Money Banking

Explanation

Hedge Funds and Venture Capital are treated as Alternative Investment Funds. Bonds and Stocks are not classified as Alternative Investment Funds.

Explanation

The Reserve Bank of India generates income through various sources such as buying and selling government bonds, buying and selling foreign currency, and printing and distributing currency notes. These activities contribute to the revenue generation of the central bank, allowing it to carry out its monetary policy objectives effectively.

Explanation

Bondholders are considered to be at lower risk than stockholders because they are lenders to a company and have a higher claim on the company's assets in case of bankruptcy. This prioritization is evident in the repayment process where bondholders are paid before stockholders.

Explanation

India's stock market has indeed shown significant growth in recent years, even surpassing Hong Kong's market at certain points. However, the statement about India accounting for a large portion of all equity option contracts traded globally is not accurate. This discrepancy makes only statements II and III correct, leading to the correct answer being (a) I and II only.

Explanation

RTGS stands for Real Time Gross Settlement, where transactions are settled instantly. On the other hand, NEFT (National Electronic Funds Transfer) takes some time to settle payments as it operates in batches. Therefore, the statement that RTGS settlement time is instantaneous is correct.

Explanation

In the context of international merchant payments under UPI, it is important to note that UPI is a payment system developed by the National Payments Corporation of India (NPCI) for facilitating inter-bank transactions in India. As of now, UPI is primarily used for transactions within India. Therefore, among the countries listed, only three countries other than India accept international merchant payments under UPI.

Explanation

Collateral Borrowing and Lending Obligations are instruments used in the Money Market of the Indian economy. The Money Market deals with short-term borrowing, lending, buying, and selling of financial instruments such as Treasury Bills, Commercial Papers, and Collateralized Borrowing and Lending Obligations. These instruments help in managing short-term liquidity needs efficiently.

Explanation

In India, Foreign Institutional Investors (FIIs) are allowed to hold Government Securities (G-Secs). Stock Exchanges in India can offer separate trading platforms for debts, allowing trading of debt instruments. Non-Banking Financial Companies (NBFCs) do not have direct access to the Liquidity Adjustment Facility (LAF) window of the Reserve Bank of India.

Explanation

Insurance companies, pension funds, and retail investors in India can trade in corporate bonds and government securities. This allows these entities to diversify their investment portfolios and participate in the bond market, contributing to the overall development of the financial market in the country.

Explanation

Exchange-Traded Funds (ETFs) are financial instruments that represent a collection of securities like stocks, commodities, or bonds. Currency swaps involve the exchange of principal and interest payments in different currencies, making them financial instruments used for managing currency risk. Motor vehicles, on the other hand, are physical assets and not considered financial instruments in the context of money and banking.

Explanation

The Reserve Bank of India imposes specific rules for foreign banks operating in India. These rules include minimum capital requirements for wholly owned banking subsidiaries and the composition of the board members. In the case of wholly owned banking subsidiaries in India, both statements provided in the question are incorrect.

Explanation

Both statements are correct. In the event of the USA defaulting on its debt, holders of US Treasury Bonds may not receive their payments. The USA Government debt is not backed by hard assets but relies on the trust and creditworthiness of the government, making it faith-based.

Explanation

Syndicated lending involves multiple lenders coming together to provide funds to a single borrower, thereby spreading the risk of borrower default across these lenders. Syndicated loans can be structured as fixed amounts or credit lines, providing flexibility in terms of the type of funding arrangement.

Explanation

The digital rupee is a sovereign currency issued by the Reserve Bank of India (RBI) and appears as a liability on the RBI's balance sheet. It is not insured against inflation by design, and it is not freely convertible against commercial bank money and cash. Therefore, statements 1 and 2 are correct.

Explanation

Interest income from deposits in Infrastructure Investment Trusts (InvITs) is indeed exempted from tax, but dividends are taxable. However, InvITs are not recognized as borrowers under the 'Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002'.

Explanation

Conducting 'Open Market Operations' is considered a part of 'sterilization' by the Reserve Bank of India. Sterilization refers to the central bank's actions to offset the impact of its foreign exchange market interventions on the money supply. Through open market operations, the RBI buys or sells government securities to absorb or inject liquidity into the system, thereby sterilizing the impact on money supply.

