Banking & Financial Awareness Mixed Quiz: Set 18

The correct answer is C, 75 per cent of Adjusted Net Bank Credit. A regional rural bank is set up under the Regional Rural Banks Act, 1976 to serve farmers, farm labourers and rural artisans, so the Reserve Bank asks it for a much higher share than it asks of a commercial bank: 75 per cent to the priority sector, with 18 per cent for agriculture, 10 per cent for small and marginal farmers, 7.5 per cent for micro enterprises and 15 per cent for weaker sections, the highest weaker sections target of any bank. Option A is wrong because 40 per cent applies to domestic commercial banks and to foreign banks with 20 or more branches. Option B is wrong because 60 per cent is the figure for small finance banks and primary urban co-operative banks. Option D is wrong because no bank is asked to put its entire credit in the priority sector.

The correct answer is B, 40 per cent of Adjusted Net Bank Credit. A domestic commercial bank, and a foreign bank with 20 or more branches in India, must lend 40 per cent of its Adjusted Net Bank Credit, or of the Credit Equivalent of Off-Balance Sheet Exposure where that is higher, to the priority sector. The figure has stood at 40 per cent since 1985 and is repeated in the Reserve Bank of India (Priority Sector Lending - Targets and Classification) Directions, 2025. Option A is wrong because 18 per cent is the sub-target for agriculture alone, not the whole priority sector. Option C is wrong because 60 per cent is the target set for small finance banks and for primary urban co-operative banks, which were created to serve small borrowers. Option D is wrong because 75 per cent applies to regional rural banks, whose whole business is rural lending.

The correct answer is B, rupees 1 lakh. The scheme separates two kinds of award. For the loss the complainant actually suffered, the Ombudsman may award the actual loss or rupees 20 lakh, whichever is lower. Over and above that, the Ombudsman may award up to rupees 1 lakh for loss of the complainant's time, the expenses he incurred and the harassment and mental anguish he suffered. Option A is wrong because rupees 10,000 was the limit in some earlier consumer compensation rules and not in this scheme. Option C is wrong because rupees 5 lakh is the deposit insurance cover given by the Deposit Insurance and Credit Guarantee Corporation, a quite separate figure. Option D is the limit for the actual loss itself, which is why the two numbers must be kept apart.

The correct answer is B, SBI. Ecowrap is the research report of the State Bank of India, brought out by its economic research department.

Ecowrap is written by the team of the group chief economic adviser at SBI and comments on growth, inflation, bank credit, government finances and the state of households. It is widely quoted in the press because it often carries an early estimate of GDP growth or of the fiscal position before the official figures appear. The edition of May 2020 studied the damage the Covid-19 lockdown was doing to incomes and to economic activity. SBI is the country's largest commercial bank, with its headquarters in Mumbai.

A is wrong: the Reserve Bank publishes its own Monetary Policy Report, Financial Stability Report and Annual Report, not Ecowrap. C is wrong: HDFC Bank brings out no report of this name. D is wrong: nor does ICICI Bank.

Exam tip: Ecowrap belongs to SBI Research, while the best known Reserve Bank reports are the Financial Stability Report and the Monetary Policy Report.

The correct answer is C, 25 lakh rupees. Under the 2025 Directions a loan to an individual for educational purposes, including a vocational course, is classified as priority sector lending so long as it does not exceed 25 lakh rupees; the ceiling applies to the loan, not to the fee or the course. Option A is wrong because 10 lakh rupees is the ceiling for a loan to an individual household for a renewable energy installation, such as a rooftop solar system. Option B is wrong because 20 lakh rupees was the earlier education ceiling and was raised, so it is the classic trap in this question. Option D is wrong because 50 lakh rupees is the housing loan ceiling for a centre with a population of 50 lakh and above, where the cost of the dwelling unit must also stay within 63 lakh rupees.

