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Q1Indian Economy·Money & Capital MarketsPYQ 2025
Consider the following statements about the International Bank for Reconstruction and Development (IBRD):
1. It provides loans and guarantees primarily to middle-income countries.
2. It works single-handedly as the only multilateral institution for poverty reduction.
3. It was originally established to help Europe rebuild after the Second World War.
Which of the statements given above are correct?
- A1 and 2 only
- B2 and 3 only
- C1 and 3 onlyCorrect
- D1, 2 and 3
Explanation
Correct. The IBRD lends mainly to middle-income and creditworthy lower-middle-income countries, and it was created in 1944 to support post-war reconstruction in Europe.
Why the other options are incorrect
- Option A
Statement 2 is incorrect because the IBRD is part of the larger World Bank Group and does not work alone. Statements 1 and 3 are the correct ones.
- Option B
Statement 2 is wrong because poverty reduction is pursued by multiple institutions, not by the IBRD alone. Statement 1 is also correct, so this combination is incomplete.
- Option D
Statement 2 is incorrect because the IBRD is not the sole institution involved in development finance and poverty reduction.
Q2Indian Economy·Money & Capital MarketsPYQ 2024
With reference to the digital rupee or e-rupee, consider the following statements:
1. It is a sovereign currency issued by the Reserve Bank of India.
2. It appears as a liability on the balance sheet of the RBI.
3. It is designed to provide automatic protection against inflation.
4. It is freely convertible into bank deposits and cash.
Which of the statements given above are correct?
- A1 and 2 only
- B1 and 3 only
- C2 and 4 only
- D1, 2 and 4Correct
Explanation
Correct. The e-rupee is an RBI-issued sovereign liability, and it is designed to be convertible with bank money and physical cash. It is not an inflation-indexed asset.
Why the other options are incorrect
- Option A
Statement 4 is also correct because the e-rupee is meant to be interchangeable with other forms of sovereign money.
- Option B
Statement 3 is incorrect because central bank digital currency does not guarantee inflation protection.
- Option C
Statement 1 is also correct because the digital rupee is issued by the RBI as sovereign currency.
Q3Indian Economy·Money & Capital MarketsPYQ 2024
Which one of the following best describes 'Collateral Borrowing and Lending Obligation (CBLO)'?
- AA capital market instrument for long-term equity finance
- BA money market instrument for short-term borrowing against government securities as collateralCorrect
- CA foreign exchange hedging contract
- DA credit guarantee scheme for exporters
Explanation
Correct. CBLO was a money market instrument operated by the CCIL where participants could borrow and lend short-term funds against the collateral of government securities. It has since been replaced by TREPS.
Why the other options are incorrect
- Option A
CBLO was not a capital market instrument but a money market product for short-term fund management.
- Option C
CBLO had nothing to do with foreign exchange hedging.
- Option D
Credit guarantee schemes for exporters are an entirely different framework.
Q4Indian Economy·Money & Capital MarketsPYQ 2023
Consider the following markets:
1. Government bond market
2. Call money market
3. Treasury bill market
4. Stock market
How many of the above are generally included in the capital market?
- AOnly one
- BOnly twoCorrect
- COnly three
- DAll four
Explanation
Correct. The capital market deals with medium- and long-term funds; government bond market and stock market fall in this category, while call money and treasury bills belong to the money market.
Why the other options are incorrect
- Option A
Both the government bond market and the stock market are part of the capital market, so one is too few.
- Option C
Only two instruments here belong to the capital market, not three.
- Option D
Call money and treasury bills are money market instruments, so all four are not part of the capital market.
Q5Indian Economy·Money & Capital MarketsPYQ 2022
Inflation-Indexed Bonds are considered attractive to investors mainly because they:
- AProtect the real value of savings against inflationCorrect
- BGuarantee a fixed equity-like return
- CEliminate default risk of all corporate issuers
- DCan be issued only in foreign currency
Explanation
Correct. Inflation-indexed bonds link returns or principal to inflation, helping preserve the investor's purchasing power.
Why the other options are incorrect
- Option B
They are debt instruments, not equity instruments, and they do not guarantee equity-like returns.
- Option C
Inflation indexation does not remove issuer default risk, especially in the case of private issuers.
- Option D
Such bonds need not be foreign-currency denominated; domestic sovereign versions also exist.
Q6Indian Economy·Money & Capital MarketsPYQ 2021
In the context of Indian government securities, which one of the following correctly describes the 'Retail Direct' facility?
- AIt enables retail investors to open gilt accounts directly with the RBICorrect
- BIt allows only banks to buy newly issued government securities
- CIt is a platform meant only for foreign portfolio investors
- DIt replaces the need for primary dealers in G-Sec auctions
Explanation
Correct. Retail Direct allows individual investors to maintain gilt accounts with the RBI and invest in government securities directly.
Why the other options are incorrect
- Option B
The facility expands access beyond banks; it is not confined to banking institutions.
- Option C
Foreign investors may access government securities through other routes, but Retail Direct is specifically designed to widen domestic retail access.
- Option D
Primary dealers still continue to play an important role in the G-Sec market and auctions.
