Money & Financial Markets

SECTION A

What is the role of SEBI?

What is the difference between put and call option?

What are futures and their various types?

What is Financial Deepening?

What are the reasons for change in interest rates?

Discuss the Theory of money supply.

Evaluate the role of depositories.

Explain the difference between NSE and OTCEI.

SECTION B
Case study

The Reserve Bank of India (RBI) is India's central banking institution, which formulates the monetary policy with regard to the Indian rupee. It was established on 1 April 1935 during the British Raj in accordance with the provisions of the Reserve Bank of India Act, 1934. The share capital was divided into shares of  ?100 each fully paid, which was entirely owned by private shareholders in the beginning. Following India's independence in 1947, the RBI was nationalised in the year 1949.

RBI assumes an important part in the development strategy of the Government of India, and as a leading member of the Alliance for Financial Inclusion (AFI), is notably active in promoting financial inclusion policy. RBI is also a member of the Asian Clearing Union. The general superintendence and direction of the RBI is entrusted with the 21-member-strong Central Board of Directors—the Governor (currently Duvvuri Subbarao), four Deputy Governors, two Finance Ministry representative, ten government-nominated directors to represent important elements from India's economy, and four directors to represent local boards headquartered at Mumbai, Kolkata, Chennai and New Delhi. Each of these local boards consists of five members who represent regional interests, as well as the interests of co-operative and indigenous banks.
Answer Section
Q.No 1: What is India's central banking institution?

Q.No 2: In which year RBI was nationalised.
 

Q.No 3: What was divided into shares of ?100 each fully paid?

SECTION C
………….are funds transfer systems where transfer of money or securities takes place from one bank to another on a "real time" and on "gross" basis.
 (A): current price and syndication
 (B): real time gross settlement
 (C): corporate counselling
 (D): lease

Settlement in "real time" means payment transaction is not subjected to any …….. period.
 (A): waiting
 (B): debentures
 (C): fixed deposits
 (D): loans

…...means the transaction is settled on one to one basis without bunching or netting with any other transaction
 (A): gross settlement
 (B): bond markets
 (C): debt markets
 (D): Companies

An efficient national …... system reduces the cost of exchanging goods and services, and is indispensable to the functioning of the interbank, money, and capital markets
 (A): payment
 (B): payables
 (C): products
 (D): services

A weak payment system may severely drag on the stability and developmental capacity of a….. economy; its failures can result in inefficient use of financial resources
 (A): SEBI
 (B):  national
 (C): NCLT
 (D): CLB

Technical effciency of the payment system is important for development of an ………..
 (A): common portfolio
 (B): economy
 (C): single portfolio
 (D): single security

…..means to allow a positive value and a negative value to set-off and partially or entirely cancel each other out.
 (A): price of securities
 (B): netting
 (C): buyers of securities
 (D): TYPES OF SECURITIES

 In the counterparty bankruptcy or any other relevant event of default specified in the relevant agreement if accelerated (i.e. effected), all transactions or all of a given type are netted (i.e. set off against each other) at market value or, if otherwise specified in the contract
 (A): global deposits record
 (B): close out netting
 (C): gross domestic record
 (D): gross deposit receipts

The legal obligations of the parties to make required payments under one or more series of related transactions are canceled and a new obligation to make only the net
 (A): invest in assets
 (B): netting by novation
 (C): Issue stocks
 (D): sell products

For cash settled trades, this can be applied either bilaterally or multilaterally and on related or unrelated transactions.
 (A): payment netting
 (B): Govt
 (C): SEBI
 (D): stock exchange

……...decreases credit exposure and reduces both operational and settlement risk and operational costs.
 (A): netting
 (B): market Price
 (C): base price
 (D): discount

………..refers to a procedure whereby a company can create a new pollution source only if it makes equal reductions in pollution elsewhere in the company, i.e. it cannot acquire new permits from the outside.
 (A): netting
 (B): AA
 (C): A
 (D): BB

……..refers to accounting for the "fair value" of an asset or liability based on the current market price, or for similar assets and liabilities, or based on another objectively assessed "fair" value
 (A): mark to market
 (B): bank
 (C): financial institution
 (D): VCF

…….. accounting has been a part of Generally Accepted Accounting Principles (GAAP) in the United States since the early 1990s, and is now regarded as the "gold standard" in some circles.
 (A): service companies
 (B): SEBI
 (C): govt.
 (D): Fair value

…….are formula-based financial contracts between buyers and sellers, and are not traded on exchanges, so their market prices are not established by any active, regulated market trading.
 (A): Fixed public offer
 (B): Fixed private offer
 (C): otc derivatives
 (D): Free public offer

