. This measure helps in controlling excessive lending and prevents the banks from taking excessive risks.
b) Moral Suasion:
Moral suasion is a persuasive technique used by the RBI to influence the lending behavior of banks. It involves informal communication, discussions, meetings, and directives to convince banks to adopt certain credit policies. The RBI uses moral suasion to encourage banks to increase or decrease their lending activities in line with the monetary policy objectives.
c) SLR (Statutory Liquidity Ratio):
SLR is a quantitative credit control measure and not a qualitative measure. It refers to the percentage of a bank's net demand and time liabilities (NDTL) that it is required to maintain in the form of liquid assets such as cash, gold, government securities, etc. The purpose of SLR is to ensure the solvency and liquidity of banks. By adjusting the SLR, the RBI can control the flow of credit in the economy. An increase in the SLR reduces the funds available for lending, while a decrease in the SLR expands the lending capacity of banks.
d) Margin Requirement:
Margin requirement is a qualitative credit control measure that pertains to the lending against specific securities. The RBI can impose higher margin requirements, i.e., increasing the proportion of collateral that borrowers need to provide, to restrict the availability of credit for certain types of loans. Higher margin requirements reduce the amount of loans that can be availed against a given collateral, thus limiting credit expansion.
In conclusion, the correct answer is option 'C' - SLR, as it is a quantitative credit control measure rather than a qualitative measure.
Which of the following of credit control?- a)Credit Rationing
- b)Change in Cash Reserves of Commercial Banks
- c)Publicity and Notifications
- d)Regulation of Consumer Credit.
Correct answer is option 'B'. Can you explain this answer?
Which of the following of credit control?
a)
Credit Rationing
b)
Change in Cash Reserves of Commercial Banks
c)
Publicity and Notifications
d)
Regulation of Consumer Credit.
|
|
Freedom Institute answered |
The different instruments of credit control used by the Reserve Bank of India are Statutory Liquidity Ratio (SLR), Cash Reserve Ratio (CRR), the Bank Rate Policy, Selective Credit Control (SCC), Open Market Operations (OMOs).
The RBI can decrease the bank credit by:
- a)Maintaining the bank rate at the same level
- b)Increasing the Bank rate, Lowering the Bank rate and Lowering the CRR
- c)Increasing the CRR
- d)None of these
Correct answer is option 'B'. Can you explain this answer?
The RBI can decrease the bank credit by:
a)
Maintaining the bank rate at the same level
b)
Increasing the Bank rate, Lowering the Bank rate and Lowering the CRR
c)
Increasing the CRR
d)
None of these
|
|
Pranav Gupta answered |
Decreasing Bank Credit through RBI Policy Measures
The Reserve Bank of India (RBI) can influence the level of bank credit in the economy through various policy measures. One of the primary objectives of RBI is to maintain price stability and promote economic growth.
One of the ways RBI can decrease the bank credit is by reducing the flow of funds to the banks. This can be achieved through the following measures:
1. Increasing Bank Rate: RBI can increase the bank rate, which is the rate at which the central bank lends money to the commercial banks. When the bank rate is increased, the cost of borrowing for the banks increases, which leads to a decrease in the credit available for the customers.
2. Lowering Bank Rate: On the other hand, RBI can also decrease the bank rate. This would encourage the banks to borrow more from the central bank at a lower rate and lend more to the customers, thus increasing the credit available in the economy.
3. Lowering Cash Reserve Ratio: RBI can also lower the cash reserve ratio (CRR), which is the percentage of deposits that banks are required to maintain with the central bank. When the CRR is lowered, banks have more funds available to lend, which leads to an increase in the credit available in the economy.
Conclusion
Thus, it can be concluded that RBI can decrease the bank credit by increasing the bank rate or lowering the CRR, or even by lowering the bank rate. Option 'B' is the correct answer.
The Reserve Bank of India (RBI) can influence the level of bank credit in the economy through various policy measures. One of the primary objectives of RBI is to maintain price stability and promote economic growth.
One of the ways RBI can decrease the bank credit is by reducing the flow of funds to the banks. This can be achieved through the following measures:
1. Increasing Bank Rate: RBI can increase the bank rate, which is the rate at which the central bank lends money to the commercial banks. When the bank rate is increased, the cost of borrowing for the banks increases, which leads to a decrease in the credit available for the customers.
