MODEL SOLVED PAPER
:aUI
Beldon RBI OFFICERS IN GRADE 'B'
19.09.2016
Based On Memory PHASE-II EXAM
FINANCE If MANAGEMENT
(There will be questiona carrying 2 marks each and
queationa carrying 1 mark each)
Dlrectiona (1-3): Read the followingpassage and
answer the given questions:
Job Enrtchment and job enlargement techniques
if given proper attention in the organization the im-
balance can be changed to balanced work life. These
two techniques have roots in motivational theories.
Job itself is motivating and if it is designed in such a
manner that they are challenging, interesting and
meaningful the employees feel that the organization
owes them and ultimately boost their performance and
motivate them. Once, employees are motivated produc-
tivity as well as profitability of organization increases.
This would enhance their monetary benefits and final-
ly their standard of livingwill be raised. They can also
fulfill their basic needs along with it, can lead com-
fortable and luxurious life. If their personal needs are
fulfilled the members of the family are satisfied, no
more of conflicts arise hence can work tension free.On
the other hand, Job enrichment and job enlargement
increases responsibilities and autonomy in work. The
feeling of employees towards job insecurity turns to
security feeling and employees feel that they are being
valued. The competencyofemployeesis improvedwhich
helps in their career development, career growth.and
ultimately job satisfaction. Autonomy in work helps
them to be stress free as they have not to work under
undue pressure of their seniors rather have freedom in
work and decision making. So by satisfying their high-
er order needs they can make equtlibrtum in personal
and professional life.
1. Which of the followingstatements is/are not cor-
rect regardingperformanceappraisal at workplace?
(2marb)
(1) An employee's performance appraisal is an
example of something in the workplace that
depends very much on the perceptual process
(2) An employee's future is closely tied to his or
her appraisal
(3) Hiringand performance appraisals are the only
processes in organizations that are subject to
perceptual bias
(4) Although the appraisal can be objective,many
jobs are evaluated in subjective terms
(5) Both 1and 2
2. Which of the following statements correctly de-
scribe 360-degree evaluation? (2 marks)
a. Its primary objective is to pool feedback from
all the employees
b. It fits well into organizations that have intro-
duced teams, employee involvement and To-
tal Quality Management programs.
c. It provides performance feedback from the
fullcircle of daily contacts that an employee
might have.
Select the correct answer using the codes giv-
en below:
(1) Both a and c (2) Only c
(3) Only b (4) Both b and c
(5) All of the above given as options
3. With reference to Job Enrichment and the Job
Characteristics Model,which of the followingcrit-
ical psychological states is linked to the core job
dimensions? (2 marks)
a. Experienced meaningfulness
b. Knowledgefor the actual results
c. Experienced responsibility for improvement
Select the correct answer using the codes given
below: .
(1) Only b (2) Both a and c
(3) Only c (4) Both a and b
(5) All of the above given as options
4. Job-specific competencies that drive proven high-
performance, quality results for a given position,
are called (1 mark)
(1) Management competency
(2) Organizational competency
(3) Functional competency
(4) Technical competency
(5) Core competency
5. Which of the followingis the full form of ICAAP?
(1 mark)
(1) Internal Capital Adequacy Process
(2) International Currency Asset Protocol
(3) Internal Currency Asset Process
(4) International Capital Adequacy Protocol
(5) Internal Currency Adequacy Process
Dlrectiona : Read the followingpassage and an-
swer the given question:
Human Resource Outsourcing (HRO)is a sustain-
able and competitive method to manage costs and al-
Iowa company's core resources to focus on strategic
initiatives rather than managing transactional acttvt-
======t(MODEL SOLVED PAPER: RBI OFFICERS IN GRADE 'B' PHASE-II EXAM
ties in HR operations. This has enabled HR profes-
stonals in being more strategic people managers by
outsourcing some ofthe administrative and operational
tasks. Comprehensive Human Resource Outsourcing
is achieved by offloadtngmultiple processes and tech-
nologies such as benefits and payroll.
6. Which of the followingstatements does not cor-
rectly summarize the essential features of HR
outsourcing? (2_b)
(1) Businesses that outsource HR are typically
large firms
(2) Payroll outsourcing is commonly outsourced
since it is a time-consuming administrative
task for employers
(3) HR outsourcing does not absolve the organi-
zation of good people management practices
nor of overall responsibility for the provision
of HR services
(4) Outsourcing human resources or some of its
processes to an external provider is a major
business decision as, while it may be cost-
effective.it introduces new elements of risk
(5) Both 2 and 3
7. Which ofthe followingis/are not the dimension(s)
of participative leadership? (1_k)
a. Formal participation
b. Consultative participation
c. Short-term participation
d. Representative participation
Select the correct answer using the codes given
below:
(1) Both c and d (2) Only a
(3) Both a and d (4) Only c
(5) None of these
Directions (8-10): Read the followingparagraph
and answer the questions given below:
Profitabilitymeasures such as the Sharpe ratio and
the reward-to-VaRratio are proposed for loan portfoli-
os although it is not assessed whether their risk-re-
turn trade-offs are optimal for banks. The profitability
measures are based on capital market models instead
and represent the optimal risk-return trade-off'oftndt-
vidual capital market investors. However,the optimal
risk-return trade-off of individual capital market in-
vestors and banks do not need to be the same since
they have different targets and banks are confronted
with specific costs of risk-taking. Models of commer-
cial banks are developedwhich are based on two capi-
tal market imperfections. They assume that equity-
funding is too costly to be profitable. and that insol-
vency causes bankruptcy costs. The models derive op-
timal risk-return trade-offs by quantifying the effects
of the loan portfolio's risk-return profile on the mar-
ket price of equity. The models consider the limited
liability of shareholders. the risk premium of share-
holders and market discipline in the form of the disci-
)):::===
pUning by uninsured debtholders. Furthermore, it is
calculatedhowthe optimalrisk-return trade-offchanges
in the presence of regulatory capital requirements and
the restriction of a fixed portfoliovolume. The models
not only contribute to the answering of the research
question, they also help in understanding risk man-
agement motives of banks, in particular, how market
disciplineand capital requirements ofBasel I and Basel
IIaffectthe optimal decision-making ofbanks with and
without the presence of deposits.
8. Consider the followingstatements regarding Beta
as a measurement of investment risk: (2 marks)
a. It is a measure of an asset's return on investment
compared to the risk adjusted expected return.
b. In case of stock in a big technology company, the
beta is less than one.
c. It is calculated using regression analysis.
d. It measures the risk of an investment held on a
stand-alone basis.
Which of the statements given above is/are not
correct?
Select the correct answer using the codes given
below:
(1) Both a and d (2) Only b, c and d
(3) Both b and c (4) Only a, band d
(5) All of the above given as options
9. Which of the followingstatements is/are correct
regarding risk premium? (2 marks)
a. It is the return on an investment minus the re-
turn that would be earned on a risk-free invest-
ment
b. The risk premium of the market is the average
return on the market plus the risk-free rate
c. The risk premium of a particular investment us-
ing the capital asset pricing model is alpha times
the differencebetween the return on the market
and the return on a risk-free investment.
Select the correct answer using the codes given
below:
(1) Only c (2) Both a and b
(3) Only a (4) Both b and c
(5) Only c
10. Risk Return Trade-off (2marks)
a. Assumes that markets are efficientand no alpha-
profit could be found.
b. Does not exist at the portfolio level.
c. Is the balance between the desire for the lowest
possible risk and the highest possible return.
d. Assumes that higher risk equals greater return.
Select the correct answer using the codes given
below:
(1) Only c (2) Both a and c
(3) Only d (4) Both b and d
(5) All of the above given as options
=====~(MODEL SOLVED PAPER: RBI OFFICERS IN GRADE 'B' PHASE-II EXAM
11. Which of the followingis true regarding Perpetu-
al Bonds? (1 mark)
(1) These bonds are not issued on a private place-
mentbasis
(2) These bonds are treated as security and not
as bond
(3) They are bonds with long term maturity
(4) They work like life-time. irredeemable fixed
deposit
(5) These bonds protect the investor from credit
risk
12. Two-factor theory was given by (1 mark)
(1) FrederickHerzberg (2) Abraham Maslow
(3) David McClelland (4) Edwin Locke
(5) Henry A. Landsberger
13. Which of the followingstatements is not correct
regarding NSDLand CSDL? (1muk)
. (1) NSDLis promoted by lOBI. lITI and Bombay
Stock Exchange
(2) CSDL is promoted by State Bank of India.
Union Bank of India. Bank of Baroda. Bank
of India. Standard Chartered Bank
(3) CSDL is the pioneer electronic depository of
securities established in India
(4) The total number of depository participants
in in NSDLis less than those in CSDL
(5) The active investor accounts in NSDLare com-
paratively higher than in CDSL
Dlrectio ... (14-18): Read the followingpassage and
answer the questions given below:
A core function of the Reserve Bank in the has
been the formulation and implementation of mone-
tary policywith the objectives ofmamtammg price sta-
bility and ensuring adequate flow of credit to produc-
tive sectors of the economy. To these was added. in
more recent times. the goal of maintaining financial
stability. The objective of maintaining financial sta-
bility has spanned its role from external account man-
agement to oversight ofbanks and non-banking ftnan-
cialinstitutions as also of money. government securi-
ties and foreign exchange markets. The Reserve Bank
designs and implements the regulatory policy frame-
work for banking and non-banking financialinstitu-
tions with the aim of providing people access to the
banking system. protecting depositors' interest. and
maintaining the overall health of the ftnanetal sys-
tem. The last one-and-a-half decades have also seen
growing integration of the national economy and fi-
nancial system with the globalizing world. WhUeris-
ing global integration has its advantages in terms of
expanding the scope and scale of growth of the Indian
economy. it also exposes India to global shocks. Hence.
maintaining financial stability became an important
mandate for the Reserve Bank. This. in tum. has
brought forth the need for effective coordination and
consultation with other regulators within the country
and abroad.
)):::===
14. With reference to RBI's Open Market Operations.
which of the followingstatements is/are correct?
(2 mark)
a. It directly controls the total money supply. in ef-
fect expanding money or contracting the money
supply.
b. It is a stand-alone instrument for adjusting the
quantum and price of money in the system.
c. In comparison to the CRR (Cash reserve ratio).
the usage of OMOs has increased since the fi-
nancial sector reforms of 1991.
Select the correct answer using the codes given
below:
(1) Both a and b (2) Only a
(3) Only c (4) Both b and c
(5) All of the above given as options
115. Consider the followingstatements regarding the
Monetary Policy Committee: (2 marks)
a. It has been given a statutory and institutional-
izedframeworkby amendment ofthe RBIAct 1934
through the MPCAct 2016.
b. It is entrusted with the task of fixing the repo
rate required to contain inflation within the spec-
ified target level.
c. With the formation of the MPC. the RBI has lost
its discretion to surprise the market.
d. The meetings of the MPC will be held at least 3
times a year.
Select the correct answer using the codes given
below:
(1) Only c (2) Both a and b
(3) Only b. c and d (4) Both b and c
(5) None of these
18. Which of the following statements correctly re-
flect the evolvingrole of the RBI Since the 1991
reforms? (2 marks)
a. The RBIhas gradually started the practice ofpro-
viding concessional finance or refinance for spec-
ified sectors such as agriculture. industry and
export. .'
b. Transfer of the balance of profits. after necessary
provisions. to the Central Government has been
rationalized as part ofthe reform process in 2005.
c. De facto. RBI has not been accorded autonomy
on par with recent trends in some of the industri-
alized as well as emerging economies.
