Money and Financial System

MCQ Money and Financial System

MCQ Money and Financial System

MCQ Money and Financial System:- In this post, we will help you in MCQ (Multiple Choice Question) Money and Financial System with Solution Chapter wise this post will help you a lot in the examination. This post is for 3rd year Student This post can benefit more students. and this post amiable in all mcq with chapter wise. available in all chapter.

Notes Here All Chapter For Money and Financial System

Bcom Money and Financial System Notes Question Paper


1. Money: Definition, Functions and Importance

1, Direct exchange of one commodity for another is termed AS:

(a) Measure of value

(b) Barter ()

(c) Price

(d) None of these


2, Meaning of Exchange is:

(a) Doing business

(b) Purchasing goods

(c) Transfer of wealth ()

(d) All these


3, Which of the following is a demerit of barter system?

(a) Want of double coincidence ()

(b) Absence of money circulation

(c) Absence of natural resources

(d) Scarcity of goods


4, The term money has been derived from the Latin Word:

(a) Moneta ()

(b) Peconja

(c) Monate

(d) Menoty


5, Theory of evolution of money was propounded by:

(a) Prof. Crowther ()

(b) Prof. Spalding

(c) Prof. Marshall

(d) None of these


6, Theory of spontaneous growth of money was propounded by:

(a) Prof. Marshall

(b) Prof. Spalding ()

(c) Prof. Crowther

(d) None of these


7, “Money is what money does”, this definition was given by:

(a) Hartley Withers ()

(b) Robbins

(c) Knapp

(d) Friedman


8, “Anything which is declared by the state as money becomes money”, this definition was given by:

(a) Thomas

(b) Hartley Withers

(e) Knapp ()

(d) Coulborn


9, “Money may be defined as the means of valuation and payment,” this definition was given by:

(a) Coulborn ()

(b) Knapp

(c) Thomas

(d) None of these


10, “Money is one thing that have general acceptability”, this definition was given by:

(a) Seligman ()

(c) Keynes

(b) Crowther

(d) Kent


11, “Anything that is generally acceptable as a means of exchange and as the same time as a measure and store of value”, this definition was given by:

(a) Seligman

(b) Crowther ()

(c) Keynes

(d) Kent


12, According to conventional approach, money includes:

(a) Currency

(b) Demand Deposit

(c) Currency + Demand Deposits ()

(d) None of above


13, According to Chicago Approach, money includes:

(a) Currency+Demand Deposits

(b) Currency+ Demand Deposits+Time Deposits ()

(c) Demand Deposits + Time Deposits

(d) None of above


14, Which of the following is a characteristic of money?

(a) General Acceptability

(b) Medium of Exchange

(c) Liquid Asset

(d) All these ()


15, Which of the following is not correct about money?

(a) Money is a veil ()

(b) Money is not a veil

(c) Money is a means and not an end

(d) Liquid Asset


16, Medium of exchange is the following function of money:

(a) Primary ()

(b) Secondary

(c) Contingent

(d) All these


17, Money has been considered as primary invention of man, this statement is given by:

(a) Seligman

(b) Knapp

(c) Coulborne

(d) Crowther ()


18, Which of the following is a function of money?

(a) Medium of exchange

(b) Store of value

(c) Transfer of value

(d) All these ()


19, Which of the following is the function of money, according to Hartley Withers?

(a) Medium of exchange

(b) Stantard of deferred payment

(c) Store of value

(d) All of the above ()


20, Something which is freely used and generally accepted as: a medium of exchange and as a unit of account is called:

(a) Money ()

(b) Capital

(c) Assets

(d) Wealth


21, Consider the following:

  1. Scarcity
  2. Homogeneity
  3. Durability
  4. Divisibility

Which of the above are the essential qualities of a good money material?

(a) 1 and 2

(b) 1, 2 and 3

(c) 2, 3 and 4 ()

(d) 1, 2, 3 and 4


22, Medium of exchange and measure of value, both are the constituents of:

(a) Primary functions of money ()

(b) Contingent functions of money

(c) Secondary functions of money

(d) None of above


23, Consider the following:

  1. Store of value
  2. Measure of value
  3. Transfer of value
  4. Standard of deferred payments

Which of the above are the secondary functions of money?

(a) 1, 2 and 3

(b) 1, 3 and 4 ()

(c) 2, 3 and 4

(d) All of these


24, Consider the following:

  1. Basis of credit
  2. Distributor of collective production
  3. Helps in the maximization of utility
  4. Guarantor of solvency

Which of the above are contingent functions of money?

(a) 1, 2 and 4

(b) 2, 3 and 4

(c) 1, 3 and 4

(d) 1, 2, 3 and 4 ()


25, Money performs its contingent functions normally in:

(a) Underdeveloped countries

(b) Developing countries

(e) Both (a) and (b)

(d) Developed countries ()


26, Some assets which are very much liquid though not as much as money itself is called:

(a) Near money ()

(b) Dear money

(c) Substitute money

(d) Fiat money


27, A Financial bill which does not arises in connection with genuine commercial transaction is called:

(a) Commercial bill

(b) Banker’s bill ()

(c) Treasury bill

(d) None of these


28, Promises by the government to pay a fixed sum of money at a prescribed date generally three months ahead, are called:

(a) Treasury bills ()

(b) Government bill

(c) Promissory bills

(d) Non-commercial bills


29, Exchange bills, treasury bills, bonds, debentures are the examples of:

(a) Fiat money

(b) Near money ()

(c) Liquid money

(d) None of these


30, Wealth that has physical existence and is required either for its own sake or for its contribution to production is called:

(a) Physical wealth

(b) Capital wealth

(c) Real wealth ()

(d) Capital assets


31, Which of the following would not be termed “Near Money”?

(a) Bills of

(b) ₹ 1000 notes ()

(c) Treasury bills

(d) Debentures


32, Choose the incorrect statement: Asset demand for money is that it:

(a) Is held as an asset

(b) Is held as transactions are unforeseen and unexpected

(c) Is convenient for holding and also certain in terms of value ()

(d) Becomes significant during war


33, With the use of currency:

(a) Velocity of money increases ()

(b) National Income increases

(c) Capacity increases

(d) Inflation occurs


34, Primary functions of money includes:

(a) Medium of Exchange

(b) Measure of value

(c) Store of value

(d) Both (a) and (b) ()


35, Which of the following is not secondary function of money?

(a) Standard of deferred payments

(b) Store of value

(c) Transfer of value

(d) Basis of credit creation ()


36, Which of the following is a contingent function of money?

(a) Distribution of National Income

(b) Basis of credit creation

(c) Guarantor of solvency

(d) All above ()


37, Who classified the functions of money into static and dynamic functions?

(a) Paul Einzing ()

(b) Knapp

(c) Crowther

(d) Marshall


38, Which of the following is static function of money?

(a) Medium of exchange

(b) Transfer of value

(c) Standrad for deferred payment

(d) All above ()


39, Which of the following is dynamic function of money?

(a) Full utilization of resources

(b) Facilitates deficit financing

(c) Economic development

(d) All above ()


40, Who among the following did not attach much significance to the role of money?

(a) Adam Smith

(b) J.S. Mill

(c) Pigoy

(d) All of these ()


41, The……… are of the opionion that money plays a significant role in increasing the level of income and employment.

(a) Adam Smith

(b) Pigou

(c) Keynes

(d) Friedman ()


42, “Money is such a path which is used for transporting entire output of the district to the market, but which in itself produces nothing”, this statement is given by:

(a) Adam Smith ()

(b) Mill

(c) Pigou

(d) None of these


43, “Money is a wrapper in which things come to you”, this statement is given by:

(a) Pigou ()

(b) Keynes

(c) Friedman

(d) Mill


44, “Modern economic life which is founded on specialization would not be possible without money”, who remarked this?

(a) Friedman

(b) Benham ()

(c) Mill

(d) Pigou


45, “Money is the Pivot around which the whole economic science clusters”, this statement is given by:

(a) Marshall ()

(b) Pigou

(c) Mill

(d) Prof. Dey


46, In which economic system, money plays a vital role?

(a) Capitalist Economy

(b) Socialism

(c) Mixed Economy

(d) All of these ()


47, Money plays a important role in:

(a) Economic fields

(b) Social fields

(c) Political fields

(d) All of these ()


48, “Lack of money is the root of all evils,” who said this?

(a) Bernard Shaw ()

(b) Robertson

(c) Pigou

(d) Mill


49, “Money is a good servent but bad master,” this statement is given by:

(a) Robertson ()

(b) Mill

(c) Pigou

(d) Marshall


50, Economic evil of money is:

(a) Instability of value

(b) Over capitalisation

(c) Unequal distribution of wealth

(d) All of the above ()


51, Which of the following is social evil of money?

(a) Problem of black money

(b) Unequal distribution of wealth

(c) Economic wastage

(d) Encourage Materialism ()


52, In which of the following economic system sovereignty of the consumer become possible?

(a) Capitalism ()

(b) Socialism

(c) Mixed economy

(d) None of these


53, Near money is….. than money:

(a) More liquid

(b) Less liquid ()

(c) Narrow term

(d) None of these


54, Quality of good money

(a) Acceptability

(b) Durability

(c) Portability

(d) All these ()


55, Currency includes:

(a) Metallic coins

(b) Notes

(c) Credit money

(d) Both (a) and (b) ()


56, The money whose intrinsic value is not equal is its face value, is termed as:

(a) Commodity Money

(b) Representative Money ()

(c) Actual Money

(d) None of these


57, Paper money is an example of:

(a) Commodity money

(b) Representative money ()

(c) Actual money

(d) None of these


58, Fiat money is also termed as:

(a) Convertible money

(b) Inconvertible money ()

(c) Commodity money

(d) None of these


59, Legal Tender Money includes:

(a) One-rupee coin

(b) Paper currency notes

(c) Cheque

(d) Both (a) and (b) ()


60, Optional money includes:

(a) Cheques

(b) Drafts

(e) Bills of Exchange

(d) All of these ()


61, The coins whose face value is more than intrinsic value termed as:

(a) Standard coins

(b) Token coins ()

(c) Subsidiary coins

(d) None of these


62, Gresham law is applicable to:

(a) Public expenditure

(b) Banks

(c) Finance

(d) Money ()


63, The qualities of a good money are:

(a) General acceptability

(b) Portability

(c) Cognizability

(d) All of these ()


64, As economy grows, the relative importance of credit money:

(a) Increases ()

(b) Decreases

(c) Remains constant

(d) None of these


65, Money which is a source of many blessings to mankind, becomes also, unless we control it, a source of perils and confusion.” Who has given this view point?

(a) Crowther

(b) Robertson ()

(c) Alfred Marshall

(d) None of these


66, Which is the most convenient medium of exchange?

(a) Currency ()

(b) Deposit money

(c) Credit card

(d) None of these


67, Concept of inside money was introduced by:

(a) Gurley R. Show ()

(b) R. Solow

(c) Stigler

(d) Sweezy


68, What is the correct sequence of following developments?

