QUIZ – 2020: INSIGHTS STATIC , 8 July 2021 – Economy – INSIGHTSIAS

Solution: d)

CASA ratio stands for current and savings account ratio. CASA ratio of a bank is the ratio of deposits in current and saving accounts to total deposits.

A low CASA ratio means the bank relies heavily on costlier wholesale funding, which can hurt its margins.

A higher CASA ratio indicates a lower cost of funds, because banks do not usually give any interests on current account deposits and the interest on saving accounts is usually very low.

If a large part of a bank’s deposits comes from these funds, it means that the bank is getting those funds at a relative lower cost. It is generally understood that a higher CASA ratio leads to higher net interest margin. In India, it is used as one of the metrics to assess the profitability of a bank.

Solution: a)

Return on assets

What this is: it shows how profitable a bank’s assets are in generating revenue.
What it means: A lower RoA means that bank is not able to utilise assets efficiently. Negative RoA implies the bank’s assets are yielding negative return.

Solution: c)

• The WPI and the CPI baskets are different, both at the weightage assigned to food, fuel and manufactured items as well as at the broken-down level of these segments. The weight of food in CPI is higher than in WPI.
• The WPI inflation does not capture price changes of services but the CPI does.
• WPI inflation is released by Office of Economic Adviser, Department for Promotion of Industry and Internal Trade (DPIIT).
• CPI for Industrial workers CPI(IW), CPI for Rural Labourers (RL) and CPI for Agricultural Labourers CPI(AL) are compiled by Labour Bureau.
• CPI(Urban), CPI(Rural) and CPI Combined are compiled by Central Statistical Organisation (CSO).

Solution: d)

Countries use bilateral/regional trade agreements to increase market access and expand trade in foreign markets. These agreements are called reciprocal trade agreements (RTAs) because members grant special advantages to each other.

RTAs include many types of agreements, such as preferential arrangements, free trade agreements, customs unions, and common markets, in which members agree to open their markets to each other’s exports by lowering trade barriers.

Solution: a)

Operation Twist

• RBI launched US-style ‘Operation Twist’ to bring down interest rates.
• ‘Operation Twist’ is when the central bank uses the proceeds from sale of short-term securities to buy long-term government debt papers, leading to easing of interest rates on the long-term papers.
• The objective behind such an operation is management of the yield curve.
• It will help to make loans less expensive with those looking to buy homes, cars and make savings less desirable as it doesn’t pay much interest.
• Other central banks, including the US Federal Reserve, have used similar measures.