CUET Economics MCQs Unit V Money and Banking

Question. Bank money is that money which is:
a) Printed by RBI
b) Printed by the government
c) Generated in the form of credit creation
d) None of these

Answer : Generated in the form of credit creation

Question. Central bank is an apex bank of the country that:
a) Controls the entire banking system of the country
b) Issues currency
c) Acts as a banker to the government
d) All of these

Answer : All of these

Question. Barter system refers to that system where in:
a) Goods are exchanged for goods
b) Goods are not exchanged at all
c) Goods are exchanged for domestic currency
d) Goods are exchanged for foreign currency

Answer : Goods are exchanged for goods

Question. Full- bodied money is that money, whose money value and commodity value are:
a) Equal
b) Proportionately equal
c) Different
d) None of these

Answer : Equal

Question. Which of the following is not the function of commercial bank?
a) To accept deposits
b) To offer loans
c) To provide overdraft facility
d) To fix CRR

Answer : To fix CRR

Question. Credit cards issued by the banks:
a) Encourage Consumer Spending
b) Increase Aggregate Demand In the Economy
c) Both (a) and (b)
d) None of these

Answer : Both (a) and (b)

Question. The minimum percentage of a bank’s total deposits which is required to be kept with the RBI is called:
a) CRR
b) Repo rate
c) SLR
d) Reverse Repo Rate

Answer : CRR

Question. Out of the following , which is the primary function of money supply?
a) Store of value
b) Transfer of value
c) Measure of value
d) Bases of credit

Answer : Measure of value

Question. Which of the following system governs note issuing in India
a) Proportionate system
b) Minimum reserve system
c) Fixed fiduciary issue system
d) Simple deposit system 

Answer : Minimum reserve system

Question. Non- chequeable deposits are those:
a) Against which no cheque can be drawn at any time
b) Against which no money can be withdrawn
c) Which are called fixed deposit
d) All of these

Answer : All of these

Question. Which of the following leads to increase in AD ?
a) Fall in imports
b) Increase in investment expenditure
c) Increase in government expenditure
d) All of these

Answer : All of these

Question. Which of the following is the component of M₁ measure of money supply?
a) Time deposit
b) Bill of exchange
c) Treasury bill
d) None of these

Answer : None of these

Question : Which of the following is not concerned with banking organization?
a) Bank rate
b) Fiscal deficit
c) Credit creation
d) Cash reserve ratio

Answer : Fiscal deficit

Question : Deficient or excess demand can be corrected through
a) Fiscal Policy
b) Monetary Policy
c) Both (a) and (b)
d) None of these

Answer : Both (a) and (b)

Question : Which of the following is related to barter system of exchange 
a) Double coincidence of wants
b) Common unit of value
c) Limited exchange 
d) Both (a) and (c)

Answer : Both (a) and (c)

Question : In India there are four alternative measures of money supply M₁, M₂, M₃ and M₄ of these M_{1 =}
a) Currency with people
b) Currency with people + demand deposits
c) Currency with people +demand deposits + other deposits with the reserve bank
d) None of these

Answer : Currency with people +demand deposits + other deposits with the reserve bank

Question : Which of the following is not the instrument of credit control?
a) CRR
b) SLR
c) Repo rate
d) Managed floating

Answer : Managed floating

Question : Which of the following is the adequate definition of money?
a) Any goods which is commonly used as a store of value
b) Any goods which is exchanged for gold at a fixed rate
c) Any goods which is acceptable to a bank
d) Any goods which is commonly accepted as a medium of exchange

Answer : Any goods which is commonly accepted as a medium of exchange

Question : A commercial bank is a bank that:
a) Gives long-term loans
b) Creates credit
c) Gives short-term loans
d) All of these

Answer : All of these

Question : Credit control means:
a) Contraction of credit only
b) Extension of credit only
c) Extension and contraction of money supply
d) None of these

Answer : Extension and contraction of money supply

Question. The section 4 of the Negotiable Instruments Act, 1881 deals with ________
a) Cheque
b) Bills of Exchange
c) Promissory Note
d) All of the Above
e) None of the Above

Answer : c) Promissory Note
Explanation: The section 4 of the Negotiable Instruments Act, 1881 deals with Promissory Note)

Question. Which of the following section of Negotiable Instruments Act, 1881 deals with Cheques?
a) Section 4
b) Section 5
c) Section 6
d) Section 7
e) None of the Above

Answer : c) Section 6
Explanation: The section 6 of the Negotiable Instruments Act, 1881 deals with Cheques.

