IAS Pre Exam 2015 Current Affairs Practice Test-2


Ajit Kumar AJIT KUMARWISDOM IAS, New Delhi.

April 2015                                                                                 Ajit Kumar (Wisdom IAS, New Delhi)
                                                    Economy
 (1) Which of the statements are correct regarding the Micro Units Development Refinance Agency (MUDRA)?
(I) The primary product of MUDRA will be refinance for lending to micro businesses / units under the aegis of the Pradhan Mantri MUDRA Yojana
(II) The MUDRA, to be set up by SEBI under SEBI Act 1992
(III) The roles envisaged for MUDRA would include laying down policy guidelines for micro enterprise financing business, and registration of MFI entities
(IV) MUDRA is targeted towards mainstreaming young, educated or skilled workers and entrepreneurs including /women entrepreneurs.
Select the answer from the codes given below-
(a)    I,II,III                        (b) II,III,IV
(c) I, III,IV                      (d) All of the above
Ans.(c)
Expl: The MUDRA, to be set up through a statutory enactment. The primary products and schemes under MUDRA have already been created as ‘Shishu’, ‘Kishor’ and ‘Tarun’ to signify the stage of growth / development and funding needs of the beneficiary micro unit / entrepreneur as also provide a reference point for the next phase of graduation / growth for the entrepreneur to aspire for:
(i) Shishu: covering loans upto Rs. 50,000/-
(ii) Kishor: covering loans above Rs. 50,000/- and upto Rs. 5 lakh
(iii) Taruncovering loans above Rs. 5 lakh and upto Rs. 10 lakh 
(2) Monetary Policy is the process by which the RBI controls the supply of money in the economy by exercising its control over interest rates in order to-
(I) maintain price stability
(II) achieve high economic growth
Select the answer from the codes given below-
(a)    I only                       (b) II only
(c) I and II                     (d) None of the above
Ans.(c)
Expl:  On the basis of an assessment of the current and evolving macroeconomic situation, it has been decided toby RBI in April 2015 to: (a) keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 7.5 per cent; (b) keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liability (NDTL); (c) continue to provide liquidity under overnight repos at 0.25 per cent of bank-wise NDTL at the LAF repo rate and liquidity under 7-day and 14-day term repos of up to 0.75 per cent of NDTL of the banking system through auctions; and (d) continue with daily variable rate repos and reverse repos to smooth liquidity.
Consequently, the reverse repo rate under the LAF will remain unchanged at 6.5 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 8.5 per cent
(3) The National Mission for Electric Mobility (NMEM) Plan aims at -
(a) National energy security
(b) Mitigation of the adverse impact of vehicles on the environment
(c) Growth of domestic manufacturing capabilities
(d) All of the above
Ans.(d)
Expl:  Government of India launched the National Electric Mobility Mission Plan (NEMMP) 2020 in 2013. There is an ambitious target to achieve 6-7 million sales of hybrid and electric vehicles year on year from 2020 onwards. Government aims to provide fiscal and monetary incentives to kick start this nascent technology.
FAME-India or Faster Adoption and Manufacturing of Hybrid and Electric vehicles in India as part of the National Mission for Electric Mobility was launched from April 1, 2015 by the Department of Heavy Industries. The government had approved an initial outlay of Rs 75 crore from Plan Fund for the FAME-India scheme in the Budget 2015-16.
(4) In order for a centre to be considered an international financial centre, it must have a concentration of all of the following five banking activities:
 (I) Financing foreign trade, such as issuing credit for import
 (II) Currency exchange, such as foreign exchange (FOREX) trading
 (III) Transferring funds across political boundaries (foreign currency deposits)
(IV) Foreign borrowing and lending
 (V) Foreign investment
Select the answer from the codes given below-
(b)   I,II,III                        (b) II,III,IV
(c) III,IV,V                       (d) All of the above
Ans.(d)
Expl: The capital market regulator, Security and Exchange Board of India (SEBI) Board on 22 March 2015 approved SEBI (International Financial Services Centres) Guidelines, 2015. 
The guidelines for IFSCs aim to provide an enabling environment for setting up of capital market infrastructure like stock exchanges, clearing houses, depository services, etc., in such centres.
(5) Objective of the RBI as Monetary Authority is to-
(a) maintaining price stability and ensuring adequate flow of credit to productive sectors.
 (b) maintain public confidence in the system, protect depositors' interest and provide cost-effective banking services to the public.
 (c)  facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.
 (d) give the public adequate quantity of supplies of currency notes and coins and in good quality.
Ans.(a)
Expl: Main Functions of the RBI are -
As Monetary Authority:
- Formulates, implements and monitors the monetary policy.
- Objective: maintaining price stability and ensuring adequate flow of credit to productive sectors.
As Regulator and supervisor of the financial system:
- Prescribes broad parameters of banking operations within which the country's banking and financial system functions.
- Objective: maintain public confidence in the system, protect depositors' interest and provide cost-effective banking services to the public.
As Manager of Foreign Exchange
- Manages the Foreign Exchange Management Act, 1999.
- Objective: to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.
As Issuer of currency:
- Issues and exchanges or destroys currency and coins not fit for circulation.
- Objective: to give the public adequate quantity of supplies of currency notes and coins and in good quality.
Developmental role
- Performs a wide range of promotional functions to support national objectives.
Related Functions
- Banker to the Government: performs merchant banking function for the central and the state governments; also acts as their banker.
- Banker to banks: maintains banking accounts of all scheduled banks.
(6) What is liquidity adjustment facility (LAF)?
(I) It allows commercial banks to borrow money through repurchase agreements.
(II) It allows banks to respond to liquidity pressures and is used by governments to assure basic stability in the financial markets.
