UPSC Prelims Marathon 1 May - Banking in India

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We are posting prelims marathon MCQs for today. In this initiative, you can attempt 10 subjectwise MCQs daily. Daily Quiz UPSC Prelims Marathon 1 May Banking in India

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Question No. 1

With reference to financial institutions in India, consider the following statements:
1.A financial institution that accepts deposits, lends money, and allows withdrawal through cheques is classified as a bank.
2.A non-bank financial institution can perform all functions of a bank except allowing depositors to withdraw money using cheques.
Which of the statements given above is/are correct?

A1 only

B2 only

CBoth 1 and 2

DNeither 1 nor 2

Question No. 2

With reference to Non-Banking Financial Companies (NBFCs) in India, consider the following statements:
1.NBFCs can accept demand deposits and issue cheques like banks.
2.NBFCs are required to register with the RBI, but those regulated by sector-specific regulators like SEBI or IRDA are exempted.
3.Public deposits with NBFCs are not insured under the deposit insurance scheme.
Which of the statements given above is/are correct?

A1 and 2 only

B2 and 3 only

C1 and 3 only

D1, 2 and 3

Question No. 3

With reference to the monetary policy tools of the Reserve Bank of India (RBI), consider the following statements:
1.Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) are quantitative tools used by the RBI to manage liquidity in the economy.
2.A decrease in CRR injects liquidity into the banking system by increasing the lendable resources of commercial banks.
3.SLR is maintained by banks in the form of cash reserves held with the RBI.
Which of the statements given above is/are correct?

A1 and 2 only

B2 and 3 only

C1 and 3 only

D1, 2 and 3

Question No. 4

With reference to the monetary policy instruments used by the Reserve Bank of India (RBI), consider the following statements:
1.Bank Rate is the interest rate at which RBI lends to commercial banks and other institutions for the long term.
2.Repo Rate is the interest rate RBI pays to banks when it borrows short-term funds from them.
3.Reverse Repo Rate is used by financial institutions to park their short-term surplus funds with RBI and earn interest.
Which of the statements given above is/are correct?

A1 and 2 only

B1 and 3 only

C2 and 3 only

D1, 2 and 3

Question No. 5

With reference to the Marginal Standing Facility (MSF) introduced by the Reserve Bank of India (RBI), consider the following statements:
1.Under MSF, banks can borrow overnight funds from RBI by pledging securities over and above the SLR requirement.
2.The MSF rate is typically lower than the repo rate and serves as the lower bound of the interest rate corridor.
3.The main objective of MSF is to reduce volatility in overnight inter-bank interest rates and ensure smooth monetary transmission.
Which of the statements given above is/are correct?

A1 and 2 only

B2 and 3 only

C1 and 3 only

D1, 2 and 3

Question No. 6

With reference to the Bank Rate and its relationship with other RBI monetary policy instruments, consider the following statements:
1.The Bank Rate is now kept equal to the Marginal Standing Facility (MSF) rate, which is linked to the repo rate..
2.The Bank Rate now acts as a penal rate for banks that fail to maintain their reserve requirements such as CRR and SLR.
3.The Bank Rate is used by the RBI to signal short-term monetary policy stance and is adjusted more frequently than the repo rate.
Which of the statements given above is/are correct?

A1 and 2 only

B2 and 3 only

C1 and 3 only

D1, 2 and 3

Question No. 7

With reference to the Base Rate system in Indian banking, consider the following statements:
1.Base Rate is the minimum interest rate below which scheduled commercial banks cannot lend, except in a few specified cases.
2.The Base Rate system was introduced to make lending rates more transparent and to improve the transmission of RBI’s policy rates.
3.Under the Base Rate system, banks can still offer loans below this rate for all borrowers if the loan amount exceeds ₹2 lakh.
Which of the statements given above is/are correct?

A1 and 2 only

B2 and 3 only

C1 and 3 only

D1, 2 and 3

Question No. 8

With reference to the Regional Rural Banks (RRBs) in India, consider the following statements:
1.RRBs were established to provide concessional credit to weaker sections and mobilize rural savings for productive use.
2.The shareholding pattern of RRBs includes contributions from the Central Government, State Government, and sponsoring bank in a 50:15:35 ratio.
3.As per government reforms, RRBs are now allowed to lend only to weaker sections and at concessional interest rates.
Which of the statements given above is/are correct?

A1 and 2 only

B2 and 3 only

C1 and 3 only

D1, 2 and 3

Question No. 9

With reference to the classification of Non-Performing Assets (NPAs) in Indian banking, consider the following statements:
1.An asset that remains in the NPA category for up to 12 months is termed a Sub-Standard Asset.
2.A Doubtful Asset refers to an NPA that has remained in that category for more than 12 months.
3.A Loss Asset is one where full recovery is certain, but the asset has been partially written off.
Which of the statements given above is/are correct?

A1 and 2 only

B2 and 3 only

C1 and 3 only

D1, 2 and 3

Question No. 10

With reference to the classification of money in the Indian banking system, consider the following statements:
1.Narrow money is highly liquid and includes components like currency and demand deposits.
2.Broad money includes more stable deposits, enabling banks to use it for lending activities.
Which of the statements given above is/are correct?

A1 only

B2 only

CBoth 1 and 2

DNeither 1 nor 2