Banking sample questions

Banking Awareness: Structure of Banking in India

1. Nainital Bank is a subsidiary of which of the following banks?

 [A]Bank of Baroda

[B]Allahabad Bank

[C]Bank of India

 [D]Union Bank

2. What is the share of the Foreign Banks in the branch network in India?

[A]Less than 1 %

[B]Around 5%

[C]Around 3%

 [D]Around 6%

3. For the regional rural banks, which among the following is the correct share of Central, State and Sponsor Bank?

[A]50%, 40%, 10%

[B]50%, 35%, 15%

[C]50%, 15%, 35%

[D]40%, 50%, 10%

 4. Which of the following bodies regulates the Regional Rural Banks?

 [A]RBI

[B]NABARD

[C]Department of Rural Development

[D]State Government

 5. In which year, Cooperative Societies Act was enacted?

 [A]1910

[B]1912

 [C]1913

[D]1915

6. Which of the following rural cooperatives in India work at village or grassroots level?

 [A]State Cooperative Banks

[B]District Central Cooperative Banks

 [C]Primary Agricultural Credit Societies

 [D]Primary Cooperative Agriculture and Rural Development Banks (PCARDBS)

7. The owners of the cooperative bank are also its __:

[A]Customers

[B]Debtors

[C]Creditors

 [D]All of above

8. In the constitution of India, ‘Cooperatives’ come under which among the following in the seventh schedule?

[A]Union List

 [B]State List

 [C]Concurrent List

 [D]None of them

 9. Bank branches are established under which section of Banking Regulations Act, 1949?

[A]Section 20

[B]Section 23

 [C]Section 22

[D]Section 10

 10. In which country, the Unit Banking System originated?

 [A]United States

[B]United Kingdom

[C]France

[D]Spain

11.In RRBs, 50% share shall be held by the central government, 15% by the concerned state government and 35% by the sponsor bank. The RRB amendment act 2014 has allowed the


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1.Which of the following is NOT an advantage of Unit Banking?

  [A]They have fast decision making

  [B]The management enjoys more autonomy

  [C]They have risk diversification

  [D]All of above are advantages of Unit Banking

Answer  They have risk diversification Due to small size and due to unit structure; the decision making in unit banks is very fast. The management in unit banks enjoy more autonomy and more discretionary powers. However, due to single units, the risk is not distributed or diversified.

2. With reference to various types of Banking, what is “Mixed Banking”?

  [A]when banks undertake the activities of commercial and investment banking together

  [B]when banks undertake the activities of wholesale and retail banking together

  [C]when banks undertake the activities of offline and online banking together

  [D]when banks undertake the activities of commercial and cooperative banking together

 Answer  when banks undertake the activities of commercial and investment banking together

3. What is the current number of Local Area Banks in India?

  [A]Three

  [B]Four

  [C]Six

  [D]Eight

Answer   Four As of May 2015, these four local area banks are: 1.Coastal Local Area Bank Ltd – Vijayawada (Andhra Pradesh) 2.Capital Local Area Bank Ltd – Phagwara (Punjab) 3.Krishna Bhima Samruddhi Local Area Bank Ltd, Mahbubnagar (Andhra Pradesh) 4.Subhadra Local Area Bank Ltd., Kolhapur (Maharashtra)

4. Which country has largest shadow banking market in the world?

  [A]China

  [B]UK

  [C]Netherland

  [D]USA

Answer   USA Shadow banking refers to the activities of financial institutions that operate outside government-regulated banking systems. United States has the largest shadow banking market followed UK and China.

 5. In terms with Banking Sector, Anywhere Banking refers to __:

  [A]The customer can deposit/ withdraw cash at any branch other than the branch in which he holds the account

  [B]The customer can deposit/ withdraw cash at any bank other than the bank in which he holds the account

  [C]The customer can deposit/ withdraw cash in foreign countries

  [D]The customer can deposit/ withdraw cash at all points of sale

Answer The customer can deposit/ withdraw cash at any branch other than the branch in which he holds the account Anywhere Banking means that the customer can deposit/ withdraw cash at any branch other than the branch in which he holds the account. Anywhere banking frees the customer from geographical boundaries and limitations and gives the flexibility to the customer to use his account across the board.

