Chapter: Banking
1.

Which of the following is a qualitative or selective method of credit control by the central bank?

A. Bank rate or Discount Rate Policy
B. Open market operations
C. Cash Reserve Ratio
D. None of the above
Answer» D. None of the above
2.

In what way the Central Bank serves as a Banker’s Bank?

A. By maintaining gold reserve
B. By controlling currency
C. By acting as a lender of the last resort
D. By reducing the interest rates
Answer» C. By acting as a lender of the last resort
3.

Which of the following is not a function of commercial bank?

A. Accepting deposits
B. Creating credits
C. Printing bank notes
D. None of the above
Answer» C. Printing bank notes
4.

Reserve Bank of India(RBI) was established on

A. 1st April,1925
B. 1st April 1935
C. 1st April 1945
D. 1st April 1955
Answer» B. 1st April 1935
5.

Primary deposit in a commercial bank is called

A. Active deposit
B. Passive deposit
C. Derivative deposit
D. All of the above
Answer» B. Passive deposit
6.

Derivative deposit in a commercial bank is also called

A. Active deposit
B. Passive deposit
C. Primary deposit
D. None of the above
Answer» A. Active deposit
7.

Bank rate is

A. The rate of interest charged by banks on their loans
B. The rate of interest paid by banks on deposits
C. Official discount rate at which the Central Bank rediscount approved bills of the commercial banks
D. The interest paid by commercial banks to their beneficiaries
Answer» C. Official discount rate at which the Central Bank rediscount approved bills of the commercial banks
8.

Which of the following is not a function of Central Bank?

A. Enjoys monopoly of note issue
B. Acts as the banker’s bank
C. Creation of credit
D. Lender of the last resort
Answer» A. Enjoys monopoly of note issue
9.

Which of the following is a qualitative method of credit control of a central bank?

A. Bank rate
B. Open market operation
C. Rationing of Credit
D. All of the above
Answer» C. Rationing of Credit
10.

If the central bank wants to control credit, it should

A. Lower the rediscount rate
B. Raise the bank rate
C. Buy securities in the open market
D. Raise cash reserve ratio
Answer» B. Raise the bank rate
11.

Which of the following is a selective credit instrument?

A. variable reserve ratio
B. credit rationing
C. Bank rate
D. All of the above
Answer» B. credit rationing
12.

When the Central Bank intends to expand the credit, it should

A. Raise the margin requirements
B. Raise the variable reserve ratio
C. Lower the bank rate
D. Purchase government securities in the open market
Answer» D. Purchase government securities in the open market
13.

Open Market Operation is

A. Buying and selling of government securities
B. Sale of government securities
C. Buying and selling of government cheques
D. All of the above
Answer» A. Buying and selling of government securities
14.

Open market operation will become successful if there is a

A. free-market economy
B. developing economy
C. well-developed bill and security market
D. All of the above
Answer» C. well-developed bill and security market
15.

Which of the following is not an instrument of selective credit control?

A. Margin requirements
B. Open market operation
C. Credit rationing
D. None of the above
Answer» B. Open market operation
16.

Bank rate policy is not very effective because-

A. It requires a well-developed money market
B. It cannot operate effectively
C. All banks are not under the control of central bank
D. All the above
Answer» A. It requires a well-developed money market
17.

Which of the following is not a quantitative method of credit control

A. Bank arte
B. Open market operation
C. Variable reserve ratio
D. Regulation of consumer credit
Answer» D. Regulation of consumer credit
18.

To what extent the central bank is the lender of the last resort?

A. As it lends to the government
B. As it provides finance to agriculture
C. As it is the ultimate source of credit in times of crisis
D. As it controls the money supply in the economy
Answer» C. As it is the ultimate source of credit in times of crisis
19.

Variable reserve ratio refers to-

A. The ratio which the commercial banks are required to maintain with the central bank
B. The ratio at which the central bank rediscounts first class bills
C. The purchase and sale by the central bank to government securities in the money market
D. All of the above
Answer» A. The ratio which the commercial banks are required to maintain with the central bank
20.

The term bank liquidity implies

A. Management of cash
B. Creation of credit
C. The capacity of the bank to give cash on demand in exchange
D. All of the above
Answer» C. The capacity of the bank to give cash on demand in exchange
21.

