1. What is the importance of the term ‘Interest Coverage Ratio’ of a firm in India?
1. It helps in understanding the present risk of a firm that a bank is going to give a loan to. 2. It helps in evaluating the emerging risk of a firm that a bank is going to give a loan. 3. The higher a borrowing firm’s level of Interest Coverage Ratio, the worse its ability to service its debt.
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. (a) 1 and 2 only
- The Interest Coverage Ratio (ICR) is a calculation used to see how well a company can pay the interest on its debt. A higher ratio is better and can vary depending on the industry.
- It is also known as the ‘times interest earned ratio’. Creditors, lenders, and investors use this to judge the company’s riskiness when it comes to its current debt and future borrowing.
- Creditors and lenders also look at this ratio to decide how risky it is to lend money to the company.
|
2. What was the purpose of Inter-Creditor Agreement signed by Indian banks and financial institutions recently? (a) To lessen the Government of India’s perennial burden of fiscal deficit and current account deficit (b) To support the infrastructure projects of Central and State Governments (c) To act as independent regulator in case of applications for loans of Rs. 50 crore or more (d) To aim at faster resolution of stressed assets of Rs. 50 crore or more which are-under consortium lending.
[I.A.S. (Pre) 2019] Ans. (d) To aim at faster resolution of stressed assets of Rs. 50 crore or more which are-under consortium lending.
- The government approved the ‘Sashakt’ project, which was suggested by the Sunil Mehta Committee, to help solve the problem of bad loans.
- On July 23, 2018, 22 public sector banks, 19 private sector banks, 32 foreign banks, and 12 major financial institutions (including LIC and HUDCO) signed the Inter-Creditor Agreement (ICA).
- This agreement covers cases of loans worth at least Rs. 50 crore and states that if two thirds of the lenders agree to a resolution plan, then it must be followed by all lenders.
|
3. Which of the following statements best describes the term ‘Scheme for Sustainable Structuring of Stressed Assets (S4A)’, recently seen in the news? (a) It is a procedure for considering ecological costs of developmental schemes formulated by the Government. (b) It is a scheme of RBI for reworking the financial structure of big corporate entities facing genuine difficulties. (c) It is a disinvestment plan of the Government regarding Central Public Sector Undertaking. (d) It is an important provision in ‘The Insolvency and Bankruptcy Code’ recently implemented by the Government.
[I.A.S. (Pre) 2017] Ans. (b) It is a scheme of RBI for reworking the financial structure of big corporate entities facing genuine difficulties.
- The Reserve Bank of India has created a plan called the Scheme for Sustainable Structuring of Stressed Assets (S4A) to help large businesses that are having financial difficulties.
- This plan aims to make it easier for lenders to help companies that are struggling and offers a chance to restructure a company’s finances.
- Under the scheme, a company’s debt will be divided into two parts (sustainable and unsustainable) depending on the company’s cash flow.
|
4. Consider the following statements : ”The Reserve Bank of India’s recent directives relating to ‘Storage of Payment System Data’, popularly known as data diktat, command the payment system providers that” 1. they shall ensure that entire data relating to payment systems operated by them are stored in a system only in India. 2. they shall ensure that the systems are owned and operated by public sector enterprises. 3. they shall submit the consolidated system audit report to the Comptroller and Auditor General of India by the end of the calendar year. Which of the statements given above is/are correct? (a) 1 only (b) 1 and 2 only (c) 3 only (d) 1, 2 and 3
[I.A.S. (Pre) 2019] Ans. (a) 1 only
- The Reserve Bank of India gave orders on April 6, 2018, that all payment system data must be stored within India.
- This includes transaction details and information that is collected, carried, and processed. System providers must submit a report to the Reserve Bank of India by December 31, 2018, that proves they are following the order.
- This rule applies to all payment system providers, not just public sector enterprises.
|
5. Which committee has been constituted by the Government of India to boost cashless transactions? (a) Nachiket More Committee (b) Shanta Kumar Committee (c) H.R. Khan Committee (d) Neeraj Kumar Gupta Committee (e) None of the above/More than one of the above
[60th to 62nd B.P.S.C. (Pre) 2016] Ans. (d) Neeraj Kumar Gupta Committee
- In April 2016, India’s government and the Reserve Bank of India set up the Neeraj Kumar Gupta Committee to help increase cashless payments and lower the use of cash.
- After the demonetization in November 2016, the government set up a new committee, led by the NITI Aayog CEO Amitabh Kant, to create a plan to make India a cashless economy faster.
|
6. Which one of the following best describes the term ‘Merchant Discount Rate’ sometimes seen in news? (a) The incentive given by a bank to a merchant for accepting payments through debit cards pertaining to that bank. (b) The amount paid back by banks to their customers when they use debit cards for financial transactions for purchasing goods or services. (c) The charge to a merchant by a bank for accepting payments from his customers through the bank’s debit cards. (d) The incentive given by the Government to merchants for promoting digital payments by their customers through Point of Sale (PoS) machines and debit cards.
[I.A.S. (Pre) 2018] Ans. (c) The charge to a merchant by a bank for accepting payments from his customers through the bank’s debit cards.
- Banks charge a Merchant Discount Rate (MDR) from merchants for allowing customers to pay with credit and debit cards at their establishments.
- This fee is split between the bank and the merchant and is a percentage of the transaction amount.
- This money goes to the card issuing bank and the company providing the Point of Sale terminal and payment services like MasterCard or Visa.
|
7. Which one of the following links all the ATMs in India? (a) Indian Banks Association (b) National Securities Depository Limited (c) National Payments Corporation of India (d) Reserve Bank of India
[I.A.S. (Pre) 2018] Ans. (c) National Payments Corporation of India
- In 2004, RBI’s Institution for Development and Research in Banking Technology (IDRBT) designed, developed, and released the National Financial Switch (NFS) to connect ATMs across India.
- In December 2009, the National Payments Corporation of India (NPCI) took over NFS. NFS provides the connections to the ATMs in India, so option (c) is the right answer.
|
8. Consider the following statements : 1. National Payments Corporation of India (NPCI) helps promote the financial inclusion in the country. 2. NPCI has launched RuPay, a card payment scheme. 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) 2017] Ans. (c) Both 1 and 2
- The National Payments Corporation of India (NPCI) was created with the help of the RBI to make banking services more accessible to those who may not normally use banks or have access to them.
- This was done by creating better, cheaper and more efficient payment systems in India.
- The NPCI also launched the ‘RuPay’ card payment system in 2012, which helps to make financial services more available to a wider range of people.
|
9. Which of the following is the most likely consequence of implementing the ‘Unified Payments Interface (UPI)’? (a) Mobile wallets will not be necessary for online payments. (b) Digital currency will totally replace the physical currency in about two decades. (c) FDI inflows will drastically increase. (d) Direct transfer of subsidies to poor people will become very effective.
[I.A.S. (Pre) 2017] Ans. (a) Mobile wallets will not be necessary for online payments.
- UPI is a quick, real-time payment system developed by NPCI. It allows people to send or receive money between any two bank accounts using their phones.
- With UPI, mobile wallets won’t be needed for online payments because customers can link their phone number to their bank account using a special app built on the UPI platform.
|
10. With reference to ‘Bitcoins’, sometimes seen in the news, which of the following statements is/are correct? 1. Bitcoins are tracked by the central banks of the countries. 2. Anyone with a Bitcoin address can send and receive Bitcoins from anyone else with a Bitcoin address. 3. Online payments can be sent without either side knowing the identity of the other. Select the correct answer using the code given below : (a) 1 and 2 only (b) 2 and 3 only (c) 3 only (d) 1, 2 and 3
[I.A.S. (Pre) 2016] Ans. (b) 2 and 3 only
- Bitcoin is a form of digital money that was created in January 2009 by an anonymous person called Satoshi Nakamoto.
- It does not come from a bank or government and is the first type of cryptocurrency to use peer-to-peer technology.
