Money and Banking – Indian Economy, Previous Year Questions(UPSC CSE)(2011-24)

1. Consider the following statements:

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

Statement-II: The syndicated loan can be 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?

(a) Both Statement-I and Statement-II are correct and Statement-II explains Statement-I

(b) Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I

(c) Statement-I is correct, but Statement-II incorrect

(d) Statement-I is incorrect, but Statement-II is correct.

2. Consider the following statements in respect of the digital rupee:

1. It is a sovereign currency issued by the Reserve Bank of India RBI 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?

(a) 1 and 2 only

(b) 1 and 3 only

(c) 2 and 4 only

(d) 1, 2 and 4

3. 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?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

 4. Consider the following statements:

1. The Self-Help Group (SHG) programme was originally initiated by the State Bank of India by providing microcredit to the financially deprived.
2. In an SHG, all members of a group take responsibility for a loan that an individual member takes.
3. The Regional Rural Banks and Scheduled Commercial Banks support SHGs.

How many of the above statements are correct?

(a) Only one

(b) Only two

(c) All three

(d) None

5. With reference to Central Bank digital currencies, consider the following statements:

1. It is possible to make payments in a digital currency without using US dollar or SWIFT system.
2. A digital currency can be distributed with condition programmed into it such as a time-frame for spending it.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

6. With reference to the ‘Banks Board Bureau (BBB)’, which of the following statements are correct?

1. The Governor of RBI is the Chairman of BBB.
2. BBB recommends for the selection of heads for Public Sector Banks.
3. BBB helps the Public Sector Banks in developing strategies and capital raising plans.

Select the correct answer using the code given below:

(a) 1 and 2 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2 and 3

7. With reference to ‘Urban Cooperative Banks’ in India, consider the following statements:

1. They are supervised and regulated by local boards set up by the State Governments.
2. They can issue equity shares and preference shares.
3. They were brought under the purview of the Banking Regulation Act, 1949 through an Amendment in 1966.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2 and 3

8. If you withdraw ₹1,00,000 in cash from your Demand Deposit Account at your bank, the immediate effect on aggregate money supply in the economy will be

(a) To reduce it by ₹1,00,000

(b) To increase it by ₹1,00,000

(c) To increase it by more than ₹1,00,000

(d) To leave it unchanged

9. Why is the offering of “teaser loans” by commercial banks a cause of economic concern?

1. The teaser loans are considered to be an aspect of sub-prime lending and banks may be exposed to the risk of defaulters in future,
2. In India, the teaser loans are mostly given to inexperienced entrepreneurs to set up manufacturing or export units.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 or 2

10. In India, which of the following have the highest share in the disbursement of credit to agriculture and allied activities?

(a) Commercial Banks

(b) Cooperative Banks

(c) Regional Rural Banks

(d) Microfinance Institutions

11. 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?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

12. The Service Area Approach was implemented under the purview of

(a) Integrated Rural Development Programme

(b) Lead Bank Scheme

(c) Mahatma Gandhi National Rural Employment Guarantee Scheme

(d) National Skill Development Mission

13. Which of the following is not included in the assets of a commercial bank in India?

(a) Advances

(b) Deposits

(c) Investments

(d) Money at call and short notice

14. What was the purpose of Inter-Creditor Agreement signed by Indian banks and financial institutions recently?

(a) To lessen the Government of India’s perennial burden of fiscal deficit and current account deficit

(b) To support the infrastructure projects of Central and State Governments

(c) To act as independent regulator in case of applications for loans of RS 50 crore or more

(d) To aim at faster resolution of stressed assets of Rs 50 crore or more which are under consortium lending

15. The Chairmen of public sector banks are selected by the

(a) Banks Board Bureau

(b) Reserve Bank of India

(c) Union Ministry of Finance

(d) Management of concerned bank

16. With reference to the governance of public sector banking in India, consider the following statements:

1. Capital infusion into public sector banks by the Government of India has steadily increased in the last decade.
2. To put the public sector banks in order, the merger of associate banks with the parent State Bank of India has been affected.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

17. Which one of the following statements correctly describes the meaning of legal tender money?

(a) The money which is tendered in courts of law to defray the fee of legal cases

(b) The money which a creditor is under compulsion to accept in settlement of his claims

(c) The bank money in the form of cheques, drafts, bills of exchange, etc.