What is known as the most profitable asset of a commercial bank?

A. Investment at call and short-notice
B. Loans and advances to its customers
C. Accepting deposits
D. None of the above
Answer» B. Loans and advances to its customers
22.

The fundamental function of a commercial bank is

A. Acceptance of deposits
B. Advancing loans
C. Issuing bank draft
D. Creating credit
Answer» B. Advancing loans
23.

Which of the following is not a function of commercial bank?

A. Accepting deposits
B. Advancing loans
C. Creating credit
D. Printing bank notes
Answer» D. Printing bank notes
24.

Loans and investment of a commercial bank constitute its

A. Derivative deposits
B. Primary deposits
C. Secondary deposits
D. All of the above
Answer» A. Derivative deposits
25.

Bank’s liquidity means

A. Its capacity to create credit
B. Its capacity to provide a high rate of interest
C. Its capacity to supply finance
D. Its capacity to convert its assets into cash
Answer» D. Its capacity to convert its assets into cash
26.

A bank’s capacity to create credit is limited by the

A. Size of cash
B. Size of its area
C. Size of the central bank
D. All of the above
Answer» A. Size of cash
27.

A bank can increase the supply of money by

A. printing notes
B. Creating credit
C. Issuing cheques
D. None of the above
Answer» B. Creating credit
28.

Which of the following public sector banks has the highest number of branches in India?

A. State Bank of India
B. Allahabad Bank
C. Bank of India
D. Punjab National Bank
Answer» A. State Bank of India
29.

Derivative deposits are created during the time of –

A. Accepting demand deposits
B. Accepting drafts
C. Making loans to the customers
D. All of the above
Answer» C. Making loans to the customers
30.

The securities and bonds which a commercial banks holds is also known as

A. Cash reserve ratio
B. Derivative deposits of the banks
C. Secondary deposits of the bank
D. All of the above
Answer» C. Secondary deposits of the bank
31.

Which is known as the most profitable asset of the bank?

A. loans and advance to its customers
B. the investment in government securities
C. life insurance policies of the staff
D. None of the above
Answer» A. loans and advance to its customers
32.

The derivative deposit created by a bank results in-

A. a decrease in the total stock of money
B. an increase in the total stock of money
C. an increase in government securities
D. none of the above
Answer» B. an increase in the total stock of money
33.

What is Currency Deposit Ratio (CDR)?

A. Ratio of money held by the public in currency to that of money held in bank deposits
B. Ratio of money held by the public in bank deposits to that of money held by public in currency
C. Ratio of money held in demand drafts to that of money held in treasury bonds
D. None of the above
Answer» A. Ratio of money held by the public in currency to that of money held in bank deposits
34.

What is the Reserve Deposit Ratio ?

A. The proportion of money RBI lends to commercial banks
B. The proportion of total deposits commercial banks keep as reserves
C. The total proportion of money that commercial banks lend to the customers
D. None of the above
Answer» B. The proportion of total deposits commercial banks keep as reserves
35.

Which among the following is called the rate of interest charged by RBI for lending money to various commercial banks by rediscounting of the bills in India?

A. Bank rate
B. Discount window
C. Monetary Policy
D. Overnight rate
Answer» A. Bank rate
36.

What method is used by the Bank to read code on cheque?

A. MICR
B. OCR
C. OMR
D. None of the above
Answer» A. MICR
37.

Which is the largest private sector bank in India?

A. ICICI
B. Axis Bank
C. HDFC
D. ICICI
Answer» C. HDFC
38.

Who was the first Indian to become Governor of Reserve Bank of India(RBI)?

A. Liaquant Ali Khan
B. T.T. Krishnamachari
C. John Mathai
D. C.D. Deshmukh
Answer» D. C.D. Deshmukh
39.

In July 1969, 14 major Indian Scheduled Banks were nationalized and 6 more banks were nationalized in

A. April 1980
B. May 1980
C. April 1981
D. May 1981
Answer» A. April 1980
40.

Which is the largest private sector bank in India?

A. Axis Bank
B. ICICI Bank
C. HDFC Bank
D. South Indian Bank
Answer» B. ICICI Bank
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