- This means that payments can be made between two people without either of them knowing who the other is.
|
11. Consider the following:
1. Currency with the public 2. Demand deposits with banks 3. Time deposits with banks
Which of these are included in Broad Money (M3) in India? (a) 1 and 2 (b) 1 and 3 (c) 2 and 3 (d) 1, 2 and 3 [I.A.S. (Pre) 2002, U.P.P.C.S. (Mains) 2008]
Ans. (d) 1, 2 and 3
- The Reserve Bank of India publishes numbers for 4 different types of money supply, which are M0, M1, M2, and M3. M3 is called BroadMoney.
- M3 includes the amount of money that people have, money in banks, money at the RBI, and money in time deposits of banks. M3 is the sum of M1 and money in time deposits of Commercial banks
|
12. The sum of which of the following constitutes Broad Money in India?
1. Currency with the public 2. Demand deposits with banks 3. Time deposits with banks 4. Other deposits with RBI
Choose the correct answer using the codes given below: (a) 1 and 2 (b) 1, 2 and 3 (c) 1, 2, 3 and 4 (d) 1, 2, and 4 [I.A.S. (Pre) 1997]
Ans. (c) 1, 2, 3 and 4
- The Reserve Bank of India (RBI) releases data on four types of money supply: M0, M1, M2, and M3. M3 is also known as BroadMoney and includes cash held by people, bank demand deposits, RBI deposits, and money kept in commercial banks’ time deposits. M3 is calculated by adding M1 and commercial banks’ time deposits.
|
13. If you withdraw Rs. 1,00,000 in cash from your Demand Deposit Account at your bank, the immediate effect on aggregate money supply in the economy will be: (a) to reduce it by Rs. 1,00,000 (b) to increase it by Rs. 1,00,000 (c) to increase it by more than Rs. 1,00,000 (d) to leave it unchanged
[I.A.S. (Pre) 2020] Ans. (d) to leave it unchanged
- M3 is the main way to measure how much money is available.
- It also is called aggregate money supply, or Broad money.
- If we remove Rs.1,00,000, the Demand deposits part will go down by the same amount, but the amount of money held by people (CU) will go up by Rs.1,00,000.
- This means that the amount of money stays the same.
- Therefore, option (d) is the right answer.
|
14. Consider the following liquid assets :
1. Demand deposits with the banks 2. Time deposits with the banks 3. Savings deposits with the banks 4. Currency
The correct sequence of these assets in the decreasing order of liquidity is- (a) 1-4-3-2 (b) 4-3-2-1 (c) 2-3-1-4 (d) 4-1-3-2 [I.A.S. (Pre) 2013]
Ans. (d) 4-1-3-2
- Money is the most flexible asset since it is the easiest to use for buying and selling.
- Time deposits are the least liquid since they are set for a particular amount of time and cannot be withdrawn until they mature.
- Demand deposits are more liquid than savings deposits because they can be taken out by the owner from the bank anytime.
- Therefore, option (d) is the correct answer.
|
15. The money multiplier in an economy increases with which one of the following? (a) Increase in the Cash Reserve Ratio in the banks (b) Increase in the Statutory Liquidity Ratio in the banks (c) Increase in the banking habit of the people (d) Increase in the population of the country
[I.A.S. (Pre) 2021, I.A.S. (Pre) 2019] Ans. (b) Increase in the Statutory Liquidity Ratio in the banks
- The money multiplier is a ratio that explains how a starting deposit can lead to a larger total of money in circulation. When people put more money in the bank, the banks have more money to lend out, which increases the money multiplier. However, if banks increase their reserve ratios, like Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR), then the money multiplier will decrease – an increase in population does not always mean more deposits, and therefore a higher money multiplier.
|
16. Money multiplier in India is defined as : (a)Broad Money Base Money (b)Broad Money Reserve Money (c) Reserve Money Base Money (d) Base Money Reserve Money
[U.P.P.C.S. (Mains) 2009, U.P.P.C.S. (Spl.) (Mains) 2008] Ans. (b) Broad Money Reserve Money
- In India, the money multiplier is the proportion between the total amount of money (M3) and the amount of money held by the government (M0 or Rm).
- If the money multiplier is K, then K is equal to M3 divided by M0 or Rm.
|
17. What is black money? (a) It is an illegal currency (b) It is a Fake currency (c) It is dirty/bad money (d) It is an illegal income upon which income tax is not paid
[U.P. Lower Sub. (Spl.) (Pre) 2002, 2003] Ans. (d) It is an illegal income upon which income tax is not paid
- Illegal money, such as income from underground activities, is known as black money.
- This money is not reported for tax purposes and is a major issue that can affect a country’s economy.
- Governments often create programs, such as the Voluntary Disclosure of Income Scheme, to try to stop illegal money from circulating.
|
18. Which one of the following effects of creation of black money in India has been the main cause of worry to the Government of India? (a) Diversion of resources to the purchase of real estate and investment in luxury housing (b) Investment in unproductive activities and purchase of precious stones, jewellery, gold, etc. (c) Large donations to political parties and growth of regionalism (d) Loss of revenue to the State Exchequer due to tax evasion
[I.A.S. (Pre) 2021] Ans. (d) Loss of revenue to the State Exchequer due to tax evasion
- Black money is not defined in an exact way in economics or literature. Different words that mean the same thing are used, such as ‘unaccounted income’, ‘dirty money’, ‘underground wealth’, ‘black economy’, and ‘shadow economy’.
- This type of money is income on which taxes have not been paid. Real estate, mining, pharmaceuticals, pan masala, gutkha and tobacco industry, bullion and commodity markets, film industry, educational institutions, and professionals are some of the areas where black money is most common.
- This type of tax evasion is a big issue in India and it reduces the money the government has for welfare schemes.
|
19. Which of the following was not the stated objective of demonetization in India? (a) Reduction in the use of cash in the economy. (b) Increasing in the use of digital modes of transaction. (c) Expanding the tax base. (d) Increasing the growth rate of G.D.P.
[U.P.P.C.S. (Mains) 2017] Ans. (d) Increasing the growth rate of G.D.P.
- On 8 November 2016, India’s government declared that 500 and 1000 rupee banknotes from the Mahatma Gandhi Series were no longer valid.
- The main reason for this was to reduce the amount of black money, which is money made through corruption, illegal activities, or not taxed.
- Other goals included getting more people to pay taxes, using digital payments more often, taking away money from terrorists and radical groups, and linking the formal and informal economies.
|
20. Paper currency was first started in India in : (a) 1862 (b) 1542 (c) 1601 (d) 1880
[U.P.P.C.S. (Mains) 2011] Ans. (a) 1862
- Paper money, like what we use today, began in the late 1700s when private and semi-government banks (the Bank of Bengal, the Bank of Bombay and the Bank of Madras) started to issue their own money. In 1861, the government took over and began printing its own paper money.
- The first paper money issued by the government was in 1862.
|
21. When did the ‘Naya paisa’ introduced with the decimal system of coinage become, paisa? (a) April 1, 1957 (b) April 1, 1965 (c) June 1, 1964 (d) October 2, 1961
[Uttarakhand P.C.S. (Pre) 2005] Ans. (c) June 1, 1964
- In India, the paisa coins were first used on April 1, 1957 when the Indian rupee was changed to a decimal system. From 1957 to 1964, these coins were called “Naya paisa”.
- On June 1, 1964, the word “Naya” was removed and the coins were just called “paisa”.
|
22. In India, the decimal coinage system was introduced in the year : (a) 1951 (b) 1955 (c) 1957 (d) 1960
[U.P.P.C.S. (Mains) 2010, U.P.P.C.S. (Mains) 2005, U.P.P.C.S. (Pre) 1995] Ans. (c) 1957
- In India, the decimal system of money (paisa) was first started on April 1st, 1957.
- From 1957 to 1964, the paisa was called Naya Paisa, and from June 1st, 1964, the Naya was taken away and the money was just called paisa.
|
23. Which one of the following statements correctly describes the meaning of legal tender money? (a) The money which is tendered in courts of law to defray the fee of legal cases (b) The money which a creditor is under compulsion to accept in settlement of his claims (c) The bank money in the form of cheques, drafts, bills of exchange, etc. (d) The metallic money in circulation in a country
[I.A.S. (Pre) 2018] Ans. (b) The money which a creditor is under compulsion to accept in settlement of his claims
- Legal tender is money that is required to be accepted by law in order to pay off a debt or fulfill an obligation. This includes coins, banknotes, and in some cases, even taxes.
