Finance MCQ Quiz in తెలుగు - Objective Question with Answer for Finance - ముఫ్త్ [PDF] డౌన్‌లోడ్ కరెన్

The correct answer is  1, 2 and 3.

Key PointsSEBI Exit Guidelines for Stock Exchanges

• Statement 1: SEBI requires stock exchanges to have an annual trading turnover of ₹10 billion under its exit guidelines.
  • This statement pertains to the criteria that SEBI has set for stock exchanges to remain operational. As per the guidelines, a stock exchange must meet an annual trading turnover threshold of ₹10 billion to continue functioning.
  • This criterion is significant to ensure that only exchanges with substantial trading activity and liquidity are operational.
  • Hence, statement 1 is correct.
• Statement 2: Stock exchanges failing to meet criteria within two years are subject to compulsory exit.
  • This statement mentions a time frame of two years for stock exchanges to meet the criteria set by SEBI, failing which they are subject to compulsory exit
  • Hence, statement 2 is correct.
• Statement 3: The exit guidelines were implemented in 2012.
  • This statement refers to the year of implementation of SEBI's exit guidelines for stock exchanges. The guidelines were indeed introduced in 2012.
  • This information is correct and aligns with SEBI's regulatory updates.
  • Hence, statement 3 is correct.

Additional Information

• Securities and Exchange Board of India (SEBI):
  • The Securities and Exchange Board of India (SEBI) is the regulator for the securities market in India, established in 1988 and given statutory powers through the SEBI Act, 1992.
  • SEBI's primary functions include protecting investor interests, promoting and regulating securities markets, and ensuring market integrity and transparency.
• Exit Guidelines for Stock Exchanges:
  • The exit guidelines were formulated to ensure that stock exchanges maintain a certain level of trading activity to remain operational.
  • The guidelines provide a framework for the voluntary exit of stock exchanges that are unable to maintain the prescribed turnover threshold.
  • They also include provisions for compulsory exit in cases where exchanges fail to meet regulatory requirements.
• Annual Trading Turnover:
  • Annual trading turnover is a critical metric for stock exchanges, indicating the total value of securities traded on the exchange over a year.
  • A higher turnover reflects greater market activity and liquidity, which are essential for the efficient functioning of stock markets.

The correct answer is 1 and 3 only.

Key Points

• NBFCs play a critical role in bridging the financial inclusion gap by serving MSMEs and rural borrowers.
• They are allowed to provide infrastructure loans within RBI guidelines.
• Customized loan products make NBFCs attractive to niche market segments.
• NBFCs often complement banks by serving high-risk or low-profitability sectors.

Additional Information

• Infrastructure Loans: Include funding for roads, bridges, and renewable energy projects.
• Flexibility: NBFCs are agile and can tailor products based on customer requirements.
• MSMEs: A significant portion of NBFC credit is directed toward this underserved sector.

The Correct answer is Option 1. 

Key Points

• It was launched by the President of India on 17th September 2023 (1): This statement is NOT true. The PM-VISHWAKARMA scheme was launched by the Prime Minister of India, not the President, on this date.
• It is a Central Sector Scheme (2):  This statement is true. PM-VISHWAKARMA is indeed classified as a Central Sector Scheme.
• The new scheme intends to provide recognition and holistic support to traditional artisans (3):  This statement is true. The scheme aims to support and recognize traditional artisans and their contributions.
• The scheme intends to improve the quality, scale and reach of artisans’ products (4):  This statement is true. PM-VISHWAKARMA focuses on enhancing the quality and market reach of artisans' products.
• The statement that is NOT true in relation to PM-VISHWAKARMA is Option 1.

The correct answer is  ₹50,000.