2. Lowering Bank Rate: On the other hand, RBI can also decrease the bank rate. This would encourage the banks to borrow more from the central bank at a lower rate and lend more to the customers, thus increasing the credit available in the economy.
3. Lowering Cash Reserve Ratio: RBI can also lower the cash reserve ratio (CRR), which is the percentage of deposits that banks are required to maintain with the central bank. When the CRR is lowered, banks have more funds available to lend, which leads to an increase in the credit available in the economy.
Conclusion
Thus, it can be concluded that RBI can decrease the bank credit by increasing the bank rate or lowering the CRR, or even by lowering the bank rate. Option 'B' is the correct answer.
Who works as RBI's agent at places where it has no office of its own?- a)State Bank of India
- b)Ministry of Finance
- c)Government of India
- d)International Monetary Fund
Correct answer is option 'A'. Can you explain this answer?
Who works as RBI's agent at places where it has no office of its own?
a)
State Bank of India
b)
Ministry of Finance
c)
Government of India
d)
International Monetary Fund
|
|
Niharika Joshi answered |
State Bank of India as RBI's Agent
The Reserve Bank of India (RBI) is the central bank of India and manages the country's monetary policy, regulates the banking sector, issues currency and operates payment systems. RBI has its own offices in various parts of the country to carry out its functions. However, there are some places where RBI does not have its own office. In such places, RBI appoints an agent to carry out its functions. The agent is appointed by RBI to perform certain functions on its behalf.
State Bank of India (SBI) is the agent of RBI in places where it does not have its own office. SBI is the largest commercial bank in India and has a vast network of branches across the country. As an agent of RBI, SBI performs various functions on behalf of RBI. Some of the functions performed by SBI as an agent of RBI are:
1. Currency Management: SBI manages the currency chest on behalf of RBI. It ensures that the currency issued by RBI is distributed to various banks and financial institutions in the region.
2. Government Business: SBI carries out various government transactions on behalf of RBI. It collects taxes, issues government bonds, and manages the public debt.
3. Banking Regulation: SBI acts as an agent of RBI in regulating banks and financial institutions in the region. It ensures that the banks comply with the regulations laid down by RBI.
4. Payment and Settlement Systems: SBI operates the payment and settlement systems on behalf of RBI. It ensures that the payment and settlement systems are safe, secure, and efficient.
In conclusion, State Bank of India works as an agent of RBI in places where RBI does not have its own office. As an agent of RBI, SBI performs various functions on behalf of RBI to ensure the smooth functioning of the monetary system in the country.
The Reserve Bank of India (RBI) is the central bank of India and manages the country's monetary policy, regulates the banking sector, issues currency and operates payment systems. RBI has its own offices in various parts of the country to carry out its functions. However, there are some places where RBI does not have its own office. In such places, RBI appoints an agent to carry out its functions. The agent is appointed by RBI to perform certain functions on its behalf.
State Bank of India (SBI) is the agent of RBI in places where it does not have its own office. SBI is the largest commercial bank in India and has a vast network of branches across the country. As an agent of RBI, SBI performs various functions on behalf of RBI. Some of the functions performed by SBI as an agent of RBI are:
1. Currency Management: SBI manages the currency chest on behalf of RBI. It ensures that the currency issued by RBI is distributed to various banks and financial institutions in the region.
2. Government Business: SBI carries out various government transactions on behalf of RBI. It collects taxes, issues government bonds, and manages the public debt.
3. Banking Regulation: SBI acts as an agent of RBI in regulating banks and financial institutions in the region. It ensures that the banks comply with the regulations laid down by RBI.
4. Payment and Settlement Systems: SBI operates the payment and settlement systems on behalf of RBI. It ensures that the payment and settlement systems are safe, secure, and efficient.
In conclusion, State Bank of India works as an agent of RBI in places where RBI does not have its own office. As an agent of RBI, SBI performs various functions on behalf of RBI to ensure the smooth functioning of the monetary system in the country.
Who is the custodian of national reserves of international currency?- a)SBI
- b)RBI
- c)ICICI
- d)World Bank
Correct answer is option 'B'. Can you explain this answer?
