101. Which private sector bank has launched the ‘e-Kisaan Dhan’ app for farmers?
(a) Axis Bank
(b) HDFC Bank
(c) IDBI Bank
(d) Kotak Mahindra Bank
(e) None of the above / More than one of the above
[66th B.P.S.C. (Pre) 2020]
Ans. (b) HDFC Bank
- In June 2020, HDFC Bank, a private sector bank, released the ‘e-Kisaan Dhan’ app for farmers across India.
- With this app, farmers will be able to access banking and agricultural services from their phones.
- In addition to this, ‘e-Kisaan Dhan’ will offer useful services like market prices, farming news, weather forecasts, seed variety information, and more.
- This app will also provide multiple banking services.
|
102. The Commercial Bank which has been merged with the Punjab National Bank is :
(a) Bank of India
(b) New Bank of India
(c) Indian Overseas Bank
(d) Oriental Bank of Commerce
[U.P. U.D.A./L.D.A. (Spl.) (Pre) 2010]
Ans. (b) New Bank of India
- In 1993, the New Bank of India was combined with the Punjab National Bank.
- On August 30, 2019, Indian Finance Minister Nirmala Sitharaman declared that the Oriental Bank of Commerce and United Bank of India would be joined by Punjab National Bank.
- This merger happened on April 1, 2020.
|
103. Recently The Bank of Rajasthan has been merged with:
(a) HDFC
(b) ICICI
(c) State Bank of Bikaner and Jaipur
(d) State Bank of India
[R.A.S./R.T.S.(Pre) 2010]
Ans. (b) ICICI
- In August 2010, the Bank of Rajasthan joined ICICI Bank Ltd.
|
104. Which of the following banks was closed due to a securities scam?
(a) Metropolitan Bank
(b) Bank of Karad
(c) National Housing Bank
(d) Grindlays Bank
[M.P.P.C.S. (Pre) 1992]
Ans. (b) Bank of Karad
- The Bank of Karad had to shut down in 1994 because of a fraud involving securities.
- It was then merged with the Bank of India.
|
105. Which of the following institutions is involved in long-term industrial financing?
(a) ICICI
(b) IDBI
(c) IFCI
(d) All of the above
[U.P. Lower Sub. (Pre) 1998]
Ans. (d) All of the above
| Institution Established in (Year) |
| ICICI |
January, 1955 |
| IDBI |
July, 1964 |
| IFCI |
July, 1948 |
| All of the given institutions are involved in medium and long-term industrial financing. |
|
106. Match List-I with List-II and select the correct answer from the codes given below.
| List – I |
List – II |
| (Bank) |
(Type) |
| A. Indian Bank |
1. Foreign |
| B. ICICI Bank |
2. Cooperative |
| C. CITI Bank |
3. Private |
| D. Saraswat Bank |
4. Public |
Codes
A B C D
(a) 1 2 3 4
(b) 2 3 1 4
(c) 4 2 3 1
(d) 4 3 1 2
[U.P. R.O./A.R.O. (Re-Exam) (Pre) 2016]
Ans. (d) 4 3 1 2
| The correctly matched list is as follows : |
| Bank |
Type |
| Indian Bank |
Public |
| ICICI Bank |
Private |
| CITI Bank |
Foreign |
| Saraswat Bank |
Cooperative |
|
107. Which one of the following four Foreign Banks operating in India, has the largest number of branches in the country?
(a) City bank
(b) BNP Paribas Bank
(c) Standard Chartered Bank
(d) HSBC
[U.P.P.C.S. (Pre) 2008, Jharkhand P.C.S. (Pre) 2003]
Ans. (c) Standard Chartered Bank
- As of October 31, 2021, there are a total of 100 branches of the Standard Chartered Bank from the United Kingdom, 35 branches of Citibank N.A. from the United States, 26 branches of HSBC Ltd. from Hong Kong, 17 branches of Deutsche Bank from Germany, and 8 branches of BNP Paribas Bank France 8.
|
108. Consider the following pairs: Large Bank Country of origin
1. ABN Amro Bank: USA
2. Barclays Bank: UK
3. Kookmin Bank : Japan
Which of the above pair(s) is/are correctly matched?
(a) 1 only
(b) 2 only
(c) 1 and 2
(d) 2 and 3
[I.A.S. (Pre) 2009]
Ans. (b) 2 only
| The correctly matched pairs are as follows : |
| Large Bank Country of Origin |
| ABN Amro Bank |
Netherlands |
| Barclays Bank |
United Kingdom |
| Kookmin Bank |
South Korea |
| So option (b) is the correct answer. |
|
109. Consider the following :
1. Regional Rural Banks
2. Lead Bank Scheme
3. NABARD
4. State Bank of India
The correct chronological sequence of the establishment of these banks is as follows:
(a) 4 3 1 2
(b) 4 2 1 3
(c) 2 3 4 1
(d) 2 1 4 3
[U.P.P.C.S. (Mains) 2005]
Ans. (b) 4 2 1 3
- The State Bank of India was set up in 1955, the Lead Bank Scheme in 1969, Regional Rural Banks in 1975, and NABARD in 1982.
|
110. Consider the following statements:
1. The maximum limit of shareholding of Indian promoters in private sector banks in India is 49 percent of the paid-up capital.
2. Foreign Direct Investment of up to 49 percent from all sources is permitted in private sector banks in India under the automatic route.
Which of these statements is/are correct?
(a) Only 1
(b) Only 2
(c) Both 1 and 2
(d) Neither 1 nor 2
[I.A.S. (Pre) 2003]
Ans. (b) Only 2
- In January 2001, the RBI set the minimum paid-up capital for a new private bank at Rs. 200 crore, which had to be raised to Rs. 300 within 3 years.
- The promoter had to contribute at least 40% of the paid-up capital.
- In February 2002, the RBI increased the FDI limit in private sector banks from 20% to 49%.
- Nowadays, the FDI limit in private sector banks can be up to 74%, with 49% allowed automatically and above that with the government’s permission.
- So, Statement 1 is wrong and Statement 2 is right
|
111. The percentage of rural branches of all kinds of private, public sector commercial Banks including Regional Rural Banks as of 30.06.2012, according to RBI, was approximately :
(a) 17%
(b) 27%
(c) 37%
(d) 47%
[U.P.P.C.S. (Mains) 2012]
Ans. (c) 37%
- According to RBI data, around 37% of all private and public sector banks (including Regional Rural Banks) had branches in rural areas as of June 30, 2012.
- At the end of March 2020, public sector banks had 28,921 rural branches, private sector banks had 7,232, and foreign banks had 15.
|
112. The ‘Lead Bank’ Scheme was launched in :
(a) October, 1966
(b) October, 1969
(c) December, 1969
(d) December, 1980
[U.P.P.C.S. (Spl.) (Mains) 2004]
Ans. (c) December, 1969
- In 1969, a study group headed by Prof. D.R. Gadgil recommended an ‘Area Approach’ where public sector banks should focus on certain districts and act as a ‘Lead Bank’.
- This Lead Bank Scheme was then introduced by the Reserve Bank of India in December of the same year.
- Its purpose is to coordinate the activities of banks and other developmental agencies to increase the flow of bank finance to priority sectors and to promote banks’ role in the rural sector.
- A particular bank is assigned the responsibility of leading the district and coordinating the efforts of credit institutions and the government.
- This scheme was last reviewed in 2009 by a High-Level Committee led by Smt. Usha Thorat.
|
113. The functions of the Lead Bank are performed by :
(a) State Bank of India
(b) Reserve Bank of India
(c) Any Bank
(d) A bank designated for this purpose
[U.P.P.C.S. (Mains) 2007]
Ans. (d) A bank designated for this purpose
- In 1969, two groups – the Gadgil Study Group and the Nariman Committee – recommended the idea of an ‘Area Approach’ in order to help public sector banks meet their social responsibilities.
- This led to the introduction of the Lead Bank Scheme by the Reserve Bank of India.
- This scheme is meant to help coordinate the activities of banks and other development agencies to increase the flow of bank finance, prioritize certain sectors, and promote banks’ role in rural development.
- As part of the scheme, one particular bank is assigned as the Lead Bank for the district and is expected to take a leadership role in coordinating the efforts of the credit institutions and government.
- The Lead Bank Scheme was most recently reviewed in 2009.
|
114. The basic aim of the Lead Bank Scheme is that :
(a) big banks should try to open offices in each district
(b) there should be stiff competition among the various nationalized banks
(c) individual banks should adopt particular districts for intensive development
(d) all the banks should make intensive efforts to mobilize deposits
[I.A.S. (Pre) 2012]
Ans. (c) Individual banks should adopt particular districts for intensive development
- The Lead Bank Scheme was created in 1969 after an idea from the Gadgil Study Group and was supported by the Nariman Committee.
