1..Consider the following statements:
- Non-Scheduled Banks do not have to follow CRR conditions.
- Non-Scheduled Banks are not eligible for obtaining loans from RBI to meet day to day activities.
Which of the above statements is/are correct?
(a) Only 1
(b) Only 2
(c) Both 1 and 2
(d) Neither 1 nor 2
Non-scheduled banks are also subject to the statutory cash reserve requirement. But they are not required to keep them with the RBI; they may keep these balances with themselves. They are not entitled to borrow from the RBI for normal banking purposes.
2..The Reserve Bank of India regulates the commercial banks in matters of
- liquidity of assets
- branch expansion
- merger of banks
- winding-up of banks
Select the correct answer using the codes given below.
(a) 1 and 4 only (b) 2, 3 and 4 only . (c) 1, 2 and 3 only (d) 1, 2, 3 and 4
3..Which of the following are the purposes of SLR?
- To enable government to borrow from the commercial banks by pledging their securities.
- To prevent a panic run on the banks.
- To control the expansion of bank credit.
- To ensure the solvency of commercial banks.
Select the correct answer from the codes given below.
(a) 3 and 4 only
(b) 2,3 and 4 only
(c) 1 only
(d) All of the above
4..Consider the following statements regarding Priority sector lending in India:
- Domestic banks have to lend 40% of net bank credit towards the priority sector.
- If the bank falls short of its target lending, then the remaining amount is contributed towards the Public accounts of India.
- Priority sector lending includes export credit for exporting own farm produce.
- Foreign banks have no obligation towards the Priority sector.
(a) 2, 3, 4
(b) 1, 2, 4
(c) 1, 3
(d) 2, 4
- If the bank falls short of its target lending, then the remaining amount is contributed towards the rural infrastructure debt fund.
- Foreign banks also have the obligation towards the priority sector.
5..When the Reserve Bank of India announces an increase of the Cash Reserve Ratio, what does it mean?
(a) The commercial banks will have less money to lend
(b) The Reserve Bank of India have less money to lend
(c) The Union Government will have less money to lend
(d) The commercial banks will have more money to lend
- Cash Reserve Ratio is a bank regulation that sets the minimum reserves each bank must hold to customer deposits and notes.
- RBI uses CRR either to drain excess liquidity or to release funds needed for the economy from time to time.
- Increase in CRR means that banks have less funds available and money is sucked out of circulation.
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