Qualitative Instruments

Q.

Why should credit at reasonable rates be available for all?

Q.

What are the instruments of monetary policy of RBI? How does RBI stabilise money supply against exogenous shocks?

Q.

Which of the following does not come under quantitative methods of monetary policy?

1. Open market operations

2. Cash reserve ratio

3. Moral suasion

4. Repo rate

Q.

At the time of Independence, moneylenders and traders exploited small and marginal farmers and landless labourers by lending to them on high interest rates and by manipulating the accounts to keep them in a debt trap. A major change occurred after 1969 when India adopted social banking and multi-agency approach to adequately meet the needs of rural credit. Can you highlight values violated by moneylenders and traders?

Q. Distinguish between:

1. Central Bank and Commercial Bank
2. Quantitative Credit Control Measures and Qualitative Credit Control Measures
3. Bank Rate and Open Market Operations
4. Cash Reserve Ratio and Statutory Liquidity Ratio

Q.

They can be issued to individuals, corporations, and companies during periods of tight liquidity when the deposit growth of banks is slow, but the demand for credit is high.

1. Call money

2. Commercial bill

3. Commercial papers

4. Certificate of deposit

Q.

What are the instruments of monetary policy of RBI? How does RBI stabilize money supply against exogenous shocks?

Q.

Under which qualitative tool does the RBI fix the maximum limit on loan and advances that can be made, which the commercial banks cannot exceed?

1. Moral Suasion

2. Rationing of credit

3. Loan-Value ratio

4. Margin requirement

Q. The primary objective of selective credit control is ________.

1. to raise the cost of credit for all purposes
2. to regulate total bank credit and general level of interest rates
3. to decrease the total supply of credit in the economy
4. to influence allocation of credit among different borrowers and users

Q.

What are the instruments of monetary policy of RBI? How does RBI stabilise money supply against exogenous shocks?

Q. Under , the RBI fixes the maximum limit on loan and advances that can be made, which the commercial banks cannot exceed.

1. moral suasion
2. loan-value ratio
3. rationing of credit
4. margin requirement

Q. State whether the following statements are TRUE or FALSE.

1. Credit rationing is quantitative credit control measure of Central bank.
2. Regulation of Consumer Credit is a quantitative credit control measure of Central Bank.
3. Bank Rate is the selective credit control measure used by the Central Bank of the country.
4. Central Bank also performs commercial banking business.
5. The main objective of a Central Bank is to earn profit.

Q. Give reasons or explain.

1. Clearing house system economises the use of cash.
2. Central Bank acts as a lender of the last resort.
3. The CRR affects the lending capacity of the banks.
4. As a banker to the government, the Central Bank transfers government funds.
5. A Central Bank may take 'Direct Action' against the defaulting commercial banks.

Q. What kind of change is to be made in (i) cash reserve ratio and (ii) bank rate in order to control inflation?

1. (i) should be increased, (ii) should be decreased.
2. (ii) should be increased, (i) should be decreased.
3. Both should be increased.
4. Both should be decreased.

Q. Read the following statements carefully and choose the correct answer from the following:

Statement 1 – State Bank of India (Commercial Bank) receives initial deposit of ₹100 crore and Liquidity Reserve Ratio (LRR) is 10%.

Statement 2 – SBI is required to keep only 10% as reserve i.e. (₹10 crore) and can lend the remaining amount, i.e. ₹90 crore.

[0.80 marks]

1. Both the statements are true.
2. Both the statements are false.
3. Statement 1 is true and Statement 2 is false.
4. Statement 2 is true and Statement 1 is false.

Q. is not an element of quantitative methods of monetary policy.

1. Repo rate
2. Moral suasion
3. CRR
4. OMO

Q. Which of the following is normative statement?

1. Wage rate in Satara should be Rs. 200 per day.
2. Tax should be reduced.
3. National income should be equally distributed.
4. All of the above

Q. Match the following:

Group A	Group B
1. Central bank	a. Quantitative measure of credit
2. Clearing house	b. Apex banking institution
3. Credit control	c. Deliberate buying and selling of government securities
4. Direct action	d. Selective method of credit control
5. Open market operations	e. Central bank
	f. Government
	g. S.L.R. (Statutory Liquidity Ratio)

Q.

Factors that affect the market price of bonds include all of the following except:

Q.

Unconventional monetary policies have not been regarded successful in most cases in the past. State true or false.

1. True

2. False

Q. Discuss four qualitative measures of the Central Bank to control credit in the economy.

Q. Which of the following is not a traditional function of the RBI?

1. Bankers to Government
2. Issue of currency
3. Banker's Bank
4. Credit to Priority Sector and Weaker sections

Q. Answer the following questions:

1. “Central Bank of the country has the monopoly of note issue.” Explain.
2. How does a Central Bank (for example RBI) transfer funds from one place to another? Illustrate.
3. Explain the Data Collection and Publicity functions of the Central Bank.
4. What are the various measures of quantitative credit control?
5. What are the various measures of qualitative credit control?

Q. State with reasons whether you agree or disagree with the following statements.
Accepting deposits is the only primary function of commercial banks.

Q. As per the announcement made by the RBI, some Stock Exchanges in India are allowed to introduce Plain Vanilla Currency Options. The term Plain Vanilla Currency Options is associated with which of the following activities/operations?

1. Dollar-Rupee Exchange Rate
2. Floating of Commercial Papers
3. Launch of new mutual funds
4. Deciding the opening price of a share on a particular business day

Q. Define or Explain the following concepts.

1. Prof. Samuelson's definition of Central Bank
2. Open Market Operation
3. Bank Rate
4. Moral suasion
5. Cash Reserve Ratio
6. Clearing House System
7. Central Bank as Bank of Issue