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Nationalization of Banks
A significant milestone in Indian Banking happened in the late 1960s when the government nationalized, on 19th July, 1969 14 major commercial Indian Banks, followed by nationalization of 6 more commercial Indian banks in 1980. The stated reason for the nationalization was more control of credit delivery. After this, until the 1990s, the nationalized banks grew at a leisurely pace of around 4%. New Bank of India was amalgamated with Punjab National Bank in 1993.
During 1990 and 2000 Liberalisation, Privatisation and Globalisation took place and banking industry picked up a lot in its business. Technological advancement started by migrating from manual to computerisation of records. Narasimhans Commitee recommendations on prudential norms for Non Performing Assets were adopted which resulted in healthy growth of banks asset portfolio. After 2000 till date banks growth started galloping through Online Banking, development of Alternate delivery channels like ATM, Net BANKING, Mobile Banking, etc.
Reverse repo rate signifies the rate at which the central bank absorbs liquidity from the banks, while repo signifies the rate at which liquidity is injected.
What is CRR?
Cash Reserve Ratio, refers to a portion of deposits (as cash) which banks have to keep/maintain with the RBI. This serves two purposes. It ensures that a portion of bank deposits is totally risk-free and secondly it enables that RBI control liquidity in the system, and thereby, inflation by tying their hands in lending money.
What is SLR?
Besides the CRR, banks are required to invest a portion of their deposits in government securities as a part of their statutory liquidity ratio (SLR) requirements. What SLR does is again restrict the banks leverage in pumping more money into the economy.
Minimum margin for lending against selected commodities Ceiling on level of credit Minimum rate of interest to be charged on advances against particular commodities.
Practice Bits
1. Functions of Reserve Bank are: a) Bankers bank b) Banker to Government c) Lender of last resort d) Controlling financial requirements of banks through Repo/Reverse Repo e) All the above 2. How many Deputy Governors will be there in RBI: a) 3 b) 5 c) 7 d) 4
e) No Deputy Governor will be appointed 3. Reverse Repo Rate has the following characteristic: a) Borrowing by RBI from banks b) Borrowing with government security as collateral c) Short Term Borrowing d) All the above e) None of the above 4. Indian commercial banks are categorised into: a) Public Sector banks d) All the above b) Foreign Banks e) None of the above c) Private Sector Banks
5. Regional Rural Banks have been set up with the basic objective of: a) Providing credit to semi-urban and urban population b) Providing deposits facilities to farmers c) Providing credit and deposit facilities to rural areas d) Providing credit, deposit and other banking facilities to people in rural areas e) None of the above 6. The following is a mechanism for injecting liquidity by RBI to the financial system: a) Reverse Repo d) Repo b) Hike in CRR e) None of the above c) Hike in interest rate
7. ____________ are Local Institutions functioning like Banks a) Local Area Banks d) Financial Institutions b) Indigenous Banks e) All the above c) Private Banks
8. The first nationalisation of banks exercise was done on: a) 19.07.1969 d) 15.08.1967 b) 19.07.1970 e) None of the above c) 19.07.1967
10. The Basic criteria that was considered while nationalisation of banks in 1969 was the liability base of banks is more than: a) 30 crores or more d) 60 crores or more
a) Fixed Deposits d) Call Deposits
c) 50 crores or more
11. Which of the following deposits do not attract TDS? c) Flexi Deposits
12. At present the rate of interest paid by RBI to Commercial Banks on CRR is : a) 3% b) 4% c) 5% d) No interest
d) Only for above Rs. 1000 crore CRR balance. 13. The Cash Reserve Ratio is to be maintained by Commercial Banks in the form of: a)Cash in hand at branches c)Balance in a special account with RBI e) Any of the above options. 14. Increasing Cash Reserve Ratio from time to time by Reserve Bank of India leads to: a) Decrease in deposit b) Increase in lendable resources c) Any of the above b) Increasing in deposit d) Decrease in lendable resources. b) Balance with other banks d) Funds in the currency chest
15. The interest on Marginal Standing Facility sanctioned by RBI to banks is: a) Repo rate plus 1% b) Repo Rate plus 2% c) Repo Rate plus 3% e) None of the above
c) C.Desh Mukh
17. RBI was established in 1935 pursuant to recommendation of: a) The Hilton Young Commission b) b) All India Rural Credit Survey Committee c) Gorawala Committee d) Talwar Committee e) None of the above 18. One rupee note and all coins will be issued by: a) Reserve Bank of India c) Central and State Governments collectively d) None of the above 19. Who will sign One Rupee Note? a) Governor- RBI b) Governors of concerned state governments c) Finance Secretary, Ministry of Finance d) Finance Minister e) None of the above 20. What is MSF? a) Marginal Standing Facility b) Micro and Small Finance c) Medium Size finance d) Mid Term Sanction facility e) None of the above e) All the above b) Central Government
Answers
Q Ans 1 e 2 d 3 d 4 d 5 d 6 d 7 b 8 a 9 b 10 c
Q Ans
11 e
12 d
13 c
14 d
15 a
16 a
17 a
18 b
19 c
20 a