Daily Static Quiz – 31 December, 2022


            31 December 2022
        
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31 December 2022 Static Quiz for UPSC Prelims
            

            
            
                
            
        
                
            
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                            Question 1 of 10                        
                        
                            1. Question                        

                                                    2 points
                            
                        
                                                
                            
                                An increase in Capital to Risk Weighted Asset Ratio of a bank indicates which of the following?

Lower safety of bank deposits

Bank’s freedom to lend is reduced

Select the correct answer using the code given below:
                            
                                                        
                                
                                    

                                                                                                                                
                                            
                                                 1 only                                            

                                                                            
                                    
                                    

                                                                                                                                
                                            
                                                 2 only                                            

                                                                            
                                    
                                    

                                                                                                                                
                                            
                                                 Both 1 and 2                                            

                                                                            
                                    
                                    

                                                                                                                                
                                            
                                                 Neither 1 nor 2                                            

                                                                            
                                                                
                        
                                                    
                                
                                                                            
									Correct								

                                    Ans d

A higher the capital to risk weighted asset ratio (CRAR), higher is the safety of bank deposits.

The higher the capital is above the regulatory minimum, the greater the freedom banks have to make loans.
                                
                                
                                                                            
									Incorrect								

                                    
                                
                            
                        
                        
                                                
                                                
                        

                        

                        
                    

                                    
                        
                            Question 2 of 10                        
                        
                            2. Question                        

                                                    2 points
                            
                        
                                                
                            
                                The Reserve Bank has specified certain regulatory trigger points, as a part of Prompt Corrective Action (PCA) Framework. Which of the following are included as parameters for introducing a Prompt Corrective Action Framework in a particular bank?

Capital to risk weighted assets ratio

Debt Service Obligation

Net non-performing assets

Return on Assets

Select the correct answer using the codes given below:
                            
                                                        
                                
                                    

                                                                                                                                
                                            
                                                 1, 2, 3 only                                            

                                                                            
                                    
                                    

                                                                                                                                
                                            
                                                 2, 3, 4 only                                            

                                                                            
                                    
                                    

                                                                                                                                
                                            
                                                 1, 2, 4 only                                            

                                                                            
                                    
                                    

                                                                                                                                
                                            
                                                 1, 3, 4 only                                            

                                                                            
                                                                
                        
                                                    
                                
                                                                            
									Correct								

                                    Ans d

The Reserve Bank has specified certain regulatory trigger points, as a part of prompt corrective action (PCA) Framework, in terms of three parameters, i.e.

Capital to risk weighted assets ratio (CRAR)

Net non-performing assets (NPA)

Return on Assets (RoA)
                                
                                
                                                                            
									Incorrect								

                                    
                                
                            
                        
                        
                                                
                                                
                        

                        

                        
                    

                                    
                        
                            Question 3 of 10                        
                        
                            3. Question                        

                                                    2 points
                            
                        
                                                
                            
                                In context of the Prompt Corrective Action Framework of RBI, consider the following statements:

The Prompt Corrective Action Framework is applicable only to commercial banks

Under PCA, RBI can stop banks from lending and there can be a cap on lending to specific sectors/entities

PCA can constrain normal operations of the banks for the general public like lending and depositing

Which of the statements given above is/are correct?
                            
                                                        
                                
                                    

                                                                                                                                
                                            
                                                 1 only                                            

                                                                            
                                    
                                    

                                                                                                                                
                                            
                                                 1 and 2 only                                            

                                                                            
                                    
                                    

                                                                                                                                
                                            
                                                 2 only                                            

                                                                            
                                    
                                    

                                                                                                                                
                                            
                                                 2 and 3 only                                            

                                                                            
                                                                
                        
                                                    
                                
                                                                            
									Correct								

                                    Ans b

The RBI has clarified that the PCA framework is not intended to constrain normal operations of the banks for the general public like lending and depositing.
                                
