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Banking & Financial Awareness Mixed Quiz: Set 37

  • 20 questions
  • 20 minutes
  • Difficulty: Medium
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About this quiz

Set 37 of the Banking & Financial Awareness mixed quiz has 20 multiple-choice questions from 15 different topics of the subject: Types of Banks in India, Retail, Wholesale, Universal and Investment Banking, Loans, Advances and Interest Rates and more. 11 of them were asked in real previous-year papers. A topic quiz checks one chapter; this set revises the whole subject at once, the way an exam paper does, where the next question can come from any chapter. Every question carries an explanation of why the correct option is right and why the others are wrong. Keep to the timer, read the explanations at the end, and go back to the notes of any topic where you slipped.

Questions in this quiz

20 questions with answers and explanations

Q1.Banking & Financial AwarenessAsked in: UPSC Civil Services · CSE Prelims 2024, GS Paper IHard

With reference to the rule/rules imposed by the Reserve Bank of India while treating foreign banks, consider the following statements : 1. There is no minimum capital requirement for wholly owned banking subsidiaries in India. 2. For wholly owned banking subsidiaries in India, at least 50% of the board members should be Indian nationals. Which of the statements given above is/are correct ?

  1. A.1 only
  2. B.2 only
  3. C.Both 1 and 2
  4. D.Neither 1 nor 2
Show answer
Correct answer: B. 2 only

RBI does set a minimum capital for a foreign bank's wholly owned subsidiary, and it requires at least half the board to be Indian nationals.

Q2.Banking & Financial AwarenessMedium

The Working Group that recommended universal banking in India in 1998 was chaired by which person?

  1. A.M. Narasimham
  2. B.S. H. Khan
  3. C.S. S. Tarapore
  4. D.R. N. Malhotra
Show answer
Correct answer: B. S. H. Khan

The Reserve Bank of India set up a Working Group under S. H. Khan, then chairman of IDBI, to examine the roles of development financial institutions and banks; its 1998 report recommended that the two be harmonised and that India move towards universal banking, which is why the idea is…

Q3.Banking & Financial AwarenessAsked in: UPSC Civil Services · CSE Prelims 2024, GS Paper IMedium

Consider the following statements:

Statement-I: Syndicated lending spreads the risk of borrower default across multiple lenders.

Statement-II: The syndicated loan can be a fixed amount/lump sum of funds, but cannot be a credit line.

Which one of the following is correct in respect of the above statements?

  1. A.Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
  2. B.Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
  3. C.Statement-I is correct, but Statement-II is incorrect
  4. D.Statement-I is incorrect, but Statement-II is correct
Show answer
Correct answer: C. Statement-I is correct, but Statement-II is incorrect

A syndicate shares the default risk, and a syndicated facility can be either a term loan or a credit line.

Q4.Banking & Financial AwarenessEasy

The CASA ratio of a bank is the proportion of which of the following to its total deposits?

  1. A.Cash and statutory liquidity holdings
  2. B.Current account and savings account deposits
  3. C.Capital and surplus
  4. D.Credit and advances to small borrowers
Show answer
Correct answer: B. Current account and savings account deposits

CASA is short for current account and savings account, and the CASA ratio is current plus savings deposits divided by total deposits, shown as a percentage.

Q5.Banking & Financial AwarenessAsked in: UPSC Civil Services · CSE Prelims 2018, GS Paper IMedium

With reference to digital payments, consider the following statements : 1. BHIM app allows the user to transfer money to anyone with a UPI-enabled bank account. 2. While a chip-pin debit card has four factors of authentication, BHIM app has only two factors of authentication. Which of the statements given above is/are correct ?

  1. A.1 only
  2. B.2 only
  3. C.Both 1 and 2
  4. D.Neither 1 nor 2
Show answer
Correct answer: A. 1 only

BHIM can send money to anyone who has a UPI-linked bank account, but a chip-and-PIN debit card does not use four factors of authentication.

Q6.Banking & Financial AwarenessMedium

Under UCP 600, a letter of credit that carries no statement about whether it may be cancelled is treated as:

  1. A.Revocable, because silence favours the issuing bank
  2. B.Irrevocable, even without any indication to that effect
  3. C.Automatically confirmed by the advising bank
  4. D.Automatically transferable to a second beneficiary
Show answer
Correct answer: B. Irrevocable, even without any indication to that effect

Article 3 of UCP 600 states this in so many words, and Article 10 adds that an irrevocable credit can be amended or cancelled only with the agreement of the issuing bank, the confirming bank if any, and the beneficiary.

Q7.Banking & Financial AwarenessAsked in: UPSC Civil Services · CSE Prelims 2016, GS Paper IEasy

The term 'Core Banking Solutions' is sometimes seen in the news. Which of the following statements best describes/describe this term?

1. It is a networking of a bank's branches which enables customers to operate their accounts from any branch of the bank on its network regardless of where they open their accounts.

2. It is an effort to increase RBI's control over commercial banks through computerization.

3. It is a detailed procedure by which a bank with huge non-performing assets is taken over by another bank.

Select the correct answer using the code given below.

  1. A.1 only
  2. B.2 and 3 only
  3. C.1 and 3 only
  4. D.1, 2 and 3
Show answer
Correct answer: A. 1 only

Core Banking Solutions (CBS) links all branches of a bank to one central system, so a customer can bank at any branch, not just the home branch.

Q8.Banking & Financial AwarenessEasy

A nostro account of an Indian bank is:

  1. A.A rupee account kept by a foreign bank with the Indian bank
  2. B.The Indian bank's foreign currency account with a bank abroad
  3. C.A rupee account of a resident individual for foreign travel
  4. D.An account of the Reserve Bank of India with the Indian bank
Show answer
Correct answer: B. The Indian bank's foreign currency account with a bank abroad

Nostro means ours, and the full sense is our account with you.

Q9.Banking & Financial AwarenessAsked in: UPSC Civil Services · CSE Prelims 2020, GS Paper IMedium

Consider the following statements :

1. In terms of short-term credit delivery to the agriculture sector, District Central Cooperative Banks (DCCBs) deliver more credit in comparison to Scheduled Commercial Banks and Regional Rural Banks.

2. One of the most important functions of DCCBs is to provide funds to the Primary Agricultural Credit Societies.

Which of the statements given above is/are correct?

  1. A.1 only
  2. B.2 only
  3. C.Both 1 and 2
  4. D.Neither 1 nor 2
Show answer
Correct answer: B. 2 only

DCCBs are the middle tier that funds the Primary Agricultural Credit Societies, but the commercial banks, not the DCCBs, give the largest share of short-term farm credit.

Q10.Banking & Financial AwarenessMedium

Under Section 4 of the Prevention of Money Laundering Act, the punishment for money laundering is rigorous imprisonment of

  1. A.One to three years
  2. B.Three to seven years
  3. C.Five to ten years
  4. D.Seven to fourteen years
Show answer
Correct answer: B. Three to seven years

Section 4 provides that whoever commits the offence of money laundering shall be punishable with rigorous imprisonment for a term of not less than three years, which may extend to seven years, and with a fine.

Q11.Banking & Financial AwarenessAsked in: UPSC Civil Services · CSE Prelims 2022, GS Paper IMedium

Consider the following statements : 1. In India, credit rating agencies are regulated by Reserve Bank of India. 2. The rating agency popularly known as ICRA is a public limited company. 3. Brickwork Ratings is an Indian credit rating agency. Which of the statements given above are correct ?

  1. A.1 and 2 only
  2. B.2 and 3 only
  3. C.1 and 3 only
  4. D.1, 2 and 3
Show answer
Correct answer: B. 2 and 3 only

Credit rating agencies in India are regulated by SEBI, not by the RBI, while statements 2 and 3 are true.

Q13.Banking & Financial AwarenessAsked in: UPSC Civil Services · CSE Prelims 2024, GS Paper IMedium

Consider the following statements in respect of the digital rupee:

1. It is a sovereign currency issued by the Reserve Bank of India (RBI) in alignment with its monetary policy.

2. It appears as a liability on the RBI's balance sheet.

3. It is insured against inflation by its very design.

4. It is freely convertible against commercial bank money and cash.

Which of the statements given above are correct?

  1. A.1 and 2 only
  2. B.1 and 3 only
  3. C.2 and 4 only
  4. D.1, 2 and 4
Show answer
Correct answer: D. 1, 2 and 4

The digital rupee is RBI-issued sovereign money, sits as a liability of the RBI like notes do, and can be exchanged one-to-one for cash and bank deposits.

Q14.Banking & Financial AwarenessMedium

Under the PCA framework, restriction on the distribution of dividends is a mandatory action at which stage?

  1. A.Risk Threshold 1
  2. B.Risk Threshold 2
  3. C.Risk Threshold 3
  4. D.Only after the bank is placed under moratorium
Show answer
Correct answer: A. Risk Threshold 1

The first set of mandatory actions, applied as soon as a bank crosses Risk Threshold 1, is a restriction on dividend distribution or remittance of profits, together with a requirement that the promoters, owners or the parent of a foreign bank infuse capital.

Q15.Banking & Financial AwarenessAsked in: UPSC Civil Services · CSE Prelims 2019, GS Paper IMedium

The Service Area Approach was implemented under the purview of

  1. A.Integrated Rural Development Programme
  2. B.Lead Bank Scheme
  3. C.Mahatma Gandhi National Rural Employment Guarantee Scheme
  4. D.National Skill Development Mission
Show answer
Correct answer: B. Lead Bank Scheme

The Service Area Approach, introduced by the RBI in 1989, worked within the framework of the Lead Bank Scheme to plan rural credit village by village.

Q18.Banking & Financial AwarenessEasy

The sale of insurance policies to customers through the branches of a bank is known as

  1. A.Bancassurance
  2. B.Reinsurance
  3. C.Underwriting
  4. D.Securitisation
Show answer
Correct answer: A. Bancassurance

The word joins bank and assurance and describes the arrangement by which an insurer uses a bank branch network and customer base to sell policies while the bank earns fee income as a corporate agent or broker; it is a permitted para banking activity in India.

Q20.Banking & Financial AwarenessAsked in: UPSC Civil Services · CSE Prelims 2016, GS Paper IMedium

What is/are the purpose/purposes of the 'Marginal Cost of Funds based Lending Rate (MCLR)' announced by RBI?

1. These guidelines help improve the transparency in the methodology followed by banks for determining the interest rates on advances.

2. These guidelines help ensure availability of bank credit at interest rates which are fair to the borrowers as well as the banks.

Select the correct answer using the code given below.

  1. A.1 only
  2. B.2 only
  3. C.Both 1 and 2
  4. D.Neither 1 nor 2
Show answer
Correct answer: C. Both 1 and 2

The RBI brought in MCLR to make banks' loan pricing more transparent and to give borrowers rates that are fair to both sides.

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