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 B, the Executive Director in charge of the Consumer Education and Protection Department of the Reserve Bank of India. Either the complainant or the regulated entity may appeal to this officer within thirty days of receiving the Award, and a regulated entity that failed to appoint a Principal Nodal Officer cannot appeal at all. Option A is wrong because the Governor does not sit in appeal over individual awards; the appellate function is assigned to a named Executive Director. Option C is wrong because the Department of Financial Services is part of the Ministry of Finance and has no role in deciding these appeals. Option D is wrong because the National Commission belongs to the separate consumer protection route; a customer chooses one route, and the two do not sit one above the other.

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 A, NABARD. A bank that falls short of its priority sector target is not fined; it is required to place the shortfall in the Rural Infrastructure Development Fund kept with the National Bank for Agriculture and Rural Development, or in the funds notified with SIDBI, the National Housing Bank and MUDRA, and it earns a deliberately low return there, the Bank Rate minus two to four percentage points depending on the size of the shortfall. Option B is wrong because SEBI regulates the securities market and has no role in bank credit. Option C is wrong because the Reserve Bank sets the targets and monitors them but does not itself hold the Rural Infrastructure Development Fund. Option D is wrong because the Ministry of Finance makes policy and owns the public sector banks, while the fund is operated by NABARD.

The correct answer is C, seventy five per cent. A small finance bank exists to serve small borrowers, and the guidelines enforce that purpose by requiring seventy five per cent of its adjusted net bank credit to go to the sectors eligible as priority sector lending, which include agriculture, micro and small enterprises, education, housing and weaker sections. Option A, forty per cent, is the priority sector target for a universal domestic commercial bank, and it is the sharpest distractor because candidates remember that figure from the general priority sector chapter. Option B, sixty per cent, is not a target under these guidelines. Option D, fifty per cent, is a real figure in this chapter but for a different rule: at least half of a small finance bank's loan portfolio must consist of loans and advances of up to twenty five lakh rupees each, which limits the size of individual loans rather than the sector they go to.

The correct answer is C, 30 days. The scheme makes the bank the first forum: a complaint is maintainable before the Ombudsman only if the customer has already complained to the regulated entity and either received no reply for thirty days or received a reply he is not satisfied with, or had the complaint rejected. The complaint must then be filed within one year of that reply, or within one year of the complaint itself where no reply came. Option A is wrong because seven days is the period for some grievance acknowledgements, not for this step. Option B is wrong because fifteen days belongs to no stage of this scheme. Option D is wrong because sixty days would double the waiting period and delay relief, which the scheme is designed to avoid.

The correct answer is D, 1978. The Corporation came into being on 15 July 1978, when the Deposit Insurance Corporation was merged with the Credit Guarantee Corporation of India Ltd, and the Deposit Insurance Act, 1961 was renamed the Deposit Insurance and Credit Guarantee Corporation Act, 1961. Option A is wrong because 1961 is the year of the parent Act, not of the merged Corporation. Option B is wrong because 1 January 1962 is the day deposit insurance actually began working in India, under the Deposit Insurance Corporation. Option C is wrong because 1971 is the year the Credit Guarantee Corporation of India Ltd was set up, the body that later merged in. These four years form a chain examiners enjoy shuffling, so fix them in order: 1961 the Act, 1962 the start of cover, 1971 the credit guarantee body, and 1978 the Corporation as it stands today.

The correct answer is C, 25 lakh rupees and multiples thereof. Priority Sector Lending Certificates were introduced in 2016 so that a bank which has lent beyond its target can sell the excess achievement to a bank that has fallen short. They are traded on the Reserve Bank e-Kuber platform in a standard lot of 25 lakh rupees and multiples of it, and every certificate expires on 31 March whatever the date of purchase. Options A and B are wrong because one lakh and ten lakh rupees are not the prescribed lot; a lot that small would make the platform unwieldy. Option D is wrong because one crore rupees would shut out smaller banks and co-operative banks that buy in modest amounts. Note also that only the target achievement is transferred; the loan and its credit risk stay with the selling bank.

