Ans: D

Exp:

Legal tender is anything recognized by law as a means to settle a public or private debt or meet a financial obligation, including tax payments, contracts, and legal fines or damages. The national currency is legal tender in practically every country. 

Option (a) is correct: A creditor is legally obligated to accept legal tender toward repayment of a debt.

Option (b) is correct: The coins issued by the Government of India under Section 6 of The Coinage Act, 2011, shall be legal tender in payment or on account provided that a coin has not been defaced and has not lost weight so as to be less than such weight as may be prescribed in its case. Coin of any denomination not lower than one rupee shall be legal tender for any sum not exceeding one thousand rupees. Fifty paise (half rupee) coin shall be legal tender for any sum not exceeding ten rupees. While anyone cannot be forced to accept coins beyond the limits mentioned above, voluntarily accepting coins for amounts exceeding the limits mentioned above is not prohibited.

Option (c) is correct: Every banknote issued by Reserve Bank of India (₹2, ₹5, ₹10, ₹20, ₹50, ₹100, ₹200, ₹500 and ₹2000), unless withdrawn from circulation, shall be legal tender at any place in India in payment or on account for the amount expressed therein, and shall be guaranteed by the Central Government, subject to provisions of sub-section (2) Section 26 of RBI Act, 1934. ₹1 notes issued by Government of India are also Legal Tender. ₹500 and ₹1000 banknotes of Mahatma Gandhi series issued up to November 08, 2016 have ceased to be Legal Tender with effect from the midnight of November 8, 2016.

 Hence Option (d) is the incorrect answer.

Ans: A

Exp:

The various methods employed by the RBI to control credit creation power of the commercial banks can be classified in two groups, viz., quantitative controls and qualitative controls. Quantitative controls are designed to regulate the volume of credit created by the banking system qualitative measures or selective methods are designed to regulate the flow of credit in specific uses.

Statement 1 is correct: An increase in bank rate results in an increase in the cost of credit; this is expected to lead to a contraction in demand for credit by commercial banks. The Bank’s credit is an important component of aggregate money supply in the economy, a contraction in demand for credit consequent on an increase in the cost of credit restricts the total availability of money in the economy and hence may prove an anti-inflationary measure of control. 

 Statement 2 is incorrect: Open market operations refer to the sale and purchase of securities by the Central bank to the commercial banks. A sale of securities by the Central Bank or RBI , i.e., the purchase of securities by the commercial banks, decrease in the money available for lending to businesses thus resulting in reduced money supply. Hence it acts as an anti-inflationary in measure. While buying of government securities by the Central Bank or RBI(Reserve Bank of India) leads to increased money available for lending by the commercial banks. Hence, it is an inflationary measure of the central bank.

Statement 3 is incorrect: A rise in the cash reserve ratio results in a fall in the value of the deposit multiplier. Conversely, a decrease in the Cash Reserve Ratio leads to a rise in the value of the deposit multiplier. Commercial banks have more money to lend. This will increase inflation in the economy.

Ans: A

Exp:

The various methods or instruments of credit control used by the central bank can be broadly classified into two categories:

• Quantitative or general methods, and
• Qualitative or selective methods. 

1. Quantitative or General Methods: The methods used by the central bank to influence the total volume of credit in the banking system, without any regard for the use to which it is put, are called quantitative or general methods of credit control. These methods regulate the lending ability of the financial sector of the whole economy and do not discriminate among the various sectors of the economy.

The important quantitative methods of credit control are–

• Bank rate,

• Open market operations (OMO), and

• Cash-reserve ratio (CRR).

• Statutory Liquidity Ratio (SLR) 

2. Qualitative or Selective Methods:

The methods used by the central bank to regulate the flows of credit into particular directions of the economy are called qualitative or selective methods of credit control. Unlike the quantitative methods, which affect the total volume of credit, the qualitative methods affect the types of credit extended by commercial banks; they affect the composition rather than the size of credit in the economy. The important qualitative or selective methods of credit control are:

• Marginal Requirements,

• Regulation of consumer credit,

• Control through directives,

• Credit rationing,

• Moral suasion and publicity, and
• Direct action.

Ans: A

Exp:

The Insolvency and Bankruptcy Code, 2016 (IBC) is the bankruptcy law of India which seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy. 

Statement 1 is correct: The proposed bankruptcy legislation seeks to address the issues faced currently in the context of insolvency and winding up. The provisions of the Code are applicable to companies, limited liability entities, firms and individuals (i.e. all entities other than financial service providers).

Key Features: 

• • Insolvency and Bankruptcy Board of India: The Board will be set up as the regulator under the Code.

• Insolvency Professionals: The Bill proposes to regulate insolvency professionals and insolvency professional agencies.

• Insolvency Adjudicating Authority: The adjudicating authority will exercise jurisdiction over cases by or against the debtor.

Statement 2 is incorrect: The Debt Recovery Tribunal shall be the adjudicating authority with jurisdiction over individuals and partnership firms other than Limited Liability Partnerships. Appeals from the order of the DRT will lie to the Debt Recovery Appellate Tribunal. The National Company Law Tribunal shall be the Adjudicating Authority with jurisdiction over companies, other limited liability entities (including LLPs.). Appeals from the order of NCLT shall lie to the National Company Law Appellate Tribunal (NCLAT).

Ans: C

Exp:

The government is setting up the Financial Services Institutions Bureau (FSIB), replacing Banks Board Bureau (BBB), as a single entity for making recommendations for appointments of whole-time directors and non-executive chairman of banks and financial Institutions.

Statement 1 is correct: The Financial Services Institutions Bureau has been constituted effective by the Central Government for the purpose of recommending persons for appointment as whole-time directors and non-executive chairpersons on the Boards of financial services institutions and for advising on certain other matters relating to personnel management in these institutions. 

Statement 2 is correct: The functions of the Bureau as outlined in the Clause 2 of the Government Resolution are :-

•  To recommend persons for appointment as whole-time directors (WTDs) and non-executive chairpersons (NECs) on the Boards of Directors in Public Sector Banks, financial institutions and Public Sector Insurers (hereinafter referred to as “PSBs”, “FIs” and “PSIs” respectively);
• To help PSBs, FIs and PSIs in terms of developing business strategies and capital raising plan etc.; 
• To advise the Government on matters relating to appointments, transfer or extension of term of office and termination of services of the said directors;
•  To advise the Government on the desired management structure at the Board level for PSBs, FIs and PSIs;
•  To advise the Government on a suitable performance appraisal system for WTDs and NECs in PSBs, FIs and PSIs;
•  To build a databank containing data related to the performance of PSBs, FIs and PSIs;
•  To advise the Government on formulation and enforcement of a code of conduct and ethics for whole-time directors in PSBs, FIs and PSIs;
• To advise the Government on evolving suitable training and development programmes for management personnel in PSBs, FIs and PSIs;