Select the correct answer using the codes given
below:
(1) Only b (2) Only a
(3) Both a and b (4) Only c
(5) All of the above given as options
17. Which of the followingstatements is/are not cor-
rect regarding the repo rate? (1 mark)
===:::::::( MODEL SOL.VED PAPER: RBI OFFICERS IN GRADE 'B' PHASE-II EXAM J====
(1) It is a means of short-term borrowing
(2) It is the discount rate at which banks borrow
from RBI
(3) Before the launch of repo, the most impor-
tant monetary policy instrument used to
counter inflation was CRR
(4) Alongwith CRR,repo rate is used as a policy
instrument to fight inflation
(5) None of these
18. Which of the following is not a component of
MCLR? (1muk)
(1) Minimum Rate of return
(2) Marginal cost of funds
(3) Negativecarry on account of CRR
(4) Operating costs
(5) Tenor premium
19. The First Five Year plan was started in (1mark)
(1) 1948 (2) 1949
(3) 1950 (4) 1951
(5) 1952
20. Which of the followingis/are correct regarding
CSR Rules under Companies Act, 2013? (1mark)
(1) The CSR activities should be with respect to
any of the activities mentioned in Schedule
VIIIof the 2013 Act
(2) The CSR activities should not be undertaken
in the normal course of business
(3) Only activities in India would be considered
for computing CSR expenditure
(4) Both 2 and 3
(5) All of the above given as options
21. Which of the followingstatements correctly ex-
plains Risk WeightedAssets? (1mark)
(1) Its calculation is dependent on whether the
bank has adopted the IRBapproach under the
Basel II framework
(2) It is expressed as a percentage ofa bank's risk
weighted credit exposures
(3) Capital Adequacy Ratio (CAR)is used in its
calculation
(4) Both 2 and 3
(5) Both 1 and 2
22. Mutual funds in India are regulated by (1mark)
(1) RBI (2) IRDAI
(3) SEBI (4) FMC
(5) Both 2 and 3
DIrections (23-25): Read the followingpassage and
answer the questions given below:
During recent times, "corporate governance" has
gained significant attention and focus across tile globe.
Most evidently, the reason for this renewed focus has
been a result of major corporate collapses and lack of
governance standards cited in those instances. In In-
dia also, various initiatives have been taken in the past
by the Ministry of Corporate Affairs and SEBI to as-
certain that those entrusted with the responsibility of
governingshareholder wealth are adequately regulated
and made accountable. Over the past 15 years, there
have been many reforms in the corporate governance
framework - starting from constitution of the Kumar
Mangalam Committee (1999), introduction of Clause
49 in the listing agreement (2000), revision in Clause
49 on recommendations of the Narayana Murthy Com-
mittee (2006), issue of voluntary gutdelmes on corpo-
rate governance (2009), issue of guiding prtnciples on
corporate governance(2012)based on recommendation
of the Adi Godrej Committee, enactment of the revised
Companies Act (2013) and finally the new corporate
governance norms by SEBI (2014).
23. According to new corporate governance rules is-
sued by the Securities and Exchange Board of
India (SEBI)in 2014, (2 mark)
a. Aperson can't be an independent director in more
than nine companies.
b. Directors nominated by the company's promoter
can be classified as an independent director.
c. Thenew rules restrict the tenure of independent
directors to two five-yearterms
d. Companies will have to disclose remuneration
policies of CEOs and executive directors.
Select the correct answer using the codes given
below:
(1) Both a and b (2) Only c
(3) Both c and d (4) Only d
(5) All of the above given as options
24. Which of the followingstatements is/are correct
regardingthe revised Clause49 ofthe UstingAgree-
ment between a company and the stock exchang-
es?(2mark)
a. Clause 49 was added to the Listing agreement
consequent to the recommendations of the CII
(Confederation of Indian Industry) Code for De-
strable Corporate Governance 1996.
b. Accordingto the 2014 rules, selling, disposing or
leasing of more than 20% of assets of the matert-
a~subsidiary will require approval of sharehold-
ers by way of special resolution.
c. Clause 49 under revised rules define an indepen-
dent Director as a Non-ExecutiveDirector who is
not a CEO/Director of a non-profit firm that re-
ceives 33% or more of its receipts from the Com-
pany.
Select the correct answer using the codes given
below:
(1) Only c (2) Both a and b
(3) Only a (4) Only b
(5) All of the above given as options
25. Which of the followingwas/were the major find-
ings of the OECD Corporate Governance Com-
mittee on Corporate Governance and the Finan-
cia~Crisis during 2009-1O? (2 marks)
=====eC MODEL SOLVED PAPER: RBI OFFICERS iN GRADE 'B' PHASE-II EXAM
a. One of the greatest shocks from the financial cri-
sis has been the widespread failure of risk man-
agement.
b. It should be fully understood by regulators and
other standard setters that effectiverisk manage-
ment is not about eliminating risk taking. which
is a fundamental driving force in business and
entrepreneurship.
c. Effective implementation of risk management re-
quires treating each business unit individually.
d. It is a good practice that risk management and
control functions be independent of profit cen-
tres.
Select the correct answer using the codes given
below:
(1) Both a and d (2) Only b
(3) Both b and c (4) Only d
(5) All of the above given as options
Directions (26): Read the following passage and
answer the questions given below:
Theory x and theory y are still referred to common-
ly in the field of management and motivation. and
whilst more recent studies have questioned the rigidi-
ty of the model. it remains a valid basic principle from
which to develop positive management style and tech-
niques. The theory remains central to organizational
development, and to improving organizational culture.
26. Which of the following statements is/are correct
regarding Theory X-Y? . (2 marb)
a. Theory X highlights the motivating role of job
satisfaction and encourages workers to approach
tasks without direct supervision.
b. Theory Y stresses the importance of strict super-
vtston, external rewards. and penalties.
c. Theory X generally proves to be most effective in
terms of consistency of work
d. It is derived from Douglas McGregor's research
over various leadership styles known as the con-
tingency theory.
Select the correct answer using the codes given
below:
(1) Both a and b (2) Only c
(3) Both b and c (4) Only d
(5) Both a and d
27. The 360-degree feedback (1 marlr.)
(1) Is based on soltcttmg information about the
employee from subordinate. lateral. and su-
pervisory sources
(2) Is a form of upward feedback
(3) Tools are customized to the needs of the orga-
nizations in which they are used
(4) Is useful in aU types of organizations and with
all types ofjobs
(5) Is widely used by the U.S. military due to its
Validity and rl"Hability
)J====
28. Management By Objectives (MBO)management
Modelwas given,by (1 mark)
(1) Peter Drucker (2) George S. Odiorne
(3) Mary Parker Follet (4) Frederick W. Taylor
(5) Henri Fayol
29. As per India - Risk management in the Guidelines
on Corporate Governance for Central Public Sec-
tor Enterprises. which of the following policies
should be implemented by the board? (1 mark)
(1) Staff responsibilities in relation to fraud pre-
vention and identification
(2) Responsibility of fraud investigation once a
fraud has been identified
(3) Process of reporting on fraud related matters
to management
(4) Both 2 and 3
(5) All of the above given as options
DireCtioM (30}: Read the following passage and
answer the questions given below:
If we talk in general terms. all relationships are
based on communication. Whether it is personal or
professional. a healthy and effective communication
becomes indispensable. Nowhereis this truer than when
it comes to business. Professional relationships are built
on this pillar. If we want to expect the maximum prof-
its out of a venture. it becomes a prerequisite that there
should be a healthy rapport amongst the clients. part-
ners and employees (ifany). To put it simply. commu-
nication allows a process to take place.
30. Which of the following statements is/are correct
regarding the various perspectives on the role of
communication in management functions?
(2marb)
a. Fayol defines planning as a crafted tool that will
examine complex issues and propose a set of so-
lutions that serves as a bridge towards growth
and change.
b. According to Weber. effective leadership and the
creation of an environment conducive to motiva-
tion depend on communication.
c. Wolvindefines communication as a conscious or
unconscious. intentional or unintentional pro-
cess in which feelings and ideas are expressed as
verbal and/or nonverbal messages. which are sent.
received. and comprehended.
Select the correct answer using the codes given
below:
(1) Both a and c (2) Only b
(3) Both a and b (4) Only c
(5) Both b and c
Directions (31-32) : Read the following passage
and answer the questions given below:
'le ~..,.tyamscandal broke in January 2009. Sa-
'a:... ';0' -uter Services was a publicly traded compa-
======I(MODEL SOLVED PAPER: RBI OFFICERS IN GRADE 'B' PHASE-II EXAM
ny listed on the Bombay Stock Exchange (BSE), the
National Stock Exchange (NS~ in India and on the
Nework Stock Exchange (NYSE)in the United States.
Rarnalinga Raju, Satyam Computer Services Ltd.'s
founder and formerchairman, and his brother B. Rama
Raju were found guilty of criminal breach of trust. This
scandal is often referred to as India's equivalent of the
Enron scandal and marked a historical turning point
in corporate governance practices. From that point
onwards, the Indian government dectded to improve
the corporate governance main mechanisms related to
disclosure and accountability.
31. Which of the followingwas/were the highlights
ofthe GodrejCommitteeon corporate governance?
(2marb)
a. It aimed at transforming corporate governance
from a "tick-box"exercise to an actual roadmap.
b. The committee recommended the increase of Fa-
miliarity Quotient (FQ) to enhance the gender
diversity of Indian boards.
c. The amended CompaniesBill20 11 CompaniesBill
2012 were largelybased on the recommendations
of this committee.
Select the correct answer using the codes given
below: ..
(1)Onlyb (2) Both a and c
(3) Only a (4) Both b and c
(5) All of the above given as options
32. Consider the followingstatements on the features
of corporate governance under the CompaniesAct
2013? (2marb)
a. This act is applicable to only the listed compa-
nies, although some exceptions have been made
in the act for small companies.
b. The act allows class action suits to protect inter-
est of investors.
c. The act has provisions for a company to make an
investment through more than two layers of in-
vestment companies.
d. The act includes a detailed code of conduct for
independent directors and providing them some
relief from prosecutio~. .
Which of the statements given above is/are cor-
rect?
