Banking & Financial Awareness Mixed Quiz: Set 10

The correct answer is A, Burma. The Reserve Bank of India, which began work on 1 April 1935 on the recommendation of the Hilton Young Commission, was also the central bank of Burma, then part of British India, and it stayed in that role until April 1947, a few months before India became independent. Burma had been separated from India administratively in 1937, yet the RBI continued to manage its currency and banking. In the same way it served as central bank for Pakistan until June 1948, while the State Bank of Pakistan was being set up. The RBI itself was nationalised on 1 January 1949. B is wrong because Nepal has had its own central bank, the Nepal Rastra Bank, since 1956. C is wrong because Bhutan's Royal Monetary Authority was set up in 1982, though the ngultrum is still pegged to the rupee. D is wrong because Sri Lanka, then Ceylon, was never under the RBI and started its own central bank in 1950. Exam tip: the RBI acted for Burma till April 1947 and for Pakistan till June 1948.

The correct answer is D, Large amounts of loan. Microfinance means small loans to poor households that banks treat as too risky, so a large loan is the opposite of the idea. The Reserve Bank defines a microfinance loan as a collateral-free loan given to a household below a set annual income, and the whole model rests on small, frequent repayments rather than big sums. Option A is a real principle, because the borrower has no land or gold to pledge and the group's promise takes the place of security. Option B is a real principle: members of a joint liability group watch each other's repayment, and this peer pressure is why recovery rates stay high. Option C is a real principle, since self-help groups are built mainly around women, who save and repay more regularly and spend more on the family. NABARD's SHG-Bank Linkage Programme of 1992 carried this model across India. Exam tip: microfinance — small, collateral-free, group-guaranteed loans, mostly to women.

The correct answer is C, two lakh rupees. RTGS is meant for large value payments, and the Reserve Bank has fixed a floor of two lakh rupees for a remittance through it, while setting no ceiling of its own on the amount. Option A is wrong because a transfer of ten thousand rupees would go through NEFT, IMPS or UPI, none of which has a minimum. Option B is wrong because one lakh rupees is below the floor and would be refused by the system. Option D is wrong because five lakh rupees is well above the floor and can certainly be sent by RTGS; it is the figure to which the Reserve Bank raised the per transaction ceiling for IMPS in 2021, which is why it appears as a distractor here. Fix the pairing in memory: RTGS has a minimum and no maximum, while NEFT and IMPS have no minimum at all.

The correct answer is D, 30 th December, 2016. Prime Minister Narendra Modi launched the BHIM app on 30 December 2016, a few weeks after the note ban of November 2016, to push people towards digital payment. BHIM stands for Bharat Interface for Money and is named after Dr B R Ambedkar, whose full name was Bhimrao Ramji Ambedkar. The app is built by the National Payments Corporation of India on the Unified Payments Interface, so money moves straight from one bank account to another using a UPI identifier or a mobile number, and it works in several Indian languages. A is wrong because 15 August 2016 saw no such launch. B is wrong because 31 October 2016 is before the note ban announcement. C is wrong because 26 January 2016 is Republic Day of that year and unconnected. Exam tip: BHIM, Bharat Interface for Money, NPCI, UPI, 30 December 2016.

The correct answer is B, 2008. NPCI was incorporated in 2008 as a not for profit company under Section 25 of the Companies Act, 1956 to act as the umbrella organisation for all retail payment systems in India, and it began by taking over the National Financial Switch the following year. Option A is wrong because 2005 saw no such company; the enabling law itself came only in 2007. Option C is wrong because 2012 is the year RuPay, a product of NPCI, was launched, which candidates often mistake for the year of the company. Option D is wrong because 2016 is the year of UPI and BHIM, again products rather than the parent body. Fix the sequence in order: the Act in 2007, the company in 2008, RuPay in 2012 and UPI in 2016.

The correct answer is D, Financial service to disadvantaged people. A microfinance institution exists to lend small sums to poor and low-income people who cannot offer the security an ordinary bank asks for. It gives tiny loans, takes small savings and sells simple insurance, usually working through self-help groups or joint liability groups in which the members stand guarantee for one another, so no collateral is needed. The loans are small, are repaid weekly or monthly, and are often used for a small shop, a sewing machine, cattle or seed. In India these bodies are registered with the Reserve Bank of India as NBFC-MFIs, and NABARD's SHG-Bank Linkage programme works on the same idea. A and B are wrong because government employees and Union ministers draw regular salaries and can borrow from ordinary banks. C is wrong because corporate borrowers are served by commercial banks and the capital market. Exam tip: microfinance means small collateral-free loans to the poor, through SHGs and NBFC-MFIs under the RBI.

