Banking Liquidity

In India, the Central Bank’s function as the “lender of last resort” usually refers to which of the following?

• and 2 only

• only

• 2 and 3 only

• only

The lowering of Bank Rate by the Reserve Bank of India leads to

• More liquidity in the market

• Less liquidity in the market

• No change in the liquidity in the market

• Mobilization of more deposits by commercial banks

The Reserve Bank of India (RBI) acts as a bankers’ bank. This would imply which of the following?

• 2 and 3 only

• 1 and 2 only

• 1 and 3 only

• 1,2 and 3

The ease with which assets can be converted into cash

• Liquidity

• Return

• Futures

• Options

What is the primary role of a central bank in managing banking liquidity?

• To control inflation

• To regulate interest rates

• To ensure sufficient liquidity in the banking system

• To manage foreign exchange reserves

Which of the following tools is commonly used by central banks to manage liquidity in the banking system?

• Open market operations

• Taxation policies

• Foreign exchange interventions

• Public spending

How does an increase in the reserve requirement affect banking liquidity?

• Increases liquidity

• Decreases liquidity

• No effect on liquidity

• Improves bank profitability

What is the impact of a central bank purchasing government securities on banking liquidity?

• Decreases liquidity

• Increases liquidity

• No change in liquidity

• Reduces bank reserves

Which of the following best describes 'liquidity risk' in banking?

• The risk of a bank not having enough capital

• The risk of a bank not being able to meet its short-term financial obligations

• The risk of a bank's assets losing value

• The risk of a bank facing regulatory penalties

What is the effect of lowering the discount rate on banking liquidity?

• Increases liquidity

• Decreases liquidity

• No effect on liquidity

• Increases bank reserves