Question. Which of the following refers to an account that a bank holds in a foreign currency in another bank?
a) Nostro Account
b) Vostro Account
c) LORO Account
d) Mirror Account
e) None of the Above

Answer : a) Nostro Account
Explanation: Nostro account refers to an account that a bank holds in a foreign currency in another bank.

Question. Which of the following service(s) is/are available in small finance banks?
a) Providing loans
b) Acceptance of deposits
c) Setting up of Subsidiaries
d) Both (A) and (B)
e) None of the Above

Answer : d) Both (A) and (B)
Explanation: Banks with a small finance bank license can provide basic banking service of acceptance of deposits and lending.

Question. According to RBI Regulations, which of the following are allowed to set up small finance banks?
a) NBFC
b) MFI
c) LAB
d) All of the Above
e) None of the Above

Answer : d) All of the Above
Explanation: The firms must have a capital of Rs.100 crore)Existing non-banking financial companies (NBFC), micro-finance institutions (MFI) and local area banks (LAB) are allowed to set up small finance banks.

Question. Local currency account maintained by a local bank for a foreign (correspondent) bank is termed as _________
a) Nostro Account
b) Vostro Account
c) LORO Account
d) Mirror Account
e) None of the Above

Answer : b) Vostro Account
Explanation: Local currency account maintained by a local bank for a foreign (correspondent) bank is termed as Vostro Account.

Question. What are the other deposit accounts can be opened by an individual in where one holds „Basic Savings Bank Deposit Account‟?
a) Fixed Deposit
b) Recurring Deposit
c) Another BSBDA
d) Both A and B
e) None of the Above

Answer : d) Both A and B
Explanation: One can have Term/Fixed Deposit, Recurring Deposit etc), accounts in the bank where one holds ‗Basic Savings Bank Deposit Account.

Question. Currency swap is an instrument to manage _______
a) Interest Rate Risk
b) Currency Risk
c) Cash flows in different countries
d) All of the Above
e) None of the Above

Answer : c) Cash flows in different countries
Explanation: A currency swap (or a cross currency swap) is a foreign exchange derivative between two institutions to exchange the principal and/or interest payments of a loan in one currency for equivalent amounts, in net present value terms, in another currency.

Question. “Hawala transactions” in India are prohibited under the provision of which of the following acts?
a) Banking Regulation Act
b) Financial Action Task Force Act
c) Foreign Exchange Management Act
d) All of the Above
e) None of the above

Answer : c) Foreign Exchange Management Act
Explanation: Hawala transactions‖ in India are prohibited under the provision of Foreign Exchange Management Act.

Question. BSBDA Small accounts are valid for a period of _________
a) 3 months
b) 4 months
c) 12 months
d) 6 months
e) None of the Above

Answer : c) 12 months
Explanation: Small accounts are valid for a period of 12 months initially which may be extended by another 12 months if the person provides proof of having applied for an Officially Valid Document.

Question. SEBI is a/an ________
a) Constitutional body
b) Advisory body
c) non-statutory body
d) Statutory body
e) None of the Above

Answer : d) Statutory body
Explanation: Initially SEBI was a non statutory body without any statutory power. However, in 1995, the SEBI was given additional statutory power by the Government of India through an amendment to the Securities and Exchange Board of India Act, 1992.

Question. Which of the following policies is known as Annual Policy Statement?
a) Annual budget of central government
b) Credit and Monetary Policy of RBI
c) Foreign trade policy of DGFT
d) Regulations issued by SEBI
e) None of the Above

Answer : b) Credit and Monetary Policy of RBI
Explanation: Credit and Monetary Policy of RBI is known as Annual Policy Statement.

Question. Which of the following is the Regulator of the credit rating agencies in India ?
a) RBI
b) SEBI
c) SIDBI
d) GOI
e) None of the Above

Answer : b) SEBI
Explanation: The capital market regulator regulates rating agencies in most regions. In India, the capital markets regulator, the Securities and Exchange Board of India (SEBI), regulates the rating agencies in the country.