The correct answer is B, Mumbai. The National Bank for Agriculture and Rural Development has its head office in Mumbai, in the Bandra Kurla Complex. NABARD was set up on 12 July 1982 under an Act passed in 1981, on the advice of the Sivaraman Committee, and it took over the rural credit work that the Reserve Bank and the Agricultural Refinance and Development Corporation had been doing. It is the apex body for rural finance: it refinances cooperative banks and regional rural banks rather than lending much directly to farmers, supervises those banks, runs the Rural Infrastructure Development Fund and links self-help groups to banks under its microfinance programme. It is fully owned by the Government of India. A is wrong because Pune houses the National Insurance Academy, not NABARD. C is wrong because Chennai is the headquarters of Indian Bank and Indian Overseas Bank. D is wrong because Kolkata is the headquarters of UCO Bank and Bandhan Bank. Exam tip: NABARD, Mumbai, set up 12 July 1982 on the Sivaraman Committee's recommendation.

The correct answer is B, 16. A debit card carries a 16-digit card number printed on its front, and this is the number a shop or a website reads to route the payment. The digits are not random. The first six form the Bank Identification Number, which names the card network and the bank that issued the card; the next nine identify the customer's account with that bank; and the last one is a check digit worked out by the Luhn formula, so a mistyped number is caught at once. RuPay, Visa and Mastercard debit cards issued in India all follow this pattern, usually printed in four groups of four. A is wrong because 15 digits belong to American Express cards, which are charge and credit cards. C and D are wrong because 14 and 17 digits do not match the pattern used for debit cards. Exam tip: 16 digits, the first six the BIN, the last one a Luhn check digit, and the three-digit CVV on the back.

The correct answer is A, Muhammad Yunus. Muhammad Yunus, an economist from Bangladesh, founded Grameen Bank. He grew it out of a lending experiment begun in the village of Jobra in 1976, and the bank was given formal status by law in 1983. It lends small sums without collateral, mostly to poor rural women organised in small groups whose members stand behind one another's repayment, and this model of microcredit has since been copied across Asia, Africa and Latin America. Yunus and the bank shared the Nobel Peace Prize in 2006 for creating economic and social development from below. B is wrong because Abdullah Abu Sayeed is a Bangladeshi writer and educationist. C is wrong because Anu Muhammad is an economist known for his writing on development, not the bank's founder. D is wrong because Atiur Rahman served as Governor of Bangladesh Bank. Exam tip: Muhammad Yunus, Grameen Bank of Bangladesh, microcredit, Nobel Peace Prize 2006.

The correct answer is B, Banking. The Basel Norms are international standards for banking supervision.

They are issued by the Basel Committee on Banking Supervision, which works under the Bank for International Settlements at Basel in Switzerland. Their purpose is to make sure a bank holds enough capital against the risks it takes, so that losses fall on its shareholders and not on depositors. Basel I of 1988 dealt with credit risk, Basel II of 2004 added market and operational risk along with supervision and disclosure, and Basel III, framed after the crisis of 2008, raised the quality of capital and brought in liquidity and leverage rules. In India the Reserve Bank applies them and asks for a capital to risk weighted assets ratio of nine per cent.

Options A, C and D are wrong because insurance is governed by IRDAI, and the share and commodity markets by SEBI.

Exam tip: Basel Committee, Basel, Switzerland; India's CRAR requirement is nine per cent.

The correct answer is A, National Electronic Funds Transfer. NEFT is the nationwide system operated by the Reserve Bank of India for transferring funds from one bank account to another, settled on a deferred net basis in half hourly batches and available on all days of the year since December 2019. Options B, C and D are wrong because they are invented expansions of the same four letters, and none of them is used in any Reserve Bank circular; papers build such options because a candidate who has only heard the abbreviation spoken will not have seen it written out. Remember the three expansions together, since they are often asked in one question: RTGS is Real Time Gross Settlement, NEFT is National Electronic Funds Transfer and IMPS is Immediate Payment Service.

The correct answer is A. The Banking Ombudsman is a senior officer appointed by the Reserve Bank of India to hear and settle customer complaints about deficiency in banking service. The scheme was first brought in under Section 35A of the Banking Regulation Act, 1949, and the ombudsman decides complaints on matters such as delayed payment, wrongly levied charges, card and digital transaction disputes and refusal to accept small coins. A customer must first take the complaint to the bank and may approach the ombudsman when the bank does not reply in thirty days or the reply is unsatisfactory. Option B is wrong because private banks, foreign banks, regional rural banks and scheduled cooperative banks are covered too, not only public sector banks. Option C is wrong because the complainant is free to reject the award and go elsewhere; it binds the bank once accepted. Option D is wrong because the whole process is free of cost to the customer. Exam tip: the ombudsman is appointed by the RBI, complain to the bank first, and the service costs nothing.

The correct answer is B, the Indian Banks Association. NPCI was set up on the initiative of the Reserve Bank of India together with the Indian Banks Association, and ten core promoter banks held its first shareholding, which is why it is owned by the banking industry rather than by the government. Option A is wrong because SEBI regulates the securities market and has no role in retail payment systems. Option C is wrong because NITI Aayog is a policy think tank created in 2015, seven years after NPCI came into being. Option D is wrong because the ministry for electronics and information technology promotes digital services and runs schemes such as Digital India, but it did not promote NPCI. Remember the pair as the central bank plus the bankers association.

