Banking Financial Awareness · Economics

Banking Regulation and Monetary Policy

1,180 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

The Securities and Exchange Board of India recently imposed a restriction on money flow in equity through P-Notes. What is the full form of P-Notes?

  1. Permanent Notes

  2. Purchase Notes

  3. Participatory Notes

  4. Private Notes
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Participatory Notes (P-Notes) are financial instruments used by foreign investors to invest in Indian stock markets without registering with SEBI. They are issued by foreign institutional investors to their overseas clients who wish to invest in India. SEBI has periodically tightened regulations on P-Notes to prevent misuse and improve transparency in foreign investment flows.

Multiple choice

Which of the following are essential functions of banks as indicated in Section 5(b) of Banking Regulation Act?

(a) accept deposits and lend or invest such deposits (b) accept deposit and undertake non-fund based business (c) accept deposits and undertake remittance business (d) lend, invest and issue letters of credit

  1. (a) and (d) only

  2. (a) and (c) only

  3. (c) only

  4. (a) only
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

As indicated in Section 5(b) of Banking Regulation Act - “banking” means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise.

Multiple choice

Other than the business specified u/s 6 (1) of Banking Regulation Act, a bank can undertake any other business which can be prescribed/decided by

(a) Central Govt. (b) RBI (c) Board of the Bank (d) Ministry of Corporate Affairs

  1. (a) and (b) only

  2. (b) and (c) only

  3. (d) only

  4. (a) only
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

In addition to the business of banking, banking company may engage in any other forms of business which the Central Government may by notification in the Official Gazette, specify as a form of business in which it is lawful for a banking company to engage u/s 6(1).

Multiple choice

Which of the following are regulated by Banking Regulation Act 1949?

(a) Public Sector Banks (b) State Bank Group Banks (c) RRBs (d) Coop Land Mortgage Banks

  1. (a) to (d) all

  2. (a) to (c) only

  3. (a), (b) and (d) only

  4. (a), (c) and (d) only
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In computing the period of limitation for an appeal or an application for leave to appeal or for revision or for review of a judgment, the day on which the judgment complained of was pronounced and the time requisite for obtaining a copy of the decree, sentence or order appealed from or sought to be revised or reviewed shall be excluded.

Multiple choice

Who can suspend the operation of banking company and on whose recommendations?

  1. RBI, on the recommendations of Central Govt.

  2. RBI, on its own

  3. Central Govt, on its own

  4. Central Govt, on recommendations of RBI
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Under The Banking Regulation Act, 1949, Section 45 states: Power of Reserve Bank to apply to Central Government for suspension of business by a banking company and to prepare scheme of reconstitution of amalgamation.

Multiple choice

In the context of Cooperative Banks, which of the following statements are correct?

(a) Coop bank operating in one State obtains registration under State Coop Societies Act. (b) For coop banks operating in more than one State, Central Govt. appoints Registrar. (c) Coop banks are under purview of BR Act u/s 56. (d) Where coop bank is registered under DICGC Act, RBI can order its winding up.

  1. (a) to (d) all

  2. (a) to (c) only

  3. (a), (c) and (d) only

  4. (b) and (d) only
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Correct Answer: (a) to (d) all

Multiple choice

RBI can appoint Chairman of a bank

(a) if the office is lying vacant and not filled immediately (b) if in the opinion of RBI, such vacant position is to be against interest of the banking company (c) and such appointment shall be for a maximum period of 5 years (d) and there is provision for re-appointment after the initial period

  1. (a) to (d) all correct

  2. (a), (b) and (d) are correct

  3. (a), (b) and (c) are correct

  4. (b), (c) and (d) are correct
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Power of Reserve Bank to appoint chairman of the Board of Directors appointed on a whole-time basis or a managing director of a banking company: Where the office of a banking company is vacant, the Reserve Bank may, if it is of opinion that the continuation of such vacancy is likely to adversely affect the interests of the banking company, appoint a person eligible under sub-section (4) of section 10B to be so appointed, to be the chairman of the Board of directors appointed on a whole-time basis.

 

Multiple choice

While issuing a banking license for a foreign bank, RBI, in addition to usual consideration, takes into account

(a) whether the business will be carried by the company in public interest (b) whether the law of the country where the bank originated discriminates against Indian banks (c) whether the company complies with provisions of BR Act, as applicable to foreign companies

  1. (a) to (c) all

  2. (a) and (b) only

  3. (b) and (c) only

  4. (a) and (c) only
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Procedurely, foreign banks are required to apply to RBI for opening their branches in India. Foreign banks’ application for opening their maiden branch is considered under the provisions of Sec 22 of the BR Act, 1949. Before granting any licence under this section, the general character of the proposed management of the proposed bank will be in public interest or the interest of its depositors. RBI may require to be satisfied that the Government or the law of the country in which it is incorporated does not discriminate in any way against banks from India.