(1) Both a and d (2) Only b
(3) Both b and c (4) Only a, c and d
(5) Both a and d
33. Transactional analysis theory was developedby
(lmarlt)
(1) Eric Berne (2) Claude Steiner
(3) Albert Mehrabian
(4) Wilder Penfield
(5) Rene Spitz
)F===
34. Whowas the first to propose a psychologicalthe-
ory of attribution? (1 JDaJ:k)
(1) F. Heider (2) Dennis Daly
(3) Wilson Aronson (4) B. Weiner
(5) Jones and Davis
35. Which of the followingstatements is/are correct
regarding Job enrichment? (1 mark)
(1) It means increasing the scope ofajob through
extending the range of its job duties and re-
sponsibilities generally within the same level
and periphery
(2) It is a horizontal restructuring technique
(3) Job enrichment, as a managerial activity, in-
cludes the technique of turning employees'
effort into performance
(4) Both 2 and 3
(5) All of the above given as options
36. The Four-WayTest ofH.B. Taylor was adopted by
which international organization? (1 mark)
(1) International Monetary Fund
(2) United Nations Organization
(3) Rotary International
(4) WorldBank
(5) Amnesty International
Directions (37-38) : Read the followingparagraph
and answer the questions given below
The concept of using the outdoors as a tool in
management training was first developed by Dr. Kurt
Hahn, a philosopher outdoorsman who believed that
the outdoors has many lessons for city people which
willenhance their personal thresholds as wellas group
thresholds. It was Dr. Hahn's beliefthat advancing civ-
ilizations and technologywere deprivingmany persons
the opportunities to develop self-reliance, physical fit-
ness and a compassion for others. An established cor-
porate training tool in Western countries, Out Bound
Training is gaining increasing popularity in India to-
day as more and more corporate houses discover its
ability to solve several issues that cannot be complete-
ly addressed in classroom training situations.
37. Which of the followingstatements is/are correct
regarding outbound training? (2 marks)
a. It was first tested in the turbulent waters of the
North Sea during WorldWar I. .
b. It is a technique used to enhance the efficiencyof
employees through Experimental learning.
c. The game-like targets under outbound training
increase resistance to negative feedback.
Select the correct answer using the codes given
below:
(1) Both a anc h (2) Only c
(3) Only b (4) Both b and c
5) None I " ; I ottons
------------------------ ---- --
====t( MODEL SOLVED PAPER: RBI OFFICERS IN GRAbE 'B' PHASE-II EXAM
38. Which of the followingstatements is/are correct
regarding the Outbound training methods of Ed-
ward de Bono? (2 marlul)
a. De Bono's tool for effective dectston making and
team thinking is known as Three Thinking Hats.
b. Under his training method, users are required to
consider aspects of an issue even if they contra-
dict their existing perspectives on the matter.
c. Under De Bono's methods. the team practices
collective thinking.
Select the correct answer ustag the codes given
below:
(l) Both a and c (2) Only b
(3) Both b and c (4) Only a
(5) All of the above given as options
Directions (39) : Read the followingparagraph and
answer the questions given below:
Recent explosion of the digital platform industry
led to an epiphany among the top executives and lead-
ership teams at large. on talent management. To in-
crease the level of attraction for young and exception-
ally skilled talent. the focus on leading edge practices
has become critical. Thus. an innovativebucket of fringe
benefits is introduced in the market. Some of these are
voluntary and taxable in nature. but aid the employee
in different aspects of his/her life.
39. Which of the followingis/are not correct regard-
ing Fringe benefits? (2 marlul)
a. Is any advantage in money's worth provided to an
employee in respect of or in relation to his em-
ployment.
b. The Finance Act 2016 has introduced a new tax
called 'Income-tax on fringe benefits.'
c. Fringe benefits commonly include health insur-
ance. group-term life insurance coverage, educa-
tional assistance, childcare and assistance reim-
bursement.
d. Employee stock option plans (ESOPs) come un-
der fringe benefits tax. . marginal costs of assessment activities. This new ca-
Select the correct answer using the codes given
below:
(1) Both b and c (2) Only d
(3) Both c and d (4) Only b
(5) None of these
40. Which of the followingis an example of organiza-
tion structure having elements of the public sec-
tor. the private sector and the voluntary sectors?
(1 mark)
(1) Social housing providers
(2) Public schools
(3) Hospitals
(4) Both 2 and 3
(5) All of the above given as options
)1====
41. The Decision Tree Model of leadership was first
proposed by (1 mark)
(1) Vroom and Yetton
(2) Tannenbaum and Schmidt
(3) Fielder and Hart
(4) Weber and Foley
(5) Gray and Schlesinger
42. Which of the following methods is/are not used
in judgmental performance appraisal? (1 mark)
(1) Graphic Rating scale
(2) Employee comparison method
(3) Behavioral checklists and scales
(4) Objective Production
(5) None of these
43. Which of the followingis not true about Zero cou-
pon bonds? (1 mark)
(1) These are bonds that do not make any inter-
est payments
(2) When the bond reaches maturity, its investor
receives its par (or face) value
(3) These bonds are not inflation indexed
(4) These bonds are traded at a deep discount
(5) None of these
Directions (44-45) : Read the followingparagraph
and answer the questions given below:
The most important step that can be taken totm-
prove the effectiveness of recruitment and recruitment
research is to develop and use fine-grained assessments
of the quality of applicants attracted. This single as-
sessment is the basis for evaluating the effectiveness
of current recruitment efforts, determining whether
modifications of recruitment tactics is likelyto be worth
the effort, and if meaningful improvement is possible.
identifying where those efforts should be placed. Orga-
nization assessment is in the midst of a paradigm shift.
The increasing use of integrated human resource in-
formation systems permits greater access to fata than
has ever been possible while dramatically reducing the
pability has triggered increased interest in HR analyt-
tcs, However.as reviewof recruitment evaluation mea-
sures will show, more extensive use of current mea-
sures is unlikely to lead to meaningful improvement in
recruitment effectiveness.
44. Consider the following statements regarding the
recruitment models and select the correct answer
using the codes given below: (2 marks)
a. The Seven Point Plan of Munro is based on seven
headings and each candidate is "judged" on the
basis of those headings.
b. The FivefoldGrading System of Rodgers is intend-
ed to be a guide for recruiters.
c. The seven-point plan is split into essential and
, str=ble categories.
 MODEL SOLVED PAPER: RBI OFFICERS IN GRADE
(1) Both b and c (2) Only a
(3) Both a and b
(4) Only c
(5) All of those given as options
43. Whicn of the followingstatements is/are correct
regarding the problems in interview during the
recruitment process? (2_u)
a. In the Halo Effect.-the interviewer takes a dislike
to the candidate. their personality. the way they
dress. etc.
b. Affinityis where the interviewer's perception of a
candidate alters because the individual is a
c. woman. black. Asian or disabled.
d. In the Horns Effect. perceptions often cloud the
mind and judgement of the interviewer.
Select the correct answer using the codes given
below:
(1) Only a
(2) Only c
(3) Both a and b .
(4) All of the above given as options
(5) None of the above given as options
46. Which of the followingqualifies as personal at-
tributes of leaders? (I_It)
(1) Achievemeritdrive (2) Self-confidence
(3) Cognitive ability (4) Both 2 and 3
(5) All of the above given as options
47. Which of the followingis correct regarding sys-
temic risk? (I_It)
(1) It is also known as undiversifiable risk
(2) It affects the overall market
(3) It was a major contributor to the financial
crisis of 2008
(4) Recessionis a common source ofsystemic risk
(5) All of the above given as options
Directions (48-49): Readthe followingparagraph
and answer the questions given below:
For any organization to function effectively.it must
have resource of men (Human Resource). money. ma-
terials and machinery. The resources by themselves
cannot fulfill the objectives of an organization. they
need to be collected. coordinated and utilized through
human resources. And. the effective management of
human resources is also vital. Hence. Human Resource
Management (HRM)has emerged as a major function
in organizations.Human Resource Management is the
organizational function that deals with issues related
to people such as compensation. hiring. performance
management. organization development. safety. well-
ness, benefits. ernp' ~ motivation. communication,
administration. and t ling.
'B' PHASE-II EXAM J====
48. Consider the followingstatements regarding Hu-
man Resource Management (HRM)and select the
correct answer using the codes given below:
(2marlts)
a. HRMis a product of the human relations move-
ment ofmid-19tth century. when researchers be-
gan documenting ways of creating business value
through the strategic management of the work-
force.
b. HRMconcerns itself with organizational change
. and industrial relations. that is. the balancing of
organizational practices with requirements aris-
ing from collective bargaining and from govern-
mental law.
c. Accordingto EdwinFlippo.HRMis concerned with
the people dimension" in management.
(1) Both b and c (2) Only a
(3) Both a and b (4) Only b
(5) All of the above given as options
49. Which of the followingstatements is/are correct?
(2 marks)
(1) Boxall and Purcell conceptualize workforce
performance as a function of ambition and
rewards.
(2) Human Resource Management is limited to
manage and optimally exploit human intel-
lect; it leaves aide managing physical and
emotional capital of employees.
(3) It is Human Resource Planning process which
helps the management of the organization in
meeting the future demand ofhuman resource
in the organization.
(4) Both 1 and 3
(5) All of the above given as options
50. Which of the followingis/are not correct about
Nostro accounts? (1 mark)
(1) Nostro accounts are mostly commonly used
for currency settlement
(2) A bank counts a Nostro account with a debit
balance as a cash asset in its balance sheet
(3) A Nostro account is a record ofmoney held by
a bank or owed to a bank by a third party
(4) In normal usage. a Nostro account will be in
foreigncurrency
(5) None of these
51. The value of the derivative is determined by flue-
tuations in (1 marlt)
(1) Stocks and bonds
(2) Commodities and currencies
(3) Interest rates
(4) th 1 and 2
(5) of the above given as options
====9(MODEL SOLVED PAPER: RBI OFFICERS IN GRADE 'B' PHASE-II EXAM)1=. ===
Directions (52-53 ): Read the followingparagraph 515. Which of the followingconcessions is/are gener-
and answer the questions given below: ally offered by banks and ftnancial institutions
Transactional analysis or TA is a branch of psy- as part of the package of rehabilitation assis-
chotherapy developedby Eric Berne. His definition of tance? (1mark)
it is "a theory of personality and a systematic psycho- (1) Sanction of additional loan to meet the addi-
therapy for personal growth and change". Based on tional capital expenditure
this theoryThomasAnthony Harris had written a beau- (2) FUnding of the overdue interest
tiful self-help book. "I am OK. You are OK." It is (3) Reduction 1n interest rate of existing loans
about how people interact with each other especially (4) Only 1 and 3
which ego state of the person is interacting with which
.(5) All of the above given as options
ego state. Knowing about TA can be very useful for
improving our interaction/communication skills. TA Directions (56-58) : Suppose you buy a 10 % cou-
is about how peopleare structured psychologicallyand pon bond today for Rs. 1.100.The bond has 10years to
is both a theory of communication and a theory of maturity. Answer the followingquestions:
child development. 56. What rate of return do you expect to earn on your
52~ Consider the followingstatements regarding Per- investment?
sonal Ego-Transactional Analysis and select the (1) 8.50 % (2) 7.30%
correct answer using the codes given below: (3) 5.30% (4) 6.35%
(2marb) (5) 9.25%
a. Harris defined an ego state as a consistent pat- 57. Twoyears from now. the YTMon your bond has
tern of feelingand experience directly related to a declined by 2.5 per cent. and you decide to sell.
corresponding consistent pattern of behavior. What is the realized yield on your investment?
b. Berne had originally defined two ego states: par- (1) 14.56% (2) 15.23 %
ent and Child. (3) 18.36% (4) 17.43%
c. In Berne's transactional analysis theory. the par- (5) 16.500;6
ent represents a massive collection of recordings 58. Compare this yield to the YTMwhen you first
in the brain of external events experienced or per- bought the bond.
ceivedin approximately the first fiveyears of life. (1) The realized yield is greater than the expected
(1) Only b (2) Both a and c yield when the bond was bought.