OTC derivatives such as …….. were not marked to market frequently
 (A): Allowable depository receipts
 (B): interest rate swaps
 (C): American Deposit Referrals
 (D): American Deposit records

At the end of every trading day, the ……... is marked to its present market value. If the trader is on the winning side of a deal, his contract has increased in value that day, and the exchange pays this profit into his account
 (A): contract
 (B): cash
 (C): services
 (D): product plan

 if the market price of his contract has …….., the exchange charges his account that holds the deposited margin.
 (A): Foreign currency current bonds
 (B): Foreign currency current block
 (C): decreased
 (D): Free currency current bonds

………...is a widely used risk measure of the risk of loss on a specific portfolio of financial assets.
 (A): is alike FDI
 (B): value at risk
 (C): is in the form of business plan
 (D): is selling bonds

………….is defined as a threshold value such that the probability that the mark-to-market loss on the portfolio over the given time horizon exceeds this value (assuming normal markets and no trading in the portfolio) is the given probability level
 (A): private
 (B): VaR
 (C): company
 (D): corporate

…………... is a currency system in which governments try to maintain their currency value constant against one another
 (A): a bank
 (B): a financial institution
 (C): a company
 (D): fixed exchange rate system

In a fixed exchange-rate system, a country’s government decides the worth of its currency in terms of either a fixed weight of…….., a fixed amount of another currency or a basket of other currencies
 (A): similar to a  loan
 (B):  gold
 (C): similar to merger
 (D): similar to shares

The central bank provides ……... needed to finance payments imbalances
 (A): Counter party credit risk
 (B): External fraud by clients
 (C): Legal, compliance and tax risks
 (D): foreign currency

The ……... of a country remains committed at all times to buy and sell its currency at a fixed price
 (A): Qualified Institutional Income
 (B): Quality Institutional Investors
 (C): Qualified Iindian Investors
 (D): central bank

The ……. or gold exchange standard of fixed exchange rates prevailed from about 1870 to 1914, before which many countries followed bimetallism
 (A): reduces risk
 (B): reduces time
 (C): reduces cost
 (D): gold standard

The regime intended to combine binding legal obligations with multilateral decision-making through the International Monetary Fund (IMF).
 (A): recourse factoring
 (B): non recourse factoring
 (C): bretton woods system
 (D): none of the above

…...is an audit professional who performs an audit in accordance with specific laws or rules on the financial statements of a company, government entity, other legal entity or organization, and who is independent of the entity being audited
 (A): external auditor
 (B): lease
 (C): hire purchase
 (D): mutual fund

………….is India's central banking institution, which formulates the monetary policy with regard to the Indian rupee
 (A): RBI
 (B): helps companies
 (C): helps govt
 (D): helps shareholders

 It was established on 1 April 1935 during the British Raj
 (A): rbi
 (B): companies
 (C): govt.
 (D): mangers

RBI assumes an important part in the development strategy of the Government of India, and as a leading member of the Alliance for Financial Inclusion
 (A): Government of India
 (B): china
 (C): japan
 (D): korea

…………. is notably active in promoting financial inclusion policy.
 (A): rbi
 (B): leasing
 (C): hiring
 (D): selling

RBI is also a member of the…….. Clearing Union
 (A): SEBI
 (B): Govt
 (C):  Asian
 (D): investors

The general superintendence and direction of the RBI is entrusted with the 21-member-strong ……. Board of Directors
 (A): Central
 (B): profits
 (C): liquidity
 (D): investment

The Reserve Bank of India has…..regional representations
 (A):  ten
 (B): cost
 (C): time
 (D): investment

………..formed in November 1994, serves as a CCBD committee to control the financial institutions
 (A): India
 (B): BFS
 (C): UK
 (D): Asia

………….was set up by the Reserve Bank of India under the chairmanship of former RBI deputy governor S. S. Tarapore to "lay the road map" to capital account convertibility.
 (A): no entry load
 (B): no exit load
 (C): tarapore committee
 (D): none of the above

Under Section 22 of the Reserve Bank of India Act, the Bank has the sole right to issue ……... of all denominations
 (A): lease
 (B): mutual funds
 (C): factoring
 (D): bank notes

The distribution of one rupee notes and coins and small coins all over the country is undertaken by the Reserve Bank as……...of the government.
 (A): agent
 (B): are taxable
 (C): are income funds
 (D): are growth funds

The Reserve Bank has a separate Issue Department which is entrusted with the …... of currency notes.
 (A): issue
 (B): return
 (C): profits
 (D): investment

………..is the main monetary authority of the country and beside that, in its capacity as the central bank, acts as the bank of the national and state governments
 (A): investment in single security
 (B): RBI
 (C): invesment in govt securities only
 (D): investment in bonds