Explanation

Government Bond Market, Treasury Bill Market, and Stock Market are included in capital markets. These markets facilitate the buying and selling of long-term financial instruments such as stocks, bonds, and government securities. Call Money Market, on the other hand, deals with short-term funds, making it a part of the money market rather than the capital market.

Explanation

Central Bank digital currencies allow for making payments without relying on the US dollar or SWIFT system. Additionally, digital currencies can be distributed with programmable conditions, such as setting a time-frame for spending the currency. These features make both statements 1 and 2 correct in the context of Central Bank digital currencies.

Explanation

Beta is a measure used in finance to assess the volatility or risk of a stock in relation to the overall stock market. It quantifies the stock's sensitivity to market movements. A beta value greater than 1 indicates the stock is more volatile than the market, while a beta less than 1 suggests lower volatility compared to the market.

Explanation

The Self-Help Group (SHG) programme was not originally initiated by the State Bank of India; it was actually started by NGOs and other organizations. In an SHG, all members collectively take responsibility for loans taken by individual members, fostering a sense of mutual trust and accountability. Both Regional Rural Banks and Scheduled Commercial Banks actively support SHGs by providing financial assistance and guidance to promote financial inclusion and empowerment among marginalized communities.

Explanation

ICRA is a public limited company and Brickwork Ratings is an Indian credit rating agency. In India, credit rating agencies are regulated by the Securities and Exchange Board of India (SEBI), not the Reserve Bank of India. Therefore, the correct statements are 2 and 3 only.

Explanation

The Banks Board Bureau (BBB) does not have the Governor of RBI as its Chairman. BBB is responsible for recommending the selection of heads for Public Sector Banks and assisting these banks in developing strategies and capital raising plans.

Explanation

Convertible Bonds pay a lower rate of interest compared to traditional bonds because of the embedded option to convert the bond into equity. This feature provides bondholders with the potential upside of benefiting from an increase in the issuer's stock price. Additionally, the option to convert to equity can act as a hedge against inflation, as it offers bondholders a degree of indexation to rising consumer prices.

Explanation

'Rapid Financing Instrument' and 'Rapid Credit Facility' are emergency lending mechanisms provided by the International Monetary Fund (IMF) to member countries facing urgent balance of payments needs. These facilities are designed to provide quick financial assistance to countries experiencing sudden economic shocks or crises, helping them stabilize their economies and restore macroeconomic stability.

Explanation

If the rupee is rapidly depreciating, the Reserve Bank of India (RBI) is likely to sell dollars in the market to stabilize the currency. Additionally, if interest rates in the USA or European Union were to fall, RBI would be induced to buy dollars as lower interest rates in those regions could make investing in India relatively more attractive.

Explanation

Inflation-Indexed Bonds (IIBs) in the Indian economy offer advantages such as allowing the government to lower coupon rates on its borrowing through IIBs and providing investors with protection against inflation uncertainty. Additionally, the interest received as well as capital gains on IIBs are exempt from taxation, making them a tax-efficient investment option for individuals.

Explanation

The money multiplier in an economy increases with an increase in the banking habit of the people because when people deposit more money in banks, it leads to a higher amount of reserves available with banks, which in turn allows banks to create more loans and deposits, thereby increasing the money supply through the money multiplier effect.

Explanation

Retail investors in India can invest in Treasury Bills and Government of India Debt Bonds through their demat accounts in the primary market. The Negotiated Dealing System-Order Matching (NDS-OM) is indeed a government securities trading platform operated by the Reserve Bank of India.

Explanation

The central bank's role as the 'lender of last resort' primarily involves providing liquidity support to banks facing temporary crises. This function helps maintain stability in the financial system by preventing bank runs and ensuring the smooth functioning of the banking sector during times of stress.

Explanation

The Governor of the Reserve Bank of India (RBI) is appointed by the Central Government, making statement 1 correct. The power of the Governor of the RBI is derived from the RBI Act, which is why statement 3 is also correct. However, the Constitution of India does not explicitly provide the Central Government with the right to issue directions to the RBI in public interest, making statement 2 incorrect.

Explanation

Indian Government Bond Yields are primarily influenced by the actions of the Reserve Bank of India. The RBI's monetary policy decisions, such as changes in interest rates, impact bond yields. Factors like inflation and short-term interest rates also play a significant role in determining bond yields.

