Financial Regulatroy Framework (305)
Online Internal Test
by
Dr Tanaji Chavan
Questions and Answers
- 1.
Which among the following body authorizes the credit limit to the National Co-operative Marketing Federation?
- A.
RBI
- B.
Department of Agriculture
- C.
NABARD
- D.
Department of Finance
Correct Answer
C. NABARDExplanation
NABARD (National Bank for Agriculture and Rural Development) is the body that authorizes the credit limit to the National Co-operative Marketing Federation. NABARD is responsible for providing credit facilities and promoting agricultural and rural development in India. It plays a crucial role in the agricultural sector by providing financial support to various institutions and organizations involved in agricultural activities, including co-operative marketing federations. Hence, NABARD is the correct authority to authorize the credit limit to the National Co-operative Marketing Federation.Rate this question:
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- 2.
Mutual funds are regulated in India by which among the following?
- A.
RBI
- B.
SEBI
- C.
Stock exchanges
- D.
RBI and SEBI both
Correct Answer
B. SEBIExplanation
Mutual funds in India are regulated by SEBI, the Securities and Exchange Board of India. SEBI is the regulatory authority for the securities market in India and is responsible for protecting the interests of investors and ensuring the smooth functioning of the market. It formulates regulations, monitors the activities of mutual funds, and enforces compliance with the necessary rules and regulations. RBI (Reserve Bank of India) is the central banking institution in India and is not directly involved in regulating mutual funds. Stock exchanges facilitate the trading of securities but do not regulate mutual funds.Rate this question:
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- 3.
Which of the following NBFC converted itself into a commercial Bank?
- A.
Kotak Mahindra
- B.
Birla Mutual
- C.
Reliance Capital Trust
- D.
Tata Finance
Correct Answer
A. Kotak MahindraExplanation
Kotak Mahindra is the correct answer because it is the only option given that has converted itself from a non-banking financial company (NBFC) into a commercial bank. Birla Mutual, Reliance Capital Trust, and Tata Finance have not undergone such a conversion.Rate this question:
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- 4.
The working of SEBI includes—
- A.
All of these
- B.
To regulate the dealings of share market
- C.
To check the foul dealings in share market
- D.
To control the inside trading of shares
Correct Answer
A. All of theseExplanation
SEBI, the Securities and Exchange Board of India, is responsible for regulating the share market in India. Its working includes all of the mentioned tasks, which are to regulate the dealings of share market, to check foul dealings in the share market, and to control inside trading of shares. This means that SEBI is involved in overseeing and ensuring fair and transparent practices in the share market, protecting the interests of investors, and maintaining the integrity of the market.Rate this question:
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- 5.
Reserve Bank of India was nationalised on
- A.
1 January, 1949
- B.
21 May, 1948
- C.
12 October, 1951
- D.
13 July, 1951
Correct Answer
A. 1 January, 1949Explanation
The Reserve Bank of India was nationalized on 1 January, 1949. This means that the control and ownership of the central bank of India was transferred to the government. Nationalization of the Reserve Bank of India was a significant step taken by the Indian government to ensure better regulation and control over the country's monetary policy and financial system. This move aimed to strengthen the government's influence and decision-making power in the banking sector, ultimately leading to more effective economic management.Rate this question:
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- 6.
Which of the following are likely to lead to international financial crises?
- A.
International business
- B.
Exchange rate profit and large international long-term lending.
- C.
Waves of over lending and over borrowing.
- D.
High rate of oil price
Correct Answer
C. Waves of over lending and over borrowing.Explanation
Waves of over lending and over borrowing are likely to lead to international financial crises because they create a situation where there is excessive debt in the economy. When lenders provide too much credit and borrowers take on more debt than they can handle, it creates a bubble that eventually bursts, leading to financial instability. This can result in defaults, bankruptcies, and a collapse of the financial system, causing a ripple effect across countries and leading to a global financial crisis.Rate this question:
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- 7.
It is claimed that the global financial crisis starting in 2007 was partially caused by poor regulation of the world financial system. A major problem with regulation of financial institutions is:
- A.
The variety of different national regulatory systems.
- B.
The Basel II Framework has been too effective.
- C.
Banks have provided regulators with too much information on their activities.
- D.
Regulators were well informed about the new financial products created by financial institutions.
