Banking sector - Inflation and RBI - MCQs with answers - Part 2

Banking sector - Inflation and RBI - MCQs with answers - Part 2


1. The base year to calculate CPI-AL is

a. 1980-81
b. 1986-87
c. 2001-02
d. 2003-04

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ANSWER: b. 1986-87

The base year to calculate CPI-AL is 1986-87 and 260 items are included in the index.



2. The base year to calculate CPI-UNME is

a. 1980-81
b. 2001-02
c. 2003-04
d. 1984-85

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ANSWER: d. 1984-85

The base year to calculate CPI-UNME is 1984-85. 180 items are included in the index.



3. Consider the following statements and identify the right ones.

i. RBI has the sole right to issue currency notes
ii. Minimum reserve system has been replaced by proportional reserve system

a. i only
b. ii only
c. both
d. none

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ANSWER: a. i only

Proportional reserve system has been replaced by minimum reserve system.



4. Which of the following is not a function of RBI?

a. Banker to government
b. Regulation of foreign exchange
c. Collection and publication of data
d. None of the above

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ANSWER: d. None of the above

RBI performs central banking functions as well as development and promotional functions.



5. Consider the following statements and identify the right ones.

i. RBI provides advice in all monetary matters except agriculture and industrial finance.
ii. RBI is obliged to transact business of central government and state governments including J&K

a. i only
b. ii only
c. both
d. none

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ANSWER: d. none

RBI provides advice in all monetary matters including agriculture and industrial finance. RBI is obliged to transact business of central government and state governments excluding J&K.



6. Consider the following statements and identify the right ones.

i. RBI acts as clearing house for commercial banks.
ii. It also grants license for setting up banking operations

a. I only
b. ii only
c. both
d. none

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ANSWER: c. both

RBI is also responsible for regulating banks, directs their credit policies and provides advice to them.



7. The amount a bank needs to maintain in form of cash, gold and other securities before giving credit is

a. SLR
b. CRR
c. OMO
d. Bank rate

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ANSWER: a. SLR

The amount a bank needs to maintain in form of cash, gold and other securities before giving credit is called SLR.



8. The percentage of demand and time liabilities that banks have to keep with RBI is

a. SLR
b. CRR
c. OMO
d. Bank rate

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ANSWER: b. CRR

The percentage of demand and time liabilities that banks have to keep with RBI is called cash reserve ratio.



9. Consider the following statements and identify the right ones.

i. RBI is the custodian of foreign exchange reserves of the country.
ii. It also keeps the exchange rate of domestic currency at stable level.

a. i only
b. ii only
c. both
d. none

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ANSWER: c. both

RBI is responsible for transaction of the currencies of IMF countries.



10. Which of the following is not a function of RBI?

a. Branch licenses and expansion
b. Supervision of assets and liabilities
c. Reconstruction and liquidity
d. None of the above

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ANSWER: d. None of the above

RBI has a set of supervisory functions too.



11. For bank rate to be effective, which of the following conditions are to be fulfilled?

a. Banks should be ready to avail rediscounting facility from RBI

b. Banks should have adequate quantity of credit instruments that can be rediscounted

c. Banks do not have surplus cash and depend on RBI for extraordinary needs

d. All the above

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ANSWER: d. All the above

Bank rate is the rate at which banks can borrow from RBI when in need of funds.



12. The buying, selling of treasury bills, government and other securities by RBI is called

a. Cash reserve ratio
b. Statutory liquidity ratio
c. Open market operations
d. None of the above

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ANSWER: c. Open market operations

CRR, SLR and OMO are various tools in the hands of RBI to influence money supply in the economy.


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