- In India, coins are accepted up to a certain value, while any amount of banknotes can be used.
- The government and reserve bank guarantee that all banknotes issued are legal tender.
- However, the 500 and 1000 rupee notes from the Mahatma Gandhi series are no longer accepted.
|
24. The Reserve Bank of India has the power to print currency notes of Rupees up to: (a) Rs. 10,000 (b) Rs. 5,000 (c) Rs. 15,000 (d) Rs. 1,000
[U.P.P.S.C. (R.I.) 2014] Ans. (a) Rs. 10,000
- The Reserve Bank of India can make money in bills up to 10,000 rupees.
- Right now, the RBI has bills in the amounts of 10, 20, 50, 100, 200, 500 and 2000 rupees.
|
25. Note issuing department of RBI should always possess the minimum gold stock of worth : (a) Rs 85 crore (b) Rs 115 crore (c) Rs 200 crore (d) None of the above
[U.P. Lower Sub. (Pre) 2008] Ans. (b) Rs 115 crore
- The Reserve Bank of India set up a system of note issuing based on the proportional reserve system.
- This was changed in 1956 to a system which required a minimum of Rs. 400 crore in foreign securities and Rs. 115 crore in gold coin and bullion, for a total of Rs. 515 crore.
- The Reserve Bank (Second Amendment) Act, 1957 then said that the total of gold, bullion and foreign securities must never go below Rs. 200 crore, with the value of gold and bullion never going under Rs. 115 crore.
- Nothing has changed since then.
|
26. In India ‘Currency Notes issue system’ is based on : (a) Proportional reserve system (b) Minimum reserve system (c) Fixed exchange rate system (d) Full convertibility system
[U.P.P.S.C. (GIC) 2010, U.P.P.C.S. (Mains) 2004, 2007] Ans. (b) Minimum reserve system
- In 1956, the Reserve Bank of India changed the way they issued money, from the proportional reserve system to the Minimum Reserve System which required them to hold a minimum of Rs. 400 crore in foreign securities and Rs. 115 crore in gold coin and bullion (totalling Rs. 515 crore).
- The Reserve Bank (Second Amendment) Act of 1957 then said that they had to have at least Rs. 200 crore in gold coin, gold bullion and foreign securities at all times, with Rs. 115 crore of that being gold coin and bullion.
- This has not been changed since then.
|
27. Reserve Bank of India issues currency notes against which of the following? (a) Gold (b) Foreign security (c) Govt. of India security (d) All of the above
[M.P.P.C.S. (Pre) 2012] Ans. (d) All of the above
- The Reserve Bank of India (RBI) prints banknotes that are supported by things like gold, government bonds, and foreign currency reserves, according to section 33 of the RBI Act of 1934.
|
28. Who is authorized to issue coins in India ? (a) Reserve Bank of India (b) Ministry of Finance (c) State Bank of India (d) National Stock Market
[U.P. U.D.A./L.D.A. (Spl.) (Pre) 2010] Ans. (b) Ministry of Finance
- The Indian Government (Ministry of Finance) produces coins and supplies them to the Reserve Bank when needed.
- The Reserve Bank then passes the coins out into circulation for the Central Government.
- There are four mints in India where the coins are made: Mumbai, Noida, Kolkata, and Hyderabad.
- The Reserve Bank is responsible for the distribution, issue, and management of the coins.
|
29. Coins are minted in India at : (a) Delhi, Mumbai and Kolkata (b) Delhi, Kolkata and Hyderabad (c) Mumbai, Delhi and Bangalore (d) Mumbai, Kolkata and Hyderabad
[U.P. P.C.S. (Mains) 2008] Ans. (d) Mumbai, Kolkata and Hyderabad
- The Government of India is responsible for making coins and provides them to the Reserve Bank when asked.
- The Reserve Bank then distributes and exchanges the coins on the central government’s behalf.
- Coins are made at four different mints in Mumbai, Noida, Kolkata, and Hyderabad.
|
30. Currency expansion can be best described as – (a) Higher prices (b) Increase in price coordinates (c) Increase in purchasing power of currency (d) Increase in prices of specific commodities
[R.A.S./R.T.S. (Pre) 1996] Ans. (a) Higher prices
- The amount of money available has gone up, which causes the worth of money to decrease.
- This in turn causes prices of things to get higher.
|
31. With reference to Indian economy, demand-pull inflation can be caused/increased by which of the following?
1. Expansionary policies 2. Fiscal stimulus 3. Inflation-indexing wages 4. Higher purchasing power 5. Rising interest rates
Select the correct answer using the code given below. (a) 1, 2 and 4 only (b) 3, 4 and 5 only (c) 1, 2, 3 and 5 only (d) 1, 2, 3, 4, and 5 [I.A.S. (Pre) 2021]
Ans. (a) 1, 2 and 4 only
- Demand-pull inflation happens when people are trying to buy more than what is available.
- This can happen because of an increase in money supply or when people are spending more money and/or the government is increasing spending or cutting taxes (fiscal policy).
- A fiscal stimulus is when the government gives tax rebates and incentives to increase money supply and try to help the economy.
- Inflation-indexing wages does not lead to demand-pull inflation because wages are adjusted with inflation.
- Higher purchasing power can lead to demand-pull inflation because people have more money to spend.
- Rising of interest rates cannot lead to demand-pull inflation because it reduces money supply.
|
32. Due to inflation : (a) Prices of goods increase (b) The value of money falls (c) The exchange rate improves (d) Above (a) and (b) (e) Above (a), (b) and (c)
[Chhattisgarh P.C.S. (Pre) 2013] Ans. (d) Above (a) and (b)
- Inflation means that the cost of things and the services we use go up and the value of a currency goes down.
- This makes the Indian rupee worth less compared to other currencies and affects the exchange rate.
|
33. Which of the following is/are definite implication(s) of a fall in inflation rate :
I. Prices have fallen. II. Prices are increasing more slowly than before. III. Food supply has increased. IV. There is industrial stagnation.
Select the correct answer from the codes given below : Codes : (a) I and III (b) I only (c) II only (d) I, III and IV [U.P.P.C.S. (Mains) 2017]
Ans. (c) II only
- Inflation is when prices go up, and it is measured by the inflation rate which is the percentage change in a general price index from year to year.
- If the inflation rate is lower this year than it was last year, it means prices are still increasing, but not as quickly.
- Deflation means prices are decreasing compared to the previous year, and this can be caused by things like an increase in food supply.
|
34. Who amongst the following benefits most from inflation : (a) Creditors (b) Debtors (c) Savings Account holders (d) Government pensioners
[U.P.P.C.S. (Pre) 1995] Ans. (b) Debtors
- Inflation causes prices to go up and the value of money to go down.
- This gives borrowers an advantage while creditors are at a disadvantage.
- People who have changeable incomes, like debtors, producers, traders, and farmers, benefit from this. Meanwhile, consumers, creditors, and moneylenders are losing out.
- Expenses, imports, employment, and taxes all increase, while savings and exports go down.
|
35. Inflation is beneficial to which of the following section of economy? (a) Creditors (b) Investors in bonds and securities (c) Debtors (d) Consumers
[U.P. R.O. / A.R.O. (Mains) 2016] Ans. (c) Debtors
- During inflation, prices of goods and services go up and the value of money goes down.
- This means that people who borrowed money can pay it back with money that is worth less than when they borrowed it, which helps them.
- However, creditors (people who lent money) lose out since their money is worth less. Investors with fixed interest rates, consumers, and pensioners also lose money in real terms.
|
36. Consider the following statements : 1. Inflation benefits the debtors. 2. Inflation benefits the bondholders. Which of the statements given above is/are correct? (a) Only 1 (b) Only 2 (c) Both 1 and 2 (d) Neither 1 nor 2
[I.A.S. (Pre) 2013] Ans. (a) Only 1
- Inflation is characterized by a widespread rise in the prices of goods and services, accompanied by a decrease in the purchasing power of money.