Correct Answer
A. The variety of different national regulatory systems.Explanation
The correct answer is the variety of different national regulatory systems. This is because the global financial crisis was partially caused by poor regulation of the world financial system, and one of the major problems with regulation was the lack of consistency and coordination among different countries' regulatory systems. This allowed for regulatory arbitrage, where financial institutions could exploit loopholes and differences in regulations across different jurisdictions to engage in risky behavior. This lack of harmonization and coordination among regulatory systems made it difficult to effectively monitor and regulate financial institutions on a global scale.Rate this question:
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- 8.
RBI regulates the interest rates on
- A.
Interest rates on loans given to exporters
- B.
Savings deposits
- C.
FCNR
- D.
Current account
Correct Answer
B. Savings depositsExplanation
The RBI regulates the interest rates on savings deposits. This is because savings deposits are a common form of deposit for individuals and households, and the RBI wants to ensure that banks offer fair and competitive rates to encourage savings. By regulating these rates, the RBI can also influence the overall liquidity in the banking system and control inflationary pressures.Rate this question:
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- 9.
Who among the following, is outside the regulatory control of RBI?
- A.
Multilateral development banks
- B.
Currency Management
- C.
Urban cooperative banks
- D.
SIDBI, NHB and EXIM bank
Correct Answer
A. Multilateral development banksExplanation
Multilateral development banks are outside the regulatory control of RBI because they are international financial institutions that operate independently and are governed by their own regulations and policies. These banks provide financial assistance and support for development projects in various countries, and their operations are overseen by a board of directors representing member countries. As such, they are not subject to the regulatory authority of the Reserve Bank of India.Rate this question:
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- 10.
Which of the following has not fully implemented core banking solution yet?
- A.
Urban cooperative banks
- B.
Regional rural banks
- C.
Scheduled commercial banks
- D.
Infrastructure Finance Companies
Correct Answer
A. Urban cooperative banksExplanation
Urban cooperative banks have not fully implemented core banking solution yet. This means that these banks have not fully integrated their banking operations and services into a centralized system. Unlike other types of banks such as regional rural banks, scheduled commercial banks, and infrastructure finance companies, urban cooperative banks still rely on manual processes and have not fully adopted technology-driven solutions for their banking operations. This may result in limitations in terms of efficiency, accessibility, and convenience for customers and may also pose challenges in terms of data management and security.Rate this question:
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- 11.
Which of the following is an example of NBFC?
- A.
B. Infrastructure Debt Fund
- B.
A. Infrastructure Finance Companies,
- C.
Both A and B
- D.
Reserve funds company
Correct Answer
C. Both A and BExplanation
Both A and B are examples of NBFCs. Infrastructure Finance Companies and Infrastructure Debt Funds are both types of NBFCs. NBFC stands for Non-Banking Financial Company, which is a company that provides financial services similar to traditional banks, but does not hold a banking license. Both A and B fall under this category as they provide financial services in the infrastructure sector.Rate this question:
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- 12.
The bank which refinances the loans given to the poor and weaker sections to construct or buy houses is
- A.
NHB
- B.
SIDBI
- C.
IDBI
- D.
IIBI
Correct Answer
A. NHBExplanation
NHB, or the National Housing Bank, is the correct answer because it is the institution that refinances loans given to the poor and weaker sections for the purpose of constructing or buying houses. NHB plays a crucial role in providing financial assistance to individuals who may not have access to traditional banking services, thereby promoting affordable housing and social inclusion.Rate this question:
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- 13.
Bancassurance is
- A.
A composite financial service offering both bank and insurance product
- B.
An insurance scheme to insure bank deposits
- C.
An insurance scheme exclusively for the employee of banks
- D.
A bank deposit scheme exclusively for employees of insurance companies
Correct Answer
A. A composite financial service offering both bank and insurance productExplanation
Bancassurance is a composite financial service that combines both banking and insurance products. This means that customers can access both banking services, such as deposits and loans, as well as insurance products, such as life insurance or property insurance, through a single institution. This integrated approach allows customers to conveniently manage their financial needs in one place, while also providing the institution with an opportunity to cross-sell and offer a wider range of products to their customers.Rate this question:
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- 14.
Which one of the following is not a function of RBI:
- A.
Opening Savings Accounts for general public
- B.
Decide Bank Rate, CRR and SLR from time to time
- C.
Currency Management
- D.
