All India Management Association (AIMA) 2007 M.B.A Marketing Management Central Banking

END OF part C

END OF ques. PAPER


Suggested Answers
Central Banking & Commercial Banking (MB3G2B) : October 2008
part A : Basic Concepts
Answer Reason
1. B In project financing transactions, the lenders base credit appraisal on projected revenues from the operation of the project rather than on physical assets or the credit worthiness of the sponsor. < TOP >

2. A The US monetary officials have made a point by their public statements which nevertheless attach importance to controlling inflation, though often referring to price stability. < TOP >

3. C Unlike the other sectors, issues in the banking sector percolate rapidly into the entire financial system and the economy. < TOP >

4. B The instruments whose maturity periods are less than 1 year, or 1 year (some times 18 months) are termed as short term instruments. Tail end Bonds are those whose remaining term to maturity is 1 year or less than 1 year. < TOP >

5. C All other choices other than (c) relate to Macro and Micro level prudent considerations .However the imbalance ranging from competing goals of loan quantities and loan quality will be addressed in the loan policy.. < TOP >

6. B Float funds, which are the third component of working funds, are much similar to the volatile funds. < TOP >

7. A All India financial institutions are covered by on-site supervisory process as per (CAMELS standards). IDBI inspects SFCs .Options b, c and d are under inspection by NABARD and NHB supervises Housing finance companies. < TOP >

8. E Money supply, interest rates and exchange rates mainly influenced a nation’s economic growth. < TOP >

9. B There is growing recognition that price stability ought to be the core objective of monetary policy. This is due to the cause that real growth itself would be in jeopardy, if inflation rates go beyond the margin of tolerance. < TOP >

10. D RBI has to ensure that a sound and healthy banking system emerges in the country. Any issues in the banking sector percolate rapidly into the entire financial system and the economy. In the absence of prudent regulations funds may not be deployed in a prudent fashion. < TOP >

11. C All choices other than (C) are accurate .Un registered fishing trawlers with the port authorities do not come under hypothecation loans.. < TOP >

12. B RBI passes regulations, problems guidelines and circulars on a continuous basis for better functioning of the financial system. Such regulations etc may become outdated and may not be attuned to the changing times. Hence RBI set up RRA whose function is primarily to review the regulations. < TOP >

Earning:   Approval pending.