Insights Static Quiz -337, 2019
Economy
INSIGHTS STATIC QUIZ 2019
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Question 1 of 5
1. Question
Consider the following statements about Prompt Corrective Action (PCA) of RBI.
- PCA norms allow the regulator to place certain restrictions on the Banks.
- Curbs on lending and deposit by the banks are mandatory restrictions.
- If PCA is triggered banks are allowed to re new or access costly deposits.
Which of the above statements is/are incorrect?
Correct
Solution: b)
PCA norms allow the regulator to place certain restrictions such as halting branch expansion and stopping dividend payment. It can even cap a bank’s lending limit to one entity or sector. Other corrective action that can be imposed on banks include special audit, restructuring operations and activation of recovery plan. Banks’ promoters can be asked to bring in new management, too. The RBI can also supersede the bank’s board, under PCA.
There are two type of restrictions, mandatory and discretionary. Restrictions on dividend, branch expansion, directors compensation, are mandatory while discretionary restrictions could include curbs on lending and deposit.
Banks are not allowed to re new or access costly deposits or take steps to increase their fee-based income. Banks will also have to launch a special drive to reduce the stock of NPAs and contain generation of fresh NPAs. They will also not be allowed to enter into new lines of business. RBI will also impose restrictions on the bank on borrowings from interbank market.
Incorrect
Solution: b)
PCA norms allow the regulator to place certain restrictions such as halting branch expansion and stopping dividend payment. It can even cap a bank’s lending limit to one entity or sector. Other corrective action that can be imposed on banks include special audit, restructuring operations and activation of recovery plan. Banks’ promoters can be asked to bring in new management, too. The RBI can also supersede the bank’s board, under PCA.
There are two type of restrictions, mandatory and discretionary. Restrictions on dividend, branch expansion, directors compensation, are mandatory while discretionary restrictions could include curbs on lending and deposit.
Banks are not allowed to re new or access costly deposits or take steps to increase their fee-based income. Banks will also have to launch a special drive to reduce the stock of NPAs and contain generation of fresh NPAs. They will also not be allowed to enter into new lines of business. RBI will also impose restrictions on the bank on borrowings from interbank market.
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Question 2 of 5
2. Question
Consider the following statements about domestic systemically important bank (D-SIB).
- RBI declares only Public Sector Banks as domestic systemically important bank.
- Banks become systemically important due to their size, cross-jurisdictional activities and interconnection.
- Banks whose assets exceed 2% of GDP are considered part of this group.
Which of the above statements is/are correct?
Correct
Solution: c)
D-SIB means that the bank is too big to fail. According to the RBI, some banks become systemically important due to their size, cross-jurisdictional activities, complexity and lack of substitute and interconnection. Banks whose assets exceed 2% of GDP are considered part of this group. The RBI stated that should such a bank fail, there would be significant disruption to the essential services they provide to the banking system and the overall economy.
Incorrect
Solution: c)
D-SIB means that the bank is too big to fail. According to the RBI, some banks become systemically important due to their size, cross-jurisdictional activities, complexity and lack of substitute and interconnection. Banks whose assets exceed 2% of GDP are considered part of this group. The RBI stated that should such a bank fail, there would be significant disruption to the essential services they provide to the banking system and the overall economy.
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Question 3 of 5
3. Question
Y M Deosthalee committee is associated with
Correct
Solution: d)
The Reserve Bank of India (RBI) had formed a high-level task force on public credit registry (PCR) for India. The task force was chaired by Y M Deosthalee.
The task force has suggested the registry should capture all loan information and borrowers be able to access their own history. Data is to be made available to stakeholders such as banks, on a need-to-know basis. Data privacy will be protected.
Incorrect
Solution: d)
The Reserve Bank of India (RBI) had formed a high-level task force on public credit registry (PCR) for India. The task force was chaired by Y M Deosthalee.
The task force has suggested the registry should capture all loan information and borrowers be able to access their own history. Data is to be made available to stakeholders such as banks, on a need-to-know basis. Data privacy will be protected.
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Question 4 of 5
4. Question
Consider the following statements about Index of Industrial Production (IIP) and the Manufacturing Purchasing Managers’ Index (PMI).
- Both are gauged by the government.
- Both are based on surveys and hence, represent only a sample of the entire formal manufacturing sector.
Which of the above statements is/are correct?
Correct
Solution: b)
There are two key parameters that the government and private sector analysts use to gauge the level of activity in the manufacturing sector — the Index of Industrial Production (IIP) and the Manufacturing Purchasing Managers’ Index (PMI).
What is manufacturing PMI?
There are two main points of difference between the PMI and the IIP. The first is that the PMI is a private sector survey while the IIP is gauged by the government. The second difference is in what is being measured. While the IIP is a measure of output, PMI, as the name suggests, measures activity at the purchasing or input stage.
Together the two indices provide a composite and reasonably comprehensive information about the formal manufacturing sector. As with the IIP, the PMI suffers from the lacuna of not measuring informal sector activity.
Both the PMI and the IIP are based on surveys and hence, represent only a sample of the entire formal manufacturing sector.
Incorrect
Solution: b)
There are two key parameters that the government and private sector analysts use to gauge the level of activity in the manufacturing sector — the Index of Industrial Production (IIP) and the Manufacturing Purchasing Managers’ Index (PMI).
What is manufacturing PMI?
There are two main points of difference between the PMI and the IIP. The first is that the PMI is a private sector survey while the IIP is gauged by the government. The second difference is in what is being measured. While the IIP is a measure of output, PMI, as the name suggests, measures activity at the purchasing or input stage.
Together the two indices provide a composite and reasonably comprehensive information about the formal manufacturing sector. As with the IIP, the PMI suffers from the lacuna of not measuring informal sector activity.
Both the PMI and the IIP are based on surveys and hence, represent only a sample of the entire formal manufacturing sector.
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Question 5 of 5
5. Question
Which of the following forms part of Capital receipts of the Government.
- Borrowings by Government from Reserve Bank.
- Interest income received from foreign Governments
- Disinvestment receipts
- Loans and advances granted by Central Government to State Governments.
Select the correct code:
Correct
Solution: b)
Under Article 112 of the Constitution of India, the Annual Financial Statement has to distinguish expenditure of the Government on revenue account from other expenditures. Government Budget, therefore, comprises of Revenue Budget and Capital Budget.
Capital Budget consists of capital receipts and capital payments.
The capital receipts are loans raised by Government from public, called market loans, borrowings by Government from Reserve Bank and other parties through sale of Treasury Bills, loans received from foreign Governments and bodies, disinvestment receipts and recoveries of loans from State and Union Territory Governments and other parties.
Capital payments consist of capital expenditure on acquisition of assets like land, buildings, machinery, equipment, as also investments in shares, etc., and loans and advances granted by Central Government to State and Union Territory Governments, Government companies, Corporations and other parties.
Incorrect
Solution: b)
Under Article 112 of the Constitution of India, the Annual Financial Statement has to distinguish expenditure of the Government on revenue account from other expenditures. Government Budget, therefore, comprises of Revenue Budget and Capital Budget.
Capital Budget consists of capital receipts and capital payments.
The capital receipts are loans raised by Government from public, called market loans, borrowings by Government from Reserve Bank and other parties through sale of Treasury Bills, loans received from foreign Governments and bodies, disinvestment receipts and recoveries of loans from State and Union Territory Governments and other parties.
Capital payments consist of capital expenditure on acquisition of assets like land, buildings, machinery, equipment, as also investments in shares, etc., and loans and advances granted by Central Government to State and Union Territory Governments, Government companies, Corporations and other parties.
