Banking – Test 5 Welcome to your Banking - Test 5 Q1. If a bank maintains a cash reserve ratio of 5%, with a cash base of Rs. 1,000 cr, then banks would be able to create credit of value: a) Rs. 5,000 cr b) Rs. 10,000 cr c) Rs. 20,000 cr d) Rs. 80,000 cr Q2. To reduce the money supply in the economy, the central bank should: a) Reduce the minimum percentage of bank's deposits to be kept with it b) Reduce the rate at which the commercial banks borrow from the central bank against approved securities c) Increase the margin requirements between loan taken and security offered d) Buy Govt. bonds from the open market Q3. If an economy is to control deflation like most Euro-zone nations, which of the following would be appropriate? a) Reducing the short-term lending rate b) Reducing the reserve deposit ratio c) Both (a) & (b) d) None of the above Q4. For commercial banks, the source of profit is: a) Unclaimed deposits b) Grants by the Govt. c) Spread d) None of the above Q5. Commercial banks advance loans: a) Only to the extent of their term-deposits b) Only to the extent of their gold reserves c) Only to the extent of their demand deposits d) Multiple times of their initial cash deposits Q6. __________________deposits indicate the savings of the depositors with the banks. a) Primary deposits b) Secondary deposits Q7. Primary deposits + Secondary deposits = Demand deposits. True or false? a) True b) False Q8. Which function is performed by the central bank, by holding accounts of all commercial banks? Q9. LIC is a financial institution, and not a bank because: a) It accepts deposits from the public b) It advances loans to the public c) Both (a) & (b) d) None of the above Q10. According to a recent news item, "The repo rate has been lowered to 4% by the central bank". Why did the central bank do so? a) To infuse investments in the economy b) To reduce the demand for consumption expenditure c) Both (a) & (b) d) None of the above Q11. Which of the following does not refer to monetary policy? a) Bank rate b) Govt. spending c) Persuasion and pressure policy d) Credit rationing Q12. Which of the following functions of the central bank can help the commercial banks to deal with a situation of financial crisis? a) Custodian of cash reserves b) Lender of last resort c) Banker's bank d) Bank of issue Q13. The function of central bank involving buying and selling of government securities from or to the public and commercial banks is known as: a) Selective credit control b) Open market operations c) Legal reserve requirements d) None of the above Q14. Money multiplier is alternatively known as "Deposit multiplier" and ____________________ Q15. In which year did India get its central bank? a) 1947 b) 1948 c) 1932 d) 1935 Time's up
