Prelims-IAS –ECONOMICS MCQ Ans-10

1..When the Reserve Bank of India reduces the Statutory Liquidity Ratio by 50 basis points, which of the following is likely to happen?

(a)  India’s GDP growth rate increases drastically
(b)  Foreign Institutional Investors may bring more capital into our country
(c)  Scheduled Commercial Banks may cut their lending rates

(d)  It may drastically reduce the liquidity to the banking system

  • ANS-C

The SLR cut by the RBI is likely to give more elbow room for banks to cut rates.


2..Consider the following statements regarding Lead Bank Scheme:

  1. Under the scheme, individual banks adopt particular districts for intensive development.
  2. It is applicable only to Public Sector Banks.
  3. It covers all the districts in the country.

Which of the statements given above is/are correct?
(a) 1 only

(b) 1 and 3 only
(c) 2 and 3 only

(d) 1, 2 and 3

 

  • ANS-B
  • The Lead Bank Scheme, introduced towards the end of 1969, envisages assignment of lead roles to individual banks (both in public sector and private sector) for the districts allotted to them for intensive development.
  • All the districts in the country have been allotted to various banks.
  • The lead bank acts as a leader for coordinating the efforts of all credit institutions in the allotted districts to increase the flow of credit to agriculture, small-scale industries and other economic activities included in the priority sector in the rural and semi-urban areas, with the district being the basic unit in terms of geographical area.

3..Sterilization by RBI is an:

(a) Open market operation

(b) Bank rate policy
(c) Deficit financing operation

(d) Change in SLR

  • ANS-A

By selling the govt. securities, RBI suck out the liquidity from the market and hence sterilizes the economy against adverse external shocks.


4..Consider the following statements:

  1. CRR is the rate at which the central bank gives interest to the commercial banks for the deposits kept with the central bank.
  2. When the RBI lowers CRR, it is known said to follow an expansionary monetary policy.

Select the correct answer from the codes given below.
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

  • ANS-B
  • The CRR is the credit reserve ration i.e. the ratio of the total demand and time liability of a bank that it has to keep with the central bank in cash at any given point of time.

5..Consider the following statements regarding Dear Money:

  1. The money which flows in the economy, when the government repurchases its bonds before their maturity.
  2. In banking industry, it means period of softer interest regime.

Which of the above given statement(s) is/are correct?
(a) 1 only
(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

 

  • ANS-D
  • Dear Money: A situation in which money or loans are very difficult to obtain in a given country.
  • If you do have the opportunity to secure a loan, then interest rates are usually extremely high.
  • Also known as “tight money”.
  • (Not to be confused with ‘Hard Currency’, A currency, usually from a highly industrialized country, that is widely accepted around the world as a form of payment for goods and services. A hard currency is expected to remain relatively stable through a short period of time, and to be highly liquid in the forex market).

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