Financial Markets and Banking Operations

1. 205 FMBO
MCQ

2. • How many depositories are there in
India?
1. One
2. Two
3. Three
4. Four
Answer: (2)
Depository is a place where financial securities are held in
dematerialised form. There are two registered depositories
in India viz. Central Depository Services Ltd and National
Securities Depository Ltd.

3. What is the underlying collateral under
borrowing through inter-corporate deposit
(ICD) ?
1. Government Securities
2. Certificate of Deposits
3. Shares
4. No collateral required
Answer: (4)
An Inter-Corporate Deposit (ICD) is an unsecured borrowing by corporates and
FIs from other corporate entities registered under the Companies Act 1956. The
corporate having surplus funds would lend to another corporate in need of funds.
This lending would be an uncollateralized basis and hence a higher rate of
interest is demanded by the lender. The short term credit rating of the borrowing
corprorate would determine the rate at which it would be able to borrow funds.
Further the credit spreads demanded even for the top rated corporates would be
higher than similar rated banks and the rates on ICDs would higher than those in
the Certificate of Deposit (CD) market.

4. • The tenor of ICD ranges from ________
to ______?
1. 1 day to 1 year
2. 7 days to 1 year
3. 1 day to 180 days
4. 1 day to 3 years
Answer: (1)
The tenor of ICD may range from 1 day to
1 year, but the most common tenor of
borrowing is for 90 days.

5. • Who are permitted to borrow in ICD
market?
1. Banks
2. FII
3. Primary Dealers
4. Authorised Dealers
Answer: (3)
Primary Dealers are permitted to borrow in
the ICD market

6. • The maximum borrowing under ICD is
restricted to _____ of Net Owned Fund
(NOF)?
1. 50%
2. 70%
3. 100%
4. 125%
Answer: (1)
The borrowing under ICD is restricted to 50%
of the Net Owned Funds

7. • What is the opening time for trading in
foreign exchange market?
1. 9:00 AM
2. 10:00 AM
3. 10: 30 AM
4. 24 hour market
Answer: (4)
The foreign exchange market is open 24 hours a day in
different parts of the world. At any point in time, there is at
least one market open, and there are a few hours of overlap
between one region’s market closing and another opening.

8. • LIBOR stands for __?
1. London Inter Bank Offered Rate
2. Las Vegas Inter Bank Offered Rate
3. Los Angeles Inter Bank Offered Rate
4. Las Cruces Inter Bank Offered Rate
Answer: (2)
The London Interbank Offered Rate (LIBOR) is
a benchmark interest rate at which major global
banks lend to one another in the international
interbank market for short-term loans

9. • LIBOR is issued for how many
currencies?
1. Three
2. Four
3. Five
4. Six
Answer: (3)
It is computed for five currencies with seven different
maturities ranging from overnight to a year. The five
currencies for which LIBOR is computed are Swiss franc,
euro, pound sterling, Japanese yen and US dollar

10. • Who publishes and administers the
LIBOR?
1. Intercontinental Exchange
2. London Stock Exchange
3. New York Stock Exchange
4. Shanghai Stock Exchange
Answer: (1)
LIBOR is administered by the
Intercontinental Exchange or ICE.

11. • LIBOR is issued for ____ maturities
1. Four
2. Five
3. Six
4. Seven
Answer: (4)
LIBOR is currently calculated for five currencies (USD, GBP,
EUR, CHF and JPY) and for seven tenors in respect of each
currency (Overnight/Spot Next, One Week, One Month, Two
Months, Three Months, Six Months and 12 Months). This
results in the publication of 35 individual rates (one for each
currency and tenor combination) every applicable London
business day.

12. • What is the frequency of publication of
LIBOR?
1. Daily
2. Weekly
3. Monthly
4. Yearly
Answer: (1)
The London Interbank Offer Rate provides a stable
pool of 35 rates calculated daily under a monitored
environment.

