Banking & Financial Awareness Mixed Quiz: Set 24

The correct answer is B, CRAFICARD, chaired by B. Sivaraman. The Committee to Review Arrangements for Institutional Credit for Agriculture and Rural Development, known by the short name CRAFICARD, recommended a single apex institution for rural and agricultural credit, and NABARD was established in July 1982. Option A, the Narasimham Working Group of 1975, recommended the regional rural banks, the first of which opened on 2 October 1975, and this is the pairing most often confused with NABARD. Option C, the Khusro Committee, reviewed the agricultural credit system later, in 1989, but did not create NABARD. Option D, the Gadgil Study Group, is associated with the Lead Bank Scheme introduced in 1969, under which one bank takes charge of the credit needs of a district. Keep Sivaraman with NABARD and Narasimham with the regional rural banks.

The correct answer is A, the Hilton Young Commission. The Royal Commission on Indian Currency and Finance, known after its chairman as the Hilton Young Commission, reported in 1926 and recommended a central bank for India; the recommendation was carried out by the Reserve Bank of India Act of 1934, and the Reserve Bank began its operations on 1 April 1935. Option B, the Narasimham Committee, reported in 1991 and 1998 on the reform of the banking system that already existed, and crediting it with the creation of the Reserve Bank is the commonest error in this chapter. Option C, the Chakravarty Committee of 1985, reviewed the working of the monetary system. Option D, the Malhotra Committee of 1993, dealt with the insurance sector and led to the setting up of the insurance regulator.

The correct answer is C, 60 years. The scheme, which began in 2004, is open to an individual who has attained sixty years, and it has a term of five years that can be extended by three years, with interest paid every quarter. Option A, fifty-five years, is wrong as a general rule but is the strongest distractor, because a person who retires under a voluntary retirement or superannuation scheme may open an account after fifty-five and before sixty, within the period allowed after receiving retirement benefits. Option B, fifty-eight years, is wrong and corresponds to no provision of the scheme. Option D, sixty-five years, is wrong; there is no upper age bar, so sixty-five is permitted but is not the qualifying age. Retired defence personnel enjoy a wider relaxation than civilian retirees.

The correct answer is B, 15 years. A PPF account runs for fifteen financial years counted from the end of the year in which it is opened, and after that it can be extended in blocks of five years, with or without fresh deposits. Option A, ten years, is wrong; no small savings scheme has a ten-year term, and the shorter certificates run for five years. Option C, twenty years, is wrong because an extended PPF account reaches twenty years only after one five-year block, which is a choice made by the holder and not the original maturity. Option D, twenty-one years, is the strongest distractor; that is the maturity of the Sukanya Samriddhi Account, counted from the date of opening. Fix fifteen with the PPF and twenty-one with Sukanya Samriddhi, because these two are the usual pair in a question.

The correct answer is A, insurance. The committee chaired by R. N. Malhotra, a former Governor of the Reserve Bank, reported in 1993 on the reform of the insurance sector; it recommended opening the sector to private companies and the creation of an independent regulator, from which the Insurance Regulatory and Development Authority was set up at the end of the decade. Option B, mutual funds, come under the Securities and Exchange Board of India, which was given statutory powers by an Act of 1992. Option C, commodity markets, were regulated by the Forward Markets Commission, later merged into SEBI. Option D, cooperative banks, have been the subject of several separate working groups of the Reserve Bank. Learn Malhotra with insurance in the same way as Narasimham with banking and Tarapore with convertibility.

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 B, 5 years. The eighth issue of the National Savings Certificate is a five-year certificate on which interest is compounded annually and paid along with the principal when it matures, and deposits in it qualify for deduction under section 80C. Option A, three years, is wrong; three years is one of the terms available under the Post Office Time Deposit, not for the NSC. Option C, seven years, is wrong and recalls the discontinued ninth issue of the certificate, which ran for a longer term. Option D, ten years, is wrong because no current small savings certificate runs for ten years. The five-year block is worth remembering because the NSC, the Senior Citizens' Savings Scheme, the Monthly Income Scheme and the Recurring Deposit all share it.

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 A, working capital finance to industry. The study group chaired by P. L. Tandon reported in 1974 on the norms for bank lending for working capital, fixing acceptable levels of inventory and receivables for each industry and setting out methods of lending that limited how much of a borrower's working capital gap a bank would finance; the Chore Committee of 1979 then reviewed the cash credit system that grew out of it. Option B, priority sector lending, is governed by targets set by the Reserve Bank after bank nationalisation, not by this committee. Option C, capital adequacy, came with the Narasimham reports and the Basel norms. Option D, customer service, belongs to the Goiporia Committee of 1991 and the Damodaran Committee of 2011. Remember Tandon and Chore as a pair on working capital.

The correct answer is C, USD 2,50,000. Under the Liberalised Remittance Scheme every resident individual, including a minor, may freely remit up to two lakh fifty thousand United States dollars in a financial year running from April to March, for any permitted current or capital account transaction or a combination of the two. The scheme is not available to companies, partnership firms, Hindu undivided families or trusts, and the Permanent Account Number must be quoted. Option A is wrong because twenty-five thousand dollars was the limit when the scheme began in 2004 and has been raised several times since. Option B is wrong because one lakh dollars is one of those intermediate limits and is now out of date. Option D is wrong because ten lakh dollars is the annual ceiling for repatriation from an NRO account, a different rule.

