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All questions of Current Affairs for BPSC (Bihar) Exam

Zombie firms, sometimes seen in news implies
  • a)
    Firms which earn sufficient profit to finance their debts
  • b)
    Firms with creating more employment opportunities
  • c)
    Firms which are not able to cover their debt-servicing costs with current earnings.
  • d)
    Firms supported by the government without taxing on its profits.
Correct answer is option 'C'. Can you explain this answer?

Aditya Kumar answered
Former Chief Economic Advisor Arvind Subramanian said India had moved from socialism with a limited entry (for firms) to capitalism without exit. Alas, capitalism without exit is Zombieland, full of companies neither dead nor alive.
In the financial world, companies on life support are called "Zombies": Those firms that cannot cover their debt-servicing costs with current earnings. They are in bad shape and probably should have gone out of business already. Yet, they are being kept alive.
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Consider the following statements regarding AT-1 bonds.
1. AT-1 bonds are unsecured, high-risk bonds that banks issue to shore up their core capital base to meet the Basel III norms.
2. As per the latest norms, banks can issue these bonds only on electronic platforms, and only institutional investors could subscribe to them.
3. As per RBI guidelines, Banks cannot skip paying interest on these bonds even if their capital ratios fall below a certain threshold level.
Which of the above statements is/are correct?
  • a)
    1 and 2 only
  • b)
    1 and 3 only
  • c)
    2 and 3 only
  • d)
    1 only
Correct answer is option 'A'. Can you explain this answer?

Sanjay Rana answered
AT-1 bonds are unsecured, perpetual, high-risk bonds that banks issue to shore up their core capital base to meet the Basel III norms. Banks can skip paying interest on these bonds if their capital ratios fall below a certain threshold level.
Market regulator Securities and Exchange Board of India (Sebi) tightened its regulations of additional tier-1 bonds or AT-1 bonds and ensured that these risky instruments are less accessible to retail investors.
As per the latest norms, banks can issue these bonds only on an electronic platform, and only institutional investors could subscribe to them. Minimum allotment for these bonds is set at 1 cr
"These instruments have certain unique features which, inter-alia, grant the issuer (i.e. banks, in consultation with RBI) a discretion in terms of writing down the principal/interest, to skip interest payments, to make an early recall etc. without the commensurate right for investors to legal recourse, even if such actions of the issuer might result in a potential loss to investors,"
"The absolute right, given to the RBI, to direct a bank to write down the entire value of its outstanding AT1 instruments/bonds, if it thinks the Bank has passed the Point of Non-Viability (PONV) or requires a public sector capital infusion to remain a going concern.

Which of the following are the functions of Banks Board Bureau (BBB)?
1. Improve the governance of Public Sector Banks.
2. Advise the government on top-level bank appointments.
3. Provide adequate capital to the Public Sector Banks to deal with bad loans.
Select the correct answer code:
  • a)
    1 and 3 only
  • b)
    1 and 2 only
  • c)
    2 and 3 only
  • d)
    All of the above
Correct answer is option 'B'. Can you explain this answer?

Pooja Shah answered
Banks Board Bureau (BBB) was set up in February 2016 as an autonomous body based on the RBI-appointed PJ Nayak Committee's recommendations to improve governance of Public Sector Banks (PSBs).
It was the part of Indradhanush Plan of government.
It had replaced Appointments Board of Government.
Its broad agenda is to improve governance at state-owned lenders. Its mandate also involved advising the government on top-level bank appointments and assisting banks with capital-raising plans and strategies to deal with bad loans.
It guides banks on mergers and consolidations and governance issues to address bad loans problem among other issues.

National Company Law Appellate Tribunal (NCLAT) hears appeals from the orders of
1. National Company Law Tribunal (NCLT)
2. Insolvency and Bankruptcy Board of India
3. Competition Commission of India (CCI)
Select the correct answer code:
  • a)
    1 and 2 only
  • b)
    1 and 3 only
  • c)
    2 and 3 only
  • d)
    All of the above
Correct answer is option 'D'. Can you explain this answer?

Anjali Rao answered
The National Company Law Appellate Tribunal (NCLAT) is a tribunal formed by the Central Government of India under Section 410 of the Companies Act, 2013. The tribunal is responsible for hearing appeals from National Company Law Tribunal (NCLT) orders, starting on 1 June 2016.
The tribunal also hears appeals from orders issued by the Insolvency and Bankruptcy Board of India under Section 202 and Section 211 of IBC. It also hears appeals from any direction issued, a decision made, or order passed by India's Competition Commission (CCI).

Consider the following statements regarding the zero-coupon bond.
1. A zero-coupon bond is a debt security that not pay interest but instead trades at a deep discount, rendering a profit at maturity, when the bond is redeemed for its full face value.
2. These are special types of bonds issued only by the Central government specifically to a particular institution.
Which of the above statements is/are correct?
  • a)
    1 only
  • b)
    2 only
  • c)
    Both 1 and 2
  • d)
    Neither 1 nor 2
Correct answer is option 'A'. Can you explain this answer?

Shivani Desai answered
Zero-coupon bond:
A zero-coupon bond is a type of debt security that does not pay any interest to the bondholder. Instead, it is sold at a deep discount from its face value and the bondholder receives the full face value of the bond at maturity. This means that the bondholder earns a profit by purchasing the bond at a discount and receiving the full face value at maturity.

Statement 1: A zero-coupon bond is a debt security that does not pay interest but instead trades at a deep discount, rendering a profit at maturity, when the bond is redeemed for its full face value.
This statement is correct. As mentioned earlier, a zero-coupon bond does not pay any interest to the bondholder. Instead, it is sold at a discounted price, typically below its face value, and the bondholder receives the full face value of the bond at maturity. The difference between the discounted purchase price and the face value represents the profit earned by the bondholder.

Statement 2: These are special types of bonds issued only by the Central government specifically to a particular institution.
This statement is incorrect. Zero-coupon bonds can be issued by various entities including governments, corporations, and financial institutions. While it is true that governments may issue zero-coupon bonds, they are not exclusively issued by the central government and are not specifically issued to a particular institution. These bonds can be bought by individual investors, financial institutions, or any other entity interested in investing in fixed-income securities.

Conclusion:
In conclusion, the correct statement is statement 1. Zero-coupon bonds do not pay interest but are sold at a discount and redeemed for their full face value at maturity, resulting in a profit for the bondholder. Statement 2 is incorrect as zero-coupon bonds can be issued by various entities and are not exclusively issued by the central government or specifically issued to a particular institution.

Consider the following statements.
1.    Indian tax revenues remain largely dependent on direct tax collections.
2.    The interest payments represent the lowest share of revenue expenditure rendered by the Centre.
Which of the above statements is/are correct?
  • a)
    1 only
  • b)
    2 only
  • c)
    Both 1 and 2
  • d)
    Neither 1 nor 2 
Correct answer is option 'D'. Can you explain this answer?

Ojasvi Mehta answered
  • Since an overwhelming majority of Indians do not pay income taxes, Indian tax revenues remain largely dependent on indirect tax collections, which include all taxes on spending (such as GST). These indirect taxesaccount for over two-thirds of total tax revenue in India.
  • Over half of the government's expenditure in India goes towards subsidies and other programmes.
  • India also spends a substantial amount on interest payments. At 2017 levels of expenditure, 6% of GDP went towards interest payments.
  • Higher proportion of interest payments are a direct outcome of the debt levels accumulated by the Indian government.