  1. Barter system
  2. Plastic money
  3. Paper money
  4. Gold standard
  5. Credit money

(a) 1, 4, 3, 5, 2

(b) 1, 3, 5, 4, 2

(c) 1, 2, 3, 4, 5

(d) 5, 3, 4, 2, 1


69, Inconvertible paper money which circulates in the country, under extraordinary circumstances on the command of the State is called:

(a) Imposed money

(b) Fiat money ()

(c) Near Money

(d) Fiat currency


70, None-legal tender money like cheques, bank drafts, hundies, bills of exchange, etc. are called:

(a) Optional money ()

(b) Near money

(c) Near money

(d) Liquid-money


2. Concept of Money Supply


71, Which of the following is not “currency with public”?

(a) Notes in circulation

(b) Circulation of small coins

(c) Circulation of rupee coins

(d) Cash in hand with banks ()


72, Choose the odd combination in the following:

(a) Currency Money, Bank Money ()

(b) Legal Tender Money, Currency Money

(c) Ordinary Money, Legal Tender Money

(d) Common Money, Currency Money


73, Choose the item excluded from money supply:

(a) Coins and currency notes held by commmercial banks ()

(b) Coins and currency in circulation

(c) Demand deposits with national banks

(d) Deposits with SBI


74, Which of the following constitute the reserve on which demand deposits of the public are supported?

(a) Coins and currency in circulation

(b) Cash held by Government and SBI ()

(c) Deposits with commerical banks

(d) other deposits with RBI


75, If M1 is the money supply in the country, indicate which of the following forms a part of it?

(a) Time deposits with banks

(b) Post office savings and bank deposits

(c) Deposit money with the public ()

(d) All of the above


76, “Money stock” includes:

(a) Post office savings bank deposits

(b) Time deposits with bank

(c) Currency with public

(d) All of the above ()


77, Currency held by public + net demand deposits of banks + other deposits of RBI is equal to:

(a) M1 ()

(b) M2

(c) M3

(d) M4


78, The form of money ‘M’ consists of:

(a) M₁ and net time deposits of banks

(b) M2 and total deposits with the post office savings organisation

(c) M and post office savings deposits ()

(d) None of the above


79, M + Net time deposits of banks, is referred to as:

(a) M₂

(b) M3 ()

(c) M4

(d) None of these


80, Which of the following would be a correct expression for “M4” form of money?

(a) M3 + Total deposits with Post-office savings organisation ()

(b) M₂ + Net time deposits of organisation banks

(c) M1 + Net time deposits of banks

(d) M₁ + M2 + Net time deposits of banks


81, The Reserve Bank presently provides estimates of the supply of money in terms of:

(a) M₁

(b) M₂

(c) M₁ and M

(d) M, M2, M3 and M4 ()


82, Which form of money has the highest degree of liquidity?

(a) M()

(b) M₂

(c) M3

(d) M4


83, Arrange all the four concepts of money M, M2, M3 and M4, in the ascending order in terms of liquidity.

(a) M₁, M2 Mi and M4

(b) M₁, M2, Ms and M4

(c) M., M₂, Ms and M1

(d) M4, M, M2, and M()


84, Two measures of money supply, generally known narrow and broad measures repectively, are:

(a) M2 and M3

(b) M₁ and M2

(c) M1 and M3 ()

(d) M2 and M4


85, The appropriate nominal stock of money is determined by:

(a) Private real demand for money

(b) Price level decision of the government

(c) Both (a) and (b) ()

(d) RBI’s decision on the total money supply


86, Narrow definition of money supply is:

(a) M()

(b) M₂

(c) M3

(d) M4


87, Broad definition of money supply is:

(a) M₁

(b) M2

(c) M3 ()

(d) M4


88, Which types of money definition is frequently used by policy makers?

(a) M₁ and M2

(b) M2 and M3

(c) M1 and M3 ()

(d) M2 and M4


89, Money supply is a:

(a) Flow concept

(b) Stock concept ()

(c) Both (a) and (b)

(d) None of these


90, Hoarding of money leads to:

(a) Decrease in money supply ()

(b) Increase in money supply

(c) Constant money supply

(d) None of the above


91, Increase in money supply will lead to:

(a) Cost push inflation

(b) Demand pull inflation ()

(c) Structural inflation

(d) None of these


92, The most liquid definition of money includes:

  1. Currency notes and coins held by public
  2. Net time deposit with commercial banks
  3. Net demand deposit with bank
  4. None of the above

Select the answer from given code:

(a) 1+2

(b) 1+3 ()

(c) 2+4

(d) 1+4


93, When the supply of Money decreases, the Price commodities:

(a) Increases

(b) Decreases ()

(c) Remain same

(d) No change


94, Increase in money supply will most likely:

(a) Raise interest rate

(b) Decrease interest rate ()

(c) May decrease investment

(d) None of these


95, In reality, money supply is:

(a) Exogenous

(b) Endogenous

(c) Both (a) and (b) ()

(d) None of these


96, Keynes assumed money:

(a) Exogenous ()

(b) Endogenous

(c) Both (a) and (b)

(d) None of these


97, Which of the following is included in the total supply of high powered money?

(a) Currency

(b) Required reserves

(c) Excess reserves

(d) All of these ()


98, If M= the money supply, H = the supply of high powered money, then M/R is called:

(a) Incremental money multiplier ()

(b) Incremental supply multiplier

(c) Money supply coefficient

(d) None of the above


99, High powered money is controlled by:

(a) Public

(b) Government ()

(c) Banks

(d) All of these


100, Following components are included in High Powered Money:

(a) Currency with the public

(b) Cash reserve with the Bank

(c) Cash reserve with the RBI

(d) Above all ()


101, High Powered Money is also termed as:

(a) Reserve Money

(b) Base Money

(c) Demand Money

(d) Both (a) and (b) ()


102, Common to both M and H are:

(a) C and OD ()

(b) C and R

(c) C and DD

(d) C and BD


103, When supply of money is defined for a particular moments of time, then it will be?

(a) Monetanist concept

(b) Flow concept

(c) Stock concept ()

(d) None of these


104, As per the definition of RBI currency notes and coins with the public is included in:

(a) M1

(b) M2

(c) M3

(d) All of these ()


105, Sources for supply of money in India are:

(a) 2

(b) 3

(c) 5 ()

(d) 8


106, Which of the following includes deposits in the supply of money?

(a) Shicago Community Approach ()

(b) Traditional Approach

(c) Both (a) and (b)

(d) None of the above


107, Value of Money multiplier (m) is:

(a) M/H ()

(b) H/M

(c) C/H

(d) None of these


108, High powered money affect supply of money in:

(a) Direct Proportion ()

(b) Inversely

(c) Does not affect

(d) None of these


109, Formula for High Power Money is:

(a) C+DD+OD

(b) C+R+OD ()

(c) C+R+DD

(d) None


110, If the cash reserve of the banks are ₹10 crores and credit multiplier is 10 then the final increase in demand deposits will be:

(a) ₹50 crores

(b) ₹100 crores ()

(c) ₹10 crores

(d) ₹20 crores


111, Supply of money in India is influenced by:

(a) Government

(b) Bank and commercial sector

(c) Foreign Transaction

(d) All of these ()


112, Which of the following does not include in the currency with the public?

(a) Notes in circulation

(b) Rupee coins

(c) Small coins

(d) Cash with the banks ()


113, The Ma concept of money is relatively…… than M1 concept.

(a) Less liquid ()

(b) More liquid

(c) Less practical

(d) None of these


114, If high powered money increases by 10% then money supply will increase by:

(a) 10%

(b) More than 10% ()

(c) Less than 10%

(d) None of these


115, Increase in monetary deficit will lead to increase in:

(a) Money demand

(b) High Powered money ()

(c) Savings

(d) Export


16, Rate of Increase in money supply is high in India because of:

(a) High rate of interest

(b) High deficit ()

(c) High saving rate

(d) None of these


117, The reserve money or the high powered money is produced by the………..

(a) Reserve Bank of India

(b) Government of India

(c) Both (a) and (b) ()

(d) None of these


118, The reserve money held by the public and banks includes:

(a) Currency held by the public

(b) Cash reserves of banks

(c) other deposits of the Reserve Banks

(d) All these ()


3. Finance Meaning, Types and Importance


119, Finance is related to:

(a) Money

(b) Monetary Resources ()

(c) Credit

(d) Loans


120, Finance is science and art of earning and expending of money”. This is said by:

(a) Haward

(b) Hastings ()

(c) Guthman

(d) None of these


121, Capital required to run day to day functioning is called:

(a) Institutional Finance

(b) Business Finance

(c) Working Capital ()

(d) Public Finance


122, Elements of finance on the basis of managerial aspect are:

(a) Expending of funds

(b) Raising of funds

(c) Rationing of funds

(d) All of these ()


123, Which of the following does not include in the self financing?

(a) Own capital

(b) Business surplus

(c) Shares

(d) Institutional Finance ()


124, Internal source of financing is:

(a) Retained earnings ()

(b) Preference shares

(c) Ordinary shares

(d) Institutional financing


125, Which of the following financing?

(a) Loan from commercial banks

(b) Term Deposits

(c) Development Banks

(d) Portfolio Investment ()


126, The fund collected by selling………… is a good source of financing.

(a) Debentures

(b) Equity shares ()

(c) Preference shares

(d) Deferred shares


127, Deferred shares are bought by the………..

(a) Public

(b) Management

(c) Promoters ()

(d) Government


128, Commercial and co-operative banking mainly provide:

(a) Short-term funds ()

(b) Medium-term funds

(c) Long-term funds

(d) All of these


129, Non-banking financial companies can accept deposits from the public for:

(a) More than three years

(b) Upto three years ()

(c) Less than three years

(d) Upto five years


130, Non-institutional financial sources include:

(a) Money lender

(b) Indigenous bankers

(c) Chit funds.

(d) All these ()


131, External source of finance include:

(a) Foreign loan

(b) Foreign grants

(c) Foreign investment

(d) All these ()


132, Foreign Direct Investment is made by:

(a) Purchasing shares and debentures of the domestic company

(b) Establishing companies by Foreign Investors ()

(c) Making collaboration

(d) All above


133, In FDI, full ownership and management remains in the hands of:

(a) Domestic company

(b) Foreign Investors ()

(c) Government

(d) RBI


134, In the portfolio investment, foreign investors:

(a) Purchase shares/debentures of domestic company ()

(b) Establish companies in other countries

(c) Make collaborations

(d) All above


135, In portfolio investment, management and control remains with:

(a) Domestic company ()

(b) Foreign company

(c) Government

(d) None of these


136, Tied loans are provided for:

(a) A given project

(b) For buying goods from given country

(c) Both (a) and (b) ()

(d) Any project


137, Which of the following is not an international institution?

(a) Asian Development

(b) International Finance Corporation

(c) IMF

(d) IDBI ()


138, Requirement of finance on the basis of time may be divided into categories.

(a) 2

(b) 5

(c) 3 ()

(d) 4


139, The period of long-term finance is:

(a) More than three or five years

(b) More than five or seven years ()

(c) More than three years

(d) None of the above


140, Which type of finance is required for purchasing fixed assets?