(d) The metallic money in circulation in a country

18. Consider the following statements:

1. Capital Adequacy Ratio (CAR) is the amount that banks have to maintain in the form of their own funds to offset any loss that banks incur if the account-holders fail to repay dues.
2. CAR is decided by each individual bank.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

19. 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?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

20. Which one of the following links all the ATMs in India?

(a) Indian Banks’ Association

(b) National Securities Depository Limited

(c) National Payments Corporation of India

(d) Reserve Bank of India

21. Consider the following statements:

1. National Payments Corporation of India (NPCI) helps in promoting the financial inclusion in the country
2. NPCI has launched RuPay, a card payment scheme.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither1 nor 2

22. Which of the following statements best describes the term ‘Scheme for Sustainable Structuring of Stressed Assets (S4A)’, recently seen in the news? 

(a) It is a procedure for considering ecological costs of developmental schemes formulated by the Government.

(b) It is a scheme of RBI for reworking the financial structure of big corporate entities facing genuine difficulties.

(c) It is a disinvestment plan of the Government regarding Central Public Sector Undertakings.

(d) It is an important provision in The Insolvency and Bankruptcy Code’ recently implemented by the Government.

23. Which of the following is a most likely consequence of implementing the Unified Payments Interface (UPI)?

(a) Mobile wallets will not be necessary for online payments.

(b) Digital currency will totally replace the physical currency in about two decades.

(c) FDI inflows will drastically increase.

(d) Direct transfer of subsidies to poor people will become very effective.

24. What is the purpose of setting up of Small Finance Banks (SFBs) in India?

1. To supply credit to small business units
2. To supply credit to small and marginal farmers
3. To encourage young entrepreneurs to set up business particularly in rural areas.

Select the correct answer using the code given below:

(a) 1 and 2 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2 and 3

25. ‘The establishment of ‘Payment Banks’ is being allowed in India to promote financial inclusion. Which of the following statements is/are correct in this context?

1. Mobile telephone companies and supermarket chains that are owned and controlled by residents are eligible to be promoters of Payment Banks.
2. Payment Banks can issue both credit cards and debit cards.
3. Payment Banks cannot undertake lending activities.

Select the correct answer using the code given below

(a) 1 and 2 only

(b) 1 and 3 only

(c) 2 only

(d) 1, 2 and 3

26. 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.
3. Select the correct answer using the code given below.

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither I nor 2

27. ‘Basel III Accord’ or simply ‘Basel III’, often seen in the news, seeks to 

(a) Develop national strategies for the conservation and sustainable use of biological diversity

(b) Improve banking sector’s ability to deal with financial and econo-mic stress and improve risk management

(c) Reduce the greenhouse gas emissions but places a heavier burden on developed countries

(d) Transfer technology from developed countries to poor countries to enable them to replace the use of chlorofluorocarbons in refrigeration with harmless chemicals

28. Pradhan Mantri Jan-Dhan Yojana’ has been launched for 

(a) Providing housing loan to poor people at cheaper interest rates

(b) Promoting women’s Self-Help Groups in backward areas

(c) Promoting financial inclusion in the country

(d) Providing financial help to the marginalized communities

29. What is/are the facility/facilities the beneficiaries can get from the services of Business Correspondent (Bank Saathi) in branchless areas?

1. It enables the beneficiaries to draw their subsidies and social security benefits in their villages.
2. It enables the beneficiaries in the rural areas to make deposits and withdrawals.

Select the correct answer using the code given below.

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

30. Priority Sector Lending by banks in India constitutes the lending to 

(a) Agriculture

(b) Micro and small enterprises

(c) Weaker sections

(d) All of the above

31. Which of the following grants/grant direct credit assistance to rural households? 

1. Regional Rural Banks
2. National Bank for Agriculture and Rural Development
3. Land Development Banks

Select the correct answer using below.

(a) 1 and 2 only

(c) 1 and 3 only

(b) 1 and 3 only

(d) 1, 2 and 3

32. Consider the following liquid assets: 

1. Demand deposits with the banks
2. Time deposits with the banks
3. Savings deposits with the banks
4. Currency

The correct sequence of these assets in the decreasing order of liquidity is

(a) 1-4-3-2

(b) 4-3-2-1

(c) 2-3-1-4

(d) 4-1-3-2

33. The basic aim of Lead Bank Scheme is that

(a) Big banks should try to open offices in each district

(b) There should be stiff competition among the various nationalized banks

(c) Individual banks should adopt particular districts for intensive development

(d) All the banks should make intensive efforts to mobilize deposits

——————————————————————————————————–

Key with Explanation:

1. Consider the following statements:

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

Statement-II: The syndicated loan can be 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?

