RBI GRADE B 2016 PHASE 2 MAINS 70 MCQ STUDY MATERIAL PAPER 3 FINANCE & MANAGEMENT

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

i. IMF came into existence as an outcome on Bretton Woods agreement
ii. France was the 1st country to borrow from IMF

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

ANSWER: c. both

IMF oversees the international monetary system.

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

i. The executive board is the highest decision making body of IMF
ii. The Board of Governors meets twice a year.

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



ANSWER: d. none

The Board of Governors is the highest decision making body of IMF. The Board of Governors meets once a year.

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

i. Executive board conducts the business of the IMF
ii. It meets once in a year

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


ANSWER: a. I only

Executive board conducts the business of the IMF. It functions in continuous session and meets several times in a week.

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

i. The day to day work of IMF is conducted by the board of governors
ii. Selected nations who are members of IMF are given a quota

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



ANSWER: b. ii only

The day to day work of IMF is conducted by the executive board. All the nations are assigned a quota.

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

i. The quota does not decide voting power in IMF’s decisions
ii. Quota subscription constitutes most of the financial resources of IMF

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



ANSWER: b. ii only

The quota decides voting power in IMF’s decisions. Quota subscription constitutes most of the financial resources of IMF.

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

i. SDRs cannot voluntarily be exchanged among members for currencies
ii. US is the largest member of the IMF

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



ANSWER: b. ii only

SDRs can voluntarily be exchanged among members for currencies.

7. Which of the following is an institution of World Bank?

a. IBRD
b. IDA
c. IFC
d. All the above



ANSWER: d. All the above

World Bank has five institutions- IBRD, IDA, International Finance Corporation, MIGA and ISCID.

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

i. Low income countries are eligible to receive low interest loans from IDA
ii. India is eligible for a blend of financial assistance from IDA and IBRD

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



ANSWER: c. both

IBRD aims at reducing poverty in middle income and credit-worthy poor countries.

9. Which of the following is not an objective of World Bank?

a. To provide guarantee on private loans
b. To develop production facilities in underdeveloped countries
c. To rehabilitate war ruined economies
d. None of the above



ANSWER: d. None of the above

World Bank provides long term capital to member countries for economic reconstruction and development.

10. Which of the following is known as soft loan window of the World Bank?

a. IDA
b. IFC
c. IBRD
d. MIGA


ANSWER: a. IDA

IDA was established in 1960. It aims at reducing poverty by providing interest free credits and grants for economic growth.

11. The investment arm of the world bank is

a. IDA
b. IFC
c. IBRD
d. MIGA


ANSWER: b. IFC

IFC was established in 1956. It is known as the investment arm of the World Bank.

12. The insurance arm of world bank is

a. IDA
b. IFC
c. IBRD
d. MIGA



ANSWER: d. MIGA

MIGA is known as the insurance arm of World Bank. It was established in 1988.

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

i. MIGA does not offers political risk insurance for projects to developing member countries
ii. MIGA also helps investors and lenders deal with investment risks

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



ANSWER: b. ii only

MIGA offers political risk insurance for projects to developing member countries.

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

i. IFC is governed by board of governors
ii. It mobilizes capital in international capital markets

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



ANSWER: c. both

International Finance Corporation is governed by board of governors who are represented by member countries.

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

i. ICSID is a multilateral treaty formulated by executive directors of IBRD
ii. All the countries have deposited their instruments of ratification, acceptance of the convention.

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



ANSWER: a. I only

Not all the countries have deposited their instruments of ratification, acceptance of the convention.

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

i. The head of WTO is known as director general
ii. The WTO summit is held once in very year

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



ANSWER: a. I only
The WTO summit is held once in two years. The summit is known as Ministerial Conference.