Consider the following statements regarding Monetary Policy.
1.  The responsibility for conducting monetary policy is assumed by the Reserve Bank of India (RBI) under the terms of the Monetary Policy System Act Agreement.
2.  The primary objective of monetary policy is to maintain price stability and achieve growth.
3.  The inflation target is set by the Reserve Bank of India in consultation with Government of India, once in every five years.
Which of the above statements is/are correct?
  • a)
    1 and 2 only
  • b)
    2 only
  • c)
    1 and 3 only
  • d)
    2 and 3 only
Correct answer is option 'B'. Can you explain this answer?

Kavita Shah answered
  • Monetary policy refers to the policy of the central bank with regard to the use of monetary instruments under its control to achieve the goals specified in the Act.
  • The Reserve Bank of India (RBI) is vested with the responsibility of conducting monetary policy. This responsibility is explicitly mandated under the Reserve Bank of India Act, 1934.
  • The primary objective of monetary policy is to maintain price stability while keeping in mind the objective of growth. Price stability is a necessary precondition to sustainable growth.
  • In May 2016, the Reserve Bank of India (RBI) Act, 1934 was amended to provide a statutory basis for the implementation of the flexible inflation targeting framework.
  • The amended RBI Act also provides for the inflation target to be set by the Government of India, in consultation with the Reserve Bank, once in every five years. Accordingly, the Central Government has notified in the Official Gazette 4 per cent Consumer Price Index (CPI) inflation as the target for the period from August 5, 2016 to March 31, 2021 with the upper tolerance limit of 6 per cent and the lower tolerance limit of 2 per cent.

Consider the following statements.
1. Disinvestment can either reduce the government's share in the public sector undertakings (PSUs) or transfer the ownership of the PSU altogether to the highest bidder.
2. Department of Investment and Public Asset Management (DIPAM) under the Ministry of Finance is tasked with managing the Centre's investments in the PSUs.
3. In the last five years, the Government has been unable to meet the Disinvestment target it wanted at the start of the year.
Which of the above statements is/are correct?
  • a)
    1 and 2 only
  • b)
    2 only
  • c)
    1 and 3 only
  • d)
    2 and 3 only
Correct answer is option 'A'. Can you explain this answer?

Ojasvi Mehta answered
What is disinvestment?
  • The Union government invests in several public sector undertakings (PSUs) such as Air India, Bharat Petroleum, Delhi Metro Rail Corporation etc. Since it is the majority shareholder (meaning that it owns more than 51% of the shares), the Centre can raise money through the liquidation of its shareholding in these PSUs.
  • Such asset sales can either reduce the government's share — like when it attempted to do with the public listing of Life Insurance Corporation in 2020 — or it can also transfer the ownership of the firm altogether to the highest bidder — as it did with Bharat Aluminium Company, which was sold to the Vedanta group in 2001.
  • All PSUs work under different departments and ministries within the government. However, the Department of Investment and Public Asset Management (DIPAM) under the Ministry of Finance is tasked with managing the
  • Centre's investments in the PSUs. Sale of the Centre's assets falls within the mandate of DIPAM.

Consider the following statements.
1. India is the world's largest crude oil importer.
2. At present, OPEC countries meet 90% of India's crude oil demand.
Which of the above statements is/are correct?
  • a)
    1 only
  • b)
    2 only
  • c)
    Both 1 and 2
  • d)
    Neither 1 nor 2
Correct answer is option 'D'. Can you explain this answer?

Ankita Sarkar answered
Explanation:

Statement 1: India is the world's largest crude oil importer.
This statement is incorrect. As of 2021, the world's largest crude oil importer is China. India stands at the second position in terms of crude oil imports.

Statement 2: At present, OPEC countries meet 90% of India's crude oil demand.
This statement is incorrect. The Organization of Petroleum Exporting Countries (OPEC) is a group of oil-producing countries. While OPEC countries play a significant role in meeting India's crude oil demand, they do not account for 90% of it. The share of OPEC countries in India's crude oil imports has declined over the years. Currently, it is estimated that OPEC countries meet around 80% of India's crude oil demand.

Conclusion:
Neither Statement 1 nor Statement 2 is correct. India is not the world's largest crude oil importer, and OPEC countries do not meet 90% of India's crude oil demand.

Which of the following are considered as tax revenue for the Union Government?
1. Personal income tax
2. Excise Duty
3. Dividends on investments
4. Income through Spectrum Auctions 
Select the correct answer code:
(c)1, 2
  • a)
    1, 2, 3
  • b)
    1, 3, 4
  • c)
    1, 2, 4 
Correct answer is option 'C'. Can you explain this answer?

Akshara Menon answered
Tax revenue for the Union Government includes the following:

1. Personal income tax: Personal income tax is a direct tax levied on the income earned by individuals. It is a significant source of revenue for the government. Individuals are required to pay taxes on their income, which includes salaries, wages, profits from businesses, rental income, and other sources. The tax rates vary based on the income slab, with higher rates applicable to higher income earners. Personal income tax contributes to the government's revenue pool and helps fund various public services and developmental projects.

2. Excise Duty: Excise duty is a form of indirect tax levied on the manufacture, sale, or use of certain goods. It is typically imposed on goods that are considered harmful or non-essential, such as tobacco, alcohol, petroleum products, and luxury items. The government collects excise duty from manufacturers or importers when these goods are produced or imported. Excise duty serves as a significant source of revenue for the government and helps control the consumption of certain goods by making them relatively more expensive.

3. Dividends on investments: Dividends received by the government from its investments in public sector undertakings (PSUs) and other entities also contribute to its tax revenue. PSUs are government-owned corporations that operate in various sectors of the economy. The government holds a significant stake in these entities and receives dividends based on their profitability. These dividends are considered as a part of the government's overall tax revenue.

4. Income through Spectrum Auctions: Spectrum refers to the radio frequencies used for wireless communication. The government auctions spectrum licenses to telecom companies allowing them to use specific frequency bands for providing mobile and other communication services. Telecom companies bid for these licenses, and the government earns revenue from the auction proceeds. This revenue is considered as part of the government's tax revenue and helps in funding various developmental initiatives.

In conclusion, personal income tax, excise duty, dividends on investments, and income through spectrum auctions are all considered as tax revenue for the Union Government. These revenue sources play a crucial role in financing various government expenditures and developmental projects.

With reference to the government expenditure in India, which of the following constitutes Transfer Payments?
1.    The payments which are made by the government to its employees.
2.    The Interest payments made to foreign countries on loans taken.
3.    The payments which are made as financial aid in a social welfare programme.
Select the correct answer code:
  • a)
    1 and 2 only
  • b)
    1 and 3 only
  • c)
    3 only
  • d)
    2 and 3 only
Correct answer is option 'C'. Can you explain this answer?

  • In macroeconomics and finance, a transfer payment is a redistribution of income and wealth by means of the government making a payment, without goods or services being received in return. 
  • These payments are considered to be non-exhaustive because they do not directly absorb resources or create output. Examples of transfer payments include welfare, financial aid, social security, and government subsidies for certain businesses.
     

Consider the following statements.
1. Regional Rural Banks (RRBs) were formed by an act of parliament, with an objective to provide credit and other facilities to small farmers, agricultural labourers, and artisans in rural areas.
2. As per RBI guidelines, the RRBs have to provide 90 per cent of their total credit under priority sector lending.
3. Co-operative Banks contributed the major share in agricultural and allied credit in India.
Which of the above statements is/are incorrect?
  • a)
    1 and 2 only
  • b)
    2 only
  • c)
    1 and 3 only
  • d)
    2 and 3 only
Correct answer is option 'D'. Can you explain this answer?

Incorrect Statements Explanation:

Statement 2: As per RBI guidelines, the RRBs have to provide 90 per cent of their total credit under priority sector lending.
- This statement is incorrect because the correct requirement for RRBs is to provide 75 per cent of their total credit under priority sector lending, not 90 per cent.

