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Question 1 of 10
1. Question
2 points
Consider the following statements with respect to the Payment Banks:
Payment banks can issue ATM/debit cards and credit cards
Payment banks cannot undertake lending activities
Payment banks can accept demand and time deposits and provide remittance services
Which of the given statement(s) is/are incorrect?
Correct
Ans c
Payments banks can issue debit cards however, they cannot issue credit cards.
Payments banks will accept only demand deposits i.e., only savings account and current account facility will be available. RBI has put a cap of Rs. 1 lakh on deposits that payment banks can receive from individual customers.
Incorrect
Question 2 of 10
2. Question
2 points
When RBI increases the sale of government securities through open market operations, which of the following is most likely to happen?
Correct
Ans c
Open Market operations are the sale or purchase of government securities by RBI in the open market (secondary bond/debt market) to banks/financial institutions for injection and absorption of durable liquidity (money supply) in the economy.
Hence, in the above given case, an increase in the sale of G-secs indicates that the RBI is following a tight or contractionary money policy to reduce the inflation in the economy.
Incorrect
Question 3 of 10
3. Question
2 points
With reference to India, consider the following:
Prompt Corrective Action
Creation of Payments Infrastructure Development Fund (PIDF)
Lead Banks Scheme
Banking Regulation (Amendment) Act, 2020
Which of the above can be considered as step(s) taken to reduce the Non-Performing Assets in the banking sector of India?
Correct
Ans d
A “Payments Infrastructure Development Fund (PIDF)” has been created by RBI in June, 2020. The purpose of this fund will be to encourage Merchants/Retailers, so that more and more merchants and retailers start using the Point of Sale (PoS) Infrastructure in underserved areas like Tier 3/4/5/6 cities and in eastern States.
The Lead Bank Scheme was introduced by RBI in December 1969. The Scheme aims at coordinating the activities of banks and other developmental agencies through various fora in order to achieve the objective of enhancing the flow of bank finance to priority sector and other sectors and to promote banks’ role in overall development of the rural sector.
Incorrect
Question 4 of 10
4. Question
2 points
Which of the following event(s) is/are most likely to happen as a consequence(s) of a liquidity trap in the economy?
People keep their funds in fixed and demand deposits instead of investing in bonds and other financial instruments
The Central banks will start to increase the repo rates to make the money market more liquid
Select the correct answer using the codes given below:
Correct
Ans d
A liquidity trap is when monetary policy becomes ineffective due to very low interest rates combined with consumers who prefer to save rather than invest in higher-yielding bonds or other investments.
In case of liquidity trap, people keep their funds in normal savings accounts (demand deposits) and do not want to lock their investment in fixed deposits at a very low interest rate.
Incorrect
Question 5 of 10
5. Question
2 points
Consider the following statements:
The concept of Helicopter money is used to boost demand in the economy.
Negative interest rates act as liability for the depositor and assets for the borrower.
Which of the statements given above is/are correct?
Correct
Ans c
Both options are correct.
Incorrect
Question 6 of 10
6. Question
2 points
Consider the following statements with respect to the Small Finance Banks:
The small finance banks are required to extend more than half of its total credit to the sectors eligible for classification as priority sector lending (PSL)
At least 50% of its loan portfolio should constitute loans and advances of up to Rs. 25 lakhs
Unlike Payments Banks, Small Finance banks can accept all types of deposits
Select the incorrect statements by using the codes given below:
Correct
Ans d
All statements are correct.
Incorrect
Question 7 of 10
7. Question
2 points
If everyone started withdrawing their time deposits with banks due to low returns, the immediate effect on aggregate money supply in the economy will be
Correct
Ans d
M1 = Currency with the Public + Demand deposits of public with banks
M2 = M1 + Savings Deposits with Post Office Savings Bank
M3 = M1 + Time deposits of public with banks
M4 = M3 + Total deposits with Post Office Savings Bank
Hence, even if the time deposits are withdrawn (part of M3) there will be no immediate effect on money supply as the money withdrawn will be counted as the currency held with the public (part of M1).
Incorrect
Question 8 of 10
8. Question
2 points
Consider the following with reference to Indian Tax System:
Corporation Tax
Dividends Distribution Tax
Minimum Alternative Tax
Stamp Duty
Which of the following is/are direct tax(es) applicable to private sector companies in India?
Correct
Ans c
When a company announces dividends, it has to pay tax (DDT) on the dividend which is to be distributed to the owners and the owners also pay tax (as per their income tax slab) on the dividend received. However, from Assessment Year 2021-22, the domestic company isn’t required to pay dividend distribution tax on any amount declared, distributed or paid by such company by way of dividend. Dividends received from domestic companies are taxable in the hands of shareholders.
Stamp duty is a legal tax payable in full and acts as evidence for any sale or purchase of a property. It is payable under Section 3 of the Indian Stamp Act, 1899. Although it is applicable to the companies, it is not a direct tax.
Incorrect
Question 9 of 10
9. Question
2 points
Consider the following transactions:
Investment in Mutual Funds
Buying an immovable property which is under construction
Transfer or shares and debentures
The stamp duty will be applicable on which of the given transaction(s)?
Correct
Ans c
All Statements are correct
Incorrect
Question 10 of 10
10. Question
2 points
Which of the given statements is not correct regarding the tax system of India?
According to the Article 265, no tax should be levied/collected except the authority of the law
When the government reduces taxes during the recession period, it is said to be following a procyclical fiscal policy
The Goods and Services tax (GST) is a consumption and destination based indirect tax
GST being a value added tax, it’s collection will increase with the increase in the Nominal Gross Domestic Product (GDP)
Select the correct answer using the codes given below:
Correct
Ans b
The pro-cyclical fiscal policy goes in line with the current mood of the business cycle i.e., amplifying them. For example, during a recession, the government reduces spending and increases taxes, leading to further slowdown in the economy. This kind of fiscal policy is dangerous and brings instability in the economy.
When the government reduces taxes during a recession it follows a counter-cyclical fiscal policy.