17. Which of the following is not included under the money market?

a. RBI
b. Commercial banks
c. SEBI
d. None of the above


ANSWER: c. SEBI

Money market includes RBI, commercial banks and other financial institutions. SEBI belongs to capital market.
18. Consider the following statements and identify the right ones.

i. Call money market is a short term market
ii. Money can be borrowed for not less than a week

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



ANSWER: a. I only

It is a very short term market, also known as overnight market as money can be borrowed or lent for a day.
19. Consider the following statements and identify the right ones.

i. Treasury bills are used by government to get long term loans
ii. The maturity period of a treasury bill in India ranges from 14 days to 365 days

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



ANSWER: b. ii only

Treasury bills are used by government to get short term loans
20. Who discounts the treasury bills?

a. RBI
b. Commercial banks
c. SEBI
d. Finance Ministry


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

i. Treasury bills can be issued by all the states
ii. They are not used for OMO

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



ANSWER: d. none

Treasury bills cannot be issued by the states. They are used by the RBI for open market operations.
22. Consider the following statements and identify the right ones.

i. Trading of treasury bills is not allowed in the market
ii. The ad hoc treasury bills have been replaced by Ways and Mean Advances System

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



ANSWER: b. ii only

Trading of treasury bills is allowed in the market.
23. Consider the following statements and identify the right ones.

i. Commercial bills are not tradable in market
ii. It is raised by the payer and accepted for payment by the payee on some future date

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



ANSWER: d. none

Commercial bills are raised by the payee and accepted for payment by the payer on some future date. They are tradable in market.
24. Consider the following statements and identify the right ones.

i. The certificate of deposits are issued at a discount to the face value
ii. The issuing institution can repurchase it before maturity period.

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



ANSWER: a. I only

The issuing institution cannot repurchase it before maturity period.
25. Which of the following is a criterion for issuing commercial paper market?

i. It should be a listed company
ii. It should have a working capital of 5 crores at least

a. i only
b. ii only
c. i and ii
d. None



ANSWER: c. I and ii

Commercial papers are short term borrowing instruments that are used by corporates.
26. Consider the following statements and identify the right ones.

i. The Money Market Mutual Fund aims at providing investment opportunities to small investors to enter into markets
ii. Banks can get their bills rediscounted directly by DFHI

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



ANSWER: c. both

The DFHI was set up in 1988 to provide investment opportunities to small investors to enter into markets.
27. The market for transaction of government securities is called

a. Gilt-edged market
b. Industrial securities market
c. Call money market
d. None of the above



ANSWER: a. Gilt-edged market

The market for transaction of government securities is called gilt-edged market.
28. Consider the following statements and identify the right ones.

i. In debentures, maturity period is pre-decided.
ii. Companies cant issue debentures.

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


ANSWER: a. I only

Companies can issue debentures to raise capital and in debentures, maturity period and interest rate too is pre-decided.
29. Consider the following statements and identify the right ones.

i. NBFCs can accept demand deposits
ii. Deposit insurance facility of DICGC is available for NBFC depositors.

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



ANSWER: d. none

NBFCs cannot accept demand deposits. Deposit insurance facility of DICGC is not available for NBFC depositors.
30. Consider the following statements and identify the right ones.

i. The RBI registers and regulates brokers and sub-brokers working in the securities market.
ii. RBI also prevents insider trading in the securities market.

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


ANSWER: d. none

The SEBI registers and regulates brokers and sub-brokers working in the securities market. SEBI also prevents insider trading in the securities market.
31. Consider the following statements and identify the right ones.

i. SEBI was given a statutory status on the recommendation of Narasimhan Committee
ii. The chairman and members are appointed by the government and RBI

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


ANSWER: c. both
SEBI regulates stock markets and other markets in the country.

32. Who issues metallic coins in India?

a. RBI
b. Government of India
c. Banks and financial institutions
d. Any of the above can issue it.


ANSWER: b. Government of India

The Government of India issues metallic coins in India. Coins, paper currency and deposits are the components of money supply in India.
33. Which of the following is issued by RBI?

a. Currency notes
b. Coins
c. Both
d. None


ANSWER: a. Currency notes

Currency notes are issued by RBI. The Government of India issues metallic coins in India.

