Banking: Commercial Banks and The Central Banks-Important Questions

IMPORTANT QUESTIONS

CHAPTER 16: Banking: Commercial Banks and the Central Bank

  1. What is a commercial bank?
  2. Explain the different functions of commercial banks briefly?
  3. Explain the process of money creation by commercial banks, giving a numerical example.
  4. How do commercial banks create deposits?
  5. What is meant by central bank? Why is it known as apex body?
  6. Explain ‘banker to the government’ functions of central bank?
  7. What are the open market operations? What is their effect on availability of credit?
  8. Explain the effect of an increase in bank rate on credit creation by commercial banks? Explain
  9. Explain the following functions of the central bank:
    1. Bank of issue
    2. Banker’s bank
  10. Explain the distinction between statutory liquidity ratio and legal reserve ratio?
  11. Explain the role of reserve repo rate in controlling credit creation.
  12. Explain the role of cash reserve ratio in controlling credit creation?
  13. What is monetary policy? State any three instruments of monetary policy?
  14. Briefly discuss difference between central bank and commercial bank?
  15. How do changes in bank rate affect money supply in an economy? Explain.
  16. Describe any two methods by which reserve bank of India can regulate money supply.
  17. What is meant by margin requirement? How can it be used to control the money supply? Explain it with a help of an example
  18. Illustrate with the help of a hypothetical numerical example the process of credit creation.
  19. Calculate the value of money multiplier and total deposits created if initial deposits are of Rs. 500 crores and LRR is 10%.
  20. Government of India has recently launched ‘Jan Dhan Yojna’ aimed at every household in the country to have at least one bank account. Explain how deposits made under the plans are going to affect national income of the country?
  21. Explain the working of money multiplier with the help of a numerical example?
  22. Write the advantages of centralized cash reserves with central bank?