Banking Reforms, Financial Markets - Question Bank

1. The 'Financial Sector Development Council' (FSDC) in India is chaired by the:
A) Governor of RBI
B) Minister of Finance
C) Chief Economic Advisor
D) Chairman of SEBI
2. Which of the following is a characteristic of the 'capital market'?
A) Short maturity of instruments
B) High liquidity for all instruments
C) Facilitates long-term investment and capital formation
D) Dominated by government borrowing
3. The introduction of 'Payment Banks' in India is a reform focused on:
A) Providing full-fledged banking services
B) Offering deposit and remittance services to low-income households, unbanked, and underbanked sections
C) Facilitating large corporate loans
D) Underwriting securities
4. What is the primary objective of the 'Bharatiya Reserve Bank Note Mudran Private Limited' (BRBNMPL)?
A) To regulate the stock market
B) To print currency notes and coins for the Reserve Bank of India
C) To manage the foreign exchange reserves
D) To develop financial infrastructure
5. Which committee's report led to the introduction of the 'Prompt Corrective Action' (PCA) framework for banks in India?
A) Narasimham Committee
B) Chakravarty Committee
C) Working Group on Resolution of Stressed Assets
D) Vaghul Committee
6. The 'Indradhanush' framework was launched by the government to:
A) Improve the financial health and governance of Public Sector Banks
B) Regulate the payment systems
C) Promote agricultural lending
D) Oversee the insurance sector
7. What does the term 'Asset Reconstruction Company' (ARC) do?
A) It lends money to new businesses
B) It buys non-performing assets (NPAs) from banks and financial institutions to clean up their balance sheets
C) It issues new shares for companies
D) It regulates the foreign exchange market
8. The establishment of 'Small Finance Banks' (SFBs) in India is a reform aimed at:
A) Serving large corporate clients
B) Deepening financial inclusion by providing savings, lending, and payment services to underserved sections
C) Exclusively dealing with international trade finance
D) Managing government debt
9. Which of the following is NOT a function of the money market?
A) Providing short-term liquidity
B) Facilitating the creation of money
C) Financing working capital needs
D) Issuing long-term bonds
10. What is the primary role of the 'Deposits Insurance and Credit Guarantee Corporation' (DICGC) in India?
A) To regulate the stock market
B) To provide insurance cover for bank deposits and guarantee credit facilities
C) To manage foreign exchange reserves
D) To issue new currency notes
11. The 'Indian Financial Code' (IFC) was a proposed comprehensive law intended to:
A) Regulate only the banking sector
B) Consolidate and streamline financial sector regulation in India
C) Focus solely on capital market reforms
D) Promote agricultural credit
12. Which of the following is a key reform aimed at improving the governance of Public Sector Banks in India?
A) Increasing the number of branches
B) Implementing Core Banking Solutions
C) The P. J. Nayak Committee recommendations on board composition and ownership
D) Reducing staff strength
13. The term 'disintermediation' in financial markets refers to:
A) The process of banks lending more money
B) The reduction or elimination of intermediaries (like banks) in the flow of funds between savers and borrowers
C) The increase in the number of financial institutions
D) The process of creating new financial products
14. What does the 'Credit Default Swap' (CDS) primarily represent in financial markets?
A) A loan agreement
B) An insurance policy against the default of a specific debt instrument
C) A type of equity share
D) A short-term money market instrument
15. Which committee was instrumental in recommending the establishment of a separate debt management office in India?
A) Narasimham Committee
B) Rangarajan Committee
C) S. V. S. Nathan Committee
D) P. J. Nayak Committee
16. The 'Financial Sector Assessment Program' (FSAP) is a joint initiative of the:
A) RBI and SEBI
B) IMF and World Bank
C) Ministry of Finance and NITI Aayog
D) SEBI and IRDAI
17. What is the primary purpose of the 'Capital Adequacy Ratio' (CAR)?
A) To measure a bank's profitability
B) To ensure banks have sufficient capital to cover potential losses and protect depositors
C) To determine the interest rate on loans
D) To regulate the stock market
18. Which banking reform aimed to reduce the government's direct control over Public Sector Banks?
A) Nationalization
B) Establishment of RRBs
C) Appointment of professional directors on bank boards and allowing PSBs to raise equity
D) Merger of banks
19. The concept of 'Core Banking Solutions' (CBS) in Indian banking refers to:
A) A system where banks only handle core banking functions
B) A network that allows banks to offer services from any branch, anytime, anywhere
C) A specific type of loan product
D) A method of calculating capital adequacy
20. What is the role of a 'market maker' in the financial markets?
A) To issue new securities
B) To provide liquidity by quoting buy and sell prices for a security on a continuous basis
C) To set the interest rates
D) To audit financial statements
21. The 'Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002' was enacted to:
A) Promote new bank licenses
B) Facilitate the recovery of non-performing assets (NPAs) by banks and financial institutions
C) Regulate the insurance sector
D) Improve customer service in banks
22. Which of the following is a key component of the Indian financial market?
A) Only the stock market
B) Money Market, Capital Market, and Foreign Exchange Market
C) Only the banking system
D) Insurance sector only
23. What is the primary objective of the 'Financial Inclusion' initiative in India's banking reforms?
A) To increase the profits of private banks
B) To provide access to formal financial services to all sections of society, especially the unbanked and underbanked
C) To restrict credit availability
D) To promote only rural banking
24. The Financial Stability Board (FSB) is an international body that monitors and makes recommendations about the global financial system. India is a member of the FSB.
