Q50. Which label is incorrect as a direct synonym for the policy repo rate?
[WBCS Mains 2015]
A. Repurchase agreement rate
B. Repo rate
C. Rate of discount
D. Interest rate for collateralised repo borrowing
Answer: (C) Rate of discount
Explanation: The repo rate concerns repurchase-agreement lending against collateral. The discount or bank rate is a distinct concept with a different legal and operational history, so the two should not automatically be treated as synonyms.
Q49. Which direction of SLR adjustment formed part of financial-sector reform in India?
[WBCS Mains 2015]
A. Progressively reducing statutory liquidity requirements
B. Increasing SLR permanently to 100%
C. Eliminating every government bond
D. Giving SLR powers to municipalities
Answer: (A) Progressively reducing statutory liquidity requirements
Explanation: Indian financial reforms sought to reduce excessively high statutory pre-emptions of bank funds through CRR and SLR. The changes permitted greater flexibility in commercial lending while retaining prudential liquidity safeguards.
Q48. Why is the RBI not best described as an agent of the Government of India at the World Bank?
[WBCS Mains 2015]
A. Its statutory banking and currency roles are different
B. It has no capacity to manage reserves
C. It issues no monetary policy
D. It is owned by foreign shareholders
Answer: (A) Its statutory banking and currency roles are different
Explanation: RBI acts as India’s central bank, government banker and foreign-exchange reserve manager, while India’s representation and engagement with the World Bank are arranged through governmental and institutional channels rather than that asserted RBI agency role.
Q47. Which measure of RBI monetary restraint is usually associated with curbing inflation?
[WBCS Mains 2015]
A. Increasing the bank rate
B. Lowering the bank rate
C. Reducing CRR
D. Buying government bonds to add reserves
Answer: (A) Increasing the bank rate
Explanation: An increase in the bank rate is a tightening action that can raise financing costs. Higher borrowing costs tend to limit credit demand and spending, although effectiveness depends on transmission and the inflation’s causes.
Q46. How can additional deposit money arise when commercial banks increase loans?
[WBCS Mains 2015]
A. Through loan-created deposits
B. Only through new coin minting
C. Only through central government tax collections
D. Only by changing share certificates
Answer: (A) Through loan-created deposits
Explanation: Bank lending typically credits the borrower’s deposit account, creating a corresponding deposit liability. This expands bank money, subject to capital, liquidity, regulation, credit risk and the demand for borrowing.
Q45. Are scheduled commercial banks ordinarily a source of long-term industrial credit?
[WBCS Mains 2015]
A. Yes, among several financing channels
B. No, they may only make overnight loans
C. No, they cannot lend to firms
D. Only when RBI purchases shares
Answer: (A) Yes, among several financing channels
Explanation: Commercial banks provide both working capital and, within prudential guidelines, term loans to industry. They are therefore one source of longer-term business finance alongside equity, debt securities and development institutions.
Q44. Before market-based reforms, which two mandatory ratios were major banking liquidity controls?
[WBCS Mains 2015]
A. CRR and SLR
B. GST and VAT
C. CPI and WPI
D. Repo and equity P/E ratio
Answer: (A) CRR and SLR
Explanation: Cash Reserve Ratio and Statutory Liquidity Ratio imposed significant pre-emptions on banks’ funds in the pre-reform period. Their historical settings affected how much deposit funding banks could allocate to other credit activities.
Q43. In a conventional classification, open-market operations are which kind of credit control?
[WBCS Mains 2015]
A. An indirect market-based method
B. A retail loan waiver
C. An indirect tax on deposits
D. An automatic government salary increase
Answer: (A) An indirect market-based method
Explanation: Open-market bond purchases and sales affect market liquidity and bank reserves rather than targeting each individual loan. For this reason, they are commonly classified as indirect, quantitative instruments of monetary control.
Q42. A central bank conducts a repo transaction principally to achieve what immediate effect?
[WBCS Mains 2015]
A. Inject funds against eligible collateral
B. Permanently close commercial banks
C. Increase equity dividends
D. Collect import tariffs
Answer: (A) Inject funds against eligible collateral
Explanation: Under a repo, the central bank lends cash against eligible securities with an agreement for repurchase. The borrowing bank receives temporary liquidity, while the corresponding reverse repo arrangement absorbs liquidity from placing banks.
Q41. Discounting a commercial bill is generally an example of which financing arrangement?
[WBCS Mains 2015]
A. Trade credit and short-term finance
B. Issuing new share capital
C. Long-term pension payouts
D. Collection of customs duty
Answer: (A) Trade credit and short-term finance
Explanation: A financial institution discounts a bill by advancing money to its holder before maturity, less the discount. It is linked to underlying trade and converts a future receivable into present business liquidity.