(a) Both Statement-I and Statement-II are correct and Statement-II explains Statement-I

(b) Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I

(c) Statement-I is correct, but Statement-II incorrect

(d) Statement-I is incorrect, but Statement-II is correct.

Explanation:

2. Consider the following statements in respect of the digital rupee:

1. It is a sovereign currency issued by the Reserve Bank of India RBI 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?

(a) 1 and 2 only

(b) 1 and 3 only

(c) 2 and 4 only

(d) 1, 2 and 4

Explanation:

3. 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?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Explanation:

4. Consider the following statements:

1. The Self-Help Group (SHG) programme was originally initiated by the State Bank of India by providing microcredit to the financially deprived.
2. In an SHG, all members of a group take responsibility for a loan that an individual member takes.
3. The Regional Rural Banks and Scheduled Commercial Banks support SHGs.

How many of the above statements are correct?

(a) Only one

(b) Only two

(c) All three

(d) None

Explanation:

5. With reference to Central Bank digital currencies, consider the following statements:

1. It is possible to make payments in a digital currency without using US dollar or SWIFT system.
2. A digital currency can be distributed with condition programmed into it such as a time-frame for spending it.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Explanation:

6. With reference to the ‘Banks Board Bureau (BBB)’, which of the following statements are correct?

1. The Governor of RBI is the Chairman of BBB.
2. BBB recommends for the selection of heads for Public Sector Banks.
3. BBB helps the Public Sector Banks in developing strategies and capital raising plans.

Select the correct answer using the code given below:

(a) 1 and 2 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2 and 3

Explanation:

7. With reference to ‘Urban Cooperative Banks’ in India, consider the following statements:

1. They are supervised and regulated by local boards set up by the State Governments.
2. They can issue equity shares and preference shares.
3. They were brought under the purview of the Banking Regulation Act, 1949 through an Amendment in 1966.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2 and 3

Explanation:

8. If you withdraw ₹1,00,000 in cash from your Demand Deposit Account at your bank, the immediate effect on aggregate money supply in the economy will be

(a) To reduce it by ₹1,00,000

(b) To increase it by ₹1,00,000

(c) To increase it by more than ₹1,00,000

(d) To leave it unchanged

Explanation:

9. Why is the offering of “teaser loans” by commercial banks a cause of economic concern?

1. The teaser loans are considered to be an aspect of sub-prime lending and banks may be exposed to the risk of defaulters in future,
2. In India, the teaser loans are mostly given to inexperienced entrepreneurs to set up manufacturing or export units.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 or 2

Explanation:

10. In India, which of the following have the highest share in the disbursement of credit to agriculture and allied activities?

(a) Commercial Banks

(b) Cooperative Banks

(c) Regional Rural Banks

(d) Microfinance Institutions

Explanation:

11. 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?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

Explanation:

12. The Service Area Approach was implemented under the purview of

(a) Integrated Rural Development Programme

(b) Lead Bank Scheme

(c) Mahatma Gandhi National Rural Employment Guarantee Scheme

(d) National Skill Development Mission

Explanation:

13. Which of the following is not included in the assets of a commercial bank in India?

(a) Advances

(b) Deposits

(c) Investments

(d) Money at call and short notice

Explanation:

14. What was the purpose of Inter-Creditor Agreement signed by Indian banks and financial institutions recently?

(a) To lessen the Government of India’s perennial burden of fiscal deficit and current account deficit

(b) To support the infrastructure projects of Central and State Governments

(c) To act as independent regulator in case of applications for loans of RS 50 crore or more

(d) To aim at faster resolution of stressed assets of Rs 50 crore or more which are under consortium lending

Explanation:

15. The Chairmen of public sector banks are selected by the

(a) Banks Board Bureau

(b) Reserve Bank of India

(c) Union Ministry of Finance

(d) Management of concerned bank

Explanation:

16. With reference to the governance of public sector banking in India, consider the following statements:

1. Capital infusion into public sector banks by the Government of India has steadily increased in the last decade.
2. To put the public sector banks in order, the merger of associate banks with the parent State Bank of India has been affected.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Explanation:

17. Which one of the following statements correctly describes the meaning of legal tender money?

(a) The money which is tendered in courts of law to defray the fee of legal cases

(b) The money which a creditor is under compulsion to accept in settlement of his claims

(c) The bank money in the form of cheques, drafts, bills of exchange, etc.

