23.16      ndian    onom
     24. Consider the following statements about       AnsWer key With exPlAnAtions
         the idea of ‘micro-finance’ in India.         1. (b) This is one of the provisions of the Basel
          1. Micro-finance is a small-scale financial          III norms of prudential regulation of the
              intermediation, inclusive of savings,            banking sector.
              credit, insurance, business services     2. (b) Rupee is fully convertible in the cases—
              and technical support provided to the            interest payment, remittances, grants
              needy borrower.                                  and indirect foreign investment (though,
          2. The thrust of the micro finance                   it belongs to the capital account).
              initiative is to channelize production   3. (d) All are the objectives of the new
              and consumption credit in multiple               methodology. The MCLR will be a tenor
              doses based on the absorption capacity
                                                               linked internal benchmark and actual
              of the prospective borrower.
                                                               lending rates will be determined by
          3. It has evolved through following                  adding the components of spread to the
              different models at different times—a            MCLR. Banks will review and publish
              ‘charity based model’ to a ‘thrift-based         their MCLR of different maturities every
              model’ and finally to the ‘trust and             month on a pre-announced date. The
              creditworthiness model’.                         periodicity of reset shall be one year or
          4. It was in Australia where the link                lower. Banks will continue to review and
              between microfinance institutions                publish Base Rate as hitherto.
              and the formal financial institutions            As per the RBI (April 2016), ‘for
              evolved.                                         monetary transmission to occur, lending
         Select the correct statements using the code          rates have to be sensitive to the policy
         below.                                                rate’. But this was not occurring by now.
         (a) 1, 2 and 3                                        Banks, by now, have been using either of
         (b) 2, 3 and 4                                        the following three methods to compute
                                                               their Base Rate—(i) average cost of
         (c) 1, 3 and 4
                                                               funds, (ii) marginal cost of funds, or (iii)
         (d) 1, 2, 3 and 4                                     blended cost of funds (liabilities).
     25. Crypto-currencies have been in news           4. (c) RBI announced this route in 2011–12
         recently—select the correct statement(s)              as a ‘penal’ route for banks to borrow
         about it in case of India, by using the code          once they have exhausted all borrowing
         given below:                                          option, i.e., the repo route. MSF rate is
          1. Government of India does not consider             regulated by the RBI above the current
              crypto-currencies a legal tender.                repo rate. This route can be used by
          2. Government proposes to eliminate use              banks for only overnight borrowings and
              of such currencies.                              is linked to their net demand and time
                                                               liabilities (NDTL).
         Code:
                                                       5. (b) Only those foreign banks which have 20
         (a) Only 1
                                                               or more branches in the country have
         (b) Only 2                                            been brought at par with domestic banks
         (c) Both 1 and 2                                      regarding PSL (in a phased manner over
         (d) Neither 1 nor 2                                   a maximum period of 5 years starting