 6. Which among the following types of Banking is most helpful in cross selling?

 [A]Virtual Banking

 [B]Relationship Banking

 [C]Wholesale Banking

 [D]Personal Banking

Answer  Relationship Banking Relationship banking is a banking system in which banks make deliberate efforts to understand customer needs and offer him products accordingly.

7. Which of the following is the first financial institution of India that adopted the Universal Banking System?

 [A]ICICI

 [B]SBI

 [C]IDBI

 [D]None of the above

Answer   ICICI Universal banking is a one-stop shop of financial products and services. The Industrial Credit and Investment Corporation of India Limited (ICICI) is the first financial institution of India that adopted the Universal banking system. It was set up in January 1955 as a joint stock company with support from the Government of India, the World Bank, the Commonwealth Development Finance Corporation, and other foreign institutions.

8. In which of the following types of banking, there is a direct execution of transactions between a bank and its consumers?

  [A]Retail banking

  [B]Universal Banking

  [C]Virtual Banking

  [D] Unit Banking

Answer  Retail banking When there is a direct execution of transactions between a bank and its consumers, rather than with corporations or other banks, then this type of banking system is known as Retail banking.

 9. A commercial bank will launch a medium term note (MTN) programme to ___:

 [A]Provide loans

 [B]Raise Funds

 [C]Sell Equity

 [D]Purchase shares

Answer  Raise Funds Medium term note (MTN) is a debt bond which usually matures in 5 to 10 years. Obviously it is used for raising funds in domestic or international markets. Recently Union Bank of India has hit the global debt market to raise around USD 500 million through bond issuance.

 10. Which Indian bank has opened its first branch in China in May, 2015?

 [A]Axis Bank

 [B]HDFC Bank

 [C]ICICI Bank

 [D]Corporation Bank

Answer ICICI Bank Country’s top private sector bank ICICI bank has opened its first branch in China. It was inaugurated by Prime Minister Narendra Modi. The bank will be based in Shanghai. ICICI Bank with presence in 17 countries earlier had a representative office in China, which it had opened over 10 years ago in 2003.

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Banking Awareness Practice Questions-Structure & Functions of RBI

1. Which among the following is NOT a subsidiary of RBI?

 [A]National Housing Bank

 [B]NABARD

 [C]Bharatiya Reserve Bank Note Mudran Private Limited

 [D]SIDBI

Answer  SIDBI RBI has four subsidiaries viz. Deposit Insurance and Credit Guarantee Corporation, DICGC; National Housing Bank; Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL) and NABARD.

2. The headquarters of local boards of RBI are located at__:

 [A]Mumbai, Kolkata, Chennai and New Delhi

 [B]Mumbai, Jaipur, Chennai and Mysore

 [C]Mumbai, Ahmedabad, Chennai and New Delhi

 [D]Mumbai, Ahmedabad,Jaipur and New Delhi

Answer   Mumbai, Kolkata, Chennai and New Delhi The headquarters of local boards of RBI are in Mumbai, Kolkata, Chennai and New Delhi. The members of the local boards of RBI are appointed by the Central Government for a term of four years. Their main purpose is to advise the Central Board on local matters and to represent territorial and economic interests of local cooperative and indigenous banks; to perform such other functions as delegated by Central Board from time to time.

3. Which of the following is NOT a function of Reserve Bank of India?

  [A]Controls the credit operations of banks through quantitative and qualitative tools

  [B]Lender of the last resort

  [C]Holds cash reserves of all the scheduled banks

  [D]Manages Credit Rating of Banks

Answer  Manages Credit Rating of Banks The Reserve Bank of India (RBI) was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934. The main functions of RBI: RBI controls the credit operations of banks through quantitative and qualitative tools, holds the cash reserves of all the scheduled banks, controls the banking system through the system of licensing, inspection and calling for information, acts as the lender of the last resort by providing rediscount facilities to scheduled banks, has sole right to issue bank notes of all denominations etc.