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

i. Deposits are created by banks and financial institutions.
ii. They constitute the major source of money supply in India.

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


ANSWER: c. both

Coins, paper currency and deposits are the components of money supply in India.
35. Which of the following about money supply measure adopted in 1977 is correct?

a. M2= M1 +demand deposits with post offices
b. M3= M1 +term deposits with banks
c. M4=M3+total deposits with post offices
d. All the above


ANSWER: d. All the above

These are the measures of money supply adopted by RBI in 1977.
36. Which of the following is most liquid measure of money supply in India?

a. M1
b. M2
c. M3
d. M4


ANSWER: a. M1

M1= cash with the public+ demand deposits with banks+ other deposits with RBI
37. Which of the following is known as broad money?

a. M1
b. M2
c. M3
d. M4


ANSWER: c. M3

M3 is known as broad money as more items are included in this measure when compared to M1 which is known as narrow money.
38. Which of the following about money supply measures adopted in 1998 is wrong?

a. M1= currency with public +demand deposits with banking system + other deposits with RBI

b. M2= M1 + savings deposits of post office savings bank

c. M3= M1+ time deposits with banking system

d. None of the above



ANSWER: d. None of the above

M4= M3+ all deposits with post office savings banks excluding National Savings Certificate
39. Consider the following statements and identify the right ones.

i. Data on Mo are published on monthly basis
ii. Data on M1 and M3 are available on weekly basis

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


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

i. Data on liquidity aggregates L1 and L2 are published weekly
ii. Data on L3 are published once in a quarter.

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


41. Which of the following banks was not nationalized in 1969?

a. Vijaya Bank
b. Canara Bank
c. Bank of India
d. Central Bank of India



ANSWER: a. Vijaya Bank
Vijaya Bank was nationalized in 1980 with 5 other banks. In 1969, 14 banks were nationalized.

42. The base year to calculate CPI-AL is

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


ANSWER: b. 1986-87

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

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



ANSWER: d. 1984-85

The base year to calculate CPI-UNME is 1984-85. 180 items are included in the index.
44. 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



ANSWER: a. i only

Proportional reserve system has been replaced by minimum reserve system.

45. 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



ANSWER: d. None of the above

RBI performs central banking functions as well as development and promotional functions.
46. 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



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.
47. 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



ANSWER: c. both

RBI is also responsible for regulating banks, directs their credit policies and provides advice to them.
48. 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



ANSWER: a. SLR

The amount a bank needs to maintain in form of cash, gold and other securities before giving credit is called SLR.
49. The percentage of demand and time liabilities that banks have to keep with RBI is

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



ANSWER: b. CRR

The percentage of demand and time liabilities that banks have to keep with RBI is called cash reserve ratio.
50. 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



ANSWER: c. both

RBI is responsible for transaction of the currencies of IMF countries.
51. 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



ANSWER: d. None of the above

RBI has a set of supervisory functions too.
52. 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



ANSWER: d. All the above

Bank rate is the rate at which banks can borrow from RBI when in need of funds.
53. 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



ANSWER: c. Open market operations
CRR, SLR and OMO are various tools in the hands of RBI to influence money supply in the economy.

54. Which of the following is a reason for inflation?

a. Deficit financing
b. Growth in per capita income
c. Structural deficiencies
d. All the above


ANSWER: d. All the above

Inflation refers to rise in the general price level in the economy. Various demand and supply side factors cause inflation.
55. Which of the following is an effect of inflation?

a. Erosion in purchasing power
b. Affects relative price of goods
c. Increase in inequalities of income
d. All the above


ANSWER: d. All the above

As a result of inflation, some sections like producers or big landlords gain due to the ownership of assets, income inequality increases.
56. Consider the following statements and identify the right ones.

i. Government can reduce indirect taxes to control inflation
ii. There is trade-off between growth and inflation in India

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



ANSWER: c. both

Growth cannot be sustained in inflationary situation for a long time and inflation is bound to be high with high growth rates.
57. Which of the following is not a reason for inflation?

a. Increase in administered prices
b. Increase in cost of capital
c. More dependence on indirect taxes for revenue
d. None of these



ANSWER: d. None of these

Inflation refers to rise in the general price level in the economy. Various demand and supply side factors cause inflation.

