Which of the following is NOT a commercial bank?

The correct answer is C, granting loans and accepting deposits. A commercial bank exists to gather savings from those who have a surplus and lend them to those who need funds, and it earns from the gap between the interest it pays depositors and the interest it charges borrowers. Every other service it offers, such as remittances, lockers or card facilities, is secondary to these two.

Options A, B and D all describe work of the central bank. Issuing currency notes is the Reserve Bank's monopoly, with the one rupee note and coins issued by the Government. Conducting monetary policy is done by the RBI through its Monetary Policy Committee. Regulating the money supply is again the RBI's task, exercised through the repo rate, the cash reserve ratio and the statutory liquidity ratio. The line to fix is that a commercial bank deals with the public while the central bank deals with the banks.

The correct answer is C, Bank of Baroda. It was founded in 1908 by Maharaja Sayajirao Gaekwad III, nationalised in the first round of July 1969, and the Government of India still holds the majority of its shares, which is what makes a bank a public sector bank. In 2019 it absorbed Vijaya Bank and Dena Bank.

Option A, Axis Bank, began life in 1994 as UTI Bank, the first of the new private banks licensed after the RBI guidelines of 1993. Option B, ICICI Bank, grew out of a development finance institution and is a private sector bank. Option D, Yes Bank, is also private and started business in 2004. A quick test in the examination hall: if the bank was nationalised in 1969 or 1980, or is the State Bank of India, it is a public sector bank; if it was licensed in the 1990s or later, it is private.

The correct answer is A, 1974. Women of the Self-Employed Women's Association at Ahmedabad, who worked as vendors, headloaders and home-based workers, pooled their own share capital and registered a cooperative bank of their own in 1974 because ordinary banks would not deal with borrowers who had no collateral and no paperwork. It is a standard example of a cooperative bank owned by its members.

Option C, 1994, is close enough to look right to a candidate who remembers only the decade of microfinance growth, but the bank is twenty years older than that. Options B, 1894, and D, 1874, belong to the nineteenth century: 1894 is the year Punjab National Bank was registered, which is probably why it appears here. Note the wider point the question tests, that a cooperative bank is registered as a cooperative society and works on one member one vote.

The correct answer is C, both I and II. The Reserve Bank is banker to banks: every scheduled bank keeps an account with it, holds its cash reserve ratio there, settles payments with other banks through those accounts and can borrow from it when short of funds. It is also the currency issuing authority, with the sole right to issue currency notes in India under the Reserve Bank of India Act, 1934.

Option A is wrong because it leaves out note issue, which is the function the Bank is best known for. Option D is wrong because it leaves out the banker to banks role, from which the description lender of last resort follows. Option B is wrong on both counts. The one refinement worth remembering is that the one rupee note and all coins are issued by the Government of India, although the Reserve Bank puts them into circulation, and that the Bank is also banker to the Government.

The correct answer is B, the Second Schedule of the Reserve Bank of India Act, 1934. A bank is placed in that Schedule once it has the prescribed paid-up capital and reserves and satisfies the Reserve Bank that its affairs are not conducted in a manner harmful to depositors. Inclusion brings the right to borrow from the RBI at the bank rate, membership of the clearing house and access to the money market.

Options A and C name the Banking Regulation Act, 1949, which is the law on licensing, inspection and winding up of banks but does not carry the list of scheduled banks, so both are wrong. Option D, the Seventh Schedule of the Constitution, contains the Union, State and Concurrent Lists and has nothing to do with banks, although banking itself is an entry in the Union List. Remember the pair: RBI Act 1934 for the Second Schedule, Banking Regulation Act 1949 for regulation.