Banking and Financial Awareness MCQ Quiz - Objective Question with Answer for Banking and Financial Awareness - Download Free PDF

The term 'Line of Credit' is a soft loan at the concessional interest rate.

Line Of Credit:

• The Line of Credit is not a grant but a ‘soft loan’ provided on concessional interest rates to developing countries, which has to be repaid by the borrowing government.
• The Line of Credit - LOCs helps to promote exports of Indian goods and services, as 75% of the value of the contract must be sourced from India.
• The projects under LOCs are spread over different sectors (Agriculture, Infrastructure, Telecom, Railway, Transmission/Power, Renewable Energy, etc.).
• The actual implementation of LOC projects in various countries is dependent on local factors, such as prevailing political & social conditions, statutory clearances by the borrowing Governments, making available land, and other infrastructural support.
• The Government of India is reasonably satisfied with the progress in the implementation of Lines of Credit supported by India in foreign nations over the past 3 years.
• For instance, India will support the implementation of the Greater Male Connectivity project in the Maldives. The project will connect three neighbouring islands-Villingili, Gulhifahu and Thilafushi., through a financial package consisting of a grant of USD 100 million and a new Line of Credit (LoC) of USD 400 million.

The correct answer is - 1935

Key Points

• Year of Establishment
  • The Reserve Bank of India (RBI) was established on April 1, 1935, under the Reserve Bank of India Act, 1934.
  • Its formation was a result of recommendations made by the Hilton Young Commission, which aimed to create a central bank for India.
• Purpose of Establishment
  • The RBI was created to regulate the issue of banknotes, maintain monetary stability, and operate the credit and currency system in India.
  • It serves as the central bank responsible for managing India's monetary policy and financial framework.
• Initial Setup
  • Initially, the RBI was headquartered in Kolkata, but it was moved to Mumbai in 1937.
  • It started as a privately-owned institution and later became fully owned by the Indian government in 1949.

Additional Information

• Hilton Young Commission
  • The commission was formed in 1926 to examine banking and financial systems in India.
  • It recommended the establishment of a central bank to improve India's financial structure and economy.
• Nationalization of RBI
  • In 1949, the RBI was nationalized, and ownership was transferred to the Government of India.
  • Nationalization aimed to ensure better control over monetary policies and align the central bank's operations with government goals.
• Key Functions of RBI
  • Formulating and implementing monetary policy to maintain price stability and economic growth.
  • Regulating and supervising banks and other financial institutions.
  • Managing foreign exchange and acting as the custodian of India's foreign currency reserves.
  • Issuing and regulating the supply of Indian currency.
• Other Related Facts
  • The RBI emblem features a tiger and a palm tree, symbolizing India's strength and agricultural heritage.
  • It plays a vital role in India's economic stability and development.

Key Points

• The Reserve Bank Staff College (RBSC) is located in Chennai, Tamil Nadu, India.
• RBSC was established by the Reserve Bank of India in 1963 to provide training to its officers.
• The college focuses on delivering high-quality training programs on banking, finance, and economic policies.
• RBSC caters primarily to RBI officials but also conducts training programs for other financial institutions.
• Its location in Chennai makes it accessible to financial professionals in southern India.

Additional Information

• Reserve Bank of India (RBI):
  • RBI is India’s central bank, established in 1935 under the Reserve Bank of India Act, 1934.
  • It is responsible for regulating the monetary policy of India and managing the country’s currency issuance.
  • RBI’s headquarters is in Mumbai, Maharashtra.
  • The bank plays a crucial role in maintaining financial stability in India.
• Training and Development in RBI:
  • RBI operates multiple training institutes, including the Reserve Bank Staff College and the College of Agricultural Banking in Pune.
  • These institutes specialize in developing human resources for the banking and financial sectors.
  • Training programs cover topics such as monetary policy, financial management, and banking regulations.
• Chennai as a Financial Hub:
  • Chennai is one of India’s major financial and economic centers.
  • It houses several banks, financial institutions, and educational institutions specializing in finance and economics.
  • The city is also known for its thriving IT and service industries.
• Other RBI Training Institutes:
  • National Institute of Bank Management (NIBM), Pune – focuses on banking leadership and research.
  • Indira Gandhi Institute of Development Research (IGIDR), Mumbai – specializes in economic research and policy-making.
  • Institute for Development and Research in Banking Technology (IDRBT), Hyderabad – focuses on banking technology and innovation.

The correct answer is K V Kamath.