(a) Medium-term finance

(b) Long-term finance ()

(c) Short-term finance

(d) All of these


141, Which type of finance is required for replacement of machinery and equipment?

(a) Medium-term finance ()

(b) Long-term finance

(c)Short-term finance

(d) All of these


142, The period of medium-term finance is:

(a) One to five or seven years ()

(b) Three to five years

(c) Less than five years

(d) None of the above


143, Finance mainly depends on the:

(a) Volume of savings

(b) Mobilisation of savings

(c) Both (a) and (b) ()

(d) None of these


144, Investment made for providing facilities like eduction, health care, training etc. are termed as:

(a) Capital Formation

(b) Human Capital Formation ()

(c) Development of tertiary sector

(d) None of the above


145, Tertiary sector includes:

(a) Trade

(b) Banking

(c) Insurance

(d) All these ()


146, is not International Finance:

(a) Business Finance ()

(b) Government International Finance

(c) Private International Finance

(d) Finance from International Institutions


4. Financial System


147, Financial system includes:

(a) Financial institutions

(b) Financial markets

(c) Financial services

(d) All of these ()


148, Function of financial system is:

(a) To provide a mechanism for transformation of savings investments

(b) To serve as a link between savers and investors

(c) To provide alternate forms of deposits

(d) All the above ()


149, Components of Financial Institutions are:

(a) Regulatory Institution.

(b) Financial Intermediaries

(c) Regulatory institutions and financial intermediaries

(d) None of these


150, Primary securities include:

(a) Bills

(b) Bonds

(c) Shares

(d) All of these ()


151, Secondary Securities include:

(a) Notes and coins issued by RBI

(b) Bank deposits

(c) Life Insurance Policies

(d) All the above ()


152, IDBI bonds is a:

(a) Primary security

(b) Secondary security ()

(c) Government bonds

(d) None of these


153, Debenture holders are entitted to get:

(a) Dividend

(b) Interest at a specified rate ()

(c) Commission

(d) None of these


154, Debenture holders are:

(a) Debtors of the company

(b) Creditors of the company

(c) Loan providers ()

(d) None of these


155, Preference Shares have the priority to:

(a) Payment of dividend out of profits

(b) Repayment of capital in case of liquidation

(c) Both (a) and (b) ()

(d) None of these


156, Preference shareholders are entitled to get:

(a) Dividend

(b) Interest

(c) Dividend at fixed rate ()

(d) None of these


157, Preference shares must be redeemed within:

(a) 5 years

(b) 10 years ()

(c) 7 years

(d) 15 years


158, Equity shareholders are the:

(a) Debtors of the company

(b) Creditors of the company

(c) Owner of the company ()

(d) Loan providers


159, Which of the following has the right to participate in the management?

(a) Equity shareholders ()

(b) Preference shareholders

(c) Debenture holders

(d) All of these


160, Rate of dividend on equity shares is:

(a) Fixed

(b) Not fixed

(c) Determined by directors

(d) Both above (b) and (c) ()


161, The equity shareholders have:

(a) Preferences of dividend

(b) Residual claims on income ()

(c) No right to participate in the management

(d) None of these


162, Debt Equity Swaps are:

(a) Convertible debentures ()

(b) Inconvertible debentures

(c) Redeemable at premium

(d) None of these


163, Money market deals in:

(a) Short-term claims ()

(b) Long-term claims

(c) Both (a) and (b)

(d) None of these


164, Money market includes:

(a) Treasury-bill market

(b) Call-money market

(c) Commercial bill market

(d) All of these ()


165, “Money market is the centre of dealings mainly of short. term character in monetary assets.” This is defined by:

(a) Reserve Bank of India ()

(b) Crowther

(c) Prof. Dougal

(d) None of these


166, Organised sector of money market includes:

(a) Reserve Bank of India

(b) Commercial Banks

(c) Co-operative Banks

(d) All of these ()


167, The major function of financial system in any economy is:

(a) Mobilization of savings

(b) Provision of liquidity

(c) Matching between long term requirement of funds and short term savings

(d) All of the above ()


168, Unorganised sector of money market includes:

(a) Indigenous Bankers

(b) Money Lenders

(c) Chit funds

(d) All of these ()


169, Which of the following is not a part of money market?

(a) Commercial Banks

(b) Unorganised Sector

(c) Stock Exchange ()

(d) Co-operative Banks


170, Financial instrument of money market is:

(a) Treasury Bills

(b) Promissory Notes

(c) Commercial Papers

(d) All of these ()


171, Which of the following is not a financial instrument of money market?

(a) Government Securities ()

(b) Bills of Exchange

(c) Hundies

(d) Certificates of Deposits


172, Apex Institution in money market is:

(a) SBI

(b) RBI ()

(c) RRB



173, Money markey does not include:

(a) Short-term Government Bills

(b) Security Market ()

(c) Liquid Money Market

(d) Trade Bill Market


174, For short-term loan, the market is known as:

(a) Short-notice credit market

(b) Money market ()

(c) Acceptance market

(d) Discount market


175, The bill on which acceptance is not required is known as:

(a) Treasury Bills ()

(b) Exchange Bills

(c) Accommodation Bills

(d) None of these


176, To fulfill the requirement of SLR of commercial bank, the helping market is known as:

(a) Discount market ()

(b) Bill market

(c) Short Notice Credit Market

(d) None of these


177, In India, commercial paper was started in:

(a) 1950

(b) 1951

(c) 1990 ()

(d) None of these


178, In India Certificate of Deposits was started in:

(a) 1950

(b) 1951

(c) 1989 ()

(d) 1974


179, The most volatile part of the organised money market is

(a) Gilt edged market

(b) Commercial bill market

(c) Call money market ()

(d) Bond market


180, The duration of treasury bills is:

(a) 14 days to 364 days ()

(b) 1 day to 364 days

(c) More than 5 years but less than 10 years

(d) 10 years and above


181, Inter-Bank Participation Certificate (IBPCs) issued in India for:

(a) 90 days

(b) 91-180 days ()

(c) 90+91 – 181 days

(d) 14 days


182, Inter-bank lending and borrowing takes place in:

(a) Capital market

(b) Money market

(c) Bill market

(d) Call money market ()


183, Which is not a credit note?

(a) Promissory Note

(b) Bank Draft

(c) Treasury Bill

(d) Insurance Policy ()


184, How many days are added to the due date of bills of exchange?

(a) 3 days ()

(b) 4 days

(c) 5 days

(d) 6 days


185, Writer of the bills of exchange is:

(a) Creditor ()

(b) Debtor

(c) Seller

(d) Owner


186, Which of the following is essential for secured payment through cheque?

(a) Crossing of cheque ()

(b) Endorsement of cheque

(c) Dishonour of cheque

(d) None of these


187, The capital market deals in long-term funds, both debt and equity”. This is defined by:

(a) RBI

(b) Prof. Dougal ()

(c) Crowther

(d) None of these


188, Old shares are bought and sold in:

(a) Primary Market

(b) Secondary Market ()

(c) Money Market

(d) None of these


189, New shares are bought and sold in:

(a) Primary Market ()

(b) Secondary Market

(c) Money Market

(d) None of these


190, Securities are purchased/sold in capital market:

(a) Short-term

(b) Long-term ()

(c) Middle-term

(d) None of these


191, Which of the following is an instrument of capital market?

(a) Government Securities ()

(b) Trade Bills (MM)

(c) Treasury Bills M

(d) Promissory Note M.M


192, Which one of the following is not a part of Capital Market?

(a) Gilt edged security market

(b) Old capital market

(c) New issue market

(d) Commercial paper market ()


193, Old issue market is known as:

(a) Stock Exchange ()

(b) Primary Market

(c) Money Market

(d) None of these


194, In India paper less trading was started by:

(a) NSDL

(b) CDSL

(c) Both (a) and (b) ()

(d) UTI


195, Which one of the following is wrong?

(a) Indian capital market is controlled by Capital Issue Controller ()

(b) SEBI got legal position in 1992

(c) GDR is doller main equipment

(d) None of the above


196, Gilt edged market deals with:

(a) Currency notes

(b) Gold

(c) Silver

(d) Government Securities ()


197, Capital market includes:

(a) Stock-market

(b) Government bond market

(c) Debentures

(d) All of these ()


198, Non-banking financial institutions are:

(a) Life Insurance Corporation

(b) Unit Trust of India

(c) Export Import Bank of India

(d) All of the above ()


199, Financial institutions which buy primary securities and sell secondary securities are termed as:

(a) Non-banking financial intermediaries ()

(b) Banking financial intermediaries

(c) Non-institutional intermediaries

(d) None of the above


200, Which of the following is not a part of financial institutions?

(a) Banking Intermediaries.

(b) Non-banking Intermediaries

(c) Regulated Institutions

(d) Organised Market ()


201, Financial intermediaries………. the primary securities.

(a) Buy ()

(b) Sell

(c) Both (a) and (b)

(d) None of these


202, Financial intermediaries intermediate between:

(a) Government and Banks

(b) Businessmen and Banks

(c) Final lenders and borrowers ()

(d) None of the above


203, Which of the following is not a Non-banking Financial Institution?

(a) UTI

(b) GIC

(c) LIC

(d) Commercial Banks ()


204, Capital market of India is regulated by:

(a) Government

(b) RBI

(c) SEBI

(d) Both (b) and (c) ()


205, SEBI was established in:

(a) 1988 ()

(b) 1992

(c) 1998

(d) 1989


206, SEBI was converted into a statutory institution in:

(a) 1992 ()

(b) 1988

(c) 1995

(d) 1998


207, IRDA was established in:

(a) 1992

(b) 1990 ()

(c) 1995

(d) 1991


208, Full name of SEBI is:

(a) Securities and Exchange Board of India ()

(b) Securities and Earning Board of India

(c) Savings and Earning Board of India

(d) None of the above


209, Headquarter of IRDA is at:

(a) Mumbai

(b) Delhi

(c) Lucknow

(d) Hyderabad ()


210, Headquarter of SEBI is at:

(a) Delhi

(b) Mumbai ()

(c) Lucknow

(d) Hyderabad


211, Financial institutions:

(a) Promote savings

(b) Mobilise savings

(c) Allocate funds among different uses and users

(d) All the above ()


212, Which of the following is incorrect?

(a) Capital markets provides long-term funds

(b) Primary markets are meant for new issue

(c) Bills of exchange is a financial instrument

(d) LIC is a banking financial intermediaries ()


213, Most important source of finance in the past for large scale industries has been:

(a) Public investment/deposits

(b)  Shares/Debentures issued in Capital market ()

(c) Public sector financial institutions

(d) Foreign financial institutions


5. Bank: Definition and Functions


214, The term Bank was derived from the Italian word:

(a) Banco

(b) Bancus

(c) Banque

(d) All above ()


215, The beginning of modern bank was assumed in:

(a) 17 century ()

(b) 16 century

(c) 18 century

(d) 19 century


216, In India, bank was first established in:

(a) 1806 ()

(b) 1809

(c) 1814

(d) 1820


217, In India, name of first established bank was:

(a) Bank of England

(b) Bank of Bengal ()

(c) Allahabad Bank

(d) None of these


218, In India, first commercial bank was established in:

(a) 1806

(b) 1881 ()

(c) 1809

(d) 1820


219, Which of the following is first commercial bank of India?