Statement 3: Co-operative Banks contributed the major share in agricultural and allied credit in India.
- This statement is incorrect because Regional Rural Banks (RRBs) actually play a significant role in providing credit and other facilities to small farmers, agricultural labourers, and artisans in rural areas. RRBs were specifically established with this objective by an act of parliament.
Therefore, the correct answer is option 'D' as both statements 2 and 3 are incorrect.

Consider the following statements regarding Incremental Capital-Output Ratio (ICOR).
1.    The Incremental Capital Output Ratio (ICOR) refers to the relationship between the degree of economic expenditure and the corresponding rise in gross domestic product (GDP).
2.    The higher the ICOR, the higher the productivity of capital.
3.    In the last ten years, the ICOR has seen substantial decline in India.
Which of the above statements is/are correct?
  • a)
    1 and 2 only
  • b)
    1  and 3 only
  • c)
    1 only
  • d)
    2 and 3 only
Correct answer is option 'C'. Can you explain this answer?

Meera Kapoor answered
  • The Incremental Capital-Output Ratio (ICOR) is the ratio of investment to growth which is equal to the reciprocal of the marginal product of capital. The higher the ICOR, the lower the productivity of capital or the marginal efficiency of capital. The ICOR can be thought of as a measure of the inefficiency with which capital is used.
  • In FY19 (2018-19), the implicit incremental capital-output ratio (ICOR) was 4.6. This is relatively high because of deficient capacity utilisation.
  • Historically, India's average ICOR during the three-year period from FY17 to FY19 has averaged 4.23.

Consider the following statements regarding Open Credit Enablement Network (OCEN).
1. The Open Credit Enabling Network is a new credit protocol infrastructure that will link lenders and marketplaces.
2. It will help small businesses and entrepreneurs get loans.
3. National Payments Corporation of India builds it.
Which of the above statements is/are correct?
  • a)
    1 only
  • b)
    1, 2
  • c)
    1, 3
  • d)
    1, 2, 3
Correct answer is option 'B'. Can you explain this answer?

Suresh Reddy answered
Open Credit Enablement Network (OCEN), a credit protocol infrastructure built by the Indian Software Product Industry Roundtable (iSpirt), a think-tank of the software industry, will democratise the lending ecosystem.
OECN as a credit rail will have a common language and connecting lenders and marketplaces, allowing them to create innovative credit products and services on top of it.
It will democratise credit in the country, helping small businesses and entrepreneurs get loans.

Teaser loan, sometimes seen in news means;
  • a)
    Loans which charge lower rates of interest in the first few years after which the rates are increased.
  • b)
    Loans provided to weaker sections of the society with an interest rate below the repo rate.
  • c)
    Loans provided to high net worth individuals.
  • d)
    None of the above
Correct answer is option 'A'. Can you explain this answer?

Teaser Loan: An Explanation

Introduction:
Teaser loans, also known as introductory rate loans or hybrid adjustable-rate mortgages (ARMs), are a type of loan where the interest rate is initially set at a lower rate for a specified period, typically for the first few years. After this initial period, the interest rate is adjusted to the prevailing market rate. This type of loan structure is often seen in the news as it has implications for borrowers and the overall economy.

Explanation:
Teaser loans are structured in a way that allows borrowers to enjoy lower interest rates for an initial period, which is typically between one to five years. This introductory period is known as the teaser period. During this time, borrowers benefit from lower monthly payments as the interest rate is lower than the prevailing market rate.

Adjustment Period:
After the teaser period ends, the interest rate is adjusted to the prevailing market rate. This adjustment can result in an increase in the monthly payment amount as the interest rate may be higher than what the borrower was initially paying. The interest rate adjustment is typically based on an index, such as the prime rate or the London Interbank Offered Rate (LIBOR), plus a margin determined by the lender.

Advantages and Disadvantages:
Teaser loans can be advantageous for borrowers who plan to sell their property or refinance their mortgage before the teaser period ends. They can take advantage of the lower interest rate during the initial period and then move on to a different loan or sell the property. However, if borrowers are not able to sell or refinance within the teaser period, they may face higher monthly payments once the interest rate adjusts.

Impact on Borrowers and Economy:
Teaser loans can have both positive and negative effects on borrowers and the overall economy. Initially, borrowers may be attracted to the lower interest rates, which can make homeownership more affordable. However, if borrowers are unable to handle the increased monthly payments after the teaser period, they may face financial difficulties and potential foreclosure.

From an economic perspective, teaser loans played a significant role in the 2008 financial crisis. Many borrowers were attracted to the initial lower interest rates and took out loans they could not afford once the rates adjusted. This led to a significant number of defaults and foreclosures, which had a ripple effect on the housing market and the overall economy.

Conclusion:
Teaser loans are a type of loan where the interest rate is initially set at a lower rate for a specified period, after which it adjusts to the prevailing market rate. While they can be attractive to borrowers initially, it is important for borrowers to carefully consider their long-term financial stability and ability to handle the potential increase in monthly payments once the teaser period ends.

Consider the following statements regarding the Asian Development Bank (ADB).
1. Asian Development Bank (ADB) is a regional development bank dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth.
2. The Bank admits the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) and non-regional developed countries.
3. The ADB was modelled closely on the New Development Bank, where the Bank's initial subscribed capital was equally distributed among the founding members.
Which of the above statements is/are correct?
(b)1 and 2 only
  • a)
    1 and 3 only
  • b)
    2 and 3 only
  • c)
    All of the above
Correct answer is option 'B'. Can you explain this answer?

Amit Kumar answered
About ADB
(i) It is a regional development bank.
(ii) Established on 19 December 1966.
(iii) headquartered — Manila, Philippines.
(iv) Official United Nations Observer.
The Bank admits the members of the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP, formerly the Economic Commission for Asia and the Far East or ECAFE) and non-regional developed countries.
ADB now has 68 members, 49 from within Asia.
It is modelled closely on the World Bank and has a similar weighted voting system where votes are distributed in proportion with members' capital subscriptions.
As of 31 December 2019, ADB's five largest shareholders are Japan and the United States (each with 15.6% of total shares), the People's Republic of China (6.4%), India (6.3%), and Australia (5.8%).
Roles and functions:
Dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration.
This is carried out through investments - in the form of loans, grants and information sharing - in infrastructure, health care services, financial and public administration systems, helping nations prepare for the impact of climate change or better manage their natural resources, as well as other areas.

A repurchase or buyback of a share is a decision by a business to buy its own shares from the market. Such a move can contribute to
1.    It reduces the number of outstanding shares of the company. 
2.    It tends to increase the price of remaining shares.
3.    It is often undertaken when the company's shares are undervalued.
Select the correct answer code:
  • a)
    1 and 2 only
  • b)
    1 and 3 only
  • c)
    2 and 3 only
  • d)
    1, 2, 3
Correct answer is option 'D'. Can you explain this answer?

Amrutha Kapoor answered
Repurchase or Buyback of Shares:

1. Reduces Number of Outstanding Shares:
- When a company repurchases its own shares, it reduces the number of outstanding shares in the market.
- This reduction in the number of shares can lead to an increase in the company's earnings per share (EPS) and improve financial ratios.

2. Increases Price of Remaining Shares:
- With a decrease in the number of outstanding shares, the demand for the remaining shares may increase.
- The increase in demand can lead to a rise in the price of the company's shares, benefiting existing shareholders.

3. Undertaken When Shares are Undervalued:
- Companies often repurchase shares when they believe that their shares are undervalued in the market.
- By buying back undervalued shares, the company can show confidence in its own stock and potentially increase shareholder value in the long run.
Therefore, a repurchase or buyback of shares can have multiple benefits for a company, including reducing outstanding shares, increasing share price, and signaling confidence in the company's valuation.

