[Mission 2022] QUIZ – 2020: INSIGHTS STATIC QUIZ , 2 October 2021 – Economy – INSIGHTSIAS

Solution: b)

• In simple words, fiscal prudence is Spending within budget.
• For any economy to mature, fiscal prudence is critical. If the government continues to spend way more than its revenues, it will either have to print more currency or borrow from the market to meet the shortfall. Printing currency will fuel inflation and, at times, hyper-inflation.
• In a bid to avoid these scenarios and mandate fiscal prudence, the Government of India passed the Fiscal Responsibility and Budget Management (FRBM) Act in 2003. Its objective was to institutionalize fiscal prudence and reduce the country’s fiscal deficit in such a manner that it gradually moves towards balancing the Budget.

Solution: a)

Gross value added (GVA) is a measure of total output and income in the economy. It provides the rupee value for the amount of goods and services produced in an economy after deducting the cost of inputs and raw materials that have gone into the production of those goods and services. It also gives sector-specific picture like what is the growth in an area, industry or sector of an economy.

Solution: a)

Deposit Insurance and Credit Guarantee Corporation (DICGC) is a wholly-owned subsidiary of the Reserve Bank of India (RBI).

The authorized capital of the Corporation is 50 crores, which is fully issued and subscribed by the Reserve Bank of India (RBI). The management of the Corporation vests with its Board of Directors, of which a Deputy Governor of the RBI is the Chairman. 

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Solution: d)

Prompt Corrective Action or PCA is a framework under which banks with weak financial metrics are put under watch by the RBI. The PCA framework deems banks as risky if they slip below certain norms on three parameters — capital ratios, asset quality and profitability.

• It aims to monitor the operation of weaker banks more closely to encourage them to conserve capital and avoid risks.
• PCA framework is about imposing certain restrictions on expansion of branches and dividend distribution by banks that are financially weak as reflected in parameters like non-performing asset ratio and return on assets.

Solution: b)

“Call Money” means borrowing or lending in unsecured funds on overnight basis;

“Notice Money” means borrowing or lending in unsecured funds for tenors up to and inclusive of 14 days excluding overnight borrowing or lending;

“Term Money” means borrowing or lending in unsecured funds for periods exceeding 14 days and up to one year.

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