Prelims Daily MCQs - Economy (6 April)

1. With reference to the call money market, consider the following statements :

Call Money market is an inter-bank money market where funds are borrowed and lent.
In the call money market, borrowing can take place only against securities.
Individuals are also allowed to borrow and lend in the call money market.

Select the correct answer using the codes given below:

a) 1 only

b) 1 and 2 only

c) 2 and 3 only

d) 1, 2 and 3

Ans: a

Exp: Statement 1 is correct: This is basically an interbank money market where funds are borrowed and lent, generally, for one day—that is why this is also known as overnight borrowing market (also called money at call).

Statement 2 is incorrect: Borrowing in this market may take place against securities or without securities.

Statement 3 is incorrect: The scheduled commercial banks, co-operative banks operate in this market as both the borrowers and lenders while LIC, GIC, Mutual Funds, IDBI and NABARD are allowed to operate as only lenders in this market.

2. Consider the following statements:

Commercial paper is an unsecured money market instrument.

Commercial papers are backed by collateral.

Commercial Bills can be issued by Scheduled Commercial Banks only.

Select the correct answer using the codes given below:

a) 1 only

b) 1 and 2 only

c) 3 only

d) 2 and 3 only

Ans: a

Exp: Statement 1 is correct: Commercial paper, also called CP, is a short-term debt instrument issued by companies to raise funds generally for a time period up to one year. It is an unsecured money market instrument issued in the form of a promissory note.

Statement 2 is incorrect: Since Commercial papers are not backed by collateral, only firms with high ratings from a recognised credit rating agency can sell such commercial papers at a reasonable price.

Statement 3 is incorrect: Commercial bills are unsecured, short-term debt issued by a corporation, oftentimes for the financing of short term liabilities and inventory. Commercial Bill is issued by the All India Financial Institutions (AIFIs), Non-Banking Finance Companies (NBFCs), Scheduled Commercial Banks, Merchant Banks, Co-operative Banks and the Mutual Funds. It replaced the old Bill Market, available since 1952 in the country.

3. Consider the following statements regarding differentiated banks.

RBI’s priority sector lending targets are applicable to both payments banks and

small finance banks.

They both accept deposits up to Rs. 2 lakhs only.
Payments banks and small finance banks both are set up based upon the Nachiket Mor committee recommendations.

Which of the statements given above is/are correct?

a) 1 only

b) 1 and 3 only

c) 1 and 2 only

d) 3 only

Ans- d

Exp: Statement 1 is incorrect. RBI’s priority sector lending targets are applicable on small finance banks only and not to payments banks. PSL lending target is 75% of adjusted net bank credit.

Statement 2 is incorrect. In case of accepting deposits, there is no restriction in case of small finance banks but there is a maximum cap of 2 lakh rupees in case of payments banks.

Statement 3 is correct. The Committee on Comprehensive Financial Services for Small Businesses and Low Income Households or the Nachiket Mor committee setup in 2013 by former RBI governor Raghuram Rajan, recommended setting up of the payments banks and small finance banks.

4. Consider following statements regarding India’s economy.

Agricultural exports crossed the $50 bn mark for the first time in 2021-22.
India is the top remittance receiver in the world in 2022 followed by Mexico and China.
India has been the largest recipient of FDI in the world for the last five years.

Choose incorrect statements.

a) 1 and 2 only

b) 3 only

c) 1 only

d) 1, 2 and 3

Ans: b

Exp: As per the DGCI&S data, the country's agricultural products exports had grown by 19.92 percent in the latest FY of 2022 to touch USD 50.21 billion.

Remittance inflow in India in 2022 is expected to top the $100 billion mark for the first time ever. It will continue to retain the top spot in the list of countries with the highest remittance receipts, a report by World Bank said. India will be followed by Mexico with $60 billion in remittance receipts. At $51 billion, China, which occupied the second spot earlier will receive the third-highest remittances this year, the report added.

India jumped one position to 7th among the top recipients of foreign direct investment (FDI) in 2021 despite FDI inflows into the country declining, according to the United Nations Conference on Trade and Development (UNCTAD). Hence, third statement is wrong.

5. Consider the following statements regarding Deposit Insurance and Credit Guarantee Corporation (DICGC).

1. The RBI Governor acts as the chairman of the DICGC.

2. The DICGC is 100% owned by the Central Government.

3. The DICGC is a statutory body set up through an Act of the Parliament.

Which of the statements given above is/are correct?

a) 1 and 3 only

b) 1 and 2 only

c) 1, 2 and 3

d) 2 and 3 only

Ans- d

Exp:

Statement 1 is incorrect. The management of Deposit Insurance and Credit Guarantee Corporation is done by the Board of Directors from which the Deputy Governor of the Reserve Bank of India is the Chairman.

Statement 2 is correct. The DICGC is a wholly owned subsidiary of RBI and is 100% owned by the Central Government.

Statement 3 is correct. DICGC is a statutory body under the DICGC Act, 1961 with authorized capital of Rs 50 crores fully issued and subscribed by the RBI.

Directions for the following 2 (two) items:

Consider the information given below and answer the items that follow.

A, B, C, D, E, F, G and H are eight friends sitting around a circle facing towards the centre. H is on the immediate left of A but is not the neighbour of D or E. F is on the immediate right of B and G is the neighbour of E. C is between E and F.

6. Who is sitting opposite to C?

a) A

b) B

c) D

d) G

Ans: (a)