Try yourself: In the question given below, there are two statements marked as Assertion (A) and Reason (R). Read the Statements and choose the correct option:
Assertion (A) : Banks keeps a small proportion of their deposits as cash with themselves.Reason (R) : This is kept to meet the loan requirements of the people.
A
Both (A) and (R) are true and (R) is the correct explanation of (A).
B
Both (A) and (R) are true but (R) is not the correct explanation of (A).
C
(A) is correct but (R) is wrong.
D
(A) is wrong but (R) is correct
Correct Answer: C
Banks keep only a small proportion of their deposits as cash with themselves. This is kept as a provision to pay the depositors who might come to withdraw money from the bank on any given day.
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Q2:
MULTIPLE CHOICE QUESTION
Try yourself: In the question given below, there are two statements marked as Assertion (A) and Reason (R). Read the Statements and choose the correct option:
Assertion (A) : Banks give loans not only to profit making businesses but also to small cultivators.Reason (R) : The RBI supervises the functioning of formal sources of loans.
A
Both (A) and (R) are true and (R) is the correct explanation of (A).
B
Both (A) and (R) are true but (R) is not the correct explanation of (A).
C
(A) is correct but (R) is wrong.
D
(A) is wrong but (R) is correct
Correct Answer: A
The Reserve Bank of India supervises the functions of banks in the following ways: It ensures that the banks give loans not just to profit-making businesses and traders but also to small cultivators, small scale industries, to small borrowers etc.
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Q3:
MULTIPLE CHOICE QUESTION
Try yourself: In the question given below, there are two statements marked as Assertion (A) and Reason (R). Read the Statements and choose the correct option:
Assertion (A) : Periodically, banks have to submit information to the finance Minister on how much they are lending, to whom, at what interest rate, etc.
Reason (R) : The finance Minister monitors the banks in actually maintaining cash balance.
A
Both (A) and (R) are true and (R) is the correct explanation of (A).
B
Both (A) and (R) are true but (R) is not the correct explanation of (A).
C
(A) is correct but (R) is wrong.
D
(A) is wrong , (R) is wrong
Correct Answer: D
Assertion is wrong as Banks in India must submit information to the Reserve Bank of India (RBI) annually, not to the finance minister. Reason is wrong as the Finance Minister does not monitor banks in maintaining cash balance. The Reserve Bank of India (RBI) is responsible for monitoring banks and ensuring they maintain their cash balance and run smoothly. The RBI also ensures that banks lend to small cultivators, not just profitable businesses and traders.
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Q4:
MULTIPLE CHOICE QUESTION
Try yourself: Find the incorrect option:
A
Demand deposit share the essential features of money
B
With demand deposit payments can be made without cash
C
Demand deposits are safe way of money transformation
D
Demand deposit facility is like cheque
Correct Answer: D
People deposit their savings in banks. They can withdraw their money whenever required. Because the deposits in the bank account can be withdrawn on demand, these deposits are called demand deposits. Cheques against a deposit settle payments without the use of direct cash.
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Q5:
MULTIPLE CHOICE QUESTION
Try yourself: Find the incorrect option:
A
Banks accept deposit and also pay an amount as interest.
B
People's money is safe with banks.
C
Banks provide loans only to profit-making businesses.
D
It is easy for individuals to get credit who have savings and current account in the banks.
Q6:
MULTIPLE CHOICE QUESTION
Try yourself: Find the incorrect option:
A
Poor households still depend on informal sources of credit.
B
RBI supervises the functioning of informal sources of loans.
C
Banks are not present everywhere in the rural areas.
D
RBI monitors the banks in actually maintaining cash balance.
Correct Answer: B
Commercial banks lend money to for-profit companies and other organizations every day. In fact, business lending makes up a large portion of a commercial bank's operations. This makes a commercial bank different from an investment bank, although the same institution can include commercial and investment branches.
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Q7:
MULTIPLE CHOICE QUESTION
Try yourself: Direction: Mark the option which is most suitable:
Assertion : The modern currency is used as a medium of exchange; however, it does not have a use of its own.Reason : Modem currency is easy to carry
A
If Both assertion and reason are true, and reason is the correct explanation of assertion.
B
If Both assertion and reason are true, but reason is not the correct explanation of assertion.
C
If Assertion is true, but reason is false.
D
If Both assertion and reason are false.
Correct Answer: B
The modern currency is used as a medium of exchange because it is accepted and authorized as a medium of exchange by a country's government.
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Q8:
MULTIPLE CHOICE QUESTION
Try yourself: Direction: Mark the option which is most suitable:
Assertion : The Reserve Bank of India supervises the functioning of formal sources of loans.Reason : The RBI sees that the banks give loans not just to profit-making businesses and traders but also to small cultivators, small scale industries, to small borrowers etc.
A
If Both assertion and reason are true, and reason is the correct explanation of assertion.
B
If Both assertion and reason are true, but reason is not the correct explanation of assertion.