Consider the following statements regarding the leverage ratio for banks.
1. The leverage ratio measures a bank's core capital to its total assets.
2. An increase in the leverage ratio for banks helps them boost their lending activities.
Which of the above statements is/are correct?
  • a)
    1 only
  • b)
    2 only
  • c)
    Both 1 and 2
  • d)
    Neither 1 nor 2
Correct answer is option 'A'. Can you explain this answer?

Pooja Shah answered
The Reserve Bank relaxed the leverage ratio (LR) for banks to boost their lending activities.
The leverage ratio stands reduced to 4 per cent for Domestic Systemically Important Banks (DSIBs) and 3.5 per cent for other banks effective from the quarter commencing October 1, 2019.
"Both the capital measure and the exposure measure, along with Leverage Ratio, are to be disclosed on a quarter-end basis. However, banks must meet the minimum Leverage Ratio requirement at all times," RBI said.
The leverage ratio is defined as the capital measure divided by the exposure measure, expressed as a percentage. The capital measure is tier 1 capital, and the exposure measure includes both on-balance sheet exposure and off-balance sheet items.
The leverage ratio measures a bank's core capital to its total assets. The ratio uses tier 1 capital to judge how leveraged a bank is in relation to its consolidated assets. Tier 1 assets are ones that can be easily liquidated if a bank needs capital in the event of a financial crisis. So, it is basically a ratio to measure a bank's financial health. The higher the tier 1 leverage ratio, the higher the bank's likelihood withstanding negative shocks to its balance sheet.
The leverage ratio is used as a tool by central monetary authorities to ensure banks' capital adequacy and place constraints on the degree to which a financial company can leverage its capital base.

Which of the following are regulated by Reserve Bank of India (RBI)?
1. Housing Finance Companies
2. Merchant Banking Companies
3. Venture Capital Fund Companies 
Select the correct answer code:
  • a)
    1 only
  • b)
    1 and 2 only
  • c)
    1 and 3 only
  • d)
    None of the above 
Correct answer is option 'D'. Can you explain this answer?

Kabir Verma answered
Housing Finance Companies are regulated by National Housing Bank, Merchant Banker/Venture Capital Fund Company/stock-exchanges/stock brokers/sub-brokers are regulated by Securities and Exchange Board of India, and Insurance companies are regulated by Insurance Regulatory and Development Authority. Similarly, Chit Fund Companies are regulated by the respective State Governments and Nidhi Companies are regulated by Ministry of Corporate Affairs, Government of India. Companies that do financial business but are regulated by other regulators are given specific exemption by the Reserve Bank from its regulatory requirements for avoiding duality of regulation.

The term 'Roaring Twenties' refer to
  • a)
    Strong westerly winds found in 10 to 20 degrees latitude
  • b)
    Period of economic prosperity in the United States and Europe
  • c)
    Severe Thunderstorms during 1920s
  • d)
    Economic recession in Asian countries during 1920s
Correct answer is option 'B'. Can you explain this answer?

Bijoy Saha answered
The Roaring Twenties is a term used to describe a period of economic prosperity in the United States and Europe during the 1920s. This era was marked by a significant increase in consumer spending, driven by technological advancements, mass production, and urbanization.

Heading: Economic Prosperity
During this period, the economy experienced a rapid growth in production and consumption, leading to an increase in employment rates and higher wages for workers. The availability of new technologies, such as the automobile and radio, also led to new industries and job opportunities. The stock market reached new heights, and people invested heavily in stocks, leading to a stock market bubble.

Heading: Social Changes
The Roaring Twenties was also marked by a significant shift in social and cultural norms. Women gained more independence and freedom, leading to the emergence of flappers, who challenged traditional gender roles. The prohibition of alcohol also led to the rise of illegal speakeasies and bootlegging.

Heading: Literature and the Arts
The Roaring Twenties was a significant period for literature and the arts. Many famous authors, such as F. Scott Fitzgerald and Ernest Hemingway, emerged during this time and wrote about the changing social norms and the disillusionment of the era. Jazz music also became popular, and the Harlem Renaissance emerged as a significant cultural movement.

In conclusion, the Roaring Twenties was a period of economic prosperity, social change, and cultural innovation in the United States and Europe. It was a time of great change and transformation, which had a significant impact on the world's political and economic landscape.

Consider the following statements regarding Special economic zones (SEZs) in India.
1. The SEZ Act 2005 envisages a key role for the State Governments in Export Promotion and creating a related infrastructure in SEZs.
2. All laws of India are applicable in SEZs unless specifically exempted as per the SEZ Act/ Rules.
3. SEZs are exempted from Minimum Alternate Tax (MAT).
Which of the above statements is/are correct?
  • a)
    1 and 3 only
  • b)
    2 and 3 only
  • c)
    1 and 2 only
  • d)
    All of the above
Correct answer is option 'C'. Can you explain this answer?

Kabir Verma answered
A special economic zone (SEZ) is an area where the business and trade laws are different from the rest of the country. SEZs are located within a country's national borders, and their aims include increased trade balance, employment, increased investment, job creation and effective administration.
The SEZ Scheme's main objectives are generation of additional economic activity, promotion of exports of goods and services, promotion of investment from domestic and foreign sources, creation of employment opportunities, and the development of infrastructure facilities. All laws of India are applicable in SEZs unless specifically exempted as per the SEZ Act/ Rules. Sales in the Domestic Tariff Area from the SEZ units are treated as imported and subject to payment of applicable customs duties.
SEZs were introduced to India in 2000, following the already successful SEZ model used in China. Before their introduction, India relied on export processing zones (EPZs), which failed to impact foreign investors. By 2005, all EPZs had been converted to SEZs.
The SEZ Act 2005 envisages a key role for the State Governments in Export Promotion and creation of related infrastructure.

Consider the following statements.
1.  Commercial crops are not covered under minimum support prices (MSPs).
2.  If MSP is legally binding, no crop can be bought by private buyers below the MSP.
3.  The marketed surplus for all the crops covered under MSP is more than 50%.
Which of the above statements is/are correct?
  • a)
    1 and 2 only
  • b)
    1 and 3 only
  • c)
    2 only
  • d)
    2 and 3 only
Correct answer is option 'C'. Can you explain this answer?

Arnav Malik answered
Explanation:

Statement 1: Commercial crops are not covered under minimum support prices (MSPs).
This statement is correct. The minimum support price (MSP) is a price set by the government to protect farmers from any sharp fall in crop prices. However, MSPs are generally announced only for major crops such as wheat, rice, maize, and pulses. Commercial crops like cotton, sugarcane, and oilseeds are not covered under the MSP system.

Statement 2: If MSP is legally binding, no crop can be bought by private buyers below the MSP.
This statement is correct. When the government announces an MSP, it becomes a legally binding price. Private buyers are not allowed to purchase crops from farmers below the MSP. However, this does not mean that private buyers are obligated to buy crops at the MSP. They can choose to buy at a higher price, but not below the MSP.

Statement 3: The marketed surplus for all the crops covered under MSP is more than 50%.
This statement is incorrect. The marketed surplus refers to the quantity of a crop that is sold in the market after meeting the farmer's own consumption needs. While it is difficult to provide an exact percentage, it is generally observed that the marketed surplus for crops covered under MSP is less than 50%. This means that a significant portion of the crop is consumed by the farmers themselves or used for other purposes like seed or animal feed.

Therefore, the correct statements are:
1. Commercial crops are not covered under minimum support prices (MSPs).
2. If MSP is legally binding, no crop can be bought by private buyers below the MSP.