- The aim of the Lead Bank Scheme is to increase the flow of bank finance to priority sectors and promote development in rural areas.
- A particular bank is made the “Lead Bank” of a district in order to coordinate the efforts of credit institutions and the government.
- The Scheme was last reviewed in 2009 by a High-Level Committee.
|
115. The Service Area Approach was implemented under the purview of :
(a) Integrated Rural Development Programme
(b) Lead Bank Scheme
(c) Mahatma Gandhi National Rural Employment Guarantee Scheme
(d) National Skill Development Mission
[I.A.S. (Pre) 2019]
Ans. (b) Lead Bank Scheme
- In 1989, the Service Area Approach (SAA) was introduced to help scheduled commercial banks, including Regional Rural Banks, plan and improve rural and semi-urban areas.
- Banks were responsible for providing credit to a group of 15-25 villages.
- The goal was to increase production, productivity, and income.
- The SAA was reviewed regularly and changed to make it better.
- In December 2004, the SAA was changed so that banks weren’t restricted to lending in just their service area, but borrowers could approach any branch for credit.
- Banks can also take steps to stop multiple financing.
- Now, the SAA is only used for government-sponsored programs.
|
116. District Credit Planning is done :
(a) Under the Lead bank
(b) Under the NABARD
(c) Under the District Magistrate
(d) Under the SBI
[U.P. Lower Sub. (Pre) 2002, 2003]
Ans. (a) Under the Lead bank
- The Lead bank is responsible for credit planning in each district.
|
117. Which of the following banks operates mainly in relation to small industries?
(a) SIDBI
(b) IDBI
(c) ICICI
(d) NABARD
[U.P.P.C.S. (Mains) 2012]
Ans. (a) SIDBI
- The Small Industries Development Bank of India (SIDBI) was established on April 2nd, 1990 through a law passed by the Indian Parliament.
- It serves as the main financial institution to help, finance, and grow the Micro, Small, and Medium Enterprises (MSME) sector.
- SIDBI is based in Lucknow and has branches all over India.
|
118. The Head Office of the Small Industries Development Bank of India (SIDBI) is located at :
(a) Ghaziabad
(b) Lucknow
(c) Kanpur
(d) New Delhi
[U.P.R.O. / A.R.O. (Mains) 2016]
Ans. (b) Lucknow
- The Small Industries Development Bank of India (SIDBI) was created in April 1990 by the Indian Parliament.
- It is the main financial institution that promotes, finances and develops Micro, Small, and Medium Enterprises (MSMEs).
- SIDBI is based in Lucknow and has offices throughout India.
|
119. SIDBI has been established to :
(a) Finance cottage industries
(b) Finance small-scale industries
(c) Finance large-scale industries
(d) Finance public sector undertakings
[U.P.P.C.S. (Mains) 2004]
Ans. (b) Finance small-scale industries
- The Small Industries Development Bank of India (SIDBI) was established on April 2, 1990, by the Indian Parliament.
- It works as the main financial organization for promoting, financing, and developing Micro, Small, and Medium Enterprises (MSME).
- It is based in Lucknow and has branches in many places in India.
|
120. Consider the following pairs:
| (Name of the banks) |
(Locations of head office) |
| 1. Allahabad Bank |
Kolkata |
| 2. Small Industries Development Bank of India |
Mumbai |
| 3. Indian Overseas Bank |
Chennai |
Which one of the above pairs is not correctly matched?
(a) 1 only
(b) 2 only
(c) 3 Only
(d) 1 and 3 only
[U.P. P.C.S. (Mains) 2014]
Ans. (b) 2 only
- The Small Industries Development Bank of India (SIDBI) is based in Lucknow.
- SIDBI’s job is to help promote, finance, and develop the Micro, Small, and Medium Enterprises (MSME) sector.
- The other items are correctly matched.
|
121. ‘Financial Inclusion’ can be encouraged :
(a) by issuing a ‘specific letter of credit’ to the deserving beneficiaries.
(b) by providing banking services to people of lower income groups with ‘zero’ or ‘minimum balance’.
(c) by providing financial services to low-income groups.
(d) by all of the above.
[U.P.P.C.S. (Spl.) (Mains) 2008]
Ans. (d) by all of the above.
- Financial Inclusion is a way of providing banking and financial services to people.
- It attempts to make sure everyone has access to basic financial services, no matter how much money they have.
- The goal is to provide financial assistance to people who are not well off.
- Therefore, all of the statements are correct and option (d) is the right answer.
|
122. Which one of the following is not the objective of financial inclusion?
(a) To extend financial services to poor populations.
(b) To unlock the door of growth potential of weaker sections.
(c) Shrinking of banking infrastructure.
(d) To extend the financial sector into rural areas.
[U.P.P.C.S. (Pre) 2016]
Ans. (c) Shrinking of banking infrastructure.
- The goal of financial inclusion is to give financial services to people who are poor, help the weaker part of society grow, and bring financial services to rural areas.
- To do this, banking systems need to be expanded in areas that are underserved.
- Option C is the correct answer.
|
123. Which one of the following is a hindrance in the process of financial inclusion?
(a) low income
(b) illiteracy
(c) lack of bank branches
(d) All of the above
[U.P. U.D.A./L.D.A. (Pre) 2013]
Ans. (d) All of the above
- The C. Rangarajan Committee believes that financial inclusion is providing people in vulnerable groups (like those with a low income or low literacy) access to financial services, including credit, at an affordable cost.
- Poor income, lack of education, and limited bank branches can make this difficult.
|
124. Who among the following was the Chairman of the ‘Committee on Financial Inclusion’ constituted in January 2005?
(a) C. Rangarajan
(b) D. Subbarao
(c) M.S. Ahluwalia
(d) Kamal Nath
[U.P. U.D.A./L.D.A. (Pre) 2013]
Ans. (a) C. Rangarajan
- The Government of India (with Chairman Dr. C. Rangarajan) created the Committee on Financial Inclusion on June 26, 2006, to make a strategy for financial inclusion. The Committee’s final Report was given on January 4, 2008.
- The Report said that financial inclusion means giving access to financial services and loans to people who are vulnerable (such as those with low income) at an affordable cost.
- Financial inclusion includes giving people access to bank accounts, credit, remittances, payment services, financial advice, and insurance.
|
125. Which of the following committees has given its recommendations on ‘financial inclusion’?
(a) Rakesh Mohan Committee
(b) Sinha Committee
(c) Rangarajan Committee
(d) Kelkar Committee
[U.P.P.S.C. (R.I.) 2014]
Ans. (c) Rangarajan Committee
- The Government of India created the Committee on Financial Inclusion, headed by Dr. C. Rangarajan, on June 26, 2006.
- The purpose of the committee was to create a strategy to make sure that everyone, especially those more vulnerable, had access to financial services and credit.
- This includes access to bank accounts, credit, remittance services, financial advice, and insurance.
- The committee presented its final report on January 4, 2008.
|
126. What is the purpose of setting up Small Finance Banks (SFBs) in India?
1. To supply credit to small business units.
2. To supply credit to small and marginal farmers.
3. To encourage young entrepreneurs to set up businesses, particularly in rural areas.
Select the correct answer using the code given below :
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
[I.A.S. (Pre) 2017]
Ans. (a) 1 and 2 only
- The Reserve Bank of India has guidelines for setting up Small Finance Banks, which are meant to help people in unorganized sectors like small and marginal farmers, small businesses, and micro and small industries by providing them with savings and credit facilities.
- But, there is no provision to help young entrepreneurs to set up businesses in rural areas.
|
127. The establishment of ‘Payment Banks’ is being allowed in India to promote financial inclusion.
Which of the following statements is/are correct in this context?
1. Mobile telephone companies and supermarket chains that are owned and controlled, by residents are eligible to be promoters of Payment Banks.
2. Payment Banks can issue both credit cards and debit cards.
3. Payment Banks cannot undertake lending activities.
Select the correct answer using the code given below :
(a) 1 and 2 only
(b) 1 and 3 only
(c) 2 only
(d) 1, 2 and 3
[I.A.S. (Pre) 2016]
Ans. (b) 1 and 3 only
- The Reserve Bank of India has set up guidelines for licensing Payment Banks.
- These banks will be registered as a public limited company according to the Companies Act of 2013 and licensed according to Section 22 of the Banking Regulation Act of 1949.
- These banks are mainly meant to provide small savings accounts and payments/remittance services to people with low incomes, small businesses, and other entities.
- Non-bank Pre-paid Payment Instrument (PPI) issuers, individuals, Non-Banking Finance Companies, corporate BCs, mobile telephone companies, and public sector entities can apply to set up Payment Banks.