(d) The metallic money in circulation in a country

Explanation:

18. Consider the following statements:

1. Capital Adequacy Ratio (CAR) is the amount that banks have to maintain in the form of their own funds to offset any loss that banks incur if the account-holders fail to repay dues.
2. CAR is decided by each individual bank.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Explanation:

19. 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?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Explanation:

20. Which one of the following links all the ATMs in India?

(a) Indian Banks’ Association

(b) National Securities Depository Limited

(c) National Payments Corporation of India

(d) Reserve Bank of India

Explanation:

21. Consider the following statements:

1. National Payments Corporation of India (NPCI) helps in promoting the financial inclusion in the country
2. NPCI has launched RuPay, a card payment scheme.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither1 nor 2

Explanation:

22. Which of the following statements best describes the term ‘Scheme for Sustainable Structuring of Stressed Assets (S4A)’, recently seen in the news? 

(a) It is a procedure for considering ecological costs of developmental schemes formulated by the Government.

(b) It is a scheme of RBI for reworking the financial structure of big corporate entities facing genuine difficulties.

(c) It is a disinvestment plan of the Government regarding Central Public Sector Undertakings.

(d) It is an important provision in The Insolvency and Bankruptcy Code’ recently implemented by the Government.

Explanation:

23. Which of the following is a most likely consequence of implementing the Unified Payments Interface (UPI)?

(a) Mobile wallets will not be necessary for online payments.

(b) Digital currency will totally replace the physical currency in about two decades.

(c) FDI inflows will drastically increase.

(d) Direct transfer of subsidies to poor people will become very effective.

Explanation:

24. What is the purpose of setting up of Small Finance Banks (SFBs) in India?

1. To supply credit to small business units
2. To supply credit to small and marginal farmers
3. To encourage young entrepreneurs to set up business particularly in rural areas.

Select the correct answer using the code given below:

(a) 1 and 2 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2 and 3

Explanation:

25. ‘The establishment of ‘Payment Banks’ is being allowed in India to promote financial inclusion. Which of the following statements is/are correct in this context?

1. Mobile telephone companies and supermarket chains that are owned and controlled by residents are eligible to be promoters of Payment Banks.
2. Payment Banks can issue both credit cards and debit cards.
3. Payment Banks cannot undertake lending activities.

Select the correct answer using the code given below

(a) 1 and 2 only

(b) 1 and 3 only

(c) 2 only

(d) 1, 2 and 3

Explanation:

26. 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.
3. Select the correct answer using the code given below.

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither I nor 2

Explanation:

27. ‘Basel III Accord’ or simply ‘Basel III’, often seen in the news, seeks to 

(a) Develop national strategies for the conservation and sustainable use of biological diversity

(b) Improve banking sector’s ability to deal with financial and econo-mic stress and improve risk management

(c) Reduce the greenhouse gas emissions but places a heavier burden on developed countries

(d) Transfer technology from developed countries to poor countries to enable them to replace the use of chlorofluorocarbons in refrigeration with harmless chemicals

Explanation:

28. Pradhan Mantri Jan-Dhan Yojana’ has been launched for 

(a) Providing housing loan to poor people at cheaper interest rates

(b) Promoting women’s Self-Help Groups in backward areas

(c) Promoting financial inclusion in the country

(d) Providing financial help to the marginalized communities

Explanation:

29. What is/are the facility/facilities the beneficiaries can get from the services of Business Correspondent (Bank Saathi) in branchless areas?

1. It enables the beneficiaries to draw their subsidies and social security benefits in their villages.
2. It enables the beneficiaries in the rural areas to make deposits and withdrawals.

Select the correct answer using the code given below.

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Explanation:

30. Priority Sector Lending by banks in India constitutes the lending to 

(a) Agriculture

(b) Micro and small enterprises

(c) Weaker sections

(d) All of the above

Explanation:

31. Which of the following grants/grant direct credit assistance to rural households? 

1. Regional Rural Banks
2. National Bank for Agriculture and Rural Development
3. Land Development Banks

Select the correct answer using below.

(a) 1 and 2 only

(c) 1 and 3 only

(b) 1 and 3 only

(d) 1, 2 and 3

Explanation:

32. Consider the following liquid assets: 

1. Demand deposits with the banks
2. Time deposits with the banks
3. Savings deposits with the banks
4. Currency

The correct sequence of these assets in the decreasing order of liquidity is

(a) 1-4-3-2

(b) 4-3-2-1

(c) 2-3-1-4

(d) 4-1-3-2

Explanation:

33. The basic aim of Lead Bank Scheme is that

(a) Big banks should try to open offices in each district

(b) There should be stiff competition among the various nationalized banks

(c) Individual banks should adopt particular districts for intensive development

(d) All the banks should make intensive efforts to mobilize deposits

Explanation: