Q260. Which combination is associated with the traditional money-supply measure M4?
[WBCS Mains 2022]
A. M3 plus specified post-office deposits
B. Only bank time deposits
C. Only notes and coins
D. Only post-office certificates
Answer: (A) M3 plus specified post-office deposits
Explanation: Under older monetary classifications, M4 extends broad money by including eligible post-office deposits, excluding certain savings instruments. A question framed using historical M4 should be interpreted against definitions used when the examination occurred.
Q259. Which is NOT generally recognised as a named monetary-policy framework?
[WBCS Mains 2022]
A. Exchange-rate anchoring
B. Monetary-aggregate targeting
C. Inflation targeting
D. Sterilisation rate control
Answer: (D) Sterilisation rate control
Explanation: Exchange-rate, money-supply and inflation targeting are recognised approaches for setting monetary policy. Sterilisation is an operation used to offset liquidity changes, particularly those arising from foreign-exchange intervention, rather than a distinct formal targeting framework.
Q258. Which components enter the definition of reserve money or high-powered money?
[WBCS Mains 2022]
A. Only bank loans
B. Notes circulating plus banker deposits and other deposits with RBI
C. All bank time deposits
D. Only foreign-exchange reserves
Answer: (B) Notes circulating plus banker deposits and other deposits with RBI
Explanation: Reserve money comprises currency in circulation and specified deposits held with RBI, including bankers’ deposits and other deposits. It is the monetary base on which deposit multiplication can operate through the banking system.
Q257. Which alternative name is used for high-powered money?
[WBCS Mains 2022]
A. Broad money
B. Reserve money
C. Quasi money
D. Credit money only
Answer: (B) Reserve money
Explanation: The monetary base is often called reserve money or high-powered money because banks can expand deposits on the foundation of reserves and currency. It differs from M3, which includes much larger banking-system deposits.
Q256. RBI’s statutory authority to require commercial banks to maintain CRR arises under which legislation?
[WBCS Mains 2022]
A. Companies Act
B. Income-tax Act
C. Reserve Bank of India Act
D. SEBI Act
Answer: (C) Reserve Bank of India Act
Explanation: Section 42 of the RBI Act provides the framework for required cash reserves of scheduled banks. Maintaining specified balances at RBI influences systemic liquidity and underpins the central bank’s use of reserve requirements.
Q255. How many commercial banks were nationalised in the second round in 1980?
[WBCS Mains 2022]
A. Eight
B. Six
C. Five
D. Four
Answer: (B) Six
Explanation: The government nationalised fourteen major commercial banks in 1969 and another six banks in 1980. The two rounds expanded the state-owned share of bank deposits, credit delivery and rural branch networks.
Q254. What is the capital adequacy ratio for a commercial bank?
[WBCS Mains 2022]
A. Available regulatory capital divided by risk-weighted assets
B. Capital divided by term deposits only
C. Capital divided by NPAs only
D. Capital divided by staff salaries
Answer: (A) Available regulatory capital divided by risk-weighted assets
Explanation: Capital adequacy compares a bank’s eligible regulatory capital with risk-weighted exposures. It gauges its ability to absorb losses relative to the risks undertaken, rather than merely measuring capital against deposits or outstanding bad loans.
Q253. Which central-bank technique is an example of qualitative credit control?
[WBCS Mains 2022]
A. Open-market purchases
B. Variable CRR
C. Repo rate adjustment
D. Moral suasion
Answer: (D) Moral suasion
Explanation: Moral suasion involves influencing lending behaviour through guidance, persuasion and communication rather than changing a general reserve or policy rate. This is a selective or qualitative instrument because it addresses banks’ conduct and credit choices.
Q252. In classical banking terminology, a central bank’s lending rate to commercial banks is called what?
[WBCS Mains 2022]
A. Open-market operation
B. Statutory liquidity ratio
C. Discount rate
D. Customs tariff
Answer: (C) Discount rate
Explanation: The discount rate is the rate at which eligible paper can be discounted or liquidity provided by the central bank. This mechanism is separate from open-market trading, liquidity-reserve requirements and government customs taxation.
Q251. What does demonetisation of a currency denomination mean?
[WBCS Mains 2022]
A. Making it legal tender for the first time
B. Removing its legal-tender status
C. Increasing banks’ capital
D. Issuing a new sovereign bond
Answer: (B) Removing its legal-tender status
Explanation: Demonetisation withdraws the legal-tender character of specified currency units. It is often associated with exchange or withdrawal programmes, but the legal change should not be equated mechanically with every possible eventual change in total money supply.
