Banking & Financial Awareness Mixed Quiz: Set 21

The correct answer is B, C. Rangarajan. The Committee on Financial Inclusion chaired by C. Rangarajan submitted its report in 2008 and gave the definition of financial inclusion that policy documents still quote, as the process of ensuring access to financial services and timely and adequate credit to vulnerable groups at an affordable cost. Option A is wrong because Nachiket Mor chaired the Committee on Comprehensive Financial Services for Small Businesses and Low Income Households, which reported in 2014 and proposed differentiated banks. Option C is wrong because Raghuram Rajan chaired the Committee on Financial Sector Reforms, which reported in 2009, and later served as Governor of the Reserve Bank. Option D is wrong because Deepak Mohanty chaired the Committee on Medium-term Path on Financial Inclusion, which reported in 2015.

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, The High Court on a question of law. Under FEMA a contravention is adjudicated by an Adjudicating Authority, an appeal from that order goes to the Appellate Tribunal, and from the Tribunal an appeal lies to the High Court, but only on a question of law and within the period the Act allows. Option A is wrong because the Reserve Bank administers the Act and may compound contraventions, but it sits nowhere in the appellate chain. Option B is wrong because the Adjudicating Authority is the first stage, below the Tribunal, so an appeal cannot travel back to it. Option D is wrong because the Directorate of Enforcement is the investigating agency that brings the case, and an accused person obviously does not appeal to the prosecutor.

The correct answer is A, Foreign Exchange Regulation Act, 1973. FERA suited an economy short of foreign exchange: it presumed every transaction forbidden unless allowed, made a contravention a criminal offence punishable with imprisonment, and placed the burden of proof on the accused. FEMA repealed it and made contraventions civil and compoundable. Option B is wrong because the Prevention of Money Laundering Act of 2002 came three years after FEMA and runs alongside it, dealing with the criminal offence of laundering the proceeds of crime. Option C is wrong because the Banking Regulation Act of 1949 governs the business of banking and is still in force. Option D is wrong because the COFEPOSA Act of 1974 provides for preventive detention in smuggling cases and was not replaced by FEMA.

The correct answer is B, Mumbai. The Reserve Bank of India has had its central office at Bombay, now Mumbai, since 1937, and it has stayed there ever since. Option A is wrong, but it is the strongest distractor, because the Reserve Bank was established on 1 April 1935 with its central office at Calcutta, and the office was moved two years later; a question that asks where the Reserve Bank was first located does take Kolkata as the answer. Option C is wrong because New Delhi is the seat of the central government and of the finance ministry, not of the central bank. Option D is wrong because Chennai is the headquarters of Indian Bank and Indian Overseas Bank, two public sector banks, but not of the Reserve Bank.

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, Basel. The Bank for International Settlements was set up in 1930 at Basel in Switzerland and still works from there, which is why the capital standards drafted under its roof are called the Basel norms. Option A is wrong because Geneva hosts the World Trade Organization, the World Health Organization and the International Labour Organization, but not the BIS. Option C is wrong because Vienna is the seat of the International Atomic Energy Agency and of OPEC, which have nothing to do with banking supervision. Option D is wrong because Frankfurt is the home of the European Central Bank, a central bank of the euro area and itself a member of the BIS, not its host city. Fix Basel with both the BIS and the Basel Committee.

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 A, The Reserve Bank of India. Section 10 of FEMA empowers the Reserve Bank to authorise any person to deal in foreign exchange or in foreign securities as an authorised dealer, money changer, offshore banking unit or in any other way, and to revoke that authorisation in the public interest or for breach of its conditions. The public must transact only through such a person. Option B is wrong because the Ministry of Commerce and Industry frames trade policy and does not license foreign exchange dealers. Option C is wrong because the Directorate General of Foreign Trade issues importer-exporter codes and administers the foreign trade policy. Option D is wrong because the Indian Banks Association is an industry body of banks with no statutory power to authorise anyone.

The correct answer is B, twenty five per cent. At least a quarter of the banking outlets of a small finance bank must be in unbanked rural centres, which the guidelines define as centres with a population of up to 9,999 according to the latest census, the same definition used for universal banks; the requirement exists so that a bank licensed in the name of financial inclusion actually opens where banking is absent. Option A, ten per cent, is too low and has no basis in the guidelines. Option C, fifty per cent, is the share of the loan portfolio that must be in loans of up to twenty five lakh rupees, so it belongs to a different rule in the same chapter. Option D, seventy five per cent, is the priority sector lending target and the payments bank investment ratio, and it is the figure most often misplaced by candidates, since seventy five and twenty five recur through this chapter with different meanings.

The correct answer is C, Vadodara. Bank of Baroda has its head office at Vadodara in Gujarat, the city formerly called Baroda, from which the bank takes its name, and that link between the name and the city is the simplest way to remember the fact. Option A is wrong because Mumbai is the headquarters of the State Bank of India, Bank of India, Union Bank of India and Central Bank of India, and a candidate who guesses Mumbai for every bank will get this one wrong. Option B is wrong because Ahmedabad is the largest city of Gujarat but is not the seat of this bank. Option D is wrong because Surat, also in Gujarat, has no public sector bank headquartered in it. Bank of Baroda is also the one public sector bank with Gujarat as its base, which is a useful way to fix it against the four Mumbai banks.

The correct answer is C, deposits of one bank kept with another bank. Inter-bank deposits are expressly excluded, because deposit insurance exists to protect ordinary depositors and not to insure banks against one another. Option A is wrong as an answer because savings bank deposits are squarely covered. Option B is wrong because recurring deposits are covered in the same way. Option D is wrong because a current account balance is also an insured deposit; candidates sometimes assume it is excluded because it earns no interest, which is not the case. The other exclusions worth remembering are deposits of foreign governments, deposits of the Central and State Governments, deposits of a State Land Development Bank with the State co-operative bank, any amount due on a deposit received outside India, and any deposit the Corporation exempts with the prior approval of the Reserve Bank of India.

The correct answer is A, 1930. The BIS was founded in 1930, which makes it the oldest international financial institution in the world, older than the Bretton Woods institutions by fourteen years. Option B is wrong because 1944 is the year of the Bretton Woods conference, which led to the International Monetary Fund and the World Bank, both of which began work in 1945 and 1946. Option C is wrong because 1955 marks no founding of this kind in international finance. Option D is wrong because 1974 is the year the Basel Committee on Banking Supervision was created by the central bank governors of the Group of Ten countries, which is hosted by the BIS but is not the BIS itself. Keep 1930 and 1974 apart in your notes.

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 B, Bank of Baroda. India's International Bank is the line by which Bank of Baroda is best known, and it reflects the bank's long presence in overseas markets. Option A is wrong because the State Bank of India is known by the lines The Banker to Every Indian and Pure Banking, Nothing Else. Option C is wrong because Bank of India uses Relationship Beyond Banking, and the similarity of the two names, Bank of Baroda and Bank of India, is what makes this question worth setting. Option D is wrong because Indian Overseas Bank uses Good People to Grow With; the word overseas in its name tempts a candidate towards it in a question about an international bank, which is exactly the trap.

The correct answer is C, Section 138. Inserted into the Negotiable Instruments Act by the amendment of 1988, it makes the drawer of a cheque that is returned unpaid for insufficiency of funds, or because it exceeds the arrangement, punishable with imprisonment or fine, provided the payee gives notice of demand within the prescribed time and the drawer fails to pay. Option A is wrong because Section 31 of the RBI Act, and not of the NI Act, restricts who may draw instruments payable to bearer on demand. Option B is wrong because Section 118 lays down presumptions as to negotiable instruments, such as the presumption of consideration. Option D is wrong because Section 148, a later insertion, deals with the power of the appellate court to order deposit of part of the compensation during an appeal.

The correct answer is C, the Basel Committee on Banking Supervision. The committee was created in 1974 by the central bank governors of the Group of Ten countries, sits at the Bank for International Settlements in Basel, and drafts the standards that national regulators then adopt for their own banks. Option A is wrong because the IMF watches balance of payments and exchange rate stability and lends to countries in difficulty; it does not write bank capital standards. Option B is wrong because the Financial Action Task Force, based in Paris, sets standards against money laundering and terrorist financing. Option D is wrong because the World Trade Organization deals with trade rules from Geneva. Remember that the Basel norms become binding only when a central bank such as the Reserve Bank of India adopts them.

The correct answer is C, New Delhi. Punjab National Bank is headquartered at New Delhi, as is Punjab and Sind Bank, so both the public sector banks with Punjab in their names are based in the capital rather than in the state. Option A is wrong because Chandigarh, though the capital of Punjab and Haryana, has no public sector bank headquartered in it. Option B is wrong because Amritsar is the city where Punjab National Bank was founded in the late nineteenth century, which makes it the most tempting wrong answer in this set. Option D is wrong because Ludhiana is the largest industrial city of Punjab but is not the seat of either bank. The lesson is that the name of a bank points to its origin, not always to its present head office.

The correct answer is B, Manila, Philippines. The Asian Development Bank was established in 1966 and has worked from Manila since then, with field offices in its member countries including India. Option A is wrong because, although Japan holds one of the two largest shares in the bank and its president has by convention been Japanese, Tokyo is not its seat. Option C is wrong because Singapore hosts many regional offices of banks and firms but not the ADB headquarters. Option D is wrong because Jakarta is the seat of the ASEAN Secretariat, which is a different kind of body altogether. For revision, fix Manila with the ADB, Beijing with the AIIB, Shanghai with the New Development Bank and Washington DC with the IMF and the World Bank.

The correct answer is A, Kolkata. UCO Bank is headquartered at Kolkata and is the public sector bank most often asked about in connection with that city; its tagline is Honours Your Trust. Option B is wrong because Mumbai holds the State Bank of India, Bank of India, Union Bank of India and Central Bank of India among the public sector banks, as well as most of the large private banks. Option C is wrong because Bhubaneswar, the capital of Odisha, has no public sector bank headquartered in it. Option D is wrong because Patna, the capital of Bihar, likewise has none. Grouping the banks by city, with Mumbai holding four, Chennai two, New Delhi two and Kolkata one, is the fastest way to answer this whole family of questions.