TYBBI SEM-6 : Central Banking (Objective Questions with Solutions)

  Paper/Subject Code: 85501/Central Banking

TYBBI SEM-6 : 

Central Banking

(Objective Questions with Solutions)

April 2025

Q.1. (A) Choose the correct alternative. (Any Eight)        (08)

1. Which institution is responsible for the regulation of money supply in India?

a) Ministry of Finance

b) Reserve Bank of India (RBI)

c) Securities and Exchange Board of India (SEBI)

d) Government of India

2. A decrease in the cash reserve ratio (CRR) would likely result in:

a) A decrease in the money supply

b) An increase in the money supply

c) A decrease in inflation.

d) A decrease in interest rates

3. Which of the following is NOT a form of public debt?

a) Treasury Bills

b) Bonds

c) Stock market shares

d) Government securities

4. Which of the following describes the role of the secondary market?

a) It involves the initial sale of securities to the public.

b) It allows for the buying and selling of existing securities.

c) It deals with government bonds exclusively.

d) It involves government bills only.

5. Which of the following is a characteristic of a 'fixed exchange rate' system?

a) The currency value is determined by market forces.

b) The central bank adjusts the currency value based on economic performance.

c) The currency's value is pegged to another currency or a basket of currencies.

d) The currency fluctuates based on inflation rates.

6. Which of the following is a tool used by central banks to control money supply?

a) Open market operations

b) Capital controls

c) Interest rate targeting

d) Exchange rate control

7. Which of the following is an example of a fiscal policy tool?

a) Adjusting the bank's reserve requirements.

b) Changing the money supply

c) Taxation and government spending

d) Setting interest rates

8. Which of the following is a consequence of deficit financing?

a) Increase in government debt

b) Decrease in inflation

c) Reduction in the money supply

d) Improvement in fiscal balance

9. What is the primary responsibility of the Federal Reserve in the United States?

a) To set foreign trade policies

b) To regulate and supervise national elections.

c) To control the money supply and regulate the banking system

d) To collect taxes for the federal government.

10. RBI was nationalized in the year

a) 1935

b) 1995

c) 1997

d) 1949

Q.1. (B) State whether the following statements are true or false (Any Seven) (7)

1) Central Bank also performs commercial banking business.

Ans: False

2) Open Market Operations (OMO) involve the buying and selling of government securities by the RBI to regulate liquidity.

Ans: True

3) The primary goal of monetary policy is to control the money supply and maintain economic stability

Ans: True

4) Price stability and economic growth are conflicting in nature.

Ans: False

5) During inflation RBI adopts cheap money policy to control the supply of credit.

Ans: False

6) The Reserve Bank of India (RBI) was established in 1947.

Ans: False

7) Repo Rate applies to lending, while Reverse Repo Rate applies to borrowing by the RBI

Ans: True

8) There are 3 deputy governors in the RBI.

Ans: False

9) Credit rationing is a quantitative credit control measure of Central Bank.

Ans: False

10) A country's central bank cannot change the monetary policy once it has been set.

Ans: False

November 2024

(1) (A) Choose the correct option: (Any Eight)                (08)

1) LPG was introduced in India in

a) 1981

b) 1991

c) 1999

d) 2001

2) The RBI is in charge of the _________ policy of the country.

a) structural

b) trade

c) fiscal

d) monetary

3) The 25 core principles of effective banking supervision enunciated by

a) IRDAI

b) LIC

c) BIS 

d) SEBI

4) Repo & Reverse Repo are __________ instruments.

a) Budgetary

b) Quantitative

c) Fiscal

d) Qualitative

5) The process by which RBI or any Central Bank protects the economy against adverse economic shocks is known as

a) Protection

b) Liberalisation

c) Stabilisation

d) Sterilization

6) The NABARD was set up in

a) 1981

b) 1982 

c) 1983

d) 1984

7) Central Bank accept receipts and make payment on behalf of Government by acting as

a) Banker's Bank 

b) Banker to government

c) Banker to agency

d) Banker to institution

8) There are _________ Federal Reserve Banks in USA.

a) 11

b) 12

c) 14

d) 15

9) The Sites which allow the customers to do all banking transactions are called

a) Advanced transactional websites

b) Expert information website information

c) Basic website

d) Simple transactional websites

10) In CAMELS Model 'M' stands for

a) Mitigation

b) Mismanagement

c) Management

d) Minority

(1)(B) State whether the following statements are True or False (Any 7 of 10)            (7)

