Economic Organisations and Regulatory Bodies in India Questions and Answers

Answer: D

The Ministry of Finance formulates fiscal policy.

It decides taxation, expenditure and borrowing, and gives them effect through the annual budget. Monetary policy is the Reserve Bank's, and the Finance Commission recommends how resources are shared between the Centre and the states.

Answer: B

Correct answer: Barring Indians, NRIs, and entities beneficially owned by NRIs from being owners of participatory notes

The amendment to the Foreign Portfolio Investor regulations barred resident Indians, non-resident Indians and entities beneficially owned by them from subscribing to offshore derivative instruments - participatory notes.

The concern was round-tripping: a P-note lets its holder take exposure to Indian securities without appearing on any Indian register, which makes it a convenient route for undisclosed domestic money to return disguised as foreign investment. Note the precision of the restriction: it addresses ownership of the notes, not trading in Indian markets generally, which NRIs may do through other channels.

Answer: D

Correct answer: All of the above

All three are quantitative instruments, acting on the total volume of credit and leaving its allocation to the banks.

The bank rate prices the Reserve Bank's own lending; the cash reserve ratio and the statutory liquidity ratio lock up a share of deposits, the first as a balance with the RBI and the second in cash, gold or approved securities; and open market operations add or drain liquidity by buying or selling government securities. Selective controls such as margins and purpose-specific ceilings work the other way, on direction rather than volume.

Answer: D

Correct answer: RBI does not regulate the flow of credit

That statement is false, and it inverts one of the RBI's principal functions. Regulating the flow of credit is monetary policy, conducted through the repo rate, the cash reserve ratio, the statutory liquidity ratio and open market operations.

The other three are accurate. The RBI is the bank of issue, holding the sole right to issue currency notes other than the one-rupee note; it is banker to the Government, keeping its accounts and managing its debt; and it is the bankers' bank, holding their reserves and acting as lender of last resort.

Answer: C

The Narsimham Committee for financial sector reform was constituted under N.Narsimham, former governor of RBI in 1999. Committee has suggested reduction in statutory liquidity ration and cash reserve ratio. It has also suggested that statutory liquidity ratio should be reduced upto 25%. Lending priority sector should also be reduced.

Answer: B

Correct answer: PFRDA

The Pension Fund Regulatory and Development Authority oversees the National Pension System and the Atal Pension Yojana. It was given statutory backing by an Act of 2013.

Answer: A

Correct answer: Geneva

The WTO is based in Geneva and came into being in 1995, succeeding the GATT. It administers trade agreements and provides the mechanism through which member states settle trade disputes.

Answer: B

Correct answer: April-March

The Reserve Bank's accounting year now runs from April to March, aligning it with the Government of India's financial year.

This is a recent change. For most of its history the RBI kept a July–June year, a legacy of its 1935 origins, and the transition to the April–March cycle was made with a nine-month accounting period in 2020–21. The alignment matters practically: the RBI's surplus is transferred to the Government, and matching the years lets that transfer fall in the same fiscal year as the Budget that counts on it.

Answer: A

Correct answer: State Bank of India

The State Bank of India acts as the Reserve Bank's agent where the RBI has no office of its own, conducting government business - receipts, payments and the handling of currency - on its behalf.

The arrangement is a historical one, and it explains the 1955 nationalisation of the Imperial Bank in the first place: a nationwide branch network was needed to carry the central bank's functions into places the RBI's own small number of offices could not reach. Other public sector banks and some private ones were later designated agency banks as well.

Answer: D

Correct answer: None of these

Both statements fail. Permission for a Qualified Foreign Investor under the Portfolio Investment Scheme was not granted by SEBI directly: a QFI opened its account through a SEBI-registered depository participant or qualified custodian, who did the due diligence and the compliance reporting.

Nor were the QFIs free of limits. They had their own investment ceilings - individual and aggregate caps expressed as a share of a company's paid-up capital - set separately from those applying to FIIs and NRIs. "Not applicable" and "separately prescribed" are quite different things, and the second statement asserts the former.