DCM3103 MONEY AND BANKING MARCH 2025

Description

SESSION	MARCH 2025
PROGRAM	BACHELOR OF COMMERCE (B.COM)
SEMESTER	V
COURSE CODE & NAME	DCM3103 MONEY AND BANKING

 

 

Set – 1

 

Q1. Explain the meaning of the statement ‘Money is what money does’ and describe the importance of money in modern societies.   4+6     

Ans 1.

Understanding the Phrase ‘Money is What Money Does’

The phrase ‘Money is what money does’ implies that money cannot be defined merely by its physical form, such as coins or currency notes, but by the functions it performs in an economy. It is a practical, function-based definition, emphasizing the utility and role of money in facilitating economic activities. Whether it’s in the form of paper notes, digital currency, or precious metals, anything that serves the essential functions of money qualifies as money.

This definition moves away from the conventional view of money as a commodity and

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Q2. Describe the significance of Banking Codes and Standard Board of India (BSCSBI).

Ans 2.

BCSBI

The Banking Codes and Standards Board of India (BCSBI) was an independent institution set up in 2006 by the Reserve Bank of India (RBI) to ensure that banking customers are treated fairly and transparently. Although it ceased operations in 2021, its impact on standardizing customer service practices and building trust in the banking sector remains significant.

The objective of BCSBI was to develop and promote a Code of Banking Practices that banks would voluntarily adopt to ensure fair treatment of customers. These codes aimed to enhance customer awareness, improve service quality, and create a uniform set of customer rights and

 

 

Q3. A. Explain the process of credit creation in the banking system.

1. Distinguish between real and nominal interest rates.

Ans 3.

1. Credit Creation

Credit creation is a fundamental function of commercial banks in modern economies. It refers to the process by which banks create credit or deposits by lending more than the actual cash reserves they hold. This capacity of banks to expand the money supply in the economy through lending is a crucial element in the functioning of the monetary system.

Primary Deposits and Lending

The process begins when customers deposit money in banks. These are known as primary

 

 

Set – 2

 

 

Q1. Write a note on

1. Asset Liability Management
2. Treasury Management 5+5

Ans 1.

1. Asset Liability Management (ALM)

Asset Liability Management is a strategic framework used by banks and financial institutions to balance their assets and liabilities in a way that minimizes risks and maximizes profitability. The core objective of ALM is to manage liquidity risk, interest rate risk, and market risk.

Purpose and Functions

ALM ensures that the bank has enough liquid assets to meet short-term obligations while maintaining profitable long-term investments. It helps in managing mismatches in maturity and

 

 

Q2. Discuss the role of the Narasimhan Committee on banking sector reforms.          

Ans 2.

Narasimhan Committee

The Narasimhan Committee was established by the Government of India in the early 1990s, under the chairmanship of M. Narasimham, a former Governor of the Reserve Bank of India. The committee was set up in response to the growing need for banking reforms following India’s economic liberalization in 1991. It played a pivotal role in transforming the Indian banking sector from a heavily regulated system to a more competitive, transparent, and efficient

 

 

Q3. Discuss quantitative and qualitative instruments of monetary policy to control the money supply in countries.       

Ans 3.

Monetary Policy Instruments

Monetary policy refers to the central bank’s actions to regulate the money supply, control inflation, and stabilize the economy. These policies are implemented using quantitative and qualitative instruments, with the Reserve Bank of India (RBI) as the primary authority in India. The goal is to influence credit availability, interest rates, and liquidity in the financial system.

Quantitative Instruments of Monetary Policy

1. Cash Reserve Ratio (CRR)

CRR is the percentage of a bank’s total deposits that must be kept with the central bank in the