PREVIOUS YEAR SOLVED PAPERS - January 2017
41. Match the items of Column-I with the items of Column-II and suggest the correct code.
| Column–I | Column–II |
| (a) Relationship Banking | 1. Dealing in hundis and acceptance of deposits. |
| (b) Merchant Banking | 2. Widening the entrepreneurial base and assist in a rapid rate of industrial growth. |
| (c) Indigenous Banking | 3. Engaged in the business of Issue Management. |
| (d) Development Banking | 4. Creating, maintaining and enhancing strong relationship with customers. |
CODES
| (a) | (b) | (c) | (d) | |
| 1 | 4 | 2 | 1 | 3 |
| 2 | 2 | 4 | 3 | 1 |
| 3 | 4 | 3 | 1 | 2 |
| 4 | 2 | 1 | 4 | 3 |
- Option : D
- Explanation : The Industrial Finance Corporation of India
was set up in July 1948 by the Government
of India. It was established under the IFCI Act,
1948 with the basic objective of providing
finance to the industries in private sector. At
present it also providing financial assistance
to cooperative, joint, public sector units. It
provides loans for expansion, diversification
and modernisation of existing units. It also
underwrites and directly subscribes to
industrial securities, merchant banking services
and lease finance. It renders financial
assistance both in rupees and foreign
currencies to the corporate sector.
The small scale industries, proprietary and partnership concerns were not eligible for financial assistance from the IFCI. It did not grant assistance for the purpose of working capital. It did not provide assistance for the acquisition of capital goods for commercial or trading purposes. It did not grant loans in foreign currencies for purchasing of raw materials, imports or payments of royalties, interest and dividends.
The IFCI (Amendment) Act, 1986 has made it possible for the Corporation to provide assistance inter alia for medical, health or other allied services.
43. SIDBI was set up as a subsidiary of IDBI to
- Option : A
- Explanation : SIDBI was set up on April 2, 1990 as a wholly owned subsidiary of IDBI, under an Act of the Parliament, viz., Small Industries Development Bank of India Act, 1989. The objectives of SIDBI are to serve as the principal financial institution for promotion, financing and development of industry in the small scale sector and to coordinate the functions of the institutions engaged in promoting, financing or developing industry in the small scale sector. The paid-up capital of SIDBI is ` 450 crore. Earlier this was entirely held by IDBI. In order to provide greater functional autonomy and operational flexibility to SIDBI from IDBI. SIDBI Act was amended in September 2000, which inter alia, envisages transfer of IDBI’s share holding in SIDBI to the extent of 51% to public sector banks, LIC, GIC and other institutions owned and/or controlled by GOI. SIDBI functions as the principal financial institution for financing, developing and promoting the small-scale industrial sector. A major part of SIDBI’s financial assistance, initially, was by way of refinance of term-loans and bills rediscounting. However, it has gradually diversified and expanded its lending operations by way of direct lending as well as support through the existing institutions and banks.
44. Letters of credit, Guarantees, Forward Contracts, etc., come under which one of the following?
- Option : D
- Explanation : Off-Balance Sheet items : Those are items that generate income for the bank but do not appear in the bank’s balance sheet. Examples of such items are letters of credit, guarantees, acceptances and various types of derivatives i.e., forward contracts.
- Option : C
- Explanation : Theory of Absolute Cost Advantage : Adam
Smith was one of the forerunners of the
classical school of thought. He propounded a
theory of international trade in 1776, which is
known as the theory of absolute cost
advantage. He was of the opinion that
productive efficiency differed among different
countries because of diversity in the natural
and acquired resources possessed by them.
The differences in natural advantage manifests
in varying climate, quality of land, availability
of minerals, water, and other natural resources;
while the difference in acquired resources
manifests in different levels of technology
and skills available. A particular country
should specialise in producing only those
goods that it is able to produce with greater
efficiency, that is at lower cost; and exchange
those goods with other goods of their
requirements from a country that produces
those other goods with greater efficiency or at
lower cost. This will lead to optimal utilisation
of resources in both the countries. Both
countries will gain from trade insofar as both
of them will get the two sets of goods at the
least cost.
Adam Smith explains the concept of absolute advantage in a two commodity, two country framework.
