Indian Economy MCQ Set-10

Most Important Commercial Banking MCQ GK for competitive examinations in India such as UPSC CSE, State PSC, IBPS PO, SBI PO, IBPS SO, IBPS RRB, IBPS Clerk and various government & public sector undertaking jobs in India.

Q.1 Which of the following is the key tool for implementation of the monetary policy by the RBI?

A. Open Market Operation

B. Issuing of notes

C. Discount Rate

D. None of these

Answer: A. Open Market Operation

Note: Open market operations (OMOs), the purchase and sale of securities in the open market by a central bank–are a key tool used by the Federal Reserve in the implementation of monetary policy.

Q.2 The Reserve Bank of India does open market transaction in which of the following case(s)?

I. Inflation in the Market

II. Less supply of money in the market

III. Enhancing borrowing power of the commercial banks

A. Only I

B. Only II

C. Only III

D. Both I & II

Answer: D. Both I & II

Q.3 When Cash Reserve Ratio is reduced by the RBI, which of the following is likely to happen?

I. Low Interest rates on loans by banks

II. Increases supply of money in the market

III. High interest rates charged by the banks on loans

A. Only I

B. Only II

C. Only III

D. Both I & II

Answer: D. Both I & II

Note: When the Cash Reserve Ratio is reduced, more funds are available to banks for deploying in other businesses because they need to keep fewer amounts with RBI. This means that the banks would have more money to play and this leads to reduction of interest rates on Loans provided by the Banks.

Q.4 Which of the following is NOT a monetary tool?

A. Cash Reserve Ratio

B. Discount Rate

C. Open Market Operation

D. Deficit Financing

Answer: D. Deficit Financing

Note: The Central banks have four main monetary policy tools: the reserve requirement, open market operations, the discount rate, and interest on reserves. Deficit financing means generating funds to finance the deficit which results from an excess of expenditure over revenue.

Q.5 The another name of “Discount Rate” is:

A. Statutory Liquidity Ratio

B. CRR

C. Bank Rate

D. None of these

Answer: C. Bank Rate

Note: The discount rate or bank rate is a powerful tool used by the RBI to control liquidity and money supply in the market.

Q.6 Which of the following is NOT a function of the RBI?

A. Maintaining CRR

B. Issuing Coins

C. Printing Currency

D. Custodian of Foreign Currency

Answer: B. Issuing Coins

Note: Coins are issued by the Ministry of Finance in India.

Q.7 Which of the following is the CORRECT funding pattern of a Regional Rural Bank?

A. 35% Central Government, 25% Concerned State Government and 40% Sponsor Bank of the RRB

B. 50% Central Government, 15% Concerned State Government and 35% Sponsor Bank of the RRB

C. 35% Central Government, 35% Concerned State Government and 20% Sponsor Bank of the RRB

D. None of these

Answer: B. 50% Central Government, 15% Concerned State Government and 35% Sponsor Bank of the RRB

Q.8 The Punjab National Bank was nationalized in which of the following year?

A. 1969

B. 1972

C. 1976

D. 1994

Answer: A. 1969

Note: The Government of India (GOI) nationalized PNB and 13 other major commercial banks, on 19 July 1969.

Q.9 The Regional Rural Bank Bill was enacted in which of the following year?

A. 1975

B. 1976

C. 1982

D. None of these

Answer: B. 1976

Note: Regional Rural Banks were established under the provisions of an ordinance passed on 26 September 1975 and the RRB Act 1976 to provide sufficient banking and credit facility for agriculture and other rural sectors. As a result, five RRBs were set up on 2 October 1975 and the RRB act was passed in 1976.

Q.10 Which of the following is/are likely to happen if the Statutory Liquidity Ratio is increased?

I. Increase in loan interest rates of banks

II. Less money with commercial banks for lending

III. Higher money with commercial banks for lending

A. Only I

B. Only II

C. Both I & II

D. Both I & III

Answer: C. Both I & II

Note: If the SLR increases, it restricts the commercial bank’s lending capacity and helps in controlling the inflation by soaking the liquidity from the market. Consequently, banks will have less money available to lend, and they will charge higher interest rates on loans to keep up with their profit margin.

List of Indian Economy MCQ sets from GKLead.com

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