Exercise Quiz & Test – 27


1. The largest bank Imperial bank was nationalized in 1955 and rechristened as State Bank of India on the recommendation of which committee?
A. Rangarajan Committee
B. Chelliah Committee
C. Rekhi Committee
D. Gorewala Committee

Answer & Solution
D. Gorewala Committee
Explanation: Bank of Madras merged into the other two in British India i.e. Bank of Calcutta and Bank of Bombay to form the Imperial Bank of India which became the State Bank of India. 

2. SEBI was established in the year
A. 1994
B. 1990
C. 1992
D. 1982

Answer & Solution
C. 1992
Explanation: SEBI(Securities and Exchange Board of India) was set up with the main purpose of keeping a check on malpractices and protect the interest of investors.

3. Which public sector bank of India is the first fully Indian bank, established by the Indian capital?
A. Bank of Baroda
B. State Bank of India
C. Central Bank of India
D. Punjab National Bank

Answer & Solution
D. Punjab National Bank
Explanation: The first bank managed by Indians was Punjab National Bank in 1895(Lahore) and is one of the largest banks in India. PNB has the distinction of being the first Indian bank to have been started solely with Indian capital that has survived to the present. 

4. When RBI sells government securities its meaning is?
A. Liquidity in banking increases
B. Liquidity gets diminished
C. Liquidity remains unchanged
D. None of these

Answer & Solution
B. Liquidity gets diminished
Explanation: A Government security is a tradable instrument issued by the Central or the State Governments. It recognizes the Government’s debt commitment.  Such securities are short term (treasury bills, with original maturities of less than one year) or long term (Government bonds or dated securities with original maturity of one year or more). 

5. With a view to facilitate payment of balance in the deposit account to the person named by the depositor without any hassles in the event of death of account holder, the following facility was introduced for bank account in our country.
A. Guarantee
B. Registration
C. Nomination
D. Will

Answer & Solution
C. Nomination
Explanation:The benefit of nomination is that in the event of death of an account holder or locker holder, the Bank can release the account proceeds or contents of the locker to the nominee without insisting upon a Succession Certificate, Letter of Administration or Court Order.
When you open a savings bank account, or make a mutual fund investment, there is a space which asks for the nominee details. Nomination for joint holders is permitted, however in the event of death of any of the holders the benefits will be transmitted to the surviving holder’s name. 

6. Which among the following statement is incorrect about SEBI?
A. Capital market regulator
B. Mutual fund regulator
C. Regulates the credit rating agencies in India
D. None

Answer & Solution
D. None
Explanation: All are true 

7. Which of the following rates are decided by the RBI called as “Policy Rate”?
A. Cash reserve ratio
B. Lending rate
C. Bank rate
D. Deposit rate

Answer & Solution
A. Cash reserve ratio
Explanation: CRR or cash reserve ratio is the minimum percentage of a bank’s deposits to be held in the form of cash. When a bank’s deposits increase by Rs. 100 crore, and considering the present cash reserve ratio of 3%, bank will have to hold additional Rs. 3 crore with RBI and will be able to use only Rs. 97 crore for investments and lending. 

8. Non-Banking Financial Companies (NBFCs) are financial institution that
A. holds a banking license
B. does not hold a banking license
C. are government undertaking institutions
D. None of these

Answer & Solution
B. does not hold a banking license
Explanation: Housing Finance Companies, Merchant Banking Companies, Stock Exchanges, Companies engaged in the business of stock-broking, Venture Capital Fund Companies, Nidhi Companies, Insurance companies and Chit Fund Companies are NBFCs but they have been exempted from the requirement of registration under Section 45-IA of the RBI Act, 1934. 

9. In comparison with Liquidity Adjustment facility (LAF), Marginal Standing Facility (MSF) has
A. Higher Rate of Interest
B. Lower Rate of Interest
C. No difference in interest rate
D. None of these

Answer & Solution
A. Higher Rate of Interest
Explanation: Marginal standing facility is a window for banks to borrow from Reserve Bank of India in emergency situation when inter-bank liquidity dries up completely. Banks borrow from the central bank by pledging government securities at a rate higher than the repo rate under liquidity adjustment facility or LAF in short.

10. Indian Depository Receipt (IDR) is the
A. Proof of an Indian company’s share
B. Is an unsecured money market instrument
C. Proof of ownership of foreign company’s share
D. Proof of earnings or profits of Indian Companies

Answer & Solution
C. Proof of ownership of foreign company’s share
Explanation: These receipts can be listed in India and traded in rupees. For instance foreign investors in the US-listed American Depository Receipts of Infosys and Wipro get receipts against ownership of shares held by an Indian custodian, an IDR is proof of ownership of foreign company’s shares.