Money & Banking

11. The “Marginal Standing Facility” is a window for banks to borrow funds

The “Marginal Standing Facility” is a window for banks to borrow funds from the Reserve Bank of India at

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the repo rate
a rate lower than the repo rate
a rate higher than the repo rate
zero interest rate
This question was previously asked in
UPSC Combined Section Officer – 2021-22
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The correct answer is C. The Marginal Standing Facility (MSF) rate is higher than the repo rate.
The Marginal Standing Facility (MSF) is a facility under which scheduled commercial banks can borrow additional funds overnight from the Reserve Bank of India (RBI) by dipping into their Statutory Liquidity Ratio (SLR) portfolio up to a limit. It was introduced as a safety valve against unanticipated liquidity shocks. The rate charged under MSF is a penal rate, typically higher than the prevailing repo rate.
The MSF rate is usually pegged 25 or 50 basis points above the repo rate. For instance, if the repo rate is 6.50%, the MSF rate might be 6.75%. This higher rate discourages banks from using MSF frequently and encourages them to manage their liquidity prudently. The repo rate is the rate at which commercial banks borrow money from the RBI by selling their securities to the central bank under a repurchase agreement.

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12. Consider the following objectives : 1. Control inflation 2. Control

Consider the following objectives :

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  • 1. Control inflation
  • 2. Control fiscal deficit
  • 3. Regulate foreign exchange rates
  • 4. Regulate interest rates

Which of the above objectives are correct ?

1 and 2 only
3 and 4 only
1, 2 and 4 only
1, 2, 3 and 4
This question was previously asked in
UPSC Combined Section Officer – 2021-22
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The correct answer is 1, 2, 3 and 4.
All the listed objectives (Control inflation, Control fiscal deficit, Regulate foreign exchange rates, Regulate interest rates) are standard and correct objectives typically pursued through macroeconomic policies by governments and central banks.
Inflation control and interest rate regulation are primarily within the domain of monetary policy, usually managed by the central bank. Fiscal deficit control is a key objective of fiscal policy, managed by the government. Regulation of foreign exchange rates can involve interventions by both the central bank and the government, depending on the exchange rate regime. These objectives are interconnected and crucial for economic stability and growth.

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13. Which index is used to measure the performance of the Bombay Stock Exc

Which index is used to measure the performance of the Bombay Stock Exchange ?

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NIFTY
Sensex
NASDAQ
Dow Jones Industrial Average
This question was previously asked in
UPSC Combined Section Officer – 2021-22
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Sensex, short for Sensitive Index, is the benchmark stock market index for the Bombay Stock Exchange (BSE). It comprises 30 large and well-established companies listed on the BSE.
Sensex is the oldest stock index in India and represents the performance of the BSE.
NIFTY 50 is the benchmark index for the National Stock Exchange (NSE). NASDAQ and Dow Jones Industrial Average are major stock market indices in the United States.

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14. Which of the following is the highest policy-making body for monetary

Which of the following is the highest policy-making body for monetary matters in India?

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The Securities and Exchange Board of India
The NITI Aayog
The Ministry of Finance
The Reserve Bank of India
This question was previously asked in
UPSC Combined Section Officer – 2019-20
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The Reserve Bank of India (RBI) is the central bank responsible for monetary policy in India. The Monetary Policy Committee (MPC) within the RBI is the statutory body entrusted with the task of setting the benchmark policy rate (repo rate) to achieve the inflation target set by the government, while keeping in mind the objective of growth. This makes the RBI the highest policy-making body for monetary matters.
– RBI is the monetary authority of India.
– The Monetary Policy Committee (MPC) within RBI decides the key interest rates.
– SEBI regulates capital markets, NITI Aayog is a planning/advisory body, and the Ministry of Finance handles fiscal policy.
The MPC was constituted in 2016 and consists of six members – three officials from the RBI and three external members nominated by the government. The Governor of RBI is the ex-officio Chairperson. The decisions of the MPC are binding on the RBI.

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15. The index that measures the average change in the prices of goods and

The index that measures the average change in the prices of goods and services consumed by urban households is called

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Wholesale Price Index
Consumer Price Index
Producer Price Index
Sensex
This question was previously asked in
UPSC Combined Section Officer – 2019-20
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The Consumer Price Index (CPI) measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. In India, CPI is calculated separately for rural, urban, and combined populations. The question specifically refers to urban households, which corresponds to CPI-Urban or CPI-Combined (which includes urban data). WPI measures prices at the wholesale level, PPI measures prices received by producers, and Sensex is a stock market index.
– CPI reflects the cost of living for typical consumers.
– It is used as a key measure of retail inflation.
– Different series of CPI are published based on the target population (urban, rural, combined).
In India, the CPI combined (CPI-C) is currently the main inflation indicator used for monetary policy formulation by the Reserve Bank of India.