- Payment Banks can issue ATM/Debit cards, but not credit cards, and they are not allowed to lend money.
|
128. RBI has cleared the resolution to start Payment Banks in India to improve Financial Inclusion. The following committee had recommended the creation of Payment Banks :
(a) Arvind Mayaram
(b) Y.V. Reddy
(c) Bimal Jalan
(d) Nachiket Mor
[U.P.P.C.S. (Mains) 2014]
Ans. (d) Nachiket Mor
- In 2013, a group called the Nachiket Mor Committee was created to come up with ideas on how to provide financial services to small businesses and low-income households.
- They suggested creating a type of bank called Payment Banks and submitted their report to the Reserve Bank of India on January 7th, 2014.
|
129. What is ‘Shadow Banking’?
(a) Outsourcing of banking work by a bank
(b) Financial transactions and other activities of nonbanking financial intermediary
(c) Domestic banks’ foreign operations
(d) Foreign bank operating in another country for banking and other activities
[U.P.R.O./A.R.O. (Pre) 2014]
Ans. (b) Financial transactions and other activities of nonbanking financial intermediary
- The term ‘Shadow Bank’ was created by economist Paul McCulley in 2007.
- It refers to financial institutions that aren’t subject to regular banking regulations, but still provide services like banks do.
- These institutions act as a middleman between investors and borrowers, giving out credit and creating liquidity.
- It symbolizes one of the many problems of the financial system before the global financial crisis.
|
130. The difference between a bank and a Non-Banking Financial Institution (NBFI) is that :
(a) a bank interacts directly with customers while an NBFI interacts with banks and governments
(b) a bank indulges in a number of activities relating to finance with a range of customers, while an NBFI is mainly concerned with the term loan needs of large enterprises
(c) a bank deals with both internal and international customers while an NBFI is mainly concerned with the finances of foreign companies
(d) a bank’s main interest is to help in business transactions and savings/investment activities while an NBFI’s main interest is in the stabilization of the currency
[I.A.S. (Pre) 1994]
Ans. (b) a bank indulges in a number of activities relating to finance with a range of customers, while an NBFI is mainly concerned with the term loan needs of large enterprises
- Banks are organizations given permission by the government to do activities such as taking deposits, giving out loans, withdrawing money, giving interest, cashing checks, and providing services for customers.
- Banks are important for a country’s economic growth.
- Non-Banking Financial Institutions (NBFIs) are companies that don’t have a full banking license and are not regulated by the government.
- They mainly focus on providing long-term loans to big companies.
|
131. With reference to the Non-Banking Financial Companies (NBFCs) in India, consider the following statements :
1. They cannot engage in the acquisition of securities issued by the government.
2. They cannot accept demand deposits like Savings Accounts.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
[I.A.S. (Pre) 2010]
Ans. (b) 2 only
- A Non-Banking Financial Company (NBFC) is a company that is registered under the Companies Act, 1956 and is involved in giving loans, buying stocks and bonds, leasing, insurance, and chit business.
- However, it does not include activities like agriculture, industry, buying and selling goods, or providing services.
- A company that has its main focus on taking lump sum or installment deposits is also classified as an NBFC. NBFCs cannot accept demand deposits, cannot issue cheques, and do not form part of the payment and settlement system.
- Deposit insurance is not available to NBFC customers, unlike banks.
|
132. On which date, the Ombudsman Scheme for the NonBanking Financial Companies (NBFC), 2018 was effectively introduced by the Reserve Bank of India?
(a) 26 January, 2018
(b) 23 January, 2018
(c) 26 February, 2018
(d) 23 February, 2018
[M.P. P.C.S. (Pre) 2020]
Ans. (d) 23 February, 2018
- The Reserve Bank of India has set up a fast and free system to help customers of Non-Banking Financial Companies (NBFCs) with issues related to the services they receive.
- This system called the Ombudsman Scheme for Non-Banking Financial Companies (NBFC), 2018, has been in effect since February 23, 2018.
- A senior official appointed by the Reserve Bank of India is in charge of the NBFC Ombudsman.
|
133. Microfinance is the provision of financial services to people of low-income groups. This includes both the consumers and the self-employed. The service/services rendered under microfinance is/are :
1. Credit facilities
2. Savings facilities
3. Insurance Facilities
4. Fund Transfer facilities
Select the correct answer using the codes given below :
(a) 1 only
(b) 1 and 4 only
(c) 2 and 3 only
(d) 1, 2, 3 and 4
[I.A.S. (Pre) 2011]
Ans. (d) 1, 2, 3 and 4
- Microfinance provides people who are low-income or poor with access to basic financial services, like savings, credit, leasing, insurance, and cash transfers.
- These services are available from different organizations, like banks, non-governmental organizations, credit and savings cooperatives, and informal sources.
|
134. RBI had set up a committee to study and give suggestions on the microfinance sector. Its Chairman was :
(a) Y.H. Malegam
(b) Abid Hussain
(c) Bimal Jalan
(d) Rakesh Mohan
[U.P.P.C.S. (Mains) 2010]
Ans. (a) Y.H. Malegam
- The RBI’s Board of Directors set up a Sub-Committee on October 15, 2010, which was led by Mr. Y.H. Malegam.
- The Sub-Committee gave its report in December 2011.
- They suggested that NBFCs operating in the microfinance sector should be classified into their own category, called NBFC-MFI.
|
135. ‘Gullak Bachcha Bank’ is a bank based in :
(a) Delhi
(b) Patna
(c) Bhopal
(d) Jaipur
(e) None of the above/More than one of the above
[63rd B.P.S.C. (Pre) 2017]
Ans. (b) Patna
- The Gullak Bachcha Bank was started by Bihar Chief Minister Nitish Kumar on Children’s Day in 2009 at the Bal Bhavan-Kilkari in Patna.
- It teaches kids about the importance and proper use of money, encourages them to save, educates them about how banks work and promotes mutual cooperation.
|
136. Which among the following is an asset for a Commercial Bank?
(a) Credit to farmers
(b) Deposit of public
(c) Borrowings from R.B.I.
(d) Demand deposits of Industries
[U.P.P.C.S. (Mains) 2007]
Ans. (a) Credit to farmers
| Among the given options, credit to farmers is an asset for a commercial bank. Liabilities and assets of commercial banks are as follows : |
| A. Liabilities |
B. Assets |
| 1. Paid-up capital and Reserves |
1. Cash in hand and with RBI |
| 2. Deposits : |
2. Money at call and short notice |
| (i) Time (Term) deposits |
|
| (ii) Demand deposits |
|
| 3. Borrowings |
3. Investments |
| 4. Other liabilities |
4. Loans, advances, and bills discounted and purchased |
|
137. Which of the following is not included in the assets of a commercial bank in India?
(a) Advances
(b) Deposits
(c) Investments
(d) Money at call and short notice
[I.A.S. (Pre) 2019]
Ans. (b) Deposits
- In India, a commercial bank’s assets do not include deposits.
- Deposits are a liability of the commercial bank as they have to be paid back to the customer.
- Assets of a commercial bank in India are cash, money at call at short notice, investments, loans, advances, and discounted bills.
- Liabilities of a commercial bank in India are deposits (both term and demand deposits), borrowings, paid-up capital, and bills that need to be paid.
|
138. Which of the following is the most important component of the liabilities of commercial banks in India?
(a) Demand deposits
(b) c
(c) Inter-bank liabilities
(d) Other borrowings
[U.P.P.C.S. (Mains) 2008, 2009]
Ans. (b) Loans in which interest or principal amount is not recovered
- Time deposits are the most significant liability that commercial banks in India have followed by savings and demand deposits.
|
139. Non-performing assets in commercial banks mean:
(a) Bank deposits which are not invested
(b) Capital assets not in use
(c) Loans in which interest or principal amount is not recovered
(d) Low-interest rate loans
[U.P.P.C.S. (Pre) 2009]
Ans. (c) Loans in which interest or principal amount is not recovered
- A non-performing asset (NPA) is a term used for loans or advances that have not been paid on time.
- According to the RBI, if a loan or advance is overdue for 90 days or more, it is classified as an NPA.
|
140. Priority sector lending by banks in India constitutes the lending to :
(a) Agriculture
(b) Micro and small enterprises
(c) Weaker sections
(d) All of the above
[I.A.S. (Pre) 2013]
Ans. (d) All of the above
- The Reserve Bank of India (RBI) requires banks to provide 40% of their loans to certain sectors such as agriculture, small businesses, education, housing, exports, social infrastructure, and renewable energy.
- This also includes lending to vulnerable groups.
- Therefore, option (d) is the correct answer.
|
141. Short Term Loans are of :
(a) Maximum 15 months
(b) 2 to 5 years
(c) 1 to 3 years
(d) 1 to 2 Months
[R.A.S./R.T.S.(Pre) 1999, 2000]
Ans. (a) Maximum 15 months
- Loans are divided into three groups based on how long they last:
- Short-term loan – 15 months or less
- Medium-term loan – Between 15 months and 5 years
- Long-term loan – More than 5 years
- Note: Some short-term loans can last up to 2 years, depending on the lender.
|
142. Why is the offering of ‘teaser loans’ by commercial banks a cause of economic concern?
1. The teaser loans are considered to be an aspect of subprime lending and banks may be exposed to the risk of defaulters in the future.