A) True
B) False
C) Partially True
D) Cannot be determined
25. Which financial reform measure aimed to improve the efficiency of public sector banks by allowing them to raise capital from the market?
A) Nationalization of Banks
B) Introduction of Priority Sector Lending
C) Partial disinvestment/IPOs of PSBs
D) Merger of Banks
26. The 'reverse repo rate' is the rate at which:
A) RBI borrows money from commercial banks
B) Commercial banks borrow from the public
C) RBI lends money to commercial banks
D) Commercial banks lend to each other
27. What is the purpose of the 'repo rate' in monetary policy?
A) The rate at which RBI lends to the public
B) The rate at which commercial banks lend to each other
C) The rate at which RBI lends short-term funds to commercial banks against government securities
D) The rate at which banks accept deposits
28. The introduction of Negotiated Dealing System (NDS) by RBI aimed to:
A) Increase the number of public sector banks
B) Improve transparency and efficiency in the government securities market
C) Regulate the insurance sector
D) Control inflation through interest rates
29. Which committee's recommendations led to the introduction of Liquidity Adjustment Facility (LAF) by the RBI?
A) Narasimham Committee I
B) Narasimham Committee II
C) S. S. Tarapore Committee
D) Vaghul Committee
30. The liberalization of the Indian economy in 1991 led to significant reforms in:
A) Only the public sector
B) The banking and financial sectors
C) Only the agricultural sector
D) The defense sector
31. What is a 'bond'?
A) A share of ownership in a company
B) A loan made by an investor to a borrower (typically corporate or governmental) which offers a fixed rate of interest and matures at a specified date
C) A short-term negotiable money market instrument
D) A contract to buy or sell a financial asset at a future date at a predetermined price
32. Which of the following is a debt instrument traded in the capital market?
A) Equity Shares
B) Bonds
C) Mutual Fund Units
D) Preference Shares
33. What is the main function of a stock exchange?
A) To lend money to businesses
B) To provide a platform for the buying and selling of existing securities
C) To issue new corporate bonds
D) To regulate the banking sector
34. The Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) primarily operate in the:
A) Money Market
B) Primary Market
C) Capital Market (Secondary Market)
D) Commodity Market
35. When a company issues new shares to the public for the first time, it is an activity in the:
A) Secondary Market
B) Money Market
C) Primary Market
D) Derivatives Market
36. What is the primary difference between the primary market and the secondary market?
A) Primary market deals with long-term instruments, secondary market with short-term.
B) Primary market is where securities are issued for the first time, secondary market is where they are traded subsequently.
C) Primary market is regulated by RBI, secondary market by SEBI.
D) Primary market is for debt, secondary market is for equity.
37. The capital market deals with:
A) Short-term debt instruments
B) Long-term financial instruments like stocks and bonds
C) Only government securities
D) Interbank lending
38. Which institution is the primary issuer of Treasury Bills in India?
A) Securities and Exchange Board of India (SEBI)
B) Ministry of Finance
C) Reserve Bank of India (RBI)
D) State Bank of India (SBI)
39. Treasury Bills (T-Bills) are instruments of the:
A) Capital Market
B) Money Market
C) Primary Market
D) Derivatives Market
40. Which of the following is a function of the money market?
A) Raising long-term capital for businesses
B) Facilitating the trading of short-term debt instruments
C) Providing long-term loans for housing
D) Underwriting new stock issues
41. What is the primary role of the Reserve Bank of India (RBI)?
A) Regulating the stock exchanges
B) Issuing currency, managing monetary policy, and regulating the banking system
C) Supervising the insurance sector
D) Collecting income tax
42. The primary function of SEBI is to:
A) Regulate the banking sector
B) Protect the interests of investors in securities and promote the development of the securities market
C) Manage foreign exchange reserves
D) Formulate monetary policy
43. Which regulatory body is responsible for overseeing the capital markets in India?
A) Reserve Bank of India (RBI)
B) Securities and Exchange Board of India (SEBI)
C) Insurance Regulatory and Development Authority of India (IRDAI)
D) Ministry of Finance
44. What does the term 'Universal Banking' refer to in the Indian context?
A) Banks offering only deposit and lending services
B) Banks offering a wide range of financial services, including commercial banking, investment banking, and insurance
C) Banks exclusively serving a single industry
D) Banks operating only in rural areas
45. The introduction of the 'priority sector lending' concept in India was largely influenced by:
A) Recommendations of the M. Narasimham Committee
B) The Banking Regulation Act, 1949
C) The Financial Sector Assessment Program
D) The recommendations of the Tendulkar Committee
46. Basel III aims to strengthen the regulation, supervision, and risk management of banks. What is a major focus of Basel III compared to Basel II?
A) Reducing the number of regulatory bodies
B) Increasing liquidity requirements and capital buffers
C) Simplifying risk-weighted asset calculations
D) Focusing solely on credit risk
47. What is the primary objective of Basel Accords in banking?
A) To increase bank profitability
B) To ensure banks have adequate capital to absorb unexpected losses
C) To standardize accounting practices
D) To promote competition among banks
48. Which of the following was a key recommendation of the Narasimham Committee II (1998)?
A) Introduction of Universal Banking
B) Stricter capital adequacy norms
C) Deregulating interest rates
D) Reducing the number of public sector banks
49. The Narasimham Committee I (1991) focused primarily on:
A) Rural Credit
B) Capital Market Reforms
C) Banking Sector Reforms
D) Insurance Sector Reforms
50. Which committee recommended the establishment of the Narasimham Committee on Banking Sector Reforms?
A) Kapur Committee
B) Gadgil Committee
C) Chakravarty Committee
D) Rangarajan Committee
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