Banking & Financial Awareness Mixed Quiz: Set 26

The correct answer is C, three lakh rupees. The framework defines a microfinance loan by the borrower's household income rather than by the size of the loan or the kind of lender, and the same definition applies to a bank, a small finance bank, an NBFC and an NBFC-MFI alike, which was the main reform the framework brought. Option A, one lakh, and option B, two lakh, are the rural and urban limits of the older regime, which distinguished between the two and which the present framework replaced with a single figure. Option D, five lakh, is not a threshold in this framework at all. Two other numbers belong with this one: the monthly repayment obligations of a household may not exceed fifty per cent of its monthly household income, and an NBFC-MFI must hold at least seventy-five per cent of its total assets as microfinance loans.

The correct answer is B, IRDAI. The Insurance Regulatory and Development Authority of India is the statutory regulator of insurance, created under the IRDA Act 1999 after the Malhotra Committee recommended opening the sector to private and foreign capital; it licenses life, general, health and reinsurance companies and registers agents, brokers and surveyors, and its headquarters is at Hyderabad. Option A is wrong; the Securities and Exchange Board of India regulates the securities market, which means stock exchanges, depositories, brokers, merchant bankers, mutual funds and the disclosures of listed companies. Option C is wrong; the Pension Fund Regulatory and Development Authority regulates the National Pension System and the Atal Pension Yojana, and although an annuity is bought from an insurer at the end of a pension account, the insurer itself answers to IRDAI. Option D is wrong; the Reserve Bank regulates banks, non-banking financial companies and payment systems, not insurers, even where a bank sells insurance as a corporate agent.

The correct answer is B, SEBI. The Forward Markets Commission had regulated forward and commodity derivative trading since 1953 under the Forward Contracts (Regulation) Act 1952 and worked under the Ministry of Finance in its last years; it was merged into the Securities and Exchange Board of India on 28 September 2015, the first merger of two financial regulators in India, and commodity derivatives exchanges now come under the Securities Contracts (Regulation) Act. Option A is wrong; the Reserve Bank regulates the currency and interest rate derivatives traded by banks, but not the commodity exchanges. Option C is wrong; IRDAI has nothing to do with commodity markets, and insurers face limits on how far they may use derivatives at all. Option D is wrong; NABARD refinances rural and agricultural credit and supervises Regional Rural Banks and cooperative banks, and although commodity markets matter to farmers, it is not a market regulator.

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, fifty per cent. The cap covers the repayment of all loans of the household taken together, not only the microfinance loan being considered, and the lender must assess household income and existing debt before sanctioning, which is the framework's main protection against over-indebtedness. Option A, twenty-five per cent, is too low and is not used anywhere in the framework. Option B, forty per cent, is an invented figure that sounds plausible because lenders often use a similar ratio in retail lending practice. Option D, sixty per cent, is likewise wrong. Learn the three numbers of the framework as one set: three lakh rupees of annual household income to define a microfinance loan, fifty per cent of monthly income as the repayment cap, and seventy-five per cent of total assets as the minimum microfinance portfolio of an NBFC-MFI.

The correct answer is A, the Tarapore Committee. The committee chaired by S. S. Tarapore reported in 1997 and again in 2006 on capital account convertibility, that is the freedom to convert the rupee for capital transactions, and it set out preconditions such as fiscal consolidation, a low rate of inflation, a strengthened banking system and a low level of non-performing assets. Option B, the Verma Committee of 1999, examined the restructuring of weak public sector banks. Option C, the Ghosh Committee of 1992, reported on frauds and malpractices in banks. Option D, the Goiporia Committee of 1991, reported on customer service in banks, a subject revisited by the Damodaran Committee of 2011. The rupee is already convertible on the current account, so the whole debate this committee addressed is about the capital account.

The correct answer is B, the Union Finance Minister. The Financial Stability and Development Council was set up in 2010 by an executive order of the Government, following a recommendation of the Raghuram Rajan Committee on financial sector reforms, and it is chaired by the Union Finance Minister with the heads of the regulators, the Finance Secretary and senior officials as members. It has no statutory powers and regulates no entity; it watches systemic risk, coordinates among regulators and takes up financial inclusion and literacy. Option A is wrong; the Governor of the Reserve Bank is a member of the Council, not its chairperson, although the Governor does chair the sub-committee of the Council. Option C is wrong; the SEBI chairperson is likewise only a member. Option D is wrong; the Prime Minister chairs several other national bodies, among them the NITI Aayog governing council, but not the FSDC.

The correct answer is B, 10 years. Under the Sukanya Samriddhi Account Scheme a guardian may open an account in the name of a girl child who has not completed ten years of age, and a family may hold two such accounts, or three where twins or triplets are born. Option A, eight years, is wrong and is simply a lower number offered to unsettle the candidate. Option C, twelve years, is wrong; no age relaxation to twelve exists in the scheme rules. Option D, fourteen years, is wrong, although fourteen may be confused with the fifteen years for which deposits have to be made into the account. Remember the three numbers of this scheme in order: open before ten, deposit for fifteen years, mature at twenty-one years from opening.

The correct answer is B, NABARD. The National Bank for Agriculture and Rural Development launched the programme as a pilot in 1992, connecting savings groups, mostly of women, directly to bank branches for credit, and by the number of households covered it became the largest microfinance programme in the world. Option A, SIDBI, the Small Industries Development Bank of India, supports small industry and refinances microfinance institutions, and MUDRA was set up as its subsidiary in April 2015, but the linkage programme is not its scheme. Option C, the Reserve Bank of India, supported the programme and issued the enabling instructions to banks, but it is the regulator and not the promoter. Option D, the State Bank of India, is a participating bank. NABARD itself was established in July 1982 under an Act of 1981.

The correct answer is B, 1966. The ADB was established in 1966 to lend for development in Asia and the Pacific, and India was one of its founding members, which is a fact papers like to pair with the year. Option A is wrong because 1956 is associated in Indian banking history with the nationalisation of life insurance and the second five year plan, not with the ADB. Option C is wrong because 1976 is the year the Regional Rural Banks Act came into force in India, a domestic milestone. Option D is wrong because 1986 saw the founding of the Indira Gandhi National Open University and other national bodies, again unrelated. Remember the sequence 1930 for the BIS, 1944 for Bretton Woods, 1966 for the ADB and 2016 for the AIIB.

The correct answer is B, NPCI. The National Payments Corporation of India was set up in 2008 by the Reserve Bank of India and the Indian Banks Association as a not-for-profit company under the companies law, and it operates the retail payment systems of the country, among them the Unified Payments Interface, RuPay, IMPS, NACH, AePS and the FASTag network. It is an operator and an umbrella organisation, and it is itself regulated by the Reserve Bank under the Payment and Settlement Systems Act 2007. Option A is wrong as an answer because the Insolvency and Bankruptcy Board of India is a statutory regulator, of insolvency professionals, their agencies, information utilities and registered valuers. Option C is wrong because the Pension Fund Regulatory and Development Authority is a statutory regulator of the National Pension System. Option D is wrong because SEBI is the securities market regulator. The FSDC is the other common answer to a question framed this way.

The correct answer is C, Thrice the sum involved. Section 13 provides that a person contravening the Act is liable to a penalty of up to three times the sum involved where that sum is quantifiable, and up to two lakh rupees where it is not quantifiable, and a continuing contravention attracts a further five thousand rupees for every day it continues. Option A is wrong because a penalty equal to the sum involved is only the floor of what may be imposed, not the ceiling fixed by the section. Option B is wrong because twice the sum appears in some other revenue statutes and not here. Option D is wrong because five times the sum involved is not the FEMA limit; candidates often confuse it with higher multiples found in tax penalty provisions, so the figure to remember for FEMA is three.

The correct answer is A, the Grameen Bank of Bangladesh. Muhammad Yunus built the bank on the idea that very small loans without collateral, given mostly to women organised in groups that guarantee one another, are repaid reliably, and the Nobel Peace Prize of 2006 was awarded jointly to him and to the bank. Option B, Bank Rakyat of Indonesia, is a large state bank with a well-known microfinance arm but is not connected to the prize. Option C, BRAC, is also a Bangladeshi organisation working in microfinance and development, which makes it the closest distractor in the set. Option D, Bandhan Bank, is Indian: it began as a microfinance institution, received a universal banking licence and started operations in 2015, and it is the Indian parallel to the Grameen story rather than the answer here.

The correct answer is A, Canara Bank. Under the amalgamation notified with effect from 1 April 2020, Syndicate Bank was merged into Canara Bank. Both banks had their roots in coastal Karnataka, Canara Bank at Mangaluru and Syndicate Bank at Udupi, so the merged bank kept a strong base in the same region.

Option B, Union Bank of India, absorbed Andhra Bank and Corporation Bank in the same round. Option C, Indian Bank, absorbed Allahabad Bank. Option D, Bank of Baroda, had already absorbed Vijaya Bank and Dena Bank a year earlier, from 1 April 2019. The four anchor banks of the 2020 round were Punjab National Bank, Canara Bank, Union Bank of India and Indian Bank, and remembering which six banks went into which of the four is the whole of this question.

