Q1. Consider the following statements with respect to the Monetary Policy Committee
(MPC)choose the incorrect option:
- The RBI Governor chairs the committee and enjoys a veto power.
- Members of the MPC will be appointed for a period of four years and shall not be eligible for reappointment.
- No government official will be nominated to the MPC.
- 1 only
- 2 and 3 only
- 1 and 3 only
- None of the above
Q2. Consider the following statements with respect to the Marginal Standing Facility
(MSF), choose the correct option:
- It is the rate at which banks can borrow overnight funds from RBI against the approved government securities.
- The MSF rate is always lesser than the repo rate.
- An increase in the cap for MSF will decrease liquidity with banks.
- 2 only
- 1 and 2 only
- 1 only
- 1, 2 and 3
Q3. Which of these countries border the Caspian Sea?
- Iran
- Russia
- Armenia
- Azerbaijan
- Turkmenistan
- 1, 2, 3 and 5 only
- 2, 3 and 5 only
- 1, 2, 4 and 5 only
- All of the Above
Q4. Consider the following statements with respect to the Liquidity Coverage Ratio
(LCR), choose the correct option:
- It indicates the proportion of highly liquid assets held by banks to ensure their ability to meet short-term obligations.
- The LCR is calculated by dividing a bank’s high-quality liquid assets by its total net cash flows, over a 30-day stress period.
- 1 only
- 2 only
- Both 1 and 2
- Neither 1 nor 2
Answers
Q1. Consider the following statements with respect to the Monetary Policy Committee
(MPC)choose the incorrect option:
- The RBI Governor chairs the committee and enjoys a veto power.
- Members of the MPC will be appointed for a period of four years and shall not be eligible for reappointment.
- No government official will be nominated to the MPC.
- 1 only
- 2 and 3 only
- 1 and 3 only
- None of the above
Answer: a
Explanation:
The RBI Governor will chair the committee.
The governor does not enjoy a veto power to overrule the other panel members but will have a casting vote in case of a tie.
The committee will have six members. Of the six members, the government will nominate three. No government official will be nominated to the MPC.
The other three members would be from the RBI with the governor being the ex-officio chairperson. Members of the MPC will be appointed for a period of four years and shall not be eligible for reappointment.
Q2. Consider the following statements with respect to the Marginal Standing Facility
(MSF), choose the correct option:
- It is the rate at which banks can borrow overnight funds from RBI against the approved government securities.
- The MSF rate is always lesser than the repo rate.
- An increase in the cap for MSF will decrease liquidity with banks.
- 2 only
- 1 and 2 only
- 1 only
- 1, 2 and 3
Answer: c
Explanation:
Marginal standing facility (MSF) is the rate at which banks can borrow overnight funds from RBI against the approved government securities.
It is a window for banks to borrow from the Reserve Bank of India in an emergency situation when inter-bank liquidity dries up completely.
Banks borrow from the central bank by pledging government securities at a rate higher than the repo rate under the liquidity adjustment facility. The MSF rate is pegged 100 basis points or a percentage point above the repo rate.
Generally, banks are allowed to borrow under MSF within a cap (based on SLR reserves or NDTL). An increase in this cap will open up more avenues for the bank to borrow from the RBI. Hence an increase in the cap for MSF will increase liquidity with banks.
Q3. Which of these countries border the Caspian Sea?
- Iran
- Russia
- Armenia
- Azerbaijan
- Turkmenistan
- 1, 2, 3 and 5 only
- 2, 3 and 5 only
- 1, 2, 4 and 5 only
- All of the Above
Answer: c
Explanation:
Azerbaijan, Iran, Kazakhstan, Russia and Turkmenistan border the Caspian Sea.
Q4. Consider the following statements with respect to the Liquidity Coverage Ratio
(LCR), choose the correct option:
- It indicates the proportion of highly liquid assets held by banks to ensure their ability to meet short-term obligations.
- The LCR is calculated by dividing a bank’s high-quality liquid assets by its total net cash flows, over a 30-day stress period.
- 1 only
- 2 only
- Both 1 and 2
- Neither 1 nor 2
Answer: c
Explanation:
Liquidity Coverage Ratio (LCR) indicates the proportion of highly liquid assets held by banks to ensure their ability to meet short-term obligations.
The LCR is calculated by dividing a bank’s high-quality liquid assets by its total net cash flows, over a 30-day stress period. The high-quality liquid assets include only those with a high potential to be converted easily and quickly into cash
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