(3) Only c (4) Both a and b (2) The realized yield is less than the expected
(5) All of the above given as options yield when the bond was bought
53. Which of the followingis correct regarding the (3) The realized yield is equal to the expected
Transactional analysis theory ofThomas Harris? yield when the bond was bought
(2marb)
(4) The realized yield is half of the expected yield
a. Harris describes the mental state called the Par- when the bond was bought
ent by analogy. as a collection of "tape record- (5) The realized yield is three fourth of the ex-
ings" of external influences that a child observed pected yield when the bond was bought
adults doing and saying. .
b. In Harris' theory. the Adult is a simultaneous re-
cording of internal events. On-line Shopping
c. Harris defines Pollution of the Adult as how it is BOOKS AND MAGAZINES
safer for a person to believea lie than to acknowl-
edge the evidence in front of them. of Kiran Prakashan
Select the correct answer using the codes given
below: Get books
(1) Only b (2) Both a and c and magazines of
(3) Only a (4) Both b and c Kiran Prakashan
(5) All of the above given as options
54. Which of the models combines five financial ra- at your doorstep easily,
tios? (1 mark) log on our website:
(1) Altman's Z Score (2) Credit Metrics
www.klranprakashan.com ,
(3) Credit Risk+\ (4) Univariate analysis
(5) None of these.given as options
===~ MODEL SOLVED PAPER: RBI OFFICERS IN GRADE 'B' PHASE-II EXAM 1====
Directions (59-61) : Based on the given financial statement answer the followingquestions:
Baker CorporatioDBalance Sheet
December 31, 2002
Cash and marketable securities $ 50 Accounts payable $ 250
Accounts receivable 200 Accrued liabilities 250
Inventory , 250 Notes payable 500
Total current assets $ 500 Total current liabilities $1.000
Net fixed assets 1,500 Long-termdebt 250
Common stock 400
Retained earnings 350
Total assets $2,000 Total liabilities and equity $2.000

59. What is Baker corporation's current ratio as on December 31, 2oo2?

(1) 0.35 (2)0.65 . (3)0.50 (4)0.55 (5)0.65
60. IfBaker uses Rs. 50 of cash to payoff Rs. 50 of its account payable, what is the new current ratio after this
action?
(1) 0.47 (2) 0.44 (3)0.54 (4)0.23 (5)0.36.
61. If Baker uses its Rs. 50 cash balance to payoff Rs. 50 of its long term debt, what Willbe its new current
ratio?
(1) 0.35 (2)0.50 (3)0.45 (4)0.55 (5)0.65

Directions (62-64) : Answer the followingquestions based on the 64. Determine the profit for com-
information given below: .. pany A assuming that the vol-
Assume that two companies make similar products, but that the ume dropped 20% from cur-
companies have adopted different cost structures. Company A's product rent levels of 10.000 units
is made in a labour-intensive operation Withrelatively high variable costs (1) 30% decrease on 100000
but relatively low fixed costs, and company B's product is made in a profit
capital intensive operation Withrelatively lowVariablecosts but relatively (2) 40% decrease on 100000
high fixed costs. Each firm presently sells 10000 units of product. Cost profit
structures are given below: (3) 45% decrease on 100000
Company A- CompanyB- profit
Lower operating leverage Higher operating leverage (4) 50% decrease on 100000
Per'Unit Per unit profit
$ $ (5) 60 % decrease on 100000
Revenue 50 ~oooo units sold 50 10000 units sold profit
Variable expenses 35 20 65. Aman deposited Rs. 1000 in a
Contribution margin 15 30% 30 60% bank. In return he got Rs.
Fixed expenses 50000 200000 1331. Bank gave interest 10%
per annum. How long did he
62. Profit for both Company A and Company B respectively is: kept the money in the bank?
(1) 1,000,00 and 1.000,00 (1) 2years
(2) 1,500,00 and 1,500,00 (2) 3years
(3) 2,000.00 and 2.000.00 (3) 4years
(4) 2.500.00 and 2.5000.00 (4) 5years
(5) 50.000.00 and 50.000.00 (5) 6years
63. Effect on profit of a l00f0increase in volume from 10000 to 11000
units on company B is : Read Every Month
(1) 15%increase on 100000 profit
(2) 30 % increase on 100000 profit REND GENERAL KNOWLEDGE
(3) 35% increase on 100000 profit
(4) 45% increase on 100000 profit & WORLD VISION
(5) 500Alincreaseon 100000 profit (Hindi & English Medium)
======eCMODEL SOLVED PAPER: RBI OFFICERS IN GRAD, 'B' PHASE-II EXAM )J====
360-degree performance evaluation is to pool feed-
I ANSWERS I back from all of the employee's customers.
They fit well into organizations that have intro-
1. (3) 2.(4) 3. (4) 4. (3) 5. (1) duced teams. employee involvement. and Total
6. (1) 7. (2) .8. (4) 9. (3) 10. (2) QUalityManagement (TQM)programs. By relying
11. (4) 12. (1) 13. (3) 14. (3) 15. (4) on feedback from co-workers. customers. and
employees. these organizations are hoping to give
16. (1) 17. (4) 18. (1) 19. (4) 20. (4) everyone more of a sense of participation in the
21. (1) 22.(3) 23.(3) 24.(4) 25. (1) review process and gain more accurate readings
on employee performance. On this latter point,
26. (2) 27. (1) 28. (1) 29.(5) 30. (4) 360-degree evaluations are consistent with evi-
31. (3) 32. (3) 33. (1) 34.(1) 35. (3) dence that employee performance varies across
contexts and that people behave differently with
36~ (3) 37. (5) 38. (2) 39. (4) 40. (5)
different constituencies.96 The use of multiple
41. (1) 42. (4) 43.(3) 44. (4) 45. (5) sources. therefore. is more likely to capture this
46. (5) 47. (3) 48. (4) 49. (S) 50. (3) variety of behavior accurately.
3. (4)Richard Hackman from Harvard Universityand
51. (5) 52. (3) 53. (3) 54. (1) 55. (5) Greg Oldham from the University of Illinois ex-
56. (1) 157.(2) 58. (1) 159.(3) 60. (1) plored the nature of good jobs through their job
characteristics model (JCM).97The JCM identi-
61. (3) 62. (1) 63. (2) 64.(1) 65. (2)
fies five core job dimensions and their relation-
ship to personal and work outcomes. Job enrich-
EXPLANATIONS I ment. an application of the JCM. refers to the
1. (3)An employee's performance appraisal is anex- vertical expansion ofjobs. It increases the degree
ample ofsomething in the workplace that depends to which workers control the planning, execution,
very much on the perceptual process. An employ- and evaluation of their work. An enriched job or-
ee's future is closely tied to his or her appraisal- ganizes tasks so that an employee does a com-
promotions. pay raises. and continuation of em- plete activity. It expands employees' freedom and
ployment are among the most obvious outcomes. independence. increases responsibility. and pro-
Although the appraisal can be objective (for ex- vides feedback. so individuals will be able to as-
ample. a salesperson is appraised on how many sess and correct their own performance. Accord-
rupees of sales he or she generates in a given ter- ing to the JCM. any job can be described in terms
ritory). many jobs are evaluated in subjective offive corejob dimensions: skill variety. task iden-
terms. When managers use subjective measures tity. task Significance. autonomy and feedback.
in appraising employeesor choosingwhom to pro- The JCM links the five core job dimensions to
mote. what the evaluator perceives to be good or three critical psychological states:
bad employeecharacteristics or behaviors willsig- Experienced meaningfulness. The model predicts
nificantly influence the outcome of the apprats- that if an employee's task is meaningful, the em-
al. One recent study found that managers in both ployee will view the job as important, valuable,
Hong Kongand the United States were more like- and worthwhile. (Noticehow in Exhibit 5-7 skill
ly to promote individuals who were more similar variety. task identity, and task significance com-
to themselves. One's behavior may also be affect- bine to create meaningful work.)
ed by perceptions. Experienced responsibility for outcomes. Employ-
Hiring and performance appraisals are not the ees feel a sense of personal responsibility for re-
only processes in organizations that are subject sults when their jobs giV'ethem greater autono-
to perceptual bias. For instance. we evaluate how my.
much effort our co-workers are putting into their Knowledgeof the actual results. Feedback helps
jobs. When a new person joins a work team. he or employees know whether they are performing ef-
she is immediately "sized up" by the other team fectively.
members. ~cordin g to research, individuals even The model ,gests that the more employees ex-
make judgments about people's virtues based on perience .ntngfulness. responsibility, and
whether or r ; they exercise. knowler le actual results the "'eater their
=====( MODEL SOLVED PAPER: RBI OFFICERS IN GRADE 'B' PHASE-II EXAM )====
ten technical or operational in nature (e.g., back-
ing up database is a functional competency), tak-
ing the form of specific skills, and are often man-
aged at a workgroup level. Functional competen-
cies can be applied to different roles and func-
tions based on the function's maturity, Exam-
ples of functional competencies include data anal-
ysis, programming, and risk analysis.
5. (1) ICMF stands for Internal Capital Adequacy
Assessment Process (ICMF), a result of Pillar 2 of
Baseill accords. Under ICAAPrequirements a bank
needs to have in place internal procedures and
processes to ensure that it possesses adequate
capital resources in the long term to cover all of
its material rtsks, A banking institution should
have an ICAAP in place for assessing its overall
capital adequacy in relation to its risk profile and
a strategy for maintaining appropriate capital lev-
els. In particular, ICMF aims to:
Identify all material risks and measure those risks
that can be reliably quantified to determine how
such risks affect the banking institution's overall
capital adequacy;
Develop a strategy for maintaining adequate cap-
ital levels consistent with the banking institu-
tion's risk profile, and taking into account its stra-
tegic focus and business plans as well as its con-
trol environment.
6. (1) Businesses that outsource HR are typically
small-to-midsize firms with between 25 and 1,500
employees. These businesses view HR outsourc-
ing as a strategic tool that relieves them of HR
responsibilities and enables them to focus on what
they do best. In addition to allowing such firms
to concentrate on their core business activities,
outsourcing provides some key benefits, includ-
ing:
Providing the firms with skilled professionals who
are focused specifically on HR
Helping the firms reduce and manage operating
costs
tion in work decisions; Consultative participation;
Short-term participation; Informal participation;
Employee ownership; Representative participation.
S. (4)Alpha and beta are two common measurements
of investment risk. Beta is a historical measure
of volatility. Beta measures how an asset (i.e. a
stock, an ETF, or portfolio) moves versus a bench-
mark (i.e. an index). Alpha is a historical mea-
sure of an asset's return on investment compared
to the risk adjusted expected return.
In finance, the beta ~ or beta coefficient) of an
investment indicates whether the investment is
more or less volatile than the market. In general,
a beta less than 1 indicates that the investment
is less volatile than the market, while a beta more
than 1 indicates that the investment is more vol-
atile than the market.A beta greater than one gen-
erally means that the asset both is volatile and
tends to move up and down with the market. ~
example is a stock in a big technology company.
Negative betas are possible for investments that
tend to go down when the market goes up, and
vice versa. Beta is important because it measures
the risk of an investment that cannot be reduced
by diversification. It does not measure the risk of
an investment held on a stand-alone basis, but
the amount of risk the investment adds to an al-
ready-diversified portfolio.
9. (3) Risk premium, sometimes referred to as de-
fault risk premium, is the return on an invest-
ment minus the return that would be earned on a
risk-free investment. The risk premium is the
amount that an investor would like to earn for
the risk involved with a particular investment.
The risk premium of the market is the average
return on the market minus the risk-free rate.
The term "the market" in respect to stocks can be
connoted as an entire index of stocks such as the
S&P 500 or the Dow. The market risk premium
can be shown =s:
Market Risk ~ nium = Rm - Rf
 ===~ MODEL SOLVED PAPER: RBI OFFICERS IN GRADE 'B' PHASE-II EXAM
llarly. a security with too high risk relative to the
price. there will be a rush to sell and the price
will decrease until the risk matches the return of
the stock and equllibrium is reached. This is the
basic assumption of the risk-return tradeoff: the
investor expects higher return when taking on
securities with higher risk.
~ common misconception is that higher risk
equals greater return. The risk/return tradeofftells
us that the higher risk gives us the possibility of
higher returns. There are no guarantees. Just as
risk means higher potential returns. it also means
higher potential losses. The risk-return tradeoff
also exists at the portfolio level. For example. a
portfolio composed of all equities presents both
higher risk and the potential for higher returns.
Within an all-equity portfolio. risk and reward
can be increased by concentrations in specific
sectors or single positions that represent a large
percentage of holdings. Conversely. a portfolio
holding short-term Treasury's presents low risk
levels combined with limited returns.
11. (4)Perpetual bond. which is also known as a per-
petual or just a perp, is a bond with no maturity
date. Therefore. it may be treated as equity. not
as debt. Issuers pay coupons on perpetual bonds
forever. and they do not have to redeem the pnn-
Cipal. Perpetual bond cash flows are. therefore.
those of a perpetuity. Perpetual bonds are issued
on a private placement basis. The usual investors
in these bonds are provident funds and lead man-
agers to the issue who subscribe in bulk and sell
them to HNIs. Perpetual period exposes the in-
vestor to credit risk over an extended period of
time. As time passes. bond issuers. including both
government owned and private corporations. can
get into finanCial trouble and even fatI.
A perpetual bond works like a life-time. irredeem-
able fixeddeposit. with bond holders getting fixed
coupon everyyear. In India. due to rate volatility..
issuers fix a call option. which could be activated
after 5 or 10 years. givinginvestors an exit. These
bonds typically have a face value of Rs. 10 lakh
and trade in the wholesale debt market in lots.
12. (1) The two-factor theory. also known as dual-
factor theory. states that there are certain fac-
tors in the workplace that cause job satisfaction.
while a separate set of factors cause dissatisfac-
tion. It was developed by psychologist Frederick
Herzberg. who theorized that job satisfaction and
job dissatisfaction act independently ofeach other.
The theory was first published in form of an arti-
cle. titled "One More Time: How do You Motivate
Employees." in the 1950s. Herzberg's findings re-
vealed that certain characteristics of a job are
consistently related to job satisfaction. while dif-
ferent factors are associated with job dissatisfac-
tion. These are:
J====
13. (3)The National Securities Depository Ltd (NSDL
and the Central Depository Services India Ltd
(CDSL)are both share depositories in India. NSDL
is the Primary electrontc depository of securities
in India. that came into existence in the year
1996. based in Mumbat, Maharashtra. The pro-
motion of NSDLis done by the country'S largest
banks and institutions. i.e. IDBI, UTI and Bom-
bay Stock Exchange. Further. India's leadingbanks
hold a stake in NSDL.CDSLis a depository that
holds securities in dematerialized form and facil-
itates trading and settlement of securities to be
processed by book entry. It is the second largest
central depository of securities in India. based in
Mumbai, Maharashtra. The depository began its
operations in February 1999. It is promoted by
Bombay Stock Exchange in association with
prominent banks of the nation. i.e. State Bank of
India. Union Bank of India. Bank of Baroda. Bank
of India. Standard Chartered Bank. NSDLoper-
ates in the NSE; conversely. CDSL operates in
BSE. The total number of depository participants
in NSDLis 272 and in CDSLis 581. Account wise,
the active investor accounts in NSDL are com-
paratively higher than in CDSL.
14. (3) An open market operation (OMO)is an activ-
ity by a central bank to give (or take) liquidityin
its currency to (or from) a bank or a group of
banks. Open market operations are conducted by
the RBIby way of sale or purchase ofgovernment
securities (g-secs)to adjust money supply condi-
tions. The central bank sells g-secs to suck out
ltqutdtty from the system and buys back g-secs to
infuse ltqutdtty into the system. These operations
are often conducted on a day-to-day basts in a
manner that balances inflation while helping
banks continue to lend.The usual aim of 'open
market operations is - aside from supplying com-
mercial banks with hqutdtty and sometimes tak-
ing surplus ltqutdtty from commercial banks - to
manipulate the short-term interest rate and the
supply of base money in an economy. and thus
indirectly control the total money supply, in ef-
fect expanding money or contracting the money
supply. The RBIuses OMOalong with other mon-
etary policy tools such as repo rate. cash reserve
ratio and statutory hqutdtty ratio to adjust the
quantum and price of money in the system.
15. (4)The Reserve Bank of India Act. 1934 (RBIAct)
has been amended by the Finance Act. 2016. to
provide for a statutory and institutionalized
framework for the MPC. The aim is to maintain
price stability. while keeping in mind the growth
objective. The MPChas been entrusted with the
task offixingthe benchmark policyrate (reporate)
required to contain inflation within the specified
target level. The main aim of the MPCis inflation
targeting. Accordingthe RBIand ~overnment have
 MODEL SOLVED PAPER: RBI OFFICERS IN GRADE 'B' PHASE-II EXAM )====
agreed on a target of 4% for the duration starting
from August 5, 2016 to March 31. 2021. The 'up-
per tolerance' level for the target is 6%, while the
'lower tolerance' level is 2%. With the constitu-
tion of MPC, the RBI has lost its discretion to
surprise the market with out-of-policy rate ac-
tions. Such surprises are eonsidered.a potent weap-
on in its arsenal. But the RBI is left with enough
means to surprise and even shock the market, if it
really wants to. The meetings of the MPC will be
held at least 4 times a year and it shall publish its
dectstons after each such meeting.
16. (I) The RBI has gradually withdrawn from the
practice of providing concessional finance Orrefi-
nance for specified sectors such as agriculture,
industry and export, though the legal provisions
continue to enable it. In the same view, as part
of strengthening monetary management, only
notional provisions are made out of RBI profits
for Agriculture, Industrial and Housing Credit
Funds. No doubt, there are persistent demands
on RBI to reverse the process, but the RBI advo-
cates direct fiscal support to development activi-
ties so as to be transparent, accountable and
quantifiable rather than through monetary oper-
ations of RBI, which would tantamount to qua-
st-flscal operations. Transfer of the balance of
profits, after necessary provtstons, to the Central
Government has been rationalized as part of the
reform process in 1997. The present arrangement
is governed by the objective of reaching a stipu-
lated level of reserves in RBI's balance sheet over
a period - though the timeframe to reach the lev-
el is extended by mutual consent to accommo-
date 1mmediate fiscal compulsions.
Harmonious relations between Government and
RBI have no doubt generally contributed to the
successful policy outcomes thus far, but it would
be appropriate to conclude that there are differ-
ences in analysis, approaches, Judgements and
instrumentalities. In the given legal and cultural
context, while making everyeffort to giveits views
either informally or formally, the RBI generally
respects the wishes and final inclination of the
government. The RBI, however, has to accept the
responsibility for all its decisions and actions,
while being generally conscious of the impact of
its articulation and actions on the credibility for
central banks operations. In sum, de jure, RBI
has not been accorded autonomy on par with re-
cent trends in some of the industrialized as well
as emerging economies; but, de facto, the experi-
ence reflects a growing degree of autonomy. Dur-
. mg the period ofreform since 1991, there has been 21; (I) Risk-weighted asset (also referred to as RWAj
a gradual and mutually agreed progress towards
greater autonomy in matters relating particularly
to financial markets and, in the conduct of mon-
etary policy.
17. (4)Before the launch of repo, the most important
monetary policy instrument used to counter in-
flation was the CRR. After a few years of its in-
troduction, repo emerged as the most effective
instrument to fight inflation sidelining conven-
tional instruments like the CRR. Later with the
1ntroduction of tnflation targeting, RBIhas made
repo as 'the policy rate'. This means that it is the
only policy instrument used to fight inflation or
target inflation and thus to ensure price stabili-
ty.
18. (I) The marginal cost of funds based lending rate
(MCLR)refers to the minimum interest rate of a
bank below which it cannot lend, except in some
cases allowed by the RBLIt is an Internal bench-
mark or reference rate for the bank.The MCLR
methodology for fixinginterest rates for advances
was introduced by the Reserve Bank oflndia with
effect from April 1,2016. The main components
of MCLRare:
Marginal cost of funds: It is the novel element of
the .l\1CLR. The marginal cost of funds will com-
prise of Marginal cost of borrowings and return
on networth;
Negative carry on account of CRR: It is the cost
that the banks have to incur while keeping re-
serves with the RBI;
Operating costs: It is the operating expenses in-
curred by the banks;
Tenor premium: It denotes that higher interest
can be charged from long term loans
19. (4) The first five-year plan was presented in the
parliament by Prime Minister Jawaharlal Nehru
in December 1951.This plan promoted the idea of
self-reliant closed economy and was developedby
Prof. P. C. Mahalanobis. The plan had heavily
borrowed ideas from USSR'sfiveyear plans devel-
oped by Domer. Due to this, the first five-year
plan is also called Domer-Mahalanobis Model.
20. (4)With effectfromApril 1. 2014, every company,
private limited or public limited, which either has
a net worth of Rs 500 crore or a turnover of Rs
1,000 crore or net profit of Rs 5 crore, needs to
spend at least 2% of its average net profit for the
immediately preceding three financial years on
corporate social responsibility activities. The CSR
activities should not be undertaken in the nor-
mal course of business and must be with respect
to any of the activities mentioned in Schedule VII
of the 2013 Act. Contribution to any political
party is not considered to be a CSR activity and
only acttvtties in India would be considered for
computing CSR expenditure.
is a bank's assets or off-balance-sheet exposures,
weighted according to risk. Risk-weighted assets
are used to determine the minimum amount 'of
capital that must be held by banks and other in-
 MODEL SOLVED PAPER: RBI OFFICERS IN GRADE 'B' PHASE-II EXAM 1=====
stitutions to reduce the risk of insolvency. The
capital requirement is based on a risk assessment
for each type of bank asset. In other words. RWA
is used in determining the capital requirement or
Capital Adequacy Ratio (CAR)for a financial in-
stitution. The calculation of risk weights is de-
pendent on whether the bank has adopted the
standardized or IRB approach under the Basel II
framework.
22. (3) A mutual fund is a trust made up of money
collected from public or investors through the sale
of units for investment in securities such as
stocks. bonds. and money market instruments.
Mutual Funds in India are governed by the Secu-
rities Exchange Board of India (Mutual Fund)
Regulations 1996 with the exception of Unit Trust
. of India (UTI)as it was created by the UTI Act
passed by the Parliament of India. All mutual
funds must be registered with SEBI.
