fbpx

Prelims-IAS –ECONOMICS MCQ Ans-09

1..Which of the following terms indicates a mechanism used by commercial banks for providing credit to the government?

(a) Cash Credit Ratio
(b) Debt Service Obligation
(c) Liquidity Adjustment Facility

(d) Statutory Liquidity Ratio

  • ANS-D
  • Statutory Liquidity Ratio or SLR refers to the amount that all banks require maintaining in cash or in the form of Gold or approved securities.
  • Here by approved securities we mean, bond and shares of different companies.
  • Statutory Liquidity Ratio is determined as percentage of total demand and percentage of time liabilities.
  • The maximum limit of SLR is 40% and minimum limit of SLR is 24%.
  • In India, Reserve Bank of India always determines the percentage of Statutory Liquidity Ratio.
  • There are some statutory requirements for temporarily placing the money in Government Bonds.
  • Following this requirement, Reserve Bank of India fixes the level of Statutory Liquidity Ratio.
  • At present (2010), the minimum limit of Statutory Ratio that can be set by the Reserve Bank is 25%.

2..RBI have introduced revised priority sector lending norms. Consider the following statements in light of changed norms:

  1. The new norms require banks to ensure that 8% of their loans should go to small and marginal farmers.
  2. Renewable energy sector is now classified as priority sector.
  3. Social infrastructure has been brought under priority sector.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) 1 and 3 only
(d) 1, 2 and 3

 

  • ANS-D
  • The Reserve Bank of India has revised the priority sector lending norms which direct banks to lend to certain segments by prescribing targets as a percentage of their total business.
  • The new norms require banks to ensure that 8% of their loans go to small and marginal farmers(Earlier there was no segmented/fragmented targets for marginal and small farmers).
  • Earlier there were broadly 6 categories Agriculture,Micro and Small Enterprises, Education, Housing, Export Credit, Others
    Also, now new sectors like renewable energy and social infrastructure will get a boost as these are now classified as priority sector.
  • Any bank that lends up to Rs 10 lakh to a household for solar power and biomass-based generators can classify the loan as priority sector.

3..Which of the following are true about financial indicators used in Basel norms and CAR?

  1. Tier 1 capital can absorb losses in the event of a winding-up.
  2. Tier 2 can absorb losses without a bank being required to cease trading.
  3. Govt. debt are subtracted from total assets for purposes of calculating the CAR.

Select the correct answer using the code given below.
(a) 1, 2
(b) 1, 2, 3
(c) 3 only
(d) 2, 3

  • ANS-C
  • Tier 2 capital can absorb losses in the event of a winding-up.
  • Tier 1 can absorb losses without a bank being required to cease trading.
  • Govt. debt are subtracted from total assets for purposes of calculating the CAR as govt. debt has zero risk

4..With respect to various rates, regulated by RBI consider the following statements:

  1. Cash Reserve Ratio is the ratio of total deposits of a bank which is to be maintained by the bank with itself in the form of cash.
  2. The purpose of Cash Reserve Ratio is to ensure that banks do not run out of cash to meet the payment demands of their depositors.
  3. To meet SLR requirements, bank can use cash, gold, various assets owned by bank like bank building, government approved securities.

Which of the statement(s) given above is/are correct?
(a) 2 only
(b) 2 and 3 only

(c) 1 and 3 only
(d) 1 and 2 only
  • ANS-A
  • Cash Reserve Ratio is the ratio of total deposits of a bank which is to be maintained with RBI (and not with the bank itself) in the form of cash.
  • The purpose of Cash Reserve Ratio is to ensure that banks do not run out of cash to meet the payment demands of their depositors.
  • The other purpose is to control amount of cash in the economy.
  • To meet SLR requirements various assets owned by bank like buildings can be used.

5..Consider the following statements regarding functions of RBI in India:

  1. Only RBI can issue currency notes.
  2. RBI carries out sale and purchase of treasury bills of state as well as central government.
  3. RBI manages the Foreign ExchangeManagement Act, 1999.

Which of the statement(s) given above is/are correct?
(a) 1 and 3 only
(b) 2 only
(c) 2 and 3 only
(d) 1, 2 and 3

  • ANS-C
  • RBI issues currency notes and coins except rupee 1 currency note and coin. Rupee 1 currency note is issued by Ministry of finance itself. 
  • RBI does open market operations which means that RBI carries out sale and purchase of treasury bills of government.
  • RBI Manages the Foreign Exchange management Act, 1999 which facilitate external trade and payment, and promote orderly development and maintenance of foreign exchange market in India. 

 

579 total views, 2 views today

Please follow and like us:

Leave a Reply

Your email address will not be published. Required fields are marked *

error: Content is protected !!