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Question 1 of 10
1. Question
2 points
1 Consider the following about solar flares and coronal mass ejections ( CMEs ) :
1. A CME can jostle Earth’s magnetic fields creating currents that drive particles down towards Earth’s poles .
2. Both eruptions are created when the motion of the Sun’s interior contorts its own magnetic fields.
3. While solar flares involve huge explosions of energy , CMEs involve formation of energy suctions in space that consume energy from its surroundings.
4. CMEs travel at the speed of light , solar flares do not .
Select the correct answer using the codes below :
Correct
Ans( a )
•Statement 1 : Flares and CMEs behave differently in terms of its impact on Earth . Radio waves travelling through the atmosphere can be disrupted by the energy from a flare . This can lead to disruption of communications and navigation signals and even temporary blackouts . CMES which interfere with Earth’s magnetic fields can funnel particles into near – Earth space driving it further downwards towards Earth’s poles . These cosmic particles react with oxygen and nitrogen producing brilliant display of lights called aurora . This is also known as the Northern and Southern Lights . Besides , the changes in the magnetic field can disrupt a variety of human technologies .
•Statement 3 : These magnetic fields realign themselves resembling sudden release of a compressed rubber band . This drives vast amounts of energy into space leading to generation of a sudden flash of light which is called a solar flare . Explosions can also occur due to magnetic contortions which hurl huge amounts of solar matter into space .
• Statement 4 : Duration of flares can range from a minute to hours releasing huge amount of energy . Solar flares travel at the speed of light to reach the Earth which is little over 8 minutes . Very – high – energy particles are hurled and accelerated towards the Earth by some of the energy
•released . This can reach Earth in tens of minutes , CME is composed of immense cloud of magnetised particles that is violently hurled into space . This leads to generation of the hot material called plasma . Plasma travels over a million miles per hour and takes up to 3 days to reach Earth.
•The subtle difference between the two types of explosions can be seen through solar telescopes . The flares appear as a bright light while CMEs look like enormous fans of gas swelling in space .
Incorrect
Question 2 of 10
2. Question
2 points
During the festival season, the people usually withdraw large amount of money from
the banks, leading to an increase in the Currency Deposit Ratio (CDR). What is the
impact the Money Multiplier?
Correct
Answer: (b)
Explanation:
The Currency Deposit Ratio (CDR) is the ratio of money held by the public in
currency to that they hold in the bank deposits. It reflects the people’s preference for
liquidity. For example, the CDR increases during the festive season, as the people
convert the deposits to ca balance for meeting extra expenditure during such periods.
If the CDR increases, that means that the public is holding more of its money out of
the banks, rather than depositing it. Hence, the Money Multiplier will go down.
Incorrect
Question 3 of 10
3. Question
2 points
Which of the following is/are considered as the legal tender in India?
1. Currency notes
2. Coins
3. Cheques and demand drafts.
Select the correct answer using the code
given below:
Correct
Answer: (b)
Explanation: ‘Legal tender’ is the money that is recognised by the law of the land as
valid for payment of the debt. It must be accepted for discharge of the debt. Both
currency notes and coins are considered to be the legal tender. However, cheques
and demand drafts are not considered to be the legal tender. Legal tender can be
limited or unlimited in character. In India, coins function a limited legal tender.
Therefore, 50 paise coins can be offered as the legal tender for dues up to Rs. 10.
Coins of Re. 1 and above can be offered as the legal tender for dues up to Rs. 1,000.
Currency notes are unlimited legal tender and can be offered as payment for dues of
any size.
Incorrect
Question 4 of 10
4. Question
2 points
Consider the following statements related to the Scheduled Banks in India:
1. They are listed under the Second Schedule to the RBI Act, 1934.
2. They need to have a minimum paid-up capital of Rs. 1,000 crore.
3. All the Cooperative Banks and the Regional Rural Banks (RRBs) are categorized
under the Scheduled Banks.
Which of the statements given above is/are correct?
Correct
Answer: (a)
Explanation:
The Scheduled Banks in India constitute those banks which have been included in
the Second Schedule to Reserve Bank of India (RBI) Act, 1934. These banks should
fulfil two conditions:
• The paid capital and collected funds of the bank should not be less than Rs.
5 lac.
• Any activity of the bank will not adversely affect the interests of the
depositors.
Note: All the categories of the Cooperative Banks are not categorized as the
Scheduled Banks. For example, some of the Urban Cooperative Banks are
categorized as the Non-Scheduled Banks. Scheduled Banks: The list includes the
State Bank of India and its subsidiaries (like State Bank of Travancore), all
nationalized banks (Bank of Baroda, Bank of India etc.), regional rural banks (RRBs),
foreign banks (HSBC Holdings Plc, Citibank NA) and some co-operative banks.
Incorrect
Question 5 of 10
5. Question
2 points
With reference to the printing of the currency notes by the RBI, consider the following
statements:
1. The RBI needs to maintain certain minimum reserves of foreign currency and gold
to print the currency notes in India.
2. The RBI Act, 1934 imposes statutory limit on the printing of the currency notes by
the RBI.
Which of the statements given above is/are correct?
Correct
Answer: (a)
Explanation:
As per the RBI Act, 1934, the RBI needs to maintain minimum reserves of Rs. 200
crore (Rs. 115 Crore – Gold and Rs. 85 crore – Foreign Currency Assets) in order to
print the currency notes. Based upon the maintenance of the minimum reserves, the
RBI can print unlimited currency notes. As such, there is no statutory limit on the
printing of the currency notes by the RBI.
Incorrect
Question 6 of 10
6. Question
2 points
Which of the following categories of banks can use the Liquidity Adjustment Facility?
(LAF) of the RBI to manage their liquidity?
1. The Scheduled Commercial Banks
2. The Scheduled Cooperative Banks
3. The Regional Rural Banks
Select the correct answer using the code given below:
Correct
Answer: (d)
Explanation:
Earlier, the Liquidity Adjustment Facility (LAF) was applicable only to the Scheduled
Commercial Banks and the Scheduled Cooperative Banks. Recently, the RBI has
decided to extend the LAF and the Marginal Standing Facility (MSF) to the Regional
Rural Banks (RRBs). It has also been decided to permit the RRBs to participate in
the Call/Notice money market, both as the borrowers and the lenders.
Incorrect
Question 7 of 10
7. Question
2 points
Which of the following financial instruments are used by the government to borrow
money in order to address its temporary mismatches in its cash balances?
1. Ways and Means Advances (WMA)
2. Cash Management Bills (CMB)
3. Treasury Bills
Select the correct answer using the code given below:
Correct
Answer: (d)
Explanation:
The Ways and Means Advances (WMA) act as a loan facility to the central and the
state governments to meet their cash requirements. This facility is availed by the
government due to the temporary mismatches in their receipts and expenditure. The
loan taken by the government through the WMA needs to be paid back in 90 days.
The interest rate of the WMA currently is the repo rate. The Treasury Bills or the TBills are short term debt instruments issued by the Government of India and are
presently issued in three tenors, viz., 91-day, 182 day and 364 day. The Treasury
Bills are zero coupon securities and pay no interest. Instead, they are issued at a
discount and redeemed at the face value at maturity. The Cash Management Bills
were introduced in 2010 to meet the temporary mismatches in the cash flow of the
Government of India. The CMBs have the generic character of the T-Bills, but are
issued for maturities less than 91 days.
Incorrect
Question 8 of 10
8. Question
2 points
Which of the following best describes the concept of Non-Performing Asset (NPA) of
a bank?
Correct
Answer: (b)
Explanation:
According to the RBI, if the principal or interest is due for more than 90 days, then the
loan has to be categorized as Non – Performing Asset (NPA).
Categories of NPAs –
• Sub-standard Assets: More than 90 days and less than 1 year.
• Doubtful Assets: More than 1 year.
• Loss Assets: A loss asset is one where loss has been identified by the bank
or internal or external auditors, but the amount has not been written off.
Incorrect
Question 9 of 10
9. Question
2 points
Which of the following can lead to an increase in the Money Multiplier within the
Indian economy?
1. Decrease in the CRR
2. Decrease in the SLR
3. Decrease in the rate of interest on loans
Select the correct answer using the code
given below:
Correct
Answer: (d)
Explanation:
The Money Multiplier refers to how a initial deposit can lead to a bigger final increase
in the total money supply. For example, if the commercial banks gain deposits of Re.
1, this may lead to a final money supply of Rs. 6. The Money Multiplier is 6. It is
calculated as (1/R), where R denotes the Reserve Ratio. As the CRR (Cash Reserve
Ratio) and the SLR (Statutory Liquidity Ratio) reduce, the Money Multiplier increases.
Similarly, an increase in the financial inclusion also leads to an increase in the Money
Multiplier. Decrease in the rate of interest on loans can lead to an increase in the
Money Multiplier within the Indian economy.
Incorrect
Question 10 of 10
10. Question
2 points
Consider the following statements related to the Standing Deposit Facility (SDF):
1. The SDF enables the RBI to inject liquidity into the economy, without accepting the
G-Secs as collateral from the banks.
2. This tool has been introduced through an amendment to the RBI Act, 1934.
Which of the statements given above is/are correct?
Correct
Answer: (b)
Explanation:
The Standing Deposit Facility (SDF) works similar to the Reverse Repo. However,
the SDF is different from the Reverse Repo in the following ways:
1. Under the SDF route, the RBI would not be required to provide the G-Secs as
collateral to the banks. Hence, it would enable the RBI to absorb huge amount of
liquidity from the economy, without the G-Secs acting as collateral.
2. The SDF would be lower than the
Reverse Repo.
3. Reverse Repo exercise is carried out as per the discretion of the RBI, depending
upon the market conditions. However, the SDF would enable the banks to keep their
surplus funds with the RBI at their own discretion. The Finance Act (2018),
introduced as a part of the Budget, amended the RBI Act, 1934, to enable the RBI to
use the new tool of the SDF. Subsequently, the liquidity management framework
adopted by the RBI in February, 2020, has decided to use the SDF in India.
However, the RBI has so far not notified the operational details.
