First In India Questions and Answers

Answer: B

Correct answer: Cash Reserve Ratio

The cash reserve ratio is the proportion of a bank's net demand and time liabilities that must be held as a balance with the Reserve Bank.

Two features distinguish it from the statutory liquidity ratio. It must be held in cash with the RBI, not in gold or securities, and it earns no interest - so it is a direct cost to the bank as well as a monetary instrument. Raising it withdraws liquidity from the system and lowering it releases liquidity, which is why it is used as a structural tool alongside the repo rate.

Answer: A

Correct answer: 1907

The Indian Mercantile Insurance Limited, founded in 1907, was the first wholly Indian company able to transact every class of general insurance business, until then dominated by British firms. It is a landmark in the Indianisation of the industry, as the Bombay Mutual Life Assurance Society of 1870 had been in life insurance.

Answer: B

Correct answer: June, 2008

The Government of India acquired the Reserve Bank's entire 72.5 per cent holding in NABARD in June 2008, leaving the RBI with a nominal stake.

The reasoning was the same that had moved IDBI out of RBI ownership in 1976. The RBI regulates the banking system that NABARD refinances, and holding a controlling stake in a supervised institution sits awkwardly with that role. The Narasimham Committee had recommended such divestments as a matter of principle, and the transfers of the RBI's holdings in SBI, NHB and NABARD followed in turn.

Answer: D

Correct answer: NITI Aayog

NITI Aayog is a policy think tank, successor to the Planning Commission, and it regulates nothing - it advises the Government and the states and frames policy. The other three are statutory regulators: SEBI for the securities markets, IRDAI for insurance, and PFRDA for pension funds.

Answer: D

Correct answer: Blue chip

A blue chip is a large, financially sound, well-established company whose shares are considered a safe investment - a stock market term with no place in monetary policy. The other three are the instruments themselves: the cash reserve ratio, the proportion of deposits held with the Reserve Bank; the repo rate, at which banks borrow from it; and the bank rate, at which it discounts eligible bills.

Answer: D

Correct answer: Allotting money directly to farmers for agricultural development

The Reserve Bank does not lend to individuals at all. Agricultural credit reaches farmers through commercial banks, regional rural banks and cooperatives, with NABARD providing refinance and policy direction. The other three are genuine RBI functions: banker to the banks, controller of credit through the policy rates and reserve ratios, and custodian of the country’s foreign exchange reserves.

Answer: D

RIDF was set up in NABARD in 1995-96 to boost public sector investment in agriculture and rural infrastructure. The fund is raised yearly from the commercial banks to the extent of their shortfall in agricultural lending. The corpus of RIDF I-XV amounted to Rs. 1,03,718 crore by March 31, 2010.

Answer: A

In the field of rural credit and agricultural development, establishment of NABARD is a major event. The National bank of Agriculture and Rural Development as an apex body with the responsibility for the overall development, policy, planning and financial support for agriculture and rural development was established on 12th July 1982.
 

Answer: A

Correct answer: 1949

The Banking Regulation Act was passed in 1949, giving the Reserve Bank power to license banks, inspect them, control their management and set their capital requirements. It is still the principal statute governing banking in India, and Section 22 - the licensing provision - is the one under which every bank operates.

Answer: A

Correct answer: Swadeshi movement

The Swadeshi movement, from 1905, urged Indians to use Indian goods and Indian institutions, and a wave of Indian-owned banks followed - among them Bank of India, Central Bank of India, Bank of Baroda and Canara Bank. The point was to keep Indian savings in Indian hands and to finance Indian enterprise, which the British-managed banks were reluctant to do.