The correct answer is B, Immediate Payment Service. IMPS is an interbank money transfer service run by the National Payments Corporation of India, launched in November 2010. Its great advantage is that it works round the clock, on holidays and at night, and the money reaches the beneficiary within seconds. A transfer can be made using the account number with the IFSC code, or using the mobile number with the MMID, and it can be started from mobile banking, internet banking, an ATM or a branch. NPCI, set up in 2008 as an umbrella body for retail payments, also runs UPI, RuPay, NACH, AePS and FASTag. Option A is wrong because the letter S stands for service, not sector. Option C is wrong for the same reason. Option D is wrong because the first word is immediate, not instant. Exam tip: NEFT and RTGS are run by the RBI, while IMPS and UPI are run by NPCI; RTGS is meant for amounts of two lakh rupees and above.

The correct answer is B, RTGS. The words in the name say it: real time means the instruction is carried out as it is received, and gross settlement means each instruction is settled by itself rather than set off against others. Settlement is final and irrevocable once done, which is what a large value payment needs. Option A is wrong because NEFT works on deferred net settlement, collecting instructions and settling the net position in half hourly batches. Option C is wrong because NACH is a bulk clearing system for repeated credits and debits such as salary, pension, subsidy and instalments, which is the opposite of transaction by transaction settlement. Option D is wrong because the Cheque Truncation System clears cheques in sessions by sending their images, again in batches. Gross with RTGS and net with NEFT is the distinction papers test most often.

The correct answer is A, Maharashtra. The Industrial Development Bank of India has its head office in Mumbai, the capital of Maharashtra, at the IDBI Tower in Cuffe Parade. IDBI was set up in 1964 by an Act of Parliament as a wholly owned subsidiary of the Reserve Bank of India, to give long-term finance to industry. It was transferred to the Government of India in 1976, turned into a banking company in 2004, and reclassified by the RBI as a private sector bank in 2019 after the Life Insurance Corporation took a majority stake in it. Option B is wrong because West Bengal's Kolkata is the home of UCO Bank and Bandhan Bank, not IDBI. Option C is wrong because Karnataka holds Canara Bank at Bengaluru and Karnataka Bank at Mangaluru. Option D is wrong because Haryana has no such national financial institution's head office. Exam tip: Mumbai holds the RBI, SEBI, IDBI, the State Bank of India and both stock exchanges, which is why it is called the financial capital of India.

The correct answer is C, 2016. UPI was launched by NPCI in 2016, and the BHIM application followed in December of the same year, which is why 2016 is the single most asked year in this topic. Option A is wrong because 2010 is the year of IMPS, the instant transfer service on which UPI was later built. Option B is wrong because 2012 belongs to RuPay, the domestic card network. Option D is wrong because 2019 is the year NEFT became available at all hours and the National Common Mobility Card was launched, not the year of UPI. A clean timeline answers a whole family of questions: the National Financial Switch taken over in 2009, IMPS in 2010, RuPay in 2012, UPI and BHIM in 2016, e-RUPI in 2021 and UPI 123PAY in 2022. Note also that UPI was launched as a pilot first and reached ordinary users through bank apps in the same year.

The correct answer is C, the National Payments Corporation of India. IMPS was launched by that organisation in 2010 and was the first Indian system to offer interbank transfer instantly at any hour, including Sundays and holidays. Option A is wrong because the Reserve Bank operates RTGS and NEFT but not IMPS, although it regulates every payment system under the Payment and Settlement Systems Act of 2007. Option B is wrong because the State Bank of India is a member bank of the system, not its operator. Option D is wrong because the Indian Banks Association, along with the Reserve Bank, promoted the National Payments Corporation of India but does not run the service itself. Group the products by owner: RTGS and NEFT with the Reserve Bank, and IMPS, UPI, RuPay, NACH, AEPS, BBPS and FASTag with the National Payments Corporation of India.

The correct answer is C, IMPS. The Immediate Payment Service, launched in 2010, already moved money between banks instantly at every hour, and UPI uses that rail while adding the virtual payment address, interoperable applications and single click authentication. Option A is wrong because RTGS is a large value system run by the Reserve Bank in which each transaction settles individually and a minimum of two lakh rupees applies. Option B is wrong because NEFT, also run by the Reserve Bank, settles in batches rather than instantly, so it could not have supported the instant experience of UPI. Option D is wrong because NACH is a bulk clearing system for salaries, subsidies and instalments and is not a person to person transfer rail. The point of the question is to separate the rail from the interface built over it.

The correct answer is B, on a deferred net basis, in half hourly batches. NEFT holds instructions for a short period, works out what each bank owes the others on balance, and settles only that difference; the batches run every half hour through all twenty four hours, since the service was made available on all days of the year in December 2019. Option A is wrong because settling each instruction the moment it arrives is the method of RTGS, not NEFT. Option C is wrong because a single settlement at the close of the day was the practice of older clearing arrangements and was never how NEFT worked. Option D is wrong because settlement between the banks is not made to wait for a confirmation from the beneficiary bank, although the credit to the customer's account does follow the settlement. Net settlement in batches is the phrase to carry into the hall.