Regulatory Institutions Very Short Answer Type Questions

Question 1.
Who is the regulatory framework of the Indian financial system?
Answer:
Indian financial system has two major regulatory arms of Government of India:

  • Reserve Bank of India
  • Securities Exchange Board of India.

Question 2.
Define RBI.
Answer:
According to Kisch and Elkin, “The essential function of central bank is the maintenance of stability with monetary standard which involves control of the monetary circulation”.

Question 3.
What is need for Central Bank or RBI?
Answer:
If the country has to secure monetary stability, it has to have one Institution like central bank or RBI that will ensure monetary stability and control the other commercial banks.

Question 4.
Define Investor Regulations.
Answer:
The Regulations framed to protect the interest of the investors are known as Investors regulations.

Question 5.
What do you mean by Internal regulations?
Answer:
To ensure discipline in the management of financial institution or other financial service organisations, the RBI has introduced various regulations wherein all the
institutions have to abide by the regulations laid down. These are known as internal regulations.

Question 6.
What do you mean by Self regulations?
Answer:
The regulations imposed by them selves are called self, regulations. Ex. the , Merchant Bankers association in India have framed a list of impositions or legislations apart from the regulations laid down the SEBl.

Question 7.
State the types of Regulatories.
Answer:

  • Legislative regulations
  • Self regulations
  • Internal regulations
  • Investor regulations
  • Institutional regulations

Question 8.
What do you mean by Economic Growth?
Answer:
The growth of the economy financially and economically is known growth. To ensure economic growth there should be proper planning as Qc, activities that provides employment opportunities, increases standard of living and the profitability of the organizations undertaking activities.

Question 9.
What is zero interest bond?
Answer:
Some bonds, called zero interest bonds, don’t pay out any interest prior to maturity. These bonds are sold at-a deep discount because all of the bond occurs at maturity when the principal is returned to the bond holders along with interest. These bonds are also known as “zeros”.

Question 10.
What are the three objective RBI?
Answer:

  • To ensure monetary and financial stability
  • To frame policies and lay down regulations
  • To monitor the activities of commercial bank
  • To issue currency notes except one rupee notes and coin

Question 11.
State any four functions of RBI.
Answer:

  • Maintain financial stability and enable the growth of sound institutions.
  • Maintain monetary stability for the business and economic life towards growth and proper functioning of a mixed economic system in the cowry.
  • Maintain a stable payment and currency ensure regulations monetary and financial stability
  • Policies and lay down efficient execution of financial transaction system and facilitate safe.
  • Regulate the money and credit supply in the economy to help maintain price stability to a reasonable extent.
  • Ensure credit allocation in line with

Question 12.
Expand CRR and SLR?
Answer:

  • CRR = Cash Reserve Ratio
  • SLR = Statutory Liquidity Ratio

Question 13.
Give the meaning of open market operations.
Answer:
Open market operations refers to buying and selling by the RBI in the money market to change the volume The basic objective of this measure is to control the national economic priorities.

Question 14.
State two credit controls used by RBI?
Answer:
Credit control used by RBI are:

  • Quantitative Credit Control Measures
  • Qualitative Credit Control Measures.

Question 15.
What are the objectives of SEBI?
Answer:
The objectives of the SEBI:

  • Protection of investors interests in securities
  • Promotion market and of the development of the securities market
  • Regulation of the securities market

Question 16.
Give the meaning of central bank.
Answer:
A central bank or reserve bank is a public institution that manages a state’s currency, money supply and interest rates. They usually oversee the commercial banking system of their respective countries. It possess a monopoly on increasing nation’s monetary base and usually print the national currency, which serves as nations legal tender.

Question 17.
What is monetary policy?
Answer:
Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low unemployment

Question 18.
State the key roles of RBI.
Answer:
The Key roles of the RBI are:

  • Regulator and supervisor of the financial system
  • Manager of exchange control
  • Issuer of currency
  • Banker to the Government
  • Bank to banks: maintains banking accounts of all scheduled banks

Question 19.
What is Credit Control?
Answer:
Credit Control is an important tool used by the Reserve Bank of India, a major weapon of the monetary policy used to control the demand and supply of money (liquidity) in the economy.

Question 20.
What is qualitative methods?
Answer:
Qualitative methods means the control or management of the uses of bank credit or manner of channelizing of cash and credit in the economy.

Question 21.
What is publicity?
Answer:
RBI uses media for the publicity of its views on the current market condition and its directions that will be required to be implemented by the commercial banks to control.

Question 22.
What is direct action?
Answer:
Under the banking regulation Act, the central bank has the authority to take strict action against any of the commercial banks that refuses to obey the directions given by Reserve Bank of India. This phenomenon is termed as direct action.

Question 23.
What is moral suasion?
Answer:
This method is also known as “Moral Persuasion” as the method that the Reserve Bank of India, being the apex bank uses here, is that of persuading the commercial banks to follow its directions/orders on the flow of credit.

Question 24.
What is bank rate.
Answer:
Bank Rate also known as the Discount Rate is the official minimum rate at which the Central Bank of the country is ready to rediscount approved bills of exchange or lend on approved securities.

Question 25.
What is open market operations?
Answer:
Open Market Operations indicate the buying/selling of government securities in the open market to balance the money supply in the economy.

Question 26.
Give the meaning of repo.
Answer:
Repo is a swap deal involving immediate sale of securities and a simultaneous re. purchase of those securities at a future date at a predetermined price. Commercial banks and financial institution also park their funds with RBI at a certain rate, this rate is called the Reverse Repo Rate.

Question 27.
What is do you mean by cash reserve ratio?
Answer:
The money supply in the economy is influenced by the cash reserve ratio. It is the ratio of a bank’s time and demand liabilities to be kept in reserve with the RBI. A high CRR reduces the flow of money in the economy and is used to control inflation. A low CRR increases the flow of money and is used to overcome recession.

Question 28.
What is statutory liquidity ratio or SLR?
Answer:
Under SLR, banks have to invest a certain percentage of its time and demand liabilities in Government approved securities. The reduction in SLR enhances the liquidity of commercial banks. The present statutory ratio of commercial banks in India is 25%.

Question 29.
What do you mean by time deposits?
Answer:
Time deposits are repayable after a certain fixed period. These deposits are not withdrawn able by cheque, draft or by other means. It includes the following.

Question 30.
What is Bank Rate?
Answer:
Section 49 of the Reserve Bank of India, defines bank rate as “the standard rate at which the bank is prepared to buy or discount bills of exchange or other commercial papers eligible for purchases under this Act.”

Question 31.
State two credit control used by Reserve Bank of India.
Answer:
The two credit control used by Reserve Bank of India are:

  • General or Quantitative credit control
  • Selective or Qualitative credit control

Question 32.
Who is a speculators?
Answer:
Speculators are those who deal in securities in order to make profit. They do not take delivery of the securities purchased or sold by them but only pay or receive the differences between the purchase price and sale price.

Question 33.
Expand SEBI.
Answer:
SEBI = Securities and Exchange Board of India.

Question 34.
What is CRR?
Answer:
The word CRR stands for Cash Reserve Ratio. Under Section 42 of RBI Act, 1934, scheduled banks are required to maintain with RBI a specified percentage of their net demand.and time liability in the from of cash reserve. This is known as cash reserve ratio.