Prescribe the Capital Adequacy Ratio
Correct Answer
A. Opening Savings Accounts for general publicExplanation
The correct answer is "Opening Savings Accounts for general public". This is not a function of the RBI because the opening of savings accounts for the general public is typically done by commercial banks and not the central bank. The RBI's main functions include deciding bank rates, managing currency, and prescribing capital adequacy ratios to ensure the stability and regulation of the banking system.Rate this question:
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- 15.
Which one of the following cannot be called an anti-inflationary measure
- A.
Purchase of Securities in the Open Markets
- B.
Rationing of the Credit
- C.
Raising the Reserve Ratio Requirements
- D.
Raising the Bank Rates
Correct Answer
A. Purchase of Securities in the Open MarketsExplanation
Purchase of Securities in the Open Markets cannot be called an anti-inflationary measure because it involves the central bank buying securities from the open market, which increases the money supply in the economy. This increase in money supply can potentially lead to inflation rather than controlling it. Therefore, it is not an effective measure to combat inflation.Rate this question:
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- 16.
Which of the following is the purpose of introducing 'Know Your Customer' norms by the bank?
- A.
To ensure that money deposited in the banks has come from genuine sources.
- B.
To bring more people under the banking net.
- C.
Identify the people who do not pay Income Tax.
- D.
To ensure whether the money deposited in the bank is of an Indian or a foreign national.
Correct Answer
A. To ensure that money deposited in the banks has come from genuine sources.Explanation
The purpose of introducing 'Know Your Customer' norms by the bank is to ensure that money deposited in the banks has come from genuine sources. This is done to prevent money laundering and other illegal activities by verifying the identity and financial transactions of customers. By implementing these norms, banks can maintain the integrity of the financial system and protect against fraudulent activities.Rate this question:
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- 17.
Which among the following is an instrument of monetary policy used by the RBI?
- A.
CRR
- B.
PLR
- C.
BPLR
- D.
Base Rate
Correct Answer
A. CRRExplanation
CRR, or Cash Reserve Ratio, is a monetary policy instrument used by the RBI (Reserve Bank of India). It refers to the portion of a bank's total deposits that must be maintained with the central bank in the form of reserves. By adjusting the CRR, the RBI can control the liquidity in the banking system, impacting the lending capacity of banks and influencing overall economic conditions. Therefore, CRR is an important tool for the RBI to regulate and manage monetary policy in the country.Rate this question:
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- 18.
SEBI is a
- A.
Statutory body
- B.
Constitutional body
- C.
Advisory body
- D.
Non-statutory body
Correct Answer
A. Statutory bodyExplanation
SEBI is a statutory body because it is created by an Act of Parliament, the Securities and Exchange Board of India Act, 1992. As a statutory body, SEBI has the power to regulate and oversee the securities market in India. It is responsible for protecting the interests of investors, promoting fair and transparent trading practices, and ensuring the development and regulation of the securities market. SEBI has the authority to make rules and regulations, conduct investigations, and impose penalties for non-compliance. Being a statutory body gives SEBI the legal framework and authority to carry out its functions effectively.Rate this question:
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- 19.
Correct Statement about NPS?
- A.
PFRDA, a statutory body, is responsible for implementation of NPS.
- B.
Initially it was meant for employees in central service and armed forces.
- C.
Only nationalized banks can work as fund managers of NPS.
- D.
For developmental purpose
Correct Answer
A. PFRDA, a statutory body, is responsible for implementation of NPS.Explanation
The correct answer is PFRDA, a statutory body, is responsible for implementation of NPS. The Pension Fund Regulatory and Development Authority (PFRDA) is the regulatory body that oversees and regulates the National Pension System (NPS) in India. It was established by the government to promote and develop pension schemes, including NPS, for the citizens of India. PFRDA is responsible for formulating policies, regulating pension funds, appointing intermediaries, and ensuring the smooth implementation and functioning of NPS.Rate this question:
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- 20.
Regional Rural Banks are classified as
- A.
Scheduled commercial banks
- B.
Subsidiaries of the sponsor banks
- C.
Subsidiaries of NABARD
- D.
Subsidiaries of RBI
Correct Answer
A. Scheduled commercial banksExplanation
Regional Rural Banks (RRBs) are classified as scheduled commercial banks because they are included in the Second Schedule of the Reserve Bank of India Act, 1934. This classification allows RRBs to access various banking facilities and services provided by the RBI, such as borrowing from the RBI's liquidity support and participating in the clearing system. RRBs are established with the aim of providing credit and other banking services to the rural population, and their classification as scheduled commercial banks ensures their regulatory oversight and integration into the banking system.Rate this question:
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