C
If Assertion is true, but reason is false.
D
If Both assertion and reason are false.
Correct Answer: B
The RBI oversees the functioning of commercial banks. The reason statement substantiates the assertion but it is not the explanation for the assertion.
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Q9:
MULTIPLE CHOICE QUESTION
Try yourself: Direction: Mark the option which is most suitable:
Assertion : The terms of deposit are same for all credit arrangements.Reason : Credit arrangements are very complex process so to remove the complexities same terms of deposits are used.
A
If Both assertion and reason are true, and reason is the correct explanation of assertion.
B
If Both assertion and reason are true, but reason is not the correct explanation of assertion.
C
If Assertion is true, but reason is false.
D
If Both assertion and reason are false.
Correct Answer: D
The terms of credit vary substantially from one credit arrangement to another. They may vary depending on the nature of the lender and the borrower.
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Q10:
MULTIPLE CHOICE QUESTION
Try yourself: Direction: Mark the option which is most suitable:
Assertion : Credit would be useful or not depending on the risk involved in a situation.Reason : The chance of benefiting from credit is highest in the agriculture sector.
A
If Both assertion and reason are true, and reason is the correct explanation of assertion.
B
If Both assertion and reason are true, but reason is not the correct explanation of assertion.
C
If Assertion is true, but reason is false.
D
If Both assertion and reason are false.
Correct Answer: C
Whether credit would be useful or not depends on the risks in the situation and whether there is some support, in case of loss.
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Q11:
MULTIPLE CHOICE QUESTION
Try yourself: Direction: Mark the option which is most suitable:
Assertion : Rohan took credit in the form of advance payment from a buyer and he delivered the goods to the buyer on time and also earned profit. The credit made Rohan better off in this situation.Reason : Credit can never push a person into a debt trap.
A
If Both assertion and reason are true, and reason is the correct explanation of assertion.
B
If Both assertion and reason are true, but reason is not the correct explanation of assertion.
C
If Assertion is true, but reason is false.
D
If Both assertion and reason are false.
Correct Answer: C
The credit made Rohan better off in this situation, however, Rohan would have been worse off if he had failed to deliver the goods on time or he had made a loss in the production process. The latter two situations may have caused Rohan to fall in a debt trap
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Q12:
MULTIPLE CHOICE QUESTION
Try yourself: Direction: Mark the option which is most suitable:
Assertion : Banks charge a higher interest rate on loans than what they offer on deposits.Reason : The difference between what is charged from borrowers and what is paid to depositors is their main source of income.
A
If Both assertion and reason are true, and reason is the correct explanation of assertion.
B
If Both assertion and reason are true, but reason is not the correct explanation of assertion.
C
If Assertion is true, but reason is false.
D
If Both assertion and reason are false.
Correct Answer: A
Banks in India hold about 15 percent of their deposits as cash as the remaining deposits are used to provide loans. The interest charged on Loans is higher than the interest paid on deposits and the difference between the two interest rates is the major source of income for banks.
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Q13:
MULTIPLE CHOICE QUESTION
Try yourself: Direction: Mark the option which is most suitable:
Assertion : Banks keep only a small proportion of their deposits as cash with themselves.Reason : Banks in India these days hold about 15 percent of their deposits as cash.
A
If Both assertion and reason are true, and reason is the correct explanation of assertion.
B
If Both assertion and reason are true, but reason is not the correct explanation of assertion.
C
If Assertion is true, but reason is false.
D
If Both assertion and reason are false.
Correct Answer: B
Banks keep only a small proportion of their deposits as cash with themselves because they use the major portion of the deposits to extend loans as there is a huge demand for Loans for various economic activities.
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Q14:
MULTIPLE CHOICE QUESTION
Try yourself: Direction: Mark the option which is most suitable:
Assertion : The facility of demand deposits makes it possible to settle payments without the use of cash.Reason : Demand deposits are paper orders which make it possible to transfer money from one person's account to another person's account.
A
If Both assertion and reason are true, and reason is the correct explanation of assertion.
B
If Both assertion and reason are true, but reason is not the correct explanation of assertion.
C
If Assertion is true, but reason is false.
D
If Both assertion and reason are false.
Correct Answer: D
The facility of cheques against demand deposits makes it possible to directly settle payments without the use of cash. Since demand deposits are accepted widely as a means of payment, along with currency, they constitute money in the modern economy.
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Q15:
MULTIPLE CHOICE QUESTION
Try yourself: Direction: Mark the option which is most suitable:
Assertion : In India, no individual can refuse to accept a payment made in rupees.Reason : Rupee is the legal tender in India.
A
If Both assertion and reason are true, and reason is the correct explanation of assertion.
B
If Both assertion and reason are true, but reason is not the correct explanation of assertion.
C
If Assertion is true, but reason is false.
D
If Both assertion and reason are false.
Correct Answer: A
The law legalizes the use of rupee as a medium of payment that cannot be refused in settling transactions in India.
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