- One consequence of inflation is that debtors, or borrowers, are able to repay their creditors, or lenders, with money that has diminished in value since the time it was borrowed.
- This situation benefits debtors as it effectively redistributes real wealth in their favor, albeit at the expense of creditors.
- However, inflation also negatively impacts various other groups, including investors in fixed-interest bonds and securities, consumers, and pensioners, as their real wealth is eroded.
|
37. A zero rate of inflation obtains necessarily in a year where the annual rate of inflation : (a) in every week of the year is zero (b) is falling in every week of the year (c) is both falling and rising in a year (d) is constant in every week of the year
[I.A.S. (Pre) 1993] Ans. (a) in every week of the year is zero
- If the prices of goods increase by 5 percent in a certain week of a month compared to the same week of the same month the year before, this is known as a 5 percent inflation.
- It is measured week by week, so in order to have no inflation the annual rate of inflation in each week of the year must be 0.
|
38. Assertion (A): The rate of inflation in India has come down in the last three years. Reason (R): Foreign investment in the country is increasing rapidly during these years. Select 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.P.C.S. (Pre) 1998] Ans. (c) A is true, but R is false
- The inflation rate was 10.9% in 1994-95 and decreased to 4.8% in 1997-98.
- Statement (1) is correct.
- India received 4807 million US Dollars in foreign investment in 1994-95 and only slightly more (5353 million US Dollars) in 1997-98. Therefore, Statement (2) is incorrect.
|
39. Which one of the following statements is an appropriate description of deflation? (a) It is a sudden fall in the value of a currency against other currencies. (b) It is persistent recession in both the financial and real sectors of economy. (c) It is a persistent fall in the general price level of goods and services. (d) It is a fall in the rate of inflation over a period of time.
[I.A.S. (Pre) 2010] Ans. (c) It is a persistent fall in the general price level of goods and services.
- Inflation means prices going up in a country. Deflation means prices going down in a country, which is the opposite of inflation.
|
40. A rapid increase in the rate of inflation is sometimes attributed to the ‘base effect’. What is ‘base effect’? (a) It is the impact of drastic deficiency in supply due to failure of crops (b) It is the impact of the surge in demand due to rapid economic growth (c) It is the impact of the price levels of previous year on the calculation of inflation rate (d) None of the statements (a), (b), (c) given above is correct in this context.
[I.A.S. (Pre) 2011] Ans. (c) It is the impact of the price levels of previous year on the calculation of inflation rate
- Base effect is a type of statistical oddity that can lead to a sharp increase or decrease in the rate of change in prices.
- This happens because the current prices are compared to the prices from the previous period.
- For example, if something cost a low price last year and has returned to its normal price this year, the rate of change, when compared to last year, will still look high.
|
41. Which one of the following governmental steps has proved relatively effective in controlling the double digit rate of inflation in the Indian economy in the recent years? (a) Enhanced rate of production of all consumer goods (b) Streamlining public distribution system (c) Pursuing an export-oriented strategy (d) Containing budgetary deficit and unproductive expenditure
[I.A.S. (Pre) 1994] Ans. (d) Containing budgetary deficit and unproductive expenditure
- In the years 1990-91 and 1992-93, the government was spending too much without making any profits – this was 3.3% of the Gross Domestic Product (GDP).
- This reduced to 2.5% of GDP, meaning they were spending less without making any profits.
- The total amount of spending without making any profits (called the budgetary deficit) decreased too, since the revenue deficit was lower.
- This concept of budgetary deficit was stopped in 1997-98.
|
42. Given below are two statements one is labelled as Assertion (A) and other as Reason (R) : Assertion (A): The government faces a tough time tackling the bottleneck inflation. Reason (R): The situation is due to deficiencies existing in the economy such as supply bottleneck and inefficient distribution. Select the correct answer from the codes given below. Codes : (a) Both (A) and (R) are true and (R) is correct explanation of (A) (b) Both (A) and (R) are true, but (R) is not correct explanation of (A) (c) (A) is true, but (R) is false (d) (A) is false, but (R) is true
[U.P.P.C.S. (Pre) 2021] Ans. (a) Both (A) and (R) are true and (R) is correct explanation of (A)
- When there is a big decrease in supply but demand stays the same, it causes an increase in prices.
- This happens when there are problems with the way supplies are managed, distributed or when unfortunate accidents happen.
- The government has a hard time dealing with this kind of inflation.
- Both the statement and its explanation are true.
|
43. Core inflation is defined as : (a) Headline inflation excluding only fuel inflation. (b) Food inflation and fuel inflation. (c) Headline inflation excluding only food inflation. (d) Headline inflation excluding both food inflation and fuel inflation.
[U.P.P.C.S. (Mains) 2017] Ans. (d) Headline inflation excluding both food inflation and fuel inflation.
- Core inflation shows how much prices are increasing or decreasing over a long period of time.
- To figure out this trend, prices that change quickly (such as food and fuel) should not be included.
- This means core inflation is the rate of inflation calculated without taking food and fuel prices into account.
|
44. Tick mark which is incorrect about inflation : (a) Inflation indicates the rise in the price of a basket of commodities on a point-to-point basis. (b) The inflation rate in India is calculated on the basis of the wholesale price index. (c) For some commodities retail price are also considered for measurement of inflation. (d) Inflation rate going down does not mean prices are declining.
[R.A.S./R.T.S.(Pre) 2008] Ans. (b) The inflation rate in India is calculated on the basis of the wholesale price index.
- Option (c) was the right answer before, but now option (b) is the correct one.
- In India, there are two main indices to measure inflation – the Consumer Price Index (CPI) and the Wholesale Price Index (WPI).
- WPI was the main index for inflation in India until April 2014 when the Reserve Bank of India (RBI) switched to using the new CPI (Combined).
- WPI is based on wholesale prices, administered prices, and ex-factory prices for primary articles, fuel, and manufactured products, respectively.
- The CPI, however, is based on retail prices and focuses on the change in the general level of prices for goods and services bought by households for consumption.
|
45. On what basis is the inflation rate measured in India? (a) Consumer Price Index (b) Wholesale Price Index (c) Labour Cost of Living index (d) All of the above
[Jharkhand P.C.S. (Pre) 2011] Ans. (d) All of the above
- In India, inflation is usually checked using the Consumer Price Index (CPI), Wholesale Price Index (WPI), and Labour Cost of Living Index.
- Currently, the Reserve Bank of India (RBI) is using the Consumer Price Index (CPI) (Combined) to measure inflation.
|
46. The most common measure of estimating inflation in India is : (a) Price Index (b) Wholesale Price Index (c) Consumer Price Index (d) Price Index of Industrial Goods
[I.A.S. (Pre) 1997, U.P.P.C.S.(Pre) 2012, U.P.P.C.S. (Mains) 2008, U.P. Lower Sub. (Spl) (Pre) 2004] Ans. (c) Consumer Price Index
- Right now, the Reserve Bank of India (RBI) uses the Consumer Price Index (CPI) to measure overall inflation.
- The base year for this index is 2011-12. Before April 2014, the Wholesale Price Index (WPI) was used to measure inflation in India, but now the RBI is using the new CPI (combined) as the key measure of inflation.
|
47. In India, headline inflation is based on : (a) Consumer Price Index-Combined (CPI-C) (b) Consumer Food Price Index (CFPI) (c) Consumer Price Index – Rural Labourers (CPI-RL) (d) Wholesale Price Index (WPI)
[Jharkhand P.C.S. (Pre) 2021] Ans. (a) Consumer Price Index-Combined (CPI-C)
- Currently, the Reserve Bank of India (RBI) utilizes the Consumer Price Index (CPI) (Combined) as the primary metric to gauge headline inflation.
- The base year for this index is 2011-12, which has been in effect since April 2017.
- Prior to April 2014, the Wholesale Price Index (WPI) served as the main indicator of inflation in India.