Key Points

• K V Kamath was the first President of the New Development Bank (NDB), appointed in July 2015.
• The New Development Bank was established by the BRICS countries (Brazil, Russia, India, China, and South Africa) with the purpose of funding infrastructure and sustainable development projects.
• K V Kamath served as the President of the NDB from its inception until May 2020.
• He is a renowned Indian banker, known for his leadership at ICICI Bank, where he significantly contributed to the growth of India's banking sector.
• The headquarters of the New Development Bank is located in Shanghai, China.

Additional Information

• New Development Bank (NDB):
  • It was formally launched during the 6th BRICS Summit held in Fortaleza, Brazil, in July 2014.
  • The primary objective of the bank is to mobilize resources for infrastructure and sustainable development projects in BRICS countries and other emerging economies.
  • The NDB aims to complement the efforts of existing multilateral financial institutions like the World Bank and IMF.
• K V Kamath's Contributions:
  • Before joining NDB, K V Kamath was the Managing Director and CEO of ICICI Bank, transforming it into one of India’s largest private-sector banks.
  • He has received several prestigious awards, including the Padma Bhushan in 2008, for his contributions to trade and industry.
• BRICS:
  • BRICS is an acronym for an association of five emerging economies: Brazil, Russia, India, China, and South Africa.
  • It was formally established in 2006, with the first summit held in 2009.
  • BRICS nations account for around 40% of the world’s population and over 25% of global GDP.
• Current Leadership of NDB:
  • As of 2023, Dilma Rousseff, the former President of Brazil, serves as the President of the NDB.
  • The leadership transition reflects the rotational nature of the presidency among BRICS member states.

The correct answer is Two.

Key Points

• Foreign Direct Investment (FDI) in India can be made through two primary routes: Automatic Route and Government Approval Route.
• The Automatic Route allows foreign investors to invest without prior approval from the government or Reserve Bank of India (RBI).
• The Government Approval Route requires investors to obtain permission from the government, specifically from the Foreign Investment Promotion Board (FIPB), Department of Economic Affairs, or other authorities depending on the sector.
• Most sectors in India fall under the Automatic Route, with certain sensitive sectors requiring approval under the Government Approval Route.
• The policy framework for FDI in India is governed by the Foreign Exchange Management Act (FEMA), 1999, and is regularly updated by the Department for Promotion of Industry and Internal Trade (DPIIT).

Additional Information

• Automatic Route:
  • Investments do not require prior approval from the government or RBI.
  • Examples include sectors like IT, real estate, and some manufacturing industries.
  • Foreign investors are required to adhere to sectoral caps and guidelines specified by the Indian government.
• Government Approval Route:
  • Investments in sensitive sectors like defense, media, and telecommunications require prior approval.
  • Applications are reviewed by the concerned ministry or department based on FDI policy guidelines.
  • This route ensures that investments align with national security and strategic interests.
• Key Regulatory Bodies:
  • Department for Promotion of Industry and Internal Trade (DPIIT): Responsible for formulating and updating FDI policies.
  • Reserve Bank of India (RBI): Regulates foreign exchange transactions and ensures compliance with FEMA.
  • Foreign Investment Promotion Board (FIPB): Handles approval for investments under the Government Approval Route (now abolished; replaced by DPIIT).
• Sectoral Caps:
  • FDI limits are specified for each sector, expressed as a percentage of equity ownership.
  • For example, FDI in insurance is capped at 74%, while in defense, it is capped at 74% under the Automatic Route and 100% under the Government Approval Route.

The correct answer is option 1 i.e., 1990

• SIDBI is the principal development financial institution for promotion, financing, and development of Micro, Small, and Medium Enterprises (MSME) sector in India.
• It was established on April 2, 1990, through an Act of Parliament.
• The headquarters of the SIDBI is located in Lucknow, Uttar Pradesh.
• It aims to facilitate and strengthen credit flow to MSMEs and address both financial and developmental gaps in the MSME eco-system across the country.
• It coordinates the functions of institutions engaged in similar activities.

The correct answer is Allahabad Bank.

• Allahabad Bank (nationalized bank) is the oldest joint stock bank in India.
• It was founded in Allahabad in 1865 and its headquarters in Kolkata, India.

Key Points

The correct answer is 14.

Key Points

• Nationalisation of Bank in India:
  • On July 19, 1969, Indira Gandhi who was both Prime Minister and Finance Minister at that time decided to nationalise the 14 largest private banks of the country. Hence, Option 1 is correct.
  • The largest and the oldest bank which is still in existence is the State Bank of India (SBI).
    • It originated and started working as the Bank of Calcutta in mid-June 1806.
    • In 1809, it was renamed the Bank of Bengal.
    • This was one of the three banks founded by a presidential government, the other two were the Bank of Bombay in 1840 and the Bank of Madras in 1843.
  • The three banks were merged in 1921 to form the Imperial Bank of India, which upon India's independence, became the State Bank of India in 1955.
  • For many years, the presidency banks had acted as quasi-central banks, as did their successors, until the Reserve Bank of India was established in 1935, under the Reserve Bank of India Act, 1934.
  • In 1960, the State Banks of India was given control of eight state-associated banks under the State Bank of India (Subsidiary Banks) Act, 1959. These are now called associate banks. 
  • In 1969, the Government of India nationalised 14 major private banks; one of the big banks as Bank of India. In 1980, 6 more private banks were nationalised.
  • These nationalised banks are the majority of lenders in the Indian economy.
  • They dominate the banking sector because of their large size and widespread networks. 

• Allahabad Bank is the oldest public-Sector bank of India.
• It was established in the year 1865.
• Its current chairman of the bank is SS Mallikarjuna Rao.

Allahabad Bank has been merged with Indian Bank.

The correct answer is option 2 i.e Manmohan Singh.

• Manmohan Singh is the only Prime Minister to have also served as the Governor of RBI.
• He was the Governor of RBI from 1982-1985.

Facts to remember about RBI:

• The Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934.
• The Central Office of the Reserve Bank was initially established in Kolkata but was permanently moved to Mumbai in 1937. The Central Office is where the Governor sits and where policies are formulated.
• Though originally privately owned, since nationalisation in 1949, the Reserve Bank is fully owned by the Government of India.
• The Reserve Bank of India (RBI) is India's central bank, which controls the issue and supply of the Indian rupee.
• RBI is the regulator of the entire Banking in India.
• Shaktikanta Das is the current governor of RBI.
• RBI's headquarters are in Mumbai. The RBI has four zonal offices at Chennai, Delhi, Kolkata and Mumbai.

Reserve Bank of India was established in the year 1935 after the recommendation of the Royal Commission under the chairmanship of Hilton Young.

• It was set up in 1935 under the Reserve Bank of India Act,1934.
• Until the Monetary Policy Committee was established in 2016, it also controlled monetary policy in India.
• The Reserve Bank of India is India's central bank, which controls the issue and supply of the Indian rupee.
• RBI was established in Calcutta but was moved to Bombay in 1937.

The correct answer Tertiary sector.

Key Points

• Banking comes under the tertiary sector.
• The tertiary sector, also known as the service sector includes transport, banking, storage, communication, etc.
• The primary sector is the one which is dependent on nature and makes use of raw materials. It includes agriculture, fishing, mining, etc.
• The secondary sector is concerned with manufacturing, construction, processing, etc.

The correct answer is ₹2,00,000.

Key Points

• Rs. 2,00,000 is the minimum amount that can be remitted through Real Time Gross Settlement (RTGS).
• The acronym "RTGS" stands for Real-Time Gross Settlement, which can be described as a mechanism where fund transfers are settled continuously and in real-time, individually on a transaction basis (without netting).
• "Real-Time" means the delivery of instructions at the time of receipt; "Gross Settlement" means the settlement of instructions for the transfer of funds happens separately.
• The RTGS system is intended specifically for large-value transactions.

The correct answer is 137%.

Key Points

• The allocation towards health and well-being was increased by 137% over the previous year in Union Budget 2021-22. 
• According to analysts, one of the sectors that have continually been neglected is "health."
• However, in her Budget 2021-22, Union Finance Minister Nirmala Sitharaman announced a 137 percent increase in the allocation for health from the previous year's budget estimate of over Rs. 94,000 crore (Rs. 94,452 crore) and a 118 percent increase from the previous year's revised budget of over Rs. 1.02 lakh crore (Rs. 1,02,873 crore).

Important Points

• The 2.23 lakh crore spending in Budget 2021 comprises allocations to the Ministry of Ayurveda, Yoga and Naturopathy, Unani, Siddha, and Homoeopathy, as well as the Ministry of Health and Family Welfare (MoHFW), which is the country's focal ministry for healthcare (AYUSH).
• To calculate the spending for health and wellness, the Finance Minister combined the amounts given under several categories of other ministries. 

• The National Bank for Agriculture and Rural Development (NABARD) is a financial, development institution and it is headquartered in Mumbai.
• The institution deals with Operations and Policy Planning in the Agriculture sector of rural areas. 
• It was formed on 12 July 1982 on the recommendations of the B. Sivaramman Committee.
• It was established under the National Bank for Agriculture and Rural Development (NABARD) Act 1981.