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 among the following bodies recommends MSP (Minimum Support Price) for the crops in India?

  1. FCI (Food Corporation of India)

  2. RBI (Reserve Bank of India)

  3. Ministry of Agriculture

  4. CACP (Commission for Agricultural Costs and Prices)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The Commission for Agricultural Costs and Prices (CACP) recommends MSP for crops to the Government of India. CACP is an attached office of the Ministry of Agriculture and Farmers' Welfare. FCI procures crops at MSP, RBI regulates monetary policy, and the Ministry implements policies but doesn't set prices.

Multiple choice

Foreign Exchange Reserves of India are kept in the custody of

  1. Reserve Bank of India

  2. National Stock Exchange

  3. Bombay Stock Exchange

  4. Foreign Ministry of India
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The Reserve Bank of India (RBI) is India's central bank and is responsible for managing the country's foreign exchange reserves. These reserves include foreign currency assets, gold, and Special Drawing Rights (SDR) maintained to ensure stability in international payments and monetary policy. Stock exchanges (BSE, NSE) are trading platforms, while the Foreign Ministry handles diplomatic relations.

Multiple choice

__________ had announced removing of restrictions on foreign funds. Among the curbs relaxed include removal of the 40 percent cap on Participatory Notes and Overseas Derivative Instruments.

  1. SEBI

  2. BSE

  3. NSE

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

SEBI (Securities and Exchange Board of India) announced the removal of restrictions on foreign funds, including removing the 40% cap on Participatory Notes and Overseas Derivative Instruments. This was a significant liberalization move aimed at attracting more foreign investment. The relaxation of these curbs was part of broader financial sector reforms. The other options (BSE, NSE, RBI) are financial institutions but SEBI was the regulator that made this specific announcement.

Multiple choice

In the context of Indian economy; which of the following is/are the purpose/purposes of Statutory Reserve Requirements?

  1. To enable the Central Bank to control the amount of advances the banks can create.
  2. To make the people's deposits with banks safe and liquid.
  3. To prevent the commercial banks from making excessive profits.
  4. To force the banks to have sufficient vault cash to meet their day-to-day requirements.

Which of the following is the correct option?

  1. 1 only

  2. 1 and 2 only

  3. 2 and 3 only

  4. 1, 2, 3 and 4
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Statutory Reserves Requirements include Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). First statement is correct. Second statement is incorrect because of the term liquid in that. Third statement is obviously incorrect. Fourth statement is partially correct for SLR but does not stand correct for CRR so it is incorrect.

Multiple choice

Which of the following terms NOT used in Banking Sector?

  1. SLR

  2. NPA

  3. Credit Rating

  4. Fixed

  5. PURA
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

PURA (Provision of Urban Amenities in Rural Areas) is a rural development initiative, not a term specifically used in banking operations. The other options - SLR (Statutory Liquidity Ratio), NPA (Non-Performing Assets), Credit Rating, and Fixed (as in Fixed/Fixed Deposit) - are all standard banking terms. PURA is a government development policy, not banking terminology.

Multiple choice

Which of the following terms NOT used in Banking Sector?

  1. SLR

  2. NPA

  3. Credit Rating

  4. Fixed

  5. PURA
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

PURA (Providing Urban Amenities to Rural Areas) is a rural development initiative, not a banking term. It was proposed by Dr. A.P.J. Abdul Kalam to bridge the urban-rural divide. The other options - SLR (Statutory Liquidity Ratio), NPA (Non-Performing Assets), Credit Rating, and Fixed - are all commonly used terms in the banking and financial sector.

Multiple choice

Which of the following terms NOT used in Banking Sector?

  1. SLR

  2. NPA

  3. Credit Rating

  4. Fixed

  5. PURA
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

PURA (Provision of Urban Amenities in Rural Areas) is not a banking term. It's a rural development strategy. SLR (Statutory Liquidity Ratio), NPA (Non-Performing Assets), and Credit Rating are standard banking terms. Fixed is also commonly used in fixed deposits.

Multiple choice

Which of the following is not a function of the central bank of India?

  1. Regulation of currency and flow of credit system.

  2. Maintaining exchange value of rupee.

  3. Formulating monetary policy.

  4. Lending at low rates to the public.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The central bank (RBI in India) regulates currency and credit, maintains exchange value, and formulates monetary policy. Direct lending to the public at concessional rates is a commercial bank function, not a central bank function.

Multiple choice

The committee formed to suggest ways and means for Capital Account Convertibility Rupee is headed by

  1. N K Singh

  2. S S Tarapore

  3. Y K Alagh

  4. G V K Raghavan

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

The S.S. Tarapore Committee (1997) was formed to suggest measures for Capital Account Convertibility. The committee was headed by former RBI Deputy Governor S.S. Tarapore. N.K. Singh, Y.K. Alagh, and G.V.K. Raghavan served on other committees but not this one.

Multiple choice

Commercial banks finance rural credit directly and through

  1. NABARD

  2. Rural banks

  3. Cooperative societies

  4. State Govt

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

Commercial banks in India provide rural credit both directly and through Regional Rural Banks (RRBs). RRBs were established specifically to provide banking services to rural areas, combining the cooperative spirit with professional banking. They are sponsored by commercial banks but operate in rural sectors.

Multiple choice

According to the situation, who is responsible for the interest on the housing loans given by the bank?

Directions: Study the situation given below to answer the question.
Satish Vrati's New Year resolution for the past three years has been the same; to buy a new house in New Delhi at the earliest. With every hike in salary, he would scramble through newspapers to find out good properties and housing loans. Meanwhile, he received conflicting advice about the pros and cons of owning a flat. If one friend pointed out the risk involved in leasing out the property. Another would say his money was being locked up without good returns. Vrati became indecisive.

With the cut in Cash Reserve Ration (CRR) by the Reserve Bank of India (RBI), many banks decided to trim interest rates for housing loans. But Vrati still wondered whether real estate was a safe investment. With the entry of corporate sector, the real estate sector has become reliable�, says Rajendra Varshney, chartered accountant and real estate adviser. Today,� it can compete with any available investment option.�

  1. The customers

  2. The government

  3. Reserve Bank of India

  4. The banks themselves
Reveal answer Fill a bubble to check yourself
C Correct answer