- However, the RBI transitioned to the new CPI (combined) as the key measure of inflation during that time.
|
48. Headline inflation refers to the change in value of all goods on the basket. On which basis is the headline inflation measured? (a) Wholesale Price Index (b) Consumer Price Index for Industrial Worker (c) Combined Consumer Price Index (d) Urban Consumer Price Index
[U.P.P.C.S. (Pre) 2021] Ans. (c) Combined Consumer Price Index
- Currently, the Reserve Bank of India (RBI) uses the Consumer Price Index (CPI) to measure inflation.
- This index has a base year of 2011-12 and has been used since April 2017.
- Before this, the Wholesale Price Index (WPI) was used to measure inflation in India until April 2014 when the RBI switched to the new CPI.
|
49. In India, inflation is measured by the : (a) Wholesale Price Index Number (b) Consumer Price Index for urban non-manual workers (c) Consumer Price Index for agricultural labourers (d) National Income Deflator
[R.A.S./R.T.S.(Pre) 2013] Ans. (a) Wholesale Price Index Number
- As per the question period option (a) was the correct answer. See the explanation of above question.
|
50. Which of the following fixed the four percent inflation target in India with tolerance level of + / – 2 percent for the period 2016 to 2021? (a) Reserve Bank of India (b) Government of India (c) NITI Aayog (d) Fourteenth Finance Commission
[R.A.S./R.T.S. (Pre) 2018] Ans. (b) Government of India
- In 2016, the RBI Act was changed to officially allow the Government of India to set an inflation target with a tolerance level of + / -2 percent for the next five years.
- Before this change, an agreement between the Government and the RBI set the inflation target of 4 percent based on the Consumer Price Index.
|
51. The annual rate of inflation in India during the 1991 calendar year based on the monthly average of the Wholesale Price Index was : (a) 12.7³ (b) 13.5³ (c) 14.2³ (d) 14.5³
[R.A.S./R.T.S. (Pre) 1992] Ans. (a) 12.7³
- The value of the Indian rupee has been decreasing over the last few years, which has caused the prices of goods and services to go up. In 1991, the average inflation rate (the rate at which prices increased) was 12.7%.
- In recent years, the inflation rate has been 4.3% in 2018-19, 1.7% in 2019-20, and even decreased 0.1% in 2020-21.
|
52. Consider the following statements: 1. The weightage of food in Consumer Price Index (CPI) is higher than that in Wholesale Price Index (WPI). 2. The WPI does not capture changes in the prices of services, which CPI does. 3. Reserve Bank of India has now adopted WPI as its key measure of Inflation and to decide on changing the key policy rates. Which of the statements given above is/are correct? (a) 1 and 2 only (b) 2 only (c) 3 only (d) 1, 2 and 3 only
[I.A.S. (Pre) 2020] Ans. (a) 1 and 2 only
- The Consumer Price Index (CPI), also known as the cost of living index, looks at how much the average prices of goods and services have changed.
- Food makes up a large part of the CPI (45.86%) while it only makes up 24.4% of the Wholesale Price Index (WPI). WPI does not include services, but CPI does.
- The RBI switched to using CPI (Combined) as its main measure of inflation and to decide on changing the key policy rates since April 1, 2014.
|
53. Consider the following statements with respect to Consumer Price Index and select the correct answer from the codes given below : 1. It computes price changes in both goods and services. 2. It is computed by the Office of Economic Advisor (OEA), Department of Industrial Policy and Promotion. 3. It is taken as the measure of inflation while formulating Monetary Policy by RBI. Codes : (a) 1 and 2 (b) 2 and 3 (c) 1 and 3 (d) Only 1
[U.P.B.E.O. (Pre) 2019] Ans. (c) 1 and 3
- The Consumer Price Index (CPI) measures changes in the prices of a group of goods and services that households typically purchase for consumption.
- In India, there are three types of CPIs – for Industrial Workers, Agricultural Labourers and Rural Labourers – which are compiled by the Labour Bureau. The National Statistical Office (NSO) computes CPI (Urban), CPI (Rural) and CPI (Combined; Urban + Rural), which is used by the RBI to set Monetary Policy.
- Wholesale Price Index (WPI) is computed and released by the Office of Economic Advisor (OEA) in the Department for Promotion of Industry and Internal Trade.
|
54. Consider the following consumer price index :
I. Consumer Price Index for Industrial Workers. II. Consumer Price Index for Agricultural Labourers. III. Consumer Price Index for Rural Workers. IV. Consumer Price Index for Urban Non-Manual Employees.
In the given indexes, which is/are compiled by Central Statistics Office (CSO)? (a) Only III and IV (b) Only I, II and III (c) Only IV (d) I, II, III and IV [56th to 59th B. P. S.C. (Pre) 2015]
Ans. (*)
- Labour Bureau in the Ministry of Labour and Employment creates CPI-IW, CPI-AL, and CPI-RL indexes. Previously, CSO was in charge of creating CPI-UNME, but this was stopped in April 2008.
- Now, NSO in the Ministry of Statistics and Programme Implementation handles CPI-Urban and CPI-Rural (as well as CPI-Combined) Indexes.
|
55. Which of the following brings out the ‘Consumer Price Index Number for Industrial Workers’? (a) The Reserve Bank of India (b) The Department of Economic Affairs (c) The Labour Bureau (d) The Department of Personnel and Training
[I.A.S. (Pre) 2010] Ans. (c) The Labour Bureau
- The Labour Bureau in the Ministry of Labour and Employment calculates the CPI-IW, CPI-AL and CPI-RL.
- The National Statistical Office in the Ministry of Statistics and Programme Implementation calculates the CPI-Urban and CPIRural (and CPI-Combined) Indexes.
- The CPI-UNME was calculated by the CSO but this was stopped in April 2008.
|
56. The base of the Consumer Price Index for industrial workers has been shifted from 1982 to : (a) 2002 (b) 2001 (c) 2000 (d) 1998
[U.P.P.C.S. (Mains) 2008] Ans. (b) 2001
- The Consumer Price Index for Industrial Workers (CPI-IW) is made by the Labour Bureau, which is part of the Ministry of Labour and Employment.
- This Index was updated in October 2020 to adjust to changes in what people buy.
- It was first created in 1960 with the results of the 1958-59 Family Living Survey, then updated in 1988 and again in 1999-2000, so that the base year is now 2001.
|
57. Industrial Consumer Price Index year 1960 was changed to which base year? (a) 1971 (b) 1980 (c) 1982 (d) 1990
[U.P.P.C.S. (Pre) 1990] Ans. (c) 1982
- The Labour Bureau, which is part of the Ministry of Labour and Employment, compiles the Consumer Price Index for Industrial Workers (CPI-IW).
- This index was first created in 1960, with a base year of 100, based on a survey taken in 1958-59. In October 2020, the base year was changed from 2001 to 2016 to show changes in consumption.
- The index was also updated in 1988 and 1999-2000.
|
58. Which of the following price index is used to compensate the wages of Central Government employees? (a) Wholesale Price Index (b) Consumer Price Index for Industrial Workers (c) Consumer Price Index for Agricultural Labourers (d) None of the above
[U.P.U.D.A./L.D.A. (Pre) 2001] Ans. (b) Consumer Price Index for Industrial Workers
- The CPI-IW is used to adjust the wages of central government workers.
- It is said that WPI inflation may not be the best way to show the impact of rising prices on the everyday person. Instead, CPI-IW, which takes into account services and is based on retail prices, is often used to calculate the allowance for both public and private sector employees.
- Food items are given more importance in CPI-IW than in WPI.
|
59. The basis of determining dearness allowances to employees of India is : (a) National Income (b) Consumer Price Index (c) Standard of Living (d) Per Capita Income
[Uttarakhand U.D.A./L.D.A. (Pre) 2007, U.P.P.C.S. (Mains) 2008, U.P. Lower Sub. (Pre) 2008] Ans. (b) Consumer Price Index
- In India, the Consumer Price Index for Industrial Workers (CPIIW) is used to measure how much prices have increased (inflation) and to calculate the extra money (dearness allowances) that employees and industrial workers
|
60. Which of the following Institution/Office bring out the Wholesale Price Index (WPI) data in India? (a) The Reserve Bank of India (b) The Ministry of Commerce and Industry (c) The Ministry of Finance (d) The Ministry of Consumer Affairs Food and Public Distribution
[U.P.P.C.S. (Pre) 2021] Ans. (b) The Ministry of Commerce and Industry
- The Wholesale Price Index (WPI) is made up by the Office of Economic Adviser (OEA) in the Ministry of Commerce and Industry every week.
- The information is gathered from official and non-official sources about the prices of certain items and products.
- The Wholesale Price Index is currently based on the year 2011-12.
|
61. With reference to the Wholesale Price Index (WPI), consider the following statements:
1. The new WPI series with base year 1993-94 = 100 became effective from April 1998. 2. In the new WPI series, the weight for primary articles has gone down by 10 percentage points. 3. The weight for electricity has increased in the new WPI series.
Which of these statements are correct? (a) 1, 2 and 3 (b) 2 and 3 (c) 1 and 3 (d) 1 and 2 [I.A.S. (Pre) 2002]
Ans. (b) 2 and 3
- In April 2000, a new Wholesale Price Index (WPI) series, with a base of 1993-94 = 100, was released – not in April 1998, which means that Statement 1 is incorrect and Statements 2 and 3 were correct.
- On May 12th, 2017, the base year for WPI was changed from 2004-05 to 2011-12. In the new WPI basket, the weight of primary articles is 22.6%, fuel and power is 13.2%, and manufactured products is 64.2%.
|
62. In calculation of Index of wholesale prices which one of the following sectors is assigned maximum weightage ? (a) Food articles (b) Non-food articles (c) Fuel, power, light and Iubricants (d) Manufactured products
[U.P.P.C.S. (Mains) 2008] Ans. (d) Manufactured products
- In April 2000, a new WPI series with a base of 1993-94 = 100 was released, not in April 1998, which means Statement 1 is wrong but Statements 2 and 3 are correct.
- On 12 May 2017, the base year of the WPI changed from 2004-05 to 2011-12. In the new WPI, 22.6% of the basket is made up of primary articles, 13.2% is fuel and power, and the remaining 64.2% consists of manufactured products.
|
63. The new WPI series was introduced on : (a) 1 April, 2010 (b) 1 July, 2010 (c) 15 August, 2010 (d) 14 September, 2010
[U.P.P.C.S. (Mains) 2009] Ans. (d) 14 September, 2010
- The Wholesale Price Index (WPI) was released in 2010 with the base year of 2004-05. In 2017, it was changed to 2011-12, starting in April.
|
64. The base year for All-India Wholesale Price Index (WPI) has been changed by the Government of India from 2004-05 to : (a) 2010-11 (b) 2011-12 (c) 2012-13 (d) 2013-14 (e) None of the above/More than one of the above
[63rd B.P.S.C. (Pre) 2017] Ans. (b) 2011-12
- The Wholesale Price Index (WPI) was first introduced in 2010, with the base year of 2004-05.
- However, it got revised in 2017, and the new base year became 2011-12.
|
65. On which date was the new Wholesale Price Index with 2004-05 as the base year released ? (a) 14 September, 2010 (b) 2 October, 2010 (c) 1 January, 2011 (d) 1 April, 2011
[U.P.P.C.S. (Mains) 2011] Ans. (a) 14 September, 2010
- In 2010, a new Wholesale Price Index (WPI) was released with 2004-05 as its base year.
- However, on May 12, 2017, the base year was changed from 2004-05 to 2011-12, effective from April 2017.
|
66. The new series of Wholesale Price Index (WPI) released by the Government of India is with reference to the base prices of: (a) 1981-82 (b) 1990-91 (c) 1993-94 (d) 1994-95
[I.A.S. (Pre) 2001] Ans. (c) 1993-94
- The Indian Government recently changed the base year of their Wholesale Price Index (WPI) from 1981-82 to 1993-94.
- Currently, the WPI uses 2011-12 as its base year.
|
67. In October 2009, a decision has been taken that the base year of Wholesale Price Index (WPI) has been shifted from 1993-94 to : (a) 2001-2002 (b) 2002-2003 (c) 2003-2004 (d) 2004-2005
[U.P.P.C.S. (Pre) 2009] Ans. (d) 2004-2005
- On October 19th, 2009, CCEA made the decision to change the base year of WPI from 1993-94 to 2004-05 and produce data every month.
- This WPI series was suggested by the Abhijit Sen Committee.
|
68. With reference to India, consider the following statements: 1. The Wholesale Price Index (WPI) in India is available on a monthly basis only. 2. As compared to Consumer Price Index for Industrial Workers [CPI (IW)] the WPI gives less weight to food articles. 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. (c) Both 1 and 2
- In 2009, the government stopped releasing weekly inflation data from the Wholesale Price Index.
- They continued to do this for Primary Articles and Fuel & Power until 2012.
- This means that statement 1 was wrong at that time, but it is correct now since WPI only comes out on a monthly basis.
- Statement 2 is also correct because the WPI puts less emphasis on food than the Consumer Price Index for Industrial Workers.
- Therefore, option c is the correct answer.
|
69. The current price index (base 1960) is nearly 330. This means that : (a) all items cost 3.3 times more than what they did in 1960 (b) the prices of certain selected items have gone upto 3.3 times (c) weighted mean of prices of certain items has increased 3.3 times (d) gold price has gone up 3.3 times
[I.A.S. (Pre) 1998] Ans. (c) weighted mean of prices of certain items has increased 3.3 times
- Price index looks at the average cost of a group of goods and services.
- The index is based on 1960 prices and is now 3.3 times higher than it was back then.
|
70. Producer Price Index measures : (a) the average change in the prices of produced goods and services. (b) the marginal change in the prices of produced goods and services. (c) the total change in the prices of produced goods and services. (d) None of the above
[U.P. R.O./A.R.O. (Pre) 2017] Ans. (a) the average change in the prices of produced goods and services.
- The Producer Price Index (PPI) looks at the average change in prices of goods and services when they are produced (Output PPI) or when they enter the production process (Input PPI).
- It estimates how much more or less a producer gets in terms of price.
|
71. Assertion (a): Cost push inflation is caused by shift in aggregate supply curve. Reason (R): Shift in aggregate supply curve takes place because of increase in wages. (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.
[R.A.S./R.T.S. (Pre) 2018] Ans. (a) Both (A) and (R) are true and (R) is the correct explanation of (A).
- Cost push inflation is caused by a decrease in the amount of goods and services that can be produced, which is caused by a rise in wages.
- Both the statement and the reason are true, and the reason explains the statement.
|
72. Which one of the following is NOT a method to control inflation? (a) Controlling the demand (b) Controlling the supply of money (c) Reducing the rate of interest (d) Rationing of commodities
[U.P.P.C.S. (Pre) 1996] Ans. (c) Reducing the rate of interest
- RLowering the interest rate is a way to help the economy grow, but it won’t help control inflation.
- The most common way to manage inflation is contractionary monetary policy, which means decreasing the amount of money in the economy by making bonds cheaper and interest rates higher.
- This makes people buy less, prices go down, and inflation slows down.
- These are the ways we can control inflation:
- Monetary Measures : Monetary measures aim to reduce monetary income.
- Credit control
- Demonitization of currency
- Issue of new currency
- Fiscal Measures :
- Reduction in unnecessary expenditure
- Increase in Taxes
- Increase in Savings
- Surplus Budget
- Public debt
- Other Measures
- To increase production
- Rational wage policy
- Price control
- Rationing
|
73. With reference to inflation in India, which of the following statements is correct? (a) Controlling the inflation in India is the responsibility of the Government of India only. (b) The Reserve Bank of India has no role in controlling the inflation. (c) Decreased money circulation helps in controlling the inflation. (d) Increased money circulation helps in controlling the inflation.
[I.A.S. (Pre) 2015] Ans. (c) Decreased money circulation helps in controlling the inflation.
- If more money is put into circulation compared to the growth in actual goods and services, it will cause prices to go up.
- This happens because there is more money trying to buy the same amount of items.
- The RBI (Reserve Bank of India) uses monetary policy to try to reduce the amount of money in circulation in order to help control inflation.
|
74. India has experienced persistent and high food inflation in the recent past. What could be the reasons?
1. Due to a gradual switch over to the cultivation of commercial crops, the area under the cultivation of food grains has steadily decreased in the last five years by about 30%. 2. As a consequence of increasing incomes, the consumption patterns of the people have undergone a significant change. 3. The food supply chain has structural constraints.
Which of the statements given above are correct? (a) 1 and 2 only (b) 2 and 3 only (c) 1 and 3 only (d) 1, 2, and 3 [I.A.S. (Pre) 2011]
Ans. (b) 2 and 3 only
- In the last five years, the land used for growing food has not been decreasing.
- Therefore, statement 1 is wrong. Statements 2 and 3 are true.
|
75. Assertion (A): Between October 2009 and February 2010 the inflation rate in India was negative. Reason (R): Petrol price had come down from 140 $ a barrel to 30 $ a barrel in the global market. Select 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. U.D.A./L.D.A. (Pre) 2010] Ans. (a) Both (A) and (R) are true, and (R) is the correct explanation of (A).
- The question asked was answered correctly, with both the statement (A) and its explanation (R) being accurate.
- Reason (R) was the correct explanation for statement (A).
|
76. In India, the first Bank of limited liability managed by Indians and founded in 1881 was : (a) Hindustan Commercial Bank (b) Oudh Commercial Bank (c) Punjab National Bank (d) Punjab and Sind Bank
[I.A.S. (Pre) 2003] Ans. (b) Oudh Commercial Bank
- Oudh Commercial Bank was set up in Faizabad, India in 1881 and operated until it shut down in 1958.
- It was the first Indian bank that had limited liability and was managed by an Indian board.
- Punjab National Bank is the first Indian bank, founded in 1894 and began operations in Lahore, Pakistan on April 12, 1895.
|
77. With reference to India, consider the following :
1. Nationalization of Banks 2. Formation of Regional Rural Banks 3. Adoption of villages by Bank Branches
Which of the above can be considered as steps taken to achieve the ‘financial inclusion’ in India? (a) 1 and 2 only (b) 2 and 3 only (c) 3 only (d) 1, 2 and 3 [I.A.S. (Pre) 2010]
Ans. (d) 1, 2 and 3
- These steps were taken to ensure that everyone in India has access to financial services.
- Nationalization encouraged more banks to open in rural areas and reduced the power of the wealthy.
- Regional Rural Banks and Lead Bank Scheme were created to help rural areas.
|
78. In the context of independent India’s economy, which one of the following was the earliest event to take place? (a) Nationalization of insurance companies (b) Nationalization of State Bank of India (c) Enactment of Banking Regulation Act (d) Introduction of first Five Year Plan
[I.A.S. (Pre) 2009, U.P.P.C.S (Mains) 2016] Ans. (c) Enactment of Banking Regulation Act
- In 1956, life insurance companies were taken over by the government and in 1972, general insurance companies were also taken over.
- The State Bank of India was taken over in July 1955 and the Banking Regulation Act was established in 1949.
- The first Five Year Plan started in 1951, making option (c) the correct answer.
|
79. The Government of India has nationalized 14 banks of the country in : (a) July, 1969 (b) August, 1971 (c) March, 1981 (d) July, 1991
[Chhattisgarh P.C.S. (Pre) 2011, U.P.P.C.S. (Mains) 2014, M.P.P.C.S. (Pre) 2014, U.P.P.C.S. (Pre) 1996, 2007, U.P.U.D.A./L.D.A. (Pre) 2006, Uttarakhand U.D.A./L.D.A. (Pre) 2007] Ans. (a) July, 1969
- On July 19,1969, the Indian Government took over 14 commercial banks that had assets worth more than 50 crore rupees.
- On April 15, 1980, they did the same with 6 more commercial banks.
|
80. Arrange the following in chronological order : 1. Nationalization of 14 major banks 2. Nationalization of SBI 3. Nationalization of RBI 4. Nationalization of LIC Codes : (a) 3, 2, 4, 1 (b) 2, 3, 4, 1 (c) 3, 4, 2, 1 (d) 4, 3, 2, 1 (e) None of these
[Chhattisgarh P.C.S. (Pre) 2017] Ans. (a) 3, 2, 4, 1
| Institution |
Year |
| 1. Nationalization of RBI |
1949 |
| 2. Nationalization of SBI |
1955 |
| 3. Nationalization of LIC |
1956 |
| 4. Nationalization of 14 major banks |
1969 |
| Hence, the correct chronological order is 3, 2, 4, 1. |
|
81. Consider the following statements : 1. Gorewala Committee’s recommendation led to the establishment of State Bank of India. 2. Six Commercial Banks were nationalized on April 15, 1980. Which one of the statements given above is/are correct ? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2
[U.P.P.C.S. (Spl.) (Mains) 2004] Ans. (c) Both 1 and 2
- The A.D. Gorewala Committee suggested the creation of the State Bank of India by joining together the Imperial Bank of India and some other banks from different states.
- This was made official on April 15, 1980 when the Indian government nationalized six commercial banks, so both of the statements are accurate.
|
82. The number of public sector banks in India (excluding State Bank of India Group) is presently : (a) 28 (b) 27 (c) 20 (d) 19
[U.P.P.C.S. (Mains) 2011] Ans. (c) 20
- The Modi government wanted to improve public sector banks in India (excluding the SBI Group) so they merged some of them, making 20 banks into 12.
- The first phase involved merging five associate banks and the Bharatiya Mahila Bank with the State Bank of India.
- Vijaya Bank and Dena Bank were merged with the Bank of Baroda and the IDBI Bank was re-categorized as a private sector bank.
- In the second phase, six weaker banks were combined into four bigger banks.
- Oriental Bank of Commerce and United Bank of India were merged with Punjab National Bank, Allahabad Bank was merged with Indian Bank, Syndicate Bank was merged with Canara Bank, and Andhra Bank and Corporation Bank were merged with Union Bank of India.
- Now, there are 12 public sector banks in the country, including State Bank of India.
- State Bank of India
- Bank of Baroda (including Vijaya Bank and Dena Bank)
- Bank of India
- Bank of Maharashtra
- Canara Bank (including Syndicate Bank)
- Central Bank of India
- Indian Bank (including Allahabad Bank)
- Indian Overseas Bank
- Punjab National Bank (including Oriental Bank of Commerce and United Bank of India)
- Punjab & Sind Bank
- Union Bank of India (including Andhra Bank and Corporation Bank)
- UCO Bank
|
83. The recent amalgamation of public sector banks in India is aimed at multiple gains.
1. Economies of scale 2. Improved access to capital 3. Covering larger geographical areas 4. Banks of global size
Select the correct benefits using the codes given below: Codes : (a) 1 and 2 only (b) 2 and 3 only (c) 1, 2 and 4 only (d) 1, 2, 3 and 4 all [U.P.B.E.O. (Pre) 2019]
Ans. (d) 1, 2, 3 and 4 all
- In August 2019, the government announced that 10 public sector banks would combine to form 4 larger and stronger banks.
- This change took place on April 1st, and the total number of public sector banks (including SBI) is now 12.
This merger of public sector banks has many advantages.
- Economies of scale;
- Improve access to capital;
- Covering larger geographical areas;
- Banks of global size;
- Reducing operational risks;
- Concentrated payment and greater settlement flows;
- Better management of banking capital etc
|
84. With reference to the governance of public sector banking in India, consider the following statements : 1. Capital infusion into public sector banks by the government of India has steadily increased in the last decade. 2. To put the public sector banks in order, the merger of associate banks with the parent State Bank of India has been affected. 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. (b) 2 only
- From 2008-09 to 2016-17, the Indian government put in a total of Rs. 1,18,724 crore into public sector banks.
- However, the amount of money they put in did not always increase each year, there were drops now and then.
- Because of this, statement 1 is not true.
- The Indian government merged five SBI associate banks and Bharatiya Mahila Bank in 2017 to make public sector banks run more efficiently.
- This merger was done to help improve the efficiency and organization of banking operations.
- Therefore statement 2 is correct.
|
85. Consider the following statements: The functions of commercial banks in India include
1. Purchase and sale of shares and securities on behalf of customers. 2. Acting as executors and trustees of wills.
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. (c) Both 1 and 2
- A commercial bank is a type of financial institution that deals with people’s deposits and withdrawals of money, giving out loans and investments, and buying and selling shares and securities on behalf of customers.
- They also act as executors and trustees of wills.
|
86. Which of the following is the commercial bank of public sector? (a) ICICI (b) H.D.F.C. (c) Indian Overseas Bank (d) U.T.I. bank
[U.P.U.D.A./L.D.A. (Pre) 2006] Ans. (c) Indian Overseas Bank
- Most of the ownership of Public Sector Banks (PSBs) is held by the Government (over 50%).
- Examples of PSBs are State Bank of India, Indian Overseas Bank, and Punjab National Bank.
- Currently, there are 12 PSBs in India (including State Bank of India).
|
87. Which of the following is a private bank? (a) Allahabad Bank (b) Punjab and Sind bank (c) Bank of Punjab (d) Punjab National Bank
[U.P.U.D.A./L.D.A. (Pre) 2001] Ans. (c) Bank of Punjab
- Bank of Punjab is a private bank among the others listed.
- In 2005, Bank of Punjab and Centurion Bank combined to create Centurian Bank of Punjab.
|
88. Which one of the following is not a nationalized bank ? (a) Bank of Baroda (b) Canara Bank (c) ICICI Bank (d) Punjab National Bank
[U.P.P.C.S. (Spl.) (Mains) 2004] Ans. (c) ICICI Bank
- In 1955, the World Bank, the Government of India, and representatives of Indian industry worked together to create ICICI (Industrial Credit and Investment Corporation of India).
- This was done to provide medium and long-term financial support to Indian businesses.
- In 1994, ICICI bank was established as a part of the ICICI group and is now one of the leading private sector banks in India.
- In 1999, ICICI became the first Indian company and the first bank from non-Japan Asia to be listed on the New York Stock Exchange.
- All other banks are nationalized.
|
89. Which one of the following Indian Banks is not a nationalized bank ? (a) Corporation Bank (b) Dena Bank (c) ICICI Bank (d) Vijaya Bank
[Uttarakhand Lower Sub. (Pre) 2010] Ans. (c) ICICI Bank
- In 1955, the World Bank, the Government of India, and representatives of Indian Industry joined together to create ICICI (Industrial Credit and Investment Corporation of India).
- This was done with the goal of providing medium and long-term project financing to Indian businesses.
- ICICI Bank was established as part of the ICICI Group in 1994 and is now one of the leading private sector banks in India.
- In 1999, ICICI became the first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the New York Stock Exchange.
- All other banks are nationalized Banks.
|
90. When was the State Bank of India established? (a) 1954 (b) 1955 (c) 1956 (d) 1957
[M.P.P.C.S. (Pre) 2017] Ans. (b) 1955
- In 1955, the Indian government took over the Imperial Bank of India and changed its name to State Bank of India (SBI).
- The Reserve Bank of India owned 60% of SBI.
|
91. The largest commercial bank of India is : (a) NABARD (b) State Bank of India (c) ICICI (d) Union Bank of India
[U.P.P.C.S. (Pre) 2005, U.P.P.C.S. (Mains) 2004, Uttarakhand U.D.A./L.D.A. (Pre) 2003, M.P.P.C.S. (Pre) 2016] Ans. (b) State Bank of India
- State Bank of India is one of the biggest companies in the world and it is a public sector banking and financial services company based in Mumbai, India.
- It is the biggest bank in India, with around a quarter of the market share, and it serves over 45 crore customers with its huge network of 22,000 branches, 62,617 ATM’s/ADWMs and 71,968 BC outlets.
|
92. The largest public sector commercial bank of India is the : (a) Bank of India (b) Reserve Bank of India (c) State Bank of India (d) Union Bank of India
[U.P.P.C.S. (Mains) 2003] Ans. (c) State Bank of India
- State Bank of India is an Indian company which is part of the Fortune 500 and is a public sector banking and financial services company.
- It is the biggest commercial bank in India and serves over 45 crore customers with 22,000 branches, 62,617 ATMs/ADWMs and 71,968 BC outlets.
|
93. Which of the following commercial banks of India comes in top 100 global banks? (a) ICICI Bank (b) SBI (c) HDFC 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) SBI
- According to a report from S & P Global Market Intelligence in April 2020, India only had one bank in the top 100 global banks (by total assets).
- This bank was State Bank of India (SBI) and it was at 55th place.
- China had 18 banks and the US had 12 banks.
- In the April 2021 list, SBI’s rank went down to 57th amongst the world’s 100 largest banks.
|
94. Which one of the following bank has formed ‘farmers clubs’ to reach out to the farmers easily ? (a) Allahabad Bank (b) Punjab National Bank (c) Regional Rural Bank (d) State Bank of India
[U.P. U.D.A./L.D.A. (Mains) 2010, U.P.P.C.S. (Spl.) (Pre) 2008] Ans. (d) State Bank of India
- The State Bank of India and NABARD have created a “Farmers Club” (Kishan Club) in Uttar Pradesh to help farmers.
- The goal of the club is to give farmers and artisans more power and reach out to people in rural areas.
|
95. Since April, 2011, the SBI’s Chairman has been : (a) Pratip Chaudhuri (b) D. Subha Rao (c) Amiya Bagachi (d) Rao Birendra Singh
[U.P.P.C.S. (Mains) 2012, U.P.U.D.A. / L.D.A. (Pre) 2006] Ans. (a) Pratip Chaudhuri
- Pratip Chaudhuri was the head of SBI from 2011 to 2013.
- Currently, Dinesh Kumar Khara is the Chairman of SBI and was appointed for a 3 year period in 2020.
|
96. The Chairman of public sector banks are selected by the : (a) Banks Board Bureau (b) Reserve Bank of India (c) Union Ministry of Finance (d) Management of concerned bank
[I.A.S. (Pre) 2019] Ans. (a) Banks Board Bureau
- The Bank Board Bureau (BBB) chooses the chairmen and other leading officials of public sector banks.
- Starting from April 1, 2016, the BBB is an independent body that suggests choices.
- Its purpose is to enhance the management of public sector banks, suggest top-level positions for public sector banks and financial organizations, and help banks with their strategies and money-raising plans.
|
97. Which of the following banks has started the ‘Simply Click’ credit card scheme? (a) IDBI (b) ICICI (c) B.O.B. (d) S.B.I.
[U.P.P.C.S. (Pre) 2016] Ans. (d) S.B.I.
- On September 15, 2015, State Bank of India teamed up with 7 of India’s biggest online shopping businesses to launch the new ‘Simply click’ credit card.
- These 7 companies include Amazon India, Book My Show, Cleartrip, Fabfurnish, Food Panda, Lenskart and Ola Cabs.
|
98. Which bank became the first bank to open its branch in China ? (a) IDBI Bank (b) HDFC Bank (c) State Bank of India (d) Punjab National Bank
[U.P.P.C.S. (Mains) 2007] Ans. (c) State Bank of India
- In 2006, the State Bank of India became the first Indian financial institution to open a branch in China.
|
99. Which of the following Private Bank for the first time did set up its branch in China? (a) IClCI Bank (b) HDFC Bank (c) Axis Bank (d) Samadhan Bank
[U.P.P.C.S. (Mains) 2014] Ans. (c) Axis Bank
- In 2014, Axis Bank became the first Indian private sector bank to open a branch in Shanghai and take deposits from the Chinese mainland.
- This happened four months after they were given permission to do banking operations by the Chinese Banking Regulatory Commission in September 2013.
|
100. Which Indian commercial bank started the first ever moving ATM Services? (a) ICICI (b) IDBI (c) H.D.F.C. (d) S.B.I.
[U.P.R.O./A.R.O. (Pre) 2014] Ans. (a) ICICI
- On December 12th, 2002, ICICI Bank, a private bank, launched the first-ever mobile ATM service in Mumbai.
|
