UPSC Essentials | Daily subject-wise quiz : Economy (Week 28)

1. These are institutions whose members are included only from developing countries.

2. These banks fulfil certain lending obligations to facilitate developmental objectives.

3. Developing countries primarily borrow from these institutions to fund development projects.

How many of the statements given above are correct?

(a) Only one

(b) Only two

(c) All three

(d) None

QUESTION 2

Consider the following oilseeds:

1. Groundnut

2. Soyabean

3. Sunflower

4. Canola

How many of the above oilseeds are covered under the Minimum Support Price?

(a) Only one

(b) Only two

(c) Only three

(d) All four

QUESTION 3

With reference to the liquidity of the banking system, consider the following statements:

1. It refers to readily available cash that banks need to meet short-term business and financial needs.

2. The system of liquidity is said to be a surplus if the bank is a net borrower to the Reserve Bank of India (RBI).

Which of the above statement(s) is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

QUESTION 4

With reference to the Digital Banking Units (DBU), consider the following statements:

1. It is a specialised fixed point business unit or hub, housing a certain minimum digital infrastructure for delivering digital banking products and services.

2. Commercial Banks are permitted to open DBUs in tier 1 to tier 6 centres.

3. It offers existing financial products and services digitally in self-service mode at any time.

Which of the statement(s) given above is/are correct?

(a) Only one

(b) Only two

(c) All three

(d) None

QUESTION 5

With reference to the Indian Post Payments Bank (IPPB), consider the following statements:

1. It is aimed at making banking services available at people’s doorstep.

2. This payments bank of the Indian postal department will work through a network of post offices.

3. The operations of IPPB will be on a larger scale as compared to other banks.

4. It can advance loans or issue credit cards.

How many of the statements given above are correct?

(a) Only one

(b) Only two

(c) Only three

(d) All four

ANSWERS TO THE MCQs

1. (b)

FYI:

— A G20 expert panel on strengthening Multilateral Development Banks (MDBs) such as the World Bank and the Asian Development Bank wants the institutions to shift away from financing individual projects and towards prioritising sector-focused programmes and long-term transformation plans identified by national governments.

— Multilateral Development Banks are institutions whose members include multiple developed and developing countries, which have to fulfil certain lending obligations to facilitate developmental objectives. Hence, statement 1 is not correct and statement 2 is correct.

— They give funding and technical help to governments and organisations working on projects in areas such as transportation, energy, urban infrastructure, and waste management.

— Typically, rich nations contribute to the loan pool in MDBs, whereas developing countries borrow from these organisations largely to support development initiatives. Hence, statement 3 is correct.

— According to the expert group, MDBs should focus their operations – financial as well as analytical – on helping national governments create and operationalise their respective country platforms for the highest priority sustainable development goals (SDG) “as evidenced by the commitment of country leadership and degree of national investment.”

Therefore, option (b) is the correct answer.

2. (c)

FYI:

— Minimum Support Price (MSP) is a form of market intervention by the Government of India to insure agricultural producers against any sharp fall in farm prices.

— The MSPs are announced by the Union government and as such, it is the government’s decision. But the government largely bases its decision on the recommendations of the Commission for Agricultural Costs and Prices (CACP).

— The minimum support prices are announced by the Government of India at the beginning of the sowing season for certain crops.

— During each cropping season, the government announces minimum support prices for 23 crops.

— Crops covered by MSPs include:

(i) 7 types of cereals (paddy, wheat, maize, bajra, jowar, ragi and barley).

(ii) 5 types of pulses (chana, arhar/tur, urad, moong and masur).

(iii) 7 oilseeds (rapeseed-mustard, groundnut, soyabean, sunflower, sesamum, safflower, nigerseed).

(iv) 4 commercial crops (cotton, sugarcane, copra, raw jute).

Therefore, option (c) is the correct answer.

(Other Source: vikaspedia.in)

3. (a)

FYI:

— Liquidity in the banking system refers to readily available cash that banks need to meet short-term business and financial needs. Hence, statement 1 is correct.

— On a given day, if the banking system is a net borrower from the RBI under Liquidity Adjustment Facility (LAF), the system liquidity can be said to be in deficit. Hence, statement 2 is not correct.

— If the banking system is a net lender to the RBI, the system liquidity can be said to be in surplus.

— The LAF refers to the RBI’s operations through which it injects or absorbs liquidity into or from the banking system.

— The deficit in the liquidity situation has been caused by an uptick in the bank credit, advance tax payments by corporates, the intervention of the RBI into the forex market, and also incremental deposit growth not keeping pace with credit demand.

Therefore, option (a) is the correct answer.

4. (c)

FYI:

— In the Budget for 2022-23, the Finance Minister said: In recent years, digital banking, digital payments and fintech innovations have grown at a rapid pace in the country and to mark 75 years of our independence, it is proposed to set up 75 Digital Banking Units (DBUs) in 75 districts of the country by Scheduled Commercial Banks.

— A digital banking unit is a specialised fixed point business unit or hub, housing a certain minimum digital infrastructure for delivering digital banking products and services. Hence, statement 1 is correct.

— DBUs will service existing financial products and services digitally in self-service mode at any time. Hence, statement 3 is correct.

— Commercial banks (other than regional rural banks, payment banks and local area banks) with past digital banking experience are permitted to open DBUs in tier 1 to tier 6 centres, unless otherwise specifically restricted, without having the need to take permission from the RBI in each case. Hence, statement 2 is correct.

— The services include saving bank accounts under various schemes, current accounts, fixed deposit and recurring deposit accounts, digital kits for customers, mobile banking, Internet banking, debit cards, credit cards, and mass transit system cardss, digital kits for merchants, UPI QR codes, BHIM Aadhaar and point of sale (PoS).

— Currently, fintechs operating as neobanks offer digital banking services but they do so in partnership with non-banking financial companies (NBFCs). Some of the neobanks offering services in India are Jupiter, Fi Money, Niyo, Razorpay X.

Therefore, option (c) is the correct answer.

5. (b)

FYI:

— The IPPB or Indian Post Payments Bank is an initiative of the government aimed at making banking services available at people’s doorstep. Hence, statement 1 is correct.

— This payments bank of the Indian postal department will work through a network of post offices and nearly 3 lakh postmen and ‘Grameen Dak Sewaks’. Hence, statement 2 is correct.

— The operations of IPPB will be on a smaller scale as compared to other banks. Hence, statement 3 is not correct.

— Indian Post Payments Bank will not advance loans or issue credit cards to avoid risk. Hence, statement 4 is not correct.

— It will accept deposits, offer remittance services, mobile payments/transfers/purchases and other banking services like ATM/debit cards, net banking and third-party fund transfers. It has teamed up with PNB and Bajaj Allianz Life Insurance for loans and insurances.

Therefore, option (b) is the correct answer.

Previous Daily Subject-Wise-Quiz

Daily subject-wise quiz — Polity and Governance (Week 28)

Daily Subject-wise quiz — History, Culture, and Social Issues (Week 28)

Daily subject-wise quiz — Environment, Geography, Science and Technology (Week 28)

Daily subject-wise quiz — Economy (Week 27)

Daily subject-wise quiz – International Relations (Week 27)

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