Question 1

Under the National Pension System (NPS) framework, which regulatory authority is responsible for regulating pension fund managers, custodians, and the overall functioning of the NPS architecture?

Accepted Answer

The Pension Fund Regulatory and Development Authority (PFRDA) is the statutory regulator established under the Pension Fund Regulatory and Development Authority Act, 2013. PFRDA regulates and supervises all aspects of the National Pension System (NPS), including pension fund managers, custodians, points of presence (POPs), and the Central Record Keeping Agency (CRA). PFRDA was established on 1 October 2003 as a non-statutory body and later given statutory status in 2013. It is headquartered in New Delhi. PFRDA's mandate includes promoting voluntary retirement savings, ensuring transparency, and protecting subscriber interests in the NPS. Therefore, the answer is Option C.

Question 2

Which of the following regulatory bodies is responsible for regulating and supervising the insurance sector in India, including life insurance, general insurance, and health insurance?

Accepted Answer

The Insurance Regulatory and Development Authority of India (IRDAI) is the statutory body established under the Insurance Regulatory and Development Authority Act, 1999. IRDAI regulates, promotes, and ensures orderly growth of the insurance industry in India across all segments — life insurance, general insurance, and health insurance. It was established on 1 April 2000 and is headquartered in Hyderabad. IRDAI issues licenses to insurers, sets premium guidelines, monitors solvency, and protects policyholder interests. Therefore, the answer is Option B.

Question 3

Which regulatory body has the authority to issue guidelines on corporate governance standards for listed companies in India?

Accepted Answer

The Securities and Exchange Board of India (SEBI) has the statutory authority to issue guidelines and regulations on corporate governance standards for listed companies under the Securities and Exchange Board of India Act, 1992. SEBI's Corporate Governance Code and Listing Regulations mandate disclosure, board composition, audit committee requirements, and other governance standards. Therefore, answer is A.

Question 4

The National Pension System (NPS) allows subscribers to invest in which of the following asset classes?

Accepted Answer

The National Pension System (NPS) offers subscribers the flexibility to invest in multiple asset classes including equities, government securities (G-secs), corporate bonds, and alternative investments through various pension fund managers. NPS provides three investment options: Active Choice (subscriber selects allocation), Auto Choice (age-based allocation), and Guided Choice (fund manager recommends allocation). Therefore, answer is B.

Question 5

Under which Act was the Pension Fund Regulatory and Development Authority (PFRDA) established to regulate the National Pension System (NPS) in India?

Accepted Answer

The Pension Fund Regulatory and Development Authority (PFRDA) was established under the Pension Fund Regulatory and Development Authority Act, 2013. PFRDA regulates all aspects of the National Pension System (NPS), including pension fund managers, custodians, and subscribers. The Act came into force on 1st January 2015. Therefore, answer is C.

Question 6

Which of the following statements correctly describes the regulatory relationship between SEBI, IRDAI, and PFRDA in India's financial system?

Accepted Answer

SEBI regulates securities and capital markets, IRDAI regulates insurance, and PFRDA regulates pension funds. These are three independent regulatory authorities with distinct mandates and no hierarchical relationship. While all three are financial sector regulators, they operate under different statutory acts and regulate different product categories. RBI is the apex banking regulator but does not oversee SEBI, IRDAI, or PFRDA. Therefore, the answer is A.

Question 7

The National Pension System (NPS) is regulated and promoted by which authority, and which of the following is a key feature of NPS?

Accepted Answer

The National Pension System (NPS) is regulated by the Pension Fund Regulatory and Development Authority (PFRDA). A key feature of NPS is that it allows individuals to choose their pension fund manager and investment portfolio based on risk appetite. NPS is a defined contribution scheme (not defined benefit), meaning the retirement corpus depends on contributions and investment returns. Therefore, the answer is D.

Question 8

Which of the following is NOT a function of the Securities and Exchange Board of India (SEBI)?

Accepted Answer

SEBI regulates securities markets, stock exchanges, mutual funds, and derivatives. It protects investor interests and promotes fair market practices. However, SEBI does NOT regulate insurance products or insurance companies — that is the exclusive function of IRDAI. SEBI also does not regulate commercial banking or pension funds (PFRDA regulates pensions). Therefore, the answer is B.

Question 9

Under which Act is the Pension Fund Regulatory and Development Authority (PFRDA) established, and what is its primary function?

Accepted Answer

PFRDA was established under the Pension Fund Regulatory and Development Authority Act, 2013. Its primary function is to regulate, promote, and develop the pension sector in India, particularly overseeing the National Pension System (NPS). PFRDA licenses pension fund managers, custodians, and points of presence (POPs) to ensure orderly growth of the pension market. Therefore, the answer is C.