2. In India, teaser loans are mostly given to inexperienced entrepreneurs to set up manufacturing or export units.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
[I.A.S. (Pre) 2011]
Ans. (a) 1 only
- A ‘Teaser Loan’ is a type of loan that has a low interest rate at the start, but then increases to the regular rate after a certain period of time.
- This kind of loan has a higher risk of default, so banks must put aside more money to cover any potential losses.
- It is not usually given to people who are just starting out in business.
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143. Consider the following :
1. Market borrowing
2. Treasury bills
3. Special securities issued to RBI
Which of these is/are component(s) of internal debt?
(a) 1 only
(b) 1 and 2 only
(c) 2 only
(d) 1, 2 and 3
[I.A.S. (Pre) 2001]
Ans. (d) 1, 2 and 3
- The government of India owes money, which is known as public debt.
- This debt is divided into two parts: internal debt and external debt.
- Internal debt is then broken down into marketable and non-marketable securities.
- Marketable securities are things like G-secs and T-bills, which are auctioned off.
- Non-marketable securities are things like intermediate treasury bills and special securities given to the RBI.
- Option (d) is the right answer.
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144. In the context of the Indian economy, non-financial debt includes which of the following?
1. Housing loans owed by households
2. Amounts outstanding on credit cards
3. Treasury bills
Select the correct answer using the code given below :
(a) 1 only
(b) 1 and 2 only
(c) 3 only
(d) 1, 2 and 3
[I.A.S. (Pre) 2020]
Ans. (d) 1, 2 and 3
- Non-financial debt includes things like loans and credit from government agencies, people, and companies that aren’t part of the financial world.
- So, statements 1, 2, and 3 are all true.
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145. The term ‘Core Banking Solutions’ is sometimes seen in the news. Which of the following statements best describes/describe this term?
1. It is a network of a bank’s branches that enables customers to operate their accounts from any branch of the bank on its network regardless of where they open their accounts.
2. It is an effort to increase RBI’s control over commercial banks through computerization.
3. It is a detailed procedure by which a bank with huge non-performing assets is taken over by another bank.
Select the correct answer using the code given below.
(a) 1 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
[I.A.S. (Pre) 2016]
Ans. (a) 1 only
- Core banking is a kind of banking service where customers can access their bank account and do simple tasks from any bank branch that’s part of the network.
- Technology and special software let a bank keep track of everything in one place and let customers access it from anywhere.
- Statements 2 and 3 are wrong, so option (a) is the right answer.
|
146. The Government of India has recently acquired the RBI’s stake in :
(a) NABARD
(b) State Bank of India
(c) Housing Finance Corporation
(d) IDBI
[U.P.P.C.S. (Mains) 2007]
Ans. (b) State Bank of India
- In 2007, the Indian government bought 59.7% of the State Bank of India from the Reserve Bank of India.
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147. Which one of the following banks is under the control of the Reserve Bank of India?
(a) Exim Bank
(b) IDBI
(c) NABARD
(d) Central Bank of India
[U.P.P.C.S. (Pre) 1998]
Ans. (c) NABARD
- NABARD and NHB were both originally under the control of the Reserve Bank of India (RBI).
- RBI slowly sold off their shareholding in two phases.
- They sold 71.5% of their shareholding (Rs. 1430 crore) in October 2010, and their remaining stake in NABARD and their entire stake in NHB (Rs. 20 crore and Rs. 1450 crore) in February and March 2019.
- After this, the Government of India has full control of both institutions.
- This divestment was based on the recommendations of the Narasimham Committee II and a Discussion Paper prepared by RBI.
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148. The National Housing Bank was set up in India as a wholly-owned subsidiary of which one of the following?
(a) State Bank of India
(b) Reserve Bank of India
(c) ICICI Bank
(d) Life Insurance Corporation of India
[I.A.S. (Pre) 2007]
Ans. (b) Reserve Bank of India
- Established on July 9, 1988, the National Housing Bank (NHB) serves as the primary institution for housing in accordance with the NHB Act of 1987.
- Initially, it operated as a fully owned subsidiary of the Reserve Bank of India.
- However, on March 19, 2019, the RBI divested its complete stake, which amounted to 1450 crore.
- As a result, the Government of India now possesses a 100% stake in the NHB.
|
149. ‘Basel III Accord’ or simply ‘Basel III’, often seen in the news, seeks to :
(a) develop national strategies for the conservation and sustainable use of biological diversity.
(b) improve the banking sector’s ability to deal with financial and economic stress and improve risk management.
(c) reduce greenhouse gas emissions but place a heavier burden on developed countries.
(d) transfer technology from developed countries to poor countries to enable them to replace the use of chlorofluorocarbons in refrigeration with harmless chemicals.
[I.A.S. (Pre) 2015]
Ans. (b) improve the banking sector’s ability to deal with financial and economic stress and improve risk management.
- The Basel Committee was created in 1974 by the central bank Governors of the Group of Ten countries in response to banking issues.
- It is based at the Bank for International Settlements in Basel and its goal is to make banking supervision better worldwide.
- The Basel Committee now has 45 members from 28 countries.
- Basel I, II, and III are the accords they have created, the most recent one being Basel III, which was created in 2010 in response to the financial crisis of 2007-09.
- These standards are minimum requirements for internationally active banks and members have to implement them within the time frame set by the committee, which has been extended to 2023 due to the COVID-19 pandemic.
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150. Basel II relates to which one of the following?
(a) International standard for safety in civil aviation
(b) Measures against cyber crimes
(c) Measures against drug abuse by sportspersons
(d) International standards for measuring the adequacy of a bank’s capital
[U.P.P.C.S. (Pre) 2005]
Ans. (d) International standards for measuring the adequacy of a bank’s capital
- In June 1999, the Basel Committee on Banking Supervision introduced a proposal for a new framework on capital adequacy to replace the existing 1988 Accord, commonly referred to as Basel I.
- This proposal eventually resulted in the release of a revised capital framework in June 2004, which is widely known as ‘Basel II’.
- The revised framework consisted of three pillars:
- Minimum capital requirements: These aimed to enhance and expand upon the standardized regulations outlined in the 1988 Accord.
- Supervisory review of capital adequacy and internal assessment process: This pillar emphasizes the importance of regulatory oversight and evaluation of a financial institution’s capital adequacy and internal assessment procedures.
- Effective use of disclosure: This pillar focused on utilizing transparency and disclosure as tools to strengthen market discipline and foster responsible banking practices.
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151. Consider the following statements :
1. Capital Adequacy Ratio (CAR) is the amount that the banks have to maintain in the form of their own funds to offset any loss that banks incur if the account holder fails to repay any dues.
2. CAR is decided by each individual bank.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
[I.A.S. (Pre) 2018]
Ans. (a) 1 only
- Capital Adequacy Ratio is the amount of capital a bank has in comparison to its assets and liabilities that carry risk.
- It is also known as the Capital to Risk (Weighted) Assets Ratio.
- This ratio takes into account credit risk, market risk, and operational risk.
- Central banks and bank regulators decide this ratio so that banks do not take too much risk and become bankrupt.
- The Basel III norms say that the capital to risk-weighted assets should be 8%.
- In India, scheduled commercial banks must maintain a CAR of 9% and public sector banks must maintain a CAR of 12%.
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152. With reference to Deposit Insurance and Credit Guarantee Insurance Corporation, which of the following statements is/are correct?
1. A subsidiary of the Reserve Bank of India.
2. Deposits up to Rs. 5 lakhs are insured by it
Select the correct answer using the codes given below :
Codes :
(a) Only 1
(b) Only 2
(c) Both 1 and 2
(d) Neither 1 nor 2
[U.P. R.O./A.R.O. (Re-Exam) (Pre) 2016]
Ans. (c) Both 1 and 2
- The Deposit Insurance and Credit Guarantee Corporation (DICGC) is owned by the Reserve Bank of India.
- It was created in 1961 to protect and guarantee people’s deposits and credit.
- Starting from February 4, 2020, DICGC insures all bank deposits such as savings, fixed, current, and recurring up to a limit of Rs. 5 lakh per depositor.
- Before this, the limit was Rs. 1 lakh per person.
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153. In India, the interest rate on savings accounts in all the Nationalized Commercial Banks is fixed by:
(a) Union Ministry of Finance
(b) Union Finance Commission
(c) Indian Bank’s Association
(d) None of the above
[I.A.S. (Pre) 2010]
Ans. (d) None of the above
- Before 2011, the Reserve Bank of India set the interest rate on savings accounts in all Nationalized Commercial Banks.
