1 IES Most asked Important Question from Paper Questions: “> (First 4 chapters only, Last chapter recently added not in QP) @ Chapter 1 © Seed What is Money market? **2021, 2018 Give any two examples of instruments that are traded in money market. **2021 Name the components of Financial System. **2019 What is Capital market? **2019, 2015 What is a financial system? **2018 What is Financial Institution? **2017, 2015 ‘What is Primary Market?** 2017 Give the meaning of Open Market. **2017 Give the meaning of financial asset. **2016 0. What are the marketable securities? Give any two examples. **2016 Ans: Marketable securities are securities that can easily be sold. On a corporation's balance sheet, they are assets that can be readily converted into cash - for example, government securities, banker's acceptances and commercial paper, 11, What is a money market? **2014 12. Classify the financial assets with examples. **2014 Ans: Cash, stocks, bonds, mutual funds, and bank deposits are all are examples of financial assets. Unlike land, property, commodities, or other tangible physical assets, financial assets do not necessarily have inherent physical worth or even a physical form, seen away © SecB 1. State the functions of Capital Market. **2021 2. Distinguish between money market and capital market. ***2019, 2016 3. Write a note on NSE. *#2019 Ans: National Stock Exchange of India Limited is the leading stock exchange of India ¥ Itis located in Mumbai, Maharashtra. ¥ The National Stock Exchange of India Limited (NSE) is India's largest financial market and the fourth largest market by trading volume. Y The National Stock Exchange of India Limited was the first exchange in India to provide modem, fully automated electronic trading. ¥ It is world’s largest derivatives exchange in 2021 by number of contracts traded based on the statistics maintained by Futures Industry Association, a derivatives trade body. Y To establish a trading facility for debt, equity, and other asset classes accessible to investors across the nation, Y To act as a communication network providing investors an equal opportunity to participate in the trading system. ¥ To meet the global standards set for financial exchange markets. 4. Briefly explain the functions of Financial Markets. **2018 5. What are the features of financial se *#2018 6. State the role of financial markets. **2017 RNSFGCeRe een s ay 2 . Distinguish between Primary market and Secondary market, **2017 Briefly explain any six functions of financial system. **2016 Explain the features of Money Market. **2015 © SecC Discuss the role and funetions of Financial Market. **2021 ‘What is financial system discuss the various components of financial system, *** 2019, 2016 ‘What is Capital market? Discuss their objectives and importance. **2019 What is Capital market? Distinguish between the capital market and the money market. **2018, 2017 What is secondary market? Explain its functions. *#2015 Discuss the role and functions of Financial Markets. **2014 @ Chapter 2 © SecA 1. aT 10, WL 12. 13. What is ATM? ** 2021 Ans: Automated teller machine, itis a computerized electronic machine that performs basic banking functions (such as handling check deposits or issuing cash withdrawals) — called also automated teller machine, automatic teller, automatic teller machine. What is SLR? **2021 Ans; Statutory liquidity ratio (SLR) refers to the minimum reserve requirement that needs to be maintained by commercial banks in the nation. This term is used by the Indian government. The current SLR ratio is 18%. Who is Indigenous Banker? **2021 Ans; Indigenous bankers are private firms or individuals who operate as banks and as such both receive deposits and give loans. Like banks, they are also financial intermediaries. They should be distinguished h professional moneylenders whose primary business is not banking but money lending. Define Bank, **2019 What is Bank Rate? “#2019 Ans: A bank rate is the interest rate a nation’s central bank charges to its domestic banks to borrow money. The rates central banks charge are set to stabilize the economy. Expand ICICI. ** 2019 Define a Foreign Bank. **2018 Define Nonperforming Assets / NPA. **2021, 2018, 2014 ‘Ans; A non-performing asset (NPA) is a loan or advance for which the principal or interest payment remained overdue for a period of 90 days. Banks are required to classify NPAs further into Substandard, Doubtful and Loss assets. Whaat is Overdraft? **2017 What is Credit Control? **2017 . State any four primary functions of commercial banks. ** 2016 . State any two funetions of IDBI. **2015 Given) What is Group Bank? **2015 Ans: Group banking is a term that refers to a type of banking plan offered to groups such as employees in a corporation of people instead of individuals. These plans provide incentives and other benefits for those who participate, which are not readily available to the bank's other customers. RNSFGC3 14, When is bank considered as scheduled bank? **2016 Ans: When the paid-up capital and raised funds of the banks should be a minimum of 5 Lakh for qualifying as a scheduled bank. © SecB 1, Explain the role of Commercial banks in Economic Development. **2021 © See 7. Give the meaning and discuss the functions of Commercial Banks. *** *2019, 2018, 2017, 2016, 2014 8. Explain the changing role of Commercial banks in the Indian Economy. **2015 © Chapter 3 @ SecA State any four financial Institutions. **2021 State any two functions of EXIM Bank. **2021 ‘What do you mean by Non-banking Institutions (NBFCs)**2019 Expand SIDBI. ** 2019 Expand SFCs and SIDBI. **2018 Expand NBFC and NABARD. **2016 State any two features of financial service. **2016 Aaya ey © SecB ‘What are the functions of SFCs. **2019 ‘What are the features of Financial Services? **2018 ‘What are the objectives of EXIM banks. **2017 Bring out any three distinctions between Banking Companies and Non-Banking Financial Companies. **2016 What are the features of Financial Services? **2015 State the functions of EXIM Bank. **2014 Beye ay @ SecC 1, What is financial system discuss the various components of financial system. ** 2019 2. What are the functions and problems of State Financial Corporations? **2021 3. Write a note on the following: ****2018 a, Venture Capital b. Housing Finance c, Consumer Finance Discuss the objectives and functions of EXIM Bank. **2018, 2015, 2014 Explain in detail the different types of financial services. **2017 Write short notes on: "#2014 a, Housing and vehicle finance b. Venture capital, ane RNSFGC@ Chapter 4 eee = Aas 9. 10. W @ SecA ‘What is Mutual Funds? **2019, 2014 What is factoring? **2021, 2018, 2015 Whaat is letter of Credit? **2018, 2017 © SecB Find out the difference between Factoring and Bill Financing. **2021 Explain briefly the advantages of mutual funds. **2018 Give the classification of Venture Capital funds. **2015 What is factoring? State any 4 functions of factoring. **2014 @ SecC ‘What is Mutual Funds? Explain the features, advantages & disadvantages and various types of Mutual Funds. **** 2021, 2019, 2016, 2015 Write a note on the following: ****2016 a. Factoring b. Leasing c. Venture C: General Topics asked: Explain LIC and SIDCs. **** 2021, 2015 Ans; Life Insurance Corporation and State Industrial Development Corporations ‘What is meant by Liquidity? **2021 Ans: Liquidity refers to the ease with which an asset, or security, can be converted into ready cash without affecting its market price. Cash is the most liquid of assets, while tangible items are less liquid. The two main types of liquidity include market liquidity and accounting liquidity. ‘What is lender of last resort? **2017 Ans: A lender of last resort is whoever you tum to when you urgently need funds and you've exhausted all your other options. Banks typically turn to their lender of last resort when they cannot get the funding they need for their daily business. State the objectives of SEBI. **2021 (Given) State the Funetions of SEBI. **202, 2015 (Given) Mention any two objectives of RBI. **2016 (Given) Expand IDBI and SIDCs **2014 Ans; Industrial Development Bank of India and State Industrial Development Corporations What is Monetary Policy? **2014 Ans: Monetary policy is the control of the quantity of money available in an economy and the channels by which new money is supplied. By managing the money supply, a central bank aims to influence macroeconomic factors including inflation, the rate of consumption, economic growth, and overall liquidity. State the objectives of IDBI. Sec B**2021 (Given) ). Discuss the principles of Liquidity. Sec B**2019 . Explain the recommendations of Narasimhan Committee, Sec B**2018 Ans: The Narasimhan committee was appointed by the Reserve Bank of India (RBI) in 1969, soon after the nationalization of 14 banks. The Narasimhan Committee was appointed with RNSFGC5 the mandate of giving recommendations on how the banking facilities could be spread across India in an adequate manner. 11 Recommendations Made by the Narasimhan Committee on the Financial System of India: A high level committee was appointed by the Government of India under the Chairmanship of Shri M. Narasimhan in August 1991 to examine all aspects relating to the structure organisation, functions and procedures of the financial system, The committee’s report was tabled in Parliament on December 17, 1991: The main recommendations of the committee are as follows: 1. Reduction in Liquidity Ratio: Statutory Liquidity Ratio (SLR) to 25 percent over a period of five years. It also recommended the progressive reduction in Cash Reserve Ratio (CRR) from the present high level. Abolition of Directed Credit Programmes Free Determination of Interest Rates Improvements in Accounting Systems of the Banks Establishment of Special Tribunals in the banking sector Reconstitution of Banking System of India Abolition of Branch Licensing Foreign Banking More Freedom to Banks (0. Ending of Dual Control: The dual control over the banking system of the Finance Ministry and Reserve Banks should be ended 11, Financial Institutions: a) Transferring of direct lending function of IDBI to a separated institution while se eNAyeYN retaining to IDBI apex and refinancing role. b)_he Reserve Bank should set up a new agency to supervise financial institutions such as merchant banks, mutual funds, leasing companies, venture capital companies and factor companies. ©) Capital market to be liberalized. 12, What are the indication of liquidity of a commercial bank (or Factors affecting the Liquidity of Commercial Bank)? *** Sec B & Sec C2016 Ans: Internal factors affecting the liquidity of banks include the bank's capital base, asset quality, deposit base, level and quality of management, balance sheet demand and liabilities, quality of securities and loan portfolio, peculiarities of the customer base, bank image, attraction of funds from extemal sources. Intemal factors affecting the liquidity of banks include the bank's capital base, asset quality, deposit base, level and quality of management, balance sheet demand and liabilities, quality of securities and loan portfolio, peculiarities of the customer base, bank image, attraction of funds from extemal sources. RNSFGCFactors atfecting to the liquidity of commercial banks mandatory sererve policy ‘Refinancing and 13. 4. Tepipoatea ote Tee purty ni Gapesi scuss the objectives of LIC. Sec B **2018 Ans: The objectives of LIC are: a) Spread Life Insurance widely and in particular to the rural areas and to the socially and ‘economically backward classes b) Maximize mobilization of people's savings by making insurance-linked savings adequately attractive. ©) Investment of funds, the primary obligation to its policyholders. 4) Conduct business with utmost economy and with the full realization that the moneys belong to the policyholders. ©) Actas trustees of the insured public in their individual and collective capacities. £) Meet the various life insurance needs of the community that would arise in the changing social and economic environment. g) Involve all people working in the Corporation to the best of their capabili the interests of the insured public. h) Promote amongst all agents and employees of the Corporation, in furthering Explain any three credit control measures of RBI. Sec B **2016 Ans: Quantitative or traditional methods of credit control include banks rate policy, open market operations and variable reserve ratio. Qualitative or selective methods of credit control include regulation of margin requirement, credit rationing, regulation of consumer credit and direct action. 1 ‘Quantitative Qualitative Bank rate: Itis the rate of interest at which central | 1. Margin requirements; It is the bank lends funds to commercial banks. During difference between the market value of excess demand or inflationary gap, central bank | loan and the security value of loan. At RNSFGCincreases bank rate. Borrowings become costly and commercial banks borrow less from central bank. During deflationary gap central bank decreases the bank rate. It is cheap to borrow from the central bank or the part of the commercial banks which in turn the Commercial banks also decreases their lending rates. 2. Open market operations: The open market, operations means buying and selling of bonds and shares by RBI is open market. It is also called | 2. buying and selling of government security by the central bank from the public and commercial banks. 3. Legal Reserve Requirement: It is another method of RBI for controlling credit or supply of money. It | 3 includes 2 types of methods such as: a) Cash Reserve Ratio (CRR): It is the ratio of bank deposits that commercial bank has to keep with the central bank. At the time of inflation the RBI increases the rate of CRR, similarly at the time of deflation RBI decreases the rate of | 4. CRR. b) Statutory Liquidity Ratio (SLR): Every bank required to maintain a fixed percentage of its assets in the form of cash or other liquid assets called SLR. At the time of inflation the RBI increases the SLR, similarly at the time of deflation RBI decreases the rate of SLR. the fime of inflation the margin requirement value decreases by RBI for discouraging people and commercial banks for approaching more and more amount of loan. On the other hand at the time of deflation the RBI increases the value of margin just to encourage issuing of more amount of loan to the commercial banks and general public Moral Compulsion: It refers to written or oral advices given by central bank to commercial banks to restrict or expand a Direct_Action: Sometimes the RBI directly takes action against the commercial banks. It takes action to such type of commercial banks who are not following the rules regulation of RBI. It cancels their registration or nationalization of commercial banks. Rationing of credit: It is the related to limiting the amount of credit, which is issued by all the commercial banks. RBI fixes the size of issuing the credit according to the requirement of the country. 15. Mention six functions of RBI. Sec B ** 2014 Given) 16. Explain the functions of RBI. Sec C *** 2021, 2017 Ans: Meaning: The Reserve Bank of India is India’s ci tral bank and regulatory body and is responsible for the issue and supply of the Indian rupee and the regulation of the Indian banking system, It also manages the country's main payment systems and works to promote its economic development. Y Functions of Reserve Bank 1) Issue of Notes —The Reserve Bank has a monopoly for printing the currency notes in the country. It has the sole right to issue currency notes of various denominations except one rupee note (Which is issued by the Ministry of Finance). 2) Banker to the Government~The second important function of the Reserve Bank is to act as the Banker, Agent and Adviser to the Government of India and states. It performs all the banking functions of the State and Central Government and it also tenders useful advice to the government on matters related to economic and monetary policy. It also manages the public debt of the government. 3) Banker's Bank:- The Reserve Bank performs the same functions for the other commercial banks as the other banks ordinarily perform for their customers. RBI lends money to all the commercial banks of the country. 4) Controller of the Credit:- The RBI undertakes the responsibility of controlling credit created by commercial banks. RBI uses two methods to control the extra flow of money in the economy. These methods are quantitative and qualitative techniques to control and regulate the credit flow in the country. RNSFGC8 5) Custodian of Foreign Reserves:-For the purpose of keeping the foreign exchange rates stable, the Reserve Bank buys and sells foreign currencies and also protects the country's foreign exchange funds. RBI sells the foreign currency in the foreign exchange market when its supply decreases in the economy and vice-versa. Currently, India has a Foreign Exchange Reserve of around US$ 487 bn. 6) Other Functions: The Reserve Bank performs a number of other developmental works. These works include: a) The function of clearinghouse arranging credit for agriculture (which has been transferred to NABARD) 'b) Collecting and publishing the economic data ©) Buying and selling of Government securities (gilt edge, treasury bills etc) and trade is. 4) Giving loans to the Government buying and selling of valuable commodities ete €) It also acts as the representative of the Government in the International Monetary Fund (LMLF,) and represents the membership of India. 17. Explain the quantitative and qualitative credit control of RBI See C**2017, 2015. (Given) 18, What is Stock Exchange? Explain the purpose of SEBI Act and its functions. See C **2018 Ans: Meaning: SEBI full form is Securities and Exchange Board of India SEBI is a statutory regulatory body established by the Government of India to regulate the securities market in India and protect the interests of investors in securities. It also regulates the functioning of the stock market, mutual funds, etc. Y Objectives of SEBI a) To monitor the activities of the stock exchange. b) To safeguard the rights of the investors, ‘0 curb fraudulent practices by maintaining a balance between statutory regulations and self-regulation. 4) To ban the internal trading. e) SEBI also governs a company’s takeover. 1) To define the code of conduct for the brokers, underwriters, and other intermediaries. ¥ Powers and Functions that SEBI are: a) Itchecks price manipulation b) Itbans Insider trading ©) It prohibits unfair and fraudulent trade practices 4) Itpromotes a fair code of conduct in the security market ¢) It takes efforts to educate the investors regarding ways to evaluate the investment options better 1) It has designed a code of conduct, rules, and regulations to regulate the brokers, underwriters, and other intermediaries. g) SEBI also governs a company’s takeover. hh) It regulates and registers the workings of share transfer agents, stockbrokers, merchant bankers, trustees, and others who are linked with the stock exchange. i) Itregulates and registers the mutual funds as well. j) It conducts audits and inquiries of stock exchanges. k) Asa part of its developmental functions, SEBI performs the following role: })_ It facilitates the training of the intermediaries. m) It aims at promoting activities of the stock exchange by having an adoptable and flexible approach. RNSFGC9 19. What is Stock Exchange? Discuss the features and advantages (can write functions) of stock exchange. See C **2016 (Given) 20. Explain the functions of IDBI. Sec C **2014 Ans: Meaning: Industrial Development Bank of India (IDB1) established under Industrial Development Bank of India Act, 1964, is the principal financial institution for providing credit and other facilities for developing industries and assisting development institutions. Y The main objectives of IDBI a) Co-ordination, regulation and supervision of the working of other financial institutions such as IFCI, ICICI, UTI, LIC, Commercial Banks and SFCs. b) Supplementing the resources of other financial institutions and there by widening the scope of their assistance. ©) Planning, promotion and — development. == oof,_—skey _—_industries and diversification of industrial growth 4) Devising and enforcing a system of industrial growth that conforms to national priorities. e) The principal objective isto give loans both to the private as well as public sector undertaking in the field of commodity production, mining and services such as hotels and transport £) This bank provides loans to the industries directly. ¥ The role and Functions of IDBI are: a) To grant loans and advances to IFCI, SFCs or any other financial institution by way of refinancing of loans granted by such institutions which are repayable within 25 year. b) To grant loans and advances to scheduled banks or state co-operative banks by way of refinancing of loans granted by such institutions which are repayable in 15 years. ©) To grant loans and advances to IFCI, SFCs, other institutions, scheduled banks, state co- operative banks by way of refinancing of loans granted by such institution to industrial concems for exports. 4) To discount or re-discount bills of industrial concerns. e) To underwrite or to subscribe to shares or debentures of industrial concerns. £) To subscribe to or purchase stock, shares, bonds and debentures of other financial institutions, g) To grant line of credit or loans and advances to other financial institutions such as IFCI, SFCs, etc. h) To grant loans to any industrial concer. i) To guarantee deferred payment due from any industrial concern. j) To guarantee loans raised by industrial concems in the market or from institutions. k) To provide consultancy and merchant banking services in or outside Indi }) To provide technical, legal, marketing and administrative assistance to any industrial concem or person for promotion, management or expansion of any industry. m) Planning, promoting and developing industries to fill up gaps in the industrial structure in India n) To act as trustee for the holders of debentures or other securities. © Arithe Best RNSFGC