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

Which of the following financial products are not licensed to be marketed by Financial Service Executives?

  1. Pension products regulated by PFRDA

  2. Banking/financial products of banks/NBFC regulated by RBI

  3. Non-insurance products offered by Department of Posts, Government of India

  4. None of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

To distribute by engaging Financial Service Executives (FSE) who are individuals licensed to market, distribute and service such other financial products namely:

a. mutual funds of mutual fund companies regulated by SEBI; b. pension products regulated by PFRDA; c. other financial products distributed by SEBI licensed Investment Advisors; d. banking/ financial products of banks/ NBFC regulated by RBI; e. non-insurance products offered by Department of Posts, Government of India; f. any other financial product or activity permitted by the Authority from time to time.

Multiple choice

The Lead Bank Scheme was recommended by the

  1. Gadgil Group

  2. Kamraj Plan

  3. Wanchoo Committee

  4. Bank Committee
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The Gadgil Group (1969) recommended the Lead Bank Scheme to promote integrated area development and ensure banking services in underbanked regions. The scheme assigned each district a lead bank responsible for credit deployment and financial inclusion. The Kamraj Plan was about political leadership, Wanchoo Committee dealt with tax evasion, and Bank Committee is too vague.

Multiple choice

Which of the following is/are not an instrument of selective credit control in India?

  1. Regulation of consumer credit

  2. Rationing of credit

  3. Margin requirements

  4. Variable Reserve Ratios
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Variable Reserve Ratio (Cash Reserve Ratio) is aimed to control only the volume of credit (quantitative method), not the purpose of credit for which bank gives loans. Qualitative method and selective control method are used for these purposes.

Multiple choice

The sum of which of the following constitutes Broad Money in India?

  1. Currency with the public
  2. Demand deposits with banks
  3. Time deposits with banks
  4. Other deposits with RBI

  1. 1 and 2

  2. 1, 2 and 3

  3. 1, 2, 3 and 4

  4. 1, 2 and 4
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Narrow money is the most liquid part of the money supply because the demand deposits can be withdrawn anytime during the banking hours. Time deposits on the other hand have a fixed maturity period and hence, cannot be withdrawn before expiry of this period. When we add time deposits into narrow money, we get broad money, which is of public with banks.

Multiple choice

Consider the following statements:

  1. Reserve Bank of India was nationalized on 26th January, 1950.
  2. The borrowing programme of the Government of India is handled by the Department of Expenditure, Ministry of Finance.

Which of the statements given above is/are correct?

  1. 1 only

  2. 2 only

  3. Both 1 and 2

  4. Neither 1 nor 2
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

RBI was established in 1935 and its shares were held by private individuals. There are 20 directors who govern its activities. It was nationalized on 1st January, 1949. The borrowing programme of the Government of India is handled by the Department of Economic Affairs under Union Finance Ministry.

Multiple choice

Consider the following statements regarding Reserve Bank of India:

  1. It is a banker to the Central Government.
  2. It formulates and administers monetary policy.
  3. It acts as an agent of the Government in respect to India.
  4. It handles the borrowing programme of Government of India.

Which of these statements are correct?

  1. 1 and 2

  2. 2, 3 and 4

  3. 1, 2, 3 and 4

  4. 3 and 4
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Functions of RBI: sole authority to issue currency; government’s bank; banker’s bank; guardian of money market; lender of the last resort; sole reservoir of foreign exchange reserves; controller of credit; clearing house for setting inter bank transactions. It follows an independent monetary policy.

Multiple choice

With reference to Non-Banking Financial Companies (NBFCs) in India, consider the following statements:

  1. They cannot engage in the acquisition of securities issued by the government.
  2. They cannot accept demand deposits like Savings Account.

Which of the statements given above is/are correct?

  1. 1 only

  2. 2 only

  3. Both 1 and 2

  4. Neither 1 nor 2
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A non–banking financial company (NBFC) is a company registered under the Companies Act, 1956 and is engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by government or local authority or other securities of like marketable nature, leasing, hire-purchase, insurance business, chit business, etc.

Multiple choice

The Reserve Bank of India was nationalized in the year

  1. 1934

  2. 1935

  3. 1947

  4. None of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The Reserve Bank of India was established in 1935 and was nationalized in 1949. Since none of the specific years listed (1934, 1935, 1947) match the nationalization year of 1949, 'None of these' is the correct answer.