Consider the following statements regarding Off-budget borrowing.
1.  Off-budget loans are loans made under the control of the central government by any public entity.
2.  Off-budget borrowing helps keep the country's fiscal deficit within acceptable limits. 
3.  Off-budget financing is not part of the calculation of the fiscal indicators and does not have any fiscal implications.
4.  Public sector banks can fund off-budget expenses.
Which of the above statements is/are correct?
  • a)
    1, 2 and 3 only
  • b)
    1, 2 and 4 only
  • c)
    1 and 2 only
  • d)
    All of the above
Correct answer is option 'B'. Can you explain this answer?

Kavita Shah answered
  • Off-budget borrowings are loans that are taken not by the Centre directly, but by another public institution which borrows on the directions of the central government. Such borrowings are used to fulfil the government's expenditure needs.
  • But since the liability of the loan is not formally on the Centre, the loan is not included in the national fiscal deficit. This helps keep the country's fiscal deficit within acceptable limits.
  • Comptroller and Auditor General report of 2019 points out, this route of financing puts major sources of funds outside the control of Parliament. "Such off-budget financing is not part of the calculation of the fiscal indicators despite fiscal implications," said the report.
  • The government can ask an implementing agency to raise the required funds from the market through loans or by issuing bonds. In the Budget presentation for 2020-21, the government paid only half the amount budgeted for the food subsidy bill to the Food Corporation of India. The shortfall was met through a loan from the National Small Savings Fund.
  • Public sector banks are also used to fund off-budget expenses. For example, loans from PSU banks were used to make up for the shortfall in the release of fertiliser subsidy.

Consider the following statements.
1. Recession is defined as a fall in the overall economic activity for two consecutive quarters accompanied by a decline in income, sales and employment.
2. India's economy has now formally entered into a technical recession.
3. Gross Value Added (GVA) data provides a measure of national income by looking at the value-added sectors of the economy.
Which of the above statements is/are correct?
  • a)
    1 and 2 only
  • b)
    1 and 3 only
  • c)
    2 and 3 only
  • d)
    All of the above
Correct answer is option 'D'. Can you explain this answer?

Kabir Verma answered
According to the official data released recently, India's gross domestic product (GDP) contracted by 7.5% during the July, August, and September quarter. This means that in Q2 of 2020-21 India produced 7.5% fewer goods and services compared to what India produced in Q2 of 2019-20.
In the process, India's economy has now formally entered into a technical recession because — along with the nearly 24% contraction in Q1 — India has had two consecutive quarters when GDP growth rate has declined.
Recession is defined as a fall in the overall economic activity for two consecutive quarters (six months) accompanied by a decline in income, sales and employment.
Gross Value Added (GVA) data provides a measure of national income by looking at the value-added by different economic sectors in that quarter. If you want to compare which parts of the economy improved production and incomes from one quarter to another, the GVA is more apt.
 

Consider the following statements regarding Monetisation of the deficit.
1. Deficit monetisation means printing large sums of money and distributing it to the public.
2. The Monetisation of the deficit is not practised in India after 1991 Economic Reforms.
Which of the above statements is/are incorrect?
  • a)
    1 only
  • b)
    2 only
  • c)
    Both 1 and 2
  • d)
    Neither 1 nor 2
Correct answer is option 'C'. Can you explain this answer?

Amit Kumar answered
In layman's language, Monetisation of deficit means printing more money. In other words, Monetisation of deficit happens when RBI buys government securities directly from the primary market to fund the Government's expenses.
The Monetisation of the deficit was in practice in India until 1997, whereby the central Bank automatically monetised government deficit through ad-hoc treasury bills.
What is helicopter money? : This is an unconventional monetary policy tool aimed at bringing a flagging economy back on track. It involves printing large sums of money and distributing it to the public. Under such a policy, a central bank "directly increase the money supply and, via the government, distribute the new cash to the population to boost demand and inflation."

Singapore's Temasek-like model, sometimes seen in news is related to
(a) Restrictive lockdown measures
(b) Disinvestment programme
(c) Local Governance
(d) Primary Health care
Correct answer is 'b'. Can you explain this answer?

The Economic Survey 2019-20 backed the government's move to aggressively privatise central public sector enterprises (CPSEs) through divestment of government stake, which will have a multiplier effect on improving efficiency and profitability of the divested company while unlocking capital that can be used for building public infrastructure.
The Survey cited the case of Temasek Holdings Company in Singapore, a model that it said can be adopted to maximise government stake in CPSEs successfully.
In the model, the government can transfer its stake in the listed CPSEs to a separate corporate entity that would be managed by an independent board and would be mandated to divest the government stake in these CPSEs over time. "This will lend professionalism and autonomy to the disinvestment programme which, in turn, would improve the economic performance of the CPSEs," the Survey said.

Consider the following statements regarding Special Drawing Right (SDR).
1. The Special Drawing Right (SDR) is an international reserve asset generated by the IMF that bears interest.
2. The value of the SDR is not set by IMF, rather it is directly determined by supply and demand in the market.
3. It can be held and used by member countries, private entities or individuals.
Which of the above statements is/are incorrect?
  • a)
    1 and 2 only
  • b)
    2 only
  • c)
    2 and 3 only
  • d)
    1 and 3 only
Correct answer is option 'C'. Can you explain this answer?

Aniket Kapoor answered
Special Drawing Right (SDR) is an international reserve asset generated by the International Monetary Fund (IMF) to supplement the existing official reserves of member countries. It was created in 1969 and is based on the basket of currencies, including the US dollar, euro, yen, pound sterling, and the Chinese renminbi.

Incorrect Statements:

2. The value of the SDR is not set by IMF, rather it is directly determined by supply and demand in the market.
3. It can be held and used by member countries, private entities or individuals.

Explanation:

2. The value of SDR is determined by the IMF's basket of currencies, and it is reviewed and adjusted every five years based on the relative importance of currencies in international trade and finance. The IMF also determines the interest rate on SDR holdings.

3. SDR is only allocated to member countries, and it cannot be held or used by private entities or individuals. However, member countries can use SDR to settle international payments or to obtain currencies of other member countries.

Correct Statements:

1. The Special Drawing Right (SDR) is an international reserve asset generated by the IMF that bears interest.

Explanation:

1. SDR is a financial instrument created by the IMF to supplement the official reserves of member countries. It is not a currency but a claim to currencies held by IMF member countries. SDR holdings earn interest and can be used by member countries to settle international payments or to obtain currencies of other member countries.

Special Drawing Rights (SDR) can be used to
1. Supplementing IMF member countries' official reserves.
2. Settle Balance of Payment transactions
3. Bridge fiscal deficit and fund infrastructure projects
Select the correct answer code:
  • a)
    1 and 3 only
  • b)
    1 and 2 only
  • c)
    1 only
  • d)
    All of the above
Correct answer is option 'B'. Can you explain this answer?

Meera Kapoor answered
The SDR is neither a currency nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. SDRs can be exchanged for these currencies. It cannot be used to fund infrastructure projects as it is not a currency. Same goes for settling domestic financial bills of the government.
SDR allocations can play a role in providing liquidity and supplementing member countries' official reserves.
IMF member countries can borrow SDRs from its reserves at favourable interest rates, mostly to adjust their balance of payments to favourable positions.

Participatory notes (P-notes) investments in the Indian market is allowed in which of the following instruments
1. Equity
2. Debt
3. Hybrid securities
4. Derivatives
Select the correct answer code:
  • a)
    1,2 and 3 only
  • b)
    1,3 and 4 only
  • c)
    1 and 2 only
  • d)
    All of the above
Correct answer is option 'D'. Can you explain this answer?