Q7Indian Economy·Money & Capital MarketsPYQ 2021
Which of the following factors generally leads to a fall in the yield of an already issued bond?
- AA rise in market interest rates
- BA decline in the creditworthiness of the issuer
- CAn increase in demand for that bondCorrect
- DAn increase in inflation expectations
Explanation
Correct. When demand for an existing bond rises, its price rises; since yield moves inversely with price, the yield falls.
Why the other options are incorrect
- Option A
If market rates rise, existing bond prices usually fall and their yields rise, not fall.
- Option B
Lower creditworthiness raises perceived risk and usually pushes yields upward, not downward.
- Option D
Higher inflation expectations usually make investors demand higher yields rather than lower ones.
Q8Indian Economy·Money & Capital MarketsPYQ 2020
Which of the following is a money market instrument?
- AEquity share
- BPreference share
- CTreasury billCorrect
- DConvertible debenture with long maturity
Explanation
Correct. Treasury bills are short-term government securities and are classic money market instruments.
Why the other options are incorrect
- Option A
Equity shares are capital market instruments representing ownership, not short-term borrowing instruments.
- Option B
Preference shares are also part of the capital market and represent ownership claims with preference rights.
- Option D
A long-maturity debenture belongs to the capital market, not the money market.
Q9Indian Economy·Money & Capital MarketsPYQ 2019
Consider the following statements about Indian Government Bond Yields:
1. They are influenced by the actions of the US Federal Reserve.
2. They are influenced by the actions of the Reserve Bank of India.
3. They are influenced by inflation and short-term interest rates.
Which of the statements given above are correct?
- A1 and 2 only
- B2 only
- C3 only
- D1, 2 and 3Correct
Explanation
Correct. Indian government bond yields are influenced by global factors such as US Fed policy, domestic monetary policy actions by the RBI, and prevailing inflation and interest rate conditions.
Why the other options are incorrect
- Option A
Statement 3 is also correct because inflation expectations and short-term rate movements directly influence bond yields.
- Option B
While the RBI's actions are important, US Fed actions and domestic inflation also play significant roles in influencing Indian bond yields.
- Option C
Inflation and short-term rates matter, but the RBI and the US Federal Reserve also have a material impact on Indian government bond yields.
Q10Indian Economy·Money & Capital MarketsPYQ 2019
Consider the following statements:
1. Retail investors through a demat account can invest in Treasury Bills and Government Debt Bonds in the primary market.
2. The Negotiated Dealing System-Order Matching (NDS-OM) is a government securities trading platform of the RBI.
3. The Central Depository Services Limited (CDSL) is jointly promoted by the RBI and BSE.
Which of the statements given above are correct?
- A1 only
- B1 and 2 onlyCorrect
- C3 only
- D2 and 3 only
Explanation
Correct. Retail investors can participate in T-bill and G-Sec auctions through their demat accounts, and the NDS-OM is the RBI's order-matching platform for government securities. CDSL was promoted by BSE along with certain banks, not by the RBI.
Why the other options are incorrect
- Option A
Statement 2 is also correct because NDS-OM is indeed the RBI's electronic platform for secondary market trading of government securities.
- Option C
Statement 3 is incorrect because CDSL is not jointly promoted by the RBI. Statements 1 and 2 are both correct.
- Option D
Statement 1 is also correct. Retail investors can invest in government securities through demat accounts.
Q11Indian Economy·Money & Capital MarketsPYQ 2019
Consider the following statements:
1. Commercial Paper is a short-term unsecured promissory note.
2. Certificate of Deposit is a long-term instrument issued by the RBI to corporates.
3. Call money is short-term finance used for interbank transactions.
4. Zero-coupon bonds are issued at a discount.
Which of the statements given above are correct?
- A1 and 2 only
- B4 only
- C1 and 3 onlyCorrect
- D2, 3 and 4 only
Explanation
Correct. Commercial Paper is indeed a short-term unsecured promissory note, and call money is the ultra-short-term interbank borrowing market. Statement 2 wrongly describes CDs, and statement 4 describes bonds rather than pure money market instruments.
Why the other options are incorrect
- Option A
Statement 2 is incorrect because Certificates of Deposit are short-to-medium-term instruments issued by banks, not long-term instruments by the RBI.
- Option B
While statement 4 is correct in general, it describes bonds rather than money market instruments, and statements 1 and 3 are also correct.
- Option D
Statement 2 is incorrect. CDs are not long-term RBI instruments but short-term bank-issued negotiable instruments.
Q12Indian Economy·Money & Capital MarketsPYQ 2018
Recapitalization of public sector banks by the Government increases the banks' ability mainly because it:
- AStrengthens their capital adequacy and lending capacityCorrect
- BEliminates the need for prudential regulation
- CConverts all non-performing assets into profits
- DAllows banks to stop maintaining statutory reserves
Explanation
Correct. Additional capital improves the capital adequacy position of banks and supports further lending.
Why the other options are incorrect
- Option B
Regulation remains necessary even after recapitalization.
- Option C
Recapitalization does not magically turn stressed assets into profit-making assets.
- Option D
Statutory reserve requirements continue to apply as per RBI rules.