(s) Bank of Bengal

(b) Avadh Commercial Bank ()

(c) Allahabad Bank

(d) None of these


220, Banking system was started in India:

(a) In 18 century

(b) In 19 century ()

(c) In 17 century

(d) In 16 century


221, “Bank is a manufacturer of credit and a machine for facilitating exchanges”, this definition is given by:

(a) Crowther

(b) Horace White ()

(c) Kinley

(d) A.G. Hart


222, “The business of banking may be briefly defined as dealing in money and instruments of credit”, this is defined by:

(a) Kenneth Machenzie ()

(b) Horace White

(c) Kinley

(d) A.G. Hart


223, Commercial Bank in India are governed by the:

(a) Banking Regulation Act ()

(b) Reserve Bank of India Act

(c) Regional Rural Bank Act

(d) Negotiable Instrument Act


224, The primary function of a commercial bank is:

(a) Lending

(b) Providing subsidiary services

(c) Accepting deposits

(d) Accepting deposits and lendings ()


225, Which of the following are banking functions of a commercial bank?

(a) Financing foreign trade

(b) Clearing cheques

(c) Attraction of deposits

(d) All of these


226, The functions of a bank which include collection of cheques, bills, promissory notes, interest payments, sale of stock and securities are called:

(a) Agency functions ()

(b) Banking functions

(c) General utility services

  1. d) None of these


227, Consider the following:

(1) Collection and distribution of information

(2) Issuing letters of credit

(3) Underwriting loan raised by Government

(4) Collection of cheques

Which of the above are included in the general utility services of commercial banks?

(a) 1, 2 and 3 ()

(b) 1, 2, 3 and 4

(c) 1, 2 and 4

(d) 1, 3 and 4


228, Which one of the following is not the function of a Commercial Bank?

(a) Providing Loans

(b) Accepting Deposits

(c) Controlling Credit ()

(d) Creation of Credit


229, Which one of the following statement is correct?

(a) Commercial bank keep liquidity of their funds ()

(b) Crossed Cheques are paid in cash

(c) Short-term Govt. bills are transacted in Indian money market

(d) Foreign Exchange Banks do not deal in banking functions


230, In India Limited Liability bank was established in:

(a) 1806

(b) 1813

(c) 1853

(d) 1860 ()


231, In which account Cheques facilities is not provided by the bank:

(a) Fixed deposits Accounts ()

(b) Current Account

(c) Saving Account

(d) None of these


232, Banks earn interest on:

(a) Deposits

(b) Loans ()

(c) Demand Draft

(d) Bills of exchange


233, The function of Commercial Bank is:

(a) Accepting Deposits

(b) Discounting the exchange bills

(c) Govt. Finance

(d) All of these ()


234, Under overdraft facilities banks:

(a) Charge interest at lower rate

(b) High rate of interest is paid on deposits

(c) On withdrawing amount more than the deposit amount, interest is charged from the customer ()

(d) None of the above


235, The main soruces of supply of funds to a commercial banks is:

(a) Deposits from public ()

(b) Borrowing from RBI

(c) Borrowing from fellow bankers

(d) Borrowing from the money market


236, Types of loans are:

(a) Cash credit

(b) Overdraft

(c) Advances

(d) All above ()

237, In case of Cash credit, interest:

(a) Has to be paid on the amount which actually has withdrawn

(b) On the amount which has been accepted

(c) On high rate on amount actually taken and on the whole of loan accepted ()

(d) None of the above


238, Main difference between overdraft and cash credit is:

(a) Overdraft is a temporary arrangement and Cash Credit a fixed one

(b) Overdraft and Cash Credit is the same things

(c) Overdraft is a fixed arrangement and Cash Credit is temporary arrangement

(d) None of the above


239, Which one of the following is not the function Commercial Bank?

(a) Issue of travellers cheque

(b) Creation of Credit ()

(c) Issue of notes

(d) None of these


240, While issuing bill of exchange, banks earn through:

(a) Interest

(b) Dividend

(c) Discount ()

(d) None of these


241, ATM facility provides:

(a) Loans

(b) Liquidity ()

(c) Investment

(d) None of these


242, Highest rate of interest is paid on:

(a) Savings Account

(b) Current Account

(c) Fixed Deposits Account ()

(d) None of these


243, Which of the following in not a source of bank funds?

(a) Share capital

(b) Deposits

(c) Loans

(d) Overdraft ()


244, Interest is not paid by bank on:

(a) Savings A/C

(b) Fixed Deposit A/C

(c) Current A/C ()

(d) Recurring Deposit A/C


245, Banks are regulated by:

(a) SEBI

(b) RBI ()

(c) Company Law Baord

(d) Registrar of Companies


246, Allahabad Bank was established in:

(a) 1806

(b) 1865 ()

(c) 1881

(d) 1894


247, Punjab National Bank was established in:

(a) 1806

(b) 1865

(c) 1881

(d) 1894 ()


248, Imperial Bank of India was established in:

(a) 1865

(b) 1881

(c) 1894

(d) 1921 ()


249, Which bank is functioning as a Central Bank of India?

(a) Reserve Bank of India ()

(b) State Bank of India

(c) Punjab National Bank-

(d) All of these


250, Which banking system is followed in India?

(a) Branch Banking ()

(b) Unit Banking

(c) Both (a) and (b)

(d) All of these


251, The banks which perform general banking functions are termed as:

(a) Co-operative Banks

(b) Commercial Banks ()

(c) Central Banks

(d) None of these


252, Commercial banks are established generally in the form of:

(a) Partnership

(b) Joint Stock Company ()

(c) Government Company

(d) None of these


253, Amount deposited for a fixed period in the bank account is termed as:

(a) Demand Liability

(b) Time Liability ()

(c) Current Liability

(d) None of these


254, The bank which is included in the second schedule Reserve Bank is termed as:

(a) Scheduled Bank ()

(b) Public Bank

(c) Private Bank

(d) Non-scheduled Bank


255, Scheduled Bank must have a paid up capital and reserves of an aggregate value of:

(a) At least ₹50 lakhs

(b) At least ₹5 lakhs

(c) At least ₹5 crore ()

(d) None of these


256, Scheduled bank must be a:

(a) Corporated firm ()

(b) Partnership firm

(c) Single owner firm

(d) None of these


257, Reserve Bank has no specific control on:

(a) Scheduled Bank

(b) Non-scheduled Banks ()

(c) Regional Rural Bank

(d) None of these


258, Those banks of which the total capital is less than ₹5 crore. termed as:

(a) Scheduled Banks

(b) Non-scheduled Bank ()

(c) Rural Banks

(d) None of these


6. Structure of Commercial Banking in India


259, Imperial Bank of India was established in:

(a) 1921 ()

(b) 1955

(c) 1881

(d) 1911


260, Which bank was nationalised to create State Bank of India?

(a) Bank of Baroda

(b) Indian Bank

(c) Imperial Bank ()

(d) None of these


261, State Bank of India was established in:

(a) 1921

(b) 1955 ()

(c) 1969

(d) None of these


262, At present number of subsidiaries banks of State Bank India is:

(a) 5 ()

(b) 7

(c) 6

(d) 8


263, Which of the following is not apex banking institution?

(a) Reserve Bank of India


(c) Export-import Bank

(d) State Bank of India ()


264, Permission to set up a new bank is given by:

(a) SEBI

(b) RBI ()

(c) BFIR

(d) High Court


265, Major Commercial Banks of India were nationalised first in :

(a) 1969 ()

(b) 1970

(c) 1971

(d) 1972


266, How many Commercial Banks were nationalised in 1969:

(a) 19

(b) 17

(c) 16

(d) 14 ()


267, How many banks were nationalised in 1980:

(a) 5

(b) 6 ()

(c) 7

(d) 8


268, At persent, total number of nationalised banks are:

(a) 20

(b) 18

(c) 19 ()

(d) 28


269, Which is not a nationalised bank operating in India?

(a) Punjab National Bank

(b) Central Bank of India

(c) ICICI Ltd. ()

(d) Bank of India


270, Match Unit I and II and select correct answer using code given below:


(A) Raghuam Rajan Committee

(B) Mehrotra Committee

(C) Bimal Jalan Committee


(1) Insurance

(2) Capital Market

(3) Banks

(a) A B C (2, 1, 3)

(b) A B C (3, 2, 1)

(c) A B C (3, 1, 2) ()

(d) A B C (1, 2, 3)


271, Number of public sector Commercial Banks in India is:

(a) 26

(b) 25 ()

(c) 28

(d) 32


272, Dena Bank is a:

(a) Government bank

(b) Nationalised bank

(c) Private bank

(d) Foreign bank ()


273, The Jammu and Kashmir Bank is a:

(a) Government bank

(b) Nationalised bank

(c) Private bank ()

(d) Foreign bank


274, City bank is a:

(a) Government bank

(b) Nationalised bank

(c) Private bank

(d) Foreign bank ()


275, The Central Banking institution of India is:

(a) Central Bank of India

(b) Reserve Bank of India ()

(c) State Bank of India

(d) Union Bank of India


276, The leader of the Indian money market is:

(a) Government of India

(b) Ministry of Finance

(c) Indian Bank Association

(d) Reserve Bank of India ()


277, The Head Office of the State Bank of India is located at:

(a) New Delhi

(b) Kolkatta

(c) Mumbai ()

(d) Chennai


278, When did nationalisation of banks take place in India first?

(a) 1969 ()

(b) 1970

(c) 1959

(d) 1960


279, In 1969, those banks, were nationalised, the total deposits of which:

(a) ₹ 50 crore or more ()

(b)₹  5 crore or more

(c) ₹ 20 crore or more

(d) None of these


280, En 1980, those banks of which were:

(a) ₹50 crore or more

(b) ₹200 crore or more ()

(c) ₹100 crore or more

(d) None of these


281, State Bank of India is a:

(a) Nationalised Bank

(b) Public Sector Bank ()

(c) Private Bank

(d) None of these


282, State Bank of India works under the control of:

(a) Government ()

(b) Shareholders

(c) Public

(d) RBI


283, Which of the following acts as a representative of Reserve Bank of India?

(a) PNB

(b) SBI Group ()

(c) Central Bank of India

(d) Bank of India


284, Which of the following Act regulate the Commercial Bank in India:

(a) Indian Companies Act

(b) Banking Regulation Act, 1949 ()

(c) Banking Act, 1958

(d) None of the above


285, State Bank of India was establised under the:

(a) Banking Regulation Act, 1949

(b) Indian Companies Act, 1956

(c) State Bank of India Act, 1955 ()

(d) None of the above


286, SBI Acts as a:

(a) Government Banker

(b) Agent of the RBI

(c) Banker’s Bank

(d) All these()


287, Which of the following is not a private sector bank?

(a) HDFC Bank Ltd.

(b) ICICI Banks Ltd.

(c) Overseas Bank ()

(d) Axis Bank Ltd.