The correct answer is B, Kisan Vikas Patra. The Kisan Vikas Patra is sold as a certificate that doubles the amount invested over a period notified by the government, and that period moves up or down as the interest rate is revised. Option A, the National Savings Certificate, is wrong; it is a five-year certificate on which interest accumulates but the amount does not double. Option C, the Public Provident Fund, is wrong because it is a fifteen-year account with annual deposits, not a single certificate with a doubling promise. Option D, the Post Office Monthly Income Scheme, is wrong since it pays interest out every month and returns the principal at the end of five years. Note also that the Kisan Vikas Patra gets no deduction under section 80C, unlike the NSC.

The correct answer is B, the Nachiket Mor Committee. The Reserve Bank set up the Committee on Comprehensive Financial Services for Small Businesses and Low Income Households under Nachiket Mor in September 2013, and its report recommended differentiated bank licences, including payments banks, as a faster route to financial inclusion than waiting for full service banks to expand. Option A, the Narasimham Committee, reported in 1991 and 1998 on banking sector reform, capital adequacy and the structure of public sector banks, a full generation earlier. Option C, the Raghuram Rajan Committee on financial sector reforms, reported in 2008 and did discuss small banks, which makes it a genuine distractor, but the guidelines of 2014 followed the Mor Committee. Option D, the Urjit Patel Committee, recommended the move to inflation targeting and the monetary policy framework, which is a separate subject altogether.

The correct answer is A, governance of the boards of banks. The committee to review governance of boards of banks in India, chaired by P. J. Nayak, reported in 2014 that public sector banks were handicapped by the manner of appointment of their directors and by the government's dual role as owner and policy maker, and it proposed transferring the government's shareholding to a bank investment company. Option B, microfinance institutions, was the subject of the Y. H. Malegam Committee of 2011, after which the Reserve Bank created the NBFC-MFI category. Option C, the resolution of stressed loans, was the subject of the K. V. Kamath Committee of 2020, which set the financial parameters for resolution after the pandemic. Option D, the financing of infrastructure, was examined by the Deepak Parekh Committee of 2007.

The correct answer is B, 1962. The Deposit Insurance Corporation, created under the Deposit Insurance Act, 1961, began functioning on 1 January 1962, and that is the date from which bank deposits in India have been insured. The step followed a spell of bank failures at the end of the 1950s, the collapse of the Palai Central Bank in 1960 being the one usually named as the immediate push. Option A is wrong because 1949 is the year of the Banking Companies Act, later renamed the Banking Regulation Act, and also the year the Reserve Bank of India was nationalised. Option C is wrong because 1969 is the year fourteen major commercial banks were nationalised. Option D is wrong because 1978 is when the Deposit Insurance Corporation merged with the Credit Guarantee Corporation to form the present Corporation. Every wrong option here is a genuine banking milestone, which is precisely why the question works.

The correct answer is B, the National Small Savings Fund. The fund was created in 1999 in the Public Account of India, all small savings collections flow into it, and the Centre and the States draw loans from it, which is why small savings are treated as a source of government borrowing. Option A is wrong; the Consolidated Fund of India under Article 266 holds the government's revenues and loans raised, and money from it can be withdrawn only by law, whereas the small savings fund sits in the Public Account. Option C is wrong because the Contingency Fund of India under Article 267 is a small fund at the disposal of the President for unforeseen expenditure. Option D is wrong since the National Investment Fund was created to hold the proceeds of disinvestment of government holdings in public sector companies.

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 A, frauds and malpractices in banks. The committee chaired by A. Ghosh reported in 1992 on frauds and malpractices in banks and recommended systems of internal control, a separate vigilance machinery and rules for the prevention and early detection of fraud. The same year the Janakiraman Committee examined the securities transactions of banks after the stock market scam, so the two reports of 1992 must be kept apart. Option B, money market reform, belongs to the Vaghul Committee of 1987. Option C, weak public sector banks, was the subject of the Verma Committee of 1999, which classified banks by their financial strength. Option D, agricultural credit, was reviewed by the Khusro Committee of 1989 and, earlier, by CRAFICARD, which recommended NABARD.

The correct answer is B, the SARFAESI Act, 2002. Its full name is the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, and Section 13 lets a secured creditor issue a demand notice under sub-section (2) giving the borrower sixty days to pay and, on default, take possession of the secured asset under sub-section (4) without approaching a court or tribunal. Option A is wrong because the Act of 1993 works through the Debt Recovery Tribunals, which are adjudicating bodies. Option C is wrong because the Code of 2016 is a court-driven insolvency process before the National Company Law Tribunal. Option D is wrong because the money laundering Act of 2002 deals with attachment of the proceeds of crime, not with recovery of a bank's dues.

The correct answer is B. The Department of Economic Affairs in the Ministry of Finance notifies the rates at the start of every quarter, and since the Shyamala Gopinath Committee reported in 2010 the rates are linked to the yields on government securities of comparable maturity, with a spread for some schemes. Option A is wrong; the Reserve Bank sets the policy repo rate and regulates bank interest, but it does not fix small savings rates. Option C is wrong because the Budget may announce a new scheme, as it did for the Mahila Samman Savings Certificate, without fixing the quarterly rates. Option D is wrong since the Department of Posts only sells and services the schemes through post offices; it does not decide the rate at which they pay.

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.