Question. Securities Appellate Tribunal is a/an __________ established under the provisions of Section 15K of the Securities and Exchange Board of India Act, 1992
a) Constitutional body
b) Advisory body
c) non-statutory body
d) Statutory body
e) None of the Above

Answer : d) Statutory body
Explanation: Securities Appellate Tribunal is a statutory body established under the provisions of Section 15K of the Securities and Exchange Board of India Act, 1992 to hear and dispose of appeals against orders passed by the Securities and Exchange Board of India)

Question. Maximum balance in the BSBDA small account should not exceed ______ rupees at any time
a) 50000
b) 100000
c) 200000
d) 300000
e) None of the Above

Answer : a) 50000
Explanation: Maximum balance in the BSBDA small account should not exceed fifty thousand rupees at any time)

Question. The total of debits by way of cash withdrawals and transfers will not exceed ten thousand rupees in _________
a) One month
b) Two month
c) Three month
d) All of the Above
e) None of the Above

Answer : a) One month
Explanation: The total of debits by way of cash withdrawals and transfers will not exceed ten thousand rupees in a month for BSBDA small accounts.

Question. Which of the following is a function of SEBI?
a) to approve by−laws of stock exchanges.
b) inspect the books of accounts of financial intermediaries.
c) to require the stock exchange to amend their by−laws.
d) compel certain companies to list their shares in one or more stock exchanges.
e) All of the Above

Answer : e) All of the Above
Explanation: Function of SEBI:
To approve by−laws of stock exchanges.
Inspect the books of accounts of financial intermediaries.
To require the stock exchange to amend their by−laws.
Compel certain companies to list their shares in one or more stock exchanges.

Question. Credit rating _______
a) is used to rate the borrowers while giving advances
b) is used to work out performance of the employees
c) is used to calculate the number of excellent audit rated branches
d) is not used in any bank
e) is necessary before giving promotion to employees

Answer : a) is used to rate the borrowers while giving advances
Explanation: Credit rating is an analysis of the credit risks associated with a financial instrument or a financial entity. An assessment of the creditworthiness of a borrower with respect to a particular debt or financial obligation.

Question. IDFC Bank is headquartered in _______
a) Mumbai
b) Kolkata
c) Chennai
d) Bangalore
e) None of the Above

Answer : a) Mumbai
Explanation: IDFC Bank is headquartered in Mumbai.

Question. Who among the following launched IDFC Bank?
a) Narendra Modi
b) Rajnath Singh
c) Santosh Gangwar
d) Arun Jaitley
e) None of the Above

Answer : a) Narendra Modi
Explanation: Prime Minister Narendra Modi formally launched IDFC Bank on 19 October 2015.

Question. Small finance banks are a type of ______ banks in our country.
a) niche
b) investment
c) industrial
d) All of the Above
e) None of the Above

Answer : a) niche
Explanation: Small finance banks are a type of niche banks in India)Niche Bank is a specialised bank which deals only with certain types of customers or services.

Question. Reserve Bank of India gave provisional licences to _______ entities to launch small finance banks.
a) 10
b) 11
c) 12
d) 13
e) None of the Above

Answer : a) 10
Explanation: Reserve Bank of India gave provisional licences to 10 entities out of 72 applicants to launch small finance banks.
The selected applicants are: Au Financiers (Jaipur), Capital Local Area Bank (Jalandhar),Disha Microfin (Ahmedabad), Equitas Holdings (Chennai), ESAF Microfinance and Investments (Chennai), Janalakshmi Financial Services (Bengaluru), RGVN (Northeast) Microfinance (Guwahati), Suryoday Micro Finance (Navi Mumbai), Ujjivan Financial Services (Bengaluru) and Utkarsh Micro Finance (Varanasi).

Question. Minimum paid-up capital of small finance banks is _______
a) 100 crore
b) 200 Crore
c) 500 crore
d) 1000 crore
e) None of the Above

Answer : a) 100 crore
Explanation: Minimum paid-up capital of small finance banks is Rs.100 crore)

Question. Committee on Comprehensive Financial Services for Small Businesses and Low Income Households, headed by ________ recommended the formation of a new category of bank called payments bank.
a) NR Madhawan Menon
b) Bimal Jalan
c) Nachiket Mor
d) Y.H. Melagam
e) None of the Above

Answer : c) Nachiket Mor
Explanation: Committee on Comprehensive Financial Services for Small Businesses and Low Income Households, headed by Nachiket Mor recommended the formation of a new category of bank called payments bank.

Question. The Monetary Authority in India, viz Reserve Bank of India is bound to maintain a reserve against the notes issued, Whatever may be the mount. This system is called as __________
a) Minimum Reserve System
b) Proportional Reserve System
c) Maximum Fiduciary Issue system
d) Simple deposit system
e) None of the Above

Answer : a) Minimum Reserve System
Explanation: The RBI follows a minimum reserve system in the note issue) Initially, it used to keep 40 per cent of gold reserves in its total assets.

Question. Which of the following services is NOT provided by the post offices in India ?
a) Savings Bank Scheme
b) Retailing of Mutual Funds
c) Sale of stamp Papers (Judicial)
d) Issuance of Demand Drafts
e) Life Insurance cover

Answer : d) Issuance of Demand Drafts
Explanation: Issuance of Demand Drafts is NOT provided by the post offices in India)

Question. Reserve Bank of India gave “in-principle” licences to _______ entities to launch payments banks.
a) 10
b) 11
c) 12
d) 13
e) None of the Above

Answer : b) 11
Explanation: Reserve Bank of India gave ―in-principle‖ licences to 11 entities to launch payments banks.
They are:-
Aditya Birla Nuvo
Airtel M Commerce Services
Cholamandalam Distribution Services
Department of Posts
FINO PayTech
National Securities Depository
Reliance Industries
Dilip Shanghvi, Sun Pharmaceuticals
Vijay Shekhar Sharma, Paytm
Tech Mahindra
Vodafone M-Pesa)

Question. The small finance banks will be licensed under ______ of the Banking Regulation Act, 1949.
a) Section 21
b) Section 22
c) Section 23
d) Section 24
e) None of the Above

Answer : b) Section 22
Explanation: The small finance banks will be licensed under Section 22 of the Banking Regulation Act, 1949.

Question. Which of the following is/are the product(s) of IDFC Bank?
a) Commercial Banking
b) Bharat Banking
c) Retail Banking
d) Business Banking
e) All of the Above

Answer : e) All of the Above
Explanation: Products of IDFC Bank are as follows Retail banking,Commercial & Wholesale Banking,Business Banking Bharat Banking

Question. Which is the first bank to be set up in eastern part of India after Independence?
a) UCO Bank
b) Allahabad Bank
c) United Bank of India
d) Bandhan Bank
e) None of the Above

Answer : d) Bandhan Bank
Explanation: Kolkata-headquartered Bandhan Bank is the first bank to be set up in eastern part of India after Independence)

Question. Which of the following can be provided by small finance banks
a) Mutual Funds
b) Insurance Products
c) Third Party financial products
d) All of the Above
e) None of the Above

Answer : d) All of the Above
Explanation: Small finance banks can distribute mutual funds, insurance products and other simple third-party financial products.

Question. Maximum loan size to a single person cannot exceed ________ of total capital funds.
a) 30%
b) 20%
c) 11%
d) 10%
e) None of the Above

Answer : d) 10%
Explanation: Maximum loan size to a single person cannot exceed 10% of total capital funds; cannot exceed 15% in the case of a group.
Small finance bank can lend 75% of their total adjusted net bank credit to priority sector Maximum loan size would be 10% of capital funds to single borrower, 15% to a group Minimum 50% of loans should be up to 25 lakhs.

Question. The banks will be licensed as payments banks under ______ of the Banking Regulation Act, 1949.
a) Section 21
b) Section 22
c) Section 23
d) Section 24
e) None of the Above

Answer : b) Section 22
Explanation: The payment banks will be licensed as payments banks under Section 22 of the Banking Regulation Act, 1949 and will be registered as public limited company under the Companies Act, 2013.

Question. Payment banks can accept a restricted deposit which is currently limited to _______per customer account.
a) Rs.1 lakh
b) Rs.3 lakh
c) Rs.2 lakh
d) Rs.5 lakh
e) None of the Above

Answer : a) Rs.1 lakh
Explanation: Payment banks can accept a restricted deposit which is currently limited to Rs. 1 lakh per customer account.

Question. Payment Banks can not issue ________
a) Credit Card
b) Debit Card
c) loans
d) Both (B) and (C)
e) Both (A) and (C)

Answer : e) Both (A) and (C)
Explanation: Payment banks cannot issue loans and credit cards while at the same time current account and savings accounts can be operated by such banks.

Question. Any acquisition by the Payment Banks that are more than ____ will require approval of the RBI.
a) 5%
b) 10%
c) 15%
d) 20%
e) None of the Above

Answer : a) 5%
Explanation: Any acquisition of more than 5% will require approval of the RBI.

Question. Which of the following services can be offered by Payment Banks?
a) Debit Cards
b) Online Banking
c) Mobile Banking
d) All of the Above
e) None of the Above

Answer : d) All of the Above
Explanation: Payments banks can issue services like ATM cards, debit cards online banking and mobile banking.