288, Head Office of foreign bank is located in:

(a) Domestic country

(b) Foreign Country ()

(c) At both places

(d) None of these


289, Foreign banks do:

(a) Financing of foreign trade

(b) Financing of internal trade

(c) General banking functions

(d) All these ()


290, Which of the following is a foreign bank?

(a) Axis Bank Ltd.

(b) Yes Bank Ltd.

(c) City Union Bank Ltd.

(d) Standard Chartered Bank ()


291, Origin of Branch banking was assumed from:

(a) America

(b) England ()

(c) Itly

(d) Germany


292, Branch Banking is also termed as:

(a) Centralised system

(b) Decentralised system ()

(c) Unit system

(d) None of these


293, Origin of Unit Banking was assumed from:

(a) England

(b) America ()

(c) Itly

(d) Japan Aslan


294, When was the name of ‘Banking Companies Act’ into ‘Banking Regulation Act’:

(a) 1949

(b) 1956

(c) 1965  ()

(d) 1988


295, SBI was established on the recommendation of the:

(a) Rural Credit Survey Committee ()

(b) Rural Credit and Investment Committee

(c) Finance Committee Government of India

(d) None of the above


7. Balance Sheet of


296, Balance sheet of a bank shows:

(a) Deposits and borrowings of a bank

(b) Assets and Liabilities of a bank ()

(c) Expenses and Incomes earned by a bank

(d) None of the above


297, Which one of the following is the liability of a bank?

(a) Deposit amount ()

(b) Advances

(c) Investments

(d) Purchased + Discounted Bills


258, The main source of getting finance of banks is:

(a) Share capital ()

(b) Deposit Amount

(c) Loan

(d) All of these


299, Sources of funds in banks are:

(a) Share Capital

(b) Reserve Fund

(c) Deposits

(d) All of these ()


300, Which of the following is an asset of a bank?

(a) Time Deposit

(b) Demand Deposit

(c) Share Capital

(d) Advances ()


301, Which of the following is liability for a bank?

(a) Gold in safe custody

(b) Share capital ()

(c) Investment

(d) Loans


302, Balance sheet of a bank shows:

(a) Profit of a bank

(b) Cash of a bank

(c) Real financial position of a bank ()

(b) None of the above


303, According to which section of Banking Regulation Act, 1949 it is mandatory to prepare Balance Sheet for a Bank?

(a) Section 29 ()

(b) Section 30

(c) Section 31

(d) Section 28


304, It is mandatory for a bank to publish Balance Sheet on the last day of:

(a) 31st March

(b) 31st December

(c) June ()

(d) None of these


305, The creditors which are not included in the Balance Sheet are called:

(a) Bills Payable

(b) Contingent Liabilities ()

(c) Loan from other bank

(d) None of these


306, The part of capital which is paid by public is known as:

(a) Authorised Capital

(b) Issued Capital

(c) Paid-up Capital ()

(d) None of these


307, According to Banking Regulation Act, 1949, a bank prepare its balance sheet on the:

(a) Form A ()

(b) Form B

(c) Form C

(d) Form D


308, According to which section of Banking Regulation Act, audit of balance sheet of a bank is compulsory:

(a) Section 29

(b) Section 30 ()

(c) Section 31

(d) Section 28


309, Schedule 1 of the balance sheet of a bank shows:

(a) Capital ()

(b) Reserve and Surplus

(c) Deposits

(d) Borrowings


310, Schedule 2 of the balance sheet of a bank shows:

(a) Capital

(b) Reserves and Surplus  ()

(c) Deposits

(d) Borrowings


311, Schedule 3 of the balance sheet of a bank shows:

(a) Capital

(b) Reserve and surplus

(c) Deposits ()

(d) Borrowings


312, Borrowings of banks are shown in the schedule number:

(a) 3

(b) 4 ()

(c) 5

(d) 6


313, Schedule number 6 of balance sheet of a bank shows:

(a) Cash and balances with Reserve Bank of India ()

(b) Money at call and short notice

(c) Investments

(d) Advances


314, Schedule 7 of the balance sheet of a bank shows:

(a) Cash and balance with Reserve Bank of India

(b) Money at call and short notice ()

(c) Investments

(d) Advances


315, Schedule 8 of the balance sheet of a bank shows:

(a) Cash and balance with Reserve Bank of India

(b) Money at call and short notice

(c) Investments ()

(d) Advances


316, Schedule 9 of the balance sheet of a bank shows:

(a) Cash and balance with Reserve Bank of India

(b) Money at call and short notice

(c) Investments

(d) Advances ()


317, In which schedule, fixed assets of a bank are shown:

(a) Schedule 10 ()

(b) Schedule 11

(c) Schedule 9

(d) Schedule 12


318, In which schedule, contingent liabilities of a bank shown in the balance sheet:

(a) Schedule 10

(b) Schedule 12 ()

(c) Schedule 9

(d) None of these


319, Which of the following is not a liability of a bank?

(a) Capital

(b) Deposits

(c) Borrowings

(d) Advances ()


320, Which of the following is not an asset of a bank?

(a) Money at call and short notice

(b) Fixed Assets

(c) Advances

(d) Deposits ()



321, It is mandatory for each bank to transfer…………… of current year’s net profit in the statutory reserve fund.

(a) 25%

(b) 10%

(c) 20% ()

(d) 15%


322, Meaning of non-banking Assets is:

(a) Assets used in the ordinary business of bank

(b) Assets pledged by customers for loans ()

(c) Cash reserves

(d) None of these


323, The non-banking assets must be sold within……….. from the date of acquiring.

(a) 5 years

(b) 3 years

(c) 1 years

(d) 7 years ()


324, Profitless investment of a bank is:

(a) Discounting of Bills

(b) Money at call and short notice

(c) Cash reserve ()

(d) None of these


325, Which of the following is a profitable investment  for a bank:

(a) Investment in building

(b) Discounting of bills ()

(c) Cash reserves

(d) None of these


326, Significance of Balance Sheet of a bank is because it:

(a) Provides estimate of progress

(b) Creates confidence among people

(c) Provide knowledge about liquidity and solvency

(d) All above ()


327, Portfolio management of the bank refer to the distribution of funds among:

(a) Liquidity and Security

(b) Loans and Other Assets

(c) Cash and Investment

 (d) All of these ()


328, Investment policy of bank must follow the principle of:

(a) Liquidity

(b) Safety

(c) Profitability

(d) All of these ()


329, Liquid assets of the banks does not include:

(a) Treasury Bills

(b) Cash reserves with the Central Bank

(c) Money at call

(d) Advances ()


330, A bank should make a balance between:

(a) Safety and Profitability

(b) Profitability and Liquidity

(c) Liquidity and Safety

(d) None of the above


331, Increased liquidity always implies:

(a) Reduced profitability ()

(b) More profits

(c)Reduced safety

(d) None of these


332, Consider the following:

  1. Bills purchased and discounted
  2. Share capital and reserves
  3. Deposits
  4. Borrowings from other banks

Which of the above are included in liabilities of banks?

(a) 1 and 2

(b) 1,2 and 3

(c) 2, 3 and 4 ()

(d) 1, 2, 3 and 4


333, Which of the following is not true about “deposits from the public” in banks?

(a) They constitute the Reserve Fund ()

(b) They are liabilities for the bank as they are returnable to the owners

(c) They are assets for the bank’s service since they are used to g interest yielding assets

(d) They are the biggest proportion of bank’s working funds


334, As a banker, what consideration would determine acquisition of assets?

(a) Distribution in a way that maximises profit for the shareholders

(b) Availability of adequate cash

(c) Easy convertibility of assets

(d) All of the above ()


335, The major portion of funds with the banks are:

(a) Capital reserves

(b) Individual savings

(c) Deposits ()

(d) Fluctuating


336, A bank aims at:

(a) Maintaining high liquidity

(b) High profit earnings

(c) Balancing liquidity and profitability ()

(d) Low liquidity as money earns no profit


337, A bank with a large proportion of demand deposits may have to:

(a) Maintain more capital stocks

(b) Maintain a more liquid assets portfolio ()

(c) Give more loans and advances

(d) Invest in real estate


338, Total cash in the bank and balance with Reserve Bank, balances in current account with other bank and investment in government and other approved securities owners borrowings from RBI, SBI and IDBI constitute:

(a) Liquidity ratio

(b) Cash reserve ratio

(c) Net liquidity ()

(d) Cash balance


8. Regional Rural Banks


239, Regional Rural Banks was established first in:

(a) 1975 ()

(b) 1977

(c) 1969

(d) 1964


340, How many RRBs were established in 1975?

(a) 2

(b) 4

(c) 3

(d) 5 ()


341, Regional Rural Banks are sponsored by:   

(a) Government

(b) RBI

(c) Commmercial Bank ()

(d) None of these


342, Generally a Regional Rural Bank covers a:

(a) District ()

(b) State

(c) Country

(d) None of these


313, Authorised capital of RRBs is:

(a) ₹ 1 Crore

(b) ₹ 5 crores ()

(c) ₹ 25 lakh

(d) ₹ 50 lakh


344, Paid-up capital of RRBs is:

(a) ₹1 Crore ()

(b) ₹5 Crore

(c) ₹5 Lakh

(d) ₹25 Lakh


345, RRBs work under the guidance of:


(b) Parent Commercial Bank

(c) Both (a) and (b) ()

(d) None of these


346, RRBs provide credit and other facilities to the:

(a) Small and marginal farmers

(b) Agricultural labourers

(c) Artisans

(d) All above ()


347, Government, State Government and Sponsor Bank in the proportion of:

(a) 50:15:35

(b) 60:20:20 ()

(c) 40:20:40

(d) None of these


348, Which of the following provide the re-finance facility to RRBs:

(a) Sponsor Bank

(b) NABARD ()

(c) Reserve Bank

(d) None of these


349, RRBs are established on the principle of:

(a) Locally based

(b) Rural oriented

(c) Commercially organised

(d) All of these ()


350, RRBs have the status of:

(a) Scheduled Bank ()

(b) Non-scheduled Bank

(c) Unorganised sector

(d) None of these


351, How many RRBs was in working at the end of June, 2006?

(a) 194

(b) 196 ()

(c) 15

(d) 82


352, RRBs get refinance facility at:

(a) Bank rate

(b) 2% below the bank rate ()

(c) 1% below the bank rate

(d) None of these


353, RRBs have been promoted by:

(a) Commercial Banks ()

(b) Non-banking finance companies

(c) Industrial Finance Corporation of India

(d) None of the above


354, SARFAESI Act, 2002 is related with:

(a) Commercial Bank

(b) Co-operative Bank

(c) Regional Rural Banks ()

(d) None of these


355, Report of Kelker Committee on the working of RRBs was submitted in:

(a) 1986 ()

(b) 1984

(c) 1996

(d) 2001


356, For restructuring of RRBs, appointed by the RBI:

(a) Kelker Committee

(b) M.C. Bhandari Committee ()

(c) Prof. M.L. Dantwala

(d) None of the above


357, Recapitalisation process for RRBs was started in:

(a) 1991-92

(b) 1993-94 ()

(c) 2001

(d) 2004


358, The recommendation of not merging regional rural banks with promoter banks was given by:

(a) Narasimham Committee

(b) A.K. Khusroo Committee ()

(c) Kelker Committee

(d) None of these


359, What is NABARD?

