Money and Banking online Test - 43

For the issue of currencies, the RBI follows Minimum Reserve System at present. The Minimum Reserve System (MRS) is followed from 1956 onwards.

Under the Minimum Reserve System, the RBI has to keep a minimum reserve of Rs 200 crore comprising of gold coin and gold bullion and foreign currencies. Out of the total Rs 200 crores, Rs. 115 crore should be in the form of gold coins or gold bullion. 

The purpose of shifting to this system was to expand money supply to meet the needs of increasing transactions in the economy.

Consumer credit refers to a personal debt taken by a consumer on the purchase of goods and services for the satisfaction of wants. Regulation of consumer credit act as a qualitative credit control measure of the central bank as in the time of inflation or deflation, they regulate the consumer credit on a certain relative products in order to regulate uncertain market conditions. 

The financial market is a platform where investors deal in financial instruments. Money market and capital market are part of the financial market.

Due to the financial crisis and failure of large banks, to keep a close watch, supervision was required to avoid recurrence of any financial crisis. Hence, the Board for Financial Supervision was set up by the RBI. The object was to pay most attention to the supervision of the institution in the financial sector.

Under this Section, a collecting bank has protection only if the collecting bank, in good faith and without negligence, receives payment of the customer by a cheque, i.e. if there is negligence in receiving of a cheque on behalf of the customer, the collecting bank would be liable for negligence.

Dematerialisation is the process of converting physical shares into electronic format however, reconversion to physical form or rematerialisation is also possible.

Also called Sveriges Riksbank, or simply Riksbanken, the Swedish Central Bank is the central bank of Sweden.

It was founded by Johan Palmstruch in 1656.

It is the world's oldest central bank and the third oldest bank in operation.

A zero-coupon bond, also known as an "accrual bond," is a debt security that doesn't pay interest (a coupon) but is traded at a deep discount, rendering profit at maturity when the bond is redeemed for its full face value.

Consortium approach lending stated that more than one bank could finance a single borrower which requires large credit limit. It helps the bank to spread the risk of lending and also break the monopoly of big banks to have the capacity to lend a big amount.