QUIZ – 2019: Insights Static Quiz, 28 December 2019 – Economy
INSIGHTS STATIC QUIZ 2019
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Question 1 of 5
1. Question
Which of the following were the goals of the planning system in India between 1950-1990?
- Export promotion
- Industrialization
- Self-reliance
- Equity
Select the correct answer code:
Correct
Solution: a)
All the above are the goals of the planning system in India between 1950-1990.
Incorrect
Solution: a)
All the above are the goals of the planning system in India between 1950-1990.
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Question 2 of 5
2. Question
Consider the following statements about Marginal Standing Facility (MSF).
- It is the penal rate at which banks can borrow money from the central bank over and above what is available to them through the Liquidity Adjustment Facility (LAF) window.
- Here banks can borrow funds by pledging government securities within the limits of the statutory liquidity ratio.
- At present MSF is 1 percent above the repo rate.
Which of the above statements is/are correct?
Correct
Solution: c)
Marginal Standing Facility (MSF) was announced by the Reserve Bank of India (RBI) in its Monetary Policy (2011-12) and refers to the penal rate at which banks can borrow money from the central bank over and above what is available to them through the LAF window.
MSF is always fixed above the repo rate. The MSF would be a penal rate for banks and the banks can borrow funds by pledging government securities within the limits of the statutory liquidity ratio.
Current Repo Rate is 5.15% and MSF is 5.4% (MSF was originally intended to be 1% above the repo rate).
Incorrect
Solution: c)
Marginal Standing Facility (MSF) was announced by the Reserve Bank of India (RBI) in its Monetary Policy (2011-12) and refers to the penal rate at which banks can borrow money from the central bank over and above what is available to them through the LAF window.
MSF is always fixed above the repo rate. The MSF would be a penal rate for banks and the banks can borrow funds by pledging government securities within the limits of the statutory liquidity ratio.
Current Repo Rate is 5.15% and MSF is 5.4% (MSF was originally intended to be 1% above the repo rate).
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Question 3 of 5
3. Question
) Consider the following statements about Real Estate investment Trusts (REITs).
- REITs are mutual fund like institutions that enable investments mainly in completed and revenue generating real estate assets.
- REITS are regulated by the securities market regulator in India.
- A REIT can be launched as an initial public offer (IPO).
Which of the above statements is/are correct?
Correct
Solution: d)
REITs are similar to mutual funds. While mutual funds provide for an opportunity to invest in equity stocks, REITs allow one to invest in income-generating real estate assets.
They are collective investment vehicles that operate and manage property portfolios and give returns to investors. Securities and Exchange Board of India (Sebi) mandated that all REITS be listed on exchanges and make an initial public offer to raise money.
REITs can reduce the risk related to your property investments as 80 per cent of the value of the REIT should be in completed and rent-generating assets. They are required to be run by professional managements with specified years of experience notified by SEBI.
A REIT can be launched as an initial public offer (IPO). An investor can apply for investment in the REIT through his demat account, either online or by filling up the IPO form and indicating demat account details. After the issue is closed, the REIT will allot units to eligible investors.
Incorrect
Solution: d)
REITs are similar to mutual funds. While mutual funds provide for an opportunity to invest in equity stocks, REITs allow one to invest in income-generating real estate assets.
They are collective investment vehicles that operate and manage property portfolios and give returns to investors. Securities and Exchange Board of India (Sebi) mandated that all REITS be listed on exchanges and make an initial public offer to raise money.
REITs can reduce the risk related to your property investments as 80 per cent of the value of the REIT should be in completed and rent-generating assets. They are required to be run by professional managements with specified years of experience notified by SEBI.
A REIT can be launched as an initial public offer (IPO). An investor can apply for investment in the REIT through his demat account, either online or by filling up the IPO form and indicating demat account details. After the issue is closed, the REIT will allot units to eligible investors.
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Question 4 of 5
4. Question
Consider the following statements.
- Economic capital framework refers to the risk capital required by the central bank while taking into account different risks.
- RBI pays wealth tax to the Union Government for holding capital reserves.
- RBI transfers surplus reserves to the Government of India in accordance with Section 47 of the Reserve Bank of India Act, 1934.
Which of the above statements is/are correct?
