Banking & Financial Awareness Mixed Quiz: Set 3

The correct answer is A, Kolkata. Bandhan began in 2001 at Kolkata as a microfinance body serving poor women in eastern India, and its head office has stayed in that city. In April 2014 the Reserve Bank gave in-principle approval for a universal bank to just two applicants - Bandhan Financial Services and IDFC Limited - out of twenty-five who applied, and Bandhan Bank opened for business in August 2015. It was the first bank of its kind to be set up in eastern India after independence, and the first microfinance lender in the country to turn into a full-service bank. Option B is wrong because Mumbai houses the Reserve Bank and many private banks, but not Bandhan. Option C is wrong because Pune is the home of Bank of Maharashtra. Option D is wrong because Lucknow has no connection with Bandhan. Exam tip: 2014 universal bank licences - Bandhan of Kolkata and IDFC; both began operations in 2015.

The correct answer is B, Banking. The Basel Norms are international standards for banking supervision.

They are issued by the Basel Committee on Banking Supervision, which works under the Bank for International Settlements at Basel in Switzerland. Their purpose is to make sure a bank holds enough capital against the risks it takes, so that losses fall on its shareholders and not on depositors. Basel I of 1988 dealt with credit risk, Basel II of 2004 added market and operational risk along with supervision and disclosure, and Basel III, framed after the crisis of 2008, raised the quality of capital and brought in liquidity and leverage rules. In India the Reserve Bank applies them and asks for a capital to risk weighted assets ratio of nine per cent.

Options A, C and D are wrong because insurance is governed by IRDAI, and the share and commodity markets by SEBI.

Exam tip: Basel Committee, Basel, Switzerland; India's CRAR requirement is nine per cent.

The correct answer is C, NABARD. The National Bank for Agriculture and Rural Development is a development financial institution set up in 1982. It refinances banks and cooperative institutions, plans rural credit and supervises cooperative banks and Regional Rural Banks, but it does not run branches to take deposits from the public, so it is not a commercial bank.

Option A, Canara Bank, founded in 1906 and nationalised in 1969, is a public sector commercial bank. Option B, HDFC Bank, licensed in the 1990s, is a private sector commercial bank. Option D, Prathama Bank, was the first Regional Rural Bank, opened at Moradabad on 2 October 1975, and Regional Rural Banks are counted among commercial banks even though they work in a limited area. The other development institutions that appear in such options are SIDBI, the EXIM Bank and the infrastructure financing institution created in 2021.

The correct answer is A. The Banking Ombudsman is a senior officer appointed by the Reserve Bank of India to hear and settle customer complaints about deficiency in banking service. The scheme was first brought in under Section 35A of the Banking Regulation Act, 1949, and the ombudsman decides complaints on matters such as delayed payment, wrongly levied charges, card and digital transaction disputes and refusal to accept small coins. A customer must first take the complaint to the bank and may approach the ombudsman when the bank does not reply in thirty days or the reply is unsatisfactory. Option B is wrong because private banks, foreign banks, regional rural banks and scheduled cooperative banks are covered too, not only public sector banks. Option C is wrong because the complainant is free to reject the award and go elsewhere; it binds the bank once accepted. Option D is wrong because the whole process is free of cost to the customer. Exam tip: the ombudsman is appointed by the RBI, complain to the bank first, and the service costs nothing.

The correct answer is D, Reserve Bank of India. Policy rates are announced by the Reserve Bank, and since 2016 the decision is taken by its Monetary Policy Committee of six members under the chairmanship of the Governor. The repo rate is the rate at which banks borrow short term funds from the Bank against government securities, and the reverse repo is the rate at which the Bank absorbs their surplus funds, so both are instruments of the central bank and not of any other body.

Option A, the Ministry of Finance, sets the inflation target in consultation with the Bank and appoints three members of the Committee, but it does not fix the rates. Option B, the State Bank of India, is a commercial bank that borrows at these rates. Option C, the Comptroller and Auditor General, audits government accounts and has no role in monetary policy at all.

The correct answer is C, 1955. The All India Rural Credit Survey Committee found that rural credit needed a bank with a nationwide branch network, so Parliament passed the State Bank of India Act, 1955, and the Imperial Bank of India was taken over and renamed the State Bank of India with effect from 1 July 1955. The Imperial Bank itself had been formed in 1921 by joining the presidency banks of Bengal, Bombay and Madras.

Option A, 1947, is the year of independence and of no banking statute of this kind. Option B, 1965, is far too late; by then the State Bank already had its associate banks under the Act of 1959. Option D, 1950, is the year the Constitution came into force, and candidates pick it by association. Note also that 1949 was the year the Reserve Bank was nationalised, which is a different event from the creation of the State Bank.

