MCQ’s Related to Monetary
Policy
Monetary Policy of RBI, CRR, SLR, LAF, Repo,
Reverse Repo, MSF, Bank rate, OMO, MSS
1. Which
one is referred to as Policy rate of RBI?
a) Repo rate
b) Reverse Repo rate
c) MSF Rate
d) Bank rate
Answer: A)
2. RBI
adopted bi-monthly monetary policy on the recommendation of -
a) Bimal Jalan Committee
b) Urjit Patel Committee
c) CRAFICARD
d) Mukul Mudgal Committee
Answer: B)
3. What
will be the effect on market, if repo rate is increased?
a) Liquidity in the market will increase
b) Liquidity in the market will decrease
c) No effect in liquidity
d) None of the above
Answer: B)
4. What is
Net Demand and Time Liabilities (NDTL) of banks?
a) Net Demand Deposits (Savings and Current
Deposits) and Time Deposits (Recurring and Fixed Deposits)
b) Net Demand Deposits (Savings and Fixed Deposits)
and Time Deposits (Recurring and Current Deposits)
c) Net Demand Deposits (Recurring and Fixed
Deposits) and Time Deposits (Savings and Fixed Deposits)
d) None of the above
Answer: A)
5) What is
the significant of the term 'Liabilities' in NDTL?
a) It means Demand and Time Deposits are assets for
customers, but liabilities for banks
b) It means Demand and Time Deposits are assets for
banks, but liabilities for customers
c) It means Demand and Time Deposits are liabilities
for both banks and customers
d) It means Demand and Time Deposits are assets for
both banks and customers
Answer: A)
6) What is
Call Money?
a) Money lent by one bank to another bank for 2 to
14 days
b) Money lent by one bank to another bank for 1 day
c) Money lent by RBI to a bank for 1 day
d) Money lent by RBI to a bank for 2 to 14 days
Answer: B)
7) Which
one is true regarding Liquidity Management by RBI?
a) RBI anchors the call rate around the reverse repo
rate - If reverse repo rate is increased by RBI, call rate will increase,
making inter-bank loans costlier, thereby reducing liquidity in market
b) RBI anchors the call rate around the policy rate
(repo rate) - If repo rate is increased by RBI, call rate will increase, making
inter-bank loans costlier, thereby reducing liquidity in market
c) Both (a) and (b) are true
d) None of the above is true
Answer: B)
8) 14-day
variable rate term repo auctions are provided by RBI for what percentage of
NDTL to each banks?
a) 0.25 % of NDTL
b) 0.75 % of NDTL
c) 1 % of NDTL
d) 2 % of NDTL
Answer: B)
9) In
addition to providing loans to banks at repo rate, RBI uses Marginal Standing
Facility (MSF) to help banks manage their liquidity mismatches, if any. What
percentage of stipulated Statutory Liquidity Ratio (SLR) holdings of government
securities is eligible for this facility?
a) 1 % of SLR
b) 2 % of SLR
c) 1.5 % of SLR
d) None of the above
Answer: B)
10) According
to the new norms of RBI, MSF rate is fixed 100 basis points above -
a) policy rate (repo rate)
b) reverse repo rate
c) SLR
d) bank rate
Answer: A)
11) Reverse
repo rate is the rate at which -
a) banks take loans from RBI
b) banks provide loans to RBI
c) banks provide loans to another banks
d) None of the above
Answer: B)
12) According
to the new norms of RBI, Reverse repo rate is -
a) 100 bps above the repo rate
b) 100 bps below the repo rate
c) same as repo rate
d) None of the above
Answer: B)
13) If
reverse repo rate is increased, what will be its effect in market?
a) Liquidity will be increased in the market
b) Liquidity will be decreased in the market
c) No effect in liquidity
d) None of the above
Answer: B)
14) According
to the 1st Monetary Policy of 2015 (April 7), policy rate is 7.5 %. What can
you deduce from the information?
a) Reverse repo rate is 6.5 %
b) MSF rate is 8.5 %
c) Repo rate is 7 %
d) Both (a) and (b)
Answer: D)
15) The
full form of 'repo' is repurchase operation. What is the significance of
repurchase?
a) Banks sell its securities to RBI to get loans at
repo rate, with an agreement to buy back (repurchase) the securities from RBI
at a later date
b) RBI sell its securities to banks to get loans at
repo rate, with an agreement to buy back (repurchase) the securities from banks
at a later date
c) Both (a) and (b)
d) None of the above
Answer: A)
16) What is
bank rate?
a) Rate charged by RBI to banks for loans for a
longer period without selling or buying any security
b) Rate charged by banks to RBI for loans for a
longer period without selling or buying any security
c) Rate charged by RBI to banks for loans for a longer
period with an agreement to sell or buy securities
d) Rate charged by RBI to banks for loans for a
longer period with an agreement to sell or buy securities
Answer: A)
17) For
Cash reserve ratio (CRR) requirements -
a) banks have to keep / maintain a portion of its
deposits, as cash or balance with RBI
b) banks have to keep / maintain a portion of its
deposits, as cash or balance with itself
c) Both (a) and (b)
d) None of the above
Answer: A)
18) If CRR
is increased by RBI, what will be the effect on market?
a) Banks will have to maintain more money as cash or
deposits with RBI, hence will have less money to lend or invest, thus
increasing the liquidity in the market
b) Banks will have to maintain more money as cash or
deposits with RBI, hence will have less money to lend or invest, thus reducing
the liquidity in the market
c) Both (a) and (b)
d) None of the above
Answer: B)
19) What is
Statutory Liquidity Ratio (SLR)?
a) Banks need to maintain a portion of their NDTL as
liquid assets in the form of cash, gold and other approved securities, with
itself, at the close of every business day
b) Banks need to maintain a portion of their NDTL as
liquid assets in the form of cash, gold and other approved securities, with
RBI, at the close of every business day.
c) Both (a) and (b)
d) None of the above
Answer: A)
20) To
reduce the liquidity in the market, RBI can perform which of the following
operations?
i)
Increase policy rate
ii)
Increase cash reserve requirements
iii)
Increase statutory liquidity ratio
a) Only (i)
b) Only (i) and/or (ii)
c) Only (i) and/or (iii)
d) (i) and/or (ii) and/or (iii)
Answer: D)
21) What
'L' denotes in LAF?
a) Liberty
b) Liquidity
c) Low
d) Listed
Answer: B)
22) Open
Market Operations (OMO) deals with -
a) buying or selling government securities
b) buying or selling non-government securities
c) inter-bank dealings
d) None of the above
Answer: A)
23) Which
of the followings are government securities?
i)
Treasury Bills (T-Bills)
ii)
Cash Management Bills (CMBs)
iii)
Dated Government Securities
iv)
State Development Loans (SDLs)
v)
Certificate of Deposits (CDs)
vi)
Inter-Corporate Deposits (ICDs)
a) Only (i) and (iii)
b) Only (i), (ii), (iii) and (iv)
c) All except (ii), (v) and (vi)
d) All are government securities
Answer: B)
24) RBI, on
behalf of government, issues MSS Bonds to mop up extra liquidity from the
market. This is same as Open Market Operations (OMO), but has a significant
difference. What is it?
a) Money raised from the market by MSS Bond is
stored in government's normal account
b) Money raised from the market by MSS Bond is
stored in a separate account, known as MSS Account, which cannot be used for
normal government expenditure.
c) Money is not raised by MSS bonds
d) None of the above
Answer: B)
