International Finance and Treasury MCQ Questions and Solutions with Explanations | Management

Syndication of loans is done in Eurocredit market. It is the market where financial banking institutions provide banking services denominated in foreign currencies. They may accept deposits and provide loans.

The Bretton Woods System called for fixed exchange rates against the US Dollar. The Bretton Woods agreement was created in a 1944 conference of all of the World War II Allied nations.

The number of nostro accounts that can be maintained by a bank in a particular currency is no such limit. Nostro account is maintained by Indian banks in foreign countries where they have operations for facilitating easy clearing of their transactions. These accounts are maintained with their correspondent banks overseas who in turn act as their clearing bank in the foreign country where the Indian bank has its base.

Non-resident bank accounts are maintained in Indian rupee. Non-Resident bank accounts are those, which are maintained by Indian nationals and Persons of Indian origin resident abroad, foreign nationals and foreign companies in India. Bank branches can open ordinary non-resident accounts in the names of private individuals provided initial deposits for opening the accounts are received from abroad in an approved manner or the initial amount is tendered in foreign currency while on a visit to India or transfer of funds from the existing non-resident account of the same person.

Full fledged money changers are authorized to undertake purchase and sale of foreign currency notes, coins and travellers cheques. The Full Fledged Money Changers are liable to carry on the following activities: FFMCs can go into franchise agreement at their convenience for undertaking the Restricted Money Changing business which comprises the conversion of coins or traveler's cheques, foreign currency notes into (INR) Indian Rupees.

According to classification by IMF, the currency system of India falls under managed floating. Managed float regime is the current international financial environment in which exchange rates fluctuate from day to day, but central banks attempt to influence their countries' exchange rates by buying and selling currencies to maintain a certain range.

Under fixed exchange rate system, fall in the value of domestic currency due to deficit in balance of payments resulted in no change in the exchange rate normally. A fixed exchange rate is a regime applied by a government or central bank ties the country's currency official exchange rate to another country's currency or the price of gold. The purpose of a fixed exchange rate system is to keep a currency's value within a narrow band.

Under the original scheme IMF, a member country had to obtain the permission of IMF for any devaluation of its currency. The IMF formally came into existence on 27 December 1945, when the first 29 countries ratified its Articles of Agreement. By the end of 1946 the IMF had grown to 39 members. On 1 March 1947, the IMF began its financial operations, and on 8 May France became the first country to borrow from it.

At present the role of IMF in the exchange rate policies of its members is to have surveillance and express opinion on policies. The International Monetary Fund (IMF) is an organization of 189 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

Pegging is controlling a country's currency rate by tying it to another country's currency or steering an asset's price prior to option expiration. Pegging the value of a currency can be done by pegging to a major currency or pegging to a basket of currencies or pegging to SDR.