                                
                                                                            
									Incorrect								

                                    
                                
                            
                        
                        
                                                
                                                
                        

                        

                        
                    

                                    
                        
                            Question 4 of 10                        
                        
                            4. Question                        

                                                    2 points
                            
                        
                                                
                            
                                Consider the following pairs:

Currency 					Feature

1. Hard currency 				Least liquidity

2. Soft currency 				Easily available

3. Heated Currency 				Currency under depreciation

4. Cheap Currency 				Currency with the public

Which of the statements given above is/are correctly matched?
                            
                                                        
                                
                                    

                                                                                                                                
                                            
                                                 1, 2, and 3 only                                            

                                                                            
                                    
                                    

                                                                                                                                
                                            
                                                 2, 3, and 4 only                                            

                                                                            
                                    
                                    

                                                                                                                                
                                            
                                                 1, 3, and 4 only                                            

                                                                            
                                    
                                    

                                                                                                                                
                                            
                                                 1, 2, and 4 only
                                            

                                                                            
                                                                
                        
                                                    
                                
                                                                            
									Correct								

                                    Ans b

Hard currency is the most liquid form of currency.
                                
                                
                                                                            
									Incorrect								

                                    
                                
                            
                        
                        
                                                
                                                
                        

                        

                        
                    

                                    
                        
                            Question 5 of 10                        
                        
                            5. Question                        

                                                    2 points
                            
                        
                                                
                            
                                Consider the following groupings:

Asian Pacific Economic Cooperation.

Indian Ocean Rim Association.

Organization for Economic Co-operation and Development.

South Asian Free Trade Area.

Which of the above groupings does not include India as its member?
                            
                                                        
                                
                                    

                                                                                                                                
                                            
                                                 3 only                                            

                                                                            
                                    
                                    

                                                                                                                                
                                            
                                                 1, 2, and 3 only                                            

                                                                            
                                    
                                    

                                                                                                                                
                                            
                                                 1 and 3 only                                            

                                                                            
                                    
                                    

                                                                                                                                
                                            
                                                 2 and 4 only                                            

                                                                            
                                                                
                        
                                                    
                                
                                                                            
									Correct								

                                    Ans c

Asia Pacific Economic Cooperation (APEC) is a group of 21 members of the Pacific rim of ocean economies with its headquarters in Singapore. India is not a member of this grouping.

Organization of the Petroleum Exporting Countries (OECD) is a group of oil exporting countries with its headquarters in Austria. It was established in 1961. It includes 13 members. India is not a member of this.
                                
                                
                                                                            
									Incorrect								

                                    
                                
                            
                        
                        
                                                
                                                
                        

                        

                        
                    

                                    
                        
                            Question 6 of 10                        
                        
                            6. Question                        

                                                    2 points
                            
                        
                                                
                            
                                Which one of the following statements appropriately describes “Globalisation”?
                            
                                                        
                                
                                    

                                                                                                                                
                                            
                                                 An increase in economic integration among nations.                                            

                                                                            
                                    
                                    

                                                                                                                                
                                            
                                                 Unrestricted cross border movements of goods and services, capital and the labour force.                                            

                                                                            
                                    
                                    

                                                                                                                                
                                            
                                                 Both a and b                                            

                                                                            
                                    
                                    

                                                                                                                                
                                            
                                                 Neither a nor b                                            

                                                                            
                                                                
                        
                                                    
                                
                                                                            
									Correct								

                                    Ans c

Both option A and B describe Globalisation.
                                
                                
                                                                            
									Incorrect								

                                    
                                
                            
                        
                        
                                                
                                                
                        

                        

                        
                    

                                    
                        
                            Question 7 of 10                        
                        
                            7. Question                        

                                                    2 points
                            
                        
                                                
                            
                                With reference to the Indian economy, consider the following:

Long Term Repo Auctions

KYC Norms

Currency Swap

Capital Adequacy Norms

Which of the above can be considered as the steps taken to achieve effective Monetary Policy Transmission by the Reserve Bank of India?