Explanation

Urban Cooperative Banks in India are supervised and regulated by the Reserve Bank of India (RBI), not by local boards set up by State Governments. These banks are allowed to issue equity shares and preference shares. They were brought under the purview of the Banking Regulation Act, 1949 through an Amendment in 1965, not 1966.

Explanation

In an expansionist monetary policy, the RBI aims to boost the money supply and lower loan interest rates. Increasing the Marginal Standing Facility (MSF) rate would lead to higher loan interest rates, which contradicts the objective of the policy. Therefore, the RBI would not increase the MSF rate during an expansionist monetary policy.

Explanation

To protect India from the impact of another global financial crisis, it is advisable to avoid relying on short-term foreign borrowings. Additionally, opening up to more foreign banks may introduce risks of foreign economic issues impacting India. Therefore, the most effective action to provide some immunity to India would be to not depend on short-term foreign borrowings only, as stated in option 1 (a).

Explanation

When you withdraw Rs. 1,00,000 in cash from your Demand Deposit Account, the effect on the aggregate money supply in the economy will be to leave it unchanged. This is because the Rs. 1,00,000 will move from the demand deposit column to the currency held by the public, without affecting the overall M3 aggregate money supply.

Explanation

Interest Coverage Ratio is a crucial term in the Indian economy. It helps banks assess the current and potential risks associated with lending to a firm. A higher Interest Coverage Ratio indicates a firm's ability to cover its debt obligations. The correct answer to the importance of Interest Coverage Ratio is option (a) - 1 and 2 only.

Explanation

In the context of the Indian economy, consider the statements provided. 'Commercial Paper' is indeed a short-term unsecured promissory note, which is accurate. However, 'Certificate of Deposit' is actually a short-term instrument, contrary to the statement that it is long-term. 'Call Money' does represent short-term finance utilized in interbank transactions, which is correct. Therefore, the correct statements are 1 and 3 only, making option (c) the correct choice.

Explanation

Non-financial debt in the Indian economy refers to debt taken on by individuals or entities that do not borrow solely for the purpose of relending. In the context of the question, housing loans owed by households, amounts outstanding on credit cards, and Treasury bills all fall under non-financial debt. Therefore, the correct answer is option (d) 1, 2, and 3.

Explanation

An expansionary monetary policy is not the most likely measure the Government/RBI takes to prevent the decline of the Indian rupee. This is because increasing the supply of rupee without a corresponding increase in the supply of dollars can lead to the strengthening of the dollar and further weakening of the Indian Rupee.

Explanation

The money multiplier in an economy increases when there is a rise in the banking habit of the population. As more people engage with banking services, the money multiplier improves. This improvement is also seen indirectly as the economy progresses, leading to higher consumption and loan demand, and better banking penetration.

Explanation

In the Indian economy, a commercial bank's assets do not include deposits. According to NCERT Macroeconomics Class 12, deposits are categorized on the liability side of a commercial bank's balance sheet, as shown in Table 3.1.

Explanation

In the context of India, the factors that can help reduce the risk of a currency crisis are the foreign currency earnings of India's IT sector and remittances from Indians abroad. Increasing government expenditure does not have a significant impact on reducing the risk of a currency crisis. Therefore, the correct answer is (b) 1 and 3 only.

Explanation

The Reserve Bank of India has issued directives regarding the storage of payment system data, commonly known as the data diktat. These directives mandate that payment system providers must store all data related to their payment systems within India. Additionally, the systems must be owned and operated by public sector enterprises. Furthermore, payment system providers are required to submit a consolidated system audit report to the Comptroller and Auditor General of India by the end of the calendar year. The correct statement among the options provided is (a) 1 only, as per the directives issued by the RBI.

Explanation

In the context of managing government securities, the Reserve Bank of India handles securities for both the Government of India and State Governments, making statement 1 incorrect. Treasury bills are issued by the Government of India and are sold at a discount from their face value, which makes statement 3 correct.

Explanation

Merchant Discount Rate (MDR) is the fee charged to a merchant by a bank for accepting payments from customers using the bank's debit cards.

Explanation

The BHIM app, introduced in 2016, permits users to send money to UPI-enabled bank accounts, making statement 1 correct. The BHIM app employs three levels of authentication, not two, as mentioned in statement 2, making it incorrect.

Explanation

Prior to 2009, the connection for all ATMs in India was facilitated by RBI's Institute for Development and Research in Banking Technology (IDRBT). However, this responsibility was later transferred to NPCI's National Financial Switch (NFS).

Explanation

In the Indian economy, banks are required to maintain a certain amount of their own funds known as the Capital Adequacy Ratio (CAR) to cover any potential losses in case account-holders are unable to repay their dues. Each bank determines its CAR based on guidelines established by the BASEL-III Committee on Banking supervision and enforced by the central bank of the country. Therefore, the second statement is correct, while the first statement is also accurate.

Explanation

In the governance of public sector banking in India, the Government of India has been increasing capital infusion into public sector banks steadily over the past decade. Additionally, to streamline the operations of public sector banks, the merger of associate banks with the main State Bank of India has been implemented. The correct statement in this regard is that the merger of associate banks with the parent State Bank of India has been affected, as indicated by the Economic Survey.

Explanation

Legal tender money is a form of currency that must be accepted by all citizens of a country to settle any type of transaction. It is the money that a creditor is obligated to accept as payment for debts owed to them.

Explanation

NPCI, a not-for-profit organization created by multiple banks, aims to offer affordable payment solutions to banks. Its initiatives like IMPS, BHIM, RuPay, and AEPS have significantly contributed to enhancing financial inclusion in the country.

Explanation

The most likely consequence of implementing the 'Unified Payments Interface (UPI)' is that mobile wallets will no longer be required for online payments. This is because the UPI platform allows for direct linkage of your mobile number with your bank account through the bank's customized app.

Explanation

In the context of the Monetary Policy Committee (MPC), it is important to note that it consists of 6 members, not 12 as mentioned. Additionally, the MPC is chaired by the Governor of the Reserve Bank of India (RBI), rather than the Union Finance Minister. Therefore, statements 2 and 3 are incorrect.

Explanation

Starting from April 1, 2016, all loans in India must adhere to the Marginal Cost of Funds based Lending Rates (MCLR) for pricing. The purpose of MCLR, as outlined by the Reserve Bank of India, is to enhance transparency in the process used by banks to determine interest rates on loans and to guarantee that borrowers and banks receive fair interest rates. Both of these objectives are achieved through the implementation of MCLR guidelines.

Explanation

In India, 'Payment Banks' are being allowed to enhance financial inclusion. Mobile telephone companies and supermarket chains owned and operated by residents are eligible to establish Payment Banks. Payment Banks are not permitted to issue credit cards or engage in lending activities. They can facilitate transfers and remittances through mobile phones, as per RBI guidelines.

Explanation

In the news, you may come across the term 'Core Banking Solutions'. This term refers to a system where a bank's branches are connected in a network, allowing customers to access and manage their accounts from any branch within the network, regardless of where they initially opened their accounts. This enhances convenience and accessibility for customers.

Explanation

In the realm of 'Bitcoins', a digital currency frequently making headlines, it is important to note that Central Banks do not oversee or regulate Bitcoins. These virtual coins are generated as a form of compensation for individuals who engage in processing payment transactions. Unlike traditional currencies, Bitcoins operate independently of any central governing body. In the context of online transactions involving Bitcoins, it is possible for individuals with Bitcoin addresses to send and receive payments without disclosing their identities to one another. Therefore, statements 2 and 3 are accurate in describing the features of Bitcoin transactions.

Explanation

The issue of international liquidity arises when there is a shortage of dollars and other strong currencies that are needed for making payments in global trade, investments, and settling international debts.

Explanation

The convertibility of the rupee means allowing the free exchange of rupees for other currencies and vice versa.

Explanation

The Basel III Accord, also known as Basel III, is a series of reforms designed to enhance the oversight, supervision, and risk management of the banking industry. Its primary goal is to bolster the banking sector's capacity to withstand and navigate challenges stemming from financial and economic pressures.

Explanation

In the Indian economy, the components of Monetary Policy include Bank rate and Open market operations. These are tools used by the RBI to regulate the economy. Public debt and Public revenue, on the other hand, are instruments of fiscal policy, separate from Monetary Policy.

Explanation

If the Reserve Bank of India decreases the Statutory Liquidity Ratio by 50 basis points, it is likely that Scheduled Commercial Banks will lower their lending rates.

Explanation

The terms 'Marginal Standing Facility Rate' and 'Net Demand and Time Liabilities' are related to banking operations. The Marginal Standing Facility Rate is the interest rate at which banks borrow money overnight from the Reserve Bank of India by pledging government securities. Net Demand and Time Liabilities refer to the total amount of funds that banks owe to the public and other banks, including both immediate and time-bound liabilities.

Explanation

In the Indian economy, Statutory Reserve Requirements serve specific purposes. These include enabling the Central Bank to regulate the banks' lending capacity and ensuring the safety and liquidity of people's deposits with banks. Additionally, these requirements aim to ensure that banks maintain sufficient cash reserves to meet their daily operational needs. The correct answer in this context is option (a), which includes the purpose of controlling the amount of advances banks can create.

Explanation

When the demand for money increases while the money supply remains constant, the result will be an increase in the rate of interest.

Explanation

India's foreign exchange reserves consist of foreign currency assets, gold holdings of the Reserve Bank of India, and Special Drawing Rights (SDRs).

Explanation

Open Market Operations in the Indian economy refers to the buying or selling of government securities by the Reserve Bank of India (RBI). The primary objective of these operations is to influence short-term interest rates and regulate the supply of base money in the economy.

Explanation

In the context of the Tertiary Sector Economy, the Reserve Bank of India oversees various aspects of commercial banks, such as the liquidity of assets, branch expansion, merger of banks, and winding-up of banks. The correct answer to the question is option (d), which includes all the mentioned areas of regulation. The Reserve Bank of India serves as the primary monetary authority in the country and also functions as the central bank for both national and state governments, playing a crucial role in regulating these banking operations.

Explanation

The increase in the Bank Rate usually indicates that the Central Bank is implementing a policy to restrict spending in the economy or control rapidly rising inflation. By raising the bank rate, borrowing costs go up, making borrowing less appealing.

Explanation

In terms of liquidity, currency is the most liquid asset, followed by demand deposits, saving deposits, and time deposits. Time deposits are the least liquid among the options provided. The correct sequence of these assets in decreasing order of liquidity is 4-1-3-2, as indicated by option (d).

Explanation

To increase the money supply in the economy, two measures are effective: when the Central Bank buys government securities from the public and when the government borrows from the Central Bank.

Explanation

The Reserve Bank of India (RBI) functions as a central bank for commercial banks. This means that other banks hold their deposits with the RBI, the RBI provides funds to commercial banks when necessary, and the RBI offers guidance to commercial banks on monetary issues. The correct answer is option (d) - all three statements are accurate.

Explanation

The concern with commercial banks offering 'teaser loans' lies in the potential risks associated with sub-prime lending and the possibility of future defaulters. In India, these loans are primarily offered to inexperienced entrepreneurs looking to establish manufacturing or export businesses. The correct statement is that the first statement is accurate as it defines teaser loans and highlights the risk of defaulters, while the second statement is incorrect as teaser loans in India are predominantly provided to home buyers.

Explanation

Bank Rate is the official interest rate at which the Reserve Bank of India lends money to commercial banks. When the Reserve Bank of India reduces the Bank Rate, it becomes cheaper for banks to borrow money, leading to an increase in credit availability. This results in more money circulating in the market, creating greater liquidity.

Explanation

SDR, or Special Drawing Rights, is considered as an artificial currency. It was established by the IMF in 1969 as an international monetary reserve. SDR functions as a unique currency utilized by the IMF and is composed of a mix of different national currencies.

Explanation

Explanation: The Cash Reserve Ratio (CRR) is the portion of a bank's total deposits that it must maintain with the central bank of the country.

Explanation

Commercial banks provide credit to the government by investing their funds in government securities for the long term and by purchasing Treasury Bills for short-term finance. This mechanism is known as the Statutory Liquidity Ratio (SLR).

Explanation

Non-banking financial companies (NBFCs) in India primarily focus on providing loans and investing in various securities. They are not permitted to acquire government-issued securities or accept demand deposits like Savings Accounts offered by commercial banks since they are not integrated into the clearance and settlement system.