Registered FPIs issue P-notes to overseas investors who wish to be part of the Indian stock market without registering themselves directly. They, however, need to go through a due diligence process.
P-note investments in Indian markets - equity, debt, hybrid securities and derivatives.

Consider the following statements regarding International Financial Services Centres Authority.
1. International Financial Services Centres Authority is a statutory regulatory body under the Department of Economic Affairs to regulate all financial services in International Financial Services Centres (IFSCs) in the country.
2. The authority exercises the powers of RBI in respect of financial services performed in the international financial services centres in the country.
3. IFSCA has members each nominated from RBI, IRDAI, SEBI and PFRDA.
Which of the above statements is/are correct?
  • a)
    1, 2
  • b)
    1, 3
  • c)
    2, 3
  • d)
    1, 2, 3
Correct answer is option 'D'. Can you explain this answer?

Amit Kumar answered
About the International Financial Services Centres Authority
(i) It is a statutory body established in 2020.
(ii) It works under the Department of Economic Affairs, Ministry of Finance.
(iii)Headquartered in Gandhinagar, Gujarat.
The Authority will function as a unified regulator and is empowered to exercise the powers of RBI, SEBI, IRDAI and PFRDA in respect of financial services, financial products and financial institutions performed/located in the international financial services centres in the country.
Besides the Chairman, IFSCA has a member each nominated from RBI, IRDAI, SEBI and PFRDA. There are also two members from the Central Government and full-time or part-time members in the Authority.

Which of the following are recognised as "Three Sisters" under the Sanitary and Phytosanitary Measures (SPS) Agreement of the World Trade Organization (WTO)?
1. International Plant Protection Convention (IPPC)
2. Codex Alimentarius Commission
3. Pacific Plant Protection Organization
4. World Organization for Animal Health (OIE)
Select the correct answer code:
Answer: b
  • a)
    1,2 and 3
  • b)
    1,2 and 4
  • c)
    2,3 and 4
  • d)
    2 and 4
Correct answer is option ''. Can you explain this answer?

Ojasvi Mehta answered
The International Plant Protection Convention (IPPC) is one of the "Three Sisters" recognised by the World Trade Organization's (WTO) Sanitary and Phytosanitary Measures (SPS) Agreement, along with the Codex Alimentarius Commission for food safety standards and the World Organization for Animal Health (OIE) for animal health standards.

Geographical Indication tags are typically given for
1. Agricultural products
2. Foodstuffs
3. Handicrafts
4. Industrial products
5. Wines and spirit drinks 
Select the correct answer code:
  • a)
    1, 2, 3, 4
  • b)
    1, 2, 3, 5
  • c)
    1, 2, 3, 4, 5
  • d)
    1, 2, 4, 5
Correct answer is option 'C'. Can you explain this answer?

Amit Sharma answered
The World Intellectual Property Organisation defines a GI as "a sign used on products that have a specific geographical origin and possess qualities or a reputation that are due to that origin".
GIs are typically used for agricultural products, foodstuffs, handicrafts, industrial products, wines and spirit drinks. Darjeeling tea, Kullu shawl, Mysore agarbathi, champagne (France), Swiss watches etc. are examples.
Internationally, GIs are covered as an element of intellectual property rights under the Paris Convention for the Protection of Industrial Property. They have also covered under the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement.

In India, the sectors where FDI is not allowed are:
1. Investment in Chit Funds
2. Tobacco industry
3. All Agricultural or Plantation Activities
4. Satellite and its associated activities 
Select the correct answer code:
  • a)
    1,2 and 3 only
  • b)
    1 and 2 only
  • c)
    1, 2 and 4 only
  • d)
    All of the above
Correct answer is option 'B'. Can you explain this answer?

Rahul Mehta answered
Sectors in the Indian economy where FDI is not allowed are
(i) Atomic Energy Generation
(ii) Cigars, Cigarettes, or any related tobacco industry
(iii) Lotteries (online, private, government, etc.)
(iv) Investment in Chit Funds
(v) Agricultural or Plantation Activities (although there are many exceptions like horticulture, fisheries, tea plantations, Pisciculture, animal husbandry, etc.)
(vi) Housing and Real Estate (except townships, commercial projects, etc.)
(vii) Trading in TDR's (Transferable development rights)
(viii) Any Gambling or Betting businesses

Consider the following statements regarding the London Interbank Offered Rate (LIBOR).
1. The London Interbank Offered Rate (LIBOR) is a benchmark interest rate at which major global banks lend to one another in the international interbank market for short-term loans.
2. The European Central Bank manages it (ECB).
3. LIBOR will not be published any more after end-2021.
Which of the above statements is/are correct?
  • a)
    1 and 2 only
  • b)
    1 and 3 only
  • c)
    2 and 3 only
  • d)
    All of the above
Correct answer is option 'B'. Can you explain this answer?

Amit Sharma answered
The London Interbank Offered Rate (LIBOR) is a benchmark interest rate at which major global banks lend to one another in the international interbank market for short-term loans.
LIBOR, which stands for London Interbank Offered Rate, serves as a globally accepted key benchmark interest rate that indicates borrowing costs between banks. The rate is calculated and published each day by the Intercontinental Exchange (ICE). Still, due to recent scandals and questions around its validity as a benchmark rate, it is being phased out.
Libor will not be published any more after end-2021, and market participants are strongly encouraged to transition to other risk-free rates.

Consider the following statements regarding the Bank for International Settlements (BIS).
1. The Bank for International Settlements (BIS), jointly owned by the World Bank and the International Monetary Fund, is an international financial institution.
2. It offers banking services, but only to central banks and other foreign organisations.
Which of the above statements is/are incorrect?
  • a)
    1 only
  • b)
    2 only
  • c)
    Both 1 and 2
  • d)
    Neither 1 nor 2
Correct answer is option 'A'. Can you explain this answer?

The Bank for International Settlements (BIS) is an international financial institution owned by central banks that "fosters international monetary and financial cooperation and serves as a bank for central banks". The BIS carries out its work through its meetings, programmes and through the Basel Process - hosting international groups pursuing global financial stability and facilitating their interaction.
It also provides banking services, but only to central banks and other international organisations. It is based in Basel, Switzerland.

The actual liabilities of the Union government include which of the following
1.  Borrowings by PSUs
2.  Loans taken for the recapitalisation of banks
3.  Capital expenditures of various Ministries.
Select the correct answer code:
  • a)
    1 and 2 only
  • b)
    1 and 3 only
  • c)
    2 and 3 only
  • d)
    All of the above
Correct answer is option 'A'. Can you explain this answer?

Tanvi Gupta answered
Liabilities of the Union government:
Borrowings by PSUs:
- Public Sector Undertakings (PSUs) are government-owned companies that often require borrowing to finance their operations.
- These borrowings are considered liabilities of the Union government as the government ultimately guarantees or is responsible for repaying these debts.
Loans taken for the recapitalisation of banks:
- The government may provide loans to banks for recapitalization purposes, especially during financial crises or to strengthen the banking sector.
- These loans are considered liabilities as they represent financial commitments that the government must fulfill.
Capital expenditures of various Ministries:
- Capital expenditures refer to investments in assets such as infrastructure, equipment, and buildings by various Ministries of the Union government.
- These expenditures are considered liabilities as they represent future financial obligations that the government must meet.
Therefore, the actual liabilities of the Union government include borrowings by PSUs and loans taken for the recapitalization of banks. These financial commitments reflect the government's responsibility to manage and repay debts incurred on behalf of these entities.