4. Under which section of the Reserve Bank of India (RBI) Act 1934, the RBI has the sole right to issue bank notes of all denominations?

 [A]Section 24 of the RBI Act 1934

 [B]Section 25 of the RBI Act 1934

 [C]Section 21 of the RBI Act 1934

 [D]Section 22 of the RBI Act 1934

Answer  Section 22 of the RBI Act 1934 Under Section 22 of the Reserve Bank of India (RBI) Act 1934 , the RBI has the sole right to issue bank notes of all denominations.

5. Under minimum reserve system, how much amount Reserve Bank of India (RBI) was required to keep in gold and foreign exchange reserves?

 [A]Rs.200 crore

 [B]Rs.220 crore

 [C]Rs.222 crore

 [D]Rs.280 crore

Answer  Rs.200 crore Under minimum reserve system, the Reserve Bank of India (RBI) was required to keep gold and foreign exchange reserves of Rs. 200 crore, of which Rs. 115 crore in gold and Rs. 85 crore in foreign exchange form.

6. Which of the following is not the quantitative tool of the Reserve Bank of India (RBI)?

 [A]OMO

 [B]Reserve ratios

 [C]Rationing of credit

 [D]Statutory Pre-emptions

Answer  Rationing of credit To control the cost and quantity of credit, quantitative tools are adopted by the Reserve Bank of India (RBI). The quantitative tools are the indirect tools viz. OMO, bank rate, SLR, CRR, repo rate, etc.

7. Under which of the following rates, the banks avail long term loans from Reserve Bank of India (RBI) by putting no collateral securities?

 [A]Bank rate

 [B]Repo rate

 [C]Reserve repo rate

 [D]Marginal Standing Facily

Answer  Bank rate The bank rate (or discount rate) is the rate of interest at which banks take long term loans from Reserve Bank of India (RBI) by putting no collateral security. It is the rate at which RBI rediscounts the bills of exchange and government securities held by the commercial banks. For controlling the credit, inflation and money supply, RBI increases the bank rate.

8. Which of the following is / are included under Statutory Pre-emptions? 1. SLR 2. CRR 3. Bank Rate 4. Repo Rate Select the correct option from the codes given below:

 [A]Only 1 & 2

 [B]Only 1, 2 & 3

 [C]Only 2, 3 & 4

 [D]Only 1, 2 & 4

Answer  Only 1 & 2 Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) are called Statutory Pre-emptions. The RBI has been empowered by Banking Regulation Act and RBI act to mandate commercial banks to maintain a certain portion of their Net Demand and Time Liabilities (NDTL) in the form of cash with the Reserve Bank [this is called Cash Reserve Ratio (CRR)] and in the form of investment in unencumbered approved securities [this is called Statutory Liquidity Ratio (SLR)]. They are statutory because they get their legality from Banking Regulation Act 1949.

9. Which among the following is most important functions being done by SLR in recent times?

 [A]Control of Inflation

 [B]Cushion against bank failures

 [C]Financing Government deficits

 [D]Adjustment of liquidity

 Answer  Financing Government deficits There are three purposes to keep SLR. These are: It is an instrument of credit control It works as a cushion against the possibility of bank failures It is a conduit for financing government deficits. We note here that SLR is not very frequently changed; so as an instrument of Credit Control; its role is limited. However, most important function SLR is doing in current times is to “finance the government deficit”.