Explanation

In India, the interest rate on savings accounts in all nationalized commercial banks is determined by the Reserve Bank of India. In 2011, the RBI granted permission to commercial banks to set their own interest rates for savings accounts.

Explanation

The Banking Ombudsman in India is an institution that provides a quick and cost-effective way for bank customers to address their complaints. If a person is unhappy with the decision of the Banking Ombudsman, they can appeal to the Appellate Authority, which is overseen by a Deputy Governor of the RBI.

Explanation

In India, commercial banks have various functions including transferring and collecting funds, buying and selling shares for customers, serving as executors and trustees for wills, and dealing with foreign exchange transactions. The correct statements are: 1. Purchase and sale of shares and securities on behalf of customers, and 2. Acting as executors and trustees of wills.

Explanation

Basel II is the second set of guidelines under the Basel Accords, provided by the Basel Committee on Banking Supervision, that focus on recommending banking laws and regulations.

Explanation

In the Tertiary Sector Economy, the repo rate represents the rate at which commercial banks borrow money from the Reserve Bank of India. A Gini Coefficient value of 1 in a country signifies perfect income equality among its population, while a value of 0 indicates complete inequality. The correct statement among the given options is that the repo rate is the rate at which other banks borrow from the Reserve Bank of India.

Explanation

The National Housing Bank was established in India as a fully-owned subsidiary of the Reserve Bank of India. It was formed under the National Housing Bank Act of 1987, which was enacted on July 9, 1988. The primary purpose of the National Housing Bank is to promote housing finance institutions and offer them financial assistance.

Explanation

The correct answer is option (c) Federal Bank, as it is a prominent Indian commercial bank that operates in the private sector and is based in Kochi, Kerala. This bank is not a nationalized bank.

Explanation

In the Tertiary Sector Economy, the National Housing Bank was created as a wholly-owned subsidiary of the Reserve Bank of India. Similarly, the Small Industries Development Bank of India was established as a wholly-owned subsidiary of the Industrial Development Bank of India. Both statements are correct, making option (c) - Both 1 and 2 - the correct answer.

Explanation

The Reserve Bank of India was established in 1935, but it was nationalized on 1 January 1949. The borrowing programme of the central and State Governments is managed by the RBI.

Explanation

The first bank in India with limited liability that was managed by Indians and was founded in 1881 was the Oudh Commercial Bank. It was established in Faizabad and unfortunately, it collapsed in 1958.

Explanation

In India, Indian promoters can hold up to 49 percent of the paid-up capital in private sector banks. Foreign Direct Investment of up to 49 percent from all sources is allowed in private sector banks in India through the automatic route. These statements are incorrect. Additionally, the Foreign Direct Investment limit in private sector banks has been increased to 74 percent under the automatic route, which includes investment by Foreign Institutional Investors (FIIs).

Explanation

Debentures are essentially long-term bonds that a company issues to raise funds through loans, offering a fixed interest rate in return. Those who hold debentures are considered creditors of the company.

Explanation

In a fully convertible rupee scenario, it means that the currency can freely fluctuate with other international currencies, be directly exchanged with any foreign currency at any specified location within or outside the country, and be treated like any other global currency. The correct statements are 1, 2, and 3.

Explanation

The Broad Money (M3) in India includes Currency with the public, Demand deposits with banks, and Time deposits with banks. Therefore, the correct option is (d) 1, 2 and 3.

Explanation

In this question, you are required to match the publishers in List-I with their respective publications in List-II. The Ministry of Industry corresponds to the Wholesale Price Index, the Central Statistical Organisation to National Accounts Statistics, the Reserve Bank of India to the Report on Currency and Finance, and the Ministry of Finance to the Economic Survey. By matching these pairs correctly, the correct answer is option (b), where A corresponds to 3, B to 4, C to 1, and D to 2.

Explanation

Internal debt refers to the portion of the overall debt that is borrowed from lenders within the country. Market borrowings, Treasury bills, and special securities issued to the Reserve Bank of India are all examples of internal borrowings. In this case, all three components - market borrowing, treasury bills, and special securities issued to the RBI - are part of the internal debt.