23. (3)According to 2014 corporate governance rules
issued by the SEBI. a person can't be an indepen-
dent director in more than seven companies and
cannot accept stock options from them. The new
rules restrict the tenure of independent directors
to two five-year terms. Directors nominated by
the company's promoter cannot be classified as
an independent director. Companies willnow have
to disclose remuneration pollctes of CEOs and
executivedirectors. related-party transactions and
appointment and resignations of independent di-
rectors. These rules are aimed at aligning corpo-
rate governance norms to best globalpractices and
to the new Companies Act of 20 13.
24. (4)The term Clause 49 refers to clause number 49
of the Listing Agreement between a company and
the stock exchanges on which it is listed (the List-
ing Agreement is identical for all Indian stock ex-
changes. including the NSEand BSE).This clause
is a recent addition to the Ltstmg Agreement and
was inserted as late as 2000 consequent to the
recommendations of the Kumarmangalam Btrla
COmmitteeon Corporate Governance constituted
by the Securities Exchange Board of India (SEBI)
in 1999. Clause 49 defines an Independent Direc-
tor as a Non-Executive Director who:
Is NOTa NOmineeDirector.
Js/Was NOTa promoter / relative of the promoter
of the Company or its holding. subsidiary or as-
sociate company.
Has/had NO pecuniary relationship (apart from
directorial remuneration) with the Company. its
holding. subsidiary. associate company or the
promoters or directors during two immediately
preceding finapcial years.
Whose relatives DO NOT have/had any pecuni-
ary relationship with the Company its holding.
subsidiary. associate company or the promoters
or directors. amounting to 2% or more of its total
income or Rs. 50 lakh during the two immediate-
ly preceding flnaneial years.
Who is/was NOTan employee of the Company its
holding. subsidiary. associate company in the any
ofthe three immediately preceding financial years.
Is/has NOTbeen an employee/proprietor/partner
of an audit /legal /consulting/any other firm
which has transaction with the Company its hold-
ing. subsidiary. associate company, amounting to
10%or more of gross turnover of that firm, in any
of three preceding financial years.
Is NOTa CEO/Director of a non-profit firm that
receives 25% or more of'tts receipts from the Com-
pany its holding. subsidiary, associate company,
promoters or its directors, or holds 2% or more
voting power of the Company.
Is NOT a material supplier, service provider or
customer or a lessor or lessee of the company.
Is NOTless than 21 years of age.
25. (1) As per the recent findings of the e OECD Cor-
porate Governance Committee on Corporate Gov-
ernance and the Financial Crisis durmg 2009-10:
Perhaps one of the greatest shocks from the fi-
nancial crisis has been the widespread failure of
risk management. Inmany cases risk was not man- '
aged on an enterprise basis and not adjusted to
corporate strategy. Risk managers were often sepa-
rated frommanagement and not regarded as an es-
sential part of implementing the company's strate-
gy. Most important of all. boards were in a number
of cases ignorant of the risk facing the company..
It should be fully understood by regulators and
other standard setters that effectiverisk manage-
ment is not about eliminating risk taking, which
is a fundamental driving force in business and
entrepreneurship. The aim is to ensure that risks
are understood. managed and, when appropriate,
communicated.
Effectiveimplementation of risk management re-
quires an enterprise-wide approach rather than
treating each business unit individually. It should
be considered good practice to involve the board
in both establishing and overseeing the risk man-
agement Structure.
The board should also review and provide guid-
ance about the alignment of corporate strategy
with risk-appetite and the internal risk manage-
ment structure.
To assist the board in its work, it should also be
considered good practice that risk management
and control functions be independent of profit
centres and the "chief risk officer" or equivalent
should report directly to the board of directors
along the .lines already advocated in the OECD
'Principles for internal control functions report-
ing to the audit committee or equivalent,
======{ MODEL SOLVED PAPER: RBI OFFICERS IN GRADE 'B' PHASE-II EXAM
The process of risk management and the results
of risk assessments should be appropriately dis-
closed. Without revealing any trade secrets, the
board should make sure that the firm communi-
cates to the market material risk factors in a trans-
parent and understandable fashion. Disclosure
of risk factors should be focused on those identi-
fied as more relevant and/or should rank materi-
al risk factors in order of importance on the basis
of a qualitative ~election whose criteria should
also be disclosed.
With few exceptions, risk management is typical-
ly not covered, or is insufficiently covered, byex-
tstmg corporate governance standards or codes.
Corporate governance standard setters should be
encouraged to include or improve references to
risk management in order to raise awareness and
improve implementation
26. (2) Theory X and Theory Y are theories of human
motivation and management. They were created
and developed by Douglas McGregor at the MIT
Sloan School of Management in the 1960s. These
theories describe two contrasting models ofwork-
force motivation applied by managers in human
resource management, organizational behavior,
organizational communication and organizational
development. Theory X stresses the importance
of strict supervision, external rewards, and pen-
alties: in contrast, Theory Y highlights the moti-
vating role of job satisfaction and encourages
workers to approach tasks without direct super-
vision.
Overall, Theory Xgenerally proves to be most ef-
fective in terms of consistency of work. Although
managers and supervisors are in almost complete
control of the work, this produces a more system-
atic and uniform product or work flow.Theory X
can also benefit a work place that is more suited
towards an assembly line or manual labor type of
occupation. For McGregor, Theory X and Y are
not opposite ends of the same continuum, but
rather two different continua in themselves. In
order to achieve the most efficient production, a
combination of both theories may be appropri-
ate. This approach is derived from Fred Fiedler's
research over various leadership styles known as
the contingency theory. This theory is based on 3
dimensions: Leader-member relationship, degree
of task structure, and the leader's position pow-
er.
27. (1) 360-degree feedback is a process utilized by
organizations to soltctt information from a vari-
ety of workplace sources on an employee's work-
related behavior and/or performance, Most often,
tnformatton solicited in a 360-degree feedback
process wi - feedbac n an empk
subordinates, .~olleagt, and supervis: 1),
as well as a sel Iuatton ae employee m
~===
or herself. It is so named because it solicits feed-
back regarding an employee's behavior from a va-
riety of points of view (subordinate, lateral. and
supervisory). It therefore may be contrasted with
"downward feedback" (traditional feedback on
work behavior and performance delivered to sub-
ordinates by supervisory or management employ-
ees only, or "upward feedback" delivered to super-
visory or management employees by subordinates
only.
Many 360-degree feedback tools are not custom-
ized to the needs of the organizations in which
they are used. 360-degree feedback is not equally
useful in all types of organizations and with all
types ofjobs. Additionally, using 360-degree feed-
back tools for appraisal purposes has increasing-
ly come under fire as performance criteria may
not be valid and job based, employees may not be
adequately trained to evaluate a co-worker's per-
formance, and feedback providers can manipulate
these systems.The U.S. military has criticized its
own use of 360-degree feedback programs in em-
ployment decisions because of problems with va-
lidity and reliability.
28. (1) Management by objectives (MBa). also known
as management by results (MBR), was first popu-
larized by Peter Drucker in his 1954 book The Prac-
tice of Management. Management by objectives is
the process of defining specific objectives within
an organization that management can convey to
organization members, then deciding on how to
achieve each objective in sequence. This process
allows managers to take work that needs to be
done one step at a time to allow for a calm, yet
productive work environment. This process also
helps organization members to see their accom-
plishments as they achieve each objective, which
reinforces a positivework environment and a sense
of achievement
29. (5) Section 7.3 of the India- Risk management in
the Guidelines on Corporate Governance for Cen-
tral Public Sector Enterprises, which are estab-
lished under the auspices of the Department of
Public Enterprises (DPE)and mandatory for Indi-
an SOEs, makes the following stipulations:
The company shall lay down procedures to inform
board members about the risk assessment and
minimization procedures. These procedures shall
be periodically reviewed to ensure that executive
management controls risk through means of a
properly defined framework. Procedure will be laid
down forinternal risk management also. The board
should implement policies and procedures which
should include:
staff responsibilities in relation to fraud preven-
:'s 1 and if iflcatton:
msiL f fraud investigation once a fraud
. been fied;
====={( MODEL SOLVED PAPER: RBI OFFICERS IN GRADE 'B' PHASE-II EXAM
process of reporting on fraud related matters to
management;
reporting and recording processes to be followed
to record allegations of fraud;
requirements oftratntng to be conducted on fraud
prevention and identification
30. (4) Berko, Aitken and Wolvin(2010) define com-
municationas a conscious or unconscious, inten-
tional or unintentional process in which feelings
and ideas are expressed as verbal and/ or nonver-
bal messages, which are sent, received, and com-
prehended. Communication is a fundamental el-
ement which contributes to the success of all
business organizations.
Parks (1955 cited in Weihrich and Koontz 1993)
defined planning as a crafted tool that will exam-
ine complex'issues and propose a set of solutions
that serves as a bridgetowards growthand change.
Planning involvesthe setting of goals and targets
and since the objectives of a team cannot be set
by a single employee,management interacts with
all related and concerned employeesto assign tar-
gets for team members and also set goals for the
organization.
Leading involves influencing others toward the
attainment of organizational objectives. Effective
leading requires the manager to motivate subor-
dinates, communicate effectively,and effectively
use power.Ifmanagers are effectiveleaders, their
subordinates will be enthusiastic about exerting
effort toward the attainment of organizational
objectives.Fayol(1949)argues that, effectivelead-
ership and the creation of an environment con- 33. (1) Transactional analysis is a psychoanalytic
ducive to motivation depend on communication,
moreover, it is through communication that one
determines whether events and performance con-
forms to plans and therefore it is communication
that makes leading possible.
31. (3)The Godrejcommittee, in its recommendations
submitted to the government in 2012. suggested
'GUiding Principles of Corporate Governance"
aimed at transforming corporate governance from
a "tick-box"exerciseto an actual roadmap. The
committee listed the important principles and
their rationales and advocated some practical
suggestions on strengthening the actual perfor-
mance of Indian corporate governance within the 34. (1)Attribution theory is concerned with how in-
existing legal framework.These principles ranged
from reducing the Familiarity Quotient (FQ) to
increasing,the gender diversity of Indian boards.
and included adoption of better and transparent
processes for selection of independent directors.
detailed recording of minutes of board meetings.
board evaluation. succession planning. risk man-
agement. crtsts management. whistle blowing.
investor activism and continuing board training
and education.'T'heCompanies bill 2011 [ j e
)}====
amended Companies Bill2012 were largelybased
on the recommendations of the J.J. Irani com-
mittee and the Naresh Chandra committee.
32. (3)The Companies Act 2013. enacted on 29 Au-
gust 2013. is applicable to all companies in In-
dia. and not only to the listed companies, al-
though some exceptions have been made in the
act for small companies. There are specificprovi-
sions for rotation of auditors. qualifications and
disqualifications for their appointment, prohib-
ited non-audit services for auditors and penalties
for auditors. Class action suits have been allowed
to protect interest of investors. Many of the re-
quirements under Clause-49-such as those for
board composition. independent directors and
audit committees-have been retained or strength-
ened in the Act. A detailed code of conduct has
been included forindependent directors. and they
have been given some relief from prosecution.