(a) Poverty eradication programme

(b) Social security plan

(c) Bank ()

(d) None of these


360, Long-term finance to agriculture is provided by:

(a) Land Development Bank ()

(b) Commercial Bank

(c) RRBs

(d) State Co-operative Bank


361, The main function of NABARD is:

(a) Providing loans to Primary Credit Societies

(b) Loan to Land Development Bank

(c) Loan to Commercial Bank

(d) To provide re-finance facilities to all ()


362, Which of the financial institution is not included in Institutional Credit?

(a) Co-operative Society

(b) Commercial Banks

(c) Indigenous Bankers ()

(d) Industrial Development Bank of India


363, Which one of the following pair is correctly matched?

(a) Regional Rural Bank: Sponsored by Commercial Banks ()

(b) Lead Banks: Sponsored by the RBI

(c) NABARD: Sponsored by the World Bank

(d) Apex Co-operative Bank: Sponsored by the Asian Development Bank


9. Co-operative Banking in India


364, The beginning of the history of Agricultural Co-operative Bank was in:

(a) 1906

(b) 1912

(c) 1904 ()

(d) 1920


365, Apex institution of co-operative bank is:

(a) Primary Co-operative Societies

(b) Central Co-operative Bank

(c) State Co-operative Bank ()

(d) None of the above


366, Structure of co-operative credit in India is:

(a) Pyramidical ()

(b) Horizontal

(c) Vertical

(d) None of these


367, Which of the following, Co-operative Credit Bank is not included in three tier structure:

(a) State Co-operative Bank

(b) Central Co-operative Bank

(c) Primary Co-operative Societies

(d) Regional Rural Bank ()


368, When were the primary agricultural co-operative credit societies were establised in India:?

(a) 1947

(b) 1904 ()

(c) 1951

(d) 1941


369, Central Co-operative Bank is situated at:

(a) Centre

(b) State

(c) District ()

(d) None of these


370, District Co-operative Bank was established in:

(a) 1910

(b) 1933 ()

(c) 1947

(d) 1912


371, In every state, the number of state co-operative Bank is:

(a) 1 ()

(b) 21

(c) 3

(d) 4


372, The Co-opertative Societies Act was passed in India in:

(a) 1910

(b) 1904

(c) 1912 ()

(d) 1933


373, Every member of the co-operative society has the right:

(a) To Cast only one vote ()

(b) To Cast vote on the number of shares held by him

(c) To Cast vote according to his position

(d) None of the above


374, Co-operative societies has to retain……. of their profit as reserve fund:

(a) 20%

(b) 10%

(c) 25% ()

(d) 30%


375, All Co-operative Credit Societies in India by:

(a) Reserve Bank of India ()


(c) Government

(d) None of these


376, Registration of credit co-operative societies is:

(a) Compulsory ()

(b) Voluntary

(c) Not required

(d) None of these


377, Liability of co-operative societies member’ is:

(a) Limited

(b) Unlimited ()

(c) Based on his share

(d) None of these


378, Which committee recommended the establishment State Co-operative Bank?

(a) Maclagen Committee ()

(b) Kelker Committee

(c) Khusroo Committee

(d) None of these


379, NABARD was established on:

(a) July 1982 ()

(b) June 1984

(c) June 1964

(d) June 1992


380, The authorised capital of NABARD is presently:

(a) ₹ 1,000 crore

(b) ₹ 5,000 crore ()

(c) ₹ 2,000 crore

(d) None of these


381, Function of NABARD is:

(a) Refinance of Agriculture Credit

(b) Agent of Government and Reserve Bank

(c) Inspection of RRBs

(d) All above ()


10. Process of Credit Creation


382, A primary deposit is created when

(a) Lends money to the public

(b) Lends money to the Government

(c) Accepts money from the public ()

(d) Invests money on shares


383, The deposits arising as a result of funds deposited by customers are called:

(a) Uncreated deposits

(b) Passively created deposits ()

(c) Actively created deposits

(d) Dead deposits


384, Banks as a whole are able to support a volume of deposits which is multiple of the cash reserves they hold. This phenomenon is known as:

(a) Multiple contraction of deposits

(b) Multiple effect of deposits

(c) Multiple expansion of deposits ()

(d) None of the above.


385, The extent of credit expansion by the banking system can be found out by the formula:

(a) Excess reserve / Cash reserve

(b) Excess reserve / Legal reserve ratio ()

(c) Legal reserve ratio / Cash reserve

(d) Excess reserve ratio × Legal reserve ratio


886, Primary deposits is otherwise known as:

(a) Cash deposit ()

(b) Created deposit

(c) Fixed deposit

(d) Current deposit


387, Credit creation depends upon:

(a) Ratio of cash reserves to deposits ()

(b) Ratio of deposits to cash reserves

(c) Ratio of deposits to loans and advances

(d) Ratio of deposits to long-term government bonds


388, Deposits multiplier (K) is:

(a) Reverse of cash reserve ratio ()

(b) Reverse of liquidity ratio

(c) Rate of interest of bank deposits

(d) Rate of interest applicable for short-term loans and advances


389, Deposits creation can be calculated by:

(a) Money supply change multiplied by cash reserve ratio

(b) Additional cash multiplied by deposits multiplier ()

(c) Additional cash diveded by ratio of cash reserves to deposit

(d) Additional cash multiplied by ratio of cash reserves to deposit


890, During periods of depression commercial banks:

(a) Will expand credit

(b) Will not expand credit ()

(c) Will work with higher cash reserve

(d) Will be compelled by central bank more


391, A commercial bank’s capacity of credit creation depends mainly on:

(a) Increase in the cash reserve (AR)

(b) The cash reserve ratio (r)

(c) Both (a) and (b) ()

(d) The amount of excess reserves


392, If bank have to hold a large percentage of deposits in the form of cash, the total amount of deposits that can be created will be:

(a) Same

(b) Much more

(c) Less ()

(d) Zero


393, Secondary deposits refer to:

(a) Term deposits

(b) Recurring deposits

(c) Fixed deposits

(d) Deposits created through lending ()


394, “Cash Drain” refers to:

(a) Desire of depositor to withdraw cash ()

(b) Flow of cash out of the economy

(c) Increase in money supply

(d) Increase in demand for money


395, Which of the following do not limit the bank’s capacity to create deposits?

(a) Proportion of deposits kept with the banks

(b) Amount of cash drain

(c) Availability of opportunities for lending

(d) Preventing consumption expenditure in the economy ()


396, Banks are required to maintain a percentage of their deposits in the form of balances with RBI. This is called:

(a) Cash ratio

(b) Liquidity ratio

(c) Legal reserve requirement ()

(d) Credit balance


397, An increase in reserve ratio has an effect that leads to:

(a) Expansionary credit.

(b) Contracting credit ()

(c) Increase in demand for money

(d) Increase in supply of money


398, An increase in the {time deposit / demand deposit} will lead to:

(a) An increase in Bank credit ()

(b) A decrease in Bank credit

(c) No effect on Bank credit

(d) None of the above


399, Full form of CRR is:

(a) Cash Reserve Ratio ()

(b) Cash Reserve Rate

(c) Current Reserve Ratio

(d) Capital Reserve Ratio


400, Cash reserve with Central Banks is called:

(a) Statutory Liquidity Ratio

(b) Cash Reserve Ratio ()

(c) Equity Ratio

(d) Debt Ratio


401, During the period of depression, credit creation is:

(a) Less ()

(b) More

(c) Unchanged

(d) None of these


402, Bank credit is a credit from:

(a) Its share capital

(b) Its liabilities

(c) It securities

(d) Cash deposits ()


403, Higher the reserve ratio:

(a) Lower will be deposit multiplier ()

(b) Higher will be deposit multiplier

(c) Constant deposit multiplier

(d) None of the above


404, In comparison to deposit multiplier, bank credit multiplier is:

(a) Lower ()

(b) Higher

(c) Same

(d) Indeterminates


405, Increase in bank credit leads to:

(a) Cost push inflation

(b) Demand pull inflation ()

(c) Structural inflation

(d) None of these


406, Increase in bank credit leads to:

(a) Decrease in money supply

(b) Increase in money supply ()

(c) No effect on money supply

(d) None of these


407, On whom optimum capacity is dependent in credit creation?

(a) Number of banks

(b) Monetary Institution or Central Bank

(c) Amount of deposits

(d) All of the above ()


408, By decreasing cash reserve ratio, bank’s power of credit creation will:

(a) Increase ()

(b) Decrease

(c) Remain constant

(d) None of these


409, On which of the following, power of credit creation depends on:

(a) Credit deposits

(b) Cash deposits

(c) Cash reserve ratio

(d) All of these ()


410, Which of the following statement is correct?

(a) Credit money creates new deposits

(b) Banks creates credit actually to

(c) Credit depends upon cash deposits

(d) All of the above ()


411, According to Walter Leaf and Canon, the function of credit creation is done by:

(a) Depositors ()

(b) Banks

(c) Government

(d) None of these


412, In the process of credit creation, the following are included:

(a) Depositors and Debtors

(b) Monetary Institution and Central Bank

(c) Banking System

(d) All of above ()


413, Bank credit creation capacity is affected by:

(a) Monetary Policy

(b) Demand of Public

(c) Bank Deposits

(d) All of these ()


414, Credit creation is done by:

(a) Commercial Banks ()

(b) Reserve Bank of India

(c) State Bank of India

(d) Co-operative Credit Societies


415, The Cash Reserve Ratio is determined by:

(a) Free play of market forces

(b) Commercial Bank

(c) Monetary Authority ()

(d) None of these


416, “Loan creates deposits”, who said this:

(a) Hartley Withers ()

(b) G.N. Halm

(c) Canon

(d) None of these


417, The creation of derivative deposits is indentical with what is commonly called the creation of credit.” This is defined by:

(a) Hartley Withers.

(b) G.N.Halm  ()

(c) Canon

(d) None of these


418, Derivative deposits is the result of:

(a) Primary deposits ()

(b) Investments

(c) Cash reserves

(d) None of these


419, Banks expand their secondary deposits through:

(a) Loans

(b) Advances

(c) Investments

(d) All of these ()


420, Cash Reserve Ratio will be equal to:

(a) Primary Deposits / Total Deposits ()

(b) Primary Deposits × K

(c) Total Deposits / Primary Deposits

(d) None of these


421, In order to increase the money supply, the banking system must have:

(a) Required reserves

(b) Issue of new currency

(c) The authority to print U.S. currency

(d) Excess reserves ()


422, Assumption of credit creation is:

(a) All bank strictly maintain Cash Reserve Ratio

(b) All the depositors will not withdraw their funds at the time

(c) Bank expand credit on the basis of excess reserve

(d) All of the above ()


11. Development Banks


423, Development Banks provide:

(a) Long-term finance

(b) Medium-term finance

(c) Short-term finance

(d) Both (a) and (b) ()


424, Development Banks:

(a) Accept deposits from the public

(b) Do not accept deposits from the public ()

(c) Merely provide loans like commercial bank

(d) None of the above


425, Development bank’s chief distinguishing role is:

(a) The promotion of economic development

(b) Provision of risk-capital

(c) Identification of investment projects

(d) All of the above ()


426, A Development bank is that bank which gives priority to development objective”, who said this:

(a) Dr. Desai

(b) William Diamond ()

(c) Dr. K.V. Prabhakar

(d) None of these


427, Development banking approach has been:

(a) Security oriented

(b) Project oriented ()

(c) Profit oriented

(d) None of these


428, Development banks mainly provide finance to:

(a) Agriculture

(b) Industries ()

(c) New establishments

(d) None of these


429, Which one was established first for providing industrial finance out of the following:

(a) IDBI

(b) IFCI ()




430, Which one of the following is incorrect?