Question 10

Which of the following regulatory bodies is responsible for regulating and supervising the insurance sector in India?

Accepted Answer

The Insurance Regulatory and Development Authority of India (IRDAI) is the statutory body established under the Insurance Regulatory and Development Authority Act, 1999. It regulates life insurance, general insurance, and health insurance sectors. SEBI regulates securities markets, PFRDA regulates pension funds, and RBI regulates banking and payment systems. Therefore, the answer is B.

Question 11

Which of the following is NOT a function of IRDAI (Insurance Regulatory and Development Authority of India) as per the Insurance Act, 1938?

Accepted Answer

IRDAI is the statutory regulator for the insurance sector in India, established under the Insurance Regulatory and Development Authority Act, 1999. Its primary functions include: (1) regulating and supervising insurance companies, (2) protecting policyholders' interests, (3) promoting insurance awareness, (4) issuing licenses to insurers and intermediaries, and (5) setting solvency margins and investment norms. However, IRDAI does NOT directly conduct monetary policy or set repo/reverse repo rates — these are RBI functions. IRDAI also does NOT regulate banking operations or set CRR/SLR. Therefore, answer is D.

Question 12

Under the SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003, which of the following constitutes 'insider trading'?

Accepted Answer

Insider trading occurs when a person who is in possession of unpublished price-sensitive information (UPSI) about a company trades in its securities or counsels others to do so, thereby gaining an unfair advantage. SEBI defines UPSI as any information that is not generally available and which if made public would materially affect the price of securities. This is governed under SEBI (Prohibition of Insider Trading) Regulations, 2015 (amended from 2003 version). The key element is that the person must have access to UPSI through their position (director, employee, consultant, etc.) and must trade before such information becomes public. Therefore, answer is B.

Question 13

PFRDA has prescribed that Pension Fund Managers (PFMs) under NPS must maintain a minimum net worth. What is the primary purpose of this requirement?

Accepted Answer

PFRDA prescribes minimum net worth requirements for Pension Fund Managers (PFMs) operating under NPS to ensure financial stability and protect subscriber interests. As per PFRDA regulations, PFMs must maintain a minimum net worth (currently prescribed at ₹100 crore for new applicants, though this may be subject to updates). The primary purpose of this requirement is to: (1) Ensure PFMs have sufficient capital to absorb losses and continue operations, (2) Protect subscriber funds from PFM insolvency, (3) Maintain operational resilience and service quality, and (4) Ensure compliance with regulatory standards. This is a prudential regulation similar to capital adequacy requirements for banks. The requirement ensures that PFMs do not engage in excessive risk-taking and remain solvent to manage subscriber portfolios effectively. Therefore, answer is B.

Question 14

Under the SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003, which of the following constitutes 'insider trading' as per the definition provided by SEBI?

Accepted Answer

Insider trading under SEBI regulations involves dealing in securities by a person who is in possession of unpublished price-sensitive information (UPSI) about the company. UPSI is information that is not generally available to the public and which, if disclosed, would materially affect the price of the security. The SEBI (Prohibition of Insider Trading) Regulations, 2015 (which superseded the 2003 regulations) define insider trading as dealing in securities while in possession of UPSI. The key element is that the person must have access to material non-public information before it is disclosed to the market. Option A correctly identifies this core principle. Option B is incorrect because insider trading is not limited to board members alone — it extends to any person with access to UPSI, including employees, consultants, and auditors. Option C confuses insider trading with market manipulation; insider trading is about information asymmetry, not price manipulation through false statements. Option D is a distractor that conflates insider trading with breach of fiduciary duty — while related, insider trading has a specific regulatory definition under SEBI rules. Therefore, answer is A.

Question 15

SEBI has prescribed detailed regulations for mutual fund operations. Under SEBI (Mutual Funds) Regulations, 1996, which of the following is NOT a permissible investment for a mutual fund scheme?

Accepted Answer

SEBI (Mutual Funds) Regulations, 1996 (as amended) prescribe detailed investment guidelines for mutual fund schemes. Permissible investments include: (1) Securities listed on recognized stock exchanges; (2) Government securities and treasury bills; (3) Money market instruments (CPs, CDs, etc.); (4) Units of other mutual funds; (5) Deposits with banks and financial institutions; (6) Gold and gold-related securities (subject to limits). However, mutual funds are NOT permitted to invest in: (1) Real estate or immovable property (except for REITs); (2) Unlisted securities (with limited exceptions); (3) Commodities (except through commodity funds); (4) Derivatives for speculation (only for hedging); (5) Loans or advances to any person or entity. A common misconception is that mutual funds can directly invest in real estate or provide loans — they cannot. Therefore, answer is C.