Speetflcprovisions regarding disclosure of related
party transactions have also been made. The act
provides for restrictions on advancing any loan,
givingany guarantee or providing any security in
connection with any loan to any director or to'
any other person in whom the director is inter-
ested. The act has new requirements that a.com-
pany cannot make an investment through more
than twolayers ofinvestment companies. and that
a company will disclose to its members the full
particular of loans given, investments made or
guarantee given.or security providedand the pur-
pose for which loan or guarantee or security is
proposed to be utilized by the recipient.
theoryand method oftherapy wherein socialtrans-
actions are analyzed to determine the ego state of
the patient (whether parent-like. child-like, or
adult-like) as a basis for understanding behavior.
Eric Berne developed the concept and paradigm
of transactional analysis in the late 1950s. pre-
sented transactional analysis to the world as a
phenomenological approach supplementing
Freud's philosophical construct with observable
data. His theory built on the science of Wilder
Penfield and Rene Spitz along with the neo-psy-
choanalytic thought of people such as Paul Fed-
ern. Edoardo Weiss. and Erik Erikson.
dividuals interpret events and how this relates to
their thinking and behavior. Heider (1958) was
the first to propose a .psychological theory of at-
tribution. but Weiner and colleagues developed a
theoretical framework that has become a major
research paradigm of social psychology. Heider
discussed what he called "naive" or "common-
sense" psychology. In his view. people were like
amateur scientists, trying to understand other
people's behavior by piecing together information
===9( MODEL SOLVED PAPER: RBI OFFICERS IN GRADE
until they arrived at a reasonable explanation or
cause.Attribution theory assumes that people try
to determine why people do what they do. i.e.
attribute causes to behavior.
35. (3)Job enrichment can be described as a medium
through which management can motivate self-
driven employees by assigning them additional
responsibility normally reserved for higher level
employees. By doing this. employees feel like their
work has meaning and is important to the com-
pany. This theory is based on the premise that
employees have a natural tendency to want to
succeed and are eager to be trusted with a bigger
role in the company.Job enrichment. as a mana-
gerial activity includes a three steps technique:
Tum employees' effort into performance; Link
employees performance directly to reward; Make
sure the employee wants the reward.
Job enrichment can be contrasted to job enlarge-
ment which simply increases the number of tasks
without changing the challenge. Job enlargement
means increasing the scope of a job through ex-
tending the range of its job duties and responsi-
bilities .generally within the same level and pe-
riphery. Job enrichment is seen as a vertical job
restructuring technique where the focus is on giv-
ing the employee more authority. independence.
and control over the manner the activity is com-
pleted. On the other hand. job enlargement is seen
as a horizontal restructuring technique where the
focus is merely increasing the number of assign-
ments but does not change the overall authority.
autonomy. and control of the projects.
36. (3)The Four-Way Test of the things we think. say
or do is a test used by Rotarians world-wide as a
moral code for personal and business relation-
ships. The test can be applied to almost any as-
pect of life. The test was scripted by Herbert J.
Taylor an American from Chicago as he set out to
save the Club Aluminum Products Distribution
Company from bankruptcy. It was later adopted
by Rotary International. the global federation of
Rotary service' clubs. for its internal and promo-
tional use. Taylor gave Rotary International the
right to use the test in the 1940s and the copy-
right in 1954. He retained the rights to use the
test for himself. his Club Aluminum Company and
the Christian Workers Foundation.
37. (5)Outbound Training was first tested in the tur-
bulent waters of the North Sea during World War
II to provide young Sailors with the experiences
and skills necessary to survive at sea. Dr. Kurt
Hahn. founder of Outward Bound Methodology.
a philosopher outdoorsman believed that the out-
doors provide a robust learning ground for city
professionals. The Outbound Training is a tech-
nique used to enhance the efficiency of employ-
ees through Experiential Learning. In other words,
PHASE-II EXAM)1====
'B'
taking the group of employees away from the ac-
tual work environment into the outdoors and are
assigned some challenging task or activity that
needs to be completed by them within a given time
frame. The game-like targets also decrease resis-
tance to negativefeedback and makes it more likely
for it to be accepted and acted upon. The stakes'
being low. further encourages risks involved with
changing behavior to effect performance arid en-
courages experimentation.
38. (2) Most errors in business decisions come from
errors in thinking. The Six Hats Process of Ed-
ward De Bono ensures that thinking outcomes
are sound and teaches teamwork at the most fun-
damental stage 'of work - the thinking process.
By engaging everyone to use the same mode of
thinking at the same time. the team practices
parallel thinking. This speeds up the discussion
process and saves precious time while increasing
thinking output substantially. Individuals are able
to transcend their personal biases in the process
hence ensuring more well-thought out solutions
which incorporate not only critical thinking but
take into account tntuittve insights and the all
enriching component of serious creativity. Under
De Bono's methods.
User/s (mdtvtdual or team) are required to move
away from stubborn limited perspectives of an is-
sue by being required to use the other modes of
thinking which offer different aspects of the issue
under review.
The users are required to consider aspects of an
issue even if they contradict their existing per-
spectives on the matter.
Participants are required to apply the newly ac-
quired insights into the method both to hypo-
thetical situations as well as to selected issues
from their own backyard. This will allow for cus-
tomized learning applications.
39. (4)A' fringe benefit' is any advantage in money's
worth provided to an employee in respect of or in
.relation to his employment. Fringe benefits com-
monly include health insurance. group-term life
insurance coverage.educational assistance. child-
care and assistance reimbursement. cafeteria
plans. employee discounts. employee stock op-
tions. personal use of a company-owned vehicle
and others. The Finance Act 2005 Introduced a
new tax called 'Income-tax on fringe benefits' with
effect froml April 2006. This benefit in the form
of additional income tax levied on fringe benefits
provided or deemed to have been provided by an
employer to his employees during the previous
year. Employee stock option plans (ESOPs) was
brought under fringe benefits tax from the fiscal
year 2007-08.
=====((MODEL SOLVED PAPER: RBI OFFICERS IN GRADE 'B' PHASE-II EXAM
40. (5)A hybrid organization is an organization that
mixes elements. value systems and action logics
of various sectors of society. i.e. the public sec- .
tor. the private sector and the voluntary sector. 44. (4) Seven Point Plan was developed by Professor
Examples include organizations employed in the
provision of public services that were originally
established by societal actors. such as most so-
cial housing providers. public schools and hospi-
tals. Other examples are public sector organiza-
tions that. due to the New Public Management
revolution. behave in a more business-like' way
and organizations as the state-owned enterprise
that also compete on the market place. In the
context of social entrepreneurship.
41. (1) The earliest version of DectstonTree Approach
for leadership was proposed by VictorVroom and
Philip Yetton and later revised and expanded by 45. (5)During the interview, the Halo Effect is where
Vroom and Arthur Jago. Vroom's approach as-
sumes that the degree to which subordinates
should be encouraged to partictpate in decision
making depends on the characteristic of the situ-
ation. In other words. no one decision making
process is best for'all situations. After evaluating
a variety of problem attributes (characteristics of
the problem or decision). the leader determines
an appropriate decision style that specifies the
amount of subordinate parttctpatton,
42. (4)A performance appraisal (PA)is a method by
which the job performance of an employee is
documented and evaluated. To collect PA data.
there are three main methods: objective produc-
tion. personnel. and judgmental evaluation. Judg-
mental evaluations are the most commonly used
with a large variety of evaluation methods. The
main methods used in judgmental performance
appraisal are:
Graphic Rating Scale: graphic rating scales are
the most commonlyused system in PA.On sever-
al different factors. subordinates are judged on
'how much' of that factor or trait they possess.
Employee-ComparisonMethods:rather than sub-
ordinates beingjudged against pre-established cri-
teria. they are compared with one another.
Behavioral Checklists and Scales: behaviors are
more definite than traits. The critical incidents
method (or critical incident technique) concerns 46. (5)The trait model of leadership is based on the
"specific behaviors indicative of good or bad job
performance.
43. (3) A zero-coupon bond, also known as an "ac-
crual bond," is a debt security that doesn't pay
interest (a coupon) but is traded at a deep dis-
count, rendering profit at maturity when the bond
is redeemed forits full-facevalue. Some zero-cou-
pon bonds are inflation indexed, so the amount
of money that will be paid to the bond holder is
calculated to have a set amount of purchasing
power rather th: 1 a set amount of money out
)J====
the majority of zero coupon bonds pay a set
amount of money known as the face value 'ofthe
bond.
Alec Rodger in the 1950s. The model is based on
seven headings and each candidate is "judged"or
assessed under essential and destrable crtterta
within each category.The seven-point plan is split
into essential and desirable categories. The es-
sential criteria are what a candidate must pos-
sess, and the destrable criteria are the minimum
standard that will be accepted. FivefoldGrading
Systemwas devisedby John MunroFraser in 1978.
The criteria are very similar to those in Rodgers'
plan and the model is intended to be a guide for
recruiters.
the interviewer or interviewers see the person in
an "exalted"way because they have the same hob-
bies or interests, belong to the same golf club.
went to a top school. are smartly dressed. etc.
These perceptions often cloud the mind and judge-
ment of the interviewer and the candidate gains a
halo whether they are good or bad at doing their
job. The Horns Effect is the opposite of the halo
effect. The interviewer takes a dislike to the can-
didate. their personality. the way they dress. etc;
This alters the interviewer's perception ofthe can-
didate and. no matter how good that candidate
may be at doing the job. s/he gains a set of
"horns"l Once the interviewer adopts this percep-
tion of the candidate. it is very difficult to shake
off.This is why. it is often important to have more
than one person interviewing; it helps to avoid
scenarios such as the halo and horns effect hap-
pening. Stereotyping is where the interviewer's
perception of a candidate alters because the indi-
vidual is a woman. black. Asian or disabled. etc.
Some common SOCietalstereotypes or preconcep-
tions about the above groups are:
That a woman's place is in the home;
That it will be difficult to get a group of white
workers to work under a black or Asian team lead-
er/ supervisor;
That disabled people are difficult to employ
characteristics of many leaders - both successful
and unsuccessful- and is used to predict leader-
ship effectiveness.The resulting lists of traits are
then compared to those of potential leaders to
assess their likelihood of success or failure. Suc-
cessfulleaders definitely have interests. abilities.
and personality traits that are different ftom those
of the less effective leaders. Through many re-
earches conducted in the last three decades of
! 20th century, a set of core traits ofsuccessful
-s have been identified. These traits are not
======( MODEL SOLVED PAPER: RBI OFFICERS IN GRADE 'B' PHASE-II EXAM J=====
responsible solelyto Identifywhether a person Will
be a successful leader or not. but they are essen-
tiallyseen as preconditions that endowpeopleWith
leadership potential. Among the core traits iden-
tified are:
Achievement drive: High level of effort. high lev-
els of ambition. energy and initiative
Leadership motivation: an intense desire to lead
others to reach shared goals
Honesty"and integrity: trustworthy. reliable. and
open
Self-confidence: Belief in one's self. ideas. and
ability
Cognitiveability: Capable ofexeretsing goodjudg-
ment. strong analytical abilities. and conceptu-
ally skilled
Knowledgeofbusiness: Knowledgeofindustry and
other technical matters
Emotional Maturity: well adjusted. does not suf-
fer from severe psychological disorders.
Others: charisma. creativity and flexibility
47. (3)Systemic risk is generally used in reference to
an event that can trigger a collapse in a certain
industry or economy;whereas systematic risk re-
fers to overallmarket risk.Generally.systemic risk
can be descrtbed as a risk caused by an event at
the firm level that is severe enough to cause in-
stability in the financial system. Systemic risk
was a major contributor to the financial crtsis of
2008.
Systematic Risk is the risk inherent to the entire
market or an entire market segment. Systematic
risk. also known as "undtversiftable risk." "vola-
tility"or "market risk." affects the overall market.
not just a particular stock or industry. Some com-
mon sources of market risk are recessions. wars.
interest rates and others that cannot be avoided
through a diversified portfolio.The Great Reces-
sion provides a prime example of systematic risk.
Anyone who was.invested in the market in 2008
saw the values of their investments change be-
cause ofthis market-Wideeconomicevent. regard-
less of what types of securities they held. The
Great Recession affected different asset classes
in different ways. however. so investors With
broader asset allocations were impacted less than
those who held nothing but stocks.
48. (4) Human resource management (HRM) is the
management of human resources. It is a function
in the organizations designed to maximize em-
ployee performance in service of an employer's
strategic objectives. HRMis primarily concerned
with the management of people within orgamza-
. nons, focusing on pohctes and on systems. It also
concerns itself with organizational change and
industrial relations. that is. the balancing of or- ,
gamzational practices with requirements arising
from collective bargaining and from ~ :nm"-
I t and selection 'be initiated by the manage-
tal laws. HRM is a product of the human rela-
tions movement of the early 20th century. when
researchers began documenting ways of creating
business value through the strategic management
of the workforce. The function was initially dom-
inated by transactional work. such as payroll and
benefits administration. but due to globalization,
company consolidation. technological advances,
and further research.
Accordingto Decenzo and Robbins, "HRMis con-
cerned With the people dimension" in manage-
ment. Since every organization is made up of peo-
ple. acquiring their services, developing their
skills. motivating them to higher levels of perfor-
mance and ensuring that they continue to main-
tain their commitment to the organization is es-
sential to achieve organizational objectives. This
is true. regardless of the type of organization -
government. business, education, health or so-
etal actionn
49. (3) Boxall and Purcell in their book Strategy and
human resource management conceptualizework-
force performance as a function of capabilities
(the knowledge. skills and aptitudes which em-
ployees need to carry out their work), motivation
(the incentiveswhich employeesrequire to encour-
age them to perform to the best of their abilities)
and work organization (the way that work and
organizations are structured so as to allow em-
ployees to perform well).To this we add employ-
ment relations (thepolicies,programmes and prac-
tices which govern the relationship between em-
ployees and employers) on the basts that employ-
ee relationship management is a key responsibil-
ity of the HRMfunction.
Human Resource Management is not just limited
to manage and optimally exploit human intellect.
It also focuses .on managing physical and emo-
tional capital of employees. Considering the in-
tricaetes involved. the scope of HRMis Widening
with every passing day. It cover" but is not limit-
ed to HRplanning. hiring (recruitment and selec-
tion). training and development. payroll manage-
ment. rewards and recognitions. Industrial rela-
tions. grievance handling, legal procedures etc.
Human Resource Planning (HRP)is the process
offorecasting the future human resource require-
ments of the organization and determining as to
how the existing human resource capacity of the
organization can be utilized to fulfill these re-
quirements. It is the HRP process which helps
the management of the organization in meeting
the future demand of human resource in the or-
ganization Withthe supply of the appropriate peo-
ple in appropriate numbers at the appropriate time
and place. Further. it is only after proper analysis
ofthe HRrequirements can the process of recruit-
it,
====( MODEL SOLVED PAPER: RBI OFFICERS IN GRADE 'B' PHASE-II EXAM )====
50. (3)The terms nostro and vostro are used. mainly
02. (3) In addition to the analysis of the interactions
by banks. when one bank keeps money at anoth-
er bank. Both banks need to keep records of how
much money is being kept by one bank on behalf
of the other. In order to distinguish between the
two sets of records of the same balance and set of
transactions. banks refer to the accounts as nos-
.tro and vostro. Speaking from the point of view of
the bank whose money is being held at another
bank:
A nostro is our account of our money. held by the
otherbank
A vostro is our account of other bank money. held
by us
A vostro account is the same as any other bank
account. It is a record of money held by a bank or
owed to a bank by a third party (an individual.
company or bank). The nostro account is a way of
the bank whose money it is. keeping track of how
much is being held by the other bank. It is simi-
lar to an individual keeping a detailed record of
every payment in and out of his or her bank ac-
count so that she/he knows the balance at any
point in time. In normal usage:
A nostro account will be in foreign currency (it is
a record of funds held by a bank in another coun-
try in the currency of that country) t.e, a bank in
country A keeping a record of money held by.a
bank in country B. in the currency of country B.
A vostro account will be in the local currency of
the bank where the money is being held t.e, it is
the bank in Country B's record of the money kept 53. (3) After describing the context for his belief of
by the bank from country A with it.
A bank counts a nostro account with a debit bal-
ance as a cash asset in its balance sheet. Con-
versely. a vostro account with a credit balance
(i.e. a deposit) is a liabiltty. and a vostro with a
debit balance (a loan) is an asset. Nostro accounts
are mostlycommonlyused forcurrency settlement.
where l bank or other financial institution needs
to hold balances in a currency other than its home
accounting unit.
51. (5) DeIVatives are contracts which derive their
value f~m one or more underlying assets. The
underl~g assets can be stocks. bonds. commod-
ities. curencres, interest rates. market indexes
or even tie weather. The value of the derivative is
determinel by fluctuations in these underlying
assets. Dtivatives are generally used as an in-
strument b hedge risk. Additionally. it can also
be used fotthe followingpurposes:
To speculas - to reflect a view on the future di-
rection of tie market
To enhance~quidity
To change tIe nature of an investment without
incurring thi costs of selling one portfolio and
br=tn anothr
between individuals. Berne's Transactional Anal-
ysis involves the identification of the ego states
behind each and every transaction. Berne defined
an ego state as "a consistent pattern of feeling
and experience directly related to a correspond-
ing consistent pattern of behavior. Berne ultimate-
ly defined the three ego states as: Parent, Adult,
and Child.
Parent - The parent represents a massive collec-
tion of recordings in the brain of external events
experienced or perceived in approximately the first
five years of life. Since the majority of the exter-
nal events experienced by achild are actions of
the parent. the ego state was appropriately called
Parent.
Child - In contrast to the Parent. the Child repre-
sents the recordings in the brain ofinternal events
associated with external events the child perceives.
Stated another way. stored in the Child are the
emotions or feelings which accompanied external
events. Like the Parent. recordings in the Child
OCcurfrom childbirth all the way up. to the age of
apprOximately 5 years old.
Adult - The Adult is the last ego state. Close to
one year of age. a child begins to exhibit gross
motor activity. The child learns that he or she
can control a cup from which to drink, that he or
she can grab a toy. In social settings. the child
can play peek-a-boo.
the Significance of Transactional Analysis (TA)..
Harris describes TA. starting from the observa-
tion that a person's psychological state seems to
change in response to different situations. The
question is. from what and to what does it
change? Harris answers this through a simplified
introduction to TA. explaining Berne's proposal
that there are three states into which a person
can switch: the Parent. the Adult and the Child.
Harris describes the mental state called the Par-
ent 'by analogy. as a collection of "tape record-
ings" of external influences that a child observed
adults doing and saying. The recording is a long
list of rules and admonitions about the way the
world is that the child was expected to believe
unquestioningly. In parallel with those Parent
recordings. the Child is a Simultaneous recording
of internal events - how life felt as a child.
According to Harris. humans start developing a
third mental state. the Adult. about the time chil-
dren start to walk and begin to achieve some mea-
sure of control over their environment, Instead of
.lear ; ideas directly from parents into the Par-
t. !Xperiencingsiw>:' ~ernotir-i as tho ('. Ie
=====t( MODEL SOLVED PAPER: RBI OFFICERS IN GRADE 'B' PHASE-II EXAM)l::c===
the world and form their own opinions. They test 59. (3) Baker corporation's current ratio equals cur-
the assertions of the Parent and Child and either 500
update them or learn to suppress them. Thus, the rent asset/current liabilities ee : 1,000 = 0.50
Adult inside us all develops over time, but it is
very fragile and can be readily overwhelmed by 60. (1)Baker corporatton's new current ratio equals
stressful situations. Its strength is also tested
(500- 50) = 450 = 0.47
through conflict between the simplistic ideas of (1,000- 50) 950
the Parent and reality. Sometimes, Harris asserts,
it is safer for a person to believe a lie than to 61. (3)Only the current asset balance is affected by
acknowledge the evidence in front of them. This this action. Baker's new current ration
ts called Contamination of the Adult.
_ (500- 50) = 450 = 0.45
54. (1) Altman presented his model of multivariate - 1,000 1,000
analysis for predicting industrial sickness in the
year 1966. In his mode, he combined five finan- 62. (1)Company A: P = Sx - VCx - FC = 10000 (50
cial rations into a single index. He named his - 35) - 50,000 = 1,000,00
index as Z-score. The Altman's Z Score forecasts Company B: P = Sx - VCx - FC = 10000 (50-20)
the probability of a company entering bankruptcy - 20,000 = 1,000,00
within a 12~montpertod., the model combines five 63. (2)P = 11000 (50-20)-20,000 = 130000
flnanctalrattos using reported accounting infor- P increased by 30%
mation and equity values to produce an objective 1000 additional units contribution margin (50-
measure of borrower's financial health.
20) =30,000
55. (5)When a project that has long term debt com- Therefore, 30 % increase on 100000 profit
ponent in its capital structure becomes sick, it
become necessary to ease the burden of debt to 64. (1) P = x (S - VC)- Fe = 8000 (50-35) - 50,000
enable the sick unit to recover from its sickness. =70,000
This necessitates restructuring of the debts. In P has decreased by 30%
general, banks and ftnancial institutions offerthe OR
followmg concessions in their package of rehabtl- Loss of 2000 units ( 50 - 35) . = 30,000 there-
ttation assistance: . fore, 30% decrease on profit of 100000
Reduction in interest rate of extstmg loans 65., (2) Let the required time be n years. Then,
Conversion of short-term loans in to long term
loans
Conversion of part of long term loans into equity
Funding of the overdue interest and making it
repayable in easy installments.
Offering a revised schedule of repayment for the
principal components of term loans
Sanction of additional loan to meet the addition-
al capital expenditure
Enhancement of working capital limits and regu-
larizing the irregular portion of working capital ( l1)n
Therefore, 1000 x 10 = 1331
finance already availed. [Since, amount =1331 (given))
156. (1) Po= Rs. 1,100 = Rs. 50(PVIFA"",.2J + Rs. 1000
(PVIFr%.~; r = 4.248% .
=> (1101)n 1331 11 x 11 x 11
YrM = 8.50 % = 1000 = 20x lOx 10
This is the rate of return you expect to earn on
your investment when you purchase the bond.
57. (2) P2 = Rs. 50 (PVIF~. ItJ + Rs. 1000 (PVIF3%.lS)
= 1,251.22
( 11)3
= loo0x -10
Po= Rs. 1,100 = Rs. 50 (PVIF~) + Rs. 1,251.22
(PVIFr%,4);r = 7.614%
'= 15.23%
(.!!.)n (!!.)3
=> 10
=
10