Who is the custodian of national reserves of international currency?
a)
SBI
b)
RBI
c)
ICICI
d)
World Bank
|
|
Amrutha Goyal answered |
Custodian of National Reserves of International Currency
The Reserve Bank of India (RBI) is the custodian of national reserves of international currency. The RBI is the central bank of India, responsible for regulating the country's monetary and financial system. It plays a crucial role in maintaining the country's foreign exchange reserves, which are essential for international trade and economic stability.
Functions of RBI as custodian of national reserves of international currency:
1. Maintaining Foreign Exchange Reserves: The RBI holds and manages India's foreign exchange reserves, which consist of various foreign currencies, gold, and Special Drawing Rights (SDRs) allocated by the International Monetary Fund (IMF). These reserves are used to finance the country's imports and debt obligations, and to maintain the stability of the rupee in the foreign exchange market.
2. Managing Exchange Rate: The RBI manages the exchange rate of the Indian rupee against other major currencies. It intervenes in the foreign exchange market to buy or sell foreign currencies to maintain the desired exchange rate level.
3. Regulating Foreign Exchange Transactions: The RBI regulates all foreign exchange transactions in India, including imports, exports, and remittances. It also sets the guidelines for foreign investment in the country.
4. Representing India in International Financial Institutions: The RBI represents India in various international financial institutions, such as the IMF, World Bank, and Asian Development Bank. It participates in the decision-making process of these institutions and helps to shape global economic policies.
Conclusion
In summary, the RBI plays a crucial role as the custodian of national reserves of international currency. It manages India's foreign exchange reserves, regulates foreign exchange transactions, maintains exchange rate stability, and represents India in international financial institutions. These functions are essential for maintaining the country's economic stability and promoting international trade and investment.
The Reserve Bank of India (RBI) is the custodian of national reserves of international currency. The RBI is the central bank of India, responsible for regulating the country's monetary and financial system. It plays a crucial role in maintaining the country's foreign exchange reserves, which are essential for international trade and economic stability.
Functions of RBI as custodian of national reserves of international currency:
1. Maintaining Foreign Exchange Reserves: The RBI holds and manages India's foreign exchange reserves, which consist of various foreign currencies, gold, and Special Drawing Rights (SDRs) allocated by the International Monetary Fund (IMF). These reserves are used to finance the country's imports and debt obligations, and to maintain the stability of the rupee in the foreign exchange market.
2. Managing Exchange Rate: The RBI manages the exchange rate of the Indian rupee against other major currencies. It intervenes in the foreign exchange market to buy or sell foreign currencies to maintain the desired exchange rate level.
3. Regulating Foreign Exchange Transactions: The RBI regulates all foreign exchange transactions in India, including imports, exports, and remittances. It also sets the guidelines for foreign investment in the country.
4. Representing India in International Financial Institutions: The RBI represents India in various international financial institutions, such as the IMF, World Bank, and Asian Development Bank. It participates in the decision-making process of these institutions and helps to shape global economic policies.
Conclusion
In summary, the RBI plays a crucial role as the custodian of national reserves of international currency. It manages India's foreign exchange reserves, regulates foreign exchange transactions, maintains exchange rate stability, and represents India in international financial institutions. These functions are essential for maintaining the country's economic stability and promoting international trade and investment.
The CRR is determined in India by:- a)Ministry of finance
- b)State Bank of India
- c)Reserve Bank of India
- d)Parliament
Correct answer is option 'C'. Can you explain this answer?
The CRR is determined in India by:
a)
Ministry of finance
b)
State Bank of India
c)
Reserve Bank of India
d)
Parliament
|
BT Educators answered |
C: Reserve Bank of India
The cash reserve ratio (CRR) is determined by the Reserve Bank of India (RBI), which is the central bank of India. The CRR is the percentage of deposits that commercial banks are required to hold with the RBI as a reserve.
The RBI uses the CRR as a tool to regulate the supply of credit in the economy. By increasing the CRR, the RBI can reduce the amount of money that commercial banks have available to lend, which can reduce the supply of credit in the economy. By decreasing the CRR, the RBI can increase the amount of money that commercial banks have available to lend, which can increase the supply of credit in the economy.
The Ministry of Finance, State Bank of India (SBI), and Parliament are not responsible for determining the CRR in India. Only the RBI has this authority as the central bank of the country.
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