Question. _______ percentage of Payment Bank‟s branches must be in the unbanked rural area)
a) 25%
b) 10%
c) 15%
d) 20%
e) None of the Above

Answer : a) 25%
Explanation: 25% of Payment Bank‘s branches must be in the unbanked rural area)

Question. ____is a Current Account Maintained by one Domestic Bank on behalf of other domestic bank in foreign bank in foreign currency
a) BSBDA
b) CA
c) LORO Account
d) Mirror Account
e) None of the Above

Answer : c) LORO Account
Explanation: LORO Account is a Current Account Maintained by one Domestic Bank on behalf of other domestic bank in foreign bank in foreign currency.

Question. How many Basic Savings Bank Deposit Account(BSBDA) can be opened by an individual?
a) One
b) Two
c) Three
d) Four
e) None of the Above

Answer : a) One
Explanation: An individual is eligible to have only one ‗Basic Savings Bank Deposit Account‘ in one bank.

Question. As per the licensing norms of RBI, a new bank must have a _______ capital
a) 200 Crore
b) 100 Crore
c) 1000 Crore
d) 500 Crore
e) None of the Above

Answer : d) 500 Crore
Explanation: The RBI licensing norms stipulate that a new bank must have Rs.500 crore capital.

Question. Who among the following inaugurates Bandhan Bank as full-fledged scheduled commercial bank?
a) Narendra Modi
b) Rajnath Singh
c) Santosh Gangwar
d) Arun Jaitley
e) None of the Above

Answer : d) Arun Jaitley
Explanation: Union Finance Minister Arun Jaitley officially inaugurated the bank in Kolkata) Initially it opened with 501 branches across India)

Question. Bandhan Bank is headquartered in _______
a) Mumbai
b) Kolkata
c) Chennai
d) Bangalore
e) None of the Above

Answer : b) Kolkata
Explanation: Bandhan Bank is headquartered in Kolkata)

Question. Which of the following surrendered their “in-principle” to launch payments banks?
a) Cholamandalam Distribution Services
b) Dilip Shanghvi, Sun Pharmaceuticals
c) Tech Mahindra
d) All of the Above
e) None of the Above

Answer : d) All of the Above
Explanation: Three of the 11 entities have surrendered their licenses. They are ―Chalomandalam Distribution Services‖, ―Dilip Shanghvi, Sun Pharmaceuticals‖ and ―Tech Mahindra‖.

Question. The “in-principle” license is valid for _____months within which the entities must fulfil the requirements.
a) 12 Months
b) 14 Months
c) 18 Months
d) 24 Months
e) None of the Above

Answer : c) 18 Months
Explanation: The ―in-principle‖ license is valid for 18 months within which the entities must fulfil the requirements.

Question. Bandhan Bank starts with a capital base of ______ crore
a) 2500 Crore
b) 1070 Crore
c) 2570 Crore
d) 2470 Crore
e) None of the Above

Answer : c) 2570 Crore
Explanation: Bandhan Bank starts with a capital base of Rs. 2,570 crore and this will be raised to Rs. 3,052 crore)

Question. An external advisory committee headed by _______ evaluated the license applications for small finance banks.
a) NR Madhawan Menon
b) Usha Thorat
c) Nachiket Mor
d) Y.H. Melagam
e) None of the Above

Answer : b) Usha Thorat
Explanation: An external advisory committee headed by Usha Thorat evaluated the license applications for small finance banks.

Question. ______ percentage of Foreign share holding will be allowed in small finance banks as per the rules for FDI in private banks in India
a) 64%
b) 74%
c) 61%
d) 50%
e) None of the Above

Answer : b) 74%
Explanation: Foreign share holding will be allowed in these banks as per the rules for FDI in private banks in India) Foreign shareholding capped at 74% of paid capital.

Question. Which of the following is/are the loan product(s) of Bandhan Bank?
a) Agri loan
b) MSME loan
c) Retail loan
d) Both (A) and (C)
e) All of the Above

Answer : e) All of the Above
Explanation: Products of Bandhan Bank includes Agri loan, MSME loan, Retail loan and Micro loan.

Question. Which of the following is the slogan of Bandhan Bank?
a) Hum Hai na
b) Aapka Bhala, Sabki Bhalai
c) Aao Sochein Bada
d) Both (A) and (C)
e) None of the Above

Answer : b) Aapka Bhala, Sabki Bhalai
Explanation: Aapka Bhala, Sabki Bhalai is the slogan of Bandhan Bank.