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16. Consider the following statements : The Reserve Bank of India is respo

Consider the following statements :
The Reserve Bank of India is responsible for the issuance of

  • 1. currency notes and coins
  • 2. Government bonds
  • 3. corporate bonds
  • 4. stocks

Which of the above statements are correct?

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1, 2 and 4 only
1, 2, 3 and 4
3 and 4 only
1, 2 and 3 only
This question was previously asked in
UPSC Combined Section Officer – 2019-20
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The Reserve Bank of India (RBI) is the central bank of India and is responsible for the issuance of currency notes (except the one-rupee note and coins which are issued by the Government of India but put into circulation by RBI) and management of government debt, which includes issuing government bonds. RBI does not issue corporate bonds or stocks; these are issued by companies and traded in the securities market regulated by SEBI. Therefore, statements 1 and 2 are correct, while 3 and 4 are incorrect.
– RBI is the sole authority for issuing currency notes in India (except ₹1 note).
– RBI acts as the debt manager for both the Central and State Governments, involving the issuance and management of government securities (bonds).
– Corporate bonds and stocks are capital market instruments issued by non-government entities.
The one-rupee note and coins are minted by the Government of India, but RBI facilitates their distribution and circulation. RBI’s other functions include acting as a banker to the government, banker to banks, foreign exchange manager, and regulator of the banking system.

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17. The term ‘inflation’ refers to the increase in

The term ‘inflation’ refers to the increase in

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unemployment rate
prices of goods and services
foreign exchange reserves
interest rates
This question was previously asked in
UPSC Combined Section Officer – 2019-20
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Inflation is defined as a sustained increase in the general price level of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy.
– It is about the increase in the *general* price level, not just a few items.
– It leads to a decrease in the purchasing power of money.
– It is typically measured as an annual percentage increase.
Inflation can be caused by various factors, including demand-pull (excess aggregate demand) and cost-push (increase in production costs). It is typically measured using price indexes like the Consumer Price Index (CPI) and Wholesale Price Index (WPI).

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18. The Banking Regulation (Amendment) Bill, 2020 was passed to provide re

The Banking Regulation (Amendment) Bill, 2020 was passed to provide regulatory powers to the Reserve Bank of India for overseeing the functioning of which financial institution?

  • 1. Mutual funds
  • 2. Insurance companies

Select the correct answer using the code given below.

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Both 1 and 2
1 only
2 only
Neither 1 nor 2
This question was previously asked in
UPSC Combined Section Officer – 2019-20
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Neither mutual funds nor insurance companies were brought under the purview of the Reserve Bank of India’s regulatory powers by the Banking Regulation (Amendment) Bill, 2020.
The Banking Regulation (Amendment) Bill, 2020, aimed to bring cooperative banks under the direct supervision of the Reserve Bank of India. This was done to strengthen their governance, improve financial stability, and protect depositors’ interests.
Mutual funds are regulated by the Securities and Exchange Board of India (SEBI). Insurance companies are regulated by the Insurance Regulatory and Development Authority of India (IRDAI). The 2020 amendment specifically targeted cooperative banks and did not extend RBI’s regulatory ambit to mutual funds or insurance companies.

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19. Insurance penetration is measured as

Insurance penetration is measured as

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the ratio of insurance premium to population
the percentage of insurance premium to GDP
the percentage of insurance premium to per capita income
the ratio of insurance premium to market capitalization
This question was previously asked in
UPSC CBI DSP LDCE – 2023
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The correct answer is B.
– Insurance penetration is a measure of the level of development of the insurance sector in a country.
– It is calculated as the ratio of total insurance premium underwritten in a given year to the Gross Domestic Product (GDP) of the country in the same year, expressed as a percentage. This indicates how much of the country’s economic output is spent on insurance premiums.
Another related measure is “insurance density,” which is calculated as the ratio of total insurance premium underwritten in a given year to the total population, indicating the average spending on insurance per person.

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20. Which of the following statements about the National Stock Exchange (N

Which of the following statements about the National Stock Exchange (NSE) of India is/are correct?

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  • 1. It was set up in 1990.
  • 2. It was recognized as a stock exchange by SEBI in 1993 and it commenced its operations in 1994.

Select the correct answer using the code given below.

1 only
2 only
Both 1 and 2
Neither 1 nor 2
This question was previously asked in
UPSC CBI DSP LDCE – 2023
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The correct answer is B, meaning only statement 2 is correct.
– Statement 1 is incorrect. The National Stock Exchange (NSE) of India was incorporated in 1992 based on recommendations from the Pherwani Committee report of 1991. While discussions and initial steps might have occurred around 1990, its formal establishment year is 1992.
– Statement 2 is correct. NSE received recognition as a stock exchange from SEBI in April 1993. It commenced operations in the Wholesale Debt Market (WDM) segment in June 1994 and in the Equity segment in November 1994.
NSE was established to bring transparency and efficiency to the Indian capital markets through technology and nationwide access. It was a key reform during the early 1990s liberalization period in India.

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