Key PointsMaximum Deduction under Section 80D

• Under Section 80D of the Income Tax Act, individuals can claim deductions for premiums paid towards health insurance policies.
• The maximum deduction allowed for health insurance premiums paid for senior citizens (aged 60 years and above) is ₹50,000.
• This deduction is applicable for premiums paid for self, spouse, dependent children, and parents.
• If both the taxpayer and the parents are senior citizens, the total deduction can be up to ₹100,000 (₹50,000 for self and family and ₹50,000 for parents).
• Additionally, preventive health check-ups can provide a deduction of up to ₹5,000 within the overall limit.

Additional Information

• Section 80D is a key provision in the Income Tax Act that encourages taxpayers to invest in health insurance.
• The provision aims to promote health security by offering tax benefits on premiums paid towards health insurance policies.
• For individuals below 60 years, the maximum deduction under Section 80D is ₹25,000.
• In the case of Hindu Undivided Families (HUF), the deduction is allowed for premiums paid for insuring the health of any member of the HUF.
• Section 80D also covers expenses incurred for preventive health check-ups, up to a specified limit.
• The importance of investing in health insurance has increased significantly, especially with rising medical costs and the prevalence of lifestyle diseases.

The correct answer is 15 billion.

Key PointsUPI Transactions in August 2024

• Unified Payments Interface (UPI) was launched by the National Payments Corporation of India (NPCI) in 2016.
• UPI has transformed the landscape of digital payments in India, making it easier for people to transfer money instantly between bank accounts using a mobile device.
• In August 2024, there were 14.96 billion Unified Payments Interface (UPI) transactions, which was a 41% increase year-on-year. This was also a 3.6% increase month-on-month. The total value of these transactions was Rs 20,60,735.57 crore. Hence, the correct answer is 15 billion.
• UPI transactions have been increasing at a rapid rate, with a ten-fold increase in volume over the last four years. In 2023-24, there were 131 billion UPI transactions, compared to 84 billion in 2022-23.
• This growth demonstrates the increasing acceptance and reliance on digital payment methods among Indian consumers.

Additional Information

• Unified Payments Interface (UPI) is a real-time payment system that enables instant money transfer between bank accounts using a mobile device.
• It was developed by the National Payments Corporation of India (NPCI) and is regulated by the Reserve Bank of India (RBI).
• UPI allows users to link multiple bank accounts to a single mobile application, facilitating seamless transactions without the need to enter bank details each time.
• The popularity of UPI has been driven by factors such as ease of use, security features, and the ability to make payments 24/7.
• Various banks and third-party apps like Google Pay, PhonePe, and Paytm have integrated UPI, further boosting its adoption.
• The success of UPI is also attributed to government initiatives promoting digital payments and financial inclusion, such as the Digital India campaign.
• UPI has not only simplified peer-to-peer transactions but has also become a preferred mode of payment for businesses, enhancing the overall digital economy of India.

The correct answer is  Greece.

Key PointsIMF and Stand-By Arrangements (SBA)

• The International Monetary Fund (IMF) provides financial assistance to member countries through various lending instruments.
• One such instrument is the Stand-By Arrangement (SBA), which is designed to address short-term balance of payments problems.
• During the European Debt Crisis that began in 2009, Greece faced severe economic challenges and required international financial assistance.
• The IMF, along with the European Union and the European Central Bank, provided financial aid to Greece through an SBA to help stabilize its economy.

Additional Information

• Stand-By Arrangements (SBA):
  • The SBA is one of the IMF's primary lending instruments, aimed at providing short-term financial assistance to member countries facing balance of payments problems.
  • It is typically used to support economic stabilization programs that include policy measures to restore macroeconomic stability.
• Greece Debt Crisis:
  • The crisis in Greece was part of the broader European Debt Crisis, which affected several Eurozone countries.
  • Greece faced a severe economic downturn, high levels of public debt, and a significant fiscal deficit.
  • In response, the IMF, along with the European Union and the European Central Bank, provided financial assistance through multiple bailout packages, including SBAs.
• IMF's Role:
  • The IMF's role in providing financial assistance includes not only lending money but also offering technical assistance and policy advice.
  • This helps countries implement necessary economic reforms to stabilize their economies and restore growth.