10. How Bank Rate is different from Repo rate?

 [A]While Repo Rate is a short-term measure, Bank Rate is a long-term measure

 [B]While Bank Rate is a short-term measure, Repo Rate is a long-term measure

 [C]While Repo Rate is used to control money supply, Bank Rate is used to control inflation

 [D]While Bank Rate is used to control money supply, Repo Rate is used to finance government debt

Answer While Repo Rate is a short-term measure, Bank Rate is a long-term measure Bank Rate and Repo Rate seem to be similar terms because in both of them RBI lends to the banks. Repo Rate is a short-term measure and it refers to short-term loans and used for controlling the amount of money in the market. On the other hand, Bank Rate is a long-term measure and is governed by the long-term monetary policies of the RBI.

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Banking Awareness Practice Questions-Structure & Functions of RBI-Part-2

1. Who signs One rupee note in India?

 [A]RBI Governor

 [B]RBI Deputy Governor

 [C]Finance Secretary

 [D]Prime Minister

Answer Finance Secretary Under Section 22 of the Reserve Bank of India Act, RBI has sole right to issue currency notes of various denominations except one rupee notes. The One Rupee note is issued by Ministry of Finance and it bears the signatures of Finance Secretary, while other notes bear the signature of Governor RBI.

 2. First printing press for bank notes in India was established at __?

  [A]Calcutta

  [B]Surat

  [C]Nasik

  [D]Aurangabad

Answer Nasik Currency Note Press (CNP), Nasik, Maharashtra was established in 1928. It was the first printing press for bank notes in India.

3. A fifty paisa coin in India is a legal tender till what amount?

  [A]Re. 1

  [B]Rs. 5

  [C]Rs. 10

  [D]Rs. 50

Answer  Rs. 10 One Rupee Note and One Rupee coins are legal tenders for unlimited amounts. 50 Paisa coins are legal tender for any sum not above Rs. 10. The coins of smaller than 50 paisa value are legal tenders of a sum below Re. 1.

4. In which denomination, star series notes in India are not issued?

  [A]Rs. 20

  [B]Rs. 50

  [C]Rs. 100

  [D]Rs. 500

Answer  Rs. 500 The Star series notes are currently issued in Rs. 10, 20, 50 and Rs. 100. These notes are issued to replace the defected printed notes at the printing press. They have an additional character of a star and the bundles are NOT in series. Rest all the features are same.

5. In how many languages, the amount of a banknote is written on it ?

  [A]15

  [B]17

  [C]22

  [D]24

Answer  17 The amount of a banknote is written on it in 17 languages out of 22 official languages of India. The languages are Hindi, English, Assamese, Bengali, Gujarati, Kannada, Kashmiri, Konkani, Malayalam, Marathi, Nepali, Oriya, Punjabi, Sanskrit, Tamil, Telugu and Urdu.

 6 RBI provides Ways and Means Advances (WMA) to __:

   [A]Central Government

   [B]State Government

   [C]Both

   [D]None

Answer  State Government Whenever there is a temporary mismatch in the cash flow of the receipts and payments of the State Governments, RBI provides them Ways and Means Advances (WMA). This also comes under debt management works of RBI.

 7. Which of the following is not a function / power of Reserve Bank of India?

   [A]To assume the responsibility of meeting directly or indirectly all reasonable demands for accommodation

   [B]To hold cash reserves of the commercial banks and make available financial accommodation to them

  [C]To assume responsibility of all banking operations of the government

  [D]To assume the responsibility of statistical analysis of data related to macro economy of India

Answer  To assume the responsibility of statistical analysis of data related to macro economy of India Statistical analysis of data related to macro economy of India is a function of Central statistical organization and not of RBI.

 8. What will be the impact on the cash reserves of commercial banks if RBI conducts a sale of securities ?

  [A]Increase

  [B]Decrease

  [C]Remain constant

  [D]Increase or decrease

Answer  Decrease

9. Which among the following statement gives the most correct definition of “Lender of Last Resort”?

   [A]If a person or firm which is eligible to get a loan, does not get it from any commercial bank, may approach to Reserve Bank of India for loan.

   [B]If the state governments are in crisis and need money for short term , they can approach RBI for this purpose

   [C]If a commercial bank is in crisis, it may place its reasonable demand for accommodation to Reserve Bank of India

   [D]Whenever the government declares a debt relief, the RBI will have to bear the brunt of it.

Answer  If a commercial bank is in crisis, it may place its reasonable demand for accommodation to Reserve Bank of India The banks can borrow from the RBI by keeping eligible securities as collateral or any other arrangement and at the time of need or crisis, they approach RBI for financial help. Thus RBI works as Lender of the Last Resort (LORL) for banks.

 10. RBI takes certain steps to curb the menace of Inflation. In this context, which among the following will not help RBI in controlling the inflation in the country?

  [A]An increase in the Bank Rate

  [B]An increase in the Reserve Ratio Requirements

  [C]A purchase of securities in the open market

  [D]Increasing the Repo Rate

Answer  A purchase of securities in the open market When RBI purchases the securities, RBI is effectively releasing liquidity in the market. Increased liquidity will increase inflation.

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1. Reserve Bank of India would like to increase the cash reserves of the commercial Banks. Which among the following would be most appropriate action of the RBI to achieve this aim?

 [A]RBI would release gold from its reserves

 [B]RBI would raise the reserve ratio

 [C]RBI would buy the bonds in the open market

 [D]RBI will stop the transactions which involve the bills of exchange

Answer  RBI would buy the securities in the open market RBI buys securities from the market, it releases liquidity and banks have more money with them in the form of Cash reserves. Report Error

 2. If the Cash Reserve Ratio (CRR) is increased by the RBI, its impact on the expansion of credit creation will be to__:

 [A]decrease it

 [B]increase it

 [C]no impact

 [D]Cant’ say

Answer   decrease it If the Cash Reserve Ratio (CRR) is increased by the RBI, its impact on the expansion of credit creation will be to decrease it. In short, credit creation is the reciprocal of the CRR.

3. To combat raising inflation, RBI has to do which of the following activities?

 [A]increase bank rate

 [B]sell government securities

 [C]increase reserve ratios

 [D]All of above

Answer   All of above To combat from inflation, RBI has to sell government securities, increase bank rate, increase policy rate, etc , so that banks have left less money to lend then people borrow less, demand goes down and the result of it is the prices of goods and services also goes down. This is how, RBI decreases the inflation rate.

4. Under which qualitative tool, RBI fixes maximum limit to loans and advances that can be made above which the commercial banks cannot exceed?

  [A]Rationing of credit

  [B]Margin Requirement

  [C]Loan to Value ratio

  [D]Moral suasion

Answer Rationing of credit Rationing of credit : Under this method, RBI fixes a maximum limit of loans and advances that can be made above which the commercial banks cannot exceed.

5. When RBI provides Ways and Means Advances (WMA) to the state governments against collateral Government Securities; it is called?

 [A]Normal WMA

 [B]Special WMA

 [C]Statutory WMA

 [D]None of them

  

Answer   Special WMA If there is a temporary mismatch in the cash flow of the receipts & payments of the State Government then Ways and means advances (WMA) facility is used by RBI to handle the mismatch for a period of 90 days. There are two types of WMA – normal and special. If the state government takes WMA against the collateral Government securities then it is called Special WMA. If they are not against the security, then they are provided WMA based upon the 3-year average of actual revenue and capital expenditure of the state then it is called normal WMA.

 7. Which among the following is NOT a function of RBI?

    [A]To work as monetary authority and implement its Monetary Policy

    [B]To serve as issuer of bank notes

    [C]Serve as banker to central and state governments

    [D]Serve as debt manager to other banks

ANSWER  Serve as debt manager to other banks

 8. What is the maximum number of Official Directors in RBI’s Central Board of Directors?

   [A]One

   [B]Two

   [C]Four

   [D]Five

Answer  Five The Governor and Deputy Governors are the official directors. There is on Governor and maximum 4 Deputy Governors; so maximum number of Official Directors in RBI’s Central Board of Directors is five.

9. Who appoints the governor of Reserve Bank of India?

  [A]President of India

  [B]Prime Minister of India

  [C]Central Government

  [D]Vice President of India

Answer  Central Government RBI Governor and Deputy Governors are appointed by the Central Government. Their names are cleared by Cabinet Committee on appointments.

10. What is the retirement age of RBI Governor?

  [A]58 Years

  [B]60 Years

  [C]62 Years

  [D]65 Years

Answer  62 Years For both Governors and Deputy Governors, the tenure of service is maximum of 5 years or till the age of 62 whichever is earlier.

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1. What is the number of non-official directors in RBI?

 [A]12

 [B]16

 [C]18

 [D]20

Answer  16 There are 16 non-official directors in RBI. Out of them, there are four represent the local Boards located in Delhi, Chennai, Kolkata and Mumbai, thus representing 4 regions of India. Rest 12 are nominated by the Reserve Bank of India.

2. Which of the following is the main objective of conductive Open Market Operations?

  [A]Adjust the capitalization of Banks

  [B]To contain current account deficit

  [C]To boost share markets

  [D]To adjust liquidity conditions

Answer  To adjust liquidity conditions Open Market Operations (OMO) refer to the purchase and sale of the Government Securities (G-Secs) by RBI from / to market. The objective of OMO is to adjust the rupee liquidity conditions in the economy on a durable basis. The working of OMOs is defines as below:

3. Which of the following is NOT a correct statement with regard to Liquidity Adjustment Facility:

 [A]Only Government securities are used as collateral

 [B]Repo Inject liquidity in the system, while reverse repo absorbs liquidity from the system

 [C]RBI makes separate announcements for Repo and Reverse Repo Rates

 [D]Regional Rural Banks are not eligible to participate in Repo auctions

Answer RBI makes separate announcements for Repo and Reverse Repo Rates RBI only announces Repo Rate. The Reverse Repo Rate is linked to Repo Rate and is 100 basis points (1%) below repo rate. RBI makes decision regarding Repo Rate on the basis of prevalent market conditions and relevant factors.

4. What is the minimum bid under Liquidity Adjustment Facility?

 [A]1 Crore

 [B]2 Crore

 [C]5 Crore

 [D]10 Crore

Answer  5 Crore Under the Liquidity Adjustment Facility, bids need to be for a minimum amount of Rs.5 crore and in multiples of Rs. 5 Crore thereafter.

5. Which of the following is available to banks to borrow overnight funds from RBI against the approved government securities?

[A]Repo Rate

[B]Bank Rate

[C]Base Rate

[D]Marginal Standing Facility

Answer  Marginal Standing Facility MSF is the rate at which the banks are able to borrow overnight funds from RBI against the approved government securities. The overall idea behind the MSF is to contain volatility in the overnight inter-bank rates.

6. If Repo Rate is 6%, then which among the following is correct about Reverse Repo and Marginal Standing Facility?

 [A]Reverse Repo Rate is 7% and Marginal Standing Facility is 8%

 [B]Reverse Repo Rate is 5% and Marginal Standing Facility is 8%

 [C]Reverse Repo Rate is 5% and Marginal Standing Facility is 7%

 [D]Reverse Repo Rate is 8% and Marginal Standing Facility is 7%

Answer  Reverse Repo Rate is 5% and Marginal Standing Facility is 7% If Repo Rate is X%, reverse repo rate is X-1% and MSF is X+1%.

7. The custodian of India’s foreign exchange reserve is__:

 [A]Department of Finance

 [B]State Bank of India

 [C] Reserve Bank of India

 [D]Board of Financial Supervision

Answer  Reserve Bank of India In 1946, India became a member of the International Monetary Fund (IMF) and from that time RBI has the responsibility of maintaining fixed exchange rates with all other member countries of the IMF. Apart from maintaining the rate of exchange of the rupee, RBI has to act as the custodian of India’s reserve of international currencies.

8. What is sold and purchased during Open Market Operations by RBI?

 [A]Government Securities

 [B]Commercial Papers

 [C]Certificates of Deposits

 [D]Global Depository Receipts

Answer Government Securities OMOs are conducted by the RBI via the sale/purchase of government securities to/from the market with the primary aim of modulating rupee liquidity conditions in the market OMOs are an effective quantitative policy tool in the armoury of the RBI, but are constrained by the stock of government securities available with it at a point in time

9. RBI has a principle that overseas banks are given near national treatment in India only if their home country allowed Indian banks to open branches there without much restrictions. This principle is known as __?

 [A]Reciprocity

 [B]National Treatment

 [C]Equal Treatment

 [D]Fair Deal

Answer Reciprocity

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1. What is the number of non-official directors in RBI?

 [A]12

 [B]16

 [C]18

 [D]20

Answer  16 There are 16 non-official directors in RBI. Out of them, there are four represent the local Boards located in Delhi, Chennai, Kolkata and Mumbai, thus representing 4 regions of India. Rest 12 are nominated by the Reserve Bank of India.

 2. Which of the following is the main objective of conductive Open Market Operations?

 [A]Adjust the capitalization of Banks

 [B]To contain current account deficit

 [C]To boost share markets

 [D]To adjust liquidity conditions

Answer  To adjust liquidity conditions Open Market Operations (OMO) refer to the purchase and sale of the Government Securities (G-Secs) by RBI from / to market. The objective of OMO is to adjust the rupee liquidity conditions in the economy on a durable basis. The working of OMOs is defines as below:

3. Which of the following is NOT a correct statement with regard to Liquidity Adjustment Facility:

 [A]Only Government securities are used as collateral

 [B]Repo Inject liquidity in the system, while reverse repo absorbs liquidity from the system

 [C]RBI makes separate announcements for Repo and Reverse Repo Rates

 [D]Regional Rural Banks are not eligible to participate in Repo auctions

Answer  RBI makes separate announcements for Repo and Reverse Repo Rates RBI only announces Repo Rate. The Reverse Repo Rate is linked to Repo Rate and is 100 basis points (1%) below repo rate. RBI makes decision regarding Repo Rate on the basis of prevalent market conditions and relevant factors.

4. What is the minimum bid under Liquidity Adjustment Facility?

  [A]1 Crore

  [B]2 Crore

  [C]5 Crore

  [D]10 Crore

Answer 5 Crore Under the Liquidity Adjustment Facility, bids need to be for a minimum amount of Rs.5 crore and in multiples of Rs. 5 Crore thereafter.

5. Which of the following is available to banks to borrow overnight funds from RBI against the approved government securities?

 [A]Repo Rate

 [B]Bank Rate

 [C]Base Rate

 [D]Marginal Standing Facility

Answer Marginal Standing Facility MSF is the rate at which the banks are able to borrow overnight funds from RBI against the approved government securities. The overall idea behind the MSF is to contain volatility in the overnight inter-bank rates.

 6. If Repo Rate is 6%, then which among the following is correct about Reverse Repo and Marginal Standing Facility?

 [A]Reverse Repo Rate is 7% and Marginal Standing Facility is 8%

 [B]Reverse Repo Rate is 5% and Marginal Standing Facility is 8%

 [C]Reverse Repo Rate is 5% and Marginal Standing Facility is 7%

 [D]Reverse Repo Rate is 8% and Marginal Standing Facility is 7%

Answer Reverse Repo Rate is 5% and Marginal Standing Facility is 7% If Repo Rate is X%, reverse repo rate is X-1% and MSF is X+1%.

7. The custodian of India’s foreign exchange reserve is__:

  [A]Department of Finance

  [B]State Bank of India

  [C] Reserve Bank of India

  [D]Board of Financial Supervision

Answer Reserve Bank of India In 1946, India became a member of the International Monetary Fund (IMF) and from that time RBI has the responsibility of maintaining fixed exchange rates with all other member countries of the IMF. Apart from maintaining the rate of exchange of the rupee, RBI has to act as the custodian of India’s reserve of international currencies.

8. What is sold and purchased during Open Market Operations by RBI?

 [A]Government Securities 

 [B]Commercial Papers

 [C]Certificates of Deposits

 [D]Global Depository Receipts

Answer  Government Securities OMOs are conducted by the RBI via the sale/purchase of government securities to/from the market with the primary aim of modulating rupee liquidity conditions in the market OMOs are an effective quantitative policy tool in the armoury of the RBI, but are constrained by the stock of government securities available with it at a point in time

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objective Banking GK – Structure & Functions of RBI

 1. Who appoints the governor of Reserve Bank of India?

 [A]President of India

 [B]Prime Minister of India

 [C]Central Government

 [D] Vice President of India

Answer  Central Government The Governor of RBI is appointed by the Central Government. The approval comes from Appointments Committee of the Cabinet.

2. The Reserve Bank of India has power to print currency notes of up to Rs ____?

 [A]1,000

 [B]5,000

 [C]10,000

 [D]15,000

Answer 10,000 The RBI has power to print currency notes of up to Rs 10,000. At present, notes of Rs 10, Rs 100, Rs 500 and Rs 1,000 are only printed.

3. Which among the following is a qualitative tool of monetary policy?

 [A]Bank Rate

 [B]Credit Ceiling

 [C]Credit rationing

 [D]Cash Reserve Ratio

Answer Credit rationing The quantitative instruments are Open Market Operations, Liquidity Adjustment Facility (Repo and Reverse Repo), Marginal Standing Facility, SLR, CRR, Bank Rate, Credit Ceiling etc. On the other hand, qualitative instruments are: credit rationing, moral suasion and direct action (by RBI on banks).

4. Which among the following is NOT a subsidiary of RBI?

 [A]National Housing Bank

 [B]NABARD

 [C]Bharatiya Reserve Bank Note Mudran Private Limited

 [D]SIDBI

Answer  SIDBI RBI has four subsidiaries viz. Deposit Insurance and Credit Guarantee Corporation, DICGC; National Housing Bank; Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL) and NABARD.

5. In India, the Chit funds are governed / Regulated by ___?

  [A]RBI

  [B]Central Government

  [C]State Governments

  [D]Local Bodies

Answer  State Governments Chit funds in India are governed by the Chit Funds Act, 1982. Under this Act, the chit fund businesses can be registered and regulated only by the respective State Governments. Regulator of chit funds is the Registrar of Chits appointed by respective state governments under Section 61 of Chit Funds Act. Powers of adjudication vest in the Registrar and the state government concerned is the Appellate authority. In case of failure of a chit fund business, the responsibility for winding up such a business also vests with the respective State Governments. Moreover, the Prize chits and money circulation schemes are illegal and are banned under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. Powers of investigation under this Act are vested with the concerned state police authorities.

 6. Which organization regulates Mutual funds in India?

  [A]RBI

  [B]SEBI

  [C]Finance Ministry

  [D]SBM

Answer SEBI SEBI formulates policies and regulates the mutual funds. It notified regulations in 1993 and issues guidelines from time to time. Mutual funds, either promoted by public or by private sector entities including one promoted by foreign entities are governed by these regulations.

7. Which one of the following is the new sub-category of the commercial real estate sector (CRE) as per the latest RBI directive?

 [A]Residential projects

 [B]Commercial projects

 [C]Industrial projects

 [D]SEZ projects

Answer  Residential projects The new RBI directive which follows the monetary policy statement of 2013-14 has carved out a sub-sector of ‘Commercial real estate sector (CRE)-residential housing’ to boost investments in residential housing sector by altering the risk weight, which is currently 0.75% reduced from the previous 1%.