Banking & Financial Awareness Mixed Quiz: Set 13

The correct answer is B, it pays from the money already in the holder's account. The amount of a debit card payment leaves the account at once, which is the essential difference from a credit card, where the bank pays first from a limit it has granted and bills the holder later with an interest free period. Option A is wrong for that reason, as it describes a credit card. Option C is wrong because a debit card works at the machines of other banks as well, through the shared network that connects the country's ATMs. Option D is wrong because debit cards are issued to savings account holders as a matter of course, including under government schemes. A prepaid card is a third kind, loaded with an amount in advance.

The correct answer is A, 1982. The National Bank for Agriculture and Rural Development began work in 1982, set up on the recommendation of the Sivaraman Committee, and it is the apex development bank for agriculture and the rural economy, refinancing and supervising both Regional Rural Banks and cooperative banks. Option B is wrong; 1991 is the year of the economic reforms and of the first Narasimham Committee on the financial system, not of NABARD. Option C is wrong because 1987 has no connection with the founding of this institution. Option D is wrong although it is the most tempting choice, since 2 October 1975 is the day the first five Regional Rural Banks were set up, seven years before NABARD came into being; candidates who remember only that rural credit began in the mid nineteen seventies fall into it. Keep 1975 for Regional Rural Banks and 1982 for NABARD.

The correct answer is B, Anyonya Cooperative Bank of Vadodara in Gujarat, begun in 1889 as a mutual aid society among government servants and generally counted as the first urban cooperative bank in India, older even than the Cooperative Credit Societies Act of 1904. Option A is wrong because Saraswat Cooperative Bank of Mumbai, founded in 1918, is among the largest urban cooperative banks but not the first. Option C is wrong; Cosmos Cooperative Bank of Pune dates from 1906 and is therefore later than Anyonya. Option D is wrong because Abhyudaya Cooperative Bank of Mumbai is a twentieth century institution. The point worth carrying from this question is that cooperative banking in India is older than both the Reserve Bank and the first cooperative statute, which is why its law grew in pieces.

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, 2014. The Reserve Bank released the final guidelines for licensing both payments banks and small finance banks on the twenty seventh of November 2014, acting on the report of the Nachiket Mor Committee on Comprehensive Financial Services for Small Businesses and Low Income Households. Option A, 2012, is before the committee was even constituted, which was in September 2013. Option C, 2016, is the year the first small finance bank began operations, when Capital Small Finance Bank opened in April of that year, so it marks the start of business and not the making of the rules. Option D, 2019, is the year the Reserve Bank issued the on tap licensing guidelines for small finance banks, on the fifth of December, which raised the minimum net worth requirement to two hundred crore rupees; it is the strongest distractor because it is also a guidelines date, so read whether the question asks for the original guidelines or the on tap ones.

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, the Reserve Bank of India Act, 1934. Section 22 of that Act gives the Reserve Bank the sole right to issue bank notes in India, and the Bank has done so since it began operations on 1 April 1935. Only the one rupee note and coins are issued by the Government of India. Option A is wrong because the Banking Regulation Act, 1949 controls banking companies, dealing with licences, capital, the Statutory Liquidity Ratio and inspection, and says nothing about the issue of currency. Option C is wrong because the Coinage Act deals with coins and their denominations, which belong to the Government and not to the Bank's note-issuing power. Option D is wrong because the Negotiable Instruments Act, 1881 governs promissory notes, bills of exchange and cheques between private parties.

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 C, two lakh rupees. Real Time Gross Settlement is meant for large value payments, which are settled one transaction at a time as they are received rather than in batches, and the system sets a floor of two lakh rupees with no upper limit. Option A is wrong because ten thousand rupees is not a limit in any of these systems. Option B is wrong because one lakh rupees is a figure from other contexts and not the RTGS floor. Option D is wrong because it is NEFT that has no minimum; any amount can be sent through it and the service is available round the clock. Examiners set RTGS and NEFT against each other, so keep the floor of two lakh rupees with RTGS alone.

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 A, the Banking Regulation Amendment Act of 2020. It ended the loose half of the old dual control by placing all urban cooperative banks and multi state cooperative banks squarely under the supervision of the Reserve Bank, giving the Bank powers over their boards, their capital raising and their amalgamation, after a series of failures had hurt depositors. Option B is wrong because the Companies Act of 2013 governs companies and not cooperative societies. Option C is wrong; the Payment and Settlement Systems Act of 2007 is the law behind payment systems such as white label cash machines. Option D is wrong because the Multi State Cooperative Societies Act of 2002 deals with the registration and management of societies working in more than one state, which is the cooperative side of the dual control rather than the banking side.

The correct answer is C, Mumbai. RBL Bank, a private sector bank, has its corporate office in Mumbai, the financial capital of the country, while its registered office stays in Kolhapur in Maharashtra, where the bank was founded in 1943 as the Ratnakar Bank. It served traders and farmers of the Kolhapur and Sangli belt for decades, was renamed RBL Bank in 2014 and now works across the country in retail, credit card and microfinance business. Option A is wrong because Srinagar is the headquarters of Jammu and Kashmir Bank, a bank promoted by that state. Option B is wrong because no large commercial bank keeps its corporate office in Patna. Option D is wrong because Bengaluru is the headquarters of Canara Bank, which was started in Mangaluru in 1906. Exam tip: RBL Bank was born as Ratnakar Bank in Kolhapur, 1943, and is run from Mumbai.

