Banking Financial Awareness · Economics

Banking Regulation and Monetary Policy

1,219 Questions

Banking regulation and monetary policy questions test your understanding of the Reserve Bank of India functions, regulatory frameworks, and monetary tools. Topics include KYC guidelines, repo rates, and foreign exchange reserves management. This section is crucial for candidates preparing for banking and financial awareness exams.

RBI monetary toolsKYC guidelinesInterest rate regulationsCurrency issuanceBanking business acts

Banking Regulation and Monetary Policy Questions

Multiple choice

Raghuram Rajan is the ___ Governor of the Reserve Bank of India.

  1. 23rd

  2. 24th

  3. 25th

  4. 27th
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Raghuram Rajan served as the 23rd Governor of the Reserve Bank of India from 2013 to 2016. He was appointed by the UPA government and was known for his advocacy of inflation targeting. The other options (24th, 25th, 27th) do not correspond to his position in the RBI's gubernatorial sequence.

Multiple choice

Marginal Standing Facility (MSF) is a scheme announced by the Reserve Bank of India (RBI) in its Monetary Policy and refers to the penal rate at which banks can borrow money from the central bank over and above what is available to them through the LAF window. In which year did this scheme come into effect?

  1. 2010

  2. 2011

  3. 2012

  4. 2013
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The Marginal Standing Facility was introduced by the Reserve Bank of India in 2011-12 as part of the monetary policy framework. MSF allows scheduled commercial banks to borrow funds from the RBI at a penal rate (usually 1% above the repo rate) against their excess statutory liquidity ratio (SLR) holdings. This provides banks with an additional borrowing window beyond the Liquidity Adjustment Facility (LAF).

Multiple choice

The 'Protected Disclosure' scheme was introduced for

  1. public sector banks

  2. private banks

  3. foreign banks

  4. Both (2) and (3)

  5. cooperative banks
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The Protected Disclosure scheme (also known as whistleblowing policy) was introduced for private banks and foreign banks, making 'Both (2) and (3)' the correct answer. This scheme allows employees to report unethical or fraudulent practices without fear of retaliation.

Multiple choice

Which of the following is correct in relation to banks in the post reform period?

  1. Bank rate has been increased to 10 per cent.

  2. CRR has been increased to 8 per cent.

  3. CRR has been reduced in stages.

  4. Public sector banks have been asked to raise their funds from their private resources only.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In the post-reform period (after 1991), the CRR (Cash Reserve Ratio) has been reduced in stages by the RBI as part of financial liberalization and to increase lendable resources for banks. This was done to improve monetary policy flexibility and banking sector efficiency. Option A is incorrect as bank rate hasn't been fixed at 10%. Option B is incorrect as CRR has been reduced, not increased to 8%. Option D is incorrect as banks can raise funds from multiple sources, not just private resources.

Multiple choice

M1 in the money stock in India refers to

  1. post office saving deposits

  2. total post office deposits

  3. currency plus demand deposits plus other deposits with RBI

  4. time deposits with banks
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

M1 in India's money stock refers to currency (notes and coins in circulation) plus demand deposits (current account balances) plus other deposits with the RBI. This is the narrow measure of money supply. Option A (post office savings) is incorrect as these are not part of M1. Option B (total post office deposits) is incorrect as they're not included in M1. Option D (time deposits) is part of broader money measures like M3 but not M1.

Multiple choice

What is DFIAS?

  1. It is a kind of licence that allows duty-free imports for export production.

  2. Code numbers of operating flights

  3. The client level position limit as prescribed in the report of the RBI Sebi Standing Technical Committee.

  4. RBI's electronic funds transfer system
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

DFIAS (Duty Free Import Authorization Scheme) allows duty-free import of inputs for export production, helping exporters compete internationally by reducing their production costs. The question has a spelling discrepancy - the acronym is written as 'DFIAS' in the question but 'DFAS' in option A.

Multiple choice

On the recommendations of Kelkar Committee, no new RRB (Regional Rural Bank) has been established since

  1. April 1987

  2. April 1988

  3. April 1989

  4. April 1990
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The Kelkar Committee (1987) reviewed the Regional Rural Banks (RRBs) structure and recommended that no new RRBs be established. Following this recommendation, the government stopped establishing new RRBs from April 1987 onwards, focusing instead on strengthening the existing ones.

Multiple choice

Which pair is not correct?

  1. Rangrajan Committee - Balance of Payment

  2. Rekhi Committee - Simplification of Export and Import

  3. A. C. Shah Committee - NBFC

  4. Goiporia Committee - Banking Service Improvements
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The Rekhi Committee (1990) focused on the SIMPLIFICATION of export-import procedures and documentation in India, NOT the broader scope implied by 'Simplification of Export and Import'. Its mandate was reducing procedural hurdles for traders. The Rangarajan Committee dealt with Balance of Payments, the A.C. Shah Committee with NBFCs, and Goiporia Committee with banking services - all correctly matched.

Multiple choice

The Reserve Bank of India reduced which of the following rates by 25 basis' points in October 2012?

  1. Repo rate

  2. Cash Reserve Ratio

  3. Statutory Liquidity Ratio and Repo Rate

  4. Repo Rate and Cash Reserve Ratio
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In October 2012, RBI reduced the Cash Reserve Ratio (CRR) by 25 basis points to inject liquidity into the banking system. The repo rate was left unchanged at that time. CRR is the portion of deposits banks must maintain with RBI, and reducing it increases funds available for lending.

Multiple choice

Which one of the following is correct regarding the Note Issuing Authority of the Reserve Bank of India?

  1. Apart from the government it has the authority / monopoly to issue Currency notes other than one rupee notes/ coins.

  2. One rupee notes/coins and coins of smaller denominations are put into circulation by the Central government.

  3. At present the RBI Issues notes in seven denominations.

  4. The functions of note issue and currency management are discharged by the RBI through its head office in Mumbai.

  5. None of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

RBI currently issues notes in seven denominations: Rs. 10, 20, 50, 100, 200, 500, and 2000. Option A is incorrect because RBI alone has the monopoly (not the government). Option B is incorrect - only one rupee notes are issued by government, not coins. Option D is incorrect because these functions are performed through 19 issue offices across India, not just the head office.

Multiple choice

The Securities and Exchange Board of India (SEBI) has introduced a new type of Demat Account called “Basic Services Demat Account [BSDA). Which of the following is one of its features?

  1. Individuals are eligible to have multiple BSDA account across all depositories.

  2. Investors will receive transaction statement on annual base.

  3. Investors can avail at least two delivery instruction slip during account opening.

  4. Investors can avail SMS alert facility for credit transactions.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

BSDA was designed for small investors with minimal holdings. One key feature was that investors could avail at least two delivery instruction slips (DIS) during account opening. Option A is incorrect - only one BSDA per individual across depositories is allowed. Option B is incorrect - statements are provided quarterly, not annually. Option D is incorrect - SMS alerts were not a BSDA feature.