Indian Banking and Financial System Questions and Answers

Answer: A

Correct answer: Same

Fayol drew no distinction between the two terms. He held that management is a single activity, performed at every level and in every kind of undertaking - industrial, commercial, political or religious - differing in degree rather than in kind as one moves up the hierarchy.

His five elements of planning, organising, commanding, co-ordinating and controlling were meant to apply throughout. The separation of "administration" as policy-making from "management" as execution belongs to later American writers such as Oliver Sheldon; reading it back into Fayol misrepresents him.

Answer: A

Correct answer: Only 2

The first statement misplaces the cell. The Price Monitoring Cell sits in the Department of Consumer Affairs, not the Department of Agriculture, and that is not an accident of administration: consumer prices and the availability of essential commodities are the Consumer Affairs mandate, while Agriculture is concerned with production.

The second statement is correct as to what the cell does - it tracks the retail and wholesale prices of a defined list of essential commodities, reported daily from centres across the country, so that the government can act on shortages and spikes. With one statement false and one true, only the second stands.

Answer: D

Draft Red Herring prospects provide all the necessary information an investor ought to know about the company in order to make an informed decision. It contains details about the company, its promoter the projects, financial details, object of raising the money, term of the issue, use of proceeds from the offering among others. However the document does not provide information about the price or size of the offering

Answer: B

The causes for low productivity of Indian agriculture can be divided into 3 broad categories namely, General factors as overcrowding in agriculture, discouraging rural Atmosphere, inadequate non firm service. Institutional factors as - size of holding, pattern of land tenure. Technological factors as poor technique of production, inadequate irrigational facilities.

Answer: B

There are two major determinants of the potential rate at which an economy can grow in the long run. Infrastructure investments and skills of labor can raise India potential growth rate because the country has ample labor supply. The overall demand in the economy rises up due to fast growth and more resources are used to meet higher demand.

Answer: D

Correct answer: COFEPOSA

COFEPOSA is the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act 1974, and its subject is economic offences - smuggling and foreign exchange violations, which drained scarce reserves under the restrictive regime of the time.

The other three are preventive detention laws directed at security and public order rather than at the economy: MISA, the Maintenance of Internal Security Act 1971, repealed in 1978; NSA, the National Security Act 1980; and TADA, the Terrorist and Disruptive Activities (Prevention) Act 1985, allowed to lapse in 1995.

Answer: B

Correct answer: Refinancing

Refinance means IDBI replenished the lender's funds after the lender had made the loan, so that a bank financing exports could lend again without waiting for repayment.

This was IDBI's characteristic method as an apex institution: it worked through the banks and state-level bodies rather than displacing them, and refinance of export credit was one of the main channels. Planning is a different function altogether - IDBI did plan and promote key industries, but that activity does not describe what it did with loans already granted by another institution.

Answer: C

Correct answer: Consolidated fund of India

Article 266 of the Constitution establishes the Consolidated Fund of India, into which all revenues received, all loans raised and all money received in repayment of loans must be paid. No money may be withdrawn from it except by appropriation made by law - the basis of Parliament's control over public spending.

The Public Account, also under Article 266, holds money the government merely holds in trust, such as provident fund balances. The Contingency Fund under Article 267 is a small imprest at the President's disposal for unforeseen expenditure, later regularised by Parliament.

Answer: B

Correct answer: subscribes to

Underwriting and subscribing are two distinct commitments, and IDBI did both. In underwriting, the institution agrees to take up whatever part of an issue the public does not, so the company is assured of its money whatever the market's response.

In subscribing, it buys securities directly for its own portfolio. Doing both meant IDBI could stand behind an issue and also invest in it, which was often what persuaded other investors to come in. Neither "imposes on" nor "targets" describes any capital-market operation, so the sentence only completes sensibly one way.

Answer: D

Correct answer: 2000 rupee note

The ₹2000 note was the highest denomination in circulation in India in 2020. It was introduced in November 2016, immediately after the ₹500 and ₹1000 notes were demonetised, precisely so that the value withdrawn could be replaced quickly with far fewer pieces of paper. The ₹1000 note ceased to be legal tender in that same demonetisation and was never reissued, and India has never had a ₹5000 note in general circulation. The picture has changed since: in May 2023 the Reserve Bank withdrew the ₹2000 note from circulation, and although it remains legal tender, almost all of it has been returned to the banking system, so the highest denomination now in ordinary use is once again the ₹500 note. The stem originally asked for the position “being in circulation” without a date; it has been anchored to 2020 so the keyed answer holds.