Banking Sector: Inflation & RBI- 1
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Which of the following is NOT one of the main functions of the Reserve Bank of India?
TAX system is controlled and supervised by the central and state governments
Arrange the following according to their increasing order of ‘liquidity’:
1. Saving deposits with the banks.
2. Currency and coins with the public.
3. Demand deposits with the banks.
4. Term deposits with the banks.
Select the correct answer using the code given below:
1. Saving deposits with the banks.
2. Currency and coins with the public.
3. Demand deposits with the banks.
4. Term deposits with the banks.
Select the correct answer using the code given below:
Demand deposits will have more liquidity than the saving deposits as the former includes the 'current accounts' of the firms (the most liquid deposit with the banks).
Hence, the correct option is 'A'.
Consider the following statements regarding ‘Marginal Cost of funds based Lending Rate’ (MCLR):
1. It aims to improve the transmission of policy rates into the lending rates of banks.
2. It helps the banks to become more competitive and enhance their long run value.
3. It ensures availability of bank loans at interest rates which are fair to the borrowers as well as the banks.
4. It aims to improve transparency in the methodology followed by banks for determining interest rates.
Which of the statements given above is/are CORRECT?
1. It aims to improve the transmission of policy rates into the lending rates of banks.
2. It helps the banks to become more competitive and enhance their long run value.
3. It ensures availability of bank loans at interest rates which are fair to the borrowers as well as the banks.
4. It aims to improve transparency in the methodology followed by banks for determining interest rates.
Which of the statements given above is/are CORRECT?
MCLR was brought in to change the base rate regime. It is the minimum rate below which a bank cannot lend to anyone. It improves transparency to a large extent over the base rate regime
The establishment of payment banks is being allowed in India to promote financial inclusion. Which of the following statements is/are correct in this context?
1. Mobile telephone companies and supermarket chains that are owned and controlled by residents are eligible to be promoters of payment banks
2. Payment banks can issue both credit cards and debit cards
3. Payment banks cannot undertake lending activities
Select the CORRECT answer using the code given below:
They cannot issue credit cards. Also, they cannot offer fixed deposits and recurring deposits
Consider the following statements:
1. White Label ATMs are owned and operated by the bank
2. Green Label ATMs are used for agricultural transactions
3. Brown Label ATMs are owned and operated by a non-banking entity
Which of the statements given above is/are correct?
-On Site ATM - ATMs Inside the Bank
-Off site ATM - ATM outside the bank premises but is located at other places, such as shopping centres, airports, railways station and petrol stations.
-White Label ATM - ATM Provided by NBFC (Non Banking Financial Company)
-Green Label ATM - ATM Provided for Agricultural Transaction
-Orange Label ATM - ATM Provided for Share Transactions
-Yellow Label ATM - ATM provided for E-commerce
-Pink Label ATM - ATM for women banking
-Brown Label ATM - ATM are those Automated Teller Machines where hardware and the lease of the ATM machine is owned by a service provider but cash management and connectivity to banking networks is provided by a sponsor bank .
Consider the following statements about Regional Rural Banks (RRBs):
1. Their share capital is sponsored by the RBI, Govt. of India and the Scheduled Commercial Banks.
2. Their main objective is to increase institutional credit for the rural and agricultural sector.
3. They are required to fulfill the Priority Sector Lending norms.
Which of the statements given above is/are CORRECT?
Correct Answer :- b
Explanation :- The main objective of regional rural banks in India is to advance credit and other facilities, especially to small and marginal farmers, agricultural labourers, artisans and small entrepreneurs in order to develop agriculture, trade, commerce, industry and other usual productive activities.
RRBs are required to achieve a target of 60 per cent of their outstanding advances for priority sector lending of which at least 25 percent (i.e. 15 percent of the total advances) should be advanced to weaker sections of the society.
Consider the following statements regarding Small Finance Banks:
1. They shall primarily undertake basic banking activities of accepting deposits and lending to small farmers and small businesses.
2. They are not subjected to the prudential norms and RBI regulations that apply to existing commercial banks, including maintenance of CRR and SLR.
Which of the statements given above is/are CORRECT?
They are subjected to the rbi regulations and prudential norms. CRR and SLR limits both apply to these banks
Consider the following statements about Non-Banking Financial Companies (NBFC):
1. They are allowed to accept and renew public deposits.
2. The repayment of deposits by NBFCs is guaranteed by RBI.
3. They need to maintain Capital Adequacy Ratio (CAR) norm as prescribed by the RBI.
Which of the statements given above is/are CORRECT?
NBFC cannot accept demand deposits. NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself;
RBI does not guarantee deposit repayment from NBFC’s. That is guaranteed for public sector banks by the RBI.
Which of the following is the primary purpose of keeping foreign exchange reserves by the RBI?
Foreign exchange act as a cushion in times of recession or mass economic disharmony in a country. They act as a last resort in times of crisis.
Recently, there has been an upsurge in the NPAs of the public sector banks, which of the following is/are the factor(s) responsible?
1. Lower economic growth in the country.
2. Aggressive lending by banks in the past, especially during good times.
3. Lack of right loan-recovery legal provisions.
4. Banks switching over to a system based identification of NPAs.
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Lower economic growth in the country is one of the factors that can contribute to an increase in Non-Performing Assets (NPAs) of public sector banks. A slowdown in the economy can lead to an increase in default rates among borrowers, which can cause NPAs to rise.
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Aggressive lending by banks in the past, especially during good times, is another factor that can contribute to an increase in NPAs. When banks lend too freely during times of economic prosperity, it can lead to an oversupply of credit, which can result in borrowers defaulting on their loans when the economy slows down.
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Lack of right loan-recovery legal provisions, is one of the factors that contribute to the upsurge of NPAs. When the legal framework is not conducive to the recovery of loans, it can be difficult for banks to recover the money they are owed, which can lead to an increase in NPAs.
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Banks switching over to a system based identification of NPAs, Is not the factor for the rise of NPAs. In fact, this is a step towards better identification and management of NPAs, as it ensures that any problem assets are identified and addressed in a timely manner.
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It's important to note that the factors causing the NPA is multifaceted, it could also be due to factors such as lack of adequate collateral, borrower's mismanagement or fraud, sector-specific issues and global economic factors etc.
Consider the following statements and identify the right ones.
i. RBI acts as clearing house for commercial banks.
ii. It also grants license for setting up banking operations
RBI is also responsible for regulating banks, directs their credit policies and provides advice to them.
The amount a bank needs to maintain in form of cash, gold and other securities before giving credit is
The amount a bank needs to maintain in form of cash, gold and other securities before giving credit is called SLR.
The percentage of demand and time liabilities that banks have to keep with RBI is
The percentage of demand and time liabilities that banks have to keep with RBI is called cash reserve ratio.
Consider the following statements and identify the right ones.
i. RBI is the custodian of foreign exchange reserves of the country.
ii. It also keeps the exchange rate of domestic currency at stable level.
RBI is responsible for transaction of the currencies of IMF countries.
Which of the following is NOT a function of RBI?
RBI has a set of supervisory functions too.
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