(III) It is used to aid banks in adjusting the day to day mismatches in liquidity.
(IV) LAF consists of bank rate and Statutary Liquidiry Ratio(SLR)
Select the answer from the codes given below-
(a)    I,II,III                        (b) II,III,IV
(c)I, III,IV                     (d) All of the above
Ans.(a)
Expl : LAF consists of repo and reverse repo operations. Repo or repurchase option is a collaterised lending i.e. banks borrow money from Reserve bank of India to meet short term needs by selling securities to RBI with an agreement to repurchase the same at predetermined rate and date. The rate charged by RBI for this transaction is called the repo rate. Repo operations therefore inject liquidity into the system. Reverse repo operation is when RBI borrows money from banks by lending securities. The interest rate paid by RBI is in this case is called the reverse repo rate. Reverse repo operation therefore absorbs the liquidity in the system. The collateral used for repo and reverse repo operations comprise of Government of India securities. Oil bonds have been also suggested to be included as collateral for Liquidity adjustment facility
(7) Which of the following statements are correct regarding ‘Repo Rate’declared by RBI?
(I) It originated in  1917 in U.S financial market when war time taxes made other sources of lending unattractive
(II) The introduction of Liquidity adjustment facility in India was on the basis of the recommendations of Narsimham committee on banking sector reforms.
(III) Repo and reverse repo rates are announced separately in India
(IV) Repo rate has become the key policy rate which signals the monetary policy stance of the economy.
Select the answer from the codes given below-
(a)    I,II,III                        (b) II,III,IV
(c) I, II,IV                       (d) All of the above
Ans.(c)
Expl : Repo and reverse repo rates were announced separately till the monetary policy statement in 2011. In this monetary policy statement, it has been decided that the reverse repo rate would not be announced separately but will be linked to repo rate. The reverse repo rate will be 100 basis points below repo rate.
(8) Which of the following pairs is/are matched?
(I) Own-account enterprise (OAE)  -  An enterprise, which is run without any hired worker employed on a fairly regular basis, is termed as an own account enterprise.
(II) Micro-finance Institutions (MFIs) - Organisations providing micro credit facilities up to Rs 5 lakh, thrift collection services, pension or insurance services, or remittance services.
(III) Shishu, a product under MUDRA -  covering loans upto Rs. 5,000,000/-
Select the answer from the codes given below-
(a)    I only                       (b) I and II
(c) I and III                       (d) All of the above
Ans.(b)
Expl: Products under MUDRA are-
(i) Shishu: covering loans upto Rs. 50,000/-
 (ii) Kishor: covering loans above Rs. 50,000/- and upto Rs. 5 lakh
(iii) Tarun: covering loans above Rs. 5 lakh and upto Rs. 10 lakh 
(9) Which of the following are componenents of the JAM Number Trinity?
(I) Jan Suraksha Yojana
(II) Jan Dhan Yojana
(III) AadhaarNumber
 (IV) Mobile Number
Select the answer from the codes given below-
(a)    I,II,III                        (b) II,III,IV
(c) I, II,IV                       (d) All of the above
Ans.(b)
Expl : The JAM Number Trinity – Jan Dhan Yojana, Aadhaar, Mobile – can enable the State to transfer financial resources to the poor in a progressive manner without leakages and with minimal distorting effects. If the JAM Number Trinity can be seamlessly linked, and all subsidies rolled into one or a few monthly transfers, real progress in terms of direct income support to the poor may finally be possible.
(10) Indian Railways launched its own RuPay pre-paid debit card. The card will enable passengers to-
(a) book their Rail tickets
(b) do shopping the cards
(c) take e-catering services
(d) All of the above
Ans.(d)
Expl: The RuPay pre-paid card  is the first of its kind in the market where both virtual as well as physical cards are being issued to the customer in two variants
(11) The Reserve Bank of India in March 2015 signed a currency swap agreement with the Central Bank of Sri Lanka. Which of the statements is/ are correct regarding the Agreement?
(I) This agreement will further economic co-operation between the two countries and also bring in more financial stability in the SAARC region.
(II) The swap arrangement is intended to provide a backstop line of funding for the SAARC member countries to meet any balance of payments and liquidity crises till longer term arrangements are made or if there is need for short-term liquidity due to market turbulence.
Select the answer from the codes given below-
(a)    I Only                     (b) II Only
(c) I and II                    (d) None of the above
Ans.(c)
Expl: The Currency Swap Agreement with Sri Lanka was inked in backdrop of the announcement of May 2012 by the RBI during the SAARCFINANCE Governor’s meeting. At the meeting, RBI had offered swap facilities aggregating 2 billion US dollar, both in foreign currency and Indian Rupee to neighbouring countries of the SAARC region.
(12) Union Government and Reserve Bank of India (RBI) signed an agreement on Monetary Policy Framework in February 2015. Which of the statement is/are correct regarding the agreement?
(I) It will put in place a framework of a modern monetary policy to meet the challenges of an increasingly complex economy.
(II) The agreement empowers the RBI to go for inflation targeting that is common in developed countries and it also empowers RBI to monitor its monetary policy framework.
(III) As per the agreement, RBI will aim to bring down the inflation below six percent by January 2016 and inflation target for 2016-2017 and subsequent years will be 4 percent +/-2 percentage points.
(IV)The Government of India in stead of the RBI will determine the country’s key interest rates or any measures needed to achieve that inflation target.
Select the answer from the codes given below-
(a)    I,II,III                        (b) II,III,IV
(c) I, II,IV                       (d) All of the above
Ans.(a)
Expl : India’s monetary policy framework will be operated by the RBI. It will put in place a framework of a modern monetary policy to meet the challenges of an increasingly complex economy.
 


Saturday, 11th Apr 2015, 09:08:29 AM

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