Correct
Solution: c)
Economic capital framework refers to the risk capital required by the central bank while taking into account different risks. The economic capital framework reflects the capital that an institution requires or needs to hold as a counter against unforeseen risks or events or losses in the future.
Although RBI was promoted as a private shareholders’ bank in 1935 with a paid up capital of Rs 5 crore, the government nationalised RBI in January 1949, making the sovereign its “owner”. What the central bank does, therefore, is transfer the “surplus” — that is, the excess of income over expenditure — to the government, in accordance with Section 47 (Allocation of Surplus Profits) of the Reserve Bank of India Act, 1934.
Does the RBI pay tax on these earnings or profits?
No. Its statute provides exemption from paying income-tax or any other tax, including wealth tax.
Incorrect
Solution: c)
Economic capital framework refers to the risk capital required by the central bank while taking into account different risks. The economic capital framework reflects the capital that an institution requires or needs to hold as a counter against unforeseen risks or events or losses in the future.
Although RBI was promoted as a private shareholders’ bank in 1935 with a paid up capital of Rs 5 crore, the government nationalised RBI in January 1949, making the sovereign its “owner”. What the central bank does, therefore, is transfer the “surplus” — that is, the excess of income over expenditure — to the government, in accordance with Section 47 (Allocation of Surplus Profits) of the Reserve Bank of India Act, 1934.
Does the RBI pay tax on these earnings or profits?
No. Its statute provides exemption from paying income-tax or any other tax, including wealth tax.
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Question 5 of 5
5. Question
Consider the following statements regarding Development banks.
- Development banks are financial institutions that provide only short-term credit for capital-intensive investments.
- Such banks often lend at low and stable rates of interest with considerable social benefits.
- Development banks are often supported by governments in the form of tax incentives for private sector banks and financial institutions to invest in securities issued by development banks.
- IDBI was set up as an apex body of all development finance institutions.
Which of the above statements is/are correct?
Correct
Solution: c)
Development banks are financial institutions that provide long-term credit for capital-intensive investments spread over a long period and yielding low rates of return, such as urban infrastructure, mining and heavy industry, and irrigation systems.
Development banks are also known as term-lending institutions or development finance institutions.
Features of development banks:
- Such banks often lend at low and stable rates of interest to promote long-term investments with considerable social benefits.
- Fund generation: To lend for long term, development banks require correspondingly long-term sources of finance, usually obtained by issuing long-dated securities in capital market, subscribed by long-term savings institutions such as pension and life insurance funds and post office deposits.
- Support by the government: Considering the social benefits of such investments, and uncertainties associated with them, development banks are often supported by governments or international institutions.
- Such support can be in the form of tax incentives and administrative mandates for private sector banks and financial institutions to invest in securities issued by development banks.
In 1955, the World Bank prompted the Industrial Credit and Investment Corporation of India (ICICI) — the parent of the largest private commercial bank in India today, ICICI Bank — as a collaborative effort between the government with majority equity holding and India’s leading industrialists with nominal equity ownership to finance modern and relatively large private corporate enterprises. In 1964, IDBI was set up as an apex body of all development finance institutions.
Incorrect
Solution: c)
Development banks are financial institutions that provide long-term credit for capital-intensive investments spread over a long period and yielding low rates of return, such as urban infrastructure, mining and heavy industry, and irrigation systems.
Development banks are also known as term-lending institutions or development finance institutions.
Features of development banks:
- Such banks often lend at low and stable rates of interest to promote long-term investments with considerable social benefits.
- Fund generation: To lend for long term, development banks require correspondingly long-term sources of finance, usually obtained by issuing long-dated securities in capital market, subscribed by long-term savings institutions such as pension and life insurance funds and post office deposits.
- Support by the government: Considering the social benefits of such investments, and uncertainties associated with them, development banks are often supported by governments or international institutions.
- Such support can be in the form of tax incentives and administrative mandates for private sector banks and financial institutions to invest in securities issued by development banks.
In 1955, the World Bank prompted the Industrial Credit and Investment Corporation of India (ICICI) — the parent of the largest private commercial bank in India today, ICICI Bank — as a collaborative effort between the government with majority equity holding and India’s leading industrialists with nominal equity ownership to finance modern and relatively large private corporate enterprises. In 1964, IDBI was set up as an apex body of all development finance institutions.