Question 16

PFRDA has introduced the 'Atal Pension Yojana' (APY) as a social security scheme. Which of the following is a key feature of APY that distinguishes it from the regular NPS?

Accepted Answer

The Atal Pension Yojana (APY), launched by PFRDA in 2015, is a government-backed pension scheme designed for unorganized sector workers and those without access to formal pension systems. Key distinguishing features of APY include: (1) Government co-contribution of 50% of the subscriber's contribution (up to a maximum of Rs. 1,000 per annum) for the first 5 years, provided the subscriber is not covered under any other social security scheme; (2) Guaranteed minimum pension amount at retirement (age 60), regardless of market performance; (3) Eligibility restricted to Indian citizens aged 18-40 years; (4) Mandatory annuity purchase at retirement to ensure lifelong pension. In contrast, regular NPS does not offer government co-contribution or guaranteed pension amounts — returns are market-linked. Therefore, answer is B.

Question 17

The Pension Fund Regulatory and Development Authority (PFRDA) oversees the National Pension System (NPS). Which of the following statements regarding NPS account types is INCORRECT?

Accepted Answer

The National Pension System (NPS) regulated by PFRDA offers two main account types: (1) Tier I Account — a non-withdrawable retirement account with tax benefits under Section 80C and 80CCD of the Income Tax Act, and (2) Tier II Account — a voluntary, fully withdrawable savings account without the same tax benefits. Tier I is mandatory for NPS subscribers and is designed for retirement savings. Tier II is optional and allows partial or full withdrawal at any time. A common misconception is that Tier II accounts also offer the same tax deductions as Tier I — they do not. Another misconception is that both tiers have identical withdrawal restrictions — Tier I has restrictions (withdrawal only after age 60 or specific conditions), while Tier II is fully flexible. Therefore, answer is D.

Question 18

IRDAI has mandated that life insurance companies must maintain a minimum solvency ratio. Which of the following best describes the purpose of this solvency requirement?

Accepted Answer

The Insurance Regulatory and Development Authority of India (IRDAI) requires life insurance companies to maintain a minimum solvency margin to ensure they have sufficient assets to meet their obligations to policyholders even under adverse conditions. The solvency ratio is a measure of the insurer's financial strength and ability to pay claims. It is expressed as a ratio of available solvency margin to required solvency margin. The current minimum solvency ratio prescribed by IRDAI is 150% (i.e., available solvency margin must be at least 150% of the required solvency margin). This requirement protects policyholders by ensuring insurers remain solvent. Therefore, answer is C.

Question 19

Under the SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003, which of the following constitutes 'insider trading' as per the definition?

Accepted Answer

Insider trading under SEBI PIT Regulations involves dealing in securities by a person who is in possession of unpublished price-sensitive information (UPSI) about the company. The key element is that the information must be: (1) unpublished, (2) price-sensitive (likely to materially affect the security's price), and (3) the person must be an insider (director, employee, or connected person). Dealing in securities while possessing UPSI is prohibited. The trap here is that candidates often confuse 'insider' with 'shareholder' — a shareholder is not automatically an insider unless they have access to UPSI through their position. Therefore, answer is B.

Question 20

The Pension Fund Regulatory and Development Authority (PFRDA) regulates the National Pension System (NPS). Which of the following statements regarding PFRDA's regulatory jurisdiction and the structure of NPS is INCORRECT?

Accepted Answer

PFRDA, established in 2003 as a statutory body under the PFRDA Act, 2013, regulates all aspects of the National Pension System including tier-I (non-withdrawable) and tier-II (withdrawable) accounts. A critical feature of NPS is that it is open to all Indian citizens aged 18-65 years (with some relaxations for specific categories). The system operates through a network of Points of Presence (POPs) including banks, post offices, and financial institutions. PFRDA regulates fund managers, custodians, and the Central Recordkeeping Agency (CRA). Option C is incorrect because NPS is NOT restricted to government employees — this was a common misconception from the early days when NPS was introduced for government employees in 2004, but it has since been opened to all citizens under the 'Atal Pension Yojana' and general NPS schemes. Option A is correct — PFRDA does regulate fund managers and custodians. Option B is correct — tier-I accounts are non-withdrawable until retirement (with limited exceptions). Option D is correct — PFRDA operates through multiple POPs. Therefore, answer is C.

IBPS Clerk SEBI, IRDAI, PFRDA

SEBI, IRDAI, PFRDA— Rules & Concept

Key Points to Remember

Exam-Specific Tips

SEBI, IRDAI, PFRDA — Practice Questions

60-Second Revision — SEBI, IRDAI, PFRDA