Question 1

Which of the following is NOT a function of the Reserve Bank of India as per the RBI Act, 1934?

Accepted Answer

The RBI Act, 1934 establishes RBI as the central bank with functions including monetary policy regulation, currency management, banking regulation, and lender of last resort. However, direct implementation of welfare schemes like PM-KISAN is not an RBI function—it falls under the Ministry of Agriculture. RBI's core functions are defined in sections 45-49 of the RBI Act and do not include direct scheme administration.

Question 2

Which of the following is the primary function of the Statutory Liquidity Ratio (SLR) as mandated by the Reserve Bank of India?

Accepted Answer

The Statutory Liquidity Ratio (SLR) is a monetary policy tool that requires commercial banks to maintain a minimum percentage of their net demand and time liabilities in the form of liquid assets (government securities, cash, and gold). The primary function of SLR is to ensure the solvency of banks and control the money supply in the economy. By increasing SLR, the RBI reduces the amount of funds available with banks for lending, thereby contracting money supply. Conversely, reducing SLR increases lending capacity. Therefore, the answer is B.

Question 3

The Pradhan Mantri Jan Dhan Yojana (PMJDY) was launched in which year, and which ministry is primarily responsible for its implementation?

Accepted Answer

The Pradhan Mantri Jan Dhan Yojana (PMJDY) was launched on 28 August 2014 with the objective of providing universal access to banking services, financial literacy, and credit to all households in India. The scheme is primarily implemented by the Ministry of Finance in coordination with banks. PMJDY aims to bring unbanked and underbanked populations into the formal financial system through zero-balance savings accounts. Therefore, the answer is C.

Question 4

Under the RBI's monetary policy framework, the Cash Reserve Ratio (CRR) is the percentage of net demand and time liabilities that commercial banks must maintain as reserves with the RBI. As of 2024, what is the current CRR?

Accepted Answer

The Cash Reserve Ratio (CRR) is a critical monetary policy instrument used by the RBI to regulate liquidity in the banking system. As of 2024, the CRR stands at 4.5% of net demand and time liabilities. By adjusting the CRR, the RBI can influence the amount of money available for lending by banks. A higher CRR reduces lending capacity, while a lower CRR increases it. The CRR is distinct from the SLR, which includes government securities and other liquid assets. Therefore, the answer is B.

Question 5

The Pradhan Mantri MUDRA Yojana (PMMY) was launched to provide collateral-free loans to micro and small enterprises. Which ministry is the nodal agency for PMMY implementation?

Accepted Answer

The Pradhan Mantri MUDRA Yojana (PMMY) was launched in April 2015 with the objective of providing collateral-free and documentation-light loans to micro and small enterprises. The Ministry of Micro, Small and Medium Enterprises (MSME) is the nodal agency responsible for PMMY implementation. The scheme operates through MUDRA Bank (a subsidiary of SIDBI) and provides loans up to ₹10 lakh under three categories: Shishu (up to ₹50,000), Kishore (₹50,001 to ₹5 lakh), and Tarun (₹5 lakh to ₹10 lakh). Therefore, the answer is D.

Question 6

Which of the following correctly defines the relationship between Repo Rate and Reverse Repo Rate in the RBI's monetary policy framework?

Accepted Answer

The Repo Rate is the interest rate at which the RBI lends money to commercial banks against the collateral of government securities. The Reverse Repo Rate is the interest rate at which the RBI borrows money from commercial banks. By definition, the Reverse Repo Rate is always lower than the Repo Rate. This corridor (the difference between Repo and Reverse Repo) is maintained by the RBI to ensure a corridor for overnight lending rates. The Reverse Repo Rate acts as a floor (minimum rate) while the Repo Rate acts as a ceiling (maximum rate) for overnight lending in the interbank market. Therefore, the answer is A.

Question 7

Which of the following is the primary function of the Statutory Liquidity Ratio (SLR) as mandated by the RBI?

Accepted Answer

The Statutory Liquidity Ratio (SLR) is a monetary policy tool used by the RBI to regulate the money supply in the economy. Banks are required to maintain a minimum percentage of their Net Demand and Time Liabilities (NDTL) in the form of liquid assets (government securities, cash, and gold). As of 2024, the SLR is set at 18.00% of NDTL. The primary purpose is to ensure banks maintain adequate liquidity and control credit expansion. Therefore, the answer is B.

Question 8

The Pradhan Mantri Jan Dhan Yojana (PMJDY) was launched in which year with the primary objective of financial inclusion?

Accepted Answer

The Pradhan Mantri Jan Dhan Yojana (PMJDY) was launched on 28 August 2014 by Prime Minister Narendra Modi. The scheme aims to provide universal access to banking services, with emphasis on savings accounts, remittance, credit, insurance, and pension. It is implemented by the Ministry of Finance. As of 2024, the scheme has opened over 500 million bank accounts, making it one of the world's largest financial inclusion programs. Therefore, the answer is C.

Question 9

As per RBI guidelines, what is the current Cash Reserve Ratio (CRR) that commercial banks must maintain as of 2024?

Accepted Answer

The Cash Reserve Ratio (CRR) is the percentage of deposits that commercial banks must maintain with the RBI in the form of cash reserves. As of 2024, the CRR is set at 4.50% of Net Demand and Time Liabilities (NDTL). The RBI uses CRR as a tool to control liquidity and inflation in the economy. A higher CRR reduces the amount of money banks can lend, thereby contracting money supply. Therefore, the answer is B.

Question 10

The Pradhan Mantri MUDRA Yojana was launched to provide collateral-free loans to which category of borrowers?

Accepted Answer

The Pradhan Mantri MUDRA Yojana (PM-MUDRA) was launched in April 2015 by the Ministry of Finance to provide collateral-free and documentation-light loans to micro and small enterprises and individual entrepreneurs. MUDRA stands for Micro Units Development and Refinance Agency. The scheme targets non-corporate, non-farm small/micro enterprises with loan amounts up to ₹10 lakhs. The primary beneficiaries are self-employed individuals, small business owners, and micro-entrepreneurs who lack access to formal credit. Therefore, the answer is A.

Question 11

Which of the following best describes the relationship between Repo Rate and Reverse Repo Rate set by the RBI?

Accepted Answer

The Repo Rate is the rate at which the RBI lends money to commercial banks against government securities as collateral. The Reverse Repo Rate is the rate at which the RBI borrows money from commercial banks. The Reverse Repo Rate is always lower than the Repo Rate, creating a corridor. As of 2024, the Repo Rate is 6.50% and the Reverse Repo Rate is 6.25%, maintaining a 25 basis point spread. This corridor helps the RBI manage liquidity and control inflation. Therefore, the answer is D.

Question 12

Which ministry is responsible for the implementation and oversight of the Pradhan Mantri Jan Dhan Yojana (PMJDY)?

Accepted Answer

The Pradhan Mantri Jan Dhan Yojana (PMJDY), launched on August 28, 2014, is implemented under the Ministry of Finance (Department of Financial Services). The scheme aims to provide universal access to banking services and financial inclusion through zero-balance bank accounts. Therefore, answer is D.

Question 13

The Pradhan Mantri Mudra Yojana (PMMY) was launched to provide collateral-free loans to micro and small enterprises. Which ministry oversees this scheme, and what is the maximum loan amount under the 'Shishu' category?

Accepted Answer

PMMY was launched in April 2015 by the Ministry of Micro, Small and Medium Enterprises (MSME). The scheme has three categories: Shishu (up to ₹50,000), Kishor (₹50,001 to ₹5 lakh), and Tarun (₹5 lakh to ₹10 lakh). Therefore, answer is B.

Question 14

Under the Cash Reserve Ratio (CRR) framework, banks are required to maintain a certain percentage of their net demand and time liabilities with the RBI. Which statement correctly describes the current CRR and its impact on money supply?

Accepted Answer

As of 2024, the CRR is 4.50%. CRR is the percentage of NDTL that banks must keep as cash with RBI (not in their vaults). An increase in CRR reduces the money supply because banks have less money to lend; a decrease in CRR increases the money supply. Therefore, answer is D.

Question 15

Which of the following statements correctly distinguishes between a Scheduled Commercial Bank and a Non-Banking Financial Company (NBFC) in India?

Accepted Answer

Scheduled Commercial Banks are regulated under the Banking Regulation Act, 1949, and the Reserve Bank of India Act, 1934. They can accept deposits from the public and are covered by deposit insurance (DICGC). NBFCs are regulated under the RBI Act but cannot accept demand deposits (current account deposits). NBFCs are not covered by DICGC insurance. Therefore, answer is A.

Question 16

Which of the following correctly describes the Statutory Liquidity Ratio (SLR) and its primary purpose in India's banking system?

Accepted Answer

The SLR is the percentage of net demand and time liabilities (NDTL) that commercial banks must maintain in the form of liquid assets (government securities, cash, gold). As of 2024, the SLR is 18.00%. Its primary purpose is to ensure banks maintain adequate liquid assets and to control the money supply in the economy. Therefore, answer is C.

Question 17

As per the RBI's monetary policy framework, what is the relationship between the Repo Rate and the Reverse Repo Rate?

Accepted Answer

The Reverse Repo Rate is always set at a fixed spread below the Repo Rate. As of 2024, if the Repo Rate is 6.50%, the Reverse Repo Rate is typically 6.00% (50 basis points lower). The Repo Rate is the rate at which RBI lends to banks; the Reverse Repo Rate is the rate at which RBI borrows from banks. Therefore, answer is B.

Question 18

As per RBI's monetary policy framework (2024), what is the primary objective of the Reverse Repo Rate in the context of liquidity management?

Accepted Answer

The Reverse Repo Rate is the rate at which the RBI borrows money from commercial banks. It acts as a floor for short-term interest rates and is used to absorb excess liquidity from the banking system. When RBI wants to reduce money supply, it increases the reverse repo rate, making it attractive for banks to park funds with RBI rather than lend in the market. Therefore, answer is C.

Question 19

Which of the following correctly describes the relationship between Cash Reserve Ratio (CRR) and the money multiplier in the Indian banking system?

Accepted Answer

The money multiplier is inversely related to the CRR. The money multiplier = 1/CRR. When CRR increases, banks must hold more reserves and can lend less, reducing the money multiplier and contracting money supply. Conversely, when CRR decreases, the money multiplier increases. This is a fundamental principle of monetary economics. Therefore, answer is B.

Question 20

Under the Pradhan Mantri Mudra Yojana (PMMY), which category of loans is specifically designed for borrowers seeking loans between ₹50,000 and ₹5 lakh?

Accepted Answer

The Pradhan Mantri Mudra Yojana, launched in April 2015 by the Ministry of Finance, has three loan categories: Shishu (up to ₹50,000), Kishore (₹50,001 to ₹5 lakh), and Tarun (₹5 lakh to ₹10 lakh). The Kishore category specifically targets borrowers in the ₹50,000 to ₹5 lakh range for small business expansion. Therefore, answer is C.

Question 21

As per the RBI's current regulatory framework (2024), what is the minimum Capital Adequacy Ratio (CAR) that Scheduled Commercial Banks must maintain?

Accepted Answer

Under Basel III norms adopted by RBI, Scheduled Commercial Banks must maintain a minimum Capital Adequacy Ratio of 9.5% (comprising Common Equity Tier 1 of 5.5%, Tier 1 of 7%, and total CAR of 9.5%). This includes capital conservation buffer and countercyclical buffer requirements. Therefore, answer is B.

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