Banking Knowledge Practice Questions

1. Reserve Bank of India's reserve ratios are ....
a) SLR
b) CRR
c) REPO
d) Only a and b
e) Reverse REPO

2. If the bank rate is increased by RBI then ......
a) The lending rates of commercial banks also increases.
b) Cost of credit increases in the money market.
c) Demand for bank loans decreases.
d) Due to demand for goods will also decreases, inflation can be controlled.
e) All the above

3. If RBI wants to raise credit supply in the money market ......
a) RBI provide special schemes and gifts to promote more loans in market.
b) RBI decreases the bank rate.
c) RBI lend more money to banks.
d) RBI increases the bank rate.
e) None of these

4. Who acts as a custodian of cash reserves of scheduled banks ......
a) Reserve Bank of India
b) State Bank of India
c) Central Bank of India
d) Central Government of India
e) None of these

5. When does banks need to maintain mandatory reserve ratio?
a) Quarterly
b) Yearly (Financial)
c) Half yearly
d) At any given point of time
e) None of these

6. What is the rate charged by banks for discounting of approved bill of exchange?
a) Repo Rate
b) Reverse Repo Rate
c) Bank Rate
d) All the above
e) None of these

7. If RBI manipulate the Bank Rate then .......
a) Increase in supply of credit in economy.
b) Decrease in supply of credit in economy
c) Advance loans are stopped.
d) Either increase or decrease in the credit supply in economy.
e) Neither increase nor decrease in supply of credit in economy.

8. To arrest the rise in the price levels during inflation .......
a) RBI reduces the Bank Rate
b) RBI raises the Bank Rate
c) RBI manipulate the Bank Rate
d) All the above
e) None of these

9. Why does RBI need to change CRR or SLR?
a) To show that it is the supreme power for monetary system in India
b) To have grip over banking system
c) Depends upon the monetary requirements and conditions of the economy
d) Because corporate and big companies need more money to expand their business
e) All the above

10. Liquidity Adjustment Facility (LAF) mean .....
a) Advancing loans to banks in adjusting day to day mismatches in the liquidity.
b) Facilitates banks credit expansion.
c) Unsecured money market facility.
d) Maintaining the liquidity in the form of gold, cash and government securities.
e) None of these

11. Repo and Reverse Repo operations are .....
a) Reduction of excess of expenditure
b) Variable reserve ratio operations
c) Issuing and paying agent operations
d) Liquidity adjustment facility operations
e) None of these

12. When do banks get money at cheaper rate?
a) When CRR is increased
b) When Repo is lowered
c) When Reverse Repo is lowered
d) When SLR is lowered
e) None of these

13. Pulling out excess money from banks means .........
a) Raising CRR
b) Raising LAF
c) Reducing CRR
d) Reducing SLR
e) Keeping Variable Reserve Ratios unchanged

14. The rate of interest that RBI charge on banks for long term lending is .......
a) Repo Rate
b) Bank Rate
c) Reverse Repo Rate
d) Base Rate
e) None of these

15. Money available cheaper from RBI means .........
a) Bank rate is low when compared to previous bi monthly monetary policy
b) Repo Rate is low when compared to previous bi monthly monetary policy
c) Reverse repo rate is unchanged when compared to previous bi monthly monetary policy
d) Both a and b
e) None of these

16. When can RBI sell more government securities to banks?
a) When RBI increases the SLR
b) When RBI decreases the SLR
c) When RBI increases the CRR
d) When RBI decreases the CRR
e) None of these

17. Regional Rural Banks (RRBs) need to maintain their complete SLR in .......
a) Gold and cash
b) Loans and advances to rural poor
c) Government and other approved Securities
d) They need not maintain as sponsor bank maintains the SLR
e) None of these

18. Reverse Repo Rate is an instrument used by RBI in order to ........
a) Pull out excess liquidity in the economy.
b) Maintain liquidity at a certain level.
c) Increase the liquidity levels in the economy.
d) Decrease the liquidity in the banking system.
e) None of these

19. Identify the false statement from the following.
a) When RBI sells government securities to banks the main purpose of selling may be to raise more funds for banks.
b) When RBI buys the government securities from banks the main purpose of buying may be to pull out excess money from banks.
c) When RBI sells government securities to banks it is raising funds to governments in the form of borrowing.
d) When RBI repurchasing government securities for a short period from banks it is pumping more funds in the banking system.
e) None of these

20. Repurchasing the government securities means .......
a) RBI is lending to banks
b) Banks are lending to RBI
c) Government is lending to banks
d) RBI is lending to government
e) None of these

21. In RBI’s monetary policy, Liberal Money Policy means .......
a) Banks no need to deposit more excess cash as reserves.
b) Banks are asked for more and more deposits to be held with RBI.
c) CRR is Decreased
d) Both a and c
e) None of these

22. RBI’s fifth bi-monthly monetary policy statement of 2014-15 is/ was scheduled on .....
a) 30th Sep, 2014
b) 2nd Jan, 2014
c) 2nd Dec, 2014
d) 5th Aug, 2014
e) None of these

ANSWERS:
1-d, 2-e, 3-b, 4-a, 5-d, 6-c, 7-d, 8-b, 9-c, 10-a
11-d, 12-b, 13-a, 14-b, 15-d, 16-a, 17-c, 18-b, 19-e, 20-a, 21-d, 22-c