Wednesday, April 22, 2015

Day 9 - Questions


Day 9 - Monetary Policy

(Monetary Policy of RBI, CRR, SLR, LAF, Repo, Reverse Repo, MSF, Bank rate, OMO, MSS, Monetary Policy Report 2015)


Recommended Study links - (Go through these topics before attempting MCQs)


1.  Which one is referred to as Policy rate of RBI?
a.  Repo rate
b.  Reverse Repo rate
c.  MSF Rate
d.  Bank rate

2.  RBI adopted bi-monthly monetary policy on the recommendation of -
a.  Bimal Jalan Committee
b.  Urjit Patel Committee
c.  CRAFICARD
d.  Mukul Mudgal Committee

3.  What will be the effect on market, if repo rate is increased?
a.  Liquidity in the market will increase
b.  Liquidity in the market will decrease
c.  No effect in liquidity
d.  None of the above

4.  What is Net Demand and Time Liabilities (NDTL) of banks?
a.  Net Demand Deposits (Savings and Current Deposits) and Time Deposits (Recurring and Fixed Deposits)
b.  Net Demand Deposits (Savings and Fixed Deposits) and Time Deposits (Recurring and Current Deposits)
c.  Net Demand Deposits (Recurring and Fixed Deposits) and Time Deposits (Savings and Fixed Deposits)
d.  None of the above

5.  What is the significant of the term 'Liabilities' in NDTL?
a.  It means Demand and Time Deposits are assets for customers, but liabilities for banks
b.  It means Demand and Time Deposits are assets for banks, but liabilities for customers
c.  It means Demand and Time Deposits are liabilities for both banks and customers
d.  It means Demand and Time Deposits are assets for both banks and customers

6.  What is Call Money?
a.  Money lent by one bank to another bank for 2 to 14 days
b.  Money lent by one bank to another bank for 1 day
c.  Money lent by RBI to a bank for 1 day
d.  Money lent by RBI to a bank for 2 to 14 days

7.  Which one is true regarding Liquidity Management by RBI?
a.  RBI anchors the call rate around the reverse repo rate - If reverse repo rate is increased by RBI, call rate will increase, making inter-bank loans costlier, thereby reducing liquidity in market
b.  RBI anchors the call rate around the policy rate (repo rate) - If repo rate is increased by RBI, call rate will increase, making inter-bank loans costlier, thereby reducing liquidity in market
c.  Both (a) and (b) are true
d.  None of the above is true

8.  14-day variable rate term repo auctions are provided by RBI for what percentage of NDTL to each banks?
a.  0.25 % of NDTL
b.  0.75 % of NDTL
c.  1 % of NDTL
d.  2 % of NDTL

9.  In addition to providing loans to banks at repo rate, RBI uses Marginal Standing Facility (MSF) to help banks manage their liquidity mismatches, if any. What percentage of stipulated Statutory Liquidity Ratio (SLR) holdings of government securities is eligible for this facility?
a.  1 % of SLR
b.  2 % of SLR
c.  1.5 % of SLR
d.  None of the above

10.  According to the new norms of RBI, MSF rate is fixed 100 basis points above -
a.  policy rate (repo rate)
b.  reverse repo rate
c.  SLR
d.  bank rate

11.  Reverse repo rate is the rate at which -
a.  banks take loans from RBI
b.  banks provide loans to RBI
c.  banks provide loans to another banks
d.  None of the above

12.  According to the new norms of RBI, Reverse repo rate is -
a.  100 bps above the repo rate
b.  100 bps below the repo rate
c.  same as repo rate
d.  None of the above

13.  If reverse repo rate is increased, what will be its effect in market?
a.  Liquidity will be increased in the market
b.  Liquidity will be decreased in the market
c.  No effect in liquidity
d.  None of the above

14.  According to the 1st Monetary Policy of 2015 (April 7), policy rate is 7.5 %. What can you deduce from the information?
a.  Reverse repo rate is 6.5 %
b.  MSF rate is 8.5 %
c.  Repo rate is 7 %
d.  Both (a) and (b)

15.  The full form of 'repo' is repurchase operation. What is the significance of repurchase?
a.  Banks sell its securities to RBI to get loans at repo rate, with an agreement to buy back (repurchase) the securities from RBI at a later date
b.  RBI sell its securities to banks to get loans at repo rate, with an agreement to buy back (repurchase) the securities from banks at a later date
c.  Both (a) and (b)
d.  None of the above

16.  What is bank rate?
a.  Rate charged by RBI to banks for loans for a longer period without selling or buying any security
b.  Rate charged by banks to RBI for loans for a longer period without selling or buying any security
c.  Rate charged by RBI to banks for loans for a longer period with an agreement to sell or buy securities
d.  Rate charged by RBI to banks for loans for a longer period with an agreement to sell or buy securities

17.  For Cash reserve ratio (CRR) requirements -
a.  banks have to keep / maintain a portion of its deposits, as cash or balance with RBI
b.  banks have to keep / maintain a portion of its deposits, as cash or balance with itself
c.  Both (a) and (b)
d.  None of the above

18.  If CRR is increased by RBI, what will be the effect on market?
a.  Banks will have to maintain more money as cash or deposits with RBI, hence will have less money to lend or invest, thus increasing the liquidity in the market
b.  Banks will have to maintain more money as cash or deposits with RBI, hence will have less money to lend or invest, thus reducing the liquidity in the market
c.  Both (a) and (b)
d.  None of the above

19.  What is Statutory Liquidity Ratio (SLR)?
a.  Banks need to maintain a portion of their NDTL as liquid assets in the form of cash, gold and other approved securities, with itself, at the close of every business day
b.  Banks need to maintain a portion of their NDTL as liquid assets in the form of cash, gold and other approved securities, with RBI, at the close of every business day.
c.  Both (a) and (b)
d.  None of the above

20.  To reduce the liquidity in the market, RBI can perform which of the following operations?
i.  Increase policy rate
ii.  Increase cash reserve requirements
iii.  Increase statutory liquidity ratio

a.  Only (i)
b.  Only (i) and/or (ii)
c.  Only (i) and/or (iii)
d.  (i) and/or (ii) and/or (iii)

21.  What 'L' denotes in LAF?
a.  Liberty
b.  Liquidity
c.  Low
d.  Listed

22.  Open Market Operations (OMO) deals with -
a.  buying or selling government securities
b.  buying or selling non-government securities
c.  inter-bank dealings
d.  None of the above

23.  Which of the followings are government securities?
i.  Treasury Bills (T-Bills)
ii.  Cash Management Bills (CMBs)
iii. Dated Government Securities
iv. State Development Loans (SDLs)
v.  Certificate of Deposits (CDs)
vi.  Inter-Corporate Deposits (ICDs)

a.  Only (i) and (iii)
b.  Only (i), (ii), (iii) and (iv)
c.  All except (ii), (v) and (vi)
d.  All are government securities

24.  RBI, on behalf of government, issues MSS Bonds to mop up extra liquidity from the market. This is same as Open Market Operations (OMO), but has a significant difference. What is it?
a.  Money raised from the market by MSS Bond is stored in government's normal account
b.  Money raised from the market by MSS Bond is stored in a separate account, known as MSS Account, which cannot be used for normal government expenditure.
c.  Money is not raised by MSS bonds
d.  None of the above

25.  What is the projected growth rate of India for the fiscal year 2015-16 by RBI in Monetary Policy Report - April 2015?
a.  7.6 %
b.  7.8 %
c.  8.0 %
d.  8.1 %



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