The correct answer is C, Fourteen. On 19 July 1969 the government promulgated an ordinance nationalising fourteen major commercial banks, each of which held deposits of fifty crore rupees or more. The list included Central Bank of India, Bank of India, Punjab National Bank, Bank of Baroda, Canara Bank, Union Bank of India, Allahabad Bank, Indian Bank, Indian Overseas Bank, Syndicate Bank, Dena Bank, United Bank of India, United Commercial Bank and Bank of Maharashtra.

Option A, six, is the number nationalised in the second round of 15 April 1980. Option B, eight, matches no round, although the State Bank group once had seven associate banks. Option D, twenty, is the sum of the two rounds, fourteen plus six, and is the distractor that catches most candidates. Remember the pairs as fourteen in 1969 with fifty crore rupees, and six in 1980 with two hundred crore rupees.

The correct answer is C, Promissory Note. Section 4 of the Negotiable Instruments Act, 1881 defines a promissory note as an instrument in writing, signed by the maker, containing an unconditional undertaking to pay a certain sum of money to or to the order of a certain person. The word that decides the question is undertaking, that is a promise: only two parties are involved, the maker who promises and the payee who receives. A currency note is left out of the definition even though the Reserve Bank promises to pay on it. Option B is wrong because a bill of exchange, under Section 5, carries an unconditional order to pay, not a promise, and has three parties: drawer, drawee and payee. Option A is wrong because a cheque, under Section 6, is only a bill of exchange drawn on a specified banker and payable on demand, so it too is an order. Option D is wrong because a hundi is a traditional instrument in a regional language, not defined by the Act. Exam tip: promise means promissory note, order means bill or cheque.

The correct answer is A, 1 April 1935. The Reserve Bank of India Act was passed in 1934 and the Bank began work on the first day of April in the following year, with its central office at Calcutta. It was set up as a shareholders' bank on the recommendation of the Hilton Young Commission, and its first Governor was Sir Osborne Smith.

Option B, 1 July 1955, is the day the Imperial Bank of India was reconstituted as the State Bank of India. Option C, 1 January 1949, is the day the Reserve Bank was nationalised, which is a different milestone. Option D, 1 April 1934, mixes the date of commencement with the year of the Act and is the trap that catches candidates who remember the numbers but not which belongs to which.

The correct answer is B, Immediate Payment Service. IMPS is an interbank money transfer service run by the National Payments Corporation of India, launched in November 2010. Its great advantage is that it works round the clock, on holidays and at night, and the money reaches the beneficiary within seconds. A transfer can be made using the account number with the IFSC code, or using the mobile number with the MMID, and it can be started from mobile banking, internet banking, an ATM or a branch. NPCI, set up in 2008 as an umbrella body for retail payments, also runs UPI, RuPay, NACH, AePS and FASTag. Option A is wrong because the letter S stands for service, not sector. Option C is wrong for the same reason. Option D is wrong because the first word is immediate, not instant. Exam tip: NEFT and RTGS are run by the RBI, while IMPS and UPI are run by NPCI; RTGS is meant for amounts of two lakh rupees and above.

The correct answer is B, Six. On 15 April 1980 six private banks whose deposits were two hundred crore rupees or more were nationalised: Andhra Bank, Corporation Bank, New Bank of India, Oriental Bank of Commerce, Punjab and Sind Bank, and Vijaya Bank. With these, public ownership covered the greater part of bank deposits in the country.

Option A, four, is the number of anchor banks in the amalgamation that took effect on 1 April 2020. Option C, seven, was the number of associate banks of the State Bank of India under the Act of 1959. Option D, eleven, matches no event in this sequence. Note that five of these six banks were themselves later merged away: New Bank of India into Punjab National Bank, Vijaya Bank into Bank of Baroda, Oriental Bank of Commerce into Punjab National Bank, and Andhra Bank with Corporation Bank into Union Bank of India.

The correct answer is B, Teller. ATM stands for Automated Teller Machine. A teller is the bank employee who takes and pays out cash at the counter, and the machine was built to do that same job without a person, which is how it got the name. The first ATM in India was installed by HSBC in Mumbai in 1987. Machines set up and run by non-bank companies, under the rules of the Reserve Bank, are called White Label ATMs, the first of which was Indicash, launched by Tata Communications in 2013. Option A is wrong because a transfer is a movement of money between accounts, not part of this abbreviation. Option C is wrong because a transaction is any banking entry, again not what the T stands for. Option D is wrong because trunk belongs to telephone terminology, such as trunk call. Exam tip: PIN means Personal Identification Number and ATM means Automated Teller Machine.

The correct answer is A, Hilton Young Commission. Formally the Royal Commission on Indian Currency and Finance, it reported in 1926 and recommended that the currency and credit functions then divided between the Government and the Imperial Bank be placed in a single central bank. Its recommendation led to the Reserve Bank of India Act, 1934 and to the opening of the Bank in 1935.

Option B, the Narasimham Committee, reported in 1991 and 1998 on banking sector reform, prudential norms and consolidation, long after the Bank existed. Option C, the Fazl Ali Commission, was the States Reorganisation Commission of 1955 and belongs to polity, not banking. Option D, the Sarkaria Commission, examined Centre State relations in the nineteen eighties. Only the first is a currency and finance body.

The correct answer is C, Mumbai. RBL Bank, a private sector bank, has its corporate office in Mumbai, the financial capital of the country, while its registered office stays in Kolhapur in Maharashtra, where the bank was founded in 1943 as the Ratnakar Bank. It served traders and farmers of the Kolhapur and Sangli belt for decades, was renamed RBL Bank in 2014 and now works across the country in retail, credit card and microfinance business. Option A is wrong because Srinagar is the headquarters of Jammu and Kashmir Bank, a bank promoted by that state. Option B is wrong because no large commercial bank keeps its corporate office in Patna. Option D is wrong because Bengaluru is the headquarters of Canara Bank, which was started in Mangaluru in 1906. Exam tip: RBL Bank was born as Ratnakar Bank in Kolhapur, 1943, and is run from Mumbai.

The correct answer is B, 1 January 1949. The Reserve Bank of India began as a shareholders' institution in 1935 and was taken into full government ownership from 1 January 1949 under the Reserve Bank of India (Transfer to Public Ownership) Act, 1948. From that date the entire share capital of the central bank has been held by the Union government.

Option A, 1 April 1935, is the day the Reserve Bank began operations under the RBI Act, 1934, following the recommendation of the Hilton Young Commission, but it was then privately held. Option C, 1 July 1955, is the day the Imperial Bank became the State Bank of India. Option D, 19 July 1969, is the date of the first round of commercial bank nationalisation. All four dates belong to this topic, which is why the question is set as a list of them.

The correct answer is C, 1949. The Reserve Bank of India began as a shareholders' bank and was taken into public ownership on 1 January 1949 under the Reserve Bank (Transfer to Public Ownership) Act, 1948. Since then the entire capital has been held by the Government of India, although the Bank continues to be run by a Central Board under its own Act of 1934.

Option A, 1971, is the year in which the Bank's insurance related subsidiary work expanded and is close to the 1969 bank nationalisation, so it is placed to confuse. Option B, 1956, is the year the Imperial Bank of India became the State Bank of India, which candidates often mix up with this event. Option D, 1935, is the year the Reserve Bank began operations, on 1 April, under the Act of 1934, and is the commonest wrong answer of the four.

The correct answer is B, Sir Osborne Smith. He was the first Governor of the Reserve Bank, taking charge when the Bank opened in 1935, and he had earlier been a managing governor of the Imperial Bank of India. He left before completing his term after differences with the Government over exchange rate and interest rate policy.

Option A, C. D. Deshmukh, was the first Indian Governor of the Bank and later became Union Finance Minister, which is why he is the most attractive wrong answer here. Option C, Sir James Taylor, was the second Governor and the one under whom the central office moved to Bombay in 1937. Option D, Benegal Rama Rau, served the longest term as Governor and resigned after a disagreement with the Finance Minister. Read the question carefully: the first Governor and the first Indian Governor are different people.

The correct answer is A, New Bank of India. New Bank of India, one of the six banks nationalised in 1980, ran into heavy losses and was amalgamated with Punjab National Bank in 1993. It was the first time one nationalised bank was merged into another, and for years it stood alone as an example of consolidation in the public sector.

Option B, Oriental Bank of Commerce, was indeed merged into Punjab National Bank, but in the round that took effect on 1 April 2020, not in 1993. Option C, United Bank of India, was merged into Punjab National Bank in that same 2020 round. Option D, Nedungadi Bank, was a small private bank of Kerala that was merged into Punjab National Bank in 2003. All three wrong options did eventually join Punjab National Bank, so only the year decides the answer.

The correct answer is C, one rupee note. The one rupee note is issued by the Government of India through the Ministry of Finance and carries the signature of the Finance Secretary, not of the Governor. All coins are likewise issued by the Government. The Reserve Bank, under Section 22 of its Act, has the sole right to issue banknotes of two rupees and above, and it also puts the Government's coins and one rupee notes into circulation as the Government's agent.

Options A, B and D are all currency notes of denominations above one rupee, so they are printed and issued by the Reserve Bank and bear the Governor's signature and the promise to pay the bearer. This is a question about who issues, not about who circulates, and that distinction is the whole trap.

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.