Which of the following is NOT a wholesale banking product?

The correct answer is B, CASA deposits. CASA stands for current account and savings account balances. A current account earns no interest and a savings account earns a low rate, so the money a bank collects through them costs it far less than any other source, and gathering such balances from lakhs of individuals is exactly what retail banking does. Option A, certificates of deposit, are wholesale money market instruments issued in large amounts at market-linked rates, so they are costlier. Option C, bulk term deposits, are large deposits placed by companies and institutions at negotiated rates that are usually higher than the card rate. Option D, interbank borrowings, are short-term funds taken from other banks at the call money rate and are the most volatile and often the dearest source of all. A high CASA ratio is therefore treated as a sign of a strong retail franchise.

The correct answer is 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 linked to his name. Option A, M. Narasimham, chaired the two committees on banking sector reform of 1991 and 1998, and although the second favoured development financial institutions converting into banks, it is not called the universal banking working group. Option C, S. S. Tarapore, chaired the committee on capital account convertibility and is remembered in this topic for the suggestion of narrow banking. Option D, R. N. Malhotra, chaired the committee on insurance sector reform that led to the setting up of the insurance regulator.

The correct answer is B, ICICI Bank. ICICI was set up as a development financial institution for long-term industrial finance, and in 2002 it merged into its own banking subsidiary ICICI Bank. Because the parent merged into the child, the deal is called a reverse merger, and the combined entity offered deposits, retail and corporate loans, project finance, insurance and capital-market services together, which made it India first universal bank. Option A, IDBI Bank, is the other famous conversion, but IDBI was turned into a banking company in 2004, two years later. Option C, HDFC Bank, was licensed as a private bank in 1994 under the first round of new bank licences and grew organically rather than by converting a development financial institution. Option D, Axis Bank, began in 1994 as UTI Bank and was renamed in 2007, so it too does not fit the description.

The correct answer is B, SEBI. Issue management, underwriting, book building and the rest of investment banking touch the securities market, which is SEBI domain, and a firm must hold a certificate of registration as a merchant banker under the SEBI (Merchant Bankers) Regulations, 1992; the lead manager to any public issue must be such a registered merchant banker. Option A, the Reserve Bank of India, regulates banking business, payment systems and monetary policy, and it permits a bank to do capital-market work through a subsidiary, but it does not register merchant bankers. Option C, IRDAI, regulates insurance companies, agents and brokers. Option D, PFRDA, regulates the National Pension System and pension funds. A useful rule for the exam is that the instrument decides the regulator: deposits mean RBI, securities mean SEBI, policies mean IRDAI and pensions mean PFRDA.

The correct answer is A, the Glass-Steagall Act. Passed in 1933 after the stock market crash and the Great Depression, it stopped a deposit-taking commercial bank from doing securities business and also brought in federal deposit insurance, because lawmakers believed that speculation with depositors money had deepened the crisis. Option B, the Gramm-Leach-Bliley Act of 1999, is the opposite: it repealed that separation and allowed financial holding companies to combine banking, securities and insurance. Option C, the Dodd-Frank Act of 2010, followed the global financial crisis and tightened supervision, derivatives trading and consumer protection rather than creating the original wall. Option D, the Sarbanes-Oxley Act of 2002, came after the Enron and WorldCom scandals and deals with corporate governance, audit committees and financial disclosure, not with the structure of banking.