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

A person residing in India

  1. can own foreign currency or immovable property if it was held when he was resident outside India

  2. can transfer foreign currency or immovable property if it was held when he was resident outside India

  3. can invest in foreign currency or immovable property if it was held when he was resident outside India

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

All the given options are true for a person residing in India or NRI, who is residing in India but was not previously.

Multiple choice

Which of the following has the authority under SARFAESI Act to prescribe income recognition, accounting standards, and provisioning norms for Securitisation or Reconstruction Companies?

  1. RBI

  2. RoC

  3. SEBI

  4. Company Law Board
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Reserve Bank of India has the authority under SARFAESI Act to prescribe income recognition, accounting standards, and provisioning norms for Securitisation or Reconstruction Companies. The provisions of the guidelines and directions shall apply to SC/RC registered with the RBI under Section 3 of the SARFAESI Act, 2002.

Multiple choice

The provisions of SARFAESI Act are applicable in which of the following transactions?

  1. A lien or pledge on any goods as per Indian Contract Act

  2. Security interest created on agricultural land

  3. Loan amount above Rs. 1 lac

  4. Balance amount less than 20% of the principal amount and interest
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The provisions of this Act are applicable only for NPA loans with outstanding above Rs. 1.00 lac. NPA loan accounts where the amount is less than 20% of the principal and interest are not eligible to be dealt with under this Act.

Multiple choice

Section 49-A of Banking Regulation Act makes provisions for which of the following?

(a) Declaration of bank rate (b) Restrictions on the type of business that the banks cannot undertake (c) No person other than a bank is authorised to accept deposits withdrawable by cheque (d) Acceptance of deposits by banks

  1. Only (a)

  2. Only (a) and (c)

  3. Only (c)

  4. Only (b)
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Section 49-A of Banking Regulation Act, 1949 states that no person, other than a banking company, the Reserve Bank, the State Bank of India or any other 21 banking institution [firm or other person that are notified by the Central Government in this behalf on the recommendation of the Reserve Bank] shall accept from the public, deposits of money withdrawable by cheque. Thus, only (c) is true. 

Multiple choice

RBI can make application to High Court for winding up of a banking company if

(a) government directs RBI to do so (b) company fails to maintain minimum paid-up capital and reserves as per Sec 11 of BR Act (c) RBI has prohibited the bank to accept fresh deposits u/s 35-4 of BR Act (d) bank has failed to remain entitled to carry on banking activities

  1. Only (a), (b) and (d)

  2. Only (a), (c) and (d)

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

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The Reserve Bank may make an application under this section for the winding up of a banking company if the banking company has failed to comply with the requirements specified in Section 11 or has by reason of the provisions of Section 22 become disentitled to carry on banking business in India or has been prohibited from receiving fresh deposits by an order under clause (a) of Sub-section (4) of Section 35 or under clause (b) of Sub-section (3A) or Section 42 of the Reserve Bank of India Act, 1934. If the company has failed to comply with any requirement of the Act other than the requirements laid down in Section 11, has continued such failure, after notice in writing of such failure or contravention has been conveyed to the banking company.

Multiple choice

Section 45s of RBI Act relates to which of the following?

  1. Prohibits unincorporated association of persons from accepting deposits from public

  2. Prohibits banks from accepting deposits from public

  3. Allows government companies to accept deposits from public

  4. Restricts the banks to pay counter interest
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Section 45s of RBI Act relates to 'deposits not to be accepted in certain cases'. Under this, no person, being an individual or a firm or an unincorporated association of individuals, shall accept any deposit. Thus, option 1 is correct.

Multiple choice

If a securitisation company fails to comply with RBI guidelines, under SARFAESI Act, who can impose penalties and up to what extent?

  1. RBI, fine up to Rs. 5 lac and if default continues, Rs. 10000 per day

  2. SEBI, fine up to Rs. 5 lac

  3. RBI, fine up to Rs. 1 lac

  4. SEBI, fine up to Rs. 5 lac and if default continues, Rs. 10000 per day
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

If any securitisation company or reconstruction company fails to comply with any direction issued by the Reserve Bank under Section 12, such company and every officer of the company who is in default, shall be punishable with fine which may extend to Rs. 5 lac rupees. In the case of a continuing offence, with an additional fine which may extend to Rs. 10 thousand for every day during which the default continues.

Multiple choice

Which of the following is incorrectly matched?

  1. Section-8 of Banking Regulation Act : prohibitions for a banking company for trading activities

  2. Section-9 of Banking Regulation Act, 1949 : holding immovable property for period exceeding 7 years, except for its own use

  3. Section 10(1) of Banking Regulation Act, 1949 : banking company shall employ or be managed by a managing agent

  4. Section 5(0) of Banking Regulation Act, 1949 : Central Government has the authority to specify the activities that can be undertaken by a bank

Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Section 10(1) of Banking Regulation Act, 1949 states that no banking company shall employ or be managed by a managing agent.

Multiple choice

Regional rural banks are

  1. cooperative societies

  2. companies created under Companies Act

  3. body corporates created under a special statute

  4. public sector undertakings of the Central Government
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Regional rural banks are body corporates that are created under a special statute. They were established under the provisions of an ordinance passed on September, 1975 and the RRB Act, 1976 to provide sufficient banking and credit facility for agriculture and other rural sectors. These were set up on the recommendations of The M. Narasimham Working Group during the tenure of Indira Gandhi's government with a view to include rural areas into economic mainstream. At that time, about 70% of the Indian population was of rural orientation. 

Multiple choice

The major objective of formation of RBI by enacting RBI Act, 1934 was to

(a) regulate the issue of bank notes (b) keep reserves for securing monetary stability in India (c) operate the currency and credit system of India (d) keep control over the capital market and foreign exchange markets

  1. Only (a), (b) and (c)

  2. Only (b), (c) and (d)

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

  4. All of the above

Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The Preamble of the RBI describes its basic function. They are to regulate the issue of bank notes, keep reserves to secure monetary stability in India and generally to operate the currency and credit system in the best interests of the country. Thus, option 1 is correct. 

Multiple choice

Section 6(1)(o) of Banking Regulation Act deals with which of the following aspects?

  1. RBI powers to recommend amalgamation of a bank

  2. Central Government authority to notify other forms of business of a banking company

  3. Central Government authority to order merger of a bank

  4. RBI powers to supersede the management of a bank
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Section 6(1)(o) of Banking Regulation Act deals with any other form 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. Thus, option 2 is correct. 

Multiple choice

For banking business, the banking companies are licensed by which of the following?

(a) RBI (b) Company Law Board (c) Registrar of Companies (d) Security and Exchange Board of India

  1. Only (a)

  2. Only (a), (b) and (c)

  3. Only (a) and (d)

  4. All of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

For banking business, the banking companies are licensed by Reserve Bank of India. Under Banking Regulation Act, 1949, no company shall carry on banking business in India unless it holds a license issued on that behalf by the Reserve Bank.

Multiple choice

RBI issues instructions on rate of interest to banks. The provisions u/s 21A of Banking Regulation Act relate to

  1. maximum interest rate ceiling imposed by RBI

  2. method for fixing BPLR

  3. rate of interest fixed by banks as per RBI guidelines are not subject to scrutiny by courts

  4. cases of NPA accounts in which interest can be debited only when it is recovered
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Section 21-A of Banking Regulation Act relates to rate of interest that is fixed by banks, as per RBI guidelines, are not subject to scrutiny by courts.

Notwithstanding, anything contained in the Usurious Loans Act, 1918 (10 of 1918), or any other law relating to indebtedness in force in any state, a transaction between a banking company and its debtor shall not be reopened by any court on the ground that the rate of interest charged by the banking company in respect of such transaction is excessive. 

Multiple choice

RBI can remove the chairman or director of a bank under _____ against which appeal can be made to the Central Government within ________ days from date of communication of such order.

  1. RBI Act, 45 days

  2. Banking Regulation Act, 30 days

  3. Banking Regulation Act, 45 days

  4. RBI Act, 30 days
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Under Section 36AA, power of Reserve Bank to remove managerial and other per­sons from office, Reserve Bank may, for reasons to be recorded in writing, by order, remove from office, with effect from such date as may be specified in the order, 2 [any chairman or director] chief executive officer (by whatever name called) or other officer or employee of the banking company. Any person against whom an order of removal has been made, within thirty days from the date of communication to him of the order.