Finance & Management (FM) Questions For RBI Grade B Phase II 2023 | Set-10

Correct Answers: D. All the above

Explanation- It is also to be noted that the provisions for private placement applies to the issue of “securities” and not “shares”. Thus the new provisions have widened the scope and cover a whole host of instruments such as shares, bonds, debentures and other marketable securities etc. The Act, 2013 under section 42(4) mandates a company to comply with the provisions of SEBI Act & SCRA, if any offer or invitation is not in compliance with the provisions of the section and such offer or invitation shall be treated as a public offer.

Correct Answers: B. Banks should disclose bad loan divergence if the additional provisioning has exceeded 15% of the company’s profit before provision and contingencies.

Explanation- RBI altered the additional provisioning requirements which previously stated that banks should disclose divergences if the provisioning has exceed 15% of net profit after tax. Now it is 10% of the company’s profit before provision and contingencies. And there is no change in the rules that permit lenders to reveal divergences of the additional gross non-performing asset(NPA) exceeded 15% of the reported incremental gross NPAs. Thus, statement B is not true.

Correct Answers: C. Regulatory Risk          

Explanation- There are two types of risk in a portfolio investment:
Systematic Risk – It is the risk which cannot be eliminated by diversification. No investors can avoid or eliminate this risk.
Types of systematic risk-

* Interest Rate Risk

* Social or Regulator Risk

* Purchasing Power Risk

Unsystematic Risk – it is the risk that can be eliminated by diversification.
Types of unsystematic Risk-

* Business Risk

* Financial Risk

* Default Risk

Correct Answers: E. Repo Rate

Explanation- The RBI and Government of India signed the Monetary Policy Framework Agreement on 20 February 2015 to give the responsibility for price stability and inflation targeting to RBI. The term “policy rate” got first defined in that Agreement. Subsequently after in the proposal of Union Budget 2016-17, section 2 of RBI Act, 1934 is amended which defines “Policy Rate” as the “repo-rate”. Repo rate is the rate at which RBI lends money to commercial banks.

Correct Answers: D. 100%

Explanation- Cabinet gives nod for FDI policy on civil aviation; NRIs can acquire up to 100% equity in Air India. The Cabinet approved Foreign Direct Investment, FDI policy on civil aviation.

Correct Answers: C. Cash balance

Explanation- DuPont analysis examines the return on equity (ROE) analysing profit margin, total asset turnover, and financial leverage. The DuPont Corporation developed DuPont analysis in the 1920s.

A company can increase its Return on Equity if it-

1. Generates a high Net Profit Margin.
2. Effectively uses its assets so as to generate more sales
3. Has a high Financial Leverage

According to DuPont analysis:
Return on Equity = Profit margin × Total asset turnover × Financial Leverage.

Correct Answers: E. All of the above

Explanation- A Creditor means any person to whom a debt is owed and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor, and a decree-holder.

Correct Answers: B. Novel Health Score

Explanation- Sudden payment default without any prior warning by NBFCs like IL and FS triggered panic and caused liquidity crisis in NBFCs sector. Economic Survey has come out with a composite health score: an indicator of financial health of NBFCs. This Health score could be used to provide early warning signals of impending rollover risk problem in NBFCs and set prudential threshold of permitted funding to firm in NBFC sector.

Correct Answers: C. 10%

Explanation- Wiser after the Franklin Templeton crisis, market regulator SEBI has capped the mutual funds investment in debt instruments issued by single issuer at 10 per cent. Mutual fund will not invest over 10 per cent of its NAV of the debt portfolio of the scheme in instruments with special features and not more than 5 per cent of its NAV of the debt portfolio in instruments issued by a single issuer. Banning close-ended schemes from investing in perpetual bonds, SEBI said the maturity of all perpetual bonds will be treated as 100 years from the date of issuance for the purpose of valuation. The revised SEBI norms will come into effect from April 1.

Correct Answers: C. Company Policy

Explanation- Hygiene factors are the factors that characterize the context or environment of a person’s work. They can cause a dissatisfaction in job unless appropriately applied by an organization. Some examples of hygiene factors are: Organizational policies and procedures, supervision, relationships with co-workers and supervisors, physical work environment, job security, and compensation.