(a) Exim Bank-for export and import

(b) RBI Banker’s Bank

(c) IDBI-Industrial Finance

(d) FCI-Financial Institution of commercial institution ()


431, Which of the following commercial banks have worked as banks in India earlier:

(a) HDFC Bank and ICICI Bank ()

(b) IDBI Bank and ICICI Bank

(c) ICICI Bank and Union Bank

(d) Union Bank and HDFC Bank


432, Industrial Finance Corporation of India was established in:

(a) 1948 ()

(b) 1945

(c) 1976

(d) None of these


483, IFCI provides loans for a maximum period of:

(a) 15 years

(b) 20 years

(c) 25 years ()

(d) None of these


434, Initially, the paid-up capital of IFCI was:

(a) ₹ 5 crore ()

(b) ₹ 50 crore

(c) ₹ 100 crore

(d) None of these


435, At present, the authorised capital of IFCI is:

(a) ₹ 500 crore

(b) ₹ 1,000 crore ()

(c) ₹ 5,000 crore

(d) None of these


436, State Finance Corporation Act was passed in:

(a) 1951 ()

(b) 1950

(c) 1948

(d) 1964


437, In which state, State Finance Corporation was established first:

(a) Punjab ()

(b) Uttar Pradesh

(c) Haryana

(d) West Bengal


438, At present, the number of State Finance Corporation is:

(a) 20

(b) 18 ()

(c) 24

(d) 15


439, Authorised capital of State Finance Corporation should not be less than:

(a) ₹ 5 crore ()

(b) ₹ 100 crore

(c) ₹ 50 crore

(d) ₹1,000 crore


440, Industrial Development Bank of India (IDBI) was established in:

(a) July 1948

(b) July 1951

(c) July 1964 ()

(d) July 1955


441, The IDBI was converted into full fledged commercial bank on:

(a) July 2001

(b) October, 2004 ()

(c) Jan. 1991

(d) None of these


442, ICICI was established in:

(a) 1″ January, 1948

(b) March, 1950

(c) 2nd February, 1976

(d) 5th January, 1955 ()


443, The authorised capital of Industrial Development Bank is:

(a) 400 crores

(b) 1,250 crores ()

(c) 2,000 crores

(d) 800 crores


444, Industrial Investment Bank of India was established in:

(a) 1955

(b) 1948

(c) 1964

(d) 1971 ()


445, In which year IIBI was converted into IRBI?

(a) 1975

(b) 1985 ()

(c) 1986

(d) 1987


446, The IRBI was reconstitued into IIBIL in the year:

(a) 1987

(b) 1997 ()

(c) 1998

(d) 1999


447, At present, authorised capital of IIBIL is:

(a) 200 crore

(b) 1,000 crore ()

(c) 500 crore

(d) 5,000 crore


448, Headquarter of IIBIL is situated at:

(a) Mumbai

(b) Kolkatta ()

(c) Delhi

(d) Chennai


449, Small Industries Development Bank of India (SIDBI) was established in:

(a) 1990 ()

(b) 1995

(c) 1955

(d) 1992


450, Headquarter of SIDBI is situated at:

(a) Mumbai

(b) Kolkatta

(c) Lucknow ()

(d) Delhi


451, National Housing Bank (NHB) was established in:

(a) July, 1964

(b) January, 1955

(c) July, 1988 ()

(d) None of these


452, Apex institution for the purpose of Industrial Finance is:

(a) RBI

(b) IFCI

(c) IDBI ()

(d) UTI


453, Which of the following committee give recommendation on Development Banks:

(a) Narasimham Committee ()

(b) Kelker Committee

(c) Rao Committee

(d) None of these


454, Life Insurance corporation of India was established in:

(a) April, 1955

(b) March, 1958

(c) September 1956 ()

(d) None of these


455, The central office of LIC is located in:

(a) Delhi

(b) Mumbai ()

(c) Kolkatta

(d) None of these


456, What is the correct sequence of following event:

  1. Establishment of EXIM Bank
  2. Establishment of IDBI
  3. Establishment of IFCI
  4. Establishment of SIDBI

Select the correct answer for the code given below:

(a) 3 2 1 4 ()

(b) 1 2 3 4

(c) 2 3 14

(d) 4 3 2 1


457, General Insurance corporation of India was established in:

(a) November, 1972

(b) January 1973 ()

(c) March, 1956

(d) None of these


458, When did UTI start its working in India?

(a) 1st February, 1964

(b) 1st April, 1964

(c) 1st July, 1964 ()

(d) 1st November, 1964


459, Exim Bank was established on:

(a) 1 July, 1982

(b) 1 January, 1982 ()

(c) 1 April, 1985

(d) None of these


460, Long-term loan is given by:

(a) State Bank of India

(b) Industrial Development Bank of India ()

(c) Bank of India

(d) Indian Bank


12. Unregulated Credit Market in India


461, Which of the following is not a feature of unregulated credit market?

(a) No effective control of Reserve Bank

(b) Dominance of money lenders and Indigenous bankers

(c) Definite laws of credit market ()

(d) Close relations between lender and borrower


462, The main function of money lender is:

(a) Providing short-term loans ()

(b) Accepting deposits

(c) Hundies business

(d) All the above


463, The function of indigenous banker is:

(a) Accepting Deposits

(b) Providing loans

(c) Hundies business

(d) All of these ()


464, Which one of the following statement is wrong?

(a) Money lenders provide loans out of their own funds

(b) Money lenders charge high rate of interest

(c) Discounting facilities should be provided to indigenous bankers by commercial banks. It was suggested by Banking Commission 1972

(d) Reserve Bank has restricted indigenous bankers ()


465, Which of the following is not NBFC?

(a) Rural Banks ()

(b) Mutual Banks

(c) Hire Purchase Credit

(d) Chit funds


466, Indigenous bankers provide loan facilities to:

(a) Farmers

(b) Traders

(c) General Public

(d) All of these ()


467, In which year RBI made control on NBFC?

(a) 1961

(b) 1962

(c) 1963 ()

(d) 1964


468, Main credit instrument of unregulated credit market is:

(a) Bills of exchange

(b) Promissory Notes

(c) Hundies ()

(b) All of these


469, Mode of advancing loans of indigenous bankers is:

(a) Complicated

(b) Simple ()

(c) Fraudulent

(d) None of these


470, Which of the following is demerit of unregulated credit market?

(a) Mainpulation of accounts

(b) Exorbitant rate of interest

(c) Loans for unproductive purposes

(d) All of the above ()


471, Main component of unregulated credit market is:

(a) NBFCs

(b) Money Lenders

(c) Indigenous Banks

(d) All of these ()


472, Which of the following is correct about money-lenders?

(a) They do buiness in hundies

(b) They accept deposits.

(c) They adopt fraudulent practices to deprive the farmer of his land ()

(d) None of the above


473, Which of the following is not a function of Indigenous?

(a) Accepting Deposits

(b) Provding Loans

(c) Hundies Business

(d) Refinance facility ()


474, Money lenders provide loans for the purpose of:

(a) Production

(b) Consumption

(c) Ceremonial purpose

(d) All of these ()


475, Money lenders provide loans at the security of:

(a) Land

(b) Ornaments

(c) Crops

(d) All of these ()


13. Reserve Bank of India


476, Reserve Bank of India was established in:

(a) 1st April 1935 ()

(b) 1st August 1950

(c) 15th August 1947

(d) 26th January 1949


477, RBI was nationalised in:

(a) 1935

(b) 1956

(c) 1949 ()

(d) 1951


478, Head Office of RBI is situated in:

(a) Delhi

(b) Mumbai ()

(c) Chennai

(d) Kokatta


479, Which of the following bank performed central banking functions before establishment of RBI?

(a) State Bank of India

(b) Bank of India

(c) Central Bank of India

(d) Imperial Bank ()


480, Name of Central Bank of India is:

(a) Reserve Bank of Bank ()

(b) Imperial Bank

(c) State Bank of India

(d) None of these


481, Reserve Bank Act was passed in:

(a) 1935

(b) 1934 ()

(c) 1950

(d) None of these


482, How many members are there in the Board of Director of the RBI?

(a) 5

(b) 10

(c) 20 ()

(d) 7


483, Which of the following function is not performed by RBI?

(a) Issue of Notes

(b) Banker to the Government

(c) Payment of interest on deposits ()

(d) Lender of the last resort


484, Which of the following function can be performed by RBI?

(a) Carry on a business

(b) Purchase of fixed assets for Government

(c) Arrangement of Foreign Exchange ()

(d) Providing credit to Industrialists


485, Capital at the time of establishment of Reserve Bank was:

(a) ₹ 50 crore

(b) ₹ 5 crore ()

(c) ₹ 500 crore

(d) None of these


486, Consider the following:

  1. Power to issue notes
  2. To act as banker’s bank
  3. To act as a bank to the government
  4. To act as a bank to the public

Which of the above are functions of the central bank?

(a) 1 and 2

(b) 1, 2 and 4

(c) 1, 2 and 3 ()

(d) 1, 2, 3 and 4


487, R.B.I. is governed by the:

(a) Banking Company Regulation Act.

(b) RBI Act 1934 ()

(c) Central Finance Act

(d) None of the above


488, One rupee currency notes of India is issued by:

(a) The Ministry of Finance, Government of India ()

(b) The Reserve Bank of India

(c) The State Bank of India

(d) Concerned State Government


489, Interest rates given by banks on deposits by:

(a) The market

(b) The RBI forces

(c) The Indian Banks Association

(d) The individual banks ()


490, In India Monopoly of Note Issue is in the hands of:

(a) Central Bank of India

(b) State Bank of India

(c) Reserve Bank of India ()

(d) None of these


491, Reserve Bank of India was started as a bank owned by:

(a) Private Individuals

(b) Central Government ()

(c) Central and State Government

(d) None of the above


492, Credit control function is done by the following bank

(a) Industrial development Bank of India

(b) Reserve Bank of India ()

(c) State Bank of India

(d) None of the above


493, Which of the following methods is not a quantitative credit control method?

(a) Open market operation

(b) Bank rate

(c) Variation of cash reserve ratio

(d) Direct action ()


194, Rationing of credit is a:

(a) Quantitative credit control method

(b) Selective credit control method ()

(c) Direct credit control method

(d) None of the above


495, RBI has promoted:

(a) National Housing Bank

(b) National Bank for Agriculture and Rural Development

(c) EXIM Bank

(d) All of the above ()


496, Which one of the following is a quantitative weapon of credit control?

