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 has the sole right to mint coins?

  1. Reserve Bank Of India

  2. State Bank Of India

  3. Government of India

  4. Finance Minister

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

The Government of India has the exclusive right to mint coins under the Coinage Act, 2011. The RBI issues currency notes, but coinage remains a sovereign function of the government.

Multiple choice

Which measure comes under quantitative credit controls adopted by the Central Bank of the country?

  1. Bank Rate

  2. Open Market Operations

  3. Cash Reserve Ratio

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

Quantitative credit controls are monetary policy tools that directly affect the quantity of money and credit in the economy. Bank Rate influences borrowing costs, Open Market Operations adjust money supply through bond trading, and Cash Reserve Ratio mandates the fraction of deposits banks must hold as reserves. Since all three are quantitative tools administered by the central bank, option D is correct.

Multiple choice

'Sensitive sector' as defined by RBI include(s)

  1. capital market

  2. real estate

  3. commodities

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

RBI classifies capital markets, real estate, and commodities as 'sensitive sectors' due to their potential impact on financial stability and high volatility. These sectors require enhanced monitoring and regulatory oversight. Banks' exposure to these sectors is subject to specific prudential norms to mitigate systemic risk.

Multiple choice

Which of the following is a private sector bank?

  1. Indian Bank

  2. UTI Bank Ltd.

  3. PNB

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

UTI Bank Ltd. (now Axis Bank) was a private sector bank. Indian Bank, PNB (Punjab National Bank), and Syndicate Bank were all nationalized banks and are part of the public sector banking system.

Multiple choice

Under Lead Bank Scheme lead banks were asked to adopt

  1. villages

  2. towns

  3. districts

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

Under the Lead Bank Scheme, each district in India is assigned to a lead bank responsible for coordinating banking services and credit delivery in that district.

Multiple choice

Which of the rate is not determined by Reserve Bank of India?

  1. Bank Rate

  2. CRR

  3. SLR

  4. PLR
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

PLR (Prime Lending Rate) is not determined by the Reserve Bank of India. It is set individually by each commercial bank based on their cost of funds and market conditions. In contrast, Bank Rate, CRR, and SLR are all monetary policy tools directly controlled by the RBI.

Multiple choice

The equity of Reserve Bank of India in the National Housing Bank is

  1. 49%

  2. 51%

  3. 71%

  4. 100%
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The Reserve Bank of India (RBI) holds 100% equity in the National Housing Bank (NHB). NHB was established in 1988 as a wholly-owned subsidiary of RBI to promote housing finance. The other percentages (49%, 51%, 71%) are incorrect as they suggest partial ownership.

Multiple choice

In March 2015, the Reserve Bank of India reduced the repo rate to

  1. 7.75 percent

  2. 7.5 percent

  3. 7 percent

  4. 8 percent

  5. 8.25 percent
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In March 2015, the RBI cut the repo rate by 25 basis points from 7.75% to 7.5%. This was the first rate reduction under Governor Raghuram Rajan, aimed at boosting economic growth while managing inflation.

Multiple choice

The K.S.Shastry Committee recommendations deals with

  1. health insurance for senior citizens

  2. administered price mechanism for petroleum products

  3. FDI in sensitive sectors

  4. implementation of Basel norms
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The K.S. Shastry Committee (2002) specifically dealt with health insurance for senior citizens, leading to the establishment of Senior Citizen Health Insurance Scheme. It did not cover petroleum pricing (administered by different committees), FDI, or Basel norms.

Multiple choice

The Reserve Bank of India has extended currency swap arrangement to South Asian Association for Regional Cooperation nations till mid-November 2017. All 7 SAARC members can avail the facility. Under the arrangement, RBI will offer swap arrangement up to an overall amount of ________ both in foreign currency and Indian rupee.

  1. US 1 billion dollars

  2. US 1.5 billion dollars

  3. US 2 billion dollars

  4. US 2.5 billion dollars

  5. US 3 billion dollars
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Correct answer is (3). 

Multiple choice

Reserve Bank of India gives

  1. all currencies except hundred rupee notes

  2. all notes except one rupee notes

  3. all currencies

  4. All currencies more than the ten Rupee note
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The Reserve Bank of India issues all currency notes except the one rupee note. One rupee notes are issued by the Ministry of Finance, Government of India, and bear the signature of the Finance Secretary rather than the RBI Governor. This distinction is because only the RBI can issue notes of higher denominations.

Multiple choice

Base rate in banks is _________.

  1. rate of interest payable on demand deposit

  2. rate of interest payable on fixed deposits

  3. rate of interest charged by RBI on long term borrowings of public sector units

  4. the rate below which no bank allows their lending to anyone

  5. all of the above

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

Yes, its the correct choice. Base rate is the rate below which no bank allows their lending to anyone. It is fixed by RBI.