The correct answer is  1 and 2.

Key PointsLiquidity Risk

• Liquidity risk arises when a bank is unable to meet its financial obligations.
  • Liquidity risk is a type of financial risk that occurs when an entity, such as a bank, is unable to meet its short-term financial demands.
  • This can happen due to an inability to convert assets into cash quickly without significant loss in value, leading to a situation where the bank cannot cover its liabilities as they come due.
  • The inability to meet financial obligations can lead to severe financial distress or even insolvency for the bank. Hence, statement 1 is correct.
• Liquidity risk can be mitigated through diversification of funding sources.
  • Diversification of funding sources is a key strategy for mitigating liquidity risk.
  • By having multiple sources of funding, a bank can ensure that it is not overly reliant on any single source, which reduces the risk of liquidity issues if one source becomes unavailable.
  • For instance, a bank can diversify its funding through customer deposits, interbank loans, issuance of bonds, and other means. Hence, statement 2 is correct.
• Liquidity risk is unrelated to non-performing assets (NPAs).
  • This statement is incorrect as liquidity risk is indeed related to non-performing assets (NPAs).
  • NPAs are loans or advances that are in default or in arrears. High levels of NPAs can reduce the liquidity of a bank's assets, making it difficult for the bank to meet its short-term obligations.
  • When a significant portion of a bank's assets becomes non-performing, the bank's liquidity position is adversely affected, increasing the liquidity risk. Hence, statement 3 is incorrect.

Additional Information

• Non-Performing Assets (NPAs)
  • NPAs are loans or advances that are in default or in arrears. In the context of banks, an asset becomes non-performing when it ceases to generate income for the bank.
  • According to the Reserve Bank of India (RBI), a loan or advance is considered NPA if it is overdue for a period of more than 90 days.
  • High levels of NPAs can affect the profitability and liquidity of banks.
• Strategies to Mitigate Liquidity Risk
  • Asset-Liability Management (ALM): This involves managing the maturities and liquidity of assets and liabilities to ensure that the bank can meet its short-term obligations.
  • Maintaining High-Quality Liquid Assets (HQLA): Banks are required to hold a certain amount of high-quality liquid assets that can be easily converted to cash.
  • Stress Testing: Banks conduct stress tests to assess their ability to withstand various liquidity shocks.
  • Contingency Funding Plans (CFP): These are pre-arranged strategies for managing liquidity crises, including access to emergency funding sources.

The correct answer is  Ensuring the financial stability of weak banks.

Key PointsPrimary Purpose of the PCA Framework

• The Prompt Corrective Action (PCA) framework is a mechanism introduced by the Reserve Bank of India (RBI) to maintain the financial health and stability of banks.
• The framework is designed to prevent the deterioration of a bank’s financial condition by imposing certain restrictions and corrective measures.
• The primary goal of the PCA framework is to ensure the financial stability of weak banks by keeping a check on their performance and taking timely actions to restore their health.
• Banks under the PCA framework are subjected to various restrictions such as limitations on dividend distribution, branch expansion, and management compensation.
• The PCA framework also includes corrective measures like capital infusion, changes in management, and restrictions on lending to risky sectors.
• This framework helps in avoiding the collapse of banks that are financially weak and ensures that they can continue to operate in a stable manner.

Additional Information

• The RBI introduced the PCA framework in 2002 as a structured early intervention mechanism for banks showing signs of financial stress.
• The framework is based on three main parameters: Capital Adequacy Ratio (CAR), Asset Quality, and Profitability.
• Capital Adequacy Ratio (CAR) measures the bank's capital in relation to its risk-weighted assets and current liabilities.
• Asset Quality is assessed based on the level of Non-Performing Assets (NPAs) held by the bank.
• Profitability is evaluated using the Return on Assets (RoA) metric, indicating how effectively the bank is using its assets to generate profits.
• Banks are categorized into three risk thresholds under the PCA framework, with each threshold triggering specific regulatory actions.
• The PCA framework aims to protect the interests of depositors and maintain the overall stability of the financial system in India.
• In 2017, the RBI revised the PCA framework to make it more robust and effective in addressing the challenges faced by banks.