(a) Variable Reserve ratio ()

(b) Direct action

(c) Regulation of consumer credit

(d) Moral suasion


497, Which one of the following is a qualitative weapon credit control?

(a) Bank Rate

(b) Variable Reserve ratio

(c) Moral Suasion ()

(d) None of the these


498, At present, the Governor of the R.B.I. is:

(a) Raghu Ram Rajan ()

(b) M. Gopalkrishnan

(c) D. Subbarao

(d) None of these slatkais Dej


499, Which of the following system possesses great elasticity?

(a) Minimum reserve system ()

(b) Proportional reserve system

(c) Fixed fiduciary issue system

(d) None of the above


500, For controlling deflation, RBI would:

(a) Increase bank rate

(b) Reduce bank rate

(c) Not change the bank rate

(d) None of these


501, “Bank Rate” is not

(a) Rate of interest provided against short-term deposits ()

(b) Rate at which commercial banks get accommodation from the RBI

(c) Rate at which a commercial bank can obtain additional cash reserves from RBI by rediscounting its securities

(d) A determinant of lending rates of commercial bank


502, Bank rate is ineffective if:

(a) Commercial bank have large resources ()

(b) Commercial banks have limited resources

(c) Commercial banks have limited liability

(d) Commercial bank are privately owned


503, Which of the following is incorrect with regard to open market operations?

(a) Refer to buying and selling of securities and bills in the money market

(b) Influence credit operation of commercial banks

(c) Influence to bank rate as a determinant of money supply ()

(d) Affect country’s economy and business activity


504, “Credit rationing”, is a method of controlling regulating:

(a) Credit to show increased liabilities

(b) Credit so as to build liquidity

(c) The purpose for which credit is granted by commercial banks ()

(d) None of the above


505, Selective controls’ operate best in:

(a) Deflationary conditions

(b) Depression

(c) Inflationary conditions ()

(d) Unemployment conditions


506, Choose the correct statement regarding ‘selective controls”:

(a) Can control all forms of credit

(b) Can control bank credit ()

(c) Will operate under all conditions

(d) None of the above


507, Which of the following is not a form of selective or qualitative control?

(a) Essential and non-essential uses of credit are distinguished

(b) Only non-essential uses are brought under the scope of central bank controls

(c) Open market operations ()

(d) None of these


508, Which of the following is not a credit control instrument?

(a) Tax rate modification ()

(b) Open market operation

(c) Power to vary reserve requirements

(d) Bank rate


509, Bank rate’ was also known as:

(a) Clearing rate

(b) Interest rate

(c) Discount rate ()

(d) Lending rate


510, A fall in bank rate leads to:

(a) Lowering of lending rates of commercial banks

(b) Expansion of bank credit

(c) Contraction of bank credit

(d) Both (a) and (b) ()


511, The impact of cost of bank credit on the decisions to hold stocks can be quite severe if:

(a) There is a slight fall in lending rate

(b) Rise in lending rate is low

(c) Rise in lending rate is steep ()

(d) There is steep fall in lending rate


512, Bank borrows more from RBI when:

(a) Net liquidity ratio rises

(b) Net liquidity ratio falls ()

(c) Cash reserve ratio rises

(d) Cash reserve ratio falls


513, By raising the minimun net liquidity ratio for the purpose of borrowing, the banks may be induced to:

(a) Lend more to commercial sector

(b) Utilise less of deposits

(c) Lend less to commercial sector ()

(d) None of the above


514, Open Market Operations involve:

(a) Sale of government shares

(b) Purchase of government bonds

(c) Sale and purchase of securities by central bank ()

(d) Transaction in the share market


515, When central bank buys securities, bank reserves:

(a) Expand ()

(b) Contract

(c) Remain the same

(d) Have no bearing with the change


516, Open market operations do not play the role of an instrument of credit to a large extent in our country because:

(a) Government securities market in India is very broad based

(b) Government securities market in India is very narrow ()

(c) No government securities exist in market

(d) None of these


517, As a bank borrow more from the Reserve Bank of India, its net liquidity ratio:

(a) Drops ()

(b) Remain same

(c) Rises

(d) None of these


518, Which of the following is the method for selective credit controls?

(a) Regulation of margin requirements

(b) Regulation of consumer credit

(c) Rationing of credit

(d) All of the above ()


519, If rationing of credit is done with reference to the total amount, it is a:

(a) Qualitative control

(b) Quantitative control ()

(c) Administrative control

(d) Both (a) and (b)


520, Which of the following cannot be used as an instrument to neutralise open market operations?

(a) Keep low reserves

(b) Keep high reserves ()

(c) Discount eligible bills with RBI

(d) Replenish cash


521, Which bank issue note of 7 500 in India:

(a) Commercial Banks

(b) State Bank of India

(c) Reserve Bank of India ()

(d) None of these


522, Coin of one repee in India is minted by:

(a) Government of India ()

(b) State Bank of India

(c) Reserve Bank of India

(d) Commercial Bank


523, For issuing notes, which of the following system Reserve Bank of India?

(a) Minimum and Proportionate Reserve System

(b) Minimum Reserve System ()

(c) Fixed fiduciary Issue System

(d) None of the above


524, When Central Bank wants to increase credit, it should:

(a) Increase bank rate

(b) Sale of Government securities in market

(c) Decrease in bank rate ()

(d) Increase in CRR


525, Purchase of Government securities by Reserve Bank will:

(a) Increase quantity of money ()

(b) Decrease quantity of money

(c) Increase government expenditure

(d) Decrease Government expenditure


526, As compared to prevailing interest rates, bank rate is:

(a) Lesser ()

(b) Higher

(c) Similar

(d) None of these


527, Due to increase in statutory liquidity ratio, credit is:

(a) Increased

(b) Decreased ()

(c) No effect

(d) None of these


528, Cash Reserves are kept with:

(a) State Bank of India

(b) Reserve Bank of India ()

(c) Scheduled Bank

(d) None of these


529, Statutory Reserves are kept with:

(a) State Bank of India

(b) Reserve Bank of India

(c) Scheduled/Commercial Bank ()

(d) None of these


530, Margin requirement is high in case of

(a) Agriculture

(b) Export

(c) Small scale sectors

(d) Speculative activities ()


531, Rationing of credit takes place when

(a) Demand for credit is zero

(b) Demend for credit is higher than supply ()

(c) Demend for credit is low

(d) None of the above


532, Which of the following is an instrument of selective credit control?

(a) Bank rate policy

(b) Margin money requirement ()

(c) Variable reserve system

(d) All of above


533, Which of the following are method of credit control?

(a) Bank rate policy

(b) Margin money requirement

(c) Variable reserve system

(d) All of above ()


534, For priority sectors, margin money is kept

(a) High

(b) Low ()

(c) Same as for other sectors

(d) None of above


535, For speculators, margin money is kept,

(a) High ()

(b) Low

(c) same as for other sectors

(d) None of the above


536, Margin requirement is an example of

(a) Quantitative credit control

(b) Selective cerdit control ()

(c) Both (a) and (b)

(d) None of the above


537, Flow of credit to specific purpose is controlled by:

(a) Quantitative credit control

(b) Selective credit control ()

(c) Both (a) and (b)

(d) None of the above


538, Buying and selling of securities central Bank is called

(a) Closed market operations

(b) Open market operations ()

(c) Open debt operations

(d) None of above


539, In case should RBI wants to increase rate of interest, then it should

(a) Sell securities ()

(b) Buy securities

(c) Hold securities

(d) None of these


540, Open market is not successful in India because:

(a) Saving is low

(b) Investment is low

(c) Bill market is underdeveloped ()

(d) Export is low


541, Which instrument of monetary policy is used frequently by RBI?

(a) Discount Policy

(b) Reserve Requirements ()

(c) Open Market Operations

(d) Margin requirements


542, Cash reserve with Central Bank is called:

(a) Statutory Liquidity Ratio

(b) Cash Reserve Ratio ()

(c) Equity Ratio

(d) Debt Ratio


543, Investment of commercial bank in approved securities required under:

(a) Statutory Liquidity Ratio ()

(b) Cash Reserve Ratio

(c) Equity Ratio

(d) Debt Ratio


544, Who is incharge of custody of foreign exchange?

(a) Finance Ministry

(b) Commerce Ministry

(o) Reserve Bank of India ()

(d) None of above


545, Bank rate is decided by:

(a) RBI ()

(b) Commercial Bank

(c) Market Forces

(d) None of these


546, Cash Reserve Ratio is determined by:

(a) RBI ()

(b) Commercial

(c) Market Forces Bank

(d) None of these


547, Which is acceptable to under SLR?

(a) Shares

(b) Debentures

(c) Treasury Bills ()

(d) None of these


548, Credit policy is formulated by:

(a) Finance Ministry

(b) Government

(c) RBI ()

(d) Commercial Bank


549, Rate at which RBI gives loan to commercial bank is called:

(a) Credit rate

(b) Loan rate

(c) Bank rate ()

(d) Discount rate


14. Monetary Policy


550, Monetary Policy is Formulated by:

(a) RBI ()

(b) SEBI

(c) Finance Ministry

(d) All of these


551, Open market operation is a part of:

(a) Credit policy

(b) Income policy

(c) Price policy

(d) Monetary policy ()


552, In the monetary policy, measures are taken to:

(a) Control the quantity of credit

(b) Control the cost of credit money

(c) Control the uses of credit money

(d) All of above ()


553, In the narrow sense, monetary policy means:

(a) Credit control policy of Reserve Bank ()

(b) Issuing notes policy

(c) Deficit financing policy

(d) None of the above


554, Monetary policy includes:

(a) Monetary measures to control

(b) Non-monetary measures to control credit

(c) Both (a) and (b) ()

(d) None of the above


555, Objective of monetary policy in India is:

(a) Rapid economic development

(b) Price stability

(c) stability in exchange rate

(d) All of the above ()


556, Monetary measures to reduce inflation include:

(a) Bank rate

(b) Cash Reserve Ratio

(c) Statutory Liquid Ratio

(d) All of these ()


557, Inflation leads to

(a) Equitable distribution of income

(b) Inequitable distribution of income ()

(c) No impact on income distribution

(d) None of the above


558, Which of the following is limitation of monetary policy in India?

(a) Large non-menetized area

(b) Lack of organised and developed money market

(c) Controversial objects

(d) All of above


559, Monetary policy proves less effective where

(a) Proportion of credit money is small in circulation ()

(b) Proportion of credit money is large in circulation

(c) Credit money is not used

(d) None of the above


568, Which of the following is prerequisite implementation of monetary policy:

(a) Organised and developed money market

(b) Presence of independent price mechanism

(c) Developed banking services

(d) All of above ()


561, Low interest rate policy induces:

(a) Trade and industry ()

(b) Decreases investment

(c) Motivate savings

(d) None of above


562, Which of the following are anti-inflationary measures?

(a) Reduction in the volume of legal tender money

(b) Reduction in the volume of bank deposits

(c) Freezing and blocking of particular type of assets

(d) All of the above ()


 Money and Financial System
Money and Financial System


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