1. The Reserve Bank of India competes with all other banks of the country.

Ans: False

2. Repos are used to inject liquidity in the market.

Ans: True

3. OSMOS helps both the Central Bank and commercial banks.

Ans: True

4. The RBI can increase the money supply in the market by selling government securities.

Ans: False

5. Monetary Policy alone can control inflation.

Ans: False

6. Price stability and economic growth are conflicting in nature.

Ans: False

7. The bank of England is the oldest Central Bank in the world.

Ans: True

8. The Bretton Woods system came into existence in 1944.

Ans: True

9. The BIS headquarters is located at Basel.

Ans: True

10. SEBI is the regulator of capital market

Ans: True

April 2024

(1) (A) Choose the correct alternative. (Any Eight):        (08)

1. Whenever the Central Bank offers securities in the open market, the credit creation capability of the banking industry is expected to _________.

a) Fall

b) Rise

c) No effect

d) May rise or may fall

2. The term "Money Supply" relates to _________ 

a) Overall money held by the Ministry of Finance over a specified period of time

b) The total volume of money held by the public at a particular point in time

c) The total amount of money that the government possesses.

d) The total amount of money held by RBI at a particular point of time.

3. Which of the following isn't really a central bank's responsibility?

a) Banking facilities for the public

b) Providing credit to commercial banks

c) Providing financial assistance to the government

d) Banking facilities for government

4. Name the policy that accords with expenditure and taxation policies decisions of the government? 

a) Monetary Policy

b) Fiscal Policy

c) Labor Market Policies

d) Trade Policy

5. Deficit financing leads to __________

a) hyper money supply

b) low money supply

c) negative money supply

d) more money supply

6. Which market operates through the Stock exchanges?

a) Primary Market

b) Government Bills market

c) Secondary Market

d) Interbank money market

7. Public debt is mobilized during

a) Inflation

b) Deflation

c) Recession

d) Expansion

8. The World Trade Organization replaced GATT in

a) 1996

b) 1995

c) 1997

d) 1998

9 ________ refers to a targeted exchange rate against another currency currencies.

a) Inflation Targeting

b) Exchange rate Targeting

c) Taxation Targeting

d) Export Rate Targeting

10. In CAMEL rating model L. stand for _________.

a) Liability

b) Low NPAs

c) Liquidity

d) Least Earning

(1) (B) State whether the following statements are true or false (Any Seven)           (7)

1) Credit rationing is quantitative credit control measure of Central bank. 

Ans: True

2) Bank Rate is the selective credit control measure used by the Central Bank of the country.

Ans: False

3) Progressive system of taxation helps to reduce inflation.

Ans: True

4) Central Bank also performs commercial banking business.

Ans: False

5) On-site inspection of banks is done annually by the department.

Ans: True

6) Japan, Korea and Sweden are example of unified regulator.

Ans: True

7) The intangible currency of the IMF is Special drawing rights.

Ans: True

8) Price stability and economic growth are conflicting in nature.

Ans: False

9) During inflation RBI adopts cheap money policy to control the supply of credit.

Ans: False

10) UTI was the first mutual fund established in India.

Ans: True

April 2023

(1) (A) Choose the correct alternative. (Any Eight)                    (8)

1) Growth with __________ is one of the important objectives of monetary policy.

a) inflation

b) profit 

c) price stability

d) Supervision

2) The Central Board of Directors of the Reserve Bank of India consist of _________ members.

a) 30 members

b)20 members

c) 15 members

d) 10 members

3) Forecasting or fixing rate of inflation is called __________

a) reflection 

b) inflation targeting

c) deflection

d) exchange

4) The money market is divided into ________ and ________ markets.

a) primary & secondary 

b) organized and unorganized 

c) asset & liquid 

d) dependent and interdependence

5) The Bretton woods Conference led to the establishment _________.

a) RRA 

b) RBI

c) IBF 

d) IMF

6) Which of the following function of a central bank may potentially conflict with its monetary policy role?

a) Manager of the national debt 

b) Banker to the banking system

c) Issuer of currency

d) Banker to the government.

7 ) Who works as RBI's agent at places where it has no office of its own? ________

a) State Bank of India 

b) Ministry of Finance 

c) Government of India 

d) International Monetary Fund

8) The Bank for International Settlements is located at _________

a) Zurich, Switzerland

b)Basel, Switzerland

c)Lucerne, Switzerland

d) Bern, Switzerland

9) Monetary policy in India is formulated by _________

a) monetary policy 

b) monetary policy committee

c) monetary policy fund 

d) monetary policy value

10) Managed float system involves the intervention of the ________ in the forex market.

a) Federal Bank 

b) World Bank 

c) Central Bank

d) RBI

(1) (B) State whether the following statements are true or false (Any Seven) (7)

1) The Reserve Bank of India competes with all other banks of the country.

Ans: False

2) The affairs of the Reserve Bank of India are managed by the Central Board of Directors.

Ans: True

3) Transparency refers to the degree of public understanding of Central Bank's policies of decision-making process.

Ans: True

4) An electronic payment is any kind of non-cash payment that doesn't involve a paper check.