58. Which of the following can be undertaken to control inflation?

a. Control on public expenditure
b. Control on hoarding and black marketing
c. Effective control on credit
d. All the above


ANSWER: d. All the above

Inflation can be controlled using monetary, fiscal and other measures.
59. Consider the following statements and identify the right ones.

i. For measuring overall inflation in the economy, CPI is used.
ii. WPI was first published in 1942 for 23 commodities

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



ANSWER: b. ii only

For measuring overall inflation in the economy, WPI is used. WPI was first published in 1942 for 23 commodities.
60. The base year used for WPI is

a. 1993-94
b. 2001-02
c. 2004-05
d. 2014-15


ANSWER: c. 2004-05

The base year used for WPI is 2004-05, based on the recommendations of Abhijit Sen Committee.
61. Consider the following statements and identify the right ones.

i. There are 676 items divided into 3 parts in the WPI
ii. All the 3 parts are given equal weightage

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



ANSWER: a. I only

Primary articles constitute 20.12 weightage, fuel has weightage of 14.91 while manufactured items have 64.97 weightage.
62. Which group constitutes maximum weightage in WPI?

a. Primary articles
b. Fuel
c. Manufactured items
d. Equal weightage



ANSWER: c. Manufactured items

Primary articles constitute 20.12 weightage, fuel has weightage of 14.91 while manufactured items have 64.97 weightage.
63. The base year to calculate CPI-IW is

a. 2001
b. 1994
c. 1991
d. 2004



ANSWER: a. 2001
The base year to calculate CPI-IW is 2001. 260 items are included in the index.


64. Which of the following banks were nationalized in 1980?

a. Andhra Bank
b. Vijaya Bank
c. Corporation Bank
d. All the above

ANSWER: d. All the above

The other 3 banks are Punjab and Sind Bank, New bank of India and Oriental Bank of Commerce.
65. Consider the following statements and identify the right ones.

i. Post nationalization, banks were supposed to open more branches in rural and semi-urban areas
ii. Banks had to provide credit facilities to areas that come under priority sector.

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



ANSWER: c. both

Post nationalization, banks were supposed to open more branches in rural and semi-urban areas in order to collect savings from these areas.
66. Consider the following statements and identify the right ones.

i. The lead bank scheme owes its origin to Nariman Committee
ii. Under this scheme, SBI and its subsidiaries only were given the responsibility of development of districts

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


67. Regional Rural Banks work at

a. Hobli level
b. Taluk level
c. District level
d. All levels


68. Which of the following is a subsidiary of SBI?

a. State Bank of Hyderabad
b. State Bank of Mysore
c. State Bank of Patiala
d. All the above


ANSWER: d. All the above

SBI has 5 subsidiaries now. The other 2 are State Bank of Bikaner and Jaipur and State Bank of Travancore.

69. In 2001, RBI issued a set of guidelines for private sector. Which of the following is true?

a. Initial paid-up capital should be 200 crore rupees

b. Share of promoters in paid-up capital should not be less than 40%

c. Big corporate houses are not allowed to promote any bank

d. All the above



ANSWER: d. All the above

The paid up capital should be increased to 300 crore rupees in 3 years of operation.

70. In 2001, RBI issued a set of guidelines for private sector. Which of the following is true?

a. NBFCs with minimum CAR of 12% and with good track record will be allowed to open private banks

b. New banks have to open minimum 25% of branches in rural and semi-urban areas

c. They have to provide minimum 40%of loans to priority sector

d. All the above


ANSWER: d. All the above

New banks are supposed to keep minimum 10% of CAR from the beginning.


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