- However, in October 2011, the RBI deregulated this and the interest rate on savings accounts is now determined by the banks themselves, based on the market interest rate.
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154. What is/are the purpose/purposes of the ‘Marginal Cost of Funds Based Lending Rate’ (MCLR) announced by RBI?
1. These guidelines help improve the transparency in the methodology followed by banks for determining the interest rates on advances.
2. These guidelines help ensure the availability of bank credit at interest rates that are fair to the borrowers as well as the banks
Select the correct answer using the code given below :
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
[I.A.S. (Pre) 2016]
Ans. (c) Both 1 and 2
- The Reserve Bank of India (RBI) introduced the ‘Marginal Cost of Funds Lending Rate’ (MCLR) as an internal benchmark used by banks to determine the minimum interest rates applicable to various types of loans.
- Since its implementation on April 1, 2016, banks are not permitted to lend below the MCLR.
- The introduction of MCLR aimed to achieve the following objectives:
- Enhance transparency in the process employed by banks to determine loan interest rates.
- Ensure fairness in credit interest rates for both banks and borrowers.
- Provide a competitive advantage to banks, fostering long-term value and contributing to the economic growth of the country.
- Facilitate the effective transmission of RBI’s policy rates throughout the banking system of the nation.
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155. Consider the following statements related to the Reserve Bank of India (RBI) and choose the correct answer from the codes given below
I. It is the apex bank.
II. It regulates the money supply.
III. It provides loans to business families.
IV. It monitors the work of NABARD.
Codes :
(a) I and II
(b) II and IV
(c) I, II and III
(d) I, II, and IV
[U.P. U.D.A./L.D.A. (Pre) 2001]
Ans. (d) I, II and IV
- The Reserve Bank of India (RBI) is India’s main bank.
- It looks after the money supply and watches the activities of NABARD.
- RBI does not give out loans to businesses or families, so option (d) is the right answer.
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156. Consider the following statements regarding the Reserve Bank of India :
1. It is a banker to the Central Government.
2. It formulates and administers monetary policy.
3. It acts as an agent of the Government with respect to India’s membership of the IMF.
4. It handles the borrowing program of the Government of India.
Which of these statements are correct?
(a) 1 and 2
(b) 2, 3 and 4
(c) 1, 2, 3 and 4
(d) 3 and 4
[I.A.S. (Pre) 2001]
Ans. (c) 1, 2, 3 and 4
- The Reserve Bank of India (RBI) is the Central Bank of India, which was set up on April 1, 1935, according to the RBI Act.
- Its main roles are to act as banker to banks, manage monetary policy, manage debt and cash for the Central and State Governments, manage foreign exchange, regulate and supervise banking and non-banking financial institutions, manage foreign exchange reserves, act as banker to the Central and State Governments, oversee payment and settlement systems, manage currency, take on a developmental role, and do research and statistics.
- The RBI also acts on behalf of the Indian government in regard to its IMF membership.
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157. Who is the Fiscal agent and advisor to the Government in monetary and financial matters?
(a) NABARD
(b) S.B.I.
(c) R.B.I.
(d) None of the above
[U.P. R.O./A.R.O. (Mains) 2017]
Ans. (c) R.B.I.
- The Reserve Bank of India (RBI) is responsible for managing the banking and financial transactions of the government.
- The RBI Act of 1934 requires the government to deposit its money, do remittances, and manage its public debt with the RBI.
- The RBI also provides advice on monetary and banking matters when asked.
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158. Consider the following statements :
1. The Reserve Bank of India manages and services Government of India Securities but not any State Government Securities.
2. Treasury bills are issued by the Government of India and there are no treasury bills issued by the State Governments.
3. Treasury bills offer are issued at a discount from the par value.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 3 only
(c) 2 and 3 only
(d) 1, 2 and 3
[I.A.S. (Pre) 2018]
Ans. (c) 2 and 3 only
- A Government Security (G-Sec) refers to a tradable instrument that is issued by either the Central Government or the State Governments.
- These securities serve as acknowledgments of the government’s debt obligations. G-Secs can be categorized as either short-term, known as treasury bills, with original maturities of less than one year, or long-term, referred to as Government bonds or dated securities, with original maturities of one year or more.
- In India, the Central Government issues both treasury bills and bonds or dated securities, whereas the State Government exclusively issues bonds or dated securities known as State Development Loans (SDLs). Treasury bills, or T-bills, are zero coupon securities that do not pay interest.
- Instead, they are issued at a discount and redeemed at their face value upon maturity.
- For example, a 91-day T-bill with a face value of Rs. 100 may be issued at Rs. 98.50, representing a discount of Rs. 1.50, and would be redeemed at the face value of Rs. 100. Under Section 21A(1)(b) of the Reserve Bank of India Act, 1934, the RBI has the authority to manage the public debt of State Governments by reaching agreements with them.
- As a result, the RBI has entered into agreements with 28 State Governments and three Union Territories (Puducherry, Jammu & Kashmir, and Ladakh) to manage their public debt.
- Therefore, the RBI is responsible for managing and servicing both the Central Government’s G-Secs and the SDLs of these States.
- Based on the given explanation, it is evident that statements 2 and 3 are correct, while statement 1 is incorrect.
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159. Treasury bills are sold in India by :
(a) Reserve Bank of India
(b) State Governments
(c) Commercial Banks
(d) SEBI
[U.P.P.C.S. (Mains) 2009]
Ans. (a) Reserve Bank of India
- The Government of India began issuing Treasury Bills (also known as T-Bills) in 1917.
- T-Bills are a type of financial instrument that is used in the money market.
- The Reserve Bank of India sells these on auction.
- There are three different maturity periods for T-Bills, which are 91 days, 182 days, and 364 days.
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160. With reference to India, consider the following statements:
1. Retail investors through demat accounts can invest in ‘Treasury Bills’ and ‘Government of India Debt Bonds’ in the primary market.
2. The ‘Negotiated Dealing System-Order Matching’ is a government securities trading platform of the Reserve Bank of India.
3. The ‘Central Depository Services Ltd.’ is jointly promoted by the Reserve Bank of India and the Bombay Stock Exchange.
Which of the statements given above is /are correct?
(a) 1 only
(b) 1 and 2
(c) 3 only
(d) 2 and 3
[I.A.S. (Pre) 2021]
Ans. (b) 1 and 2
- The Reserve Bank of India (RBI) introduced the ‘Retail Direct Scheme’ on November 12, 2021, with the objective of providing convenient access for retail (individual) investors to invest in Government Securities (G-Secs).
- This scheme aims to encourage retail participation in G-Secs by offering pricing information to Retail Direct Gilt (RDG) account holders, enabling them to buy and sell securities under the RBI Retail Direct Scheme.
- Therefore, statement 1 is correct. The ‘Negotiated Dealing System – Order Matching’ (NDS-OM) is an electronic order matching system for trading in Government securities.
- It is owned by the RBI and is open for membership to entities such as banks, primary dealers, insurance companies, mutual funds, and others.
- These entities, known as Primary Members (PM) of NDS, are allowed by the RBI to become members of NDS-OM. Gilt account holders who hold an account with the PMs are granted indirect access to the NDS-OM system, meaning they can request their Primary Members to place orders on their behalf.
- Therefore, statement 2 is correct. Central Depository Services Limited (CDSL) was established in 1999 with the goal of providing convenient, reliable, and secure depository services to market participants at an affordable cost.
- Initially promoted by the Bombay Stock Exchange (BSE) Ltd., CDSL later sold its stake to leading commercial banks.
- However, it is important to note that CDSL is not promoted by the RBI.
- Therefore, statement 3 is incorrect.
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161. The Reserve Bank of India does not carry out the transactions of which State Government?
(a) Nagaland
(b) Jammu & Kashmir
(c) Punjab
(d) Assam
[U.P. R.O./A.R.O. (Pre) 2014]
Ans. (b) Jammu & Kashmir
- The RBI is authorized to handle financial transactions for all State Governments, except for the Government of Sikkim, as per the agreement mentioned in Section 21A of the RBI Act, 1934.
- This means that RBI has the right and responsibility to act as a banker for all the State Governments, except the Government of Sikkim.
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162. The Reserve Bank of India regulates the commercial banks in matters of :
1. liquidity of assets
2. branch expansion
3. merger of banks
4. winding -up of banks
Select the correct answer using the codes given below
(a) 1 and 4
(b) 2, 3 and 4
(c) 1, 2 and 3
(d) 1, 2, 3 and 4
[I.A.S. (Pre) 2013]
Ans. (d) 1, 2, 3 and 4
- The Reserve Bank of India (RBI) is responsible for regulating banks and has a lot of power to do this.