13. • MIBOR stands for ___?
1. Madrid inter bank offered rate
2. Manchester inter bank offered rate
3. Mumbai inter bank offered rate
4. Madison inter bank offered rate
Answer: (3)
The Mumbai Inter-Bank Offered Rate
(MIBOR) is the interest rate benchmark at
which banks borrow unsecured funds from
one another in the Indian interbank market

14. • What is the frequency of publication of
MIBOR?
1. Daily
2. Weekly
3. Monthly
4. Yearly
Answer: (1)

15. • Who publishes MIBOR in India?
1. Bombay Stock Exchange
2. National Stock Exchange
3. FIMMDA
4. FBIL
Answer: (2)
MIBOR is calculated every day by the National
Stock Exchange of India (NSEIL) as a weighted
average of lending rates of a group of major banks
throughout India, on funds lent to first-class
borrowers

16. • Which act governs the foreign exchange
management in India?
1. FEMA 1999
2. FEMA 1995
3. FEMA 1973
4. FEMA 2003
Answer: (1)
The Foreign Exchange Management Act, 1999 (FEMA), is
an Act of the Parliament of India “to consolidate and amend
the law relating to foreign exchange with the objective of
facilitating external trade and payments and for promoting
the orderly development and maintenance of foreign
exchange market in India”.

17. • FEMA 1999 has been divided into ___
chapters and ____ sections.
1. 5, 29
2. 6, 37
3. 7, 49
4. 8, 91
Answer: (3)
FEMA was enacted by Parliament of India
and it came into force on 1st June, 2000.
There are a total of 49 Sections divided
into 7 chapters.

18. • Name the authority that regulates the
Foreign exchange in India?
1. Enforcement Directorate
2. RBI
3. Finance Ministry
4. SEBI
Answer: (2)
The Reserve Bank of India (RBI) is an apex institution that
regulates and monitors the system of foreign remittances
directly or through its subsidiary bodies in India. It is the
sole regulator of foreign exchange in India and maintains
the value of the rupee in the global economy.

19. • Who investigates the contravention of
provisions of FEMA 1999?
1. Enforcement Directorate
2. RBI
3. Finance Ministry
4. SEBI
Answer: (1)

20. • Who have been authorised by RBI to deal
in foreign exchange transactions?
1. Authorised Agency
2. Authorised People
3. Authorised Company
4. Authorised Dealer
Answer: (4)
An Authorised Dealer (AD) is any person specifically
authorized by the Reserve Bank under Section 10(1) of
FEMA, 1999, to deal in foreign exchange or foreign securities
and normally includes banks.

21. • FEMA was made applicable with effect
from ____
1. 1st April, 2000
2. 1st June, 2000
3. 1st April, 1999
4. 1st June, 1999
Answer: (2)
FEMA was enacted by Parliament of India
and it came into force on 1st June, 2000.

22. • How many SEBI recognised stock exchanges
are currently active in India?
1. Nine
2. Eleven
3. Twenty One
4. Twenty Five
Answer: (1)
There are currently nine active SEBI registered stock exchanges operating in India. There are BSE
Ltd, Calcutta Stock Exchange Ltd, India International Exchange (India INX), Indian Commodity
Exchange Limited, Metropolitan Stock Exchange of India Ltd., Multi Commodity Exchange of India
Ltd., National Commodity & Derivatives Exchange Ltd., National Stock Exchange of India Ltd., NSE
IFSC Ltd. Apart from these, The Hyderabad Securities and Enterprises Ltd (erstwhile Hyderabad
Stock Exchange), Coimbatore Stock Exchange Ltd, Saurashtra Kutch Stock Exchange Ltd ,Mangalore
Stock Exchange, Inter-Connected Stock Exchange of India Ltd, Cochin Stock Exchange Ltd,
Bangalore Stock Exchange Ltd , Ludhiana Stock exchange Ltd, Gauhati Stock Exchange Ltd,
Bhubaneswar Stock Exchange Ltd, Jaipur Stock Exchange Ltd, OTC Exchange of India , Pune Stock
Exchange Ltd, Madras Stock Exchange Ltd, U.P.Stock Exchange Ltd, Madhya Pradesh Stock
Exchange Ltd, Vadodara Stock Exchange Ltd, Delhi Stock Exchange Ltd and Ahmedabad Stock
Exchange Ltd have been granted exit by SEBI

23. • In which year National Stock Exchange
started its operations?
1. 1990
2. 1991
3. 1992
4. 1993
Answer: (3)
NSE was incorporated in 1992

24. • Which among the following taxes is levied on
doing any sale/purchase of security
transaction on stock exchange?
1. Long Term Equity Tax
2. Securities Transaction Tax (STT)
3. GST
4. Income Tax
Answer: (2)
Securities transaction tax (STT) is a tax levied at the time of purchase
and sale of securities listed on stock exchanges in India. Securities are
tradable investment instruments such as shares, bonds, debentures,
equity-oriented mutual funds (MFs) and so on and are issued either by
companies or by the Indian government.The rate of STT differs based
on the type of security traded and whether the transaction is a purchase
or a sale.

25. • All equity/stock settlements in India
happens on ___ basis
1. T+4
2. T+3
3. T+2
4. T+1
Answer: (3)
All equity/stock settlements in India happen
on a T+2 basis.

26. • When an unlisted company makes a
fresh issue of securities for the first time
to public, it is called?
1. FPO
2. Rights Issue
3. Bonus Issue
4. IPO
Answer: (4)
An unlisted company announces initial public
offering (IPO) when it decides to raise funds
through sale of securities or shares for the first time
to the public.

27. • When an already listed company makes a
fresh issue of securities to the public, it
is called?
1. FPO
2. Rights Issue
3. Bonus Issue
4. IPO
Answer: (1)
When an already listed company issue shares to
the public, it is called Follow on public offer or FPO

28. • When a listed company proposed to
issue fresh securities to its existing
shareholders, it is called?
1. FPO
2. Rights Issue
3. Bonus Issue
4. IPO
Answer: (2)
When a company offers more of its shares to
current shareholders, usually to raise extra capital, it
called a rights issue

29. Name the document that has to be filed with
SEBI before a company makes public issue?
1. ROC
2. Invits Doc
3. Draft Document
4. Offer Document
Answer: (4)
Offer document means Prospectus in case of a public
issue or offer for sale and Letter of offer in case of a rights
issue, which is filed with the Registrar of Companies (ROC)
and Stock Exchanges. An offer document covers all the
relevant information to help an investor to make his/her
investment decision

30. • Retail individual investor’ means an investor
who applies or bids for securities of or for a
value of not more than _____
1. Rs. 1,00,000
2. Rs. 2,00,000
3. Rs. 3,00,000
4. Rs. 4,00,000
Answer: (2)
‘Retail individual investor’ means an investor who applies or
bids for securities of or for a value of not more than Rs.
2,00,000. All applicants, other than QIBs or individuals
applying for less than Rs. 2,00,000 are considered as NIIs.

31. • Who among the following helps a
company to issue shares and get listed
in stock exchange?
1. Investment Banker
2. Asset Manager
3. Merchant Banker
4. Relationship Manager
Answer: (3)
A merchant bank is a firm or financial institution that
invests equity capital directly in businesses and often
provides those businesses with advisory services.

32. Name the application process that allow an investor to
apply for issue using his bank account. Under this
process, the application money is debited from
applicant bank account only if his application is
selected for allotment.
1. ASBA
2. BSBDA
3. BCCMA
4. FIMC
Answer: (1)
ASBA means “Applications Supported by Blocked Amount”. ASBA
is an application containing an authorization to block the application
money in the bank account, for subscribing to an issue. If an investor is
applying through ASBA, his application money shall be debited from the
bank account only if his/her application is selected for allotment after the
basis of allotment is finalized, or the issue is withdrawn/failed.

33. • Name the term given to banks who are
capable of providing ASBA services to
its customers.
1. Stock Certified Banking Entity
2. Equity Certified Banking Company
3. Self Certified Syndicate Bank
4. ASBA Certified Bank
Answer: (1)
Banks which are certified by SEBI to allow retail individual investor to
apply in IPO’s using ASBA payment method, are known as ‘Self
Certified Syndicate Banks (SCSBs)’. These banks has capability to
block the IPO Application amount until IPO allotments are done.

34. • In which year Securities and Exchange
Board of India Act (SEBI) was enacted?
1. 1990
2. 1992
3. 1994
4. 2000
Answer: (2)
The Securities and Exchange Board of India Act, 1992 was act passed
to provide for the establishment of a Board to protect the interests of
investors in securities and to promote the development of, and to
regulate, the securities market and for matters connected therewith or
incidental thereto. Accordingly the Security and Exchange Board of
India was established on 12 April 1992

35. • SEBI was established the purpose of
regulating which market?
1. Banking
2. Insurance
3. Pension
4. Securities
Answer: (4)
The Securities and Exchange Board of India Act, 1992 was
act passed to provide for the establishment of a Board to
protect the interests of investors in securities and to
promote the development of, and to regulate, the securities
market and for matters connected therewith or incidental
thereto

36. • What is the minimum corpus of fund that
a Pension Fund must have to act as
Qualified Institutional Buyers (QIB)?
1. Rs 15 crore
2. Rs 25 crore
3. Rs 50 crore
4. Rs 75 crore
Answer: (2)
Qualified Institutional Buyers are those institutional
investors who are generally perceived to possess
expertise and the financial muscle to evaluate and invest
in the capital markets.

37. In terms of clause 2.2.2B (v) of DIP Guidelines, a ‘Qualified
Institutional Buyer’ shall mean:
Scheduled commercial banks;
Mutual funds;
Foreign institutional investor registered with SEBI;
Multilateral and bilateral development financial
institutions;
Venture capital funds registered with SEBI.
Foreign Venture capital investors registered with SEBI.
State Industrial Development Corporations.
Insurance Companies registered with the Insurance
Regulatory and Development Authority (IRDA).
Provident Funds with minimum corpus of Rs.25 crores
Pension Funds with minimum corpus of Rs. 25 crores
Public financial institution as defined in Companies Act,
2013;

38. • Name the authority with which a mutual
fund has to get registered before
making any offer to public?
1. SEBI
2. RBI
3. Department of Financial Services
4. FIMMA
Answer: (1)
A mutual fund is required to be registered with
Securities and Exchange Board of India (SEBI)
before it can collect funds from the public

39. • SEBI Regulations require that at least
_____ of the directors of trustee
company or board of trustees must be
independent
1. 1/3rd
2. 1/4th
3. 2/5th
4. 2/3rd
Answer: (4)
SEBI Regulations require that at least two thirds of the
directors of trustee company or board of trustees must be
independent i.e. they should not be associated with the
sponsors

40. • SEBI Regulations requires that _____ %
of the directors of AMC must be
independent.
1. 20%
2. 35%
3. 50%
4. 75%
Answer: (3)
SEBI Regulations require 50% of the
directors of AMC must be independent

41. • Which out of the following term
represents market value per unit of a
mutual fund?
1. Alpha
2. NAV
3. Sharpe Ratio
4. SD
Answer: (2)
Net Asset Value (NAV) is a fund’s market value
per unit. It is calculated by dividing the total value
of all the assets in a portfolio, minus all its liabilities.

42. • The Growth mutual funds invests
primarily in _______?
1. Equities
2. G-Secs
3. Corporate Bonds
4. None of the Above
Answer: (1)
A mutual fund that invests in growth
stocks/equities (an emerging company) to attain
maximum capital appreciation is a growth mutual
fund.

43. Answer: