Banking & Financial Awareness Quiz: Banking Terms and Abbreviations

The correct answer is C, Real Time Gross Settlement. RTGS is the system in which a transfer instruction is settled singly and immediately, rather than being held and netted off with others. Real time means the instruction is processed the moment it is received, and gross means every instruction is settled on its own without being set against any other. It is used for large value transfers, with a minimum of two lakh rupees and no upper limit fixed by the Reserve Bank of India, and it is available round the clock on all days.

Options A, B and D mix the words in ways that sound familiar but are wrong. The word scheme in A and D is the giveaway, because RTGS is a settlement system run by the Reserve Bank and not a scheme. Option B keeps the correct last word but replaces real time with rapid transfer. The contrast to remember is NEFT, which settles in half hourly batches, against RTGS, which settles instruction by instruction.

The correct answer is C, I, II and III. All three belong to the monetary policy toolkit of the Reserve Bank of India. SLR, the Statutory Liquidity Ratio, is the part of its deposits that a bank must keep with itself in cash, gold or approved securities, and raising or lowering it changes how much a bank can lend. MSS, the Market Stabilisation Scheme, allows the Reserve Bank to absorb lasting surplus liquidity by issuing special treasury bills and dated securities. The corridor is the band formed by the standing facility rates around the policy repo rate, within which the overnight call money rate is expected to move.

Options A, B and D each leave out one of the three. They test whether a candidate treats the corridor as a mere description rather than as a working instrument, and whether the Market Stabilisation Scheme is remembered at all, since it is used only when liquidity is in lasting surplus.

The correct answer is B, Moral Suasion. The tools of the Reserve Bank are divided into quantitative tools, which change the total amount of credit in the system, and qualitative or selective tools, which change the direction in which that credit flows. Moral suasion is the qualitative tool by which the Reserve Bank persuades banks through letters, meetings and advice, for example to lend less to a speculative sector, without issuing a binding order. The other qualitative tools are margin requirements, selective credit control, rationing of credit and direct action.

Option A, the bank rate, is the rate at which the Reserve Bank lends to banks without collateral, and changing it changes the cost of credit for everyone, so it is quantitative. Option C, open market operations, adds or removes money by buying or selling government securities, which is also quantitative. Option D, the cash reserve ratio, fixes how much of its deposits a bank must keep with the Reserve Bank, again a quantitative measure.

The correct answer is A, to connect SWIFT with its Core Banking Solution. SWIFT is the international messaging network over which banks send payment and guarantee instructions across borders. When it is kept apart from the Core Banking Solution, a message can go out without any entry appearing in the books of the bank, and that gap was used in a large fraud that came to light in 2018. The Reserve Bank therefore directed banks to link the SWIFT terminal with the Core Banking Solution by 30 April 2018, so that every outgoing message leaves a trail in the accounts.

Options B, C and D name RTGS, NEFT and MICR. RTGS and NEFT are domestic payment systems of the Reserve Bank and already run through bank systems, while MICR is only a code printed on a cheque. None of them carries the cross border instruction that created the risk, so none was the subject of the direction.

The correct answer is B, 11. The Indian Financial System Code is an eleven character alphanumeric code that identifies a particular bank branch taking part in the electronic payment systems of the Reserve Bank of India. The first four characters are letters that name the bank, the fifth character is always the digit zero and is held in reserve for future use, and the last six characters identify the branch. Without a correct IFSC, a NEFT, RTGS or IMPS instruction cannot be routed to the right branch.

Option A, nine, is the length of the MICR code printed at the foot of a cheque, where three digits each stand for the city, the bank and the branch. Option C, thirteen, matches nothing in the Indian banking system. Option D, sixteen, is the usual number of digits on a debit or credit card. Mixing up the eleven character IFSC with the nine digit MICR is the commonest error in this question.

The correct answer is D, Rupees 2 lakh. RTGS was designed for large value payments, so the Reserve Bank of India fixed a floor of two lakh rupees for a single transaction and set no ceiling at all. Anything below that floor is expected to move through NEFT or IMPS or UPI instead. The system settles each instruction on its own and in real time, and it is available on all days of the year, round the clock.

Options A, B and C give ten thousand, fifty thousand and one lakh rupees. None of these is a limit under RTGS; they are the kind of round figures candidates half remember from card or wallet limits. The point to hold is the pair of facts about RTGS: a minimum of two lakh rupees and no maximum, against NEFT, where the Reserve Bank has fixed neither a minimum nor a maximum.

The correct answer is A, Current Account and Savings Account. CASA is the combined balance a bank holds in the current accounts and the savings accounts of its customers. These are the cheapest deposits a bank can have, because a current account pays no interest at all and a savings account pays very little, unlike a fixed deposit. The share of such deposits in the total deposits of a bank is called the CASA ratio, and a high ratio means the bank is funding its lending cheaply, which raises its net interest margin.

Options B, C and D are invented expansions built from banking sounding words. They are placed there because a candidate who has only heard the term and never read its full form will find all four equally plausible. Remember the ratio along with the full form, since papers often ask what a high CASA ratio indicates rather than what the letters stand for.

The correct answer is C, 90 days. Under the asset classification norms of the Reserve Bank of India, a term loan becomes a Non Performing Asset when interest or an instalment of principal stays overdue for more than ninety days. Once it is an NPA, the bank must stop treating the interest as income and must set aside provisions against the account. NPAs are then graded further as substandard when they have been non performing for up to twelve months, doubtful beyond that, and loss assets when recovery is not expected at all.

Option A, thirty days, and option B, sixty days, describe an account that is merely overdue and is watched under the special mention categories, not yet an NPA. Option D, one hundred and eighty days, was the older norm in India before the ninety day rule was brought in to match international practice. Agricultural loans follow a separate rule based on crop seasons.

The correct answer is B, National Bank for Agriculture and Rural Development. NABARD was set up in 1982 on the recommendation of the committee headed by B Sivaraman, and its head office is at Mumbai. It is the apex institution for rural credit: it refinances the loans given by cooperative banks and regional rural banks, supervises them, and funds rural infrastructure through the Rural Infrastructure Development Fund. It also promoted the self help group and bank linkage programme that took small credit to rural women.

Option A replaces bank with board, option C replaces it with bureau and changes agriculture to agrarian, and option D adds the word reform. All three are close enough to sound right to a candidate who has not read the full form. The word to hold on to is bank, because NABARD lends and refinances rather than merely advising.

The correct answer is C, Rupees 5 lakh. The Deposit Insurance and Credit Guarantee Corporation is a wholly owned subsidiary of the Reserve Bank of India, and it insures the deposits held in banks. The cover was raised from one lakh rupees to five lakh rupees in 2020, and it applies for each depositor in each bank, taking the principal and the interest together. All commercial banks, including branches of foreign banks in India, local area banks, regional rural banks and cooperative banks, are covered, and the premium is paid by the bank, not by the depositor.

Option A, one lakh rupees, was the earlier limit and is the answer a candidate gives from an old book. Options B and D, two lakh and ten lakh rupees, are not limits under this scheme at all; two lakh rupees is instead the minimum amount for an RTGS transfer, which is why it appears here as a distractor.

The correct answer is C, 2002. The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act was passed in 2002. It allows a secured creditor, after giving the borrower a notice of sixty days, to take possession of the mortgaged asset and sell it to recover the dues, without filing a suit in a civil court. It also created the legal ground for asset reconstruction companies, which buy bad loans from banks. Agricultural land is kept outside the reach of the Act.

Option A, 1993, is the year of the Recovery of Debts Due to Banks and Financial Institutions Act, which set up the Debt Recovery Tribunals. Option B, 1999, is not linked with any such recovery law. Option D, 2016, is the year of the Insolvency and Bankruptcy Code, which handles the resolution of a whole company rather than the sale of one secured asset. Papers often place 1993 and 2016 beside 2002 exactly to test this order.

The correct answer is B, 9. MICR stands for Magnetic Ink Character Recognition, a technology in which the characters are printed in magnetic ink so that a machine can read them even if the paper is stamped or signed over. The MICR code on an Indian cheque has nine digits in three blocks of three: the first three give the city, matching the first three digits of its postal index number, the next three name the bank and the last three name the branch. It speeds up the clearing of cheques and cuts down errors.

Option A, six, matches only the branch part of an IFSC. Option C, eleven, is the length of the full IFSC used for electronic transfers. Option D, fifteen, is not a code length in Indian banking. The pair worth memorising is nine digits for MICR and eleven characters for IFSC, since a question on either usually offers the other as a trap.