Banking System, NPA & IBC — Set 7
Economy Advanced · बैंकिंग प्रणाली, NPA और IBC · Questions 61–70 of 160
The Reverse Repo Rate is the rate at which banks deposit money with RBI. What is the relationship between Repo and Reverse Repo rates?
Correct Answer: B. Reverse Repo is always lower
The correct answer is Reverse Repo is always lower. The Reverse Repo Rate is always lower than the Repo Rate to create a corridor. This differential encourages banks to lend to each other rather than RBI. This topic is frequently tested in competitive examinations such as RRB NTPC, SSC, and UPSC.
The Base Rate is a floor-set rate below which banks cannot lend for short-term loans. Which factors does RBI consider while setting Base Rate?
Correct Answer: B. Cost of funds and profit margin
The correct answer is Cost of funds and profit margin. The Base Rate is determined by banks' cost of funds, operating costs, and profit margin. RBI guidelines ensure all customers get fair pricing. This topic is frequently tested in competitive examinations such as RRB NTPC, SSC, and UPSC.
The Overnight Indexed Swap (OIS) reflects market expectations about future interest rates. What is the typical maturity for OIS contracts?
Correct Answer: D. 1 year
The correct answer is 1 year. OIS contracts typically have 1-year maturity and are used by financial institutions to hedge interest rate risks and gauge future rate expectations. This topic is frequently tested in competitive examinations such as RRB NTPC, SSC, and UPSC.
The Collateralized Borrowing and Lending Obligation (CBLO) is a money market instrument. What is the maximum maturity for CBLO?
Correct Answer: C. 30 days
The correct answer is 30 days. CBLO has a maximum maturity of 30 days and is commonly used by financial institutions for short-term borrowing and lending with collateral. This topic is frequently tested in competitive examinations such as RRB NTPC, SSC, and UPSC.
The Treasury Bill (T-Bill) market in India has different maturity periods. Which maturity period T-Bill is the most liquid?
Correct Answer: C. 364 days
The correct answer is 364 days. The correct answer is '364 days'. 364-day T-Bills are the most liquid as they are closest to long-term securities while retaining short-term characteristics. This topic is frequently tested in competitive examinations such as RRB NTPC, SSC, and UPSC.
The Overnight Indexed Swap (OIS) is used to hedge interest rate risk. What index is used in OIS contracts in India?
Correct Answer: A. MIBOR
The correct answer is MIBOR. OIS contracts in India use the MIBOR (Mumbai Interbank Offered Rate) index. MIBOR reflects overnight lending rates between banks in the Indian market. This topic is frequently tested in competitive examinations such as RRB NTPC, SSC, and UPSC.
The MIBOR (Mumbai Interbank Offered Rate) is India's primary overnight lending rate. Which institution publishes MIBOR daily?
Correct Answer: B. FIMMDA
The correct answer is FIMMDA. FIMMDA (Fixed Income Money Market and Derivatives Association) publishes MIBOR daily based on quotes from contributing banks. This topic is frequently tested in competitive examinations such as RRB NTPC, SSC, and UPSC.
The Commercial Paper (CP) market allows large corporations to raise short-term funds. What is the minimum credit rating required for CP issuance?
Correct Answer: B. P1
The correct answer is P1. Only companies with a minimum rating of P1 (equivalent to CRISIL ratings) can issue commercial paper to ensure investor protection. This topic is frequently tested in competitive examinations such as RRB NTPC, SSC, and UPSC.
The Certificate of Deposit (CD) is a money market instrument issued by banks. What is the minimum amount for CD issuance?
Correct Answer: C. Rs. 25 lakh
CDs have a minimum issuance amount of Rs. 25 lakh. They are attractive to institutional investors seeking short-term secure returns.
The Inter-bank Call Money Market is the shortest-term money market. What is the typical transaction size in call money market?
Correct Answer: B. Minimum Rs. 1 crore
The correct answer is Minimum Rs. 1 crore. Call money transactions have a minimum size of Rs. 1 crore, allowing banks to manage overnight liquidity needs efficiently. This topic is frequently tested in competitive examinations such as RRB NTPC, SSC, and UPSC.