Banking & Financial Awareness Mixed Quiz: Set 27

The correct answer is B, the Securities and Exchange Board of India. Credit rating agencies rate securities offered to the public, so they fall within the securities market and work under the SEBI (Credit Rating Agencies) Regulations of 1999, framed under the SEBI Act of 1992; no agency may rate a public issue of debt without registration with SEBI. Option A is wrong because the Reserve Bank regulates the other family in this chapter, the credit information companies or credit bureaus, under the Credit Information Companies (Regulation) Act of 2005, and it also accredits agencies for limited purposes such as the risk weights on bank exposures. Option C is wrong because IRDAI regulates insurers. Option D is wrong because the Ministry of Finance frames policy and moves legislation but does not itself register market intermediaries, which is the work of the statutory 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 B, the Reserve Bank of India Act, 1934. The Finance Act, 2022 amended Section 2 of the Reserve Bank of India Act so that the expression bank note includes a bank note issued in digital form, which gave the digital rupee the status of legal tender. Option A is wrong because the Banking Regulation Act, 1949 governs the licensing, management and supervision of banking companies and has nothing to do with the issue of currency. Option C is wrong because the Payment and Settlement Systems Act, 2007 authorises and regulates payment systems such as UPI and RTGS, but a CBDC is currency and not a payment system. Option D is wrong because the Coinage Act, 2011 deals with coins, their denominations and the Government’s power to mint them; coins are issued by the Government of India, while bank notes, now including the digital rupee, are issued by the Reserve Bank.

The correct answer is B, the Nachiket Mor Committee. The committee on comprehensive financial services for small businesses and low-income households, chaired by Nachiket Mor, reported in 2014 and proposed differentiated banking licences; from its work the Reserve Bank issued guidelines for payments banks, which may accept deposits but not lend, and for small finance banks, which lend mainly to small borrowers. Option A, the P. J. Nayak Committee of 2014, reported on the governance of bank boards and proposed a bank investment company for the government's shareholding. Option C, the Khan Working Group of 1998, dealt with harmonising the roles of development financial institutions and banks, the idea of universal banking. Option D, the Vaghul Committee of 1987, reported on the money market. Two committees of the same year are the trap here, so attach Mor to licences and Nayak to boards.

The correct answer is B, the Credit Information Companies (Regulation) Act, 2005. This Act created the framework for credit bureaus, requiring them to register with the Reserve Bank of India, obliging banks and other credit institutions to become members and to furnish data, and giving borrowers the right to see and correct their own records. Option A is wrong because the SEBI Act of 1992 governs the securities market and, through regulations of 1999, the credit rating agencies, which are a different set of bodies. Option C is wrong because the Banking Regulation Act of 1949 deals with the licensing and conduct of banks themselves. Option D is wrong because the Reserve Bank of India Act of 1934 constitutes the central bank and provides for currency and monetary management; the Reserve Bank's power over credit bureaus comes from the Act of 2005, not from its own founding statute.

The correct answer is C, 21 years. The account matures twenty-one years after the date of opening, and it may close earlier if the girl marries after completing eighteen years. Option A, fifteen years, is the commonest wrong choice because deposits into the account have to be made only for fifteen years; the balance continues to earn interest for the remaining period without further deposits. Option B, eighteen years, is wrong, although at eighteen the girl becomes eligible to withdraw half the balance or to close the account on marriage, which is where the confusion comes from. Option D, twenty-five years, is wrong and has no place in the scheme. The deposit period and the maturity period being different is exactly the point a paper setter tests here.

The correct answer is C, the settlement of secondary market transactions in Government securities. The wholesale pilot began on 1 November 2022 with a small group of banks, and its first use case was settling the secondary market leg of Government security trades, because that removes the need for a separate settlement guarantee arrangement and frees collateral. Option A is wrong because merchant payments belong to the retail pilot, e₹-R, which began a month later on 1 December 2022. Option B is wrong because cross-border use has been discussed as a later possibility but was not the first wholesale use case. Option D is wrong because subsidy transfers run through the direct benefit transfer system using ordinary bank accounts and the Aadhaar Payment Bridge; programmable CBDC has only been tested for such purposes, not deployed as the pilot’s first use.

The correct answer is B, the Hilton Young Commission. Formally the Royal Commission on Indian Currency and Finance, it reported in 1926 and recommended a central bank separate from the Imperial Bank of India; the recommendation led to the Reserve Bank of India Act 1934, and the Bank began work on 1 April 1935 with its central office at Calcutta, which moved permanently to Bombay in 1937. Option A is wrong; the Narasimham Committee reported on banking sector reform in 1991 and again in 1998, long after the Bank existed, and gave India the capital adequacy and prudential norms of the reform years. Option C is wrong; the Chakravarty Committee of 1985 reviewed the working of the monetary system and shaped monetary targeting. Option D is wrong; the Sivaraman Committee, the Committee to Review Arrangements for Institutional Credit for Agriculture and Rural Development, led to the founding of NABARD in 1982, which is the distractor most often chosen.

The correct answer is C, CRISIL. The Credit Rating Information Services of India Limited was set up in 1987 as India's first credit rating agency, promoted by ICICI and the Unit Trust of India, and the global firm S and P Global later became its majority shareholder. Option A is wrong because ICRA, the Investment Information and Credit Rating Agency of India Limited, came four years later in 1991, promoted by IFCI, and is now majority held by Moody's. Option B is wrong because CARE, the Credit Analysis and Research Limited, was set up in 1993 and promoted by IDBI, making it the third of the Indian agencies. Option D is wrong because Brickwork Ratings is a much later entrant. The order to memorise is CRISIL in 1987, ICRA in 1991 and CARE in 1993, each promoted by a different development finance institution.

The correct answer is C, China. The AIIB was proposed by China in 2013 and began operations in January 2016 with its headquarters at Beijing, and China holds the largest share in its capital. Option A is wrong, but only just: India is the second largest shareholder of the AIIB and has been among its largest borrowers, for metro rail, rural roads, power and water supply projects. Option B is wrong because Russia, though a large shareholder, stands below India in the order. Option D is wrong because Japan is not a member of the AIIB at all; Japan and the United States are instead the two largest shareholders of the Asian Development Bank. Hold the pair China first and India second for the AIIB.

The correct answer is B. The digital rupee is money, a liability of the Reserve Bank, so a transfer from one wallet to another is final the moment it happens and no interbank settlement follows. UPI, by contrast, is a payment instruction system run by the National Payments Corporation of India that moves money already held as a deposit in a bank account, and the banks settle between themselves afterwards. Option A is wrong because the digital rupee is issued by the Reserve Bank and is not an NPCI product at all. Option C is wrong and reverses the position: the digital rupee is legal tender under the amended Reserve Bank of India Act, while UPI is only a way of giving a payment instruction and can never be legal tender. Option D is wrong because the digital rupee deliberately pays no interest, so that savers are not drawn away from bank deposits.

The correct answer is C, 2016. UPI was launched by NPCI in 2016, and the BHIM application followed in December of the same year, which is why 2016 is the single most asked year in this topic. Option A is wrong because 2010 is the year of IMPS, the instant transfer service on which UPI was later built. Option B is wrong because 2012 belongs to RuPay, the domestic card network. Option D is wrong because 2019 is the year NEFT became available at all hours and the National Common Mobility Card was launched, not the year of UPI. A clean timeline answers a whole family of questions: the National Financial Switch taken over in 2009, IMPS in 2010, RuPay in 2012, UPI and BHIM in 2016, e-RUPI in 2021 and UPI 123PAY in 2022. Note also that UPI was launched as a pilot first and reached ordinary users through bank apps in the same year.

The correct answer is C, 300 to 900. TransUnion CIBIL computes its score for individual borrowers on a scale from 300 at the lowest to 900 at the highest, and a few months of credit history are needed before any score can be generated; a person who has never borrowed is shown with a no history marker rather than the lowest score. Option A is wrong because 0 to 100 is a percentage scale and is not used for credit scores in India. Option B is wrong because 100 is not the floor of the scale, though the distractor is tempting because the ceiling of 900 is right. Option D is wrong because 300 to 850 is the range of the FICO score used in the United States, which is the most plausible wrong answer of the four. Lenders in India commonly treat a score of about 750 and above as comfortable.

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, the Financial Information Provider. An FIP is the institution that already holds the customer’s data — a bank, a non-banking finance company, an insurer, a mutual fund or a pension fund — and releases it when a valid consent artefact is presented. Option A is wrong because the Financial Information User is the institution at the receiving end, which needs the data to give a service, such as a lender appraising a loan. Option C is wrong because the consent manager is the Account Aggregator itself, the data-blind pipe that may not store, use or sell what passes through it. Option D is wrong because a Lending Service Provider is an agent that sources or services loans for a regulated lender under the digital lending guidelines of 2022; it is part of the lending chain and not of the Account Aggregator framework at all.

The correct answer is C, India Post Payments Bank. It was launched on the first of September 2018, is wholly owned by the Government of India and operates under the Department of Posts, using the post office network and postal staff to reach customers, which makes it the payments bank with the widest physical reach in the country. Option A, Airtel Payments Bank, was the first payments bank in India to begin operations, in January 2017, and is promoted privately rather than by the government, which is why it is the strongest distractor in a question about firsts. Option B, Fino Payments Bank, is another privately promoted payments bank. Option D, Capital Small Finance Bank of Jalandhar, belongs to the other category altogether and was the first small finance bank to begin operations, in April 2016. Keep the two firsts and the government owned bank distinct.

The correct answer is B, IFCI. The Investment Information and Credit Rating Agency of India Limited was set up in 1991 with the Industrial Finance Corporation of India as its promoter, and Moody's later acquired a majority stake in it. Option A is wrong because IDBI, the Industrial Development Bank of India, promoted CARE, the Credit Analysis and Research Limited, in 1993. Option C is wrong because ICICI promoted CRISIL in 1987 along with the Unit Trust of India, making CRISIL the country's first rating agency. Option D is wrong because SIDBI, the Small Industries Development Bank of India, was itself set up in 1990 to finance small industry and did not promote a rating agency of this kind. The pattern worth noting is that each of India's first three rating agencies was floated by a different development finance institution.

The correct answer is B, 2008. The National Payments Corporation of India was incorporated in 2008 at the initiative of the Reserve Bank of India and the Indian Banks’ Association as the umbrella organisation for retail payments in India, and it is a not-for-profit company under what is now Section 8 of the Companies Act. Option A is wrong because 2005 precedes even the Payment and Settlement Systems Act, which was passed in 2007 and is the law under which NPCI’s systems are authorised. Option C is wrong because 2010 is the year in which NPCI launched the Immediate Payment Service, IMPS, not the year it was founded. Option D is wrong because 2016 is the year in which NPCI launched the Unified Payments Interface, its best known product; candidates often give the UPI year for the NPCI year, which is the trap in this question.

The correct answer is D, CARE Ratings. CARE is a credit rating agency registered with SEBI, which rates debt instruments and the companies that issue them; it does not keep the credit histories of individuals. Four credit information companies operate in India under the Act of 2005, registered with the Reserve Bank: TransUnion CIBIL, Equifax Credit Information Services, Experian Credit Information Company of India and CRIF High Mark. Option A is wrong as an answer because CIBIL, incorporated in August 2000, is in fact the oldest of the four. Option B is wrong because Equifax is one of the four, the Indian arm of a global bureau. Option C is wrong because CRIF High Mark is the fourth of them and is known for its coverage of microfinance borrowers. The distinction being tested is instrument ratings against individual credit records.

The correct answer is C, which is the incorrect statement. The retail digital rupee earns no interest, and this is a deliberate design decision: an interest-bearing CBDC would pull money out of bank deposits and shrink the funds banks have to lend, so the Reserve Bank kept it non-interest bearing like cash. Option A is correct and therefore not the answer, because e₹-R is a token-based bearer instrument held in a wallet offered by a bank. Option B is correct because the retail digital rupee is issued in the same denominations in which coins and bank notes are now issued. Option D is correct because both pilots follow the intermediated model, in which the Reserve Bank issues the digital rupee and banks distribute it, open the wallets and handle customer service, just as they distribute cash.