Forex Reserves of India and Forex Management GK MCQs With Answer & Explanation in English is a comprehensive resource for learners and aspirants aiming to enhance their knowledge of India’s foreign exchange reserves and its management. This article covers critical multiple-choice questions, along with detailed answers and explanations, helping you gain a deeper understanding of forex trends, policies, and their impact on the Indian economy.
Whether preparing for competitive exams or expanding your general knowledge, this guide provides valuable insights in an accessible format. Dive in and strengthen your grasp of this vital economic topic!
1. In which year was RBI empowered to regulate money, forex, G-sec, and gold-related securities market?
- 2004
- 2006
- 2008
- 2010
Show Answer
Answer: 2006
The Reserve Bank of India (RBI) was empowered to regulate money, forex, G-sec, and gold-related securities market in the year 2006: This statement is not accurate. The Reserve Bank of India (RBI) has been the regulatory authority for various financial markets, including the money market, forex market, government securities (G-sec) market, and gold-related securities for a long time, well before 2006. The RBI plays a crucial role in setting policies, regulations, and oversight in these financial markets.
2. Consider the following sources of foreign exchange reserves. Which among the above are placed under Portfolio Investment?
1. Foreign Institutional Investments (FII)
2. American Depository Receipts
3. Global Depository Receipts (GDR)
Choose the right option;
- 1, 3
- 2, 3
- 1, 2, 3
- None
Show Answer
Answer: 1, 2, 3
Among the sources of foreign exchange reserves mentioned, Foreign Institutional Investments (FII), American Depository Receipts (ADR), and Global Depository Receipts (GDR) are placed under Portfolio Investment: This statement is correct. Foreign Institutional Investments (FII), American Depository Receipts (ADR), and Global Depository Receipts (GDR) are considered part of portfolio investment. These sources represent investments made by foreign investors in a country’s financial markets, typically in the form of stocks, bonds, or depository receipts.
3. In financial language, Fixed to Floating and Floating to Floating are used in the context of which among the following?
- Interest rates
- Swaps
- Foreign Exchange Rates
- None of them
Show Answer
Answer: Swaps
In financial language, Fixed to Floating and Floating to Floating are used in the context of Swaps: This statement is correct. “Fixed to Floating” and “Floating to Floating” are terms used in the context of interest rate swaps. In a fixed-to-floating swap, one party exchanges a fixed interest rate for a floating interest rate, while in a floating-to-floating swap, both parties exchange floating interest rates tied to different reference rates.
4. Which agency is responsible for the enforcement of the Foreign Exchange Management Act 1999 and Prevention of Money Laundering Act 2002 in India?
- Reserve Bank of India
- Department of Revenue
- Enforcement Directorate
- Income Tax Department
Show Answer
Answer: Enforcement Directorate
The Enforcement Directorate (ED) is responsible for enforcing the Foreign Exchange Management Act (FEMA) 1999 and Prevention of Money Laundering Act (PMLA) 2002 in India: This statement is correct. The Enforcement Directorate (ED) is a law enforcement agency in India responsible for enforcing the provisions of the Foreign Exchange Management Act (FEMA) 1999 and the Prevention of Money Laundering Act (PMLA) 2002. It investigates and takes action against cases involving foreign exchange violations, money laundering, and other financial crimes.
5. Which is the major component of India’s foreign exchange reserves?
- Gold
- Foreign Currency assets
- SDR with IMF
- Reserve Position with IMF
Show Answer
Answer: Foreign Currency assets
Foreign Currency assets (FCA) are the major component of India’s foreign exchange reserves: This statement is accurate. Foreign Currency Assets (FCA) typically constitute the largest component of India’s foreign exchange reserves. FCA includes foreign currencies, foreign exchange assets, and investments in foreign government securities. These assets are held by the Reserve Bank of India (RBI) and are an important part of India’s external financial strength.
6. Which of the following is not a part of India’s foreign exchange reserves?
- Gold
- SDRs (Special Drawing Rights)
- Foreign currency assets
- Foreign currency and securities held by the banks and corporate bodies
Show Answer
Answer: Foreign currency and securities held by the banks and corporate bodies
Foreign exchange reserves include assets held by central banks and monetary authorities, such as gold, SDRs, and foreign currency assets. Foreign currency and securities held by banks and corporate bodies are not part of India’s foreign exchange reserves: This statement is correct. Foreign exchange reserves primarily consist of assets held by a country’s central bank, such as the Reserve Bank of India (RBI) in the case of India. These assets typically include foreign currency holdings, gold reserves, Special Drawing Rights (SDRs) from the International Monetary Fund (IMF), and foreign currency assets. Funds held by banks and corporate bodies are not counted as part of a country’s official foreign exchange reserves.
7. Consider the following statements on the ‘Enforcement Directorate (ED)’:
1. Its objective is to enforce the Foreign Exchange Management Act 1999 (FEMA) and the Prevention of Money Laundering Act 2002 (PMLA).
2. It was formed as the ‘Enforcement Unit’ in the Department of Economic Affairs.
3. It investigates crime with proceeds over and above 10 crore.
Choose the right option
- Only 1 & 2
- Only 2 & 3
- Only 1 & 3
- 1, 2 & 3
Show Answer
Answer: 1, 2 & 3
The Enforcement Directorate (ED) is responsible for enforcing FEMA 1999 and PMLA 2002 in India. It was initially formed as the ‘Enforcement Unit’ in the Department of Economic Affairs and later renamed the Enforcement Directorate. It investigates crimes with proceeds over and above 1 crore: This statement is correct. The Enforcement Directorate (ED) is an agency in India responsible for enforcing FEMA 1999 and PMLA 2002. It was originally established as the ‘Enforcement Unit’ in the Department of Economic Affairs and later renamed as the Enforcement Directorate. The ED primarily focuses on cases involving large financial transactions or proceeds exceeding a certain threshold, which is often set at 1 crore or more. The agency investigates financial crimes and money laundering cases to ensure compliance with these acts.
Latest Web Stories
Leave a Reply