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 grants RBI multiple functions including monetary policy formulation, currency issuance, banker to the government, regulation and supervision of banks, and management of foreign exchange reserves. However, direct lending to individual consumers or retail credit operations is NOT a function of RBI. RBI is a central bank and does not engage in retail banking or direct consumer lending. Therefore, the answer is D.

Question 2

Which of the following best describes the Statutory Liquidity Ratio (SLR) as per RBI regulations?

Accepted Answer

SLR (Statutory Liquidity Ratio) is the minimum percentage of a bank's Net Demand and Time Liabilities (NDTL) that must be maintained in the form of liquid assets such as government securities, gold, or cash. It is prescribed by RBI under Section 24 of the Banking Regulation Act, 1949. Unlike CRR, which is cash deposited with RBI, SLR assets are held by the bank itself. Therefore, the answer is B.

Question 3

The Banking Regulation Act, 1949 grants RBI the power to regulate which of the following aspects of commercial banks?

Accepted Answer

The Banking Regulation Act, 1949 empowers RBI to regulate multiple aspects of commercial bank operations including licensing of banks, branch expansion, capital adequacy requirements, asset classification and provisioning norms, and restrictions on business activities. Section 35 of the Banking Regulation Act, 1949 specifically grants RBI the authority to issue directions to banks regarding their operations and prudential norms. Therefore, the answer is B.

Question 4

Which of the following statements about the Cash Reserve Ratio (CRR) is correct?

Accepted Answer

The Cash Reserve Ratio (CRR) is the minimum percentage of a bank's Net Demand and Time Liabilities (NDTL) that must be maintained as cash deposits with the Reserve Bank of India. CRR is prescribed by RBI under Section 42 of the RBI Act, 1934. Banks cannot use CRR funds for lending or investment; these funds are held exclusively with RBI as a liquidity buffer. Therefore, the answer is C.

Question 5

Under which Act is the Reserve Bank of India empowered to regulate and supervise commercial banks in India?

Accepted Answer

The Reserve Bank of India is established under the RBI Act, 1934, and derives its regulatory and supervisory powers from this Act. Additionally, commercial banks are regulated under the Banking Regulation Act, 1949, which provides RBI with powers to supervise, control, and regulate banking operations. The RBI Act, 1934 is the primary constitutional framework for RBI's establishment and functioning. Therefore, the answer is B.

Question 6

The Banking Regulation Act, 1949 was amended to introduce the concept of 'Scheduled Banks' and 'Non-Scheduled Banks'. Which of the following is NOT a criterion for a bank to be classified as a Scheduled Bank?

Accepted Answer

A Scheduled Bank under the Banking Regulation Act, 1949 is defined as a bank whose name appears in the Second Schedule of the RBI Act, 1934. The key criteria include: (1) paid-up capital and reserves of at least ₹5 lakhs (as per original definition, now substantially higher), (2) compliance with CRR and SLR requirements, and (3) willingness to accept RBI's supervision and regulation. The criterion that is NOT required is that the bank must have a minimum number of branches in rural areas — this is a separate policy objective, not a statutory requirement for scheduled bank classification. Therefore, answer is C.

Question 7

Under the Reserve Bank of India Act, 1934, the RBI's monetary policy framework is designed to achieve multiple objectives. Which of the following is NOT explicitly listed as a primary objective of RBI's monetary policy under the RBI Act?

Accepted Answer

The Reserve Bank of India Act, 1934 (as amended by the RBI (Amendment) Act, 2016) defines the primary objectives of RBI's monetary policy as: (1) price stability, (2) financial system stability, and (3) growth of the economy. The Monetary Policy Committee (MPC) is mandated to maintain inflation within a target band (currently 4% ± 2%) while supporting growth. Ensuring maximum employment is NOT explicitly listed as a primary objective of RBI's monetary policy under the RBI Act — this is a secondary consideration. Therefore, answer is D.

Question 8

The Payment and Settlement Systems Act, 2007 grants the RBI regulatory authority over payment systems in India. Which of the following payment systems is NOT explicitly regulated under the Payment and Settlement Systems Act, 2007?

Accepted Answer

The Payment and Settlement Systems Act, 2007 grants RBI authority to regulate and supervise payment systems including NEFT (National Electronic Funds Transfer), RTGS (Real Time Gross Settlement), IMPS (Immediate Payment Service), and card networks. However, Unstructured Supplementary Service Data (USSD)-based mobile banking services, while supervised by RBI under banking regulations, are NOT explicitly classified as 'payment systems' under the Payment and Settlement Systems Act, 2007 — they fall under broader banking regulation. Therefore, answer is B.

Question 9

Under the Banking Regulation Act, 1949, which of the following best describes the primary objective of the Statutory Liquidity Ratio (SLR) requirement imposed on scheduled commercial banks?

Accepted Answer

SLR (Statutory Liquidity Ratio) is the minimum percentage of a bank's Net Demand and Time Liabilities (NDTL) that must be maintained in the form of liquid assets — primarily government securities, gold, or cash. It is prescribed by RBI under Section 24 of the Banking Regulation Act, 1949. The primary objective is to ensure banks maintain adequate liquid assets to meet depositor withdrawals and support government borrowing. Therefore, answer is B.

Question 10

The Banking Regulation Act, 1949 defines the term 'bank' and 'banking company' with specific criteria. Which of the following activities is NOT considered 'banking business' as defined under Section 5 of the Banking Regulation Act, 1949?

Accepted Answer

Section 5 of the Banking Regulation Act, 1949 defines 'banking company' as a company which transacts the business of banking. Banking business includes: (1) accepting deposits from the public, (2) lending or investing deposits, and (3) remittance of money. However, investment in real estate (property development or real estate trading) is NOT considered core banking business under Section 5 — it is a non-banking activity. While banks may hold real estate for operational purposes (branch buildings), active real estate investment/development is outside the definition of banking business. Therefore, answer is C.

Question 11

Under the Payment and Settlement Systems Act, 2007, the RBI designates certain payment systems as 'systemically important.' Which of the following is NOT a characteristic of a systemically important payment system as per RBI guidelines?

Accepted Answer

The Payment and Settlement Systems Act, 2007 empowers RBI to regulate and oversee payment systems. A systemically important payment system is one whose disruption could pose a risk to financial stability or the broader economy. Characteristics include: (1) high transaction volume, (2) critical to the functioning of the financial system, (3) interconnectedness with other systems, and (4) settlement finality. However, a payment system does NOT need to be operated exclusively by the Government of India to be systemically important. RTGS, NEFT, and IMPS are systemically important but are operated by RBI/NPCI, not the Government. Therefore, answer is D.

Question 12

The Reserve Bank of India Act, 1934 established RBI as the central bank of India. Which of the following powers is NOT explicitly vested in RBI under this Act regarding monetary policy and banking regulation?

Accepted Answer

The RBI Act, 1934 grants RBI extensive powers to regulate monetary policy, manage foreign exchange, issue currency, and supervise banks. However, RBI does not have the power to directly set corporate tax rates or fiscal policy—these are the domain of the Government of India and Parliament. RBI's powers are limited to monetary policy (repo, reverse repo, CRR, SLR), banking regulation (licensing, supervision, prudential norms), and payment system oversight. Direct taxation authority remains with the Finance Ministry. Therefore, answer is D.

Question 13

The Banking Regulation Act, 1949 defines 'banking' and establishes the regulatory framework for banks in India. Under this Act, which of the following activities is NOT considered part of the definition of 'banking business' as per Section 5(b)?

Accepted Answer

Section 5(b) of the Banking Regulation Act, 1949 defines 'banking' as the accepting of deposits of money from the public for the purpose of lending or investment. The core elements are: (1) acceptance of deposits, (2) from the public, (3) repayable on demand or after a fixed period, and (4) lending or investing those funds. Activities like insurance underwriting, real estate development, or manufacturing are NOT part of banking business as defined in the Act. Banks may undertake these as ancillary services, but they are not core banking. Therefore, answer is C.

Question 14

Under the Banking Regulation Act, 1949, Section 24 prescribes the Statutory Liquidity Ratio (SLR) requirement for scheduled commercial banks. Which of the following correctly describes the composition and custody of SLR-compliant assets?

Accepted Answer

SLR (Statutory Liquidity Ratio) is the minimum percentage of a bank's Net Demand and Time Liabilities (NDTL) that must be maintained in the form of liquid assets. These assets include government securities (G-secs), treasury bills, gold, and cash held by the bank itself—not deposited with RBI. The current SLR requirement is 18% of NDTL. The key distinction is that SLR assets remain under the bank's custody, whereas CRR (Cash Reserve Ratio) assets are deposited with RBI. Therefore, answer is B.

Question 15

The Pradhan Mantri Jan Dhan Yojana (PMJDY), launched in 2014, mandates that all banks provide basic savings accounts to citizens. Under the Banking Regulation Act, 1949 and RBI guidelines, which of the following is a MANDATORY feature of a PMJDY account that banks cannot waive?

Accepted Answer

The Pradhan Mantri Jan Dhan Yojana (PMJDY), launched on August 28, 2014, aims to provide universal access to banking services. Under RBI guidelines and the Banking Regulation Act framework, PMJDY accounts must include: (1) zero balance requirement (no minimum balance), (2) free deposits and withdrawals, (3) free transfer of funds via NEFT/RTGS, and (4) RuPay debit card. Banks cannot impose minimum balance requirements or charge fees for basic transactions on PMJDY accounts. These are non-negotiable features mandated by RBI and the Government. Therefore, answer is B.

RBI Assistant Banking Acts & Regulations

Banking Acts & Regulations— Rules & Concept

Key Points to Remember

Exam-Specific Tips

Banking Acts & Regulations — Practice Questions

60-Second Revision — Banking Acts & Regulations