Ans: True

5) World Bank is playing main role of providing loans for development works to member countries.

Ans: True

6) The RB1 can increase the money supply in the market by selling government securities

Ans: False

7) A financial system is a network of financial institutions, financial markets, financial instruments and financial services to facilitate the transfer of funds.

Ans: True

8) Inspection is a tool that helps RBI to stabilize money supply and prices Government securities.

Ans: False

9) The Foreign Exchange Regulation Act. (FERA) passed by the government empowered RBI to have full control over management of foreign exchange.

Ans: True

10) India is a member of the International Monetary Fund.

Ans: True

November 2023

Q1) (A) Choose the correct alternative. (Any Eight)                (8)

1 . Monetary policy deals with.................

a) Tax structure

b) Subsidy

c) Inflation

d) Current account

2. The central bank of China is __________

a) People's Bank of China

b) Reserve Bank of China

c) Federal Bank of China

d) Swiss bank of China

3. Under the flexible exchange rate mechanism exchange rate is determined by......

a) Government of India

b) RBI

c) market force

d) Ministry of Finance

4. BIS stand for.........

a) Banking and Insurance Scheme

b) Bank foreign International society

c) Bank for an International settlement

d) Business information society

5. Import export policies handle by..........

a) Labour ministry

b) EXIM Bank

c) RBI

d) ministry of Commerce

6. In CAMELS overall rating model, which number show highest rating scale of 1 to 5

b) 1

b) 2

c) 4

d) 5

7. There are Institute in the World Bank.

a) 8

b) 7

c) 6

d) 5

8. Federal Reserve system came into the exist in the year..........

a) 1910

b) 1912

c) 1913

d) 1915

9. Licenses start the bank are issued by..........

a) RBI

b) SEBI

c) IRDA

d) ITA

10. Pradhan Mantri Jan Dhan Yojana is concerned with......

a) financial inclusion

b) national literally

c) human development

d) capital market

Q. 1(B)State whether the following statements are true or false (Any Seven)        (7)

1) The Federal Reserve system is a Central Bank of USA

Ans: True 

2) REPO are used to inject liquidity in the market

Ans: True 

3) Any organization accepting deposit for its own sake is called as Bank

Ans: False

4) During the recession government increase its expenditure

Ans: True 

5) Monetary policy alone can control inflation

Ans: False

6) CRR and SLR are monetary policy instrument

Ans: True 

7) Commercial paper is issued by RBI

Ans: False

8) The RBI was established at the private shareholder Bank

Ans: True 

9) When the inflation rises the RBI sells the bonds

Ans: True 

10) The Banking Regulation Act 1949 gave a power to the commercial bank

Ans: False

April 2019

Q.1.a. State whether the following statements are True or false: (Any 8)            (08)

1. The RBI was established as a private bank.

Ans: True

2. Globlisation has increased the role of Central bank.

Ans: True

3. The RBI is totally autonomous and independent of the government.

Ans: False

4. The Bank for International Settlements frames prudential norms for the Banking sector.

Ans: True

5. Foreign exchange operations are governed by the FERA.

Ans: False

6. Monetary policy alone can control inflation.

Ans: False

7. Price stability and economic growth are conflicting in nature.

Ans: False

8. Any organization accepting deposits for its own sake is called a bank.

Ans: False

9. There are no risk in e-banking.

Ans: False

10. The World Bank consists of five institutions.

Ans: True

b. Choose the correct alternative and rewrite the sentences: (Any Seven)        (07)

1. The major weakness faced by Central Banks in emerging economies are ________.

a. Weak financial system,

b. Financing government debt,

c. Both (a) and (b),

d. None of the above

2. Forecasting or fixing rate of inflation is called _______.

a inflation targeting

b. C.R.R

c. Exchange rate targeting

d. Monetary policy

3. Monetary policy in India is formulated by ________

a. Monetary policy committee

b. Tandon committee.

c. Central Government

d. State government

4. The present governor of RBI is _______

a. Mr. Shaktikanta Das

b. Urjit Patel

c. N.K.Singh

d. Arvind Subramanian

5. During the recession time the C.R.R is ________.

a. Reduced

b. Increased

c. kept same

d. doubled

6. License to start a bank are issued by ________.

a. RB1

b. SEBI

c. IRDA

d. ITA

7. Certificate of deposit is issued by _________.

a. Commercial Banks

b. RBI

c. IRDA

d. SEBI

8. The central bank of China is _________.

a. People's Bank of China

b. Reserve Bank of China

c. Swiss Bank in China

d. Federal Bank of China

9. E-payments are increasing due to shopping __________.

a. Online

b. Offline

c. D-Mart

d. Traditional

10.RTGS stands for _________.

a. Real Time Gross Settlement

b. Reel Time Gross Settlement

c. Rate Time Gross Settlement

d. Red Time Gross Settlement