Consider the following statements.
1. Disinvestment involves selling minority shares of Public Enterprises, to a public or private entity.
2. When the government sells majority shares in a public sector entity that is strategic disinvestment.
3. Under strategic disinvestment, the government transfers the ownership and control of a public sector entity to another public entity and the private sector is not involved here.
Which of the above statements is/are correct?
  • a)
    1 and 3 only
  • b)
    1 and 2 only
  • c)
    2 and 3 only
  • d)
    All of the above
Correct answer is option 'B'. Can you explain this answer?

Rajesh Roy answered
Explanation:

Disinvestment is the process of selling shares of a public sector enterprise to a private or public entity. The government can choose to sell minority or majority shares. Strategic disinvestment is a process where the government sells its majority shares in a public sector enterprise to a private or public entity. The process involves transferring ownership and control of the public sector enterprise.

The following statements are given:

1. Disinvestment involves selling minority shares of Public Enterprises, to a public or private entity.

This statement is correct. Disinvestment can involve selling minority shares of public sector enterprises to public or private entities. The government can choose to sell shares through the stock market or a strategic sale.

2. When the government sells majority shares in a public sector entity that is strategic disinvestment.

This statement is correct. Strategic disinvestment involves selling the majority shares of a public sector enterprise to a private or public entity. The government can choose to sell shares through the stock market or a strategic sale.

3. Under strategic disinvestment, the government transfers the ownership and control of a public sector entity to another public entity and the private sector is not involved here.

This statement is incorrect. Under strategic disinvestment, the government can transfer ownership and control of a public sector enterprise to a private or public entity. The private sector can be involved in the purchase of shares.

Therefore, the correct answer is option B, which states that statements 1 and 2 only are correct.

Consider the following statements regarding Government Security (G-Sec) and Treasury Bills (T-bills).
1. In India, the Central Government issues both, treasury bills and bonds or dated securities while the State Governments issue only bonds or dated securities, which are called the State Development Loans (SDLs).
2. They are not available for small and retail investors.
Which of the above statements is/are incorrect?
  • a)
    1 only
  • b)
    2 only
  • c)
    Both 1 and 2
  • d)
    Neither 1 nor 2
Correct answer is option 'B'. Can you explain this answer?

Kavita Shah answered
What is Government Security (G-Sec)?
A Government Security (G-Sec) is a tradeable instrument issued by the Central Government or the State Governments. It acknowledges the Government's debt obligation. Such securities are short term (usually called treasury bills, with original maturities of less than one year) or long term (usually called Government bonds or dated securities with an original maturity of one year or more). In India, the Central Government issues both, treasury bills and bonds or dated securities while the State Governments issue only bonds or dated securities.

Consider the following statements regarding Off-budget financing.
1.    Off-budget spending is not included in the estimation of economic metrics, such as the fiscal deficit.
2.    Parliamentary control on such spending is also reduced.
3.    National Small Savings Fund is the biggest source for the Government for Off-budget financing.
Which of the above statements is/are correct?
  • a)
    1 and 2 only
  • b)
    1 and 3 only
  • c)
    2 and 3 only
  • d)
    1, 2, 3
Correct answer is option 'D'. Can you explain this answer?

Amit Kumar answered
  • Off-budget financing by its nature isn't taken into account when calculating fiscal indicators. This refers to expenditure that's not funded through the budget.
  • Off-budget financing by its nature isn't taken into account when calculating fiscal indicators. But the cost is borne by the budget through some mechanism or the other. Such financing tends to hide the actual extent of government spending, borrowings and debt and increase the interest burden.
  • The government's began harnessing funds from outside the Budget to service its Budget commitments since 2016-17. The size of this initiative has grown more than two-fold in a few years, and now nears 1% of grossdomestic product. What began with food security, off-Budget financing now caters heavily to a range of core spending areas.
  • Off-Budget spending may remain high, or rise, in 2021-22. The reason: theNational Small Savings Fund, which is the biggest source for such spending, is growing faster than ever this year. In a year when average incomes have not grown much, people have poured money into savings for social security.
REVENUE SPENDING:
  1. Deferred fertilizer arrears/bills through special banking arrangements
  2. Food subsidy bills/arrears of Food Corp. of India through borrowings.
  3. Accelerated Irrigation Benefit Program through National Bank for Agriculture and Rural Development borrowing
CAPITAL SPENDING
  1. Indian Railway Finance Corp. borrowing for railway projects
  2. Power Finance Corp funding of power projects

Consider the following statements regarding Non-Banking Financial Companies (NBFCs).
1.  All the NBFCs are regulated by RBI.
2.  The designation of 'Systematically Important' is applicable for Banks and not for NBFCs.
Which of the above statements is/are correct?
  • a)
    1 only
  • b)
    2 only
  • c)
    Both 1 and 2
  • d)
    Neither 1 nor 2 
Correct answer is option 'D'. Can you explain this answer?

Rahul Mehta answered
Does the Reserve Bank regulate all financial companies?
No. Housing Finance Companies, Merchant Banking Companies, Stock Exchanges, Companies engaged in the business of stock-broking/sub-broking, Venture Capital Fund Companies, Nidhi Companies, Insurance companies and Chit Fund Companies are NBFCs but they have been exempted from the requirement of registration under Section 45-IA of the RBI Act, 1934 subject to certain condition.
What are systemically important NBFCs?
NBFCs whose asset size is of 500 cr or more as per last audited balance sheet are considered as systemically important NBFCs. The rationale for such classification is that the activities of such NBFCs will have a bearing on the financial stability of the overall economy.

Consider the following statements.
1. RBI primarily factors in retail inflation while making its bi-monthly monetary policy.
2. A broad-based domestic and global economic recovery can lead to rise in inflation. 
Which of the above statements is/are correct?
  • a)
    1 only
  • b)
    2 only
  • c)
    Both 1 and 2 
  • d)
    Neither 1 nor 2 S
Correct answer is option 'C'. Can you explain this answer?

Priya Menon answered
RBI primarily factors in retail inflation while making its bi-monthly monetary policy.
A broad-based domestic and global economic recovery should improve aggregate demand, posing an upside risk to inflation. On the other hand, favorable base effect, appreciating rupee and any risk of second or third wave of covid led slowdown, will be a tailwind for CPI inflation.

Consider the following statements.
1. India is the leading exporter of Basmati Rice to the global market.
2. In India, Basmati rice is mainly grown in South and Central India.
3. Agricultural & Processed Food Products Export Development Authority (APEDA) has registered Basmati Rice as a product with Geographical Indication (GI).
Which of the above statements is/are correct?
  • a)
    1 and 2 only
  • b)
    1 and 3 only
  • c)
    2 and 3 only
  • d)
    All of the above
Correct answer is option 'B'. Can you explain this answer?

Ojasvi Mehta answered
India is the leading exporter of Basmati Rice to the global market. India is also the largest producer of basmati rice in the world.
Major Export Destinations (2019-20): Iran, Saudi Arab, Iraq, UAE, Kuwait.
Basmati Rice production areas in India are in the states of J & K, Himachal Pradesh, Punjab, Haryana, Delhi, Uttarakhand and western Uttar Pradesh.
On February 15, 2016, the Agricultural & Processed Food Products Export Development Authority (APEDA), an autonomous organisation under the Department of Commerce in India, registered Basmati Rice as a product with Geographical Indication (GI).

Consider the following statements regarding Anti-Dumping Duty.
1. An anti-dumping duty is a protectionist tariff that a domestic government imposes on imports that it believes are priced below fair market value.
2. In India, Directorate General of Trade Remedies (DGTR), under the Ministry of Commerce & Industry conducts anti-dumping investigations.
Which of the above statements is/are correct?
  • a)
    1 only
  • b)
    2 only
  • c)
    Both 1 and 2
  • d)
    Neither 1 nor 2
Correct answer is option 'C'. Can you explain this answer?

Suresh Reddy answered
An anti-dumping duty is a protectionist tariff that a domestic government imposes on imports that it believes are priced below fair market value. Dumping is a process wherein a company exports a product at a significantly lower price than the price it normally charges in its home (or its domestic) market.
Directorate General of Trade Remedies (DGTR) conducts anti-dumping investigations, under the Customs Tariff Act, 1975 and the rules made thereunder, based on a duly substantiated application filed by the domestic industry alleging dumping of goods into the country causing injury to the domestic industry. Anti-dumping measures' basic intent is to eliminate injury caused to the domestic industry by the unfair trade practice of dumping and to create a level playing field for the domestic industry.

Consider the following statements regarding Municipal Bonds.
1. A municipal bond is a kind of debt instrument where investors offer loans to local governments.
2. They are issued by civic bodies for specific projects and usually have a tenure of 10 years.
3. In India, Municipal bonds were introduced under the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) scheme.
Which of the above statements is/are correct?
  • a)
    2 and 3 only
  • b)
    1 and 2 only
  • c)
    1 and 3 only
  • d)
    All of the above
Correct answer is option 'B'. Can you explain this answer?

Anjali Rao answered
A municipal bond is a kind of debt instrument where investors offer loans to local governments. They are issued by civic bodies for specific projects and usually have a 10-year tenure. The ULB pays the annual interest on the bonds to the investor at the decided rate.
Bonds are issued to institutional and high net worth individuals. The face value of each instrument slot of a municipal bond if a minimum of Rs 10 lakh. It can be subscribed to (purchased) by a single investor or multiple investors.
According to officials, under the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) scheme, urban local bodies (ULBs) are encouraged to tap the bond market.

Consider the following statements regarding Bad Bank.
1.  A bad bank is an asset rehabilitation company (ARC) that takes over, manages and eventually recovers the capital over a period of time from the bad loans of commercial banks.
2.  Bad bank is also involved in lending and taking deposits.
Which of the above statements is/are correct?
  • a)
    1 only
  • b)
    2 only
  • c)
    Both 1 and 2
  • d)
    Neither 1 nor 2
Correct answer is option 'A'. Can you explain this answer?

Meera Kapoor answered
  • The idea of setting up a bad bank to resolve the growing problem of non-performing assets (NPAs), or loans on which borrowers have defaulted, is back on the table.
  • Technically, a bad bank is an asset reconstruction company (ARC) or an asset management company that takes over the bad loans of commercial banks, manages them and finally recovers the money over a period of time.
  • The bad bank is not involved in lending and taking deposits, but helps commercial banks clean up their balance sheets and resolve bad loans. The takeover of bad loans is normally below the book value of the loan and the bad bank tries to recover as much as possible subsequently.
     

India's economy is showing decisive signs of a 'V-shaped' recovery in 2021. What does 'V-shaped' recovery mean?
  • a)
    Economy quickly rises like a phoenix after a crash and It more than makes up for lost ground.
  • b)
    Economy quickly recoups lost ground and gets back to the normal growth trend.
  • c)
    Economy, after falling, struggles and muddles around a low growth rate for some time, before rising gradually to usual levels.
  • d)
    Growth falls and rises, but falls again before recovering yet again.
Correct answer is option 'B'. Can you explain this answer?

Meera Singh answered
  • The Z-shaped recovery is the most-optimistic scenario in which the economy quickly rises like a phoenix after a crash. It more than makes up for lost ground (think revenge-buying after the lockdowns are lifted) before settling back to the normal trend-line, thus forming a Z-shaped chart.
  • In V-shaped recovery the economy quickly recoups lost ground and gets back to the normal growth trend-line.
  • A U-shaped recovery is a scenario in which the economy, after falling, struggles and muddles around a low growth rate for some time, before rising gradually to usual levels.
  • A W-shaped recovery is a dangerous creature — growth falls and rises, but falls again before recovering yet again, thus forming a W-like chart.
  • The L-shaped recovery is the worst-case scenario, in which growth after falling, stagnates at low levels and does not recover for a long, long time.

Consider the following statements regarding Negative-yield bonds.
1. These are debt instruments that offer to pay the investor a maturity amount lower than the bond's purchase price.
2. Central banks or governments generally issue these.
3. Negative-yield bonds attract investments during times of stress and uncertainty as investors look to protect their capital from significant erosion.
Which of the above statements is/are correct?
  • a)
    1 and 2 only
  • b)
    1 and 3 only
  • c)
    2 and 3 only
  • d)
    All of the above
Correct answer is option 'D'. Can you explain this answer?

Recently China sold negative-yield debt for the first time, which saw high demand from investors across Europe. As yields in Europe are even lower, there was a huge demand for the 4-billion-euro bonds issued by China. China's 5-year bond was priced with a yield of -0.152%, and the 10-year and 15-year securities with positive yields of 0.318% and 0.664%.
What are negative-yield bonds?
These are debt instruments that offer to pay the investor a maturity amount lower than the bond's purchase price. Central banks or governments generally issue these, and investors pay interest to the borrower to keep their money with them.
Why do investors buy them?
Negative-yield bonds attract investments during times of stress and uncertainty as investors look to protect their capital from significant erosion. When the world is battling the Covid-19 pandemic and interest rates in developed markets across Europe are much lower, investors are looking for relatively better-yielding debt instruments to safeguard their interests.
 

Consider the following statements regarding the National Security Clause under the WTO rules.
1. National Security Clause is an exception that allows WTO members to breach their WTO obligations for purposes of national security.
2. If India invokes National Security Clause, it will allow India to impose tariffs on imports from one country while exempting other trading partners.
Which of the above statements is/are correct?
  • a)
    1 only
  • b)
    2 only
  • c)
    Both 1 and 2
  • d)
    Neither 1 nor 2
Correct answer is option 'C'. Can you explain this answer?

Meera Kapoor answered
National Security Exception laid out in Article XXI of the General Agreement on Tariffs and Trade (GATT) allows WTO members to breach their WTO obligations for national security purposes.
Border hostilities potentially give India room to invoke the national security clause in the WTO rules. This would allow it to impose tariffs on imports from China while exempting other trading partners.

Consider the following statements regarding the New Development Bank (NDB).
1. New Development Bank is a multilateral development bank established by the BRICS states during Second BRICS Summit.
2. The Bank shall support public or private projects through loans, guarantees and equity participation and also provide technical assistance for projects to be supported by the Bank.
3. The initial subscribed capital of the Bank was equally distributed among the founding members.
Which of the above statements is/are correct?
  • a)
    1 and 2 only
  • b)
    1 and 3 only
  • c)
    2 and 3 only
  • d)
    All of the above
Correct answer is option 'C'. Can you explain this answer?

The New Development Bank (NDB), formerly referred to as the BRICS Development Bank, is a multilateral development bank established by the BRICS states. According to the Agreement on the NDB, "the Bank shall support public or private projects through loans, guarantees, equity participation and other financial instruments." Moreover, the NDB "shall cooperate with international organisations and other financial entities, and provide technical assistance for projects to be supported by the Bank."
It was established in 2014, at the 6th BRICS Summit at Fortaleza, Brazil.
The Bank's initial authorised capital is $100 billion divided into 1 million shares having a par value of $100,000 each. The initial subscribed capital of the NDB is $50 billion divided into paid-in shares ($10 billion) and callable shares ($40 billion). The initial subscribed capital of the Bank was equally distributed among the founding members. The Agreement on the NDB specifies that every member will have one vote no one would have any veto powers.

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