Tag: instruments of monetary policy and the reserve bank of india

Questions Related to instruments of monetary policy and the reserve bank of india

In order to control credit in the country, the RBI may _________________.

instruments of monetary policy and the reserve bank of india money and banking economics

  1. buy securities in the open market

  2. sell securities in the open market

  3. reduce CRR

  4. reduce bank rate

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Correct Option: B
Explanation:

In order to control credit in the country, the RBI may sell securities in the open market, other options will be useful when expansion of credit is undertaken.

Bonds or debentures issued by Securitization company should bear interest not less than ______.

instruments of monetary policy and the reserve bank of india money and banking economics

  1. Bank Rate

  2. Prime Lending Rate

  3. 1.5% over the Bank Rate

  4. 1.5% over the Saving Rate

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Correct Option: C

In India, the Commercial Banks are given license of operation by _________.

instruments of monetary policy and the reserve bank of india money and banking economics

  1. The Government of India

  2. The Ministry of Finance

  3. Reserve Bank of India

  4. Banking Companies Regulation Act. 1949

Show answer
Correct Option: C
Explanation:

A commercial bank is that financial institution which  accepts deposit from people and offers loan for the purpose of consumption or investment. In India, the commercial banks are given license of operation by the Reserve bank of India which is an apex bank that controls the entire banking system of India. 

In order to control inflation and ensure stability in the money market  _______.

instruments of monetary policy and the reserve bank of india money and banking economics

  1. the RBI works under the direction of ministry of finance, government of India

  2. the RBI acts independently and can refuse the government directive

  3. the RBI acts under the board of directors

  4. the RBIs board of governors shall abide by the government directive

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Correct Option: B

The difference(s) between Commercial Paper (CP) & Certificate of Deposit (CD) is / are   ___________________.

instruments of monetary policy and the reserve bank of india money and banking economics

  1. CP is secured while CD is unsecured

  2. CPs can be issued by private sector companies while CDs can be issued only by scheduled banks.

  3. CP is sold at a discount and redeemed at face value whereas for CD the principal and interest are payable upon maturity

  4. All of the above

  5. Both (B) and (C) above

Show answer
Correct Option: B
Explanation:

Commercial paper (CP) is a short term unsecured usance promissory note issued at a discount to face value by any private sector company, public sector unit, non-banking company, Primary Dealers (PDs), Satellite Dealers(SDs) etc. Earlier Certificate of Deposits (CDs) were issued by all scheduled commercial banks other than scheduled co-operative banks and regional rural banks.. In 1993 six financial institutions namely SIDBI,IDBI, IFCI,IRBI,ICICI and EXIM banks were also permitted to issue CDs.

Match the following:

a) Credit Control $1)$ MCA
b) Corporate Control $2)$ SEBI
c) IPO Control $3)$ IRDA
d) ULIP $4)$ RBI
instruments of monetary policy and the reserve bank of india money and banking economics

  1. (a)-$4$, (b)-$2$, (c)-$3$, (d)-$1$

  2. (a)-$4$, (b)-$1$, (c)-$2$, (d)-$3$

  3. (a)-$2$, (b)-$3$, (c)-$4$, (d)-$1$

  4. (a)-$4$, (b)-$1$, (c)-$3$, (d)-$2$

Show answer
Correct Option: B
Explanation:

RBI - Credit control is an important tool of the monetary policy used by the Reserve Bank of India (central bank) to control the demand and supply of money and the flow of credit in an economy. RBI keeps control over the credit created by commercial banks


MCA -MCA is primarily concerned with the administration of the Companies Act, 1956, other allied Acts and rules & regulations framed there-under mainly for regulating the functioning of the corporate sector in accordance with the law.

SEBI - SEBI's responsibility is to ensure that the securities market in India functions in an orderly manner. It is made to protect the interests of investors and traders in the Indian stock market by providing a healthy environment in securities and to promote the development of, and to regulate the equity market.

IRDA - A Unit Linked Insurance Plan (ULIP) is a product offered by insurance companies that, unlike a pure insurance policy, gives investors both insurance and investment under a single integrated plan.

An agreement, which in fact is a contract, between the RBI and Banks for the sale and repurchase of Govt securities and short-term treasury bills at a future date and for which the RBI indicates "the interest rate", is generally known as the _______________________.

instruments of monetary policy and the reserve bank of india money and banking economics

  1. REPO rate

  2. bank Rate

  3. reverse REPO rate

  4. prime lending rate

Show answer
Correct Option: A
Explanation:

Repo rate is the rate charged on the secured loans offered by the Central bank to the commercial banks that includes collateral. It is usually conducted for the sale and repurchase of Govt securities and short-term treasury bills at a future date. 

The maximum time period permitted by the RBI for realization of cash exports or for payment of cash imports are ___________.

instruments of monetary policy and the reserve bank of india money and banking economics

  1. 3m and 3m

  2. 3m and 6m

  3. 6m and 6m

  4. 6m and 3m

  5. As per the norms of the contract / LC

Show answer
Correct Option: C
Explanation:

As per the RBI guidelines full proceeds must be realized on the due date for payment or within six months from the date of shipment of the goods whichever is earlier. The payments for imports into India must be made within six months from the date of shipment.

Fiat money is introduced by the ___________ of India.

instruments of monetary policy and the reserve bank of india money and banking economics

  1. government

  2. state bank

  3. commercial bank

  4. reserve bank

Show answer
Correct Option: D
Explanation:

ANS. D

Fiat money is a money whose intrinsic value is lower than its face value. Examples of fiat money include coins and bills ( paper currency). Fiat money gets its value from a government order (i.e. fiat). That means, the government declares fiat money to be legal tender, which requires all people and firms within the country to accept it as a means of payment. For example: A 10 Rupee note in India issued by RBI & is signed by the Governer of RBI & is guaranteed by RBI.

Bank draft is called __________ money.

instruments of monetary policy and the reserve bank of india money and banking economics

  1. real

  2. ideal

  3. printed

  4. bank

Show answer
Correct Option: D
Explanation:

ANS. D

A bank draft is a payment on behalf of a payer that is guaranteed by the issuing bank. Typically, banks will review the bank draft requester's account to see if sufficient funds are available for the check to clear. A draft ensures the payee a secure form of payment. And the payer's bank account balance will be decreased by the money withdrawn from the account.