Select the correct answer using the codes given below:
                            
                                                        
                                
                                    

                                                                                                                                
                                            
                                                 1 only                                            

                                                                            
                                    
                                    

                                                                                                                                
                                            
                                                 1 and 4 only                                            

                                                                            
                                    
                                    

                                                                                                                                
                                            
                                                 1 and 3 only                                            

                                                                            
                                    
                                    

                                                                                                                                
                                            
                                                 1, 2 and 4 only                                            

                                                                            
                                                                
                        
                                                    
                                
                                                                            
									Correct								

                                    Ans c

KYC means “Know Your Customer”. It is a process by which banks obtain information about the identity and address of the customer. It has little to no role in monetary policy transmission.

Capital Adequacy Ratio (CAR) is the ratio of a bank’s capital in relation to its risk weighted assets and current liabilities. However, Capital Adequacy ratio is related to a bank’s financial soundness and not policy transmission.
                                
                                
                                                                            
									Incorrect								

                                    
                                
                            
                        
                        
                                                
                                                
                        

                        

                        
                    

                                    
                        
                            Question 8 of 10                        
                        
                            8. Question                        

                                                    2 points
                            
                        
                                                
                            
                                When the Reserve Bank of India increases the Cash Reserve Ratio by 50 basis points, which of the following is likely to happen?
                            
                                                        
                                
                                    

                                                                                                                                
                                            
                                                 Money in circulation falls drastically                                            

                                                                            
                                    
                                    

                                                                                                                                
                                            
                                                  The non-performing assets of the banks will reduce                                            

                                                                            
                                    
                                    

                                                                                                                                
                                            
                                                 Scheduled Commercial Banks may cut their lending rates                                            

                                                                            
                                    
                                    

                                                                                                                                
                                            
                                                 It will reduce the amount of money available for banks to lend                                            

                                                                            
                                                                
                        
                                                    
                                
                                                                            
									Correct								

                                    Ans d

The amount of cash that the scheduled commercial banks are required to maintain with RBI with respect to their NDTL (on a fortnightly basis) is called Cash Reserve Ratio.

When the Cash Reserve Ratio is increased banks will have a lesser quantity of money to lend than before.
                                
                                
                                                                            
									Incorrect								

                                    
                                
                            
                        
                        
                                                
                                                
                        

                        

                        
                    

                                    
                        
                            Question 9 of 10                        
                        
                            9. Question                        

                                                    2 points
                            
                        
                                                
                            
                                Which of the following terms indicates a mechanism used by the Reserve Bank of India for absorbing excess liquidity from the market?
                            
                                                        
                                
                                    

                                                                                                                                
                                            
                                                 Marginal Standing Facility                                            

                                                                            
                                    
                                    

                                                                                                                                
                                            
                                                 Open Market Operations                                            

                                                                            
                                    
                                    

                                                                                                                                
                                            
                                                 Operation Twist                                            

                                                                            
                                    
                                    

                                                                                                                                
                                            
                                                 Market Stabilization Scheme
                                            

                                                                            
                                                                
                        
                                                    
                                
                                                                            
									Correct								

                                    Ans d

Market Stabilization Scheme (MSS) is a monetary policy intervention by the RBI to withdraw excess liquidity (or money supply) by selling government securities in the economy.
                                
                                
                                                                            
									Incorrect								

                                    
                                
                            
                        
                        
                                                
                                                
                        

                        

                        
                    

                                    
                        
                            Question 10 of 10                        
                        
                            10. Question                        

                                                    2 points
                            
                        
                                                
                            
                                Consider the following financial institutions:

Insurance Companies

Chit Companies

Stock Broking Companies

Micro Financial Institutions

Which of the given financial institution(s) can be considered as Non-Banking Financial Companies?
                            
                                                        
                                
                                    

                                                                                                                                
                                            
                                                 1 and 4 only                                            

                                                                            
                                    
                                    

                                                                                                                                
                                            
                                                 1, 3 and 4 only                                            

                                                                            
                                    
                                    

                                                                                                                                
                                            
                                                 4 only                                            

                                                                            
                                    
                                    

                                                                                                                                
                                            
                                                 1, 2, 3 and 4
                                            

                                                                            
                                                                
                        
                                                    
                                
                                                                            
									Correct								

                                    Ans d

All the options are types of NBFCs.
                                
                                
                                                                            
									Incorrect
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Daily Static Quiz – 31 December, 2022

31 December 2022

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