The correct answer is C, two lakh rupees. A payments bank may accept demand deposits, that is savings and current accounts, but the total balance of an individual customer with the bank cannot exceed two lakh rupees at the end of the day. Option B, one lakh rupees, was the original ceiling laid down in the guidelines of 2014 and is the commonest wrong answer, because the Reserve Bank raised the limit to two lakh in April 2021 to make these banks more useful to small savers and small businesses. Option A, fifty thousand rupees, is not a limit under these guidelines and is drawn from small account and basic savings account thresholds elsewhere in banking. Option D is wrong because the ceiling is the defining feature of a payments bank licence; a small finance bank, by contrast, has no per customer ceiling on deposits, which is exactly the contrast the question is testing.

The correct answer is B, the Second Schedule of the Reserve Bank of India Act, 1934. A bank is placed in that Schedule once it has the prescribed paid-up capital and reserves and satisfies the Reserve Bank that its affairs are not conducted in a manner harmful to depositors. Inclusion brings the right to borrow from the RBI at the bank rate, membership of the clearing house and access to the money market.

Options A and C name the Banking Regulation Act, 1949, which is the law on licensing, inspection and winding up of banks but does not carry the list of scheduled banks, so both are wrong. Option D, the Seventh Schedule of the Constitution, contains the Union, State and Concurrent Lists and has nothing to do with banks, although banking itself is an entry in the Union List. Remember the pair: RBI Act 1934 for the Second Schedule, Banking Regulation Act 1949 for regulation.

The correct answer is C, 1 March 1966. The Act was passed in 1949 as the Banking Companies Act and came into force on 16 March 1949; when its scope was extended to cooperative banks, it was renamed the Banking Regulation Act, 1949 with effect from 1 March 1966, the year being retained in the title. Option A, 1 April 1935, is the date on which the Reserve Bank of India began its operations under the Act of 1934. Option B, 1 January 1949, is the date on which the Reserve Bank was nationalised, and it is the closest trap because it falls in the same year as the Banking Companies Act. Option D, 19 July 1969, is the date on which fourteen major commercial banks were nationalised, later given effect by the Act of 1970.

The correct answer is B, Six. On 15 April 1980 six private banks whose deposits were two hundred crore rupees or more were nationalised: Andhra Bank, Corporation Bank, New Bank of India, Oriental Bank of Commerce, Punjab and Sind Bank, and Vijaya Bank. With these, public ownership covered the greater part of bank deposits in the country.

Option A, four, is the number of anchor banks in the amalgamation that took effect on 1 April 2020. Option C, seven, was the number of associate banks of the State Bank of India under the Act of 1959. Option D, eleven, matches no event in this sequence. Note that five of these six banks were themselves later merged away: New Bank of India into Punjab National Bank, Vijaya Bank into Bank of Baroda, Oriental Bank of Commerce into Punjab National Bank, and Andhra Bank with Corporation Bank into Union Bank of India.

The correct answer is B, the Aadhaar number and a fingerprint. The system, run by the National Payments Corporation of India, lets a customer withdraw cash, deposit money or check a balance at a banking correspondent's micro ATM by giving the Aadhaar number, the name of the bank and a biometric authentication, without a card or a cheque. Option A is wrong because a cheque and signature belong to the counter of a branch. Option C is wrong because a card and a PIN describe an ordinary ATM withdrawal, which is exactly what this system removes the need for. Option D is wrong because a passbook is a record and not a means of authentication. The system was designed to bring banking to villages through correspondents.

The correct answer is C, Article 43B. The Ninety seventh Constitutional Amendment Act of 2011 inserted Article 43B in the Directive Principles, asking the State to promote the voluntary formation, autonomous functioning, democratic control and professional management of cooperative societies. The same amendment added the words cooperative societies to the right of association in Article 19 and inserted a new Part Nine B. Option A is wrong because Article 41 concerns the right to work, education and public assistance. Option B is wrong; Article 43A, on the participation of workers in the management of industry, was inserted by the Forty second Amendment. Option D is wrong because Article 48A, on the protection of the environment and forests, also came with the Forty second Amendment. Remember too that in 2021 the Supreme Court left Part Nine B standing only for multi state cooperative societies.

The correct answer is B, granting loans and issuing credit cards. The licence of a payments bank excludes credit altogether: it may not lend to anyone and may not issue credit cards, and this single prohibition is what separates it from every other kind of bank in India. Option A is permitted, since a payments bank may issue ATM and debit cards to its customers and operate them on the usual payment networks. Option C is permitted, as accepting demand deposits in savings and current accounts is the core of its business, subject to the ceiling of two lakh rupees for each individual customer. Option D is permitted, because a payments bank may distribute simple financial products that carry no risk on its own books, such as units of mutual funds, insurance policies and pension products, and it may also act as a business correspondent of another bank.

The correct answer is A, Section 5(b). It defines banking as accepting, for the purpose of lending or investment, deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise. Two elements of that definition are what separate a bank from a finance company: deposits from the public, and repayment on demand. Option B is wrong because Section 11 lays down the minimum paid-up capital and reserves a banking company must have. Option C is wrong because Section 22 requires a licence from the Reserve Bank before banking business may be carried on, which follows from the definition but is not the definition. Option D is wrong because Section 35A is the Reserve Bank's power to issue directions to banking companies in the public interest.