Multiple choice

If a security is in possession of a bank, it can be sold by the bank

  1. by filing a suit under SARFAESI Act

  2. by giving 60-day notice under provisions of SARFAESI Act

  3. by giving reasonable time notice under provisions of Indian Contract Act

  4. under reasons of SARFAESI Act or Indian Contract Act, at the discretion of the bank
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The sale of the securities by the pawnee bank without giving reasonable notice to the pawner is bad and not binding on him. What Section 176 contemplates is not merely a notice but a reasonable notice, of intended sale of the security by the creditor within a certain date so as to afford an opportunity to the debtor to pay up the amount within the time mentioned in the notice.

Multiple choice

A banking company can amalgamate with another banking company of its own, called ______ amalgamation. Central Govt. can also order amalgamation of two banking companies u/s 396 of ____, in consultation with ____.

  1. voluntary, RBI Act, SEBI

  2. voluntary, Companies Act, RBI

  3. voluntary, RBI Act, RBI

  4. voluntary, Companies Act, SEBI
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Amalgamation of banks: Voluntary Amalgamation: A banking company may be amalgamated with another banking company.

Amalgamation by Govt: After Consultation with RBI, Central Govt. is empowered to order amalgamation of two banking companies (u/s 396 of Companies Act). 

Multiple choice

Central Govt. can make rules for preservation of records/books u/s ______ of BR Act. RBI can make rules u/s ______ of BR Act and banks can return the paid instruments to customers u/s ________ of BR Act.

  1. 45Z, 35, 45Y

  2. 45Y, 35A, 45Z

  3. 21A, 35A, 51Z

  4. 21A, 35A, 45Z
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In exercise of the powers conferred by section 45Y of the Banking Regulation Act, 1949 (10 of 1949), the Central Government, after consultation with the Reserve Bank of India, hereby makes the following rules, namely: Every banking company shall preserve, in good order, its books, accounts and other documents, relating to a period of not less than five years immediately preceding the current calendar year.

Reserve Bank may, having regard to the factors specified in sub-section (1) of section 35A, by an order in writing, direct any banking company to preserve any of the books, accounts or other documents mentioned in those rules, for a period longer than the period specified for their preservation, in the said rules.

45-ZC states - Nomination for return of articles kept in safe custody with banking cornpany - (1) Where any person leaves any article in safe custody with a banking company such person may nominate, in the prescribed manner, one person to whom in the event of the death of the person leaving the articles in safe custody, such article may be returned by the banking company.

 

Multiple choice

Under provision of SBI Act, 1955, SBI is managed by

(a) Board consisting of Chairman, Vice Chairman, maximum two Mg. Directors etc. (b) Chairman and Mg. Director are appointed for a period not exceeding 5 years (c) Local Boards are set up where the bank has Local HO (d) Local Boards consists of Chairman and other elected and nominated members

  1. (a) to (d) are correct

  2. (a) to (c) only are correct

  3. (b), (c) and (d) are correct

  4. (a), (c) and (d) are correct
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Under provisions of SBI Act 1955, SBI is managed by - The Central Board and it should consist of the following, namely: (a) a chairman and a vice-chairman to be appointed by the Central Government in consultation with the Reserve Bank The chairman and the vice-chairman and each managing director shall hold office for such term, not exceeding five years, as the Central Government may fix when appointing them and shall be eligible for reappointment.  A Local Board is constituted for the new local head office, any person who is, at the time of such constitution or holding office as a member of a Local Board for an existing local head office. Local Board consists of Chairman and other elected and nominated members.

Multiple choice

Banks can issue notice for enforcement of security interest under SARFAESI Act when

  1. there is default by borrower and security is in possession of the bank

  2. the account is NPA and security is in possession of the bank

  3. the account is suit filed and security is in possession of the bank

  4. the account is suit filed and security is in possession of the borrower
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Banks can issue notice for enforcement of security interest under SARFAESI Act when the account is NPA and security is in possession of the bank. The SARFAESI Act, 2002 gives powers of “seize and desist” to banks. Banks can give a notice in writing to the defaulting borrower requiring it to discharge its liabilities within 60 days. If the borrower fails to comply with the notice, the Bank may take recourse to one or more of the following measures: Take possession of the security for the loan Sale or lease or assign the right over the security Manage the same or appoint any person to manage the same