Miscellaneous Questions and Answers

Answer: D

Correct answer: Osborne Smith

Sir Osborne Smith was the first Governor of the Reserve Bank of India, from its establishment in April 1935. He served only until 1937, resigning after differences with the government over interest rates and exchange policy.

Answer: B

Correct answer: Basel III norms

Basel III is the current framework, drawn up after the 2008 crisis: more capital and of better quality, a leverage ratio independent of risk weights, capital conservation and countercyclical buffers, and liquidity standards. Basel I and II were its predecessors, and Solvency II governs insurers rather than banks.

Answer: C

Correct answer: Presidency Bank

The Presidency Banks - of Bengal, Bombay and Madras - introduced the savings account in India in the nineteenth century, offering interest on small deposits repayable on demand. They were the forerunners of the Imperial Bank and so of the State Bank of India.

Answer: D

Correct answer: Both b and c

The RBI granted new universal banking licences in 2014 to IDFC and Bandhan - the first such licences in a decade, and awarded out of some twenty-five applicants. Bandhan came from microfinance and IDFC from infrastructure lending, and each had to convert itself into a bank.

Answer: C

Correct answer: the Finance Ministry.

Fiscal policy - taxation, expenditure and borrowing - is framed by the Ministry of Finance and presented in the Union Budget. The RBI conducts monetary policy, which is a separate instrument, and the Planning Commission (now NITI Aayog) advised on plans rather than framing fiscal policy.

Answer: A

Correct answer: Central Depository Services Limited

CDSL is one of India’s two depositories, the other being NSDL. A depository holds securities in dematerialised form, so that shares are transferred by book entry rather than by moving certificates - which is what made settlement fast and eliminated forged and lost scrip.

Answer: B

Correct answer: 1949

The failures that began in 1913 were followed by decades in which weak, undercapitalised banks continued to collapse - there was no supervisor with power to prevent it. That ended only with the Banking Regulation Act of 1949, which gave the Reserve Bank authority over licensing, capital, management and inspection. Regulation, rather than any single event, is what closed the era of bank failures.

Answer: C

Correct answer: Australia

Australia issued the world’s first polymer banknote in 1988 and became the first country to convert its whole currency to polymer, in 1996. Polymer notes last several times as long as paper and are far harder to counterfeit, since the transparent window cannot easily be reproduced.

Answer: D

Correct answer: all of the above

Devaluation makes the home currency cheaper, and all three follow at once. Imports become dearer, so demand for them falls; exports become cheaper abroad, so they are more competitive; and domestic producers competing against imports are protected by the higher price of the foreign goods. Whether the trade balance actually improves depends on the elasticities - the J-curve effect means it often worsens first.

Answer: D

Correct answer: one seller many buyer

A monopoly is one seller facing many buyers, with no close substitute available, so the seller sets the price rather than taking it. One buyer facing many sellers is a monopsony; one of each is a bilateral monopoly.