SHANTI BUSINESS SCHOOL

PGDM TRIMESTER- III END TERM EXAMINATION

JULY - 2015
INDIAN FINANCIAL SYSTEM (IFS)
TIME: 3 HRS. Max. Marks: 100
Instructions:
1. The answers to Part A (MCQ) questions are to be written only in OMR sheet provided to you.
2. Only 30 minutes will be given to answer the MCQ. After that it will be collected . Use only
blue/black pen to darken the circle of OMR sheet.
3. Answers should be written neatly, briefly and to the point.
4. Main and sub question numbers should be clearly specified in the answer book.
5. Answer to sub questions of main question should be written in continuous sequence.

PART A
Total Marks: 25
1. GDR stands for
a) Global Demand Receipt
b) Global Depository Receipt
c) Global Direct Revenue
d) Gross Demand Revenue
2. The structure that is available in an economy to mobilize the capital from various surplus sectors
of the economy and allocate and distribute the same to the various needy sectors is known as -------
a) Economic Environment
b) Financial Environment
c) Financial System
d) Financial Market
3. Which of the following cannot be called as a debt instrument as referred in the financial
transactions?
a) Certificate of deposit
b) Bonds
c) Stocks
d) Commercial papers
4. ______ is when an insurance company buys insurance from another company against potential
losses.
a) Insurance
b) Reinsurance
c) Bancassurance
d) General Insurance

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5. In a company by the  use of price sensitive corporate information about the  company,  people
closer to the company try to adopt the technology to make gains or cover losses in share market
dealings and such process is  known as:
a)    Insider trading  b) Future trading c) Foreign trading d) Stock trading
6. What is meant by Repo rate?
a) When a bank is in need of cash it can it can discount bills of exchange and avail loan facilities
from Reserve Bank of India.
b) When a bank has excess cash, they buy securities from RBI against cash on the condition that
they resell the securities to RBI on a pre fixed day and price
c) It is rate at which RBI allows temporary loan facilities to commercial banks against
government securities on the condition that the bank will repurchase the securities within a
short period.
d) It is a rate which is offered by banks to their most valued customers or prime customers
7. What do you mean by universal banking?
a) Provision of all financial services in one country
b) Provision of all financial services in one bank
c) Provision of all financial services at a branch
d) Provision of all financial services at any of the counters of a branch of a bank
8. Corporate governance is a system
a) By which a company is directed and controlled
b) In which Board of directors are responsible for managing the business affairs of a company
c) Both (a) and (b)
d) Governance of companies by the government
9. Basel II accord is mostly concerned with:
a) Central vigilance commission
b) Non performing assets
c) Capital adequacy ratio
d) Foreign direct investment
10. Which of the following options best defines the risk?
a) Loss occurred due to happening of an event
b) Loss occurred due to non happening of an event
c) Risk experienced due to uncertainty
d) Probability of loss due to uncertainty
11. Which of the following is not included in three pillars of BASEL capital accord?
a) Minimum capital requirement
b) Supervisory review
c) Market discipline

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 d) Core banking solution 
12. Short selling means
a) Selling of less number of stocks than the seller holds
b) Selling of stocks in a short period
c) Sale of stocks, which the seller does not own at the time of selling
d) None of these
13. Arbitrage is
a) Buying and selling in two markets simultaneously
b) A rate of interest
c) A Fee
d) Arbitrage is a dispute resolution mechanism
14. Which of these is not a credit rating agency?
a)   Moody’s b)   Standard & Poor’s c)    Price water house d)   ICRA
15. Banking ombudsman means
a) Person appointed to recover dues from defaulting borrowers
b) A person to whom customer can approach for the redressal of his grievances
c) A person appointed to settle dispute between employees and management
d) A person appointed by RBI to oversee the functioning of Foreign Banks
16. The objective of Government to appoint Narsimhan Committee is
a)   To strengthen the banking system
b)   To improve customer service
c)    To strengthen  the credit portfolio
d)   None of these
17. A forward contract is:
a) A contract that involves a long position only.
b) An agreement between a bank and the RBI.
c) An agreement by two parties to engage in a financial transaction at a future point in time.
d) A contract that involves a short position only. .
18. The primary distinction between securities sold in the primary and secondary markets is the:
a) Riskiness of the securities
b) Price of the securities
c) Previous issuance of the securities
d) Profitability of the issuing company
19. Insider trading is basically trading on the basis of _____ of the company
a) Price sensitive information
b) Published price sensitive information
c) Critical financial information
d) Unpublished price sensitive information

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20. The money market is a(an) ______ market, while the capital market is a(an) ______ market
a) Investment; liquidity
b) Short-term; long-term
c) Liquidity; financial institution
d) Long-term; short-term
21. The most important service provided by mutual funds to mutual fund investors is:
a) The opportunity to buy corporate securities at a discounted price.
b) High expenses and trading costs which increase the rate of return for investors.
c) Diversification.
d) A higher than average rate of return.
22. In ___________ Factoring, factor can go to original seller in case buyer defaults.
a) Cross border
b) Domestic factor
c) With recourse factor
d) Without recourse factor
23. Reverse book building is a price discovery mechanism for companies who want to
a) Delist their shares
b) List their shares
c) Buy back shares
d) Both (a) and (c)
24. Participatory notes are -
a) Domestic derivative instruments
b) Overseas derivative instruments.
c) Security receipts.
d) Dated government securities.
25. Which among the following are negotiable instruments -
a) Commercial Paper.
b) Commercial Bill.
c) Certificates of Deposits.
d) All of the above.

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 PART B
Total Marks: [40]

B-1: Answer any five questions (5X4= 20 Marks)

1. Describe the Indian Financial System in the pre-reform and post reform period.
2. Briefly explain the relationship between financial system and economic growth.
3. “Treasury bills are an important short term source of finance for the government”. Discuss this
statement.
4. Compare and briefly discuss the Harshad Mehta and Ketan Parekh scam
5. What is a preferential allotment? Why preferential allotment is made by Companies?
6. Briefly explain the factors inhibiting the growth of Private Corporate Debt Market.
7. Enumerate the various functions of NABARD.

B-2: Explain any ten terms among the following: (10X2 = 20 Marks)

1. Secondary market
2. Book Building
3. Securitisation
4. Non Performing Assets
5. Red Herring Prospectus
6. Export Import Bank of India
7. Revolving Underwriting Finance Facility
8. Differential Shares
9. Demutualisation of Stock Exchanges
10. Asset Reconstruction Companies
11. Bancassurance
12. Forfaiting
13. Custodian
14. Financial Inclusion.

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 PART C
Total Marks:[5x7=35]

Read the case Indian Service Sector : “ A case study of Banking Sector” and answer the
following questions -

1. What is the case study all about? What are the major points highlighted in the case study?

2. How the flow of employment and investment takes place among primary, secondary and tertiary
sector?

3. How the entry of private players transformed the banking arena?

4. Do you thing the quality of services of the banks has improved? Explain briefly.

5. “Today the focus of banks has shifted from customer acquisition to customer retention”. Briefly
elucidate the statement.

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