Q170. Which statement about agricultural credit is correct?
(1) District cooperative banks disburse more short-term farm credit than commercial banks.
(2) They provide funds to primary agricultural credit societies.
[UPSC CSE Prelims 2020]
A. 1 only
B. 2 only
C. Both
D. Neither
Answer: (B) 2 only
Explanation: Scheduled commercial banks account for a greater share of agricultural lending than district cooperative banks. District Central Cooperative Banks nonetheless occupy an important position in the cooperative-credit chain, providing resources and support to Primary Agricultural Credit Societies.
Q169. Which measure of money is generally known as narrow money?
[WBCS Mains 2020]
A. M1
B. M2
C. M3
D. M4
Answer: (A) M1
Explanation: Narrow money, M1, consists of currency with the public, demand deposits with banking institutions and specified other RBI deposits. It focuses on highly liquid balances rather than longer-maturity savings deposits included in broader aggregates.
Q168. Which measure includes currency, bank demand deposits, RBI other deposits and bank time deposits?
[WBCS Mains 2020]
A. M1
B. M2
C. M3
D. M4 excluding currency
Answer: (C) M3
Explanation: M3 adds time deposits to narrow-money components. Because time deposits typically constitute a substantial part of savings intermediated by commercial banks, M3 is used as the standard broad-money aggregate in India.
Q167. What did committees on Indian financial reform propose regarding excessive statutory liquidity holdings?
[WBCS Mains 2020]
A. Phased reduction in SLR
B. Unending increases in SLR
C. A ban on treasury bills
D. Elimination of central-bank regulation
Answer: (A) Phased reduction in SLR
Explanation: Financial reform proposals sought to reduce the amount of bank resources tied up under high statutory pre-emptions. Gradual SLR reduction could free credit for productive uses while ensuring that banks retained sufficient liquidity discipline.
Q166. Rediscounting bills is mainly a means of obtaining which kind of finance?
[WBCS Mains 2020]
A. Long-term equity finance
B. Short-term trade finance
C. Real-estate investment capital
D. Government tax receipts
Answer: (B) Short-term trade finance
Explanation: Bills generated in commercial trade can be discounted for immediate funds and later rediscounted. The technique finances short-term working capital and trade flows, rather than long-lived capital projects or fiscal receipts.
Q165. Which were objectives of bank nationalisation in India?
[WBCS Mains 2020]
A. Wider branch network
B. Priority-sector credit
C. Greater security of deposits
D. All of these
Answer: (D) All of these
Explanation: Nationalisation was associated with enlarging bank outreach, promoting credit to previously neglected sectors and strengthening public confidence. Its implementation altered ownership and branch-expansion priorities across the commercial banking system.
Q164. What RBI action is conventionally associated with controlling excess inflationary demand?
[WBCS Mains 2020]
A. Reducing the policy rate
B. Buying government securities
C. Increasing CRR
D. Reducing SLR
Answer: (C) Increasing CRR
Explanation: Increasing CRR immobilises a greater share of bank resources at RBI and can moderate credit growth. Securities purchases, lower reserves and rate reductions generally release liquidity instead, which is not the usual anti-inflationary direction.
Q163. What term describes the turnover frequency of negotiable trade bills in a well-developed bill market?
[WBCS Mains 2020]
A. High frequency of transfer
B. No resale of bills
C. Permanently fixed ownership
D. Only annual transfers
Answer: (A) High frequency of transfer
Explanation: A mature bill market has active discounting and rediscounting channels, allowing bills to pass between holders before maturity. Liquidity makes trade receivables more useful as short-term financing instruments for businesses and financial intermediaries.
Q162. In which year were fourteen major commercial banks nationalised?
[WBCS Mains 2020]
A. 1965
B. 1969
C. 1971
D. 1973
Answer: (B) 1969
Explanation: The nationalisation of fourteen leading private commercial banks occurred in 1969. Ownership then passed to the public sector as part of a drive for branch expansion, rural outreach and a greater share of lending to priority areas.
Q161. In what year did RBI formally begin its operations?
[WBCS Mains 2020]
A. 1921
B. 1935
C. 1947
D. 1949
Answer: (B) 1935
Explanation: The Reserve Bank of India commenced functioning on 1 April 1935 under legislation passed the previous year. This is different from 1949, when the existing central bank was brought into government ownership.