Explanation

In the year 2000, the ceiling on foreign exchange for various current account transactions was reduced. This reduction was not directly linked to a decrease in foreign currency assets.

Explanation

The Reserve Bank of India performs various functions such as issuing currency, serving as the government's bank, acting as the bank for other banks, overseeing the money market, providing emergency lending, managing foreign exchange reserves, regulating credit, and facilitating interbank transactions. The RBI follows an autonomous monetary policy.

Explanation

In the context of the balance of payments' Current Account, the Indian rupee is fully convertible, but not in the Capital Account or into gold. Therefore, the correct statement is that the Indian rupee is fully convertible in respect of the Current Account of the balance of payment alone.

Explanation

The term "gild-edged" refers to the market of government securities that are backed by government guarantees at the central or state level. This market is characterized by securities considered to have the least risk and highest quality in terms of the minimal chance of default in repaying both the principal amount and interest.

Explanation

Capital Account Convertibility of the Indian Rupee refers to the ability to freely convert cross-border capital flows. It allows any entity to convert domestic currency into hard currency at the current market rate and take the hard currency out of the country without having to provide any justification.

Explanation

In the banking sector, there is a requirement for banks to hold a specific ratio of cash in hand to their total assets. This is known as the Statutory Liquidity Ratio (SLR). SLR represents the portion of a bank's total deposits that must be kept as liquid assets, such as cash, current balances with other banks, and high-quality securities that can be quickly converted into cash.

Explanation

The Reserve Bank of India follows an accounting year that starts on July 1 and ends on June 30. The shift from the previous January-December cycle to the current July-June cycle took place on March 11, 1940.

Explanation

Among the options provided, the correct sequence in decreasing order of the given currencies in terms of their value in Indian Rupees is as follows: US dollar, Canadian dollar, New Zealand dollar, Hong Kong dollar. This means that the US dollar holds the highest value in Indian Rupees among the currencies listed, followed by the Canadian dollar, New Zealand dollar, and then the Hong Kong dollar.

Explanation

In India, Broad Money, also known as M3, includes Currency with the public, Demand deposits with banks, Time deposits with banks, and Other deposits with the Reserve Bank of India. Therefore, the correct combination that constitutes Broad Money is 1, 2, 3, and 4, as per the options provided.

Explanation

The economic liberalisation policy aims to achieve full convertibility of the Indian rupee to attract more foreign capital inflow. Full convertibility means the rupee can be freely exchanged with other international currencies, allowing international investors to buy and sell Indian assets easily.

Explanation

The pairs that are correctly matched are as follows: 1. Increase in—Monetary expansion 2. Low import growth rate in India—Recession in Indian industry 3. Euro-issues—Shares held by Indian companies in European countries 4. Portfolio investment—Foreign institutional investors. Therefore, the correct option is (a). In 1992, a scheme was introduced to allow Indian companies to raise foreign currency resources by issuing Foreign Currency Convertible Bonds (FCCBs) and/or ordinary equity shares through Global Depositary Receipts (GDRs) or American Depositary Receipts (ADRs) to foreign investors. This scheme is known as Euro issue, which includes ADRs and GDRs.

Explanation

The Narasimham Committee for Financial Sector Reforms in 1991 recommended decreasing the Statutory Liquidity Ratio (SLR), Cash Reserve Ratio (CRR), and priority sector financing from 40% to 10%. However, many of the committee's suggestions were not put into practice.

Explanation

In India, the Variable Cash Reserve Ratio is a form of selective credit control that focuses on regulating the volume of credit rather than both the volume and purpose of credit provided by banks. For controlling the purpose of credit, qualitative and selective control methods are employed. Therefore, the Variable Cash Reserve Ratio is not an instrument of selective credit control in India.

Explanation

Bank Rate is the rate at which the central bank of a country discounts bills of exchange. It is a benchmark interest rate used by the Reserve Bank of India for refinancing commercial banks.

Explanation

In order to attract foreign exchange and support liberalization efforts, the government and RBI introduced two schemes called FCNR 'A' and FCNR 'B'. In scheme 'A', RBI was responsible for managing exchange rate fluctuations, while in scheme 'B', other banks had to handle these fluctuations. Both schemes have been phased out, with only scheme 'A' being withdrawn.