UPSC Essentials | Daily subject-wise quiz : Economy MCQs on SNRR account, Urban Cooperative Banks and more (Week 69)

1. Any person resident outside India, having a business interest in India for putting through bona fide transactions in rupees can open an SNRR account.

2. Opening of SNRR accounts by Pakistan and Bangladesh nationals and entities incorporated in Pakistan and Bangladesh requires prior approval of the Reserve Bank.

3. SNRR accounts can be current, savings, recurring or Fixed Deposit.

4. The business of the account holder can operate for an indefinite time.

Which of the statements given above are correct?

(a) 1 and 2 only

(b) 1, 2 and 4 only

(c) 2 and 3 only

(d) 1, 2, 3 and 4

Explanation

— Any person resident outside India with a business interest in India can open a Special Non-Resident Rupee Account (SNRR) with an authorised dealer for the purpose of conducting legitimate rupee transactions in accordance with the provisions of the Act, rules, and regulations enacted thereunder. Hence, statement 1 is correct.

— The opening of SNRR accounts by Pakistan and Bangladesh nationals, as well as entities incorporated in Pakistan and Bangladesh, requires prior Reserve Bank approval. Hence, statement 2 is correct.

— SNRR Accounts are non-interest bearing. Hence, statement 3 is not correct.

— Permissible Transactions: Debits and credits that are specific/incidental to the account holder’s anticipated business activity.

— Tenure: Concurrent with the contract / duration of operation / business of the account holder, and no longer than seven years, unless approved by the Reserve Bank. Hence, statement 4 is not correct.

Therefore, option (a) is the correct answer.

(Other Source: website.rbi.org.in)

QUESTION 2

Consider the following statements about Foreign Exchange Management Act, 1999:

1. It provides a legal framework for administration of foreign exchange transactions in India.

2. It came into force in 2005.

3. Persons resident in India are free to buy or sell foreign exchange for any current account transaction including lottery winnings.

How many of the statements given above are correct?

(a) Only one

(b) Only two

(c) All three

(d) None

Explanation

— The Foreign Exchange Management Act of 1999 establishes the legal basis for administering foreign exchange transactions in India. Hence, statement 1 is correct.

— Under the Foreign Exchange Management Act of 1999 (FEMA), which went into effect on June 1, 2000, all foreign exchange transactions were classed as either capital or current account. Hence, statement 2 is not correct.

— Current account transactions are any transactions made outside of India that do not change a resident’s assets or obligations, including contingent liabilities.

— According to Section 5 of the FEMA, Indian residents are free to buy or sell foreign exchange for any current account transaction, with the exception of transactions for which the Central Government has prohibited the drawal of foreign exchange, such as remittance of lottery winnings; remittance of income from racing/riding, etc., or any other hobby; and remittance for the purchase of lottery tickets, banned / proscribed magazines, football pools, sweepstakes, etc. Hence, statement 3 is not correct.

Therefore, option (a) is the correct answer.

(Other Source: website.rbi.org.in)

QUESTION 3

Consider the following statements:

1. In the Union Budget 2024-25, the finance minister announced a cut in the customs duty on gold to 6 per cent from 15 per cent.

2. The rate for taxation of long-term capital gains on the precious metal has been lowered to 12.5 per cent from 20 per cent.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Explanation

— In the Union Budget 2024-25, the finance minister announced a cut in the customs duty on gold to 6 per cent from 15 per cent earlier. For taxation of long-term capital gains, it was also proposed that the holding period for gold be reduced from 36 months to 24 months. Hence, statement 1 is correct.

— The rate for taxation of long-term capital gains on the precious metal, which was 20 per cent with indexation earlier, has also been lowered to 12.5 per cent without indexation. Hence, statement 2 is correct.

— According to some observers, the customs charge has been reduced in an effort to stop the smuggling of gold, which has increased since the yellow metal’s recent peak in price.

Therefore, option (c) is the correct answer.

QUESTION 4

With reference to the Urban Cooperative Banks (UCBs), consider the following statements:

1. It can issue equity shares and preference shares

2. It can issue unsecured debentures

3. UCBs does not require permission from the Reserve Bank of India for opening branches.

4. They monitor compliance with the provisions of the Banking Regulation Act, 1949.

Which of the statements given above are correct?

(a) 1, 2 and 3 only

(b) 2, 3 and 4 only

(c) 3 and 4 only

(d) 1, 2 and 4 only

Explanation

— The National Payments Corporation of India (NPCI) said that C-Edge Technologies Ltd, a technology service provider that caters mostly to cooperative banks and regional rural banks (RRBs), has been possibly impacted by a ransomware attack.

— The Reserve Bank of India’s Urban Banks Department is responsible for regulating and monitoring main (urban) cooperative banks, often known as Urban Cooperative Banks (UCBs).

— Under Section 23 of the Banking Regulation Act, 1949 (As Applicable to Cooperative Societies), primary (urban) cooperative banks must acquire authorisation from the Reserve Bank of India before creating branches. Hence, statement 3 is not correct.

— The Urban Banks Department’s regulatory tasks include ensuring that urban cooperative banks comply with the terms of the Banking Regulation Act, 1949 (As Applicable to Cooperative Societies). These provisions include : Hence, statement 4 is correct.

(i) Minimum Share Capital

(ii) Maintenance of CRR and SLR

— No co-operative bank shall establish or carry on banking activity unless the aggregate value of its paid-up capital and reserves is at least one lakh rupees.

— UCBs may issue equity shares and Perpetual Non-Cumulative Preference Shares (PNCPS) with prior authorisation from the respective Registrar / Central Registrar of Cooperative Societies (RCS / CRCS), which is given in cooperation with the Reserve Bank. Hence, statement 1 is correct.

— UCBs can also issue unsecured debentures. Hence, statement 2 is correct.

Therefore, option (d) is the correct answer.

(Other Source: website.rbi.org.in)

QUESTION 5

‘Report on Currency and Finance (RCF) for the year 2023-24’ is published by:

(a) Department of Economic Affairs

(b) Reserve Bank of India

(c) Department of Investment and Public Asset Management

(d) Department of Revenue

Explanation

— According to a Reserve Bank report, India’s digital economy is poised to constitute a fifth of GDP by 2026 from one-tenth at present.

— Reserve Bank Governor Shaktikanta Das stated in the foreword to the ‘Report on Currency and Finance (RCF) for the year 2023-24′ that digitisation in finance is paving the way for next-generation banking and expanding access to financial services at a reasonable cost.

— The country has adopted not only FinTech by speeding up digital payments, but also India Stack, which includes biometric identity, the Unified Payments Interface (UPI), mobile connectivity, digital lockers, and consent-based data sharing.

— According to the paper, the digital revolution is galvanising banking infrastructure and public finance management systems that include both direct benefit transfers and revenue collections.

Therefore, option (b) is the correct answer.

Previous Daily Subject-Wise-Quiz

Daily subject-wise quiz — Polity and Governance (Week 69)

Daily Subject-wise quiz — History, Culture, and Social Issues (Week 69)

Daily subject-wise quiz — Environment, Geography, Science and Technology (Week 69)

Daily subject-wise quiz — Economy (Week 68)

Daily subject-wise quiz – International Relations (Week 69)

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