The correct answer is C, the Primary Agricultural Credit Society. In the short term cooperative credit structure the base is the Primary Agricultural Credit Society in the village, above it stands the District Central Cooperative Bank and at the apex of the state stands the State Cooperative Bank. Option A is wrong because the State Cooperative Bank is the top tier and deals with the district banks, not directly with farmers. Option B is wrong since the District Central Cooperative Bank is the middle tier. Option D is wrong because the land development bank belongs to the long term or investment credit structure, now called the Primary Cooperative Agriculture and Rural Development Bank at the base and the State Cooperative Agriculture and Rural Development Bank at the apex. Remember that the long term structure has two tiers while the short term one has three; a paper often tests exactly that difference.

The correct answer is B, a bank's refusal to sanction a loan as a matter of commercial judgement. The Ombudsman decides whether there was a deficiency in service, not whether a lending decision was wise; a bank's commercial judgement, including whether to grant a loan and on what terms, is expressly outside the scheme, as are disputes between banks and a bank's own staff and recruitment matters. Options A, C and D are all deficiencies in service and are squarely within the scheme: delay in reversing a failed ATM transaction, failure to follow the bank's own declared cheque collection policy, and charges levied without the prior notice the customer was promised. The distinction to remember is simple: how the bank served the customer is reviewable, what the bank decided as a lender is not.

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 C, a medium enterprise with a turnover of 200 crore rupees. Weaker sections is an overlapping head that counts the borrower rather than the activity, and the Directions list small and marginal farmers, artisans with a credit limit up to two lakh rupees, beneficiaries of government sponsored schemes, Scheduled Castes and Scheduled Tribes, beneficiaries of the differential rate of interest scheme, self-help groups and joint liability groups, individual women up to two lakh rupees, distressed farmers, persons with disabilities, transgender persons and notified minority communities. A medium enterprise of that size is nowhere in that list, and for domestic banks such lending counts towards the overall achievement only within a 15 per cent cap. Options A, B and D are wrong because self-help groups, persons with disabilities and Scheduled Caste and Scheduled Tribe borrowers are each named in the list.

The correct answer is B, 10 branches. Under the Reserve Bank's Internal Ombudsman arrangement, every bank with ten or more branches must appoint an Internal Ombudsman, a senior person who is not an ordinary employee of the bank and who reports to its board. Every complaint the bank intends to reject wholly or partly must be placed before the Internal Ombudsman before the final reply goes to the customer, so an independent reviewer sees the rejection inside the bank itself. Option A is wrong because five branches is not the threshold, and such small banks are covered only through the external ombudsman. Option C and Option D are wrong because thresholds of twenty-five and a hundred branches would leave most banks outside the requirement, defeating its purpose of catching rejections early.

The correct answer is B, Adjusted Net Bank Credit or the Credit Equivalent of Off-Balance Sheet Exposure, whichever is higher. The base is deliberately a credit figure and not a deposit figure, because the obligation is about where a bank lends. Adjusted Net Bank Credit starts from bank credit in India, with adjustments the Directions specify, and the off-balance sheet figure captures exposures such as guarantees; the higher of the two is taken as on the corresponding date of the preceding year. Option A is wrong because deposits are the source of funds, not the measure of lending, and a bank with few deposits may still lend heavily. Option C is wrong because profit varies with provisioning and would make the target swing year to year. Option D is wrong because capital and reserves are the base for capital adequacy and exposure norms, not for priority sector targets.

The correct answer is A, Right to Suitability. The Charter of Customer Rights issued by the Reserve Bank in 2014 lists five rights: the Right to Fair Treatment, the Right to Transparency, Fair and Honest Dealing, the Right to Suitability, the Right to Privacy, and the Right to Grievance Redress and Compensation. The Right to Suitability means a product offered must fit the customer's needs, means and understanding, and it is the right that mis-selling of insurance or investment products through bank counters violates. Option B is wrong because no charter promises credit free of cost; lending remains a commercial decision. Option C is wrong because minimum balance requirements are a matter of each bank's disclosed policy. Option D is wrong because withdrawal limits are set by product terms and by regulation.