The correct answer is  Contingency funding plans.

Key PointsMitigating Liquidity Risk

• **Liquidity risk** can arise when a **bank or financial institution** is unable to convert **assets into cash** without significant **loss in value**.
• **Contingency funding plans** are a key method used to **mitigate liquidity risk**. These plans are **strategic frameworks** designed to ensure that a bank or financial institution can **access sufficient liquidity** during times of stress.
• **Contingency funding plans** involve **identifying potential sources of liquidity**, such as **loan sales**, **securitizations**, **asset sales**, and **backup lines of credit**.
• These plans are **proactive measures** that help institutions **prepare for unexpected liquidity shortfalls** and ensure they can meet their **financial obligations**.
• By having a well-developed **contingency funding plan**, banks can **maintain stability** and **confidence** among their **depositors and investors**.

Additional Information

• Margin trading involves borrowing funds from a broker to trade financial assets, which can increase potential returns but also amplifies risk. It is not typically used to mitigate liquidity risk.
• Speculative investments involve high-risk financial transactions in an attempt to profit from short-term market fluctuations. These investments are not suitable for managing liquidity risk as they can be highly volatile.
• High-risk loan issuance refers to lending to borrowers with a higher likelihood of default. This practice can increase a bank's risk exposure rather than mitigate liquidity risk.
• Decrease in reserve ratios would reduce the amount of liquid assets a bank holds, potentially increasing liquidity risk rather than mitigating it.
• **Contingency funding plans** are specifically designed to address **liquidity risk** by ensuring that institutions have a **structured approach** to accessing liquidity during periods of financial stress.

The correct answer is  Avoidance of losses.

Key PointsPurpose of Futures Contracts in India

• Speculation: Futures contracts are often used by traders to speculate on the future direction of prices of various assets such as commodities, currencies, or financial instruments. By predicting the price movements, traders can make profits.
• Price discovery: Futures markets play a crucial role in the price discovery process. The prices of futures contracts reflect the collective expectations of market participants regarding future price movements, thereby helping in the determination of the fair market value of the underlying asset.
• Physical settlement: Although many futures contracts are settled in cash, some contracts require physical delivery of the underlying asset. This means that the seller must deliver the asset, and the buyer must take possession of it at the contract's expiration.
• Hedging: Futures contracts are commonly used for hedging purposes. Market participants, such as producers and consumers of commodities, use futures to protect themselves against adverse price movements. For instance, a farmer might use futures to lock in a price for their crop, thereby mitigating the risk of price fluctuations.
• Avoidance of losses: While futures contracts can help mitigate risks, they do not completely avoid losses. Futures trading involves significant risk, and participants can incur substantial losses if the market moves against their positions. Hence, the purpose of futures contracts does not include the complete avoidance of losses.

Additional Information

• Futures Contracts: A futures contract is a standardized legal agreement to buy or sell an asset at a predetermined price at a specified time in the future. These contracts are traded on futures exchanges.
• Uses of Futures Contracts: Futures contracts are used for various purposes including speculation, hedging, and arbitrage. They are essential tools for managing price risks in various markets.
• Standardization: Futures contracts are standardized in terms of quantity, quality, and delivery time, which makes them highly liquid and facilitates easier trading.
• Regulation in India: In India, futures trading is regulated by the Securities and Exchange Board of India (SEBI). The major commodity exchanges in India include the Multi Commodity Exchange (MCX) and the National Commodity and Derivatives Exchange (NCDEX).
• Risk Management: Futures contracts are a vital part of risk management strategies for businesses involved in volatile markets. They allow companies to stabilize their costs and revenues by locking in prices in advance.
• Leverage: Futures contracts provide leverage, meaning traders can control a large position with a relatively small amount of capital. However, this also increases the potential for both profits and losses.