Banking & Financial Awareness Mixed Quiz: Set 32

The correct answer is B, the Governor of the Reserve Bank of India. The Board for Financial Supervision was constituted in November 1994 so that supervision of banks, select all-India financial institutions and non-banking financial companies would get undivided attention. It is a committee of the Central Board of the Reserve Bank, chaired by the Governor, with a Deputy Governor as vice-chairman and some members of the Central Board on it.

Option A is wrong because the Union Finance Minister heads the government's own financial machinery, not a Reserve Bank committee; supervision of banks is a central bank function kept at arm's length from the ministry. Option C, the Finance Secretary, heads the Department of Economic Affairs in the government and has no chairing role here. Option D is wrong because the Securities and Exchange Board of India regulates securities markets, a separate domain. The Reserve Bank's statutory power to inspect a bank comes from Section 35 of the Banking Regulation Act, 1949.

The correct answer is A, rupees 5,000. The Reserve Bank's liability table sets the lowest ceiling for Basic Savings Bank Deposit accounts, which are the no-frills accounts opened for financial inclusion, because their holders are the least able to absorb a loss. The customer pays the transaction value or five thousand rupees, whichever is lower, so a fraud of two thousand rupees costs the customer two thousand, not five.

Option B, rupees 10,000, is the ceiling for ordinary savings accounts, prepaid payment instruments and gift cards, current or overdraft accounts of micro and small enterprises, individual current accounts with a limit up to twenty five lakh rupees, and credit cards with a limit up to five lakh rupees. Option C, rupees 25,000, is the ceiling for other current, cash credit and overdraft accounts and for credit cards with a limit above five lakh rupees. Option D is wrong because zero liability needs a report within three working days.

The correct answer is C, rupees 25,000. The highest ceiling in the table applies to other current, cash credit and overdraft accounts and to credit cards whose limit exceeds five lakh rupees. The logic of the table is that the bigger the account, the greater the amount a customer is expected to watch over, so the cap rises with the size of the facility.

Option A, rupees 5,000, applies only to Basic Savings Bank Deposit accounts. Option B, rupees 10,000, applies to ordinary savings accounts, prepaid payment instruments and gift cards, micro and small enterprise current accounts, individual current accounts with limits up to twenty five lakh rupees, and credit cards with limits up to five lakh rupees, so the five lakh limit is the dividing line between the ten thousand and twenty five thousand rows. Option D, rupees 50,000, does not appear anywhere in the table and is a pure distractor.

The correct answer is B, Leverage. The 2017 framework watched capital, asset quality and profitability, with return on assets as the profitability indicator. The revised framework notified on 2 November 2021 and effective from 1 January 2022 keeps capital and asset quality but drops profitability and brings in leverage, measured by the Tier 1 leverage ratio, as the third core area. This is the single most asked point from the revised framework.

Option A, liquidity, is a prudential concern addressed through the liquidity coverage ratio and the net stable funding ratio, not through PCA parameters. Option C, credit growth, is monitored by the supervisor in other ways but is not a PCA trigger. Option D, provision coverage, is a measure of how much a bank has set aside against bad loans; it is a supervisory expectation rather than a PCA parameter. So the three areas to memorise are capital, asset quality and leverage.

The correct answer is B, 9 per cent. India applies Basel III with a stricter minimum: the capital to risk weighted assets ratio must be at least nine per cent, of which Common Equity Tier 1 must be at least 5.5 per cent and Tier 1 at least seven per cent. The Reserve Bank has consistently kept the Indian minimum one percentage point above the global floor.

Option A, 8 per cent, is the Basel III minimum total capital ratio agreed internationally and is the most common error in this question. Option C, 10.5 per cent, is the Basel figure of eight per cent plus the capital conservation buffer of 2.5 per cent, which is the global requirement including the buffer. Option D, 11.5 per cent, is the Indian nine per cent plus the 2.5 per cent conservation buffer, which is the effective Indian requirement once the buffer is counted, but the minimum ratio asked for in the question is nine per cent.

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, the Reserve Bank of India. Banks report frauds to the Reserve Bank, which keeps them in the Central Fraud Registry and makes the database searchable by banks. A lender can therefore check whether a borrower, promoter or firm is already linked to a fraud elsewhere before sanctioning credit, which closes the gap that allowed a defaulter to move from one bank to the next.

Option A, the Central Bureau of Investigation, investigates large frauds referred to it but does not maintain this registry. Option C, the Securities and Exchange Board of India, regulates securities markets and keeps its own records of market offences, not bank frauds. Option D, the Indian Banks Association, is an industry body and issues common guidance for banks but has no such statutory database. Along with the Central Fraud Registry, remember the Central Repository of Information on Large Credits, which tracks large exposures rather than frauds.

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 C, Profitability. The systemic importance score of a bank is built from four indicators: size, interconnectedness, substitutability and complexity. Size carries the highest weight because the sheer scale of a bank's balance sheet decides how much damage its failure would do. Profitability has nothing to do with systemic importance; a very profitable bank can still be small, and a loss-making bank can still be systemic.

Option A, size, is the first and most heavily weighted indicator. Option B, interconnectedness, captures how much the bank lends to and borrows from other financial institutions, because those links transmit distress. Option D, complexity, captures how complicated the bank's business and instruments are, since a complex bank is harder to resolve in a crisis. Substitutability, the fourth indicator, asks how easily other banks could take over its services, such as payments and custody.

The correct answer is C, 2004. The Financial Intelligence Unit India was set up by the Government of India in November 2004 as the central national agency to receive, process, analyse and disseminate information about suspect financial transactions. It is the national hub of financial intelligence, works under the Department of Revenue in the Ministry of Finance and reports to the Economic Intelligence Council, which the Union Finance Minister chairs. Option A is wrong because no such unit existed in 1996; the law that created the reporting system had not yet been passed. Option B is wrong because 2002 is the year the Prevention of Money Laundering Act was enacted, two years before the unit was set up and three years before the Act came into force. Option D is wrong because 2010 is the year India became a full member of the Financial Action Task Force, by which time the unit had been working for six years.

The correct answer is B, 1930. The number is run under the national cybercrime reporting arrangement of the Ministry of Home Affairs and is meant for the immediate reporting of financial cyber fraud, alongside the National Cyber Crime Reporting Portal. A call in the first hours lets the amount be traced and frozen in the accounts to which it has been transferred, which is why speed matters more here than paperwork.

Option A, 1091, is the women's helpline and is unrelated. Option C, 14448, is the Reserve Bank's own number for its ombudsman and consumer education arrangement, used for a complaint against a bank rather than for reporting a crime, which makes it a good distractor. Option D, 1800, is only the prefix used by toll-free numbers in India and is not a helpline by itself. Remember 1930 for cyber fraud and 14448 for the banking ombudsman.

The correct answer is A, the District Collector or District Magistrate. The District Consultative Committee is the working coordination forum of the district, bringing together all the banks operating there, the district administration and the development agencies, and it is chaired by the District Collector so that the administration and the banks sit together under one authority. Option B is wrong but is the usual trap: the Lead District Manager is the convenor of the committee, who calls the meeting, circulates the agenda and keeps the records, not its chairperson. Option C is wrong because the Reserve Bank's Regional Director attends state level meetings and oversees the scheme but does not chair the district forum. Option D is wrong because the convenor bank's head chairs the State Level Bankers' Committee. Remember the pattern: Collector chairs both district forums, the Lead District Manager convenes the District Consultative Committee and chairs the block committee.

The correct answer is B, rupees five crore. The Central Repository of Information on Large Credits, usually shortened to CRILC, is a database maintained by the Reserve Bank in which banks report details of every borrower whose aggregate exposure, funded and non-funded together, is five crore rupees or more. The purpose is early detection of stress: once a borrower starts defaulting at one lender, every other lender can see it.

Option A, one crore, is too low and would flood the repository with small accounts. Option C, ten crore, and option D, fifty crore, are too high and would let large stressed accounts escape notice. Along with CRILC, remember that the Central Fraud Registry is the Reserve Bank's database of frauds reported by banks, and that both are off-site surveillance tools that work alongside on-site inspection under risk-based supervision.

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 C, Section 66D. This section punishes a person who, by means of any communication device or computer resource, cheats by personation, which is exactly what a phishing website or a caller pretending to be a bank officer does. It is the provision most often invoked in online banking fraud cases, along with the general cheating provisions of the criminal law.

Option A, Section 43, provides for compensation for damage to a computer or computer system and is a civil remedy rather than a criminal punishment. Option B, Section 66C, deals with identity theft, that is the dishonest use of another person's electronic signature, password or unique identification feature; it is closely related and is the main alternative that candidates pick. Option D, Section 72, punishes breach of confidentiality and privacy by a person who has secured access to records under the Act. Learn 66C for identity theft and 66D for cheating by personation.

The correct answer is B, the Securities Appellate Tribunal. The Tribunal was set up under the SEBI Act and sits at Mumbai; since the Finance Act 2017 it also hears appeals against orders of IRDAI and of PFRDA, so one tribunal now serves three regulators. An appeal from the Tribunal goes to the Supreme Court on a question of law. Option A is wrong; the National Company Law Tribunal hears company law matters and corporate insolvency under the Insolvency and Bankruptcy Code, with appeals to the National Company Law Appellate Tribunal. Option C is wrong; the Debt Recovery Tribunal recovers the dues of banks and financial institutions and deals with the insolvency of individuals and partnership firms under the Code, with appeals to the Debt Recovery Appellate Tribunal. Option D is wrong; a High Court may be approached in writ jurisdiction in exceptional cases, but the statutory appeal is to the Securities Appellate Tribunal.

The correct answer is B, rupees 50,000. Under the Positive Pay System the issuer of a high value cheque sends the bank the key details, such as date, beneficiary name and amount, through a channel like the mobile app or internet banking, and the paying bank matches those details before honouring the cheque. The system covers cheques of fifty thousand rupees and above, which is where cheque tampering is worth a fraudster's effort.

Option A, rupees 10,000, is below the threshold and would cover almost every cheque, defeating the purpose of focusing on high value instruments. Option C, rupees 2 lakh, does not appear in the arrangement. Option D, rupees 5 lakh, is the value from which banks may make the facility compulsory for their customers rather than optional, so it is a half-right answer and the main trap here. Remember fifty thousand as the coverage threshold and five lakh as the level at which a bank may insist on it.

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 Integrated Ombudsman Scheme, 2021. The scheme merged the separate ombudsman schemes for banks, for non-banking financial companies and for digital transactions into a single one nation one ombudsman arrangement, with a centralised centre to receive and process complaints in any language. A complaint costs the customer nothing, and it can be filed once the bank has failed to resolve the matter within thirty days or has rejected it.

Option A refers to the voluntary codes of fair treatment that banks commit to, which are not a redress forum of this kind. Option C, the deposit insurance scheme run by the Deposit Insurance and Credit Guarantee Corporation, protects deposits up to a prescribed limit if a bank fails, an entirely different purpose. Option D is not a Reserve Bank scheme for banking complaints. The ombudsman is the step after the bank's internal grievance machinery, not a substitute for it.

The correct answer is B, Tarapore Committee. The committee chaired by S. S. Tarapore examined capital account convertibility for the Reserve Bank and set out the preconditions and a phased road map; the rupee remains fully convertible on the current account but only partly on the capital account. Option A is wrong because the Narasimham Committee reported on banking sector reforms, giving the recommendations on prudential norms, capital adequacy and the tiered banking structure. Option C is wrong because C. Rangarajan chaired the committee on financial inclusion of 2008 and later chaired work on poverty estimation, not on convertibility. Option D is wrong because the Chakravarty Committee of the mid-1980s reviewed the working of the monetary system and is remembered for its recommendations on monetary targeting.