The correct answer is A, DICGC. The Deposit Insurance and Credit Guarantee Corporation is a wholly owned subsidiary of the Reserve Bank of India and insures deposits in commercial banks, local area banks, regional rural banks, small finance banks, payments banks and cooperative banks; the cover was raised to five lakh rupees per depositor per bank in 2020, and it applies to the total of savings, current, recurring and fixed deposits held in the same right and capacity. Option B is wrong; the Life Insurance Corporation sells life insurance and is itself a regulated insurer under IRDAI, with no role in protecting bank deposits. Option C is wrong; IRDAI regulates insurers but does not run the deposit insurance scheme, which is a banking arrangement under its own Act of 1961. Option D is wrong; the Small Industries Development Bank of India, at Lucknow, is the apex financier of micro, small and medium enterprises.

The correct answer is C, Real Time Gross Settlement. RTGS is the system in which a transfer instruction is settled singly and immediately, rather than being held and netted off with others. Real time means the instruction is processed the moment it is received, and gross means every instruction is settled on its own without being set against any other. It is used for large value transfers, with a minimum of two lakh rupees and no upper limit fixed by the Reserve Bank of India, and it is available round the clock on all days.

Options A, B and D mix the words in ways that sound familiar but are wrong. The word scheme in A and D is the giveaway, because RTGS is a settlement system run by the Reserve Bank and not a scheme. Option B keeps the correct last word but replaces real time with rapid transfer. The contrast to remember is NEFT, which settles in half hourly batches, against RTGS, which settles instruction by instruction.

The correct answer is C, the one rupee note. It is issued by the Government of India under the Coinage Act and carries the signature of the Finance Secretary rather than of the Governor of the Reserve Bank; all coins are likewise issued by the Government, while the Reserve Bank only distributes them. The one rupee note is also the only note that is a rupee coin in law, which is why it is treated differently. Options A, B and D are all wrong for the same reason: notes of two, five, ten and every higher denomination are issued by the Reserve Bank of India under Section 22 of the Reserve Bank of India Act 1934, which gives the Bank the sole right of note issue in the country, and they carry the Governor signature. Candidates who remember only that the Reserve Bank is the note issuing authority miss the single exception, which is exactly why this question is set.

The correct answer is C, rupees fifty thousand. A small account is opened for a person who has no officially valid document, on the strength of a self-attested photograph and a signature or thumb impression made before a bank officer. Because identification is weak, the account carries three limits: the balance at any time may not exceed fifty thousand rupees, the total credits in a financial year may not exceed one lakh rupees, and withdrawals and transfers together may not exceed ten thousand rupees in a month.

Option A, ten thousand rupees, is the monthly withdrawal ceiling and not the balance limit. Option B is not a limit in the rules. Option D, one lakh rupees, is the annual credit ceiling. The three figures belong together, so the safe way to answer is to remember them as a set: fifty thousand balance, one lakh a year, ten thousand a month, valid for twelve months in the first instance.

The correct answer is B, 1982. The National Bank for Agriculture and Rural Development began work on 12 July 1982 under an Act of 1981, on the recommendation of the Sivaraman Committee, taking over the agricultural credit functions of the Reserve Bank and the refinance business of the Agricultural Refinance and Development Corporation; it has its head office at Mumbai and supervises Regional Rural Banks and cooperative banks. Option A, 1975, is the year the first five Regional Rural Banks were set up, on 2 October, and is the distractor that catches candidates who remember only that rural credit grew in the nineteen seventies. Option C, 1990, is the year SIDBI began, on 2 April, as the apex body for small industry. Option D, 1999, belongs to IRDAI. Keep the four years apart as 1975 for Regional Rural Banks, 1982 for NABARD, 1990 for SIDBI and 1988 for the National Housing Bank.

The correct answer is B, the Transfer of Property Act, 1882. Section 58 of that Act defines a mortgage as the transfer of an interest in specific immovable property to secure a loan, and it names six kinds: simple mortgage, mortgage by conditional sale, usufructuary mortgage, English mortgage, mortgage by deposit of title deeds, which is also called an equitable mortgage, and the anomalous mortgage. Banks use the simple mortgage and the mortgage by deposit of title deeds most often in housing finance.

Option A, the Indian Contract Act of 1872, governs pledge and lien, which are charges on movable goods. Option C, the Negotiable Instruments Act of 1881, deals with cheques, bills of exchange and promissory notes. Option D, the Banking Regulation Act of 1949, governs the licensing and working of banks themselves, not the creation of security over land.