- It manages money supply by using tools such as SLR and CRR.
- It also sets the ratio of bank branches in rural and urban areas.
- It works with the Competition Commission of India to control bank mergers and closures.
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163. Which one of the following statements is not correct?
(a) RBI is the Central Bank of the country.
(b) RBI is the banker of the Central and the State Governments.
(c) RBI is the custodian of the country’s Foreign Exchange Reserve.
(d) RBI was established in 1949.
[U.P.P.C.S. (Mains) 2011]
Ans. (d) RBI was established in 1949.
- The Reserve Bank of India (RBI) was established on April 1, 1935, under the Reserve Bank of India Act of 1934.
- Initially headquartered in Kolkata, the central office of the RBI was permanently relocated to Mumbai in 1937.
- While it was originally privately owned, the RBI became fully owned by the Government of India after its nationalization in 1949.
- The RBI carries out several fundamental functions, including:
- Currency issuance: The RBI has exclusive control over the issuance of currency notes, with the exception of the one rupee note, which is issued by the Ministry of Finance.
- Government banking: The RBI serves as the banker to both the State and Central Governments. It provides banking services, offers advice on monetary policy matters, and manages the government’s public debt.
- Banker’s bank: The RBI functions as the “banker’s bank,” performing similar roles to those of commercial banks for their customers.
- Credit regulation: The RBI regulates the flow of money within the country’s financial system. It plays a crucial role in controlling inflation and makes policy decisions to address systemic concerns as necessary.
- Management of foreign exchange reserves: The Central Bank engages in buying and selling foreign currencies to maintain stable foreign exchange rates. It takes appropriate measures as required.
- Developmental role: The RBI undertakes various functions and makes necessary decisions to support the government’s developmental agenda.
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164. Where is the headquarters of RBI located?
(a) Delhi
(b) Kolkata
(c) Mumbai
(d) Chennai
[U.P.P.C.S. (Mains) 2010]
Ans. (c) Mumbai
- The main office of the Reserve Bank of India is in Mumbai, and it has smaller offices in all the state capitals.
- The RBI office in Hyderabad is responsible for Andhra Pradesh and Telangana.
- In addition to Delhi and the state capitals, RBI also has offices in Nagpur, Kanpur, and Kochi.
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165. When was the Reserve Bank of India was established?
(a) 1920
(b) 1930
(c) 1935
(d) 1940
[Uttarakhand P.C.S. (Pre) 2010]
Ans. (c) 1935
- The RBI was founded on April 1, 1935, and is India’s main bank.
- It manages the country’s monetary and banking laws.
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166. The Banker’s Bank is :
(a) AXIS Bank
(b) NABARD
(c) State Bank of India
(d) Reserve Bank of India
[U.P.P.S.C. (GIC) 2010]
Ans. (d) Reserve Bank of India
- In India, the Reserve Bank of India (RBI) is like a bank for all other banks.
- It provides banking services for all the commercial banks in the country.
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167. In India, the central bank’s function as the ‘lender of last resort’ usually refers to which of the following
1. Lending to trade and industry bodies when they fail to borrow from other sources.
2. Providing liquidity to the banks having a temporary crisis.
3. Lending to governments to finance budgetary deficits.
Select the correct answer using the code given below :
(a) 1 and 2
(b) 2 only
(c) 2 and 3
(d) 3 only
[I.A.S. (Pre) 2021]
Ans. (b) 2 only
- The Reserve Bank acts as a bank for other banks and is the ‘lender of the last resort’.
- This means that when a bank is in financial difficulty, but not insolvent, the Reserve Bank will provide it with the money it needs when no other lender is willing to.
- This safety net provided by the Reserve Bank to commercial banks means they will not have to worry about financial difficulties.
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168. Who maintains the foreign exchange reserves in India?
(a) Reserve Bank of India
(b) State Bank of India
(c) Ministry of Finance, Government of India
(d) Export-Import Bank of India
[U.P.P.C.S. (Pre) 2012]
Ans. (a) Reserve Bank of India
- The Reserve Bank acts as the “lender of the last resort” (LoLR) when banks need help.
- This means that if a bank is having money problems, the RBI will provide the bank with extra money so that it can stay afloat.
- This money acts as a safety net and is provided by the RBI if other sources of credit are not available.
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169. Which among the following controls the credit creation by commercial banks in India?
(a) Ministry of Finance
(b) Reserve Bank of India
(c) Indian Government
(d) State Bank of India
[U.P. U.D.A./L.D.A. (Spl.) (Mains) 2010]
Ans. (b) Reserve Bank of India
- The Reserve Bank acts as a bank to other banks, providing them with money as a ‘lender of last resort’ (LoLR) if they are in trouble and cannot get money from anyone else.
- This is a financial safety net provided by the RBI to commercial banks, so they have money when they are in a tight spot.
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170. Which of the following statements is not correct regarding the Reserve Bank of India?
(a) It issues all types of currency notes.
(b) It functions as a branch bank of the Government of India.
(c) It is a banker’s bank.
(d) It exchanges foreign currency.
[U.P.P.C.S. (Pre) 2007]
Ans. (a) It issues all types of currency notes.
- The Reserve Bank of India (RBI) does not make one rupee notes or coins.
- Notes of other denominations are made by the RBI and have the signature of the RBI Governor.
- Before the RBI was created in 1935, the Government of India issued one rupee note with the signature of the Finance Secretary.
- One rupee note was reintroduced in 1940 with the status of a coin and was issued by the Government of India until 1994.
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171. In Indian currency, the one rupee note is issued under the signature of :
(a) Governor of Reserve Bank of India
(b) President of India
(c) Finance Secretary, Ministry of Finance, Govt. of India
(d) Finance Minister, Govt. of India
[U.P. Lower Sub. (Spl.) (Pre) 2004, 48th to 52nd B.P.S.C. (Pre) 2008, Uttarakhand P.C.S. (Pre) 2010]
Ans. (c) Finance Secretary, Ministry of Finance, Govt. of India
- The Reserve Bank of India does not have the authority to issue one rupee notes and coins.
- However, it is responsible for issuing notes of other denominations.
- The one rupee note was previously issued by the Government of India and bore the signature of the Finance Secretary. In contrast, the other notes issued by the RBI bear the signature of the RBI Governor.
- It is important to note that prior to the establishment of the Reserve Bank of India on April 1, 1935, the Government of India was responsible for issuing currency notes.
- During wartime in August 1940, the one rupee note was reintroduced by the Government of India, but it held the status of a coin.
- The Government of India continued to issue the one rupee note until 1994.
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172. Which one of the following is not a function of the Reserve Bank of India?
(a) Credit control
(b) As the apex body of Scheduled Commercial Banks
(c) Formulation of monetary policy
(d) Credit creation
[U.P.P.C.S. (Mains) 2008]
Ans. (d) Credit creation
- Commercial banks create credit, and the Reserve Bank of India (RBI) controls how much credit is created through its monetary policy.
- Other functions of the RBI are also included.
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173. Which of the following is not a function of the Reserve Bank of India?
(a) Regulation of currency
(b) Regulation of foreign trade
(c) Regulation of credit
(d) Custody and management of the country’s foreign exchange reserves.
[Uttarakhand P.C.S. (Pre) 2012]
Ans. (b) Regulation of foreign trade
- The Reserve Bank of India is responsible for issuing currency notes, acting as a banker to banks and the government, controlling credit, and managing and controlling exchange.
- Regulation of foreign trade is not the job of the RBI; instead, it is handled by the Ministry of Commerce and Industry.
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174. The Reserve Bank of India (RBI) acts as a bankers’ bank. This would imply which of the following
1. Other banks retain their deposits with the RBI.
2. The RBI lends funds to the commercial banks in times of need.
3. The RBI advises the commercial banks on monetary matters.
Select the correct answer using the code given below :
(a) 2 and 3
(b) 1 and 2
(c) 1 and 3
(d) 1, 2 and 3
[I.A.S. (Pre) 2012]
Ans. (d) 1, 2 and 3
- The RBI is the official bank of India, responsible for managing the country’s financial system.
- It was created in 1935 according to the Reserve Bank of India Act, 1934.
- The RBI is in charge of the Indian rupee and looks after the Central Government’s finances.
- Additionally, it serves as a bank for other banks and provides advice on monetary matters.
- In times of need, the RBI lends money to commercial banks and holds their deposits.
- It also works with the government to help with developmental projects and policies.
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175. Which of the following Banks is the Central Bank of India?
(a) State Bank of India
(b) Bank of India
(c) Union Bank of India
(d) Reserve Bank of India
[M.P.P.C.S. (Pre) 2012]
Ans. (d) Reserve Bank of India
- The Reserve Bank of India (RBI) is the Central Bank of India, responsible for managing and controlling India’s financial system.
- It was set up in 1935 under the Reserve Bank of India Act, of 1934.
- It is responsible for regulating the Indian currency and looking after the Central Government’s funds.
- The RBI also acts as a bank for the banks, providing advice on monetary matters and lending to commercial banks when necessary.
- Additionally, it supports the government in its development plans and policies.
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176. Monetary Policy is :
(a) Opposed to fiscal policy
(b) Complementary to fiscal policy
(c) More effective during depression
(d) Direct measures to control effective demand
[U.P. R.O. / A.R.O. (Mains) 2016]
Ans. (b) Complementary to fiscal policy
- Monetary and fiscal policy are connected and should be used together to help the economy.
- Monetary policy affects how much money and credit is available, which affects the demand, output, income, and employment.
- Fiscal policy has a direct and delayed impact on the demand.
- Monetary policy is better for fighting inflation, and fiscal policy is better for fighting deflation.
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177. Which one of the following is not an objective of Monetary Policy?
(a) Price Stability
(b) Economic Stability
(c) Equitable Distribution of Income and Assets
(d) Foreign Exchange Rate Stability
[U.P.P.C.S. (Mains) 2011]
Ans. (c) Equitable Distribution of Income and Assets
- Giving out money and possessions in a fair way is not something that monetary policy tries to do.
- The other three goals of monetary policy are different.
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178. Who formulates the monetary policy in India?
(a) SEBI
(b) RBI
(c) Finance Ministry
(d) Planning Commission
[U.P.P.C.S. (Pre) 2006, R.A.S./R.T.S. (Pre) 2010]
Ans. (b) RBI
- In India, the Reserve Bank of India used to decide the monetary policy until 2016.
- Now, the Monetary Policy Committee set up by the Central Government decides the policy interest rate to reach the inflation target.
- The Monetary Policy Department of the RBI helps the MPC make the policy.
- The RBI is responsible for doing monetary policy, which is given in the RBI Act of 1934.
- The main goal of this policy is to keep prices stable while still helping the economy to grow.
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179. Which of the following statements is/are correct regarding the Monetary Policy Committee (MPC)?
1. It decides the RBI’s benchmark interest rates.
2. It is a 12-member body including the Governor of RBI and is reconstituted every year.
3. It functions under the chairmanship of the Union Finance Minister.
Select the correct answer using the code given below :
(a) 1 only
(b) 1 and 2 only
(c) 3 only
(d) 2 and 3 only
[I.A.S. (Pre) 2017]
Ans. (a) 1 only
- The Monetary Policy Committee (MPC) is responsible for deciding the RBI’s benchmark interest rates.
- The MPC consists of 6 members, 3 from the RBI (including the Governor of RBI) and 3 from the Government of India.
- The 3 external members will be appointed for a period of 4 years while the other 3 members are official.
- The Governor of RBI is the leader of the Committee, which means that statement 1 is true.
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180. In India ‘Money and Credit’ is controlled by the :
(a) Central Bank of India
(b) Industrial Development Bank of India
(c) Reserve Bank of India
(d) State Bank of India
[U.P.P.C.S. (Mains) 2010]
Ans. (c) Reserve Bank of India
- In India, the Reserve Bank of India (RBI) manages and regulates money and credit using both numerical and non-numerical methods.
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181. Which one of the following is not an instrument of selective credit control in India?
(a) Regulation of consumer credit
(b) Rationing of credit
(c) Margin requirements
(d) Variable cost reserve ratios
[I.A.S. (Pre) 1995]
Ans. (d) Variable cost reserve ratios
- Out of the provided options, the first three are categorized as selective credit control measures or qualitative credit control measures implemented by the RBI, while the last one is classified as a quantitative credit control measure. Monetary Policy Instruments of RBI
Selective / Qualitative Credit Control Measures Quantitative Credit Control Measures
- Bank Rate 1. Loan Regulations through Fixation of Margin Requirements
- Open Market Operations 2. Consumer Credit Regulations
- Repo Rate 3. Issue of Directives
- Reverse Repo Rate 4. Rationing of Credit
- Marginal Standing Facility 5. Moral Suasion and Publicity
- Variable Reserve Ratios (CRR and SLR) 6. Direct Action
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182. Which one of the following is not the method of quantitative credit control?
(a) Bank rate
(b) Variable Reserve ratio
(c) Open market operation
(d) Rationing of credit
[U.P.P.C.S. (Mains) 2017]
Ans. (d) Rationing of credit
- The Reserve Bank of India (RBI) has four monetary policy measures: three of them are selective credit control or qualitative credit control measures, and the other one is a quantitative credit control measure.
| 1. Bank Rate |
1. Loan Regulations by Fixation of Margin Requirements |
| 2. Open Market Operations |
2. Consumer Credit Regulations |
| 3. Repo Rate |
3. Issue of Directives |
| 4. Reverse Repo Rate |
4. Rationing of Credit |
| 5. Marginal Standing Facility |
5. Moral Suasion and Publicity |
| 6. Variable Reserve Ratios (CRR and SLR) |
6. Direct Action |
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183. Open market operations are included in :
(a) Qualitative techniques of credit control
(b) Quantitative techniques of credit control
(c) Fiscal policy control
(d) Labour policy control
[U.P.P.C.S. (Mains) 2017]
Ans. (b) Quantitative techniques of credit control
- Central banks use open market operations (OMOs) to manage the money in an economy.
- The Federal Reserve uses OMOs to make sure there is the right amount of money in circulation.
- This is done by buying and selling government securities and treasury bills.
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184. With reference to the Indian economy, consider the following :
1. Bank Rate
2. Open market operations
3. Public debt
4. Public revenue
Which of the above is/are component/components is of monetary policy?
(a) 1 only
(b) 2, 3 and 4
(c) 1 and 2
(d) 1, 3 and 4
[I.A. S. (Pre) 2015]
Ans. (c) 1 and 2
- Bank Rate and open market operations (OMOs) are tools used by the government to control the money supply, while public debt and public revenue are related to the government’s budgeting and spending.
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185. Open market operations of the Reserve Bank of India refer to :
(a) trading in securities
(b) auctioning of foreign exchange
(c) transaction in gold
(d) none of the above
[U.P.P.C.S (Pre) 2010, U.P. Lower Sub. (Pre) 2008]
Ans. (a) trading in securities
- The Reserve Bank of India buys and sells government bonds and treasury bills in the open market.
- This is the main way they control the amount of money in the economy.
- To put more money in circulation, they buy government securities and to reduce the money supply, they sell them.
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186. In the context of the Indian economy, ‘Open Market Operations’ refers to :
(a) borrowing by scheduled banks from the RBI
(b) lending by commercial banks to industry and trade
(c) purchase and sale of government securities by the RBI
(d) None of the above.
[I.A.S. (Pre) 2013]
Ans. (c) purchase and sale of government securities by the RBI
- Open market operations involve the government buying and selling bonds and other investments to control the amount of money in the banking system.
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187. Variable reserve rates and Open Market Operations are the means of :
(a) State Finance Policy
(b) Monetary Policy
(c) Budget Policy
(d) Trade Policy
[I.A.S. (Pre) 1993]
Ans. (b) Monetary Policy
- The Reserve Bank of India (RBI) uses variable reserve rates and Open Market Operations (OMOs) to manage the money supply in the economy.
- Variable reserve rates are used to control credit flow, while Open Market Operations involve buying and selling government securities to regulate the money supply.
- Both are quantitative measures of the RBI’s monetary policy to regulate credit.
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188. Given below are two statements, one labelled as Assertion (A) and the other as Reason (R).
Assertion (A): Under Operation Twist, RBI simultaneously sells short-term securities and buys long-term securities.
Reason (R): The main objective of this operation is to promote long-term investment.
Choose the correct answer from the codes given below.
Codes :
(a) Both (A) and (R) are true and (R) is the correct explanation of (A)
(b) Both (A) and (R) are true, but (R) is not the correct explanation of (A)
(c) (A) is true, but (R) is false
(d) (A) is false, but (R) is true
[U.P. R.O./A.R.O. (Re-Exam) (Pre) 2016]
Ans. (a) Both (A) and (R) are true and (R) is the correct explanation of (A)
- The RBI does Operation Twist which is when they buy and sell government securities at the same time.
- This is a way the RBI uses to help lower borrowing costs.
- This program was first used by the Federal Reserves in the US in 1961.
- It is meant to help the economy by making it cheaper to borrow money in the long term.
- The main goal of Operation Twist is to encourage people to invest for the long term.
- Therefore, both statements are true and the second one explains the first one.
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189. Which of the following measures would result in an increase in the money supply in the economy?
1. Purchase of government securities from the public by the Central Bank.
2. Deposit of currency in commercial banks by the public.
3. Borrowing by the government from the Central Bank.
4. Sale of government securities to the public by the Central Bank.
Select the correct answer using the codes given below:
(a) Only 1
(b) 2 and 4
(c) 1 and 3
(d) 2, 3 and 4
[I.A.S. (Pre) 2012]
Ans. (c) 1 and 3
- The RBI (Reserve Bank of India) can increase the amount of money in the economy by buying government bonds.
- It can also increase money by lending to the government.
- On the other hand, when people deposit money into banks or the central bank sells government bonds, this reduces the amount of money in the economy.
- Therefore, option (c) is the correct answer.
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190. Consider the following measures that RBI uses to control inflation in the economy.
1. Increase Bank Rate
2. Increase Cash Reserve Ratio
3. Increase Statutory Liquidity Ratio
4. Purchase of government securities
Select the correct answer from the codes given below :
(a) Only 1 and 2
(b) Only 1, 2 and 3
(c) Only 2, 3 and 4
(d) Only 1, 3 and 4
[U.P. R.O./A.R.O. (Re-Exam) (Pre) 2016]
Ans. (b) Only 1, 2 and 3
- The Reserve Bank of India (RBI) typically uses a few methods to manage inflation.
- These include increasing Bank Rate and Repo Rate (the rates at which banks borrow from the RBI), increasing Cash Reserve Ratio (CRR) and/or Statutory Liquidity Ratio (SLR), and decreasing the interest rate on money banks deposit with the RBI.
- These steps are used as monetary tools by the RBI to limit the amount of credit created and reduce the amount of money in circulation, which helps to reduce inflation.
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191. In the context of the Indian economy, which of the following is/are the purpose/purposes of ‘Statutory Reserve Requirements’?
1. To enable the Central Bank to control the amount of advances the banks can create.
2. To make the people’s deposits with banks safe and liquid.
3. To prevent commercial banks from making excessive profits.
4. To force the banks to have sufficient vault cash to meet their day-to-day requirements.
Select the correct answer using the code given below :
(a) 1 only
(b) 1 and 2 only
(c) 2 and 3 only
(d) 1, 2, 3 and 4
[I.A.S. (Pre) 2014]
Ans. (a) 1 only
- SRR stands for Statutory Reserve Requirements and is a percentage of money that a bank must keep in the form of cash, gold, or other securities.
- It is set by the central bank and is used to control how much credit the bank can give out.
- It is not used for any other purpose.
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192. Which of the following terms indicates a mechanism used by commercial banks for providing credit to the government?
(a) Cash Credit Ratio
(b) Debt Service Obligation
(c) Liquidity Adjustment Facility
(d) Statutory Liquidity Ratio
[I.A.S. (Pre) 2010]
Ans. (d) Statutory Liquidity Ratio
- The government uses the Statutory Liquidity Ratio (SLR) to control the flow of liquidity, credit growth, and inflation in the economy.
- The SLR is the minimum amount of deposits that a commercial bank must keep in the form of cash, gold, or other securities.
- It is not kept with the Reserve Bank of India, but with banks themselves, and the SLR is set by the RBI.
- The SLR helps the government to sell debt instruments to banks.
- In contrast, the Cash Reserve Ratio (CRR) is the percentage of deposits that banks must keep with the RBI, and no interest is paid on this reserve.
- The RBI usually changes the CRR to manage liquidity in the economy, and it is a more active and useful monetary policy tool than the SLR.
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193. When the Reserve Bank of India reduces the Statutory Liquidity Ratio by 50 basis points, which of the following is likely to happen?
(a) India’s GDP growth rate increases drastically
(b) Foreign Institutional Investors may bring more capital into our country.
(c) Scheduled Commercial banks may cut their lending rates.
(d) It may drastically reduce the liquidity of the banking system.
[I.A. S. (Pre) 2015]
Ans. (c) Scheduled Commercial banks may cut their lending rates.
- The Statutory Liquidity Ratio (SLR) is a percentage of money that banks must keep in cash, gold, or other forms of secure investments.
- The RBI (Reserve Bank of India) can reduce this percentage, meaning that banks have more money available to lend to customers.
- When this happens, banks may lower the amount of interest they charge on loans to encourage people to borrow money.
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194. Which of the following is not determined by the Reserve bank of India?
(a) Bank rate
(b) C.R.R.
(c) P.L.R.
(d) S.L.R.
[U.P.P.C.S. (Spl.) (Mains) 2008]
Ans. (c) P.L.R.
- The Reserve Bank of India does not decide the Prime Lending Rate (P.L.R.).
- This is the rate of interest that banks give to their most reliable business customers.
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195. The banks are required to maintain a certain ratio between their cash in hand and total assets. This is called:
(a) SBR (Statutory Bank Ratio)
(b) SLR (Statutory Liquid Ratio)
(c) CBR (Central Bank Reserve)
(d) CLR (Central Liquid Reserve)
[U.P.P.C.S. (Mains) 2007, I.A.S. (Pre) 1998]
Ans. (b) SLR (Statutory Liquid Ratio)
- The Reserve Bank of India does not decide the Prime Lending Rate (P.L.R.).
- This is the rate of interest that banks give to their best customers who are businesses.
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196. The terms ‘Marginal Standing Facility Rate’ and ‘Net Demand and Time Liabilities’, sometimes appearing in news, are used in relation to :
(a) banking operations
(b) communication networking
(c) military strategies
(d) supply and demand of agricultural products
[I.A.S. (Pre) 2014]
Ans. (a) banking operations
- The Marginal Standing Facility (MSF) is a system that lets banks borrow extra money from the Reserve Bank of India by using their Statutory Liquidity Ratio (SLR) funds, up to a certain limit, at a higher rate of interest.
- This is used to help prevent sudden drops in liquidity in the banking system.
- The Bank Rate is linked to the MSF rate, which means it follows any changes in the MSF rate when the policy repo rate changes.
- Net Demand and Time Liabilities (NDTL) is the total amount of demand and time deposits held by banks from the public and other banks.
- NDTL is the difference between the sum of demand and time liabilities of a bank (with the public or other banks) and the deposits in assets held by other banks.
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197. If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do?
1. Cut and optimize the Statutory Liquidity Ratio
2. Increase the Marginal Standing Facility Rate
3. Cut the Bank Rate and Repo Rate
Select the correct answer using the code given below :
(a) 1 and 2 only
(b) 2 only
(c) 1 and 3 only
(d) 1, 2 and 3
[I.A.S. (Pre) 2020]
Ans. (b) 2 only
- The Statutory Liquidity Ratio (SLR) is the minimum amount of deposits that a bank has to keep in the form of cash, gold, or other securities before lending money.
- The Reserve Bank of India (RBI) increases SLR when there is inflation, and decreases it when there is a recession, to increase lending.
- Marginal Standing Facility (MSF) Rate is a way for banks to borrow money from the RBI overnight against government securities.
- Increasing the MSF rate will make borrowing more expensive, which goes against the RBI’s expansionist monetary policy.
- RBI cuts Bank Rate and Repo Rate to increase liquidity, which is part of the RBI’s expansionist monetary policy.
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198. If the interest rate is decreased in an economy, it will :
(a) decrease the consumption expenditure in the economy
(b) increase the tax collection of the Government
(c) increase the investment expenditure in the economy
(d) increase the total savings in the economy
[I.A.S. (Pre) 2014]
Ans. (c) increase the investment expenditure in the economy
- If the interest rate goes down in an economy, it will lead to more people spending and investing.
- This is because when borrowing is easier, more people will use it to buy things or make investments.
- Therefore, option (c) is the right answer.
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199. Financial sector reforms in India consist of :
(a) Lowering down of CRR and SLR
(b) Entry of private firms into the insurance sector
(c) Deregulation of interest rates
(d) All of the above
[56th to 59th B. P. S.C. (Pre) 2015]
Ans. (d) All of the above
- The government has taken steps to reform the banking system, stock market, government debt market, foreign exchange market, etc.
- This includes reducing the Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR), taking away restrictions on deposit and lending interest rates, allowing private companies to enter the banking and insurance sectors, dealing with non-performing assets, and getting rid of direct and selective credit controls.
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200. Since the economic reforms were launched in India, which one of the following statements is true for the Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR) of the commercial banks :
(a) Both SLR and CRR have been raised
(b) SLR has been reduced but CRR has been raised
(c) SLR has been raised but CRR has been reduced
(d) Both SLR and CRR have been reduced
[U.P.P.C.S. (Pre) 1999]
Ans. (d) Both SLR and CRR have been reduced
- The Narsimham Committee suggested that the Reserve Bank of India (RBI) lower the Statutory Liquidity Ratio (SLR) from 38.5% in 1991 to 25% in 1997.
- The Cash Reserve Ratio (CRR) also changed over time, decreasing from 13% in May 1996 to 9% in November 1999.
- As of April 8, 2022, the CRR is at 44% and SLR is at 18%.
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